TaxTMI 
TaxTMI 
2018 (10) TMI 490
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....ads:- 1. Unexplained Cash Credit u/s 68 Rs.2,64,20,000/- 2. Disallowance u/s 14A Rs. 1,87,566/- Total addition Rs.2,66,07,566/- Un-explained Cash Credit Under Section 68 of the I.T. Act - Rs. 2,64,20,000/- proceedings the following details has revealedOn perusal of record it is gathered that, during the financial year 2011-12, the assessee company had raised its share capital by Rs. 52,84,000/- against issue of 5,28,400 nos of equity shares of face value of Rs.I0/- each with a premium of 2,11,36,000/- at premium of Rs. 40/- per share to 4 subscribers. Hence total share capital including premium for Rs. 2,64,20.000/- . On examination of documents submitted by the assessee company during the course of assessment proceedings the following details has revealed. Name of the Share Holders No. of Shares Face value Premium amount Total investment Source of fund of the Share holder Jai Hind Promoters Pvt. Ltd. 2,50,000 10/- 40/- 1,25,00,000/- From sale of shares and refund of advances Ninachal Barter Pvt. Ltd. 92,400 10/- 40/- 46,20,000/- From sale of shares and refund of advances Dynamo Infrastructures Pvt. Ltd. 1,76,000 10....
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....s the leave to add, alter, modify, include or delete any ground of appeal." 4. We have heard rival contentions. On careful consideration of the facts and circumstances of the case, perusal of the papers on record, orders of the authorities below as well as case law cited, we hold as follows:- 4.1. The assessee is engaged in the business of trading in shares and securities. This is not a case of paper company. The premium charged i.e. Rs. 40/- per share of face value of Rs. 10/- each, is also not excessive or abnormal on the facts of this case. From the audited financial statements, it could be seen that the assessee has gross income of Rs. 5,59,283/- and has shareholder funds of Rs. 12,91,40,498/-. It had advanced long term loans and advances of Rs. 4,73,00,140/-. The total assets are Rs. 14,45,98,802/-. Thus, the premium charged per share cannot be said to be not genuine or exorbitant. In this case, four companies are the share applicants. These are Jai Hind Promoters Pvt. Ltd., Ninachal Barter Pvt. Ltd., Dynamo Infrastructures Pvt. Ltd., Dhanraksha Investment Consultants Pvt. Ltd. All these companies which have subscribed for the shares of the assessee company are also active....
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....addition made by AO is based on extraneous parameters not germane for deciding the issue. The AO had not dealt with the issue judiciously and consistently with the evidences adduced during the course of the assessment proceedings by the appellant and the replies of the share applicants in respect of the share capital which does not warrant the inference that such share application monies received in unaccounted cash credit. Hence, I am inclined to accept the arguments tendered by the AR of the appellant in this respect. In view of the foregoing, I have no hesitation to hold that the impugned addition of Rs. 2,64,20,000/- made by the AO u/s 68 of the Act is not justified in the circumstances and accordingly such addition is directed to be deleted in respect of the four shareholders. Therefore, Ground Nos. 3 to 6 of the appeal are accordingly allowed." 4.2. The ground on which the addition has been made by the Assessing Officer is that there is not compliance to the summons issued to the share subscribers u/s 131 of the Act. The share applicant companies, as well as the assessee company, belong to the same group of companies, with a common director Mr. Sanjay Kumar Khemka. When all....
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....anies as in other cases. The assessee company is a genuine company and the valuation of shares is supported by material. The shareholder/directors have explained their sources. On these facts we examine the case-law. 6. The Hon'ble Supreme Court in the case of CIT v. Lovely Exports Ltd. 216 CTR 195 SC, held as follows:- "Section 68 of the Income-tax Act, 1961 - Cash credit - If share application money is received by assessee-company from alleged bogus shareholders, whose names are given to Assessing Officer, then Department is free to proceed to reopen their individual assessments in accordance with law but this amount of share money cannot be regarded as undisclosed income under section 68 of assessee-company" 6.1. Just because the Directors did not appear to summons issued u/s 131 of the Act, no addition u/s 68 of the Act, can be made, when the Directors have otherwise confirmed the transaction to the Assessing Officer with evidence. 6.2. The Hon'ble Supreme Court in the case of Commissioner Of Income-Tax, vs Orissa Corporation (P) Ltd [1986] 159 ITR 78 (SC), held as follows:- "In this case the assessee had given the names and addresses of the alleged creditors. It....
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....the above extract, two types of cases have been indicated. One in which the Assessing Officer carries out the exercise which is required in law and the other in which the Assessing Officer (sits back with folded hands' till the assessee exhausts all the evidence or material in his possession and then comes forward to merely reject the same on the presumptions. The present case falls in the latter category. Here the Assessing Officer after noting the facts, merely rejected the same. This would be apparent from the observations of the Assessing Officer in the assessment order to the following effect - "Investigation made by the Investigation Wing of the department clearly showed that this was nothing but a sham transaction of accommodation entry. The assessee was asked to explain as to why the said amount of Rs. 1,11,50,000 may not be added to its income. In response, the assessee has submitted that there is no such credit in the books of the assessee. Rather, the assessee company has received the share application money for allotment of its share. It was stated that the actual amount received was Rs. 55,50,000 and not Rs. 1,11,50,000 as mentioned in the notice. The assessee h....
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....To elevate the inference which can be drawn on the basis of reading of such material into judicial conclusions would be improper, more so when the assessee produced material. The least that the Assessing Officer ought to have done was to enquire into the matter by, if necessary, invoking his powers under Section 131 summoning the share applicants or directors. No effort was made in that regard. In the absence of any such finding that the material 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 S. 68 of the Income Tax Act, 1961. 6.7 The Hon'ble Calcutta High Court in the case of CIT v. Roseberry Mercantile (P.) Ltd. GA No. 3296 of 2010 ITAT No. 241 of 2010 dated 10.1.2011, wherein the questions raised before their lordships and decision rendered thereon is as under:- "On the facts and in the circumstances of the case, Ld. CIT(A) ought to have upheld the assessment order as the transaction entered into by the assessee was a scheme for laundering black money into white mo....