TaxTMI 
TaxTMI 
2019 (3) TMI 695
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....) of the Income Tax Act, 1961 (in short the Act) was issued and served including through affixture of notice. None attended in response to the various notices issued subsequently and thus the assessment was completed 29/12/2008 on the basis of the material available on record. In the assessment completed, the Assessing Officer observed increase in share capital including share premium during the year under consideration of amount of Rs. 4,85,58, 000/-but in view of no evidences with regard to creditworthiness or genuineness of the transaction required to be established by the assessee in terms of section 68 of the Act, he made addition of the said amount of Rs. 4,85,58,000/-. Aggrieved, the assessee filed appeal before the Ld. CIT(A) and filed certain documents as additional evidences. The Ld. CIT(A) forwarded those evidences to the Assessing Officer. In report submitted by the Assessing Officer on 29/10/2010 (first remand report) it was submitted that 10 share applicant companies to whom the notices issued, neither appeared on the stipulated date nor a request for adjournment was filed by those companies. The Assessing Officer also recorded the statement of one Sh Surinder Kumar A....
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....produced relevant part of the statements of the directors of those shareholding companies. The Ld. Assessing Officer also forwarded, confirmation letters along with the statement of accounts, balance sheets, income tax acknowledgement and assessment order in case of the 10 shareholder companies. The Ld. CIT(A) forwarded copy of the second remand report to the assessee for his comments. The Ld. CIT(A) after taking into consideration the rejoinder of the assessee, deleted the addition observing as under:' "(f) During the course of appellate proceedings and also before the assessing officer the A.R. of the appellant has provided the following documents to establish the identity, genuineness and creditworthiness of the parties: i. Income tax returns alongwith orders passed u/s 143(3) in most cases ii. Copies of CIT(A) orders in some case iii. It has been contended that shares had been allotted and recorded in the books of accounts of all the parties. iv. Copies of audited accounts of all the parties were produced for establishing the identity and genuineness of the transaction. v. The directors of the companies have been produced be....
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....as to be found, the assessing officer has not pointed out any discrepancies or raised any such queries from the various parties whose statements had been taken. This only leads to the conclusion that on the basis of the material available on record, there is no evidence to come to the conclusion that the share application amounts received from the various parties were not genuine. (j) The A.R. of the appellant has relied upon various judicial pronouncements including CIT v. Divine Leasing (supra), CIT v. Lovely Exports (supra), CIT v. Value Capital Services (supra), CIT v. Dwarkadheesh (supra) as well as the latest decision in the case of CIT v. Nipuan Auto Pvt Ltd. in ITA No.225/2013 dt. 30-04-2013 of the jurisdictional High Court. This latest decision has also differentiated the case of Nipun Builders & Developers P. Ltd. of the Delhi High Court dt. 07- 01-2013, where it had been held that principal officers of the subscribing companies should have been produced before the assessing officer for establishing the identity, genuineness and creditworthiness of the transactions. In the factual matrix of this cases, the appellant has also produced the directors of the....
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....(A) has not taken into consideration the objection of the Assessing Officer brought on record in second remand proceedings. He submitted that the documents related to the alleged shareholders do not explain the creditworthiness and genuineness of the transaction. He submitted that the shareholder companies have shown very small amount of income either from the consultancy or from the interest income as against the huge investment made by them. He also submitted that in bank statements of all the companies, there is similar pattern of deposit of the money in the bank account immediately before issue of cheque to other entities including the assessee. According to him, these companies are merely conduit for providing accommodation entries and no real business has been carried out in these companies. He submitted that the Ld. CIT(A) only satisfied him on the basis of the list of documents filed by the assessee and did not examine the nature and source of the credit in terms of section 68 of the Act. 5. The Ld. DR relied on the decision of the Hon'ble Supreme Court in the case of Navodya Castle Private Limited vs CIT (2015- TIOL-314-SC-IT) to support the proposition that if there ar....
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....sions made before the Ld. CIT(A) and submitted that Ld. CIT(A) has passed a reasoned and justified order on the issue in dispute and thus accordingly, same might be accepted. The Ld. AR relied on the decision of the Tribunal in the case of RPG Credite and Capital Limited in ITA No. 4688- 4690/Del/2012 to support the contention that the department cannot raise any grievance, when the Assessing Officer in the remand proceedings fails to point out any justification for sustaining addition and under those circumstances appeal filed by the Revenue was held to be carelessly and frivolously filed. 9. We have heard the rival submissions and perused the relevant material on record. The brief facts in respect of the addition dispute have already been reproduced above. The assessee introduced share capital of Rs. 4,85,58,000/- alongwith share premium from following 10 companies [table extracted from para 2.8 of the Ld. CIT(A)] S.N NAME OF SHAREHO LDER COMPANY ADDRESS OF SHARE HOLDER COMPANY PAN OF SHAREHOLD ER COMPANY NAME OF DIRECTOR (PRESENT BEFORE AO) AMOU NT INVES TED BY SHARE HOLDE R Q.NO. OF STATE MENT BY AO IN WHICH AS KIN G FOR AMT. INVEST ED NO OF SHAR E A ....
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.... assessment orders , list of signatory details downloaded from the Ministry of Corporate Affairs (MCA) Portal etc. The assessee also produced current directors of these shareholder companies before the Assessing Officer in remand proceedings. The assessee has submitted paper book before us in which a copy of all the documents filed before the Ld. CIT(A) have been enclosed. The assessee has filed almost identical documents in case of all the alleged share applicants . The list documents in the case of one share applicant namely M/s Vogue Leasing and Financing Private Limited are reproduced as under: 1. Copies of documents submitted before the AO in support of share application of Rs. 56,40,000/- from M/s. Vogue Leasing and Finance P Ltd. : 1. Form No. 1 of FBT for AY 2006-07 2. Confirmation of Account 3. Audited Balance Sheet 4. Bank Statement for the period 01.02.2006 to 21.03.2006 5. List of Directors 6. Assessment order for AY 1989-1990, AY 2005-06 and AY 2007-08 7. E-filed ITR-V for AY 2012-13 8. Bank Statement for the period 01.04.2009 to 31.03.2010 9. List of Signatory details downloaded ....
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....cts the kind of transactions in which the alleged share applicant is involved. The confirmation of the share applicant filed on page 47 of the paper book is not dated. The letter head of the alleged share applicant, on which confirmation has been submitted is even not carrying phone number of the registered office of the alleged share applicant. In the list of directors, the assessee has submitted two names i.e. Sh Shish Ram Bharra and Sh Anil Kumar Bansal , both having same address i.e 209, Bhanot Plaza-II, 3 DB Gupta Road, Paharaganj, New Delhi-110055. The other documents filed are only in the nature of the paper trail documents and do not in any manner establish the nature and the source of the credit in the books of accounts of the assessee. 12. The documents in respect of M/s SR Cables P Ltd have been filed from page 65 to 82 of the paper book. The documents include balance sheet and bank statement for the period from 01/12/2005 to 05.01.2010 alongwith list of signatories etc. downloaded from the Ministry of Company Affairs Portal. On perusal of the profit and loss account on page 69 of the paper book, it is seen that there are rows for the income from consultancy fee, inte....
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....nuineness of the transaction. 13. In the case of M/s. Hillridge Investment Limited, from whom share application money of Rs. 20,04,000/- has been shown, documents have been filed from page 83 to 108 of the paper book. The documents include balance sheet and bank statement for the period from 01/02/2006 to 31/03/2006 and for the period from 01/04/2010 to 31/03/2011. On perusal of profit and loss account available on page 87 of the paper book, we find that the alleged share applicant has shown income only from interest on loans of Rs. 6,60,414/- and share profit from partnership firm amounting to Rs. 18,866/-against which operating expenses of Rs. 6,45,574/-, interest and finance charges of Rs. 60,110/-and loss on sale of investment of Rs. 4,62,760/- has been shown, and thus overall loss has been shown. In the balance sheet as on 31/03/2006 on liability side , paid-up share capital of Rs. 8,52, 00,000/-share premium of Rs. 16,18,00,000/-under reserve and surplus has been shown . On the asset side, investment in equity shares of companies has been shown as Rs. 35,66,54,000/- loan advances, share application money paid of Rs. 49,00,000/- loans of Rs. 10,60,72,542/-have been shown. T....
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....er documents are merely paper trails not supporting creditworthiness of genuineness of the transaction in any manner. 15. The documents in the case of M/s World Link Telecom Ltd. have been filed from page 125 to page 142 of the paper book. A copy of the confirmation filed by the party is available on page 126 of the paper book. The confirmation is on the letterhead of the party, however no telephone number are mentioned on the letterhead. The confirmation filed is also undated. On perusal of the profit and loss account available on page 129 of the paper book, we find income from interest on loans of Rs. 28,274/-and profit on sale of investment amounting to Rs. 2,15,278/-. Against the said income, nominal expenses under different heads including audit fees, bank charges, post and telegraph, printing and stationery etc amounting to Rs. 2,23,950/-has been shown. The expenses also include salary of Rs. 98,950/-. A nominal profit of Rs. 19,601/- has been shown in the profit and loss account. On perusal of the balance sheet as on 31/03/2006, available on page 128, we find that on liability side the paid-up share capital of Rs. 1,19,58,400/- share premium of Rs. 10,22,19,300/-under res....
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.... list of the directors includes namely Sh Rajendra Kumar and Sh. Krishan Kumar having address at 3198/15, Gali No. 1, 4th Floor, Sangatrashan , Paharganj, New Delhi. Other documents are merely paper trails not establishing any creditworthiness or genuineness of the transaction. 17. The documents in the case of M/s Pitambra Securities Private Limited showing investment of Rs. 52,20,000/- in share application money have been filed from page 158 to 175 of the paper book. A copy of confirmation filed on page 159 is undated. On perusal of profit and loss account available on page 162 of the paper book, we find that income from consultancy fees has been shown at nil, profit on sale of investment has been shown at Rs. 1,76,752/- and interest on loan has been shown at Rs. 2,325/-. Against which expenses of Rs. 1,73,759/- which includes expenses on bank charges, auditors remuneration, office rent ( Rs. 4500/-), salary of Rs. 63,685/-. A nominal profit of Rs. 5318/- has been shown for the year under consideration. On perusal of the balance sheet available on page 161 alongwith schedule on page 164, we find that on liability side paid-up share capital of Rs. 1,57,93,200/- and share premium....
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....09, Bhanot Plaza-II, 3 DB Gupta Road , Paharganj, New Delhi -110055 and Sh. Deepak Verma having address at 3198/15, Gali No. 1, 4th Floor. Sangtrashan, Paharganj, New Delhi-110055 20. In respect of M/s. Shalini Holdings Ltd, who has claimed to have invested amount of Rs. 57,00,000/- , the assessee has filed documents from page 192 - 206 of the paper book. Copy of the confirmation filed on page 193 is undated. On perusal of the profit and loss account available on page 196, we find income from sale of shares of Rs. 68, 452/- interest of Rs. 7,123/-and profit on sale of investment of Rs. 1,12,450/-. On expense side, administrative expenses of Rs. 2,44,873/- have been shown against advertisement expenses, auditor, bank charges, printing & stationary , salary ( Rs. 39,900/-). During the year loss of Rs. 1,23,832/- has been shown. On perusal of the balance sheet as on 31/03/2006, available on page 195 alongwith schedule on page 197 of the paper book, we find that on liability side paid-up share capital of Rs. 9,99,80,000/-and share premium of Rs. 4, 87,50,000/-has been shown. On asset side investment in an unquoted equity shares of Rs. 14,01,37,500/-has been shown along with loan of ....
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....w Delhi-110055. 22. We have analysed the documents filed by the assesee in respect of the share applicants. Perusal of above documents in respect of the alleged share applicants, it is clearly seen that (i) These alleged share applicants are having very meagre or nominal income in their hands . (ii) In profit and loss account, very nominal amount of income has been shown from either of the three sources of income i.e. income from consultancy, interest on loan and profit on sale of investment, in case of all the alleged share applicants. No dividend income from investment in private limited companies has been shown. (iii) Salary expenses of these companies are around Rs. 1 lakh per annum, which shows that not more than one or two employees must have been employed by these companies that too for clerical services. (iv) The income and potential of the these alleged share applicant do not justify, the high amount of share premium appearing in their reserve and surplus account. (v) All the alleged share applicants have made investment in shares mostly of the private limited companies , most of which are common. (vi) The pattern of....
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....t worth of the company or any future prospectus of earning by the company. The current directors have not been able to justify, why the shares were purchased at high premium, without corresponding valuation of the company, which was having meagre income. It is impossible that directors of these nine companies are having either of the two addresses of the Paharganj area of New Delhi. In normal circumstances it is not possible until unless all these companies are being controlled remotely by one person. All the circumstances manifests that these are all paper companies not having sufficient worth and created for providing entries of share application money or share capital or loans by way of accommodation entries. 24. The Ld. Counsel of the assessee has submitted that all the share applicants have been examined by the Assessing Officer in remand proceedings and no adverse comments have been made and thus he should be precluded from agitating the issue before the Tribunal. In support of the contention the Ld. Counsel has relied on the decision of the coordinate bench in the case of ACIT vs. RPG Credit and Capital Limited in ITA No. 4688, 4690/Del/2012. The Tribunal in the said case....
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....cussion and finding of the Hon'ble Court in the above case is reproduced as under: "11. Issue of bogus share capital in the form of accommodation entries has been subject matter of several decisions of this Court and we would like to refer to decision in Commissioner of Income Tax Vs. Navodaya Castles Pvt. Ltd. [2014] 367 ITR 306, wherein the earlier judgments were classified into two separate categories observing as under:- "11. We have heard the Senior Standing counsel for the Revenue, who has relied upon decisions of the Delhi High Court in Commissioner of Income Tax Vs. Nova Promoters and Finlease (P) Ltd. [2012] 342 ITR 169 (Delhi), Commissioner of Income Tax vs.. N.R. Portfolio Pvt. Ltd., 206 (2014) DLT 97 (DB) (Del) and Commissioner of Income Tax-ll vs. MAF Academy P. Ltd. 206 (2014) DLT 277 (DB) (Del). The aforesaid decisions mentioned above refer to the earlier decisions of Delhi High Court in Commissioner of Income Tax vs. Sophia Finance Ltd. [1994] 205 IIR 98 (FB)(Delhi), CIT vs. Divine Leasing and Finance Limited [2008] 299 IIR 268 (Delhi) and observations of the Supreme Court in CIT vs. Lovely Exports P. Ltd. [2008] 319 ITR (St.) 5 (SC), 12. ....
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....ion to prove the genuineness of the transaction, the identity of the creditors, and credit-worthiness of the investors who should have the financial capacity to make the investment in question, to the satisfaction of the AO, so as to discharge the primary onus. ii. The Assessing Officer is duty bound to investigate the credit-worthiness of the creditor/subscriber, verify the identity of the subscribers, and ascertain whether the transaction is genuine, or these are bogus entries of name-lenders. iii. If the enquiries and investigations reveal that the identity of the creditors to be dubious or doubtful, or lack credit-worthiness, then the genuineness of the, transaction would not be established. In such a case, the assessee would not have discharged the primary onus contemplated by Section 68 of the Act." 29. After examining the facts of above referred case, in view of the principles on the issue of applicability of section 68 in the cases of credit of share capital/premium, the Hon'ble Supreme Court reversed the orders of Hon'ble High Court, ITAT and 1st appellate authority and restored the order of the Assessing Officer observing as under :- "12. In ....
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....er Section 68 of the Act. 13. The lower appellate authorities appear to have ignored the detailed findings of the AO from the field enquiry and investigations carried out by his office. The authorities below have erroneously held that merely because the Respondent Company - Assessee had filed all the primary evidence, the onus on the Assessee stood discharged. The lower appellate authorities failed to appreciate that the investor companies which had filed income tax returns with a meagre or nil income had to explain how they had invested such huge sums of money In the Assesse Company - Respondent. Clearly the onus to establish the credit worthiness of the investor companies was not discharged. The entire transaction seemed bogus, and lacked credibility. The Court/Authorities below did not even advert to the field enquiry conducted by the AO which revealed that in several cases the investor companies were found to be non-existent, and the onus to establish the identity of the investor companies, was not discharged by the assessee. 14. The practice of conversion of un-accounted money through the cloak of Share Capital/Premium must be subjected to c....