TaxTMI 
TaxTMI 
2018 (3) TMI 304
X X X X Extracts X X X X
X X X X Extracts X X X X
....sessee has introduced new share capital of Rs. 50 lakhs. He directed the assessee to furnish identity, confirmation, credit-worthiness of the share applicants. It is also pertinent to observe that shares were offered at a premium of Rs. 190/-. The assessee has filed complete details. The ld.AO has carved out details of six applicants viz. Alpesh C. Gajjar, Vishnubhai G. Patel, Haresh Ishwarbhai Patel, Jigar Patel, Heena Pael and Shanabhai Rathod. The assessee has taken share application money of Rs. 8,00,000/-, Rs. 8,00,000/-, Rs. 3,60,000/-, Rs. 5,00,000/-, Rs. 5,00,000/- and Rs. 5,40,000/- respectively from these individuals. Investments were made in between July to September, 2010. These amounts were taken through account payee cheques. In order to fulfill query of the AO, the assessee has filed confirmation from the applicants, bank statements, their PANs with the Income Tax Department, copies of their returns. The AO thereafter directed the assessee to produce these applicants before him on 13.2.2014. The assessee failed to produce them, and the ld.AO has made addition of Rs. 35 lakhs out of Rs. 50.00 lakhs share capital introduced by the assessee afresh during the year. 4.....
X X X X Extracts X X X X
X X X X Extracts X X X X
....as its unexplained credit and deserves to be added under section 68 of the Income Tax Act, 1961. We deem it appropriate to bear in mind certain basic principles/tests propounded in various authoritative pronouncements of the Hon'ble High Courts and Hon'ble Supreme Court. It is also pertinent to observe that both the sides have made reference to a large number of decisions. We do not deem it necessary to recite and recapitulate them because that would make this order repetitive and bulky. We take cognizance of some of them. It is pertinent to observe that in so far as companies incorporated under Indian Companies Act are concerned, whether private limited or public limited companies, they raise their share capital, through shares though manner of raising share capital in private limited company on one hand and public limited company on other hand, would be different. The share capital and share premium are basically irreversible receipts or credits in the hands of the companies. Share capital is considered to be cost of shares on equivalent amount issued and premium is considered as extra amount charged by the company for issue of that capital. In the case of private limited company....
X X X X Extracts X X X X
X X X X Extracts X X X X
....the opinion of the Assessing Officer, satisfactory. The Hon'ble Delhi High Court in the case of CIT v. Novadaya Castles (P.) Ltd. 367 ITR 306 has considered a large number of decisions including the decision of Hon'ble Supreme Court in the case of CIT Vs. Durga Prasad [1971] 82 ITR 540 (SC). According to the Hon'ble Delhi High Court basically there are two sets of judgments. In one set of case, the assessee produced necessary documents/evidence to show and establish identity of the share-holder and bank account from which payment was made. The fact that payment was received through bank channels, filed necessary affidavit of the shareholders or confirmations of the directors of the shareholder company. But thereafter no further inquiry was made by the AO. The second set of cases are those where there was evidence and material to show that the shareholder company was only a paper company having no source of income, but had made substantial and huge investments in the form of share application money. The assessing officer has referred to the bank statement, financial position of the recipient and beneficiary assessee and surrounding circumstances. 9. Let us take into consideration....
X X X X Extracts X X X X
X X X X Extracts X X X X
....aterial disclosed was untrustworthy or lacked credibility the Assessing Officer merely concluded on the basis of enquiry report, which collected certain facts and the statements of Mr. Mahesh Garg that the income sought to be added fell within the description of section 68. Having regard to the entirety of facts and circumstances, the court is satisfied that the finding of the Tribunal in this case accords with the ratio of the decision of the Supreme Court in Lovely Exports (supra)" 10. We also deem it appropriate to take note of some of observations of the Hon'ble Delhi High Court from the decision of Fair Finvest Ltd. (supra). The Hon'ble Court has noticed proposition laid down by the Hon'ble Delhi High Court in the case of CIT Vs. Victor Electrodes Ltd., 329 ITR 271 (Delhi) regarding non-production of share applicants before the AO. The following observations are worth to note: ...In this connection the observation of the jurisdictional High Court in case of Dwarkadhish Investment (Supra) are quite relevant where the court has observed that it is the revenue which has all the power and wherewithal to trace any person. Further in the case of CIT vs. Victor E....
X X X X Extracts X X X X
X X X X Extracts X X X X
....n'ble Delhi High Court in the case of CIT Vs. Goel Sons Golden Estate Pvt. Ltd., rendered in Tax Appeal No.212 of 2012 dated 11.4.2012. It is also pertinent to observe that share applicants in the present case are individuals from surrounding areas. They are not shell-companies from Kolkatta, who are indulged in providing accommodation entries. Taking into consideration all these facts, we are of the view that the AO failed to carry out any inquiry for falsifying evidence submitted by the assessee in support of its explanation. Therefore, we allow this ground of appeal and delete the addition of Rs. 35,00,000/-. 12. In the next ground of appeal, grievance of the assessee is that the ld.CIT(A) has erred in confirming disallowance of Rs. 1,51,697/- . The assessee has availed loan of Rs. 12,64,144/-. The ld.AO found that the assessee given interest free advances. He disallowed interest at the rate of 12% and made addition of Rs. 1,51,697/-. Before the ld.CIT(A) the assessee filed written submissions wherein it has given details of amounts given to various concerns. According to the assessee, these are trade advances and no interest ought to be disallowed. The ld.CIT(A) considered s....