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2023 (4) TMI 692

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.... from various parties of Rs 10, 60, 50,000/- as unexplained cash credit. 3. That the entire addition by the AO is based on mere suspicious and without any material evidence on record and hence liable to be deleted. 4. That the addition made by AO is based on a pre-determined and biased mind-set and based on pure guess, surmises and conjecture which does not hold good in law. 5. That the assessment has been made without appreciating the documents and explanation produced before the AO and without affording reasonable opportunity to the assessee. 6. That the Ld. Assessing Officer was not justified in making addition on account of share capital as same was verified & certified by him in earlier years in detailed assessment. 7. That the addition made by Ld. Assessing Officer and upheld by Ld. the Commissioner of Income Tax (Appeal) are liable to be set aside. 8. That the appellant may add, alter, delete, withdraw or modify any of the ground at the time of hearing of the matter with the leave of the Hon'ble ITAT." 3. Brief facts of the case as culled out from the records are that the assessee is a private limited company engaged in the business of investment in shares and s....

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....also the facts of the case are almost identical and Hon'ble Tribunal decided in favour of the assessee holding that since the assessee has discharged its onus to prove the identity and creditworthiness of the share subscriber companies and the genuineness of the transaction, addition cannot be sustained merely for non-appearance to the notice issued u/s 133(6) of the Act. 7. On the other hand, ld. D/R vehemently argued supporting the orders of both the lower authorities and stated that all the alleged share subscribers are companies with no regular business activity and are in the nature of accommodation entries/jama-kharchi companies and did not have sufficient creditworthiness to invest the alleged sum in the assessee company. 8. We have heard rival contentions and perused the records placed before us. The addition u/s 68 of the Act at Rs. 10,60,50,000/- is in dispute before us. Before us, ld. Counsel for the assessee has referred to the following documents pertaining to various share subscribers which form part of the paperbook dated 30.01.2023 and the index of the paperbook is reproduced below: Sl. No. Particulars 1 Asst Order u/s.147/143(3) dated 17.06.2010 for the A....

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....5,000/- 1,49,50,000/- 6 Pinpoint Tie-up Pvt. Ltd. 1,16,30,000/- 10,37,70,000/- 1,02,00,000/- 7 Sarathi Vyapaar Pvt. Ltd. 1,16,95,000/- 10,43,56,764/- 1,29,00,000/- 8 Shivangan Dealers Pvt. Ltd. 1,08,20,000/- 9,64,80,479/- 19,00,000/- 9 Tanishque Tradelink Pvt. Ltd. 91,70,000/- 8,16,30,000/- 96,00,000/- 10 Tista Vanijyua Pvt. Ltd. 1,06,25,000/- 9,47,27,418/- 1,12,00,000/- 11 Trishna Vanijya Pvt. Ltd. 1,73,00,000/- 9,66,00,000/- 1,14,00,000/- 12 Outlook Dealcom Pvt. Ltd. 1,41,20,000/- 11,61,80,000/- 1,18,50,000/- 13 Shivangan Goods Pvt. Ltd. 87,00,000/- 7,74,00,801/- 1,60,00,000/- 10. Further, it was also submitted that all the alleged share subscribers are regularly assessed to tax, filing income tax returns, books of accounts are regularly maintained, financial statements are duly audited under the Companies Act, transactions have been carried out through banking channel, all the formalities required by Registrar of Companies for the purpose of issuing share capital has been duly adhered and as on date also all the share subscribers are active companies and their registration details are as follows: Sl.No. Nam....

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.... nothing contained in the first proviso [or second proviso] shall apply if the person, in whose name the sum referred to therein is recorded, is a venture capital fund or a venture capital company as referred to in clause (23FB) of section 10." 13. So far as the first proviso to Section 68 of the Act as mentioned above are concerned which specifically deals with the share application money, share capital and share premium, the same has been inserted by Finance Act, 2012 w.e.f. 01.04.2013 which is not applicable in the case of assessee since it pertains to AY 2008-09. The second proviso to Section 68 of the Act is also not relevant for the year under appeal since it has been inserted by Finance Act, 2022 w.e.f. 01.04.2023. So, what remains is the main content of Section 68 as per which if any sum is found credited in the books of an assessee maintained for any previous year and the assessee offers no explanation about the nature and source thereof or the explanation offered by him is not in the opinion of ld. AO, satisfactory the sum so credited may be charged to income tax as the income of the assessee of that previous year. 14. Now, examining the facts of the instant case in lig....

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....nts filed by the assessee and those being regularly assessed to tax, decided in favour of the assessee observing as follows: "9. We have heard the rival contentions and gone through the material placed on record. Admittedly, it is a fact on record that notices u/s. 133(6) of the Act were issued by Ld. AO to all the sixteen share subscriber companies and all of them had duly replied directly to the ld. AO, along with relevant documents and details. Copies of the replies duly acknowledged under seal and stamp of the office of 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 assesse and the subscribe....

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....ecord to justify the addition made by him. Ld. AO has simply added the amount of share capital and share premium on the ground that assessee has not produced the directors/shareholders. Ld. AO has ignored the reply given in response to notice issued u/s. 133(6) of the Act which are on record under duly acknowledged seal and stamp of his good office. From the perusal of the order of Ld. CIT(A), we note that Ld. CIT(A) has perused the evidence in the nature of documents and details and on their examination 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. ....

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....dition of Rs.21,08,00,000/- made on this account. Thus, these grounds of the appeal are allowed." 10.2. Further, we note that ld. CIT(A) has taken into consideration the creditworthiness of all the sixteen subscriber companies by going through the records and the net worth of each of them (refer the details tabulated above). It is also noted that all the investing companies have substantial own funds available with them to make investment in the assessee. In this respect, all 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 t....

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....atement has been extracted in full in the assessment order and it cannot be disputed that there is no allegation against the assessee company in the said statement. There is no evidence brought on record by the assessing officer to connect the said entry operator with the loan transaction done by the assessee. Therefore, the statement is of little avail and could not have been the basis for making allegations. The assessing officer ignored the settled legal 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 t....

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.... the following observations: "8.2 As per settled law, the initial onus is on the Assessee to establish by cogent evidence the genuineness of the transaction, and credit-worthiness of the investors under Section 68 of the Act. The assessee is expected to establish to the satisfaction of the Assessing Officer CIT v. Precision Finance (P) Ltd. [1995] 82 Taxman 31/[1994]208 ITR 465 (Cal.): Proof of Identity of the creditors; 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 n....

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....s furnished by the assessee before him. As observed above, the assessee having discharged its initial burden casted upon him to furnish the evidences to prove the identity and creditworthiness of the share subscribers and genuineness of the transaction, it shifted on the ld. AO to examine the evidences furnished and even make independent inquiries 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 t....