TaxTMI 
TaxTMI 
2024 (12) TMI 813
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....e of hearing." 3. Fact in Brief :- In the present case, the assessee was engaged in the business of construction, filed its return of income on 11/10/2010 for the year under consideration. The case was re-opened on the basis of information received from DCIT, Central Circle-1(1), Ahmedabad, that the assessee had obtained accommodation entries worth Rs. 1,50,00,000, from M/s. Pravhav Industries Ltd. and Rs. 65,00,000, from Avance Technologic Ltd. Notice under section 148 of the Income Tax Act, 1961 ("the Act") was issued on 16/03/2016, in response to which the assessee submitted copies of Audited Balance Sheet, PAN details, Memorandum and Articles and Association and agreement of sale along with other details which were called by the Assessing Officer from time to time. During the previous year relevant to the assessment year 2010-11, the assessee had received advance against booking of property through proper banking channels as per agreement of sale and no share premium were received and allotted by the assessee during the assessment year 2010-11. In view of a search and survey action carried out at the residence and office premises of one Shri Shirish Chandrakant Shah, at Mumb....
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.... in response to notice U/s. 148 the appellant has again e-filed the return of income on 28/06/2016 declaring total income at Rs. NIL. Notice U/s. 142(1) has also been issued to the appellant on 15/07/2016 alongwith reasons for re-opening of case. In response to notice the appellant has submitted the reply and raised objection for issuing of notice U/s. 148. The appellant encloses herewith copy of notice U/s. 148 and reasons alongwith objection reply, which is on Page-18 To 21A of the Paper Book. In the reasons for reopening the assessing officer has stated that the basis of information received from DCIT, Central Circle-1(1), Ahmedbad that the appellant has obtained accommodation entries worth of Rs. 1,50,00,000/- from M/s. Prabhav Industries Ltd. A search and survey action was carried out at the residence and office premises of Shri Shirish Chandrakant Shah at Mumbai, who is engaged in providing accommodation entries of shares premium from various clients and against this cash provides these accommodation entries. The statement was recorded behind the back during the course of search and post search proceedings. During the course of assessment proceedings the cou....
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....lready invested the aforesaid sum in its project. In order to avoid any further litigation in the matter it was amicably decided between appellant and directors of M/s. Prabhav Industries Ltd. and M/s. Avance Technologies Limited that appellant will allot equity shares of the appellant company to M/s. Prabhav Industries Ltd. and M/s. Avance Technologies Limited. In respect of said transaction both the parties entered in to modification agreement on 16/12/2012. The appellant submitted herewith copy modification agreement of M/s. Prabhav Industries Ltd., which is on Page-98 to 100 and M/s. Avance Technologies Limited, which is on Page-162 To 164 of the Paper Book. Thereafter the appellant has allotted the equity shares by applying formalities for issuing of equity shares. 5.1 The appellant had submitted all the details with respect of aforesaid transaction during the course of assessment proceedings before the assessing officer, and has made the following submission A) With respect to Prabhav Industries Limited the appellant submits the following: i. The Prabhav Industries Limited is assessed to tax vide PAN-AAACE4247Q. The appellant submitted herewith copy....
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....ts the following : i. The Avance Technologies Limited is assessed to tax vide PAN - AAECA5763B. The appellant submitted the copy of PAN card of Avance Technologies Limited, which is on Page-104 of the Paper Book. The appellant has also submitted the postal address of company is #505, Midas Chambers, Off.Link road, Andheri-West, Mumbai - 400053. The jurisdictional assessing officer of company Avance Technologies Limited is Income Tax Officer, Circle-8(1) during the course of assessment proceedings. ii. The appellant has also submitted the copy of Memorandum of association and Article of association of Avance Technologies Limited alongwith copy of certificate of incorporation during the course of assessment proceeding, which is on Page-105 To 150 of the Paper Book. iii. So far as transfer of fund the appellant has submitted bank statement of Avance Technologies Limited during the course of assessment proceedings, which is clearly showing amount transferred through proper banking channel, the appellant encloses herewith the copy of Bank Statement of Avance Technologies Limited alongwith Copy of account of Avance Technologies Limited, which is on Page-151 To ....
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.... notice to appellant, details has not been provided to the appellant for proper adjudication of the matter. As per details stated in the notice there are no incrementing documents found in respect of the appellant company. Therefore allegations made in the notice are totally denied. c. Shri Shirish C. Shah in his statement he stated and accepted that companies named M/s. Prabhav Industries Ltd and M/s. Avance Technologies Limited from whom appellant received share premium were being managed and controlled by Shri Shirish Shah and were used for providing accommodation entries of share capital/premium, share application, unsecured loan etc. but The department has not provided the copies of statement recorded of Mr. Shirish C. Shah during the course of search for proper adjudication of the matter nor Shri Shirish C. Shah have stated to whom he has provided the accommodation entries. d. The appellant also specifically denied all the allegation made by Shri Shirish Shah. The appellant once again request that all the statement were recorded behind the back of the appellant. The appellant not aware of any statement even appellant do not know to Shri Shirish Chandrakant S....
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....otal income of the appellant. When the appellant has himself proposed for issuing summon U/s. 131 to called for cross examine, even though the appellant has submitted the all the details of company during the course of assessment proceedings. The learned assessing officer has failed to grant opportunity being cross examine the directors and has also failed to verify the documents submitted by appellant are genuine or not and made addition on assumption and presumption basis. When all transactions were made through proper banking channel as well as duly reflected in the books of account as well as shown in audited balance sheet of the appellant. The assessing officer has also not been found any defect in the books of account as well as documents submitted by the appellant during the course of assessment proceedings. The appellant also draws attention to the following points on the basis of which appeal filed by the appellant may kindly be allowed 1. The appellant has received advance against booking of property (Showroom) for the sum of Rs. 1,50,00,000/- from Prabhav Industries Ltd and sum of Rs. 65,00,000/- from Avance technologies Limited and the same we....
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....ade on the ground that appellant failed to explain the source of credit. 8. Once the authorities have got all the details including the names and addresses of the company, their PAN, Name of bank from which the alleged investor received invested the money, then it cannot be termed as bogus. The issue is covered by the judgment in case of CIT -Vs.- Creative World Telefilms Ltd. (2011) 333 ITR 100 (Bom). In such circumstances there is no justification in addition making the under section 68 of the Income Tax Act, 1961. 9. There is no evidence that the entire transaction was sham and bogus transaction. The appellant has submitted that appellant company has established identity and creditworthiness of the entities as well as proved the bonafides and genuineness of transaction beyond doubt. On the above mentioned preposition appellant placed reliance on following judgments 1) Judgment of Income Tax Appellate Tribunal, "C" Bench, Mumbai dated 07/02/2014 vide ITA no.1867/Mum/2012 in case of M/s. Orchid Industries Pvt. Ltd. -Vs.- DCIT, CC-22, Mumbai 2) Judgment of High Court of Judicature at Bombay, Ordinary Original Civil Jurisdiction dated 20/....
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.... Failure of the Revenue to produce A for cross-examination, by the appellant, assumes fatal consequences. It is true that the appellants' failure to produce K had the consequence of not providing that the said person was tilling the land on their behalf. This failure cannot inexorably lead to the conclusion that no agriculture income had been generated by the appellants. Such on inference can only be drawn from the statement of A to the effect that the transaction between him, and the appellant were bogus. Therefore, it was mandatory for the Revenue to produce A for cross-examination by the appellant on their specific demand in this regard. There may well be instances where the reopening may pass muster in light of some facts, but those facts by themselves may turn out to be insufficient to preserve the assessment itself. Once ss. 147 and 148 are resorted to, the AO must first discharge the burden of showing that income has escaped assessment. It is only thereafter that the appellant has to provide all the answers. There is no reason why the initial burden of proof should not rest on the AO even whether the assessment has gone through under s. 143(1). The Tribunal has, therefore, ....
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.... discharged and the amount cannot be treted as income of the firm under s. 68. 12. Judgment of High Court of Judicature at Bombay, Ordinary Original Civil Jurisdiction, dated 12/10/2009 vide ITA No. 2182 of 2009 in case of Commissioner of Income Tax -Vs.- M/s. Creative World Telefilms Ltd. 13. (2008) 307 ITR 0334 (Del. HC) Commissioner of Income Tax -Vs.- Value Capital Services (P) Ltd. CIT(A) having accepted the existence of the share applicants and the Revenue having not shown that the applicants did not have the means to make the investment and that such investment actually emanated from the coffers of the appellant company, addition was rightly deleted by the Tribunal; no substantial question law arises. 14. (2014) 368 ITR 0001 (Bom. H.C.) Vodafone India Services Pvt. Ltd. -Vs.- Addl. CIT Provision of chapter X are not applicable to international transaction of issuance of equity share by resident company to its non-resident holding company at certain value, since neither capital receipts received by resident company on issuance of equity shares to its non-resident holding company nor short-fall between the fair market price of its e....
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....tion 68 of the Income Tax Act, 1961 while passing the order in case of the appellant and made addition of Rs. 6,58,12,500/- U/s. 68 of the Income Tax Act, 1961. The provision of Section 68 is speak that "Where any sum is found credited in the books of an appellant maintained nature and source thereof or the explanation offered by him is not, in the opinion of the [Assessing] Officer, satisfactory, the sum so credited may be charged income-tax as the income of the appellant of that previous year: Inserted by the Finance Act, 2012 w.e.f. 01/04/2013 [Provided that where the appellant is a company (not being a company in which the public are substantially interested), and the sum of credited consists of share application money, share capital, share premium or any such amount by whatever name called, any explanation offered by such appellant-company shall be deemed to be not satisfactory, unless- (a) the person, being a resident in whose name such credit is recorded 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 bee....
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.... Circle-4, Nagpur -Vs.- M/s. Swiftsol (I) Pvt. Ltd. and Others 3. Amount received were duly reflected in the books of account of the appellant as well as books of accounts of parties; 4. The appellant also draw attention that the department has not provide the copies of statement, whose statement were recorded during the course of search for proper adjudication of the matter nor whose stated to whom they have provided the accommodation entries; 5. The assessing officer has not issued summon U/s. 131 to the persons, whose statements were recorded as required by the appellant during the course of assessment proceedings and also not provided any opportunity to cross examine to the appellant; 6. All the statements were recorded behind the back of the appellant and the same were not binding on the appellant; The learned assessing officer while passing the assessment order has placed reliance on following judgments. The judgments cited by the assessing officer in the assessment order are totally difference as compared to case of the appellant. The appellant contradict judgment, which are as under 1) (2012) 342 ITR 0169 Commissioner of....
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....ion of any of the directors or employees of the share applicant. The appellant companies has also not been explained the nature and source of the receipt. But in the case of the appellant, the appellant has submitted each and every detail of the companies, from whom the appellant has received amounts towards advance against booking of property and not towards share application money. The appellant has already submitted the copies of agreement of sell, which is on Page-91 To 97 & 151 To 161 of the Paper Book. When the terms and conditions were not fulfilled thereafter the appellant has converted the booking advance by allotting equity shares executing modification agreement and the said aspects were clearly mentioned in the said agreement as well as modification agreement. The appellant has already submitted copies of modification agreement, which is on Page-98 To 100 & 162 To 164 of the Paper Book. The appellant has submitted the PAN, addresses, Memorandum of Articles alongwith incorporation certificate, copy of return alongwith audit reports of the both companies. The appellant has also submitted the bank statement of the both companies, in which transaction were duly ref....
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....he case and case laws relied upon by the appellant. The facts on record show that the appellant is engaged in the business of construction. The appellant has received total advances against sale of property of Rs. 1,50,00,000/- from M/s. Prabhav Industries Ltd. Rs. 65,00,000/- from M/s. Avance Technologies Limited during the year under consideration. Perusal of the paper book indicates that the appellant has entered into agreements to Sell dated 31/03/2010 with M/s. Prabhav Industries Ltd. through its director Shri C.S. Gaikwad and decided to construct and sell Showroom No. 22B admeasuring about 11867 ft. situated on ground floor in Shopping Malll cum Multiplex Complex under construction by the appellant company, for a total consideration of Rs. 9,50,00,000/- and received a sum of Rs. 1,50,00,000/- towards booking advance and the amount was shown in the books of account of appellant. Similarly, the appellant entered into Agreement to Sell dated 31/03/2010 with M/s. Avance Technology Limited through its director M/s. Deepak Satyaprakash Goyal and decided to sell Showroom No. 22 admeasuring about 6835 sq.ft. situated on ground floor in Shopping Mall cum Multiplex Complex constructed ....
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.... The books of account of appellant company are audited and auditor has not made any adverse remark in maintaining of the books of account. On the basis of above, and evidences filed, I do not find any justification in A.O.'s observation that the aforesaid two companies had provided accommodation entries to the appellant. The AO has not brought on record any contrary evidences that negates the legal evidences provided by appellant. The AO appears to have simply dismissed the evidences provided without assigning any valid reasons, other than the statement recorded by the department in some other case, the contents of which were also not provided to the appellant. In this, the action of the AO is found to be untenable. 6.3 In the search and seizure action at the residence and office premises of Shri Shirish Chandrakant Shah at Mumbai, it is seen that no incriminating material or documents were found in respect of appellant company. The statement of Shri Shirish Chandrakant Shah was recorded behind the back of the appellant and no copy of the statement of Shri Shirish Chandrakant Shah was provided to the appellant before using it as evidence. No opportunity was granted to the ....
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....eceived by the appellant company from alleged bogus shareholders, whose name are given to the AO, then the department is free to proceed to reopen their individual assessment in accordance with law, but it cannot be regarded as undisclosed income of appellant company. (ii) CIT V. Gagandeep Infrastructure (P) Ltd. (247 Taxman 245 (Bombay High Court) wherein it has been held as: "Further it was a submission on behalf of the Revenue that such large amount of share premium gives rise to suspicion on the genuineness (identity) of the shareholders i.e. they are bogus. The Apex Court is Lovely Exports (P) Ltd. (supra) in the context to the pre-amended Section 68 of the Act has held that where the Revenue urges that the amount of share application money has been received from bogus shareholders then it is for the Income Tax Officer to proceed by reopening the assessment of such shareholders and assessing them to tax in accordance with law. It does not entitle the Revenue to add the same to the appellant's income as unexplained cash credit." (iii) CIT V. Goa Sponge and Power Ltd. (Tax Appeal 16 of 2012) (Bombay High Court) wherein it has been held as under ....
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....sioner of Income Tax -Vs.- STL Extrusion (P) Ltd. (2011) 333 ITR 0269 (MP HC) Appellant having duty furnished the name, aged, address, date of filing the application of shares, number of shares of each subscriber, there was no justification for the AO for making the addition under s. 68. 3. Commissioner of Income Tax -Vs.- Orbital Communication (P) Ltd. (2010) 327 ITR 0560 (Delhi HC) Tribunal upheld the order of CIT(A) deleting addition made by the AO on account of share application money following the decision of the Hon'ble Supreme Court in the case of CIT vs Lovely Exports (P) Ltd. 2008) 219 CTR (SC) 195 as the appellant produced substantial evidence to establish the identity and creditworthiness of share applicant-Tribunal justified in holding that the share application money cannot be regarded as undisclosed income of the appellant under s. 68. 4. Commissioner of Income Tax -Vs.- GP International Ltd. (2010) 325 ITR 0025 (P&H HC) AO having not doubted the identity of the persons from whom the appellant company has shown receipt of share application money, impugned transactions cannot be treated as non-genuine merely because some of ....
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....by the appellants on their specific demand in this regard-AO must first discharge the burden of showing that income has escaped assessment-Opportunity to cross-examine A denied to appellant-Reopening of assessment not therefore valid. Failure of the Revenue to produce A for cross-examination, by the appellant, assumes fatal consequences. It is true that the appellants' failure to produce K had the consequence of not providing that the said person was tilling the land on their behalf. This failure cannot inexorably lead to the conclusion that no agriculture income had been generated by the appellants. Such on inference can only be drawn from the statement of A to the effect that the transaction between him, and the appellant were bogus. Therefore, it was mandatory for the Revenue to produce A for cross-examination by the appellant on their specific demand in this regard. There may well be instances where the reopening may pass muster in light of some facts, but those facts by themselves may turn out to be insufficient to preserve the assessment itself. Once ss. 147 and 148 are resorted to, the AO must first discharge the burden of showing that income has escaped assessment.....
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....ary evidence, only because those persons had not appeared before the assessing officer would not negate the case of the appellant. The judgment in case of Gagandeep Infrastructure (P) Ltd. (Supra) would be applicable in the facts and circumstances of the present case" 6.8 The appellant's counsel had requested to be supplied with copies of the statement and other material based on which the department had taken an adverse view against the appellant. I find that this were neither provided, nor was opportunity granted to cross examination. Where the Assessing Officer on basis on statement of one unrelated person, proceeds to made an addition to income of the appellant as unexplained cash credit, it was incumbent on the AO to afford the appellant an opportunity of cross-examination and in the absence of such an opportunity, the impugned addition was not justified. Reliance in this regard is placed on the decision of Delhi High Court in case of CIT V. Ashwani Gupta [2010] 322 ITR 396, CIT Vs. SMC Share Brokers Ltd. [2007} 288 ITR 345 (Delhi) and Dy. CIT V. GVS Investments (P) Ltd. [2005] 146 Taxman 36 (Delhi)(Mag.) where the addition made has been deleted as the AO has passed t....
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....shifting. 6.10 In the present case under consideration the appellant has denied the knowledge of any statement recorded Shri Shirish Shah of Mumbai. The appellant has also stated that Shri Shirish Shah is not known to the company. The AO has not established his identity and capacity in respect of his relationship either with the M/s. Prabhav Industries Ltd. or M/s. Avance Technologies Ltd. or with the appellant company. From the information made available to the appellant by the AO, it can be construed that, the impugned statement given by Shri Shirish Shah was in his individual capacity and not on behalf or related to the appellant. Therefore the appellant's contention, that the said Shri Shirish Shah has no capacity or connection with the appellant company to make any statement on behalf of the appellant company is found to be correct and justified. The same holds true for the statement given by Shri Jayesh Thakkar, of Prabhav Industries wherein no mention of the appellant company was made, but merely that Shri Shah was organizing accommodation entries for Prabhav Industries Ltd. Apart from this, the AO has also not provided the copy of statement of Shri Shirish Shah to ....
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....n the project under construction in the year 2010 and thereafter. These transactions are backed by Agreement to Sell and the amounts were received through banking channels. The appellant has explained and produced each and every details during the course of assessment proceedings before the AO. During the course of assessment proceedings, the AO himself has issued notice u/s. 133(6) to both the companies regarding the said transaction and both companies confirmed the transaction vide their letters dated 08/08/2016 & 28/11/2016. The AO has admitted the same in Para-2 (Page-2) of the assessment order. Therefore, it is an uncontroverted fact the appellant received amounts towards advance against booking of property and not towards share application money, initially. When the terms and conditions were not fulfilled, the appellant converted the booking advance by allotting equity shares executing modification agreement and the said aspects were clearly mentioned in the said agreement as well as modification agreement. Besides in any case, the shares were allotted in the year 2012, and not in the year under consideration. The appellant has already submitted copies of Modification Agreeme....
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.... are bogus, even after all the documents in support were available on record, or it could have been called by the AO from various Govt. Departments (including ROC/Income Tax authority of the investor company etc.) Even after these submissions were made of all the relevant documents to justify the appellant's stand, the AO simply disagreed with the contentions of the appellant without mentioning any concrete reason for his disagreement. I find that the AO has not demanded any other documents that could have been produced by the appellant that were required for his satisfaction. The AO has also not mentioned in his order about any contrary findings or the existence of any adverse documents that were available with him that proved the transaction as bogus. The AO has also provided no findings that the advances received by the appellant company were its own cash rerouted through accommodation entries, or even that the advances were accommodation entries of any other person. Therefore, merely on the basis of Third Party statements, the actual facts and evidences available cannot be denied or rejected. Moreover all the seven entities are Companies (and not unidentified persons) which are....
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....e must be maintained while walking the tightrope of section 68 and 69 of the It Act. The burden of proof can seldom be discharged to the hilt by the appellant; if the Assessing Officer harbours doubts of the legitimacy of any subscription he is empowered, nay duty-bound, to carry out through investigations. But if the Assessing Officer fails to unearth any wrong or illegal dealings, he cannot obdurately adhere to his suspicions and treat the subscribed capital as the undisclosed income of the Company. 16. In this analysis, a distillation of the precedents yields the following propositions of law in the context of Section 68 of the Income Tax Act. The appellant has to prima facie prove (1) the identity of the creditor/subscriber; (2) the genuineness of the transaction, namely; whether it has been transaction, namely whether it has been transmitted through banking or other indisputable channels; (3) the creditworthiness of financial strength of the creditor/subscriber; (4) If relevant details of the address or PAN identity of the creditor/subscriber are furnished to the Department along with copies of the Shareholders Register, Share Application Forms, share Transfer Registe....
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....mounts under Section 68 of the Act. 6.17 In the assessment order, the AO has cited the following judgments, the basic facts of these case is found to differ from the appellant's case, as found below : 1) CIT -Vs.- Nova Promoters & Finlease (P) Ltd. (2012) 342 ITR 0169 In the aforesaid case share applicant companies which are said to have subscribed to the share capital of the appellant company were found to be non-existent at all the address given to the department and the appellant failed to produce any of directors or employees of these share applicants, and therefore, their identity is not proved and the onus cast upon it by s. 68 has not been discharged by the appellant and, therefore, addition under s. 68 in respect of share application money was justified; mere submission of share application form, PAN, names and address and ROC registration, etc. was not sufficient in view of the fact that these companies were found to be non-existent. In the present case, the Directors of both companies had confirmed the payment of advances and statement of the directors of one company was recorded and used against the appellant, therefore, these were exi....
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....he resident from whom such money is received). Second proviso provides that the first proviso will not apply if the receipt of sum (representing share application money or share capital or share premium etc.) in from a VCC or VCF [referred in Section 10(23FB)]. However, in the year under consideration, no such provisions or stipulation existed. The amended provisions therefore, would be effective only from the Assessment Year 2013-14 onwards and not for the subject Assessment Year. In any view of the matter, the three essential tests while confirming the pre-proviso Section 68 of the Act laid down by the Courts, namely, the genuineness of the transaction, identity and the capacity of the investor have all been examined and on facts it is found satisfied. 6.19 Considering the totality of the fact and circumstances of the case, and the evidences filed before the AO and also during the appellate proceedings, and respectfully following the judicial decisions discussed in the body of the order, I am of the considered view that the A.O. was not justified in making the addition of Rs. 2,15,00,000/- under section 68 of I.T. Act 1961 and the same cannot be sustained. The AO is here....
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....ook. Both the agreements are legal evidence in the eyes of law and cannot be brushed aside. 10. We further find that since both the companies are failed to make balance agreed payment within the stipulated time limit and the assessee company has already invested aforesaid sum in its project and also was not position to return booking advance. It was amicably decided to avoid further litigation the assessee company will allot equity shares to M/s. Prabhav Industries Ltd. and M/s. Avance Technology Ltd. With respect of said transaction, both the parties entered into Modification Agreement dated 16/02/2012. The assessee company has also filed copies Modification Agreement executed with M/s. Prabhav Industries Ltd. and M/s. Avance Technology Ltd., which is placed on record Page-162 To 164 of the Paper Book. Consequent upon execution of such agreements, the assessee company has allotted equity shares by completing of formalities for issuing of such equity shares. It is admitted fact that these documents have not been controverted by the Assessing Officer. 11. It is admitted fact that the assessee company has also furnished PAN details, copies of Memorandum of Association and Artic....
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....ion, the impugned order is set aside and reference is restored to the High Court to be decided afresh. 3. CIT v/s v/s M/s.Creative World Telefilms Ltd., Ordinary Original Civil Jurisdiction, dated 12/10/2009 vide ITA no.2182 of 2009; 4. CIT v/s Value Capital Services (P) Ltd. [2008] 307 ITR 334 (Del.). CIT(A) having accepted the existence of the share applicants and the Revenue having not shown that the applicants did not have the means to make the investment and that such investment actually emanated from the coffers of the appellant company, addition was rightly deleted by the Tribunal; no substantial question law arises. 5. Vodafone (I) Services P. Ltd. v/s ACIT, [2014] 368 ITR 001 (Bom.) Provision of chapter X are not applicable to international transaction of issuance of equity share by resident company to its non-resident holding company at certain value, since neither capital receipts received by resident company on issuance of equity shares to its non-resident holding company nor short-fall between the fair market price of its equity shares and the issue price of the equity shares can be considered as income within the meaning of....
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.... 13. Commissioner of Income Tax -Vs.- Lovely Exports (P) Ltd. (2008) 216 CTR 0195 (SC) If the share application money is received by the appellant company from alleged bogus shareholders, whose names are given to the AO, then the department is free to proceed to reopen their individual assessment in accordance with law, but it cannot be regarded as undisclosed income of Appellant company. 14. Green Infra Ltd. -Vs.- Income Tax Officer (2014) 98 DTR 0187 (Mum. ITAT) Expenditure and receipts directly relating to share capital of a company are of capital in nature and therefore cannot be taxed u/s. 56(1)-Share premium realized from issue of shares is of capital in nature and forms part of share capital of company and therefore cannot be taxed as a Revenue receipt-As per Section 68, initial onus was upon appellant to establish identity, genuineness of transaction and capacity of lender or depositor-Confirmation of transaction had been received by AO by issuing notice U/s. 133(6), therefore, identity had been established-Genuineness of transaction could be safely concluded since entire transaction had been done through banking channel duly recorded in boo....
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....f should not rest on the AO even whether the assessment has gone through under s. 143(1). The Tribunal has, therefore, arrived at the correct conclusion. 16. Commissioner of Income Tax -Vs.- Steller Investment Ltd. (1991) 192 ITR 0287 (Del. HC) Notwithstanding that Assessing Officer failed to enquire into genuineness of shareholders, assessment of company could not be revised to assess the amount of share capital in the hands of company. 17. Commissioner of Income Tax -Vs.- Dwarkadhish Investment (P) Ltd. (2011) 330 ITR 0298 (Del. HC) Tribunal having confirmed the order of the CIT(A) deleting the impugned addition under s. 68 holding that the appellant has been able to prove the identity of the share applicants and the share application money has been received by way of account payee cheques, no question of law arises. 18. Commissioner of Income Tax -Vs.- Value Capital Services (P) Ltd. (2008) 307 ITR 0334 (Del. HC) CIT(A) having accepted the existence of the share applicants and the Revenue having not shown that the applicants did not have the means to make the investment and that such investment actually emanated from the coff....
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....greements on 16/02/2012. The assessee company furnished copy of Modification Agreement executed with M/s. Prabhav Industries Ltd. and M/s. Avance Technology Ltd., the documents thereof are placed on record. Consequently, the assessee company allotted the equity shares by completing the formalities for issuing of such equity shares and such documents have not been controverted by the Assessing Officer. 17. In respect of both the companies, the assessee company filed PAN details, copies of Memorandum of Association and Article of Association, Copies of Audit Report and Balance Sheets, Bank statement of the companies, copies of share application form along with Board Resolutions before the Assessing Officer and before the learned CIT(A) also, which are placed on record. The assessee company also filed the confirmation of the aforesaid two companies confirming the payments made to assessee company and the same are placed on record. All the transactions are through proper banking channel and reflected in the books of account of assessee company as well as aforesaid two companies. The books of account of assessee company are audited and auditor has not made any adverse remark in maint....
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....g Officer simply disagreed with the contentions of the assessee company without mentioning any concrete reason for his disagreement. We find that the Assessing Officer has not demanded any other documents that could have been produced by the assessee company which were required for his satisfaction. The Assessing Officer has also not mentioned in his order about any contrary findings or the existence of any adverse documents that were available with him which proved the transaction as bogus. The Assessing Officer also has not mentioned that the advances received by the assessee company were its own cash re-routed through accommodation entries or even that the advances were accommodation entries of any other person. Therefore, merely on the basis of Third Party statements, the actual facts and evidences available cannot be denied or rejected. Moreover, both the entities are Companies (and not unidentified persons) which are duly registered with Registrar of Companies and have filed all their details as statutorily requirement. Even if, for argument's sake, the Assessing Officer had any adverse information or suspicions regarding the investor companies, he could have obtained all the....
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....pellant; if the Assessing Officer harbours doubts of the legitimacy of any subscription he is empowered, nay duty-bound, to carry out through investigations. But if the Assessing Officer fails to unearth any wrong or illegal dealings, he cannot obdurately adhere to his suspicions and treat the subscribed capital as the undisclosed income of the Company. 16. In this analysis, a distillation of the precedents yields the following propositions of law in the context of Section 68 of the Income Tax Act. The appellant has to prima facie prove (1) the identity of the creditor/subscriber; (2) the genuineness of the transaction, namely; whether it has been transaction, namely whether it has been transmitted through banking or other indisputable channels; (3) the creditworthiness of financial strength of the creditor/subscriber; (4) If relevant details of the address or PAN identity of the creditor/subscriber are furnished to the Department along with copies of the Shareholders Register, Share Application Forms, share Transfer Register etc. it would constitute acceptable proof or acceptable explanation by the appellant (5) The department would not be justified in drawing an adverse ....
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....d in making additions of the amounts under section 68 of the Act. 22. In the assessment order, the Assessing Officer has cited the following judgments, the basic facts of these cases are found to differ from the assessee company's case, which as found below:- 1) CIT v/s Nova Promoters & Finlease (P) Ltd. [2012] 342 ITR 0169 In the aforesaid case share applicant companies which are said to have subscribed to the share capital of the appellant company were found to be non-existent at all the address given to the department and the appellant failed to produce any of directors or employees of these share applicants, and therefore, their identity is not proved and the onus cast upon it by s. 68 has not been discharged by the appellant and, therefore, addition under s. 68 in respect of share application money was justified; mere submission of share application form, PAN, names and address and ROC registration, etc. was not sufficient in view of the fact that these companies were found to be non-existent. In the present case, the Directors of both companies had confirmed the payment of advances and statement of the directors of one company was recorded and used aga....