Income Tax Appellate Tribunal - Raipur
Income Tax Officer-3(1), Raipur, ... vs Capital Buildcon Pvt. Ltd., Raipur on 28 June, 2024
आयकर अपील य अ धकरण यायपीठ रायपुर म।
IN THE INCOME TAX APPELLATE TRIBUNAL,
RAIPUR BENCH, RAIPUR
BEFORE SHRI RAVISH SOOD, JUDICIAL MEMBER
AND
SHRI ARUN KHODPIA, ACCOUNTANT MEMBER
आयकर अपील सं. / ITA No. 80/RPR/2024
नधारण वष / Assessment Year : 2015-16
Income Tax Officer-3 (1), Raipur,
Aayakar Bhawan,
Central Revenue Building,
Civil Lines, Raipur, Chhattisgarh
.......अपीलाथ / Appellant
बनाम / V/s.
Capital Buildcon Pvt. Ltd.
7, Shyam Nagar Road, Civil Lines,
Raipur, Chhattisgarh
PAN No. AABCC3067H
...... यथ / Respondent
Assessee by : Shri R.B. Doshi, CA.
Revenue by : Shri Satya Prakash Sharma, Sr. DR.
सुनवाई क तार ख / Date of Hearing : 19.06.2024
घोषणा क तार ख / Date of Pronouncement : 28.06.2024
2
Income Tax Officer-3(1), Raipur Vs. Capital Buildcon Pvt. Ltd.
ITA No.80 /RPR/2024
आदे श / ORDER
PER RAVISH SOOD, JM:
The present appeal filed by the revenue is directed against the order passed by the Commissioner of Income-Tax (Appeals), National Faceless Appeal Center (NFAC), Delhi, dated 12.01.2024, which in turn arises from the order passed by the Assessing Officer (A.O.) under Sec. 143(3) of the Income-tax Act, 1961 (in short 'the Act') dated 28.12.2017 for the assessment year 2015-16. The revenue has assailed the impugned order on the following grounds of appeal:
"Ground No. 1: "Whether on the facts and in the circumstances of the case, the ld. CIT(A) was justified in deleting the addition of Rs.2,39,50,000/- made by the AO u/s 68 of the Act?"
Ground No. 2: "Whether on the facts and in the circumstances of the case, the ld. CIT(A) was justified in deleting the addition of Rs.2,39,50,000/- by ignoring the facts and brought on record by the AO that the investor company is a shell company being operated by the other entry provider?"
Ground No. 3: "Whether on the facts and in the circumstances of the case, the ld. CIT(A) was justified in deleting the addition of Rs.2,59,00,000/-, thereby without considering and distinguishing the ratio of the judgment of the case such as Rameshwar Prasad Bagia 68 ITR 653 (Allahabad) & Homi Vs. CIT 41 ITR 135, 142 by (Supreme Court) wherein it is stated that the totality of circumstances must be considered in a case of circumstantial evidence and the totality of the circumstances has to be taken into consideration and the combined effect of all those circumstances has to be taken the question as to whether or not a particular act is proved?"
Ground No. 4: The order of the ld. CIT (A) is erroneous both in law and on facts.
Ground No. 5: Any other ground which may be adduced at the time of hearing."
3
Income Tax Officer-3(1), Raipur Vs. Capital Buildcon Pvt. Ltd. ITA No.80 /RPR/2024
2. Succinctly stated, the assessee company, which is engaged in the business of a property developer had filed its return of income for the AY 2015-16 on 25.09.2015 declaring its total income at Rs. 11,26,230/-. Subsequently, the case of the assessee company was selected for scrutiny assessment u/s 143(2) of the Act.
3. The A.O while framing the assessment observed that the assessee company had received a substantial amount of share application money of Rs. 9,56,75,000/- from a share applicant, viz. Intime Commodeal Pvt. Ltd., AD-76, Salt Lake, Sector- 1, Kolkata (for short, "the Investor Company"). It was observed by him that out of the aforementioned amount, an amount of Rs. 2,39,50,000/- was received by the assessee company during the year under consideration. The AO, to verify the veracity of the claim of the assessee company of having received share application money from the investor company during the subject year called upon it to place on record documentary evidence in support thereof. In compliance, the assessee company placed on record the following documents to buttress its claim of having received share application money from the aforementioned Investor Company:
"a) Copy of Bank Statement of Investor Company.
b) Copy of Memorandum and Articles of Association of the Investor Company.
c) Copy of Incorporation Certificate issued by the Registrar of Companies.
d) Copy of Form No.PAS-3 (Return of allotment) filed with Registrar of Companies.
e) Form No.MGR-14 (filing of Resolutions and Agreements) with Registrar of Companies.
f) Copy of acknowledgment of filing of ITR of investor company.4
Income Tax Officer-3(1), Raipur Vs. Capital Buildcon Pvt. Ltd. ITA No.80 /RPR/2024
g) Copy of audited financial statement of investor company.
h) Copy of PAN card of investor company.
i) Copy of Assessment Order passed u/s 143(3) of investor company." However, the AO after perusing the documents filed before him was not persuaded to subscribe to the claim of the assessee company of having received genuine share application money from the aforementioned investor company. Accordingly, the AO in order to verify the veracity of the aforesaid transaction issued notice u/s 133(6) of the Act to the investor company. As the notice issued u/s 133(6) of the Act to the aforementioned Investor Company was returned unserved, therefore, the AO held a conviction that the said company was not in existence. The AO based on the aforesaid facts directed the assessee company to produce the director of the share applicant company for necessary examination. As the assessee company failed to comply with the aforesaid directions, therefore, the A.O taking cognizance of the fact that the director of the investor company happened to be the spouse of the director of the assessee company, thus, held a firm conviction that the latter had failed to discharge the onus that was cast upon it as regards proving the identity and creditworthiness of the investor company and also the genuineness of the transaction of receipt of share application money from the latter.
4. The AO in order to verify the authenticity of the assessee's claim of having received share application money from the aforementioned investor company, issued a commission to the DDIT (inv.), Unit-II(3), Kolkata, to examine the alleged investor company. The Investigation Wing vide its report dated 20.11.2017 informed 5 Income Tax Officer-3(1), Raipur Vs. Capital Buildcon Pvt. Ltd. ITA No.80 /RPR/2024 the AO that as per the database of the entry operators the Investor Company i.e. Intime Commodeal Pvt. Ltd. (supra) (AACC16889E) was a shell company, which was managed and controlled by Shri Uday Shankar Mahawar, an infamous Kolkata based entry operator. Also, the AO was informed that Shri Dharmendra Kumar Sharma was a dummy director in the aforementioned Investor Company.
5. The assessee company, on being confronted with the aforesaid details, rebutted the information that was shared by the AO. Also, the assessee company objected to the statements of the third parties that were relied upon by the AO and requested for an opportunity for cross-examining the persons based on whose statements adverse inferences were sought to be drawn in its case. Although, the AO called upon the assessee company to provide a suitable date and time, so that the cross examination of the aforesaid person may be facilitated at the office premises of the DDIT (inv.), Unit-II(3), Kolkata, but it failed to provide the requisite details and adopted an evasive approach.
6. Apart from that, the assessee company, relied on the assessment order passed in the case of investor company, viz. Intime Commodeal Pvt. Ltd. (supra) for AY 2012-13. It was stated that if adverse inferences resulting to a consequential addition regarding the share application money that it had received from the aforementioned investor company were drawn, then it would result to a double addition which was forbidden by law.
6
Income Tax Officer-3(1), Raipur Vs. Capital Buildcon Pvt. Ltd. ITA No.80 /RPR/2024
7. On being queried, as to whether the assessment order passed in the case of the investor company was further carried in appeal, the assessee company submitted that the assessment framed u/s 143(3) of the Act in the case of the investor company was vacated in appeal by the CIT(A), Kolkata. Also, the AO was informed that no adverse inference was drawn by the first appellate authority based on the statements of the departmental witnesses while disposing of the appeal of the investor company. The AO observed that as the addition made in the case of Intime Commodeal Pvt. Ltd. (supra) was vacated by the CIT(A), therefore, the plea of the assessee company that addition made in its case would result to double addition did no more hold the ground. Also, the AO did not find any substance in the claim of the assessee company that the statement of Shri Dharmendra Kumar Sharma, dummy director of the investor company, be not acted upon. Referring to the statement of Shri Dharmendra Kumar Sharma (supra), the AO observed that he had, inter-alia, admitted that the Investor Company was a shell company that was being managed and controlled by an entry operator, viz. Shri Uday Shankar Mahawar.
8. The AO based on his exhaustive observations recorded in the body of the assessment order, concluded that the assessee company had failed to discharge the onus that was cast upon it as regards proving the authenticity of its claim of having received genuine share application money from the subject investor company. Accordingly, the AO observed that the assessee company had failed to both establish the identity and creditworthiness of the Investor Company and the genuineness of 7 Income Tax Officer-3(1), Raipur Vs. Capital Buildcon Pvt. Ltd. ITA No.80 /RPR/2024 the transaction of receipt of share application money from the latter. The AO after drawing support from, viz. (i) the statements of Shri Dharmendra Kumar Sharma (supra) and Shri Uday Shankar Mahawar (supra); and (ii) the bank account of the investor company, concluded that the amount received by the assessee company was in fact its own unaccounted money that was routed back to its coffers in the garb of the aforesaid transaction of receipt of share application money. Accordingly, the AO vide his order passed u/s 143(3) of the Act dated 28.12.2017 held the amount of Rs.2,39,50,000/- as an unexplained cash credit u/s 68 of the Act in the hands of the assessee company.
9. Aggrieved, the assessee company carried the matter before the CIT(Appeals) who found favour with its contentions and vacated the addition of Rs. 2,39,50,000/- that was made by the AO u/s 68 of the Act, observing as under:
"4. Adjudication 4.1 The first ground of appeal taken by the appellant is:
The Ld. Assessing Officer erred in law as well as in facts while making an addition of Rs 239 50000.00 on account of Share Capital U/s68 of the Income Tax Act 1961. The same is bad in law and is liable to be deleted.
4.2 The assessing officer in his order has stated that "The conclusions arrived above makes it clear that the onus to prove the identity and creditworthiness of the alleged share applicants and the genuineness of the said transaction which was cast upon the assessee by virtue of section 68 (as amended by finance act 2012) has not been discharged by a completely. The purported share application transactions were basically sham, ones used to introduce unaccounted money in the books camouflaging it as share capital Investigation has revealed that the said investor was company of he means and had been filing returns on very low or negligible income. The high value banking transaction could not be co-related with any actual or tangible business activity. The said company was found to be merely 8 Income Tax Officer-3(1), Raipur Vs. Capital Buildcon Pvt. Ltd.ITA No.80 /RPR/2024
completing the paper formalities and using the banking channels to route the money which does not make these transactions ipso facto genuine. At best, it qualifies them to be a paper/shell companies attempting to cloak the accommodation entries as genuine business transactions. The entire scheme is a sham one and therefore, the entire share application money of Rs. 2,39,50,000/- found credited in the books of assessee during the year in the name of the said alleged share applicant is held as its income u/s 68 for being unexplained and added to its returned income. Tax is being charged @30% u/s 115BBE of the Act."
4.3 The appellant in his reply dated 03.02.2020 has stated that "During the course of scrutiny assessment the AO has enquired from the assessee/appellant the details of share application money amounting to Rs. 2,39,50,000/- received during the year from the investor company M/s. Intime Commodeal Pvt. Ltd. The appellant submitted that in its reply before the Assessing Officer on 14.12.2017 he has submitted as follows: In the notice dated 08.12.2017 your good self has mentioned that the investor company has not worth. The same is not correct because on perusal of the balance sheet of the investor company your good self will find that the total assessed capital and reserves of the investor company is Rs. 11.88 crores approximately. That is to say the investor company is having sufficient net worth for making investment.
In the notice dated 08.12.2017 your good self has mentioned that the corporate entity was not having any active business operation or significant asset. The same is not correct because there are current assets, shares, stocks etc. in which the company is doing its business. Further more on going through the Memorandum of Association of the company Clause No. 11 in Page no. 3 clearly states the object "To invest any money of the company out of own surplus fund of the company not immediately required in such investments as may be thought proper."
According surplus funds have been invested in the equities of other company.
Similarly in Clause No. 1 the main object of the company to be pursued by the company on its incorporation are given---
"To carry on the business as distributors, agents, traders merchants, contractors, brokers and otherwise deal in merchandise and articles of all kinds including clearing agents, freight contractors, forwarding agents, licensing agents, general brokers and to carry any kind of 9 Income Tax Officer-3(1), Raipur Vs. Capital Buildcon Pvt. Ltd.ITA No.80 /RPR/2024
commercial business. To carry on all of any of the business as buyers, sellers, suppliers, growers, processors, traders, merchants, indentures brokers, agents, assemblers, stockiest of goods and commodities of any kind to work as commission agents, brokers, contractors processors order suppliers and dealing agents."
Therefore from the above it is clear that the investor company has purchased the shares of the assessee company as per provisions contained in Memorandum of Association of the company and the same is in accordance with the provisions of law.
In the notice dated 08.12.2017 your good self has stated -
"A perusal of the balance sheet and Profit & Loss account in the case of the assessee shows that the share application money received by the assessee along with the premium have either been used to repay the borrowing of been represented in the Balance Sheet in the form of current assets"
The observation made above by your good self is completely correct. There is nothing wrong if the company uses its share application money to repay the borrowing, rather there is no restriction to use the share application money by any statute in the instant case the assessee company has rightly used the amount of share application money for its business purposes. The same may please be accepted It may please be noted that no addition can be made u/s. 68 if the assessee proves the following three things-
1. The identity of the loan creditors
2. The credit worthiness of the loan creditors
3. The genuineness of the transactions.
In the instant case before your good self the assessee has been able to prove all the three ingredients as specified u/s 68, therefore no addition can be made u's. 68. The assessee has also explained the source of source before your good self. The same also be accepted.
4.4 Further on 05.01.2024 the appellant submitted that "The scrutiny assessment case of the assessee was completed by ITO ward 3(3) Raipur and demand of Rs 1.04,24,980/- was raised against the assessee. In para number 09 of page number 47 of the assessing officer has added a sum of Rs. 2,39,50,000/- to the income of the assessee treating the same as unexplained cash credit, the reason given by the A.O. for making the addition was that 10 Income Tax Officer-3(1), Raipur Vs. Capital Buildcon Pvt. Ltd. ITA No.80 /RPR/2024
"the assessee falls to pass the test of genuineness within meaning of section 68 of the IT Act, hence considered unexplained cash credit The impugned addition was made because the appellant company has taken share application money from another body corporate M/S intime Comodeal Pvt Ltd (herein after referred to as investor company). In the assessment case of the investor company for assessment year 2012-13 passed u/s 143(3) of the Income Tax Act 1961 a sum of Rs. 12,29,50,000/- was added by the ITO ward 10(1), Kolkata. This assessment order was passed on 22.03.2015. Since addition was made in the case of investor company therefore addition was consequently made in assessment of the appellant company.
The investor company filed appeal before the Honorable CIT (Appeals)-4 Kolkata against the addition made by the A.O. the Honorable CIT appeal vide its order dated 05.07.2016 disposed off and allowed the appeal. The revenue filed 2nd appeal against said order before the Honorable Income Tax Appellate Tribunal "B" bench Kolkata. The Honorable Tribunal vide its order dated 27.02.2019 set aside the matter and restored the matter to the file of the A.O. for deciding the matter afresh after giving the assessee proper opportunity. The ITO ward 8(4) Kolkata, carried out detailed investigation on 30.12.2019 accepted the cash credit as genuine.
Since the investor companies funds were found to be genuine by the A.O. having jurisdiction of the investor company and therefore when those funds came in as share application money in the books of appellant company the same shall also be considered as genuine. The assessment order in the present case was passed on 28.12.2017 whereas the assessment of the investor company was finalized on 30.12.2019. Thus the final assessment order of the investor company was not considered by the A.O. It is kindly requested that looking to funds available with the investor companies the cash credit may please be accepted."
4.5 The company making investment was having enough capital to make th investment, the submission of the appellant that on perusal of the balance sheet of the investor company your good self will find that the total assessed capital and reserves of the investor company is Rs. 11.88 crores approximately. That is to say the investor company is having sufficient net worth for making investment. This proves creditworiness of the company making investment. Furthermore the investor company itself has passed the test of identity and genuineness as assessmet in its own case has been held twice. There is merit in the submission of the appellant that the ITO ward 8(4) Kolkata, carried out fresh assessment u/s254 r.w.s 143(3) of Income Tax Act 1961, and after detailed investigation on 30.12.2019 accepted the cash credit as genuine.
Since the investor companies funds were found to be genuine by the A.O. having jurisdiction of the investor company and therefore when those funds came in as share application money in the books of appellant company the same shall also be considered as genuine. The ITO ward 8(4) Kolkata, carried 11 Income Tax Officer-3(1), Raipur Vs. Capital Buildcon Pvt. Ltd. ITA No.80 /RPR/2024 out fresh assessment u/s254 r.w.s 143(3) of Income Tax Act 1961, and after detailed investigation on 30.12.2019 accepted the cash credit as genuine. Since the investor companies funds were found to be genuine by the A.O. having jurisdiction of the investor company and therefore when those funds came in as share application money in the books of appellant company the same shall also be considered as genuine."
4.6 In view of the above the Ground of appeal is allowed the addition made of Rs. 2,39,50,000/- is deleted."
10. The revenue, being aggrieved by the order of the CIT(A) has carried the matter in appeal before us.
11. We have heard the learned authorized representatives of both the parties, perused the orders of the lower authorities and the material available on record as well as considered the judicial pronouncements that have been pressed into service by them to drive home their respective contentions.
12. The assessee company has filed before us an application seeking admission of certain documents as additional evidence under Rule 29 of the Income Tax Appellate Tribunal Rules, 1963 which comprises of, viz. (i) financial statements of the investor company, i.e. Intime Commodeal Pvt. Ltd. for FY. 2011-12, 2012-13 and 2013-14 a/w. charts consolidating the details of its investments made over the years; and (ii) copy of the assessment order of the investor company for A.Y.2015- 16 a/w. the corresponding notices u/s. 143(2)/142(1) of the Act for the year under consideration; and (iii) copy of summons issued u/s. 131 of the Act dated 19.12.2017 calling upon the investor company to furnish the requisite details as regards the investments made during the subject year in shares of the assessee company. As 12 Income Tax Officer-3(1), Raipur Vs. Capital Buildcon Pvt. Ltd. ITA No.80 /RPR/2024 the aforementioned documents will have a strong bearing on adjudication of the issue before us, i.e. the authenticity of the assessee's claim of having received share application money from the aforementioned investor company, we admit the same.
13. Shri Satya Prakash Sharma, learned Senior Departmental Representative (for short, ld. Sr. DR) relied on the assessment order. It was submitted by him that the ld. CIT(A) without appreciating the facts of the case in the right perspective had most arbitrarily vacated the addition made by the AO u/s 68 of the Act.
14. Per contra, Mr. R.B. Doshi, learned Authorized Representative (for short, ld. AR) for the assessee company relied on the order of the ld. CIT(A). The ld. AR submitted that as the assessee company had during the subject year received genuine share application money of Rs.2.39 crores (approx.) from the Investor Company, viz. Intime Commodeal Pvt. Ltd. (supra), therefore, the ld. CIT(A), after appreciating the correct factual position had rightly vacated the addition made by the AO u/s 68 of the Act. Elaborating further, ld. AR submitted that the share application money received by the assessee company from the aforementioned investor company along with that received in the immediately preceding year was sourced out of the liquidation of the investments held by the investor company both during the year under consideration as well as the immediately preceding year. The ld. AR to buttress his contention had drawn out attention to a "Chart" placed at Page 288 of the "additional evidence" filed by the assessee company. 13
Income Tax Officer-3(1), Raipur Vs. Capital Buildcon Pvt. Ltd. ITA No.80 /RPR/2024
15. Carrying his contention further, the ld. AR submitted that the investor Company, viz. Intime Commodeal Pvt. Ltd. (supra) had in A.Y.2014-15, i.e. the immediately preceding year advanced a loan of Rs.7,17,25,000/- to the assessee company. The Ld. AR further submitted that the opening balance of loan of Rs.7,17,25,000/- (Cr.) as of 01.04.2015 was converted into share application money from Intime Commodeal Pvt. Ltd. during the subject year. Also, it was submitted by him that there was a fresh infusion of share application of money of Rs.2,39,50,000/- with the assessee company by Intime Commodeal Pvt. Ltd. Elaborating further, the Ld. AR submitted that the fresh share application money of Rs.2,39,50,000/- received by the assessee company from Intime Commodeal Pvt. Ltd. was in turn sourced out of the liquidation of its investments held with other companies during the year under consideration, i.e. A.Y.2015-16. Elaborating further on the source of the investment made by the investor company, the ld. AR submitted that the investor company had received share capital/premium of Rs. 11.89 crores (approx.) in AY 2012-13. The Ld. A.R. to buttress his aforesaid contention had drawn our attention to the "balance sheet" of the investor company for AY 2012-13 placed on Page 297 of the APB. The Ld. AR submitted that the investor company during the next two years had not received any fresh share capital/money. To fortify his aforesaid contention our attention was drawn to the "balance sheets" of the investor company as of 31.03.2013, on Page 314 of APB, and as of 31.03.2014 Page 327 of APB, which supported his aforesaid claim. To sum up it was the claim of the ld. AR that the amount of share capital/premium of Rs.11.89 crores (approx.) that was received by 14 Income Tax Officer-3(1), Raipur Vs. Capital Buildcon Pvt. Ltd. ITA No.80 /RPR/2024 the investor company in AY 2012-13 was in turn utilized for investing in the share application money with the assessee company during the subject year i.e. AY 2015-
16. The Ld. AR had once again taken us through the details of the investments that were held by the investor company on 31.03.2012, 31.03.2013, 31.03.2014, and 31.03.2015. Elaborating further on his contention, ld. AR submitted that the investments of the investor company in unquoted shares of Face Value (FV) of Re.1/- per share in different companies remained as such during the financial year 2011- 12 and 2012-13.
16. The Ld. AR further submitted that during FY 2013-14, the investments made by the investor company in unquoted shares of different companies was reduced from Rs.11,14,50,000/- to Rs.2,69,50,000/-. The Ld. AR had drawn our attention to Page 288 of the APB, wherein the aforesaid factual position was culled out. Carrying his contention further, ld. AR submitted that the reduction of Rs. 8.47 crore of investments of Intime Commodeal Pvt. Ltd (supra) in unquoted shares of other companies during FY 2013-14 had, inter-alia, found its way to source a loan of Rs.7,17,25,000/- that it had advanced to M/s Capital Buildcon Pvt. Ltd. i.e. the assessee company during the said year, i.e. FY 2013-14. The Ld. AR. Submitted that during the subject year i.e. AY 2015-16, the investments made by the Investor Company, viz. Intime Commodeal Pvt. Ltd. (supra) in unquoted shares of other companies were further reduced by an amount of Rs.2,39,50,000/-. It was submitted by him that the investor company had during the subject year invested in share application money of Rs.9,56,75,000/- with the assessee company, which in turn 15 Income Tax Officer-3(1), Raipur Vs. Capital Buildcon Pvt. Ltd. ITA No.80 /RPR/2024 was sourced out of, viz. (i). the opening balance as of 01.04.2014 of loan that was advanced by the investor company to the assessee company in FY 2013-14, and was converted into share application money during the subject year: Rs. 7,17,25,000/-; and (ii). the liquidation of investments in equity shares of third parties during the subject year, i.e. AY 2015-16 : Rs. 2,39,50,000/-. The Ld. AR based on his aforesaid contention had tried to impress upon us that the genesis of the source of the investment of Rs.2,39,50,000/- (supra) made by the investor company with the assessee company could be traced in the liquidation proceeds of its investment in equity shares as of 31.03.2012. The Ld. AR backed by the aforesaid facts submitted that not only the source of source of the investment of share application money with the assessee company was proved to the hilt but the same had also been accepted by the department. Elaborating on his contention, the ld. AR submitted that the assessment of the investor company, viz. Intime Commodeal Pvt. Ltd. for AY 2012- 13 was initially framed by the AO and the matter had thereafter traveled before the Tribunal i.e. ITAT, Kolkata, 'C' Bench, Kolkata in ITA No. 1694/KOL/2016, Pages 132 to 134 of APB. The Ld. AR submitted that the Tribunal vide its order dated 27.02.2019 had set aside the matter back to the file of AO for fresh adjudication. The Ld. AR submitted that the AO i.e. ITO Ward 8(4) Kolkata had thereafter vide his order passed u/ss. 254/143(3) of the Act dated 30.12.2019 for A.Y.2012-13 assessed the income of the investor company and accepted its returned income as such, Pages 136 to 139 of the APB.
16
Income Tax Officer-3(1), Raipur Vs. Capital Buildcon Pvt. Ltd. ITA No.80 /RPR/2024
17. Carrying his contention further, ld. AR submitted that the core issue that was there before the AO in the course of the set-aside assessment proceedings in the case of the investor company was the addition made by his predecessor i.e. ITO, 10(1), Kolkata, vide his order u/s 143(3) of the Act, dated 22.03.2015 u/s 68 by treating the share capital/premium of Rs.12,29,50,000/- received by the investor company, i.e. Intime Commodeal Pvt. Ltd. as an unexplained cash credit. The Ld. AR submitted that the AO in the course of the set-aside assessment proceedings in the case of the investor company for A.Y.2012-13 had carried out necessary verifications and also summoned its director, who had appeared and submitted all the documents to substantiate the authenticity of its claim of having received genuine share application money. It was further submitted by him that the AO in the course of the set-aside assessment proceedings had after vetting the documents that were placed before him in the backdrop of the statement of its director that was recorded u/s 131 of the Act, not drawn any adverse inference as regards the share capital/premium of Rs. 12,29,50,000/- that was received by it in the period relevant to A.Y.2012-13. The ld. AR based on his aforesaid contention vehemently submitted that now when the source-of-source of the investment in share application money made by the investor company with the assessee company had not only been proved to the hilt but had also been accepted by the department while framing the scrutiny assessment in case of the said investor company, thus, it was incomprehensible as to on what basis adverse inferences as regards the investment made by the said investor company was drawn by the AO.
17
Income Tax Officer-3(1), Raipur Vs. Capital Buildcon Pvt. Ltd. ITA No.80 /RPR/2024
18. Apart from that, the ld. AR submitted that the AO while framing the assessment in the case of the assessee company for the subject year, i.e. A.Y.2015- 16 had issued summon u/s. 131 of the Act to Intime Commodeal Pvt. Ltd. (supra) and had called for its books of account, and details as regards its investments towards share capital/share application money made during the subject year with the assessee company, Page 344 of the APB. Carrying his contention further, ld. AR submitted that the aforementioned investor company had vide its reply dated 22.12.2017 furnished with the AO the complete source of its funds that were utilized for investing in share application money with the assessee company during the year under consideration, Page 345 of the APB. It was, thus, the claim of the ld. AR that now when the assessee company had duly discharged the onus that was cast upon it not only as regards proving to the hilt the identity and creditworthiness of the investor company but also the genuineness of the transaction of receipt of share application money from the latter, therefore, no adverse inferences could have justifiably been drawn as regards the funds which were received from the said share applicant company.
19. We have thoughtfully considered the contentions advanced by the ld. Authorized representatives of both parties in the backdrop of material available on record.
20. We have carefully perused the details of the investments made by the aforementioned Investor Company, viz. Intime Commodeal Pvt. Ltd. (supra) during the AY 2012-13 to AY 2015-16 a/w. its "balance sheets" for the said respective years 18 Income Tax Officer-3(1), Raipur Vs. Capital Buildcon Pvt. Ltd. ITA No.80 /RPR/2024 as had been filed before us. As stated by the ld. AR, and rightly so, the investment of Rs. 2.39 crores (approx.) made by Intime Commodeal Pvt. Ltd. (supra) with the assessee company during the subject year is sourced out of its investments for AY 2012-13. For the sake of clarity, we deem it fit to cull out the "Charts" reflecting the investments of the aforementioned Investor Company which thereafter had sourced its investment in share application money of Rs. 2.39 crores (approx.) with the assessee company during the subject year, as under:
19
Income Tax Officer-3(1), Raipur Vs. Capital Buildcon Pvt. Ltd.ITA No.80 /RPR/2024 20
Income Tax Officer-3(1), Raipur Vs. Capital Buildcon Pvt. Ltd.ITA No.80 /RPR/2024
21. As observed by us hereinabove, it is a matter of fact borne from record that the investment in equity shares of Rs. 11.14 crores (approx.) made by the Investor 21 Income Tax Officer-3(1), Raipur Vs. Capital Buildcon Pvt. Ltd. ITA No.80 /RPR/2024 Company during AY 2012-13 had, inter alia, sourced the investment of Rs.2.39 crores (supra) in share application money with the assessee company during the subject year, i.e. A.Y.2015-16.
22. It would be relevant to point out that the authenticity of the receipt of the share application/premium of Rs.12,29,50,000/- by Intime Commodeal Pvt. Ltd. (supra) i.e. the investor company had after thorough deliberations been accepted by the AO while framing the set-aside assessment in its case vide his order passed u/ss. 254/143(3) of the Act dated 30.12.2019 for A.Y.2012-13, Pages 136 to 139 of APB. The AO while framing the set-aside assessment of Intime Commodeal Pvt. Ltd. (supra) for AY 2012-13 had after carrying out necessary verifications concluded that the amount of Rs.12.29 crores (approx.) received by the Investor Company as share capital/premium during the AY 2012-13 was a genuine infusion of funds.
23. We are of the view that now when the investment of Rs. 2.39 crores (supra) made by Intime Commodeal Pvt. Ltd. (supra) in share application money with the assessee company is found to have been sourced from its genuinely infused share capital/premium of Rs. 12.29 crores (approx.), therefore, the doubts and suspicion raised by the AO as regards the authenticity of the source of the investment towards share application money of Rs.2.39 crore (supra) made by the investor company with the assessee company during the year under consideration, i.e. A.Y.2015-16 is totally misplaced.
22
Income Tax Officer-3(1), Raipur Vs. Capital Buildcon Pvt. Ltd. ITA No.80 /RPR/2024
24. Apart from that, we are the view that now when the aforementioned investor company, viz. Intime Commodeal Pvt. Ltd (supra) had in the course of the assessment proceedings of the assessee company complied with the summons issued u/s 131 of the Act, dated 19.12.2017, and had not only furnished the requisite details as were called for by the AO to substantiate the authenticity of its investments made with the assessee company but had also vide its letter dated 22.02.2017 furnished details as regards the source of its funds that were used for making the said investment, therefore, the said material aspect could not have been summarily brushed aside by the AO.
25. We, thus, are of a strong conviction that as the assessee company in the course of the assessment proceedings had dully discharged the onus that was cast upon it u/s 68 of the Act, viz (i). the "nature" and "source" of the amount of Rs. 2.39 crores (supra) credited in its books of account; and (ii). the source of source of the investment in share application money in the hands of the investor company in whose name the aforementioned amount was credited in the books of account of the assessee company; therefore, the AO without dislodging the authenticity of the aforesaid claim of the assessee company based on any material proving to the contrary could not have summarily drawn adverse inferences as regards the genuineness of the transaction in question.
26. In our view now when the assessee company had dully discharged the onus that was cast upon it as regards proving the "nature" and "source" of the credit in its books of account as per the mandate of sec. 68 of the Act, the department could 23 Income Tax Officer-3(1), Raipur Vs. Capital Buildcon Pvt. Ltd. ITA No.80 /RPR/2024 not have summarily brushed aside the same and drawn adverse inferences as regards the genuineness of the assessee's claim of having received share application money from the aforesaid investor company. Our aforesaid view is supported by the judgment of the Hon'ble Supreme Court in the case of CIT vs. Orissa Corporation P. Ltd. (1986) 159 ITR 78 (SC). Also, a similar view has been taken by the Hon'ble High Court of Delhi in the case of Pr. CIT vs. Laxman Industrial Resources Ltd. (2017) 397 ITR 106 (Del). The Hon'ble High Court of Delhi, had observed that in any case where the assessee had provided the requisite documents to prove the authenticity of the transaction of receipt of share application money, then the AO remains under an onerous obligation to scrutinize the said documents and cannot draw adverse inferences merely based on the report of the investigation wing. As the AO in the present case before us had failed to lead any evidence that would dislodge the authenticity of the assessee's claim of having received share application money from the investor company, therefore, we are unable to persuade ourselves to subscribe to the adverse inferences drawn by him, resulting to dubbing of the amount of Rs. 2.39 crores (supra) as an unexplained cash credit u/s 68 of the Act in the hands of the assessee company.
27. At this stage, we also find substance in the claim of the ld. AR that as the aforementioned investor company, viz. Intime Commodeal Pvt. Ltd (supra) had been assessed u/s 143(3) of the Act by the ITO, Ward 10(1), Kolkata for A.Y.2015-16 vide order dated 16.11.2017, wherein the investment made with the assessee company during the subject year was looked into and verified, therefore, the said fact further 24 Income Tax Officer-3(1), Raipur Vs. Capital Buildcon Pvt. Ltd. ITA No.80 /RPR/2024 supplements the genuineness of the assessee's claim of having received share application money from the aforementioned Investor Company, Pages 336 and 337 of the APB. We further find that the AO while framing the assessment of the investor company, viz. Intime Commodeal Pvt. Ltd. for A.Y.2015-16, had vide his notice u/s 142(1) of the Act, dated 12.07.2017 specifically queried into the investment /advances/loans made by the said investor Company, Pages 338 and 339 of APB. Also, it transpires that the AO, Ward 10(1), Kolkata while framing the assessment of Intime Commodeal Pvt. Ltd. (supra), i.e. the investor company had vide his letter dated 06.09.2017 called upon it to furnish documents supporting its investments in unlisted equity made during the subject year, Page 343 of APB. To sum up, it is a matter of fact borne from the record that the authenticity of the investment made by the investor company with the assessee company during the subject year, i.e. AY 2015-16 had been verified by the respective AOs' while framing the assessments of both the said entities, i.e. the assessee company and the Investor Company.
28. We shall now deal with the observation of the AO, who had drawn adverse inference as regards the authenticity of the assessee's claim of having received genuine share application money of Rs. 2.39 crores (supra) from the investor company for the reason that notice u/s 133(6) of the Act issued to the latter was returned unserved. Admittedly, it is a matter of fact discernible from the record that the AO, while framing assessment in the case of the assessee company, in order to verify the veracity of the aforesaid investment had issued a notice u/s 133(6) of the Act on 08.11.2017 to the aforementioned investor company, viz. Intime Commodeal 25 Income Tax Officer-3(1), Raipur Vs. Capital Buildcon Pvt. Ltd. ITA No.80 /RPR/2024 Pvt. Ltd. (supra), which, however, was returned unserved. In our view, a mere return of notice issued u/s 133(6) of the Act to the investor company cannot on such standalone basis justify drawing of adverse inferences as regards the authenticity of the transaction under consideration. Our aforesaid view is fortified by the following judicial pronouncements:
"1. CIT vs Orissa Corporation P. Ltd. (1986) 159 ITR 78 (SC), relevant observations in para no. 5 & 13.
2. ACIT vs Venkateshwar Ispat P. Ltd. (2009) 319 ITR 393 (Chhattisgarh).
3. CIT vs Orchid Industries P. Ltd. (2017) 397 ITR 136 (Mum.), PN 226 & 227 of PB, relevant observations at PN 227, para no. 6.
4. Abhijavala Developers (P.) Ltd. vs ITO (2021) 187 ITD 222 (Mum.)
5. ITO vs M/s Shree Banke Bihari Infracon Pvt. Ltd., ITA No. 95/RPR/2020 dt. 18.03.2024"
29. Be that as it may, it transpires from a perusal of the record, that the AO of the Investor Company i.e. ITO Ward 10(1), Kolkata while framing the assessment in its case had issued summon u/s 131 of the Act dated 19.12.2017, which was duly complied with by the director of the said investor company. We find substance in the claim of the ld. AR that now when the aforesaid investor company was found available at the aforesaid address i.e. AD-76, Salt Lake, Sector-1, Kolkata, as provided in the summon issued u/s 131 of the Act, dated 19.12.2017, then why the notice issued by the AO u/s 133(6) of the Act, dated 08.11.2017 to the said concerned investor company could not be served upon it. Apart from the fact, we are of the view that as the AO, i.e. ITO Ward 10(1), Kolkata pursuant to the original 26 Income Tax Officer-3(1), Raipur Vs. Capital Buildcon Pvt. Ltd. ITA No.80 /RPR/2024 assessment of the investor company framed u/s. 143(3) of the Act, dated 16.11.2017 having been set-aside by the Tribunal, had framed fresh assessment in its case vide his order passed u/s 143(3) of the Act r.w Sec. 254 of the Act, dated 30.12.2019 for AY 2012-13, therefore, the existence of the said Investor Company stands proved beyond doubt.
30. Apropos the observation of the AO that the investor company did not have substantial income to source the investment of Rs.2.39 crores (supra) with the assessee company, we concur with the ld. AR that as the latter had substantial worth, a fact which has not been dislodged by the department based on any supporting material, therefore, no adverse inference on the said count was warranted. Our aforesaid view that there is no justification for drawing an adverse inference as regards the authenticity of the transaction of receipt of share capital/premium from an investor company for the reason that the latter had meager income is supported by the order passed by the Tribunal in the case of ITO vs. M/s Shri Banke Bihari Infracon Pvt. Ltd., ITA No. 95/RPR/2020. For the sake of clarity, observations of the Tribunal on the aforesaid aspect are culled out as under:
"27. Apropos the observation of the A.O. that the investor company, viz. M/s. Modakpriya Merchandise P. Ltd. had disclosed Income of Nil and falled to generate any revenue during the year under consideration, we are afraid that considering the totality of the facts involved in the present case before us, adverse inferences as regards the authenticity of the transaction under consideration could not have been merely drawn by the A.O on the said standalone basis. Our aforesaid view is supported by the order of the ITAT, Raipur in the case of Anjani Associates Vs. ITO, ITA No.27/RPR/2018 dated 10.08.2018 for A.Y.2014-15. The 27 Income Tax Officer-3(1), Raipur Vs. Capital Buildcon Pvt. Ltd.ITA No.80 /RPR/2024
Tribunal had observed, that merely because lender companies had done meager business or have declared meager income, the same could not be a ground to disbelieve their creditworthiness especially when their respective "balance sheets" showed sufficient capital and reserves to advance such loans to the assessee company. Also, a similar view had been taken by the Hon'ble High Court of Bombay in the case of Pr. CIT VS. AMI Industries (India) P. Ltd. (2020) 424 ITR 219 (Bom.). In the case before the Hon'ble High Court, the A.O had observed, that though the share applicant company was in existence and had filed its income tax return for the year under consideration but had very meager income as disclosed in the return of income, thus, for the said reason, had doubted their creditworthiness. On appeal, the Tribunal, inter alia, observed that as the creditworthiness of the parties was proved from the bank accounts which revealed that they had funds to make payment for share application money and the said transaction was proved as per the resolution passed in the meeting of the board of directors, thus, no adverse Inferences as regards the authenticity of the assessee's claim of having received genuine share application money from them was liable to be drawn. The aforesaid view taken by the Tribunal, had thereafter, been approved by the Hon'ble High Court, which had dismissed the appeal filed by the revenue. Also, our aforesaid view is supported by the order of ITAT, Surat in the case of Pr. CIT Vs. Gandhi Capital (2022) 194 ITD 396 (Surat) and that of ITAT, Kolkata in the case of BST Infratech Ltd. Vs. Deputy Commissioner of Income-tax [2023] 146 taxmann.com 406 (Kolkata - Trib.)."
31. As regards the reference by the AO to the statements of Shri Dharmendra Kumar Mishra (supra) and Shri Uday Shankar Mahawar (supra), we concur with the ld. AR's contention that neither of the said persons in their respective statements, as can be gathered from the assessment order, had mentioned the name of the Investor Company. Also, there is substance in the contention of the ld. AR that as Shri Uday Shankar Mahawar (supra) was not director of the investor company, therefore, no adverse inference could have summarily been drawn based on the 28 Income Tax Officer-3(1), Raipur Vs. Capital Buildcon Pvt. Ltd. ITA No.80 /RPR/2024 contents of his statement recorded by the department. Also, we find force in the ld. AR's claim that now when Shri Dharmendra Kumar Sharma (supra) was Director in the Investor Company during AY 2012-13, therefore, no adverse inference could have been drawn as regards the amount of share application money of Rs.2.39 crores (supra) that was received by the assessee company from the aforementioned Investor Company during the period much subsequent thereto, i.e April, 2014 to June, 2014.
32. We, thus, based on ours aforesaid deliberations are of the considered view that as the assessee company had established the identity, creditworthiness, and genuineness of the transaction as required per the mandate of sec. 68 of the Act (i.e. post-amended), therefore, the CIT(A) based on his well-reasoned order had rightly vacated the impugned addition of Rs.2.39 crores (supra) that was made by the AO u/s 68 of the Act.
33. Resultantly, we find no infirmity in the view taken by the ld. CIT(A) and, thus, uphold the same.
29
Income Tax Officer-3(1), Raipur Vs. Capital Buildcon Pvt. Ltd. ITA No.80 /RPR/2024
34. The appeal filed by the revenue being devoid and bereft of any merit is thus, dismissed.
Order pronounced in open court on 28th day of June, 2024.
Sd/- Sd/-
ARUN KHODPIA RAVISH SOOD
(ACCOUNTANT MEMBER) (JUDICIAL MEMBER)
रायपुर/ RAIPUR ; दनांक / Dated : 28th June, 2024.
****Hem/SB
आदे श क त ल प अ े षत / Copy of the Order forwarded to :
1. अपीलाथ / The Appellant.
2. यथ / The Respondent.
3. The CIT(Appeals)-1, Raipur (C.G.)
4. The Pr. CIT, Raipur-1 (C.G)
5. वभागीय त न ध, आयकर अपील य अ धकरण, रायपुर बच,
रायपुर / DR, ITAT, Raipur Bench, Raipur.
6. गाड फ़ाइल / Guard File
आदे शानुसार / BY ORDER,
// True Copy //
नजी स चव / Private Secretary
आयकर अपील य अ धकरण, रायपुर / ITAT, Raipur.