TaxTMI 
TaxTMI 
2021 (3) TMI 210
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....n course of the appeal proceedings. 2. Brief facts of the case are that the assessee being a Private Limited Company incorporated in India was engaged in the business of trading and export of ferrous and non-ferrous ore. The assessee e-filed his return of income for A.Y.: 2014-15 on 17.09.2014 declaring total income as Rs. 1,03,89,170/-. Later on the case was selected for Scrutiny under the Scrutiny guidelines (CASS) and statutory notices were issued to the assessee on different dates for fixing the case on 17.05.2016, 14.07.2016, 21.09.2016 & 24.10.2016, respectively. The AO noticed that the assessee company has received share premium of Rs. 3,18,50,000/- from M/s. Sakambari Consultancy Pvt. Ltd. through RTGS mode in SBI Bank vide Account No. 32323649292 and Kotak Mahindra Bank Account No. 04932010000350 during the period 03.01.2013 to 24.04.2013. The assessee was asked to submit the details of genuineness of shareholders, creditworthiness etc. In this regard, the AO noticed that the submission of the assessee was not satisfactory and unexplained. He also observed that the share premium reserve of the company has drastically increased by Rs. 3,49,00,000/- and he observed that i....
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....the AO has rightly made addition u/s. 68 of the Act. Accordingly, ld. CITDR submitted that the order of AO deserves to be upheld. In support of his contentions, ld. CITDR relied on the decision of the Hon'ble Supreme Court in the case of Pr. CIT, Central Circle vs. NRA Iron & Steel (P.) Limited (103 taxmann.com 48). Further, ld. CITDR relied on the decision in the case of VMR Promoters (P) Ltd. [2016] 65 taxmann.com 322 (Delhi-Trib) and drew our attention to paras 14 & 15 of the above decision, which reads as under :- 14. In our considered view, the issues in question have not been properly considered by the ld. CIT(A). Besides our query could not be satisfactorily explained by the representative team of the assessee including its Chartered Accountant at the time of hearing. The pertinent queries were asked from the assessee's team specifically. In response thereof the team of CAs representing before us could not explain these facts. In these facts and circumstances and in order to give the assessee a fair chance of hearing, we are inclined to set aside the matter back to the file of AO to decide the assessment afresh after providing adequate opportunity of being h....
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....the ambit and scope of the 'subject matter' of the appeal filed by the assessee by which he claimed that the remittance by the assessee-company to its Mauritius Holding Company could not be taxed as dividend, forgetting the aspects relating to clause (e) of section 2(22) and therefore the said directions were within the subject matter or the issues raised by the assessee and making a direction to hold an enquiry into the aspect of fair market value of shares cannot be said to be beyond the subject matter of the appeal. The said directions cannot be said to be per se amounting to taxability of the said pay out by the assessee as 'Dividend' but the same would depend upon the nature of enquiry to be conducted by the assessing authority and findings arrived at in pursuance of the said direction. The power to remand including for conducting an enquiry in the aspect of the matter which was not earlier adjudicated upon by the lower authorities, cannot, be questioned by the assessee or the revenue. [Para 59] 7. Further the ld. CITDR to support his contentions, also placed reliance on the following case laws :- i) In the House of Lords Winter Vs. Inland Revenue C....
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....y. The AO also noticed that in the financial year 2010-2011, the shareholders of Sakambhari Consultancy Pvt. Ltd., came to the control of the assessee, hence, the assessee company has got control of the Kolkata bases shell company at a very nominal price and the said company used to introduce share application money in the assessee company to the tune of Rs. 3,64,000/- by allotting 4,55,000 shares. Since, the assessee company did not comply with the notices and requirements regarding genuineness of the transaction, the AO required M/s. Sakambhari Consultancy Ltd., to prove the transaction and its source. The said company also did not comply to the requirements of the AO. Therefore, the AO concluded that the assessee has failed to discharge the burden of proof in respect of share premium received from M/s. Sakambari Financial Consultancy Pvt. Ltd., and, accordingly, treated the share premium of Rs. 3,18,50,000/- as income of the assessee under section 68 of the Act. During first appellate proceedings, the assessee filed written submissions alongwith additional evidences in terms of Rule 46A of the Act. After considering the written submissions of the assessee, the ld CIT(A)....
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....ed the share premium receipt of Rs. 3,18,50,000/-@ Rs. 70/- per share as unexplained investment and made addition u/s. 68 of the Act without bringing any evidence on record when the investor company has routed the investment through banking channel. In this connection, Section 68 of the Act reads as under: "Section 68 of the Act. Provides that "where any sum is found credited in the books of the assessee for any previous year and the assessee fails to offer satisfactory explanation as to the nature and the source of the same to the Assessing Officer (AO), such sum, may be taxed as income of the assessee". As per settled Law, in such transactions, the initial onus is upon the assessee to prove the identity of the party/source of money, credit worthiness/capacity of the parties and genuineness of the transactions. The assessee has discharged its initial onus and therefore, the onus of proof shifts to the Income Tax Department (ITD/Revenue) if it wants to tax the said transaction as income of the assessee. Rulings 6. The Hon'ble Supreme Court in the case of CIT v. Lovely Exports Ltd. 216 CTR 195 SC, held as follows:- "Section 68 of the ....
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....tisfied that the identities of the applicants for shares in the assessee had been established. No legal question arises as a result of such finding." 4. The Hon'ble Delhi High Court in the case of CIT vs. Kamdhenu Steel & Alloys Ltd. (2012) 248 ITR 33, held that once the assessee has proved identity of creditor share applicant, by either furnishing PAN or copy of their bank account, the addition under section 68 of the Act cannot be made without any material to support the same. 5. The Hon'ble Delhi High Court in the case of CIT vs. Gangeshwari Metal P. Ltd., 361 ITR 10(Del) after considering its decisions in the case of Nova Promoters and Finlease Pvt. Ltd. 342 ITR 169 and judgment in the case of CIT vs. Lovely Exports 319 ITR (Sat. 5) (S.C.) held as follows : "As can be seen from the above extract, two types of cases have been indicated. One in which the Assessing Officer carries out the exercise which is required in law and the other in which the Assessing Officer (sits back with folded hands' till the assessee exhausts all the evidence or material in his possession and then comes forward to merely reject the same on the presumptions. The p....
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....ity no addition can be made under Section 68 of the Income Tax Act, 1961. Consequently, the question is answered in the negative. The decision of the Tribunal is correct in law. 6. In the case of CIT vs. Fair Finvest Ltd., (2013) 357 ITR 146 (Del.) at para 6, Hon'ble Delhi High Court held as follows. "6. This Court has considered the submissions of the parties. In this case the discussion by the Commissioner of Income Tax (Appeals) would reveal that the assessee has filed documents including certified copies issued by the ROC in relation to the share application, affidavits for the directors, form 2 filed with the ROC by such applicants confirmations by the applicant for company's shares, certificates by auditors etc. Unfortunately, the Assessing Officer chose to base himself merely on the general inference to be drawn from the reading of the investigation report and the statement of Mr. Mahesh Garg. To elevate the inference which can be drawn on the basis of reading of such material into judicial conclusions would be improper, more so when the assessee produced material. The least that the Assessing Officer ought to have done was to enquire into the matte....
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.... as per the book entries were in fact dummies or stooges of the directors of the assessee company, the same cannot be treated as unaccounted income of the assessee. There was no such finding by the assessing authority. In this view of the matter, the ultimate conclusion of the Tribunal cannot be faulted in any case. We, therefore, see no ground to admit this appeal as no substantial question of law arises for consideration" 9. The Hon'ble Bombay High Court in Paradise Inland Shipping (P) Ltd., 400 ITR 439(Bom) has held that companies which investment in share capital of another company cannot be treated as bogus if they are registered and have been assessed to tax. Once the assessee has proved the existence of the company, the burden shifts to the revenue to establish their case. 10. The Hon'ble Bombay High Court in the case of M/s. Gagandeep Infrastructure (P) Ltd., 80 tamann.com 272 (Bom) has held that if the receipt of large amount of share premium gives rise to suspicion on the genuineness of the shareholders whose identities have been established, the revenue should proceed by reopening the assessment of such shareholders In view of above jud....
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....mium receipts from M/s. Sakambari Financial Consultancy (P) Ltd. cannot be taxed as income of the assessee u/s. 68 of the Act and deleted the addition made by the AO in this regard after observing as under :- "4.7 I have considered the matter with reference to the facts and materials brought on record. I have also gone through the assessment order, the written submissions of the assessee, remand report of the AO and the response of the assessee to the remand report. The assessee company has received during the FYs 2012-13 (Rs. 3,49,00,000/-) and 2013-14 (Rs. 15,00,000/-) share premium totaling Rs. 3,18,50,000/- from M/s. Sakambari Financial Consultancy (P) Ltd. The company M/s. Sakambari Financial Consultancy (P) Ltd. is assessed to tax and has been filing returns regularly since its incorporation as is evident from the copies of its income tax returns filed by the assessee. The amount towards share premium has been given by M/s. Sakambari Financial Consultancy (P) Ltd. through banking channels (RTGS) and from the copies of the audited accounts of the company filed by the assessee and also copies of the bank statements for the relevant period, it is quite evident that it h....
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....s. 15,00,000/- only was received in the FY 2013-14 relevant to the AY 2014-15. Accordingly, the addition that can be made u/s. 68 for the AY 2014-15 cannot exceed Rs. 15,00,000/-. 4.10 It is quite relevant to mention here that the AO has not treated the entire share capital investment by M/s. Sakambari Financial Consultancy (P) Ltd. as bogus. The total investment made by this company amounts to Rs. 3,64,00,000/-. The AO has accepted the investment to the extent of Rs. 54,50,000/- which represents the face value of 4,55,000 number of shares @ Rs. 10/- per share as genuine since no addition has been made in respect of the same. What the AO has done is that he has treated the share premium receipt of Rs. 3/,18,50,000/-@ Rs. 70/- per share as unexplained and made addition for the same. Once a part of the share capital investment is accepted as genuine, there is no reason not to accept the share premium receipt of Rs. 3,18,50,000/-. The AO has not brought on record any materials, either at the time of assessment or at the time of remand proceeding, to indicate that the share premium receipt is not genuine. The voluminous documents submitted by the assessee before the AO at the ....
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....ata on 19.12.2017 u/s. 143(3)/147. A copy of the order has been filed by the assessee in the course of the remand proceeding which is lying on record. From this order, it is apparent that the AO has accepted the returned income of that company without any adverse comments to show that M/s. Sakambari Financial Consultancy (P) Ltd. is a shell company. 4.13 It is relevant to mention here the decision of the Hon'ble Bombay High Court in the case of Paradise Inland Shipping (P) Ltd. dt. 28.11.2017 400 ITR 439 (Bom.). The Hon'ble High Court has held in this case that companies which invest in share capital of another company cannot be treated as bogus if they are registered and have been assessed to tax. It has been further held in this case that once the assessee has produced documentary evidence to establish the existence of such companies, the burden shifts to the Revenue to establish their case and that reliance on statements of 3rd parties who have not been subjected to cross examination is not permissible. Voluminous documents produced by the assessee cannot be discarded merely on the basis of statements of individuals contrary to such public documents. 4.....