TaxTMI 
TaxTMI 
2019 (9) TMI 147
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....credited and such explanation is found to be satisfactory. However, this proviso is applicable only from AY 2013- 14 and the same is not retrospective in nature as held by Hon'ble Bombay High Court in the case of CIT Vs. Gagandeep Infrastructure Private Limited [80 Taxmann.com 272]. 2. It is settled position of law that to avoid the rigors of Section 68, the assessee must prove the identity, creditworthiness of the lenders / investors to advance such monies and genuineness of the transactions. Once these three ingredients are fulfilled by the assessee, the primary onus casted upon him, in this regard, could be said to have been discharged and accordingly, the onus would shift upon revenue to dislodge the assessee's claim by bringing on record material evidences and unless this onus is discharged by the revenue, no addition could be sustained u/s 68. The Hon'ble Supreme Court in the case of Lovely Exports P. Ltd. [319 ITR 5], dismissing revenue's appeal, observed as under: - 2. Can the amount of share money be regarded as undisclosed income under section 68 of IT Act, 1961? We find no merit in this Special Leave Petition for the simple reason that if the share application money ....
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....on of addition u/s 68. The grounds raised by the revenue read as under: - 1. On the facts and in the circumstances of the case and in law, the Ld. CIT (A) erred in deleting the addition u/s. 68 of share premium and share capital without appreciating the fact that the parties had no creditworthiness to justify such high amount of share premium. 2. On the facts and in the circumstances of the case and in law, the Ld. CIT (A) erred in not appreciating the fact that the shares which were subscribed by bogus concerns for high premium were resold by them to promoters of assessee company at face value without charging any premium thus questioning the amount of high premium paid. 5.1 Facts on record would reveal that the assessee being resident corporate assessee was saddled with impugned addition of Rs. 250 Lacs in the year under consideration in an assessment framed u/s 143(3) on 30/03/2015. During assessment proceedings, upon perusal of assessee's financial statements, it transpired that the assessee had issued 1 Lacs equity shares of face value of Rs. 10/- each at a premium of Rs. 240/- per share to various concerns and accordingly received Share premium of Rs. 240 Lacs. The detai....
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....t in response to summons issued by Ld. AO, Shri Abhishek Morarka visited the office of Ld. AO on 17/03/2015 and on 20/03/2015. The assessee reiterated that the documentary evidences already submitted by the assessee would establish that all the entities were genuine and independent entities who applied to assessee's share capital. In the said background, it was submitted that invocation of provisions of Section 68 was not justified since the assessee established the primary ingredients of the transactions. Reliance was placed, inter-alia, on the decision of Hon'ble Supreme Court rendered in Lovely Exports P. Ltd. [319 ITR 5]. 5.3 The assessee, vide further submissions dated 25/03/2015, drew attention to the retraction dated 15/05/2014 in the shape of an affidavit filed by Shri Pravin Kumar Jain before investigation wing wherein it was stated that statement during search operations was recorded under coercion, force and mental duress. He confirmed that the activities of all the entities were genuine and all the entities were carrying on legal business. To substantiate the genuineness of the transactions, the assessee filed copies of the affidavits executed by the directors of enti....
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.... business but solely used as conduits for providing accommodation entries. The real objective of these share subscription was to introduce unaccounted money of the assessee company in the garb of share capital. Another fact noted was that during the year 50,000 shares were issued to Mr. Ritesh Agarwal and Mr. Rajender K Agarwal at face value of Rs. 10/- each as against the fact that such shares were issued to the applicant at a premium of Rs. 240/- per share. Further, the shares, in later year, was transferred by the share applicants to the promoter shareholders at face value. 5.8 Finally, citing various judicial pronouncements, the said amount of Rs. 250 Lacs representing Share Capital & Share Premium was added in the income of the assessee as unexplained cash credit u/s 68 by Ld. AO by observing as under: - 5.13 Creditworthiness is not proved by showing issue and receipt of a cheque or by furnishing a copy of statement of bank account, when circumstances requires that there should be some more evidence of positive nature to show that the subscribers had made genuine investment or had, acted as angel investors after due diligence or for personal reasons. The final conclusion mu....
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....f Companies to comply with statutory obligations, intimation to the Registrar of Companies about the issue of shares giving the full details of the investors, the payment of stamp duty on issue of shares, details of the distinctive numbers and share certificate numbers of the shares which were issued along with Income Tax Returns of all the entities. The assessee denied having made any dealing with Shri Pravin Kumar Jain. The attention was again drawn to the fact that Ld. AO could not rely upon any material without confronting the same to the assessee and without providing an opportunity to the assessee to meet the evidence which is alleged to be against the assessee. Reliance was again placed, inter-alia, on the decision of Hon'ble Supreme Court in the case of Lovely Exports P. Ltd. [supra]. The attention was also drawn to the retraction statement filed by Shri Pravin Kumar Jain subsequent to search proceedings wherein the it was stated that statement was recorded under coercion, force and mental duress and he denied having given any accommodation entries and further stated that all the entities were carrying out genuine business activities and complying with applicable laws. The ....
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....with the A.O., to establish that no cash transactions were involved in the bank accounts of the investing company then without further probe to prove contrary the addition u/s 68 in the hands of the assessee cannot be made. In view of the above discussion on the facts of the case and having regard to the decisions of the courts and judicial precedents as noted above, the addition made by the A.O. of the share capital and premium of Rs. 2,50,00,000/- under Section 68 of the Income Tax Act 1961 cannot be sustained in appeal and is directed to be deleted. Accordingly, this ground of appeal is allowed. Aggrieved as aforesaid, the revenue is in further appeal before us. 7. The Ld. Departmental Representative for Assessee [DR] relying upon the findings of Ld. AO placed reliance on the decision of Hon'ble Apex Court in Pr.CIT V/s NRA Iron & Steel Pvt. Ltd. [103 Taxmann.com 48], decision of Hon'ble Delhi High Court in CIT V/s N.R. Portfolio Pvt. Ltd. [222 Taxman 157] & CIT V/s MAF Academy Pvt. Ltd. [42 Taxmann.com 377] and the decision of Ahmedabad Tribunal in Pavankumar M.Sanghvi V/s ITO [81 Taxmann.com 308]. On the other hand, Ld. Authorised Representative for Assessee [AR], distinguis....
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....5 to 110 of the paper book. We arc enclosing herewith the following information. (a) The total number of share issued is 10,000 and our client received Rs. 25,00,000/- Out of this Rs. 1,00,000/- towards share capital and Rs. 24,00,000/- towards share premium. b) Share application form -page No. 55 to 56 c)Details of the payments made by the party giving cheque No., date, name of the bank& the branch -page No. 57 d)Party confirmation giving cheque No., date, name of the bank, branch, Funding confirmation, PAN no. -page No. 58 e)The copies of the bank statement where such investments are reflected - page No. 59 (f) Copy of PAN card-page No. 60 (g) Audited financial statements for year ending 31.3.2012-page No, 61 to 78. (h) Board resolution passed at the meeting of the Board of Directors held on 05/03/2012 for making investments in the shares of the client -page No. 79 (i) Copy of income tax return filed for A.Y. 2011-12 & for A. K 2012-13-page No. 80 to 81 (j) Please note that the net worth of the investor company as on 31.3.2011 is Rs. 45,57,62,438/- and as 31.3.2012 is Rs. 45,94,91,972/-. Both these figures are reflected in the balance sheet of the company whic....
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....unding information, PAN no. -page No. 158. e)The copies of the bank statement where such investments are reflected - page No. 159. (I) Copy of PAN card-page No. 160. (m) Audited financial statements for year ending 31.3.2 012-page No.161 to 172. (n) Board resolution passed at the meeting of the Board of Directors held on . 15/03/2012 for making investments in the shares of the client -page No. 173. (o) Copy of income tax return filed for A. Y. 2011-12-page No. 174. (p) The net worth of the company as on 31.3.2011 was Rs. 2,46,11,393/- and as on 31.3.2012 was Rs. 2,50,31.09S/-. Please refer to the balance sheet as on 31.3.2012 which is on page No.164. (q) The investments reflected in the balance sheet of the company as on 31.3.2012 is Rs. 52,81,53,550/-. Please refer to page No.164 and ine breakup of the same is on page No. 167. (r) The company has received advances amounting to Rs, 68,50,00,000/- and the same is reflected in the balance sheet as on page no. 166. 8. As regards Kush Hindustan Entertainment Ltd. is concerned please refer to pages 175 to 230_ of the paper book. We are enclosing herewith the following information. (a) The total number of share issued is ....
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.... (a) The total number of share issued is 10,000 and our client received Rs. 25,00,000/-. Out of this Rs. 1,00,000/- towards share capital and Rs. 24,40,000/- towards share premium. (b) Share application form -page No. 278. (c) Details of the payments mode by the party giving cheque No., date, name of the bank & the branch -page No. 279. (d) Party confirmation giving cheque No., date, name of the bank, branch, Funding confirmation, PAN no. -page No. 280. (e) The copies of the bank statement where such investments are reflected- page No. 281 to 282. (f) Copy of PAN card-page No. 283. (g) The copy of the Form No. 23AC for the year ending 31.03.2012 being the form filed by the company disclosing the financial statements to the Registrar of Company in Form XBRL is enclosed - page No. 284 to 331. (h) Board resolution passed at the meeting of the Board of Directors held on 02.01.2012 for making investments in the shares of the client-page No. 332. i) Copy of income tax return filed for A. Y. 2011-12 -page No. 333 to334. j) The copy of the Form No.23AC being the form filed by the company disclosing the financial statements to the Registrar of Company in Form XBRL is enc....
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....the party giving cheque No., date, name of the bank & the branch -page No. 428. (d) Party confirmation giving cheque No., date, name of. the bank, branch, Funding confirmation, PAN no. -page No. 429. (e) The copies of the bank statement where such investments are reflected - page No. 430 to 431. (f) Copy of PAN card-page No. 432. (g) The copy of the Form No. 23AC being the form filed for the year ending 31.03.2012 by the company disclosing the financial statements to the Registrar of Company in Form XBRL is enclosed, -page No. 433 to 463. (h) Board resolution passed at the meeting of the Board of Directors held on 02.01.2012 for making investments in the shares of the client -page No. 464. (i) Copy of income tax return filed for A.Y. 2011-12-page No. 465 to 466. d) The company has borrowed the funds amounting to Rs. 22,11,22,751/- as on 31.3,2011 and FDs. 15,50,34,000/- as on 31.3.2012 page no. 478. (k) The company has made investment in shares amounting to Rs. 3,91,68,8951- as on 31.3.2012. Please refer to page No. 478. Upon perusal of the same, we find that the assessee had, inter-alia, not only furnished copies of bank statements but also placed on record financ....
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....l, we note certain distinguishing features vis-à-vis factual matrix of the present case. Upon perusal of para 3.7 & 3.8 of the said judgement, it is noted that Ld. AO had issued summons to as many as 19 investor entities but nobody appeared on behalf of the investor companies. The submissions were received through DAK only which created a doubt about the identity of the investor company. Further, Ld. AO independently got field inquiries conducted at the location of investor companies, the result of which has been tabulated in the said para. Notice was served on few entities but the same were not replied to. In few cases, the notices were returned back. Submissions were received in few cases though DAK wherein the company only provided the mode of investment but no reasons were supplied for paying a huge premium of Rs. 190/- per share. Another striking feature was that most of the investors had reflected meagre income during assessment year under dispute. The two companies in Mumbai as well as Guwahati were found to be non-existent. With respect to Kolkata Companies, the response came through DAK only and nobody appeared. Further, the bank statements were not produced in most....