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2016 (9) TMI 382 - ITAT DELHI

2016 (9) TMI 382 - ITAT DELHI - TMI - Addition u/s 68 on account of unexplained share capital - Held that:- The assessee is a private limited company whose functioning capability strengths etc. would be known only to its close knit circle of friends and Directors and promoters who would be privy to this information. The Private Ltd. Company and such known concerns known to the said company would operate on internal information available to them and it is generally not easily available in the pub .....

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gus transactions have been accepted by Director, Sh. Rajendra Agarwal in 2009-10 AY and a surrender has been made of ₹ 45 lakhs is sufficient evidence for the Revenue to conclude that such behavior for Director was a norm and not an aberration. - Accordingly the company having been given an opportunity to prove that the transactions were genuine the onus in the peculiar facts and circumstances cannot be said to be discharged by placing insufficient evidences. The evidences now on reco .....

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ermination. The AO accordingly is directed to pass a speaking order in accordance with law on the jurisdictional aspect first and thereafter if need be on merits after giving the assessee a reasonable opportunity of being heard. - I.T.A .No.-3556/Del/2012, C.O.No.301/Del/2012 - Dated:- 27-7-2016 - SMT DIVA SINGH, JUDICIAL MEMBER AND SH.O.P.KANT, ACCOUNTANT MEMBER For The Assessee : Mrs. Nandita Kanchan, CIT DR For The Revenue : Sh. Vinod Kr. Bindal, CA ORDER PER DIVA SINGH, JM The present appeal .....

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ssessee failed to prove the genuineness of transaction as well as the identity and creditworthiness of the person who contributed the share capital. 3. The appellant craves leave to add, amend any/all the grounds of appeal before or during the course of hearing of the appeal. 1.1. The assessee has also filed C.O. on the following grounds:- 1. The additions in the impugned assessment order passed u/s 153 are bad in law and on facts because a) the additions were not based on any books of account o .....

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leave to add, substitute, modify, delete or amend all or any ground of appeal either before or at the time of hearing. 2. The relevant facts of the case are that a search and seizure operation under section 132 of the income tax act was carried out in Raj Darbar group of cases on 31.07.2008 wherein certain documents belonging to the assessee company were also seized from the residence of Sh. Rajendra Aggarwal, Director of the assessee s company. Accordingly proceedings under section 153C of the .....

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25,00,000 2. M/s Hunt Commercial P.Ltd. 1000 5,00,000/- 3. M/s Reliance Polycreate P.Ltd. 3000 15,00,000/- 4. M/s Viv Sun Properties 1000 5,00,000/- 2.1. The assessee was required to prove the genuineness of the transactions by filing evidences in respect of share application money received during the year. In response thereto the assessee filed Shared Allotment Form as filed before the RoC. No other document such as confirmations, copies of share application form, Income Tax Return acknowledgem .....

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oceedings to Sh. Rajendra Aggrawal. In response thereto Sh. Rajendra Agarwal as per record vide letter dated 12.9.2008, addressed to the Dy. Director of Income Tax (Inv), Unit-II(l), New Delhi stated that he bought back Shares back from these companies by paying cash amount over and above the value recorded in his books of accounts leading to the surrender of ₹ 45,00,000/- as his personal undisclosed income for the A.Y. 2009-10. The AO concluded that these facts clearly showed that the gro .....

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essee has failed to discharge the onus as caste upon it by section 68 of the Act as it had failed despite opportunity to file any supporting document. 3. Aggrieved, the assessee came in appeal before the First Appellant Authority. In support of its claim it was submitted that on 23.12.2010 the assessee had filed copies of Share Application Form along with ITR and bank account copies etc. and there was no provision under the Act to ask for balance sheet of a shareholder. In the face of these evid .....

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panies were much more than the investments made by each of them thus their creditworthiness stood proved. Further, the amounts having been received through banking channels, it was submitted proved the genuineness of the transactions. Moreover since all of these were incorporated bodies or individuals, their identity was also stated to be proved beyond doubt. Apart from these facts it was submitted nothing more was available with the assessee as at the time of receiving share application money o .....

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on can be taken by the government against them. Reliance was also placed on latest information/documents made available vide letter dated 29.12.2011 consisting of information downloaded from the portal of Ministry of Corporate Affairs. Considering these facts and arguments, the CIT(A) deleted the addition holding as under:- 6. Determination: The first and second grounds of the appeal are about the addition of share capital investment made u/s 68 of the Act and are disposed off together. The appe .....

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nybody else against the said investments. Nothing is apparent from assessment order that any adverse material exists in the assessment folder for the relevant period. It is not the case where any person claimed before the revenue that the impugned share capital is nothing but bogus introduction by way of accommodation entries. In the impugned appeal the issue is squarely covered by the earlier judgments in the case of Lovely Exports Pvt. Ltd., Divine Leasing and Finance Ltd. (supra) etc cited in .....

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nt in the equity capital of the appellant company at the relevant time but also reflects that they are regular in their business activities on year to' year basis and there has been increase in their own funds ever since they made investment in the appellant company. All these companies have made substantial investments in the equity share capital of the listed as well unlisted scrips and some of them are blue chip companies. It is not the case where the equity was invested in the appellant .....

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s record. Therefore, their existence are established. Besides, they had enough resources to make the impugned investments in the relevant period. The genuineness of the transaction has also not been found contrary to the audited books of account by the assessing officer. In absence of any material contrary to the information on record, the action of the assessing officer based on surmises and conjecture while making addition u/s 68 of the Act in respect of share capital received cannot be sustai .....

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was argued cannot be said to be a factual finding warranting relief. 6. The Ld. AR filed a copy of the order of the ITAT dated 13.04.2016 in ITA No. 3053/Del/2012 and 2611/Del/2013 and others in the case of M/s Rite Pack Industries Private Ltd vs DCIT. Relying upon para 6 of the said order, it was submitted that on identical facts and circumstances the ITAT had restored the issue back to the assessing officer to pass a speaking order in accordance with law after giving the assessee a reasonable .....

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end of the assessment year concerned 31/12/07 Date of Search 31/07/08 Date of recording of satisfaction u/s 153C 21/07/10 6.1. Accordingly it was his prayer that the assessment for the AY 2005-06 was not abated [and deemed to be completed u/s 143(1)] as on the date of recording satisfaction. 7. We have heard the rival submissions and perused the material available on record. We find that though the assessee as per the chart has claimed that original return u/s 139 had been filed on 28.10.2005 a .....

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essing the departmental appeal, we deem it appropriate to set aside the impugned order following the view taken by the Co-ordinate Bench in ITA No.3053/Del/2016 & Others in the case of M/s Rite Pack Industries Pvt.Ltd. vs DCIT. We further find that whereas the AO categorically holds that apart from the Share Allotment Form nothing else was filed by the assessee despite opportunity. The CIT(A) has accepted the argument that PAN, ITRs and copies of Bank Accounts etc. were filed on 23.12.2010 b .....

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e presumably taken into consideration from the public domain and relied upon has not discussed the specifics of the evidences and the facts leading to general observations that there were sufficient funds available with the parties have not been brought out in the order. The correctness of these conclusions in the absence of discussion on facts is not possible. We further find that the facile argument advanced on behalf of the assessee that the law requires only a company to satisfy itself at th .....

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such known concerns known to the said company would operate on internal information available to them and it is generally not easily available in the public domain. Thus necessarily the shareholders are limited to persons or concerns managed by the close knit circle of family and friends of the assessee. Accordingly the benefit of arm s length distance between a shareholder of a Public Ltd. Company with the company cannot be claimed by a shareholder in a Private Ltd. Company as the shareholders .....

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