TaxTMI 
TaxTMI 
2017 (11) TMI 1809
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.... erred in confirming the addition of Rs. 7,30,487/- made by the AO by disallowing the entire expenses incurred during the year. 2.2 During the course of hearing, the ld.AR of the assessee has not pressed the Ground No. 1 and 2, hence the same are dismissed being not pressed. Thus the appeal of the assessee in ITA No.391/JP/2017 is dismissed. 3.1 Now we take up the appeal of the Revenue in ITA No.491/JP/2017 for the A.Y. 2009-10 wherein the Revenue has raised the solitary ground as under:- ''Whether on the facts and in the circumstances of the case the ld. CIT(A) was right in deleting the addition of Rs. 2,00,00,000/- 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.'' 3.2 Apropos solitary ground of the Revenue, the AO made the addition of Rs. 2,00,00,000- u/s 56(1) of the Act in the hands of the assessee company by observing as under:- ''16. Having dealt with each of the contention of the assessee and having found the same to be untenable it is important to place on r....
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....-10 and the original return filed on 23.09.2009 declaring Rs. 6,56,487/- total income was only processed u/s 143(1) of the Act. Various courts have held that processing of returns u/s 143(1) of the Act is no assessment. It is obvious that if no incriminating material is found during search, then additions, if any, have to be made in the income shown in the return of income (in the case of pending assessments which abate) and to the computed income (in case of assessments were completed). Thus effectively, what was said in the case of Kabul Chawla was that making any addition in the returned income or income earlier assessed was not allowed if no material was found in the search which could lead to an addition on the basis of the said material. Now in this regard, I would like to discuss the issue pertaining to assessment completed u/s 153A r.w.s 143(3) of the Act when no incriminating documents were found from the assessee's premises. Before coming to the facts of the present case it would be appropriate to mention sec. 153A of the Act, the relevant part of which reads as under: "153A. (1) Notwithstanding anything contained in section 139, section 147, section 148, section....
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....ources or any material placed before the Assessing Officer but from all sources including the undisclosed ones, or based on the unplaced material before the AO. Some related Judgments a) CIT vs. Kabul Chawla (Delhi High Court) : Completed assessments can be interfered with by the AO while making the assessment under Section 153 A only on the basis of some incriminating material unearthed during the course of search or requisition of documents or undisclosed income or property discovered in the course of search which were not... b) Gurinder Singh Bawa vs. DCIT (ITAT Mumbai) : In All Cargo Global Logistics 137 ITD 287 (Mum)(SB), the Special Bench held that in a case where the assessment has abated the AO can make additions in the assessment, even if no incriminating material has been found. However, in a case where the assessment has not abated, .... c) Anil Kumar Bhatia vs. ACIT (ITAT Delhi) : S. 153A does not authorize the making of a de novo assessment. While under the 1st Proviso, the AO is empowered to frame assessment for six years, under the 2nd Proviso, only the assessments which are pending on the date of initiation of search abate. d) San....
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....i. Assessments and reassessments pending on the date of the search shall abate. The total income for such AYs will have to be computed by the AOs as a fresh exercise. iii. The AO will exercise normal assessment powers in respect of the six years previous to the relevant AY in which the search takes place. The AO has the power to assess and reassess the 'total income' of the aforementioned six years in separate assessment orders for each of the six years. In other words there will be only one assessment order in respect of each of the six AYs "in which both the disclosed and the undisclosed income would be brought to tax". iv. Although Section 153 A does not say that additions should be strictly made on the basis of evidence found in the course of the search, or other post-search material or information available with the AO which can be related to the evidence found, it does not mean that the assessment "can be arbitrary or made without any relevance or nexus with the seized material. Obviously an assessment has to be made under this Section only on the basis of seized material." v. In absence of any incriminating material, the completed assessmen....
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....sues were raised before the Hon'ble ITAT'1" Bench, Mumbai: "1. The Ld CIT (A) failed to appreciate the fact that no incriminating documents /evidences were found during the course of search of third party, and hence, re-computing the income u/s I53A is bad in law and liable to be quashed. 2. The Ld CIT (A) failed to appreciate the fact that original assessment was made u/s 143(3) vide order 31st August 2007 after considering all the documents and materials on record and due application ff mind and hence re-computing the income by merely changing head of income for the said year under the grab of section 153A based on same documents and materials, is bad in law and order is liable to be quashed, 3. The Ld CIT (A) erred in confirming the action of the AO reassessing the income u/s 143(3) r.w.s I53A, without appreciating the fact that only pending assessment abet and not the completed assessments and hence the order u/s 143(3) r.w.s I53A is bad in law and liable to be quashed. 4. The Ld CIT (A) erred in not allowing the decision of jurisdictional High Court wherein it was held that no addition can be made u/s I53A if no incriminating materia....
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....the Act. a) Now there are two situations - either the assessment was complete before the search or pending at that time. If the assessment was complete, and if any income which had escaped assessment in the regular assessment is found during proceedings u/s 153A, what is the AO supposed to do? He has no power to act u/s 147/148 because of the non-obstante clause. He is now precluded from invoking provisions of section 148 because of the conclusion drawn in Kabul Chawla. b) The situation is even more serious if a pending assessment or reassessment abates. What if a show-cause notice had been issued on an undisclosed income prior to search? According to Kabul Chawla if no incriminating material is found during search, then NO ACTION can be taken in such cases also. No interpretation of a provision of an Act can be such that it leads to results which were never intended. By drawing a conclusion that the presence of incriminating material, and addition thereon is necessary for making an addition which is not based on material found during search, Kabul Chawla has done exactly that, and so it has to be held that the conclusion so drawn is per incuriam. ....
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.... there is incriminating material in even one year. This case is extremely important for the Revenue. Similar sentiments have been expressed in the case of CIT v. Anil Kumar Bhatia [2013] 352 ITR 493 (Del) where only one unsigned document dated 10.02.2003 showing a loan of Rs. 1,50,000/- was found during search conducted on 13.12.2005. The Hon'ble High Court held that this material was enough to justify additions in all the 6 years. c) Recently, the Kerala High Court in Sunny Jacob Jewellers and Wedding Centre v. Deputy Commissioner of Income-Tax [2014] 362 ITR 664 (Ker) has also very categorically stated that incriminating material found during search is not necessary in all the 6 years for additions to be made on other issues. While giving these decisions, the Hon'ble ITAT, Mumbai as well as the Hon'ble ITAT, Delhi Bench has referred to the decision of the Hon'ble Mumbai High Court in the case of All Cargo Global Logistics Limited Vs. DCIT, Central Circle-44, Mumbai and the decision of Hon'ble Delhi High Court in the case of CIT Vs. Kabul Chawla in ITA No. 707/2014 dated 22.8.2015. Here it is pertinent to mention that the Department has n....
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....ng search conducted on 13.12.2005. The Hon'ble High Court held that this material was enough to justify additions in all the 6 years. c) Recently, the Kerala High Court in Sunny Jacob Jewellers and Wedding Centre v. Deputy Commissioner of Income-Tax [2014] 362 ITR 664 (Ker) has also very categorically stated that incriminating material found during search is not necessary in all the 6 years for additions to be made on other issues. Therefore, in view of above discussion with regard to the provisions of Sec 153A of the Act, it is seen that from 01.06.2003 onwards the number of years from which assessments could be framed after search were reduced from 10 to six. Section 153A of the Act has mandated that there have to be 6 separate assessments instead of a block assessment. It also started with a non-obstante clause which stated that the operation of sections 139, 147,148,149,151,and 153 was ousted. In other words when an assessment was being completed u/s 153A, the sections mentioned above could not be invoked. The section did not, repeats, and did not mention that for making an assessment u/s 153A of the Act, it was necessary to have some incriminating material found du....
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.... various companies at a premium of Rs. 490/- per share detail of which is as under: - Sr. No. Name No. of Shares alloted/ applied during the year Amount Adjusted against share capital Rate per share Amount adjusted against share premium Rate of premium per share Issue price of the share Total Consideration Received 1 Anuraj Securities Pvt Ltd 4,000 40,000 10 19,60,000 490 500 20,00,000 2 Matribhumi Dealers Pvt Ltd 5,000 50,000 10 24,50,000 490 500 25,00,000 3 Narottamka Trade & Vyapaar Pvt Ltd 3,000 30,000 10 14,70,000 490 500 15,00,000 4 Puja Dealcom Pvt Ltd 8,000 80,000 10 39,20,000 490 500 40,00,000 5 Tarang Suppliers Pvt LTd 6,000 60,000 10 29,40,000 490 500 30,00,000 6 Vandana Dealers Pvt Ltd 6,000 60,000 10 29,40,000 490 500 30,00,000 7 Puja Tie-Up Pvt Ltd 8,000 80,000 10 39,20,000 490 500 40,00,000 Total 40,000 4,00,000 1,96,00,000 2,00,00,000 2) During the course of assessment proceedings the assessee sub....
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....eived etc. • Copy of board resolution. • Copy of PAN card of party. • Copy of bank statement showing the entry of payment made to assessee. • Declaration of source of funds with party. • Copy of Ack. of ITR of AY 2009-10. • Copy of audit report and audited balance sheet along with annexure of 31.03.09. • Copy of registration certificate issued by ROC. 169-170 171 172 173 174 175 176-185 186 Tarang Suppliers Pvt. Ltd • Share application containing the name/address/PAN of party, detail of payment received etc. • Copy of board resolution. • Copy of PAN card of party. • Copy of bank statement showing the entry of payment made to assessee. • Declaration of source of funds with party. • Copy of Ack. of ITR of AY 2009-10. • Copy of audit report and audited balance sheet along with annexure of 31.03.09. • Copy of registration certificate issued by ROC. 187 188 189 190 191 192 193-202 203 Vandana Dealers Pvt. Ltd • Share application ....
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....ows 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: - Name of the Investor company Amount invested in assessee company Share capital and reserve & surplus with Investor companies as on 31.03.2009 Share capital and reserve & surplus with Investor companies as on 31.03.2008 Anuraj Securities Pvt Ltd 20,00,000 3,90,10,000 3,90,10,000 Matribhumi Dealers Pvt Ltd 25,00,000 3,16,50,000 3,16,50,000 Narottamka Trade & Vyapaar Pvt Ltd 15,00,000 33,22,10,241 33,21,86,557 Puja Dealcom Pvt Ltd 40,00,000 13,54,55,817 13,54,51,613 Tarang Suppliers Pvt Ltd 30,00,000 2,55,00,000 2,55,00,000 Vandana Dealers Pvt Ltd 30,00,000 9,39,42,000 9,39,42,000 Puja Tie-Up Pvt Ltd 40,00,000 11,95,23,840 11,95,12,729 From the above chart it is clear that all the Investor companies were having their own share capital and Reserve & surplus which was much more than to the amount invested in the assessee company. The above chart shows that the investor co....
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....ysical assets/assets are not in commensurate to value of share with the company wither in the form of fixed assets, plant & machinery etc. In the above background the receipt of share capital Rs. 4,00,000/- and premium to the tune of Rs. 1,96,00,000/- during the year under consideration was not only abnormal but also appeared to be a part of a well planned exercise of tax evasion as discussed earlier. Regarding these findings/observations of ld. AO we may submit as under: - i) Admittedly the assessee company received huge share premium without having major business activities but the same does not automatically make the share premium as non genuine and taxable in the hands of the assessee. The investment by the investee companies was made after being convinced with the future business planning of the assessee company. The assessee company has a large chunk of agricultural land at Village Gidani (Near Dudu at main NH Jaipur Ajmer Road and planning development of township thereon. The market rate of this land was very high. The assessee company was expecting good revenue from such township and the investor companies were convinced to be partner of such project, therefore the....
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....arned and the tax evasion is arose when the undisclosed income is generated. In the forgoing paras the ld. AO himself doubted the share premium on the ground that the assessee company did not have any business so ever. When the assessee company is not having any business than question of having any income either disclosed or undisclosed does not arise and when there is no income than how the tax can be evaded thereon. Therefore in view of finding given in these paras by the ld. AO it had to be proved first by the department that the assessee was having some income on which it has not paid the tax and the same brought in books of accounts in the form of share capital & premium thereon. But in the instant case the department could not prove any kind of undisclosed source of income of the assessee as a result of search over assessee as well as during the course of assessment proceedings. As a result of so called long inquiries/analysis the department could not evidentiary proved that the assessee company managed its funds with investor companies to brought the same in books of accounts in the form of share capital & premium thereon more so when the investor companies having their o....
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....egistered address of all the companies is the same, which has been changed on 01.03.2012. (viii) Two of the said companies information on MCA website were examined in detail. M/s. Alliance Tradecom & M/s. Evershine suppliers Pvt. Ltd were incorporated on 25.11.2008 and 05.01.2009 respectively. The inflow of capital upon incorporation was through share sold at a very high premium and thereafter the said Capital was claimed to be invested in Unquoted shares worth Rs. 11.06 Crores and Rs. 10.39 Crores respectively. (ix) All above factors indicate systematic and deliberate creation of a colurable device to introduce share capital into Motisons Group Companies. 6. In response to show cause notice the assessee filed its reply vide letter dated 13.02.2015 (Copy at PB Page 96 to 99). The submission of the assessee on the observations of ld. AO as mentioned above in para 5 above is as under: - a) The share premium was decided by the company and investors mutually and share applicant companies have agreed to pay this share premium. There was no bar to issue shares on premium under Companies Act and Income Tax Act for the period under relevant. Further the ld. AO held that the "--....
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....assessee, then also the transaction cannot be treated as not genuine as the main issue is availability of funds in the hands of the investor company and if that is explainable then no question is arise for treating the share capital as not genuine. (ii) The low creditability of directors of allottee company, their relationship with Motisons Group etc. have no relevance for examining the genuineness of share capital and creditworthiness of the investor company as in the case of assessee it is well proved by documentary evidence that the amount against share application money was received through genuine source of funds with investor companies and the amount was adjusted against allotment of shares. The source of funds with the investor companies which they invested in assessee company was also well explained genuinely. If department have some doubt regarding genuineness of funds with investor companies the necessary investigation of such funds should had been made in the case of investor companies and the necessary action should had been taken in their case. It is relevant to mention here that apart from the investment made in the assessee company the other assets/investment of s....
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....d facts that during the year under consideration as well as in previous years the assessee company is not having any business activities or not having any source of income from with this much of undisclosed income could be earned. When there is no income than how the same can be managed to brought in books of accounts in the form of share capital. In this case the department could not prove any kind of undisclosed source of income of the assessee as a result of search over assessee as well as during the course of assessment proceedings or as a result of inquiries. As a result of so called long inquiries the department could not evidentiary proved that the assessee company managed its funds with investor companies to brought the same in books of accounts in the form of share capital more so when the investor companies having their own sufficient funds to invest in the assessee company much prior to investment made in the assessee company. Thus, from the above submission and record it is well proved that the amount so received by the assessee company from above named companies was received against share capital and the investment was made by them by their own disclosed source, the....
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....share capital and reserves. Apart from the investment made in the assessee company they have huge other investments/advances/assets. As per declaration of source of funds submitted by them they realized money from their old investments/advances/assets and the same money was utilized for making the investment in the assessee company. These companies are assessee of Income Tax department and in case of any doubt, necessary action could be taken in the hands of these companies and if these companies failed to explain the source of investment, necessary addition can be made in the hands of these companies by applying the provisions of section 69 of Income Tax Act. However the ld. AO made the addition in the hands of assessee company under the complete disregard of provisions of Income Tax Act and merely on surmises and conjectures. The Hon'ble apex Court in the case of CIT vs. Lovely Exports (P) Ltd. 216 CTR 0195/ 6 DTR 308 (SC) held that if the share capital money is received by the assessee company from alleged bogus shareholders then the Department is free to proceed to reopen the individual assessments of such shareholders in accordance with law. Such share application money cannot....
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....ve reveals that the source of funds with such investor companies was funded by the assessee company than only the addition could be made in the hands of the assessee company. It is admitted facts that during the year under consideration the assessee company was not having any such source of income from which this much of undisclosed income could be earned and the ld. AO is completely silent on this issue that where from this much of money was earned by the assessee company. v) The finding of ld. AO that simply because some form of identification on paper has been provided does not mean that the transaction stands explained from the viewpoint of the credit worthiness and genuineness this is to submit that by filing the sufficient documents the assessee discharge its onus cast on it by the law and now onus in on the department to disprove the submission and documents of the assessee by positive evidence. The department has not discharged its onus and no inquired were carried out and no evidence is in possession with the department to disprove the claim of the assessee. One the one hand the ld. AO is claiming that the revenue authorities can examine the transaction from all possibl....
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....d to escape the provision of law, simply because it contained a broader & wider manifestation of its true intent which was enunciated only after the transaction took place. The contention of the assessee is a pervert argument & deserves to be rejected. Submission of assessee: - i) Share premium 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 reduction petition, or, in other words, except under exactly the same conditions as those under which any other capital asset can reach the shareholders hands. Distribution of share premium amount is not permitted through dividend. It is taken out of the category of divisible profits. The provisions in respect of issue of shares at premium are the same in the ....
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....tity and a transaction, which is patently beyond the realms of acceptability and which also are embedded within here tax implications, that they need to be left alone only because there was no specific bar this is to submit that for bringing a transaction into a Income Tax territory first it is to proved by the revenue authorities that the transaction is colorable device or a sham transaction. In the case of the assessee the investor companies are confirming that they have gave the amount to the assessee company as share premium and the assessee company is entering such amount in its books of accounts as a share premium. There is no evidence on record to prove that the transaction is sham transactions or not real transaction. The onus is on department to prove that the transaction is sham or not real. The allegation should be based on the evidences. The ld. AO is duty bound to prove a transaction not real and not acceptable with evidences which is absent in the instant case. Admittedly there are numerous deeming provisions related to Gift, sale consideration on sale of assets under which the deemed income are taxed but the deeming fiction can only strictly applied on the transactio....
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....mission of assessee: - i) The finding of ld. AO is patiently wrong, perverse and not backed with any supporting evidence. First of all regarding allegation that the assessee introduced its own unexplained money in the share capital and share premium this is to submit that the department carried out intensive search over the assessee and during the course of search not a single document/evidence was found to show that the assessee was having some undisclosed income or having some unexplained money. As a result of inquiries carried out by the investigation wing they also could not gathered any positive evidence to show that the assessee was having any undisclosed income or unexplained money. If there is no proof with the department to prove that the assessee was having some unexplained money than how it can be alleged that the assessee has introduced its unexplained money in the form of share capital and share premium. This is completely on the basis of surmises and conjectures. ii) As regard to not providing the justification of the value of shares this is to submit that the shares issued at high rates does not make the transactions itself shame or colourful device to evade th....
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....esumed that the deposit made by the creditors is money belonging to the assessee itself. (ii) CIT Vs Orissa Corporation (P) Ltd (1986) 159 ITR 79 (SC) The assessee had given named and addresses of the cash creditors, who were income tax assessees. Revenue apart from issuing summon u/s 131 notices to creditors, did not pursue the matter further- it did not examine creditworthiness of the creditors- assessee could not, under the circumstances do anything further. Held that the additions were rightly deleted. (iii) CIT Vs Heera Lal Chagan Lal Tank (2002) 157 ITR 281 (Raj) Burden of the assessee stands discharged when the identity of the creditors is established and he confirms the loans. It is further submitted that the investor companies were having sufficient accumulated funds in the form of share capital and reserves & surplus much prior to the investment made in the assessee company and the same are much more than to investment made in the shares of assessee company. The same funds were being managed by such company at their own and having investment in shares of other companies/loans & advances to various parties. The investment by such companies in the assessee co....
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....n which thus arises is that what is it that the subscriber company paid for in form of the share having face value of Rs. 10. The assessee company has failed to answer this question even when a specific query in this regard had been raised thus the same creates doubts regarding genuineness of share capital and premium thereon credited in books of accounts Submission of assessee: - i) The transfer of share application into share capital & share premium is not only based on accounting entries but they are supported by documentary evidence. It is not a case where the certain receipts have been accounted for by assessee company as per its own sweet will. The investor companies filed the share application forms to subscribe the shares of the assesses company and in the share application form the detail of share premium is also mentioned. Thus this is not a case where the claim of the assessee is based on accounting entries. There is no contra material with the department to prove that the adjustment made in books of accounts by the assessee is not correct or not based on documents. ii) The ld. AO himself admitted that the face value of a share is intrinsically capital in nature....
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....s were discussed to justify the modus operandi of introduction of money in the shape of high share premium which is relevant in this case also as the shares were allotted in this case also at the rate higher to the justifiable amount. Submission of assessee: - i) Whatever inquiries are being discussed in the show cause notice as well as in assessment order are not applicable in the case of the assessee for the instant year as in the year under consideration no shares were issued to such companies on which the inquiries were conducted by the department. In this year no any inquiries was made from the investor companies who made investment in the year under consideration. ii) As regard to presuming the modus operandi based on the inquired carried out in the case of some other companies presuming that the same modus operandi was followed in each and every case, this is to submit that as per law the inquiries conduced in the case of particular person should be restricted from that person only and can made applicable for the transactions carried out from such person. The same cannot be extended to making any presumption & assumption in each and every case where no inquiries wer....
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.... some irrelevant inquiries. There is no case or evidence with the department to presume that the assessee has introduced its unexplained money in accounts of such investor companies. f) Finding of ld. AO: - Admittedly during the course of search over Motisons Group no documents/evidence was found to show that the companies who made investment in shares of the assessee company are run/manage by Motisons Group but from the inquiries and modus operandi its reveals that the allotee companies are merely paper companies and providing accommodation entries. Therefore the indirect evidence/inquiries conducts given clear sign of introduction of large money in the company in the form of share capital/share premium more so when the justification of charging such higher rate not genuinely proved. Submission of AO: - i) In this para the ld. AO himself admitted that during the course of search over Motisons Group no documents/evidence was found to show that the companies who made investment in shares of the assessee company are run/managed by Motisons Group. Thus if the department is not in possession of any positive material against the assessee or its investor companies than how the i....
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....nking channels-Assessee company also furnished written confirmations from the applicant companies, copies of certificates of incorporation, PAN cards, PAN details and company details etc. of the applicants-Finding of Tribunal that identity of the subscribers stood duly established from the documents produced by the assessee, cannot be said to be perverse-There is no legal bar to more than one company being registered at the same address-Merely because the applicants did not respond to the notices sent to them, AO was not justified in adding the amount of share application money to the income of the assessee. • CIT v/s. Samir Bio-tech (P) Ltd. (2009) 17 DTR (Del) 224 Income-Cash credit-Share application money-Identity of the subscribers not being in doubt, share application money having been paid by account payee cheques, subscribers having shown the amounts in their audited balance sheets and having given complete details with regard to their returns and assessments, no addition could be made under s. 68 only because the subscribers did not initially respond to summons. h) Finding of ld. AO: - It is clear that what is apparent is not real and the assessee's c....
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....or the year under consideration by which this much of income could be earned which also proves that the share capital received by the assessee is genuine. CIT Vs Bharat Engineering and Construction Co. (1972) 83 ITR 187 (SC) In this case tribunal came to the conclusion that unexplained cash credit entries in the first year of business of engineering construction company could not be income of assessee. The High Court after careful examination of the various findings reached by the Tribunal has come to the conclusion that the Tribunal's findings are findings of fact. Hon'ble Apex court confirmed that conclusion. This gives the answer in favor of the assessee that in this case the apparent should be considered as real as the assessee company is not having any source of income from which this much of undisclosed income could be earned than question of receiving of non genuine share capital to brought its unaccounted income in its books of accounts does not arise. iii) The assessing officer merely disbelieved the explanation/statements given by the assessee and has converted good proof into no proof. Hon'ble Justice Hidayatullah of the Supreme Court in the case of Sreelekha B....
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....hich has been provided in section 56(2) of Income Tax Act, 1961 and as per provision of section 56(2) of Income Tax Act, 1961 the share premium received prior to AY 2013-14 were not taxable in any circumstances if the assessee has proved the identity, creditworthiness and genuineness of the transactions. c) The Income for the purpose of the Income Tax Act has a well understood meaning as defined in section 2(24) of the Income Tax Act 1961. It is true that section 2(24) of the Income Act 1961 contains inclusive definition but it cannot be disputed that income should have been look into its normal meaning. The income will not include capital receipts unless it is specified in Income Tax Act. This argument clarifies after the amendment made by Finance Act 2012 w.e.f. 1.4.2013 in section 56(viib) 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) o Income Tax Act, 1961 and the same was already included in the definition of Income than why this amendment was made. Therefore the ld. AO is wrong in making the addition u/s 56(1) of Income Tax Act, 1961. d) Charge of tax is on income as understood in t....
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....capital gain chargeable u/s 45. This contention was not accepted by the High Court. If the computation provision do not apply to a case then such a case will not be covered under charging section. At later stage, a reference will be made to 56 (vii b) inserted by Finance Act 2012 w.e.f. 1.4.2013 as the same will be a computation provision. For the A.Y. 2011-12, computation provision were not there. In absence of computation provision, entire value of share premium can not be taxed u/s 56. As for tenancy right, the full consideration can not be taxed u/s 56, similarly entire share premium is not taxable u/s 56(1). ii) The Hon'ble Apex Court in the case of CIT V D.P. Sandu Bros. Chembur (P) Ltd 273 ITR 1 also hold that as per 2(24)(vi) only income which is chargeable u/s 45 is to be included in income and if computation provision u/s 45 fails then charging provisions will fail. Ref. to CIT V B.C. Srinivasa Setty 128 ITR 294. iv) The Hon'ble Rajasthan High Court in the Case of CIT V Gotan Lime Stone Khanij Udyog 269 ITR 399 also held that in case computation provision u/s 48 could not be applied for want of ascertainable cost of acquisition, then capital gain does not arise to b....
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....w. Then it is for the legislature to do the needful in the matter." Hon'ble Bombay High Court in this case (Vodafone case) observed that issue of shares at a premium is on capital account and gives rise to no income. 56(1) provides the income of every kind which is not excluded from the total income is chargeable under the head income from other sources. However before section 56 of the Act can be applied there must be income which arises. If the receipt is capital then it is not income. Hence share premium is not an income. f) The CBDT vide circular/instruction No.2 dated 29.01.2015 has stated as under [371 ITR 6(st)]. In reference to the above cited subject, I am directed to draw your attention to decision of the High Court of Bombay in the case of Vodafone India Services Pvt. Ltd V UOI for the Assessment year 2009-10 (WP No.871 of 2014) wherein the court has held interalia, that the premium on share issue was on account of a capital account transaction and does not give rise to income and hence, not liable to transfer pricing adjustment. It is hereby informed that the Board has accepted the decision of the High Court of Bombay in the above mentioned writ petition. In....
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....eable to income tax. Under any of the heads specified in section 14, items A to E. For an income to be taxed u/s 56, it has to satisfy three conditions. (a) It shall be classifiable as income as per the charging section of the Act. (b) It shall not be excluded from the total income (e.g. section10). (c) It is not chargeable to tax under any of the specified Heads in section 14, items A to E. The finance Bill 2012 as presented on 16th March 2012 included a new clause (viib) u/s 56(2) of I.T. Act [342 ITR1(st)]. No proposal in the original bill to insert a new clause u/s 2(24). Subsequently Notice of amendments to Finance Bill was given [See 343 ITR 37(st)] and amendments also included the in section of clause (xvi) in 2(24) of I.T. Act and such clause is as under: (xvi) Any consideration received for issue of shares as exceeds the fair market value of the shares referred to in clause (viib) of subsection (2) of 56. The amendment introduced in 2(24) signifies that section 56 is not a charging section. Unless the income which is to be taxed u/s 56(2)(vii b) is included in the definition of income, then it can be taxed and be part of total income. Nature of income as ....
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....n 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 against a retrospective construction is different. In a legislation confers a benefit on some persons but without inflicting a corresponding detriment on some other person or on the public generally, and where to confer such benefit appears to have been the legislators objects, then presumption would be that such a legislation, giving it a purposive construction, would warrant it to be given a retrospective effect. This exactly is the justification to treat procedural provision as retrospective. Where a law is enacted for the benefit of community as a whole, even in the absence of a provision the statute may be held to be retrospective in nature. The Hon'ble Apex Court further noticed that CBDT circular mentioned that proviso is applicable from 1.6.2002. In respect of 56(2)(vii b), 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. Hence Share premium even if in excess of Fa....
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....a) has held as under : "6. As regards the issue on merit in the Departmental appeal, we concur with the views of the learned CIT(A) that the AO has not considered the explanation of the assessee. The amount under consideration of Rs. 1.89 crore has been received by the assessee as share application money from M/s Jalkanta Technical & Financial Service (P) Ltd. (JTFSPL) after a proper resolution passed by the board of directors of the aforesaid company through banking channel. M/s JTFSPL is having permanent account and filing its return of income regularly. The AO has nowhere mentioned that money belongs to the assessee company and therefore, provisions of s. 68 cannot be invoked. The learned CIT(A) has rightly relied upon the decision of Hon'ble Delhi High Court in the case of CIT vs. Steller Investment Ltd. (2000) 164 CTR (SC) 287 which has been confirmed by the Hon'ble Supreme Court of India. The learned CIT(A) has also relied upon the decision of Hon'ble jurisdictional High Court in the case of Barkha Synthetics Ltd. vs. Asstt. CIT (2005) 197 CTR (Raj) 432 and also the decision of Tribunal, Jodhpur Bench in the case of Uma Polymers (P) Ltd. vs. Dy. CIT (dt. 27th Feb., 2006) [....
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.... of any subscription he is empowered, nay duty-bound, to carry out 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 registers, 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 positive material or evidence which would indicate that the shareholders were benamidars or fictitious p....
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....ness and creditworthiness of the cash creditors. The ld Assessing Officer made addition on the basis of investigation conducted by the ITO, Investigation Wing, Kolkata but the ld Assessing Officer of the assessee has not clarified what inquiry had been conducted and what evidences collected which goes against the assessee. The notice U/s 131 issued by the ITO, Investigation Wing, Kolkata were served in case of Vidya Agencies Pvt. Ltd. and Shivarpan Mercantiles Pvt. Ltd., but compliance could not be made on the given date because concerned officer was on leave. In case of Middleton Goods Pvt. Ltd. And Lactrodryer Marketing Pvt. Ltd., notices were served on the assessee and in compliance to the notice, the party submitted all the documents in the IT office. The case law referred by the ld CIT(A) i.e. decision of Hon'ble Delhi High Court in the case of Nipun Builders and Developers Pvt. Ltd. Vs. CIT and Vijay Power Generator Ltd. Vs CIT (supra) are not squarely applicable on the facts of the case as there was short time available with the Assessing Officer as well as Investigation Wing of Kolkata. The copy of inquiry has not been provided by the Assessing Officer to the assessee. As p....
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....share premium amount credited by the assessee which was not proved - Held that:- Following the decision in CIT v. Lovely Exports (P) Ltd. [2008 (1) TMI 575 - SUPREME COURT OF INDIA] - all the four parties, who are subscribers of the shares, are limited companies and enquiries were made and received from the four companies and all the companies accepted their investment - the assessee has categorically established the nature and source of the sum and discharged the onus that lies on it in terms of Section 68 of the Act - When the nature and source of the amount so invested is known, it cannot be said to be undisclosed income - the addition of such subscriptions as unexplained credit under Section 68 of the Act is unwarranted - Decided against Revenue. (vi) 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 MumTrib 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 Inc....
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....had fully discharged the burden of proof, onus of proof and explained the source of share capital and advances received by established the identity, creditworthiness and genuineness of transaction by banking instruments with documentary evidences. The further stand of the assessee had been that the assessee-company substantiated the details with the documentary evidences as extracted from the website of Ministry of Corporate Affairs, Government of India before the Assessing Officer. These facts had not been rebutted on behalf of the Revenue. (para 2.4) In view of the facts and circumstances of the present case as well as considering the decisions as 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 acco....
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....holders stood established, but also examined the fact that each of them were income-tax assessees and had disclosed the share application money in their accounts which were duly reflected in their IT returns as well as in their balance sheets-Tribunal was not therefore justified in coming to the conclusion that the CIT(A) had not considered the matter in the right perspective-Order passed by Tribunal remanding the matter for examining the share applicants set aside and that of CIT(A) restored x) Meera Engineering & Commercial Co. (P) Ltd. vs. Asstt. CIT (1997) 58 TTJ (Jab) 527 Income-Cash credits-Genuineness of share capital of company-All the 51 shareholders filed their affidavits and confirmatory letters and 24 of them filed their replies also to notice under s. 133(6)-Names of parties purchasing the shares with amount subscribed were furnished before AO-All documents clearly show that shareholders do exist- Assessee-company had discharged its onus of explaining the cash credits as required under law-If the company is able to establish that shareholders existed and they have invested money for purchase of shares burden of company to prove the credit is discharged-Identity of s....
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....e 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 have no relation with....
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.... to be deleted......." 3.3 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. 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 Buildcon Pvt Ltd, details of which are as under: Name of Appellant Company ITA No AY AY Addition Made by AO Addition Sustained Addition deleted/ Relief Given Motisons Global Pvt. Ltd 753/14-15 2009-10 2,75,00,00 ------------- 2,75,00,000 Motisons Global Pvt. Ltd 754/14-15 2011-12 6,96,50,00 --------------- 6,96,50,000 Motisons Global Pvt. Ltd 767/14-15 2012-13 42,07,29,60 5,94,47,727 36,12,81,873 Motisons Global Pvt. Ltd 755/14-15 2013-14 4,41,00,00 50,50,000 3,90,50,000 Motisons Entertainment (I) Ltd Pvt. 760/14-15 2009-10 3,40,00,00 --------------- 3,40,00,000 Motisons Entertainment (I) Ltd Pvt. 766/14-15 2011....
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....12-13 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 3,50,000 86,50,000 94,14,07,100 8,71,97,727 85,42,09,373 It is pertinent to mention h....
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....00 10 29,40,000 490 500 30,00,000 7 Puja Tie-Up Pvt Ltd 8,000 80,000 10 39,20,000 490 500 40,00,000 Total 40,000 4,00,000 1,96,00,000 2,00,00,000 b). The ld. AO has not made the addition under the deeming provisions of section 68 of Income Tax Act. The ld AO made the addition by applying the provisions of section 56(1) of Income Tax Act on the ground that the assets of the assessee company don't commensurate to premium charged and any business activity was not performed or any business income has not been shown by the assessee. The ld CIT(A) has not confirmed the addition made by ld AO by applying the provisions of section 56(1) of Income Tax Act, on the basis of his detailed findings at page 39-42 of his order. The assessee relies on the findings of ld CIT(A). d) Justification of Charging share premium The assessee has submitted the justification for charging the share premium which is summarized as under: - Name of Company Reason for Charging Share Premium Rainbow Buildcon Pvt. Ltd 1. Owning large chunk of agricultural land at Village Gidani (Nea....
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....ium of Rs. 190 per share was charged. The Tribunal observed as under (pg 358 to 359/Case laws): "11. We have carefully perused the orders of the lower authorities. In our considered view, the issue of shares at premium is always a commercial decision which does not require any justification. Further the premium is a capital receipt which has to be dealt with in accordance with Sec. 78 of the Companies Act, 1956. Further, the company is not required to prove the genuineness, purpose or justification for charging premium of shares, share premium by its very nature in a capital receipts and is not income for its ordinary sense. It is not in dispute that the assessee had filed all the requisite details/documents which are required to explain credits in the books of accounts by the provisions of Sec. 68 of the Act. The assessee has successfully established the identity of the companies who have purchased shares at a premium. The assessee has also filed bank details to explain the source of the share holders and the genuineness of the transaction was also established by filing copies of share application forms and Form No. 2 filed with the Registrar of Companies. The entire disp....
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....rom other sources", if it is not chargeable to income-tax under any of the heads specified in section 14, items A to E." In the case of the assessee company, the amount was received from investors were against share application and the same is capital receipt which was adjusted against share capital and share premium. The money so received to assessee company was capital receipt and was not revenue receipt, therefore the same cannot be taxed in the hands of assessee company under section 56(1) of Income Tax Act, 1961 because this section deal with income and not with capital receipts. The investors who subscribed the share capital of assessee company is also showing the amount paid to assessee as their investment in shares of assessee company and necessary documents in this regard was submitted to ld. AO. Therefore the assessee has proved with documentary evidences that the amount was received against share application i.e. capital receipt, therefore the same cannot be treated as income of the assessee. Further for treating the share capital/share premium as income of the assessee company no cogent reason has been given by ld. AO. Further, there is no deeming fiction has been given....
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.... that amendment took effect from 1st April, 1995 and therefore will not be applicable for A.Y. 1987-88. Similar finding has been recorded by Hon'ble Raj, High Court in the case of Gotan Lime Stone Khanij Udhyog. The ratio of law in respect of amendment in 55(2) being held as prospective is applicable for 56(2)(vibe) and hence share premium in excess of fair market value can not be held taxable for A.Y. 2011-12. b) Recently the Hon'ble Apex Court in the case of M.G. Pictures (Madras) Ltd V/s ACIT 373 ITR 39 held that amendment in section 40A(3) w.e.f. from 1.4.1996 is prospective and cannot be applied to previous years of Block period prior to F.Y. 1995-96. c) The figure of 10,000 was changed to 20,000 u/s 40A(3) of Income Tax Act, 1961 and 269SS of Income Tax Act, 1961 by Direct Tax Laws (Amendment) Act 1987 w.e.f. 1.4.1989. The CBDT vide circular No.522 dated 18.08.1988 stated that amendment in section 40A(3) is applicable for A.Y. 1989-90 as it is a substantive provision and since 269SS is a procedural provision, the effective date will be 1.4.89 i.e. previous year relevant to A.Y. 89-90. d) The five Judge Constitution Bench in the case of CIT ....
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.... It shall not be excluded from the total income (e.g. section10). (c) It is not chargeable to tax under any of the specified Heads in section 14, items A to E. The finance Bill 2012 as presented on 16th March 2012 included a new clause (viib) u/s 56(2) of I.T. Act [342 ITR1(st)]. No proposal in the original bill to insert a new clause u/s 2(24). Subsequently Notice of amendments to Finance Bill was given [See 343 ITR 37(st)] and amendments also made in charging section 2(24) in inserting clause (xvi) in 2(24) of I.T. Act w.e.f. 1.4.2013 reads as under: (xvi) Any consideration received for issue of shares as exceeds the fair market value of the shares referred to in clause (viib) of subsection (2) of 56. The amendment made in 2(24) is also applicable w.e.f. 01.04.2013 and it cannot be applied earlier to 01-04-2013. j) The Income for the purpose of the Income Tax Act is defined in section 2(24) of the Income Tax Act 1961. Section 2(24) of the Income Act 1961 gives inclusive definition of income but the income should be look into its normal meaning. The income will not include capital receipts unless it is specified in Income Tax Act. This ....
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....9/Case Laws) also hold that as per 2(24)(vi) only income which is chargeable u/s 45 is to be included in income and if computation provision u/s 45 fails then charging provisions will fail. Ref. to CIT V B.C. Srinivasa Setty 128 ITR 294. iii) The Hon'ble Rajasthan High Court in the Case of CIT V Gotan Lime Stone Khanij Udyog 269 ITR 399 (PB 56-65/Case Laws) also held that in case computation provision u/s 48 could not be applied for want of ascertainable cost of acquisition, then capital gain does not arise to be included in total income on account of failure of applicability of computation provision. The Hon'ble High Court referred to decision of Bombay High Court in the case of Cadell Wvg. Mills Co (P) Ltd. (Supra). iv) The Hon'ble Rajasthan High Court in the case of S. Zoraster and Co. V/s CIT 322 ITR 35 (PB 6668/Case Laws) had on occasion to consider the taxability of receipt of Rs. 20,000 received by vendee on default of the purchaser as per agreement for sell of Prem Prakash Talkies. The Hon'ble High Court after referring to the decision of Apex Court in the case of Travancore Rubber and Tea Co Ltd. V CIT 243 ITR 158 held that such receipt is capital receipt....
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....stated as under [371 ITR 6(st)]. "In reference to the above cited subject, I am directed to draw your attention to decision of the High Court of Bombay in the case of Vodafone India Services Pvt. Ltd V UOI for the Assessment year 2009-10 (WP No.871 of 2014) wherein the court has held interalia, that the premium on share issue was on account of a capital account transaction and does not give rise to income and hence, not liable to transfer pricing adjustment. It is hereby informed that the Board has accepted the decision of the High Court of Bombay in the above mentioned writ petition. In view of the acceptance of the above judgment, it is directed that the ratio decidendi of the judgment must be adhered to by the field officers in all cases where the issue is involved. This may also be brought to the notice of the ITAT, DRP's and CIT (Appeals)." In view of above instruction, it is clear that ratio deciding of treating of share premium as capital receipt is binding on revenue authorities. j. In view of the above submissions, it is clear that share premium received is a capital receipt and consideration received cannot be considered as income for t....
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....gs the assessee submitted the following documents to prove their identity of shareholders, creditworthiness of shareholders and genuineness of transaction with them: - Name of Shareholder Particulars of Documents submitted Copy at PB Page Anuraj Securities Pvt. Ltd • Share application containing the name/address/PAN of party detail of payment received etc. • Copy of board resolution. • Copy of PAN card of party. • Copy of bank statement showing the entry of payment made to assessee. • Declaration of source of funds with party. • Copy of Ack. of ITR of AY 2009-10. • Copy of audit report and audited balance sheet along with annexure of 31.03.09. • Copy of registration certificate issued by ROC. 102 103 104 105 106-108 109 110-125 126 Matribhumi Dealers Pvt. Ltd • Share application containing the name/address/PAN of party, detail of payment received etc. • Copy of board resolution. • Copy of PAN card of party. • Copy of bank statement showing the entry of payment made to assessee. â€....
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.... of payment received etc. • Copy of board resolution. • Copy of PAN card of party. • Copy of bank statement showing the entry of payment made to assessee. • Declaration of source of funds with party. • Copy of Ack. of ITR of AY 2009-10. • Copy of audit report and audited balance sheet along with annexure of 31.03.09. • Copy of registration certificate issued by ROC. 204-205 206 207 208 209-211 212 213-224 225 Puja Tie Up Pvt. Ltd • Share application containing the name/address/PAN of party, detail of payment received etc. • Copy of board resolution. • Copy of PAN card of party. • Copy of bank statement showing the entry of payment made to assessee. • Declaration of source of funds with party. Copy of Ack. of ITR of AY 2009-10. • Copy of audit report and audited balance sheet along with annexure of 31.03.09. • Copy of registration certificate issued by ROC. 226-227 228 229 230 231 232 233-244 245 m) All the share capital/share application was re....
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....t 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 proved. iii) Genuineness The assessee submitted the Share Application Form received from above companies against the share application received from the companies. The share application is supported by Board Resolution passed in the investor companies. The assessee company has allotted the shares to the investor companies. The proper returns were filed before the ROC against allotment of the shares to these companies. Furthermore, the department has carried out intensive search operations over the assessee and no any incriminating material was found to show that the ....
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....tory, 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 Vs M/s. Gagandeep Infrastructure Pvt.Ltd 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 201314 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 April, 2013 was its normal meaning. The Parliament did not introduce to p....
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..../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 Laws). The findings of Hon'ble Rajasthan High Court was as under:- 10. The points as sought to be raised by the appellantrevenue in the present case are all the matters relating to appreciation of evidence. The relevant factors have been taken into account and considered by the appellate authorities before returning the findings in favour of the assessee. Even as regards the three referred share capital contributors, it is noticed that they are existing assessees having PA numbers; and are being regularly assessed to tax. The appellate authorities cannot be said to have erred in deleting the additions in their regard too at the hands of assess....
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.... 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 and then recorded a finding for its acceptance. Such finding when challenged does not constitute a substantial question of law within the meaning of s. 260A ibid in an appeal arising out of such order. 10. In our opinion, therefore, once the CIT(A) and Tribunal accepted the explanation of assessee and accordingly, deleted certain additions made by AO holding the transaction of shares to be genuine, then it would not involve any substantial issue of law as such. In other words, this Court in its appellate jurisdiction under s. 260A ibid, would not again de novo hold yet another factual inquiry with a view ....
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....e 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 investment in the assessee-company and thus the assessee has discharged its initial burden except in one case-As regards individual investors, the Tribunal found that identity of 9 out of 10 investors has been established and they have confirmed the fact of making investment in the shares of the assessee-company and no further enquiry was directed by the AO-Thus, additions were sustained only in respect of investments said to have been made by U, an individual investor and by W Ltd., for the reason that such investments were not proved- Finding of the Tribunal is es....
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....y 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 to 238/Case Laws) In this case Hon'ble ITAT Jaipur Bench has relied on its old decision in the case of Hotel Gaudavan ITA No. 1162 and 1137/JP/2008 and addition on account of share capital was deleted. 28.5 On identical issue, the Tribunal, Jaipur Bench in the case of Hotel Gaudavan (P) Ltd. (supra) has held as under : "6. As regards the issue on merit in the Departmental appeal, we concur with the views of the learned CIT(A) that the AO has not considered the explanation of the assessee. The amount under consideration of Rs. 1.89 crore has been received by the assessee as ....
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....t 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 money. We are reproducing the held portion from the decision of Hon'ble Delhi High Court as mentioned in (2007) 207 CTR (Del) 38 (supra). "Income-Cash credit-Share application money- Burden of proof can seldom be discharged to the hilt by the assessee-If the AO harbours doubts of the legitimacy of any subscription he is empowered, nay duty-bound, to carry out 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....
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....n 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 facts also, the assessee has produced before the Assessing Officer copy of share application, confirmation of the cash creditors, copy of PAN, copy of Board resolution, copy of Director's report, auditor's report, copy of balance sheet, copy of P&L account, copy of bank account in all the cases to prove the identity, genuineness and creditworthiness of the cash creditors. The ld Assessing Officer made addition on the basis of investigation conducted by the ITO, Investigation Wing, Kolkata but the ld Assessing Offi....
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....rther, 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 have no relation with the amount invested with the assessee-company-Merely because she has not submitted her returns after the asst. yr. 1984-85, it cannot be said that she was not assessed to tax-Though V has not been shown to be assessed to tax, he had made major part of investments towards share capital through cheques and his identity is not doubted- Accordingly, share capital advanced by U and V is also to be accepted as genuine-Therefore, no addition of share capital money could be made in the hands ....
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....e 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 law on this subject is also settled by numerous decisions. The alleged report of the Inspector of the Department who is stated to have visited at the given addresses of the share applicants was never put or confronted to the assessee. The cumulative effects of these reasons is that the impugned addition cannot be added in the hands of the assessee company. Accordingly, we order to delete the entire additions and allow the appeal of the assessee. 3.0 In the result, the appeal ....
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....s 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 positive material or evidence which would indicate that the shareholders were benamidars or fictitious persons or that any part of the share capital represented company's own income from undisclosed sources-As regards receipt of share capital on issue of rights shares to five companies, these companies were duly incorporated under the Sikkimese Companies Act and were assessed under the Sikkimese Taxation Manual- Their share subscriptions were also received through banking channels a....
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....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 by AO on account of bogus share application money under provisions of s 68-CIT(A) deleted addition made by AO-Held, in case of CIT vs. M/s. Lovely Exports (Pvt) Ltd, reported in [2008] 216 CTR 195 (SC), it was held that If share application money was received by assessee company from alleged bogus shareholders whose name were given to AO then department was free to proceed to reopen their individual assessments in accordance with law but it could not be regarded as undisclosed income of assessee company-I....
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....rfere 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) Income-Cash credits-Genuineness of share capital of company-All the 51 shareholders filed their affidavits and confirmatory letters and 24 of them filed their replies also to notice under s. 133(6)- Names of parties purchasing the shares with amount subscribed were furnished before AO-All documents clearly show that shareholders do exist- Assessee-company had discharged its onus of explaining the cash credits as required under law-If the company is able to establish that shareholders existed and t....
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....it-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) f) Ratio Laid down in following cases not applicable to the facts of the case of assessee:- 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 this assessee company, notice u/s 133(6) was sent to investor companies, all of which were served and some 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 ....