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TMI Blog2023 (1) TMI 770X X X X Extracts X X X X X X X X Extracts X X X X ..... gh the Revenue through affixture as there was nobody available at the given address as per Form No.36. Under these circumstances, we have no other option but to adjudicate the appeals on the basis of material available on record and after hearing the ld. DR. ITA No.937/HYD/2014 for AY 2009-10 (By Assessee) 3. Facts of the case, in brief, are that the assessee is a company engaged in manufacture and sale of FMCG. It filed its return of income on 17.11.2009 declaring total income at Rs.85,23,300/-. A survey u/s. 133A was conducted on 31.01.2011 during which it was noticed that the assessee company has infused an amount of Rs.3.21 crores towards share capital/share premium during the year 2008-09 relevant to AY 2009-10. During the survey, Shri M.Srinivas Reddy, Managing Director of the assessee company could not properly explain about the veracity of investments by subscribers. The AO, therefore, after recording reasons, reopened the assessment and issued notice u/s. 148 of the I.T.Act. In response to the statutory notices issued u/s. 143(2) & 142(1), Shri M.Srinivasa Reddy, the Managing Director of the assessee company appeared before the AO from time to time and filed certain deta ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... stment is not proven. 4.4 Alluri Vijaya Rama Raju: In the statement recorded on 28.12.11, this person confirmed to have subscribed Rs,10 lakh towards share capital. The source of investment was stated to be out of his past savings and borrowals from friends and relatives. He could neither furnish any documentary evidence to prove his identity nor for the sources of his income such as copies of income tax returns/bank statements etc for accumulation of past savings for investment. Therefore, the genuineness of the claim of investment is not proven, 4.5 Sommula Gangadhar Reddy: In the statement recorded on 28.12,11, this person confirmed to have subscribed Rs,30 lakh towards share capital, The source of investment was stated to be out of his past savings and borrowals from friends and relatives, He could not identify himself and also did not produce any evidence in support of the sources,acumulation of past savings or income. Therefore, his claim of subscription to share capital is not accepted, 6. Since the assessee failed to produce the remaining 10 persons for his examination and observing that the parties who were produced could not prove their identity and creditworthiness, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... o income -tax None of them have any income from taxable sources. None of them have any bank account. All these agriculturists have paid the money in cash. Further, some of them have put their left thumb impression on the confirmation letters. But the confirmations are written in English. How the illiterate/semi-literate persons could understand and file confirmation letter in English could not be explained by the appellant. What is surprising is that all the agriculturists were contributing money in lakhs, none of them have used banking channels to lend the money to the shareholders. Even in written submissions, the AR is not clear, whether the farmers invested the money in company through shareholders or they have lent the money to shareholders. The submissions of the AR are inconsistent. However, the statement of shareholders clearly tell, that sources were either loans given by friends / relatives or from their own source. There was utter failure on the part of the appellant to produce the shareholders for examination by the AO either during assessment proceedings or during remand proceedings. The appellant's plan of action is to lead the ultimate source to the agriculturist ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ernative claim with regard to allowing of 1/5th of the expenditure of Rs.2,75,000/- in the light of provisions of section 35D of the 1T Act. 4. The Hon'ble C1T(A) ought to have deleted the addition made by the assessing officer treating the share capital of Rs.3,21,50,000/- as unexplained investment. 5. In the facts and circumstances of the case, the Hon'ble CIT(A) ought to have observed that the requirements mentioned u/s.6B of the IT Act were satisfied and therefore there was no scope to treat the amount of Rs.3,21,50,000- as unexplained investment in the hands of the assessee company in which public are substantially interested. 6. The Hon'ble CIT(A) erred in upholding the determination of the total income at Rs. 4,13,26,942/- as against the income admitted of Rs.85,23,300/- and therefore the additions are liable for deletion. 7. Any other ground will be raised at the time of hearing. 9. The assessee has also raised following additional grounds. 1. The reasons recorded for issue of notice u/s 148 of the 1T Act, 1961 have no nexus with income escaping assessment. Therefore the issue of notice u/s 148 of the 1T Act, 1961 and the assessment made thereon is invali ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d the AO disallowed the amount as this was incurred towards subscription fee for increasing share capital which is capital in nature. We find the ld.CIT(A) rejected the claim of the assessee to allow the same u/s.35D of the I.T.Act by observing as under:- 6.4 Such expenditure can be allowed at the rate of 1/5th for 5 consecutive years starting from the year of production. The AR has not submitted any details or evidence in support of his claim that the expenditure incurred falls under any of the categories mentioned above. Further, the AR explained that this amount was paid to Company Law Board as a fee to enhance the share capital. He was requested to produce the receipt given by the Company Law Board, however, the same was not submitted. Therefore, this ground of appeal is dismissed. 13. We do not find any infirmity in the order of the ld.CIT(A) on this issue in absence of furnishing of any details or evidence in support of the claim that the expenditure falls under any of the categories mentioned in provisions of section 35D(2) of the I.T.Act. We, therefore, do not find any infirmity in the order of the ld.CIT(A) on this issue and accordingly, the same is upheld. The grounds ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 5 for AY 2010-11 (By Revenue) 17. Facts of the case, in brief, are that the assessee filed its return of income on 12.10.2010 declaring total income of Rs. 2,62,15,827/-. The return was processed u/s. 143(1) of the Act. Subsequently, the case was converted to scrutiny and statutory notices u/s. 143(2) and 142(1) were issued. In response to the same, the AR of the assessee appeared before the AO from time to time and filed the requisite details. The AO completed the assessment u/s. 143(3) on 22.03.2013 determining the total income at Rs.9,49,89,417/- wherein he made the following additions. A - Disallowance of Rs.27,56,900/- being fee paid to ROC for increase in share capital B - Addition of Rs.4,00,00,000/- as unexplained share capital u/s. 68 of the I.T.Act C - Addition of Rs.2,32,58,123/- on account of bogus raw materials D - Rs.20,46,634/- on account of bogus packing material and E. Rs.7,11,933/- being disallowance u/s.40(a)(ia) 18. In appeal, the ld.CIT(A) sustained the addition of Rs.7,11,933/- and Rs.27,56,900/- respectively. So far as the remaining three additions are concerned, he deleted the additions. However, the revenue has challenged the order of the ld.CIT(A) in ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e requested for not treating the share application money as income u/s. 68 of the I.T.Act by relying on various decisions instead of furnishing details as called for, the AO issued summons u/s. 131 of the I.T.Act to the above six parties asking them to furnish the following details. 1.All the movable and immovable properties owned by the above persons and their family members during the F.Y. 2009-10. 2.Income tax returns of the above persons for the A.Ys. 2007-08, 2008- 09,2009-10 and 2010-11. 3. All the bank statements of the above persons from 01-04-2009 to 31- 03-2010 highlighting the transactions regarding transfers made to M/s. Farmax India Ltd and also explaining the sources for deposits/credit transfers in their bank account. 21. However, out of the six subscribers five subscribers did not respond and one Mr. D.Ranga Raju who is stated to have invested Rs.66,75,000/- informed that he is an ex-serviceman and did not invest in M/s. Farmax India Ltd. He further stated that he did not have any contact with M/s. Farmax India Ltd. In view of the above, the AO relying on the decision of Hon'ble Delhi High court in the case of NR Portfolio vs CIT held that if the share subscr ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... fore, ground no.2 is treated as Allowed. 23. Aggrieved with such order of the ld.CIT(A), the revenue is in appeal before the Tribunal by raising the following grounds 1. The order of the Ld CIT(A) is contrary to law and facts of the case. 2. The Ld. CIT(A) ought to have upheld the order of the Assessing Officer as the assessee has completely failed to prove the credit worthiness of the subscribers of share capital and that his onus has not been fully discharged. 3. The Ld. CIT(A) ought to have relied on the decision of the Hon'ble Delhi High Court in the case of Nipon Builders and Developers Private Limited (07/01/2013) in which the Hon'ble Court has categorically stated that u/s. 68, the onus is upon the assessee to prove the three necessary ingredients of identity, credit worthiness and genuineness of transaction. 4. Whether on the facts and in the circumstances of the case, the CIT(A) is justified in deleting the addition made on account of share capital and directing the Assessing Officer to take up the case with the Assessing Officer's of the individual subscribers without appreciating the fact that the assessee has not discharged his onus of proving the c ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ain, the Assessing Officer did give findings after proper investigation. He submitted that the ld.CIT(A) ignored the investigation and findings of the AO in both the instances and blindly relied upon the decision in the case of Lovely Exports Pvt.Ltd.(supra) which is not correct. 25. The ld. DR further submitted that merely routing the money through banking channels does not establish the genuineness of the transaction or the creditworthiness of the subscriber. Further without even having a look at the bank statements of the subscribers the ld.CIT(A) deleted the addition. The ld.DR specifically referred to the following portion of his written submission On perusal of paper book filed by the assessee on 03-10-2016 at page 43 to 54, it is observed that Sri A.Venkat Raju supposedly invested Rs.66.75 lakhs. Looking at his bank statement at Page No.45, for every payment to the appellant, there has been a corresponding deposit of the same amount before the payment is made. The entire trail of the source of such deposits should have been investigated by the ld. CIT(A) before accepting it as a concluding evidence. Further, going to the page 48 to 54, it is seen that the net profit of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he course of assessment proceedings failed to furnish the complete details as called for by the AO. We find the assessee in the instant case has received share capital and share premium of Rs.4 crores from six investors, the details of which are given at para no. 19 of this order. We find during the course of assessment proceedings, the assessee did not furnish the confirmation letters, income tax returns and bank statements of the shareholders for which the AO issued summons u/s. 131 of the I.T.Act to all the six investors by calling for certain details from them. However, out of the six investors five investors did not respond and the sixth investor Shri D.Ranga Raju who is alleged to have invested of Rs.66,75,000/- towards share capital and share premium, has denied to have invested any amount in the assessee company. He further stated that he has no contact with the assessee company. We find before the ld.CIT(A), the assessee furnished certain details in shape of additional evidences which were forwarded to the AO for his comment and despite the AO's remarks in the remand report that the investors could not substantiate their creditworthiness, the ld.CIT(A) deleted the addition ..... X X X X Extracts X X X X X X X X Extracts X X X X
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