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TaxTMI 
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2026 (1) TMI 363
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....e Tax (Appeals) erred in law and facts in confirming the adhoc addition of Rs. 6,05,000/- alleging the same as unaccounted transaction charges/ commission/ brokerage. 3. The Learned Commissioner of Income Tax (Appeals) erred in law and facts in confirming the disallowance of Rs. 4,39,494/- u/s 14A of the Act without appreciating that the disallowance could not exceed the exempt income of Rs. 1,36,840/- earned by the Appellant during the year under consideration.", 3. Ground No.1, raised in assessee's appeal, pertains to the addition of Rs. 1,21,00,000/- under section 68 of the Act on account of share application money received by the assessee. 4. The brief facts of the case pertaining to this issue, as emanating from the record, are: The assessee is engaged in the business of investment. For the year under consideration, the assessee filed its return of income on 13.10.2012, declaring a total loss of Rs. 7,97,080/-. The return filed by the assessee was selected for scrutiny, and statutory notices under section 143(2) and section 142(1) were issued and served on the assessee. From the perusal of the balance sheet of the assessee, it was observed that during the year u....
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....s provided by the assessee of the share applicants were also returned unserved with remarks "left / not known". The AO further held that the assessee has also not produced these parties with the necessary supporting evidence to justify its claim of receipt of a sum in the form of share application money, and the copy of the resolution of the board meeting of these share applicants supporting the investment in the assessee company was also not produced. The AO further noted that most of these companies invested more than their net worth and are earning meagre income during the year under consideration. Accordingly, the AO held that the identity and creditworthiness of these share applicants and the genuineness of the transaction have not been established by the assessee beyond doubt. Accordingly, the entire share application money amounting to Rs. 1,21,00,000/- was treated as unexplained credit under section 68 of the Act and added to the total income of the assessee. 6. The learned CIT(A), vide impugned order, upheld the addition made by the AO under section 68 of the Act. Being aggrieved, the assessee is in appeal before us. 7. During the hearing, the learned Authorised Repr....
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....istry Pvt. Led. V d. City Distributor (Bombay) Pvt. Ltd. e. Pet Plastic Ltd. f. South East Asia Packaging Pvt. Ltd. g. Statford Textile Specialities Ltd. h. Young Grow Marketing India Pvt. Ltd. 10. In response to the same, the notices issued to the following parties were returned with remark "left / not known, etc.", while the remaining parties did not respond to the notice: - a. Aditya Fashion Pvt. Ltd. b. Raghuraj Trading Pvt. Ltd. c. City Distributor (Bombay) Pt. Ltd. d. South East Asia Packaging Pvt, Ltd. e. Young Grow Marketing India Pvt. Ltd. 11. It is further evident from the record that the said fact was brought to the notice of the assessee, and the assessee was specifically asked to produce these parties from whom share application money was received, along with supporting evidence to prove the identity and creditworthiness of the parties, and the genuineness of the transaction. However, the assessee neither produced any of the parties before the AO nor furnished updated address of the share applicants. During the assessment proceedings, the assessee furnished the documents, su....
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....action under consideration before us was not under scrutiny before the Co-ordinate Bench in the aforesaid decision, and thus, we are of the view that the reliance placed upon the aforesaid decision does not in any manner support the case of the assessee. 14. During the hearing, the learned AR also furnished the data available on the MCA portal to support its contention that the share applicants are not paper/shell companies and are in existence. From the perusal of the said details as furnished by the learned AR, we find that the learned AR did not provide any information regarding Raghuraj Trading Pvt. Ltd., City Distributor (Bombay) Pvt. Ltd. and Pet Plastic Ltd. Further, from the details filed before us, we find that, insofar as the share applicants, namely, South East Asia Packaging Pvt. Ltd. and Young and Grow Marketing India Pvt. Ltd., are concerned, their status is mentioned as "Strike Off". In any case, we are of the considered view that the status on the MCA portal is not proof that the entity is not a sham or a bogus entity. Thus, to prove the identity of these share applicants in the year under consideration, mere reliance on data available on the MCA portal is insuff....
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....licable to the present case. As regards the other decisions relied upon by the learned AR in support of its contentions that the share application money received by the assessee from these entities is genuine, we find from the perusal of these decisions that the same have been rendered in their own facts, and each case needs to be examined qua the facts involved. Accordingly, we are of the considered view that none of the decisions relied upon by the learned AR apply to the facts of the present case. 18. It is pertinent to note that in the present case despite the fact of notices issued to the share applicant being returned back with remark 'left / not known', etc., and some of these parties not responding the same being brought to the notice of the assessee, it is evident from the record that the assessee did not furnish latest address of these parties to the AO for necessary examination and all the details which were furnished before the AO was only submitted by the assessee and none of these details came from any of these share applicants. In this regard, it is pertinent to note the following findings of the Hon'ble Supreme Court in PCIT vs. NRA Iron and Steel Pvt. Ltd., repo....
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.... For example: Neha Cassetes Pvt. Ltd. - Kolkatta had disclosed a taxable income of Rs. 9,744/- for A.Y. 2009-10, but had purchased Shares worth Rs, 90,00,000 in the Assessee Company. Similarly Warner Multimedia Ltd. - Kolkatta filed a NIL return, but had purchased Shares worth Rs. 95,00,000 in the Assessee Company - Respondent. Another example is of Ganga Builders Ltd. - Kolkatta which had filed a return for Rs. 5,850 but invested in shares to the tune of Rs. 90,00,000 in the Assessee Company - Respondent, etc. iii. There was no explanation whatsoever offered as to why the investor companies had applied for shares of the Assessee Company at a high premium of ks. 190 per share, even though the face value of the share was Rs. 10/- per share. iv. Furthermore, none of the so-called investor companies established the source of funds from which the high share premium was invested. v. The mere mention of the income tax file number of an investor was not sufficient to discharge the onus under Section 68 of the Act. 13. The lower appellate authorities appear to have ignored the detailed findings of the AO from the field en....
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....aid amount to the income of the Assessee." (emphasis supplied) 20. In this regard, it is also relevant to note the following observations of the Hon'ble Delhi High Court in CIT vs. Navodaya Castles (P.) Ltd., reported in [2014] 367 ITR 306 (Delhi): - "18. ......... In case of private limited companies, generally persons known to directors or shareholders, directly or indirectly, buy or subscribe to shares. Upon receipt of money, the share subscribers do not lose touch and become incommunicado. Call money, dividends, warrants, etc. have to be sent and the relationship remains a continuing one. Therefore, an assessee cannot simply furnish some details and remain quiet when summons issued to shareholders remain un-served and uncomplied. As a general proposition, it would be improper to universally hold that the assessee cannot plead that they had received money, but could do nothing more and it was for the Assessing Officer to enforce shareholders' attendance in spite of the fact that the shareholders were missing and not available. Their reluctance and hiding may reflect on the genuineness of the transaction and creditworthiness of the creditor. It would be also in....