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2016 (5) TMI 43 - ITAT MUMBAI

2016 (5) TMI 43 - ITAT MUMBAI - TMI - Addition u/s 68 - subscription of share capital received during the year - Revenue contended that assessee had not produced the directors of the company, that SEBI had made enquiries in the case of RGTPL, HTCPL and YVJL, that they were found to be indulged in price rigging - Held that:- We find that the assessee had filed copies of income tax returns, directors reports, confirmations and affidavits of the directors of all the three subscribers. Thus, it had .....

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worth of all the three subscribers was approximately ₹ 2. 00 crores, that the transactions were carried out through banking channels. It is found that the AO did not make any enquiries with the subscribers about the investments made by them. The FAA has mentioned that the incidence of price rigging took place in the month of December of the succeeding year whereas the subscription was made in earlier year. Thus, it could not be said that assessee had routed its unaccounted money through th .....

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m/2014 - Dated:- 29-3-2016 - Sh. Joginder Singh, Judicial Member And Rajendra, Accountant Member For the Petitioner : Shri Ashish Heliwal For the Respondent : Shri Rahul R. Sarda ORDER Per Rajendra A. M. Challenging the order, dtd. 25/03/2014 of the CIT (A)-22, Mumbai the assessing officer(AO) has filed the present appeal. Assessee-company filed its return of income on 3/10/ 2007, declaring total income at rupees NIL. The AO completed the assessment, u/s. 143(3) of the Act, on 30/12/2010, determ .....

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mations of the shareholders. While surfing the Internet database, the Google search on one of the shareholders namely M/s. Kush Hindustani led the AO to a link of SEBI site. The site had listed an order of SEBI passed in the case of Pyramid Samarai Ltd. He found that one Nirmal Kotecha(NK) was using large number of front companies to manipulate the security market and to prove the funds to several layers in order to hide the source, that SEBI had identified a list of 230 entities also having sim .....

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rsonal capacity, that they were not authorised by the companies to discharge legal duties, that they had not entered into any transaction in their personal capacities. The AO issued a notice to the assessee and informed it that creditworthiness of the subscribers of share money and genuineness of the transactions were not proved. He further informed the assessee that he wanted to add back money credited as share application money and premium with respect to above mentioned three parties to its t .....

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up and Spanco were carried out by the Department, hat during the search proceedings it was found that the subscriber group was indulged in paper transaction of trading in goods where there was no physical movement of goods. The AO further observed that money had been received from specimen bank account through proper banking channels, that the identity of the subscriber was not in dispute, that the view of the adverse finding by SEBI regarding the capacity of the subscriber-companies were was av .....

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grieved by the order of the AO, the assessee preferred an appeal before the First Appellate Authority (FAA). Before him the assessee objected to the reliance placed by the AO on the order of the SEBI in case of Nirmal Kotecha(NK), promotor of M/s. Pyramid Siamira Theatres Ltd. (PSTL). It was contended that the transaction carried out in the stock market in the above-mentioned case was on 21st and 22nd of December, 2008, that the assessee had received the share application money in February, 2007 .....

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ther inquiries. The AO filed his remand report on 3/2/2012. After considering the remand report and the submission of the assessee, the FAA held that the AO had given a categorical finding that no details were available in the assessment record that connected the receipt of contribution of share application money by the assessee to certain search and seizure actions carried out by the investigation wing. As the AO had not conducted enquiries as directed by the FAA, he asked the AO to go through .....

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existence of such evidence filed during the course of assessment proceedings, that the AO had miserably failed to carry out specific directions issued by him u/s. 250(4)of the Act. He further observed that the particular focus of investigation by SEBI was towards rigging of prices of shares in the case of PSTL, that the action of SEBI was in respect of transaction carried out in the month of December 2008, that the shares of the company were subscribed in the month of February, 2007, that promo .....

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ibers were among the 230 entities alleged to have been involved in rigging prices of shares, that unless the AO proved that assessee had routed its own unaccounted money in form of share application money he was not justify in invoking the provisions of section 68 of the act, that during the course of assessment proceedings the assessee had filed the complete addresses along with PAN filed for assessment year 2007-08 along with the balance sheet and profit & loss account and the bank stateme .....

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oved the identity of the subscribers as well as the creditworthiness and genuineness of the transaction, that the AO himself had mentioned, in the assessment order, that there was no dispute with the identity of the shareholders, that the AO did not controvert the evidences filed before him, that he had never made an attempt to conduct enquiries with subscriber of share application money by issue of summons u/s. 131 or notice u/s. 133(6)in spite of the repeated directions issued u/s. 250(4), tha .....

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as routed and got invested as share application money, that in absence of any evidence gathered by the AO, during the course of assessment proceedings, no addition could be made u/s. 68 of the Act. Finally, he allowed the appeal filed by the assessee. 4. Before us, the Departmental Representative stated that assessee had not produced the directors of the company, that SEBI had made enquiries in the case of RGTPL, HTCPL and YVJL, that they were found to be indulged in price rigging. The Authorise .....

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made an addition of ₹ 55. 00 lakhs invoking the provisions of section 68 of the Act, that RGTPL, HTCPL and YVJL had subscribed ₹ 20. 000 lakhs, ₹ 20. 00 lakhs and ₹ 15. 00 lakhs respectively as share subscription money, that the AO had not doubted the identity of the subscribers, that he was of the opinion that genuineness of the transaction and creditworthiness of the subscribers was not proved by the assessee, that he referred to order of SEBI and search and seizure act .....

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