TaxTMI 
TaxTMI 
2015 (11) TMI 1304
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....Name and Address of the Applicant Total 1 Damidar Vanijya Pvt. Ltd. 45,00,000/- 2 Dayanidhi Vyapar Pvt. Ltd. 68,00,000/- 3 Dolphin Indotech limited 2,50,00,000/- 4 Dowell Finance Ltd. 25,00,000/- 5 Eastern Sponge Pvt. Ltd. 1,75,00,000/- 6 Feel Good Merchandise Pvt. ltd. 20,00,000/- 7 Information Synergies Pvt. Ltd. 30,00,000/- 8 Kamayani Commotrade (P) Ltd. 3,83,00,000/- 9 Prabhudhan Financial Services Pvt. Ltd 20,00,000/- 10 Rovam Tieups Pvt. Ltd. 25,00,000/- 11 Rubicon Pharmaceuticals Pvt. Ltd. 20,00,000/- 12 Satyam Commodeal Pvt. Ltd. 2,87,00,000/- 13 Shringar Marketing Pvt. Ltd. 4,75,00,000/- 14 Sumanta Trading &Commissioner Pvt Ltd 15,00,000/- 15 Vibhore Trading and Finance Ltd. 3,58,00,000/- Total 21,96,00,000/- The AO stated that the assessee company has paid cash and has taken the accommodation entry of share application money and, therefore, made the addition. 4. Before the CIT(A) the assessee submitted as under :- "it has received the share application money from the entities mentioned above. The asses....
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....the company cannot be added as undisclosed income in hands of the company: * CIT v. Value Capital Services P. Ltd [307 ITR 334 (Del.)] * CIT v. AKJ Granites P. Ltd. [301 ITR 298 (Raj.)) * CIT V. First Point Finance Ltd. [286 ITR 477 (Raj.)) * Shree Barkha Synthetic Ltd. v. ACIT [283 ITR 377 (Raj.)) * CIT v. Belenje Investment & Trading Co. Ltd. (Income-tax Application No. 314 of 1993 dated 08.12.1993) * Twin Roses & Traders Agency Ltd. v. ITO (ITA No. 2653/Bom/1995 dated 18.10.1995) * Uma Polymers v. DCIT [100 ITD 1 (Jodh) (TM)) * Standard Cylinders v. ITO [24 ITD 504 (Del)) * AlIen Bradley India Ltd. v. DCIT [80 ITD 43 (Del)) * CITv. Stellar Investment Ltd. [192 ITR 287 (Del))" 5. By the impugned order the CIT(A) deleted the addition by considering assessee's argument in the light of judicial pronouncement cited before him, after recording the following findings :- "17. I have considered the submissions of the appellant and the order of the AO. On considering the documentary evidences furnished during the course of assessment proceedings, written submissions made before me and arguments made in ....
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....t been able to make out a case of unexplained cash credits with regards to this company. 22. The appellant has brought on record considerable evidence to show that the transaction of issue of share capital was genuine. That being so no addition under the provisions of section 68 can be made in the hands of the appellant. In the case of CIT vs. Stellar Investments Ltd. 192 ITR 287 (Del) Hon'ble Delhi High Court held that provisions of section 68 cannot be applied to such sums received by a company and credited in the share capital account of the company. This judgment of Hon'ble Delhi High Court did not find favour with subsequent larger bench of Delhi High Court and in the case of CIT vs. Sophia Finance Ltd 205 ITR 98 (Del) (FB) full bench of Hon'ble Delhi High Court held that provisions of section 68 apply to the credits representing share application money /share capital subscription in the same manner as ordinary cash credits. In that judgment it was further held that if the shareholder exists then possibly no further enquiry need be made. But if the Income tax Officer finds that the shareholders do not exist, then it would mean that there is no valid issuance of ....
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....undisclosed income under section 68 of I T Act, 1961 and answered, "if the share application money is received by the assessee company from alleged bogus shareholders, whose names are given to the A. 0., then the department is free to proceed to reopen their individual assessment in accordance with law." With these observations, Hon'ble Supreme Court has dismissed Special Leave Petition of the Department. It, therefore, follows that in the case of share application money or share capital contribution the enquiry in the case of the issuing company has to be confined to whether or not the shareholders do exist. In a case where existence of shareholder is not in doubt, any further action would lie in the assessment of the shareholder and not in the assessment of company. 23. Recently, the Hon'ble High Court of Delhi in the case of CIT-IV vs. M/s Dwarkadhish Investment Pvt. Ltd. (2010-TIOL-617-HC-DEL-IT) has held as under: "The onus of proof was not static. Initially, the burden of proof was on the assessee. Yet, once, the assessee had proved the identity of the creditors or share applicants by either furnishing their PAN number or income tax assessment number and s....
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....nd details regarding share subscribers in question, so as to establish these ingredients of genuine credit. The identity of the subscribers stood proved by the fact that their names, address PAN Number balance sheet, bank statement and confirmation letters, share application and share allotment details were submitted by the assessee company. All these facts go to prove the identity of the subscribers. The CIT(A) further recorded a finding to the effect that creditworthiness of these parties was also proved by the fact that all the payments have been made through the banking channels through account payee cheques and that bank statements were also submitted by the assessee company. It was also observed that since money is towards purchase of shares having drawn from bank, it is clear that moneys were available. The finding recorded by the CIT(A) is as per material on record and do not require any interference on our part. Accordingly, we do not find any infirmity in the order of CIT(A) deleting the addition made on account of share application money. 8. In the result, appeal of the revenue is dismissed. ITA No.8748/Mum/2010 (by the assessee) and ITA No.9223/Mum/2010 by the rev....
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....seini director of M/s. Chevend Technology F Ltd and Cheveron Metal Products (P) Ltd in the returned income. There is no addition made regarding the sundry creditors in her hand at all. In the case of the appellant also, following the same logic, the same should, be done by making addition of 0.50% as commission and no addition regarding the sundry creditors should be made." 12. By the impugned order the CIT(A) deleted the addition after observing as under :- I have considered the above submissions and also considered the facts of the case. The AO in para 1 on page 2 of the order mentioned that the appellant had filed the details regarding the sundry creditors and also produced the books of accounts along with the bank statement, bills and vouchers. The appellant also produced the copies of confirmation, bank statements, ledger, stock ledger, purchase bills regarding the following entities: 1. Nupur International Pvt. Ltd. 2. Chevron Metal Products Pvt. Ltd. 3. Nemani Steels Pvt. Ltd. 4. Nagneshi Metals Pvt. Ltd. The AO has mentioned that however, Director of M/s Chevron Metal Products Pvt. Ltd. Mrs. Mehrunnisa Hussairii had admitted that....
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....ry of items. The GP of 6% is therefore applied in this case also and after giving benefit for the disclosed GP of 2.59%, the addition is made of 3.41% in the GP. Accordingly. for the turnover of about Rs. 151 crores, the addition will be Rs. 5.15 crores. Hence, there is enhancement in this case of Rs. 4,92 crores. Therefore, the ground of the appellant is dismissed." 13. Against the above order of CIT(A), both assessee and revenue are in appeals before us. 14. The revenue is aggrieved against the deletion of addition of Rs. 23.16 lakhs, whereas the assessee is aggrieved for the addition made by the CIT(A) by directing the AO to enhance the GP by 3.41%. 15. We have considered rival contentions, carefully gone through the orders of the authorities below and found from the record that while completing the assessment, the assessing officer made the addition of Rs. 23,16,000/- u/ s 68 of the Act to the income of the assessee in respect of the purchases made from one M/s. Chevron Metal Products Private Limited for the reason 'that its director Mrs Mehrunissa Husseini had admitted that the transactions were merely accommodation entries. The assessing officer also referred to ....
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....herein the AO has clearly stated that stock ledger reflecting purchases had been produced before him. 17. On the other hand, ld. DR relied on the order of AO and contended that the CIT(A) was not justified in deleting the addition made on account of purchases from Mrs. Mehrunissa Husseini's company. 18. We have considered rival contentions, carefully gone through the orders of the authorities below and found that the contradictory statement was given by Mehrunissa with regard to the sales undertaken by her. However, nowhere she has stated the name of assessee company with regard to any bogus sales. It is a matter of record that nothing wrong was found by the AO in the books of account. All the purchases have been accepted by the AO and its corresponding sales. Once the sales have been accepted, there must be purchases. Under such circumstances, it is possible that bills have been taken from one party, whereas goods have been purchased from some other party. Keeping in view the totality of facts and circumstances of the case the total purchases cannot be disallowed. Accordingly, we direct the AO to restrict the addition to the extent of 10% of the purchases so as to serve the ....