TaxTMI 
TaxTMI 
2022 (7) TMI 1158
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.... on account of unexplained cash credit u/s 68 of the Act as the assessee has failed to prove bona fide of the transaction within the meaning of Section 68 of the I.T. Act, 1961. 2. The appellant craves leave to add, alter, amend and/or withdraw any ground(s) of appeal either before or during the course of hearing of the appeal. 3. It is, therefore, prayed that the order of the Ld. CIT(A) may be set aside and that of assessing officer may be restored to the above extent." 3. Briefly stated, the relevant material facts are as follows. The assessee before is a private limited company and engaged in business of processing of man-madefabrics (MMF) on job work basis. During the course of scrutiny assessment proceedings, it was observed that assessee company had received substantial amount of share application money during the year under consideration towards share capital and share premium. The following table depicts a bird's eye view of the receipts by the assessee towards share capital and share premium. Name of Investor Address of Investor No. of Shares Face value per share Premium Per Share Total face value Total Share Premium Total A....
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....e in which received in Bank account of the assessee Relation with the investing party, if any. AO of the investor (7) (8) (9) Please provide copy of your Bank A/c. from 01.04.201.1 to 31.03.2012. You are further requested to give the copy of bank book for 10 days before and after receipt of money (towards share capital and share premium) You are further requested to attach the folio-wing documents in respect of investors who have introduced their capital (Please refer to Sr. No.(i) above): (i) Copy of return of income, (ii) Copy of Audit Report, (iii) Copy of balance sheet, (iv) Copy of Bank account details of the investors, marking out the money received by you, Please furnish - (a) Proof of Board meeting in which receipt/allotment of share application money finalized. (b) The valuation report, if any, on the basis of which premium was decided. (c) Copies of all share application received, along with details. (d) copies of all communications entered with all prospective investors including calling for investment, applications, installment of money called, received, decision of ....
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....t has filed the return of income showing a very meager income. In view of the same and after taking into consideration all the above facts and evidences brought on record that go on to conclusively prove that explanation of the assessee with regards to the sources of the funds credited in the guise of share capital and premium is nothing but a colourable device, the explanation of the assessee over the nature and source of the funds is held to be grossly unsatisfactory and untenable in the eyes of law. Thus, the sister concern i.e. Jay Bharat Finstock Pvt., Ltd lacks creditworthiness and therefore the same needs to be disallowed. Therefore, the total amount of Rs.1,83,81,000/- was added back to the total income of the assessee- company under section 68 of the Act. 7. Aggrieved by the order of Assessing Officer, the assessee carried the matter before the Ld. CIT(A) who has deleted the addition made by the Assessing Officer. 8 Aggrieved by the order of Ld. CIT(A), the Revenue is in appeal before us. 9.Learned Senior DR for the Revenue argued that assessee has failed to produce relevant documents and evidences. During the assessment stage, following details and documents were....
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.... therefore the addition u/s 68 of the Act was made by the A.O. This way, ld DR submitted before the Bench that order passed by the AO may be upheld. 10. On the other hand, Ld. Counsel for the assessee reiterated the findings of ld CIT(A) and defended the order passed by Ld. CIT(A) and prayed before the Bench to confirm the findings of ld CIT(A). 11. We have given our thoughtful consideration to rival contention. We have perused case file as well as paper books furnished by assessee. We note that during the appellate proceedings Ld. CIT(A) has observed that share applicant company "Jay Bharat Fin stock (P) Ltd" is holding more than 50% of shares of appellant company. The financial statements of the share applicant company was also scrutinized by the department for the A.Y 2012-13 in separate assessment proceedings and no adverse inference has been drawn by the A.O. Based on these facts Ld CIT(A) held that the assessee has discharged its onus by furnishing contra confirmation, source of funds and the nexus between the share applicant and the company. We do not agree with the approach adopted by ld CIT(A) to delete the addition. In order to examine three ingredients of section 6....
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....ation Money during the year. Please furnish details and supporting material to establish the genuineness of source and creditworthiness in respect of share premium receipt during the year. Please justify the receipt of share premium and please explain the reasons duly supported by adequate evidence on account of which the assesses company commanded the huge share premium on its shares." 15. However, there was no compliance in this regard by assessee. 16.Therefore, assessing officer issued another specific notice under section 142(1) devoted entirely to the issue of share capital and share premium. As per this notice, the assessee was required to submit various precise information in respect of the receipt of share application money, share capital and share premium. The contents of the relevant portion of the said notice are reproduced as under for ready reference: "Details, Documents and Explanations to be furnished: You are requested to furnish the following information for the A.Y. 2012-13 in respect of introduction of share capital including share premium, share pending allotment /allotted. Sr. No. Name of the allottee/applicant Addre....
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....this order, before the assessing officer. Therefore, we set aside the order of ld CIT(A) and remit this issue back to the file of the assessing officer for denovo adjudication in accordance with law. 18. In the result, appeal filed by the Revenue is allowed for statistical purposes. 19. Now we shall take Revenue's appeal in ITA No.114/SRT/2020 for assessment year 2013-14, wherein the grounds of appeal raised by Revenue are as follows: "1. Whether on the facts and in the circumstances of the case and in law, the Ld. CIT(A) is justified in deleting the addition made by the AO on account Of disallowance of interest expenses to the tune of Rs.80,02,302/- @ 12% on interest free advances given to its sister concern M/s Jay Bharat Fin stock Private Limited, when interest was incurred at the same rate by the assessee on its borrowed funds? 2. Whether On the facts and circumstances of the case, the Ld. CIT(A) is justified in deleting the entire addition of Rs.80,02,302/- made on account of disallowance of interest expenses, ignoring the facts that the assessee has failed to prove the nexus between the own surplus funds and interest free funds which were claimed to ha....
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....ecord any contrary finding from examination of books of accounts, bank statement etc. Based on these facts, ld CIT(A) deleted the addition. 23. It is settled principle of law that when the assessee has adequate interest free funds to make interest free advances to sister concerns, then no disallowance of interest expenses can be made. For this, reliance can be placed on the judgment of Hon`ble Gujarat High Court in the case of Commissioner of Income-tax, Gandhinagar vs. Rajendra Brothers [2014] 52 taxmann.com 334 (Gujarat), wherein it was held as follows: "Both the Commissioner (Appeals) as well as the Tribunal have recorded concurrent findings of fact to the effect that the assessee was also running a sarafi business and the funds obtained from the bank had got merged with the funds of other businesses. Having regard to the total funds available from the safari business, the Tribunal has found no reason to believe that bank funds have been diverted as interest free/lower, interest advances. Moreover, no material has been brought on record by the revenue; either to demonstrate that the small business was bogus or to establish diversion of interest bearing funds as low/i....