TaxTMI 
TaxTMI 
2021 (11) TMI 209
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....ures 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) is reproduced hereunder: "The assessee company ....
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....y 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 Voter Id Card 7 Smt Kamla Bai Verma AOKPV5411J Rs. 900000/- 7.1 Copy of share application form duly signed and filled. 7.2 PAN Card 7.3 Copy of his income tax return as fil....
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....ded 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. 16.4 Copy of his statement recorded u/s 131 in assessment proceeding 17 Shri Shubham Verma AOKPV5410K Rs. 400000/- 17.1 Copy of share application form duly signed and filled 17.2 PAN Card . 17.3 Copy of acknowledgement of Income Tax return as filed. 17.4 Copy of his bank account duly highlighting the amount of share application money. 17.5 The cheque prior to investment ....
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....0000 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. 26.2 Voter ID 26.3 PAN Card 26.4 Copy of his bank account duly highlighting the amount of share application Money. 26.5 Copy of his statement as recorded U/s 131 of the Act during the assessment proceeding 27 Shri Mukesh Morya N.A. Rs. 950000/- 27.1 Copy of share application form duly signed and filled. 27.2 Voter ID 27.3 Copy of his bank account duly highlighting the amount of share application money. 27.4 Copy of his statement recorded U/s 131 of the Act 28 Shri Gautam Verma ALLPV7829C Rs. 200000/- 28.1 Copy of share application money form 28.2 ....
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....l 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 assessee has to prove only identity of the investor which in the case in hand is proved beyond doubt. As regard the observation of the assessing officer in respect of few of the share applicants, the appellant company vide it's submission in Paras 1.13.1 to 1.13.6 has dealt the same in great details, and the same is again reproduced for sake of clarity:- " 1.13.1] The assessing officer in the assessment order on inner Page No 8 and 9 has discussed about the share application money of Rs. 20,50,000/- as received from share applicant Shri Sanjay Sharma. The assessing officer observed that the amount as invested by Shri Sanjay Sharma was not reflected in his bank account as filed during the course of assessment proceeding. In this respect,....
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....ni, 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 the bank account of the share applicant and therefore the amount of share application money as received from Smt Kamla Bai stand explained. 1.13.3] The assessing officer further observed in Para 2.14 on inner Page No 11 of the assessment order that an amount of Rs. 800000/- was credited through transfer in the bank account of Suman Verma vide reference No 1011-2723.The assessing officer has serious doubt about the transfer of amount through reference No 1011-2723. In this respect we would 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 wherein total income was declared by her of Rs. 397580/- and paid legitimate amount of Tax of Rs. 21970/-. [d] Copy of her bank account with Bank of I....
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....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 received by Shri Ved Prakash Verma and Shri Shubham Verma from the bank account of Shri Amit soni are 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 Shri Ved Prkash Verma and Shri Shubham 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 Shri Ved Prakash Verma and Shri Shubham Verma. 1.13.5] The assessing officer in Para 2.16 of the assessment order on inner Page No 12 has referred the affidavit as filed by Shri Amit Soni in respect of share application money as received from Sona Verma, Nidhi Verma and Vidhi Verma. In this respect ....
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....f share applicant Amount [Rs] Income Remarks 1 Gautam Verma 200000 Out of income and saving 2 Ankit Verma 800000 380710 Rs. 500000/- invested out of transfer from Amit Soni bank account and balance out of his saving 3 Vijay Semre 200000 268890 Out of his income and saving [b] Share application form duly signed by the applicant has been filed. [c] Copy of PAN card has also been filed [d] Copy of their income tax return [e] Copy of their bank account with Bank of India. [f] the major amount was received prior to the issuance of the cheques from Shri Amit Soni [g] 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 Ankit Verma. Hence, source of amount as received from the bank account of Shri Amit soni are duly explained. [h] Copy of bank account of Shri Amit Soni, Ex- director of the assessee company is enclosed for your kind reference. The source of amount transfer in the bank account of Ankit Verma is duly explained as received from Shri Amit Soni and sour....
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....oncerned. 4.1.3] The appellant company had received share capital of Rs. 18,00,000/- from ten persons. The assessing officer in Para 2.4 to 2.8 of the assessment order has discussed that statement of Shri Navin Raghuvanshi , Shri Ankur Soni and Shri Rupesh Dave recorded on oath and they have denied making any investment in the share application money/share capital of the assessee company by them or by their other family members, list of such persons is as under:- S. No Name of the Share holders Amount [Rs] 1 Ankur Soni 2,00,000 2 Navin Raghuvanshi 1,00,000 3 Gajendra Singh Raghuvanshi 1,00,000 4 Smt Sheetal Raghu Vanshi 2,00,000 5 Roopesh Dave 1,00,000 6 Shri B S Dave 2,00,000 7 Smt Shakuntala Dave 1,50,000 8 Smt Sonal Dave 2,00,000 9 Smt Premlata Dave 3,00,000 10 Kavita Joshi 2,50,000 18,00,000 The appellant has explained that due to some dispute with these persons they have given negative statement even when amount was invested by them in the share capital of the appellant company. It was also argued by the appellant that entire amount of share capital from the above persons were received prior to the com....
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....'ble Madras High Court in the case of CIT, Central Circle, Salem v. Victory Spinning Mills Ltd. as reported in [2014] 50 taxmann.com 416 (Madras); The Hon'ble Rajasthan High Court in the case of CIT v. First Point Finance Ltd. as reported in [2006] 286 ITR 477 (Rajasthan); The Hon'ble Rajasthan High Court in the case of CIT v. Deen Dayal Choudhary as reported in [2017] 293 CTR 468 (Rajasthan). 7. We have heard rival contentions and perused the records placed before us and carefully gone through the decisions referred by the ld. CIT(A) in the impugned order. We find that the assessee company issued 4,56,464 equity shares during the year under consideration. A summary showing increase the in the amount of share capital and securities premium of the assessee company during the year under consideration is as under: S. No Particulars Amount as on 31st March, 2012 [in Rs.] Amount as on 31st March, 2011 [in Rs.] Amount of increase [in Rs.] 1 Share Capital 62,89,640 17,25,000 45,64,640 2 Securities Premium 2,89,75,000 NIL 2,89,75,000 Total 3,35,39,640 Details of share applicants and share application money of Rs. 3,35,39,640/- as ....
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....p; Total 4,56,464 3,35,39,640 From above, it is clear that the Assessing Officer made addition of entire amount of Rs. 3,35,39,640/- to the total income of the assessee co. on account of share application money received during the year under consideration. We find that the ld. CIT(A) deleted the addition of Rs. 3,17,39,640/- in respect of share applicants/share application money as shown on Sl. No.1 to 32 and sustained the remaining addition of Rs. 18,00,000/- in respect of share applicants/share application money as shown on Sl. No.33 to 42. Hence, the grievance of the Revenue relates to the amount of addition to the tune of Rs. 3,17,39,640/- which was deleted by the ld. CIT(A) as reproduced above. We find from the material available on record that the assessee company was incorporated on 23-09-2009. However, no business was carried on by the assessee company till 09-10-2011. It was only from 10-10- 2011 that entire business carried on by Shri Surendra Kumar Soni in his proprietorship concern M/s Sanverwala, was succeeded by the assessee company w.e.f. 10-10-2011. The balance of capital of Shri Surendra Kumar Soni in his proprietorship concern, M/s Sanverwala as on 0....
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....proceedings 81-83 2 Shri Ankit Verma [PAN: AHLPV9818R] - Rs. 8,00,000/- 2.1 Share application form duly signed 84-85 2.2 PAN Card 86 2.3 Acknowledgment of income-tax return for the Assessment Year 2012-13 87 2.4 Bank statement duly highlighting the amount invested in the share capital of the respondent assessee 88-89 2.5 Statement as recorded under section 131 of the Income Tax Act during the course of assessment proceedings 90-93 3 Shri Anoop Singh Rajput - Rs. 9,50,000/- 3.1 Share application form duly signed 94-95 3.2 Bank statement duly highlighting the amount invested in the share capital of the respondent assessee 96-101 3.3 Aadhar Card 102 3.4 Statement as recorded under section 131 of the Income Tax Act during the course of assessment proceedings 103-105 4 Shri Ashish Kumar Soni [PAN: DDKPS8760M] - Rs. 14,00,000/- 4.1 Share application form duly signed 106-107 4.2 PAN Card 108 4.3 Acknowledgment of income-tax return along with computation of income for the Assessment Year 2012-13 109-111 4.4 Statement as recorded under section 131 of the Income Tax Act during the course of assessment proceedings 112-114 ....
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....Rs. 11,50,000/- 11.1 Share application form duly signed 171-172 11.2 Voter ID 173 11.3 Bank statement duly highlighting the amount invested in the share capital of the respondent assessee 174-177 12 Shri Mohan Mandloi [PAN: BGBPM4765J] - Rs. 9,50,000/- 12.1 Share application form duly signed 178-179 12.2 PAN Card 180 12.3 Bank statement duly highlighting the amount invested in the share capital of the respondent assessee 181-197 12.4 Statement as recorded under section 131 of the Income Tax Act during the course of assessment proceedings 198-199 12.5 Driving license 200 13 Smt. Nidhi Verma [PAN: ANPPV4738E] - Rs. 6,00,000/- 13.1 Share application form duly signed 201-202 13.2 PAN Card 203 13.3 Acknowledgment of income-tax return along with computation of income for the Assessment Year 2012-13 204-206 13.4 Bank statement duly highlighting the amount invested in the share capital of the respondent assessee 207-208 14 Shri Nihal Singh Mourya - Rs. 19,50,000/- 14.1 Share application form duly signed 209-210 14.2 Voter ID 211 14.3 Bank statement duly highlighting the amount invested in the share capital of....
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....application form duly signed 279-280 21.2 PAN Card 281 21.3 Acknowledgment of income-tax return along with computation of income for the Assessment Year 2012-13 282-284 21.4 Bank statement duly highlighting the amount invested in the share capital of the respondent assessee 285-286 22 Shri Ved Prakash Verma [PAN: ADFPV5995H] - Rs. 11,00,000/- 22.1 Share application form duly signed 287-288 22.2 PAN Card 289 22.3 Acknowledgment of income-tax return along with computation of income for the Assessment Year 2012-13 290-292 22.4 Bank statement duly highlighting the amount invested in the share capital of the respondent assessee 293-294 23 Smt. Vidhi Verma [PAN: AMYPV5139K] - Rs. 8,00,000/- 23.1 Share application form duly signed 295-296 23.2 PAN Card 297 23.3 Acknowledgment of income-tax return along with computation of income for the Assessment Year 2012-13 298-300 23.4 Bank statement duly highlighting the amount invested in the share capital of the respondent assessee 301-302 24 Shri Sanjay Sharma [PAN: CKPPS0242H] - Rs. 20,50,000/- 24.1 Share application form duly signed 303-304 24.2 PAN Card 305 24.3 Bank statem....
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....annexures before the Assessing Officer which have been filed before us at Page No. 365- 381 of the paper book. The provision of section 68 of the Income- Tax Act, 1961 which was in force for the previous year relevant to present Assessment Year 2012-13 is reproduced hereunder for ready reference: "Cash credits. 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:" 10. The relevant extract of the proviso to section 68 of the Income-Tax Act, 1961 which was inserted by the Finance Act, 2012 w.e.f. 1-4-2013 reads as under: "Provided that where the assessee is a company (not being a company in which the public are substantially interested), and the sum so credited consists of share application money, 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-....
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....es Limited, Sharjah is a bogus company or a non-existent company and the amount which was subscribed by the said Company by way of share subscription was in fact the money of the respondent assessee. In the present case, the assessee had established the identity of investor who had provided the share subscription and it was established that the transaction was genuine though as per contention of the respondent the creditworthiness of the creditor was also established. In the present case, in the light of the judgment of Lovely Exports (P.) Ltd.'s (supra) we have to see only in respect of the establishment of the identity of the investor. The Delhi High Court also in Divine Leasing & Finance Ltd.'s case (supra), considering the similar question held that the assessee Company having received subscriptions to the public/rights issue through banking channels and furnished complete details of the shareholders, no addition could be made under section 68 in the absence of any positive 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 s....
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....e Tribunal is correct and the aforesaid question is answered against the revenue and in favour of the assessee." 13. 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) vide order dated 29-01-2020 has categorically distinguished the decision of the Hon'ble Supreme Court of India in the case of NRA Iron & Steel (P.) Ltd. and has held that: "21. From the above, it is seen that identity of the creditors were not in doubt. Assessee had furnished PAN, copies of the income tax returns of the creditors as well as copy of bank accounts of the three creditors in which the share application money was deposited in order to prove genuineness of the transactions. In so far credit worthiness of the creditors were concerned, Tribunal recorded that bank accounts of the creditors showed that the creditors had funds to make payments for share application money and in this regard, resolutions were also passed by the Board of Directors of the three creditors. Though, assessee was not required to prove source of the source, nonetheless, Tribunal took the view that Assessing Officer had made inquiries through the ....
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....ficer was therefore not justified in doubting the amount of share application money received from these share applicants merely for the reason that the share applicants could not furnish documentary evidences so as to substantiate the agricultural income earned by them as it would tantamount to seeking an explanation with regard to source of funds invested by the share applicants which was outside the domain and purview of the provision of section 68 of the Income-Tax Act, 1961 as applicable for the year under consideration prior to the insertion of proviso to section 68 of the Act. Further, the Assessing Officer himself observed in the assessment order that most of the share applicants appeared before him personally and accepted that they had made investment in the shares of the respondent assessee company but these share applicants could not furnish supporting documentary evidences so as to 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 a....
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....he case of CIT, Ajmer v. H.S. Builders (P.) Ltd. as reported in [2012] 26 taxmann.com 86 (Raj.); 2. The ITAT Indore Bench in the case of Late Shri Sanjay Paliya vs. DCIT as reported in (2017) 50 CCH 0198 IndoreTrib; has categorically held that: 3. The Hon'ble Rajasthan High Court in the case of CIT, Ajmer v. Jai Kumar Bakliwal as reported in [2014] 366 ITR 217 (Rajasthan). 16. We find that the Assessing Officer also noted that the amount was transferred from the same reference number being 1011-2723 in the bank accounts of Smt. Kamla Bai, Smt. Suman Verma, Shri Shubham Verma and Shri Ved Prakash Verma, therefore, someone else was operating these bank accounts and name of these persons were only for namesake. The Assessing Officer further noted that Sona Verma, Nidhi Verma and Vidhi Verma had invested the amount in shares in cash also. However, we find from the material 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 ....
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....f share applicants on various dates. Statement on oath was also recorded of those persons. In the process of recording statement. It is learnt that the most of share applicants are farmers residing at outskirts of Indore City. They confirmed to have invested money in the form of share with the assessee company. They have also stated that source of such investment is income from Agricultural activity, but they have not submitted copy of PI and PII (ऋण पुस्तिका) to establish the proof of agricultural activity done by them and quantum of agriculture income which has been invested in the assessee company. From the above, it is clear that the Assessing Officer merely doubted the investment made by the share applicants for the reason that they did not submit any proof regarding agricultural activities done 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....
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....iance on the decision of the Hon'ble Apex Court in the case of Hero Cycles P Limited as reported in 379 ITR 0347. Considering the overall facts of the case and decisions as referred by the appellant, it is proved that the interest bearing funds in possession of the appellant company were higher than the amount as advanced by it. Further, most of the advances were carried forwards from the erstwhile firm where no interest bearing funds were used. I therefore direct the assessing officer to delete the addition of Rs. 9,73,742/- made out of Interest paid. The appellant accordingly get relief of Rs. 9,73,742/-. This ground of appeal is allowed." 18. Being aggrieved, the Revenue has challenged the action of the ld. CIT(A) before this Tribunal. Before us, ld. CIT-DR relied upon the order of the Assessing Officer whereas the learned Counsel for the assessee relied on the impugned order. 19 We have considered the rival submissions of both the parties and gone through the material available on the file. We find that the Assessing Officer noted that the assessee claimed that out of total loan of Rs. 81,14,522/-, loan of Rs. 78,91,106/- was transferred from the proprietorship concern of Shr....