TaxTMI 
TaxTMI 
2024 (4) TMI 423
X X X X Extracts X X X X
X X X X Extracts X X X X
....d Company, has filed its return of Income for the A.Y. 2017-18 on 23.10.2017, declaring the total income of Rs. 6,24,260/-. The book profit under MAT was declared of Rs. 33,22,460/-. Case of the assessee was subsequently selected for scrutiny through 'CASS', statutory notice u/s 143(2) and 142(1) of the Act a/w queries have been issued on the assessee. As the assessee has not complied with the notice, further show cause notices were issued on 22.10.2019, 20.11.2019 & 27.11.2019. Later on, the case of the assessee was transferred from I.T.O., Ward-3(1) to I.T.O., Ward-1(4), as per the provisions of sections 129 of the Act, a letter for change of incumbent and notice u/s 142(1) along with questionnaire was issued on 10.12.2019 requiring the assessee to make compliance of queries on or before 13.12.2019. In response the assessee filed written replies with details and documents, which have been duly perused and placed on record by the Ld. AO. The reasons for selection of the case of complete scrutiny were: (i). "Large share premium received during the year (verify applicability of sec. 56(2)(viib) of any other relevant section) and (ii). "Higher turnover repor....
X X X X Extracts X X X X
X X X X Extracts X X X X
....of the shareholder company Axis Propbuild Pvt. Ltd. doesn't show sufficient income to generate such fund for investment in the assessee company. Though Axis Propbuild Pvt. Ltd. has share capital and reserve of Rs. 5,99,83,539/- in its balance sheet but it is same from preceding financial years. No share capital and reserve has got changed during the current financial year. In view of these facts, the creditworthiness of the shareholder and genuineness of the transactions are not established. Therefore, share application money received of Rs. 2,00,00,000/- from Axis Propbuild Pvt. Ltd. is hereby treated as unexplained credit u/s 68 read with Section 115BBE of the Income Tax Act, 1961, for the year under consideration and added to the total income of the assessee and tax is payable under Section 115BBE of Income Tax Act, 1961. 7. With the aforesaid observations, Ld. AO has treated the share application receipts of M/s Axis Propbuild Pvt. Ltd. as unexplained credit u/s 68 of the act and to make an addition of Rs. 2,00,00,000/-, to the returned income of the assessee. Aggrieved by the order of Ld. AO, the assessee has filed an appeal u/s 246A of the Act with the jurisdictional C....
X X X X Extracts X X X X
X X X X Extracts X X X X
.... of income and acknowledgement of ITR filed by investor, PN 54 & 55 of PB. iv) Financial statements of investor, PN 59 to 70 of PB. Balance sheet at PN 65 of PB Net worth of about Rs. 6 crore. v) MOA and AOA of investor, PN 71 to 92 of PB. vi) Details of source of source of investment, PN 53 of PB. 2. Source of source substantiated Source of source also substantiated by the assessee. Investor company received money from Toplink Projects Pvt. Ltd. Following documents were filed to establish source of source: - i) Computation of income and acknowledgement of ITR , PN 93 & 94 of PB. ii) financial statements of investor, PN,95 to 111 of PB. Balance sheet at PN 101 of PB. Profit& loss a/c at PN 102 of PB. iii) Bank statement of investor, PN 112 & 113 of PB. No cash deposit. All the legal & cogent evidence remained undisputed. No adverse material brought on record by AO. 3. Summons u/s 131 was issued to Axis Propbuild Pvt. Ltd. Director appeared and his statement was recorded on 23.12.2019. Identity stood established. 4. Director of investor appeared before AO Director of investor ....
X X X X Extracts X X X X
X X X X Extracts X X X X
....arged its burden, the AO could not have made addition without bringing on record any material to prove otherwise. PN 153 to 175 of PB, relevant on PN 170 & 171. 10. Nothing brought on record by the AO. Observations of AO are baseless and arbitrary. 11. Some observations of AO i) Director of investor company failed to substantiate creditworthiness Nowhere from the statement of director it is coming out that the AO has enquired & doubted about creditworthiness of investor company. Director has given details of source of investment and provided all the details /documents which was asked which has not been doubted by A(). ii) Meagre/ nil income It is not the case that investor made investment out of its income. Investor had substantial net worth, which stood accepted in its own case. Nothing brought on record to dispute net worth of investor. In view of this, magnitude of income was not relevant. Reliance on: - Anjani Associates vs ITO, ITA no. 27/RPR/2018 dt. 10.08.2018, PN 176 to 185 of PB, relevant observations in PN 183 para no. 16, last 6 lines. - DCIT vs Gandhi Capital (P) Ltd. (2022) 194 ITT) 396 (Surat) ....
X X X X Extracts X X X X
X X X X Extracts X X X X
.... established. 12. According to Ld. AR, regarding the genuineness of transaction and creditworthiness of the investor which was established by the assessee by way of producing necessary documents and moreover the director of the investor company has appeared before the Ld. AO and confirmed the veracity of the transaction. It is the submission that the Assessee has discharged the onus cast on it u/s 68, all the legal and cogent evidence furnished remain undisputed by the revenue, the investor have confirmed having made the investment, therefore, the addition made by the Ld. AO was uncalled for and unjustified. To strengthen the contentions raised by the Ld. AR, the reliance was placed on various case laws referred to supra in para 6 of the written synopsis as extracted hereinabove. It is the submission that the allegation of the Ld. AO regarding creditworthiness of the investor company was baseless and arbitrary. Regarding meagre/nil income of the investor company, it is submitted by the Ld. AR that the investment is made from the funds available in the form of substantial net worth of the investor company, which is nothing to do with its income. The revenue failed to be brought o....
X X X X Extracts X X X X
X X X X Extracts X X X X
....pplicant companies and purchase of share had been proved by assessee. In Rajshree Synthetics v. CIT (2002) 256 ITR 331 (Raj.) it was held that sec 68 of the Act empowers the AO to make enquiries if he is not satisfied with entries of cash credits The o's satisfaction to invoke sec. 68 must be derived from relevant factors on the basis of proper enquiry and collection o facts. If no proper enquiry is made, the cash credit entry cannot be assessed u/s 68 of the ct. In CIT Heeralal Chaganlal (2002) 257 ITR 281 (Raj.), the Hon'ble Tribunal had recorded a finding that the identity of the creditor had been established and he had also confirmed the loan. On these facts, the Tribunal deleted the addition and the HC held that this was a finding of fact, recorded by the Tribunal which did not warrant any interference by the HC In MM Wollens v. ACIT 20 Taxation 142 (Jaipur Trib.) it was held that the identity of the creditor was established, and that the creditor also affirmed having advanced the amount and the payment was made by crossed cheque and hence the addition u/s . 68 was held uncalled for. Further, the Hon'ble Supreme Court in the case....
X X X X Extracts X X X X
X X X X Extracts X X X X
....he assessee that the transaction was a genuine transaction. The transaction was duly confirmed by the investor, which is submitted before the Ld. AO. A copy of the same is placed before us at page 53 of the assessee's PB. We have also gone through the bank statement of the Axis available at page nos. 56 to 58 of the assessee's PB and are privy that there was no cash deposit in the said account. On perusal of the ITR acknowledgment of the Axis, it is apparent that the investor has nil gross total income. The financial statement of the Axis shows that it possesses the total share capital and reserves & surplus of approx. Rs. 6 crores. We have further perused the documents of source of source, i.e., of M/s Toplink, who had made the entire investment in the Axis. As per the financial statement of the Toplink, it is evident that there was a gross total income of Rs. 16.86 crores for the year ended on 31.03.2017 i.e., in the relevant AY 2017-18. The source of source i.e., M/s Toplink also has share capital, reserves, and surplus in aggregate of Rs. 92.81 crores, represented by inventories (shares) of Rs. 71.48 crores and short-term loans and advances to the tune of Rs. 21.61 crores. Furt....