TaxTMI 
TaxTMI 
2020 (5) TMI 209
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....Rs. 18,166/-. The return was initially processed u/s. 143(1) of the Act. Later, the case of assessee was taken up for scrutiny under CASS. The AO noted that the assessee company was incorporated on 10-02-2010 in A.Y 2010-11. The AO noted that the authorized capital of the assessee company was Rs. 50,00,000/- and paid up share capital of the assessee company as on 31.03.2012 was Rs. 46,00,000/-. Out of which, share capital subscribed and paid up capital during the A.Y under consideration amounted to Rs. 18,60,000/- and the assessee company also received share premium amounting to Rs. 3,53,40,000/-. And later the assessment u/s. 143(3) of the Act was concluded on 20-03-2015, wherein the AO was pleased to add share capital and share premium as undisclosed cash credit and added the same to the total income which was computed at Rs. 3,72,18,170/-. Thereafter, the ld. PCIT, Kolkata-4, Kolkata exercised his first (1) revisional jurisdiction u/s. 263 of the Act on 10-06-2016, wherein he was pleased to set aside the original assessment order dt. 20-03-2015 and directed the AO to frame de novo assessment along with specific direction to carry out proper examination of books of account, ba....
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....i) On the whole the impugned order dated 25112016 passed u/s 263/143(3) of the Income Tax Act, 1961 prima facie suffers from lack of independent and adequate enquiry on the aforesaid issues." 5. Thereafter, the ld. Pr. CIT after reproducing the assessee's reply in the impugned order date 12.03.2019 was pleased to set aside the assessment order dt. 25-11-2016 by holding as under:- "7. I have carefully considered the submission of the assessee and perused the material available on record and found that the issue pointed out in the show cause needs verification, After having considered the position of law and facts and circumstances of the instant case, I am of the considered opinion that the assessment order passed by the A.O. is erroneous in so far as it is prejudicial to the interest of revenue in accordance with the Explanation '2(c) below section 263 (1) of the Act on the ground of lack of enquiry. Accordingly, the assessment made by the Assessing officer is set aside on the issues as outlined in para 2 above, The A.O. is directed to provide reasonable opportunity to the assessee company to produce documents & evidences which it may choose to rely upon for substan....
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....ccording to Ld. AR, since the assessee company is genuinely running well, one of the director has approached the NCLT for taking control over the management, or else he wondered as to who will be keen to go before NCLT for getting the management of a company if it was merely a jama kharchi company. So, according to Ld. AR, the assessee company was a genuine running company engaged in manufacturing of fly ash bricks which for expansion activities has collected share capital and premium from its own directors and group companies and cannot be compared with the so called shell companies/jama kharchi companies. And, therefore, according to him, Ld. Pr. CIT erred in appreciating these facts and has unnecessarily interfered with AO's action thinking it to be a shell company when the fact is that in the second round of assessment also, the AO did in depth enquiry and after satisfying himself about the identity, creditworthiness of share subscribers and genuineness of the share capital/premium have accepted the same. The Ld. AR of the assessee in order to show us that the assessee company is a genuine business entity also drew our attention to page-16 of the paper book, which is forming pa....
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....it and added the same to the total income which was computed at Rs. 3,72,18,170/-. Thereafter, the ld. PCIT, Kolkata-4, Kolkata exercised his first (1) revisional jurisdiction u/s. 263 of the Act on 10-06-2016, wherein he was pleased to set aside the original assessment order dt. 20-03-2015 and directed the AO to frame de novo assessment along with specific direction to carry out proper examination of books of account, bank account of the assessee as well as that of the investors. And the AO was also directed to examine the source of share application/share applicants' identity of the investors and its genuineness. Pursuant to the order dated 10.06.201 of Ld. Pr. CIT, the AO gave effect to the order of the ld. Pr. CIT vide reassessment order dt. 25-11-2016, wherein the (AO) was pleased to accept the identity, creditworthiness of the share subscribers and genuineness of the share capital and share premium received by the assessee company in this assessment year and accepted the retuned income of the assessee at Rs. 18,166/-. This action of AO has been interfered by the ld PCIT exercising his revisional jurisdiction for the second time for the AY 2013-14. without even mentioning whic....
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....ult of an erroneous order, some loss is caused to the interest of the revenue. Their Lordship in the said judgment held that every loss of revenue as a consequence of an order of Assessing Officer cannot be treated as prejudicial to the interest of the revenue. It was further observed that when the Assessing Officer adopts one of the course permissible in law and it has resulted in loss to the revenue, or where two views are possible and the Assessing Officer has taken one view with which the Ld. CIT does not agree, it cannot be treated as an order prejudicial to the interest of the revenue unless the view taken by the Assessing Officer is unsustainable in law. 8. Keeping in mind the law laid by the Hon'ble Apex Court in Malabar Industries (supra), when we examined the records and three paper books which contain 201 & 231 & 362 pages, we note the following relevant facts which would reveal that this company is engaged in genuine business of manufacturing. (a) We note that the Assessee company is engaged in the business of manufacturing and production of Fly Ash Brick and had Started setting up the factory and expansion of it is going on, which is revealed by the fact th....
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.... prove their identity, creditworthiness and genuineness of the transaction. We find that notice u/s 133(6) of the Act was issued to (i) director of assessee company Shri Shyam Sundar Khandelia (Refer page 39 paper book vol-I) and pursuant to which, reply was given vide letter dated 28.10.014 (refer page 95) with all details, viz., voter ID, bank statement, acknowledgement of filing of return, allotment of shares worth Rs. 16 lakh and source of income of Rs. 241akhs and capital of Rs. 90 lakhs. Likewise, in respect of (ii) M/s. Subhshree Grihnirmann Pvt. Ltd. notice u/s. 133(6) was issued which is placed at paper book page 41, and pursuant to which reply dated 28.10.2014 was given to AO is found placed at page 147 of vol-I paper book along with all details, viz., bank statement, source, acknowledgement of filing of return and that it had capital of over Rs. 177 lakhs. Likewise, in respect of (iii) M/s. Kushal Solutions P. Ltd. the AO had issued notice u/s. 133(6) which is placed at paper book page 43, and reply to it dated 21.10.2014 is found placed at page 61 of paper book along with all details, viz., bank statement, acknowledgement of return filing, source, copy of audited accoun....
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....irector of assessee company appeared before AO on 25.11.2016 and AO duly recorded his statement which is found placed at page 4-6 (Vol. II paper book) and also filed document in addition to the documents filed during the first round mentioned (supra) at para 6(h) - (i) copy of passport (refer page 10 of paper book), (ii) Return of Income for AY 2016-17 (page 8 of paper book) which shows that total income was to the tune of Rs. 29,22,225/-, (iii) PAN Card, (iv) Balance Sheet etc. (page 17 of paper book). Likewise, Shri Sandeep Khandelwal, director of assessee company as well as that of M/s. Kushal Solutions Pvt. Ltd. also appeared before AO on 25.11.2016 whose statement was recorded by AO which is found placed at pages 27 to 30 of paper book and he also filed documents like the other director, and filed the return of income for AY 2015-16 (refer page 32), PAN Card (refer page 33), passport (refer pages 35-36) and also filed before the AO the following details: i) Master data of M/s. Kushal Solutions Pvt. Ltd.; ii) PAN Card of M/s. Kushal Solutions Pvt. Ltd. iii) MOA/AOA of M/s. Kushal Solutions Pvt. Ltd iv) Alltoment advice of M/s. Kushal Solution....
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....us, the AO after summoning the individual share holders and directors of the share holding corporate entities and after recording their statements and after going through the documents submitted before him, have framed the reassessment order giving effect to the first revisional order of Ld. Pr. CIT wherein the AO accepted the identity, creditworthiness and genuineness of the shareholders. This reassessment framed by the AO has been interfered by the ld. Pr. CIT by this impugned second revisional order. Before the impugned order was passed, the ld Pr CIT had issued SCN proposing his desire to interfere u/s. 263 of the Act (supra). However, we do not find the Ld. Pr. CIT alleging nonadherence by AO to his specific directions passed on 10.06.2016 [i.e, First Round of Revisional order]. Once the AO has reassessed pursuant to the revisional order wherein specific directions were given to the AO while framing the reassessment on the share capital and premium collected by the assessee company, the Ld. Pr. CIT ought to have pointed out where the AO faulted with or which specific directions of his has been ignored by AO, which we find the Ld. Pr. CIT has not touched upon or is found to be ....
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....ivities of the business of making/manufacturing fly ash bricks. We note that the share capital infused into the company has yielded result. And moreover the investor companies were group companies and shares allotted this year was to existing shareholders and only new shareholders was the father of a director. As stated earlier, the promoter and group companies found potential of growth in the business and had made the investment and premium which was agreed upon mutually by all the existing shareholders taking into consideration the expansion and future return expected of it. After appreciating these facts and taking into consideration the financial results of the assessee company as on the date of reassessment order, the AO had accepted the genuinity of the transaction, so nothing turns around in respect of this fault raised by the Ld. Pr. CIT. (c) The next fault found by the Ld. Pr. CIT is that the AO failed to examine the rationale behind the premium. From the aforesaid reasons (supra) (b), the AO has accepted the transaction which on the factual background is a probable view. (d) The other fault noted by Ld. Pr. CIT is that the AO failed to collect relevant evidences ....
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....ma facie suffers from independent and adequate enquiry. We do not countenance this allegation of the Ld. Pr. CIT. We have already discussed in detail about how the AO has called the individual share holders and the directors of the corporate shareholders and recorded their statements and gone through the voluminous documents filed by the assessee. Thus, the shareholders had discharged the onus on it to prove the identity, creditworthiness and genuinity of the share transaction who are none other than the promoters, directors and group companies and the AO after examining and satisfying himself about the share capital and premium has accepted it. Thus it is noted that independent and adequate enquiry was made and further it is not pointed out by Ld. Pr. CIT as to what further enquiry was needed or how the enquiry made by AO is wrong, without which in the facts of the case as discussed supra, the ld Pr CIT cannot term the order of AO as erroneous. 14. Further, we note that the Ld Pr CIT in the impugned order u/s 263 concluded that there was lack of enquiry. We also take note that while he proposed to interfere u/s. 263 of the Act, he had opined that there was no detailed or ind....
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....s about the identity, creditworthiness and genuineness of the transaction as well as the source of the investment etc. So, from the aforesaid actions carried out by the AO during the reassessment proceeding cannot be found fault with for lack of enquiry and thus, we note that AO has discharged his duty as an Investigator as per the direction of Ld. Pr. CIT dated 10.06.2016 u/s. 263 of the Act (First 263 order) and further we note that the Ld. Pr. CIT while issuing the Show Cause Notice while exercising his revisional jurisdiction for second time has not made even a whisper about the non-compliance/failure on the part of AO in respect of the specific direction given by the Ld. Pr. CIT dated 10.06.2016 while setting aside the original assessment order passed by the AO dated 20.03.2015. And in the impugned order the Ld. Pr. CIT has not found fault with the action of the AO in giving effect to the specific directions given by him while passing the first revisional order on 10.06.2016. Thus, we note that when the AO while framing the reassessment order pursuant to the specific direction of the Ld. Pr. CIT's order dated 10.06.2016 (first revisional order) has complied with the specific d....
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....explanation about the nature and source thereof or the explanation offered by him is not, in the opinion of the Assessing Officer, satisfactory, the sum so credited may be charged to income-tax as the income of the assessee of that previous year. " The phraseology of section 68 is clear. The Legislature has laid down that in the absence of a satisfactory explanation, the unexplained cash credit may be charged to income-tax as the income of the assessee of that previous year. In this case the legislative mandate is not in terms of the words 'shall' be charged to income-tax as the income of the assessee of that previous year". The Supreme Court while interpreting similar phraseology used in section 69 has held that in creating the legal fiction the phraseology employs the word "may" and not "shall". Thus the un-satisfactoriness of the explanation does not and need not automatically result in deeming the amount credited in the books as the income of the assessee as held by the Supreme Court in the case of CIT v. Smt. P. K. Noorjahan [1999] 237 ITR 570. We note that against the said decision of Hon'ble Gujarat High Court the special leave petition filed by the Revenue has also b....
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....oner of Income Tax (Appeal) and the Tribunal below followed the wellaccepted principle which are required to be followed in considering the effect of Section 68 of the Act and we thus find no reason to interfere with the concurrent findings of fact recorded by both the authorities." 19. We also rely on the decision of the Hon'ble Supreme Court while dismissing SLP in the case of Lovely Exports as has been reported as judgment delivered by the CTR at 216 CTR 295: "Can the amount of share money be regarded as undisclosed income under section 68 of the Income tax Act, 1961? We find no merit in this special leave petition for the simple reason that if the share application money is received by the assesseecompany from alleged bogus shareholders, whose names are given to the AO, then the Department is free to proceed to reopen their individual assessments in accordance with law. Hence, we find no infirmity with the impugned judgment. 20. We also rely on the decision of the Hon'ble Calcutta High Court while relying on the case of Lovely Exports, in the appeal of COMISSIONER OF INCOME TAX, KOLKATAIV Vs ROSEBERRY MERCANTILE (P) LTD., ITAT No. 241 of 2010 dated 10- 01....
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....ourt held as follows: "The Assessing Officer was of the view that the increase in share capital by Rs. 52,03,500/was nothing but the introduction of the assessee's own undisclosed funds/income into the books of accounts of the assessee company. The Assessing Officer accordingly treated the investment as unexplained credit under Section 68 of the Income Tax Act and added the same to the income of the assessee. Being aggrieved, the assessee filed an appeal before the Commissioner of Income Tax (Appeals) being the First Appellate Authority and contended that the Assessing Officer had no material to show that the share capital was the income of the assessee company and as such the addition made by the Assessing Officer under Section 68 of the Act was wrong. The learned Commissioner of Income Tax (Appeals) after hearing the department and the Assessee Company deleted the addition of Rs. 52, 03,500/to the income of the assessee company during the Assessment Year in question. The learned Commissioner of Income Tax Appeals found that there were as many as 2155 allottees, whose names, addresses and respective shares allocation had been disclosed. The ....
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....thiness and the genuineness of the transaction. The aforesaid judgment was rendered in the context of the factual background of the aforesaid case where, despite several opportunities being given to the assessee, nothing was disclosed about the identity of the shareholders. In the instant case, the assessee disclosed the identity and address and particulars of share allocation of the shareholders. It was also found on the facts that all the shareholders were in existence. Only nine shareholders subscribing to about 900 shares out of 6, 12,000 shares were not found available at their addresses, and that too, in course of assessment proceedings in the year 1994, i.e., almost 3 years after the allotment. By an order dated 2nd May, 2001, this Court admitted the appeal on three questions which essentially centre around the question of whether the Appellate Commissioner erred in law in deleting the addition of Rs. 52, 03, 500/to the income of the assessee as made by the Assessing Officer. We are of the view that there is no question of law involved in this appeal far less any substantial question of law. The learned Tribunal has concurred with the learned Commi....
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.... long the Assessing Officer was unable to arrive at a finding that the particulars given by the assessee were false, there was no scope of adding those money under section 68 of the Incometax Act and the Tribunal below rightly held that the onus was validly discharged. We, thus, find that both the authorities below, on consideration of the materials on record, rightly applied the correct law which are required to be applied in the facts of the present case and, thus, we do not find any reason to interfere with the concurrent findings of fact based on materials on record. The appeal is, thus, devoid of any substance and is dismissed summarily as it does not involve any substantial question of law. 23. So, in the light of the case laws discussed supra, we find that in the case in hand and from the details as discussed (supra) which emerges from the paper book filed before us as well as before the lower authorities, it is vivid that all the share applicants are (i) income tax assessee's, (ii) they are filing their return of income, (iii) the share application form and allotment letter is available on record, (iv) the share application money was made by account pay....
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....he transaction entered into by the assessee was a scheme for laundering black money into white money or accounted money and the Ld. CIT(A) ought to have held that the assessee had not established the genuineness of the transaction. " IT A No. 1669/KoI/2009CAM M/s. Global Mercantiles Pvt. Ltd 11 Held After hearing the learned counsel for the appellant and after going through the decision of the Supreme Court in the cases of CIT vs M/s Lovelv Exports Pvt Ltd, we are at one with the tribunal below that the point involved in this appeal is covered by the said Supreme Court decision in favour of the assessee and thus, no substantial question of law is involved in this appeal. The appeal is devoid of any substance and is dismissed. 3.4.2. In view of the aforesaid findings and respectfully following the decision of the apex court (supra) and Jurisdictional High Court (supra) , we find no infirmity in the order of the Learned CIT(A) and accordingly, the ground no.2 raised by the Revenue is dismissed. 4. The last ground to be decided in this appeal of the Revenue is as to whether the Learned CIT(A) is justified in deleting the addition u/s 68 of the Act made in re....
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....e application monies were received during the asst year under appeal. Aggrieved, the Revenue is in appeal before us by filing the following ground:- "That in the facts and circumstances of the case, the Ld. CIT(A) has erred in deleting the addition made u/s 68 in respect of the allotment of shares to 20 numbers of individual investors for an amount of Rs. 57 lakhs, where genuineness of the transactions and creditworthiness of the investors were not established." 4.3. The Learned DR prayed for admission of the additional ground raised before us and vehemently supported the order of the Learned AO. In response to this, the Learned AR fairly conceded to admission of this additional ground and vehemently supported the order of the Learned CIT(A). 4.4. We have heard the rival submissions and perused the materials available on record including the detailed paper book filed by the assessee. We find that the additional ground raised by the assessee separately before us vide its covering letter dated 9. 12.2011 is admitted as it appears to be a genuine and bonafide error of omission on the part of the Revenue from not raising this ground in the original grounds of....
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....hat the impugned issue is also covered by the decision of Hon'ble Calcutta High Court in the case of CIT vs Roseberrv Mercantile (P) Ltd in GA No. 3296 of 2010 ITAT No. 241 of 2010 dated 10.1.2011, wherein the questions raised before their lordships and decision rendered thereon is as under:" On the facts and in the circumstances of the case, Ld. CIT(A) ought to have upheld the assessment order as the transaction entered into by the assessee was a scheme for laundering black money into white money or accounted money and the Ld. CIT(A) ought to have held that the assessee had not established the genuineness of the transaction." Held After hearing the learned counsel for the appellant and after going through the decision of the Supreme Court in the cases of CIT vs M/s Lovely Exports Pvt Ltd, we are at one with the tribunal below that the point involved in this appeal is covered by the said Supreme Court decision in favour of the assessee and thus, no substantial question of law is involved in this appeal. The appeal is devoid of any substance and is dismissed." 6.2. We find that the issue is also covered by the decision of Hon'ble Delhi High Court in the cas....
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....date of receipt of Share applications from the Applicants, they furnished their addresses, which were recorded in the Register of Members. The AO observed that as per ROC records the addresses of the nine companies were different from the address as per Form filed with him. The AO issued notices u/s.133(6) to all the companies at the addresses furnished in Form 2 as filed with him, which were duly served at the given addresses. The A0 argued that the letters should not have been served at the given address by the assessee. He served a show a cause notice dated 09.12.2011 asking for the explanation from the assessee as to how the notices u/s. 133(6) could be served to these nine companies who had different address as per ROC records. The AO was explained vide letter dated 20.12.2011 of the assessee that those companies had changed their addresses since filing of Form 2 with the Registrar. Further, it was none of the business of the assessee to question the addresses of the applicants as long as they affirm the address. The applicants were duly incorporated bodies under the Companies Act. 1956 since long. They have been regularly filing their returns of income under the Inco....
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.... AO has made the addition of the share application money because all the nine companies were having the common address and the notice sent under section 133(6) was received by the single person. Accordingly the AO opined that the assessee has used its unaccounted money in the share application transactions. However we find that all the money received in the form of share capital is duly supported with the requisite document as discussed above. To our mind the basis on which the addition was made by the AO is not tenable. The Ld. DR also could not brought anything on record to controvert the findings of the Ld. CIT(A). In view of above we find no reason to interfere in the order of the Id. CIT(A). Accordingly the ground raised by Revenue is dismissed." (d) The ITAT Kolkata in ITO vs Cygnus Developers (I) P Ltd in ITA No. 282/Kol/2012 dated 2.3.2016. In this the decision the Ld. Tribunal held as follows: "6. On appeal by the assessee the CIT(A) deleted the addition made by the AO observing as follows "6) I have considered the submission of the appellant and perused the assessment order. I have also gone through the details and documents filed by the appe....
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.... learned DR, who relied on the order of AO. The learned counsel for the assessee relied on the order of CIT(A) and further drew our attention to the decision of Hon'ble Allahabad High Court in the case of CIT vs Raj Kumar Agarwal vide ITA No. 179/2008, dated 17. 11.2009 wherein the Hon 'ble Allahabad High Court took a view that non production of the director of a Public Limited company which is regularly assessed to Income tax having PAN, on the ground that the identity of the investor is not proved cannot be sustained. Attention was also to the similar ruling of the ITAT Kolkata bench in the case of ITO vs Devinder Singh Shant in IT A No.20BIKo112009 vide order dated 17.04.2009. 9. We have considered the rival submissions., We are of the view that order of CIT(A) does not call for any interference. It may be seen from the grounds of appeal raised by the Revenue that the Revenue disputed only the proof of identity of the shareholder. In this regard it is seen that for A Y.200405 Shree Shyam Trexim Pvt. Ltd., was assessed by ITO, Ward9( 4), Kolkata and the order of assessment u/s/143(3) dated 25.01.2006 is placed in the paper book. Similarly Navalco Commodities Pvt.....