TaxTMI 
TaxTMI 
TaxTMI 
2022 (2) TMI 1390
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....blish the genuineness of transaction? 2.Whether on the fact and the circumstances of the case and in law, the Ld. CIT(A) was justified in deleting the addition made on account of unexplained share capital and share premium without appreciating the fact that during the course of assessment proceedings, the assessee company failed to establish the identity of investors by not producing investors for cross examination?" 3. The relevant material facts, as culled out from the material on record, are as follows. The assessee before us is a Private Limited Company and is engaged in the business of embroidery work and manufacturing of fabric doubling and twisting of yearn. The turnover of assessee company for the year is Rs.174.48 crores as against turnover of Rs.116.08 crores for the preceding year. The gross profit for the year is Rs.8.86 crores as against Rs.1.33 crores for the preceding year. The net profit for the year is Rs.2.28 crores as against Rs.30 lacs for the preceding year. The gross profit ratio for the year is 5.08% as against 1.15% for preceding year. The net profit ratio for the year is 1.31% as against 0.26% for the preceding year. During the course of scrutiny asses....
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....sponse to the notice of the Assessing Officer, assessee submitted his written submission to prove the identify genuineness and creditworthiness of share subscribers which is reproduced by assessing officer in the assessment order, Vide page no.11 to 22. However, the assessing officer rejected the contention of the assessee and held that assessee had failed to offer any satisfactory explanation and evidence for the creditworthiness of the so-called share subscribers. In view of the same and after taking into consideration all the above facts and evidences brought on record that go on to conclusively prove that the explanation of the assessee with regards to the sources of the funds credited in the guise of share capital and premium is nothing but a colorable device, the explanation of the assessee over the nature and source of the funds is held to be grossly unsatisfactory and untenable in the eyes of law. The assessee has deliberately avoided the examination of these parties to ascertain the genuineness of the transaction and its creditworthiness. Accordingly, the amount of Rs.9,49,88,000/- claimed to have been received by the assessee as share capital and premium from above mentio....
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....provided opportunity to produce the all investors before him on 25.03.2015 however; the assessee has failed to produce the alleged investors before the assessing officer. Therefore, the assessee has failed to discharge its onus in proving the credits as genuine to the satisfaction of the Assessing Officer by not producing the so-called investors of the assessee company, especially in a scenario when the very existence of the investor was in doubt. The Ld. CIT(A) has failed to appreciate the fact that bank statement of Shri Sunil Borda was obtained from Axis bank, Surat from which it was found that huge sums of money have been channelized through this account to various accounts of the other contributors to share application money. The Ld. CIT(A) has failed to appreciate the fact that payments received through banking channel are not sacrosanct. Finally, ld DR prays the Bench that order passed by the assessing officer may be upheld. 7.Shri Suresh K. Kabra, Learned Counsel submitted that assessing officer has made unwarranted and serious allegations on the assessee without pointing any fundamental fallacy in the documents and evidences submitted by the assessee, to prove three ingre....
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....d personal statement of affair 16-20 (iii) Assessment order u/s 143(3) of the Act for the AY 10-11 21-23 (iv) Copy of bank statement and bankbook (Allahabad Bank) of the shareholder 24-30 (v) Ledger a/c from the books of the shareholder 31 (vi) Allotment return (from no.2) filed with theROC 32-35 (vii) Personal and audited accounts of the shareholder for the AY 12-13 36-44 (viii) Ledger a/c copy of shareholder from the books of the source of funds (Deeprekha Impex P Ltd.) 45 (ix) Bank statement and bank book and ITR V of 46-48 Deeprekha Impex Pvt.Ltd. for the AY 12-13 Ramesh Bodra - Shareholder Sr.No. Nature of document page No (i) ITR and CTI of the year 49-53 (ii) ITR V of the shareholder for the AY 14-15 54-59 (iii) Ledger a/c from the books of the Soham Impex (Prop concern of shareholder) 60-61 (iv) Copy of bank statement and bankbook (Allahabad Bank) of Ramesh Bodra recorded in the books of Soham Impex (Prop concern of shareholder) 62-70 (v) The audited accounts of Soham Impex (prop. concern of shareholder) for the year 71-88 (vi) Bank statement and bank book of Soham Impex (prop concern of the shareholder) 8....
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....1 Date: 21st September, 2011 wherein the Court held as follows: "In our opinion, in such circumstances, the Assessing officer of the assessee cannot take the burden of assessing the profit and loss account of the creditor when admittedly the creditor himself is an income tax assessee. After getting the PAN number and getting the information that the creditor is assessed under the Act, the Assessing officer should enquire from the Assessing Officer of the creditor as to the genuineness" of the transaction and whether such transaction has been accepted by the Assessing officer of the creditor but instead of adopting such course, the Assessing officer himself could not enter into the return of the creditor and brand the same as unworthy of credence. So long it is not established that the return submitted by the creditor has been rejected by its Assessing Officer, the Assessing officer of the assessee is bound to accept the same as genuine when the identity of the creditor and the genuineness" of transaction through account payee cheque has been established. We find that both the Commissioner of Income Tax (Appeal) and the Tribunal below followed the well-accepted principle whi....
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....edits'. In his order, the assessing officer has not given factual findings in respect of these share applicants; but has discussed (from page 22 to 45) the 'modus operandi' adopted by entities /Shell companies engaged in providing bogus entries of share capital and share premium, to large number of Companies by money laundering. This discussion covers in elaborate the activities of shell - companiesand various decisions of the Courts where in this modus operandi is discussed. The assessing officer forgot the point that in assessee`s case the share application money is received from individuals and that too from the Director and his family members. Thus, ld CIT(A) noted that in the assessment order, there is no discussion at all as to whether the assessing officer examined the details filed before him, by the assessee. As already stated, the assessing officer talks of shell companies, which provide accommodation entries by money laundering, whereas the share application money is received by the assessee-company from individuals i.e Promoter (Alpesh Badra) and family members of the promoters (Bodra family). Hence, there is not any relevance or any applicability of the discussion ....
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....observed that assessing officer has obtained the bank account of one of the NRI share - applicant namely Shri Sunil K Bodra (brother of Shri Alpesh Bodra) from AXIS Bank. The assessing officer has observed that in this account, there are huge credits received in US dollars which have been transferred / remitted to family members and concerns such as, the assessee - company, M/s Ugam Impex Ltd etc. However, the assessing officer has not been able to specify any irregularity or violation of any law and accounting principles in this and also not able to clearly spell out the adverse inference he wishes to draw from the observation. It is explained before the assessing officer that Shri Sunil Bodra is having a trade licence at Ras Al, Khaimah Free Trade Zone at UAE, where he is doing business in the name and style of Al Maya general trading. The net worth certificate issued by DUBAI based audit firm namely M. Al. Ali Auditing firm shows that income Al Maya General Trading Co FZE is 69,15,560 AED. It is also seen from the net worth statement that Shri Sunil Bodra has made investment totaling to Rs.35.28 crores in various companies other than the assessee- company. Similarly, the net wor....
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....said addition.Copy of passport, bank account statements, net worth certificate and copies of trade license filed establish the identity, creditworthiness and genuineness. The above two judicial pronouncements squarely apply in the two NRI share applicants cases. 15. In respect of Resident Indian share applicants, ld CIT(A) noticed that in the case of three Resident share applicants, the assessing officer has not given any finding regarding the details filed before him including the bank statements, audited financial statements, copies of ITR etc. prima facie perusal of the bank accounts of the share applicants shows that there is no cash deposit in any of the bank accounts. It is also seen that three Indian residents are regularly assessed to tax and assessment u/s 143(3) has been done in their cases, in earlier year. Even for the assessment year 2012-13, the assessment u/s 143(3) has been made in the case of Shri Alpesh Bodra and Shri Sunil Bodra and there is no adverse finding regarding "source" of the investments, it is also seen that the all the three Indian resident share applicants are involved in businesses of their own. The name of the business enterprises, turnover, opera....
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....deposited by them before issue of cheque to the assessee towards share application money. If the assessing officer doubts the source of source, he was free to conduct inquiry in the case of person from whom assessee has received funds" . The Hon'ble' jurisdictional High Court has concurred with this view of Hon'ble ITAT in ITA No. 967/2015 dated 05.01.2016 . 18. On the identical facts, in Tax appeal no.442 of 2011 of Hon'ble' Gujarat High Court in the case ofCIT v/s Belgium Glass & Ceramics P Ltd (date of pronouncement 13.06.2012), held as follows: "4. On consideration of facts and the order of the Tribunal, it is seen that while reversing the order of the Commissioner (Appeals) the Tribunal took view that once the applicants admit to have made the payment of share application money, no further inquiry was necessary into the creditworthiness and genuineness of the transactions in the case of assessee - company. It took such view on the basis of various judicial pronouncements of the High Courts in which, the issue of share application money was considered and mainly relied on the decision of the Apex Court in CIT v/s Lovely Exports P Ltd (2010 ) 14 SSC 761) 4.1 ....