TaxTMI 
TaxTMI 
2022 (10) TMI 1304
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....ing the assessment proceedings, Assessing Officer observed from the record that assessee has not carried out any business as projected, as the project has not taken off. However, the assessee has taken over chemical manufacturing unit in Sarigam, Gujarat. Further, Assessing Officer observed that assessee has issued 26000 equity shares of face value of Rs..10 each on a premium of Rs..990/- per share. In order to verify the genuineness of the transaction, Assessing Officer issued notices u/s. 133(6) of the Act to all the shareholders who had been allotted shares during the year, calling for necessary details. The details of shareholders with their financial position as extracted by the Assessing Officer are given below: - Sl.NO. Name and address of the company Profit before tax No of shares applied for Share capital Share premium Total amount paid Return of income for Financial Year 2011-12 1. 2. 3. 4. 5. 6. (4+5) 7. 1. Idor Systems and solution P. Ltd., 226792 4500 45000 4455000 4500000 67809 2. Algorithmic software system Pvt LTD 51353 4500 45000 4455000 4500000 67809 3. Div....
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....bmitted that, on the facts above, the income is correctly treated as business income in the case of assessee company and should be assessed as income from business instead of income from other sources relying the judgement hereinabove ...... " 5. After considering the submissions of the assessee, Assessing Officer rejected the same and proceeded to make the additions with the following observations: - "1. During the last two year the Assessee Company has not earned anything from operational income. Assessee has earned only income from Bank Interest. In this background, the EPS of the company goes into very bad situation. Before an investor buys shares of any company, this is the first figure that the investors need to check. An increase in earnings every year is a sign that the company is prima facie a good candidate for further analysis. Increasing earnings generally leads to a higher stock price. Analyzing Earnings is the first most important step for investors because they give an indication of the company's expected future dividends and its potential for growth and capital appreciation. But it is evident the EPS of the assessee cannot attract any investor as the....
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....ll require infusion of further capital over and above the capital presently available with the company. As per one audit balance sheet of 31-03-2011, the net worth of the company is Rs. 1,50,61,917/- and thus the share value is Rs. 628/- per shares. The company has investment in flat at Borivali West, Mumbai-400092 which is of Rs. 16,90,654 (al cost), which is purchased on 04-02-2004. The market value of the said flat as on 31-03-2011 is Rs. 50,00,000/- (Approx) and therefore considering the net worth of the company as follows: Particulars Amount (Rs..) Net Worth as per Audited Balance Sheet as on 31 03.2011 1,50,61,917/- Market Value of the flat situated at Borivali West, Mumbai - 400002 is Rs..50,00,000/- (Minus Rs.. 16,90,654/-) net appreciation 33,09,346/- Total 1,83,71,263/- No of shares 24,000 Book Value per shares Rs.. 765/- However, considering the future earning of the chemical plant, the lumpsum appreciation in the book value is considered including goodwill of the company Rs..250/- Issue price of preferential shares 1015/- say Rs..1000/- Therefore, the shares are issued at a premium of Rs. 990/- per shares. ....
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....icer - 10(2)(1), Mumbai. 2. That the Office of the Commissioner of Income Tax (Appeal) - 17 issued fixing the date for hearing on 29.12.2017, 27.02.2019 & 11.03.2019 appellant authorized Representative Shri N R Agarwal, CA attended before Hon'ble Commissioner of Income Tax (A) 17 and submitted the submission as per respective hearing dates. 3. That thereafter the Office of the Commissioner of Income Tax (Appeal) - 17 issued notice the date for hearing on 11.03.2019. However, the aforesaid notice was never received by the Appellant and therefore appellant was unaware of the date of hearing before Commissioner of Income Tax (Appeal) 17. 4. That during the period from 16.01.2016 to 16.04.2018 and 26.04.2018 to 03.05.2019 deponent was in the custody of EOW & ED hence office of the company was closed. 5. That the deponent thereafter met the Office of the Commissioner of Income Tax (Appeal)- 16 on several occasions for the status of appeal. However, the deponent was given to understand that the file was not traceable and in absence of the file they are unable to give status of appeal. 6. That the deponent met the Office of the Commissioner....
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....ed below: - "3). Assessee had issued shares at Rs. 990/- AO had objections for issuing shares at a premium Hence addition is made by him. AO failed to consider following value of assessee's share as on 31/3/2011 which is as under. Share Capital 2,40,000/ Reserve and Surplus 1,48,21,917/- Property Investment Market Value 50 lacs (Cost 16,90,654) (Property sold on 22/8/2014 for Rs. 57,35,000/-) 33,09,346/- Appreciation in Value of Investment Market/Book Value 6,59,85,135/- less cost 23,89,650/- 6,35,95,485/- Total in build value of shares of assessee 8,19,66,748/- Number of shares as on 31.03.2011 24000 Book value of each share of the assessee as on 31.03.2011 3415/- 4. Apart from above book Valuation of shares, Assessee had plans from 2012 to enter into manufacturing Industry, Particularly in Chemicals at GIDC Sarigam Tal. Umbergaon Dist Valsad, Gujrat for which finally agreement dated 26/11/2014 was entered in to. Offer letter dated 31/5/2011 to prospective shareholder is enclosed. Page No. 212 to 250 Kindly see page no. 226 for investment in chemical business. Basis of issue of shares at....
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....he decision of the M/s. Sweta Synthetics Pvt. Ltd., (supra). The Coordinate Bench in the case of M/s. Sweta Synthetics Pvt. Ltd., (supra) held as under: - "9.2. We find that all the investor companies are having sufficient creditworthiness to make investment in the assessee company which would be evident from the table hereinbelow :- Details & capacity of share Holders Name of Applicant Share Capital Reserve Secured Loans Total Income Invested 1) Hema Trading Company Pvt Ltd 17,600,000.00 159891.00 0 17759891.00 2,52,451.00 25,20,000 2) Javda India Impex Ltd 36,790,000.00 776703.00 9966942.00 47533645.00 904728.00 25,20,000 3) Kush Hindusthan Entertainment Lt 25,290,000.00 186178.00 0.00 25476178.00 293230.00 6420000 4) Real Gold Trading Co. Pvt Ltd 17,592,000.00 119971.00 17711971.00 189356.00 25,20,000 5) Lexus Infotech Ltd. 20,132,000.00 127509.00 20259509.00 102211.00 25,20,000 Share Application Money 6). Reynolds Petro chem. Ltd 8,000,000.00 4424932.00 5....
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....onfirmation letter filed nor was he produced. (vi) Shri Ram Chander - Only a confirmation letter was filed. However, the AO observed that the same was not supported by any evidence of identification, cheque numbers, sources of income or sources of loan. The person was not produced. (vii) Smt. Sunita - Only a confirmation letter was filed. However, the AO observed that the same was not supported by any evidence of identification, cheque numbers, sources of income or sources of loan and even she was not produced. (viii) Shri Virender Yadav - A confirmation letter was produced but no PAN number was mentioned. The AO observed that the bank statements reveal the deposit of cash of Rs.13,00,000/- and Rs.7,00,000/- immediately before the issuance of the cheque in favour of the Assessee. He was also not produced. 15. The ITAT by order dated 19th July, 2016 partly allowed the Assessee's appeal and deleted the additions in respect of four of the creditors. The summary of the conclusions of the ITAT in respect of eight creditors and the transactions is set out below: (i) In respect of Smt. Sunita, the ITAT held that additional evidence was submit....
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.....50 lakhs in respect of Shri Amar Singh. (viii) In respect of Shri Harpreet Singh, the ITAT referred to the letter issued by him explaining that the loan was given by his son Mr. Dakshdeep Singh vide cheque no. 58913 dated 18th June, 2010 drawn on HDFC Bank. He also referred to the confirmation letter given by Mr. Dakshdeep Singh. The ITAT noted that the creditworthiness of Mr. Dakshdeep Singh was not established and hence the matter was restored to the file of the AO to examine the identity, genuineness and creditworthiness. However, for statistical purpose, addition of Rs.3,50,000/- in respect of Shri Harpreet Singh was allowed. 16. Thus, the ITAT * deleted the following additions qua Shri. Amar Singh, Shri. Chandan Singh, Shri. Ram Chander, and Smt. Sunita. * restored the additions with respect to Shri. Virender Yadav, Shri. Om Prakash, Shri. Shiv Tej Singh, and Shri. Harpreet Singh, to the AO for reconsideration It was held by Hon'ble Delhi High Court as under:- 41. An analysis of the above facts shows that none of these four individuals have the financial strength to lend such huge sums of money to the Assessee, that too without....
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....dered in favour of the revenue. We have gone through the said judgement and we find in that case, the ld AO had made extensive enquiries and from that he had found that some of the investor companies were non-existent which is not the case before us. Certain investor companies did not produce their bank statements proving the source for making investments in assessee company, which is not the case before us. Source of funds were never established by the investor companies in the case before the Hon'ble Apex Court, whereas in the instant case, the entire details of source of source were duly furnished by all the respective share subscribing companies before the ld AO in response to summons u/s 131 of the Act by complying with the personal appearance of directors. In the instant case before us, after the relevant details were furnished by the assessee before the ld AO, no enquiries were further made by the ld AO with the share subscribers. The ld AO merely relied on the statement of Shri Praveen Kumar Jain and proceeded to make the addition. Hence the decision relied upon by the ld DR is factually distinguishable and does not advance the case of the revenue. 9.5. We find....
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....n his account (with the result that he himself is accountable to explain the source of such credits in whatever way and form, the same have emerged) support can be derived from section 4 of Bankers Book Evidence Act 1891 which reads as under :- "4. Mode of proof of entries in bankers' books: Subject to the provisions of this Act, a certified copy of any entry in a bankers' book shall in all legal proceedings be received as prima facie evidence of the existence of such entry, and shall be admitted as evidence of the matters, transactions and accounts therein recorded in every cases where, and to the same extent as, the original entry itself is now by law admissible, but not further or otherwise." 9.6.1. Following the said provisions, the co-ordinate bench of Allahabad Tribunal in the case of Anand Prakash Agarwal reported in 6 DTR (All-Trib) 191 held as under :- "The question that remains to be decided now is whether the subject matter of transfer was the asset belonging to the transferor/donors themselves. There is enough material on record which goes to show that there were various credits in the bank accounts of the donors, prior to the transact....
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....aterials disclosed by the assessee prompted the Assessing Officer to enquire through the Inspector to verify the statements." 9.8. We find that the Hon'ble Supreme Court in the case of M/s Earthmetal Electricals P Ltd vs CIT & Anr. reported in 2010 (7) TMI 1137 in Civil Appeal No. 21073 / 2009 dated 30.7.2010 arising from the order of Hon'ble Bombay High Court had held as under :- ORDER Delay condoned. Leave granted. Heard learned counsel on both sides. We have examined the position. We find that the shareholders are genuine parties. They are not bogus and fictitious. Therefore, the impugned order is set aside. The appeal is allowed accordingly. No order as to costs. In the instant case before us, the share subscribing companies are duly assessed to income tax. It is not in dispute that the share subscribing companies are in existence. It is not in dispute that the share subscribing companies are duly assessed to income tax and their income tax particulars together with the copies of respective income tax returns with their balance sheets are already on record . Hence it could be safely conclud....
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.... Officer. The statement of Shri Pravin Kumar was supplied and no cross-examination was provided. There nothing on record about the result of investigation having done by the DGIT (Investigation), Mumbai. The papers filed by the assessee clearly demonstrate that the identity, creditworthiness and genuineness of the transaction is proved. The assessee has prima facie discharged its onus and AO has not carried out any inquiry. In view of the above, we confirm the order of CIT(A) and this issue of Revenue's appeal is dismissed." The facts of the instant case before us squarely fit in into the facts before the co-ordinate bench of this tribunal in the aforesaid case. Though this decision was rendered in the context of transactions with 5 parties mentioned supra, the same documents that were filed for these 5 parties were filed by the assessee herein for the other two parties also viz Reynolds Petro Chem Ltd and Utkantha Trading Pvt Ltd. Hence the decision rendered thereon would apply with equal force for these two companies also. 9.11. We find that the Hon'ble Apex Court recently in the case of Principal CIT vs Vaishnodevi Refoils & Solvex reported in (2018) 96....