9911796707
TMI Blog2011 (6) TMI 795X X X X Extracts X X X X X X X X Extracts X X X X ..... ing black money into white money and the ld.CIT(Appeals) ought to have held that in such circumstances, the Assessing Officer is entitled to pierce the corporate veil. 3. The brief facts of this issue are that the AO while doing the scrutiny assessment observed that the assessee company has received share application from four parties namely :- (i) M/s. East Metaliks Ltd. (ii) M/s. Bhagwati Management Ltd. (iii) M/s. Mahavir Advisory Ltd. and (iv) M/s. Bhagirath Management Ltd. On enquiry he observed that the assessee was having its Account No.848116 with ABN Amro Bank in which whole of the share premium was received during the year. On verification it was seen that before receipt of the share premium in the assessee s ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ansfer entries were routed through and finally received in the account of the assessee company s account. 3.1. The AO further conducted the enquiries through Inspector and finally concluded that the existence of the share applicant companies and other unknown companies are only in paper. Accordingly, their creditworthiness to invest such huge money in assessee company remains unestablished and unverified. Therefore, it is concluded that the entire share capital and premium amount are the undisclosed money of the assessee company invested in the garb of share capital. Hence the entire amount of ₹ 18,39,52,000/- is considered as assessee s undisclosed cash credit u/s 68 of the IT Act and added to the total income of the assessee. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tal llnk i.e. flow of funds from appellant company to the share applicant companies. In the absence of such a link or nexus, it is not correct to conclude that the said share capital actually belonged to, or were owned by the appellant. As such treating such share capitol as income derived by the appellant from undisclosed sources is not correct. Even otherwise, there are judicial rulings including Supreme Court decisions that amounts received towards share capital are totally outside the scope of assessment u/s. 68, even if they are unproved, on the ground that they cannot be treated as cash credit falling within the purview of section 68. following the ratio laid down by Hon ble Supreme Court in CIT VS. Stellar Investment Ltd (2001) 251 I ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... channel, the assessee has to prove the existence of the person in whose name the share application is received. Once the existence of the investor is proved, it is not further the burden of the assessee to prove whether that person itself has invested the said money or some other person has made in vestment in the name of that person. The burden then shifts on to the revenue to establish that such investment has come from the assessee company itself. Once the receipt of the confirmation letter from the creditor is proved and the identity and the existence of the investor have not been disputed, no addition on account of share application money in the name of such investor can be made in the assessee s hands. The Hon ble Supreme Court in t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nce most of the share applicants have made payments prior to 12.08.2004. He further contended that the AO could not treat the share applicants as bogus since in the subsequent years the Hon ble High Court has confirmed the amalgamation of these companies by amalgamation order dated 15.02.2005/22.06.2005 which was placed at pages 91-123 of the paper book. Therefore, he contended that the facts narrated by the AO in rejecting the assessee s contention is factually incorrect. Therefore, he requested to upheld the order of the ld. CIT(A). 6. Having heard the rival submissions and on careful perusal of the materials available on record, it is observed that the assessee company has received the share application money much prior to 12.08.2004 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... his part called for the details from the assessee and also from the share applicants and analysed the facts and ultimately observed certain abnormal features, which were mentioned in the assessment order. The Assessing Officer, therefore, concluded that nature and source of such money was questionable and evidence produced was unsatisfactory. Consequently, the Assessing Officer invoked the provisions under section 68/69 of the Income Tax Act and made addition of ₹ 24,00,000/-. On appeal the learned CIT(A) by following the decision of the Supreme Court in the case of CIT vs. M/s. Lovely Exports Pvt. Ltd. reported in (2008) 216 CTR 195 allowed the appeal by holding that share capital/premium of ₹ 24,00,000/- received from t ..... X X X X Extracts X X X X X X X X Extracts X X X X
|
