TaxTMI 
TaxTMI 
2018 (5) TMI 2034
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....rred in not appreciating the fact that the assessee had not produced any evidence before the AO and the Ld. CIT(A) admitted the additional evidence without appreciating the fact that assessee was to establish how and what prevented the assessee from filing the same evidence before the A.O". (iii) "Whether on the facts and circumstances of the case, Ld. CIT (A) erred in accepting the paper book submitted by the assessee and based on it has accepted the identity, genuineness and creditworthiness of the entities from whom the assessee has received monies". The appellant prays that the order of the CIT(A) on tjie above grounds be set aside and that of the AO be restored. 3. The grounds of appeal in assessee's appeal read as under: 1. On the facts and circumstances of the case and in law, the learned CIT(A) 16 has erred in confirming disallowance u/s. 68 of the Act, of Preference Share Capital amounting to Rs. 5,40,00,000/- received from M/s. Empower Industries India Limited. 2. The order under appeal is not only bad in law and invalid, but also against the natural law of equity and justice. 4. Brief facts of the case are as under:....
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....oresaid, the Assessing Officer held that identities of the shareholders have not been proved. He noted that the assessee has merely furnished photo copies of share application forms, balance sheets, relevant bank statements entries of the shareholders. However, the Assessing Officer noted that even by doing so, the assessee has not established the identity of the said shareholders as neither the concerned persons have been produced nor their books of accounts been furnished. The Assessing Officer further noted that as per the information available on the official website of RoC(MCA), the preference shareholders listed hereinabove have continued with the assessee company till 31.03.2012. The Assessing Officer noted that the assessee has repeatedly conveyed that it is in close contact with all the said concerns. However, the Assessing Officer noted that the assessee has not been able to produce those persons. The Assessing Officer further observed that the assessee have furnished photocopies of the share application and relevant bank statements to prove the creditworthiness of the said shareholders. However, the Assessing Officer held that these papers cannot be treated as evidenc....
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.... * Dynachem Pharmaceuticals (Exports) Limited d. Statement showing details of Bank Accounts of preference shareholders (Name and address of Bank alongwith respective bank account numbers) The appellant company has also submitted bank statement of its own reflecting payment received from above shareholders. 7. Thereafter, the ld. Commissioner of Income Tax (Appeals) noted that the Assessing Officer has issued summons u/s. 131. He also noted that the Inspector has been deputed to find out some of the shareholders. The assessee made elaborate submissions before the ld. Commissioner of Income Tax (Appeals). The ld. Commissioner of Income Tax (Appeals) noted that the assessee has submitted various documents by way of additional evidences which include the following: i. Copy of acknowledgement of return of income and financial statement in case of Proficient Merchandise Private Limited&Raw Gold Securities Limited for A.Y. 2010-11 ii. Copy of signed application for applying to the issue of preference shares and board resolution of Priority Traders Private Limited iii. Copy of PAN card iv. Bank statements of shareholder....
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....) read with sub-rule (4) of Rule 46 A. 4.2.4 In the present case, the details submitted by the appellant are relevant to the grounds raised in appeal as the major reasons for addition made in the assessment. The appellant has clearly stated that the appellant was not provided with enough time of submitting other evidences. There was no intentional failure on the part of the appellant and evidences being material and supportive, and in the interest of justice the evidences produced by the applicant are admitted and taken on record after considering the principles laid down by the jurisdictional High Court in the case of Smt Prabhavati S. Shah. Further, the appellant had submitted most of the details during the assessment: proceedings itself as can be seen from the record. Only part of the details are submitted now. Even the said fact is accepted by the AO in para 15 of the remand report which is reproduced heiein below, as pointed cut by the AR of die appellant . "The evidences and details furnished now are the same as were furnished before the AO ' V except, few additional evidences which were already furnished before the CIT(Appeals)." ....
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....er they actually exist in the given addresses. After visiting the premises, the Inspector has stated in his report that the following parties actually existed at the given addresses. Inspector's report is attached herewith; i) Aarika Steel and Metal Private Limited ii) Safford Mercantile Private Limited iii) Benchmark Buildcon Private Limited iv) Jagdamba Complex Private Limited v) Proficient Merchandise Private Limited vi) Nihal Mercantile Private Limited vii)Pasupati Enclave Private Limited 4.2.7 The appellant company had filed the copies of the replies received in response to notice u/ s. 133(6) notices in its submission and stated that the shareholders not only furnished the documentary evidences but also provided the explanation asked for by AO. Thus, AO is not correct in stating that they have failed to furnish any new evidences or information to establish the credit worthiness of the parties and the genuineness of the share application money claimed to be invested in the appellant company during the year. 4.2.8 As regards identity of the shareholder it has been stated in the re....
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.... appellant place reliance on following case laws in support that in the circumstances of the facts of the case of the appellant no addition under section 68 can be made on account of unexplained cash credit: i. ACIT v. Kisco Casting (P.) Ltd (2013) 34 taxmann.com 37 ii. CIT v. Creative World Telefilms Ltd. (2011) 15 taxmann.com 183 (Bom)(HC) iii. CIT v. Orbital Communication (P) Ltd (2010) 327 ITR 560 (Delhi) iv. CIT v. Shree Rama Multi Tech Ltd. (2013) 34 taxmann.com 177 (Gujarat) v. CIT v. Orissa Corpn. (P.) Ltd. (1986) 25 TAXMAN 80F (SC) vi. CIT v. Apex Therm Packaging (P.) Ltd (2014) 42 taxmann.com 473 (Guj) vii. CIT vs. MoraniAutomotives (P.) Ltd (2014) 45 taxmann.com 473 (Rajasthan) viii. CIT v. Nipuan Auto (P.) Ltd (2014) 49 taxmann.com 13 (Delhi) ix. CIT v. Vacmet Packaging (India) (P.) Ltd (2014) 45 taxmann.com 204 (Allahabad) x. CIT v. Misra Preservers (P.) Ltd. (2013) 31 taxmann.com 214 (Allahabad) xi. CIT v. Expo Globe India Ltd. (2014) 51 taxmann.com 208 (Delhi) ;;-::---,. xii. ACIT vs. Bahubali Dyes Ltd (2015) 55 taxmann.com 357 (Delhi - Trib) ....
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....inspector who could not find 7 shareholders on the addresses provided by the appellant company. 5.1.2 Merely not producing shareholders before the AO would not mean that the appellant company has not proved the identity of the shareholders. Ld. AO failed to consider other documentary evidences such as copy of acknowledgement of return of income, balance sheet, bank account details of the shareholders, confirmations of shareholders etc. which were submitted during assessment proceedings proving the identity of the shareholders. The appellant company has also filed share application forms received from shareholders and copy of correspondence with the shareholders. It was contended that shareholders were not under command of appellant. They were not ready to ;*-; "come on requests of appellant. 5.1.3 AO himself has stated in the order that as per the information on the official website of the ROC (MCA) the preference shareholders have continued with the appellant company till 31.03.2012. This, itself, proves the identity of shareholder as they were registered with ROC and their information was available on the website of the ROC. 5.1.4 Further during the rem....
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....e of M/s. Citygold Education Research P. Ltd. in order No. CIT(A)-16/ITO 8(1)(3)/IT 178/2012-13 dated 22.05.2015. The observations of QT(A)-16 i.e. my predecessor is reproduced herein below: "5.14 Report of the DDIT, (INV) Unit l-(3) dated 2-3-2015 is sub the AO. The DDIT (INV), Ahmedabad has also forwarded the states:-: Shri Vimal Nemchand Gala, director and authorised for the deposition . M/s Dynachem Pharmaceuticals (Exports) Limited, Sonal Internationa^ Limited, SonalSil - Chem Limited, Sonal Cosmetic (Exports) Limited. 5.15 Prom the statement of Shri Vimal Nemchand Gala it can be noticed as follows: i. Business activities of the companies were explained. They are engaged in business of trading in chemicals (Ans to Q 4) ii. Confirmed the transaction of subscribing preference share of the appellant company. (Ans to Q 8) in. Details about business activities (Real estate) of appellant company were also provided. (Ans to Q 9) iv. The shares were subscribed for the purpose of investment and through common acquaintances. (Ans to Q9) v. Investment registers, audited accounts, return of income and bank statements were....
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..... Kumar Infraprojects Limited in which he has stated that that the said company has received bogus funds in the form of share application money pending allotment as on 31.03.2006 from a few companies whose credit worthiness is doubtful. In the said list, name of 3 companies were also appearing. 5.2.2 The said 3 companies were providing bogus funds to M/s. J Kumar Infraprojects Ltd, but it does not prove that the said companies has made bogus investment in the appellant company also. No such confession is available for investment in appellant company. Moreover, the investment made in the appellant company is after the date of search on J.Kumar Infra Projects Ltd i.e. 26.08.2009. 5.2.3 As regards issue of notice u/s. 133(6) to the bank and observation of AO that KYC forms do not reveal any particulars or specifics as may establish the identity of the person behind the shareholder company, it has been stated by the appellant that they are duly signed by the director of the company and also name of the authorised director is mentioned on the form and bank A/c itself proves the identity. 5.2.4 The appellant company had explained individual capacities of each s....
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.... reveals the following: i. Equity share capital of Rs. 12,06,00,000 and securities premium of Rs. 12,06,00,000. ii. Gross Block of Fixed Assets of Rs. 3,21,21,162 iii. The company has huge investments of Rs. 11,07,19,768. 1.1 The above details prove the credibility of the company and capacity to make investment in the appellant's company. 1.2 Identity was proved by submitting PAN card and registration address. Also notice u/s. 133(6) were duly served. Further, in case of M/s. Citygold Education Research Private Limited, the said party appeared before DDIT (Inv) and explained business activities carried on by them and also produced audited accounts, investment register, return of income, bank statement before DDIT(Inv), Unit - 1(3), Ahmedabad. The observation of the CIT(A)-16 i.e. my predecessor in case of abovementioned company is reproduced herein below: "5.9.3 ........... Further, in the statement recorded on oath u/s. 131 of Shri. Vimal Gala, director of Sonal Cosmetics (Export) Limited, he has confirmed the transaction of investing in the preference shares of the appellant company. The observation made by the AO were befor....
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.... RTGS & cheques. 2.4 The said company were holding till date the shares of the appellant company as stated by it in its reply to notice u/s. 133(6). 2.5 Hence addition made in the assessment is not correct 3. In case of SonalSil - Chem Ltd(Rs. 2,00,40,000), the said company has produced 20th Annual Report in the year under consideration. This shows that it is very old company. The financial statement of the said company reveals the following; i. Equity share capital of Rs. 8,45,40,000. ii. Gross Block of Fixed assets of Rs. 6,89,16,942. iii. The company has huge investments of Rs. 1,41,83,691 3.1 The above details prove the credibility of the company and capacity to make investment in the appellant's company. . 3.2 Identity was proved by submitting PAN card and registration address. Also notice u/s. 133(6) were duly served. Further, in case of M/s. City gold Education Research Private Limited, the said party appeared before DDIT (Inv) and explained business activities carried on by them and also produced audited accounts, investment register, return of income, bank statement before DDIT(Inv), U....
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....24 of PB and also in the statement recorded on oath of u/s. 131 of Shri. Virnal Gala, authorized for the ^deposition by Dynachem Pharmaceuticals (Exports) Limited, he has confirmed the transaction of investing in the preference shares of the appellant company. The observation made by the AO loere before the above statement taken on oath. However now, there is no room for doubt." 4.3 The appellant had also filed its confirmation also on page 42 of PB where the the above company has confirmed of having applied for the shares at premium and has given details of payments made through RTGS &cheques. 4.4 The said company were holding till date the shares of the appellant company as stated by it in its reply to notice u/s, 133(6). 4.5 Hence addition made in the assessment is not correct. 5. In case of Aarika Steel and Metal Private Ltd (Rs. 1,00,80,000), the financial statement of the above company reveals the following: i. Equity share capital of Rs. 50,95,000/- with high reserves and surplus of Rs. 9,49,52,194/- The company has huge investments of Rs. 9,61,55,000/-. 5.1 The above details prove the credibility of....
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....d computer peripharels. iii. The company has inventories of Rs. 3,15,18,831 and huge cash and bank balance of Rs. 5,57,69,177 which includes balance of FD with Foreign Bank of Rs. 1,31,91,650. iv. The company has huge investments of Rs. 64,64,90,200. v. The said company has written off GDR issue expenses of Rs. 10,10,431 and paid salary and wages of 2,31,46,513. 7.1 The above details prove the credibility of the company and capacity to make investment in the appellant's company. 7.2 Identity was proved by submitting PAN card and registration address. Also notice u/s. 133(6) were duly served. 7.3 The bank account of the said company reflects the payment made to the appellant company for investing in shares. But there is no entry in bank accounts which reflects that the appellant company has paid back the amount of investment. 7.4 The appellant had also filed its confirmation also on page 96 of PB where the the above company has confirmed of having applied for the shares at premium and has given details of payments made through RTGS & cheques. 7.5 However, the above party did not reply to the notice u/s....
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....dditional evidence paperbook where the above company has confirmed of having applied for the shares at premium and has given details of payments made through RTGS & cheques. 9.5 The said company is holding till date the shares of the appellant company as stated by it in its reply to notice u/s. 133(6). 9.6 Hence addition made in the assessment is not correct. 10. In case of Safford Mercantile Pvt Ltd (Rs. 1,00,80,000), the financial statement of the said company reveals the following: i. Equity share capital of Rs. 41,26,6007- with high reserves and surplus of Rs. 9,66,71,290/- ii. The company has huge investments of Rs. 9,56,30,000/- 10.1 The above details prove the credibility of the company and capacity to make investment in the appellant's company. 10.2 Identity was proved by submitting PAN card and registration address. Also notice u/s. 133(6) were duly served. 10.3 The bank account of the said company reflects the payment made to the appellant company for investing in shares. But there is no entry in bank accounts which reflects that the appellant company has paid back the amount of investment.....
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....sting in shares. But there is no entry in bank accounts which reflects that the appellant company has paid back the amount of investment. 12.4 The appellant had also filed its confirmation which is placed on page 184 of paper book where the above company has confirmed of having applied for the shares at premium and has given details of payments made through RTGS &cheques. 12.5 The said company is holding till date the shares of the appellant company as stated by it in its reply to notice u/s. 133(6). 12.6 "Hence addition made in the assessment is not correct 13. In case of Proficient Merchandise Private limited (Rs. 1,00,80,000), the financial statement of the said company reveals the following : i. Equity share capital of Rs. 51,68,200/- with high reserves and surplus of Rs. 12,78,97,313/- ii. The company has investment of Rs. 9,77,92,900/- 13.1 The above details prove the credibility of the company and capacity to make investment in the appellant's company. 13.2 Identity was proved by submitting PAN card and registration address. Also notice u/s. 133(6) were duly served. 13.3 The bank acco....
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....,73,84,398/- majorly in buildings, plant & machinery and electrical installations. * The company has huge cash and bank balance of Rs. 93,05,748 * It has also paid right issue expenses of Rs. 4,14,159 and penalty to Stock Exchange of Rs. 4,80,000 which proves that it's a running concern. 15.1 The above details prove the credibility of the company and capacity to make investment in the appellant's company. 15.2 Identity was proved by submitting PAN card and registration address. Also notice u/s. 133(6) were duly served. 15.3 In case of M/s. Citygold Education Research Ltd, DDIT(Inv) of Baroda had confirmed the existence of the above party. Financial statement of the above company was also filed. The observation of the CIT(A) - 16 i.e. my predecessor is reproduced herein below; "5.5.2 Also AddL, Director of Income Tax (Investigation), Baroda, has sent his report dated 4-6-2024 confirmed that the party namely M/ s. Prabhav Industries Limited actually exists and its address has changed. It shows the shares as investment as shown by the appellant, Balance sheet for y.e. on 31-3-10 is filed before him and the same shoivs the s....
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....m the statement of Shri Hiren C. Chhatrewala: i. Business activities of the companies of trading in commodities especially through commodity exchanges were explained. (Ans to Q 4) ii. Confirmed the transaction of subscribing preference share of the appellant company and submitted share application form. (Ans to Q 7) iii. Details about business activities of appellant company were also provided. (Ans toQ8) iv. The. shares were subscribed for the purpose of investment and through common acquaintances. (Ans to Q 8) v. Investment registers, audited accounts, return of income and bank statements were provided for the FY 2009-20 of all four companies. (Ans to Q 9,10) vi. Source of funds for making investment in the appellant company were explained. It was explained that the company had surplus funds inform of share capital. The said funds are extended as loans to various parties. The investments have been made out of the share capital and the short-term loans taken from other parties or loan repayments received by these companies. .(Ans to Q 12) vii. It was confirmed that shares are still held with the all four companies and ....
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....& cheques. 17.5 The said company are holding till date the shares of the appellant company as stated by it in its reply to notice u/s. 133(6). 17.6 Hence addition made in the assessment is not correct 18. In case of Pasupati Enclave Private Limited - Rs. 1,00,80,000, the financial statement of the said company reveals the following: I Equity share capital of Rs. 37,36,000/- with high reserves and surplus of Rs. 8,73,04,363/- ii. The company has investment of Rs. 6,15,40,000/- 18.1 The above details prove the credibility of the company and capacity to make investment in the appellant's company. 18.2 Identity was proved by submitting PAN card and registration address. Also notice u/s. 133(6) were duly served. 18.3 The bank account of the said company reflects the payment made to the appellant company for investing in shares. But there is no entry in bank accounts which reflects that the appellant company has paid back the amount of investment 18.4 The appellant had also filed its confirmation which is placed on page 287 of paper book where the above company has confirmed of h....
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....d; certainly it did nothing worthwhile to discharge the onus to prove the creditworthiness of the subscribing companies" In the appellant's case, the appellant had requested shareholders to comply with the notices issued to them and also the above documents submitted by appellant company prove the identity of the shareholders. Further notice u/s. 133(6) issued during remand proceedings were duly served on the shareholders and the shareholders had filed their replies along with supporting documents and explanation for source of investment. During remand proceedings appellant was ready to produce the principal officers but after receipt of reply u/5.133(6), A.O. did not insist for it. ii. In case of CIT vs. P. Mohanakala (2007) 291 ITR 278 (SC) wherein it was held that: "25. .....The doubtful nature of the transaction and the manner in which the sums were found credited in the books of accounts maintained by the assessee have been duly taken into consideration by the authorities below. The transactions though apparent were held to be not real one. May be the money came by way of bank cheques and paid through the process of banking transaction but that i....
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....ng Officer holding that if share application money was received by assesseecompany from alleged bogus shareholders, whose names were given to Assessing Officer, then department could always proceed against them and if necessary reopen their individual assessments. Assessing Officer should have found out details of shareholders through PAN cards, bank account, etc., so as to reach them because all relevant details and particulars were given by assessee to Assessing Officer. Therefore, impugned order passed by Tribunal was upheld. ii. CIT v. Orbital Communication (P) Ltd (2010) 327 ITR 560 (Delhi) The assessee had produced substantial evidence to establish the identity and creditworthiness of creditors and genuineness of share application but failed to produce creditors; and on that ground, the Assessing Officer added share application money as the assessee's undisclosed income under section 68. Held that, non-production of creditors could not be considered to negate the evidentiary value of rest of the material and share application money could not be regarded as undisclosed income of the assessee under section 68. iii. In the case of Shree Rama Multi Tech Ltd.....
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....e, as noticed by the Commissioner (Appeals) the assessee had filed the IT returns of the subscriber companies as also their bank statements and balance sheet in addition to the confirmation letters from the said two companies. A copy of the Form No. 2 filed by the assessee with the ROC regarding the allotment of shares to the said two companies had also been furnished. It is in this backdrop that the Commissioner (Appeals) had concluded that the assessee had been able to prove its case and that the Assessing Officer could not shift the burden back on to the assessee-company without the Assessing Officer producing any tangible material to doubt the veracity of the documents furnished by the assessee. The Tribunal concurred with the views taken by the Commissioner (Appeals). viii. The Tribunal in case of CIT v. Vacmet Packaging (India) (P.) Ltd (2014) 45 taxmarm.com 204 (Allahabad) held that the assessee had filed document evidence in order to prove the genuineness of the share application money consisting of: (i) share application forms; (ii) copies of bank accounts of the share applicants; (iii) copies of the income tax returns of the share allottees; (iv) balance s....
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....g number of shares, amount invested, mode of investment as cheque, bank account number, source of funds etc., to prove identity and existence of subscribers as also evidence of investment in shares through banking channels. Assessing Officer made addition of said share capital money, as undisclosed income of assessee, on ground that persons who subscribed to share capital were not produced before him. Since Assessing Officer had failed to bring on record any relevant and credible material to neutralize documentary evidences filed by assessee, impugned addition was to be deleted. 9. The ld. A.O. had made additions u/s.68 on the basis that notices u/s. 133(6)/131 of I. T. Act were not served during assessment proceedings. The principal officers of the company were also not produced at the time of assessment. During appellate stage it was specifically inquired about non availability or non service of notice at the time of assessment. During appellate proceedings additional evidences in form of confirmation and latest postal addresses were submitted by the appellant which were forwarded to the A.O. for conducting further necessary inquiries. During assessment proceeding....
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....d submit as hereunder. Background 2. The appellant is engaged in the business of maintaining and running infrastructure facilities and proper development. The return of income for A.Y.2010-11 was filed on 15.10.2010 declaring taxable income at Rs. NIL and claimed carried forward loss of previous year relevant to A.Y.2010-11 amounting to Rs. 8,67,35,476/-. The book profit u/s.115JB of the Act was disclosed at loss of Rs. 8,79,47,093/- 3. The return of income was subjected to the scrutiny assessment. During the course of the assessment proceedings, the Assessing Officer called for details of preference shares. 4. The appellant company furnished the related details to the Assessing Officer. For the sake of ready reference, the list of shareholders who had. invested in preference share capital of the appellant is given below: Sr. No. Name of the shareholders (Rs.) 1. Sonal Cosmetic (Exports) Ltd. 2,00,40,000 2. Sonal International Ltd. 2,00,40,000 3. Sonali Sil-Chem Ltd. 2,00,40,000 4. Dynachem Pharmaceuticals (Exports) Ltd. 2,00,40,000 5. Aarika Steel and Metal P. Ltd. 1,00,080,000 6. Prior....
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....ticulars Rs. 1. Income from Business As per assessee's computation (-) 8,67,35,476, Add : Unexplained cash credits u/s. 68 38,12,79,600 Taxable income 29,45,44,124 Rounded off u/s.288A 29,45,44,120 2. Book profit u/s.H5JB of the Act As per assessee's computation (-) 8,79,47,093 20. The appellant filed appeal before the CIT(A) against the said addition made u/s.68 of the Act. During the appellate proceedings, various evidence were filed before the CIT(A) and the remand report was called for from the Assessing Officer. The Assessing Officer in remand proceedings issued notices u/s.!33(6) of the Act at the fresh addresses submitted by the appellant and the same were duly responded by all the parties except one i.e. Empower Industries India Ltd. ("Empower" in short) 21. After taking into account the material gathered during the appellate proceedings, the submissions/details filed by the appellant, the reasons given for making addition u/s.68 of the Act in the assessment order and the remand report submitted by the Assessing Officer, the CIT(A) evaluated the amount invested by ....
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....lied upon by the Assessing Officer does not prove that three companies referred in his list did not make investment in the appellant. ii. The investment was made in the appellant company subsequent to the date of search on J. Kumar Infra Projects Ltd. i.e. 26.08.2009. iii. The appellant company had furnished details which show the individual capacity of the shareholder which had been discussed at length in the appellate order f. The reasons given by the Assessing Officer, to conclude genuineness of transactions had not been established, were untenable in view of the fact that the Assessing Officer had nowhere mentioned that there were immediate cash transactions in the bank statements and that the Assessing Officer has not doubted the fact that shareholders had enough balance to make the investment in the appellant. Similarly, the list of Hawala Dealers issued by the Sales-tax Department had no connection with the investment transactions with the appellant, [para 5.3.3 of the CIT(A)'s order]. g. The details submitted by the appellant prove the identity-, credibility and genuineness of transactions in the case of each shareholder. However, sin....
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....nt made by Empower. In the case of Citygold Education Research Ltd. which is listed on page 3 of the said order of the Hon'ble Tribunal. The discussion made by the CIT(A) in respect of this party has been extracted on page 10 of the said order of the Hon'ble Tribunal. On its perusal, it can be seen that the CIT(A) has deleted the addition on the basis of fact that statement of Shri Devang Dinesh Chandra Master, Director of Empower, was recorded u/s.131 of the Act on 12.03.2013 (i.e. before the Assessing Officer passed the assessment order in the case of appellant) wherein he had admitted that trading activities were bogus but it did not mean that investments were bogus. The confirmation for having made investment by the party was filed by the assessee therein and that investment was held till that date. The Hon'ble Tribunal upheld the deletion vide para 6 of the order of the Hon'ble Tribunal wherein it has been considered that notices were served in the case of Empower and related details were on file, the party had confirmed transaction before DIT, Baroda and that the CIT(A) had deleted addition after taking into account the remand report of the Assessing Officer. ....
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....on made by the Assessing Officer u/s.68 of the Act should not be sustained. 33. It is submitted that the CIT(A) has deleted the addition after taking into account material available on the record and in accordance with the settled principles of law. 34. During the appellate proceedings, the Assessing Officer had caused fresh enquiries and furnished his remand report. The CIT(A) has also caused verification by deputing his inspector and found the information collected to be correct. Thus, it is submitted that it is not the case where no enquiries had been caused. The initial onus laid upon the assessee has been duly discharged and on further verification, no adverse material has been found. Therefore, the addition made by the Assessing Officer u/s. 68 of the Act has been righlty deleted by the CIT(A). 13. Thereafter, the ld. Counsel of the assessee has referred to several case laws which are as under: 1. ACIT vs. Gagandeep Infrastructure Pvt. Ltd. for A.Y. 2008-09 in ITA No. 5784/Mum/2011 dated 23.01.2014; 2. CIT vs. Creative World Telefilms Ltd. (333 ITR 100 (Bom)); 3. ITO vs. Shreedham Construction Pvt. Ltd. for A.Ys. 2008-09,....
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....de by the CIT(A) may kindly be upheld. 15. We have heard both the counsels and perused the records. Upon careful consideration we note that assessee company in this case has received share application money from 19 corporate entities. The assessee has submitted that documentary evidences in connection with the share application money received. These included various details like name, address, company incorporation details, share application details, balance sheets, bank statements, permanent account number and income tax returns. The assessing officer has taken adverse inference because he noted that assessee has neither produced the concerned parties nor produced their books of accounts. The assessing officer also noted that his requisitions and notices to the above parties have not been responded. Before the ld. Commissioner of Income Tax (Appeals), the assessee made elaborate submissions and also submitted some additional details. The ld. Commissioner of Income Tax (Appeals) remanded the submissions to the assessing officer. He also noted that the Inspector of the department was also deputed to find out some of the shareholders and his reports were in the affirmative.....
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....ecorded, is a venture capital fund or a venture capital company as referred to in clause (23FB) of section 10. 17. The Hon'ble jurisdictional High Court had occasion to consider the addition of similar share applications u/s. 68 in several case laws. 18. We may gainfully refer to the Hon'ble jurisdictional High Court expositions in this case as under: 1) CIT vs. Gagandeep Infrastructure (P.) Ltd. [2017] 394 ITR 680 (Bom) had held as under: (e) We find that the proviso to section 68 of the Act has been introduced by the Finance Act 2012 with effect from 1st April, 2013. Thus it would be effective only from the Assessment Year 2013-14 onwards and not for the subject Assessment Year. In fact, before the Tribunal, it was not even the case of the Revenue that Section 68 of the Act as in force during the subject years has to be read/understood as though the proviso added subsequently effective only from 1st April, 2013 was its normal meaning. The Parliament did not introduce to proviso to Section 68 of the Act with retrospective effect nor does the proviso so introduced states that it was introduced "for removal of doubts" or that it is "declarat....
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....al that the Assessee has also produced the entire record regarding issuance of shares i.e. allotment of shares to these parties, their share application forms, allotment letters and share certificates, so also the books of account. The balance sheet and profit and loss account of these persons discloses that these persons had sufficient funds in their accounts for investing in the shares of the Assessee. In view of these voluminous documentary evidence, only because those persons had not appeared before the Assessing Officer would not negate the case of the Assessee. The judgment in case of Gagandeep Infrastructure (P.) Ltd. (supra) would be applicable in the facts and circumstances of the present case" 19. From the expositions, it is clear that the assessee's case clearly false under the realm of the above case laws. The proviso to section 68 has clearly and unambiguously been held to be prospective and not retrospective. Admittedly the same is not applicable in the assessment year which has been considered here, i.e., assessment year 2010 - 11. Hence, adverse inference taken by the assessing officer that assessee could not produce the share applicants and also could....
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....the assessee company. The CIT(A) after getting the remand report from the AO, deleted the addition. 7. We find that the AO proceeded to discredit the investors of the assessee, which is completely erroneous. The AO was looking for proof beyond doubt and proceeded on an element of suspicion that the amounts of investments are really those of the assessee, which have been ploughed back by the assessee. But the settle principle of law is that any amount of suspicion however, it strong might be, is no substitute for proof. Suspicion is not sufficient enough to lead to the conclusion that the investments received by the assessee company are all manipulated receipts and on that basis he can record a finding that the explanation of the assessee is not satisfactory. According to us, so long as the proof and identity of the investor and the payment received from him is through a doubtless channel like that of a banking channel, the receipt in the hands of the assessee towards share capital or share premium does not change its colour. The money so invested in the assessee company would still be the money available and belonging to the investors. The consistent principle followed is ....
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.... the Act with retrospective effect nor does the proviso so introduced states that it was introduced "for removal of doubts" or that it is "declaratory". Therefore it is not open to give it retrospective effect, by proceeding on the basis that the addition of the proviso to Section 68 of the Act is immaterial and does not change the interpretation ofSection 68 of the Act both before and after the adding of the proviso. In any view of the matter the three essential tests while confirming the pre-proviso Section 68 of the Act laid down by the Courts namely the genuineness of the transaction, identity and the capacity of the investor have all been examined by the impugned order of the Tribunal and on facts it was found satisfied. Further it was a submission on behalf of the Revenue that such large amount of share premium gives rise to suspicion on the genuineness (identity) of the shareholders i.e. they are bogus. The Apex Court in Lovely Exports (P.) Ltd.(supra) in the context to the pre-amended Section 68 of the Act has held that where the Revenue urges that the amount of share application money has been received from bogus shareholders then it is for the Income Tax Officer to procee....
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....Ministry of Corporate Affairs, Govt. of India. The learned Sr. DR, stated that this information is not available with the department. Further, we made enquiry from the learned Counsel for the assessee whether this company has been strike off from the Registrar Of Companies or not, the learned Counsel stated that it is very much on the register of Registrar Of Companies. In view of these facts, we reach to a conclusion that this is existing company and even the investors are existing. 11. In view of the above facts and circumstances of the case, we are of the view that CIT(A) has rightly deleted the addition and we confirm the same. This issue of revenue's appeal is dismissed 12. In the result, the appeal of Revenue is dismissed. 21. We find that deletion of addition by the ld. Commissioner of Income Tax (Appeals) in this case is in conformity with the expositions of the Hon'ble High Court and the decision of ITAT in assessee's group case as above. Further, we note that these companies are also existing in the records of registrar of companies. The report supplied by the ld. Counsel of the assessee in this regard is as under: 48 It is sub....
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....struck off some of the shell companies/companies which are inactive with no activity for a long time. However, we also note that in a number of such cases where names have been struck off, fresh applications have been made by the CBDT with the Company Law Tribunal for restoration of those companies whose name has been struck of so that Department can pursue appeals related to them. In light of these facts, we deem it appropriate to remit the issue of addition in the case of Jagdamba Complex Private Limited to the file of the assessing officer so that assessing officer shall examine this case afresh. 23. In the case of M/s. Empower Industries India Limited we find that all the findings of the ld. Commissioner of Income Tax (Appeals) are identical as in case of all other share applicants, except that in this case there has been no reply to the requisition of the assessing officer under section 133(6). All the relevant details like name, address, PAN no., financial statements, income tax returns, bank statements were duly submitted. The ld. Commissioner of Income Tax (Appeals) has confirmed the addition only for the reason of non reply to the requisition u/s. 133(6). In this....