TaxTMI 
TaxTMI 
2020 (4) TMI 90
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....,33,03,071/-. The assessee company had received share application money from its Directors as under: "S. No. Name of the Director Share application Money 1. Sh. Bhanu Choudhrie Rs. 7,28,93,499.40 2. Sh. Sumant Kapur Rs. 16,44,15,381.70 3. Sh. Dhruv Choudhrie Rs. 7,29,11,400.00 4. Sh. Sudhir Choudhrie Rs. 38,31,03,071.21" 2.1 During the course of assessment proceedings, the assessee filed confirmations from the Directors which stated that the Directors had paid the share application money out of income earned outside India which was sent through foreign remittances. The Directors also submitted bank details, confirmation letters and copies of their Income Tax Returns. The assessee company also furnished copies of passports of the Directors. From the perusal of the details furnished by the assessee, the AO observed that the remittances received by the assessee company against the Share Application Money from the Directors were as under: "Beneficiary A/c Prime Land Real Estate Pvt. Ltd. ICICI BANK A/c 007105001972 Name of Remitter Date Rs. Sudhir Choudhrie 26.07.2004 10,615,877/- 27.08.2004 10,0....
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....irectors was, therefore, doubted and the AO held that the share application money of Rs. 38,33,03,071/- received by the assessee is income as envisaged u/s 68 of the Act. Addition was made to total income in this regard by concluding as under: "The assessee company could not prove the creditworthiness of the persons advancing share application money to it. Therefore, the provisions of section 68 is clearly attracted in this case. In various judicial pronouncement the provisions of section 68 has been explained and it has been held that for justifying any credits in books of account, the assessee must prove identity, capacity of the creditors and genuineness of creditors. In this context the decision reported in 131 Taxman 391 (2003), 49 ITR 112 (SC), 50 ITR 1 (SC), 98 ITR 337 (SC), 161 Taxman 169 (SC), 53 ITR 623 (SC) and 34 ITR 807 (SC) are relied upon and the ratio of judgements in those cases are applicable to the facts of the case under assessment. Under the circumstances these 4 credits amounting to Rs. 38,31,03,071/- found unexplained and treated as undisclosed income of the assessee company for the year under consideration u/s 68. Accordingly the s....
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....fourth shareholder i.e., Sh. Sumant Kapur, it is pleaded that the same is a U.K. citizen and his source of income is not originated in India, accordingly in view of the settled law, as followed in the cases of DCIT vs. Finlay Corporation Ltd. 2003 - (ID4) GJX-0021 TDEL and Saraswati Holding Corpn. Vs. DDIT Circle 2(2), International Taxation, New Delhi 2007- (ID3)-GJX-0243-TDEL by ITAT Delhi, the same cannot be added u/s 68 in the hands of company. There is forcer in the argument of the ld. AR specifically in the light of few recent decisions of jurisdictional High Court in the cases of M/s Divine Leasing & Finance Ltd. 299 ITR 268 and Lovely Exports (P) Ltd. as well as the order of Hon'ble Apex Court in the case of M/s Lovely Export (P) Ltd. 216 ITR 195 wherein the Supreme Court has held that "if the share application money is received by the assessee company from alleged bogus shareholders, whose names are given to the AO than the Department is free to reopen their assessments in accordance with law". This decision was delivered while dismissing the special leave petition of the Department. Further, in another recent decision the jurisdictional Delhi High Court in the ca....
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....e or amend any other grounds of appeal. 3.0 It was submitted by Ld. CIT (DR) that the assessee has not been able to substantiate the credit worthiness of the four directors who have introduced share capital during the year under consideration. The Ld. CIT(DR) relied upon the judgment of the Hon'ble Apex Court in its recent judgement in the case of ACIT vs. NRA Iron & Steel Pvt. Ltd. reported in 412 ITR 161 (SC). It was stated by the Ld. CIT(DR) that although the identity and genuineness of the transaction is not in dispute, however, the assessee has not been able to negate the objections raised by the AO that creditworthiness of the directors has not been substantiated. 4.0 Per contra Ld. AR, Shri Tarandeep Singh, vehemently supported the findings recorded in the impugned order. It was submitted by the Ld. AR that during the course of assessment proceedings, following documents/evidences were furnished by the assessee in order to substantiate the identity, genuineness and creditworthiness of the Shareholder Directors: • Confirmation received from directors stating that the amount invested by them as share application money has been made out of income earned ou....
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....n following judicial pronouncements: (i) Russian Technology Centre Pvt. Ltd vs DCIT reported in 155 TTJ 316 (Del.) as upheld by Delhi High Court in CIT vs Russian Technology Centre Pvt. Ltd in ITA No. 547, 549 & 555 of 2013 (ii) Order dated 19th February, 2007 passed by Hon'ble Delhi High Court in the case of CIT vs M/S Pondy Metal and Rolling Mill (HC) (iii) Order dated 8th January 2008 passed by Hon'ble Supreme Court in case of CIT vs M/S Pondy Metal & Rolling Mills (P.) Ltd. in SLP No. 12860 of 2007 (iv) Finlay Corporation Ltd reported in 86 ITD 626 (Del.) (v) Saraswati Holding Corpn. In. vs DDIT reported in 111 TTJ 334 (Del.) 5.0 We have heard the rival submissions and have also considered the material available on record. We find considerable merit in the submissions advanced by the Ld. AR. The AO has not doubted the genuineness of FIRCs furnished by the assessee. Share Capital has been remitted through modus recognized by the RBI. Moreover source of money received is undisputedly from abroad. The AO has not conducted any independent enquiry to doubt or disbelieve the evidences submitted by the assessee during the course of asses....
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....and credit-worthiness, then the AO must conduct an inquiry, and call for more details before invoking Section 68. If the Assessee is not able to provide a satisfactory explanation of the nature and source, of the investments made, it is open to the Revenue to hold that it is the income of the assessee, and there would be no further burden on the revenue to show that the income is from any particular source. 8.3 With respect to the issue of genuineness of transaction, it is for the assessee to prove by cogent and credible evidence, that the investments made in share capital are genuine borrowings, since the facts are exclusively within the assessee's knowledge. The Delhi High Court in CIT v. Oasis Hospitalities (P.) Ltd. [2011] 9 taxmann.com 179/198 Taxman 247/333 ITR 119, held that: "The initial onus is upon the assessee to establish three things necessary to obviate the mischief of Section 68. Those are: (i) identity of the investors; (ii) their creditworthiness/investments; and (iii) genuineness of the transaction. Only when these three ingredients are established prima facie, the department is required to undertake further exercise." It ha....