TaxTMI 
TaxTMI 
2021 (3) TMI 875
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....issued shares to the following persons/parties:- 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 r....
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....ed to the share capital and securities premium of the company 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....
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....s addition of Rs. 2,05,00,000/- u/s. 68 of the Act in the case of 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. Refer....
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....ion of the AO that the bank statement could not be furnished, it was argued that the same 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 ....
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.... added both under the head "Unsecured Loans" as well as "Share Application Money" resulting in double addition 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 ....
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....nvestor which he may not be willing to disclose to the third party. Therefore, in absence thereof cannot be the sole determinant to 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....
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....otal income of Rs. 1,12,55,185/-, including gross salary of Rs. 96,02,170/- and interest income of Rs. 25,17,015/-. The appellant stated that the loan given by 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....
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.... account of Shri Arun Gupta and has discharged its onus of proving the identity and capacity of Shri Arun Gupta and the genuineness of the transactions. Considering these facts, 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 rec....
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....dits received, had been filed before the A.O. The appellant stated that the balance sheet of M/s. ARG Udyog Pvt. Ltd. reflected the investment made in the appellant company and the balance sheet shows 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 ret....
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....editor and the genuineness of the transactions. In view of these facts, the addition made by the A.O. in respect of this company is not sustainable in law and is deleted." 18.3. So far as ARG Auto Components Pvt. 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 mo....
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....received, had been filed before the A.O. The appellant stated that the balance sheet of M/s. ARG Autosystems Ltd. reflected the investment made in the appellant company and the balance sheet shows share capital and reserves of more than Rs. 3.77 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 re....
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....this company. The appellant has stated that when the FDI has been provided by the RBI, there is no reason for doubting the genuineness of the transaction and the A.O. has made the addition without considering the facts of the case. The appellant has stated that this 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 a....
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....ed, the ld. DR submitted that the bank account of Shri Arun Gupta reveals that every debit entry is preceded by a credit entry of same or similar amount. The shares were issued at a premium of Rs. 115/- as against the NAV of Rs. 52.50. Further, the assessee did not furnish bank statement or computation of income of the investor. 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 ....
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....rem Castings (P.) Ltd. Vs CIT [2017] 88 taxmann.com 189 (Allahabad) 4A. Prem Castings (P.) Ltd. Vs CIT 2018-TIQL-274-SC-IT 5. CIT Vs MAF Academy (P.) Ltd. (361 ITR 258) 6. CIT Vs Navodaya Castle Pvt. Ltd. [2014] 367 ITR 306 (Del) 7. Konark Structural Engineering (P.) Ltd. Vs DCIT [2018] 96 taxmann.com 255 (SC) 7A. Konark Structural Engineering (P.) 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 2....
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....f addition Double/Excess Addition Net Addition Reference to Paper Book 1 Arun Gupta Share Capital and Securities Premium Rs. 1,00,00,000/- - Rs. 1,00,00,000/- • Page no 39 to 40 of the Paper Book Page no 90-105 of the Paper Book Unsecured Loan Rs. 6,75,75,579/- Rs. 2,05,00,000/- (See Note 1) Rs. 4,70,75,579/- 2 Arg Udyog Private Limited Share Capital and Securities Premium Rs. 4,50,00,000/- - Rs. 4,50,00,000/- • Page no 40 to 42 of the Paper 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. 35,85,51....
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....e addition. Therefore, it is not proper on the part of the ld. DR to say that the ld. CIT(A) has not adjudicated the issue properly. 27. So far as the argument of the ld. DR that there is violation of provisions of section 46A of the IT Rules, 1962 is concerned, the ld. AR submitted that there was no violation of Rule 46A provisions since the application for admission of additional evidence was duly forwarded by the ld. CIT(A) to the AO and her replies/comments were taken into consideration. So far as the statement of the ld. DR that the computation of income and bank statement of ARG Udyog Ltd. were never produced before the AO is concerned, the ld. Counsel for the assessee submitted that the income-tax return and computation of income were duly filed 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, 19....
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.... ld. Counsel for the assessee submitted that during the period under consideration, the assessee company had entered into an agreement for technical-cum-financial collaboration with M/s. Shiroki Corporation, a Japanese conglomeration having extensive experience in the area of manufacture of auto components with a view to benefit from its experience and expertise as a part of which it had received an investment of Rs. 9,20,00,000/- in 7,36,000 equity shares of the face value of Rs. 10 per share at a premium of Rs. 115 per share. He submitted that the above investment was fully compliant with the existing policy and guidelines relating to FDI and duly approved/registered with the RBI. Moreover, the said money had been transferred to the assessee company through 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 subm....
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....ailed order passed by him, sustained the addition of Rs. 4,36,63,403/- being unsecured loan from ARG Auto Components Pvt. Ltd. and deleted the balance addition of Rs. 18.40 crores on account of share capital/share premium and Rs. 11,44,76,315/- on account of unsecured loan. It is the submission of the ld. DR that the CIT(A) has admitted additional evidence without complying with the provisions of Rule 46A of the IT Rules in respect of ARG Udyog Ltd. Further, he has not given justifiable reasons for the acceptance of share premium of Rs. 115/- per share as against the NAV of Rs. 52.50. It is also her submission that the case of the assessee should have been decided on merit considering the surrounding circumstances in which the assessee has accepted huge share capital and share premium without any substantial business or net worth. It is the 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 del....
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....nexplained unsecured loan and Rs. 120 lakhs towards unexplained share application money. We find, in appeal, the ld. CIT(A) has sustained the addition of Rs. 4,36,63,403/-, but, has deleted the addition of Rs. 120 lakhs towards unexplained share application money. From the details furnished by the assessee, it is noted that the share application money was transferred from the unsecured loan account of M/s. ARG Auto Components Pvt. Ltd. Since the ld. CIT(A) has sustained the unsecured loan of Rs. 4,36,63,403/- and the assessee has accepted the same by withdrawing the appeal by going under Vivad Se Vishwas Scheme 2020 and since the amount of Rs. 120 lakhs has been transferred from the loan amount of Rs. 4,36,63,403/-, therefore, making addition of the same would amount to double addition. The ld. CIT(A), after considering the totality of the facts 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 addi....
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....he investment from this company. The FDI was approved by the RBI. So far as the bank statement of the said company is concerned, no doubt, the assessee had not filed the same, but, it was pleaded that since the bank statement contains the entire bank transactions of M/s. Shiroki Corporation which is one of the largest Japanese companies in the field of auto components, the above party did not want to part with its bank statement which contains its entire transaction including that with the assessee. However, in the instant case, as mentioned earlier, the FDI from this company had been approved by RBI and the allotment of shares was fully in compliance with the regulatory and statutory provisions in force at the relevant point of time including the Foreign Exchange Management Act, 1999, the policy relating to overseas direct investment formulated 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....