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2019 (1) TMI 267
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.... of share capital raised. 4. Submission of AR : We would like to inform that M/s. Dhara Vyapaar Private Limited is a private limited company incorporated in the year 2006. The company issued 317,000 equity shares of Rs. 10/- each at a premium of Rs. 90/- per share and all the shares have been allotted during the year. Now Sir, What is share premium? A company may issue its shares at a price exceeding their nominal par value, that is, at a premium. (Gower's Principles of Modern Company Law (Fourth Edition) Chapter 10). Share premium is not being distributable as income any more than any capital asset. On a winding up, the surplus moneys in the share premium account would be returned to the shareholders as capital and, so long as the company is a going. concern, these same moneys can ordinarily be returned to shareholders through the medium of a reduction petition or, in other words, except under more or less the same conditions under which* any capital asset can reach the shareholders' hands. Where shares are issued at a premium, whether for cash or otherwise, the premium is to be carried into a share premium account in the books of the co....
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....ding the source of their investment in shares. As per decided case law of Standard Cylinders (P.) Ltd. v. [1998] Taxation 89(4) 76 (Delhi-Trib.), it was held that the company was a separate juristic person and it cannot be asked to prove the source of investments by the shareholders for the subscriptions made by them for shares. It is sufficient if the company furnishes the list of persons with their addresses, and the number of shares held by them. No addition can made for such subscriptions. In the case [2014] 51 taxmann com 198 (Madras) HIGH COURT OF MADRAS Commissioner of Income-tax, Chennai v Pranav Foundations Ltd . .". [2014] 51 taxmann com 198 (Madras)1 [2015] 229 Taxman 58 (Madras), the Ld Judges observed "All that the said provision contemplates is that the assessee has to give satisfactory explanation above the "nature and source of such sum found credited in the books of account." Further that the decision of the Supreme Court in Lovely Exports (P) Ltd case, referred (supra), applies, in view of the fact that all the parties, who are subscribers of the shares, are Registered Private Limited companies and all the companies accepted the....
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....ar the appeal to discourage tax avoidance is not a relevant consideration' Further the Tribunal did not approve the action of the Commissioner and cancelled the orders passed by him under section 263 on the following grounds: (a) No company is authorised to ask its shareholders to explain the source of their investment. (b) Whatever information a company is obliged to keep under the Companies Act was duly furnished to the department. (c) There is no provision which makes it obligatory on the company to collect evidence regarding the source of investment by the shareholders. (d) The law does not enjoin on anybody to furnish evidence which is not available with him or which he is not authorised to collect. (e) No assessee can be called upon to prove the source of source. (f) A company is a jurisdic person different from its shareholders and any liability which is legitimately that of the shareholders cannot be fastened on the company. As per decided case law of CIT v. Stellar Investments Ltd. [1991] 59 Taxman 568 (Delhi) followed by decision of Madras High Court in CIT v. Electro Polychem Ltd. [2007]....
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...., By merely rejecting unreasonably a good explanation, the department cannot convert good proof into 'no proof In fact, the principle of onus, which the assessee is required to establish the identity, prove the genuineness of the transaction and establish the creditworthiness of the donor, has been reiterated even' in a recent decision of Hon. Delhi High Court in the case of CIT vs. Oasis Hospitalities Pvt. Ltd., 333 ITR 119 (Delhi)(2011). In this case it was held by-the Hon. Court that "The initial onus is upon the assessee to establish three things necessary to obviate tile mischief of Section 68. Those are: (i) identity of the investors; (ii) their creditworthiness/investments; and (iii) genuineness of the transaction. Only when these three ingredients are establish prima facie, the department is required to undertake further exercise." . Further Your honour {2014} 45 taxmann corn 204 (Allahabad) HIGH COURT OF ALLAHABAD Commissioner of Income-tax (Central)' v Vacmet Packaging (India) (P) Ltd*_ accordance with law, but it cannot be regarded as undisclosed income of assesseecompany Similar view has been expressed by Hon'ble Delhi High Court in cas....
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....transaction has been done through the banking channels duly recorded in the books of account of the assessee and duly reflected in the financial statement of the assessee. The related Bank Statements are attached hereto. In the Bank Statement, the transactions relating to the allotment of shares are duly reflected. Therefore, all the relevant documents have been provided that may be reasonably treated as sufficient to substantiate that the company has entered into a genuine transaction with the shareholders as well as by providing the details mentioned above, the existence and identity of the investing companies has also been justified. As held in the case of Nemi Chand Kothari v. CIT [2003] 264 ITR 254 (Gau.) where in it was held that it cannot be said that a transaction, which takes place by way of cheque, is invariably sacrosanct. Once the assessee has proved the identity of his creditors the genuineness of the transactions, and the creditworthiness of his creditors vis-a-vis the transactions which he had with the creditors, his burden stands discharged and the burden then shifts to the revenue to show that though covered by cheques, the amounts in question, actually belonged to....
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....city of subscribers and as they were regular assessees, the addition made was not held justified. In CIT v Sahibganj Electric cables (p) Ltd. [1978] 1151TR 408 (Cal.) where the amounts of loan received by cheques and repayments also made by cheques through assessee's bankers, the creditors gave confirmation letters mentioning therein their income tax file numbers. ITO without making any further enquiry, disbelieving the evidence of the assessee made addition. ITAT held the additions not justified as the assessee discharged the onus. High Court held that Tribunal is justified in deleting the addition. As held in case of Sreelekha Banerjee v. CIT [1963] 49 ITR 112 (SC), By merely rejecting unreasonably a good explanation, the department cannot convert 'good proof into' no proof . The very words" an undisclosed source" shows that the disclosure must come from the assessee and not from the department, this is so because the source of the credit in the books of the assessee is within the knowledge of the assessee and section 106 of the Evidence Act requires the assessee, and not the department to disclose it and prove it. But the assessee cannot be....
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....genuineness of the transactions and c) creditworthiness of the shareholders. Therefore, no adverse inference needs to draw against the assessee. 1. That the assessee company has received 'share application from 1. M/s Renomex Dealers Private Limited. 2. M/s Riddhi Siddhi Tradevin Private Limited. 3. M/s Value Added IT Consultancy Private Limited. 4. M/s Contship Commodities Private Limited. 5. M/s Diamention Mercantile Private Limited. 6. M/s Giltedge Vincom Private Limited. 7. M/s Mirabelle Tradecomm Private Limited. 8. M/s Mubarak Lubricant Private Limited. 9. M/s Vanraj Merchants Private Limited. 10. M/s Vighnhar Marketing Private Limited. 1. M/s Renomex Dealers Private Limited having its registered office at 18/1, M. D. Road, 5th Floor, Room # 73 Kolkata- 700007 The company has been allotted 2000 equity shares of Rs. 101- each at a premium of Rs. 90/- per share. The payment has been made through cheque no. 375879 dated 12/10/2011 for Rs. 2,00,000/- drawn on Karur Vysya Bank Limited, Burra Bazar Branch. The Bank statement highlighting the payment portion has b....
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....e Dealers Pvt. Ltd., Poddar Consultancy Pvt. Ltd., Renomex Dealers Pvt. Ltd. & Som Dealers Pvt. Ltd., the amount has been received on 29/09/2011, 01/10/2011, 07/10/2011, 08/10/2011 & 12/10/2011 through cheque no. 53841, 957652, 375878, 957653, 53842 & 155794 of Rs. For Rs. 3,00,0001-, 3,00,000/-, 3,00,000/-, 2,00,0001-, 1,00,0001- & Rs. 1,00,000/- respectively. The confirmation of accounts has been attached. The Investor Company has also provided their Financial Statement and copy of the ITR acknowledgement for Asst. Year 2012-13.They have provided Xerox copy of share certificate No. 000000051 vide registered folio no. 53 and distinctive no. 0000602001-0000615000 dt 31.03.2012 allotted to them along with their board resolution for their investment in our company. We at this moment attached the share application form and their allotment advice duly signed by them. (Refer Annexure B"). The Investor Company has also forwarded their notarised affidavit confirming the above fact. The copy of ID proof of the director of the company as well as his IT Acknowledgement for A.Y. 2012-13 has also been attached. List of documents submitted in Annexure "B" 1. Confirmat....
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....Kolkata- 700001 The company has been allotted 25,000 equity shares of Rs. 101- each at a premium of Rs. 90/- per share. The payment has been made through cheque no. 385927 dated 27.03.2012 for Rs. 25,00,000/- drawn on Central Bank of India. The Bank statement highlighting the payment portion has been attached. The source for the payment of such amount has been generated from the receipt from sale of shares to Aradhna Commercial Pvt. Ltd. and Amritvani Sales Pvt. Ltd., the amount has been received on 26/03/2012 through cheque no. 529297 & 528996 for Rs. 20,00,0001- & 5,00,000/- respectively. The confirmation of accounts has been attached. The Investor Company has also provided their Financial Statement and copy of the ITR acknowledgement for Asst. Year 2012-13.They have provided Xerox copy of share certificate. 000000033 vide registered folio no. 45 and distinctive no. 0000300001-0000325000 dt 31.03.2012 allotted to them along with their board resolution for their investment in our company. The investor company is registered NBFC (Non-Banking Financial company) registered with Reserve 8ank Of India U/s 45 of the Reserve Bank of India Act 1934 vide registration no B.05.06269....
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....dgement 9. Financial statements 10. Certificate of Registration from RBI 6. M/s Giltedge Vincom Private Limited having its registered office at 85, N S Road, Kolkata- 700001 The company has been allotted 80,000 equity shares of Rs. 10/- each at a premium of Rs. 90/- per share. The payment has been made through cheque no. 900448, 900457 & 900463 dated 23/03/2012,28/03/2012 & 30/03/2012 for Rs. 30,00,000/-, Rs. 25,00,000/- & Rs. 25,00,000/- respectively drawn on Indian Bank. The Bank statement highlighting the payment portion has been attached. The source for the payment of such amount has been generated from the receipt from sale of shares to Anunay Sales Pvt. Ltd., Anubhav Comrnonsales Pvt. Ltd. & Unique Dealtrade Pvt. Ltd., the amount has been received on 23/03/2012,28/03/2012 & 30/03/2012 through cheque no. 685958, 685907 & 685990 for Rs. 10,00,000/-, Rs. 10,00,000/- & Rs. 10,00,000/- respectively. The confirmation of accounts has been attached. The Investor Company has also provided their Financial Statement and copy of the ITR acknowledgement for Asst. Year 2012-13.They have provided Xerox copy of share certificate. 000000035 vide registered ....
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....serve Bank Of India U/s 45 of the Reserve Bank of India Act 1934 vide registration no B.05.06607 dt. 16.02.2006. We hereby attached the share application form and their allotment advice duly signed by them. (Refer Annexure G"). The Investor Company has also forwarded their notarised affidavit confirming the above fact. List of documents submitted in Annexure "G" 1. Confirmation 2. Board resolution for investment 3. Share Application Form 4. Letter of Allotment 5. Share Certificate 6. Bank Account 7. ITR Acknowledgement 8. Financial statements 9. Certificate of Registration from RBI 10. Affidavit by the Director 8. M/s Mubarak Lubricant Private Limited having its registered office at 85, N S Road, Kolkata- 700001 The company has been allotted 25,000 equity shares of Rs. 10/- each at a premium of Rs. 90/- per share. The payment has been made through cheque no. 530128 dated 21/03/2012 for Rs. 25,00,0001- drawn on Central Bank of India. The Bank statement highlighting the payment portion has been attached. The source for the payment of such amount has been gener....
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....heir investment in our company. The Investor company is registered NBFC (Non-Banking Financial company) registered with Reserve Bank Of India U/s 45 of the Reserve Bank of India Act 1934 vide registration no B-05.03442 dt. 06.02.2004. We hereby attached the share application form' and their allotment advice duly signed by them. (Refer Annexure I"). The Investor Company has also forwarded their notarised affidavit confirming the above fact. List of documents submitted in Annexure "I" 1. Confirmation 2. Board resolution for investment 3. Share Application Form 4. Letter of Allotment 5. Share Certificate 6. Bank Account 7. ITR Acknowledgement 8. Financial statements 9. Certificate of Registration from RBI 10. Affidavit by the Director 10. M/s Vighnhar Marketing Private Limited having its registered office at 18A, Ramakanta Bose Street, Kolkata-700003 The company has been allotted 25,000 equity shares of Rs. 10/- each at a premium of Rs. 90/- per share. The payment has been made through cheque no. 284091 dated 31/03/2012 for Rs. 25,00,0001- drawn on Central Bank of I....
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....851- kept in fixed deposits. Quantity of authorized shares as on 31,03,2011 was 300000 numbers. Price was fixed at Rs. 10/- each. Premium as on 31.03.2011 reported was Rs. 2,61,00,000/-. Quantity of equity share issued earlier year' was 300000. Average value of premium received as on 31.03.2011 calculated at Rs.(26100000 -:- 300000) = 87 per share. During the previous year authorized shares increased to 75000 numbers. Quantity of equity shares issued during previous year (617000-300000) =317000 number. Total premium received was Rs:(31700000-3170000) =285300001-. Premium received Rs.(25360000 -:- 317000) = 90/- per share. During the course of assessment proceeding Notice U/S 142(1) dated 10.10.2014 issued by ITO Wd-6(1), Kolkata. Case later on transferred to ITO, Wd-6(1), Kolkata There is no any record/correspondence made during the period 10.10.2014 to 04.02.2015. Show cause notice issued on 05.02.2015 by ITO, Wd-6(1), Kolkata on account of non-compliance of notice U/S issued 142(1). In compliance of show cause notice assessee filed application for adjournment of date to present the case in a proper way on 17.02.2015. Later....
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....cision: (Ground No.1,2,3,&4) 6(1) I have considered the submission of the appellant and perused the assessment order and the remand report I have also considered the judicial decisions relied upon by the appellant. The facts of the case have already been discussed as above. It is observed that in the year under consideration the appellant company had raised share capital! Share Premium of Rs. 3,17,00,000/- from 10 parties on face value of Rs. 10/-& premium of Rs. 90/-. In the course of the assessment proceedings, to verify the receipt of share capital, the assessing officer issued notices u/s.131 to 09 share applicants and in response, they all confirmed the transactions and submitted the details/documents in respect of the subscription of shares of the appellant as necessitated by the assessing officer. The shareholders also submitted the details of the source of the fund. One of director of appellant company also attended & his statement was recorded. Even director of two investor companies also attended. However, without taking into consideration of the details/documents filed in the course of the assessment proceedings, he made addition of the share capital of....
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.... year inter-alia holding that once the identity and other relevant particulars of shareholders are disclosed, it is for these shareholders to explain source of their funds and not for assessee- company to show wherefrom these shareholders obtained funds. In CIT Versus Mls. Dataware Private Limited [ITA T No. 263 of 2011], the Calcutta High Court dismissed the appeal of the revenue holding as under: "After hearing the learned Advocate for the appellant and after going through the materials on record, we are of the view that no substantial question of law is involved in this appeal. Both the Commissioner of Income Tax (Appeal) and the Tribunal below have in details considered the fact that the share application money was paid by account payee cheque, the creditor appeared before the Assessing Officer, disclosed its PAN number and also other details of the accounts but in spite of that the Assessing Officer did not enquire further from the assessing officer of the creditor but instead, himself proceeded to consider the profit and loss account of the creditor and opined that he had some doubt about the genuineness of such account. In our opinion, in ....
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....ssessee's accounts with Bharat Overseas Bank is filed, duly confirmed by Shri A E Medhora on behalf of M/s. Novrojee & Co. A copy of the bank account disclosed and the regular books of accounts were filed before the Ld.CIT(A) which were also made available before the AO. Based on these submissions, the Ld.CIT(A) has deleted the same." The facts and circumstances of the case, we are sorry to say, depict clear abuse of power of the assessing officer. We were inclined to impose exemplary costs upon the revenue but refrained from doing so because notice of this appeal has not been given to the respondent. No one has appeared, The question formulated in this case is answered in the affirmative and against the revenue. The appeal is, therefore. dismissed," In ITO versus M/s. Savera Suppliers (P) Ltd. (ITA No. 12/K0l/2010), the Kolkata Bench of the Income Tax Appellate Tribunal, following the order of the Calcutta High Court in the case of CIT Versus M/s. Dataware Private Limited (Supra), dismissed the revenue's appeal holding as under: "5. We have heard the rival submissions. As it is noticed from the assessment order that the assessee....
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....ber, the genuineness of the transaction, namely, whether it has been transmitted through banking or other indisputable channels, the creditworthiness or financial strength of the share subscriber. The relevant details of the address or PAN identity of the share subscriber are furnished to the Assessing officer along with copies of the Shareholders Register, Shared Application Forms, Share Transfer Register etc. it would constitute acceptable proof or acceptable explanation by the assessee. The revenue would not be justified in drawing an adverse inference only because the share applicant failed to respond to notices. As held by Hon'ble Delhi High Court Assessing officer is duty-bound to investigate the creditworthiness of the share applicant and the genuineness of the transaction. Further, the assessee has discharged its onus of proving the identity of the share applicants. In the given facts the Assessing officer had not brought any material or evidence which would indicate that the share applicants were (a) benamidars or (b) fictitious persons or (c) that any part of the share capital represented the company's own income from undisclosed sources. In view of the facts and ....
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....the revenue." In M/s. Prabhu Dhan Infrastructure Pvt, Ltd. versus DCIT [ITA No.1908/KoI/2012] it was held as under: "6. We have heard the rival submissions and are of the view that addition made by the assessing officer and sustained by CIT(A) deserves to be deleted. It is clear from the evidence on record that Jai Kali Properties (P) Ltd held that investment was Rs. 5,00,000/- in Prabhudan Securities Pvt. Ltd as on 31.03 .2004. During the previous year this investments have been liquidated and sale proceeds on such sale has gone into the bank account and the same has been utilised for making investments in the form of share application money in the assessee company by Jai Kali Properties (P) Ltd. Thus it is clear that the assessee has established the identity and creditworthiness and genuineness of the transactions of the receipt of share application money. We, therefore, hold that the addition made by the Assessing officer and sustained by CIT(A)should be deleted." In ACIT versus M/s. Kunj Alloys Pvt. Limited [ITA No. 257/CTK/2007], it was held as under: "9. We have heard the arguments of both the sides and also perused the relevant ma....
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....dition made for the share capital raised by the assessee holding that ''the evidences filed by the assessee are staring on us and the same cannot be brushed aside or swept under the carpet". In the case of CIT versus Anshika Consultants (P) Ltd (2015) 93 CCH 0016, the Delhi High Court dismissed the appeal of revenue holding as under: ".6. The onus cast upon the assessee under Section 68 of the Act to satisfy the department about the true identity of an investor, its creditworthiness and' genuineness of a transaction was explained by the Supreme Court in CIT Vs. Lovely Exports (P) Ltd., 216 CTR 195. Whilst, the Assessing Officer acted legitimately in enquiring into, the matter, the inferences drawn by him were not justified at all in the circumstances of the case. Whether the assessee company charged a higher premium or not, should not have been the subject matter of the enquiry in the first instance. Instead, the issue was whether the amount invested by the share applicants was from legitimate sources. The objective of Section 68 is to avoid inclusion of amount which is suspect. Therefore, the emphasis on genuineness of all the three ....