Appeal details
Counselvise Citation
[2022] 104 COUNSELVISE.COM (IT) 2485 (ITAT-SURAT)
Assessee PAN
Bench
Appeal Number
Duration Of Justice
3 year(s) 11 month(s) 23 day(s)
Appellant
Respondent
Appeal Type
Income Tax Appeal
Pronouncement Date
08-02-2022
Appeal Filed By
Assessee
Order Result
Allowed
Bench Allotted
DB
Next Hearing Date
20-12-2021
Assessment Year
2012-2013
Appeal Filed On
15-02-2018
Judgement Text
IN THE INCOME TAX APPELLATE TRIBUNAL, SURAT BENCH, SURAT BEFORE SHRIPAWAN SINGH, JM &DR. A.L.SAINI, AM आयकरअपीलसं./ITA No.101/SRT/2018 (िनधाŊरणवषŊ / Assessment Year: (2012-13) (Physical Court Hearing) Kejriwal Geotech Pvt. Ltd., 7004,World Trade Centre, Ring Road, Surat-395002 Vs. Income Tax Officer, Ward- 1(1)(3),Aayakar Bhavan, majura Gate, Surat ̾थायीलेखासं./जीआइआरसं./PAN/GIR No.: AADCK 7366F (Appellant ) (Respondent) Assessee by : Shri Devesh Poddar, A.R Respondent by :Ms. Anupama Singla– Sr.D.R सुनवाईकीतारीख/ Date of Hearing : 21/12/2021 घोषणाकीतारीख/Date of Pronouncement : 09/02/2022 आदेश / O R D E R PER DR. A. L. SAINI, ACCOUNTANT MEMBER: Captioned appeal filed by the assessee, pertaining to assessment year 2012- 13, is directed against the order passed by the Learned Commissioner of Income Tax(Appeals)-1,Surat, dated 04.12.2017, which in turn arises out of an order passed by the Assessing Officer under section 143(3) of the Income Tax Act, 1961 (in short ‘the Act’), dated 31.03.2015. 2. The grounds of appeal raised by the assessee are as follows: “1) That on the facts and in the circumstances of the case as well as in law, the ld. Commissioner of income Tax (Appeals) has erred in confirming the addition of Rs.2,33,01,950/- u/s 68 of the income Tax Act, 1961 (the Act), by assuming the share capital and share premium received by the appellant company from twenty shareholders as non-genuine and by treating the same as unexplained cash credits. 2) That the reasons and bases mentioned by ld. Assessing Officer and ld. CIT(A) for making/sustaining above addition of Rs.2,33,01,950/- are factually incorrect, invalid, unjustified, unsustainable and contrary to the settled law. 3) Without prejudice to above grounds of appeal, that the above addition of Rs.2,33,01,950/- by treating the share capital and share premium as unexplained cash credits u/s68 of the Act is contrary to the law laid down by Hon'ble Apex Court, Gujarat High Court and other High Courts holding that the share capital/share premium cannot be added in the hands of the company.” Page | 2 ITA No.101/SRT/2018 A.Y. 12-13 Kejriwal Geotech Pvt. Ltd. 3.Brief facts as discernable from the orders of lower authorities are that assessee before is a private limited company and engaged in the business of manufacturing of texturized yarn. The assessee-company field its return of income on 03.09.2012 showing total loss at (-) Rs.18,22,48,493/-. The return of income was processed u/s 143(1) of the Act. Later, the assessee`s case was taken up for scrutiny and accordingly notice u/s 143(2) of the Act was issued on 06.08.2013.During the course of assessment proceedings, it was noticed from the details filed by the assessee that assessee has received share capital/share premium from the various parties and failed to explain the identity, creditworthiness and genuineness of the transactions. Before us, ground raised by the assessee pertains to making addition of Rs.2,33,01,950/- on account of bogus share application money under section 68 of the Act. During the course of assessment proceedings, the assessing officer found that appellant had received a sum of Rs.2,33,01,950/- towards share capital/premium from the following 20 persons, details of the same is reproduced below: 1 Anil Kejriwal HUF Rs.15,00,000/- 2 AnupKejriwal HUF Rs.15,00,000/- 3 Mohanlal & Sons HUF Rs.20,00,000/- 4 SureshkumarSahu Rs.40,00,000/- 5 Tirupati Coal Ayush Rs.15,00,000 6 J. K. Das Prop J K Property Rs.10,00,000/- 7 Menka Singh Rs.11,00,000/- 8 Prakash Lal HUF Rs.10,50,000/- 9 Subodhkumar Sinha Rs.5,00,000/- 10 S S Agarwal HUF Rs.6,00,000/- 11 Sbmya Rs.6,50,000/- 12 Dinesh Kumar Rs.11,20,950/- 13 Santosh Devi Rs.8,00,000/- 14 Vishnu Kejriwal HUF Rs. 16,00,000/- 15 Gopal Kumar Rs.10,00,000/- 16 Rujiesh Kumar Rs.5,81,000/- 17 Irshad Khan Rs.l5,00,000/- 18 Krishna Singh Rs.3,00,000/- 19 Roshan HUF Rs.8,00,000/- 20 Subodh Kumar Sinha Rs.2,00,000/- Total Rs.2,33,01,950/- Page | 3 ITA No.101/SRT/2018 A.Y. 12-13 Kejriwal Geotech Pvt. Ltd. The said amount of Rs.2,33,01,950/- was received as share capital/share premium @ Rs.40/- from 20 investors during the year. The assessing officer found that the large numbers of investors were from Ranchi, Jharkhand and many of these investors was having common addresses at Ranchi. In order to verify the identity, creditworthiness and the genuineness of the transactions, an enquiry was got conducted by the assessing officer at Ranchi by issuance of commission u/s 131(1)(d) of the Act to DDIT(Inv.), Ranchi. The DDIT(Inv.)Ranchi in his report dated 13.03.2015 submitted that the investors failed to submit the documents which were required to be produced as per the summons issued under section 131 of the Act. The investors did not produce the balance sheet, capital account to prove their creditworthiness. The investors were issued summons but they did not attend the hearing proceedings personally nor did they furnish the details before the Investigation Wing. In absence of the basic details by these investors such as books of accounts, balance sheet, complete bank statements, cash book etc, the creditworthiness of the investors could not be proved. The assessing officer observed that these investors were having meager income and had filed return of income u/s 44AD of the Act. The assessing officer noted that these investors were failed to prove their creditworthiness before the DDIT(Inv.) at the time of enquiry u/s 131(l)(d) of the Act.Theassessing officer, on the analysis of the above facts, found that these investors were not identifiable and did not have creditworthiness to make the transactions in the share capital. Therefore,assessing officer held that amount of investment of Rs.2,33,01,950/-in form of share capital/share premium was in form of cash credit and made an addition u/s 68 of the Act. 4. On appeal, ld CIT(A) confirmed the action of the assessing officer. Aggrieved, the assessee is in further appeal before us. 5.Shri Devesh Poddar, Learned Counsel for the assessee, begins by pointing out that during the assessment stage assessee submitted, Balance Sheet, profit and loss account, Bank statements, PAN numbers, and postal address of all the investors. Those Investors, who are covered by the provisions of section 44AD, need not to Page | 4 ITA No.101/SRT/2018 A.Y. 12-13 Kejriwal Geotech Pvt. Ltd. maintain books of accounts, however, they submitted bank statements, Copy of Income Tax Return, PAN number, postal address etc. It was contended by ld Counsel that transactions have been made through proper banking channels. The ld Counsel relied on several case laws in support of his contention regarding the genuineness of the share capital and prays the Bench that addition made by the assessing officer may be deleted. 6. On the other hand, Ms. Anupama Singla, Learned DR for the Revenue submits that majority of the investors are showing his income u/s 44AD of the Act. No balance sheet has been provided with regard to these parties to prove theworth of these persons.The income shown by these parties in their returns are not adequate to make such a huge investment in share capital.The investors were failed to prove their creditworthiness before the DDIT(Inv.) at the time of enquiry u/s 131(l)(d) of the Act. Therefore, she prays that addition made by the assessing officer may be upheld. 7.We have heard both the parties and carefully gone through the submission put forth on behalf of the assessee along with the documents furnished and the case laws relied upon, and perused the fact of the case including the findings of the ld CIT(A) and other materials brought on record. Before the Bench Ld. Counsel for the assessee submitted that during the assessment proceedings, the assessee has submitted copy of income tax return, computation of total income, bank statement, balance-sheet, profit and loss account, PAN number, name and addresses of the share applicants etc.We note that it is well settled position of law on the issue under consideration that an assessee receiving a credit has to testify its case through the 'triple marker test' of Identity, Creditworthiness and Genuineness of Transactions. It is imperative, therefore, that the case be analyzed in light of these three well-settled canons of adjudication, as embedded in the statute as also promulgated by various judicial pronouncements. In order to prove these three ingredients of section 68 of the Act, Learned Counsel submitted a chart before the Bench. The said chart contains the comprehensive detail in respect of each share Page | 5 ITA No.101/SRT/2018 A.Y. 12-13 Kejriwal Geotech Pvt. Ltd. applicants, showing Name of the share applicant, PAN number of share applicant, net income of the share applicant, amount of share capital, balance of capital and reserves of each share applicants, documents and evidences submitted by each share applicant before the lower authorities, sources of payment and bank statement of each share applicant. The said chart is reproduced below Sr N o Name PAN No Net income of the year Amt. reced. Capital as on 31.03.11 Document submitted sources of payment Page No of bank statemen t 1 Anil Kejriwal HUF AAGHA2306F 435590 1500000 5308138 ITR Computation of income, Bank statement, balance- sheet amount received from Aditya Dhanuka 1250000 and Hindustan Credit Corpn. 200000 which was advance 115 2 Anup Kejriwal HUF AADHA3790G 167690 1500000 2176440 ITR Computation of income, Bank statement, balance- sheet Amount received from Shivam Entt. 1465000/- which was advance 120 3 Mohanlal & Sons HUF AAGHM8485D 276990 2000000 9588661 ITR Computation of income, Bank statement, balance- sheet Amount received from Aditya Dhanuka 1250000 and Hindustan credit Corpn. 700000 cash deposit 50000 124 4 Suresh Kr.Sahu AGJPS4783K 207620 4000000 9496243 ITR Computation of income, Bank statement, balance- sheet Amount received from Shree Ram Entt. 1100000 and Hindusthan Entt. 1500000 and other advance received 130 & 131 5 Ayush Kejriwal (Tirupati Coal) BGHPK7329C 276750 1500000 2215236 ITR Computation of income, Bank statement, balance- sheet Amount received from Tirupati Finance which was advance for vehicles 136 6 J.K.Das HUF AAAHJ7739R 246070 1000000 3416434 ITR Computation of income, Bank statement, balance- sheet Loan return from Ganpati Sales Corpnn. Rs.1000000 138 7 Menka Sen AVOPS0247N 239650 1100000 3218987 ITR Computation of income, Bank statement, balance- sheet Amount received from Capital Real Estate 450000 cancellation of land agreement and rest amount received from debtors. 143 8 Prakash Lal HUF AAGHP0363P 201890 1050000 1466568 ITR Computation of income, Bank statement, balance- sheet Amount received from Krishna Rice Mill against sale of paddy 148 9 Subodh Kr.Sinha AGJPS5362C 409410 500000 3655435 ITR Computation of income, Bank statement, balance- sheet Amount received from Debtors/advances 10 S.S. Agarwal HUF AAPHS4115K 254940 600000 1832730 ITR Computation of income, Bank statement, balance- sheet Amount received from debtors & advances 156 11 Somiya Kejriwal AWHPK9646H 258330 650000 6011937 ITR Computation of income, Bank statement, balance- sheet Amount received on maturity of PPF Rs.590,215 + cash deposit 60000 160 12 Dinesh Kumar APBPK8512M 195140 1120950 1923110 ITR Computation of income, Bank statement, balance- sheet Amount received from debtors/advance 164 13 Santosh Devi Kejriwal ABZPK2111Q 249450 800000 3798237 ITR Computation of income, Bank statement, balance- sheet Amount received from debtors/advances Page | 6 ITA No.101/SRT/2018 A.Y. 12-13 Kejriwal Geotech Pvt. Ltd. 14 Vishnu Kejriwal HUF AACHV8541D 394440 1600000 7452345 ITR Computation of income, Bank statement, balance- sheet Amount received from Shivan Entt. 1465000 which was advance 174 15 Gopal Kumar ARXPK7702P 210750 1000000 3296543 ITR Computation of income, Bank statement, balance- sheet Amount received from Hindusthan Industries 830000 which was advance against coal 180 16 Rupesh Kr.Verma AKZPV4037D 172100 581000 2188474 ITR Computation of income, Bank statement, balance- sheet Amount received 418390 from Mango Creatino (loan return) 17 Irshad Khan AXDPK024L 195020 1500000 3517007 ITR Computation of income, Bank statement, balance- sheet Amount received from Krishna Rice Mill against sale of paddy 191 18 Krishna Singh BBPPS7333R 557870 300000 4727271 ITR Computation of income, Bank statement, balance- sheet Amount received from Mourya Vihar Rs.488367 against contract work. 198, 199, 200 & 201 19 Roshanlal HUF AAGHR7904A 219240 800000 3582362 ITR Computation of income, Bank statement, balance- sheet Amount received from Bus hire charges from Wd.a.v.School and 280000 from Hindustan Credit Corpn. 207 & 208 20 Subodhkumar Sinha HUF AAJHS5698K 196470 200000 2528915 ITR Computation of income, Bank statement, balance- sheet Amount received from debtors/advance 212 8. With help of the above chart, Learned Counsel submits that share applicants, namely: J.K.Das HUF, Subodh Kr.Sinha, Irshad Khan, Krishna Singh, Roshanlal HUF, and Subodhkumar Sinha HUF, are covered by the judgment of the Coordinate Bench of ITAT Surat, by group case of M/s Kejriwal Industries Limited, in ITA No.1509/Ahd/2016, for assessment year 2011-12, order dated 04.05.2020. The Tribunal has deleted the addition of cash credit under section 68, in respect of these persons. Therefore, addition should not be made under section 68 of the Act in respect of the above, mentioned share applicants. The findings of the Coordinate Bench are reproduced below: “20. In the light of above findings of ld.CIT(A), we are of the considered opinion the ld. CIT(A) has examined the each lender and arrived at finding that loan creditors are genuine hence, no addition could be made under section 68 of the Act. Therefore, we are in the agreement with the ld. CIT(A). We further notice that the AO observed para No. 13.9 in the assessment order, several alleged lenders are share applicant in earlier years. However, the learned counsel for the assessee submitted that the loan has been given from CCA account and from Kejriwal Dyeing and Printing Mills Pvt. Ltd. whose financial have been accepted by the same AO in the assessment order made under section 143 (3) of the Act of even date. Further Page No. 3 of appellate order mentioned that the claim of the assessee that it is surprising that cash deposits of Rs.15,00,000/-in the case of M/s. Kejriwal Dyeing & Printing Mills Pvt. Ltd. has been considered as unexplained in the case. Whereas the Id. AO himself has scrutinized the said assessee u/s. 143(3) and have verified the books of accounts of M/s. Kejriwal Dyeing & Printing Mills Pvt. Ltd. Page | 7 ITA No.101/SRT/2018 A.Y. 12-13 Kejriwal Geotech Pvt. Ltd. This shows the predetermination of the state of mind of the Ld.AO which superseded the facts available on the record with the AO and the Ld.AO to make an unjustified and unlawful decision. The ACIT (TDS) Ranchi or the AO has not given any adverse finding in respect of creditworthiness or genuineness of transaction in respect of these lenders are concerned. The learned counsel for the assessee further submitted that the lenders were not asked to be produced by the AO before him. The learned counsel for the assessee referred para No. 9.3.1 to 9.3.2 of appellate order and submitted that Ld. CIT (A) has observed that there is contradictory reports of the AO. It was further observed that the assessee had filed all address of the creditors but due to time gap, It is possible that at the time of enquiry they will have shifted to new address. However, copies of income-tax returns and copy of new address was filed before CIT (A) in respect of 8 person who were not found at the stated address as per enquiry reports. The learned counsel for the assessee referred para No.10 of appellate order wherein the CIT(A) has examined and discussed the issue of identity, creditworthiness and analysis of bank account and genuineness of transaction. It was submitted that that as per para No. 11 of CIT(A) order the AO has not made addition in respect of person mentioned in table at para No. 11.1 observed that the AO has not made addition in respect of Serial No. 45, 46, 47, 49, 50, 51 and 52 without any discussion in the assessment order. There is no discussion authority these loans were treated as explained, whereas fact and circumstances of other creditors are same. 21. The learned counsel relied in the case of CIT v. RanchhodJivabhai Nakhava [2012] 21 taxmann.com 159 (Gujarat)/[2012] 81 CCH 193 Guj-HC held that where lenders of assessee are income-tax assessees whose PAN have been disclosed, Assessing Officer cannot ask the assessee to further prove genuineness of transactions without first verifying such fact from income-tax returns of lenders. The learned counsel for the assessee further referred and relied in the case of DCIT v. Rohini Builders [2002] 256 ITR 360 (Guj.)/ [2003] 127 Taxman 523 (Guj) of Hon'ble Gujarat High Court which laid down that when the assessee has primarily discharged the initial onus laid on him in terms of section 68 by providing details to establish genuineness of transaction, identity and creditworthiness of depositors then the assessee is not expected to prove genuineness of cash deposited in bank account of those creditors because under the law the assessee can be asked to prove the source of credits in his books of accounts but not the source of source. 22. The learned counsel relied in the case of in the case of CIT v. Apex Therm Packaging (P.) Ltd. [2014] 42 taxmann.com 473 (Gujarat) wherein it was held that where name, address, PAN copy of IT Returns, balance sheet, Profit & Loss Account of all creditors / lenders as well as their confirmation has been furnished, Assessing Officer could not make addition on account of unsecured loan and interest thereon. 23. The learned counsel relied in the case of CIT v. Orissa Corporation (P) Ltd. [1986] 159 ITR 78 (SC)/ 25 Taxman 80(SC), the Hon'ble Supreme Court observed that when the assessee furnishes names and addresses of the alleged creditors and the GIR Numbers, the burden shifts to the Department to establish the revenue's case and in order to sustain the addition the revenue has to pursue the enquiry and to establish the lack of creditworthiness and mere non-compliance of summons issued by the Assessing Officer under section 131 by the alleged creditors will not be sufficient to draw an adverse inference against assessee. 24. In view of above, we are of the considered view that the assessee has discharged the initial onus which lay on him in the terms of section 68 of the Act by providing identity of creditors and same has not been doubted by the AO also. Further, the assessee has proved the creditworthiness by way of filing ITR returns, bank account, balance sheet, confirmation of the creditors. The assessee is not expected to prove: the genuineness of cash deposits in bank accounts of those e creditors because under the law the assessee Page | 8 ITA No.101/SRT/2018 A.Y. 12-13 Kejriwal Geotech Pvt. Ltd. can be asked to prove source of credit but not the source of the source held by the Hon'ble Bombay High Court in the case of Orient Trading Co. v. CIT [1963] 49 ITR 723 (Bombay). Therefore, in such a situation and considering above fact and finding ,we are in complete agreement with the reasoning given by the Ld. CIT (A) that when full particulars, inclusive of the confirmation with name, PAN, copy of Income-tax returns, balance sheet Profit & Loss Account computation of income are furnished and same reflected in their books of accounts. Further, the findings recorded by the Ld. CIT (A) are also supported by the decision of Hon'ble Gujarat High Court and Hon'ble Supreme Court as discussed above. The addition so made is rightly deleted by the Ld. CIT(A). In view of these facts and circumstances, we do not find any infirmity in the order of CIT(A), accordingly, same is upheld. Accordingly, all the grounds of appeal of as taken by the Revenue are therefore, dismissed.” 9.By submitting the documents in respect of each share applicant, as mentioned in the above chart, (reproduced in para no.7 of this order) the ld Counsel claimed that assessee has proved three ingredients of section 68 of the Act, namely, Identity, Creditworthiness and Genuineness of Transactions. We note that where any sum is found credited in the books of an assessee then there is a duty casted upon the assessee to explain the nature and source of credit found in his books. In the instant case, the credit is in the form of receipt of share capital from share applicants. The nature of receipt towards share capital is seen from the entries passed in the respective balance sheets of the companies as share capital and investments. In respect of source of credit, the assessee has to prove the three necessary ingredients i.e. identity of share applicants, genuineness of transactions and creditworthiness of share applicants. For proving the identity of share applicants, the assessee furnished the name, address, PAN of share applicants together with the copies of balance sheets and Income Tax Returns. With regard to the creditworthiness of share applicants, we noted that these share applicants are having capital and reserves and the investment made in the assessee company is only a small part of their capital. These transactions are also duly reflected in the balance sheets of the share applicants, so creditworthiness is proved. Even if there was any doubt, if any, regarding the creditworthiness of the share applicants was still subsisting, then AO should have made enquiries from the AO of the share subscribers. Page | 9 ITA No.101/SRT/2018 A.Y. 12-13 Kejriwal Geotech Pvt. Ltd. 10.Learned Counsel drew our attention towards letter of JCIT (Inv) Ranchi dated 13.03.2015, wherein the Ld. JCIT (Inv) Ranchi has mentioned following facts in the commission report u/s131(1)(d), of the Act: “....... 3, Finding:-Person/Entity wise report is enclosed herewith as “Annexure- 1” 4. From the submission of all 35 parties, it is clear that their availability at the stated addresses is confirmed. All of them have filed their ITR for A.Y 2012-13. All of them have made investment through banking channel. Owing to shortage of time, further details such as books of account, balance sheet, complete bank statement, cash book etc., could not be submitted by the party so their creditworthiness cannot be verified at the end of the undersigned.” 11. From the above commission report u/s131(1)(d) of the Act, it is vivid that all 35 parties are availability at the stated addresses, all these 35 parties have filed their Income Tax Return ( ITR) for A.Y 2012-13,and all of 35 parties have made investment through banking channel. The ld Counsel submits that even books of account, balance sheet, complete bank statement, cash book etc. were submitted before the Income Tax officer. Hence, ld Counsel contended that there is no failure on the part of the assessee to submit Income Tax Return, books of account, balance sheet, complete bank statement, cash book etc, before the Income Tax Authorities. 12. Learned Counsel further drew our attention on page no.6 of the paper book which is annexure of the letter of JCIT(Inv) Ranchi dated 13.03.2015, wherein it is stated that address of parties were genuine and parties were engaged in retail trade, the notices issued by Income Tax Authorities were served upon the parties. The parties have confirmed and disclosed the source of their personal investment made in the assessee-company. Some of the parties made the investment in assessee-company as share applicants out of their own funds; some of the parties have invested in assessee-company out of their capital and bank balance; all the investors have made investments through banking channel. We note that the annexure to the letter of the Ld. JCIT(Inv) Ranchi, which is placed in paper book Page | 10 ITA No.101/SRT/2018 A.Y. 12-13 Kejriwal Geotech Pvt. Ltd. pages nos. 6 to 25 of the assessee’s paper book, wherein these facts were narrated by the Income Tax Officer for each share applicant. Therefore, based on the above documentary evidences, Ld. Counsel states that addition made by Assessing Officer is not sustainable in law and may be deleted. 13. We note that ld Counsel produces the chart before the Bench showing necessary details of all the investors parties which is placed at page 1 of the paper book and the same is reproduced by us in para no.7 of this order. In the report of DDI(Inv) Ranchi, the DDIT has verified all the investors and confirmed their existence and stated that investments made by investors in assessee-company, were through banking channel, which is placed at paper book pages 2 to 28.The Ld. Counsel submitted before the Bench, the copy of IT return, copy of computation of total income, copy of balance-sheet, copy of profit and loss account, copy of bank statements and copy of PAN number, of each share applicants. The ld Counsel also submitted the financial statements of assessee- company, from financial year 2009-10 to financial year 2011-12. We note that by submitting these documents and evidences the assessee company has proved the identity, creditworthiness and genuineness of all the share applicants. In this regard reliance can be placed on the judgment of the Hon'ble jurisdictional High Court in the case of Associated Transrail Structure Ltd. vs. ACIT 397 ITR 573 (Guj), wherein it was held as follows: “9. Thus, from the facts emerging on record, it is apparent that during the period immediately after its incorporation the assessee-company had practically done no business so as to generate income of Rs.50 lakhs. The Assessing Officer on inquiry has found many of the alleged shareholders to be benamidars or having not invested the money, but at the same time, he has traced out the source of money to some specific persons, who were the real investors. The Supreme Court has in the case of CIT v. Lovely Exports (P).Ltd., (supra),held that if the share application money is received by the assessee-company from the alleged bogus shareholders, whose names are given to the Assessing Officer, then the Department is free to proceed to reopen the individual assessment in accordance with law. Such amounts cannot be regarded as undisclosed income under section 68 of the Act. Applying the said principles to the facts of the present case, the Assessing Officer having traced out the source of funds to specific persons who had invested the same in share of the assessee-company, it was open for the Assessing Officer to proceed against the said persons. The funds not having emanated from the assessee-company, there was no warrant for making addition Page | 11 ITA No.101/SRT/2018 A.Y. 12-13 Kejriwal Geotech Pvt. Ltd. of the said amount as undisclosed income under section 68 of the Act in its hands. In the circumstances, the Tribunal was justified in deleting the addition of Rs.50,00,000 made under section 68 of the Act. The question stands answered accordingly, that is, in favour of the assessee and against the Revenue.” 14.We note that law regarding addition u/s 68 on account of the share application money has been laid out by the Hon'ble Supreme Court in the case of CIT v/s Lovely Exports ( 2008) 216 ITR 195 ( SC) wherein it has held that: “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." 15. The Hon'ble’ High Court of Delhi in the case of CIT v/s. Steller Investment Ltd 192ITR 287 has held that: “...if it be assumed that the subscribers to the increased share capital were not genuine even then under no circumstances could the amount of share capital be regarded as undisclosed income of the assessee. It may be there were some bogus shareholders and the money may have been provided by some other persons. It would have been more sensible to re - open the assessments of the person alleged to have advanced the money. How this amount of increased share capital could be assessed in the hands of the company itself was beyond understanding. The Hon'ble Supreme Court has agreed with this view, and dismissed the SLP of Revenue in CIT v/s Stellar Investment Ltd in 251 ITR 263 (SC). 16.The Hon'ble jurisdictional ITAT in the case of Pankaj Enka v/s DCIT in ITA No.816/Ahd/2013 has held that: “the assessee has discharged the primary onus to prove as genuine share application money. On perusal of bank statement, no cash has been deposited by them before issue of cheque to the assessee towards share application money. If the assessing officer doubts the source of source, he was free to conduct inquiry in the case of person from whom assessee has received funds" . The Hon'ble’ jurisdictional High Court has concurred with this view of Hon'ble ITAT in ITA No. 967/2015 dated 05.01.2016 . Page | 12 ITA No.101/SRT/2018 A.Y. 12-13 Kejriwal Geotech Pvt. Ltd. 17. On the identical facts, in Tax appeal no.442 of 2011 of Hon'ble’ Gujarat High Court in the case of CIT v/s Belgium Glass & Ceramics P Ltd (date of pronouncement 13.06.2012), held as follows: "4. On consideration of facts and the order of the Tribunal, it is seen that while reversing the order of the Commissioner (Appeals) the Tribunal took view that once the applicants admit to have made the payment of share application money, no further inquiry was necessary into the creditworthiness and genuineness of the transactions in the case of assessee - company. It took such view on the basis of various judicial pronouncements of the High Courts in which, the issue of share application money was considered and mainly relied on the decision of the Apex Court in CIT v/s Lovely Exports P Ltd (2010 ) 14 SSC 761) 4.1 In the facts of the case, it is not disputed that the assessee had furnished the assessing officer the names of 15 persons from whom the share application money was receive. The assessee had also produced in respect of each of them the copies of revenue records in form no. 7/12 extracts showing that they were holders of agricultural land. In Lovely Exports (supra), the Supreme Court considered the issue of share application money regarded as undisclosed income u/s 68 of the Act and observed that if share application money was received by assessee - company, from the alleged bogus share holders, whose names were given to assessing officer then the Department was free to proceed to reopen the individual assessments in accordance with Law." 18. We note that with effect from assessment year 2013-14 section 68 of the Act has been amended to provide that if a closely held company fails to explain the source of share capital, share premium or share application money received by it to the satisfaction of the A.O., the same shall be deemed to be the income of the company u/s 68 of the Act. The said amendment has been held to be prospective and not retrospective by Hon`ble Bombay High Court in Gagandeep Infrastructure Private Limited TS-132-HC-2017(Bom). We note that in assessee`s case under consideration, the amended provisions of section 68 are not applicable, as the assessment year involved in the assessee`s case is “assessment year 2012-13, hence the assessee need not to explain the source of the source. 19. Based on the facts and the precedent applicable to these facts, as narrated above, we are of the view that assessee had discharged its onus to prove the Page | 13 ITA No.101/SRT/2018 A.Y. 12-13 Kejriwal Geotech Pvt. Ltd. identity, creditworthiness and genuineness of the share applicants, therefore, we delete the addition of Rs.2,33,01,950/-. 20. In the result, the appeal of the assessee is allowed. Order is pronounced on 09/02/2022 by placing the result on the Notice Board. Sd/- Sd/- (PAWAN SINGH) (Dr. A.L. SAINI) JUDICIAL MEMBER ACCOUNTANT MEMBER Surat/िदनांक/ Date: 09/02/2022 Dkp Outsourcing Sr.P.S. Copy of the Order forwarded to 1. The Assessee 2. The Respondent 3. The CIT(A) 4. Pr.CIT 5. DR/AR, ITAT, Surat 6. Guard File By Order // True Copy // Assistant Registrar/Sr. PS/PS ITAT, Surat Page | 14 ITA No.101/SRT/2018 A.Y. 12-13 Kejriwal Geotech Pvt. Ltd. Date Initial Draft order verbally directed by author (AM) 21/12/2021 Draft placed before author 23/12/2021 Draft proposed & placed before the second member /01/2022 Draft discussed/approved by Second Member. /01/2022 Approved Draft comes to the Sr.PS/PS /01/2022 Kept for pronouncement on /01/2022 File sent to the Bench Clerk /01/2022 Date on which file goes to the AR Date on which file goes to the Head Clerk. Date of dispatch of Order. Draft dictation sheets are attached
