TaxTMI 
TaxTMI 
2025 (2) TMI 1413
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....roducts. Return of Income for AY 2014-15 was filed on 29.09.2014, declaring total income at NIL. Subsequently, assessment proceedings u/s 143(3) are completed vide order dated 27.12.2016 after making additions on account of share application money u/s 68 for Rs. 11,54,65,000/- and estimated disallowance out of consumption of Stores & Spares and Repairs & maintenance of Rs. 1,59,401/-, aggregating to Rs. 11,56,24,401/- thereby, the assessed income of assessee has been determined at Rs. 11,11,09,885/-. 3.1 While making the addition on account of share application and share premium receipt by the assessee during the year under consideration, Ld. AO observed that the assessee company had issued fresh shares to Giriraj Infotech Pvt. Ltd. (GIPL) and Wave Promoters Pvt. Ltd. (WPPL) for Rs. 14,70,00,000/- out of which an amount of Rs. 11,54,65,000/- has been received during the year under consideration. Ld. AO observed that GIPL, Raipur (formerly known as Vizcom Solutions Pvt. Ltd.) and WPPL are Kolkata Based Companies. On further verification, it is revealed from ROC that both these shareholders companies have changed the place of their registered office from Kolkata to Raipur. In view....
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....nd Association, Certificate of Incorporation etc. of the investor companies. In addition, the assessee submitted copy of assessment order of M/s GIPL for the AY 2011-12, wherein the capital of Rs. 23.21 Cr was raised and the assessment was completed u/s 143(3) of the Act. Copy of Assessment order of M/s WPPL for AY 2008-09, wherein the capital of 15.59 Cr. was raised and assessed u/s 143(3) was also furnished before the Ld. AO. 3.5 Before Ld. AO, assessee submitted that all the necessary primary information / documents required to substantiate the identity and creditworthiness of the investors and genuineness of the transactions are furnished, which is further supported with assessment u/s 143(3) of the Act of the investor companies, wherein such shareholders have raised their capital and was accepted by the concerned Assessing Officers, therefore, the assessee had duly discharged its onus cost upon it to prove the presence of essential ingredient, to be looked into before invoking the provisions of 68 of the Act i.e., identity and creditworthiness of the shareholders and genuineness of the transaction. The addition, therefore, shall not be made in its case, unless the evidence ....
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.... the assessee u/s 68 of the Act. Penalty proceedings u/s 271(1)(c) of the Act are initiated separately. 3.7 Ld. AO, further observed another discrepancy in the P&L of the assessee and had made the following estimated addition: 4. During the course of proceedings, from perusal of P&L account it is found that the assessee has debited Rs. 1,56,61,943/- towards Consumption of Stores & Spares and Rs. 2,78,142/- towards "Repair & Maintenance" under head "Manufacturing Expenses". The assessee was asked to substantiate the claims made under these heads. In response, the assessee produced relevant vouchers for verification. After verification of these vouchers, it is found that in some of the cases the expenditure has been incurred in cash through self-drawn vouchers and the vouchers are not properly maintained. As such, the vouchers are not fully verifiable. Therefore, considering the facts and circumstances of the case and the quantum of expenses claimed under this head, 1% of aforesaid expenses Rs. 1,59,40,085/- (15661943+240324) which works out to Rs. 1,59,401/- is disallowed and added to the total income of the assessee to prevent the leakage of revenue. 3.8 Ld.....
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....mpany had shown a returned income of Rs. Nil in A Yrs. 2011-12, 2012-13 & 2013-14. Even in the assessment year under consideration, the share-applicant company has shown other income of only Rs. 19,860/-. The AO has also stated that initially the share-applicant company was a Kolkata based company but thereafter, the directors of the Company have been changed and a Director of the assessee group of companies has now become the Director of the share-applicant company which is now based in Raipur. In view of the above facts, the AO has inferred that the share applicant did not have any actual genuine business activity or any profit making apparatus and was merely rotating the money which was coming through its bank account which showed that this share application money had been managed in connivance with the share applicant company. As regards the genuineness of the transaction, the AO has admitted that this money was received through banking channels but the AO has held that the assessee has failed to discharge its onus regarding the genuineness of the transaction also. The AO has cited several case laws which lay down the position that the onus lies on the assessee to establish the....
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.... opted for the Vivad-se-Viswas Scheme to avoid any future litigation and has offered the entire share capital received by it of Rs. 23,21,54,000/- as income and has paid due taxes on it to settle the matter permanently. The appellant has submitted copies of Form No. 1, Form No. 2, Form No. 3, Form No. 4 & Form No. 5 in the case of M/s Giriraj Infotech Pvt. ltd. with respect to its share capital of Rs. 23,21,54,000/- received in A.Y. 2011-12. The appellant has submitted that M/s Giriraj InfoTech Pvt. Ltd. has subscribed to the shares of the assessee company from its share capital and since due taxes have been paid by M/s Giriraj InfoTech Pvt. Ltd. on its share capital, the source of share application money of Rs. 6,37,00,000/- in the hands of the appellant, received from M/s Giriraj Infotech Pvt. Ltd. stands fully explained. Without prejudice to the above. the appellant has also stated that it had informed the AO that both the share applicant company and its Directors are based in Raipur. The appellant has stated that the AO did not conduct any inquiry and has made addition without bringing any material on record to show that the source of the share application money is not properly....
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....in the hands of M/s Giriraj InfoTech Pvt. Ltd in A.Y. 2011-12 and this matter has attained finality. Therefore the nature and source of the share application money received by the appellant from M/s Giriraj InfoTech Pvt. Ltd. stands explained. When the source of the share application money has been taxed in the hands of the share applicant company and the matter has attained finality; upholding this addition u/s 68 in the hands of the appellant amounts to taxing the same amount twice; which is illogical and illegal. Further, appellant has submitted that the same set of issues were there in the case of assessee's sister concern M/s Balajee Structure (India) Private Limited before the honorable CIT(A), which have been concluded in the favour of the company. Appellant has enclosed copy of order of the sister concern in the submissions. In view of the above discussion, the addition made by the AO u/s. 68 of share application money received from M/s. Giriraj InfoTech Pvt. Ltd. is directed to be deleted. 4.2.4 Similarly the AO has made addition of share application money amounting to Rs. 1,29,65,000/- received by the appellant from Wave Promoters Pvt Ltd. Raipur on the groun....
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....lication money received by the assessee from Wave Promoters Pvt Ltd, and has added this amount as unexplained cash credit u/s 68 of the I.T. Act. 4.2.5 In reply, the appellant has stated that it had discharged its onus u/s 68 with respect to the identity, credit worthiness of the share-applicant company and the genuineness of the transaction by submitting PAN number of the share-applicant company, MOA and Certificate of Incorporation issued by the ROC, bank statements. Audited financial statements, income tax return, copy of assessment order u/s 143(3) of the share-applicant Company and copy of the Valuation Certificate under Rule 11UA. The appellant has stated that the shares of face value of Rs. 10/- has been subscribed at a premium of Rs. 50/- which is backed by the book value per share of the appellant at Rs. 63.90 thereby justifying the share premium charged. The appellant has further stated that the source of the share application money received by it from the share applicant Wave Promoters Pvt ltd is the share capital of Rs. 23,21,54,000/- raised by GIPL in Financial Year 2010-11. In support of this, the appellant has submitted copy of audited financial statements o....
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....e by M/s Wave Promoters Private Limited it is to submit that the said amount has been invested out of the funds received on 22.07.2013 from Shri Hanuman Loha (P) Ltd. of Rs. 1,22,00,000 and from M/s Balajee Steels of Rs. 12,65,000/- on account of loans and advances given. The investor company has given loan to M/s Hanuman Loha Pvt. Ltd. of Rs. 9,22,00,000/- and Rs. 1,01,80,000/- to M/s Balajee Steels in preceding assessment years. The repayment received from the said parties were further transferred to M/s Balajee Loha Pvt. Ltd. on 22.07.2013 and shares were issued to the M/s Wave Promoters Pvt. Ltd. on 26.07.2013. Summary of the nexus of the amount utilized in investing in the shares of the assessee company is as under: - Particulars Total Advance given by M/s Wave Promoters Pvt. Ltd. in preceding assessment years Amount paid to M/s Wave Promoters Pvt. Ltd. on 22.07.2013 Amount Invested in shares of M/s Balajee Loha Pvt. Ltd. on 22.07.2013 by M/s Wave promoters pvt. Ltd. Hanuman Loha (P) Ltd. 9,22.00,000/- 1.22,00,000/- 1.22,00,000/- Balajee Steels 1,01,80,000/- 12,65,000/- 7,65,000/- The above-mentioned facts are evident from the copy ....
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....2 is related to disallowance of Rs. 1,59,401/- being 1% of expenses of Rs. 1,56,61,943/- as consumption of stores and spares and Rs. 2,78,142/- as Repair and Maintenance. This disallowance has been made for the reason that some of the vouchers are cash vouchers and are self-drawn and vouchers are not properly maintained. The appellant is contending that the AO have not pointed out any specific defect in any of bills and vouchers and has disallowed the expenses on general observation and that too on adhoc basis. According to assessee the books of accounts have been duly audited u/s 44AB of the Income Tax Act. 1961 by a Chartered Accountant and no defect has been pointed out by him in his report. Appellant has stated that, the finding of the A.O. is not supported by any instance of unverifiable expenses. Here it is to be noted that it is matter of fact that there are always few vouchers which are self-made for some unverifiable expenses. The AO has disallowed 1% of expenses on consumption of sores and spares and repair and maintenance. The disallowance is confirmed to the extent of 50 % of Rs. 1,59,401/- and balance amount is deleted. This ground is partly allowed. 3.11 A....
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.... Giriraj Infotech (P) Ltd 3,00,00,000/- 10,25,00,000/- 11,70,00,000/- 1,55,00,000/- Wave Promoters (P) Ltd (Now known as Shri 1,70,35,000/- 1,29,65,000/- 3,00,00,000/- NIL Note: The fresh equity shares has been issued at face value of Rs. 10/- and premium of Rs. 50/- per share. The book value of the share is Rs. 63.90/- per share. Observation of the AO: * The observation of the AO is at Para 3 at page 2 to 10 of the assessment order. * The main allegation and observation of the AO is that the assessee has not established the identity and creditworthiness of the share holder and genuineness of the transaction. * For identity; the observation of the AO is at 2^nd para, page 6 of assessment order. * For creditworthiness and genuineness; the observation of the AO is at 3rd para, page 7 of the assessment order. * The concluding observation of the AO is at para 3.4 and 3.5 of order at page 9. Observation of CIT (A), NFAC: * For Giriraj Infotech (P) Ltd: The observation of the CIT(A) is at para 4.2.3 at page 25 & 26 of CIT(A) Order. * For Wave Promoters (P) Ltd: The obse....
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....fer page 111 to 114 of PB. * The source of source has duly been explained along with the identity of the shareholder and genuineness of the transaction. * Since the identity and creditworthiness of both the shareholders and genuineness of the transactions has duly been explained, the CIT(A) NFAC has correctly deleted the addition made by the AO and therefore the order passed by CIT(A), NFAC may kindly be uphold. Thanking you. Sd/- Adv Amit Malu Jain (Counsel for the Assessee) 5.1 Based on aforesaid written synopsis, it was the submission that the all the necessary documents related to both the investors companies / shareholders are furnished before the revenue authorities, however, Ld. AO has not conducted any enquiry that any of the shareholders so as to decide the identity, creditworthiness of the investors and genuineness of the transactions. It is submitted that the recourse available with the Ld. AO to conduct enquiries u/s 131 or u/s 133(6) of the Income Tax Act are deemed necessary to exercise, therefore, the case of assessee is squarely covered by the judgment of Hon'ble jurisdictional High Court in the case of Pawan Kumar Agrawal ....
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....ad discharged his primary onus under Section 68 of the Act. That having been done, the First Appellate Authority was fully justified in taking the view that it was open to the department to take recourse of Section 131 or Section 133(6) of the Act if they were to further proceed. That not having done so, the First Appellate Authority was within its jurisdiction to conclude on facts and law, in favour of the Assessee. The Appellate Tribunal, in the Appeal at the instance of the Revenue, has not rendered the decision holding the finding of the First Appellant Authority regarding applicability of Sections 131 and 133(6) of the Act, as the case may be, is erroneous in law. So much so, the impugned decision of the Tribunal stands faulted on a substantial question of law referable to the contents of Section 68 of the Act and the failure of the Revenue to take recourse to Sections 131 and 133(6) of the Act, in the case of the Assessee, where the primary onus under Section 68 of the Act stood discharged by the Assessee. 7. For the foregoing reasons, we are of the view that the impugned order of the Tribunal has to be set aside, answering the question of law, framed and quoted abov....
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....has not assigned any specific reasons but has only relied upon certain case laws which are totally distinguishable from the facts of the present case of the appellant. The same is demonstrated as under :- Case law relied upon by the AO Facts of the case Remark Sumati Dayal vs. CIT (214 ITR 801) In the case of Sumati Dayal there were specific documentary evidences against the assessee which was provided to assessee in order to rebut but the assessee fails to rebut and therefore it was held by the explanation offered by the assessee was rejected by the AO. . The fact of the present case is totally different from the facts of the case relied upon by the AO. In the present case there was no documentary evidence against the appellant. Further, no discrepancies were ever pointed out by the AO in the documents furnished before him. CIT vs. Durga Prasad More 82 ITR 540 (SC). In the case of Durga Prasad More it was held by the Apex Court that they authorities were entitled to look into the surrounding circumstances to find out the reality of the recitals made in those documents. Whether to accept those recitals or not was within the province of the Tribunal. Unless i....
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....148 on basis of information received from Investigation. Wing that assessee was one of beneficiaries, who had procured share application money from, entry providers-Inspite of various notices issued, assessee did not appear in response to said notices-Accordingly, ex-parte or best judgment assessment orders were passed for impugned A.Ys.- * The fact of this case is totally different from the present case of the appellant. In the case N.R.Portfolio (P) Ltd enquiry was conducted by investigation wing and statements of certain persons were recorded who accepted the fact that they have provided the accommodation entries to various companies. The summons was also issued to the persons as well as company which remained un served and none complied. In light of these circumstances it was held in N.R.Portfolio (P) Ltd that share capitals are bogus and accordingly addition u/s 68 was made. Whereas the facts of the present case of appellant is entirely and squarely different from the case of N.R.Portfolio. There is no admission by any of the persons/brokers/entry providers that they have provided accommodation entries to the appellant company. There is no adverse material collected by the ....
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....nvoked section 68 of the Act and added the amount of Rs. 1,18,50,000/- to the income of the assessee. The fact of this case is totally different from the present case of the appellant. In the case Nova Promoters Finlease (P) Ltd enquiry was conducted by investigation wing and statements of certain persons were recorded who accepted the fact that they have provided the accommodation entries to various companies including Nova Promoters Finlease (P) Ltd. The summons was also issued to the persons as well as company which remained unserved and non complied. In light of these circumstances it was held in Nova Promoters Finlease (P) Ltd that share capitals are bogus and accordingly addition u/s 68 was made. Whereas the facts of the present case of appellant is entirely and squarely different from the case of Nova Promoters. In the case of the appellant no such enquiry has ever been conducted by the department. There is no admission by any of the persons/brokers/entry providers that they have provided accommodation entries to the appellant company. There is no adverse material collected by the department. No Summons ever issued to any of the director. Notice u/s 133(6) has duly been c....
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....ere received back unserved-Ultimately assessee produced five of the fifteen shareholders whose statements were recorded-On analysis of these statements, authorities below arrived at the finding of fact that neither the identity of said parties is established nor their capacity to invest is proved as they are all agriculturists and have not produced a single document to support their version-No steps were taken by the assessee which could establish the three ingredients to obviate the mischief of s. 68- It has merely given the names of the parties without anything more-Even the bank . statement submitted by the assessee has not been proved-Therefore, assessee has not discharged the onus and addition under s. 68 is justified As already stated in earlier non of the summons ever issued to any director. Further no notice ever issued u/s 133(6) of the Income Tax Act, 1961. So the case law not applicable in the present case. Vijay Kumar Talwar Vs. CIT 330 ITR 1 The apex court has not given any decision. Hon'ble apex court has stated that all the authorities below, in particular the Tribunal, having observed in unison that the assessee did not produce any evidence to rebut the....
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....an a racket of accommodation entries. * In the case of Principal Commissioner of Income Tax Vs. Ami Industries (India) Ltd (2020) 107 CCH 0294 Mum HC, it was held that "Addition u/s 68 is not sustainable where the assessee had discharged its onus of proving identity of the creditors. Genuineness of the transactions and creditworthiness of the creditors". * In the recent judgment of Delhi HC in case of CIT Vs. Vrindawan Farms (P) Ltd ITA 71/2015 pronounced on 12.08.2015 it was held that "If the identity and other details of the share applicants are available, the share application money cannot be treated as undisclosed income in the hands of the Co. The addition, if at all, should be in the hands of the applicants if their creditworthiness cannot be proved." * In case of CIT vs. Oasis Hospitalities Pvt. Ltd. 333 ITR 119 (Del), it was held that "assessee company has filed copies of PAN, acknowledgment of returns of the share applicants and their bank accounts and statements of the relevant period, thus the primary onus was discharged by the assessee The appellant contends that now it is for the AO to disprove the credits by bringing adverse material. In hol....
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....e order of the CIT(A), deleting the said addition in effect. * In case of ACIT vs Venkateshwar Ispat Pvt. Ltd., 319 /TR 393 (CG), the Jurisdictional High Court Chhattisgarh has held that "in case of share application money the assessee has produce evidence regarding names, addresses etc. and the shareholders have confirmed the investment. The department is free to proceed to re-open shareholders individual assessment in accordance with law but it cannot be regarded as undisclosed income of the assessee company.". 5.5 Apropos, explanation about the source of investment, Ld. AR further submitted that the First investor i.e., GIPL has raised share capital of Rs. 21.31 Crores in the AY 2011-12, that the said shareholders has opted for VSVS-2020 and has paid the due tax on total share capital of Rs. 23.21 Crores. It was the submission that share capital and premium of GIPL remain unchanged from AY 2011-12 till year consideration i.e., 2014-15. To substantiate the aforesaid facts, Ld. AR drew our attention to page nos. 76 to 79 of the paper book comprising of Audit Balance Sheet of M/s Vizcom Solution Pvt. Ltd. (presently known as GIPL) showing share capital and source of sur....
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....aid information, it is submitted that the source of GIPL is duly taxed under VSVS-2020, therefore, source of source is duly explained, accordingly the addition made by Ld. AO is rightly vacated by the Ld. CIT(A). 5.7 Regarding, WPPL, Ld. AR submitted that WPPL is received unsecured loan from Shri Hanuman Loha Pvt. Ltd. And M/s Balajee Steels on 22.07.2013 and on the same day the investment was made in the share capital of the assessee company. It is further explained that the amount received from the aforesaid parties was on account of the repayment of loans extended by M/s WPPL to Shri Hanuman Loha and Balajee Steel, therefore, the source of source of such investments by WPPL in the assessee company is duly explained with the identity and creditworthiness of the shareholders and genuineness of transactions. 5.8 Backed by aforesaid submissions, it was the prayer by Ld. AR that the source of source of the share capital + share premium issued by the assessee company are duly explained before the revenue authorities which was rightly appreciated by the Ld. CIT(A), therefore, the addition u/s 68 after considering the various judicial pronouncements had rightly been vacated by the....
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....t have been rejected by the Ld. AO without their evidence being recorded. AO had power of a Civil Court by virtue of section 131. Misplaced apprehensions of Ld. AO that the confirmations were in same handwriting, therefore, they were not believable was a typical pro revenue approach, without any foundation. CIT(A) after having looked into evidence on record was justified in granting relief to the assessee. 6.4 As the aforesaid issue, which was there before Ld. CIT(A) also, who had recorded the same in his order taking note of the contention of the assessee, shows that Ld. CIT(A) had an affirmative view towards such submission of the assessee, though there was no categorical finding on issue. Since Ld. AR had raised a preliminary objection, which in our opinion is permissible to be raised before us, thus admitted, in terms of decision of this tribunal in the case of ITO-2, Raigarh Vs. Shri Bishambhar Dayal Agrawal in ITA No. 223/RPR/2016, dated 27.10.2023, following the judgments of various Hon'ble Courts, wherein the observations of the Tribunal are as under: 13. Admittedly, it is a fact borne from the record that the assessee respondent has neither preferred before....
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....ment of the Hon'ble High Court of Delhi in the case of Sanjay Sawhney Vs. Pr. CIT (supra), we find favor with the claim of the Ld. AR that as the objection under Rule 27 of the Income Tax Appellate Tribunal Rules, 1963, does not propose raising the same in writing, the assessee-respondent before us is, thus, well within his right to raise the same orally. 15. Coming to the issue as to whether the assessee respondent, in the absence of any cross-appeal or a cross-objection, could assail the validity of the jurisdiction that the A.O assumed for reopening the concluded assessment despite the fact that neither any such issue was raised before the CIT(Appeals) nor was adverted to by the latter while disposing off the appeal, we find that the said issue had been looked into at length by the Hon'ble High Court of Bombay in the case of Peter Vaz Vs. CIT, Central Circle, Bangalore (supra). Before adverting to the view taken by the Hon'ble High Court on the aforesaid issue, we shall briefly cull out the facts involved in the appeal before the Hon'ble High Court in the context of which the latter had looked into the scope of Rule 27. (i) The assessee before t....
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....he Hon'ble Supreme Court in the case of S. Nazeer Ahmed Vs. State Bank of Mysore (2007) 11 SCL 75, the ITAT should not have precluded the assessee from assailing the issue as regards the validity of the jurisdiction assumed by the A.O u/s. 153C of the Act in the course of hearing of the appeal instituted by the revenue, even without the necessity of filing any cross- objection. Based on its aforesaid observations, the Hon'ble High Court observed that in terms of Rule 27 of the Income Tax Appellate Tribunal Rules, 1963, the assessee was entitled to support the order of the CIT(Appeals) before the Tribunal even without the necessity of filing any cross-objection. For the sake of clarity, the observations of the Hon'ble High Court are culled out as under (relevant extract) : "38. In the present case, it is not as if the issue of non-fulfillment of jurisdictional parameters of Section 153C was raised but rejected by the CIT (Appeals). Such an issue was not raised before the CIT (Appeals). Having regard to the provisions of Rule 27 of the Appellate Tribunal Rules, 1963 as also the provisions of Section 260A(7) read with Order XLI Rule 22 of CPC as interpreted by the....