2015 (8) TMI 604 - AT - Income Tax

Tribunal deletes Rs. 1.9M addition, allows vehicle expenses. Interest charged deemed consequential.

Modinagar Rolls Ltd. Versus Additional Commissioner of Income Tax, Range-1, Ghaziabad

The Tribunal allowed the appeal, deleting the addition of Rs. 1,90,00,000 under Section 68 and the adhoc disallowance of Rs. 5,00,000 for vehicle expenses ... Addition on issued capital u/s 68 - share application money - Held that:- In the present case, it is an admitted fact that the assessee received a sum of ₹ 1.70 crores from M/s Shalini Holdings Ltd. and ₹ 20 lacs from M/s Apoorva Leasing Finance & Investment Pvt. Ltd. on account of share capital. Both the above said companies were registered with ROC and were regularly assessed with the Income Tax Department,copy of assessment order of the assessment year 2010-11 of both the companies is placed which clearly established the identity of both the parties. The aforesaid parties applied in proper application form for allotment of the shares of the assessee company,the amount was paid to the assessee through account payee cheque/RTGS which is reflected in their respective bank account. After receiving the share application money, the shares were allotted to both the parties and copy of Form No. 2 was filed with Registrar of Companies with respective resolution, statement, copies of which are placed and the receipt of the Registrar of companies of the assessee’s compilation. From the above documents, it is clear that the companies who applied for the shares of the assessee were inexistence, those were assessed to tax and filing their regular return of income. The share application money was drawn from their respective bank account and deposited in the bank account of the assessee. Both the companies applied the shares in proper form, the shares were allotted and information was given to the Registrar of Companies after allotment of the shares on the basis of resolution of Board of Directors, therefore, the transaction was genuine. In the present case, the assessee discharged the onus cast upon it to prove the identity and creditworthiness of the share applicant and genuineness of the transaction. Therefore, the addition made by the AO and sustained by the ld. CIT(A) was not justified. - Decided in favour of assessee. Addition of adhoc basis towards out car running & maintenance expenses and out of depreciation of the cars - Held that:- In the present case, it is an admitted fact that the assessee maintained the books of accounts which were duly audited and no discrepancy was pointed out in those books of accounts which had also been accepted by the AO. In the instant case, the AO although presumed that the personal use of the vehicle was not ruled out, however no specific instance was pointed out where the vehicles were not used for business purposes or those were used for personal purposes. In the instant case, the assessee is a juristic person which cannot use the vehicles itself and if at all the vehicles were used for the personal purposes by the Directors or the employees then the expenses can be considered as the perquisite in their respective hands but no disallowance can be made in the hands of the assessee. Moreover, no specific instance of personal use was pointed out either by the AO or by the ld. CIT(A) and the vouchers maintained for the expenses had been accepted. Therefore, the disallowance made by the AO and sustained by the ld. CIT(A) was not justified. Accordingly, the impugned addition is deleted. - Decided in favour of assessee. Issues Involved:1. Addition of Rs. 1,90,00,000/- to the income of the assessee under Section 68 of the Income Tax Act, 1961.2. Adhoc addition of Rs. 5,00,000/- for personal use of vehicles and Rs. 46,532/- for depreciation disallowed on these vehicles.3. Consideration of various details, pleadings, and written submissions during assessment proceedings.4. Legality of interest charged under Sections 234B and 234C.5. Demand of Rs. 95,22,541/- created pursuant to this assessment.6. General observations and inferences drawn by the AO.Issue-wise Detailed Analysis:1. Addition of Rs. 1,90,00,000/- under Section 68:The AO added Rs. 1,90,00,000/- to the assessee's income under Section 68, questioning the creditworthiness and genuineness of share application money from M/s Shalini Holdings Ltd. and M/s Apoorva Leasing Finance and Investment Co. Ltd. The AO's findings included that the companies were not found at the provided addresses and were suspected to be involved in money laundering. The assessee provided PAN, income tax returns, balance sheets, and bank statements to substantiate the identity and creditworthiness of the investors. The AO, however, deemed these documents insufficient and relied on previous investigations indicating the companies as entry providers. The CIT(A) upheld the AO's decision, emphasizing that mere furnishing of PAN and financial documents was not enough to prove the genuineness of the transactions.The Tribunal, however, observed that the assessee had provided sufficient documentary evidence, including Form No. 2, balance sheets, bank statements, and income tax returns of the investing companies. The Tribunal noted that the AO did not conduct any further inquiry or verification into the materials provided. Citing precedents from the Delhi High Court, the Tribunal concluded that the assessee had discharged its burden under Section 68, proving the identity, creditworthiness, and genuineness of the transactions. Consequently, the addition of Rs. 1,90,00,000/- was deleted.2. Adhoc Addition of Rs. 5,00,000/- and Rs. 46,532/- for Depreciation:The AO made an adhoc disallowance of Rs. 5,00,000/- for vehicle expenses and Rs. 46,532/- for depreciation, suspecting personal use of vehicles. The assessee argued that all vehicle expenses were fully vouched and audited, and no discrepancy was pointed out during the assessment. The CIT(A) upheld the AO's disallowance, reasoning that personal use of vehicles could not be ruled out.The Tribunal found that the AO did not provide specific instances of personal use and noted that the assessee, being a juristic person, could not use vehicles personally. The Tribunal held that if the vehicles were used personally by directors or employees, the expenses should be treated as perquisites in their hands, not disallowed in the assessee's hands. Therefore, the disallowance of Rs. 5,00,000/- and Rs. 46,532/- was deleted.3. Consideration of Various Details During Assessment:The assessee contended that the AO did not consider various details, pleadings, and written submissions made during the assessment proceedings. The Tribunal did not provide specific comments on this ground, indicating it as general in nature.4. Legality of Interest Charged under Sections 234B and 234C:The assessee challenged the interest charged under Sections 234B and 234C. The Tribunal noted that the charging of interest is consequential in nature and directed accordingly.5. Demand of Rs. 95,22,541/-:The assessee requested a stay on the demand of Rs. 95,22,541/- created pursuant to the assessment. The Tribunal did not provide specific comments on this ground, indicating it as general in nature.6. General Observations and Inferences by AO:The assessee argued that several observations and inferences drawn by the AO were incorrect and unwarranted. The Tribunal did not provide specific comments on this ground, indicating it as general in nature.Conclusion:The Tribunal allowed the appeal of the assessee, deleting the addition of Rs. 1,90,00,000/- under Section 68 and the adhoc disallowance of Rs. 5,00,000/- for vehicle expenses and Rs. 46,532/- for depreciation. The interest charged under Sections 234B and 234C was deemed consequential.