TaxTMI 
TaxTMI 
2021 (6) TMI 199
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....e course of assessment proceedings, the assessee company could not satisfy the creditworthiness, identity of the alleged investors and genuineness of transaction remained unexplained? 2. On the facts and circumstances of the case, Ld. CIT(A) ought to have upheld the order of the assessing officer. 3. It is, therefore, prayed that the order of Ld. CIT(A) may be set aside and that of assessing office may be restored to the above extent." 2. The relevant material facts, as culled out from the material on record, are as follows. The assessee before us is a Private Limited Company engaged in the business of Real Estate Development and dealing in Land and Properties. It filed its return of income in respect of A.Y. 2012-13, declaring income of Rs. 31,53,480/-, on 09/09/2012. The same was processed by accepting the returned income. Subsequently, assessee`s case was selected for scrutiny and assessing officer framed the assessment under section 143(3) of that Act, on 31.03.2015. During the course of scrutiny proceedings, it was observed by the assessing officer that Assessee Company had received substantial amount of share application money during the year under consid....
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....above named assessee company for A.Y. 2012-13, it is observed that you have invested a sum of Rs. (Amount invested) towards share capital and premium of the above company. You are, therefore, requested to furnish the following:- (i) Copy of return of income along with enclosures, audit report and balance sheet for A.Y. 2011-12 & 2012-13. (ii) Copy of Bank statement for F. Y. 2011-12. (iii) Please submit a copy of your Bank book for the period one week before and one week after the transaction relating to investment in the above mentioned company with details of sources of funds. (iv) Copy of share certificate received by you. Notices u/s 133(6) of the IT Act was issued to all the above stated investors". 3. Assessing officer has received the response from the share applicant companies (Investors). Details relating to service of notices u/s 133(6) and gist of responses from the said investors is depicted in the following table: Name of Investor Whether notice u/s 133(6) served or not Whether reply to notice u/s 133(6) received or not FRANK MERCANTILE PVT.LTD Served Yes SEASON MULTITRADE PVT.LTD Served Yes ....
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....i Commodities P. Ltd. 60,000 60,00,000 5 Lona Mercantile P. Ltd. 89,000 89,00,000 6 Mascot Mutitrade P. Ltd. 20,000 20,00,000 7 Coral Multitrade P. Ltd. 10,000 10,00,000 8 Delight Landcorn P. Ltd. 40,000 40,00,000 Total 4,50,000 4,50,00,000 Learned DR contends that during the assessment stage notices u/s 133 (6) of the Act have been sent by assessing officer, to the eight share applicant companies, as per addresses given by the assessee and the said notices were not served on two share applicant companies. The ld DR pointed out that ld CIT(A) has fallen into serious errors by failing to appreciate that once the claim made by the assessee about the identity of the subscribers stands prima-facie disproved and found wrong by the assessing officer, the onus shifts to the assessee and it is this onus which the assessee has failed to discharge in the present case. The CIT(A) has merely gone by the submissions of the assessee by listing the various documents which were produced by the assessee in support of the identity of the investors, without appreciating the fact that the AO, has successfully discharged his pa....
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....the notices u/s 133(6) were not served, and in other six cases of share applicants, the notices were served and they have also responded to the said notices, by filing necessary details. The ld Counsel states that subsequently the said two share - holders too complied with the notices, by filing details on 27. 03. 2015. This way, ld Counsel claimed that assessee company has discharged his onus to prove the three ingredient of section 68 of the Act viz: identity, creditworthiness and genuineness of the transactions. Ld. Counsel also submits that in the hands of the share subscribing companies assessment has been framed under section 143(3) of the Act which were placed in the paper book submitted by the assessee and during the proceedings under section 143(3) of the Act, in the hands of the share subscribing companies, no additions were made. Thus, ld Counsel defended the order passed by the ld CIT(A). 6. We have heard both the parties and carefully gone through the submissions put forth on behalf of the assessee along with the documents furnished and the case laws relied upon, and perused the facts of the case including the findings of the ld. CIT(A) and other material brought on....
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....submitted bank book of ICICI Bank A/c No. 624605064230 (vide PB page no.39-45). Assessee also submitted the board resolution passed by it for issuing shares which is placed at paper book page no.46-48 of assessee`s paper book. The assessee company filed the board resolution issuing shares at premium, which is placed at paper book page 49-50. The assessee-company filed Form no.3, return of allotment of shares, filed with the Registrar of companies vide paper book 51-58. Assessee company filed member's register (vide PB No.59-66). These are the documents and evidences submitted by the assessee-company (share capital receiver company). 8. There are eight share applicant companies. The assessee-company has submitted following documents for each share applicant company: (1).In respect of share Applicant Company, Mills Commodities Pvt. Ltd: (i) Copy of Assessment Order passed u/s 143 for AY.2012-13, vide PB.67-70. (ii) Acknowledgement of return of income filed by the assessee, vide PB.71. Annual Report and audited financial statements, vide Pb.72-85. (iii) Share application form, vide Pb.86. (iv) Share Certificates, vide PB.87, (v) Board Resolution of the share appli....
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....on (Pb.230), Relevant Bank Statement (Pb.231-232), Relevant Bank Book (Pb.233) (7)In respect of share Applicant Company, Mascot Mulitrade Pvt. Ltd. Assessment Order passed u/s. 143(3) for A.Y. 2012-13 (Pb.234-236), Acknowledgment of return of income (Pb. 237), Annual Report along with Audited financial statements (Pb.238-258), Share Application Form (Pb.259), Share Certificates (Pb.260), Board Resolution (Pb.261), Relevant Bank Statement (PB.262-263), Relevant Bank Book (PB.264) (8)In respect of share Applicant Company, Lona Merchantile Pvt. Ltd. Acknowledgement of return of income (Pb.265), Annual report along with audited financial statements (Pb.266-278), Share application form (Pb.279-280), Share certificates (Pb.281-283), Board Resolution (Pb.284), Contra Confirmation of accounts (Pb.285), Relevant bank statement (Pb.286-290), Relevant bank book (Pb.291-293). 9. Learned Counsel claimed that by submitting these above noted plethora documents and evidences, the assessee company has proved identity, creditworthiness and genuineness of the share applicant companies. By submitting PAN Card, Board Resolution and share certificate, the company h....
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....Tax Act. On the contrary, the AO has just brushed aside these evidences without even a word on why they are not acceptable. It is a well settled Law that when an assessee has all the possible evidence in support of its claim, they cannot be brushed aside based on surmises. As evident from the assessment order, (vide page 5) the Id assessing officer issued notices u/s 133 (6) to all the eight share applicants. The Id AO mentions that, case of two share applicants, the notices u/s 133 (6) were not served, and these six cases of share applicants, the notices were served and they have responded to the said notices, by filing necessary details. On being confronted with this issue, the assessee asked for names of share applicants on whom notices were not served. It is seen that subsequently the said two share - holders too complied with the notices, by filing details on 27.03. 2015. The Id assessing officer in page no. 13 of his order, while discussing the issue of" Identity ' states as under:- "It would be worthwhile to mention here that notices u/s 133(6) have been sent as per addresses given by the assessee and the said notices have either come back unserved or no replies....
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....ulated from the Audited balance sheet as on 01.04.2011. The Id assessing officer has not found any defect in this nor has be given any contrary finding. It is seen from the balance sheet that, as on 31.03. 2011, the net worth of the assessee - company is Rs. 4.51 crores, and the number of shares is 4.6 lakhs, which works out to Rs. 98.05 per share. In view of this, the assessee is practically not charging any premium, over and above its book value. Hence, the observation of the Id assessing officer is without any factual basis. The Id AO also observed that, the assessee-company was not doing any business activity during the year. The Id AO has mistaken in this connection, as the assessee - company is engaged in the business of real estate development. In such case, there cannot be any day - to - day turnover and regular revenue from operations. In the previous year concerned, the assessee has purchased two pieces of land and have also paid advance for office space. The returned income is Rs. 31.50 lakhs. Hence, the observation of the Id assessing officer is incorrect on facts. 12. It was also noted by ld CIT(A) that all the share-applicant companies are assessed to tax and....
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....m all share applicants with details of share capital paid which contained details such as full addresses, permanent account numbers and tax jurisdiction of the depositors. The Tribunal further recorded that all payments were received by cheques and were credited in the bank account of the respondent; the share application forms contained all details of the depositors; their confirmations were clear with all addresses; and that they were on the departmental records as tax-payers. In the aforesaid factual background, the Tribunal was of the view that the respondent had sufficiently discharged its burden of explaining the same. The Tribunal further observed that the department has not brought any material on record to show that the depositors were bogus. According to the Tribunal none of the decisions relied upon by the revenue had held that the assessee was required to establish the credit worthiness of the share applicants strictly in the manner understood in the context of cash credits under section 68 of the Act. The Tribunal was of the view that the assessee had given the names and addresses of the share applicants, it was within the knowledge of the revenue that the sai....
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.... V. Deputy Commissioner of Income-Tax, 117 TAXMAN 25 (AMD.) (MAG.), held as follows: "...the assessee had discharged the initial onus which lay on it in terms of section 68 by proving the identity of the creditors by giving their complete addresses, GIR Numbers/Permanent Account Numbers and the copies of assessment orders wherever readily available. It had also proved the capacity of the creditors by showing that the amounts were received by the assessee by account payee cheques drawn from bank accounts of the creditors and the assessee was not expected to prove the genuineness of the cash deposited in the bank accounts of those creditors because under law the assessee can be asked to prove the source of the credits in its books of account but not the source of the source as held by the Bombay High Court in the case of Orient Trading Co. Ltd. v. CIT [1963] 49 ITR 723." 16. To conclude, in this case on hand, the assessee had discharged its onus to prove the identity, creditworthiness and genuineness of the share applicants, thereafter the onus shifted to AO to disprove the documents furnished by assessee, cannot be brushed aside by the AO to draw adverse view, cannot be ....