AI Drafter 
TaxTMI 
TaxTMI 
2018 (5) TMI 1085
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....d. Rs. 6,00,000/- 5. M/s. Sun Rays Agencies Pvt Ltd. Rs.18,00000/- 6. M/s. Vindya Agencies Pvt Ltd Rs.10,00,000/- Total : Rs.66,08,000/- 4. The Assessing Officer issued summons to the shareholders but there was no compliance. Further, the Assessing Officer observed that two individual shareholders are from Bhubaneswar and the four company shareholders are from Kolkata. Since, none of the shareholders appeared before the Assessing Officer, the Assessing Officer concluded that genuineness of the transactions, identity, and creditworthiness of the shareholders has not been proved by the assessee added Rs. 66,08,000/- u/s.68 of the Act as unexplained share application money. 5. On appeal before the CIT(A), the assessee submitted that the shareholders could not appear during the assessment proceedings as sufficient time was not given to the shareholders. It was further submitted that four company shareholders are having substantial assets and liabilities and the Assessing Officer's decision to hold that they do not have creditworthiness is not correct. The assessee submitted the following particulars of the four company shareholders: ....
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....aimed and confirmed that they never heard the names of these companies. He further stated in his report that further investigation revealed that all these four concerns are shell companies and one person Naresh Kumar Chhaparia is controller of all these companies. Hence, through ITD, he could find out the address and served the summons to Naresh Kumar Chhaparia on 4.10.2016 asking for his personal attendance. But he did not appear. Again another summon as a reminder was issued and served to him at his address on 4.11.2016 asking for his personal attendance on 7.11.2016. Again he did not appear. Further investigation revealed that Shri Naresh Kumar Chhaparia has remained one of the directors in two of the above companies in the duration mentioned below: i) M/s. Sun Rays Agencies Pvt Ltd., from 18.2.2005 to 5.5.2009 ii) M/s. Vindya Agencies Pvt Ltd., from 14.1.2005 to 3.3.2011. 9. The list of the companies in which he is the controller was provided in the soft copy. Further, in the remand report, it was stated that as the available record, dubious role was played by Shri Naresh Kumar Chhaparia, non- availability of the individuals/ directors of all these companie....
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....chase PUR RATE NET GAIN TOTAL Sudama Trading & Investment Ltd. 23.11.200 5 600 294.1 05.04.2004 6.52 287.5 172518 Shiv Om Investment Ltd. 13.02.200 6 2000 197.1 21.06.2004 1.87 195.2 390360 Shiv Om Investment Ltd. 14.02.200 6 1000 197 21.06.2004 1.87 195.1 195130 Shiv Om Investment Ltd. 17.02.200 6 3000 197.1 24.06.2004 1.87 195.2 585690 Total Long term capital gain Ltd. 1343698 It is seen that the appellant has claimed capital gain of 4410% in the case of Sudama Trading & Investment Ltd and 10435%, in the case of Shiv Om....
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....0/-. The examination of the bank account suggest that the credit entries are on account of transfers from other companies and debit entries are also on account of transfer to other companies. Other than these transfer entries there are hardly any transaction. 4.10 It is important to note that at the time of assessment proceedings, the assessing officer had issued summons to the alleged corporate share holders but they did not appear before the assessing officer. On field enquiries by the Investigation Wing of Income Tax Department, none of these corporate share holders are found to exist. If these 4 corporate share holders are raising genuine capital and investing in the other companies, how could they be untraceable. So much so that nobody in the building has even heard about them. In my opinion, these alleged corporate share holders are nothing but shell companies, about whom only the documents have been produced, but there is no substance in their transations. 4.11 In the following cases when the share holders were not traceable or did not respond to the summon of the assessing officer, the share capital is held as appellant's undisclosed in....
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.... Section 68 of the Income-tax Act, 1961 - Cash credits - Share transactions -Assessment year 2007-08 - Assessee company had shown in its balance sheet certain amount representing share capital received from a Kolkata based company and some other individual investors - Face value of shares was Rs. 10 and those shares were issued at a premium of Rs. 90 per share - Next year, promoters/directors of assessee-company purchased those shares back at a discount of 90 per cent - In order to ascertain genuineness of share transactions, Assessing Officer issued notices to Kolkata based company and other alleged shareholders which were returned by postal authorities with a remark 'left' - He also visited respective banks through which money was routed by these investors and found that cash was deposited immediately prior to issue of cheque to assessee and accounts of those companies were closed immediately after transfer of funds - Assessing Officer thus taking a view that share transactions were not genuine, added amount in question to assessee's taxable income - Whether on facts, impugned order passed by Assessing Officer did not require any interference - Held, yes [para 9] ....
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....ed said fact - Moreover, assessee failed to produce principal officers of subscriber companies who could explain sources from which share subscription was made - Whether in aforesaid circumstances, Assessing Officer was justified in adding share subscription money to assessee's taxable income as unexplained deposits - Held, yes [Para 13] [In favour of revenue] (vi) Commissioner of Income Tax vs. N.R. Portfolio (P.) Ltd. reported in [2014] 42 taxmann.com 339(Delhi). Section 68 of the Income-tax Act, 1961 - Cash credit [Share money] - Assessment years 2002-03 and 2003-04 - Whether creditworthiness or genuineness of transaction depends on whether two parties are related or known to each, manner or mode by which parties approached each other, whether transaction was entered into through written documentation to protect investment, whether investor professes and was an angel investor, quantum of money, creditworthiness of recipient, object and purpose for which payment/investment was made, etc. - Held, yes - Whether certificate of incorporation of company, payment by banking channel, etc. cannot in all cases tantamount to satisfactory discharge of onus - Held, yes ....
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....rsons but the office of the Registrar of Co: took any action to verify the existence of the companies at the so-called address; the existence of the respective share applicants itself was not found to be Assessing Officer could not further enquire as to the source of their investment. Since the assessee failed to prove even the basic identity as also the credit worthiness, genuineness of the transaction in the form of share premium, the addition was r:_ by the Assessing Officer. (ix) Commissioner of Income Tax vs MAF Academy (P.) Ltd. reported in [2 taxmann.com 377 (Delhi). Section 68 of the Income-tax Act, 1961 - Cash credits [Share trans. Assessment year 2002-03 - Whether where, assessee, a private limited company, sold its shares to unrelated parties at a huge premium and thereupon within short span of tin shares were purchased back even at a loss i.e. less than their face value, revenue ai. rightly concluded that share transactions in question were bogus and, therefore, am received from said transactions was to be added to assessee's taxable income under 68 - Held, yes [Para 35] [In favour of revenue] (x) Agrwal Coal Corporation (P.) Ltd.....
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.... apply ratio laid by Supreme Court in case of Lovely Exports (P.) Ltd. (supra) - Held, yes - Whether in view of above, it was to be held that initial onus laid down under section 68 had not been discharged by assessee and, thus, addition made was to be upheld -Held, yes [In favour of revenue] (xl) Aratrac Automotive India(P.) Ltd. Vs Asst. Commissioner of Income Tax reported in [2012] 2 ITR(T) 649 (Delhi). Held that the existence of a person is not merely on paper. Particularly when the Assessing officer required the assessee to produce the share applicants and particularly when at the stated address the share applicants were not found to exist, it could not be said that the amount received by the assessee was proved to be towards share capital. When the identity of the person itself was not proved, the amount received by the assessee could not be considered to be genuinely received. It was also to be noted that the assessee-company was stated to have issued shares at premium nine times its face value. How the premium was fixed was not forthcoming. All the facts put together revealed that neither the identity of the d was proved nor justification for shar....
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.... taxed in respect of impugned amounts as same were received before start of commercial operations - Whether statutory requirement for treating any amount as income of assessee under section 68 is where assessee fails to justify and establish genuineness of entry in books of account - Held, yes - Whether question as to whether amount was introduced prior to commencement of business of company or afterwards is of no significance in as much as aforesaid provision nowhere envisages any such eventuality -Held, yes - Whether in view of aforesaid, impugned order passed by Tribunal was to be set aside - Held, yes [In favour of revenue] (ii) Pennar Aqua Exports (P.) Ltd. vs Asst. Commissioner of Income Tax, Hyderabad reported in [2013] 40 taxmann.com 105(Hyderabad -Trib.) Section 68, read with section 254, of the Income-tax Act, 1961 - Cash credit [Share capital of Company] - Assessment year 1994-95 - Assessing Officer found huge cash credit in books of account of assessee-company on very first day it commenced its business - He disbelieved share capital introduced by 25 shareholders amounting to Rs. 38.40 lakhs and did not accept investment made by them - Assessee contend....
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....at the decision in the case of Commissioner of Income Tax vs. Lovely Exports (P) Ltd will be applicable only after the identity of share applicant is established. In the case of the appellant, the identity of the 4 corporate share holders has not been established. The other cases relied upon by the appellant are no longer a good law and they have distinguished in the judgements quoted by me above. Therefore, the decisions relied upon by the appellant are of no assistance to the appellant. 4.14 Considering the above, it is held that the appellant has failed to establish creditworthiness of the individual share holders and has failed to establish genuineness of the transaction and identity and creditworthiness of the alleged corporate share holders. Therefore, the decision of the assessing officer to hold an amount of Rs. 66,08,000/- as undisclosed income of the appellant is upheld and the ground of appeal is dismissed." 12. Before us, ld A.R. reiterated the submissions made before the lower authorities and ld D.R. fully justified the orders of lower authorities. 13. We have heard the rival submissions, perused the orders of lower authorities and materials available on....
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....d as undisclosed income u/s.68 of the I.T.Act, 1961? -We find that no merit in the Special Leave Petition for the simple reason that if the share application money is received by the assessee-company from the alleged bogus shareholders whose names are given to the A.O., the Department is free to proceed to reopen the individual assessments in accordance with law. Hence, we find no infirmity in the impugned judgement. 17. Further, we are alive to the fact that amendment in Section 68 of the Act has been brought by the Finance Act, 2012 w.e.f. 1.4.2013 by adding a proviso to Section 68, which reads as under: "Provided that where the assessee is a company (not being a company in which the public are substantially interested), and the sum so credited consists of share application money, share capital, share premium or any such amount by whatever name called, any explanation offered by such assessee company shall be deemed to be not satisfactory, unless- (a) The person, being a resident in whose name such credit is recorded in the books of such company also offers an explanation about the nature and source of such sum so credited; and (b) Such explanation i....