TaxTMI 
TaxTMI 
2018 (11) TMI 1835
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....ing the year. The assessee had, during the year issued 5,500 shares at a face value of Rs. 10/- at a premium of Rs. 190/- per share to six subscriber companies. Aggrieved the assessee carried the matter in appeal. The ld. First Appellate Authority granted relief. 3. Aggrieved, the revenue is in appeal before us. 4. We have heard rival contentions. On careful consideration of the facts and circumstances of the case, perusal of the papers on record, orders of the authorities below as well as case law cited, we hold as follows:- 5. The assessee company is in the business of construction for more than 15 years. This is not a paper company or a jamakharchi company. A perusal of the balance sheet dt. 31/03/2012, demonstrates that the assessee company has assets and investments of Rs. 12,16,88,053/-, against issued, subscribed and paid up capital of Rs. 16,75,000/-. The assessee received share application money from 6 companies. The Assessing Officer had issued summons u/s 131 to one Shri Pradip Kumar Jain, Director of the assessee company. The Assessing Officer directed that the Directors of these share subscribers companies be produced for verification. This was not done, bu....
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....ces against purchase and sale of shares. We find that the investible fund available with this company is Rs. 9,92,61,898/- as against the investment of Rs. 15 Lakhs/- only. In our view, the ld. CIT(A) was right in holding that this company has proved its identity, creditworthiness and genuineness of the transactions. Merely because this company raised capital during the year, the addition cannot be made in the hands of the assessee company, specifically when M/s. Tricon Business Pvt. Ltd, is also assessed to tax. c) M/s. Wilco Finexim Pvt. Ltd.:- This company invested an amount of Rs. 20,00,000/-, in the assessee company. The source of investment was explained as refund of advances against purchase and sale of shares. We find that the investible surplus available with this company is Rs. 20,00,90,645/- as against the investment of Rs. 20 Lakhs/- only. In our view, the ld. CIT(A) was right in holding that this company has proved its identity, creditworthiness and genuineness of the transactions. Merely because this company raised capital during the year, the addition cannot be made in the hands of the assessee company, specifically whenM/s. Wilco Finexim Pvt. Ltd, is also a....
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.... reserves which were several times more than the share subscription amount paid to the appellant. For example in the case of Alavel Finvest P Ltd. the company's own funds were Rs. 2968.04 lacs whereas the amount invested in the assessee's shares was only Rs. 20 lacs which in percentage terms was 0.67%. In case of PleasantSales P Ltd. the company's net owned funds were Rs. 768.54 lacs whereas investment in appellant share was Rs. 15 lacs, which in percentage terms of 1.95%. In case of Ritz Agencies P Ltd and Tricon Business P Ltd the investment was Rs. 15 lacs & 15 lacs respectively as opposed to their net owned funds of Rs. 2102.19 lacs & 992.62 lacs respectively. In percentage terms it was about 0.71% and 1.51% respectively. In the case of Wilco Finexim Pvt. Ltd. & Ideal Barter P Ltd. the net owned funds were Rs. 2000.90 lacs and Rs. 3022.21 lacs whereas investment in appellant's share was Rs. 20 lacs and 25 lacs, which in percentage terms only 1% and o0.82% respectively. From these fact I find that only a fraction of the net owned funds of the respective subscribing companies was investment in assessee's equity shares." 5.2. Thereafter, at from para 4.9 to 4.11, the ld. CIT(A)....
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....he information ordinarily required to be furnished by the share applicant in support of their subscription to appellant's share capital had already been provided in response to notice u/s 133(6). In view of these facts therefore I have no hesitation in holding that the assessee had discharged its onus of establishing the identity, creditworthiness & genuineness of the share applicants. 4.11. The PAN Details and IT Acknowledgments of the share subscribing companies also proved that each share subscribing company was assessed to tax and for AY 2012-13 being the year under consideration they were assessed in their own right. The facts and documents therefore supported the AR's contention that the assessee had established identity of all the six share subscribing companies. The A.R of the appellant also furnished copies of the bank statements of the respective share subscribing companies. Referring to the copies of the bank statements, the AR established that payment of subscription amounts were recorded in the bank statements of the respective companies. The entries in the bank statement proved that the share subscription amount was transacted through banking channel.....
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....the investment in the assessee company is around Rs. 88 Lakhs/-. In the case of Jai Hind Promoters Pvt. Ltd., the total assets are to the tune of Rs. 2,18,34,717/-, and the investment of the assessee company is around Rs. 1,25,00,000/-. In the case of Ninachal Barter Pvt. Ltd., the total assets are Rs. 2,32,26,565/- and the investment in the assessee company is around Rs. 46.20 Lakhs/-. As brought out by the ld. CIT(A), all these companies have given replies to the statutory notice u/s 133(6) of the Act. They have furnished copies of the income tax acknowledgements evidencing filing of the return of income by each one of them. Copy of the audited books of accounts including balance sheet, wherein such investments are reflected etc. have been filed as evidence After taking all these facts into account, the ld. CIT(A) at para 4.12. as concluded as follows:- "4.12. Considering the totality of the facts and circumstances of the case. I find substance in the arguments of the AR that the appellant has made its case that the identity of the share applicants are established beyond doubt and on enquiries made by the AO there was no adverse finding on this aspect. Admittedly, all th....
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....se of Commissioner of Income Tax v. Orchid Industries Pvt. Ltd. 397 ITR 136, have held that an addition cannot be made simply because a person has not appeared in compliance to notice u/s 131of the Act, when all the other requirements of the notices u/s 133(6) of the Act, has been complied with. Similar are the decision of this Bench of the Tribunal in the case of Income Tax Officer vs. Wiz-Tech Solutions Pvt. Ltd., ITA No.1162/Kol/2015 and Hon'ble Jurisdictional High Court in the case of Pr. CIT-1 vs. M/s. Steel Emporium Ltd., GA No. 3275 of 2016 in ITAT 354 of 2016. This Bench of the Tribunal under identical circumstances, discussed the issue at length, in the case of Five Star Vanijya Pvt. Ltd v. Deputy Commissioner of Income Tax, Circle-8, Kolkata in ITA No. 1120/Kol/2015, Assessment Year: 2010- 11, order dt. July 31st, 2018, and by relying upon a number of judgement of various Courts of law, held as follows:- "5. After hearing rival contention, perusing the papers on record, orders of the authorities below as well as case-law cited, we hold as follows:- The assessee in this case is not a paper company and is engaged in international and inland tradin....
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....d not examine the source of income of the said alleged creditors to find out whether they were credit-worthy or were such who could advance the alleged loans. There was no effort made to pursue the so-called alleged creditors. In those circumstances, the assessee could not do any further. In the premises, if the Tribunal came to the conclusion that the assessee had discharged the burden that lay on him, then it could not be said that such a conclusion was unreasonable or perverse or based on no evidence. If the conclusion was based on some evidence on which a conclusion could be arrived at, no question of law as such could arise." 6.3. Recently, the Hon'ble Jurisdictional High Court in the case of ld. Pr. CIT-1, Kolkata vs. M/s. Steel Emporium Ltd. in GA NO.3275 OF 2016 WITH ITAT NO.354 OF 2016, 14th May, 2018, held as follows:- "The third ground is on account of share application money. The assessing officer found that several of the applicants for issuance of further shares in the assessee shared the same 12, Waterloo Street address as the assessee and that one individual had accepted notices under Section 133(6) of the Act, though different rubber stamps were u....
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....t of Rs. 55,50,000 by furnishing copies of share application money, balance sheet, etc. of the parties mentioned above and asserted that the question of addition in the income of the assessee does not arise. This explanation of the assessee has been duly considered and found not acceptable. This entry remains unexplained in the hands of the assessee as has been arrived by the Investigation wing of the department. As such entries of Rs. 55,50,000 received by the assessee are treated as an unexplained cash credit in the hands of the assessee and added to its income. Since I am satisfied that the assessee has furnished inaccurate particulars of its income, penalty proceedings under Section 271(1)(c ) are being initiated separately. " The facts of Nova Promoters and Finlease (P) Ltd. (supra) fall in the former category and that is why this Court decided in favour of the revenue in that case. However, the facts of the present case are clearly distinguishable and fall in the second category and are more in line with facts of Lovely Exports (P) Ltd. (supra). There was a clear lack of inquiry on the part of the Assessing Officer once the assessee had furnished all the material whi....
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.... and after going through the decision of the Supreme Court in the case of CIT v. 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." 6.8. The Hon'ble Andhra Pradesh High Court in the case CIT vs. Lanco Industries Ltd. [2000] 242 ITR 357 (Andhra Pradesh), held as follows:- "Moreover, we fail to see how merely by reason of unsatisfactory explanation relating to the source of investment by the shareholders, the money invested on shares should be treated as income of the assessee. If the ostensible shareholders failed to explain the means of investment, that should have been treated as unexplained income in their hands. In order to add it to the income of the assessee there must be a further finding that in fact the shareholders were mere name-lenders and the money allegedly invested by them really belonged to the directors of the assessee-company. In the absence of a finding that the persons to whom the share certificate....