AI Drafter 
TaxTMI 
TaxTMI 
TaxTMI 
2023 (3) TMI 359
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....tal. (ii) For that the Ld. CIT(A) was not justified in law as well as in facts in deleting addition of Rs. 8,00,00,000/- on account of Share Premium. (iii) For that the Ld. CIT(A) was not justified in law as well as in facts in deleting addition of Rs. 28,00,000/- on account of Share Capital. (iv) Any other ground or grounds that may be raised at the time of hearing." Assessment Year: 2012-13: "(i) For that the Ld. CIT(A) was not justified in law as well as in facts in deleting addition of Rs. 64,00,000/- on account of Share Capital. (ii) For that the Ld. CIT(A) was not justified in law as well as in facts in deleting addition of Rs. 2,56,00,000/- on account of Share Premium. (iii) Any other ground or grounds that may be raised at the time of hearing." 3. From perusal of the grounds, we notice that two issues are raised by the Revenue for our consideration; (a) deletion of addition of Rs. 10 Cr for AY 2011-12 and Rs. 3.20 Cr for AY 2012-13 made by ld. AO u/s 68 of the Act towards unexplained cash credit in the form of share capital and share premium, (b) deletion of addition for unexplained cash of Rs. 28 lakh seized....
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....tary evidences about their investments in the Satyam Ispat (NE) Ltd. But till the completion of the assessment no reply from their end has been received. As already mentioned above, the Companies from whom the assessee claims to have received the share capital are based in Kolkata. It may be stated here that the assessee Company is not a reputed Company. It is improbable that the Companies from Kolkata would invest such huge amount, and that too with share premium of four times the share capital, in such a small, unknown and un-reputed Company where there is no guarantee of getting their money back and when they have many other scopes of investing their money in other reputed Companies or Banks, etc from where they could expect good returns. It is beyond human probabilities that investors would invest such a huge amount in a small, an unknown and an un-reputed Company. Further, even if the assessee's A/R claims that the payments were received by RTGS, no any bank statements of the above Companies could be furnished to prove the case. 8.2 It may be stated here that as per the provisions of section 68 of the IT Act, 'where any sum is found credited in the books of an....
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....re Premium and brought to taxation as Undisclosed Income. [Add: Rs.8,00,00,000/-]" 7. Further for AY 2012-13, ld. AO almost gave the similar finding and confirmed the impugned addition. Accordingly, the addition u/s 68 of the Act was made for AY 2011-12 at Rs. 10 Cr (Share capital: 2 Cr + Share premium: 8 Cr) and for AY 2012-13 at Rs. 3.20 Cr (Share capital: 64 lakh + Share premium: 2.56 Cr). 8. Dissatisfied with the order of ld. AO the assessee preferred appeal before ld. CIT(A) and filed complete details in order to prove that the identity and creditworthiness of the share applicants is beyond doubt and genuineness of the transaction is also not in doubt since the assessee company carries sufficient net worth to attract the share premium of Rs. 40/- on the equity shares of face value of Rs. 10/-. Ld. CIT(A) on examining the facts in detail and also after calling for the remand report from ld. AO observed that the assessee has filed sufficient documentary evidences including bank statements, memorandum and article, PAN and address of the applicant companies, income tax return copies. Ld. CIT(A), further, on perusal of the order sheet, available in the assessment records copy....
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.... Valley Traders Pvt. Ltd. 9 lakh 36 lakh 2 Sarovar Dealers Pvt. Ltd. 55 lakh 2.20 Cr Total 64 lakh 2.56 Cr 13. We notice that the assessee filed complete details to explain the said credit received in the form of share capital and share premium. It is impleaded by the assessee that ld. AO has not issued any letter u/s 133(6) of the Act and no incriminating material was found during the course of search pertaining to the said addition. 14. Before us, ld. Counsel for the assessee has referred to the following written submission filed before ld. CIT(A) challenging the said addition and for reference we are reproducing below the submissions made for AY 2011-12: "GROUND NO. 4 and 5: (ADDITION ON ACCOUNT OF ALLEGED BOGUS SHARE CAPITAL AND SHARE PREMIUM) (i) Ground nos. 4 & 5 are taken up together as the grounds on which the additions have been made by the assessing officer are similar. (ii) While making the assessment, the assessing officer has added the following amounts in the total income of the appellant:- (a) Alleged bogus share capital Rs.20000000/- (b) Alleged bogus share premium Rs.80000000/- ....
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....nts with the following banks showing the receipt of share capital/ application money:- (a) HDFC Bank (b) State Bank of India (C.A.) (c) State Bank of India (C.C.) (iii) Copies of Memorandum & Articles of Association and audited balance sheets in respect of corporate share holders/ applicants. (iv) Copies of returns of allotment filed by us in respect of shares allotted during the previous year relevant to the assessment year under appeal. (c) The assessing officer has mentioned in the assessment order that requisition u/s l33(6) of the Act was issued to share holder companies on 10.03.2015 but till completion of the assessment no reply was received from them. In this connection it is submitted that the appellant was never confronted with the result of notices u/s 133(6) of the Act sent to the share holder companies. This is in gross violation of the principles of natural justice more so section 142(3) of the Act. Secondly, merely not responding to notices issued u/s 133(6) of the Act, by the share holder companies, no adverse inference can be drawn against the appellant company. Despite furnishing the names, ad....
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....ant for disposal of the issue. 12.3. I find that the appellant had submitted the details of share capital and share premium in course of the assessment proceedings. This fact has been noted by the Assessing Officer in para 8 of his order. The appellant could not submit the documents in support of share capital/premium as these were not readily traceable at the time of assessment proceedings. The appellant has further submitted that it was not given proper and meaningful opportunity of being heard to produce the documents in support of share capital/premium. The appellant has submitted before me the following details/documents in support of the share capital/premium:- (i) Chart showing name & address of the share holders/applicants. No. of shares applied for/allotted face value of shares, premium paid, mode of payment, PAN No., CIN nos. of the applicant companies. (ii) Copies of the appellant's statements with the following banks showing the receipt of share capital/application money: (a) HDFC Bank (b) State Bank of India (C.A.) (c) State Bank of India (C.C.) (d) Copies of Memorandum & Articles of Association and aud....
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....se details/documents, I do not find any reason to doubt the identity of the share holders, their credit worthiness and the genuineness of the transactions. It is settled law that once an assessee provides details regarding identity of the share applicants/holders, their permanent account numbers, bank details, balance sheets, A/D receipt in support of filing of income tax returns, copies of Memorandum & Articles of Association etc., the share application money/capital cannot be treated as unexplained in the hands of the assessee. This view has been taken in the following cases: (i) Principal C.I.T. vs. Soft-line Creations Pvt. Ltd. (2016)387 R 636 (Delhi) (ii) C.I.T. vs. Kamdhenu Steel & Alloys Ltd. (2014) 361 ITR 220 (Delhi) (iii) C.I.T. vs. Lovely Exports Pvt. Ltd. 319 ITR (St.) 5 (S.C.) 320 (iv) C.I.T. vs. Sameer Bio-Tech Pvt. Ltd. 325 ITR 294 (Delhi) (v) C.I.T. vs. Five Vision Promoters Pvt. Ltd. (2016) 380 ITR 289 (Delhi) (vi) C.I.T. vs. Dwarkadhish Investment Pvt. Ltd. 330 R 298 (Delhi) (vii) C.I.T. vs. Divine Leasing & Finance Ltd. (2008) 299 ITR 268 (Delhi) In view of my above discussion, I del....
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....ept Ratan Sharma. It may be stated here that the assessee Company is not a reputed Company. It is improbable that the Companies would invest such huge amount, and that too with share premium of four times the share capital, in such a small, unknown and un-reputed Company where there is no guarantee of getting their money back and when they have many other scopes of investing their money in other reputed Companies or Banks, etc from where they could expect good returns. It is beyond human probabilities that investors would invest such a huge amount in a small, an unknown and an un-reputed Company. Further, even if the assessee's A/R claims that the payments were received by RTGS, no any bank statements of the above Companies could be furnished to prove the case." 17. In the above finding of ld. AO, he states that the assessee company is a small, unknown and unreputed company where there is no guarantee of getting their money back and further stated that it is beyond human probability that investors would invest such a huge amount in a small, unknown and unreputed company. We fail to find any merit in this observation of ld. AO and it seems to be merely surmises and conjecture....
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....f the Ld. AO are placed on record. We note that Ld. AO without even going through and discussing these details submitted by the sixteen subscriber companies, insisted for personal appearance to prove the identity, creditworthiness of the subscriber companies and the genuineness of the transactions. 9.1. To our mind, ld. AO could have taken an adverse view only if he could point out the discrepancies or insufficiency in the evidence and details received in his office from all the sixteen subscriber companies and also pointing out as to what further investigation was needed by him by way of recording of statement of the directors of the assessee and the subscriber companies. We draw our force from the decision of the Hon'ble Bombay High Court in the case of PCIT vs. Paradise Inland Shipping Pvt. Ltd. [2017] 84 taxmann.com 58 (Bom) wherein it was held that once the assessee has produced documentary evidence to establish the existence of the subscriber companies, the burden would shift on the revenue to establish its case. 9.2. We also draw our force from the decision of Hon'ble Jurisdictional High Court of Calcutta in the case of Crystal Network Pvt. Ltd. vs. CIT (su....
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....mination has deleted the addition made by the Ld. AO. Thus, going by the records placed by the assessee and by all the share subscribing companies in response to notices issued u/s 133(6), it can be safely held that the assessee has discharged its initial burden and the burden shifted on the ld. AO to enquire further into the matter which he failed to do so. 10.1. Ld. CIT(A) has elaborately appreciated the evidence and details placed on record and has given his factual findings, crux of which is contained in para 8.1 of his order, which is extracted below for ease of reference : "8.1. Basically the law requires documentary evidences on record in dealing with the issue of authenticity. It is not the case of the AO that necessary documentary evidences are not on record but the only major reliance placed on his action is based on non-attendance of the directors of the appellant company along with directors of subscriber companies before him u/s 131 of the Act. It is no longer res integra that such non-attendance should be considered as a factor which should be used by the AO in coming to an adverse conclusion against the appellant. On an overall analysis of the issue....
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....l the investing companies have also explained their source of funds in their reply to notices issued u/s. 133(6) of the Act. 10.3. From the perusal of the paper book and the replies filed by share subscribing companies in response to notice u/s. 133(6) of the Act, it is vivid that all the share applicants are (i) income tax assessees, (ii) they are filing their income tax returns, (iii) share application form and allotment letter is available on record, (iv) share application money was paid by account payee cheques, (v) details of the bank accounts belonging to share applicants and their bank statements are on record, (vi) in none of the transactions, there are any deposit of cash before issuing cheques to the assessee, (vii) all the share applicants are having substantial creditworthiness represented by their capital and reserves. 10.4. For expressing our views as aforesaid, we draw our force also from the decision of Hon'ble jurisdictional High Court of Calcutta in the case of PCIT vs. Shree Leathers in ITAT/18/2022 (IA No. GA/02/2022) dated 14.07.2022 wherein Hon'ble High Court succinctly dealt with the aspect whether notices u/s. 133(6) of the Act are issued w....
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....l principle and in spite of the assessee having offered the explanation with regard to the loan transaction, no finding has been recorded as regards the satisfaction on the explanation offered by the assessee. Therefore, the assessing officer ignored the basic tenets of law before invoking his power under Section 68 of the Act. Fortunately, for the assessee, CIT(A) has done an elaborate factual exercise, took into consideration, the creditworthiness of the 13 companies the details of which were furnished by the assessee. More importantly, the CIT noted that all these companies responded to the notices issued under Section 133 (6) of the Act which fact has not been denied by the assessing officer. On going through the records and the net worth of the lender companies, the CIT has recorded the factual findings that the net worth of those companies is in crores of rupees and they have declared income to the tune of Rs. 45,00,000/- and 75,00,000/-. Therefore, the assessing officer if in his opinion found the explanation offered by the assessee to be not satisfactory, he should have recorded so with reasons. We find that there is no discussion on the explanation offered ITAT 18 OF 2022 ....
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.... Capacity of creditors to advance money; and Genuineness of transaction This Court in the land mark case of Kale Khan Mohammed Hanif v. CIT [1963] 50 ITR 1 (SC) and Roshan Di Hatti v. CIT [1977] 107 ITR 938 (SC) laid down that the onus of proving the source of a sum of money found to have been received by an assessee, is on the assessee. Once the assessee has submitted the documents relating to identity, genuineness of the transaction, and credit-worthiness, then the AO must conduct an inquiry, and call for more details before invoking Section 68. If the Assessee is not able to provide a satisfactory explanation of the nature and source, of the investments made, it is open to the Revenue to hold that it is the income of the assessee, and there would be no further burden on the revenue to show that the income is from any particular source." 11.1. Further, in para 9 of the said decision, Hon'ble Supreme Court has observed as under: "9. The Judgments cited hold that the Assessing Officer ought to conduct an independent enquiry to verify the genuineness of the credit entries. In the present case, the Assessing Officer made an inde....
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....nquiries and thereafter to state that on what account he was not satisfied with the details and evidences furnished by the assessee by confronting with the same to the assessee. In view of this, the aforesaid decision of the Hon'ble Supreme Court in the case of PCIT vs. NRA Iron and Steel Pvt. Ltd., in our humble view, is not applicable to the facts and circumstances of the case in hand. 12. Considering the facts and circumstances of the case and the material placed on record, we find that assessee has discharged its onus to prove the identity and creditworthiness of the share subscribing companies and the genuineness of the transactions. Accordingly, considering these facts and in the light of the judicial precedents referred above, we find no reason to interfere with the fact-based findings given by the Ld. CIT(A) and uphold his decision to delete the addition made by the Ld. AO towards share capital and share premium u/s. 68 of the Act. Accordingly, grounds taken by the revenue in this respect are dismissed. 13. In the result, appeal of the revenue is dismissed." 18. We, therefore, respectfully following the above decision as well as our finding of fact ....