Appeal details
Counselvise Citation
[2022] 104 COUNSELVISE.COM (IT) 1675 (ITAT-SURAT)
Assessee PAN
Bench
Appeal Number
Duration Of Justice
5 year(s) 6 month(s) 5 day(s)
Appellant
Respondent
Appeal Type
Income Tax Appeal
Pronouncement Date
18-09-2022
Appeal Filed By
Department
Order Result
Dismissed
Bench Allotted
DB
Next Hearing Date
25-08-2022
Assessment Year
2011-2012
Appeal Filed On
13-03-2017
Judgement Text
IN THE INCOME TAX APPELLATE TRIBUNAL, SURAT BENCH, SURAT BEFORE SHRI PAWAN SINGH, JM & DR. A. L. SAINI, AM आयकर अपील सं./ITA No.633/AHD/2017 (Ǔनधा[रणवष[ / Assessment Years: (2011-12) (Physical Court Hearing) The DCIT, Circle-2(1)(2), Surat. Vs. M/s. SVS Tex O Fab Pvt. Ltd., E-4247/48, Millenium Textile Market, Ring Road, Surat-395001. èथायीलेखासं./जीआइआरसं./PAN/GIR No.: AANCS 8465 R (Appellant)/(Revenue) (Respondent)/(Assessee) Assessee by : Shri Suresh K. Kabra, CA Revenue by : Shri H. P. Meena, CIT(DR) स ु नवाईकȧतारȣख/ Date of Hearing : 26/08/2022 घोषणाकȧतारȣख/Date of Pronouncement : 19/09/2022 आदेश / O R D E R PER DR. A. L. SAINI, AM: Captioned appeal filed by the assessee, pertaining to Assessment Year (AY) 2011-12, is directed against the order passed by the Learned Commissioner of Income Tax (Appeals)-2, Surat [in short “the ld. CIT(A)”] in Appeal No. CAS/2/96/2015-16 dated 20.12.2016, which in turn arises out of an assessment order passed by the Assessing Officer under section 143(3) of the Income Tax Act, 1961 [hereinafter referred to as the “Act”] dated 25.03.2015 2. The Grounds of appeal raised by the Revenue are as follows: “1. Whether on the facts and circumstances of the case and in Law, the Ld.CIT(A) has not erred in deleting the additions of Rs.5,15,52,000/- on account of unexplained cash credit u/s 68 of the Act on account of share capital & share premium? 2. Whether on the facts and in the circumstances of the case and in Law, the Ld. CIT(A) has not erred in not appreciating the fact that the share application money found credited in the books of account of the assessee received from Shri Sunil kumar Rameshbhai Bodra were lacking genuineness of transaction? The Ld. CIT(A) has not appreciated the fact that the assessee company could not establish the creditworthiness of Shri Sunil kumar Rameshbhai Bodra and assessing Page | 2 633/AHD/2017/AY.2011-12 SVS Tex O Fab Pvt. Ltd. officer, after conducting inquiries, was not satisfied with the explanation offered by the assessee company, hence, the additions made should have been sustained. 3. On the facts and in the circumstances of the case and in Law, the Ld.CIT(A), Surat ought to have upheld the order of the Assessing Officer. It is, therefore, prayed that the order of the Ld.CIT(A), Surat may be set-aside and that of the Assessing Officer's order may be restored.” 3. The facts necessary for disposal of this appeal are stated in brief. The assessee before us is a Private Limited Company and filed its return of income for assessment year (A.Y.) 2011-12 showing total income of Rs.77,71,630/- on 19.09.2011. The assessee`s case was selected for scrutiny assessment and a notice under section 143(2) of the IT Act, dated 27.09.2012 was issued and duly served on the assessee on 30.09.2012. Further, notice u/s 142(1) of the Act along with detailed questionnaire was issued on 11.04.2011 which was served upon the assessee. This case was referred to FT & TR division, New Delhi on 14.03.2014 by virtue of section 153(1)(viii) r.w.s. 90A of the Income-tax Act, 1961. Therefore, the time limit for completion of the scrutiny assessment case was extended. 4. The details and other documents filed and furnished during the course of assessment proceedings have been scrutinized by Assessing Officer. The assessee company is engaged in the business of Trading in various types of Yarns and Cloths. During the year under consideration, the assessee has shown turnover of Rs.153,30,66,162/- and gross profit of Rs.3,01,11,293/- which is 1.96%. During the year under consideration, the investment in equity shares of SVS Fab Pvt. Ltd at premium of Rs.140/- per share, was made by the following Investor in the following manner: Sr. No. Name of the Investor No of Shares Share Capital Share Premium Total Amount 1. Sunil Bodra, Flat No. 102, Old Gold Sover, Dubai, U.A.E 343680 3436800 48,115,200 5,15,52,000/- The Assessing Officer noted that an assessee receiving a credit has to testify its case through the 'triple marker test' of Identity, Creditworthiness and Genuineness Page | 3 633/AHD/2017/AY.2011-12 SVS Tex O Fab Pvt. Ltd. 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. Then Assessing Officer explained the modus operandi, generally adopted by these companies, stating that the pernicious practice of conversion of unaccounted money through masquerade of unsecured loan of a company needs to be prevented, have advised a heavier onus to be positioned over the assessee in case it has ‘closer than arm's length’ relationship with its lenders/depositors. The Hon'ble Courts have drawn a distinction and emphasized that in case of private placement of shares the legal regime should be different from that which is followed in case of a company seeking share capital from the public at large. The onus of proof requires the assessee to furnish the proof of identity of the creditor, capacity of such creditors to advance the money and the genuineness of the transaction. On the issue of burden of proof a very specific and illustrious decision was delivered by the Hon. Calcutta High Court in CIT vs. Precision Finance Pvt. Ltd. (1994) 208 ITR 465 (Cal), where in it was laid down that assessee is expected to establish: 1. Identity of the investors; 2. Capacity of creditors to advance money; and 3. Genuineness of transaction. 5. The Assessing Officer noted that source of amount received in the form of investment in equity share at premium by Assessee Company from Mr. Bodra Sunil Kumar Rameshbhai has not been proved by assessee. Therefore, show cause notice was issued on 09.03.2015 to the assessee company to show -cause as to why the amount of Rs.5,15,52,000/- should not be treated as cash credit within the meaning of section 68 of the I.T. Act, 1961 and added to the total income of the assessee. In response, the assessee filed its reply dated 16.03.2015 before the Assessing Officer. The reply of the assessee was perused by Assessing Officer. In its reply, the assessee has placed reliance on certain judicial pronouncement also. However, assessing officer observed that facts and circumstances of those cases are not same as that of the impugned case, therefore assessing officer rejected the Page | 4 633/AHD/2017/AY.2011-12 SVS Tex O Fab Pvt. Ltd. contention of the assessee. The details of Mr. Bodra Sunil Kumar Rameshbhai and his address are as under: The details of nationality/Passport No. and residence certificate of Mr. Bodra Sunil Kumar Rameshbhai are given as under: The assessing officer noted that Mr. Bodra Sunil Kumar Rameshbhai had invested Rs.5,15,52,000/- during the period of 1 st April, 2010 to 31 st March, 2011 in equity of shares of SVS Tex-O-Fab Pvt Ltd at a premium. As per resident permit issued by UAE Authority on 05.09.2013, he is a sales executive of Bodra Trading Company (LLC). However, as per documents submitted during assessment proceedings he is shown to be the owner of Al Maya General Trading FZE. In the net worth statement on 31 st March 2011, issued on 18 th July 2011, his total investment in Dubai is shown to be AER 47873070, i.e. Rs. 76.5 crores at current exchange rate. He has made investment of Rs.47 crores in various Indian companies in his and his father's Mr. Bodra Rames Karmasibhi's, name till 31 st March 2011. Mr. Bodra Sunil Kumar Rameshbhai has shifted to Dubai in 2007 and hence it is hard to comprehend that in just four years he could have earned Rs. 121.5 crores. Page | 5 633/AHD/2017/AY.2011-12 SVS Tex O Fab Pvt. Ltd. 6. The assessing officer also noted that the details of investment made by Mr. Bodra Sunil Kumar Rameshbai in Indian companies as on 31 st March 2011, which are as under: Name of the Company No. of Shares Investment Value (Amount in Rs) Raj International Ltd 741584 111237600 SVS Tex O Fab Pvt. Ltd 598680 77052000 Guru-G Tex Print Pvt. Ltd 700100 70010000 Ugam Impex Ltd 630150 94522500 Total 35,28,22,100/- Investment made by Mr. Bodra Sunil Kumar Rameshbai in the name of his father Mr. Ramesh Karamsibhai Bodra as on 31 st March 2011 in Karmeshwar Exim Pvt. Ltd is to the tune of Rs.1,34,67,000/-. Further, Mr. Bodra Sunil Kumar Rameshbai has given unsecured loans to various Indian Companies/firms/proprietary concerns, which can be seen in net worth statement as on 31 st March, 2011 of Mr. Sunil Kumar Rameshbai Bodra. The investment capacity of Bodra Trading Company (LLC) and Al Maya General Trading FZE, which are the ultimate sources of funds invested by Mr. Bodra Sunil Kumar Rameshbai in various Indian companies, is not proved. Based on the above facts, the assessing officer concluded that ultimate source of investment made by Mr. Bodra Sunil Kumar Rameshbhai in the form of investment in equity shares at premium is not proved. In view of the facts and circumstances mentioned above, the assessing officer held that assessee has failed to prove the ‘triple marker test’ of identity, Creditworthiness and Genuineness of Transaction and therefore, the equity shares of the assessee company at premium amounting to Rs.5,15,52,000/- were treated as cash credit within the meaning of Section 68 of the I.T. Act and added to the total income of the assessee- company. 7. Aggrieved by the order of the Assessing Officer, the assessee carried the matter in appeal before the Ld. CIT(A) who has deleted the addition made by the Assessing Officer. 8. Aggrieved by the order of the Ld. CIT(A), the Revenue is in appeal before us. Page | 6 633/AHD/2017/AY.2011-12 SVS Tex O Fab Pvt. Ltd. 9. Learned Departmental Representative (ld. DR) for the Revenue vehemently argued that during the course of assessment proceedings the assessee did not satisfy the doubt of the assessing officer and failed to pass the 'triple marker test' of Identity, Creditworthiness and Genuineness of transactions, which resulted in addition of Rs.5,15,52,000/- under section 68 of the I.T. Act. The ld DR pointed out that merely the transaction is through the banking channel does not mean that it is a genuine transaction. As various judiciaries have taken the view that mere furnishing of the particulars is not enough, there must be proper, reasonable and acceptable explanation as regard the sums found credited in the books of the assessee. The Ld. DR further submitted that the assessee had miserably failed to explain the nature and source of the sums in question, so the assessing officer has rightly added the sums of Rs.5,15,52,000/- u/s 68 of the Act. 10. In addition to these arguments, ld DR also submitted written submission before the Bench, which is reproduced below: “During the assessment, the assessing officer noted that Shri Sunil Kumar Rameshbhai Bodra had invested Rs,5,15,52,000/- was sales executive of Bodra Trading Co. (LLC) as per resident permit issued by UAE Authority on 05.09.2013. It was also claimed that he was owner of AI Maya General Trading FZE and as per net worth statement as on 31.03.2011 issued on 18.07.2011, his total investment in Dubai shown to AER (Dubi Riyal) was 47,873,070 which equivalants to Rs.76.5 crore besides this, he has made investment of Rs.47 crore in various companies. As per records, Shri Sunil Kumar Bodra shifted to Dubai in 2007 and it was not proved how one can earn Rs.121.5 crore in a span of 4 years. Thus, assessing officer was of the opinion that ultimate source of investment made by Shri Sunil Kumar Bodra in the form of investment in equity shares at premium was not proved beyond doubt. Therefore, the assessing officer had made reference to FT & TR Division, New Delhi during the assessment proceedings. In response to the said reference, information was received by this office through your good self and from the worthy Pr.CIT-1, Surat on 10.02.2022. On perusal of the case records and said information, it is seen that the assessee maintains bank A/c. No.910010001320236 with Axis Bank at Surat in which, the amount of Rs.2,35,00,000/- and Rs.2,80,52,000/- were debited on 07.07.2010 & 16.07.2020 respectively against the amount of Rs.2,35,23,808/- (being FIR USD 49,997.00 @ 47.05) and Rs.2,80,52,563/- (being USD 59,9993 @ 46.7550) were credited on 07.07.2010 and 16.07.2010 respectively. Further, as per information received from the FT&TR reveals that Shri Sunil Kumar Bodra maintains a current bank A/c. No.90010200008422 with Bank of Baroda at Dubai UAE. To cross verify the said bank transactions, both the bank account statements have been perused and found that the amount of 8,35,000 and 10,00,000 were credited to the bank A/c. maintained at Dubai by transfer entry on 06.07.2010 and other hand, an amount of 18,37,000/- debited by cheque No.909202 on the same day, it means, it is a Page | 7 633/AHD/2017/AY.2011-12 SVS Tex O Fab Pvt. Ltd. transfer entry as per said bank statement. The said amount of 18,37,000/- debited in bank A/c at Dubai is not verifiable with the bank statement of account maintained with Axis Bank at Surat. Therefore, it cannot be said that fund of 18,37,000/- debited by single entry in Bank of Baroda at UAE was the fund transferred to bank account maintains with Axis Bank at Surat because the amount of Rs.2,35,23,808/- and Rs.2,80,52,563/- were credited on 07.07.2010 and 16.07.2010 respectively in Axis Bank at Surat was converted funds from the USD whereas, amount credited/debited in Bank of Baroda at UAE was in local currency of UAE i.e. Dirham. Further, it is worthwhile to mention here that during the assessment proceedings, the assessee company failed to furnish corroborative evidences so as to prove that the amounts debited in bank A/c maintained at Dubai were the amounts credited in the bank A/c maintained at Surat. Furthermore, the assessee has also failed to prove the source of 18,35,000 (83500 + 1000000) credited in the bank A/c of Shri Sunil Kumar Bodra at Dubai with cogent supporting evidences in support of its stand. In view of the above discussed material evidences and in absence of corroborative evidences from the assessee, it can be said that the assessee has failed to prove the genuineness of transactions and credit worthiness of Shri Sunil Kumar Bodra in respect of so called investment shown in the form of shares at premium in his name in own books for the year under reference. Therefore, it can be concluded that the assessing officer has rightly treated the share investment at premium of Rs.5,15,52,000/- shown in the name of Shri Sunil Kumar Bodra as unexplained cash credits u/s 68 of the Act in the hands of assessee company. Hence, the Hon'ble ITAT, Surat may be requested to consider the above discussed material evidences and upheld the addition made by the assessing officer.” 11. On the other hand, Shri Suresh K. Kabra, Learned Counsel for the assessee, pleads that assessing officer has made the addition merely on suspicion that the assessee had made the investment of Rs.4,70,00,0000/- in various Indian Companies along with his father till 31.03.2011, though he had shifted to Dubai in 2007 and how he could earned Rs.121.5 crores just in period of 4 years, thus, addition made by the assessing officer is based on guesswork and assumptions. He pointed out that assessee has submitted various details/documents to prove his identity. The bank account through which the fund has been transferred was a NRE account and the funds have been received in foreign currency. The evidences filed by the assessee proves the identity, creditworthiness and genuineness of the transaction and therefore addition made by the assessing officer of Rs.5,15,52,000/- has rightly been deleted by ld CIT(A). Hence, ld Counsel prays the Bench that since ld CIT(A) has considered all the facts of the assessee and then passed a reasoned and speaking order, therefore such order may be upheld. Page | 8 633/AHD/2017/AY.2011-12 SVS Tex O Fab Pvt. Ltd. 12. We have heard both the parties and carefully gone through the submissions put forth on behalf of the assessee along with the documents furnished and the case laws relied upon, and perused the facts of the case including the findings of the ld. CIT(A) and other material brought on record. Before us, ld Counsel for the assessee submitted Form No.2 of the ROC of the assessee -company which is placed at page no.1 to 5 of the paper -book. The ld Counsel submitted list of shareholders which is placed at page no. 5 of the paper book. The assesse submitted the copy of bank statements of Axis Bank, which is placed at page no.9 and 10 of the paper book. In order to prove the identity, the assessee submitted license of the share- applicant and the passport of the share-applicant, which is placed at page no.11 to 13 of the assessee’s paper book. The assessee also submitted a chart showing the remittances of money from outside to India. The ld Counsel claimed that by submitting these documents and evidences by the assessee, clearly prove, Identity, Creditworthiness and Genuineness of transactions. 13. We note that according to section 68 of the Income Tax Act, 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 satisfactory in the opinion of the assessing officer, the sum so credited may be charged to income tax as the income of the assessee of that assessment year. The assessing officer may consider such sum as cash credit due to lack of sufficient explanation. It is well known that provisions of section 68 have been introduced into the taxing enactments step by step in order to plug loopholes. Even long prior to the introduction of section 68 of the Act, in the statute book, courts had held that where any amounts were found credited in the books of the assessee in the previous year and the assessee offered no explanation about the nature and source thereof or the explanation offered was, in the opinion of the assessing officer, is not satisfactory, the sums so credited could be charged to income-tax as income of the assessee of the relevant assessment year. 14. We note that with effect from assessment year 2013-14, section 68 of the Income Tax Act has been amended to provide that if a closely held company fails Page | 9 633/AHD/2017/AY.2011-12 SVS Tex O Fab Pvt. Ltd. to explain the source of share capital, share premium or share application money received by it to the satisfaction of the assessing officer, the same shall be deemed to be the income of the company under section 68 of the Act. We note that in assessee`s case under consideration, the assessment year involved is the assessment year 2011-12 therefore, assessee need not to prove source of the source. The Hon`ble Bombay high Court in the case of Gagandeep Infrastructure (P.) Ltd [2017] 80 taxmann.com 272 (Bombay), held that the “proviso to section 68 has been introduced by the Finance Act, 2012 with effect from 1-4-2013. Thus, it would be effective only from the assessment year 2013-14 onwards and not for the subject assessment year. In fact, before the Tribunal, it was not even the case of the Revenue that section 68 as in force during the subject years has to be read/understood as though the proviso added subsequently effective only from 1-4-2013 was its normal meaning. The Parliament did not introduce to proviso of section 68, with retrospective effect nor does the proviso to introduced states that it was introduced 'for removal of doubts' or that it is 'declaratory'. Therefore, it is not open to give it retrospective effect, by proceeding on the basis that the addition of the proviso to section 68 is immaterial and does not change the interpretation of section 68 both before and after the adding of the proviso” 15. We note that 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, shall be assessed as its undisclosed income. In the facts of the present case, both the nature and source of the share application received was fully explained by the assessee. The assessee had discharged its onus to prove the identity, creditworthiness and genuineness of the share applicants. The PAN details, bank account statements, financial statements, License and passport and the bank account through which the fund has been transferred was a NRE account and the funds have been received in foreign currency all these evidences were placed on assessing officer's record. Thus, assessee under consideration has proved “source of the source” also, although he need not to prove the same, as the assessment year under consideration is A.Y. 2011-12. Page | 10 633/AHD/2017/AY.2011-12 SVS Tex O Fab Pvt. Ltd. 16. We note that the investment in the share capital/ premium was made by Shri Sunil Bodra, a NRI of Dubai, UAE. The complete funds for the share capital have been received through his NRE account with the Axis Bank and the funds have been flown in foreign exchange. The assessee filed the copy of the passport of the shareholder along with the Trade License issued by UAE Government to the business firm of Sunil Bodra and the amount has been received through the NRE bank account in Axis Bank which establishes the identity, creditworthiness, and genuineness of the transaction. We note that assessing officer made various inquiries during the assessment proceedings regarding identity, creditworthiness and genuineness of the transaction. The assessing officer referred the case to Joint Secretary FT&TK-II, New Delhi on 31.03.2011 u/s 90A of the Act and by virtue of Explanation-1(viii) to Sec. 153 the period of limitation got extended which was originally expiring on 31.03.2014. The ld CIT(A) noted that assessing officer has made the addition u/s 68 merely on suspicion that share applicant had made the investment of Rs.4,70,00,0000/- in various Indian Companies along with his father till 31.03.2011, though he had shifted to Dubai in 2007. The assessing officer raised the doubt that it is difficult to comprehend that in four years he could have earned Rs.121.5 crores. The assessee had filed before the assessing officer to prove his identity, the copy of the passport alongwith the Trade License issued by the UAE Government to the business firm namely Maya General Trading FZE, copy of the bank statement issued by Axis Bank of the NRE account alongwith the certificate of net worth issued by a CA from Dubai. The ROC details, list of shareholders were also filed before the assessing officer. The bank account through which the fund has been transferred is a NRE account and the funds have been received in foreign currency. 17. We note that assessing officer has not discussed any of these “above listed details, evidences and documents, as noted by us in para 16 of this order”, in the assessment order. The assessing officer has not made any adverse finding in any of these documents even, though all the details were furnished by the assessee before him. The assessing officer ought to have examined all these details and refuted / rejected them, with a cogent adverse findings and discernable line of reasoning, in Page | 11 633/AHD/2017/AY.2011-12 SVS Tex O Fab Pvt. Ltd. order to arrive at a conclusion and to make the addition u/s 68 of the Income Tax Act. On the contrary, the assessing officer has just brushed aside these evidences without even a word on why they are not acceptable. It is a well settled Law that when an assessee has all the possible evidences/documents in support of its claim, they cannot be brushed aside based on surmises. Thus, we note that assessing officer has made the addition merely on surmises and conjectures and no actual finding has been given for rejecting the explanation and the evidences filed by the assessee. The evidences filed by the assessee proves the identity, creditworthiness and genuineness of the transaction and therefore ld CIT(A) deleted the addition. Hence, we do not find any infirmity in the order of ld CIT(A). The conclusions arrived at by the ld CIT(A) are, therefore, correct and admit no interference by us. We, approve and confirm the order of the CIT(A) and dismiss the appeal of the Revenue. 18. In the result, appeal filed by the Revenue is dismissed. Order is pronounced in the open court on 19/09/2022 by placing the result on the Notice Board as per Rule 34(5) of the Income Tax (Appellate Tribunal) Rule 1963. Sd/- Sd/- (PAWAN SINGH) (Dr. A.L. SAINI) JUDICIAL MEMBER ACCOUNTANT MEMBER lwjr /Surat / Ǒदनांक/ Date: 19/09/2022 SAMANTA 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
