TaxTMI 
TaxTMI 
TaxTMI 
2021 (3) TMI 875
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....s:- 3. Similarly, he also noted that the assessee has taken unsecured loan of Rs. 16,07,58,797/- from the following persons:- 4. The AO asked the assessee to substantiate the identity and credit worthiness of the share applicants and genuineness of the transactions and to file the details like name, address, PAN, ITR computation and complete bank statements and also to provide calculation of share premium. He also asked the assessee to justify the issue of shares at a premium of Rs. 115/- whereas the NAV of such shares comes to Rs. 52.50. 5. From the various details furnished by the assessee, the AO noted that as per the income-tax return of M/s. ARG Udyog P. Ltd., the returned income is only Rs. 1,78,101/- and the assessee did not furnish the bank statements or the computation of income. According to the AO, the income-tax return of M/s. ARG Udyog P. Ltd. does not support the fact that it has purchased the shares at a premium of Rs. 4.5 crores and further granted loan to the assessee company of Rs. 4.33 crores. Similarly, in the case of ARG Auto Components P. Ltd., the income returned by the said company as per the income-tax return is only Rs. 7,03,554/-. A perusal of the bank....
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....pany amounting to Rs. 9,20,00,000/-. Despite being asked by him to submit the financials of the said company for its credit appraisal, the assessee failed to submit the same. He, therefore, doubted the credit worthiness of Shiroki Corporation. 9. In view of the above discrepancies the AO doubted the credit worthiness of the above companies and asked the assessee to substantiate source of source of the funds. The assessee submitted that it has already submitted the bank statements and income-tax return copies and argued that the entire amount was received through banking channels. Relying on various decisions, it was argued that the assessee has discharged the onus cast on it by providing all necessary evidences and, therefore, no addition u/s. 68 is called for. 10. However, the AO was not satisfied with the arguments advanced by the assessee. He referred to the amended provisions of section 68 of the IT Act and concluded that merely because the transactions have been made through banking channels it does not legitimize a transaction where the transacting parties are suspect. According to the AO, the assessee is not only required to prove the source, but, also the source of the so....
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.... Arun Gupta. It was further submitted that the income of Arun Gupta of Rs. 1,12,55,185/- includes gross salary of Rs. 96,02,170/- and interest income of Rs. 25,17,015/-. It was further submitted that the loan given by Shri Arun Gupta was reflected in his balance sheet and the balance sheet shows a capital of about Rs. 52.62 crores and loans from ICICI of about Rs. 3.46 crores. It was submitted that Shri Arun Gupta had received proceeds from provident fund, leave encashment, salary arrears, premature encashment of FDR and sales of shares of Technico Kongsberg Automotive India Ltd. It was stated that vide agreement dated 31.11.2010(sic), Shri Arun Gupta had sold his 29,90,000/- shares in Technico Kongsberg Automotive India Ltd. to M/s. Kongsberg Automotive Holding ASA and the sales proceeds were utilized to give loan to the assessee company. It was stated that Technico Kongsberg Automotive India Ltd., was a joint venture and M/s. Kongsberg Automotive Holding ASA was an internationally renowned manufacturer of auto components. It was argued that all these transactions had taken place by cheque through bank account. Referring to the income-tax returns filed regularly and the balance sh....
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....was due to the reasons beyond the control of the assessee company during the assessment proceedings but has been procured subsequently and it was accordingly requested to admit the same as an additional evidence under Rule 46A of the Income-tax Rules, 1962. In addition a copy of the annual accounts as at March 31, 2011 reflecting the amounts paid to the Appellant Company and the Computation of Income for A/Y 2011-12 of the said company was also filed before the CIT(A). 14. It was stated that the total credits in the loan account of M/s. ARG Udyog Pvt. Ltd. were Rs. 4,33,15,223/- and the entire amount has been added by the A.O. as unexplained loans u/s. 68. It was stated that the A.O. has further added Rs. 4.5 Cr. Towards unexplained share application money even though this amount had been transferred from the loan account of M/s. ARG Udyog Pvt. Ltd. by debiting the loan a/c and crediting the share application money a/c. The assessee stated that when all the credits in the loan account have already been added u/s. 68, there can be no possible reason for again adding an amount which has been debited to the loan account and credited to the share application account. It was further st....
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....ddition of the like amount. (b) The cumulative effect again without prejudice to the Appellant Company's stand with regard to the discharge of onus u/s. 68, has resulted in an excess addition of Rs. 1,20,00,000/- in this account. 16.1. The assessee also filed a copy of the Annual Accounts of the said Company as at March 31, 2011 and its Computation of Income for A/Y 2011-12 are being enclosed herewith. 16.2. So far as ARG Autosystems Ltd. is concerned, it was submitted that the AO made the addition of Rs. 35,85,513/- on the ground that the above amount represents the money received by the assessee company during the year from the above party. It was argued that there was an opening credit balance in the account of M/s. ARG Autosystems Ltd., amounting to Rs. 2,51,14,095/-. The copy of confirmation, bank statement, ITR along with computation and balance sheet of the above party was filed before the AO. It was accordingly argued that the source of the source in this case was also proved before the AO by filing a chart showing the source of various deposits made by the assessee company. It was further submitted that the net addition in the accounts of M/s. ARG Autosystems Ltd. ....
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....arrive at an adverse conclusion and the issue needs to be judged objectively by considering the entire gamut of facts surrounding the case. 17. The assessee also filed an application for admission of additional evidence under Rule 46A in respect of unsecured loans obtained from parties including M/s. ARG Auto Components Pvt. Ltd. It was submitted in the said application that the assessee could not produce various documents relating to the Kolkata based companies during the course of assessment proceedings on account of paucity of time and on account of reasons beyond the control of the assessee company which were subsequently obtained after the completion of the assessment. It was accordingly requested to admit the additional evidences. 18. The ld. CIT(A) forwarded the submissions made by the assessee and the application filed under Rule 46A to the AO for her comments. The AO, in her comments, objected to the admission of additional evidences. Further, the remand report which was given by the AO was confronted by the CIT(A) to the assessee. After considering the remand report of the AO and the rejoinder of the assessee to such remand report, the ld. CIT(A) discussed para-wise and....
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.... Shri Arun Gupta was reflected in his balance sheet and the balance sheet showed capital of about Rs. 52.62 Cr. and a loan from ICICI Ltd. for about Rs. 3.46 Cr. The appellant stated that Shri Arun Gupta had received proceeds from provident fund, leave encashment, salary arrears, premature encashment of FDR, and sale of shares of Technico Kongsberg Automotive India Ltd. The appellant stated that vide agreement dated 31.11.10(sic), Shri Arun Gupta had sold his 29,90,000 shares in Technico Kongsberg Automotive India Ltd. to M/s. Kongsberg Automotive Holding ASA, and the sale proceeds were utilized to give loan to the appellant company. The appellant stated that Technico Kongsberg Automotive India Ltd. was a Joint Venture and M/s. Kongsberg Automotive Holding ASA was an internationally renowned manufacturer of auto components. The appellant stated that all these transactions had taken place by cheque through the bank account. It was stated that Shri Arun Gupta was regularly filling his income tax returns and a copy of his return, balance sheet and bank statement evidencing the capacity of Shri Arun Gupta had been filed before the A.O. The appellant contended that it has given a satisf....
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....cts, if the A.O. still had any doubts about the source from which the creditor has made investment in loans/share capital of the appellant, then this information could have been passed to the A.O. of the creditor, and he could have afterwards considered taking necessary action, if there were any adverse findings warranting action in the case of the appellant. The appellant has pointed out that in this case, the A.O. has made the addition only on the basis of her observation that in the bank statement of Shri Arun Gupta, each debit entry is preceded by a credit of a similar account, and the amounts are in round figures. The appellant argued that the A.O. has made the addition only on the basis of surmises and conjectures. The appellant contended that anybody wanting to effectively utilize his funds through banking channels would naturally transfer money in and out of bank account in this manner, and this does not lead to any adverse conclusion, in the assessment order, the A.O. has not brought any material on record to controvert the evidence filed by the appellant and justify the addition made. Considering the facts and judicial decisions on this subject, the appellant has clearly ....
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....hows share capital and profits of more than Rs. 8.9 Cr. The appellant stated that M/s. ARG Udyog Pvt. Ltd. had received loans from M/s. ADI Automotive Pvt. Ltd. which were repaid next year, and had also received proceeds from sales of shares of M/s. Technico Kongsberg Automotive India Ltd. The appellant stated that M/s. ADI Automotive Pvt. Ltd. was a well-known automotive company with sales of more than Rs. 125 Cr. The appellant stated that vide agreement dated 31.11.10(sic), M/s. ARG Udyog Pvt. Ltd. had sold its 10,97,548 preference shares in Technico Kongsberg Automotive India Ltd. to M/s. Kongsberg Automotive Holding ASA, an internationally renowned manufacturer of auto components, and the sale proceeds were utilized to give loan to the appellant company. The appellant stated that the transactions involved well known manufacturing companies. The appellant stated that all transactions were by cheque through bank account and M/s. ARG Udyog Pvt. Ltd. was regularly filing its income tax returns. 4.6 The appellant contended that it had filed a detailed explanation in respect of credits along with a copy of the bank statement evidencing these credits, and the A.O. had not pointed ou....
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....vt. Ltd., the ld. CIT(A), while sustaining the addition of Rs. 4,36,63,403/- as unsecured loans, however, deleted the addition of Rs. 1,20,00,000/- by observing as under:- "5.12 Regarding the addition u/s. 68 towards unexplained share application money from M/s. ARG Auto Components Pvt. Ltd., the appellant has pointed out that this amount has been transferred from the unsecured loan account of M/s. ARG Auto Components Pvt. Ltd. where all the credits have already been added u/s. 68. The appellant has stated that when all the credits in the account have already been added u/s. 68, the amount transferred by debiting this account, and crediting the share application money account, cannot be added again. In the remand reports, the A.O. has not controverted these contentions. In the asstt. order and the remand reports, the A.O. has failed to justify this addition and show how this is not a double addition. In view of these facts, the addition towards share application money from this concern, being a double addition, is unsustainable in law, when all the credits have already been added u/s. 68 and also upheld in appeal. Thus, while the addition u/s. 68 towards unexplained loans amounti....
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.....77 Cr. The appellant stated that M/s. ARG Autosystems Ltd. had also received share application money from related parties. The appellant stated that all the transactions were by cheque through bank account and M/s. ARG Autosystems Ltd. was regularly filing its income tax returns. 6.6 The appellant contended that it had filed a detailed explanation in respect of credits along with a copy of the bank statement evidencing these credits, and the A.O. had not pointed out any shortcomings in the evidence filed. The appellant stated that in the assessment order, the A.O. has made the addition only on the basis that the returned income of M/s. ARG Autosystems. Ltd. is less than the loan given. The appellant stated that a copy of the income tax return, balance sheet and bank statement evidencing the capacity and source of credits received, had been filed before the A.O. The appellant contended that the A.O. had erred in only considering the returned income of this company but ignoring the balance sheet, and the funds available with this company. The appellant stated that as per its balance sheet, M/s. ARG Autosystems Ltd., has substantial funds from which these credits have been received....
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....s investment has been made with the approval of the RBI. The appellant raised other arguments as were raised in respect of the credits from Shri Arun Gupta, which have been discussed above. 7.3 It is clear from the above discussion that the appellant has discharged its burden of proving the identity and capacity of this company and the genuineness of the transactions. In the assessment order, the A.O. has not brought any material on record to controvert the evidence filed by the appellant. Considering the facts and judicial decisions on this subject, the addition made u/s. 68 in respect of share application money from this company is not sustainable in law and is deleted. 8. To summarize the above discussion, the addition u/s. 68 of Rs. 4,36,63,403/- being unexplained loans from M/s. ARG Auto Components Pvt. Ltd. is justified and is upheld. The remaining additions u/s. 68 are not sustainable in law and are deleted. The Grounds are accordingly partly allowed." 19. Aggrieved with such order of the ld. CIT(A), the Revenue is in appeal before the Tribunal by raising the following grounds:- "1. "The impugned order of the CIT(A) is bad in law as well as on facts of the case." 2.....
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..... Therefore, considering the surrounding circumstances, the matter may be decided on merit. So far as the investment by ARG Udyog Ltd. is concerned, the ld. DR submitted that the above creditor was showing returned income of Rs. 1,78,101/- whereas it has invested an amount of Rs. 450 lakhs towards share capital/share application money and given unsecured loan of Rs. 4,33,15,223/-. The computation of income and the bank statement of the above party was never produced before the AO, therefore, the credit worthiness of the said party remained unsubstantiated. She submitted that the bank statement of the above party was never filed before the AO and it was filed for the first time before the CIT(A) with an application for acceptance of additional evidence. Referring to the order of the CIT(A), he submitted that the ld. CIT(A) has proceeded to erroneously observe in para 4.5 on page 28 of his order that the bank statement of the above creditor was filed before the AO evidencing the source of the creditor. Even in para 4.6 at page 28 of his order, the ld. CIT(A) has again mentioned that the bank statement was filed before the AO and that the AO could not point out any discrepancy in the ....
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....Ltd. Vs DCIT [2018] 90 taxmann.com 56 (Bombay) 8. Pratham Telecom India Pvt. Ltd. Vs DCIT (2018-TIOL-1983-HC-MUM-IT) 9. JJ Development Pvt. Ltd. Vs CIT (2018-TIQL-395-SC-IT) 10. DRB Exports (P.) Ltd. Vs CIT [2018] 93 taxmann.com 490 (Calcutta) 11. CIT Vs Nipun Builders & Developers (P.) Ltd. (30 taxmann.com 292, 214 Taxman 429, 350 ITR 407, 256 CTR 34) 12. CIT Vs Nova Promoters & Finlease (P) Ltd. (18 taxmann.com 217, 206 Taxman 207, 342 ITR 169, 252 CTR 187) 13. CIT Vs Ultra Modern Exports (P.) Ltd. ( 40 taxmann.com 458 : 220 Taxman 165) 14. CIT Vs Frostair (P.) Ltd. (26 taxmann.com 11 : 210 Taxman 221) 15. CIT Vs N R Portfolio Pvt. Ltd. [2014] 42 taxmann.com 339 (Delhi)/[2014] 222 Taxman 157 (Delhi)(MAG)/[2014] 264 CTR 258 (Delhi) 16. CIT Vs Empire Builtech (P.) Ltd. (366 ITR 110) 17. CIT Vs Focus Exports (P.) Ltd. (51 taxmann.com 46 (Delhi)/[2015] 228 Taxman 88) 18. PCIT Vs Bikram Singh [2017] 85 taxmann.com 104 (Delhi)/[2017] 250 Taxman 273 (Delhi)/[2017] 399 ITR 407 (Delhi) 19. Rick Lunsford Trade & Investment Ltd. Vs CIT [2016] 385 ITR 399 (Cal) 20. Rick Lunsford Trade & Investment Ltd. Vs CIT [ 2016-TIOL-207-SC-IT] (Supreme Court) 21. CIT vs. Durg....
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....er Book Page no 107-130 of the Paper Book Unsecured Loan Rs. 4,33,15,223/- Rs. 4,33,15,223/- (See Note 2) Rs Nil /- 3. Arg Auto Components Private limited Share Capital and Securities Premium Rs. 1,20,00,000/- Rs. 4,36,63,403/- Rs. 1,20,00,000/- (See Note 3) Rs Nil /- Rs. 4,35,63,403/- * Page no 42 to 43 of the Paper Book Page no 131-147 of the Paper Book - 4. Arg Autosystem Limited Share Capital and Securities Premium Rs. 2,50,00,000/- - Rs. 2,50,00,000/- Page no 43 to 44 of the PB Page no 148-166 of the PB Unsecured Loan Rs. 35,85,513/- Rs. 35,85,513/- (See Note 4) Rs Nil /- 5 Shiroki Corporation Share Capital and Securities Premium Rs. 9,20,00,000/- Rs. 9,20,00,000/- * Page no 44 to 47 of the PB Page no 167-175 of the PB Total Rs. 34,21,33,718/- Rs. 7,94,00,736/- Rs. 26,27,38,982/- Note 1 (a) A sum of Rs. 1,05,00,000/- represents cheques cancelled i.e. in respect of which no funds were actually received. (b) A sum of Rs. 1,00,00,000/- was transferred by means of journal entry to the Share Application Money Account which has been added both under the head "Unsecured Loans" as well as "Share....
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....led before the AO vide letter dated 14th March, 2014. So far as the bank statement is concerned, it was submitted that the bank statement of the above party was not filed before the AO and this fact was duly brought to the notice of the CIT(A) vide submission dated 15th July, 2014 which is evident from page 42 of the paper book. A request was made to the CIT(A) to treat this as an additional evidence under Rule 46A of the IT Rules, 1962. There was complete compliance and due disclosure by the assessee company. He submitted that the application under Rule 46A along with submissions were duly sent by him to the AO for her comments vide letter dated 21st July, 2014 which is evident from para 5.4 at page 34 of the order of the CIT(A). As such, in this respect also there was no deviation from the procedure laid down in Rule 46A which was complied with. He submitted that the complete documentary evidence with regard to share capital/share premium and unsecured loan was duly filed before the AO vide letters dated 11th December, 2013, 24th November, 2014 and 14th March, 2014, respectively. This fact was also reiterated vide letter dated 29th March, 2014 filed before the AO in response to t....
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....rough regular banking channels. He submitted that when FDI has been approved by the RBI, there is no reason for doubting the genuineness of the underlying transaction. He submitted that merely for non-submission of the bank statement of the foreign investor, the transaction cannot be doubted since the said investment was duly approved by the RBI and was fully compliant with the existing policy and guidelines relating to FDI. He submitted that CIT(A) has given justifiable reasons while deleting the addition on this account. The ld. Counsel, referring to the order of the CIT(A) submitted that the ld. CIT(A) has discussed party-wise details and has given justifiable reasons for deleting the addition of share application money/share premium and the unsecured loans. He accordingly submitted that the order of the ld. CIT(A) be upheld and the grounds raised by the Revenue be dismissed. 29. We have considered the rival arguments made by both the sides, perused the orders of the Assessing Officer and CIT(A) and the paper book filed on behalf of the assessee. We have also considered the various decisions cited before us. We find, the AO, in the instant case, made an addition of Rs. 34,21,39....
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....he submission of the ld. Counsel for the assessee that it has substantiated with evidence regarding the identity and credit worthiness of the loan creditors/share applicants and the genuineness of the transactions. It is also his submission that the ld. CIT(A) after considering the details filed by the assessee has passed a speaking order while deleting each of the addition and, therefore, the same should be upheld. 31. We have given our careful consideration to the rival arguments made by both the sides. So far as the addition of Rs. 6,75,75,529/- being unsecured loan and addition of Rs. 1 Crore on account of share capital and share premium made by the AO in respect of Shri Arun Gupta is concerned, we find, the assessee before the AO has filed the confirmation statement, bank statement, ITR along with computation and balance sheet of the said party. The assessee has filed a chart showing the source of various deposits made by him. The submission of the assessee before the ld. CIT(A) that the net addition on account of Shri Arun Gupta on account of unsecured loans stands only at Rs. 4,70,75,579/- and not Rs. 6,75,75,579/- due to cancellation of cheque of Rs. 1.05 crore and transfe....
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....cts of the case, has deleted the addition, which, in our opinion, is just and proper under the facts and circumstances of the case. Accordingly, the order of the CIT(A) deleting the addition of Rs. 120 lakhs in respect of unexplained share application money is upheld. 33. So far as ARG Autosystems Ltd. is concerned, we find, the AO made addition of Rs. 250 lakhs being share capital and security premium and unsecured loan of Rs. 35,85,513/- on the ground that assessee failed to explain the source of the same from the above party in terms of section 68 of the IT Act, 1961. It was demonstrated by the assessee that a sum of Rs. 250 lakhs was transferred by means of journal entry to the share application money amount whereby a sum of Rs. 35,85,513/- has been added both under the head 'unsecured loans' as well as 'share application money' resulting in double addition of the like amount. The assessee before the AO has also filed the bank statement, income-tax return, copy of balance sheet, etc., vide its reply dated 11.12.2015, 24.01.2014 and 14th March, 2014. The assessee has demonstrated that the loan account of M/s. ARG Autosystems Ltd. had an opening credit balance of....
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....thereunder and the Companies Act, 1956. In view of the above and in view of the detailed discussion by the ld. CIT(A) on this issue deleting the addition, we find no infirmity in the same and accordingly the order of the CIT(A) on this issue is upheld. 35. Now, coming to the addition of Rs. 450 lakhs on account of share capital and share premium and unsecured loan of Rs. 4,33,15,223/- in respect of ARG Udyog Pvt. Ltd. is concerned, it is the submission of the ld. Counsel for the assessee that a sum of Rs. 30 lakhs represents cheques cancelled in respect of which no funds were received and a sum of Rs. 450 lakhs was transferred by means of journal entry to share application money account which has been added both under the head 'unsecured loans' as well as 'share application money' and the cumulative effect of the above is an excess addition of Rs. 4,33,15,223/-. A perusal of the assessment order shows that the assessee has not filed the bank statement of M/s. ARG Udyog Pvt. Ltd. before the AO although the same was filed before the CIT(A) as an additional evidence. However, a request was made to the ld. CIT(A) for admission of additional evidence in respect of ARG U....