TaxTMI 
TaxTMI 
TaxTMI 
2018 (4) TMI 1561
X X X X Extracts X X X X
X X X X Extracts X X X X
....assessee relief vide the impugned order dt.22.5.2015. 3.0 Aggrieved by the order of the CIT (Appeals) - 11, Bangalore dt.22.5.2015 for Assessment Year 2010-11, Revenue has filed this appeal before the Tribunal, raising the following grounds :- " 1. The learned CIT (Appeals) has erred in deleting the addition made protectively towards unexplained cash credits / unaccounted payments. 2. For the above and other grounds that may be agitated during the course of appeal, the order of the learned CIT (Appeals) may be set aside and that of the Assessing Officer restored." 4. Grounds (i) and (ii) - Cash Credits/unaccounted payments Rs. 18.00 Crores 4.1 The only issue raised by Revenue in this appeal challenges the action of the ld CIT(A) in deleting the addition of Rs. 18.00 crores made protectively towards unexplained cash credits u/s 68 of the Act. The ld standing counsel pleaded for confirmation of the aforesaid addition made by the AO and filed written submissions in support of Revenue's contentions which are extracted hereunder:- 1. " Search under section 132 of the Act was conducted in the case of Shri.Dinesh Kumar Singhi, Bharat Mines and Minerals and BMM ISPAT Ltd on 19/7/20....
X X X X Extracts X X X X
X X X X Extracts X X X X
....mpany, took over reserves and surplus of the above company at Rs. 125,40,64,500/- as on 31/3/2010. ii. Similarly another company by name M/s.Panchamukhi Properties Private Limited (PPPL) Kolkatta issued and subscribed shares of Rs. 10 per share aggregating to Rs. 2,22,91,950/-. The assessee purchased 60% of the shares and his wife purchased remaining 40% of the issued and subscribed shares. The details are tabulated in page 5 and 6 of the assessment order. In view of the acquisition of 100% of the issued and subscribed share capital of the above company, took over reserves and surplus of the above company at Rs .101,39,38,050/- as on 31/3/2010. iii. The close relatives of the assessee acquired 50 shares out of 22,29,195 shares. iv. The assessee and his wife by acquiring hundred percent of shares by paying a sum of Rs. 1,99,98,700/- acquired control over an amount of Rs. 125,40,64,500/- in respect of M/s.BPO Finance and Investments Private Limited. Similarly by paying a sum of Rs. 2,22,91,450/- acquired control over an amount of Rs. 101,39,38,050/-. v. In view of the disproportionate cost of purchase, enquiries were conducted regarding genuiness of the above transactions. Du....
X X X X Extracts X X X X
X X X X Extracts X X X X
....hat some of the directors or employees of Mr.Sagarmal Nahata was arranging funds at Kolkatta. One of the director was found to be watchmen. The directors were not residing at the addresses provided. The signed blank cheques of the companies were found in the possession of Mr.Sagarmal Nahata. x. In view of the disproportionate investment of acquiring to companies worth Rs. 226 crores by paying a sum of Rs. 4.02 crores the circumstantial evidence was considered by the Assessing Officer. At the time of search a document containing notings regarding payments made to various parties including Kolkatta a/c was seized from the residence of the assessee. The details reflected at page 18 of the assessment order. In total sum of Rs. 5,02,00,000/- has been shifted from Karnataka to some accounts in Kolkatta and the assessee failed to offer an explanation about the nature and source of the entries. Ledger accounts of the share application money received from BPO and PPPL in the books of M/s.BMM Ispat were obtained and examined. xi. On examination of the seized material and the Ledger accounts of BPO and PPPL the Assessing Officer arrived at a conclusion that the assessee has shifted money ....
X X X X Extracts X X X X
X X X X Extracts X X X X
....res and 40% of shares by his wife to identify the genuiness of the company and also the directors of the company would demonstrate the object of the said two companies owned by the assessee and his wife. The Hon'ble Supreme Court in the case of Vodafone has clearly held that the companies without any business being carried out, being used as a conduit for device for avoidance of tax to be treated as shell companies and direct nexus to be created. ii. In view of the seized material reflecting payments towards Kolkatta account and the same amounts being reflected in BMM Ispat private limited and the same amounts being reflected as investment by the BPO and PPPL in the group companies of the assessee would establish the nexus beyond doubt and the same has been rightly taxed as an investment of the assessee. iii. As admitted by the assessee at page 16 of the written submissions, share application money has been considered in the hands of the shareholders, the assessee and his wife being 100% shareholders as unexplained investment." The above addition has been made on protective basis in the hands of the assessee and on substantive basis in the case of Shri Dinesh Kumar Singhi and....
X X X X Extracts X X X X
X X X X Extracts X X X X
....ability for making such investment. Inspite of the above details being furnished, the AO made the said disallowance. The assessee filed appeal before the CIT-A and filed its written submissions vide replies dt.21.10.2013, 06.11.2013,27.12.2013, 21.01.2015 and 02.02.2015 (available at PB pages 18 to 43) and relied on the following case laws: 1) CIT v. Lovely Exports (P) Ltd (216 CTR (SC) 195) 2) CIT & Anr v. Arunananda Textiles (P) Ltd. (333 ITR 116) 3) CIT & Anr v. Mulberry Silk International Ltd (68 DTR 149) wherein it has been held that share application money/share capital cannot be regarded as undisclosed income in the hands of the assessee (recipient company). The Ld CIT-A deleted the addition based on the submissions made by the assessee and for the reasons recorded in the para 8.7 of the CIT-A order. Before the ITAT it is the contention of the assessee that the facts relating to addition of Rs. 18cr is covered by the decision of the Supreme Court mentioned supra. Before the Hon'ble ITAT the assessee relies on the submissions made before the lower authorities. In addition to the above, the assessee relies on the following case laws: 1) Pr.CIT vs Laxman Industrial ....
X X X X Extracts X X X X
X X X X Extracts X X X X
....gus shareholders, whose names are given to the AO, then the Department is free to proceed to re-open their individual assessments in accordance with law. Hence, we find no infirmity with the impugned judgment." 4.3.3 The Hon'ble Karnataka High Court in the case of CIT & Another Vs. Arunananda Textiles Pvt. Ltd., (323 ITR 116) held as under at paras 5 and 6 of its order:- "5. The short question that arises for our consideration in this appeal is "If the company has received share amount from the intending shareholders, is it required for the respondent- assessee to identify and establish the creditworthiness of the depositors." The question raised in this appeal is squarely covered by several judgments of the Supreme Court and also the judgment of this court passed in CIT v. ASK Brothers Ltd. [2011] 333 ITR 111 (Karn) wherein this court following the judgments of the Supreme Court in the case of CIT v. Lovely Exports P. Ltd. reported in [2008] 216 CTR (SC) 195; [2009] 319 ITR (St.) 5 (SC) and also in the case of CIT v. Steller Investment Ltd. [2001] 251 ITR 263 (SC) has ruled that it is not for the assessee to place material before the Assessing Officer in regard to the cr....