TaxTMI 
TaxTMI 
2024 (11) TMI 227
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....ASS followed by validly serving notices u/s 143(2) and 142(1) of the Act. The ld. AO called for various information about the registration certificate of RBI, bank statement, audited financial statement, etc. to which reply was furnished. Ld. DR observed that assessee has issued equity shares and has received share capital of Rs.4,60,000/- and security premium of Rs.2,25,40,000/-. The ld. AO thereafter examined the financials of the assessee company for past many years and taking note of the low revenue and meagre profits came to a conclusion that considering the financial statements, assessee cannot raise share capital with such huge share premium. Thereafter, the ld. AO examined the transactions in light of section 68 of the Act and was of the view that assessee could not explain the nature and source of alleged sum to his satisfaction and he concluded the assessment by making addition u/s 68 of the Act at Rs.2,30,00,000/- and also made minor addition u/s 14A of the Act at Rs.1010 and assessed the income at Rs.2,29,68,322/-. 3. Aggrieved assessee preferred the appeal before the ld. CIT (A) challenging the addition made u/s 68 of the Act and again filed various documents and ev....
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....are provided, the assessee's duties are over. If on verification, the information becomes unproven or patently false or unsatisfactory or unverifiable, the onus shifts back to the assessee. Therefore, there is no gainsaying that the applicants were required to obey the summon, and present himself before the Ld. AO for examination and verification of the documents. The details available reflect certain paperwork and documentation, and that however such documentation does not lead credence to the genuineness, creditworthiness and identity of the persons. It is therefore observed that the companies that have subscribed to the shares of Assessee Company on substantial premium do not have the capacity or the financial standing to do so. During the course of assessment proceedings, the identity, capacity and the genuineness of the transaction has not been established by the appellant. Therefore, on preponderance of probabilities the contention of the assessee company regarding share capital and premium cannot be accepted." 4. After going through the above finding, the ld. CIT (A) has referred to plethora of decisions and has dismissed the assessee's appeal. Now, the assessee is in....
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....0 6. Regius Tie-Up Pvt. Ltd. PAN AAFCR6431G 40, Weston Street, 3rd Floor, Kolkata-700 013 5,000 50,000 24,50,000 25,00,000 7. Shivkripa Creations Pvt. Ltd. PAN AAQCs8409Q 4, Raja Woodmount Street, Kolkata-700 001 2,000 20,000 9,80,000 10,00,000 8. Subham Commotrade Pvt. Ltd. Pan AAOCS3790C 10, Kirron Shankar Roy Road, Kolkata-7000001 3,000 30,000 14,70,000 15,00,000 9. Maco Distributors Pvt. Ltd. PAN AAHCMR128P 10, Kirron Shankar Roy Road, Kolkata-7000001 2,000 20,000 9,80,000 10,00,000 10. Devkripa Agency Pvt. Ltd. PAN: AAECD0988P 3, Amartolla Street, 1st Floor, Kolkata-700 001 3,000 30,000 14,70,000 15,00,000 11. Navtech Agency Pvt. Ltd. PAN AADCN8661N 3, Amartolla Street, 1st Floor, Kolkata-700 001 3,000 30,000 14,70,000 15,00,000 12. Duplex Vinimay Pvt. Ltd. PAN AADCD0933H 4, Synagogue Street, 4th Floor, R.No. 401, Kolkata-700 001 1800 18,000 8,82,000 9,00,000 13. Prayash Dealcom Pvt. Ltd. PAN: AAGCP3894C 40, Weston Street, 3rd Floor, Kolkata-700 013 2200 22,000 10,78,000 11,00,000 Total 46,000 4,6....
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....e Supreme Court in the landmark judgment of Kale Khan Mohammad Hanif Vs. Commissioner Of Income-Tax dated 8th February, 1963 reported in [1963] 50 ITR 1(SC) and Roshan-Di-Hatti vs CIT (1977) 107 ITR 938 (SC) laying down the proposition that the onus of proving the source of a sum of money found to have been received by an assessee, is on the assessee. Once the assessee has submitted the documents relating to identity, genuineness of the transaction, and creditworthiness, then the AO must conduct an inquiry, and call for more details before invoking Section 68. If the Assessee is not able to provide a satisfactory explanation of the nature and source, of the investments made, it is open to the Revenue to hold that it is the income of the assessee, and there would be no further burden on the revenue to show that the income is from any particular source. 10. Thereafter the Hon'ble Supreme court summed up the principles, which emerged after deliberating upon various case laws, as under: "11. The principles which emerge where sums of money are credited as Share Capital/Premium are: i. The assessee is under a legal obligation to prove the genuineness of the transacti....
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....& creditworthiness of cash creditors/ share applicant and genuineness of the transactions. Before us, the ld. Counsel for the assessee has submitted detailed paper book containing various documents filed for each of the share applicant and the same is abstracted below:- SL Particulars From To 3. Details of share Applicants (i) Uniworth Marketing Pvt. Ltd. Copy of reply to notice u/s 133(6) -- 27 -- Copy of IT Acknowledgement -- 28 -- Audited Financial Statement 29 38 Copy of Share application -- 39 -- Copy of allotment advice -- 40 -- Copy of relevant bank statement -- 41 -- (ii) Lochan Distributors Marketing Pvt. Ltd. Copy of reply to notice u/s 133(6) -- 42 -- Copy of IT Acknowledgement -- 43 -- Audited Financial Statement 44 -- 52 Copy of Share application 53 -- 54 Copy of allotment advice 55 -- 56  ....
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....vant bank statement 139 Copy of assessment order u/s 144 for A.Y. 12-13 139A -- 139C (viii) Subham Commotrade Pvt. Ltd. Copy of reply to notice u/s 133(6) 140 Copy of IT Acknowledgement 141 Audited Financial Statement 142 153 Copy of Share application 154 Copy of allotment advice 155 Copy of relevant bank statement 156 Copy of assessment order u/s 144 for A.Y. 12-13 156A -- 156B (ix) Maco Distributors Pvt. Ltd. Copy of reply to notice u/s 133(6) 157 Copy of IT Acknowledgement 158 Audited Financial Statement 159 -- 170 Copy of Share application 171 Copy of allotment advice 172 Copy of relevant bank statement 173 Copy of assessment....
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....d their credentials are available on MCA portal. All the 13 share applicants are regularly assessed to tax. Books of accounts are duly audited and audited financial statements are attached to the income tax return and are also filed along with the annual return. One cannot deny the possibility that assessee which became a NBFC and being into this trade since 11 years, have been able to approach various private limited companies of which few have consented to apply of equity shares of the assessee company. Proper process has been followed and after filing of the share application and making due payment, allotment has been issued. Copies of the bank statement of each of these companies are available on record and there is no immediate cash deposit prior to issuing of cheque for making alleged investment. Revenue authorities also failed to rebut this fact that against the notice issued by the ld. AO u/s 133(6) of the Act all the share alleged share applicants have replied and had furnished the details along with cover. It is also observed that most of the alleged share applicants have also passed through the scrutiny proceedings for the very same assessment year i.e. A.Y. 2012-13 u/s ....
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....ase of CIT vs. Orissa Corporation Pvt. Ltd. (supra), under identical circumstances, has held as follows:- "In this case the assessee had given the names and addresses of the alleged creditors. It was in the knowledge of the revenue that the said creditors were the income-tax assessees. Their index number was in the file of the revenue. The revenue, apart from issuing notices under section 131 at the instance of the assessee, did not pursue the matter further. The revenue did not examine the source of income of the said alleged creditors to find out whether they were credit-worthy or were such who could advance the alleged loans. There was no effort made to pursue the socalled alleged creditors. In those circumstances, the assessee could not do any further. In the premises, if the Tribunal came to the conclusion that the assessee had discharged the burden that lay on him, then it could not be said that such a conclusion was unreasonable or perverse or based on no evidence. If the conclusion was based on some evidence on which a conclusion could be arrived at, no question of law as such could arise." emphasis ours} b) The ITAT Kolkata Bench in ITO vs Cygnus....
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....ers and genuineness of the transaction. The relevant part of the order, for the purpose of ready reference, is reproduced as under: "5. Conclusion: Ground No.1 & 2 I have considered the order of the A.O as well as the submission of the appellant. I have also considered the judicial decisions relied upon by the appellant. The facts of the case have already been discussed as above. It is observed that in the year under consideration the appellant company had raised share capital of Rs. 7,60,00,000/-from 6 parties. In the course of the assessment proceedings, to verify the receipt of share capital, the AO issued notices u/s.133(6) to all the 6 share applicants and in response, they all confirmed the transactions submitted the details/document in respect of the subscription of shares of the appellant. In the course of the appellate proceedings, the appellant filed copy of each of the assessment orders passed in all the 6 cases of the shareholders for that year in which the share subscription amount has been received by the assessee company. Besides, the income-tax return filing acknowledgment, Audited Balance and sheets as on 31.03.2012, relevant bank, copy of the not....
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....e the corpus becomes technically explained in the eyes of law, how can, the credits arising out of the same corpus can be viewed as unexplained u/s 68 of the IT Act. In view of the facts & circumstances of the case it is held that the addition of Rs. 7,60,00,000/- for the share capital raised by the appellant from 6 share applicants as unexplained cash credit u/s 68 of the Act was not justified and the same is directed to be deleted. The appeal of the assessee company on Grounds No.1 & 2 are treated as allowed. Ground no. 3 is general in nature, which does not require adjudication. 6. In the result, the appeal of the assessee is treated as allowed." 6. A perusal of the above concluding part of the order of the CIT(A) reveals that the ld. CIT(A) has not only taken note of the accounts of the share subscribers but also, noted that all the six share subscribers were assessed u/s 143(3) of the Act. Out of which, no additions were made in case of two share subscribers. However, in the case of other four share subscribers, the additions were made regarding their source of income. Now, it is settled law, once the addition has been made in the hands of the share subscribers, the investment....
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....ompanies. Even if the directors of the subscriber companies have not come personally in response to the summons issued by the AO, in our view, adverse inference cannot be taken against the assessee solely on this ground as it is not under control of the assessee to compel the personal presence of the directors of the shareholders before the AO. The Ld. Counsel for the assessee has rightly placed reliance upon the decision of the Hon'ble Bombay High Court in the case of PCIT, Panji vs. Paradise Inland Shipping Pvt. Ltd. reported in (2017) 84 taxman.com 58 (Bom) wherein the Hon'ble High Court has held that once the assessee has produced documentary evidence to establish the existence of the subscriber companies, the burden would shift on the revenue to establish their case. Further the jurisdictional Calcutta High Court in the case of "Crystal networks (P) Ltd. vs CIT" (supra) has held as under: "We find considerable force of the submissions of the learned counsel for the appellant that the Tribunal has merely noticed that since the summons issued before assessment returned unserved and no one came forward to prove. Therefore it shall be assumed that the assessee failed to p....
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....ding the identity of the investor or lender along with their confirmations, the assessee has discharged the initial burden and, therefore, the burden shifts on the Assessing Officer to examine the source of the credit to be justified in referring to section 68 of the Act. After the Assessing Officer puts the assessee on notice and the assessee submits the explanation concerning the cash credit, the Assessing Officer should consider it objectively before he decides to accept or reject it. Where the assessee furnishes full details regarding the creditors, it is up to the Department to pursue the matter further to locate those creditors and examine their creditworthiness. While drawing the inference, it cannot be assumed in the absence of any material that there have been some illegalities in the assessee's transaction. Held, dismissing the appeal, that the allegations against the assessee were in respect of thirteen transactions. The Assessing Officer issued a show-cause notice only in respect of one of the lenders. The assessee responded to the show-cause notice and submitted the reply. The documents annexed to the reply were classified under three categories namely: to establish th....