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2020 (12) TMI 1050
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....ount and other documents were found during the course of search. The Ld. CIT(A) has erred in confirming the action of A.O. 2. That in the facts and circumstances of the case, the A.O has erred in making additions purely on surmises without any incriminating material on record. The Ld. CIT(A) has erred in confirming the action of A.O. 3. That in the facts and circumstances of the case, the A.O has erred in passing order under section 153A/143(3) of the Act for instant year without issuing notice u/s 143(2) of the Act and as such the order u/s 153A/143(3) of the Act is void-ab-initio. 4. That in the facts and circumstances of the case, the A.O has erred in making addition of Rs. 45,00,000 under section 68 of the Income Tax Act, 1961. The Ld. CIT(A) has erred in confirming the action of A.O. 4.a) That in the facts and circumstances of the case, the A.O has erred in concluding that the appellant company has failed to discharge its onus of proving the identity and creditworthiness of share applicants and genuineness of the transactions. The Ld. CIT(A) has erred in confirming the action of A.O. 4.b) The A.O has erred in observing that investor....
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....s) has no specific allegations against the appellant. 7. No show cause was ever issued during assessment proceedings which could give an indication that A.O. was not satisfied with respect to identity and genuineness of share application money received by the appellant company A.O has treated share application as unexplained cash credited u/s 68 of the Act purely on conjecture and surmises without bringing any positive materials on record and on pre-determined notion, surmises and on guess work only. The appellant has all along complied during the assessment proceeding (appeared seven times besides filing written submissions, replies etc.). The Ld. CIT(A) has erred in confirming the action of the A.O. 8.a) That in the facts and circumstances of the case, the Learned CIT(A) has relying on the aforesaid enquiry report without allowing proper opportunity to cross examine the persons on whose statements he has relied upon while passing appellate order. 8.b) That in the facts and circumstances of the case, the Learned CIT(A) has erred in ignoring the rejoinder to the enquiry report filed during appellate proceedings and proceeded to pass appellate order on pre....
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.... the extent of their shareholding interest. 2. You have mentioned that dividend was never declared by the company. We are part of Poddar Group who are aggressively expanding the business. That is the reason, perhaps, a number of investors reposed faith in us and investments were made by them looking at the future growth potentials. To our knowledge and belief an investor invests in equity generally to look for growth rather than dividend yield. 3..........The plant is having immovable properties whose market value is significantly higher than the book value. (Rs. in lakhs) Fin Year Turnover/Receipts Profit before dep. and tax Profit before tax Net profit Balance of Reserve and Surplus 31/03/2010 1708.29 18.11 8.94 5.94 606.81 31/03/2011 1966.22 24.25 15.55 11.18 662.10 Based on the above strong financial strength as per audited accounts, the company has issued shares at a premium. 4.Book value of shares at the end of the financial year: Date Face Value Book Value 31.03.2008 10/- 44.37 31.03.2009 10/- 46.17 31.03.2010 10/- 47.70 The value shall si....
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....the tune of Rs. 26.59 crore. Based on this analysis, the AO concluded that the share application money received from the subscriber companies defied all logic and the appellant did not discharge its onus of identity, creditworthiness and genuineness of the transaction leading to addition of this amount as unexplained cash credit u/s 68 of the Act. In the appellate proceeding, the appellant has controverted this finding on following arguments: i) No incriminating document were found or seized during search and seizure action pertaining to the share application money. Therefore, the AO was not within his jurisdiction to assess this issue u/s 153A of the Act. ii) The issue of shares application premium is a capital a/c transaction and not a revenue transaction and it cannot be subject matter of addition unless there is specific provision in the Act. The applicant has referred to the judgment of Bombay High Court in the case of Vodafone India Services Pvt Ltd Vs. Union of India 50 Taxmann.com 300. iii) The appellant has contended that the companies financial over the last few years were very sound which led the company to issue shares at a premium. i....
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....sessment order. The Hon'ble Kerala High Court in its decision in the case of St. Francis Clay Decotiles 70 Taxmann.com 234 has stated that neither u/s 132 nor u/s 153A, phraseology incriminating is used by the parliament. Thus, the appellant's contention is not sustainable on the issue of assessment of share application money in the proceeding u/s 153A of the Act. As regards the appellant's contention that share application premium is on capital account and as per the decision of Bombay High Court in the case of Vodafone India Services Pvt. Ltd, I find that in the current case the share application money and share premium was received from subscriber companies which were third parties and their identity, genuineness of transaction and creditworthiness was not proved by the appellant before the AO. These subscriber companies were mere share applicants whose credentials were under question. In the case of Vodafone India Services Pvt. Ltd the facts were different and distinguishable from the facts of the current case. With regard to the appellant's contention of violation of principle of natural justice, I find that the AO had required the appellant to prove the shar....
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....dy noted in our earlier para and is not being repeated for the sake of brevity. 9. We have heard both the parties and carefully gone through the submission put forth on behalf of the assessee along with the documents furnished and the case laws relied upon, and perused the fact of the case including the findings of the ld CIT(A) and other materials available on record. We note that according to section 68 of the Income Tax Act, where any sum is found credited in the books of an assessee maintained for any previous year, and the assessee offers no explanation about the nature and source thereof or the explanation offered by him is not satisfactory in the opinion of the assessing officer, the sum so credited may be charged to income tax as the income of the assessee of that assessment year. The assessing officer may consider such sum as cash credit due to lack of sufficient explanation. It is well known that provisions of section 68 have been introduced into the taxing enactments step by step in order to plug loopholes. Even long prior to the introduction of section 68 of the Act, in the statute book, courts had held that where any amounts were found credited in the books of the a....
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....profit and loss account and Balance Sheet. (c). Bank statement for the F.Y. 2010-11 relating to A.Y. 2011-12 indicating the payment made and the source of fund. (d) Share Application money was paid by Ch.No.000045, drawn on HDFC bank, Rs. 45,00,000/0. (e). Share Allotment Letters (f). The above transaction was made by the share subscribing company out of the amount received from M/s Lavender Tie-up Pvt Ltd, vide RTGS dated 16.12.2010 of Rs. 45,00,000/-. (g) Transaction with the assessee was duly highlighted in the bank statement (h) Copy of Income tax return acknowledgement. (i) Evidences of source of source of the share holders j) PAN Number(address proof) All these evidences are available in the paper book from pages 96-119 of the paper book, which were submitted before the assessing officer. 11. Before addressing the legal issue involved in this case, we would like to bring on record the various documents relating to the assessee company to justify the share premium received by it, which are available in the paper book and ld Counsel submitted the same before the Bench. The ld. Counsel submitted before....
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....e the AO, at the cost of repetition, are reproduced below: (a) Income Tax Return of the share subscribing company, A.Y.2011-12. (b) Audited Accounts of the share subscribing company, that is copy of audit report, profit and loss account and Balance Sheet. (c). Bank statement for the F.Y. 2010-11 relating to A.Y. 2011-12 indicating the payment made and the source of fund. (d) Share Application money was paid by Ch.No.000045, drawn on HDFC bank, Rs. 45,00,000/0. (e). Share Allotment Letters (f). The above transaction was made by the share subscribing company out of the amount received from M/s Lavender Tie-up Pvt Ltd, vide RTGS dated 16.12.2010 of Rs. 45,00,000/-. (g) Transaction with the assessee was duly highlighted in the bank statement (h) Copy of Income tax return acknowledgement. (i) Evidences of source of source of the share holders j) PAN Number (address proof), documents filed with ROC. 13. The Ld. Counsel submitted that the details of PAN, IT Acknowledgment, and the Form 18 furnished by the share applicant with the ROC duly proved the identity of the share subscriber. The Ld. Counse....
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.... it has past accumulated profits and very good track record. The assessee company has been earning profit since a long and has goodwill in the market.It is noted that the all the requisitioned documents were furnished before the AO which substantiated the transaction between the assessee company and the share applicants. It is therefore not a case where the documents sought from the applicant to examine the transaction were not available before the AO. The assessee has proved the identity, creditworthiness and genuineness of the transaction. We note that in such a case the Hon'ble Apex Court in the case of Orissa Corpn. (P) Ltd. (supra) 159 ITR 78 and the Hon'ble Gujarat High Court, in the case of Dy. CIT v. Rohini Builders [2002] 256 ITR 360 /[2003] 127 Taxman 523, has held that onus of the assessee (in whose books of account credit appears) stands fully discharged if the identity of the creditor is established and actual receipt of money from such creditor is proved. In case, the Assessing Officer is dissatisfied about the source of cash deposited in the bank accounts of the creditors, the proper course would be to assess such credit in the hands of the creditor (after ma....
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....book shall in all legal proceedings be received as prima facie evidence of the existence of such entry, and shall be admitted as evidence of the matters, transactions and accounts therein recorded in every cases where, and to the same extent as, the original entry itself is now by law admissible, but not further or otherwise." 16. Following the said provisions, the co-ordinate bench of Allahabad Tribunal in the case of Anand Prakash Agarwal reported in 6 DTR (All-Trib) 191 held as under:- "The question that remains to be decided now is whether the subject matter of transfer was the asset belonging to the transferor/donors themselves. There is enough material on record which goes to show that there were various credits in the bank accounts of the donors, prior to the transaction of gifts, which undisputedly belonging to the respective donors themselves, in their own rights. No part of the credits in the said bank' accounts was generated from the appellant and/or from its associates, in any manner. The certificates issued by the banks are construable as evidence about the ownership of the transferors or their respective bank accounts, as per s.4 of the Bankers' Bo....
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....the assessee and the creditor nor does the wording of section 68 indicate that section 68 does not authorize the Revenue Department to make inquiry into the source(s) of the credit and/or sub-creditor. The language employed by section 68 cannot be read to impose such limitations on the powers of the Assessing Officer. The logical conclusion, therefore, has to be, and we hold that an inquiry under section 68 need not necessarily be kept confined by the Assessing Officer within the transactions, which took place between the assessee and his creditor, but that the same may be extended to the transactions, which have taken place between the creditor and his sub-creditor. Thus, while the Assessing Officer is under section 68, free to look into the source(s) of the creditor and/or of the sub-creditor, the burden on the assessee under section 68 is definitely limited. This limit has been imposed by section 106 of the Evidence Act which reads as follows: "Burden of proving fact especially within knowledge.-When any fact is especially within the knowledge of any person, the burden) of proving that fact is upon him. " ******** What, thus, transpires from the above ....
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.... which took between the creditor and sub-creditor and/or creditworthiness of the sub- creditors, for, these aspects may not be within the special knowledge of the assessee." ********** " ... If a creditor has, by any undisclosed source, a particular amount of money in the bank, there is no limitation under the law on the part of the assessee to obtain such amount of money or part thereof from the creditor, by way of cheque in the form of loan and in such a case, if the creditor fails to satisfy as to how he had actually received the said amount and happened to keep the same in the bank, the said amount cannot be treated as income of the assessee from undisclosed source. In other words, the genuineness as well as the creditworthiness of a creditor have to be adjudged vis-a-vis the transactions, which he has with the assessee. The reason why we have formed the opinion that it is not the business of the assessee to find out the actual source or sources from where the creditor has accumulated the amount, which he advances, as loan, to the assessee is that so far as an assessee is concerned, he has to prove the genuineness of the transaction and the creditworthiness of....
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....ave been, under the law, treated as the income from the undisclosed sources of the assessee himself, when there was neither direct nor circumstantial evidence on record that the said loan amounts actually belonged to, or were owned by, the assessee. Viewed from this angle, we have no hesitation in holding that in the case at hand, the Assessing Officer had failed to show that the amounts, which had come to the hands of the creditors from the hands of the sub-creditors, had actually been received by the sub-creditors from the assessee. In the absence of any such evidence on record, the Assessing Officer could not have treated the said amounts as income derived by the appellant from undisclosed sources. The learned Tribunal seriously fell into error in treating the said amounts as income derived by the appellant from. undisclosed sources merely on the failure of the subcreditors to prove their creditworthiness." 18. In the case of CIT Vs Jalan Hard Coke Ltd (95 taxmann.com 330), the Hon'ble Rajasthan High Court noted that the assessee had furnished the details of the share applicants but expressed its inability to produce the share applicants before the AO for examination. The Hon....
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....Act, the Assessing officer should enquire from the Assessing Officer of the creditor as to the genuineness" of the transaction and whether such transaction has been accepted by the Assessing officer of the creditor but instead of adopting such course, the Assessing officer himself could not enter into the return of the creditor and brand the same as unworthy of credence. So long it is not established that the return submitted by the creditor has been rejected by its Assessing Officer, the Assessing officer of the assessee is bound to accept the same as genuine when the identity of the creditor and the genuineness" of transaction through account payee cheque has been established. We find that both the Commissioner of Income Tax (Appeal) and the Tribunal below followed the well-accepted 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." 21. Our attention was also drawn to the decision of the Hon'ble Supreme Court while dismissing SLP in the case of Lovely Exports as has been reported as judgment delivered ....
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....earlier, the Tribunal below dismissed the appeal filed by the Revenue. After hearing the learned counsel for the appellant and after going through the decision of the Supreme Court in the case of Cl. T. vs. M/s. Lovely Exports Pvt. Ltd. [supra], 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. 23. Our attention was also drawn to the decision of the Hon'ble High Court, Calcutta in the case of Commissioner Of Income Tax vs M/s. Nishan Indo Commerce Ltd in ITA No. 52 of 2011 dated 2 December, 2013 wherein the Court 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 aggr....
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.... Income Tax Act arbitrarily and illegally and in any case without giving the assessee adequate opportunity of representation and/or hearing. Learned Tribunal agreed with the factual findings of the learned Commissioner and accordingly the learned Tribunal dismissed the appeal of the Revenue and affirmed the decision of the learned Commissioner. Mr. Dutta appearing on behalf of the petitioners cited judgment of the Division Bench of this Court in Commissioner of Income Tax Vs. Ruby Traders and Exporters Limited reported in 236 (2003) ITR 3000 where a Division Bench of this Court held that when Section 68 is resorted to, it is incumbent on the assessee company to prove and establish the identity of the subscribers, their credit worthiness 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 th....
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....ants Pvt Ltd (62 taxmann.com 192), the AO had added the share application monies treating it to be their unaccounted monies routed though accommodation entries since the shares were issued at a high premium. The Hon'ble Delhi High Court did not agree with this contention put forth by the Revenue, by observing as under: "Whether the assessee-company charged a higher premium or not, should not have been the subject matter of the enquiry in the first instance. Instead, the issue was whether the amount invested by the share applicants were from legitimate sources. The objective of section 68 is to avoid inclusion of amount which are suspect. Therefore, the emphasis on genuineness of all the three aspects, identity, creditworthiness and the transaction. What is disquieting in the present case is when the assessment was completed, the investigation report which was specifically called from the concerned department was available but not discussed by the Assessing Officer. Had he cared to do so, the identity of the investors, the genuineness of the transaction and the creditworthiness of the share applicants would have been apparent. Even otherwise, the share applicants particular....
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....ich we note that the monies have been directly paid to the assessee company by account payee cheques out of sufficient bank balances available in the bank accounts of the share applicant. It will be evident from the paper book that the assessee has even demonstrated the source of money deposited into their bank accounts, which in turn has been used by them to subscribe to the assessee company as share application. Hence the source of source is proved by the assessee in the instant case though the same is not required to be done by the assessee as per law as it stood/ applicable in this assessment year. The share applicant has confirmed the share application as well as the payments made to the assessee company, which are duly corroborated with their respective bank statements and all the payments are by account payee cheques. We note that section 68 of the Act provides that if any sum found credited in the year in respect of which the assessee fails to explain the nature and source shall be assessed as its undisclosed income. In the facts of the present case, both the nature & source of the share application received was fully explained by the assessee. The assessee had discharge....