TaxTMI 
TaxTMI 
2019 (4) TMI 557
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....company has filed its return of income on 26.09.2013 declaring total income of Rs. 15,99,640/-. The assessee's case was selected for scrutiny under section 143(3) of the Income Tax Act. During the course of assessment proceedings, on verification of the Balance Sheet of the Assessee Company, it was noticed by the assessing officer that the Assessee company has received share application money to the tune of 8,74,97,500/- against which shares were allotted in the assessment year 2013-14, consisting of 87,49,750 shares of face value Rs. 10/- issued at a premium of Rs. 10/- per share. That is, share premium amounting to Rs. 8,74,97,500/- was also received during the assessment year 2013-14. During the assessment proceedings, the assessee furnished before the assessing officer the copies of final accounts including Balance Sheet and profit and loss account, Income Tax return acknowledgement and bank statement for the relevant period evidencing the amount received from share applicants on account of Share capital and premium. The assessing officer verified the details furnished by the assessee company and noted that the assessee has claimed to have received share application money and s....
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.... Group Companies manage by our families members and I am shareholders of both the companies. 3. Please produce List of Directors of M/s. C.P. Re-Rollers Ltd. Ans : S. No. Name Address PAN 1 KUMAR CHAND CHAWLA AC-43, ABINDRANATH BITHI, CITI CENTRE, DURGAPUR 713216 ACTPC 5780A 2 DILIP CHAWLA AC-26,ABINDRANATH BITHI, CITI CENTRE, DURGAPUR 713216 ACTPC 577F 3 AMIT CHAWLA AC-26,ABINDRANATH BITHI, CITI CENTRE, DURGAPUR 713216 ACCPC6493P 4 SHANKAR CHAWLA AC-43,ABINDRANATH BITHI, CITI CENTRE, DURGAPUR 713216 AIAPC0624L 4. Please state about your family's members in details. Ans: My families consist of myself and Elder Brother Shri Mohan Chawla, Nephew Mr.Dilip Chawla and Mr. Amit Chawla ,Son- Shri Shankar Chawla. 5. Please state the name of companies in which your family members are associated with. Ans: Our family business are. * M/s C P Re- Rollers Ltd. * M/s TarakNath Sales Agencies Pvt. Ltd. * M/s Gourav Enterprises Pvt. Ltd. * M/s C P Steel Pvt. Ltd. * M/s Gannet Vintrade Pvt. Ltd. * M/s HavenVimcom Pvt. Ltd. * M/s ....
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....ed that both the Directors, Sri Mohan Chawla and Sri Kumar Chand Chawla admitted in three share applicant companies on following dates: M/s PRISM VINTRADE PRIVATE LIMITED Date of admission on 20 November 2012 M/s GANNET VINTRADE PRIVATE LIMITED Date of admission on 19 November 2012 M/s HAVEN VINCOM PRIVATE LIMITED Date of admission on 21 November 2012 All the share application money and share premium money were received by the assessee company from the aforesaid three share applicant companies during the period December, 2012 to March, 2013 i.e. after admission of Sri Mohan Chawla and Sri Kumar Chand Chawla in the three share applicant companies. The AO was of the view that all the three share applicant companies invested in shares of paper companies after raising capital through share application money and share premium money from other paper companies during the F.Y. 2009-10. Share application money and share premium money raised from paper companies were disallowed u/s 263/147/143(3) in the A.Y. 2010-11 by the respective assessing officer, ITO, Ward-2(3) and 2(2), Durgapur, the details of which are given below: Names of share applicant companies ....
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....gement again decided to invest all collected money ( of sold share) to our group of company in same year, because it will be much safer and reliable to monitor our invested amount in tune of purchase M/s C.P. Re- Rollers Ltd, shares with premium. 8. However, the assessing officer rejected the contention of the assessee company and observed the followings: (a) Three share applicant companies (M/s. Prism Vintrade Private Limited, M/s. Gannet- Vintrade Private Limited, and M/s. Haven Vincom Pvt. Ltd ), are raising money through share application and share premium and in case of two share applicant companies viz: M/s. Prism Vintrade Private Limited, M/s. Gannet-Vintrade Private Limited, such share application money and share premium received were treated as its own money and disallowed u/s 68 resulting in huge demand (as already discussed). This had been used to purchase unquoted shares of paper companies at huge price which again sold to paper companies and sale proceeds invested in assessee company. (b). i) No agreement of such sales of unquoted shares, ii) No contract note/ no other corroborative evidence for such sale of unquoted share at cost price to companie....
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....therefore these three share applicant companies did not have creditworthiness. The AO also noted that for remaining shareholder of Sushma Chawala for share application of Rs. 4,22,500/- and share premium of Rs. 4,22,500/-, the assessee has not furnished required details. Therefore, the assessing officer concluded that assessee company has failed to prove, identity of share applicants, genuineness of transaction and creditworthiness of share applicants as per the provisions of section 68 of the Act, and noted that the amount of Rs. 17,49,95,000/- claimed to have been received as share application money and share premium is treated as Assessee's own unaccounted income introduced in its business in the disguise of share application and share premium money, hence he made addition to the tune of Rs. 17,49,95,000/-. 10. Aggrieved by the addition made by the assessing officer, the assessee carried the matter in appeal before the ld CIT(A), who has confirmed the addition made by the assessing officer. Aggrieved, the assessee is in appeal before us. 11. Ld Counsel, Shri J.P.khaitan, begins by pointing out that assessee furnished before the assessing officer the copy of Balance Shee....
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....ee company therefore no disallowance is required in this case also as the department accepted the share capital and share premium as genuine. Therefore, addition made in the hands of assessee company should be deleted. Shri J.P.khaitan also submitted before the Bench that assessee company's shares are not listed in any stock exchange therefore it is not necessary to issue contract notes at the time of issue of shares. The concept of contract notes do not apply in case of these three share applicant companies also, that is, M/s. Prism Vintrade Private Limited, M/s. Gannet-Vintrade Private Limited, and M/s. Haven Vincom Pvt. Ltd. Therefore, the argument of the AO during the assessment stage that assessee company failed to furnish the contract notes is baseless. 13. On the other hand, Ld DR for the Revenue submitted before us that it is well settled principal of law as declared by the Hon'ble Supreme Court in the case of Sumati Dayal Vs CIT, (214 ITR 801) that the true nature of transactions have to be ascertained in the light of the Surroundings circumstances. The findings emanating from the investigation carried out reveal that the circumstances surroundings the transactio....
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....en introduced into the taxing enactments step by step in order to plug loopholes. Even long prior to the introduction of section 68 of the Act, in the statute book, courts had held that where any amounts were found credited in the books of the assessee in the previous year and the assessee offered no explanation about the nature and source thereof or the explanation offered was, in the opinion of the assessing officer, is not satisfactory, the sums so credited could be charged to income-tax as income of the assessee of the relevant assessment year. We note that with effect from assessment year 2013-14, section 68 of the Income Tax Act has been amended to provide that if a closely held company fails to explain the source of share capital, share premium or share application money received by it to the satisfaction of the assessing officer, the same shall be deemed to be the income of the company under section 68 of the Act. With this background, now we shall proceed to examine in the assessee's case under consideration, whether assessee has discharged his onus to prove, prima facie, the identity, creditworthiness and genuineness of the share capital and share premium received b....
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.... 4) Details of investments sold by all share applicant companies. 5).Transaction with the assessee was duly highlighted in the bank statement 6). Explanation along with evidence of source of source of the funds of the share applicant Companies. 7). Audited Accounts of the share holders. 8) Relevant address proofs / Form filed by the share applicants with ROC. 9). Income Tax Return of share applicant companies. 10) Copy of the Bank Statement of Share applicant companies where from the amount was debited. 11) Copies of Bank statement of the assessee company where the share application money and premium were credited. 12). Cheque Number, the amounts subscribed by shareholders along with the name of bank its branch address and the number of shares allotted to them with face value on the date of allotment. 13) Common Director of these three share applicant companies ( who is director in assessee company as well as director in share applicant companies) appeared before the assessing officer in response to notice u/s 131 of the Income Tax Act and submitted documents and evidences before the AO. With help....
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....hares of paper companies at huge price which again sold to paper companies and sale proceeds invested in assessee company. (2). No agreement of such sales of unquoted shares, ii) No contract note/ no other corroborative evidence for such sale of unquoted share at cost price to companies which have no business relation either with the assessee company or with the three share applicant companies could be produced by Sri Kumar Chand Chawla, common Director of aforesaid three share applicant companies and assessee company. Therefore, creditworthiness of the three share applicant companies in which, Sri Mohan Chawla and Sri Kumar Chand Chawla (Directors of assessee company) are common directors, could not be substantiated. (3). These three share applicant companies (M/s. Prism Vintrade Private Limited, M/s. Gannet- Vintrade Private Limited, and M/s. Haven Vincom Pvt. Ltd ), do not have business activities, no Fixed assets as evident from the Audited Statement of accounts of these companies. 18. Sr. Counsel Mr. J.P. Khaitan, submitted before us about the first reason of assessing officer for making the disallowance under section 68 of the Act. He stated that the shar....
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.... assessee company. Hence, ld Counsel submitted that Rs. 4,92,50,000/-, belongs to share applicant of M/s Gannet Vintrade Private Limited and Rs. 5,96,00,000/- belongs to share applicant M/s Prism Vintrade Pvt, both aggregating Rs. 10,88,50,000/- (Rs. 4,92,50,000+ Rs. 5,96,00,000) should be treated as explained in terms of identity, creditworthiness and genuineness. For that ld Counsel relied on the Judgment of Coordinate Bench of ITAT in the case of M/s Maa Amba Towers, ITA No.1381/Kol/2015, for A.Y.2012-13, order dated 12.10.2018, wherein it was held as follows: "3.Mr. Choudhury vehemently contends during the course of hearing that the Assessing Officer had rightly made the impugned addition since the taxpayer had failed to prove identity, genuineness and creditworthiness of the share premium money. He terms the impugned share subscription premium Rs.690/- per share having face value of Rs.10/- each as highly exorbitant. Case laws Sumati Dayal vs. CIT (1995) 214 ITR 801 (SC) and CIT vs. Durga Prasad More (1971) 82 ITR 540 (SC) is further quoted during the course of hearing that the relevant evidence submitted during the course of assessment has to be considered as per the....
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....ness and genuineness. 20. In the case of third company, M/s Haven Vincom Pvt. Ltd, the assessment, pertaining to the AY. 2010-11 was not revised by the Department. That is, M/s Haven Vincom Pvt. Ltd has raised share capital and share premium which has not been treated by the Department as cash credit under section 68 of the Act and has not been disallowed by the assessing officer in the assessment of M/s Haven Vincom Pvt. Ltd ( vide assessment order-paper book pg.173) . We note that M/s Haven Vincom Pvt. Ltd has utilized the same money ( which it received by raising share capital/premium and not disallowed by AO U/s 68) to purchase the share capital and share premium in the assessee company (M/s C.P. RE Rollers Ltd) therefore it should not be disallowed under section 68 of the Act, in the hands of the assessee company, as the Department itself accepted genuine money. Hence, in the case of M/s Haven Vincom Pvt. Ltd, the identity, creditworthiness and genuineness have been proved beyond doubt about Rs. 6,53,00,000/-. 21.In case of Sushma Chawala for share application of Rs. 4,22,500/- and share premium of Rs. Rs. 4,22,500/-, the ld Counsel explained the identity, creditworthine....
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.... dated 15.03.2015, under section 263/147/143(3) of the Act, therefore their share capital and share premium have been already suffered tax. Thus, the share capital and share premium of the investor companies have been treated as its money/income. Since these companies subsequently invested their own money by selling their investments in the assessee company ( C.P.Re-Rollers Ltd) therefore, in the hands of assessee company ( C.P.Re-Rollers Ltd), the genuineness, identity and creditworthiness of the amount should be treated to be explained. We also note that these companies did not have any source to invest the money in the assessee company C.P. Re Rollers Ltd, except, the money which had been disallowed by the Assessing Officer u/s 68 of the Act. Therefore, since the money has been disallowed u/s 68 and the Assessing Officer has imposed the tax, hence it becomes the investors money. In the case of M/s Haven Vintrade Pvt. Ltd., we note that the Assessing Officer has not disallowed the amount u/s 68 of the Act, it is accepted by the Department as a genuine and hence the identity, creditworthiness and genuineness has been proved beyond doubt. Hence, once taxed money should not be ta....
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....ble in the paper book of the assessee. i)Gannet Vintrade Pvt. Ltd. : This company invested a sum of Rs. 4,92,50,000/- in the assessee company (vide PB-4). This company duly filed its return of income before Assessing Officer having PAN no. AADCG 4706 H. The share application was made by account payee cheque. This company was having paid up capital with free reserve to the tune of Rs. 6,15,24,186/- (Rs.13,29,000 + Rs. 6,01,95,186). The copy of the bank statement of the company is duly available in the paper book. On examination of the bank statement it will be seen that there is no deposit of cash prior to issue of cheque to the assessee company (C.P. Re-Rollers Pvt. Ltd.). The copy of the assessment order u/s 263 / 147 / 143(3) of the Act, for assessment year 2010-11 is available in the paper book page 134. The assessing officer made disallowance U/s 68 at Rs. 6,01,21,000/-. The details of source of funds from which this company had made the share application are also available in the paper book. One of the common directors of the assessee company himself presented before the Assessing Officer in response to the summons u/s 131 of the Act. ( vide PB-107) and the director has ....
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....serve of Rs. 6,28,24,424/- (Rs. 13,55,000 + 6,14,69,424). The copy of the bank statement of the company is duly available in the paper book. On examination of the bank statement it will be seen that there is no deposit of cash prior to issue of cheques to the assessee company. The copy of the assessment order u/s 263/143(3) for assessment year 2010-11 is available in the paper book page 149. The details of source of funds from which this company had made the share application are also available in the paper book. The deposition dated 09.03.2016 of Shri Kumar chand Chawla, director is available in the paper book (PB-137 to 139). Reasons for investment sold vide letter dated 11.03.2016 as required by the Assessing Officer is available in the paper book ( vide PB-140) which is given below: "11th March, 2016 To Mr. S K Roy Deputy Commissioner of Income Tax Circle-I, Durgapur City Centre Durgapur - 713216 Subject: Brief of details towards share sold on Cost Price during F.Y. 2012-13 Against Notice: U/s 131 of the IT Act 1961. Dear Sir, As per proceeding of notice u/s 131 of the Income Tax Act, 1961....
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....tion of the bank statement it will be seen that there is no deposit of cash prior to issue of cheques to the assessee company. The copy of the assessment order u/s 147 / 143(3) of the Act, dated 22.03.2013 is available in the paper book. The details of source of funds from which this company has made the share applications are also available in the paper book (vide PB-181 and 182). The reasons for sale of investment as asked by the Assessing Officer is available in the paper book (vide PB-172) which is given below : 11th March, 2016 To Mr. S KRoy Deputy Commissioner of Income Tax Circle-I, Durgapur City Centre Durgapur - 713216 Subject: Brief of details towards share sold on Cost Price during F.Y. 2012-13 Against Notice: U/s 131 of the IT Act. 1961. Dear Sir, As per proceeding of notice u/s 131 of the Income Tax Act, 1961, you had required to know why we are sold our current assets share at cost price to unknown or out of Group Company. So we hereby confirm you that our management and board director decided to sale our all investment in share of Rs. 6,39,96,000 for 10,91,541 shares to....
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..... 2010-11 by the respective assessing officer, ITO, Ward-2(3) and 2(2), Durgapur, therefore, addition under section 68 of the Act had been already made in the hands of the these two Share Applicant Companies, and the amount which had been suffered addition under section 68 of the Act, had been subsequently invested in the assessee company (M/s C.P.RE Rollers Ltd), therefore no addition should be made in the hands of the assessee company under section 68 of the Act, in respect of these two share applicant companies, as it would tantamount to double addition. And even otherwise the source of the investor stands proved to be their income by their Assessing Officer (A.O) 26. To make it more clear, it can be said that the money of these two companies Viz: M/s. Prism Vintrade Private Limited, M/s. Gannet Vintrade Private Limited, had already been taxed as an accounted money under section 68 of the Act in their respective income tax assessments under section 263/147/143(3) of the Act. The assessing officer has himself admitted, this fact, in his assessment order. Thus, we note that all the share application money and share premium money which were received by the assessee company from ....
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....are applicant companies, Mr.Kumar Chand Chawla, appeared before the AO and submitted all the required documents, evidences and details and not only that he explained the reasons to sale the investments in share applicant companies. The Ld. DR thereafter took us through the relevant documents furnished by the assessee company in their Paper book. With regard to the identity of the share subscribers, he submitted that all the share applicants were paper companies and the fact that only one of the Directors of these three share applicant companies attended would not prove the identity. We do not agree with ld DR for the Revenue that all the share applicants were paper companies. We find that stand of the ld DR is contrary to the assessment order of the Investor companies. We already noted in this order that the AO of these Investor companies have, in fact, assessed the share capital and share premium as their income under section 68 of the Act. Therefore, once taxed money can not be taxed again in the hands of assessee company. If this is so, how could these Investor companies be said to be paper companies. 28. On the other hand the Ld Counsel first drew our attention to the ....
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....the transactions were conducted through proper banking channel and that there were no cash deposits in any of the bank account of the share applicants. He also invited our attention to the explanation furnished by each of the share applicants regarding their source of funds. It was thus submitted that the fund flow position of the share applicants and not the profitability was the decisive criteria to examine the creditworthiness of the share applicants. With regard to the genuineness of the transaction, the Ld Counsel pointed out that it was never the AO's case that the assessee did not substantiate the justification for high share premium. 29. Before we adjudicate as to whether the Ld. CIT(A)'s action is right or erroneous, let us look at section 68 of the Act and the judicial precedents on the issue at hand. Section 68 under which, the addition has been made by the AO reads as under: "68. 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 credit....
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....f the identity of the creditor is established and actual receipt of money from such creditor is proved. In case, the Assessing Officer is dissatisfied about the source of cash deposited in the bank accounts of the creditors, the proper course would be to assess such credit in the hands of the creditor (after making due enquiries from such creditor). In arriving at this conclusion, the Hon'ble Court has further stressed the presence of word "may" in section 68. Relevant observations at pages 369 and 370 of this report are reproduced hereunder:- "Merely because summons issued to some of the creditors could not be served or they failed to attend before the Assessing Officer, cannot be a ground to treat the loans taken by the assessee from those creditors as non-genuine in view of the principles laid down by the Supreme Court in the case of Orissa Corporation [1986] 159 ITR 78. In the said decision the Supreme Court has observed that when the assessee furnishes names and addresses of the alleged creditors and the GIR numbers, the burden shifts to the Department to establish the Revenue's case and in order to sustain the addition the Revenue has to pursue the enquiry an....
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....k Evidence Act 1891 which reads as under:- "4. Mode of proof of entries in bankers' books Subject to the provisions of this Act, a certified copy of any entry in a bankers' book shall in all legal proceedings be received as prima facie evidence of the existence of such entry, and shall be admitted as evidence of the matters, transactions and accounts therein recorded in every cases where, and to the same extent as, the original entry itself is now by law admissible, but not further or otherwise." 27. Following the said provisions, the co-ordinate bench of Allahabad Tribunal in the case of Anand PrakashAgarwal reported in 6 DTR (All-Trib) 191 held as under:- "The question that remains to be decided now is whether the subject matter of transfer was the asset belonging to the transferor/donors themselves. There is enough material on record which goes to show that there were various credits in the bank accounts of the donors, prior to the transaction of gifts, which undisputedly belonging to the respective donors themselves, in their own rights. No part of the credits in the said bank' accounts was generated from the appellant and/or from its associates....
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...., we notice nothing in section 68 to show that the scope of the inquiry under section 68 by the Revenue Department shall remain confined to the transactions, which have taken place between the assessee and the creditor nor does the wording of section 68 indicate that section 68 does not authorize the Revenue Department to make inquiry into the source(s) of the credit and/or sub-creditor. The language employed by section 68 cannot be read to impose such limitations on the powers of the Assessing Officer. The logical conclusion, therefore, has to be, and we hold that an inquiry under section 68 need not necessarily be kept confined by the Assessing Officer within the transactions, which took place between the assessee and his creditor, but that the same may be extended to the transactions, which have taken place between the creditor and his sub-creditor. Thus, while the Assessing Officer is under section 68, free to look into the source(s) of the creditor and/or of the subcreditor, the burden on the assessee under section 68 is definitely limited. This limit has been imposed by section 106 of the Evidence Act which reads as follows: "Burden of proving fact especially within ....
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....e taken place between the assessee and the creditor, and it is not the business of the assessee to find out the source of money of his creditor or of the genuineness of the transactions, which took between the creditor and sub-creditor and/or creditworthiness of the sub- creditors, for, these aspects may not be within the special knowledge of the assessee. " ********** " ... If a creditor has, by any undisclosed source, a particular amount of money in the bank, there is no limitation under the law on the part of the assessee to obtain such amount of money or part thereof from the creditor, by way of cheque in the form of loan and in such a case, if the creditor fails to satisfy as to how he had actually received the said amount and happened to keep the same in the bank, the said amount cannot be treated as income of the assessee from undisclosed source. In other words, the genuineness as well as the creditworthiness of a creditor have to be adjudged vis-a-vis the transactions, which he has with the assessee. The reason why we have formed the opinion that it is not the business of the assessee to find out the actual source or sources from where the creditor has acc....
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.... the creditors to show that their sub-creditors had creditworthiness to advance the said loan amounts to the assessee, such failure, as a corollary, could not have been and ought not to have been, under the law, treated as the income from the undisclosed sources of the assessee himself, when there was neither direct nor circumstantial evidence on record that the said loan amounts actually belonged to, or were owned by, the assessee. Viewed from this angle, we have no hesitation in holding that in the case at hand, the Assessing Officer had failed to show that the amounts, which had come to the hands of the creditors from the hands of the sub-creditors, had actually been received by the sub-creditors from the assessee. In the absence of any such evidence on record, the Assessing Officer could not have treated the said amounts as income derived by the appellant from undisclosed sources. The learned Tribunal seriously fell into error in treating the said amounts as income derived by the appellant from. undisclosed sources merely on the failure of the subcreditors to prove their creditworthiness." 33. In the case of CIT Vs. Jalan Hard Coke Ltd (95 taxmann.com 330), the Hon'ble Rajas....
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....ld not negate the case of the Assessee. The judgment in case of Gagandeep Infrastructure (P.) Ltd. (supra) would be applicable in the facts and circumstances of the present case" 35. Further, in the case of CIT v. S. Kamaljeet Singh [2005] 147 Taxman 18(All.) their lordships, on the issue of discharge of assessee's onus in relation to a cash credit appearing in his books of account, has observed and held as under:- "4. The Tribunal has recorded a finding that the assessee has discharged the onus which was on him to explain the nature and source of cash credit in question. The assessee discharged the onus by placing (i) confirmation letters of the cash creditors; (ii) their affidavits; (iii) their full addresses and GIR numbers and permanent account numbers. It has found that the assessee's burden stood discharged and so, no addition to his total income on account of cash credit was called for. In view of this finding, we find that the Tribunal was right in reversing the order of the AA C, setting aside the assessment order." 36. Further the jurisdictional Calcutta High Court in the case of S.K. Bothra& Sons, HUF v. Income-tax Officer, Ward- 46(3), Kolkata (34....
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....gment of the Commissioner of Income-tax (Appeals) and to ignore the other portion of the same. The judicial propriety and fairness demands that the entire judgment both favourable and unfavourable should have been considered. By not doing so the Tribunal committed grave error in law in upsetting the judgment in the order of the Commissioner of Income-tax (Appeals). 9. In this connection he has drawn our attention to a decision of the Supreme Court in the case of UdhavdasKewalram v. CIT [19671 66 ITR 462. In this judgment it is noticed that the Supreme Court as proposition of law held that the Tribunal must In deciding an appeal, consider with due care, all the material facts and record its finding on all the contentions raised by the assessee and the Commissioner in the light of the evidence and the relevant law. 10. We find considerable force of the submissions of the learned counsel for the appellant that the Tribunal has merely noticed that since the summons issued before assessment returned unserved and no one came forward to prove. Therefore, it shall be assumed that the assessee failed to prove the existence of the creditors or for that matter the creditwort....
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....edit was received from various persons and supply as against cash credit also made. 13. Hence, the judgment and order of the Tribunal is not sustainable. Accordingly, the same is set aside. We restore the judgment and order of the Commissioner of Income-tax (Appeals). The appeal is allowed. 38. When a question as to the creditworthiness of a creditor is to be adjudicated and if the creditor is an Income Tax assessee, it is now well settled by the decision of the Calcutta High Court that the creditworthiness of the creditor cannot be disputed by the AO of the assessee but the AO of the creditor. In this regards our attention was drawn to the decision of the Hon'ble High Court, Calcutta in the CIT Vs Data ware Pvt Ltd (ITAT No. 263 of 2011) dated 21.09.2011 wherein the Court held as follows: "In our opinion, in such circumstances, the Assessing officer of the assessee cannot take the burden of assessing the profit and loss account of the creditor when admittedly the creditor himself is an income tax assessee. After getting the PAN number and getting the information that the creditor is assessed under the Act, the Assessing officer should enquire from the Asse....
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....deration had brought Rs. 4, 00, 000/- and Rs. 20,00,000/- towards share capital and share premium respectively amounting to Rs. 24,00, 000/- from four shareholders being private limited companies. The Assessing Officer on his part called for the details from the assessee and also from the share applicants and analyzed the facts and ultimately observed certain abnormal features, which were mentioned in the assessment order. The Assessing Officer, therefore, concluded that nature and source of such money was questionable and evidence produced was unsatisfactory. Consequently, the Assessing Officer invoked the provisions under Section 68/69 of the Income Tax Act and made addition of Rs. 24,00,000/-. On appeal the Learned CIT (A) by following the decision of the Supreme Court in the case of Cl. T. vs. M/s. Lovely Exports Pvt. Ltd., reported in (2008) 216 CTR 195 allowed the appeal by holding -that share capital/premium of Rs. 24,00,000/- received from the investors was not liable to be treated under Section 68 as unexplained credits and it should not be taxed in the hands of the appellant company. As indicated earlier, the Tribunal below dismissed the appeal filed by ....
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.... that inquires had confirmed the existence of most of the shareholders at the addresses intimated to the Assessing Officer, but the Assessing Officer took the view that their investment in the Assessee Company was not genuine, on the basis of some extraneous reasons. The Commissioner of Income Tax (Appeals) took note of the observation of the Assessing Officer that enquiry conducted by the Income Tax Inspector had revealed that nine persons making applications for 900 shares were not available at the given address and rightly concluded that the total share capital issued by the Assessee Company could not be added as unexplained cash credit under 'Section 68 of the Income Tax Act. Moreover, if the nature and source of investment by any shareholder, in shares of the Assessee Company remained unexplained, liability could not be foisted on the company. The concerned shareholders would have to explain the source of their fund. The learned Commissioner on considering the submissions of the, respective parties and considering the materials, found that the Assessing Officer had applied the provisions of Section 68 of the Income Tax Act arbitrarily and illegally and in any case....
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....e Hon'ble High Court, Calcutta in the case of Commissioner of Income Tax vs M/s. Leonard Commercial (P) Ltd in ITAT No. 114 of 2011 dated 13thJune, 2011 wherein the Court held as follows: "The only question raised in this appeal is whether the Commissioner of Income-tax (Appeals) and the Tribunal below erred in law in deleting the addition of Rs. 8,52,000/-, Rs. 91,50,000/- and Rs. 13,00,000/- made by the Assessing Officer on account of share capital, share application money and investment in HTCCL respectively. After hearing Md. Nizamuddin, learned Advocate appearing on behalf of the appellant and after going through the materials on record, we find that all such application money were received by the assessee by way of account payee cheques and the assessee also disclosed the complete list of shareholders with their complete addresses and GIR Numbers for the relevant assessment years in which share application was contributed. It further appears that all the payments were made by the applicants by account payee cheques. It appears from the Assessing Officers order that his grievance was that the assessee was not willing to produce the parties who ha....
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....er which is again an extremely detailed one. 5. The concurrent factual findings of both the CIT (A) and ITAT have not been shown to be perverse by the Appellant. This is virtually the fourth stage of the litigation. 6. Question (1) is accordingly answered in the negative, i.e., in favour of the Assessee." It is noted that the SLP filed by the Revenue against this judgment has been dismissed by the Hon'ble Supreme Court. 44. From the details as aforesaid which emerges from the paper book filed before us as well as before the lower authorities, it is vivid that all the share applicants are (i) regular income tax assessees, (ii) they are filing their return of income, (iii) the board resolutions approving the investment in the assessee company is available on record, (iv) the share application money was made by account payee cheques, (v) the details of the bank accounts belonging to the share applicants and their bank statements, (vi) in none of the transactions the AO found deposit in cash before issuing cheques to the assessee company, (vii) the share applicants have furnished declaration explaining the source of funds out of which the cheques were issued to ....
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....all the payments are by account payee cheques. 46. We find that the Hon'ble Supreme Court in the case of M/s Earth Metal Electricals P Ltd vs CIT &Anr. reported in 2010 (7) TMI 1137 in Civil Appeal No. 21073 / 2009 dated 30.7.2010 arising from the order of Hon'ble Bombay High Court had held as under:- ORDER Delay condoned. Leave granted. Heard learned counsel on both sides. We have examined the position. We find that the shareholders are genuine parties. They are not bogus and fictitious. Therefore, the impugned order is set aside. The appeal is allowed accordingly. No order as to costs. 47. In the instant case before us, we also note that the share subscribing companies are duly assessed to income tax. The Ld AR had placed on record the copies of the assessment orders framed in the cases of the share subscribing companies, as noted above. It therefore cannot be disputed that the share subscribing companies are not in existence. From the assessment orders, it is noted that the share subscribing companies are duly assessed to income tax and their income tax particulars together with the copies of respective income tax retur....
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....ellants which could rebut the documents produced by the Respondents herein. In such circumstances, the finding of fact arrived at by the authorities below which are based on documentary evidence on record cannot be said to be perverse. Learned Counsel appearing for the Appellants was unable to point out that any of such findings arrived at by the authorities below were on the basis of misleading of evidence or failure to examine any material documents whilst coming to such conclusions. Under the guise of the substantial question of law, this Court in an Appeal under Section 260A of the Income Tax Act cannot reappreciate the evidence to come to any contrary evidence. Considering that the authorities have rendered the findings of facts based on documents which have not been disputed, we find that there are no substantial question of law which arises in the present Appeal for consideration. 49. We also find that the Hon'ble Apex Court recently in the case of Principal CIT vs Vaishnodevi Refoils & Solvex reported in (2018) 96 taxmann.com 469 (SC) wherein the SLP of the Revenue has been dismissed by the Hon'ble Apex Court. The brief facts of that case were that the addition u/s 68 of....
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.... by the law on the amount of premium, the transaction should not be questioned merely because the assessing authority thinks that the investor could have managed by paying a lesser amount as Share Premium as a prudent businessman. The test of prudence by substituting its own view in place of the businessman's has not been approved by the Supreme Court. [Para 54]" (b) In the case of CIT v. Gagandeep Infrastructure (P.) Ltd. [2017] 80 taxmann.com 272/247 Taxman 245/394 ITR 680 the Revenue contended that the fact that the shares were issued at high premium raised suspicion on the genuineness of the transactions. While dismissing this plea raised by the Revenue, the Hon'ble Bombay High Court held as under: (e) We find that the proviso to section 68 of the Act has been introduced by the Finance Act 2012 with effect from 1st April, 2013. Thus it would be effective only from the Assessment Year 2013-14 onwards and not for the subject Assessment Year. In fact, before the Tribunal, it was not even the case of the Revenue that Section 68 of the Act as in force during the subject years has to be read/understood as though the proviso added subsequently effective only from 1st A....
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....clusion of amount which are suspect. Therefore, the emphasis on genuineness of all the three aspects, identity, creditworthiness and the transaction. What is disquieting in the present case is when the assessment was completed, the investigation report which was specifically called from the concerned department was available but not discussed by the Assessing Officer. Had he cared to do so, the identity of the investors, the genuineness of the transaction and the creditworthiness of the share applicants would have been apparent. Even otherwise, the share applicants' particulars were available with the Assessing Officer in the form of balance sheets income-tax returns, PAN details etc. While arriving at the conclusion that he did, the Assessing Officer did not consider it worthwhile to make any further enquiry but based his order on the high nature of the premium and certain features which appeared to be suspect, to determine that the amount had been routed from the assessee's account to the share applicants' account. As held concurrently by the Commissioner (Appeals) and the Tribunal, these conclusions were clearly baseless and false. This Court is constrained to observ....
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....he case of M/s Haven Vincom Pvt. Ltd, the identity, creditworthiness and genuineness have been proved beyond doubt. In case of Sushma Chawala for share application of Rs. 4,22,500/- and share premium of Rs. Rs. 4,22,500/-, the ld Counsel explained the identity, creditworthiness and genuineness therefore no disallowance can be made. Besides, the assessee had discharged its onus to prove the identity, creditworthiness and genuineness of the these three share applicants by submitting the following documents and evidences: 1) Return of ROC, that is, form No. 2 submitted before R.O.C. 2) PAN Number copies of each share subscriber. 3) Copy of Balance Sheet, Profit and loss account of all share applicant companies. 4) Details of investments sold by all share applicant companies. 5).Transaction with the assessee was duly highlighted in the bank statement 6). Explanation along with evidence of source of source of the funds of the share applicant Companies. 7). Audited Accounts of the share holders. 8) Relevant address proofs / Form filed by the share applicants with ROC. 9). Income Tax Return of share applicant....
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.... 952 62,831,424 62,845,540 60,980,000 59,500,000 1,847,540 3,884 797,185 2,548,355 62,831,424 62,845,540 Directors PRISM VINTRADE PRIVATE LIMITED Chanden. Director PRISM VINTRADE PRIVATE LIMITED Mohan Charle. Director Document 2 HAVEN VINCOM PRIVATE LIMITED _ANCE SHEET AS AT 31ST MARCH, 2013 I. EQUITY AND LIABILITIES (1) Shareholder's Funds (a) Share Capital (b) Reserves & Surplus (2) Current Liabilities (a) Trade Payables (b) Short-Term Provisions II.ASSETS As at As at Notes 31.03.2013 Rs. 31.03.2012 Rs. 72 1 2 1,431,000 65,301,861 1,431,000 65,216,430 34 23,750 4 38,203 7,000 827 66,794,814 66,655,257 (1) Non-Current Assets (a) Fixed Assets (i) Tangible assets - Net Block (b) Non-Current Investments 5 66,642,000 62,950,000 (c) Other Non-Current Assets (2) Current Assets (a) Cash and Cash Equivalents (b) Short Term Loans & Advances 67 6 25,084 222,928 127,730 3,482,329 66,794,814 66,655,257 See Accompanying Notes forming part of the Financial Statements As per our attached Report of even date ....