TaxTMI 
TaxTMI 
2022 (1) TMI 727
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....m amount of Rs. 15,69,46,250/-, the premium of Rs. 4,21,40,000/- was received during the financial year 2010-11 and the balance of Rs. 11,48,06,250 has been received during the year under consideration. Notices under section 133(6) dated 11.8.2015 were issued by the ld.AO to all seven companies who had applied for shares. Out of seven companies, six have replied in response to the said notices and confirmed their investment. While doing so, they have further filed certain documents in order to substantiate the genuineness of their investment. However, upon perusal of the details provided by these parties, the ld.AO came to the conclusion that share premium charged by the company was excessive considering financial performance of those company. The company, providing share premium, existed only on paper. The Company relieved huge amount as loan and gave the same to other concerns without apparent motive of conducting any actual business. As per the opinion of the ld.AO, the appellant company had accepted share premium from the companies which were engaged in providing bogus entries in the form of loan and share application money. The ld.AO ultimately was not satisfied with the credi....
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....tion in detail We have raised ground no. 1 to keep this matter alive. If any adjudication is to be given on this issue, We may be given some time to give separate submission on this issue. Ground No.2 2.1 This ground relates to addition of Rs. 17750000/- by alleging that credit worthiness and genuineness of the share transaction cannot be proved. 2.2 That the appellant has produced following before the AO:- i) Computation of Income along with acknowledgement. ii) Balance Sheet along with Audit Report, iii) Confirmation letters. iv) Relevant bank statements. 2.3 The AO in para 5.2 also confirmed that the assesses has submitted the desired details. 2.4 Notices u/s 133(6) were issued to all seven companies from whom share application money was received. 2.5 All the seven notices issued u/s 133(6) were served and replies were received by the AO from Six companies directly and from one company by the assesses on the instructions of the AO. 2.6 The AO commented that though the identity of shareholder is proved yet the genuineness and credit worthiness is not proved. 2.7 That when the assessee has proved the identity and also the transaction is through banking chan....
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....CIT vs. Lovely Exports Pvt Ltd. Reported in 216 CTR 0195 held that if the share application money is received by the assessee company from alleged bogus shareholders, whose names are given to the AO, then the department is free to proceed to reopen their individual assessment in accordance with law, but it cannot be regarded as undisclosed income of assessee company. iv)Honorable Supreme Court of India in the case of CIT vs. Lovely Exports Pvt. Ltd. Reported in 229 CTR 86 held that can the amount of share money be regarded as undisclosed income u/s 68 of-IT Act, 1961? We find no merit in this special leave petition for the simple reason that if the share application money is received by the assessee company from alleged bogus shareholders, whose names are given to the AO, then the department is free to proceed to reopen their individual assessments in accordance with law, Hence, we find no infirmity with the impugned judgment. vi. Honorable Madhya Pradesh High Court in the case of Sumerchand Jain vs. CIT Reported in 292 ITR 0241 held that the source of CR was not essential to be proved inasmuch as the assessee had been able to prove the identity, entry and source of the third p....
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.... section 68- Commissioner (Appeals) held that five companies subscribing equity share amounting to Rs. 25 lakhs were identified _ and they had submitted their bank statements, cash extracts and returns-filling receipt - He , therefore, deleted impugned addition made by assessing officer -Tribunal upheld order of commissioner (Appeals) - supreme court while dealing with similar issue in various cases held that identity of shareholder alone is required to be proved in case of capital contributed by shareholders -Whether since five companies subscribing equity share amounting to Rs. 25 lakhs were identified and they had submitted their bank statement, cash extracts and returns filling receipt, identity of share applicant companies and purchase of share had been proved-by assessee - Held, yes - Whether, therefore, appellate authorities had rightly deleted impugned addition made by Assessing Officer - Held, yes [para6] [In favour of assessee] ix) Honorable Delhi High court in the case of CIT vs. Kansal Fincap Ltd. Reported in 221 Taxman 151 Section 68: Cash credits -Share application money - No addition shall be made in the hands of the assessee where transaction related to the receip....
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....in the case of Agrawal coal corporation Pvt. Ltd. Vs. Additional CIT reported in 135 ITD 270 S. 68 : Cash Credits - share application money - identity - identity of share applicants were not established hence addition was up held The assessee is a Pvt. Ltd. Company engaged in the trading business in coal. It was found that Hindustan Continental Ltd. (HCL) had applied for 40000 share application on face value of Rs.IO each and premium of Rs. 90 per share. Similarly the Optimates Textile Industries Ltd, (OTL) also applied for 10000 shares. Both the parties are from Indore. The Assessing Officer referred the matter to Assistant Commissioner Indore to verify the genuineness or parties. '1 he investigation carried out by the officials of Indore; it was found that the parties were not in existence. The assessing officer held that as the assessee has failed to establish identity of share applicants the addition was made under section 68. On appeal the commissioner (Appeals), up held the addition. On appeal to the Tribunal, the Tribunal held that since the identity of share applicants had not been established, the initial onus laid down under section 68 had not been discharged and thus....
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....hile making addition under section 68 of the Act against share premium received by the assessee-company. Needless to mention that the ld.AO only on the basis of surmises, conjectures and presumption held that the companies providing premium are bogus and paper company. 7. The ld.CIT(A) has also confirmed addition on the wrong presumption that the alleged shareholder were not found to be in existence. However, he failed to show that while observing the same, whether the ld.AO has conducted any inquiry whatsoever about the identity, creditworthiness of the companies and genuineness of the transactions. It also appears from the order passed by the ld.CIT(A) that he has relied upon certain judgments including the judgment passed by the Co-ordinate Bench in the case of Vaibhav Cotton P.Ltd. Vs. ITO, (2012) 20 ITJ 422 (Trib-Indore) wherein the facts of the instant case is completely different from the facts available in the case mentioned above. It is also a trite law that an addition made without making any investigation and/or inquiry and only on surmise and conjectures is required to be deleted. The AO under statutory provisions has to carry out his own investigation by exercising p....
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.... the Act as "unexplained credits". The Ld A.R submitted that the AO has accepted the genuineness of share capital to the extent of its par value and hence it can be concluded that the AO was satisfied with the three main ingredients required to be proved u/s 68 of the Act viz. identity of the shareholder, credit worthiness of the shareholder and genuineness of the transactions. Accordingly, the Ld A.R submitted that there is no scope for making addition u/s 68 of the Act." 9. We further appreciate that when the basic evidences are on record, as provided by the assessee to the Revenue mere failure of the creditor to appear cannot be the basis for making addition. In fact, the assessee has discharged its onus to prove credit-worthiness of the share holders and genuineness of the transaction by providing the documents and/or information to the AO. The documents filed in support of identity and credit-worthiness of the share holders and genuineness of the transactions being the balance sheet, bank statement, audited accounts, and the affidavit of the companies provided share premium were not doubted as non-genuine. The Ld. AO accepted genuineness of the share capital to the extent of ....