TaxTMI 
TaxTMI 
2015 (8) TMI 44
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....nt of Rs. 33 lakhs has been introduced as share application money. On verifying the details of share application money furnished by assessee, AO noticed that while the Managing Director and his wife contributed Rs. 8 lakhs, and the balance amount of Rs. 25 lakhs was shown to have been contributed by various other persons, the details of which were mentioned by AO in the impugned assessment order. Assessee also submitted confirmation letters from the concerned share applicants. On examining the confirmation letters, AO noted the following facts: "i) All the share applicants and agriculturists, many of them having only agriculture as their only source of income. ii) Bills were produced in support of the alleged share of agricultural produce which is stated to be the source for the share application money. Scrutiny of the bills however showed some unusual patters like the bills issued by one commission agent to several persons did not have the same features/details, the dates on the bills did not show a contiguous patterns, the rates varied on the same date in respect of the same agent etc. iii) None of the share applicants is assessed to income tax. iv) The entire share applic....
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....Hon'ble Supreme Court in case of CIT Vs. Stellar Investments Ltd., Though, AO accepted that share applicants in the statement recorded from some of them have stated that they have advanced share application money to assessee, but, he did not believe their statements. AO referring to the statements of some of the share applicants observed that, though, all of them claimed to have sold agricultural produce i.e. tomatoes to commission agents but the commission agents denied of having purchased such products from them. Therefore, in view of the contradicting statements of share applicants and commission agents, AO was of the view that claim of share applicants that they have sold agricultural produce and the money invested towards share application was out of such income is not believable. As far as the submission of assessee that share application money cannot be considered as unexplained cash credit at the hands of assessee, AO observed that the decision relied upon by assessee is rendered in case of a large joint stock company where shareholding is wide spread unlike assessee where share application money is raised from very limited number of persons. Thus, AO opined that share appl....
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....ition of Rs. 25 lakhs is valid. 6. Ld. AR submitted before us, at the stage of assessment proceeding, assessee has not only submitted confirmation letters of the share applicants but many of them were also examined by AO. In course of their examination they categorically admitted of having applied for shares of assessee company by making advances. Therefore, money received by assessee being in the nature of share application money, it cannot be treated as unexplained cash credit. Ld. AR heavily relying upon the decision of Hon'ble Delhi High Court in case of Stellar Investments Ltd., 192 ITR 287 and the decision of the Hon'ble Supreme Court in case of CIT Vs. Stellar Investments Ltd., 251 ITR 263 wherein the decision of the Hon'ble Delhi High Court was affirmed. It was submitted by ld. AR, in case of share application money, AO cannot make any addition at the hands of assessee , if AO has any doubt with regard to creditworthiness of the share applicants, then, addition can be considered in their hands. In this context, ld. AR relied upon a decision of the Hon'ble AP High Court in case of CIT Vs. Lanco Investments Ltd., 242 ITR 357. As far as factual aspect is concerned, ld. AR sub....
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....in course of assessment proceeding has also examined some of the share applicants and in the statement recorded from them not only they have accepted of having advanced money to assessee towards share application money but have also explained the source of such investment by stating that it is out of income generated from sale of agricultural produce. To prove such fact, share applicants have submitted the bills representing sale of tomatoes to commission agents. As it appears, AO to ascertain the genuineness of the share applicants claim had conducted survey operation in the business premises of the commission agents and in the statement recorded from commission agents they have denied of having purchased any product from assessee or issued any bills. It is further evident that solely relying upon the statements of the commission agents, AO has treated the share application money as unexplained cash credit, which is also confirmed by ld. CIT(A). Though, it may be a fact that share applicant's claim for sale of agricultural produce was contradicted by some commission agents, but, their denial may be for various reasons, one of them being purchaser may be out of account. However, so....
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....m could have been accepted had the land in question been an investment. However, since assessee is in real estate business and land being stock-in-trade the entire expenditure has to be debited to trading account and after utilizing any sales made therein assessee has to show remaining in the form of closing stock. On the aforesaid basis, AO treated the surplus of Rs. 20,64,529 as business income of assessee. Being aggrieved of such addition, assessee challenged the same before ld. CIT(A). Ld. CIT(A), however, confirmed the addition by observing as under: "7.2 I have considered the arguments of the appellant as well as the facts on record and I find that the contentions of the appellant is absolutely unfounded and not supported by any evidence whatsoever. No details whatsoever have been submitted regarding the persons to whom payments were made, the cheques nos., the details of bank accounts, etc. Whenever, a property is purchased with an encumbrance, the price is invariably much lower than the market price because of the fact that possession of the property is not clear. These facts are also mentioned in the sale deed. No such fact has been brought on record in the present case. ....
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....s noticed that certain investments made as per the said agreements were not recorded in the books of account. Therefore, he issued a show cause notice to assessee to explain why the same will not be added u/s 69 of the Act. In response to the said notice, assessee submitted its reply vide letter dated 22/12/08. AO on verifying the submissions of assessee found that though assessee has explained the investments made in respect of an amount of Rs. 50,000 and Rs. 83,325, but, he has failed to explain the amounts of Rs. 47,000 and Rs. 50,000. Accordingly, he added an amount of Rs. 97,000 by treating it as unexplained investment in land. Though, assessee challenged the addition before ld. CIT(A), but, ld. CIT(A) also confirmed the addition. 16. Ld. AR reiterating the submissions made before the departmental authorities submitted, assessee is not at all involved in these transactions. It was submitted by ld. AR, amount of Rs. 50,000 shown to be in the name of Bahadur is not related to assessee as the purchaser's name in the document is K. Srinivas Goud. It was submitted, document found at the time of survey may be a link document on the basis of which addition has been made. As far as P....