TaxTMI 
TaxTMI 
2019 (3) TMI 2104
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....ested in the assessee company in the AYs 2009-10 to 2013-14, as under: Name of the entity AY 2009-10 AY 2010-11 AY 2011-12 AY 2012-13 AY 2013-14 Acute Vinimay Pvt. Ltd. 266.50 251.00 141.34 370.50 - Parrot Traders Pvt. Ltd. (formerly known as IHM Pipes & Steels Pvt. Ltd.) 245.00 236.00 374.86 327.00 50.00 Penguin Barter Pvt. Ltd. (formerly known as IHM Valves Pvt. Ltd. 406.25 317.50 185.97 - - 917.75 804.50 702.17 697.50 50.00 2.2 The AO investigated the transaction involved in this transaction. AO found that all these companies are registered in Kolkotta and all the directors of these companies are directors of assessee company and their relatives. Further, he found that all the investments received by these companies and also 5 to 6 layers of companies through which the investments were made are through only banking channe. Further, he observed that one Mr. Rajesh Bainwala, who is the accommodating entry operator and all these are paper companies. Hence, the AO treated the entire amount raised as share capital/premium from the above entities as 'unexplained cash credit u/s 6....
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....he initial onus of establishing the bona-fide of the transactions and the AO was not justified in ignoring various evidences provided to him by the assessee. In the facts of the present case, it is a matter of record that the assessee has produced confirmation letters along with bank statements and audited financial statements. of all the three entities wherein not only the identity of the three with their address have been furnished but income tax particulars including their Income tax returns for the relevant assessment year have been furnished. Therefore, the identity of the three entities remains established. The second ingredient which requires fulfilment is the genuineness of the transaction. As is evident the entire transaction has been through proper banking channels which is confirmed by verification of the bank statements of the assessee company and also the bank statements obtained from the three entities by the AO. The genuineness of the transaction has been therefore established by the assessee as not only transaction is through proper banking channel but the source of such credit has also been proven by the assessee. Now coming to the third ingredient, the creditworth....
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....d on facts and in law in deleting the addition made by the Assessing Officer as unexplained credits u/s 68 of the I.T. Act, 1961 ignoring the facts that assessee failed to discharge its onus of proving necessary ingredients of section 68 i.e. the identity, genuineness and creditworthiness of the alleged shareholders to the satisfaction of the AO. (b) The Ld. CIT(A) ought to have appreciated the fact that assessee must prove identity of credits, capacity of creditor to advance money and genuineness of transaction. (c) The Ld. CIT(A) ought to have appreciated that the assessee also has to prove the capacity to give credit of the creditor; merely proving the identity of the creditor does not discharge the onus of the assessee if the capacity or creditworthiness of the creditors is not proved. (d) The Ld. CIT(A) erred in not appreciating the fact that the enquiries conducted by the department clearly established the investor companies bogus and non- existing/Paper companies. (e) The Ld. CIT(A) erred in not appreciating the fact that the bank transactions were passed through 5-6 layers; the pattern of the transactions clearly establish that the invest....
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....ubmitted that it is the suspicion of the AO and on assumptions. He submitted that assessee has established the identity and capacity of the investing companies. By submitting the confirmation letters, PAN details and the sources for the investment by these companies. They have clearly brought on record in pages 47-50 of the paper book, in which, these companies liquidated their past investments and made investment in the assessee company. With regard to genuineness, he submitted that the investments were made through banking channels and the sources for the investments are established and made through banking channel. The whole transactions are clear and properly recorded and documented. 9.1 With regard to AO's observation that these companies addresses were not traceable, he submitted that investigation was done behind the back of the assessee and it was not confronted with the assessee. All these companies are in existence and he submitted that these companies are regularly filing returns of income and also all the returns regularly required to be submitted before the Registrar of Companies are also filed. He further brought to our notice that all these companies are havin....
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.... change, the law prior to AY 2013-14. In this connection, we refer to the decision of the Hon'ble Supreme Court in the case of Lovely Exports Pvt. Ltd., 216 CTR 195, wherein the Hon'ble Apex Court held as under: "Whether share application money can be treated as undisclosed income of the Assessee ? If the share application money is received from alleged bogus shareholders, whose names are given to AO, then department is free to proceed to reopen their individual assessments in accordance with law, but, it cannot be regarded as undisclosed income of the assessee. The SLP filed by department was also dismissed by Supreme Court reported in 319 ITR 5." In various other cases also, the Courts have held that even if subscribers to the capital are not genuine, the amount received by the company as share capital could not be assessed in the hands of the company itself. Such amounts should be considered for assessment in the hands of persons who are alleged to have really advanced the money (CIT Vs. Stellar Investment Ltd., [2001] 115 Taxman 99 [SC] ). Similar view was upheld in the case of CIT Vs. Divine Leasing & Finance Ltd., [2007] 158 Taxmann 440 (Delhi). 10.2 Fr....
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.... capital fund or a venture capital company as referred to in clause (23FB) of section 10." As per the above proviso, the subscribers to the share capital are obligated to explain the nature and source of such investment. With this additional requirement, the subscribers i.e. the three companies in this case have submitted the relevant information about the sources, that is, they encashed the earlier investment, which was there in the balance sheet and made the present investment in the assessee company and all these were through only banking channel. Even the AO has not found anything wrong in the transaction. AO doubted the transaction due to the reason that the investments were through Kolkotta and it was handled by Mr. Rajesh Bainwala. The AO at the end found that these investments were made by the companies in which the directors of the assessee company are also the directors. AO made the investigation thoroughly and it has not led to anywhere. He found the easiest way by making addition to the income of the assessee company, even though, it had clearly established the identity, capacity and genuineness of the transaction and the subscribers of the investment also have sa....