2015 (8) TMI 556 - AT - Income Tax

Unexplained share capital/share application money - Held that - Factual finding recorded in the assessment order as well as impugned order and the assertion made by the ld. respective counsel are kept in juxtaposition and analysed, we find that the Tribunal has already deliberated upon various judicial pronouncements including the off-quoted decision from Hon ble Apex Court in the case of Lovely Exports Ltd.; 2008 (1) TMI 575 - SUPREME COURT OF INDIA . In the present appeal the fund was claimed to be received from Omex Management (P) Ltd. Itself. This report was never contradicted by the assessee by bringing any adverse material on record. Before us, the ld. Counsel for the assessee merely contended that the search operation in the case of Omex Management P. Ltd. was done on 16.9.2009 whereas the transaction in the case of the assessee was made in 2007. We are not convinced with this argument because the director of Omex Management P. Ltd. was never produced by the assessee in its support, evidencing that it was not an accommodation entry, more specifically, when the report/statement were duly forwarded to the assessee for its comments. The financial statement of Standard Dealers P. Ltd. was duly examined by the Assessing Officer, wherein total receipt during the period was of a meagre sum of ₹ 3,51,449/-, virtually no business was carried out by the company. The expenses booked by this company comprises of administrative expenses, resulting into, book profit of ₹ 25,311/- only. In view of these facts, how a figure of the disputed amount can be believed to be diverted to others. The assessee has claimed that M/s. Standard Dealers P. Ltd. contributed the capital at a premium of nine times of the face value of its shares. The human probability does not permit to believe the story. The assessee, at any stage right from the assessment itself, neither brought on record any positive material in its favour nor cross-examined the director of the company Omex Management P. Ltd. which was brought to the notice of the assessee and the report dated 10.12.2009 of DDIT(Inv.), Kolkata wherein it was tendered that they are providing accommodation entries. We further find that due enquiry has been made by the Assessing Officer before making the impugned addition. When the source of the impugned amount is itself bogus, the net result cannot be genuine unless and until, positive material is brought on record to contradict the finding of the Department. In view of these facts, we find no infirmity in the conclusion drawn by the ld. CIT(A). It is affirmed. - Decided against assessee.

Summary

Issues Involved:
1. Addition of Rs. 25 lacs as unexplained share capital/share application money.
2. Confirmation of income at Rs. 27,54,470/-.
3. Disallowance of Rs. 1 lac out of telephone expenses.

Issue-wise Detailed Analysis:

1. Addition of Rs. 25 lacs as unexplained share capital/share application money:
The assessee challenged the addition of Rs. 25 lacs on account of alleged unexplained share capital/share application money. The main argument was that the genuineness of the transaction was not disputed, and therefore, the addition was wrongly upheld. The Department contended that the issue was covered by a previous decision of the ITAT in the case of M/s. Agrawal Coal Corporation Ltd. & others, where similar issues were discussed extensively. The Tribunal noted that the assessee failed to establish the identity, creditworthiness, and genuineness of the transaction. The companies involved were found to be paper companies providing accommodation entries, and the addresses provided were fictitious. The Tribunal concluded that the assessee did not discharge the onus of proving the identity of the share applicants, and thus, the addition was justified.

2. Confirmation of income at Rs. 27,54,470/-:
The assessee's income was determined and confirmed at Rs. 27,54,470/-. This included the addition of Rs. 25 lacs as unexplained share capital/share application money. The Tribunal upheld this determination based on the failure of the assessee to provide satisfactory evidence regarding the identity and creditworthiness of the share applicants. The Tribunal emphasized that the initial burden of proof lies with the assessee, which was not discharged in this case.

3. Disallowance of Rs. 1 lac out of telephone expenses:
The Tribunal found that the disallowance of Rs. 1 lac out of total telephone expenses of Rs. 12,29,154/- was made without assigning any reason. It was noted that since the company is a juristic person, no disallowance of personal nature can be made in the case of a company. Therefore, the Tribunal reversed the orders of the authorities below on this issue and allowed the appeal of the assessee regarding the disallowance of telephone expenses.

Conclusion:
The Tribunal dismissed the appeal of the assessee regarding the addition of Rs. 25 lacs as unexplained share capital/share application money and the confirmation of income at Rs. 27,54,470/-. However, it allowed the appeal regarding the disallowance of Rs. 1 lac out of telephone expenses. The order was pronounced in the open Court in the presence of representatives from both sides.