TaxTMI 
TaxTMI 
2022 (2) TMI 1390
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....roceedings, the assessee company could not establish 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 t....
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....hy amounts of share capital and share premium should not be treated as unexplained cash credits and why the same should not be added back to the total income of assessee-company for the AY 2012-13. 4.In response 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....
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.... transactions.The Ld. CIT(A) has failed to appreciate the fact that onus has been cast on the assessee to prove the genuineness of the credit entry in its books of accounts. In the instant case, the assessee was 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....
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.... by assessee. Before us, the assessee has submitted for each shareholder, the following documents and evidences: Alpesh Bodra - Shareholder Sr.No. Nature of document Paper book page No. (i) ITR of the shareholder AY 2014-15 15 (ii) ITR of the year (AY 12-13) alongwith computation of total income and 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....
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....hiness and genuineness of the transactions.When a question as to the creditworthiness of a creditor is to be adjudicated and if the creditor is an Income Tax assessee, it is now well settled by the decision of the Calcutta High Court that the creditworthiness of the creditor cannot be disputed by the assessing officer of the assessee but the assessing officer of the creditor. In this regards our attention was drawn to the decision of the Hon'ble High Court, Calcutta in the COMMISSIONER OF INCOME TAX, KOLKA TA-Ill Versus DATAWARE PRIVATE LIMITED ITAT No. 263 of 2011 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 adop....
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.... 21/10.2011 22/10/2011 24/10/2011 04/11/2011 2,46,60,000 2,64,47,337 GAURIBEN BODRA 3,88,000 05/12/2011 3,88,00,000 USD received in the NRE a/c No. 910010001359975 with Axis Bank 3,88,05,844 5/12/2011 3,88,00,000 3,88,05,844 9,49,88,000 11. From the above chart it is clear that during the year, the assessee company has received share application money of Rs. 9,49,88,000/-,from five individuals as stated by the assessing officer (on page no. 5 of his order). The assessing officer had added the said amount u/s 68 of the Act as ' unexplained cash credits'. 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 wh....
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....nil Bodra 5 Bank book 5 confirmation 6 Contra confirmation 6 Form No.2 (allotment return file with ROC (Registrar of companies) 7 Leger account in books of individual 8 Allotment return FormNo.2 filed with ROC 13. From the above chart, it can be seen that assessee has submitted enough evidences to prove three ingredients of section 68 of the Act, namelyidentity, creditworthiness and genuineness of the transactions. We also note that Assessing Officer has issued statutory notices u/s 133(6) of the Act, in the case of shareapplicants out of which four notices were served. The three resident Indian share applicants have complied with to the statutory notices u/s 133(6) of the Act. 14. In respect of Non - Resident Share applicants, the ld CIT(A) 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 ....
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....uineness of transaction. ON appeal, Commissioner (Appeals) as well as Tribunal deleted addition by recording findings of fact that said amount was given by one "J" staying in UK by cheque from his NRE account and said fact had been confirmed by 'J' - Whether order passed by Tribunal could be interfered with - Held NO. (in favour of assessee ). It is also seen that Shri Sunil Bodra had invested a sum of Rs 5.15 crores in other Surat based company M/s S.V.S. Tex Fab Ltd. This amount was added u/s 68 in the hands of M/s S.V.S. Tex. O Fab P Ltd for the assessment year 2011-12. In the appeal before the Id CIT (Appeals)-2, Surat the matter was examined and the Id CIT (Appeals)-2, Surat in his order in appeal no. CAS/2/ 96/2015-16 dated 20.12.2016 has held that the investment satisfies all the three elements of Sec.68 and hence, he deleted the 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....
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....ctivities generating operating Revenue and incurring operating expenses. 16. We note that law regarding addition u/s 68 on account of the share application money has been laid out by the Hon'ble Supreme Court in the case of CIT v/s Lovely Exports ( 2008) 216 ITR 195 ( SC) wherein it has held that: "if share application money is received by assessee - company from alleged bogus shareholders, whose names are given to Assessing Officer, then Department is free to proceed to reopen their individual assessments in accordance with law, but this amount of share money cannot be regarded as 'undisclosed income' under section 68 of assessee -company." 17.The Hon'ble jurisdictional ITAT in the case of Pankaj Enka v/s DCIT in ITA No.816/Ahd/2013 has held that: "the assessee has discharged the primary onus to prove as genuine share application money. On perusal of bank statement, no cash has been 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' juris....