ITO, WD-9(2), KOLKATA, KOLKATA vs M/S GOLDSTAR TRACOM PVT. LTD., KOLKATA

Income Tax Appellate Tribunal, KOLKATA ‘C’ BENCH, KOLKATA

Before: Sri J. Sudhakar Reddy & Smt. Madhumita Roy

Assessment Year: 2011-12 Income Tax Officer, Ward-9(2), Kolkata...........................................................…..…….………..Appellant M/s. Goldstar Tracom Pvt. Ltd…..………………………………………..……………...…….…............Respondent 4, Synagougue Street Burrabazar Kolkata – 700 001 [PAN: AADCG 8045 K] Appearances by: Shri Manish Tiwari, A/R, appeared on behalf of the assessee. Shri Saurabh Kumar, Addl. CIT, D/R. appearing on behalf of the Revenue. Date of concluding the hearing : September 12th, 2018 Date of pronouncing the order : November 9th , 2018 ORDER Per J. Sudhakar Reddy, AM :-

This appeal filed by the assessee is directed against the order of the Learned Commissioner of Income Tax (Appeals) - 2, Kolkata, (hereinafter the ‘Ld. CIT(A)’), dt. 29/06/2015, passed u/s 250 of the Income Tax Act, 1961 (hereinafter the ‘Act’), relating to Assessment Year 2011-12.

The assessee is a company and is in the business of trading in shares and finance. During the year, it had issued share capital and ten different Private Limited Companies had subscribed for the same. The shares were of face value of Rs.10/- were issued at a premium of Rs.90/-. The Assessing Officer called for details from the share applicants who had applied for allotment of shares. These were furnished. Thereafter he issued notice u/s 131 of the Act, to the Directors of all the companies. It is stated that summons u/s 131 of the Act, were issued to the Directors of the assessee company also on 21/03/2013, through e-mails. In response to these notices the share applicant companies furnished various documents such as their respective, annual reports together with audited accounts of the company for the year ended 31st March, 2011, along with the auditor’s report, director’s report statements. They also furnished their income tax details such as copies of PAN Card, copies of returns of income filed and confirmation certificates. 2.1. The Assessing Officer, on the ground that the Directors of those share applicant companies had not appeared before him, made the addition of the entire share capital received by the assessee, u/s 68 of the Act. Aggrieved, the assessee carried the matter in appeal. Before the ld. First Appellate Authority the assessee repeated the contentions. The ld. First Appellate Authority after examining the evidence, for the various reasons given in his order, deleted the addition and allowed the appeal of the assessee.

Aggrieved, the revenue is in appeal before us.

The ld. D/R, submitted that the ld. CIT(A) has wrongly granted relief in this case. He submitted that the assessee could not prove the creditworthiness of the share applicant companies. He argued that the directors of the companies have not appeared before the Assessing Officer despite issual of summons u/s 131 of the Act and hence the genuineness could not be proved by the assessee. On a query from the Bench regarding the errors in the factual findings made by the Assessing Officer, as specifically pointed out by the ld. CIT(A), the ld. D/R could not controvert these factual findings. Nevertheless, he submitted that the case should be set aside to the file of the Assessing Officer for correcting these factual inaccuracies that have crept into his order and for passing fresh orders after conducting fresh investigation in this case. He prayed that the order of the ld. CIT(A) be set aside and the matter be restored to the file of the Assessing Officer for fresh adjudication. 4.1. The ld. Counsel for the assessee on the other hand submitted that the assessee company is not paper company and an examination of its financial statements demonstrated that it is an active genuine company with substantial turnover. He also submitted that share applicant companies have furnished all possible details in support of the identity, creditworthiness and genuineness of the transactions and the Assessing Officer could not point out any deficiencies in the same. He pointed out that none of the share applicant companies can be called paper companies and that all these companies are having huge turnover and good income. He relied heavily on the order of the ld. CIT(A) and submitted that all these aspects were considered by the ld. CIT(A) and a factually and legally correct order was passed and that the same should be upheld. He also relied on the following case-law in support of his contentions, that no addition can be made in the case of genuine companies which raise share capital from genuine sources. He submitted that no addition can be made merely because the directors did not appear before the ld. Assessing Officer in response to summons issued to them. He relied on the following case-law:- a) Orrissa Corporation Ltd. 159 ITR 78 (SC) b) Orchid Industries (P) Ltd. 397 ITR 136 (Mumbai HC) c) Gagandeep Infrastructure P. Ltd. 394 ITR 680 (Mumbai HC) 4.1.1. He specifically pointed out to the factual findings of the ld. CIT(A), at page 32 & 33 of his order, wherein the factual errors committed by the Assessing Officer have been highlighted and submitted that he ld. D/R could not controvert these findings and argued that the matter cannot be restored to the Assessing Officer for fresh investigation. He prayed that the order of the ld. CIT(A) be upheld and the appeal of the revenue be dismissed.

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:- The ld. CIT(A) at para 32 & 33 of his order has held as follows:- “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. 5,94,50,0001- subscribed by 10 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:- 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. same is a commercial decision and cannot be interfered upon. iv. Nominal balance maintained in banks by share applicant 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. vii. There had had been no compliance to the summons u/s 131 by the share applicants or the appellant. Its 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.”(Emphasis Ours)

5.1. These factual findings of the ld. CIT(A) could not be controverted by the ld. D/R. We find that this is not a case of any jamakharchi company. The assessee company has good turnover. This is evident from the fact that, in the case of the assessee company, the total expenditure during the year ended 31/03/2011 is about Rs.2.23 Crores. Moreover, the share applicant companies are also not jamakharchi companies or paper companies. The submissions of the assessee on each of these share applicant companies are as follows :-

Anchal Vyapaar Pvt. Ltd. The company invested a sum of Rs.13,00,000/- in the assessee company. The share application was made by account payee cheque. This company was incorporated on 15/03/2005 and was having company identification number U51109WB2005PTC02263. This company duly filed its return of income before ITO Ward 9(1), Kolkata and was having PAN AAFCA2480C. This company was having a paid up capital with free reserves and surplus of Rs. 13,67,93,279/- as on 31/03/2011. The company has total gross receipts of Rs. 6,72,26,509/- i.e. (Interest on loans of Rs. 25,66,159/- & Sale of shares of Rs. 6,46,60,350/-) as per Profit & Loss A/c placed at page 57 of paper book. There is no allegation of AO that deposit of cash in bank accounts of share subscribers. The details of source of funds from which this company had made the share application was also explained in respective reply filed in the paper book. From the above it can be seen that this company has gross receipt of Rs.6.72 Cores. The investment is only Rs.13 Lakhs.

Apostel Distributors Pvt. Ltd. The company invested a sum of Rs. 45,00,000/- in the appellant company. The share application was made by account payee cheque. This company was incorporated on 10.06.2004 and was having company identification number U5190WB2004PTC098805. This company duly filed its return of income before ITO Ward 4(3), Kolkata and was having PAN AAFCA0625H. This company was having a paid up capital with free reserves and surplus of Rs. 10,71,32,502/- as on 31/03/2011. The company has total gross receipts of Rs. 6,42,85,619/- i.e. (Interest on loans of Rs. 4,85,619/- & Sale of shares' of Rs. 6,38,00,000/-) as per Profit & Loss A/c placed at page 74 of paper book. There is no allegation of AO that deposit of cash in bank accounts of share subscribers. The details of source of funds from which this company had made the share application was also explained in respective reply filed in the paper book. This company has gross receipts of Rs.6.42 Crores.

Devnath Merchandise Pvt. Ltd. The company invested a sum of Rs. 1,55,00,000/- in the assessee company. The share application was made by account payee cheque. This company was incorporated on 22.03.2005 and was having company identification number 51109WB2005PTC102401. This company duly filed its return of income before Central Circle-3(1), Kolkata and was having PAN AACCD2441F. This company was having a paid up capital with free reserves and surplus of Rs. 10,95,42,089/- as on 31/03/2011. The company has total gross receipts of Rs. 11,76,97,116/- i.e. (Interest on loans of Rs. 6,99,341/- & Sate of shares of Rs. 11,69,97,775/-) as per Profit & Loss A/c placed at page 92 of paper book. There is no allegation of AO that deposit of cash in bank accounts of share subscribers. The details of source of funds from which this company had made the share application was also explained in respective reply filed in the paper book. This company has gross receipt of Rs.11.77 Crores.

Hello Communication Pvt. Ltd. The company invested a sum of Rs. 1,00,00,000/- in the appellant company. The share application was made by account payee cheque. This company was incorporated on 14.03.1997 and was having company identification number 74210WB1997PTC083360.

This company duly filed its return of income before ITO Ward 9(1), Kolkata and was having PAN AABCH2250F. This company was having a paid up capital with free reserves and surplus of Rs. 16,23,97,430/- as on 31/03/2011. The company has total gross receipts of Rs. 9,89,89,572/- i.e. (Interest on loans of Rs. 6,54,012/- & Sales of Rs. 9,83,35,560/-) as per Profit & Loss A/c placed at page 110 of paper book. There is no allegation of AO that deposit of cash in bank accounts of share subscribers. The details of source of funds from which this company had made the share application was also explained in respective reply filed in the paper book. This company has a gross receipt of Rs.9.89 Crores. Jharna Liquor Pvt. Ltd. The company invested a sum of Rs. 25,00,000/- in the assessee company. The share application was made by account payee cheque. This company was incorporated on 18.05.2007 and was having company identification number 15531WB2007PTCl15908. This company duly filed its return of income before ITO Ward 6(2), Kolkata and was having PAN AACCJ1261D. This company was having a paid up capital with free reserves and surplus of Rs. 4,55,30,000/- as on 31/03/2011. The company has total gross receipts of Rs. 2,21,918/- i.e. (Interest on loans of Rs. 2,21,918/-) as per Profit & Loss A/c placed at page 127 of paper book. There is no allegation of AO that deposit of cash in bank accounts of share subscribers. The details of source of funds from which this company had made the share application was also explained in respective reply filed in the paper book. This company has invested only Rs.25 Lakhs in the assessee company. It has capital and revenue of Rs.4.55 Crores.

Nandankanan Iron & Steel Pvt. Ltd. The company invested a sum of Rs. 80,00,000/- in the appellant company. The share application was made by account payee cheque. This company was incorporated on 31.03.1997 and was having company identification number 27109WB1997PTC083793. This company duly filed its return of income before ITO Ward 6(3), Kolkata and was having PAN AABCN7812M. This company was having a paid up capital with free reserves and surplus of Rs. 11,45,57,184/- as on 31/03/2011. The company has total gross receipts of Rs. 6,76,50,186/- i.e. (Interest on loans of Rs. 5,85,186/- & Sale of shares of Rs. 6,70,65,000/-) as per Profit & Loss A/c placed at page 145 of paper book. There is no allegation of AO that deposit of cash in bank accounts of share subscribers. The details of source of funds from which this company had made the share application was also explained in respective reply filed in the paper book. This company has gross receipt of Rs.6.76 Crores. Sanchay Trexim Pvt. Ltd. The company invested a sum of Rs. 20,00,000/- in the assessee company. The share application was made by account payee cheque. This company was incorporated on 10.01.2011 and was having company identification number 51909WB2011PTC156960. This company duly filed its return of income before ITO Ward 5(1), Kolkata and was having PAN AAPCS1999E. This company was having a paid up capital with free reserves and surplus of Rs. 3,14,17,584/- as on 31/03/2011. The company has total gross receipts of Rs. 26,675/- i.e. (Interest on loans of Rs. 5,000/- & Profit in shares of Rs. 21,675/-) as per Profit & Loss A/c placed at page 163 of paper book. There is no allegation of AO that deposit of cash in bank accounts of share subscribers. The details of source of funds from which this company had made the share application was also explained in respective reply filed in the paper book. This company invested Rs.20 Lakhs in the assessee company and has capital and revenue of Rs.3.14 Crores.

Surbhika Vyapaar Pvt. Ltd. The company invested a sum of Rs. 16,50,000/- in the assessee company. The share application was made by account payee cheque. This company was incorporated on 16.03.2005 and was having company identification number 51109WB2005PTC102301. This company duly filed its return of income before ITO Ward 5(1), Kolkata and was having PAN AAJCS0680C. This company was having a paid up capital with free reserves and surplus of Rs. 9,53,70,692/- as on 31/03/2011. The company has total gross receipts of Rs. 7,50,62,389/- Le. (Interest on loans of Rs. 9,51,189/- & Sales of Rs. 7,41,11,200/-) as per Profit & Loss A/c placed at page 182 of paper book. There is no allegation of AO that deposit of cash in bank accounts of share subscribers. The details of source of funds from which this company had made the share application was also explained in respective reply filed in the paper book. The gross receipts of this company is Rs.7.50 Crores and the investment is only Rs.16.50 Lakhs. Swarnapriya Vanijya Pvt. Ltd. The company invested a sum of Rs. 5,00,000/- in the assessee company. The share application was made by account payee cheque. This company was incorporated on 16.03.2005 and was having company identification number 51109W82005PTC102300. This company duly filed its return of income before ITO Ward 5(1), Kolkata and was having PAN AAJCS0595E. This company was having a paid up capital with free reserves and surplus of Rs. 12,86,53,471/- as on 31/03/2011. The company has total gross receipts of Rs. 9,30,37,881/- Le. (Interest on loans of Rs. 10,62,131/- & Sales of Rs .. 9,19,75,750/-) as per Profit & Loss A/c placed at page 199 of paper book. There is no allegation of AO that deposit of cash in bank accounts of share subscribers. The details of source of funds from which this company had made the share application was also explained in respective reply filed in the paper book. The gross receipts is Rs.9.50 Crores and investment is Rs. 5 Lakhs, only.

Swarnapushpa Vanijya Pvt.Ltd. The company invested a sum of Rs. 1,35,00,000/- in the assessee company. The share application was made by account payee cheque. This company was incorporated on 15.03.2005 and was having company identification number 51109W82005PTC102262. This company duly filed its return of income before ITO Ward 5(1), Kolkata and was having PAN AAJCS0597G. This company was having a paid up capital with free reserves and surplus of Rs. 18,87,91,912/- as on 31/03/2011. The company has total gross receipts of Rs. 8,19,47,256/- Le. (Interest on loans of Rs. 10,65,412/- & Sales of Rs. 8,08,81,844/-) as 10 Assessment Year: 2011-12 M/s. Goldstar Tracom Pvt. Ltd per Profit & Loss A/c placed at page 215 of paper book. There is no allegation of AO that deposit of cash in bank accounts of share subscribers. The details of source of funds from which this company had made the share application was also explained in respective reply filed in the paper book. This company has gross receipt of Rs.8.19 Crores and capital and free reserve of Rs.18.87 Crores. An analysis of these facts of all the companies who applied for shares have proven their identity, creditworthiness and genuineness of the transactions.

5.2. We find that the Assessing Officer had discussed the details furnished by these share applicant companies in the assessment order. The identity, creditworthiness and genuineness of the transactions have been proved by the assessee. No contrary evidence is brought on record by the Assessing Officer. Under these circumstances the addition in question cannot be sustained.

6. This Bench of the Tribunal in the case of M/s. Advent Stock Management Ltd. in order dt. 28/11/2018, at para 4 to 5 held as follows:- “4. 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. The assessee is engaged in the business of trading in shares and securities. This is not a case of paper company. The premium charged i.e. Rs.40/- per share of face value of Rs.10/- each, is also not excessive or abnormal on the facts of this case. From the audited financial statements, it could be seen that the assessee has gross income of Rs.5,59,283/- and has shareholder funds of Rs.12,91,40,498/-. It had advanced long term loans and advances of Rs.4,73,00,140/-. The total assets are Rs.14,45,98,802/-. Thus, the premium charged per share cannot be said to be not genuine or exorbitant. In this case, four companies are the share applicants. These are Jai Hind Promoters Pvt. Ltd., Ninachal Barter Pvt. Ltd., Dynamo Infrastructures Pvt. Ltd., Dhanraksha Investment Consultants Pvt. Ltd. All these companies which have subscribed for the shares of the assessee company are also active companies. They are not paper companies. This 11 Assessment Year: 2011-12 M/s. Goldstar Tracom Pvt. Ltd is clear from the financial statements filed by them. In case of Dhanraksha Investment Consultants Pvt. Ltd., the assets are about Rs.47.20 Lakhs and the investment in the assessee company is about Rs.5 Lakhs. In the case of Dynamo Infrastructures Pvt. Ltd., the assets are to the extent of Rs.2,44,57,638/- and the investment in the assessee company is around Rs.88 Lakhs/-. In the case of Jai Hind Promoters Pvt. Ltd., the total assets are to the tune of Rs.2,18,34,717/-, and the investment of the assessee company is around Rs.1,25,00,000/-. In the case of Ninachal Barter Pvt. Ltd., the total assets are Rs.2,32,26,565/- and the investment in the assessee company is around Rs.46.20 Lakhs/-. As brought out by the ld. CIT(A), all these companies have given replies to the statutory notice u/s 133(6) of the Act. They have furnished copies of the income tax acknowledgements evidencing filing of the return of income by each one of them. Copy of the audited books of accounts including balance sheet, wherein such investments are reflected etc. have been filed as evidence After taking all these facts into account, the ld. CIT(A) at para 4.12. as concluded as follows:- “4.12. Considering the totality of the facts and circumstances of the case. I find substance in the arguments of the AR that the appellant has made its case that the identity of the share applicants are established beyond doubt and on enquiries made by the AO there was no adverse finding on this aspect. Admittedly, all the share applicants are existing assessees under the Act and that some of them were subject to scrutiny assessment during the same period establishes he fact that the identity and authenticity of the share applicants were not in doubt. About the genuineness of the transactions, there is neither any adverse finding in the assessment order nor which is subversive to the facts brought on record by the appellant during the course of assessment proceeding to this effect. The creditworthiness of the share applicants as regards their subscription to the share capital is proved by the submission their return, audited annual accounts, their bank statement and replies to notices u/s 133(6) of the Act as depicted in the foregoing. The net worth of such subscribers is in excess of the amount invested by each of them as explained hereinabove. The addition made by AO is based on extraneous parameters not germane for deciding the issue. The AO had not dealt with the issue judiciously and consistently with the evidences adduced during the course of the assessment proceedings by the appellant and the replies of the share applicants in respect of the share capital which does not warrant the inference that such share application monies received in unaccounted cash credit. Hence, I am inclined to accept the arguments tendered by the AR of the appellant in this respect. In view of the foregoing, I have no hesitation to hold that the impugned addition of Rs.2,64,20,000/-

made by the AO u/s 68 of the Act is not justified in the circumstances and accordingly such addition is directed to be deleted in respect of the four shareholders. Therefore, Ground Nos. 3 to 6 of the appeal are accordingly allowed.”

4.2. The ground on which the addition has been made by the Assessing Officer is that there is not compliance to the summons issued to the share subscribers u/s 131 of the Act. The share applicant companies, as well as the assessee company, belong to the same group of companies, with a common director Mr. Sanjay Kumar Khemka. When all the information as required by law, is given, an addition cannot be made solely on the ground that the directors failed to appear in response to summons issued u/s 131 of the Act. The Hon’ble Supreme Court in the case of Commissioner of Income Tax vs. Orissa Corporation Pvt. Ltd. 159 ITR 78 SC and the Hon’ble Bombay High Court in the case of Commissioner of Income Tax v. Orchid Industries Pvt. Ltd. 397 ITR 136, have held that an addition cannot be made simply because a person has not appeared in compliance to notice u/s 131of the Act, when all the other requirements of the notices u/s 133(6) of the Act, has been complied with. Similar are the decision of this Bench of the Tribunal in the case of Income Tax Officer vs. Wiz-Tech Solutions Pvt. Ltd., and Hon’ble Jurisdictional High Court in the case of Pr. CIT-1 vs. M/s. Steel Emporium Ltd., GA No. 3275 of 2016 in ITAT 354 of 2016.

This Bench of the Tribunal under identical circumstances, discussed the issue at length, in the case of Five Star Vanijya Pvt. Ltd v. Deputy Commissioner of Income Tax, Circle-8, Kolkata in Assessment Year: 2010-11, order dt. July 31st, 2018, and by relying upon a number of judgement of various Courts of law, held as follows:- “5. After hearing rival contention, perusing the papers on record, orders of the authorities below as well as case-law cited, we hold as follows:- The assessee in this case is not a paper company and is engaged in international and inland trading of iron ores and minerals. It has a turnover of about Rs.15 Crores during the year 31/03/2010. It has profits and taxation of about Rs.33.84 Lakhs. The share holders in this company are also not paper companies or Jamakharchi companies. They are individuals who are also the directors of the company.

The assessee company has only three Directors and the said application money has been received from these three Directors. Hence, the identity of the payees is proved. The Directors have furnished their annual statement of accounts and explained their sources of funds for the investments in the share capital. When the Director are themselves the shareholders, and have confirmed the transaction, the proposition of law laid down by the Hon’ble Supreme Court in the case of Lovely Exports Ltd. (supra), apply. The share holders are not paper companies or ‘jamakharchi’ companies as in other cases. The assessee company is a genuine company and the valuation of shares is supported by material. The shareholder/directors have explained their sources. On these facts we examine the case-law.

The Hon’ble Supreme Court in the case of CIT v. Lovely Exports Ltd. 216 CTR 195 SC, held as follows:- “Section 68 of the Income-tax Act, 1961 - Cash credit - If share application money is received by assessee-company from alleged bogus shareholders, whose names are given to Assessing Officer, then Department is free to proceed to reopen their individual assessments in accordance with law but this amount of share money cannot be regarded as undisclosed income under section 68 of assessee-company” 6.1. Just because the Directors did not appear to summons issued u/s 131 of the Act, no addition u/s 68 of the Act, can be made, when the Directors have otherwise confirmed the transaction to the Assessing Officer with evidence. 6.2. The Hon’ble Supreme Court in the case of Commissioner Of Income-Tax, vs Orissa Corporation (P) Ltd [1986] 159 ITR 78 (SC), held as follows:-

“In this case the assessee had given the names and addresses of the alleged creditors. It was in the knowledge of the revenue that the said creditors were the income-tax assessees. Their index number was in the file of the revenue. The revenue, apart from issuing notices under section 131 at the instance of the assessee, did not pursue the matter further. The revenue did not examine the source of income of the said alleged creditors to find out whether they were credit-worthy or were such who could advance the alleged loans. There was no effort made to pursue the so-called alleged creditors. In those circumstances, the assessee could not do any further. In the premises, if the Tribunal came to the conclusion that the assessee had discharged the burden that lay on him, then it could not be said that such a conclusion was unreasonable or perverse or based on no evidence. If the conclusion was based on some evidence on which a conclusion could be arrived at, no question of law as such could arise.” 6.3. Recently, the Hon’ble Jurisdictional High Court in the case of ld. Pr. CIT-1, Kolkata vs. M/s. Steel Emporium Ltd. in GA NO.3275 OF 2016 WITH ITAT NO.354 OF 2016, 14th May, 2018, held as follows:- “The third ground is on account of share application money. The assessing officer found that several of the applicants for issuance of further shares in the assessee shared the same 12, Waterloo Street address as the assessee and that one individual had accepted notices under Section 133(6) of the Act, though different rubber stamps were used along with the signature. The Tribunal was satisfied that the identities of the applicants for shares in the assessee had been established. No legal question arises as a result of such finding.” 6.4. The Hon’ble Delhi High Court in the case of CIT vs. Kamdhenu Steel & Alloys Ltd. (2012) 248 ITR 33, held that once the assessee has prove identity of creditor share applicant, by either furnishing PAN or copy of their bank account, the addition under section 68 of the Act cannot be made without any material to support the same. 6.5. The Hon’ble Delhi High Court in the case of CIT vs. Gangeshwari Metal P. Ltd. in judgment dated 21.1.2013 reported in 361 ITR 10 after considering its decisions in the case of Nova Promoters and Finlease Pvt. Ltd. 342 ITR 169 and judgment in the case of CIT vs. Lovely Exports 319 ITR (Sat.5) (S.C.) the Hon'ble High Court held as follows :

"As can be seen from the above extract, two types of cases have been indicated. One in which the Assessing Officer carries out the exercise which is required in law and the other in which the Assessing Officer (sits back with folded hands' till the assessee exhausts all the evidence or material in his possession and then comes forward to merely reject the same on the presumptions. The present case falls in the latter category. Here the Assessing Officer after noting the facts, merely rejected the same. This would be apparent from the observations of the Assessing Officer in the assessment order to the following effect –

"Investigation made by the Investigation Wing of the department clearly showed that this was nothing but a sham transaction of accommodation entry. The assessee was asked to explain as to why the said amount of Rs.1,11,50,000 may not be added to its income. In response, the assessee has submitted that there is no such credit in the books of the assessee. Rather, the assessee company has received the share application money for allotment of its share. It was stated that the actual amount received was Rs.55,50,000 and not Rs.1,11,50,000 as mentioned in the notice. The assessee has furnished details of such receipts and the contention of the assessee in respect of the amount is found correct. As such the unexplained amount is to be taken at Rs.55,50,000. The assessee has further tries to explain the source of this amount of Rs.55,50,000 by furnishing copies of share application money, balance sheet, etc. of the parties mentioned above and asserted that the question of addition in the income of the assessee does not arise. This explanation of the assessee has been duly considered and found not acceptable. This entry remains unexplained in the hands of the assessee as has been arrived by the Investigation wing of the department. As such entries of Rs.55,50,000 received by the assessee are treated as an unexplained cash credit in the hands of the assessee and added to its income. Since I am satisfied that the assessee has furnished inaccurate particulars of its income, penalty proceedings under Section 271(1)(c ) are being initiated separately. " The facts of Nova Promoters and Finlease (P) Ltd. (supra) fall in the former category and that is why this Court decided in favour of the revenue in that case. However, the facts of the present case are clearly distinguishable and fall in the second category and are more in line with facts of Lovely Exports (P) Ltd. (supra). There was a clear lack of inquiry on the part of the Assessing Officer once the assessee had furnished all the material which we have already referred to above. In such an eventuality no addition can be made under Section 68 of the Income Tax Act, 1961.

Consequently, the question is answered in the negative. The decision of the Tribunal is correct in law. " 6.6. In the case of CIT vs. Fair Finvest Ltd., (2013) 357 ITR 146 (Del.) at para 6 held as follows. "6. This Court has considered the submissions of the parties. In this case the discussion by the Commissioner of Income Tax (Appeals) would reveal that the assessee has filed documents including certified copies issued by the ROC in relation to the share application, affidavits for the directors, form 2 filed with the ROC by such applicants confirmations by the applicant for company's shares, certificates by auditors etc. Unfortunately, the Assessing Officer chose to base himself merely on the general inference to be drawn from the reading of the investigation report and the statement of Mr.Mahes Garg. To elevate the inference which can be drawn on the basis of reading of such material into judicial conclusions would be improper, more so when the assessee produced material. The least that the Assessing Officer ought to have done was to enquire into the matter by, if necessary, invoking his powers under Section 131 summoning the share applicants or directors. No effort was made in that regard. In the absence of any such finding that the material disclosed was untrustworthy or lacked credibility the Assessing Officer merely concluded on the basis of enquiry report, which collected certain facts and the statements of Mr. Mahesh Garg that the income sought to be added fell within the description of S. 68 of the Income Tax Act, 1961. 6.7 The Hon'ble Calcutta High Court in the case of CIT v. Roseberry Mercantile (P.) Ltd. GA No. 3296 of 2010 ITAT No. 241 of 2010 dated 10.1.2011, wherein the questions raised before their lordships and decision rendered thereon is as under:— "On the facts and in the circumstances of the case, Ld. CIT(A) ought to have upheld the assessment order as the transaction entered into by the assessee was a scheme for laundering black money into white money or accounted money and the Ld. CIT(A) ought to have held that the assessee had not established the genuineness of the transaction." Held After hearing the learned counsel for the appellant and after going through the decision of the Supreme Court in the case of CIT v. M/s Lovely Exports Pvt Ltd, we are at one with the tribunal below that the point involved in this appeal is covered by the said Supreme Court decision in favour of the assessee and thus, no substantial question of law is involved in this appeal. The appeal is devoid of any substance and is dismissed." 6.8. The Hon’ble Andhra Pradesh High Court in the case CIT vs. Lanco Industries Ltd. [2000] 242 ITR 357 (Andhra Pradesh), held as follows:- “Moreover, we fail to see how merely by reason of unsatisfactory explanation relating to the source of investment by the 17 Assessment Year: 2011-12 M/s. Goldstar Tracom Pvt. Ltd shareholders, the money invested on shares should be treated as income of the assessee. If the ostensible shareholders failed to explain the means of investment, that should have been treated as unexplained income in their hands. In order to add it to the income of the assessee there must be a further finding that in fact the shareholders were mere name-lenders and the money allegedly invested by them really belonged to the directors of the assessee- company. In the absence of a finding that the persons to whom the share certificates were issued on receipt of consideration as per the book entries were in fact dummies or stooges of the directors of the assessee-company, the same cannot be treated as unaccounted income of the assessee. There was no such finding by the assessing authority. In this view of the matter, the ultimate conclusion of the Tribunal cannot be faulted in any case. We, therefore, see no ground to admit this appeal as no substantial question of law arises for consideration. The income-tax Tribunal appeal is dismissed.” 6.3. Applying the proposition of law laid down in the case law to the facts of this case, we find that the Assessing Officer has simply disbelieved the evidence filed by the assessee. He has not conducted any verification, let alone investigation, before coming to the conclusion that the confirmations and evidence filed by the Directors cannot be admitted as evidence. As the share applicants are the Directors of the assessee Company and have confirmed the transactions and have also filed their source of funds for the investment. When statement of final accounts were filed giving sources of funds for making the investment, the Assessing Officer has not given any reason as to why he is not able to accept the same. If at all the creditworthiness of the directors is not proved, then an addition can be made only in their hands and not in the hands of the company as held by the Hon’ble A.P. High Court in the case of Lanco Industries Ltd. (supra). No contrary evidence to controvert the evidence produced by the assessee, is brought on record. Simply because the directors/shareholders did not present themselves before the Assessing Officer, an addition u/s 68 of the Act, cannot be made. In view of the above circumstances, we cannot uphold this addition made u/s 68 of the Act. Under these circumstances, we delete the addition and allow this appeal of the assessee.

In the result, appeal of the assessee is allowed.”

5. In view of the above discussion, we uphold the order of the ld. First Appellate Authority and dismiss this appeal of the revenue.”

18 Assessment Year: 2011-12 M/s. Goldstar Tracom Pvt. Ltd 7. Consistent with the view taken therein and in view of the facts and circumstances as discussed above, we uphold the decision of the ld. CIT(A), wherein he held as follows:- “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 scrutinised. 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. 5,94,50,000/-“

ITO, WD-9(2), KOLKATA, KOLKATA vs. M/S GOLDSTAR TRACOM PVT. LTD., KOLKATA