TaxTMI 
TaxTMI 
2019 (5) TMI 946
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.... culled out from the records are that the assessee is a limited company engaged in trading and manufacturing of steel Ingots. E-return was filed on 31.10.2007 declaring NIL income after claiming set of carried forward losses. Case selected for scrutiny assessment followed by serving of notices u/s 143(2) and 142(1)(ii) of the Act. Ld. A.O noticed that during the year assessee received share application money of Rs. 50,00,000/- from two companies namely Rolled Gold Industries Ltd (Rs. 20,00,000/-) and BPO Finance & Investments Pvt. Ltd (Rs. 30,00,000/-). Assessee was asked to furnish necessary documents to prove the identity, genuineness and creditworthiness of the cash creditors. Submissions were made by the assessee along with the details but it could not find favour from the Ld. AO as he was of the view that the genuineness and creditworthiness of both the share applicants are not proved as they have meager fixed assets, no regular business and transactions in the bank statement reflects that maximum inflow and outflow are of amounts which have no nexus with the turnover of the companies. In view of these observations addition u/s 68 of the Act was made at Rs. 50,00,000/- and dis....
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....ted that though they have not appeared personally but all the documents required by them were duly furnished from time to time with the AO. They have duly filed their replies along with ITRs and final accounts which itself proves their own identity and the identity of the company as well of which they are the directors. Also the identity of share applicants and its directors was no where questioned by the Ld. AO and Ld. CIT(A). This means that both of them relied on the documents given by assessee in this regards, but none of them commented on the same in their findings. Another issue considered by the AO was non serving of notice uls 133(6) to the company BPO Finance & Investments Pvt. Ltd. The issue here was related to the change in address of the said company. New address of the company was duly conveyed to the AO by assessee through a letter dated 26.10.2009 copy of which is enclosed herewith. Your honor may appreciate that despite of updating assessing officer with the new address of BPO Finance & Investments Pvt. Ltd., he did not considered the same and not panicked to reissue the notices at new address and enquire then. The Ld. CIT(A) also erred in the facts of the c....
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....Central)-1 V/s NRA Iron & Steel Pvt. Ltd. 7. We have heard rival contentions and perused the records placed before us. The assessee's sole grievance is against the order of Ld. Rs.(A) confirming the addition for unexplained share application money made u/s 68 of the Act at Rs. 50,00,000/- received from following two companies; (i) Rolled Gold Industries Ltd Rs. 20 lakhs (ii) BPO Finance & Investments Pvt. Ltd Rs. 30 lakhs 8. Ld. Counsel for the assessee has referred to various documents including audited balance sheet, PAN Number, I.T. returns, financial and bank statements in order to prove the identity, genuineness and creditworthiness of the transaction with the alleged cash creditors. Ld. A.O however was not satisfied with these documents being in sufficient to prove the genuineness and creditworthiness of the transaction of alleged share application money on account of following observations of facts; "In the assessment order the AO has given following facts about the share application money received from these two concerns. The assessee's balance sheet reflects receipt of share application money amounting to Rs. 50,00,000/- from two persons viz. Rolled gold Indu....
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..... in fact, it is a paper company only, its directors are not in the financial position to invest substantial money rather to say even minimum subscription in the company. No remuneration has been received by them, Obviously, they are name lenders only. In view of the above, the subscription. amounting to Rs. 30,00,000/- is not acceptable as genuine. The assessee has, in/act, introduced this amount from out of its income from undisclosed sources through the conduit of M/s Rolled Gold industries Ltd. Accordingly it is assessed u/s 68 of the income tax Act. M/s B.P.O. Finance investment P. Ltd. Kolkatta, i) Notice u/s 133(6) issued to this company has been received back un served with the postal remark "not Known". ii) Copy of return of income was filed by the assessee in which address of M/s B.P.O. Finance & Investment P. Ltd. has been given as "Chamber 304 Naiwala Having PIN 110005 which appears to be some locality of Ne,1/ Delhi, iii) The Bank Account of Company reflects transfer in & transfer out of funds with the result that only on few occasions the balance crossed the figure of Rs. 1,00, 000/-. iv) The company has no fixed assets. v) It neither has leased accommod....
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....stigate the credit-worthiness of the creditor/subscriber, verify the identity of the subscribers, and ascertain whether the transaction is genuine, or these are bogus entries of name-lenders. iii. If the enquiries and investigations reveal that the identity of the creditors to be dubious or doubtful, or lack credit-worthiness, then the genuineness of the transaction would not be established. In such a case, the assessee would not have discharged the primary onus contemplated by Section 68 of the Act. 12. In the present case, the A.O. had conducted detailed enquiry which revealed that: i. There was no material on record to prove, or even remotely suggest, that the share application money was received from independent legal entities. The survey revealed that some of the investor companies were non-existent, and had no office at the address mentioned by the assessee. For example: The companies Hema Trading Co. Pvt. Ltd. and Eternity Multi Trade Pvt. Ltd. at Mumbai, were found to be non-existent at the address given, and the premises was owned by some other person. a. The companies at Kolkatta did not appear before the A.a., nor did they produce their bank statements to s....
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.... enquiry conducted by the AO which revealed that in several cases the investor companies were found to be non-existent, and the onus to establish the identity of the investor companies, was not discharged by the assessee. 14. The practice of conversion of un-accounted money through the cloak of Share Capital/Premium must be subjected to careful scrutiny. This would be particularly so in the case of private placement of shares, where a higher onus IS required to be placed on the Assessee Since the information is within the personal knowledge of the Assessee. The Assessee is under a legal obligation to prove the receipt of share capital/premium to the satisfaction of the AO, failure of which, would justify addition of the said amount to the income of the Assessee. 15. On the facts of the present case, clearly the Assessee Company - Respondent failed to discharge the onus required under Section 68 of the Act, the Assessing Officer was justified in adding back the amounts to the Assessee's income. 16. The Appeal filed by the Appellant - Revenue is allowed. In the aforesaid facts and circumstances, and the law laid down above, the judgment of the High Court, the I TAT , and th....