TaxTMI 
TaxTMI 
2022 (5) TMI 884
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....-13. 2. The appellant craves leave to add to, amend or alter the above grounds as may be deemed necessary." 2. The brief facts leading to the case is this that the assessee a dealer and trader of paper and board filed its return of income on 29.09.2012 declaring total income at Rs. 3,49,190/-. 3. The case was selected for scrutiny assessment. Notice under Section 143(2) dated 06.08.2013 followed by notice under Section 142(1) dated 20.10.2014 was issued and served upon the assessee alongwith the questionnaire for necessary compliance. During the year under consideration the assessee company has shown turnover of Rs. 3,09,95,681/- and profit of Rs. 3,49,189/-. Record further revealed that the assessee has introduced Rs. 1.93 crores to the share capital account through equity shares. Further that the assessee during the year under consideration issued 67000 shares having face value of Rs.10/- at a premium of Rs. 290/- per share, thereby accepted total premium of Rs. 1,94,30,000/-. The assessee was asked to give the details of the share capital introduced during the year under consideration in response whereof the assessee furnished the details wherefrom the following f....
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....ircumstances the share were issued at huge premium, the assessee could submit estimated cash flow with growth @ 25% and the valuation/analysis on equity shares was based only upon the future projection of the company depending upon various assumptions in respect to the operations of its business which is insufficient to decide the transaction in favour of the assessee.. He ultimately relied upon the order passed by the Ld. AO. In support of his argument the following case laws were relied upon: (i) Pragati Financial Management Pvt. Ltd. vs. CIT, reported in 82 taxmann.com 12 (Cal) (ii) Blessing Construction vs. ITO, reported in 32 taxmann.com 366 (Guj.) (iii) Ayaana Comtrade Pvt. Ltd. vs. ITO, reported in 104 taxmann.com 66 (Ahd.) (iv) Major Metals Ltd. vs. UOI, reported in 19 taxmann.com 176 (Bom.) 5. On the other hand, Ld. Counsel appearing for the assessee supported the order passed by the Ld. CIT(A). Further that it was argued by the Ld. Counsel that the Ld. AO has not given any reason in support of his contention in respect of the genuineness of the said share transactions that the shareholders had obtained loan from other concerns before....
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....me-lenders, transaction related to receipt of amount on account of share capital and premium thereon amounting to Rs. 2,01,00,000/- was not found genuine and added to the total income of the assessee under Section 68 of the Act upon considering the same as unexplained cash credit. 9. Before the Ld. CIT(A) the assessee submitted the following: "2.1 The appellant company has issued 67000 equity share of Rs. 10 each at a premium of Rs. 290 per share totaling to Rs. 2,01,00,000/- 2.2 The appellant company has submitted copy of confirmation, PAN, copy of relevant bank statements and copy of income tax return of all shareholders during original assessment proceedings. 2.3 The appellant company had submitted all proofs related to i) Identity II) Credit worthiness and; iii) Genuineness of the transaction as under: a) Copy of PAN and Income Tax Return of depositor which shows the identity of the depositor b) Copy of Bank Statement/Passbook explaining mode of payment by shareholder and Income Tax Return which shows the credit worthiness c) Copy of Bank Statement/Passbook of the appellant company and shareholder and Income Tax Return wh....
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....y. 3.2 Your appellant submits that all the payments have been made through banking channel. It is a genuine transaction. The appellant company had already proved the onus. It had discharged the initial onus of establishing the bona-fide of the transactions. 3.3 Your appellant submits that the learned AO has made an addition purely on an assumption basis. All the information was available with the AO. The AO was not justified in ignoring various evidences provided to him by the appellant. Your appellant submits that if AO has a doubt than it would be for the AO to disprove the same. However, the learned AO has not choose to cross verify the transactions and made disallowances purely on an assumption without evidence which is not permitted in law. 3.4 Your appellant submits that when summons were issued and share holders had accepted the investment and that apart, the names and identity of the share applicants/ share holder was also available on record and the nature and the source of the amount invested were known/provided, it cannot be allowed to be concluded as undisclosed income in the hands of appellant." 12. In support of the submissions made by th....
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....ation from all the shareholders. Thus the appellant has established the identity of the shareholders as well as the genuineness of transactions. Now the only reason given by the AO for disbelieving the genuineness of such share application transactions are that the shareholders had obtained loans from other concerns before making investment in the appellant company. She has observed that the whole fund was diverted through loan from M/s Bigwin Paper Distributors Private Limited. It may also be mentioned here that the AO had also made enquiry directly with the shareholders by issuing notices under section 133(6) of the Act and in response to this, all the shareholders had submitted these details directly, to the AO also. Thus the only reason for making addition of these share application amounts as income of the appellant company is that the AO has disbelieved the creditworthiness of the applicants for issue of shares. 4.3.1 In this regard, it is seen that the honorable High Court of Gujarat in its decision in the case of of Himatsu Bimet Ltd., 12 taxmann.com 87 (Guj.), has held as follows:- "4. As can be seen from the Impugned order of the Tribunal, the Tribunal h....
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.... respondent had discharged the burden and accordingly reversed the findings of the Commissioner (Appeals). 6. Thus the Tribunal has after appreciation of the evidence on record found as a matter of fact that the assessee had supplied addresses and permanent account numbers as well as confirmation letters of the share applicants. In the circumstances, it was for the revenue to make further inquiry in case it was of the opinion that the share applicants were not genuine. In absence of any findings recorded by the Assessing Officer to the effect that the share applicants are bogus, there is nothing on record to doubt or disbelieve the confirmations and application forms submitted by the depositors. In the circumstances, no infirmity can be found in the impugned order of the Tribunal in holding that the assessee had discharged its burden. Whether burden has been discharged or not is a question of fact." 4.3.2 Again the honorable High Court of Gujarat in its decision in the case of Rama Multi Tech Ltd (supra) has held as follows: "7. If can be noted from the submissions made by learned counsels as also from the material on record that both CIT(Appeals) as well....
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....assessees who denied having made any investment altogether. The issue thus would fall squarely within the ambit of the judgment of the Supreme court in the case of Lovely Exports (supra). No error of law can be stated to have been committed by the Tribunal. Tax Appeal is therefore dismissed." 4.4 In the present appeal also, the AO had made enquiries directly with the share applicants and they all have confirmed to the AO regarding their share application. The physical existence of all the share holders has been proved along with the genuineness of the transactions. Under such circumstances the facts of the present case are squarely covered by the decisions of the jurisdictional High Court as discussed above. Hence following these decisions, the addition made by the AO under section 68 of the Act is directed to be deleted and this ground of appeal is allowed." 15. From the records it is evident that sufficient enquiry and notice under Section 133(6) of the Act was issued by the Ld. AO whereupon sufficient documents in support of the transaction and creditworthiness of the shareholders were duly placed. The confirmation from all the share applicant with details of share c....
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....5C and 245D of the Act. Addition u/s. 68 was affirmed on the basis of detailed report of the Commissioner containing 14 adverse factors against- the assessee in that case. In the present appeal, no inquiry is done at all by AO and entire addition is based only on assumption without rebutting the evidence filed by the assessee. Needless to mention that the rebuttal as above by the assessee against the judgments cited by the Ld. D.R. is found to be correct. 17. We have considered several others judgments relied upon by the Ld. A.R. including the order passed by the Hon'ble Supreme Court in the case of CIT vs. Steller Investment Ltd., reported in (2001) 115 taxman 99 (SC). The finding of the Hon'ble Apex Court on the issue is as follows: "...it was evident that even if it be assumed that the subscribers to the increased share capital were not genuine, nevertheless, under no circumstances, could the amount of share capital be regarded as undisclosed income of the assessee. It held that it might be that there were some bogus shareholders in whose names shares had been issued and the money might have provided by some other persons and if the assessment of the persons wh....