TaxTMI 
TaxTMI 
2018 (2) TMI 2016
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....nd therefore dismissed as not pressed. 4. The issue raised in ground No. 2 relates to confirmation of addition of Rs. 5 crores by CIT(A) as made by the AO under Section 68 of the Income Tax Act, 1961 (hereinafter "the Act") in respect of share capital and share premium received by the assessee-company for allotment of 10% non cumulative preference shares to M/s. Janitor Distributors Pvt. Ltd. 5. The brief facts of the case are that the assessee-company filed its return of income on 28.09.2012 declaring a loss of Rs. 3,946/-. The case of the assessee was selected for scrutiny. Notice under Sections 143(2) and 142(1) were duly issued and served upon the assessee. The AO noticed from the Balance Sheet of the company that the assessee has allotted 10% non cumulative preference shares of face value of Rs. 100/- each at a premium of Rs. 100/- each to M/s. Janitor Distributors Pvt. Ltd. on 31.03.2012 thereby receiving a total amount of Rs. 5 crores. According to the AO the transaction of receiving money by way of share capital on premium was unnatural, suspicious and accordingly the AO called the assessee to prove the genuineness of the said transaction. The assessee during the cour....
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....case here falls within the ambit of the above mentioned cases. One has to consider the totality of facts, surrounding circumstances and human probability for arriving at a conclusion as held in by the Hon. Supreme Court sin the following cases : 1. CIT Vs Durga Prasad 82 ITR 540 (SC) 2. Sumati Dayal Vs CIT (1995) 214 ITR 801 (SC) The A.O. has done all the above to arrive at a conclusion that it is an unexplained credit u/s. 68. 8.2 This case also falls within the ambit of the term "colourable devices" as coined by Hon. Supreme Court wherein the Hon. Supreme Court has observed in the case of Me Dowell and Co. Ltd. Vs ITO 154 ITR 148 that "Tax planning may be legitimate provided it is within the framework of law. Colourable devices cannot be a part of tax planning and it is wrong to encourage or entertain the belief that it is honourable to avoid the payment of tax by resorting to dubious method. It is obligation of every citizen to pay the taxes, honestly without resorting to subterfuges". Thus, the addition of Rs. 5,00,00,000/- is confirmed since the A.O. has passed a very speaking order by bringing out all the facts and issu....
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....The learned A.R. also pointed out that the funds were raised by way of 10% non cumulative redeemable preference shares which mean that the assessee was to pay 10% dividend on the said money raised by the assessee. The learned A.R. submitted that the conclusion of the AO that the shares of the assessee-company were not worth subscribing in absence of any business activity was incorrect. The ld AR further submitted that the assessee company belongs to G.R. Agarwal Group, Udaipur and its flagship company was G.R. Infraprojects Ltd. which is engaged in development of infrastructural facilities and is renowned in the market for quality construction and timely completion of infrastructural projects like road, highways and flyovers, etc. The average turnover for the last three years of the said flagship company was around Rs. 800 to Rs. 850 crores with the net profit ranging between Rs. 35 to 50 crores. Considering the potential of infrastructure in India there are large number of investors including FIIS and financial institutions which are interested in investment in the group by way of equity participation, preference shares or inter corporate loans etc. The learned A.R. also pointed o....
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.... the company either under Section 147 or 263 in respect of completed assessment unlike in the case of private companies whose cases have been reopened by the government which are engaging in accommodation business. The learned A.R. for the assessee took us through similar transactions in the case of group company M/S Lokesh Builder Pvt. Ltd. which has received share capital from M/s. Janitor Distributors Pvt. Ltd. in A.Y. 2012-13 and the transaction was accepted by the Income Tax Officer, Ward-1, Udaipur after carrying out a detailed enquiry and gathering various information. The ld AR stated that the AO after satisfying about the genuineness and creditworthiness thereof framed the assessment under Section 143(3) vide order dated 27.03.2010 accepting the contentions and submissions of the assessee qua said transaction. The learned A.R. also placed before the Bench a copy of letter dated 25.11.2014 addressed by the AO to Lokesh Builder Pvt. Ltd. and copy of assessment order of the said group company. The learned A.R. contended that in view of the contemporary evidence filed on record of the Department itself, the suspicion of the AO as regards the transaction being non-genuine was w....
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....as sourced and financed by the said investor from the sale of shares of other private companies. As far as genuineness, credit worthiness and identity of the investor is concerned the learned D.R. submitted that mere production of records such as ITR, Balance Sheet and source out of sale of shares could not be taken to mean that the transaction is genuine especially when in both the companies, investor and investee there was no business. The learned D.R. argued that the benefit of similar transaction in the group company M/s. Lokesh Builder P. Ltd. from the same investor which was examined and accepted by Income Tax Officer, Ward-1, Udaipur could not be taken to mean that the instant transaction of the assessee is genuine and not suspicious. The learned D.R. finally relying on the orders of the Authorities below prayed that the order of the CIT(A) be confirmed as this is a case of circuiting transactions intended to route black money into company. The ld DR while distinguishing the decisions relied upon by the ld AR placed reliance on the following decisions in support of her arguments:- i. Sreelekha Banerjee and Ors. vs. CIT 49 ITR 112 (SC) ii. Income Tax Officer....
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....n.com 526 (AP) xxxvii. Agrawal Coal Corpn. (P) Ltd. vs. ACIT 135 ITD 270 (Ind) xxxviii. Nipun Builders & Developers P. Ltd. 350 ITR 407 (Del) xxxix. CIT vs. Ultra Modern Exports P. Ltd. 40 taxmann.com 458 (Del) xl. ACIT vs. Dhanalaxmi Steel Re-rolling Mills 57 ITD 361 (Hyd) xli. CIT vs. Meenakshi Mills Ltd. 63 ITR 609 (SC) The learned A.R. in the rebuttal distinguished the various decision decisions relied upon by the AO in the assessment order and also the CIT(A). 9. We heard the rival submissions and perused the material on record including the impugned order and various decisions cited by rival parties. The undisputed facts of the case are that the assessee issued 250,00,000 10% non cumulative e redeemable preference shares of Rs. 100/- each at a premium of Rs. 100/- each to M/s. Janitor Distributors Pvt. Ltd. on 31.03.2012. The assessee company was not carrying on any business during the year and so was the investor company M/s. Janitor Distributors Pvt. Ltd. The source of investment was out of sale of shares which were held by M/s. Janitor Distributors Pvt. Ltd. The AO also recorded a finding in the assessment order that M/S J....
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....e find that the assessee company belongs to G.R. Agarwal Group, Udaipur and its flagship company is G.R. Infraprojects Ltd. which is engaged in development of infrastructural facilities/projects and is very famous and known in the market for quality construction and timely construction of infrastructural projects like road, highways and flyovers, etc. The average turnover for the last three years of the said flagship company was around Rs. 800 to Rs. 850 crores with the net profit ranging between Rs. 35 to 50 crores. It is also a fact the private equity funds, namely India Business Excellence Fund I and IDFC Investment Advisors Ltd. invested Rs. 80 crores by way of equity capital in G.R. Infraprojects Ltd. in 2011 and the company is in the process of listing of its shares in the market. In view of all these facts we are not in a position to agree with the conclusion of the AO as confirmed by the learned CIT(A) that the shares in the assessee company were issued at a premium which is sham and non genuine as the potential and growth trajectory of the entire group has to be seen and not the individual company. In our pinion the investments in the market are driven by the past track re....
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....e flagship company G.R. Infraprojects Ltd. which is engaged in the development of infrastructural facilities like road, highways and flyovers and has a turnover of more than Rs. 800 crores to 850 crores over a period of three years with net profit of Rs. 30 to 50 crores. The investment in the flagship company to the tune of Rs. 80 crores by private equity funds, i.e. India Business Excellence Fund I and IDFC Investment Advisors Ltd. in 2011 realising the gross potential of the company, which is in the process of listing the shares in the market. Seeing the facts in totality we are of the view that the AO has not brought any evidence on record to prove that the transaction to be sham and non genuine and thus we are not in agreement with the conclusion drawn by the CIT(A) on the issue. The case of the assessee is also supported by a series of decisions relied upon by the learned A.R. is discussed as under: - • In the case of ACIT vs. Gagandeep Infrastructure Pvt. Ltd. it has been held that the issue of shares at premium is always a commercial decision which does not require any justification. It was further held by the Hon'ble Tribunal that it is a prerogative of the....
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....lete the disputed addition. • In the case of Lalitha Jewellery Mart P. Ltd. vs. DCIT (399 ITR 425 (Mad) the Hon'ble Madras High Court held that the assessee cannot upon its investors to disclose all such business transactions they carried on in the immediate past and as to how much they made from their respective business enterprises. The assessee cannot call upon its investors to prove their good business sense in investing in the assessee-company, as such investors cannot gain any controlling stake. • In the case of Orchid Industries Pvt. Ltd. vs. DCIT in ITA No. 1867/Mum/2013 dated 07.02.2014 the Coordinate Bench of this Tribunal held that merely because the cheques were deposited in the respective accounts would not lead to the conclusion that these cheques money was the assessee's own money routed through these parties until and unless it is found in the enquiry and substantiated with the facts and material. .................................In view of the above discussion as well as facts and circumstances of the case, we are of the considered opinion that the addition made by the AO under Section 68 of the Act is not justified and the same is her....
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....nst cheques issued and charged commission. The Directors of these share appellant companies were also cross-examined by the assessee whereas in the present case the facts are different. • In the case of Bisaka Shares Pvt. Ltd. (supra) the Hon'ble Tribunal confirmed the order passed under Section 263 by CIT because the AO did not conduct any enquiry about the genuineness of share application and simply accepted the return filed by the assessee in the assessment completed under Section 143(3) r.w.s. 147 of the Act whereas this not the fact in the present case. • In the case of Durga Prasad More (supra) it was held by the Hon'ble Supreme Court that though apparent must be considered real unless it was shown that there were reasons to believe that the apparent was not real, in a case where a party relied on self-serving recitals in documents it was for that party to establish the truth of those recitals, and that the taxing authorities were entitled to look into surrounding circumstances to find out reality of the recitals. The documents considered by the Hon'ble Court in this ruling were a deed of conveyance and another deed of settlement in respe....