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TMI Blog2016 (11) TMI 1235X X X X Extracts X X X X X X X X Extracts X X X X ..... 00/- made by the Assessing Officer under section 68 of the Income Tax Act, 1961." 3. At the time of hearing before us, it is submitted by the learned DR that during the accounting year relevant to assessment year under consideration, the assessee company has raised the share capital of Rs. 4 crores by issuing the share of Rs. 100/- each at a premium of Rs. 39,900/- per share. That the assessee is a private limited company and there cannot be any justification for such a huge premium. That M/s Adhyay Equi Pref Pvt.Ltd. (hereinafter referred to as 'AEPPL') claimed to have acquired such shares from the assessee by investing huge sum of Rs. 4 crores just for 1,000 equity shares of Rs. 100/- each. The assessee could not give any satisfactory explanation for such a high premium. That on investigation of bank account of AEPPL, it is noticed that there was a meager balance in the bank account on the date of issue of Rs. 4 crores to the assessee. There has been credit of Rs. 12 crores on the same day against which cheques to the assessee and two other entities were issued. On these facts, the Assessing Officer rightly treated the credit of Rs. 4 crores as unexplained and made the addition ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... h has mainly been invested in shares. He further pointed out that the credit in the account of AEPPL on the date of issue of cheque and other concern was out of the sale proceeds of shares of another company. Thus, AEPPL has sold the shares of some other companies and invested in the assessee and two other concerns. He also referred to the income tax returns of AEPPL, copy of which is placed at page 161 of the assessee's paper book. He further referred to the certificate of incorporation of AEPPL and pointed out that the said company is in existence since 1994 and is regularly investing in the shares of various companies. He, therefore, submitted that the assessee has duly established the identity, creditworthiness and genuineness of transactions of AEPPL. 5. We have carefully considered the submissions of both the sides and have perused the material placed before us. Admittedly, the onus is upon the assessee to prove the credit in its books of account whether by way of loan or share capital. To discharge such onus, the assessee has to establish the identity and creditworthiness of the shareholder and the genuineness of the transaction. In this case, there is no dispute with regar ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the creditworthiness of the share applicants would have been apparent. Even otherwise, the share applicants' particulars were available with the AO in the form of balance sheets income tax returns, PAN details etc. While arriving at the conclusion that he did, the AO did not consider it worthwhile to make any further enquiry but based his order on the high nature of the premium and certain features which appeared to be suspect, to determine that the amount had been routed from the assessee's account to the share applicants' account. As held concurrently by the CIT (Appeals) and the ITAT, these conclusions were clearly baseless and false. This Court is constrained to observe that the AO utterly failed to comply with his duty considers all the materials on record, ignoring specifically the most crucial documents. We place these observations on the record and direct a copy of the judgment to be furnished to the concerned income tax authorities for appropriate action towards reflecting these observations suitably in service record of the concerned AO to avoid such instances in the future. 7. For the above reasons, this Court is of the opinion that the concurrent findings of fact, as ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... y. The assessee company along with other four investment companies is holding major equity stakes in the operating companies of the Uflex Group and even in some cases holding 100% equity shares. These five companies including the assessee company are further shareholder in each other and holding almost 97 to 98% of shares holding in each other. The remaining shareholders are the individual promoters and outside shareholders. Since all these investment companies are cross holding the shares of each other, hence any outsider by becoming shareholder in any of these companies also automatically becomes the shareholder in the other four companies. In nutshell, if a person becomes shareholder in the assessee company, it automatically becomes shareholder in the remaining four holding companies. He further submitted that if the net book value of the assets is divided by the number of shares of the assessee company, the worth of each share is more than Rs. 40,000/-. In this regard, he furnished the following working:- Amount in Lac As on 31st March 2009 2009 2008 Total Assets : 7890.06 9819.24 Less : Liabilities Secured Loans 1806.25 1604.27 Unsecured Loans 1806.25 1604.27 Boo ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of hearing before us, the limited argument made by the learned counsel was that the assessee had made the investment in the shares of other group companies to acquire controlling interests in those companies. No investment was made for earning of exempt income. That various Benches of the ITAT have taken the view that where the investment has been made for acquiring the controlling interests in the group companies, then the disallowance cannot be made u/s 14A. He also stated that no expenditure was incurred by the assessee for earning of exempt income because no borrowed money was invested and moreover, it is a permanent investment in the few group companies. Thus, no expenditure was incurred. Learned DR stated that no such claim was made before the Assessing Officer. All these aspects would require verification at the end of the Assessing Officer. He, therefore, submitted that on this issue, the matter may be set aside to the file of the Assessing Officer. Learned counsel for the assessee has no objection to this suggestion of learned DR. 13. In view of the above, we set aside the orders of authorities below on this point and restore the matter to the file of the Assessing Office ..... X X X X Extracts X X X X X X X X Extracts X X X X
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