AI OCR 
TaxTMI 
TaxTMI 
TaxTMI 
2022 (7) TMI 159
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....000 shares were sold at a premium of Rs. 15/- per share with a total premium of Rs. 30,00,000/- to M/s Zinnia Sales Pvt. Ltd. (40000 shares), M/s Daisy Suppliers Pvt Ltd (40,000 shares), M/s Pansy Dealer (P) Ltd (40,000 shares), M/s Sunflame Distributors (P) Ltd (40,000 shares), M/s Virat Commosale (P) Ltd (20,000 shares) and M/s Nilay Distributors (P) Ltd (20,000 shares). Apart from this, 1,50,000 shares had been issued to Ms Madhu Aul and 40,000 shares to Shri Lokesh Kumar and no share premium had been taken from these two shares holders. The Assessing Officer (AO) required the assessee to produce evidence to prove the genuineness as well as the creditworthiness and identity of the shareholders. 2.1 In response, the assessee filed copies of the Income Tax Returns, PAN and Bank account statements of these companies. Subsequently, the assessee was required to produce the directors of these investors. However, the assessee submitted that it was unable to produce Shri Tarun Kumar Sah of Kolkata (who was the common director) for recording his statement because of the ongoing financial crisis in the market on account of demonetization carried out by the Government of India. It was als....
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....e had failed to pass the test of human probability as laid down by the Hon'ble Apex Court in the case of Sumati Dayal Vs. CIT [1995] 214 ITR 801 (SC). The AO was of the opinion that the assessee had failed to discharge the onus caused upon it and proceeded to add an amount of Rs. 50,00,000/- to the income of the assessee u/s 68 of the Act and completed the assessment at income of Rs. 62,97,250/-. 2.4 Aggrieved by the assessment order, the assessee preferred an appeal before the Ld. CIT(A) but his appeal came to be dismissed and now the assessee has approached this Tribunal challenging the order of the Ld. CIT(A) on the following grounds: 1. That the Ld. CIT(A) has erred in law as well as on facts in upholding an addition of Rs.50,00,000/- treating share capital and share premium to be unexplained cash credits applying the provisions of Section 68 of the Act which is illegal, arbitrary and unjustified. 2. That the assessee had explained in toto all the three essential ingredients i.e. identity, creditworthiness and genuineness of the transactions and as such treating the genuine share capital and share premium received u/s 68 is illegal, arbitrary and unjustified. 3. Th....
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....ere found to be not genuine by the AO as the companies were found to be not-existent at the address given by the assessee and that the Ld. CIT(A)-1, Ludhiana in the case of M/s Technico Steels and Alloys (P) Ltd in Appeal No. 21/IT/CIT(A)-1/Ldh/2015-16 vide order dated 22.09.2016 had upheld the addition, however, the said order had been reversed by ITAT Chandigarh Bench in ITA No. 134/Chd/2017 vide order dated 15.02.2019. 3.1 The Ld. AR further submitted that once the assessee had submitted the relevant documents before the AO, the assessee could not be required further to explain the source of source as was done in the present case by the AO by requiring the assessee to explain and justify the source of money of the investing companies although from the records it was evident that the companies had invested either from raising loans or from proceeds of sale of shares. It was submitted that the entire case of the Department had been built on suspicion, surmises and conjecture and, therefore, the addition was not sustainable in the eyes of law. The Ld. AR relied on numerous judicial precedents in support of his contention which are placed in the paper book and have been taken on re....
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.... assessee was required to produce the common director Shri Tarun Kumar Sah for the purpose of recording of his statement to which the assessee had expressed his inability in view of the demonetization exercise carried out by the Government of India which prevented Shri Tarun Kumar Sah for travelling from Kolkata to Ludhiana. The AO, thereafter issued summons u/s 133(6) of the Act to the investing companies and the summon in the case of M/s Nilay Distributors (P) Ltd was returned un-served while the other five companies did not respond. The AO again required the assessee to produce Shri Tarun Kumar Sah, the common director in all the six companies and again the assessee expressed his inability to produce the said director but requested for some time for producing the said person. The AO also got the address verification done and it came to light that the three of the companies viz M/s Daisy Suppliers (P) Ltd, M/s Pansy Dealer (P) Ltd and M/s Zinnia Sales (P) Ltd did not exist at the addresses as provided. On these set of facts, the AO reached the conclusion that the impugned transactions were not genuine and that the assessee had failed to prove the identity and credit worthiness of....
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....ble Apex Court in the case of PCIT Vs. NRA Iron and Steel Ltd (supra). In this case, none of the investing companies, which had invested amounts ranging between Rs. 90,00,000/- to Rs. 95,00,000/-, could justify making investment at a huge premium of Rs. 190/- per share when the face value of the share was only Rs. 10/-. However, in the present case, the assessee has submitted the valuation of the company made through DCF method to justify the share premium of Rs. 15/- per share but both the lower authorities have completely ignored it and have not even discussed it in the bodies of their respective orders. Secondly, in the case of NRA Iron and Steel Pvt. Ltd (supra), some of the investing companies were found to be non-existent, whereas, in the present case, the existence of the companies have been duly evidenced by copies of ITRs, PAN cards, as well as bank statements. Further, in the case of NRA Iron & Steels Ltd (supra) almost none of the companies could produce the bank statements to establish the source of funds for making investments in shares, whereas, in the present case, all the six investing companies have supplied their bank statements. Of course, none of the Investing c....
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....us. ii. The Assessing Officer is duty bound to investigate the credit-worthiness of the creditor/ subscriber, verify the identity of the subscribers, and ascertain whether the transaction is genuine, or these are bogus entries of name-lenders. iii. If the enquiries and investigations reveal that the identity of the creditors to be dubious or doubtful, or lack creditworthiness, then the genuineness of the transaction would not be established. In such a case, the assessee would not have discharged the primary onus contemplated by Section 68 of the Act." 5.3 However, from the facts of the present case, it is glaring that the AO took no steps to verify the creditworthiness of the creditors or identity of the subscribers to ascertain that the transactions were genuine or whether these were bogus entries of money lenders and, therefore, we are of the considered view that the judgement of the Hon'ble Apex Court in the case of NRA Iron & Steel Pvt. Ltd. does not help the case of the Department. 5.4 At this juncture, we would also like to make a reference to the order of the Coordinate Bench in the case of M/s Tehnico Metals Pvt. Ltd Vs. DCIT Circle-1 Ludhiana in ITA No. 1348/Chd/2....
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....t the alleged report of the inspector of the Department who has stated to have visited at the given address of the share applicant was never put or confronted to the assessee and, hence, the reliance cannot be placed on the said report. 11. In this case, the share application money along with premium was received through banking channel. The details of the bank account of the investor have been duly supplied. Even the source of funds of the Investor is also explained. The income tax returns of the investor are also furnished. The investor companies have been duly registered under the Indian Companies Act and there is no evidence on file that their registration has been cancelled or that the investor companies have been declared as nonexistent or shell companies. In response to summons issued by the DDIT (Inv), Kolkata, investor companies duly filed all the details and duly confirmed that they had invested in the shares of the assessee company. The only reason for which the aforesaid investment has been disbelieved by the Assessing officer is on the ground that the Inspector of the Income tax at Kolkata had reported that the aforesaid companies could not be traced out at the give....