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TMI Blog2015 (8) TMI 604X X X X Extracts X X X X X X X X Extracts X X X X ..... m time during the course of assessment proceedings. 4. That the interest as charged under Section 234B and 234C is illegal on various factual and legal grounds. 5. That the demand of Rs. 95,22,541/- created, pursuant to this assessment which is a disputed demand, be kindly stayed till disposal of the appeal. 6. That the several observation as made and inferences drawn are untenable, incorrect, unwarranted and uncalled for. 7. That the Appellant may take any other Ground or Grounds at the time of hearing of Appeal with the kind permission of the learned ITAT." 3. Ground Nos. 3, 5, 6 & 7 are general in nature so do not require any comments on our part. 4. Vide Ground No. 1 the grievance of the assessee relates to the confirmation of addition of Rs. 1,90,00,000/-made by the AO u/s 68 of the Income Tax Act, 1961 (hereinafter referred to as the Act) on account of share capital. 5. Facts related to this issue in brief are that the assessee filed the return of income through e-filing on 22.09.2010, declaring an income of Rs. 30,77,084/-. Later on, the case was selected for scrutiny. During the course of assessment proceedings, the AO noticed that the assessee had received share appl ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of transaction stands proved as per law." 7. The AO observed that the assessee only relied upon the PAN No. for the identity of the share application money subscribers, Balance Sheet and account payee cheques for capacity and genuineness of the aforesaid parties. He further observed that he had completed an assessment of M/s Parsandi Biotech Park Pvt. Ltd., Shastri Nagar, Meerut wherein share capital of Rs. 1,00,00,000/-subscribed by M/s Shalini Holdings Ltd. was held to be bogus. The AO observed that on enquiry, it was found that none of the Directors was available on the given address of the aforesaid companies and both were also not functioning and that the neighbours were also not aware of these companies. The AO extracted the following tabular matrix in respect of both the companies: S. No. Name of Company Returned income (In Rs.) Paid up capital (In Rs.) Share premium capital (In Rs.) Investment made in the assessee co. (In Rs.) No. of other cos. wherein investment made. Total investment in other cos. (In Rs.) 1. M/s Apoorva Leasing Finance & Investment Co. Ltd. 82,225 19.97 crores 99.88 crores 20 lacs 129 118.70 crores 2. M/ ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... acted to assessee company for investment in shares." 9. The AO accordingly made the addition of Rs. 1,90,00,000/- u/s 68 of the Act. The reliance was placed on the following case laws: * Sumati Dayal 214 ITR 801 (SC) * Macdowell & Co. 154 ITR 148 (SC) * Azadi Bachao Andolan 263 ITR 706 (SC) * Avarsale Automation Ltd. 266 ITR 178 (Kar.) * Nivedan Vanijya Niyojan Ltd. 263 ITR 623 (Cal) * Gyan Chand Anil Kumar 251 ITR 559 (MP) Ø Hindustan Tea Trading Co. Ltd. 263 ITR 289 (Cal) * Sophia Finance Ltd. 205 ITR 95 (Del) (FB) * Ram Lal Aggarwal 280 ITR 547 (All) * Precision Finance (P) Ltd. 208 ITR 465 (Cal) * Anil Rice Mill 282 ITR 236 (All) * CIT Vs M/s Nova Promoters & Finlease Pvt. Ltd., ITA No. 342 of 2011 (Del) 10. Being aggrieved the assessee carried the matter to the ld. CIT(A) and submitted as under: "(i) Assessee Company on 24th December 2012 has furnished to the Ld. Assessing Officer the necessary details of the shares issued which include: (a) Copy of Form No. 2 i.e. Return of allotment of shares along with Board Resolution and name and address of the assessee. (b) Copy of balance sheets of the applicants. (c) Copy of Bank statement of the appl ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Construction and Leasing India Ltd. (2007) 10 MTC 271 (ITAT, LKO) * Uma Polymers (P) Ltd. Vs DCIT (2006) 100 ITD 1 (Jodh) (tm) * Indradhan Agro Products Ltd. Vs DCIT (2004) 89 TTJ 1958 (Del) * DCIT Vs Arjun Cold Storage and Gen. Mills (P) Ltd. (2009) 13 MTC 1001 (ITAT, Del) * Barkha Synthetics Ltd. Vs ACIT (2005) 197 CTR 432 (Raj.) * Aravali Trading Co. Vs ITO (2010) 187 Taxman 338 (Raj.) * Murlidhar Lahorimal Vs CIT 280 ITR 512 (Guj.) * CIT Vs Daulatram Rawatmal (1973) 87 ITR 349 (SC) * India Rice Mill Vs CIT (1996) 218 ITR 508 (All) * CIT Vs Jauhari Mal Goel (2006) 201 CTR 54 (All) * Tolaram Gaga Vs CIT (1966) 59 ITR 632 (Assam) * Gyan Prakash Bhatia Vs ITO (2006) 8 MTC 87 (ITAT, Del) * S. Hastimal Vs CIT (1963) 49 ITR 273 (Mad) * Sarogi Credit Corporation Vs CIT 103 ITR 344 (Pat.) * Nemi Chand Kothari Vs CIT (2004) 136 Taxman 213 (Guj.) * Mulk Raj Verma Vs ITO (2006) 8 MTC 671 (ITAT, LKO) * Orient Trading Co. Ltd. Vs CIT (Central) Calcutta 49 ITR 723 (Bom) * Sundarmal Bagaria Vs CIT 10 CTR 349 (Pat.) * ACIT Vs M/s Dhanvantri Jeewan Rekha (P) Ltd. (2005) 6 MTC 204 (ITAT, Del.) 12. The ld. CIT(A) asked the remand report from the AO who re ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e. The ld. CIT(A) further observed that the fact that the ACIT, Central Circle-23, New Delhi has accepted returned income of entry providers does not help the case of the assessee. He also observed that the transactions of the assessee with entry providers were not real transactions but only paper transactions for which the conduit companies had earned commission income. Therefore, accepting the returned income of commission, the assessee in hands of the entry providers only strengthens the conclusion that the assessee had not been able to discharge the onus cast upon him u/s 68 of the Act of proving the credit entries from these known entry provider concerns as genuine. The ld. CIT(A) also observed that the facts of the present case are distinguishable from the facts relied by the assessee in the case of M/s Prasandi Biotech Pvt. Ltd. wherein CIT(A), Meerut had granted relief by following the judgment of the Hon'ble Supreme Court in the case of CIT Vs Lovely Export Pvt. Ltd. reported at 216 CTR 195. Accordingly, the addition made by the AO was confirmed. 14. Now the assessee is in appeal. The ld. Counsel for the assessee reiterated the submissions made before the authorities belo ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... o application to the facts of the assessee. It was further stated that the assessee company is a closely held public limited company and has fulfilled all the provisions prescribed to issue share capital under the Companies Act and filed its return of allotment of shares in Form No. 2, copies of which is placed at pages 182 to 188 of the paper book. It was further stated that the reliance placed by the ld. CIT(A) in the case of M/s Nova Promoters Finlease Ltd. was misplaced. It was contented that the share applicant were registered with ROC and were filing returns of income, having PANs/Bank Account, they furnished share application form, memorandum of association, certificate of incorporation etc. The aforesaid documentary evidences were overlooked by the AO and the ld. CIT(A). It was further contended that the AO never called upon the assessee to produce the Directors or employees which is evident from the order sheet entries (copy of which is placed at page nos. 8 to 10 of the assessee's paper book). It was further stated that the assessment order in the case of Share Applicant Companies had been passed under sections 153C/153A of the Act. Therefore, the assessee discharged the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ctive bank account statement, copies of which are placed at page nos. 127 and 153 to 156 in the case of M/s Apoorva Leasing Finance & Investment Pvt. Ltd. and M/s Shalini Holdings Ld. respectively. Both the above said parties were having worth Rs. 119,85 crores and Rs. 124.87 crores respectively, which is evident from their respective balance sheets, copies of which are placed at page nos. 136 to 141 and 165 to 181 in the case of M/s Apoorva Leasing Finance & Investment Pvt. Ltd. and M/s Shalini Holdings Ltd. respectively. After receiving the share application money, the shares were allotted to both the parties and copy of Form No. 2 was filed with Registrar of Companies with respective resolution, copies of which are placed at page nos. 183 to 188 of the assessee's paper book and the receipt of the Registrar of companies is placed at page no. 182 of the assessee's compilation. From the above documents, it is clear that the companies who applied for the shares of the assessee were inexistence, those were assessed to tax and filing their regular return of income. The share application money was drawn from their respective bank account and deposited in the bank account of the assesse ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... resent case, the assessee discharged the onus cast upon it to prove the identity and creditworthiness of the share applicant and genuineness of the transaction. Therefore, the addition made by the AO and sustained by the ld. CIT(A) was not justified. Accordingly, the same is deleted. 21. The next issue vide Ground No. 2 relates to the sustenance of addition of Rs. 5,00,000/- an adhoc basis towards out of car running & maintenance expenses and Rs. 46,532/- out of depreciation of the cars. 22. Facts related to this issue in brief are that the AO during the assessment proceedings noticed that the assessee owned 8 vehicles in its name and debited corresponding expenses in the profit and loss account to the extent of Rs. 10,93,514/-, By considering the turnover and volume of business, the AO considered the maintenance charges of vehicles on higher side, he estimated the total running of the vehicles at 21600-25200 km and worked out the cost of petrol to Rs. 1,09,200/- by considering the average rate of consumption at 15 km per litre and the rate of petrol at Rs. 65 per litre. He also estimated maintenance of 6 vehicles @ 25000/- per vehicle at Rs. 1,50,000/-. The AO estimated the expe ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ddition without pointing out any discrepancy in books of accounts/Vouchers is not tenable in the eyes of the Law and the depreciation so disallowed by him also needs to be deleted in full. (vii) Now looking to the various facts and the contradiction in the order of ld. Assessing Officer the addition of Rs. 5,00,000/- in Vehicle Expenses and Rs. 46,532/- in depreciation needs to be deleted." 24. The ld. CIT(A) after considering the submissions of the assessee confirmed the addition made by the AO by observing that the personal use of vehicle is not ruled out. A reference was made to the following case laws: * Swadeshi Cotton Mills Co. Ltd. Vs CIT 63 ITR 57 (SC) * Bengal Enamel Works Ltd. Vs CIT 77 ITR 119 (SC) * Jitendra Printing Works Vs CIT 128 ITR CTR 255, 226 (Raj.) 25. Being aggrieved the assessee is in appeal. The ld. Counsel for the assessee reiterated the submissions made before the authorities below and further submitted that the ld. CIT(A) had not dealt with the submissions made by the assessee and further submitted that all the expenses were fully vouched and verifiable, the books of accounts were duly audited. Therefore, the disallowance on mere presumption on ..... X X X X Extracts X X X X X X X X Extracts X X X X
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