TaxTMI 
TaxTMI 
2016 (4) TMI 736
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.... Transmission Line Towers and Parts. The Learned AO observed that during the assessment year under appeal, the assessee company issued fresh shares to the following parties at face value of Rs. 10 each per share :- Sl. No. Name of the Share Applicant No. of Shares Issued Total amount recd. including premium (in Rs.) 1 Trinton Vinimoy Pvt Ltd 2,70,000 27,00,000/- 2 Annunoday Dealcom Pvt Ltd 2,70,000 27,00,000/- 3 Deva Merchants Pvt Ltd 93,748 9,37,480/- 4 Ankur Tie-up Pvt Ltd 70,000 7,00,000/- 5 Rose Valley Merchants Pvt Ltd 11,250 1,12,500/- 6 Kushal Khemka 11,995 1,19,950/- 7 Nalanda Vanijya Pvt Ltd 2,70,000 27,00,000/- 8 Safal Vyapar Pvt Ltd 2,70,000 27,00,000/- 9 Saroj Kabra 28,000 2,80,000/- TOTAL :- 1,29,49,930/- The Learned AO accepted the identity and creditworthiness of Mr.Kushal Khemka and Smt.Saroj Kabra and made no addition for the amounts received from them. In respect of amounts received from 7 corporate entities, the Learned AO doubted the creditworthiness of the parties. The total share capital received from these seven corporate entities amounted to Rs. 1,25,49,980/-. The assessee had duly furnished the docu....
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....l before us on the following grounds:- 1) For that on the facts and in the circumstances of the case, the Ld. CIT(A) was not justified in confirming the addition of Rs. 1,25,49,980/- made by the A.O. on account of unexplained cash credit U/s 68 of the Income Tax Act when in fact, such sum represents share application money received from seven share applicant companies. 2) For that on the facts and in the circumstances of the case, the action of the Ld. CIT(A) in confirming Rs. 1,25,49,980/- as appellant's undisclosed income U/s 68 of the Income Tax Act is highly arbitrary, unjustified and unwarranted. 3) For that on the facts and in the circumstances of the case, the Ld. CIT(A) was not justified in confirming the treatment of share application money by the Ld. A.D. as income of the appellant by wrongly invoking section 68 of the Income Tax Act based on conjectures, suspicion and surmises. 4) That the Ld. CIT(A) erred in holding that the transactions of share application are in violation of the provision of the Benami Transaction (Prohibition) Act, 1988. 5) That the appellant craves leave to add, alter or delete all or any of the grounds of appeal. 5. The Learned AR a....
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....s. Hence he argued that there is nothing wrong for the jute mill company to pay the monies directly to the assessee company towards purchase of shares on behalf of its sister concerns. He further argued that the Learned CITA had wrongly invoked the provisions of section 3 of Benami Transactions (Prohibition) Act, 1988 to the facts of the instant case. He argued that no examination was carried out by the Learned CITA to prove that the subject mentioned transactions are benami transactions. He argued that the Learned CIT(A) simply reiterated the observations of the Learned AO in his appellate order. He argued that the assessee in the instant case had proved all the three ingredients of section 68 of the Act viz identity of the share applicants, creditworthiness of share applicants and genuineness of the transactions. He also placed reliance on the following decisions in support of his contentions:- (i) Decision of Hon'ble Delhi High Court in the case of CIT vs Vrindavan Farms (P) Ltd in ITA No. 71/2015 , 72/2015 and 84/2015 dated 12.8.2015 (ii) Decision of co-ordinate bench of this tribunal in the case of ITO vs Cygnus Developers (I) P Ltd in ITA No. 282/Kol/2012 dated 2.3.2016. ....
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....of shares i.e. Rs. 10 each aggregating to Rs. 1,29,49,930. Out of it the A.O. accepted the share applications of 2 individuals namely Kushal Khemka and Saroj Kabra and made addition of the balance amount of Rs.,125,49,980 being the aggregate amount of share applications by 7 share applicant companies. The details of share application amount, Cheque No., Bank's name etc. are as under: a) Deva Merchants P Ltd. [PAN AACCD4311L] By Cheque No. 824600 dated 25.8.2008 drawn on Syndicate Bank, Camac Street Br. (Audited B/S at pg 45-50; Copy of ITR Ack pg 51, Certificate reg share investment at pg 52, Bank Statement of Agarpara at pg 53 and certificate regarding payment by Agarpara at page 54 of paper book) Rs.9,37,480 b) Ankur Tie up P Ltd. [PAN AAFCA3294G] By Cheque No 824599 dated22.8.2008 drawn on Syndicate Bank, Camac Street Br. (Audited B/S at pg 55-63; Certificate reg. share investment at pg 64, Bank Statement of Agarpara at pg 65 and certificate regarding payment by Agarpara at page 66 of paper book) Rs. 7,00,000 c) Rosevalley Merchants P Ltd. [PAN AABCR3695Q] (Audited B/S at pg 67-72; Copy of ITR Ack pg 73, Certificate reg share investment at pg 74, Bank Statement of Agarp....
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....ute Mills Ltd. and Premium Agro Exports Ltd. on behalf of the 3 share applicants and 4 share applicants respectively. Relevant details are given hereinbelow :- Amounts given by Agarpara Jute Mills Ltd. PAN AACCA4864H 7.4.1 A sum aggregating to Rs. 17,49,980/- for and on behalf of Deva Merchants P Ltd. Rs. 9,37,480/- ; Ankur Tie up P Ltd. Rs. 7,00,000/- and Rosevalley Merchants P Ltd. Rs. 1,12,500/-. All payments were made by A/c Payee Cheques in favour of the assessee company. Details of Cheque No., date and Bank's name are mentioned above and therefore not being repeated. 7.4.2 Agarpara Jute Mills Ltd. is a Jute manufacturing company having its factory at 28, BT Road, Kamarhati, Kolkata 700058 and assessed under PAN AACCA4864H. The copy of Annual Report also comprising Profit & Loss a/c, Balance Sheet and relevant details were submitted during assessment proceedings and the copy of the same is appearing at page 118 to 139 of the paper book. 7.4.3. The turnover of finished goods of this company for the year ended 31.3.2009 was Rs. 64.51 crores and the income for the year amounted to Rs. 70.07 Lakhs after tax (copy of Profit & Loss account at page 126A). 7.4.4. The company h....
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.... and assessed under PAN AACCP6412C. The copy of Annual Report also comprising Profit & Loss a/c, Balance Sheet and relevant details were submitted during assessment proceedings and the copy of the same is appearing at page 100 to 117 of the paper book. 7.5.3. The turnover of goods of this company for the year ended 31.3.2009 was Rs. 42.91 crores. However there was loss during the year (copy of Profit & Loss account at page 107). 7.5.4. The company had issued confirmation in writing mentioning Cheque No., date, Bank's name etc. in respect of the 4 cheques of Rs. 27 Lakhs each issued by it regarding share application amount for Triton Vinimay P Ltd. (copy of certificate at page 34); Arunoday Dealcom P Ltd.Rs.27 Lakhs (copy of certificate at page 44); Nalanda Vanijya P Ltd. (copy of certificate at page 84); and Safal Vyapar P Ltd. (copy of certificate at page 94). These confirmations were furnished in course of assessment proceedings. 7.5.5. The amount given by the said company Premium Agro Export Ltd. on behalf of the four share applicants is duly shown in list of Loans & Advances. Copy at page 116 of paper book. 7.5.6. The copy of Bank Statements of the said company Premium ....
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....seven share applicant companies, as the case may be. f) Asst Orders u/s 143(3) of the act for AY 2009-10 for Premium Agro Exports Ltd dated 26.12.2011 and for Agarpala Jute Mills Ltd u/s 153C/153A/143(3) of the act for AY 2009-10. g) Relevant pages of Bank Statements of the assessee 7.7. We find that the following documents were filed by the assessee before us by way of supplementary paper book which were called for by the Bench during the course of previous hearings :- 1. Details of Directors of seven share applicant companies , Agartala Jute Mills Ltd, Premium Agro Exports Ltd and the assessee company together with the details of companies having common directors. (pages 1 to 125 of paper book dated 29.4.15) 2. Detailed source of funds in the hands of Premium Agro Exports Ltd for advancing the amount to the share applicant companies. (pages 126 to 137 of paper book dated 29.4.15). Relevant bank statements with IDBI Bank was already filed in paper book 2. 3. Detailed source of funds in the hands of Agarpara Jute Mills Ltd for advancing the amount to the share applicant companies. (pages 138 to 285 of paper book dated 29.4.15) 4. Detailed source of funds in the hands of Prem....
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....doubt. In respect of source of credit, the assessee has to prove the three necessary ingredients i.e identity of share applicants, genuineness of transactions and creditworthiness of share applicants. In the instant case, we find that the identity of share applicants is proved beyond doubt by the assessee by furnishing the name, address, PAN of share applicants together with the copies of balance sheets and Income Tax Returns. With regard to the creditworthiness of share applicants, the Learned AO himself states that the seven share applicants had invested in assessee company's shares by taking money from some other companies who has directly given cheques in the name of the assessee company on behalf of applicant companies. These transactions are also duly reflected in the balance sheets of the seven share applicants by debiting the investment in share capital of assessee company by corresponding credit to the loan creditors who had advanced monies on behalf of share applicants. Hence the source of the share applicants for making investment in share capital of assessee company is by way of borrowings from two jute companies. By this, the creditworthiness of the share applicants is....
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....nue has not doubted the identity of the share applicants. The sole basis for the Revenue to doubt their creditworthiness was the low income as reflected in their Income- Tax- Returns. The entire details of the share applicants were made available to the AO by the Assessee. This included their PAN numbers, confirmations, their bank statements, their balance sheets and profit and loss accounts and the certificates of incorporation etc. It was observed by the ITAT that the AO had not undertaken any investigation of the veracity of the above documents submitted to him. It has been righty commented by the IT AT that without doubting the documents, the AO completed the assessment only on the presumption that low return of income was sufficient to doubt the credit worthiness of the share holders . 4. The Court is of the view that the Assessee by produced sufficient documentation discharged its initial onus of showing the genuineness and creditworthiness of the share applicants. It was incumbent to the AO to have undertaken some inquiry and investigation before coming to a conclusion on the issue of creditworthiness. In para 39 of the decision in Nova Promoters (supra), the Court has tak....
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.... not in existence. The assessment orders were completed on the address as provided by the appellant company in the course of assessment proceedings. It is not known as to how the AO's inspector had reported that the aforesaid companies were not in existence at the given address. Since the appellant company had provided sufficient documentary evidences in support of its claim of receipt of share application money, I am of the opinion that the no addition u/ s.68 could be made in the hands of appellant company. On going through the various judicial pronouncements relied upon by the appellant, it is observed that the view taken as above is also supported by them. In view of above the AO is directed to delete the addition of Rs. 54,00,000/ -. The ground Nos. 2 and 3 are allowed," 7. Aggrieved by the order of CIT{A) the revenue is in appeal before the Tribunal. 8. We have heard the submissions of the learned DR, who relied on the order of AO. The learned counsel for the assessee relied on the order of CIT(A) and further drew our attention to the decision of Hon'ble Allahabad High Court in the case of CIT vs Raj Kumar Agarwal vide ITA No.179/2008 dated 17.11.2009 wherein the ....
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....uestions to be answered by them and had duly replied by them in the order. The questions raised by them are as below:- (i) Whether the provisions of section 68 can be attracted if share capital with premium is not properly explained by the assessee company ? (ii) Whether insertion of proviso to section 68 by the Finance Act, 2012 with effect from 1-4-2013 empowering the Assessing Officer to examine the genuineness of the share capital in the case of a company in which public are not substantially interested, is prospective ? (iii) Whether the enquiry conducted by the Assessing Officer in facts and circumstances of the case can be considered as a proper enquiry ? (iv) Whether Commissioner can set aside the assessment order and direct the Assessing Officer to conduct a thorough enquiry, thereby interfering with the jurisdiction of the Assessing Officer conferred on him in terms of section 142(1) and 143(2) of the Act? (v) Whether inadequate inquiry conducted by the Assessing Officer empowers the Commissioner to revise the assessment order ? (vi) Whether the order of the Commissioner was based on irrelevant consideration and was he supposed to point out specifically where t....
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....relevant time. The materials on records disclosed that some information from at least two individuals indicated that the money had not been given by them. In view of the fact that concurrently the lower authorities held against the assessee and given the intensive factual nature of the evidence, no substantial question of law arises. The appeal is accordingly dismissed. In the instant case, the assessee had indeed proved the identity of the share applicants, creditworthiness of share applicants and genuineness of transactions beyond doubt by explaining firstly the source , secondly the source of source and thirdly the source of source of source. Moreover, the seven share applicants had duly confirmed the fact of making investment in share capital in the assessee company and the two jute companies had also confirmed the fact of having made the payments to the assessee company on behalf of the seven share applicants. Hence the decision relied upon by the Learned DR on the aforesaid decision is not applicable to the facts of the instant case. 7.12. With regard to the case relied upon by the Learned DR on the decision of the Hon'ble Apex Court in the case of Navodaya Castle (P) Ltd v....
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....ed transactions are Benami Transactions by adducing proper legal evidences because he is the person who is asserting the said allegation. We would like to place reliance on the following decisions in support of our proposition :- (a) Decision of the Hon'ble Supreme Court in the case of P. Satyanarayan Murty vs State of Andhra pradesh reported in (1992) 4 SCC 39 dated 22.7.1992 8. Though it is not necessary to cite all those decisions, it will suffice to refer to the rule laid down by Bhagwati, J. , as he then was in Krishnanand Agnihotri vs State of M.P. . In that case, it was contended that the amounts lying in fixed deposit in the name of one Shanti Devi was an asset belonging to the appellant and that Shanti Devi was a benamidar of the appellant. The learned Judge speaking for the Bench has disposed of that contention holding thus: It is well settled that the burden of showing that a particular transaction is benami and the owner is not the real owner always rests on the person asserting it to be so and this burden has to be strictly discharged by adducing legal evidence of a definite character which would either directly prove the fact of benami or establish circumstances u....