AI Drafter 
TaxTMI 
TaxTMI 
2015 (10) TMI 1756
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....d address, PAN and amount of capital introduced. Accordingly, details were filed and from perusal of ledger share application money submitted by the assessee, it was noted by the AO that the assessee company has shown Rs. 75,00,000/- as opening balance as on 01.04.2009, whereas rest of amount i.e. Rs. 1,60,00,000/- has been received by the assessee company during the year under consideration from the following share holder companies: Sl.No. Name of shareholding companies No of shares allotted during F.Y.2009-10 Share Capital invested Share Premium invested. 1. M/s Artline Vinimay (P) Ltd. 1, Mahendra Nath Roy Bye Lane, Howrah. West Bengal 711101 15,000 Rs.1,00,000/ Rs.13,50,000/- 2. M/s Biraja Dealers [P) Ltd, 1,'Mahendra Nath Roy Bye. Lane, Howrah, .West Bengal-711101 10,000 Rs.1,50,000/- Rs.9,00,000/- 3. M/s Deesha Tie-up (P) Ltd.. 1, Raj Ballav Saha Lane, Howrali, West Bengal- 711101 15,000 Rs.1,50,000/- Rs.13,50,000/ 4. M/s Kathleen Vyapaar (P] Ltd., 1, Raj Ballav Saha Lane, Howrah, West Bengal-711101 15,000 Rs.1,50,000/- Rs.13,50,000/- 5. M/s.Kokila Exports (P) Ltd., 9/12, Lal Bazar Street, Bl....
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.... furnish the copy of ITR, PAN, copy of ledger and bank accounts of shareholding companies to prove the identity, creditworthiness and genuineness of transactions, as the onus squarely lies on the assessee company to substantiate that these companies have actually invested the funds as tabulated above. 4. The assessee has consequently filed the copy of ITR, PAN and copy of bank accounts of the shareholders. However, for independent verification about alleged shareholders the AO issued letter u/s 133(6) of the Act to all these companies requiring them to furnish complete details of share purchase mode of payment, copy of bank account and PAN/assessment particulars. In respect of three companies i.e. (i) M/s Topline Finvest (P) Ltd. (ii) M/s MA Hire Purchase (P) Ltd. Kolkata (iii) M/s RMB Finance Company Ltd., Kolkata, the letters were returned by postal department marked as "address not known" or "addresses moved". In rest of the cases, neither replies have been received nor were letters returned back by postal authorities. The AO therefore, confronted these facts to the assessee and asked him to prove the identity, creditworthiness and genuineness of transaction. After confrontat....
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....in response thereto the assessee has filed the reply which was taken into account by Ld. Assessing Officer but was not convinced with it. The Assessing Officer has held that the assessee has not discharged the onus which let upon it therefore, the shareholders are not genuine and he accordingly made the addition of Rs. 1,60,00,000/- as unexplained credit u/s 68 of the Act. The relevant observation of the Assessing Officer is extracted as under:- "8. Thus from above facts and circumstances, it is evident that the'onus was not discharged by the assessee in as much as the identity of the creditors remained un-established. Moreover, almost all the above transactions have been made on the same day or following day establish conclusively that the transaction suffers from irrationality and are colourful. The above alleged shareholder companies had not done any business activities during the year but investments in shares have been made- in lakhs. Therefore, the creditworthiness of the alleged shareholder companies could not be proved by the assessee company during the course of assessment proceedings. From report of DIT(Inv.), Kolkata, it is also apparent that these ....
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....it prima facie transpires that the company itself contacted these alleged investors to utilize their names in the garb of prospective share holders. No proof of making any correspondence or inquiry with the company by these investors before investing in shares of the company has been produced on record. The initial onus is upon the assessee to establish three things necessary to obviate the mischief of Section 68 of the Act. These are (i) Identity of investors; (ii) their creditworthiness/investments and (iii) genuineness of the transaction. In view of the above facts as discussed above, it is very clear that the assessee company has failed to establish the identity, genuineness and creditworthiness of the alleged shareholder companies and they are in fact non- existent paper companies. These shareholders have not been proved by the assessee company to company lo be genuine. Therefore, the entire credits appearing in the accounts of the assessee during the year under consideration in the shape of alleged investment from above ten shareholding companies at Rs. 1,60,00,000/-are treated as unexplained credit u/s 68 of the I.T. Act and accordingly added towards the income of t....
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....of the shareholder company M/s. Artline Vinimay P. Ltd. before the AO to prove the identity and creditworthiness of the shareholders and genuineness of the transactions: a. Details of registered office, Company Identification No., date of incorporation, authorized and paid up capital b. Confirmation cum application form for equity shares of M/s. Ansh Intermediate Services Pvt. Ltd. c. Minutes of Board Meeting dated 23.11.1998 d. ITR Acknowledgement for AY 2008-09 e. Company Master Data as downloaded dated 29.03.2013 from site of MCA Portal (Ministry of Corporate Affairs) . i . f. List of Directors as downloaded dated 29.03.2013 from site of MCA Portal g. Reply u/ s 133(6) ot.i.T. Act, IVbl belore 11 U-l^ h. Bank statement of Current Account No.191010200006606 with Axis Bank, Mansha Bari, P 249, Lake Town, Block B, Kolkata- 700089 reflecting withdrawal i.- Directors Report to share holders for the year ending 31.03.2010 j. Auditors Report, dated. 25.08.2010 by V.M.D. & Associates, Chartered Accountants, Kolkata. k. Balance Sheet and Profit and Loss Account and Annexures/Schedules for t....
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....sing Ltd. of Rs.30,00,000/- vide cheque no.281868 dated 29.05.2009 5. M/s.Kokila Exports (P) Ltd., 15000 15,00,000 The source of fund was out of share sale money received from Square Trades & Holdings Pvt. Ltd. of Rs. 15,00,000/- vide cheque no.272689 dated 04.06.2009 6. M/s Midnight Agencies (P) Ltd,, 10000 10,00,000 The source of fund was out of share sale money received from Vidhata Housing Ltd. of Rs.15,00,000/- vide cheque no.281869 dated 29.05.2009 7. M/s Motorex Finance (P) Ltd., 20000 20,00,000 The source of fund was out of share sale money received from Prime Commodeal Pvt. Ltd. of Rs.6,00,000/- vide cheque no.139459 dated 21.05.2009, share sale money received fromSpandan Vanijya Pvt. Ltd. of Rs.3,00,000/- vide cheque no.255938 dated 21.05.2009, share sale money received from Vibgyor Vinimay Pvt. Ltd. of Rs.1,00,000/- vide cheque no.258660 dated 21.05.2009 and loan refund from Crown Infrastructures Pvt. Ltd. of Rs.10,00,000/- vide cheque no.281303 dated 29.05.2009. 8. M/s Ran....
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....nt of such share capital. The documents as mentioned above prove that the investor companies are existing companies with established identity, have capacity and creditworthiness to make the investment and the investment made by them are genuine 4.3 In the assessment order, the AO has stated that the shareholding companies are non-existent paper or briefcase companies the identities of which could not be established by the appellant company. The observations of the AO are not justified in view of the following facts: a. The share applicants are duly incorporated companies under the provisions of the Companies Act, 1956. b. They are regular income tax assessees and are holding PANs issued by the Income Tax Department They are filing their income tax returns & are being assessed c. They are holding valid .bank accounts. d. The notices issued to these companies by the AO u/s 133(6) have been duly complied with. e. The summons issued u/s 131 by the ADIT(Inv.), Kolkata have duly been served on the share applicant companies at their registered offices and complied with. In view of above the AO is not justified in observing tha....
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....ition made by Assessing Officer - He held that in case of capital contributed by a shareholder, identity of shareholder was only required to be proved - Tribunal upheld order of Commissioner (Appeals) - Whether instant case was squarely covered by decision of Supreme.Court in case ofSteller Investment Ltd. (supra) - Held, yes [Para 3] d. CIT v, Som tobacco India Ltd. [2014] 42 taxmann.com 310 (All.) Section 68 of. the Income-tax Act, 1961 - Cash credits [Share application money] -Assessment year 2005-06 - In course of assessment, Assessing Officer made addition to assesses^ income in respect of share application money received from various persons -Tribunal finding that names, addresses and PAN of depositors were provided to Assessing Officer,. which were sufficient to prove their identity and creditworthiness, set aside impugned addition -Whether, on facts, impugned order passed by Tribunal did not require any interference - Held, yes [Para 9] e. CIT v. Vacmet Packaging India Private Limited [2014] 367 ITR 217 (All.) The Assessing Officer, in the course of an order of assessment under section 153A of the Income Tax Act, 1961, made an addition un....
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....osed income. Inthe given case the assessee company has established the identity and the investment by them in shares. In view of the above settled legal position, there is merits in the submission of the Ld. A.R. that since all the share holders have been identified on record by the assessee company, no addition on account of unexplained snare capital can be made in the hands of the assessee company" g. CIT v. Miq Steels (P.) Ltd. [2013] 36 taxmann.com 422 (All.) h. CIT v. Al Anam Agro Foods (P.) Ltd. [2013) 38 taxmann.com 375 (All,) i. GIT (Central) v. L.D.K. Shares arid Securities P. Ltd. and Ors, 71 DTK 371 (All.) In view of the above discussions it is held that addition of Rs. 1,60,00,000/- made by the AO under section 68 of the Act is not justified and the same is deleted. Ground nos. 2, 3 and 4 are decided in favour of the appellant, Ground nos. 1, 5, 8 and 9 are general in nature. Ground no. 6 relates to charging of interest u/s 234A, 234B, 234C and 234D of the Act. Charging of interest is mandatory but the AO is directed to allow consequential relief. Ground no. 7 relates to initiation of penalty proceedings u/s 271(l)(c) of the Act. The ....