2013 (12) TMI 13 - DELHI HIGH COURT

Issue of share capital – camouflage transactions / accommodation entries - Held that:- The Assessee company is a private limited company – The assessee company has issued share capital including premium of Rs.4,35,00,000/-, out of which only Rs.92,00,000/- was infused from the Directors/family members of the Directors. The remaining share capital had been infused from parties which were completely unrelated either to the Assessee or to any of its Directors - In a private limited company, normally the investment of shares is from parties or persons who are friends or relatives of Promoters/Directors – Later on these shares were transferred to directors of the company at a substantial loss - The entire investment happened during a short span of time and re-transfer of the shares to the Directors of the company also happened during a short span of few days - The modus operandi and the manner in which cash is deposited in a bank and then utilized by way of an account payee cheque for purchase of shares clearly establishes that the said transaction was a camouflage transaction - The Assessee failed to produce the persons who had invested towards share capital shows that these were people who were completely unrelated to the Assessee - All the entries were merely accommodation entries - It would not have been difficult in case of private company to produce persons who were investing substantial amount of money in the company towards share capital - The Assessee has not been able to discharge the initial onus and has not been able to establish the identity, creditworthiness of the share applicants and the genuineness of the transaction – Decided in favour of Revenue.