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Income Tax Appellate Tribunal, SURAT BENCH, SURAT
Before: SHRI PAWAN SINGH, JM & DR. A. L. SAINI, AM
IN THE INCOME TAX APPELLATE TRIBUNAL, SURAT BENCH, SURAT BEFORE SHRI PAWAN SINGH, JM & DR. A. L. SAINI, AM आयकरअपीलसं./ITA No.1485/AHD/2017 (�नधा�रणवष� / Assessment Years: (2012-13) (Virtual Court Hearing) The DCIT, Circle-1(1)(1), Vs. Ellsons Developers Pvt. Ltd., 2/2222, 2nd Floor, Avichal Krupa, Nagar Surat. Sheri, Mahidharpura, Surat-395002. �थायीलेखासं./जीआइआरसं./PAN/GIR No.: AACCE5530E (Assessee) (Respondent) Assessee by : Shri Rasesh Shah, CA Revenue by : Shri O.P. Vaishnav, CIT(DR) सुनवाईक�तार�ख/ Date of Hearing : 11/05/2021 घोषणाक�तार�ख/Date of Pronouncement : 27/05/2021 आदेश / O R D E R PER DR. A. L. SAINI, ACCOUNTANT MEMBER: Captioned appeal filed by the Revenue, pertaining to the Assessment Year (AY) 2012-13, is directed against the order passed by the Learned Commissioner of Income Tax (Appeals)-3, Surat [in short “the ld. CIT(A)”] in Appeal No. CAS- 3/TRFD-1/404/2015-16, dated 31.03.2017, which in turn arises out of an order passed by Assessing Officer under section 143(3) of the Income Tax Act, 1961 [hereinafter referred to as the “Act”], dated 31.03.2015. The grievances raised by the Revenue are as follows: “1.Whether, on the facts and circumstances of the facts and in law, Ld. CIT(A) was justified in deleting the addition made on account of unexplained share application and Share Premium amounting to Rs. 4,50,00,000/- without appreciating the facts that during the course of assessment proceedings, the assessee company could not satisfy the creditworthiness, identity of the alleged investors and genuineness of transaction remained unexplained? 2. On the facts and circumstances of the case, Ld. CIT(A) ought to have upheld the order of the assessing officer. 3. It is, therefore, prayed that the order of Ld. CIT(A) may be set aside and that of assessing office may be restored to the above extent.”
ITA No.1485/AHD/2017 Assessment Years.2012-13 Ellsons Developers Pvt. Ltd.
The relevant material facts, as culled out from the material on record, are as follows. The assessee before us is a Private Limited Company engaged in the business of Real Estate Development and dealing in Land and Properties. It filed its return of income in respect of A.Y. 2012-13, declaring income of Rs.31,53,480/-, on 09/09/2012. The same was processed by accepting the returned income. Subsequently, assessee`s case was selected for scrutiny and assessing officer framed the assessment under section 143(3) of that Act, on 31.03.2015. During the course of scrutiny proceedings, it was observed by the assessing officer that Assessee Company had received substantial amount of share application money during the year under consideration towards share capital and share premium. The following table depicts a bird's eye view of the receipts by the assessee towards share capital and share premium.
Name of Investor Address of Investor No. of value Premiu Total Total Total m Per face Share Amount
Shares per Share value Premium paid share
545, Kalbadevi Road, Bharat Photo House, FRANK MERCANTILE Office No.311, 3rd 70000 10 90 700000 6300000 7000000 PVT.LTD Floor, Mumbai- 400002 545, Kalbadevi Road, Bharat Photo House, SEASON MULTITRADE Office No.311, 3rd 124000 10 90 1240000 11160000 12400000 PVT.LTD Floor, Mumbai- 400002 545, Kalbadevi Road, VIRGO MERCANTILE Bharat Photo House, 37000 10 90 370000 3330000 3700000 PVT.LTD Office No.311, 3rd Floor, Mumbai A-07, Rajsheela ,539 MILI COMODITIES PVT. LTD Kalbadevi 60000 10 90 600000 5400000 6000000 Road,Mumbai 400002 A-07, Rajsheela ,539 LONA MERCANTILE PVT.LTD Kalbadevi 89000 10 90 890000 8010000 8900000 Page | 2
ITA No.1485/AHD/2017 Assessment Years.2012-13 Ellsons Developers Pvt. Ltd.
Road,Mumbai 400002 164, Shah Bhawan, 3rd Floor, Dr. Vigas ' MASCOT MULTITRADE PVT. Street, Opp. Barretto 20000 10 90 200000 1800000 2000000 LTD High School, Kalbadevi. Mumbai - 400002. 164, Shah Bhawan, 3rd Floor, Dr. Vigas CORAL MULTITRADE PVT. Street, Opp. Barretto 10000 10 90 100000 900000 1000000 LTD High School, Kalbadevi. Mumbai - 400002.
164, Shah Bhawan, 3rd Floor, Dr. Vigas DELIGHT LANDCORN PVT. Street, Opp. Barretto 40000 10 90 400000 3600000 4000000 LTD High School, Kalbadevi. Mumbai - 400002. Total 450000 4500000 40500000 45000000
In questionnaire vide notice dated 30/10/2014 u/s 142(1) of the IT Act, the assessee was required to furnish details and supporting material to establish the identity, genuineness of transaction and source creditworthiness in respect of addition to share capital and receipt of share premium during the year. Besides, notices u/s 133(6) dated 23.12.2014 were issued to the investors. In the said notices u/s 133(6), the investors were required to furnish the following details/ documents / explanations/ clarifications, etc. The relevant portion of the notice u/s 133(6) is as under: "During the course of scrutiny proceedings in the case of above named assessee company for A.Y. 2012-13, it is observed that you have invested a sum of Rs. (Amount invested) towards share capital and premium of the above company. You are, therefore, requested to furnish the following:- (i) Copy of return of income along with enclosures, audit report and balance sheet for A.Y. 2011-12 & 2012-13. (ii) Copy of Bank statement for F. Y. 2011-12.
ITA No.1485/AHD/2017 Assessment Years.2012-13 Ellsons Developers Pvt. Ltd.
(iii) Please submit a copy of your Bank book for the period one week before and one week after the transaction relating to investment in the above mentioned company with details of sources of funds. (iv) Copy of share certificate received by you. Notices u/s 133(6) of the IT Act was issued to all the above stated investors".
Assessing officer has received the response from the share applicant companies (Investors). Details relating to service of notices u/s 133(6) and gist of responses from the said investors is depicted in the following table: Name of Investor Whether notice u/s Whether reply to 133(6) served or not notice u/s 133(6) received or not FRANK MERCANTILE PVT.LTD Served Yes SEASON MULTITRADE PVT.LTD Served Yes VIRGO MERCANTILE PVT.LTD Served Yes Ml LI COMODITIES PVT. LTD Unserved NA LONA MERCANTILE PVT.LTD Unserved NA MASCOT MULTITRADE PVT. LTD Served Yes CORAL MULTITRADE PVT. LTD Served Yes DELIGHT LANDCORN PVT. LTD Served Yes
After verification and analysis of various facts available on record and various facts gathered during the course of enquiry proceedings, a show cause letter dated 02.03.2015 was issued to the assessee requiring it to explain various relevant facts why amounts of share capital and share premium should not be treated as unexplained cash credits and why the same should not be added back to the total income of assessee company for the A.Y. 2012-13. In response, the assessee has attended the office of the assessing officer on various dates and furnished books of accounts, bank statements, relevant documents, explanations and clarifications. However, assessing officer has rejected the contention of the assessee and held that assessee has deliberately avoided the examination of share applicant companies to ascertain the genuineness of the transaction and its credit worthiness. Accordingly, the amount of Rs.4,50,00,000/- claimed to have been received by the assessee as share capital and premium from above mentioned parties were treated by the assessing officer as unexplained cash credits and added back to the total income of the assessee u/s.68 of the I.T. Act.
ITA No.1485/AHD/2017 Assessment Years.2012-13 Ellsons Developers Pvt. Ltd.
Aggrieved by the order of the Assessing Officer, the assessee carried the matter in appeal before ld. CIT(A) who has deleted the addition made by the Assessing Officer. Aggrieved, the Revenue is in appeal before us.
Learned Departmental Representative (in short “the ld. DR”) for the Revenue submits that address of all the investor companies are common, vide assessment order page No.2, that is, these all companies are situated in the Kalbadevi Road Mumbai, therefore these all are paper companies and their business is to provide accommodation entries. During the year, the assessee company has received share capital and share premium from the following parties. Sl. No. Name of the allottee Shareholders No. of shares Amount (in Rs.)
1 Frank Mercantile P. ltd. 70,000 70,00,000 2 Season Multitrade P. Ltd. 1,24,000 1,24,00,000 3 Virgo Mercantile P. Ltd. 37,000 37,00,000 4 Mili Commodities P. Ltd. 60,000 60,00,000 5 Lona Mercantile P. Ltd. 89,000 89,00,000 6 Mascot Mutitrade P. Ltd. 20,000 20,00,000 7 Coral Multitrade P. Ltd. 10,000 10,00,000 8 Delight Landcorn P. Ltd. 40,000 40,00,000 Total 4,50,000 4,50,00,000
Learned DR contends that during the assessment stage notices u/s 133 (6) of the Act have been sent by assessing officer, to the eight share applicant companies, as per addresses given by the assessee and the said notices were not served on two share applicant companies. The ld DR pointed out that ld CIT(A) has fallen into serious errors by failing to appreciate that once the claim made by the assessee about the identity of the subscribers stands prima-facie disproved and found wrong by the assessing officer, the onus shifts to the assessee and it is this onus which the assessee has failed to discharge in the present case. The CIT(A) has merely gone by the submissions of the assessee by listing the various documents
ITA No.1485/AHD/2017 Assessment Years.2012-13 Ellsons Developers Pvt. Ltd. which were produced by the assessee in support of the identity of the investors, without appreciating the fact that the AO, has successfully discharged his part of onus by returning a finding to the effect that the claim made by the assessee about the existence of these subscribers has been found to be wrong. Section 68 requires the three ingredients i.e. (i) identity of the lender/subscriber, (ii) Creditworthiness of the lender/subscriber and (iii) genuineness of the transaction. As per the innumerable cases decided on the issue, it is a settled position of law that the initial burden is cast on the assessee to prove these three ingredients. The assessee company has miserable failed to prove these three ingredients of section 68 of the Act, therefore, order of the assessing officer may be upheld.
Shri Rasesh Shah, Ld. Counsel for the assessee begins pointing out that assessee has submitted before the assessing officer following documents and evidences: (i) Share application forms details viz name, address of the share applicants ,copy of Board Resolution allotting the shares to the share applicants. (ii)Copies of Memorandum and Articles of Association & Certificate of Incorporation. (iii) Copies of bank statements of share appellants and that of share applicant companies and bank books. (iv) Copy of share certificates and copy of share holders register of the appellant - company. (v) Copies of return of income and audited financial statements of share - applicant companies.
The ld assessing officer has not discussed any of these (above listed details) in the assessment order. The Id AO has not made any adverse finding in any of these documents even, though all the details were furnished by the asssessee before him. The ld AO ought to have examined all these details and refuted / rejected them, with a cogent adverse findings and discernable line of reasoning, in order to arrive at a conclusion and to make the addition u/s 68 of the Income Tax Act. On
ITA No.1485/AHD/2017 Assessment Years.2012-13 Ellsons Developers Pvt. Ltd. the contrary, the ld AO has just brushed aside these evidences without even a word on why they are not acceptable. It is a well settled Law that when an assessee has all the possible evidences/documents in support of its claim, they cannot be brushed aside based on surmises. Shri Rasesh Shah, also pointed out, as evident from the assessment order, ( vide page 5 of AO), that Id assessing officer issued notices u/s 133 (6) to all the eight share-applicants. The Id AO mentioned that, in case of two share applicants, the notices u/s 133(6) were not served, and in other six cases of share applicants, the notices were served and they have also responded to the said notices, by filing necessary details. The ld Counsel states that subsequently the said two share - holders too complied with the notices, by filing details on 27. 03. 2015. This way, ld Counsel claimed that assessee company has discharged his onus to prove the three ingredient of section 68 of the Act viz: identity, creditworthiness and genuineness of the transactions. Ld. Counsel also submits that in the hands of the share subscribing companies assessment has been framed under section 143(3) of the Act which were placed in the paper book submitted by the assessee and during the proceedings under section 143(3) of the Act, in the hands of the share subscribing companies, no additions were made. Thus, ld Counsel defended the order passed by the ld CIT(A). 6. We have heard both the parties and carefully gone through the submissions put forth on behalf of the assessee along with the documents furnished and the case laws relied upon, and perused the facts of the case including the findings of the ld. CIT(A) and other material brought on record. We note that according to section 68 of the Act, where any sum is found credited in the books of an assessee maintained for any previous year, and the assessee offers no explanation about the nature and source thereof or the explanation offered by him is not satisfactory in the opinion of the assessing officer, the sum so credited may be charged to income tax as the income of the assessee of that previous year. It is well known that the whole catena of sections starting from section 68 to section 69D of the Act have been introduced into the taxing enactments step by step in order to plug loopholes. Even long prior to the introduction of section 68 in the statute book, Page | 7
ITA No.1485/AHD/2017 Assessment Years.2012-13 Ellsons Developers Pvt. Ltd. courts had held that where any amounts were found credited in the books of the assessee in the previous year and the assessee offered no explanation about the nature and source thereof or the explanation offered was in the opinion of the assessing officer not satisfactory, the sums so credited could be charged to income-tax as income of the assessee of that relevant previous year. Section 68 of the Act was inserted in the Income Tax Act, 1961, only to provide statutory recognition to a principle which had clearly emerged in judicial decisions. With effect from assessment year 2013-14, section 68 of the Act has been amended to provide that if a closely held company fails to explain the source of share capital, share premium or share application money received by it to the satisfaction of the assessing officer, the same shall be deemed to be the income of the assessee company u/s 68 of the Act. We note that the amended provisions of section 68, is not applicable to the assessee company under consideration, as the assessee`s, assessment year is 2012-13. The Hon`ble Bombay High Court, in the case of Gagandeep Infrastructure 80 Taxmann.Com 272 (Bom), held that amendment to section 68 is prospective and applicable only from assessment year 2013-14. With this background, now we shall proceed to examine in the assessee`s case under consideration, whether assessee company has discharged his onus to prove, prima facie, the identity, creditworthiness and genuineness of the share capital and share premium received by it from share subscribers companies.
Before us, the assessee-company has submitted the bank statements of ICICI bank account no.624605064230 (PB page no.31-38). The assessee submitted bank book of ICICI Bank A/c No. 624605064230 (vide PB page no.39-45). Assessee also submitted the board resolution passed by it for issuing shares which is placed at paper book page no.46-48 of assessee`s paper book. The assessee company filed the board resolution issuing shares at premium, which is placed at paper book page 49-50. The assessee-company filed Form no.3, return of allotment of shares, filed with the Registrar of companies vide paper book 51-58. Assessee company filed member’s register (vide PB No.59-66). These are the
ITA No.1485/AHD/2017 Assessment Years.2012-13 Ellsons Developers Pvt. Ltd. documents and evidences submitted by the assessee-company (share capital receiver company).
There are eight share applicant companies. The assessee-company has submitted following documents for each share applicant company: (1).In respect of share Applicant Company, Mills Commodities Pvt. Ltd: (i) Copy of Assessment Order passed u/s 143 for AY.2012-13, vide PB.67-70. (ii) Acknowledgement of return of income filed by the assessee, vide PB.71. Annual Report and audited financial statements, vide Pb.72-85. (iii) Share application form, vide Pb.86. (iv) Share Certificates, vide PB.87, (v) Board Resolution of the share applicant company, vide PB.89. (vi) Contra Confirmation of the accounts, vide Pb.90. (vii) Relevant bank statement of the share applicant company, vide Pb.91-92. (viii) Relevant bank book, vide Pb.93-94. (2)In respect of share Applicant Company,Frank Mercantile Pvt. Ltd. Assessment Order passed u/s 143(3) for A.Y. 2012-13 (PB.95-98), Acknowledgment of return of income (PB.99), Annual Report along with Audited financial statements (PB. 100-112), Share Application Form (Pb.113), Share Certificates (pb.114-115), Board Resolution (Pb.116), Contra Confirmation of accounts (Pb.117), Relevant Bank Statement (Pb.118-119), Relevant Bank Book (Pb.120). (3)In respect of share Applicant Company,Virgo Mercantile Pvt. Ltd. Assessment Order passed u/s. 143(3) for A.Y.2012-13(Pb.121-123), Acknowledgment of return of income (Pb.124), Annual Report along with Audited financial statements (Pb.125-137), Share Application Form (Pb.137A) , Share Certificates (Pb.138-140), Board Resolution (Pb.141), Contra Confirmation of accounts (Pb.142), Relevant Bank Statement (Pb.143-144), Relevant Bank Book (Pb.145-146).
(4)In respect of share Applicant Company, Season Multitrade Pvt. Ltd. Assessment Order passed u/s. 143(3) (Pb.147-148), Acknowledgment of return of income (Pb.149), Annual Report along with Audited financial statements Page | 9
ITA No.1485/AHD/2017 Assessment Years.2012-13 Ellsons Developers Pvt. Ltd. (Pb.150-161), Share Application Form (Pb.150-161), Share Application Form (Pb.162-163), Share Certificates (Pb.164-165), Board Resolution (Pb.166), Contra Confirmation of Accounts (Pb.167), Relevant Bank Statement (Pb.168- 171), Relevant Bank Book (Pb.172-173). (5)In respect of share Applicant Company, Delight Landcorn Pvt. Ltd. Assessment Order passed u/s. 143(3) for A.Y. 2012-13 (Pb.174-176), Acknowledgment of return of income (Pb.177), Share Application Form (Pb.199), Annual Report along with Audited financial Statements (Pb.178-198), Share Certificates (Pb.200), Board Resolution (Pb.201), Relevant Bank Statement (Pb.202-203), Relevant Bank Book (Pb.204). (6)In respect of share Applicant Company,Coral Multitrade Pvt. Ltd. Assessment Order passed u/s. 143(3) for A.Y. 2012-13 (Pb.205-207), Acknowledgment of return of income (Pb.208), Annual Report along with Audited financial statements (Pb.209-227), Share Application Form (Pb.228), Share Certificates (Pb.229), Board Resolution (Pb.230), Relevant Bank Statement (Pb.231-232), Relevant Bank Book (Pb.233) (7)In respect of share Applicant Company, Mascot Mulitrade Pvt. Ltd. Assessment Order passed u/s. 143(3) for A.Y. 2012-13 (Pb.234-236), Acknowledgment of return of income (Pb. 237), Annual Report along with Audited financial statements (Pb.238-258), Share Application Form (Pb.259), Share Certificates (Pb.260), Board Resolution (Pb.261), Relevant Bank Statement (PB.262-263), Relevant Bank Book (PB.264) (8)In respect of share Applicant Company, Lona Merchantile Pvt. Ltd. Acknowledgement of return of income (Pb.265), Annual report along with audited financial statements (Pb.266-278), Share application form (Pb.279-280), Share certificates (Pb.281-283), Board Resolution (Pb.284), Contra Confirmation of accounts (Pb.285), Relevant bank statement (Pb.286-290), Relevant bank book (Pb.291-293).
ITA No.1485/AHD/2017 Assessment Years.2012-13 Ellsons Developers Pvt. Ltd. 9. Learned Counsel claimed that by submitting these above noted plethora documents and evidences, the assessee company has proved identity, creditworthiness and genuineness of the share applicant companies. By submitting PAN Card, Board Resolution and share certificate, the company has proved the identity. By submitting bank statements, profit and loss account and detail of reserve and surplus, the assessee has proved the genuineness of the transaction, as the transaction took place through banking channels only. By submitting shareholders funds and details of reserve and surplus of the share applicant companies, which shows that share applicant companies have sufficient funds before making investment in the assessee-company, and this proves the creditworthiness of the transactions. This way, ld Counsel submits before the Bench that assessee-company has proved the identity, genuineness and creditworthiness of the transactions, that is, the three ingredients of section 68 have been proved by the assessee company successfully.
We note that assessee company received share application money to the extent of Rs 4.5 Crores from eight parties (details mentioned in the form of table in para no. 2 of this order). We note that assessee company has furnished the following documents and evidences before the assessing officer: (i) Share application forms details viz name, address of the share applicants ,copy of Board Resolution allotting the shares to the share applicants. (ii)Copies of Memorandum and Articles of Association & Certificate of Incorporation. (iii) Copies of bank statements of appellant and that of share applicant companies and bank books. (iv) Copy of share certificates and copy of shareholders register of the appellant - company etc. (v) Copies of return of income and audited financial statements, such as Balance Sheet, profit and loss account of share - applicant companies. (vi). Assessment Order passed u/s 143(3) for A.Y.2012-13 in case of share applicant companies. (vii) PAN Number of all share applicants Page | 11
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(ix) Proof that all transactions were through banking channel.
The ld CIT(A) noticed that assessing officer has not discussed any of these (above listed details) in the assessment order. The Id AO has not made any adverse finding in any of these documents even, though all the details were furnished by the appellant before him. The AO ought to have examined all these details and refuted / rejected them, with a cogent adverse findings and discernable line of reasoning, in order to arrive at a conclusion and to make the addition u/s 68 of the Income Tax Act. On the contrary, the AO has just brushed aside these evidences without even a word on why they are not acceptable. It is a well settled Law that when an assessee has all the possible evidence in support of its claim, they cannot be brushed aside based on surmises. As evident from the assessment order, (vide page 5) the Id assessing officer issued notices u/s 133 (6) to all the eight share applicants. The Id AO mentions that, case of two share applicants, the notices u/s 133 (6) were not served, and these six cases of share applicants, the notices were served and they have responded to the said notices, by filing necessary details. On being confronted with this issue, the assessee asked for names of share applicants on whom notices were not served. It is seen that subsequently the said two share - holders too complied with the notices, by filing details on 27.03. 2015. The Id assessing officer in page no. 13 of his order, while discussing the issue of" Identity ' states as under:- "It would be worthwhile to mention here that notices u/s 133(6) have been sent as per addresses given by the assessee and the said notices have either come back unserved or no replies have been received. The addresses which have been provided by the assessee, have also been found to be bogus during physical inquiry made by the department. Having regard to the facts of the case, identity in respect of the four entities is thus not proved....." This is contradictory to his observation in page no. 5 regarding notices u/s 133 (6) of the Act. The statement regarding physical verification appears all of a sudden, as there is no mention of any physical verification in the entire order or in the show cause notice.
During the appellate proceedings, the ld CIT(A) observed that in his show cause notice dated 02.03.2015, the Id assessing officer asked the assessee to
ITA No.1485/AHD/2017 Assessment Years.2012-13 Ellsons Developers Pvt. Ltd. produce the directors of share-applicants on or before 09.03.2015 and in the alternative show cause why amounts should not be added as unexplained cash credits. The Id Assessing Officer’s wordings give assessee an option to produce the directors or to file explanation / details regarding the share application money received. The assessee appears to have gone for latter option. The next reason quoted by the Id AO is that, the share-applicants did not have business activity during the year. In this context, the assessee has given the details of revenue from operations, returned income, net worth of the share-applicants. It can be seen that most of them have gross revenue running into several lakhs of rupees and also have taxable income. The net worth of all the share-applicants are above Rs 10 crores and investment made in assessee-company is meager compared to net worth. It can be seen that the investment made by these share applicants in the assessee company range from meager 1.96 % to 5.77 % of their total net worth. The share applicant companies have investments worth crores of rupees in equity of other companies including quoted shares. The investment in assessee - company by the share-applicants is a very small part (2.5 % to 8%) of its total investment in equity shares, in view of the facts summarized in the table, the conclusion of the Id assessing officer about 'creditworthiness’ is devoid to any merits. The next observation made by the ld AO is that, premium is unjustified. It is noticed that the share are issued @Rs100/- per share (F V 10 + premium Rs 90). Before the ld AO, the assessee - company filed calculation of Book value as per net worth method, calculated from the Audited balance sheet as on 01.04.2011. The Id assessing officer has not found any defect in this nor has be given any contrary finding. It is seen from the balance sheet that, as on 31.03. 2011, the net worth of the assessee - company is Rs 4.51 crores, and the number of shares is 4.6 lakhs, which works out to Rs 98.05 per share. In view of this, the assessee is practically not charging any premium, over and above its book value. Hence, the observation of the Id assessing officer is without any factual basis. The Id AO also observed that, the assessee-company was not doing any business activity during the year. The Id AO has mistaken in this connection, as the assessee - company is engaged in the business of real estate development. In such
ITA No.1485/AHD/2017 Assessment Years.2012-13 Ellsons Developers Pvt. Ltd. case, there cannot be any day - to - day turnover and regular revenue from operations. In the previous year concerned, the assessee has purchased two pieces of land and have also paid advance for office space. The returned income is Rs. 31.50 lakhs. Hence, the observation of the Id assessing officer is incorrect on facts.
It was also noted by ld CIT(A) that all the share-applicant companies are assessed to tax and particularly in the assessment year 2012-13. Out of the eight share-applicants seven share applicants have been subject to scrutiny assessments u/s 143 (3) of the Act. The scrutiny assessments have no adverse inference. The scrutiny assessments conducted by respective AOs can be presumed to have been completed after considering all the issues arising from Profit & Loss account and balance sheet including new investments made in the year and the sources thereof. It is seen that, the share - applicant companies are based in Mumbai and do not bear common address. The Id assessing officer has not brought out any connection with accommodation entry operators or tainted shell company operators. It is also seen from master data printout that, these companies have “active status \ which means they are complying with statutory requirements of holding AGM and filing annual returns. It is also seen that they are not incorporated together at one go as is done in case of Shell Companies. The incorporation dates range from April 2007 to January 2010. Considering the facts and circumstances discussed above leads to conclusion that the three ingredients, viz: identity, creditworthiness and genuineness of the Section 68 are satisfied by the assessee. Thus, order passed by the ld CIT(A) is acceptable.
We note that once the basic documents such as, confirmation, copy of bank account, copy of share application and copy of income tax returns of the creditors, or share applicants have been furnished by the assessee, the onus of proving the above three elements required for section 68 is discharged. It is also held that if there is any doubt regarding source of the said creditors / share applicants, the matter can be examined by the concerned AO in the assessment of
ITA No.1485/AHD/2017 Assessment Years.2012-13 Ellsons Developers Pvt. Ltd.
the creditor / share applicant. For that we rely on the following binding decisions of Hon'ble jurisdictional High Court Gujarat:
(i)CITv/s Ranchhod Jivabhai Nakhawa ITA No. 50/2011,(Guj) (ii) CIT v/s Ujala Dyeing and Printing Mills (P) Ld, 328 ITR 0437 (Guj)
Our view is fortified by the judgment of the Hon`ble Gujarat High Court in the case of CIT v/s Himatsu Bimet Ltd, 12 Taxmann.com87. (H C of Guj), wherein it was held as follows: “4. As can be seen from the impugned order of the Tribunal, the Tribunal has recorded that the respondent-assessee had filed confirmations from all share applicants with details of share capital paid which contained details such as full addresses, permanent account numbers and tax jurisdiction of the depositors. The Tribunal further recorded that all payments were received by cheques and were credited in the bank account of the respondent; the share application forms contained all details of the depositors; their confirmations were clear with all addresses; and that they were on the departmental records as tax-payers. In the aforesaid factual background, the Tribunal was of the view that the respondent had sufficiently discharged its burden of explaining the same. The Tribunal further observed that the department has not brought any material on record to show that the depositors were bogus. According to the Tribunal none of the decisions relied upon by the revenue had held that the assessee was required to establish the credit worthiness of the share applicants strictly in the manner understood in the context of cash credits under section 68 of the Act. The Tribunal was of the view that the assessee had given the names and addresses of the share applicants, it was within the knowledge of the revenue that the said share applicants were assessed to Income-tax, hence the burden was on the revenue to make further inquiry. The Tribunal placed reliance upon the decision of the Apex Court in the case of CIT v. Divine Leasing Finance Co. wherein it has been held that when the assessee company had given the name of the shareholders, the department was free to reopen their individual assessment in accordance with law. 5. The Tribunal further observed that in respect of Mangal Finance Limited, the said company was assessed to tax on department records; the copies of the application forms were submitted by the said company, which were at pages 3 to 14 of the paper book; all funds had been received by cheque as per bank details at page 130 of the paper book; in the audited balance-sheet Mangal Finance Limited was shown to have been allotted shares of Rs. 1.20 crores, which formed part of total paid up capital of Rs. 3.80 crores of the assessee which was duly reflected in the balance-sheet; and that the return of allotment was also filed with Registrar of Companies. In the aforesaid factual matrix, the Tribunal was of the view that the respondent had discharged the burden and accordingly reversed the findings of the Commissioner (Appeals). 6. Thus the Tribunal has after appreciation of the evidence on record found as a matter of fact that the assessee had supplied addresses and permanent account
ITA No.1485/AHD/2017 Assessment Years.2012-13 Ellsons Developers Pvt. Ltd.
numbers as well as confirmation letters of the share applicants. In the circumstances, it was for the revenue to make further inquiry in case it was of the opinion that the share applicants were not genuine. In absence of any findings recorded by the Assessing Officer to the effect that the share applicants are bogus, there is nothing on record to doubt or disbelieve the confirmations and application forms submitted by the depositors. In the circumstances, no infirmity can be found in the impugned order of the Tribunal in holding that the assessee had discharged its burden. Whether burden has been discharged or not is a question of fact. 7. In the light of the aforesaid, it cannot be said that the impugned order of the Tribunal suffers from any legal infirmity so as to warrant interference. In absence of any substantial question of law, the appeal is dismissed.”
On the identical facts, the Coordinate Bench of ITAT Ahmedabad in the case of Rohini Builders V. Deputy Commissioner of Income-Tax, 117 TAXMAN 25 (AMD.) (MAG.), held as follows: “...the assessee had discharged the initial onus which lay on it in terms of section 68 by proving the identity of the creditors by giving their complete addresses, GIR Numbers/Permanent Account Numbers and the copies of assessment orders wherever readily available. It had also proved the capacity of the creditors by showing that the amounts were received by the assessee by account payee cheques drawn from bank accounts of the creditors and the assessee was not expected to prove the genuineness of the cash deposited in the bank accounts of those creditors because under law the assessee can be asked to prove the source of the credits in its books of account but not the source of the source as held by the Bombay High Court in the case of Orient Trading Co. Ltd. v. CIT [1963] 49 ITR 723.” 16. To conclude, in this case on hand, the assessee had discharged its onus to prove the identity, creditworthiness and genuineness of the share applicants, thereafter the onus shifted to AO to disprove the documents furnished by assessee, cannot be brushed aside by the AO to draw adverse view, cannot be countenanced. In the absence of any investigation, much less gathering of evidence by the Assessing Officer, we hold that an addition cannot be sustained merely based on inferences drawn by circumstance. Applying the propositions laid down in these case laws to the facts of this case, we are inclined to uphold the order of the Ld. Commissioner of Income Tax (Appeals). 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 shall be assessed as its undisclosed income. In the facts of the present case, both the nature and source of the share Page | 16
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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. 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 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 confirm the order of ld CIT(A) in deleting the addition of Rs.4,50,00,000/-.
In the result, the appeal of the Revenue is dismissed. Order is pronounced on 27/05/2021 by placing result on Notice Board.
Sd/- Sd/- (PAWAN SINGH) (Dr. A.L. SAINI) JUDICIAL MEMBER ACCOUNTANT MEMBER lwjr /Surat �दनांक/ Date: 27/05/2021 SAMANTA Copy of the Order forwarded to 1. The Assessee 2. The Respondent 3. The CIT(A) 4. CIT 5. DR/AR, ITAT, Surat 6. Guard File By Order // TRUE COPY // Assistant Registrar/Sr. PS/PS ITAT, Surat