2015 (4) TMI 906 - AT - Income Tax

Addition u/s 68 of the Income tax Act, 1961 - Unexplained share application money - Share application money received from outside India, credit worthiness of investor not established - Held that - In respect of share application received from first five parties as mentioned in para 3, the AO observed that all the five companies were functioning from common premises; all had opened accounts in the same bank, all had received share application money either on the same day or the next date of deposit in the bank account. Thus, a number of peculiar features noted in all the five transactions clearly revealed that these were bogus transactions so as to dislodge assessee s claim of genuineness. The CIT(A) after recording detailed finding at para 9 of his appellate order further fortified the action of the AO. The findings recorded by lower authorities have not been controverted by Ld. AR by bringing any positive material on record. Accordingly we do not see any reason to interfere with the findings of Ld. CIT(A) resulting into confirmation of addition of ₹ 38,75,000/- in respect of five parties mentioned at para 3 of this order. - Decided against the assessee. Share application money received outside India - In respect of share application money received from Smt. Nirmala Barmecha, we found that Smt. Nirmala Barmecha is a none resident Indian, residing in Israel. The assessee has filed a bank statement to substantiate remittance of money to assessee company. Sources of money was also substantiated by filing the Joint Bank Account of Smt. Nirmala Barmecha with her husband. The Bank statement which is a copy of foreign Currency Account Statement , reveals withdrawal of US Dollar 2,50,000/- on 15/2/2007 and a further withdrawal of US Dollar 2,00,000/- on 26.2.2007. The certificate of bank for remittance from the Israeli Accountant dated November 25, 2001 was also filed certifying that source of money was deposits/ savings in her joint account with her husband. We also find that as per the income tax return filed by the Smt. Nirmala Barmecha at India, she was having capital exceeding ₹ 3.4 crores, with investments mainly, in shares and debentures and income arising therefrom amount to ₹ 4.04 lacs which has been also offered for tax.The detailed findings recorded by CIT(A) with regard to identity, genuineness and creditworthiness of Smt. Nirmala Barmecha has not been controverted by Ld. DR by brining any positive material on record. Accordingly we do not see any reason to interfere in the findings recorded by the CIT(A) resulting into deletion of addition of ₹ 1,98,49,900/- received on account of share application money from Smt. Nirmala Barmecha. - Decided against the revenue.

Summary

Issues Involved:
1. Addition of Rs. 1,98,49,900/- under Section 68 of the Income Tax Act.
2. Addition of Rs. 38,75,000/- under Section 68 of the Income Tax Act.

Detailed Analysis:

1. Addition of Rs. 1,98,49,900/- under Section 68 of the Income Tax Act:

The assessee, engaged in the manufacture of diamond-studded jewelry, received various sums towards share capital subscriptions. A sum of Rs. 1,98,49,900/- was received from Smt. Nirmala Barmecha, a non-resident Indian residing in Israel. The Assessing Officer (AO) questioned the creditworthiness of the investor, dismissing the bank statement provided by the assessee due to it being partially in Israeli. The CIT(A) deleted the addition, observing that the identity of the investor and genuineness of the transaction were established beyond doubt. The bank statements, though partly in Israeli, showed clear transactions in English, corroborating the remittance certificates from Bank of India. Further, the appellant provided an English translation of the Israeli bank statement during the appeal, confirming the transactions. The CIT(A) noted that Smt. Nirmala Barmecha had substantial capital and investments in her Indian income tax return, proving her financial capacity. The Tribunal upheld the CIT(A)'s findings, noting that the detailed evidence provided sufficiently established the identity, genuineness, and creditworthiness of the investor, thus deleting the addition of Rs. 1,98,49,900/-.

2. Addition of Rs. 38,75,000/- under Section 68 of the Income Tax Act:

The AO added Rs. 38,75,000/- received from five companies towards share capital, doubting the genuineness of the transactions due to peculiar features such as all companies operating from the same premises, having accounts in the same bank, and showing minimal income in their tax returns. The CIT(A) confirmed this addition, agreeing with the AO's assessment that the creditworthiness and genuineness of the transactions were not established. The Tribunal upheld this decision, noting that the findings of the lower authorities were not countered by the assessee with any positive material. The peculiar features noted by the AO indicated that the transactions were not genuine, thus justifying the addition of Rs. 38,75,000/-.

Conclusion:

The Tribunal dismissed both the appeals of the Assessee and the Revenue. The addition of Rs. 1,98,49,900/- was deleted due to sufficient evidence proving the identity, genuineness, and creditworthiness of the investor, Smt. Nirmala Barmecha. However, the addition of Rs. 38,75,000/- was upheld due to the lack of credible evidence establishing the genuineness and creditworthiness of the transactions with the five companies. The order was pronounced in open court on 13.02.2015.