TaxTMI 
TaxTMI 
2025 (2) TMI 1135
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....unsel, who advised the assessee to file the appeal before the tribunal and it was finally filed with a delay of 73 days on 02.04.2024. Considering the explanation offered by the assessee for delay in filing the appeal, we are of the view that reasons are genuine and bonafide and therefore, we are inclined to condone the delay in filing the appeal. 03. The only issue raised in the various grounds of appeal is against the confirmation of addition of Rs.3,61,54,000/- by ld. CIT (A) as made by the ld. AO on account of share application / share premium, received during the year as unexplained cash credit u/s 68 of the Act. 04. The facts in brief are that the assessee filed the original return of income on 26.09.2009, showing total loss of Rs.3,642/- which was processed u/s 143(1) of the Act. The case of the assessee was reopened u/s 147 read with section 148 of the Act and accordingly, the assessment was framed u/s 147/143(3) of the Act vide order dated 28.04.2011, assessing the total income at Rs.5,360. Thereafter, the said order was revised by the ld. PCIT u/s 263 of the Act on the ground that the ld. AO has not conducted a requisite and proper enquiries regarding the identity a....
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....013] 30 taxmann.com 292 (Delhi), the ld. CIT (A) affirmed the finding of the ld. AO by dismissing the appeal of the assessee. 07. The ld. AR vehemently submitted before us that the assessment framed u/s 147/143(3) of the Act dated 28.04.2011, was invalidly revised by the ld. CIT (A) by giving general observations without specifically dealing with the case of the assessee as to how the order is erroneous and prejudicial to the interest of the revenue. The ld. AR referred to the revisionary order particularly page no.3 passed u/s 263 of the Act, wherein the ld. PCIT has discussed the facts of the case. We note from Para 4 wherein the PCIT stated that the ld. AO has not conducted a proper and requisite enquiries regarding identity and creditworthiness of the investors and mechanically passed the order without any application of mind and thus, the order is erroneous and prejudicial to the interest of the Revenue. In para no.5, the ld. PCIT referred to the objection dated 05.03.2014, wherein the assessee requested for another opportunity to file the final submissions. Thereafter on page no.7 para 2, the ld. PCIT stated that the assessee case was not viewed in isolation and under the ....
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....rd, we find that the assessment framed u/s 143(3) of the Act dated 22.03.2015 was revised by the ld. PCIT u/s 263 of the Act on the ground that the ld. AO has not conducted a requisite and proper enquiry qua the share capital received by the assessee during the instant financial year from its subscribers. We note that the ld. CIT (A) also noted that in similar other cases, similar amounts were taken and the assessment orders were revised. Therefore, to this extent the contentions of the ld. AR is correct that the ld. CIT (A) has in general manner revised the assessment order. Now go to the merit of the case before us. Undoubtedly, the assessee has now filed the evidences qua the subscribers before the ld. AO which were filed before the ld. CIT (A) along with application u/s 46A of the Rules, which were also rejected, stating that the assessee has not given cogent/ proper reasons for having filed these evidences now. We note that the assessee has filed the various documents / evidences of the 8 share subscribers which comprised of share application, ITRs, audited financial statements, PAN Cards, allotments receipts, bank statements of source of funds, assessment orders u/s 147/143(3....
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....to discharge the primary onus. The second aspect is with regard to the duty of the assessing officer, wherein it was held that the assessing officer is duty bound to investigate the creditworthiness of the creditors/subscribers, verify the identity of the subscribers and ascertain whether the transaction is genuine or there are bogus increase of name lenders. If the enquiry and investigation reveal that the identity of the creditors to be dubious or doubtful or lack of creditworthiness then the genuineness of the transaction would not be established. As noticed above, the CIT(A) had in mind the broad parameters laid down by the Hon'ble Supreme Court and examined the factual position. There were seven subscribers whose creditworthiness was considered by the CIT(A) and in paragraph 4.3 of the order passed by the CIT(A) dated 2nd September 2020, the net worth of the companies have been set out. In paragraph 4.4 the CIT(A) noted that it is evident from the information furnished by the assessee filed out of the seven subscriber companies were subjected to assessment under Section 143(3) of the Act for the assessment year under consideration and in respect of two other assesses ....
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....ial year 2011-12 was Rs 6,00,00,000/-. We find that all the shareholders had duly confirmed the transactions with the assessee company. The evidences which were filed before the ld AO with regard to this issue are as under:- a) Income Tax Return of the shareholders b) Audited financial statements of shareholder companies. c) Share Allotment Letters d) Copy of the bank account of the shareholders e) Transactions with the assessee duly highlighted in the bank statement. f) Evidences of source of source of the shareholders. g) Form of Application for Equity Shares h) Board Resolution for making investment in assessee company i) Memorandum and Articles of Association of the shareholder companies j) Certificate of Incorporation These evidences are enclosed in pages 16 to 395 of the paper book filed before us. 7.1. From the aforesaid details, we find that in case of all the share applicants - a) The share application form and allotment letters are available. b) The share applicants are income tax assessee's and had filed their income tax returns regularly. ....
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.... which are duly corroborated with their respective bank statements and all the payments are by account payee cheques. Reliance in this regard is placed on the decision of the Hon'ble Supreme Court in the case of Orissa Corporation P Ltd reported in 159 ITR 78 (SC) and Hon'ble Gujarat High Court in the case of DCIT vs Rohini Builders reported in 256 ITR 360 (Guj), wherein it was held that onus of the assessee (in whose books of account, the credit appears) stands fully discharged, if the identity of the creditor is establishd and actual receipt of money from such creditor is proved. In case, the Assessing Officer is dissatisfied about the source of 'cash deposited in the bank accounts of the creditors', the proper course would be to assess such credit in the hands of the creditor (after making due enquiries from such creditor). In arriving at this conclusion, the Hon'ble Court has further stressed the presence of word 'may' in section 68 of the Act. Relevant observations of Hon'ble Gujarat High Court at pages 369 & 370 are as under :- "Merely because summons issued to some of the creditors could not be served or they failed to attend before the Assessing Officer, cannot be ....
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.... not and need not automatically result in deeming the amount credited in the books as the income of the assessee as held by the Supreme Court in the case of CIT vs. Smt. P.K. Noorjahan [1999] 237 I TR 570." It would be pertinent to note that against the said decision of Hon'ble Gujarat High Court, the Special Leave Petition (SLP in short) preferred by the revenue was dismissed by the Hon'ble Supreme Court. 7.3. Undisputedly the Share Applicants in this case are the bank account holder in their respective banks in their own name and are sole owner of the credits appearing in their bank account from where they issued cheques to the appellant. For the proposition that a Bank Account holder himself is the 'owner' of 'credits' appearing in his account (with the result that he himself is accountable to explain the source of such credits in whatever way and form, the same have emerged) support can be derived from section 4 of Bankers Book Evidence Act 1891 which reads as under:- "4. Mode of proof of entries in bankers' books Subject to the provisions of this Act, a certified copy of any entry in a bankers' book shall in all legal proceedi....
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....held that, once it is found that an assessee has actually taken money from depositor/lender who has been fully identified, the assessee/borrower cannot be called upon to explain, much less prove the affairs of such third party, which he is not even supposed to know or about which he cannot be held to be accredited with any knowledge. In this view, the Hon'ble Court has laid down that section 68 of Income-tax Act, should be read along with section 106 of Evidence Act. The relevant observations at page 260 to 262, 264 and 265 of the report are reproduced herein below:- "While interpreting the meaning and scope of section 68, one has to bear in mind that normally, interpretation of a statute shall be general, in nature, subject only to such exceptions as may be logically permitted by the statute itself or by some other law connected therewith or relevant thereto. Keeping in view these fundamentals of interpretation of statutes, when we read carefully the provisions of section 68, we notice nothing in section 68 to show that the scope of the inquiry under section 68 by the Revenue Department shall remain confined to the transactions, which have taken place between the asse....
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....e harmonious construction of section 106 of the Evidence Act and section 68 of the Income- tax Act will be that though apart from establishing the identity of the creditor, the assessee must establish the genuineness of the transaction as well as the creditworthiness of his creditor, the burden of the assessee to prove the genuineness of the transactions as well as the creditworthiness of the creditor must remain confined to the transactions, which have taken place between the assessee and the creditor. What follows, as a corollary, is that it is not the burden of the assessee to prove the genuineness of the transactions between his creditor and sub-creditors nor is it the burden of the assessee to prove that the sub-creditor had the creditworthiness to advance the cash credit to the creditor from whom the cash credit has been. eventually, received by the assessee. It, therefore, further logically follows that the creditor's creditworthiness has to be Judged vis-a-vis the transactions, which have taken place between the assessee and the creditor, and it is not the business of the assessee to find out the source of money of his creditor or of the genuineness of the transactions,....
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....ceived by the sub-creditor from the assessee ...." ********** "Keeping in view the above position of law, when we turn to the factual matrix of the present case, we find that so far as the appellant is concerned, he has established the identity of the creditors, namely, Nemichand Nahata and Sons (HUF) and Pawan Kumar Agarwalla. The appellant had also shown, in accordance with the burden, which rested on him under section 106 of the Evidence Act, that the said amounts had been received by him by way of cheques from the creditors aforementioned. In fact the fact that the assessee had received the said amounts by way of cheques was not in dispute. Once the assessee had established that he had received the said amounts from the creditors aforementioned by way of cheques, the assessee must be taken to have proved that the creditor had the creditworthiness to advance the loans. Thereafter the burden had shifted to the Assessing Officer to prove the contrary. On mere failure on the part of the creditors to show that their sub-creditors had creditworthiness to advance the said loan amounts to the assessee, such failure, as a corollary, could not have been and ought not to....
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....works (P) Ltd vs CIT reported in 353 ITR 171 (Cal) had held that when the basic evidences are on record, the mere failure of the creditor to appear before the Assessing Officer cannot be the basis to make addition. The relevant observations of the Hon'ble Court are as under:- 8. Assailing the said judgment of the learned Tribunal learned counsel for the appellant submits that Income-tax Officer did not consider the material evidence showing the creditworthiness and also other documents, viz., confirmatory statements of the persons, of having advanced cash amount as against the supply of bidis. These evidence were duly considered by the Commissioner of Income-tax (Appeals). Therefore, the failure of the person to turn up pursuant to the summons issued to any witness is immaterial when the material documents made available, should have been accepted and indeed in subsequent year the same explanation was accepted by the Income-tax Officer. He further contended that when the Tribunal has relied on the entire judgment of the Commissioner of Income-tax (Appeals), therefore, it was not proper to take up some portion of the judgment of the Commissioner of Income-tax (Appeals) and ....
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.... to determine finally all questions of fact. The Tribunal must, in deciding an appeal, consider with due care all the material facts and record its finding on all the contentions raised by the assessee and the Commissioner, in the light of the evidence and the relevant law. " 11. The Tribunal must, in deciding an appeal, consider with due care all the material facts and record its finding on all contentions raised by the assessee and the Commissioner, in the light of the evidence and the relevant law. It is also ruled in the said judgment at page 465 that if the Tribunal does not discharge the duty in the manner as above then it shall be assumed the judgment of the Tribunal suffers from manifest infirmity. 12. Taking inspiration from the Supreme Court observations we are constrained to hold in this matter that the Tribunal has not adjudicated upon the case of the assessee in the light of the evidence as found by the Commissioner of Income-tax (Appeals). We also found no single word has been spared to up set the fact finding of the Commissioner of Income-tax (Appeals) that there are materials to show the cash credit was received from various persons and supply as a....
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....hen the identity of the creditor and the genuineness" of transaction through account payee cheque has been established. We find that both the Commissioner of Income Tax (Appeal) and the Tribunal below followed the well-accepted principle which are required to be followed in considering the effect of Section 68 of the Act and we thus find no reason to interfere with the concurrent findings of fact recorded by both the authorities." 7.8. We find that the Hon'ble Jurisdictional High Court in the case of CIT vs Roseberry Mercantile (P) Ltd in ITAT No. 241 of 2010 dated 10.1.2011, while relying on the Hon'ble Supreme Court in the case of Lovely Exports reported in 216 CTR 295 (SC), had held :- "On the facts and in the circumstances of the case, Ld. CIT(A) ought to have upheld the assessment order as the transaction entered into by the assessee was a scheme for laundering black money into white money or accounted money and the Ld. CIT (A) ought to have held that the assessee had not established the genuineness of the transaction. " It appears from the record that in the assessment proceedings it was noticed that the assessee company during the year....
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....by the assessee by way of account payee cheques and the assessee also disclosed the complete list of shareholders with their complete addresses and GIR Numbers for the relevant assessment years in which share application was contributed. It further appears that all the payments were made by the applicants by account payee cheques. It appears from the Assessing Officers order that his grievance was that the assessee was not willing to produce the parties who had allegedly advanced the fund. In our opinion, both the Commissioner of Income-tax (Appeals) and the Tribunal below were justified in holding that after disclosure of the full particulars indicated above, the initial onus of the assessee was shifted and it was the duty of the Assessing Officer to enquire whether those particulars were correct or not and if the Assessing Officer was of the view that the particulars supplied were insufficient to detect the real share applicants, to ask for further particulars. The Assessing Officer has not adopted either of the aforesaid courses but has simply blamed the assessee for not producing those share applicants. In our view, in the case before us so l....
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....licants, genuineness of transactions and creditworthiness of share applicants. In the instant case, we find that the identity of share applicants is proved beyond doubt by the assessee by furnishing the name, address, PAN of share applicants together with the copies of balance sheets and Income Tax Returns. With regard to the creditworthiness of share applicants, the ld AO himself states that the five share applicants had invested in assessee company's shares by taking money from some other companies. Hence the source of the share applicants for making investment in share application monies of assessee company is also proved. By this, the creditworthiness of the share applicants is also proved beyond doubt. Third ingredient is genuineness of the transactions. We find that the five share applicants had paid the monies to the assessee company by account payee cheques out of sufficient bank balances available in their bank accounts, which are quite evident from the bank statements enclosed in the paper book. We agree with the arguments of the ld AR that the source of source of share applicants need not be proved by the assessee herein. We hold that the decision rendered by this tribun....
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....the paper book filed before us as well as before the lower authorities, it is vivid that all the share applicants are (i) income tax assessee's, (ii) they are filing their return of income, (iii) the share application form and allotment letter is available on record, (iv) the share application money was made by account payee cheques, (v) the details of the bank accounts belonging to the share applicants and their bank statements, (vi) in none of the transactions the AO found deposit in cash before issuing cheques to the assessee company, (vii) the applicants are having substantial creditworthiness which is represented by a capital and reserve as noted above. 29. As noted from the judicial precedents cited above, where any sum is found credited in the books of an assessee then there is a duty casted upon the assessee to explain the nature and source of credit found in his books. In the instant case, the credit is in the form of receipt of share capital with premium from share applicants. The nature of receipt towards share capital is seen from the entries passed in the respective balance sheets of the companies as share capital and investments. In respect of source of credi....
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....from the above extract, two types of cases have been indicated. One in which the Assessing Officer carries out the exercise which is required in law and the other in which the Assessing Officer 'sits back with folded hands' till the assessee exhausts all the evidence or material in his possession and then comes forward to merely reject the same on the presumptions. The present case falls in the latter category. Here the Assessing Officer after noting the facts, merely rejected the same. This would be apparent from the observations of the Assessing Officer in the assessment order to the following effect:- ''Investigation made by the Investigation Wing of the department clearly showed that this was nothing but a sham transaction of accommodation entry. The assessee was asked to explain as to why the said amount of Rs. 1,11,50,000/- may not be added to its income. In response, the assessee has submitted that there is no such credit in the books of the assessee. Rather, the assessee company has received the share application money for allotment of its share. It was stated that the actual amount received was Rs. 55,50,000/- and not Rs. 1,11,50,000/- as ....
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....s by the applicant for company's shares, certificates by auditors etc. Unfortunately, the Assessing Officer chose to base himself merely on the general inference to be drawn from the reading of the investigation report and the statement of Mr. Mahesh Garg. To elevate the inference which can be drawn on the basis of reading of such material into judicial conclusions would be improper, more so when the assessee produced material. The least that the Assessing Officer ought to have done was to enquire into the matter by, if necessary, invoking his powers under Section 131 summoning the share applicants or directors. No effort was made in that regard. In the absence of any such finding that the material disclosed was untrustworthy or lacked credibility the Assessing Officer merely concluded on the basis of enquiry report, which collected certain facts and the statements of Mr.Mahesh Garg that the income sought to be added fell within the description ofS.68 of the Income Tax Act 1961. Having regard to the entirety of facts and circumstances, the Court is satisfied that the finding of the Tribunal in this case accords with the ratio of the decision of the Supreme Court in Lovely Expor....
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....nnot be justified. In the facts and circumstances of the case as discussed above, no addition was warranted under Section 68 of the Act. Therefore, we do not want to interfere in the impugned order of Ld. CIT(A) which is confirmed and consequently the appeal of Revenue is dismissed. 7.12. We find that the Hon'ble Supreme Court in the case of M/s Earthmetal Electricals P Ltd vs CIT & Anr. reported in 2010 (7) TMI 1137 in Civil Appeal No. 21073 / 2009 dated 30.7.2010 arising from the order of Hon'ble Bombay High Court had held as under:- ORDER Delay condoned. Leave granted. Heard learned counsel on both sides. We have examined the position. We find that the shareholders are genuine parties. They are not bogus and fictitious. Therefore, the impugned order is set aside. The appeal is allowed accordingly. No order as to costs. In the instant case before us, the share subscribing companies are duly assessed to income tax. It is not in dispute that the share subscribing companies are in existence. It is not in dispute that the share subscribing companies are duly assessed to income tax and their income tax pa....
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....see company who also failed to serve the same. The ld AO accordingly proceeded to drew adverse inference against the company and treated the entire share capital and share premium received during the year to the tune of Rs 6,00,00,000/- as unexplained cash credit. The assessee had already rebutted this fact that the ld AO was able to serve the notices issued u/s 143(2) and 142(1) of the Act at the same address of the assessee which were duly complied with. We find that the reliance placed by the ld DR on the decision of Hon'ble Calcutta High Court in the case of Rajmandir Estates supra was distinguishable on facts as the said decision was rendered in the context of validity of revisionary jurisdiction u/s 263 of the Act by the Learned Administrative Commissioner. This fact has already been addressed by this tribunal in the case of VSP Steel P Ltd supra. No decision whatsoever was rendered by the Hon'ble Jurisdictional High Court in the case of Raj mandir Estates P ltd on merits of the addition and hence does not come to the rescue of the revenue in the facts of the instant case. 7.14. We also find that the Hon'ble Apex Court recently in the case of Principal CIT vs Vaishno....