9911796707
TMI Blog2017 (12) TMI 1574X X X X Extracts X X X X X X X X Extracts X X X X ..... er board. The return of income for the Asst Year 2014-15 was filed by the assessee on 27.11.2014 disclosing total income of Rs Nil. During the year under review, the assessee had received equity share capital with share premium from the following shareholders :- Sr. No. Name of the Allottee PAN No. of Shares Allotted Face Value @ Rs. 10/- Premium @ 50/- Total (Rs. 60/- per share) 1 Apex Tradexim Pvt. Ltd. AAGCA8097 C 2,70,0000 2,70,0000 13,500,000 16,200,000 2 Bansi Dealcom Pvt. Ltd. AAECB1132 B 20,000 200,000 1,000,000 1,200,000 3 Epson Electronics Pvt. Ltd AABCE4985 E 3,750 37,500 187,500 225,000 4 Extreme Tieup Pvt. Ltd. AACCE0207 G 12,500 125,000 625,000 750,000 5 RBM Impex Pvt. Ltd. AADCR6957 Q 411,250 4,112,500 20,562,500 24,675,000 6 Siksha Dealtrade Pvt. Ltd. AAQCS 7851 L 17,500 175,000 875,000 1,050,000 TOTAL 735,000 7,350,000 36,750,000 44,100,000 Further the assessee company received preference share capital during the year under review from Apex Tradexim Pvt Ltd. The assessee allotted 615000 preference shares @ Rs. 100 per share to the said shareholder. 3.1. To ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 00 3,000,000 Rajesh Kumar Singhania 1,330,000 13,300,000 66,500,000 79,800,000 The ld AO perused the documents submitted by the assessee in detail and thereafter issued summons u/s 131 of the Act dated 18.11.2015 to the directors of the above companies to appear personally and give complete details of investemtn in the shares of assessee company. The said summon was duly complied with by the parties concerned and all the related documents with regard to the investment in the assessee company in Asst Year 2013-14 were submitted. The ld AO independently examined the documents submitted by the assessee and the share applicant companies in detail and found no discrepancy with regard to the identity, creditworthiness of the parties and genuineness of the share allotment made during the year. The assessment for the Asst Year 2013-14 was completed u/s 143(3) of the Act on 26.3.2016 and no addition towards share capital was made u/s 68 of the Act by the ld AO, though the same was passed subsequent to the survey operations conducted on 29.7.2015. 3.4. Further even in Asst Year 2012-13, the assessee allotted 1522300 equity shares to the following shareho ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... entioned in his assessment order directly that no opportunity of cross examination need to be given as the directors of the share applicant companies had filed the retraction affidavit before the ld AO. The assessee came to know of the retraction affidavits filed by the directors of the share applicant companies only from the observations made in the assessment order and accordingly made a request to the ld AO seeking for certified copies of the said affidavits vide its letter dated 3.1.2017 filed on 5.1.2017, which were furnished to the assessee by the ld AO vide letter dated 19.1.2017 (i.e after the completion of assessment for the Asst Year 2014-15 on 29.12.2016). 3.7. The ld AO again recorded the statement of Jaswant Kumar Nangalia and Brij Mohan Nangalia (directors of share subscribing companies) on 16.12.2016 when they appeared in person in response to summons issued u/s 131 of the Act, wherein they were asked the reason behind investment in assessee company. In response, both the parties had stated that their companies invested in the assessee company keeping in mind the growth and future prospects of the company. In this regard, the assessee submitted that the profits in t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... pplicant companies had furnished the source of funds before investing in the share capital of the appellant. 3. That the Ld. CIT(A) further erred in having upheld the addition of Rs. 10,56,00,000/- on the basis of alleged statements by the directors of different companies before the DDIT(Inv.) and completely ignored the fact that the statements recorded by the deponents were retracted, leading the entire exercise made by DDIT(Inv.) to a nullity. 4. That the Ld. CIT(A) erred in not having considered that the addition made by the AO on the basis of cash trail assumed by him was totally unfounded and baseless inasmuch as the figures shown were imaginary and not as per records and furthermore the entire transactions mentioned in the cash trail were through banking channel and no cash was deposited in the bank account and they were not related parties to the appellant. 5. That on the facts and circumstances of the case, the Ld. CIT(A) erred in upholding the addition of Rs. 10,56,00,000/- on account of share capital raised by the appellant as unexplained income u/s 68 of the Act in spite of that conditions precedent to invoke the said section have not been satisfied in the instant ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... erest payable on its long term borrowings, the assessee sought to receive equity and preference share capital from its existing shareholders of the company. Accordingly it received equity share capital at premium of Rs. 50 per share (face value Rs. 10 per share) to the une of Rs. 7.98 crores from the shareholders as stated above during the Asst Year 2013-14. The assessee company also received equity share capital at premium of Rs. 50 per share to the tune of Rs. 4.41 crores during the Asst Year 2014-15 (i.e the year under appeal) from its existing shareholders and a new shareholder. The only new shareholder from whom share capital and premium was received to the tune of Rs. 12 lacs during the year under appeal was from M/s Bansi Dealcom Pvt Ltd (PAN - AAECB1132B). The details of parties from whom monies were received are as follows:- Sr. No. Name of Allottee No of Shares Allotted in A Y 2014-15 No. of Shares Allotted in A Y 2013-14 No. of Shares Allotted in A Y 2012-13 1 Apex Tradexim Pvt. Ltd. 270,00 885,000 160,000 2 Bansi Dealcom Pvt. Ltd. 20,000 3 Epson Electronics Pvt. Ltd. 3,750 50,000 4 Extreme Ti-up Pvt. Ltd. 12,500 40,000 10,00 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... E) The premium has been duly justified by an independent share valuation done by a Chartered Accountant in terms of Rule 11UA of the Income Tax Rules who had certified the value per share at Rs. 67.78 , whereas the assessee company had issued shares only at Rs. 60 per share ( enclosed in page 202 of the paper book which is part of the reply letter dated 19.9.2016 filed before the ld AO during the scrutiny proceedings for Asst Year 2014-15) . F) One of the main contentions of the ld AO for framing the addition towards share capital was due to the fact that in the post survey proceedings, the shareholders had given a statement u/s 131 of the Act wherein they had stated that the entire share capital given to Krishna Tissues group of companies are merely accommodation entries. But these statements had been immediately retracted within one or two days from the date of giving statement by way of an Affidavit explaining the circumstances in which the statements were recorded by the DDIT(Inv.). The ld AO was well aware of these initial statements and subsequent retractions while completing the scrutiny assessment for the Asst Year 2013-14. As stated above, the ld AO even examined the s ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... y Public at Bidhannagar Court. H) The Directors of the share applicant companies in response to summons issued u/s 131 of the Act had responded vide reply letter dated 16.12.2016 filed on 16.12.2016 for the Asst Year 2014-15 as under:- a) Copy of the PAN Card . b) Hard Copy of the ITR for the Asst Year 2014-15. c) Computation of Income for the year ended 31.3.2014. d) Copy of the Profit and Loss Account along with copy of Balance Sheet for the year ended 31.3.2014. e) Since the concerned director had no transactions with the assessee company in his individual capacity, he stated that there is no question of furnishing his relevant bank statement. f) Copy of the Company's PAN Card. g) Hard Copy of the Company's ITR for the Asst Year 2014-15. h) Computation of income of the company for the year ended 31.3.2014. i) Copy of the Profit and Loss Account and Balance Sheet of the Company for the year ended 31.3.2014. j) Copy of the relevant bank statements for the Asst Year 2014-15 of the company in connection with share application money made for equity shares and preference shares in assessee company. k) Copy of affidavit made before the Notary of Bidhannagar Cour ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the assessee company. 5.3. We find that Mr Brij Mohan Nangalia and Mr Jaswant Kumar Nangalia had during the course of assessment proceedings had given a statement before the ld AO in person wherein they had accepted to the fact that their respective companies had invested in the share capital of the assessee company and had also retracted from the statements recorded by the DDIT(Inv.). They had also stated the reasons as to why the statements recorded by the DDIT(Inv.) could not be relied upon in the form of an affidavit stating that it had been obtained by coercion. Except the statement recorded u/s 131 of the Act, the ld AO does not have any corroborative evidence to come to a conscious conclusion that the receipt of share capital by the assessee is bogus , more so in the light of his decision taken for the immediately preceding asst year 2013-14 wherein the receipt of share capital and share premium from very same shareholders were accepted by the ld AO in the section 143(3) proceedings after due examination of the same. The directors of the share applicant companies had proved with supporting evidences that the contents of their statement were not true and as such the same can ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... cases that by mere rejection of the explanation of the assessee, the character of a particular receipt as income could be said to have been established ; but where the circumstances of the rejection were such that the only proper inference was that the receipt must be treated as income in the hands of the assessee, there was no reason why the assessing authority should not draw such an inference. Such an inference was an inference of fact and not of law. It was further observed that in determining whether an order of the Tribunal would give rise to a question of law the Court must read the order of the Tribunal as a whole to determine whether every material fact, for and against the assessee, had been considered fairly and with due care; whether the evidence pro and con had been considered in reaching the final conclusion ; and whether the conclusion reached by the Tribunal had been coloured by irrelevant considerations or matters of prejudice. It was further reiterated that the previous decisions of this Court did not require that the order of the Tribunal must be examined sentence by sentence through a microscope as it were, so as to discover a minor lapse here or an incautious o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nts of section 68 of the Act are duly fulfilled in the instant case which is not so in the case before the Hon'ble Calcutta High Court. Hence the reliance placed on the said decision by the ld DR does not advance the case of the revenue as it is factually distinguishable as explained above. 5.7. We find that the preference capital to the tune of Rs. 6.15 crores has been received by the assessee company at par during the year under appeal from its existing shareholder only and hence the findings given hereinabove for receipt of equity capital would apply with equal force for preference capital also. 5.8. Moreover, we find that the statements recorded by the DDIT(Inv.) from the directors of the share subscribing companies had lost its evidentiary value in as much as the ld AO had recorded further statement from the very same directors during the course of assessment proceedings. Hence the ld AO ought not to have placed any reliance on the statements recorded by DDIT(Inv.) which is not supported by any other corroborative evidences. 5.9. We find that the reliance placed by the ld AR on the decision of the Hon'ble Delhi High Court in the case of Pr.CIT vs Laxman Industrial Resources ..... X X X X Extracts X X X X X X X X Extracts X X X X
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