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2022 (10) TMI 1097 - AT - Income TaxAddition u/s 68 - share application money - preference shares - additions as dubious transaction for which no proper explanation was given - HELD THAT - We have no doubt that the assessee was provided with ample opportunities to furnish details pertaining to his claim. From the submissions made by the assessee, notice u/s 133(6) was issued by the AO to the concerned parties which was found to be returned as unserved . The assessee has not proved the identity, creditworthiness of the investors and genuiness of the transaction. CIT(A) has rightly relied on the decision in the case of PCIT vs NRA Iron Steel Pvt Ltd 2019 (3) TMI 323 - SUPREME COURT wherein it was held that in the present case, assessee has failed to discharge initial onus cast upon him to prove the identity and creditworthiness of the investors and the genuineness of the said transaction. CIT(A) has relied on the said decision alongwith other judicial precedents such as the Hon ble Calcutta High Court in the case of CIT vs Precision Finance Pvt Ltd 1993 (6) TMI 17 - CALCUTTA HIGH COURT and the Apex Court judgement in the case of Kale Khan Mohammad Hanif 1963 (2) TMI 33 - SUPREME COURT and Roshan Di Hatti 1977 (3) TMI 3 - SUPREME COURT We are of the considered opinion that ground 1 raised by the assessee deserves to fail as we do not find any infirmity in the order of the CIT(A) on this ground. In the result, ground 1 is dismissed. Disallowance of legal and professional charges - HELD THAT - The lower authorities has disallowed the said expenses on the ground that the assessee has failed to submit documentary evidence to substantiate the assessee s claim that these were business expenses and not payment made for legal and professional expenses for the purchase of factory premises. CIT(A) has relied on the decision in the case of Calcutta Agency Ltd 1950 (12) TMI 4 - SUPREME COURT wherein the burden of proving the necessary facts pertaining to the claim of expenses is on the assessee. The assessee has failed to furnish evidence to prove that these were expenses for the purpose of business and we are of the opinion that the burden of proving the profits / loss of the assessee, is on the assessee. In the present case, assessee has not produced any such evidence before the lower authorities nor before us to substantiate its claim. In view of our above observation, we deem it fit to dismiss this ground of appeal raised by the assessee. Disallowance pertaining to Registrar of Companies filing fees, registration and stamp duty on the grounds that the same is a capital expenditure - HELD THAT - The assessee has stated that the said expenses were incurred for issue of preference shares. The assessee has claimed the same to be for the purpose of business as it was revenue in nature. It is observed that the CIT(A) has reiterated the view of the AO that the same is in the nature of capital expenditure as against the assessee s claim of revenue expenditure. CIT(A) has relied on the decision in the case of Punjab State Industrial 1996 (12) TMI 6 - SUPREME COURT wherein it was held that the fees paid to the Registrar of Companies is of capital base of the company and was directly related to capital expenditure incurred by the company and although incidentally that would help in the business of the company and may also help in profit making, it still remains the character of the capital expenditure since the expenditure was directly related to the expansion of the capital base of the company. We do not differ with the view taken by the CIT(A) or by the lower authorities in holding that the expenses pertaining to fees paid to Registrar of Companies and other ancillary expenses are for the expansion of the capital base of the assessee company which are directly related to the capital expenditure incurred by the assessee inspite of the fact that the same is incidental, still, it would be held in the business and profit making of the assessee we hold that it is in the nature of capital expenditure and also on the fact that the assessee is not before us to controvert this view taken by the lower authority, we hereby dismiss this ground of appeal raised by the assessee.
Issues:
1. Addition under section 68 for dubious preference shares. 2. Disallowance of legal and professional charges as capital expenditure. 3. Disallowance of ROC filing fees and registration expenses. Issue 1: Addition under Section 68 for Dubious Preference Shares The assessee's appeal was against the order of the Ld. Commissioner of Income-tax (Appeals) under section 250 of the Income-tax Act, 1961 for the assessment year 2010-11. The assessing officer added Rs. 8,00,000 under section 68 of the Act, considering preference shares a dubious transaction due to lack of proper explanation. The assessee failed to provide satisfactory details despite submitting information and explanations during assessment proceedings. The Ld. CIT(A) dismissed the appeal, citing non-compliance and suspicion regarding transactions with certain companies. These transactions were deemed colorable devices for tax evasion. The Ld. CIT(A) upheld the addition of Rs. 8 lakhs as unexplained cash credit under section 68. The Tribunal, after considering submissions and legal precedents, affirmed the Ld. CIT(A)'s decision, as the assessee failed to prove the legitimacy of the transactions. Issue 2: Disallowance of Legal and Professional Charges The assessing officer disallowed legal and professional charges of Rs. 4,11,935, treating them as capital expenditure related to the purchase of factory premises. The assessee contended that these expenses were for business purposes, not directly linked to the factory purchase. However, the lower authorities disallowed the expenses due to insufficient documentary evidence supporting the business claim. The burden of proof regarding expenses lies with the assessee, as per legal precedents. As the assessee failed to substantiate the business purpose of the expenses, the Tribunal upheld the disallowance, dismissing the appeal on this ground. Issue 3: Disallowance of ROC Filing Fees and Registration Expenses Regarding the disallowance of Rs. 48,805 for ROC filing fees and registration expenses, the assessee argued that these were revenue expenditures for issuing preference shares. However, the Ld. CIT(A) and lower authorities considered these expenses as capital in nature, related to expanding the company's capital base. Citing legal precedents, including the Supreme Court's decision in Punjab State Industrial vs. CIT, the Tribunal agreed with the lower authorities. The expenses were deemed capital expenditures directly linked to the company's capital base expansion. As the assessee did not challenge this view and failed to provide contrary evidence, the Tribunal dismissed the appeal on this ground. The Tribunal found no merit in the grounds raised by the assessee and dismissed the appeal, upholding the additions and disallowances made by the assessing officer and the Ld. CIT(A). The Tribunal's decision was based on the lack of substantiating evidence and non-compliance by the assessee throughout the proceedings.
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