TaxTMI 
TaxTMI 
2024 (2) TMI 1625
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....notice to incorrect email address resulting in passing the impugned order dated 13.07.2023 ex-parte. 3. That the learned Commissioner of Income fax (Appeals), grossly erred in law as well as on facts of the case in confirming the addition under observation that the A.O was justified to make addition of Rs. 6,52,00,000/-. 4. That Ld. Commissioner of Income Tax (Appeals) has erred in adding back a sum of Rs. 1,02,350/- to the total income of the appellant by applying the provision of Rule 8D r.w.s. 14A of the Income Tax Act, 1961. 5. That Ld. Commissioner of Income Tax (Appeals) has erred in not appreciating the fact that Ld. AO has not issued the notice under section 143(2) during the assessment proceedings. 6. That the Appellant craves leave to alter, add or modify all or any of the ground or grounds of the appeal at or before the time of hearing." 3. Brief facts of the case as culled out from the records are that the assessee is a private limited company engaged in the business of investment in shares and trading. Income of Rs. 74,420/- declared in the return of income filed for AY 2012-13 furnished on 20.08.2012. Case selected for scrutiny t....
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..... 6,52,00,000/-. That the learned CIT (Appeals) erred in confirming the additions of Rs. 6,52,00,000/-, as unexplained cash credit under section 68 of the Act, in respect of share capital and security premium received from certain companies/ persons in spite of fact that appellant has substantiated the transaction before the Ld. AO by proving the identity of the concerned parties, their creditworthiness and the genuineness of the transaction and even proved the source of source of amount given by the shareholder companies/person, by submitting complete information, explanation, documentary proof/evidence thereof, Ld. CIT(A) gone ahead in confirming the addition made by AO merely on the basis of presumption and surmises only. That the net worth of each of the share applicants appearing in the audited financial statements of the relevant year has sufficiently justified the source of investments made in the assessee company. That Ld. AO has not made any independent enquiry in the matter. Further in absence of detailed and independent inquiry what is necessary is the share application money recorded in the books of account and the evidences produced by the ap....
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....tted the required documents to establish the identity and creditworthiness of the shareholder companies/person and" genuineness of the transactions including the documents which even shows the source of the source of the shareholder companies/persons and in absence of any inquiry, the share application money recorded in the books of account and the evidences produced by the appellant company cannot be rejected by the Ld. AO. Hence the conclusion drawn by the Ld. AO merely on the basis of presumptions, surmises and conjecture are totally unjustified. That Ld. CIT(A) has evaded that position of law that the test of prudence by substituting its own view in place of the businessman's has been disapproved by the Supreme Court in the decisions of CIT V/s. Walchand & Co. Pr. Ltd. [(1967) 65ITR 381] and J.K. Woollen Manufacturers V/s. CIT [(1969) 72 ITR 612]. That the Ld. CIT(A) has failed to appreciate the dictum of Hon'ble Allahabad High court in the matter of CIT v. S. Kamaljeet Singh [2005] 147 Taxman 18(AIL) their lordships, on the issue of discharge of assessee's onus in relation to a cash credit appearing in his books of account. That Ld. CIT(A....
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....reditworthiness of share applicants. That further for proving the identity of share applicants, the assessee furnished 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, as we noted supra, these Companies are having capital in several crores of rupees and the investment made in the appellant company is only a small part of their capital. These transactions are also duly reflected in the balance sheets of the share applicants, so creditworthiness is proved. Even if there was any doubt if any regarding the creditworthiness of the share applicants was still subsisting, then AO should have made enquiries from the AO of the share subscribers as held by Hon'ble jurisdictional High Court in CIT us Dataware (supra) which has not been done, so no adverse view could have been drawn. Third ingredient is genuineness of the transactions, for which it may be noted that the monies have been directly paid to the assessee company by account payee cheques out of sufficient bank balances available in their bank accounts on behalf of the share applicants. It will be evident ....
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....to the finding of both the lower authorities and stated that the alleged share applicant companies are showing meagre income and mainly engaged in rotation of funds in order to provide accommodation entries to various beneficiaries. He further, alleged the share applicants to be Jama-Kharchi/paper/shell companies with the help of which assessee company has routed its unaccounted income. He thus, prayed that the addition u/s 68 of the Act may please be confirmed. 7. We have heard rival contentions and perused the records placed before us. The first issue for our consideration is regarding the addition at Rs. 6.52 Crore confirmed by ld. CIT(A) which has been made by the AO alleging it to be unexplained cash credit received by the assessee in the form of share capital and share premium. The Revenue authorities have alleged that the assessee has merely furnished the documentary evidences but the assessee failed to appear before the Revenue authorities for recording their statements. The AO has also alleged that the assessee has been unable to discharge its primary onus casted under the provisions of Section 68 of the Act to explain the nature and source, in other words, unable to pr....
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....ent (158), Master' data as appearing on MCA (159), details of directors as appearing on MCA (160), Memorandum and Articles of Association (161), Copy of PAN Card (179) copy of share application (180), Copy of confirmation of Investment (181) 4. Aqua Viiicom Private Limited. AAJCA0593L 25 Lacs 11,13,01,196/- (Page no. 186 of the paper book) Copy of Auditor's Report (182), Audited Balance Sheet (186), Bank statement (194), Incorporation certificate (195), Income Tax Return Acknowledgement (196), Master data as appearing on MCA (197), details of directors as appearing on MCA (198), Memorandum and Articles of Association (199), Copy of PAN Card (217) copy of share application (218), Copy of confirmation of Investment (219) 5. Aryawart Viacom Private Limited. AAICA6743K 111 Lacs 11,71,50,828/- (Page no. 224 of the paper book) Copy of Auditor's Report (220), Audited Balance Sheet (224), Bank statement (233), Incorporation certificate (234), Income Tax Return Acknowledgement (235), Master data as appearing on MCA (236), details of directors as appearing on MCA (237), Memorandum and Articles of Association (238), Copy ....
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....ditor's Report (424), Audited statement, (439), Incorporation certificate (440), Income Tax Return Acknowledgement (441), Master data as appearing on MCA (442), details of directors as appearing on MCA (442),- Memotandum and Articles of Association (443),. Copy of PAN Card (465) copy of share application (466), Copy of confirmation of Investments (467) 11. Manyata Suppliers Private Limited AAGCM9937P 35 Lacs 10,15,00,561/- (Page no. 472 of the paper book) Balance Sheet (472), Bank Copy of Auditor's Report (468), Audited statement (481), Incorporation certificate (482), Income Tax Return. Acknowledgement (483), Master data as appearing on MCA (484), details of directors as appearing on MCA (485), Memorandum and Articles of Association (486), Copy of PAN Card (505) copy of share application (506), Copy of confirmation of Investment (507) 12. M/s. Nupur Dealmaik Private limited AADCN8443Q 25 Lacs 14,90,50,429/- (Page no. 512 of the paper book) dopy of Auditor's Report (508), Audited Balance Sheet (512), Bank statement (520), Incorporation certificate (521), Income Tax Return Acknowledgement (524), Master data as a....
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....er best evidence which one can gather to discharge the onus casted u/s 68 of the Act i.e. to explain the nature and source of the sum found credited in the books has been done so by the assessee. The assessee has offered complete explanation to prove the identity and creditworthiness of the share applicants and genuineness of the transaction which have been routed through banking channel. Once the assessee has discharged its onus then it's the turn of the Revenue authorities to examine those details and also consider the explanation offered by the assessee and then to form an opinion about being satisfied with such evidence or not and so as to form an opinion, a proper satisfaction has to be recorded by the AO/CIT(A). This is the mandate of Section 68 of the Act which has two limbs; firstly, the explanation to be offered by the assessee to explain the nature and source and second limb is the opinion of the AO to satisfy the veracity of such explanation offered by the assessee. In the instant case, except for personally not appearing before the AO in few cases against the summons issued u/s 131 of the Act, all the other details and evidences have been filed. These details clearl....
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....radesh) and the recent judgment of Hon'ble Jurisdictional High Court in the case of PCIT vs. Sreeleathers [2022] 448 ITR 332 (Calcutta) has decided in favour of the assessee deleting the addition u/s 68 of the Act observing as follows: "6. We have heard rival contentions and perused the material placed on record. 7. Addition u/s 68 of the Act at Rs. 3.59 Crores is in dispute before us wherein both the lower authorities have held that the assessee had been unable to explain the nature and source of this share application money which included share capital and share premium totaling to Rs. 3.59 Crores, on account of issue of share of face value of Rs. 10/- and premium of Rs. 90/- received from 14 share subscribers. We notice that the assessee has furnished following documents/information/evidence of all the alleged share subscribers :- S. No. Name of the Party and PAN Amount invested (appearing in Audited financial statement investment schedule of concern share applicant) Net Worth as per audited balance sheet of the concerned share applicant Copy of documents of concerned share applicants submitted to establish identity, Creditwort....
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.... 6. Keshav Educon Private Limited. AAECK3541R 10 Lacs 26 Lacs (Page no. 241 of the paper book) Copy of audited balance Sheet (241), Bank statement (250), Incorporation certificate (252), Income Tax Return (253), Master data as appearing on MCA (254), details of directors as appearing on MCA (255), Memorandum and Articles of Association (256), Copy of PAN Card (272) copy of share application (273), Copy of confirmation of Investment (275) 7. Orchid Commosale Pvt Ltd AAGCP2558P 10 Lacs 662 Lacs (Page no. 282 of the paper book) Copy of audited balance Sheet (282), Bank statement (291), Incorporation certificate (293), Income Tax Return (294), Master data as appearing on MCA (295), details of directors as appearing on MCA (296), Memorandum and Articles of Association (297), Copy of PAN Card (313) copy of share application (314), Copy of confirmation of Investments (315) 8. Punam Agarwal AFBPA5779A 10 Lacs Bank statement (316), Copy of PAN Card (318) copy of share application (319) and Copy of confirmation of Investment (320), 9. Ramawater Agarwal ACPPA6445E 10 Lacs - ....
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.... Copy of confirmation of Investments (534) 8. All the above details stood furnished before both the lower authorities. As far as assessee is concerned, in terms of provisions of Section 68 of the Act, it has discharged the primary onus by furnishing all the documents and details relevant/necessary to explain the identity, creditworthiness of share applicants and genuineness of the transactions. Once these documents have been filed then, the burden shifts over the revenue authorities and they have to examine those details and find out any discrepancy in such documents and then confront the assessee. Perusal of the impugned order as well as the assessment order reveals that no such discrepancies have been noticed by the assessing authorities except giving general remarks about the income and business turnover. In the paper book, the assessee had filed the confirmation letters and all the share subscribers have stated to have given the share application money and the source of such share application money in the confirmation letter which the share applicants received before making the investment in the assessee company. In other words, source of source has been explained by t....
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....hare applicants, namely, M/s. Honesty Dealers Put. Ltd. and M/s Seaview Agencies Pvt. Ltd., for the sum of Rs. 10,52,00,000/- and Rs. 8,62,50,000/-, received against the issue of equity capital during the year, both the share applicants of replied to the notice under section 133(6) of the Act and have filed complete details including bank statements, income tax returns, audited balance sheets, confirmation of accounts etc .. It was also submitted that the alleged share applicants are part of the assessee's group. However, when the summons under section 131 of the Act were not complied by the directors of the assessee company, the impugned additions were made under section 68 of the Act. Thereafter when the assessee preferred appeal before the ld. CIT(A), filing complete details and also stating that the source of source of the alleged sum is duly proved with the fact that both the alleged share applicants have received equity share capital and share premium in the preceding years and those years have been assessed to tax and even addition has been made in the hands of M/s. Honesty Dealers Put. Ltd., towards unexplained share capital at Rs. 14,80,00,000/- in AY 2009-10. Based on....
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....ties are not in doubt. These two concerns are companies having common Directors with the assessee company and they have been regularly filing their returns of income. Appellant has submitted assessment order for M/s. Honesty Dealers Put. Ltd. for assessment year 2009-10. Similarly, appellant has also submitted the assessment orders in the case of M/ s. Seaview Agencies Put. Ltd. for AY: 2011-12 and 2012-13. This shows that both these companies have their separate existence and these have been verified independently by their respective AOS Regarding creditworthiness of the two parties, it is notice that M/ s. Honesty Dealers Put. Ltd. had received share capital of Rs. 1,4,80,00,000/- in AY: 2009-10 and in scrutiny order u/s 144/263/143(3)/ 147 dated 12.03.2015, entire receipt of share capital has been added in the hands of M/ s. Honesty Dealers Pvt Ltd. Further, perusal of the Balance-sheet of M/s. Honesty Dealers Put. Ltd. as on 31.03.2012 shows that major chunk of the share capital received in AY: 2009-10 has been invested in the shares of the assessee company in AY: 2012-13. Thus, the investments in the shares of assessee company, amounting to Rs. 10,52,00,000/- has been out of t....
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....nt year 2011-12 and assessment year 2012-13. Thus, the Balance-sheet of M/s. Seaview Agencies Pvt Ltd. cannot be questioned without any adverse evidence. There is nothing on record to suggest that the share capital raised by M/s. Seaview Agencies Pvt. Ltd. in assessment year 2009-10 was not genuine. Under the circumstances, investments made in the shares of the assessee company in assessment year 2012-13 (current year) cannot be questioned, as the creditworthiness of M/s. Seaview Agencies Pvt. Ltd. has been established. All the investments in the share capital of the assessee company have come through banking channels. The identities and creditworthiness of the investors are not in any doubt and the transactions are genuine. Thus, all the three ingredients of section 68, they are identity, creditworthiness and genuineness of transactions, gets established. Under the circumstances, there is no case for any addition u/s. 68 of the Act. Hence, in view of the above discussion, AO is directed to delete the addition of Rs. 19,14,50,000/-. " 8. On going through the above findings as well as the available records so far as the alleged sum of Rs. 10,52,00,000/- received fr....
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....nd it has been assessed to tax u/s 143(3)/ 147 of the Act for AYs 2011-12, 2012-13 and 2014-15. Even for AY 2012-13, though the case of M/s Seaview Agencies Pvt Ltd., was selected for the limited scrutiny for examining the unaccounted income of Rs. 20,00,000/- and for this purpose all the details of M/s Seaview Agencies Pvt Ltd. including audited balance sheet and details of share capital were filed before the AO but except for the addition of Rs. 20,00,000/- which was found to be income escaped from assessment, no other addition was made in the assessment order dated 11/12/2018. This proves that the source of funds utilised for making the alleged investment in equity capital of the assessee company was available with M/s Seaview Agencies Pvt Ltd., from AY 2009-10 onwards and that fund has been rotated but it was always available for investment and during the year under consideration part of that fund has been utilised for making investment in the equity capital. 11.1. At this juncture we also notice that the assessee company is having a huge turnover and for financial year 2012-13, the same is amounting to Rs. 145.38 Crores and net profit from continuing operations is Rs.....
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....ompany, vii. Audited accounts for the year, viii. Relevant Bank Statement for the year, ix. Form 18 in support of registered office address of these companies. 11. Thereafter, summons were issued to the Directors of the share subscriber companies as well as the Directors of the assessee company which were duly served upon the respective persons and the details as called for were filed which included the following: i. Photo Identity and Address Proof, ii. Narration of all debit and credit entries in relevant Bank statements, iii. Copies of all relevant ROC returns, iv. Sources of funds and utilisation of funds, v. Evidence of creditworthiness along with Income Tax Returns filed and vi. Copies of Audited Accounts and Tax Audit Report for the relevant AY. 12. We further, notice that ld. AO has not pointed out any defect and not questioned the correctness of any of the documents filed by the assessee company, share subscriber companies as well as the Directors. The only ground for making the addition is that the Directors of the assessee company as well as the investor companies have not ....
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.... "Merely because summons issued to some of the creditors could not be served or they failed to attend before the Assessing Officer, cannot be a ground to treat the loans taken by the assessee from those creditors as non-genuine in view of the principles laid down by the Supreme Court in the case of Orissa Corporation (1986) 159 ITR 78. In the said decision the Supreme Court has observed that when the assessee furnishes names and addresses of the alleged creditors and the GIR numbers, the burden shifts to the Department to establish the Revenue's case and in order to sustain the addition the Revenue has to pursue the enquiry and to establish the lack of creditworthiness and mere non- compliance of summons issued by the Assessing Officer under section 131, by the alleged creditors will not be sufficient to draw and adverse inference against the assessee. in the case of six creditors who appeared before the Assessing Officer and whose statements were recorded by the Assessing Officer, they have admitted having advanced loans to the assessee by account payee cheques and in case the Assessing Officer was not satisfied with the cash amount deposited by those creditors in their bank....
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....xmann.com (Kolkata - Trib.) pronounced on 29-05-2020 where the Hon'ble jurisdictional ITAT held that: "30. To sum up section 68 of the Act provides that if any sum found credited in the year in respect of which the assessee fails to explain the nature and source, it shall be assessed as its undisclosed income. In the facts of the present case, both the nature & source of the share application received was fully explained by the assessee. The assessee had discharged its onus to prove the identity, creditworthiness and genuineness of the share applicants. the PAN details, bank account statements, audited financial statements and Income Tax acknowledgments were placed on AO's record, including that of the directors and share holders of share subscribing entities as discussed supra. Accordingly all the three conditions as required u/s. 68 of the Act i.e. the identity, creditworthiness and genuineness of the transaction was placed before the AO and the onus shifted to AO to disprove the materials placed before him. Without doing so, the addition made by the AO and confirmed by Ld. CIT(A) are based on conjectures and surmises, so their impugned action cannot be justified....
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.... sufficient share capital and reserve and surplus fund for giving share application money. Even otherwise ld. AO has not made the addition for charging of higher share premium and has made the addition of unexplained cash credit but still charging of share premium is a commercial decision and the same can be challenged only with sufficient documentary evidence. It thus brings to a conclusion that since the assessee filed complete details of identity and creditworthiness of the share subscribers and genuineness of the transaction before ld. AO, the onus shifted to ld. AO to disprove the material placed before him and without doing so the additions made by ld. AO are based on conjectures and surmises and the impugned additions cannot be justified and therefore, the impugned action of ld. AO cannot be held to be justified. 19. Our view is further supported by following judicial pronouncements: "i) CIT vs. Gagandeep Infrastructure (P) Ltd. 80 taxmann.com 272 (Bombay) wherein it was held by High Court that the proviso to section 68 of the Act has been introduced by the Finance Act 2012 with effect from 1st April, 2013. Thus it would be effective only from the Assessmen....
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....outing of unaccounted money of assessee in the form of subscription to share capital. However, in the assessments made the AOs had not brought on record any material or evidence to substantiate such finding. Accordingly, on appeal the appellate authorities had deleted the additions made u/s 68 of the Act. iv) CIT vs. Orissa Corpn (P) Ltd. 159 ITR 78 where the Court held that "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 income-tax assessee. 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 so called 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 c....
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....ce 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 the identity of the lender, to prove the genuineness of the transactions and to establish the creditworthiness of the lender. The Assessing Officer had brushed aside these documents and in a very casual manner had stated that merely filing the permanent account number details, and balance sheet did not absolve the....
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....1.2023. 12. Respectfully following the above referred judgments and decisions and also considering the facts and circumstances of the case, we find that the assessee carried out a genuine transactions of receiving share capital and share premium duly authorized by its Board of Directors and also proved the identity and creditworthiness and genuineness of the transaction carried out towards receiving share capital and share premium during the year and also has sufficiently proved that all the investing companies were having sufficient net worth to make the alleged investment, and are regularly assessed to tax and active companies carrying out business. Therefore, since the assessee has explained the nature and source of the alleged sum to our satisfaction no addition is called for u/s 68 of the Act. Therefore, finding of ld. CIT(A) is set aside and ground no. 3 raised by the assessee is allowed. 13. As far as ground no. 4 is concerned, the same relates to the disallowance u/s 14A of the Act at Rs. 1,02,350/-, both the lower authorities have failed to controvert the fact that the assessee has not earned any exempt income during the year. It has been consistently held by the Hon....