TaxTMI 
TaxTMI 
2020 (12) TMI 236
X X X X Extracts X X X X
X X X X Extracts X X X X
....ring and trading of garments. It filed its return of income on 29th September, 2011 declaring the total income of Rs. 31,41,11,880/-. During the course of assessment proceedings, the AO noted that the assessee company has introduced share capital and received the share application money of Rs. 20,17,00,000/- from the following companies:- Sl. No. Assessment Particulars Amount of share application money received 1. Himachal Yarns Formerly Himachal Steel Ltd., PAN : AABCH0451J Udyog 7,07,10,000/- 2. Brijeshwari Textiles Pvt. Ltd Pan.: AACCB7479K 3,00,00,000/- 3. Balmukhi Textiles Pvt. Ltd. Pan AACCB7477K 300,00,000/- 4. Shiva Spin Fab Pvt. Ltd. Pan. AAKCS6521K 400,00,000/- 5, GAL Cottex Pvt. Ltd., PAN AABCS8023C 2,03,70,000/- 6. Shubam Yarns Pvt. Ltd., Pan, AAGCS8023C * 1,06,20,000/- 20,17,00,000/- 80000 equity shares allotted during the year @ 2000/- 16,00,00,000/ Outstanding share application money as at 31.03.2011 4,17,00,000/- 4. He observed that the assessee company has issued shares to the abo....
X X X X Extracts X X X X
X X X X Extracts X X X X
....pplication money in the name of six companies and these companies are not having any capacity to deposit such huge amounts as share application money. Relying on various decisions and observing that the assessee failed to prove the three ingredients as per provisions of section 68 of the IT Act, the AO made addition of Rs. 20,17,00,000/- to the total income of the assessee u/s 68 of the IT Act. While doing so, the AO summarized his findings which are as under:- "2. The findings as discussed in para 3 to 5 of this order are summed up as under:- i) None of the subscriber was known to any of the employees or even to the Managing Director. ii) In view of the documents as pointed out above it was necessary to verify whether the person signing the share application form or confirmation is genuine or not, hence the assessee was insisted for production of the subscriber. iii) Not even a single subscriber is produced even after allowing a time of around two months at the convenience of the assessee. iv) Hence the assessee has failed to prove the identity of the subscriber. v) The assessee has also failed to prove the creditworthiness of ....
X X X X Extracts X X X X
X X X X Extracts X X X X
.... at the business premises of SEL Manufacturing Company Ltd., on 11th September, 2013 during which it was found that M/s Garg Acrylic Ltd., i.e., the assessee company is involved in suspicious/bogus purchase/sales mainly that of knitted cloth/fabric with M/s SEL Manufacturing Company Ltd. From the details communicated by the DDIT (Inv.), Shimla, he noted that M/s Garg Acrylics Ltd. has made sale of Rs. 44.65 crores during the financial year 2011-12 to SEL Group. Similarly, bogus sale of SEL Group to Garg Acrylics for the assessment year under reference was reported at Rs. 29.16 crores. It was further intimated by the DDIT (Inv.) that substantial part of goods sold/purchased by the company to/from SEL group were not supported by delivery challan and transportation of goods could not be reconciled with inward/outward gate registers. Subsequently, a survey u/s 133A was also conducted in the premises of the assessee company on 20th September, 2013. Accordingly, the assessee company was required to furnish proof of purchase of goods from SEL Manufacturing Co. Ltd., and also to prove as to where the goods were sold and the details of loading and unloading expenses. During the assessment p....
X X X X Extracts X X X X
X X X X Extracts X X X X
.... - 4. GargFincap Ltd. - 8,00,000/- 5. Shiva Spin Fab Pvt. Ltd. Pan. AAKCS6521K 4,00,00,000 1,70,00,000/- 6. GAL Cottex Pvt. Ltd. PAN AABCS8023C 2,03,70,000 5,30,00,000/- . 7. Apporva Leasing Finance and Investment Company Ltd. - 7,50,00,000/ - 8. Pushpa Yarns Pvt Ltd. - 1,00,00,000/- 9 Shubam Yarns Pvt. Ltd. Pan. AAGCS8023C 1,06,20,000 9,98,25,000/- 20,17,00,000/- 28,98,25,00/- 9. He observed that the assessee company issued shares to above 8 companies at a huge premium of Rs. 2,490/- per share. From the audited balance sheet of the assessee company, he noted that earning per share of the assessee company as on 31.03.2012 was only Rs. 49.27 per share which is as under:- Year Ended 31.03.2012 Year ended 31.03.2011 Profit after tax for the year Rs. 2,95,61,231/- Rs. 26,81,1 7,058 Weighted average no. of equity shares Rs. 5,99,945/- Rs. 5,17,534/- Basic & Diluted Earning Per Share Rs. 49.27 Rs. 518.07 10. The AO asked the assessee to substantiate the identity and credit worthiness of the share applicants and the genuine....
X X X X Extracts X X X X
X X X X Extracts X X X X
....iness activity is being carried on from those premises. The AO, therefore, confronted the same to the assessee and asked him to produce the principal officers of the eight companies for his examination. However, the assessee failed to produce the principal officers of the above companies. In view of the above, the AO, relying on various decisions and invoking the provisions of section 68 of the IT Act, made an addition of Rs. 28,98,25,000/- to the total income of the assessee. While doing so, he summarized his findings the details of which are as under:- "i) All of the subscribers were not known to any of the employees or even to the Managing Director or promoters of the companies. ii) Many specific opportunities were given to the assessee to produce the Principal Officer of the share applicant companies. iii) Even Inspector was deputed to serve the summons u/s 131 to all the companies by hand for personal attendance/deposition of the Principal Officer of the applicant companies. iv) Two of the companies were found bogus as there was no companies existing at the registered office address provided by the assessee company even the employees h....
X X X X Extracts X X X X
X X X X Extracts X X X X
....y important point to be noted is that the share holding pattern of the applicant companies was also examined and found that these companies are being promoted and operated by the family members of the promoters of the assessee company and all these companies are directly or indirectly interconnected with each other and controlled by same people known to each other. Thus, in such a situation the onus on the assessee is heavier than under the normal circumstances and in the instant case, the assessee company failed to discharged its onus even in the normal circumstances to produce the subscribers who have invested such a huge amount of share application at such a huge share premium and known to the assessee company. The surrounding circumstances of the instant case clearly show that apparent was not the real and the assessing authority is not supposed to put on blinkers so as to not find out the real state of affairs. 12. Before the ld. CIT(A) it was submitted that the AO had conducted enquiries u/s 133(6) of the Act by issuing notice to companies from whom share capital was received by the assessee company. All these companies and their banks had duly responded to the said notice....
X X X X Extracts X X X X
X X X X Extracts X X X X
...., the addition of Rs. 20.17 crore made by the AO is uncalled for. 12.3 So far as assessment year 2012-13 is concerned, it was submitted that the assessee had filed all details such as confirmations, bank statements, balance sheets, PAN details, income-tax return copy etc., to substantiate the identity, creditworthiness and genuineness of the share applicants. It was submitted that the assessee had justified the basis of charging of such share premium. It was argued that the assessee being an unlisted company, the networth has to be determined as per the Companies Act, 1956 and Rule 11UF of the Income-tax Rules, 1962 according to which the average of book value and EPS based share value comes to Rs. 3,812/-. As regards the allegation of the AO that the assessee company had earning capacity of Rs. 49.27 per share only whereas it has charged premium of Rs. 2490 per share is concerned, it was argued that it is the prerogative of the Board of Directors to decide the amount of premium. As regards the capacity of the share applicants, it was argued that all applicants are corporate entities and their net worth is based on balance sheet alone is relevant criteria for judging the creditw....
X X X X Extracts X X X X
X X X X Extracts X X X X
....facturing and trading activity. It was argued that the assessee had also traded in yarn worth Rs. 110/- crore which includes the purchases made from M/s SEL Manufacturing Co. Ltd. of Rs. 29.16 crore. Similarly, out of the total sales of Rs. 131/- crores, the sales made to SEL Manufacturing Co. Ltd. amounted to Rs. 44 crores only. It was argued that the adverse view taken by the AO with regard to the transaction with SEL Manufacturing Co. Ltd. is not correct and was not based on any adverse findings. It was argued that the transaction with M/s SEL Manufacturing Co. Ltd. was duly recorded in the books of account which was relied upon by the AO and found to be authentic since the AO has neither rejected the books nor has passed the order u/s 144 of the Act. It was submitted that M/s SEL Manufacturing Co. Ltd. is a listed company which is registered with the Excise Department and accordingly all sales made by that company were duly recorded in the records of the Excise Department. The assessee filed the Excise Duty return and VAT-20 return in which the total turnover of Rs. 600/- crore was shown. It was argued that the records of sales and purchase were duly maintained and no adverse f....
X X X X Extracts X X X X
X X X X Extracts X X X X
....held that none of the subscribers were known to the any of the employees or even to the M.D., while at page no.3-4 of the order, he has given detailed finding that all 6 companies that have invested in share capital of the assessee company are related to appellant's group and has given details of the Director and promoter of all 6 companies and their shareholding. On careful consideration, I hold that the identity of all the 6 companies which have invested in the appellant company stood duly proved before the AO and disregarding the relevant evidences gathered by the Ld.AO himself during the course of inquiry u/s 133(6) was not judicious. 6.3 Regarding the 2nd condition, namely Creditworthiness of the investor companies, the Ld. AO has held that these companies did not have sufficient returned income during the year and that these companies having made investment have not followed on the investment. In this regard, he relied upon the returned income shown by these companies. The appellant had furnished before the Ld. AO, a copy of the balance sheet of the 6 companies which clearly show that these companies had sufficient own funds including share capital, prem....
X X X X Extracts X X X X
X X X X Extracts X X X X
....d. AO has not applied mind and has perhaps mixed up the facts of the case with some other case. Evidently, no enquiry was carried out by the Ld. AO through any Inspector in the case of the appellant and thus, I hold that there is no adverse observation with the Ld. AO regarding genuineness of these transactions. Similarly, the observation that all shares allotted were transferred before 31.3.2012 is also based on incorrect facts. 6.5.2 On careful consideration, I find that these transactions were made through the banking channel and the Ld AO was provided with a copy of the bank statements of all the 6 investor companies as also of the appellant company and all such transactions were in the form of issue of cheque. The bank statements show that the investor companies did not receive any cash amounts prior to issue of cheques to the appellant company. Under the circumstances, I find that there existed no credible adverse observation regarding the genuineness of the share capital received by the appellant company from the 6 investment companies. Under the circumstances, as the appellant had duly substantiated the identity, creditworthiness and the genuineness of the appellan....
X X X X Extracts X X X X
X X X X Extracts X X X X
.... 20.24 Crores has already been offered to tax by the appellant. The same difference of Rs. 20.24 Crores cannot be taxed again, as done by the Ld. AO, as it tantamount to double addition, which is in violation of the principle of the equity and justice. Second, it is also evident that the Ld. AO had taken adverse view regarding the transactions of the appellant with M/s SEL, including purchases of Rs. 29.16 Crores and Sales of Rs. 44 Crores, however, the AO has held entire trading transactions (even with other parties) as bogus, without any adverse finding/evidence in respect of such parties. Third, I find that though the Ld. AO has hold the payments for purchases of Rs. 110 Crores and receipts for sales of Rs. 131.14 Crores as bogus, he has not rejected the books of accounts u/s 145 and accordingly, the impugned order of assessment has not been passed u/s 144. The Ld. AO neither rejected the books nor has gathered any additional evidence/ material and has paid no credence to the material available. Accordingly, the assessment itself is bad in law. 6.8 Without prejudice, on the merit of the case, I find that in reaching to his conclusions, the Ld. AO has t....
X X X X Extracts X X X X
X X X X Extracts X X X X
....aw nor is there any business prudence to first take delivery of the traded goods (sold on consignment basis) at Ludhiana and then to sell it to potential buyers elsewhere. Apparently, the appellant had effected delivery of the trading goods from M/s SEL to the buyers directly by using the trucks/vehicles of its own or sometimes by incurring freight expenses. Details of relevant expenses were furnished before the Ld. AO and also before me. Taking into account the above evidences, I find that relying only on the semantics with regard the reply of Mr. Sanjiv Garg, M.D. limited to 3 short questions, cannot be sufficient to hold that the huge payment for purchase and receipts for sales of the appellant amounting to Rs. 110 Crores & Rs. 131 Crores were bogus in the absence of any other supporting evidence. Moreover, in the reply to the question 16 to 18, he has maintained that no inward and outward register was maintained at the godown 3, which is explained by the fact that the appellant is doing trading on consignment basis (Answer 17). Further, the reply that the company did not maintain separate records for loading and unloading of trading goods at Godown no.3, is also proved by the f....
X X X X Extracts X X X X
X X X X Extracts X X X X
....stantiate bonafide of the share application money received by the appellant, by issue of a questionnaire dated 27.5.2014 (served upon the appellant on 26.8.2014) vide Item No. 4. In response to this, the appellant vide letter dated 31.12.2014, had filed Written confirmation letters, Copy of ITRs and the relevant bank statements from all the 8 investor companies, to support identity, genuineness and creditworthiness of the aforesaid cash credits. The Ld. AO again issued another questionnaire dated 20.1.2015, in which these details were again asked vide Item No. 2. To this, the appellant informed vide the letter dated 27.1.2015 that such details were already provided to the Ld. AO vide letter dated 31.12.2014 (wrongly mentioned as 9.12.2014). 6.3.3 The Ld. AO did not raise further queries on the evidences furnished by the appellant. However, on 28.1.2015, he asked the AR to produce the Principal Officers of such 8 investor companies. As the appellant could not produce them on the hearing held on 6.2.2015, the AO again asked the appellant to produce them. In response, the appellant furnished the names of the Principal Officers of these companies as under: Table-3 : Princip....
X X X X Extracts X X X X
X X X X Extracts X X X X
....he 5 companies in which he was Principal Officer and unsecured loans received from M/s GAL Coltex and M/s Shubham Yarns Pvt. Ltd. The AO insisted that the Principal Officer of these companies may be produced. The case was discussed on 13.3.2015 without further inquiry. 6.3.5 On 11.3.2015, the AO noted that a copy of Inspector's report was given to the AR for comments. On the next hearing held after a day's break on 13.3.2015, no queries were raised on the Inspector's report and on appellant's response thereon. 6.3.6 The Ld. AO also mentioned in the impugned order that with regard M/s Apoorva Leasing Finance and Investment Co. Ltd. the Inspector had reported that on reaching its given address at 104A, Ramesh Nagar, Single Story, New Delhi-110015, it was found that it was a residential house, on the front side of which one Mr. Hajur Singh was found at A-104-A and he was not aware of the resident on the backside of that premise. The Inspector also noted that there was no signboard or address board on the same premise. Further, enquiries from residents from other floors shows that this was a residential complex in which no company in the name of Apoorv....
X X X X Extracts X X X X
X X X X Extracts X X X X
....sheet. Moreover, the Ld. AO had also carried out enquiries in respect of unsecured loans received from M/s GAL Caltex and M/s Subam Yarns Pvt. Ltd. and on the same set of facts preferred not to make addition u/s 68 in respect thereof. Under the circumstances, the action of the AO of holding share application money received from these 5 companies as unexplained was without any prudent basis. Since the appellant had duly substantiated identity, genuineness and creditworthiness in respect of share application money received from the above 5 companies based on relevant evidences, addition u/s 68 in their case was without any basis and deserves to be deleted as such. 6.5 With regard M/s Brijeshwari Textile Ltd. and M/s Shiva Spin Fab Pvt. Ltd., I find that Ld. AO had deputed an Inspector, who had visited Ludhiana to gather information about the above 8 investing companies. The Inspector, in his report mentioned that first he visited 8L Model Town, Ludhiana which relates to Shiva Group of companies. The Inspector reported that there he met Sh. Navrantna Kumar, GM and Mr. Ramesh Malhotra GM Accounts who had informed him that the above companies did not exist at the given address.....
X X X X Extracts X X X X
X X X X Extracts X X X X
....itten confirmations and the balance sheet in support of identity, genuineness and creditworthiness in respect of the share application money received from the above 2 companies, however, no adverse observations were made by the Ld. AO on the above evidences, which are germane to explain cash credit u/s 68. It is seen that share application money has been received from these 2 companies by cheque and there is no cash deposit in the bank during this period. The Ld. AO has also not made adverse observation in this regard. Further, it is also noticeable that these companies have own funds (Table-1), which was much higher than the investment made in the appellant company. Under the circumstances, creditworthiness of these companies and genuineness of these transactions stand proved. I find that the Ld. AO has made the addition u/s 68 by holding that the identity of these companies could not be proved. The Ld. AO has disregarded the fact of registration of these companies with ROC and issue of PAN by the Income Tax Department, by holding that such evidences were not sufficient as, in his view, no physical verification is made for such purposes. The AO had accordingly, based his ....
X X X X Extracts X X X X
X X X X Extracts X X X X
....mises, but as he had to cover other premises the same day, he did not return and preferred to file a baseless report. In view of this, the Inspector's report cannot be considered as a credible evidence to hold that despite having given details of address in PAN, ROC registration, these 2 companies were not existing at the given address. Without prejudice, the Ld. AO had not given any reasonable opportunity to the appellant to furnish explanation on the aforesaid report of the inspector. In view of this, I hold that the appellant had duly substantiated the genuineness and creditworthiness of share application money from these two companies and no adverse observation were made by the AO on such evidences and with regard identity, the evidences in the form of PAN, ITR, ROC registration sufficiently substantiate the identity of the above two companies. In view of this, I hold that there was no merit in the action of the AO of treating the share application money received from these 2 companies as unexplained. 6.6 With regard the share application money received from M/s Apoorva Leasing Finance and Investment Company Ltd., which is not the group/associate company, I find th....
X X X X Extracts X X X X
X X X X Extracts X X X X
.... to why at the time of Inspector's visit, no evidence of existence of that company was found at the address given in the return of income, which was filed by the appellant before the AO in support of identity of that company. It was informed that M/s Apoorva Leasing Finance and Investment Company Ltd. was in the process of shifting its premise to Naiwala, Karol Bagh, New Delhi and in which regard, a copy of an agreement for hiring the premise at Karol Bagh w.e.f 15.4.2015 was filed before me along with the copy of electricity bill. These evidences undisputedly show the existence of the company and it cannot be held that M/s Apoorva Leasing Finance and Investment Company Ltd. was a bogus company with no actual identity, being a listed company. Further, with regard the Inspector's report to the AO, which was not shared with the appellant, it is seen that the Inspector has emphasized on the absence of a signboard at the given address. However, an investment company is not akin to a public utility service providing company, which may require existence of signboard. Moreover, there is no provision in law requiring a company to have a signboard installed outside the premise. The ....
X X X X Extracts X X X X
X X X X Extracts X X X X
....Leasing Finance and Investment Company Ltd. also stand duly proved, I find no merit in the addition made by the Ld. AO u/s 68 of the Act, merely, based on some report of the Inspector doubting identity of the company, which was not on the record and, which evidently, was not shared with the appellant. Under the circumstances, no addition u/s 68 was called for in respect of share application money received from M/s Apoorva Leasing Finance and Investment Co. Ltd. 6.8 I find that the Ld. AO was not satisfied as to how the appellant company charged premium of Rs. 2490 per share. The Ld. Counsel filed before me detailed submissions and contended that the appellant company had sufficient net worth and if the net worth is calculated as per Rule 11 UF, the average of book value and EPS based shares comes at Rs. 3812. In view of this, the appellant pleaded that the premium of Rs. 2490 charged by the appellant company cannot be held as excessive and pleaded that the Board of Directors of the company was fully empowered to charge the same. On careful consideration, I find merit in the argument of the appellant company. I also find that the Ld. AO has not applied the provisions of Rul....
X X X X Extracts X X X X
X X X X Extracts X X X X
....rom the decision of Hon'ble Delhi High Court in the case of CIT vs. Nova promoters Finlease Pvt. Ltd. (Supra) and M/s Lovely Export Ltd. (Supra). 6.9.2 With regard, the Ld. AO's reliance on the ITAT, Indore in the case of the Dashratlal Agrawal, Ratlam (Supra), I find that the facts in that case are distinguishable. On perusal of the said order, it is seen that the Hon'ble ITAT had held unexplained cash credit in respect of the amounts deposited from M/s Hindustan Continental Ltd., based on the decision of the same tribunal in the case of M/s Aggarwal Coal Corporation Ltd. and Others (ITA No.151136, 196, 137 and 190) and other cases in which the said M/s Hindustan Continental Ltd., was proved to be a bogus company. On the facts of the case, it was observed in other decisions, by the tribunal that there were cash deposits made in the bank account of that company out of which cheques were issued to the plaintiff. Further detailed enquiries were conducted by the tribunal through the department, which proved that such company was not existing and was a bogus company. In the case of the appellant, however, evidently, the bank statements clearly show that no cash dep....
X X X X Extracts X X X X
X X X X Extracts X X X X
....6 companies. Further, the enquiries conducted by the Ld. AO by deputing Inspector are held to be not credible, the results of which were used against the appellant without giving due opportunity. In any case, based on the evidences filed by the appellant and on due examination of the same, I hold that it was not a fit case for application of provisions of section 68. Accordingly, this ground is allowed in favour of the appellant." 16. Aggrieved with such order of the CIT(A), the Revenue is in appeal before the Tribunal by raising the following original grounds:- ITA No.6834/Del/2014 "1. Whether on the facts and circumstances of the case and law, the Ld. CIT(A) erred in deleting the addition of Rs. 20,17,00,000/- made on account of unexplained cash credits u/s68 ignoring the fact that all the six companies are not having any income to subscribe such huge share premium and companies are directly or indirectly operated by the promoters of the assessee as evident from the address of entry providers. 2. Whether on the facts and circumstances of the case and law, the Ld. CIT(A) erred in deleting the addition of Rs. 20,24,39,341/- made on account of income fo....
X X X X Extracts X X X X
X X X X Extracts X X X X
....ng to Rs. 28,98,25,000. ii. Whether on the facts and in the circumstances of the case and in law, the Ld. CIT(A) has erred in admitting and considering the additional evidence in the form of an affidavit of Mr. Ramesh Malhotra, GM of Brijeshwari Textiles Ltd. and Shiva Spin Fav P Ltd., an agreement for hiring the premise and electricity bill without giving an opportunity to the AO which is in violation of Rule 46A of the Income Tax Rules, 1962. iii. The appellant craves leave to add, amend, modify, vary, omit or substitute any of the aforesaid grounds of appeal at any time before or at the time of hearing of the appeal." 17. The ld. DR strongly challenged the order of the CIT(A) in deleting the addition made by the AO u/s 68 of the Act for both the years as well as the addition on account of bogus transaction of purchase and sales made by the assessee with M/s SEL Manufacturing Company Ltd. So far as the deletion of addition made by the AO u/s 68 of the Act is concerned, the ld. DR submitted that the assessee has not fulfilled the three ingredients of section 68 of the Act, namely, the identity and credit worthiness of the share applicants and the genuineness o....
X X X X Extracts X X X X
X X X X Extracts X X X X
....ssessee once the AO asked him to produce the principal officers. Since the onus was not discharged by the assessee, the AO had rightly treated the credits as unexplained. He accordingly submitted that the order of the CIT(A) be reversed and that of the AO be restored on the issue of addition u/s 68 is concerned or at least be set aside to the file of the AO for fresh adjudication. 19. So far as the order of the CIT(A) in deleting the addition of Rs. 20,24,39,341/- made by the AO on account of undisclosed income from bogus purchase and sales with M/s SEL Manufacturing Co. Ltd., is concerned, he relied on the order of the AO. He submitted that under the facts and circumstances of the case, the ld.CIT(A) was not justified in deleting the addition, therefore, the same also should be reversed and that of the AO be restored. 20. The ld. Counsel for the assessee, on the other hand, heavily relied on the order of the CIT(A). The ld. counsel at the outset drew the attention of the Bench to the original grounds and revised grounds filed by the assessee and submitted that a perusal of the original grounds would show that the words "companies are directly or indirectly operated by the pr....
X X X X Extracts X X X X
X X X X Extracts X X X X
....filed before the AO have not been rebutted by him. He has not raised any query regarding various evidences furnished before him during the course of assessment proceedings. Referring to page 482 to 484 of the paper book, (PDF paper book-3, page Nos.54-57), the ld. Counsel for the assessee submitted that the assessee, vide letter dated 23.02.2015 addressed to the AO has given the names of Mr. Pradeep Makkar, Mr. SanjayGarg, Mr. Ramesh Malhotra and Mr. Bharat Bhushan, who are the principal officers of the applicant companies. He submitted that the assessee has produced the principal officers of seven companies. However, neither any enquiry was made from them nor their statements recorded. He submitted that the assessee has produced Mr Sanjeev Garg from Ludhiana who is the principal officer of M/s Pushpa Yarns (P) Ltd. on 11th March, 2015. However, no statement was recorded nor there is mention of any further enquiry on the note sheets. Similarly, Mr Pradeep Makkar was produced on 13th March, 2015. He is the principal officer of M/s Gal Cottex (P) Ltd., M/s Shubam Yarns (P) Ltd., M/s Himachal Yarns (P) Ltd. and M/s Garg Fincap Ltd. However, as per the note sheet entry, no enquiry was ....
X X X X Extracts X X X X
X X X X Extracts X X X X
....rves of Rs. 120/- crores. Referring to various pages of the paper book, the ld. counsel submitted that the assessee has discharged the burden cast on it by producing all the relevant details such as their PAN numbers, bank details, Income-Tax particulars, copy of incometax returns, audited balance sheets, etc., and has substantiated the availability of huge capital and free reserves and surplus with them to invest in the shares of the assessee company. 25. The ld. Counsel for the assessee submitted that all the investors are regular investors of the assessee company and they are holding shares till date. In subsequent assessment year, i.e., A.Y. 2013-14, the assessee company has received share application for Rs. 20,55,25,000/- from three common investors which has been accepted as genuine transaction. All the investors have duly responded to notice issued under section 133(6) of the Act. The assessee has filed various documentary evidences to discharge the burden of proof. Therefore, merely because there is low income of the shareholders for this particular year the same cannot be a ground to doubt the creditworthiness of the shareholder. Further, the AO cannot make the source ....
X X X X Extracts X X X X
X X X X Extracts X X X X
.... ground for making addition. For the above preposition, he relied on the decisions of the Hon'ble Delhi High Court in the case of CIT vs Value Capital Services Private Limited, 307 ITR 334; CIT vs Victor Electrodes Ltd. 329 ITR 271; CIT vs Fair Finvest Ltd., 357 ITR 146 and various other decisions. Referring to the CBDT instruction No.2/2015 dated 29th January 2015, he submitted that premium on share issued represents capital account transaction and does not give rise to income. The ld. counsel for the assessee, relying on various decisions placed in the case law compilation and synopsis submitted that the burden of the assessee stood discharged as entire evidence was furnished. 27. The ld. counsel for the assessee submitted that for accepting the share capital/share premium the three ingredients, namely, the identity & creditworthiness of the lenders/subscribers and the genuineness of the transaction have to be proved which the assessee in the instant case has duly discharged. He submitted that each case depends on its own sets of facts and in the instant case the assessee has satisfactorily proved the three ingredients of the provisions of section 68 of the Act. Therefore, the....
X X X X Extracts X X X X
X X X X Extracts X X X X
.... dated 17.04.2018 Pr. CIT vs. Veedhata Tower Pvt. Ltd. ALLAHABAD HIGH COURT i) 350 ITR 220 (All) CIT vs, Jav Dee Securities and Finance Ltd. ii) 350 ITR 222 (All) CIT vs. Misra Preservers (P) Ltd. - MADHYA PRADESH HIGH COURT i) 356 ITR 65 (MP) CIT vs. Peoples General Hospital Ltd CALCUTTA HIGH COURT i) ITA No. 263/2011 GA No. 2856/2011 (Cal) dated 21.9.2011 CIT vs. Dataware (P) Ltd. ii) 2016 TIOL 1227 CIT v.JJ Development (P) Ltd. INCOME TAX APPELLATE TRIBUNAL i) ITA No, 6492/M/2016 AY 2007-08 Arceli Realty Ltd. v. ITO ii) ITA No. 453/13/2016 AY 2012-13 ACIT v. TRN Energy, (P) Ltd. iii) ITA No.5955/D2014 AY 2010-11 dated 23.2.2018 Umbrella Projects (P) Ltd, iv) 62 ITR (Trib) 512 (Del) ACIT v. Shyam Indus Power Solutions (P) Ltd. v) ITA No. 2525/D/2015 for Assessment year 2011-12 M/s Prabhatam Investment (P) Ltd. v. ACIT vi) C.O.No.163, 164 & 165/Del/2016 M/s. Garuda Imaging & Diagnostics Pvt. Ltd v. ACIT vii) ITA No. 3611/D/2014 dated 16.10.2017 ACIT v. NRA Iron. & Steel Pvt, Ltd viii) ITA No. 02 & 03/D/2016 AY 2012-13 & 2013-14 AC....
X X X X Extracts X X X X
X X X X Extracts X X X X
....Corporation vs. CIT v) 59 ITR 632 (Assam) Tola Ram Daga vs. CIT vi) 49 ITR 273 (Mad) S. Hastimal vs. CIT vii) 151 ITR 150 (Pat) Additional CIT. Bihar vs. Hanuman Aggarwal viii) 154 ITR 244 (Pat) Addl. CIT vs. Bahri Brothers (P) Ltd. ix) 87 ITR 349 (SC) CIT vs. Daulat Ram Rawatmull x) ITA No. 3133/Del/2018 dated 25.6.2018 Moti Adhesives (P) Ltd. vs, ITO xi) ITA NO. 1162/Kol/2015 dated 14.6.2018 ITO vs. Wiz-Tech Solutions (P) Ltd. xii) ITA 1463/Kol/2010 dated 21.6.2013 Sri Nirmal Kumar Bose vs. ITO xiii) ITA No. 2677/Kol/2013 dated 25.7.2014 Jyoti Saraf vs. ITO e) The common address of shareholders is otherwise not a valid basis to disregard the claim of the Assessee i) 329 ITR 271 (Del) CIT vs. Victor Electrodes Ltd. ii) 330 ITR 603 (Del) CIT vs. Winstral Petrochemicals Pvt. Ltd. iii) 238 Taxman 653 (Del) CIT vs. SVP Builders India Ltd. iv) 357 ITR 146 (Del) CIT(IV) vs. Fair Finvest Ltd. dated 22.11.2012 v) ITA No. 71/2015 dated 12.8.2015 (Del) CIT v. Vrindavan Farms (P) Ltd. f) That share application money received during the year from grou....
X X X X Extracts X X X X
X X X X Extracts X X X X
.... No. 3342/D/2013 ITO v. XO Infotech Ltd. 27.2 So far as the order of the CIT(A) in deleting the addition of Rs. 20,24,29,341/- in assessment year 2011-12 representing difference of sale and purchase made by the assessee with M/s SEL Manufacturing Company Ltd. is concerned, he submitted that the ld. CIT(A) has given justifiable reasons while deleting the addition. He submitted that the assessee had made total payments for trading purchases at Rs. 110,89,61,370/- and had shown total receipts for trading sales at Rs. 131,14,00,711/- which have been booked in the accounts. Accordingly, it is evident that the resultant difference of Rs. 20.24 crores has already been offered to tax by the assessee. Therefore, the sum of Rs. 20.24 crores could not have been taxed again by the AO which amounted to double addition. Further, it is also evident that the AO had taken adverse view regarding the transaction of the assessee with M/s SEL Manufacturing Company Ltd., including purchase of Rs. 29.16 crores and sales of Rs. 44 crores. However, the AO has held the entire trading transactions with other parties as bogus without any adverse findings/evidence in respect of such parties. He submitted th....
X X X X Extracts X X X X
X X X X Extracts X X X X
....20,17,00,000/- for A.Y. 2011-12 and Rs. 28,98,25,000/- for assessment year 2012-13 which was made by the AO under section 68 of the Act. A perusal of the assessment order shows that the AO made addition of Rs. 20.17 crores in respect of following six parties for assessment year 2011-12 and Rs. 28.29 crores in respect of 8 parties for 2012-13 the details of which are as under:- SL. No. Particulars of the Subscribers Amount of share application money received in F.Y. 2010-11 Amount of share application money received in F.Y. 2011-12 1. Himachal Yarn Formerly Himachal Steel Udyog Ltd. PAN: AABCH0451J 7,07,10,000 1,50,40,000/- 2. Brijeshwari Textiles Pvt. Ltd Pan.: AACCB7479K 3,00,00,000 1,50,00,000/ - 3. Balmukhi Textiles Pvt ltd. 3,00,00,000 - 4. GargFincap Ltd. - 8,00,000/- _ 5. Shiva Spin Fab Pvt. Ltd. Pan. AAKCS6521K 4,00,00,000 1,70,00,000/- 6. GAL Cottex Pvt. Ltd. PAN AABCS8023C 2,03,70,000 5,30,00,000/- . 7. Apporva Leasing Finance and Investment Company Ltd. - 7,50,00,000/ - 8. Pushpa Yarns Pvt Ltd. - 1,00,00,000/- 9 Shu....
X X X X Extracts X X X X
X X X X Extracts X X X X
..... Counsel. A perusal of the assessment order shows that the AO at Page 3 of the assessment order for assessment year 2011-12 has mentioned as under:- "The share holding pattern of the applicant companies was also examined and found that these companies are being promoted and operated by the family members of the promoters of the assessee company." 31. Similarly in assessment year 2012-13, the AO at page 5 of the assessment order has mentioned as under:- "The share holding pattern of the applicant companies was also examined and found that these companies are being promoted and operated by the family members of the promoters of the assessee company." 32. A perusal of the details furnished by the assessee shows that in the order passed under section 143(3) for assessment year 2013-14, as per direction of the JCIT u/s 144A of the IT Act, 1961, the AO in assessee's own case has accepted the share capital subscribed by the following companies which are as under:- i) M/s. Himachal Yarns Limited - Rs. 4,88,50,000/- ii) M/s. Gal Cottex (P) Ltd. - Rs. 4,13,50,000/- iii) M/s Shubham Yarns (P) Ltd. - Rs. 11,53,25,000/- 33. Similarly in ass....
X X X X Extracts X X X X
X X X X Extracts X X X X
....p Makkar although he is fully aware that he is the director-cum-shareholder of the assessee company as well as the principal officer of above four companies. From the various details furnished by the assessee before the AO, before the CIT(A) as well as before us, it is clearly established that the company who have invested in the shares of the assessee company are group companies as admitted by the AO in the body of the assessment order. No doubt, the companies have declared meager income for the current year when they have subscribed to the shares of the assessee company. However, their credit worthiness stands proved from the balance sheet filed by them which shows huge own capital and free reserves available with them. There is no evidence on record that money from the coffers of the assessee company has directly or indirectly gone to those companies which have come back in the form of share capital / share premium. It is also seen that in the preceding and subsequent years the investment by some of the companies have been accepted in the orders passed under section 143(3) in their respective cases, details of which are placed in the paper book and synopsis which can be summariz....
X X X X Extracts X X X X
X X X X Extracts X X X X
....ho have subscribed to the equity capital of the company. Name of the subscriber Principal officer of the Company i) GAL Cottex (P) Ltd. Sh. Pardeep Makkar ii) Shubham Yarns (P) Ltd. Sh. Pardeep Makkar iii) Himachal Yarns Ltd. Sh. Pardeep Makkar iv) Garg Finap Ltd. Sh. Pardeep Makkar v) Pushpa Yarns (P) Ltd. Sh. Sanjiv Garg vi) Brijishwari Textile (P) Ltd. Shri Ramesh Malhotra vii) Shiva Spinfab (P) Ltd. Shri Ramesh Malhotra viii) Apporva Leasing Finance & Investment Co. Sh. Bharat Bhushan" 33.6 However, it is not known as to why the AO did not examine either Shri Pradeep Makkar or Mr. Sanjiv Garg who had appeared before him. 33.7 Similarly, in the case of M/s Apoorva Leasing Finance & Investment Co., is concerned, we find from the details furnished by the assessee company in the paper book that the said company is a listed company with a capital and free reserve of more than Rs. 120/- crores. Further, we find from the paper book pages 496 and 497 (PDF paper book pages 68 and 69) that assessment in this company was completed u/s 153C/153A on 28.03.2013 for the A.Y. 2010-11 accepting the returne....
X X X X Extracts X X X X
X X X X Extracts X X X X
.... Calculation of EPS 2010-11 Profit after tax (in lacs) 2681.17 No. of Eq. Shares(Weighted) 517534 EPS Rs. 518.02 Capitalized @10% (B) Rs. 5180.70 Average of Book value & EPS based share Value (Rs. 2444+ 5181) / 2 Rs. 3812.00" 33.10 The ld. DR has not brought any material to show that such valuation is incorrect. Therefore, we do not find any force in the allegation of the AO or DR that the premium charged by the assessee company is exorbitantly high. 33.11 So far as the ground raised by the Revenue that the ld.CIT(A) has admitted additional evidence in the form of an affidavit of Mr. Ramesh Malhotra, GM of Brajeswari Textiles Ltd. and Shiva Spin Fab Pvt. Ltd. is concerned, we find from the order of the ld.CIT(A) at para 6.5.2 (which has been reproduced at page 25 of this order) that the affidavit was filed at the direction of the ld.CIT(A) and, therefore, we are of the opinion that there is no violation of the Rule 46A when some document is filed at the direction of the CIT(A). The ground raised by the Revenue on this issue is accordingly dismissed. 34. The various decisions relied on by the ld. DR are not applicable to the facts of the p....
X X X X Extracts X X X X
X X X X Extracts X X X X
.... from undisclosed source for assessment year 2011-12 is concerned, we find the same was made by the AO on the basis of the search that has taken place under section 132 of the Act in the case of SEL Manufacturing Company and the survey conducted in the premises of the assessee subsequent to the search. It is the allegation of the AO that the assessee was involved in bogus transaction of purchase and sales with SEL Manufacturing Company. According to him the total payment for such bogus purchase is Rs. 110,89,61,370/- and total payment received for such bogus sale is Rs. 131,14,00,711/- and thus the assessee has introduced additional funds in the business at Rs. 20,24,39,341/- for which he made the addition. A perusal of the assessment order shows that the assessee filed its return of income declaring total income at Rs. 31,41,11,880/-. The AO has not rejected the book results nor passed the order under section 144 of the Act. Since the assessee has shown income of Rs. 31,41,11,880/- which is much more than the amount of Rs. 20,24,39,341/-, therefore, such income, even if treated as bogus, has already been taxed and therefore, the addition of the same again will amount to double tax....
X X X X Extracts X X X X
X X X X Extracts X X X X
.... revenue is as under: Sr. Name of Assessment Years No. company i) M/s. Himachal 2011-12 7,07,10,000 2012-13 1,50,40,000 2013-14 4,88,50,000 2014-15 2015-16 Yarns Ltd. Investments made in earlier years in preference shares A.Y. 2007-08-2,63,00,000 A.Y. 2008-09 1,00,00,000 (Listed company) 11) M/s. 3,00,00,000 1,50,00,000 Brijeshwari Textiles (P) Ltd. iii) M/s. Balmukhi 3,00,00,000 -- Textiles (P) Ltd. iv) M/s. Shiva Spin 4,00,00,000 1,70,00,000 Fab (P) Ltd. v) M/s. Gal 2,03,70,000 5,71,30,000 4,13,50,000 1,68,75,000 A.Y. 2007-08-1,00,00,000 Cottex (P) Ltd. A.Y. 2008-09 (formerly A.Y. 2009-10 1,00,00,000 50,00,000 known as Garg Sons Investment (P) Ltd.) vi) M/s. Shubham 1,06,20,000 9,98,55,000 11,53,25,000 58,00,000 2,75,00,000 Yarns (P) Ltd. A.Y. 2007-08 1,00,00,000 A.Y. 2008-09-1,00,00,000 A.Y. 2009-10 50,00,000 vii) M/s. Garg 8,00,000 Fincap Ltd. A.Y. 2007-08-2,37,00,000 A.Y. 2009-10-1,00,00,000 viii) M/s. Apoorva Leasing Finance and Investment ....