TaxTMI 
TaxTMI 
2025 (1) TMI 522
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.... paper companies having meager income or loss, which were started 6 to 12 months prior to investment in M/s. Lupin Commodities Pvt. Ltd., which is a closely held company of Uttamchand Jain and his family members. 2) On the facts and in the circumstances of the case and in law, whether the Ld. CIT(A) erred in ignoring the fact that the DDIT (Inv.), Kolkata, could not find the company, M/s. Lupin Commodities Pvt. Ltd., at the given address, and the assessee failed to furnish the changed address of the said company, even subsequent to this. 3) On the facts and in the circumstances of the case and in law, whether the Ld. CIT(A) erred in relying on the decision of Hon'ble High Court of Madhya Pradesh, which is reported in 245 ITR 160, to state that source of source cannot be asked, whereas in the case of the assessee, the Assessing Officer made independent enquiries with regard to the concerns, which had invested in M/s Lupin Commodities Pvt. Ltd., which is in accordance with the decision of the Hon'ble High Court. 4) Reliance is placed on the decision of Hon'ble High Court of Delhi in the case of CIT vs. Globus Securities & Finance Pvt. Ltd. (2014), reported ....
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....company. Though, assessee furnished the detailed submissions during the assessment proceedings to the Assessing Officer, however, the Assessing Officer was not satisfied about the same and accordingly he treated the same as unexplained credits and held that assessee has routed its unaccounted money in the guise of share application and share premium. The Assessing Officer accordingly made addition of Rs. 538 lakh to the total income of the assessee company. 3. In appeal, the learned CIT(A) deleted the addition for detailed reasons indicated in the appellate order. 4. The learned Departmental Representative ("the learned D.R.") placed reliance on the order of the Assessing Officer to submit that addition is correctly made for the detailed reason indicated in assessment order. The Learned D.R. submitted that the assessee has not been able to explain the source of source of share capital contribution received by the assessee company during the year under consideration. It was submitted that the learned CIT(A) has not correctly appreciated the facts and evidence on record and was not justified in deleting the addition made under section 68 of the Act. The learned D.R. thus submit....
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.... D) A.O. has verified the transaction by obtaining the details from website of Ministry of Corporate Affairs. Details obtained corroborated the contribution of share capital and nothing adverse was noted found. (Para 7.5 of assessment order). E) A.O. has verified bank statement of corporate share holder and it was noted that there are no cash deposit in the bank account of corporate share holder. Nothing adverse can be considered from the details on record. (Para 7.5 of assessment order). F) The Hon'ble Bombay High Court has concluded that prior to Asstt. Year 2013-14 law laid down by Hon'ble Apex Court in the case of Lovely Exports (P) Ltd. will be applied and thus revenue is not entitled to assess the share capital as unexplained cash credit. Reliance on: i) ITA No.1613 of 2014 in the case of M/s. Gagandeep Infrastructures vide order dated 20/03/2017. (P- 10 - 16) (14, 15) [Vol. - II] G) It is settled proposition of law that contribution to share capital is capital receipt. The shareholder is corporate shareholder assessed to income tax. Assessee has established identity, creditworthiness of share applicant and genuine....
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.... iii) Hon'ble High Court of Bombay in ITA No.1613 of 2014 in the case of M/s. Gagandeep Infrastructure Pvt. Ltd. vide order dated 20/03/2017 (P- 10 -16) [Vol.- II] iv) Hon'ble Haryana High Court in ITA No.386 of 2010 (O & M) in the case of M/s. K.C. Pipes Pvt. Ltd. vide order dated 02/08/2016 (P- 50 - 51) [Vol.- II] K) A.O. has made addition and same is not based on any incriminating evidence or material found in the course of search on Mahavir Global Coal Ltd. (MGCL). The present assessment is framed u/s 153C of I.T. Act 1961. Only addition made is in respect to Share Capital and that too not based on any incriminating material found during the course of search. Addition made not based on incriminating material unsustainable as A.O. has no jurisdiction to make such addition u/s 153C of I.T. Act 1961. Reliance on: i) Hon'ble Bombay High Court order in ITA No.923 of 2012 in the case of Bharati Vidyapeeth vide order dated 11/09/2014. L) Decision of Hon'ble Delhi High Court in the case of CIT vs. Globus Securities & Finance Pvt. Ltd. relied upon by revenue is distinguishable on facts and is inapplicable to the facts in the case of assesse....
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....he transaction of receipt of share capital contribution by assessee company. It is seen from the financial statements that share capital contribution made by corporate share holder is Rs. 538 lakh during the year under consideration. The financial statements of corporate shareholder indicates that it had share capital and reserve surplus on the opening day of accounting year at Rs. 539 lakh. The financial statements for subsequent two years are also placed on record. The investment made in assessee company is properly reflected in financial statement of corporate share holder. The financial statements clearly established creditworthiness of the corporate share holder to contribute the share capital contribution of Rs. 538 lakh. Bank statement of corporate shareholder is placed on record and no cash deposit is found in bank statement. The transaction of contribution of share capital is through proper banking channel. On above undisputed factual position identity and creditworthiness of the corporate share holder as well as genuineness of transaction of contribution of share capital contribution stands established. Before us, the Revenue is not able to show any adverse evidence on re....
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....ny 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 by the impugned order of the Tribunal and on facts it was found satisfied. 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 in 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 assessee's income as unexplained cash credit." 11. The ratio laid down by the decision of Hon'ble Jurisdictional High Court squarely applies to the facts in the case of assessee and respectfully following the same, addition made in the case of assessee is held to....
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....den of the Revenue. It must show that even if the applicant does not have the means to make the investments, the investment made by the applicant actually emanated from the coffers of the assessee so as to enable it to be treated as the undisclosed income of the assessee. This has not been done insofar as the present case is concerned and that has been noted by the Tribunal also." iii) Hon'ble Bombay High Court order in ITA (L) No.2182 of 2009 in the case of M/s. Creative World Telefilms Ltd. (Earlier known as Link International Services Pvt. Ltd.) vide order dated 12/10/2009 "2. The question sought to be raised in the appeal was also raised before the Tribunal and the Tribunal was pleased to follow the judgment of the Apex Court in the case of CIT V/s. Lovely Exports (P) Ltd. reported in [2008] 216 CTR 195 (SC) wherein the Apex Court observed that if the share application money is received by the assessee company from alleged bogus shareholders, whose names are given to the assessing officer, then the department can always proceed against them and if necessary reopen their individual assessments. In the case in hand, it is not disputed that the assessee had given....
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....I] "If the shareholders have acquired the money illegally, the respondent - assessee cannot be held liable. There is nothing to show that the money belongs to the Company/assessee itself. The revenue must then proceed against the shareholders." vii) Hon'ble Bombay High Court in Writ Petition No.3027 of 2015 in the case of Khubchandani Healthparks Pvt. Ltd. vide order dated 10/02/2016. (P- 52 - 60) (58, 59) [Vol.- II] "We are of the view that the basis of the impugned Notice stands concluded by the decision of this Court in Vodafone India Services Ltd. Vs. CIT 368 ITR 01, wherein it has been held that the share premium being on the capital amount cannot be subjected to tax as income" viii) CIT v/s Dwarkadhish Investment (P) Ltd. [2011] 330 ITR 298 (Del.) "8. In any matter, the onus of proof is not a static one. Though in s. 68 proceedings, the initial burden of proof lies on the assessee yet once he proves the identity of the creditors/share applicants by either furnishing their PAN or income-tax assessment number and shows the genuine-ness of transaction by showing money in his books either by account payee cheque or by draft or by any o....
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....er Section 68 of the Act. 18. In the first appellate proceedings, it was held that assessee had produced sufficient evidence in support of proof of identity of the creditors and confirmation of transactions by many documents, such as, share application form etc. First appellate authority also noted that there was no requirement under Section 68 of the Act to explain source of source. It was not necessary that share application money should be invested out of taxable income only. It may be brought out of borrowed funds. It was further held that non-responding to notice would not ipso facto mean that the creditors had no credit worthiness. In such circumstances, the first appellate authority held that where all material evidence in support of explanation of credits in terms of identity, genuineness of the transaction and credit-worthiness of the creditors were available, without any infirmity in such evidence and the explanation required under Section 68 of the Act having been discharged, Assessing Officer was not justified in making the additions. Therefore, the additions were deleted. 19. In appeal, Tribunal noted that before the Assessing Officer, assessee had su....
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....ials required which proved the source of the source, though as per settled legal position on this issue, assessee need not to prove the source of the source. (v) Assessing Officer has not brought any cogent material or evidence on record to indicate that the shareholders were benamidars or fictitious persons or that any part of the share capital represent company's own income from undisclosed sources. Accordingly, no addition can be made u/s. 68 of the Act. In view of above reasoned factual finding of CIT(A) needs no interference from our side. We uphold the same." 21. From the above, it is seen that identity of the creditors were not in doubt. Assessee had furnished PAN, copies of the income tax returns of the creditors as well as copy of bank accounts of the three creditors in which the share application money was deposited in order to prove genuineness of the transactions. In so far credit worthiness of the creditors were concerned, Tribunal recorded that bank accounts of the creditors showed that the creditors had funds to make payments for share application money and in this regard, resolutions were also passed by the Board of Directors of the three credi....
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.... Capital and Financial Services Pvt. Ltd. was controlled by Shri Hari Om Bansal and M/s Sober Associates Pvt. Ltd. and M/s Shri Niwas Leasing & Finance Ltd. were controlled by Shri Mahesh Garg, who in their statements before Director of Income Tax (Investigations) had admitted that they were engaged in the business of providing accommodation entry through various companies controlled by them. Hon'ble Delhi High Court has remanded the matter back to the file of Tribunal. It has been noted at Para-18 that Tribunal will also take into account facts and circumstances noted above but the observation made in this order will not be treated as conclusive and final. The facts in the case of assessee indicate that in an independent enquiry contribution of share was confirmed by the corporate share holder before Investigation Wing along with documentary evidence. The evidence brought on record in an independent enquiry has not been found to be incorrect or adversely commented in the assessment order. Thus nothing adverse can be drawn from the said decision in the case of assessee. The Tribunal, Delhi Bench, Delhi, has decided the appeal after remand order of Hon'ble Delhi High Court vide orde....