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Hemkunt Investments Ltd. Versus ITO, Ward 12 (3) , New Delhi

2017 (11) TMI 965 - ITAT DELHI

Loss on sale of shares - addition u/s. 68 on account of bogus sale of shares - Held that:- AO observed that it is clear that the assessee company debited the sum of ₹ 1580705/- to the P&L account with an intention to adjust the income accrued to it from the Service Receipts during the year. AO after examination of all the facts held that the loss amounting to ₹ 15,80,705/- on the alleged sale of the shares to such farmers was booked and cash amounting to ₹ 5,60,000/- was introd .....

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,000/- falsely shown as sale consideration has been rightly treated as unexplained cash credit, hence, Ld. CIT(A) has rightly upheld the addition made by the AO, which does not need any interference on our part, therefore, we uphold the same and reject the ground no. 1 to 3 raised by the assessee. - Addition on account of share application money - Non genuineness of transaction - Held that:- Although, the assessee has been able to indicate that M/s Silverline Appliance Ltd. had entered the t .....

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ion money was claimed to have been returned to the appellant company does not appear to be a reliable document. There are no signatures of any person and the acknowledgment part is totally blank. The AO's conclusion that there was never a transaction and this was only a squared up cash account of unexplained cash introduced sounds totally feasible. Hence, Ld. CIT(A) felt that the genuineness of the transaction was proved and the AO has rightly treated it as unexplained cash credit and confirmed .....

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ing corresponding expenditure lies with the assessee. In the absence of any such execution of responsibility, the AO left with no choice but to apportion the expenditure on estimate basis. Therefore, in this case the AO has very reasonably and scientifically worked out the proportion of the business receipts vis--vis, the exempted income and then applied that ratio to the expenditure, hence, he rightly affirmed the addition, which does not need any interference on our part - Decided against ass .....

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e Ld. CIT(A) has erred in law in confirming the disallowance of loss as sale of shares of ₹ 15,80,705/-. 2. On the facts and in the circumstances of the case, returned included loss on sale of shares of ₹ 15,80,705/-. During the course of assessment proceedings, on being enquiry made by the AO, the details of the persons to whom the shares were sold and the mode of receipt of the consideration has been furnished. Further, the assessee has brought on record affidavits from the purchas .....

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affidavits and identification papers in the form of copies of-Election Commission Card etc. c) Everyone has confirmed having made investment in purchase of shares. d) Some of the persons who has not disclosed the names of their relatives, only to avoid harassment by the Income Tax Authorities. On the facts and in the circumstances of the case, the assessee has proved genuineness of the transactions and the disallowance of the loss of ₹ 15,80,705/- deserves to be fully deleted. 5. The Ld. .....

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. The confirmation of the receipt of share application has been filed. M/s. Silverline Appliances Ltd. is an Income-Tax assessee and his Permanent Account Number has also been filed. The addition of ₹ 75,000/- is unjustified and illegal. 7. The Ld. CIT(A) has erred in confirming the disallowance of an amount of ₹ 28,938/- out of establishment expenses on proportionate basis by applying the provision of Section Income Tax Act, 1961 no method of apportionment is prescribed under sectio .....

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case of the assessee was picked up for scrutiny assessment. Accordingly, Notice u/s. 143(2) of the Act dated 28.10.2002 was issued and in response to the said notice the A.R. of the assessee and the employee of the assessee attended the proceedings from time to time and filed necessary details. Books of accounts and vouchers were produced and examined on test check basis. During the year under reference the assessee company was engaged in the dealing / trading in shares and securities and rende .....

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eness of the transactions of the sale of the shares and the alleged resulted loss, the assessee company was asked to furnish the details of the persons to whom the said shares were sold and what was the mode of receipt of the sale consideration. It was stated that the sale consideration was received in cash from the individuals who had purchased the alleged shares from the assessee. Further, the assessee brought on record affidavits from the individuals in support of its claim of shares sold to .....

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f the confirming party has been furnished in support of the immediate source of the funds. In view of the above, AO observed that it is clear that the assessee company debited the sum of ₹ 1580705/- to the P&L account with an intention to adjust the income accrued to it from the Service Receipts during the year. Secondly, the unexplained cash credit of ₹ 75000/- was given the color of share application money. These were the willful attempts on the part of the assessee to reduce i .....

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see found to be correct has been totally ignored and additions made are based merely on surmises and conjectures. He further stated that during the course of assessment proceedings, on being enquiry made by the AO, the details of the persons to whom the shares were sold and the mode of receipt of the consideration has been furnished. Further, the assessee has brought on record affidavits from the purchasers of the shares. The parties were agriculturists, individuals and none of them were income .....

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ommission Card etc.; c) Everyone has confirmed having made investment in purchase of shares; d) Some of the persons who has not disclosed the names of their relatives, only to avoid harassment by the Income Tax Authorities. Ld. Counsel of the assessee further stated that Ld. CIT(A) has erred in applying the provisions of Section 68 of the Income Tax Act 1961 to the cash receipt of sale of shares ₹ 5,60,000/-. It was further stated that Ld. CIT(A) has erred while confirming the addition mad .....

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proportionate basis by applying the provision of Section 14A of the Income Tax Act, 1961 no method of apportionment is prescribed under section 14 of the Income Tax Act, 1961, disallowance of ₹ 28,938/- is arbitrary and needs to be deleted. 5. Ld. DR relied upon the orders of the authorities below and in support of his contention, he filed the Written Submission in the case. For the sake of convenience, we are reproducing the contents of the Written Submission filed by the Ld. DR as under .....

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Service Receipt' of ₹ 17,29,000/-. (2) The assessee was asked to furnish the detail of the persons to whom shares were sold. It was also asked to furnish about the mode of receipts against such sale. (3) In response, the assessee furnished the requisite detail which has been reproduced by the AO at page 2&3 of the assessment order. (4) All receipts against the sale are claimed to be received in cash. (5) The appellant had also furnished the copy affidavits from the persons to whom .....

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r. The Dy. DIT at Bhatinda got the local enquiry done through Income Tax Inspector who recorded the statement of the following persons: i). Sh. Rajinder Singh S/o Sh. Ajmer Singh ii) Sh. Kaur Sigh S/o Sh. Amar Singh iii) Sh. Gurdas Singh S/o Sh. Kartar Singh iv) Sh. Dharminder Sigh S/o Sh. Gurdeep Singh v) Sh. Gurdeep Singh S/o Sh. Janrail Singh vi) Sh. Sham Sunder S/o Sh. Teja Ram vii) Sh. Baljeet Singh S/o Sh. Ajmer Singh viii) Sh. Amarjeet Singh Sfo Sh. Bagga Singh ix) Sh. Surinder Singh S/o .....

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sically villagers and farmers and they don't know about investment in shares. (8) The report and statement recorded by the Investigation Wing Patiala were forwarded to the AR of the appellant, but he could not submit anything concrete against the above finding. (9) Value of shares of M/s Pentagon Screw Fastener Ltd. as determined by the assessee company vide letter dt. 27.01.2004 was at ₹ 1.06 against the sale price of ₹ 2.50 per share whereas value of shares of Ms PSB Finance an .....

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d on the ratio pronounced by the Hon'ble Supreme Court in the case of Sumati Dayal Vs. CIT 214 ITR 801 (Copy Enclosed) is very much relevant to this issue that the matter must be looked into from the angle of human probabilities. (10) Another sister concern of the assessee company M/s Hemkund Construction Ltd. has purchased shares of the same company i.e. M/s Pentagon Screw Fastener Ltd. during the same period at ₹ 10/- per share whereas the assessee company claimed to sale the same sh .....

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le consideration of shares at ₹ 5,60,000/-. Thus, Ld. AO has rightly added this amount uls 68 of the I T Act to the total income of the assessee. (13) Ld. CIT(A) afforded more than 15 opportunities to the appellant company within the time span of more than two year to substantiate its appeal but the appellant miserably failed to do so. (14) Neither before Ld. AO nor before CIT(A) the appellant could established the identity and creditworthiness of buyers and genuineness of transaction. (8) .....

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ly blank. (4) Ld. AO has rightly added this amount uls 68, which has further upheld by the CIT(A). (C) Grounds of Appeal 5 : Disallowance u/s 14A. (1) The appellant has shown dividend income of ₹ 4,51,337/- which is claimed to be exempt from tax and which constitutes 20.67% of total receipt. (2) It is settled law that no income can be earned without any expenditure. Since, the appellant had not made any disallowance against this income, the Ld. AO rightly estimated the disallowance in prop .....

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taxmann.com 292, 214 Taxman 429, 350 ITR 407, 256 CTR 34) (Copy Enclosed). where Hon'ble Delhi High Court held that where assessee failed to prove identity and capacity of subscriber companies to pay share application money, amount so received was liable to be taxed under section 68. It would not be correct to state that AO should get the addresses from Registrar of Companies Website or search for the addresses of the shareholders of the company with them. Similarly, Credit Worthiness was no .....

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see from accommodation entry providers in garb of share application money, was to be added to its taxable income under section 68. 6. We have heard both the parties and perused the records, especially the impugned order. With regard to ground no. 1 to 3 relating to disallowance of loss of ₹ 15,80,705/- claimed by the assessee on account of sale of shares addition of ₹ 5,60,000/- u/s. 68 of the I.T. Act on account of bogus sale of shares is concerned, we find that during the assessmen .....

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nted the loss on the sale of shares as per details given at page no. 1 of the assessment order dated 26.3.2004. In order to verify, the genuineness of the transactions of the sale of the shares and the alleged resulted loss, the assessee company was asked to furnish the details of the persons to whom the said shares were sold and what was the mode of receipt of the sale consideration. It was stated that the sale consideration was received in cash from the individuals who had purchased the allege .....

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of the shares was furnished with the affidavits and none of the individuals were income tax assesses and neither the bank account statement of the confirming party has been furnished in support of the immediate source of the funds. In view of the above, AO observed that it is clear that the assessee company debited the sum of ₹ 1580705/- to the P&L account with an intention to adjust the income accrued to it from the Service Receipts during the year. AO after examination of all the fa .....

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The loss of ₹ 15.80 lacs claimed is not admissible also on account of provisions of Explanation to section 73 of the Income Tax Act. The receipts shown on sale of shares, the amount of ₹ 5,60,000/- falsely shown as sale consideration has been rightly treated as unexplained cash credit, hence, Ld. CIT(A) has rightly upheld the addition made by the AO, which does not need any interference on our part, therefore, we uphold the same and reject the ground no. 1 to 3 raised by the assesse .....

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ce there were too many discrepancies involved. In the appeal, the assessee contended that the party making payment of share application was an income-tax assessee and had recorded the transaction in its books. Confirmations were filed along with copies of accounts. During the appellate proceedings, the AO in his report has indicated that MIs Silver line Appliances had received cash to the tune of RS.6 lacs before subscribing for share application in cash. Although, the assessee has been able to .....

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8.3.2001 through which the alleged cash of the share application money was claimed to have been returned to the appellant company does not appear to be a reliable document. There are no signatures of any person and the acknowledgment part is totally blank. The AO's conclusion that there was never a transaction and this was only a squared up cash account of unexplained cash introduced sounds totally feasible. Hence, Ld. CIT(A) felt that the genuineness bf the transaction was proved and the AO .....

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