AI Drafter 
TaxTMI 
TaxTMI 
2022 (12) TMI 935
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....al"), in ITA no. 258/Alld./2018 for ay; 2013-14:- 1. That in any view of the matter assessment as framed on income of Rs.2,61,36,540/- by order dated 28.03.2016 passed u/s 143(3) is bad both on the facts and in law. 2. That in any view of the matter no notice u/s 143 (2) was served on the assessee nor the assessee is aware about service of notice hence the assessment framed in absence of proper issue and service of notice u/s 143 (2) is void abinitio. 3. That in any view of the matter addition of Rs.1,10,00,700/- as made by the assessing officer u/s 56 (2) (viib) of the Act, and confirmed by CIT appeal is highly unjustified. 4. That in any view of the matter the addition of Rs.1,10,00,700/- as made by the assessing officer on account of difference in share premium amount are infact capital receipts and cannot be considered as income hence simply on presumption basis addition made is highly unjustified. simply on. 5 That in any view of matter the value of shares as determined by the assessing officer as per rule 11 UA of the I.T. rules at Rs.25.29/- per share was on the basis of self working as determined by assessing officer without ment....
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....business activity had been carried out by assessee company during the year under consideration. The assessee company did not furnish any reply or explanation to justify the charging of share premium on the equity shares issued by it. The assessee submitted position of equity shares held as on 31st March, 2012 as well as 31st March, 2013, and from perusal of the same., the AO observed that outstanding shares as on 31st March, 2012 was 62000 equity shares , which increased to Rs. 2,32,000/- as on 31st March, 2013. The AO gave fresh opportunity to the assessee to give requisite details of the amount received as premium on the equity shares issued and also to justify the same. The assesse in reply submitted that 1,70,000 equity shares have been issued during the year to 13 persons @ Rs. 90/- per equity share inclusive of premium of Rs. 80/- per equity share, totaling to Rs. 1,53,00,000/-. The assessee did not furnish any further details. As regards , justification on charging of share premium, the assessee submitted as under: "ISSUE OF FRESH SHARE CAPITAL During the A.Y. 2013-14 relevant to F.Y.2012-13 we have issued 170000 fresh equity shares of Rs. 10/- at a premium of Rs. 80/-....
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....Share Premium Rs. 80/- per share Total inflow of Capital Rs. 1,53,00,000/- APPLICABILITY OF SECTION 56(2)(viib) of the Income Tax Act 1961 The Finance Act 2012 inserted clause (viib) in section 56(2) of the Income Tax Act, 1961 ("Act") with effect from April 1, 2012 to bring within the purview of taxation the premium received by a company (other than a company in which public are substantially interested" [1]), on the issue of its shares in excess of the "Fair Market Value" (FMV") of such shares. The FMV was to be the price (a) Arrived at as per the prescribed method OR (b) as may be substantiated to the assessing officer based on the value of the company at the time of issue of the shares. Also, as per the existing clause (viia) of section 56(2), if the consideration paid for the acquisition of shares (of a closely held company) is lower than the FMV of the shares, the delta is treated as income of the company or firm that acquires such shares. Rule 11U and Rule11UA of the Income-Tax Rules, 1962('IT Rules'), amongst other things, prescribed the Net Asset Value Method (based on Balance Sheet values) for arriving at the FMV for the purpose of this c....
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.... of Rs. 1,10,00,700/- representing the excess of premium charged over the Fair Market Value of the equity shares is chargeable to tax which stood added by AO to the income of the assessee under the Head "Income from other Sources". 3b. The AO issued notices under Section 136(6) to following companies who have subscribed to the share capital for the assessee company, for establishing creditworthiness of the shareholders as well as genuineness of the transaction, as under: Sr. No. Name of the Companies Address as submitted by the assessee company 1 AprajitaVanijya Private Limited Chunaraipara Colony, Post-Nawabganj, Kolkata-743144 2 Sandal Wood Commercial Pvt. Ltd. Chunaraipara Colony, Post- Nawabganj, Kolkata-743144 3 Zigzag Vanijya Private Limited Chunaraipara Colony, Post- Nawabganj, Kolkata-743144 4 ShradhaVintrade Private Limited, Chunaraipara Colony, Post- Nawabganj, Kolkata-743144 5 Champion Vintrade Private Limited 50-2, Cabin Road, Golghar Ward No. 15, Jagaddal, Kolkata-743125 The AO observed that all the aforesaid notices came back undelivered with remarks 'Not Known' from the postal authorities. The assessee was c....
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....ed summons u/s 131 to Mr. Dinesh Kumar Mishra, and finally on 16th March, 2016 said Mr. Dinesh Kumar Mishra, Director of the assessee appeared before AO, and his statement on oath was recorded by AO , gist of which is as under : The AO observed that the assessee has brought in share capital in the name of different companies purportedly, based at Kolkata and that too at significantly high premium which is neither justified nor in accordance with its Fair Market Value, despite the fact that the assessee has not been conducting any business activity as is evident from its Profit & Loss Account which shows total revenue from running of Gitti business at Rs. 2,75,500/-. The AO observed that notices sent to the investing companies have been returned back undelivered . The AO observed that on being confronted , the assessee came up with new addresses of these investing companies, and out of 5 notices sent at new addresses furnished by assessee, two notices have been served while the balance three notices have been received back undelivered. The AO observed that this is despite the fact that Director of the assessee company in his sworn statement has claimed that these investing compan....
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....th the assessee company. The AO observed that M/s Champion Vintrade Pvt. Ltd. which has invested Rs. 36,00,000/- in the shares of assessee company, the total income from operations is only Rs. 1,16,611/- and profit before tax is Rs. 10,535/- , and thus no case is made out by assessee company which could explain the capacity of these companies to invest in its shares. The AO also observed that the confirmation letter given by the said company is unsigned , and even the Director of the assessee company in his statement could not identify the name of the Director of the said company and stated that the Director of the investing company was not known to him. The AO further observed that the copy of the bank account statement shows regular flow of funds in the form of transfer entries with each debit preceded by corresponding credit entry or through transfer entries from one company to the other. The AO also observed that in the Director Report of the said investing company , it is stated that its performance is not satisfactory .Further, the Auditor has stated in its report that the company has incurred cash loss of Rs. 7,844/- and accumulated loss was Rs. 15,364/- . Thus, the AO obser....
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..../or its counsel did not appear before ld. CIT(A), but however, the assessee made following submissions, as detailed hereunder : "Submissions "One of the several issues involved in the present appeal relate to addition of share capital of Rs.1,51,20,000/- inclusive of premium charged u/s. 68 of the Act 1961 and also addition of the premium charged Rs. 1,10,00,700/- separately u/s.56(2)(vii). The AO has added a sum of Rs. 1,51,20,000/- u/s.68 which is inclusive of premium charged and Rs. 1,10,00,700/- again received as premium separately. Thus there is double addition to the extent of Rs. 1,08,71,280/- one added u/s. 68 as part of share capital of Rs. 1,51,20,000/- and then again added separately u/s 56(2). Against the total amount received Rs. 1,53,00,000/- addition has been made of Rs. 2,61,20,700/-. "It is submitted at the very outset that the double addition made is contrary to the provisions of law. On the face of it the addition of Rs.1,10,00,700/- made u/s. 56(2)(iii) should be deleted. "The company had issued 1,70,000 equity shares of FV of Rs.10/- each at a premium of Rs.80/- per share. Thus the total amount received by the company inclusi....
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....for charge of premium on issue of shares has been furnished by the assessee company either before AO or during the appellate proceedings. Rule 11UA of the Income Tax Rules, 1962 prescribes a definitive method to arrive at Fair Market Value of the shares based on a mathematical formula. This has not been followed by the appellant. AO worked out the FMV of the shares of the assessee company under Rule 11UA at the time of issue of shares as only Rs. 25.29 per share. As against this, the assessee company had issued shares at Rs. 90 per share. In other words, the assessee company has received consideration for issue of shares which exceeds FMV of the shares by Rs. 64.71 per share. Rule 11UA of the Income Tax Rules specifies the method of calculating fair market value. The FMV of unquoted shares and securities other than unquoted equity shares shall be estimated to be the price it would fetch if sold in the open market on the valuation date and the assessee obtains a report from a Category I merchant banker or a Chartered Accountant in respect of such valuation. Thus, for valuation of unquoted shares and securities, other than equity shares there are no prescribed methods, which are laid....
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.... same has not been disputed by the AO however while making the addition in respect of the share capital the AO has again added the premium amount received as unexplained. The AO accepts the premium of Rs.25.29 as reasonable and treats Rs.54.71 per share as excessive. Thus the addition of Rs.1,51,20,000/- consists of two parts namely the unexplained share capital of Rs.16,80,000/- (Rs. 17,00,000/- - 20,000/-) and the remaining amount of Rs.13,44,000 out of share premium amount of Rs. 1,36,00,000/-. Confirmation from individual applicant has been filed. In view of the above, it is submitted, that the addition made by the AO may kindly be deleted. The appeal may kindly be allowed." 4d. The ld. CIT(A) dismissed the appeal of the assessee and confirmed the additions as was made by the AO to the income of the assessee, by holding as under: "Decision: "I have gone through the facts and the written submissions filed along with the details filed enclose therein. Appellant has taken share capital from 12 applicants, of which 05 are corporate, while the remaining 08 are individuals. Appellant submitted details of share applicants with name, address, number of sha....
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....pital at a premium from Kolkata based companies even in the past also without having any financial health which raises serious doubts over the conduct of the appellant, which is best known to them. A case in the point is raising of capital from one M/s. Bajrangbali Vincom Pvt. Ltd., which held 24.19% of its share capital and which has since been struck of from the register of ROC. It is from this company that the assessee company raised share capital during A.Y. 2010-11 at a premium of Rs. 65/- per share without having any net worth. Similar is the case of another investor company, M/s. Vrindavan Commodity Pvt. Ltd. which subscribed to 40.32% of shares of the assessee company which too has now gone without trace. In contrast to this, it is pertinent to note that in its reply dated 21.12.2015; the assessee company has not shown any shareholding in the name of these companies i.e. M/s. Bajrangbali Vincom Pvt. Ltd. and M/s. Vrindavan Commodity Pvt. Ltd. It is very clear that the assessee company is in a habit of raising capital at a significant premium from Kolkata based companies which disappear without trace after subscribing to its share capital at a premium. This is followed by an....
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....to layer in the investment in the shares of the assessee company. The facts above, as relied upon by AO clearly show that the identity & genuineness of these transactions has not been established in these cases whereas in the other three companies the identity itself has been left to be proved as evident by the return of notices, not once but twice from the addresses given by the assessee company. The onus is on the assessee company to furnish a satisfactory explanation for the same, which he has failed to do so. This onus has become even more vigorous following the insertion of proviso to Section 68 of the Income Tax Act, 1961 which has come into effect by the Finance Act 2012 w.e.f. 01.04.2013 i.e. A.Y. 2013- 14, the year under consideration which is cited above. Appellant has simply submitted during the appellate proceedings that the report received from DDIT-Kolkata is self-explanatory, which the AO has chosen to completely ignore and therefore the record file may kindly be called for, examined it would be find that the same is explained. I have gone through the report and find no anomaly with the inference drawn by the AO. This shows that the appellant has no....
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....g at the addresses given in the papers submitted by them through post before AO, Hence the onus was shifted back to appellant for proving the ingredients of S. 68 as being fulfilled in these transactions. Appellant provided the new address of the lenders, shifting the onus back to AO who took the investigation further on these addresses also, but could not locate these share applicants, again shifting back the onus to appellant. Appellant has failed to shift back the onus on AO by failing to give the current addresses of the various companies. Where the assessee does not furnish the new or current correct addresses, there is no duty on AO to bring any facts on record to show that conditions required u/s 68 are not satisfied but where appellant does, then AO need to bring more facts on record to show that conditions required u/s 68 are not satisfied as HELD in Sri Jagdish Saran Shuklavs Commissioner Of Income- Tax 1988 171 ITR 694 (All). In this case appellant has failed to prove the identity of the companies and genuineness of transactions and creditworthiness as required u/s 68 of the Act. As per the provisions of Section 68 of the Income Tax Act, 1961, an assess....
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....pedestrian an interpretation the same might be. It can be said that the maximum addition made in combination of both sections should not be more than the total share capital received. We can leave this question of law for the higher legal forums to decide as the law is yet to evolve on this point. But in such cases even if the receipt is found not taxable u/s 56[2][viib] for the reason that the FMV of the shares justifies the share premium being taken bythe appellant, the same amount received can be taxed u/s 68 if the statutory requirements of S. 68 are not fulfilled like identity, genuineness and creditworthiness of the share applicant and vice versa i.e. if a receipt is not found taxable u/s 68 for the reason that the identity, genuineness and creditworthiness of the share applicant is proved but if the FMV of the shares did not justifies the share premium being taken by the appellant, the same amount received can be taxed u/s 56[2][viib]. These are deeming provisions to tax income though normally it may not have been taxed as capital receipt, where double addition is possible. In the light of above narration and express legal provisions, I hold that the sum of....
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.... order. It was submitted that assessee followed NAV(Net Asset Value) method to determine Fair Market Value(FMV) of the equity shares. It was submitted that as per NAV method, FMV of shares comes to Rs. 87 per equity share , while issue price was Rs. 90 per share. It was submitted that the AO did not gave any working as to how FMV of Rs. 25.29 per share was arrived at by him. The ld. Counsel for the assessee submitted that as per Rule 11UA , the FMV of equity shares was Rs. 87.00 per share . Our attention was drawn to the Page No. 3 of the paper book ,where working of Fair Market value(FMV) of equity share is provided , which is reproduced hereunder: Working: Particulars Amount (Rs.) Total Value of Assets as per Balance sheet as on 31st March, 2012 2,04,44,467 Less: Unamortised amount of deferred expenditure (shown in schedule 11: Other non-current Assets of the ABS- placed at (Page No. 21 of the Paper-book) 21,910 Less: Amount of Advances Income Tax Shown in schedule 16: Short term loans and advances of ABS placed at Page NO. 22 of the Paper Book 27,130 Book Value of Assets-'A' 2,03,95,427 L= book value of liabilities shown in the bal....
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....are while making addition u/s 68 read with Section 115BBE, while the assessee issued 170000 equity shares during the year. It was submitted that so far as 2000 equity shares issued by assessee company to individuals is concerned, the same were accepted by the AO, and no additions were made so far as additions made u/s 68 read with Section 115BBE is concerned. While so far as additions made u/s 56(2)(viib), the additions wrt entire 170000 equity shares issued by the assessee were made by the AO. Our attention was drawn to Page no 29 of the paper book ,where the details of the equity shares issued by the assessee company to the tune of 168000 equity shares to 5 companies all based in Kolkatta are placed , and also to page 29-30/paper book where the details of 2000 equity shares to 8 individuals are placed. Thus, total equity shares aggregating to 170000 were issued by the assessee company during the year under consideration to 13 persons, out of which 168000 equity shares were issued to 5 Kolkatta based companies, while 2000 equity shares were issued to 8 individuals, all equity shares issued at a price of Rs. 90/- per equity share comprising face value of Rs. 10 per equity share and....
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.... placed in paper book filed by Department/page 76. Our attention was drawn to paper book filed by department/page 80-84 , which is a notice dated 11.12.2015 issued u/s 142(1). Our attention was drawn to page 85-90 of the paper book filed by department, wherein reply dated 21.12.2015 was filed by the assessee in response to aforesaid notice u/s 142(1) is placed , and in this reply the list of shareholders to whom shares were issued in the year under consideration as well earlier years were placed. Our attention was also drawn to page No. 193 of the paper-book filed by the Department., wherein information supplied by Champion Vintrade Pvt. Ltd. to department is placed. Our attention was also drawn to Page No. 194 of the paper-book filed by department,wherein certificate issued by Champion Vintrade Pvt. Ltd.(which is unsigned) is placed, explaining source of making investment in the assessee company. Our attention was also drawn to Page No. 195 of the paper book filed by department, wherein the bank statement of Champion Vintrade Pvt. Ltd. is placed ,and it was submitted that the funds to the tune of Rs. 36 lacs were transferred from the bank account of Champion Vintrade Private Limit....
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....so drawn to the decision of Mumbaitribunalin the case of Pratik Syntex Private Limired v. ITO, reported in (2018) 94 taxmann.com 12(Mum-tribunal) in which one of us being Accountant Member was part of the Division Bench that pronounced the order , and it was submitted that merely because return of allotment filed with ROC/MCA is not filed before the authorities below, will not make these share investment as non genuine, as filing of return of allotment is merely administrative/ministerial work. It was submitted that additions u/s 68 read with Section 115BBE is made w.r.t. 5 corporate entities who invested in assessee company, while additions u/s 56(2)(viib) was made with respect to all the thirteen investing persons , viz. 5 corporate entities and 8 individuals. It was also submitted that double additions are not possible . The ld. Counsel for the assessee relied upon decision of Hon'ble Kerala High Court in the case of Sunrise Academy of Medical Specialties India Private Limited , reported in (2018) 409 ITR 109(Kerala HC) , and it was submitted that double addition is not possible. It was also submitted that only one addition can be sustained , if it is proved that transaction is ....
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....ok filed by department and it was submitted that when the letters issued u/s 133(6) to these investing companies returned undelivered by the postal authorities, the assessee furnished new addresses and explained that registered offices of these companies changed, and new address as per MCA portal was furnished by assessee.Our attention was drawn to page 179- 189 of paper book filed by department, and it was submitted by ld. Sr. DR that the AO sent fresh notices u/s 133(6) to all the five investing companies, and out of five fresh notices, three notices returned undelivered/unserved by postal authorities, while 2 companies to whom notices u/s 133(6) were issued duly responded. Our attention was drawn to page 187-189 of paper book filed by department, and it was submitted that these are the copies of envelop showing return by postal authorities in case of Aparajita Vanijya Private Limited, Zigzag Vanijya Private Limited and ShradhaVintrade Private Limited, wherein envelop's containing notices u/s 133(6) returned, while notices u/s 133(6) were served in the case of two investing companies namely M/s Champion Vintrade Private Limited and M/sSandal Wood Commercial Private Limited. Our a....
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....rves, investments made by these company , bank details as on 31.03.2014. It was also submitted that they have nil turnover and nil income , except Champion Vintrade Private Limited which has meager gross income of Rs. 1,16,611/- and taxable income of Rs. 10,540/- . Our attention was drawn to investment made by these companies in the assessee company. The detail of Director of these companies on the date when investment was made in the assessee by these companies, wherein Mr. Arvind Pandit was Director in the four companies, except in Champion Vintrade Private Limited, while presently Mr. Aditya Pathak and Mr. Jayanto Roy are Directors in all these five investing companies. It was submitted that all these five companies are deactivated by MCA, while four companies except Champion Vintrade Private Limited were struck off by MCA. 5h. The ld. Counsel for the assessee at this stage raised preliminary objection under Rule 27 & 29 of ITAT Rules, 1963, with respect to filing of details by way of additional evidences by the department in page 425-426 of paper book. 5i. The ld. Sr. DR submitted that the assessee do not have any business activities , apart from raising share capital fro....
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....saction of raising of share capital at huge share premium, in aggregate to Rs. 1,51,20,000/- . It was submitted that the assessee failed to satisfactorily explain the source of source of raising share capital at a huge share premium and proviso to Section 68 is applicable , and hence the AO has rightly made additions by invoking provisions of Section 68 read with Section 115BBE. Alternatively, it was submitted that the AO also invoked provisions of Section 56(2)(viib). The ld. Sr. DR has filed paper book containing case laws, and reliance was placed on following decisions: a) PCIT v. NRA Iron & Steel Private Limited , reported in (2019) 412 ITR 161(SC) b) PCIT v. NDR Promoters Private Limited, reported in (2019) 410 ITR 379(Del HC) c) NDR Promoters Private Limited v. PCIT, reported in (2019) 266 Taxman 93(SC) d) CIT v. Midas Golden Distilleries Private Limited , reported in (2021) 283 Taxman 395(Mad. HC) e) CIT v. Sadiq Sheikh (2021) 429 ITR 163(Bom. HC) f) Royal Rich Developers Private Limited v. PCIT , reported in (2019) 265 Taxman 99(Bom.) g) CIT v. Globus Securities & Finance Private Limited, reported in (2014) 264 ....
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.... was submitted that ITO, Kanpur issued notices u/s 133(6) , and information was sent by these investing companies to ITO, Kanpur , and in between there was transfer of jurisdiction , and if the department had not received the letters sent by investing companies, the assessee cannot be blamed. Our attention was drawn by ld. Counsel for the assessee to page 53-62/paper book filed by department, wherein information u/s 133(6) were called by ITO, Kanpur from these five investing companies, vide letter dated 28.09.2015 and 05.10.2015. It was submitted that replies were duly filed by these investing companies on 20.11.2015, to ITO, Kanpur(page 167-170/paper book filed by department), which was sent by speed post. Our attention was drawn to page 74-76/paper book filed by department, and it was submitted that these are orders passed u/s 127(1) and 127(3) by ld. PCIT for transfer of jurisdiction in the case of the assessee, from ITO, Kanpur to ITO, Banda. The ld. counsel for the assessee submitted that there is no such requirement of explaining source of source of investment in share capital. The ld. Counsel for the assessee relied upon the judgment and order of Hon'ble Calcutta High Court ....
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....quity shares of Rs. 10 each of par/face value were issued by assessee at a share premium of Rs. 80 per equity shares, i.e. at issue price of Rs. 90 per equity share, during the year under consideration . The AO observed that the assessee has raised share capital at consideration price of Rs. 90 per equity share including share premium of Rs. 80 per equity shares, from the following persons: S. No. Name and Address of Shareholders Nos. of shares issued Mode of payment Date of payment Amount Received (Rs.) 1 Champion Vintrade Private Limited 50-2, Cabin Road, Golghar Ward No. 15, Jagaddal, Kolkata-743125 40000 Bank RTGS 09.06.2012 36,00,000 2 AprajitaVanijya Private Limited, Chunaraipara Colony, Post- Nawabganj, Kolkata-743144 28000 Bank RTGS 12.05.2012 25,20,000 3 Zigzag Vanijya Private Limited Chunaraipara Colony, Post- Nawabganj, Kolkata-743144 28000 Bank RTGS 12.05.2012 25,20,000 4 ShradhaVintrade Private Limited, Chunaraipara Colony, Post- Nawabganj, Kolkata-743144 28000 Bank RTGS 22.05.2012 25,20,000 5 Sandal Wood Commercial Pvt. Ltd. Chunaraipara Colony, Post- Nawabganj, Kolkata-743....
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..... 10 each at an issue price of Rs. 90 per equity share inclusive of share premium of Rs.80 per equity shares. The ld. CIT(A) affirmed the aforesaid additions as was made by the AO in the assessment order. The AO further made addition to the tune of Rs. 1,10,00,700/- by invoking provisions of Section 56(2)(viib) of the 1961 Act with respect to all the thirteen investing persons , being excess of consideration for issue of equity shares and the Fair Market value(FMV). This addition was also confirmed by ld. CIT(A). Thus, the AO made two additions aggregating to the tune of Rs. 2,61,20,700/- in the hands of the assessee, firstly by invoking provisions of Section 68 read with Section 115BBE to the tune of Rs. 1,51,20,000/- with respect to share money inclusive of share premium raised from 5 corporate entities based at Kolkatta and further second addition of Rs. 1,10,0700/- was made by invoking provisions of Section 56(2)(viib) with respect to share money inclusive of share premium raised from 13 persons which included 5 corporate entities as well 8 individuals , while the assessee only raised aggregate amount of Rs. 1,53,00,000/- during the year under consideration, from issue of 17000....
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....excluded from the total income under this Act shall be chargeable to income-tax under the head "Income from other sources", if it is not chargeable to income-tax under any of the heads specified in section 14, items A to E. (2) In particular, and without prejudice to the generality of the provisions of subsection (1), the following incomes, shall be chargeable to income-tax under the head "Income from other sources", namely :- *** *** (viib)where a company, not being a company in which the public are substantially interested, receives, in any previous year, from any person being a resident, any consideration for issue of shares that exceeds the face value of such shares, the aggregate consideration received for such shares as exceeds the fair market value of the shares: Provided that this clause shall not apply where the consideration for issue of shares is received- (i) by a venture capital undertaking from a venture capital company or a venture capital fund; or (ii) by a company from a class or classes of persons as may be notified by the Central Government in this behalf. Explanation.-For the purposes of thi....
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...., being goodwill, know-how, patents, copyrights, trademarks, licences, franchises or any other business or commercial rights of similar nature. This amendment will take effect from 1st April, 2013 and will, accordingly, apply in relation to the assessment year 2013-14 and subsequent assessment years." C. Measures to Prevent Generation and Circulation of Unaccounted Money CASH CREDITS UNDER SECTION 68 OF THE ACT "Section 68 of the Act provides that if any sum is found credited in the books of an assessee and such assessee either (i) does not offer any explanation about nature and source of money; or (ii) the explanation offered by the assessee is found to be not satisfactory by the Assessing Officer, then, such amount can be taxed as income of the assessee. The onus of satisfactorily explaining such credits remains on the person in whose books such sum is credited. If such person fails to offer an explanation or the explanation is not found to be satisfactory then the sum is added to the total income of the person. Certain judicial pronouncements have created doubts about the onus of proof and the requirements of this secti....
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....x as per the tax rate applicable to the assessee. In case of individuals, HUF, etc., no tax is levied up to the basic exemption limit. Therefore, in these cases, no tax can be levied on these deemed income if the amount of such deemed income is less than the amount of basic exemption limit and even if it is higher, it is levied at the lower slab rate. In order to curb the practice of laundering of unaccounted money by taking advantage of basic exemption limit, it is proposed to tax the unexplained credits, money, investment, expenditure, etc., which has been deemed as income under section 68, section 69, section 69A, section 69B, section 69C or section 69D, at the rate of 30% (plus surcharge and cess as applicable). It is also proposed to provide that no deduction in respect of any expenditure or allowance shall be allowed to the assessee under any provision of the Act in computing deemed income under the said sections. This amendment will take effect from 1st April, 2013 and will, accordingly, apply in relation to the assessment year 2013-14 and subsequent assessment years. [Clause 45] Notes On Clauses "It is proposed to insert a new clause (viib) ....
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.... apply if the person, in whose name the sum referred to therein is recorded, is a venture capital fund or a venture capital company as referred to in clause (23FB) of section 10. This amendment will take effect from 1st April, 2013 and will, accordingly, apply in relation to the assessment year 2013-2014 and subsequent assessment years." Before , we proceed further, we have to see inter-play between Section 68 and 56(2)(viib). Section 68 is applicable to all the assessee and is an anti tax evasion measure, which act as a measures to prevent generation and circulation of unaccounted money. There was an amendment by Finance Act, 2012,wherein proviso is added to Section 68 , which stipulates that in case of closely held companies in which public is not substantially interested, the person in whose name credit is appearing in the books of the tax-payer with respect to share capital, share application money , share premium or by any other name called, shall also be required to explain the source of making such investment. While Section 56(2)(viib) deals with a class of companies in which public is not substantially interested , and sought to bring to tax excess of considerat....
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....ic offers(IPO) wherein shares are listed on stock exchanges and widely traded, wherein members of public make subscriptions in pursuance to the Prospectus issued by the company. Issue of shares in these cases to general public in India as well abroad are approved, regulated and monitored by various authorities who are engaged in regulating and managing securities market such as Securities and Exchange Board of India (SEBI), Stock Exchanges, Government of India etc.. Those members of public who make subscription in Public issues of securities are widely scattered all over the country or even outside India as any person entitle to apply as per the conditions prescribed in the prospectus can place an application subscribing to the shares of the company by depositing duly filled in application along with application money with the designated authorized recipients of the company stipulated in the prospectus such as bankers, brokers, under-writers, merchant bankers, company offices etc. These shareholders who are member of public are un-known persons to the company issuing shares and the company issuing shares have no control/mechanism to verify their creditworthiness etc. and the burden....
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....ew, merely submission of the name and address of the creditor, income tax returns, Balance Sheet/statement of affairs of the creditor and bank statement of the creditor is not sufficient as the AO is to be satisfied as to their identity and creditworthiness as well as to the genuineness of the transaction entered into. Thus, if the taxpayer is not able to give satisfactory explanation as to nature and source of the credits in the books, the entire amount is liable to be added as income of the person in whose books the said sum stood credited by invoking provisions of Section 68. Now, with the newly inserted proviso by Finance Act, 2012 w.e.f. 01.04.2013, burden is more onerous in case of closely held companies raising share capital, share application money and share premium etc. are now even required to explain to the satisfaction of the AO as to the sources of investor making investment in such tax-payer company . If such tax-payer fails to offer explanation or explanation offered is not satisfactory as per AO, then the entire amount which stood credited in the books of the taxpayer shall be added as income by invoking provision of Section 68 , and then one need not proceed to mak....
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....x. However if an explanation is offered and if it is satisfactory in the case of a Company in which the public are not substantially interested, then the charge to tax will only be to that portion exceeding the fair market value determined; which anyway has to occur under Section 56(2)(viib). 10. If Section 68 is applicable, and the proviso is not satisfied, then the entire amounts credited to the books would be treated as income. If satisfactory explanation is offered as to the source, then the premium paid as revealed from the books will be brought to tax as income from other sources. The contentions raised are to be negatived.: Reference is also drawn to the appellate order passed by Kolkatta-tribunal in the case of Subhlakshmi Vanijya Private Limited v. CIT, reported in (2015) 60 taxmann.com 60(Kol-trib.), wherein tribunal discussed the inter-play between Section 68 and 56(2)(viib), as under: "13.af. At this stage, we consider it appropriate to discuss the submission of the ld. AR that a simultaneous amendment to section 56(2) connected with the amendment to section 68, has also been made w.e.f. 1.4.2013 and hence section 68 amendment is also retrospective.....
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....nds crossed and the share premium, to the extent stipulated, is chargeable to tax u/s 56(2)(viib) of the Act. It shows that only when source of such share premium in the hands of a shareholder is properly explained to the satisfaction of the AO, that the provisions of section 56(2)(viib) gets triggered. Approaching this section pre-supposes that the assessee genuinely received share premium from the share-holder having satisfactorily explained the transaction. Thus it is evident that sections 68 and 56(2)(viib) can never simultaneously operate. The later excludes the former and vice versa." Thus, we hold that firstly, it is to be seen that the assessee passes the requirements as to offering of explanation to the satisfaction of AO as is provided u/s 68 with respect to the consideration received on issue of 1700000 equity shares of Rs. 10 face value , which were issued at Rs. 90 per equity share including share premium of Rs. 80 per equity share, and if not, then the entire amount of consideration received which could not be satisfactorily explained as per requirement of Section 68 shall be brought to tax. But, once the assessee satisfied to the satisfaction of the AO as to the i....
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....Bank RTGS 09.06.2012 36,00,000 2 AprajitaVanijya Private Limited, Chunaraipara Colony, Post- Nawabganj, Kolkata-743144 28000 Bank RTGS 12.05.2012 25,20,000 3 Zigzag Vanijya Private Limited Chunaraipara Colony, Post- Nawabganj, Kolkata-743144 28000 Bank RTGS 12.05.2012 25,20,000 4 ShradhaVintrade Private Limited, Chunaraipara Colony, Post- Nawabganj, Kolkata-743144 28000 Bank RTGS 22.05.2012 25,20,000 5 Sandal Wood Commercial Pvt. Ltd. Chunaraipara Colony, Post- Nawabganj, Kolkata-743144 44000 Bank RTGS 21.05.2012 09.06.2012 25,20,000 14,40,000 Thus, as could be seen that these 5 investing companies are all Private Limited Companies , which are residents based at Kolkatta. The amounts have been invested in the month of May/June, 2012. During the course of assessment proceedings, the assessee recorded statement on oath of Director of the assessee company namely Mr. Dinesh Kumar Mishra u/s 131, on 16.03.2016. The gist of said statement is reproduced hereunder: As could be seen from the above statement given by Mr. Dinesh Kumar Mishra, Director of the assessee company, that he has given an evasive repli....
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....tors of these 5 investing companies and recording of their statements, to unravel truth. The AO is both the investigator and the adjudicator. The assessee has claimed that these three investing companies , namely Aparajita Vanijya Private Limited, Zigzag Vanijya Private Limited and Shradha Vintrade Private Limited, initially responded by sending information through speed post, to ITO, Kanpur who initially issued letters u/s 133(6), but in between jurisdiction of ITO Changed to ITO, Banda from ITO , Kanpur. The assessee has placed said documents sent by these three investing companies on record to substantiate that these investments are genuine and credit worthiness as well identities of these investing companies stood proved. It is pertinent to mention that the jurisdiction of the AO was changed from ITO, Kanpur to ITO, Banda, on the request of the assessee, as the assessee filed application requesting for transfer of jurisdiction as the assessee has shifted its business from Kanpur to Hamipur. Before Proceeding further, it is also pertinent to mention that the assessee company was incorporated on 23.06.2009. The assessee company audited accounts for the year under consideration , ....
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....aceable. Both these companies are based in Kolkatta. It is also interesting to note from the copy of ITR filed by the assessee itself with department for ay: 2010-11 (page 5/paper book filed by department), that additionally one more Kolkatta based company namely M/s Zodiac Dealcom Private Limited, 14-C, Maharashi Devendra Road, Kolkatta , also held 16.13% shares of the assessee company, as at 31.03.2010. Thus, as could be seen that as high as more than 80% of its shareholding were held by Kolkatta based companies as on 31.03.2010, from whom the assessee has raised share capital at premium , in the very first year of its incorporation i.e. financial year 2009-10, that is how share capital of Rs. 6,20,000 and share premium of Rs. 46,80,000/- as on 31.03.2010, was constituted . The details of these three investing companies duly found mentioned in the ITR filed by assessee for ay: 2010-11. It is further interesting to note from the said ITR filed by assessee for ay: 2010-11 , that its income from operations were Rs. Nil during financial year 2009-10. It is also pertinent to mention that the assessee has filed details of shareholders as on 31.03.2011 before AO in its reply dated 21.12....
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....se so called under shell/garb of legitimate investments are made, the entire documentation for substantiating their identity, creditworthiness and genuineness are created and are handed over by these investing companies engaged in laundering money to the invested company in whom these investments are made , and along with is handed over simultaneously all the necessary blank signed documents to reverse the transaction at the date convenient to the invested company , so that the actual promoters can transfer the shares allotted to these companies engaged in money laundering at later date ,to themselves or their nominees /relatives at a throw away prices and consideration for reversal is also paid in cash and no money trail through banking channel will be available when the transactions are reversed. This will then enable the actual promoters and/or their nominees/relatives to wrest back control of their company , and at the same time unaccounted money are brought into the company by way of share capital allotted at huge premium for which laundered money comes through banking channel through these investing companies , and while on reversal the shares are transferred at throw away pr....
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....has a plot of land of 800 square yards on which it proposes to develop real estate project and hence higher valuation for shares. We are afraid that this contention lacks merit, as in the year 2009-10 itself when the assessee company was a newly incorporated entity having no business, it issued equity shares of Rs. 10 each at a share premium of Rs. 65 per equity share to three Kolkatta based investing companies which held as high as 80%+shares, and it is pertinent to mention that the assessee has purchased the plot of land of 800 square yards in financial year 2011-12 , as is reflected in ITR for ay: 2012-13 as no such property was there in the accounts until financial year 2010-11. Thus, even when there was no business was carried out by the assessee and no plot of land was available with assessee company to undertake any real estate project, the assessee company raised share capital at a premium of Rs. 65 per share , at issue price of Rs 75 per share in financial year 2009-10 i.e. the year of incorporation from these Kolkatta based company as against face value of Rs. 10 per equity share, and hence to say that the assessee issued shares at Rs. 90 per share including share premium....
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.... names now are not reflected in the shareholder list of the assessee company as at 31.03.2011 filed by assessee before AO vide reply dated 21.12.2015, and no explanation is forthcoming from assessee with respect thereto.. The assessee has claimed to have filed response of these five investing companies with AO,as certified in paper book at page number 85-212 (paper book filed by the assessee with tribunal), which is disputed by Revenue that said replies were not filed before the authorities below. Now, let us analyse all these documents pertaining to these five investing companies, as claimed by the assessee to have been filed before authorities below in its defense albeit disputed by Revenue : a) Champion Vintrade Private Limited This investing company has confirmed that it invested Rs. 36,00,000/- in the assessee company via RTGS sent on 09.06.2012 through Indusind Bank, Burra Bazar, Kolkatta, for subscribing to 40000 shares of Rs. 10 each at premium of Rs. 80 per share of the assessee company. The source of investment is shown to be advance received against sale of shares from M/s Avtar Suppliers Private Limited to the tune of Rs. 25,50,000/- and from M/s Russl....
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....d none of the investments are in quoted shares/mutual funds which are liquid form of investments and can generate higher as well regular returns. Despite huge investments made by it, the investing company did not got any dividend from its investments in this year as well preceding year, as the income of Rs. 1,16,611/- declared by it for year under consideration is from interest income . Thus, the company did not consider investment in quoted shares/Mutual Funds , which are liquid and scope of growth is higher if investments are made in blue chip companies. The company has not declared any dividend during the year as well preceding year, and it is stated in Directors Report that the Company's performance is not satisfactory. This is against the theory of commercial expedience ,and is a path to self destruction, that is why we have seen many of these companies are struck off from records of ROC and are now untraceable. Thus, the entire factual matrix as discussed above leads to one and only one conclusion that this company is engaged in money laundering activities, where in it is a conduit/shell company to launder and convert unaccounted money of invested companies to bring in the bo....
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....2 there were purchase /sale of shares/Mutual Fund routed through Profit and Loss Account. It has declared post tax profit of Rs. 7,969.07 for the financial year ended 31.03.2013, while for the financial year 2011-12, there was loss of Rs. 22,618.45. Thus, the company does not have any business apart from investments and/or sale / purchase of share/MF in preceding year. This company has paid up share capital of Rs. 19,53,750 as at 31.03.2012 and also at 31.03.2013, while Reserves and Surplus were to the tune of Rs. 36,88,13,930.05 as at 31.03.2012 and Rs. 36,88,21,899.12 as at 31.03.2013. The aforesaid Reserves and Surplus comprises mainly of Securities Premium received on issue of shares which was at Rs. 36,88,54,010 as at 31.03.2022 as well at 31.03.2013. Thus, as against share capital of Rs. 19,53,750 consisting of 195375 equity shares of Rs. 10 each, the securities premium raised on issue of shares is to the tune of Rs. 36,88,21,899.12 translating into average share premium of Rs. 1887.76 per equity shares, which by no means justify issuing shares at whopping price of Rs. 1898 per share keeping in view business of the said investing company . This company has majorily one asset ....
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....00/-and Rs. 2,00,000/-on same day, while Rs. 5,00,000/- stood credited on 09.05.2012 . The balance prior to this credit was Rs. 10298.77 and the average balance maintained in this account was meager Rs. 10,000/-. There are several credits in this account , which are succeeded by debits of the same amount on the very same or within 2-3 day of credit of amount in bank account , so that balance maintained is merely Rs. 10,000/-. The source of investment is shown to be receipt from M/s Shivdarshan Commodeal Private Limited to the tune of Rs. 7,00,000/- and from M/s Russle Mercantile Private Limited to the tune of Rs. 18,20,000/- . It has passed a Board Resolution dated 19.07.2011 authorizing Mr. Arvind Pandit, Director to invest the fund of the company and to do all necessary documentation with respect thereto on behalf of the company The investing company has not furnished its ITR for ay : 2013-14 , while ITR for assessment year 2011-12 is furnished in which income is reflected at loss of Rs. 16,210. The income from operation in financial year 2010-11 was Rs. Nil. The perusal of Balance Sheet as at 31.03.2013 will reveal that there is no fixed assets as at 31.03.2012 and also at 31.03....
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....off from Register of ROC/MCA. Thus, the entire factual matrix as discussed above leads to one and only one conclusion that this company is engaged in money laundering activities, where in it is a conduit/shell company to launder and convert unaccounted money of invested companies to bring in the books of invested company by way of share capital and share premium raised by invested company through these investing companies based at Kolkatta. d) Shradha Vintrade Private Limited This investing company has confirmed that it invested Rs. 25,20,000/- in the assessee company via RTGS sent on 22.05.2012 through Indusind Bank. The reply was claimed to be sent on 20.11.2015 to ITO, Kanpur, but on 19.11.2015, the jurisdiction of the case stood shifted from ITO, Kanpur to ITO, Banda. The revenue has denied to have received the said reply. The jurisdiction was shifted at the behest of the assessee company. The assessee has enclosed reply of said company before ITO. The copy of bank statement of Indusind Bank is enclosed, and the said investing company has remitted an amount of Rs. 25,20,000 on 22nd May, 2012 through RTGS , for making investment in the assessee company . This d....
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.... are in unquoted shares. Thus, the company did not consider investment in quoted shares/Mutual Funds , which are liquid and scope of growth is higher if investments are made in blue chip companies. Despite huge investments made by it, the investing company did not got any dividend from its investments in this year as well in the preceding year. The company has not declared any dividend during the year as well preceding year, and it is stated in Directors Report that the company's performance is not satisfactory. This is against the theory of commercial expedience ,and is a path to self destruction, that is why we have seen many of these companies are struck off from records of ROC and are now untraceable. The name of the assessee was also struck off from Register of ROC/MCA. Thus, the entire factual matrix as discussed above leads to one and only one conclusion that this company is engaged in money laundering activities, where in it is a conduit/shell company to launder and convert unaccounted money of invested companies to bring in the books of invested company by way of share capital and share premium raised by invested company through these investing companies based at Kolkatta.....
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....3.2013, while Reserves and Surplus were to the tune of Rs. 39,06,67,877.81 as at 31.03.2012 and Rs. 39,06,75,681.36 as at 31.03.2013. The aforesaid Reserves and Surplus comprises mainly of Securities Premium received on issue of shares which was at Rs. 39,06,92,500/- as at 31.03.2022 as well at 31.03.2013. Thus, as against share capital of Rs. 20,63,500/- consisting of 206350 equity shares of Rs. 10 each, the securities premium raised on issue of shares is to the tune of Rs. 39,06,92,500/- translating into average share premium of Rs. 1893 per equity shares, which by no means justify issuing shares at whopping price of Rs. 1903 per share keeping in view business of this investing company . This company has majorly one asset which is investment in equity shares of other companies , which stood at Rs. 39,18,90,000/- as at 31.03.2012 and Rs. 37,14,80,000/- as at 31.03.2013. It is interesting to note that the entire investments made by it are in unquoted shares , and none of the investments are in quoted shares/mutual funds which are liquid form of investments. Despite huge investments made by it, the investing company did not got any dividend from its investments in this year as well ....
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....m/2014, vide appellate order dated 24.08.2016 , in which one of us being Accountant Member was part of the Division Bench which pronounced the order. The said appellate order of tribunal in the case of Royal Rich Developer was affirmed by Hon'ble Bombay High Court in Royal Rich Developers Private Limited v. PCIT, reported in (2019) 265 Taxman 99(Bom.). Our view is fortified by the decision of Mumbai-tribunal in the case of Pratik Syntex Private Limited v. ITO, reported in (2018) 94 taxmann.com 12(Mum.) , in which one of us being Accountant Member was part of the Division Bench which pronounced the order. Our view is further fortified by the decision of Hon'ble Supreme Court in the case of A. Govindarajulu Mudaliar v. CIT [1958] 34 ITR 807, wherein Hon'ble Supreme Court held as under: "Now the contention of the appellant is that assuming that he had failed to establish the case put forward "by him, it does not follow as a matter of law that the amounts in question were income received or accrued during the previous year, that it was the duty of the Department to adduce evidence to show from what source the income was derived and why it should be treated as concealed i....
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....ct is erroneous and also prejudicial to the interest of the revenue? (d) Whether the impugned judgement of the learned Tribunal is perverse? 22. We shall consider the second question first. In a commentary on the Prevention of Money Laundering Act, 2002 by Dr. M. C. Mehanathan published by Lexis Nexis, 2014, the steps of money laundering are described as follows:- "STEPS OF MONEY-LAUNDERING Although money-laundering often involves a complex series of transactions, it generally includes the following three basic steps: 1. Placement It involves introduction of the proceeds of crime into the financial system. This is accomplished by breaking up large amounts of cash into smaller sums that are then deposited directly into a bank account, or by purchasing monetary instruments, transferring the cash overseas for deposit in banking/financial institutions, use for purchase of high value things such as gold, precious stones, art works etc. and reselling the same through cheques or bank transfers etc. 2. Layering This involves formation of complex layers of financial transactions which distance the illicit proce....
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.... premium of Rs.31.7 crores. (b) From the information made available by the assessee, it appears that 19 out of 39 applicants secured funds, for the purpose of contributing to the share capital of the assessee, on account of share application money. In other words, those 19 applicants collected funds on account of share application money in their respective companies and that money was contributed to the share capital of the assessee. 15 out of the 39 applicants procured the requisite fund by selling shares. The rest of the applicants of shares, in the share capital of the assessee company, did not disclose the nature of receipt at their end though the source of fund was identified. What has not been specified is, as to on what account was the money received. (c) The forms of share application purporting to have been signed by the applicant companies have also been disclosed from which it appears that the date of allotment, number of allotment, number of shares allotted, share ledger folio, allotment register folio, application number, have all been kept blank. These particulars, Mr. Poddar, submitted should have been filled up by the assessee, but that has not bee....
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....nce and the prima facie finding, we are emboldened to say that the three requirements: (A) identity of the share-holders; (B) genuineness of the transaction and (C) the creditworthiness of the share-holders repeatedly impressed, by Mr. Poddar, upon us, have not been satisfied. Identity of the alleged shareholders is known but the transaction was not a genuine transaction. The transaction was nominal rather than real. The creditworthiness of the alleged share holders is also not established because they did not have any money of their own. Each one of them received from somebody and that somebody received from a third person. Therefore, prima facie, the share-holders are mere name lenders. 25. For the reasons discussed in the preceding paragraph, we are satisfied that the judgement in the case of Steller Investment (supra) has no manner of application to the facts and circumstances of this case. The question as to whether there has been a device adopted for money laundering also did not crop up for consideration in that case. The Prevention of Money Laundering Act, 2002 was not also there on the statute at that point of time. Before the appeal in Steller Investment....
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....ee where "the preponderance of evidence indicates absence of culpability". In the present case there exists reasonable suspicion if not prima facie evidence of culpability. 26. The learned Tribunal in the impugned judgement in paragraphs 3, 4 and 5 observed, inter alia as follows:- "We have heard the rival submissions and perused the relevant material on record. It is relevant to mention that we have disposed of more than 500 cases involving same issue through certain orders with the main order having been passed in a group of cases led by Subhlakshmi Vanijya Pvt. Ltd. v. CIT (ITA No.1104/Kol/2014) dated 30.07.2015 for the A. Y. 2009-10. Both the sides have fairly admitted that facts and circumstances of the cases under consideration are mutatis mutandis similar to those decided earlier, except for certain issues which we will advert to a little later. In our aforesaid order in Subhalakshmi Vanijya Pvt. Ltd. v. CIT (ITA No. 1104/Kol/2014 A.Y. 2009-10), we have drawn the following conclusions:- ** ** **" It is noticed that all or some of the above conclusions are applicable to the appeals in this batch." The appellant has disclos....
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.... it cannot be said that where an assessee has been assessed to tax it was prejudicial to the interests of revenue on the ground that no assessment could have been made in respect of the income of which she made a voluntary return. This contention in our view is unwarranted by the language of section 33B. The words of the section enable the Commissioner to call for and examine the record of any proceeding under the Act and to pass such orders as he deems necessary as the circumstances of the case justify when he considers that the order passed was erroneous in so far as it is prejudicial to the interests of the revenue. It is not, as submitted by the learned advocate, prejudicial to the interests of the revenue only if it is found that the assessment for the year was disclosed on the basis that an income had been earned which is assessable. Even where an income has not been earned and is not assessable, merely because the assessee wants it to be assessed in his or her hands in order to assist someone else who would have been assessed to a larger amount, an assessment so made can certainly be erroneous and prejudicial to the interests of the revenue. If so and we think it is so the C....
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....nterest of the revenue was considered by this Court in the case of Maithan International (supra) to which one of us (Girish Chandra Gupta, J.) was a party wherein the following views were expressed:- 'It is not the law that the Assessing Officer occupying the position of an investigator and adjudicator can discharge his function by perfunctory or inadequate investigation. Such a course is bound to result in erroneous and prejudicial orders. Where the relevant enquiry was not undertaken, as in this case, the order is erroneous and prejudicial too and, therefore, revisable. Investigation should always be faithful and fruitful. Unless all fruitful areas of enquiry are pursued the enquiry cannot be said to have been faithfully conducted. In a different context the apex court observed "contra veritatem lex nunquam aliquid permittit : implies a duty on the court to accept and accord its approval only to a report which is the result of faithful and fruitful investigation" (See Sidhartha Vashisht alais Manu Sharma v. State (NCT of Delhi) reported in [2010] 6 SCC 1 paragraph 200 at page 80)' In the case of N.R. Portfolio (P.) Ltd. (supra) the following vie....
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.... on account of share application can be roped in under Section 68 of the Income Tax Act if the source of the receipt is not satisfactorily established by the assessee. Reference in this regard may be made to the judgement in the case of Sumati Dayal (supra) wherein Their Lordships held that any sum "found credited in the books of the assessee for any previous year, the same may be charged to income tax....". We are unable to accept the submission that any further investigation is futile because the money was received on capital account. The Special Bench in the case of Sophia Finance Ltd. (supra) opined that "the use of the words "any sum found credited in the books" in Section 68 indicates that the said section is very widely worded and an Income-tax Officer is not precluded from making an enquiry as to the true nature and source thereof even if the same is credited as receipt of share application money. Mere fact that the payment was received by cheque or that the applicants were companies, borne on the file of Registrar of Companies were held to be neutral facts and did not prove that the transaction was genuine as was held in the case of Nova Promoters and Finlease (P) Ltd. (su....
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....s not shown nor was held by the Court to be an erroneous view. Whereas in this case we have demonstrated in some detail as to why is the order of the assessing officer erroneous and prejudicial to the revenue. The judgement in the case of Malabar Industrial Co. Ltd. (supra) and Max India Ltd. do not apply to the facts of this case for reasons already discussed by us. From the judgement of the learned Tribunal in the case of Subholaxmi, placed before us in great detail by Mr. Poddar, we find that all important issues placed for consideration by no other than Mr. Poddar himself were duly considered by the learned Tribunal. 30. For reasons already discussed we answer the issue No. (a) and (c) in the affirmative and the issue No. (b) and (d) in the negative. In the result the appeal fails and is dismissed. It is clarified that the views expressed herein are for the purpose of disposal of this appeal and shall not preclude the statutory authority from arriving at its own conclusion in accordance with law." The ld. Sr. DR has relied upon number of case laws to support its contentions, which we have reproduced in the preceding para's of this order. The ld. Counsel for....
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....ssee had issued equity shares of Rs. 10 each at share premium of Rs. 65 per share to three investing companies in the year 2009-10 ( year of incorporation of the assessee) , and incidentally these three companies held 80%+ shares in the share capital of the assessee company , but their names were not appearing in the list of shareholders as on 31.03.2011 filed by assessee before the AO, nor any explanation is forthcoming from assessee as to their exclusion from the list of shareholders as on 31.03.2011. Thus, these five investing companies who have invested in the year under consideration in the assessee company by subscribing 168000 equity shares of Rs. 10 each at a share premium of Rs. 80 per shares , aggregating to Rs. 1,51,20,000/- are merely shell /conduit companies created to launder illgotten money to convert and bring back into the books of the assessee under the garb/shell of legitimate share capital and hence it is a fit case for making additions u/s 68 read with Section 115BBE of the 1961 Act. The detailed analysis was made by us in preceding para's of this order. The ld. Counsel for the assessee has relied upon the decision of ITAT-Mumbai in the case of Pratik Syntex....
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.... which was inducted by way of share capital and share premium in the assessee company by laundering through these five investing companies based at Kolkatta, and the assessee company fails to prove the creditworthiness of these five investing companies as well genuineness of these transactions, and the requirements of Section 68 read with newly inserted proviso are not fulfilled/satisfied, and hence we uphold the appellate order passed by ld. CIT(A) which in turn confirmed the addition made by the AO in the assessment order, to the tune of Rs. 1,51,20,000/- u/s 68 read with Section 115BBE of the 1961 Act. 6b. Now, coming to the second issue which concerns with additions to the tune of Rs.1,10,00,700/- made by AO by invoking provisions of Section 56(2)(viib) of the 1961 Act, with respect to 170000 equity shares of Rs. 10 face value issued by the assessee company at an issue price of Rs. 90 per share including share premium of Rs. 80 per share , issued by the assessee company during the year under consideration to thirteen investors. We have already held in the preceding para's of this order that so far as issue of 168000 equity shares of Rs. 10 each face value at an issue price o....
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....lock, Kidwai Nagar, Kanpur 400 Cash 20.05.2012 20.06.2012 18,000 18,000 6 Divakar S/o Ram Shankar, Gram Post- Kamokhar, Distt- Hamirpur 200 Cash 20.05.2012 18,000 7 Anupam S/o Suresh Kumar, Gram post- Imilia Distt- Hamirpur 200 Cash 20.05.2012 18,000 8 Smt. Pushpa D/o Shiv Shankar Gram Post- Imilia Distt-Hamirpur 400 Cash 20.05.2012 20.06.2012 18,000 18,000 It will be profitable at this stage to refer to provisions of Section 56(2)(viib) of the 1961 Act, which were inserted by Finance Act, 2012 , w.e.f. 01.04.2013, which reads as under: "Income from other sources. 56. (1) Income of every kind which is not to be excluded from the total income under this Act shall be chargeable to income-tax under the head "Income from other sources", if it is not chargeable to income-tax under any of the heads specified in section 14, items A to E. (2) In particular, and without prejudice to the generality of the provisions of subsection (1), the following incomes, shall be chargeable to income-tax under the head "Income from other sources", namely :- *** *** (viib)where a compa....
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....ad "Income from other sources". However, this provision shall not apply where the consideration for issue of shares is received by a venture capital undertaking from a venture capital company or a venture capital fund. Further, it is also proposed to provide the company an opportunity to substantiate its claim regarding the fair market value. Accordingly, it is proposed that the fair market value of the shares shall be the higher of the value- (i) as may be determined in accordance with the method as may be prescribed; or (ii) as may be substantiated by the company to the satisfaction of the Assessing Officer, based on the value of its assets, including intangible assets, being goodwill, know-how, patents, copyrights, trademarks, licences, franchises or any other business or commercial rights of similar nature. This amendment will take effect from 1st April, 2013 and will, accordingly, apply in relation to the assessment year 2013-14 and subsequent assessment years." Simultaneously , sub-clause (xvi) was inserted in Section 2(24) by Finance Act, 2012 w.e.f. 01.04.2013, which stipulated, as under: "(24) "income" includes- *** ....
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.... year 2009-10. These three investing companies are untraceable..The issue has not been comprehensively dealt with by the authorities below. In our considered view, this matter need to be restored back to the file of the AO for fresh determination of income chargeable to tax u/s 56(2)(viib), after giving opportunity of being heard to the assessee. Thus, this issue is restored to the file of the AO for fresh denovo adjudication, after giving proper opportunity to the assessee. The assessee shall be allowed by AO to submit evidences/explanation in its defence, which shall be adjudicated by AO on merits in accordance with law. We order accordingly. 7. In the result, appeal filed by assessee in ITA no. 258/Alld/2018 for ay: 2013-14 is partly allowed for statistical purposes. Order pronounced on 19/12/2022 at Allahabad in accordance with Rule 34(4) of the Income Tax (Appellate Tribunal) Rule, 1863. ============= Document 1 Gist of statement company wise of the above companies is, as under: Questioner Question Answer Number 13. कृपया अपराजिता वाणिजà¥à¤¯ पà....
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....ंक à¤à¤•à¤¾à¤‰à¤‚ट बतायें मà¥à¤à¥‡ पता नहीं है । और बैंक नाम à¤à¥€ बतायें? Document 2Traceback (most recent call last): File "C:\inetpub\vhosts\taxmanagementindia.com\httpdocs\python_image_text_project\google\direct_extract_text.py", line 19, in from google_doc_api import process_single_document File "C:\inetpub\vhosts\taxmanagementindia.com\httpdocs\python_image_text_project\google\google_doc_api.py", line 345 elif mime_type in ["image/gif"]: IndentationError: expected an indented block after 'if' statement on line 341 Document 3 23 जैसा कि अपने उपरोकà¥à¤¤ पतà¥à¤° में बताया कि कमà¥à¤ªà¤¨à¥€ का रजिसà¥à¤Ÿà¤°à¥à¤¡ आफिस चेंज हो जाने à....
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....¥¦ के डायरेकà¥à¤Ÿà¤° शà¥à¤°à¥€ अरबिनà¥à¤¦à¥à¤° पंडित डायरेकà¥à¤Ÿà¤° हैं का नाम बतायें? जिगजैग वाणिजà¥à¤¯ पà¥à¤°à¤¾à¥¦à¤²à¤¿à¥¦ क० का खाता à¤à¤µà¤‚ नहीं मालूम बैंक का नाम बतायें? अरबिनà¥à¤¦ पंडित के अतिरिकà¥à¤¤ और à¤à¥€ कोई अरबिनà¥à¤¦à¥à¤° पंडित के अलावा अनà¥à¤¯ डायरेकà¥à¤Ÿà¤° के बारे में। à....
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....े बाद जैसा कि आपने सà¥à¤Ÿà¥‡à¤Ÿà¤®à¥‡à¤‚ट, आडिटेड बैलेंस सीट à¤à¤µà¤‚ अनà¥à¤¯ दसà¥à¤¤à¤¾à¤µà¥‡à¤œ पूरà¥à¤µ में बता चà¥à¤•à¥‡ है इस कंपनी का पहले ही दे चà¥à¤•à¤¾ हूठजोकि इस बात का सबूत है existence नहीं है। कारण बतायें? कि यह कंपनी मौजूद है। Shradha Vintrade Private Limited, 37. 38. 39. 40. 41. 42. 43. शà¥à¤°à¤¦à¥à¤§à¤¾ विटेड पà¥à¤°à¤¾à¥¦ लि० सà....
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....¤•à¤‚पनी ने मेरी कंपनी के साथ रू० 25,20,000/- 28000 शेयर के रूप में निवेश किया कितना इनवेसà¥à¤Ÿ किया और किस रूप में? है। उकà¥à¤¤ कंपनी ने जो निवेश आपकी कंपनी में उकà¥à¤¤ कंपनी आरटीजीà¤à¤¸ से मई या जून 2012 में किया वह किस रूप में à¤à¤µà¤‚ कब किया? निवेश किया। कंपनी....
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....from google_doc_api import process_single_document File "C:\inetpub\vhosts\taxmanagementindia.com\httpdocs\python_image_text_project\google\google_doc_api.py", line 345 elif mime_type in ["image/gif"]: IndentationError: expected an indented block after 'if' statement on line 341 Document 7 52 शà¥à¤°à¥€ तपन कà¥à¤®à¤¾à¤° से मिलने का कोई पà¥à¤°à¤®à¤¾à¤£ पतà¥à¤° | समय अधिक हो जाने के कारण साकà¥à¤·à¥à¤¯ के रूप में आपके पास है? 53. के० सामनà¥à¤¤à¤¾ कौन है 54. 55. 56- 57. मे० चैमà¥à¤ªà¤¿à¤¯à¤¨ विनà¥à¤¦à¥à¤°à¥‡à¤¡ पà¥à¤°à¤¾à¥¦à¤²à¤¿à¥¦ ने आपकी कंपà¤....
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....¤²à¤¿à¥¦ शà¥à¤°à¤§à¤¾ विनà¥à¤Ÿà¥‡à¤¡ पà¥à¤°à¤¾à¥¦à¤²à¤¿à¥¦ à¤à¤µà¤‚ संदल पà¥à¤¢ कामरà¥à¤¶à¤¿à¤¯à¤² पà¥à¤°à¤¾à¥¦à¤²à¤¿à¥¦ के मैनेजिंग डायरेकà¥à¤Ÿà¤° à¤à¤µà¤‚ डायरेकà¥à¤Ÿà¤°à¥à¤¸ को मेरे समकà¥à¤· 18-03-2016 तक उपसà¥à¤¥à¤¿à¤¤ करे? दिनक 58 इसके अलावा और आप को कà¥à¤› कहना है? कà¥à¤› à¤à¥€ उपलबà¥à¤§ नहीं है। के० सामनà¥à¤¤à¤¾ उकà¥à¤¤ कंपनी के डायरे....
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.... मैनेजिंग डायरेकà¥à¤Ÿà¤°à¥‹à¤‚ को यथाशीघà¥à¤° उपसà¥à¤¥à¤¿à¤¤ करेंगे अगर आप चाहे तो उनà¥à¤¹à¥‡à¤‚ समà¥à¤®à¤¨ जारी कर बà¥à¤²à¤¾ सकते हैं। उपरोकà¥à¤¤ के अलावा मà¥à¤à¥‡ कà¥à¤› नहीं कहना है। Document 8 Gist of statement company wise of the above companies is, as under: Questioner Question Number 13. Answer कृपया अपराजिता वाणिजà¥à¤¯ पà¥à¤°à¤¾à¥¦ लिठे, जिगजैग वाणिजà¥à¤¯ उकà¥à¤¤ कà¤....
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....ं है । और बैंक नाम à¤à¥€ बतायें? Document 9Traceback (most recent call last): File "C:\inetpub\vhosts\taxmanagementindia.com\httpdocs\python_image_text_project\google\direct_extract_text.py", line 19, in from google_doc_api import process_single_document File "C:\inetpub\vhosts\taxmanagementindia.com\httpdocs\python_image_text_project\google\google_doc_api.py", line 345 elif mime_type in ["image/gif"]: IndentationError: expected an indented block after 'if' statement on line 341 Document 10 23 जैसा कि अपने उपरोकà¥à¤¤ पतà¥à¤° में बताया कि | नया कमà¥à¤ªà¤¨à¥€ का आफिस होने के कारण जिसकी कमà¥à¤ªà¤¨à¥€ का रजिसà¥à¤Ÿà¤°à¥à¤¡ आफिस चेंà¤....
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....ंडित डायरेकà¥à¤Ÿà¤° हैं का नाम बतायें? जिगजैग वाणिजà¥à¤¯ पà¥à¤°à¤¾à¥¦à¤²à¤¿à¥¦ कंठका खाता à¤à¤µà¤‚ नहीं मालूम बैंक का नाम बतायें? अरबिनà¥à¤¦ पंडित के अतिरिकà¥à¤¤ और à¤à¥€ कोई अरबिनà¥à¤¦à¥à¤° पंडित के अलावा अनà¥à¤¯ डायरेकà¥à¤Ÿà¤° के बारे में डायरेकà¥à¤Ÿà¤° है? मà¥à¤à¥‡ जानकारी नहीà....
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....Ÿ, आडिटेड बैलेंस सीट à¤à¤µà¤‚ अनà¥à¤¯ दसà¥à¤¤à¤¾à¤µà¥‡à¤œ पूरà¥à¤µ में बता चà¥à¤•à¥‡ है इस कंपनी का पहले ही दे चà¥à¤•à¤¾ हूठजोकि इस बात का सबूत है existence नहीं है। कारण बतायें? कि यह कंपनी मौजूद है। Shradha Vintrade Private Limited, 37. 38. 39. 40. 41. 42. 43. शà¥à¤°à¤¦à¥à¤µà¤¾ विदेड पà¥à¤°à¤¾à¥¦ लि० से आपके कà¥à¤¯à¤¾ वà¥à¤¯à¤¾à¤ªà¤¾à¤°à¤¿à¤• | उकà¥à¤¤ à¤....
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....°à¥‚० 25,20,000/- 28000 शेयर के रूप में निवेश किया कितना इनवेसà¥à¤Ÿ किया और किस रूप में? है । उकà¥à¤¤ कंपनी ने जो निवेश आपकी कंपनी में उकà¥à¤¤ कंपनी आरटीजीà¤à¤¸ से मई या जून 2012 में किया वह किस रूप में à¤à¤µà¤‚ कब किया? निवेश किया। कंपनी का बैंक à¤à¤•à¤¾à¤‰à¤£à¥à¤Ÿ à¤à¤µà¤‚ बैंक कà¤....
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....le_doc_api.py", line 345 elif mime_type in ["image/gif"]: IndentationError: expected an indented block after 'if' statement on line 341 Document 14 52 53 54. 55. 56- 57. शà¥à¤°à¥€ तपन कà¥à¤®à¤¾à¤° से मिलने का कोई पà¥à¤°à¤®à¤¾à¤£ पतà¥à¤° | समय अधिक हो जाने के कारण साकà¥à¤·à¥à¤¯ के रूप में आपके पास है? के० सामनà¥à¤¤à¤¾ कौन है मे० चैमà¥à¤ªà¤¿à¤¯à¤¨ विनà¥à¤¦à¥à¤°à¥‡à¤¡ पà¥à¤°à¤¾à¥¦à¤²à¤¿à¥¦ मे आपकी कंपनी में कà¥à¤¯à¤¾ निवेश किया à¤à¤µà¤‚ कà....
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....दल पà¥à¤¢ कामरà¥à¤¶à¤¿à¤¯à¤² पà¥à¤°à¤¾à¤²à¤¿ के मैनेजिंग डायरेकà¥à¤Ÿà¤° à¤à¤µà¤‚ डायरेकà¥à¤Ÿà¤°à¥à¤¸ को मेरे समकà¥à¤· 10-03-2016 तक उपसà¥à¤¥à¤¿à¤¤ करे? दिनोंक 58 इसके अलावा और आप को कà¥à¤› कहना है? कà¥à¤› à¤à¥€ उपलबà¥à¤§ नहीं है। के० सामनà¥à¤¤à¤¾ उकà¥à¤¤ कंपनी के डायरेकà¥à¤Ÿà¤° हैं लेकिन | उनसे मेरी कोई मà¥à....