TMI Blog2016 (1) TMI 1370X X X X Extracts X X X X X X X X Extracts X X X X ..... e in the hands of the assessee buyer - Decided in favour of assessee Addition towards share capital - Held that:- Assessee had given the complete details about the share applicants clearly establishing their identity , creditworthiness and genuineness of transaction proved beyond doubt and had duly discharged its onus in full. Nothing prevented the Learned AO to make enquiries from the assessing officers of the concerned share applicants for which every details were very much made available to him by the assessee - decision of the Hon’ble Apex Court in the case of CIT vs Lovely Exports (P) Ltd [2008 (1) TMI 575 - SUPREME COURT OF INDIA] is very well founded, wherein, it has been very clearly held that the only obligation of the company receiving the share application money is to prove the existence of the shareholders and for which the assessee had discharged the onus of proving their existence and also the source of share application money received. - Decided against revenue Addition u/s 68 made in respect of allotment of shares to 20 individuals - Held that:- We find from the details available on record that the share application monies from 20 individuals in the sum of & ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d in 226 ITR 344 (Raj) and vehemently pleaded for confirmation of the order of the Learned AO. In response to this, the Learned AR vehemently supported the order of the Learned CIT(A). 2.3. We have heard the rival submissions and perused the materials available on record. The facts stated hereinabove remain undisputed are not reiterated for the sake of brevity. We find that in the case relied upon by the Learned DR in 226 ITR 344 (Raj) , it was held that even inspite of specific query, the assessee failed to point out any mistake / lacuna in ascertaining the value of the plot of land by the value. In these circumstances, the only reasonable inference that can be drawn is that the assessee has shown less amount in the account books and sale deed than the actual consideration paid. Considering the comparable cases and the facts of the case, we find no ground to interfere in the addition made u/s 69B of the Act. We find that in the case before the Rajasthan High Court relied upon by the Learned AO, the higher cost of acquisition was taken in the hands of the purchaser on the basis of the report of the Department Valuation Officer (DVO) estimating the higher fair market value of p ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e shape of determination of market value by the State Revenue authorities for the purpose of computing payment of stamp duty. Clearly, adoption of such market value cannot distract from the consideration stated in the sale deed. Even the provisions of s. 50C pressed into the service by the AO are of no avail to sustain the instant addition. The fiction created by s. 50C is for the limited purpose of computing the capital gains. It only seeks to make a special provision for determining the full value of consideration in cases of transfer of immovable properties for the purpose of s. 48. Therefore, the fictional regime of s. 50C is not available with the AO in support of his case of invoking s. 69B against the present assessee. The stand of the AO is that the actual sale consideration paid by the assessee for purchase of land is ₹ 95,46,451. The case made out by the AO is that ₹ 46,50,000 has been paid by the assessee to the sellers in question and the balance of ₹ 48,96,451 has been actually paid by the assessee to the middlemen. In fact, for having made the payment of ₹ 48,96,451 to the middlemen there is not even an iota of evidence on record except the pre ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... stamp value' in terms of section 50C, is applicable in the hands of the seller of the property who has to compute capital gains u/s 48 pursuant to the transfer of a capital asset in the nature of land or building or both. On the contrary, section 69B, which is again a deeming provision, governs the cases in which investment made by the assessee is not fully disclosed. In other words, section 69B applies to the purchaser of an asset, in contradistinction to sec. 50C, which applies to the seller of an asset. The position about the substitution of 'stamp value' with the 'consideration received' in case the latter is lower than the former, in the hands of the seller only, leaving the differential investment made by the buyer untaxed, appears to have been realized by the Parliament. That is why, the legislature in its wisdom has inserted clause (vii) to section 56(2) by the Finance (No.2) Act, 2009 w.e.f. 1.10.2009, inter alia, providing that where an individual or a Hindu undivided family receives, in any previous year, from any person or persons on or after the 1st day of October, 2009, (b) any immovable property, - (i) without consideration, the stamp duty ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 19,00,000 Long View Trade Credit (P) Ltd 10,00,000 Panoram Fiscal Services (P) Ltd 10,00,000 Tropex Suppliers (P) Ltd 10,00,000 Trade Link Carrying Co (P) Ltd 10,00,000 Belfast Engineering (P) Ltd 3,50,000 62,50,000 From Directors Shri Dilip Kumar Agarwal 7,80,000 Shri Dinesh Kumar Agarwal 26,30,000 34,10,000 Smt. Meena Devi Agarwal (Wife of Shri Dilip Kumar Agarwal -Director) 25,00,000 Total monies received during the year 1,21,60,000 The movement of share application money and share capital account during the year is as ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... c. To Directors (27,60,000 +{34,10,000 7,00,000} 54,70,000 (-)2,90,20,000 (+)2,90,20,000 Closing Balance as on 31.03.2006 32,00,000 2,91,80,000 3.1.1. From the chart, it could be seen that during the assessment year under review , the assessee was in receipt of ₹ 1,21,60,000/- towards share application money. The shares were allotted by the assessee to various parties to the tune of ₹ 2,90,20,000/- out of monies lying in the opening balance of share application money (Rs. 2,00,60,000/-) and out of monies received during the year (Rs. 1,21,60,000) , leaving a balance in share application money to the tune of ₹ 32,00,000/- at the end of the asst year under appeal.The assessee filed copies of balance sheet of 5 body corporate except Belfast Engineering (P) Ltd (Rs. 3,50,000/-) to explain that the parties had sufficient sources in their balance sheet to invest in shares of the assessee company. 3.2. The Learned AO did not raise any query regarding share application money recei ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... and the figure of ₹ 64,00,000/- calculated by the Learned AO for which the assessee could furnish the balance sheet. He observed that though the Learned AO asked the assessee to produce the share applicants, but he never exercised his authority u/s 131 of the Act to force the compliance. Moreover, when the director Shri Dinesh Kumar Agarwal was personally present before the Learned AO, the AO chose not to record any statement from him. The Learned CIT(A) further observed that in view of the complete details filed by the assessee from its side to prove the identity of share applicants, genuineness of transaction and creditworthiness of share applicants (except Belfast Engineering P Ltd ₹ 3,50,000/- ) , the decision of the Hon ble Apex Court in the case of CIT vs Lovely Exports (P) Ltd reported in (2008) 216 CTR 195 (SC) would be squarely applicable to the facts of the instant case and accordingly deleted the addition. Aggrieved , the revenue is in appeal before us on the following ground:- 2. 2nd ly the Assessing Officer made an addition of ₹ 89,60,000/- under the head fresh share capital introduced during the financial year treating it as unexplained cash c ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t decision in favour of the assessee and thus, no substantial question of law is involved in this appeal. The appeal is devoid of any substance and is dismissed. 3.4.2. In view of the aforesaid findings and respectfully following the decision of the apex court (supra) and Jurisdictional High Court (supra) , we find no infirmity in the order of the Learned CIT(A) and accordingly, the ground no.2 raised by the revenue is dismissed. 4. The last ground to be decided in this appeal of the revenue is as to whether the Learned CIT(A) is justified in deleting the addition u/s 68 of the Act made in respect of allotment of shares to 20 individuals for an amount of ₹ 57,00,000/- in the facts and circumstances of the case. 4.1. The brief fact of this issue is that the assessee had received share application monies from 20 individuals in the earlier year which were kept in share application money account. During the asst year under appeal, the assessee allotted shares to these 20 individuals out of transferring the monies from share application money account to share capital account. The details of 20 individuals are reflected in page 6 7 of the Learned CIT(A) order. The Lear ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... pported the order of the Learned AO. In response to this, the Learned AR fairly conceded to admission of this additional ground and vehemently supported the order of the Learned CIT(A). 4.4. We have heard the rival submissions and perused the materials available on record including the detailed paper book filed by the assessee. We find that the additional ground raised by the assesse separately before us vide its covering letter dated 9.12.2011 is admitted as it appears to be a genuine and bonafide error of omission on the part of the revenue from not raising this ground in the original grounds of appeal filed along with the memorandum of appeal. Moreover, it does not require any fresh examination of facts. Hence the same is admitted herein for the sake of adjudication. 4.4.1. We find from the details available on record that the share application monies from 20 individuals in the sum of ₹ 57,00,000/- has been received by the assessee during the financial year 2004-05 relevant to Asst Year 2005-06 and only the shares were allotted to them during the asst year under appeal. Admittedly no monies were received during the asst year under appeal and hence there is no scope f ..... X X X X Extracts X X X X X X X X Extracts X X X X
|
