TMI Blog2018 (2) TMI 2016X X X X Extracts X X X X X X X X Extracts X X X X ..... 015 for A.Y. 2012-13. 2. The grounds of appeal raised by the assessee are as under: - 1. The learned CIT(A) has erred in law and on facts in passing the appellate order, which is invalid and bad in law. 2. The learned CIT(A) has erred in law and on facts in confirming the addition of ₹ 5,00,00,000/- made by the Assessing Officer u/s. 68 of the Act. The learned CIT(A) ought to have deleted the afore-stated addition of ₹ 5,00,00,000/- in respect of share capital and share premium. 3. The issue raised in ground No. 1 is not pressed during the course of hearing and therefore dismissed as not pressed. 4. The issue raised in ground No. 2 relates to confirmation of addition of ₹ 5 crores by CIT(A) as made by the AO under Section 68 of the Income Tax Act, 1961 (hereinafter the Act ) in respect of share capital and share premium received by the assessee-company for allotment of 10% non cumulative preference shares to M/s. Janitor Distributors Pvt. Ltd. 5. The brief facts of the case are that the assessee-company filed its return of income on 28.09.2012 declaring a loss of ₹ 3,946/-. The case of the assessee was selected for scrutiny. Notice under ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... preferred appeal before the First Appellate Authority. The learned CIT(A) dismissed the appeal of the assessee after considering the contention of the assessee as has been incorporated in paras 7.2 and 7.3 of the order. According to the learned CIT(A) the funds were not utilised for the purpose of business or generating any income. Since the condition of the company is not very sound , the CIT(A) noted that the AO has rightly doubted the genuineness of such investment in the assessee company. Finally the learned CIT(A) dismissed the appeal of the assessee by observing and holding as under: - 8.1 The case here falls within the ambit of the above mentioned cases. One has to consider the totality of facts, surrounding circumstances and human probability for arriving at a conclusion as held in by the Hon. Supreme Court sin the following cases : 1. CIT Vs Durga Prasad 82 ITR 540 (SC) 2. Sumati Dayal Vs CIT (1995) 214 ITR 801 (SC) The A.O. has done all the above to arrive at a conclusion that it is an unexplained credit u/s. 68. 8.2 This case also falls within the ambit of the term colourable devices as coined by Hon. Supreme Court wherein the Hon. Supreme Court h ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d to nil turnover and profit of the company to support his case by noting that no prudent businessman will invest in the shares of the company which is not doing nay business. The observation of the learned AO that the assessee has raised money by way of share capital at a very high premium especially when the assessee was not carrying on any business was doubtful and suspicious was uncalled for and without any basis as it is for the assessee to decide as to how and on what terms the funds are to be raised from the market. The learned A.R. also pointed out that the funds were raised by way of 10% non cumulative redeemable preference shares which mean that the assessee was to pay 10% dividend on the said money raised by the assessee. The learned A.R. submitted that the conclusion of the AO that the shares of the assessee-company were not worth subscribing in absence of any business activity was incorrect. The ld AR further submitted that the assessee company belongs to G.R. Agarwal Group, Udaipur and its flagship company was G.R. Infraprojects Ltd. which is engaged in development of infrastructural facilities and is renowned in the market for quality construction and timely completi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... f the Ministry of Corporate Affairs. The learned A.R. also placed before the Bench a copy of the assessment order dated 30.09.2009 passed under Section 143(3) for A.Y. 2007-08 considering the issue of shares at premium and increase in the share capital of ₹ 43 crores in the case of M/s. Janitor Distributors Pvt. Ltd. The learned A.R. also placed before the Bench a copy of the assessment order dated 15.09.2017 passed under Section 143(3) for A.Y. 2012-13 of the above said investor and submitted that there is no pending proceedings against the company either under Section 147 or 263 in respect of completed assessment unlike in the case of private companies whose cases have been reopened by the government which are engaging in accommodation business. The learned A.R. for the assessee took us through similar transactions in the case of group company M/S Lokesh Builder Pvt. Ltd. which has received share capital from M/s. Janitor Distributors Pvt. Ltd. in A.Y. 2012-13 and the transaction was accepted by the Income Tax Officer, Ward-1, Udaipur after carrying out a detailed enquiry and gathering various information. The ld AR stated that the AO after satisfying about the genuineness ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 0% non cumulative preference shares on a premium of ₹ 100/- and thus the transaction was a colourable device which was nothing but structured transaction to generate money from other entities. The learned D.R. submitted that even the investor M/s. Janitor Distributors Pvt. Ltd. was not doing any business. They merely invest in the shares of private limited companies and doing the purchase and sale thereof. Even the said transaction of subscribing the preference shares in the assessee company at a premium was sourced and financed by the said investor from the sale of shares of other private companies. As far as genuineness, credit worthiness and identity of the investor is concerned the learned D.R. submitted that mere production of records such as ITR, Balance Sheet and source out of sale of shares could not be taken to mean that the transaction is genuine especially when in both the companies, investor and investee there was no business. The learned D.R. argued that the benefit of similar transaction in the group company M/s. Lokesh Builder P. Ltd. from the same investor which was examined and accepted by Income Tax Officer, Ward-1, Udaipur could not be taken to mean that th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... xxxii. CIT vs. Precision Finance Pvt. Ltd. 208 465 (Cal) xxxiii. Orient Wire Industries (P) Ltd. 131 ITR 688 (Cal) xxxiv. CIT vs. Korlay Trading Co. Ltd. 232 ITR 820 (Cal) xxxv. K.C.N. Chandrassekhar vs. ACIT 66 TTJ 355 (Bang) xxxvi. Gayathri Associates vs. Income Tax Officer 41taxmann.com 526 (AP) xxxvii. Agrawal Coal Corpn. (P) Ltd. vs. ACIT 135 ITD 270 (Ind) xxxviii. Nipun Builders Developers P. Ltd. 350 ITR 407 (Del) xxxix. CIT vs. Ultra Modern Exports P. Ltd. 40 taxmann.com 458 (Del) xl. ACIT vs. Dhanalaxmi Steel Re-rolling Mills 57 ITD 361 (Hyd) xli. CIT vs. Meenakshi Mills Ltd. 63 ITR 609 (SC) The learned A.R. in the rebuttal distinguished the various decision decisions relied upon by the AO in the assessment order and also the CIT(A). 9. We heard the rival submissions and perused the material on record including the impugned order and various decisions cited by rival parties. The undisputed facts of the case are that the assessee issued 250,00,000 10% non cumulative e redeemable preference shares of ₹ 100/- each at a premium of ₹ 100/- each to M/s. Janitor Distributors Pvt. Ltd. on 31.03.2012. The assessee company was not c ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... picious observed that the turnover of the assessee was nil and there being no profit to support to justify the issue of preference shares at a premium and in view of that the assessee company could not have been made at huge premium. We find that the assessee company belongs to G.R. Agarwal Group, Udaipur and its flagship company is G.R. Infraprojects Ltd. which is engaged in development of infrastructural facilities/projects and is very famous and known in the market for quality construction and timely construction of infrastructural projects like road, highways and flyovers, etc. The average turnover for the last three years of the said flagship company was around ₹ 800 to ₹ 850 crores with the net profit ranging between ₹ 35 to 50 crores. It is also a fact the private equity funds, namely India Business Excellence Fund I and IDFC Investment Advisors Ltd. invested ₹ 80 crores by way of equity capital in G.R. Infraprojects Ltd. in 2011 and the company is in the process of listing of its shares in the market. In view of all these facts we are not in a position to agree with the conclusion of the AO as confirmed by the learned CIT(A) that the shares in the as ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... belongs, growth and future perspects and status of the group vis-a-vis other similarly placed companies in a particular arena of the same field of activities. In this case we note that the assessee belong to the very famous G.R. Agarwal group of companies with the flagship company G.R. Infraprojects Ltd. which is engaged in the development of infrastructural facilities like road, highways and flyovers and has a turnover of more than ₹ 800 crores to 850 crores over a period of three years with net profit of ₹ 30 to 50 crores. The investment in the flagship company to the tune of ₹ 80 crores by private equity funds, i.e. India Business Excellence Fund I and IDFC Investment Advisors Ltd. in 2011 realising the gross potential of the company, which is in the process of listing the shares in the market. Seeing the facts in totality we are of the view that the AO has not brought any evidence on record to prove that the transaction to be sham and non genuine and thus we are not in agreement with the conclusion drawn by the CIT(A) on the issue. The case of the assessee is also supported by a series of decisions relied upon by the learned A.R. is discussed as under: - ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... matter for consideration. The Hon'ble Tribunal, after taking note of and relying upon the aforesaid rulings in CIT v. Gagandeep Infrastructure P. Ltd. (394 ITR 680) and CIT v. Creative World Telefilms Ltd. (333 ITR 100), was pleased to delete the disputed addition. In the case of Lalitha Jewellery Mart P. Ltd. vs. DCIT (399 ITR 425 (Mad) the Hon'ble Madras High Court held that the assessee cannot upon its investors to disclose all such business transactions they carried on in the immediate past and as to how much they made from their respective business enterprises. The assessee cannot call upon its investors to prove their good business sense in investing in the assessee-company, as such investors cannot gain any controlling stake. In the case of Orchid Industries Pvt. Ltd. vs. DCIT in ITA No. 1867/Mum/2013 dated 07.02.2014 the Coordinate Bench of this Tribunal held that merely because the cheques were deposited in the respective accounts would not lead to the conclusion that these cheques money was the assessee s own money routed through these parties until and unless it is found in the enquiry and substantiated with the facts and material. ......................... ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... y Hon'ble ITAT as well by the Hon'ble High Court because the share appellant-companies categorically admitted that they had given accommodation entries by accepting cash against cheques issued and charged commission. The Directors of these share appellant companies were also cross-examined by the assessee whereas in the present case the facts are different. In the case of Bisaka Shares Pvt. Ltd. (supra) the Hon'ble Tribunal confirmed the order passed under Section 263 by CIT because the AO did not conduct any enquiry about the genuineness of share application and simply accepted the return filed by the assessee in the assessment completed under Section 143(3) r.w.s. 147 of the Act whereas this not the fact in the present case. In the case of Durga Prasad More (supra) it was held by the Hon'ble Supreme Court that though apparent must be considered real unless it was shown that there were reasons to believe that the apparent was not real, in a case where a party relied on self-serving recitals in documents it was for that party to establish the truth of those recitals, and that the taxing authorities were entitled to look into surrounding circumstances to find o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... been duly complied with by the assessee in the present case. In the case of Nova Promotors Finlease Pvt. Ltd. (supra) the AO had received information from Investigation Wing about 16 entry operators who had given accommodation entries to several persons including the assessee. Upon examination, the Assessing Officer found that the material available showed link between the entry providers and the assessee-company. Besides, out of the 22 companies whose names figured in the information given by them to the Investigation Wing, 15 companies had provided share subscription monies to the assessee. In Independent Media (P) Ltd. (supra) the alleged shareholders had confessed that they had provided entry against receipt of cash. The facts of the present case are different. In Focus Exports Pvt. Ltd. (supra) the assessee was not cooperative and did not furnish complete details/particulars in respect of the share application money received. In fact, the assessee had 'absconded' as a result of which the assessment was completed exparte whereas in the present case the facts are different. In N R Portfolio Pvt. Ltd. (supra) not only the share applicants did not attend ..... X X X X Extracts X X X X X X X X Extracts X X X X
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