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Income Tax Appellate Tribunal, “C” BENCH, MUMBAI
Before: SHRI M. BALAGANESH & SHRI PAVAN KUMAR GADALE
सुनवाई क� तार�ख / Date of Hearing 21/9/2020&18/12/2020 घोषणा क� तार�ख /Date of Pronouncement 07/01/2021 आदेश / O R D E R
PER PAVAN KUMAR GADALE - JM:
The revenue has filed an appeal against the order of Commissioner of Income Tax (Appeals)-16, Mumbai passed u/s 143(3) and 250 of Income Tax Act, 1961. The assessee has raised the following grounds of appeal:
Citygold Farming P. Ltd., Mumbai. - 2 - “Whether on the facts and circumstances of the case the Ld. CIT(A) erred in not considering the contentions of the A.O in the remand report, thereby admitting additional evidences even though adequate opportunity was given to the assessee during assessment proceedings?
Whether on the facts and circumstances of the case of the Ld. CIT(A) erred in law in not considering the factual findings given by the A.O in remand report that the genuineness of the transactions and the creditworthiness of the investing companies was not proved?
Whether on the facts and circumstances of the case the Ld. CIT(A) erred in not considering the factual findings given by the A.O in remand report that M/s Alken Management and Financial Services Pvt Ltd., and M/s. Shree Ganesh spinners Ltd., had admitted to be nothing but accommodation entry providers and therefore, the transactions with these parties could not be accepted as being genuine?.
The brief facts of the case are that the assessee company is engaged in the business of construction, erection and infrastructure facilities. The assessee filed the return of income on 15.10.2010 with total income of Rs. 46,34,400/-.Subsequently, the case was selected for scrutiny and notice u/s 143(2) and 142(1)
Citygold Farming P. Ltd., Mumbai. - 3 - of the Act were issued. In response to the notices, the Ld. AR of the assessee appeared from time to time and submitted details and the case was discussed. The A.O on the perusal of the financial statements found that the assessee company has issued 2,58,750 non- cumulative convertible preference shares of face value of Rs. 100/- each at premium. The preference share capital including the share premium raised during the financial year is Rs31,05,00,000/-.The A.O has called for the information of 11 investors who have invested in the assessee company referred at page 3 of the assessment order as under:
“2. Notice U/s. 142(1) of the Act was issued to the assessee company on 02.11.2012, calling for the following details with regard to the above share capital raised by it during the year: a. Name, address, amount and PAN of the shareholders / share subscribers. b. Copy of Bank book highlighting the relevant entries. c. Income tax return with annexure thereto, Profit & loss account and balance sheet with schedules thereto and capital account of the shareholders / share subscribers.
Citygold Farming P. Ltd., Mumbai. - 4 - d. Name of the Bank and branch, amount and chque No. of the shareholders / share subscribers and the date of credit of such amount to your account. e. Amount of premium received per share and reason and circumstances for issuing the shares at premium. Also please substantiate the same with documentary evidence. f. Copies of correspondence ensured with the share subscribers / shareholders in the form of emails / letters etc., g. Details of the introducer(s) of the share scribers / shareholders. h. Please state as to whether the services of any investment banker have been availed of by the assessee company. i. Please state as to whether any of the subscribers is a director on board. j. You are required to prove the identity and creditworthiness of the share subscribers/ shareholders vis-avis genuineness of the transaction.
Whereas, the assessee company has submitted the details and explained the increase of authorized share capital and the capital structure of equity Citygold Farming P. Ltd., Mumbai. - 5 - shares and 8% non-convertible cumulative preference shares. But, the A.O was of the view that the assessee has not filed the required and detailed information and hence issued summons u/s 131(1) of the Act on 07.01.2013 on the investors of preferences share holders. The A.O found that the investors have failed to comply the summons. Again the A.0. has issued notice u/s 133(6) of the Act on 28.01.2013 and forwarded the copy to the assessee company. The A.O. observed that the requisite information as mentioned at pages 5 to 7 of the assessment order were called for and the assessee though filed the information but does not satisfy the identity and creditworthiness of the investors / shareholders and genuineness of transaction and no evidence was filed to substantiate the investments. The A.O finds that inspite of giving several opportunities to the assessee and the summons issued to the shareholders along with questionnaire, were not complied. Further the A.O deputed the inspector to the addresses provided by the investors and the report was called for. As per the inspector’s report, the shareholders were not present at the addresses provided and no person has Citygold Farming P. Ltd., Mumbai. - 6 - appeared on behalf of the investors. Considering the fact of non availability of information and also non compliance of summons u/s 131(1) of the Act and no information was submitted in respect of notices issued u/s 133(6) of the Act, the A.O dealt on the information submitted by the assessee and wants to verify the identity of shareholders. The A.O observed that the creditworthiness and genuineness of the transaction were not proved. The A.O. also observed that inspite of providing ample opportunities the assessee has failed to prove the identity of the shareholders. In the course of the assessment proceedings the assessee filed a letter dated 09.01.2013 with the details of investors with copies of share application forms, balances sheet, bank statement entries of the shareholders. The A.O was not satisfied with the information submitted by the assessee company as per the books of accounts and neither the shareholders came forward and produced the books of accounts nor any statement to support their investments in the assessee company was furnished. Further, the report of the inspector also proved that the investors are not available at the Citygold Farming P. Ltd., Mumbai. - 7 - addresses provided. The A.O considering the fact of non availability of the investors, relying on the judicial decisions came to conclusion that the assessee has failed to prove the identity of shareholders. In respect of second ingredient of creditworthiness of the shareholders, the A.O observed that the information submitted by the assessee cannot be treated as the substantial evidence as they are not corroborated by the records or books of accounts of the shareholders. The A.O also received the investigation report from ADIT (Inv) - 3, Mumbai, statement recorded in respect of Jagdish Kumar Gupta. While Shri Jagdish Kumar Gupta in his statement recorded u/s 131 of the Act in the course of such proceedings in JK Kumar Projects Ltd., Group confirmed that the said company has received bogus funds in the form of share capital and also there appears to be a name of the company investor M/S Alken Management and Financial Services Private Limited who have invested in assessee’s companies in respect of preference shares. On perusal of the photo copy of the KYC forms of few investors furnished by the various banks in response Citygold Farming P. Ltd., Mumbai. - 8 - to notice u/s 133(6) of the Act. The A.O was not satisfied with the evidence that the investors have creditworthiness and therefore observed that the assessee has failed to substantiate the creditworthiness of the investor shareholders. Finally in respect of genuineness of transaction the A.O observed that the assessee has failed to substantiate the investor’s identity, creditworthiness and the transactions were not explained corroborating with the books of accounts and are not duly supported with the investors accounts. The A.O considering the facts concluded that the share application money and share premium collected by the assessee does not satisfy the test of identity, genuineness and creditworthiness and the assessee failed to substantiate the investments with evidences. Hence, the A.O treated the investments as unexplained cash credits u/s 68 of the Act and assessed the total income of Rs. 31,51,34,410/-and passed the order u/s 143(3) of the Act dated 30.03.2013.
Aggrieved by the order, the assessee has filed an appeal with Ld. CIT(A), the Ld. CIT(A) dealt on the grounds of appeal and submissions of the assessee Citygold Farming P. Ltd., Mumbai. - 9 - and findings of the A.O. The CIT(A) in the course of appellate proceedings dealt on the facts and the written submissions of the Assessee in support of the claim. The Ld AR submitted that the assessee has discharged its duty by submitting the information and the onus lies on the A.O to make enquires. We consider it appropriate to refer to the written submissions at page 2 to 8, para 5 of the order which is as under:-
During the course of appellate proceedings, a written submission was filed, the relevant part of which is summarized as under:
"Disallowance u/S. 68 of the Act amounting to Rs. 31,05,00,000/- On the facts and circumstances of the case and in law the LAO erred in making addition u/s. 68 of the Act, Rs. 31,05,00,0001- received as preference share capital including share premium front parties. Appellant pleads that it had discharged its onus of proving the identity of the preference shareholders and the addition made is unfair, illegal and excessive. Facts 2.01. The appellant company introduced share capital of Rs.2,58,75,0001- by way of "Issued, Subscribed & Paid- up Share Capital" for 2,58,750 non- cumulative convertible preference shares. 2.02. Details of non-cumulative preference share are as Citygold Farming P. Ltd., Mumbai. - 10 - disclosed at page No. 3 of this order. 2.03. The appellant company submitted the following details vide letter dated 09.01.2013 and 23.01.2013. a. Copy of correspondence with preference shareholders alongwith share certificate. b. Copy of application forms c. Copy of board resolution d. Confirmations from preference shareholders in case of Shri Ganesh Spinners Ltd., Nextgen Infotel pvt ltd., and Albright Electricals Pvt Ltd. e. Bank statement of the shareholders showing payment made to appellant company. f. Bank statement and bank book of appellant company. g. Valuation report of Charter Accountant justifying issue of shares at premium, the rate of Rs. 1,255/- per share. 2.04 Summons u/s. 131 and requisition u/s. 133(6) were issued on 28.01.2013 to above preference shareholders. Copy of requisition called for by Ld. AO is reproduced in assessment order on pages 5 & 6. Certain notices returned with remarks "Left" or "Not known ". There was no compliance to the said notices by the shareholders. AR of the appellant company was intimated about the above non-compliance. A showcause notice was also issued for non-compliance of summons issued u/s 131(1) of the Act, proposing to levy penalty u/s. 272A(1)(c) of the Act. 2.05 Inspectors in charge had visited premises of the following places to check the identity of the shareholders but failed to yield any result. Hormony Energy Pvt Ltd. Citygold Farming P. Ltd., Mumbai. - 11 - Next gen Infotel Pvt Limited Aiken Management and Financial Services Pvt Limited Harekrishna Securities Pvt Limited 2.06 Vide letter dt. 08.01.2013, the. appellant company had informed the Ld. AO that all the documents and registers were destroyed in fire that occurred on 23.12.2011 and therefore appellant company was unable to provide more details during assessment proceedings. Appellant company also coordinated with the parties and requested them to comply with the notices received by them. 2.07 As per LAO, the appellant company failed to produce shareholders and thus failed to prove identity and creditworthiness of the shareholders and failed to prove genuineness of the transaction thereby failed to fulfil the conditions u/s. 68 of the Act and made additions of Rs.31,51,34,408 as unexplained cash credit. Our Submission Identity of the Shareholders: - 2.08 As per the Ld. AO, appellant company failed to prove the identity of the shareholders because the appellant company did not produce them or failed to ensure their compliance for verification of the transactions and also relied on the report of the inspector who could not find the shareholders on the address provided by the appellant company. 2.09 The appellant company has submitted various documents as stated above. The appellant company is also submitting before Your Honour copy of acknowledgement of return of income, confirmation for making payment to the appellant company and copy of PAN card.
Citygold Farming P. Ltd., Mumbai. - 12 - 2.10 The above shareholders are company and regularly assessed to Income Tax. Their PAN is submitted before Your Honour. This reveals the identity of the shareholder. 2.11 The Ld. AO vide letter dt 10.01.2013 brought to the appellant's notice that its reply dated 08.01.2013 & 09.01.2013 was general in nature and did not contain any information/evidence specifically with regard to the identity &creditworthiness of the shareholder and genuineness of the transaction. However, the details submitted by appellant company vide letter dt. 09.01.2013 contained i. Copy of correspondence with shareholder, ii. Share application form, iii. Copy of board resolution passed by shareholder for making investment in the shares of appellant company, iv Bank statements of the shareholders and v. Confirmations from shareholders.
2.12 Merely not producing shareholders before the Ld. AO would not mean that the appellant company has not proved the identity of the shareholders. Ld. AO failed to consider other documentary evidence's such as bank statements of the shareholders which were submitted during assessment proceedings proving the identity of the shareholders. The appellant company has also filed share application form received from shareholders and copy of correspondence with the shareholders alongwith share certificate. 2.13 The Ld. AO himself has stated in the order that as per the information on the official website of the ROC (MCA) the preference shareholders have continued with Citygold Farming P. Ltd., Mumbai. - 13 - the appellant company till 31.03.2012. This, itself, proves the identity or shareholder as they were registered with ROC and their information was available on the website of the ROC. 2.14 According to the report of the Inspectors, shareholders do not exist at the given addresses. But this fact does not deny the identity of the company. The other documentary evidences and information available on official website of the ROC cannot be ignored. 2.15 The Ld. AO has relied in case of Nipun Builders & Developers Private Limited, 350 1TR 407 wherein it was held that: "if the assessee was serious enough to establish its case, it ought to have produced the principal officers of the subscribing companies before the Assessing Officer so that they could explain the sources from which the share- subscription was made. That would also have taken care of the difficulty of the assessee in proving the creditworthiness of the subscriber companies. Instead the assessee took an adamant, attitude and failed to comply with the direction of the Assessing Officer.... The assessee thus took a very extreme stand which was not justified; certainly, it did nothing worthwhile to discharge the onus to prove the creditworthiness of the subscribing companies" 2.16 The facts of the above case are not similar with that of the appellant company. The appellant company had requested shareholders to comply with the notices issued to them. Also, the above documents submitted by appellant company prove the identity of the shareholders. 2.17 Thus, the appellant company has proved the identity of the shareholder and fulfilled the first Citygold Farming P. Ltd., Mumbai. - 14 - requirement of establishing the identity u/s. 68 of the Act. Creditworthiness of Shareholders: - 2.18 The LAO has relied on the statement recorded u/s. 131 on oath of Shri Jagdish Kumar Gupta, Director of J. Kumar Infraprojects Limited in which he has stated that that the said company has received bogus funds in the form of share application money pending allotment as on 31.03.2006 from a few companies whose credit worthiness is doubtful. In the said list, name of Alken Management and Financial Services Private Limited is also appearing. 2.19 We have to state that merely because the said company i.e. Alken Management and Financial Services Private Limited was providing bogus funds to M/s. J Kumar Infra projects Ltd, it does not prove that the said company has made bogus investment in the appellant company also. No such confession is available for• 2.20 The Ld. AO had issued notice u/s. 133(6) of the Act to the banks of two companies i.e. Hormony Energy Private Limited and Epson Trading Private Limited. As per the Ld. AO, KYC forms do not reveal any particulars or specifies as may establish the identity of the person behind the shareholder company. As can be seen from the above KYC forms, they are duly signed by the director of the company and also name of the authorised director is mentioned on the form. • 2.21 The Ld AO relied upon CIT vs. P. Mohanakala (2007) 291 ITR 278 (SC) wherein it was held that: "25. The doubtful nature of the transaction and the manner in which the sums were found credited in the books of accounts maintained by the assessee have been duly taken into consideration by the authorities below.
Citygold Farming P. Ltd., Mumbai. - 15 - The transactions though apparent were held to be not real one. May be the money came by way of bank cheques and paid through the process of banking transaction but that itself is of no consequence." 2.22 The facts are different from the case of the appellant company. Alongwith the bank statement of the shareholders, the appellate company has also provided many other documentary evidences which show the identity and creditworthiness of the shareholder. 2.23 The appellant company is submitting balance sheet of the shareholders as on 31.03.2010 which will prove the creditworthiness of the shareholders. Bank statements of the shareholders reflect that they had enough balance for making investment in the shares of the appellant company. 2.24 Individual capacities of the shareholders: i. Hormony Energy Private Limited - Rs. 2,50,80,000/- The financial statement of the above company reveals the following: Equity share capital of Rs. 59,50,000/- with high reserves and surplus of Rs. 4,99,36,709/-. Fixed assets of Rs. 22,41,706/-. The company has huge cash and bank balances of Rs.20,20,673/-The above details prove the credibility of the company. Therefore, the appellant has proved identity, creditworthiness and genuineness by filing copy of PAN card, financial statements, bank statements, confirmations, etc. of the shareholders. ii. Aiken Management and Financial Services Private Limited - Rs. 2,50,80,000/- The financial statement of the above company reveals the following:
Citygold Farming P. Ltd., Mumbai. - 16 - Equity share capital of Rs.5,00,000/- with high reserves and surplus of Rs.13,93,05,664/- Fixed assets of Rs.18,43,348/- The company has huge investments of Rs. 9,95,64,379/- The company has huge investments of Rs.9,95,64,379/- The above details prove the credibility of the company. Therefore, the appellant has proved identity, creditworthiness and genuineness by filing copy of PAN card, financial statements, bank statements, confirmations, etc. of the shareholders. iii. Priority Traders Private Limited (Known as Choice exterior and Interio Pvt Limited - Rs.2,50,80,0001- The financial statement of the above company reveals the following: • Equity share capital of Rs.1,45,00,0001- with high reserves and surplus of Rs.8,68,60,2891- • The company has huge cash and bank balances of-Rs 43,51,534/- • The company has huge investments of Rs.12,43,10,0001- • Fixed assets stand at Rs.13,03,1481- The above details prove the credibility of the company. Therefore, the appellant has proved identity, creditworthiness and genuineness by filing copy of PAN card, financial statements, bank statements, confirmations, etc. of the shareholders. iv.Shri Ganesh Spinners Ltd. – 3,50,40,000/- The financial statement of the above company reveals the following: • Equity share capital of Rs.45,06,53,0001- with high Citygold Farming P. Ltd., Mumbai. - 17 - reserves and surplus of Rs. 1,00,00,00,000/- • Fixed Assets of Rs.69,59,3721-. • The company has huge cash and bank balances of Rs.1,58,19,7481• The company has huge investments of Rs.1,32,04,52,1501- • The company has received subsidy of Rs.10,27,0001- in the current year. The above details prove the credibility of the company. Therefore, the appellant has proved identity, creditworthiness and genuineness by filing copy of PAN card, financial statements, bank statements, confirmations, etc. of the shareholders. v. Tac Technosoft Private Limited - Rs.2,00,40,0001 The financial statement of the above company reveals the following: • Equity share capital of Rs. 11,52,00,000/- • The company has huge investments of Rs. 7,2 8,2 0, 000/- The above details prove the credibility of the company. Therefore, the appellant 1105 proved identity, creditworthiness and genuineness by filing copy of PAN card, financial statements, bank statements, confirmations, etc. of tte shareholders. vi. Hindustan Continental Limited - Rs.4,50,00,0001 The financial statement of the above company reveals the following: • Equity share capital of Rs.8,95,96,0001- with reserves and surplus of Rs.66, 12,089/- • Fixed Assets of Rs.1,16,22,4001- • The company has cash & bank balance of Citygold Farming P. Ltd., Mumbai. - 18 - Rs.2,92,42,8921- • The company has inventory of Rs. 2,58,76,455/- •The company has huge operational income of Rs. 1,47,50,68,0041- The above details prove the credibility of the company. Therefore, the appellant has proved identity, creditworthiness and genuineness by filing copy of PAN card, financial statements, bank statements, confirmations, etc. of the shareholders. vii. Epson Trading Private Limited - Rs.4,00,80,0001 The financial statement of the above company reveals the following: • Equity share capital of Rs.1,31,00,000/- with high reserves and surplus of Rs.8,14,00,000/- Fixed assets of RS. 22,05,812/- The company has cash & bank balance of Rs.33,12,096/- The company has investment of Rs.7,92,30,000/- The company has huge sales & operational income of Rs. 34,90,08,267/- The above details prove the credibility of the company. Therefore, the appellant has proved identity, creditworthiness and genuineness by filing copy of PAN card, financial statements, bank statements, confirmations, etc. of the shareholders. viii. Lilac Medicines Private Limited - Rs.2,00,40,000/- The financial statement of the above company reveals the following: Equity share capital of Rs.1,30,50,000/- with high reserves and surplus of Rs.4,71,67,413/- The company has investment of Rs.7,90,40,000/- The above details prove the credibility of the company.
Citygold Farming P. Ltd., Mumbai. - 19 - Therefore, the appellant has proved identity, creditworthiness and genuineness by filing copy of PAN card, financial statements, bank statements, confirmations, etc. of the shareholders. ix. Harekrislma Securities Private Limited - Rs.5,00,40,000/- The financial statement of the above company reveals the following: Equity share capital of Rs.96,44,000/- with high reserves and surplus of Rs.11,66,26,828/- The Company has cash & bank balance of s.35,22,934/- The company has huge investment of Rs.10,01,19,700/- The above details prove the credibility of the company. Therefore, the appellant has proved identity, creditworthiness and genuineness by filing copy of PAN card, financial statements, bank statements, confirmations, etc. of the shareholders. x. Nextgen Infotel Private Limited — Rs.1,00,20,000/- The financial statement of the above company reveals the following. Equity share capital of Rs.44,31,900/- with high reserves and surplus of Rs.42,88,71,076/- Huge Share Investment of Rs.77,70,47,000/- The company has cash & bank balance of s.19,25,147/- The above details prove the credibility of the company. Therefore, the appellant has proved identity, creditworthiness and genuineness by filing copy of PAN card, financial statements, bank statements, confirmations, etc. of the shareholders. xi. Albright Electricals Private Limited - Rs.1,50,00,000/- Citygold Farming P. Ltd., Mumbai. - 20 - The financial statement of the above company reveals the following: Equity share capital of Rs.3,40,55,800/- with high reserves and surplus of Rs.46,55, 74, 437/- Huge Investment of Rs.61,57,83,042/- The company has cash & bank balance of Rs.1,90,23,070/- The above details prove the credibility of the company. Therefore, the appellant has proved identity, creditworthiness and genuineness by filing copy of PAN card, financial statements, bank statements, confirmations, etc. of the shareholders. 2.25 Thus, from the above facts and explanation the appellant company has proved the creditworthiness of the shareholder and fulfilled second requirement of s. 68 of the Genuineness of the transaction:- Genuineness of the transaction:- 2.26 The Ld AO has simply stated that as the appellant company had failed to prove the identity and creditworthiness of the shareholders, genuineness of the transaction is also not substantiated. 2.27 The copies of confirmations of shareholders are submitted before Your Honour Whereby the shareholders have confirmed the investment made in appellant company's shares. This shows that the transactions are genuine. 2.28 The Ld AO has relied upon Vijay Kumar Taiwar v. CIT (2011) 330 ITR I Wherein it is held that: 2.29 the authorities below, below, in particular the Tribunal, have observed in unison that the assessee did not produce any evidence to rebut the presumption drawn against him under section 68 of the Act, by Citygold Farming P. Ltd., Mumbai. - 21 - producing the parties in whose name the amounts in question had been credited by the assessee in his books of account. In the absence of any cogent evidence, a bald explanation furnished by the assessee about the source of the credits in question viz., realization from the debtors of the erstwhile firm, in the opinion of the Assessing Officer, was not satisfactory. It is well settled that in view of section 68 of the Act, where any sum is found credited in the books of the assessee for any previous year, the same may be charged to Income-tax as the income of the assessee of that previous year, if the explanation offered by the assessee about the nature and source thereof is, in the opinion of the Assessing Officer, not satisfactory." 2.29 In the above case the assessee did not furnish any evidence which substantiates his claim. But the appellant company has submitted documentary evidences such as copy of correspondence with the shareholders, bank statements of the shareholders, copy of share application and board resolution. The facts of the above case are different from the appellant company's case. 2.30 Thus, the transaction is genuine and beyond any doubt. The appellant company has proved the genuineness of the transaction and fulfilled the third requirement also of s. 68 of the Act. 2.31 From the above facts and explanation, all the three requirements i.e. identity, creditworthiness and genuineness are fulfilled. Therefore, additions u/s. 68 is bad in law and needs to be deleted."
5. The Ld. CIT(A) considered the submissions of the assessee and the information submitted in the course of appellate proceedings made observations on issue Citygold Farming P. Ltd., Mumbai. - 22 - of 258750 non-cumulative preference shares of Rs. 100/- each at a premium of Rs., 1,100/- and dealt on the findings of the A.O. Further, the CIT(A) found that, in response to the notice u/s 142(1) of the Act issued by the A.O to the assessee company, the assessee has filed the details in respect of share capital before the A.O on 14.12.2012.
“Vide letter dt. 14.12.2012: a. Form 5 being notice to ROC regarding increase in number of member. b. Extra of special resolution for increase in authorized share capital. Vide letter dated 09.01.2013: a. Copy of correspondence with preference share holders alongwith share certificate. b. Copy of share application forms. c. Copy of board resolution of shareholders. d. Confirmations from preference shareholders in case of 3 parties. e. Bank statement of the shareholders showing payment made to appellant company. Vide letter dt. 23.01.2013: a. Bank statement and bank book of appellant. b. Valuation report of Chartered account justifying issue of shares at premium, the rate of Rs. 1,255/- per share.
Citygold Farming P. Ltd., Mumbai. - 23 - 6. Further the A.O to verify the identity, creditworthiness and genuineness of the investors / shareholders has issued summons u/s 131 of the Act in some of the cases it was returned back by the postal department and in some other cases no reply was received. The assessee has filed the information in respect of these investments, but there was no reasonable explanations submitted, therefore the A.O was not satisfied with the reply. Further, CIT(A) dealt on the facts that the A.O has verified from the website of ROC, MCA that the preference shareholders continued with the assessee company till 31.03.2012 which is not disputed. And also the statement of Shri Jagdish Kumar Gupta, Director of JK Infra projects Ltd., where one of the investor of the assessee company was also investor and providing the only accommodation entries. The CIT(A) has also dealt on the findings of the A.O in the appellate proceedings. During the appellate proceedings, the assessee has submitted the various documents by way of additional evidences as under:-
“a. Copy of special resolution authorizing the directors of the appellant company to allot the preference shares.
Citygold Farming P. Ltd., Mumbai. - 24 - b. Form 2 submitted online to MCA c. Acknowledgment of return of income and financial statement for A.Y 2010-11 of the subscribers. d. Copy of signed confirmation by the subscribers for making application of preference shares issue of the appellant company. e. Copy of pan card. f. Copy of board resolution and share application in case of M/s. Hindustan Continental Ltd., and Lilac Medicines Pvt Ltd., g. Latest addresses of the subscribers.
The assessee submitted that there was no sufficient opportunity provided in Assessment proceedings and the documents could not be submitted. Further, the evidences and the related documents, registers were destroyed in a fire occurred on 23.02.2011. Therefore, the evidences could not be submitted for the genuine reasons and supported with various judicial decisions. The Ld CIT(A) after receipt of the additional evidences, which was for the first time filed with the appellate authority forwarded the same to the Assessing officer for examination. Whereas, the A.O has submitted remand report and mentioned that the additional evidence should not be Citygold Farming P. Ltd., Mumbai. - 25 - accepted by the CIT(A) as the assessee was provided ample and adequate opportunity of the hearing in the assessment proceeding to furnish the details. The Ld. A.R. relied on the judicial decisions, where the assessee is entitled to file or produce the additional evidence under special circumstances. The assessee has filed reply on the comments in the remand report and explained the specific circumstances and the reasonable cause for not filing the submissions or evidences before the Assessing Officer. The Ld CIT(A) is empowered to make enquiry and direct the A.O for further enquiry and file report with the appellate authority. The additional evidence filed by the assessee has been forwarded to the A.O. and calling for remand report of the A.O as per the Rule 46A of the Rules. The Ld CIT(A) has no discretion to refuse the admission of additional evidence. The Ld. AR of the assessee in the appellate proceedings supported his stand on filing of additional evidence and admission of documents on the coordinate Bench decision of Mumbai ITAT in the case of Shahrukh Khan Vs. DCIT, 2007, 13 sot 61 (Mum) and Jurisdictional Hon’ble Bombay High Court decision of Citygold Farming P. Ltd., Mumbai. - 26 - Smt. Prabhadevi S. Shah Vs CIT 23 ITR 01. Considering the objections of the A.O on admission of additional evidence and the reply filed by the assessee to the remand report on judicial decisions, the CIT(A) has considered the facts that the assessee has not filed the information before the A.O in the assessment proceedings for various reasons including important details i.e register and documents which were destroyed in fire on 23.12.2011 and the same was brought on record by the A.O. The assessee cannot be barred from filing the evidence, which goes to the root of the case. Further, the CIT(A) has observed at page 6.3.2 of the order that the A.O has made addition with no proper evidences or information was filed or available on record. The assessee does not have enough time to file the information as it has to be collected, and the assessee also brought on record that some of the information and details were destroyed in fire on 23.12.2011 and the same is a just and reasonable cause. The appellate authority relied on the decision of the Hon’ble Jurisdictional High Court and has admitted the additional evidence and forwarded to the A.O. On receipt of the information Citygold Farming P. Ltd., Mumbai. - 27 - by letter dated 28.01.2015,from CIT(A), the A.O in the remand proceedings has issued notice u/s 133(6) of the Act on the 11 preference shareholders calling for the information of income tax returns acknowledgement, balance sheet, copy of pan card and signed confirmations. The A.O observed that the notices were served on the shareholders and the relevant details have been submitted. And all the investor shareholders have confirmed of making investment in the assessee company. The A.O after receipt of this information has made detailed analysis and found that the shareholders have failed to establish the creditworthiness and genuineness of the transactions. The CIT(A) observed that all the 11 shareholders to whom notices u/s 133(6) of the Act were issued, filed the details as per directions and to support their identity, has filed the details of their establishment. Further, the shareholders have confirmed the fact of investments and the premium paid. The assessee has substantiated the onus of proving the investors with the evidences, where the investors have complied with the directions of the A.O u/s 133(6) of the Act and the details are filed which Citygold Farming P. Ltd., Mumbai. - 28 - are not disputed. The assessee has duly complied with the directions of the Revenue in the remand proceedings. The Ld.AR in the hearing proceedings submitted that for the same assessment year in assessee’s sister concern M/s. City gold Education Research Ltd, where the issues are identical and the three investors who made investments in the assessee company were also part of the investigation of DDIT (Inv), Ahmedabad and Baroda. In respect of three investors, it was proved before the DDIT (Inv) Unit, that these investors carried out their business activities and produced the audited accounts, investment registers, and return of income and bank statements. The investors are i. Alken Management and Financial Services Pvt. Ltd.; ii. M/s. Lilac Medicines Pvt. Ltd.; M/s. Hare Krishna Securities Pvt. Ltd. All these companies have filed documentary evidences before the investigation department wing in Ahmedabad and the explanations were considered. The investors proved their identity and creditworthiness and genuineness of transactions before the Investigation Department and satisfied the ingredients of Sec. 68 of the Act. The Ld. AR Citygold Farming P. Ltd., Mumbai. - 29 - supported the stand with the judicial decisions emphasizing that the addition cannot be made u/s 68 of the Act. The CIT(A) dealt on the explanations submitted by the assessee on the criteria of identity, creditworthiness and genuineness of transactions are as under:
“6.5.1 Identity of shareholder a. As per the AO, appellant company failed to prove the identity of the shareholders because the appellant company did not produce them or failed to ensure their compliance for verification of the transactions and failed to furnish any evidence to prove the identity of the said preference shareholders. AO also relied on the report of the inspector who could not find some of the shareholders on the addresses provided by the appellant company. b. Merely not producing shareholders before the AO would not mean that the appellant company has not proved the identity of the shareholders. Ld. AO failed to consider other documentary evidences such as copy of acknowledgement of return of income, balance sheet, bank account details of the shareholders, confirmations of shareholders etc. .which were submitted during assessment proceedings proving the identity of the shareholders. The appellant company has also filed share application forms received from shareholders and copy of correspondence with the shareholders. It was contended that shareholders were not under command of appellant. They were not ready to come on requests of appellant.
Citygold Farming P. Ltd., Mumbai. - 30 - c. A0 himself has stated in the order that as per the information on the official website of the ROC(MCA) the preference shareholders have continued with the appellant company till 31.03.2012. This, itself, proves the identity of the shareholders as they were registered with ROC and their information was available on the website of the ROC. d. Further during the remand proceeding the notices .u/s. 133(6) were duly served to the shareholders and all the shareholders filed their replies with the AO. e. Further in case of M/s. Citygold Education Research Private Limited which is a group concern of the appellant company, same issue was raised for A.Y. 2010-11. The following parties have also invested in M/s. Citygold Education Research Private Limited. a. M/s. Alken Management and Financial Services Pvt. Ltd. b. M/s. Lilac Medicines Pvt. Ltd. c. M/s. Hare Krishna Securities Pvt. Ltd. The above parties are shareholders of the appellant company also. In case of M/s. Citygold Education Research Private Limited,-the AO had issued Commission at Baroda and Ahmadabad to verify the identity of the above 3 parties. The copy of the report of the AO along with report of the commission issued is on record of CIT(A) -16 in the case of M/s. Citygold education Research Pvt. Ltd., investment made in the appellant company is after the date of search on J. Kumar Infra Projects Ltd i.e. 26.08.2009. It was further, contended that neither the copy of the statement was provided to the appellant company nor any opportunity of cross examination was provided to appellant company.
Citygold Farming P. Ltd., Mumbai. - 31 - e. Similarly, in the case of M/s Ganesh Spinners Ltd (now known as Yantra Natural Resources Ltd.), the Ld. AO has relied on the statement of Shri. Shirish Chandrakant Shah, who allegedly managed and controlled more than 212 companies and who had admitted to have given entries of share capital, share premium and share application money to various entities. It is stated by the Ld. AO that the directors of the Company managed by Shri Shirish Chandrakant Shah have been found to be dummy and for namesake and in their statements, they have revealed that they are mere money lenders. f. Presently, even if it is accepted that the said company was providing bogus funds to M/s. Shree Ganesh Spinners Ltd. Ltd (now known as Yantra Natural Resources Ltd.), but it does not prove that the said companies has made bogus investment in the appellant company also. No such confession is available for investment in appellant company. Also, there is no evidence put on record as to what was the nature of statements given by the said Mr. Shirish Chandrakant Shah and how is it directly or indirectly linked with the appellant. 6.5.3 Genuineness of the transaction a. AO stated that since appellant company had failed to prove the identity and creditworthiness of the shareholders, genuineness of the transaction is also not substantiated. b. Although the mere fact that transaction have been taken through the banking channel would not constitute evidence of the genuineness of the transactions, however the fact cannot be ignored that the relevant books of accounts of the shareholders and their confirmation were also submitted. Further during the remand proceedings Citygold Farming P. Ltd., Mumbai. - 32 - all the shareholders, except one, replied to the notice u/ s. 133(6) and explained their source of investment also. Thus, genuineness of the transaction cannot be doubted. C. Further the AO had stated that notices were issued u/s. 133(6) to the bankers, shareholders and submissions received from them. d. It is rightly said by the appellant that AO has not passed any adverse comments on the bank statements of the shareholders. AO had nowhere mentioned that there were immediate cash withdrawals in the bank statement or there were many debit or credit entries. Also, AO has not doubted the fact that the shareholders had enough balance to make the investment in the appellant company. Thus, capacity and credibility of the shareholders is proved beyond any doubt. 6.5.4 Now let's discuss the identity, credibility and genuineness of transactions in respect to individual shareholders: i. Harmony Energy Private Limited a. In the case of M/s. Harmony Energy Private Limited, Baroda (Rs. 2,50,80,000) it is seen that the company was incorporated on 17.12.2007 as per PAN card. The financial statement of the said company reveals the following: i. Equity share capital of Rs. 59,50,000 with high reserves and surplus of Rs. 4,99,36,709 ii. Fixed Assets are disclosed at Rs. 22,41,706 and the company has huge cash and bank balance of Rs. 20,20,673. iii. The Company has huge investments of Rs. 3,40,27,000 and has given loans & advances of Rs. 3,92,14,380.
Citygold Farming P. Ltd., Mumbai. - 33 - iv. During the year, the Company also has a substantial turnover of Rs. 2,04,54,861 and profit during the year (before tax) was Rs. 6,74,825. b. This proves the capacity to make investment in the appellant company and also issue shares at premium. The said company is holding shares till date of the appellant company. Thus, there is no rotation of money c. Also, the party has made its submissions before the AO in response to notice u/s 133(6) of the Act. It has confirmed the shares as investment as shown by the appellant. Balance sheet for year ending on 31-3-2010 is filed before the AO and the same shows the same figures as stated herein above. In view of this, other observations of the AO are not relevant, though the appellant has satisfactorily replied to them also. d. This not only proves the identity of party but also proves the genuineness of transaction and creditworthiness. Hence addition made in the assessment is not correct. ii. Alken Management and Financial Services Private Limited a. In the case of M/s. Alken Management and Financial Services Private Limited (Rs. 2, 50,80,000) it is seen that the company was incorporated on 14.04.1996 as per PAN card and is therefore an old company. The financial statement of the said company reveals the following: i. Equity share capital of Rs. 5,50,000 with huge reserves and surplus of Rs. 13,93,05,664. ii. Fixed Assets are disclosed at Rs. 18,43,348 and the company has huge cash and bank balance of Rs. 23,03,875.
Citygold Farming P. Ltd., Mumbai. - 34 - iii. The Company has huge investments of Rs. 9,95,64,379 and has given loans & advances of Rs. 4,06,21,633. iv. During the year, the Company also has a substantial turnover of Rs. 2,28,41,793 and profit during the year (before tax) was Rs. 9,19,440. b. This proves the capacity to make investment in the appellant company and also issue shares at premium. The said company is holding shares till date of the appellant company. Thus, there is no rotation of money. c. With regards the observation of the AO that during the course of search and seizure action u/s 132 of the Act in the case of M/s J Kumar Infraprojects Ltd (formerly known as J Kumar & Co) and its associate cases on 25.08.2009, it emerged that this was one of the entities which provided bogus entries. d. Also the party has made its submissions before the A.O in response to notice u/s 133(6) of the Act, it has confirmed the shares as investment as shown by the appellant. Balance sheet for year ending on 31.03.2010 is filed before the A.O and the same shows the same figures as stated herein above. In view of this, other observations of the AO are not relevant, though the appellant has satisfactorily replied to them also. Moreover, it was further contended that neither the copy of the statement was provided to the appellant company nor any opportunity of cross examination was provided to the appellant company. e. This not only proves the identity of party but also proves the genuineness of transaction and creditworthiness. Hence addition made in the assessment is not correct.
Citygold Farming P. Ltd., Mumbai. - 35 - iii. Priority Traders Private Limited a. In the case of M/s. Priority Traders Private Limited (Rs. 2,50,80,000) (now known as Choice Exterio & Interio Private Limited) it is seen that the company was incorporated on 08.01.1996 as per PAN card. It is therefore an old company. The financial statement of the said company reveals the following: i. Equity share capital of Rs. 1,45,00,000 with high reserves and surplus of Rs. 8,68,60,289 ii. Fixed Assets are disclosed at Rs. 13,03,148 and the company has huge cash and bank balance of Rs. 43,51,534. iii. The Company has huge investments of Rs. 12,43,10,000 and has given loans & advances of Rs. 3,40,26,808. iv. During the year, the Company also has a substantial turnover of Rs. 48,46,79,028 and profit during the year (before tax) was Rs. 3,59,500. b. This proves the capacity to make investment in the appellant company. The said company is holding shares till date of the appellant company. Thus, there is no rotation of money c. The appellant had also responded to notice u/s 133(6) of the Act issued by the A.O. It has confirmed the investments in shares as investment as shown by the appellant. Balance sheet for year ending on 31-3-2010 is filed before the AO which confirms the transaction. In view of this, other observations of the AO are not relevant, though the appellant has satisfactorily replied to them also. - d. This not only proves the identity of party but also proves the genuineness of transaction and creditworthiness. Hence addition made in the assessment Citygold Farming P. Ltd., Mumbai. - 36 - is not correct. IV. Shree Ganesh Spinners ltd., a. In the case of M/s. Shree Ganesh Spinners Limited (Rs. 3,50,40,000) (now known as Yantra Natural Resources Limited) it is seen that the company was incorporated on 01-09.1988 as per PAN card. It is therefore an old company. It is also a listed entity. The financial statement of the said company reveals the following: i. Equity share capital of Rs. 45,06,53,000. ii. Fixed Assets are disclosed at Rs. 69,59,272 and the company has huge cash and bank balance of Rs. 1,58,19,748. iii. The Company has huge investments of Rs. 132,04,52,150 and has given loans & advances of Rs. 10,89,49,168. iv. During the year, the Company also has a turnover of Rs. 69,35,995 and profit during the year (before tax) was Rs. 28,89,124. b. This proves the capacity to make investment in the appellant company. The said company is holding shares till date of the appellant company. Thus, there is no rotation of money c. With regards the observation of the AO that during the course of search action in the case of Shri Shirish Chandrakant Shah and his key employees on 09.04.2013, it emerged that this was one of the entities which provided bogus entries. I agree with the appellant that merely because the said Shirish Chandrakant Shah was providing bogus entries to M/ s. Shree Ganesh Spinners Ltd, it does not prove that the said M/ s. Shree Ganesh Spinners Ltd company has made bogus investment in the appellant company.
Citygold Farming P. Ltd., Mumbai. - 37 - No such confession is available for investment in appellant company. Moreover, it was further contended that neither the copy of the statement was provided to the appellant company nor any opportunity of cross examination was provided to the appellant company. d. This proves the capacity to make investment in the appellant company and also issue shares at premium. The said company is holding shares till date of the appellant company. Thus, there is no rotation of money. e. Also, the party has made its submissions before the AO in response to notice u/s 133(6) of the Act. It has confirmed the shares as investment as shown by the appellant. Balance sheet for year ending on 31-3- 2010 is filed before the AO and the same shows the same figures as stated herein above. f. This not only proves the identity of party but also proves the genuineness of transaction and creditworthiness. Hence addition made in the assessment is not correct. V. Tac Technosoft Private Limited a. In the case of M/s. Tac Technosoft Private Limited (Rs. 2,00,40,000) it is seen that the company was incorporated on 25.07.2001 as per PAN card. The financial statement of the said company reveals the following: i. Huge equity share capital of Rs. 11,51,00,000/- with reserves and surplus of Rs. 9,55,662/-. ii. The company has also cash and bank balance of Rs. 7,43,361. iii. The Company has huge investments of Rs. Citygold Farming P. Ltd., Mumbai. - 38 - 7,28,20,000 and has given loans & advances of Rs. 5,24,37,459. iv. During the year, the Company also had a substantial turnover of Rs. 101,13,89,573 and profit during the year (before tax) was Rs. 2,75,990. b. This proves the capacity to make investment in the appellant company. The said company is holding shares till date of the appellant company. Thus, there is no rotation of money. c. Also, the party has made its submissions before the AO in response to notice u/s 133(6) of the Act. It has confirmed the shares as investment as shown by the appellant. Balance sheet for year ending on 31-3-2010 is filed before the AO and the same shows the same figures as stated herein above. In view of this, other observations of the AO are not relevant, though the appellant has satisfactorily replied to them also. d. This not only proves the identity of party but also proves the genuineness of transaction and creditworthiness. Hence addition made in the assessment is not correct. vi. Hindustan Continental Limited a. In the case of M/s. Hindustan Continental Limited (now known as Azure Exirn Services Limited) (Rs. 4,50,00,000) it is seen that the company was incorporated on 07.01.1993 as per PAN card. The Company is an old company. The financial statement of the said company reveals the following: i. Equity share capital of Rs. 9,95,96,000 with high reserves and surplus of Rs. 66,12,089. ii. Fixed Assets are disclosed at a substantial amount of Rs.1,16,22,400 and the company has cash and Citygold Farming P. Ltd., Mumbai. - 39 - bank balance of Rs. 2,92,42,892. iii. The Company has huge investments of Rs. 7,86,40,000 and has given loans & advances of Rs. 49,45,653. iv. During the year, the Company also has a substantial turnover of Rs. 147,50,68,004 and profit during the year (before tax) was Rs. 35,26,517. b. This proves the capacity to make investment in the appellant company and also issue shares at premium. The said company is holding shares till date of the appellant company. Thus, there is no rotation of money c. Also, the party has made its submissions before the AO in response to notice u/s 133(6) of the Act. It has confirmed the shares as investment as shown by the appellant. Balance sheet for year ending on 31-3-2010 is filed before the AO and the same shows the same figures as stated herein above. In view of this, other observations of the AO are not relevant, though the appellant as satisfactorily replied to them also d This not only proves the identity of party but also proves the genuineness of transaction and creditworthiness Hence addition made in the assessment is not correct. Vii. Epson Trading Pvt ltd., In the case of M/s. Epson Trading pvt ltd (Rs. 4,00,80,000) it is seen that the company was incorporated on 23.11 .1994 as per PAN card. Therefore it is an old company. The financial statement of the said company reveals the following: i. Equity share capital of Rs. 1,31,00,000 with high reserves and surplus of Rs. 8,14,00,006. ii. Fixed Assets are disclosed at Rs. 22,05,812 and the Citygold Farming P. Ltd., Mumbai. - 40 - company has cash and bank balance of Rs. 33,12,096. iii. The Company has huge investments of Rs. 7,92,30,000 and has given loans & advances of. Rs. 3,53,19,740. iv. During the year, the Company also has a substantial turnover of Rs. 34,90,08,267 and profit during the year (before tax) was Rs. 8,80,713. b. This proves the capacity to make investment in the appellant company and also issue shares at premium. The said company is holding shares till date of the appellant company. Thus, there is no rotation of money c. Also, the party has made its submissions before the AO in response to notice u/s 133(6) of the Act. It has confirmed the shares as investment as shown by the appellant. Balance sheet for year ending on 31-3-2010 is filed before the AO and the same shows the same figures as stated herein above. In view of this, other observations of the AO are not relevant, though the appellant has satisfactorily replied to them also. d. This not only proves the identity of party but also proves the genuineness of transaction and creditworthiness. Hence addition made in the assessment is not correct. viii. Lilac Medicines Private Limited a. In the case of M/s. Lilac Medicines Private Limited (Rs. 2,00,40,000) it is seen that the company was incorporated on 02.01.2008 as per PAN card. The financial statement of the said company reveals the following: i. Equity share capital of Rs. 1,30,50,000 with high reserves and surplus of Rs. 4,71,67,413. ii. Fixed Assets are disclosed at Rs. 13,34,251 and the Citygold Farming P. Ltd., Mumbai. - 41 - company has cash and bank balance of Rs. 1,58,154. iii. The Company has huge investments of Rs. 7,90,40,000 and has given loans & advances of Rs. 2,10,88,084. iv. During the year, the Company also has. a substantial turnover of Rs. 2,45,46,810 and profit during the year (before tax) was Rs. 3,67,142. b. This proves the capacity to make investment in the appellant company and also issue shares at premium. The said company is holding shares till date of the appellant company. Thus, there is no rotation of money c. Also, the party has made its submissions before the AO in response to notice u/s 133(6) of the Act. It has confirmed the shares as investment as shown by the appellant. Balance sheet for year ending on 31-3-2010 is filed before the AO and the same shows the same figures as stated herein above. In view of this, other observations of the AO are not relevant, though the appellant has satisfactorily replied to them also. d. This not only proves the identity of party but also proves the genuineness of transaction and creditworthiness. Hence addition made in the assessment is not correct. ix. Hare Krishna Securities Private Limited a. In the case of M/s. Hare Krishna Securities Private Limited (Rs. 5,00,40,000) it is seen that the company was incorporated on 01.09.1994 as per PAN card. The financial statement of the said company reveals the following: i. Equity share capital of Rs. 96,44,000 with high reserves and surplus of Rs. 11,66,26,828. ii. Fixed Assets are disclosed at Rs. 5,64,489 and the Citygold Farming P. Ltd., Mumbai. - 42 - company has cash and bank balance of Rs. 35,22,934. iii. The Company has huge investments of Rs. 10,01,19,700 and has given loans & advances of Rs. 2,29,83,391. iv. During the year, the Company also has a turnover of Rs. 1,17,81,407 and profit during the year (before tax) was Rs. 2,03,736. b. This proves the capacity to make investment in the appellant company and also issue shares at premium. The said company is holding shares till date of the appellant company. Thus, there is no rotation of money c. Also, the party has made its submissions before the AO in response to notice u/s 133(6) of the Act. It has confirmed the shares as investment as shown by the appellant. Balance sheet for year ending on 31-3-2010 is filed before the AO and the same shows the same figures as stated herein above. In view of this, other observations of the AO are not relevant, though the appellant has satisfactorily replied to them also. d. This not only proves the identity of party but also proves the genuineness of transaction and creditworthiness. Hence addition made in the assessment is not correct. X. Nextgen Infotel Private Limited a. In the case of M/s. Nextgen Infotel Private Limited (Rs. 10,20,000) it is seen that the company was incorporated on 13.08.2008 as per PAN card. The financial statement of the said company reveals the following: i. Equity share capital of Rs. 44,31,900 with high reserves and surplus of Rs. 42,88,71,076. ii. The company has huge cash and bank balance af Rs. Citygold Farming P. Ltd., Mumbai. - 43 - 19,25,148. iii. The Company has huge investments of Rs. 77,80,47,000 and has given loans & advances of Rs. 2,73,00,000. iv. During the year, the Company also has a turnover of Rs. 49,590 and profit during the year (before tax) was Rs. 10,716. b. This proves the capacity to make investment in the appellant company and also issue shares at premium. The said company is holding shares till date of the appellant company. Thus, there is no rotation of money. c. Also, the party has made its submissions before the AO in response to notice u/s 133(6) of the Act. It has confirmed the shares as investment as shown by the appellant. Balance sheet for year ending on 31-3-2010 is filed before the AO and the same shows the same figures as stated herein above. In view of this, other observations of the AO are not relevant, though the appellant has satisfactorily replied to them also. d. This not only proves the identity of party but also proves the genuineness of transaction and creditworthiness. Hence addition made in the assessment is not correct. xi. Albright Electricals Private Limited a. In the case of M/s. Alibright Electricals Private Limited (Rs. 1,50,00,000) it is seen that the company was incorporated on 26.06.1996 as per PAN card. Therefor it is an old company. The financial statement of the said company reveals the following: i. Equity share capital of Rs. 3,40,55,800 with high reserves and surplus of Rs. 46,55,74,437.
Citygold Farming P. Ltd., Mumbai. - 44 - ii. Fixed Assets are disclosed at Rs. 27,846 and the company has cash and bank balance of Rs.. 1,90,23,071. iii. The Company has huge investments of Rs. 61,57,83,042 and has given loans & advances of Rs. 1,82,76,260. iv. During the year, the Company also has a substantial turnover / Income of Rs. 6,98,088 and profit during the year (before tax) was Rs. 3,67,142. b. This proves the capacity to make investment in the appellant company and also issue shares at premium. The said company is holding shares till date of the appellant company. Thus, there is no rotation of money' c. Also, the party has made its submissions before the AO in response to notice u/s 133(6) of the Act. It has confirmed the shares as investment as shown by the appellant. Balance sheet for year ending on 31-3-2010 is filed before the AO and the same shows the same figures as stated herein above. In view of this, other observations of the AO are not relevant, though the appellant has satisfactorily replied to them also. d. This not only proves the identity of party but also proves the genuineness of transaction and creditworthiness. Hence addition made in the assessment is not correct.
8. The Ld. CIT(A) made observations on the findings of the A.O and on the facts submitted before the A.O in the remand proceedings. The CIT(A) dealt on the catena of Hon’ble Tribunal and Hon’ble Jurisdictional High Court decisions on the 3 ingredients of the Citygold Farming P. Ltd., Mumbai. - 45 - sec68 of the Act and finally concludes that the assessee has satisfied the requisite conditions and submitted the details and discharged its burden of proof and observed at para 6.9 of the order as under:
6.9 The Ld. AO hd made additions u/s. 68 on the basis that notice u/s.133(6) / 131 of the Act were not served during the assessment proceedings. The principal officers of the company were also not produced at the time of assessment. During appellate stage it was specifically inquired about non-availability or non-service of notice at the time assessment. During appellate proceedings additional evidences in form of confirmation and latest postal addresses were submitted by the appellant which were forwarded to the A.O for conduction further necessary inquiries. During remand proceedings, the Ld. AO once again issued notice u/s 133(6) on the latest address which were duly complied by the subscriber of shares alongwith all necessary details which were called by the A.O. All the subscribers of shares furnished audited financials alongwith other necessary details a called by the A.O. The Ld. AO had not doubted the genuineness of documents furnished in response to notices issued u/s 133(6) and he has not pointed out any discrepancies in them. Therefore, the only basis on which AO made addition u/s 143(3) about non-services of notice issued u/s 131/133(6) is no more valid because not only notices were served but complied by the recipients. The A.O had not pointed out any defects in the information received in response to notices u/s 133(6). During appellate proceedings, it was also submitted that at the time of remand proceedings, appellant was ready to produce the principal officer of Citygold Farming P. Ltd., Mumbai. - 46 - companies which had subscribed the shares of appellant company but after receipt of information u/s 133(6) A.O did not insist for it
9. Similarly, the Ld CIT(A) supported his views relying on the decision in the assessee’s own case for the A.Y 2012-13. and finally relying on the facts, provisions of law and the case laws, deleted the addition u/s 68 of the Act and allowed the assessee’s appeal. Aggrieved by the CIT(A) order, the revenue has filed an appeal before the Tribunal.
10. At the time of hearing, the Ld. DR submitted that the Ld. CIT(A) has erred in accepting and admitting the additional evidences overlooking the fact that the assessee was provided ample opportunities in the course of assessment proceedings. CIT(A) overlooked the findings of the A.O. irrespective of additional evidences considered in the remand report. Further, the Ld CIT(A) erred on his views that the assessee could not substantiate in the remand proceedings, the genuineness of the transaction and creditworthiness of investor companies which they have claimed to have been proved. Whereas, based on the submissions of the Ld. AR in the appellate proceedings, the Citygold Farming P. Ltd., Mumbai. - 47 - genuineness, correctness and creditworthiness of the companies could not be proved. The CIT(A) erred in overlooking the fact that the A.O in the remand report mentioned about the two companies Alken Management and financial services Pvt ltd and Ganesh Spinners Ltd., who are part of the investors in JK Infra Projects Ltd., and who have only engaged themselves in the business of accommodation entry providers. Therefore, the genuineness is doubted and cannot be substantiated with any evidences. The Ld. DR also submitted that the CIT(A) should have considered the remand report, the objections as two divergent views are permissible and prayed for allowing the revenue appeal.
11. Per Contra, the Ld. AR submitted that the assessee has satisfied the three ingredients necessary u/s 68 of the Act. Whereas, the A.O has failed to discharge his duty, when the details were filed in the assessment proceedings. The Ld. AR further emphasized that the Ld CIT(A) has considered the grounds of appeal of the assessee and written submissions which goes to the root of the case duly supported by the evidences. Further the assessee Citygold Farming P. Ltd., Mumbai. - 48 - could not submit the details before the A.O though the opportunity was provided as the records were destroyed on 23.12.2011 in a fire accident, which was mentioned in the course of the assessment proceedings and the revenue has also not disputed. Further, the Ld. AR submitted that in respect of 11 investors who have made investments in the assessee company, were considered on similar issues in the sister concern case, of Hon’ble Tribunal decision in ITO Vs. City gold Pvt Ltd., dated 31.01.2018 for the Assessment Year 2012-13 where the revenue appeal was dismissed. Whereas in the case of DCIT Vs. City gold Farming Pvt. Ltd. in the assessee’s own case, the Ld CIT(A) has relied on his earlier decision and granted relief to the assessee. The contentions of the Ld. AR, that in respect to non compliance of summons u/s 131(1) of the Act by the investor companies issued to prove the identity, creditworthiness and genuineness of the transaction, the Ld AR submitted that the assessee has filed the information on 14.02.2012, 09.01.2013 and 23.01.2013 to justify the premium and also the creditworthiness and genuineness of the transaction and was not disputed Citygold Farming P. Ltd., Mumbai. - 49 - by the A.O. The assessee has cooperated in submitting the information and had not disobeyed the directions of the revenue. The investors, to whom the summons u/sec 131 of the Act were issued have not appeared for various reasons but the assessee has filed the details through the letters, including the compliances made under companies Act and KYC norms under the Banking Regulations. The assessee has discharged his burden of onus of proof, on submitting the details but due to non availability of information due to fire mishap on 23.12.2011, it was delayed. Whereas, the A.O was not satisfied with the claims and the notices issued u/s 133(6) of the Act on the investors were returned un-served in some cases, and in some cases no reply has been received. Whereas, the assessee in the appellate proceedings before the CIT(A) has filed a detailed written submissions in respect of all 11 investors to substantiate the ingredients of identity of the investors, creditworthiness and genuineness of the transaction of shares. Whereas the CIT(A) on receipt of the information filed by the assessee for the first time as additional evidences under Rule 46A of the IT Citygold Farming P. Ltd., Mumbai. - 50 - Rules. CIT(A) has considered the evidences and forwarded the same to the A.O for his comments. The CIT(A) has dealt elaborately on the facts of the additional evidences and forwarded to A.O by letter dated 28.01.2015. Whereas, the A.O has filed a remand report dated 19.05.2017 explaining that the assessee was provided ample opportunities to submit the said information in the regular assessment proceedings and also summons under section 131(1) of the Act and notice u/s 133(6) of the Act were issued to verify and examine the identity, creditworthiness and genuineness of the transaction of the parities. But there were no proper compliances before the A.O in the assessment proceedings. The Ld. AR submitted that the A.O in the remand proceedings have issued notice u/s 133(6) of the Act on the addresses provided and all the 11 investors have filed the details along with financial statements as referred by the CIT(A) in his order. The A.O. verified that the preference shareholders are with the assessee company as on 31.03.2012 as per M C A, Ministry of Corporate Affairs website. The A.O. considered the income tax returns filed by the investors, audited Citygold Farming P. Ltd., Mumbai. - 51 - financial statements, pan card copies and confirmations and investments in preference shares. The assessee has cooperated in submitting this information and complied with the directions. Where as, in respect of two companies which made investments in the assessee company, the A.O has submitted that in case of J Kumar and Company, search was conducted and a statement was recorded explaining that these two companies are only accommodation entry providers and such statement was never put to the assessee for cross examination. The A.O has disputed all the material facts, irrespective of submitting all the details filed by the investors, the assessee could not substantiate that the investor companies are having the creditworthiness and the transactions are genuine. The Ld. AR submitted that these companies are still active and filed the copies of existence with supporting company master data, which discloses the CIN number, companies name, address and details of last balance sheet filed by the investor companies as per the website of Ministry of Corporate Affairs (MCA). Further, the latest status of investors filed by the Citygold Farming P. Ltd., Mumbai. - 52 - assessee on 17.06.2019 based on the Ministry of Corporate Affairs (MCA) data the details were filed explaining the status of these companies by way of chart is as under:
Citygold farming Pvt ltd., Name of the Company Status Azure Exim Services ltd (formerly; Active Hindustan Continental Ltd.,) Nextgen Infotel Pvt Ltd Active Accelerate Trader Pvt Ltd (Formerly; Amalgamated Choice Exterio and interio Pvt ltd & Earlier: Priority Traders pvt Ltd.) Epson Trading Pvt ltd Active Harekrishna Securities Pvt Ltd Active Tac Technosoft pvt Ltd., Active Yantra natural Resources Ltd Active (Formerly: Shri Ganesh Spinners ltd.,) Hormony Energy Pvt Ltd Amalgamated Alken Managemnet and financial Amalgamated services Pvt ltd Lilac Medicines Pvt Ltd., Amalgamated
The Ld. AR after submitting the voluminous information and the investor company status as per the Ministry of Corporate Affairs (MCA) website submitted that the assessee has discharged its burden of submitting the information in respect of identity, creditworthiness and genuineness of the Citygold Farming P. Ltd., Mumbai. - 53 - transactions and complied with the provisions of Sec. 68 of the Act. Further, the amendment to proviso u/s 68 of the Act are applicable prospectively from A.Y. 2013-14 onwards. Whereas in the present case, the assessment year dealt is A.Y. 2010-11. The assessee has complied with the directions in the remand proceedings and further the CIT(A) satisfied with the submissions and provisions of law relied on the judicial decisions and granted the relief. Hence, the appeal filed by the revenue be dismissed.
We have heard the rival submissions and perused the material on record and judicial decisions. The Revenue has raised the grounds of appeal in respect of admission of the additional evidence by the appellate authorities and also the assessee failed to satisfy the genuineness of the transactions and creditworthiness in the remand report. Similarly the investors of the assessee company in a statement recorded in the case of JK Projects was found that they are in the business of providing only accommodation entries. The Ld. DR has been emphasizing that the assessee was granted ample opportunities before the assessing authority and the Citygold Farming P. Ltd., Mumbai. - 54 - CIT(A) has erred in not considering the comments and facts of the A.O and granted the relief. We first deal on the issue with regard to the admission of the additional evidence by the Ld CIT(A). On perusal of the CIT(A) order, we find that the CIT(A) after receiving written submissions of the additional evidence under Rule 46A of the IT Rules has forwarded the additional evidences to the file of the A.O for his comments and called for the remand report on 25.01.2015. Whereas, the A.O on the receipt of the information from the appellate authority office has issued notice u/s 133(6) of the Act to all the relevant shareholders to file the details of copy of acknowledgment of return of income for the A.Y 2010- 11, copy of the balance sheet and profit and loss account including notes and schedules for the F.Y 2009-10 relevant to the A.Y 2010-11, copy of the PAN card and the confirmation of application for subscription to the non cumulative convertible preference shares. In compliance, all the 11 investors have filed the details and complied with the directions of the A.O in the remand proceedings. Further, the A.O has made his observations in the remand report Citygold Farming P. Ltd., Mumbai. - 55 - that the assessee and investors have cooperated in submitting the information and the assessee was provided opportunity to substantiate the objections raised by the A.O. At this point of time, we consider that the CIT(A) has powers to admit the additional evidence as it goes to the root of the case and the A.O was provided time for verification and examination of the evidences filed in the course of appellate proceedings. The CIT(A) has admitted the additional evidence relying on the facts and the judicial decisions in particular of Coordinate Bench of Hon’ble tribunal in the case of Shahrukh Khan and DCIT (Supra), where it was held, that after calling for remand report from the A.O on merits as envisaged in Rule 46A of IT Rules, 1962, the CIT(A) has no discretion to refuse to admit the additional evidence. Considering the overall facts in respect of admission of additional evidence, the Ld CIT(A) plays a vital role in exercising his powers and they are co terminus in line with the A.O and further opportunity was provided to the A.O. by calling for the remand report. The assessee was provided time to file the counter arguments therefore, the CIT(A) action in Citygold Farming P. Ltd., Mumbai. - 56 - admitting the additional evidence is within his jurisdiction supported by the judicial decisions and facts and in accordance with law. The Revenue cannot agitate that the CIT(A) should not have admitted the additional evidence. We also considered the observations of the Hon’ble High Court of Madras in the case of Smt. B. Jayalaxmi Vs. ACIT 2018, 407 ITR 212 (Madras) held in respect of the remand report filed by the A.O as under:
Held, that the Tribunal repeated verbatim the order passed by the AO dated March 29, 2001, and ignored the remand report dated November 25, 2002 and the findings rendered by the Commissioner (Appeals) based on such remand report. Though a question was not specifically, the admission of the AO in the remand report, required to be considered. Thus, in the absence of consideration of this important jurisdictional issue, the judgment dated September 30, 2013, suffered from error which was apparent on the face of the judgment. The order of the High Court was recalled and the matter remanded to the Tribunal to decide the question of its jurisdiction to entertain the appeals filed by the revenue against the order of the Commissioner (Appeals) and if the Tribunal decided the question in favour of the Revenue, it was to reconsider the other issues after opportunity to the revenue and the assessee
14. In respect of the second grievance on the grounds of appeal raised by the revenue on identity, Citygold Farming P. Ltd., Mumbai. - 57 - genuineness of the transaction and creditworthiness, the Ld. AR has submitted that the assessee has filed the details to substantiate the ingredients of Sec. 68 of identity, genuineness of transaction and creditworthiness of investors, we find that the CIT(A) has dealt on the disputed issue in his order elaborately and relied on the decisions of the Coordinate Bench of Hon’ble Tribunal and the Hon’ble High Court decisions and came to a conclusion that the assessee has satisfied the ingredients required u/s 68 of the Act. The Ld. AR referred to the paper book at page 1 to 7 in respect of remand report and submitted that the assessee’s company investors who have contributed to the preference shares have submitted the details. Whereas, the A.O observed that the information submitted does not satisfy the requirements u/s 68 of the Act. The Ld. AR submitted that in assessee’s own case for the A.Y 2012-13 the Hon’ble Tribunal in A.Y 2012- 13 dated 14.04.2017 has remanded the matter to the file of the A.O as the CIT(A) has not called for any report for verification of the details, the relevant Citygold Farming P. Ltd., Mumbai. - 58 - operative portion of the order of the Tribunal is as under:
6. We have heard the rival contentions of both the parties. We find that during the course before the Ld. CIT(A), the assessee has submitted own bank statement reflecting the said payment, ledger account of lender and balance confirmation but Ld. CIT(A) has not called for the remand report or the ld. CIT(A) has not verified these details. The Ld. CIT(A) has, simply relying upon the judgment of Hon’ble Guwahati High Court in the case of Nemi Chand Kothari Vs. CIT (2014) 264 ITR 254, deleted the addition. Therefore, we reverse the finding of Ld. CIT(A) and restore this matter back to the file of AO and the AO is directed to decide the matter afresh, as per law
15. The Ld. AR submitted that, in the present case for the A.Y 2010-11, the CIT(A) after receipt of the written submissions and additional evidence from the assessee has forwarded the additional evidence to the file of the Assessing officer by letter dated 28.01.2015 for the remand report and the said remand report was filed with the Office of the CIT(A) dated 19.05.2017. This proves the fact that the CIT(A) has provided an opportunity to the A.O to verify and examine the evidences filed by the assessee for the first time before the appellate authority. The A.O based on the information filed by the letter dated Citygold Farming P. Ltd., Mumbai. - 59 - 25.01.2015 has issued notice u/s 133(6) on all the 11 investors and information was submitted. These facts prove that the A.O has applied his mind at the time of remand proceedings and filed the remand report. The CIT(A) after receiving the remand report and comments of the assessee has verified the details. The Ld CIT(A) considering the provisions of law and facts and circumstances dealt on the disputed issues and granted the relief. The Ld. AR also relied on the Hon’ble tribunal decision of sister concern referred at the page 11 to 55 of the paper book in case of DCIT Vs. Fern Infrastructure Pvt Ltd, A.Y 2010-11 dated 31.05.2018. In this cross appeal, the Hon’ble Tribunal considered the facts of the existence of the companies in the website of MCA and the material filed before the CIT(A). The Ld. AR submitted that only one company was struck off from the register of companies and therefore in respect of other companies with are in existence and status of the investor companies on the website of MCA, the Tribunal has confirmed the order of the CIT(A) on granting the relief except one company where the name has been struck off. We find that in assessee’s Citygold Farming P. Ltd., Mumbai. - 60 - sistern concern in the case of ITO Vs. City Gold education Pvt Ltd in ITA 4742/Mum/2015, for the A.Y 2010-11, the Tribunal on the similar issue, where the remand report was called for and relied on the decisions and the fact of existence of these companies from the list submitted by the assessee has dealt at page 32 para 7 to 11 of the order and confirmed the CIT(A) order and dismissed the revenue appeal as under:
“7. We find that the AO proceeded to discredit the investors of the assessee, which is completely erroneous. The AO was looking for proof beyond doubt and proceeded on an element of suspicion that the amounts of investments are really those of the assessee, which have been ploughed back by the assessee. But the settle principle of law is that any amount of suspicion however, it strong might be, is no substitute for proof. Suspicion is not sufficient enough to lead to the conclusion that the investments received by the assessee company are all manipulated receipts and on that basis he can record a finding that the explanation of the assessee is not satisfactory. According to us, so long as the proof and identity of the investor and the payment received from him is through a doubtless channel like that of a banking channel, the receipt in the hands of the assessee towards Citygold Farming P. Ltd., Mumbai. - 61 - share capital or share premium does not change its colour. The money so invested in the assessee company would still be the money available and belonging to the investors. The consistent principle followed is that the investors sources and creditworthiness cannot be explained by the assessee. If the Department has a doubt about the genuineness of the investor’s capacity, it is open to it to proceed against those investors. Without taking such a course of action, the AO proceeded on conjectures and surmises that the assessee has, in fact, ploughed back the money. The very approach of the AO is completely opposed to settled legal principles enunciated and they have arrived at conclusions contrary to the legal principles on the subject. Further, they are finding fault with the assessee for the alleged failure of its investors in proving beyond doubt that they have the capacity to invest at the moment they did in the assessee. The Assessee is not expected to perform a near impossibility.
8. From the above, it is clear that the assessee has completely produced the evidences before the AO i.e. the identity of the shareholder by filing the registered address with ROC, PAN No. along with copy of returns of income furnished with particular Ward of the department of the investors. The assessee has also received money from shareholders through account payee cheque and issued documents such as share certificate, return of allotment filed with ROC forms which were filed before Citygold Farming P. Ltd., Mumbai. - 62 - the AO. The assessee has also filed copies of bank statement of the subscribers showing that it had sufficient balance in its accounts to enabled the subscriber to subscribe the share capital. In view of these facts and circumstances, once the AO has not rebutted the evidences, the AO cannot disbelieve the same. This issue is squarely covered by the decision of Hon’ble Bombay High Court in the case of CIT vs. Gagandeep Infrastructure Pvt. Ltd. (2017) 394 ITR 680 (Bom), wherein Hon’ble High Court had held as under : - (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 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 Citygold Farming P. Ltd., Mumbai. - 63 - 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.
(f) In the above circumstances and particularly in view of the concurrent finding of fact arrived at by the CIT(A) and the Tribunal, the proposed question of law does not give rise to any substantial question of law. Thus not entertained.
Further, in recent decision of Hon’ble Bombay High Court in the case of CIT vs. Orchid Industries Pvt. Ltd Citygold Farming P. Ltd., Mumbai. - 64 - (2017) 397 ITR 136 (Bom), following the case law of Gagandeep Infrastructure Pvt. Ltd deleted the addition by observing in as under: - “5] ‘ The Assessing Officer added Rs.95 lakhs as income under Section 68 of the Income Tax Act only on the ground that the parties to whom the share certificates were issued and who had paid the share money had not appeared before the Assessing Officer and the summons could not be served on the addresses given as they were not traced and in respect of some of the parties who had appeared, it was observed that just before issuance of cheques, the amount was deposited in their account.
6] The Tribunal has considered that the Assessee has produced on record the documents to establish the genuineness of the party such as PAN of all the creditors along with the confirmation, their bank statements showing payment of share application money. It was also observed by the Tribunal that the Assessee has also produced the entire record regarding issuance of shares i.e. allotment of shares to these parties, their share application forms, allotment letters and share certificates, so also the books of account. The balance sheet and profit and loss account of these persons discloses that these persons had sufficient funds in their accounts for investing in the shares of the Assessee. In view of these voluminous documentary evidence, only because those Citygold Farming P. Ltd., Mumbai. - 65 - persons had not appeared before the Assessing Officer would not negate the case of the Assessee. The judgment in case of Gagandeep Infrastructure (P.) Ltd. (supra) would be applicable in the facts and circumstances of the present case”
We have also made enquiry from the learned Sr. Departmental Representative, whether the investors or this company is a Shell company or in the list prepared by Ministry of Corporate Affairs, Govt. of India. The learned Sr. DR, stated that this information is not available with the department. Further, we made enquiry from the learned Counsel for the assessee whether this company has been strike off from the Registrar Of Companies or not, the learned Counsel stated that it is very much on the register of Registrar Of Companies. In view of these facts, we reach to a conclusion that this is existing company and even the investors are existing.
In view of the above facts and circumstances of the case, we are of the view that CIT(A) has rightly deleted the addition and we confirm the same. This issue of revenue’s appeal is dismissed.”
We find that the assessee company has received the share capital along with the share premium and in the remand proceedings the investors have submitted income tax return copies, financial Citygold Farming P. Ltd., Mumbai. - 66 - statements and copy of Pan card and confirmation of investments which are not disputed by the Revenue. The Assessing officer after receipt of the evidences has examined the details and was satisfied with the explanations on the identity of the investors and disagreed with the genuineness and credit worthiness of the transactions. Whereas, the Ld CIT(A) has dealt on the facts, details and law and examined the remand report and has relied in his own order for the A.Y 2012-13 and granted the relief. The Ld.AR also relied on the decision of the coordinate Bench of Hon’ble Tribunal in the case of ITO Vs. Sidhivinayaka Filaments Pvt Ltd. in ITA 3003/Mum/2017, for the A.Y 2012-13, where the issues are identical and Hon’ble Tribunal has dealt on the disputed issue at page 16 para 7.5 to 10 which is read as under:
“7.5. Based on the aforesaid observations, the ld. CIT(A) deleted the addition made u/s.68 of the Act towards share capital and share premium in the sum of Rs.2,50,00,000/-.
Aggrieved, the revenue is in appeal before us.
9. We have heard rival submissions and perused the materials available on record including the entire documents filed by the assessee before the lower authorities which are not in dispute before us. These Citygold Farming P. Ltd., Mumbai. - 67 - documents are also placed on record in the form of detailed paper books by the assessee. We find that the ld. CIT(A) had elaborately dealt with the entire issue by due appreciation of the various documentary evidences submitted in respect of investor companies duly proving the three necessary ingredients of Section 68 of the Act viz. identity of the investors, creditworthiness of the investors and genuineness of the transactions. We find that none of these documentary evidences were controverted by the ld. AO by proceeding to make further enquiry in this regard. None of these facts were even denied by the ld. AO or any deficiencies were found thereon by the ld. AO and we also take note of the fact that out of the five investor companies who had invested monies in the assessee company, four of them are public limited companies which are listed in various stock exchanges. We also take note of the fact that the ld. CIT(A) had placed reliance on the co-ordinate bench decision of this Tribunal in the case of Gagandeep Infrastructure supra, wherein it was held that the amendment to Section 56(2)(viib) and proviso to Section 68 of the Act are only prospective in nature and applicable only from A.Y.2013-14 onwards and not earlier. We find that this judgment has been subsequently approved by the Hon’ble Jurisdictional High Court. We find that the Ld. DR vehemently relied upon the decision of Hon’ble Delhi High Court in the case of Navodaya Castles (P) Ltd., reported in 50 taxmann.com 110. We hold that the decision of Hon’ble Jurisdictional High Court would bind this Tribunal. Hence, in view of the aforesaid observations and various decisions of Hon’ble Jurisdictional High Court relied upon by the ld. CIT(A) while granting relief to the assessee, we do not deem it fit to interfere in the said order of the ld. CIT(A). Accordingly, ground No.2 raised by the revenue is dismissed.
Citygold Farming P. Ltd., Mumbai. - 68 - 10. In the result, appeal of the revenue is dismissed”.
17. We find that the Ld. AR has substantiated his arguments with the judicial decisions and the material facts with the evidences which cannot be disputed and the Ld. CIT(A) has also considered the legal aspects and the remand report and took a reasonable decision. We also find that in respect of third ground raised by the revenue, that the CIT(A) has not considered the findings of the A.O in the remand report in respect of two investors who have nothing to do with the investment but only accommodating operations. Whereas, the Ld CIT(A) having received the remand report has dealt at para 6.4.1 of the order, where these companies have been tested and investigated by the DDIT, (Inv) Ahmedabad and the documentary evidence was filed. The observations of the CIT(A) at para 6.4.1 and 6.4.2 at page 15 and 16 are as under:
“6.4.1. Further the appellant company has referred to the case of Citygold Education Research Limited wherein the same issue was raised for A.Y.2010-11. It has been stated that in the abovementioned company following shareholders were holding shares which are also shareholders of the Citygold Farming P. Ltd., Mumbai. - 69 - appellant company. They appeared before the DDIT(Inv) at Ahmadabad and Baroda and parties at Ahmadabad have confirmed that they held shares in the aforementioned company. Further, they also explained business activities carried out by them and also produced audited accounts, investment register, return of income, bank statement before the DDIT(Inv), Unit - 1(3), Ahmadabad. It not only proves that the above parties actually exist but also proves that they have capacity to invest in the shares of appellant company. The details of companies examined by the DDIT (Inv), Unit-1(3), Ahmadabad is as under: a. Alken Management & Financial Services Private Limited b. Lilac Medicines Private Limited c. Hare Krishna Securities Private Limited 6.4.2 The appellant company that from the facts, explanation, documentary evidence and also judicial pronouncement proved that addition u/s 68 is not correct since, the identity and creditworthiness of the shareholders and genuineness of the transaction is proved beyond doubt. The appellant placed reliance on following case laws in support that in the circumstances of the facts of the case of the appellant no addition under section 68 can be made on account of unexplained cash credit: i. ACIT v. Kisco Casting (P.) Ltd (2013) 34 taxmann.com 37 ii. CIT v. Creative World Telefilms Ltd. (2011) 15 taxmann.com 183 (Born) (HC) iii. CIT v. Orbital Communication (P) Ltd (2010) 327 ITR 560 Citygold Farming P. Ltd., Mumbai. - 70 - (Delhi) iv. CIT v. Shree Rama Multi Tech Ltd. (2013) 34 taxmann.com 177 (Gujarat) v. CIT v. Orissa Corpn. (P.) Ltd. (1986) 25 TAXMAN 80F (SC) vi. CIT v. Apex Therm Packaging (P.) Ltd (2014) 42 taxmann.com 473 (Guj) vii. CIT vs. Morani Automotives (P.) Ltd (2014) 45 taxmann.ccm 473 (Rajasthan) viii. CIT v. Nipuan Auto (P.) Ltd (2014) 49 taxmann.com 13 (Delhi) ix. CIT v. Vacmet Packaging (India) (P.) Ltd (2014) 45 taxmann.com 204 (Allahabad) x. CIT v. Misra Preservers (P.) Ltd. (2013) 31 taxmann.com 214 (Allahabad) xi.CIT v. Expo Globe India Ltd. (2014) 51 taxmann.com 208 (Delhi) xii. ACIT vs. Bahubali Dyes Ltd (2015) 55 taxmann.com 357 (Delhi - Trib) 18. The CIT(A) accepts that these companies actually exist and have capacity to make investments in assessee company as it was proved in the case of the investigation at Ahmedabad and Baroda. The CIT(A) also observed that the assessee has discharged his onus of burden of proof in respect of identity of investor, creditworthiness and genuineness of the transaction. We find the Jurisdictional Hon’ble High Court in the case of Pr. CIT vs. Ami Industries India Pvt Ltd., 2020, 116 taxmann.com 34 (Mumbai) dated 29.01.2020, where the similar facts of the present Citygold Farming P. Ltd., Mumbai. - 71 - case were dealt by the Hon’ble Jurisdictional High Cour at para 14 to 24 which reads as under:
“14. Section 68 of the Act has received considerable judicial attention through various pronouncements of the Courts. It is now well settled that under Section 68 of the Act, the assessee is required to prove identity of the creditor; genuineness of the transaction; and credit worthiness of the creditor. In fact, in NRA Iron & Steel (P) Ltd (supra), Supreme Court surveyed the relevant judgments and culled out the following principles:- “11. The principles which emerge where sums of money are credited as Share Capital/Premium are: 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. iii. If the inquiries 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.”
It is also a settled proposition that assessee is not required to prove source of source. In fact, this position has been clarified by us in the recent decision in Gaurav Citygold Farming P. Ltd., Mumbai. - 72 - Triyugi Singh Vs. Income Tax Officer-24(3)(1)2 16. Having noted the above, we may now advert to the orders passed by the authorities below.
In so far order passed by the Assessing Officer is concerned, he came to the conclusion that the three companies who provided share application money to the assessee were mere entities on paper without proper addresses. The three companies had no funds of their own and that the companies had not responded to the letters written to them which could have established their credit worthiness. In that view of the matter, Assessing Officer took the view that funds aggregating Rs. 34 Crores introduced in the return of income in the garb of share application money was money from unexplained source and added the same to the income of the assessee as unexplained cash credit under Section 68 of the Act.
In the first appellate proceedings, it was held that assessee had produced sufficient evidence in support of proof of identity of the creditors and confirmation of transactions by many documents, such as, share application form etc. First appellate authority also noted that there was no requirement under Section 68 of the Act to explain source of source. It was not necessary that share application money should be invested out of taxable income only. It may be brought out of borrowed funds. It was further held that nonresponding to notice would not ipso facto mean that the creditors had no credit worthiness. In such circumstances, the first appellate authority held that where all material evidence in support of explanation of credits in terms of identity, genuineness of the transaction and creditworthiness of the creditors were available, without any infirmity in such evidence and the explanation required under Section 68 of the Act having been discharged, Assessing Officer was not Citygold Farming P. Ltd., Mumbai. - 73 - justified in making the additions. Therefore, the additions were deleted.
In appeal, Tribunal noted that before the Assessing Officer, assessee had submitted the following documents of the three creditors:- a) PAN number of the companies; b) Copies of Income Tax return filed by these three companies for assessment year 2010-11; c) Confirmation Letter in respect of share application money paid by them; and d) Copy of Bank Statement through which cheques were issued. 20. Tribunal noted that Assessing Officer had referred the matter to the investigation wing of the department at Kolkata for making inquiries into the three creditors from whom share application money was received. Though report from the investigation wing was received, Tribunal noted that the same was not considered by the Assessing Officer despite mentioning of the same in the assessment order, besides not providing a copy of the same to the assessee. In the report by the investigation wing, it was mentioned that the companies were in existence and had filed income tax returns for the previous year under consideration but the Assessing Officer recorded that these creditors had very meager income as disclosed in their returns of income and therefore, doubted credit worthiness of the three creditors. Finally, Tribunal held as under:- “5.7 As per the provisions of Section 68 of the Act, for any cash credit appearing in the books of assessee, the assessee is required to prove the following- (a) Identity of the creditor (b) Genuineness of the transaction Citygold Farming P. Ltd., Mumbai. - 74 - (c) Credit-worthiness of the party (i) In this case, the assessee has already proved the identity of the share applicant by furnishing their PAN, copy of IT return filed for asst. year 2010-11. (ii) Regarding the genuineness of the transaction, assessee has already filed the copy of the bank account of these three share applicants from which the share application money was paid and the copy of account of the assessee in which the said amount was deposited, which was received by RTGS. (iii) Regarding credit-worthiness of the party, it has been proved from the bank account of these three companies that they had the funds to make payment for share application money and copy of resolution passed in the meeting of their Board of Directors. (iv) Regarding source of the source, Assessing Officer has already made enquiries through the DDI (Investigation), Kolkata and collected all the materials required which proved the source of the source, though as per settled legal position on this issue, assessee need not to prove the source of the source. (v) Assessing Officer has not brought any cogent material or evidence on record to indicate that the shareholders were benamidars or fictitious persons or that any part of the share capital represent company’s own income from undisclosed sources. Accordingly, no addition can be made u/s.68 of the Act. In view of above reasoned factual finding of CIT(A) needs no interference from our side. We uphold the same.”
From the above, it is seen that identity of the creditors were not in doubt. Assessee had furnished PAN, copies of the income tax returns of the creditors as well as copy of bank accounts of the three creditors in which the share application money was deposited in order to prove genuineness of the transactions. In so far credit Citygold Farming P. Ltd., Mumbai. - 75 - worthiness of the creditors were concerned, Tribunal recorded that bank accounts of the creditors showed that the creditors had funds to make payments for share application money and in this regard, resolutions were also passed by the Board of Directors of the three creditors. Though, assessee was not required to prove source of the source, nonetheless, Tribunal took the view that Assessing Officer had made inquiries through the investigation wing of the department at Kolkata and collected all the materials which proved source of the source.
In NRA Iron & Steel (P) Ltd (supra), the Assessing Officer had made independent and detailed inquiry including survey of the investor companies. The field report revealed that the shareholders were either non- existent or lacked credit-worthiness. It is in these circumstances, Supreme Court held that the onus to establish identity of the investor companies was not discharged by the assessee. The aforesaid decision is, therefore, clearly distinguishable on facts of the present case.
Therefore, on a thorough consideration of the matter, we are of the view that the first appellate authority had returned a clear finding of fact that assessee had discharged its onus of proving identity of the creditors, genuineness of the transactions and credit-worthiness of the creditors which finding of fact stood affirmed by the Tribunal. There is, thus, concurrent findings of fact by the two lower appellate authorities. Appellant has not been able to show any perversity in the aforesaid findings of fact by the authorities below.
22. Under these circumstances, we find no error or infirmity in the view taken by the Tribunal. No question of law, much less any substantial question of law, arises Citygold Farming P. Ltd., Mumbai. - 76 - from the order of the Tribunal. Consequently, the appeal is dismissed. However, there shall be no order as to cost. 19.We considering the various facts, provisions of law, and the Judicial decisions find that the CIT(A) has passed a reasonable and logical order considering the provisions of law, judicial decisions, remand report and the assessee’s own case, and applied the ratio of the judicial decisions to the present case and deleted the addition. The Ld.DR has submitted that the order of the LdCIT(A )is bad in law and supported his arguments relying on the order of the A.O and remand report and could not controvert the findings of the CIT(A) with any new or cogent evidence. Accordingly, we do not find any infirmity in the order of the CIT(A) and uphold the same and dismiss the grounds of appeal of the revenue.
In the result, the appeal filed by the revenue is dismissed.