TaxTMI 
TaxTMI 
2018 (10) TMI 858
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....lant relied in his submissions as also the decisions to which the AO made reference in the impugned order. From the assessment order I find that the AO per se did not dispute the fact that the AR of the assessee in the course of assessment had submitted the documentary evidences in support of the share subscription amounts received. It is not the AO's case that the assessee had failed to furnish any documents in support of the subscription amount received from the five corporate entities. In AO's opinion however mere furnishing of documents being Xerox copies of PAN Cards, Bank statements, IT Acknowledgments etc. of the share subscribing companies was not sufficient to discharge the onus cast by Section 68 of the Act. In AO's opinion presently several companies in Kolkata existed on paper through which undisclosed income of other assessees was ploughed back in the guise of share capital. According to AO in order to verify the genuineness of the assessee's share transactions; notices u/s 131 of the Act were issued but save & except two cases the remaining three notices were returned unserved. Even with regard to two notices served there was no compliance. The AO ther....
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....e facts I find that only a fraction of the net owned funds of the respective subscribing companies was invested in assessee's equity shares. assessees at the addresses specified in the respective assessment order. Since the addresses specified in the assessment orders of the respective companies tallied with the addresses specified on Page 1 of the impugned order, supported the appellant's case that the share subscribing companies had their respective offices at the addresses specified before the AD and therefore no adverse inference was not permissible merely because the AO was unable to serve the notices u/s 131. at the given addresses. 4.6 The assessment orders of the share subscribing companies also proved that each share subscribing company was regularly assessed to tax and for AY 2012-13 being the year under consideration they were assessed in their own rights with reference to the financial results disclosed by their respective audited financial statements. The facts and documents therefore supported the AR's contention that the assessee had established identity of all the five share subscribing companies. No adverse inference was therefore required to be draw....
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....e share transaction, conducted in FY 2011-12 latest copy of the annual return filed with the ROC by the share subscribing companies apparently did not have any relevance nor the AO clarified in what way such information was required for determining the genuineness and creditworthiness of the share subscribing companies .. The AO had further required the share subscribing companies to clarify whether they had received any dividend from Singhania & Sons Pvt Ltd or benefitted by way of any means against the investment in shares of that company or what prompted them to make investment in shares of the said company. Once again I find that the AO made reference to a company named 'Singhania & Sons Pvt Ltd' whose relationship with the appellant was not explained. In what way the share subscribing companies' transactions with Singhania & Sons Pvt Ltd were relevant in determining the appellant's transactions with the subscribing companies was not explained by the AO in the impugned order. In my opinion the information as called for through clause (ii) of the notice u/s 131 had no relevance in determining identity, creditworthiness of the share subscribers or proving the genuinen....
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.... carrying on businesses. In order to part finance business activities the assessee had raised capital from other bodies corporate. In the course of assessment the appellant had furnished the documentary evidences as were made available to the assessee by the share subscribing companies. The documents furnished prima facie proved the identity & creditworthiness of the shareholders. The transactions were carried through banking channels. Although the documents were submitted before the AO no enquiry was conducted by the Assessing Officer either from the Departmental records or from the bankers of the share subscribers. The AO drew adverse inferences primarily because none of the share subscribers appeared before him. In the impugned order much emphasis was placed on the fact that three of the shareholders were not served with the notices u/s 131. However from the assessment orders passed by the different officers of the Department showed that in the assessment orders passed for AY 2012-13, the addresses of the share subscribing companies were found to be same as specified by the AO himself. On these facts therefore I find that the appellant had brought on AO's record sufficient d....
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....el & Alloys Limited [361 ITR 220]. In both these decisions the earlier judgment in the case of Nova Promoters & Finlease Pvt Ltd (supra) was cited by the Department. However after considering the factual context in which the earlier judgment was delivered, the Delhi High Court refused to follow the ratio laid down in the earlier judgment. On the contrary the Delhi High Court took note of the fact that in later two cases each share applicant was regularly assessed to tax, having independent PAN. The shareholders had accepted their transactions with the assessee company. The High Court further found that in each case the share subscription amounts were paid by account payee cheques. Copies of the bank statement were also furnished. The High Court further found that by producing these documents, the assessee had discharged its onus of proving identity and creditworthiness of the shareholders as also the genuineness of the transactions. On the contrary however the AO had not conducted any inquiry nor proved any falsity in the documents furnished. The High Court therefore held the addition u/s 68 to be unsustainable. Following observations of the Delhi High Court in the case of CIT Vs K....
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....et Packaging (India) Pvt Ltd (367 ITR 217) (Allah HC) CIT Vs Pranav Foundation Ltd (229 Taxman 58) (Mad HC) CIT Vs Supertech Diamond Tools Pvt Ltd (229 Taxrnan 62) (Raj HC) CIT Vs Victory Spinning Mills Limited (50 taxmann.com 416) (Mad HC) 4.13 In all the above decisions the relief was allowed by the High Courts by placing reliance on the judgment of the Apex Court in the case of CIT Vs Lovely Exports Pvt Ltd (319 ITR 5). The decision of the jurisdictional Calcutta High Court in the case of CIT vs Dataware Pvt Ltd: dated 21.09.2011 in this regard is relevant because the observations in this judgment has bearing in deciding the issue of application of Section 68 in relation to cash credit. In that decision the Calcutta High Court made the following observations: "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 Assessing officer should enquire from the Assessing Officer of the creditor as to the gen....
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....tive share subscribing companies at the addresses specified in the respective assessment orders and which tallied with the addresses furnished before the AO of the present appellant, then I see no reason for the AO not to find the very same companies at the given addresses. Moreover the assessment orders passed by the AOs of the respective share subscribers also substantiated the fact that the IT Department had accepted the genuine existence of the respective companies and with reference to information disclosed by each of them in their respective balance sheet, the total income was assessed. If the existence of the respective share subscribers was accepted by the AOs of the IT Department for the purposes of framing assessment for AY 2012-13, then I see no reason why the AO of the appellant company could dispute and doubt their existence. Moreover, I find that each share subscribing company had disclosed in its audited accounts sufficiently large investible funds and only fraction of such investible funds were received by the appellant in the form of share capital. On these facts it could not be alleged that respective companies were benamidar of the assessee. In the impugned order....
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....the case of CIT Vs Dataware Pvt. Ltd. and Delhi High Court in the case of CIT Vs Kamdhenu Steel & Alloys Limited (supra) and CIT Vs Gangeshwari Metal (P) Ltd (supra), I hold that the AO was not justified in making addition o Rs. 3,01,00,000/.- u/s 68 of the Act. The addition is accordingly deleted. [Ground Nos. 1 to 4 are therefore allowed]." 3. Mr. Choudhury vehemently contends during the course of hearing that the Assessing Officer had rightly made the impugned addition since the taxpayer had failed to prove identity, genuineness and creditworthiness of the share premium money. He terms the impugned share subscription premium Rs.690/- per share having face value of Rs.10/- each as highly exorbitant. Case laws Sumati Dayal vs. CIT (1995) 214 ITR 801 (SC) and CIT vs. Durga Prasad More (1971) 82 ITR 540 (SC) is further quoted during the course of hearing that the relevant evidence submitted during the course of assessment has to be considered as per the human probabilities by removing all blinkers. Our attention is thereafter invited to the relevant nuances of such share subscription routing involving multiple layers to plough back unaccounted monies back to the books. We find no m....
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.... facilities under the head "House Property" as opposed to "Profits & Gains of Business" as claimed by the assessee. It is relevant to note" that the jurisdictional facts in the present case are in narrow compass and there is no dispute with regard to these facts between the assessee and the AO. Having regard to the admitted and undisputed facts the short question to be decided is whether the income which the assessee derived from letting out of the warehousing facilities was rightly assessable under the head "House Property" or Business. On scrutiny of the material placed before me, I note that the appellant was incorporated as a private company in 2006. From the assessee's Memorandum of Association, I note that the main object of the appellant inter alia included object No. 1 which reads as follows: " To conceive, plan, survey, design, study and evaluate all steps, process, techniques and methods for setting up of all types of infrastructure Projects, facilities or works, and to, build, construct, install, erect, undertake, la-down, commission, establish, own , operate, manage, maintain, control, and administer, lease, transfer, all Infrastructure Projects, facilities or wor....
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....ranged both own and borrowed funds. Substantial investment was made not only in construction of warehouse building but also in acquisition and installation of plant & machineries so as to develop, operate & maintain a modern warehousing facility which could simultaneously be used by number of FMCG companies for storing numerous types of consumer products. From the details furnished it appeared that apart from constructing a modern building with pre-fabricated blocks, the assessee installed several plant & machineries such as central airconditioning, fire-fighting equipments, overhead cranes, material handling systems, electronic security surveillance systems etc. Besides the assessee also developed civic infrastructures such as roads within the building and adjoining compound, spaces for loading & unloading of goods, facilities for parking of vehicles, security for the goods & vehicles etc. The rent charged by the assessee was not only for letting out of the building simplicitor but also for providing incidental facilities and amenities for safe storage and handling of goods in an efficient manner. The air conditioning provided within the warehousing facilities enabled the occupier....
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....illary objects in clause Ill. (A) and (B) respectively. The main object of the appellant company is to acquire and hold the properties known as "Chennai House" and "Firhavin Estate" both in Chennai and to let out those properties as well as make advances upon the security of lands and buildings or other properties or any interest therein. What we emphasise is that holding the aforesaid properties and earning income by letting out those properties is the main objective of the company. It may further be recorded that in the return that was filed, entire income which accrued and was assessed in the said return was from letting out of these properties. It is so recorded and accepted by the assessing officer himself in his order. We are conscious of the aforesaid dicta laid down in the Constitution Bench judgment. It is for this reason, we have, at the beginning of this judgment, stated the circumstances of the present case from which we arrive at irresistible conclusion that in this case, letting of the properties is in fact is the business of the assessee. The assessee therefore, rightly disclosed the income under the Head Income from Business. It cannot be treated as 'income fr....
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....ther find that identical issue of taxability of Income derived from letting out of the warehouses was considered by the Punjab & Haryana High Court in the case of Haryana Warehousing Corporation Vs ACIT (328 ITR 23) and Karnataka High Court in the case of CIT Vs Karnataka State Warehousing Corporation (44 taxmann.com 205). In both these cases the income was derived by State Govt undertakings from letting out of the warehousing facilities and the income was offered under the head "Business". The Assessing authorities however assessed the income under the head "House Property". On due consideration of the facts and after considering the judgments of the Apex Court in the case of S.G. Mercantile Corpn Vs CIT (supra) and Karanpura Development Co. Ltd. v. CIT (supra), the High Courts held that income from warehousing activities was liable to be assessed under the head "Business" and not "House Property". The same view was taken by the ITAT, Chennai Bench in the case of ACIT Vs N.D.R. Warehousing Pvt Ltd (ITA No. 182/Mds/20i3) which was upheld by the Madras High Court in its judgment dated 01.12.2014. The AR also placed before me copy of the recent decision of the jurisdictional IT AT, K....
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....issue had arisen in the assessee's sister concern M/s Maa Amba Infrastructure (P) Ltd's case ITA No.1309/Kol/2015 vide at the Revenue's behest. Learned co-ordinate bench therein affirms the CIT(A)'s identical findings as follows:- "2.3. We have heard the rival submissions. Briefly stated facts are that the assessee company was formed with the main object as stated in the Memorandum of Association , to conceive, plan, survey, design, study and evaluate all steps, process, techniques and methods for setting up of all types of infrastructure projects, facilities or works, and to, build, construct, install, erect, undertake, commission, establish, own, operate, manage, maintain , control and administer , lease, transfer, all infrastructure projects, facilities or works including agricultural, parks, gardens, roads, bridges, flyovers, highways, roadways, structures and facilities ................ In pursuance of its objective, the assessee had acquired land at Matigara and constructed a specialized warehouse of international standards providing and / or for rendering storage facilities to multinational companies. The warehouse is fitted with complete machineries, pre-fabricated struct....
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....e under the head 'income from house property' instead of 'business'. When this question came up for consideration before the Hon'ble Supreme Court, the Court gave paramount importance to the main objects laid down in the Memorandum of Association to determine the nature of rental income. The Court found that the main object of the assessee was to acquire and rent out properties and accordingly it held that the rental income was earned in the regular course of assessee's business as set out in the object clause of its Memorandum. The Hon'ble Supreme Court distinguished the decisions of its earlier co-ordinate Bench in the case of East India Housing & Land Development Trust Ltd vs CIT reported in 42 ITR 49 (SC) and Sultan Brothers (P) Ltd vs CIT reported in 51 ITR 353 (SC) . Instead the Supreme Court followed the law laid down in the decision by the same court in Karampura Development Co. Ltd vs CIT reported in 44 ITR 362 (SC). In the aforesaid case, the assessee was formed with the purpose of acquiring and disposing coal mining rights. In pursuance of its objective, the assessee had acquired long term leases of coalfields which was subsequently let out to various customers. The rent....