TaxTMI 
TaxTMI 
2022 (11) TMI 1541
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.... all grounds of appeal either before or during course of appellate proceedings". 3. The facts have been lucidly noticed by the ld. 1st Appellate Authority in paragraph no. 3.1 of the impugned order. Therefore, for the sake of brevity of repetition, we take facts from this paragraph, which reads as under:- "3.1. Grounds of Appeal No(s). 1,2,3,4,5 and 6 : Assessee had filed its regular return of income on 25.09.2009 declaring total income of Rs. 4,60,071/-. Return was processed u/s. 143(1) of the Income-tax Act, 1961 on 30.10.2010. Search & seizure action u/s. 132(1) was taken against the Dhandhania Group to which assessee belongs on 19.11.2015. During post search enquiries, it was found that some of the Group companies of Dhandhania Group had raised bogus share capital during AY: 2009-10. Assessee company is one of such Group companies which had raised share capital of Rs. 1,50,00,000/-. This information was passed on to the AO and on the basis of this information assessment proceedings of the assessee for the current year was reopened and notice u/s. 148 was issued on 30.03.2016. In response to notice u/s. 148, assessee filed return on 29.04.2016 and asked for reasons for reopen....
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....balance sheet of the assessee company as on 31.03.2008 there are insignificant reserves in form of accumulated profit to command premium of Rs 40/ - per share. Even in the year in which capital was raised there was no significant business activity of tilt company, till it managed to raise capital from 10 entities which subscribed to the shares of die assessee company at the rate of Rs. 50/- per share including premium which is five times of the face value, which is not logical. If the creditworthiness of the subscribing company is analysed it is seen that these companies are paper companies with no actual business activity of profit to justify investments of this magnitude in Assessee Company. On going through the balance sheet of the assessee company it is found that the assessee company has invested Rs. 54,47,150/ - towards land & building but no documentary evidence of the same was produced, further the amount which was raised by issue of shares has been advanced to parties without any apparent business objective which further lends credibility to our findings. Any normal company cannot afford to disburse share capital raised in such a wayward manner, as it would invite die ir....
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....ad subscribed to the preference shares of the company Sl. No. Particulars Pg. No. Summary sheet of Allottee Companies and the relevant documents produced in respect of each of them 73 Chaturang Commercials Pvt. Ltd. : Rs. 15,00,000/- IT Acknowledgment for AY 2009-10 74 Directors report along with audited financial statements for FY 2008-09 75-89 Summary sheet of allottee companies and the relevant documents produced in respect of each of them 73 Chaturang Commercials Pvt. Ltd. Rs. 15,00,000/- IT Acknowledgment for AY 2009-10 74 Directors report along with audited financial statements for FY 2008-09 75-89 Explanation regarding the source of investments in assessee company. 9 - Relevant extracts of bank statements evidencing that payments were made through proper banking channel. Copy of the Share Application 92 Form filed with the assessee company. Copy of the Board Resolution authorizing investments. 93 Vikrant Constructions Pvt Ltd - Rs. 10,00,000/- - IT Acknowledgement for AY 2009-10. 94 Director....
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....Sales Pvt. Ltd. Rs. 10,00,000/- Explanation regarding the source of investments in assessee company 163 Relevant extracts of bank statements evidencing that payments were made through proper banking channel 164 Copy of the share application form filed with the assessee company 165 Copy of the Board Resolution authorizing investments 166 Kasturi Merchants Pvt. Ltd.- Rs. 15,00,000/- Audited financial statements for FY 200809 167-171 Explanation regarding the source of investments in assessee company 172 Relevant extracts of bank statements evidencing that payments were made through proper banking channel 173 Copy of the share application form filed with the assessee company 174 Copy of the Board Resolution authorizing investments 175 Goodworth Commodities Pvt. Ltd. Rs. 25,00,000/- Audited financial statements for FY 2008-09 176-180` Copy of the share application forms filed with the assessee company 181 Copy of the Board resolution authorizing investments 182 Pushker Trading & Holding Pvt. Ltd. Rs. 15,00,000/- ....
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....eceipt of information, AO does not appear to have made any enquiries to establish the real identity and creditworthiness of the creditors, even though, appellant had submitted the details of all the share holders who had contributed to share capital during the current year. The documents relating to share application forms, copies of the relevant bank statements, copies of Board Resolution authorising issue of shares, financial statements of 10 share applicants along with the IT acknowledgement regarding returns filed by them and other supporting documents were submitted during assessment proceedings along with the letter raising objections against reopening proceedings. However, AO has not made any efforts to verify the genuineness of these documents with field enquiry or enquiry in any other forms. Further, AO does not appear to have disposed the objections of the assessee against reopening proceedings, before concluding the assessment proceedings. It appears that AO has not disposed the same in violation of the directions of the Hon'ble Supreme Court in the case of GKN Driveshafts India Ltd. Vs. ITO, 259 ITR 19 (SC). It appears that the main reasons for adding the share capi....
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....earch has taken place on the Dhandhania Group but there is evidence that the assessee has taken any entry for share capital. Further assessee had submitted all the details along with supporting documents, regarding share subscribers. To build a case AO should have conducted enquiries to find out discrepancies in those details/documents and these discrepancies/evidences should have been elaborately discussed in the order to justify holding the share capital as bogus. However, AO has failed to bring any adverse material on record. Under the circumstances, the additions made by the AO cannot be sustained. Hence, addition of Rs. 1,50,00,000/- is deleted". 8. We have duly considered rival contentions and gone through the record carefully. before we embark upon an inquiry on the facts of the present appeal, in order to find out whether the share capital and share premium money received by the assessee during the year is required to be treated as its unexplained credit and deserves to be added under section 68 of the Income Tax Act, 1961. We deem it appropriate to bear in mind certain basic principles/tests propounded in various authoritative pronouncements of the Hon'ble High Courts....
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.... of such credit. The explanation should be to the satisfaction of the AO. In order to give such type of explanation which could satisfy the AO, the assessee should fulfill three ingredients viz. (a) identity of the share applicants, (b) genuineness of the transaction, and (c) credit-worthiness of share applicants. As far as construction of section 68 and to understand its meaning is concerned, there is no much difficulty. Difficulty arises when we apply the conditions formulated in this section on the given facts and circumstances. In other words, it has been propounded in various decisions that section 68 contemplates that there should be a credit of amounts in the books of an assessee maintained by the assessee, (b) such amount has to be a sum received during the previous year, (c) the assessee offers no explanation about the nature and source of such credit found in the books, or (d) the explanation offered by the assessee is not, in the opinion of the Assessing Officer, satisfactory. The Hon'ble Delhi High Court in the case of CIT v. Novadaya Castles (P.) Ltd. 367 ITR 306 has considered a large number of decisions including the decision of Hon'ble Supreme Court in the c....
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....eal that the assessee has filed documents including certified copies issued by the Registrar of Companies in relation to the share application, affidavits of the directors, Form 2 filed with the Registrar of Companies by such applicants confirmations by the applicant for company's shares, certificates by auditors etc. Unfortunately, the Assessing Officer chose to base himself merely on the general inference to be drawn from the reading of the investigation report and the statement of Mr. Mahesh Garg. To elevate the inference which can be drawn on the basis of reading of such material into judicial conclusions would be improper, more so when the assessee produced mate- rial. The least that the Assessing Officer ought to have done was to enquire into the matter by, if necessary, invoking his powers under section 131 summoning the share applicants or directors. No effort was made in that regard. In the absence of any such finding that the material disclosed was untrustworthy or lacked credibility the Assessing Officer merely concluded on the basis of enquiry report, which collected certain facts and the statements of Mr. Mahesh Garg that the income sought to be added fell within t....
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....fficer. He made reference to the finding of the DDIT (Investigation), Unit-2(1), Kolkata, but that was not an adjudicatory finding. It was a process of collecting incriminating material against the assessee and preparation of a report to consider that material. The opportunity to the assessee is to be given during an assessment proceeding when it can explain this material and ld. Assessing Officer is bound to verify to the contentions of the assessee in the light of that material in an analytical manner. That exercise is totally missing here. This aspect has been considered by the ld. 1st Appellate Authority in the finding extracted supra. 13. Apart from the above, it is pertinent to note that copy of the reasons for reopening is available on page no. 32 of the paper book. According to the assessee, this is the information supplied by the ld. Assessing Officer, but it does not contain complete copy as well as the approval, if any, granted by the ld. Principal CIT, Kolkata. Though to our mind, it is an irregularity and if we are called upon to test the veracity of impugned order only on this fold of dispute, then we would have remitted the issue back for adjudication of the objecti....