The ACIT, Central Circle-2(3), Ahmedabad V. M/s. Uday Infrastructure Intl. Pvt. Ltd, Ahmedabad

ITSSA 44/AHD/2021

AI Insights

The case involves an appeal by the Revenue against the order of the Learned Commissioner of Income Tax (Appeals)-12, Ahmedabad, which pertained to the assessment order for the year 2011-12. The primary issue was the deletion of additions made on account of unexplained share application money and related commission expenses by the Assessing Officer. The Revenue challenged the deletion of these additions, arguing that the assessee failed to prove the genuineness of the share application money. However, the Tribunal upheld the CIT(A)'s decision, noting that the assessee had provided sufficient evidence to substantiate the transactions and that similar transactions had been accepted in previous assessments.

• Counselvise Citation: [2023] 140 COUNSELVISE.COM (IT) 135648 (ITAT-AHMEDABAD)
• Duration Of Justice: 1 year(s) 11 month(s) 11 day(s)
• Appeal Type: Income Tax (Search & Seizure) Appeal
• Pronouncement Date: 16-03-2023
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: B
• Next Hearing Date: 22-02-2023
• Assessment Year: 2011-2012
• Appeal Filed On: 04-04-2021
• Other Referred Cases: DCIT V/s. Rohini Builders, CIT V/s. Ranchhodbhal Nakhava, DCIT V/s. Ganesh Plantation Ltd., DJ Stock Broking Pvt. Ltd. Vs. ITO, Almega Paints Pvt. Ltd. V. DCIT
• Laws Referred To: Income Tax Act, 1961
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Keywords: Unexplained cash credit; Unexplained expenditure; Third party statement; Accommodation entries; Set aside
• Section: 68; 69C; 205

Judgement Text

आयकर आयकरआयकर आयकर अपी अपीअपी अपीलीय लीयलीय लीय अिधकरण अिधकरणअिधकरण अिधकरण, अहमदाबाद अहमदाबादअहमदाबाद अहमदाबाद यायपीठ यायपीठ यायपीठ यायपीठ IN THE INCOME TAX APPELLATE TRIBUNAL, ‘’B’’ BENCH, AHMEDABAD BEFORE SHRI WASEEM AHMED, ACCOUNTANT MEMBER And MS. MADHUMITA ROY, JUDICIAL MEMBER आयकर अपील सं./IT(SS)A No. 44/AHD/2021 िनधा रणवष िनधा रणवष िनधा रणवष िनधा रणवष /Asstt. Year: 2011-12 A.C.I.T, Central Circle-2(3), Ahmedabad Vs. M/s. Uday Infrastructure Intl. Pvt. Ltd. 16, Patel Society, Nr. Panchvati, Ellisbridge, Ahmedabad PAN: AAACU2411N (Applicant) (Respondent) Revenue by : Shri Sudhendu Das, CIT D.R. Assessee by : None (Written Submission) सुनवाईक तारीख/Date of Hearing : 23/02/2023 घोषणाक तारीख/Date of Pronouncement: 17/03/2023 आदेश आदेशआदेश आदेश/O R D E R PER WASEEM AHMED, ACCOUNTANT MEMBER: The captioned appeal has been filed at the instance of the Revenue against the order of the Learned Commissioner of Income Tax (Appeals)-12, Ahmedabad, dated 25/01/2021, arising in the matter of assessment order passed under s. 143(3) r.w.s. 153A(1)(b) of the Income Tax Act, 1961 (here-in-after referred to as "the Act") relevant to the Assessment Year 2011-12. 2. The Revenue has raised the following grounds of appeal: “1. On the facts and in the circumstances of the case and in law, the ld. CIT(A) has erred in deleting the addition of Rs.25,00,000/- made on account of unexplained share application money received from M/s Associated Fastners Pvt. ltd. pertaining to A.Y. 2011- 12, as the assessee failed to discharge its onus of proving the genuineness of the share application money. 2. On the facts and in the circumstances of the case and in law, the ld. CIT(A) has erred in deleting the addition of Rs. 1,77,50,000/- made on account of unexplained share application money received from M/s Aakansha Goods Pvt. Ltd. pertaining to A.Y.2011-12, IT(SS)A No.44/AHD/2021 A.Y. 2011-12 2 as the assessee failed to discharge its onus of proving the genuineness of the share application money. 3. On the facts and circumstances of the case and in law, the Ld. CIT(A) has erred in deleting the addition of Rs.4,79,425/- made on account of commission expenditure incurred to arrange accommodation entries of share application money received from various persons. 4. On the facts and in the circumstances of the case and in law, the Ld. CIT(A) ought to have upheld the order of the A.O. 5. It is, therefore, prayed that the order of the Ld. CIT(A) be set aside and that of the A.O. be restored to the above extent.” 3. The only interconnected issue raised by the Revenue is that the Ld. CIT(A) erred in deleting the addition made by the Assessing Officer for Rs. 2,02,50,000/- on account of unexplained cash credit under Section 68 of the Act treating as accommodation entry and the commission expenses of Rs. 4,79,425.00 for obtaining such accommodation entry. 4. The facts in brief are that the assessee in the present case is a private limited company and declared an income of Rs. 448.00 only in the return of income. The assessee in the year under consideration has issued shares for raising the capital to the following companies: Sr. No. Name of the shareholder Amount 1. Akansha Goods Pvt. Ltd. 1,92,50,000/- 2. Associated Fasteners Pvt. Ltd. 7,61,35,000/- 4.1 However, the A.O. during the assessment proceedings found that the assessee has not furnished the necessary details to justify the creditworthiness of the impugned parties and therefore, the A.O. treated the same as unexplained cash credit under Section 68 of the Act. Accordingly, the addition of Rs. 9,58,85,000/- was made to the total income of the assessee. 5. Besides the above, the AO also opined that the assessee must have incurred some commission expenses for having taken such accommodation entries being share capital of Rs. 9,58,85,000/-. Thus, the AO worked out such IT(SS)A No.44/AHD/2021 A.Y. 2011-12 3 commission expenses of Rs. 4,79,425/- being 0.5% of the share capital received by the assessee which was also added to the total income of the assessee. 6. Aggrieved assessee carried the matter before the Ld. CIT(A). 7. The assessee before the Ld. CIT(A) submitted that out of the addition of Rs. 7,66,35,000/- with respect to Associated Fastners, the sum of Rs. 7,41,35,000/- was received in the immediate preceding assessment year. The assessee in support of its contention has filed the copy of the bank statement. Accordingly, the assessee contended that the question of making the addition of Rs. 7,41,35,000/- does not arise in the year under consideration. Likewise, the assessee submitted that a sum of Rs. 15,00,000/- out of the addition of Rs. 1,92,50,000/- with respect to Akansha Goods Pvt. Ltd. pertains to the A.Y. 2009- 10 and therefore, to this extent the question of making the addition in the year under consideration does not arise. 8. The assessee for the balance amount of addition of Rs. 25,00,000/- and Rs. 1,77,50,000/- received from Associated Fastners and Akansha Goods Pvt. Ltd. submitted that it has discharged the onus imposed under section 68 of the Act by furnishing affidavits of the shareholders, share applications with copy of PAN of the share subscribers, share-holders resolution, Income Tax Return, bank statements, copy of allotment return, counterfoils of share certificates and shareholders register. Thus, it was submitted that no addition is warranted under the provisions of Section 68 of the Act. The assessee further submitted that once the addition on account of share capital is deleted, the addition for the commission expenses treating the share capital transaction as accommodation entry for Rs. 4,79,425/- is not sustainable. The Ld. CIT(A) after considering the submissions of the assessee deleted addition made by the A.O. by observing as under: “DECISION I have carefully considered the assessment order and submissions made by the assessee. The effective ground is for addition of Rs. 9,58,85,000/- as unexplained share application money/unsecured loans under Section 68 received from following two parties: IT(SS)A No.44/AHD/2021 A.Y. 2011-12 4 Akansha Goods P. Ltd. Rs. 1,92,50,000 Associated Fastners Rs.7,66,35,000 -------------------- Total: Rs.9,58,85,000 ========== 6.1 It is noticed that in respect of the party namely Associated Fastners the amount of Rs. 7,41,35,000/ were received during FY 2009-2010 ie. relevant to A.Y 2010-2011 with reference to bank statement. It is seen that the amount of Rs. 7,41,35,000 us share application money was received from 12-08-2009 to 15-01-2010 i.e. during Financial Year 2009-2010 relevant to A.Y. 2010-2011. The details of the money received is an under:- Opening balance as on 01.04.2010 Rs.7,41,35,000/- Bank credits as on 10.06.2010 Rs. 25,00,000/- Total Rs.7,66,35,000/- The appellant submitted that as per Section 68 the addition of unexplained credit may be made in the financial year in which it is received and therefore it cannot be added in AY 2011-2012. I am in agreement that under Section 68 unexplained credits may be added in the financial year in which it is received. In the present case, Rs. 7,41,35,000 as share application money is received in FY 2009-10 i.e. A.Y.2010-11 which has not been doubted by the AO also as verifiable from the record submitted and therefore no adverse action on the said credits could be taken in the year under consideration. Thus the addition of Rs.7,41,35,000/ is deleted in the AY 2011-2012. 6.2 As regards balance amount of Rs.25,00,000 received on 10-06-2010 from Associated Fastners as per the bank statement furnished, it is submitted that the same cannot be added under Section 68 since the assessee has already furnished necessary documents vide letter dated 18.03.2014 to the AO in the assessment proceedings which has been made part of the assessment order as per Annexure 1 For ready reference the details submitted by the appellant to the written submission are once again reiterated as under: 1. Affidavit from page 39 to 40 2. Bank statement copy from page No. 50 to 60 3. Balance sheet from page 41 to 49 4. ITR acknowledgment copy page No.61 It is also submitted that the assessee has proved the source of income and also the source of source of the applicant shareholder, therefore the assessee has discharge the initial burden by proving the source of income and source of source by placing reliance on certain judgments. 6.3 As regards addition on account of share application money of Rs. 1,92,50,000 from Akansha Goods P. Ltd, it is submitted that on 21-01-2009 Rs. 8,00,000 & on 27-01-2009 Rs 2,00,000 and on 10-03-2009 Rs 5,00,000 amounting in all to Rs. 15,00,000 were received during FY 2008-2009 i.e. relevant to AY 2009-2010 as per bank statements received an unsecured loan. The details of the total credits is as under:- Opening balance as on 01.04.2010 Rs. 15,00,000/- Bank credit on 12.07.2010 Rs. 30,00,000/- Bank credit on 16.07.2010 Rs. 35,00,000/- Bank credit on 17.07.2010 Rs. 45,00,000/- Bank credit on 04.08.2010 Rs. 27,50,000/- Bank credit on 17.08.2010 Rs. 15,00,000/- Bank credit on 19.08.2010 Rs. 25,00,000/- Total Rs.1,92,50,000/- IT(SS)A No.44/AHD/2021 A.Y. 2011-12 5 It is also submitted that the addition of Rs 15,00,000 received during A.Y. 2009- 2010 as mentioned above could not be made in AY 2011-2012 that in the year under consideration as verifiable from the records submitted and not doubted by the AO also and therefore no adverse action on the said credits could be taken in the year under consideration. The appellant's contention was found correct and legally the addition of the amount of Rs. 15,00,000/- received in AY 2009-10 is directed to be deleted. 6.4 An regards balance amount of Rs. 1,77,50,000 in respect of Akansha Goods Pvt. Ltd. received during A.Y. 2011-2012 as per the bank statement furnished, it is submitted that the same may not be added under Section 68 since the assessee has already furnished the confirmation, PAN & ITR & bank statement of unsecured loans in submissions filed during the course of assessment proceedings vide letter dated 18.03.2014 which has been made part of the assessment order by the AO as per Annexure 1. For ready reference the details submitted are repeated as under: 1. Affidavit from page 19 2. Bank statement copy from page No.38 3. Balance sheet from page 28 to 37 4. ITR acknowledgment copy page No 20 to 27 It is also submitted that the assessee has proved the source of income and also the source of source of the share application money/loan giving company, therefore the assessee has discharged the initial burden by proving the source of income and source of source by placing reliance on certain judgments. The assessee has furnished all the evidences to prove the identity, creditworthiness and genuineness and therefore the assessee has discharged the initial burden. 5.3 The appellant had also given explanation with regard to the alleged observation of the AO concerning specific shareholders in para 12 of the said reply dated 18.03 2014. Even it was informed that where the appellant had taken Search from website of ROC, companies who invested was active as per status shown. The appellant submitted that in several cases even source of source was explained. 6.5 It was further categorically submitted that the so called alleged statements taken behind the back of the appellant were not binding. The appellant had given reply and made submissions point wise of the notice issued in para 12 of the above letter and it was submitted that once the affidavit, PAN Bank statements, Income tax Return acknowledgement, copy of resolution, counterfoil of share certificates issued and shareholders register were furnished, initial onus stood discharged since genuineness Identity and creditworthiness were established prima facie and the genuine receipt towards share capital could not be added under section 68. The relevant case laws were also brought to notice of AO. 6.6 Most importantly, it was also submitted that during search operations, no incriminating material was found which may indicate that transactions of share capital or other business transactions were not genuine. 6.7 In view of the above discussion. I find that the addition of Rs 7,41,35,000 received from Associated Fastners as share application money is received during AY 2010 2011 and not in AY 2011 2012. Similarly, the addition for Rs 15,00,000 received from Akansha Goods P. Ltd as unsecured loan in AY 2009-2010 and not in AY 2011 2012. I agree that the said amount is not received during the financial year of AY 2011-2012, therefore the above additions are deleted. IT(SS)A No.44/AHD/2021 A.Y. 2011-12 6 6.8. As regards the balance amount of Rs. 25,00,000 from Associated Fastners and Rs. 1.77,50,000 from Akansha Goods P Ltd, it is seen that the assessee has submitted confirmation, PAN & ITR & bank statement of unsecured loans in submissions dated 18.03.2014 which has been made part of the assessment order an Annexure-1. It is seen that the assessee has proved the source of income and also the source of source of the applicant shareholder, therefore the assessee has discharged the initial burden by proving the source of income and source of source by placing reliance on certain judgments including the followings: 6.9 The Hon’ble Gujarat High Court in the case of DCIT V/s. Rohini Builders 286 ITR 360 (SLP Dismissed by Supreme Court) has held as under: "Held that when assessee haul discharged initial onus by providing identity of all creditors by giving their complete addresses, GIR numbers / permanent account numbers and copies of assessment orders wherever readily available and also proved capacity of creditors by showing that amounts were received by account payee cheques drawn from bank accounts of creditors assessee was not expected to prove genuineness of cash deposited in bank accounts of creditors, because under law, assessee can be asked to prove source of credits in its books of account but not source of source. 6.10 The Hon'ble Gujarat High Court in the case of CIT V/s. Ranchhodbhal Nakhava 205 Taxman 35 (Guj) held an under: "Held that Once the Assessing Officer gets hold of the PAN of the lenders, it was his duty to ascertain from the Assessing Officer of those lenders, whether in their respective return they had shown existence of such amount of money and had further shown that those amount of money had been lent to the assessee. If before verifying of such fact from the Assessing Officer of the lenders of the assessee, the Assessing Officer decides to examine the lenders and asks the assessee to further prove the genuineness and creditworthiness of the transaction, in our opinion, the Assessing Officer did not follow the principle laid down under Section 68 of the Income Tax Act.” 6.11 The Ahmedabad ITAT judgement in the case of DCIT V/s. Ganesh Plantation Ltd. in ITA No. 472/Ahd/2016 dated 11-12-2020. Para No. 17.11 to Para No. 17.13 & Para No. 18 is reproduced as under 17.11 There are various companies incurring huge losses but price of their shares in market are high. Similarly, there are various companies having high book value but trading at a very low price. Accordingly, we are of the view that the high profit/taxable income cannot be a criteria to decide the price of the share/ script. Thus any unusual price rise/ fall in the shares of the company cannot be a basis to draw an inference that capital loss generated by the assessee is bogus in nature. Thus after considering the above facts, we are of the opinion that AO is not correct in challenging the loss declared by the assessee on the purchase and sale of shares. 17.12. We also note that it is not the case of the Revenue that there was come inflow of money from the buyer of the shares to the assessee which is unaccounted. As there is no dispute about the nature of the transaction and the consideration received by the assessee against the sale of shares, therefore the transaction cannot be termed as a sham transaction. Moreover, the onus is on Revenue to establish that assessee has received some benefit over and above the actual sales consideration. IT(SS)A No.44/AHD/2021 A.Y. 2011-12 7 17.13. In view of the above, we are not inclined to interfere in the order passed by ld. CIT(A) deleting the addition of Rs. 10,81,15,500.00 and the same is hereby upheld. This ground of the Revenue's appeal is dismissed." 6.12 The Hon'ble ITAT bench-C Mumbai in the case of ITO Va. Om Shanti Residency in ITA No.5613/Mum/2017 and ITA No.5614/Mum/2017 dated 10.01.2020 has held that when the assessee has proved identity, genuineness of transactions and creditworthiness of the parties in an unsecured transaction AO cannot make addition u/s 68 of IT Act merely based on non service of notices u/s.13316) of IT Act or non cooperation of lenders to said notices. 6.13 The Hon'ble ITAT, Bench B, Ahmedabad in the case of DJ Stock Broking Pvt. Ltd. Vs. ITO, Ward-1(1)(4), Ahmedabad in ITA No.313/Ahd/2017 dated 03.03.2020 has held that disbelieving the genuineness of share applicants by merely drawing certain inference the addition made u/s.68 without proper enquiries is not sustainable. Further held that mere quantum of Income mentioned in the return of Income of the share applicants cannot be the criteria to just bare their creditworthiness. 6.14 The Hon'ble ITAT Bench-B, Ahmedabad In the case of Deem Roll Tech Ltd. Vs. DCIT, Cir.1(1)(2) Ahmedabad in ITA No.961/Ahd/2016 dated 26.10.2020 has held the assessee cannot be penalised and no additions could be made in its hands u/s.68 of IT Act in respect of the share application money/share capital for in action of revenue to carry enquiry in respect of genuineness of the transactions. 6.15 The Hon'ble ITAT. A Bench, Mumbai in the case of DCIT-15(1)(1), Mumba V. Almega Paints Pvt. Ltd. in ITA No.6267/Mum/2017 dated 06.11.2020 has held that addition u/s.68 cannot be made on the in genuineness of the transactions when the assessee has discharged the initial onus of establishing identity, creditworthiness of the parties and genuineness of the transaction. 6.16 In view of the above discussion and facts and law including the binding judgments of the higher Courts some of them referred above, the entire addition of Rs. 9,58,85,000 is found not sustainable and hence deleted since the assessee has proved his initial burden. The grounds of appeal are allowed. 7. Ground of appeal No. 7 is against the addition of Rs.4,79,425/- u/s 69C of the IT Act. The Assessing Officer has made the addition in the assessment order, observing as under: “10. During the search operations, as mentioned above, the statements of persons who have bogs share applications have been recorded. In their statements recorded they have confirmed that they have provided accommodation them, they have received commission @ 0.5% of the share The assessee has spent the said amount for acquiring bogus money share premium. The same is not allowable as since the same is not for the purpose of business of this office letter dated 28/2/2014, the assessee was asked to amount should not be added as unexplained The reply of the assessee was to be filed on or ply was been received from the assessee by that the assessee has no explanation to offer. The Therefore, an amount calculated 0.5% reply till money and share premium received during the year is explained expenditure of the assessee u/s 69C of the Act Penalty 1.2771 of the Act are initiated." [ADDITION Rs. 479425/-]" IT(SS)A No.44/AHD/2021 A.Y. 2011-12 8 7.1 DECISION I have considered the facts and submission of the appellant. It is found that in an account unexplained credits in the form of unsecured loan/share stainable for the reasons discussed in the preceding paras and the same was deleted. Consequently, the question of making the payment of any commission on the aforesaid credits does not arise and hence the addition of such unexplained expenditure made by the AO is also deleted. Thus the ground of appeal is allowed.” 9. Being aggrieved by the order of the Ld. CIT(A) Revenue is in appeal before us. The Ld. D.R. before us vehemently supported the order of the A.O. by reiterating the contentions recorded in the assessment order. 10. On the other hand, the assessee has filed the written submission running from pages 1 to 3 wherein it was contended that the assessee has filed all the details of the parties which have subscribed the share capital in the assessee company. It was also submitted that the assessee is not required to justify the source of source as provided in the proviso to section 68 of the Act by the Finance Act, 2012. It is for the reason that such proviso is effective from 01.04.2013. 10.1 Both the ld. DR and assessee by way of the written submission filed before us vehemently supported the order of the authorities below as favouable to them. 11. We have heard the rival contentions of both the parties and perused the materials available on record. At the outset, we note that the assessee has received share application money/unsecured loan from both the parties in the earlier years which was accepted as genuine. At the time of hearing the Ld. D.R. has not brought anything on record suggesting that the share application money/ unsecured loan received by the assessee from the companies discussed above in the earlier years was not accepted by the Revenue. Thus, we can safely hold that once the Revenue has accepted the transaction as genuine in the earlier year the same transaction cannot be doubted in the year under consideration until and unless some cogent material is brought on record. Besides the above we note that the assessee has duly discharged the onus imposed upon it under the provisions of section 68 of the Act. This can be verified from the details submitted by the assessee which is reproduced as under: IT(SS)A No.44/AHD/2021 A.Y. 2011-12 9 Sr. No. Particulars Pages 4. Details of Share Applicant: Akansha Goods Pvt. Ltd. • Master data obtained from ROC website • Affidavit of Director • Return of Income • Contra Confirmation • Bank Statement of Appellant (to substantiate receipt through banking channel) • Annual Accounts 16 17 17A 18 19-26 27-37 5. Details of Share Applicant: Associated Fastners Pvt. Ltd. • Master data obtained from ROC website • Affidavit of Director • Return of Income • Contra Confirmation • Bank Statement of Appellant (to substantiate receipt through banking channel) • Annual Accounts 38 39-40 41 42 43-63 64-74 11.1 In view of the above, we hold that the assessee has discharged the onus imposed under section 68 of the Act. The ld. DR at the time of hearing has also not brought anything on record contrary to the finding of the ld. CIT-A. Thus, after considering the facts in totality, we do not find any infirmity in the order of the Ld. CIT(A). Hence, the ground of appeal of the Revenue is hereby dismissed. 12. In the result, the appeal filed by the Revenue is dismissed. Order pronounced in the Court on 17/03/2023 at Ahmedabad. Sd/- Sd/- (MADHUMITA ROY) (WASEEM AHMED) JUDICIAL MEMBER ACCOUNTANT MEMBER (True Copy) Ahmedabad; Dated 17/03/2023 Tanmay/Manish, Sr. PS TRUE COPY