TaxTMI 
TaxTMI 
2016 (8) TMI 1484
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...., which had invested in share application money and the Assessing Officer established these to be non genuine. 2. Whether on the facts and in the circumstances of the case and in law, the Ld. CIT(A) was correct in holding that the Assessing Officer was not right in disallowing 80% of the expenses claimed as interest repayment, professional fees and administrative expenses and deleting the addition of Rs. 5,05,87,952/- without appreciating the fact that these expenses have no relevance for business of the assessee, during the year." 3. Assessee filed its return of income at a loss of Rs. 5,04,64,311/-. Assessment was completed u/s.143(3) of the Act dated 28.03.2013 at income of Rs. 34,01,23,640/- where addition u/s.68 amounting to Rs. 34 crores and addition of Rs. 5.05 crores on account of expenditure of capital nature was made. Matter was carried before the First Appellate Authority, wherein various contentions were raised on behalf of assessee and having considered the same, CIT(A) granted relief to the assessee. 4. Same has been opposed before us on behalf of Revenue inter alia submitted that CIT(A) erred in deleting the addition made u/s.68 of the Act without appreciating....
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....s on the address given by him and in their return of income. These notice remained unserved by postal authorities. 5.2 Vide letter dated 02.03.2013, assessee company submitted new addresses of these three companies together with fresh copy of Form No.18 filed with the Registrar of Companies for shifting their registered office w.e.f. 21.02.2013 and according to which, the new address was as under: 7/1A, Grant Lane, 1st Floor, Room No.25, Kolkata, West Bengal - 700012. Notices issued thereafter were served on these three companies on new address. 5.3 Assessee company submitted before Assessing Officer following documents in respect of these three companies from whom share application money was received: a) PAN Number of the companies, b) Copies of Income Tax return filed by these three companies for assessment year 2010-11 c) Confirmation Letter in respect of share application money paid by them; and d) Copy of Bank statement through which cheques were issued. In the meantime, Assessing Officer referred the matter to the Investigation Wing at Kolkata for making inquiries of the three companies from whom share application money has been received. As mentioned b....
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....28 to 41 of the paper book inter alia submitted that further finance was required for putting additional capacity of manufacturing AMR etc. and for buying own premises at various places for the business and for that purpose, the share application money was taken from these three companies. Vide letter dated 20.03.2013, it was intimated to the Assessing Officer that the enquiries were conducted by Investigation Wing, Kolkata and they have summoned the parties, recorded their statements and obtained the required documents and evidence including the ledger account of assessee as appearing in their books in support of the share application money paid by them. It was also informed that in view of these, it was not necessary for the assessee company to submit further evidences/ documents regarding share application money received by it. Assessing Officer has given its final finding that; i. These companies were merely entities on paper without proper address of their functioning and a single person controlling its affairs. ii. These companies have no funds of their own to make huge investment. iii. These companies have not responded to the letter written to them, which could hav....
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....py of letter dated 20.03.2013 as placed on page no. 48 of Paper Book filed by assessee. (v) Copy of letter dated 26.03.2013 as placed on page nos. 45 to 47 of Paper Book filed by assessee. From the assessment order, it is obvious that after receiving report from the Investigation Wing, Kolkata dated 18.03.2013, Assessing Officer has drawn his own conclusion which was not based on any facts and figures as Assessing Officer has not mentioned anything in the order on what basis the conclusion was arrived on and what were the facts and materials available with him. Therefore, the addition made by him u/s.68 of the Act on account of share application money received without considering the various facts brought to the knowledge of Assessing Officer, which is not justified. 5.7 As per the provisions of Section 68 of the Act, for any cash credit appearing in the books of assessee, the assessee is required to prove the following- (a) Identity of the creditor (b) Genuineness of the transaction (c) Credit-worthiness of the party (i) In this case, the assessee has already proved the identity of the share applicant by furnishing their PAN, copy of IT return filed for asst. ye....
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....t is noticed that the A.O. has disallowed the amounts as preoperative expenses by allowing 1/5th and remaining 4/5th has been disallowed. Therefore, it is not the case of the A.O. that some particular expenses are disallowable for disqualifications u/s.37 of the I.T. Act because 1/5th of the expenses are allowed as in the manner of section 35D of the I.T. Act. There is no question on the nature of expenses for being for non business purpose or in the nature of capital expenditure as such, liable to be disallowed. There is no specific discussion to the effect that the expenses under question are disallowable for any of the specific reasons applicable under section 37 of the I.T. Act for this purpose, which have been claimed by the appellant in that manner. The grouping and description of expenses in the Books of accounts of the appellant is prima facie Revenue in nature as same have been recorded in the books and final accounts in that manner and also accepted in the Audit Report. It is also on record that the appellant has ongoing business and the expenses are stated to be relating to such ongoing business. The AC. has not brought on record any reason or material to contradict the ....
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....without assigning any reason and the basis of bifurcation on which he held that these are pre-operative expenses of capital nature. 6.3 The business of assessee company was already explained to Assessing Officer vide letter dated 28.12.2013 which was incorporated by Assessing Officer in para 10.4 of his order inter alia submitted that earlier assessee company was manufacturing various types of automobile parts as per the requirement of customer from its factory at Pune, which is now closed and since A.Y. 2009-10, the assessee company has started manufacturing of AMR and other hardware material which were supplied to various clients and having its head office at Mumbai and branches at Hyderabad, Secunderabad, Kolkata, Baroda, Jaipur, Delhi, Pune, etc. Regarding the interest expenses also, full details were filed and explanation was given by letter dated 28.09.2013 which was partly incorporated in the assessment order in para 10.4. This being a specialized business wherein hardware and software both are required and it takes time to fully exploit the market and get the customers. Assessee company has got the fruits of these expenses and efforts in the subsequent years, which was cl....
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....iness; (ii) expenses are not of capital nature; and (iii) expenses are not of personal nature. Therefore, these expenses were neither of personal nature, nor of capital nature or of pre-operative nature. These were all of revenue nature which were incurred for the purpose of carrying on the business and therefore, same are obviously allowable as revenue expenses during the year. Assessing Officer has neither given any finding as to why any part of these expenses were to be disallowed, nor he has issued any show cause notice why he intends to disallow part of these expenses. 6.5 In view of above, CIT(A) was justified in granting relief to the assessee as discussed above. We are not inclined to interfere with the finding of CIT(A) on this issue. Same is upheld. 7. As a result, appeal filed by Revenue is dismissed. 8. In ITA No.353/Mum/2015 for A.Y. 2011-12, Revenue has filed appeal on following grounds: "1. On the facts and in the circumstances of the case and in law, the Ld. CIT(A) erred in deleting the addition made u/s.68 of I.T. Act, without appreciating the fact that assessee failed to discharge its onus to establish identity, genuineness and creditworthiness of....