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Income Tax Appellate Tribunal, “C”, BENCH KOLKATA
Before: SHRI J. SUDHAKAR REDDY, AM & SHRI S. S. GODARA, JM
Appellant by : Shri Aloke Nag, Addl. CIT(DR) Respondent by : Shri P.K. Himmatsinghka, A/R सुनवाई क� तार�ख/ Date of Hearing : 05/08/2019 घोषणा क� तार�ख/Date of Pronouncement : 04/10/2019 आदेश / O R D E R Per Shri S. S. Godara: This Revenue’s appeal for assessment year 2011-12 arises against the Commissioner of Income Tax (A) - 2, Kolkata dated 29.06.2015 passed in Case No.1648/CIT(A)-2/2014-15 involving proceedings u/s 143(3) of the Income Tax Act, 1961 (in short ‘the Act’).
Heard both the parties. Case file perused.
The Revenue’s sole substantive ground pleaded in the instant appeal seeks to reverse CIT(A)’s action deleting section 68 unexplained share application/premium addition of Rs.5,99,67,750/- made by the Assessing Officer in his assessment order dated 28.03.2014.
We come to the basic relevant facts. The assessee had claimed to have issued shares to six different companies and received Rs.5,99,67,750/- in issue as the share application/premium comprising face value @10 per share with premium of Rs.190 per unit. There does not appear to be any dispute that the Assessing M/s. Iris Commosale Pvt. Ltd.
Officer asked for addresses of that director along with income tax return, P & L account, balance sheet and bank statement and also issued section 131 summons to all the six investors/their directors in order to complete factual verification during the course of scrutiny. We find that the said factual verification undertaken by the Assessing Officer could not be completed since the respective details neither came from assessees’ side nor the investor parties. The Assessing Officer therefore quoted Hon’ble apex court’s landmark decision in CIT vs. Durga Prasad More [1971] 82 ITR 540 and Sumati Dayal v. CIT [1995] 80 Taxman 89/214 ITR 801(SC) that the assessee’s extraordinary share premium of Rs.190/- per share from the six investor parties lacked genuineness and this resulted in this impugned additions made in assessee’s hands.
The assessee preferred appeal. The CIT(A) has taken note of its documentary evidence to conclude that it has sufficiently discharged its onus of proving identity, genuineness and creditworthiness of the six investor parties and therefore, the Assessing Officer’s action invoking the impugned addition could not be upheld. The CIT(A) detailed discussion to this effect reads as under:
“I have carefully considered the findings made by the assessing officer, submission of the appellant and the cases relied upon by the parties. It is seen that during the year, the appellant company received share application money aggregating Rs.5,99,50,000/- subscribed by 6 share holders. The assessee discharged its onus to establish the identity, creditworthiness of the share subscribers and genuinity of the transactions by submitting details thereof. In order to verify identity, creditworthiness of the share subscribers and genuinity of the transactions the Ld. AO issued cross verification notices u/s 133(6) to all share applicants which were served through post. In compliance to the said notice all the share applicants furnished details and confirmed the transaction with the applicant. The share applicants also submitted details of their source of fund. The Ld. AO in order to verify the genuinity of the source of share applicants with their identity, creditworthiness and genuinity of the transactions, the Ld.AO issued cross verification notices u/s 133(6) to all sources of all share applicants. All the notices were served through post and were complied by the source of the share applicants. Later the assessing officer issued summon to some of the share holder companies and the appellant. None appeared in compliance to the said summon notices. However, the notices were not served initially and the notices were served at the fag end of the limitation period. Since, the compliances were already made u/s 133(6) by the share applicants and the source of the share applicants and there was no material unearthed by the AO in the replies against the assessee, adverse inference cannot be drawn in the same. There are grievous errors with regard to the adverse findings recorded by the assessing officer as explained below:-
M/s. Iris Commosale Pvt. Ltd. i. The share applicants and the appellant company do not have same directors. ii. The share applicants have different addresses. iii. No adverse view can be taken merely for reason that the share applicants and appellant companies have bank accounts in the same bank. The appellant have argued that the same and is acceptable. Even otherwise the same is a commercial decision and cannot be interfered upon. iv. Nominal balance maintained in banks by share applicants and the appellant company cannot be viewed adversely since admittedly the bank accounts are current accounts wherein no interest is received. In view of the above the parties being investment companies invested their funds in -shares. The explanation of the appellant is not unreasonable. Even otherwise the same is a commercial decision and cannot be interfered upon. v. Fact that funds received on the same day or earlier day of making investment by the investors cannot be viewed adversely since admittedly the funds of share applicants companies were fully deployed in shares and in order to make fresh investment the existing shares had to be sold or fresh funds procured. It is quite obvious that if one wants to make new investments he would have to raise money in same fashion. vi. The share applicants and appellant company have meager profits have no relevance as the share applicants had sufficient funds in form of share capital and reserves. The investments are not necessarily made from profits specifically when the share applicant is a investment company. There had had been no compliance to the summons u/s 131 by the share applicants or the appellant. It is observed that not proper time was available with them to present their case. The notices were served at the very end of the limitation period. Again, no specific material was brought into light by the AO against the replies received against notices issued u/s 133(6), from the share applicants and the source of the share applicants proving otherwise to their identity, creditworthiness or ingenuinity of the transactions. As such it is incorrect to say that the appellant or the share applicants did not comply. Under the facts and circumstances of the case there is no dispute to the identities of the share applicants who are companies having PAN and regularly filing their returns of income. All the notices issued to the share applicants were duly served upon and complied with. All the share applicants had sufficient funds in the form of capital and reserve and surplus to invest. The transaction have been made through banking channels and duly recorded in the books of account and reflected in the Audited Financial Statements. There is no instance of cash deposit in any account. Even the share applicant companies are regularly assessed to tax and also scrutinized. The case of the assessee is squarely covered by the decision of Jurisdictional High Court at Kolkata in the case of CIT v Data Ware Pvt. Ltd. (supra). Considering the facts and circumstances of the case the appellant have proved the identity and capacity of the share applicant and genuineness of the transaction. In view of above I delete the addition of Rs.5,99,50,000/-”
5. We have given our thoughtful consideration to rival contentions. Learned DR vehemently submits during the hearing that the Assessing Officer had rightly invoked unexplained cash credits addition u/s 68 of the Act since the assessee’s share application/premium raised from the six investors could not be proved M/s. Iris Commosale Pvt. Ltd.
genuineness or creditworthy. And also that the CIT(A) has gone by its documentary evidence only than looking into all facts and circumstances. The assessee’s case on the other hand is that the CIT(A) has rightly deleted the impugned addition as it had sufficiently discharged its onus of proving all the three relevant parameters i.e identity, genuineness and creditworthiness of the six investors.
6. We find also merit is the assessee’s foregoing arguments. The fact remains that the assessee detailed evidence filed in support of its impugned share application/premium money derived from the six investors could not be factually verified since they had merely filed alleged confirmation(s) and did not come forward before the Assessing Officer during scrutiny. We find in this factual backdrop that the tribunal’s coordinate bench decision in ITO vs. M/s Primeline Sales Private Ltd. has restored identical issue back to the Assessing Officer as under:
“2. The assessee is a company and during the previous year it has raised share capital amounting to Rs. 11,01,00,000/-, including share premium of Rs. 9,96,00,000/-. The assessing officer made an addition u/s 68 of the Act. Aggrieved the assessee carried the matter in appeal. The ld. first appellate authority deleted the addition made by the Assessing Officer u/s 68 of the Act and granted relief to the assessee. Aggrieved the revenue is in appeal before us.
3. We have heard rival contentions. On careful consideration of the facts and circumstances of the case, perusal of the papers on record, orders of the authorities below as well as case law cited, we hold as follows:- 4.1. Before us, the ld. D/R, submits that the Assessing Officer was not given adequate opportunity to examine all the details filed on record before the ld. CIT(A) and that new evidence were brought on record. He prayed that the issue may be remanded back to the file of the Assessing Officer for fresh adjudication in light of all the evidences on record. 4.2. The ld. A/R, though not leaving his ground did not raise any objection to the matter being set aside to the file of the Assessing Officer for fresh adjudication. We find that this bench of the ITAT in all such cases has been restoring the matter to the file of the Assessing Officer for fresh adjudication.
In the case of Sriram Tie Up Pvt. Ltd. supra at para 6 and 7 held as follows: “6. In the case of M/s. Sukanya Merchandise Pvt. Ltd. vs ITO (ITA 291/Kol/2016 dated 15.12.2017) cited by the learned counsel for the assessee, a similar view has been taken by the Co-ordinate Bench of this Tribunal and the similar issue relating to the addition made under section 68 on account of share capital contribution by treating the same as unexplained cash credits is restored back by the Tribunal to the file of the A.O. in almost similar situation after recording its observations / findings as under:
M/s. Iris Commosale Pvt. Ltd.
We note that the AO pursuant to the order of Ld. CIT had taken note of the directions of the Ld. CIT and issued notice u/s. 142(1) dated 16.08.2013 and has acknowledged that the assessee had furnished the copy of final account, I.T. Acknowledgement, bank statement for the relevant period evidencing the receipt of share application money from the share applicants. Thereafter, the AO makes certain inferences based on the list of shareholders and taking note of the bank statement furnished by the assessee. We note that after the initial notice dated 16.08.2013, thereafter the AO had issued the notice on 26.02.2014 which has been reproduced at page 3 of the reassessment order, wherein AO required the directors of the assessee company to be present before him on 06.03.2014. However, according to the Ld. AR, the assessee received the notice only on 07.03.2014 and thereafter, the assessee requested the AO to provide another opportunity of hearing vide its letter dated 20.03.2014. Thereafter, the AO fixed the date of hearing on 12.03.2014 vide notice dated 10.03.2014. So, according to the assessee company since the directors were not in station till 23.03.2014, the Ld. AR had requested for adjournment till that time. Though the AO has stated that he has issued summons on 24.03.2014 to the assessee company to produce the directors of the company before him on 26.03.2014, the assessee company contended that it has not received the said summon and, therefore, could not make the personal appearance. The AO has drawn adverse conclusion basically because of non-appearance of the directors of the assessee company and that of the shareholder companies. We note that initially the AO started the enquiry on 16.08.2013 which was complied by the assessee by submitting documents which has been acknowledged by the AO. Thereafter, the enquiry was started only at the fag end of February 2014 and the assessee company had informed the AO that their directors were out of station till 23.03.2014. In the light of the aforesaid facts, we are of the opinion that the assessee did not get fair opportunity to present the evidences before the AO so, there was a lack of opportunity as aforesaid, therefore, it has to go back to AO.
8. We also note that Ld. Cit while setting aside the order of the AO which was passed u/s. 147/143(3) of the Act, the Ld. CIT gave certain guidelines to follow for conducting deep investigation. We also note that similarly placed assessees had challenged the exercise of revisional jurisdiction u/s. 263 of the Act before this Tribunal in those cases one of it of Subha Lakshmi Vanijya Pvt. Ltd. Vs. CIT in dated 30.07.2015, wherein the Tribunal was pleased to uphold the order passed by the Ld. CIT passed u/s. 263 of the Act, which we learn to have been confirmed by the Hon’ble jurisdictional High Court and the SLP preferred against the decision of the Hon’ble jurisdictional High Court has been dismissed by the Hon’ble Supreme Court. Therefore, similar order of the Ld. CIT passed u/s. 263 of the Act has been upheld. We note that the AO while giving effect to the CIT’s 263 order has noted that the assessee company has in fact furnished the documents sought by him to his notice u/s. 142(1) of the Act. However, the AO took the adverse view against the assessee on the plea that the directors of the assessee company and share subscribing companies had not appeared before him on 26.03.2014 and t after taking note that none appeared on 26.03.2014 concluded on the same day 26.03.2014 that entire amount of share application money received along with premium amounting to Rs.8,06,00,000/- which has remained unexplained and added to the income of the assessee. We also note that the Ld. CIT after looking into the pernicious practice of converting black money into white money has given the guidelines to AO as to how the investigation should be conducted to find out the source of source. Since similar order of the Ld. CIT passed u/s. 263 of the Act has been upheld by the Tribunal as well as by the Hon’ble Calcutta High Court as well as the SLP has been dismissed by the Hon’ble Supreme Court, similar order of the Ld. CIT has to be given effect to as directed by the Ld. CIT. We take note that the Ld. CIT with his experience and wisdom has given certain guidelines in the backdrop of black money menace should have been properly enquired into as directed by him. The AO ought to have followed the investigating guidelines and method as directed by him to unearth the facts to determine whether the identity, genuineness and creditworthiness of the share subscribers. We note that the Hon’ble M/s. Iris Commosale Pvt. Ltd.
Supreme Court in three judges bench in the case of Tin Box, (supra), has held that since there was lack of opportunity to the assessee at the assessment stage itself, the assessment needs to be done afresh and thereby reversed the Hon’ble High Court, Tribunal and CIT(A)’s orders and remanded the matter back to AO for fresh assessment. So, since there was lack of opportunity as aforestated it has to go back to AO. We also note that the Hon’ble Delhi High Court in the case of CIT Vs. Jansampark Advertising & Marketing Pvt. Ltd. in dated 11.03.2015 wherein after noticing inadequate enquiry by authorities below have held as under: “41. We are inclined to agree with the CIT(Appeals), and consequently with ITAT, to the extent of their conclusion that the assessee herein had come up with some proof of identity of some of the entries in question. But, from this inference, or form the fact that the transactions were through banking channels, it does not necessarily following that satisfaction as to the creditworthiness of the parties or the genuineness of the transactions in question would also have been established.
The AO here may have failed to discharge his obligation to conduct a proper inquiry to take the matter to logical conclusion. But CIT(Appeals), having noticed want of proper inquiry, could not have closed the chapter simply by allowing the appeal and deleting the additions made. It was also the obligation of the first appellate authority, as indeed of ITAT, to have ensured that effective inquiry was carried out, particularly in the fact of the allegations of the Revenue that the account statements reveal uniform pattern of cash deposits of equal amounts in the respective accounts preceding the transactions in question. This necessitated a detailed scrutiny of the material submitted by the assessee in response to the notice under Section148 issued by the AO, as also the material submitted at the stage of appeals, if deemed proper by way of making or causing to be made a 'further inquiry’ in exercise of the power under Section 250(4). His approach not having been adopted, the impugned order of ITAT, and consequently that of CIT(Appeals), cannot be approved or upheld." In view of the aforesaid order and in the light of the Hon’ble Supreme Court’s decision in Tin Box Company (supra) and taking into consideration the fact the order of the Ld. CIT passed u/s. 263 of the Act in similar cases being upheld up to the level of Apex Court, and taking note of Hon’ble Delhi High Court’s order in Jansampark Advertising & Marketing Pvt. Ltd. (supra), we set aside the order of the Ld. CIT(A) and remand the matter back to the file of AO for de novo assessment and to decide the matter in accordance to law after giving opportunity of being heard to the assessee.
7. We, therefore, consider it fair and proper and in the interest of justice to set aside the orders of the authorities below on the issue in dispute and restore the matter to the file of the A.O. to decide the same afresh after giving the assessee proper and sufficient opportunity of being heard and after taking into consideration the entire evidence already available on record as well as other documentary evidence which the assessee may choose to file in support of its case on the issue.”
The Kolkata Bench of the ITAT has passed similar order in many cases on the same issue of additions made u/s 68 of the share capital. It has set aside the assessment to the file of the AO for fresh adjudication, on the lines stated in the above order after giving the Assessing Officer an opportunity to examine the evidence already on record as well as other documentary evidences which the assessee has filed at the appellate stage or further may choose to file in support of his case.
Keeping in view the totality of the facts and circumstances of the case and also the orders of the Co-ordinate Bench of the Tribunal in similar matters, we set aside this issue to the file of the AO for fresh adjudication in accordance with law, after giving the assessee adequate opportunity of being heard. Accordingly the appeal of the revenue is allowed for statistical purposes.
In the result, appeal of the revenue is allowed for statistical purposes.
M/s. Iris Commosale Pvt. Ltd.
7. We adopt the above detailed discussion mutatis mutandis to restore the instant lis back to the Assessing Officer for finalizing consequential factual verification as per law.
8. This Revenue’s appeal is allowed for statistical purposes.
Order is pronounced in the open court on 04.10.2019.