TaxTMI 
TaxTMI 
2023 (9) TMI 1031
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....ddition without considering the facts that the source of fresh share capital amount was not properly explained by the assessee during the course of assessment proceedings and the director of the assessee company did not appear against summon u/s. 131 to substantiate the claim of the assessee with documentary evidences. 3. Whether on the facts and circumstances of the case the Ld. CIT(A), failed to appreciate that when the sums are credited in the books of accounts of the assessee, the onus lies on the assessee to prove three criteria viz. Identity of the creditworthiness of the creditor and genuineness of the transaction. 4. Whether on the facts and circumstances of the case the Ld. CIT(A), failed to appreciate that the assessee claimed that no amount has been received but the same was not disclosed under the head of Amount receivable rather it has been shown as investment in unquoted. 5. Whether the Ld. CIT(A) is erred in interpreting the meaning of section 68 of the I.T. Act, 1961 that no money has been received by the assessee during the year under consideration and thus no addition u/s. 68 is applicable in this case. In this instant case the assessee ....
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....ed. The assessee also filed details of the group concern BMW Industries Ltd., which advanced loan to one of the alleged share subscriber and thus pleaded that the source of the source is duly explained and thus addition u/s 68 of the Act is uncalled for. The assessee also filed complete details including addresses, PAN Nos., financial statements of the alleged share subscriber and cash creditors to prove the identity and creditworthiness of these transactions and also the genuineness of the transaction Ld. CIT(A) deleted the impugned additions. 4. Aggrieved, the revenue is now in appeal before this Tribunal challenging the finding of the ld. CIT(A) deleting the addition for unexplained share capital and share premium as well as unexplained unsecured loans. 5. The ld. D/R vehemently argued supporting the finding of the Assessing Officer and further submitted that the assessee has miserably failed to file the details before the Assessing Officer and also the summons u/s 131 of the Act remained uncomplied and even the Inspector, who was assigned the work to serve the summon failed to do so as he was unable to find the assessee company at the given address and people of the build....
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.... charged to income tax as the income of the assessee of that previous year. In this provision, the words 'any sum as found credited' is mentioned and the ld. CIT(A) has adopted the view that such sum co-relates to the actual sum received in the bank account. However, the situation is that in the double entry system of accounting, entries are of the three categories:- (i) Those entered through cash books. (ii) Those entered through bank books. (iii) Those entered through journal entries. 8.1.1. Mercantile system of accounting takes into account the entries both in the nature of cash/bank and journal entries and for the purpose of making any entry in the books of accounts, an amount has to be assigned. Thus, in our humble understanding, where there is any journal entry in the books, which of course is denominated in an amount, is found credited in the books and the explanation for the same is not been given by the assessee to the satisfaction of the Assessing Officer, then Section 68 of the Act comes into operation. We also find it pertinent to mention that credit entries can be in the nature of liabilities as well as income and, therefore, if any credit....
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.... company as on 31st March, 2012 B. Certificate of Incorporation C. Article and Memorandum of Association D. Copy of ITR Acknowledgment for A.Y. 2012-13 E. Audited annual accounts as on 31.03.2012 F. List of directors as on 31.03.2012 G. Bank statement for the period and bank book for the period H. Declaration by the company on Investment in equity shares of appellant, with details of payments made afterwards and supporting bank statement I. Details of Investment in equity shares J. NBFC registration certificate Merrit Fintrade Private Limited (i) Notice u/s 133(6) in remand proceedings to Merrit Fintrade Private Limited (ii) Reposne to Notice u/s 133(6) by the Merrit Fintrade Private Limited thereon (iii) Response filed to proceeding u/s 143(2) of the Appellant with following enclosures:- A. List of shareholder of the company as on 31st March, 2012 B. Certificate of Incorporation C. Article and Memorandum of Association D. Copy of ITR Acknowledgment for A.Y. 2012-13 E. Audited annual accounts as on 31.03.2012 F. List of directors as on 3....
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....eholders in these subscribing companies are body corporates and they are group companies of BMW Group which is a company having turnover of Rs. 750 Crores. The finding of ld. CIT(A) examining the identity, capacity and genuineness of the transactions in respect of share subscribers reads as follows:- "7. Without prejudice to above, if we look at the identity, capacity and genuineness of transactions w.r.t. share subscribers, (even though received in subsequent year), following can be observes:- i. Tricom Investments (P) Ltd. - 7,11,74,384. It is seen that most of the share capital has come from this company. Identity- The company is an NBFC, registered with RBI. The directors of the company Mr. Partho' Ghosh, Anand Saraf, and Ashok Kumar Agarwal are senior employees of BMW Group of companies. This company belongs to BMW group. The company had filed relevant documents with Assessing Officer and also in remand proceeding. The share holders are mainly body corporate, the shareholders companies, namely Manchest Finpro (P) Ltd, Rolex Fintrade (P) Ltd, Concord Dealcom (P) Ltd and Parakram Tracpm (p) Ltd are group companies of BMW group; holding nearly 78% o....
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....e company had filed relevant documents with Assessing Officer and also in remand proceeding. The shareholders are mainly body corporate, the shareholders companies, namely Manchest Finpro (P) Ltd, Rolex Fintrade (P) Ltd, Shakti Vanijya (P) Ltd, Torrid Fintrade (P) Ltd. are group companies of BMW group; holding nearly 76% of paid up share capital. The registered office of the company is at 12/2, Park Mansion, 57A, Park Street, Kolkata-700016, which is the BMW group headquarters in Kolkata. The company is assessed with Income tax under PAN- AADCM5090L The source of fund paid in next financial year with supporting also filed. The company earned dividend of Rs. 389450 during the year and have investments in shares of BMW Industries Ltd. (Rs. 80.85 Lac) and Mutual Fund (Rs. 2.26 Lac). The Bank statement for the period 01.04.2011 to 31.03.2014 reflects transaction with BMW industries Ltd and other group companies. Therefore assessee has been able to submit proof of identity, capacity and genuineness of the share subscriber. iv. Bleweet Finvest (P) Ltd. It is one of the share subscribers during the year. The company is an NBFC, registered with RBI. The directors....
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.... clear that the assessee has not received any share capital during the year and therefore addition during AY 2012-13 is not justified on this count. Further it is seen that all the share subscribers in whose name credits have come during the year are associate companies of the assessee (BMW group, a listed entity). The assessee has been able to show the source of share capital in the hands of the share allottees. First of all the AO has not been able to prove that the share subscribers are doubtful. Further even if the share subscribers had any doubtful source of funding the additions should have been made in the hands of the share applicants and hot the assessee concern. In view of the above discussion, invoking the provisions of section 68 by the AO is not justified in the circumstances. Accordingly, the AO is directed to delete the addition made on this account. This ground of appeal is allowed." 12. From going through the above finding of the ld. CIT(A) as well as the details submitted by the assessee in the paper book which in itself is sufficient to indicate that the assessee has filed all necessary details to explain the nature and source of alleged transactions ....
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....td. Unsecured loan taken in earlier years 332386 332386 Merrit Fintrade Pvt. Ltd. Unsecured loan taken in earlier years 590000 590000 TOTAL AS PER BALANCE SHEET 1266550 922386 69500000 69844164 From the above table it can be seen that only addition in the unsecured loan has been on account of loan taken from M/s Gaurav Commerce Pvt. Ltd. of Rs.6.95 crores. I find in such cases, apart from Rs. 69500000, there is no real cash entry on the credit side of the cash book. The question of inclusion of the amount of the entry unexplained cash credit cannot arise. 9.1 In the remand letter following was asked from the AO- With respect to unsecured loan - it was stated that some of the loans have been received from Group Companies; therefore; no addition for the same could have been done. Further some of the loans were old loans; therefore, no addition could have been done in this year. For the same in the light of these two arguments and the evidences submitted." Please submit your remand report within 30 days." 9.2. In reply the AO has stated the foll....
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.... and profit of Rs. 27.13 Crores. Therefore Source of source for the loan transaction is genuine and verifiable and belonging to the assessee group. Therefore Capacity of the creditor has been established. Genuineness of transaction- From the paper book filed it is seen that M/s Gaurav Commerce Pvt Ltd has received money from BMW industries Ltd. On different dates through HDFC bank Ltd., and this fund has been lent to the assessee. In view of the above, assessee has been able to prove genuineness of the transaction. Since the assessee has been able to prove the identity, capacity of the loan creditor and the genuineness of the transaction therefore, I hold that the impugned addition made by invoking the provisions of section 68 by the AO is directed to delete the addition made on this account. This ground of appeal is allowed." 14. On going through the above finding of the ld. CIT(A) and also perusing the details filed by the assessee in the paper book, we notice that there was a proper response from M/s. Gourav Commerce Pvt. Ltd., to the notice issued u/s 133(6) of the Act and necessary details including statement of account, audited financial statements, incom....
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....ss of the share subscribers and genuineness of the transaction. The relevant part of the order, for the purpose of ready reference, is reproduced as under: "5. Conclusion: Ground No. 1 & 2 I have considered the order of the A.O as well as the submission of the appellant. I have also considered the judicial decisions relied upon by the appellant. The facts of the case have already been discussed as above. It is observed that in the year under consideration the appellant company had raised share capital of Rs. 7,60,00,000/-from 6 parties. In the course of the assessment proceedings, to verify the receipt of share capital, the AO issued notices u/s. 133(6) to all the 6 share applicants and in response, they all confirmed the transactions submitted the details/document in respect of the subscription of shares of the appellant. In the course of the appellate proceedings, the appellant filed copy of each of the assessment orders passed in all the 6 cases of the shareholders for that year in which the share subscription amount has been received by the assessee company. Besides, the income-tax return filing acknowledgment, Audited Balance and sheets as on 31.03.2....
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....y considered opinion, unjustified. Where the corpus becomes technically explained in the eyes of law, how can, the credits arising out of the same corpus can be viewed as unexplained u/s 68 of the IT Act. In view of the facts & circumstances of the case it is held that the addition of Rs. 7,60,00,000/- for the share capital raised by the appellant from 6 share applicants as unexplained cash credit u/s 68 of the Act was not justified and the same is directed to be deleted. The appeal of the assessee company on Grounds No.1 & 2 are treated as allowed. Ground no. 3 is general in nature, which does not require adjudication. 6. In the result, the appeal of the assessee is treated as allowed." 6. A perusal of the above concluding part of the order of the CIT(A) reveals that the ld. CIT(A) has not only taken note of the accounts of the share subscribers but also, noted that all the six share subscribers were assessed u/s 143(3) of the Act. Out of which, no additions were made in case of two share subscribers. However, in the case of other four share subscribers, the additions were made regarding their source of income. Now, it is settled law, once the a....
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....eeded 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. The Ld. Counsel for the assessee has rightly placed reliance upon the decision of the Hon'ble Bombay High Court in the case of PCIT, Panji vs. Paradise Inland Shipping Pvt. Ltd. reported in (2017) 84 taxman.com 58 (Bom) wherein the Hon'ble High Court has 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 their case. Further the jurisdictional Calcutta High Court in the case of "Crystal networks (P) Ltd. vs CIT" (supra) has held as under: "We find considerable force of the submissions of the learned counsel for the appellant that the Tribunal has merely noticed that since the summons issued before assessment returned unserved and no one came fo....
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....essee offers an explanation to the credit by placing evidence regarding the identity of the investor or lender along with their confirmations, the assessee has discharged the initial burden and, therefore, the burden shifts on the Assessing Officer to examine the source of the credit to be justified in referring to section 68 of the Act. After the Assessing Officer puts the assessee on notice and the assessee submits the explanation concerning the cash credit, the Assessing Officer should consider it objectively before he decides to accept or reject it. Where the assessee furnishes full details regarding the creditors, it is up to the Department to pursue the matter further to locate those creditors and examine their creditworthiness. While drawing the inference, it cannot be assumed in the absence of any material that there have been some illegalities in the assessee's transaction. Held, dismissing the appeal, that the allegations against the assessee were in respect of thirteen transactions. The Assessing Officer issued a show-cause notice only in respect of one of the lenders. The assessee responded to the show-cause notice and submitted the reply. The documents annexed....