TaxTMI 
TaxTMI 
TaxTMI 
2024 (3) TMI 881
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....circumstances of the case, the Ld. CIT(A) was justified in deleting the addition of Rs. 2,05,00,000/- 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 the case, the Ld. CIT(A) was justified in deleting the addition, thereby not considering and not distinguishing the findings of the AO which is well supported by the ratio of the judgment of Hon'ble Gujarat High Court in the case of Pavan kumar M Sanghvi Vs ITO (2018) 404 ITR 601 (Guj), wherein it is mentioned that 'it is also settled legal position that the onus of the assessee, of explaining nature and source of credit, does not get discharged merely by filing confirmatory letters, or demonstrating that the transactions are done through the banking channels or even by filing the income tax assessment particulars'? " 4. "Whether on points of law and on facts & circumstances of the case, the Ld. CIT(A) was justified in deleting the addition which is contrary to the ratio of the ....
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....e 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 company as genuine, a finding which is factually incorrect, thereby rendering the decision, which is perverse?" 10. "Whether on points of law and on facts & circumstances of the case, the Id. CIT(A) was justified in ignoring the ratio of Hon'ble Delhi High Court in the case of CIT-II vs. Jansampark Advertising & Marketing (P.) Ltd. reported in [2015] 56 taxmann.com 286(Delhi) held that "though it is obligation of assessing officer to conduct proper scrutiny of material, in even of assessing officer failing to discharge his functions properly, obligation to conduct proper inquiry shifts to commissioner (Appeals) and they cannot simply delete addition made by assessing officer on ground of lack of inquiry." 11. "Whether on points of law and facts & circumstances of the case, the Ld. CIT(A) was justified in giving a decision in favour of the assessee and against t....
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....ny was found at the said address. 4. Also, the Income Tax Officer-2(1), Bhilai vide his aforesaid report dated 2303.2016 informed the A.O. that the persons putting up near the address of the investor company had expressed their unawareness about the availability of the latter at the said address. The A.O, referring to the aforesaid facts held a firm conviction that the assessee company had failed to discharge the onus that was cast upon it as regards proving the authenticity of its claim of having received share capital/premium of Rs. 2.05 crore from the aforementioned share applicant/subscriber company viz. M/s. Modakpriya Merchandise Pvt. Ltd. The A.O., observed, that the identity of the aforesaid share applicant/subscriber company was not established, and also, the return of income filed by the latter revealed nil income and was not accompanied by any financial statement. Apart from that, the A.O. observed that except for the aforesaid transaction of payment made towards share capital/premium, the bank account of the share subscriber/applicant company revealed no other transaction. Accordingly, the A.O. being of the view that the assessee company in the garb of share capital/pr....
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....e sheet, bank account statement, ROC certificate were furnished. The. AO has made addition due drawing adverse inference that the subscriber company did not exist at the address whereas the notice was sent to wrong address. As per ROC the address of the company was Mango Lane at which the company duly existed. As per audited balance sheet of Modak it has assets and liabilities of Rs 11.16 cr and amount of share capital advanced to the assessee is Rs 2.05 cr. Company has share capital of Rs 1.12 cr and Reserves & Surplus of Rs 10.0 cr. Ap has furnished details of source of source also. The capital of Modak has come from sale of investments and list of buyers of investment was furnished. Modakpriya has. given Rs. 39,99,970/- to another company Shree Rupandham Steel Pvt Ltd Raipur. In case of M/s Rupandham Steel Pvt Ltd in the Assessment Order dated 31.12.2019 for AY 2017-18 the capital has been accepted treating the share capital from M/s Modakpriya as genuine. As per the these facts, the addition has been made because as per the AO, the existence of the investor company could not be established. However such inference was drawn by the Ld. AO on the basis of the inquiry at the inco....
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....393 Chhattisgarh 2010, 41 DTR 350 the deletion of addition by [TAT was justified. Briefly stated, the facts of the case are that the assessee-company filed its return for the assessment year 1989-90. The Assessing Officer during assessment proceedings, not satisfied with the explanation of the assessee, added Rs. 13,36,000 towards holdings of the shareholders, whose confirmation could not be adduced. Before the Commissioner of Income-tax (Appeals), the assessee sought permission for adducing additional evidence under rule 46A of the Income-tax 2, which was accepted and appeal of the assessee was allowed on the basis of additional evidence adduced by the assessee as also keeping in view of the fact that for subsequent assessment year, the share holders investment was confirmed during the assessment proceedings. The appeal preferred by the Revenue was dismissed by the ITAT. Before the honorable HC, it was submitted on behalf of the department that apart from the reasons assigned by the respondent, the Tribunal, wherein it has been held that the investment has been verified on the basis of the additional evidence adduced by the assessee, in view of the latest judgment of the hon'b....
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....ted. 3.0 Appeal is allowed." 6. The revenue being aggrieved with the order of the CIT(Appeals) has carried the matter in appeal before us. 7. We have heard the ld. Authorized Representatives of both the parties, perused the orders of the lower authorities and the material available on record, as well as considered the judicial pronouncements that have been pressed into service by them to drive home their respective contentions. 8. Before proceeding any further, it would be relevant to point out that the case of the assessee company for the assessment year 2013-14 would be governed by the provisions of post-amended Section 68 of the Act, which reads as under: "68. Where 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 the Assessing Officer, satisfactory, the sum so credited may be charged to income-tax as the income of the assessee of that previous year : Provided that where the assessee is a company (not being a company in which the public are substantially interested), and the sum so credited consists....
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....ed upon the aforesaid investor company but it had failed to comply with the same and furnish the requisite details as were therein called for. Considering the aforesaid fact, the A.O., vide notice issued u/s. 142(1) of the Act dated 08.03.2016 is stated to have brought to the notice of the assessee company the non-compliance of the aforesaid investor company and had directed it to produce the director of the aforementioned investor company for necessary examination before him. However, as observed by the A.O., the aforesaid notice u/s. 142(1) dated 08.03.2016 could not be served upon the assessee company and was returned by the postal department with the remark "incomplete address". Because all the earlier correspondence at the aforesaid address with the assessee company was duly served and complied with, the A.O held a conviction that the assessee company had intentionally evaded the service of the aforesaid notice to avoid producing the investor company for necessary examination before him. Accordingly, the A.O. deputed an Income Tax Inspector on 16.03.2016 to effect service of the aforementioned notice u/s. 142(1) of the Act on the assessee company, but the Inspector is stated t....
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....tion. Referring to the bank account of the share applicant/subscriber company, the A.O. observed that except for the investment made by the share applicant company with the assessee company, there was no other transaction. Considering the aforesaid facts, the A.O. concluded that the share applicant/subscriber company was a paper company that had no existence and credibility. 14. On appeal, the CIT(Appeals) took strong note of the fact that the verification carried out by the A.O. about the existence of the share applicant/subscriber company, viz. M/s. Modakpriya Merchandise Pvt. Ltd., Kolkata was carried out at the back of the assessee company and findings were never confronted to it. The CIT(Appeals) had also observed that while the correct address of the investor company was "Mango Lane, Kolkata", the report filed by the Income Tax Inspector was, in turn, based on the inquiry carried out at the wrong address, i.e. "Synagogue Street, Kolkata". Referring to the notice issued u/s. 142(1), dated 08.03.2016 issued by the A.O to the assessee company which as stated in the assessment order was returned by the postal authority, the CIT(Appeals) observed that the said observation of the ....
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....ber company had discharged the primary onus that was cast upon it as regards proving the authenticity of its claim of having received share capital/premium from the investor company. Also, it was observed by him that the share applicant/subscriber company had share capital/reserves and a surplus of Rs. 11.12 crore from where the investment towards share application money was made with the assessee company. Apart from that, the CIT(Appeals) observed that the assessee company had also placed on record source of source of the investment made by the share applicant/subscriber company. It was observed by him that the investment of Rs. 2.05 crore made by the share applicant/subscriber company with the assessee company was sourced from the sale of its investments, and complete details of the same were filed with the A.O. Apart from that, the CIT(Appeals) observed that the share applicant/subscriber company, viz. M/s. Modakpriya Merchandise Pvt. Ltd., Kolkata had also invested Rs. 39.99 lacs (approx.) with another company, i.e. M/s. Rupandham Steel Pvt. Ltd. during A.Y.2017-18, which was accepted by the A.O while framing assessment u/s. 143(3) dated 31.12.2019 for A.Y. 2017-18 of the afore....
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....t the said address was found. As observed by the CIT(Appeals), and rightly so, now when the aforesaid investor company, viz. M/s. Modakpriya Merchandise Pvt. Ltd. had shifted from its old address: " Synagogue Street, Kolkata" to its new address: "3, Mango Lane, 4th Floor, Kolkata(WB)-700 001", we are unable to fathom as to on what basis its existence and availability was being looked into at the aforesaid old address. At this stage, we may herein observe that the A.O himself on Page 3 of his order had referred to the new address of the share applicant/subscriber company, viz. "3, Mango Lane, 4th Floor, Kolkata (WB)-700 001". Apart from that, the ROC record of the assessee company also revealed its new address, viz. "3, Mango Lane, 4th Floor, Kolkata (WB)-700 001". Based on the fact that the A.O. despite being well aware that the share applicant/subscriber company had shifted to its new address, viz. "3, Mango Lane, 4th Floor, Kolkata (WB)-700 001" was looking for its existence and availability at its old address, we are unable to approve the adverse inferences so drawn by the A.O. 18. Also, the fact that the investment of Rs. 39.99 lacs ( approx.) made by the aforesaid share appli....
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....ng the identity and creditworthiness of the share applicant/subscriber company, viz. M/s. Modakpriya Merchandise P. Ltd., and the genuineness of the transaction of receipt of share application money from the aforementioned investor company. 21. At the threshold, we may herein observe that the assessee company in discharge of the primary onus that was cast upon it had placed on record with the A.O supporting documentary evidence substantiating the authenticity of its claim of having received share application money from the share applicant/subscriber company, viz. confirmation of the share applicant/subscriber company, bank statement, copies of the return of income, financial statements of the investor company, copy of share application forms, copy of PAN, copy of memorandum and articles of association, copy of board resolution and return of allotment in Form No.2. On a perusal of the confirmation of the aforesaid share applicant/subscriber company, Page 38 of APB, we find that the investor company had not merely confirmed the transaction of having invested Rs. 2.05 crore towards share application money with the assessee company but had categorically furnished the complete source f....
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....id bank account but is sourced from bank transfers made through RTGS. To dispel all doubts about the amount received in the bank account of the investor company, which was utilized for investing share application money with the assessee company, the latter had in the course of the assessment proceedings filed with the A.O the confirmations of the companies to whom the investor company, viz. M/s. Modakpriya Merchandise P. Ltd. had sold its investments during the year under consideration, viz. (i) Cosmos Dealcom Pvt. Ltd., (ii) M/s. Jolly Vinimay Pvt. Ltd.; (iii) M/s. Strongwell Commodeal Pvt. Ltd., (iv) M/s. Fantasy Dealcom Pvt. Ltd., Page 59 to 63 of APB. 23. Based on the aforesaid facts, we are of the view that the assessee company had discharged the double facet onus that was cast upon it as regards proving the authenticity of its claim of having received genuine share application money from the aforementioned investor company, viz. M/s. Modakpriya Merchandise P. Ltd., viz. (i). by substantiating based on documentary evidence the "nature" and "source" of the amount so credited in its books of account, i.e. receipt of the share application money from the aforementioned investor c....
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.... in the course of the assessment proceedings had filed before the A.O copies of share application forms, Page 64-73 of APB, copy of board resolution dated 05.04.2012 of the investor company authorising investment with the assessee company, Page 94 of APB, return of allotment of shares in Form 2, Page 95-102 of APB of the investor company, which substantiates the authenticity of the transaction of receipt of share application money by the assessee company, there is no whisper of word by the A.O as regards the said documents. In fact, we are of the view that the A.O merely based on generalized observations and without making any attempt to dislodge the documentary evidence which were filed by the assessee before him, as well as disproving the explanation of the assessee company as regards its claim of having received genuine share application money from the aforesaid investor company, had summarily drawn adverse inferences, which we are afraid cannot be accepted. 26. Our aforesaid view that in a case where the assessee had placed on record sufficient documentary evidence to prove the authenticity of its claim of having received genuine share application money from the investor, viz.....
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....filed its income tax return for the year under consideration but had very meager income as disclosed in the return of income, thus, for the said reason, had doubted their creditworthiness. On appeal, the Tribunal, inter alia, observed that as the creditworthiness of the parties was proved from the bank accounts which revealed that they had funds to make payment for share application money and the said transaction was proved as per the resolution passed in the meeting of the board of directors, thus, no adverse inferences as regards the authenticity of the assessee's claim of having received genuine share application money from them was liable to be drawn. The aforesaid view taken by the Tribunal, had thereafter, been approved by the Hon'ble High Court, which had dismissed the appeal filed by the revenue. Also, our aforesaid view is supported by the order of ITAT, Surat in the case of Pr. CIT Vs. Gandhi Capital (2022) 194 ITD 396 (Surat) and that of ITAT, Kolkata in the case of BST Infratech Ltd. Vs. Deputy Commissioner of Income-tax [2023] 146 taxmann.com 406 (Kolkata - Trib.). 28. We, thus, based on our aforesaid observations, find no infirmity in the view taken by the CIT(Ap....