TaxTMI 
TaxTMI 
2024 (2) TMI 916
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.... 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 selected for scrutiny assessment u/s. 143(2) of the Act for verification of ....
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....sence 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 facts, the A.O held a conviction that the assessee company, despite the sufficie....
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....ore (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 course of the assessment proceedings as well as before him failed to offer an explanat....
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....iven 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. In case if the contention of the assessee is correct then the AO cannot add this amount to the income of the assessee in this assessment year in that case the AO is directed to take necessary action in the respe....
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....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 culled out as under: Apart from that, the Ld. A.R came up with his novel alternative contention and submitted that as the entire amount of share application money of Rs. 1.87 crore (supra) that was received by the assessee company during the year under consideration from the aforementioned share applicant companies was immediately on the same date transferred to the real beneficiary company, viz. M/s Rashi Steel & Powe....
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....agle 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 company for A.Y 2013-14, 'wherein he had observed that the assessee was a briefcase company, only arranging funds for M/s. Rashi Steel and Power Ltd. through its director, Shri Rakesh Jindal, i.e., a common director in both companies. 11. Per contra, the Ld. Departmental Representative (for short 'DR) relied on the orders of the lower authorities. 12. We have heard the ld. Authorized Representatives of both the parties, p....
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....y: 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 assessee company, we find that to date the assessee had failed to come forth with any explanation as regards the "nature" of the amounts that were received by the share applicant companies, which, thereafter, had sourced their investment of Rs. 1.87 crore (approx.) with the assessee company. 15. All that can be gathered from the details filed by the assessee before us, i.e., a "Chart" (Page 34 of APB), is a simpliciter reference of certain amounts that are cla....