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2019 (7) TMI 1576
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....e is a private limited company and engaged in the business of manufacturing and trading of copper wire and strips. The assessee filed its return of income on 30.09.2012 declaring total income of Rs. 10,75,533/-. During the scrutiny assessment proceedings, the AO noted that the assessee company has received share capital at very high premium from various concerns based at Calcutta. The details of the share applicants, their addresses and share application money received by the assessee as reproduced by the AO at page 5 are as under :- S.No. Name of the Share Applicant Address of Share applicant Share Application money 1. Agomini Commercial Pvt. Ltd. 52, Weston Street, Kolkatta. 1050000/- 2. Bagdevi Suppliers Pvt. Ltd. 52, Weston Street, Kolkatta. 1050000/- 3. Solphone Commerce Pvt. Ltd. 1, Ganesh Chandra Avenue, Kolkatta 2100000/- 4. Alfa Tie Up Pvt. Ltd. 52, Weston Street, Kolkatta. 2100000/- 5. Index Tie Up Pvt. Ltd. 6th Floor, room No. 601, 1 Ganesh Chandra Avenue, Kolkatta 1050000/- 6. Goodview Vintrade Pvt. Ltd. 64, Saklat Place, 4th Floor, Kolkatta 1050000/- 7. Trishna Distributors Pvt. L....
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.... A/R of the assessee has submitted that the assessee received share capital from 13 applicants, out of which 6 are individuals and 7 are companies. The ld. A/R has referred to the assessment order and submitted that though the AO has mentioned that the notices issued under section 133(6) were received back unserved, however, no details of date of notice and the parties to whom the notices were issued and received back are given. A very vague statement has been made at para 6 of the order. The ld. CIT (A) has given the details of the notices issued by the AO and also reproduced the copies of the returned envelopes in the impugned order. However, all these facts and records were not confronted with the assessee either during the assessment proceedings or during the appellate proceedings. The ld. A/R has further pointed out that the AO has given the details of the share applicants with their addresses as provided by the assessee at page 5 whereas the notices were issued at wrong address. He has referred to the notices issued to M/s. Goodview Vintrade Pvt. Ltd. wherein the address written on the envelope is a wrong address at : 64, Saklat Place, 4th Floor, Kolkata-700072 whereas the co....
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.... CIT (A) has confirmed the addition by relying upon various decisions. However, those decisions are not applicable in the case of the assessee when there is no material with the AO to show that share capital received by the assessee is bogus transaction. The AO has made the addition only on the basis of suspicion and not on the basis of any evidence. In the decisions relied upon by the ld. CIT (A), there were investigations and investigation reports were available with the AO to show that those share applicants were entry providers whereas in the case of the assessee none of the share applicants were found to be entry providers. He has further contended that the AO has made the addition on the ground that the details of five companies show that they have very less or meager income declared in the return of income and further no income is shown from the huge investments as per their balance sheets. The ld. A/R has submitted that when there is no material or admission by the shareholders that the transactions are not genuine, then the addition made merely on the suspicion is not justified. He has relied upon the decision of Hon'ble Jurisdictional High Court in case of CIT vs. ARL Inf....
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....D/R has further pointed out that in the Profit & Loss account these companies have not claimed any rent for office, therefore, the addresses were not genuine. The premium received by the assessee of Rs. 290/- per share of face value of Rs. 10/- is not justified having regard to the financial position of the assessee. The AO asked the assessee to produce the directors to verify the identity and creditworthiness of the investors and genuineness of the transactions. However, the assessee has failed to produce the directors. He has referred to the finding of the ld. CIT (A) and submitted that the ld. CIT (A) has relied upon the decision of Agra Bench of the Tribunal in the case of Suman Gupta vs. ITO, 138 ITD 153 (Agra). He has relied upon the decision of Hon'ble Delhi High Court in case of CIT vs. Nova Promoters and Finlease Pvt. Ltd., 342 ITR 169 (Delhi). He has also relied upon the decision of Hon'ble Supreme Court in case of PCIT vs. NRA Iron & Steel Pvt. Ltd., 262 Taxman 74 (SC). Thus the ld. D/R has submitted that when the assessee has failed to discharge its onus to prove the identity and creditworthiness of the share applicants as well as genuineness of the transaction, then in....
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....up Private Limited had non-current investments worth Rs. 6,81,52,000/- as on 31.03.011 and worth Rs. 3,53,40,000/- as on 31.03.2012. It means that the company had reduced investments approximately Rs. 3.28 crores till 31.03.2012. (ii) The Company M/s. Alfa Tie-up Private Limited had non-current investments worth Rs. 1,25,50,000/- as on 31.03.2011 and worth Rs. 1,21,00,000/- as on 31.03.2012. It means that the company had reduced investments approximately Rs. 4.50 lakh till 31.03.2012. (iii) The company M/s. Baddevi Suppliers Pvt. Ltd. had non-current investments worth Rs. 1,56,00,000/- as on 31.03.2011 and worth Rs. 2,11,00,000/- as on 31.03.2012. It means that the company had increase non current investments approximately Rs. 55.00 lakh till 31.03.2012. (iv) The company M/s. Agomoni Commercial Pvt. Ltd. had non current investments worth Rs. 95,27,000/- as on 31.03.2011 and worth Rs. 3,20,87,000/- as on 31.03.2012. It means that the company had increase non current investments approximately Rs. 2.26 crore lakh till 31.03.2012. (v) The Company M/s. Dolphin Commerce Private Limited had noncurrent investments worth Rs. 4,95,28,000/....
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.... returned envelopes as produced by the ld. CIT (A) at pages 30, 31, 34, 35 and 36 that the reasons given by the postal authorities is incomplete address. Thus it is clear that due to wrong/incomplete address, the notices issued by the AO to some of the share applicants were received unserved. Once the reason of non delivery of the notices was known to the AO, then further steps could have been taken by the AO to conduct a proper enquiry. Instead of taking further steps, the AO asked the assessee to produce all the share applicants. The assessee submitted the letters from all six individual share applicants along with the affidavits wherein they have confirmed the investment in the shares of the assessee. Once the assessee has produced the letters and affidavits, then the primary onus on the assessee has been discharged. In respect of these companies, the AO has himself accepted that they have filed all the relevant details, ITRs, financial statements, bank statements and replies to the notices issued by the AO under section 133(6). Once all these documentary evidences were produced before the AO and the genuineness of these documents were not doubted by the AO, then the assessee ha....
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.... consideration the aforesaid facts, the Tribunal in para 2.6, observed as under : "Adverting to the facts of the given case, we are of the considered opinion that all the shares applicants stand identified. The assessee has provided PANs of the share applications. The mode of payment has also been made explained. There is no direct or indirect relation between the assessee-company and the share applicants. The statements recorded during survey has got no evidentiary value and the law is very much settled on this issue. In any case, even under the provisions of section 68 of the Act, the assessee cannot be forced to prove the source of the source. The law on this subject is also settled by numerous decisions. The alleged report of the Inspector of the Department who is stated to have visited at the given address of the share applicants was never put or confronted to the assessee. The cumulative effects of these reasons is that the impugned addition cannot be added in the hands of the assessee-company. Accordingly, we order to delete the entire additions and allow the appeal of the assessee." 6. In our view, the decision of the Supreme Court in the case of CIT v. Lo....
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....irect relation between the assessee-company and the share applicants. The statements recorded during survey has got no evidentiary value without any supporting documents or evidence." We find that a similar view has been taken by the Hon'ble Jurisdictional High Court in case of PCIT vs. M/s. Shubh Mines Pvt. Ltd. in DB IT Appeal No. 96/2015 dated 03.05.2016 as well as in case of PCIT vs. Dhanlaxmi Equipment Pvt. Ltd. in DB IT Appeal No. 189/2016 dated 23.10.2017. The Hon'ble Allahabad High Court in case of CIT vs. Vacmet Packaging (India) P. Ltd. (supra) has held in para 7 & 8 as under:- "7. Reliance has been placed on behalf of the assessee on the judgment of the Supreme Court in CIT v. Lovely Exports (P) Ltd. [2008] 216 CTR 195. While dismissing a Special Leave Petition against the judgment of the Delhi High Court in an Income Tax Appeal, the Supreme Court observed that if the share application money had been received by the assessee from bogus share holders, whose names were furnished to the Assessing Officer, the department was free to reopen their assessment proceedings in accordance with law. This decision has been considered in a subsequent judgment of the Delhi ....