TaxTMI 
TaxTMI 
2012 (2) TMI 732
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....aid for loans and advances; & (4) Charging of interest u/s 234A and 234B of the Act is mandatory and consequential in nature and, thus, this ground is not maintainable and, therefore, dismissed. II. ITA No.1254/A/04 - A.Y. 1994-95: 2.1. The grounds raised are as under: (i) The CIT (A) erred in confirming the addition of Rs.29,73,120/- made on account of share application money as unaccounted income u/s 68 of the Act; & (ii) Charging of interest u/s 234A and 234B of the Act is mandatory and consequential in nature and, thus, this ground is not maintainable and, therefore, dismissed. III ITA No.1255/A/04 - A.Y. 1996-97: 2.2. The grounds raised are as under: (1) The CIT (A) erred in confirming the addition of Rs.47,73,776/- made on account of unexplained credits u/s 68 of the Act; (2) The CIT (A) erred in confirming the addition of Rs.1,50,218/- on account of interest paid on borrowing funds diverted for nonbusiness purposes; (3) Confirming the addition of Rs.3,898/- being unpaid bonus; & (4) Charging of interest u/s 234A 234B and 244A of the Act is mandatory and consequential in nature and, thus, the ground ra....
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....sufficient for the parties to attend and say that they have loaned the funds. Their source of income has to be suitably explained and the reason for making the investment has also to be explained. As none of this has happened by even the six parties who have attended, it is not possible to accept the genuineness of these transactions. The parties do not appear to be having large holdings and no other investments. Therefore, giving deposits to the appellant company does not appear to be credible, besides being nonverifiable. Under the circumstances, the addition made on this point also is confirmed. (ii) Addition of Rs.35,35,000/-: "4. The main ground of appeal is regarding the addition on account of unexplained cash credits/deposits money of Rs.35,35,000/- and on account of share application money of Rs.16,49,000/-. Similar issues were present in assessment years 94-95 & 96-97. The appellant submitted that a large number of details stating that all had been filed late before the assessing officer due to riots in Baroda. In the interest of justice, the same were forwarded to the assessing officer again u/s 46A to submit factual report. Firstly, on whether the details sta....
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....om the details available, the matter would be treated as explained as the appellant had given copies of account from the party confirming the inter-corporate deposit. However, as the assessing officer is still making inquiries regarding M/s. Gujarat Oil & Inds. Ltd., he is directed to complete the enquiry and if the party is duly assessed to tax and has shown the loan given in its account, the same may be treated as genuine. If, however, the deposits are not shown by that party, the addition may be sustained." (iii) Interest on borrowing funds: "4. The third ground of appeal is regarding interest paid on borrowed funds, the appellant states that the figure should actually be Rs.20,106/- and not Rs.20,506/-. Further, share application money was available with the assessee and if the same was considered there would be no disallowance. On this point, I am unable to agree with the appellant as the genuineness itself of the deposits is not confirmed. Hence, the addition is sustained. The assessing officer should, however, verify the correct figure of disallowance." 6. Aggrieved, the assessee has come up with the present appeal. During the course of hearing, the Ld. AR rei....
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....rthiness with reference to PAN, Ward etc., The assessee has, however, not furnished the above details during the assessment proceeding. The assessee has furnished details only on 28.3.2002 while the assessment order was passed on 26.3.2002. Even after giving adequate opportunities, the above details were not furnished before the assessing officer during the course of assessment proceedings; therefore the question of not considering them does not arise. Furnishing of fresh details before the CIT (A) is strongly objected. Without prejudice to the above and as directed by your office, the assessee was requested to produce the persons who have subscribed to share capital with the company. After allowing opportunities on 26.7.2003, 4.8.2003, 6.8.2003 and 8.9.2003, assessee could produce only six persons out of 42 creditors. The statements of these six persons were recorded. These six persons have attended along with the proof of identity like ration card, election card etc. Most of them have agricultural income and do not maintain books of accounts and are not assessed to tax. They have stated that they have made investment in share capital of the company. However for ....
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....ies of titles obtained from the Revenue authorities of the State Government as to whether they have cultivated their lands, variety of crops grown, sale proceeds of the crops grown etc., were forth-coming. No such vital particulars were furnished to verify the authenticity or otherwise of such confirmations. Moreover, the AO while furnishing his remand report had also highlighted such short comings. 7.7. With due respects, we have perused the ruling of the Hon'ble Supreme Court in the case of CIT v. Lovely Exports (P) Ltd cited supra wherein the Hon'ble Court had observed that "If the share application money is received by the assessee company from alleged bogus shareholders, whose names are given to the AO, then the Department is free to proceed to reopen their individual assessments in accordance with law, but, it cannot be regarded as undisclosed income of the assessee company." 7.8. With highest regards to the observations of the Hon'ble Court, we would like to point out that in the present case, majority of the alleged share-holders who purported to have funded share applications monies were agriculturists produced none other than the ration cards, Election Identity Card....
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.... was stated that they had gone abroad and no details were available." 7.10 In view of the facts of the issue as discussed above, we are of the considered view that the preponderance of probability and evidence available on record makes it amply clear that the whole set of transaction was nothing but a sham transaction and, therefore, distinguishing the case which was before the Hon'ble Supreme Court referred above. 7.11 With regard to confirming the disallowance of Rs.20,506/-, the CIT (A) had reasoned that since the genuineness of share application money was at stake, he rejected the assessee's contention and went ahead in confirming the addition. 7.12 During the course of hearing, it was contended that the assessee had share application money of Rs.16,51,000/- (sic) Rs.16,49,000/- which was interest free and, hence, the CIT (A) ought to have considered the same before making such disallowance. 7.13 At this juncture, we would like to reiterate that the issue of genuineness of the share application money of Rs.16.49 lakhs has since been decided against the assessee in the fore-going paragraphs [Refer: Paras 7.4. - 7.4.4 ]. In view of the above, the confirmation of disal....
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....Sales Corporation, Ahmeadabad 82,000 (iii)Deepak M Patel 1,04,686 (iv)Mitul V Patel 1,11,790 (v)Patel Tractor Co. P.Ltd 9,35,000 (vi)Piyush Sales Corporation P. Ltd 5,09,115 (vii)Vimlaben V Patel 2,16,397 (viii)Vithalbhai S Patel (HUF) 1,09,285 (ix)Share application money 7,00,000 40,19,920 In the body of assessment order, under the head share capital and unsecured loans introduced, the assessing officer has stated that assessee has shown to have received deposits amounting to Rs.30,15,120/- while he has totaled up the deposits at Rs.22,73,120/- under this head as against the correct total of Rs.33,19,920/-and a sum of Rs.7 lacs shown as receipt on account of share application money also remained to be added up. As against the shown total of unaccounted income added u/s 68 at Rs.29,73,120/- there should have been addition of Rs.40,19,920/- as shown above i.e., total of (i) to (ix). The said assessment order was set-aside by the CIT (A)-I, Baroda vide order No.CAB /I-74/99-2000 dated 20.1.2001 to be framed afresh. In view of the above, order u/s 143(3) rws 250 was passed on 26.3.02 on a total inco....
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....ated above) are treated unexplained and the addition itself is confirmed." 8.4 We have duly perused the reasoning of the CIT (A) and also the documentary evidences in the shape of copies of (i) confirmation letters (in few cases only with copies of paltry land-holdings, (ii) auditor's report; (iii) statement showing the details of names, addresses of the shareholders etc., In view of the above, the issue is remitted back to the file of the AO with a direction to verify the details/documentary evidences which will be furnished by the assessee and to take appropriate action in accordance with the relevant provisions of Act prevailed at that relevant period after affording a reasonable opportunity to the assessee of being heard. It is ordered accordingly. III ITA No.1255/A/04 - A.Y. 1996-97: 9. The main grievance of the assessee being that the CIT (A) erred in confirming the addition of Rs.47,73,776/- made on account of unexplained credits u/s 68 of the Act; 9.1. It was submitted during the course of hearing before this Bench that the assessee had received Rs.30 lakhs through cheques and demand draft from Nova Prefab Construction Pvt. Ltd which is being assessed to income-....
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....completion of the enquiries, we are, therefore, of the considered view that this issue requires to the remitted back to the file of the AO. Since the AO is seized of the matter and the enquiry with reference to the evidences adduced by the assessee is still in the pipeline, we revert back the issue to the file of the AO with a specific direction to expedite the enquiry and if he finds after verification of required particulars received from his counterparts that the transactions have been through banking channels as claimed by the assessee all along, the addition requires to be deleted. It is ordered accordingly. 9.5 With regard to the disallowance of interest of Rs.1,50,218/-, it was claimed by the assessee that though details of deposits received from its sister concerns, namely Nin Trading Pvt. Ltd of Rs.71.24 lakhs, A.N.Desai Trading Pvt. Ltd of Rs.15.99 lakhs, Samir Motors of Rs.9 lakhs, Deval Sales Corporation of Rs.8.8 lakhs and Patel Tractors Co. Pvt. Ltd of Rs.42.25 lakhs, for which, no interest was paid by the assessee etc., were furnished before the AO who had considered only the share capital and ignored the above receipts and, accordingly disallowed the interest pay....