TaxTMI 
TaxTMI 
2017 (5) TMI 418
X X X X Extracts X X X X
X X X X Extracts X X X X
.... and circumstances of the case, the Ld. Commissioner of Income tax (A) ought to have upheld the order of the Assessing Officer. V) It is, therefore, prayed that the order of the Ld. Commissioner of Income tax (A) may be set-aside and that of the Assessing Officer be restored. 2. In this case return of income declaring Rs. 2,46,93,530/- was filed on 26/09/2008. Thereafter, case was selected under scrutiny by issuing notice u/s.143(2) of the Act. The facts of case are discussed as under different grounds of appeal of the assessee. 3. Apropos to ground no.1 the Learned Assessing Officer (in short ''Ld.AO'') during the course of assessment proceedings the noticed that assessee has introduced credit of Rs. 2,73,51,600/- in the form of share capital. The Ld.AO observed that all those persons who contributed towards share capital were the close relatives or HUF of the assessee-company. Thereafter, Ld.AO asked the asessee to furnish name, addresses, PAN and confirmation letters from the parties who had contributed towards share capital in the assessee-company. Subsequently, Ld.AO noticed that in the bank accounts of the 13 parties as mentioned below, there was cash deposit in the bank....
X X X X Extracts X X X X
X X X X Extracts X X X X
....as received are assessed to tax as their PA Numbers and copies of l.T.Returns were furnished during the assessment proceedings. In addition to this, copy of bank account from where these share capital was received was also furnished. In my considered view, these documents clearly established the identity, genuineness of transactions and creditworthiness of the creditor. This way the appellant has discharged the onus cast upon him by the provisions of Section 68 of the IT.Act. 5.4 It is a matter of record that the appellant has received share capital of Rs. 2,73,51,600/- during the year under consideration. Out of this receipt, the A.O. had made an addition of Rs. 21,72,7007-u/s.68 of the I.T.Act. It is clearly held by the Hon'ble Supreme Court in the case of Loveli Export Pvt. Ltd. 260 ITR 195 that in the case of share application money, to discharge onus of sec.68, the appellant has to establish the identity of the persons from whom share capital was received. In such cases the appellant need not to prove the genuineness of the transaction and creditworthiness of the creditor. The PAN numbers clearly established the identity of the persons who had contributed share capital a....
X X X X Extracts X X X X
X X X X Extracts X X X X
....ld be for the purpose of extension of an existing business or profession. (iv)Interest liability may or may not be capitalized. I have carefully considered the facts of the case. In the instant case the A.O. has not identified capital borrowed for acquiring or raising the capital work-in-progress. Since the A.O. has not identified the capital borrowed, accordingly the first condition as mentioned above is not fulfilled. Since the basic condition of proviso to section 36(1)(iii) is not fulfilled, accordingly in my considered view interest cannot be capitalized as per these provisions. It is also seen that the A.O. has capitalized interest on proportionate basis. Perusal of provisions of proviso to section 36(1)(iii), which has been discussed in detail above, reveals that these provisions does not provide for capitalization of interest on proportionate basis. In view of above facts, I am of the considered view that the A.O. has not capitalized interest as per the provisions of proviso to sec.36(1)(iii) and the, same is untenable.'' 7. Apropos to ground no.3 the Ld.AO during the course of assessment proceedings has observed that assessee has not included in the value of closing....
X X X X Extracts X X X X
X X X X Extracts X X X X
.... closing stock and situs of its arising or accruing where the valuation is made and valuation of unsold stock is necessary part of the process of determining trading results but it can in no sense be regarded as source of such profit. (c) It is clearly held in the case of CIT v/s. Ahmedabad New Cotton Mills reported at 4 ITC 245 that when the opening and closing stock of business are both undervalued, if the method of alteration of both valuation is not adopted, it is perfectly plain that profits which is brought forward is not real one. In such cases, the real profits of a particular year cannot be ascertained by merely raising value of closing stock, not taking into consideration the similar valuation of opening stock. As per the ratio of this case, enhancing the value of closing stock without giving corresponding effect to the valuation of opening stock is not proper. (d) The appellant during the assessment proceedings as well as appellate proceedings submitted that it was paying excise duty at a concessional rate and accordingly it was not entitled to take benefit of CENVAT credit. This is a plausible explanation given by the appellant which remain uncontroverted. In my con....