TaxTMI 
TaxTMI 
2022 (11) TMI 717
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....ted the addition by holding that the genuineness and creditworthiness of the investors are proved by ignoring the fact that the nature and source of application money received were not furnished and even proved before the AO nor any remand report was called for by ld. CIT(A). 4. Facts in brief are that the case of the assessee was selected for scrutiny under CASS and statutory notices were duly issued and served upon the assessee. Pertinent to state that the return of income was duly filed declaring total income of Rs. 19,88,060/-. The company was incorporated on 20.12.2005 and in FY 2011-12 issued equity shares to various private limited companies at a high premium. Accordingly the AO called upon the assessee to furnish various details/evidences/information which were duly furnished by the assessee pertaining to increase in share capital however summons issued u/s. 131 of the Act remained non-complied with. The summons issued to the Directors of investing companies/share allottee companies also remained non-complied however investor companies had furnished all the details before the AO. Finally the AO added the entire share capital and share premium of Rs. 3,15,00,000/- to the in....
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....n all the 9 shareholders. Admitted position in the assessment order is that directors of shareholder companies did not appear in person but merely filed replies containing the evidences of investments made. Copies of such replies have been filed by the AR of the appellant company. However the AO concluded that the identity and creditworthiness of the shareholders and genuineness of the transaction between shareholders and the appellant could not be verified and, therefore, he added the entire sum of Rs. 3,15,00,000/- as unexplained cash credit u/s. 68 of the Act. 4.3. I find that the appellant has raised share capital of Rs. 3,00,00,000/- during the relevant assessment year from 9 shareholder companies by way of issue of 60000 equity shares of Rs. 10 each at a premium of Rs. 490/- per share. Remaining share capital of Rs. 15,00,000/- was raised from the directors of the appellant company. As a result total increase in share capital including share premium amounted to Rs. 3,15,00,000/-. Since the capital of Rs. 15,00,000/- was raised from the directors of appellant company the same is being dealt with separately as follows: I find that the appellant has furnished details of thes....
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....statement none of which has a cash deposit before issuing of cheque to the appellant company (vi) shareholders have substantial creditworthiness which is represented by their capital and reserves. I find that the identity of shareholders is proved by the fact that all the 9 shareholders are corporate bodies registered with Registrar of Companies, they have been allotted PAN by Department and they are filing their return of income, the summons issued u/s. 131 of the Act were served upon all the 9 shareholders which were complied to by filing necessary evidences. As regards creditworthiness of these share applicant companies it is noted that these shareholder companies have huge funds available in the form of capital and reserves and the investment made by them is only a small part of their capital. These transactions are duly reflected in the balance sheets of the shareholders, so the creditworthiness in my view is also proved. I agree with the contentions of the AR who placed reliance upon the decision of Hon'ble Jurisdictional High Court in CIT vs Dataware Ltd. in ITAT No. 263 of 2011 dated 21/09/11 & G.A. No 2856 of 2011 which is applicable in appellant's case. I find tha....
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.... Jurisdictional High Court in the case of Crystal Networks Pvt. Ltd. vs. CIT reported in 353 ITR 171. In view of the foregoing findings no addition of unexplained cash credit u/s. 68 of the Act was warranted. In view of the foregoing the impugned addition of Rs. 3,15,00,000/- does not stand to any merit which is now hereby directed to be deleted. 6. In the result, the appeal of the appellant is treated as allowed." 6. The Ld. D.R vehemently submitted before us that the order passed by the Ld. CIT(A) is wrong and against principles of natural justice as the Ld. CIT(A) has admitted the new evidences which were not before the AO and decided the issue of share capital and share premium on basis the said evidences without calling for any remand report on the said new evidences. The Ld. D.R., while taking us through the assessment order, brought to the notice of the Bench that the summons were issued to the directors of the investor companies which remained non-complied nevertheless the ld. D.R admitted that the evidences as regards the share capital and share premium were furnished before the AO. The Ld. D.R. therefore prayed before the bench that the case may kindly be restored to t....
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.... acknowledgments, audited accounts, share application forms, PAN cards, bank statements, audited accounts, source of funds for making investments etc which are placed in the paper book from page no. 49 to 2013. We note that the assessee has received the amounts through account payee cheques and source of investments were fully explained and proved. We further note that the AO has made the addition that no compliance was made to the summons issued to the assessee as well as the investors. In our considered view non compliance to summons issued u/s. 131 of the Act or non appearance of the directors of the subscribing companies before the AO can not be basis for making addition as the assessee has filed all the necessary documents before the authorities below proving the identities, creditworthiness of the investors and genuineness of the transactions. The case of the assessee is squarely covered by the decisions of Hon'ble Calcutta High Court in the case of Crystal Networks Pvt. Ltd. vs. CIT(Supra) wherein it has held that where all the evidences were filed by the assessee proving the identity and creditworthiness of the loan transactions, the fact that summon issued were returne....
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....ment of the Tribunal suffers from manifest infirmity. Taking inspiration from the Supreme Court observation we are constrained to hold in this matter that the Tribunal has not adjudicated upon the case of the assessee in the light of the evidence as found by the Ld. CIT(A). We also found no single word has been spared to up set the fact finding of the Ld. CIT(A) that there are materials to show the cash credit was received from various persons and supply as against cash credit also made. Hence, the judgment and order of the Tribunal is not sustainable. Accordingly, the same is set aside. We restore the judgment and order of the Ld. CIT(A). The appeal is allowed." The case of is also covered by the decision of the coordinate bench by ITO Vs M/s. Cygnus Developers India Pvt. Ltd. (supra) the operative part whereof is extracted below: "8. We have heard the submissions of the learned D.R, who relied on the order of AO. The learned counsel for the assessee relied on the order of Ld. CIT(A) and further drew our attention to the decision of Hon'ble Allahabad High Court in the case of CIT vs. Raj Kumar Agarwal vide ITA No. 179/2008 dated 17.11.2009 wherein the Hon'ble Allaha....