TaxTMI 
TaxTMI 
2017 (10) TMI 1445
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...., 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 The solitary ground of the Revenue in ITA No. 481/JP/2017 for the Asses....
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....emium/ 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 Pvt. Ltd is hereby deleted. Assessee gets relief in Gr No. 2 & 3.'' Para 2.1.4.7 reads of ld. CIT(....
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....ion 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 share holders as capital. So long as the company is a going concern, the monies in share premium account can never be returned to the shareholders except through the medium of a redu....
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....quired 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 bar from any legislated law of the land. The amendment has been brought in the Income Tax Act under the head "Income from other sources" by inserting Clause (viib) to Sec. 56 of the Act wherein i....
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....see 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 clause in 56(2). The new clause will apply where, accompany, not being a company in which the public are substantially interested, receives, in any previous year, from any person being a resident, any consideration for issue of sh....
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....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 hardships only of the assessee, not of the department. Imposing a retrospective levy on the assessee would have caused undue hardship and for that reason parliament specifically chose to make the proviso effective from June 1, 2002. Where a benefit is conferred by a legislation, the rule a....
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....r 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 member Bench of the Apex Court in CIT V Vatika Township P Ltd 367 ITR 466 (PB pg 19/case Laws). "Tax Laws are clearly in derogation of personal rights and property interests and are, therefore, subject to strict construction and any ambiguity must be resolved against imposition of the tax. In Billings V U.S 232 U.S.261 at page 265, 34 S.Ct 421 (1914), the Supreme C....
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.... (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 occasion to consider the difference between the share premium determined by revenue and the share premium charged as deemed loan and taxing of national interest on deemed loan. The Hon'ble Bombay High Court has referred to the decision of Apex Court in the case of Mathuram Aggarwal V/s State of MP (1999) 8 SCC 667 for the test to interpret a taxing statue which reads as under: " The intention of the legislature is a taxation statu....
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....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. The ld AO issued several notices to assessee to explain the share capital. The assessee submitted detailed reply and documents from time to time as under:- The assessee has submitted sufficient documents before the ld AO to prove identity, creditworthiness and genuineness of share capital and ld AO satisfied that addition under section 68 cannot be made, so he applied section 56(1) of ITax Act to make the addition. The assessee submitted detailed r....
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....laration 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 amount. The above chart shows that the investor companies were having their own independent funds and having their independent source to invest in the shares of the 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 pr....
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....eholder 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 Court in the case of Commissioner of Income Tax 1 V....
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.... 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 Income Tax Act, 1961 has been cited in the submission made for AY 2012-13 in assessee's appeal ITA No 482/JP/17. In view of the above submission, the humble assessee prays your honor kindly to dismiss the appeal filed by the department.'' 4.6 We have heard the rival contentions and perused the materials available on record. Brief facts of the case are that the Department carried out search over Motisons Group on 31-10-2012. The AO during the course of assessment proceeding observed that in the course of search and seizure action u/s 132 of the Act, cash, jewellery, valuables, stock-intrade, documents, books of account an....
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..../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 Court): Summons sent to the companies received back unserved and other summons remained uncomplied with Whereas, in the case of assessee companies, notice u/s 133(6) was sent to investor companies, all of which were served and most of them were complied with. (ii) CIT V/s N. R. Portfolio Pvt. Ltd 206 (2014) DLT (DB) (Del)/ 264 CTR 0258 (del) : Assessed u/s 144 of Itax Act. In this case the AO issued several notices and show cause notice which was not served/complied and assessment was framed u/s 144 of Income Tax Act. In our case all the compliances were made and evidences submitted. (iii) N Tariks Properties Pvt. Ltd 227 Taxmann.com 373 (with reference to decis....
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....s 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) Commissioner of Income Tax Vs. AKJ Granites (P) Ltd. (Raj HC) (2008) 301 ITR 0298. i) 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. 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. (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. (x) CIT Vs Jai Kumar Bakliwal (2014) 101 DTR (Raj) 377 : (2014) 267 CTR (Raj) 396. No liability to prove source of source (xi) Aravali Trading Co Vs Income Tax Officer (....
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....t 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 premium on shares & its taxability. The AO has observed that companies have received abnormal share premium whereas as per the audited P&L account and balance sheet, these companies, do not have any business/profit and physical assets/assets are not in commensurate to value of share with the companies which appeared to be a part of a well planned exercise of tax evasion. In this regard, Ld AR has submitted following reasons for Charging of premium: The ld AR has further submitted that that the shares were allotted to the investor companies at premium, after mutual discussion between assessee companies and investor companies. "Motisons Group" enjoys very high reputation and goodwill in market which was main reason for high premium. Hon'ble ITAT, Mumbai Bench in the case of ACIT Vs. Gagandeep Infrastructure Pvt. Ltd. 2014-T10L-656-ITAT-Mum has held that issu....
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....ovides 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 public are substantially interested, receives, in any previous year, from any person being a resident, any consideration for issue of shares. In such a case if the consideration received for issue of shares exceeds the face value of shares, the aggregate consideration received for such shares as exceeds the fair market value of the shares shall be chargeable to income Tax, under the head "income from other sources". The said amendment is effective from 1st April 2013, it will accordingly apply in relation to AY 2013-14 and subsequent AYs. In the memorandum it is mentioned that premium in excess of fair market value is to be treated as income. CBDT vide circular No.3 of 2012 dated 12.06.2012 has also mentioned that provisions of 56(2)(vii b) will be applicable for Assessment year 2013-14 onward. In all the cases of following assessee companies share capital and premium was received in the assessment years earlier to AY 2013-14....
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....ubmitted 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 power "in an appeal against an order of assessment he may confirm, reduce, enhance or annual the assessment" but he has no power to modify the basic theme of assessment order. During the course of assessment proceedings the assessee has submitted ample documents and satisfied the ld AO. The ld. AO being satisfied with the submission of assessee on section 68 of the Act, has not applied section 68 of the Act for the addition. The provisions of section 68 specified the authority mentioned as "Assessing Officer". The CIT(A) is not assessing officer so he cannot step into the satisfaction of AO for making the addition when the ld AO has satisfied about the ingredients of section 68 of Income Tax Act. Hon'ble ITAT Delhi Bench in the case of SH. SHAMSHER SINGH GILL C/O S.K. MONGA & ASSOCIATES Versus ITO, WARD-2, HARIDWAR ITA No 2987/Del/2015 order dated 28/02/2017. It was further stated by ld AR that the assessee has submitted ample documents to prove identity, creditworthiness....
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....2-13) 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 following appellant companies, notices u/s 133(6) issued remained un-complied or not complied, but their identity and creditworthiness is further proved from registration of charge under Companies Act Name of assessee company Name of investor company Amount of Share application received Motisons Global Pvt. Ltd (AY 2009-10) Nawab Vyapar Pvt Ltd 50,00,000 Motisons Buildtech Pvt. Ltd (AY 2009-10) Arcade Dealcom Pvt. Ltd 30,00,000 Motisons Buildtech Pvt. Ltd (AY 2009-10) Puja Tie Up Pvt. Ltd 50,00,000 Motisons Entertainment (I) Pvt. Ltd (AY 2011-12) Puja Tie Up Pvt. Ltd 15,00,000 Godawari Estates Pvt. Ltd (AY 2010-11) Snowfall Commercial Pvt. Ltd 25,00,000 Bholenath Real Estates Pvt Ltd (AY 2009-10) Arcade Dealcom Pvt. Ltd 20,00,000 Rainbow Buildcon Pvt Ltd (AY 2009-10) Matribhumi Dealers Pvt Ltd 25,00,000 Rainbow Buildcon Pvt Ltd (AY 2009-10) Puja Tie Up Pvt Ltd 40,00,000 Rainbow Buildcon Pvt Ltd (AY 2009-10) Narottama Trade & Yyapaar Pvt Ltd 15,00,000 Total ....
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....sp; Regent Barter Pvt. Ltd 1,60,27,500 Total 3,68,27,500 14 Shivansh Buildcon Pvt. Ltd 2012-13 Evershine Suppliers Pvt. Ltd 90,00,000 Total 90,00,000 Total Additions 58,70,57,300   2.1.4.4 As regard Seized documents [party-1/Exhibit AS-3/Pge21], Sh Vijay Goyal, the Ld AR of the assessee has further clarified that FMV and maximum appreciation written 250/- and shares were also allotted for Rs. 250/- in that period. It is pertinent to also note that there is no Incriminating noting to show that share capital was acquired against the unaccounted cash of assessee group. As regard Tally accounts, the ld AR of assessee has explained that the tally accounts of six companies (assessed by same AO for AY 2013-14) were found in Pen drive of accountant Shri Banwari lal Yogi found and seized from residence of Chhabra Brothers. Same were received for reconciliation purpose. Since the up to date accounts were not there in Tally and missing supporting bills and vouchers from the searched premise clearly indicates that assessee group was not maintaining the books of account of shareholder c....
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....e subscriber to the sharecapital 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 ITR (AT) 1 Jodhpur.'' 2.6 Adverting, the facts of the given case, we are of the considered opinion that all the share applicants stand identified. The assessee has provided PANs of the share applicants. The mode of payment has also been made explained. There is no direct or indirect relation between the assessee company and the share applicants. The statements recorded during survey has got no evidentiary value and the law is very much settled on thi....
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....1 at the instance of the assessee, did not pursue the matter further. The Revenue did not examine the source of income of the said alleged creditors to find out whether they were credit-worthy or were such who could advance the alleged loans. There was no effort made to pursue the so-called alleged creditors. In those circumstances, the assessee could not do any thing further. In the premises, if the Tribunal came to the conclusion that the assessee has discharged the burden that lay on him, then it could not be said that such a conclusion was unreasonable or perverse or based on no evidence. If the conclusion is based on some evidence on which a conclusion could be arrived at, no question of law as such arises." 12. In the case of CIT v. Chandra Prakash Rana [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 w....
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....on offered by assessee and then accepted the explanation by placing reliance on the documents filed by assessee. As a consequence thereof, the additions made by AO came to be deleted." 13. In CIT v. Shree Barkha Synthetics Ltd. [2004] 270 ITR 477 (Raj.), in a similar nature matter, this Court observed that the Tribunal having found that the companies from which the share application money had been received by the assessee-company were genuinely existing and the identity of the individual investors were also established and they had confirmed the fact of making investment, the finding that assessee had discharged initial burden and addition under Section 68 could not be sustained, was essentially a finding of fact. This Court 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 ....
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....avour of leading banks for crores of rupees. 2.1.4.6 Therefore, in view of the findings of Hon'ble jurisdictional High Court, the identity, creditworthiness and genuineness of transaction of these companies cannot be held as doubtful and addition by applying the provisions of section 68 of the Act cannot be upheld. However, it is also to be seen that the Investigation Directorate has carried out investigation for deposit of cash/DD at fourth stage of channel source in some cases. The Chart showing cash deposit/DD deposit at 4th Channel as per inquiries made by Investigation wing is as under: Company A.Y. Amount From Company Cash deposit /Demand draft at 4th Channel per inquiry by investigation wing Motisons Buildtech P Ltd 2012-2013 15,00,000 Evershine Suppliers P Ltd Swastik Traders Motisons Buildtech P Ltd 2012-2013 20,00,000 Alliance Trade com P Ltd Swastik Traders and Global Securities Motisons Buildtech P Ltd 2012-2013 17,00,000 Alliance Trade com P Ltd Swastik Traders Motisons Buildtech P Ltd 2012-2013 30,00,000 Alliance Trade com P Ltd Swastik Traders Total 82,00,000 &....
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....s Motisons Global P Ltd 2012-2013 9,00,000 Regent Dealers P Ltd Nibu Nagi Motisons Global P Ltd 2012-2013 18,00,000 Regent Dealers P Ltd Durga Enterprises Motisons Global P Ltd 2012-2013 9,00,000 Regent Dealers P Ltd Kevihulie Sinotsu Motisons Global Private Limited 2012-2013 28,50,000 Regent Dealers P Ltd Durga Enterprises and Shyam Fashion Motisons Global Private Limited 2012-2013 18,50,000 Regent Dealers P Ltd Shyam Fashion Motisons Global Private Limited 2012-2013 22,00,000 Alliance Tradecom P Ltd PNB, Axis Bank Siliguri, Swastik Traders an Global Securities Motisons Global Private Limited 2012-2013 10,00,000 Alliance Tradecom P Ltd Swastik Traders Motisons Global Private Limited 2012-2013 35,00,000 Alliance Tradecom P Ltd M/s Swastik Traders , Global Securities Axis Bank Siliguri, Motisons Global Private Limited 2012-2013 20,00,000 Alliance Tradecom P Ltd Swastik Traders and Global Securities Motisons Global Private Limited 2012-2013 20,00,000 Alliance Tradecom P Ltd Swastik Traders and Global Securities Motisons Global Private Limited 2012-2013 ....
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....,00,000 --------------- 3,40,00,000 Motisons Entertainment (I) Pvt. Ltd 766/14-15 2011-12 1,95,00,000 ---------------- 1,95,00,000 Motisons Entertainment (I) Pvt. Ltd 756/14-15 2012-13 7,78,00,000 1,41,50,000 6,36,50,000 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 Total additions 94,14,07,100 8,71,97,727 85,42,09,373 It is pertinent to mention here that M/s Mayukh Vinimay Pvt Ltd received share application of Rs. 10,54,95,000/- in AY 2009-10 which was added as income of M/s Mayukh Vinimay Pvt Ltd in AY....
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....ons of Section 56(1) the Act can be invoked to tax income of every kind which is not chargeable to tax under any head specified in Section 14 from Item No. A to E is chargeable under the head 'Income from other sources'' by the provisions of section 56 of the Act. . Therefore, provisions of sec 56(1) are not applicable. Further the amended provisions of sec 56 (2) of the I.T. Act, 1961 specify the various income to be assessed under this section. The premium on shares has been included by provision of sec 56(2)(viiib)of the Act w.e.f. 01-042014 which is reproduced as under: ''56(2) In particular, and without prejudice to the generality of the provisions of sub-section (1), the following incomes, shall be chargeable to income tax under the head ''Income from other sources'' namely:- (i) dividends (ia) to (viia)... (viib) Where a company, not being a company in which the public are substantially interested, receives, in any previous year, from any person being a resident, any consideration for issue of shares that exceeds the face value of such shares, the aggregate consideration received for such shares as exceeds the fair market va....
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....ake effect from 1st April, 2013 and will, accordingly, apply in relation to the assessment year 2013-14 and subsequent assessment years.'' The provisions of sec 56(2)(viib) of Income-tax Act, 1961 are applicable w.e.f. 1st April, 2013 and will accordingly apply in relation to Assessment Year 2013-14 and subsequent Assessment Years. The income as mentioned in section 56(2)(viib) is included in definition of section 2(24) of the Act w.e.f. 01-04-2013. Therefore, the provisions of these sections cannot be made applicable prior to that A.Y. 2013-14. It is pertinent to note that the ld. CIT(A) had issued the show cause notice to the assessee to tax the share capital under section 68 of the I.T. Act, 1961 as against section 56(1) applied by the AO. However, he had not made any addition under section 68 of the Act. His observation on this issue is in para 2.1.4.6 which reads as under:- ''2.1.4.6 Therefore, in view of the findings of Hon'ble Jurisdictional High Court, the identity, creditworthiness 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 up....
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....f the case as well as case laws. While passing the assessment orders, AO has disallowed entire expenses of Rs. 24,20,479/- & Rs. 41,26,273/- 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....
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....ther amenities and received composite rent of Rs. 18,00,000/- The discount was of Rs. 19,006/- 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 3, 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 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 the same is duly allowable out of income of the year. f) The Administrative expenses debited in P&L was in relation to income earned during the year or other day to 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 o....
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....1 Now we take up the cross appeals for the Assessment Year 2012-13 raising the grounds of appeal by the assessee and Revenue. ITA No.385/JP/2017 - A.Y. 2012-13 (Assessee) 1. On the facts and in the circumstances of the case and in law the ld. CIT (A) erred in: - a) confirming the addition of Rs. 82,00,000/- out of total addition of Rs. 3,68,27,500/- made by ld. AO treating the following amount received by the assessee against share capital and premium from companies mentioned as under as income of the assessee. Date Amount From Company Cash deposit /Demand draft at 4th Channel as per inquiry by investigation wing 02.08.2011 1500000 Evershine Suppliers Private Limited Swastik Traders 25.07.2011 2000000 Alliance Tradecom Private Limited Swastik Traders and Global Securities 26.07.2011 1700000 Alliance Tradecom Private Limited Swastik 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 partie....
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....ere not required to put on blinkers while looking at the documents produced before them. They were not entitled to look into the surrounding circumstances to find out the reality of the recitals made in those documents. 25. In the above back ground of the facts and circumstances surrounding this case, it is hereby held that the receipt of share capital and share premium was part of a colourful transaction by way of which a sum of Rs. 3,68,27,500/- was introduced into the books of the assessee company in the form of share premium attached to the share capital. As discussion above, the premium of Rs. 1240/- per share was not justified at all on the basis of absolutely no assets commensurate to premium charged, no business activity, no income, no net worth nor any promise for creation of this much assets, business 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....
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....73 In view of the above facts and circumstances of the case as discussed above, addition of Rs. 2,86,27,500/- made on a/c of bogus share capital in the hands of M/s. Motisons Buildtech Pvt. Ltd is hereby deleted. Assessee gets relief in Gr No. 2 & 3.'' 7.3 During the course of hearing, the ld. DR relied on the order of the AO and submitted that the order of the ld. CIT(A) should be set aside on the issue in question. 7.4 On the other hand, the ld.AR of the assessee submitted that the facts and circumstances of the issue raised in the departmental appeal for the AY 2012-13 under ground No 1 are exactly 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,....
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....0 Motisons Global Pvt Ltd 767/14-15 2012-13 42,07,29,600 5,94,47,727 36,12,81,873 Motisons Global Pvt Ltd 755/14-15 2013-14 4,41,00,000 50,50,000 3,90,50,000 Motisons Entertainment(I) Pvt. Ltd 760/14-15 2009-10 3,40,00,000 - 3,40,00,000 Motisons Entertainment (I) Pvt. Ltd 766/14-15 2011-12 1,95,00,000 - 1,95,00,000 Motisons Entertainment (I) Pvt. Ltd 756/14-15 2012-13 7,78,00,000 1,41,50,000 6,36,50,000 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 &....
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....company and such funds were more than the amount of share application. Ld CIT(A) satisfied about the ingredients of section 68 of I.Tax Act however, he sustained the addition of Rs. 82,00,000/- on account of cash/DD deposited at 4th channel stage as under:- Date Amount From Company Cash deposit /Demand draft at 4th Channel as per inquiry by investigation wing 02.08.2011 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 ma....
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....ion that the additions of share capital cannot be made u/s 68 but it should have been made u/s 56(1) of Income Tax Act, 1961 then the jurisdiction of CIT (A) in limited to deciding the matter whether the addition under this section is correct or not. In the appellate proceeding 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....
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....rge amount. The above chart shows that the investor companies were having their own independent funds and having their independent source to invest in the shares of the 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 fou....
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....ugh 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 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....
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....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. 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 PB....
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.... 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 act honestly on the material before him and not vindictively, capriciously, or arbitrarily- Gurumuk....
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....sessee. 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 claimed by it and if the investigation done by the department leads to doubt regarding the genuineness of the transactions, it is incumbent on the ....
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.... 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, the Hon'ble Supreme Court in the case of Dhakeswari Cotton Mills Ltd. v. CIT (1954) 26 ITR 775 (SC) has held that "The rule of law on this subject has been fairly a....
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....urpose 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 assessee. It will, therefore, be seen that, even if we assume that this letter was in fact addressed by the manager of the bank to the ITO, no reliance could be placed upon it, sinc....
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....nk 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 of 68 of Income Tax Act, 1961. (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) (PB pg 144 to 149/Case....
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....enue) 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 in this case, then in such event, a concurrent finding recorded 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 a....
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.... 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 to 156/Case Laws) Substantial question of law-Cash credit vis-a-vis share application money-Tribunal found that 6 out of 7 companies from which the share application money had been received were genuinely existing and no enquiry was conducted in respect of the source of share application money at the time of making the investme....
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....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 established and he confirms the loans. (xii) CIT Vs Heera Lal Chagan Lal Tank (2002) 157 ITR 281 (Raj) (PB pg 201 to 202/Case Laws) Burden of the assessee stands discharged when the identity of the creditors is established and he confirms the loans. b) ITAT Jaipur/Jodhpur i) Shalimar Buildcon (P) Ltd. vs ITO (2011) 128 ITD 0396 (Jaipur) (PB pg 214 t....
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....ceed 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 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, but it cannot be regarded as undisclosed income of assessee company." 28.6 The Hon'ble Delhi High Court in the case of CIT vs. Divine Leasing & Finance Ltd. (supra) had an occasion to consider the addition on account of share application ....
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....IOL-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 without bringing on record any material for the addition. Simply on the basis of information which is not substantiated in the course of assessment proceedings against the assessee, the AO could not have added the amount. (ii) The Honb'le ITAT, Jaipur Bench, Jaipur in its judgment the case of M/s Jadau Jewellers & Manufacturers Pvt. Ltd., B-1, Trimutri Circle, Govind Marg, Jaipur in ITA No. 686/JP/2014 dated 14.12.2015 (PB pg 239 to 267/Case Laws) gave the following findings:- ".6.1 On ....
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....den 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 in the course of assessment of the assessee-Having regard to the information collected by the AO from the banks, identity of the shareholders was fully established-If any shareholder is found to have made unexplained investment, then addition of such investment is required to be made in the hands of the shareholder and not in the account of the assessee- U had invested in the share capital through cheque except for a small sum which was returned to her-Her bank account shows several entries, both credit and debit, which....
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....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 ITR (AT) 1 Jodhpur.'' 2.6 Adverting, the facts of the given case, we are of the considered opinion that all the share applicants stand identified. The assessee has provided PANs of the share applicants. The mode of payment has also been made explained. There is no direct or indirect relation between the assessee company and the share applicants. The statements recorded during survey has got no evidentiary value and the law is very much settled on this issue. In any case, even under the provisions of Section 68 of the Act, the assessee cannot be forced to prove the source of the source. The ....
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....f 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 forms, share transfer register, etc. it would constitute acceptable proof or explanation by the assessee-Department would not be justified in drawing an adverse inference only because the creditor/subscriber fails or neglects to respond to its notices-Tribunal has noted that the assessee-company is a public limited company which had received subscriptions to the public issue through banking channels and the shares were allotted in consonance with the provisions of Securities Contract (Regulation) Act, 1956, as also the rules and regulations of Delhi Stock Exchange-Complete details were furnished- Tribunal has further found that the AO has not brought any positiv....
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....ing 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 OFFICER vs. MS. SUPERLINE CONSTRUCTION P. LTD. ITAT, BOMBAY TRIBUNAL (A) ITA No. 3644 TO 3648, 3650, 3651Mum/2014 30th November, 2015 (2015) 45 CCH 0281 Mum Trib. (PB pg 376 to 392/Case Laws) Addition-Addition on account of bogus share application money-Assessee was in business of builder and developer-Assessment was completed u/s 143(3) r.w.s. 147-Re-assessment proceedings were initiated on basis of information received from Directorate of Income-tax (Investigation) without recording AO'S own satisfaction and information was accepted in mechanical manner-After reopening of assessment u/s 147, AO made addition of Rs. 40 lakhs received by assessee from various corporate entities- Addition was made ....
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....entary 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 discussed above on the similar issue, ITAT was not inclined to interfere with the findings of the CIT(A) who had rightly deleted the entire impugned additions of Rs. 40 lakhs made by the Assessing Officer u/s 68 of the Act on account of share capital subscription received by the assessee-company. (para 2.5) Conclusion: When Assessee-company had substantiated details with documentary evidences as extracted from website of Ministry of Corporate Affairs, Government of India before AO, then additions made by AO u/s 68 on account of share capital subscription received by assessee-company was rightly deleted. (iii) Meera Engineering & Commercial Co. (P) Ltd. vs. Asstt. CIT (1997) 58 TTJ (Jab) 527 (PB pg 393 to 399/Case Laws) ....
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.... 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 brought on record. (e) Supreme Court i) CIT vs. Lovely Exports (P) Ltd. (2008) 216 CTR (SC) 195 Income-Cash credit-Share application money-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, but it cannot be regarded as undisclosed income of assessee company. ii) CIT vs. Steller Investment Ltd. (200) 251 ITR 263 (SC) Even if the subscribers to the increased share capital of assessee-company were not genuine, the amount could not be regarded as undisclosed income of the assessee-company. (iii) CIT Vs Orissa Corporation (P) Ltd (1986) 159 ITR 79 (SC) D) Ratio L....
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....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 Act is as under:- ''Where any sum is found credited in the books of an assessee maintained for any previous year, and the assessee offers no explanation about the nature and source thereof or the explanation offered by him is not, in the opinion of the [Assessing] Officer, satisfactory, the sum so credited may be charged to income-tax as the income of the assessee of that previous year.' From the above definition, it is noted that Section 68 of the Act does not empower the ld. CIT(A) to make addition under this Act. Thus the addition u/s 68 can only be made by the Assessing Officer. The definition of the Assessing Officer has been provided in Section 2(7A) of the Act which reads as under:- [(7A) "Assessing Officer" means the Assistant Commissioner [or Deputy Commissioner] [or Assistant Director] [or Deputy Director] or the Income-tax Officer who is vested with....
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....t 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 creditworthiness the amount advanced as loan to the assessee by the creditor shall have to be read as corollary as the income from undisclosed source of the assessee himself. (iii) In the case of Shankar Industries vs CIT (1978) 114 ITR 689 (Cal.): Observed that that mere establishing identity of the creditor and nothing more is not sufficient and something more is to be proved by the assessee and in the aforesaid case, the assessee was unable to prove beyond identity and, therefore, the Calcutta High Court upheld the findings of the Tribunal. However, in the present case, we notice that not only the identity of the creditor has been proved but from the facts which have been culled out, the assessee has been able to prove the genuineness also. (iv) In the case of Kanhailal Jangid vs ACIT (2008) 217 CTR 354 (Raj): Held that the burden does not go beyond to put the assessee under an obligation....
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....oceeding 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. 19,08,447/-. The AO keeping in view of the fact that the assessee has not started its business activities the interest income is to be taxed as income from other sources and the expenses claimed by the assessee should be capitalized for which the AO made the addition of Rs. 19,08,375/- relying on the decision of Hon'ble Supreme Court in the case of Tuticorin Alkali Chemicals and Fertilizers Pvt Ltd 227 ITR 172. 9.2 In first appeal, the Ld. CIT(A) has confirmed the action of the AO by observing as under:- ''3.3.2 I have duly considered assessee's submission and carefully gone through assessment order. I have also taken a note of factual matrix of the case as well as applicable case laws relied upon. It is noticed that the assessee had not started its business activities for the year under consideration and the assessee has claimed that that it has received interest income of Rs. 19,08,447/- against the same....
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....l 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 the same is duly allowable out of income of the year. f) The Administrative expenses debited in P&L was in relation to income earned during the year or other day to 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. I....
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....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 respectively cannot be sustained, accordingly AO is directed to delete them. Assessee gets relief in Gr ....
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....ively. 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 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 exp....