TaxTMI 
TaxTMI 
2021 (6) TMI 199
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....ompany 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 consideration towards share capital and share premium. The following tab....
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....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 VIRGO MERCANTILE PVT.LTD Served Yes Ml LI COMODITIES PVT. LTD Unserved NA LONA MERCANTILE PVT.LTD Unserved NA MASCOT MULTITRADE PVT. LTD Served Yes CORAL MULTITRADE PVT. LTD Served Yes DELIGHT LANDCORN PVT. LTD Served Yes After verification and analysis....
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....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 part of onus by returning a finding to the effect that the claim made by the assessee about the existence of these subscribers has been found to be wrong. Section 68 requires the three ingredients i.e. (i) identity of the lender/subscriber, (ii) Creditworthiness of the lender/subscriber and (iii) genuineness of the transaction. As per the innumerable cases decided on the issue, it is a settle....
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....ction 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 record. We note that according to section 68 of the 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 previous year. It is well....
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....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 applicant company, vide PB.89. (vi) Contra Confirmation of the accounts, vide Pb.90. (vii) Relevant bank statement of the share applicant company, vide Pb.91-92. (viii) Relevant bank book, vide Pb.93-94. (2)In respect of share Applicant Company,Frank Mercantile Pvt. Ltd. Assessment Order passed u/s 143(3) for A.Y. 2012-13 (PB.95-98), Acknowledgment of return of income (PB.99), Annual Report along with Audited financial statements (PB. 100-112), Share ....
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....ompany, 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 has proved the identity. By submitting bank statements, profit and loss account and detail of reserve and surplus, the assessee has proved the genuineness of the transaction, as the transaction took place through banking channels only. By submitting shareholders funds and details of reserve and surplus of the share applicant companies, which shows that share applicant companies have sufficient funds before making investment in the assessee-company, and this proves the creditworthiness of the transactions. This way, ld Counsel submits before the Benc....
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....ces, 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 have been received. The addresses which have been provided by the assessee, have also been found to be bogus during physical inquiry made by the department. Having regard to the facts of the case, identity in respect of the four entities is thus not proved....." This is contradictory to his observation in page no. 5 regarding notices u/s 133 (6) of the Act. The statement regarding physical verification appears all of a sudden, as there is no mention of any physical verification in the entire order or in the show cause notice. 11. During the appellate proceedings, the ld CIT(A) observed that in his show cause no....
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....ng 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 particularly in the assessment year 2012-13. Out of the eight share-applicants seven share applicants have been subject to scrutiny assessments u/s 143 (3) of the Act. The scrutiny assessments have no adverse inference. The scrutiny assessments conducted by respective AOs can be presumed to have been completed after considering all the issues arising from Profit & Loss account and balance sheet including new investments made in the year and the sources thereof. It is seen that, the share - applicant companies are based in Mumbai and do not bear common address. The Id assessing officer has not brought out any connection with ....
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....served 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 said share applicants were assessed to Income-tax, hence the burden was on the revenue to make further inquiry. The Tribunal placed reliance upon the decision of the Apex Court in the case of CIT v. Divine Leasing Finance Co. wherein it has been held that when the assessee company had given the name of the shareholders, the department was free to reopen their individual assessment in accordance with law. 5. The Tribunal further observed that in respect of Mangal Finance Limited, the said company was assessed to tax on department records; the copies of the application forms were submitted by the said company, which were at pages 3 to 14 of the paper book; all....