AI OCR 
TaxTMI 
TaxTMI 
TaxTMI 
2021 (3) TMI 720
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....significant funds of its own for investment in the unlisted company like the assessee company. 3. On the facts and circumstances of the case the Ld. CIT(A) has erred in law deleting the addition of Rs. 4,84,00,000/- made by AO on a/c of unexplained share premium and Share capital received by assessee from Saumitra Investment and Finance Pvt. Ltd., Viva Trade-link Pvt. Ltd., Hingora Finvest Pvt. Ltd., Doldrum Investment and Finance Pvt. Ltd. & Oshin Investment and Finance Pvt. Ltd. As the assessee failed in proving the creditworthiness of the investors as all the investors are showing nominal income." 2. We have heard the Learned Representative of both the parties and perused the material available on record. 3 The facts of the case are that assessee has filed the return of income declaring total income of Rs. 3,93,976/- on 24.09.2008. Notice under section 143(2) was issued and served upon the assessee. A search under section 132 was conducted in Bhushan Steel Group of cases on 03.03.2010. The case of assessee was centralized with this case. The assessee attended the proceedings and filed necessary details before A.O. for completion of the assessment. The A.O. noted the relevan....
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....eports of the Investors. The A.O. noted that all the Investor Companies have shown meager income in their return of income. However, the A.O. on perusal of the balance-sheet of the Investors found their main source of fund as under : 1. M/s. Taranga Vyapar Private Limited Rs. 7,36,76,300/- 2. UDIT Vyapar Private Limited Rs. 8,80,28,900/- 3. Remo Engineering Works Pvt. Ltd., Rs. 5,53,23,000/- 4. Mysol Engineering Private Limited Rs. 4,21,99,000/- 5. Twenty First Century (India) Ltd., Rs. 23,25,00,000/- + Rs. 5,00,00,000/- 3.3. The A.O. on the basis of the above observed that all the Investors are based out in Kolkata and it is beyond the limit of human reasonableness that these Companies would invest such large amount in the assessee company. All the companies invested in assessee company do not have any significant income and their source of fund is share premium and share capital. The A.O, therefore, noted that creditworthiness of the creditors have not been established and genuineness of the transactions is also in doubt. The A.O. accordingly made addition of Rs. 4.96 crores on account of unexplained share capital/premium. 3.4. The A.O. on perusal of the detail....
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....e A.O. The amounts have been received through banking channel and parties have confirmed the transactions with the assessee. All are assessed to Income Tax and have sufficient funds to make investment in assessee company. The onus upon assessee have been discharged to prove identity of the Investors, their creditworthiness and genuineness of the transactions in the matter. The A.O. cannot ask the assessee to prove source of the source. The assessee relied upon several decisions of Hon'ble Delhi High Court and Hon'ble Supreme Court in support of the contention that addition is wholly unjustified. The Ld. CIT(A) called for the remand report on the submissions of the assessee and assessee also filed rejoinder to the same. It was submitted that field enquiry was not confronted to the assessee and all the Investors are existing parties. The Ld. CIT(A) considering the material on record including the remand report etc., deleted the entire addition. The findings of the Ld. CIT(A) in paras 3.4 and 4 of the impugned order are reproduced as under : "3.4. I have considered the assessment order, submissions of the appellant, inquiries made by the revenue and reply of Ld. AR thereto. Absence....
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....ere has to be conclusive proof for the revenue to reach this conclusion. In the absence of any such evidence, the addition made cannot be legally sustained and is deleted. 4. In the result, the appeal is allowed." 4. The Ld. D.R. relied upon the Order of the A.O. and submitted that A.O. had discussed the issue in detail, but, the Ld. CIT(A) deleted the addition in a casual manner. The Ld. D.R. relied upon Judgment of the Hon'ble Supreme Court in the case of PCIT vs., NRA Iron & Steel (P.) Ltd., [2019] 103 taxmann.com 48 [SC] and submitted that the issue is covered in favour of the Revenue by the aforesaid decision because the facts in this case are identical with the facts of the assessee's case. In both the cases share capital/ premium have been taken from Kolkata and Mumbai based companies where share premium was very high. The creditors have filed their return of income showing negligible income and no explanation is offered by the Investor companies applying at high premium for allotment of shares. In both the cases enquiry have been made by the A.O. and the Ld. CIT(A) did not advert to the field enquiry conducted by the A.O. The Ld. D.R. also submitted that addresses of the....
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.... 131 of the I.T. Act were served at the given address which have been responded by the parties also. Therefore, the report of Kolkata Income Tax Department has no value. The A.O. did not bring any evidence on record to controvert the documentary evidences furnished by the assessee. Whatever enquiry was conducted at the back of the assessee was not confronted to the assessee and no right of cross examination have been given, therefore, such material cannot be used against the assessee. Similarly, enquiry conducted through Mumbai Investigation Officer/Inspector was not confronted to assessee, therefore, such report of Inspector cannot be read in evidence against the assessee. All the material on record clearly prove that all the parties are existing and are assessed to tax and registered with the Registrar of Companies. 5.1. Learned Counsel for the Assessee submitted that facts of the case of assessee and NRA Iron & Steel (P.) Ltd., are clearly distinguishable on facts. The parties in both the cases are totally different. The creditworthiness of the Investors in both the case are totally different. The details filed by assessee in the present case have not been doubted by the A.O. T....
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....ces, we find no error or infirmity in the view taken by the Tribunal. No question of law, much less any substantial question of law, arises from the order of the Tribunal. Consequently, the appeal is dismissed. However, there shall be no order as to cost." 5.2. Learned Counsel for the Assessee submitted that the assessee's case is fully covered by Judgment of the Hon'ble Supreme Court in the case of PCIT vs., Adamine Construction (P) Ltd., 259 Taxman 131 Dated 28.09.2018 whereby the Hon'ble Supreme Court had dismissed the SLP filed by the Department against the Order Dated 12.02.2018 of Hon'ble Delhi High Court in the case of PCIT vs., Adamine Construction Pvt. Ltd., 99 taxmann.com 44. In this case the Hon'ble Delhi High Court has confirmed the Order of the Tribunal in the case of ACIT vs., Adamine Construction Pvt. Ltd., 87 taxmann.com 216 in which this assessee was also connected with Bhushan Group of cases and search conducted on 03.03.2010 and the case of assessee was also centralized. The Tribunal in this case held "where in order to prove genuineness of the share transaction and creditworthiness of the Investor companies, the assessee company furnished Investor companies....
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....und that this company has received share capital from different companies. However, A.O. has not mentioned any fact as to what material was recovered during the course of search in the case of Bhushan Steel Group of cases to point-out that assessee has received any bogus share capital/premium. The A.O. only on the basis of documentary evidences filed by the assessee came to know that assessee has received share capital and premium from the 10 Investor companies at Kolkata and Mumbai. The assessee produced copy of the confirmations, bank accounts, income tax returns, and annual reports of all the Investor companies before the A.O. The A.O. did not doubt any of the documentary evidences. All investments have been made by the Investor companies through banking channel and have sufficient amount in their bank accounts to make investment in assessee company. No cash was found to have been deposited in the bank accounts of the Investors. The A.O. did not dispute the identity of any of the Investor companies. All the Investor companies are registered companies and are assessed to tax also. Therefore, these companies being legal entities, their identity cannot be disputed by the authoriti....
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....lear that A.O. did not make any enquiry on the documentary evidences filed by the assessee and did not doubt the documentary evidences, therefore, initial onus upon assessee to prove creditworthiness and genuineness of the transaction have been discharged by the assessee. In support of the above findings, we rely upon the following decisions. 6.1. CIT vs. Fair Investment Ltd., 357 ITR 146 in which it was held that A.O. did not summon investors and did not make efforts. There is no finding that material disclosed was untrustworthy. The Appellate Authorities rightly deleted the addition. 6.2. Decision of Supreme Court in the case of CIT vs. Lovely Exports Pvt. Ltd., (2008) 216 CTR 195 in which it was held as under: "If the share application money is received by the assessee company 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, but it cannot be regarded as undisclosed income of assessee company." 6.3. Decision of Hon'ble jurisdictional High Court in the case of CIT vs. Kamdhenu Steel and Alloys Ltd., &Ors. 361 ITR 220 (Del.) in which it was held as under : "....
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.....No.21073 of 1999, in which it was held as under : "We have examined the position, we find that the shareholders are genuine parties. They are not bogus and fictitious therefore, the impugned order is set aside." 6.7. Decision of Hon'ble jurisdictional High Court in the case of Divine Leasing & Finance Ltd., 299 ITR 268, in which it was held as under : "No adverse inference should be drawn if shareholders failed to respond to the notice by A.O. 6.8. Decision of Hon'ble M.P. High Court in the case of CIT vs. Peoples General Hospital Ltd., (2013) 356 ITR 65, in which it was held as under : "Dismissing the appeals, that if the assessee had received subscriptions to the public or rights issue through banking channels and furnished complete details of the shareholders, no addition could be made under section 68 of the Income-tax Act, 1961, in the absence of any positive material or evidence to indicate that the shareholders were benamidars or fictitious persons or that any part of the share capital represented the company's own income from undisclosed sources. It was nobody's case that the non- resident Indian company was a bogus or non-existent company or that the amoun....
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....(Appeals) deleted the addition on the ground that the assessee had proved the existence of the shareholders and the genuineness of the transaction. The Income-tax Appellate Tribunal confirmed the order of the Commissioner of Income-tax (Appeals) as it was also of the opinion that the assessee had been able to prove the identity of the share applicants and the share application money had been received by way of account payee cheques. On appeal to the High Court: Held, dismissing the appeals, that the deletion of addition was justified." 6.10 Decision of Hon'ble jurisdictional High Court in the case of CIT vs. WinstralPetrochemicals P. Ltd., 330 ITR 603, in which it was held as under : "Dismissing the appeal, that it had not been disputed that the share application money was received by the assessee-company by way of account payee cheques, through normal banking channels. Admittedly, copies of application for allotment of shares were also provided to the Assessing Officer. Since the applicant companies were duly incorporated, were issued PAN cards and had bank accounts from which money was transferred to the assessee by way of account payee cheques, they could not be said to be no....
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....at the respondent had discharged the burden that lay on it, 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 arose. The High Court was right in refusing to state a case." 6.14. The Hon'ble Madhya Pradesh High Court in the case of PCIT vs., Chain House International Pvt. Ltd., 98 taxmann.com 47 [HC] [MP] [ 408 ITR 561 [HC] [MP] ] while deciding several appeals including the appeal of the Revenue in the case of Bharat Securities Pvt. Ltd., held that "once genuineness, creditworthiness and identity of the Investors are established, no addition could be made as cash credit on the ground that shares were issued at excess premium." The Departmental SLP have been dismissed by the Hon'ble Supreme Court reported in 113 taxmann.com 32 (SC) in the case of PCIT vs., Bharat Securities Pvt. Ltd., 6.15. The Ld. D.R. heavily relied upon Judgment of the Hon'ble Supreme Court in the case of PCIT vs., NRA Iron & Steel (P.) Ltd., (supra). In this case the Investors were being non-existing and have not having capacity to invest funds ....