TaxTMI 
TaxTMI 
2022 (1) TMI 1024
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....s in shares and securities. The company registered with RBI as NBFC filed its return of income on 29.09.2012 declaring total loss at Rs. (-) 7,89,937/-. The appellant company has issued 3,05,000 shares having face value of Rs. 10/- each at premium of Rs. 52/- per share to three parties namely Sanguine Media Ltd., Specialty Papers Ltd. and Yantra Natural Resources Ltd. (Ganesh Spinners Ltd.), 1,05,000 shares to each and received Rs. 30,05,000/- towards share capital and Rs. 1,58,60,000/- towards share premium aggregating to Rs. 1,89,10,000/-. In response to the notice regarding the details of increase in share capital, the assessee furnished complete documents in support of share capital and share premium received during the year alongwith a detailed submission dated 29.01.2015 followed by another written submission dated 23.03.2015 objecting the show-cause issued directing the assessee to explain as to why the addition under Section 68 of the Act should not be made in its hands. However, the assessment was completed upon assessing income at Rs. 1,89,10,000/- which was added to the total income of the assessee under Section 68 of the Act being share capital/premium received from ....
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.... books of accounts of the assessee from three companies namely Sanguine Media Ltd., Specialty Paper Ltd. and Yantra Natural Resources Ltd. (Ganesh Spinners Ltd.) was treated as unexplained within the meaning of Section 68 of the Act and added the total income of the assessee. 5. We find that on the basis of the detail of evidences found during the course of search Revenue has claimed establishing the following facts:- (i) Details of 220 bank accounts and more than 300 Blank and signed cheque books, bank statements, bank deposits- withdrawal and RTGS slips were found. These pertain to 210 companies including 16 listed companies managed and controlled by him and used for providing accommodation entries by Shrirish Chandrakant Shah. (ii) Directors of the companies have been found to be dummy and for namesake. Statements of persons who are Directors in large number of companies, have been recorded wherein they have admitted that they are mere name lenders. Notarized declarations have also been filed by a number of Directors wherein they have stated that they are only name lenders and do not know about the activities of the companies in which they are Directors. ....
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.... The funds received in the assessee company as share capital/premium have been paid by Shri Chandrakant Shah's (SCS) companies against receipt of cash/other credits that has been recorded in the seized evidence in the name of Rajesh Jhaveri. The SCS companies from which funds have been received by the assessee do not have any business activities, have dummy directors and are operated and managed by SCS, as detailed at Annexure-1. Therefore, the creditworthiness of the companies from whom the share capital has been received, is not proved. Further, SCS has accepted that the funds paid in these companies are one time accommodation entries paid against receipt of cash or squaring off transactions and the same is also corroborated with the evidence seized/impounded during the course of search and survey action in case of SCS. 9. However, it appears from the records that during the course of assessment proceeding the assessee submitted the following evidences/materials in support of share capital/premium received during the year which fact has not been denied by the Ld. AO: (i) Statement showing number of shares allotted to each of the company and the....
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....aster data from the website of MCA and details downloaded from the website of BSE. The document being the bank statement, confirmation and audited accounts of the respective company showing investment in share/capital premium of the appellant company proves the genuineness of the transaction as claimed by the assessee seems to be correct as we find from the records. The audited accounts of the respective company showing substantial net worth affirm creditworthiness of those companies. Furthermore, the three companies are listed companies fact of which cannot be brushed aside. 12. We find that on this aspect the appellant before us relied upon the judgment passed by the Hon'ble Madhya Pradesh High Court in the case of PCIT (1), Indore vs. Chain House International (P.) Ltd. reported in, 98 taxmann.com 47 wherein it has been held that "Once genuineness, creditworthiness and identity of investors are established, no addition could be made as cash credit on the ground that shares were issued at excess premium". The similar identical issue was examined with respect to 5 companies said to be managed and controlled by SCS out of which there is one company as in the instant case before ....
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....res, Dhanush Technologies, Emporis Projects and L.N. Industries (formerly known as L.N. Polyster) came to the conclusion that the assessee company having received share application money through bank channel and furnished complete details of bank statements, copy of accounts and complied with notices issued and the directors of the subscriber company also appeared with books of account before the appellate authority and confirmed the investment made by them with the assessee company, therefore, the identity and creditworthiness of investor and genuineness of transaction of the share applicant has been proved in the light of the ratio laid down by the M.P. High Court, Delhi High Court and the Supreme Court and were of the opinion that the onus cast upon the assessee as provided under section 68 has been duly discharged by the assessee the Identity of the share subscriber, creditworthiness and genuineness of the transaction is not to be doubted. The Tribunal considered the case of the each company in great detail and recorded its finding. The aforesaid findings of fact recorded by the Tribunal are based on the material available on record which is a finding based on appreciation of e....
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....eam which support the allegation of generation of any unaccounted cash and transfer of such cash for the purpose of obtaining accommodation entries. In the absence of any evidence of such cash transfer, the AO was unjustified in holding that the appellant company had routed back its own unaccounted cash. In this connection it would be also relevant to state that during the process of examining these investor companies I have found that there is no transfer of cash from the appellant company to these investor companies or to anybody else for this purpose. I hold that there is no generation of cash outside the books of account and also there is no transfer of any such cash by the appellant company to anyone else and, therefore, I hold that there is no accommodation entry and the share capital received is genuine." 25. The appellate authority had considered all the issues raised before her and had recorded her findings separately, on the conclusion of the assessing officer that the assesses had received bogus share capital and premium of Rs. 55.00 Crores as held as under :- "The appellant company had filed enormous evidences in support of the identity, creditworthiness and ge....
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....ant company and also explained the source thereof. They were found to be fully acquainted with the directors of the investee company. They also explained about the business premises and activities of the associates companies of the appellant. They fully explained the purpose of making the investment in the appellant company. Under this background I have no hesitation in holding that none of these persons were acting as dummy directors. Hence this conclusion of the AO is rejected." 27. In respect of the allegation against the five listed companies for providing accommodation entries, the appellate authority has held as under : - "The basis of such conclusion is the statement of SCS and some others as recorded in the search of others and also on the back of the appellant company. The appellant had argued that such statements are outside the jurisdiction of the assessment u/s 153A since they were recorded not in connection with the search on the appellant company. No cross examination was done. It is pertinent to note here that the appellant was very keen to cross examine the persons. This opportunity was never provided to the appellant despite repeated requests duri....
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....source or the source of the source as vague or untrue The AO has not examined these companies from where RTGS has arisen. The amount of RTGS had come on surface in the books of account somewhere else and these entities have not been proved bogus or non-existent. But in any case it is settled law that the appellant have to prove the source of investment received. It is not supposed to go beyond that and explain further in this matter. Additionally SCS in his statement has denied for being involved in any entry providing business. In view thereof, the conclusion drawn by the AO is devoid of any merit and hence rejected.' 52. Issuing the share at a premium was a commercial decision. It is the prerogative of the Board of Directors of a company to decide the premium amount and it is the wisdom of shareholder whether they want to subscribe the shares at such a premium or not. This was a mutual decision between both the companies. In day to day market, unless and until, the rates is fixed by any Govt. Authority or unless there is any restriction on the amount of share premium under any law, the price of the shares is decided on the mutual understanding of the parties concerne....
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....the issue involved has not been decided merely on the basis of statement given by SCS and others but is decided mainly on the basis of various evidences found during the course of search on SCS. On the other hand, we find that the said AO admitted that SCS in his statements have elaborated the entries recorded in evidences found and seized which also corroborates with the evidences found and entries recorded in the books of accounts of the assessee. This particular finding establishes the evidences in itself could have been relied upon in the absence of any explanation or clarification given by the author of the seized material i.e. SCS. This is sufficient for granting cross-examination of SCS since it is his version about the noting in the seized documents which has relied upon by the Ld. AO while drawing adverse inferences against the assessee. Thus, the reasons for refusal of granting opportunity to cross-examination as assigned by the Ld. AO is contrary to his own finding. This is a glaring instance of violation of the principle of natural justice by the Ld. AO. On this aspect we have considered the judgment passed by the Hon'ble Supreme Court in the case of Andaman Timber Indu....
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....Ltd.[2018] 97 taxmann.com 623 (Mumbai - Trib.) ACIT v. Shyam Indus Power Solutions (P.) Ltd. [2018] 90 taxmann.com 424 (Delhi - Trib.) ACIT v. Swiftsol (I) (P.) Ltd [2018] 95 taxmann.com 286 (Nagpur - Trib.) Pavitra Realcon (P.) Ltd. v. ACIT [2017] 87 taxmann.com 142 (Delhi - Trib.) Jadau Jewellers & Manufacturers (P) Ltd. v. ACIT [2017] 83 taxmann.com 249 (Jaipur-T) ITO vs. M/s Land Mark Dealers (P) Ltd. - ITA No. 178/JP/2015. ITO vs. M/s Alok Fintrade (P) Ltd, - ITA No. 1SO/JP/2015. M/s. Komal Agrotech P. Ltd. vs. ITO - ITA.No.437/Hyd/2016 In view of the above facts and circumstances discussed above and respectfully following the ratio laid down in the decisions relied upon by the appellant company, I am of the considered opinion that the appellant company has sufficiently and reasonably discharged its primary onus u/s. 68 of the Act and the AO was not justified in resting his case on the loose papers and documents found and seized from the premises of a third party viz. SCS which even otherwise do not contain any noting of exchange of cash for which allegation of accommodation entries has been made in the as....
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....ing judicial precedent for the said proposition. 7. Proceeding further, we find that the assessee was saddled with similar additions in AY 2012-13 but the same were deleted by Ld. CIT(A). Upon further appeal to Tribunal, the appellate order was set aside and Ld.AO was directed to reframe the assessment. Upon perusal M/s. Amirashmi Finstock Private Limited Assessment Years :2010-11 & 2011-12 of cited order of the Tribunal, we that the assessee, in that year, had received similar share premium from certain entities which allegedly being managed and controlled by Shri Shirish Chandrakant Shah. Relying on the statement of Shri Shirish Chandrakant Shah, the same were added as assessee's income u/s 68, in smilar manner. The Ld. CIT(A) deleted the same by observing that the assessee had established the identity, creditworthiness and genuineness of share application money. Upon further appeal to Tribunal, the matter was restored back to Ld. AO for fresh assessment after examining the aforesaid parties and allowing the assessee an opportunity to cross-examine the same. Pursuant to the said directions, an assessment was framed u/s 143(3) r.w.s. 254 on 30/12/2019. During the cour....
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...., the revenue in in further appeal before us. The assessee has filed similar cross-objections which is merely supportive of impugned order. 10. Since the facts are pari-matena the same, our adjudication for AY 2010-11 shall mutatis-mutandis apply to this year also. The impugned M/s. Amirashmi Finstock Private Limited Assessment Years: 2010-11 & 2011-12 order would not require any interreference on our part. The revenue's appeal as well as assessee's crossobjections stands dismissed. Conclusion 11. The revenue's appeals as well as assessee's cross-objections stands dismissed." 16. We have already discussed that the appellant company has sufficiently and reasonably discharged its primary onus under Section 68 of the Act by producing all relevant required documents as asked for by the Revenue. It also appears that the Ld. AO completely relied upon the loose papers and documents found and seized from the premises of third party i.e. SCS which even do not contain any noting of receiving or paying cash which could at all lead to the allegation of accommodation entries by the Ld. AO. Finally considering factors inter alia the status of all three companies in qu....