TaxTMI 
TaxTMI 
2024 (2) TMI 916
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....ts, namely M/s. Eagle Commotrade Pvt. Ltd., at Rs. 1,01,00,000/-; and M/s. Krishnakali Distributors Pvt. Ltd., at Rs. 86,00,00/- total Rs. 1,87,00,000/- without having any adverse material on record and rejecting the supporting sand explanations filed before him. Prayed that Appellant discharged the burden of proving identification, credit-worthiness and genuineness of transaction, addition of Rs. 1,87,00,000/- be deleted. 2. That under the facts and the lad, the learned Commissioner of Income Tax (Appeals) further erred in maintaining the addition of Rs. 1,87,00,000/- u/s. 68 made by the learned Assessing Officer observing that source of source was not proved. Prayed that details of source of source was submitted before the Hon'ble CIT(A) which was in the possession of the appellant. The addition be deleted." 2. Succinctly stated, the assessee company which had not carried out any business during the year under consideration, had e-filed its return of income for A.Y.2014-15 on 30.09.2014 declaring an income of Rs. Nil. The return of income filed by the assessee company was processed u/s.143(1) of the Act. Subsequently, the case of the assessee was sel....
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....tion of receipt of share capital/premium from them could be proved. In the absence of necessary compliance by the assessee company of the aforesaid directions despite reminders, the A.O observed that it was incomprehensible that the assessee company, which had neither commenced its business nor commanded good financials, would have received a substantial amount of share capital/premium. Referring to the return of income and balance sheet of two share subscriber companies, viz., (i) M/s. Eagle Commotrade Pvt. Ltd.; and (ii) M/s. Krishnakali Distributors Pvt. Ltd., the A.O observed that the substantial investment that was made by the said companies was not commensurate with their taxable income, as under: Further, the A.O in order to verify the authenticity of the assessee's claim for having received share capital/premium from the aforementioned investor companies, deputed his Inspector to conduct spot enquiries at their respective addresses at Kolkata (WB). The Inspector, vide his report dated 08.12.2016, stated that as the aforementioned companies were not functioning from the addresses that were provided to him, they appeared to be bogus companies. 4. Backed by the aforesaid....
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....y evidence and the claim of the assessee company that only an amount of Rs. 1.87 crore (supra) of share capital/premium was received during the year under consideration, the CIT(Appeals) called for a remand report from the A.O. After considering the remand report of the A.O and the rejoinder of the assessee company, the CIT(Appeals) found favor with the claim of the assessee company that share application money of Rs. 2,26,41,500/- (out of Rs. 4,13,41,500/- ) was received by it in the earlier years. Considering the aforesaid facts, the CIT(Appeals) vacated the addition of Rs. 2,26,41,500/- with a direction to the A.O. to take necessary action in the respective assessment years in which the assessee company had received the aforementioned amounts. 6. Apropos the share application money of Rs. 1.87 crore that was received by the assessee company during the year under consideration from the aforementioned share subscriber companies, viz. (i) M/s. Eagle Commotrade Pvt. Ltd.; and (ii) M/s. Krishnakali Distributors Pvt. Ltd., the CIT(Appeals) after duly considering the additional evidence that was filed under Rule 46A before him, observed that as the assessee company had both in the c....
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....he assessee company. My decision on the issue is as under:- (i) As per the Ld. AR the assessee has received the share application money from individuals and three companies as per detail given hereinafter: (ii) On the basis of the above chart the Id AR submitted that since the assessee has received share application money of Rs. 1,87,00,000/- only during the previous year relevant to assessment year 2014-15 and share application money of Rs. 2,26,41,500/- was received in earlier assessment years, hence the addition of Rs. 2,26,41,500/- (4,13,41,500 - 1,87,00,000) cannot be made to the income of this assessment year. The Id AR further submitted that in view of hon'ble Supreme Court's decision in the case of CIT v Parmeshwar Bohra [2008] 301 ITR 404 the opening credit balance cannot be added to the income of the assessee by applying the provision of section 68 of the Income Tax Act, 1961. (iii) Whether the assessee has received share application of Rs. 2,26,41,500/- in assessment year prior to assessment year 2014-15 or not is a matter of verification. Accordingly, the AO is directed to verify the correctness of the figures given in para (i) above. ....
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.... submission including the supporting documents furnished, I find that though the assessee has filed the above papers however it has failed to establish in the assessment proceeding as well as appellate proceeding the source of sum received by the share applicant companies, For this reason the explanation given by the Id AR is not acceptable and 'addition of Rs. 1,87,00,000/- on account of share application money received during the year under consideration from M/s. Eagle Commotrade Pvt. Ltd. and M/s. Krishnakali Distributors Pvt. Ltd. is confirmed. Thus, these grounds of appeal is partly allowed." 7. The assessee, being aggrieved with the order of the CIT(Appeals), has carried the matter in appeal before us. 8. At the threshold of hearing of the appeal, Shri Veekaas S. Sharma, Ld. Authorized Representative (for short 'AR') for the assessee company took us through the facts of the case. Adverting to the addition of Rs. 1.87 crore (supra), i.e., the amount of share application money received by the assessee company during the year under consideration from the aforementioned share subscriber companies, the Ld. AR took us through a "Chart", placed on Page 34 of APB, which is cul....
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....uildcon (P) Ltd., ITA No.133/RPR/2016 dated 23.09.2021. Also, the Ld. AR had pressed into service the judgment of the Hon'ble Supreme Court in the case of the State of Uttar Pradesh & Anr. Vs. Raza Buland Sugar Co. Ltd. (1979) 118 ITR 50 (SC). It was, thus, the claim of the Ld. AR that now when the assessee company had only facilitated routing the money from the aforementioned share subscriber companies, viz., (i) M/s. Eagle Commotrade Pvt. Ltd.; and (ii) M/s. Krishnakali Distributors Pvt. Ltd. to the real beneficiary, i.e. M/s. Rashi Steel and Power Ltd, and the same had been assessed in the hands of the latter as its undisclosed income; therefore, there was no justification for the A.O. to have held the said amount as an unexplained cash credit u/s. 68 of the Act in the hands of the assessee company. 10. The Ld. AR, in order to buttress his claim that the assessee company had only acted as a facilitator for transferring funds to M/s. Rashi Steel and Power Ltd., Bilaspur, had pressed into service the observations recorded by the A.O, i.e., ITO, Ward-2, Raigarh, while framing the assessment vide order passed u/s. 143(3) of the Act, dated 31.03.2016, in the case of the assessee c....
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....remium or any such amount by whatever name called, any explanation offered by such assessee-company shall be deemed to be not satisfactory, unless- (a) the person, being a resident in whose name such credit is recorded in the books of such company also offers an explanation about the nature and source of such sum so credited; and (b) such explanation in the opinion of the Assessing Officer aforesaid has been found to be satisfactory: Provided further that nothing contained in the first proviso shall apply if the person, in whose name the sum referred to therein is recorded, is a venture capital fund or a venture capital company as referred to in clause (23FB) of section 10." 14. As is discernible from the orders of the lower authorities, no explanation as regards the "nature" and "source" of the investments made by the aforementioned share subscriber companies, viz., (i) M/s. Eagle Commotrade Pvt. Ltd.: Rs. 1,01,00,000/-; and (ii) M/s. Krishnakali Distributors Pvt. Ltd.: Rs. 86,00,000/- was filed by the assessee company. As regards the explanation with respect to the source of source of the share application money as had been filed before us by the ass....
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.... case of the assessee company before us. We say so for the reason that it is not the case that M/s. Rashi Steel and Power Ltd. had admitted that the amount of Rs. 1.87 crore (supra) received from the assessee company represented its own fund, for which the assessee company had merely acted as a facilitator for routing the same from the aforementioned share subscriber companies, viz. (i) M/s. Eagle Commotrade Pvt. Ltd.; and (ii) M/s. Krishnakali Distributors Pvt. Ltd. On the contrary, the Ld. DR had brought to our notice that M/s. Rashi Steel and Power Ltd. (supra) had assailed the addition of Rs. 1.87 crore (supra) (included in Rs. 35,63,74,944/-) made by the A.O in its case for the year under consideration and, thus, had carried the matter in appeal. 18. We, thus, in terms of our aforesaid observations, are of the considered view that as there is no material available on record that would conclusively prove to the hilt that the assessee company had merely acted as a facilitator for routing the unaccounted money of M/s. Rashi Steel and Power Ltd. to the latters coffer; therefore, the said claim of the assessee cannot be accepted. We are of the considered view that as the aforesa....