TaxTMI 
TaxTMI 
TaxTMI 
2018 (10) TMI 855
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....d in law and on facts in confirming the action of the Ld. AO in disallowing the deduction fully as claimed by the assessee u/s 24(a) of the Income Tax Act, 1961. 4. That having regard to the facts and circumstances of the case, Ld. CIT(A) erred in law and on facts in confirming the action of the Ld. AO in making the impugned additions/disallowances and in framing the impugned assessment order which is contrary to law and facts and was framed without providing adequate opportunity of hearing and without confronting the entire adverse material which was used against the assessee and that too by recording incorrect facts and findings. 5. That having regard to the facts and circumstances of the case the ld. CIT(A) erred in law and on facts in confirming the action of the A.O. in charging interest u/s. 234A, 234B and 234C of the Income-tax Act. 2. From the above grounds of appeal, it emerges out that the issues involved in this appeal, which need adjudication, pertain to the following additions made by the Assessing Officer and sustained by the ld. CIT(A) : (i). Addition of Rs. 1,07,25,000/- made on a/c of unexplained share Premium Received by the assessee. (ii). Addition of Rs....
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....relates to the addition of Rs. 1,07,25,000/- on account of share premium on the ground that assessee failed to justify the impugned credit with supporting documentary evidence and failed to produce the parties. Ld. A.O. has discussed this issue at Page 1-2 of the assessment order, whereas Ld. CIT(A) has discussed this issue from Page 2-19 of the appeal order. PB 166-175 are the submission before Ld. CIT(A) inter-alia submitting that share capital has been accepted but share premium received from those very shareholders through banking channel were not accepted which is not possible, more so when there were overwhelming evidences from these shareholder-companies confirming the share premium and that all the shareholder-companies were assessed to tax and such shareholder-companies confirmed the transaction to Ld. A.O. directly and relying upon various pages of the paper book and meeting adverse observation of Ld. A.O. and relying several decisions, which are relied upon here also. PB 185-207 are further submissions to Ld. CIT(A) in response to the enquiry made by her and submitting fresh confirmations, copies of income tax returns of A.Y. 2008-09 and 2009-10, master-data chart ....
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....T(A) mentions that bank account of the shareholder companies were not filed by the assessee. Thus, this shows the contradictory findings by Ld. CIT(A) and proves that the earlier finding was incorrect. It is further submitted that investment is made out of the funds available and not out of the income and therefore, even if there was nil income in the hands of the shareholdercompanies, it does not go to establish that those companies were not creditworthy, more particularly when bank statements and other evidences filed by the assessee clearly show the source of the investment made. Ld. CIT (A) has found the deposits and withdrawals as typical example of entry providers. In reply, it is submitted that this conclusion of Ld. CIT(A) is nothing but surmise and conjecture. 5. Ld. CIT(A) has mentioned in Para 8.16 that the director of all the four companies was Sh. Jitender Kumar but none of the returns have been signed by him and the affidavits have also been signed by Mr. Parmod Kumar. In reply, it is submitted that in a company, there has to be more than one director. It is not the case of the Ld. CIT(A) that Mr. Parmod Kumar was not the director of the shareholder companies an....
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....119 (Delhi High Court) Income-Cash credit-Share application money-Though the share applicants were not produced in spite of specific direction of the AO, assessee company has filed copies of PAN, acknowledgement of returns of the share applicants and their bank account statements of the relevant period when the cheques were cleared-Thus, primary onus was discharged by the assessee-Assessee was not confronted with the investigation carried out by the Investigation Wing or given any opportunity to cross-examine the persons whose statements were recorded by the Investigation Wing to draw adverse conclusion against the assessee-As regards discrepancies in the bank statements, these statements were provided by the shareholders and were printed on the bank stationery-Assessee was never confronted with these discrepancies by the AO-In any case, it does not follow from these discrepancies that the amount of share capital was undisclosed income of the assessee-Even the correct bank statements as claimed by the AO show that the assessee has received cheques from the shareholders-Though source of cash deposits in the bank accounts of some shareholders is questionable, AO has not further pro....
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....returns in which addresses of the applicant companies are recorded- Genuineness of these documents is not doubted-AO did not make any verification nor summoned the records of the banks on which cheques issued were drawn-There was no legal obligation on the assessee to produce the director or other representatives of the applicant companies before the AO-If the AO had any doubt about identity of the share applicants, he could have summoned the directors of the applicant companies- Assessee had established the identity of share applicants and the genuineness of the transactions-Therefore no addition could be made under s. 68. Without prejudice to the above, reliance is placed on the decision in the case of CIT vs. Dataware (P) Ltd. in ITA 263/2011, dated 21-09-2011 for the proposition that Ld. AO can make direct enquiry from the Ld. AO of shareholder. "In our opinion, in such circumstances, the assessing officer of the assessee cannot take the burden of assessing the profit and loss account of the creditor when admittedly the creditor himself is an income tax assessee. After getting the PAN number and getting the information that the creditor is assessed under the Act, the assess....
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....as surprising that when assessee is pointing out arithmetical error based on PB- 6, to say that there was no evidence, highly unjustified. Apart from the above, the ld. AR also relied on following decisions : (i). CIT vs. Jalan Hard Coke Ltd., 95 taxmann.com 330 (Rajasthan), SLP filed by the Revenue stands dismissed by Hon'ble Supreme Court reported in 95 taxmann.com 331(SC) (ii). Order of ITAT, Hyderabad in M/s. Hariom Concast & Steel Pvt. Ltd., Vs. ITO (ITA No. 1775/Hyd/2014 dated 05.10.2016). 6. On the other hand, the ld. DR relying on the orders of authorities below, submitted that the assessee failed to substantiate the identity and creditworthiness of the creditors and as such failed to discharge the onus that lay upon him by section 68 of the Act. Therefore, the ld. Authorities below were quite justified in sustaining the addition on account of unexplained share premium and unexplained unsecured loans. The ld. DR also relied on the decisions, as relied by the ld. CIT(A) in the impugned order and submitted that the decisions relied by the ld. AR are not applicable to the present case. 7. We have heard the rival submissions and have gone through the material available ....
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....,00,000), M/s. Rishabh Shoes P. Ltd. (Rs.30,00,000) and M/s. Thar Steels P. Ltd. (Rs.20,00,000). 8. It is apparent on record that none of the authorities below have bothered to rebut the contentions of the assessee that he issued 27,500 equity shares of Rs. 10 each at premium of Rs. 390/- per share during the year to above share holders. The authorities below have no objection on increase of share capital of Rs. 2,75,000/-, rather accepted the same, but have proceeded to disbelieve the share premium on the issue of these very shares @ 390/- per share, amounting to Rs. 1,07,25,000/- received from the same very share holders through account payee banking instruments, which also included the amount of share capital of the face value of Rs. 2,75,000/-. Such a partial acceptance and partial disallowance out of the two segments of same transactions, in our opinion, leads to contradictory approach of the authorities below which is not tenable under law. 9. The Co-ordinate Bench of Hyderabad Tribunal in the case of M/s. Hariom Concast & Steel Pvt. Ltd. (supra) in the identical facts of the case has held as under : "7. We have considered the rival contentions and perused the orders of a....
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.... has been subscribed and allotted to IDFC PE Fund-II which company is a Front Manager of IDFC Ltd., in which company Government of India is holding 18% of shares. The contributors to the IDFC PE Fund-II who is a subscriber to the assessee's share capital, are LIC, Union of India, Oriental Bank of Commerce, Indian Overseas Bank and Canara Bank which are all public sector undertakings. Therefore, to raise eyebrows to a transaction where there is so much of involvement of the Government directly or indirectly does not make any sense. 10.1. No doubt a non-est company or a zero balance company asking for a share premium of Rs. 490/- per share defies all commercial prudence but at the same time we cannot ignore the fact that it is a prerogative of the Board of Directors of a company to decide the premium amount and it is the wisdom of the share holders whether they want to subscribe to such a heavy premium. The Revenue authorities cannot question the charging of such of huge premium without any bar from any legislated law of the land. Details of subscribers were before the Revenue authorities. The AO has also confirmed the transaction from the subscribers by issuing notice u/s. 133(6)....
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....imal Vs CIT 131 ITR 451, wherein the Hon'ble Supreme Court has laid down the ratio that "It is well known that an appellate authority has the jurisdiction as well as the duty to correct all errors in the proceedings under appeal and to issue, if necessary, appropriate directions to the authority against whose decision the appeal is preferred to dispose of the whole or any part of the matter afresh, unless forbidden from doing so by statute." 11.1. Considering the submissions of the Ld. DR in the light of the above ratio, let us test the transaction in the light of the provisions of Sec. 68 of the Act. As per Section 68 - the initial onus is upon the assessee to establish identity, genuineness of the transaction and the capacity of the lender or the depositor. The subscribers to the share capital are all companies. The confirmations of the transactions have been received by the AO by issuing notice u/s. 133(6) of the Act, therefore, identity has been established beyond all reasonable doubts nor the Revenue authorities have questioned the identity of the share holders. The genuineness of the transaction can also be safely concluded since the entire transaction has been done thr....
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....s in all the related transaction under issue are directly or indirectly related to the Government of India. Therefore, considering the entire issue in the light of the material evidence brought on record, in our considerate view, the Revenue authorities have erred in treating the share premium as income of the assessee u/s. 56(1) of the Act. In our considerate view, for the reasons discussed hereinabove, we do not find it necessary to apply the provisions of Sec. 68 of the Act. We, therefore, direct the AO to delete the addition of Rs. 47,97,10,000/-. Ground No. 2 & 3 are accordingly allowed". 8. The other case law relied on by assessee is also on the issue that share premium cannot be brought to tax invoking the provisions of Section 68, unless there is a link with either quid pro quo transaction or investing by assessee-company in their accounts so as to receive it back as share capital. No such evidence was brought on record. On the given facts of the case, and on the basis of the confirmation filed by the companies, we cannot hold that this amount can be brought to tax invoking the provisions of Section 68. The genuineness and credit worthiness of those companies is not in d....
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....the assessee regarding the three ingredients of section 68 of the Act. Once, all the above documentary evidences are produced, the assessee had discharged the onus cast upon him. It is also not in dispute that the notices issued by the Assessing Officer u/s. 133(6) of the Act stood served upon the shareholders/creditors and the same were directly responded to the Assessing Officer. Hon'ble Gujrat High Court in a recent decision of PCIT vs. D&H Enterprises, (2016) 72 taxmann.com 91 (Gujrat) on such issue held as under : "7. Thus, from the facts noted hereinabove, it is evident that the assessee had produced all relevant details in its possession, namely, names, permanent account numbers, income tax returns, and bank statements of all the investors. The amounts in question had been received by way of account payee cheques. Having regard to the fact that the permanent account numbers and the income tax returns of all the investors had been furnished by the assessee, the Assessing Officer could have easily verified the same. He, however, placed reliance upon the fact that the summons issued to the parties under section 131 of the Act could not be served and hence, did not accept the ....
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....issue summons against said investors under section 131 for their production at assessment stage was not considered and Assessing Officer passed assessment order on next day - Whether since assessee at assessment stage had produced sufficient evidences before Assessing Officer so as to discharge its initial onus to prove identity of investor companies, their creditworthiness and genuineness of transactions, impugned additions under section 68 were unjustified - Held, yes [Paras 5,5.2,5.9] [In favour of assessee] 14. It is also pertinent to note that the ld. CIT(A) while directing some enquiries to be conducted by the Assessing Officer vide letter dated 06.07.2011 has also pointed out various defects in the impugned assessment order such as non-specifying the sections under which the additions were made; how many companies were involved in the transactions and how many of them were connected with one Sri Tarun Goel; how many shares were allotted to various companies or the share premium paid by these companies; absence of number of parties to whom notices u/s. 133(6) were issued and number of companies who responded to them is also not clear and to make enquiries on existence of va....