TaxTMI 
TaxTMI 
2020 (12) TMI 209
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....ganese, Ferro Manganese, M.S. Billets, S.S. Flats etc. It filed return on 25.09.12 stating income of Rs. 39555100/-. The Assessing Officer took up scrutiny. He noticed assessee's share application/allotment amount of Rs. 8,50,40,000/- coming from three entities i.e. M/s. Set Square Holdings Pvt. Ltd., M/s. Almal Financiers & Consultants Pvt. Ltd. & M/s. Dherar Textiles Private Ltd. in lieu of 7,02,800, 4,10,000 and 5,88,000 units of shares for Rs. 3,51,40,000/-, Rs. 2,05,00,000/- and 2,94,00,000/-; respectively. He was of the view that it had become a common practice to introduce undisclosed income in the guise of share application/share allotment to various investors without paying tax. He therefore appears to have issued a letter dated 23.03.2015 to the assessee seeking to verify identity, genuineness and creditworthiness of the three investor concerns. We notice from a perusal of page 3 in the assessment order that the Assessing Officer quoted the assessee's failure in producing any of the investors during the course of scrutiny to add its share application money of Rs. 85,040,000/- unexplained cash credits lacking of genuineness/creditworthiness u/s. 68 of the Act. 4....
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....ng channel. The copy of the bank statement of the Company is duly available in the paper book. The details of source of funds from which this company had made the share application are also available from a perusal of the bank statement and other documents filed in the paper book. An affidavit has also been given by the director of this company affirming the investments made in the appellant company and source and mode of investments made by them in the appellant company Also, all the above mentioned documents were claimed to be filed before the AO including the affidavit. The AO has not made any comment on the documents or the affidavit filed before him as evident from the assessment order. 7.3 In respect of the share applicant M/s. Set Square Holdings Pvt. Ltd., the relevant details and documents were given at page nos. 58-113 of the paper book submitted by the appellant. The applicant has invested Rs. 3,51,40,000/- in the appellant company, From the details submitted, I find that the directors of the appellant company i.e. Mr. Shiv Kumar Agarwala is also the directors of the applicant company, Also, there are many shareholders of the appellant company ....
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.... the copy of PAN Card submitted in the paper book it was seen that the company duly filed its return of income before DCIT Central Circle 3(XVI). Kolkata and was having PAN AABCDO906G. Also, I find that the share application was made through proper banking channel. The copy of the bank statement of the Company is duly available in the paper book. The details of source of funds from which this company had made the share application are also available from a perusal of the bank statement and other documents filed in the paper book. An affidavit has also been given by the director of this company affirming the investments made in the appellant company and source and mode of investments made by them in the appellant company. Also, all the above mentioned documents were claimed to be filed before the AO including the affidavit. The AO has not made any comment on the documents or the affidavit filed before him as evident from the assessment order. 7.5 On going through the submissions made by the appellant and the assessment order, the following facts are emerged: A] All the share applicants listed in the table at Page No. 3 of this order are Group comp....
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.... i] On the first issue, the A.O. alleged that the appellant company entered into a sham transaction with the investor to introduce the unaccounted income in form of share application/allotment. It is seen that the share applicant company had readily provided with all the documents as required by the AO. The appellant has already proved the identity and credit worthiness of the applicants and genuineness of the said transactions. The copy of Audited Accounts, IT Acknowledgement and Computation for A.Y. 2011-12 to 2013-14 has already been submitted. Moreover, the copy of the bank statements of all the three investor companies highlighting the payments made in respect of the share application money has also been submitted. With this, the identity and credit worthiness of the appellant company and genuineness of the transactions are proved. In addition, the appellant company has also filed copy of Affidavit before the notary public Kolkata dated 10.03.2015 relating to share application money given by its new shareholders and copy of IT Return acknowledgement, computation of total income, balance sheet and profit & Loss account of the directors of the shareholders company for ....
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....share is very much justified. iv] On the fifth issue, the AO alleged that the appellant would not have been able to withstand the cross examination. if any. It is observed that the AO made a baseless allegation without giving any opportunity to the appellant which is completely bad in law and should have been considered. The Ld. AO has made general allegations based on his own assumptions. The impugned order seriously lacks specific findings. The A.O has used serious allegation like "shelter of corporate veil to channelize the undisclosed income to support his contentions but did not point out any material that has been found during the course of assessment proceedings. The AO had all the documents available with him to verify the genuineness of the transactions as well as the credit worthiness and identity of the directors. The appellant further also relied on the following judicial decisions where it is held that non-compliance to summons u/s. 131 or non appearance before the AO cannot be a base for making the addition: a) Income Tax Officer. Wd-12(3)/Kol Vs. M/s. Harshwardhan Gems Pvt. Ltd. in ITA No. 1337/Kol/2010 vide order dt. 03.02.2016 (I....
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.... capital raised and if do not find any defect in the documents submitted, then merely on the basis of non appearance of the directors, no addition is permissible in law. Assessment of a particular year must be based on legitimate material from which a reasonable inference of income earned during the year could be drawn. The facts worth considering in this context are (i) That the purported amount was credited adopting proper banking channel. i.e. through account-payee cheques. The same tact has been confirmed by the party through account confirmation statement. (ii) That the above parties are body corporate registered with Registrar of Companies and individual who are also assessed to income-tax under the Income-Tax Act, 1961, which the AO has disregarded. 7.6 I have considered the submission of the AR and all, the facts and details brought on record by the AR. I find merit in the contention of the AR. All the share applicants as discussed above are group companies of the appellant having common directorship and shareholding and directors being relatives. The appellant relied in this regard ITAT Ahmedabad, CIT vs. Gyscoal alloys Ltd., ITA No. 102/Ahd 2014 dated 06....
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....hat it had placed the three sister concerns' copy of master data details available in the Ministry of Corporate Affairs Portal, regular audited accounts for financial year 2010-11, IT Acknowledgements for assessment year 2011-12, audited accounts not only of the said assessment year but for the succeeding assessment year 2012-13 as well as 2013-14, bank statements as well as the three directors' affidavits confirming the impugned allotment followed by the very details regarding the tax-payer itself before the Assessing Officer during the course of scrutiny. All this sufficiently indicates that the Assessing Officer's action holding the assessee to have failed in filing the necessary details in support of the impugned share allotment money goes against the case records. Coming the Revenue's argument that the assessee had never produced any of the three investor parties, we find no merit since there was no such direction from the Assessing Officer's side to this effect. Be that as it may, we make it clear that the impugned share capital has come from the three group concerns only having the common directors/shareholders, address as well as assessment jurisdiction.....
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.... ascertain the facts correctly. The share applicant company M/s. General Capital has been duly confirmed the fact of making investment in the appellate company. The amounts have been received through banking channel. The same are duly reflected in the annual accounts of that company. The extracts of the bank statement which have been filed before me during the course of appellate proceedings as well as before the AO clearly show that there are no cash deposits as mentioned by the AO in the assessment order. The observation of the AO that the cash has been deposited and subsequently cheques were issued is factually incorrect. The director of the company also attended before AO and confirmed the fact. It is also noted that both the companies, that is the appellant company as well as the share applicant are managed by the same group of persons. Honourable High Court of Gujarat has consistently held that if the assessee has given sufficient proof in respect of the share application, no addition can be made in the hands of the assessee. If the AO has any doubt about the source of the share applicant further investigation can be made in the hands of the share applicant, but not ....