TaxTMI 
TaxTMI 
2025 (2) TMI 1545
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....ed in passing the order, in the first appellate proceedings, ex-parte, without providing adequate opportunity to the assessee company, to present its case and make appropriate submissions. The action of the Id. CIT(A) is illegal, unjustified, arbitrary and against the facts of the case. Relief may be please be granted by quashing the entire order passed by the Id. CIT(A), being passed against the principles of natural justice. 3. This ground raised by the assessee relates to challenging the order of Ld. CIT(A) in adjudicating the appeal against the principles of natural justice. 4. In this regard, Ld. AR submitted that proper and due opportunity was not granted to the assessee and Ld. CIT(A) has adjudicated the grounds raised by the assessee in violation of the principles of natural justice. 5. Whereas on the contrary, Ld.DR submitted that due and proper opportunities were granted to the assessee, but even in spite of that assessee failed to appear before Ld. CIT(A) therefore Ld. CIT(A) adjudicated the grounds raised by the assessee considering the submissions filed by the assessee and the documents placed before Ld.AO. 6. We have heard counsel for both the parties and ....
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....factual position is undisputed. 2.2 During the assessment proceedings, Id. AO issued notice under Section 133(6) dated 16.11.2017 to SDPL, seeking specific details. The notice was duly served on SDPL, and a reply dated 14.12.2017 was submitted by SDPL, along with certain documents. 2.3 However, the Id. AO noted that the letter received from SDPL did not mention the date of issuance and seal or logo of the SDPL. Based on these observations, Id. AO concluded that SDPL was a shell company. Consequently, additions were made to the income of the assessee company under Section 68 for the amount received from SDPL. 2.4 It is pertinent to note that the action of the Id. AO in making the addition to the income of the assessee company is not pursuant to any search conducted on a third party. It is not the case of the lower authorities that any search was conducted on a third party, which revealed that SDPL was engaged in providing bogus transactions or was a shell company. 2.5 Further, the documents submitted by the assessee company before the Id. AO did not reveal any discrepancies. Once the assessee company submitted the required documents, the onus unde....
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....e lending of money. 2.11 In the case of lending, the lender primarily assesses the financial position of the borrower to ensure repayment. In contrast, an investment decision is driven by the investor's confidence in the business strategy and future prospects of the company. The investor, in this case, was willing to place their trust in the assessee company's business model and its potential for future growth. 2.12 It is submitted that although the Id. CIT(A) has dismissed the appeal of the assessee company, the merits of the case have been duly considered. In this regard, reference has been drawn by the Id. CIT(A) from the order of the first appellate authority for the AY 2012-13. 2.13 It is further submitted that in the first appellate proceedings for AY 2012-13, the appeal of the assessee company before the first appellate authority was dismissed on the ground that the assessee company was unable to furnish the bank statement of the investor company at that stage. However, the assessee company has now obtained the bank statement of the investor company. In this regard, a separate prayer has been made for the admission of the said bank statemen....
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....pute about the genuineness of the transaction. That apart, the creditor has explained as to how the credit was given to the assessee. Thus, assessee had discharged the onus which was on him as per the requirement of section 68 of the Act. What the Assessing Officer held was that sources of the source were suspect i.e., he suspected the two sources Shri Rajendra Bahadur Singh and Smt. Sarojini Thakur of the source Smt. Savitri Thakur." Other High Court CIT vs. Vacmet Packaging (India) (P.) Ltd. [2014] 367 ITR 217 (Allahabad) '...The Tribunal, while sustaining the view of the CIT(A), has observed that the assessee had filed documentary evidence in order to prove the genuineness of the share application money consisting of; (i) share application forms; (ii) copies of bank accounts of the share applicants; (iii) copies of the income tax returns of the share allottees; (iv) balance sheets; and (v) copies of share allotment certificates and of the Board's resolution of the share applicants. The identity of the applicants was held to be established by the production of copies of the PAN cards and registration certificate with the Registrar of Companies. The ....
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....g paragraph from the impugned decision adequately encapsulates the necessary details: "Thus, the question is whether in the present case, the Assessing Officer had material to conclude that the share applicants in questions did not exist. It is seen that the assessee-company has furnished the necessary details such as PAN No./Income-tax Ward No./ration card of the share applicants and some of them are assessed to tax. The share application money has been received through banking channel. In some case, the confirmations/affidavits of share applicants containing the above detail were also filed. It is seen that the Assessing Officer did not carry out any inquiry into the income-tax record of the persons who have given the PAN No./Ward No. in order to ascertain the non- existence of the share applicants in question. The Assessing Officer has neither controverted nor disapproved the material filed by the assessee. In the case of CIT v. Makhani & Tyagi (P.) Ltd. [2004] 267 ITR 433 1 (Delhi), the jurisdictional High Court has held that when the documentary evidence was placed on record to prove the identity of all the shareholders including their PAN/GIR numbers and fil....
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....elevant point in time. 13. The AO and the Ld. CIT(A) had basically casted doubt upon the acumen of the investors in making a decision to invest in the assessee company, on the premise that the assessee was not generating any profit. Therefore, according to AO no prudent investor would choose to invest in such a company. Thus genuineness of the transactions were in doubt and challenged by the AO . 14. In this regard, we are of the view that the decision to invest in a company, as well as the valuation at which such an investment is made is a matter of mutual understanding between the investor and the investee. Therefore, subjective consideration cannot be used as a basis to declare the investment as non-genuine. 15. As it has been pointed out that at the time the investment was made, the assessee company had significant future prospects in the field of electrification and related production activities. Considering these prospects, the investor deemed it fit to make the investment in the assessee company. Therefore, the doubts raised regarding the genuineness of the transaction are baseless and unwarranted. 16. We also noted that AO has also casted doubt by raising the co....
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.... entire amount of consideration through the banking channel. 2.1.ii Audited financial statements of SDPL for the periods ending 31.03.2014 and 31.03.2015, clearly evidencing the investments made by SDPL in the assessee company. 2.1.iii Confirmation letter from SDPL, dated 27.11.2017, confirming: * The investment made in the assessee company. Date- wise particulars of the remittances made * PAN details of SDPL.. * Confirmation that the source of investment was the sale of shares of other entities. The aforementioned factual position is undisputed. 22. During the assessment proceedings, AO issued notice under Section 133(6) dated 16.11.2017 to SDPL, seeking specific details. The notice was duly served on SDPL, and a reply dated 14.12.2017 was submitted by SDPL, along with certain documents. 23. However, the AO noted that the letter received from SDPL did not mention the date of issuance and seal or logo of the SDPL. Based on these observations, AO concluded that SDPL was a shell company. Consequently, additions were made to the income of the assessee company u/s. 68 for the amount received from SDPL. 24 It would not be ou....
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....ther entities. 28. In this regard, we also noted and also admitted by Ld.AO that SDPL had duly provided confirmation during the course of the assessment proceedings. The source of the amount invested in the assessee company was explained as proceeds from the sale of shares in different other companies. This is clearly discernible from the bank statement of SDPL. 29. Reliance in this regard is placed on the following judicial pronouncements, the relevant extracts of which are set out below: Supreme Court CIT vs. Lovely Exports (P) Ltd. (2008) 216 CTR 195 (SC) "If share application money is received by the assessee company from alleged bogus shareholders, whose names are given to the AO. Then the department is free to proceed to reopen their individual assessments in accordance with law, but it cannot be regarded as undisclosed income of assessee company." CIT vs. Stellar Investment Ltd. [2001] 251 ITR 263 (SC) "Even if it is assumed that the subscribers to the increased share capital were not genuine, under no circumstances could the amount of share capital be regarded as undisclosed income of the company." Jurisdictional High Court....
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....resent case the assessee had discharged the onus of establishing the identity, credit worthiness and genuineness of the transactions which had formed the basis of the addition that was made under Section 68 " Peoples General Hospital Ltd. [2013] 356 ITR 65 (Madhya Pradesh) "..Heads Notes Section 68 of the Income-tax Act, 1961 Cash credit [Share application money] - Whether, where assessee had established identity of person providing share application money, burden of proving creditworthiness of said person was not on assessee, and, therefore, addition could not be made as cash credit under section 68 - Held, yes..." Arunananda Textiles P. Ltd. [2011] 333 ITR 116 (Karnataka) "...It is not for the assessee to place material before the Assessing Officer in regard to the creditworthiness of the shareholders. If the assessee has given the addresses of the shareholders and their identity is not in dispute, whether they were capable of investing, the Assessing Officer shall investigate. It is not for the assessee to establish but it is for the Department to enquire with the investors about their capacity to invest the amount in the shares " 2.1....