TaxTMI 
TaxTMI 
2021 (6) TMI 486
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....f the Income Tax Act, 1961 (hereinafter the 'Act'). 3. Brief facts of the case as noted by the AO are that the assessee company is engaged in the business of manufacturing of cotton yarn and trading of synthetics yarn and cotton yarn. The A.O noted that the assessee company has raised share capital to the tune of Rs. 2,79,34,200/- and share premium @Rs. 590 totalling Rs. 16,48,11,780/- during the relevant assessment year (herein after in shortA.Y). In order to verify the identity, creditworthiness and genuineness of shareholders, the AO issued notice u/s. 133(6) of the Act to the shareholders. The AO noted that notices u/s. 133(6) in case of following six (6) shareholders i.e. (i) M/s Pragati Complex Advisory Pvt. Ltd. at 70, Nalini Seth Road, 1st Floor, Kollkata-700007, (ii) M/s Richfield Vintrade Pvt. Ltd. at 8, Lyons Range, Kolkata-700001, (iii) M/s Laxmiputra Tradecomm Pvt. Ltd. at 77, N.S. Road, 5th Floor, Kolkata-700001, (iv) M/s Jintan Mercantile Pvt. Ltd. at 33/1, N. S. Road, Kolkata-70000 1, (v) M/s Newzone Vintrade Pvt. Ltd at 77, N.S. Road, 5th Floor, Kolkata-700001 and (vi) M/s Brijbhumi Commosale Pvt. Ltd. at 70, Nalini Seth Road, 1st Floor, Kolkata-700005 got retur....
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....iving details of their establishment, the staff etc., he did not accept the share capital and premium supposed to have been given by them and made the addition of Rs. 7,69,71,990/-. According to the Ld. CIT-DR, the Ld. CIT(A) has mistakenly drawn inferences in favour of assessee which impugned action according to the Ld. CIT-DR was not based on relevant materials; and the Ld. CIT-DR pointed out that though the Ld. CIT(A) during appellate proceedings had directed the A.O to carry out investigation by issuing section 133(6) notice, pursuant to which, when the A.O had issued summons u/s 131of the Act, instead of notices u/s 133(6) as directed by him, the Ld. CIT(A) found fault with the action of the A.O and has given relief even by taking note that the share applicant companies' directors had in fact presented themselves in the office of A.O pursuant to the summons, however the A.O was not present in the Office at that time when they came to AO's office and so they had to leave the office without their statement being recorded by the AO. This factual assertion of the Ld. CIT(A) has been questioned by the Ld. CIT-DR, who submitted that pursuant to the directions of Ld. CIT(A), during r....
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....ollected share capital & premium; and out of which nine (9) notices could be served and since six (6) parties could not be served because of change of address, and the AO has drawn adverse inference against these six (6) share subscribers, without awaiting for their response from them.Moreover, according to the Ld. AR, the A.O while making the addition of Rs. 7.69 crores u/s 68 of the Act has not made any addition of the share capital received by the assessee from these six (6) companies[details will be discussed (infra) with the aid of charts]which means according to the Ld. AR, the A.O on one hand has accepted the share capital subscribed by these companies, however he did not accept the share premium subscribed by them and made addition u/s 68 of the Act, which action of AO according to the Ld. AR, is erroneous. According to Ld AR, the AO by accepting the share capital from these six (6) share subscribers' the AO has conveyed his satisfaction in respect of their [six (6) share subscribers'] respective identity and creditworthiness and also the AO has accepted the genuineness of the share capital transaction from these companies with the assessee company. So, according to the Ld.....
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....,60,000 21,24,000 24,84,000 22 Ojaswini Retailers Pvt Ltd 12,60,000 74,34,000 86,94,000 TOTAL 2,79,34,200 16,48,11,780 19,27,45,980 8. According to the Ld. AR, as discussed supra, the assessee has received share capital money aggregating to Rs. 19,27,45,980/- from twenty two (22) private limited companies comprising share capital of Rs. 2,79,34,200/- and share premium of Rs. 16,48,11,780/- by issuing shares of face value of Rs. 100/- at a premium of Rs. 590/According to the Ld. AR, the A.O had issued notices u/s 133(6) to fourteen (14) companies which were served upon nine (9) companies, however it could not be served up on five (5) companies. However, he drew adverse inference against six (6) share applicant companies [ later on referred to as companies under Serial C] which are as under: Sl. no. Name of the Party Application Premium 1 Pragati Complex Advisory Pvt. Ltd 21,11,000 1,24,54,900 2 Richfield Vintrade Pvt. Ltd 26,20,000 1,54,58,000 3 LaxmiputraTradecomm Pvt. Ltd 26,97,000 1,59,12,300 4 Jintan Mercantile Pvt. Ltd 18,84,000 1,11,15,600 5 Newzone Vintrade Pv....
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.... and Audited Accounts, ii) Income Tax Return, iii) Bank Statement. Companies under (Serial B) - i) Mangalkamna Merchants Pvt. Ltd, ii) Needful Projects Advisory Pvt. Ltd, iii) Ramdot Suppliers Pvt. Ltd, iv) BhagwatKripa Trading Pvt. Ltd v) Ojawswani Realtors Pvt. Ltd, vi) Waltaz Commodities Pvt. Ltd, vii) GMB Finvest Pvt. Ltd, viii Dharnidhar Trading Pvt. Ltd. 12. According to the Ld. AR, in the light of the above facts, the Ld. CIT(A) wondered as to when the assessee has filed all these details like balance sheet and audited account, income-tax return and bank statement of these share applicant companies also (i.e. six companies), then why the A.O after having accepted their identity, creditworthiness and genuineness in respect of share capital from these following six companies, didn't accept the premium from them and made the addition. These six companies are hereinafter referred to as companies under Serial C: Companies under (Serial C) i) Brijbhumi Commosale Pvt. Ltd ii) Newzone Vintrade Pvt. Ltd iii) Jintan Mercantile Pvt. Ltd iv) ....
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....eceived total share application money aggregating to Rs. 19,27,45,980/- from twenty two (22) companies comprising of share capital of Rs. 2,79,34,200/- and share premium of Rs. 16,48,11,780/- by issuing shares of face value of Rs. 100/- at a premium of Rs. 590/. During the assessment proceedings, the A.O asked the assessee to prove the identity, creditworthiness and genuineness of the share applicants. And the A.O issued notices u/s 133(6) of the Act to six (6) companies shown under Serial 'C' (supra) namely (i) M/s Pragati Complex Advisory Pvt. Ltd., (ii) M/s Richfield Vintrade Pvt. Ltd., (iii) M/s LaxmiputraTradecomm Pvt. Ltd., (iv) M/s Jintan Mercantile Pvt. Ltd., (v) M/s Newzone Vintrade Pvt. Ltd. and (vi) M/s Brijbhumi Commosale Pvt. Ltd. According to the A.O, the notices were returned back by the postal authorities since it could not be served upon them. Further, according to the A.O, the field enquiry by the A.O to verify the genuineness of the company did not yield any result. So he showcaused the assessee as to why the share capital & premium received from the aforesaid six(6) companies should not be added u/s 68 of the Act. Further according to the A.O, the certificate of....
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....ven by AO to conduct any field enquiry at the address of these companies nor any field report in the assessment folder, which discovery led the Ld CIT(A) to conclude that AO made no such enquiry. In the light of the aforesaid discussion, we are of the considered opinion that only on the basis that notices/field enquiry could not find the share subscribers [at serial C]at their respective old address cannot be the sole basis to draw adverse inference against them, when the assessee was able to bring material/evidence on record that these companies had changed to a new address and when they are able to adduce evidence to establish their existence by other evidences. Further we note that the Ld. CIT(A) had given direction to AO to issue notices u/s 133(6) to these companies at their new addresses while calling for remand report and the AO had issued summons u/s 131 to these companies in their new address to produce their respective Principal Officers, and pursuant to which (after summons being served upon them) they claim to have been produced, when the AO was not present in his office, which fact also the Ld. CIT(A) has taken note of in his order at page 16 & 27. [Though this avermen....
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....which we will deal infra] under which the addition has been made by the Assessing Officer reads as under: "68. Where any sum is found credited in the books of an assessee maintained for any previous year, and the assessee offers no explanation about the nature and source thereof or the explanation offered by him is not, in the opinion of the Assessing Officer, satisfactory, the sum so credited may be charged to income-tax as the income of the assessee of that previous year. " 19. The phraseology of section 68 is clear. The Legislature has laid down that in the absence of a satisfactory explanation, the unexplained cash credit may be charged to income-tax as the income of the assessee of that previous year. In this case the legislative mandate is not in terms of the words 'shall' becharged to income-tax as the income of the assessee of that previous year". TheHon'ble Supreme Court while interpreting similar phraseology used in section 68 has held that in creating the legal fiction the phraseology employs the word "may" and not "shall". Thus the un-satisfactoriness of the explanation does not and need not automatically result in deeming the amount credited in the books as....
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....mount deposited by those creditors in their bank accounts, the proper course would have been to make assessments in the cases of those creditors by' treating the cash deposits in their bank accounts as unexplained investments of those creditors under section 69. 21. In the case of Nemi Chand Kothari 136 Taxman 213, (supra), the Hon'ble Guahati High Court hasthrown light on another aspect touching the issue of onus on assessee under section 68, by holding that the same should be decided by taking into consideration the provision of section 106 of the Evidence Act which says that a person can be required to prove only such facts which are in his knowledge. The Hon'ble Court in the said case held that, once it is found that an assessee has actually taken money from depositor/lender who has been fully identified, the assessee/borrower cannot be called upon to explain, much less prove the affairs of such third party, which he is not even supposed to know or about which he cannot be held to be accredited with any knowledge. In this view, the Hon'ble Court has laid down that section 68 of Income-tax Act, should be read along with section 106 of Evidence Act. The relevan....
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...., actually belongs to, or was of, the assessee himself. In other words, while section 68 gives the liberty to the Assessing Officer to enquire into the source/source from where the creditor has received the money, section 106 makes the assessee liable to disclose only the source(s) from where he has himself received the credit and IT is not the burden of the assessee to prove the creditworthiness of the source(s) of the sub-creditors. If section 106 and section 68 are to stand together, which they must, then, the interpretation of section 68 are to stand together, which they must, then the interpretation of section 68 has to be in such a way that it does not make section 106 redundant. Hence, the harmonious construction of section 106 of the Evidence Act and section 68 of the Income- tax Act will be that though apart from establishing the identity of the creditor, the assessee must establish the genuineness of the transaction as well as the creditworthiness of his creditor, the burden of the assessee to prove the genuineness of the transactions as well as the creditworthiness of the creditor must remain confined to the transactions, which have taken place between the assessee and t....
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.... taken place between his creditor and the subcreditor... " ********** "In other words, though under section 68 an Assessing Officer is free to show, with the help of the inquiry conducted by him into the transactions, which have taken place between the creditor and the sub-creditor, that the transaction between the two were not genuine and that the sub-creditor had no creditworthiness, it will not necessarily mean that the loan advanced by the sub-creditor to the creditor was income of the assessee from undisclosed source unless there is evidence, direct or circumstantial, to show that the amount which has been advanced by the sub-creditor to the creditor, had actually been received by the sub-creditor from the assessee ...." ********** "Keeping in view the above position of law, when we turn to the factual matrix of the present case, we find that so far as the appellant is concerned, he has established the identity of the creditors, namely, Nemichand Nahata and Sons (HUF) and Pawan Kumar Agarwalla. The appellant had also shown, in accordance with the burden, which rested on him under section 106 of the Evidence Act, that the said amounts had bee....
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.... we find that the Tribunal was right in reversing the order of the AA C, setting aside the assessment order." 23. We also take note of the decision of the Hon'ble High Court, Calcutta in the case of S.K. Bothra & Sons, HUF v. Income-tax Officer, Ward- 46(3), Kolkata 347 ITR 347 wherein the Court held as follows: "15. It is now a settled law that while considering the question whether the alleged loan taken by the assessee was a genuine transaction, the initial onus is always upon the assessee and if no explanation is given or the explanation given by the appellant is not satisfactory, the Assessing Officer can disbelieve the alleged transaction of loan. But the law is equally settled that if the initial burden is discharged by the assessee by producing sufficient materials in support of the loan transaction, the onus shifts upon the Assessing Officer and after verification, he can call for further explanation from the assessee and in the process, the onus may again shift from the Assessing Officer to assessee. 16. In the case before us, the appellant by producing the loan-confirmation-certificates signed by the creditors, disclosing their permanent account ....
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....ention to a decision of the Supreme Court in the case of Udhavdas Kewalram v. CIT [19671 66 ITR 462. In this judgment it is noticed that the Supreme Court as proposition of law held that the Tribunal must In deciding an appeal, consider with due care, all the material facts and record its finding on all the contentions raised by the assessee and the Commissioner in the light of the evidence and the relevant law. 10. We find considerable force of the submissions of the learned counsel for the appellant that the Tribunal has merely noticed that since the summons issued before assessment returned unserved and no one came forward to prove. Therefore, it shall be assumed that the assessee failed to prove the existence of the creditors or for that matter the creditworthiness. As rightly pointed out by the learned counsel that the Commissioner of Income-tax (Appeals) has taken the trouble of examining of all other materials and documents, viz., confirmatory statements, invoices, challans and vouchers showing supply of bidis as against the advance. Therefore, the attendance of the witnesses pursuant to the summons issued, in our view, is not important. The important is to prove as....
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....ax assessee, it is now well settled by the decision of the Calcutta High Court that the creditworthiness of the creditor cannot be disputed by the AO of the assessee but the AO of the creditor. In this regards our attention was drawn to the decision of the Hon'ble High Court, Calcutta in the CIT, Kolkata-Ill Versus DATAWARE Pvt Ltd ITAT No. 263 of 2011 Date: 21st September, 2011 wherein the Hon'ble High Court held as follows: "In our opinion, in such circumstances, the Assessing officer of the assessee cannot take the burden of assessing the profit and loss account of the creditor when admittedly the creditor himself is an income tax assessee. After getting the PAN number and getting the information that the creditor is assessed under the Act, the Assessing officer should enquire from the Assessing Officer of the creditor as to the genuineness" of the transaction and whether such transaction has been accepted by the Assessing officer of the creditor but instead of adopting such course, the Assessing officer himself could not enter into the return of the creditor and brand the same as unworthy of credence. So long it is not established that the return submitted....
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....h were mentioned in the assessment order. The Assessing Officer, therefore, concluded that nature and source of such money was questionable and evidence produced was unsatisfactory. Consequently, the Assessing Officer invoked the provisions under Section 68/69 of the Income Tax Act and made addition of Rs. 24,00,000/-. On appeal the Learned CIT (A) by following the decision of the Supreme Court in the case of Cl. T. vs. M/s. Lovely Exports Pvt. Ltd., reported in (2008) 216 CTR 195 allowed the appeal by holding -that share capital/premium of Rs. 24,00,000/- received from the investors was not liable to be treated under Section 68 as unexplained credits and it should not be taxed in the hands of the appellant company. As indicated earlier, the Tribunal below dismissed the appeal filed by the Revenue. After hearing the learned counsel for the appellant and after going through the decision of the Supreme Court in the case of Cl. T. vs. M/s. Lovely Exports Pvt. Ltd. [supra], we are at one with the Tribunal below that the point involved in this appeal is covered by the said Supreme Court decision in favour of the assessee and thus, no substantial question of la....
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....nducted by the Income Tax Inspector had revealed that nine persons making applications for 900 shares were not available at the given address and rightly concluded that the total share capital issued by the Assessee Company could not be added as unexplained cash credit under 'Section 68 of the Income Tax Act. Moreover, if the nature and source of investment by any shareholder, in shares of the Assessee Company remained unexplained, liability could not be foisted on the company. The concerned shareholders would have to explain the source of their fund. The learned Commissioner on considering the submissions of the, respective parties and considering the materials, found that the Assessing Officer had applied the provisions of Section 68 of the Income Tax Act arbitrarily and illegally and in any case without giving the assessee adequate opportunity of representation and/or hearing. Learned Tribunal agreed with the factual findings of the learned Commissioner and accordingly the learned Tribunal dismissed the appeal of the Revenue and affirmed the decision of the learned Commissioner. Mr. Dutta appearing on behalf of the petitioners cited judgment of the....
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....s. 91,50,000/- and Rs. 13,00,000/- made by the Assessing Officer on account of share capital, share application money and investment in HTCCL respectively. After hearing Md. Nizamuddin, learned Advocate appearing on behalf of the appellant and after going through the materials on record, we find that all such application money were received by the assessee by way of account payee cheques and the assessee also disclosed the complete list of shareholders with their complete addresses and GIR Numbers for the relevant assessment years in which share application was contributed. It further appears that all the payments were made by the applicants by account payee cheques. It appears from the Assessing Officers order that his grievance was that the assessee was not willing to produce the parties who had allegedly advanced the fund. In our opinion, both the Commissioner of Income-tax (Appeals) and the Tribunal below were justified in holding that after disclosure of the full particulars indicated above, the initial onus of the assessee was shifted and it was the duty of the Assessing Officer to enquire whether those particulars were correct or not and if the Ass....
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....ough proper banking channel and according to assessee it was not the case of the A.O that there was any cash deposit prior to the issue of cheques to the assessee company. Thus the assessee claims that the genuineness of the transaction cannot be disputed. And in order to prove the creditworthiness of the share subscribers, the Ld. A.R drew our attention to audited balance sheet of the share subscribing companies and contended that shareholders possess sufficient capital and reserves out of which share subscription amounts were paid through account payee cheques. So according to assessee, it has discharged the burden of proof casted by section 68 of the Act in respect of share capital & premium it collected. And according to assessee, without finding any infirmity in the documents produced by the assessee in respect of identity, creditworthiness and genuineness of the transaction, no addition u/s 68 of the Act was warranted and the Ld CIT(A) after considering and appreciating inter-alia these facts have deleted the addition. 31. Further we note that the A.O had accepted the share capital subscribed by the six corporate entities at Serial C. The Ld. A.R in this context had drawn ....
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....ial 'C', viz. (i) copy of ITR acknowledgement for A.Y 2014-15, (ii) copy of bank statement depicting transaction, (iii) copy of share application form, (iv) copy of share allotment letter. Despite that the A.O has drawn adverse inference against these companies because the notice u/s 133(6) could not be served upon them and the field enquiry also could not yield any result, which we have already dealt with (supra) wherein we disapproved the action of AO and upheld the action of Ld CIT(A). 32. As we noted (supra) the AO has made addition of Rs. 7,69,71,990/- i.e. share premium collected by assessee during this AY 2014-15 whereas he has accepted the share capital of Rs. 1,11,46,100/- collected by them and on appeal the Ld. CIT(A) has deleted the same and when we have to adjudicate the legality of the action of Ld. CIT(A), first of all, let us have a look at section 68 of the Act. And we note that the relevant assessment year [A.Y] before us is A.Y 2014-15 wherein we note that a Proviso has been inserted by Finance Act 2012 w.e.f. 01.04.2013 in section 68 of the Act which is applicable for this relevant AYand for ready reference relevant and applicable in this case of section 68 of....
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....to show the nature and source of the credit i.e. identity, creditworthiness and genuineness of the transaction in question. And once an assessee is able to discharges the initial burden which liesupon it, then the onus shifts to the AO to disprove/rebut the material adduced by the assessee to substantiate the nature and source of the credit transaction. And if the AO is not able to disprove/rebut the evidence brought on record by the assessee to prove the nature and source of the credit entry, then section 68 of the Act cannot be used by the AO to charge the credit appearing in the books of the assessee as income for taxation. This position of law we note remains the same even after the insertion of Finance Act 2012, wherein additional requirement/burden is brought in by the Parliament in the cases of an assessee which is a corporate entity (not being a company in which the public are substantially interested) claims to have received share application money, share capital, share premium or any such amount, then with effect from 01.04.2013, while giving the explanation to the AO regarding the nature and source of such sum credited in its books, the share subscribors has to offer the....
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....s the source of money from where those share subscribers could subscribe in assessee company is clearly discernible. Thus the source of source was evident since all the six (6) share subscribing companies at Serial C could demonstrate their source of source which is flowing through regular banking channel from various remittance by corporate entities in the course of their business dealings and since all the transactions happened through banking channel, and since these relevant facts are clearly discernable and which will be discussed (infra) in detail while discussing about each share subscriber. And since the source of source of the sum of money credited in the assessee's books for share subscribing (capital and premium) has been shown to the A.O, the proviso to section 68 stands satisfied. Therefore, in the peculiar facts and circumstances of the case as discussed, it cannot be held that the assessee had not discharged its onus of proving the source of source of the share capital and premium. Here it has to be taken note that the share premium of Rs. 590/- per share the A.O has accepted, because he has accepted that from the other sixteen (16) companies, therefore, valuation of....
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....f the shareholders, our attention was drawn to the balance sheet of the shareholders (Paper Book pages given infra) which was filed before the AO and the Ld. CIT(A) and we note that their source of investment and net worth as per balance sheet as on 31.03.2014 as well as the sum invested by them in the assessee is discernible as under: Sl No Name of the Party Source of Investment Capital & Reserves Sum invested in assessee's business 1 Pragati Complex Advisory Pvt Ltd 66-70 of PB Rs. 7,57,92,433 (Page 58 of PB) Rs. 1,45,65,000 2 BrijbhumiCommosale Pvt Ltd 84-87 of PB Rs. 10,20,58,974 (Page 78 of PB) Rs. 1,27,65,000 3 Jintan Mercantile Pvt Ltd 103-106 of PB Rs. 15,78,77,331 (Page 95 of PB) Rs. 1,29,99,600 4 LaxniipurtraTradecomm Pvt Ltd 123-126 of PB Rs. 13,30,11,167 (Page 115 of PB) Rs. 1,86,09,300 5 RichifleldVintrade Pvt Ltd 142-144 of PB Rs. 14,44,31,804 (Page 134 of PB) Rs. 1,80,78,000 6 NewzoneVintrade Pvt Ltd 159-162 of PB Rs. 7,87,90,688 (Page 152 of PB) Rs. 1,30,00,290 38. So, from a perusal of the above chart, we note that the assessee and the shareholders ....
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.... in the assessee-company including the share premium comes to Rs. 1,45,65,900/-. There is Share Application Form, Bank statement, ITR acknowledgement and financial statement available in the PB-page 53-72. This share applicant regularly filed Income Tax Return (ITR) and it has filed its Bank statement. Thus we note that the assessee had duly discharged its onus to prove the identity of the share applicants by adducing PAN as well as income-tax returns. The financial statement shows that the share applicant had enough funds to invest in the assesseecompany and the transaction has happened through banking channel. Since the case pertains to AY 2014-15, the share subscribers has to show the source of its fund for subscribing to the share capital/premium of the assessee company. From the bank statement of M/s Pragati Complex Advisory Pvt Ltd enclosed as page no 66-70 of paper book it is clear that the share subscriber has invested Rs. l,45,65,000/-in the assesse company on various dates as follows: on 20.12.2012 Rs. 25 lakhs, on 21.12.2013 Rs. 25 lakhs, on 26.12.2013 Rs. 20 lakhs, on 01.02.2014 Rs. 25 lakhs, on 14.02.2014 Rs. 25 lakhs, on 20.02.2014 Rs. 10.10 lakhs and on 26.02.2014 Rs....
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....are placed at page 90 to 108 of share applicant M/s. Jintan Mercantile Pvt Ltd which is a Private Limited Company, and which has Permanent Account No. AACCJ6360P and CIN U51909WB2011PTC164209 and its Net-worth as on 31.03.2014 (in total)- share capital & reserve is to the tune of Rs. 15,78,77,331/- (PB page 95) and the investment made in the assessee-company including the share premium comes to Rs. 1,29,99,600/-. There is Share Application Form, Bank statement, ITR acknowledgement and financial statement available in the PB-page 90-108. This share applicant regularly filed Income Tax Return (ITR) and it has filed its Bank statement. Thus we note that the assessee had duly discharged its onus to prove the identity of the share applicants by adducing PAN as well as income-tax returns. The financial statement shows that the share applicant had enough funds to invest in the assessee-company and the transaction has happened through banking channel. Since the case pertains to AY 2014-15, the share subscribers has to show the source of its fund for subscribing to the share capital/premium of the assesse company. From the bank statement of M/s. Jintan Mercantile Pvt Ltd enclosed as page no....
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.... that there was no cash deposit. Thus the company has furnished the details of source of Funds and has duly filed its financial statements, so the requirement of source of source is satisfied and no adverse view against this share subscriber especially in respect of share premium is warranted. (v) On perusal of the paper book, it reveals that the documents are placed at page 129 to 146 of share applicant M/s. Richifield Vintrade Pvt Ltd which is a Private Limited Company, and which has Permanent Account No. AAFCR3199H and ON U51909WB2011PTC163139 and its Net-worth as on 31.03.2014 (in total)- share capital & reserve is to the tune of Rs. 14,44,31,804/- (PB page 134) and the investment made in the assessee-company including the share premium comes to Rs. 1,80,78,000/-. There is Share Application Form, Bank statement, ITR acknowledgement and financial statement available in the PB-page 129-146. This share applicant regularly filed Income Tax Return (ITR) and it has filed its Bank statement. Thus we note that the assessee had duly discharged its onus to prove the identity of the share applicants by adducing PAN as well as income-tax returns. The financial statement shows that the s....
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....ny on various dates as follows : on 03.01.2014 Rs. 25 lakhs, on 06.01.2014 Rs. 25 lakhs, on 07.01.2014 Rs. 20 lakhs, on 09.01.2014 Rs. 251akhs,onl0.01.2014 Rs. 20 lakhs and on 15.01.2014 Rs. 15 lakhs through banking channel. From perusal of bank statement it is evident that there was no cash deposit. Thus the company has furnished the details of source of Funds and has duly filed its financial statements, so the requirement of source of source is satisfied and no adverse view against this share subscriber especially in respect of share premium is warranted. 39. Thus from the aforesaid discussions and in the light of the facts and circumstances discussed and since there is no other material to negate or find any infirmity in the documents filed, we find that the Ld. CIT(A)'s action to delete the addition of Rs. 7,69,71,990/- cannot be faulted and is in consonance with the judicial precedents on the issue and therefore we confirm the action of Ld. CIT(A) and dismiss the appeal of the Revenue. 40. Before we part, we note that the AO had raised many grounds of appeal, however the issue is only one, that is deletion of Rs. 7,69,71,990/- and a perusal of grounds shows that AO has a....
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....56(2) (viib) 7.1. On perusal of the Audited Accounts for the year ended 31/03/2015 submitted by the Assessee Company, it is found that during the year under consideration, it has issued 4,95,800 Nos of Class A Equity Shares of Rs. 10- each and premium Rs. 62/- which translate to Rs. 72 per equity share. The assessee has also issued 6,65,566 Nos of Class B Equity shares of Rs. 100/- face value and premium Rs. 620/-. The assessee was requested to submit the FMV as per Rule 11UA w.r.t. regarding issues of shares during the year. 7.2 In response to the same, the assessee company filed copy of valuation of its Shares of A & Class B. Ongoing through the same, it is noted that the assessee company had shown book value of Class A & Class B shares of Rs. 71.92/- & Rs. 719.21 respectively Therefore the excess amount received by the assessee company per share comes to Rs. 0.08/- (Rs. 72.00 - Rs. 71.92) & Rs. 0.79/-(Rs. 720/- Rs. 719.21) respectively. Therefore, as per Section 56(2)(viib) as mentioned above, the excess consideration on the issue of the shares as exceeds the book value comes to Rs. 39,664/- [4,95,800 x Rs. 0.08/-] & Rs. 5,25,797/- [6,65,566 x Rs. 0.79/-] total....
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.... case of Manoj Singhal Us. DCIT, ITA NO.6023/De l/2015, dated 17.10.2016. Taking the same logic in this case where valuation price and transaction price difference is negligible, no addition can be made. In view of the above discussion the ground is Allowed." 46. Aggrieved the Revenue is before us. 47. We have heard both the parties and perused the records. We note that during the year, the assessee had issued Class-A equity shares of Rs. 10/- each face value with a premium of Rs. 62/- each amounting to Rs. 72/- per equity share. The assessee company had also issued 6,65,566 number of Class-B equity shares of Rs. 100/- face value at a premium of Rs. 620/- which amounts to Rs. 5,65,461/-. The A.O noted that the difference in the price of the shares and the fair market value as per certificate issued by the Chartered Accountant. It was pointed out by the Ld. AR that from a perusal of the certificate issued by the Chartered Accountant, it can be seen that book value of Class-A equity share is Rs. 71.92/- and for Class-B is Rs. 719.21/- and as the assessee had issued the share prices at round figure of Rs. 72/- per share for Class-A equity shares, of Rs. 720/- for Class-....
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....than 180 days (B) Total Depreciation 1 Electrical installation (10%) Depreciation at the prescribed rate as per Income Tax Act Electrical installation (10 %) 8,33,82,144/- - 10,87,31,419/ Rs. 1,37,74,785/- Assessee's claim Electrical installation (15%) Rs. 2,06,62.178/- Excess claim of depreciation Rs. 68,87,393/- As per above working notes, it is seen that the assessee had made excess claim of deprecation of Rs. 68,87,393/- 8.2 During the assessment proceedings, the assessee was asked to explain ás to why the excess claim of depreciation on electrical installation of Rs. 68,87,393/- should not be disallowed. In response to the same, the A/R of the assessee company stated that the aforesaid electrical installation were categorised under the Plant & Machinery and accordingly claimed depreciation at the rate prescribed for Plant & Machinery. The contention of the A/R of the assessee is not acceptable....
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.... 10,87,31,419 From the schedule it is seen that the Electrical Installations made by the assessee are all related to plant and machinery of the assessee. Therefore, I agree with the contention of the AR that electrical installation has been made in the factory premises of the assessee and would form part of plant and machinery. Therefore, the assessee has rightly claimed depreciation of 25 per cent. Therefore, the ground is allowed." 51. Before us, the Revenue is in appeal. We note that the assessee has claimed depreciation on electrical installation @15% applicable for plant and machinery whereas the A.O has considered the rate of depreciation of electrical installation at 10% each and disallowed 5% on depreciation claimed by the assessee. We note from the items mentioned in the Ld. CIT(A)'s order which goes on to show that these are electrical installations which are integral part of the plant and machinery, without which the plant and machinery cannot operate.Andsince the assessee is engaged in manufacturing of cotton yarn and the electrical installation for which the assessee has claimed depreciation @ 15% are integral part of plant and machinery without which plan....
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....an of Rs. 12,95,00,000/- from twenty two (22) lender companies/Parties. On a show cause notice received from the Assessing Officer to prove the loans taken, the assessee explained that the payments (loans) were received through Bank and the interest outgoing was paid to the lenders by deducting TDS andin support of the identity, creditworthiness and genuineness of the loan lenders of the unsecured loans, the assessee filed the following documents (i) copy of acknowledgement of income tax return, (ii) copy of bank statement and (iii) copy of audited financial statement of the loan creditors.The Assessing Officer taking note of statements recorded by Investigation Wing on oath of Shri Arun Nangalia on 17.09.2015, Shri Ashok Jha recorded on 02.03.2015 and Shri Vijay Kumar Gupta on 03.08.2015 noted that these were entry operators who had admitted to be providing the same through their companies viz M/s Banka Enterprise, M/s Ritman commodities, & M/s Sanwaria Marketing respectively. [AO has reproduced their respective statements in the assessment order from pages 3 to 18] So, according to the Assessing Officer, these lender companies were paper concerns and genuineness of the loan trans....
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....anies have substantial genuine .asset and other evidence of genuineness. In reply the AR downloaded the data relating to lender companies from ROC website . The gist given by the AR was cross checked by undersigned and was found to be correct. 15.4 The same is summarized below : 1. Ritman commodities Pvt Ltd (1) - The Company is having investment ofRs. 42,87 lakhs, in Quoted shares. The company has a bank deposit of Rs. 245.56 lakhs with banks. The:,company; pays tax regularly, in this year (FY 14-15) it paid tax of Rs. 4.09 Lac and in next year, it paid tax of Rs. 30.68 lac. The company is regularly lending monies to large and established corporate house. During the year FY 14.-15, it gave: ICD to Usha Breco Ltd., Kirloskar Electric Co, Ltd,, TIL Ltd. Williamson Magor & Co. Ltd, Bengal Topis Ltd, Mukand Ltd. and. so on.The company belongs to Bhaskar Rungta Group a renowned group of Kolkata. The ICD for the assessee was., arranged by renbv/ned corporate finance broker. Apparently .this, company, cant be said, to be a paper company, 2. Nirmaldeep Resources Ltd (2) - The Company is having investment in Quoted shares of Rs. 39.97 lakhs. Company keeps substan....
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....he assessment year. 6. Kuku Mercantile Pvt Ltd (6) - The' Company is having investment in Land & Building. The company is 'having.' Fixed .deposit of Rs. 100 Lac with Bank. The company pays tax regularly in this year (FY 14-T5) it paid tax of Rs. 16.53 Lac and in next year, it paid tax of Rs. 5.19 Lac. The company is regularly lending monies to large and established corporate house, such as Mani Square Ltd and Sunshine Niwas Pvt Ltd arid so on .The company belongs to NPE Jalan Group.' The ICD for.the assessee was arranged by' renowned, corporate finance broker. . In view of the above this Company can't be said to be a paper company during the assessment year. 7. Banka. Enterprises. Pvt Ltd- - (7) - The company is having Tangible Fixed Assets. The company pays-tax regularly in this year (FY 14-15) it paid tax of Rs. 36..48 Lac and in next year, it paid tax of Rs. 51.16 Lac. The company belongs to Rawalwasia Group. The ICD for the assessee was arranged by renowned corporate finance broker. In view of the above this company can't be said to be a paper company during the assessment year. 8. Best Luck Securities Pvt Ltd (8) -- It is a small-company....
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....longs to... BMA. Bteei- Gupta Group (Metal, Plywood). The ICD for, the assessee was arranged by renowned corporate finance broker. 12. Girdhar Tracom Pvt Ltd (12) - The Company is haring Fixed Assets 85Properties.The Company is haring investment in Quoted Shares and Mutual funds of Rs. 96 lakhs. The company pays tax regularly in this year (FY 14-15) it paid-tax of Rs. 10.88 Lac and in next year, it paid tax of Rs. 4.54 Lac. The company is regularly tendering monies to large and established corporate house. The company belongs to Primac Pansari Group. The. ICD for the assessee was arranged by renowned corporate finance broker. 13. Gulmohar Mercantiles Pvt Ltd (13) - The Company is having Fixed Assets (Rs. 31.11 lakhs') & Properties. The company, pays tax regularly in. this year (FY 1415) it paid tax of Rs. 22.88Lac and in next year, it paid tax of. Rs. 49.81 Lac, The company belongs to JAYA Biscuits Group. The ICD for the assessee was arranged by renowned corporate finance broker. 14. Jagadhatri Foods Pvt Ltd (14) - The Company is having Fixed Assets. The Company is having fixed deposits with bank. The company pays tax regularly in this year (FY 14-15)....
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....e Company is having investment in Quoted shares of Rs. 167 lakhs. The company belongs to Paragon Group , a reputed group in vehicle financing. The ICD for the assessee was arranged by renowned corporate finance broker. 21. Padmawati Vinimay Pvt Ltd (21) - The Company is having investment in Quoted shares of Rs. 18 lakhs and Mutual funds (Rs. 68 lakhs). The company belongs to Diamond Group, a reputed large builder of Kolkata. The ICD for the assessee was arranged by renowned corporate finance broker. 22. Park Complex Pvt. Ltd (22) - The company is having hold Fixed assets of over Rs. 500 lac. The Company is having investment in land and fixed deposit in bank of Rs. 40 lakhs. The company belongs to -Agarwal group having interest in Pulse & Agro Products trading The ICD for the assessee was arranged by renowned corporate finance broker. 23. Pawanputra Securities Pvt Ltd (23) - the Company owns fixed assets of around 41 lac. The Company is having investment in Quoted shares(47 lakhs) and land(Rs. 770 lakhs). The company pays tax regularly in this year (FY 14-15) it paid tax of Rs. 23.87 Lac and in next year, it paid tax of Rs. 25.47 lac. The company belongs t....
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....ment Ltd., BP Poddar Hospital, S K Singhi & co etc. The ICD for the assessee was arranged by renowned corporate finance broker. 30. Sanwaria marketing Pvt Ltd(30) - The Company is having investment in Mutual funds and Bond and holding quoted shares as inventories.- The company pays tax regularly in this year (FY 14-15) it paid tax of Rs. 18.10 Lac and in next year, it paid tax of Rs. 37.22 lac. During the year FY 14-15, it gave LCD to Uma Plastic Ltd, Turtle Ltd, Suraj International, Shristi Infrastructure Development Corporation Ltd, The Otudh Sugar mill Ltd, Palm product Pvt Ltd, National plasto product pvt Ltd, Jayshree Chemical Ltd, Elpro International Ltd, Diamond Beverages Pvt Ltd, BMW Industries Ltd Babeock Borsing Ltd, aditi Oil Ltd and so on. The company belongs to Radhamani Group. 31. Shroff Chemicals Pvt Ltd (31) - The Company is having investment in land (Rs. 359.51 Lac) and fixed deposits with bank (Rs. 27.05 Lac). The company pays tax regularly in this year (FY 14-15) it paid tax of Rs. 46.14 Lac 'and in next year, it paid tax of Rs. 37.93 Lac. The company is regularly tendering monies to large and established corporate house. The company belongs....
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.... the-finance -broker arranges' money through dubious companies in that; case the AO' should' have examined the finance broker to find out as to why and how he has arranged these loans the assessee cannot be penalized. if the finance broker arranges loans from some companies whose source of fund is dubious . 15.6. Identity : In the instant case all the companies are registered with ROC, therefore, their identity cannot be doubted, further, all these companies have Directors from reputed business group. Therefore identify of the lender is not in doubt. Capacity : From the analysis of Balance Sheet of these companies it is evident that these companies have substantial asset in their hands, therefore, capacity of these companies to lend money cannot be doubted. Genuineness : Since loan has come through cheque further the companies belongs to reputed business houses, therefore, genuineness of the transaction is not in doubt. In view of the above analysis I am of the opinion that the loan amount procured by .the assessee is, genuine.. The assessee has been able to prove. Identity capacity and genuineness of the transaction, therefore, addit....
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....dicial precedents have drawn adverse inference against the loan creditors and so he prayed that the decision of the Ld. CIT(A) to be reversed and the A.O's order to be upheld. 61. Per contra, the Ld. AR of the assessee, vehemently opposed the submission of the Ld. CIT-DR and in respect ofdeletion of Rs. 12.95 cr,the Ld. A.R supporting the decision of Ld. CIT(A)and contended that all the twenty two (22) lender companies from which all assessee received this assessment year (AY 2015-16) loan of Rs. 12.95 crore are Income Tax assessee's and are regularly assessed by the Income Tax department and drew our attention to the paper-book wherein the assessee has filed the assessment/intimation order u/s 143(1) of the Act issued by the Revenue in respect of lenders. According to her, all their (lenders) respective PAN, ITR and order u/s 143(1)goes on to prove the identity of the lenders were filed; and according to her, their respective balance sheets reveal their respective creditworthiness which the Ld. CIT(A) has taken pains to bring out about each lender companies and details given therein goes on to show that they have more than sufficient capacity to give loans to assessee; and acco....
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....out bringing any infirmity in respect of the factual finding rendered by the Ld CIT(A), she prayed that the impugned order of Ld CIT(A) be up-held. 62. We have heard both the parties and perused the records.We note that in this assessment year, the assessee has taken loan of Rs. 12.95 crores from twenty two (22) parties and the Assessing Officer had asked the assessee to prove the identity, creditworthiness and genuineness of the loan transactions with these twenty two (22) parties. In pursuance of the show-cause notice, the assessee brought to the notice of the Assessing Officer that the loans have been received through banking channel and the interest outgoing was paid by the assessee after duly deducting TDS. In support of the identity, creditworthiness and genuineness of the lenders, the assessee had filed the following documents:- (i) Copy of income-tax return; (ii) Copy of bank statement; & (iii) Copy of audited financial statement of the loan creditors. 63. The Assessing Officer taking note of statements recorded by Investigation Wing on oath of Shri Arun Nangalia on 17.09.2015, Shri Ashok Jha recorded on 02.03.2015 and Shri Vijay Kumar Gupta....
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....,00,000 5 Mokhit Bakers Pvt. Ltd 25,00,000 6 Kuku Merchantile s Pvt. Ltd 30,00,000 7 Jagadhatri Food Ltd 50,00,000 8 Gulmohar Mercantile Pvt. Ltd 100,00,000 9 Crescemthemum Vyapaar Pvt. Ltd 30,00,000 10 Banka Enterprises Pvt. Ltd 50,00,000 11 Ritesh Roadlinks Pvt. Ltd 25,00,000 12 S.K. Dudhoria Holdings Pvt. Ltd 50,00,000 13 Shroff Chemicals Pvt. Ltd 50,00,000 14 Sanwaria Marketing Pvt. Ltd 200,00,000 15 Swaran Financial Pvt. Ltd 50,00,000 16 Rego Chemicals Pvt. Ltd 30,00,000 17 Navin Construction & Credit Pvt. Ltd 50,00,000 18 Jainco Projects (I) Ltd 100,00,000 19 Girdhar Tracomm Pvt. Ltd 100,00,000 20 Disha Point Pvt. Ltd 100,00,000 21 Blackcherry Commosale Pvt. Ltd 30,00,0000 22 Best Luck securities Pvt. Ltd 20,00,0000 TOTAL 12,95,00,000 65. Further it was brought to our notice that in the subsequent assessment year i.e, AY 2016-17 the AO has accepted the loan taken by the assessee from the following thirteen (13) parties to be genuine out of total twenty two (22) parties not accepted by him in this A....
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....L Yes 7 JAGADHATRI FOOD LTD U51909WB1981PLC033866 AAACJ6899F Yes 8 GULMOHAR MERCANTILE PVT. LTD U51909WB2006PTC108134 AACCG5361R Yes 9 CRESCENTHEMUM VYAPAAR PVT LTD U51109WB2007PTC114264 AADCC0224E Yes 10 BANKA ENTERPRISES PVT.LTD. U70200WB1995PTC069399 AABCB2996A Yes 11 RITESH ROAD LINKS PVT.LTD. U63090WB1990PTC050172 AABCR2234H Yes 12 S K DUDHORIA HOLDINGS PVT.LTD. U17232W81990PTC048372 AADCS7341A Yes 13 SHROFF CHEMICALS PVT.LTD. U29230Wß1960PTC024890 AAECS5253N Yes 14 SANWÀRIA MARKETING PVT LTD U51900WB2009PTC132938 AAMCS7944J Yes 15 SWARAN FINANCIAL PVT.LTD U67120WB1995PTC071950 AAECS4024R Yes 16 REGO CHEMICALS PVT. LTD U24231WB2000PTC092255 AACCR1945E Yes 17 NAVIN CONSTRUCTION & CREDIT PVT.LTD U70101WB1992PTC055374 AAACN9084E Yes 18 JAINCO PROJECTS (INDIA) LTD L40300WB1991PLC053444 AAACJ7110P Yes 19 GIRDHAR TRACOM PVT.LTD. U51909WB2004PTC097788 AACCG1735D Yes 20 DISHA PAINT PVT.LTD. U24222WB1993PTC059702 AABCD1812H Yes 21 BLACKCHERRY COMMOSALE PVT. ....
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....e capital& reserves of all these 22 companies are much more than the loan given to the assessee, which is visible from the facts noted in the form of chart given above under the heading "creditworthiness". Moreover, it has also been brought to our notice that the Assessing Officer in the next assessment year i.e. A.Y. 2016-17 has accepted thirteen (13) parties out of this twenty-two (22) parties as genuine lender companies (supra) and thereafter it was brought to our notice that the Ld. CIT(Appeals) has accepted the loan obtained from one party, i.e. M/s. Sanwaria Marketing Pvt. Limited for A.Y. 2016-17 (which we will examine separately). We note that while adjudicating this issue, the Ld. CIT(Appeals) has gone through the Master Data relating to the lender companies, which were available in the ROC Websites and the Ld. CIT(Appeals) has acknowledged the fact that he has crosschecked the facts regarding the identity, creditworthiness and genuineness of the loan transaction, which fact is evident from his finding at para 15.3 (Page 18) of his impugned order; and it is noted that the Ld. CIT(Appeals) has not only discussed about the identity, creditworthiness and genuineness of the tw....
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....ty to make the aforesaid general observations. We find that the AO's case as per the assessment order for AY 2015-16 is concerned, the AO aftertaking note that the assessee has taken unsecured loan from so many lender companies, called for the details from the assessee; and from the list of the creditors/lender companies, he found that three (3) parties were controlled by entry operators. According to the AO, (1) M/s. Banka Enterprises Pvt. Ltd. was the concern of entry operator Shri Monoharlal Nangalia/Arun Nangalia. (2) M/s. Ritman Commodities Pvt. Ltd. was the concern of the entry operator Shri Ashok Kumar Jha and (3) M/s. Sanwaria Marketing Pvt. Ltd. was the concern of entry operator Shri Vijay Kumar Gupta and thereafter he reproduced their respective statements which were recorded on oath u/s. 131 of the Act by Investigation Wing [Refer pages 3 to 18 of the assessment order]. According to AO, since these three (3) lender companies are the concerns of the entry operators, he issued summons and insisted on the personal appearance of the Directors of the lender companies and failure of which prompted him to make the additions as bogus loan credits in the assessee's books which th....
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....the assessment order, we note that his statement was recorded on 03.08.2015 by the DDIT, Investigation Wing Unit. In the assessment order the AO has alleged that the entry operator Mr. Vijay Kumar Gupta's concern is M/s. Sanwaria Marketing Pvt. Ltd. It is noted from the statement of Mr. Gupta that nowhere in the statement he has named M/s. Sanwaria Marketing Pvt. Ltd. as his company for providing accommodation entries. In answer to question no. 5, Mr. Gupta has enlisted the names of various persons who were his relatives and in answer to question no. 7 he had given the names of two (2) persons who were his employees. On perusal of the information pertaining to M/s. Sanwaria Marketing Pvt. Ltd. extracted from the master data it is noted that the registered office of the creditor company was situated at 176, Jamuna Lal Bajaj Street, Kolkata-700 007 and the said company also declared that the company's books of account and other papers were maintained at 10/3, Acropolis, 1858/1, Rajdanga Main Road, Kolkata700107 and as per the company master data Shri Siddharth Kumar Podder, Shri Sanjib Kumar Podder and Shri Supradip Kumar Sharma are the directors of the creditor company since 26.07.2....
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....erusal of the statement of Shri Nangalia it reveals that the Investigation Wing was questioning him in respect of the survey conducted on M/s. Happy Bengal Promoters Ltd. and M/s. Mangalthan Properties Pvt. Ltd. It is also noted that this was in continuation to the statement recorded during the survey of Shri Sushil Kumar Podder who has stated about fifteen (15) companies created by Mr. Pramod Agarwal which has been transferred to Mr. Arun Nangalia. However, Shri Arun Nangalia has stated that Mr. Promod Agarwal has transferred only twelve (12) companies not fifteen (15) companies to him, details are given at page nos. 15 and 16 of the assessment order. From the statements of Shri Arun Nangalia, we note that nowhere the name of M/s. Banka Enterprises Pvt. Ltd. or its director's name or their relatives are found. Therefore, we wonder as to how the AO has connected Shri Nangalia with M/s. Banka Enterprises Pvt. Ltd., Therefore, the finding of the AO that M/s. Banka Enterprises Pvt. ltd. was the concern of the entry operator Shri Monoharlal Nangalia/Shri Arun Nangalia are perverse and the Ld. CIT(A) has rightly deleted the addition. And since the assessee was able to show that the asse....
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....ly overturned the decision of AO on this issue. Further, before us, the details of the unsecured loans taken by the assessee; and the interest given to them by the assessee can be seen as well as the fact that assessee company has squared up/ repaid the loan which facts are discernable from the chart below. 73. From a perusal of the chart (infra)we can see the list of lenders( total 33), their respective PAN, , loan amount, interest per annum, TDS deducted while interest is paid to lenders, loan repaid/closed F.Y, supporting documents filed etc: 74. From a perusal of the chart (supra) we note that out of the total thirty-three (33) lender companies, which had given loans to the assessee, other than the loan taken from M/s. Richmen Barter Limited shown at item number 29, all other loan amounts have been repaid which is evident from the chart. Thus we note that all the lender companies from which all the assessee has taken loan this year and also carry forwarded loan except Rs. 20,00,000/- of M/s. Richmen Barter Pvt. Limited [which does not pertain to this year and it is noted that it is the carry forwarded loan/opening loan of this year], the assessee had repaid / squared up t....
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....his assessment year, so the AO added back the closing balance of these loan parties to the tune of Rs. 4.5 crores. Further details of these lender companies can be seen from the chart below; 78. According to Ld AR, the opening balance of loan as on 01.04.2014 except for Rs. 1 crore repaid in this AY 2015-16 was through banking channel on 03.04.2014 (Refer Page 93 of Paperbook 2) , has been added back by AO. According to Ld AR, since the loan was accepted in previous year, no addition was made in this regard in previous AY 2014-15, so such addition of Rs. 4.5 crores is legally un-tenable and is bad in law. Further according to Ld AR, it is evident from Paperbook 2, that said Companies have reflected the interest income from loan and the TDS in respect thereof was duly accounted for and deposited and the parties have filed Income Tax Returns and have been duly assessed, so no addition was warranted. 79. We have heard both the parties and we note that AO made an addition of Rs. 4.5 crores andwe note that the addition of Rs. 4.5 crores was made for the loan taken by assessee from eight (8) parties (supra), which was admittedly the carry forwarded loans/opening loans of this asses....
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....assessment year, no fresh loan was taken from these three (3) parties and opening loan along with interest was repaid in this assessment year through banking channel after deducting TDS on interest. It was brought to our notice that AO had added back interest of Rs. 1,10,22,742/- paid to following parties: Sl. No. Name of company Interest (Rs.) TDS (Rs.) 1 RITMAN COMMODITIES PVT LTD 83,288 8,329 2. R.D.FANLTD 3,96,712 39,671 3. PARK COMPLEX PVT.LTD. 2,83,068 28,307 4. PAWAN PUTRA SECURITIES PVT.LTD 14,384 1,438 5. MOHIT BAKERS PYT.LTD 1,19,178 11,918 6. KUKU MERCANTILE PYT.LTD 1,66,028 16,602 7. JAGADHATRI FOOD LTD. 4,20,549 42,056 8. GULMOHAR MERCANTILE PVT. LTD. 3,86,302 38,630 9. CRESCENTHEMUM VYAPAAR PVT.LTD. 18,904 1,890 10. BANKA ENTERPRISES PVT.LTD 1,02,329 10,233 11. RITESH ROAD LINKS PVT.LTD. 55,479 5,548 12. S K DUDHORIA HOLDINGS PYT.LTD. 31233 3123 13. ....
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.... later repaid to the parties concerned through banking channel, the loan transaction is to be presumed to be genuine unless the facts noted above are found to be wrong on the basis of evidence, which is not the case of Assessing Officer or the grounds of appeal of the Revenue raised before us does not assail the same. We have already taken note of the lenders identity and creditworthiness i.e. of the twenty-two (22) lenders of this assessment year and the other eleven (11) totalling thirty-three (33) lender companies details have been discussed by the Ld. CIT(Appeals), which action we have considered and upheld the action (supra). So the question of their identity and creditworthiness cannot be doubted. So the question of disallowing interest payment on such loans on which TDS has also been duly deducted cannot be countenanced.And coming to the three(3) more parties from whom no fresh loan was obtained, we note the three parties were (i) M/s. Padmavati Vinimay Pvt. Limited, (ii) M/s PNR Complex Pvt. Limited and (iii) M/s. Monet Securities Pvt. Limited from which lender companies the assessee has taken loans of Rs. 1,00,00,000/-, Rs. 50,00,000/- and Rs. 1,00,00,000/- respectively an....
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.... Vintrade Pvt. Ltd., (iii) M/s Laxmiputra Tradecomm Pvt. Ltd., (iv) M/s Jintan Mercantile Pvt. Ltd., (v) M/s Vintrade Pvt. Ltd. and (vi) M/s Brijbhumi Commosalę Pvt. Ltd. were returned un-served by postal authority and field enquiry also yielded no result. Therefore, he noted that these companies were treated by the A.O as non-genuine for AY 2014-15. After reproducing the relevant portion of the assessment order in respect of A.Y.2014-15 on this issue and the assessee's reply in respect of it for AY 2014-15, the A.O issued Show Cause Notice to the assessee company, wherein AO observes that assessee has collected in this year (AY 2015-16) share capital with premium of Rs. 51,49,05,120/- and from the details submitted, he noted that same were paper companies. Therefore, he had issued summons u/s. 131 of the Act to the Directors of nineteen (19) parties directing them to appear before him and to prove the identity, creditworthiness and genuinity of the transaction. However, according to AO, only five (5) allottees complied with the summons and appeared before him. And since remaining fourteen (14) parties/directors did not comply, the AO issued the Show Cause Notice (herein after....
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....ector of the Department did not find these companies existing at the addresses. iii) The assessee did not take any step to produce these parties before the AO. iv) It is seen that the assessee has not paid any dividend to these investors even though the shares have been subscribed at huge premium. Nor are these investors belonging to any reputed business group. (unlike in case of loan taken by the assessee) v) Amongst the list of 14 companies, 7 companies are appearing in the listof 16794 shell companies published by various Government agencies. These companies are- a) Brijbhumi Commosale Pvt. ltd b) Waltaz Commodities Pvt. Ltd. c) Pragati Complex Advisory Pvt. Ltd. d) Newzone Vintrade Pvt. Ltd. e) Mangalkamana Pvt. Ltd. f) Jintan Mercantile Pvt. Ltd. g) Needful Projects Advisory Pvt. Ltd. It would be pertinent to mention that taking of share capital is different footing compared to taking of unsecured loan from possibly dubious sources. The burden of proof in case of Share capital is greater as in share capital case the assessee can't argue. that some genuine Investor might have rout....
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....s or gifts. The High Court in CIT v. Maithan International [2015] 375 ITR 123/231 Taxman 381/56 taxmann.com 283 (Cal.), CIT v. Active Traders (P.) Ltd. [1995] 214 ITR 583/[1993] 69 Taxman 281 (Cal.), Mimec (India) (P.) Ltd. v. Dy. CIT [2013] 353 ITR 284/216 Taxman 157 (Mag.)/35 taxmann.com 319 (Cal.) and CIT v. Nivedan Vanijya Niyojan Ltd. [2003] 263 ITR 623/130 Taxman 153 (Cal.) has specifically held that the three ingredients, viz. identity and capacity of creditor and genuineness of transaction are required to be satisfied even in case of issue of share capital by a closely held company. It shows that the intention of the legislature, as interpreted by the High Court, is always to cast duty on the assessee to prove the satisfaction of the three ingredients in case of transaction of issue of share capital by a closely held company in the same way as is in the case of transaction of loans. 6. In the case of CIT v. N.R. Portfolio (P.) Ltd. [2013] 214 Taxman 408/29 taxmann.com 291 (Delhi) wherein a similar addition under Section 68 in respect of receipt on account of share application money was set aside by the CIT and upheld by the Tribunal. The High Court restored the ord....
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....e of civil proceedings and additions are made on the basis of preponderance of probability. Theory of preponderance of probability mean that it is more likely that the share capital has been raised from dubious sources and it is more likely that the assessee's own money has been routed through these dubious companies. Assessment proceedings are in the nature of civil proceedings and it does not require proof beyond doubt. It is not a case of dacoity or murder where proof beyond doubt is required. In view of the facts enumerated above and case laws discussed above, I am convinced that the AO has rightly added the share capital and share premium to the total income of the assessee. Therefore, addition made by the A.O. Rs. 8,94,96,000/- on account of share capital money received from companies is hereby upheld." 89. Aggrieved the assessee is before us. 90. We have heard both the parties and perused the records. It is noted that assessee company received Rs. 51,49,05,120/- from nineteen (19) companies as share capital and premium in this assessment year i.e. AY 2015-16. The AO asked for the details and found that some of the companies which has subscribed for share capital ar....
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....otice u/s 133(6) of the Act to the companies at the new address provided by the assessee company and summonsissued u/s 131 of the Act was served upon them. The said companies are as follows: i) Brijbhumi Commosale Pvt. Ltd ii) Pragati Complex Advisory Pvt. Ltd iii) NewzoneVintrade Pvt. Ltd iv) Jintan Mercantile Pvt. Ltd v) Richfield Vintrade Pvt. Ltd vi) Laxmiputra Tradecomm Pvt. Ltd 91. Further it was brought to our notice that in the case of the following five (5) companies in the Assessment Year 2014-15, the Assessing Officer himself accepted the share application money along with premium received by relying on the copies of the Acknowledgement of Income Tax Return, Audited Financial Statements, Bank Statements, copy of return of share allotment filed to the ROC, Share Application form, and copy of the Board resolution of the subscriber companies. And no defect in the above document whatsoever was found by the Assessing Officer in this assessment year warranting any change in opinion of these companies. These companies are: 1) Waltaz Commodities Pvt. Ltd 2) Ojaswini Retailors Pvt. Ltd 3) Mangalka....
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.... will discuss about all the 14 share holders because we need to examine and satisfy the additional requirement of proviso to section 68 of the Act i.e, source of source. 96. The assessee before us produced the following documents to prove the identity from which we note the CIN, PAN and that they have filed their income tax return. The following chart will give these details of fourteen (14) share subscribers. 97. From the aforesaid details, we note that all the share-holders are regular income tax assessees and their respective CIN and PAN details are there. Therefore in the light of the aforesaid documents discussed, identity of share subscribers cannot be disbelieved. Coming to the creditworthiness of the shareholders, our attention was drawn to the balance sheet of the shareholders which was filed before the AO and the Ld. CIT(A). We note that their source of investment and net worth as per balance sheet as on 31.03.2015 as well as the sum invested by them in the assessee is discernible from the paperbook filed before Ld. CIT(A) which are as under: 98. So, from perusal of the above chart, we note that the assessee have brought to the notice of AO & CIT(A) that share su....
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....n the assessee company onvarious dates as follows : on 16.08.2014 Rs. 33.30 lakhs, on 29.01.2015 Rs. 4.30 lakhs, on 30.01.2015, Rs. 7.00 lakhs and on 03.02.2015Rs. 22 lakhs through banking channel. From perusal of bank statement itis evident that there was no cash deposit. Confirmation of its source is provided in Page 189 of Paper book. (ii) On perusal of the paper book, it reveals that the documents are placed at page 264 to 283 of share applicant M/s. Pragati Complex Advisory Pvt Ltd which is a Private Limited Company, and which has Permanent Account No. AAGCP0516K and CIN U74140WB2011PTC162259 and its Net-worth as on 31.03.2015 (in total)- share capital & reserve is to the tune of Rs. 7,58,63,413/- and the investment made in the assessee-company including the share premium comes to Rs. 75,99,600/-. The payment has been made through banking channel and this share applicant has made the transaction through banking channel through cheque. There is Bank statement, ITR acknowledgement and financial statement available. This share applicant regularly filed Income Tax Return (ITR) and it has filed its Bank statement. Financial statement and source of fund of share subscriber has be....
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....lakhs and on 29.01.2015Rs. 47.16 lakhs through banking channel. From perusal of bank statement it is evident that there was no cash deposit. Confirmation of its source is provided in Page 331 of Paper book. (iv) On perusal of the paper book, it reveals that the documents are placed at page 352 to 374 of share applicant M/s. NewzoneVintrade Pvt Ltd which is a Private Limited Company, and which has Permanent Account No. AADCN6885G and CIN U51909WB2011PTC163187 and its Net-worth as on 31.03.2015 (in total)- share capital & reserve is to the tune of Rs. 7,89,82,848/- and the investment made in the assessee-company including the share premium comes to Rs. 67,83,120/-. There is Bank statement, ITR acknowledgement and financial statement available. This share applicant regularly filed Income Tax Return (ITR) and it has filed its Bank statement. Financial statement and source of fund of share subscriber has been duly filed. Thus we note that the assessee had duly discharged its onus to prove the identity of the share applicants by adducing PAN as well as income-tax returns. The financial statement shows that the share applicant had enough funds to invest in the assessee-company and the ....
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....paper book, it reveals that the documents are placed at page 429 to 449 of share applicant M/s. Jintan Mercantile Pvt Ltd which is a Private Limited Company, and which has Permanent Account No. AACCJ6360P and CIN U51909WB2011PTC164209 and its Net-worth as on 31.03.2015 (in total)- share capital & reserve is to the tune of Rs. 15,78,80,606/- and the investment made in the assessee-company including the share premium comes to Rs. 67,82,400/-. There is Bank statement, ITR acknowledgement and financial statement available. This share applicant regularly filed Income Tax Return (ITR) and it has filed its Bank statement. Financial statement and source of fund of share subscriber has been duly filed. Thus we note that the assessee had duly discharged its onus to prove the identity of the share applicants by adducing PAN as well as income-tax returns. The financial statement shows that the share applicant had enough funds to invest in the assessee-company and the transaction has happened through banking channel. Since the case pertains to AY 2015-16, the share subscribers has to show the source of its fund for subscribing to the share capital/premium of the assessee company. From the bank ....
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....N U51909WB2012PTC175896 and its Net-worth as on 31.03.2015 (in total)- share capital & reserve is to the tune of Rs. 39,52,55,411/- and the investment made in the assessee-company including the share premium comes to Rs. 63,36,000/-. There is Bank statement, ITR acknowledgement and financial statement available. This share applicant regularly filed Income Tax Return (ITR) and it has filed its Bank statement. Financial statement and source of fund of share subscriber has been duly filed. Thus we note that the assessee had duly discharged its onus to prove the identity of the share applicants by adducing PAN as well as income-tax returns. The financial statement shows that the share applicant had enough funds to invest in the assessee-company and the transaction has happened through banking channel. Since the case pertains to AY 2015-16, the share subscribers has to show the source of its fund for subscribing to the share capital/premium of the assessee company. From the bank statement of M/s. Ojaswini Retailers Pvt Ltd enclosed as page no 287-290 of paper book it is clear that the share subscriber has invested Rs. 63,36,000/- in the assessee company on various dates as follows : on ....
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....he share premium comes to Rs. 78,62,400/-. There is Bank statement, ITR acknowledgement and financial statement available. This share applicant regularly filed Income Tax Return (ITR) and it has filed its Bank statement. Financial statement and source of fund of sWe subscriber has been duly filed. Thus we note that the assessee had duly discharged its onus to prove the identity of the share applicants by adducing PAN as well as income-tax returns. The financial statement shows that the share applicant had enough funds to invest in the assessee-company and the transaction has happened through banking channel. Since the case pertains to AY 2015-16, the share subscribers has to show the source of its fund for subscribing to the share capital/premium of the assessee company. From the bank statement of M/s. Needful Projects Advisory Pvt Ltd enclosed as page no 486 of paper book it is clear that the share subscriber has invested Rs. 78,62,400/- in the assessee company on various dates as follows : on 16.08.2014 Rs. 39.312 lakhs, on 04.02.2015 Rs. 10.00 lakhs and on 07.02.2015 Rs. 29.312 lakhs through banking channel. From perusal of bank statement it is evident that there was no cash dep....
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....nd of share subscriber has been duly filed. Thus we note that the assessee had duly discharged its onus to prove the identity of the share applicants by adducing PAN as well as income-tax returns. The financial statement shows that the share applicant had enough funds to invest in the assessee-company and the transaction has happened through banking channel. Since the case pertains to AY 2015-16, the share subscribers has to show the source of its fund for subscribing to the share capital/premium of the assessee company. From the bank statement of M/s. KA Vanijya Pvt Ltd enclosed as page no 260-261 of paper book it is clear that the share subscriber has invested Rs. 25,74,000/- in the assessee company on various dates as follows : on 22.08.2014 Rs. 12.87 lakhs and on 17.01.2015Rs. 12.87 lakhs through banking channel. From perusal of bank statement it is evident that there was no cash deposit. Confirmation of its source is provided in Page 230 of Paper book. (xiii) On perusal of the paper book, it reveals that the documents are placed at page 333 to 351 of share applicant M/s. Ontime Securities Pvt Ltd which is a Private Limited Company, and which has Permanent Account No. AABC05....
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....t in the assessee-company and the transaction has happened through banking channel. Since the case pertains to AY 2015-16, the share subscribers has to show the source of its fund for subscribing to the share capital/premium of the assessee company. From the bank statement of M/s. BlueSky Sales Pvt Ltd enclosed as page no 335-336 of paper book it is clear that the share subscriber has invested Rs. 38,57,040/- in the assessee company on various dates as follows : on 18.08.2014 Rs. 19.285 lakhs and on 10.03.2015 Rs. 19.285 lakhs through banking channel. From perusal of bank statement it is evident that there was no cash deposit. Confirmation of its source is provided in Page 333-334 of Paper book. 99. From the aforesaid facts discussed, we are of the view that assessee has discharged its onus casted upon it to prima facie prove the identity, creditworthiness and genuineness of the share-subscribers and the share capital and premium collected by it. And the additional requirement of source of source of the share capital and premium has also been brought to the notice of lower authorities, including the confirmation is there on record. Therefore, the addition u/s 68 of the Act was n....
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....vt. Ltd., 4) M/s. Tigerhill Vanijya Pvt. Ltd 5) M/s. Ritman Commodities Pvt. Ltd., 6) M/s. Sanwaria Marketing Pvt. Ltd., 7) M/s. Gonedawala Developers Pvt. Ltd., 8) M/s. Dhaaviradni S:ppliers Pvt. Ltd., 9) M/s. Brijwasi Vininay Pvt. Ltd. and 10) M/s. Anjani Tradelinks Pvt. Ltd. 103. However, according to the AO in response to the notices u/s 131 of the Act compliances were made only by two (2) companies and the loans received from these companies were accepted by the AO. In respect of the remaining eight (8) companies, the AO drew adverse inference primarily because the notices u/s 131 remained uncomplied with. According to the AO the failure of the loan creditors/directors to appear before him and confirm the transactions was sufficient reason to hold that the amounts of ICDs received were not genuine and assessable as income u/s 68 of the Act.The alleged transactions of unsecured loan and interest expenses of the aforesaid parties on which the AO made the addition are as under: Sl. No. Name of the party Amount of received during year Loan the Interest paid during F.Y.2015-16 ....
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....ny Master Data B. Trimurti Vincom Pvt. Ltd. i) Copy of I.T. Acknowledgement For AY 2016-17 ii) Copy of the Audited Accounts for AY 2016-17 iii) Copy of the Bank Statement Depicting ICD Transactions iv) Account confirmation for FY 2015-16, 2016-17 v) Company Master Data C. Top Class Logistics Pvt. Ltd. i) Copy of I.T. Acknowledgement For AY 2016-17 ii) Copy of the Audited Accounts for AY 2016-17 iii) Copy of the Bank Statement Depicting ICD Transactions iv) Account confirmation for FY 2015-16, 2016-17 & 2017-18 v) Company Master Data D. Sanwaria Marketing Pvt. Ltd. i) Copy of letter dated 13.12.2018 submitted to IT Department Directly ii) Copy of the Audited Accounts for AY 2016-17 iii) Account confirmation for FY 2015-16, 2016-17 & 2017-18 iv) Company Master Data E. Gonedawala Developers Pvt. Ltd. i) Copy of the Audited Accounts for AY 2016-17 ii) Company Master Data F. Dhanvirdhi Suppliers Pvt. Ltd. i) Copy of letter dated 27.12.2018 submitted to I T Department Directly ii) Cop....
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....O while seeking remand report in this case. In this case there were 127 entities from whom loan amounting Rs. 37.51 crore was taken by the assessee during the year under consideration. Out of these 127 parties AO chose to verify the following eight (08) parties : i) M/s. Ujjwal Cloth Marketing Pvt. Ltd., ii) M/s. Trimurti Vincom Pvt. Ltd., iii) M/s. Top Class Logistic Pvt. Ltd., iv) M/s. Sanwaria Marketing Pvt. Ltd., v) M/s. Gonedawala Developers Pvt. Ltd, vi) M/s. Dhanvridhi Suppliers Pvt. Ltd., vii) M/s. Brijwasi Vinimay Pvt. Ltd., viii) M/s. Anjani Tradelinks Pvt. Ltd. The parties were selected alleging that the entities belong to a known entry operators of Kolkata and along with the name of the company, name of the entry operator was also given. The AO has also copied statement given by these entry operators to Investigation Wing, Kolkata. On verification, it is noted that: i) The AO simply reproduced the contents of some statements recorded before the Investigation Wing Kolkata without disclosing the context and relevance. The AO has not reproduced any part of the statement in wh....
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....appears to be a shell company. For example, Dhanvriddhi Suppliers Pvt. Ltd. is being assesseed in, the same PCIT charge and duly assesseed for Income taxes. Similarly, Sanwaria Marketing Pvt. Ltd. was found to be not a shell company by my predecessor while deciding the appeal of the assessee company for A.Y. 2015-16. The other six companies were also found to be having sufficient resources to provide loan to the assessee company. The details in this regard has already been in the appellate order. In view of the above, it is seen that the only criteria adopted by the AO seems to be the physical presence of the Directors of these donor companies rather than the strength of their Financial Statements. It is to be mentioned that the section 68 requires assessee to furnish the explanation. As per various judicial pronouncements, this explanation must satisfy the three basic criteria of identity, genuineness and creditworthiness. Once assessee explains these three ingredients before the AO, it is for AO to specify as what is lacking in the explanation given by the assessee arid make further enquiries and bring cogent material to brush aside the explanation given by the assessee ....
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.... Therefore, the additions cannot be sustained. As established above, it can be seen that addition has been made in a haphazard and in an ad hoc manner and without any basis. Therefore, the addition made by the AO are not on the basis of merit but in a whimsical manner. The assessing officer, has placed reliance on the decision of jurisdictional High Court in the case of CIT versus Precision Finance Private limited 208 ITR 463 wherein the honorable High Court has held that: "it is for the assessee to prove the identity of the creditors, their creditworthiness and the genuineness of the transactions. The enquiry of the ITO revealed that either the assessee was not traceable or there was no such file...creditworthiness''. In this case however the facts are totally different. The assessee has submitted relevant documents however no field enquiry was conducted by the AO and therefore the AO could not have concluded that the companies was not traceable. Therefore, the ratio of above-mentioned case cannot be applied to the present appeal. 106. Thereafter the Ld. CIT(A) while giving relief to the assessee has made the following findings of fact in respect of e....
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....ed interest income of Rs. 92,20,817/- which inter-alia included interest of Rs. 60,109/- which was payable by the assessee. Your goodself will therefore note that besides the interest income earned from the appellant Ujjwal Cloth Marketing Pvt Ltd had declared interest income in excess of Rs. 91 Lacs from the other loans as well. It is also evident that in respect of such interest income the taxes were deducted by the Payers and therefore the creditor company had claimed refund of Rs. 8,57,130/- out of TDS. 2. Trimurti Vincom Pvt. Ltd: The assessee had obtained loan of Rs. 15,00,000/- on 13.01.2016. This loan was repaid in October 2016. Copies of the loan confirmations are enclosed. The said Company's Regd. Office is situated at 318, Hossainpur, Tiljala, IKolkata700 107. As per the Company Master Data Company's current status is active. The said Company is assesseed to tax under PAN: AADCT6881G. For the A.Y. 2016-17 it filed Return of income on 08.10.2016 and copy of the I.T Acknowledge is enclosed. The loan of Rs. 15,00,000/- was paid by the said Company from its Bank A/c No. 0262102000011972 by way of RTGS. Copy of the Bank Statement is enclosed. From t....
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....des the interest received from the assessee; M/s. Top Class Logistics Pvt. Ltd earned interest in excess of Rs. 61 Lacs from other Parties and the same was accounted in the books of the creditor. 4. Sanwaria Marketing Pvt. Ltd: M/s. Sanwaria Marketing Pvt. Ltd was a Company with whom the appellant had transactions in the earlier year as well. The opening outstanding balance due to M/s. Sanwaria Marketing Pvt. Ltd was Rs.l Crore. M/s. Sanwaria Marketing Pvt. Ltd is having its Regd. Office at 176, Jamuna Lai Bajaj Street, Kolkata -700007. Besides it is having Administrative Office at 10/3, Acropolis, 1858/1, Rajdanga Main Road, Kolkata. Your goodself will note that the opening balance due to M/s. Sanwaria Marketing Pvt. Ltd was Rs. 1 Crore which was fully repaid on 02.04.2015. Thereafter the said Company granted following ICDs during F.Y. 2015-16: Date Amount 24.08.2015 Rs. 1,50,00,000/- 21.12.2015 Rs. 1,00,00,000/- 22.12.2015 Rs. 1,00,00,000/- 16.02.2016 Rs. 1,00,00,000/- The loan of Rs. 150 Lacs accepted on 24.08.2015 was fully repaid along with interest on 18.09.2015. The loan taken on 21.12.2015 was refunded on the same dat....
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....a Marketing Pvt. Ltd. The CIT (A) after appreciating the documents 6s evidences brought on record deleted the addition made u/s 68 vide his appellate order dated 16.08.2018 in Appeal No. 14/CIT(A)-14/2017-18. Copy of the said appellate order is enclosed. You will thus note that the identity and creditworthiness of M/s. Sanwaria Marketing Pvt. Ltd was accepted by the Ld. CIT(A) in the appellant's own case in the immediately preceding year. In the circumstances, there was no reason for the AO to doubt the Company's transaction with the same party in A.Y. 2016-17. 5. Gonedawala Developers Pvt. Ltd: The appellant had taken loan of Rs. 50,00,000/- from this creditor. Although the AO has alleged that the creditor was managed by an entry operator by the name Prawesh Beria, his statement was not quoted by the AO. The appellant submits that the AO's allegation that the creditor was controlled by entry operator is factually incorrect in as much as the said Company belongs to Diwansons Group which is one of the reputed Jewellers of Kolkata. For your kind perusal and record, we enclose herewith the information extracted from Ministry of Corporate Affairs Website from which it....
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....6Q declaring total income of Rs. 20,61,396/-. Although in the impugned order the AO claimed that the creditor was controlled by one Mr. Shankar Khaitan; no tangible material including statement of Mr. Khaitan was brought on record by the AO to prove his allegation that creditor Company was managed by the said Entry Operator. Be the same as it may, for your kind perusal and record, we enclose herewith copy of the information extracted from Ministry of Corporate Affairs Website from which it will be evident that the creditor company is managed by its Directors, Mr. Sourabh Mukherjee & Mr. Debashis Roy. For your kind perusal and record, we enclose herewith copy of the audited Balance Sheet of M/s. Dhanvridhi Suppliers Pvt. Ltd from which it will be noted that the capital of the creditor company remained same at Rs. 2,15,65,750/-. Company's net owned funds in the form of Capital & Reserves as on 31.03.2016 were Rs. 31,58,92,818/-. During the relevant year the said Company had granted loans & advances to the tune of Rs. 13,17,73,025/- and this did not include loan to the appellant since it was fully refunded prior to 31.03.2016. Your goodself will also note that in respect of loans gran....
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....ly to the appellant. 8. Anjani Tradelinks Pvt. Ltd : In this case loan of Rs. 25,00,000/- was obtained by the appellant on 17.02.2016 and interest paid for the F.Y.2015-16 was Rs. 30,137/-. This loan together with accrued interest was fully paid by the assessee in F.Y. 2017-18. Copies of the Account Confirmations for the F.Ys 2015-16 to 2017-18 are enclosed. The said loan was paid from the A/c No. 0060102000103848 and the relevant Bank Statement of the creditor is enclosed for ready reference and record. The creditor company is regularly assesseed to tax under PAN: AAJCA0590K. For the A.Y. 2016-17 it had filed its return of income on 08.10.2016. Although the Regd. Office of the assessee is presently located at 318, Hossainpur, Tiljala, Kolkata and Company's Office was earlier located at 52, Weston Street, Bow Bazar, Kolkata. For your kind perusal and record, we enclose herewith Audited Balance Sheet of the creditor company from which it will be observed that the paid up capital of the assessee during the relevant year continued to remain at Rs. 21,22,000/-. The Reserves & Surplus of the creditor was Rs. 20,01,71,694/-. It had granted loans 8b advances to the exten....
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....reditor possessed substantial resources of their own. Compared with the total investible funds available with each loan creditor, the loans advanced by them to the appellant during the year was not significant. For your perusal we are enumerating the fund position of each loan creditor and the loans advanced by them. The comparative data set out above will clearly establish that each of the bodies corporate had their own resources which were several times more than the loan advanced to the appellant company. It is also material to point out that each of the Company who had granted 1CD to the appellant; reported in the respective P/L A/c substantial interest income from the business of granting loans. Interest income as accounted by the creditors clearly showed that their interest earnings from Loans granted to parties other than assessee were substantially more. These facts therefore showed that these Companies were actively engaged in business of granting loans & earned substantial interest income. In the circumstances none of the company could be said to be shell Company. Following salient features emerge on this issue of unsecured loan- i) It can be seen that m....
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....ed the records. We note that the ground no. (i), (ii), (iv) to (xiii) and (xv) to (xviii) of the appeal are directed against the Ld. CIT(A) deleting the addition made u/s 68 of the Act of Rs. 11.40 crores and disallowance of interest paid on these loans totaling to Rs. 31.99 Lakhs. We also note that during the year under consideration the assessee has taken loan from one hundred and twenty seven (127) parties and paid interest on the said loan. In the course of assessment proceedings the assessee was called upon to furnish details of unsecured inter-corporate deposits (ICD) accepted by it during the year. In compliance, the assessee furnished the details in the format prescribed by the AO. However, the AO relied on the statements of alleged five (5) entry operators which were recorded by the Investigating Wing, Kolkata namely Mr. Jivendra Mishra, Mr. Pranav Kumar Modi, Mr. Ankit Bagreee, Mr. Vijay Kumar Gupta and Mr. Akash Agarwal and opined that some of the creditor companies were paper companies allegedly managed and controlled by these entry operators. The AO observed that in view of the statements of entry operators with certain lender companies, he had issued notices to ten (1....
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....ut the names of these purported Companies and corresponding names of the alleged entry operators and the said Chart is given below for ready reference : 110. Thereafter on Pages 4 to 16 of the assessment order, the AO extracted statements of alleged (5) entry operators, namely Mr. Jivendra Mishra, Mr. Pranaw Kumar Modi, Mr. Ankit Bagri, Mr. Vijay Kumar Gupta & Mr. Akash Agarwal and thereafter having selectively extracted part of the statements of those five (5) persons, the AO proceeded to make additions of Rs. 11.40 crores being the Loans/ICDs received by the assessee from eight(8) Bodies Corporate named (supra) in the chart. According to Ld. A.R no person properly instructed in law would have drawn inferences against the assessee on the basis of the statements as appearing in the assessment order. According to Ld. A.R the material on record would go on to show that before the statements of these entry operators were used in as evidence against the assessee, the AO himself never examined any of these persons personally so as to verify the assessee's transactions with the loan creditor companies. According to Ld. A.R, the AO erred in relying on the statement (selective extracts)....
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....managed from Offices located at Room No. 311, 85, N. S. Road, Kolkata - 700001, 18A Rama Kanta Bose Street, Kolkata - 700003 and Room No. 757, 25, Strand Road, Kolkata. Thus according to Ld. A.R it can be noted that the Regd. Office of Brijwasi Vinimay Pvt. Ltd had no connection whatsoever with any of the places from where Companies controlled and managed by Mr. Mishra were having Offices. At page-6 of the assessment order Mr. Mishrahas admitted that Mr. Murli Kumar Mishra, Mr. Gopal Maity, Mr. Mithilesh Kumar Mishra, Mr. Tara Kant Chowdhury, Mr. Rajesh Kumar Jha, Mr. Biswanath Jha, Mr. Bishwanath Maity were either related to him or his employees and acted as dummy Directors of various paper companies controlled by him. The MCA Master Data of M/s Brijwasi Vinimay Pvt. Ltd however demonstrates that with effect from 16.04.2010 Mr. Pawan Kumar Agarwal & Mr. Punit Madhogaria were Directors of Brijwasi Vinimay Pvt. Ltd, and none of the persons enumerated in the Answer to Question No. 11 find mention as Directors of M/s Brijwasi Vinimay Pvt. Ltd. So in this back ground when one analyses the statement of Mr. Jivendra Mishra as extracted in the assessmentorder it is evident that nowhere he....
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....were engaged in providing accommodation entries. Thus we find having regard to the information as is available from the extracted statement of Mr Modi vis-a-vis the information available in the Company Master Data,the AO could have alleged that the assessee had availed accommodation entry in the form of ICD from M/s Trimurti Vincom Pvt. Ltd.Therefore we note that apparently there was no material/oral evidence available in the statement of Mr. Modi, on the basis of which any adverse inference could have been drawn against M/s Trimurti Vincom Pvt. Ltd. or the assessee,so the AO erred in relying on the statement of Mr. Modi to draw adverse inference against M/sTrimurti Vincom Pvt. Ltd. 113. Coming next to the statement of Mr. Ankit Bagri whose statement has been extracted by the AO at Pages 9 & 10 it is noted that AO has alleged that he was controlling & managing the affairs of M/s. Ujjwal Cloth Marketing Pvt. Ltd from whom the assessee had received loan of Rs. 50,00,000/- in the month of February 2016. From a perusal of the Page-9 of the assessment order, it will be noted that statement of Mr. Bagri was recorded by DDIT (Inv), Unit-IV(2) Kolkata on 03.07.2014. Thus, it is noted th....
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....r. It is noted that the Statement of Mr. Gupta was recorded in August 2015 i.e. the same year in which the loans were availed by the assessee from M/s Sawaria Marketting Pvt. Ltd. On careful perusal of the statement of Mr. Gupta, it is evident that nowhere in the statement recorded before the DDIT (Inv) he had named M/ s. Sawaria Marketing Pvt. Ltd to be a Company controlled & managed by him for providing accommodation entries. In Answer to Question No. 5, Mr. Gupta had enlisted names of various persons who were his relatives and in Answer to Question No. 7, he had given names of 2 persons, who were his employees. On perusal of information pertaining to M/s Sawaria Marketing Pvt. Ltd extracted from Master Company Data, it is noted that the Registered Office of the creditor company was situated at 176, Jamuna Lai Bajaj Street, Kolkata-700007. The said company also declared that the Company's books of account and other papers were maintained at 10/3, Acropolis, 1858/1, Rajdanga Main Road, Kolkata - 700107. As per Company Master Data, Sri Siddharth Kumar Poddar, Sri Sandip Kumar Poddar & Sri Supradip Kumar Sharma are the Directors of the creditor company since 26.07.2012. In contr....
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....Kestopur, Kolkata and his office premises were at Room No. Ill, 1st Floor, 23B, Netaji Subhas Road, Kolkata. It is noted from a perusal of the assessment order that the AO has selectively extracted some of the Questions & Answers from Mr. Agarwal's statement at Pages 15 & 16 and in his answers to DDIT's question he had admitted of earning commission from accommodation entries provided by him. However from a perusal of the statement it is relevant to note that nowhere in the selective extracted statement he had neither admitted of providing accommodation entries to the assessee nor he had admitted AO's claim that M/s Top Class Logistics Pvt. Ltd was a Company controlled & managed by him. From the Company Master Data, it is noted that the Registered Office of the creditor Company is situated at Narayani Building, 27, Braboume Road, Kolkata-700001 and Directors of the Company are Mr. Suman Barasia & Mr. Sushil Kumar Agarwal with whom no relation of Mr. Akash Agarwal was brought out by the AO.So we note that the AO erred in relying on the statement of Mr. Akash Agarwal to draw adverse inference against M/s. Top Class Logistics Pvt. Ltd 116. Thus from the foregoing analysis of the st....
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....ure to confirm the transactions were sufficient reason to hold that the amounts of ICDs received were not genuine & assessable as income u/s 68 of the Act. According to AO the assessee was given more than twenty three (23) days & this was sufficient opportunity for producing the relevant evidence. Since the assessee failed to produce the Parties for AO's verification, drew adverse inference against the assessee company.In this regard, Ld. A.R drew our attention to the assessment order from which it is noted that the assessment proceedings were initiated by issue of notice u/s 143(2) in the month of July 2017. Thereafter notices u/s 142(1) were issued in May 2018, October 2018 & November 2018 respectively. And from the assessment order, it is noted that assessee complied with the notices & the hearing of the assessment was conducted by the AO on 04.08.2017, 10.08.2017, 12.06.2018, 12.10.2018, 20.11.2018 and lastly on 26.12.2018. It is noted that even though the assessment proceedings commenced in August 2017, the notices to unsecured loan creditors were issued for the first time on 06.12.2018 while the assessment was getting time barred on 31.12.2018. This action of AO according to ....
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....uineness of the transaction. Similarly, it is noted in respect of loan from M/s Dhanvridhi Suppliers Pvt. Ltd the entire loan ofRs. 5 Crores was fully repaid along with interest during F.Y. 2015-16 itself. Similarly, the loan of Rs. 50 Lacs was fully repaid to M/s. Gonedawala Developers Pvt. Ltd along with interest. It was therefore according to Ld. A.R, the AO was un-justified to make the addition simply based on suspicion and conjecture. The Ld. A.R submits that if one scrutinizes the audited accounts of each of the loan creditor then it would be evident that each creditor possessed substantial resources of their own when compared with the total investible funds available with each loan creditor, and the loans advanced by them to the assessee company during the year was not significant. For our perusal the Ld. A.R enumerated the fund position of each loan creditor and the loans advanced by them which is reproduced as under: Name of Company Investible own funds available as per Financials Fresh Loan during the year Interest (Rs) TDS(Rs.) Ujjwal Cloth Marketing Pvt. Ltd. 14,56,93,873 50,00,000 60,109 6,011 Trimurti Vincom Pvt. Ltd. ....
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....discharge the onus of the nature & source of the loan it took from the lender companies [i.e. fresh loans received during the year]. It is noted that all the loan creditors were regularly assessed to tax. The net owned funds of each loan creditor was several times more than the loans advanced by them to the assessee. The assessee had therefore discharged the primary onus to prove the identity of the shareholders, creditworthiness of the shareholders & genuineness of the transactions as contemplated by Section 68 of the Act. In the circumstances the AO could not have arbitrarily and in a whimsical manner could not havedrawn adverse inference against eight (8) loan creditors. 124. It is noted that the AO has made sweeping and generalized imputations while justifying additionwhich is not borne out from the documents and evidences on record. The AO has alleged that the assessee had failed to establish the identity of the loan creditors & genuineness of the transactions. According to AO furnishing of corporate information pertaining to loan creditors, bank statements, annual accounts and other documents cannot be treated as justifiable evidence, and hence the assessee was alleged to ....
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....supra). Therefore in the facts and circumstances the Ld CIT(A) rightly deleted the addition of Rs. 11,40,00,000/- and further, the disallowance of interest of Rs. 31,99,351/- was also unjustified, since the assessee had paid interest to each loan creditor after duly deducting taxes u/s 194A in respect of such interest and the loan creditors had disclosed interest income in their respective tax returns,thereforein the facts and circumstances the Ld CIT(A) rightly deleted the addition of Rs. 31,99,351/- and we confirm the same. The Revenue appeal on this issue fails. 126. In ground nos. (iii) & (iv) the Revenue is aggrieved against the deletion of addition of Rs. 2,57,56,247/- made u/s 40a(i) on account of payment of sales commission. 127. The AO from perusal of the Tax audit Report found that the assessee has paid sales commission of Rs. 2,57,56,247/- from which no deduction of TDS was made and therefore disallowance of sales commission was made by him. On Appeal the Ld CIT(A) deleted the disallowance by finding that sales commission was paid by assessee to the non-resident agents in foreign currency for the services rendered outside India; and the assessee has provided latest....
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.... and not tax residents of India. It is material to submit that the AO has not brought on record any material whatsoever to prove that any part of the services were rendered by the Agents in India so as to attract tax liability in their hands in India. It is settled legal proposition that before provisions of Sec. 195 are invoked by AO he has to demonstrate that the amount paid to the Nonresident is legally chargeable to tax in India. If however the amount is held to be not chargeable to tax in India, then the assessee has no liability to deduct tax and consequently therefore no disallowance under 40(a)(i) is called for. In the present case the commission was paid to foreign agents solely for obtaining export orders from Parties located outside India. The services in connection with marketing of the Company's products and to secure orders were entirely performed outside India. The marketing services rendered by the foreign agents did not have any connection with territory of India nor any part of the services were performed in or from India. As such, the commission income entirely accrued for the services performed outside India and the commission was also paid in foreign curren....
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....s confirmed by the Ld. CIT (A) u/s 40(a)(i) of the Act is unsustainable. Accordingly, it is directed to be deleted. This ground of appeal of assessee is allowed. Similar issue was considered by the ITAT Kolkata in yet another case of M/s. Lux Industries Ltd in ITA No. 1144 & 1145/Kol/2018 dated 27.06.2018. In. this case alsothe assessee paid foreign export commission in respect of export of its hosiery products. In respect of export orders secured by the foreign agents outside India export sales commission @5% was paid on the value of export orders secured. The AO disallowed the export commission on the ground that no tax was deducted at source. The Jurisdictional ITAT relying on the decision of the Co-ordinate Bench at Ahmedabad in the case of DCIT Vs Welspun Corporation Ltd (I.T.A. No. 48/Ahd/2015) dated 31.03.2017 deleted the said disallowance. In the decided case of Ahmedabad Bench the Tribunal held as follows: "In the instant case admittedly the non-resident agents were only procuring orders abroad and following up payments with the buyers. No other services are rendered other than above. Sourcing orders abroad, for which payments have been made directly to t....
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.... in the order of the Ld. CIT (A). The same should be confirmed. It is prayed that the ground no. (iii) & (xiv) of the appeal of revenue be dismissed. 23. In view of the foregoing submissions it is prayed that the order of the Ld. CIT (A) be confirmed and the appeal of the Revenue be dismissed" 129. We have heard both the parties and perused the records. We note that AO on perusal of the tax audit report found that the assessee has paid sales commission of Rs. 2,57,56,247/-; and further he noted that the assessee has not deducted TDS on the sales commission paid by it. Therefore, as per him, since the assessee has not deducted tax u/s 195 of the Act, he disallowed the said expense in terms of section 40(a)(i) of the Act. On appeal, the Ld. CIT(A) deleted the addition, by citing the decision of the Tribunal in JCIT vs. Omprocess Technology India Pvt. Ltd. (supra) as well as the Hon'ble Delhi High Court decision in the case of CIT vs. EON Technology (supra) and Hon'ble Madras High Court decision in the case of CIT vs. Faizen Shoes Pvt. Ltd. (supra). We note that in this case the assessee had incurred expenditure on account of sales commission it had paid in foreign currenc....
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....D. AARCP52911. 30,00,000 4 PAWAN PUTRA SECURITIES PVT.LTD. AABCK1563C 25,00,000 2014-15 Cheque/R Tas N.A N.A 2,83,068 28,307 30,00,000 2017-18 Cheque/R TGS 7,36,473 Ledger, TDS Certificate, Assessment order Ledger, TDS Certificate, 73,649 Assessment order Ledger, TDS Certificate, 14,384 1,438 25,00,000 2019-20 Cheque/R TGS 19,59,931 1,95,996 Assessment order is MOHIT BAKERS PVT.LTD. AAFCM9864J 25,00,000 25,00,000 1,19,178 11,918 Ledger, TDS 2014-15 Cheque/R TGS N.A N.A Certificate, Assessment order 6 KUKU MERCANTILES PVT.LTD. AABCK3311L 30,00,000 30,00,000 1,66,028 16,602 2014-15 Cheque/R TGS N.A N.A 7 JAGADHATRI FOOD LTD. AAACJ6899F 50,00,000 50,00,000 4,20,549 42,056 GULMOHAR MERCANTILE PVT. 8 LTD. AACCO5361R 1,00,00,000 2014-15 Cheque/R TOS N.A $ N.A Ledger, TDS Certificate, Assessment order Ledger, TDS Certificate, Assessment order Ledger, TDS Certificate, 3,86,302 38,630 1,00,00,000 2015-....
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....PAINT PVT.LTD. AABCD1812H 1,00,00,000 22 Certificate, Assessment order Ledger, TDB Certificate, 3,54,872 Assessment. order Ledger, TDS Certificate, Assessment order Ledger, TDS 2014-15 Cheque/R TGS N.A N.A Certificate, 73,973 7,397 1,00,00,000 2017-2018 Cheque/R Assessment 22,46,575 2,24,659 TOS BLACKCHERRY COMMOSALE PVT.LTD. AARCB74880 30,00,000 2,18,959 21,896 30,00,000 2016-2017 Cheque/R Tas 5,36,547 53,655 Ledger, TDS Certificate, Assessment BEST LUCK SECURITIES PVT.LTD. AABCB9026F TOTAL (A) OLYMPIA CREDIT & MERCANTIB PVT.LTD. AAACO2805J 50,00,000 20,00,000 1,88,712 18,871 20,00,000 2015-2016 Cheque/R 2,11,069 TOS 12,95,00,000 43,92,881 6,00,000 6,000 50,00,000 2015-2016 Cheque/R 4,80,000 Ledger, TDS Certificate, 21,107 Assessment Ledger, TDS Certificate, 48,000 Assessment order Name PAN Opening Balance 01/4/14 Loan Repaid Loan Received During Year to Party During Year Interest during the Year TDS Closing Balance as on 31/03/15....
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....L DEEP RESOURCES LTD. U67120WB1991PLC051266 AABCN1077A Yes 3 AMEXCO INVESTMENTS PVT.LTD. U65992WB1979PTC032021 AAFCA8435P Yes 4 SANWARIA MARKETING PVT.LTD. U51900WB2009PTC132938 AAMCS7944J Yes 5 SADHANA TRADE & CREDIT PVT.LTD. U51909WB1991PTC051307 AADCS9461R 6 TROPEX SUPPLIERS PVT.LTD. 7 RICHIMEN BARTER PVT.LTD. 8 NARMADA TREXIM PVT.LTD. U51109WB1994PTC061937 U51109WB1997PTC083978 U51109WB1994PTC061888 AABCT1459N Yes AABCR2219Q Yes AABCN6495N Yes Document 4 S1 Name of Company no Net Worth (Rs) Op balance of Loan as Amt repaid on 01.04.2014 (Rs) Closing balance of Loan as on 31.03.2015 (Rs) 1 6,04,84,006 OLYMPIA CREDIT & 50,00,000 50,00,000 MERCANTIE PVT.LTD. 2 NIRMAL DEEP RESOURCES 8,49,18,000 50,00,000 50,00,000 LTD. 3 AMEXCO INVESTMENTS P LTD. 3,33,60,728 2,00,00,000 2,00,00,000 4 11,25,00,000 2,00,00,000 1,00,00,000 1,00,00,000 SANWARIA MARKETING P.LTD. 5 SADHANA TRADE & CREDIT P 13,03,97,829 10,00,000 10,00,000 Document 5 LTD. 6 TROPEX SUPPLIE....
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....ce Sheet, Assessment order Extract of Balance Sheet, Assessment order Extract of Balance Sheet, Assessment order Extract of Balance Sheet, Assessment order Extract of Balance Sheet, Assessment order Extract of Balance Sheet, Assessment order Extract of Balance Sheet, Assessment order Extract of Balance Sheet, Assessment order Document 7 ITR filed for AY 2015-16 Sl No Name of the Party CIN PAN 1 Brijbhumi Commosale Pvt Ltd 2 Pragati Complex Advisory Pvt Ltd 3 Richifield Vintrade Pvt Ltd U51909WB2011PTC163205 AAECB5701C yes 4 Newzone Vintrade Pvt Ltd U74140WB2011PTC162259 U51909WB2011PTC163139 U51909WB2011PTC163187 AAGCP0516K yes AAFCR3199H yes AADCN6885G yes 5 LaxmipurtraTradecomm Pvt Ltd 6 Jintan Mercantile Pvt Ltd U51909WB2011PTC158663 U51909WB2011PTC164209 AACCL0187C yes AACCJ6360P yes 7 Waltaz Commodities Pvt Ltd U74999WB2012PTC174119 AABCW2145G yes 8 Ojaswini Retailers Pvt Ltd U51909WB2012PTC175896 AABCO6308D yes 9 Mangalkamna Merchants Pvt Ltd U51909WB2011PTC163124 AAHCM2337E yes 10 Needful Projects Advisory Pvt ....
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....ancials 14,56,93,873 Fresh Loan during the year 50,00,000 15,39,44,741 15,00,000 12,48,19,072 25,00,000 12,05,79,254 4,50,00,000 8,56,27,760 50,00,000 31,58,92,818 5,00,00,000 12,64,13,868 25,00,000 20,22,89,040 127,52,60,426 11,40,00,000 25,00,000 Document 11 SNName ANJANI TRADELINKS PVT 1 LTD BRIJWASI 2 VINIMAY PVT LTD DHANVIRDHI SUPPLIERS 3 LTD GONEDAWALA DEVELOPER 4 PRIVATE LTD SANWARIA MARKETING PVT Openning Balance 01/4/15 Loan Returned to Party During Year Loan Received During Year 30,137 25,00,000 Interest Closing during the Balance as on Year 31/03/16 30,137 25,00,000 1,480 25,00,000 14,795 25,13,315 5,18,89,344 5,00,00,000 18,89,344 55,95,068 50,00,000 5,95,068 PVT 5 LTD 1,00,00,000 3,51,42,741 TOP CLASS LOGISTICS PVT 6 LTD TRIMURTI VINCOM 7 PVT LTD UJJWAL MARKETING CLOTH PVT 8 LTD Total 4,50,00,000 5,02,740 2,03,59,999 6,831 25,00,000 68,306 25,61,475 38,852 15,00,000 38,852 15,00,000 60,109 50,00,000 ....