TaxTMI 
TaxTMI 
2023 (9) TMI 545
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....cts as brought on record by the AO that the assessee company failed to prove the identity, genuineness and creditworthiness of the investor company as per the parameters of the legal provisions u/s 68 of the Act?" 3. "Whether on points of law and on facts & circumstances of the case, the Ld. CIT(A) having concurrent powers of the AO u/s 250(4) of the Act, was justified in deleting the addition of Rs. 3,07,00,000/- made by the AO in the absence of satisfaction of parameters prescribed u/s 68 of the Act?" 4. "Whether on points of law and on facts & circumstances of the case, the Ld. CIT(A) has erred by giving a finding which is contrary to the ratio of the decision of Hon'ble Supreme Court in the case of M/s Rajmandir Estates Pvt Ltd vs. PCIT-III, Kolkata (SLP No. 22566-22567 dt. 09.01.2017)" 5. "Whether on points of law and on facts & circumstances of the case, the Ld. CIT(A) has erred by giving a finding which is contrary to the ratio of the decision of ITAT, Kolkata 'B' Bench in the case of M/s Subhlakshmi Vaniya (P) Ltd. Vs. CIT-1, Kolkata in ITA No. 1104/Kol/2014 and other cases dated 30.07.2015?" 6. "Whether on points of law and f....
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....ct enquiry into the genuineness of receipt of the share capital/premium, however, no response was received from the following shareholders from whom the assessee has claimed to have received share capital/premium aggregating to Rs. 1,10,00,000/- :- 1. Winsher Vinimay Pvt. Ltd. 2. Everlast Vinimay Pvt. Ltd. 3. Subhlabh Prints Pvt. Ltd. 4. Rajhans Dealers Pvt. Ltd. 5. Liberal Merchangs Pvt. Ltd. Therefore, in absence of establishment of genuineness of the receipt of share capital/premium, the AO added Rs. 3,07,00,000/- to the total income of the assessee u/s. 68 of the Act. 4. Against the above order of AO, the assessee preferred appeal before the ld. CIT(A) and the ld. CIT(A) allowed the appeal of the assessee and deleted the addition made by the AO. 5. Now, the revenue is in appeal before the Tribunal against the order of the ld.CIT(A). 6. Ld. CIT-DR, at the outset, submitted that the case of the assessee was selected for scrutiny under CASS. The assessment proceedings were initiated by issuing notice u/s. 143(2) of the Act, detailed questionnaire in terms of Section 143(2) & 142(1) of the Act were issued, hearings were condu....
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....the genuineness of the investment made by such Kolkata based companies, since the said companies do not exist in reality, therefore, mere furnishing of PAN and certificate of incorporation indicates dormant existence and the same cannot be considered as sufficient discharge of onus u/s. 68 of the Act. By stating so, and rightly, ld. AO added the entire amount of Rs. 3,07,00,000/- as income of the assessee from undisclosed source u/s. 68 of the Act. Ld. CIT-DR further submitted that the issue was raised by the assessee before the ld. CIT(A), wherein the ld. CIT(A) has granted relief to the assessee observing that the AO has discussed in the assessment order that no response was received from five shareholders to the notice u/s. 133(6) of the Act. Ld. AO without assigning any reason rejected the documents even for those companies from whom, the documents were received. It was the observation of the ld. CIT(A) that the ld. AO has not pointed out any defect in the document received and the adverse conclusion drawn by on the basis of fact in respect of those companies on which reply was not received. It was the observation of the ld. CIT(A) that the AO has mentioned about certain inform....
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....shifts on the AO to make enquiries/investigation to establish that either or all of the identity, creditworthiness and genuineness of shareholders has not been established. Since documents were submitted before the AO in all cases it shows that the companies do exist. Ld. CIT(A) discussed as an example the balance sheet of M/s Apurva Bartar (P) Ltd. As on 31.12.2012 stating that it has interest income of Rs. 15,35,594/- and share capital and reserve of the company was Rs. 5,79,33,838/- out of which the share subscriber company has invested in long term loans, advances and shares of the companies. Ld. CIT(A) has observed that the picture is same in respect of other shareholders also. Thereafter applying certain case laws, ld. CIT(A) has deleted the addition. It was the submission of the ld. CIT-DR that the ld.CIT(A) has not discussed the financial statement of all the 12 companies whose financial conditions are apparently suggesting that the companies are shell or paper companies, no cognizance to the observations of the AO in the remand report was also given by the Ld CIT(A). Ld CIT(A) who poses the powers coterminous with that of the AO, was obligated to conduct enquiry, when a ne....
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....fer In absence of any enquiry conducted by AO, only on the basis of such observations, addition could not have resulted. 8. Allegation of meager income i) It is undisputed that all investors had huge net worth. ii) Investment made by them not out of their income but out of overall funds available with them. iii) Balance sheet being filed by the investors in their individual returns, which has been accepted without any dispute in their case. Availability of funds in the hands of such investors could not have been doubted in the case of assessee without disturbing the assessments of the investors. iv) Reliance on: - - CIT vs Vrindavan Farms (P) Ltd., in ITA 71, 72 & 84/2015 of Hon'ble Delhi High Court dt. 12.08.2015. - Anjani Associates vs ITO in ITA No. 27/RPR/2018 dt. 10.08.2018 of Raipur Bench of ITAT. - Prabhatam Investment P. Ltd. vs ACIT. (2017) 49 CCH 299 (Del. Trib.). - Pr. CIT vs AMI Industries (India) P. Ltd. (2020) 424 ITR 219 (Bom.) 9. Burden was on the AO to disprove the legal & cogent evidences. Burden not discharged and so addition could not be made. 10. Although....
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.... the IT Act, 1961 which includes Rs. 1,00,000/- received from promoters against share subscription and Rs. 3,06,00,000/- from 13 different private limited companies against share capital and share premium. 2. That on being aggrieved from the aforesaid assessment order of Assessing Officer, the assessee preferred an appeal before the Commissioner of Income Tax (Appeals)-I, Raipur on the ground that the Ld. AO has grossly erred on facts and in the circumstances of the case and in the law while making addition of share capital money amounting to Rs. 3,07,00,000/- to the total income of assessee as unexplained credit u/s 68 of the IT Act, 1961 on arbitrary basis, unjustified and bad in law, and should be deleted. 3. That the CIT(A) after taking extensive note of the observations made in the assessment order and oral & written submissions made on behalf of the assessee, found substantial merits in the plea of the assessee and reversed the additions so made by passing a self speaking and self explanatory appellate order dated 05/07/2018.3 4. That against the aforesaid appeal order dated 05/07/2018, assessing officer has filed an appeal before the honorable trib....
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....of the investor companies are not satisfactory. The said company was earning very meager income without having any business activity. The said company had never been eligible for compulsory audit u/s 44AB as its income from operations was either zero or negligible and turnover is also not within the purview of required limit. (Para-3.5 of SOF) It was clear that the creditworthiness of the said entity was non-existent as they were merely paper or shell or jamakharchi company providing accommodation entries to various other entities. (Para-3.6 of SOF) The Ld. C1T(A) has given relief to the assessee by giving a finding that the assessee has furnished the details and documents such as ROC registration, PAN, Audited accounts and bank accounts evidencing the transaction and as per bank statements, payment have been received by the assessee from shareholder's account to assessee's account. Therefore genuineness of the transactions cannot be doubted. But the Ld. CIT(A) has ignored the other parameter of creditworthiness of investor company which was raised by the AO in assessment order. (Para-3.8 of SOF) The Ld. CIT(A) has not appreciated the fact that how such a weak balance sheet comm....
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...., which itself signifies genuineness The audited balance sheet of investor companies clearly depict the receipt of such amounts the fact that it had sufficient balance available for investment. As already stated, copy of Statutory Audit Report of the investor company reflects the factum of impugned investment made by that company. In response to notice u/s. 133(6) of the Act issued by the AO, the investor company, in categorical terms, had confirmed the fact of having invested the said sum with the assessee company towards share application money Based on above, we may conclude that all the allegation raised by the AO is baseless and is not tenable in the law and facts of the case. 3. The fact of investor companies being shell or jamakharchi companies has been established in enquiry conducted by the Department. In search and seizure action, one of the entry provider of named Sh. Vinod Kumar Jajoo was recorded and he admitted that the companies were managed by him for the purpose of providing accommodation entries various beneficiaries companies. Sh. Vijay Jajoo has clearly accepted that entities and their respective bank account were managed and controlled by him throug....
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....ase of M/s Pee Aar Securities Ltd. Vs. DCIT- Circle-14(l), New Delhi in ITA No. 4978/Del/2014 for the AY 2005-06 and it was held that "genuineness of transaction has to be determined by ground realities and not by documents like PAN cards, board resolutions, share certificates etc. as even shell companies have these documents. If the assessee is not able to produce the brains behind these companies and the documents with respect to their financials the transaction cannot regarded as genuine. [Para- 3.8 of SOF) the brains behind these companies and the documents with respect to their financials either. * No such notice u/s 133(6) was issued for conducting enquiry and no such responses was made by the investor companies against 133(6) notices * The investor companies were identified as shell companies. * Therefore, it is respectfully be submitted here that the ratio of the case of Hon'ble ITAT, New Delhi (A Bench) in the case of M/s Pee Aar Securities Ltd. Vs. DC1T- Circle-14(l), New Delhi in ITA No. 4978/Del/2014 is distinguished and therefore not applicable in assessee's present case. 5. The assessee has submitted only the documents, but he could....
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.... absolutely different from the facts of present case. In present case: * genuineness of the receipt of share capital/ premium is in question. * AO in order to verify the genuineness conducted enquiry and issued notices u/s 133(6) to respective shareholders. * There is no such issue of section 263 invocation treating assessment order erroneous and prejudicial to interest of revenue and therefore there is no such question with respect to jurisdiction of CIT for invoking section 263 in instant case. Whereas in the case of M/s Rajmandir Estates Pvt Ltd Vs PCIT-III, Kolkata as relied on by the AO, * The case of M/s Rajmandir Estates Pvt Ltd was with respect to the jurisdiction of CIT for invoking section 263 treating the assessment order erroneous and prejudicial to interest of revenue * The question before the court was leg4ality of invocation of section 263 where assessee with a small amount of authorised share capital, raised a huge sum on account of premium and chose not to go in for increase of authorised share capital merely to avoid payment of statutory fees. * Further in that case, Assessing Officer did not hold requisite ....
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....le ITAT, New Delhi (A Bench] in the case of M/s Pee Aar Securities Ltd. Vs. DCITCircle- 14(l), New Delhi in ITA No. 4978/Del/2014 is not applicable in assessee's case and facts of present case is clearly distinguished from the facts of the quoted so quoted by the AO as under: In the instant case of the assessee: the assessee has submitted before the AO as well as before the CIT(A) all the documents and information such as list of shareholders along with Name, Address, PAN, Amount received & mode of receipt, share application forms, share certificates, relevant extracts of bank statements, audit report, ITR, Board resolution, ledger confirmation of respective shareholders etc. Further, the notices u/s 133(6] has been issued by the AO to all the respective shareholders which were duly served to them and there is no evidence on record with respect to non-serving of any such notices. Further, all those shareholders has duly responded to notices issued to them u/s 133(6), copy of which is also in record of AO as well as CIT(A). The current MCA status of all the investor companies are "Active" and none of those companies are there in the list of shell compan....
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....ents of jurisdictional High Court. Hence we see no reason to depart from the rationale of the decision of CIT(A) on reversal of additions u/s 68 of the Act. We thus decline to interfere Similar decision has been given by ITAT, Raipur bench in following case:- i. DCIT (Central) Vs. M/s Abhishek Steel Industries Limited (ITA No. 250 to 255/RPR/2014) ii. DCIT (Central) Vs. M/s Shree Shyam Sponge & Power Pvt. Limited (ITA No. 243 to 249/RPR/2014) iii. DCIT (Central) Vs. M/s Devi Iron & Power Pvt. Limited (ITA No. 262 to 265/RPR/2014) 7.3. Further, the jurisdiction Raipur bench of ITAT on the basis of similar facts in the case of Deputy Commissioner of Income-tax, 1(2) Raipur v. RCP Infratech (P.) Ltd. IT APPEAL NO. 273 (RPR) OF 2014 [ASSESSMENT YEAR 2011-12] [2018] 95 taxmann.com 163 (Raipur - Trib.) has held as under: In course of assessment, Assessing Officer found that assessee had received huge amount of money by issuing shares at high premium - Assessing Officer asked assessee to furnish complete details of persons from whom share capital and share premium had been received - Assessee furnished PAN details along with copies of ....
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....lant was in fact received from the appellant and investors merely routed the undisclosed income of the appellant through money laundering process in the form of share application money. On the contrary, the A.O himself has stated in the assessment order that the investors have sent confirmatory letters. In the backdrop of these facts and documentary evidences, in my considered opinion, the identity and creditworthiness of the subscribers has been established and cannot be doubted, it is not justified on the part of the A.O to simply reject the documentary evidences on record and take an adverse view and clothing the case of the appellant with the judicial pronouncements which have been rendered on absolutely different facts and circumstances. In my considered opinion, apart from drawing presumptions, the AO has not brought any clinching material or evidence on record to prove that the said share capital money belongs to the appellant since no nexus has been established that the money for augmenting the investment in the business has flown from appellant's own money which is an essential prerequisite for making addition in such cases. I am convinced that the case of the....
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.... above discussion, I am inclined to agree with the arguments and evidences provided by the appellant to substantiate that the transaction regarding Share Application Money received by it were genuine transactions and the same were not accommodation entries. I also do not find any evidence collected by the A.O which could prove otherwise. Accordingly, the AO was not justified in treating the amount of share application money received by the appellant as its undisclosed income. I am convinced that the appellant has been able to establish the identity and creditworthiness of the subscribers as also the genuineness of the transactions. In my considered opinion, the ratio of the aforesaid judgements of the Hon'ble Supreme Court in Lovely Exports and that of jurisdictional High Court are certainly binding in nature on all the revenue authority and courts etc. and further, the judgement of the jurisdictional High Court as well as that of the Hon'ble Supreme Court in Lovely Exports has been rendered on identical facts. Hence it is impermissible to deviate from the ratio laid down therein and against the law of judicial precedents. In view of the above and respectfully foll....
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....* [2021] 133 taxmann.com 31 (Delhi - Trib.] Whether where all investments (in form of share capital and share premium) have been duly made via banking channels where investor companies have shown sufficient balances in their bank accounts to make such an investment in assessee companies, Assessing Officer without questioning material submitted by assessee could not have added said share premium to income of assessee under section 68 - Held, yes 4. ITAT DELHI BENCH 'F' Renu Proptech (P.) Ltd. V. ACIT, Circle-21(1), New Delhi [2021] 128 taxmann.com 242 (Delhi - Trib.) Where assessee company issued shares at premium and received sharecapital and share premium of certain amount, since assessee had filed documentary evidences in respect of all share allotees such as copy of PAN, copy of share application, confirmation of receipt of shares, copy of share certificate, copy of ITR acknowledgement, affidavit, bank statement so as to prove identity and creditworthiness of parties and genuineness of transactions, impugned addition made under section 68 in respect of said sharecapital and premium amount received by assessee was unjustified. 5. ITAT KOLKATA BENCH '....
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.....) Ltd. [2017] 80 taxmann.com 272 (Bombay) Whether proviso to section 68 introduced by Finance Act 2012 with effect from 1-4-2013, would not have retrospective effect - Held, yes Whether where assessee-company had established identity, genuineness and capacity of shareholders who had subscribed to its shares, Assessing Officer was not justified in adding amount of share capital subscription as unexplained credit - Held, yes Whether where revenue urged that assessee had received share application money from bogus shareholders, it was for Income-tax Officers to proceed by reopening assessment of such shareholders and assessing them to tax in accordance with law and it did not entitle revenue to add same to assessee's income as unexplained cash credit - Held, yes. PRAYER In the light of all that has been extensively enumerated above along with documentary evidence submitted herewith and paper book submitted earlier, the impugned addition made by the AO, unsubstantiated on the strength of corroborative evidence brought on record against the assessee, is unsustainable on facts and in law. It is therefore submitted before your honor that no interference is cal....
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.... of which 5 companies have not responded. However, papers in respect of all 12 companies were submitted by the assessee (para 2.3 of CIT(A)'s order). AO has not accepted the share capital of even those companies from which the documents were received. No reason have been given by the AO to reject such documents. (ii) AO's observation "As there is no positive response from the companies the genuineness of the share capital/ premium has not been established" was considered as perverse in absence of in specific defect pointed out by the AO in the documents received for drawing such adverse conclusion, it was found even worse when the same conclusion was drawn for the companies from which no reply was received. (iii) AO's conclusion based on certain information received about genuineness of investment made by the Kolkata Based companies/ subscribers to shares of the assessee company that these are merely paper companies without concrete business was never confronted with the assessee to refute, before making additions. (iv) Remand report was called for from the AO with respect to documents like PAN, audited accounts, ROC Certificate etc for the 5(five) compan....