TaxTMI 
TaxTMI 
2021 (11) TMI 209
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.... going through the audited tax report and annexures thereof, the Assessing Officer noted that the assessee had received share capital and share premium money of Rs. 3,35,39,640/- during the year under consideration. Accordingly, the Assessing Officer asked the assessee to furnish the relevant information. In response, the assessee furnished the list of share applicants and the Assessing Officer issued summons u/s 131 to the share applicants. The Assessing Officer noted that some of them appeared in office on various dates and statement on oath was recorded. The Assessing Officer noted that some share applicants denied to have been allotted or have purchased the shares of the assessee company. Ultimately, the Assessing Officer made the addition of Rs. 3,17,39,640/- u/s 68 of the I.T. Act to the total income of the assessee company in respect of increase in the share capital. 4. Being aggrieved, the assessee challenged the action of the Assessing Officer before the ld. CIT(A). The ld. CIT(A) summarized the breakup of the share capital and having gone through the facts, submissions and judicial pronouncements thereof deleted the addition. The relevant discussion made by ld. CIT(A) ....
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.... Copy of his bank account with Bank of India duly highlighting the amount of share application Money 3.3 Aadhar Card 3.4 Copy of his statement as recorded during the course of search 4 Shri Ashish Kumar Soni DDKPS8760M Rs. 14,00,000 4.1 Copy of share application form duly signed and filled. 4.2 Copy of PAN Card 4.3 Copy of Income Tax return as filed for the Asst Year 2012-13 4.4 Copy of his statement as recorded U/s 131 of the Income Tax Act. 5 Shri Harish Singh Mandloi N.A. Rs. 10,00,000 5.1 Copy of share application form duly signed and filled. 5.2 Copy of Voter Card 5.3 Copy of his Bank passbook with Indore Premier Co-operative Bank Limited duly highlighted the amount of share application money. 5.4 Copy of his statement as recorded U/s 131 in assessment proceeding 5.5 Copy of his driving license 6 SHRI HUKUM SINGH N.A. 10,00,000 6.1 Share application money form duly signed 6.2 Copy of PAN Card 6.3 Copy of his bank account 6.4 Copy of his statement as recorded during the course of assessment proceeding 6.5 Copy of....
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....s filed during the course of assessment 13 Shri Nihal Singh N.A. Rs. 1950000 13.1 Copy of share application form duly signed and filled. 13.2 Voter Id 13.3 Copy of his bank account duly highlighting the entry related to the Investment in the share application money. 13.4 Copy of his statement as recorded U/s 131 of the Act 14 Shri Ramesh Semre DUEPS1511R Rs. 300000/- 14.1 Copy of share application form duly signed and filled 14.2 PAN Card 15 Shri Ramesh Chand Chouhan, Nawada ANNPC4310R Rs. 1000000 15.1 Copy of share application form duly signed and filled. 15.2 Voter Id 15.3 Copy of his bank account duly highlighting the entry related to the Investment in the share application money. 15.4 Copy of PAN Card 15.5 Copy of his statement as recorded U/s 131 of the Act 16 Shri Shankar lal Baganna N.A. Rs. 500000/- 16.1 Copy of share application form duly signed and filled. 16.2 Voter Id 16.3 Copy of his bank account duly highlighting the entry related to the Investment in the share application money. 16....
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....e application money. 22.5 Prior to the issuance of the cheque amount was received from Shri Amit Soni 23 Smt Vidhi Verma AMYPV5139K Rs. 800000/- 23.1 Copy of share application form duly signed and filled. 23.2 PAN Card 23.3 Copy of her Income tax return as filed for the Asst Year 2012-13. 23.4 Copy of her bank account duly highlighting the amount of share application money. 23.5 Copy of affidavit was filed and also discussed in Para 2.16 24 Shri Sanjay Sharma CKPPS0242H Rs. 2050000 24.1 Copy of share application form duly signed and filled. 24.2 PAN Card 24.3 Copy of his bank account 24.4 Copy of his statement as recorded U/s 131 of the Act 25 Shri Vijay Semre AYPPS8021E Rs. 200000/- 25.1 Copy of share application form duly signed and filled. 25.2 Copy of his Income tax return as filed for the Asst Year 2012-13. 25.3 Copy of his statement as recorded U/s 131 of the Act 26 Shri Manoj Patel CBWPM2597R Rs. 1400000 26.1 Copy of share application form duly signed and filled. ....
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....nts of Smt Kamla Bai Verma, Smt Suman Verma, Shri Shubham Verma and Shri Ved Prakash Verma and also observed that affidavit were filed in case of Ms Sona Verma, Ms Nidhi Verma ,Ms Vidhi Verma ,Gautam Verma , Ankit Verma and Vijay Semre. On perusal of the documents as filed by the appellant company and observation of the assessing officer, it is clear that most of the share applicants personally appeared before the assessing officer and their statement were also recorded wherein they have clearly accepted about the investment made in the share capital of the appellant company. The appeal relates to the Asst Year 2012-13 i.e. prior to the insertion of the explanation to section 68 of the Act. In cases of share application / share capital prior to the insertion of the explanation the appellant company needs to prove identity of the share applicant only. However, in the present case in hand the appellant has not only proved the identity of the share applicants but also proved the creditworthiness of the share applicant and genuineness of the transactions. Hon'ble Jurisdictional High Court in the case of People General Hospital Limited [ Appeal No ITA No 89/ 2011] has held that the asse....
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.... Copy of PAN card has also been filed [c] Copy of her income tax return has also been filed wherein total income was declared by her of Rs. 451930/- and paid legitimate amount of Tax of Rs. 21340/-. [d] Copy of her bank account with Bank of India A/c No 880010110006560 [e] the cash as deposited by her in her bank account prior to issuance of the cheque to Shri Amit Soni is out of her income and saving. [f] the amount as invested by her in the share application money of the assessee company was received by her from Shri Amit Soni and in turn Shri Amit sonit received amount from Shri Surendra Soni, AU Commodities P Limited and M/s Sanverwala Jewellers P Limited. Hence, source of amount as received by Smt Kamla Bai and Shri Amit soni duly explained. [g] Copy of bank account of Shri Amit Soni, Ex- director of the assessee company is enclosed for your kind reference. The source of cheque as received by Smt Kamla Bai was duly explained as received from Shri Amit Soni and source of amount received by Shri Amit soni was also explained. Hence, there was no justification for having any doubt about the source of amount as found credited in....
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....like to clarify as under:- [a] Share application form duly signed by the applicant has been filed. [b] Copy of PAN card has also been filed [c] Copy of her income tax return has also been filed by Shri Ved Prakash Verma and Shri Shubham Verma declaring total income at Rs. 379608/- and Rs. 378953/- respectively and paid legitimate amount of Tax due on their income. [d] Copy of bank account of Shri Vzed Prakash Verma with Bank of India A/c No 880010110006561 and copy of bank account of Shri Shubham Verma with Bank of India A/c No 880010110006564 has also been filed during the course of assessment and enclosed with this submission. [e] the amount as found credited vide referene No 1011-2723 is the bank account of Shri Amit Soni ex- director of the assessee company and therefore the source of amount as invested by them are duly explained. [f] That on perusal of the bank account of Shri Amit soni it is evident that he has received amount from Shri Surendra Soni, AU Commodities P Limited and M/s Sanverwala Jewellers P Limited prior to issuance of the cheques to Shri Ved Prakash Verma and Shri Shubham Verma. Hence, source of amount as ....
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....ssessee company is enclosed for your kind reference. The source of amount transfer in the bank account of Sona Verma, Nidhi Verma and Vidhi Verma are duly explained as received from Shri Amit Soni and source of amount received by Shri Amit soni was also explained. Hence, there was no justification for having any doubt about the source of amount as found credited in the bank account of the share applicant and therefore the amount of share application money as received from Sona Verma, Nidhi Verma and Vidhi Verma. 1.13.6] The assessing officer in Para 2.18 of the assessment order on inner Page No 12 has discussed about the share applicant Shri Gautam Verma, Shri Ankit Verma and Shri Vijay Semre. The assessing officer himself accepted that they have accepted about the investment made by them. The assessing officer has doubted the capacity of these share holders. In this respect we would like to clarify as under:- [a] detail of share application money as received by the assessee from the above share applicant is as under:- S.No Name of share applicant Amount [Rs] Income Remarks 1 Gautam Verma 200000 Out of income and savin....
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....are applicants were proved beyond doubt as they had personally appeared before the assessing officer and accepted the amount as invested in share capital. In case of affidavit, the assessing officer has not contravert the same, where the source of share application was duly explained and income tax return as filed was also provided. I am therefore of the view that the appellant company has properly discharged onus in respect of share application money of Rs. 2,87,00,000/- as received from the above thirty one share applicant. The decision as relied by the appellant are also squarely applicable in the case of the appellant. The decision of the Hon'ble Apex Court in lovely exports (P) Ltd.(Supra), Hon'ble Jurisdictional High court in the case of People General Hospital limited (Supra) and Hon'ble Jurisdictional bench of ITAT in the case of Rajshree Finsec P. Ltd. (Supra) directly support the case of the appellant company. I therefore direct the assessing officer to delete the addition of Rs. 2,87,00,000/- as made in respect of above thirty one share applicants. The appellant get relief accordingly in so far as these thirty one share applicants are concerned. 4.1.3] The appel....
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.... appeal before this Tribunal. Ld. Departmental Representative(DR) vehemently argued supporting the order of the Assessing Officer. 6. Per contra Ld. counsel for the assessee heavily relied on the finding of ld. CIT(A). Reference was also made to the paper book and written submission/judicial pronouncements contending that ld. CIT(A) having appreciated the facts and material on record in the light of the relevant judicial pronouncements rightly deleted the addition. Learned Counsel for the assessee relied upon the following judicial pronouncements: Hon'ble Supreme Court of India in the case of CIT Vs Lovely Exports (P.) Ltd. as reported in [2008] 216 CTR 195 (SC) The Hon'ble Madhya Pradesh High Court in the case of CIT, Bhopal v. Peoples General Hospital Ltd. as reported in [2013] 356 ITR 65 (Madhya Pradesh) The Hon'ble Madhya Pradesh High Court in the case of CIT v. Metachem Industries as reported in [2000] 245 ITR 160 (Madhya Pradesh) The Hon'ble Bombay High Court in the case of Pr. CIT- 1 v. Ami Industries (India)(P.) Ltd. as reported in [2020] 116 taxmann.com 34 (Bombay) The Hon'ble Delhi High Court in the case of CIT v. Value Capi....
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....0R 5,000 10,00,000 17 Shankar Lal Baganna N.A. 2,500 5,00,000 18 Shubham Verma AOKPV5410K 2,000 4,00,000 19 Shyam Singh Mourya N.A. 9,750 19,50,000 20 Sodan Singh N.A. 5,000 10,00,000 21 Sona Verma AOLPV1274N 5,500 11,00,000 22 Suman Verma AOKPV5412M 4,000 8,00,000 23 Ved Prakash Verma ADFPV5995H 5,500 11,00,000 24 Vidhi Verma AMYPV5139K 4,000 8,00,000 25 Sanjay Sharma CKPPS0242H 10,250 20,50,000 26 Chandra Semre DUEPS1510Q 1,500 3,00,000 27 Gautam Verma ALLPV7829C 1,000 2,00,000 28 Ramesh Semre DUEPS1511R 1,500 3,00,000 29 Vijay Semre AYPPS8021E 1,000 2,00,000 30 Mukesh Mourya N.A. 4,750 9,50,000 31 Rajesh Soni BOGPS9852H 4,000 8,00,000 32 Khushboo Soni DEVPS7925N 4,500 9,00,000 33 Ankur Soni CSYPS3860A 1,000 2,00,000 34 Navin Raghuvanshi AKNPR8248Q 500 1,00,000 35 Gajendra Singh Raghuvanshi ACCPR1018F 500 1,00,000 36 Sheeta....
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....r himself did not give any adverse finding in respect of these 3,03,964 equity shares issued to Shri Surendra Kumar Soni. We also find that the scrutiny assessment in the case of Shri Surendra Kumar Soni for the Assessment Year 2012-13 was completed by the same Assessing Officer wherein also the Assessing Officer did not make any addition to the total income of Shri Surendra Kumar Soni on account of investment made in the share capital of the assessee company. Thus, we do not find any reason for making addition of Rs. 30,39,640/- to the total income of the assessee company in respect of shares issued to Shri Surendra Kumar Soni. Therefore, the findings of ld. CIT(A) on this point are confirmed. 8. The remaining share application money of Rs. 2,87,00,000/- was received from 31 individual share applicants as per list above. We find that the assessee co. filed ample documentary evidences so as to justify the identity and creditworthiness of the share applicants and genuineness of the transactions as entered into them. A list of documents which were filed by the assessee company before the Assessing Officer in respect of these share applicants is reproduced hereunder for ready re....
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....capital of the respondent assessee 133-134 6.4 Statement as recorded under section 131 of the Income Tax Act during the course of assessment proceedings 135-136 6.5 Aadhar Card 137 7 Smt. Kamla Bai Verma [PAN: AOKPV5411J] - Rs. 9,00,000/- 7.1 Share application form duly signed 138-139 7.2 PAN Card 140 7.3 Acknowledgment of income-tax return along with computation of income for the Assessment Year 2012-13 141-143 7.4 Bank statement duly highlighting the amount invested in the share capital of the respondent assessee 144-145 8 Smt. Kaushalya Bai - Rs. 5,00,000/- 8.1 Share application form duly signed 146-147 8.2 Aadhar Card 148 8.3 Bank statement duly highlighting the amount invested in the share capital of the respondent assessee 149-151 8.4 Statement of her spouse, Shri Babulal as recorded under section 131 of the Income Tax Act during the course of assessment proceedings 152-153 8.5 Driving license of her spouse, Shri Babulal 154 9 Smt. Kusum Verma [PAN: AOLPV1256L] - Rs. 8,00,000/- 9.1 Share application form duly signed ....
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.....3 Bank statement duly highlighting the amount invested in the share capital of the respondent assessee 222-230 15.4 PAN Card 231 15.5 Statement as recorded under section 131 of the Income Tax Act during the course of assessment proceedings 232-234 16 Shri Shankar Lal Baganna - Rs. 5,00,000/- 16.1 Share application form duly signed 235-236 16.2 Voter ID 237 16.3 Bank statement duly highlighting the amount invested in the share capital of the respondent assessee 238-240 16.4 Statement as recorded under section 131 of the Income Tax Act during the course of assessment proceedings 241-243 17 Shri Shubham Verma [PAN: AOKPV5410K] - Rs. 4,00,000/- 17.1 Share application form duly signed 244-245 17.2 PAN Card 246 17.3 Acknowledgment of income-tax return along with computation of income for the Assessment Year 2012-13 247-249 17.4 Bank statement duly highlighting the amount invested in the share capital of the respondent assessee 250-251 18 Shri Shyam Singh Mourya - Rs. 19,50,000/- 18.1 Share application form duly signed 252-253 18.2 ....
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....ested in the share capital of the respondent assessee 306-315 24.4 Statement as recorded under section 131 of the Income Tax Act during the course of assessment proceedings 316-318 25 Smt. Chandra Semre [PAN: DUEPS1510Q] - Rs. 3,00,000/- 25.1 Share application form duly signed 319-320 25.2 PAN Card 321 25.3 Acknowledgment of income-tax return along with computation of income for the Assessment Year 2012-13 322-324 26 Shri Gautam Verma [PAN: ALLPV7829C] - Rs. 2,00,000/- 26.1 Share application form duly signed 325-326 26.2 Statement as recorded under section 131 of the Income Tax Act during the course of assessment proceedings 327-328 26.3 PAN Card 329 27 Shri Ramesh Semre [PAN: DUEPS1511R] - Rs. 3,00,000/- 27.1 Share application form duly signed 330-331 27.2 PAN Card 332 28 Shri Vijay Semre [PAN: AYPPS8021E] - Rs. 2,00,000/- 28.1 Share application form duly signed 333-334 28.2 Acknowledgment of income-tax return along with computation of income for the Assessment Year 2012-13 335-337 28.3 Statement as recorded und....
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...., share capital, share premium or any such amount by whatever name called, any explanation offered by such assessee-company shall be deemed to be not satisfactory, unless- (a) the person, being a resident in whose name such credit is recorded in the books of such company also offers an explanation about the nature and source of such sum so credited; and (b) such explanation in the opinion of the Assessing Officer aforesaid has been found to be satisfactory:" From the above, we find that an assessee was only required to establish the identity of share applicants prior to the Assessment Year 2013-14. It was only after the insertion of proviso to section 68 of the Act w.e.f. Assessment Year 2013-14 that the assessee was required to furnish an explanation regarding nature and source of sum invested by the share applicant. Hon'ble Bombay High Court in its landmark judgment in the case of CIT-1 v. Gagandeep Infrastructure (P.) Ltd. as reported in [2017] 394 ITR 680 (Bombay) has categorically held that proviso to section 68 introduced by Finance Act 2012 with effect from 1-4-2013, would not have retrospective effect. We find that the Hon'ble Supreme Court of India in ....
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....ive material or evidence to indicate that the shareholders were benamidars or fictitious persons or that any part of the share capital represented company's own income from undisclosed sources. The similar view has been taken by the other High Courts. 17. As the Apex Court has considered the law in Lovely Exports (P.) Ltd.'s case (supra) and in view of law laid down by the Apex Court, we find that the substantial questions framed in these appeals do not arise for our consideration. Accordingly, all these appeals are dismissed with no order as to costs." 12. The Hon'ble Madhya Pradesh High Court in the case of CIT v. Metachem Industries as reported in [2000] 245 ITR 160 (Madhya Pradesh) has held that: "4. On appeal, the Commissioner (Appeals) examined the matter in detail and found that Shri S.K. Gupta was the real owner of the business. The explanation given by the assessee was found to be satisfactory and he deleted the aforesaid three entries. The same finding of fact has been affirmed by the Tribunal. Once it is established that the amount has been invested by a particular person, be he a partner or an individual, then the responsibility of the asses....
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....regard, resolutions were also passed by the Board of Directors of the three creditors. Though, assessee was not required to prove source of the source, nonetheless, Tribunal took the view that Assessing Officer had made inquiries through the investigation wing of the department at Kolkata and collected all the materials which proved source of the source. 22. In NRA Iron & Steel (P.) Ltd. (supra), the Assessing Officer had made independent and detailed inquiry including survey of the investor companies. The field report revealed that the shareholders were either non-existent or lacked credit-worthiness. It is in these circumstances, Supreme Court held that the onus to establish identity of the investor companies was not discharged by the assessee. The aforesaid decision is, therefore, clearly distinguishable on facts of the present case. 23. Therefore, on a thorough consideration of the matter, we are of the view that the first appellate authority had returned a clear finding of fact that assessee had discharged its onus of proving identity of the creditors, genuineness of the transactions and credit-worthiness of the creditors which finding of fact stood affirmed ....
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.... substantiate the agricultural income earned by them out of which they has made investment in the shares of the respondent assessee company. But, the Assessing Officer failed to appreciate the findings laid down in the judicial precedents (supra) and the fact that it is quite evident that the assessee company established the identity of the share applicants and genuineness of the transactions entered into with them beyond any doubt. The assessee company cannot be put in a disadvantageous position merely because the share applicants could not satisfactorily substantiate the source of investment made by them in the shares of the assessee company. If the Assessing Officer had any doubt regarding the source of investment made by them these share applicants, the Assessing Officer was free to proceed against these share applicants but by no stretch of imagination can the share application money received from existing individuals duly accepted by them, be taxed as income of the assessee company unless the Assessing Officer establishes the fact that such money has emanated from the coffers of the respondent assessee company. Further, we find that the Assessing Officer noted that cash was d....
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....rial available on record that the members of the Verma Family are relatives of directors of the respondent assessee company. The ex-director of the assessee company, Shri Amit Soni in his statement recorded during the course of assessment proceedings categorically mentioned about his relationship with the members of the Verma Family and also the fact that shares were purchased by the members of the Verma Family. The statement of Shri Amit Soni, ex- director of the respondent assessee company as recorded during the course of assessment proceedings has been filed on Page No. 382-385 of the paper book. Further, the said reference in the bank accounts of the members of Verma Family was actually the reference of the bank account of Shri Amit Soni. The copy of bank statement of Shri Amit Soni has been filed on Page No. 386-389 of the paper book. Therefore, it is evident that the assessee company has proved the source of source of funds in the case of members of Verma Family by filing the copy of bank statement of Shri Amit Soni also. Hence, there remains no doubt regarding the investment made by members of the Verma Family. Hence, the observation of the Assessing Officer that these bank ....
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....by them. It is therefore quite evident that the Assessing Officer himself accepted the identity of the share applicants and genuineness of the transactions as entered into with them. In view of these facts, we are of the view that the assessee company satisfactorily discharged the primary onus as cast upon it under section 68 of the Income-Tax Act, 1961 by establishing the identity and creditworthiness of the share applicants and genuineness of the transactions as entered into with them and therefore, addition made by the Assessing Officer on account of share application money received from remaining share applicants was neither legal nor proper and was rightly deleted by the Ld CIT(A). The action of the Ld CIT(A) is therefore, confirmed. Accordingly, ground nos.1 to 3 with regard to deletion of addition of Rs. 3,17,39,640/- are dismissed. 17. Now, the only ground left is ground no.4 with regard to disallowance of interest of Rs. 9,73,742/- made by the Assessing Officer on the ground that the assessee has not charged interest on loan and advance but paid interest to others. Facts, in brief, are that the Assessing Officer noted that the assessee company did not charge any interes....