TaxTMI 
TaxTMI 
2017 (10) TMI 1445
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....sec 153B and 143(3)of the I.T. Act, 1961 is bad in law, void ab-initio and deserves to be annulled as the assessment for the A.Y. 2009-10 was not abated and ld. CIT(A) erred in holding that the AO was justified in reassessing the completed assessment. 2. On the facts and in the circumstances of the case and in law, the CIT erred in confirming the addition of Rs. 2,81,476/- made by the AO by disallowing the entire expenses incurred during the year. ITA No.481/JP/2017 - A.Y. 2009-10 (Revenue ) 1. Whether on the facts and in the circumstances of the case the ld. CIT(A) was right in deleting the addition of Rs. 3,03,00,000/- made u/s 56(1) of the Act ignoring the fact that assets of the assessee company don't commensurate to premium charged and further ignoring the fact that neither any business activity was performed nor any business income has been shown by the assessee. 3.1 During the course of hearing, the ld.AR of the assessee has not pressed the Ground No. 1 and 2 of the assessee in ITA No.384/JP/2017 for the Assessment Year 2009-10. Hence, the appeal of the assessee in ITA No. 384/JP/2017 is dismissed being not pressed. 4.1 &nb....
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....ess activity income or net worth in the future. Accordingly, the charging and receipt of share premium/ share capital to the tune of Rs. 3,03,00,000/- is held to be income of the assessee company in the nature of income envisaged u/s 56(1) of the Income Tax Act, 1961. The same is added back to the total income of the assessee.'' 4.3 In first appeal, the ld. CIT(A) has deleted the addition of Rs. 3,03,00,000/- made by the AO by observing at pages 96 & 97 of his order as under:- ''3.2.3 I have considered assessee's submission and carefully gone through assessment order. I have also take a note of factual matrix of the case as well as applicable case laws relied upon. I have already given a detailed findings in para 2.1.4.7 wherein total of Rs. 8,71,97,727/- has been sustained in the hands of M/s. . Motisons Global Pvt. Ltd, M/s. Motisons Entertainment Pvt. Ltd, M/s. Motisons Buildtech Pvt. Ltd and M/s. Shivansh Buildtech Pvt. Ltd, details of which are as under:- In view of the above facts and circumstances of the case as discussed above, addition of Rs. 3,03,00,000/- made on a/c of bogus share capital in the hands of M/s. Motisons Buildtech....
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....AO has not made the addition under the deeming provisions of section 68 of Income Tax Act. The ld AO made the addition by applying the provisions of section 56(1) of Income Tax Act on the ground that the assets of the assessee company don't commensurate to premium charged and any business activity was not performed or any business income has not been shown by the assessee. The ld CIT(A) has not confirmed the addition made by ld AO by applying the provisions of section 56(1) of Income Tax Act, on the basis of his detailed findings at page 39-42 of his order. The assessee relies on the findings of ld CIT(A). d) Justification of Charging share premium The assessee has submitted the justification for charging the share premium which is summarized as under: - e) Share premium/Capital is capital receipt: If shares are issued at premium then capital receipt aggregate amount of premium is to be transferred to an account called the share premium account. This share premium account is not distributable as income just like as any other capital assets. On winding up, the surplus monies in the share premium account is to be returned to the s....
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.... share premium by its very nature in a capital receipts and is not income for its ordinary sense. It is not in dispute that the assessee had filed all the requisite details/documents which are required to explain credits in the books of accounts by the provisions of Sec. 68 of the Act. The assessee has successfully established the identity of the companies who have purchased shares at a premium. The assessee has also filed bank details to explain the source of the share holders and the genuineness of the transaction was also established by filing copies of share application forms and Form No. 2 filed with the Registrar of Companies. The entire dispute revolves around the fact that the assessee has charged a premium of 190/- per share. No doubt a non-est company or a zero balance sheet company asking for 190/- 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 the 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 huge premium without any ....
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....his section deal with income and not with capital receipts. The investors who subscribed the share capital of assessee company is also showing the amount paid to assessee as their investment in shares of assessee company and necessary documents in this regard was submitted to ld. AO. Therefore the assessee has proved with documentary evidences that the amount was received against share application i.e. capital receipt, therefore the same cannot be treated as income of the assessee. Further for treating the share capital/share premium as income of the assessee company no cogent reason has been given by ld. AO. Further, there is no deeming fiction has been given in section 56(1) of Income Tax Act, 1961 wherein the income can be taxed under deeming provision. h) By Finance Act 2012 a new clause (viib) was inserted in 56(2). Memorandum explaining the provisions in Finance Bill 2012 stated as under:- Share premium in excess of the fair market value is to be treated as income. "Section 56(2) provides for the specific category of incomes that shall be chargeable to income tax under the head "income from other sources". It is proposed to insert a new ....
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....dras) Ltd V/s ACIT 373 ITR 39 held that amendment in section 40A(3) w.e.f. from 1.4.1996 is prospective and cannot be applied to previous years of Block period prior to F.Y. 1995-96. c) The figure of 10,000 was changed to 20,000 u/s 40A(3) of Income Tax Act, 1961 and 269SS of Income Tax Act, 1961 by Direct Tax Laws (Amendment) Act 1987 w.e.f. 1.4.1989. The CBDT vide circular No.522 dated 18.08.1988 stated that amendment in section 40A(3) is applicable for A.Y. 1989-90 as it is a substantive provision and since 269SS is a procedural provision, the effective date will be 1.4.89 i.e. previous year relevant to A.Y. 89-90. d) The five Judge Constitution Bench in the case of CIT V Vatika Township (P) Ltd. 367 ITR 466 had an occasion to consider as to whether Proviso added to section 113 of the I.T. Act, is prospective or retrospective. The Hon'ble Apex Court while considering the various decisions held (as per page 469 Of ITR 367). That surcharge levied by assessing Officer for the block assessment pertaining to the period from June 1, 2002 was liable to be deleted. An amendment made to a taxing statute can be said to be intended to remove hardsh....
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....ion 2(24) in inserting clause (xvi) in 2(24) of I.T. Act w.e.f. 1.4.2013 reads as under: (xvi) Any consideration received for issue of shares as exceeds the fair market value of the shares referred to in clause (viib) of subsection (2) of 56. The amendment made in 2(24) is also applicable w.e.f. 01.04.2013 and it cannot be applied earlier to 01-04-2013. j) The Income for the purpose of the Income Tax Act is defined in section 2(24) of the Income Tax Act 1961. Section 2(24) of the Income Act 1961 gives inclusive definition of income but the income should be look into its normal meaning. The income will not include capital receipts unless it is specified in Income Tax Act. This argument finds supports from the amendment made by Finance Act 2012 w.e.f. 1.4.2013 in section 56(viib) and clause (xvi) of section 2(24) of Income Tax Act, 1961 wherein certain share premiums were made taxable w.e.f. 01.04.2013. If the same were already taxable u/s 56(1)/ 2(24) of Income Tax Act, 1961 then there was no need to make these amendments in the Act. In case there is no charging provision for specific receipt, then it cannot be taxed. The five membe....
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....ion u/s 48 could not be applied for want of ascertainable cost of acquisition, then capital gain does not arise to be included in total income on account of failure of applicability of computation provision. The Hon'ble High Court referred to decision of Bombay High Court in the case of Cadell Wvg. Mills Co (P) Ltd. (Supra). iv) The Hon'ble Rajasthan High Court in the case of S. Zoraster and Co. V/s CIT 322 ITR 35 (PB 6668/Case Laws) had on occasion to consider the taxability of receipt of Rs. 20,000 received by vendee on default of the purchaser as per agreement for sell of Prem Prakash Talkies. The Hon'ble High Court after referring to the decision of Apex Court in the case of Travancore Rubber and Tea Co Ltd. V CIT 243 ITR 158 held that such receipt is capital receipt. Such Capital receipt is not taxable in view of judgment of Apex Court in D.P. Sandu Bros. Chembur (P) Ltd (Supra). Hence capital receipt is not taxable unless there is charging provision for a capital receipt and computation provisions are also applicable. v) The Hon'ble Bombay High Court in the case of Vodafone India Services P. Ltd. V/s UOI 368 ITR 1 (PB 76-107/Case Laws) had an occ....
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.... give rise to income and hence, not liable to transfer pricing adjustment. It is hereby informed that the Board has accepted the decision of the High Court of Bombay in the above mentioned writ petition. In view of the acceptance of the above judgment, it is directed that the ratio decidendi of the judgment must be adhered to by the field officers in all cases where the issue is involved. This may also be brought to the notice of the ITAT, DRP's and CIT (Appeals)." In view of above instruction, it is clear that ratio deciding of treating of share premium as capital receipt is binding on revenue authorities. j. In view of the above submissions, it is clear that share premium received is a capital receipt and consideration received cannot be considered as income for the year under consideration by applying the provisions of section 56(1) of Income Tax Act. k. The ld CIT(A) issued show cause notice to assessee to tax the share capital under section 68 of ITax Act as against 56(1) applied by ld AO but he satisfied about the ingredients of section 68 of I.Tax Act and no addition was sustained for AY 2009-10 even u/s 68 of I.Tax Act.&....
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....the identity of the above named companies. Further the notice issued u/s 133(6) of Income Tax Act, 1961 was duly served on all the companies which also prove the identity of the parties. ii) Creditworthiness All the companies are Income Tax assessee and duly filing the Income Tax return and Balance sheets. There is sufficient source of funds with all the companies to investment share capital/share application in the assessee company. The assessee submitted the copies of bank account/declaration of source of funds with them of investor companies. The bank statement shows the huge transaction of high value in the accounts of the companies. The chart showing the amount invested by the above named companies in assessee company viz a viz own funds with the investor company are as under: - From the above chart it is clear that all the Investor companies were having their own share capital and Reserve & surplus which were much more than to the amount invested in the assessee company. From the audited P & L Account of these companies it is apparent that these companies had trading activities of large am....
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....cern but the assessee cannot be hold responsible for cash deposit in some account at 4th Channel. Under section 68 of Income Tax Act, 1961 the onus of the assessee is to prove the source of credit entry and there is no onus of assessee to prove the source of source or source of all channel sources. The amendment in section 68 of I. Tax was made by inserting the following proviso to section 68 w.e.f. 01/04/2013 which require to prove source of finds in the hands of shareholder company. Though not required by law but still the assessee has proved source of finds in the hands of shareholder company. The amended section even does not require to prove source of funds in the hands of 3rd or 4th stage. Further the amendment in section 68 of I.Tax was made by inserting the following proviso to section 68 w.e.f. 01/04/2013 "Provided that where the assessee is a company, (not being a company in which the public are substantially interested) and the sum so credited consists of share application money, share capital, share premium or any such amount by whatever name called, any explanation offered by such assessee-company shall be deemed to be not sa....
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....n money has been received from bogus shareholders then it is for the Income Tax Officer to proceed by reopening the assessment of such shareholders and assessing them to tax in accordance with law. It does not entitle the Revenue to add the same to the assessee's income as unexplained cash credit. (f) In the above circumstances and particularly in view of the concurrent finding of fact arrived at by the CIT(A) and the Tribunal, the proposed question of law does not give rise to any substantial question of law. Thus not entertained. But in the case of the assessee the fact remains that the assessee has also proved source of source by submitting the copy of bank statement of the share applicant company wherein no cash deposit was made against the share application money. Therefore, the addition on share application received by the assessee can neither be made u/s 56(1) of Income Tax Act, 1961 nor u/s 68 of Income Tax Act, 1961. The various judgments and arguments regarding addition made u/s 56(1) of Income Tax Act, 1961 has been submitted in forgoing paras. The various judgments regarding addition cannot be made u/s 68 of ....
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....xable income u/s 56(1) of I. Tax Act, accordingly he made the additions in the hands of various companies as under:- During the appellate proceeding, Sh Vijay Kr Goyal has requested to keep the appellate matter pending for time being in case of M/s Mayukh Vinimay Pvt Ltd as the appeal against the order of 263 is pending for adjudication before the Hon'ble ITAT Kolkata where matter pertaining to jurisdiction of CIT who passed the order of 263, has been challenged. It is further submitted that assessee has also made request to ITAT Kolkata to transfer the said case to ITAT Jaipur which is still pending for consideration. In respect of addition made on a/c of bogus share capital, AO has also made similar addition of Rs. 10,54,95,000/= in the hands of M/s Mayukh Vinimay P Ltd, tantamounts to double addition. After duly taking a note of the same, appellate order in case of M/s Mayukh Vinimay Pvt Ltd is being kept in abeyance till the disposal of said appeal by Hon'ble ITAT. With regard to decisions relied upon by the undersigned, Sh Vijay Goyal were differentiated on facts as under: (i) Nova Promoters & Finlease Pvt. Ltd (2012) 342 ITR 169 (Delhi High....
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....rough the banking channels. This show the preponderance of probabilities is in favour of assessee. (viii) CIT V/s Mussadilal Ram Bharose [1987] 165 ITR 14 This judgment relates to penalty u/s 271(1)(c). In support of its contention, assessee through AR has relied upon following judgments fact of which are identical to the fact of the case of assessee: Jurisdictional Rajasthan High Court (i) CIT-1, Jaipur V/s M/s. ARL Infratech Ltd, wherein Hon'ble Rajasthan High Court has recently confirmed the findings of Hon'ble ITAT by deciding the appeal of revenue in DB ITA No 24/2014 vide order dated 28/09/2016. (ii) Commissioner of Income-tax, Jaipur -II Versus Morani Automotives (P.) Ltd. No.- D.B. IT Appeal No. 619 of 2011 Dated.- October 23, 2013 (Rajasthan High Court). (iii) Barkha Synthetics Ltd. vs. Asstt. CIT (005) 197 CTR (Raj) 432. (iv) CIT vs. First Point Finance Ltd. (2006) 206 CTR (Raj) 626 : (2006) 286 ITR 477 (Raj HC). (v) Commissioner of Income Tax Vs. Bhaval Synthetics (Raj HC) (2013) 84 DTR 0449 (Raj). (vi) ....
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....ed , assessee has already been confronted with the oral evidences gathered during the survey operation from aforementioned 3 persons by Investigation Directorate Kolkata. Further, the right of cross examination is not an absolute right as decided in Nath International Sales vs. UOI, AIR 1992 (Del) 295) wherein Hon'ble Supreme Court has also held that the right of hearing does not necessarily include right of cross examination. The right of cross examination must depend upon the circumstances of each case. In this regard, assessee is trying to use this shield of "absence of opportunity to cross-examine" of Sh Santosh Choube, Sh Ajit Sharma and Sh Rajesh Kumar Singh. It will be miscarriage of justice if assessee be given benefit on this a/c. It is also not possible to allow opportunity of cross-examination of each parties. Assessee is supposed to controvert all facts gathered from the oral evidences as well as from bank enquiries. In view of these facts, assessee's grievance is not justified as proper opportunity during the appellate proceeding has already been given to controvert those findings as mentioned in the show-cause letter. 2.1.4.2 (b) Charging of p....
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....g adjustment. It is hereby informed that the Board has accepted the decision of the High Court of Bombay in the above mentioned writ petition. In view of the acceptance of the above judgment, it is directed that the ratio decidendi of the judgment must be adhered to by the field officers in all cases where the issue is involved. This may also be brought to the notice of the ITAT, DRP's and CIT (Appeals). In view of above instruction of CBDT share premium cannot be treated as revenue receipt taxable u/s 56(1) of Income Tax Act. Further this should be seen with reference to amendment made by Finance Act 2012 by insertion of clause (viib) to section 56 of Income Tax Act, 1961. This amendment was made effective from 01/04/2013. Memorandum explaining the provisions in Finance Bill 2012 stated as under: "Share premium in excess of the fair market value is to be treated as income. "Section 56(2) provides for the specific category of incomes that shall be chargeable to income tax under the head "income from other sources". It is proposed to insert a new clause in 56(2). The new clause will apply where, accompany, not being a company in which the pu....
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.... of shares as computed as per rule 11UA of Income Tax Rules 1962 and it is acceptable. Accordingly, no addition can be made in AY 2013-14 also as income of M/s Motisons Global Pvt Ltd as per provisions of section 56(2)(viib)of the Act 1961. Therefore, AO's action in this regard is not correct as per the applicable provisions of the Act. 2.1.4.2 (c) Addition by applying the provisions of section 68 of the Act The assessee submitted that in all the cases, credit entries are supported by Share application containing (i) name/ address /PAN of party, (ii) detail of payment received, (iii) Copy of board resolution, (iv) Copy of PAN card of party , (v) Copy of bank statement showing the entry of payment made to assessee, (vi) Declaration of source of funds with party (vii) Copy of Ack. of ITR and Computation, (viii) Copy of audit report and audited balance sheet along with annexure. None of notice sent u/s 133(6) received back as "Un-served". Further it is also submitted that the ld AO has not made the addition by applying the provisions of section 68 of the Act so it cannot be applied by CIT(A). As per section 251 (1)(a) of Income Tax Act, 1961 the CIT (A) have the powe....
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....ets of some of the investor companies under Companies Act in favour of leading banks like SBI etc for crores of rupees which proves that the shareholder companies are not shell company-rather creating of charge proves creditworthiness of the companies. The assessee submitted the following chart with search report on ROC site: The assessee further clarified that out of above 10 cases, in 4 cases which have share capital of Rs. 1.15 crores with the following appellant Companies, notices u/s 133(6) sent by AO were also complied by these companies Name of assessee company Name of investor company Amount of Share application received Motisons Global Pvt. Ltd AY 2009-10 Kingfisher Vinimay Pvt. Ltd 20,00,000 Motisons Global Pvt. Ltd AY 2011-12 Vikash Trade Com Pvt Ltd 25,00,000 Motisons Entertainment (I) Pvt. Ltd (AY 2009-10) Kingfisher Vinimay Pvt. Ltd 20,00,000 Godawari Estates Pvt. Ltd (AY 2012-13) Rukmani International Pvt Ltd 50,00,000 Total 1,15,00,000 However, in case of following 9 parties cases having share capital of Rs. 2.70 crores with fo....
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....lers Pvt. Ltd 7,59,99,900 Rose Suppliers Pvt. Ltd 9,87,49,800 Total 41,93,29,800 4 Motisons Global Pvt. Ltd 13-14 Alliance Tradecom Pvt. Ltd 50,50,000 Evershine Suppliers Pvt. Ltd 1,45,00,000 Mayukh Vinimay Pvt. Ltd 2,24,50,000 Regent Dealers Pvt. Ltd 16,00,000 Rose Suppliers Pvt. Ltd 5,00,000 Total 4,41,00,000 7 Motisons Entertainment (I) Pvt. Ltd 2012-13 Alliance Tradecom Pvt. Ltd 1,59,00,000 Evershine Suppliers Pvt. Ltd 93,00,000 Evershine Suppliers Pvt. Ltd 17,00,000 Mayukh Vinimay Pvt. Ltd 1,55,00,000 Regent Barter Pvt. Ltd 1,79,00,000 Regent Dealers Pvt. Ltd 1,40,00,000 Rose Suppliers Pvt. Ltd 35,00,000 Total 7,78,00,000 9 Motisons Buildtech P....
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..... 2.1.4.5 Hon'ble Rajasthan High Court in the case of CIT -1, Jaipur Vs M/s. ARL Infratech Ltd, has recently confirmed the findings of Hon'ble ITAT by deciding the appeal of revenue in DB ITA No 24/2014 vide order dated 28/09/2016. Hon'ble ITAT Jaipur Bench in this case has made the following findings : ".....Before, we proceed to decide the issue on merits, we would like to discuss the scheme of the Act and precedents on the issue involved in this appeal as under: ''In cases where share application money is found recorded in the books of an assessee which may represent credit in the books and the share applicant is identified, that amount cannot be added in the assessee's hands u/s 68 of the Act. The Hon'ble Rajasthan High Court has repeatedly reiterated the above legal position. These cases are: (i) CIT vs. Shree Barkha Synthetics Ltd. 182 CTR 175 (Raj.) (ii) Barkha Synthetics Ltd. vs. ACIT (2005), 197 CTR 432 (Raj).13 In coming to the above conclusion, the Hon'ble Jurisdictional High Court has considered at length the relevant decisions on the issue like CIT vs....
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....dated 28/09/2016. Further, Hon'ble Rajasthan High Court in another case Commissioner of Income-tax, Jaipur-II Versus Morani Automotives (P.) Ltd. No. D.B. IT Appeal No. 619 of 2011 Dated.- October 23, 2013 held that : 10. The points as sought to be raised by the appellant-revenue in the present case are all the matters relating to appreciation of evidence. The relevant factors have been taken into account and considered by the appellate authorities before returning the findings in favour of the assessee. Even as regards the three referred share capital contributors, it is noticed that they are existing assessees having PA numbers; and are being regularly assessed to tax. The appellate authorities cannot be said to have erred in deleting the additions in their regard too at the hands of assessee-company. 11. Ultimately, the question as to whether the source of investment or of credit has been satisfactorily explained or not remains within the realm of appreciation of evidence; and the Courts have consistently held that such a matter does not give rise to any substantial question of law. In the case of CIT v. Orissa Corpn. (P.) Ltd. [1986) 159 ITR 78 ....
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....ded on such explanation by two appellate Courts is binding on the High Court. 9. Perusal of impugned finding quoted supra would go to show that Tribunal did examine the explanation offered by assessee in detail and then recorded a finding for its acceptance. Such finding when challenged does not constitute a substantial question of law within the meaning of s. 260A ibid in an appeal arising out of such order. 10. In our opinion, therefore, once the CIT(A) and Tribunal accepted the explanation of assessee and accordingly, deleted certain additions made by AO holding the transaction of shares to be genuine, then it would not involve any substantial issue of law as such. In other words, this Court in its appellate jurisdiction under s. 260A ibid, would not again de novo hold yet another factual inquiry with a view to find out as to whether explanation offered by assessee and which found acceptance to the CIT(A) and Tribunal is good or bad, or whether it was rightly accepted, or not. It is only when the factual finding recorded had been entirely de hors the subject, or that it had been based on no reasoning, or based on absurd reasoning to the extent that no prudent m....
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.... Hon'ble Apex Court in the case of CIT Vs G.M Mittal Stainless Steel (P), CIT (2003) 263 ITR 255 wherein it has held by Hon'ble Supreme Court that decision of jurisdictional High Court is binding on the Revenue authorities within the State. Revenue authorities within the State cannot refuse to follow the jurisdictional High Court's decision on the ground that the decision of some other High Court was pending disposal before the Supreme Court. There are no material change in the facts of the appellant Companies with the facts of the above cited cases decided by Hon'ble Rajasthan High Court as the appellant Companies have submitted documents such as (i) Share application containing the name/address/PAN of party, (ii) detail of payment received etc. (iii) Copy of board resolution, (iv) Copy of PAN card of party, (v) Copy of bank statement showing the entry of payment made to assessee,(vi) Declaration of source of funds with party (vii) Copy of Ack. of ITR and Computation, (viii) Copy of audit report and audited balance sheet along with annexure proved all the ingredients of section 68 of the Act. Apart from this, it is also to be noted here that six companies involving share capital o....
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....Durga Enterprises Motisons Entertainment P Ltd 2012-2013 8,00,000 Regent Dealers P Ltd Durga Enterprises and Shyam Fashion Motisons Entertainment P Ltd 2012-2013 29,00,000 Alliance Trade Com P Ltd Swastik Traders and Global Securities Total 1,41,50,000 Motisons Global P Ltd 2012-2013 17,00,000 Rose Suppliers P Ltd Durga Enterprises and Shyam Fashion Motisons Global P Ltd 2012-2013 18,00,000 Rose Suppliers P Ltd Nibu Nagi Motisons Global P Ltd 2012-2013 19,00,000 Rose Suppliers P Ltd Nibu Nagi and Durga Enterprises Motisons Global P Ltd 2012-2013 3,50,000 Rose Suppliers P Ltd Durga Enterprises Motisons Global P Ltd 2012-2013 14,00,000 Rose Suppliers P Ltd Shyam Fashion Motisons Global P Ltd 2012-2013 18,50,000 Rose Suppliers P Ltd Durga Enterprises Motisons Global P Ltd 2012-2013 18,00,000 Regent Barter P Ltd Nibu Nagi Motisons Global P Ltd 2012-2013 18,00,000 Mayukh Vinimay P Ltd Nibu Nagi and Kevilhulie Suno....
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.... 2012-2013 3000000 Alliance P Ltd Shyam Fashion and Durga Enterprises Motisons Global Private Limited 2012-2013 16,00,000 Alliance P Ltd P Ltd Nibu Nagi Motisons Global Private Limited 2012-2013 19,50,000 Alliance Tradecom P Ltd Durga Enterprises Motisons Global Private Limited 2013-2014 5050000 Alliance Tradecom P Ltd Shyam Fashion and Durga Enterprises Total 6,44,97,727 Company A.Y. Amount From Company Cash deposit /Demand draft at 4th Channel per inquiry by investigation wing Shivansh Buildcon P Ltd 2012-2013 3,50,000 Evershine Suppliers P Ltd Durga Enterprises, Swastik and Shyam Fash  Total 3,50,000 Grand Total 8,71,97,727 2.1.4.7 In view of above findings, it is also seen that this cash/DD was deposited at 4 Channel of source/stage. This money came to the hands of some of appellant companies through the six companies assessed in Jaipur. However, on perusal of written submissions and compliance to show cause letter , it is also seen that assessee has not controverted....
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....hereafter in subsequent years the part of the funds owned by this company was invested in the companies under appeal as under: S.No Name of Company (under your appeal) Assessment Year Amount 1 Motisons Global Pvt Ltd 2012-13 6,93,49,800 2. Motisons Global Pvt Ltd 2013-14 2,24,50,000 3 Motisons Entertainment (India) Pvt Ltd 2012-13 1,55,00,000 Total 10,72,99,800 Further, it is also submitted that addition made by the AO tantamount to double addition. It is also mentioned here that as per Ld AR's request, appellate proceedings in case of M/s Mayukh Vinimay Pvt Ltd have been kept in abeyance till the disposal of appeal by Hon'ble ITAT. In view of aforementioned findings, now additions made by the AO are being discussed with respect to grounds of appeal raised by the respective assessee in para below. '' Section 68 of the Act provides regarding any sum found credited in the books of an assesse maintained and explanation offered by the assessee is ....
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....e of such shares, the aggregate consideration received for such shares as exceeds the fair market value of the shares:'' This has also been included in the definition of income u/s 2(24)of the Act w.e.f. 01-04-2013. The relevant portion reads as under:- ''(xvi) any consideration received for issue of shares as exceeds the fair market value of the share referred to in clause (viib) of sub-section (2) of Section 56;]'' To tax the income under the Act, it must come under the definition of income as provided u/s 2(24) of the I.T. Act, 1961. There were amendments in sec 2(24) of the Act and in section 56(2) of the Act w.e.f. 01-04-2013 are not applicable to A.Y. under consideration. By these amended provisions, any consideration received for issue of shares that exceeds the face market value of such shares the aggregate consideration received for such shares as exceeds the fair market value of the shares shall be taxable as per clause (viib) of sub-section 2 of section 56 of the Act. The CBDT vide Circular No. 3 of 2012 dated 12-06-2012 has also mentioned that provision of section 56(2)(viib) will be applicable for A.Y. 2013-14. Thus the relevant portion ....
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....s and genuineness of transaction of these companies cannot be held as doubtful and addition by applying the provisions of sec 68 of the Act cannot be upheld.''' The Revenue has not preferred appeal against this findings the ld. CIT(A). It is also pertinent to note that AO has made whole addition by invoking section 56 of the Act, hence the amended provision w.e.f. 0104-2013 are applicable only on shares premium received on fair market value. In view of these facts, circumstances of the case and the case laws relied on by the ld.AR of the assessee (supra), it is clear that share premium received cannot be considered as income for the year under consideration by invoking provisions of section 56(1) of the Act. Therefore, in our considered view, the ld. CIT(A) has rightly deleted the addition of Rs. 3,03,00,000/- and we concur with his findings on the issue in question Thus the Revenue's appeal in ITA No. 481/JP/2017 is dismissed. 5.1 In ITA No. 554/JP/2017 for the Assessment Year 2011-12, the Revenue has raised the solitary ground as under:- ....
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....other amenities such as electricity & water, repair & maintenance, guard facility etc. Thus these expenses have direct bearing from income of the year credited in P&L a/c and therefore, same is duly allowable out of the income of the year. It is also a fact that during the search operation, no incriminating document suggesting suppression of income or inflation of incidental expenses, were found from the possession of the assessee. The rental income so disclosed by the assessee for the year are composit rent, accordingly assessee has claimed incidental expenses in relation to that building /property. For claiming of such composite rents for the aforementioned AYs, assessee has debited the same in its P&L A/c to which AO has not pointed out any mistake/ defect. It is also a fact that AO has not properly examined the P&L A/c & Balance Sheet for the AYs 2011-12 & 2013-14. Apart from this AO's observation is also not based on any positive finding arising out of investigation carried out by him during assessment proceeding. In view of the facts and circumstances of the case, addition made by the AO of Rs. 24,20,479/- and Rs. 41,26,273/- for A.Y. 201112 & 2013-14 respecti....
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.... day incidental expenses of the company. Since the expenses so claimed were incidental to the income earned during the year or day to day incidental expenses of the company which are not attributable to a particular activity/project of the company, thus the same are duly allowable out of income of the year. g) The fact of case law relied by ld. AO i.e. Tuticorin Alkali Chemcials and Fertilizers Pvt Ltd 227 ITR 172 (SC)/1997 is totally difference from case of the assessee. In the cited case for the accounting year ending on June 30, 1981 (assessment year 1982-83), the assessee received a total amount of interest of Rs. 2,92,440. In its return of income filed on June 22, 1982, the company disclosed the said sum of Rs. 2,92,440 as " income from other sources ". It also disclosed business loss of Rs. 3,21,802. After setting off the interest income against business loss, the company claimed the benefit of carry forward of net loss of Rs. 29,360. But in the case of the assessee, it has started business activity and rental income of the assessee is business income. The assessee has shown this rental income as business income in the return filed by it and the ld AO ac....
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.... Traders 29.07.2011 3000000 Alliance Tradecom Private Limited Swastik Traders Total 8200000 b) confirming the addition of Rs. 82,00,000/- by holding that the assessee could not explain the deposit of cash/DD in the accounts of other parties/persons at 4th Channel of source/stage and further erred in not providing opportunity of cross examination of Shri Santosh Choube, Shri Ajit Sharma and Sh Rajesh Kumar Singh and other persons; and c) confirming the addition of Rs. 82,00,000/- more so when he has categorically held that the addition made by ld. AO u/s 56(1) of Income Tax Act, 1961 is not sustainable and the identity, creditworthiness and genuineness of transaction of the transaction cannot be held as doubtful and the addition by applying the provisions of section 68 of I.Tax Act cannot be upheld. 2. On the facts and in the circumstances of the case, the ld. CIT(A) erred in confirming the addition of Rs. 19,08,447/- made by the AO by disallowing the entire expenses during the year.'' ITA No.482/JP/2017 - A.Y. 2012-13 (Revenue ) &nbs....
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....ess activity income or net worth in the future. Accordingly, the charging and receipt of share premium and share capital to the tune of Rs. 3,68,27,500/- is held to be income of the assessee company in the nature of income envisaged u/s 56(1) of the Income Tax Act, 1961. The same is added back to the total income of the assessee.'' 7.2 In first appeal, the ld. CIT(A) has deleted the addition of Rs. 2,86,27,500/- out of addition of Rs. 3,68,27,500 made by the AO u/s 56(1) of the Act by observing at pages 105 & 106 of his order as under:- ''3.2.2 I have considered assessee's submission and carefully gone through assessment order. I have also take a note of factual matrix of the case as well as applicable case laws relied upon. I have already given a detailed findings in para 2.1.4.7 wherein total of Rs. 8,71,97,727/- has been sustained in the hands of M/s. . Motisons Global Pvt. Ltd, M/s. Motisons Entertainment Pvt. Ltd, M/s. Motisons Buildtech Pvt. Ltd and M/s. Shivansh Buildtech Pvt. Ltd, details of which are as under:- Name of Appellant Company ITA No.  ....
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....ctly similar to Ground No 1 for AY 2009-10 in ITA No 481/JP/2017. The assessee has made detailed submission in AY 2009-10 for ITA No 481/JP/2017. In order to avoid repetition, we pray your honor kindly to consider the submission made for ITA No 481/JP/2017 for AY 2009-10 under para 2.01.2 above as also made for AY 2012-13 under Ground No 1 of ITA No 482/JP/2017. 7.5 We have heard the rival contentions and perused the materials available on record. It is not imperative to repeat the same facts of the case as the similar issue on deleting the addition of Rs. 2,86,27,500/- out of total addition of Rs. 3,68,27,500/- u/s 56(1) of the Act was dealt with in detail in the Revenue's appeal in ITA No. 481/JP/2017 for the Assessment Year 2009-10. Hence, the decision taken therein shall apply mutatis mutandis on this ground of the Revenue's appeal. In this view of the matter, the Ground raised in the Revenue's appeal is dismissed. 8.1 In Ground No. 1 (ITA No. 385/JP/2017l), the assessee is aggrieved that the ld. CIT(A) has confirmed the addition of Rs. 82,00,000/- in the hands of the assessee. The relevant observation of the ld. CIT(A) at p....
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....36,50,000 Motisons Buildtech Pvt. Ltd 758/14-15 2009-10 3,03,00,000 - 3,03,00,000 Motisons Buildtech Pvt. Ltd 759/14-15 2012-13 3,68,27,500 82,00,000 2,86,27,500 Godawari Estates Pvt. Ltd 769/14-15 2010-11 2,00,00,000 - 2,00,00,000 Godawari Estates Pvt. Ltd 768/14-15 2012-13 10,30,00,000 - 10,30,00,000 Bholenath Real Estates Pvt. Ltd. 770/14-15 2009-10 2,90,00,000 - 2,90,00,000 Rainbow Buildcon Pvt. Ltd 757/14-15 2009-10 2,00,00,000 - 2,00,00,000 Shivansh Buildcon Pvt. Ltd 771/14-15 2012-13 90,00,000 3,50,000 86,50,000 94,14,07,100 8,71,97,727 85,42,09,373 Thus the ld. CIT(A) confirmed the addition of Rs. 82.00 lacs in the hands of the assessee. 8.2 During the course of hearing, the ld.AR of the assessee prayed for deletion of addition confirmed by the ld. CIT(A) amounting to Rs. 82.00 lacs for which the ....
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.....2011 1500000 Evershine Suppliers Private Limited Swastik Traders (PB page 484/AY 2012-13) 25.07.2011 2000000 Alliance Tradecom Private Limited Swastik Traders and Global Securities (PB pg 478/AY 2012-13) 26.07.2011 1700000 Alliance Tradecom Private Limited Swastik Traders (PB pg 478/AY 2012-13) 29.07.2011 3000000 Alliance Tradecom Private Limited Swastik Traders (PB pg 478/AY 2012-13) Total 8200000 b) Regarding application of 68 of ITax Act, 1961 by CIT(A) i) Section 68 was not applied by AO, therefore, the CIT(A) cannot apply it. ii) It is relevant to mention here that as per section 251 (1)(a) of Income Tax Act, 1961 the CIT (A) shall have the power "in an appeal against an order of assessment he may confirm, reduce, enhance or annual the assessment". As regard applicability of section 68 of I.Tax Act by CIT(A) we submit that the assessee has made detailed submission before the ld AO and satisfied the ld AO that it has discharged its onus laid down under section 68 of Income Tax Act. The ld AO being sati....
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....ing the addition cannot be confirmed by applying all together different section by invoking a section for which satisfaction is required to be by "Assessing Officer" and the assessing officer after considering the detailed reply and documents was satisfied about the ingredients of section 68. c) Regarding confirming the addition of Rs. 82,00,000/- by CIT(A) A) All the share capital/share application was received through a/c payee cheques and verifiable from bank statement of assessee as well as bank statement of the party. The onus u/s 68 of the assessee is to prove the identity, capacity and genuineness of the transactions has been discharged which may be seen from the followings:- i) Identity:- The assessee proved the identity of all the companies by filing the share application received from the parties and the parties are duly in existence and the existence of the parties can be verified from the official website of MCA. The ld. AO also not doubted the identity of the above named companies. Further the assessment for AY 2009-10 (Copy at PB Page 198 to 199, 212 to ....
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.... assessee company. Apart from the investment made in the shares of assessee companies, the investor companies were also having investments in shares of other companies or loans & advances to parties which is much more than to the amount invested in the assessee company, therefore from the bank statement as well as financials statements of the investor companies their creditworthiness is duly proved. iii) Genuineness The assessee submitted the Share Application Form received from above companies against the share application received from the companies. The share application is supported by Board Resolution passed in the investor companies. The assessee company has allotted the shares to the investor companies. The proper returns were filed before the ROC against allotment of the shares to these companies. Furthermore, the department has carried out intensive search operations over the assessee and no any incriminating material was found to show that the money against the share allotment was own money of the company. Shares certificates were issued against the allotment of the shares to....
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.... the hands of shareholder company. The amended section even does not require to prove source of funds in the hands of 3rd or 4th stage. Further the amendment in section 68 of I.Tax was made by inserting the following proviso to section 68 w.e.f. 01/04/2013 "Provided that where the assessee is a company, (not being a company in which the public are substantially interested) and the sum so credited consists of share application money, share capital, share premium or any such amount by whatever name called, any explanation offered by such assessee-company shall be deemed to be not satisfactory, unless- (a) the person, being a resident in whose name such credit is recorded in the books of such company also offers an explanation about the nature and source of such sum so credited; and (b) such explanation in the opinion of the Assessing Officer aforesaid has been found to be satisfactory: The above proviso was inserted with effect from the 1st day of April, 2013 so it cannot be applied retrospectively. Therefore as per law the assessee has no onus to prove source of source. Hon'ble Mumbai High Cou....
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....; But in the case of the assessee the fact remains that the assessee has also proved source of source by submitting the copy of bank statement of the share applicant company wherein no cash deposit was made against the share application money. C) As regard to the statement of Shri Santosh Choube, Shri Ajit Sharma and Shri Rajesh Kumar Singh, as mentioned in show cause notice of ld CIT(A) PB pg 403-408, the assessee has submitted before ld CIT(A) that:- i) As regard to the statement of Shri Santosh Choubey first of all this is to submit the assessee group or its Shareholder (investor) companies have no concern with this person or concerns managed by Shri Santosh Choubey. The assessee group do not know to any person naming Shri Santosh Choubey. Regarding the statement of Shri Santosh Choubey and its reliance for taking the adverse action against the assessee we submit as under: - a) This person admitted to maintain the bank a/c of Shri Ajit Sharma and Rajesh Kumar Singh and used for its own purpose therefore onus to prove the source of amount deposited in their bank accounts primarily lay on this person P....
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....ed to the a/c of Motisons Jewellers group but no question were asked from this person that what is the detail of such accounts in which the money were transferred. It is most importantly relevant to notice that M/s Motisons Jewellers did not receive any share application from the six companies than how this person choose to take the name of Motisons Jewellers and how he know the name of Motisons Jewellers and how he come to know that the assessee group is engaged in the Jewellery business too. This shows that the name of "Motisons Jewellers Group" was put into the mouth of this person by the search party with a motive to make their case strong. The AO and Investigation team neither followed the principle of law nor principle of evidence rather appeared to be bent upon making huge additions without any basis. The AO has not made independent inquiry on this issue. a) It is settled law that the AO is quasi-judicial authority and should be governed in his function by judicial consideration and must conform to the rules of natural justice and must proceed without bias- Tin Box Co. Vs CIT 249 ITR 216 (SC). b) It is also settled law that the AO must ....
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....ant addition made under section 68 of the Act. Undisputedly, the primary onus to establish genuineness of the loan transaction is on the assessee. In the instant case, the assessee has provided the necessary explanation, furnished documentary evidence in terms of tax filings, affidavits and confirmation of the Directors, bank statements of the lender, balance sheet of the lender company, and an independent confirmation has also been obtained by the Assessing officer to satisfy the cardinal test of identity, creditworthiness and genuineness of the loan transaction. However, the Assessing officer has not given any finding in respect of such explanation, documentary evidence as well as independent confirmation. Apparently, the reason for not accepting the same is that the Assessing officer was in receipt of certain information from the investigation wing of the tax department as per which the transaction under consideration is a bogus loan transaction. The said information received from the investigation wing thus overweighed the mind of the Assessing officer. The Assessing officer stated that the primary onus is on the assessee to establish the genuineness of the transaction....
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....at if the entries and material are gathered behind the back of the assessee and if the AO proposes to act on such material as he might have gathered as a result of his private enquiries, he must disclose all such material to the assessee and also allow the cross examination and if this is not done, the principles of natural justice stand violated. 2.9 In light of above discussions, in our view, the crux of the issue at hand is that whether the principle of natural justice stand violated in the instant case. In other words, where the AO doesn't want to accept the explanation of the assessee and the documentation furnished regarding the genuineness of the loan transaction and instead wants to rely upon the information independently received from the investigation wing of the department in respect of investigation carried out at a third party, can the said information be used against the assessee without sharing such information with the assessee and allowing an opportunity to the assessee to examine such information and explain its position especially when the assessee has requested the same to the Assessing officer. 2.10 In this regard, th....
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..... 1,07,350 said to have been remitted by Tilokchand from Madras represented the undisclosed income of the assessee. The only evidence on which the Tribunal could rely for the purpose of arriving at this finding was the letter, dated 18-2-1955 said to have been addressed by the manager of the bank to the ITO. Now it is difficult to see how this letter could at all be relied upon by the Tribunal as a material piece of evidence supportive of its finding. In the first place, this letter was not disclosed to the assessee by the ITO and even though the AAC reproduced an extract from it in his order, he did not care to produce it before the assessee or give a copy of it to the assessee. The same position obtained also before the Tribunal and the High Court and it was only when a supplemental statement of the case was called for by this Court by its order, dated 168-1979 that, according to the ITO, this letter was traced by him and even then it was not shown by him to the assessee but it was forwarded to the Tribunal and it was for the first time at the hearing before the Tribunal in regard to the preparation of the supplemental statement of the case that this letter was shown to the asses....
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....ents of Shri Ajit Sharma and Shri Rajesh Kumar Singh are no relevance in the case of the assessee because in their statement these persons have not admitted that they were maintaining the bank account for the benefit of assessee group. They admit to maintain their bank account by some Shri Santosh Choubey. Therefore, the addition on share application received by the assessee can neither be made u/s 56(1) of Income Tax Act, 1961 nor u/s 68 of Income Tax Act, 1961. The various judgments and arguments regarding addition made u/s 56(1) of Income Tax Act, 1961 has been submitted in forgoing paras. The reliance regarding addition cannot be made u/s 68 of Income Tax Cat, 1961 is placed on the following decisions: - a) Rajasthan High Court: - (i) CIT-1, Jaipur V/s M/s. ARL Infratech Ltd, (PB pg 130 to 143/Case Laws) wherein Hon'ble Rajasthan High Court has recently confirmed the findings of Hon'ble ITAT by deciding the appeal of revenue in DB ITA No 24/2014 vide order dated 28/09/2016 regarding deletion of addition of share capital made by applying the provisions o....
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....[2001] 48 DTR 271 (Raj.), this Court noticed similar nature grounds urged on behalf of the revenue and found the same not leading to any substantial question of law. This Court noticed, observed, and held as under:- "7. Learned counsel for the appellant (Revenue) contended that firstly Tribunal erred in accepting the explanation offered by assessee in relation to source of income. His second submission was that what was offered by assessee was no explanation and hence should not have been accepted and lastly learned counsel made sincere attempt on his part after taking us through factual scenario of the explanation and contended that it can never be taken as satisfactory explanation for deleting the addition made by AO. We do not agree to this submission for more than one reason. 8. In the first place, it is a pure question of fact, what to say question of law, much less substantial question of law. Secondly, this Court cannot again in this appeal undertake the examination of factual issues nor can draw factual inferences on the basis of explanation offered by assessee. Thirdly, once the explanation is accepted by the two appellate Courts i.e. CIT(A) and Tribunal ....
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....said,- "19. A perusal of the aforesaid finding goes to show that deletion has been made on appreciation ofevidence, which was on record Finding that there was existence of investors and their confirmation has been obtained, were found to be satisfactory. All these conclusions are conclusions of fact based on material on record and, therefore, cannot be said to be perverse so as to give rise to question of law, which may be required to be considered in this appeal under s.260A of the IT Act." 14. The ratio of the decisions aforesaid directly applies to the present case too. Herein, as noticed, the appellate authorities have returned the findings of fact in favour of the assessee after due appreciation of the evidence on record, on relevant considerations, and on sound reasonings. These findings have neither been shown suffering from any perversity nor appear absurd nor are of such nature that cannot be reached at all. Thus, no case for interference in the findings of the appellate authorities is made out. In the result, the appeal fails and is, therefore, dismissed." (iii) Barkha Synthetics Ltd. vs. Asstt. CIT (005) 197 CTR (Raj) 432. (PB pg 150 t....
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....on money for augmenting the investment in business has flown from assessee's own money-No substantial question of law arises-Barkha Synthetics Ltd. vs. Asstt. CIT (2005) 197 CTR (Raj) 432 followed. (vii) Commissioner of Income-Tax, Central, Jaipur Versus Supertech Diamond Tools (Pvt) Ltd. (Raj HC) D. B. IT Appeal No. 74 of 2012 Dated: - 12 December 2013. (PB pg 169 to 174/Case Laws) (viii) Commissioner of Income-tax - I, Jaipur Versus AL Lalpuria Construction (P.) Ltd (Raj HC) D.B. IT Appeal Nos. 256 of 2010 AND 26 & 39 of 2011 Dated: - 25 February 2013. (PB pg 175 to 176/Case Laws) (ix) Commissioner of Income-tax, Ajmer Versus HS. Builders (P.) Ltd. D.B. INCOME Tax (Raj HC) APPEAL NO. 48 OF 2006 Dated: - 03 March 2012. (PB pg 177 to 185/Case Laws) (x) CIT Vs Jai Kumar Bakliwal (2014) 101 DTR (Raj) 377 : (2014) 267 CTR (Raj) 396 (PB pg 186 to 192/Case Laws). No liability to prove source of source. (xi) Aravali Trading Co Vs Income Tax Officer (2008) 8 DTR (Raj) 199. (PB pg 193 to 200/Case Laws) Burden of the assessee stands discharged when the identity of the creditors is es....
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....td. dt. 21st Jan., 2008, the copy of which is placed on record where it has been observed by the Supreme Court as under : 'Can the amount of share money be regarded as undisclosed income under s. 68 of IT Act, 1961 ? We find no merit in this SLP for the simple reason that if the share application money is received by the assessee company from alleged bogus shareholders, whose names are given to the AO, then the Department is free to proceed to reopen their individual assessments in accordance with law. Therefore, we find no infirmity in the order of the learned CIT(A), with the impugned judgment.' The said decision of Hon'ble Supreme Court of India has been followed by the Tribunal, Delhi Bench in the case of ITO vs. Bhor Mal Dhansi Ram Ltd. in ITA No. 4670/Del/2007, dt. 3rd March, 2006. The copy of the said decision of Tribunal, Delhi Bench is placed on record. The learned counsel for the assessee Shri H.M. Singhvi, chartered accountant has also relied upon the decision of Hon'ble Supreme Court of India on the said issue in the case of CIT vs. Lovely Exports (P) Ltd. (2008) 216 CTR (SC) 195 : (2008) 6 DTR (SC) 308 wherein it has been held that if the share applic....
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.... application money cannot be regarded as undisclosed income of the assessee company. 28.8 The Hon'ble High Court in the case of First Point Finance Ltd. (supra) held that burden of proof on the assessee company lies to the extent of making out a case that investor exists and thereafter it is not for the assessee to further prove where they have brought money from to invest with it. 28.9 The Hon'ble Delhi High Court in the case of CIT vs. United Bio-tech (P) Ltd. 2010 TIOL-533-HC-Del held that in case the identity of the share applicants has been established and it is found that the said applicants are corporate assessees who are assessed to tax with IT Department then there is no case of any substantial question of law. In the instant case, the share applicants are corporate assessees. 28.10 The Hon'ble Delhi High Court in the case of CIT vs. Samir Bio-tech (P) Ltd. (supra) held that if investments have been shown by the share applicants in their audited balance sheet then the addition cannot be made under s. 68 of the Act. 28.11 In view of the legal position as discussed above, the AO was not justified in making the addition of Rs. 1.10 crore wi....
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.... reverse the order of the ld CIT(A) on technical ground as well as on merit also...." (iii) Uma Polymer (P) Ltd. , 101 TTJ 124, Jodhpur (PB pg 282 to 318/Case Laws) Income-Cash credit- Share application money-In respect of share capital money, the assessee-company has to prove only the existence of the person in whose name share application is received-No further burden is cast on the assessee to prove whether that person himself has invested the money or some other person has made the investment in his name-Burden to prove that the money did not belong to him but to somebody else is on the Revenue-Distinction between a public company and a private company is not very material for this purpose- AO treated the investments made by ten shareholders in the assessee-company as bogus and made addition under s. 68 -Not justified-In all the cases except that of V, AO had obtained the bank statements of the shareholders which clearly show that the accounts were regularly maintained and the shareholders had made deposits-Further, the shareholders are also assessed to tax-Simply because scrutiny assessments were not made in the case of shareholders, such assessments could not be made....
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....sp; In coming to the above conclusion, the Hon'ble Jurisdictional High Court has considered at length the relevant decisions on the issue like CIT vs. Steller Investment Ltd. (2000) 164 CTR (SC) 287 = 251 ITR 263 (SC) which has confirmed the decision of Hon'ble Delhi High Court reported in (1992) 192 ITR 287. The Hon'ble Court has gone to the extent of stating that even if it be assumed that the subscriber to the share capital are not genuine, nevertheless, under no circumstances can the amount of share capital be regarded as undisclosed income of the assessee. In this case, the share subscriber is identified. There can be no dispute regarding the above stated legal position. The following decisions also lay down the same ratio:- (i) CIT vs. Lovely Exports (P) Ltd. (2008) 6 DTR 308 (SC) (ii) CIT vs. Dolphin Conpack Ltd. (2006) 283 ITR 190 (Del.) (iii) CIT vs. Gujarat Heavy Chemicals Ltd. (202) 256 ITR 795(SC) (iv) CIT vs. Kwick Travels (1992) 199 ITR (St.) 85 (SC) This issue has been dealt at length by the Third Member in the case of Uma Polymers (P) Ltd. vs. DCIT, (2006) 101 TTJ (Jd.) T.M. 126 = (2006) 284 IT....
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....rce of the amount so invested is known, it cannot be said to be undisclosed income - the addition of such subscriptions as unexplained credit under Section 68 of the Act is unwarranted - Decided against Revenue. (ii) CIT vs. Illac Investment (P) Ltd. (2007) 207 CTR (Del) 687; (PB pg 341 to 342/Case Laws) assesseecompany has satisfactorily established the identity of the share subscribers and deleted the addition under s. 68, no substantial question of law arises for consideration. (iii) CIT vs. Divine Leasing & Finance Ltd. (2007) 207 CTR (Del) 38; (PB pg 321 to 340/Case Laws) Income-Cash credit-Share application money-Burden of proof can seldom be discharged to the hilt by the assessee-If the AO harbours doubts of the legitimacy of any subscription he is empowered, nay dutybound, to carryout thorough investigations-But if the AO fails to unearth any wrong or illegal dealings, he cannot obdurately adhere to his suspicions and treat the subscribed capital as the undisclosed income of the company-If relevant details of address and identity of the subscribers are furnished to the Department along with copies of the shareholders register, share application form....
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....shareholders stood established, but also examined the fact that each of them were income-tax assessees and had disclosed the share application money in their accounts which were duly reflected in their IT returns as well as in their balance sheets-Tribunal was not therefore justified in coming to the conclusion that the CIT(A) had not considered the matter in the right perspective-Order passed by Tribunal remanding the matter for examining the share applicants set aside and that of CIT(A) restored (d) Other Benches of ITAT (i) ITO V M/s. Reliance Marketing Pvt. Ltd. 2015TIOL-319-TAT-Del (PB pg 367 to 375/Case Laws) identity of the creditors/share applicants by furnishing their PAN number and copy of acknowledgment of Income-tax Return. The amount on account of share application was received through banking channel, copies of the confirmation alongwith affidavit of the parties were furnished. The assessee also furnished the copy of share application forms, copy of Form no.2 filed with Register of Companies (ROC), showing allotment of shares to the applicants. Therefore, the assessee discharged the onus cast upon it, (ii) INCOME TAX OFF....
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....h law but it cannot be regarded as undisclosed income of assessee company. (para 2.3) In this background, it was submitted on behalf of the assessee that the Assessing Officer failed to appreciate that there was no documentary evidence against the assessee-company to support such impugned additions. It was further submitted by the assessee that the Assessing Officer failed to appreciate that the statements of any person recorded u/s 143(3) r.w.s. 147. The assessee-company had fully discharged the burden of proof, onus of proof and explained the source of share capital and advances received by established the identity, creditworthiness and genuineness of transaction by banking instruments with documentary evidences. The further stand of the assessee had been that the assessee-company substantiated the details with the documentary evidences as extracted from the website of Ministry of Corporate Affairs, Government of India before the Assessing Officer. These facts had not been rebutted on behalf of the Revenue. (para 2.4) In view of the facts and circumstances of the present case as well as considering the decisions as....
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.... supporting evidence was filed-CIT(A) was justified in deleting the additions. (v) 2017 (3) TMI 1047-ITAT AHMEDABAD Income Tax Officer, Ward 8 (1), Ahmedabad Versus Seven Star Aviation Services Pvt. Ltd (PB pg 400 to 404/Case Laws)Addition u/s 68 - share application money and unsecured loan received. Held that: - When the depositors are regular tax payers and the advances made by such depositors as also share application monies paid by such shareholders are duly accepted in their personal assessments, there cannot be any occasion to hold that these amounts are unexplained in the hands of the company. The credit worthiness or identity cannot be an issue in such a situation. (vi) 2016 (10) TMI 920 - ITAT HYDERABAD M/s. Hariom Concast and Steel Pvt. Ltd. Versus Income Tax Officer, Ward-2 (2) , Hyderabd (PB pg 405 to 411/Case Laws) Addition for shares issued on premium. Held 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 broug....
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....my Pvt. Ltd 206 (2014) DLT 277 (DB)(Del)/ 361 ITR 0285 (Del) AO found that immediately before issuance of cheques for the purpose of making pay order or demand draft there was deposit of cash. In our case no cash deposit in the bank account of shareholder company. Further, the summons u/s section 131 of I.tax Act were sent to the shareholders which were received back unserved. In view of the above submission, the humble assessee prays your honor kindly to delete the addition of Rs. 82,00,000/- confirmed by ld CIT(A).'' 8.3 On the other hand, the ld. DR relied on the order of the AO. 8.4 We have heard the rival contentions and perused the materials available on record. In this ground, it is noted that the AO made the addition of Rs. 3,68,27,500/- out of which the ld CIT(A) deleted the addition of Rs. 2,86,27,500/- and sustained the addition of Rs. 82.00 lacs as mentioned at para 3.2.2. and 2.1.4.6 & 2.1.4.7 of the ld. CIT(A)'s order (supra). The question arises as to whether the ld CIT(A) can make the addition u/s 68 of the Act or not. For this purpose, the definition of Section 68 of the ....
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.... (i) In the case of CIT vs Jai Kumar Bakliwal (2014) 366 ITR 217 (Raj):- Held, dismissing the appeal, that all the cash creditors were assessed to Income-tax and they provided a confirmation as well as their permanent account number. They had their own respective bank accounts which they had been operating and it was not the claim of the Assessing Officer that the assessee was operating their bank accounts. Most of the cash creditors appeared before the Assessing Officer and their statements under section 131 of the Income-tax Act, 1961, were also recorded on oath. There was no clinching evidence nor had the Assessing Officer been able to prove that the money actually belonged to none but the assessee. The addition of Rs. 17,27,250 under section 68 was not justified. (ii) In the case of Nemi Chand Kothari vs CIT (2003) 264 ITR 254 (Gau): Held that it is not the business of the assessee to find out the source or sources from where the creditor had accumulated the amount which he had advanced in the form of loan to the assessee and section 68 cannot be read to show that in the case of failure of sub-creditors to prove their ....
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....he course of hearing of appeal before the ld. CIT(A), the assessee had requested for cross examination of Shri Sanbtosh Choubey Shri Ajit Sharma, Shri RajeshKumar Singh and other persons which was denied by the ld. CIT(A). The ITAT Coordinate Bench in the case of Prateek Kothari (supra) has given verdict that without providing opportunity of cross examination of the materials gathered and statement recorded behind the assessee cannot be used. However, we hold that Revenue is free to initiate proceedings in the hands of these concerns who have received the amount after deposit in cash/DD in respective bank A/cs. Thus Ground No. 1 of the assessee is allowed. 9.1 In Ground No. 2, the assessee is aggrieved that the ld. CIT(A) has erred in confirming the addition of Rs. 19,08,447/- made by the AO by disallowing the entire expenses incurred during the year. Brief facts of the case are that the AO during the course of assessment proceeding noticed that the assessee has not started its business activities during the year under consideration. The AO further noted that the assessee had received interest income of Rs. 19,08,375/- for which the assessee claimed expenses of Rs. 1....
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....dum of Association of the company (PB pg 2333/AY 2011-12) your honor would found that the assessee is in the business of real estate and leasing out of the property is its business activities. Kindly see main object and objects incidental or ancillary to main object at PB pg 26-27/AY 201112. Therefore, the letting out the properties is business activity of the assessee. c) From the P&L of the assessee PB pg 83, your honor would found that during the year the assessee received rental income from renting out of building along with other amenities and received composite rent of Rs. 18,00,000/- and interest income of Rs. 108375/- only. d) The assessee has shown the rental income as Income from business or Profession in the income tax return . Kindly see computation at PB 67, which has been accepted by AO. Therefore, ld AO has made wrong finding that the business activity of the assessee has not started. e) The financial expenses, salary expenses, Water & electricity expenses, Repair & maintenance expenses etc. were in relation of building which was given on rent inclusive of other amenities such as electricit....
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....O has disallowed entire expenses of Rs. 24,20,479/- & Rs. S41,26,273/- debited respectively in profit & loss a/c for A.Y. 2011-12 & 2013-14 by holding that assessee has not started its business activities and only received rental income and discount which are to be assessed as income from rent & other sources respectively. In this regard, it is submitted that the expenses debited in P&L for the years were in relation to income earned during the year or other day today incidental expenses of the company. Since the expenses so claimed were incidental to the income earned during the year or day to day incidental expenses of the company which are not attributable to a particular activity/ project of the company, thus the same are duly allowable out of income of the year. The financial expenses, salary expenses, water & electricity expenses, Repair & Maintenance expenses etc. were in relation of building which was given on rent inclusive of other amenities such as electricity & water, repair & maintenance, guard facility etc. Thus these expenses have direct bearing from income of the year credited in P&L a/c and therefore, same is duly allowable out of the income of the year. It i....
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....t that the assessee has not started its business activities the other income is to be taxed as income from other sources and the expenses claimed by the assessee should be capitalized for which the AO relied on the decision of Hon'ble Supreme Court in the case of Tuticorin Alkali Chemicals and Fertilizers Pvt Ltd. 227 ITR 172 (SC). The AO thus assessed the income of assessee at Rs. 22,94,267/-. 10.3 In first appeal, the ld. CIT(A) has deleted the addition of Rs. 41,26,273/- by observing as under:- ''3.3 I have duly considered assessee's submission and also carefully gone through the assessment order. I have also taken a note of factual matrix of the case as well as case laws. While passing the assessment orders, AO has disallowed entire expenses of Rs. 24,20,479/- & Rs. S41,26,273/- debited respectively in profit & loss a/c for A.Y. 2011-12 & 2013-14 by holding that assessee has not started its business activities and only received rental income and discount which are to be assessed as income from rent & other sources respectively. In this regard, it is submitted that the expenses debited in P&L for the years were in relation to income earned during the ye....
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....onounced in the open Court on 30 -10-2017. ============= Document 1 Name of ITA No. A. Y. Appellant Addition made Addition by AO Addition sustained deleted/Relief Company given Motisons 753/14-15 2009-10 2,75,00,000 2,75,00,000 Global Pvt Ltd Motisons 754/14-15 2011-12 6,96,50,000 6,96,50,000 Global Pvt Ltd Motisons 767/14-15 2012-13 42,07,29,600 5,94,47,727 36,12,81,873 Global Pvt Ltd Motisons 755/14-15 2013-14 4,41,00,000 50,50,000 3,90,50,000 Global Pvt Ltd Motisons 760/14-15 2009-10 3,40,00,000 3,40,00,000 Entertainment (I) Pvt. Ltd Motisons 766/14-15 2011-12 1,95,00,000 1,95,00,000 Entertainment (I) Pvt. Ltd Motisons 756/14-15 2012-13 7,78,00,000 1,41,50,000 6,36,50,000 Entertainment (I) Pvt. Ltd Motisons 758/14-15 2009-10 3,03,00,000 3,03,00,000 Buildtech Pvt. Document 2 Ltd Motisons 759/14-15 2012-13 3,68,27,500 82,00,000 2,86,27,500 Buildtech Pvt. Ltd Godawari 769/14-15 2010-11 2,00,00,000 2,00,00,000 Estates Pvt. Ltd Godawari ....
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....justed premium price alloted/ against share against per share of the Consideration Received applied share share share during capital premium the year 1 Arcade Dealcom Pvt. 3000 30,000 10 29,70,000 990 1000 30,00,000 Ltd 2 Debdaru Vinimay Pvt. 2500 25,000 10 24,75,000 990 1000 25,00,000 Ltd 3 Debdoot Vinimay Pvt. 3500 35,000 10 34,65,000 990 1000 35,00,000 Ltd 4 Matrabhumi Dealers 4400 44,000 10 43,56,000 990 1000 44,00,000 Pvt. Ltd 5 Puja Tie-Up Pvt. Ltd 5000 50,000 10 49,50,000 990 1000 50,00,000 6 Pushpa Dealers Pvt. 2500 25,000 10 24,75,000 990 1000 25,00,000 Ltd 7 Pushpa Trading Pvt. 4000 40,000 10 39,60,000 990 1000 40,00,000 Ltd 8 Shreya Tie Up Pvt. Ltd 1000 10,000 10 9,90,000 990 1000 10,00,000 9 Taranh Suppliers Pvt. 3400 34,000 10 33,66,000 990 1000 34,00,000 Ltd 10 Vandana Dealers Pvt. 1000 10,000 10 9,90,000 990 1000 10,00,000 Lt....
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....hare application containing name/address/PAN of party, detail of payment received etc. Copy of board resolution. Copy of PAN card of party. payment made to assessee. 163 164 Copy of bank statement showing the entry of 165 ➤ Declaration of source of funds with party. Copy of Ack. of ITR of AY 2009-10. 166 167 Copy of audit report and audited balance sheet 168-177 along with annexure of 31.03.09. ➤ Copy of registration certificate issued by ROC. 178 Document 11 Matribhumi Dealers Pvt. Ltd Share application containing the 179-182 name/address/PAN of party, detail of payment received etc. Copy of board resolution. Copy of PAN card of party. 183 184 payment made to assessee. Copy of bank statement showing the entry of 185-187 Declaration of source of funds with party. Copy of Ack. of ITR of AY 2009-10. 188 189 Copy of audit report and audited balance sheet 190-198 along with annexure of 31.03.09. Puja Tie Up Pvt. Ltd Share Copy of registration certificate issued by ROC. application containing 199 the 200-203 name/address/PAN of party, detail of pay....
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.... of 284-285 payment made to assessee. ➤Declaration of source of funds with party. Copy of Ack. of ITR of AY 2009-10. 286 287-288 Copy of audit report and audited balance sheet 289-297 along with annexure of 31.03.09. ➤ Copy of registration certificate issued by ROC. 298 Document 13 Vandana Dealers Pvt. Ltd Share application containing the 299 name/address/PAN of party, detail of payment received etc. Copy of board resolution. Copy of PAN card of party. 300 301 Copy of bank statement showing the entry of 302 payment made to assessee. ➤Copy of Ack. of ITR of AY 2009-10. 303-305 Copy of audit report and audited balance sheet 306-316 along with annexure of 31.03.09. ➤ Copy of registration certificate issued by ROC. 317 Document 14 Name of the Investor company assessee Amount Share capital Share capital invested in and reserve & and reserve & surplus with surplus with Document 15 company Arcade Dealcom Pvt. Ltd 30,00,000 Investor companies as on 31.03.2009 11,71,00,000 (PB 136) Investor companies as on 31.03.2008 11,71,00,000 Debdaru ....
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....vt. Ltd 6,93,49,800 Mayukh Vintrade Pvt. Ltd 13,99,800 Regent Barter Pvt. Ltd 4,04,71,800 Regent Dealers Pvt. Ltd 7,59,99,900 Rose Suppliers Pvt. Ltd 9,87,49,800 Total 42,07,29,600 4 Motisons Global Pvt. Ltd 13-14 Alliance Tradecom Pvt. Ltd 50,50,000 Evershine Suppliers Pvt. Ltd 1,45,00,000 Mayukh Vinimay Pvt. Ltd 2,24,50,000 Regent Dealers Pvt. Ltd 16,00,000 Rose Suppliers Pvt. Ltd 5,00,000 Total 4,41,00,000 5 Motisons Entertainment (I) Pvt. Ltd 2009-10 Bholenath Traders Pvt. Ltd 35,00,000 Debdaru Vinimay Pvt. Ltd 50,00,000 Indigo Vinimay Pvt. Ltd 50,00,000 Kingfisher Vinimay Pvt. Ltd 20,00,000 Reality Merchant Pvt. Ltd 25,00,000 Document 18 S. No. Name of Company AY Detail of Share Capital issued Name of allottee Total Amount of Share capital and Premium. Shreya Tie Up Pvt. Ltd 75,00,000 Sumeru Vincom Pvt. Ltd 35,00,000 Victor Tradcom Pvt. Ltd 50,00,000 Total 3,40,00,000 6 Motisons Entertainment (I) Pvt. Ltd 2011-12 Access Tradelink Pvt. Ltd 20,00,000 Bholenath Traders Pvt. Ltd 40,00,000 Chakra Deal Trade P....
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....Pvt Ltd 50,00,000 Bernstain Marketing Pvt Ltd 15,00,000 Kesarinandan Vanijya Pvt Ltd 5,00,000 Deep Commosale Pvt Ltd 50,00,000 Apollo Vintrade Pvt Ltd 25,00,000 Innova Commercial Pvt Ltd 25,00,000 Prayash Dealtrade Pvt Ltd 40,00,000 Justify Vanijya Pvt Ltd 50,00,000 Solty Financial Consultants P Ltd 50,00,000 Achiever Commotrade Pvt Ltd 50,00,000 Sishmahal Commotrade Pvt. Ltd 20,00,000 Advantage Dealtrade Pvt. Ltd 25,00,000 Origin VinimayPvt Ltd 40,00,000 Rukmani International Pvt Ltd 50,00,000 Total 10,30,00,000 12 Bholenath Real Estates Pvt. Ltd 2009-10 Lavender Dealcom Pvt. Ltd. 30,00,000 Arcade Dealcom Pvt. Ltd 20,00,000 Tarang Suppliers Pvt. Ltd 15,00,000 Transit Vinimay Pvt. Ltd 62,00,000 Vandana Dealers Pvt. Ltd 98,00,000 Variety Dealcom Pvt. Ltd 25,00,000 Document 21 S. No. Name of Company AY Detail of Share Capital issued Name of allottee Total Amount of Share capital and Premium. Vanila Vinimay Pvt. Ltd Outlook Tracom Pvt. Ltd Total 13 Rainbow Buildcon Pvt Ltd 2009-10 Anuraj Securities Pvt Ltd 15,00,000 ....
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....Pvt. Ltd Alliance Tradecom Pvt. Ltd Detail of Share Capital issued No of shares Share Capital @ Rs. 10 per share Share Premium Rate of Premium per share Total Amount 12625 1,26,250 49,23,750 390 50,50,000 Evershine Suppliers Pvt. Ltd 36250 3,62,500 1,41,37,500 390 1,45,00,000 Mayukh Vinimay Pvt. Ltd 56125 5,61,250 2,18,88,750 390 2,24,50,000 Regent Dealers Pvt. Ltd 4000 40,000 15,60,000 390 16,00,000 Rose Suppliers Pvt. Ltd 1250 12,500 4,87,500 390 5,00,000 Total 1,10,250 11,02,500 4,29,97,500 4,41,00,000 Document 25 Particulars Book Value of total assets less prepaid expenses & preliminary expenses as on last B/s i.e. 31.03.2012 Add: - Appreciation in market value of assets (In excess to book value) Land at SB-110* Total Assets (A) Total Liabilities, excluding share capital and reserves & Surplus (L) Total amount of paid up equity share capital as shown in B/S (PE) Paid up value of such equity shares (PV) Fair market value of shares [(A-L)/PE]*PV As per Method (A) (Net assets value method) 53,88,09,212 NA 53,88,09,21....