TaxTMI 
TaxTMI 
2023 (7) TMI 785
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.... creditworthiness of the subscribing company in this case remained unproved." 3. Briefly stated, the assessee filed return of income declaring loss of Rs.47,55,183/- for Assessment Year 2015-16 in question. The return filed by the assessee was subjected to scrutiny assessment. In the course of the scrutiny assessment, the Assessing Officer inter alia noted that the assessee-company has allotted preference share capital of Rs.52,77,760/- to various shareholders during the year and collected a premium of Rs.13,72,21,760/- thereon. The list of impugned share capital allotted during the year to various parties is tabulated hereunder: Particulars No. of shares Nominal amount per share Premium per share Share capital Share premium Total Swapan Mahal Builders Pvt. Ltd. 3,70,370 10 260 37,03,700 9,62,96,200 9,99,99,900 Pleasant Vyapaar P. Ltd. 83,333 10 260 8,33,330 2,16,66,580 2,24,99,910 Independent Infra Projects Pvt. Ltd. 18,518 10 260 1,85,180 ,48,14,680, 49,99,860 Siyona Construction Pvt. Ltd. 37,037 10 260 3,70,370 96,29,620 99,99,990 Sumitra Builders & Develope....
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....e action of the Assessing Officer and deleted the addition made under Section 68 of the Act. The relevant operative paragraph of the order of the CIT(A) is reproduced hereunder: "7. I have perused the submissions of the appellant and the order of the AO. 1ne relevant facts are that the appellant company has received a sum of Rs.14,24,99,520/- as share capital including the share premium during the year. A show cause notice for adding the entire amount was issued by the A0 on 22.10.2017 (refer to para 3 of the assessment order). The appellant submitted its reply on 26.12.2017 and the same has been reproduced from page 3 to page 7 of the assessment order. A perusal of the reply of the appellant as reproduced in the assessment order reveals that the appellant has not only furnished the complete details of the entities from whom the share capital has been received but also the source of the source of the entire funds received by the appellant company. In total the entire share capital have been received from five companies and the chart of the same is available at page 7 of the assessment order. The AO has accepted the contention of the appellant in respect of four companies (....
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.... time has been granted, the appellant filed the requisite details of all five companies, from whom capital was received. The details contained their bank statements for the relevant period, acknowledgement of the return of income, annual accounts, and the sources of their funds for investing in the appellant company. Thus, the ultimate source of money was also there on the record. The evidences as required under section 68 were produced by way of evidence filed by the appellant and the evidence filed by the share holders of the appellant. 2.2 It may kindly be seen that effective hearing on the issue of the evidence regarding share capital started on 22.12.2017 and the appellant was given time only up to 26.12.2016. In this short period the appellant filed sufficient evidence to discharge the onus cast on it by providing the identity and capacity of the subscribers and genuineness of the transactions, which were carried out through banking channels. However, against the tenor of voluminous evidence filed by the appellant and its shareholders, the Id. A.O. made unwarranted and huge addition of Rs.2,24,99,910/-. It is submitted that thought the time allowed to the ap....
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.... on 22.12.2017 and 29.12.2017 has refused to accept reply of M/s. Pleasant Vyapar Pvt Ltd. from Mr Pankaj. However the replies given by the other investor companies against Summon issued to them u/s. 131 were duly accepted from Mr. Pankaj. He misinterpreted the facts of the case, assumed facts which are nonexistent on record and having quoted the contents of the various cases and judgments in the order made an addition by holding that the Share Capital /Premium amounting to Rs. 2,24,99,910/- received from M/s. Pleasant Vyapar Pvt. Ltd is bogus. 3.5 The onus on assessee under proviso to section 68 will be similar to the onus under the main provision. This stands discharged in the case of appellant on filing of the details of the source of source by the shareholders of the appellant. The entire details of the share applicants i.e M/s. Pleasant Vyapar Private limited were made available to the ld. AO by the appellant. These included the: - 1. The company has been registered with the Registrar of Companies vide CIN - U51109WB1994PTC062056 on 03.03.1994 2. Confirmation of Accounts. 3. Income Tax Return. 4. Return of Allotment (PAS 3)....
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....made by the Id. AO only on the ground that M/s. Pleasant Vyapar Pvt. Ltd is paper company. The Ld. AO has not explained how M/s Pleasant Vyapar Pvt. Ltd is not existing and is a fictitious company. The Ld AO totally ignored the followings: - 1. Notice U/s 133(6) to M/s Pleasant Vyapar Pvt. Ltd at its email and also served on its local address i.e D-15, Pumposh Enclave, New Delhi. 2. The annual accounts for the 3 years of M/s Pleasant Vyapar Put. Ltd 3. The registered office of M/s Pleasant Vyapar Pvt. Ltd is in Kolkatta. Hence, not considering all these submission & documents and ignoring the above stated facts, simply non-filing of confirmation of M/s Dhoomketu without specifically seeking it either U/S 133(6) or U/s 131(1) and making high pitched addition is really harsh on appellant. However, in terms of the decision Supreme Court discussed above, this onus stands restricted to furnishing the name and the address of the companies which are the source of the source. This has already been done. Accordingly, it is requested that the addition made by the A.0. may be deleted. 3.6 It has been submitted earlier that there are some e....
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....ssment order reproduced earlier, the only reason on account of which the addition has been made by the AO, is based on the AO's observations that the company in question i.e. M/s Pleasant Vyapaar Pvt. Ltd. does not exist at its given address and is thus a paper company. The AO as per the assessment order has arrived at this conclusion based on the field visit made by the Inspector (as per which the company was not found at the given address) and on the basis that the summons issued us 131 by the AO remained uncomplied. 11. The reply of the appellant on this particular issue during the course of assessment proceedings has also been reproduced in the assessment order itself at page 5 of the order and the same is reproduced below for the sake of clarity: 5. In the case of Pleasant Vyapaar Private Limited, it is clear from the chart itself that the amount invested Rs. 225 Lacs is received by the investor company from Dhoomketu Marketing Put. Ltd. and ultimate source of the Dhoomketu is the amount received from the maturity of Fixed Deposits of Rs.224 lacs on 26/08/2014. Please find attached herewith the bank statement and balance sheet of Dhoomketu which shows tha....
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....appellate proceedings, the appellant has reiterated all these above facts before me. In fact the Ld. AR has furnished the copy of the courier receipt issued by "Trackon Couriers Pvt. Ltd." issued on 29.11.2017, from PVPL to ACIT, Income Tax Faridabad and the same is placed on record. Moreover, the appellant has also furnished the email details of the email received from the AO calling for information us 133(6) and the details of the emails sent by PVPL wherein information called for by the AO u/s. 133(6) have been replied to by PVPL. These emails are also placed on record. Besides this a perusal of the assessment order itself reveals that the entire details of the funds received not only by PVPL but also the source of the source have been furnished before the AO and the same is evident from the chart reproduced by the AO on page 8 of the assessment order. Similar submissions have been made before me and I find that the appellant has furnished not only the complete financial records of pVPl but also the source of the funds received by PVPL from M/s Dhoomketu Pvt. Ltd. The funds received by PVPL from M/s Dhoomketu Pvt. Ltd. is on account of the maturity of an FDR amounting t....
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....l statement) and owning real estate and having FDRs. The company is in existence since 1994 and doing statutory compliances with various Government Authorities since inception. The company is regularly assessed by the income-tax department. In respect of source of source, the amount that has been given as share application money to the appellant company by Ms Pleasant Vyaapar Pvt. Ltd. has been given out of the funds received by it from M/s Dhoomketu Marketing Pvt. Ltd. through banking channel. M/ Dhoomketu Marketing Pvt. Ltd. is having net worth of Rs. 25.49 crores as on 31.03.2015 and of Rs. 25.47 crores on 31.03.2014. It can be observed from the audited financial statement of M/ Pleasant Vyaapar Pvt. Ltd. that it has cash & bank balance of Rs. Approx. 240 lacs (as per schedule 8 of financial statement). The company is in existence since long and filing its tax return with the department regularly and getting assessed every year. All the document in support of the above has already placed before the ld. AO and your honour with detailed written submission filed on 19.02.2018." 17. I find that all the three parameters pertaining to the creditworthiness, g....
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....he CIT(A). The broad submissions on behalf of the assessee are; (i) The assessee has attracted as many as five parties to subscribe to the share capital of the company. The shares were issued at a face value of Rs.10/- each at a premium of Rs.260/- per share to all the parties. The Assessing Officer has found the subscription received at a premium of Rs.260/- per share to all the parties to his satisfaction except the share subscription received from M/s. PVPL. The veracity of the share premium charged at Rs.260/- per share is thus not in question and has received the endorsement of the Assessing Officer himself. (ii) the assessment order is marred with major controversies. (a) It is stated in the assessment order that no details were furnished in respect of PVPL but the source of fund has been mentioned at page no.8 of the assessment order itself. (b) The claim of the Assessing Officer that the confirmation from Dhoomketu Pvt. Ltd., i.e., company which has extended funds to PVPL for subscription in the assessee company has not been furnished is wholly unjustified as such confirmation was never asked by the Assessing Officer. (c) The all....
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....s were held by the subscriber company PVPL. The subscriber company is assessed regularly by the Income Tax Department over a long horizon of 20 years. The ld. counsel for the assessee thus submitted that the CIT(A) could not have rejected the tell-tale evidences to come to a wrong full conclusion and has rightly reversed the arbitrary decision taken by the Assessing Officer. The ld. counsel thus submitted that no interference with the order of the CIT(A) is called for. 10. We have carefully considered the rival submissions and perused the orders of the authorities below and case law cited at bar. 11. The Assessing Officer, in the instant case, has disputed the identity, creditworthiness and genuineness of the transaction in relation to preference share capital infused in the company along with premium associated thereon. Consequently, the Assessing Officer has treated the receipt towards share capital and share premium is at Rs.2,24,99,910/- received from PVPL as unexplained credit with the aid of Section 68 of the Act. In the first appeal, the CIT(A) however reversed the action of the Assessing Officer after detailed examination of nuances of the factual matrix. 12. The c....
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....to PVPL has been duly complied with. The time period of compliance for summons under Section 131 was barely four days and Chartered Accountant Mr. Pankaj did appear before the Assessing Officer for the subscriber. In response to such summons, his presence was however discredited by the AO. Under the circumstances, on the face of such tangible evidences giving firm impression of the bona fides of the transaction, mere rejection of explanation provided by the assessee on flimsy grounds will not convert a credit into income of an assessee. The action of Assessing Officer has the effect of converting a good proof into no proof. 14. In the backdrop of the facts, where the existence of the shareholder/subscriber is fully identifiable and unequivocally proved by direct evidences, the creditworthiness of the subscriber is justifiable by formidable evidences and the genuineness of the transaction carried out through banking channel and return of allotment for subscription of shares have been filed before the competent authority, the dispute raised by the Revenue appears inexplicable. The substantial net worth enjoyed both by the subscriber as well as the source of source also provides so....