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2024 (2) TMI 521
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....icants. 2. That on the facts and the circumstances of the case, the Ld. CIT(A) has erred in overlooking the principles which has been laid down by the Hon'ble Supreme Court in the case of Pr.CIT (Central)-l, Delhi Vs. NRA Iron & Steel Pvt. Ltd. (412 ITR 161), which suggests that the assessee is under a legal obligation to prove the receipt of share capital/premium to the satisfaction of the AO., failure of which, would justify addition of the said amount to the income of the assessee. 3. That on the facts and the circumstances of the' case, the Ld. CIT(A) was not justified in ignoring the principle which has been laid down by the Hon'ble Supreme Court in the case of Pr. CIT (Central)-l, Delhi Vs. NRA Iron & Steel Pvt. Ltd. (412 ITR 161), which also suggests that the Assessing Officer is duty bound to investigate the creditworthiness of the creditor/subscriber, verify the identity of the subscribers, and ascertain whether the transaction is genuine, or these are bogus entries of name lenders. In the facts of the case, in spite of best efforts made by the assessing officer, he could not verify the same as there was no response from companies to whom shar....
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.... That on the fact and circumstances of the case, the Ld. CIT(A) has erred in not considering the facts that the real intention of the assessee company for introducing such huge amount in the form of share application money in its business only to introduce its unaccounted money in the form of fresh share capital." 3. There is a delay of 35 days in filing the present appeal for which petition for condonation of delay was filed on 08.03.2021. Considering the administrative reasons and Pandemic of Covid-2019 specified in the said petition, we find it appropriate to condone the delay and take up the matter for adjudication. 4. Brief facts of the case are that assessee filed its return of income on 31.03.2013, reporting total income as nil. Case was selected for scrutiny through CASS with the reason "large share premium received" for which statutory notices were issued and served on the assessee. Against the said notices, assessee through its Authorised Representative filed various details and documents to explain the return filed by the assessee for the year under consideration. In the course of the assessment, Ld. AO noted that assessee has raised share capital including share p....
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....on made by the Ld. AO is based on conjectures and surmises and, therefore, cannot be sustained. 6.2. Ld. Counsel also emphasized on the fact that in the submissions including ITRs, audit reports, share application details etc. as listed above, the Ld. AO has not found fault in any of the details submitted and simply proceeded to make addition in respect of the amount of share capital and premium. The documents furnished are to be prima facie considered as correct unless evidence is brought on record to falsify the claim made therein. 6.3. On the three basic ingredients for any cash credit viz., identity, creditworthiness of the subscribers and the genuineness of the transactions, Ld. Counsel submitted that all of these are fulfilled. In this respect he submitted as under: (i) On identity : - All the shareholders are regular income tax assessees and have filed their income tax returns. Ld. Counsel thus emphasized that identity of all the share subscribers is well established and cannot be doubted. Further, he submitted that company subscribers are body corporate registered under the Companies Act, 1956. ii) On creditworthiness: To establish the creditworthine....
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....er. The brief facts of the issue in the case are that the AO treated the entire share capital raised by the appellant to the extent of Rs. 2,76,50,000/- to be assessable u/s. 68 of the Act. On the other hand, the AR of the appellant contested on the action of the AO to the effect that section 68 was not applicable in the appellant's case for the year under consideration for the following reasons: (a) that identities of the share subscribers stood proven as per documentary evidences (supra) (b) that creditworthiness of the share subscribers stood proven (supra) (c) that the genuineness of the transactions stood proven (supra) and (d) that the share applicants have been regularly assessed to tax by the respective Assessing officers (supra). In such view of the matter, I find the AO cannot abruptly come to the conclusion that section 68 of the Act was applicable in the appellant's case just for the allegations as launched by the AO. I find that all relevant documentary evidences were before the AO who could have decided the case on merit but however this did not happen. The copies of replies filed by the share applicants appear at Page Nos.26 to 199 of the paper book submitted....
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....applicants and genuineness of the transaction are established, Sec. 68 cannot be invoked on the ground of high share premium as contended by the AR. Relevant case laws on the matter are as follows: (a) PCIT vs. Chain House International (P.) Ltd. [2018] 98 taxmann.com 47 (Madhya Pradesh) (b) Principal Commissioner of Income Tax v. Rohtak Chain Co. (P.) Ltd. [2019] 110 taxmann.com 59 (SC), (c) Principal Commissioner of Income-tax v. Bharat Securities (P.) Ltd. [2020] 113 taxmann.com 32 (SC). 6. Further, I find that the share subscribers have enough net worth in their balance sheet to make investments in shares of the appellant company as depicted hereinunder: 8. Ld. CIT(A) also distinguished the various case laws which Ld. AO relied upon while making the assessment. The observations and finding given by the Ld. CIT(A) in this respect are reproduced as under: "6.2. Basically the law requires documentary evidences on record in dealing with the issue of authenticity. It is not the case of the AO that necessary documentary evidences are not on record but the only major reliance placed on his action is based on non-attendance of the directors of the assessee company ....
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....s not genuine and/or the source of investment was not fully explained to the satisfaction of the AO. Further, the Hon'ble Jurisdictional High Court in the case of CIT VS. Dataware Private Ltd. [ITAT No. 263 of 2011 dated 21.09.2011] wherein while examining the issue of addition of share application money received by the assessee therein u/s 68 of the Act, it was held that after getting the PAN number and getting the information that the creditor is assessee 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. The Hon'ble High Court further held that so long as it is not established that the return submitted by the creditor (subscriber shareholder) 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 ....
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....d, ledger account, bank statement, explanation for source of funds, income tax returns and audited financial statements and also assessment order framed under Section 143(3) of the Act in all the cases. The Tribunal further noted that in spite of such being the factual position, the only reason for making the addition in the hands of the assessee the director of the assessee company did not respond to the summons issued by the assessing officer under Section 131 of the Act. The correctness of this was also considered by the learned Tribunal and it was held that non appearance of the director cannot be made a ground for addition in the hands of the assessee under Section 68 of the Act when other evidence relating to the raising of share capital qua the share subscriber were available on record as furnished by the assessee and also cross verified by the assessing officer pursuant to the enquiry conducted in response to the notices issued under Section 133(6) of the Act. The learned Tribunal also referred to the decision of this Court in the case of Crystal Networks Pvt. Ltd. Vs. CIT reported in 353 ITR 171 (CAL). Thus we find that there is no question of law much less substa....
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....not disputed that the assessee had given the details of name and address of the shareholder, their PAN/GIR number and had also given the cheque number, name of the bank. It was expected on the part of the Assessing Officer to make proper investigation and reach the shareholders. The Assessing Officer did nothing except issuing summons which were ultimately returned back with an endorsement "not traceable". The Assessing Officer ought to have found out their details through PAN cards, bank account details or from their bankers so as to reach the shareholders since all the relevant material details and particulars were given by the assessee to the Assessing Officer. In the above circumstances, the view taken by the Tribunal could not be faulted. No substantial question of law was involved in the appeal.'' iv) Decision of Hon'ble Madras High Court in the case of Pranav foundations Ltd. (2015) 229 Taxman 58 (Mad) is also referred wherein it was held as under: "In view of the fact that all the four parties, who are subscribers of the shares, are limited companies and enquiries were made and received from the four companies and all the companies accepted their investm....
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....use said amount was received through banking channel, Assessing Officer was not justified in accepting said transactions as genuine without making proper enquiries. Apparently, the AO has not properly appreciated that decision of the Hon'ble IT AT. The Hon'ble ITAT has never held that share capital and share premium can be assessed as unexplained cash credit merely for high share premium even though the identities and creditworthiness of the share applicant and genuineness of the transactions have been established. What is held by the Hon'ble ITAT is that revision proceedings u/s 263 are valid where the transactions have been accepted as genuine without making proper enquiries. 14. Further, in respect of ground nos. 2, 3, 4 and 5, reference to the judgment of Hon'ble Supreme Court in the case of NRA Iron & Steel Pvt. Ltd. (412 ITR 161) is found to be distinguishable on facts in as much as in the said decision, Ld. AO has made extensive enquiries and some of investors were found to be non-existent. Upon going through the facts involved in that judgment, it is noted that, in the decided case the AO had made extensive enquiries and from that he had found that some of th....
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....t. Ltd. AAJHK4548K 1004, Samuddhi Apt, City Light, Surat AAAHY8643P 1004, Samuddhi Apt, City Light, Surat AEOPM9881K 1004, Samuddhi Apt, City Light, Surat AGXPM7822R 3018, World Trade Centre Ring Road, Surat AHZPM9714B 3018, World Trade Centre Ring Road, Surat U51909WB2011PTC158115 AAFCP8292H 262, Panchanantala Road Howrah-711 101 U70109WB2011PLC157855 AAJCA1464E 319/21, Jessore Road, Kolkata-700 074 9 Multifold Plastic Marketing Pvt. Ltd. U51909WB2011PTC158047 AAGCM9703K 262, Panchanantala Road Howrah-711 101 10 Bunpur Power Pvt. Ltd. U40106WB2008PTC125004 AADCB7722N 21, Hemant Basu Sarani Kolkata-700 001 11 Shreyans Embroidery Machine Pvt. Ltd. U74900WB2011PTC158379 AAPCS2888E 27, Netaji Subhash Road, 12 Faithful Cloth Merchants Pvt. Ltd. Howrah-711 204 U51909WB2011PTC157971 AABCF6670P 319/21, Jessore Road, Kolkata-700 074 Document 3 70 SI. No. Particulars Filed Filed Page Before Before No. A.O. CIT(A) 1 Share Allotment Chart Yes Yes 01 2 Details Share Applicants Yes Yes 02 3 ITR Acknowledgement of assesse for AY 2012-13 Yes Yes 03 4 ....
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....nvestment Schedule. iv) Share Application Form v) Relevant Bank Statement. 15 vi) Certificate in respect of source of Payment. Multifold Plastic Marketing Pvt. Ltd. 92-108 109 110-113 114 Yes Yes i) Copy of PAN Card of Co 115 ii) I.T.R. filing receipt for A.Y. 2012-13. iii) Audited Accounts for Y.E. 31.03.2012 with Investment Schedule. iv) Share Application Form 116 117-132 133 v) Relevant Bank Statement. 134 16 16 vi) Certificate in respect of source of Payment. Burnpur Power Pvt. Ltd. 135 Yes Yes i) Copy of PAN Card of Co. 136 ii) I.T.R. filing receipt for A.Y. 2012-13. with Investment Schedule. iv) Share Application Form 137 iii) Audited Accounts for Y.E. 31.03.2012 138-154 v) Relevant Bank Statement. vi) Certificate in respect of source of Payment. 155 156-160 161 19 Shreyans Embroidery Machine Pvt. Ltd. Yes Yes 1) Copy of PAN Card of Co. 162 i) LT.R. filing receipt for A.Y. 2012-13. 163 ) Audited Accounts for Y.E. 31.03.2012 with Investment Schedule. 164-180 iv) Share Application Form 181 v) Relevant Bank Statem....