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TaxTMI 
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2022 (9) TMI 1084
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....o prove the same, the AO made enquiry u/s 133 (6) and did not proceed further and as such the assessee discharged the onus that lay upon him. 2. For that the Ld. CIT(A) failed to appreciate the fact that AO has brought no evidence on record to controvert the submissions of the assessee and the creditors and as such the order of the Ld CIT(A) is against the well established principles of law. 3. For that on the facts and circumstances of the case that the Ld. CIT(A) erred in confirming the order of the A.O in adding back Rs.2,53,00,000/- to the total income of the appellant which was unjustified and uncalled for." 4. The brief facts of the case, as culled out from the Assessment Order dated 25.03.2015, are that the assessee filed its return of income for the relevant assessment year (in short the 'AY') on 13.08.2012. The case of the assessee was selected for scrutiny. Accordingly a notice u/s 143(2) of the Income Tax Act, 1961 (in short the 'Act') was issued by the concerned Assessing Officer (in short the 'AO'). Thereafter, a notice u/s 142(1) of the Act was also issued by the AO. In response to the above notices, the assessee filed requisite details and documents and finan....
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....mpany. Further, that all these subscribers were income tax assessees and further that all the investor companies were duly incorporated with the Registrar of Companies. That there were no paper companies involved in the transactions. The assessee duly filed the details of share Allottee Company with the address, PAN & Form 2 & Form 5 filed with Registrar of Companies. That all the evidences including acknowledgement of filing their Income Tax Return, audited financial statements as well as copy of bank statement of the allottee company highlighting the payment of the entire amount of share capital and share premium were duly furnished. He, however, has submitted that the AO instead of examining the relevant documents, insisted for the personal presence of the directors of the subscribers which was not in the hands of the assessee. He therefore, has submitted that the identity and creditworthiness of these companies was duly established. He has further submitted that the AO could not point out any defect or discrepancy in the evidences/documents submitted by the assessee to prove the identity and creditworthiness of the subscribers and genuineness of the transaction. He has further....
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....edgement and Audited Financial Statements have already been filed. There are no paper companies involved in the transactions. The assessee duly filed the details of share Allottee Company with the address, PAN & Form 2 & Form 5 filed with Registrar of Companies (Kindly refer para 4 of the assessment order). It is submitted that the shareholders duly confirmed the share subscription in the Assessee company. All the evidences including acknowledgement of filing their Income Tax Return, audited financial statements as well as copy of bank statement of the allottee company highlighting the payment of the entire amount of share capital and share premium, and reply to notices u/s 133(6) are enclosed herewith. When the addition is made without considering the reply of the shareholder, the addition itself was bad in law. The details of each of the subscriber companies enclosed herewith are explained below: 1. M/s. Cindrella Barter Pvt. Ltd having PAN No. AADCC8512F filed a confirmation along with all the requisitions made by the AO viz. allotment advice, copy of Audited P/L Ac and Balance Sheet as on 31st March 2012, the sources of funds and their bank statement highlighting the Source ....
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.... VsMaaAmba Towers in I. T.A No: 1381/kol/2015 &alsoin a recent judgement pronounced on 22.05.2019 by Hon'ble Kolkata ITAT "B" Bench in the case of ITO, Ward 12(2), Kolkata Vs M/s. Happy Structure Private Limited reported in ITA No. 1977/Kol/2016. 2. M/s. DivyaTreximPvt. Ltd having PAN No AADCD9O06F filed all the documents requisitions made by the AO and the same are enclosed herewith, viz. the allotment advise, Audited P/L A/c and Balance Sheet as on 31st March 2012, the sources of funds and their bank statement highlighting the source of payment made. Payment of Rs 10,00,000&Rs 20,00,000 was made on 05.09.2011 & 29.11.2011 respectively to Urmila Properties Pvt. Ltd for purchase of 12000 shares through cheque. The source of fund was Rs. 20,00,000 received from M/s. Natureview Merchants Pvt Ltd. of 21, ghola road ,belghoria, Kolkata-700083 &Rs 5,00,000 each received from VisheshDudheria of 14/2, Old China Bazar street ,Room 308, Kolkata-700001 having PAN ADLPD3616K & from Ram Krishna Das of Dwipamalita, Janapara, Bagnan, Howrah 711303 having PAN No. AJIPD6470E respectively. The company had net worth of Rs. 2,22,01,948/- as is evident from the balance sheet. This itself shows ....
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....the requisitions made by the AO viz. share allotment advice, Audited P/L AG and Balance Sheet as on 31st March 2012, and their bank statement highlighting the payment made. Payment of Rs 8, 50,000 was made to Umila Properties Pvt. Ltd on 24.03.2012 for purchase of 3400 shares through Cheque No.0675289. The copy of reply to the notice u/s. 133(6) along with the documents submitted are enclosed herewith. The source of fund was the share capital and share premium raised by the company during the assessment year under consideration. The company had net worth of Rs. 5,53,55,755/ as is evident from the balance sheet. This itself shows the creditworthiness of the company. Therefore, all the three limbs ie., identity, genuineness and creditworthiness are proved and no addition is called for. 5. M/s. Green Gold Plantation & Nursery Limited Pvt. Ltd having PAN No AABCG3571G filed all the documents requisitions made by the AO and the same are enclosed herewith, viz. copy of ITR Acknowledgement, allotment advise, Audited P/L Ac and Balance Sheet as on 31st March 2012, the sources of funds and their bank statement highlighting the source of payment made. Payment of Rs 17,50,000&Rs 4,00,000 w....
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....1,99,68,000/- and the same money raised was invested in the Assessee Company. The assessment of this company pertaining to A. Y. 2012-2013 was completed u/s 143(3) of the Act, a copy of which is enclosed herewith wherein no adverse view about share capital and share premium raised was taken by AO, that is, there was no addition u/s 68 of the Act, therefore no disallowance should be made in the hands of the assessee company u/s 68 of the Act as also the department accepted the share capital and share premium as genuine. Thus, addition made in the hands of the assessee company ought to be deleted. The same view was upheld by the Hon'ble ITAT Kolkata Bench "B", in the case of M/s C.P. Re-Rollers Ltd Vs D.C.I.T, Cir-1, Durgapur& also by hon'ble Kolkata ITAT in the case of ITO, Ward 12(2), Kolkata Vs M/s, Happy Structure Private Limited reported in 1TA No. 1977/Kol/2016 which has been referred to above. 7. M/s. Nature View Merchants Private Limited having PAN No AACCL1305J filed all the documents requisitions made by the A0 and the same are enclosed herewith, viz. the ITR Acknowledgement for the A.Y. 2012-13, allotment advise, Audited P/L A/c and Balance Sheet as on 318t Marc....
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....y added u/s 68 of the Income Tax Act, 1961. Therefore, no disallowance should be made in the hands of the assessee company u/s 68 of the Act as it would amount to double addition on the same amount which is unjustified and unsustainable as per Income Tax Laws. Thus, addition made in the hands of the assessee company ought to be deleted. The same view was upheld by the Hon'ble ITAT Kolkata Bench "B", in the case of M/s C.P. Re-Rollers Ltd Vs D.C.I.T, Cir-1,Durgapur which was based on identical facts as applicable in the case of the appellant. The Hon'ble Kolkata ITAT while deleting the addition made u/s 68 of the income Tax Act, 1961 held the following. "Therefore, we are of the view that based on the factual position narrated above and the fact that in case of two companies, Viz Gannet VintradePvt. Ltd and Prism VintradePvt. Ltd, the amount of their share capital and share premium have already been disallowed by assessing officer under section 263/147/143(3) of the Act, therefore no further disallowance is warranted." Similar observations were also made in an identical case in DCIT VsMaaAmba Towers in I.T.A No: 1381/Kol/2015 & also in a recent judgment pronounced on 22.0....
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.... 14.11.2011 from M/s Oasis Agro Products Ltd on 09.12.2011 of 14, Amenian Street, 1st Floor, Room No 18, Kolkata-700001. The company had net worth of Rs. 7,90,41,630.90/- as is evident from the balance sheet. This itself shows the creditworthiness of the company. Therefore, all the three limbs i.e., identity, genuineness and creditworthiness are proved and no addition is called for 11. M/s. Skipper Trade Centre Pvt. Ltd. having PAN No. AADCS6719G filed a confirmation along with all the requisitions made by the AO viz. the copy of their l. T. Acknowledgement along with Audited P/L Ac and Balance Sheet as on 31st March 2012, the sources of funds and their bank statement highlighting the payment made. Payment of Rs 15,00,000 was made on 23.09.2011 to Umila Properties Pvt Ltd through Cheque No. 466737 for purchase of 6000 shares. The copy of reply to the notice u/s. 133(6) showing the requisitions made and the confirmation filed along with the above documents are enclosed herewith. The source of fund was Rs. 15,00,000 received from M/s Deb Enterprises of 15, Ganesh Chand Avenue, Kolkata-700013 on account of advance received on sale of shares. The company had net worth of Rs. 1,48,39....
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....led against the assessee company by the Ld AO that share capital and share premium raised by it is nothing but rotating its own unaccounted money through various paper companies or entities is baseless and infructuous. Having said that the additions made in the Return income of the assessee company ought to be deleted. 13 M/s. Vinayak Printpack Pvt. Ltd having PAN No AADCv9773D filed all the documents requisitions made by the AO and the same are enclosed herewith, viz. the allotment advise, Audited P/L AAC and Balance Sheet as on 315t March 2012, the sources of funds and their bank statement highlighting the of payment made. Payment of Rs 7,50,000 was made to Umila Properties Pvt Ltd for purchase of 3000 shares through cheque no. 989056. The source of fund was Rs. 20,00,000 received from M/s. DivyaTrexim Pvt Ltd. of Vivian Valley, Apartment No 218, 2nd Floor, Kona, Nibra, Howrah-711403 having PAN No. AADCD9006F. The company had net worth of Rs.98,97,760/- as is evident from the balance sheet. This itself shows the creditworthiness of the company. Therefore, all the three limbs i.e., identity, genuineness and creditworthiness are proved and no addition is called for. Further, it ....
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....unds and their bank statement highlighting the payment made. Payment of Rs 20,00,000/- was made on 08.09.2011 to M/s. Umila Properties Pvt Ltd through Cheque No. 857563 for purchase of 8000 shares. The copy of reply to the notice u/s. 133(6) and the above mentioned documents are enclosed herewith. The source of fund was Rs. 20,00,000 from M/s Sarbottam Alloy & Fiscal Pvt Ltd. of Lake Land Country Club, Munshidanga, Nibra, Howrah 711403 having PAN No AAHCS2686Q. The Company had net worth of Rs.1,83,63,379/- as is evident from the balance sheet. This itself shows the creditworthiness of the company. Therefore, all the three limbs i.e., identity, genuineness and creditworthiness are proved and no addition is called for. It is to be noted that while doing the scrutiny assessment of the above company u/s 143(3) of the Act for the A. Y. 2012-2013, a copy of which is enclosed herewith, the Ld. AO did not dispute the investments made by the company in the assessee company during the F.Y. 2011-2012 which implies that the Ld AO has rightly accepted it as genuine investments. Thus, the allegations levelled against the assessee company by the Ld AO that share capital and share premium raised b....
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....x in accordance with law. It does not entitle the Revenue to add the same to the assessee's income as unexplained cash credit. (b) In the above circumstances and particularly in view of the concurrent finding of fact arrived at by the CIT(A) and the Tribunal, the proposed question of law does not give rise to any substantial question of law. Thus, not entertained. This was also cited by the judgement of Hon'ble Kolkata ITAT in the case of Bidit Financial Management Pvt. Ltd. in I.T.A No: 579/Kol/2017. Therefore, source of source is not necessary to prove by the assessee company. Further, it is apparent from the assessment order that the AO took up the hearing and in the course of hearing issue notice u/s. 133(6) to all the shareholders. Reply was duly given by all the share subscriber companies in response to the notices issued to them u/s 133(6) of the Act. The AO also alleged to have issued notice u/s. 131 to all the subscriber companies vide para 12 of the order which according to him have been returned unserved by postal authorities. It is surprising note that when the notice u/s. 133(6) could be served, how the notices u/s. 131 could be served. The AO there after ....
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....e'. Where the assessee in support of transaction of receipt of share application money brought on record various documents such as name and addresses of the share applicants, their confirmatory letter, PAN No. etc., the said transaction is to be considered as genuine as the assessee has furnished all the documents to prove the identity of the shareholders and also the genuineness of the transaction by showing the entries in the books through account payee cheques addition cannot be made as was held in the case of Gangeshwari Metal (P) Ltd. 30 Taxmann.com 328 Delhi. In the case CIT v Down Town Hospitals Pvt Ltd. 267 ITR 439 (Gauhati), the hon'ble court held that: In the instant case, the Tribunal found that the identities of the creditors had been established and all essential particulars were furnished by the assessee. The assessee had discharged its burden to the satisfaction of the Tribunal. There was fact no Scope for re-appreciation of the materials on record as the High Court was required to tender its opinion on the question of law on the given facts and circumstances of the case. Therefore, the Assessing Officer was wrong in adding the aforesaid amount to the incom....
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.... taken as proved. The Court in CIT v. Oasis Hospitalities Pvt. Ltd. 2011 Ind law Delhi 1083 held that the genuineness of the transaction is to be demonstrated by showing that the assessee had, in fact, received money from the said shareholder and it came from the coffers from that very shareholder. It held that when the money is received by cheque or is transmitted through banking or other indisputable channels, genuineness of transaction would be proved. Other documents showing the genuineness of transaction could be the copies of the shareholders register, share application forms share transfer register, etc. Further, it is stated that whenever a company invites applications for allotment of shares from different applicants, there is no procedure contemplated to find out the genuineness of the address or the genuinity of the applicants before allotting the shares. The Court in CIT v. Expo Globe India Ltd. 2012 (7) TMl 802 has observed that the share application money or the source of the share application money had been satisfactorily explained on the basis of income tax returns, balance sheets, ROC particulars and bank account statements. Further, in CIT v. Dolphin Canpack Lt....
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....9 dated 1.4.2015 Madras High Court in the case of Pranav Foundation Ltd. reported in 117 DTR 227 and other similar judgments. Recently it has been held that when the assessee filed all the evidences no addition called for. Kindly refer to 223 taxman 110 in the case of Veer leasing and finance P Ltd. It is further submitted that the AO has mainly added the amount for nonappearance of the directors when the appearance of directors has nothing to do with the genuinity of the cash credit u/s 68 as has been held in the case of Cygnus Developer Pvt Ltd by Kolkata Bench of ITAT Wherein the Hon'ble ITAT has relied on the judgment of Allahabad High Court and coordinate Bench. Therefore the addition made on the said basis is also not in accordance with law. The AO even otherwise could have made independent enquiries by down loading the information with regard to the creditworthiness of the share applicants which the assessee has been able to do. It is submitted that section 68 nowhere speaks of production of the creditor for acceptance of the cash credit. IT only requires that the assessee has to prove the nature and source of the credit. The assessee has proved that the amount was receiv....
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....d to provide any justification for quantum of premium and thus held that it is a case of money laundering and overlooking all evidences filed in Support of the transaction had added the entire share capital issued along with share premium u/s 68. In rebuttal of the same, we would like to draw your attention to the judgment of Hon'ble Madhya Pradesh High Court in the case of Pr. CIT vs. Chain House International (P) Ltd. [2018] (98 taxmann.com 47) wherein it was held that issuing the share at a premium was a commercial decision. It is the prerogative of the Board of Directors of a company to decide the premium amount and it is the wisdom of shareholder whether they want to subscribe the shares at such a premium or not. This was a mutual decision between both the companies. Relevant extract of the judgement is reproduced below: "Issuing the share at a premium was a commercial decision. It is the prerogative of the Board of Directors of a company to decide the premium amount and it is the wisdom of shareholder whether they want to subscribe the shares at such a premium or not. This was a mutual decision between both the companies. In day to day market, unless and until, the rates i....
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....hiness of the share applicants would have been apparent. Even otherwise, the share applicants' particulars were available with the AO in the form of balance sheets income tax returns, PAN details etc. While arriving at the conclusion that he did, the AO did not consider it worthwhile to make any further enquiry but based his order on the high nature of the premium and certain features which appeared to be suspect, to determine that the amount had been routed from the assessee's account to the share applicants' account. As held concurrently by the CIT (Appeals) and the ITAT, these conclusions were clearly baseless and false. This Court is constrained to observe that the AO utterly failed ITA No. 1977/Kol/2016 M/s Happy Structure Pvt. Ltd. to comply with his duty considers all the materials on record, ignoring specifically the most crucial documents. We also rely on the judgment of the Coordinate Bench of ITAT Kolkata in the case of M/s Jagannath Banwarilal Texofabs in ITA No.1762/Kol/2016, for A.Y 2012-13, order dated 26.10.2018 where based on same facts, and identical and common grounds and coordinate Bench deleted the addition made u/s 68 of the Income Tax Act, 1961....
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..... The AO, in our view, could have taken an adverse inference, only if, he would have pointed out the discrepancies or insufficiency in the evidences and details received in his office and pointed out as to on what account further investigation was needed by way of recording of statement of the directors of the subscriber companies. Even if the directors of the subscriber companies have not come personally in response to the summons issued by the AO, in our view, adverse inference cannot be taken against the assessee solely on this ground as it is not under control of the assessee to compel the personal presence of the directors of the shareholders before the AO. In this case, as detailed in the written submissions of the assessee, the assessee had duly submitted details and evidences to prove the identity and creditworthiness of each of the share subscribers separately. However, the ld. AO, in the impugned Assessment Order has not recorded any peculiar facts of circumstance which would suggest that the assessee had routed his own money through the above stated subscribers. The AO has not brought any material or evidence on the file to show that these share applicants were fictitio....