ITO, WARD- 6(4), NEW DELHI vs. CREATIVE TECHNO SOLUTIONS PVT. LTD., NEW DELHI

Whether on the facts and in the circumstances of the case and in law, the Ld CIT(A) has earned in accepting the creditworthiness and genuineness of transactions merely on the basis that transaction were through banking channel or by account payee instruments but it did not reflect their actual genuine business activities.

Whether on the facts and in the circumstances of the case and in law, the Ld. CIT (A) did not notice that the share subscribers did not have its own profit making apparatus. It merely rotated money, which was coming through the bank accounts. The bank accounts did not reflect their creditworthiness of transaction

The appellant craves leave for reserving the right to amend, modify, alter, add or forego any ground(s) of appeal at any time before or during the hearing of this appeal.”

Brief facts of the case are that, the Assessee filed its return of income declaring NIL income. The case of the Assessee was selected for scrutiny under CASS. The assessment order came to be passed u/s 143(3) of the Income Tax Act, 1961 (‘Act’ for short) by making an addition of Rs. 3,00,00,000/- u/s 68 of the Act. Aggrieved by the assessment order dated 25/03/2015,the Assessee preferred an Appeal before the Ld. CIT(A). The Ld. CIT(A) vide order dated 23/02/2017, allowed the Appeal of the Assessee by deleting the addition made by the A.O. Aggrieved by 3 the order of the Ld. CIT (A) dated 23/02/2017, the Department of Revenue preferred the present Appeal on the Grounds mentioned above.

The Ld. Departmental Representative submitted that the Assessee has not discharged the onus of proving the genuineness of transaction as contemplated u/s 68 of the Act. Further submitted that when the Inspector was deputed to serving the notices to the Companies, the investing Companiesfoundto be not running at the business givenin the address and during the service of summons also the Companies were not found in exist. Further submitted that in some of the cases share capital/share premium were not received through banking channel and has been received through book entry by increasing the share capital and share premium and correspondingly increasing the loans and share application money paid which clearly reflects that share application money is nothing but the own money of the Company, which was routed through the said channel to avoid taxation. The Ld. Departmental 5. Per contra, the Ld. Assessee's Representative submitted that the Ld. CIT(A) while deleting the additiondealtwith all the issues. Further submitted that, the entire transaction are through banking channel, the A.O. has not brought anything on record to show that the cash has been deposited in the bank account of the Assessee. Further submitted that all the seven share holder Companies are live Companies having PAN and have filed their income tax return. All the Companies have replied to the notice issued u/s 133(6) of the Act and those facts establish the existence/identity of the shares applicants. All the Companies are having high net worth which could be corroborated from the bank statement of the investor company, therefore, there is no doubt in so far as creditworthiness of the share applicant parties. All the transactions were done through banking channel and there was no deposit of cash found in the bank accounts of the Assessee. The Assessee has established the initial onus, however, without bring any material on record to controvert the claim of the Assessee, the A.O. made the addition which has been rightly deleted by the Ld. CIT(A). The Ld.

We have heard both the parties and perused the material available on record. During the assessment proceedings, the Ld. A.O. observed that the Assessee company issued 3,12,000/- shares and received share application money and premium of Rs. 3,00,00,000/- form seven Companies located in Kolkata. To examine the identification and genuineness of the Companies, a notices u/s 133(6) of the Act were issued. On receipt of the notice u/s 133(6) of the Act, all the seven companies have replied. The A.O. also observed that the entire money has been received through banking channel. The A.O. deputed an Inspector and the said Inspector found that the Companies were not running at the given address. However, in the assessment order no such date of the report or date of visit of the Inspector has been mentioned, however A.O. termed the transaction as not genuine, made addition u/s 68 of the act which has been deleted by the Ld. CIT(A).

It is a matter of fact that the seven subscriber companies from whom share application money/share premium of Rs. 3,00,00,000/- was received by the Assessee during the year under consideration are all live Returns. All the seven Companies have replied to the notice issued u/s 133(6) of the Act by the A.O. The bank statement and balance sheet of all the investor Companieswere also produced, which has been verified by the Ld. CIT(A) and found that they had high networth so as to invest in the Assessee Company. Thus, the creditworthiness of the share applicant parties are not in doubt. In so far as the genuineness of the transactions are concerned, the Ld. CIT(A) perused the bank statement of share subscribers and found that all the transactions were done through banking channel and there was no deposit of cash in the bank account of the Assessee before issue of funds in favour of the Assessee Company. Considering the fact that the transactions have been done through banking channel, one cannot doubt the genuineness of the transaction. The Assessee has established the initial onus as required u/s 68 of the Act, therefore, it is for the A.O. to bring the material on record to controvert the claim of the Assessee or to discredit the evidence produced by the Assessee. In the assessment order in one breath A.O. confirmed that all the notices issued u/s 133(6) of the Act were served on the Investor Companies and contrary to the same, the existence of those report and no reference of date of inspection has been mentioned in the assessment order. The A.O. has not collected any evidence to prove that the transactions in questions were not genuine or the share application money/share premium received by the Assessee during the year was its own undisclosed income. It is well settled law that mere non production of Directors of share applicant cannot be termed that the entire transactions are not genuine as held in the case of CIT vs. Orissa Corporation Pvt. ltd. 1986 159 ITR 768 (S.C).Considering the above facts and circumstances, we find no error or infirmity in the order of the Ld. CIT(A) in deleting the addition made by the A.O. 8. In the result, Appeal of the Revenue is dismissed. Order pronounced in the open court on 27th February, 2025 (AVDHESH KUMAR MISHRA) JUDICIAL MEMBER Date:- 27.02.2025 R.N, Sr.P.S*