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2021 (4) TMI 1009
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.... consideration has issued 40,00,000 equity shares having face value at Rs. 10 and share premium at Rs. 90 per share aggregating to Rs. 40 crores only. The details of the companies which acquired the shares at premium of the assessee company stand as under: S. No Name of shareholder Face value (inRs.) Premium (inRs.) Gross amount (inRs.) 1 Sangam Infratech Ltd. 2,20,00,000/- 19,80,00,000/- 22,00,00,000/- 2 Dhanlaxmi Re-Rolling Mill 90,00,000/- 8,10,00,000/- 9,00,00,000/- 3 Swift Venture Pvt Ltd 90,00,000/- 8,10,00,000/- 9,00,00,000/- 4 Total 4,00,00,000/- 36,00,00,000/- 40,00,00,000/- 3.1 The assessee, besides the above, has also received share application money pending for allotment of shares amounting to Rs. 25,23,27,371/- only from the companies as detailed under: (1) Sangam Infratech Ltd. Rs. 13,95,00,000.00 (2) Swift Ventures Private Limited Rs. 2,95,00,000.00 (3) Dhanlaxmi Re-rolling Mills. Rs. 5,21,78,717.00 (4) Shri Ramkishan Mantri Rs. 50,000.00 (5) Shri Sanjay mantra Rs. 1,05,98,654.0....
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....nance 11 crores 9 crores 2. Casting machine 5.23 crores 4 Crores 3. 20 M. Ton Crane 22.65 lakhs 18.5 lakhs 4. 30 M. Ton Crane 34.65 lakhs 32.5 lakhs 3.7 Accordingly, the AO to verify the genuineness of the capital cost shown by the assessee under the project with respect to certain items issued notices to the suppliers of the capital goods but none of them replied. Thus the AO was of the view that the assessee has inflated the project cost of the capital goods in order to avail higher funds from the banks. In other words the assessee claimed the high project cost so that it could take the money back from the supplier which could be reinvested in the guise of share capital/share premium in the name of the companies as discussed above. 3.8 Likewise, the AO found that the companies, namely Sangam Infratech Limited (in short SIL) and Swift Venture Private Limited (in short SWPL), which invested in the assessee company were either showing the meagre income or the losses. Furthermore, these companies (SIL and SWPL) have shown sources of funds in their respective hands by way of issuing shares on premium which was not possible for the simple....
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....tc of investors companies. In view of the above document, the assessee claimed that identity of the investors get established by the fact that the they are income tax assessee and assessed under the provision of the Act. The genuineness of transaction is established by the fact that the subscribers of share confirmed the investment and reflected the same in their respective balance sheet and all the payments were made through banking channel. Similarly the credit worthiness is also proved beyond doubt that they have available funds in their bank account for making investment. The assessee also submitted that the duty of assessee is only to explain the sources of money in its own hand and not to explain the sources of source. Therefore doubting the impugned transaction of share subscription was not justified, specially, in the facts and circumstances where no cash was deposited in its banks as well as in the bank accounts of the subscribers of shares. Similarly, the aforesaid parties have shown investment in their respective income tax return. There was no information or finding available with the AO that any cash transaction is carried out between the investors and assessee. 5.1....
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....heet and confirmation from the investors. Further all the above parties were subject to assessments under section 143(3) of the Act for the year under consideration and for the subsequent years. (b) The impugned companies/parties have shown investment in the shares of the assessee company in their audited financial statements. (c) The investors namely M/s Sangam Infratech Ltd, M/s Swift Venture Pvt Ltd during the year under consideration has received share capital and premium amounting to Rs. 67 crore and 22.39 crore respectively. But the AO of the respective parties in the assessment proceeding has not doubted the same. Hence it is proved that that they were having adequate fund in their hands for the impugned investments. (d) Similarly, M/s Dhanlaxmi Re-Rolling Mills has shown taxable income of Rs. 3,57,98,017/- share capital of Rs. 3.14 crore and unsecured loan of Rs. 27.80 crores in its balance sheet. But the AO during the assessment proceeding under section 143(3) has made no adverse remark about the same. Further the assessment of impugned party was conducted by the AO range -1 which was headed by the AO of the assessee on hand. (e) The imp....
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..... Purohit and Shri Eknath N. Mandavkar do not give rise to the doubt that the assessee has received share application money on premium after connivance with the subscribers. (l) There is no clarity with respect to the notices issued under section 133(6) of the Act to the suppliers the machineries/expenses and various contractors about the date of notices and when the response from them was due. Furthermore if the suppliers have not responded to the notices issued under section 133(6) of the Act then the AO does not get the authority to draw any adverse inference against the assessee until and unless such fact is brought to the notice of the assessee for its rebuttal. But what appears from the order of the AO that such opportunity has not been afforded to the assessee. (m) Likewise, the allegation of the AO that the assessee has accepted the cash from the suppliers by inflating cost of the project is without any tangible material. The onus was upon the AO to bring corroborative evidence on record before arriving at the conclusion that the assessee has inflated its cost of the project. 6.1 In view of the above the learned CIT (A) was pleased to delete the additio....
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....s 153A, page 110 of paper book filed by the department) (iii) M/s Swift Ventures Pvt Limited was also covered under search/survey operations. It was admitted by the director of the assessee company that the shares of Swift Ventures were purchased by the promoter group @ Rs. 3 per share in FY 2009-10 (page 156 of paper book of the department).The said shares were purchased from the companies controlled by Mr. Jagdish Purohiti as admitted by the director of assessee company in his statement recorded on 3.05.2013.At the time of such purchase, Swift Venture was a shell/paper company of accommodation entry operator Mr.Jagdish Purohit. (iv) Shri Jagdish Purohit in a statement on oath u/s 132(4) acknowledged multilayering of funds and providing accommodation entries. A list of companies through which accommodation entries were provided is at page 162 to 165 of the paperbook filed by the department. The name of M/s Swift Ventures Pvt Limited is appearing at SI. No. 24 (page 164 of department's paper book) of this list of paper/shell companies. (v) At the time of purchase of shares of M/s Swift venture by promoters of the assessee company, Swift Venture was ha....
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....s accepted themake believe paper evidences submitted by the assessee and deleted the addition by largely following the decision of Hon'ble Supreme Court in the case of M/s Lovely Exports Limited. However, the issue of introducing unaccounted income in the garb of share application money through paper companies have been a subject matter of discussion by various courts wherein the make-believe paper work regarding such transactions has not been accepted by the Hon'ble Courts. It may be submitted that in a recent case of Pr. CIT v. NDR Promoters (P.) Ltd. [2019] 102 taxmann.com 182/261 Taxman 270/410 ITR 379 (Delhi), Hon'ble Delhi High Court has held that a case involving make-believe paper work to camouflage the bogus nature of the transactions is to be treated as unexplained credit u/s 68 of the Act. The said decision of Hon'ble Delhi High Court has been upheld by Hon'ble Supreme Court109 taxmann.com 53 (SC) 17. The Hon'ble Supreme Court in its decision dated 25.03.2019 in the case of NRA Iron & Steel Pvt Limited 412 ITR 161 (SC) after discussing a number of decisions including its own decision in the case of M/s Lovely exports has held that the pra....
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....vestor companies involved in the present case are shell/paper companies because some of the associated companies of investor companies in present case have already been held as shell companies by the Hon'ble Supreme Court. 20. Kind attention is also drawn to the decision of Hon'ble ITAT (Pune Bench) in the case of M/s Prathamesh Ceremics Pvt Limited (ITA No. 2260- 2262/PUN/2014) dated 04.02.2020. In this case, the Ld. CIT(A) had deleted the addition by accepting the make-believe documentation and following the decision in the case of Lovely Exports. After considering the decision in the case of NRA Iron & Steels Private Limited and M/s NDR Promoters (P) Limited, the Hon'ble ITAT held that the decision in the case of M/s Lovely Exports is no more a binding decision, The Hon'ble ITAT accordingly remanded the matter back to file of Ld. CIT(A) for deciding the matter in accordance to the decision in the case of M/s NRA Iron & Steels Private Limited and M/s NDR Promoters (P) Limited, (para 10 of the said order page, page 311 of department's paper book) 21. Kind attention is also drawn to para 9.10 ofthe decision of Hon'ble ITAT (Pune Bench) in t....
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....uge expenses has already taken loan from the Union Bank of India. The learned AR in support of his contention drew our attention on the financial statements of the assessee which are placed on pages 1 to 10 of the paper book and sanctions letters issued by the bank which are placed on pages 154 to 232 of the paper book. The learned AR also drew our attention on the techno economic feasibility report of assessee's project which was placed on pages 233 to 266 of the paper book. 9.2 The learned AR further submitted that the assessee has not inflated its project cost as alleged by the AO in his order. In fact the AO has grossly erred in comparing the cost incurred by the assessee with the data available on the Internet which has no relevance. As per the learned AR, the capacity of the product acquired by the assessee were different with the product compared by the AO on the basis of the data obtained from the Internet. The learned AR in support of his contention drew our attention on the invoice issued by the supplier placed on pages 299 to 301 of the paper book. The learned AR also contended that the notices were issued to the suppliers vide letter dated 18 March 2013 whereas the a....
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.... proving it wrong, it can be said that assessee has discharged its onus. If the AO presents some contrary evidences, the responsibility again shifts upon the assessee to rebut such contrary evidences. 11.2 Admittedly, in the case on hand, the assessee has discharged its onus by furnishing the necessary details such as a confirmation of the parties, copy of ITR- V, copy of bank statement of parties along with their balance sheet, share certificate, MOA, AOA etc. in support of identity of the parties and genuineness of transaction and credit worthiness of the parties. These details of the parties are available on pages 16 to 161 of the paper book. Similarly, there is also no dispute to the fact that all the transactions were carried out through the banking channel. What is the inference that flows from a cumulative consideration of all the aforesaid contending facts is that the assessee has discharged its onus imposed under section 68 of the Act. The details filed by the assessee were cross verified by the Revenue from the respective parties and no infirmity was pointed out in the same except doubting the credit worthiness of the parties on the reasoning that these parties are ear....
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....Revenue of whatsoever in the earlier assessment year for the amount of Rs. 2 crores received by the assessee. Thus a question arises whether the creditworthiness can be doubted in the year under consideration towards the amount received by the assessee in the year in dispute. To our mind, the answer stands in negative. It is for the reason that once the revenue has accepted the creditworthiness of the company in the earlier year, the same cannot be disturbed in the subsequent year until and unless the corroborative evidences require otherwise. But no such evidences were brought on record. IV) It is also pertinent to note that the commission under section 131(1)(d) of the Act was issued upon the company SIL which submitted its report but there was no negative remark about the financial position of the company i.e. SIL. V) It is also important to note that the assessee besides the share capital of Rs. 17.85 crores has also received share application money for Rs. 13.95 crores from the company i.e. SIL, which is pending for allotment as on 31 March 2010 but there was no doubt raised by the revenue with respect to such share application money which is pending for the ....
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....assessment order is placed on pages 3 to 8 of the paper which was received separately dated 22-2- 2021. 11.5 Swift Venture Pvt. Ltd. share capital of Rs. 8,10,00,000/- I) On perusal of the balance sheet of SVPL, placed on pages 95 of the paper book, it was noticed that its position of the fund stands at Rs. 22.50 crores approximately as on 31-3-2010 and 31-3-2009. Thus what is transpired is this that the fund in the hands of the company i.e. SVPL was not generated in the year under consideration for making the investments in the assessee company. Similarly, the company i.e. SVPL has made investment in various other companies in the year under consideration as well as in the earlier assessment year which can be verified from the financial statement of the company. Thus, it is not the case that the entire capital of the SVPL was invested in the shares of the assessee company. II) It was also noticed that the assessee received a sum of Rs. 85 lacs in the earlier assessment year from SVPL which was accepted by the revenue. In other words there was no doubt raised by the revenue of whatsoever in the earlier assessment year for the amount of Rs. 85 lacs received by t....
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....e unaccounted money of the assessee as alleged by the AO. III) It is also important to note that the firm i.e. DRM is a proprietary concern owned by Shri Sanjay Mantri HUF and KARTA of the HUF has also made investments in the share application money in the individual capacity which has been accepted by the revenue. Thus what is transpired that the revenue has not believed on the creditworthiness of the HUF but did not doubt on the creditworthiness of the KARTA of the HUF in his individual capacity. IV) Likewise, there was an assessment under section 143(3) of the Act in the case of the firm i.e. DRM wherein the financial position of the firm was not doubted. The copy of the assessment order for the year under consideration is placed on pages 152 to 153 of the paper book. V) It was also noticed that the assessee received a sum of Rs. 5,14,53,717/- in the earlier assessment year from DRM which was accepted by the revenue. In other words there was no doubt raised by the revenue of whatsoever in the earlier assessment year for the amount of Rs. 5.14 crores received by the assessee. Thus a question arises whether the creditworthiness can be doubted in the year....
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....Gopikar Supply Pvt. Ltd. Kolkata, Gromore Fund Management Ltd. Kolkata, Bayanwala Brothers Pvt. Ltd. Kolkata, Shivlaxmi Export Ltd. Kolkata, Natraj Vinimay Pvt. Ltd. Kolkata, Neelkanth Commodities Pvt. Ltd. Kolkata, Prominent Vyappar Pvt. Ltd. Kolkata), however, they had not given any reasons for paying such a huge premium. Furthermore, they had declared very low income in their respective returns of income. (v) The details of share purchased and the amount of premium were not specified by certain companies namely Super Finance Ltd. Kolkata, Ganga Builders Ltd. Kolkata. Furthermore, these companies had not enclosed the bank statement. (vi) In addition to above, ld. AO found that: a. Out of the four companies at Mumbai, two companies were found to be non-existent at the address furnished. b. With respect to the Kolkata companies, nobody appeared nor did they produce their bank statements to substantiate the alleged investments. c. Guwahati companies - Ispat Sheet Ltd. and Novelty Traders Ltd., were found non-existent at the given address. d. None of the investor-companies appeared before the A.O. 12.1 Based on the above it was....
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....eleted the addition made by the AO under the provisions of section 68 of the Act. In this connection we draw support and guidance form the judgment of Hon'ble Bombay High Court in case of PCIT vs. Ami Industries (India) (P.) Ltd. reported in 424 ITR 219 where it was held as under: 21. From the above, it is seen that identity of the creditors were not in doubt. Assessee had furnished PAN, copies of the income tax returns of the creditors as well as copy of bank accounts of the three creditors in which the share application money was deposited in order to prove genuineness of the transactions. In so far credit worthiness of the creditors were concerned, Tribunal recorded that bank accounts of the creditors showed that the creditors had funds to make payments for share application money and in this regard, resolutions were also passed by the Board of Directors of the three creditors. Though, assessee was not required to prove source of the source, nonetheless, Tribunal took the view that Assessing Officer had made inquiries through the investigation wing of the department at Kolkata and collected all the materials which proved source of the source. 22. In NRA Iron & ....
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..... v. It was also estimated that the sales realisation in the 1st year of its operation shall be at Rs. 16,825 Lacs which will increase gradually to Rs. 30,439 lakhs over a period of time. vi. The details of the cash flow statements. 12.8 Based on the above documents, it cannot be said that there was no business activity carried out by the assessee in the year under consideration as it has not shown any profit in the books of accounts. As such the assessee was in the process of setting up of the plant in the year under consideration and its commercial activity did not start. Accordingly, we are not convinced with the allegation of the AO that the assessee did not carry out any business activity in the year under consideration. 12.9 On perusal of the financial statement of the assessee we also note that it has shown reserve and surplus for the year ending 31st March 2009 at Rs. 25,12,448/- against the share capital of Rs. 1 lakh which was divided into 10,000 shares of Rs. 10 each. In other words the valuation of the shares of the assessee company as per its financial statement stands at Rs. 250/- approx. (Rs. 25,12,448/10000). Based on this information only, t....
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....rmity in such details furnished by the assessee. In fact the assessee has duly discharged its onus by furnishing the requisite details and therefore the onus was shifted upon the AO to reject the contention of the assessee based on the cogent materials. As such the assessee cannot be penalised for non-response of the suppliers, particularly in a situation, where the notices to the suppliers were issued by the AO at the fag end of the assessment. 12.13 It is also significant to note that the entire thrust of the learned DR was based on the documents/informations collected in the course of search proceedings under section 132 of the Act which was conducted on 2 May 2013. As per the learned DR the information gathered during the search proceedings should also be considered while adjudicating the issue on hand. The learned DR further submitted that the matter of the assessee for the year under consideration against the search proceedings is pending before the learned CIT (A). Accordingly the learned DR contended that the matter on hand can also be restored to the file of the learned CIT (A) for fresh adjudication along with the search proceedings. However, we are not convinced with ....