IN INCOME TAX APPELLATE TRIBUNAL MUMBAI BENCHES E, MUMBAI BEFORE SHRI RAJENDRA, HON BLE ACCOUNTANT MEMBER AND SHRI C.N. PRASAD, HON BLE JUDICIAL MEMBER ITA No. 4607/MUM/2012 (Asst. Year : 2008-09) ACIT, Circle-3, Vs. Shree Rajlaxmi Textile Park Pvt. Ltd., Thane. 502-503, Abhiman-II, LBS Marg, Near Damani Estate, Thane (W). PAN No. AAKCS 5236 M (Appellant) (Respondent) Assessee by : Shri Reepal Tralshawala CA Department By : Shri Manjunatha Swamy CIT DR Date of hearing : 20/07/2016. Date of pronouncement : 18/10/2016. ORDER PER C.N. PRASAD, JUDICIAL MEMBER This appeal is filed by Revenue against order of ld.CIT(A)-1, Thane dated 28/03/2012 for Assessment Year 2008-09. 2. Revenue has raised following grounds of appeal:- 1. On facts and circumstances of case and in law, Ld. CIT (A)-I, Thane has erred in deleting addition of Rs. 14,50,40,000 made u/s 68 of I.T. Act, 1961 being amount of money invested by 20 companies as share capital ignoring fact that identity, capacity of investing companies and genuineness of transaction has not been proved by assessee. 2. On facts and circumstances of case and in law, Ld. CIT (A)-I, Thane has erred in accepting identity of Company ignoring fact these companies were not found to be existing on addresses given and letters sent to these companies by RPAD were returned by postal authorities with remark "no such company 2 ITA No. 4607/MUM/2012 Assessment Year 2008-09 existed". 3. On facts and circumstances of case and in law, Ld. CIT (A)-I, Thane has erred in accepting capacity of companies even though returned income of all these companies is between Rs. 10,000 to Rs. 20,000 and thus these companies didn't have capacity to make investment as share capital in assessee company. 4. On facts and circumstances of case and in law, ld. CIT (A)-I, Thane has erred in accepting genuineness of transaction ignoring fact that all companies operated from same address at New Delhi and companies at Tamil Nadu also operated from same address in Chennai. bank accounts of all 20 companies was in same bank and same branch at New Delhi even though few of companies were located in Chennai and that most of money is transferred between 1st March and 7th March and also overlooking fact that these companies are mere conduits for routing money as there are simultaneous deposits and withdrawals of same amounts in their bank statements all throughout and thus transaction of investment by these companies as share capital is not genuine. 5. appellant prays order of Ld CIT(A)-I, Thane, may be vacated and that of Assessing Officer be restored . 6 appellant craves leave to add, amend or alter any ground/grounds, which may be necessary. 3. Brief facts of case are that assessee engaged in business of construction of godowns and filed its return of income on 01/10/2008 declaring NIL income. assessment was completed under section 143(3) on 30/12/2010 determining income of assessee at Rs. 19,40,40,000/-. While completing assessment, Assessing Officer noticed that assessee has received share application money (including share premium) to tune of Rs.19,40,40,000/-. Assessing Officer required assessee to furnish addresses, returns and computations of share applicants. It appears that, this information was called for on 14/12/2010. By 30/12/2010, assessee furnished only partial information and Assessing Officer came to conclusion that share application money provided by share applicants are only from companies established for providing accommodation entries and 3 ITA No. 4607/MUM/2012 Assessment Year 2008-09 genuineness of transactions are not proved by assessee. Therefore, he concluded that share application money (including share premium) amounting to Rs.19,40,40,000/- is treated as unexplained cash credit under section 68 of Act. 4. On appeal, ld. CIT(A) deleted addition based on submissions of assessee and remand report sent by Assessing Officer. Now revenue is in appeal before us challenging order of ld. CIT(A) in deleting share application money to extent of Rs. 14,50,40,000/- under section 68 of Act. 5. Departmental Representative vehemently supported order of Assessing Officer. He further submitted that ld. CIT(A) went wrong in relying on remand report because during remand proceedings, letters were sent to parties by RPAD and those letters were returned back by postal authorities with endorsement no such companies exists in given addresses . Departmental Representative further submitted that it was asked assessee to produce Directors of companies, but he failed to do so. Departmental Representative further submitted that all companies filed returns of income with meagre amounts and there are no much activities in companies which show that companies are paper companies to provide accommodation entries. Departmental Representative placed reliance on decision of CIT Vs. Nipun Builders and Developers (2013) 350 ITR 407 (Del) and CIT Vs. N.R. Portfolio Pvt. Ltd. (2014) 206 DLT 97 (DB). 6. Authorized Representative of assessee submitted that all observations made by Assessing Officer in assessment order are all negated in remand report. All evidences in assessment order are not correct. Authorized Representative of 4 ITA No. 4607/MUM/2012 Assessment Year 2008-09 assessee further submitted that Shri Ramesh Kumar J. Saboo appeared on behalf of all companies and given statement before Assessing Officer confirming share application money given by companies on their behalf. Authorized Representative of assessee further submitted that change of address was also given to Assessing Officer along with MCA. Authorized Representative of assessee further submitted that assessee has undertaken for construction of textile park and various companies were interested in investing to meet share application money. details of companies, confirmations, their bank statements, returns of income, balance sheets and profit & loss accounts along with annexures returns filed with ROC etc. were filed before authorities below. Referring to page Nos. 30 & 31, Authorized Representative of assessee submitted that Revenue has recorded statement of Shri Ramesh Kumar J. Saboo authorized representative of various companies, who clearly stated that all these companies have interested in making investment in projects, offering good returns. observation of Assessing Officer that all companies are from Delhi and Chennai were also not correct. He submitted that out of twenty companies, five are from Bombay, eleven are from Delhi, three are from Calcutta. Authorized Representative of assessee further referring to page No. 81 of paper book submitted that in fact one of Directors of company Shri Rajesh Kumar namely Unique Diagnostics Ltd. has given affidavit stating that company Unique Diagnostics Ltd. has paid sum of Rs. 30 Lac by way of cheque/DD towards 30,000 equity shares of Rs. 10/- each at premium of Rs. 90/- to assessee company. Authorized Representative of assessee further submitted that all these details are filed and detailed enquiries were made in course of remand proceedings and no discrepancies were pointed out in remand report. Authorized Representative of assessee further submitted that evidences placed on record and remand 5 ITA No. 4607/MUM/2012 Assessment Year 2008-09 report were examined by ld.CIT(A) and deleted addition as transactions were genuine and shareholders were also identified and they are genuine and no addition is sustainable under section 68 of Act. He placed reliance on following decisions in support of his contentions. 1) ITO Vs. M/s. Superline Construction P. Ltd. in ITA No. 3645/MUM/2014 dated 30/1/2015. (Mumbai Trib.) 2) ACIT Vs. M/s. Dhanlaxmi Equipment Pvt. Ltd. in ITA 1103/JP/2011 dated 21/03/2016 (Jaipur Trib.) 3) CIT Vs. Five Vision Promoters Pvt. Ltd. in ITA NO. 234 to 236/2015 dated 27/1/2015 (Delhi HC) 7. We have heard rival submissions, perused orders of authorities below and case-laws relied on by parties. In this case, Assessing Officer while computing assessment treated share application money as unexplained cash credits under section 68 of Act, as assessee could not file details before completion of assessment. assessee preferred appeal before ld. CIT(A), who after calling for remand report and details furnished by assessee, deleted addition by observing as under:- 4.1 Now coming to share application money received from investor companies, amounting to Rs. 14,50,00,000/-, I find that Assessing Officer during course of remand report preparation, has carried out detailed enquiries under section 133(6) of Act and also recorded statement of their Authorized Representative, Shri Ramesh Saboo, CA. After examination of documentary evidences collected under section 133(6) such as confirmation letter, share application form, copy of Audit Report along with Balance Sheet and profit & loss account copy of Bank Statement, Income Tax particulars and Form No. 23AC filed with Registrar of Companies, etc., A.O has furnished his Remand Report dt. 02.03.2012. Remand Report is forwarded to me by Jt. CIT, Range-3, Thane, vide his letter dated 06.03.2012. As is evident from Remand Report reproduced in para 3 of this order, A.O has not pointed out anything to suggest applicability of provisions of section 68 of Act. Thus, it emerges that A.O is fully satisfied with explanation/documents in respect of genuineness of share application money. In view of such situation, I do not find any reason for not accepting submission of appellant. 6 ITA No. 4607/MUM/2012 Assessment Year 2008-09 Hence addition deserves to be deleted on basis of remand report itself. 4.2 I have also perused documents listed in Remand Report and noticed that identity of share holders has been clearly proved with support of Income Tax particulars, Audit Reports, Form No. 23AC filed to ROC and appearance of Chartered Accountant on their behalf. Copy of Bank statements clearly Showing transfer of money for investment in shares, share application form, share allotment, etc. establish genuineness of transactions. Further, Bank Statements contain several transactions on regular basis of substantial amounts and there appears to be no cash deposit in Bank A/c. Balance Sheets reflect sources of funds as share capital, Reserve and surplus, etc. and investment in shares of various companies. Thus, on basis of documentary evidences brought on record by A.R of appellant and A.O, source of share application money also stands explained satisfactorily. Since all three ingredients name/identify and capacity of shareholders and genuineness of transactions are proved in respect of share application money under consideration, case laws relied upon by appellant become squarely applicable in favour of appellant. To be specific, A.O has relied upon decision of Hon'ble High Court in case of CIT Vs. Sophia Finance Ltd., 205 ITR 98 (Del)(FB) wherein it has been held that in case on enquiry, ITO finds that shareholders do not exist, share application money can be treated as unexplained cash credit for purposes of addition u/s, 68 and if share holders exist then, possibly, no further enquiry need be made. Since in case of appellant, there is not even slightest doubt about existence of share holders, decision in fact, supports case of appellant. In another important case of CIT Vs. Divine Leasing & Finance Ltd. (2007) 299 ITR 268 (Del) which is heavily relied upon by A.R., Hon'ble High Court has held that if relevant details of address and identity, PAN/Income Tax Ward Nor Confirmation, share allotment, etc. are furnished and share subscriptions were received through Banking Channel, it would constitute acceptable proof or explanation by assessee. It is further observed that if A.O fails to unearth any wrong or illegal dealings, he cannot obdurately adhere to his suspicions and treat subscribed share capital as undisclosed income of company long with this case, Hon'ble High Court has also decided case of Lovely Exports (P) Ltd. on same issue. SLP filed by department has been dismissed by Hon'ble Supreme Court in case of CIT Vs. Lovely Exports (P) Ltd. (2008) 216 CTR 195 (SC) accordingly, by observing that if share application money is received by assessee company from alleged bogus share holders, whose names are given to AO, then department is free to proceed to re-open their individual assessments in accordance with law, but it cannot be regarded as undisclosed income of assessee company. Following decision of Hon ble Supreme Court in case of Lovely Exports (P) Ltd. (supra), Hon ble Bombay High Court in case of CIT Vs. Creative World Telefilms Ltd. (2011) 333 ITR 100 (Bom.) has 7 ITA No. 4607/MUM/2012 Assessment Year 2008-09 also decided appeal in favour of assessee since name and address of share holders, their PAN/GIR No., cheque No., Bank names, etc. were given to A.O. 4.3 In view of above factual and legal position, respectfully following ratio laid down by various courts, particularly Hon ble Supreme Court and jurisdictional High Court which are binding on me, I hold that share application money under consideration cannot be treated as unexplained cash credit under section 68 of Act. Assessing Officer is, accordingly, directed to delete addition made under section 68 of Act. Appellant, thus, succeeds on grounds No. 1 & 3 to 7. 8. On going through above findings of ld. CIT(A), we do not find any infirmity or valid reason to interfere with decision in deleting unexplained cash credit since decision is based on remand report and after examining voluminous details filed by assessee to prove identity, genuineness, creditworthiness of share applicants. None of findings of ld. CIT(A) have been rebutted with evidences by revenue. Thus, we sustain order of ld. CIT(A) on this issue. 9. In result, appeal of Revenue is dismissed. Order Pronounced in open Court on 18th October, 2016 Sd/- sd/- (RAJENDRA) (C.N. PRASAD) Accountant Member Judicial Member Dated : 18 t h Oct., 2016. vr/- 8 ITA No. 4607/MUM/2012 Assessment Year 2008-09 Copy to: 1. Assessee. 2. Revenue. 3. CIT 4. CIT(A) 5. D.R. 6. Guard file. By order //True Copy// Assistant Registrar I.T.A.T., Mumbai ACIT, Circle-3, Thane v. Shree Rajlaxmi Textile Park Pvt. Ltd