TaxTMI 
TaxTMI 
2021 (4) TMI 591
X X X X Extracts X X X X
X X X X Extracts X X X X
.... capital. Its authorized share capital for the year under consideration is Rs. 50 lakhs and the amount received through Share Capital of Rs. 42,12,500/- and Share Premium of Rs. 2,10,37,500/-. The assessee has filed details of share capital/premium received from 06 parties, out of which, 04 are Individuals, out of which, two are Directors and 02 corporate entities. The details of the same are noted in Para-3.1 of the assessment order. The assessee-company has filed the confirmation, balance-sheet, profit and loss account and bank statement of the 06 Investors. The A.O. issued notices under section 133(6) of the I.T. Act, 1961 to all the Investors and asked them to file copy of their ledger account, copy of their return of income and computation copy of their balance-sheet, profit and loss account for the assessment year under appeal and earlier years, how there was a contact with the assessee company ? whether the Directors are related to you ? bank statements, basis for making contributions in assessee company, copy of share application form, value of the shares at par or at premium, present status value of the share, correspondence with the assessee company, minutes books of B....
X X X X Extracts X X X X
X X X X Extracts X X X X
....ubmissions of the assessee is reproduced in the appellate order in which the assessee reiterated the facts stated before A.O. The assessee as regards identity of the Investor Companies stated that their PAN Card, copy of ITR and RBI Registration Certificate of their status as NBFC have been filed which proves their identity. As regards the creditworthiness of both the Investor Companies, audited accounts of 04 years have been filed before Assessing Officer along with their assessment orders under sections 143(3)/143(1) and their bank statements. Therefore, creditworthiness of the Investors are established. Genuineness of the transaction is proved by filing copy of Form No.2 along with challan and Annexure filed with the Registrar of Companies ["ROC"] for allotment of shares, confirmation of both the Investors along with bank statements, Board Resolution of both the Companies along with their Memorandum and Articles of Association and bank statements showing payments made to the assessee company and bank statements of the assessee to show amounts have been received through banking channel. The assessee also explained the source of funds with the Investor Companies and in case of M/s....
X X X X Extracts X X X X
X X X X Extracts X X X X
....editworthiness of the share applicants and genuineness of the transactions of share application money / share capital / premium u/s 68 of the I.T. Act, and thereby discharged its primary onus. The AR further contended that the appellant furnished the details of source of source for receipt of share application money from the alleged two entities, during the course of assessment proceedings. 3.3. From the assessment order, it is observed that the AO also issued notices u/s 133(6) to the share holders to file confirmations, balance sheets, copies of bank accounts and other details. The notices issued to the aforementioned 2 corporate entities were returned back un-served, though subsequently replies were received by the A.O. from these two companies, as mentioned at page-5 of the assessment order. Later on, the AO issued summons u/s 131 of the I.T. Act to the directors of the appellant company and also to the directors of the 2 corporate shareholder companies. Subsequently, vide show cause dated 16/03/2015, the AO confronted the appellant and asked to produce directors of the shareholder companies as summons u/s 131 of the I.T. Act could not be served on them. 3.4. ....
X X X X Extracts X X X X
X X X X Extracts X X X X
.....3. The present case of the assessee company presents the same set of circumstances. Despite being accorded sufficient opportunities to present its case, the assessee company (did not present the concerned investors which has resulted into restricting the scope of enquiries which could have been undertaken at this end. By not discharging its onus as cast upon it by section 68, the assessee company has hampered the assessment proceedings. Perhaps the assessee company was aware of the fact that if any investigations are to be carried out, then real facts would emerge and the genuineness of the transactions would be revealed. Further the financials of the assessee company also not justified the huge share premium received. 4.4. Further it is concluded that since it is known fact that various companies and group of companies are involved in financial manipulation and providing accommodation entries. In the present case also circumstances indicate that the assessee was not having any adequate financial creditahility as per the return filed hy the assessee. The assessee has also not discharged the onus of establishing the identity, genuineness and creditworthiness of th....
X X X X Extracts X X X X
X X X X Extracts X X X X
....emium is initially on the assessee and once an assessee has discharged its primary onus, the burden shifts on the Revenue. In the present case, the appellant had duly discharged its onus by furnishing necessary evidence to establish the identities and creditworthiness of the shareholders and genuineness of the transactions of receipt of share premium / share application money and issue of shares to the two corporate shareholders. 3.11. The Assessing Officer has himself mentioned in the assessment order that in response to notices issued u/s 133(6). the share applicants have furnished replies along with documentary evidences and in response to summon u/s 131, director of one of the share applicant companies as well as of the appellant company appeared for personal deposition and their statements were recorded, which is part of assessment record. The AO has not brought anything on record to dispute the facts/details furnished by the appellant despite conducting independent enquiries in terms of section 133(6) / 131 of the I.T. Act. 3.12. The appellant had produced before the A.O. the Permanent Account Numbers (PANs), certificates of incorporation of the two....
X X X X Extracts X X X X
X X X X Extracts X X X X
....the Hon'ble Jurisdictional High Court has held in the case of CIT vs. Value Capital Services (P) Ltd. 307 ITR 334 (Delhi) that additional burden was on the department to show that even if the applicants did not have the means to make the investment, the investment made by them actually emanated from the coffers of the assessee to enable it to be treated as the undisclosed income of the assessee, which has not been done in the present case. 3.13. In my considered view, on the above facts of the appellant's case and documents / evidences placed on record, case laws relied upon by the appellant and undisputed fact that the share applicants duly complied with the notices / summons u/s 133(6) / 131 of the I.T. Act by filing their replies and directors of the share applicant company also came for personal deposition, so by furnishing documents / evidences to prove the identities and creditworthiness of the share applicants and genuineness of transactions of share capital / premium issued during the year, the onus on the appellant stands discharged u/s 68 of the I.T. Act. 3.14. Accordingly, this appeal of the appellant deserves to be allowed and the addition of Rs. 2....
X X X X Extracts X X X X
X X X X Extracts X X X X
....erve Bank of India as NBFC Company and has Registration Certificate in force. He has explained the source of making investment in assessee company in his statement. The details of the fund is also explained. The reasons for making investment in assessee company is also explained in his statement. Learned Counsel for the Assessee also referred to written statement filed before the Ld. CIT(A) in which assessee has clearly explained that shares were issued at premium due to the reason that assessee company has purchased land during financial year under consideration and Delhi Government issued a Notification in the Master Plan which was about to be implemented. Under that Master Plan Government proposed to develop dwelling houses in low density area near Village-Simphola. Therefore, looking at the good future, returns of investment and business proposals, shareholders of the assessee company agreed to pay premium on the shares. The balance-sheet of the assessee for the assessment year under appeal is also referred which shows that in assessment year under appeal assessee company has made investment in property of Rs. 2,40,85,100/-. Learned Counsel for the Assessee, therefore, su....
X X X X Extracts X X X X
X X X X Extracts X X X X
.... 133(6). In the case of remaining 02 Investors i.e., M/s Avanti Vyapaar Pvt. Ltd and M/s Golden Vyapaar Pvt. Ltd., the A.O. has issued notices under section 133(6) of the I.T. Act, 1961 to both the Investors, in response to which, both the Investors have filed reply before A.O. confirming transaction with the assessee company. Therefore, on same basis A.O. should not have made similar addition. The assessee filed confirmation of both the Investors, their balance-sheet, bank statements, their assessment orders, copy of Income Tax return, ROC Certification, PAN Card, Board Resolution etc., The documentary evidences filed on record have not been doubted by the A.O. The A.O. on going through the replies filed by both the Investor Companies directly before him found that both the Investor Companies have shown meager income in their return of income for the assessment year under appeal. This is the sole reason which prompted the A.O. to doubt the creditworthiness of the Investors and their genuineness of the transaction in the matter. The A.O. did not doubt the identity of both the Investor Companies. The A.O. also did not doubt their identity because both the Investor Companies are a....
X X X X Extracts X X X X
X X X X Extracts X X X X
....ited in order to prove genuineness of the transactions. In so far creditworthiness of the creditors were concerned, Tribunal recorded that bank accounts of the creditors showed that the creditors had funds to make payments for share application money and in this regard, resolutions were also passed by the Board of Directors of the three creditors. Though, assessee was not required to prove source of the source, nonetheless, Tribunal took the view that Assessing Officer had made inquiries through the investigation wing of the department at Kolkata and collected all the materials which proved source of the source. 22. In NRA Iron & Steel (P) Ltd (supra), the Assessing Officer had made independent and detailed inquiry including survey of the investor companies. The field report revealed that the shareholders were either non-existent or lacked creditworthiness. It is in these circumstances, Supreme Court held that the onus to establish identity of the investor companies was not discharged by the assessee. The aforesaid decision is, therefore, clearly distinguishable on facts of the present case. 23. Therefore, on a thorough consideration of the matter, we are of the v....
X X X X Extracts X X X X
X X X X Extracts X X X X
....(A) in his findings have also categorically found that the enquiry report have not been confronted to assessee, therefore, it cannot be read in evidence against the assessee. No material is produced before us to contradict the finding of fact recorded by the Ld. CIT(A). Considering the above evidence and material on record, it is clear that A.O. did not make any enquiry on the documentary evidences filed by assessee and did not doubt the documentary evidences filed by assessee, therefore, initial onus upon the 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. 6.2. 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. 6.3. 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 n....
X X X X Extracts X X X X
X X X X Extracts X X X X
....d details of share applicants i.e. copy of the PAN, Assessment particulars, mode of amount invested through banking channel, copy of resolution and copies of the balance sheet. The AO failed to conduct any scrutiny of the document, the departmental appeal was accordingly dismissed. 6.7. Decision of the Hon'ble Supreme Court in the case of Earth Metal Electric Pvt. Ltd., vs. CIT dated 30th July, 2010 in SLP.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." 6.8. 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. 6.9. 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 o....
X X X X Extracts X X X X
X X X X Extracts X X X X
.... in the share capital. The assessee offered a detailed explanation. However, according to the Assessing Officer, the assessee failed to explain the addition of share application money from five of its subscribers. Accordingly, the Assessing Officer made an addition of Rs. 35,50,000/- with the aid of section 68 of the Act, 1961 on account of unexplained cash credits appearing in the books of the assessee. However, in appeal, the Commissioner of Income-tax (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." 6.11. 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....
X X X X Extracts X X X X
X X X X Extracts X X X X
....ees. Their index numbers were in the file of the Revenue. The Revenue, apart from issuing notices under section 131 at the instance of the respondent, did not pursue the matter further. The Revenue did not examine the source of income of the said alleged creditors to find out whether they were creditworthy. There was no effort made to pursue the so-called alleged creditors. In those circumstances, the respondent could not do anything further. In the premises, if the Tribunal came to the conclusion that 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." 6.15. 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 Invest....