TaxTMI 
TaxTMI 
2022 (2) TMI 377
X X X X Extracts X X X X
X X X X Extracts X X X X
....erly appreciating the facts of the case and submissions made before him. 2. That on the facts and in the circumstances of the case and in law, the Ld. CIT(A) erred in upholding the validity of reassessment proceedings initiated under section 147 of the Income Tax Act 1961 even when there was no tangible material in possession of the assessing officer so as to prove the live link of concealment of income. 3. That on the facts and in the circumstances of the case and in law, the Ld. CIT(A) erred in upholding the validity of reassessment proceedings initiated under section 147 of the Income Tax Act 1961 even when Assessing Officer re-opened the case of the appellant merely for the purpose of making roving the fishing inquiries which is not permissible in law. 4. That on the facts and in the circumstances of the case and in law, the Ld. CIT(A) erred in upholding the validity of re- assessment proceedings initiated under section 147 of the Income Tax Act 1961 without obtaining proper sanction from the competent authority under section 151 of the Income Tax Act, 1961. 5. That on the facts and in the circumstances of the case and in law, the Ld. CIT(A) ....
X X X X Extracts X X X X
X X X X Extracts X X X X
....and reduced the amount of addition to Rs. 2,60,00,000/- (Rs. 3,17,50,000/- (-) Rs. 57,50,000/-). 3. Being aggrieved, the assessee in the meantime also preferred an appeal before the Ld CIT(A) and partly succeeded as the Ld CIT(A) deleted the addition of Rs. 1,80,00,000/- out of the total addition of Rs. 2,60,00,000/- made by the Ld AO and sustained the remaining amount of addition of Rs. 80,00,000/-. 4. Ground Nos. 5 and 6 raised by the assessee challenge the action of the Ld CIT(A) in sustaining the addition of Rs. 80,00,000/- out of the total addition of Rs. 2,60,00,000/- made by the Ld Assessing Officer whereas Ground Nos. 1 and 2 raised by the Revenue challenge the action of the Ld CIT(A) in deleting the addition of Rs. 1,80,00,000/- out of the total addition of Rs. 2,60,00,000/- made by the Ld Assessing Officer on account of share application money. Brief facts relating to this issue are that the Ld Assessing Officer during the course of re-assessment proceedings made addition of Rs. 2,60,00,000/- to the total income of the assessee on account of share application money received from following share applicants: S. No Name of the Company PAN Amount [Rs] 1 ....
X X X X Extracts X X X X
X X X X Extracts X X X X
....s Netmark P Limited AADCR3152L 30,00,000 30,00,000 10 M/s Breeze Tracom P Limited AADCB1833Q 25,00,000 25,00,000 NIL 11 M/s Excel Merchant P Limited AABCE8172B 10,00,000 10,00,000 NIL 12 M/s Chandimata Management P Limited AACCC6782A 10,00,000 10,00,000 13 M/s Regal Banijya P Limited AADCR6961K 15,00,000 15,00,000 NIL 14 M/s Vaishno Devi Coloniser P Limited AABCV8060B 25,00,000 25,00,000 NIL 15 M/s Shubham Dealers P Limited AALCS0985Q 30,00,000 30,00,000 NIL 16 M/s Taral Vincom P Limited AAACT9890Q 10,00,000 10,00,000 Total 2,60,00,000 1,80,00,000 80,00,000 6. Now the assessee is in appeal before this Tribunal in respect of the additions confirmed by the Ld CIT(A) whereas the Revenue is in appeal in respect of the additions deleted by the Ld CIT(A). 7. Before us, the learned Counsel for the assessee submitted that the assessee duly explained the identity and creditworthiness of all the share applicants and genuineness of the transactions entered into with them with the help of ample docum....
X X X X Extracts X X X X
X X X X Extracts X X X X
....e so as to substantiate its contention that share application money received by it was genuine and could not have been taxed by invoking the provisions of section 68 of the Act. Before us, the Ld. Counsel relied on the relevant documentary evidences and stated that these documents were never disproved either by the Ld AO or by the Ld CIT(A), which are summarised as under: S. No Brief description of documents Page No. 1 M/s Kamakhya Developers Private Limited [PAN: AABCK0981C] - Rs. 10,00,000/- 1.1 Share application form regarding subscription of equity shares of the assessee company 1 1.2 Extracts of the Minutes of the meeting of the Board of Directors duly authorizing Shri Ashok Sureka for making investment in stocks, shares, debentures and securities on behalf of the company 2 1.3 Company Master Data and Signatory Details as downloaded from the website of Ministry of Corporate Affairs 3-4 1.4 Certificate of Incorporation 5 1.5 Memorandum of Association 6-23 1.6 Articles of Association 24-49 1.7 Director's report dated 22-07-2008 for the year ended 31^st March, 2008 50-51 1.8 Audited financial stat....
X X X X Extracts X X X X
X X X X Extracts X X X X
....rectors duly authorizing Mr. Jayesh K. Sampat for making investment in the equity shares of the assessee company 179 3.3 Company Master Data and Signatory Details as downloaded from the website of Ministry of Corporate Affairs 180-181 3.4 Certificate of Incorporation 182 3.5 Memorandum of Association 183-203 3.6 Articles of Association 204-259 3.7 Director's report dated 01-09-2008 for the year ended 31^st March, 2008 260-262 3.8 Audited financial statements for the year ended 31^st March, 2008 263-271 3.9 Form 20B regarding filing of annual return by a company having share capital with the Registrar for the Financial Year 2007-08 272-277 3.10 Form 23AC regarding filing of balance sheet and other documents with the Registrar for the Financial Year 2007-08 278-284 3.11 Form 23ACA regarding filing of profit and loss account and other documents with the Registrar for the Financial Year 200708 285-288 3.12 Form DIR-12 containing the particulars regarding appointment of/ changes among directors and key managerial personnel 289-296 4 M/s Buniyad Chemicals Limited [PAN: AABCB6954G] - Rs. 10,....
X X X X Extracts X X X X
X X X X Extracts X X X X
....ancial statements for the year ended 31^st March, 2015 479-483 5.9 Form DIR-12 containing the particulars regarding appointment of/ changes among directors and key managerial personnel 484-487 6 M/s Atishay Marketing Private Limited [PAN: AACCA5745R] - Rs. 10,00,000/- 6.1 Share application form regarding subscription of equity shares of the assessee company 488 6.2 Extracts of the Minutes of the meeting of the Board of Directors duly authorizing Shri Ashok Sureka for making investment in stocks, shares, debentures and securities on behalf of the company 489 6.3 Company Master Data and Signatory Details as downloaded from the website of Ministry of Corporate Affairs 490-491 6.4 Certificate of Incorporation 492 6.5 Memorandum of Association 493-500 6.6 Articles of Association 501-508 6.7 PAN detail as downloaded from the website of Income-Tax Department 509 6.8 Director's report dated 22-07-2008 for the year ended 31^st March, 2008 510-511 6.9 Audited financial statements for the y....
X X X X Extracts X X X X
X X X X Extracts X X X X
.... Audited financial statements for the year ended 31^st March, 2015 618-632 8 M/s Makesworth Projects & Developers Private Limited (Formerly known as M/s Tuticorin Trexim Private Limited) [PAN: AAACT9539J] - Rs. 20,00,000/- 8.1 Share application form regarding subscription of equity shares of the assessee company 888-889 8.2 Company Master Data and Signatory Details as downloaded from the website of Ministry of Corporate Affairs 633-634 8.3 Original Certificate of Incorporation 635 8.4 Fresh Certificate of Incorporation consequent upon Change of Name of the share applicant company from M/s Tuticorin Trexim Private Limited to M/s Makesworth Projects & Developers Private Limited 636 8.5 Memorandum of Association 637-647 8.6 Articles of Association 648-656 8.7 TAN detail as downloaded from the website of Income-Tax Department 657 8.8 Director's report dated 30-08-2008 for the year ended 31^st March, 2008 658 8.9 Audited financial statements for the year ended 31^st March, 2008 659-667 ....
X X X X Extracts X X X X
X X X X Extracts X X X X
....ies on behalf of the company 768 10.3 Company Master Data and Signatory Details as downloaded from the website of Ministry of Corporate Affairs 769-770 10.4 Memorandum of Association 771-777 10.5 Articles of Association 778-785 10.6 PAN detail as downloaded from the website of Income-Tax Department 786 10.7 Director's report dated 25-08-2009 for the year ended 31^st March, 2009 787-788 10.8 Audited financial statements for the year ended 31^st March, 2009 789-797 10.9 Form 32 containing the particulars regarding appointment of/ changes among managing director, directors, manager and secretary 798-801 10.10 Form 23AC regarding filing of balance sheet and other documents with the Registrar for the Financial Year 2008-09 802-808 10.11 Form 20B regarding filing of annual return by a company having share capital with the Registrar for the Financial Year 2008-09 809-813 10.12 Director's report dated 07-08-2015 for the year ended 31^st March, 2015 814-822 10.13 Audited financial stat....
X X X X Extracts X X X X
X X X X Extracts X X X X
.... 12.8 Director's report dated 30-08-2008 for the year ended 31^st March, 2008 901 12.9 Audited financial statements for the year ended 31^st March, 2008 902-911 12.10 Form 20B regarding filing of annual return by a company having share capital with the Registrar for the Financial Year 2007-08 912-916 12.11 Form 23AC regarding filing of balance sheet and other documents with the Registrar for the Financial Year 2007-08 917-923 12.12 Director's report dated 13-08-2013 for the year ended 31^st March, 2013 924-925 12.13 Audited financial statements for the year ended 31^st March, 2013 926-939 12.14 Form DIR-12 containing the particulars regarding appointment of/ changes among directors and key managerial personnel 940-949 13 M/s Regal Vanijya Private Limited [PAN: AADCR6961K] - Rs. 15,00,000/- 13.1 Share application form regarding subscription of equity shares of the assessee company 950 13.2 Company Master Data and Signatory Details as downloaded from the website of Ministry of Corporate Affairs 951-952 ....
X X X X Extracts X X X X
X X X X Extracts X X X X
....58-1065 14.10 Form 2 regarding return of allotment 1066-1068 14.11 Form 20B regarding filing of annual return by a company having share capital with the Registrar for the Financial Year 2008-09 1069-1074 14.12 Form 23AC regarding filing of balance sheet and other documents with the Registrar for the Financial Year 2008-09 1075-1081 14.13 Director's report dated 26-08-2015 for the year ended 31^st March, 2015 1082-1087 14.14 Audited financial statements for the year ended 31^st March, 2015 1088-1105 14.15 Form DIR-12 containing the particulars regarding appointment of/ changes among directors and key managerial personnel 1106-1113 15 M/s Shubham Dealers Private Limited [PAN: AALCS0985Q] - Rs. 30,00,000/- 15.1 Share application form regarding subscription of equity shares of the assessee company 1114 15.2 Company Master Data and Signatory Details as downloaded from the website of Ministry of Corporate Affairs 1115-1116 15.3 Certificate of Incorporation 1117 15.4 Memorandum of Associat....
X X X X Extracts X X X X
X X X X Extracts X X X X
....y-in-slips/ receipts in respect of share application money received by the assessee company during the Financial Year 2003-04 1267-1272 18 Copy of replies as posted directly by the following share applicant companies in response to notices issued under section 133(6) of the Income-Tax Act, 1961 by the assessing officer in the case of the assessee company: 18.1 M/s Kamakhya Developers Private Limited 1472 18.2 M/s Maps Enterprises Private Limited (Formerly known as M/s Maps Portfolio and Holdings Private Limited) 1473 18.3 M/s Rays Net Mark Private Limited 1474 18.4 M/s Breeze Tracom Private Limited 1475 18.5 M/s Excel Merchants Private Limited 1476 18.6 M/s Regal Vanijya Private Limited 1477 18.7 M/s Shubham Dealers Private Limited 1478 18.8 M/s Sun Mercantile Private Limited (Formerly known as M/s Sun Fruit Private Limited) 1479 10. On going through the record, we find that the Ld AO himself in Para 17 of the assessment order stated that two inspectors (viz Shri Mukesh Chandra Meena and Shr....
X X X X Extracts X X X X
X X X X Extracts X X X X
....ment made by all the above companies were enclosed 4 As informed by the share applicant the letter as issued during the course of Assessment proceeding for the Asst Year 2012-13 was duly served and reply was also received 5 Copy of Balance sheet of all the share applicants were enclosed duly justifying the net worth of all the share applicants 6 Copy of Acknowledgment of Income Tax return as filed by the assessee 7 Copy of bank account of the share applicant was also provided 8 Inspector as deputed during the course of scrutiny assessment also visited the premises of the share applicant at Kolkata and collected information and documents directly from the share applicant 13. Before us, the Ld Counsel for assessee in respect of his contention has relied upon the following judicial pronouncements: S. No Name of the Company PAN Amount [in Rs.] Reference of Co-ordinate bench of ITAT 1 M/s Talent Infoway Limited AAACL3305J 20,00,000 M/s Ad-Manum Packaging P Limited [ITA No 543/Ind/2013 dt 09-12-2015 for the A.Y. 2009-10] 2 M/s Buniyad Chemicals Limited AABCB6954G 10,00,000 [1] M/s Swift Intermedia Convergence L....
X X X X Extracts X X X X
X X X X Extracts X X X X
....ecedents is as under: "Hon'ble Delhi High Court in the case of CIT Vs. Oasis Hospitalities (P) Ltd reported in 333 ITR 119 (2011) has held as under:- (i) Section 68 provides that if the assessee is not able to give satisfactory explanation as to the "nature and source" of a sum found credited in his books, the sum may be treated as the "undisclosed income" of the assessee. The initial burden is on the assessee to explain the "nature and source" of the credit and to do so, the assessee is required to prove (a) Identity of the shareholder (b) Genuineness of transaction and (c) Credit worthiness of shareholders; (a) The identity of the shareholder can be proved by either (if individual) producing him before the AO or by way of documents, registered address, PAN etc; (b) The genuineness of the transaction can be shown from the fact that the money has been received from the shareholder. If the money is received by cheque and is transmitted through banking or other indisputable channels, the genuineness of transaction would be proved. Other documents showing the genuineness of transaction could be the copies of the shareholde....
X X X X Extracts X X X X
X X X X Extracts X X X X
....n money is received by the assessee company from alleged bogus share holders, whose names are given to the AO, then the Department is free to proceed to reopen their individual assessments in accordance with law. Hence, we find no infirmity with the impugned judgment." 3.9.3] That Hon'ble Apex Court in the case of Lovely Export P limited ( Supra) has categorically held that if the assessing officer is not satisfied with the explanation of the assessee in that case also necessary addition is to be made in the hand of share applicant and not in the case of the assessee. Hon'ble Delhi High Court vide its order dt 11-04-2012 in the case of Goel Sons Golden Estates Pvt Ltd has held [ Copy of the decision is reproduced in the case of M/s Excellence Town Planner P Limited [ Appeal No ITA No 871/ Del/ 2010 dt 25-05-2012][Refer Para 3 of that order ]:- "3. We have examined the said contention and find that the assessee during the course of assessment proceedings has filed confirmation letters from the companies, their PAN number, copy of bank statements, affidavits and balance sheet. Thereafter the Assessing Officer had asked the assessee to produce the said Direc....
X X X X Extracts X X X X
X X X X Extracts X X X X
....law. We are afraid that we cannot apply the ratio to a case, such as the present one, where the Assessing Officer is in possession of material that discredits and impeaches the particulars furnished by the assessee and also establishes the link between self-confessed "accommodation entry providers", whose business it is to help assessees bring into their books of account their unaccounted monies through the medium of share subscription, and the assessee. The ratio is inapplicable to a case, again such as the present one, where the involvement of the assessee in such modus operandi is clearly indicated by valid material made available to the Assessing Officer as a result of investigations carried out by the revenue authorities into the activities of such "entry providers". The existence with the Assessing Officer of material showing that the share subscriptions were collected as part of a pre- meditated plan - a smokescreen - conceived and executed with the connivance or involvement of the assessee excludes the applicability of the ratio. In our understanding, the ratio is attracted to a case where it is a simple question of whether the assessee has discharged the burden placed upon....
X X X X Extracts X X X X
X X X X Extracts X X X X
....he hands of the assessee as has been arrived by the Investigation wing of the Department. As such entries of Rs. 55,50,000/- received by the assessee are treated as an unexplained cash credit in the hands of the assessee and added to its income. Since I am 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 once the assessee had furnished all the material which we have already referred to above. In such an eventuality no addition can be made under section 68 of the Act. Consequently, the question is answered in the negative. The decision of the Tribunal is correct in law. The appeal is dismissed." Hon'ble Mumbai Bench of ITAT in the case of DCIT vs M/s Rank Shipping Agen....
X X X X Extracts X X X X
X X X X Extracts X X X X
....ordance with law. Hence, we find no infirmity with the impugned judgment." 31. In the case under consideration before us, as stated above, assessee has furnished details of share application with PAN No. and bank statement. Further, said share applicants have also filed confirmation letters placed at page 34 in the case of JMD Telefilms Industries Ltd., at page 117 in the case of Warmer Multimedia Ltd., at page 179 in the case of Shrestha Leasing & Finance Ltd,. and at page 302 in the case of Trio Mercantile & Trading Ltd. In the said confirmation letters, bank details to make the payment to assessee company for allotment of shares is also stated. The transactions are admittedly recorded in the books of account both by the assessee company as well as aforesaid share applicants. Therefore, we are of the considered view that no addition on account of unexplained cash credit is warranted in the case of assessee on the given facts and circumstances as discussed above. Hence, we are of the considered view that the action of AO is contrary to the decision of Hon'ble apex Court in the case of Lovely Exports (supra). Accordingly, we delete the addition of Rs. 72 lakhs sustaine....
X X X X Extracts X X X X
X X X X Extracts X X X X
....going on the issue of worth of these share applicants because the Hon'ble Apex Court in the case of Lovely Exports Private Limited (supra) held that even if such share applicants are bogus, but their identity is proved, then no addition is warranted in the case of the assessee. So far as the decisions cited in the impugned order are concerned, in view of the decision from Hon'ble Apex Court in the case of Lovely Exports (supra), has remained for academic interest only, being on different facts, therefore, we are refraining ourselves in dealing with each and every case individually, especially in the light of the evidences, filed by the assessee, evidencing that the identity of such share applicants was very much proved by further filing of confirmation by them. 7. In view of these facts, the decision from Hon'ble Apex Court in Lovely Exports (supra) and uncontroverted fact that the summons issued to the impugned share applicants were duly received by them with further filing of confirmation by such share applicants, at least their identity is proved, therefore, this appeal of the assessee deserves to be allowed [Emphasis applied] Hon'ble ITAT,....
X X X X Extracts X X X X
X X X X Extracts X X X X
....roduced as under:- 16. The aforesaid judgment has been followed by all the Courts and the judgments relied on by the appellants relates to the period prior to the judgment in Lovely Exports. As the Apex Court has specifically held that if the identity of the person providing share application money is established then the burden was not on the assessee to prove the creditworthiness of the said person. However, the department can proceed against the said Company in accordance with law. The position of the present case is identical. It is not the case of any of the parties that M/s Alliance Industries Limited, Sharjah is a bogus company or a non-existent company and the amount which was subscribed by the said Company by way of share subscription was in fact the money of the respondent assessee. In the present case, the assessee had established the identity of investor who had provided the share subscription and it was established that the transaction was genuine though as per contention of the respondent the creditworthiness of the creditor was also established. In the present case, in the light of the judgment of Lovely Exports (P) Ltd., we have to see only in respect of th....
X X X X Extracts X X X X
X X X X Extracts X X X X
....roach. Moreover, we find that those lenders have made inconsistent statement as pointed out by the Commissioner of Income Tax (Appeals) and in such circumstances, we find that both the Commissioner of Income Tax (Appeals) and the Tribunal were justified in setting aside the deletion as the Assessing Officer, without taking step for verification of the Income Tax Return of the creditors, took unnecessary step of further examining those creditors. If the Assessing Officers of those creditors are satisfied with the explanation given by the creditors as regards those transactions, the Assessing Officer in question has no justification to disbelieve the transactions reflected in the account of the creditors. In other words, the Assessing Officer had no authority to dispute the correctness of assessments of the creditors of the assessee when a co-ordinate Assessing officer is satisfied with the transaction. 18. We, thus, find that in the case before us the Tribunal below rightly set-aside the deletion made by the Assessing Officer, based on erroneous approach by wrongly shifting the burden again upon the assessee without verifying the Income Tax return of the creditors. The posi....
X X X X Extracts X X X X
X X X X Extracts X X X X
....e 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 Parliament did not introduce to proviso to Section 68 of the Act with retrospective effect nor does the proviso so introduced states that it was introduced "for removal of doubts" or that it is "declaratory". Therefore it is not open to give it retrospective effect, by proceeding on the basis that the addition of the proviso to Section 68 of the Act is immaterial and does not change the interpretation of Section 68 of the Act both before and after the adding of the proviso. In any view of the matter the three essential tests while confirming the pre-proviso Section 68 of the Act laid down by the Courts namely the genuineness of the transaction, identity and the capacity of the investor have all been examined by the impugned order of the Tribunal and on facts it was found satisfied. Further it was a submission on behalf of the Revenue that such large amount of share premium gives rise to suspicion on the genuineness (identity) of the shareholders i.e. they are bogus. Th....
X X X X Extracts X X X X
X X X X Extracts X X X X
....s in the light of the judicial pronouncements (supra), we find that the Ld. Assessing Officer deputed inspectors to physically visit Kolkata and collect information directly from the share applicants who gave share application money to the assessee during the year under consideration. It is also an uncontroverted fact that notices under section 133(6) of the Act were issued to the said share applicants which were duly complied with. The Ld Assessing Officer himself accepted that inspectors met Shri Ashok Kumar Surekha who represented as the Chairman in these companies. The share applicant companies also provided their acknowledgement of return, copy of account of the assessee in their books of accounts, copy of share certificate and copy of their bank statement directly to the Ld Assessing Officer which were never disproved by the Ld Assessing Officer. We find that with the help of supporting/corroborative documentary evidences, the existence of the share applicant companies was proved beyond doubt by the assessee. The assessee during the course of re-assessment proceedings and first appellate proceedings filed requisite documentary evidences which included share application form, ....