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TMI Blog2024 (10) TMI 704X X X X Extracts X X X X X X X X Extracts X X X X ..... . 3,72,000/- made by the DCIT as notional interest on interest free loans granted by the appellant out of the interest expense claimed by the appellant without appreciating the facts and circumstances of the case, the law as applicable and the submissions and the supporting evidence produced by the appellant. iii) The Ld. CIT(A) has erred in law and on facts in upholding the addition of Rs. 7,20,000/- made by the DCIT by treating the share capital received by the appellant during the year as unexplained cash-credit, without appreciating the facts and circumstances of the case, the law as applicable and the submissions and the supporting evidence produced by the appellant. 2. At the time of hearing, ld. AR for the assessee submitted that ground no.1 is general in nature and with regard to ground no.2, he submitted that during assessment proceedings, Assessing Officer observed that assessee has given loans and advances to Aardee Infrastructure of Rs. 30,00,000/- and J.P. Malhotra of Rs. 1,00,000/-. Assessing Officer disallowed the relevant interest on the abovesaid loans @ 12% per annum with the observation that assessee has not provided the reasons for giving abovesaid loans and ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... assessee submitted that assessee issued and allotted share capital to 27 shareholders. However, Assessing Officer has accepted shareholders 1 to 19 listed in the assessment order and he has not accepted shareholders listed at sl.no.2 and 20 to 26 with the observation that assessee has failed to produce Directors of the abovesaid companies for verification and the onus is on the assessee to prove the creditworthiness and identity of the abovesaid parties. Accordingly, he disallowed Rs. 7,20,00,000/- u/s 69 of the Act. 7. Aggrieved with the above order, assessee filed an appeal before the ld. CIT(A) and ld. CIT (A), after considering the submissions and new materials, called for a remand report. After considering the submissions of the assessee and remand report submitted by the Assessing Officer, he sustained the additions made by the Assessing Officer with the observation that the alleged shareholders of the assessee company had no sufficient funds and creditworthiness for subscribing such a huge share capital. 8. Aggrieved with the above order, assessee is in appeal before us and ld. AR for the assessee filed detailed synopsis and submitted as under :- "The details of above m ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the provisions of section 68 of the Act, no addition is called for in respect of amount received by the assessee during the preceding year which has been duly accounted and reported in its audited balance sheet (supra). We direct the Id. A O accordingly to delete the addition so made in this respect. " Further reliance is placed on the decision of CIT vs. Sat Prakash Agarwal, (1983) 140 ITR 880, High Court of Delhi. In view of the above, it is submitted during the impugned year, only the book entries of allotment of shares have been made and no actual cash has been credited in the books/bank account of the assessee and therefore, no addition u/s 68 can be made in absence of real inflow of cash and since made, may please be deleted. Second submission of assessee is that assessee-company has submitted voluminous evidences to substantiate the identity and creditworthiness of the parties/investor companies and genuineness of the transaction such as Form 2 filed with ROC, confirmations, bank statements, ITRs, audited Financial Statements of the said parties. These facts are evident from the following: PB 36 is the copy, of chart filed before Ld. AO vide letter dated 08.09.2014 s ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rs Pvt. Ltd. has sold their share and Form 20B was filed before ROC for such share transfer (PB 70-74). PB 58-62 is copy of Form 2 original filed wherein assessee-company inadvertently intimated ROC that 70,000 shares are allotted to Swaran Singh, director of M/s Omkareshwar Builders Pvt. Ltd. PB 63-69 is the copy of revised Form 2 filed by assessee-company before Ld. AO rightly intimating that the share were actually allotted to M/s Omkareshwar Builders Pvt. Ltd. PB 70-74 is the copy of Form 20B filed by assessee-company before ROC intimating ROC that s Omkareshwar Builders Pvt. Ltd. has transfer the share held by them on 01.12.2.012. PB 105 is the copy of confirmation of M/s Omkareshwar Builders Pvt. Ltd. wherein they have confirmed that they have invested Rs. 70.00.000/- in the assessee-company as share capital. Further that the entire investment is made through proper banking channels. They have further confirmed their PAN details as well. PB75 is the copy of notice u/s. 133(6) issued by ld. AO to Sh. Swaran Singh requesting him to submit the detail of transaction under taken by him with the assessee-company. PB 77 is the copy of letter dated 23.03.2015 sent by M/s ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... PB 123 is the copy of bank statement of M/s Anni Shoes Pvt. Ltd. showing that the entire investment of Rs. 95,00,000/- in assessee-company was made by them through proper banking channel in the subsequent year i.e., AY 2013-14. It further shows their complete address. PB 124 is the copy of acknowledgment of ITR of M/s Anni Shoes Pvt. Ltd. showing their complete address, their tax jurisdiction which duly establishes their identity. PB 125-132 is the copy of their audited financial statements of M/s Anni Shoes Pvt. Ltd. for AY 2012-13 perusal of which would show that they were engaged in the Job work and earning revenue from the same. M/s Latta Heritage Pvt. Ltd. (Rs. 95,00,000/-) PB 133 is the copy of confirmation of M/s Latta Heritage Pvt. Ltd. wherein they have confirmed that they have invested Rs. 95,00,000/- in the assessee-company as share capital and shares were duly allotted to them. Further that the entire investment is made through proper banking channels. They have further confirmed their PAN details as well. PB 135 is the copy of bank statement of M/s Latta Heritage Pvt. Ltd. showing that the entire investment of Rs. 95,00,000/- in assessee-company was made ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 013-14. PB 155 is the copy of acknowledgment of ITR of M/s Entrench Construction Pvt. Ltd. showing their complete address, their tax jurisdiction which duly establishes their identity. PB 158-163 is the copy of their audited financial statements of M/s Entrench Construction Pvt. Ltd. for AY 2012-13 wherein the investment made by them in assessee-company has duly been disclosed by them under non-current investments (PB 163). M/s Black Cobra Construction Pvt. Ltd. (Rs. 90,00,000/-) PB 164 is the copy of confirmation of M/s Black Cobra Construction Pvt. Ltd. wherein they have confirmed that they have invested Rs. 90,00,000/- in the assessee-company as share capital and shares were duly allotted to them. Further that the entire investment is made through proper banking channels. They have further confirmed their PAN details and complete address as well. PB 166-167 is the copy of bank statement of M/s Black Cobra Construction Pvt. Ltd. showing that the entire investment of Rs. 90,00,000/- in assessee-company was made by them through proper banking channel in the subsequent year i.e., AY 2013-14. PB 165 is the copy of acknowledgment of ITR of M/s Black Cobra Construction Pvt. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 04.2012, High Court of Delhi. * CIT vs. Nishan Indo Commerce Ltd., (2014)101 DTR 413, Calcutta High Court. * ITO vs Rakam Money Matters (P) Ltd., (2014) 41 CCH 0155 (Delhi Tribunal) * PR. CIT vs Rakam Money Matters (P) Ltd., ITA No. 778/201 5 (High Court of Delhi), Date of order 13.10.2015 * CIT vs. Vrindavan Farms (P) Ltd., ITA No.71/2015 (High Court of Delhi) * Commissioner of Income Tax vs. Gangeshwari Metal Pvt. Ltd. (2014) 361 ITR0010 (Delhi) * CIT vs Fair Finvest Ltd., (2013) 357 ITR 146, (High court of Delhi) * CIT vs Oasis Hospitalities (P) Ltd., (2011) 333 ITR 119, (High Court of Delhi) * CIT vs Value capital services (P) Ltd., (2008) 307 ITR 334 (High Court of Delhi) * CIT vs Winstral Petrochemicals (P) Ltd., (2011) 330 ITR 0603 (High Court of Delhi) * CIT vs Expo Globe India Ltd., (2014) 361 ITR 0147 (High Court of Delhi) Adverse observation of Ld. AO and Ld. CIT(A) are met as under: Adverse observation of Ld. AO and Ld. CIT(A) are met as under:- 1. Ld. AO in para 2 at page 2 of the assessment order has mentioned that assessee was asked to produce directors/authroized person of the investor companies chose not to produce them. In this regard, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... any basis, evidence or material and deserves to be deleted. 4. Ld. AO at page 7 has mentioned that the assessee-company has not proved the creditworthiness, genuineness of the transaction in the respected of 8 companies (mentioned above). In this regard, it is respectfully submitted assessee has filed voluminous evidences as narrated above which duly establishes the creditworthiness, genuineness of the transaction in respect of all the of 8 companies. Therefore, this observation of Ld. AO deserves to be ignored. 5. Ld. AO at page 7 has also mentioned that the onus on assessee-company would rendered even more stringent when there is evidence available impeaching the credentials of the "investor companies" and their "directors" who have admittedly been carrying on the activity of providing accommodation entries through the medium of these "companies". In this regard, it is submitted that Ld. AO has not spelt out as to what evidence is available against these investor companies or as to what and how such alleged admission has been made by their directors. Ld. AO has brought nothing on record to show any adverse material on record to prove such allegation whereas assessee-comp ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... shareholders do not have the capacity to make huge investments in the assessee company. Therefore, he supported the findings of lower authorities and submitted that the addition made by the authorities below after proper verification and enquiry. He also relied on the decision of Hon'ble Bombay High Court in the case of M/s. Pratham Telecom India Pvt. Ltd. vs. DCIT dated 17.09.2018. 10. Considered the rival submissions and material placed on record. We observed that assessee has issued share capital with share premium during this year and the Assessing Officer called for various details to prove identity and creditworthiness of the new 27 shareholders. After considering various documents submitted before the Assessing Officer, the Assessing Officer disallowed the allotment of share capital relating to 8 parties by observing that assessee has not brought on record the respective Directors before him, however, filed additional evidences before the ld. CIT (A). Ld. CIT (A) after considering the remand report sustained the additions. The first shareholder i.e. Omkareshwar Builders Pvt. Ltd. was allotted 70,000 shares by the assessee and received Rs. 70,00,000/- from this company. It w ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Y 2012-13 and also relied on the decision of ITAT, Calcutta in the case of DCIT vs. M/s. Surya Alloys Industries Ltd. in ITA No.2253/Kol/2013 order dated 10.08.2016 and ITAT, Ahmedabad in the case of Deem Roll Tech Ltd. vs. DCIT in ITA No.437/Ahd/2018 order dated 11.08.2020. The first decision relied by the assessee is distinguishable considering the fact that in those decisions, the payments were received by them subsequently and the reasons for such late payments were explained and the issue involved in those cases are share application money and not share allotment. Thus, share application money was subsequently received and it was held that capacity should be analysed on the date of realization. Even in the case of Deem Roll Tech Ltd., the issue involved in that case is relating to share application money not share allotment. However, in the present case, the issue involved is allotment of shares and the assessee has clearly indicated that the assessee has received the cheque and made the allotment that means what is relevant is allotment of shares and confirmation made by the assessee that assessee has already received the relevant cash and as per the provisions of section 39 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e has merely submitted the information what was already available on record and capacity of the shareholders who made the investments were never proved by the assessee. Therefore, we are inclined to agree with the tax authorities that assessee has proved the identity and failed miserably to prove the capacity of the investors. However, we are inclined to give conditional benefit to the assessee to submit the details of allotment of shares by the respective investors, who has shown the source of funds received as share application pending allotment. If the assessee submits the allotment of the shares in the subsequent assessment year then we direct Assessing Officer to consider the same as genuine transaction and the assessee has proved the capacity of the investors. In case, it is not submitted within a period of three months from the date of this order, the Assessing Officer can proceed to sustain the addition. Accordingly, we dismiss the grounds raised by the assessee and sustained the addition made by the Assessing Officer with the above directions. 15. In the result, the appeal filed by the assessee is partly allowed. Order pronounced in the open court on this 11th day of Oct ..... X X X X Extracts X X X X X X X X Extracts X X X X
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