TaxTMI 
TaxTMI 
2024 (7) TMI 714
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.... out. The details of hearing opportunities are as under: i) 01.08.2023- Notice came back with remark 'left' by postal authorities. DR directed to effect service through AO. ii) 04.10.2023- None appeared. Notice through DR. iii) 06.12.2023- None appeared. Notice through DR. iv) 21.07.2024- None appeared. Direction to effect service through AO and to inform the Bench about fate of service of earlier notices. v) Order sheet dated 23.04.2024 is extracted as under: "Earlier, the notice was attempted to be served upon the assessee through registered post as well as on email at the address of the assessee. The notice served through registered post has been received back with the remark of the postal authority 'left'. Thereafter, it was ordered to serve the notice upon the assessee through registered post, email as well as through department. As per the letter dated 11.10.2023, the department had deputed Notice Server to serve notice personally upon the assessee at the address of the assessee as available in latest return as well as mentioned in the notice. The concerned Inspector who was deputed to serve the notice namely Shri ....
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....he impugned edition. 1.2. Aggrieved with the action of ld. AO, the assessee went in appeal before the ld. CIT(A). Before the ld. CIT(A), the assessee assailed the action of the ld. AO by relying on a number of judicial pronouncements and also filed a detailed paper book consisting of ITR of the company, audited accounts, details of shareholders, bank statements and share application forms etc. The ld. CIT(A) was persuaded by the line of reasoning adopted by the assessee and has recorded that the assessee has been able to fully explain the nature and source of the share application received and has also discharged its onus to prove the identity, creditworthiness and genuineness of the share applicants. Thereafter, he proceeded to delete the said addition. 1.3. Aggrieved with this action of ld. CIT(A), the Revenue has filed the present appeal with the following single ground of appeal: "The Ld. CIT(A) (NFAC) Delhi es erred in not considering the financial profiles of investor companies." 2. Before us, the ld. D/R assisted us in carefully going through the order u/s 263 of the Act (supra), the finding of ld. AO and the findings of ld. CIT(A). The ld. D/R also pointed....
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....that the financial situation of the appellant does not justify any premium whatsoever and this only strengthens the assumption that the genuineness of impugned transaction is not proved. 2.2. At this stage, it may be worthwhile to recapitulate the subject matter and findings in certain important case laws as under, which will have a bearing on the outcome: a) In the case of PCIT vs. NRA Iron & Steel (P.) Ltd. reported in [2019] 412 ITR 161 (SC) the Lordships of the Hon'ble Apex Court have held that when the assessee had received share capital/premium and there was a failure to establish creditworthiness of the investor companies, the AO was justified in passing assessment order making additions u/s 68 of the Act even when the assessee had filed confirmations from investor companies to show that the entire amounts had been paid through normal banking channels. b) In the case of Neelkantha Commosales (P.) Ltd. vs. ITO reported in [2022] 286 Taxman 48 (Calcutta), the Lordships of the Hon'ble Calcutta High Court have held that even under non-amended provisions of Section 68 of the Act, that is prior to insertion of proviso to Section 68 of the Act by the Fi....
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....made by a known person; therefore, a higher onus is required to be placed on such companies besides the general onus to establish, identity and creditworthiness of the creditors and genuineness of the transaction. This additional onus needs to be placed on such companies to also prove the source of money in the hands of such shareholders or person making payments towards issue of shares before such sum is accepted as genuine credit. If the company fails to discharge the additional onus, the sum shall be treated as income of the company and added to its income. Therefore, it was proposed to amend Section 68 of the Act to provide the nature and onus of any sum credited, as share capital premium etc. in the books of a closely held company shall be treated as explained only if the source of fund is also explained by the assessee company in the hands of the resident shareholders. However, even in the case of closely held companies, it is proposed that this additional onus of satisfactorily explaining the source in the hands of the shareholder, could not apply if the shareholder is a well regulated entity namely a Venture Capital Fund, a Venture Capital Company registered with SEBI. ....
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..................... 35. We have noted that the tribunal has made certain observations as regards the future prospects of the assessee company as they are a steel industry and that their fixed assets and also the turnover had increased substantially. However, this appears to have not been the submission when the assessee filed an appeal before the CIT(A) challenging the addition made by the assessing officer. This is evident from the grounds of appeal which have been set out in the order passed by the CIT(A) in paragraph 2.1 of the order dated 28.11.2019. The finding rendered by the tribunal is probably taken from the written submissions made by the assessee before the tribunal giving certain facts and figures regarding the expanding of business activities of the assessee. The assessee in their submission contended that their business activity has increased considerably and for the purpose of expansion funds were required and therefore the assessee raised funds from various means, increment in share capital from associates being one of them. The fact clearly demonstrates that the source of the funds which have flown into the account of the assessee have substantially come fro....
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....investments made in its share capital were genuine. As noted above merely proving the identity of the investors does not discharge the onus on the assessee if the capacity or the credit worthiness has not been established. 38. In the light of the above discussion, we hold that the assessee has failed to discharge legal obligation to prove the genuineness of the transaction and the credit worthiness of the investor which has shown to be so by a "round tripping" of funds. For all the above reasons, the revenue succeeds." 2.3. It is seen that the issue of applicability of the principles of the amended provisions u/s 68 of the Act would apply to the present case, since as discussed in para 27 of the BST Infratech case (supra), the said amendments merely codified the position of law as earlier expounded in various case laws. This position deserves to be clarified as it is seen that before the ld. CIT(A) this applicant had claimed that he deserves relief due to his case pre-dating the said amendment. To stress the retrospective nature of the provisions, we also rely on two cases of Hon'ble ITAT, Kolkata from which relevant portions are extracted for reference:- i....