ITO, Ward-7(1), Kolkata V. M/s Anvil Electricals Pvt. Limited(formerly known as Damiya Vanijya Pvt. Ltd., Kolkata

ITA 133/KOL/2022

• Counselvise Citation: [2022] 104 COUNSELVISE.COM (IT) 0199 (ITAT-KOLKATA)
• Duration Of Justice: 7 month(s) 12 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 18-10-2022
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: C
• Next Hearing Date: 04-09-2022
• Assessment Year: 2012-2013
• Appeal Filed On: 07-03-2022
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Assessee Lawyers: ISSUING EQUITY SHARES AT PREMIUM; REASONED
• Keywords: Unexplained cash credit; Source of fund; Question of law; Assessment record; Onus to prove; Reassessment proceedings
• Section: 131; 68; 142(1); 133(6); 143(1); 113

Judgement Text

आयकर अपील य अ धकरण, कोलकाता पीठ ‘सी’, कोलकाता IN THE INCOME TAX APPELLATE TRIBUNAL “C” BENCH: KOLKATA ी राजपाल यादव,उपा य (कोलकाता े ) एवं ी राजेश क ु मार, लेखा सद य के सम [Before Shri Rajpal Yadav, Vice-President (KZ)& Shri Rajesh Kumar, Accountant Member] I.T.A. No. 133/Kol/2022 Assessment Year : 2013-14 ITO, Ward-7(1), Kolkata Vs. M/s Anvil Electricals Pvt. Ltd. (Formerly Known as Dalmiya Vanijya Pvt. Ltd.) (PAN: AACCD 5525 C) Appellant / (अपीलाथ!) Respondent / ("#यथ!) Date of Hearing / स ु नवाई क& 'त(थ 05.09.2022 Date of Pronouncement / आदेश उ*घोषणा क& 'त(थ 19.10.2022 For the Appellant / 'नधा/0रती क& ओर से Shri A.K. Tulsiyan, FCA For the Respondent / राज व क& ओर से Smt. Ranu Biswas, Addl. CITDR ORDER/ आदेश Per Shri Rajesh Kumar, AM: This is an appeal preferred by the revenue against the order of the Commissioner of Income Tax-16, Kolkata [hereinafter referred to as ‘CIT(A)’] dated 22.09.2020 for the assessment year 2012-13. 2. The only issue raised in the various grounds of appeal by the revenue is against the deletion of addition of Rs. 3,00,00,000/- by the Ld. CIT(A) as made by the AO u/s 68 of the Act on account of unexplained cash credit received by the assessee by issuing equity shares at premium. 2 ITA No. 133/Kol/2022 AY: 2012-13 Anvil Electricals Pvt.Ltd. 3. Facts in brief are that the assessee filed the return of income on 25.09.2012 declaring total income at Nil which was duly processed u/s 143(1) of the Act. Thereafter the case was selected for scrutiny on CASS basis and statutory notices were duly issued and served upon the assessee. The AO issued questionnaires along with notice u/s 142(1) of the Act calling upon the assessee to furnish various details/evidences which were duly filed by the assessee before the AO. The AO also issued summon u/s 131 of the Act to the directors of the assessee company to appear personally and produce directors of subscribing investor companies in order to verify identity and creditworthiness of the investors and genuineness of the transactions. However there was no compliance. The AO observed that the assessee has failed to prove identity and creditworthiness of the investors and genuineness of the transactions. The AO also noted that the assessee company was not having sufficient business justifying the issue of equity shares at a very high premium. Finally, the AO added entire amount of Rs. 3,00,00,000/-consisting of Rs. 2,70,00,000/- on account of share premium and Rs. 30,00,000/- qua share capital to the income of the assesse u/s 68 of the Act as unexplained cash credit. 4. In the appellate proceedings, the Ld. CIT(A) called for a remand report from the AO on various issues/evidences. In the remand report the AO noted that the assessee has filed all the documents pertaining to said investments comprising PAN Nos., details of investments, bank accounts, IT returns, balance sheets etc. and the sources of said investments were also substantially proved thereby proving identity, creditworthiness of the investors and genuineness of the transactions. The AO also noted in the remand report that all the investor companies were assessed to tax. Finally the Ld. CIT(A) after considering the said remand report allowed the appeal of the assessee by observing and holding as under: “I have considered the submission of the appellant and perused the assessment order and remand report given by the AO. The AO in the assessment order has made the additions giving general assumptions and treating the share capital to be bogus in the hands of the assessee. However, during the remand proceedings, die AO in the remand report has himself mentioned that assessee have made all the compliances and all the details relating to the share capital raised by the assessee were furnished before him. the AO in the remand report as he is satisfied with the documents submitted by the assessee.Further, I have gone through the documents submitted by die appellant and have seen that all the transactions are made t are active on the MCA website and are regular in filing of the income tax returns as mentioned by the AO. Also, the source of funds from which the share application money was given to the assessee was als the appellant in the paper book, it came to light that the share applicants were having sufficient owned funds for making investments in the appellant company. The details of the new owned f under: Thus, from the above table out of their owned funds and the investments made by them in the assessee company are small compared" to their total investments. As such, the creditworthiness of the applicants cannot be doubted. As such, ah the 3 ingredients of section 68 i applicants and the genuineness of the transaction evidences filed by the appellant have also not been found to be false or incorrect. Therefore, all the 3 ingredients of section 68 i.e. the identity and creditworthiness of the applicants and the genuineness of th I further find that it has been time and again reiterated by various courts that if the appellant has_ proved the ingredients of the section by proper and satisfactory documentary evidences, the burden shifts on the revenue to prove the transaction entered by the appellant to be ingenuine. In this regard, I would like to place reliance on decision of Hon'ble Supreme Court in the case of PCIT vs Paradise Inland Shipping (P.) Ltd. in 93 taxma wherein it has been held as under: 3 Anvil Electricals Pvt.Ltd. However, during the remand proceedings, die AO in the remand report has himself mentioned that assessee have made all the compliances and all the details relating to the share capital raised by the assessee were furnished before him. Also, no adverse finding has been given by the AO in the remand report as he is satisfied with the documents submitted by the assessee.Further, I have gone through the documents submitted by die appellant and have seen that all the transactions are made through proper banking channel and all the companies are active on the MCA website and are regular in filing of the income tax returns as mentioned by the AO. Also, the source of funds from which the share application money was given to the assessee was also explained by the appellant.From perusal of the details filed by the appellant in the paper book, it came to light that the share applicants were having sufficient owned funds for making investments in the appellant company. The details of the new owned funds of the applicants and the investments made by them is as the above table, it is clearly evident that the investments made the applicants are out of their owned funds and the investments made by them in the assessee company are small compared" to their total investments. As such, the creditworthiness of the applicants As such, ah the 3 ingredients of section 68 i.e. the identity and creditworthiness of the applicants and the genuineness of the transaction has been duly proved by the appellant. The evidences filed by the appellant have also not been found to be false or incorrect. Therefore, all the 3 ingredients of section 68 i.e. the identity and creditworthiness of the applicants and the genuineness of the transaction has been duly proved by the appellant I further find that it has been time and again reiterated by various courts that if the appellant edients of the section by proper and satisfactory documentary evidences, ifts on the revenue to prove the transaction entered by the appellant to be In this regard, I would like to place reliance on decision of Hon'ble Supreme Court in the case T vs Paradise Inland Shipping (P.) Ltd. in 93 taxman.com 84 dated 2 wherein it has been held as under: ITA No. 133/Kol/2022 AY: 2012-13 Anvil Electricals Pvt.Ltd. However, during the remand proceedings, die AO in the remand report has himself mentioned that assessee have made all the compliances and all the details relating to the share capital Also, no adverse finding has been given by the AO in the remand report as he is satisfied with the documents submitted by the assessee.Further, I have gone through the documents submitted by die appellant and have hrough proper banking channel and all the companies are active on the MCA website and are regular in filing of the income tax returns as mentioned by the AO. Also, the source of funds from which the share application money was o explained by the appellant.From perusal of the details filed by the appellant in the paper book, it came to light that the share applicants were having unds of the applicants and the investments made by them is as , it is clearly evident that the investments made the applicants are out of their owned funds and the investments made by them in the assessee company are very small compared" to their total investments. As such, the creditworthiness of the applicants e. the identity and creditworthiness of the has been duly proved by the appellant. The evidences filed by the appellant have also not been found to be false or incorrect. Therefore, all the 3 ingredients of section 68 i.e. the identity and creditworthiness of the e transaction has been duly proved by the appellant I further find that it has been time and again reiterated by various courts that if the appellant edients of the section by proper and satisfactory documentary evidences, ifts on the revenue to prove the transaction entered by the appellant to be In this regard, I would like to place reliance on decision of Hon'ble Supreme Court in the case 84 dated 23.04.2018, 4 ITA No. 133/Kol/2022 AY: 2012-13 Anvil Electricals Pvt.Ltd. "Section 68, read with section 147, of the Income-tax Act, 1961 - Cash credit (Share capital) - Assessing Officer initiated reassessment proceedings in case of assesses on ground that its shares Were purchased byfictitious companies -Assesses filed a petition challenging validity of said proceedings - High Court noted that assessee had produced voluminous documents from publicoffices which maintained records of those companies - Assessee also brought on record assessment orders passedin case of said companies in three proceedings years - High Courtthus taking a view that assessee hadproved genuineness of share transactions', set aside reassessment proceedings-Whetheron facts, impugned order passed mi High Court did not require any interference- - Held, yes [Para 3] [In favour of assesses]" Further, Hon'ble Delhi High, Court in the case of PCIT Ys, Himachal Fibres Ltd., Hon'ble Delhi High Court dated 28.02.2018, has held as tinder: "Income from undisclosed Sources—Addition under section 68 Share application money—Where assessee had clearly revealed the identity of share applicants, no addition coulld be made ‘under section 68 by AO in absence of any enquiry, simply on surmises, -The AO noted that the assessee was' a sick company during the relevant assessment year but had nevertheless garnered Substantial amounts to the extent, of Rs. 12 crores invested by two share applicants. After taking into account the material placed before him, the AO concluded that the identity .of the shareholders and the genuineness of the transaction had not been established and accordingly brought to tax the said, amount CIT(A) noticed that remand report, disclosed that AO did not carry out any enquiries with respect to the identity of share applicants .whose addresses were provided, Tribunal endorsed opinion of CTT(A). Held: The assessee urns a sick company; it pulled out of the woods in 2010. To tide over its financial sickness, apparently, it sought the help of the share applicants. The identity of those share applicants was clearly revealed. As noted by both the, .lower appellate authorities, no suspicion was attached to the said share applicants; moreover, the AO did not conduct any further enquiry, except resting his conclusions on surmises. The Court was of the opinion that the concurrent findings rendered were purely factual No substantial question of law arose. Revenue's appeal was dismissed. " The above decision of the Hon'ble Delhi High Court has been upheld by the Hon'ble Supreme Court by dismissing the SLP vide its SLP (civil) Diary No. 26753/2018 dated 13.08.2018.Also, as per the decision of the Hon'ble High Court, Calcutta in the case of CIT vs Nishan Indo Commerce Ltd., in ITA No.52/2001 dt.02.12.2013, has held as under: "Income? Unexplained credit? Creditworthiness and genuineness of transaction?, Addition? Assessee-company was carrying on business ofinvestment and financing? During relevant A.Y. assesses company issued 6,12,000 equity shares of Rs. 10/- each for cash at par by issue of prospectus for total issue amount of Rs,61,20,000 ? However, as on 31 st March, 1991 allotment money of Rs.9,16,500/- was in arrears and accordingly paid up share capital of company was increased by Rs.52,03,500/- in A, Y. 1991-92? In previous A. Y, i.e. 1990-91 also assesses company had increased its share capital by issuing shares amounting to Rs.40,80,000? During assessment assesses company filed details of 2,153 shareholders along with their addressees, number of shares allotted etc.? AO caused enquiries by test check to be conducted, and on basis of report of Income Tax Inspector held that investment by shareholders of assesses company was not genuine and claim of assesses to allot shares to public was false? AO was of view that increase in share capital was nothing but introduction of assessee's own undisclosed funds/income into books of accounts of assessee- company? AO accordingly treated investment as unexplained credit u/s. 68 and added 5 ITA No. 133/Kol/2022 AY: 2012-13 Anvil Electricals Pvt.Ltd. same to income of assesses? CIT(A) found that AO had applied Section 68 arbitrarily and illegally and in any case without giving assesses adequate opportunity of representation and/or hearing Tribunal affirmed order of CIT(A)? Held, Tribunal had concurred with CTT(A) on facts and found that there were materials to show that assesses had disclosed particulars of shareholders? Factual findings could not be interfered with, in appeal? Once identity and other relevant particulars of shareholders were disclosed, it was for those shareholders to explain source of their funds and not for assesses company to show wherefrom those shareholders obtained funds1 Impugned order of Tribunal upheld? Revenue's appeal dismissed". Further in a recent’ decision of the Hon'ble Kolkata ITAT in case of M/s SatyamSmertex Pvt Ltd. vs DCIT in ITA No. 2445/KoI/2019 dated 29.05.2020, it hasbeen held as under: "29. In this case on hand, the assesses had discharged its onus to prom the identity,creditworthiness and genuineness of the share applicants, thereafter the onus shifted to AO to disprove the documents furnished by assesses and thedocuments produced by the assessee cannot be brushed aside by the AO to draw , adverse view; which action of AO cannot be countenanced. In the absence of any investigation, much less gathering of evidence by the Assessing Officer, we are of the considered view that addition cannot be sustained merely based on inferences drawn by circumstance, Applying the law laid down in these case laws to the facts of this case, we are inclined to interfere with the order of the Ld, Commissioner of Income Tax (Appeals)and give relief to the assessee. 30, To sum up section' 68 of the Act provides that if any sum found credited in the year in respect of Which' the assessee fails to explain the nature and source, it shall be assessed as its undisclosed income. In the facts of the present case, both the nature & source of the share application received was fully explained by the - assessee. We assessee had discharged its onus to prove the 'identity,creditworthiness and genuineness of the share applicants. The PAN details,bank account statements, audited financial statements and Income Tax acknowledgments were placed on AO's record, including that of the directors and share holders of share subscribing entities as discussed supra. Accordingly all the three conditions as required u/s. 68 of the Act i.e. the identity, creditworthiness and genuineness of the transaction was placed before the AO and the onus shifted to AO to disprove the materials placed before him. Withoutdoing so, the addition made by the AO and confirmed by Ld C1T(A) are based on conjectures and surmises, so their impugned action cannot be justified. In the facts and circumstances of the case as discussed above, no addition was warranted under Section 68 of the Act. Therefore, we do allow the appeal of assessee and direct deletion of addition of Rs. 16 cr. under section 68 of the Act." Besides the above relied case laws, there are plethora of case laws affirming that if the appellant has discharged its onus by proving the identity, genuineness and creditworthiness of the transaction, by producing sufficient and satisfactory documentary evidences, fee burden shifts on the revenue to counter and prove fee transaction be ingenuine. In the instant case, the AO in the remand report has accepted the documents submitted by the appellant and has not found any defect in them. Also, he gave a favourable finding feat all fee compliances were made by fee appellant and he was somewhat satisfied wife fee genuineness of fee transaction. To sum up I find that the appellant has proved the 3 ingredients of section 68. The appellant has discharged its onus to prove the identity, creditworthiness and genuineness of the lender 6 ITA No. 133/Kol/2022 AY: 2012-13 Anvil Electricals Pvt.Ltd. companies. The PAN details, bank account statements, audited financial statements and Income Tax acknowledgments were placed on AO's record. Accordingly, all the three conditions as required u/s 68 of the Act, i.e. identity, creditworthiness and genuineness of the transaction was placed before the AO and the onus shifted to the AO to disprove the materials placed before him. In absence of that, the addition made by the AO based on his conjectures and surmise's- is not justified. In view of the above findings, I agree with the contentions of the AR that addition u/s 68 was not warranted. As such, on the basis of the finding given by the AO in the remand report and considering the submission made by the appellant and in view of the above discussions and various judicial decisions of the Hon'ble Apex Court, various High courts including jurisdictional High court and various ITAT including jurisdictional ITAT, I find drat all the decisions as relied are squarely applicable to the case of the appellant I agree with the contention that the addition made by the AO is without any cogent material on record and is purely based on his surmises. Therefore, it is held that the addition made by the AO u/s 68 of the Act of Rs. 3,00,00,000/- is completely unjustified Accordingly, tire AO is hereby directed to delete the addition. The appeal on this ground is allowed.” 5. The Ld. D.R. submitted before the bench that the order passed by the Ld. CIT(A) has ignored several factual issues as noted by the AO such as i)non- compliance of summons issued u/s 131 of the Act, ii) the director of the assessee company not appearing personally and iii) non production of directors of subscribing companies. The Ld. D.R submitted that undisputedly in the appellate proceedings, the Ld. CIT(A) called for the remand report from the AO but again the said remand report was silent about the appearance of such directors and there is no iota of discussion about compliance to summons u/s 131 of the Act, whether issued or not and if issued whether complied with. The Ld. D.R. requested the Bench that the issue may kindly be restored to the file of AO for carrying of fresh verification and for framing assessment de-novo and afresh on the basis of fresh verification. 6. Per Contra, the Ld. A.R. strongly relied on the order of Ld. CIT(A) by submitting that the Ld. CIT(A) has called for a remand report during the course of appellate proceedings which were on the evidences filed before him which were duly examined by the AO in the remand proceedings and no adverse inference was drawn by the AO after examination of these evidences. The Ld. A.R. submitted that in the original assessment proceedings no defect was pointed out in the evidences/details filed by the assessee qua the said investments/ receipt from subscription of equity shares at a premium. The only point for making addition was that there was non- 7 ITA No. 133/Kol/2022 AY: 2012-13 Anvil Electricals Pvt.Ltd. compliance by the Director of the assessee of the summons issued u/s 131 of the Act which required the assessee to appear personally and also produce the directors of investing companies. The Ld. A.R submitted that the Ld. CIT(A) has only relied on the remand report filed by the AO and therefore there is no infirmity in the order of Ld. CIT(A) who has examined all these details/evidences and credentials of investing companies and allowed the appeal of the assessee by passing a speaking and reasoned order. The Ld. A.R. submitted that the assessee has filed various documents/evidences comprising complete share application forms, documents relating to allotment of shares, mode of payment, copy of bank statements, source of above investments, copies of balance sheets and profit and loss accounts, PANs and IT returns and allotment return etc. The AO issued notice u/s 133(6) of the Act to the investor companies which were duly responded and the replied and were available on the assessment record. The Ld. A.R submitted that this fact was admitted by the Ld. D.R in his written submissions before the Bench also. The ld counsel of the assessee argued that once the assessee has furnished all the evidences before the AO , then no addition can not be made without pointing any defect in the documents furnished by the assessee as the assessee has discharged its onus.The Ld. A.R. has relied on the following decisions in defense of his arguements: i) PCIT vs. Ambition Agencies Pvt. Ltd. (2022) 134 taxmann.com 5 (Cal) ii) Tradelink Carrying Pvt. Ltd. vs. ITO (2020) 113 taxmann.com 520(kol-Trib) iii) PCIT vs. Paradise Inland Shipping Pvt. Ltd. (2018) 93 taxmann.com 84 (SC) iv) PCIT vs. M/s Himachal Fibres (ITA No. 263/2018) dated 28.02.2018(Del) v) SLP dismissed by the Hon’ble Supreme Court in the case of PCIT vs. M/s Himachal Fibres [SLP (Civil) Diary No. 26753/2018)] vi) CIT, Central vs. M/s Nishan Indo Commerce Ltd. (ITA No. 52 of 2001 dated 02.12.2013)(Cal) 8 ITA No. 133/Kol/2022 AY: 2012-13 Anvil Electricals Pvt.Ltd. Finally the Ld. A.R submitted that considering all these facts ,the appeal of the revenue may kindly be dismissed by upholding the order of Ld. CIT(A). 7. Having heard the rival contentions and perusing the material on record including the appellate order and remand report of the AO, we note that the assessee has produced all the evidences before the AO in the assessment proceedings as well as before Ld. CIT(A) in the appellate proceedings. The AO added this amount as unexplained cash credit reasoning that summon issued u/s 131 of the Act to the director of the assessee company remained uncomplied with whereas the AO has not pointed any defect or deficiency in the evidences/details produced qua the said investments by assesse as well as by the investing companies. We also note that the AO has examined the evidences and has not drawn any adverse inference in respect of investing companies after examination of these evidences. Even during the remand proceedings the AO has not drawn any adverse inference on the basis of these evidences and details which were sent to the AO by the ld CIT(A). We note that the Ld. CIT(A) has only followed the remand report of the AO in remand proceedings while allowing the appeal besides giving own independent findings on various issues that the identity and creditworthiness of the investor companies as well as the genuineness of the transactions were duly proved after following the various decisions as cited hereinabove. Before us also the assesse has also produced volume 1 and volume 2 which ran into pg. 1 to 230 and page. No. 231 to 416 respectively comprising various evidences of these investor companies which were examined by us. The case of the assessee is squarely covered by the decision of Hon’ble Calcutta High Court in the case of PCIT vs. Ambition Agencies Pvt. Ltd. (supra),wherein the Hon’ble Court has held that where thein the appellate proceedings, the Ld. CIT(A) after calling remand report from the AO on the issue of share application had allowed the appeal of the assessee after following the observations of the AO in the remand report stating therein that transactions of the share holders were duly cross-verified. The Hon’ble Court upheld the view taken by the Tribunal where Tribunal upheld the order passed by the Ld. CIT(A) deleting the addition on the basis of remand report 9 ITA No. 133/Kol/2022 AY: 2012-13 Anvil Electricals Pvt.Ltd. nonetheless the addition was made in the original assessment order by the AO for the want of information/details u/s 68 of the Act.Similarly the case of assessee find support from the decision of Hon’ble Supreme Court in the case of PCIT vs. Paradise Inland Shipping Pvt. Ltd. (supra) wherein the Hon’ble Apex Court has upheld the order of Hon’ble High Court wherein the Hon’ble High Court has taken a view that the assessee has proved genuineness of the transactions after the assessee filed voluminous documents from the public offices and also brought on records the assessment orders passed in the case of said companies . Similarly the case of the assesse finds supports from various other decisions as relied by the ld AR and stated hereinabove namely Tradelink Carrying (P) Ltd Vs ITO (Supra), PCIT Vs Himachal Fibres (Supra) SLP against which was dismissed by the Hon’ble Apex Court and CIT Vs. Nishan Indo Commerce Ltd (Supra). We, therefore, respectfully following the ratio as laid down in the above decisions ,uphold the order of Ld. CIT(A) by dismissing the appeal of the revenue. 8. In the result, the appeal of the revenue is dismissed. Order is pronounced in the open court on 19 th October, 2022 Sd/- Sd/- (Rajpal Yadav /राजपाल यादव) (Rajesh Kumar / राजेश क ु मार) Vice-President /उपा य Accountant Member / लेखा सद य Dated: 19 th October, 2022 SB, Sr. PS Copy of the order forwarded to: 1. Appellant- ITO, Ward-7(1), Kolkata 2. Respondent – M/s Anvil Electricals Pvt. Ltd, (formerly known as Dalmiya Vanijya Pvt. Ltd. ), 224, A.J. C. Bose Road, Krishna Building, Beckbagan, Kolkata-700017. 10 ITA No. 133/Kol/2022 AY: 2012-13 Anvil Electricals Pvt.Ltd. 3. CIT(A)- 16, Kolkata (sent through e-mail) 4. PCIT- , Kolkata 5. DR, Kolkata Benches, Kolkata (sent through e-mail) True Copy By Order Assistant Registrar ITAT, Kolkata Benches, Kolkata