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Income Tax Appellate Tribunal, “C”BENCH KOLKATA
Before: Shri Sanjay GargandDr. Manish Borad
order : October 18, 2023 आदेश / ORDER संजय गग�, �या�यक सद�य �वारा/ Per Sanjay Garg, Judicial Member: The present appeal has been preferred by the revenue against the order dated 31.03.2023 of the Commissioner of Income Tax (Appeals)-20, Kolkata [(hereinafter referred to as the ‘CIT(A)’] passed u/s 250 of the Income Tax Act (hereinafter referred to as the ‘Act’). 2. The revenue in this appeal has taken the following grounds of appeal: “1. On the facts and in the circumstances of the case, the Ld. CIT(A) erred inlaw by deleting the additions made u/s 68 of the I.T. Act, 1961 onaccount of share application money receipt of Rs. 2,75,00,000/- ignoringthe facts that the A.0. has made the addition based on the facts that allthe limbs u/s 68 of the I.T. Act. are not satisfied in this case.
2. Whether on the facts and circumstances of the case, the CIT(A) erred inlaw in deleting the addition of Rs. 2,75,00,000/- made u/s 68 of the Assessment year: 2007-08 M/s ChamanMetallics Ltd I.T.Act, 1961 without going into merits of the case and the facts thatcreditworthiness of the share applicants could not be proven as therewas no rational of the fund received by share applicants and in turntransferred the fund in the form of share application money to theassessee company who is the ultimate beneficiary.
3. Whether on the facts and circumstances of the case, the CIT(A) erred inlaw in ignoring the observations of the Hon'ble Apex Court in case of NRAIron & Steel P Ltd 103 Taxmann.com48, as the of inquiry and analysismade by the AO established that assessee has failed to prove identity,creditworthiness and genuineness of the transaction.
4. Whether on the facts and circumstances of the case, the CIT(A) erred inignoring the ratio of judgment of jurisdictional High Court in the case of CIT vs. Precision Finance Pvt. Ltd. (1993) wherein it is held that merepayment by account payee cheque is not sacrosanct nor can it make anon-genuine transaction genuine.
5. That department carves leave to add, alter or modify any or all groundsof appeal either before or during course of Appellate Proceedings.”
3. A perusal of the above grounds of appeal would reveal that the revenue is aggrieved by the action of the CIT(A) in deleting the addition made by the Assessing Officer ( in short “the AO”) by treating the share application money received by the assessee as unexplained income of the assessee by observing that the assessee could not prove the identity and creditworthiness of the share applicants and genuineness of the transaction.
4. During the assessment proceedings, the Assessing Officer noted that the assessee had received share application money from the following parties:
M/s DantaVyapar Kendra Ltd. 105,00,000 2. M/s Gilbert Merchant Pvt. Ltd. 25,00,000/- 3. M/s Mod CommodealPvt. Ltd. 35,00,000/- 4. M/s Shree VinayFinvestlPvt. Ltd. 15,00,000/- 5. M/s SikharCommotradePvt. Ltd. 50,00,000/- Assessment year: 2007-08 M/s ChamanMetallics Ltd 6. M/s SwagatTreximPvt. Ltd. 15,00,000/- 7. M/s Adhunik Gases Pvt. Ltd. 30,00,000/- Total 2,75,00,000/-
To ascertain the Genuineness of the share application money, notices u/s. 133(6) were issued to the aforesaid parties by the assessing officer. However, notices issued in the names of M/s. Swagat Trexim Pvt. Ltd., M/s. Sikhar Commotrade Pvt. Ltd. and M/s. Shree Vinay Finvestl Pvt. Ltd. were received back un-served with postal remarks ‘not known’. Thereafter, AO asked the assessee to physically produce the concerned parties for personal deposition before him. However, assessee could not produce these parties before the AO. Replies were-received from M/s. Gilbert Merchant Pvt. Ltd., M/s. Adhunik Gases Pvt. Ltd. and M/s. Mod Commodeal Pvt. Ltd..M/s. Adhunik Gases Pvt. Ltd. had denied investing any money in assessee company in the current year and the submissions of the other two parties were not accepted by the AO, because AO was not convinced with their reply. Under the circumstances, AO was convinced that assessee had introduced its own unaccounted money in the garb of share application money.
During the appellate proceedings before the CIT(A), the assessee made the following submissions:
“3 . 2 (a) In the appellate proceedings, appellant have submitted that assessee is a part of MSP Group of companies. After completion of assessment proceedings u/s. 143(3), a search & seizure action was conducted on 06.10.2010 and subsequent dates at the premises of the MSP Group. M/s. Chaman Metallics Ltd., assessee company, along with all seven share applicants, is part of MSP Group. Assessee was covered by action u/s. 132(1) of the I.T. Act along with sister concern/ group companies. Appellant has submitted that out of the seven parties, following four parties had also paid share application money to the assessee during preceding years, but no doubts were raised on those Assessment year: 2007-08 M/s ChamanMetallics Ltd share application money and these have been accepted as genuine. As per the details submitted by the appellant, following four parties had also paid share application money in years prior to assessment year 2007-08:
1. 1. M/s. Danta Vyapar Kendra Ltd.
2. M/s. Shree Vinay Finvestl Pvt. Ltd.
3. M/s. SikharCommotrade Pvt. Ltd. and 4. M/s. Swagat Trexim Pvt. Ltd. Regarding the return of notices u/s. 133(6) in respect of three parties, appellant has submitted that notices were sent on wrong address. Out of the said three parties, two parties namely M/s. Shree Vinay Finvest Pvt. Ltd. and M/s. Swagat Trexim Pvt. Ltd. were also covered by search & seizure action on 06.10.2010. Hence, identity and genuineness of the said two companies are proved. Regarding the other three parties which had sent their replies in response to notice u/s. 133(6), appellant has submitted that AO has not considered their replies. Regarding non appearance of the Directors, appellant has submitted that the Directors of the share applicant companies are independent individuals and not employees of the assessee company. Hence, their non appearance should not be treated as non-compliance on the part of the assessee company. Appellant further submits that a sum of Rs.30,00,000/- invested by M/s. Adhunik Gases Pvt. Ltd. for share application was received in the preceding year, relevant for assessment year 2006-07. Appellant has given the details of the cheque through which this money was received. Appellant submits that under the circumstances, AO failed to appreciate the legally settled position that money received in earlier years cannot be added to the total income of the current year. Appellant has cited the following decisions in support of its contentions: 1. Ivan Singh Vs. ACIT (2020) 116 taxmann.com 499 (Bombay HC) 2. PCIT Vs. Realvalue Realtors Pvt. Ltd. (2020) 113 taxmann.com 62 (Bombay HO) 3. CIT Vs. Usha Stud Agricultural Farms Ltd. (2009) 183 Taxman 277 (Delhi High Court) 3.2(b). Appellant submits that all the share applicants, along with assessee company, are group companies of MSP group. Most of the share applicants are existing shareholders of assessee. The Directors of the share applicants also held directorship in the assessee company. Appellant has given details of shareholding of the assessee company and the various share applicant companies to show that the Directors are common in assessee company and the share applicant companies. The details given by the appellant further reveals that there is common Assessment year: 2007-08 M/s ChamanMetallics Ltd shareholding between the assessee company and the share applicants showing that these are all cross shareholdings and the share applicants are all part of the MSP group. Appellant has further given details of the scrutiny assessment carried out in the cases of various share applicants. M/s. Danta Vyapar Kendra Ltd. has faced scrutiny for assessment year 2013-14 and assessment year 2017-18. M/s. Mod CommodealPvt. Ltd. has faced scrutiny in assessment year 2010-11, assessment year 2014- 15, assessment year 2016-17 and assessment year 2017-18. M/s. Sikhar Commotrade Pvt. Ltd. has faced scrutiny in assessment year 2012-13, assessment year 2016-17 and assessment year 2017-18. Appellant has further submitted that all the share applicants were registered with ROC and they were, regularly filing income tax return and also complying with the requirements of the ROC, Appellant further submits that all that share applicants had sufficient net worth and their investment in shares of the assessee company was very small as compared to their net worth. Appellant has submitted the following details in this regard: 1. M/s Danta Vyapar Kendra Ltd. 105,00,000 2. M/s Gilbert Merchant Pvt. Ltd. 25,00,000/- 3. M/s Mod Commodeal Pvt. Ltd. 35,00,000/- 4. M/s Shree Vinay Finvestl Pvt. Ltd. 15,00,000/- 5. M/s SikharCommotradePvt. Ltd. 50,00,000/- 6. M/s SwagatTreximPvt. Ltd. 15,00,000/- 7. M/s Adhunik Gases Pvt. Ltd. 30,00,000/- Total 2,75,00,000/- 3.2(c) Appellant submits that all the share applicants were having sufficient own funds to invest in the assessee company. Hence, their creditworthiness cannot be doubted. All these facts were brought before the AO at the time of assessment proceedings. However, AO has not considered these facts. Appellant further submits that from M/s. Danta Vyapar Kendra Ltd. share application money was also received in the preceding years but the genuineness of these have been accepted by the Department. In the case of M/s. Gilbert Merchant Pvt. Ltd., assessment u/s.153A read with section 143(3) has been completed for assessment years 2005-06 to 2010-11. This company has since merged with M/s. Jagran VyaparPvt. Ltd. w.e.f. 01.04.2020. Assessment u/s.153A read with section 143(3) has been completed in the case of M/s. Shree Vinay FinvestPvt. Ltd. for assessment years 2005-06 to 2020-21. Assessee had also raised share application money from this party in the preceding year. However, these have been accepted by the Department. Similarly, assessee had also raised share application money from M/s. Sikhar Commotrade Pvt. Ltd. in preceding years. However, genuineness of the share application money received in the preceding years have been accepted by the Department. Assessment u/s.153A read with section 143(3) has been completed in the case of M/s. Swagat TreximPvt. Ltd. for Assessment year: 2007-08 M/s ChamanMetallics Ltd assessment years 2005-06 to 2010-11. Assessee had raised share application money from this company in the preceding years, as well. However, Department has accepted the genuineness of the share application money raised in earlier years. Regarding M/s. Adhunik Gases Pvt. Ltd., assessee had submitted that this company was also assessed u/s.153A read with section 143(3) for assessment years 2005-06 to 2010- 11. This company had since merged with M/s. JagronVyaparPvt. Ltd. w.e.f. 01.04.2020. Under these facts, appellant submits that the share applicant companies were active companies making full compliance to both ROC and Income tax. Documents submitted during assessment proceedings had established the identity and creditworthiness of these companies. Appellant refers to the decision of Kolkata ITAT in ITO Vs. Shri Jamuna Das Gupta in which has held that once creditworthiness of the source is proved then the assessee is not responsible for source of source. Appellant submits that this order of the ITAT has been upheld by the Hon'ble Calcutta High Court in ITAT-20 of 2011. Appellant further submits that it had submitted all the documents regarding the identity, creditworthiness and genuineness of the transactions. However,' AO has not found any defects in the documents submitted during assessment proceedings. AO cannot make any addition only on the basis of non appearance of the Directors. Appellant has submitted copies of all the documents which were submitted before the AO to establish the identity and creditworthiness of the investors. 3.2(d) Appellant further submits that all the investor companies are sister / group companies. Hence, share capital received from these parties cannot be added as unexplained cash credit in view of the following decisions: i) PCIT -vs.-Anmol Stainless (P.) Ltd. (2022) 138. taxmann.com 535 (Calcutta HC) dated 9th February, 2022 ii) ACIT -vs.- M/s. Anmol Stainless Pvt. Ltd. (ITA No. 1862/Ko1/2017 dated 19-07-2019) iii) ITO -vs.- M/s. RKB Services Pvt. Ltd. (ITA No. 1530/Ko1/2019 dated 22-01-2021) (Kol. ITAT) iv) JCIT[OSD) -vs.- M/s. Shivam Iron & Steel Company Pvt. Ltd. (ITA No. 238/Kol/2020 dated 22-10-2020 (Kolkata ITAT). 3.2(e) Appellant submits that share applicant was regularly assessed to Income tax. Appellant has submitted copies of assessment orders of various; years passed in the case of share applicants. Under the circumstances, it cannot be said that share applicant company is not in existence, in view of the following case laws :- i) M/s. Shah Tracom Pvt. Ltd. -vs.- ITO (MA No. 1/Kol/2021 dated 25.02.2021) (Kolkata ITAT) ii) M/S. Shreenath Holding Pvt. Ltd. vs. ITO in ITA No. 2390/Ko1/2019; A.Y. 2012-13, order dt. 26/02/2020 Assessment year: 2007-08 M/s ChamanMetallics Ltd iii) M/s. Sanmin Trading & Holding Pvt. Ltd. -vs.- ITO (ITA NO. 2020/Ko1/2019 dated 13-11-2020) 3.2(f) Appellant further submits that non-compliance to notice u/s. 133(6) and non-appearance before the A.O. cannot be a basis for making addition in view of the following decisions : i) Income Tax Officer, Wd-12(3)/Kol Vs. M/S Harshwardhan Gems Pvt. Ltd in vide order dt. 03.02.2016 (ITAT Kolkata Bench) ii) M/s. Commissioner of Income Tax vs. Orissa Corporation (P) Ltd. (Hon'ble Supreme Court) in 159ITR 078 dt. 19.03.1986. iii) M/s. Commissioner of Income Tax Vs. Kamdhenu Steel & Alloys Ltd. &Ors. (Hon'ble Delhi High Court) in 361 ITR 220 dt. 23.12.2011. iv) M/s. A-One Housing Complex Ltd. Vs. Income Tax Officer (Hon'ble ITAT Delhi in 110 ITD 361 dt. 18.05.2007. 3.2(g) Appellant submits that share applicant is a corporate body registered with ROC and share application money was received through proper banking channels. Share applicant was have registered PAN and filing regular returns. Under the circumstances, addition made by the A.O. arbitrary and totally unjustified in view of the following case laws:- i) ITO vs M/s. Steel Emporium Ltd., Hon'ble ITAT Kolkata in ITA No. 1061/Ko1/2012 dated 05.02.2016, ii) DCIT Vs. Piramal Realty Pvt. Ltd., Hon'ble Mumbai ITAT dated 16.11.2018 iii) Hon'ble jurisdictional ITAT in the case of DCIT vs Jagannath BanwarilalTexofabs Pvt. Ltd. in ITA NO. 1762/Ko1/2016 dated 26.10.2018, iv) Hon'ble jurisdictional ITAT in the case of ITO vs Trend Infra Developers Pvt. Ltd. in ITA NO. 2270/Ko1/2016 dated 26.10.2018 v) PCIT Vs. Himachal Fibres Ltd. Hon'ble Delhi High Court dated 28.02.2018, vi) PCIT vs Paradise Inland Shipping (P.) Ltd. in 93 taxmann.com 84 dated 23.04.2018 3.2(h) Appellant has also relied on the following case laws against additions of share application money u/s.68 of the IT. Act: i) M/s. Zimkele. Commodeal Pvt. Ltd. v/s. DCIT, ITA No. 959(2011), ITAT (Kol) dt. 24.08.2016; ii) Income Tax Officer,, Wd-12(3)/KoI Vs. M/S Harshwardhan Gems Pvt. Ltd in ITA No.1337/Ko1/2010 vide order dt. 03.02.2016 (ITAT Kolkata Bench)
Assessment year: 2007-08 M/s ChamanMetallics Ltd iii) PrahuDhan Infrastructure Pvt. Ltd. \/s. DCIT vide order dt. 20.01.2016; iv) ACIT Us Global Mercantile Pvt. Ltd. in (2016) 46 CCH 41 dt.13.01.2016 (ITAT Kolkata Bench) v) Hon'ble Apex Court in the case of CIT vs Lovely Exports (P) Ltd. reported in (2008) 216 CTR 195 (SC) vi) Hon'ble Calcutta High Court in the case of CIT vs Roseberry Mercantile (P) Ltd in GA No. 3296 of 2010 ITAT No. 241 of 2010 dated 10.01.2011, vii) CIT Vs Nishan Indo Commerce Ltd. in ITA No.52/2001 dt.02.12.2013 (Calcutta High Court) viii) ACIT v. Enrich Agro Food Products (P) Ltd. [2022] 141 taxmann.com 309 (Delhi - Trib.) ix) DCIT v. Karmeshwar Exim (P) Ltd. [2022] 138 taxmann.com 560 (Surat-Trib.) 7. Considering the aforesaid submissions of the assessee, the ld. CIT(A) deleted the addition so made by the Assessing Officer on this issue, observing as under:
“3.3 I have carefully considered the facts of the case and submission of the appellant. All the creditors are group companies of the assessee with common director. Appellant has clarified that the three notices which were returned by the postal authorities were sent on wrong addresses. Reply was received from other three parties but AO has not duly considered their submissions. M/s. Adhunik Gases Pvt. Ltd. had replied that they had not made any investment in the current year and they were right because Rs. 30,00,000/- as share application money was received in the preceding year and not in the current year. Hence, this amount is not taxable in the current year u/s.68 of the Act, as held in various judgments, some of which have been referred by the appellant in its submissions. Hence, addition u/s 68 of the Act should not have exceeded Rs.2,45,00,000/-. Appellant has further pointed out that AO has not found any discrepancies in the other two replies received from the creditors. It appears that, AO has not accepted their replies only for the reasons that their bank accounts revealed that as soon as funds were received in their account these were given away to other parties. However, this cannot be a justification for rejecting their replies. AO has not pointed out any issues relating to creditworthiness of any of the parties. Additions have been made only because the Directors of these companies could not be physically produced before the AO. Non production of the Directors of lender companies cannot be fully justified but this fact alone cannot be the basis Assessment year: 2007-08 M/s ChamanMetallics Ltd for any addition u/s.68 of the Act. Appellant has cited several case laws, as above, where it is held that non-compliance to summons u/s.131 cannot be the basis for addition. Regarding identity of these parties, appellant has pointed out that all these parties are group companies with common director and in a subsequent search on the MSP group, many of these companies were also covered u/s. 132(1) of the I.T. Act. Besides, some of the companies have faced multiple scrutiny assessments, the details of which have been given in assessee’s submissions. Besides, all the relevant documents relating to the identity of these companies were submitted during scrutiny proceedings. Two of these parties have later merged with another group company M/s. JagranVyaparPvt. Ltd. In view of these facts, identity of the said companies are fully established. Perusal of the details regarding the financial strength of these companies, reveals that all these companies were high net worth companies and they had sufficient capacity for giving share application money to the assessee company. Another important fact is that four of the share applicant companies had also given share application money in the preceding years and genuineness of those share application money was never doubted by the AO. When the AO does not doubt the identity and capacity of the share applicant companies in the preceding years, there is no reason to doubt the same in the current year when the share application money is a small part of the total net worth of the share subscribing companies. Under the facts and circumstances of the case, I am satisfied that appellant has established the identity, creditworthiness and the genuineness of the transaction through its explanation and supporting documents. Under the circumstances, addition u/s.68 of the Act in respect of share application money is not justified. Hence, AO is directed to delete the addition of Rs.2,75,00,000/-.”
Before us, the ld. DR has submitted that the assessee could not produce the directors of the share applicants in person before the Assessing Officer, therefore, the Assessing Officer was justified in making the impugned additions. He, in this respect, has relied upon the assessment order of the Assessing Officer.
The ld. counsel for the assessee, on the other hand, drawing our attention to the above reproduced findings of the CIT(A) has submitted that the ld. CIT(A) has categorically noted that all the share Assessment year: 2007-08 M/s ChamanMetallics Ltd applicants/creditors were group companies of the assessee with common directors. That so far as the observation that the notices sent to three companies were returned back, it was duly explained that the said notices were sent at wrong address. It was further explained that the assessee along with 7 share applicants was part of the MSP group. That a search and seizure operation was carried out u/s 132 on 06.10.2010 and subsequent dates in the premises of the MSP group and the assessee was also covered under the search action along with other sister concern/group companies.That the three companies named above, in case of whom notices remained un-served, two companies namely Shree Vinay Finvest Pvt. Ltd. and Swagat Trexim Pvt. Ltd. were also part of the search and seizure operation carried out u/s 132 of the Act on 06.10.2010 and subsequent dates in the premises of the MSP group. Therefore, the identity and genuineness of the aforesaid two companies was duly established. That the other companies duly complied with the notices issued u/s 133(6) of the Act by the Assessing Officer and duly furnished all the requisite documents to prove their identity, creditworthiness and genuineness of the transaction. The ld. counsel, in this respect, has submitted that the following details/documents were furnished in respect of each of the share applicant : “1. M/s Danta Vyapar Kendra Ltd. (Share Applicant) a. Certificate towards the payment of share application money b. Copy of acknowledgement Slip towards the receipt of share application money from M/s Danta Vyapar Kendra Pvt. Ltd. c. Relevant copy of Bank statement d. Copy of Ledger a/c of Chaman Metallics Pvt. Ltd. in the books of M/s Danta e. Vyapar Kendra Ltd. for the A.Y. 2007-08 f. Copy of group summary of the payment of share application money g. Copy of PAN Card h. Return filing acknowledgement for the AY 2007-08 i. Return filing acknowledgement for the AY 2022-23 Assessment year: 2007-08 M/s ChamanMetallics Ltd j. Audited Balance Sheet &P/L account for the year ended 31.03.06 k. Audited Balance Sheet & P/L account for the year ended 31.03.07 l. Copy of Company Master Details from the Website of MCA m. Copy of Certificate of Registration as NBFC n. Certificate of incorporation, Certificate of commencement of business plus Copy of MOA & AOA o. Assessment order u/s 143(3) dtd. 08.12.2016 of AY 2013-14 p. Assessment order u/s 143(3) dtd. 06.12.2019 of AY 2017-18 q. Shareholding as on 31.03.2007
M/s Gilbart Merchants Pvt. Ltd. (Share Applicant) (since merged with Jagran Vyapar Pvt. Ltd. w.e.f. 01.04.2020) i) Certificate towards the payment of share application money ii) Order of NCLT, Kolkata dated 23.06.2022 approving the Scheme of Amalgamation iii) Copy of acknowledgement Slip towards the receipt of share application money from M/s Danta Vyapar Kendra Pvt. Ltd. iv) Copy of Form of Share Application v) Copy of Ledger a/c of M/s Chaman Metallics Pvt. Ltd. in the books of M/s Gilbert Merchants Pvt. Ltd. for the AY 2007-08 vi) Relevant copy of Bank Statement vii) Return filing acknowledgement of AY 2007-08 viii) Return filing acknowledgment of Jagran Vyapar Pvt. Ltd. for the AY 2022-23 ix) Audited Balance Sheet & P/L A/c for the year ended 31.03.2007 x) Copy of PAN card xi) Copy of Master Details from the website of MCA xii) Certificate of incorporation plus copy of MOA & AOA xiii) Assessment order u/s 153A / 143(3) dtd. 30.03.2013 of AY 2005-06 xiv) Assessment order u/s 153A / 143(3) dtd. 30.03.2013 of AY 2006-07 xv) Assessment order u/s 153A / 143(3) dtd. 30.03.2013 of AY 2007- 08 xvi) Assessment order u/s 153A / 143(3) dtd. 30.03.2013 of AY 2008-09 xvii) Assessment order u/s 153A / 143(3) dtd. 30.03.2013 of AY 2009-10 xviii) Assessment order u/s 153A / 143(3) dtd. 30.03.2013 of AY 2010-11 xix) Assessment order u/s 153A / 143(3) dtd. 27.12.2917 of AY 2010-11 Assessment year: 2007-08 M/s ChamanMetallics Ltd xx) Assessment order u/s 153A / 143(3) dtd. 30.03.2013 of AY 2011- 12 xxi) Assessment order u/s 153A / 143(3) dtd. 18.03.2015 of AY 2012-13 xxii) Assessment order u/s 153A / 143(3) dtd. 02.12.2019 of AY 2017-18 xxiii) Shareholding as on 31.03.2007 1. Documentary evidence of source of share applicant – M/s Howrah Gases Ltd. i. Copy of relevant page of Bank statement ii. Copy of ITR Acknowledgment for AY 2007-08 iii. Copy of Audited Accounts for the AY 2006-07 3. M/s Mod Commodeal Pvt. Ltd. (share Applicant) iv. Certificate towards the payment of share application money v. Copy of acknowledgement Slip towards the receipt of share application money from M/s Mod Commodeal Pvt. Ltd. vi. Copy of Form of Share Application vii. Copy of Ledger a/c of Chaman Metallics Pvt. Ltd. in the books of M/s Mod Commodeal Pvt. Ltd. for the A.Y. 2007-08 viii. Relevant copy of Bank statement ix. Return filing acknowledgement for the AY 2007-08 x. Return filing acknowledgement for the AY 2022-23 xi. Audited Balance Sheet & P/L account for the year ended 31.03.07 xii. Copy of PAN Card xiii. Copy of Company Master Details from the Website of MCA xiv. Assessment order u/s 147/143(3) dtd. 29.12.2017 of AY 2010-11 xv. Assessment order u/s 143(3) dtd. 27.12.2016 of AY 2014-15 xvi. Assessment order u/s 143(3) dtd. 19.12.2018 of AY 2016-17 xvii. Assessment order u/s 143(3) dtd. 24.12.2019 of AY 2017-18 xviii. Shareholding as on 31.03.2007 2. Documentary evidence of source of Share Applicant - M/s. MSP Steel & Power Ltd. (xvi) Copy of ITR Acknowledgement for AY 2007-08 (xvii) Copy of Audited Accounts for the FY 2006-07 Assessment year: 2007-08 M/s ChamanMetallics Ltd
M/s. Shree VinayFinvest Pvt. Ltd. (Share Applicant) i. Certificate towards the payment of share application money ii. Copy of acknowledgement Slip towards the receipt of share application money from M/s Shree VinayFinvest Pvt. Ltd. iii. Copy of Form of Share Application iv. Relevant copy of Bank statement v. Copy of Ledger a/c of ChamanMetallics Pvt. Ltd. in the books of M/s Shree VinayFinvest Pvt. Ltd. for the A.Y. 2007-08 vi. Copy of PAN Card vii. Return filing acknowledgement for the AY 2007-08 viii. Return filing acknowledgement for the AY 2022-23 ix. Audited Balance Sheet & P/I 2cc0unt for the year ended 31.03.07 x) Copy of Company Master Details from the Website of MCA xi. Copy of Certificate of Registration as NBC xii. Certificate of incorporation plus Copy of MOA & AOA xiii. Assessment order u/s 153A/143 (3) dtd. 30.03.2013 of AY 2008- 09 xiv. Assessment order u/s 153A/143(3) dtd. 30.03.2013 of AY 2009-10 xv. Assessment order u/s 153A/143(3) dtd. 30.03.2013 of AY 2007-08 xvi) Assessment order u/s 153A/143(3) dtd. 30.03.2013 of AY 2010-11 xvii. Assessment order u/s 147/143(3) dtd. 28.12.2015 of AY 2011-12 xviii. Assessment order u/s 143(3) dtd. 30.03.2013 of AY 2011-12 xix. Assessment order u/s 153A/143(3) dtd. 30.03.2013 of AY 2005-06 xx) Assessment order u/s 153A/143(3) dtd. 30.03.2013 of AY 2006-07 xxi)Assessment order u/s 154/143(3) dtd. 10.06.2013 of AY 2011-12 xxii)Assessment order u/s 143(3) dtd. 17.03.2015 of AY 2012-13 xxiii) Assessment order u/s 143(3) dtd. 24.09.2019 of AY 2017-18 xxiv. Shareholding as on 31.03.2007 5. M/s. Sikhar Commotrade Pvt. Ltd. (Share Applicant) i. Certificate towards the payment of share application money ii. Copy of acknowledgement Slip towards the receipt of share application money from M/s Sikhar Commotrade Pvt. Ltd. iii. Copy of Form of Share Application iv. Relevant copy of Bank statement v. Copy of Ledger a/c of Chaman Metallics Pvt. Ltd. in the books of M/s Sikhar Commotrade Pvt. Ltd. for the A.Y. 2007-08 vi. Copy of PAN Card vii. Return filing acknowledgement of AY 2007-08 viii)Return filing acknowledgement for the AY 2022-23 ix. Audited Balance Sheet & P/L account for the year ended 31.03.06 x. Copy of Company Master Details from the Website of MCA xi. Certificate of incorporation plus Copy of MA & AA xii. Assessment order u/s 143(3) dtd. 31.07.2014 A.Y 2012-13 xiii. Assessment order u/s 143(3) dtd. 19.12.2018 of A.Y 2016-17 xiv. Assessment order u/s 143(3) dtd. 26.11.2019 of AY 2017-18 Assessment year: 2007-08 M/s ChamanMetallics Ltd Shareholding as on 31.03.2007 6. M/s. Swagat Trexim Pvt. Ltd. (Share Applicant) i. Certificate towards the payment of share application money ii. Copy of acknowledgement Slip towards the receipt of share application money from M/s. Swagat Trexim Pvt. Ltd. iii. Copy of Form of Share Application iv. Relevant Copy of Bank statement v. Copy off Ledger a/c of Chaman Metallics Pvt. Ltd. in the books of M/S. Swagat Trexim Pvt. Ltd. for the A.Y. 2007-08 vi. Copy of PAN Card vii. Return filing acknowledgement & computation of tax viii. Return filing acknowledgement for the AY 2022-23 ix. Audited Balance Sheet& P/L account for the year ended 31.03.07 x. Copy of Company Master Details from the Website of MCA xi. Copy of Certificate of Registration as NBFC xii. Certificate of incorporation plus Copy of MOA & AOA xiii. Assessment order u/s 153A/143(3) dtd. 30.03.2013 of AY 2005- 06 xiv. Assessment order u/s 153A/143(3) dtd. 30.03.2013 of AY 2006-07 xv. Assessment order u/s 153A/143(3) dtd. 30.03.2013 of AY 2007-08 xvi. Assessment order u/s 153A/143(3) dtd. 30.03.2013 of AY 2008-10 xvii. Assessment order u/s 153A/143(3) dtd. 30.03.2013 of AY 2009- 10 xviii. Assessment order u/s 153A/143(3) dtd. 30.03.2013 of AY 2010- 11 xix. Assessment order u/s 143(3) dtd. 30.03.2013 of AY 2011-12 xx. Assessment order u/s 147/143(3) dtd. 26.11.2018 of AY 2011-12 xxi. Assessment order u/s 143(3) dtd. 17.03.2015 of AY 2012-13 xxii. Assessment order u/s 143(3) dtd. 14.12.2019 of AY 2017-18 xxiii. Shareholding as on 31.03.2007 7. M/s. Adhunik Gases Ltd. (Share Applicant) (since merged with Jagran Vyapar Pvt. Ltd. w.e.f. 01.04.2020) i. Certificate towards the payment of share application money ii. Copy of acknowledgement application money from M/s. Adhunik Gases Limited. iii. Relevant copy of Bank statement iv. Copy of Ledger a/c of Charnan Metallics Pvt Ltd, in the books of M/s. M/s. Adhunik Gases Ltd, for the A.Y, 2006-07. v. Copy of Ledger a/c of Charman MetallicsPrt. Ltd. in the books of M/s. M/. Adhunik Gases Ltd. for the A.Y, 2007-08. vi. Return filing acknowledgement vii. Audited Balance Sheet & P/L account for the year ended 31.03.07 viii. Copy of PAN Card (ix) Copy of Company Master Details from the Website of MCA x. Certificate of incorporation plus Copy of MOA B AOA Assessment year: 2007-08 M/s ChamanMetallics Ltd (xi) Assessment order u/s 153A/143(3) dtd. 30.03.2013 of AY 2005-06 (xii) Assessment order u/s 153A/143(3) dtd. 30.03.2013 of AY 2006-07 (xiv) Assessment order u/s 153A143(3) dtd. 30.03.2013 of AY 2007-08 (xv) Assessment order u/s 153A/143(3) dtd. 30.03.2013 of AY 2008-10 (xvi) Assessment order u/s 153A/143(3) dtd. 30.03.2013 of AY 2009- 10 (Xvii) Assessment order u/s 153A/143(3) dtd. 30.03.2013 of AY 2010- 11 (xvii) Assessment order u/s 143(3) dtd. 30.03.2013 of AY 2011-12 (Xix) Assessment order u/s 143(3) dtd. 18.03.2015 of AY 2012-13 xx. Assessment order u/s 143(3) dtd. 14.12.2019 of AY 2017-18 (xxi) Shareholding as on 31.03.2007”
It was also explained before the Assessing Officer that the entire share application money of Rs.2.75 crores was not received during the year. That the sum of Rs.30 lakh was received during prior years from Adhunik Gases Ltd., therefore, the said company rightly stated before the AO that no amount was invested by it in the assessee company during the year under consideration. However, the Assessing Officer failed to take note of the same. It was explained that all the share applicants were group companies of the assessee and most of the share applicants were existing shareholders of the assessee. Out of 7 share applicants, four share applicants were covered under the search action carried out u/s 132 of the Act, therefore, their identity was duly established. Furthermore, the other three share applicants have also been assessed under Income Tax Act from time to time and scrutiny assessment was carried out u/s 143(3) in their cases for different assessment years. The share applicants were having sufficient net worth for making investments in the assessee company, the details of which have been reproduced by the CIT(A) in the impugned order. The Assessing Officer did not point out any defect or discrepancy in the evidences furnished by the assessee.
Assessment year: 2007-08 M/s ChamanMetallics Ltd 11. The Assessee, in this case, as noted above, explained about the identity, creditworthiness and financials etc. of each of the share subscriber company individually. The AO, in our view, could have taken an adverse inference, only if, he would have pointed out the discrepancies or insufficiency in the evidences and details received in his office and pointed out as to on what account further investigation was needed by way of recording of statement of the directors of the subscriber companies. Even if the directors of the subscriber companies have not come personally in response to the summons issued by the AO, in our view, adverse inference cannot be taken against the assessee solely on this ground as it is not under control of the assessee to compel the personal presence of the directors of the shareholders before the AO.The Ld. Counsel for the assessee has rightly placed reliance upon the decision of the Hon’ble Bombay High Court in the case of PCIT, Panji vs. Paradise Inland Shipping Pvt. Ltd. reported in (2017) 84 taxman.com 58 (Bom) wherein the Hon’ble High Court has held that once the assessee has produced documentary evidence to establish the existence of the subscriber companies, the burden would shift on the revenue to establish their case. Further the jurisdictional Calcutta High Court in the case of “Crystal networks (P) Ltd. vs CIT” (supra) has held as under:
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 Assessment year: 2007-08 M/s ChamanMetallics Ltd advance given by the creditors have been established the Tribunal should not have ignored this fact finding.
So far as the reliance of the Ld. DR on the decision of the hon’ble Supreme Court in the case of “PCIT v/s NRA Iron & Steel (P) Ltd.” (supra) is concerned, we note that the hon’ble Supreme Court in the said case has taken note of the observations made by the Supreme Court in the “the land mark case of Kale Khan Mohammed Hanif v. CIT [1963] 50 ITR 1 (SC) and Roshan Di Hatti v. CIT [1977] 107 ITR 938 (SC) laying down the proposition that the onus of proving the source of a sum of money found to have been received by an assessee, is on the assessee. Once the assessee has submitted the documents relating to identity, genuineness of the transaction, and credit-worthiness, then the AO must conduct an inquiry, and call for more details before invoking Section 68. If the Assessee is not able to provide a satisfactory explanation of the nature and source, of the investments made, it is open to the Revenue to hold that it is the income of the assessee, and there would be no further burden on the revenue to show that the income is from any particular source.”
Thereafter the hon’ble Supreme court summed up the principles, which emerged after deliberating upon various case laws, as under : “11. The principles which emerge where sums of money are credited as Share Capital/Premium are : i. The assessee is under a legal obligation to prove the genuineness of the transaction, the identity of the creditors, and credit- worthiness of the investors who should have the financial capacity to make the investment in question, to the satisfaction of the AO, so as to discharge the primary onus. ii. The Assessing Officer is duty bound to investigate the credit- worthiness of the creditor/subscriber, verify the identity of the subscribers, and ascertain whether the transaction is genuine, or these are bogus entries of name-lenders.
Assessment year: 2007-08 M/s ChamanMetallics Ltd iii. If the enquiries and investigations reveal that the identity of the creditors to be dubious or doubtful, or lack credit-worthiness, then the genuineness of the transaction would not be established. In such a case, the assessee would not have discharged the primary onus contemplated by Section 68 of the Act.”