D.C.I.T., CENTRAL CIRCLE - 1(4), KOLKATA, KOLKATA vs. M/S. WISE INVESTMENT PVT. LTD., KOLKATA

O R D E R

PER DR. MANISH BORAD, ACCOUNTANT MEMBER :

2. Whether on the facts and circumstances of the case Ld. CIT (A) was erroneous as it had not taken cognizance of the fact that the investor company has negligible taxable income and there reserve and surplus most consist of share capital.

3. Whether on the facts and circumstances of the case the Ld. CIT (A) erred in law in holding that the assessee has established the identity and creditworthiness of the share applicants and genuineness of the transactions merely based on the fact that transactions were made through banking channels, when it has been held by jurisdictional High Court in the case of Precision Finance Pvt Ltd (1993) that mere payment by account payee cheque is not sacro”

4. Aggrieved the assessee preferred appeal before the ld. CIT(A) and filed complete details of the share subscribers, their net worth as on the date of applying for the shares, complete details to prove the identity, creditworthiness of the share applicants and genuineness of the transactions, replies filed by the share subscriber companies to the summons issued u/s 131 of the Act and also contended that all the documents filed before the Assessing Officer are sufficient enough to explain the nature and source of the allege sum and even the source of source has been proved by giving the details and the ld. Assessing Officer has not indicated any discrepancies in these details. Various judgments were relied on by the assessee including that of the Hon’ble Bombay High Court in the case of CIT vs. M/s. Gagandeep Infrastructure Pvt. Ltd. [2017] 80 taxmann.com 272 (Bombay); the judgment of the Hon’ble Supreme Court in the case of CIT vs. Lovely Exports P. Ltd., 216 CTR 195(SC), judgment of the Hon’ble Gujarat High Court in the case of DCIT vs Rohini Builders 256 ITR 360 (Gujarat) and other case-laws. 4.1. The ld. CIT(A) based on the facts stated by the assessee with sufficient documentary evidence in support of the claim of the nature and source being explained for the alleged transactions and also taking support from the various judicial decisions again sent all these documents filed by the assessee to ld. Assessing Officer to issue a remand report even when these details were already filed before the Assessing Officer. In the remand proceedings, the ld. Assessing Officer accepted that the Assessing Officer obtained all these details from the investment companies when summons issued u/s 131 of the Act and again no discrepancies were observed in the documents filed with regard to the share subscriber companies. The ld. CIT(A) considering these details and also the facts that all the share subscribers had sufficient net worth to cover up the investments made in the equity capital of the assessee company and also giving a finding that judgment of the Hon’ble Supreme Court in the case of PCIT vs. NRA Iron & Steel (P) Ltd. reported in [2019] 103 taxmann.com 48(SC) is not applicable on the facts of the case decoded in favour of the assessee by deleting the impugned addition u/s 68 of the Act.

5. Aggrieved the revenue is now in appeal before this Tribunal.

6. The ld. D/R vehemently argued supporting the order of the ld. Assessing Officer and stated that merely filing these paper documents cannot be treated as a compliance to explain the nature and source of the alleged sum. Surrounding circumstances which includes the meagre income offered by the share subscribers, no regular business activity carried out by the assessee company as well as by the share subscribers and the typical nature of flow of funds in the bank statement indicates that share subscribing companies are engaged in rotation of funds for providing accommodation entries and they are jamakharchi or shell/paper companies and, therefore, the ld. Assessing Officer has rightly added the sum in the hands of the assessee.

7. On the other hand, the ld. Counsel for the assessee apart from referring to the detailed written submissions and paper book containing 1129 pages again asserted the fact that the assessee company which is engaged in the business of trading in shares and financing, issued equity shares along with share premium to various share applicants and all these share subscribing companies are regularly assessed to tax, transactions being carried out through banking channels, most of these concerns have passed through scrutiny proceedings and have been assessed u/s 143(3) of the Act for Assessment Year 2012-13 itself and replied to summons issued u/s 131 of the Act providing details to the Assessing Officer. He thus claimed that assessee has explained the nature and source of the share application money received during the year and has discharged the primary onus casted upon it u/s 68 of the Act and even the source of source has also been explained. Therefore, the ld. CIT(A) has rightly deleted the addition u/s 68 of the Act. Reliance is placed on the following decisions:-  CIT vs. Gobi Textile Ltd. 294 ITR 663  Oasis Hospitalities (P) Ltd. vs. CIT (2011) 333 ITR 119 (Del.)  CIT vs. Lovely Exports Ltd. (2008) 216 CTR 195 (SC)  CIT vs. Dolfin Canpack Ltd. 283 ITR 190 (Delhi)  DCIT vs. Rohini Builders (127 Taxman 523)  Sri Barkha Synthetics Ltd. vs. CIT 283 ITR 377 (Raj.)  CIT vs. Down Town Hospitals Ltd. 267 ITR 439 (Gau)  Sophia Finance Ltd. 205 ITR 98 (Delhi) Full Bench  ITO vs. Neelkanth Finbuild Ltd. (2015) 61 taxmann.com 132  CIT vs. Orissa Corporation (P) Ltd. [159 ITR 78 (SC)]  Balurghat Transport co. vs. ACIT 63 TTJ 303 (Cal ITAT).  ITO vs. Chichinga Fatika Cold Storage Pvt. Ltd. in Assessment Year 2005-06  Midas Golden Distilleries Pvt. Ltd. vs. CIT (2009) 124 TTJ 25  Aquatech International Pvt. Ltd. vs. ITO in ITA No. 4650/Del/2007; Assessment Year 1997-98; dated 29.08.2008

22. Sunview Retail Pvt Ltd. 1/1 Meredath Street, 27,500 2,75,00,000/- PAN: AANCS1689M Kolkata-700072.

23. Vaibhav Vinimay Pvt Ltd. 3 Saket Place, Kolkata- 2,500 25,00,000/- PAN: AABCV0230B. 700072.

24. Vicky Fincon Pvt Ltd. PAN: 5/1 Clive Road, Kolkata- 13,500 1,35,00,000/- AABCV0938J 700001.

25. Vigneshwari Dealmark Pvt 5/1 Clive Road, Kolkata- 7,500 75,00,000/- Ltd. 700001. PAN: AADCV4126E 26. Welon Advisory Services Pvt 6 Hanspukur Lane, 7,500 75,00,000/- Ltd. Kolkata-700007. PAN: AAACW2230R. TOTAL 3,25,000 32,50,00,000/-

9. We further observe that during the course of assessment as well as appellate proceedings before the ld. CIT(A), the assessee has complied and has filed all the details, evidences and relevant documents which are necessary to prove the identity and creditworthiness of the share applicants and genuineness of the transactions. Though these details have been filed in the paper book but the same can be summarized that for each of the share subscriber companies as listed above, the assessee has filed the copy of PAN card, share application form, allotment advices, relevant bank statements, board resolution, ITRs for Assessment Year 2013-14, audited financial statement, source of funds i.e., the immediate source of fund which has been utilised to apply for the equity shares of the company. Assessee has also filed copy of the summons issued u/s 131 of the Act during the course of assessment proceedings and reply of each of the share subscribing companies directly to the Assessing Officer and again provided necessary details before the ld. CIT(A). The ld. Counsel for the assessee also referred to the assessment orders u/s 143(3) of the Act in the case of various share subscribing companies which have passed through scrutiny proceedings for the very same Assessment Years and the alleged transactions have been examined by the concerned Assessing Officer. Perusal of these details which have been filed in the paper book containing 1129 pages indicates that whatever documents which the assessee needs to file in order to explain the identity and creditworthiness of the share applicants and genuineness of the transactions have been filed and thereby the primary onus casted upon the assessee by virtue of Section 68 of the Act has been discharged and consequently the burden shifted over to the Assessing Officer to prove the contrary which the ld. Assessing Officer failed. We further observe that the ld. CIT(A) has made a thorough examination of all these facts and also referred to various judicial pronouncements adjudicating similar type of issues and we find it necessary to go through the relevant finding of the ld. CIT(A):- Assessment Year: 2012-13 M/s. Wise Investment Pvt. Ltd.

“Coming to another aspect of this matter, which, even though not explicitly raised by the AO, is pertinent in cases like the present one. This pertains to the question whether, since the said amount of share premium could not be added u/s 68, it could have been added u/s 56(2) of the Act; since section 56(2) (viib) envisages a situation where a company receives consideration for issue of shares which is in excess of the fair market value of the shares, then such consideration can be added to his income under this clause as income from other sources. The appellant, in this connection, has explained that although the justification for premium was not a requirement of law during the relevant assessment year but even then the share premium has been justified by the appellant with reference to the explanation filed by it with reference to relevant facts and figures. It has been explained that this premium was paid on account of the anticipated future prospects of the appellant company and the fact that it was felt by the investing companies' Boards that it would be prudent to invest in the appellant company. It has been explained that the appellant company was incorporated on 02.06.1992 with a paid up capital of Rs. 1,13,000/-. This amount was subscribed by the directors of the company as promoters. In the impugned AY, the appellant was engaged in the business of Investment and Finance. The appellant Company was dealing in Equity shares. During this period the appellant was dealing in quoted equity shares and had a turnover of over 12.46 crore. The growth of the appellant company was apparent from the fact that in the immediately preceding AY, the turnover had been Rs 8.99 crore. This was a phenomenal reported growth of almost 39%. It transpires that the appellant company was also carrying impressive inventories of quoted equity shares for a company in such nascent stages of its operations. It had inventories respectively of Rs 8.38 crore and Rs 9.36 crore as on 31.3.2011 and 31.3.2012. The Audited results of the appellant show that its profits had grown by over 3 times between AY 2011-2012 and AY 2012-2013. In the same period the EPS (Earning per share) for the appellant company had grown by 2 ½ times to 16% per share of Rs.10/-. The appellant company was obvious showing good returns and was showing good prospects for its investors. It was also a fact growing company.

This led to the formation of a goodwill and good reputation in the market. It is in this backdrop that, in order to expand its business of dealing with quoted equity shares, the appellant persuaded the investing companies to invest in the appellant on the basis of good prospects for profits.

The AO, I again find has not even tried to visit this area despite the fact that all the book results for the impugned and surrounding years were very much present before him. In fact when he himself has stated that such investments as the impugned ones take place on personal one-to-one contacts and persuasions then he should have tried to analyses the meaning and implications of these observations by applying them to the existing facts and circumstances. This is singularly absent at any of the stages, at which the appellant was being examined by the AO. Notwithstanding the above discussion, I further find that this case relates to assessment year 2012-13 s clause 56(2) (viib) of the Act was introduced in the statute only from AY 2013- Assessment Year: 2012-13 M/s. Wise Investment Pvt. Ltd. onwards. Thus, this matter relates to periods before the introduction of section 56(2)(viib) of the Act. I find that the cases of Green Infra Ltd (supra); CIT- Gagandeep Infrastructure (P.) Ltd.(Bom) (supra) and in the case of TrendInfra Developers Pvt Ltd, ITA-2270/KOL/2016 - which is the jurisdictional Tribunal, along with several other decisions also cited supra, the issue of retrospective application amendments, both, in section 68 - the insertion of the Proviso to that section, as we as in section 56(2) - the insertion of clause viib, have been discussed an adjudicated upon. It has been held by the judicial authorities that since the said amendments were made from 01.04.2013, they would have prospective effect am that they could not be applied to AYs 2012-13 or earlier, since they were no declaratory clarificatory or were for "the removal of doubts" or were expressly held b) the Parliament to be applied with retrospective effect. Therefore, the share premiums could not be added u/s 56(2)(viib) of the Act - even though it may fairly be stated that the AO has not tried to take this view either in his assessment order or in the remand report. In conclusion, I find that the AO has not doubted the identities, and creditworthiness of same set of share subscribers from whom the appellant accepted share capital, but has doubted the payment of high share premium. In my considered view, as per the discussions above, this is not permissible in law. A transaction cannot be partly accepted and party held to be unexplained based on the results of the same enquiries conducted by the AO in respect of same entities who have not only furnished documentary evidences but also appeared personally before the AO who examined them u/s 131 by recording their statements. This could only have been done if the AO, either in assessment or in remand, would have brought on record that while the investing companies had enough financial wherewithal to invest in the share capital, they did not have the capacity to pay the premium. This has not been done by the AO at any stage and is in any case, as discussed above, not borne out by the net worths and investing capacities of the investing companies. In my considered view, therefore, where the identity, creditworthiness of the shareholders and the genuineness of the transactions, as far as share capital is concerned, have been established within all the dimensions of legal enquiry, it could not be held to be an unexplained or bogus transaction insofar as it relates to the share premium, without bringing on record compelling reasons for doing so. This last has neither been done in assessment or in remand or is indeed discernible from the entire material on record. Further the AO's reliance upon the decision of Supreme Court in Principal CIT vs. NRA Iron & Steel (P) Ltd reported in 412 ITR 161 is in my opinion misplaced, even though the addition made towards cash credit was rendered in favour of the revenue in that case. It is noted that the said decision is factually distinguishable as in the appellant's case all the share applicants appeared personally u/s 131 and filed documentary evidences and the AO after conducting independent enquiries has accepted the share capital from the same set of share applicants. In the instant case, all the share applicants had confirmed their investment with the appellant and as such, there was no basis for the AO to come to any adverse conclusion and accordingly, the entire amount received by the appellant on account of share Assessment Year: 2012-13 M/s. Wise Investment Pvt. Ltd. application as well as share premium monies could not have been regarded as undisclosed income u/s 68 of the Act. The only question that could have been raised and indeed the remand report had raised this solitary issue, that whether the investors had the financial capacity to pay the premiums that had claimed to have been paid. This question has already been discussed at length in this order and answered in the affirmative - that is, the investors had indeed demonstrated their financial capacity to pay the premiums before the AO. I also find that the AO has been placing reliance upon the case of CIT vs Nipun Builders & Developers Pvt to add weight to his addition. I find that the facts of this case were that in the course of the reassessment proceedings, enquiries were sought to be made by the Assessing Officer (AO); summons u/s. 131 were issued on 14.09.2007 to the companies from whom the share capital was stated to be received and they were returned unserved with the remarks "no such company"; the inspector sent to the addresses for verification confirmed the fact. In view of this, the assessee was asked to produce the principal officer of the companies who had subscribed to the shares along with the relevant details. In response, the assessee filed a letter dated 21.11.2007 at the "dak" counter of the office of the AO stating that all the notices of the annual general meeting and call notices for shares were being sent to the same addresses of the share subscribers under certificate of posting and they have not come back unserved, implying that the share subscribers did exist at the addresses given to the AO. It was also submitted that the capital was subscribed through account payee cheques with valid share application forms, copies of the memorandum of association and board resolutions. It was pointed out that the registered offices of the companies could be found in the website www.mca.gov.in. and the AO may visit the site for further verification. These submissions were not accepted by the AO as constituting satisfactory explanation of the nature and source of the monies as required by Section 68 of the Act. He held that the genuineness of the transactions was not proved by the assessee and brought to tax the share application money of '1,47,00,000/- to tax; commission of 2.5% on the amount, which worked to '3,94,500/- was also added on the ground that the assessee would have paid the same to get the accommodation entries of share capital. The matter ultimately found its way before the Hon'ble Delhi High Court before whom the revenue preferred an appeal. The following substantial question of law is framed:

Whether the Tribunal was right in law in upholding the order of the CIT(A) deleting the addition made u/s. 68 of the Act on the ground that the assessee has proved the nature and source of the share subscription amounting to '1,47,00,000/- and has established the identity and creditworthiness of the share subscribers and the genuineness of the transactions?

The revenue contends that the Tribunal failed to appreciate that the assessee could not establish satisfactorily the nature and source of the monies received as share capital nor could it discharge the onus of proving the identity and creditworthiness of Assessment Year: 2012-13 M/s. Wise Investment Pvt. Ltd. the share subscribers and the genuineness of the transactions which are the fundamental requirements of section 68. The Hon'ble Court made the following observations in this regard: 7. We are in agreement with the contention of the revenue. Under Section 68 the onus is upon the assessee to prove the three ingredients, i.e., identity and creditworthiness of the person from whom the monies were taken and the genuineness of the transaction. As to how the onus can be discharged would depend on the facts and circumstances of each case. It is expected of both the sides - the assessee and the Assessing authority - to adopt a reasonable approach. The assessee here is a private limited company. It cannot issue shares in the same manner in which a public limited company does. It has to generally depend on persons known to its directors or shareholders directly or indirectly to buy its shares. Once the monies are received and shares are issued, it is not as if the share-subscribers and the assessee-company lose touch with each other and become incommunicado. Calls due on the shares have to be paid; if dividends are declared, the warrants have to be sent to the shareholders. It is a continuing relationship, even granting that it may not be of the same degree in which it exists between a debtor and creditor. The share- subscribers in the present case have each invested substantial amounts in the assessee's shares, as the chart at pages 2-3 of the assessment order would show. Most of them, barring two or three, are themselves private limited companies. It cannot therefore be contended, as was contended before us on behalf of the assessee, that if the summons issued u/s. 131 to the subscribing companies at the addresses furnished by the assessee returned unserved, the AO is duty- bound to enforce their attendance with all the powers vested in him. The unreasonableness of such a general proposition is writ large in the face of the contention. The assessee- company received the share monies; it even says that the communications sent by it at the addresses did not return unserved, yet when the AO requested it - that too only after trying to serve the summons unsuccessfully - to produce the principal officer of the subscribing companies, the assessee developed cold feet and said it cannot help if those companies did not appear and that it was for the assessing officer to enforce their attendance. It needs to be remembered that the AO did not merely stop with issuing summons; he followed it up with a visit by the inspector who confirmed that no such companies functioned from the addresses furnished by the assessee. Let us see the attitude of the assessee towards discharging its onus in such circumstances. It says that the AO may get the addresses from the ROC's website. We do not think that an assessee can take such an unreasonable attitude towards his onus u/s. 68, little realising that when the finding is that the subscribing companies have not been found existing at the addresses given by the assessee, it is open to the AO to even hold that the identity of the share-subscribers has not been proved, let alone their creditworthiness and the genuineness of the transactions. It was not open to the assessee, given the facts of this case, to direct the AO to go to the website of the company law department/ROC and search for the addresses of the share-subscribers and then communicate with them for proof of the genuineness of the share subscription. That is the onus of the assessee, not of the AO."

It is clear from the above pronouncement that an appellant is duty bound to explain the identity, creditworthiness of the share applicants and the genuineness of the transaction. In the circumstances of investments in private limited companies made through private endeavours and personal basis it is obligatory for the appearance of the share investors. In the instant case there was full compliance by the directors of the appellant as well as directors of investor companies to notices u/s 131 of the Act. In addition, the AO himself found positive results to his field enquiries conducted through the departmental inspector. The source of source was also given to the before the AO. There are was no objection from the AO to any of tl these conditions had been met in the case of CIT vs Nipun Build Pvt. (Supra). Therefore the reliance of the AO upon the above citati If anything the said judgement goes in favour of the appellant in the p, circumstances. Similarly, the other citations relied upon by the AO also do not help h facts and circumstances in these cases are materially different from the ir The AO has relied upon CIT Vs NR Portfolio of the Hon'ble Delhi Hi& buttress his claim that if an assessee does not produce evidence or trie appearance before the assessing officer then an adverse view would against such an assessee. But this is not true in the present case w compliances were made along with personal appearances etc. In view of the above discussions and in the present facts and circumstances of this case, I cannot lend legal support to the impugned additions made by invoking provisions of sec. 68 by the AO in the facts and circumstances of this case accordingly, direct that these additions be deleted. Thus, these grounds of appeal are allowed. Similarly, the other citations relied upon by the AO also do not help h facts and circumstances in these cases are materially different from the the AO has relied upon CIT Vs NR Portfolio of the Hon'ble Delhi Hi& buttress his claim that if an assessee does not produce evidence or tries appearance before the assessing officer then an adverse view would against such an assessee. But this is not true in the present case w compliances were made along with personal appearances etc. In view of the above discussions and in the present facts and circumstances of this case, I cannot lend legal support to the impugned additions made by invoking provisions of sec. 68 by the AO in the facts and circumstances of this case accordingly, direct that these additions be deleted. Thus, these grounds of appeal are allowed.”

10. After going through these detailed finding and examining the same in the light of the documents filed before us, we notice that all the 26 shareholder are body corporates and annual returns have been regularly filed on the Ministry of Corporate Affairs portal. All the share applicant companies are regularly assessed to tax and even passed through scrutiny proceedings also. From perusal of the financial statements of the share subscribing companies, we notice that they had sufficient share capital and accumulated Reserves and surplus which are sufficient enough to cover up the share application money invested by them in the equity of the assessee company. The following chart strengthens this fact:-

S.No. Name of Company Documents submitted 1. Aryan Vintrade Pvt. Ltd.

3. Champion Vanijya Pvt. Ltd.

6. Chirag Vincom Pvt. Ltd.

7. Contra Vanijya Pvt. Ltd.

8. Dream Valley Sales Pvt. Ltd.

11.2. The Hon’ble Supreme court, thus, has held that once the assessee has submitted the documents relating to identity, genuineness of the transaction, and credit-worthiness of the subscribers, then the AO is duty bound conduct to conduct an independent enquiry to verify the same. However, as noted above, the Assessing Officer in this case has not made any independent enquiry to verify the genuineness of the transactions. The assessee having furnished all the details and documents before the Assessing Officer and the Assessing Officer has not pointed out any discrepancy or insufficiency in the said evidences and details furnished by the assessee before him. As observed above, the assessee having discharged initial burden upon him to furnish the evidences to prove the identity and creditworthiness of the share subscribers and genuineness of the transaction, the burden shifted upon the Assessing Officer to examine the evidences furnished and even made independent inquiries and thereafter to state that on what account he was not satisfied with the details and evidences furnished by the assessee and confronting with the same to the assessee. In view of this, even applying the ratio laid down by the Hon’ble Supreme Court in the case of PCIT vs. NRA Iron and Steel Pvt. Ltd. (supra), impugned additions are not warranted in this case. 12(a). Our view is further supported by the following judicial pronouncements:- a) The Hon’ble Apex Court in the case of CIT vs. Orissa Corporation Pvt. Ltd. (supra), under identical circumstances, has held as follows:- “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 the income-tax assessees. 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 conclusion was unreasonable or perverse or based on no evidence. If the conclusion was based on some evidence on which a conclusion could be arrived at, no question of law as such could arise.” {emphasis ours} b) The ITAT Kolkata Bench in ITO vs Cygnus Developers (I) P Ltd in dated 2.3.2016, held as follows: 9. We have considered the rival submissions., We are of the view that order of CIT(A) does not call for any interference. It may be seen from the grounds of appeal raised by the Revenue that the Revenue disputed only the proof of identity of the shareholder. In this regard it is seen that for A Y.2004-05 Shree Shyam Trexim Pvt. Ltd., was assessed by ITO, Ward- 9(4), Kolkata and the order of assessment u/s/143(3) dated 25.01.2006 is placed in the paper book. Similarly Navalco Commodities Pvt. Ltd., was assessed to tax u/s 143(3) for A Y.2005-06 by I TO, Ward- 9(4), Kolkata by order dated 20.03.2007. Similarly Jewellock Trexim Pvt. Ltd was assessed to tax for A Y.2005-06 by the very same ITO- Ward- 9(3), Kolkata assessing the Assessee. In the light of the above factual position which is not disputed by the Revenue, it cannot be said that the identity of the share applicants remained not proved by the assessee. The decision of the Hon'ble Allahabad High Court as well as ITA T Kolkata Bench on which reliance was placed by the learned counsel for the assessee also supports the view that for non production of directors of the investor company for examination by the AO it cannot be held that the identity of a limited company has not been established. For the reasons given above we uphold the order of CIT(A) and dismiss the appeal of the Revenue. " c) Further the co-ordinate bench in the case of ITO vs. Forceful Estates Pvt. Ltd. in ITA No. 2558/Kol/2018; Assessment Year 2012-13, order dt. 08/02/2023, and for necessary reference, the facts and findings of the Tribunal read as follows:-

5. The ld. counsel has further invited our attention to the impugned order of the CIT(A) to submit that the ld. CIT(A) has categorically noted that the assessee during the year had raised share capital including share premium amounting to Rs.7,60,00,000/- from six share subscribers. The Assessing Officer had issued notices u/s 133(6) of the Act to the share applicants and in response, they all confirmed the transactions and furnished details/documents as called for including source of fund in their hands. The ld. CIT(A) has considered the evidences and details on record and found that the assessee has been able to prove the identity and creditworthiness of the share subscribers and genuineness of the transaction. The relevant part of the order, for the purpose of ready reference, is reproduced as under: “5. Conclusion: Ground No.1 & 2 I have considered the order of the A.O as well as the submission of the appellant. I have also considered the judicial decisions relied upon by the appellant. The facts of the case have already been discussed as above. It is observed that in the year under consideration the appellant company had raised share capital of Rs.7,60,00,000/-from 6 parties. In the course of the assessment proceedings, to verify the receipt of share capital, the AO issued notices u/s.133(6) to all the 6 share applicants and in response, they all confirmed the transactions submitted the details/document in respect of the subscription of shares of the appellant. In the course of the appellate proceedings, the appellant filed copy of each of the assessment orders passed in all the 6 cases of the shareholders for that year in which the share subscription amount has been received by the assessee company. Besides, the income-tax return filing acknowledgment, Audited Balance and sheets as on 31.03.2012, relevant bank, copy of the notices issued u/s 133(6) to the shareholders and reply thereof were also submitted. It is observed form the details & documents furnished by the appellant that in the cases of 2 share holders, namely 1) M/s Alfort Merchants Private Limited, 2) M/s Sharekhan Merchants Private Limited, the Assessment Orders u/s 143(3) for Lne AY 2012-13 were passed u/s. 143(3) without taking any adverse view. Therefore, it can be assumed that the respective Assessing Officers have all verified the accounts and therefore any amount that is credited from these two companies to the assessee company is fully explained. The assessment in the case of the other 4 share holders, namely, 1) M/s. Dhanamrit Commercial Private Limited, 2) M/s Jealous Commercial Private Limited, 3) M/s Mutual Merchants Private Limited, 4) Winsom Vanijya Private Limited were also passed u/s.143(3) where additions u/s 68 & u/s.14A of the Act were made. Therefore, the entire capital of all the above mentioned share holders had been added in its hands u/s 68 of the I.T. Act Thus, once an amount is already taxed, whatever investment is being made out of it in the assessee company can be treated as explained and the Same cannot be taxed again. Further, it is apparent from the records that the notices u/s.133 (6) issued to the shareholders were served on the their respective address by the postal authorities and in response, they confirmed the transactions and also submitted the details of the source of funds for making investment. Hence, the identity & creditworthiness of the shareholders are not in doubt. Further, all the share application money was received through banking channels. Therefore, the issue for my consideration now is -whether the share capital of Rs.7,60,00,000/- raised during the year by the appellant can be treated as unexplained cash credit u/s. 68 of the I.T Act or not. When the identity & creditworthiness of the shareholders have been clearly established because all of them were scrutinized u/s 143(3) and thus the source of the share capital and the share premium are clearly established and the transactions have all taken place through banking channels, merely for failure of the directors of the assessee and the shareholders to appear before AO in person in response to the summons issued to them u/s.131 of the Act, the addition cannot be in my considered opinion, unjustified. Where the corpus becomes technically explained in the eyes of law, how can, the credits arising out of the same corpus can be viewed as unexplained u/s 68 of the IT Act. In view of the facts & circumstances of the case it is held that the addition of Rs.7,60,00,000/- for the share capital raised by the appellant from 6 share applicants as unexplained cash credit u/s 68 of the Act was not justified and the same is directed to be deleted. The appeal of the assessee company on Grounds No.1 & 2 are treated as allowed. Ground no. 3 is general in nature, which does not require adjudication.

6. A perusal of the above concluding part of the order of the CIT(A) reveals that the ld. CIT(A) has not only taken note of the accounts of the share subscribers but also, noted that all the six share subscribers were assessed u/s 143(3) of the Act. Out of which, no additions were made in case of two share subscribers. However, in the case of other four share subscribers, the additions were made regarding their source of income. Now, it is settled law, once the addition has been made in the hands of the share subscribers, the investments by which share subscribers in the hands of the other company whose shares have been subscribed stood explained then no additions in such a case would be warranted in the hands of the assessee company as it would amount to double additions of the same amount. Even if the said addition stand confirmed in the appeal or stand deleted, in both the instances, the investment in the hands of the assessee company will stand proved.

Reliance has been placed in this respect on the decision of the Coordinate Kolkata bench of the Tribunal in the case in the case of DCIT vs. M/s Maa Amba Towers Ltd. in vide order dated 12.10.2018. The aforesaid decision has been further relied upon by the coordinate Kolkata bench of the Tribunal in the case of “Steelex India (P) Ltd vs. ITO, Ward-3(2), Kolkata”I.T.A. No.2666/Kol/2019 decided vide order dated 09.09. 2022.

We find considerable force of the submissions of the learned counsel for the appellant that the Tribunal has merely noticed that since the summons issued before assessment returned unserved and no one came forward to prove. Therefore it shall be assumed that the assessee failed to prove the existence of the creditors or for that matter creditworthiness. As rightly pointed out by the learned counsel that the CIT(Appeals) has taken the trouble of examining of all other materials and documents viz., confirmatory statements, invoices, challans and vouchers showing supply of bidi as against the advance. Therefore, the attendance of the witnesses pursuant to the summons issued in our view is not important. The important is to prove as to whether the said cash credit was received as against the future sale of the produce of the assessee or not. When it was found by the CIT(Appeal) on fact having examined the documents that the advance given by the creditors have been established the Tribunal should not have ignored this fact finding.

8. As the ld. CIT(A), in this case, has not only duly examined the facts and explanation as furnished by the assessee but also has given a categorical finding that the identity and creditworthiness of the share subscribers and genuineness of the transaction stood established.

9. The ld. DR could not point out any distinct facts warranting our interference in the order of the CIT(A).

10. In view of the above, we accordingly upheld the order of the CIT(A). The appeal of the revenue is, therefore, dismissed.” 12(b). Our views are further fortified by the judgment of the Jurisdictional Calcutta High Court in the case of Principal CIT vs. Sreeleathers reported in [2022] 448 ITR 332 (Cal) has held as follows: “Section 68 of the Income-tax Act, of 1961, deals with cash credits. It states that 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 in the opinion of the Assessing Officer, satisfactory, the sum so credited may be charged to Income-tax as the income of the assessee of that previous year. The crucial words in the provision are “the assessee offers no explanation". This would mean that the assessee offers no proper, reasonable and acceptable explanation as regards the amount credited in the books maintained by the assessee. No doubt the Act places 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 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 assessee from his responsibility of proving the nature of the transaction. There was no discussion by the Assessing Officer on the correctness of the stand taken by the assessee. Thus, going by the records placed by the assessee, it could be safely held that the assessee had discharged his initial burden and the burden shifted onto the Assessing Officer to enquire further into the matter which he failed to do. In more than one place the Assessing Officer used the expression "money laundering". Such usage was uncalled for as the allegation of money laundering is a very serious allegation and the effect of a case of money laundering under the relevant Act is markedly different. The order passed by the Assessing Officer was utterly perverse and had been rightly set aside by the Commissioner (Appeals). The Tribunal had rightly deleted the additions under section 68.”