TaxTMI 
TaxTMI 
2025 (8) TMI 136
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....rutiny Selection (CASS) for the reason of large commission expenses and low net profit, claim of depreciation at higher rates and higher additional depreciation. The statutory notices along with questionnaire were issued and duly served upon the assessee. During the impugned financial year, the assessee had issued equity shares of face value of Rs.10/- at a premium of Rs.90/-to 28 subscribers. The ld. AO during the course of assessment proceedings accepted the subscription of shares by five directors of the assessee company to the tune of Rs.3 crores as genuine. The ld. AO during the course of assessment proceedings called for the various details and evidences qua these investors which were duly furnished by the assessee comprising bank statement, balance sheet, Board Resolution and Memorandum of Articles of Association, ITR acknowledgement, final accounts, list of share applicants along with address of allottees besides ITRs, audited accounts, bank statements of the share subscribers. The assessee is a listed company on the recognized stock exchange. The ld. AO discussed the general modus operandi in case of shell companies and also findings given by the investigation wing in case....
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....the ld. CIT(A) is wrong and against the provisions of the Act as well as against the ratio laid down in various decisions. The ld. AR in defense of his arguments filed written submission which are as under: "I. It is humbly stated that the assessee-company filed its return for the A.Y. 2012-13. Subsequently, the case of the assessee was selected for scrutiny. Thereafter, notice under section 143(2) and 142(1) were issued by the A.O and finally assessment was completed by passing the order u/s 143(3) on 30.03.2015 assessing the total income at Rs 41,52,13,220/- by adding the share capital raised by the assessee during the relevant year amounting to Rs 17,00,00,000/- and also adding Rs 2,25,659/- u/s 14A r.w.R 8D. It is pertinent to note that during the relevant year the assessee company had issued20,00,000 shares of Rs 10/- each at a premium of Rs 90/- per share totaling to Rs 20,00,00,000/-The brief facts leading to the above-mentioned addition made by the Ld. A.O. are that the assessee company raised a sum of Rs. 20 crores during the year towards share capital (@Rs 10/-) per share and share premium (@ Rs 90/- per share) from 28 share subscribers. The Ld. A.O. accepted the....
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....t year. V. As regard the allegation raised by the A.O. in respect of Tirumala Holdings Pvt. Ltd. is concerned, it is humbly submitted that the office of the said company was shifted to a new address. This was submitted before the Ld. CIT(A) during the course of the appellate proceedings. Therefore, the said company could not be located at the old address though the current address of the said company is available in the public domain. However, the said company duly made compliance to the notice issued by the A.O. by filing various documentary evidences. Copies of latest IT Return Acknowledgement showing the present address along with the Form No INC - 22, Form No MGT 14 were produced and submitted. VI. (a)The Ld. A.O. further in the remand report alleged that the shareholder companies did not have creditworthiness since they had meagre income. In this regard, it is humbly submitted that merely because the income of few of the shareholders is meagre, it cannot be said that their creditworthiness is doubtful when their own funds are several times the investment made in the assessee company. In this regard, reliance is placed on the decision of the Hon'ble High C....
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....roving 'Source of Source' of funds i.e. to discharge burden of proof u/s. 68 of the Act, the source of funds of the share subscribers need not be explained in case the assessee is a company in which the public are substantially interested. The second proviso to section 68 of the Act is reproduced below: Provided further that] where the assessee is a company (not being a company in which the public are substantially interested), and the sum so credited consists of share application money, share capital, share premium or any such amount by whatever name called, any explanation offered by such assessee-company shall be deemed to be not satisfactory, unless- (a) the person, being a resident in whose name such credit is recorded in 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 been found to be satisfactory. IX. That u/s. 2(18)(b)(A) of the Income tax Act, 1961, a company in which the 'public are substantially interested' is defined as under: (18) "company in which the public are su....
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....ial authorities, who have not been able to prove the charge of round tripping of funds/accommodation entries being taken in the garb of share capital & premium. And instead, have arbitrarily made an addition on account of Share Capital & Share Premium in the hands of the Assessee Company, listed on recognized stock exchange in the year under question and having justified the premium charged on the issue of its equity shares" 06. The ld. DR, on the other hand, relied on the order of the authorities below and submitted that the assessee company has raised money through dubious sources and has completely failed to prove the identity, creditworthiness of the investors and genuineness of the transactions. The ld. DR also submitted that the shares were issued at a very high premium without any justification and therefore, the appeal of the assessee may kindly be dismissed by upholding the order of ld. CIT (A). 07. After hearing the rival contentions and perusing the materials available on record, we find that the assessee is a company in which public are substantially interested in terms of provisions of Section 2(18)(b)(A) of the Act. We note that the assessee company is listed in....
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....ssessee is a company in which public are substantially interested, therefore the proviso to section 68 of the Act has no application and the theory of source of source is not applicable. 010. We note that the ld. AO, during the remand proceedings as directed by the ld. CIT (A) following direction by the Jurisdictional Hon'ble Court in writ jurisdiction to decide the appeal of the assessee within 12 weeks from the communication of writ order. During remand proceedings, the AO issued notices u/s 131 of the Act to all investor companies out of which the notices were served only on 11 parties, whereas on the remaining the ld. AO noted that there were not traceable. The ld. AO observed that in response to notice u/s 131 of the Act, Tirumala Holdings Pvt. Ltd. which is a group company filed and furnished the documents as called though notice u/s 131 of the Act could not be served on it. The AO further observed that documents filed showed that the said subscriber did not have any creditworthiness. 011. We also note that the assessee in rebuttal to remand report submitted that the 12 subscribers on whom the notices u/s 131 of the Act could not be served were active on MCA portal and ....