TaxTMI 
TaxTMI 
2018 (5) TMI 1085
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....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: SI No. Name Total Assets 86150303 Total Liabilities Net worth a) M/s Auoplast....
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.... 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 companies, non-existence of these companies on physical verification(Inspector's Report attached); these companies appears to be bogus companies, which are being used as conduit for rotating the money despite no real....
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....ment 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 Investment Ltd in nearly one year. Both of these companies are non- descript companies and the sale rates have been pushed through manipulation. Even the fortune 500 companies have not reported such fantastic gains in one year. 4.8 In the case of Aman Agarwal, it is seen from his return of income for A.Y. 200607 that he has shown total income of Rs. 1,20,000/-. It appears that the alleged investment in the company has been made by issue of cheques from his bank account in the State Bank of India (A/c. No.-0619002....
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....x 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 income: (i) Commissioner of Income-Tax vs. Youth Construction (P) Ltd. reported in [2014J 44 taxmann.com 364 (Delhi). Section 68 of the Income-tax Act, 1961 - Cash credit - Assessment year 2000-01 -Sole fact that share applicants had established their identity by filing confirmation letters and copies of their income-tax returns is not sufficient for purpose of discharging creditworthiness of share applicants and genuineness of transactions [In favour of revenue] Section 68 applies equally to share application monies received by an assessee and b....
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....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] [In favour of revenue] (iv) Commissioner of Income Tax vs Ultra Modern Exports (P.) Ltd. reported in (2013) 40 taxmann.com 458(Delhi). Section 68 of the Income-tax Act, 1961 - Cash credits [Share application money] -Assessment year 2007-08 - In course of assessment, Assessing Officer noticed that assessee received share application money from nine applicants - Upon enquiry, five out of nine notices issued to share applicants under section 133(6) were returned unserved -Furthermore, materials on record in form of returns of income of share applicants furnished by assessee disclosed that applicants had ....
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....s 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 - Assessee was a private limited company and had received from other companies substantial amount of share application money of Rs. 63.80 lakhs and Rs. 75.60 lakhs in two consecutive years - Other than share application forms, no other agreement between assessee-company and third companies had been placed on record - Persons behind these companies were not produced by assessee - On other hand, assessee-company adopted non-cooperative attitude before Assessing Officer once they came to know about directed enquiry and investigation being made - Whether evasive and transient approach before Assessing Officer was limpid and perspicuous and, therefore, addit....
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....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. vs. Additional Commissioner of Income Tax, reported in 19 taxmann.com 209 (Indore). Section 68 of the Income-tax Act, 1961 - Cash credits - Assessment year 2005-06 and 2006-07 - Assessee-company had received share application money from HCL and OTL - Du scrutiny proceedings, Assessing Officer referred to report of Assistant Commissioner, wherein he had confirmed that investigation carried out in some other cases, it was : that HCL and OTL did not exist at given address and seemed to be bogus; that those companies merely existed on papers and were not genuine companies - Assessing Of: accordingly, held that assessee failed to establish identity of those share-applicants and hence share application money credited ....
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....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 share premium had been proved. In such circ. court could not put blinker on the eye and look only at the papers presented before it. (xii) SubhJakshmi Vanijya (P.) Ltd. vs Commissioner of Income- tax-I. reported in [2015J 60 taxmann.com 60 (Kolkata -Trib.) Section 68 of the Income-tax Act, 1961 - Cash credit (Proviso) - Assessment Year 2008-09 to 2010-11 - Whether amendment to section 68 by insertion of proviso to Finance Act, 2012 which casts onus on closely held company to explain source of share capital is clarificatory and, hence, applicable with retrospective effect - Held, yes [Para 13.aeJ [In favour of revenue] (xiii) Beutex India (P.) Ltd. vs Commissioner of Income-tax reported in [2012J 18 taxmann.com 9 (Delhi). Section 68 of the I....
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.... 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 contended that company did not derive any income and had no source of income during relevant previous year and investment was made by shareholders and that Assessing Officer should have accepted their confirmation letter and their capabilities to invest - Tribunal meticulously mentioned arguments of assessee and point raised by him, considered case law relied upon by assessee and thereafter, passed a speaking order for not entertaining claim of assessee - While rejecting claim of assessee, Tribunal distinguished judgment of Supreme Court in case of CIT v. Bharat Engg. & Construction Co. [1972] 83 ITR 187 as cited by assessee - Whether since, Tribunal had considered entire facts and circumstance of case and decided issue, there was no mistake apparent on record falling within scope of section 254(2) and h....
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....ndisclosed 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 record. In the instant case, the assessee claimed to have received share application money during the year under consideration from two Directors of the company and four Privat Limited Companies aggregating to Rs. 66,08,000/-. The Assessing Officer has not accepted the said share application money as genuine on the ground that in spite of notices being issued and several opportunities being allowed, the share-holders did not appear before him for examination. Therefore, he held the share application money as unexplained share capital introduced in the books of account u/s.68 of the Act and added the same to the income of the assessee. 14. On appeal, the CIT(A) confirmed the action of the Assessing Officer on the ground that the assessee failed to establish creditworthiness of the individual shareholders and genuineness of the transaction and ident....
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....d, 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 in the opinion of the AO aforesaid has been found to be satisfactory." 18. The assessment year under appeal before us is assessment year 2006-07. The said proviso is not applicable to the case of the assessee in hand. We, therefore, respectfully following Full Bench of the Hon'ble Delhi High Court in the case of Sophia Finance Ltd (supra) and decision of Hon'ble Supreme Court in the case of Lovely Export Pvt Ltd (supra), set aside the orders of lower authorities and delete the addition of share application money of Rs. 12,58,000/- received from Ajit Keshari and Rs. 13,50,000/- received from Sri Aman Agarwal aggregating to Rs. 26,08,000/-. Thus, this part of the ground of appeal is allowed. 19. With regard to share application money of Rs. 40,00,000/- received from four Private Limited Companies, we find that the findings of the Assessing Officer is that the Directors of said c....