TaxTMI 
TaxTMI 
2019 (2) TMI 2072
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....y the Assessing Officer as there was no compliance from the assessee. At page 2 of the assessment order he held that the identity, genuineness and the creditworthiness of the share applicant companies have not been established and the reasons for investment in this company that has no track record and that too with huge premium is not clarified. He relied on the preponderance of probabilities and made the addition. 2.1. On appeal, the ld. First Appellate Authority deleted the addition by holding that:- a) The assessee has responded to the notice of the Assessing Officer and filed documents giving full details of each of the 16 share applicant companies who had subscribed to the share capital as well as share premium money raised by the assessee. b) The addition was made just because the assessee could not ensure the physical attendance of the directors of the share applicant companies. He held that the assessee had no power to compel the directors of the share applicant companies to appear before the Assessing Officer. c) The share capital reserves and surplus of each of the share applicant companies is far higher than the miniscule investment made by ....
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....makharchi company or a company on paper which has net worth and no transactions or real asset base. 7.1. We now consider the documentation placed on record by share applicant companies. The ld. CIT(A) at page 11 & 12 of his order has given the following chart reflecting that the share capital & reserves appearing in the balance sheet of respective share holders. This works to negligible percentage:- Name of Share holder Companies Share Capital, Reserves & Surplus Application Money Percentage (%) Jai Tara Rice Mills Pvt. Ltd. 1,01,19,325 20,00,000 0.20 Utsav Distributors Pvt. Ltd. 2,51,09,804 5,00,000 0.02 Linkup Wintrade Pvt Ltd 31,91,03,635 12,00,000 0.01 Turtle Commercial Pvt. Ltd. 12,81,63,994 10,00,000 0.01 Sanskar Commodeal Pvt Ltd 43,51,10,402 25,00,000 0.01 Carwin T racom Pvt Ltd 6,39,35,337 15,00,000 0.02 Rose Commodities Pvt Ltd 5,91,80,109 15,00,000 0.03 Vatsalya Steels Pvt Ltd 4,12,02,466 5,00,00 0.01 Bhagwat Kripa Trading Pvt Ltd 12,63,04,443 6,00,000 0.01 Pushpanjali Carriers Pvt Ltd 31,43,95,270 17,00,000 0.01 Khushboo Complex Pvt. ....
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...., in the opinion of the Assessing Officer, satisfactory, the sum so credited may be charged to income-tax as the income of the assessee of that previous year." 5.3 According to this section, if identity, creditworthiness of the creditor and genuineness of the transaction is not proved or the explanation offered by the assessee is not. in the opinion of the Assessing Officer, satisfactory, the sum credited may be charged to income-tax as income of the assessee of that previous year. It is observed that the addition was made with the predetermined mindset that share application monies received by the appellant is not genuine as identity and creditworthiness of the shareholders were bogus in nature as they did not exist and the transactions were an eyewash only for bringing its black money into circulation without paying any tax to the revenue. Each of the share subscribers are regularly assessed to income tax; and the investments made by each of them are duly and fully reflected in their audited books of accounts as well as their income tax return. The appellant had duly filed its return of total income u/s 139(1) of the Act in respect of the AY 2012-13. In the course of ass....
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....bserved that share application money with share premium provided to the appellant company vis-a-vis the Share Capital & Reserves appearing in the Balance Sheet of respective share holders works to negligible percentage as shown below: Name of Share holder Companies Share Capital, Reserves & Surplus Application Money Percentage (%) Jai Tara Rice Mills Pvt. Ltd. 1,01,19,325 20,00,000 0.20 Utsav Distributors Pvt. Ltd. 2,51,09,804 5,00,000 0.02 Linkup Wintrade Pvt Ltd 31,91,03,635 12,00,000 0.01 Turtle Commercial Pvt. Ltd. 12,81,63,994 10,00,000 0.01 Sanskar Commodeal Pvt Ltd 43,51,10,402 25,00,000 0.01 Carwin T racom Pvt Ltd 6,39,35,337 15,00,000 0.02 Rose Commodities Pvt Ltd 5,91,80,109 15,00,000 0.03 Vatsalya Steels Pvt Ltd 4,12,02,466 5,00,00 0.01 Bhagwat Kripa Trading Pvt Ltd 12,63,04,443 6,00,000 0.01 Pushpanjali Carriers Pvt Ltd 31,43,95,270 17,00,000 0.01 Khushboo Complex Pvt. Ltd. 96,60,85,930 20,00,000 0.01 Top Class Logistics Pvt.Ltd. 12,31,03,460 5,00,000 0.01 Esquire Enclave Pvt. Ltd. 1,00,03,07,030 7,00,000 ....
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....lained for their non-appearance. I fully agree with the arguments of the Ld. AR that nonappearance of the Directors of the appellant company or subscriber companies cannot be a valid ground to ignore the documents available on record. I also agree that the provisions of Section 68 of the Act do not suggest any essential relation of the directors of shareholder companies. 5.6 in this respect it is relevant to refer to the decision of jurisdictional High Court in the case of CIT vs. Sagun Commercial (P) Ltd. (ITA No. 54 of 2001 dated 17.02.2011) wherein it was held as under: "After hearing the learned advocate for the appellant and after going through the materials on record, we are at one with the Tribunal below as well as the Commissioner of Income-tax (Appeals) that the approach of the Assessing Officer cannot be supported. Merely because those applicants were not placed before the Assessing Officer, such fact could not justify disbelief of the explanation offered by the assessee when details of Permanent Account Nos. payment details of shareholding and other bank transactions relating to those payments were placed before the Assessing Officer. It appears that th....
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....received from five different persons as unexplained cash credit in the hands of the assessee. According to the Assessing Officer, those parties had the same addresses as that of the assessee and they had no fixed assets and utilized their capitals in share application of the assessee company. The Assessing Officer, therefore, was of the view that the money ultimately went to the beneficiary through these companies and there, was no advertisement even published by the assessee company inviting share application and no Registrar was engaged for such raising of share capital. Being dissatisfied the assessee preferred an appeal before the Commissioner of Income-tax (Appeals). The Commissioner of Income-tax (Appeals), however, set aside the said order of assessment and came to the conclusion that all the share applicant /companies were assessed to the tax and their PAN and acknowledgement of I. T. Returns along with their audited balance sheets, bank statements showing transactions etc. were made available to the Assessing Officer. It was pointed out that there was no legal bar of more than one company being registered at the same address and, thus, according to the Co....