TaxTMI 
TaxTMI 
2024 (3) TMI 881
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....t?" 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. 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 ju....
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..... 2,05,00,000/- 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 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 fact....
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....bscriber company was neither available at the address that was provided to him nor any board evidencing the availability of the said company 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/applic....
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....wever the AO sent notice u/s 133(6) to old address and from this address the notice was returned back. All the documents in respect of M/s Modakpriya such as ITR, audited balance 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....
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....o reopen their individual assessments in accordance with law, but it cannot be regarded as undisclosed income of assessee company. In the case of ACIT vs Venkateshwar Ispat Pvt Ltd 319 ITR 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 res....
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....see's favour. Following all these decisions, in view of the above facts, the addition of Aare capital is hereby deleted. Therefore the addition of loan made by the AO as assessee's income is hereby deleted. 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 credi....
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....ed investor company, viz. M/s. Modakpriya Merchandise Pvt. Ltd., Kolkata, had issued notice u/s. 133(6) of the Act, dated 08.02.2016 (through speed post) to the said investor company. As observed by the A.O., though the aforesaid notice u/s. 133(6) of the Act was duly served 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 noti....
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....urns, balance sheet, and Profit & Loss account of the share applicant/subscriber company observed that it had disclosed its income at Rs. Nil during the year under consideration. It was also observed by him that the investor company had no revenue during the year under consideration. 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 ad....
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.... i.e., the old address of the assessee company. 15. The CIT(Appeals) further observed that the assessee company by placing on record the audited balance sheet, bank account statement, copy of income tax return, Registrar of Company (ROC) certificate of the share applicant/subscriber 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....
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....erification at the address of the aforementioned investor company, viz. M/s. Modakpriya Merchandise Pvt. Ltd., 8th Floor, Room No.814, 4 Synagogue Street, Kolkata, West Bengal-700 001, neither the said investor company was found available nor any board pointing out to its availability at 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. ....
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....ial statements of the investor which revealed that they had sufficient funds in their account for investing with the assessee company. 20. We shall now look into the aspect as to whether or not the assessee company had duly discharged the primary onus that was cast upon it as regards proving 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 confirm....
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....ation. 22. Also, on a perusal of the bank account of the investor company, viz. M/s. Modakpriya Merchandise P. Ltd., Page 39-42 of APB, we find that the amount remitted to the assessee company as an investment towards share application money by the said investor company is not preceded by any cash deposits in the said 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....
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....with another company, viz. M/s. Rupandham Steel Pvt. Ltd., Raipur, which, thereafter, had been accepted by the A.O. while framing assessment u/s. 143(3) dated 31.12.2019, therein further fortifies the creditworthiness of the investor company. Also, we find substance in the claim of the Ld. AR that though the assessee company 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 afores....
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....uch loans to the assessee company. Also, a similar view had been taken by the Hon'ble High Court of Bombay in the case of Pr. CIT Vs. AMI Industries (India) P. Ltd. (2020) 424 ITR 219 (Bom.). In the case before the Hon'ble High Court, the A.O had observed, that though the share applicant company was in existence and had 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....