TaxTMI 
TaxTMI 
2025 (2) TMI 1758
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.... 4(2) at Rs. 1,50,000/- on account of Payment made to the advocate for non deduction of TDS is wrong as per amendments in provisions. 5. The disallowance made u/s 40(a)(ia) in para 4(2) at Rs. 1,86,63,861/-on account of payment made to M/s Bothra Shipping Services Pvt. Ltd. Fornon deduction of TDS os wrong as per amendments in provisions. 6. The disallowance of interest u/s 36(1)(iii) as per Para-4(3) at Rs. 15,86,284-/- for interest is unjustified, unwarranted and in any case excessive. 7. Any other grounds prayed at the time of hearing." 3. There is a delay of 54 days in filing the present appeal by the Revenue. The learned Departmental Representative submitted that this delay occurred due to COVID-19 period and hence the delay be condoned. In this regard, it is to be mentioned here that the Hon'ble Supreme Court, vide judgment dated 10/01/2022, passed in M.A. no.21 of 2022, in M.A. no.665 of 2021, in Suo-Motu Writ Petition (Civil) no.3 of 2020, has held that the limitation period for filing the appeal was extended upto 29/05/2022. In view of this, since the delay being minor present appeal has been filed on 18/05/2022, which is within the extended t....
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....e appellant was asked to file documentary evidence to establish the identity & creditworthiness of the investor and the genuineness of the transaction. The appellant's AR submitted copy of the minutes of the board meeting with regard to the issue & allotment of shares, copy of the return of income along with balance sheet and P&L A/c of Saphire Marketing Pvt. Ltd. The AO was not satisfied with the submissions of the AR and concluded that the appellant has failed to establish the creditworthiness and genuineness. The reasons given by the AO are: 1. The investor M/s Saphire Marketing Pvt. Ltd has shown NIL income in its return of income for AY 2014-15. The P&L A/c of the Company for the same period shows that it is not doing any business. The Balance sheet as on 31.03.2014 shows that it has no funds except share capital & reserves of Rs 2.23 Crores. This shows that the Company is only a paper company giving only accommodation entries. 2. The AO has expressed doubts regarding the share capital and premium received by the Company M/s Saphire Marketing Pvt Ltd from various subscribers over the past number of years. The immediate source of payment of the sh....
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....ire Marketing Pvt Ltd to the appellant can be its reserves and surplus, it is obvious that it had enough creditworthiness. Thirdly, it is also evident from record that the investor M/s Saphire Marketing Pvt Ltd has made the payment to the appellant company for the share capital and premium through banking channel. The immediate source of these payments has been mentioned as the proceeds from the sale of shares held by M/s Saphire Marketing Pvt Ltd as investment. These investments were liquidated and the sale proceeds deposited in the bank account out of which payments were made to the appellant for the share capital and premium. Fourthly, it is important to mention here that it is the investments in shares held by M/s Saphire Marketing Pvt Ltd and the liquidation of the same in FY 2013-14 that has been adversely viewed by the AO. The AR has submitted a copy of the scrutiny assessment order of M/s Saphire Marketing Pvt Ltd, AY 2014-15, passed u/s 143(3) on 22.12.2016. In this assessment order the AO has disallowed Rs 11,30,384/- under section 14A of the Act. There is no adverse comment made by the AO in this scrutiny assessment order regarding the investments made ....
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....3) is being accepted and the same is being assessed u/s 263/147/143(3) of the IT Act, 1961." Thus, the AO has stated in the assessment order that having examined upto two layers of the share capital and premium received by M/s Saphire Marketing Pvt Ltd, nothing adverse could be found. The return of income filed by M/s Saphire Marketing Pvt Ltd for AY 2017-18 was also subjected to by the AO. scrutiny assessment and the return income was accepted / It is evident from record that returns of income filed by M/s Saphire Marketing Pvt Ltd have been regularly selected for scrutiny assessment but nothing adverse has been found by the AO with respect to the share capital and premium received by it or the share investments made by it. 4.1.3 The AO has also raised questions on the liquidation of share investment by the Company M/s Saphire Marketing Pvt Ltd. The Company had invested Rs 6.89 Crores in the shares of 8 companies in the FY 2008-09. These shares were sold at the same price by M/s Saphire Marketing Pvt Ltd in FY 2013-14 and the amount of Rs 6.89 Crores was thus received by it. There was no profit or loss on these investments. The AO has stated that some of....
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....s colour from the questions involved in the case in which it is rendered and, while applying the decision to a later case, the Courts must carefully try to ascertain the true principle laid down by the decision of this Court and not to pick out words or sentences from the judgment, divorced from the context of the questions under consideration by this Court, to support their reasoning." 4.1.5 The AO has invoked the proviso to section 68 of the Act, which is reproduced as under. "68. Where any sum is found credited in the books of an assessee maintained for any previous kand the offers no explanation about the nature and source thereof or the planation offered by him is not, in the opinion of the Assessing Officer, satisfactory, the sum credited may be charged to income-tax as the income of the assessee of that previous Provided that where the assessee is a company (not being a company in which the public are substantially interested), and the sum so credited consists of share application money, share capital, share premium or any such amount by whatever name called, any explanation offered by such assessee-company shall be deemed to be not satisfactory, u....
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....ere the share application money of Rs 34 Crores received by the assessee from three companies registered in Kolkata was held as unexplained credit u/s 68 of the Act. The AO held that the identity & creditworthiness of the Kolkata companies was questionable and also doubted the genuineness of the transaction. The first appellate authority decided in favour of the assessee and the H'ble ITAT upheld that decision. Before the H'ble High Court of Bombay the Department counsel relied on decision of the H'ble Supreme Court in the case of NRA Iron & Steel Pvt Ltd and stated that the source of the source could not be satisfactorily explained by the assessee. The H'ble Court noted that first appellate authority held that assessee has submitted sufficient evidence in support of the identity & creditworthiness of the three Kolkata companies and also submitted confirmation of transactions by many documents such as share application form, copies of IT returns, confirmation letters etc. It was also noted that it is not necessary that the share application money should come only from taxable income and that it can also be paid out of borrowed funds. It was also noted that the AO ha....
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....return of income then it will be deemed that the assessee has deducted the tax and paid the tax on such sum on the date of furnishing of the return by the payee. The AR has claimed that the payee, Advocate Shri Rahul Bhangade, has discharged his tax liability on the professional fee received from the appellant. However, the AR has not filed any documentary evidence to establish that the second proviso to section 40(a)(ia) is applicable in the appellant's case. The AO is directed to give an opportunity to the appellant to file necessary documentary evidence in support of the claim that the provisions of second provise to section 40(a)(ia) are applicable in appellant's case and therefore the addition made by the AO was not warranted. The addition of Rs 1,50,000/- made u/s 40(a)(ia) may be deleted only if the appellant's AR submits necessary documentary evidence in support of his contention. Hence, this ground of appeal is 'partly allowed'. 4.3 In ground of appeal no. 5, the appellant challenges the addition of Rs 1,86,63,861/- made on account of failure on the part of the appellant to deposit the TDS deducted by the appellant from paymen....
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....ourt of Bombay in the case of CIT vs Reliance Utilities & Power Ltd [(2009) 313 ITR 0340 (Bom)] and HDFC Bank Ltd vs DCIT [(2016) 383 ITR 0529 (Bom)]. In the case of CIT vs Reliance Utilities & Power Ltd mentioned supra, the H'ble High Court held that, "If there be interest fee funds available to an assessee sufficient to meet its investments and at the same time the assessee had raised a loan it can be presumed that the investments were from the interest free funds available..... The principle therefore would be that if there are funds available both interest-free and overdraft and/or loans taken, then a presumption would arise that investments would be out of the interest-free fund generated or available with the company, if the interest-free funds were sufficient to meet the investments." Similarly in the case of CIT vs Reliance Industries Ltd [(2019) 410 ITR 0466 (SC)], the H'ble Supreme Court has elucidated the same principle in the following words, "In so far as the first question is concerned, the issue raises a pure question of fact. The High Court has noted the finding of the Tribunal that the interest free funds available to the....
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....vidence is brought on record to discredit legal evidence adduced to explain share capital contribution. D) Scrutiny assessment proceedings of corporate shareholder M/s. Saphire Marketing Pvt. Ltd. is in progress on 16/12/2016. This fact was brought to knowledge of A.O. in written submission (P-79). A.O. made no verification with A.O. of corporate share holder and proceeded to make addition u/s 68 of I.T. Act 1961 at Rs. 454.98 lacs even though assessment was framed in the case of corporate share holder on 22/12/2016 accepting investment made by such corporate share holder with assessee company. In the case of assessee assessment is framed 29/12/2016. on E) A.O. has drawn adverse view by noting at page 2 share capital and reserves & surplus of corporate share at Rs. 2.23 crores to conclude that M/s Saphire Marketing Pvt. Ltd. is only paper company. Share capital and reserves & surplus of corporate shareholder as per evidence on record is Rs. 22.30 crores (P-62). It is thus evident that conclusion of A.O. for corporate share holder to be paper company is on mistaken understanding of correct facts on record. F) Sale of share held by M/s Saphire Marketing Pvt....
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....il) Diary Nos. 12644/2018 in the case of M/s Paradise Inland Shipping Pvt. Ltd. vide order dated 23/04/2018 (P-49) [Vol. II] vi) (2017) 98 CCH 0010 (Del.) Pr. CIT vs. N.C. Cables Ltd. (P-50-55) [Vol- II] vii) ITAT order in ITA No.4122/Del/2009 in the case of M/s. N.C. Cables Ltd. vide order dated 22/10/2014. (P-56-73) [Vol. - II] viii) (2016) 238 Taxman 0653 (Delhi) CIT-VIII vs. SVP Builders (India) Ltd. (P-74-83) [Vol. - II] ix) (2016) 380 ITR 0289 (Delhi) CIT & Ors. vs. Five Vision Promoters Pvt. Ltd. & Ors. P-84-96) [Vol. - II] x) Supreme Court order No. Petition(s) for Special Leave to Appeal (C)... of 2015 CC No(s) 374/2015 in the case of Navodaya Castle (P) Ltd. (2014) (P-97) [Vol.-II] xi) (2014) 367 ITR 0306 (Delhi) CIT vs/ Navodaya Castles Pvt. Ltd. (P-98-108) [Vol. - II] Xii) ITAT order in ITA No.4613/Del/2010 in the case of M/s. Navodaya Castles Pvt. Ltd. vide order dated 24/08/2016 (P-109-122) [Vol. - II] xiii) (2008) 216 CTR 0195 (SC) CIT vs. Lovely Exports (P) Ltd. (P-123-124) [Vol.II] xiv) (2011) 333 ITR 0100 (Bom.) CIT vs. Creative World Telefilms Ltd. (P-125-126) [Vol. - II] xv....