TaxTMI 
TaxTMI 
2015 (12) TMI 1795
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....cture & Construction P. Ltd. 5,00,000 2 M/s. Neema Investment P. Ltd. 1,05,00,000 3 M/s. Money Penny Fincom P. Ltd. 60,00,000 1,70,00,000 2.2 That on the facts and in the circumstances of the case, ld. CIT(A) has erred in maintaining addition of Rs. 1,05,00,000 in respect of share application money as received from M/s. Neema Investment P. Ltd. even when Rs. 40 lacs was received during the previous year relevant to the AY 2005-06 and balance amount of Rs. 65 lacs only in the year under appeal." 3. Short facts of the case are as under: "A search u/s 132 of the I.T. Act was executed on 21.11.2006 on the office and factory premises of the assessee. A notice u/s 153C was issued to the assessee on 5.10.2007 which served to the assessee on 8.10.2007. In response to the notice issued u/s 153C, the assessee had filed its return of total income on 8.11.2008 declaring total income at NIL. During the course of assessment proceedings the assessee filed copy of confirmation letter duly singed by all the above applicant along-with share application form. However, the assessee was also asked to justify the amou....
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....on money, share capital and Sundry creditors not explained properly added U/s 68 of the Income Tax Act. Accordingly, investment made by all these companies accepted as genuine. 2.5.3] That once the amount of share application money, share capital and sundry creditors added to the income of the share holders. In that case there is no justification to disbelieve the creditworthiness of all these companies. 2.5.4] That Income tax assessment for the Assessment Year 2005-06 was passed under scrutiny U/s 143(3) of the Income Tax Act. Hence, identity of the share holders stand proved. Since, entire amount of credits in their books of account has already been added to the income of the share holders. In that case source of investment made by them in the case of the assessee company stand proved. 2.6] That from the above documents it is very clear that the assessee has properly discharged onus lying on him. The assessee has proved identity and genuineness of the investment made by all the share holders in the share application money of the assessee company. Hence, there is no reason for making any addition in respect of share application money in the case o....
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.... application form were also found. In that case there is no reason to disbelieve on the amount of share application money as received by the assessee. 2.5] That in the case of the above companies scrutiny order U/s 143(3) has also been passed by the office of the ACIT 5(1), ITO 5(1) and ITO 5(2), Indore. Since, income tax assessment order has already been passed in the case of the above companies. There is no justification for making separate additions in the case of the assessee again. 3] That the assessee had properly discharged onous luing on him by proving the identity, capacity and genuineness of the share application/share capital. Hemce, the amount of share application /share capital as received by the assessee be treated as genuine. That all the above companies are filing there income tax return regularly with the department and also registered with the registrar of companies. Hence there is no reason to disbelieve on the identity of these companies. 4] That in view of the above and as submitted in our earlier submissions it is submitted that share application money of Rs. 4,90,00,000/-as received by the assessee be treated as....
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....assessee in the year under consideration be added to the income of the assessee U/s 68 of the Income Tax Act." 4. Matter carried to ld. CIT(A) and ld. CIT(A) has partly allowed the appeal by observing as under: "4.2.1) In ground No 2 the present appeal, the appellant has challenged the addition of Rs. 4,90,00,000/- made to the income of the appellant in respect of share application money as received from the 8 (eight) parties. The AO while making the addition in respect of share application money has observed that substantial amount of cash were deposited in the bank account of the share holders in the Asst Year 2005-06. The AO also relied on the decision of the Hon'ble Jurisdiction High Court in the case of Rathi Finlease Ltd as reported in 215 CTR 249 and Hon'ble Calcutta High Court in the case of M/s Nividen Vanijya Niyjan Ltd as reported in 182 CTR 605. It was claimed by the appellant that following documents were filed by it during the course of assessment and appellate proceedings:- S.No. Particulars 1 Share application money form 2 Memorandum and Article of Association 3 Master Record from the MCA site 4 Memorandu....
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....e as share application money and loan of Rs. 75 lakh taken in AY 05-06 was also transferred in account of share application money. Out of this, share application money of Rs. 1,65,00,000/- was refunded back to three companies, Rs. 90 lakh refunded back to Pursuit Security P. Ltd., Rs. 50 lakh refunded to Neema Investment P. Ltd. And Rs. 25 Lakh refunded to Money Penny Fincom P. Ltd. In AY 07-08. For the balance amount of Rs. 3,25,00,000/- shares were allotted to these 8 companies in AY 2007-08 and such shares of the appellant company are still held by them as per submission of appellant datred 29-11-2012 in which they submitted share holding pattern dated 31.03.12 and confirmed that such share holding pattern remains same even today. 4.2.5) In earlier years also addition was made in hands of appellant's for share application money u/s 68 of the I.T. Act. But in those years share application money was received from different companies and in those years it was confirmed by Ld CIT (A) mainly because while such companies invested in share application of appellant at a premium but such shares were bought back by directors or sister concerns of appellant belo....
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....mpany. In respect of all other companies' small amount of cash was found deposited in their bank accounts which is apparently not linked to issuance of cheques to appellant in view of deposits by cheques observed in these accounts. 4.2.7) The AO has further stated that such companies provided entries for share application money but no basis of such allegation was given. This office during appellante proccedings raised a querry before appellant through notice dated 16/07/2010 through which copy of statement recorded by investigation wing during a search action on 16/04/2009 of Shri Rameshchand Kathod director of M/s Neema Investment P. Ltd. and Money Penny Fincom P. Ltd. was provided to appellant. In this statement Shri Rameshchand Kathod admitted that these two companies provided accommodation entry of share application money. The relevant questions and answers from his statement are reproduced below:- ........................ 4.28) When appellant was confronted with these facts their only defence as furnished in reply dt. 06/11/2002 was that such statement of Shri Rameshchand Kathod was in regard to investigation carried out against Kalani Group o....
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....itted in reply to Q.No. 5 or deposited in bank account of friends and from their brought in accounts of these two companies as admitted in answer to Q.No. 24 so far as buy back of such shares is concerned in Shri R. Kathod has categorically admitted in reply to Q.No. 28 that they do not hold such share certificates. In reply to Q.No. 29 he admitted that since such share application money was provided by such companies themselves, hence such companies never gave such share certificate to them. 4.2.10) In this regard in order to overcome such specific statement of Shri R. Kathod exposing entire modus operandi of the "accommodation entry" for share application, merely filing a self serving affidavit of such person, at a subsequent date would be of no help unless all issues exposed in the statement are successfully explained by appellant as held in case of Garibdas Chandrikaprasad (1998) 147 CTR 373 (MP) and Smt. Gunwantibai Ratilal (1984) 146 ITR 140 (MP). Appellant has to establish creditworthiness of these two companies in view of meager income of such companies in their returns for last 5 years, furnish copy of bank account of not only these two companies but also o....
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....hare applicants ar bogus or the impugned money belongs to the assessee company itself. (ii) That the above order of ITAT Indore bench has also been confirmed by the Hon'ble M.P. High Court in the case of CIT V/s STL Extrusion (P) Ltd. reported in ii) Rifca Construction P Limited- [ Now known as Saumya Infraventures P 53 DTR 97(2011) after referring its earlier order in the case of CIT V/s Rathi Finlease Ltd. reported. In 215 CTR 429 has decided in favour of the assessee wherein Hon'ble Jurisdictional high court also relied on the decision of the Hon'ble Apex Court in the case of Lovely Exports P Limited. (iii) Hon'ble Apex Court in the case of Lovely Exports P Limited as reported in 216 CTR 195 has dismissed tha SLR as filed by the department. "In this case the Delhi High Court observed that when details where furnished by assessee, the burden shifted to the assessing officer to investigate into the creditworthiness of the share applicants which he was unable to discharge. (iv) Hon'ble Delhi High Court in the case of CIT vs NOVA PROMOTERS & FINLEASE (P) LTD reported in 342 ITR 169 has held that (Refer Para ....
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..../2012) has discussed the similar issue in detail and after considering the decision in the case of Nova Promoters P Limited has held that :- The facts of Nova Promoters and Finlease (P) Ltd. (supra) fall in the former category and that is why this Court decided in favour of the revenue in that case. However the facts of the present case are clearly distinguishable and fall in the second category and are more in line with facts of Lovely Exports (P) Ltd. (Supra). There was a clear lack of inquiry on the part of the assessing officer once the assessee had furnished all the material which we have already reffered to above. In such an eventuality no addition can be made under section 68 of the Act consequently, the question is answered in the negative. The decision of the Tribunal is correct in law. The appeal is dismissed." 4.2.12) In view of the aforesaid discussion, I am of the considered view that appellant has failed to explain genuineness and creditworthiness of the credits shown as received from four share applicants namely Max Touch Securities P. ltd. (Share appl. Money of Rs. 5 lakh) because of huge unexplained cash deposits in its....
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....4409R NIL 5,00,000 5,00,000 8 Central Region Infrastructure & Cont. Pvt. Ltd. AACCC5101D NIL 5,00,000 5,00,000 75,00,000 4,15,00,000 4,90,00,000 2.2.2] That the assessee had received share application money of Rs. 4,15,00,000/- only in the year under consideration. However, the assessing officer has added an amount of Rs. 4,90,00,000/- to the income of the assessee in place of Rs. 4,15,00,000/-. 2.2.3] The Ld CIT Appeal maintained addition to the extent of Rs. 1,75,00,000/- in respect of the following companies:- S.No Name of the Applicant PA No Total as on 31.03.2006 Relief allowed Addition Maintained 1 Sundrop security P. Ltd. AACCS5419C 85,00,000 85,00,000 NIL 2 Rifca Cost. P. Ltd.[ Now known as Saumya Infraventures P Limited ] AABCR2220B 40,00,000 40,00,000 NIL 3 Pramila investment & finance P Ltd AABCP8031A 25,00,000 25,00,000 NIL 4 Neema Investment P Limited AABCN5299 1,05,00,000 NIL 1,05,00,000 5....
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....ee company towards share application money. The said observation of the assessing officer was general in nature and the same is factually incorrect. The said observation was based on assessment proceeding of the some of the share holders in the Assessment year 2005-06. However, the Assessing officer has not provided the name of the share holders in whose account cash were deposited. The income tax assessments in respect of the following shareholders were finalized for the Assessment Year 2005-06:- S.No Name of the Company PAN No 1 Pramila investment & finance AABCP8031A 2 Neema Investment P Limited AABCN5299 3 Money Penny Fincom Pvt. Ltd. AADCM5417F 2.3.2] The assessee had filed copy of bank statements in respect of the following companies:- S.No Name of the Applicant PA No Addition Page Nos 1 Sundrop security P. Ltd. AACCS5419C 85,00,000 120-129 2 Rifca Cost. P. Ltd.[ Now known as Saumya Infraventures P Limited ] AABCR2220B 40,00,000 155-164 3 Pramila investment & finance AABCP8031A 25,00,000 186-189 4 Neema I....
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....nt. 2.5] The summary of papers as filed by the assessee in respect of the above companies as filed by the assessee before the AO and during the course of appeal proceeding are as under:- (i) Sundrop Securities P Limited- Share Application money of Rs. 8500000/- S.No Description Pg No of Compilation 1 Copy of A/c of Sundrop Securities P. Ltd in the books of the assessee 99 2 Copy of Minutes of the Meeting of the Board of Director of the share applicant authorizing Shri Paras Jain for Investment in the shares of the assessee company 100 3 Copy of covering letter attached with the cheques for investment in the share application of the assessee company. 101-108 4 Copy of Share application money form duly signed and filed by the share applicant 109-115 5 Copy of Confirmation of share application money of Rs. 8500000/- duly signed with PAN No 116 6 Copy of Ack of Income Tax return as filed for the Assessment Year 2006-07. 117 7 Copy of Affidavit of the director Shri Shailendra S Chouhan dt 11-062009 sworn before Notary Public accepting the Investment in the share application money in ....
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....ramila Investment & Finance P Limited- Share Application money of Rs. 2500000/- S.No Description Pg No of Compilation 1 Copy of A/c of Pramila Investment & Finance P. Ltd in the books of the assessee 176 2 Copy of extract of Minutes of the Board Meeting of the Director of the share applicant company authorizing Shri K C Pandya for investment in the shares of the assessee company 177 3 Copy of Covering letter of share applicant company duly addressed to the assessee company with cheques towards investment in the share application money of the assessee company 178-179 4 Copy of Share application money form duly filled and signed on behalf of the share holder 180-181 5 Confirmation of share application money of Rs. 2500000/- as received from the share applicant duly signed with PAN No duly confirming the investment made in the share of the assessee company. 182 6 Copy of Ack of Income Tax return of the share applicant as filed for the Assessment Year 2006-07 183 7 Copy of Affidavit of Shri Manoj Pandya dt 11-06-2009, director of the assessee company sworn before the Notary duly accepting the Investment ma....
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.... Descripotion Pg No of Compilation 1 Copy of A/c of Money Penny P. Ltd in the books of the assessee. 241 2 Copy of extract of Minutes of the Board Meeting of the Director of the share applicant company duly authorizing Shri Girish Surana for investment in the shares of the assessee company. 242 3 Copy of Covering letter of share applicant company duly addressed to the assessee company with cheques towards investment in the share application money of the assessee company. 243-248 4 Copy of Share application form duly filled and signed on behalf of the share holder. 249-254 5 Confirmation of share application money of Rs. 6000000/- duly signed with PAN No. for A.Y. 06-07. 255 6 Copy of Ack of Income Tax return as filed for the Assessment Year 2006-07. 256 7 Copy of Affidavit of Shri Ramesh Chand Khatod director of share applicant company duly sworn before the notary on 03-09-2010 accepting the investment in the share application of the assessee company 257-258 8 Copy of Affidavit of director of company Shri Ramesh Chand Khatod duly sworn before the notary on 31-03-2012 in the case of M/s Shivangi Estate Limited [....
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....uch Securities P Limited- Share Application Money of Rs. 500000/- S.No Descripotion Pg No of Compilation 1 Copy of Share Application money form duly filled and signed 345 2 Copy of Certificate of Incorporation 346 3 Article of Association of the share holder company 347-354 4 Memorandum of Association of the share holder company 355-360 5 Form No 18 as filed with the Registrar of Companies i.e. an Intimation for change of address 361-363 6 Copy of Audited Balance Sheet of the share applicant company for 364-375 the year ended on 31.03.2005 7 Copy of Annual return of the share holder as filed for the year ended on 31.03.2006 376-382 8 Copy of confirmation letter duly signed with PAN No in respect of share application money of Rs. 500000/- as received by the assessee 383 9 Copy of Notice U/s 226(3) as received by the appellant company from Tax Recovery Officer-4(1), Indore Dt 13.06.2013 against the outstanding demand of the share applicant company M/s Maxtouch Securities P Limited 384 10 Copy of reply dt 18-06-2013 to the notice as received U/s 226(3) to ....
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....that case there is no justification to disbelieve the creditworthiness of all these companies. 2.7.4]That Income tax assessment for the Assessment Year 2005-06 in the case of shareholders was passed under scrutiny U/s 143(3) of the Income Tax Act. Hence, identities of the shareholders stand proved. Since, entire amount of credits in their books of account has already been added to the income of the shareholders. In that case source of investment made by them in the case of the assessee company stand proved. 2.8.1] The Ld CIT[A] on the basis of statement of Shri Ramesh Chand Khatod as recorded during the course of his search on 16-04-2009 has maintained the addition in respect of amount received from M/s Neema Investment P Limited and also from M/s Money Penny Fincom P Limited. The Ld CIT[A] also maintained addition in respect of Central Region Infrastructure & Construciton P Limited for non- submission of the bank account and in respect of M/.s Max Touch Securities P Limited for cash deposit in its account prior to issuance of the cheque to the assessee company. 2.8.2] The statement of Shri Ramesh Chand Khatod as relied by the Ld CIT[A] was not r....
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..... The ld. CIT(A) has also maintained the addition in respect of Rs. 1,05,00,000 in respect of the amount received from Neema Investment Ltd. The assessee has not allotted the shares in respect of Rs. 1,65,00,000 but it was refunded by the assessee. The assessing officer in the concluding para of the assessment order as passed U/s 143(3) of the Income Tax Act on 31-12-2008 mentioned that the shareholder companies were deposited huge amount of cash in their bank account prior to issuance of the cheque to the assessee company towards share application money. The said observation of the assessing officer was general in nature and the same is factually incorrect. The said observation was based on assessment proceeding of the some of the shareholders in the Assessment year 2005-06. However, the Assessing officer has not provided the name of the shareholders in whose account cash were deposited. The income tax assessments in respect of the following shareholders were finalized for the Assessment Year 2005-06:- The assessee had filed copy of bank statements in respect of the following companies:- On perusal of the bank statement as filed above, we find that no cash were deposited in ....
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....Director of the share applicant authorizing Shri Paras Jain for Investment in the shares of the assessee company 100 3 Copy of covering letter attached with the cheques for investment in the share application of the assessee company. 101-108 4 Copy of Share application money form duly signed and filed by the share applicant 109-115 5 Copy of Confirmation of share application money of Rs. 8500000/- duly 116 signed with PAN No 6 Copy of Ack of Income Tax return as filed for the Assessment Year 2006-07. 117 7 Copy of Affidavit of the director Shri Shailendra S Chouhan dt 11-062009 sworn before Notary Public accepting the Investment in the share application money in the assessee company. 118 8 Copy of Bank statement of the share holders with The Bank of Rajasthan Limited from which investment in the share application money was made in the assessee company. 120-129 9 Copy of Audited Balance Sheet of the share holder for the Year ended on 31.03.2005. 130-140 10 Copy of confirmation letter duly signed by the share holder with its PAN No in the A.Y. 05-06 which was accepte....
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....m on account of share application money, share capital and Sundry creditors which they failed to explain has already been added to the income of the assessee u/s 68 of the Income Tax Act. Accordingly, investment made by all these companies requires to be accepted as genuine. Once the amount of share application money, share capital and sundry creditors added to the income of the shareholders. In that case there is no justification to disbelieve the creditworthiness of all these companies.Income tax assessment for the Assessment Year 2005-06 in the case of shareholders was passed under scrutiny U/s 143(3) of the Income Tax Act. Hence, identities of the shareholders stand proved. Since, entire amount of credits in their books of account has already been added to the income of the shareholders, the source of investment made by them in the case of the assessee company stand proved.The Ld CIT[A] on the basis of statement of Shri Ramesh Chand Khatod as recorded during the course of his search on 16-04-2009 has maintained the addition in respect of amount received from M/s Neema Investment P Limited and also from M/s Money Penny Fincom P Limited. The Ld CIT[A] also maintained add....
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....ench has also been confirmed by the Hon'ble M.P. High Court in the case of CIT V/s STL Extrusion (P) Ltd reported in 53 DTR 97(2011) after referring its earlier order in the case of CIT V/s Rathi Finlease Ltd. reported in 215 CTR 429 has decided in favour of the assessee wherein Hon'ble Jurisdictional high court also relied on the decision of the Hon'ble Apex Court in the case of Lovely Exports P Limited. Hon'ble Jurisdicitonal high Court in the case of CIT vs People General Hospital Ltd [ Appeal No M.A.I.T No 27/ 2008 dt 27-06-2013] has held that [ refer Para 16] :- " 16. The aforesaid judgment has been followed by all the Courts and the judgments relied on by the appellants relates to the period prior to the judgment in Lovely Exports. As the Apex Court has specifically held that if the identity of the person providing share application money is established then the burden was not on the assessee to prove the creditworthiness of the said person. However, the department can proceed against the said Company in accordance with law. The position of the present case is identical. It is not the case of any of the parties that M/s Alliance Industries Limited, Sha....
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....ntended that the issue is covered by the decision of the Tribunal in the case of M/s Agrawal Coal Corporation decided by this Bench on 31st October, 2011 in ITA Nos. 151/Ind/2009,283,136and34/Ind/2010,190/Ind/09,158/Ind/2010 etc. We are not agreeing with this proposition because in that case the identity of such share applicants was not proved and even the addresses of such share applicants were found nonexistent/bogus. In view of those facts, this Bench concluded that the decision from Hon'ble Apex Court pronounced in Lovely Exports Private Limited is not applicable and the addition was confirmed in the hands of the assessee. However, in the present appeal, since the identity of such share subscribers, as we have discussed above, was established, therefore, no addition u/s 68 is warranted in the case of the assessee company. So far as the decision from Hon'ble jurisdictional High Court in the case of CIT vs. Rathi Finlease Limited (2008) 215 CTR (MP) 249 is concerned, in that case, despite several opportunities, the assessee was unable to provided confirmations from the concerned parties, therefore, the Hon'ble Court reached to a particular conclusion, whereas....
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....see to explain the "nature and source" of the credit and to do so, the assessee is required to prove (a) Identity of the shareholder (b) Genuineness of transaction and (c) credit worthiness of shareholders; (a) The identity of the shareholder can be proved by either (if individual) producing him before the AO or by way of documents, registered address, PAN etc; (b) The genuineness of the transaction can be shown from the fact that the money has been received from the shareholder. If the money is received by cheque and is transmitted through banking or other indisputable channels, the genuineness of transaction would be proved. Other documents showing the genuineness of transaction could be the copies of the shareholders register, share application forms, share transfer register, etc; (c) The creditworthiness or financial strength of the creditor/subscriber can be proved by producing the bank statement of the creditors/subscribers showing that it had sufficient balance in its accounts to enable it to subscribe to the share capital. Once these documents are produced, the assessee would have satisfactoril....
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.... cannot be acted upon, then no addition can be made in the hands of the company under sec.68 and the remedy open to the revenue is to go after the share applicants in accordance with law. We are afraid that we cannot apply the ratio to a case, such as the present one, where the Assessing Officer is in possession of material that discredits and impeaches the particulars furnished by the assessee and also establishes the link between selfconfessed "accommodation entry providers", whose business it is to help assessees bring into their books of account their unaccounted monies through the medium of share subscription, and the assessee. The ratio is inapplicable to a case, again such as the present one, where the involvement of the assessee in such modus operandi is clearly indicated by valid material made available to the Assessing Officer as a result of investigations carried out by the revenue authorities into the activities of such "entry providers". The existence with the Assessing Officer of material showing that the share subscriptions were collected as part of a premeditated plan - a smokescreen - conceived and executed with the connivance or involvement of the assessee exclude....
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....addition in the income of the assessee does not arise. This explanation of the assessee has been duly considered and found not acceptable. This entry remains unexplained in the hands of the assessee as has been arrived by the Investigation wing of the Department. As such entries of Rs. 55,50,000/- received by the assessee are treated as an unexplained cash credit in the hands of the assessee and added to its income. Since I am satisfied that the assessee has furnished inaccurate particulars of its income, penalty proceedings under section 271(1)(c) are being initiated separately." The facts of Nova Promoters and Finlease (P) Ltd. (supra) fall in the former category and that is why this Court decided in favour of the revenue in that case. However, the facts of the present case are clearly distinguishable and fall in the second category and are more in line with facts of Lovely Exports (P) Ltd. (supra). There was a clear lack of inquiry on the part of the assessing officer once the assessee had furnished all the material which we have already referred to above. In such an eventuality no addition can be made under section 68 of the Act. Consequently, the question is an....
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.... substantial question of law arises. The appeals are dismissed. In the case of ACIT vs M/s Krishna Sheet Processors P limited [ Appeal No ITA No 546/ Mum/ 2013 dt 30-06-2015] the amount of share premium of Rs. 1000/- was duly accepted as genuine. In view of the above, once the assessee has established the identity of the share holder in that case the amount of share premium is not an issue. If the assessing officer has not satisfied with the explanation of the share applicant, necessary addition is to be made in the hand of the share applicant but not in the case of the assessee. In the case of CIT vs Korlay Trading Co Limited as reported in 232 ITR 820, Hon'ble Calcutta High Court observed that in case of unsecured loan mere providing of PA No was not sufficient. In that case the assessee utterly failed to furnish even confirmation letter. In the present appeal, the matter in dispute is not unsecured loan but share capital and it was categorically held that the assessee need to prove the identity of the share holders only. The assessee in present case not only filed confirmation letter but ample documents as to discharged the onus lying on the a....
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.... In case of CIT vs P Mohankala as reported in 291 ITR 278, Hon'ble Apex Court has analysis the provision of section 68 of the Income Tax Act and observed that explanation of the assessee not accepted by the assessing does not tantamount to income of the assessee. In that case the Ld CIT[A] and Hon'ble ITAT also approved the order of the Assessing officer. In the present appeal in hand, the assessee company has explained the correct nature of transactions though the same was not accepted by the Assessing officer but by the Ld CIT[A]. Since, the assessee company has filed ample documents to support its claim. Hence, rather decision of the Hon'ble Apex Court supports the case of the assessee company. In the case of MAF Academy (P) Limited as reported in 42 taxmann.com 377, Hon'ble Delhi High Court on the basis of its finding in the case of N R Portfolio [P] Limited [ Supra] reached to a conclusion that the assessee has failed to provide the identity, genuineness and creditworthiness of the share application money . In the present case as stated the assessee has extend its full co-operation and also filed ample documents as to prove the ingredients of provision of sec....
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....e Supreme Court in the case of Lovely Export (supra), 11 TTJ 357 and other decisions as reproduced above, we are of the view that ld. CIT(A) is justified in deleting the addition of Rs. 3,15,00,000/- and ld. CIT(A) is not justified in confirming the addition of Rs. 1,75,00,000/-, therefore, we delete the same.Accordingly, ground taken by Department is dismissed whereas ground taken by the assessee is allowed. 11. So far as assessee's appeal ground no.1 is concerned, same relates to maintaining the addition in respect of share application money while passing order u/s 153A/143(3) even no incriminating documents were found and seized during the course of search as to justify the said addition. 12. The assessee has challenged the addition made in respect of share capital in the search assessment order passed u/s 153A of the I.T. Act. In the present case, search u/s 132 of the I.T. Act was executed on 21.11.2006 during the previous year relevant to AY 2007-08. The amount of share application money as received by the assessee was recorded in the books of account prior to the date of search. The assessee claimed that on the date of search, no notice was issued u/s 143(2) o....
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....l Logistics Ltd., it was also held that in cases where only 143(1) processing is done and the assessment abate, there is no requirement of seized books of account or seized material to invoke provisions of sec. 153A. We find that the issue is also covered by the decision of Allahabad High Court in the case of Shaila Agrawal, 346 ITR 130 wherein it is held that sec. 153A of the I.T. Act provides that where notice under this sec. is issued as a result of any search u/s 132, assessment or reassessment, if any, relating to any AY falling within the period of six AYs referred to u/s 153, pending on the date of initiation of search u/s 132 or requisition u/s 132A shall abate. The words " pending on the date of initiation of search u/s 132 or making of requisition u/s 132A, as the case may be, " have to be assigned their simple and plain meaning. Where the assessment or reassessment is finalised, there are no pending proceedings to abate and be restored to the file of the Assessing Officer. The word "abate-ment" is referable to something which is pending, alive, or is subject to deduction. Abatement refers to suspension or termination of proceedings either of the main action, or proceedin....
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.... "1.1 On the facts and in the circumstances of the case, ld. CIT(A) has erred in maintaining the issuance of notice u/s 153C as legal and proper even nothing incriminating was found and seized during the course of search from the premises of the person search. 1.2 On the facts and in the circumstances of the case, ld. CIT(A) has erred in maintaining addition in respect of share application money while passing order u/s 153C r.w.s. 143(3) even when no incriminating documents were found and seized during the course of search as to justify the said addition. 2 On the facts and in the circumstances of the case, ld. CIT(A) has erred in maintaining addition u/s 68 of Rs. 80 lacs in respect of share application money received by the assessee company from the following companies without properly appreciating the facts of the case and submission made before him: S.No. Name of the Company Amount (Rs.) 1 M/s. Neema Investment P. Ltd. 50,00,000 2 M/s. Money Penny Fincom P. Ltd. 30,00,000 80,00,000 3. On the facts and in the circumstances of the case, ld. CIT(A) has erred in maintaining the charging of ....
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....ection 153C is necessitated to give power to the Assessing Officer having jurisdiction to proceed against the person other than the person referred to in Section 153A, inspite of the action under Section 139, 147, 148, 149, 151 and 153 of the I.T. Act. However, on closer scrutiny of the two provisions, it is indisputable that, these provisions are machinery provisions and have been provided for in the statute book for the purpose of carrying out assessment of a person other than the searched person under Section 132 or 132A of the I.T. Act in relation to Section 158BD; and Section 153A in relation to Section 153C. Notably, the purpose underlying both these provisions is similar, even though Section 153C does not specifically refer to the expression "undisclosed" income. However, in both the situations, the Assessing Officer engaged in carrying on search of the assessee within his jurisdiction, if seizes or requisitions the items (books of account or other documents or any assets for Section 158BD; and money, bullion, jewellery or other valuable article or thing or books of account or documents for Section 153C), is expected to handover those items to the Assessing Officer having ju....
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....eferred to in Section 153C belongs or belong to a person (other than the person referred to in Section 153A), being sine qua non. He cannot assume jurisdiction to transmit those items to another file which incidentally is pending before him concerning other person (person other than the person referred to in Section 153A). The question as to whether that may influence the opinion of the Assessing Officer having jurisdiction over such other person, also cannot be the basis to take any other view. As a matter of fact, the other Assessing Officer to whom the items are handed over, before issuing notice must himself be satisfied after due verification of the items received and the disclosures made by the other person in the returns for the relevant period already filed by the other person before him. For the same reason, we must reject the argument of the Department that the discretion of the Assessing Officer having jurisdiction will be impaired in any manner, if he were to hold a different view. Similarly, as there is no provision either express or implied (in the Act) to dispense with the requirement of satisfaction, if the Assessing Officer happens to be the same, as in this case, ....
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....he assessee can give meaningful explanation and reason it out as and when opportunity is given to the concerned assessee. 23. In the present case, the concurrent finding of fact recorded by the Appellate Forums is that, no satisfaction has been recorded by the Assessing Officer before issuing of notice under section 153C. Further, none of the papers seized belongs or belong to the assessee (noticee). The Appellate Forums have further found that no addition or even observations have been made by the Assessing Officer in any of the orders for the relevant assessment years in connection with any material found during the course of search. Even for that reason no action under section 153C, is justified. These findings of fact need no interference and have not been questioned before us. Considering the above, these appeals must fail. 24. Accordingly, these appeals are dismissed with no order as to costs." 38. The learned counsel for the assessee submitted that in the assessee's case, there is nothing in the assessment order or otherwise to show that the satisfaction as envisaged u/s.153C was ever recorded by the A.O. Considering it, the A.O. did not assu....
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....nating material or merely on change of opinion in relation to material already considered. [Indian & Eastern Newspaper Society Vs. C.I.T. (119 ITR 996 SC); Calcutta Discount Co. Ltd. Vs. I.T.O (41 ITR 191 SC)] The contention of the revenue to the effect that once a notice under Section 153A of the Act is issued, the assessments for all the six years are at large for the AO has no warrant in law. The learned counsel for the assessee placed reliance was placed upon the following judgments: 1. Jai Steel (India) vs. A.C.I.T. (2013) 259 CTR 281 (Raj) 19. The underline purpose of making assessment of total income under Section 153A of the Act is, therefore, to assess income which was not disclosed or would not have been disclosed. The purpose of second proviso is also very clear, inasmuch as, once a assessment or reassessment is 'pending' on the date of initiation of search or requisition and in terms of Section 153A a return is filed and the AO is required to assess the same, there cannot be two assessment orders determining the total income of the assessee for the said assessment year and, therefore, the proviso provides for abatement of such pendi....
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....The plea raised on behalf of the assessee that as the first proviso provides for assessment or reassessment of the total income in respect of each assessment year falling within the six assessment years, is merely reading the said provision in isolation and not in the context of the entire section. The words 'assess' or 'reassess' have been used at more than one place in the Section and a harmonious construction of the entire provision would lead to an irresistible conclusion that the word 'assess' has been used in the context of an abated proceedings and reassess has been used for completed assessment proceedings, which would not abate as they are not pending on the date of initiation of the search or making of requisition and which would also necessarily support the interpretation that for the completed assessments, the same can be tinkered only based on the incriminating material found during the course of search or requisition of documents. 2. C.I.T. vs. Kabul Chawla [I.T.A.No.707/2014 dt.28.08.2015 (Del)(HC)] 37. On a conspectus of Section 153A(1) of the Act, read with the provisosthereto, and in the light of the law explained in the aforementi....
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.... in the course of search which were notproduced or not already disclosed or made known in the courseof original assessment. 38. The present appeals concern AYs, 2002-03, 2005-06 and 2006-07.Onthe date of the search the said assessments already stood completed. Sinceno incriminating material was unearthed during the search, no additionscould have been made to the income already assessed. 39. The question framed by the Court is answered in favour of the Assesseeand against the Revenue. 40. The appeals are accordingly dismissed but in the circumstances noorders as to costs. 3. C.I.T. vs. MurliAgro Products Ltd. [(2014) 49 taxmann.com 172 (Bom)][Kindly refer to Para 8 to 10] 4. C.I.T vs. Continental Warehousing Corporation [58 taxmann.com 78 (Bom)] [Kindly refer to Para 28 to 37] 5. All Cargo Global Logistics Ltd. vs. D.I.T. [137 ITD 287 (Mum-SB)] [Kindly refer to Para 48 to 53; 53 conclude the issue] 6. Govind Agarwal [ITA No.3389 & 3390/M/2011 dt.10.01.2014 (Mum.Trib.)] 7. A.C.I.T. vs. Pratibha Industries Ltd. [28 taxmann.com 246 (Mum. Trib)] 8. Gurinder Singh Bawa vs. D.C.I.T.[28 taxmann.com 328 (....
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....-A/c 2 Nandini Delux V/s ACIT, 37 ITR (Trb) 52, ITAT Banglore, C Bench, - do- 3 Shivnath Rai Harnarain India Ltd. Vs/ DCIT, 117 ITD 74, ITAT, Delhi D Bench - do- 4 Harvay Heart Hospital Ltd. V/s ACIT 130 TTJ 700, ITAT Chennai A Bench - do- 5 Dr. Mansukh Kanjibhai Shah V/s ACIT, 129 ITD 376, ITAT Ahmadabad D Bench - do- 6 Rajat Tradecom India (P) Ltd V/s DCIT, 120 ITD 48, ITAT Indore Bench - do- 7 Canara Housing Development Co. V/s DCIT, 49 Taxmann.com 98 High Court, arnataka. - do- 8 Madugula Venu V/s DIT, 29 Taxmann.com High Court, Delhi. - do- 9 CIT V/s Chetandas Laxmandas 25 Taxmann.com 227, Delhi High Court - do- 10 CIT V/s Anil Kumar Bhatia, 25 Taxmann.com 98, Delhi High Court - do- 11 Memorandum explaining the provisions in the finance bill 2003 - do- 43. We have heard both the sides. We have also gone through the case laws relied upon by both the s....
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....o assessments made by issuing the notice u/s 153C of the Act has held that the Assessing Officer before issuing notice u/s 153C of the Act has to record satisfaction. Hon'ble High Court held that the Assessing Officer having jurisdiction whilst giving notice to such other person (other than the person referred to in section 153A) must apply proprio vigore. After receipt of the materials, the Assessing Officer having jurisdiction is expected to conduct inquiry and due verification of the relevant facts before forming his prima facie satisfaction. The Assessing Officer must form his independent view before issue of notice. There is no seized material belonging to the assessee which was found and seized in relation to additions made. In view of this fact, there is no justification for action u/s 153C of the Act that too without recording satisfaction. In our considered view, the Assessing Officer must have some material to prima facie satisfy himself to record the satisfaction prior to issue of notice u/s 153C of the Act. Hon'ble jurisdictional High Court held that where no satisfaction has been recorded by the Assessing Officer before issuing notice u/s 153C of th....
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....firmation letter duly signed by all the above applicant along -with share application form. However, the assessee was also asked to justify the amount of share application as received by it during the year under consideration. The letter vide its reply submitted as under: 1] That you have asked from the assessee to justify the amount of share application money of Rs. 1,90,00,000/- ( Rupees one Crores Ninety Lacs only) 2.1] Details of share application money of Rs. 49000000/- as received by the assessee is as under:- S.No Name of the Applicant Address PAN No Addition 1 Sandrop security P. Ltd. 34/35, Ganesh Path ,Govind Halwani Chowk, Pune(M.H.) AACCS5419C 3000000 2 Pramila investment & finance 40, Moti Mahal ,Sir Hukumchand Marg Indore(M.P) AABCP8031A 3000000 3 Neema 308,Shreyans Nath Investment P Limited Apartment ,3/2 Dr R.S. Bhandari Marg, Indore(M.P) AABCN5299 5000000 4 Money Penny Fincom Pvt. Ltd. 308,Shreyans Nath Apartment ,3/2 Dr R.S.&....
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....ion money in the case of the assessee. ............. 2.7.16] That in view of the above, when the assessee has properly discharged onus lying on it by proving the identity of the share holders and genuineness of the transaction. In the present case the assessee had filed complete details of share holders and also filed confirmations as received from all these share holders before the Assessing Officer. All are regularly assessed to tax and the amounts were also received through an account payee Cheque. In that case there is no justification for making any addition on account of share application of Rs. 1,90,00,000/-. 2.8] That in view of the above, it is submitted that the amount of share application money of Rs. 19000000/- as received by the assessee is genuine. The same requires to be accepted as genuine. The assessee vide his letter further submitted that:- "1] That you have asked the assessee to justify the amount of share application money received from the following companies:- S.No. Name of the Company Amount (Rs) 1 Sandrop security P. L....
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.... application money of Rs. 1,90,00,000/-as received by the assessee be treated as genuine." The assessee's contention is not acceptable. Decision quoted and relied by the assessee in its submission are distinguishable on the facts which are not identical with the facts of the present case. It is not a simlpe case of taxing of share application mony under section u/s 68 of the I.T. Act as the assessee has tried to project. It is a case of unaccounted income brought back into the books of accounts of the assessee company in a systematic & organized manner which can be evidenced from the pattern of cash deposits in the bank accounts of the companies discussed above in detail from whom share application money were received by the assessee. These companies have been used as mere conduit companies for routing of unaccounted money into the business in the grab of share application money. During the assessment proceeding in Asst.Year 200506 in the case of the companies from whom the assessee companies received share application money, it was reveal that cash deposits were found in their bank accounts but source of cash deposited were not properly explained by the above ....
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....t, 2008 w.e.f. 1.4.2005, the said section was amended. As per amended sec., if the amount so deducted is deposited by the assessee till due date of filing of return is allowable deduction prior to March in that case. In this case, TDS was deducted and payment was made prior to March, hence, assessee has paid the tax on time, therefore, he requested the Bench to allow this additional ground. It is the legal claim of the assessee, therefore, it may be allowed. We find that this claim is a legal claim of the assessee, which is allowable claim, therefore, in the interest of justice and fair play, we allow the ground of the assessee and restore this matter to the file of the Assessing Officer with direction to the Assessing Officer to decide the issue as per amended section as per law. Thus, ground of appeal is allowed for statistical purposes. 25 In the result, ground no.1 of the assessee is allowed. Ground No.2 is allowed. Departmental appeal is dismissed. Ground no.3 is consequential and ground no.4 is allowed for statistical purposes. This order was pronounced in the open Court on 1.12.2015. ============= Document 1 S.No Name of the Applicant PA No Opening ....
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....-2006 execution of the search Time limit for issuance of the notice U/s 143[2] was till Notice U/s 153A of the Act was issued on 30-11-2007 05-10-2007 Return in response to the notice as issued U/s 153A was filed 17-12-2007 5 on 6 Notice U/s 143[2] was issued on 10-06-2008 1.4.1] That as per second proviso to section 153A(1)(b) of the Income Tax Act, the assessment pending as on the date of search shall be abate. The said proviso read as under:- "Provided further that assessment or re-assessment, if any, relating to any assessment year falling within the period of six assessment years referred to in this sub-section pending on the date of initiation of the search under section 132 or making of requisition under section 132A, as the case may, shall abate." 1.4.2] That as per sub-section (2) of section 153A of the Income Tax Act, the said subsection read as under:- "(2) If any proceeding initiated or any order of assessment or reassessment made under sub- section (1) has been annulled in appeal or any other legal proceeding, then, notwithstanding anything contained in sub-section (1) or section 153, the assessment or r....