AI Drafter 
TaxTMI 
TaxTMI 
2024 (2) TMI 455
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....led for and may kindly be deleted. 2. Ground 2 : The appellant reserves the right to add, amend, alter and delete the ground(s) of appeal at the time of hearing the appeal. III. RELIEF SOUGHT That above mentioned addition amounting to Rs. 1,26,09,000/- made by the Ld. AO and sustained by the CIT(A)-II is uncalled for, against the natural justice may kindly be deleted." 2. On the other hand, the revenue has assailed the impugned order on the following grounds of appeal: "1. Whether on points of law and on facts & circumstances of the case, the Ld. CIT(A) was justified in deleting the addition of Rs. 10,03,14,000/- out of total addition of Rs. 11,19,23,000/- made by the AO u/s. 68 of the Act?" 2. Whether on points of law and on facts & circumstances of the case, the Ld. CIT(A) was justified in deleting the addition of Rs. 10,03,14,000/- by ignoring the facts 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 th....
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....CIT(A) was justified in deleting the addition made by the AO and giving a decision in favour of the assessee and against the revenue, thereby giving a finding against the ratio of the settled law of the Hon'ble Bombay High Court in the case of Sanjay Bimalchand Jain, Nagpur (I.T.A. No. 18/2017 dated 10.04.2017, Bombay High Court. Nagpur Bench) wherein it is stated that since there is no economic or financial justification for the investment in the shares, the transaction has all the ingredients of attracting the rigors of Section 68 of the IT Act ?" 8 Whether on points of law and on points of 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. Rs. 10,03,14,000/- made by the AO in the absence of satisfaction of parameters prescribed u/s. 68 of the Act?" 9. 'Whether on points of law and on facts & circumstances of the case, the Ld. CIT(A) was justified by giving a finding which is contrary to the evidence on record, as the Ld. CIT(A) has accepted the identity, creditworthiness of the entities investing in the share capital and share premiums of the assessee ....
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....an endorsement "non known". The A.O brought the aforesaid facts to the notice of the assessee company and directed it to substantiate the genuineness of its claim of having received share application money from the aforementioned persons. As per the notice issued u/s. 142(1) of the Act dated 20.03.2015, the A.O directed the assessee company to place on record evidences as regards the genuineness of the transactions a/w. creditworthiness of two share applicant companies, viz. (i) M/s. Arcade Dealcom Pvt. Ltd.; and (ii) M/s. Hector Dealers Pvt. Ltd. Also, the A.O directed the assessee company to produce all the aforementioned share applicants/shareholders for examination before him. In compliance, Shri Ashish Jaiswal, director of the assessee company appeared before the A.O who recorded his statement on oath. As is discernible from the records, Shri Ashish Jaiswal, i.e. director of the assessee company was also a director of the aforesaid three share applicant companies, viz. (i) Raja Kaimoor Buildcon Pvt. Ltd.; (ii) M/s. Arcade Dealcom Pvt. Ltd. and (iii) M/s. Hector Dealers Pvt. Ltd. Shri Ashish Jaiswal in his statement recorded by the A.O had categorically brought to his notice th....
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....urnished the requisite details in reply to Question No.8. As regards the query raised by the A.O with respect to the directors of the aforementioned share applicant companies, it transpires that Shri Ashish Jaiswal had in reply to Question No.9 furnished the said requisite details which for the sake of clarity is being culled out as under: Also, on being queried as to when the aforementioned share applicant companies were incorporated, Shri Ashish Jaiswal in reply to Question No.10, had furnished the respective dates of incorporation of the aforementioned companies, as under: 5. At this stage, we may herein observe that Shri Ashish Jaiswal who had made an investment of Rs. 3.50 lacs towards share application money with the assessee company, had in his reply to Question No.2 of his statement categorically confirmed the said transaction. Also, we find that he had divulged his income tax credentials a/w. the respective source of income in his statement recorded by the A.O. The assessee company in its attempt to substantiate the authenticity of its claim of having received genuine shares application money from the one share applicant , viz. Shri Ramesh Bind, had filed before the ....
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.... Ltd., (ii) Shri Ashish Jaiswal, (iii) M/s. Hector Dealers Pvt. Ltd. and (iv) Raja Kaimoor Buildcon Pvt. Ltd., thus, found no justification on the part of the A.O in treating the amount received from the said persons as unexplained cash credit u/s. 68 of the Act. At the same time, the CIT(Appeals) was of the view that as the assessee company had failed to substantiate the authenticity of its claim of having received genuine share application money from two share applicants, viz. S/shri Ramesh Bind and Dallu Nisad, thus, upheld the to the said extent. Accordingly, the CIT(Appeals) partly allowed the appeal of the assessee company. For the sake of clarity, the relevant observations of the CIT(Appeals) are culled out as under: "2.3 I have gone through the submission of the assessee and perused the assessment order. As per the above facts, the assessee has received share .application money from 3 companies and 3 individuals during the year. The three companies are group companies belonging to the same group as the assessee and the three individuals are also acquaintances. One of the individual investor is director of the assessee company. The AO has issued notice u/s. 133(6) i....
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....eness of share capital in the light of the documents submitted on behalf of the subscriber companies. Assessee has furnished copies of assessment order completed in the case of this company. The assessment of M/s Hector Dealers has been completed under scrutiny for AY 2010-11 vide order dated 3.12.2018 and for AY 2014-15 vide order dated 25.11.2016. No addition has been made and share capital of M/s Hector Dealers has been accepted as genuine by its assessing officer. As per the balance sheet, the company has capital and R&S of Rs 24.60 cr. out which the money has been advanced to the assessee. The company has also explained the source of money which was as received from repayment of money given to 25 companies the list of which has been furnished. On going through the balance sheets and bank statement of °M/s Arcade Dealcom, this company has shown total receipt of Rs 10,71,697/- in AY 2011-12, Rs. 1,61,34,358/- in AY 2012-13 and Rs 76,25,000/- in AY 2013-14. It has total asset and liabilities of Rs 15.25 cr. on YE 3/2012 which included share capital, and R&S of Rs 15.24 cr. Thus the company had sufficient own fund to advance to the assessee as share capital. The asses....
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....LOYS LTD. & ORS ITA Nos. 1324 of 2008; 972 of 2009; 29, 1228 to 1230 & 1710 of 2010 and 8, 339, 613 & 726 of 2011 (0033, (2014) 361 ITR 0220 (Delhi). In this case the notice issue by the AO in case of some shareholders were returned unserved whereupon the share capital was added as income of the assessee company. The matter travelled upto the High court. The honourable Delhi HC held that - .. though initial burden is upon the assessee, once he proves the identity of credits/share applications by either furnishing permanent account numbers or copies of bank accounts and shows the genuineness of the transaction by 'showing money in the banks is by account payee cheques or by draft, etc., then the onus to prove the same would shift to the Revenue. Question which assumes importance at this stage is to what the Revenue is supposed to do to dislodge the initial burden discharged by the assessee and to throw the ball again in the assessee's court demanding the assessee to give some more proofs, as the documents produced earlier by the assessee either become suspect or are rendered insufficient in view of the material produced by the Department rebutting the assessee's....
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.... is also well established principle of law that in any matter, the onus brought is not a static one. Though initial burden is upon the assessee, once he proves the identity of credits/share applications by either furnishing permanent account numbers or copies of bank accounts and shows the genuineness of the transaction by showing money in the banks is by account payee cheques or by draft, etc., then the onus to prove the same would shift to the Revenue. The question which assumes importance at this stage is to what the Revenue is supposed to do to dislodge the initial burden discharged by the assessee and to throw the ball again in the assessee's court demanding the assessee to give some more proofs, as the documents produced earlier by the assessee either become suspect or are rendered insufficient in view of the material produced by the Department rebutting the assessee's documentary evidence. It is not in doubt that the assessee had given the particulars of registration of the investing/applicant companies; confirmation from the share applicants; bank accounts details; shown payment through account payee cheques, etc. With these documents, it can be said that the assess....
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....the creditors/share applicants could not be found at the addresses given it would not give the Revenue a right to invoke s. 68 without any additional material to support such a move. It is projected by the Revenue that the Directorate of IT(Inv.) had purportedly found such a racket of floating bogus companies with sole purpose of landing entries. But, it is unfortunate that all this exercise is going in vain as few more steps which should have been taken by the Revenue in order to find out causal connection between the cash deposited in the bank accounts of the applicant companies and the assessee were not taken. It is necessary to link the assessee with the source when that link is missing, it is difficult to fasten the assessee with such a liability. A delicate balance has to be maintained while walking on the tight rope of ss. 68 and 69. On the one hand, no doubt, such kind of dubious practices are rampant, on the other hand, merely because there is an acknowledgement of such practices would not mean that in any of such cases coming before the Court, the Court has to presume that the assessee in question has indulged in that practice. To make the assessee responsible, there has ....
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....ay be exceptional circumstances in which such an inquiry can be ordered, but normally this course is not resorted to. In the facts of these cases, where the appeals relate to the assessment years, which are of 7-8 years old or even more and going by the nature of evidence which is required, it may not be apposite to make such an order. In IT Appeal No. 726 of 2011, the entire case of the Revenue is based on the plea that as per the report, the investing companies were not found at the given addresses and on this basis, argument is raised that the companies are non-existing and the transactions were bogus and not genuine. Here, the case of the Revenue is even weaker than the cases discussed above. It is not even the case that the Directorate of IT (Inv.) has found MG in such racket of floating bogus companies. After the assessee had furnished the evidence, initial onus had been discharged and it was for the AO to make further necessary inquiries which are completely missing. No question of law much less substantial question of law arises. In IT Appeal no. 613 of 2011, there is nothing wrong in the approach of the Tribunal in remitting the case back to the AO. Conclusion Onc....
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....uld have to be examined by the AO of those share applicants and not by the AO of the assessee herein. Although it was incumbent on the part of the Learned AO of the assessee herein, to trigger the said verification process from the side of the Department, this needed verification was not done by the AO. Hence the impugned additions made u/s. 68 of the Act, are unsustainable on facts and in law as held by the ITAT Kolkata Bench 'IV in ITA No.1494/Kolkata/2017 dated. 5.4.2019 in M/s. Baba Bhootnath Trade & Commerce Ltd. vs. ITO, Ward -9(2) Kolkata It is not that the AO has proved that the impugned sums have been flown from the assessee's coffers. Exchange of cash between the assessee and the impugned share applicants was also not proved. Initial onus was discharged by the assessee company. As already stated, the companies mentioned above are regularly being assessed to tax and their assessment particulars were furnished. They explained the source of source for making the impugned investment. The entire investment was received through banking channels by way of account payee cheques. The share applicant companies furnished all the required details and confirmed the im....
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....serving as above, the order of the Learned CIT (Appeals) deleting the addition made u/s. 68, was confirmed and the Departmental appeal was dismissed. In view of the above facts, and legal position as enunciated by courts, and as the creditworthiness of subscribers is sufficiently established, the addition on account of share capital of M/s Arcade Dealcom Pvt Ltd, Hector Dealers Pvt Ltd, Raja Kaimur Build con Pvt Ltd , and Shri Ashish Jaiswal is hereby deleted. The addition of share capital from Shri Ramesh Bind and Shri Dallu Nishad is hereby sustained. 3.0 Appeal is partly allowed." 8. Both, the assessee company and the revenue being aggrieved with the order of the CIT(Appeals) has carried the matter in appeal before us. 9. We shall first deal with the grievance of the department which has assailed the order of the CIT(Appeals) to the extent he had vacated the addition made by the A.O u/s. 68 of the Act. As additions which had been vacated by the CIT(Appeals) pertains to four parties, therefore, we shall deal with the same in a chronological manner as under: A. Shri Ashish Jaiswal : Rs. 3,50,000/- 10. As is discernible from the assessment order, it tr....
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.... (supra) had further stated before the A.O that he was looking after the management of the aforementioned investor company. On being queried by the A.O about the business activities of the aforementioned company a/w. its turnover for the year under consideration, Shri Ashish Jaiswal had stated in reply to Question No.6 that the aforesaid investor company was engaged in the business of share trading and had a turnover of Rs. 1,54,92,100/- during the year under consideration. Apart from that, Shri Ashish Jaiswal (supra) on being queried by the A.O had provided the details of bank account of the aforementioned investor company, i.e. current account No.301501010995706 with the Union Bank of India, Branch : Kolkata. Also, in reply to the query raised by the A.O about the number of employees a/w. their salary that was inter alia, paid to them by the aforementioned investor company, viz. M/s. Arcade Dealcom Pvt. Ltd., Shri Ashish Jaiswal had in his statement stated before the A.O that the aforementioned company had total four employees whose salary amounted to Rs. 3,40,000/-. Shri Ashish Jaiswal in reply to query raised by the A.O about the details of directors, and date of incorporation ....
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....n no occasion remittances/transfer of amount to the assessee company as investment towards share application money amounting to Rs. 50 lacs was preceded by any cash deposit. In fact, the A.O had failed to place on record any material which would evidence that the amount received by the assessee company from the aforementioned investor company was, in fact, routing back of its own funds in the garb of the aforesaid transaction. 15. Considering the fact that the assessee company had on the basis of supporting documentary evidence duly substantiated the identity and creditworthiness of the aforementioned investor company, viz. M/s. Arcade Dealcom Pvt. Ltd. and also genuineness of the transaction of receipt of share application money by the assessee company, which as observed by us hereinabove, had not been disproved/dislodged by the department either in the course of the proceedings before the lower authorities or by placing on record any such material even in the course of the proceedings before us, therefore, we find no infirmity in the view taken by the CIT(Appeals) who had to the said extent rightly vacated the addition made by the A.O u/s. 68 of the Act. C. Hector Dealers P....
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....Pvt. Ltd., Shri Ashish Jaiswal had categorically stated that no such notice was received by the aforesaid investor company. 17. As is discernible from the assessment order, we find that the A.O while framing the assessment had remained more concerned that the claim of Shri Ashish Jaiswal in his statement recorded on 20.03.2015 that no notice/letter u/s. 133(6) of the Act was received by the aforementioned investor company, viz. M/s. Hector Dealers Pvt. Ltd. was factually incorrect. Interestingly, the A.O had failed to place on record any material which would dislodge the identity and creditworthiness of the aforementioned investor company as well as genuineness of the transaction of receipt of share application money by the assessee company from the aforementioned investor company. In fact, the A.O had merely hushed through the matter and without dislodging the authenticity of the assessee's claim of having received genuine share application money from the aforementioned share applicant company had dubbed the same as an unexplained cash credit u/s. 68 of the Act. 18. As is discernible from the record, the assessee company had filed before the A.O confirmation of the aforesaid....
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.... was looking after the management of the aforementioned investor company. On being queried by the A.O about the business activities of the aforementioned company a/w. its turnover for the year under consideration, Shri Ashish Jaiswal had stated in reply to Question No.6 that the aforesaid investor company was engaged in the business of real estate and during the year under consideration had a turnover of Rs. 3,06,35,000/-. Apart from that, Shri Ashish Jaiswal (supra) on being queried by the A.O had provided the details of bank accounts of the aforementioned investor company, i.e. current account No.0399002100076210 with the PNB, Branch : Kolkata. Also, in reply to the query raised by the A.O about the number of employees a/w. their salary that was inter alia, paid by the aforementioned investor company, viz. Raja Kaimoor Buildcon Pvt. Ltd., Shri Ashish Jaiswal had in his statement stated before the A.O that the aforementioned investor company had total four employees whose salary amounted to Rs. 3,60,000/-. Shri Ashish Jaiswal in reply to query raised by the A.O about the details of directors, and date of incorporation of the aforementioned investor company had furnished the requis....
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.... investor company was in fact, routing back of its own funds in the garb of the aforesaid transaction. 23. Considering the fact that the assessee company had on the basis of supporting documentary evidence duly substantiated the identity and creditworthiness of the aforementioned investor company, viz. Raja Kaimoor Buildcon Pvt. Ltd. and also genuineness of the transaction of receipt of share application money by the assessee company, which as observed by us hereinabove, had not been disproved/dislodged by the department either in the course of the proceedings before the lower authorities or by placing on record any such material even in the course of the proceedings before us, therefore, we find no infirmity in the view taken by the CIT(Appeals) who had rightly vacated the addition to the said extent u/s. 68 of the Act. 24. Based on our aforesaid observations, we are of the view that now when the assessee company had duly discharged the primary onus that was cast upon it as regards proving the identity and creditworthiness of the aforesaid share applicants and genuineness of the respective transactions of receipt of share application money from the said persons on the basis ....
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.... contrary, is supported by the judgment of the Hon'ble High Court of Delhi in the case of Commissioner of Income Tax Vs. Kamdhenu Steel and Alloys Ltd. (2014) 361 ITR 220 ( Del.), wherein, it was, inter alia held as under: "18. We may repeat what is often said, that a delicate balance has to be maintained while walking on the tight rope of Sections 68 and 69 of the Act. On the on hand, no doubt, such kind of dubious practices are rampant, on the other hand, merely because there is an acknowledgement of such practices would not mean that in any of such cases coming before the Court, the Court has to presume that the assessee in questions as indulged in that practice. To make the assessee responsible, there has to be proper evidence. It is equally important that an innocent person cannot be fastened with liability without cogent evidence. One has to see the matter from the point of view of such companies (like the assessees herein) who invite the share application money from different sources or even public at large. It would be asking for a moon if such companies are asked to find out from each and every share applicant/subscribers to first satisfy the assessee companies ab....
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.... and it is for the AO to collect sufficient material to make addition. Further, it was observed that there may be exceptional circumstances in which such an inquiry can be ordered, but normally this course is not resorted to. For the sake of clarity, the relevant observations of the Hon'ble High Court are culled out as under: "20. During the arguments, we had posed these queries Learned counsel appearing for the Revenue understood the limitation of their case. For this reason, a fervent plea was made that this case be remitted back to the AOs to enable him to make further investigation. 21. However, in the facts and circumstances of these cases, it would be difficult to give such an opportunity to the Revenue. There are number of reasons for denying this course of action which are mentioned below: (i) It is not a case where some procedural defect or irregularity had crept in the order of the AO. Had that been the situation, and the additions made by the AO were deleted because of such infirmity, viz., violation of principle of natural justice, the Court could have given a chance to the AO to proceed afresh curing such procedural irregularity. One example ....
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....ore us, though the assessee company had duly discharged the primary onus that was cast upon it as regards proving the identity and creditworthiness of the share applicants and genuineness of the transaction of having received share application money from the aforementioned persons, but the A.O could not rebut the same based on any cogent evidence. As the A.O had not cared to discharge the onus that was cast upon him, therefore, as observed by the Hon'ble High Court in the case Commissioner of Income Tax Vs. Kamdhenu Steel and Alloys Ltd. (supra), for this negligence on the part of the A.O, he could not be provided with "fresh innings". We, thus, in terms of our aforesaid observation finding no infirmity in the view taken by the CIT(Appeals) to the extent he had vacated the aforementioned additions made by the A.O by treating the money received from the said persons as unexplained cash credits u/s. 68 of the Act, and uphold the same. 28. In the result, the appeal filed by the revenue in ITA No.11/RPR/2021 for A.Y.2012-13 is dismissed in terms of our aforesaid observations. ITA No. 99/RPR/2020 A.Y. 2012-13 29. We shall now deal with the appeal filed by the assessee compan....
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....same date on which the amount was transferred to the assessee company read a/w. the fact that the said person had no substantial sources of income, thus, raises no confidence as regards the genuineness of the investment claimed by him to have been made with the assessee company. Also, the source out of which an amount of Rs. 10 lacs was transferred by the aforementioned person to the assessee company is not discernible from the record. At this stage, we may also herein observe that though Shri Ramesh Bind (supra) had filed an "affidavit" wherein he had accepted the fact of having made an investment of Rs. 18 lacs with the assessee company, but despite specific direction by the A.O, the aforesaid company had failed to produce him for necessary examination in the course of the assessment proceedings before the A.O. 32. Considering the totality of the aforesaid facts, we are unable to find any infirmity in the view taken by the lower authorities who had rightly held the amount of Rs. 18 lacs received by the assessee company from the aforementioned person as an unexplained cash credit u/s. 68 of the Act. B. Shri Dallu Nisad : Rs. 1,08,09,000/- 33. The assessee company in order....
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....ial investment of Rs. 1.08 crore (approx.) with the assessee company. All that have been done by the assessee company is to place on record an "affidavit" of the aforementioned person wherein he had admitted of having made investment of Rs. 1.08 crore towards share application money with the assessee company, Page 104 of APB. As nothing is discernible from the records, which would substantiate the creditworthiness of the aforementioned person who has stated to have made an investment of Rs. 1.08 crore (approx.) with the assessee company, we find no infirmity in the view taken by the A.O who had rightly dubbed the same as unexplained cash credit u/s. 68 of the Act. 37. Based on our aforesaid observations, we concur with the view taken by the CIT(Appeals) who had rightly observed that the assessee company had failed to establish the genuineness of the assessee's claim of having received share application money from the aforementioned person by placing on record supporting documentary evidence, which would reveal his annual income and availability of funds a/w. sources of the same, therefore, we uphold the same. 38. In the result, appeal of the assessee in ITA No.99/RPR/2020 for....
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