Income Tax Appellate Tribunal - Mumbai
Ito 10(3)(1), Mumbai vs Aneri Properties P.Ltd, Navi Mumbai on 16 June, 2017
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IN THE INCOME TAX APPELLATE TRIBUNAL „A‟ BENCH, MUMBAI
BEFORE SHRI G.S. PANNU, AM AND SHRI RAVISH SOOD, JM
आमकय अऩीर सं./ I.T.A. No.3990/Mum/2014
(निर्धारण वषा / Assessment Year: 2007-08)
Income Tax Officer 10(3)(1), M/s Aneri Properties Pvt. Ltd.
Room No. 456, 4th Floor, बिधम/ A-12, Grain Merchant Co-op.
Aayakar Bhavan, M.K. Road Vs. Society Ltd., Sector 17,
Mumbai-400 020 Vashi, Navi Mumbai 400705
स्थामीरेखासं ./ जीआइआयसं ./ PAN/GIR No. AAACK4080F
(अऩीराथी/Revenue) : (प्रत्मथी / Assessee)
अऩीराथी की ओय से/Revenue by : Shri. Ajai Pratap Singh
प्रत्मथी की ओय से/ Assessee by : Shri Dr. K. Shivaram
सन
ु वाई की तारीख/ : 30/05/2017
Date of Hearing
घोषणा की तारीख/ : 16/06/2017
Date of Pronouncement
आदे श / O R D E R
PER RAVISH SOOD, JUDICIAL MEMBER:
That the present appeal filed by the revenue is directed against the order passed by the CIT(A)-22, Mumbai, dated 25/03/2014, which in itself arises from the order passed by the Assessing Officer u/s 143(3) of the Income tax Act, 1961 (for short Page |2 "Act"), for A.Y. 2007-08. That the revenue had assailed the order of the CIT(A) by raising the following grounds of appeal:-
"1. On the facts and in the circumstances of the case and in law the Ld. CIT(A) erred in deleting addition of Rs.55,00,000/- u/s. 68 of I.T. Act.
1.1 On the facts and in the circumstances of the case and in law the Ld. CIT(A) erred in allowing relief to the assessee in spite of the fact that the investigation of the SEBI, was not finalized.
1.2 On the facts and in the circumstances of the case and in law the Ld. CIT(A) failed to appreciate the fact that the search & seizure actions were conducted by Investigation Wing in the case of Rajat Pharmachem Group and Sapanco Group on the same issues and these facts got due mention in the assessment order.
1.3 On the facts and in the circumstances of the case and in law the Ld. CIT(A) failed to carry out enquiries by himself though he has plenary powers which Assessing Officer is having (187 ITR 688 (SC)) and only mentioned that the Assessing Officer has failed to conduct the necessary inquiries during the remand report proceedings.
2. The appellant craves leave to add, amend, vary, omit or substitute any of the aforesaid grounds of appeal at any time before or at the time of hearing of appeal.
3. The appellant prays that the order of CIT(A) on the above ground be set aside and that of the assessing officer be restored."
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2. Briefly stated, the facts of the case are that the assessee company had filed its return of income for A.Y. 2007-08 on 17.10.2007, declaring total income of Rs. Nil with a loss of (Rs. 3,104/-). The return of income of the assessee was processed as such under Sec. 143(1) of the „Act‟. The case of the assessee was thereafter taken up for scrutiny assessment under Sec. 143(2).
3. That during the course of the assessment proceedings it was observed by the A.O that the assessee had received subscriptions towards share capital during the year under consideration, as under:-
Sr. No. Name of the Qty. Of Date of Amount of
Subscriber Shares Cheque for Subscription
invested investment
1 M/s. Vangaurd Jewels 2,00,000 21.02.2007 20,00,000
Ltd. &
09.03.2007
2 M/s. Hema Trading 1,50,000 15.02.2007 15,00,000
Co. Pvt. Ltd.
3 M/s. Alka Diamond 2,00,000 20.02.2007 20,00,000
Ind. Ltd.
Total 55,00,000
That during the course of the assessment proceedings information was gathered by the A.O that one Shri Nirmal Kotecha who was the promoter of M/s Pyramid Saimira Ltd., had floated number of companies to manipulate the scrips of the above mentioned company in the stock market. That it came to the notice of the A.O that SEBI had identified about 230 companies which were involved in such manipulation of shares by rigging the prices. It was observed by the A.O that the aforesaid share subscribers of the assessee company, viz.
(i). M/s Vangaurd Jewels Ltd., (ii). M/s Hema Trading Co. Pvt. Ltd.
and (iii). M/s Alka Diamond Ind. Ltd., figured in the list of 230 entities Page |4 (supra). The A.O. called for the KYC details of the companies from the banks where these companies maintained their accounts and had routed their funds by way of share subscriptions to the assessee company. That as per the information gathered by the A.O., the list of persons/directors who were appointed as authorized signatories for operating the aforesaid bank accounts of the subscriber companies, were as under:-
Sr. No. Name of Subscriber Name of the
Authorized Signatory
/Director
1 M/s. Vangaurd Jewels Pvt. Uma Jayant Kansar
Ltd.
2 M/s. Nakshatra Business -
Pvt. Ltd.
3 M/s. Alka Diamond Ltd. Gopal Javda
The A.O. further observed that the aforesaid subscriber companies at Sr.No.1 to 3 were sharing a common email address i.e. hkamalcorp @hotmail.com, common telephone nos. i.e. 23624583, 2336534, as well as were operating from the same address. The A.O observed that the „Memorandum of association‟ (for short „MOA‟) of the aforesaid companies had a particular pattern, and one Sh. K.K Jhunjunwala, a Chartered accountant figured as witness in the „MOA‟ of all the three companies. That still further a scan of the list of the 230 entities (supra) revealed that the names of the authorized signatories or the directors of the aforesaid subscriber companies also figured in the same. The A.O observed that SEBI had suspended the aforesaid three companies from trading directly or indirectly in the stock market. That as per the A.O certain search and seizure operations carried out Page |5 by the Investigation wing of the Income-tax department in the case of certain group companies, viz. Rajat Pharmachem Group and Spanco Group, therein revealed that the aforesaid subscriber companies had indulged in paper transactions of trading in goods.
4. The A.O harbouring serious doubts as regards the genuineness and veracity of the raising of funds by way of share subscriptions by the assessee company, therein had a strong conviction that the source of funds moving through a maze of accounts belonging to the subscriber companies had remained unexplained in absence of genuine transactions. The A.O in the backdrop of the aforesaid facts recorded the statement of the main director of the assessee company, viz. Shri Mayur Satra, who however stated that he was neither aware of the main persons of the subscriber companies, nor about the nature of their activities and whereabouts. It was further stated by Sh. Mayur Satra that the main link between the assessee company and the investors was one Shri Premji Darod. The A.O thus in order to verify the genuineness of the transactions and the creditworthiness of the subscriber companies, therein issued summons to the aforesaid authorized signatories/directors of the subscriber companies. The summons issued to the authorized signatories/directors of the subscriber companies were however not complied with, and on the basis of identically worded letters the aforementioned persons declined to appear before the A.O. That subsequent thereto one Shri Nilesh Parmar, director of one of the subscriber company, viz. M/s Vanguard Jewel Pvt. Ltd. appeared before the A.O and placed on record the copy of the „Profit and loss account‟ and the „Balance sheet‟ of the subscriber company. That Sh. Nilesh Parmar (supra) in his statement recorded by the A.O. expressed his unawareness of the transactions related to the investment made in the shares of the assessee company. That on an enquiry as regards the source of the funds from where Page |6 investment towards the shares of the assessee company was made by the subscriber company, it was submitted by him that the same were on account of receivables from the business of trading in diamond. It was however gathered by the A.O. that the companies with which business was claimed to have been transacted by the subscriber company, viz. M/s Vanguard Jewel Pvt. Ltd, were in itself identified as companies indulging in paper transactions. The aforesaid director was called upon by the A.O to file certain documents, which however were never filed by him.
5. The A.O. in the backdrop of the aforesaid facts, though being of the view that there was no dispute that the funds had been received by the assessee company from the subscriber companies through banking channels, and as such the existence of the subscribers was not in dispute, but however had serious doubts, both as regards the creditworthiness of the subscriber companies and the genuineness of the transactions. The A.O thus in the totality of the aforesaid facts, being of the considered view that receipt of funds by the assessee company by way of share subscriptions from the aforesaid three subscriber companies was not by way of genuine transactions, as well as the creditworthiness of the subscribers was also not established, therefore called upon the assessee to explain as to why the amount received by way of share subscriptions during the year may not be added back to its total income as unexplained cash credit under Section 68 of the „Act‟. That in response to the aforesaid „SCN‟ the assessee company submitted vide its reply dated 29.12.2009 that as the complete creditworthiness of the subscriber companies, viz. complete address of the parties; PAN numbers; copies of the income tax returns of the subscribing companies; copies of the audited P & loss a/c and balance sheets of the respective companies for A.Y. 2007- 08; confirmations of the respective subscriber companies, along with Page |7 notarized „Affidavits‟ of the directors admitting subscribing to the shares of the assessee company, and the copies of the bank accounts of the subscriber companies were placed on record of the A.O, therefore the initial onus as stood cast upon it to substantiate the creditworthiness of the subscribers and genuineness of the transaction stood discharged beyond any scope of doubt. The assessee further fortifying the genuineness of the transactions as well as the creditworthiness of the subscriber companies, therein submitted that all of the respective subscriber companies were of substantial net worth, and a perusal of their respective bank accounts from which the share subscriptions were received by the assessee company did not reveal that any cash had been deposited in the said respective bank accounts, in the absence of which there remained no occasion to draw any doubts, either as regards the genuineness of the transactions or the creditworthiness of the subscriber companies.
6. That the A.O after perusing the contentions of the assessee in the backdrop of the facts of the case though conceded to the fact that the identity of the subscriber companies was not disputed, but however concluded that it remained as a matter of fact that the assessee had failed to establish the capacity of the subscribers, and therein prove that the money so received from the respective subscribers was coming out of their disclosed and accounted sources of income. The A.O thus being of the view that the assessee had failed to explain both the „Nature‟ and „Source‟ of the amount of Rs. 55 lac which was claimed to have been received by way of share subscriptions, therefore assessed the same as an unexplained credit in the hands of the assessee u/s 68 of the „Act‟.
7. The assessee being aggrieved with the order of the A.O therein carried the same in appeal before the CIT(A). That before the CIT(A) Page |8 the assessee objected to the reliance placed by the A.O on the SEBI‟s order passed in the case of Pyramid Saimira Theatre Ltd. It was submitted by the assessee that as per the records, the transaction under the scanner of SEBI was carried out in the stock market in the above mentioned case on 21st and 22nd December, 2008, whereas in the case of the assessee the share application money was received in February, 2007. It was submitted by the assessee that the issue involved with SEBI was in connection with rigging of prices of shares of Pyramid Saimira Theatre Ltd. (supra), which had nothing to do with the creditworthiness of the subscriber companies and the genuineness of the transaction, as the transaction in the case of the assessee was in connection with share capital. The assessee further objected to the reference by the A.O in the assessment order of certain search and seizure action conducted by the Income-tax department, which as claimed by the A.O revealed that the subscriber companies were found to be indulged in paper transactions of trading in goods. The CIT(A) in order to dispel the aforesaid doubts, thus in all fairness directed the A.O to conduct further enquiries by summoning the subscribers, and also to find out as to whether the interim order passed by SEBI was followed by a final order. The remand report of the A.O was received by the CIT(A) on 03.02.2011. The A.O in his remand report though conceded that no details were available as regards any search and survey operations conducted on the subscriber companies, but however in complete disregard to the specific directions of the CIT(A), therein neither conducted any enquiries about the subscriber companies, nor gathered any information as regards the final order of SEBI. The CIT(A) therefore once again issued directions to the A.O under Section 250(4) and called upon him to conduct enquiries with the share subscribers by summoning them, as well as gather information about the final outcome of the SEBI order. The A.O Page |9 however despite specific directions by the CIT(A), once again acted in a most callous manner and did not bother to issue summons to the subscriber companies under Section 131, nor gathered the details as regards the final outcome of the SEBI order. The CIT(A) thus witnessing the miserable failure on the part of the A.O to comply with his directions, thus being left with no other alternative, therein proceeded with on the basis of the submissions made by the assessee before him and the facts available on record.
8. The CIT(A) referring to the records available before him, therein observed that during the course of the remand proceedings the A.O had addressed a letter dated. 27.09.2013 to SEBI, in response to which the Deputy General Manager (Investigation Department), SEBI had filed a reply dated. 19.09.2013, which read as under:-
"We have received your letter dated September 05, 2013 wherein you have sought the details of any action taken or contemplated by SEBI in respect of three companies and the details of money laundering activity , if any, undertaken by M/s. Aneri Properties Pvt. Ltd.
It be noted that SEBI in the matter of Pyramid Saimira Theatres Ltd. (PSTL) vide ex-parte, ad interim order dated. April 23,2009 inter-alia among others directed M/s Vanguard Jewels Lt., M/s Hema Trading Company Pvt. Ltd. and M/s Alka Diamond Ind. Ltd. not to buy, sell or deal in the securities market including in initial public offerings, in any manner, either directly or indirectly, till further directions. The said interim order is available on SEBI website. No final order is passed with respect to these companies till date. A reference was also made to Finance Intelligence Unit.
P a g e | 10 SEBI has initiated proceedings u/s 11 and 11B of SEBI Act, 1922 against the said three companies and the same is pending. There is no entity with the name M/s Aneri Properties Pvt. Ltd. involved in the investigation of Pyramid Saimira Theatres Ltd."
The CIT(A) being of the view that though the assessee had placed on record overwhelming evidence, viz. complete address of the parties; PAN numbers; copies of the income tax returns of the subscribing companies; copies of the audited P & loss a/c and balance sheets of the respective companies for A.Y. 2007-08; confirmations of the respective subscriber companies, along with notarized „Affidavits‟ of the directors admitting subscribing to the shares of the assessee company; and the copies of the bank accounts of the subscriber companies on the record of the A.O, and thus discharged the initial onus as regards the creditworthiness of the subscribers and the genuineness of the transactions, but however the A.O on the other hand had completely failed to controvert the evidences which were filed before him. The CIT(A) further observed that despite specific directions, the A.O had failed to conduct enquiries with the share subscribers by either issuing summons u/s 131 or notices u/s 133(6). The CIT(A) thus being of the view that the A.O. had failed to place on record any material which could go to prove that the assessee had given cash, which in turn was routed and got invested as share application money with the assessee company, nor had placed on record any evidence which could go to prove that the substantial documentary evidences furnished by the assessee in support of creditworthiness of the subscriber companies and genuineness of the transaction was found to be untrustworthy or lacked credibility, therefore concluded that the A.O. had failed to discharge the onus as was shifted on him. The CIT(A) further being of the view that the share P a g e | 11 application money was received by the assessee company from the aforesaid subscribers in February, 2007, whereas the investigation of SEBI and its order was passed in December 2008, therefore concluded that it was absolutely impossible that the money earned by rigging of shares could have been introduced in the form of share application money with the assessee company. The CIT(A) further perusing the remand report of the A.O, wherein the latter had conceded that there was no such material available with him about the alleged searches and surveys conducted by the investigation wing of the department, from where it could be gathered that the subscriber companies were found to have indulged in paper transactions of trading in goods, thus concluded that the A.O while framing the assessment had wrongly remained under the influence of the SEBI‟s order, as well as proceeded with on the basis of wrong and misconceived facts. The CIT(A) thus holding a strong conviction that the A.O. without conducting any independent inquiry and gathering any material which could go to irrebutably prove that the share application money subscribed by the companies was bogus, had rather only on the basis of presumptions wrongly characterized the amount of Rs.55 lac as an unexplained cash credit in the hands of the assessee. The CIT(A) thus relying on a host of judicial pronouncements therein set aside the order of the A.O and allowed the appeal of the assessee.
9. That the revenue aggrieved with the order of the CIT(A) had therein assailed the same in appeal before us. That at the very outset of the hearing of the appeal it was submitted by the ld. Authorized Representative (for short „A.R‟) for the assessee, that the issue involved in the case of the present assessee was squarely covered by the decision of the coordinate bench of the Tribunal in the case M/s Jinit Properties Pvt. Ltd. (ITA No. 3989/Mum/2014, A.Y. 2006-07; Dated 29.03.2016) (Mum) (Trib), wherein a similar addition made by P a g e | 12 the A.O had been struck down by the CIT(A), and the appeal of the revenue had thereafter been dismissed by the Tribunal. It was submitted by the ld. A.R. that not only the facts involved in the case of the assessee company were identical to those involved in the case of M/s Jinit Properties Pvt. Ltd. (supra), but rather the very genesis and the entire chain of events leading to drawing of adverse inferences and addition of the share subscriptions received in both the cases by the A.O were found to be the same. The Ld. A.R in order to drive home his contention that the facts involved in the case of M/s Jinit Properties Pvt. Ltd. (supra) for A.Y. 2007-08 were similar to those involved in the appeal of the present assessee, therein referred to a chart placed at Page No. 2 of the fact sheet filed by him, as under:-
PARTICULARS M/S JINIT PROPERTIES ASSESSEE
PVT. LTD.
Assessment Year 2007-08 2007-08
Share applicants 3 i.e. M/s Hema Trading 3 i.e. M/s. Hema
Co. Pvt. Ltd. Real Gold Trading Co. Pvt. Ltd.
Trading Pvt. Ltd. and Yash M/s. Vanguard
V. Jewels Ltd. Jewels Ltd. and M/s.
Alka Diamond Ind.
Ltd.
Reason for addition by The genuineness of the The genuineness of
A.O. transaction and the credit the transaction and
worthiness of the the credit worthiness
subscribers was not proved of the subscribers
by the assessee. was not proved by the
assessee
Reason for deletion of AO presumed that the AO presumed that the
addition by CIT(A) share application money share application
subscribed by these money subscribed by
P a g e | 13
companies were bogus these companies were
without conducting any bogus without
independent inquiry and conducting any
without gathering any independent inquiry
material. and without gathering
any material.
Name of CIT(A) and date Dr. B. Senthil Kumar Dr. B. Senthil Kumar
of CIT(A) order
25.03.2014 25.03.2014
Remand Report contents Same Response Same Response
It was thus in the backdrop of the aforesaid facts averred by the ld. A.R. that as the issue involved in the present case was squarely covered by the order passed by the Tribunal in the case of M/s Jinit Properties Pvt. Ltd. (supra), therefore the addition made in the hands of the assessee may therein be deleted. The ld. A.R. further supported the order of the CIT(A) and therein submitted that the additions made by the A.O. on the basis of assumptions, presumptions and misconceived facts had rightly been deleted by the CIT(A) on the basis of a well reasoned order.
10. Alternatively, it was submitted by the ld. A.R. that even if it so emerged that the amount of share application money was received by the assessee from bogus shareholders, in that situation also the A.O. could have only proceeded against the shareholders and assessed the amount in their respective hands, while for no such addition was called for in the hands of the assessee company. The ld. A.R. in support of his aforesaid contention relied on the recent judgment of the Hon'ble High Court of Bombay in the case of CIT Vs. Gagandeep Infrastructure Pvt. Ltd. (ITA No. 1613 of 2014, dated 20.03.2017), wherein the Hon'ble High Court had held as under:-
P a g e | 14 "We find that the proviso to Section 68 of the Act has been introduced by the Finance Act 2012 with effect from 1st April, 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 th Revenue that section 68 of the Act as in force during the subject years has to be read/understood as thought the proviso added subsequently effective only from 1st April, 2013 was its normal meaning. The Parliament did not introduce to proviso to Section 68 of the Act with retrospective effect nor does the proviso so 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 of the Act is immaterial and does not change the interpretation of Section 68 of the Act both before and after the adding of the proviso. In any view of the matter the three essential tests while confirming the pre-proviso Section 68 of the Act laid down by the Courts namely the genuineness of the transaction, identity and the capacity of the investor have all been examined by the impugned order of the Tribunal and on facts it was found satisfied. Further it was a submission on behalf of the Revenue that such large amount of share premium gives rise to suspicion on the genuineness (identity) of the shareholders i.e. they are bogus. The Apex Court in Lovely Exports (P) Ltd. (supra) in the context to the pre-amended Section 68 of the Act has held that where the revenue urges that the Amount of share application money has been received from bogus shareholders then it is for the Income Tax Officer to Proceed by reopening the assessment of such shareholders an assessing them to tax in accordance wi6th law. It does not entitle the revenue to P a g e | 15 add the same to the assessee's income as unexplained cash credit."
Per contra, the ld. Departmental Representative (for short D.R.) supported the order of the A.O.
11. We have heard the Authorized Representatives for both the parties, perused the orders of the lower authorities and the material produced before us. We find that the issue involved in the present appeal involving identical facts, as averred by the ld. A.R., is covered by the order passed by a coordinate bench of the Tribunal in the case of ITO-10(3), Mumbai Vs. Jinit Properties Pvt. Ltd. (ITA 3989/Mum/2014, A.Y. 2007-08, dated 29.03.2015). We find that in the aforementioned case while for one of the subscriber company, viz. M/s Hema trading Co. Pvt. Ltd. (supra) was common as in the case of the assessee company, but for the remaining two subscriber companies were different. Be that as it may, we however find that the issue pertaining to the genuineness of the transaction involving the raising of funds by way of share subscriptions, as well as the creditworthiness of the subscriber companies, in both the cases are found to be similarly placed and emerges from the same set of facts. That the ld. A.R. in order to drive home his contention as regards the similarity between the facts involved in the case of the present assessee company, as against that of M/s Jinit Properties Pvt. Ltd. (supra), had therein drawn our attention to the order passed by the A.O. and the CIT(A) in the case of the aforesaid party, viz. M/s Jinit Properties Pvt. Ltd. (supra), on perusal of which we find ourselves to be in agreement with the factual position so averred by the Ld. A.R before us. We have perused the order passed by the coordinate bench of the Tribunal in the case of Jinit Properties Pvt. Ltd. (supra), wherein P a g e | 16 the Tribunal while dismissing the appeal of the revenue had held as under:-
"We have heard the rival submissions and perused the material before us. We find that the A.O. had made an addition of Rs.55.00 lacs invoking the provisions of section 68 of the Act, that RGTPL, HTCPL and YVJL had subscribed Rs.20.000 lacs, Rs.20.00 Iacs and Rs. 15.00 lacs respectively as share subscription money, that the A.O had not doubted the identity of the subscribers, that he was of the opinion that genuineness of the transaction and creditworthiness of the subscribers was not proved by the assessee, that he referred to order of SEBI and search and seizure actions carried out by the Investigation Wing of the department for making the addition, that the SEBI had found that all the three subscribers were engaged in price rigging of shares of PSTL, that the FAA had directed the A.O to carry out certain enquiry and furnish remand report, that the A .O submitted two remand reports, that he did not follow the instructions of the FAA issued as per provisions of section 250(4) of the Act, that the FAA had directed him to verify the claim made by the assessee about the credit worthiness of the subscribers. We find that the assessee had filed copies of income tax returns, directors reports, confirmations and affidavits of the directors of all the three subscribers. Thus, it had discharged the burden of proof cast upon it. However, the A.O ignored these evidences and did not make any further enquiries. It is surprising that in spite of clear direction of the FAA, he chose not to examine the evidences produced by the assessee. The FAA had given a clear finding of fact that there was no evidence of deposit of cash in the bank accounts of the subscriber at the time of issuing cheques to the assessee for P a g e | 17 allotting shares. The A.O has ignored the fact that the net worth of all the three subscribers was approximately Rs.2.00 crores, that the transactions were carried out through banking channels. It is found that the A.O did not make any enquiries with the subscribers about the investments made by them. The FAA has mentioned that the incidence of price rigging took place in the month of December of the succeeding year whereas the subscription was made in earlier year. Thus, it could not be said that assessee had routed its unaccounted money through the subscribers in our opinion, assessee had discharged its onus in proving the identity of the creditor as well as creditworthiness of the subscribers and genuineness of the transactions. In these circumstances, we are of the opinion that the order of the FAA does not suffer from any legal or factual infirmity. The A.O had not made any enquiries to substantiate his stand. Considering the above, we uphold the order of the FAA and decide the effective ground of appeal against the A.O."
12. We have given a thoughtful consideration to the order of the CIT(A) and are persuaded to subscribe to the view arrived at by him by way of a well reasoned order. We find that the CIT(A) had observed that while for the assessee had placed on record overwhelming evidence in support of the credibility of the share subscribers and the genuineness of the transactions, and thus by so doing had discharged the initial onus as stood cast upon it, while for on the other hand the A.O except for harbouring doubts, despite specific directions by the CIT(A), had neither gathered information as regards the share subscribers, nor verified about the status of the final order of SEBI. The CIT(A) had further observed that the assessee in discharge of the onus as stood cast upon it as regards satisfaction of the „Nature‟ and „Source‟ of the credit appearing in its books of accounts, as P a g e | 18 contemplated u/s 68 of the „Act‟, had therein placed on record overwhelming evidence, viz. complete address of the parties; PAN numbers; copies of the income tax returns of the subscribing companies; copies of the audited P & loss a/c and balance sheets of the respective companies for A.Y. 2007-08; confirmations of the respective subscriber companies, along with notarized „Affidavits‟ of the directors admitting subscribing to the shares of the assessee company; and the copies of the bank accounts of the subscriber companies, on the record of the A.O, and thus established beyond any scope of doubt, viz. (i). Identity of the parties; (ii). Creditworthiness of the parties; and (iii). Genuineness of the transactions. The CIT(A) had further observed that as all of the respective subscriber companies were of substantial net worth, and a perusal of their respective bank accounts from which the share subscriptions were received by the assessee company did not reveal that any cash had been deposited in the said respective bank accounts, therefore there remained no occasion to draw any doubts, either as regards the genuineness of the transactions or the creditworthiness of the subscriber companies. We further find that as observed by the CIT(A), the A.O had not only absolutely failed to controvert the evidences which were filed before him by the assessee, but rather as a matter of fact even failed to comply with the directions of the CIT(A) and carry out the requisite enquiries. We find that the CIT(A) dealing with the contention of the A.O that the assessee company had indulged in raising of bogus share capital, had therein rebutted the same by observing that pursuant to a letter dated. 27.09.2013 written by the A.O to SEBI, the Deputy General Manager (Investigation Department), SEBI, had vide his reply dated. 19.09.2013, therein categorically stated that there was no entity with the name M/s Aneri Properties Pvt. Ltd. involved in the investigation of Pyramid Saimira Theatres Ltd. We have perused the P a g e | 19 aforesaid observations of the CIT(A) and are of the considered view that in the absence of any material having been placed on record by the Ld. D.R which could prove to the contrary, and therein persuade us to dislodge the same, are thus unable to persuade ourselves to disturb the well reasoned order of the CIT(A).
13. We further find ourselves to be in agreement with the observations of the CIT(A), that now when the share application money was received by the assessee company from the subscriber companies in February, 2007, while for the investigation of SEBI and its order was passed in December 2008, which too was in context of some rigging of shares, therefore it was absolutely impossible that the money earned by such rigging of shares could have been introduced in the form of share application money with the assessee company. We further find that the adverse inferences arrived at by the A.O that the subscriber companies had indulged in paper transactions of trading in goods, was in itself found to be incorrect by the A.O in the course of the remand proceedings. Be that as it may, we are unable to find any reason to dislodge the duly substantiated creditworthiness of the subscriber companies and the genuineness of the transactions in the backdrop of overwhelming documentary evidence placed on record by the assessee company in support thereof, which we find had not been rebutted by the A.O. We find ourselves to be in agreement with the CIT(A) that the A.O while framing the assessment had wrongly remained under the influence of the SEBI‟s order, as well as proceeded with on the basis of wrong and misconceived facts. We are further of the considered view that in the absence of any material having been brought on record by the A.O, which could go to irrebutably disprove and dislodge the claim of the assessee, the CIT(A) had rightly concluded that the assessee had duly satisfied all the three ingredients contemplated u/s 68 of the „Act‟, and thus the amount of P a g e | 20 Rs. 55 lac (supra) received by the assessee from the share subscribers could not be characterized as an unexplained cash credit. We further being of the considered view that as the issue involved in the present appeal is covered by the order of the coordinate bench of the Tribunal in the case of M/s Jinit Properties Pvt. Ltd. (supra), therefore finding no reason to take a different view, therefore respectfully follow the same.
14. Before parting, we may herein observe that though we have allowed the appeal of the assessee on merits, however, we may herein observe that we are further persuaded to subscribe to the view of the Ld. A.R that even if it would have emerged that the amount of share application money was received by the assessee from bogus shareholders, in that situation also the A.O. could have only proceeded against the said duly identified shareholders and assessed the amount in their respective hands, while for no such addition was liable to be made in the hands of the assessee company. We find that the aforesaid contention of the Ld. A.R is found within the four corners of the judgment of the Hon'ble High Court of Bombay in the case of CIT Vs. Gagandeep Infrastructure Pvt. Ltd. (ITA No. 1613 of 2014, dated 20.03.2017).
15. The appeal of the revenue is thus dismissed.
Order pronounced in the open court on 16/06/2017
Sd/- Sd/-
(G.S. Pannu) (Ravish Sood)
रेखा सदस्म/Accountant Member न्मायमक सदस्म/Judicial Member
भंफई Mumbai; ददनांक Dated : 16.06.2017
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आदे श की प्रयिलरपऩ अग्रेपिि/Copy of
the Order forwarded to :
1. अऩीराथी / The Appellant
2. प्रत्मथी / The Respondent
3. आमकय आमक्ि(अऩीर) / The CIT(A)
4. आमकय आमक्ि / CIT - concerned
5. पिबागीम प्रयियनधध, आमकय अऩीरीम अधधकयण, भंफई / DR, ITAT, Mumbai
6. गार्ड पाईर / Guard File आदे शधिस ु धर/ BY ORDER, उप/सहधयक पंजीकधर (Dy./Asstt.
Registrar) आयकर अपीऱीय अधर्करण, भंफई / ITAT, Mumbai.
P a g e | 22
Details Date Initials Designation
S.No.
1 Draft dictated on Sr.PS/PS
2 Draft Placed before author Sr.PS/PS
3 Draft proposed & placed before the Second JM/AM
Member
4 Draft discussed/approved by Second Member JM/AM
5 Approved Draft comes to the Sr.PS/PS Sr.PS/PS
6 Kept for pronouncement on Sr.PS/PS
7 File sent to the Bench Clerk Sr.PS/PS
8 Date on which the file goes to the Head clerk
9 Date on which file goes to the AR
10 Date of Dispatch of order