TaxTMI 
TaxTMI 
2023 (2) TMI 1233
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....ee had issued 18,250 equity shares of face value of Rs. 10/- each at a premium of Rs. 990/- for which share capital and share premium raised by it during the year amounted to Rs. 1,82,50,000/- from five share subscribing companies. In the course of assessment, Ld. AO sought explanation and required the assessee to furnish details and evidence to establish identity and creditworthiness of the share subscribing companies and prove the genuineness of transactions. Ld. AO also issued notice u/s. 133(6) of the Act to the share subscribers all of which were duly complied with. Ld. AO also issued summon u/s. 131 of the Act which were partly complied with. Owing to the said non-compliance, Ld. AO doubted the genuineness of the transactions and completed the assessment by making an addition in this respect. Aggrieved, assessee went in appeal before the Ld. CIT(A) who after elaborately dealing with the facts of the case on all the three aspects of section 68 of the Act in respect of identity, creditworthiness of the share subscribing companies and also the genuineness of the transactions, deleted the addition so made. Aggrieved, Revenue is now in appeal before the Tribunal. 4....
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.... was served and duly complied by the shareholder company, copy of which is provided at pages 20-32 of the paper book. In the said reply, the shareholder company furnished copies of IT Acknowledgment and audited financials, enclosed at pages 26 to 32 of the Paper book. Further, copies of relevant and corresponding bank statement were submitted (enclosed at page 24- 215 of paper book), evidencing that funds were transferred to the appellant company on 18.10.2011 & 27.10.2011 through proper banking channel. Copy of the allotment advice was also submitted. The shareholder company has also furnished explanation regarding the source of these funds, viz. share application money received from Maa Gawarja Traders and Hornbill Vinimoy Pvt. Ltd. The AO has not pointed out any defect in the documents furnished by the shareholder company in response to notice u/s. 133(6) of the Act. (b) In the case of S D Vinimoy Pvt. Ltd. it is noted that the share applicant is assessed under the PAN AAPCS6871D. It has invested a sum of Rs. 43,00,000/- in the shares of the appellant company during the relevant FY 2011-12. The investments made are supported by the shareholder company's net worth (2.28 c....
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....under the PAN AACCH5926R. It has invested sum of Rs. 23,00,000/- in the appellant company's share during the relevant FY 2011-12. The investments made are supported by the shareholder company's net worth (3.80 crores) which is at page No. 65 of the Paper book. The AO issued notice u/s. 133(6) on the shareholder company, which was served and duly complied by the shareholder company, copy of which is provided at pages 59-72 of the paper book. In the reply, the shareholder company furnished copies of IT Acknowledgment and audited financials, enclosed at pages 64-72 of the paper book. Further, copies of relevant and corresponding bank statement were submitted (enclosed at page 63 of paper book), evidencing that funds were transferred to the appellant company on 20.10.2011, through proper banking channels. Copy of the share allotment advice was also submitted. The shareholder company has also furnished explanation regarding the source of these funds, viz., share application money received from AB Enterprise. The AO has not pointed out any defect in these documents furnished by the shareholder company. (e) In the case of DP Eminent Computer Sales Pvt. Ltd., it is noted that ....
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....ng ITRs, audit reports, share application details etc. as listed above, the Ld. AO has not found fault in any of the details submitted and simply proceeded to make addition in respect of the amount of share capital and premium. 6.3. Ld. Counsel further submitted that all the shareholder companies are regular income tax assessees and had filed their income tax returns. It was thus emphasized that identity of all the five share subscribers is well established before the Department and is beyond any doubt. 6.4. To establish the creditworthiness of these five share subscribing companies, details relating to their net-worth and the investment made by them in the assessee were furnished along with their respective bank statement and audited financial statements. The details of sufficiency for net-worth to make investment in the share capital of the assessee is tabulated as under: Sl. No. Name of investor company Investible Funds available as per Financials Amount invested in the assessee company 1. Faithful Deal trade Pvt. Ltd. 88,45,575 49,50,000 2. S D Vinimoy Pvt. Ltd. 2,28,20,552 43,00,000 3. Divinity Vintrade Pvt. Ltd. 2,54,95,495 47,00,000 4. Hornbill Vimi....
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....estment in the share capital of the assessee. We also take note of the fact that the share subscribers had furnished copies of their ITR acknowledgments which showed that each of them were regular income tax assessees, testifying their identity. 7.1. From the perusal of the paper book and the documents placed therein, it is seen 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 made by account payee cheques, (v) details of the bank accounts belonging to share applicants and their bank statements, (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. 7.2. We also take note of the elaborate and well reasoned findings and decisions arrived at by the Ld. CIT(A) by taking into consideration all the details and documents placed on record. The relevant findings and decisions from the following paras are extracted as under: "4.5. To sum up the foregoing, it is obse....
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....e Act. The facts and circumstances furnished by the shareholders in response thereto, supported the AR's contention that the identity of all the five share subscribing companies stood established. Referring to the copies of the bank statements, the AR established that payment of subscription amounts were recorded in the bank statements of the respective companies. The entries in the bank statement proved that the share subscription amount was transferred through banking channel. Besides the entries in the bank statements also substantiated that before payment of share subscription mounts, no cash was deposited in the bank accounts of the subscribing companies. The AR further pointed out that appellant had furnished explanations before the AO with regard to immediate sources from which share subscription amounts were paid. On these facts therefore, I find that in terms of section 106 of the Evidence Act, the creditworthiness of the share subscribers and the genuineness of the transactions could not have been doubted by the AO merely on the ground that Directors of the share subscribers did not appear before the AO for verification. Gainful reference in this regard may be made to fol....
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....ndi where the unaccounted cash was rotated in four-five layers and thereafter the money was brought into the assessee's bank account in the form of share capital. I however find that before these conclusions were recorded the AO himself did not bring on record sufficient tangible and cogent material to support his conclusion that the amount credited in the assessee's books in the form of share capital and premium actually represented assessee's undisclosed income. ...... .... 4.15. Applying the judicial principles laid down in the above decisions to the appellant's case. I find that the AO had made addition u/s. 68 without proper application of mine and incorrect appreciation of the relevant provisions of the Act. In the above judicial decisions, it has been held that before an addition u/s. 68 is made, it is necessary for the AO to bring on record irrefutable material or evidence which would prove that there was no valid issuance of the shares and for that reason the assessee had failed to prove identity & creditworthiness of the shareholders and also failed to substantiate genuineness. If these touchstones are applied to the appellant's case then I find that the copies inco....
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....othing except issuing summons which were ultimately returned back with an endorsement "not traceable". The Assessing Officer ought to have found out their details through PAN cards, bank account details or from their bankers so as to reach the shareholders since all the relevant material details and particulars were given by the assessee to the Assessing Officer. In the above circumstances, the view taken by the Tribunal could not be faulted. No substantial question of law was involved in the appeal.'' iii) Judgment of Hon'ble Jurisdictional High Court in the case of Exoimp Resources (India) Ltd. vs. CIT (supra), wherein it was held as follows: "It is incumbent upon the Assessing Authority to examine the explanation of the creditor and arrive at a conclusion as to whether the explanation was satisfactory. The conclusion arrived by the Assessing Authority is to be communicated to the assessee if such explanation is not considered satisfactory. If thereupon the assessee submits any comments or furnishes further information, in that event, the Assessing Authority has to examine the same and arrive at his own conclusion. The inbuilt safeguard provided in section 68 cannot ....
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....rrectness of various proof, filed by the assessee by carrying out any investigation. Merely for non-appearance of the directors, the ld. Assessing Officer disregarded all these documents which have been placed before various statutory authorities including Registrar Of Companies, Income Tax Department and Schedule Banks. The assessee by way of filing all these documents necessary to prove identity, creditworthiness and genuineness of the alleged transaction, has discharged the initial burden casted upon it under the provisions of section 68 of the Act. Unless and until, the assessing authority finds any lacuna or adversity or defect in the said documents, the burden to prove remains on the Revenue authorities. In the instant case, ld. Assessing Officer failed to discharge the burden and summarily disregarded the documents filed by the assessee by merely referring to some decisions and not going into the facts of the case except referring to the price per share. 9. We further observe that provision for examining the source of source under the provisions of section 68 of the Act has been brought in by Finance Act 2012 w.e.f. 01.04.2013 as per which "where an assessee is a company (n....