TMI Blog2019 (5) TMI 946X X X X Extracts X X X X X X X X Extracts X X X X ..... tments Pvt. Ltd there is no turnover during the year. Petty expenses of ₹ 57,531/- were incurred against NIL revenue and net loss of ₹ 57,531/- was carry forwarded. As against this picture of Profit Loss Account having NIL turnover and loss of ₹ 57,531/- there stands reserve and surplus of ₹ 125.38 crores on the liability side. Investment in other companies is at ₹ 127.31 crores on the asset side. Bank transactions in BPO Finance Investment Pvt. Ltd placed at page 10 11 shows that huge inflow and outflow of the huge amounts appearing round of the year but having no nexus with the regular business of the company for which it is incorporated. Genuineness of the transactions of the share application money has not proved and also the creditworthiness of both the share applicants namely Rolled Gold Industries and BPO Finance Investment Pvt. Ltd has not proved as they have no regular means to invest in the share capital of the assessee company. - A.O has justified in invoking the provisions of Section 68 of the Act making the addition for unexplained share application money - Decided against assessee - ITA No.893/Ind/2016 - - - Dated:- 14-5-2019 - ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ce was also made u/s 14A of the Act at ₹ 1,66,845/-. Income assessed at Rs. NIL after allowing set off of brought forward business loss to the extent of ₹ 1,35, 22,601/-. Aggrieved assessee preferred appeal before Ld. CIT(A) and partly succeeded as the disallowance u/s 14A was deleted whereas addition made u/s 68 of the Act for unexplained share application money at ₹ 50,00,000/- confirmed. 4. Now the assessee is in appeal before the Tribunal raising sole issue of addition of ₹ 50,00,000/- made u/s 68 of the Act for unexplained share application money received from two companies. 5. Ld. Counsel for the assessee submitted that necessary details in the form of balance sheet, share application form, Board resolution, bank statement, PAN number have been filed in the case of Rolled Gold Industries Ltd. In the case of BPO Finance Investment Pvt. Ltd, income tax returns, share application forms, board resolution, registration certificate as NBFC, bank statement and balance sheet have been filed. These documents are sufficient enough to prove the identity, genuineness and creditworthiness of the cash cre ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t. Ltd., he did not considered the same and not panicked to reissue the notices at new address and enquire then. The Ld. CIT(A) also erred in the facts of the case by not looking into this matter and not observing the lack in the procedures followed by Ld. AO. The assessee therefore made available all the details and documents to the satisfaction of AO and Ld. CIT(A) regarding the identity, genuineness and creditworthiness of the share applicants. The Ld. AO almost at every stage failed to point out whether assessee lacked in reproducing him with any explanation or document. From the documents related to the identity of the companies and their share holders; and genuineness and creditworthiness of the same, all details were made available to th~ Ld. AO. But the factual aspect has been totally ignored by the Ld. AO and Ld. CIT(A) as neither of them commented on these documents or pointed out whether there was any failure on the part of assessee to reproduce anything. Thus the onus has been duly discharged by the assessee by proving with the basic criteria of identity, genuineness and creditworthiness. In this regard, reference is in ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... creditworthiness of the transaction of alleged share application money on account of following observations of facts; In the assessment order the AO has given following facts about the share application money received from these two concerns. The assessee's balance sheet reflects receipt of share application money amounting to ₹ 50,00,000/- from two persons viz. Rolled gold Industries Limited, Indore and BPO Finance and Investment Pvt. Ltd., Kolkata. It was asked to explain the genuineness of the subscription as also the identity and creditworthiness of the. subscribers. In response, the copies of balance sheet, Board resolution, application form and bank statements were filed. On perusal of the above documents, following observations are made: Rolled Gold Industries. Indore (i) It has fixed assets worth ₹ 55,000/- only. (ii) Entire capital is invested in shares and advances against capital assets. (iii) No profit and Loss account has been produced. It appears that the profit and Loss account has not been prepared. (iv) Copy of account opening form ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... P.O. Finance investment P. Ltd. Kolkatta, i) Notice u/s 133(6) issued to this company has been received back un served with the postal remark not Known . ii) Copy of return of income was filed by the assessee in which address of M/s B.P.O. Finance Investment P. Ltd. has been given as Chamber 304 Naiwala Having PIN 110005 which appears to be some locality of Ne,1/ Delhi, iii) The Bank Account of Company reflects transfer in transfer out of funds with the result that only on few occasions the balance crossed the figure of ₹ 1,00, 000/-. iv) The company has no fixed assets. v) It neither has leased accommodation nor free hold. The Profit Loss account of the company shows net loss of ₹ 75,4801- which happens to be on account of administrative expenses. No working profit or loss is indicated. The capital of the company is Rsl,99,96,60{)1- and it has share premium reserve (Rs,125,38,56, 600/- vi) The above reserve and capital has been utilized to the maximum extent in the subscription of shares various companies whose names have 170t been given. vii) ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... en the genuineness of the transaction would not be established. In such a case, the assessee would not have discharged the primary onus contemplated by Section 68 of the Act. 12. In the present case, the A.O. had conducted detailed enquiry which revealed that: i. There was no material on record to prove, or even remotely suggest, that the share application money was received from independent legal entities. The survey revealed that some of the investor companies were non-existent, and had no office at the address mentioned by the assessee. For example: The companies Hema Trading Co. Pvt. Ltd. and Eternity Multi Trade Pvt. Ltd. at Mumbai, were found to be non-existent at the address given, and the premises was owned by some other person. a. The companies at Kolkatta did not appear before the A.a., nor did they produce their bank statements to substantiate the source of the funds from which the alleged investments were made. b. The two companies at Guwahati viz. Ispat Sheet Ltd. and Novelty Traders Ltd., were found to be nonexistent at the add ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ert to the field enquiry conducted by the AO which revealed that in several cases the investor companies were found to be non-existent, and the onus to establish the identity of the investor companies, was not discharged by the assessee. 14. The practice of conversion of un-accounted money through the cloak of Share Capital/Premium must be subjected to careful scrutiny. This would be particularly so in the case of private placement of shares, where a higher onus IS required to be placed on the Assessee Since the information is within the personal knowledge of the Assessee. The Assessee is under a legal obligation to prove the receipt of share capital/premium to the satisfaction of the AO, failure of which, would justify addition of the said amount to the income of the Assessee. 15. On the facts of the present case, clearly the Assessee Company - Respondent failed to discharge the onus required under Section 68 of the Act, the Assessing Officer was justified in adding back the amounts to the Assessee's income. 16. The Appeal filed by the Appellant - Revenue is allowed. In the aforesaid facts and circumstances, and the law laid d ..... X X X X Extracts X X X X X X X X Extracts X X X X
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