TaxTMI 
TaxTMI 
TaxTMI 
2018 (7) TMI 2375
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....the occasions. (b) Letters were issued to the share applicants seeking the following details: i. Mode of payment, details of allotment of shares by Cauvery Iron & Steels (India) Ltd., ii. Income tax particulars of A.Y. 2009-10 iii. Ledger extracts of Cauvery Iron & Steels in the books of share applicants. (c) Letters were issued to 22 share applicants and the response is as under: (i) Confirmed the investment - 5 cases. They are : 1. Glozon Alloys & Castings Pvt. Ltd., New Delhi 2. Mahak Textile Pvt. Ltd., New Delhi 3. Afflatus Software Pvt. Ltd., New Delhi 4. Sperm Tracom Pvt. Ltd., Kolkata 5. Jamuna Machine Tools & Manufacturing Company P. Ltd., Hyderabad. (ii) Letters returned with the remarks unknown / not known - 7 cases. They are: 1. Dost International Ltd. 1510/11, Shiv Ashram, SP Mukharji Marg, Delhi-6. 2. Rishikesh Properties Pvt. Ltd. 18/19, Eriappan St., Sowkarpet, Chennai. 3. Rupe Promoters Pvt. Ltd., 18/19, Eriappan St., Sowkarpet, Chennai. 4. Rupa Merchants Pvt. Ltd. 302, 3rd floor, Vardhaman North Ex-plaza, netajee Subhash Place, Pitampura, New Delhi - 6. 5. CEE AAR Decors Pvt. Ltd., 1510/11, Shiv Ashram, SP Mukharji....
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.... produced for examination, the enquiries were conducted by Income-tax Investigation officials located at Mumbai, Kolkata, New Delhi and Chennai. All of them have reported that the companies do not exist at the given address and reported that these are only paper companies. (j) That with reference to investment made by sister concern M/s. Jamuna Machine Tools & Manufacturing Company P. Ltd. vital details of share applicants and the reasons for fixing the premium at Rs.4,990/- were not submitted. (k) That Mr. Ashok Kumar Gupta, Managing Director of the company admitted that the share application money was received through an agent - Mr. K.C. Malu, CA, who is currently not in India, but his address, contact number and PAN No. were not given. Mr. Ashok Kumar Gupta clearly admitted that he did not know any of the investor companies and their directors. He further admitted that the process of raising funds in the case of Jamuna Machine Tools & Manufacturing Company P. Ltd., was also the same, the funds were raised through an agent. (l) Based on the above enquiries, the Assessing Officer informed his conclusions to assessee as under: "A. The companies which you claim as your i....
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.... Venkateshwar Ispat (P) Ltd. (2010) (II) ITCL 0355 (Chattisgarh - HC) (vi) Hindustan Inks & Resins Ltd Vs. Dy.CIT (2011) [60 DTR 0018 (Guj.HC) 4. Ld. CIT(A) vide para 5 of the order has considered that none of the investors are existing at the addresses given, issuance of PAN (Permanent Account Number) does not prove the physical existence of a person unlike that of a Passport, almost all companies do not have any activity at all and majority of the companies have shown NIL income or nominal income and further enquiries conducted with assessee's bank account indicated that the amounts are routed through several accounts. Relying on the decision of the Hon'ble Delhi High Court in the case of CIT Vs. Titan Securities Ltd., (2013) [84 CCH 184] / [357 ITR 184] (Delhi) and the decision of the Hon'ble Supreme Court in the case of CIT Vs. Lovely Exports (P) Ltd., [216 CTR 195] (SC) / [319 ITR 0005] (SC) which was distinguished in the above case, Ld. CIT(A) held that investors are not existing and they are mere entities on paper. It was further held 'as the entire evidence is so glaring and apparent that these appellants own unaccounted money which has come accounted, further t....
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....statements so as to prove the investment made in assessee-company and the investor companies also got their books audited and are regularly filed returns of income. Ld. Counsel further submitted that none of these companies have been deleted from the list of the companies recently, which proves that they are genuine companies. It was further submitted that assessee-company has received an amount of Rs. 39,97,00,000/ towards share capital, whereas AO made an addition of Rs. 39,17,06,000/-, thereby accepting part of the share capital and share premium received. It further shows that AO has not examined the issue properly. With reference to the share premium received, Ld. Counsel relied on the Co-ordinate Bench decision in the case of M/s. Hariom Concast & Steel Pvt. Ltd., Vs. ITO in ITA No. 1775/Hyd/2014 for the proposition that amount of premium cannot be doubted when share capital was accepted. It was further contended that AO is trying to enquire the source of source to treat the transactions as bogus, which is unsustainable against the law. Since assessee had filed the details of investors, their PAN numbers, ITRs and confirmations along with financials, the same has to be accept....
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....e of procurement of funds from the investors and stated that one Mr. K.C. Mali, CA had arranged the funds rather than in his own. Since assessee-company failed to furnish the requisite details in order to prove the identity of the alleged investor to establish their creditworthiness and the genuineness of the transactions, AO invoked the provisions of Section 68 and taxed the entire amount of increase in share capital and share premium account as income of assessee. Ld. DR relied on the judicial principles laid down by the Hon'ble Apex Court in the case of Sumati Dayal Vs. CIT [80 taxman 89] (SC) and CIT Vs. Sophia Finance Ltd., [205 ITR 98] (Delhi). 7.1. Ld. DR further submitted that the surrounding circumstances considered by the AO are : i. Receipt of share premium of Rs. 490/- per share without any justification which is not commensurate with the net worth of the company or profit earning ability of the company, as evidenced by the financial statements; ii. It is identified that most of the alleged shareholders/companies are located in the same address in Delhi or Kolkata; iii. In most of the cases, they have common directors; iv. In most of the cases, there are co....
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....he case of M/s. Royal Rich Developers Pvt. Vs. DCIT - ITA Nos. 1835 & 1836/Mum/2014. 8. In reply, Ld. Counsel for assessee submitted that the share capital cannot be enquired in the hands of assesseecompany once the shares were allotted and confirmations were furnished by assessee. Further non-declaration of dividend cannot be a reason for computing the transaction as declaration of dividend will depend on the incomes earned by the company. It was submitted that none of the companies have either sold the shares or transferred the shares and they are still holding the share capital in assessee-company. 9. We have considered the rival contentions and perused the documents placed on record. Both the parties have placed paper books. It is surprising to note that Revenue has placed the paper book, containing pages 1 to 20, out of which pages 15 to 20 the decision of the Hon'ble Delhi High Court in the case of CIT Vs. Titan Securities Ltd., [32 taxmann.com 306] (Delhi) was placed. Thus, pages 1 to 14 are only relevant documents on facts, the index of which is as under: PAPER BOOK S.No. Details Page Nos 1 Copy of the sworn statement dt. 16/12/2011 of Ashok Kumar Gupta, Managin....
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....h Annexure-I is submitted for your kind perusal and necessary action at your end. Yours faithfully, XXXXXXXXX 9.3. As can be seen from the above report, a reference from the CIT, Hyderabad to the Investigation Unit was dated 22-12-2011 and the report from DDIT was dated 26-12-2011. It is not understandable what enquiries have been caused in the four days i.e., from the date of letter of CIT and the reply by the DDIT, leave alone the detailed enquiries caused by the above unit. The modus operandi adopted is explained in the letter, but there is no such enquiry report or any details /evidence enclosed to the report in support of such modus operandi. Pg. No. 13 is enclosure to the report which lists the companies which are supposed to be non-existing : Sl. No Name of the company Address Remarks 1) Sperm Tracom Pvt. Ltd., 32A, Brindaban Basak Lane, 1st Floor, Kolkata Not existed 2) Ma Santoshi International Ltd., 10A, Hospital Street, Kolkata-700 072 Not existed 3) Shardarji Tradefin Ltd 1, Croocked Lane, Room No. 109, Kolkata- 69 Not existed 4) Limtex Investment Ltd., 16, Ganesh Chandra Avenue, 7th Floor, Kolkata-700 013. Not existed 5) Blueprint Secur....
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....t to file the necessary enquiry report on record, so that this can be confronted to assessee. In fact, it was one of the contentions of assessee that enquires caused behind the back of assessee have not been confronted to assessee at all and so the same cannot be relied upon. 9.6. Analysing the paper book placed on record, it reveals that the enquiry by DIT, Investigation, Chennai confirms that two companies are assessed at Delhi. There is no evidence of modus operandi stated by the DDIT in the report and no such supporting evidence has been furnished. One company M/s Sperm Tracom Pvt. Ltd., Kolkata has responded directly to AO as mentioned in the assessment order, but this company was also reported as non-existing company, throwing doubt about the veracity of the report itself. It is to be mentioned here that no enquiry has been caused at New Delhi. Thus, rejection of companies from New Delhi out-rightly cannot be accepted. Thus, the so called evidence by revenue is incomplete and does not justify the conclusions drawn by the AO/ CIT(A) when assessee has furnished whatever evidence it could collect in support of the cash credits. The enquiry report from DIT, Chennai proves that t....
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.... the investigation report of DIT, Chennai indicates that Rupa Promoters Pvt. Ltd., and Rishikesh Properties Pvt. Ltd., were also assessed in Delhi. Thus these five companies cannot be considered as bogus. No investigation was conducted at New Delhi and there is no evidence against assessee worth mentioning as far as the investment by the Delhi companies are concerned. Since assessee has furnished the evidence available with it in support of the contentions, which have not been controverted, we have no hesitation in holding that these companies cannot be categorised as non-genuine. The investments to that extent from the above companies cannot be brought to tax as 'unexplained cash credits' in the hands of assessee. 12. Coming to the balance of investment from Kolkata companies, the name of the company and amounts invested are as under: S.No. Company Name Investment amount (Rs) 1 Sperm Tracom Pvt. Ltd. 10,62,00,000 2 Good Luck Industries Pvt. Ltd. 1,00,00,000 3 Amar Shree Industries Ltd. 85,00,000 4 Impex Services Ltd. 1,00,00,000 5 Blue Print Securities Ltd. 1,00,00,000 6 Konark Commerce & Industries Ltd. 1,00,00,000 7 Limtex Investments Ltd. 1,00,00,000 8....
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....ontrary, the contentions of assessee cannot be rejected. In our opinion, the Revenue has failed to establish that it is assessee's money which has been routed through various companies. 13. It may not be out of place to mention that Revenue has placed some statements recorded from one person supposed to have been the key person establishing various companies and routed various funds i.e., of one Mr. Manohar Lal Nagalia from whom statements have been recorded in the years 2008 and 2014. But those statements have been placed in the appeal for AY. 2013-14 which have been considered there. No such evidence has been placed for AY. 2009-10. Even otherwise also that evidence no way support Revenue contentions. It is to be noted that FY. 2008-09 was boom year in the Indian economy and many companies have issued shares with premium (one example is that of M/s Reliance Petroleum Ltd., which has come out with largest public issue with premium). Generally, shareholders respond to the background of the promoters, projects and its viability. Just because high share premium was received by assessee, it cannot be considered that the entire share capital is bogus. Be that as it may, since AO or th....