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Income Tax Appellate Tribunal, INDORE BENCH, INDORE
Before: SHRI MAHAVIR PRASAD & SHRI MANISH BORAD
2008-09 are directed against the order of Ld. Commissioner of Income Tax(Appeals)-2 (in short ‘Ld. CIT], Bhopal dated 07.09.2019 which is arising out of the order u/s 147 of the Income Tax Act 1961(In short the ‘Act’) dated 29.03.2016 framed by ITO-4(1), Bhopal.
In the assessee has raised the following grounds of appeal:
“1. That on the facts and in the circumstances of the case and in law, the Ld. CIT(A) erred in upholding the validity of r- assessment proceedings initiated under section 147 of the Income Tax Act, 1961 without properly appreciating the facts of the case and submissions made before him.
2. That on the facts and in the circumstances of the case and in law, the Ld. CIT(A) erred in upholding the validity of re- assessment proceedings initiated under section 147 of the Income Tax Act 1961 even when there was no tangible material in possession of the assessing officer so as to prove the live link of concealment of income.
That on the facts and in the circumstances of the case and in law, the Ld. CIT(A) erred in upholding the validity of re- assessment proceedings initiated under section 147 of the Income Tax Act 1961 even when Assessing Officer re-opened the case of the appellant merely for the purpose of making roving the fishing inquiries which is not permissible in law.
4. That on the facts and in the circumstances of the case and in law, the Ld. CIT(A) erred in upholding the validity of re- 2
M/s. Reliable Global Venture P. Ltd. & 335/Ind/2020 assessment proceedings initiated under section 147 of the Income Tax Act 1961 without obtaining proper sanction from the competent authority under section 151 of the Income Tax Act, 1961.
5. That on the facts and in the circumstances of the case and in law, the Ld. CIT(A) erred in maintaining the addition of Rs.80,00,000/- out of the addition of Rs.2,60,00,000/- made by the assessing officer under section 68 of the Income Tax Act 1961 on account of share application money received during the year without properly appreciating the facts of the case and submissions made before him more so when the appellant had properly discharged the primary onus case upon it under section 68 of the Act.
6. That on the facts and in the circumstances of the case and in law, the Ld. CIT(A) erred in maintaining the addition of Rs.80,00,000/- out of the addition of Rs.2,60,00,000/- made by the assessing officer under section 68 of the Income Tax Act 1961 on account of share application money received during the year even when no business activities were carried out during the year and henceforth, there arises no question of earning any income, much less any undisclosed income.
7. The appellant reserves the right to add, alter and modify the grounds of appeal as taken by it.
The Revenue has raised the following grounds of appeal in ITA No. 335/Ind/2020:
1. Whether on the facts and in the circumstances of the case, the CIT(A) was justified in deleting the addition of Rs.1,80,00,000/- out of total addition of Rs.2,60,00,000/- made by the AO on account of share application money.
2. Whether on the facts and in the circumstances of the case, the ld. CIT(A) was justified in holding that the assessee has discharged the onus to prove the identity and creditworthiness of the share applicants/creditors and the genuineness of the transactions in accordance with section 68 of the Income Tax Act.
M/s. Reliable Global Venture P. Ltd. & 335/Ind/2020
Brief facts as culled out from the records are that case of the assessee was reopened u/s 147 of the Act for the AY 2008-09. The Ld Assessing Officer while passing the assessment order added an amount of Rs 3,17,50,000/- to the total income of the assessee on account of share application money received by the assessee u/s 68 of the Act. The assessee thereafter filed a rectification application before the Ld Assessing Officer wherein it was stated that an amount of Rs 57,50,000/- added to the total income on account of share application money was related to the Financial Year 2003-04 and was not received during the year. The said contention was duly accepted by the Ld AO who subsequently passed a rectification order and reduced the amount of addition to Rs 2,60,00,000/- (Rs 3,17,50,000/- (-) Rs 57,50,000/-).
3. Being aggrieved, the assessee in the meantime also preferred an appeal before the Ld CIT(A) and partly succeeded as the Ld CIT(A) deleted the addition of Rs 1,80,00,000/- out of the total addition of Rs 2,60,00,000/- made by the Ld AO and sustained the remaining amount of addition of Rs 80,00,000/-.
M/s. Reliable Global Venture P. Ltd. & 335/Ind/2020
Ground Nos. 5 and 6 raised by the assessee challenge the action of the Ld CIT(A) in sustaining the addition of Rs 80,00,000/- out of the total addition of Rs 2,60,00,000/- made by the Ld Assessing Officer whereas Ground Nos. 1 and 2 raised by the Revenue challenge the action of the Ld CIT(A) in deleting the addition of Rs 1,80,00,000/- out of the total addition of Rs 2,60,00,000/- made by the Ld Assessing Officer on account of share application money. Brief facts relating to this issue are that the Ld Assessing Officer during the course of re-assessment proceedings made addition of Rs. 2,60,00,000/- to the total income of the assessee on account of share application money received from following share applicants:
S. No Name of the Company PAN Amount [Rs] 1 Kamakhya Developers P Ltd AABCK0981C 10,00,000 2 M/s MAPS Enterprises P Limited AABCM6875B 12,50,000 3 M/s Talent Infoway Limited AAACL3305J 20,00,000 4 M/s Buniyad Chemicals Limited AABCB6954G 10,00,000 5 M/s Jai Hind Synthetics Ltd AAACJ2475R 10,00,000 6 M/s Atishay Marketing P Limited AACCA5745R 10,00,000 7 M/s Sun Fruit P Limited (Now known as AAJCS2031D 12,50,000 Sun Mercantiles P Ltd ] 8 M/s Tuticorin Trexim P Limited AAACT9539J 20,00,000 (Previously known as M/s Makes worth Projects & Developers P Ltd)
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9 M/s Rays Netmark P Limited AADCR3152L 30,00,000 10 M/s Breeze Tracom P Limited AADCB1833Q 25,00,000 11 M/s Excel Merchant P Limited AABCE8172B 10,00,000 12 M/s Chandimata Management P Limited AACCC6782A 10,00,000 13 M/s Regal Banijya P Limited AADCR6961K 15,00,000 14 M/s Vaishno Devi Coloniser P Limited AABCV8060B 25,00,000 15 M/s Shubham Dealers P Limited AALCS0985Q 30,00,000 16 M/s Taral Vincom P Limited AAACT9890Q 10,00,000 Total 2,60,00,000
5. The Ld CIT(A) deleted the addition of Rs 1,80,00,000/- out of the total addition of Rs 2,60,00,000/- made by the Ld AO and sustained the addition of Rs 80,00,000/-. A summary of the amount of addition deleted and as maintained by the Ld CIT(A) out of the total addition of Rs 2,60,00,000/- is summarised as under:
S. Name of the Company PAN Amount [Rs] Deleted by Maintained No CIT(A) by the CIT(A) 1 Kamakhya Developers AABCK0981C 10,00,000 10,00,000 NIL P Ltd 2 M/s MAPS Enterprises AABCM6875B 12,50,000 12,50,000 NIL P Limited 3 M/s Talent Infoway AAACL3305J 20,00,000 20,00,000 Limited 4 M/s Buniyad AABCB6954G 10,00,000 10,00,000 NIL Chemicals Limited
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5 M/s Jai Hind AAACJ2475R 10,00,000 10,00,000 NIL Synthetics Ltd 6 M/s Atishay Marketing AACCA5745R 10,00,000 10,00,000 P Limited 7 M/s Sun Fruit P AAJCS2031D 12,50,000 12,50,000 NIL Limited (Now known as sun Mercantiles P Ltd) 8 M/s Tuticorin Trexim P AAACT9539J 20,00,000 20,00,000 NIL Limited (Previously known as M/s Makes worth Projects & Developers P Ltd) 9 M/s Rays Netmark P AADCR3152L 30,00,000 30,00,000 Limited 10 M/s Breeze Tracom P AADCB1833Q 25,00,000 25,00,000 NIL Limited 11 M/s Excel Merchant P AABCE8172B 10,00,000 10,00,000 NIL Limited 12 M/s Chandimata AACCC6782A 10,00,000 10,00,000 Management P Limited 13 M/s Regal Banijya P AADCR6961K 15,00,000 15,00,000 NIL Limited M/s Vaishno Devi 14 AABCV8060B 25,00,000 25,00,000 NIL Coloniser P Limited 15 M/s Shubham Dealers AALCS0985Q 30,00,000 30,00,000 NIL P Limited 16 M/s Taral Vincom P AAACT9890Q 10,00,000 10,00,000 Limited Total 2,60,00,000 1,80,00,000 80,00,000
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Now the assessee is in appeal before this Tribunal in respect of the additions confirmed by the Ld CIT(A) whereas the Revenue is in appeal in respect of the additions deleted by the Ld CIT(A).
7. Before us, the learned Counsel for the assessee submitted that the assessee duly explained the identity and creditworthiness of all the share applicants and genuineness of the transactions entered into with them with the help of ample documentary evidences which were filed/available before the Revenue Authorities and are also part of the paper book filed before this Tribunal. The learned Counsel for the assessee relied on ample documentary evidences and stated that these documents were never disproved either by the Ld Assessing Officer or by the Ld CIT(A). The learned Counsel for the assessee emphasized the fact that the Ld Assessing Officer himself accepted that inspectors visited and met Shri Ashok Kumar Surekha who represented as Chairman in these companies and relevant details were also provided by him to the inspectors. Detail of all these companies of Kolkata to which notices u/s 133(6) of the Act were issued has been filed in the paper book. The learned Counsel for the assessee also contended that the Ld AO himself did not deny the above 8
M/s. Reliable Global Venture P. Ltd. & 335/Ind/2020 submission of the assessee as filed during the course of re- assessment proceedings but rather he himself accepted that Shri Ashok Kumar Surekha was the chairman of all the companies.
With regard to the remaining share applicants, the Ld. Counsel submitted that the assessee duly explained the identity and creditworthiness of the share applicants and genuineness of the transactions entered into with them by filing the ample documentary evidences and share application money received from many of these companies had also been accepted as genuine by Co-ordinate benches of Tribunal in the relevant decisions filed in the paper book/written submission. Accordingly, the learned Counsel for the assessee submitted the addition deserves to be deleted in full.
On the other hand, the Ld. DR supported the findings of Ld. AO and submitted that that the Ld. AO was justified in making addition of Rs 2,60,00,000/- to the total income of the assessee on account of share application money.
We have heard the rival contentions and perused the record placed before us and also gone through the judgments and 9
M/s. Reliable Global Venture P. Ltd. & 335/Ind/2020 decisions referred to and relied upon by the Ld. Counsel for the assessee and Ld. DR. We find that the assessee received share application money of Rs 2,60,00,000/- during the year under consideration. Out of the total share application money of Rs 2,60,00,000/- received by the assessee, Ld CIT(A) deleted the addition of Rs 1,80,00,000/- and maintained the addition of Rs 80,00,000/-. We have also gone through the documentary evidences furnished by the assessee so as to substantiate its contention that share application money received by it was genuine and could not have been taxed by invoking the provisions of section 68 of the Act. Before us, the Ld. Counsel relied on the relevant documentary evidences and stated that these documents were never disproved either by the Ld AO or by the Ld CIT(A), which are summarised as under:
S. No Brief description of documents Page No. M/s Kamakhya Developers Private Limited [PAN: AABCK0981C] – Rs. 1 10,00,000/- Share application form regarding subscription of equity shares 1.1 1 of the assessee company Extracts of the Minutes of the meeting of the Board of Directors 1.2 2 duly authorizing Shri Ashok Sureka for making investment in stocks, shares, debentures and securities on behalf of the M/s. Reliable Global Venture P. Ltd. & 335/Ind/2020 company Company Master Data and Signatory Details as downloaded 1.3 3-4 from the website of Ministry of Corporate Affairs 1.4 Certificate of Incorporation 5 1.5 Memorandum of Association 6-23 1.6 Articles of Association 24-49 Director’s report dated 22-07-2008 for the year ended 31st 1.7 50-51 March, 2008 Audited financial statements for the year ended 31st March, 1.8 52-59 2008 Form 20B regarding filing of annual return by a company 1.9 having share capital with the Registrar for the Financial Year 60-64 2007-08 Form 23AC regarding filing of balance sheet and other 1.10 65-71 documents with the Registrar for the Financial Year 2007-08 Director’s report dated 18-08-2015 for the year ended 31st 1.11 72-82 March, 2015 Audited financial statements for the year ended 31st March, 1.12 83-96 2015 M/s Maps Enterprises Private Limited (Formerly known as M/s Maps 2 Portfolio and Holdings Private Limited) [PAN: AABCM6875B] – Rs. 12,50,000/- Share application form regarding subscription of equity shares of the assessee company 2.1 96-A
Extracts of the Minutes of the meeting of the Board of Directors duly authorizing Shri Ashok Sureka for making investment in 2.2 96-B stocks, shares, debentures and securities on behalf of the company Company Master Data and Signatory Details as downloaded 2.3 97-98 from the website of Ministry of Corporate Affairs 2.4 Certificate of Incorporation 99 2.5 Memorandum of Association 100-111
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2.6 Articles of Association 112-127 PAN detail as downloaded from the website of Income-Tax 2.7 128 Department Director’s report dated 22-07-2008 for the year ended 31st 2.8 129-130 March, 2008 Audited financial statements for the year ended 31st March, 2.9 131-139 2008 Form 20B regarding filing of annual return by a company having share capital with the Registrar for the Financial Year 2.10 140-144 2007-08 Form 23AC regarding filing of balance sheet and other 2.11 145-151 documents with the Registrar for the Financial Year 2007-08 Director’s report dated 17-08-2015 for the year ended 31st 2.12 152-155 March, 2015 Audited financial statements for the year ended 31st March, 2.13 156-170 2015 Form DIR-12 containing the particulars regarding appointment 2.14 171-174 of/ changes among directors and key managerial personnel M/s Talent Infoway Limited (Formerly known as M/s Ravit Vinimay 3 Limited) [PAN: AAACL3305J] – Rs. 20,00,000/- Share application form regarding subscription of equity shares 3.1 175-178 of the assessee company Extracts of the Minutes of the meeting of the Board of Directors 3.2 duly authorizing Mr. Jayesh K. Sampat for making investment in 179 the equity shares of the assessee company Company Master Data and Signatory Details as downloaded 3.3 180-181 from the website of Ministry of Corporate Affairs 3.4 Certificate of Incorporation 182 3.5 Memorandum of Association 183-203 3.6 Articles of Association 204-259 Director’s report dated 01-09-2008 for the year ended 31st 3.7 260-262 March, 2008 Audited financial statements for the year ended 31st March, 3.8 263-271
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2008 Form 20B regarding filing of annual return by a company 3.9 having share capital with the Registrar for the Financial Year 272-277 2007-08 Form 23AC regarding filing of balance sheet and other 3.10 278-284 documents with the Registrar for the Financial Year 2007-08 Form 23ACA regarding filing of profit and loss account and 3.11 other documents with the Registrar for the Financial Year 2007- 285-288 08 Form DIR-12 containing the particulars regarding appointment 3.12 289-296 of/ changes among directors and key managerial personnel 4 M/s Buniyad Chemicals Limited [PAN: AABCB6954G] – Rs. 10,00,000/- Share application form regarding subscription of equity shares 4.1 297-298 of the assessee company Extracts of the Minutes of the meeting of the Board of Directors 4.2 duly authorizing Mr. Mukesh M. Choksi for making investment in 299 the equity shares of the assessee company Company Master Data and Signatory Details as downloaded 4.3 300-301 from the website of Ministry of Corporate Affairs 4.4 Memorandum of Association 302-339 4.5 Articles of Association 340-409 PAN detail as downloaded from the website of Income-Tax 4.6 410 Department TAN detail as downloaded from the website of Income-Tax 4.7 411 Department Audited financial statements for the year ended 31st March, 4.8 412-418 2008 Form 18 containing the information regarding notice of situation 4.9 419-420 or change of situation of registered office Form 23B containing the information provided by the auditor to 4.10 421-422 the Registrar Form 23AC regarding filing of balance sheet and other 4.11 423-429 documents with the Registrar for the Financial Year 2007-08
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Director’s report dated 07-05-2014 for the year ended 31st 4.12 430-432 March, 2014 Audited financial statements for the year ended 31st March, 4.13 433-440 2014 5 M/s JaiHind Synthetics Limited [PAN: AAACJ2475R] – Rs. 10,00,000/- Share application form regarding subscription of equity shares 5.1 441-442 of the assessee company Extracts of the Minutes of the meeting of the Board of Directors duly authorizing Mr. Mukesh Choksi for making investment in 5.2 443 the equity shares of the assessee company Company Master Data and Signatory Details as downloaded 5.3 444-445 from the website of Ministry of Corporate Affairs Director’s report dated 25-06-2008 for the year ended 31st 5.4 446-453 March, 2008 Audited financial statements for the year ended 31st March, 5.5 454-467 2008 Form 23ACA regarding filing of profit and loss account and 5.6 other documents with the Registrar for the Financial Year 2007- 468-471 08 Form 23AC regarding filing of balance sheet and other 5.7 472-478 documents with the Registrar for the Financial Year 2007-08 Audited financial statements for the year ended 31st March, 5.8 479-483 2015 Form DIR-12 containing the particulars regarding appointment 5.9 484-487 of/ changes among directors and key managerial personnel M/s Atishay Marketing Private Limited [PAN: AACCA5745R] – Rs. 6 10,00,000/- Share application form regarding subscription of equity shares 6.1 488 of the assessee company Extracts of the Minutes of the meeting of the Board of Directors duly authorizing Shri Ashok Sureka for making investment in 6.2 489 stocks, shares, debentures and securities on behalf of the company 6.3 490-491 Company Master Data and Signatory Details as downloaded
M/s. Reliable Global Venture P. Ltd. & 335/Ind/2020 from the website of Ministry of Corporate Affairs 6.4 Certificate of Incorporation 492 6.5 Memorandum of Association 493-500 6.6 Articles of Association 501-508 PAN detail as downloaded from the website of Income-Tax 6.7 509 Department Director’s report dated 22-07-2008 for the year ended 31st 6.8 510-511 March, 2008 Audited financial statements for the year ended 31st March, 2008 6.9 512-519
Form 20B regarding filing of annual return by a company having share capital with the Registrar for the Financial Year 6.10 520-524 2007-08 Form 23AC regarding filing of balance sheet and other 6.11 525-531 documents with the Registrar for the Financial Year 2007-08 Director’s report dated 28-07-2014 for the year ended 31st 6.12 532-533 March, 2014 Audited financial statements for the year ended 31st March, 6.13 534-545 2014 Form DIR-12 containing the particulars regarding appointment 6.14 546-553 of/ changes among directors and key managerial personnel M/s Sun Mercantile Private Limited (Formerly known as M/s Sun Fruit 7 Private Limited) [PAN: AAJCS2031D] – Rs. 12,50,000 Share application form regarding subscription of equity shares 7.1 554 of the assessee company Extracts of the Minutes of the meeting of the Board of Directors duly authorizing Shri Ashok Sureka for making investment in 7.2 555 stocks, shares, debentures and securities on behalf of the company Company Master Data and Signatory Details as downloaded 7.3 556-557 from the website of Ministry of Corporate Affairs 7.4 Original Certificate of Incorporation 558
M/s. Reliable Global Venture P. Ltd. & 335/Ind/2020
Fresh Certificate of Incorporation consequent upon Change 7.5 of Name of the share applicant company from M/s Sun Fruit 559 Private Limited to M/s Sun Mercantile Private Limited 7.6 Memorandum of Association 560-574 7.7 Articles of Association 575-590 PAN detail as downloaded from the website of Income-Tax 7.8 591 Department Director’s report dated 22-07-2008 for the year ended 31st 7.9 592-593 March, 2008 Audited financial statements for the year ended 31st March, 7.10 594-601 2008 Form 23AC regarding filing of balance sheet and other 7.11 602-608 documents with the Registrar for the Financial Year 2007-08 Form 20B regarding filing of annual return by a company 7.12 having share capital with the Registrar for the Financial Year 609-613 2007-08 Director’s report dated 18-08-2015 for the year ended 31st 7.13 614-617 March, 2015 Audited financial statements for the year ended 31st March, 7.14 618-632 2015 M/s Makesworth Projects & Developers Private Limited (Formerly known as 8 M/s Tuticorin Trexim Private Limited) [PAN: AAACT9539J] – Rs. 20,00,000/- Share application form regarding subscription of equity shares 8.1 888-889 of the assessee company Company Master Data and Signatory Details as downloaded 8.2 633-634 from the website of Ministry of Corporate Affairs 8.3 Original Certificate of Incorporation 635 Fresh Certificate of Incorporation consequent upon Change of Name of the share applicant company from M/s Tuticorin 8.4 636 Trexim Private Limited to M/s Makesworth Projects & Developers Private Limited 8.5 Memorandum of Association 637-647
M/s. Reliable Global Venture P. Ltd. & 335/Ind/2020
8.6 Articles of Association 648-656 TAN detail as downloaded from the website of Income-Tax 8.7 657 Department Director’s report dated 30-08-2008 for the year ended 31st March, 2008 8.8 658
Audited financial statements for the year ended 31st March, 8.9 659-667 2008 Form 23AC regarding filing of balance sheet and other 8.10 668-674 documents with the Registrar for the Financial Year 2007-08 Director’s report dated 31-08-2015 for the year ended 31st 8.11 675-677 March, 2015 Audited financial statements for the year ended 31st March, 8.12 678-692 2015 9 M/s Rays Net Mark Private Limited [PAN: AADCR3152L] – Rs. 30,00,000/- Share application form regarding subscription of equity shares 9.1 693 of the assessee company Extracts of the Minutes of the meeting of the Board of Directors duly authorizing Shri Ashok Sureka for making investment in 9.2 694 stocks, shares, debentures and securities on behalf of the company Company Master Data and Signatory Details as downloaded 9.3 695-696 from the website of Ministry of Corporate Affairs 9.4 Certificate of Incorporation 697 9.5 Memorandum of Association 698-705 9.6 Articles of Association 706-715 PAN detail as downloaded from the website of Income-Tax 9.7 716 Department Director’s report dated 22-07-2008 for the year ended 31st 9.8 717-718 March, 2008 Audited financial statements for the year ended 31st March, 9.9 719-727 2008 9.10 728-734 Form 23AC regarding filing of balance sheet and other
M/s. Reliable Global Venture P. Ltd. & 335/Ind/2020 documents with the Registrar for the Financial Year 2007-08 Form 20B regarding filing of annual return by a company 9.11 having share capital with the Registrar for the Financial Year 735-739 2007-08 Director’s report dated 06-08-2015 for the year ended 31st 9.12 740-743 March, 2015 Audited financial statements for the year ended 31st March, 9.13 744-757 2015 Form DIR-12 containing the particulars regarding appointment 9.14 758-766 of/ changes among directors and key managerial personnel 10 M/s Breeze Tracom Private Limited [PAN: AADCB1833G] – Rs. 25,00,000/- Share application form regarding subscription of equity shares 10.1 767 of the assessee company Extracts of the Minutes of the meeting of the Board of Directors duly authorizing Shri Ashok Sureka for making investment in 10.2 768 stocks, shares, debentures and securities on behalf of the company Company Master Data and Signatory Details as downloaded 10.3 769-770 from the website of Ministry of Corporate Affairs 10.4 Memorandum of Association 771-777 10.5 Articles of Association 778-785 PAN detail as downloaded from the website of Income-Tax 10.6 786 Department Director’s report dated 25-08-2009 for the year ended 31st 10.7 787-788 March, 2009 Audited financial statements for the year ended 31st March, 10.8 789-797 2009 Form 32 containing the particulars regarding appointment of/ 10.9 changes among managing director, directors, manager and 798-801 secretary Form 23AC regarding filing of balance sheet and other documents with the Registrar for the Financial Year 2008-09 10.10 802-808
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Form 20B regarding filing of annual return by a company 10.11 having share capital with the Registrar for the Financial Year 809-813 2008-09 Director’s report dated 07-08-2015 for the year ended 31st 10.12 814-822 March, 2015 Audited financial statements for the year ended 31st March, 10.13 823-836 2015 11 M/s Excel Merchants Private Limited [PAN: AABCE8172B] – Rs. 10,00,000/- Share application form regarding subscription of equity shares 11.1 837 of the assessee company Company Master Data and Signatory Details as downloaded 11.2 838-839 from the website of Ministry of Corporate Affairs PAN detail as downloaded from the website of Income-Tax 11.3 840 Department 11.4 Memorandum of Association 841-848 11.5 Articles of Association 849-856 Director’s report dated 22-08-2008 for the year ended 31st 11.6 857-858 March, 2008 Audited financial statements for the year ended 31st March, 11.7 859-867 2008 Form 20B regarding filing of annual return by a company 11.8 having share capital with the Registrar for the Financial Year 868-872 2007-08 Form 23AC regarding filing of balance sheet and other 11.9 873-879 documents with the Registrar for the Financial Year 2007-08 Form 66 regarding submission of compliance certificate with the 11.10 880-881 Registrar for the Financial Year 2007-08 Form DIR-12 containing the particulars regarding appointment 11.11 882-885 of/ changes among directors and key managerial personnel M/s Chandi Mata Management Private Limited [PAN: AACCC6782A] – Rs. 12 10,00,000/- Share application form regarding subscription of equity shares 12.1 886-887 of the assessee company
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Company Master Data and Signatory Details as downloaded 12.2 890-891 from the website of Ministry of Corporate Affairs Certificate of Incorporation 12.3 892 Certificate of Registration of Regional Director order for 12.4 Change of State in connection with change in address of the 893 Registered Office Form INC-22 containing the information regarding notice of 12.5 894-896 situation or change of situation of registered office Order passed by the Company Law Board, Kolkata Bench 12.6 confirming the alteration to the situation clause in the 897-899 Memorandum of Association PAN detail as downloaded from the website of Income-Tax 12.7 900 Department Director’s report dated 30-08-2008 for the year ended 31st 12.8 901 March, 2008 Audited financial statements for the year ended 31st March, 12.9 902-911 2008 Form 20B regarding filing of annual return by a company 12.10 having share capital with the Registrar for the Financial Year 912-916 2007-08 Form 23AC regarding filing of balance sheet and other 12.11 917-923 documents with the Registrar for the Financial Year 2007-08 Director’s report dated 13-08-2013 for the year ended 31st 12.12 924-925 March, 2013 Audited financial statements for the year ended 31st March, 12.13 926-939 2013 Form DIR-12 containing the particulars regarding appointment 12.14 940-949 of/ changes among directors and key managerial personnel 13 M/s Regal Vanijya Private Limited [PAN: AADCR6961K] – Rs. 15,00,000/- Share application form regarding subscription of equity shares 13.1 950 of the assessee company Company Master Data and Signatory Details as downloaded 13.2 951-952 from the website of Ministry of Corporate Affairs
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13.3 Certificate of Incorporation 953 13.4 Memorandum of Association 954-961 13.5 Articles of Association 962-969 PAN detail as downloaded from the website of Income-Tax 13.6 970 Department Form 1 regarding application and declaration for incorporation of 13.7 971-979 a company Form 18 containing the information regarding notice of situation 13.8 980-981 or change of situation of registered office Form 32 containing the particulars regarding appointment of/ 13.9 changes among managing director, directors, manager and 982-985 secretary Director’s report dated 22-08-2008 for the year ended 31st 13.10 986-987 March, 2008 Audited financial statements for the year ended 31st March, 13.11 988-996 2008 Form 23AC regarding filing of balance sheet and other 13.12 997-1003 documents with the Registrar for the Financial Year 2007-08 Director’s report dated 12-08-2015 for the year ended 31st 13.13 1004-1007 March, 2015 Audited financial statements for the year ended 31st March, 13.14 1008-1021 2015 Form DIR-12 containing the particulars regarding appointment 13.15 1022-1030 of/ changes among directors and key managerial personnel M/s Vaishno Devi Coloniser Private Limited [PAN: AABCV8060B] – Rs. 14 25,00,000/- Share application form regarding subscription of equity shares 14.1 1031-1032 of the assessee company Extracts of the Minutes of the meeting of the Board of Directors 14.2 duly authorizing Shri Sanjay Jhanwar for making investment in 1033 the equity shares of the assessee company Company Master Data and Signatory Details as downloaded 14.3 1034-1035 from the website of Ministry of Corporate Affairs
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14.4 Certificate of Incorporation 1036 14.5 Memorandum of Association 1037-1046 14.6 Articles of Association 1047-1055 PAN detail as downloaded from the website of Income-Tax 14.7 1056 Department Director’s report dated 25-08-2009 for the year ended 31st 14.8 1057 March, 2009 Audited financial statements for the year ended 31st March, 14.9 1058-1065 2009 14.10 Form 2 regarding return of allotment 1066-1068 Form 20B regarding filing of annual return by a company 14.11 having share capital with the Registrar for the Financial Year 1069-1074 2008-09 Form 23AC regarding filing of balance sheet and other 14.12 1075-1081 documents with the Registrar for the Financial Year 2008-09 Director’s report dated 26-08-2015 for the year ended 31st 14.13 1082-1087 March, 2015 Audited financial statements for the year ended 31st March, 14.14 1088-1105 2015 Form DIR-12 containing the particulars regarding appointment 14.15 1106-1113 of/ changes among directors and key managerial personnel 15 M/s Shubham Dealers Private Limited [PAN: AALCS0985Q] – Rs. 30,00,000/- Share application form regarding subscription of equity shares 15.1 1114 of the assessee company Company Master Data and Signatory Details as downloaded 15.2 1115-1116 from the website of Ministry of Corporate Affairs 15.3 Certificate of Incorporation 1117 15.4 Memorandum of Association 1118-1125 15.5 Articles of Association 1126-1133 PAN detail as downloaded from the website of Income-Tax 15.6 1134 Department Director’s report dated 22-08-2008 for the year ended 31st 15.7 1135-1136 March, 2008
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Audited financial statements for the year ended 31st March, 15.8 1137-1145 2008 Form 20B regarding filing of annual return by a company 15.9 having share capital with the Registrar for the Financial Year 1146-1150 2007-08 Form 23AC regarding filing of balance sheet and other 15.10 1151-1157 documents with the Registrar for the Financial Year 2007-08 Director’s report dated 04-08-2015 for the year ended 31st 15.11 1158-1161 March, 2015 Audited financial statements for the year ended 31st March, 15.12 1162-1175 2015 Form DIR-12 containing the particulars regarding appointment 15.13 1176-1180 of/ changes among directors and key managerial personnel M/s Linkpoint Infrastructure Private Limited (Formerly known as M/s Taral 16 Vincom Private Limited) [PAN: AAACT9890Q] – Rs. 10,00,000/- Company Master Data and Signatory Details as downloaded 16.1 1181-1182 from the website of Ministry of Corporate Affairs 16.2 Original Certificate of Incorporation 1183 Fresh Certificate of Incorporation consequent upon Change 16.3 of Name of the share applicant company from M/s Taral Vincom 1184 Private Limited to M/s Linkpoint Infrastructure Private Limited Memorandum of Association 16.4 1185-1193 16.5 Articles of Association 1194-1202 PAN detail as downloaded from the website of Income-Tax 16.6 1203 Department Director’s report dated 30-08-2008 for the year ended 31st 16.7 1204 March, 2008 Audited financial statements for the year ended 31st March, 16.8 1205-1213 2008 Form 20B regarding filing of annual return by a company 16.9 having share capital with the Registrar for the Financial Year 1214-1218 2007-08 16.10 1219-1225 Form 23AC regarding filing of balance sheet and other
M/s. Reliable Global Venture P. Ltd. & 335/Ind/2020 documents with the Registrar for the Financial Year 2007-08 Copy of account payee cheques and pay-in-slips/ receipts in 17 respect of share application money received by the assessee 1267-1272 company during the Financial Year 2003-04 Copy of replies as posted directly by the following share applicant companies in response to notices issued under 18 section 133(6) of the Income-Tax Act, 1961 by the assessing officer in the case of the assessee company: 18.1 M/s Kamakhya Developers Private Limited 1472 M/s Maps Enterprises Private Limited (Formerly known as M/s 18.2 1473 Maps Portfolio and Holdings Private Limited) 18.3 M/s Rays Net Mark Private Limited 1474 18.4 M/s Breeze Tracom Private Limited 1475 18.5 M/s Excel Merchants Private Limited 1476 18.6 M/s Regal Vanijya Private Limited 1477 18.7 M/s Shubham Dealers Private Limited 1478 M/s Sun Mercantile Private Limited (Formerly known as M/s Sun 18.8 1479 Fruit Private Limited)
On going through the record, we find that the Ld AO himself in Para 17 of the assessment order stated that two inspectors (viz Shri Mukesh Chandra Meena and Shri Amit Verma) were deputed to visit Kolkata and to collect the information of the said share applicants. Notices u/s 133(6) of the Act were issued to the said share applicants and reply in response to the notices issued u/s 133(6) of the Act were also filed by these share applicants. We find
M/s. Reliable Global Venture P. Ltd. & 335/Ind/2020 that the Ld AO himself accepted that inspectors visited and met Shri Ashok Kumar Surekha who represented as Chairman in these companies and relevant details were also provided by him to the inspectors. Details of all these companies of Kolkata to which notices u/s 133(6) of the Act were issued and were duly complied with are summarised as under:
S.No Name of the Company PA No Amount [Rs] Response received U/s 133(6) 1 M/s Kamakhya AABCK0981C 10,00,000 Yes, reply filed Developers P Ltd M/s MAPS Enterprises P Yes, reply filed 2 AABCM6875B 12,50,000 Limited M/s Rays Netmark P Yes, reply filed 3 AADCR3152L 30,00,000 Limited M/s Breeze Tracom P Yes, reply filed 4 AADCB1833Q 25,00,000 Limited M/s Excel Merchant P Yes, reply filed 5 AABCE8172B 10,00,000 Limited M/s Regal Banijya P Yes, reply filed 6 AADCR6961K 15,00,000 Limited M/s Shubham Dealers P Yes, reply filed 7 AALCS0985Q 30,00,000 Limited M/s Sun Fruit P Limited [ Yes, reply filed 8 Know Known as Sun AAJCS2031D 12,50,000 Mercantile P Limited Total 1,45,00,000
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Before us, the ld. Counsel for the assessee contended that the additional information required by the inspector was provided directly to the Ld AO by these companies. We find that the Ld AO himself did not deny the above submission of the assessee as filed during the course of re-assessment proceedings but rather he himself accepted that Shri Ashok Kumar Surekha was the chairman of all the companies.
So far as the remaining share applicants are concerned, we find that the assessee duly explained the identity and creditworthiness of the share applicants and genuineness of the transactions entered into with them. The details of the same are summarised as under:
S.No Particulars 1 Share application money was received through account payee cheques 2 Complete postal addresses was also provided by the assessee 3 Share application money form duly confirming the investment made by all the above companies were enclosed 4 As informed by the share applicant the letter as issued during the course of Assessment proceeding for the Asst Year 2012-13 was duly served and reply was also received 5 Copy of Balance sheet of all the share applicants were enclosed duly justifying the net worth of all the share applicants
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6 Copy of Acknowledgment of Income Tax return as filed by the assessee 7 Copy of bank account of the share applicant was also provided 8 Inspector as deputed during the course of scrutiny assessment also visited the premises of the share applicant at Kolkata and collected information and documents directly from the share applicant
Before us, the Ld Counsel for assessee in respect of his contention has relied upon the following judicial pronouncements:
S. No Name of the PAN Amount Reference of Co-ordinate Company bench of ITAT [in Rs.] M/s Talent Infoway 20,00,000 M/s Ad-Manum Packaging P 1 AAACL3305J Limited Limited [ITA No 543/Ind/2013 dt 09- 12-2015 for the A.Y. 2009-10] M/s Buniyad 10,00,000 [1] M/s Swift Intermedia 2 AABCB6954G Chemicals Limited Convergence Ltd [ITA No 566/Ind/ 2013 dt 09- 12-2015 for A.Y. 2009-10] [2] M/s Ad-Manum Packaging P Limited [ITA No 543/ Ind/ 2013 dt 09- 12-2015 for the A.Y. 2009-10] 3 M/s Jai Hind AAACJ2475R 10,00,000 M/s Deep Darshan Properties Synthetics Ltd P Limited [ITA Nos 2117 & 2118/ Mum/ 2014 dt 28-09-2015 for the Asst Years 2006-07 & 2007- 08] M/s Atishay 10,00,000 M/s Bhiwani Vanaspati 4 AACCA5745R Marketing P 27
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Limited Limited [ITA No 522/Kol/2011 dt 15- 03-2012] 5 M/s Tuticorin AAACT9539J 20,00,000 M/s Luminant Investment Trexim P Limited Limited [Currently known [ITA No 2067/ Mum/ 2013 dt as M/s Makes 27-09-2017 for the Asst Year worth Projects & 2007-08 ] Developers P Ltd] 6 M/s Chandimata AACCC6782A 10,00,000 M/s Tirupati Infra Projects P Management P Limited Limited [ITA No 2472/ Del/ 2014 dt 27-01-2017 for the Asst Year 2008-09] 7 M/s Vaishno Devi AABCV8060B 25,00,000 There was no dispute. It Coloniser P Limited means the amount of share application money received from this company was accepted in all the cases 8 M/s Taral Vincom P AAACT9890Q 10,00,000 1] M/s Tirupati Infra Projects Limited P Limited [ITA No 2472/ Del/ 2014 dt 27-01-2017 for the Asst Year 2008-09] 2] M/s Shokeen Properties P Limited [ITA No 2266/ Del/ 2012 dt 28-01-2014 for the Asst Year 2008-09 ] 3] M/s Kunj Alloys P Limited [ITA No 239/ CTK/ 2007 dt 27-11-2015 for the Asst Year 2004-05 ] Total 1,15,00,000
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Before us, the learned Counsel for the assessee relying on the decisions of Hon’ble Jurisdictional High Court in the case of M/s People General Hospital Limited [Appeal No 2011] and the Hon’ble Apex Court in the case of M/s Lovely Exports P Limited reported in 216 CTR 195 argued that in case, the Assessing Officer has any doubt about the genuineness and creditworthiness of the share applicant, necessary addition could be made to the income of the share applicant but not in the case of the assessee. The learned Counsel for the assessee also relied on various other judicial precedents in support of the above-stated contentions. Relevant extract of written submission in which the learned Counsel for the assessee has relied upon judicial precedents is as under:
“Hon’ble Delhi High Court in the case of CIT Vs. Oasis Hospitalities (P) Ltd reported in 333 ITR 119 (2011) has held as under:- (i) Section 68 provides that if the assessee is not able to give satisfactory explanation as to the “nature and source” of a sum found credited in his books, the sum may be treated as the “undisclosed income” of the assessee. The initial burden is on the assessee to explain the “nature and M/s. Reliable Global Venture P. Ltd. & 335/Ind/2020 source” of the credit and to do so, the assessee is required to prove
(a) Identity of the shareholder (b) Genuineness of transaction and (c) Credit worthiness of shareholders;
(a) The identity of the shareholder can be proved by either (if individual) producing him before the AO or by way of documents, registered address, PAN etc;
(b) The genuineness of the transaction can be shown from the fact that the money has been received from the shareholder. If the money is received by cheque and is transmitted through banking or other indisputable channels, the genuineness of transaction would be proved. Other documents showing the genuineness of transaction could be the copies of the shareholders register, share application forms, share transfer register, etc;
(c) The creditworthiness or financial strength of the creditor/subscriber can be proved by producing the bank statement of the creditors/subscribers showing that it had sufficient balance in its accounts to enable it to subscribe to the share capital. Once these documents are produced, the assessee would have satisfactorily discharge the onus cast upon him. The AO can discredit the documents produced by the assessee with cogent reasons and materials but not on the realm of suspicion;
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(ii) If the assessee has produced documents like PAN Card, bank account details or details from the bankers the onus shifts upon the AO and it is for him to reach the shareholders and the AO cannot burden the assessee merely on the ground that summons issued to the investors were returned back with the endorsement “not traceable”
(iii) The initial burden on an assessee which is a pvt ltd company is somewhat heavy because the shareholders are family friends/close acquaintances etc and the assessee cannot feign ignorance about the status of these parties;
(iv) There is an additional burden on the Department to show that even if share applicants did not have the means to make investment, the investment made by them actually emanated from the coffers of the assessee so as to enable it to be treated as the undisclosed income of the assessee. In the absence of such finding, addition cannot be made u/s 68 in the hands the assessee.
(v) The Department is free to reopen the individual assessment in case of alleged bogus shareholders in accordance with law and, thus, not remedy-less.
[Emphasis applied]
The assessee in view of the specific finding of the decision of the Hon’ble Delhi High Court properly discharged onus lying on it and also proved not only the identity but also the M/s. Reliable Global Venture P. Ltd. & 335/Ind/2020 genuineness of the share application money and creditworthiness of the share applicant.
Hon’ble Apex Court in the case of Lovely Exports P Limited reported in 6 DTR 308/ 216 CTR 195 has dismissed the SLP as filed by the department with the following remarks on 11-01-2008:-
“ 2. Can the amount of share money be regarded as undisclosed income under s. 68 of IT Act, 1961 ? We find no merit in this special leave petition for the simple reason that if the share application money is received by the assessee company from alleged bogus share holders, whose names are given to the AO, then the Department is free to proceed to reopen their individual assessments in accordance with law. Hence, we find no infirmity with the impugned judgment."
3.9.3] That Hon’ble Apex Court in the case of Lovely Export P limited ( Supra) has categorically held that if the assessing officer is not satisfied with the explanation of the assessee in that case also necessary addition is to be made in the hand of share applicant and not in the case of the assessee.
Hon’ble Delhi High Court vide its order dt 11-04-2012 in the case of Goel Sons Golden Estates Pvt Ltd has held [ Copy of the decision is reproduced in the case of M/s Excellence Town Planner P Limited [ Appeal No Del/ 2010 dt 25-05-2012][Refer Para 3 of that order ]:-
“3. We have examined the said contention and find that the assessee during the course of assessment proceedings has filed confirmation letters from the companies, their
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PAN number, copy of bank statements, affidavits and balance sheet. Thereafter the Assessing Officer had asked the assessee to produce the said Directors/Parties. Assessee expressed its inability to produce them. The Assessing Officer did not consequent thereto conduct any inquiry and closed the proceedings. This is a case where the Assessing Officer has failed to conduct necessary inquiry, verification and deal with the matter in depth specially after the affidavit/confirmation along with the bank statements etc. were filed. In case the Assessing Officer had conducted the said enquiries and investigation probably the challenge made by the Revenue would be justified. In the absence of these inquiries and non-verification of the details at the time of assessment proceedings, the factual findings recorded by the Assessing Officer were incomplete and sparse. The impugned order passed cannot be treated and regarded as perverse. The appeal is dismissed as no substantial question of law arises”. [Emphasis applied]
Hon’ble Delhi High Court vide order dt 21-01-2013 in the case of Gangeshwari Metal Pvt Ltd [Appeal No has discussed the similar issue in detail and after considering the decision in the case of Nova Promoters P Limited has held that :-
Mr. Sabharwal, appearing on behalf of the revenue/ appellant sought to place reliance on a Division Bench decision of this Court in CIT v. Nova Promoters and Finlease (P) Ltd.: (2012) 342 ITR 169 (Del.). However, on going through the said decision in Nova Promoters and Finlease (P) Ltd. (supra) we find that the facts are clearly distinguishable. In fact, in Nova
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Promoters and Finlease (P) Ltd. (supra) itself this Court has observed, in the context of Lovely Exports (P) Ltd. (supra), as under: -
“The ratio of a decision is to be understood and appreciated in the background of the facts of that case. So understood, it will be seen that where the complete particulars of the share applicants such as their names and addresses, income tax file numbers, their creditworthiness, share application forms and share holders‟ register, share transfer register etc. are furnished to the Assessing Officer and the Assessing Officer has not conducted any enquiry into the same or has no material in his possession to show that those particulars are false and cannot be acted upon, then no addition can be made in the hands of the company under sec.68 and the remedy open to the revenue is to go after the share applicants in accordance with law. We are afraid that we cannot apply the ratio to a case, such as the present one, where the Assessing Officer is in possession of material that discredits and impeaches the particulars furnished by the assessee and also establishes the link between self-confessed “accommodation entry providers”, whose business it is to help assessees bring into their books of account their unaccounted monies through the medium of share subscription, and the assessee. The ratio is inapplicable to a case, again such as the present one, where the involvement of the assessee in such modus operandi is clearly indicated by valid material made available to the Assessing Officer as a result of investigations carried out by the revenue authorities into the activities of such “entry providers”. The existence with the Assessing Officer of material showing that the share subscriptions were collected as part of a pre- 34
M/s. Reliable Global Venture P. Ltd. & 335/Ind/2020 meditated plan - a smokescreen - conceived and executed with the connivance or involvement of the assessee excludes the applicability of the ratio. In our understanding, the ratio is attracted to a case where it is a simple question of whether the assessee has discharged the burden placed upon him under sec.68 to prove and establish the identity and creditworthiness of the share applicant and the genuineness of the transaction. In such a case, the Assessing Officer cannot sit back with folded hands till the assessee exhausts all the evidence or material in his possession and then come forward to merely reject the same, without carrying out any verification or enquiry into the material placed before him. The case before us does not fall under this category and it would be a travesty of truth and justice to express a view to the contrary.
[Emphasis supplied] As can be seen from the above extract, two types of cases have been indicated. One in which the assessing officer carries out the exercise which is required in law and the other in which the assessing officer „sits back with folded hands‟ till the assessee exhausts all the evidence or material in his possession and then comes forward to merely reject the same on the presumptions. The present case falls in the latter category. Here the assessing officer, after noting the facts, merely rejected the same. This would be apparent from the observations of the assessing officer in the assessment order to the following effect: -
“Investigation made by the Investigation Wing of the Department clearly showed that this was nothing but a sham transaction of accommodation entry. The assessee was asked to explain as to why the said amount of `1,11,50,000/- may not 35
M/s. Reliable Global Venture P. Ltd. & 335/Ind/2020 be added to its income. In response, the assessee has submitted that there is no such credit in the books of the assessee. Rather, the assessee company has received the share application money for allotment of its share. It was stated that the actual amount received was `55,50,000/- and not `1,11,50,000/- as mentioned in the notice. The assessee has furnished details of such receipts and the contention of the assessee in respect of the amount is found correct. As such the unexplained amount is to be taken at `55,50,000/-. The assessee has further tried to explain the source of this amount of `55,50,000/- by furnishing copies of share application money, balance sheet, etc. of the parties mentioned above and asserted that the question of addition in the income of the assessee does not arise. This explanation of the assessee has been duly considered and found not acceptable. This entry remains unexplained in the hands of the assessee as has been arrived by the Investigation wing of the Department. As such entries of `55,50,000/- received by the assessee are treated as an unexplained cash credit in the hands of the assessee and added to its income. Since I am satisfied that the assessee has furnished inaccurate particulars of its income, penalty proceedings under section 271(1)(c) are being initiated separately.”
The facts of Nova Promoters and Finlease (P) Ltd. (supra) fall in the former category and that is why this Court decided in favour of the revenue in that case. However, the facts of the present case are clearly distinguishable and fall in the second category and are more in line with facts of Lovely Exports (P) Ltd. (supra). There was a clear lack of inquiry on the part of the assessing officer once the assessee had furnished all the material which we have already referred to above. In such an 36
M/s. Reliable Global Venture P. Ltd. & 335/Ind/2020 eventuality no addition can be made under section 68 of the Act. Consequently, the question is answered in the negative. The decision of the Tribunal is correct in law. The appeal is dismissed.”
Hon’ble Mumbai Bench of ITAT in the case of DCIT vs M/s Rank Shipping Agency Pvt Ltd [Appeal No 2008 dt 21-11-2012] had an occasion to dealt with the issue in respect of share application/ share capital and held that:-
“30. Now coming to the question as to whether the assessee has discharged its burden which lay upon it to prove the genuineness of the issuance of shares. Hon'ble Rajasthan High Court in the case of Barkha Synthetics Ltd vs ACIT(2005) 197 CTR 432(Raj) held that the principle relating to burden of proof concerning assessee is that whether the matter concerns the money receipts by way of share application from investors, through banking channels, assessee has to prove existence of persons in whose name the share application is received. Once the existence of investor is proved it is no further burden on the assessee to prove whether that person itself has invested the said money or some persons made investments in the name of that person. The burden then shifts on revenue to establish that such investment has come from assessee company itself. The Hon'ble Apex Court has also held in the case of Daulat Ram Rawatmul, 87 ITR 349(SC) that onus to prove that the apparent is not the real is on the person who claims it to be so. Therefore, onus is on the department to prove that the share application money subscribed to the share capital of the assessee company by the above named share applicants is not the money of the share applicants but of the assessee company, is on the 37
M/s. Reliable Global Venture P. Ltd. & 335/Ind/2020 department. In the case before us, the department has not brought any material on record to establish the same. We are of the considered view that considering evidence on record, AO has doubted the receipt of share premium on surmises and conjectures and has not brought any cogent material on record to establish that it was the assessee's own unaccounted money came back to it by way of fake introduction of share capital. The Hon'ble Apex Court has also considered similar issue in the case of Lovely Exports (supra) as under: "Can the amount of share money be regarded as undisclosed income under section 68 of the I.T.Act, 1961? We find no merit in this Special Leave Petition for the simple reason that if the share application money is received by the assessee company from alleged bogus shareholders, whose names are given to the AO, then the Department is free to proceed to reopen their individual assessments in accordance with law. Hence, we find no infirmity with the impugned judgment."
In the case under consideration before us, as stated above, assessee has furnished details of share application with PAN No. and bank statement. Further, said share applicants have also filed confirmation letters placed at page 34 in the case of JMD Telefilms Industries Ltd., at page 117 in the case of Warmer Multimedia Ltd., at page 179 in the case of Shrestha Leasing & Finance Ltd,. and at page 302 in the case of Trio Mercantile & Trading Ltd. In the said confirmation letters, bank details to make the payment to assessee company for allotment of shares is also stated. The transactions are admittedly recorded in the books of account both by the assessee company as well as aforesaid share applicants. Therefore, we are of the considered view that no addition on account of unexplained
M/s. Reliable Global Venture P. Ltd. & 335/Ind/2020 cash credit is warranted in the case of assessee on the given facts and circumstances as discussed above. Hence, we are of the considered view that the action of AO is contrary to the decision of Hon'ble apex Court in the case of Lovely Exports (supra). Accordingly, we delete the addition of Rs.72 lakhs sustained by ld CIT(A) by allowing grounds of appeal taken by assessee.”
Hon’ble ITAT, Indore Bench in the case of M/s Rajshree Finsec P Limited [Appeal No 545/ Ind/2010 dt 06-02- 2012 for the Asst Year 2007-08 ] had an occasioned to discussed the decision in the case of M/s Agrawal Coal Corporation and held that :-
During hearing the learned Senior DR contended that the issue is covered by the decision of the Tribunal in the case of M/s Agrawal Coal Corporation decided by this Bench on 31st October, 2011 in d/2010etc. We are not agreeing with this proposition because in that case the identity of such share applicants was not proved and even the addresses of such share applicants were found non-existent/bogus. In view of those facts, this Bench concluded that the decision from Hon'ble Apex Court pronounced in Lovely Exports Private Limited is not applicable and the addition was confirmed in the hands of the assessee. However, in the present appeal, since the identity of such share subscribers, as we have discussed above, was established, therefore, no addition u/s 68 is warranted in the case of the assessee company. So far as the decision from Hon'ble jurisdictional High Court in the case of CIT vs. Rathi Finlease Limited (2008) 215 CTR (MP) 249 is 39
M/s. Reliable Global Venture P. Ltd. & 335/Ind/2020 concerned, in that case, despite several opportunities, the assessee was unable to provided confirmations from the concerned parties, therefore, the Hon'ble Court reached to a particular conclusion, whereas in the present appeals, the identity of share applicants, namely, M/s. Shrilal Traders Private Limited, M/s Lakeview Vinimay Private Limited, M/s Saharsh Suppliers Private Limited and M/s Ambitions Tie Up Private Limited was established, therefore, in view of the decision from Hon'ble Apex Court in the case of Lovely Exports Private Limited (supra), this judicial decision from Hon'ble High Court may not help the revenue.
6.So far as the argument of the learned Sr. DR and the objections / observations of the learned Assessing Officer/learned Commissioner of Income Tax (Appeals) that these are paper companies only, the contention raised on behalf of the assessee is that the net worth (as on 31.3.2007) of such share subscribers is Rs. 317.31 lacs, Rs. 424.58 lacs, Rs. 385.71 lacs and Rs. 289.01 lacs. We are not going on the issue of worth of these share applicants because the Hon'ble Apex Court in the case of Lovely Exports Private Limited (supra) held that even if such share applicants are bogus, but their identity is proved, then no addition is warranted in the case of the assessee. So far as the decisions cited in the impugned order are concerned, in view of the decision from Hon'ble Apex Court in the case of Lovely Exports (supra), has remained for academic interest only, being on different facts, therefore, we are refraining ourselves in dealing with each and every case individually, especially in the light of the evidences, filed by the assessee, evidencing that the identity of such share applicants was very much proved by further filing of confirmation by them.
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In view of these facts, the decision from Hon'ble Apex Court in Lovely Exports (supra) and uncontroverted fact that the summons issued to the impugned share applicants were duly received by them with further filing of confirmation by such share applicants, at least their identity is proved, therefore, this appeal of the assessee deserves to be allowed [Emphasis applied]
Hon’ble ITAT, Indore Bench, Indore vide its order dt 28- 03-2012 in the case of M/s Mittal Appliances Limited for the Asst Year 2004-05 after considering the decisions as referred in Para 1.12.1 of this letter, accepted the amount of share application money as received by the assessee as genuine by stating that:-
“9. In view of documents filed before the Assessing Officer, wherein not only the identity of the share applicant was established, we do not find any infirmity in the order of CIT(A) for deleting addition made by the Assessing Officer on account of share application money.”
3.10.1] That when the entire amount of share application money was received through an account payee cheques, PA No of the share applicant has also been provided and various other documents through which not only the identity but also the genuineness and creditworthiness of the share application has been proved. Hence, the assessing officer was not justified in adding the amount of share application money to the income of the appellant.
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Hon’ble Apex Court in the case of CIT vs Orissa Corporation [P] Ltd as reported in 159 ITR 78 has held that:-
“ In this case the assessee had given the names and addresses of the alleged creditors. It was in the knowledge of the Revenue that the said creditors were income-tax 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 is based on some evidence on which a conclusion could be arrived at, no question of law as such arises.
Hon’ble Jurisdictional High Court in the case of People General Hospital Limited [Appeal No 2011] has held that the assessee company need to prove identity of the shareholders only , para 16 of the said decision is produced as under:-
16. The aforesaid judgment has been followed by all the Courts and the judgments relied on by the appellants relates to the period prior to the judgment in Lovely Exports. As the Apex Court has specifically held that if the identity of the M/s. Reliable Global Venture P. Ltd. & 335/Ind/2020
person providing share application money is established then the burden was not on the assessee to prove the creditworthiness of the said person. However, the department can proceed against the said Company in accordance with law. The position of the present case is identical. It is not the case of any of the parties that M/s Alliance Industries Limited, Sharjah is a bogus company or a non-existent company and the amount which was subscribed by the said Company by way of share subscription was in fact the money of the respondent assessee. In the present case, the assessee had established the identity of investor who had provided the share subscription and it was established that the transaction was genuine though as per contention of the respondent the creditworthiness of the creditor was also established. In the present case, in the light of the judgment of Lovely Exports (P) Ltd., we have to see only in respect of the establishment of the identity of the investor. The Delhi High Court also in Divine Leasing & Finance Ltd. (supra), considering the similar question held that the assessee Company having received subscriptions to the public/rights issue through banking channels and furnished complete details of the shareholders, no addition could be made under section 68 in the absence of any positive material or evidence to indicate that the shareholders were benamidars or fictitious persons or that any part of the share capital represented company's own income from undisclosed sources. The similar view has been taken by the other High Courts. [Emphasis applied]
Hon’ble Gujrat High Court in the case of CIT vs Ranchhod Jivabhai Nakhava reported in 21 taxmann.com 159 , has discussed the issue of cash credit in detail and held that (refer Para 15 to 18):- 43
M/s. Reliable Global Venture P. Ltd. & 335/Ind/2020
“15. In our view, once the assessee has established that he has taken money by way of accounts payee cheques from the lenders who are all income tax assessees whose PAN have been disclosed, the initial burden under Section 68 of the Act was discharged. It further appears that the assessee had also produced confirmation letters given by those lenders.
Once the Assessing Officer gets hold of the PAN of the lenders, it was his duty to ascertain from the Assessing Officer of those lenders, whether in their respective return they had shown existence of such amount of money and had further shown that those amounts of money had been lent to the assessee. If before verifying of such fact from the Assessing Officer of the lenders of the assessee, the Assessing Officer decides to examine the lenders and asks the assessee to further prove the genuineness and creditworthiness of the transaction, in our opinion, the Assessing Officer did not follow the principle laid down under Section 68 of the Income Tax Act.
If on verification, it was found that those lenders did not disclose in their income tax return the transaction or that they had not disclosed the aforesaid amount, the Assessing Officer could call for further explanation from the assessee to prove the genuineness of the transaction or creditworthiness of the same. However, without verifying such fact from the income tax return of the creditors, the action taken by the Assessing Officer in examining the lenders of the assessee was a wrong approach. Moreover, we find that those lenders have made inconsistent statement as pointed out by the Commissioner of Income Tax (Appeals) and in such circumstances, we find that both the Commissioner of Income Tax (Appeals) and the Tribunal were justified in setting aside the deletion as the Assessing Officer,
M/s. Reliable Global Venture P. Ltd. & 335/Ind/2020 without taking step for verification of the Income Tax Return of the creditors, took unnecessary step of further examining those creditors. If the Assessing Officers of those creditors are satisfied with the explanation given by the creditors as regards those transactions, the Assessing Officer in question has no justification to disbelieve the transactions reflected in the account of the creditors. In other words, the Assessing Officer had no authority to dispute the correctness of assessments of the creditors of the assessee when a co-ordinate Assessing officer is satisfied with the transaction.
18. We, thus, find that in the case before us the Tribunal below rightly set-aside the deletion made by the Assessing Officer, based on erroneous approach by wrongly shifting the burden again upon the assessee without verifying the Income Tax return of the creditors. The position, however, would have been different if those creditors were not income tax assessee or if they had not disclosed those transactions in their income tax returns or if such returns were not accepted by their Assessing Officers.”
Hon’ble Indore Bench of ITAT in the case of M/s Swift Intermedia Convergence P Limited [ A.Y. 2009-10 dt 09-12-2015 ] has decided similar issued in favour of the assessee, in the said decisions most of the companies are common as in the case of the assessee company.
Hon’ble Mumbai Bench of ITAT in the case of M/s. Kalsha Builders Pvt. Ltd [ Appeal No & 1808/Mum/2015 dt 05-12-2016 has also discussed the M/s. Reliable Global Venture P. Ltd. & 335/Ind/2020 similar issue in detail and deleted the entire additions as made to the income of the assessee on account of share application money.
3.11.1] Further, the appellant received share application money during the previous year 2007-08 relevant to the Assessment Year 2008-09. The case of the appellant pertains to the Assessment Year 2008-09. The proviso inserted in section 68 of the Income-Tax Act, 1961 by the Finance Act, 2012 w.e.f. 1- 4-2013 which required a private limited company to establish the source of source was effective from Assessment Year 2013- 14. It is quite clear that an assessee was only required to establish the identity of share applicants prior to the Assessment Year 2013-14. It was only after the insertion of proviso to section 68 of the Act w.e.f. Assessment Year 2013-14 that the assessee was required to furnish an explanation regarding nature and source of sum invested by the share applicant. Hon’ble Bombay High Court in its landmark judgment in the case of CIT-1 v. Gagandeep Infrastructure (P.) Ltd. as reported in [2017] 394 ITR 680 (Bombay) has categorically held that proviso to section 68 introduced by Finance Act 2012 with effect from 1-4-2013, would not have retrospective effect. Relevant extract from the judgment of the Hon’ble Bombay High Court is reproduced hereunder for your ready reference: “3. Regarding question no.(i):— (e) We find that the proviso to section 68 of the Act has been introduced by the Finance Act 2012 with effect from 1st April, 2013. Thus it would be effective only from the Assessment Year 2013-14 onwards and not for the subject Assessment Year. In fact, before the Tribunal, it was 46
M/s. Reliable Global Venture P. Ltd. & 335/Ind/2020 not even the case of the Revenue that Section 68 of the Act as in force during the subject years has to be read/understood as though the proviso added subsequently effective only from 1st April, 2013 was its normal meaning. The Parliament did not introduce to proviso to Section 68 of the Act with retrospective effect nor does the proviso so introduced states that it was introduced "for removal of doubts" or that it is "declaratory". Therefore it is not open to give it retrospective effect, by proceeding on the basis that the addition of the proviso to Section 68 of the Act is immaterial and does not change the interpretation of Section 68 of the Act both before and after the adding of the proviso. In any view of the matter the three essential tests while confirming the pre-proviso Section 68 of the Act laid down by the Courts namely the genuineness of the transaction, identity and the capacity of the investor have all been examined by the impugned order of the Tribunal and on facts it was found satisfied. Further it was a submission on behalf of the Revenue that such large amount of share premium gives rise to suspicion on the genuineness (identity) of the shareholders i.e. they are bogus. The Apex Court in Lovely Exports (P.) Ltd. (supra) in the context to the pre-amended Section 68 of the Act has held that where the Revenue urges that the amount of share application money has been received from bogus shareholders then it is for the Income Tax Officer to proceed by reopening the assessment of such shareholders and assessing them to tax in accordance with law. It does not entitle the Revenue to add the same to the assessee's income as unexplained cash credit.” [Emphasis Supplied] 3.11.3] In view of the above discussion and categorical finding laid down by the Hon’ble Bombay High Court, it is quite 47
M/s. Reliable Global Venture P. Ltd. & 335/Ind/2020 manifest that the proviso as inserted in section 68 of the Act would have prospective operation w.e.f. Assessment Year 2013-14 and would not be applicable in the facts of the present case. 3.11.4] The assessing officer while adding the amount to the total income of the appellant observed that prior to the issuance of the cheques to the appellant company amount was credited in the bank account of the share applicant. The assessing officer also observed that bank account of most of the share applicant companies were opened in Bhopal. The assessing officer himself stated that he has deputed his Inspector to verify the genuineness of the Kolkata Based investor companies. As explained above, the inspector visited and found all the companies at the address as given. The inspector also met Shri Ashok Kumar Sureka, chairman and director of all these companies and collected relevant information directly from him. It is also pertinent to mention that all the share applicant companies also filed the details as asked by the inspector during the course of his visit at Kolkata. 3.11.5] That from the assessment order it is clear that cheques were received by the appellant against the credit of cheque and therefore the appellant company not only proved the identity but also proved the genuineness and creditworthiness of the share applicants. 3.11.6] In view of the above, identity and creditworthiness of these companies and genuineness of the transactions stands proved beyond any doubt.”
M/s. Reliable Global Venture P. Ltd. & 335/Ind/2020
On perusal of above, we find that share application money received from many of these companies had also been accepted as genuine by Co-ordinate benches of Tribunal in the aforesaid decisions.
16. On consideration of above facts in the light of the judicial pronouncements (supra), we find that the Ld. Assessing Officer deputed inspectors to physically visit Kolkata and collect information directly from the share applicants who gave share application money to the assessee during the year under consideration. It is also an uncontroverted fact that notices under section 133(6) of the Act were issued to the said share applicants which were duly complied with. The Ld Assessing Officer himself accepted that inspectors met Shri Ashok Kumar Surekha who represented as the Chairman in these companies. The share applicant companies also provided their acknowledgement of return, copy of account of the assessee in their books of accounts, copy of share certificate and copy of their bank statement directly to the Ld Assessing Officer which were never disproved by the Ld Assessing Officer. We find that with the help of supporting/corroborative documentary evidences, the existence of M/s. Reliable Global Venture P. Ltd. & 335/Ind/2020 the share applicant companies was proved beyond doubt by the assessee. The assessee during the course of re-assessment proceedings and first appellate proceedings filed requisite documentary evidences which included share application form, extract of minutes of the meeting of the companies, Master data and signatory details, Certificate of incorporation, MOA, AOA, audited financial statements etc. so as to justify the identity and creditworthiness of the share applicants and genuineness of the transactions entered into with them. It is also an uncontroverted fact that the said documents were never disproved by the Ld AO and Ld CIT(A). The identity of the above share applicants was also independently verified by the inspectors during the course of re- assessment proceedings. Notices u/s 133(6) of the Act were issued to the above share applicants which were duly replied to by the share applicants. So far as the share application money received from remaining companies is concerned, we find that the assessee filed ample documentary evidences which discharged the primary onus cast upon it u/s 68 of the Act. We also observe that the Coordinate Benches of Tribunal on several occasions duly accepted the amount received from these share applicants as genuine and from disclosed sources. Thus, we are of the 50
M/s. Reliable Global Venture P. Ltd. & 335/Ind/2020 considered opinion that there was no justification for doubting the identity and creditworthiness of the share applicants and genuineness of the transactions entered into with them in the light of the aforesaid discussion and judicial pronouncements (supra).
Under the given facts and circumstances of the case, we are of considered view that the assessee company properly discharged the primary onus cast upon it u/s 68 of the Act to justify the identity and creditworthiness of the share applicants and genuineness of the transactions entered into with them and accordingly, addition of Rs 2,60,00,000/- made by the Ld AO on account of share application money was not justified. We, thus dismiss Ground Nos. 1 and 2 raised by the Department and confirm the findings of Ld CIT(A) in deleting the addition of Rs 1,80,00,000/- made by the Ld Assessing Officer and also set aside the findings of Ld CIT(A) in sustaining the addition of Rs 80,00,000/- and allow Ground Nos. 5 and 6 raised by the assessee. Thus, Ground Nos. 1 and 2 raised by the Department are dismissed and Ground Nos. 5 and 6 as raised by the assessee are allowed.
17. Ground Nos. 1 to 4 raised by the assessee are legal in nature.
As we have already dealt with the issue on merits and deleted 51
M/s. Reliable Global Venture P. Ltd. & 335/Ind/2020 entire additions as made by the Assessing Officer, the legal grounds taken by the assessee have become academic in nature and are henceforth not adjudicated as infructuous.
In the result, appeal filed by the assessee is partly allowed and that of the Revenue ITA No. 335/Ind/2020 is dismissed.
The order pronounced as per Rule 34 of ITAT Rules, 1963 on 20.12.2021.