GOODVIEW MARKETING PVT. LTD.,KOLKATA vs. ITO, WARD - 6(2), KOLKATA, KOLKATA

order

: 16.10.2024 ORDER

Per Dr. Manish Borad, Accountant Member:

2. Grounds of appeal raised by the assessee are reproduced as under:

Goodview Marketing Pvt. Ltd., AY : 2008-09 “1. That on the facts and in the circumstances of the case, the impugned proceedings for assessment having being initiated post the order of the learned PCIT u/s. 263 of the Act, the jurisdiction of AO was circumscribed by the jurisdiction vested in him in the 263 order.

3. That on the facts and in the circumstances of the case, mere statement of the learned AO that notices were unserved on the parties is contrary to the material on record and therefore cannot be held against the assessee.

4. That on the facts and in the circumstances of the case, the learned AO having collected no negative material in the course of assessment, erred in treating the amount of share capital received during the year amounting to Rs.7,97,00,000/- as unexplained cash credit under section 68 of the Act and the Ld. CIT(A) erred in upholding the same.

7. That the appellant craves to leave to add/alter and/or delete any of the grounds of appeal on or before the date of hearing.”

6. Aggrieved, assessee preferred appeal before the Ld. CIT(A) and furnished detailed submission along with placing reliance on plethora of judgment in support of its contention that the detailed enquiry was conducted in the first round of revisional proceedings and the AO was satisfied with those details and did not invoke sec. 68 of the Act. In the second round of reassessment proceedings, which was carried out for after a long period, Ld. AO has not carried out the proceeding as per the direction given by the Ld. Pr. CIT and has merely test checked some of the share subscribers. Ld. CIT(A), however, decided against the assessee making a reference to few judgments and also observing that merely filing of ITR, ROC document do not prove the genuineness of the transaction or creditworthiness. Aggrieved, assessee is now in appeal before this Tribunal.

Page 4 of 31 Goodview Marketing Pvt. Ltd., AY : 2008-09 and also took us through the paper book dated 17.09.2024 containing details filed during the first round of assessment proceedings, order sheet note of the first round of the assessment proceedings etc. Placing heavy reliance on the recent decision of this Tribunal in the case of M/s. Aastha Vincom Pvt. Ltd. Vs. DCIT, for AY 2008-09 dated 26.08.2022 wherein almost on identical facts, the addition u/s. 68 of the Act was deleted and further, revenue failed succeed before the Hon’ble jurisdictional High Court, which vide order dated 21.06.2023 in ITA 77/2023 held that the Tribunal has carried out a thorough factual examination and there is no question of law much less substantial question of law is arising for consideration. Ld. Counsel for the assessee firstly contended that in the first round of reassessment proceedings itself, the issue of share capital and share premium was fully examined by the AO, therefore, the revisionary proceedings u/s. 263 of the Act were beyond jurisdiction and, therefore, all the subsequent proceedings are also bad in law. Further referring to the merits of the case he submitted that the Ld. AO has not carried out the enquiries in direction given by Ld. Pr. CIT and even though out of 18 share applicants, only 5 share applicants could not be served that too having common address which may have changed due to long time gap. Address of the director was provided by assessee to the AO but he did not conduct further enquiry. Ld. AO failed to take note that out of 18 share applicants 13 have duly replied the AO. He also submitted that merely for non-appearance to the issue of notice cannot be fatal for the assessee considering the ratio laid down by the Hon’ble Delhi High Court in the case of CIT

Page 5 of 31 Goodview Marketing Pvt. Ltd., AY : 2008-09 Vs. Orissa Corporation Pvt. Ltd. (1986) 159 ITR 78 (Del). He further submitted that all the share applicants are duly assessed to tax, regularly filing the income tax returns, have also passed through the scrutiny proceedings, duly filing annual returns with the Registrar of Companies and having sufficient net worth to explain the source of investment in equity of the assessee company.

9. We have heard rival contentions and perused the material placed before us. The assessee is aggrieved with the finding of the Ld. CIT(A) confirming the addition of unexplained cash credit u/s. 68 of the Act amounting to Rs.7.97 Cr. which the assessee has received from 18 share applicants which are Private Limited Company against allotment of 3,98,500 equity shares of face value of Rs. 10/- and share premium of Rs. 190/- per share charged thereon. Before us, first issue of legal nature has been Page 6 of 31 Goodview Marketing Pvt. Ltd., AY : 2008-09 raised by Ld. Counsel for the assessee stating that when the issue of share capital was thoroughly examined in the first round of reassessment proceedings, the scope of assessment could not be enlarged u/s. 263 of the Act. This issue has been raised by the assessee in ground nos. 5 and 6 praying for the restoration of the reassessment order carried out in the first round framed on 12.05.2010. We observe that the revisionary order passed by Ld. Pr. CIT dated 30.03.2013 was affirmed by this Tribunal vide its order dated 10.08.2015 ex parte qua the assessee and other 22 assessees. The assessee failed to challenge this order of the Tribunal dated 10.08.2015 before the Hon’ble jurisdictional High Court. The second round of reassessment proceedings have been carried out in pursuance to the directions given by the Ld. Pr. CIT in its revisionary order. Now before us, Ld. Counsel for the assessee is challenging the jurisdiction of the revisionary proceedings stating that in the first round of reassessment proceedings the issue has already been examined and, therefore, Ld. Pr. CIT erred in giving direction for further enquiries on the same issue. We find that the similar issue came before this Tribunal in the case of Astha Vincom Pvt. Ltd. (supra) and this Tribunal did not admit the additional ground raising similar grievance observing as follows: “7. In so far as the additional grounds raised

by the assessee are concerned, we are of the considered view that the assessee is not challenging the jurisdiction of Ld. Pr. CIT u/s. 263 of the Act to pass the reassessment order, it is undisputed fact that assessee has not challenged the order before the Tribunal. We are therefore of the considered view that the assessee has not challenged the revisionary order passed under section 263 by the Ld. Pr. CIT dated 07.03.2013 before the Tribunal and therefore it has attained finality, nonetheless we have observed that in the original assessment proceedings under section 147 of the Act, the ld. Assessing Officer has carried out the investigations into the share subscription/investments into the share capital and premium to the extent of Rs.7,86,50,OOO/- by issuing notices under Page 7 of 31. Goodview Marketing Pvt. Ltd., AY : 2008-09 section 133(6) of the Act to five share applicants, which were duly complied with by the share applicants by filing the necessary details as called for by the Ld. Assessing Officer and the ld. Assessing Officer has accepted the genuineness of the investments after examining all these details/evidences. Besides the Ld. Assessing Officer has called for the details from the company in respect of all the eight investors which were duly filed and furnished by the company. But despite at this stage, the assessee cannot be allowed to raise the issue of validity of jurisdiction of Ld. Pr. CIT under section 263 of the Act in revising assessment order as the same has attained finality and the assessee has missed the bus by not filling appeal before the Tribunal challenging the said revisionary order. At this stage we can only examine the validity of addition in the assessment order under section 143(3) read with section 147/148/263 of the Act dated 31.03.2014. Considering these facts and circumstances, we are not admitting the additional grounds and are dismissed at the preliminary stage.”

10. In view of the above finding of this Tribunal which is squarely applicable on the legal issue raised before us, we are of the considered view that at this stage assessee cannot challenge the validity of the revisionary order u/s. 263 of the Act and the directions given therein since the same has attained finality in view of the order of this Tribunal which has subsequently not been challenged by the assessee before the higher forum.

11. Now, we take up the merits of the case as to whether Ld. CIT(A) was justified in confirming the action of the AO of making the addition on unexplained cash credit u/s. 68 of the Act for the share capital and share premium totalling to Rs. 7.97 Cr. received from 18 private limited share applicants. Before dealing with the facts of the instant case, we would like to go through the position of law discussed by this Tribunal in case of Astha Vincom Pvt. Ltd. (supra) wherein also similar issue of challenging the addition u/s. 68 of the Act came for adjudication which was made by Ld. AO during the course of assessment proceeding carried out in direction to order u/s. 263 of the Act giving

Page 8 of 31 Goodview Marketing Pvt. Ltd., AY : 2008-09 direction to AO to examine the nature and source of share capital and share premium which is explained as under:

Page 9 of 31 Goodview Marketing Pvt. Ltd., AY : 2008-09

Page 10 of 31 Goodview Marketing Pvt. Ltd., AY : 2008-09 generally raised by public issue inviting general public at large for subscription of these shares. Yet, it is also possible that in the case of public limited company, the share capital is issued in close-circuit. When companies incorporated under the Companies Act raise their capital through shares, various persons would apply for shares and then give share application money. This amount received from such share holder would naturally be credited in the books of accounts of the assessee. Once the alleged share capital is credited to the accounts of the assessee, then role of section 68 would come. It is pertinent to take note of this section. It reads as under: “Where any sum is found credited in the books of an assessee maintained for any previous year, and the assessee offers no explanation about the nature and source thereof or the explanation offered by him is not, in the opinion of the officer, satisfactory the sum so credited may be charged to income tax as the income of the assessee of that previous year. ”

Page 11 of 31 Goodview Marketing Pvt. Ltd., AY : 2008-09 “……………This court has considered the concurrent order of the Commissioner of Income-tax (Appeals) as well as the Income-tax Appellate Tribunal. Both these authorities primarily went by the fact that the assessee had provided sufficient indication by way of permanent account numbers, to highlight the identity of the share applicants, as well as produced the affidavits of the directors. Furthermore, the bank details of the share applicants too had been provided. In the circumstances, it was held that the assessee had established the identity of the share applicants, the genuineness of transactions and their creditworthiness; The Assessing Officer chose to proceed no further but merely added the amounts because of the absence of the directors to physically present themselves before him. The Income-tax Appellate Tribunal has relied upon a decision of this court in CIT v. fair Finvest Ltd. [2013] 357 ITR 146 (Delhi), where in somewhat similar circumstances, it was stated as follows (page 152): "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 Registrar of Companies in relation to the share application, affidavits of the directors, Form 2 filed with the Registrar of Companies 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. Mahesh 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 section 68. Having regard to the entirety of facts and circumstances, the court is satisfied that the finding of the Tribunal in this case accords with the ratio of the decision of the Supreme Court in Lovely Exports (supra) ”

Page 12 of 31 Goodview Marketing Pvt. Ltd., AY : 2008-09 companies before the A.O. Therefore failure on part of the assessee to produce the Directors of the share applicant companies could not by itself have justified the additions made by the AO particularly when the seven share applicant companies through their present Directors have now again filed fresh affidavits confirming the application and allotment of shares with respect to the total amount of Rs. 45 Lacs. It is observed that no attempt was made by the AO to summon the Directors of the share applicant companies. Moreover, it is settled law that the asses see need not prove the "source of source". Accordingly it was incumbent upon the department to have enforced attendance of Shri Mahesh Garg or the erstwhile Directors of the share applicant companies and confronted them with the evidences & affidavits relied upon by the appellant and thereupon given opportunity to the assessee to cross examine these applicants”. ******* ****** 19. Having considered the aforesaid facts and observations of the ld. CIT(Appeals) and the extent of verification done by the ld. Assessing Officer in the proceedings under section 147 of the Act, we observe that the ld. Assessing Officer has carried out full investigation into the share capital/share premium in the assessment proceedings under section 147 of the Act by issuing notices u/s 133(6) of the Act, which were duly supplied by the said investors. Besides we note that the assessee has fully furnished all the details before the ld. Assessing Officer to prove the identity, creditworthiness (source of money) of the investors and the genuineness of these transactions. But in the set assessment proceedings, the Assessing Officer has not carried out any investigation and harped on the fact that the assessee has failed to discharge its onus to prove the identity, creditworthiness and genuineness of the transactions by ignoring and overlooking the facts available on record. We note that the ld. Assessing Officer has all the records before him on the basis of which in the first assessment proceedings, the ld. Assessing Officer held the investments in share capital/share premium as genuine, whereas in the set aside proceedings, the ld. Assessing Officer has treated the same investments as bogus and non-genuine without carrying out any investigation by merely relying on the fact that summons issued under section 133(6) were served but not responded by the investors and also former and present Directors of the assessee company did not comply with summons issued u/s 131 of the Act except one Shri Rakesh Kumar Choubey. In our view, the action of the ld. Assessing Officer in making addition without complying the direction issued by the ld. Pr. CIT specifically in paragraph 19 of the order as reproduced hereinabove cannot be sustained. The addition was made simply for the reason that ld. Pr. CIT has exercised his jurisdiction under section 263 of the Act setting aside the original assessment. We also note that the ld. Assessing Officer has ignored the facts, documents, confirmations and evidences, which were available on record on the assessment folder. In our opinion, there is no bar in the Act to issue of shares at a premium as it is the prerogative of the Board of Directors to decide the premium amount and the assessee was not required to prove the purpose or justification for charging premium on shares. The ld. Counsel for the assessee to buttress the contentions in favour of the assessee placed reliance is placed on the judgment of the Hon’ble Mumbai Tribunal in the case of ACIT –vs.- Gagandeep Infrastructure Pvt. Limited (2014) 40 CCH 0128. The operating part is extracted as under:-

Page 13 of 31 Goodview Marketing Pvt. Ltd., AY : 2008-09 “We have carefully perused the orders of the lower authorities. In our considered view, the issue of shares at premium is always a commercial decision which does not require any justification. Further the premium is a capital receipt which has to be dealt with in accordance with Sec. 78 of the Companies Act, 1956. Further, the company is not required to prove the genuineness, purpose or justification for charging premium of shares, share premium by its very nature in a capital receipts and is not income for its ordinary sense. It is not in dispute that the assessee had filed all the requisite details/documents which are required to explain credits in the books of accounts by the provisions of Sec. 68 of the Act. The assessee has successfully established the identity of the companies who have purchased shares at a premium. The assessee has also filed bank details to explain the source of the shareholders and the genuineness of the transaction was also established by filing copies of share application forms and Form No. 2 filed with the Registrar of Companies. The entire dispute revolves around the fact that the assessee has charged a premium of Rs. 190/- per share. No doubt a non-est company or a zero balance sheet company asking for Rs.190/- per share defies all commercial prudence but at the same time we cannot ignore the fact that it is a prerogative of the Board of Directors of the company to decide the premium amount and it is the wisdom of the share holders whether they want to subscribe to such a heavy premium. The Revenue authorities cannot question the charging of such huge premium without any bar from any legislated law of the land. The amendment has been brought in the Income Tax Act under the head “Income from other sources” by inserting Clause (viib) to Sec. 56 of the Act wherein it has been provided that any consideration for issue of shares, that exceeds the fair value of such shares, the aggregate consideration received for such shares as exceeds the fair market value of the shares shall be treated as the income of the assessee but the legislature in its wisdom has made this provision applicable w.e.f. 1.4.2013 i.e. on and from A. Y. 2013-14. In so far as the year under consideration is concerned, the transaction has to be considered in the light of the provisions of Sec. 68 of the Act. There is no dispute that the assessee has given details of names and addresses of the share holders, their PAN Nos, the bank details and the confirmatory letters.”

20. The above decision of the Tribunal has been affirmed by the Hon’ble Bombay High Court by dismissing the appeal of the Revenue reported in (2017) 394 ITR 680 (Bombay.). The case of the assessee also finds support from the another decision of the Hon’ble Madhya Pradesh High Court in the case of CIT –vs.- Chain House International (P) Ltd. reported in 98 taxmann.com 47, wherein the Hon’ble Court has held as under:- "Issuing the share at a premium was a commercial decision. It is the prerogative of the Board of Directors of a company to decide the premium amount and it is the wisdom of shareholder whether they want to subscribe the shares at such a premium or not. This was a mutual decision between both the companies. In day to day market, unless and until, the rates if fixed by any Govt. Authority or unless there is any i restriction on the amount of share premium under any law, the price of the shares is decided on the mutual understanding of the parties concerned.”

Page 14 of 31 Goodview Marketing Pvt. Ltd., AY : 2008-09 21. Therefore, the issue of share at premium cannot be a ground for making addition. We also note that the allegation of the authorities below that the share applicants did not respond to the notices issued under section 136 of the Act, whereas this is not the allegation that notices were not served upon the share applicants. We note that the information /details/evidences of all these share applicants were available with the ld. Assessing Officer such as PANs, addresses, copies of bank statement, annual audited accounts, etc. Admittedly and undeniable, the initial burden of proof lies on the assessee but once he proves the identity of the share applicants by either furnishing PAN or income tax assessment number and shows the genuineness of transaction by showing money in his books either by account payee or by draft or any other mode, then the onus of proof would shift to the revenue. Just because the creditors/share applicants could not be found at the address given, it would not give the revenue the right to invoke section 68 of the Act. One must not lose sight of the fact that it is the revenue which has all the powers to trace any person and is also settled law that the assessee need not to prove the source of source. The case of the assessee finds support from the decision of the Hon’ble Delhi High Court in the case of CIT –vs.- Orissa Corporation Pvt. Limited (1986) 159 ITR 78 (Del.), wherein it has been held as under:- “The assessee had given the names and addresses of the alleged creditors. It was in the knowledge of the Revenue that the said creditors were income tax assessees. Their index number was in the file of the Revenue. The Revenue, apart from issuing notices under s. 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 allowed 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 has discharged the burden that lay on him then it could not be said that such a conclusion was unreasonable or perverse or based on no evidence. If the conclusion is based on some evidence on which a conclusion could be arrived at, no question of law as such arises. It cannot, therefore, be said that any question of law arose in these cases. The High Court was, therefore, right in refusing to refer the questions sought for”.

23. On the issue of share applicants, they are not having any business activity and their net worth was also very meagre. We note that the share application was received through Banking channel out of own funds of investing companies as is clear from the audited annual accounts and that it is not necessary that source of investment is to be out of taxable income. The assessee’s case finds support from the decision of Ami Industries (India) Pvt. Limited (ITA 1231 of 2017) passed by the Hon’ble Bombay High Court, wherein the Hon’ble Court has observed as under:-

Page 15 of 31 Goodview Marketing Pvt. Ltd., AY : 2008-09 “It was not necessary that share application money should be invested out of taxable income only”.

Page 16 of 31 Goodview Marketing Pvt. Ltd., AY : 2008-09 the nature and source of the alleged sum. During the course of first round of reassessment proceedings on 23.04.2010 when the Ld. AR of the assessee appeared and filed details the same were examined, books of accounts along with the confirmations were received and the same was followed by issuing of notice u/s. 133(6) of the Act which were duly replied by the share applicants. We thus, find that the adequate and independent enquiry was made by the Ld. AO during the course of the reassessment proceedings with respect to the issue of share capital and share premium of Rs.7.97 Cr. raised during the year. The documents submitted by the assessee and the share applicants were carefully looked into and properly examined by the Ld. AO and after due application of mind, he was satisfied that assessee has explained the nature and source of alleged sum and no addition u/s. 68 of the Act is warranted.

Page 17 of 31 Goodview Marketing Pvt. Ltd., AY : 2008-09 Page 18 of 31 Goodview Marketing Pvt. Ltd., AY : 2008-09 Page 19 of 31 Goodview Marketing Pvt. Ltd., AY : 2008-09

Page 20 of 31 Goodview Marketing Pvt. Ltd., AY : 2008-09 15. The contentions made by the Ld. Counsel for the assessee in the remarks column further gets fortified with the fact that Ld. AO issued the notice to 18 share applicants and 13 of them have duly replied. The five share applicants which were all having common addresses do not reply but then the Ld. Pr. CIT has directed the AO to carry out the thorough investigation and, therefore, Ld. AO ought to have checked the PAN and the current status of the income tax return and could have easily known the whereabouts of the share applicants. Ld. AO ought to have considered the fact that it was almost 7 to 8 years since the time when assessee received the share application money and one cannot ignore the possibility of change of address. We also note that a summon to the director of M/s. Goodview Marketing Pvt. Ltd. on 26.02.2014 was not addressed to the director but only in the name of company. Ld. AO failed to take note that the directors were changed and the assessee vide letter dated 05.03.2014 specifically submitted the names and addresses of the present directors. But even after getting the current address of the present directors Ld. AO did not issue any summon to the individual directors. This act of Ld. AO proves that he has not conducted any enquiry/investigation in the manner Ld. Pr. CIT has directed.

of 2011 wherein the Learned Court confirms addition of Share Capital u/s. 68 of the I. T. Act. In view of the above, the entire share capital received by the assessee to the tune of Rs.15,61,00,000/- during the year under consideration is treated as unexplained cash credit and added back to income of the assessee applying sec. 68 of I. T. Act, 1961. I am also satisfied with the fact that this is a fit case for initiation of penalty proceeding u/s. 271(1)(b) and 271(1)(c). These penalty proceedings are being initiated separately.”

Page 23 of 31 Goodview Marketing Pvt. Ltd., AY : 2008-09 "(3) The assessee shall, except where the assessment is made under section 144, be given an opportunity of being heard in respect of any material gathered on the basis of any inquiry under sub- section (2) or any audit under sub- section (2A) and proposed to be utilised for the purpose of the assessment. "

Page 24 of 31 Goodview Marketing Pvt. Ltd., AY : 2008-09 pronounced on 15-07-2021 wherein relying on the above judgment of the Hon'ble Kolkata ITAT in the case of SPML Infra (supra) it was held that, "7.11 Applying the law to the case at hand, it is evident that the Inspector Reports, that had been relied upon by the A.O., have been reproduced in length for the first time in the Assessment Orders only. The A.O., by failing to confront the assessees with the evidence he had gathered u/s. 142(2) Act, has, therefore, erroneously skipped the mandatory intermediary step prescribed u/s. 142(3) of the Act. Thus, when the A.O. has directly gone on to pass the Assessment Orders u/s. 147/143(3) of the Act to make the impugned additions u/s. 68, the same is in direct violation of the procedure of enquiry prescribed in the Statute that inherently encompasses the Principle(s) of Natural Justice. We derive support to our line of reasoning from the decision of the coordinate Bench of the Hon'ble Kolkata Tribunal in M/s. SPML Infra Ltd. vs. DCIT, wherein it has been held as under: ………. It was further held that, 7.14 Since the results of the enquiries conducted by the A.O. u/s. 142(2) of the Act have not been confronted to the assessees, we are inclined to agree with the Ld. A.R. that there has been a violation of the Principle(s) of Natural Justice implied within Section142 (2) of the Act and such statutory non-compliance vitiates the entire assessment proceedings, therefore, rendering it to be null and void. Thus, the Cross Objection taken on the violation of the Principle(s) of Natural Justice is also allowed in favour of the assessees. "

19. Thus, the order passed by the learned AO in the present case without affording an opportunity of being heard w.r.t his findings and observations during the course of assessment is not as per law and in violation of principles of natural justice 20. Moving further, reliance is also placed on the judgment of the Hon'ble jurisdictional ITAT, Kolkata in the case of ACIT vs Gold Rush Sales and Service Ltd pronounced on 21-08-2023 [2023] 156 taxmann.com 514 (Kolkata - Trib.) wherein it was held that non- compliance of summon cannot be a ground to make addition u/s. 68 of the Act when all the supporting documents are being submitted to evidence the identity, creditworthiness and genuineness of the transactions. "It is found that undisputedly the assessee has filed the evidences/details as called for by the Assessing Officer in respect of the share subscribers of Rs.2.34 crores which has not been commented by the Assessing Officer in the assessment proceedings nor any defect has been pointed out meaning thereby

Page 25 of 31 Goodview Marketing Pvt. Ltd., AY : 2008-09 that no further verification of these evidences was carried out by the Assessing Officer. Though there was a non-compliance to the summon issued under section 131 by the directors of the assessee-company, but the just mere non-compliance to the summon issued under section 131 cannot be a ground for adding the share capital/share premium raised by the assessee during the year as unexplained cash credit u/s.

21. The alleged share applicants having sufficient source of funds with them in the form of net worth i.e. share capital and reserve and surplus cannot be brushed aside as it has been held time and again that it is not necessary that the investment in equity and other companies should be out of the income earned by the investors. 18. The ld. D/R, on the other hand, has merely given a general statement that these companies are paper/shell companies but no concrete evidence is filed on record which could prove the substance in such submissions failing which the issue in hand can be decided only on the basis of documentary evidence available on record which clearly states that the assessee has explained the nature and source of the alleged sum thereby proving the identity and creditworthiness of the share subscribers and genuineness of the transactions. So far as the reliance of the Ld. DR on the decision of the Hon’ble Supreme

Page 26 of 31 Goodview Marketing Pvt. Ltd., AY : 2008-09 Court in the case of “PCIT v/s NRA Iron & Steel (P) Ltd. [2019] 412 ITR 161” is concerned, we note that the Hon’ble Supreme Court in the said case has taken note of the observations made by the Supreme Court in the “the land mark case of Kale Khan Mohammed Hanif v. CIT [1963] 50 ITR 1 (SC) and Roshan Di Hatti v. CIT [1977] 107 ITR 938 (SC) laying down the proposition that the onus of proving the source of a sum of money found to have been received by an assessee, is on the assessee. Once the assessee has submitted the documents relating to identity, genuineness of the transaction, and creditworthiness, then the AO must conduct an inquiry, and call for more details before invoking Section 68. If the Assessee is not able to provide a satisfactory explanation of the nature and source, of the investments made, it is open to the Revenue to hold that it is the income of the assessee, and there would be no further burden on the revenue to show that the income is from any particular source.”

Page 28 of 31 Goodview Marketing Pvt. Ltd., AY : 2008-09 was based on some evidence on which a conclusion could be arrived at, no question of law as such could arise.” {emphasis ours} b) The ITAT Kolkata Bench in ITO vs Cygnus Developers (I) P Ltd in dated 2.3.2016, held as follows:

“9. We have considered the rival submissions. We are of the view that order of CIT(A) does not call for any interference. It may be seen from the grounds of appeal raised by the Revenue that the Revenue disputed only the proof of identity of the shareholder. In this regard it is seen that for A Y.2004

05. Shree Shyam Trexim Pvt. Ltd., was assessed by ITO, Ward- 9(4), Kolkata and the order of assessment u/s/143(3) dated 25.01.2006 is placed in the paper book. Similarly Navalco Commodities Pvt. Ltd., was assessed to tax u/s 143(3) for A Y.2005-06 by I TO, Ward- 9(4), Kolkata by order dated 20.03.2007. Similarly Jewellock Trexim Pvt. Ltd was assessed to tax for A Y.2005-06 by the very same ITO- Ward- 9(3), Kolkata assessing the Assessee. In the light of the above factual position which is not disputed by the Revenue, it cannot be said that the identity of the share applicants remained not proved by the assessee. The decision of the Hon'ble Allahabad High Court as well as ITA T Kolkata Bench on which reliance was placed by the learned counsel for the assessee also supports the view that for non production of directors of the investor company for examination by the AO it cannot be held that the identity of a limited company has not been established. For the reasons given above we uphold the order of CIT(A) and dismiss the appeal of the Revenue. "

22. Our views are further fortified by the judgment of the Jurisdictional Calcutta High Court in the case of Principal CIT vs. Sreeleathers reported in [2022] 448 ITR 332 (Cal) has held as follows:

“Section 68 of the Income-tax Act, of 1961, deals with cash credits. It states that where any sum is found credited in the books of an assessee maintained for any previous year, and the assessee offers no explanation about the nature and source thereof or the explanation offered by him is not in the opinion of the Assessing Officer, satisfactory, the sum so credited may be charged to Income-tax as the income of the assessee of that previous year. The crucial words in the provision are “the assessee offers no explanation". This would mean that the assessee offers no proper, reasonable and acceptable explanation as regards the amount credited in the books maintained by the assessee. No doubt the Act places the burden of proof on the taxpayer. However, this is only the initial burden. In cases where the assessee offers an explanation to the credit by placing evidence regarding the identity of the investor or lender along with their confirmations, the assessee has discharged the initial burden and, therefore, the burden shifts on the Assessing Officer to examine the source of the credit to be justified in referring to section 68 of the Act. After the Assessing Officer puts the assessee on notice and the assessee

Page 29 of 31 Goodview Marketing Pvt. Ltd., AY : 2008-09 submits the explanation concerning the cash credit, the Assessing Officer should consider it objectively before he decides to accept or reject it. Where the assessee furnishes full details regarding the creditors, it is up to the Department to pursue the matter further to locate those creditors and examine their creditworthiness. While drawing the inference, it cannot be assumed in the absence of any material that there have been some illegalities in the assessee’s transaction. Held, dismissing the appeal, that the allegations against the assessee were in respect of thirteen transactions. The Assessing Officer issued a show-cause notice only in respect of one of the lenders. The assessee responded to the show-cause notice and submitted the reply. The documents annexed to the reply were classified under three categories namely: to establish the identity of the lender, to prove the genuineness of the transactions and to establish the creditworthiness of the lender. The Assessing Officer had brushed aside these documents and in a very casual manner had stated that merely filing the permanent account number details, and balance sheet did not absolve the assessee from his responsibility of proving the nature of the transaction. There was no discussion by the Assessing Officer on the correctness of the stand taken by the assessee. Thus, going by the records placed by the assessee, it could be safely held that the assessee had discharged his initial burden and the burden shifted onto the Assessing Officer to enquire further into the matter which he failed to do. In more than one place the Assessing Officer used the expression "money laundering". Such usage was uncalled for as the allegation of money laundering is a very serious allegation and the effect of a case of money laundering under the relevant Act is markedly different. The order passed by the Assessing Officer was utterly perverse and had been rightly set aside by the Commissioner (Appeals). The Tribunal had rightly deleted the additions under section 68.”

1. 1. Appellant – Goodview Marketing Pvt. Ltd.

2. Respondent – ITO, Ward-6(2), Kolkata.