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Modinagar Rolls Ltd. Versus Additional Commissioner of Income Tax, Range-1, Ghaziabad

2015 (8) TMI 604 - ITAT DELHI

Addition on issued capital u/s 68 - share application money - Held that:- In the present case, it is an admitted fact that the assessee received a sum of ₹ 1.70 crores from M/s Shalini Holdings Ltd. and ₹ 20 lacs from M/s Apoorva Leasing Finance & Investment Pvt. Ltd. on account of share capital. Both the above said companies were registered with ROC and were regularly assessed with the Income Tax Department,copy of assessment order of the assessment year 2010-11 of both the companie .....

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of which are placed and the receipt of the Registrar of companies of the assessee’s compilation. From the above documents, it is clear that the companies who applied for the shares of the assessee were inexistence, those were assessed to tax and filing their regular return of income. The share application money was drawn from their respective bank account and deposited in the bank account of the assessee. Both the companies applied the shares in proper form, the shares were allotted and informa .....

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out car running & maintenance expenses and out of depreciation of the cars - Held that:- In the present case, it is an admitted fact that the assessee maintained the books of accounts which were duly audited and no discrepancy was pointed out in those books of accounts which had also been accepted by the AO. In the instant case, the AO although presumed that the personal use of the vehicle was not ruled out, however no specific instance was pointed out where the vehicles were not used for busine .....

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rs maintained for the expenses had been accepted. Therefore, the disallowance made by the AO and sustained by the ld. CIT(A) was not justified. Accordingly, the impugned addition is deleted. - Decided in favour of assessee. - ITA No. 333/Del/2015 - Dated:- 7-8-2015 - Sh. N. K. Saini And Sh. H. S. Sidhu, JJ. For The Assessee : Sh O. P. Sapra, Adv. & Pankaj Gupta,CA For The Respondent : Sh. P. Dam Kanunjna, Sr. DR ORDER PER N.K. SAINI, A.M. This is an appeal by the assessee against the order d .....

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the personal use of Vehicles and ₹ 46,532/- for the Depreciation as disallowed on these vehicles. 3. That the Learned AO has erred in law and facts of the case in not considering the various details, pleadings and written submissions made from time during the course of assessment proceedings. 4. That the interest as charged under Section 234B and 234C is illegal on various factual and legal grounds. 5. That the demand of ₹ 95,22,541/- created, pursuant to this assessment which is a d .....

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tion of ₹ 1,90,00,000/-made by the AO u/s 68 of the Income Tax Act, 1961 (hereinafter referred to as the Act) on account of share capital. 5. Facts related to this issue in brief are that the assessee filed the return of income through e-filing on 22.09.2010, declaring an income of ₹ 30,77,084/-. Later on, the case was selected for scrutiny. During the course of assessment proceedings, the AO noticed that the assessee had received share application money from M/s Shalini Holdings Ltd .....

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-do- M/s Apoorva Leasing Finance and Investment Co. Ltd. Rs.20,00,000/- RTGS dated 13.08.2009 Axis Bank, Karol Bagh, New Delhi 6. The AO asked the assessee to explain as to why the addition of aforesaid share application money may not be added in the hands of the assessee because their creditworthiness had not been found worthwhile and enquiry report received from the Investigation Unit, Delhi in earlier year has proved that the entry is received from the professional entry provider. In response .....

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arding creditworthiness, the assessee has already filed Balance Sheet of both the investor companies. Which shows the share capital and free reserves of M/s Apoorva Leasing Finance and Investment Co. Ltd. worth ₹ 119,81,45,000/- and the share capital and free reserves of M/s Shalini Holdings Ltd. worth ₹ 124,87,30,000/-. The Balance Sheet of both the companies has already filed and is available on record from the companies has already filed and is available on record from page No. 14 .....

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et and account payee cheques for capacity and genuineness of the aforesaid parties. He further observed that he had completed an assessment of M/s Parsandi Biotech Park Pvt. Ltd., Shastri Nagar, Meerut wherein share capital of ₹ 1,00,00,000/-subscribed by M/s Shalini Holdings Ltd. was held to be bogus. The AO observed that on enquiry, it was found that none of the Directors was available on the given address of the aforesaid companies and both were also not functioning and that the neighbo .....

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Ltd. 1,29,653 12.75 crores 112.12 crores 1.70 crores 164 106.10 crores 8. On the basis of aforesaid table, the AO observed that it was incomprehensible as to how the above companies with meager income from unknown operations were able to make huge investment in numerous other companies located all over the country and what was the source of finance of those companies when not an iota has come from any recognized and credible institution? The AO pointed out that the copies of bank account of tho .....

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The AO again asked the assessee to prove the identity and creditworthiness of the creditors and genuineness of the transactions, the assessee filed the confirmations and Income Tax particulars. The AO was of the view that furnishing of PAN was not a barometer of unassailable identity of a person giving him immunity from any probe and that the such companies or concerns were quoted, in common parlance, as paper companies and often misused for money laundering and routing of unaccounted funds. The .....

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fiable at the given address. 3. Bank account, copy of ITR, balance sheet etc. of the above-named companies is not filed by assessee company to prove the creditworthiness and genuineness of the transactions. 4. Assessee company is not a public limited co. and not offered its share to general public and it is not clear as to how investment companies contacted to assessee company for investment in shares. 9. The AO accordingly made the addition of ₹ 1,90,00,000/- u/s 68 of the Act. The relian .....

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Nova Promoters & Finlease Pvt. Ltd., ITA No. 342 of 2011 (Del) 10. Being aggrieved the assessee carried the matter to the ld. CIT(A) and submitted as under: (i) Assessee Company on 24th December 2012 has furnished to the Ld. Assessing Officer the necessary details of the shares issued which include: (a) Copy of Form No. 2 i.e. Return of allotment of shares along with Board Resolution and name and address of the assessee. (b) Copy of balance sheets of the applicants. (c) Copy of Bank stateme .....

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e Tax Acknowledgments. The Assessee had proved all the ingredients of section 68 of the IT Act, 1961, for proving the issue of share capital to genuine persons. (iii) However, the Ld. Assessing Officer had ignored all the norms and added the share issued including premium in the hands of the Assessee Company on the whims of that these investor s Companies are Jama Kharchi Companies on the basis of some reference made of previous year in the case of M/s Prasandi Biotech Park Ltd. at Meerut jurisd .....

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year 2009-10 in which the full relief was given by the Ld. CIT(A), Meerut. (vi) The assessee is also enclosing the order of M/s CIT Vs Gangeshwari Metal Pvt. Ltd. which is similar to the facts of the assessee and this case clearly distinguish the facts of the case with M/s Nova Promoters and Finlease Pvt. Ltd. 11. The reliance was placed on the following case laws: CIT Vs Lovely Export (P) Ltd. (2008) 216 CTR 195 (SC) Jaya Securities Ltd. Vs CIT (2008) 166 Taxman 7 (All) CIT Vs AKJ Granites (P) .....

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radhan Agro Products Ltd. Vs DCIT (2004) 89 TTJ 1958 (Del) DCIT Vs Arjun Cold Storage and Gen. Mills (P) Ltd. (2009) 13 MTC 1001 (ITAT, Del) Barkha Synthetics Ltd. Vs ACIT (2005) 197 CTR 432 (Raj.) Aravali Trading Co. Vs ITO (2010) 187 Taxman 338 (Raj.) Murlidhar Lahorimal Vs CIT 280 ITR 512 (Guj.) CIT Vs Daulatram Rawatmal (1973) 87 ITR 349 (SC) India Rice Mill Vs CIT (1996) 218 ITR 508 (All) CIT Vs Jauhari Mal Goel (2006) 201 CTR 54 (All) Tolaram Gaga Vs CIT (1966) 59 ITR 632 (Assam) Gyan Prak .....

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d the observations in the assessment order. The assessee in his rejoinder to the remand report submitted as under: That all the investigations as mentioned by the Learned Assessing Officer are in the cases of M/s Prasandi Biotech Pvt. Ltd. for A.Y 2009-10 when the learned Assessing Officer was stationed at Meerut, no summon/notices u/s 133(6) or u/s 131 were issued to the investors of the assessee, if the so called investors are not traceable, then how come the raids can be conducted on them and .....

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ances, this remand report is nothing but merely a repetition of the assessment order. 13. The ld. CIT(A) after considering the submissions of the assessee and the remand report of the AO observed that share application money received from M/s Apoorva Leasing Finance and Investment Co. Ltd. and M/s Shalini Holdings Ltd. was not proved genuine because their identity and creditworthiness had not been proved and enquiry report received from Investigation Unit, Delhi are also proved that the entry wa .....

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t of PAN is not sacrosanct and adequate parameter of identity and it needs to be strengthened and correlated with credible creditworthiness. The ld. CIT(A) was of the view that the facts of the assessee case are akin to the facts of CIT Vs Nova Promoters and Finlease Pvt. Ltd. rather than that of CIT Vs Gangeshwari Metals Pvt. Ltd. reported at 2013(1) TMI 624 (Del) relied by the assessee. The ld. CIT(A) further observed that the fact that the ACIT, Central Circle-23, New Delhi has accepted retur .....

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credit entries from these known entry provider concerns as genuine. The ld. CIT(A) also observed that the facts of the present case are distinguishable from the facts relied by the assessee in the case of M/s Prasandi Biotech Pvt. Ltd. wherein CIT(A), Meerut had granted relief by following the judgment of the Hon ble Supreme Court in the case of CIT Vs Lovely Export Pvt. Ltd. reported at 216 CTR 195. Accordingly, the addition made by the AO was confirmed. 14. Now the assessee is in appeal. The .....

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on money, the assessee had furnished following documentary evidence before the ld. CIT(A): a) Copies of Form No. 2 i.e. return of allotment of shares alongwith Board Resolutions and names and address of the allottees of shares placed at pages 182-188 of the paper book. b) Copies of the balance sheets, bank statements, share application forms, ITRs of M/s Apoorva Leasing Finance & Investment Co. Ltd. placed at pages 125-145. c) Copies of the balance sheets, bank statements, share application .....

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nt Pvt. Ltd. And M/s Shalini Holdings Ltd. which revealed that in the year under consideration the net owned funds of M/s Apoorva Leasing Finance & Investment Pvt. Ltd. were at ₹ 119.85 crores and that of M/s Shalini Holdings Ltd. were at ₹ 124.87 crores and the investment in the assessee company was only ₹ 20 lacs by M/s Apoorva Leasing Finance & Investment Pvt. Ltd. and ₹ 1.70 crores by M/s Shalini Holdings Ltd. The said fact was overlooked by the AO who simply .....

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elied by him had no application to the facts of the assessee. It was further stated that the assessee company is a closely held public limited company and has fulfilled all the provisions prescribed to issue share capital under the Companies Act and filed its return of allotment of shares in Form No. 2, copies of which is placed at pages 182 to 188 of the paper book. It was further stated that the reliance placed by the ld. CIT(A) in the case of M/s Nova Promoters Finlease Ltd. was misplaced. It .....

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to 10 of the assessee s paper book). It was further stated that the assessment order in the case of Share Applicant Companies had been passed under sections 153C/153A of the Act. Therefore, the assessee discharged the onus cast upon it and the ld. CIT(A) was not justified in conforming the addition made by the AO. The reliance was placed on the following case laws: CIT Vs Value Capital Services P. Ltd. 307 ITR 334 (Del) CIT Vs Steller Investment Ltd. 192 ITR 287 (SC) Ø CIT Vs Electro Poly .....

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ported the orders of the authorities below and reiterated the observations made by the AO and the ld. CIT(A). It was further stated that the assessee failed to prove the identity and creditworthiness of the share applicant and genuineness of the transaction. Therefore, the addition made by the AO was rightly confirmed by the ld. CIT(A). 17. We have considered the submissions of both the parties and carefully gone through the material available on the record. In the present case, it is an admitte .....

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compilation and in the case of M/s Shalini Holdings Ltd., the similar documents are placed at page nos. 121 & 122 of the assessee s paper book which clearly established the identity of both the parties. The aforesaid parties applied in proper application form for allotment of the shares of the assessee company, copies of which are placed at page nos. 126 and 147 to 152 in the case of M/s Apoorva Leasing Finance & Investment Pvt. Ltd. and M/s Shalini Holdings Ltd. respectively. The amoun .....

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36 to 141 and 165 to 181 in the case of M/s Apoorva Leasing Finance & Investment Pvt. Ltd. and M/s Shalini Holdings Ltd. respectively. After receiving the share application money, the shares were allotted to both the parties and copy of Form No. 2 was filed with Registrar of Companies with respective resolution, copies of which are placed at page nos. 183 to 188 of the assessee s paper book and the receipt of the Registrar of companies is placed at page no. 182 of the assessee s compilation. .....

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tion of Board of Directors, therefore, the transaction was genuine. 18. On a similar issue the Hon ble Delhi High Court in the case of CIT Vs Gangeshwari Metal Pvt. Ltd. (2013) 361 ITR 10 (supra) 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 o .....

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n 68 of the Act. 19. Similarly, the Hon ble Jurisdictional High Court in the case of CIT Vs Expo Global India Ltd. (2014) 361 ITR 147 has held as under: That the assessee had furnished material which included income-tax returns, balance-sheets, Registrar of Companies particulars and bank account statements. On the basis of these, the Commissioner (Appeals) held that the share application money or the source of the share application money had been satisfactorily explained. The Tribunal was of the .....

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pplication money was received through banking channel and after allotment of the shares the information was furnished to the Registrar of Companies. Therefore, the transaction was genuine. In the present case, the assessee discharged the onus cast upon it to prove the identity and creditworthiness of the share applicant and genuineness of the transaction. Therefore, the addition made by the AO and sustained by the ld. CIT(A) was not justified. Accordingly, the same is deleted. 21. The next issue .....

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ss, the AO considered the maintenance charges of vehicles on higher side, he estimated the total running of the vehicles at 21600-25200 km and worked out the cost of petrol to ₹ 1,09,200/- by considering the average rate of consumption at 15 km per litre and the rate of petrol at ₹ 65 per litre. He also estimated maintenance of 6 vehicles @ 25000/- per vehicle at ₹ 1,50,000/-. The AO estimated the expenditure of 2 vehicles of Executive Director and Vice-President at ₹ 2,5 .....

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23. Being aggrieved the assessee carried the matter to the ld. CIT(A) and submitted as under: (i) That the ld. Assessing Officer as per his own whims and fancies had added ₹ 5,00,000/- on Vehicle Expenses, mainly on the cars provided to the Senior Staff of the business and ₹ 46,532/- on depreciation. (ii) That the complete list of Vehicles as provided to the persons, their names, designations, their addresses. The distance between their residence and place of work, their area of work .....

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ed that After verification of the sales and the purchases made by the company and the claim of expenses nothing adverse has been noticed and as such, the trading results are accepted. (iv) That all the vehicle expense are fully vouched, audited and supported. Than any kind of addition based on any kind of presumption or assumption based on some self cooked formulas and calculations are not correct, true and match with the records. (v) That under these circumstances when the books of accounts are .....

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sallowed by him also needs to be deleted in full. (vii) Now looking to the various facts and the contradiction in the order of ld. Assessing Officer the addition of ₹ 5,00,000/- in Vehicle Expenses and ₹ 46,532/- in depreciation needs to be deleted. 24. The ld. CIT(A) after considering the submissions of the assessee confirmed the addition made by the AO by observing that the personal use of vehicle is not ruled out. A reference was made to the following case laws: Swadeshi Cotton Mi .....

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