AI OCR 
TaxTMI 
TaxTMI 
TaxTMI 
2014 (1) TMI 1224
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....preliminary enquiry was found to be wrong number and none-responsive to telephonic contacts, that it smacked of being a suitcase company or a name-lender for channelling the unaccounted moneys of the assessee company. 3. The CIT(A) erred in facts in law in ignoring the low financial capacity of M/s. Churamani Housing Pvt. Ltd., as evidenced by its Balance Sheet for the A.Y. 2009-10 showing absolutely no depreciable assets and there being no fresh capital inflow during the year under consideration and artificially contrived profit being shown in the P&L a/c from apparently dubious and un-evidenced sources. Further it is to mention that the main source of income of the company is interest income. Such being the case it is not clear why the company has invested so much amounts with huge premium with no promise of any returns. 4. The CIT(A) erred in facts and in law in ignoring the fact that the telephone number given by M/s. Churamani Housing Private Limited is also being used by 25 other non-descriptive companies, that it smacked of being a suitcase company or a name-lender for channelling the unaccounted moneys of the assessee company. 5. The CIT (A) erred in facts and in law in ....
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....hareholders. 6. Further the shares have been allotted to the promoters group only. 7. Share premium is also capital receipt. 8. Post allotment the book value of the company share is Rs. 99/- for equity share as on 31/03/2009 4. Further, the AR also furnished certified true copy of the extracts of the minutes of the meeting of the Board of Directors held on 31/03/2008, wherein it was decided to hold the land as well as the project for a longer period and in order to minimize the borrowing cost the company should create shareholders funds. Further in the meeting it was decided that a premium of Rs. 90/- per share should be collected. The AR also stated as under: 1. The company is a private limited company and it prohibits any invitation to public to subscribes for any shares of the company. 2. There is no restriction with regard to issues of shares at a premium by the private limited company. 3. The shares were allotted to the promoters group and the company in which they have interest and associate companies. 4. The fact is shares are only offered to the promoters and their associates including companies in which they have interest. 5. The AO observed that M/s. Vally Distri....
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....e. Accordingly, he disallowed the same. Aggrieved, the assessee preferred an appeal before the CIT(A). 7. On appeal, regarding the first issue, the CIT(A) observed that the assessee is a company established during financial year 2006-07 relevant to assessment year 2007-08. The company raised unsecured loans of Rs. 21,06,62,070 during financial year 2006-07 i.e., assessment year 2007-08 earlier to this assessment year. During this assessment year i.e., 2009-10, the assessee- company issued shares with premium of Rs. 90/- to different parties including the three parties disputed by the AO. Before the AO also during the assessment proceedings, the assessee submitted the details and the AO himself in page 2 of his order as reproduced hereunder acknowledged the same: 1. The company is a private limited company and its prohibits any invitation to public to subscribes for any shares of the company. 2. There is no restriction with regard to issues of shares at a premium by the private limited company. 3. The shares were allotted to the promoters group and the company in which they have interest and their associate companies. 4. The fact is shares are only offered to the promoters and ....
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..... The learned DR submitted, with regard to deletion of Rs. 3,73,50,000 made u/s. 68 of the Act, that the CIT(A) is not correct in ignoring the low financial capacity of Valley Distributors (P) Ltd., as evidenced by its Profit and Loss Account for A.Y. 08-09 with net profit of just Rs. 4,953/- and by its profit and Loss Account for AY 09- 10 with a net profit of just Rs. 6,79,297/- and by its Balance Sheet showing absolutely no depreciable assets and there being no fresh capital inflow during the year under consideration. The CIT(A) ignored the fact that the telephone number by M/s. Valley Distributors Pvt. Ltd., given in its putative reply to the Assessing Officer's preliminary enquiry was found to be wrong number and none-responsive to telephonic contacts, that it smacked of being a suitcase company or a name- lender for channelling the unaccounted moneys of the assessee company. The CIT(A) erred in facts in law in ignoring the low financial capacity of M/s. Churamani Housing Pvt. Ltd., as evidenced by its Balance Sheet for the A.Y. 2009-10 showing absolutely no depreciable assets and there being no fresh capital inflow during the year under consideration and artificially contrive....
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.... the assessee. According to the AR, cash flow position of the creditors is to be seen but not owning of any depreciable asset. He submitted that there was an enquiry by the AO with those companies u/s. 133(6) of the Act and that enquiry showed that the transactions are found to be genuine and the AO considered irrelevant factors to sustain the addition. He relied on the following judgements: 1. CIT vs. Arcane Developers (P) Ltd., 95 DTR 49 (Del) 2. CIT vs. Samsung India Electronics, 92 DTR 420 (Del) 3. CIT vs. Lanco Industries Ltd., 242 ITR 357 (AP) 4. Tolaram Daga vs. CIT, 59 ITR 632 (Gau.) 5. Sarogi Credit Corporation vs. CIT, 103 ITR 344 (Patna) 6. Nemi Chand Kothari vs. CIT, 264 ITR 254 (Gau.) 7. CIT vs. Noorjahan (PK) (Smt.), 237 ITR 570 (SC) 8. Jinda Udyog vs. ITO, 260 ITR 123 (Chd) 9. CIT vs. Steller Investment Ltd., 254 ITR 263 (SC) 10. CIT vs. K. Mahim Udma, 242 ITR 133 (Ker) 11. Dhakeswari Cotton Mills Ltd. vs. CIT, 26 ITR 775 (SC) 12. Omar Salay Mohamed Sait vs. CIT, 37 ITR 151 (SC) 13. CIT vs. Creative World Telefilms Ltd., 333 ITR 100 (Bom) 14. CIT vs. ASK Brothers Ltd., 333 ITR 111 (Kar) 15. CIT vs. Arunananda Textiles (P) Ltd., 333 ITR 116 (Kar) 16. C....
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....all commercial prudence but we cannot ignore the fact that it is the prerogative of the company to decide the premium amount and it is the wisdom of the shareholders whether they want to purchase the shares at such a premium. The Revenue authorities cannot question charging of such premium unless there is a provision under the Income-tax Act, 1961. The AO having examined the parties (creditors) u/s. 133(6) of the Act and found nothing adverse against the assessee to show that the assessee's own money flew back to the assessee to these three creditors as a conduit, the AO cannot question the raising of funds by the assessee-company. As rightly argued by the learned AR, having cash/fund flow is important rather than having depreciable assets. Further, even the provisions of section 56 are not applicable to the assessment year under consideration which came into effect only from 1.10.2009 i.e., relevant to the A.Y. 2010-11. 15. Being so, we are of the considered opinion that the CIT(A) has rightly deleted the addition made by the AO u/s. 68 of the Act. We confirm the order of the CIT(A) on this issue. Ground Nos. 1 to 6 raised by the Revenue are rejected. 16. Coming to the other gro....