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TaxTMI 
TaxTMI 
TaxTMI 
2019 (10) TMI 982
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.... of the case, the Ld. CIT(A), Aurangabad has erred in deleting the addition of Rs. 3,55,00,000/- made on account of unexplained cash credit under section 68 of Income Tax Act, 1961. ii) On the facts & in the circumstances of the case, the Ld. CIT(A), Aurangabad has erred in not confirming the facts as submitted by the A.O. in his Remand Report about the credibility, genuineness and identity of the share application money received. iii) On the facts & in the circumstances of the case, the order of the Ld. CIT(A), Aurangabad be quashed and that the Order of the A.O. be restored. iv) The appellant prays leave to adduce such further evidence to substantiate its case as the occasion may demand." 3. Briefly stated the relevant facts include that the assessee was formerly known as M/s. Ashwa Multi Trade Pvt. Ltd. and is a group concern of M/s. Laxmi Cotspin Limited. Before the Assessing Officer 4. During the proceedings u/s 143(3) of the Act, the Assessing Officer noticed from the Balance Sheet that the facts relating to the details of "share application money" pending for allotment amounting to Rs. 6.55 crores. The breakup of the same includes the following :- Sr.No. Name of ....
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....s relating to the submission/compliance by the assessee and submission of the submitted the details in the Central Receiving Section. Assessing Officer received the same later after the first negative report of the ITI was sent by the ITO (Inv.), Kolkata. Shri Nemichand Jain, which is director of the one of the three companies (para 4.1 to 4.5 of the assessment order) attended to notices of the ITO (Inv.), Kolkata. The Assessing Officer issued one more show cause notice to the assessee on 11.03.2013 proposing to treat the transactions as "bogus". In reply to the said show cause notice, the assessee again submitted that all the three companies are genuinely existing and they complied with all the provisions of I.T. Act and Companies Act. Accordingly, the companies have creditworthiness to invest and rely on the transactions relating to share application money. The compliance levels of the information by assessee is tabulated as under :- Table showing the furnishing of information/documentation by the assessee. M/s Anand Vyapar Pvt. Ltd. M/s. Pushpanjali Trading Pvt. Ltd. M/s. Radico Services Pvt. Ltd. PAN details Furnished Furnished Furnished CIN details Furni....
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....bank account at various dates and on the same date, the same funds have been transferred to the assessee's bank account. 5.1 An analysis of assessee's authorized capital and money received as share application money and in the background of enquiries conducted by ITO (Inv) and also the fact that, the assessee was having meagre amount of share capital, it is beyond imagination and prudence that, an investor will invest substantial amount in company which has very limited and negligible net worth and having not any business activity. Therefore, the receipt of share application money is doubtful. It is quiet surprising that a substantial amount of money has been introduced in the assessee company in the form of share application money pending for allotment, inspite of the fact that, it is not doing any business arouses suspicion, as regards the share application money introduced by Anand Vyapar Pvt. Ltd. it was noticed that the source of money introduced of is not proved satisfactorily in the light of facts mentioned above." 7. Otherwise, the assessee relied on the ratio of various decisions such as (i) Roshan Di Hatti vs. CIT, 107 ITR 938 (SC) (for discharging the onus); (ii) CIT ....
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....ed in the bank account of investor company, came from the coffers of the appellant. On the other hand, it is obvious that sources of investment were liquidation of earlier investments. The documents filed with Registrar of Companies also do not lead to any adverse inference. It is not a case where the Assessing Officer was in possession of some material that discredited and impeached the particulars furnished by the assessee and also established the link between self-confessed 'accommodation entry providers' whose business it was to help assessee bring into its books of account the unaccounted monies through the medium of share subscription. The transaction entered by the appellant company with M/s Anand Vyapar Pvt. Ltd. is true, genuine and not a camouflage. It is also duty recorded in the books of share applicant. Even the sources of the share applicant for making investment stand explained. The suspicion however strong it may be, cannot take place of proof. On the facts & circumstances and in law, the addition made by the A.O. has no legs to stand and can't be sustained. Accordingly, I direct the A.O. to delete the addition of Rs. 3,55,00,000/- made by him. These grounds of ap....
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....ned in para 5.1 of the assessment order. When the question is raised by the Bench about the adverse evidence, if any, gathered by the Assessing Officer/ITO (Inv.), Kolkata, the ld. DR fairly relied on the order of the Assessing Officer and the report of the ITO (Inv.), Kolkata. 12. The ld. AR's arguments : On the other hand, the ld. Counsel for the assessee relied heavily on the order of the CIT(A). Referring to all the details narrated above, ld. Counsel submitted that there are 6 subscribers in total contribution Rs. 6.55 crore by the end of this year under consideration and same were collected by the assessee for in turn subscribing into the share capital in M/s. Laxmi Cotspin Limited, which is going to the Public Issue. The Assessing Officer picked up 3 Kolkata based companies i.e. (i) Anand Vyapar Pvt. Ltd.; (ii) Pushpanjali Trading Pvt. Ltd.; and, (iii) Radico Services Pvt. Ltd for deep scrutiny and outsourced the services of the Investing Wing, Kolkata. Although the summons were issued to all the 3 companies, the response of the postal authorities, the reporting of the Inspector of Income Tax, are equally adverse to all the 3 companies. However, the Assessing Officer procee....
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.... the existence of AVPL, ld. Counsel submitted that the facts of Shri Nemichand Jain, the proprietor and director of the AVPL is appeared before the ITO (Inv.), Kolkata who confirms the existence of the assessee and the same constitutes an additional evidence in the pre-active stand of the assessee in matters relating to the discharge of onus. Further, ld. Counsel relied heavily on the various decisions/judgements discussed by the Assessing Officer and the CIT(A) in their respective orders which relied on by the assessee. Mentioning that there is no reason to discredit transactions, ld. Counsel submitted that this is neither a case of shell company nor a case of accommodation entries. Commenting on the Assessing Officer's decision in restricting the addition to the contribution or investments of AVPL, ld. Counsel submitted that the suspicion about the Kolkata based companies is restricted to AVPL only and left the investment by (i) Pushpanjali Trading Pvt. Ltd. and (ii) Radico Services Pvt. Ltd.. There is no consistency with the Assessing Officer in dealing with the issue under consideration. Restricting the argument, ld. Counsel submitted that the AVPL cannot be non-existent for t....
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....the Central receiving Unit and not to the ITO personally. Thus the identity of AVPL stands established not merely by the submissions made by the respondent but also as a result of scrutiny assessment carried out by its assessing officer. 2. Issue related to credit worthiness of M/s Anand Vyapar Pvt Ltd. As stated above, the assessing officer of AVPL had carried out scrutiny assessment for the assessment year 2007-08, in which year the said company had received Rs. 4.31 crores as share capital / share application money. Enquiries u/s 133(6), were carried out by the assessing officer in respect of the contributors to share capital / share application money. The assessing officer found nothing adverse and satisfied himself as to the source of funds in the hands of M/s AVPL. The total amount received by the respondent from AVPL is Rs. 6.05 crores, and thus a large part of the same, has been subjected to verification by the department and found to be in order. 3. Issue related to genuineness of the transactions with AVPL. The amount received from AVPL and other investing companies, was not as share application money or share premium for purchase of shares of M/s Ashwa Multitra....
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....ed at a higher price during the initial public offering (IPO). Thus AVPL received an asset of matching value from the respondent in lieu of the advance received. 6. Existence of adverse evidence with the assessing officer Revenue has placed great stress on the fact that the reply received from M/s AVPL, during the remand proceedings was in the printed envelope of M/s Metarolls which is a group concern of the respondent. However, this is not a fatal flaw. It is a common experience that whenever, summons are issued to a witness by the tax authorities, there is hesitation to respond and it is the assessee who has to follow up to see that a reply is duly filed. The reply received has to be tested on the basis of documents submitted and the sources of funds received and not on the basis of the envelope in which the letter was sent. Further, it is on record that the letter in question was mailed from Kolkatta, for which proof from the postal authorities has been submitted by the respondent. Apart from this the other contention of revenue is regarding lack of response to the initial summons issued by the ITO(Inv) Kolkatta. This has been explained earlier in para 1. 7. Discharge of p....
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....1.8 Lovely Exports Private Limited [216 CTR 195]. 1.9 CIT vs. Creative World Telefilms Ltd. (333 ITR 100). 1.10 Pr.CIT vs. Paradise Inland Shipping Pvt. Ltd. (400 ITR 439). 1.11 Orchid Industries Pvt. Ltd. (88 taxmann.com 502). 1.12 CIT vs. Green Infra Ltd. (ITA No.1162 of 2014]. 8. Is it a case of shell companies and accommodation entries Both Anand Vyapar and Mangalmayee Stock Management are active companies till date and regular IT returns are being filed and ROC compliance is being made. They do not find mention in any list of shell companies prepared by the department, or any other body. These companies are genuine. In view of the discussions above, it is humbly submitted that considering the various judicial pronouncements and the explanations and clarifications. In case any, further details to be submitted with regards to this case we are ready to submit the same at the ITAT Bench." Decision of Tribunal 14. We heard both the parties on this issue of addition of Rs. 3.55 crore u/s 68 of the Act involving AVPL, the creditor, for the assessment year 2010-11. The transaction with this creditor examined by the Assessing Officer along with two other creditors and....
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....es are the statutory auditors bearing the Membership No.061636. This company has the share capital of Rs. 32,96,000/- and it has reserves and Rs. 6,07,05,000/- as on 31.03.2010. It is a recorded transaction that Ashva Multi Trade Pvt. Ltd. received Rs. 6.55 crores as seen from the Schedule 3 of the Balance Sheet page 25 of the Paper Book. The said creditor AVPL is filing the returns with the active company in the records of Ministry of Commerce and is not struck for any default or reason. Considering the same, the above allegation that the identity of the creditor is unsustainable within the meaning of section 68 of the Act. Accordingly, the Revenue fails on this issue. 16. Considering the huge reserves and surpluses available with the said AVPL, the creditworthiness of the AVPL also cannot be doubted. The Assessing Officer has not brought except stating that the company has meagre income as shown in the returns. The Assessing Officer has not brought any incriminating material to show that the creditor has not creditworthiness. As stated this company has 10 crores as reserves and surplus at the end of the March, 2010 at the relevant point of time. 17. Regarding the genuineness o....
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....ompany cannot be just accommodation entries provider. Shri Nemichand Jain is the director of the AVPL appeared before the authorities filing various documents clearly demonstrated the existence, genuineness, creditworthiness of the AVPL. From this point of view, we are of the opinion that the huge amount of documentation was filed by the assessee. Per contra, the Assessing Officer did not gather any iota of direct evidence or indirect evidence to demonstrate that the AVPL is bogus concern or sham concern or accommodation entries provider. Considering the same, we proceed to extract the finding of the CIT(A) as given in para 9 and 10 of his order and the same are as under :- "5.9 The appellant company has filed the various documents such as application for investment in shares, confirmation for investment in shares, Board Resolution for investment in shares, copy of acknowledgment of return, copy of the balance sheet, details of PAN, copy of the bank account, copy of documents filed with ROC and copy of the assessment order for AY 2010-11. All the documents and information have clearly proved the identity of the applicant company and the genuineness of the transaction. The onus....
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....the identity of the subscribers and the genuineness of the transactions. On that basis, it deleted the addition made by the authorities below. On appeal, it was held that in the absence of any perversity in the view taken by the Tribunal or anything to establish conclusively that the finding regarding the genuineness of the subscribers and the transaction suffered from any irrationality, no substantial question of law arose from the order of the Tribunal. The deletion of the amount was justified. In the following cases, the Hon'ble High Courts have also held that once the identity of the share holder is proved, the share application money can't be treated as bogus. CIT Vs Arunananda Textiles Private Limited (333 ITR 119) (Delhi) CIT Vs K.C.Fiber Limited (333 ITR 116) (Karnataka) CIT Vs Victor Electrodes Limited (332 ITR 481) (Delhi) CIT Vs Ujala Dying and Printing Private Limited (328 ITR 437) (Gujarat) 5.10 As regards addition of Rs. 3.55 crores made an account of share application money received from M/s Anand Vyapar Pvt. Ltd., the appellant had filed the necessary evidences. Since the director of investor company was residing at Kolkata and its registered office was al....
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.... of para 4.8 of the assessment order are relevant in this regard and the same are extracted hereunder :- "4.8 It is already established in the instant case that due to the close connection between the investing company and the assessee company, the attempt to take shelter behind legal pronouncement is woefully inadequate. The fact that the assessee has given certain information is insufficient to hold that the assessee has proved the creditworthiness of the share applicant, which I have noticed is conduits for passing through of monies to the assessee company. The assessee has been unable to prove the genuineness of transaction as well by being unable to substantiate creditworthiness of share applicant beyond doubt from whom share application money has been received. Under these circumstances after considering the doubtful nature of the transaction and the manner in which the sums were credited in the books of account maintained by the assessee, the undersigned hold that the amounts received as share advance is unexplained cash credit liable to be taxed as income of the assessee under section 68 of the income tax Act." 22. For the A.Y. 2012-13 : Similar addition was added by the....
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....unt of the creditor company, came from the coffers of the appellant company. On the other hand, it is obvious that sources of advance were cheques received from Gold Securities Private Limited, M/s Gopal Steels, M/s Acute Designfab and RIMS Fastners and out of credit balance, it gave RTGS to the appellant company. This explained the sources of investment of M/s Mangalmayee Stock Management Pvt. Ltd. The AO had raised doubts that M/s Mangalmayee Stock Management Pvt. Ltd. had itself received share premium and this amount was given to the appellant company without any apparent motive of conducting any actual business. On the contrary, I find that M/s Mangalmayee Stock Management Pvt. Ltd. had received dividend of Rs. 9,25,025/- on shares of Laxmi Cotspin Ltd. and this amount was also credited in its bank account with HDFC bank. Therefore it can't be said that no actual business was conducted. The fact that director of M/s Mangalmayee Stock Management Pvt. Ltd. visited Kolkata only once in two years will not make it a dummy/bogus entity. The AO had claimed that M/s Mangalmayee Stock Management Pvt. Ltd. did not have any employee whereas Shri Piyush Shivratan Mundada had replied in a....