TaxTMI 
TaxTMI 
2023 (2) TMI 838
X X X X Extracts X X X X
X X X X Extracts X X X X
....on money was received though proper banking channels. Thus, addition made by Ld. A.O and confirmed by Ld. CIT(A) is unjustified and needs to be deleted. 2. That the assessee craves leave to add, alter, amend or withdraw any ground or grounds of appeal before or at the time of hearing." 2. The brief facts of the case are that that Assessing Officer( in short AO) during the assessment proceedings noted from the accounts of the assessee that the assessee during the year had shown receipt of share capital including share premium of Rs.14,63,00,000/- from different private limited companies. On being asked to explain in this respect, the assessee furnished the required documents to prove the identity and creditworthiness of the share subscribers and genuineness of the transaction. However, the Assessing Officer treated the said share capital and share premium as unexplained income of the assessee and made the impugned addition of u/s 68 of the Income Tax Act. In first appeal, the Ld.CIT(A) confirmed the additions so made by the AO. 3. We have heard the rival contentions and gone through the record. At the outset, the Ld. AR of the assessee has brought our attention to the impugne....
X X X X Extracts X X X X
X X X X Extracts X X X X
.... investments have been created through a circular rotation of money as is evidenced by the bank accounts of the investors. This has already been discussed above. (b) The assets consist of cash and cash equivalents, (c) There actually is no or insignificant business being conducted by its investors. They do not have income (or have negligible income from business operations), (d) The returns filed by them are mostly of loss or of insignificant proportions being below the taxable limits. (e) The bank accounts are used only for rotating money and for issuing account payee cheques to impart an appearance of genuineness to the transactions." 4. The ld. counsel for the assessee explained before us that the assessee company has issued 29,26,000 no. of shares of Rs.10/- each at a share premium of Rs.40/- per share amounting to Rs.14,63,00,000/-. The ld. Counsel, further submitted that all the shareholders companies were group companies of the assessee. That in every group, there was one or two flagship companies and so was the case of the assessee. Further, that the relatives of Mr. Gopal Kumar Agarwala, the director of Assessee company, were also directors in the share applic....
X X X X Extracts X X X X
X X X X Extracts X X X X
....B2007PTC114011. This company duly filed its return of income before ITO Ward 1(1), Kolkata and was having PAN AACCG7981P. This company was having a paid up capital with free reserves and surplus of Rs.18,87,05,097/- as on 31/03/2012. The copy of the bank statement of the Company is duly available in the paper book. The company is an Active Compliant and has made a regularcompliances as evident from the master details available at the Ministry of Corporate Affairs website. Companies Balance Sheet along with the return filing Acknowledgment as on the current date is also enclosed for the kind perusal of your honours. b) Lucky Tradelink Pvt.Ltd. - This company was incorporated on 30.09.2008 and was having company identification number U51909WB2008PTC129811. This company duly filed its return of income before ITO Ward 11(2), Kolkata and was having PAN AABCL5331R. This company was having a paid up capital with free reserves and surplus of Rs.5,52,71,797/- as on 31/03/2012. The copy of the bank statement of the Company is duly available in the paper book. The company is an Active Compliant and has made a regular compliance as evident from the master details available at the Ministry o....
X X X X Extracts X X X X
X X X X Extracts X X X X
.... the kind perusal of your honours." 4.3 The Ld. Counsel, therefore, submitted that from above details it was clearly evident that the companies were active companies making full compliances of both ROC and Income Tax. The Ld. Counsel further submitted that to prove the identity and creditworthiness of the transactions, the following details were furnished before the lower authorities: " Sl. Particulars A Copy of letter dated 26.02.2015 intimating Income Tax Department of issuance of shares during AY 2012-13 B. Documents in support of change in name of assessee 1 Copy of Certificate of Incorporation pursuant to change of name from M/s. Baba Strip & Tubes Ltd to M/s. BST Infratech Ltd. 2 Copy of ITR Acknowledgement for A.Y. 2012-13. 3 Copy of Audited Accounts for the F.Y. 2011-12 5 Copy of relevant page of Bank Statement 6 Copy of Assessment proceedings for the A. Y. 2012-13 filed before the Ld. DCIT Circle -3(1), Kolkata along with requisite documents. C. Documents of the share applicants to show their identity, credit worthiness & also the genuineness of the transactions 7 M/S. GAINWELL TEXTRADE PVT. LTD. (Share Applicant) 7.1 Copy of Company Master data 7.2....
X X X X Extracts X X X X
X X X X Extracts X X X X
....py of ITR Acknowledgement for A.Y. 2011-12 9.8 Copy of Audited Accounts for the F.Y. 2010-11 9.9 Copy of ITR Acknowledgement for A.Y. 2012-13 9.10 Copy of Audited Accounts for the F.Y. 2011-12 9.11 Copy of ITR Acknowledgement and Computation for A.Y. 2013-14 9.12 Copy of Audited Accounts for the F.Y. 2012-13 9.13 Copy of Memorandum and Articles of Association 10 M/S. HIL ENGINEERING PVT. LTD. (Share Applicant) 10.1 Copy of Company Master data 10.2 Copy of PAN CARD 10.3 Copy of Ledger Account of M/s. Baba Strip & TubesLtd. in the books of M/s. HIL Engineering Pvt. Ltd. evidencing share application money paid to M/s. Baba Strip & Tubes Ltd. on different dates during the F.Y. 2011-12. 10.4 Copy of relevant page of Bank Statement 10.5 Copy of Affidavit before the Notary Public Kolkata relating to share application money 10.6 Copy of Source of Fund towards payment made to M/s. BST Infratech Ltd 10.7 Copy of ITR Acknowledgement for A.Y. 2011-12 10.8 Copy of Audited Accounts for the F.Y. 2010-11 10.9 Copy of ITR Acknowledgement for A.Y. 2012-13 10.10 Copy of Audited Accounts for the F.Y. 2011-12 10.11 Copy of ITR Acknowledgement for A.Y. 2013-14 10.12 ....
X X X X Extracts X X X X
X X X X Extracts X X X X
....nsiderably. For the purpose of expansion, funds are required to carry on the business activities. Therefore, the assessee raised funds from various means, increment in share capital from associates being one of them. Consequent to sales there has also been huge increase in the expenses incurred by the assessee in achieving such huge turnover. The increase in expenses was Rs. 102,17,48,258/- as compared to last year. If we travel through the other side of balance sheet, then your honors will address that the stock and debtors have increased by Rs. 11,01,72,814/- and Rs 29,44,11,286/-. From the above it apparent that a considerable part of funds was blocked in stock and debtors. Therefore, the assessee was in need of funds that could be channelized into its operation activities as well as in assets expansion. The assessee utilised the funds so raised (including the impugned amount of share application money of Rs. 14,63,00,000/-) for the production purpose, for acquisition of fixed assets, for repayment of loans and other activities concerned with day to day operation of the business. 1.4.2 Therefore, the facts emerging from the above analysis are that the assessee is a manufactur....
X X X X Extracts X X X X
X X X X Extracts X X X X
....turnover and asset. That the assessee was in need of funds as the assessee was expanding its operations. The facts of the case itself suggest that during the impugned point of time there was heavy increase in fixed assets also the turnover increased by 73%. To expand the business assessee needed the funds, which were generated through issue of fresh shares. Further, that the reason to invest also included strategic relation and are made by the associate / group companies, having directors directly related to the assessee company's directors. We further find force in the contention of the Ld. AR that even the Assessing Officer or the CIT(A) has not brought on record any evidence to show that it was the assessee's own fund that was brought back in the form of share application money. The Ld. CIT(A), himself, has pointed out that the assessment order of the AO was cryptic and that no exercise was done by the AO to examine the records of the case. Even the Ld. CIT(A), who has, himself, done the exercise of examining the documents has not pointed any doubt or discrepancy with regard to the identity of the investors. The only contention that has been raised by the CIT(A) in the impugne....