TaxTMI 
TaxTMI 
2026 (3) TMI 1477
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....said search proceedings. Accordingly notice u/s 153A of the Act was issued in this case on 18.03.2013. In response to the said notice the assessee filed its return of income on 22.08.2013 declaring NIL income. The AO had observed from the balance sheet of the assessee, that it has received following share capital/share application money during the financial year 2010-11 relevant to the assessment year 2011- 12 as under: Name Face value (in Rs. ) Premium (in Rs. ) Amount (in Rs. ) M/s ApoorvaLeasing Finance and Investment Co. Ltd 10/- 990/- Rs. 25 crore M/s Micro Management Ltd 10/- 990/- Rs. 30 crore 2.1 In the course of assessment proceedings the AO required the assessee to explain the source of the above share capital. Ongoing through the documents furnished by the Assessee in this respect and other material available on record, it was observed by the AO that M/s Apoorva Leasing Finance & Investment Co. Ltd was managed and controlled by one Shri S.K. Jain, an accommodation entry provider. Further M/s Micro Management Ltd has received share capital/ share premium from M/s Transnational Growth Fund Ltd and the said company M/s Transnational Gr....
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.... has shown premium of Rs. 69,86,40,000/- on paid up capital of Rs. 14,18,85,000/-. It has no fixed assets. It has shown income of Rs. 3,00,85,420/- and Rs. NIL for AY 2010-11 and AY 2011-12 respectively. Thus these investments were also alleged to be bogus. 5. In view of these facts the AO confronted the Assessee on 18.02.2015 and proposed to make addition of Rs. 55 crores on account of such bogus share capital. The Assessee relied upon details such as PAN, ITR, bank statements, confirmations and balance sheet of the share applicants and other submissions to prove the identity, creditworthiness and genuineness of the transaction but AO was not satisfied with the evidences and explanation furnished by the Assessee. The AO also mentioned that the Assessee could not explain the basis of charging of share premium @ 990/- per share on face value. The AO also examined the trading of some other companies which were in similar trade as that of the Assessee and found that shares of one such company EIH Limited traded at Rs. 75/- to Rs. 150/-., so there was no reason for investment in Assessee company for such high premium. The AO further relied upon the decisions of Hon'ble Delhi Hig....
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....nance & Investment Company Ltd. is also engaged in the activities of providing accommodation entries whereas none of the paper seized during the course of search operation and also on post search investigations made by the investigating officer as well as enquiries made by assessing officer, suggests that share capital received by the Appellant company is accommodation entry. 5. d. The CIT(A) erred in not recognizing that Id. A.O. erred in making these additions on the basis that the Directors of share applicant company have failed to provide documentary evidence to prove the sources of funds during recording of statement u/s 131 of Income Tax Act although the Assessing Officer only asked for the sources of funds and has never asked/ insisted on the furnishing of documentary evidences. Never the less, these documentary evidences have been duly furnished by the appellant company during the course of assessment proceedings. 6. e. The CIT(A) erred in not recognizing that the A.O. erred in not relying upon the judgment laid down by Hon'ble Supreme Court in the case of Lovely Exports simply on the ground that facts and circumstances of the case are different and ap....
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....ing on Arbitration orders and order of NCLT it was submitted that the transaction with Apoorva Leasing have been unreasonably tainted while the said scrip has been found to be genuine as confirmation were received and Directors of investor company had appeared. It was also argued that additions if any could have been made only in the case of share applicants and for this proposition, reliance was placed upon the decision of Hon'ble Supreme Court in the case of M/s Lovely Export Pvt. Ltd. (2008) 216 CTR 195. It was argued that once documents have been furnished in support of share application money, further onus shifts upon the AO. In this case the AO has made addition based upon presumptions and without any evidence. 8. The Ld. AR also submitted that M/s Apoorva Leasing Finance & Investment Company Ltd., is listed in various stock exchanges of the country, complying with the various listing requirements of the various stock exchanges / registrar of companies/ SEBI. The company has its issued, subscribed and paid up Capital of Rs. 19.97 Crores and Reserves & Surplus of Rs. 99.89 Crores. The company is doing a regular business and has a base of Rs. 119.86 crore of its own fund....
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.... that the working of net asset value of the Assessee company at Rs. 1000/- per share as on 31.03.2010, the working of the same stands submitted and the Assessing Officer has also gone through the same during the course of assessment and nothing adverse was noticed. 11. Ld. Counsel also cited how the reliance of the Assessing Officer on judgment of M/s Nova Promoters & Finlease (P) Ltd., & N.R Portfolio Pvt Ltd., was erroneous as the facts and circumstances in these cases were totally different from the case of Assessee company. 12. On the other hand the Ld. DR has heavily relied on the orders of the Ld. CIT(A) and Assessing Officer. 13. We have heard rival contentions, perused the record, the submissions placed before us and the case laws relied upon. Now in the case before us, though the addition on account of investment by M/s Micro Management Ltd., stands deleted by the ld. CIT(A) and revenue is not in appeal for the same, still one aspect from same becomes crucial to determine the genuineness of the investment from Apporva Leasing & Finance Company Ltd. The fact that the value of share of Assessee valued at Rs. 999 for investment stands no more disputed by the Revenue ....
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...., Delhi seeking winding up of the company by virtue of section 271 and 272 of the Companies Act, 2013 and this Petition was dismissed by order dated 18.01.2019. Going through this order dated 18.01.2019, we find that primarily it was for non-compliance of mandate of section 272 of the Companies Act in issuing the show-cause notice the petition was dismissed, but, at the same time, certain relevant observations were made with regard to genuineness of the activity of this company, wherein it was concluded by the NCLT that: "It is also difficult to accept that a company formed in 1993 with a paid-up capital of Rs. 19.97 crores can be construed as a shell company incorporated for the purpose of money laundering. Its present business under a different management is a flourishing legal one. Winding up a company is a serious affair and cannot be done at the mere asking of the Central Government. Without evidence, the Tribunal cannot be expected to sound the death knell of a company which is allegedly doing voluminous business, merely on the basis of SFIO report, without even reproducing allegations specific to the respondent company." 17. This matter was challenged before NCLA....
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....and 69) that assessment in this company was completed u/s 153C/153A on 28.03.2013 for the A.Y. 2010-11 accepting the returned income. Further, the CIT(A) has also examined the source of source of M/s Apoorva Leasing Finance & Investment Co. Ltd. and has given a finding that the source of the same came to M/s Apoorva Leasing Finance & Investment Co.Ltd. from M/s Anu Vijay Investment and Revenue has not brought any material to controvert the same. 33.8 So far as the report of the Inspector that these companies are not existing at the given address is concerned, the same, in our opinion, cannot be a valid ground for making the addition under section 68 of the Act especially when the AO is fully aware that all these companies are group companies except M/s Apoorva Leasing Finance & Investment Co. Ltd. which is a listed company. Further, in the past as well as in the subsequent assessment years the investment of some of these companies have been accepted in the order passed under section 143(3) and in the immediately succeeding assessment year, i.e., assessment year 2013-14, such investment has been accepted in the order passed u/s 143(3) as per direction of the joint Commissio....
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....y not in existence, the assessment was completed by inter alia making additions in the income of the assessee respondent under Section 68 of the Act. The appeal to the Commissioner of Income Tax (Appeals) on the aforesaid point failed whereupon a further appeal was preferred before the Tribunal and the same has been allowed. The argument of Sri Manu Ghyildyal, learned counsel for the appellant is that the respondent assessee had received entries in respect of share application money from M/s Shailini Holdings Ltd. to the tune of Rs. 1,70,00,000/- and from M/s Apoorva Leasing Finance and Investment Company Ltd. to the tune of Rs. 20,00,000/-. These entries were bogus entries as the aforesaid company were not inexistence or were simply paper companies. The said companies have no genuine source of income to make such investment with the respondent assessee. Sri Rajiv Singhal, learned counsel appearing for the respondent along with Sri Ashish Bansal in response to the above arguments submits that all these aspects have been dealt with by the Tribunal and in this connection clear findings of fact have been recorded that the said companies were registered with ....
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.... It is well settled that where the assessee discharges the burden to prove the creditworthiness of the persons/companies making investment and the identity of those persons/companies is established, the burden to prove otherwise shifts upon the Assessing Officer and if he fails to discharge the said burden that transactions are not genuine then it would not be a case for any addition under Section 68 of the Act. In this connection the Tribunal relied upon the decision of the Delhi High Court in Commissioner of Income Tax Vs. Gangeshwari Metal Pvt. Ltd. (2013) 361 ITR 10 wherein it was held as under:- "Whether amounts are shown as share application money it is a simple question of whether the assessee has discharged the burden placed upon it under Section 68 of the Income-tax Act, 1961, to prove and establish the identity and creditworthiness of the share applicant and the genuineness of the transaction. In such a case, the Assessing Officer cannot sit back with folded hands till the assessee exhausts all the evidence or material in its possession and then merely reject it, without carrying out any verification or enquiry into the material placed before him." ....
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....around Rs. 118 crores on 31.03.2010 and then was having total net worth of same amount on 31.03.2011 with the only investment came down to Rs. 1,11,00,000/-. All these aspects needed due consideration and needed to be rebutted, which has not been done. 22. We find that the transaction between the two seems to be a bona fide arrangement in due course of their business, Apoorva being NBFC and Assessee needing funds for expansion. A letter of intent and other pre-agreement communication between the parties, copies of which are available at pages 65 to 67 of the paper book, minutes of the Board Meeting of the assessee company, share purchase agreement having ordinary recitals followed by proper share application forms, share allotment letter, confirmation of accounts establish that it is not a stray transaction, but quite likely a bona fide investment from Apoorva Leasing and Finance Company Ltd. The nature of transaction arising out of share transfer agreement have been subject matter of a dispute between the investing company and the assessee and the AR has sufficiently demonstrated that both the parties were contesting their rival claims on this share transfer agreement and it wa....
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....the Revenue's insistence that it should prove the negative. In the case of a public issue. the Company concerned cannot be expected to know every detail pertaining to the identity as well as financial worth of each of its subscribers. The Company must, however, maintain and make available to the Assessing Officer for his perusal, all the information contained in the statutory share application documents. In the case of private placement the legal regime would not be the same. A delicate balance must be maintained while walking the tightrope of sections 68 and 69 of the IT Act. The burden of proof can seldom be discharged to the hilt by the assessee: if the Assessing Officer harbours doubts of the legitimacy of any subscription he is empowered, nay duty-bound, to carry out thorough investigations. But if the Assessing Officer fails to unearth any wrong or illegal dealings, he cannot obdurately adhere to his suspicions and treat the subscribed capital as the undisclosed income of the Company. 16. In this analysis, a distillation of the precedents yields the following propositions of law in the context of Section 68 of the Income Tax act. The assessee has to prima facie p....