TaxTMI 
TaxTMI 
2025 (6) TMI 1982
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....be allowed a deduction of an amount equal to one-tenth of such expenditure for each of the ten successive previous years beginning with the previous year in which the business commences or, as the case may be, the previous year in which the extension of the undertaking is completed, or the new unit commences production or operation. (Provided that where an Assessee incurs after the 31st day of March, 1998, any expenditure specified in sub-section (2), the provisions of this sub-section shall have effect as if for the words "an amount equal to one-tenth of such expenditure for each of the ten successive previous years", the words "an amount equal to one-fifth of such expenditure for each of the five successive previous years" had been substituted]?" 2. "Whether, on the facts and in the circumstances of the case and in law, the Ld CIT(A) has erred in relying on decision of the Hon'ble Supreme Court in case of CIT vs General Insurance Corporation (286 ITR 232 SC), as the decision was given in respect of issue of bonus shares whereas the assessee has increased its authorized share capital in the present case and hence the decision of the Hon'ble Supreme Court is not ap....
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....ion 35D is applicable in case of revenue expenses before the commencement of business and after the commencement of business in connection with extension undertaking or in connection with setting of new unit. Whereas in the case of the assessee, increase in the share capital was neither extension of business nor setting up of new unit, in fact this expenditure was to increase the share capital as per working capital requirements of the company and therefore, the claim of Rs. 11,40,144 should be allowed. However, the ld. AO restricted the claim of Rs. 2,85,036/- and added back Rs. 11,40,144/-. 5. The ld. CIT(A) has deleted the addition following the Hon'ble Supreme Court judgment in case of CIT vs. General Insurance Corporation (286 ITR 232) after holding and observing as under:- "8.3 In this regard it is seen that the Hon'ble Supreme Court in the case of CIT vs General Insurance Corporation [286 ITR 232 SC] has held that the expenses incurred on issuance of bonus shares was revenue expenditure. The relevant extracts are as under "22. As observed earlier, the issue of bonus shares by capitalization of reserves is merely a reallocation of company's funds.....
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....shares in the ratio of 1:1. Once authorised share capital has been increased to issue bonus shares which have been issued by capitalizing free reserves, it tantamount to re-allocation of the company's funds. There is no inflow of fresh funds or increase in the capital, as it remained the same. The issue of bonus shares has not resulted in extension of capital base of the company. The aforesaid observation and the principle laid down by the Hon'ble High Court in the case of CIT vs. General Insurance Corporation (supra) as highlighted above by the ld. CIT(A) is clearly applicable on these facts and therefore, order of the ld. CIT(A) following judgments of the Hon'ble Supreme Court is upheld. Accordingly, ground Nos. 1 & 2 raised by the Revenue are dismissed. 7. Now coming to the issue of addition made u/s. 68 for sums aggregating to Rs. 60,59,00,000/- which was on account of unsecured loan taken by assessee from three parties, which has been majorly deleted by the CIT(A). 8. The brief facts are that during the year assessee, assessee has shown loan to the extent of Rs. 60,59,00,000/- received from the following parties:- Sr. No. Name of the Parties Amount (Rs.) 1 ....
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....ed u/s 131 of the Act but only filed the audited financial statement of Allbright (v) Search taken place at the premises of M/s. Hubtown Limited in which statement of Shri Mahavir Duggar [brother in law of Shri Vinod Singhvi] was recorded as one excel sheet has been found from his laptop. In the statement he has stated that the sheet found from his laptop contains details of accommodation entry provided by him to various beneficiaries in form of unsecured loans. Shri Duggar allegedly admitted that he was arranging accommodation entry from various companies for various beneficiaries. Allbright is one of such company which has been used for giving accommodation entry. (vi) The Allbright has no substantial income from the business activity (vii) There are various transfer and/or credit entries in the bank statement of Allbright before giving loan to the Appellant. (viii) The ownership of Allbright found to be suspicion and loan taken by the Appellant is also under suspicion. 10. Similarly, AO has also disallowed the payment of interest of Rs. 5,36,467/- to M/s. Allbright Electricals Pvt. Ltd., In the case of loan taken from M/s Carron Investments....
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....ommon director viz Shri Mohd Latif Khan Ummed Ali who did not appear before the VU to testify for the genuineness of the transactions of these companies with Umang Trading Pvt Ltd. 3. Each of these companies have nominal paid up capital and negligible income declared in return of income meaning thereby that these companies do not have any funds of their own from which they could have given loans to the Assessee Umang Trading Pvt Ltd. There are corresponding credits in their bank accounts immediately before the loan transfer to Umang Trading Pvt Ltd. 4. Dubious character of two of these companies have been observed by their respective Assessing officer in their assessment proceedings. (ii) The contention of Shri Mohd. Latif Khan Ummed All that he did not attend before the verification unit for personal examination because the summons did not mention any address is but an alibi to hide his insincerity. Shri Mohd. Latif Khan Ummed Ali chose to not respond to the summons otherwise he could have reverted back online to the VU stating that he could not attend because no address was mentioned. In the summons, the VU had also required Shri Mohd. Latif Khan Ummed ....
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....n-genuine. (vi) In light of the above discussion, it is established beyond any doubts that the transactions between the Assessee company and the lending companies listed in Table-2 above, were not genuine and therefore the loans received by the Assessee company from the lending companies listed in Table-2 above deserves to be treated as unexplained cash credits. The amount of Rs. 27,64,00,000/-, thus received from M/s Novus Trade star Pvt Itd and Carron Investments Pvt Ltd is hereby added to the total income of the Assessee u/s 68 of the Income tax Act. Penalty proceedings u/s 271AAC (1) are being initiated separately. Penalty proceedings u/s 271AAC (1) are proposed to be initiated separately [(B)- Addition of Rs. of Rs. 27,64,00,000/- 12. Again with regard to loans received from Shri Gaurishankar Deora, ld. AO noted that assessee has received unsecured loans of Rs. 60,00,000/- but there is no PAN of the lender in the confirmation letter filed by him and accordingly Rs. 60,00,000/- was added. 13. Before the ld. CIT(A) assessee gave poin twise rebuttal of each and every allegation and observation of the ld. AO and various documents which were filed before the ld. A....
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....O on the other hand has simply relied on the weak financials of the lender parties and that the Directors did not depose personally for examination In the case of Allbright Electricals Pvt Ltd, the AO has also relied on the statement of Sh Mahavir Duggar, who was the brother in law of the Director of Allbright Electricals Pvt Ltd, that he was in the business of giving accommodation entries to various beneficiaries through various companies and that Allbright Electricals Pvt Ltd was one such company which had been used for this purpose. Besides relying on this general statement, the AO has not been able to bring on record any specific evidence impleading the assessee. The AO has not been able to bring on record any material fact to suggest that anywhere any specific reference was made in respect of the assessee as a recipient of accommodation entries. As regards Carron Investment Pvt Ltd and Novus Tradestar Pvt Ltd, the AO has simply relied on the fact that the Director of these companies was residing in a small flat in Bhayandar. Without making any enquiry from the said person, coming to any conclusion on the basis of the size of his accommodation cannot be accepted. The assessee o....
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....action Also, as per various judicial pronouncements, for the year under consideration, there was in any case no requirement to prove the source of the source from whom the unsecured loan had been received." 14. However, with regard to loan taken from Shri Gaurishankar Deora of Rs. 60,00,000/-, the ld. CIT(A) found that assessee has only taken loan of Rs. 30,00,000/-. During the year by way of cheque and balance of Rs. 30,00,000/- cheque was dishonoured, thus, there was only a loan of Rs. 30,00,000/-. However, he has confirmed an addition of Rs. 30,00,000/- that the onus cast upon the assessee was not discharged. 15. Before us ld. DR relied upon the various observation of the ld. AO and submitted that none of these companies had any credibility and were found to be dubious companies and drew our attention to facts as discussed by the AO ( incorporated above). Further, ld. AO also referred to statement of Shri Mahavir Duggar in whose case the search was conducted and in his statement, he has admitted that he was arranging accommodation entries from various companies which also included Allbright Electricals Pvt. Ltd., Further, in some of the companies they were not carrying out....
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....cals Private Limited in the books of the Appellant Company • Loan Ledger confirmation for Financial Year 2019-20 (letter dated 22/08/22) • Statement showing the correct amount of loan taken from the 256 Allbright for the year under consideration. Carron Investment Private Limited • Acknowledgement of return filed for Assessment Year 2020-21. 2019-20 and 2018-19. (letter dated 22/08/22) • Audited Financial Statement for Financial Year 2019-20. (letter 26 dated 22/08/22) • Relevant extract of Bank statement of the Appellant Company 27 highlighting the loan taken and repaid. (letter dated 22/08/22) • Relevant extract of Bank statement of Carron Investment 2 Private Limited. • Ledger account of Carron in the books of Appellant company 3 for Assessment Year 2020-21. • Loan Ledger confirmation for the Financial Year 2019-20. (letter dated 22/08/22) Novus Tradestar Private Limited • Acknowledgement of return filed for Assessment Year 2020-21, 2019-20 and 2018-19. (letter dated 22/08/22) • Audited Financial Statement for Financial Year 2019-20. (letter dat....
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....e the creditworthiness. The net income shown in the return of income cannot be the criteria for judging the source of income, albeit one has to see overall availability of the funds disclosed in the balance sheet, bank statement and the nature of transaction. If the AO has to inquire upon the source of funds in the hands of lender companies then he has to inquire from these companies. Assessee as the law prevalent at that point of time was required to prove the source of the source. It is only when some material has been found that assessee is beneficiary and assessee has unaccounted money routed through these companies, then ostensibly sources of funds can be inquired upon. Here in this case as discussed above there were regular transactions and assessee has also advance loan to these companies which was repaid back. Under these facts, once identity and the creditworthiness is proved from the records and genuineness of the transaction has not been disproved as noticed from the entries in the bank statement and copy of ledger account, then it cannot be deemed to be unaccounted money or credit from undisclosed sources. Ld. AO has not verified the ledger account properly the overall ....