TaxTMI 
TaxTMI 
2022 (12) TMI 1593
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....osed of by a common order for the sake of convenience. ITA No. 730/Ind/2019 (Revenue's appeal) 2. The Revenue has preferred the appeal with following grounds: "1. Whether on the facts and circumstances of the case the Ld. CIT(A) was justified in deleting the addition of Rs. 42,01,80,700/- made u/s 68 of the Income Tax Act, 1961 in view of findings in assessment order. 2. Whether on the facts and circumstances of the case the Ld. CIT(A) erred in deleting the addition of Rs. 42,01,80,700/- made u/s 68 of the Income Tax Act, 1961, when it is evident that the entire share application money including share premium money was received by the assessee company in F.Y. 2010-11 and not in F.Y. 2009-10. 3. Whether on the facts and circumstances of the case the Ld. CIT(A) erred in considering the fact that merely issuance of cheque does not mean that the same has been credited in the books of account of the second party on the date of issuance as this is evident from the assessment order dated 28.03.2014 that cheques dated 31.03.2010 were cleared on much later date i.e. in F.Y 2010-11 ? 4. Whether on the facts and circumstances of the case the Ld. C....
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....hat the assessee company filed its return of income declaring total income at Rs. 23,94,000/- on 24.09.2011. Subsequently, upon selection for scrutiny, a notice under Section 143(2) of the Act dated 27.09.2012 was served followed by further notice under Section 143(2) of the Act dated 30.07.2013 and notice under Section 142(1) of the Act dated 14.08.2013 alongwith the questionnaire to the appellant. During the course of assessment proceedings, it was found that the assessee has shown a receipt of Rs. 48,47,22,100/- as share capital by way of allotment of shares of Rs.10 each at premium of Rs. 90 for shares. The assessee was directed to file the confirmation from the share applicants and to prove their identity, creditworthiness and genuineness of the transaction with details of mode of transactions. The assessee was further directed to furnish the copy of the bank account of transaction as and when share application money was received and the details of narration appearing in the bank statement. In fact, an amount of Rs. 42,01,80,700/- in total was invested by 11 shareholding companies in assessee company, the details whereof is as follows: Investors Share Application mone....
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....oks of account and if the investors are found to be entry providers, the amount can be assessed accordingly for the said A.Y. 2010-11. On the other hand, the share application money received towards the issue of equity shares amounting to Rs. 6,45,41,400/- from the investors was confirmed by the First Appellate Authority on the ground that the appellant has failed to prove the genuineness of the transaction and creditworthiness of the shareholders which has been challenged before us by the appellant in ITA No. 656/Ind/2019 for A.Y. 2011-12. 9. We have heard the rival submissions made by respective parties and we have also perused the relevant materials available on record and the written submissions filed by the appellant and considered the case laws relied upon by both the sides. 10. We find the following details of allotment of shares from the records available by us: "List of allotments of shares allotted on 30.06.2010: S. No. Name & Occupation of Allottee Address of Allotee Number of Shares Allotted Total amount paid(including premium) 1. Ajitabh Construction Pvt. Ltd. A-9/2, MIDC Taloja Industrial Estate, Taloja, Raigarh(M.H.) 348499 ....
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....r queries raised by your good self, we submit the following for kind consideration. 01) Justification of shares issued at a premium :- a) It is submitted that the company was-incorporated in the year 2004 by members of Bansal family who transferred their entire holdings on 01.06.2007 to four inter corporates at a premium of Rs. 40/- per share. Such premium was charged by Bansal group based on intrinsic value of shares because fixed assets in the nature of land and building owned by the company. List of shares transferred from Bansal family to other inter corporates as on 01.06.2007 is annexed. Thereafter, the company allotted 1,50,000 shares of Rs. 10/- each to aforesaid four incorporates on 05.07.2007 at a premium of Rs. 40/- per share. Such premium of Rs. 40/- was thus based on the actual consideration .paid to Bansal family being fair market value of such share. The share premium decision is that of Board of Directors taking intc always the market forces and same is on capital account (Annexure-A) b) Certain shares held by these incorporates were transferred inters on 07.03.2008. At that time the fair market value of the share was considered at Rs. 60/....
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....m the fact that each one of them are having substantial capital and reserves of their own and borrowed funds were not invested while making investment in shares of the assessee company. The balance sheet of the applicant companies proves such fact beyond doubt. Genuineness of the applicants is also proved from the fact that the companies are either investment companies registered with Reserve Bank of India as NBFC or such companies are investing the funds for better return. The directors' of various companies who made the investment in this company are known to the directors of four incorporate who had initially purchased the shares from Bansal family. The share application money was received by A/c payee cheques and the investment in shares of assessee company was approved by the Board of Directors of applicant company. Thus, identity, capacity, creditworthiness and genuineness of such investment in the assessee company by various incorporates is proved beyond doubt, which may kindly be accepted. 12. Before the Ld. CIT(A), the assessee submitted as follows: "(a) Addition u/s. 68 of the cannot be made on opening balance: The Appel....
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....hares application money in the preceding of the Act. previous year 2009-10. Further, it is settled legal position that the onus is on the assessee to explain the nature and source of cash credit and it is also a legal settled position in the law that in order to discharge the onus, the assessee must prove the following: a) The identity of the person from whom the fund is received; b) The capacity of the said person to advance money; c) The genuineness of the transaction. In view of the above, the appellant has submitted the following details to prove the identity, capacity of the inventor companies and genuineness of the transaction: ⮚ Company's Master Data like company name, Company Identification Number (CIN), date of incorporation, registered address, e-mail ID, etc. of Investor companies; ⮚ Name, Address, PAN, Income-tax Jurisdiction, etc. of the Investor companies; ⮚ Certificate of Incorporation of the Investor companies: ⮚ Copy of Director Report, Audit Report and Balance Sheet of the Investor companies; ⮚ Form of application for equity shares filled by the ....
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....000 24,90,000 12,10,51,698 1235,41,698 Grand Total 484,72,210 4362,49,890 4847,22,100 In view of the above, it can be observed that all the investors, companies are assessed under Income tax Act and all investor companies had enough reserves to make investment in the Appellant Company. This proves the identity and capacity of the investor companies. Further, the Appellant has received the funds via proper banking channel and the relevant bank statement of the Appellant filed with the AO vide letter dated 04-12-2013, and all the companies had provided confirmation with respect to the transaction: By these, the genuineness of the transaction is also proved. The AO doubted the authenticity of the documents submitted before him based on the statements of directors and other persons recorded by him at the time of assessment proceeding. In this regard, as submitted above, these statements are recorded by mean of coercion and therefore these statements are not reliable evidence. Further, all the directors and other person have given statements only that they are not aware of the....
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....f entire equity shares application money amounting to Rs. 48,47,22,100/-, received from the Corporate Investors, u/s 68 of the Act on the alleged ground that it is unexplained cash credit. 2. The Learned AO failed to appreciate and ought to have held that: a. The share application money has been credited by the appellant in preceding previous year's books of account of the appellant and it is an opening balance for that year under consideration; b. the Appellant has filed all the relevant documentary evidences call for by the AO and thus, the Appellant has discharge its onus and it has proved the identity and creditworthiness of all investor companies; c. the Appellant received the funds via proper banking channel and the relevant bank statement of the Appellant were filed with the AO and hence genuineness of the transaction is also proved. 3. The Appellant prays that the AO be directed to delete the addition of Rs. 48,47,22,100/- made u/s. 68 of the Act which addition has been purportedly made by treating the equity share application money as unexplained cash credit 4. Without prejudice to above, since the shares applicatio....
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....nd conjunctures and not borne on records. No material is forthcoming from the Ld.AO to support such finding against the case made out by the appellant. In this aspect, the assessee has relied upon the judgment passed by the Hon'ble Delhi High Court in case of CIT vs. Oasis Hospitalities in ITA No. 2093/2010, which we have carefully gone through. 17. Further that, it appears that the Ld. AO has made addition on the basis of the statement of the Directors. The statements were recorded under coercion and threat and thus, the same cannot be said to be admissible evidence to arrive at such conclusion in the matter. Furthermore, no opportunity of cross examination was given to the assessee, in the absence of which, the addition is not sustainable. The judgment in this aspect as relied upon by the appellant in the case of Andaman Timber Industries vs. CCE [2015] 281 CTR 241 and the judgment passed by the Hon'ble Apex Court in the case of CIT vs. Odeon builders (P.) Ltd. [2019] 110 taxmann.com 64 has been duly taken care by us which goes without saying in favour of the assessee. We further found the following facts which goes to the germane to the issue involved in the matter. ....
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....eedings the Ld. AO on direction of CIT(A) re-examined the director of the investor company wherein Director explained the Nature of transactions & activity of their business & purpose of investment which discussed by the Ld. CIT(A) in his order at page nos. 69 to 72. The re-examination and summary thereof appeared at page 74, paragraphs 14 to 18 wherein all the directors of the investor companies had explained the transactions. Thus the finding of Ld. AO does not survive any more. (viii) That from the bare perusal of discussion made by Ld. CIT(A) in its order and in process of cross examination of directors it is evident that the entire line of reasoning given by the AO to make addition and to doubt the creditworthiness of the shareholders and evidences submitted cannot be countenanced anymore. Thus, in conclusion, the whole reasoning of Ld. AO does not exist anymore after the appellate order coupled with factum that the assessee has duly discharged his onus to prove the 3 limbs of Section 68 of the Act. In that view of the matter the addition deserves to be deleted. 18. After careful consideration of the records, we further find that all the 3 limbs of section has been....
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....re paper company as alleged by the Ld. AO. The details of turnover and net worth of these companies are as follows which is on record: Investors Turnover Net-worth Ajitab Construction Pvt Ltd 19,13,22,372/- 25,05,39,571 Aspirant Mercantile Company Pvt Ltd - Promoter 18,37,65,336/- 26,46,05,406 Avocado Trading Company Pvt Ltd - Promoter 22,86,27,396 26,10,31,451 Chhitwan Developers Pvt Ltd 19,15,49,941 22,86,23,431 Frolic Reality Pvt Ltd - Promoter 19.11 CR. 26,24,35,720 Frugul Trading Company Pvt Ltd - Promoter 291020000 26,04,75,677 Maxworth Leafin & Investment Pvt Ltd 3,74,79,857 20,05,15,532 Ruchi Agrotech Pvt Ltd 3 CR. 26,26,17,435 Samidha Mercantile Pvt Ltd 1,33,21,85,797 17,17,05,340 Subhmangal Traders Pvt Ltd 86.8 CR. 15,69,50,000 Viksit Engeneering Limited 65,50,98,278 12,36,84,879 20. That from the above, it is evident that investors company / their businesses are not paper concerns. The assessing officer has not given any reasoned finding based on examination of the financial statements. The identity, creditworthiness and genuineness of these three resident share....
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....entity and creditworthiness of the investors along with the genuineness of the transaction are provided. Once, the same has been discharged by the Assessee, the onus had shifted on Ld. AO to dislodge the assessee's documentary evidences and bring on record cogent material to establish that the assessee generated unaccounted money. However, no iota of document is forthcoming from the Revenue to establish the same against the appellant. Rather the addition has been made on surmise and conjectures only by the Ld. AO. 25. Thus, when assessee had discharged initial onus of proving share- application transactions and Assessing Officer could not establish that assessee generated unaccounted money and routed same through banking channels in the garb of share-application money, addition under sections 68 is not sustainable in law and thus liable to be quashed. 26. Keeping in view the entire aspect of the matter, we support the order of deletion of addition made by the Ld. CIT(A). We do not find any merit in the appeal preferred by Revenue. Hence, same is dismissed. However, it is also a fact that the Ld. CIT(A) deleted the addition only on this aspect that the addition is no....
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.... which investments were made. In this regard, we find that Ld. CIT(A) has been given power u/s. 251 of the Act to confirm the order of AO reduce, enhance or annul assessment order under the provision of Act there is no power available to Ld. CIT(A) to give direction to AO for reopening the case of other years. The Income Tax Act provides different schemes wherein the AO is empowered to assess or re-assess the income which has escaped assessment. So at the most, if the Revenue wishes to tax the escapement of income then it has followed the scheme provided under the Act. The relevant provisions for taxing the escape income are given u/s 147/263 of the Act. In holding so, we find support and guidance from the judgment of Hon'ble Supreme Court in the case of ITO vs. Murlidhar Bhaghubabu reported in 52 ITR 335 (SC). The relevant extract of the judgment is reproduced below: - "Section 33(4) of 1922 Act only refers to a finding or direction made by an appellate authority and does not itself confer any power on an appellate authority to make a finding or direction. Indeed, section 34 of 1922 Act deals with entirely a different aspect, that of empowering an ITO to bring to asse....
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....Certificate and P&L Account. In that view of the matter, the deletion of addition made by the Ld. CIT(A) analysing said documents placed on record is justified. The case of the Revenue is this that the assessee has not been able to furnish proper documents so as to justify the identity of those loan provider companies. The test of genuineness of the transaction has also failed as none of the transaction has been explained neither the proof of creditworthiness of those companies giving unsecured loan to the appellant has been found to be satisfactory. The funds, therefore, of these companies were not raised genuinely and these entities are nothing but paper entities. In that view of the matter, the Ld. AO rightly added this impugned amount under Section 68 of the Act, which was, however, deleted by the Ld. CIT(A). Hence, the instant appeal before us. 30. We have heard the rival submissions made by the respective parties and perused the materials available on record. 31. It appears from the records that the appellant has received unsecured loans from the following parties: SN Name of companies Date of incorporation PAN Total Amount 1 Viksit Engineering L....
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....12,36,84,879 02 Shubhmangal Traders Pvt. Ltd, 28-04-1997 AAECS7744N 3,55,62,300 36,86,35,419 12,81,58,932 03 Ruchi Agro Tech Pvt. Ltd. 11-06-1997 AABCV0168J 2,35,71,700 23,19,60,143 26,26,17,435 04 Maxworth Leafm and Investment Pvt. Ltd, 20-07-1995 AACCM7410K 35,23,000 3,74,79,857 20,05,15,532 05 Satguru Iron and Steel Company Pvt Ltd. 17-11-2005 AALCS0501Q 17,70,000 28,88,23,428 67,67,000 06 Avocado. Trading Company Pvt. Ltd. 02-04-2007 AAGCA4206K 37,50,000 22,86,27,396 26,10,31,452 07 Sarriidha Mercantiles Pvt. Ltd. 02-05-1997 AAECS7746Q 42,73,700 1,33,21,85,707 17,17,05,340 08 Mid India Power & Steel Ltd. 19-07-1995 AAACM7130L 44,40,000 6,90,15,86,455 1,84,02,22,650 Grand Total 7,85,60,70 0 10,54,43,96,683 2,99,47,03,220 33. When the assessee has discharged its onus by way of submitting entire details including the identity and creditworthiness of lenders of companies and genuineness of transactions, the addition under Section 68 of the Act is uncalled for. In this regard, the assessee reli....
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....nd thus dismissed. ITA No. 656/Ind/2019 (Assessee's Appeal) 35. Addition of Rs. 6,23,02,700/- qua account of Share application money including share premium is subject matter before us. 36. The brief facts leading to the issue is this that out of Rs. 6,45,41,400/- received by the assessee as the share application money including the share premium Rs. 6,23,02,700/- was received from one Benco Finance & Investment Pvt. Ltd. The name of the said investor company is also appearing at Page No. 52 of the order passed by the Ld. CIT(A) alongwith the name of the other 11 investor companies. Surprisingly, though the Directors of other companies were called for by Ld. AO. The Directors of this particular company was not called neither examined so as to determine the identity and creditworthiness of the said investor company and the genuineness of the transaction alongwith other companies. In fact, the said Benco Finance & Investment Pvt. Ltd. had received the said amount from its investors company. It is relevant to mention that the relevant financial statement is appearing at Page Nos. 90 onwards in the paper book filed before us. These were also on record before the authoritie....