TaxTMI 
TaxTMI 
TaxTMI 
2019 (10) TMI 829
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....dition without appreciating the fact that the par t ies have only conf i rmed the investment in shares of company but have not explained as to why share were purchased wi th premium. 3. On the facts and in the circumstances of the case and in law, the ld. CIT(A) erred in appreciating the facts that out of four investors, two investors namely M/s Duke Business Pvt . Ltd. And M/s Atharva Business Pvt . Ltd. are the companie s invol ved in Hawala Ent ry Operations which were admitted as such by Shri Pravin Kumar Jain in his statement. 4. On the facts and in the circumstances of the case and in law, the ld. CIT(A) erred in deleting the addition without appreciating the fact that the assessee had fai led to prove its claim that i t has received the said amount f rom the parties on account of share premium as the onus to prove the identity, creditworthiness & genuineness is upon assessee as a pre-condition of section 68 of the I.T Act. 5. For these and other grounds that may he urged at the time of hearing, the decision of the CIT(A) may be set aside and that of the AO restored." 2. Briefly stated, the assessee company which is engaged in the business of building and developme....
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....- per share. Apart there from, it was observed by the A.O that two of the share applicants viz. (i) M/s Duke Business Pvt. Ltd. (JPK Trading I.P Ltd.): Rs. 20,00,000/-; and (ii) M/s Atharva Business Pvt. Ltd.: Rs. 25,00,000/-, as per the information received from the office of the DGIT (Inv.), Mumbai, were the entities which were controlled by Shri. Praveen Kumar Jain, an infamous accommodation entry provider. In the backdrop of the incomplete information provided by the share applicants, the A.O called upon the assessee to furnish replies to certain queries. The assessee in order to impress upon the A.O that it was in receipt of genuine share application money, therein tried to fortify the authenticity of the transaction of receipt of share application money on the basis of its multiple submissions viz. (i) that, it had received share application money from prospective strategic partners in order to augment its requirements of funds for development of its business; (ii) that, the calculation of 'book value' of the shares of the assessee company at Rs. 387/- per share as on 31.03.2011 was worked out as per Rule 11UA of the Income-tax rules, 1963 ; (iii) that, its promoter director ....
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....d cash credit under Sec. 68 of the I.T Act. 5. Aggrieved, the assessee carried the matter in appeal before the CIT(A). The CIT(A) after deliberating on the contentions advanced by the assessee, observed, that though the assessee had placed on record the necessary evidences to substantiate the genuineness of the share application money received by it, however, the same were conveniently ignored by the A.O. Further, it was observed by the CIT(A) that the A.O had also not been able to place on record any documentary evidence which could justify drawing of adverse inferences as regards the genuineness of the transaction of receipt of share application money by the assessee from the six applicant companies. In fact, it was observed by the CIT(A), that though in response to the specific notices issued by the A.O under Sec.133(6) the six share applicant companies had furnished documentary evidence and their explanations, however, the same were conveniently ignored by the A.O. As regards the two share applicant companies which were stated by the A.O as entities which were controlled by Shri. Praveen Kumar Jain, an infamous accommodation, it was observed by the CIT(A) that the A.O except ....
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....ncome. In order to fortify his aforesaid claim, the ld. A.R took us through the relevant pages of the assesses 'Paper book' (for short 'APB'). Further, it was stated by him that the 'book value' of the shares as on 31.03.2012 was duly determined as per Rule 11UA of the Income Tax Rules, 1963. It was submitted by the ld. A.R that the shares of the assessee company were allotted to the applicant companies in the year 2018. In support of his contention that now when the identity of the aforesaid share applicant companies stood established, therefore, no adverse inferences were liable to be drawn in its hands, reliance was placed by the ld. A.R on the judgment of the Hon'ble High Court of Bombay in the case of CIT-1 Vs. Gagandeep Infrastructure Pvt. Ltd. (2017) 394 ITR 680 (Bom). 8. We have heard the authorised representatives for both the parties, perused the orders of the lower authorities and the material available on record and the judicial pronouncements relied upon by them. We find that our indulgence in the present appeal has been sought by the revenue for adjudicating, as to whether, the CIT(A) was right in law and the facts of the case in deleting the addition of Rs. 1,35,00....
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....e, the assessee vide his letters dated 19.03.2015 and 20.03.2015 furnished his reply to some of the queries raised by the A.O. 10. We have perused the orders of the lower authorities, and find that the queries that were raised by the A.O in order to verify the authenticity of the transaction of receipt of share application money by the assessee company from the applicant companies viz. (i). identity of the share applicants; (ii). credit worthiness of the share applicants; and (iii). the genuineness of the transaction, were half heartedly replied by them. A startling aspect that is discernible from the orders of the lower authorities is, that, despite the fact that the A.O had in order to verify the genuineness of the transaction of receipt of share application money by the assessee company from the six applicant companies, had specifically called for the copies of their bank statements from which investment towards share application money was made by them, however, no such details were either furnished by the share applicants or placed on record by the assessee in the course of the assessment proceedings. In fact, the said material aspect had also missed the attention of the CIT(....
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.... were either filed by the assessee, or furnished by the share applicants in compliance to the notices which were issued by the A.O to them under Sec.133(6) of the I.T. Act. 11. As observed by us hereinabove, the assessee in the course of the proceedings before the lower authorities had only tried to substantiate the identity and the creditworthiness of the share applicants, and also the basis for raising the share premium of Rs. 390/- per share, which as claimed by the assessee was as per the calculation of the 'book value' as per Rule 11UA of the Income Tax Rules, 1962. As a matter of fact, in the reply filed by the assessee before the CIT(A), dated 25.07.2016, it is though claimed that the share application money was received through proper banking channels and the bank statements were also furnished before the A.O, however, we are afraid that the said fact is neither discernible from the orders of the lower authorities, nor is the same supported on the basis of the material placed on our record. In fact, the ld. A.R on being called upon by the bench to substantiate that the copies of the bank statements of the applicant companies were filed before the lower authorities, howeve....
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....art of the lower authorities to have carried out an in depth verification of the genuineness of the transaction of receipt of share application money by the assessee from the said parties. However, as observed by us hereinabove, the authorities below had not done even the bare minimum for verifying the genuineness of the transaction of receipt of share application money by the assessee company from the aforesaid applicant companies. We are afraid that such a casual approach on the part of the lower authorities, wherein they had dispensed with the basic verifications which they were obligated to carry out cannot be subscribed on our part. 12. Our aforesaid view is fortified by the recent judgment of the Hon'ble Supreme Court in the case of Principal Commissioner of Income-tax (Central)-1 Vs. NRA Iron & Steel Pvt. Ltd.[Arising out of SLP(Civil) No. 29855 of 2018); dated 05.03.2019]. The Hon'ble Apex Court had in its aforesaid judgment observed, that, once the assessee had submitted the documents relating to identity, genuineness of the transaction, and the creditworthiness, then the A.O must conduct an inquiry, and call for more details before invoking Sec. 68. It was further obser....
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....see to prove the identity and the creditworthiness of the parties also does not inspire much of confidence, and the same could not have been summarily accepted without making of any further verifications. Say for instance, a perusal of the financial statements of two of the applicant companies viz. (i). M/s One2E Solutions India Private Limited (Page 76 & Page 80) of 'APB'; and (ii). M/s Albatross Share Registry Private Limited (Page 94 & Page 95) of 'APB', reveals, that both the companies had same set of two directors viz. (i). Mr. Binod Aggarwalla; and (ii). Mr. Ghanshyam Taparia. Also, the bank accounts of both the companies were held with the same bank i.e Kotak Mahindra Bank, Branch: Prabhadevi, Mumbai. Further, as is discernible from the records, the same Chartered Accountant viz. H.T Merchant & Co., Chartered Accountants had audited their respective accounts for the year under consideration. On the basis of the aforesaid peculiar facts, we are of the considered view that the A.O ought to have carried out necessary verifications by summoning the directors of the respective companies and carrying out further verifications, which we find had not been done by him. Also, in the c....