TaxTMI 
TaxTMI 
2022 (2) TMI 377
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....ons 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) erred in maintaining the addition of Rs. 80,00,000/- out of the addition of Rs. ....
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....eved, 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 Kamakhya Developers P Ltd AABCK0981C 10,00,000 2 M/s MAPS Enterprises P Limited AABCM6875B 12,50,000 3 M/....
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....nt 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 documentary evidences which were filed/available before the Revenue Authorities and are also part of the paper book filed before this Tribunal. The learned Counsel for the assessee relied on ample documentary evidences and stated that these documents were never disproved either by the Ld Assessing Officer or by the L....
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....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 31st March, 2008 50-51 1.8 Audited financial statements for the year ended 31st March, 2008 52-59 1.9 Form 20B regarding filing of annual return by a company having share capital with the Registrar for the Financial Year 2007-08 60-64 1.10 Form 23AC regarding filing of balance sheet and other documents with the Registrar for the Financial Year 2007-08 65-71 1.11 Director's rep....
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....the year ended 31st March, 2008 260-262 3.8 Audited financial statements for the year ended 31st 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. 10,00,000/- 4.1 Share application form regarding subscription of equity shares of the assessee company 297-298 4.2 Extracts of the Minutes of the meeting of the Board of Directors duly authorizing Mr. Mukesh M. Choksi for making investment in the equity shares of the assessee company 299 4.3 Company Master Data and Signatory Details as downloaded from the website of Ministry of Corporate Affairs 300-301 4.4 Memorandum of Association....
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....n 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 31st March, 2008 510-511 6.9 Audited financial statements for the year ended 31st March, 2008 512-519 6.10 Form 20B regarding filing of annual return by a company having share capital with the Registrar for the Financial Year 2007-08 520-524 6.11 Form 23AC regarding filing of balance sheet and other documents with the Registrar for the Financial Year 2007-08 525-531 6.12 Director's report dated 28-07-2014 for the year ended 31st March, 2014 532-533 6.13 Audited financial statements for the year ended 31st March, 2014 534-545 6.14 Form DIR-12 containing the particulars regarding appointment o....
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....kesworth 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 31st March, 2008 658 8.9 Audited financial statements for the year ended 31st March, 2008 659-667 8.10 Form 23AC regarding filing of balance sheet and other documents with the Registrar for the Financial Year 2007-08 668-674 8.11 Director's report dated 31-08-2015 for the year ended 31st March, 2015 675-677 8.12 Audited financial statements for the year ended 31st March, 2015 678-692 9 M/s Rays Net Mark Private Limited [PAN: AADCR3152L] - Rs. 30,00,000/- 9.1 Share application form regarding subscription of equity shares of the assessee company 693 9.2 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 694 9.3 Company Master Dat....
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....rm 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 31st March, 2015 814-822 10.13 Audited financial statements for the year ended 31st March, 2015 823-836 11 M/s Excel Merchants Private Limited [PAN: AABCE8172B] - Rs. 10,00,000/- 11.1 Share application form regarding subscription of equity shares of the assessee company 837 11.2 Company Master Data and Signatory Details as downloaded from the website of Ministry of Corporate Affairs 838-839 11.3 PAN detail as downloaded from the website of Income-Tax Department 840 11.4 Memorandum of Association 841-848 11.5 Articles of Association 849-856 11.6 Director's report dated 22-08-2008 for the year ended 31st March, 2008 857-858 11.7 Audited financial statements for the year ended 31st March, 2008 859-867 11.8 Form 20B regarding filing of annual return by a company having share capital with the Registrar for the Financial Year 2007-08 868-872 &nb....
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....y Master Data and Signatory Details as downloaded from the website of Ministry of Corporate Affairs 951-952 13.3 Certificate of Incorporation 953 13.4 Memorandum of Association 954-961 13.5 Articles of Association 962-969 13.6 PAN detail as downloaded from the website of Income-Tax Department 970 13.7 Form 1 regarding application and declaration for incorporation of a company 971-979 13.8 Form 18 containing the information regarding notice of situation or change of situation of registered office 980-981 13.9 Form 32 containing the particulars regarding appointment of/ changes among managing director, directors, manager and secretary 982-985 13.10 Director's report dated 22-08-2008 for the year ended 31st March, 2008 986-987 13.11 Audited financial statements for the year ended 31st March, 2008 988-996 13.12 Form 23AC regarding filing of balance sheet and other documents with the Registrar for the Financial Year 2007-08 997-1003 13.13 Director's report dated 12-08-2015 for the year ended 31st March, 2015 1004-1007 13.14....
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.... 1126-1133 15.6 PAN detail as downloaded from the website of Income-Tax Department 1134 15.7 Director's report dated 22-08-2008 for the year ended 31st March, 2008 1135-1136 15.8 Audited financial statements for the year ended 31st March, 2008 1137-1145 15.9 Form 20B regarding filing of annual return by a company having share capital with the Registrar for the Financial Year 2007-08 1146-1150 15.10 Form 23AC regarding filing of balance sheet and other documents with the Registrar for the Financial Year 2007-08 1151-1157 15.11 Director's report dated 04-08-2015 for the year ended 31st March, 2015 1158-1161 15.12 Audited financial statements for the year ended 31st March, 2015 1162-1175 15.13 Form DIR-12 containing the particulars regarding appointment of/ changes among directors and key managerial personnel 1176-1180 16 M/s Linkpoint Infrastructure Private Limited (Formerly known as M/s Taral Vincom Private Limited) [PAN: AAACT9890Q] - Rs. 10,00,000/- 16.1 Company Master Data and Signatory Details as downloaded from the website of Ministry of Corp....
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.... also filed by these share applicants. We find that the Ld AO himself accepted that inspectors visited and met Shri Ashok Kumar Surekha who represented as Chairman in these companies and relevant details were also provided by him to the inspectors. Details of all these companies of Kolkata to which notices u/s 133(6) of the Act were issued and were duly complied with are summarised as under: S.No Name of the Company PA No Amount [Rs] Response received U/s 133(6) 1 M/s Kamakhya Developers P Ltd AABCK0981C 10,00,000 Yes, reply filed 2 M/s MAPS Enterprises P Limited AABCM6875B 12,50,000 Yes, reply filed 3 M/s Rays Netmark P Limited AADCR3152L 30,00,000 Yes, reply filed 4 M/s Breeze Tracom P Limited AADCB1833Q 25,00,000 Yes, reply filed 5 M/s Excel Merchant P Limited AABCE8172B 10,00,000 Yes, reply filed 6 M/s Regal Banijya P Limited AADCR6961K 15,00,000 Yes, reply filed 7 M/s Shubham Dealers P Limited AALCS0985Q 30,00,000 Yes, reply filed 8 M/s Sun Fruit P Limited [Know Known as Sun Mercantile P Limited AAJCS2031D 12,50,000 Yes, reply filed Total 1,45,00,000 11. Before....
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....st Years 2006-07 & 2007-08] 4 M/s Atishay Marketing P Limited AACCA5745R 10,00,000 M/s Bhiwani Vanaspati Limited [ITA No 522/Kol/2011 dt 15-03-2012] 5 M/s Tuticorin Trexim P Limited [Currently known as M/s Makes worth Projects & Developers P Ltd] AAACT9539J 20,00,000 M/s Luminant Investment Limited [ITA No 2067/ Mum/ 2013 dt 27-09-2017 for the Asst Year 2007-08 ] 6 M/s Chandimata Management P Limited AACCC6782A 10,00,000 M/s Tirupati Infra Projects P Limited [ITA No 2472/ Del/ 2014 dt 27-01-2017 for the Asst Year 2008-09] 7 M/s Vaishno Devi Coloniser P Limited AABCV8060B 25,00,000 There was no dispute. It means the amount of share application money received from this company was accepted in all the cases 8 M/s Taral Vincom P Limited AAACT9890Q 10,00,000 1] M/s Tirupati Infra Projects P Limited [ITA No 2472/ Del/ 2014 dt 27-01-2017 for the Asst Year 2008-09] 2] M/s Shokeen Properties P Limited [ITA No 2266/ Del/ 2012 dt 28-01-2014 for the Asst Year 2008-09 ] 3] M/s Kunj Alloys P Limited [ITA No 239/ CTK/ 2007 dt 27-11-2015 for the Asst Year 2004-05 ] Total &....
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....ments produced by the assessee with cogent reasons and materials but not on the realm of suspicion; (ii) If the assessee has produced documents like PAN Card, bank account details or details from the bankers the onus shifts upon the AO and it is for him to reach the shareholders and the AO cannot burden the assessee merely on the ground that summons issued to the investors were returned back with the endorsement "not traceable" (iii) The initial burden on an assessee which is a pvt ltd company is somewhat heavy because the shareholders are family friends/close acquaintances etc and the assessee cannot feign ignorance about the status of these parties; (iv) There is an additional burden on the Department to show that even if share applicants did not have the means to make investment, the investment made by them actually emanated from the coffers of the assessee so as to enable it to be treated as the undisclosed income of the assessee. In the absence of such finding, addition cannot be made u/s 68 in the hands the assessee. (v) The Department is free to reopen the individual assessment in case of alleged bogus shareholders in accordance with law and, thus, not remedy-less. ....
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....f these inquiries and non-verification of the details at the time of assessment proceedings, the factual findings recorded by the Assessing Officer were incomplete and sparse. The impugned order passed cannot be treated and regarded as perverse. The appeal is dismissed as no substantial question of law arises". [Emphasis applied] Hon'ble Delhi High Court vide order dt 21-01-2013 in the case of Gangeshwari Metal Pvt Ltd [Appeal No ITA No 597/2012] has discussed the similar issue in detail and after considering the decision in the case of Nova Promoters P Limited has held that :- Mr. Sabharwal, appearing on behalf of the revenue/ appellant sought to place reliance on a Division Bench decision of this Court in CIT v. Nova Promoters and Finlease (P) Ltd.: (2012) 342 ITR 169 (Del.). However, on going through the said decision in Nova Promoters and Finlease (P) Ltd. (supra) we find that the facts are clearly distinguishable. In fact, in Nova Promoters and Finlease (P) Ltd. (supra) itself this Court has observed, in the context of Lovely Exports (P) Ltd. (supra), as under: - "The ratio of a decision is to be understood and appreciated in the background of the facts of that case. S....
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....lied] As can be seen from the above extract, two types of cases have been indicated. One in which the assessing officer carries out the exercise which is required in law and the other in which the assessing officer "sits back with folded hands_ till the assessee exhausts all the evidence or material in his possession and then comes forward to merely reject the same on the presumptions. The present case falls in the latter category. Here the assessing officer, after noting the facts, merely rejected the same. This would be apparent from the observations of the assessing officer in the assessment order to the following effect: - "Investigation made by the Investigation Wing of the Department clearly showed that this was nothing but a sham transaction of accommodation entry. The assessee was asked to explain as to why the said amount of Rs. 1,11,50,000/- may not be added to its income. In response, the assessee has submitted that there is no such credit in the books of the assessee. Rather, the assessee company has received the share application money for allotment of its share. It was stated that the actual amount received was Rs. 55,50,000/- and not Rs. 1,11,50,000/- as mentione....
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.... channels, assessee has to prove existence of persons in whose name the share application is received. Once the existence of investor is proved it is no further burden on the assessee to prove whether that person itself has invested the said money or some persons made investments in the name of that person. The burden then shifts on revenue to establish that such investment has come from assessee company itself. The Hon'ble Apex Court has also held in the case of Daulat Ram Rawatmul, 87 ITR 349(SC) that onus to prove that the apparent is not the real is on the person who claims it to be so. Therefore, onus is on the department to prove that the share application money subscribed to the share capital of the assessee company by the above named share applicants is not the money of the share applicants but of the assessee company, is on the department. In the case before us, the department has not brought any material on record to establish the same. We are of the considered view that considering evidence on record, AO has doubted the receipt of share premium on surmises and conjectures and has not brought any cogent material on record to establish that it was the assessee's ow....
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....osition because in that case the identity of such share applicants was not proved and even the addresses of such share applicants were found non-existent/bogus. In view of those facts, this Bench concluded that the decision from Hon'ble Apex Court pronounced in Lovely Exports Private Limited is not applicable and the addition was confirmed in the hands of the assessee. However, in the present appeal, since the identity of such share subscribers, as we have discussed above, was established, therefore, no addition u/s 68 is warranted in the case of the assessee company. So far as the decision from Hon'ble jurisdictional High Court in the case of CIT vs. Rathi Finlease Limited (2008) 215 CTR (MP) 249 is concerned, in that case, despite several opportunities, the assessee was unable to provided confirmations from the concerned parties, therefore, the Hon'ble Court reached to a particular conclusion, whereas in the present appeals, the identity of share applicants, namely, M/s. Shrilal Traders Private Limited, M/s Lakeview Vinimay Private Limited, M/s Saharsh Suppliers Private Limited and M/s Ambitions Tie Up Private Limited was established, therefore, in view of the decisio....
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....gh an account payee cheques, PA No of the share applicant has also been provided and various other documents through which not only the identity but also the genuineness and creditworthiness of the share application has been proved. Hence, the assessing officer was not justified in adding the amount of share application money to the income of the appellant. Hon'ble Apex Court in the case of CIT vs Orissa Corporation [P] Ltd as reported in 159 ITR 78 has held that:- " 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 number was 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 income of the said alleged creditors to find out whether they were credit-worthy or were such who could advance the alleged loans. There was no effort made to pursue the so called alleged creditors. In those circumstances, the assessee could not do any further. In the premises, if the Tribunal came to the conclusion that the as....
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.... vs Ranchhod Jivabhai Nakhava reported in 21 taxmann.com 159 , has discussed the issue of cash credit in detail and held that (refer Para 15 to 18):- "15. In our view, once the assessee has established that he has taken money by way of accounts payee cheques from the lenders who are all income tax assessees whose PAN have been disclosed, the initial burden under Section 68 of the Act was discharged. It further appears that the assessee had also produced confirmation letters given by those lenders. 16. Once the Assessing Officer gets hold of the PAN of the lenders, it was his duty to ascertain from the Assessing Officer of those lenders, whether in their respective return they had shown existence of such amount of money and had further shown that those amounts of money had been lent to the assessee. If before verifying of such fact from the Assessing Officer of the lenders of the assessee, the Assessing Officer decides to examine the lenders and asks the assessee to further prove the genuineness and creditworthiness of the transaction, in our opinion, the Assessing Officer did not follow the principle laid down under Section 68 of the Income Tax Act. 17. If on verification, it....
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....ditions as made to the income of the assessee on account of share application money. 3.11.1] Further, the appellant received share application money during the previous year 2007-08 relevant to the Assessment Year 2008-09. The case of the appellant pertains to the Assessment Year 2008-09. The proviso inserted in section 68 of the Income-Tax Act, 1961 by the Finance Act, 2012 w.e.f. 1- 4-2013 which required a private limited company to establish the source of source was effective from Assessment Year 2013- 14. It is quite clear that an assessee was only required to establish the identity of share applicants prior to the Assessment Year 2013-14. It was only after the insertion of proviso to section 68 of the Act w.e.f. Assessment Year 2013-14 that the assessee was required to furnish an explanation regarding nature and source of sum invested by the share applicant. Hon'ble Bombay High Court in its landmark judgment in the case of CIT-1 v. Gagandeep Infrastructure (P.) Ltd. as reported in [2017] 394 ITR 680 (Bombay) has categorically held that proviso to section 68 introduced by Finance Act 2012 with effect from 1-4-2013, would not have retrospective effect. Relevant extract from ....
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....icable in the facts of the present case. 3.11.4] The assessing officer while adding the amount to the total income of the appellant observed that prior to the issuance of the cheques to the appellant company amount was credited in the bank account of the share applicant. The assessing officer also observed that bank account of most of the share applicant companies were opened in Bhopal. The assessing officer himself stated that he has deputed his Inspector to verify the genuineness of the Kolkata Based investor companies. As explained above, the inspector visited and found all the companies at the address as given. The inspector also met Shri Ashok Kumar Sureka, chairman and director of all these companies and collected relevant information directly from him. It is also pertinent to mention that all the share applicant companies also filed the details as asked by the inspector during the course of his visit at Kolkata. 3.11.5] That from the assessment order it is clear that cheques were received by the appellant against the credit of cheque and therefore the appellant company not only proved the identity but also proved the genuineness and creditworthiness of the share applican....