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2018 (1) TMI 1618 - AT - Income TaxAddition u/s 68 - Bogus share capital and share premium received by assessee from the 11 private Limited companies - genuineness of the transactions and creditworthiness of the subscribers to the shares not proved - HELD THAT - Assessee has completely produced the evidences before the AO i.e. the identity of the shareholder by filing the registered address with ROC, PAN No. along with copy of returns of income furnished with particular Ward of the department of the investors. The assessee has also received money from shareholders through account payee cheque and issued documents such as share certificate, return of allotment filed with ROC forms which were filed before the AO. The assessee has also filed copies of bank statement of the subscribers showing that it had sufficient balance in its accounts to enabled the subscriber to subscribe the share capital. In view of these facts and circumstances, once the AO has not rebutted the evidences, the AO cannot disbelieve the same. As relying on M/S. GAGANDEEP INFRASTRUCTURE PVT. LTD. 2017 (3) TMI 1263 - BOMBAY HIGH COURT in view of the voluminous documentary evidence, only because those persons had not appeared before the AO would not negate the case of the Assessee. We have also made enquiry from the learned Sr. Departmental Representative, whether the investors or this company is a Shell company or in the list prepared by Ministry of Corporate Affairs, Govt. of India. The learned Sr. DR, stated that this information is not available with the department. We made enquiry from the learned Counsel for the assessee whether this company has been strike off from the Registrar Of Companies or not, the learned Counsel stated that it is very much on the register of Registrar Of Companies. In view of these facts, we reach to a conclusion that this is existing company and even the investors are existing. - Decided against revenue.
Issues Involved:
1. Admissibility of new evidence by CIT(A). 2. Deletion of addition under Section 68 of the Income Tax Act regarding share capital and share premium. Issue-wise Detailed Analysis: 1. Admissibility of New Evidence by CIT(A): The Revenue contended that the CIT(A) erred in admitting new evidence regarding the parties subscribing to the shares at a premium, despite adequate opportunity being granted during the assessment proceedings. The CIT(A) considered the submissions and additional evidence provided by the assessee, which included the identity, genuineness, and creditworthiness of the shareholders. 2. Deletion of Addition under Section 68: The primary issue was the deletion of the addition of ?22,04,40,000/- made by the AO under Section 68 of the Act. The AO questioned the genuineness of the transactions and the creditworthiness of the subscribers, noting that many notices sent to the parties were returned undelivered, and the assessee failed to produce these parties. CIT(A)'s Observations and Findings: - The CIT(A) thoroughly evaluated the financial statements, confirmations, and other documents provided by the assessee. - The CIT(A) noted that the premium charged by the appellant company was based on the future potential of land development projects and was supported by valuation reports. - For each of the nine companies where the AO raised doubts, the CIT(A) provided detailed analysis proving their identity, creditworthiness, and genuineness of transactions: - Prabhav Industries Limited: Old company with substantial equity, reserves, and cash balance. - Empower Industries India Limited: Old company with significant equity, reserves, and investments. - Harekrishna Securities Private Ltd: Old company with substantial share application money and investments. - Signora Finance Private Limited: Old company with significant equity, reserves, and investments. - Sonal Cosmetics (Export) Limited: Old company with substantial equity and investments. - Raw Gold Securities Pvt. Ltd: Old company with significant equity, reserves, and investments. - Sonal SilChem Limited: Old company with substantial equity and investments. - Dynachem Pharmaceuticals (Exports) Limited: Old company with significant equity and investments. - Sonal International Limited: Old company with substantial equity and investments. - For each company, the CIT(A) found that the payments were made through banking channels, and the companies were holding the shares, proving no rotation of money. - The CIT(A) also addressed the AO's concerns about two additional companies (Alken Management and Financial Services Pvt. Ltd. and Lilac Medicines Pvt. Limited), finding that these companies had the capacity to make investments and had not been proven to be shell companies. Tribunal's Observations: - The Tribunal noted that the AO's approach was based on suspicion rather than concrete evidence. - The Tribunal emphasized that the identity of the shareholders, the genuineness of the transactions, and the creditworthiness of the investors were sufficiently proven by the assessee. - The Tribunal referenced the Hon’ble Bombay High Court's decisions in CIT vs. Gagandeep Infrastructure Pvt. Ltd. and CIT vs. Orchid Industries Pvt. Ltd., which supported the assessee's case. Conclusion: The Tribunal upheld the CIT(A)'s decision to delete the addition made under Section 68, confirming that the assessee had provided adequate evidence to prove the identity, genuineness, and creditworthiness of the shareholders. The Tribunal dismissed the Revenue's appeal, affirming that the CIT(A)'s order was correct and based on a thorough evaluation of the evidence. The appeal of the Revenue was dismissed.
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