TaxTMI 
TaxTMI 
2023 (10) TMI 1576
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....tal income of the appellant u/s 68 of the Income Tax Act, 1961. 3. That the appellant craves leave to add/or amend any ground of this appeal." 3. Facts in brief is that the assessee is a private limited company engaged in the business of trading in shares and interest income. Return of income for Assessment Year 2012-13 was filed on 28/08/2012 declaring income of Rs. 67,912/-. Case selected for scrutiny through CASS followed by serving of notice u/s 143(2) and 142(1) of the Act. The ld. Assessing Officer noticed that the assessee had issued share capital of Rs. 35,90,000/- and also charged premium of Rs. 3,23,10,000/-. The said share application money was received through private limited companies. The assessee was asked to explain the alleged sum in terms of provisions of Section 68 of the Act by discharging its onus to prove the identity and creditworthiness of the share applicants as well as the genuineness of the share transactions. Though various details were filed by the assessee but the ld. Assessing Officer was not satisfied and made addition u/s 68 of the Act coupled with disallowance u/s 14A of the Act and assessed income at Rs. 3,59,87,910/-. 3.1. Aggrieve....
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.... the share applicants and genuineness of the transactions. Reliance was placed on the following decisions :- 1) ITO vs M/s. KDG Projects Pvt. Ltd .; ITA No. 711 of 2019 order dt. 02/11/2022 2) Urmila Properties Pvt. Ltd. vs. ITO; ITA No. 33/Kol/2020 order dt. 20/09/2022 3) DCIT, vs. Narsingh Ispat Limited; ITA No. 225/Kol/2023 order dt. 26/07/2023 4) ITO vs. M.D. Ornaments Pvt. Ltd .; ITA No. 646/Kol/2020 order dt. 19/04/2023 5) Technico Metals Pvt. Ltd. vs. DCIT; ITA No. 1348/Chd/2017 order dt. 15/02/2019 5.1. On the other hand, the ld. D/R, vehemently argued supporting the orders of both the lower authorities and stated that the alleged share applicants are paper companies and the investments made in the equity shares of the assessee company is in the nature of accommodation entry by way of which assessee has routed its unaccounted income in its books through share applicants money. 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 nat....
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....s appearing on MCA (175), details of directors as appearing on MCA (176), Memorandum and Articles of Association (177), Copy of PAN Card (195) copy of share application (196), Copy of confirmation of Investment (197) 5. Fountain Suppliers Private Limited. AABCF5766A 10 Lacs 279 Lacs (Page no. 204 of the paper book) Copy of audited balance Sheet (204), Bank statement (211). Incorporation certificate (212). Income Tax Return (213), Master data as appearing on MCA (214). details of directors as appearing on MCA (215), Memorandum and Articles of Association (216), Copy of PAN Card (234) copy of share application (235), Copy of confirmation of Investment (236) 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 L....
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....Articles of Association (475), Copy of PAN Card (493) copy of share application (494), Copy of confirmation of Investments (495) 14. Winsome Sales Pvt Ltd AAACW9316N 9 Lacs 1418 Lacs (Page no. 502 of the paper book) Copy of audited balance Sheet (502), Bank statement (510), Incorporation certificate (511), Income Tax Return (512), Master data as appearing on MCA (513), details of directors as appearing on MCA (514), Memorandum and Articles of Association (515), Copy of PAN Card (532) copy of share application (533), 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....
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....essee in the list of case-law (supra). We, find that this Tribunal in the case of DCIT, vs. Narsingh Ispat Limited; ITA No. 225/Kol/2023 order dt. 26/07/2023, under identical facts and issue held as under :- "7. We have heard rival contentions and perused the material available on record. The revenue is aggrieved with the deletion of addition of Rs. 19,14,50,000/- made by the assessing officer u/s 68 of the Act. We notice that the assessing officer when called for the details from the respective share applicants, namely, M/s. Honesty Dealers Put. Ltd. and M/s Seaview Agencies Put. 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....
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....ing of iron and steel and for the current year it had filed return showing total income of Rs. 1,74,09,340/-. Thus, the assessee company appears to have good performance record. In any case, investment decisions within the group concerns are not purely guided by the performance of the investee company. Rather, these are based on holistic and strategic view for the betterment of all the group concerns. Now coming to the identity and creditworthiness of the two shareholders, it is observed that their identities 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 Pvt. Ltd. for assessment year 2009-10. Similarly, appellant has also submitted the assessment orders in the case of M/s. Seaview Agencies Pvt. 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/- ....
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....ed income of Rs 20,00,000/- and accordingly this amount was added to the total income. Perusal of the assessment orders for these two years shows that AO has not made any adverse comments on the entries in the Balance-sheet. It also appears that even the Investigation Wing has not found any adverse evidence against share capital raised by M/s. Seaview Agencies Pvt. Ltd. in assessment year 2009-10. Otherwise, it would have informed the AO for necessary remedial measures, as has been done in assessment 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....
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....by the assessee from M/s Honesty Dealers Pvt Ltd has already been added in the hands of the share applicant. Hence, in view of the settled legal position, as the source has already been added, we uphold the action of the ld. CIT(A) in deleting the addition. 11. So far as the remaining addition towards alleged share capital of Rs.8.62 cr received from M/s Seaview Agencies Pvt Ltd, is concerned, we find that this company also raised equity share capital during the financial year2008-09 and 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 Put 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 Put 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 c....
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.... ld. AO asked the assessee to explain the source of above referred sum of share capital and share application money. In response, the assessee submitted the following documents: i. Party Wise details of share capital raised during the year, ii. Form 2, Form 5 filed with ROC, iii. Memorandum and Article of Association, iv. Bank Statement for the year, v. Share Application Form, vi. Form 18 in support of registered office address of the company, 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. Evid....
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....producing all the evidences for proving the identity and creditworthiness of the investors and the genuineness of the transaction. Merely non-appearance of the Directors cannot be a basis for treating the share application money as unexplained or non-genuine. We find support from the judgment of Hon'ble Gujarat High Court in the case of Rohini Builders (supra) relying on the judgment of Hon'ble Apex Court in the case of Orissa Corporation Pvt. Ltd. (supra) (relevant extract: "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- complian....
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.... doing so, the addition made by the AO is based on conjectures and surmises cannot 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 delete the addition of Rs 5,60,000/- and consequently the appeal of assessee is allowed. 36. In the result, the appeal of the assessee is allowed." 16. Similar view also taken in the case of Satyam Smertex (P.) Ltd vs DCIT reported in [2020] 117 taxmann.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,....
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....ntity of such shareholders. As far as the genuineness of the transaction is concerned, the same have taken place through banking channel which is traceable from the origin to the destination of such payments and further confirmed from the documents furnished before us. All these transactions are duly recorded in the respective balance sheets of the shareholder companies. Creditworthiness of the transaction is also proved from the fact that all the shareholder companies were having more than 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 surmis....
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....imited [ITA No. 972 of 2009] dated 23.12.2011 wherein the Delhi High Court in a batch of 11 appeals was required to adjudicate on the very issue of addition made by the A.O u/s 68 in respect of share application monies received by the assessee as alleged unexplained cash credit. In all these cases, the Department had alleged that the share application monies were received from persons who were 'entry operators' and the monies received by way of share application was nothing but was routing of unaccounted money of assessee in the form of subscription to share capital. However, in the assessments made the A.Os 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....
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.... the burden of proof on the taxpayer. However, this is only the initial burden. In cases where the assessee offers an explanation to the credit by placing evidence regarding 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 ....