TaxTMI 
TaxTMI 
2021 (11) TMI 1106
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.... loss of Rs.1,31,812/-. During the course of assessment proceedings, the AO noted that the assessee company has received large share premium of Rs.9,13,50,000/- on 1015000 shares @ Rs.90/- each and equity share capital of Rs.1,02,50,000/- on 10,25,000 shares @ Rs.10/- each together totaling to Rs.10,16,00,000/-. From the various details filed by the assessee, the AO noted that the share premium/share application money have been shown to have been received from the following 19 companies 12 of which are located at Kolkata and 7 are located at Delhi and the details of which are as under:- 2.1 To examine the identity, genuineness and credit worthiness of the abovementioned companies, the AO issued notice u/s 133(6) to all the above 19 companies on 19.11.2014. However, there was no compliance to the said notices issued u/s 133(6) for which the AO held that the genuineness of the transaction could not be verified. He, therefore, again, directed the assessee to produce the parties for his examination on oath. However, no reply was received. The AO, thereafter, issued summons u/s 131(1) to M/s Direct Mercantile Company Pvt. Ltd & Legency Mercantile Pvt. Ltd calling for their attendance....
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....ils of such assessment are as under:- Sr. No. Name of the company Scrutiny Assessment for A.Y. 2012-13 2013-14 2014-15 1 Swabhhumi Agency Pvt. Ltd. Yes Yes 2 Swarnim Distributor Pvt. Ltd. Yes Yes 3 Cindrella Commodeal Pvt. Ltd. Yes 4 Good Field Pvt. Ltd. Yes Yes 5 Solty Financial Consultant Pvt. Ltd. Yes Yes 6 Function Distributor Pvt. Ltd. Yes Yes 7 Helpful Vintrade Pvt. Ltd. Yes Yes Yes 8 Justify Vanija Pvt. Ltd. Yes Yes 3.1 Copies of scrutiny assessment orders in the aforesaid cases were filed before ld.CIT(A). It was accordingly argued that it cannot be said that the subscriber companies do not exist at the addresses provided. The report of the ITO (Inv.) is therefore not correct and cannot be relied upon. 3.2 So far as the objection of the AO that the subscribers were not produced in spite of opportunities provided to the assessee, it was submitted that the assessee has submitted sufficient evidence to prove the ingredients of section 68 of the I.T. Act, i.e. identity and credi....
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....ties and the Hon'ble Courts relied upon by the Ld. AO and Ld. AR & I incline to agree with the contention of the Ld. AR that the Ld. AO is not justified in making the addition of Rs.10,15,00,000/- u/s 68 of the Act in view of the following facts and circumstances of the appellant's case:- 1. As per the assessment order the appellant company had provided the required documents to the Ld. AO to establish the identity of the subscriber, confirmation, creditworthiness of the subscriber by filing copy of ITR, final accounts duly certified by the auditor, the copy of bank statement of the subscriber company. 2. The Ld. AR has submitted that all the Investing Companies were duly incorporated by due process of law under the Companies Act, 1956 and all the investing companies continue to exist on the records of the ROC as well as Income Tax department. The notices were served in most of the cases u/s 133(6). None of the investor has denied or contradicted the claim of the appellant. Most of the investors independently verified the transaction in response to notices u/s 133(6). The appellant had no legal rights over the investors to enforce their attendance before the AO. O....
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....ld not be justified in drawing an adverse inference only because the creditor/ subscriber fails or neglects to respond to its notices" Hon'ble Court further held that "a delicate balance must be maintained while walking the tightrope of sections 68 and 69 of the Income -Tax Act. The burden of proof can seldom be discharged to the hilt by the assessee; if the Assessing Officer harbours doubts of the legitimacy of any subscription, he is empowered, to carry out thorough investigations. But if the Assessing Officer fails to unearth any wrong or illegal dealings, he cannot adhere to his suspicions and treat the subscribed capital as the undisclosed income of the company" Hon'ble Supreme Court endorsed the aforesaid proposition of law by rejecting the SLP stating that "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 theDepartment is free to proceed to reopen their individual assessments in accordance with law. Hence, we find no infirmity with the impugned judgment". Further, Hon'ble jurisdictional High Cour....
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....of the Act. The brief of the above discussion is as under:- > The entire amount had been received by the appellant company through normal banking channels by account payee cheques/demand drafts. > Suspicion of the AO on account of issue of shares on premium is not justifiable as the matter pertains to financial year 2011-12 as there was no restriction on issue of shares on premium until financial year 2011-12. Restrictions u/s 56 was placed on issue of shares on premium from AY 12- 13 onwards hence not relevant for the year under consideration. > A mere perusal of the said documents would reveal that the onus on the Appellant Company with regard to the duties enjoined upon it regarding receipt of cash credit have been fulfilled and discharged and it cannot be said that the Appellant Company had failed to establish the creditworthiness of the cash creditors and genuineness of transactions. As such no adverse inference is warranted nor justified or sustainable on the facts of the case; > The AR of the appellant has submitted that the AOs of investing companies have made assessments u/s 143(3) of the Act in majority of investing companies a....
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....ineness of the shareholders disregarding the fact that no such companies were found at the addresses given. Assessee also failed to produce the directors of Delhi based investor companies" 3. "On the facts and in the circumstances of the case and in law, the Ld.CIT(A) erred in placing reliance on the decision of Hon'ble Apex court in the case of m/s Lovely Exports Pvt. Ltd. (2008) 216 CTR 195 (SC) disregarding the fact that the facts of the assessee's case are completely different from the facts of the case before the Hon'ble Apex Court." 4. "The appellant craves leave to add. Alter or amend any of the ground(s) of appeal before or during the course of hearing of the appeal," 5. The ld. DR strongly challenged the order of the CIT(A) in deleting the addition made by the AO. He submitted that the AO, after thorough analysis of the facts of the case had given a finding that the Kolkata based companies are non-existent and the assessee failed to prove the three ingredients of provisions of section 68 of the Act, i.e., identity and credit worthiness of the investor companies and the genuineness of the transaction. He submitted that the ld.CIT(A), without....
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....MUM 2. Flourish Builders & Developers vs. DCIT [2019] 103 taxmann.com 72 (Delhi- Trib.) 3. Renu Proptech (P) Ltd. vs. ACIT [2021] 128 taxmann.com 242 (Delhi- Trib.) 4. ITO vs. Commitment Financial Services (P) Ltd. 2020-TIOL-218-ITATDEL 5. ITO vs. Saktideep Suppliers (P) Ltd. 2019-TIOL-47-ITAT-KOL 6. Metro Woven Sacks (P) Ltd. vs. DCIT 2020-TIOL-386-ITAT-MUM 7. Shree Silica Product (P) Ltd. vs. ITO 2020-TIOL-362-ITAT-JAIPUR 8. Stellar Investment Ltd. [1991] 192ITR 287 (Delhi) 9. Lovely Exports (P) Ltd. [2008] 299 ITR 268 (Delhi) 10. Lovely Exports (P) Ltd. [2008] 216 CTR195 (SC) 11. A-One Housing Complex Ltd. [2008] 299 ITR (AT) 327 (Delhi) 12. CIT v. Divine Leasing & Finance Ltd. [2007] 158 Taxman 440 (Delhi) 13. CIT vs. M/s Vacmet Packaging (India) (P) Ltd. [2014] 45 taxmann.com 204 (Allahabad) 14. CIT vs. M/s Vacmet Packaging (India) (P) Ltd. [2014] 45 taxmann.com 204 (Allahabad) 15. CIT v. Apex Therm Packaging (P) Ltd. [2014] 42 taxmann.com 473 (Gujarat) 16. CIT v. Morani Automotives (P) Ltd. [2014] 45 taxmann.com 473 (Rajasthan) 17. AC....
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....on u/s 68 can be made. In that case, section 68 addition was made in the hands of the assessee since the assessee was unable to produce any of the directors, shareholders or principal officers of companies to whom shares were allotted and lenders from whom unsecured loans were taken. The Tribunal considered the said issue in detail and deleted the said addition holding that the assessee has discharged its onus of establishing identity, genuineness and credit worthiness of both the investors as well as lenders. On further appeal by the Tribunal, the Hon'ble High Court dismissed the appeal filed by the Revenue. The Revenue filed SLP before the Hon'ble Supreme Court and the Hon'ble Supreme Court dismissed the SLP filed by the Revenue as reiterated in PCIT vs. Hi-Tech Residency (P) Ltd. (2018) 96 taxmann.com 403 (SC). 6.5 He accordingly submitted that since the order of the CIT(A) is in accordance with the law and all the investor companies are assessed u/s 143(3) in the very same assessment year and the concerned AOs have verified their investments while calculating the disallowance u/s 14A on the basis of 0.5% of the average investments and this being the first year of the a....
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.... on 29.01.2016 the order has been passed u/s 143(3) for AY 2013-14, copies of which are placed at pages 45-48 of the paper book. The AO has considered the average value of investment at Rs.16,71,60,000/- for AY 2012-13 and Rs.13,37,20,000/- for AY 2013-14 for computation of disallowance u/s 14A. Similarly, in the case of Solty Financial Consultant Pvt. Ltd., the order u/s 143(3) for AY 2012-13 was passed on 20th March, 2015 and for AY 2013-14 the order was passed u/s 143(3) on 11th March, 2016 copies of which are placed at pages 49-53 of the paper book. In the AY 2013-14, the AO has considered the average investment at Rs.3,42,06,253/-. Similarly, in the case of M/s Functions Distributors Pvt. Ltd., the AO passed the order u/s 143(3) on 25th March, 2015 and for AY 2013-14, the order u/s 143(3) was passed on 29th January, 2016, copies of which are placed at pages 54 to 57 of the paper book. In this case also the AO has considered the average investment at Rs.12,23,75,000/- while computing the disallowance u/s 14A for AY 2013-14. Similarly, we find, the AO passed the order u/s 143(3) on 26th March, 2015 for AY 2012-13 and on 29th January, 2016 for AY 2013-14 in the case of M/s Helpfu....
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.... not found at their addresses. It has also been held in various decisions that once genuineness, credit worthiness and identity of investors are established and whose assessments were completed u/s 143(3) at almost the same time, then, no addition can be made on account of unexplained share capital/premium. In this view of the matter and in view of the detailed reasoning given by the ld.CIT(A) while deleting the addition, we do not find any infirmity in his order. Accordingly, we uphold the order of ld.CIT(A) and the grounds raised by the Revenue are dismissed. 9. In the result, the appeal filed by the Revenue is dismissed. Pronounced in the open court on 25.11.2021. ============= Document 1 1 2 3 Name & Address of Subscriber PAN Dhanvirdhi Sales Pvt. Ltd.,10/B, AADCD7313F B.B. Ganguly Street, Kolkata. - 700012. Swabhhumi Agency Pvt. Ltd.,23/1, AANCS2028N M.D. Road, Kolkata, West Bengal - 700007. Swarnim Distributor Pvt. Ltd.,23, AANCS2024A M.D. Road, Kolkata, West Bengal - 700007. Cindrella Commodeal Pvt. AADCC6049H Ltd.,628, N.S. Road, 3 Floor, 4 Room No. 319, Kolkata, West Bengal -700001. No. of shares purchase ....
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....t AADCD9168L $5,000 55,00000/- Ltd 119, M.J. Shopping Centre, 3 Veer Sarvarkar, New Delhi 110092 Legency Mercantile Pvt Ltd 119,M.J.ShoppingCentre, VeerS arvarkar, New Delhi 110092 AACCL0594K 45,000 10 65,00000/- Document 2 "this is with reference above cited and the final notice dated March 2015, where in the show cause has been given U/s 68, for the inclusion of share capital money received along with share premium amounting to Rs. 10.15 crore in the income of the respective year as this was reported by the investigating Officer that the notice could not be served due to non-existence of the companies in the address provided. Also in the respect of companies having officer in Delhi, the directors of the said companies could not be produced. We would like to refer our earlier submissions in regard to the transactions relating to receipt of share capital and share premium. We have already filed the following documents evidencing the existence and genuineness of the Companies Investors: 1 2 3 4 6 7 8 Coples of Incorporation Certificate. Copies of MOA & AOA. Permanent Account Number (....