TaxTMI 
TaxTMI 
2019 (1) TMI 267
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....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 company issuing the shares, and the premium can only be distributed if the procedure for re....
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....), 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 their investment Thus, the assessee has categorically established the nature and source of the said sum and discharged the onus that lies on it in terms of Section 68 of the Ac....
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.... 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], it was held that even if it can be assumed that the subscribers to the increased share capital were not genuine, under no circumstances could the amount of share capital be regarded as undisclosed income of the company. Now sir, Section 68 of the Income Tax Act, 19....
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.... 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 case of CIT v Divine Leasing and Finance Ltd ~0081 299 ITR 268 (Delhi) The Hon'ble Rajsthan High Court has taken similar view in case of CIT -v Shree Barkha Synthetics Ltd [2003] 182 CTR 175 and again reported in 197 CTR 432 Earlier, the Hon'ble Delhi High Court in case of CIT v Steller Investment Ltd [1991] 192 ITR 287 has taken simi....
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....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, or was owned by the assessee himself. In the case of Shree Barkha Synthetics Ltd. v. Asstt. CIT [2006], it was held that: "Where the share application money is received by the assessee-company through banking channel, the assessee has only to prove the existence of the person in whose name share application is received; additions could not be sust....
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.... 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 presumed to have special knowledge about the source of source or the origin of origin. Even if the credit is in the name of a close relation, e.g. the wife, the assessee cannot be presumed to have knowledge of the source from which the depositor obtained the money. The fact that an assessee was unable to satisfy the authorities as to the source from which the depositor derived the money cannot be used against the assessee. In ITO v Suresh ....
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....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 been attached. The source for the payment of such amount has been generated from the receipt from sale of shares to Arya Vanijya Pvt. Ltd., the amount has been received on 10/10/2011 through cheque no. 844256 for Rs. 2,00,000/-. 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. 000000052 vide registered folio no. 54 and distinctive no. 0000615001-0000617000 dt 31.03.2012 allotted to ....
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.....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. 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. ID proof and ITR Acknowledgement of the director 10. Affidavit by the Director 3. M/s Value Added IT Consultancy Private Limited having its registered office at 18/1, M. D. Road, 5th Floor, Room # 73 Kolkata- 700007 The company has been allotted 17,000 equity shares of Rs. 101- each at a premium of Rs. 90/- per share. The payment has been made through cheque no. 830691 & 830692 dated 12/10/2011 & 14/10/2011 of Rs. 7,00,000/-/- & Rs. 10,00,000/- respectively drawn on Karur Vysya Bank Limited, Bur....
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....ctive 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 dt. 19.03.2004. We hereby attached the share application form and their allotment advice duly signed by them. (Refer Annexure 0"). The Investor Company has also forwarded their notarised affidavit confirming the above fact. List of documents submitted in Annexure "D" 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 5. M/s Diamention Mercantile 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. 681750 dated 28.03.2012 for Rs. 25,00,000/- drawn on Indian Bank. The Ba....
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....py of the ITR acknowledgement for Asst. Year 2012-13.They have provided Xerox copy of share certificate. 000000035 vide registered folio no. 47 and distinctive no. 0000350001-0000430000 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 Bank Of India U/s 45 of the Reserve Bank of India Act 1934 v.ide registration no B-05.03758 dt. 23.07.2001. We hereby attached the share application form and their allotment advice duly signed by them. (Refer Annexure F"). The Investor Company has also forwarded their notarised affidavit confirming the above fact. List of documents submitted in Annexure "F" 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 7. M/s Mirabelle Tradecomm 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 a....
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....td., the amount has been received on 21/03/2012 through cheque no. 347699 for Rs. 25,00,000/-. 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. 000000037 vide registered folio no. 49 and distinctive no: 0000510001-0000535000 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 Bank of India U/s 45 of the Reserve Bank of India Act 1934 vide registration no B.05-06373 dt. 17.05.2004. We hereby attached the share application form and their allotment advice duly signed by them. (Refer Annexure H"). The Investor Company has also forwarded their notarised affidavit confirming the above fact. List of documents submitted in Annexure "H" 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....
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....12 through cheque no. 389068 for Rs. 25,00,0001-. 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. 000000040 vide registered folio no. 52 and distinctive no. 0000577001-0000602000 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 Bank of India u/s 45 of the Reserve Bank of India Act 1934 vide registration no B.05.05943 dt. 22.12.2003. We hereby attached the share application form and their allotment advice duly signed by them. (Refer Annexure J"). The Investor Company has also forwarded their notarised affidavit confirming the above fact. List of documents submitted in Annexure" J" 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 As me....
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....moved." Seven summon notice served and in compliance of which written request for adjournment of date filed. No fresh summon for personnel attendance found issued to investor companies. However, all investor company filed audited balance sheet, P& L Account, investment details copy of resolution passed at meeting of the Board of Directors for investment, copy of share certificate and affidavit notorised by Notary wherein investor companies affirmed the purchase of equity share from assessee. One of the Director of investor company appeared on 16.03.2015, inquiry made and statement recorded. Identity, creditworthiness and genuineness of investment were cross verified with information contained in paper books and found that. * Most of the investors were NBFC registered under RBI< Kolkata having office premises. * It has also been seen that source of fund applied for investment in assessee company were sales proceeds of old shares/equity shares. * Capital of most of the investor companies were huge and applied in investment loans and advance and other current asset. . * Investor companies during F.Yr. 2011-12 purchased equity shares from more than one company. * Transf....
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.... As some of the papers submitted before under signed was not before assessing officer, a remand report was called for. Assessing officer submitted comments as under (relevant portion reproduced ):- "Identify, creditworthiness and genuineness of investment were cross verified with information contained in paper books and found that. * Most of the investors were NBFC registered under RBI< Kolkata having office premises. * It has also been seen that source of fund applied for investment in assessee company were sales proceeds of old shares/equity shares. * Capital of most of the investor companies were huge and applied in investment/loans and advance and other current asset. * Investor companies during F.Yr.2011-12 purchased equity shares from more than one company. * Transfer of fund made through banking channel and instance of issue of cheque IRTGC after deposit of cash not found. * Investor companies were found engaged in revenue generating activities. * Investor companies were PAN holders and filed ITR and report to ROC regularly. Statements of transactions filed by investor companies cross verified with claim of assessee. No difference found. I have examine t....
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....orthy of credence. So long it is not established that the return submitted by the creditor has been rejected by its. Assessing Officer, the Assessing officer of the assessee is bound to accept the same as genuine when the identity of the creditor and the genuineness of transaction through account payee cheque has been established. We find that Path the Commissioner of Income Tax (Appeal) and the Tribunal below followed the wellaccepted principle which are required to be followed in considering the effect of Section 68 of the Act and we thus find no reason to interfere with the concurrent findings of fact recorded by both the authorities. The appeal is thus devoid of any substance and is summarily dismissed." In CIT versus Mitul Krishna Kapoor [ITA No.333/2009j, the Calcutta High Court vide order dt.09.06.2016 dismissed the appeal of revenue holding as under: "Addition of a sum of Rs. 33 .90 lakhs was made on the basis that the assessee had allegedly taken loan from the corpus fund, which the assessee has denied. The assessing officer proceeded to add this sum of Rs. 33.90 lakhs under section 68. CIT(A) has clearly held that there is no knowledge as to what the corpus fund....
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.... the Id. CIT(A) is on the right footing and does not call for any interference. This view of ours also finds support from the decision of the Hon'ble Supreme Court in the case of CIT vs Lovely Exports (P) Ltd referred to supra. 6. In the result ground Nos. 1 and 2 of the revenue's appeal stand dismissed." In ITO versus Mls Steel Emporium Ltd [ITA No.1061IKoIl2012], the Kolkata bench of the Tribunal dismissed the appeal of revenue holding as under: "10.1 From the aforesaid discussion we find that the Assessing officer has made the addition of the share application money because all the nine companies were having the common address and the notice sent under section 133(6) was received by the single person. Accordingly the Assessing officer opined that the assessee has used its unaccounted money in the share application transactions. However we find that all the money received in the form of share capital is duly supported with the requisite document as discussed above. To our mind the basis on which the addition was made by the Assessing officer is not tenable. The Ld. DR also could not brought anything on record to controvert the findings of the Ld. CIT(A). In view of ....
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....ound that the identity of the investor is not proved cannot be sustained. Attention was also to the similar ruling of the IT AT Kolkata bench in the case of ITO vs Devinder Singh Shant in ITA NO.208/K0l/2009 vide order dated 17.04.2009. 9. We have considered the rival submissions. We are of the view that order of CIT(A) does not call for any interference. It may be seen from the grounds of appeal raised by the revenue that the revenue disputed only the proof of identity of the share holder. In this regard it is seen that for A.Y.2004-0S Shree Shyam Trexim Pvt. Ltd., was assessed by ITO, Ward-9(4), Kolkata and the order of assessment uls1143(3) dated 25.01.2006 is placed in the paper book. Similarly Navalco Commodities Pvt. Ltd., was assessed to tax u/s 143(3) for A.Y.200S-06 by ITO, Ward-9(4), Kolkata by order dated 20.03.2007. Similarly Jewellock Trexim Pvt. Ltd was assessed to tax for A.Y.2005-06 by the very same ITO~Ward-9(3), Kolkata assessing the Assessee. In the light of the above factual position which is not disputed by the revenue, it cannot be said that the identity of the share applicants remained not proved by the assessee. The decision of the 'Hon'ble Allahab....
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.... established by group Companies including the assessee-Company, He has also filed summary of the relevant extract of the notings made by the Assessing Officer in this regard, which shows that fresh notices issued by the Assessing Officer under section 133(6) of the Act were duly served on all the shares subscribers and the same were also duly complied with by them by filing the relevant details and documents. In the light of the said details and documents filed by the concerned share subscribers, it was held by the Assessing Officer that their identity and capacity as well as the genuineness of the relevant transactions were duly established and no addition under section 68 was called for. Keeping in view these submissions made by the Id. Counsel for the assessee, which have not been disputed or controverted by the Id. D.R., we find no justifiable reason to interfere with the impugned order of the Ld. CIT (Appeals) deleting the addition of Rs.I,35,00,000/- made by the Assessing Officer under section 68 and upholding the same on this issue, we dismiss the appeal of the Revenue." In DCIT versus Zimkele Commodeal Pvt Ltd (ITA No. 959/K0l/2011), the Kolkata bench of the ITAT, relyi....
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.... that the amount had been routed from the assessee's account to the share applicants' account. As held concurrently by the CIT (Appeals) and the ITAT, these conclusions were clearly baseless and false. This Court is constrained to observe that the Assessing Officer utterly failed to comply with his duty considers all the materials on record, ignoring specifically the most crucial documents. We place these observations on the record and direct a copy of the judgment to be furnished to the concerned income tax authorities for appropriate action towards reflecting these observations suitably in service record of the concerned Assessing Officer to avoid such instances in the future. 7. For the above reasons, this Court is of the opinion that the concurrent findings of fact, as to the true identity of the share applicants, their creditworthiness and genuineness of the transaction, are based on sound reasoning and do not call for interference. No substantial question of law arises. The appeals are dismissed." 6(5) In view of the facts & circumstances of the case and following the principle laid down in the above discussed judicial rulings, remand report submitted by assessing....