TMI Blog2021 (11) TMI 209X X X X Extracts X X X X X X X X Extracts X X X X ..... ion made as assessee has not charged interest on loan and advance but paid interest to others - proof of sufficiency of own funds - HELD THAT:- CIT(A) was justified in deleting the addition because the interest bearing funds in possession of the assessee company were higher than the amount as advanced by it and most of the advances were carried forwards from the erstwhile firm where no interest bearing funds were used. See SA BUILDERS LTD. VERSUS COMMISSIONER OF INCOME-TAX [ 2006 (12) TMI 82 - SUPREME COURT] , RELIANCE UTILITIES POWER LTD. [ 2009 (1) TMI 4 - BOMBAY HIGH COURT] and HERO CYCLES (P.) LTD. [ 2015 (11) TMI 1314 - SUPREME COURT] - Decided in favour of assessee. - ITA No.384/Ind/2018 - - - Dated:- 22-9-2021 - Shri Manish Borad,Accountant Member And Ms. Madhumita Roy, Judicial Member For the Appellant : Shri Rajeeb Jain, Sr. DR For the Respondent : S/Shri S.N. Agrawal Bhavesh Agrawal, ARs ORDER PER MANISH BORAD, A.M: The above captioned appeal filed at the instance of the Revenue for Assessment Year 2012-13 is directed against the orders of Ld. Commissioner of Income Tax(Appeals)-II (in short Ld. CIT], Indore dated 15.01.2018 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... #8377; 30,39,640/- as made to the total income of the appellant. 4.1.2.1] The appellant company also received share capital of ₹ 2,87,00,000/- from the thirty-one share applicants, most of the share applicants personally appeared before the assessing officer and their statement was also recorded on oath. In the statement as recorded before the assessing officer, all the share applicant duly accepted that they have invested amount in the share capital of the appellant company and also explained the source of investment made in the share capital. In the shareholder- wise chart as prepared by the appellant, it has discussed entire documents as filed by them and also giving reference of the statement as recorded, the said chart so prepared is reproduced as under:- S.No Name of the Share applicant PA No Amount [Rs] 1 Shri Anar Singh Parihar N.A. ₹ 950000/- 1.1 Copy of share application form duly signe ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... oter Card 5.3 Copy of his Bank passbook with Indore Premier Co-operative Bank Limited duly highlighted the amount of share application money. 5.4 Copy of his statement as recorded U/s 131 in assessment proceeding 5.5 Copy of his driving license 6 SHRI HUKUM SINGH N.A. 10,00,000 6.1 Share application money form duly signed 6.2 Copy of PAN Card 6.3 Copy of his bank account 6.4 Copy of his statement as recorded during the course of assessment proceeding 6.5 Copy of Voter Id Card 7 Smt Kamla Bai Verma AOKPV5411J ₹ 900000/- 7.1 Copy of share application form duly signed and filled. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 11 Shri Mohan Mandloi BGBPM4765J ₹ 950000/- 11.1 Copy of share application form duly signed and filled. 11.2 PAN Card 11.3 Copy of his bank account duly highlighting the entry related to the Investment in the share application money. 11.4 Copy of his statement as recorded U/s 131 of the Act 11.5 Copy of driving licence 12 Smt Nidhi Verma ANPPV4738E ₹ 600000/- 12.1 Copy of share application form duly signed and filled. 12.2 PAN Card 12.3 Copy of acknowledgement of Income Tax return as filed. 12.4 Copy of his bank account duly highlighting the entry related to the investment in ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ; 400000/- 17.1 Copy of share application form duly signed and filled 17.2 PAN Card . 17.3 Copy of acknowledgement of Income Tax return as filed. 17.4 Copy of his bank account duly highlighting the amount of share application money. 17.5 The cheque prior to investment received from Shri Amit Soni. 18 Shri Shyam Singh Mourya N.A. ₹ 1950000/ 18.1 Copy of share application form duly signed and filled. 18.2 Voter Id 18.3 Copy of his bank account duly highlighting the entry related to the Investment in the share application money. 18.4 Nihal singh in his statement has accepted about the investment made by Shri Shyam Singh Mourya ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... filed for the Asst Year 2012-13. 22.4 Copy of his bank account duly highlighting the amount of share application money. 22.5 Prior to the issuance of the cheque amount was received from Shri Amit Soni 23 Smt Vidhi Verma AMYPV5139K ₹ 800000/- 23.1 Copy of share application form duly signed and filled. 23.2 PAN Card 23.3 Copy of her Income tax return as filed for the Asst Year 2012-13. 23.4 Copy of her bank account duly highlighting the amount of share application money. 23.5 Copy of affidavit was filed and also discussed in Para 2.16 24 Shri Sanjay Sharma CKPPS0242H ₹ 2050000 24.1 Copy of share a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 29 Smt Khusbho Soni DEVPS7529N 9,00,000 29.1 Her husband Shri Ashish Soni in his statement has also confirmed the investment made by her 30 Smt Chandra Semre DUEPS1510Q ₹ 3,00,000 30.1 Copy of share application form duly signed and filled. 30.2 Copy of PAN Card 30.3 Copy of his income tax return as filed for the Asst Year 2012-13 31 Shri Rajesh Soni BOGPS9852H 8,00,000 31.1 Copy of share application form duly signed and filled. 31.2 Copy of PAN Card 31.3 Copy of his income tax return as filed for the Asst Year 2012-13 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 1.13.1 to 1.13.6 has dealt the same in great details, and the same is again reproduced for sake of clarity:- 1.13.1] The assessing officer in the assessment order on inner Page No 8 and 9 has discussed about the share application money of ₹ 20,50,000/- as received from share applicant Shri Sanjay Sharma. The assessing officer observed that the amount as invested by Shri Sanjay Sharma was not reflected in his bank account as filed during the course of assessment proceeding. In this respect, we would like to clarify as under:- [a] Share application form duly signed by Shri Sanjay Sharma was filed [b] the amount of share application money was received through an account payee cheques. [c] Copy of his PAN Card is also filed. He is regularly assessed to tax vide PA No, the same is as under:- CKPPS0242H [d] Copy of his bank account with Allahabad Bank, cash credit account No 2177088462 Since, the cheque was issued by Shri Sanjay Sharma from his saving account for this reason, the same was not reflected in his cash credit loan account. The amount of cheque as issued to the assessee company duly found reflected in the saving bank account of that share ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... - was credited through transfer in the bank account of Suman Verma vide reference No 1011-2723.The assessing officer has serious doubt about the transfer of amount through reference No 1011-2723. In this respect we would like to clarify as under:- [a] Share application form duly signed by the applicant has been filed. [b] Copy of PAN card has also been filed [c] Copy of her income tax return has also been filed wherein total income was declared by her of ₹ 397580/- and paid legitimate amount of Tax of ₹ 21970/-. [d] Copy of her bank account with Bank of India A/c No 880010110006562 [e] the amount as invested by her in the share application money of the assessee company was out of the amount as received by her from [f] That on perusal of the bank account of Shri Amit soni it is evident that he has received amount from Shri Surendra Soni, AU Commodities P Limited and M/s Sanverwala Jewellers P Limited prior to issuance of the cheques to Smt Suman Verma. Hence, source of amount as received by Smt Suman verma and in the bank account of Shri Amit soni are duly explained. [g] Copy of bank account of Shri Amit Soni, Ex- director of the assess ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ubham Verma are duly explained as received from Shri Amit Soni and source of amount received by Shri Amit soni was also explained. Hence, there was no justification for having any doubt about the source of amount as found credited in the bank account of the share applicant and therefore the amount of share application money as received from Shri Ved Prakash Verma and Shri Shubham Verma. 1.13.5] The assessing officer in Para 2.16 of the assessment order on inner Page No 12 has referred the affidavit as filed by Shri Amit Soni in respect of share application money as received from Sona Verma, Nidhi Verma and Vidhi Verma. In this respect we would like to clarify as under:- [a] detail of share application money as received by the assessee from the above share applicant is as under:- S.No Name of share applicant Amount [Rs] Income Remarks 1 Sona Verma 1100000 333770 ₹ 800000/- invested out of transfer from Amit Soni bank account and balance out of her saving ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 1 Gautam Verma 200000 Out of income and saving 2 Ankit Verma 800000 380710 ₹ 500000/- invested out of transfer from Amit Soni bank account and balance out of his saving 3 Vijay Semre 200000 268890 Out of his income and saving [b] Share application form duly signed by the applicant has been filed. [c] Copy of PAN card has also been filed [d] Copy of their income tax return [e] Copy of their bank account with Bank of India. [f] the major amount was received prior to the issuance of the cheques from Shri Amit Soni [g] That on perusal of the bank account of Shri Amit soni it is evident that he has received amount from Shri Surendra Soni, AU Commodities P Limited and M/s Sanverwala Jewellers P Limited prior to issuance of the cheques to Ankit Verma. Hence, source of amount as received from the bank account of Shri Amit soni are duly explained. [h] Copy of b ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... company. I therefore direct the assessing officer to delete the addition of ₹ 2,87,00,000/- as made in respect of above thirty one share applicants. The appellant get relief accordingly in so far as these thirty one share applicants are concerned. 4.1.3] The appellant company had received share capital of ₹ 18,00,000/- from ten persons. The assessing officer in Para 2.4 to 2.8 of the assessment order has discussed that statement of Shri Navin Raghuvanshi , Shri Ankur Soni and Shri Rupesh Dave recorded on oath and they have denied making any investment in the share application money/share capital of the assessee company by them or by their other family members, list of such persons is as under:- S. No Name of the Share holders Amount [Rs] 1 Ankur Soni 2,00,000 2 Navin Raghuvanshi 1,00,000 3 Gajendra Singh Raghuvanshi 1,00,000 4 Smt Sheetal Raghu Vanshi 2,00,000 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... l pronouncements contending that ld. CIT(A) having appreciated the facts and material on record in the light of the relevant judicial pronouncements rightly deleted the addition. Learned Counsel for the assessee relied upon the following judicial pronouncements: Hon ble Supreme Court of India in the case of CIT Vs Lovely Exports (P.) Ltd. as reported in [2008] 216 CTR 195 (SC) The Hon ble Madhya Pradesh High Court in the case of CIT, Bhopal v. Peoples General Hospital Ltd. as reported in [2013] 356 ITR 65 (Madhya Pradesh) The Hon ble Madhya Pradesh High Court in the case of CIT v. Metachem Industries as reported in [2000] 245 ITR 160 (Madhya Pradesh) The Hon ble Bombay High Court in the case of Pr. CIT- 1 v. Ami Industries (India)(P.) Ltd. as reported in [2020] 116 taxmann.com 34 (Bombay) The Hon ble Delhi High Court in the case of CIT v. Value Capital Services (P.) Ltd. as reported in [2008] 307 ITR 334 (Delhi); The Hon ble Madras High Court in the case of CIT, Central Circle, Salem v. Victory Spinning Mills Ltd. as reported in [2014] 50 taxmann.com 416 (Madras); The Hon ble Rajasthan High Court in the case of CIT v. First Point Finance Ltd. as r ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 10,00,000 7 Hukum Singh FPNPS3966C 5,000 10,00,000 8 Kamla Bai Verma AOKPV5411J 4,500 9,00,000 9 Kaushalya Bai N.A. 2,500 5,00,000 10 Kusum Verma AOLPV1256L 4,000 8,00,000 11 Manoj Patel CBWPM2597R 7,000 14,00,000 12 Mesar Singh Mourya N.A. 5,750 11,50,000 13 Mohan Mandloi BGBPM4765J 4,750 9,50,000 14 Nidhi Verma ANPPV4738E 3,000 6,00,000 15 Nihal Singh Mourya ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 4,500 9,00,000 33 Ankur Soni CSYPS3860A 1,000 2,00,000 34 Navin Raghuvanshi AKNPR8248Q 500 1,00,000 35 Gajendra Singh Raghuvanshi ACCPR1018F 500 1,00,000 36 Sheetal Raghuvanshi AQHPR2594K 1,000 2,00,000 37 Roopesh Dave AHKPD39834 500 1,00,000 38 Bhavani Shankar Dave ADQPD7121E 1,000 2,00,000 39 Shakuntala Dave BFZPD0037B 750 1,50,000 40 Sonal Dave BAFPD4474D 1,000 2,00,000 41 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... se finding in respect of these 3,03,964 equity shares issued to Shri Surendra Kumar Soni. We also find that the scrutiny assessment in the case of Shri Surendra Kumar Soni for the Assessment Year 2012-13 was completed by the same Assessing Officer wherein also the Assessing Officer did not make any addition to the total income of Shri Surendra Kumar Soni on account of investment made in the share capital of the assessee company. Thus, we do not find any reason for making addition of ₹ 30,39,640/- to the total income of the assessee company in respect of shares issued to Shri Surendra Kumar Soni. Therefore, the findings of ld. CIT(A) on this point are confirmed. 8. The remaining share application money of ₹ 2,87,00,000/- was received from 31 individual share applicants as per list above. We find that the assessee co. filed ample documentary evidences so as to justify the identity and creditworthiness of the share applicants and genuineness of the transactions as entered into them. A list of documents which were filed by the assessee company before the Assessing Officer in respect of these share applicants is reproduced hereunder for ready reference: ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 07 4.2 PAN Card 108 4.3 Acknowledgment of income-tax return along with computation of income for the Assessment Year 2012-13 109-111 4.4 Statement as recorded under section 131 of the Income Tax Act during the course of assessment proceedings 112-114 5 Shri Harish Chandra Mandloi - ₹ 10,00,000/- 5.1 Share application form duly signed 115-116 5.2 Voter Card 117 5.3 Bank statement duly highlighting the amount invested in the share capital of the respondent assessee 118-126 5.4 Statement as recorded under section 131 of the Income Tax Act during the course of assessment proceedings 127-128 5.5 Driving license 129 6 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rd 157 9.3 Acknowledgment of income-tax return along with computation of income for the Assessment Year 2012-13 158-160 9.4 Bank statement duly highlighting the amount invested in the share capital of the respondent assessee 161 10 Shri Manoj Patel [PAN: CBWPM2597R] ₹ 14,00,000/- 10.1 Share application form duly signed 162-163 10.2 Voter ID 164-165 10.3 PAN Card 166 10.4 Bank statement duly highlighting the amount invested in the share capital of the respondent assessee 167-168 10.5 Statement as recorded under section 131 of the Income Tax Act during the course of assessment proceedings 169-170 11 Shri Mesar Singh Mourya ₹ 11,50,000/- ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 216-218 15 Shri Ramesh Chand Chouhan, Nawada [PAN: ANNPC4310R] ₹ 10,00,000/- 15.1 Share application form duly signed 219-220 15.2 Voter ID 221 15.3 Bank statement duly highlighting the amount invested in the share capital of the respondent assessee 222-230 15.4 PAN Card 231 15.5 Statement as recorded under section 131 of the Income Tax Act during the course of assessment proceedings 232-234 16 Shri Shankar Lal Baganna ₹ 5,00,000/- 16.1 Share application form duly signed 235-236 16.2 Voter ID 237 16.3 Bank statement duly highlighting the amount invested in the share capital of the respondent ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Acknowledgment of income-tax return along with computation of income for the Assessment Year 2012-13 275-276 20.4 Bank statement duly highlighting the amount invested in the share capital of the respondent assessee 277-278 21 Smt. Suman Verma [PAN: AOKPV5412M] ₹ 8,00,000/- 21.1 Share application form duly signed 279-280 21.2 PAN Card 281 21.3 Acknowledgment of income-tax return along with computation of income for the Assessment Year 2012-13 282-284 21.4 Bank statement duly highlighting the amount invested in the share capital of the respondent assessee 285-286 22 Shri Ved Prakash Verma [PAN: ADFPV5995H] ₹ 11,00,000/- 22.1 Share application form duly signed 287 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... lication form duly signed 325-326 26.2 Statement as recorded under section 131 of the Income Tax Act during the course of assessment proceedings 327-328 26.3 PAN Card 329 27 Shri Ramesh Semre [PAN: DUEPS1511R] ₹ 3,00,000/- 27.1 Share application form duly signed 330-331 27.2 PAN Card 332 28 Shri Vijay Semre [PAN: AYPPS8021E] ₹ 2,00,000/- 28.1 Share application form duly signed 333-334 28.2 Acknowledgment of income-tax return along with computation of income for the Assessment Year 2012-13 335-337 28.3 Statement as recorded under section 131 of the Income Tax Act during the course of assessment proceedings 338-340 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... see offers no explanation about the nature and source thereof or the explanation offered by him is not, in the opinion of the Assessing Officer, satisfactory, the sum so credited may be charged to income-tax as the income of the assessee of that previous year: 10. The relevant extract of the proviso to section 68 of the Income-Tax Act, 1961 which was inserted by the Finance Act, 2012 w.e.f. 1-4-2013 reads as under: Provided that where the assessee is a company (not being a company in which the public are substantially interested), and the sum so credited consists of share application money, share capital, share premium or any such amount by whatever name called, any explanation offered by such assessee-company shall be deemed to be not satisfactory, unless- (a) the person, being a resident in whose name such credit is recorded in the books of such company also offers an explanation about the nature and source of such sum so credited; and (b) such explanation in the opinion of the Assessing Officer aforesaid has been found to be satisfactory: From the above, we find that an assessee was only required to establish the identity of share applicants pr ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tion of the respondent the creditworthiness of the creditor was also established. In the present case, in the light of the judgment of Lovely Exports (P.) Ltd.'s (supra) we have to see only in respect of the establishment of the identity of the investor. The Delhi High Court also in Divine Leasing Finance Ltd.'s case (supra), considering the similar question held that the assessee Company having received subscriptions to the public/rights issue through banking channels and furnished complete details of the shareholders, no addition could be made under section 68 in the absence of any positive material or evidence to indicate that the shareholders were benamidars or fictitious persons or that any part of the share capital represented company's own income from undisclosed sources. The similar view has been taken by the other High Courts. 17. As the Apex Court has considered the law in Lovely Exports (P.) Ltd.'s case (supra) and in view of law laid down by the Apex Court, we find that the substantial questions framed in these appeals do not arise for our consideration. Accordingly, all these appeals are dismissed with no order as to costs. 12. The Hon b ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... India in the case of NRA Iron Steel (P.) Ltd. and has held that: 21. From the above, it is seen that identity of the creditors were not in doubt. Assessee had furnished PAN, copies of the income tax returns of the creditors as well as copy of bank accounts of the three creditors in which the share application money was deposited in order to prove genuineness of the transactions. In so far credit worthiness of the creditors were concerned, Tribunal recorded that bank accounts of the creditors showed that the creditors had funds to make payments for share application money and in this regard, resolutions were also passed by the Board of Directors of the three creditors. Though, assessee was not required to prove source of the source, nonetheless, Tribunal took the view that Assessing Officer had made inquiries through the investigation wing of the department at Kolkata and collected all the materials which proved source of the source. 22. In NRA Iron Steel (P.) Ltd. (supra), the Assessing Officer had made independent and detailed inquiry including survey of the investor companies. The field report revealed that the shareholders were either non-existent or lacked cr ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... h regard to source of funds invested by the share applicants which was outside the domain and purview of the provision of section 68 of the Income-Tax Act, 1961 as applicable for the year under consideration prior to the insertion of proviso to section 68 of the Act. Further, the Assessing Officer himself observed in the assessment order that most of the share applicants appeared before him personally and accepted that they had made investment in the shares of the respondent assessee company but these share applicants could not furnish supporting documentary evidences so as to substantiate the agricultural income earned by them out of which they has made investment in the shares of the respondent assessee company. But, the Assessing Officer failed to appreciate the findings laid down in the judicial precedents (supra) and the fact that it is quite evident that the assessee company established the identity of the share applicants and genuineness of the transactions entered into with them beyond any doubt. The assessee company cannot be put in a disadvantageous position merely because the share applicants could not satisfactorily substantiate the source of investment made by them in ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Jai Kumar Bakliwal as reported in [2014] 366 ITR 217 (Rajasthan). 16. We find that the Assessing Officer also noted that the amount was transferred from the same reference number being 1011-2723 in the bank accounts of Smt. Kamla Bai, Smt. Suman Verma, Shri Shubham Verma and Shri Ved Prakash Verma, therefore, someone else was operating these bank accounts and name of these persons were only for namesake. The Assessing Officer further noted that Sona Verma, Nidhi Verma and Vidhi Verma had invested the amount in shares in cash also. However, we find from the material available on record that the members of the Verma Family are relatives of directors of the respondent assessee company. The ex-director of the assessee company, Shri Amit Soni in his statement recorded during the course of assessment proceedings categorically mentioned about his relationship with the members of the Verma Family and also the fact that shares were purchased by the members of the Verma Family. The statement of Shri Amit Soni, ex- director of the respondent assessee company as recorded during the course of assessment proceedings has been filed on Page No. 382-385 of the paper book. Further, the said re ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... mpany. They have also stated that source of such investment is income from Agricultural activity, but they have not submitted copy of PI and PII ( ऋण पुस्तिका ) to establish the proof of agricultural activity done by them and quantum of agriculture income which has been invested in the assessee company. From the above, it is clear that the Assessing Officer merely doubted the investment made by the share applicants for the reason that they did not submit any proof regarding agricultural activities done by them. It is therefore quite evident that the Assessing Officer himself accepted the identity of the share applicants and genuineness of the transactions as entered into with them. In view of these facts, we are of the view that the assessee company satisfactorily discharged the primary onus as cast upon it under section 68 of the Income-Tax Act, 1961 by establishing the identity and creditworthiness of the share applicants and genuineness of the transactions as entered into with them and therefore, addition made by the Assessing Officer on account of share application money received from remaining share appli ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... aring funds in possession of the appellant company were higher than the amount as advanced by it. Further, most of the advances were carried forwards from the erstwhile firm where no interest bearing funds were used. I therefore direct the assessing officer to delete the addition of ₹ 9,73,742/- made out of Interest paid. The appellant accordingly get relief of ₹ 9,73,742/-. This ground of appeal is allowed. 18. Being aggrieved, the Revenue has challenged the action of the ld. CIT(A) before this Tribunal. Before us, ld. CIT-DR relied upon the order of the Assessing Officer whereas the learned Counsel for the assessee relied on the impugned order. 19 We have considered the rival submissions of both the parties and gone through the material available on the file. We find that the Assessing Officer noted that the assessee claimed that out of total loan of ₹ 81,14,522/-, loan of ₹ 78,91,106/- was transferred from the proprietorship concern of Shri Surendra Soni and the assessee clarified that against the loan of ₹ 2,24,91,018/- in the balance-sheet of the assessee, an amount of ₹ 8,67,76,794/- was invested for the purpose of business. Ld. ..... X X X X Extracts X X X X X X X X Extracts X X X X
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