TMI Blog2018 (10) TMI 855X X X X Extracts X X X X X X X X Extracts X X X X ..... appears to have stressed on the fact that the impugned share holders has shown meager income in their return of income. The income/losses declared by the investor companies is not a sole criterion to examine the creditworthiness of the shareholders. None of the authorities below have brought any material on record to falsify the fund flow shown in the bank statements of creditors filed by the assessee. Disallowance u/s. 24(a) - Held that:- The averment of the assessee has been that it was due to some calculation error at the end of AO. CIT(A) has also not given any cogent reasoning on this issue. AO is directed to verify the claim of assessee and to give benefit thereof, if found admissible under law. - ITA No. 1122/Del/2014 - - - Dated:- 11-10-2018 - Shri Bhavnesh Saini, Judicial Member And Shri L.P. Sahu, Accountant Member For The Appellant : Sh. Ashwani Taneja, Advocate And Sh. Saurabh Goyal, CA For The Respondent : Sh. Surender Pal, Sr. DR ORDER Per L.P. Sahu, A.M.: This is an appeal filed by the assessee against the order of ld. CIT(A)-XVII, New Delhi dated 06.12.2013 for the assessment year 2008-09 on the following grounds : 1. Tha ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... accommodation entries through various companies run by him. The Assessing Officer noticed that during this year, the share capital of assessee was increased by ₹ 3,00,000/-(actual amount ₹ 2,75,000/-) and the assessee had received share premium of ₹ 1,07,25,000/- from such companies run by Shri Tarun Goel, who was indulged in providing accommodation entries. Therefore, the assessee was required to justify the claim by explaining the nature and source of the money received as share premium. As per assessment order, the assessee, in compliance to various notices, filed details of the credit alongwith supporting evidences before the Assessing Officer. The Assessing Officer issued notices u/s. 133(6) to share subscribers, which stood responded with confirmation of the transactions. However, the Assessing Officer made the addition of ₹ 1,07,25,000/- on account of unexplained share premium received on the sole ground that the assessee failed to produce the share applicants before him for statements. On the basis of same facts and reasoning, the Assessing Officer also made addition of ₹ 42,60,340/- on account of unexplained unsecured loan received from M/s. D ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ed by Ld. A.O. Adverse observations of Ld. CIT(A) are met as under:- 1. Ld. CIT(A) has relied upon various case laws without showing as to how those judicial decisions are applicable to the facts of the assessee s case. 2. Ld. CIT(A) has mentioned in Para 8.11 , 8.12 , 8.13 8.14 at Page 16 17 of the appeal order that enquiries conducted by Ld. A.O. establish that identity and creditworthiness of four companies were not proved and the genuineness of the transaction was not established and summons were issued but no one from these companies made appearance and that four companies could not be located at the address 13/34, WEA, 4 Floor, Main Araya Samaj Road, New Delhi and that persons giving loans were showing meager income and insufficient cash and the transactions were not through undisputed banking channels and no bank account of the appellant was submitted and that these companies were of Mr. Tarun Goyal who was proved accommodation entries provider and the directors of all these companies were working in his office as peons. In, rely it is respectfully submitted that above mentioned pages of the paper book establish the necessary ingredients, more so when in rema ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... at the cheques received for share capital were the same for the share premium also and when the share capital has been accepted, there is no justification not to accept share premium. Having income and making investment may be different as investment is made out of fund flow, which has been admitted by Ld. CIT(A) herself that investment are made out of deposits. In fact above mentioned evidences clearly establish the necessary ingredients of section 68. Reliance is placed on the following judicial decisions:- CIT vs. Goelsons Golden Estate (P) Ltd. (DHC) in ITA no. 212/2012 reproduced as under:- We have examined the said contention and find that the assessee during the course of assessment proceedings has filed confirmation letters from the companies, their PAN number, copy of bank statements, affidavits and balance sheet. Thereafter the Assessing Officer had asked the assessee to produce the said Directors/parties. Assessee expressed its inability to produce them. The Assessing Officer did not consequent thereto conduct any inquiry and closed the proceedings. This is a case where the Assessing Officer has failed to conduct necessary inquiry; verification and deal with ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ted by the Tribunal-No substantial question of law arises. COMMISSIONER OF INCOME TAX IV vs. FAIR FINVEST LTD in ITA 232/2012 dated 22.11.2012 (DHC) The Commissioner of Income Tax vs. Goa Sponge and Power Ltd., Tax Appeal No. 16 OF 2012 dated 13th February, 2012 in High Court of Bombay at Goa. ACIT vs. Panchanan International (P) Ltd. in ITA No.50/Del/2011 dated 23.11.2012 Further reliance is placed on the decision in the case of CIT vs. Nipuan Auto Pvt. Ltd in ITA 225/2013 dated 30.04.2013 (DHC). CIT vs. Dwarkadhish Investment Pvt. Ltd. (2011) 330 ITR 298 Income-Cash credit-Share application money-Though in s. 68 proceedings, the initial burden of proof lies on the assessee yet once he proves the identity of the creditors/share applicants by either furnishing their PAN or income-tax assessment number and shows the genuineness of transaction by showing money in his books either by account payee cheque or by draft or by any other mode, then the onus of proof would shift to the Revenue-Just because the creditors/share applicants could not be found at the address given, it would not give the Revenue the right to invoke s. 68-Revenue has all the power and wherewithal ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e identity of the creditor and the genuineness of transaction through account payee cheque has been established. GROUND NO.2 it relates to the addition of ₹ 42,60,340/- on account of unsecured loans. Ld. A.O. has discussed this issue at Page-2 of the assessment order whereas Ld. CIT(A) has discussed this issue at Page 19-21 of the appeal order. PB 175- 184 are the submissions before Ld. CIT(A) submitting that the loan was received from the sister company through banking channel and confirmed by the lender and relying upon various pages of the paper book and case laws which are hereby also relied upon. Ld. A.O. without any basis or material has given this finding that the loan was from the company pertaining to Mr. Tarun Goel and it may please be seen that this is only surmises and conjecture and no basis has been mentioned. Ld. CIT(A) has also mentioned nothing to reject the evidences filed by the assessee and has held that the lender company was showing loss and yet advancing ₹ 42,60,340 as loan. This is based on surmise and conjectures as the evidences placed by the assessee and mentioned at PB 175-176 clearly show the necessary ingredients of genu ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 68 of the Act, where any sum is found credited in the books of the assessee maintained for any previous year, and the assessee offers no explanation about the nature and source of the same or the explanation offered by him is not satisfactory in the opinion of the Assessing Officer, the sum so credited may be charged to income tax as the income of the assessee of that previous year. A bare perusal of above section makes it clear that the basic precondition for invocation of section 68 is that there should be absence of explanation of assessee as to the source and nature of credit and the dissatisfaction of the Assessing Officer as to the credibility of assessee s explanation, if furnished by him. The factual matrix of the present case, if examined on the anvil of above section, we find that the assessee, in order to discharge the onus cast upon him by this section, has furnished explanation before the Authorities below as to the nature and source of credits, being share application money received from different companies, and unsecured loan received from M/s. Derma Care India Ltd. whose details were also filed before the authorities below. A perusal of the impugned order shows tha ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... en a presumption can be raised that the amounts were received as share application money instead of loans or credits, however, in this case, these amounts are received as share capital and shares were allotted to those companies. It is also true that those companies also reflected the investments and shown the amounts invested in assessee-company in its Balance Sheets. However, AO instead of enquiring with those companies, simply drew presumptions which are not based on any facts. If he is doubting the extent of premium as well as receipt of moneys, he should enquire from those companies or at least record some statements from those parties so as to examine the very nature of the transaction. Nothing was done by the AO. 7.1. Co-ordinate Bench in the case of M/s. Green Infra Ltd., in ITA No. 7762/Mum/2012 dt. 23-08-2013, has considered similar treatment of share premium of ₹ 47,97,10,000/- on the issue of equity shares to the shareholders as income of that assessee. The ITAT considered the issues which are similar to the present case and held as under: 10. We have considered the rival submissions and carefully perused the orders of the lower authorities and the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t: 56.1. Income from other Sources Income of every kind which is not to be excluded from the total income under this Act shall be chargeable to income-tax under the head Income from other sources , if it is not chargeable to income-tax under any of the heads specified in section 14, items A to E. 10.3. A simple reading of this section show that income of every kind which is not to be excluded from the total income shall be chargeable to income tax. The emphasis is on that income of every kind , therefore, to tax any amount under this section, it must have some character of income . It is a settled proposition of law that capital receipts , unless specifically taxed under any provisions of the Act , are excluded from income. The Hon ble Supreme Court has laid down the ratio that share premium realized from the issue of shares is of capital in nature and forms part of the share capital of the company and therefore cannot be taxed as a Revenue receipt. It is also a settled proposition of law that any expenditure incurred for the expansion of the capital base of a company is to be treated as a capital expenditure as has been held by the Hon ble Supreme Court in the ca ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 8% of the share is held by IDFC Private Equity Fund-II which is a front manager of IDFC Ltd., and the contributors in IDFC Private Equity Fund-II are LIC, Union of India, Oriental Bank of Commerce, Indian Overseas Bank and Canara Bank which are public sector undertakings. 11.2. Now the only point of dispute is the nature of transaction which according to the Revenue authorities is beyond any logical sense and which is the charging of share premium at the rate of ₹ 490/- per share. According to the Revenue authorities this is a sham transaction. So far till now, we have seen and examined the sources of funds. Let us see the application of funds and who are the ultimate beneficiaries of this share premium which may clear the clouds over the transaction alleged to be a sham. We find that the assessee company has invested funds in its three subsidiary companies namely (i) Green Infra Corporate Wind Ltd. (ii) Green Infra Wind Assets Ltd and (iii) Green Infra Wind Farms Ltd., wherein the assessee is holding 99.88% of share capital which means that the funds have not been diverted to an outsider. This clears the doubt about the application of funds and the credibility of the c ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... by the Coordinate Bench in the case of M/s. Green Infra Ltd., in ITA No. 7762/Mum/2012 dt. 23-08-2013 (supra), we have no hesitation in holding that the orders of the AO and CIT(A) are bad in law. In view of this, we delete the addition so made by AO and confirmed by CIT(A). 10. Apart from the above, the assessee also filed following documents pertaining to the share holders before the ld. Authorities below : (i). Confirmations of all the investor companies confirming the fact of subscription of assessee s shares, which contained the following details : Shareholder No. of shares of ₹ 10/- each at a premium of ₹ 390/- per share Amount Bank through which payment made. M/s. Bhawani Portfolio P. Ltd. 6,250 25,00,000 HDFC Bank Karol Bagh, New Delhi M/s. Thar Steels (P) Ltd. 5,000 20,00,000 --------do------- M/s. Campari Fiscal Services P. Ltd. 8,750 35,00,000 --------do------- ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... In the opinion of this court, taking into account the concurrent findings of fact recorded by the Commissioner (Appeals) and the Tribunal, it cannot be said that the conclusion arrived at by the Tribunal is, in any manner, contrary to the record or that the same suffers from any legal infirmity so as to give rise to any question of law, much less a substantial question of law warranting interference. In such view of the matter, in our considered opinion, the dissatisfaction of the Assessing Officer cannot be sustained only on the basis of suspicion. 12. A perusal of the assessment order further reveals that the Assessing Officer has laid emphasis only and only on the reason that the assessee failed to produce the shareholders for statement. There is no reference of any enquiry to doubt the evidences submitted by the assessee nor is there any cogent material on record to discard the same. The Assessing Officer has also not bothered to enforce the presence of creditors by issuing summons u/s. 131 despite specific request therefor as contended by the ld. AR. We, accordingly are not inclined to support the orders of the authorities below. 13. ITAT, Delhi Bench-F in Prinku ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... er pointing out all these defects, the ld. CIT(A) directed the Assessing Officer to file its remand report. However, on perusal of the remand report, we find that none of the above defects, stand meet out in the remand report. The Assessing Officer has only referred to some ITI report stating that none of the four companies were found in existence. The remand report further categorically speaks that the Assessing Officer needs 30 days more time to conduct deep enquiry from the Assessing Officers of various companies regarding the transactions made, but the ld. CIT(A) in the impugned order sustained the addition, without giving any further time to the Assessing Officer sought for making proper enquiries. Such conclusion of the ld. CIT(A), in our considered opinion, is not sustainable, which appears to have been reached on the basis of some alleged enquiries in other cases or with reference to the general statement of Shri Tarun Goel. 15. The ld. CIT(A) appears to have stressed on the fact that the impugned share holders has shown meager income in their return of income. In our opinion, the income/losses declared by the investor companies is not a sole criterion to examine the cr ..... X X X X Extracts X X X X X X X X Extracts X X X X
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