TMI Blog2019 (3) TMI 492X X X X Extracts X X X X X X X X Extracts X X X X ..... of appeal taken by the assessee are not in consonance with the Rule 8 of the Income Tax (Appellate Tribunal) Rules, 1963 - they are descriptive and argumentative in nature, though subsequently, the assessee has filed concise grounds of appeal also. In brief, the grievance of the assessee is that the ld.CIT(A) has erred in confirming addition of ₹ 36,33,000/- which was added by the AO on the ground that share application and share premium money received by the assessee is unexplained cash credit under section 68 of the Income Tax Act, 1961. 3. Brief facts of the case are that the assessee-company has filed its return of income on 29.9.2012 declaring total income at ₹ 30,162/-. The case of the assessee was selected for the scrutiny assessment and notice under section 143(2) was issued and served upon the assessee. On scrutiny of the accounts, it revealed to the AO that the assessee had issued share capital of ₹ 2,73,330/- (27,330 nos. of face value of ₹ 10/- each) during the year under consideration. The company has also received share premium of ₹ 38,26,200/- (at the rate of ₹ 140/- per share). The AO has compiled the details of all share appl ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... A.Y.2012-13 12000/- 3. Devilal Meena (HUF) A.Y.2012-13 23391 4. Laxmanlal Meena A.Y.2012-13 64000/- 5 Nathulal Meena A.Y.2012-13 57000/- 6 Hasmukh Barot HUF A.Y.2009-10 A.Y.2010-11 297980/- 193262/- 7 Karm Barot A.Y.2009-10 A.Y.2010-11 298080/- 149249/- 8 Bhavesh Khatri A.Y.2012- 13 76334/- 9 Sushilaben Machhar A.Y.2012-13 6926/- 5. After a detailed analysis, and in light of various authoritative pronouncements, the ld.AO has arrived at a conclusion that it was not a genuine transaction. Share applicants were not creditworthy except Shri Hasumukh Barot HUF. He made addition of ₹ 36,33,000/- out of the total. He did not make addition qua share a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... and deserves to be added under section 68 of the Income Tax Act, 1961. We deem it appropriate to bear in mind certain basic principles/tests propounded in various authoritative pronouncements of the Hon ble High Courts and Hon ble Supreme Court. It is also pertinent to observe that assessee has made reference to a large number of decisions in the submissions filed before the ld.CIT(A). We do not deem it necessary to recite and recapitulate them because that would make this order repetitive and bulky. We take cognizance of some of them. It is pertinent to observe that in so far as companies incorporated under Indian Companies Act are concerned, whether private limited or public limited companies, they raise their share capital, through shares though manner of raising share capital in private limited company on one hand and public limited company on other hand, would be different. The share capital and share premium are basically irreversible receipts or credits in the hands of the companies. Share capital is considered to be cost of shares on equivalent amount issued and premium is considered as extra amount charged by the company for issue of that capital. In the case of privat ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ssee is not, in the opinion of the Assessing Officer, satisfactory. The Hon ble Delhi High Court in the case of CIT v. Novadaya Castles (P.) Ltd. 367 ITR 306 has considered a large number of decisions including the decision of Hon ble Supreme Court in the case of CIT Vs. Durga Prasad [1971] 82 ITR 540 (SC). According to the Hon ble Delhi High Court basically there are two sets of judgments. In one set of case, the assessee produced necessary documents/evidence to show and establish identity of the share-holder and bank account from which payment was made. The fact that payment was received through bank channels, filed necessary affidavit of the shareholders or confirmations of the directors of the shareholder company. But thereafter no further inquiry was made by the AO. The second set of cases are those where there was evidence and material to show that the shareholder company was only a paper company having no source of income, but had made substantial and huge investments in the form of share application money. The assessing officer has referred to the bank statement, financial position of the recipient and beneficiary assessee and surrounding circumstances. The primary requirem ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... eciding this type of issue, the adjudicating authority should bear in mind that a racket of floating bogus companies with sole purpose of landing entries is being unearthed by the investigation wing of the Income Tax Department. 10. No doubt on one hand such kind of dubious practices are rampant, but on the other hand, the adjudicator has to keep in mind that merely because there is an acknowledgment of such practice would mean that it would be presumed that the assessee was indulged in this practice. 11. In the light of the above, let me examine the facts of the present case. It is pertinent to note that in the present case share applicants are individuals and not companies who could be termed as paper entities. However, while appreciating their financial capabilities to subscribe shares at premium and other surrounding circumstances, the ld.CIT(A) has recorded a specific finding. It is worth to note the relevant part of his finding recorded in his order, which reads as under: 2.6. After going through the facts of the case, it is seen that the depositors (table supra) at Sr.No.1 to 9 are fifing the return of income with meager total income. Therefore, in order to justif ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n the accounts of the assessee; it is the assessee who has to prove that identity, source and creditworthiness of such persons/parties/depositors. In all the decision cited by the appellant the Hon'ble Courts have held that the appellant has to prove the identity, source and creditworthiness of such persons/parties/depositors. In view of the abovementioned facts, it becomes clear that appellant introduced its own and accounted income in the garb of share premium application. The initial source of funds in the case of all allottee persons remains unexplained. Allotment of shares by appellant at the huge premium proves involvement of the appellant All these facts taking in totality do not leave an iota of doubt that the transactions are bogus. The assessing officer has duly discharged his burden in this case by pointing all various contradictions in the claim of appellant while appellant has miserably failed to discharge his burden to prove genuineness of these transactions. 12. At this stage, I would like to make reference to the audit reports. The audit reports have been produced on the instruction of the ITAT. These are for the period as on 31.3.2011, 31.3.2012, 31.3.2013 ..... X X X X Extracts X X X X X X X X Extracts X X X X
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