TaxTMI 
TaxTMI 
2021 (11) TMI 674
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....en sou motu cognizance of the issue arising out of the challenge faced by the country on account of Covid-19 Virus and resultant difficulties that may be faced by litigants across the country in filing their petitions/applications/suits/appeals/other proceedings within the period of limitation prescribed under the general law of limitation or under Special Laws (both Central /or State) and vide order dated 23.03.2020 has extended the period of limitation prescribed under the general law or special laws whether compoundable or not with effect from 15th March, 2020 till further order/s. The order dated 23.03.2020 was extended from time to time. Hon'ble Supreme Court vide order dated 8th March, 2021 ordered that in computing the period of limitation for any suit, appeal, application or proceeding, the period from 15.03.2020 till 14.03.2021 shall stand excluded and further granted 90 days limitation period from 15.03.2021. In view of the above orders of the Hon'ble Supreme Court, the appeal of the assessee is treated as filed within the limitation period. 3. In this appeal, the assessee has taken the following grounds of appeal: "1. That on the facts and in the circumstance....
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....ne by the previous AO i.e. ITO, Ward-4(4), Kolkata and has issued notices to the assessee as well as to the share subscribers which, as noted in the Assessment Order, were duly complied with. Since the then AO was satisfied with the relevant evidences and explanations submitted by the assessee as well as the share subscribers, therefore, he did not proceed further with more enquiries. However, after transfer of the case to ITO, Ward-1(3), Kolkata, he started afresh investigation. He has, further submitted that the observations made by the AO in para 1.4 of the order that the directors of the assessee did not appear personally before him was not correct. That, in fact, Md. Rejaul Haque, director of the assessee company appeared before the AO on 20.02.2015 with all the supporting documents were furnished. He further requested the AO to issue summons to the share subscribers u/s 131 of the Act as it was not possible for him to produce them all in person before the AO. However, the ld. AO did not mark his attendance and directed him to file the documents in the receiving section of his office. Accordingly, the director of the assessee company submitted the required documents including ....
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....nts for the year and even source of investment was also provided. The ld. Counsel for the assessee in this respect has relied upon pages 1 to 425 of the paper book. He has further submitted that instead of pointing out any defect or discrepancy in the evidences and the details furnished by the assessee, the subsequent AO i.e. ITO, Ward-1(3), Kolkata had proceeded to take adverse inference only on the ground that the directors of the subscriber companies did not appear personally before the AO. He has further submitted that the subscriber companies were investment companies, therefore, the low business income was not a relevant factor to doubt about the genuineness of the transaction. 5.1. Apart from the above oral submissions, the ld. Counsel for the assessee has also filed written submissions, the relevant part of which is reproduced below" "18. Here, it is humbly submitted during the course of assessment the preceding learned AO issued a notices u/s 143(2) and 142(1) of the Act and requisitioned the assessee to submit the complete details of the share capital raised during the year. In response to the notices issued of the Act, the assessee filed its return of income,....
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...., Director of the company appeared before the learned AO on 20-02-2015 with all the supporting documents to substantiate the identity and creditworthiness of the parties and the genuineness of the transactions. He also asked the learned AO to exercise his plenary powers independently to issue summons u/s 131 of the Act to the share subscribing companies and that the assessee company cannot produce them. On such premise, the learned AO refused to take his attendance and directed him to file the documents in the receiving section of his office. Accordingly, the Director of the assessee company submitted the ITR acknowledgment, relevant Bank statements and copy of the audited accounts of all the 21 parties. 22. However, the learned ITO, Ward-1(3), Kolkata completely ignored the documents filed by the assessee and alleged that the Directors of the assessee company failed to appear on the date fixed for hearing to explain the credit in the books of the assessee. 23. Thereafter, as per the assessment order, summon were issued to all the share subscriber companies u/s 131 of the Act. With respect to the summon issued u/s 131 of Act on the share applicant companies, the l....
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....changes in the addresses of the parties in cases where the notices were purportedly received back unserved. No Inspectors were deputed to conduct any field enquiries to verify the existence of the parties at the given address. Here, it may also be noted that in the assessment order, at page 1, para 1.1, it has been alleged by the succeeding learned AO that notice u/s 142(1) of the Act was issued to the assessee company on 13-01-2015 but the same was returned unserved by the postal authorities whereas notices u/s 143(2) and 142(1) of the Act by the preceding learned AO were duly served on the assessee. Thus, this creates a serious doubt whether such notice u/s 142(1) of the Act and summon u/s 131 of the Act were actually issued to the assessee and all the share applicant companies respectively. 26. Having said that, it is further submitted that on going through the financials of the share applicant companies and the return of income filed by them, the succeeding learned AO opined that the networth of the shareholders is highly questionable since the taxable income of these companies is low and non-commensurate with the figure of Reserves and Surplus in the....
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....earned AO has doubted the creditworthiness of the investor companies as these companies have reported low taxable income in their income tax return. In the said chart, the learned AO has himself admitted that all the investor companies are duly incorporated with the Registrar of Companies and in the last column he has tabulated the taxable income of these investor companies as reported in the Income Tax Return filed by these companies. This in itself shows that all the investor companies are duly incorporated bodies and are regular income tax assesses who have duly filed their return of income for the relevant year. Thus, the identity of these companies should not have been questioned by the learned AO. Admittedly, the learned AO has himself shown in his chart the amount of share premium and non-current investment in the books of these investor companies. On a perusal of the same, it is evident that the reserves and surplus of these companies is commensurate with the investment made by these investor companies. Hence, the creditworthiness of the investor companies to invest in the share capital of the assessee also should not have been questioned by the learned AO. ....
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....hority also noted that there was no requirement under Section 68 of the Act to explain source of source. It was not necessary that share application money should be invested out of taxable income only. It may be brought out of borrowed funds. It was further held that nonresponding to notice would not ipso facto mean that the creditors had no credit worthiness. In such circumstances, the first appellate authority held that where all material evidence in support of explanation of credits in terms of identity, genuineness of the transaction and creditworthiness of the creditors were available, without any infirmity in such evidence and the explanation required under Section 68 of the Act having been discharged, Assessing Officer was not justified in making the additions. Therefore, the additions were deleted." Thus, it is not the taxable income but the source of investment which needs to be proved u/s 68 of the Act. Admittedly, the investor companies have invested in Non-Current Investment in shares. The income will arise to these companies either by way of Dividend or Capital Gains on disposal of such investments. Thus, income from these sources should not lead to q....
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....15. Avtaar Projects (P) Ltd 7,10,00,216 2,00,000 296 - 312 16. Jatashiv Merchants (P) Ltd 6,75,00,333 10,00,000 313-332 17. Tiger Mercantile (P) Ltd 7,43,47,707 10,00,000 333 - 349 18. Subhvani Projects (P) Ltd 3,40,00,230 10,00,000 350-367 19. Amritvani Housing (P) Ltd 3,07,00,251 25,00,000 368 - 385 20. Panchsree Trademart (P) Ltd 1,90,00,281 18,00,000 386 - 406 21. Tiger Merchants (P) Ltd 7,77,02,943 5,50,000 407 -425 TOTAL SHARE CAPITAL 5,68,50,000 So, from a perusal of the above chart, it is clear that all the share subscriber companies have sufficient Capital/networth to invest in the share Capital of the assessee company. Moreover, the share subscribers have also filed before the AO the source from which they subscribed to shares of assessee (though not required as per law in force for AY 2012-13). Now, in view of the documents filed by the share applicant companies before AO, the assessee now discuss the documents filed by each share subscribers totaling 21 (twenty-one) in detail below: 1. ALTROT MERCHANT (P) LTD With respect to th....
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...., Rs. 10,00,000/- on 09-12-2011, Rs. 7,00,000 on 10-12-2011 and Rs. 25,00,000 on 17-12-2011. This share applicant company has filed Pan Card, ITR acknowledgment, Allotment Advice issued by the assessee company, relevant Bank Statements, source of source of funds and audited accounts in response to the notice issued u/s 133(6) of the Act. This share applicant has regularly filed its Income Tax Return. The audited accounts of this share applicant clearly show that it had sufficient funds to invest in the assessee-company. The investment made in the assessee company is duly shown in its audited accounts under the head 'Investments'. The Bank Statement of the party evidences that the entire inflow and outflow of funds was effected through normal banking channels and there is no cash deposit in its Bank A/c. The share applicant had confirmed the transaction with the assessee company in response to the notice issued u/s 133(6) of the Act. 3. TIGER VANIJYA (P) LTD With respect to this share applicant, please note that the documents are placed at page 54-79 of the paper Book. This share applicant is a Private Limited Company and its Permanent Account No. is AACCT7578D. On....
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....cant has regularly filed its Income Tax Return. The audited accounts of this share applicant clearly show that it had sufficient funds to invest in the assessee-company. The investment made in the assessee company is duly shown in its audited accounts under the head 'Investments'. The Bank Statement of the party evidences that the entire inflow and outflow of funds was effected through normal banking channels and there is no cash deposit in its Bank A/c. The share applicant had confirmed the transaction with the assessee company in response to the notice issued u/s 133(6) of the Act. 5. MUTUAL MERCHANTS (P) LTD With respect to this share applicant, please note that the documents are placed at page 100- 119 of the paper Book. This share applicant is a Private Limited Company and its Permanent Account No. is AAHCM0709N. On a perusal of its Audited Accounts (Page 108-118), it may kindly be noted that the Networth (Share Capital plus Reserves and Surplus) of the company as on 31.03.2012 is Rs. 18,50,00,361/-, refer page 111 of the paper book and the investment made in the assessee-company including share premium is Rs. 55,00,000/-. Entire Share Application money was r....
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....ences that the entire inflow and outflow of funds was effected through normal banking channels and there is no cash deposit in its Bank A/c. The share applicant had confirmed the transaction with the assessee company in response to the notice issued u/s 133(6) of the Act. 7. Kanina Housing Pvt Ltd. With respect to this share applicant, please note that the documents are placed at page 143- 162 of the paper Book. This share applicant is a Private Limited Company and its Permanent Account No. is AAECK4606K. On a perusal of its Audited Accounts (Page 151-161), it may kindly be noted that the Networth (Share Capital plus Reserves and Surplus) of the company as on 31.03.2012 is Rs. 15,34,00,231/-, refer page 154 of the paper book and the investment made in the assessee-company including share premium is Rs. 27,00,000/-. Entire Share Application money was received by the assessee through normal banking channels. Share Application Money of Rs. 12,00,000/- was received on 28-11-2011 and Rs. 15,00,000 on 24-03-2012. This share applicant company has filed Pan Card, ITR acknowledgment, Allotment Advice issued by the assessee company, relevant Bank Statements, source of sourc....
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....per Book. This share applicant is a Private Limited Company and its Permanent Account No. is AAOCS9923R. On a perusal of its Audited Accounts (Page 190-200), it may kindly be noted that the Networth (Share Capital plus Reserves and Surplus) of the company as on 31.03.2012 is Rs. 12,17,00,454/-, refer page 194 of the paper book and the investment made in the assessee-company including share premium is Rs. 10,00,000/-. Entire Share Application money of Rs. 10,00,000 was received by the assessee through normal banking channels on 16- 01-2012. This share applicant company has filed Pan Card, ITR acknowledgment, Allotment Advice issued by the assessee company, relevant Bank Statements, source of source of funds and audited accounts in response to the notice issued u/s 133(6) of the Act. This share applicant has regularly filed its Income Tax Return. The audited accounts of this share applicant clearly show that it had sufficient funds to invest in the assessee-company. The investment made in the assessee company is duly shown in its audited accounts under the head 'Investments'. The Bank Statement of the party evidences that the entire inflow and outflow of funds was effected through no....
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....share premium is Rs. 30,00,000/-. Entire Share Application money was received by the assessee through normal banking channels. Share Application Money of Rs. 25,00,000/- was received on 06-02-2012 and Rs. 5,00,000 on 24-02-2012. This share applicant company has filed Pan Card, ITR acknowledgment, Allotment Advice issued by the assessee company, relevant Bank Statements, source of source of funds and audited accounts in response to the notice issued u/s 133(6) of the Act. This share applicant has regularly filed its Income Tax Return. The audited accounts of this share applicant clearly show that it had sufficient funds to invest in the assessee-company. The investment made in the assessee company is duly shown in its audited accounts under the head 'Investments'. The Bank Statement of the part evidences that the entire inflow and outflow of funds was effected through normal banking channels and there is no cash deposit in its Bank A/c. The share applicant had confirmed the transaction with the assessee company in response to the notice issued u/s 133(6) of the Act. 12. Satlink India (P) Ltd With respect to this share applicant, please note that the documents a....
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....in response to the notice issued u/s 133(6) of the Act. This share applicant has regularly filed its Income Tax Return. The audited accounts of this share applicant clearly show that it had sufficient funds to invest in the assessee-company. The investment made in the assessee company is duly shown in its audited accounts under the head 'Investments'. The Bank Statement of the party evidences that the entire inflow and outflow of funds was effected through normal banking channels and there is no cash deposit in its Bank A/c. The share applicant had confirmed the transaction with the assessee company in response to the notice issued u/s 133(6) of the Act. 14. Dhananjay Vanijya (P) Ltd. With respect to this share applicant, please note that the documents are placed at page 278- 295 of the paper Book. This share applicant is a Private Limited Company and its Permanent Account No. is AADCD7430K. On a perusal of its Audited Accounts (Page 284-294), it may kindly be noted that the Networth (Share Capital plus Reserves and Surplus) of the company as on 31.03.2012 is Rs. 4,40,00,704/- refer page 287 of the paper book and the investment made in the assessee-company includi....
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....sh deposit in its Bank A/c. The share applicant had confirmed the transaction with the assessee company in response to the notice issued u/s 133(6) of the Act. 16. Jatashiv Merchants (P) Ltd. With respect to this share applicant, please note that the documents are placed at page 313- 332 of the paper Book. This share applicant is a Private Limited Company and its Permanent Account No. is AACCJ7462J. On a perusal of its Audited Accounts (Page 316-328), it may kindly be noted that the Networth (Share Capital plus Reserves and Surplus) of the company as on 31.03.2012 is Rs. 6,75,00,333/- refer page 320 of the paper book and the investment made in the assessee-company including share premium is Rs. 10,00,000/-. Entire Share Application money of Rs. 10,00,000/- was received by the assessee through normal banking channels on 19-03- 2012. This share applicant company has filed Pan Card, ITR acknowledgment, Allotment Advice issued by the assessee company, relevant Bank Statements, source of source of funds and audited accounts in response to the notice issued u/s 133(6) of the Act. This share applicant has regularly filed its Income Tax Return. The audited accounts of thi....
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....ted that the Networth (Share Capital plus Reserves and Surplus) of the company as on 31.03.2012 is Rs. 3,40,00,230/- refer page 360 of the paper book and the investment made in the assessee-company including share premium is Rs. 10,00,000/-. Entire Share Application money of Rs. 10,00,000/- was received by the assessee through normal banking channels on 28-03- 2012. This share applicant company has filed Pan Card, ITR acknowledgment, Allotment Advice issued by the assessee company, relevant Bank Statements, source of source of funds and audited accounts in response to the notice issued u/s 133(6) of the Act. This share applicant has regularly filed its Income Tax Return. The audited accounts of this share applicant clearly show that it had sufficient funds to invest in the assessee-company. The investment made in the assessee company is duly shown in its audited accounts under the head 'Investments'. The Bank Statement of the party evidences that the entire inflow and outflow of funds was effected through normal banking channels and there is no cash deposit in its Bank A/c. The share applicant had confirmed the transaction with the assessee company in response to the notice issued ....
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....R acknowledgment, Allotment Advice issued by the assessee company, relevant Bank Statements, source of source of funds and audited accounts in response to the notice issued u/s 133(6) of the Act. This share applicant has regularly filed its Income Tax Return. The audited accounts of this share applicant clearly show that it had sufficient funds to invest in the assessee-company. The investment made in the assessee company is duly shown in its audited accounts under the head 'Investments'. The Bank Statement of the party evidences that the entire inflow and outflow of funds was effected through normal banking channels and there is no cash deposit in its Bank A/c. The share applicant had confirmed the transaction with the assessee company in response to the notice issued u/s 133(6) of the Act. 21. Tiger Merchants Pvt Ltd With respect to this share applicant, please note that the documents are placed at page 407- 425 of the paper Book. This share applicant is a Private Limited Company and its Permanent Account No. is AACCT7579C. On a perusal of its Audited Accounts (Page 414-425), it may kindly be noted that the Networth (Share Capital plus Reserves and Surplus) of t....
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....id not appear personally before the learned AO, yet the requisite documents were filed and the same was also acknowledged in the assessment order. Furthermore, it is reiterated that in response to summon dated 09-02-2015, the Director of the assessee company duly appeared before the learned AO on 20-02-2015, however he was refused attendance. As such, it is an unfounded assumption on the part of the learned AO that there was non-compliance of summon by the assessee and the share applicant companies. 29. Here, it is humbly submitted that if only the ITR acknowledgment/PAN of the investor companies would have been perused by the succeeding learned AO, he would have noted that all the share subscribers were regular income tax assessees and as such their identity was duly established. Further, if the learned AO would have examined the audited accounts of these parties, he would have noted that all the share subscriber companies were having sufficient capital/networth to invest in the share capital of the assessee. The amount of share capital and the amount of share premium received during the year was duly shown under the head "Shareholders Fund" in the Balance Sheet of the as....
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....revious year, and the assessee offers no explanation about the nature and source thereof or the explanation offered by him is not, in the opinion of the Assessing Officer, satisfactory, the sum so credited may be charged to income-tax as the income of the assessee of that previous year. The following provisos shall be inserted in section 68 by the Finance Act, 2012, w.e.f. 1.4.2013: Provided that where the assessee is a company, (not being a company in which the public are substantially interested) and the sum so credited consists of share application money, share capital, share premium or any such amount by whatever name called, any explanation offered by such assessee-company shall be deemed to be not satisfactory, unless- (a) the person, being a resident in whose name such credit is recorded in the books of such company also offers an explanation about the nature and source of such sum so credited ; and (b) such explanation in the opinion of the Assessing Officer aforesaid has been found to be satisfactory : Provided further that nothing contained in the first proviso shall apply if the person, in whose name the sum referred to therein is reco....
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....3, casting an additional onus on the assessee-company of proving the source of the source of raising the share subscription, is not retrospective or clarificatory in nature but prospective in nature and hence would be effective only from A.Y. 2013-14 onwards. In the present case, the assessment year involved is 2012-13. Reliance in this connection is placed on the decision of Hon'ble High Court of Bombay in the case of CIT-1 v. M/s Gagandeep Infrastructure Pvt. Ltd. (2017) 80 taxmann.com 272 (Bombay) wherein it has been held that the amendment in section 68 is prospective and not retrospective. Relevant extract has been set out for ready reference: "...(e) We find that the proviso to Section 68 of the Act has been introduced by the Finance Act 2012 with effect from 1st April, 2013. Thus, it would be effective only from the Assessment Year 2013-14 onwards and not for the subject Assessment Year. In fact, before the Tribunal, it was not even the case of the Revenue that Section 68 of the Act as in force during the subject years has to be read/understood as though the proviso added subsequently effective only from 1st April, 2013 was its normal meaning. The Parli....
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....tted that since the case at hand pertains to A.Y. 2012- 13, the Assessee was not bound to explain the source of source of the share capital/premium monies since the proviso to section 68 has been made effective only from A.Ys 2013-14 onwards. Inspite of the same, the source of source of funds was duly submitted by all the share applicant companies. Further, w.r.t. share premium it is pointed out that as per definition of income as provided under section 2(24) of the Act at the relevant point of time of (i.e. AY 2012-13) did not define as income, any consideration received for issue of shares in excess of its fair market value. This came into effect from 1-4-2013 and it would have no application to the share premium received by the assessee in the previous year relevant to AY 2012-13. Your kind attention is also invited to sub-clause (vii)(b) of sub-section (2) of section 56 of the Act, which was inserted by the Finance Act, 2012 w.e.f 1-4-2013, which is also applicable only for the AY 2013-14 and not for the relevant AY 2012-13 which is in respect of computing/taxing the premium of shares in the hands of the assessee if consideration of value of shares is in excess of its ....
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....summons issued to some of the creditors could not be served or they failed to attend before the Assessing Officer, cannot be a ground to treat the share capital raised during the year as nongenuine. Further, before discrediting the documents filed by the share applicant companies, the Department ought to have exercised his plenary powers and conduct independent enquiries with these share applicant companies and collect material evidences against the assessee. Such outright rejection of the evidences by the Revenue is totally contrary to the law as laid down by Apex Court in the case of CIT vs Orissa Corporation Pvt Ltd (1986) 159 ITR 0078 wherein it was held that, "The assessee had given the names and addresses of the alleged creditors. It was in the knowledge of the Revenue that the said creditors were income-tax assessees. Their index number was in the file of the Revenue. The Revenue, apart from issuing notices under s. 131 at the instance of the assessee, 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 or were such who could advance the allowed loans. There was no effort....
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....e above discussion is that white section 106 of the Evidence Act limits the onus of the assessee to the extent of his proving the source from which he has received the cash credit, section 68 gives ample freedom to the Assessing Officer to make inquiry not only into the source(s)of the creditor but also of his (creditor's) sub-creditors and prove, as a result, of such inquiry, that the money received by the assessee. in the form of loan from the creditor, though routed through the sub-creditors, actually belongs to, or was of the assessee himself. In other words, while section 68 gives the liberty to the Assessing Officer to enquire into the source/source from where the creditor has received the money, section 106 makes the assessee liable to disclose only the source(s) from where he has himself received the credit and IT is not the burden of the assessee to prove the creditworthiness of the source(s) of the sub-creditors. If section 106 and section 68 are to stand together, which they must, then, the interpretation of section 68 are to stand together, which they must, then the interpretation of section 68 has to be in such a way that it does not make section 106 redundant. Hen....
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....ompany Held "If the share application money is received by the assessee company from alleged bogus shareholders, whose names are given to the Assessing Officer, then the department is free to proceed to reopen their individual assessments in accordance with law but this amount of share money cannot be regarded as undisclosed income under section 68 of the assessee company. " 35 Again, when a question as to the creditworthiness of a creditor is to be adjudicated and if the creditor is an Income Tax assessee, it is now well settled by the decision of the Hon'ble Calcutta High Court in the case of CIT v. DATAWARE (P.) Ltd. [ITAT No. 263 of 2011 Date 21-9- 2011] that the creditworthiness of the creditor cannot be disputed by the AO of the assessee but the AO of the creditor. In this regard, your kind attention is drawn to the decision of the Hon'ble High Court, Calcutta in the CIT v. DATAWARE (P.) Ltd. [ITAT No. 263 of 2011 Date 21 -9-2011] wherein the Court held as follows: ''In our opinion, in such circumstances, the Assessing officer of the assessee cannot take the burden oj assessing the profit and loss account of the creditor when ad....
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..... If the revenue had any doubt with regard to their ability to make the investment, their returns might be reopened by the department. In any case, what was clinching was the additional burden on the revenue. It must show that even if the assessee did not have the means to make the investment, the investment made by the assessee actually emanated from the coffers of the assessee so as to enable it to be treated as the undisclosed income of the assessee. As this had not been done insofar as the present case was concerned, addition made was to be deleted. > CIT vs Steller Investment Ltd (1991) 192 ITR 287 (Del) "It is evident that even if it be assumed that the subscribers to the increased share capital were not genuine, nevertheless, under no circumstances, can the amount of share capital be regarded as undisclosed income of the assessee. It may be that there are some bogus shareholders in whose names share had been issued and the money may have been provided by some other persons. If the assessment of the persons, who are alleged to have really advanced the money is sought to be reopened, that would have made some sense but we fail to understand as to how....
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....rther tries to explain the source of this amount of Rs. 55,50,000/- by furnishing copies of share application money, balance 4 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. 5-50/000/- received by the assessee are treated as an unexplained cash credit in the hands of the assessee and added to its income. Since lam 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 ....
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.... Ltd (ITA No. 1276/Kol/2008 di, 16.10.2008) and Bear Bull Distributors (P) Ltd. Vs. ITO (ITA No. 1652/Kol/2008 dt, 24.12.2008). I find that following the ratio laid down by Apex Court in Lovely Exports Pvt. Ltd. (supra), the Hon'ble IT AT, Kolkata Bench allowed the appeals in favour of the assessee. Having regard to the facts and circumstances of the case and respectfully following Hon 'ble Supreme Court decision in the case of M/s. Lovely Exports Pvt. Ltd. and Kolkata Tribunal's decisions I am to hold that the share capital/premium of Rs. 24,00,000/- received from investors is not liable to be treated u/s. 68 as unexplained credits and to be taxed in the hands of the appellant company. The appellants ground is allowed. " In view of the above, and finding no contrary decisions brought on record by the revenue authorities, we find no infirmity in the order of the Ld. CIT(A) and the same is hereby upheld. The appeal of the revenue is, therefore, dismissed. 5. In the result, the appeal of the revenue is dismissed. Aggrieved against the decision of the Hon'ble ITAT, the department went in appeal before the Hon'ble jurisdictional High Cour....
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.... blamed the assessee for not producing those share applicants. In our view, in the case before us so long the Assessing Officer was unable to arrive at a finding that the particulars given by the assessee were false, there was no scope of adding those money under section 68 of the Income- tax Act and the Tribunal below rightly held that the onus was validly discharged. > Further reliance is placed on the judgment of the Hon'ble jurisdictional ITAT in the case of ITO vs Axisline Investment Consultants (P.) Ltd dated 01-07-2019 reported in [2019] 108 taxmann.com 276 (Kolkata - Trib.) wherein dismissing the appeal of the Revenue it was held that where AO made addition to assessee's income under section 68 in respect of share application money received from various applicants, in view of fact that assessee had provided details of name, address, PAN of share applicants together with copies of their balance sheets and returns and, moreover, amount had been received by account payee cheques out of sufficient bank balances maintained by of share applicants, impugned addition deserved to be deleted. The relevant extract of the judgment is reproduced below: "28....
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....se view cannot be countenanced. In the absence of any investigation, much less gathering of evidence by the Assessing Officer, we hold that an addition cannot be sustained merely based on inferences drawn by circumstance. Applying the propositions laid down in these case laws to the facts of this case, we are inclined to allow the appeal of the assessee. 35. To sum up section 68 of the Act provides that if any sum found credited in the year in respect of which the assessee fails to explain the nature and source shall be assessed as its undisclosed income. In the facts of the present case, both the nature & source of the share application received was fully explained by the assessee. The assessee had discharged its onus to prove the identity, creditworthiness and genuineness of the share applicants. The PAN details, bank account statements, audited financial statements and Income Tax acknowledgments were placed on AO's record. Accordingly all the three conditions as required u/s. 68 of the Act Le. the identity, creditworthiness and genuineness of the transaction was placed before the AO and the onus shifted to AO to disprove the materials placed before him. Without doin....
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.... that an addition cannot be sustained merely based on inferences drawn by circumstance. Additions cannot be made on surmises and conjectures. Further reliance is placed on the following judgments: > The Delhi High Court in case of Commissioner of Income-tax v. Lovely Exports P. Ltd. [299 ITR 268] held that "In the case of a company the following are the propositions of law under section 68. The assessee has to prima facie prove (1) the identity of the creditor/subscriber ; (2) the genuineness of the transaction, namely, whether it has been transmitted through banking or other indisputable channels ; (3) the creditworthiness or financial strength of the creditor/subscriber ; (4) if relevant details of the address or PAN identity of the creditor/subscriber are furnished to the Department along with copies of the shareholders' register, share application forms, share transfer register, etc., it would constitute acceptable proof or acceptable explanation by the assessee ; " SLP filed by the Revenue against the aforesaid judgment was dismissed by the Supreme Court (216 CTR 195) and it was held that, "If the share application money is received by the a....
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....Other documents showing the genuineness of the transaction could be copies of the shareholders register, share application forms, share transfer register, etc. "Held, dismissing the appeal, that the addition was rightly deleted by the Commissioner (Appeals) and the Tribunal. Requisite documents were furnished showing the existence of the shareholders from accounts and even their Income-tax details. From bank accounts of these shareholders, it was found that they had deposited certain cash and the source thereof was questionable. The Assessing Officer should have made further probe which he failed to do. Moreover, the remedy with the Department lav in reopenins the case of the investors and the addition could not be made in the hands of the assessee. > The Hon 'ble IT AT Kolkata in the case of ITO vs. Harshwardhan Gems Pvt Ltd ITA no. 1337/Kol/2010 order dt. 03.02.2016 upheld the deletion of share capital by CIT(A) and observed at para 6 of the judgment, "6. In the instant case also facts and circumstances are identical as the assessee has prima facie proved the identity of the share subscriber, the genuineness of the transaction, namely, whether it has be....
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.... the case cited above, the Assessing Officer cannot shift the burden on the assessee company. In case the Assessing Officer had any doubt about the shareholders, nothing stopped him from taking appropriate action or proceeding against these shareholders. It is a case where the assessee has been able to meet the requirements to justify its case. If the notices issued by the A.O. to the share subscribers were not complied with or came back unserved, this could not be held against the assessee, which had discharged the initial onus which lay upon it by proving the identity of the share applicants and the genuineness of the transactions. This principle has been laid down in the case of C.I.T. vs. Orissa Corporation Pvt. Ltd., [1986J 159ITR 78 (SC), wherein it was held as follows:- "In this case, the assessee had given the names and addresses of the alleged creditors. It was in the knowledge of the Revenue that the said creditors were income-tax assessees. Their index numbers were in the file of the Revenue. The Revenue, apart from issuing notices under section 131 at the instance of the assessee, did not pursue the matter further. The Revenue did not examine the source of inco....
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....y thus be concluded that in the instant case no addition is called for u/s 68 on account of the following reasons: (i) During the course of assessment, notice u/s 142(1) of the Act was issued to the assessee and requisite documents were submitted in response to the said notice. Further, notice u/s 133(6) of the Act were issued to all the share applicant companies and in response to the said notice all the parties submitted have duly submitted their replies along with documentary evidences such as ITR acknowledgment, Certificate of Incorporation, Bank Statements, Audited Accounts and source of source of funds. Entire inflow and outflow of funds was made through normal banking channels. All these documents clearly substantiate the identity and creditworthiness of the investor companies and the genuineness of the transactions. (ii) The learned AO has not recorded his satisfaction which would even remotely suggest that the share application money received by the assessee was unexplained money of the assessee. He has not prepared any money trail/fund flow in his order which would even remotely suggest that the assessee's own money had been routed in the form of sha....
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....perusal of the Assessment Order would reveal that the AO has duly acknowledged the receipt of the relevant documents/evidences not only from the assessee, but also from the subscriber companies. However, he insisted for personal appearance of the directors of the subscriber companies without even going through and discussing about the discrepancies, if any, in the documents furnished by the assessee as well as by the share subscriber companies to prove the identity and creditworthiness of the subscribers and the genuineness of the transaction. The AO, himself, has tabulated in para 2.5 of the order recording the financial credentials of the share subscribers from which it can be noted that the said share subscribers were having enough finances in the form of reserves and surpluses to make investment in the assessee company. The AO has simply noted that the share subscribers have sent a bundle of papers in his office. However, we fail to understand that without examining those documents how could the AO came to a conclusion that the transactions in question were not genuine. The AO has not pointed out in the Assessment Order as to what further enquiries he wanted to make from the di....
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....required to be given for service of summons upon a person and further a reasonable time was required to be given for personal appearance of the summoned persons. It appears that in this case, the AO has just completed an official formality of issuing summons to subscribers without giving any reasonable opportunity and time to the subscribers to appear. We are convinced with the contention of the ld. Counsel for the assessee that since the assessment was becoming time barred, the AO has passed the impugned Assessment Order in a hurried manner even without pointing out any defect or discrepancy in the evidences and details furnished by the assessee and even without giving reasonable time of appearance to the concerned directors of the share holding companies. Even, we find that the case laws relied upon by the AO in the Assessment Order are also not applicable to the facts and circumstances of the present case as in those cases, the material fact was that the assessee had not furnished the details and evidences before the AO. However, in this case it is not the case of AO that the assessee has not furnished the relevant details and evidences to prove the identity, creditworthiness an....