TaxTMI 
TaxTMI 
2021 (10) TMI 227
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....essee read as under: - UNEXPLAINED CASH CREDIT U/S. 68 ; 1. The Ld CIT(A) erred in upholding the order of Assessing officer in confirming the addition of Rs. 3,47,18,000/- as unexplained cash credit u/s. 68 in respect of amount received during the year as share capital and premium without appreciating that the assessee had discharge its onus in terms of section 68 of the Act by furnishing necessary evidence and explanation to substantiate the genuineness of the transaction, identity and creditworthiness of the shareholders. 2. The Ld CIT(A) failed to appreciate there is no question of treating premium as income. There is no charging provision to tax a capital account transaction in respect of issue of share at a premium therefore the addition of Rs. 3,47,18,000/- on account of unexplained cash credit u/s. 68 being unwarranted, illegal, bad in law be deleted. 3. The Ld CIT(A) erred in confirming the addition of Rs. 1,00,000/- as unexplained cash credit u/s. 68 on the presumption that assessee must have paid commission @ 2% on Rs. 50,00,000/-, without appreciating that nothing incriminating was found against the assessee. As evident, the assesse....
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.... directors, employees etc. of the assessee company. Upon perusal of these documents, it was concluded that these applicants lacked creditworthiness and on the basis of said belief, the case was reopened. 4.2 During the course of re-assessment proceedings, notice u/s 142(1) was issued to the assessee calling for requisite details of the share- applicants along with documentary evidences. The assessee, vide reply dated 23/12/2015, provided the details of share-applicants along with their respective addresses and the amount received from each of them during the year. It was also submitted that this was the first year of the assessee company. Vide another reply dated 18/01/2016, the assessee furnished documentary evidences in the form of Share Application Form, PAN Card, confirmation from share applicants regarding investment, relevant pages of bank passbook / statement, Income Tax Acknowledgement for the year, Statement of Income, Profit & Loss A/c & Balance Sheet as on 31/03/2009 and letter of allotment with respect to non-corporate share applicants whereas in case of corporate share applicants, in addition, the copies of Board Resolution, Memorandum and Articles of Association wa....
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.... them in support of the fact that their net-worth was sufficient enough to make the investment in the assessee company. The assessee's various replies, documentary evidences as well as net-worth statements of each of the share applicants has been placed on page nos.49 to 468 of the paper-book. We have perused all these documents. 4.5 However, rejecting all these submissions, Ld. AO after going through various documentary evidences as well as bank statement of each of the share applicants, alleged that the receipts shown by the assessee were accommodation entry in the garb of share capital and share premium and the share applicants did not have capacity to make the investment. It was also alleged that the assessee itself was managing the bank account of the share applicants and after depositing cash, the cheques were issued by the assessee in its own name. The investor did not have financial capacity to make the investment and it could be inferred that the assessee's own unaccounted money was routed through banking channels in the name of share applicants. These findings have been rendered for each of the non-corporate share applicants on page nos. 7 to 89 of the assessment order....
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....enuine investment. * The assessee company with the help of companies providing accommodation entries has tried to route its unaccounted money through such companies to bring the same it into its books. 5.9 Based on the above observations and conclusions, it is held that the parties do not have creditworthiness for making investment as discussed above and the transaction of receipt of amount towards issue of share capital at huge premium is not genuine, but a sham transaction. Finally, in the above background, the amount of share capital / share premium was added to assessee's income as unexplained cash credit u/s 68. For obtaining such entries from corporate entities, the assessee must have paid certain commission which was estimated @2% and accordingly, another addition of Rs. 1 Lacs was made u/s 69C. Appellate Proceedings 5.1 During appellate proceedings, the assessee drew attention to the documents submitted before Ld. AO in support of the transactions with non-corporate as well as corporate entities. It was also pointed out that summons issued u/s 131 to 18 parties were duly responded to by all those parties. The assessee, referring to each of the non....
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....stablish by cogent evidence the genuineness of the transaction and creditworthiness of the investors u/s 68 as held by Hon'ble Supreme Court in Pr. CIT V/s NRA Iron & Steel Pvt. Ltd. (103 Taxmann.com 48) and various other decisions. The Ld. AO conducted independent enquiries and obtained bank statements of the investor. Upon perusal of the same, cash deposits were noted and subsequently cheques of equivalent amount were issued to the assessee. There was no material on record to prove that the share application money was received from independent legal entities. Few of the investors were found to be non-existent at the given addresses. The investors did not have financial capacity to make the investments as evident from their respective bank statements and cash deposits were diverted towards share capital and share premium. Finally, the action of Ld. AO in making the additions u/s 68 as well as u/s 69C was upheld. Aggrieved, the assessee is in further appeal before us. Our findings and Adjudication 6.1 After careful consideration of factual matrix, it could be gathered that the assessee has issued 69436 shares of face value of Rs. 10/- per share at a premium of Rs. 490/- per s....
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....0/- 11 Indra Jawanmal Prajapat 13 10,80,000/- 12,34,000/- 11,82,000/- 12 Jawanmal P. Prajapat 17 8,63,000/- 10,20,000/- 9,91,000/- 13 Jawanmal Prajapat- HUF 8 9,95,000/- 11,72,000/- 9,70,000/- 14 Keshav Gokul Nisar - HUF 8 9,97,000/- 11,73,000/- 9,50,000/- 15 Manuben K. Shah 9 25,65,000/- 27,19,000/- 19,45,000/- 16 Mitiksha B. Patel 8 999,000/- 11,64,000/- 8,75,000/- 17 Motilal D. Nisar 14 8,90,000/- 10,43,000/- 9,56,000/- 18 Pravin K. Dagha 24 8,84,000/- 10,47,000/- 9,24,000/- 19 Ranchod C. Parmar 11 8,02,000/- 9,56,000/- 8,22,000/- 20 Ranjan K. Nisar 13 9,31,000/- 10,96,000/- 10,15,000/- 21 Shailesh P. Prajapat 24 8,11,000/- 9,74,000/- 8,41,000/- 22 Shailesh P. Prajapat- HUF 8 10,01,000/- 11,77,000/- 9,65,000/- 23 Shantaben G. Nisar 14 11,44,000/- 13,09,000/- 12,25,000/- 24 Shivji B. Patel 15 8,67,000/- 10,09,000/- 7,56,000/- 25 Shivji B. Patel - HUF 8 9,96,000/- 11,60,000/- 9,85,000/- 26 Somara....
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....in terms of the requirements of Sec.68. Therefore, the onus had shifted on Ld. AO to dislodge the assessee's documentary evidences and bring on record cogent material to establish that the assessee generated unaccounted money and routed the same through banking channels in the garb of share-application money. Unless such an investigation is shown to have been carried out, the additions would not be sustainable in law since it is trite law that no addition could be made on the basis of mere suspicion, conjectures and surmises. Nothing adverse could be borne out of the fact that most of the share-applicants had bank accounts in common bank / branch and the directors of corporate entities were running various other concerns. It could be seen that few of the investors belonged to common family and therefore, it would not be uncommon to operate the bank from same Bank and Branch. 6.5 We find that as per the provisions of Section 68 of the Income Tax Act, 1961, where any sum is found credited in the assessee's books and assessee offers no explanation about the nature and source thereof or the explanation furnished is found to be unsatisfactory, the sum so credited may be charged to In....
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....sed by Hon'ble Supreme Court which is reported at 107 Taxmann.com 85. Similar is the position of decision of Hon'ble Delhi High Court rendered in Pr. CIT V/s Himachal Fibers Ltd. [98 Taxmann.com 72] against which revenue's Special Leave Petition was dismissed by Hon'ble Supreme Court which is reported at 98 Taxmann.com 173. Similar is the decision of Hon'ble High Court of Madhya Pradesh in Pr. CIT V/s Chain House International Pvt. Ltd. [98 Taxmann.com 47] against which revenue's Special Leave Petition has been dismissed by Hon'ble Supreme Court on 18/02/2019 which is reported at 103 Taxmann.com 435. Similar is the recent decision of Hon'ble Bombay High Court in Pr. CIT V/s Ami Industries (India) Pvt. Ltd. [ITA No. 1231 of 2017, dated 29/01/2020) which has been rendered after considering the principles laid down by Hon'ble Supreme Court in its recent decision titled as Pr.CIT Vs. NRA Iron & Steel Pvt. Ltd. [412 ITR 161]. 6.7 The Ld. DR has cited the decision of Hon'ble Delhi High Court in Nova Promoters & Finlease Pvt. Ltd. (18 Taxmann.com 217) which is factually distinguishable since in that case, the investors made an admission that they were accommodation entry providers. No ....