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Deputy Commissioner of Income Tax Range-I, Lucknow Versus M/s Ansh Intermediate Services Pvt. Ltd.

2015 (10) TMI 1756 - ITAT LUCKNOW

Addition u/s 68 - whether the assessee failed to prove the identity of investors, their creditworthiness/ investments and genuineness of the transaction of capital introduction? - CIT(A) deleted the addition - Held that:- As during the course of assessment proceeding, complete details were not available with the Assessing Officer and that is why he has treated share application money as bogus and made the addition of the same. But before the CIT(A) in response to remand report when fresh commiss .....

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h all these evidence the genuineness of transaction identity and creditworthiness of creditor have been proved. Therefore, we are of the view that since the assessee has discharged its primary onus of proving the genuineness of transaction, identity and creditworthiness of shareholders, the addition u/s 68 of the Act is not called for. The addition cannot be sustained only for the simple reason that these shareholder companies have not responded in first round of commission. The ADIT(Inv.) has i .....

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i K R Rastogi ORDER Per Sunil Kumar Yadav, JM. This appeal is preferred by the Revenue against the order of Ld. CIT(A)-I, Lucknow deleting the addition of ₹ 1,60,00,000/- on account of share application money without appreciating the fact that the assessee failed to prove the identity of investors, their creditworthiness/investments and genuineness of the transaction of capital introduction u/s 68 of the Income Tax Act, 1961. 2. The facts in brief born out from the record are that during t .....

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t the assessee company has shown ₹ 75,00,000/- as opening balance as on 01.04.2009, whereas rest of amount i.e. ₹ 1,60,00,000/- has been received by the assessee company during the year under consideration from the following share holder companies: Sl.No. Name of shareholding companies No of shares allotted during F.Y.2009-10 Share Capital invested Share Premium invested. 1. M/s Artline Vinimay (P) Ltd. 1, Mahendra Nath Roy Bye Lane, Howrah. West Bengal 711101 15,000 Rs.1,00,000/ Rs. .....

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s.1,50,000/- Rs.13,50,000/- 6. M/s Midnight Agencies (P) Ltd,, 1, Raj Ballav Saha Lane, Howrah, West Bengal-711101 10,000 Rs.1,00,000/- Rs.9,00,000/- 7. M/s Motorex Finance (P) Ltd., 9/12, Ul. Bazar Street, Block-E, 2"a Floor, Kolkata, 'West Bengal-700001 20,000 Rs.2,00,000/- Rs.18,00,000/- 8. M/s Ranisati Stockist (P) - Ltd., 1A, Grant lane, Kolkata-700012 Kolkata, West Bengal-Wb-700012 10,000 Rs.1,00,000/- Rs.9,00,000/- 9. M/s Topline Finvest (P) Ltd.. 107C, Todi Chamber, 2, Laibazar .....

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lkata only. The AO also observed from the details that out of 15 companies who have allegedly invested funds in the assessee company, four companies i.e. M/s Ojasvi Motor Finance (P) Ltd. (ii) M/s RMB Finance Company Ltd. (iii) M/s Rishikesh Hire Purchase & Leasing Co (P) Ltd. & (iv) M/s Kamdhenu Fincap Ltd. have same address of P-41, Princep Street 6th Floor, Kolkata, West Bengal. Similarly, three companies i.e. (i) M/s Deesha Tie-up (P) Ltd. (ii) M/s Kathleen Vyapaar (P) Ltd. (iii) M/s .....

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ies are operating from four addresses as noted above. From these facts, an inference was drawn that the assessee company has routed its own money through the shell companies/shareholders and he accordingly asked the assessee to furnish the copy of ITR, PAN, copy of ledger and bank accounts of shareholding companies to prove the identity, creditworthiness and genuineness of transactions, as the onus squarely lies on the assessee company to substantiate that these companies have actually invested .....

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. Kolkata (iii) M/s RMB Finance Company Ltd., Kolkata, the letters were returned by postal department marked as "address not known" or "addresses moved". In rest of the cases, neither replies have been received nor were letters returned back by postal authorities. The AO therefore, confronted these facts to the assessee and asked him to prove the identity, creditworthiness and genuineness of transaction. After confrontation of this fact to the AR of the assessee, replies from .....

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ion of legal character to the transaction. The modus operandi of share holders companies to act as a conduit for the persons to channelize the illegal money into a legal capital. Keeping in view of these facts, the AO issued a commission u/s 131(1)(d) of the Act to Addl. DIT (Inv.) Kolkata for making inquiries about the alleged shareholding companies based in Kolkata. The report, stating therein that notices issued u/s 131 of the Act to all these parties were not responded and thereafter ITI was .....

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re was no compliance from any parties on the appointed date. Notice from one party returned back unserved on 22.03.2013. it is is of the Directorate were deputed to carry out on thespot verification…………..ITIs personally visited the given addresses of all the 15 parties and submitted their report. None of the companies were found to be operating from or existing on the given addresses. Hence these companies appear to be bogus and mere briefcase companies. Enquiry revea .....

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sing Officer has held that the assessee has not discharged the onus which let upon it therefore, the shareholders are not genuine and he accordingly made the addition of ₹ 1,60,00,000/- as unexplained credit u/s 68 of the Act. The relevant observation of the Assessing Officer is extracted as under:- "8. Thus from above facts and circumstances, it is evident that the'onus was not discharged by the assessee in as much as the identity of the creditors remained un-established. Moreove .....

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.), Kolkata, it is also apparent that these companies are non-existent companies and the assessee company has routed its money through such companies by making accommodation entries at Kolkata and then subscribed its own shares so as to give it a look of genuine transaction. The identity of these companies, their creditworthiness and genuineness of the transaction could not be proved by the assessee company, the assessee. The assessee company at-later stage of assessment proceedings, filed copie .....

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ncome-tax return and transaction through bank accounts .do not establish, the identity, capacity, genuineness and creditworthiness of the transaction and money received by the assessee company through valid source. The enquiries made through notices u/s 133(6) and-131(1) (d) do show that these companies do not exist physically but on paper only. No documentary evidences is on record which could suggest that these alleged companies have themselves reached to the assessee company for investment in .....

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cheque/RTGS which were issued immediately after credits in the accounts of the subscribercompanies. It clearly leads to the conclusion that such companies were used as conduit for floating of unaccounted funds; Their existence, was mere on paper and filing of return did not establish that a genuine company engaged, in the business as claime was in existence. From the facts available on record anl examination of the same, it prima facie transpires that the company itself contacted these alleged .....

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as discussed above, it is very clear that the assessee company has failed to establish the identity, genuineness and creditworthiness of the alleged shareholder companies and they are in fact non- existent paper companies. These shareholders have not been proved by the assessee company to company lo be genuine. Therefore, the entire credits appearing in the accounts of the assessee during the year under consideration in the shape of alleged investment from above ten shareholding companies at &# .....

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e summon issued u/s 131 of the Act while executing the commission by the DDIT (Inv.) were received subsequent to the date fixed for the compliance. In support of these facts, the copy of postal envelope were produced before the CIT(A) vide letter dated 11.09.2014. The CIT(A) called the remand report from the AO directing him to conduct proper enquiry on the basis of written submission filed by the assessee and furnished the remand report with his comments after affording proper opportunities to .....

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ghlighted the relevant transaction, copy of audited balance sheet, profit and loss account, copy of ITR acknowledgment for AY 2010-11 and source of fund and details of transaction during the transaction period. The AO in the remand report observed that the ADIT (Inv.) has not deputed the Income tax Inspector for spot inspection. Therefore, the report of the inspector on spot inspection during the course of execution of first commission should be accepted. The CIT(A) has taken into account all th .....

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es in respect of the shareholder company M/s. Artline Vinimay P. Ltd. before the AO to prove the identity and creditworthiness of the shareholders and genuineness of the transactions: a. Details of registered office, Company Identification No., date of incorporation, authorized and paid up capital b. Confirmation cum application form for equity shares of M/s. Ansh Intermediate Services Pvt. Ltd. c. Minutes of Board Meeting dated 23.11.1998 d. ITR Acknowledgement for AY 2008-09 e. Company Master .....

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Associates, Chartered Accountants, Kolkata. k. Balance Sheet and Profit and Loss Account and Annexures/Schedules for the year ending 31.03.2010 .l. Memorandum and Articles of Association . m. Certificate of Registration with Reserve Bank of India No. B.05.05854 dated 14.10.2003 n. Reply to notice u/s 131 from DDFT (Inv.), Kolkata including explanation for the source of investment dated 25,03.2013 Similar details have been filed in respect of other 14 shareholder companies. 4.1 It is also noted .....

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solution of the Board meeting of the company to invest in shares; f. Source of funds of investment made by such company; g. Details of the directors & including the name, address and PAN; It is also noted that the source of investment submitted by the companies to the ADIT(Inv.), Kolkata can be summarized as under: S.No Name of shareholding Company No. of shares allotted during FY 2009-10 Share capital (in Rs.) Source of investment 1. M/s Artline Vinimay (P.) Ltd. 15000 15,00,000 The source .....

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; 15,00,000/- vide cheque no.272688 dated 04.06.2009 4. M/s Kathleen Vyapaar (P] Ltd., 1, Raj Ballav Saha Lane, Howrah, West Bengal-711101 15000 15,00,000 The source of fund was out of share sale money received from Vidhata Housing Ltd. of Rs.30,00,000/- vide cheque no.281868 dated 29.05.2009 5. M/s.Kokila Exports (P) Ltd., 15000 15,00,000 The source of fund was out of share sale money received from Square Trades & Holdings Pvt. Ltd. of ₹ 15,00,000/- vide cheque no.272689 dated 04.06.2 .....

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share sale money received from Vibgyor Vinimay Pvt. Ltd. of Rs.1,00,000/- vide cheque no.258660 dated 21.05.2009 and loan refund from Crown Infrastructures Pvt. Ltd. of Rs.10,00,000/- vide cheque no.281303 dated 29.05.2009. 8. M/s Ranisati Stockist (P) -Ltd., 10000 10,00,000 The source of fund was out of share sale money received from Pearl Dealer Pvt. Ltd. of Rs.20,00,000/- vide cheque no.172063 dated 21.01.2010, Ranisati Stockist Pvt. Ltd. has amalgamated with M/s Motorex Finance pvt. Ltd. as .....

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noted that the appellant company has fully discharged it onus to prove the receipt of share capital with premium from the investor companies. Out of the ten share hold ing companies relevant for the assessment year nine companies have duly confirmed their identities, their capacity along with source and genuineness of transactions in compliance with the summons issued by the ADIT (Inv.) Kolkata. These nine companies have furnished all the documents and information in respect of investmentTna.de .....

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ng PANs, are regular Income-tax assessees & are filing their returns of income. The entire share capital has been received through normal banking channels. The appellant company has filed a number of evidences before the AO as listed supra. The AO also called for information u/s 133(6) from the respective share holders by sending them notices which were duly responded by them confirming their investment of such share capital. The documents as mentioned above prove that the investor companies .....

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isions of the Companies Act, 1956. b. They are regular income tax assessees and are holding PANs issued by the Income Tax Department They are filing their income tax returns & are being assessed c. They are holding valid .bank accounts. d. The notices issued to these companies by the AO u/s 133(6) have been duly complied with. e. The summons issued u/s 131 by the ADIT(Inv.), Kolkata have duly been served on the share applicant companies at their registered offices and complied with. In view .....

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accounts of the share applicants have been duly filed before the AO. The conclusion of the AO that the amount credited in the bank account was routed as share investment the next day through RTGS/ cheques to give it a legal character is not justified as the inference drawn by the AO is not based on any material evidence. The appellant company has fully discharged the onus in respect of genuineness of the transaction. Under the circumstances it Is held that the appellant has discharged the onus .....

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y discharged - additions to be deleted. b. CIT v. Misra Preservers (P.) Ltd. [2013] 350 ITR 222 (All.) Unexplained income-share application money - assessee producing relevant evidence and establishing that all share applicants not fictitious persons - addition rightly deleted. c. CIT v. Kamna Medical Centre (P.) Ltd. [2013] 35 taxmann.com 470 (All.) Section 68 of the Income-tax Act, 1961 - Cash credit [Share application money] - Assessment year 2005-06 - During year assessee-company received fr .....

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reholder was only required to be proved - Tribunal upheld order of Commissioner (Appeals) - Whether instant case was squarely covered by decision of Supreme.Court in case ofSteller Investment Ltd. (supra) - Held, yes [Para 3] d. CIT v, Som tobacco India Ltd. [2014] 42 taxmann.com 310 (All.) Section 68 of. the Income-tax Act, 1961 - Cash credits [Share application money] -Assessment year 2005-06 - In course of assessment, Assessing Officer made addition to assesses^ income in respect of share app .....

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153A of the Income Tax Act, 1961, made an addition under section 68 an amount ofRs.8.50 crores which was received by the assessee as share application money from a company. The Commissioner (Appeal) deleted the addition which was primarily based on a black diary impounded during the course of an income-tax survey. This was confirmed by the Tribunal. The Tribunal observed that the assessee had filed documentary evidence in order to prove the. genuineness of the share application money consisting .....

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e filing of copies of the bank accounts from where the share application money was transferred through banking channels to the assessee. Finally, it was held that the genuineness of the transaction had been established by filing the documents and in view of the confirmation by both the companies of respective transactions. The black diary contained entries between February and March, 2005, which were relevant to the assessment year 2005-06 and not for the assessment year 2007-03 which was under .....

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aving held that the assessee had fully discharged the onus, no substantial question of law arose. f. Hon'ble ITAT Agra Bench in the case of M/s. Jai Hospitals & Research Centre (P.) Ltd., Agra (ITA No. 160/A/2004) has held "Thus it becomes evidently clear that if the company establishes the identity of share applicants and that they have invested in shares, no such money tan be adtied in company's hand u/s 68 as its undisclosed income. Inthe given case the assessee company has e .....

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tral) v. L.D.K. Shares arid Securities P. Ltd. and Ors, 71 DTK 371 (All.) In view of the above discussions it is held that addition of ₹ 1,60,00,000/- made by the AO under section 68 of the Act is not justified and the same is deleted. Ground nos. 2, 3 and 4 are decided in favour of the appellant, Ground nos. 1, 5, 8 and 9 are general in nature. Ground no. 6 relates to charging of interest u/s 234A, 234B, 234C and 234D of the Act. Charging of interest is mandatory but the AO is directed to .....

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circumstances, the investment in shares should not be doubted. He has also placed reliance in support of his contention of the Judgment of the Hon'ble Apex Court in the case of CIT Vs. Jaydeep Securities and Finance Ltd. reported in 350 ITR 220 (All.), CIT Vs. Misra Preservers (P.) Ltd. reported in 350 ITR 222 (All.). 8. Having carefully examined the orders of the lower authorities and in the light of rival submission, we find that during the course of assessment proceeding, complete details .....

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