TaxTMI 
TaxTMI 
2024 (10) TMI 704
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.... on facts in upholding the disallowance / addition of Rs. 3,72,000/- made by the DCIT as notional interest on interest free loans granted by the appellant out of the interest expense claimed by the appellant without appreciating the facts and circumstances of the case, the law as applicable and the submissions and the supporting evidence produced by the appellant. iii) The Ld. CIT(A) has erred in law and on facts in upholding the addition of Rs. 7,20,000/- made by the DCIT by treating the share capital received by the appellant during the year as unexplained cash-credit, without appreciating the facts and circumstances of the case, the law as applicable and the submissions and the supporting evidence produced by the appellant. 2. At the time of hearing, ld. AR for the assessee submitted that ground no.1 is general in nature and with regard to ground no.2, he submitted that during assessment proceedings, Assessing Officer observed that assessee has given loans and advances to Aardee Infrastructure of Rs. 30,00,000/- and J.P. Malhotra of Rs. 1,00,000/-. Assessing Officer disallowed the relevant interest on the abovesaid loans @ 12% per annum with the observation that asse....
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....essing Officer at pages 2 to 7 of the assessment order and ld. AR for the assessee submitted that assessee issued and allotted share capital to 27 shareholders. However, Assessing Officer has accepted shareholders 1 to 19 listed in the assessment order and he has not accepted shareholders listed at sl.no.2 and 20 to 26 with the observation that assessee has failed to produce Directors of the abovesaid companies for verification and the onus is on the assessee to prove the creditworthiness and identity of the abovesaid parties. Accordingly, he disallowed Rs. 7,20,00,000/- u/s 69 of the Act. 7. Aggrieved with the above order, assessee filed an appeal before the ld. CIT(A) and ld. CIT (A), after considering the submissions and new materials, called for a remand report. After considering the submissions of the assessee and remand report submitted by the Assessing Officer, he sustained the additions made by the Assessing Officer with the observation that the alleged shareholders of the assessee company had no sufficient funds and creditworthiness for subscribing such a huge share capital. 8. Aggrieved with the above order, assessee is in appeal before us and ld. AR for the assesse....
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.... verifiable fact that out of this total of Rs. 230 lacs, an amount of Rs. 118.50 lacs was received during the preceding year. Considering the facts on record and the provisions of section 68 of the Act, no addition is called for in respect of amount received by the assessee during the preceding year which has been duly accounted and reported in its audited balance sheet (supra). We direct the Id. A O accordingly to delete the addition so made in this respect. " Further reliance is placed on the decision of CIT vs. Sat Prakash Agarwal, (1983) 140 ITR 880, High Court of Delhi. In view of the above, it is submitted during the impugned year, only the book entries of allotment of shares have been made and no actual cash has been credited in the books/bank account of the assessee and therefore, no addition u/s 68 can be made in absence of real inflow of cash and since made, may please be deleted. Second submission of assessee is that assessee-company has submitted voluminous evidences to substantiate the identity and creditworthiness of the parties/investor companies and genuineness of the transaction such as Form 2 filed with ROC, confirmations, bank statement....
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....rror was rectified by the company by filing revised Form 2 (PB 63-69) rightly intimating that the share were actually allotted to M/s Omkareshwar Builders Pvt. Ltd. Moreover, in the next year i.e., AY 2013-14, M/s Omkareshwar Builders Pvt. Ltd. has sold their share and Form 20B was filed before ROC for such share transfer (PB 70-74). PB 58-62 is copy of Form 2 original filed wherein assessee-company inadvertently intimated ROC that 70,000 shares are allotted to Swaran Singh, director of M/s Omkareshwar Builders Pvt. Ltd. PB 63-69 is the copy of revised Form 2 filed by assessee-company before Ld. AO rightly intimating that the share were actually allotted to M/s Omkareshwar Builders Pvt. Ltd. PB 70-74 is the copy of Form 20B filed by assessee-company before ROC intimating ROC that s Omkareshwar Builders Pvt. Ltd. has transfer the share held by them on 01.12.2.012. PB 105 is the copy of confirmation of M/s Omkareshwar Builders Pvt. Ltd. wherein they have confirmed that they have invested Rs. 70.00.000/- in the assessee-company as share capital. Further that the entire investment is made through proper banking channels. They have further confirmed t....
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....firmation of M/s Anni Shoes Pvt. Ltd. wherein they have confirmed that they have invested Rs. 95,00,000/- in the assessee-company as share capital and shares were duly allotted to them. Further that the entire investment is made through proper banking channels. They have further confirmed their PAN details and complete address as well. PB 123 is the copy of bank statement of M/s Anni Shoes Pvt. Ltd. showing that the entire investment of Rs. 95,00,000/- in assessee-company was made by them through proper banking channel in the subsequent year i.e., AY 2013-14. It further shows their complete address. PB 124 is the copy of acknowledgment of ITR of M/s Anni Shoes Pvt. Ltd. showing their complete address, their tax jurisdiction which duly establishes their identity. PB 125-132 is the copy of their audited financial statements of M/s Anni Shoes Pvt. Ltd. for AY 2012-13 perusal of which would show that they were engaged in the Job work and earning revenue from the same. M/s Latta Heritage Pvt. Ltd. (Rs. 95,00,000/-) PB 133 is the copy of confirmation of M/s Latta Heritage Pvt. Ltd. wherein they have confirmed that they have invested R....
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....ee-company as share capital and shares were duly allotted to them. Further that the entire investment is made through proper banking channels. They have further confirmed their PAN details and complete address as well. PB 156-157 is the copy of bank statement of M/s Entrench Construction Pvt. Ltd. showing that the entire investment of Rs. 90,00,000/- in assessee-company was made by them through proper banking channel in the subsequent year i.e., AY 2013-14. PB 155 is the copy of acknowledgment of ITR of M/s Entrench Construction Pvt. Ltd. showing their complete address, their tax jurisdiction which duly establishes their identity. PB 158-163 is the copy of their audited financial statements of M/s Entrench Construction Pvt. Ltd. for AY 2012-13 wherein the investment made by them in assessee-company has duly been disclosed by them under non-current investments (PB 163). M/s Black Cobra Construction Pvt. Ltd. (Rs. 90,00,000/-) PB 164 is the copy of confirmation of M/s Black Cobra Construction Pvt. Ltd. wherein they have confirmed that they have invested Rs. 90,00,000/- in the assessee-company as share capital and shares were duly allotted ....
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.... Further reliance is placed on the following judicial decision: * M/s. Mantram Commodities Pvt. Ltd. Vs ITO, ITA.No.l05/Del./2021 dated 25.04.2022, ITAT Delhi Bench. * CIT vs. Bwarkadhish Investment Pvt. Ltd., (2011) 330 ITR 298, High Court of Delhi. * Pr.CIT-8 vs Softline Creations Pvt. Ltd., ITA 504/2016 dated 31.08.2016, the High Court of Delhi. * Commissioner of Income Tax & Ors. vs. Five Vision Promoters PVT. Ltd. & Ors., (2016) 380 ITR 0289, High Court of Delhi. * CIT vs Goel Sons Golden Estate (P) Ltd., ITA No. 212/2012, Date of order 11.04.2012, High Court of Delhi. * CIT vs. Nishan Indo Commerce Ltd., (2014)101 DTR 413, Calcutta High Court. * ITO vs Rakam Money Matters (P) Ltd., (2014) 41 CCH 0155 (Delhi Tribunal) * PR. CIT vs Rakam Money Matters (P) Ltd., ITA No. 778/201 5 (High Court of Delhi), Date of order 13.10.2015 * CIT vs. Vrindavan Farms (P) Ltd., ITA No.71/2015 (High Court of Delhi) * Commissioner of Income Tax vs. Gangeshwari Metal Pvt. Ltd. (2014) 361 ITR0010 (Delhi) * CIT vs Fair Finvest Ltd., (2013) 357 ITR 146, (High court of Delhi) * CIT vs Oasis Hosp....
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....espectfully submitted that this the confirmation which is mentioned by Ld. AO was inadvertently given by the director of assessee-company, however, thereafter the company filed another conformation filed by M/s Omkareshwar Builders Ltd. in response to notice u/s 133(6) enclosed at PB 77. In the said reply that have clarified that they have invested Rs. 70,00,000/- in the share capital of the assessee-company for purchase of 70,000/- shares in AY 2012-13 which were sold by them in AY 2013-14. Further, even in the confirmation provided by them enclosed at PB 105, they have duly confirmed that they shares have been duly allotted to them against the 70,00,000/- invested by them. Therefore, this observation of Ld. AO is without any basis, evidence or material and deserves to be deleted. 4. Ld. AO at page 7 has mentioned that the assessee-company has not proved the creditworthiness, genuineness of the transaction in the respected of 8 companies (mentioned above). In this regard, it is respectfully submitted assessee has filed voluminous evidences as narrated above which duly establishes the creditworthiness, genuineness of the transaction in respect of....
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....ectfully submitted that the addition made by Ld. AO is without any basis, evidence or material and is merely based on surmises and conjectures and may please be deleted." 9. On the other hand, ld. DR for the Revenue heavily relied on the findings of the Assessing Officer and submitted that Assessing Officer made the addition after making proper investigation. He submitted that shares were allotted, however whether the shareholders are the actual investors is the issue in this case. He brought to our notice remand report submitted by the Assessing Officer which is reproduced at para 6.4 of the appellate order and also brought to our notice page 11 of the ld. CIT (A)'s order. He submitted that the income declared by the shareholders is not sufficient to make such huge investments. Therefore, the shareholders do not have the capacity to make huge investments in the assessee company. Therefore, he supported the findings of lower authorities and submitted that the addition made by the authorities below after proper verification and enquiry. He also relied on the decision of Hon'ble Bombay High Court in the case of M/s. Pratham Telecom India Pvt. Ltd. vs. DCIT dated 17.09.2018. 10.....
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.... the subsequent year i.e. AY 2013-14. Accordingly, he filed a relevant chart before us. For the sake of clarity, the same is reproduced below : 13. After considering the above submissions, let us first discuss the issue of receipt of payment in the subsequent assessment year for the share capital. We observed from the record submitted before us that assessee has allotted all the shares subscribed in the year i.e. before 31.03.2012. Assessee also submitted all relevant documents in support of such allotment before the authorities and all the relevant ROC forms were submitted to claim that the assessee has already allotted all the shares before the end of the year i.e. 31.03.2012. Now before us, the assessee has filed a chart indicating that the assessee has actually received/realised the amount in the FY 2012-13 and also relied on the decision of ITAT, Calcutta in the case of DCIT vs. M/s. Surya Alloys Industries Ltd. in ITA No.2253/Kol/2013 order dated 10.08.2016 and ITAT, Ahmedabad in the case of Deem Roll Tech Ltd. vs. DCIT in ITA No.437/Ahd/2018 order dated 11.08.2020. The first decision relied by the assessee is distinguishable considering the fact that in those decisions, t....
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....own sources of the investment declared as other current liabilities and in detail, all the shareholders have shown as "application money received for allotment of securities and due for refund/interest accrued on above". Strangely all the investors have the same source that application money was received for allotment of securities and there is no document submitted that all these companies have allotted the shares against such receipt of application pending for allotment. Therefore, all these shareholders have source which are doubtful and all of them have the same source of receipt of application money and all the application monies so received were all invested in the assessee company. This transaction does raise several questions on capacity of these shareholders. Even during remand proceedings, assessee has merely submitted the information what was already available on record and capacity of the shareholders who made the investments were never proved by the assessee. Therefore, we are inclined to agree with the tax authorities that assessee has proved the identity and failed miserably to prove the capacity of the investors. However, we are inclined to give conditional benefit ....