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TMI Blog2018 (4) TMI 1417X X X X Extracts X X X X X X X X Extracts X X X X ..... various documents filed before him and decide the issue in the light of our above observation. While doing so, he should keep in mind the decision of the Hon’ble Delhi High Court in the case of Victor Electrode (2010 (5) TMI 62 - DELHI HIGH COURT ). - Appeal filed by the assessee for statistical purposes - ITA No. 679/Del/2015 - - - Dated:- 28-2-2018 - Shri R. K. Panda, Accountant Member And Shri Kuldip Singh, Judicial Member Assessee by : Shri V. K. Tulsian, CA Department by : Shri Amit Jain, Sr.DR ORDER Per R. K. Panda, AM This appeal filed by the assessee is directed against the order dated 14.11.2014 of the CIT(A)- 2, Faridabad relating to assessment year 2010-11. 2. The only ground raised by the assessee reads as under :- 1. Whether the Ld. CIT(A) was justified by upholding the Additions made u/s 68 on account of share capital from 13 shareholders out of 15 amounting to ₹ 2,77,00,000/- as unexplained, while Admittedly on record not only details available but remand report are also there, without appreciating the submission, evidence in the right prospective and without any adverse material. 3. Facts of the case, in brief, are that t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... jan Kalan, Mori Gate, Delhi- 110006. 15. Vardhman Sales Pvt. Ltd., A-64, Temple Colony, Samaypur, Delhi-110042. Note: S. K. Fashion is not a company but a proprietorship concern. 4. Vide letter dated 14.03.2013 the assessee submitted the confirmation of the investor companies/concerns along with PAN Numbers. However, in the said submissions, the assessee had not submitted the complete details of those companies such as Income-tax returns, Ledger accounts, Bank statements, etc. in respect of all these companies/concerns. To verify the genuineness of these 15 investor companies/concerns, the Assessing Officer issued notice u/s 133(6) on 19.03.2013. On 22.03.2013, the Assessing Officer gave copies of the letter u/s 133(6) to the Authorized Representative of the assessee and he was asked to establish the identity of the investors and genuineness of the transactions. He also directed the AR to ensure the personal attendance of the principal officers of these 15 investor companies/concerns by 28.03.2013. 5. The Assessing Officer observed that out of 15 letters, 7 letters issued to the companies/concerns at Sl. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... and in the case of S.K. Fashions amounting to ₹ 5,00,000/-. He, however, sustained the addition in the case of remaining companies. While doing so, he analyzed investment made by each and every company which is reproduced as under :- (a) Amarsaria Impex Limited now k/a Shine Gold Builders Ltd., E- 10B, Jawahar Park, Laxmi Nagar, Delhi-110092 :- The appellant filed copy of ITR, Auditors Report and Balance Sheet, Bank Statement, Share Application Form, Board Resolution and Copy of Pan Card. However, in addition to these neutral documentary evidences, the appellant could not produce the Principal Officer of the Co., despite repeated opportunities both during assessment and remand proceedings. As regards whereabouts of the company, as per the remand report dated 04.08.2014, the Inspector attached with the Assessing Officer could not locate the share subscriber at both the addresses given, namely- 3603, First Floor, Chamber 12, Darya Ganj, Delhi-92 and E-108, Jawahar Park, Laxmi Nagar, Delhi-92. In the light of recent Delhi High Court judgements in the case of CIT vs. Globus Securities Ltd. (supra) and CIT vs. N.R. Portfolio (P) Ltd. (supra), the identity of Amarsaria I ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ts (P) Ltd. could not be established by the appellant, by merely filing neutral documentary evidence. Addition of ₹ 25 lacs made by the AO on account of capital contribution of this Co. is thus sustained. (d) Fabrika Industries (India) Ltd. 127, Hari Nagar Ashram, New Delhi-14 :- The appellant submitted copy of ITS, Bank Statement, Balance Sheet, Share Application Form, Board Resolution, Memorandum of Association and PAN Card. Besides, confirmation was also filed by the appellant. The appellant could produce Shri Kuldeep Thakur, one of the Directors of the Co., who confirmed having contributed 30 lacs to the, share capital of appellant company. However, could not explain the source of such investment. Furthermore, the return of income filed by him showed a total income of ₹ 1,03,855/- only. How can a Co. with an annual income of just ₹ 1 lac contribute 30 lacs to the share capital of an un-related Co., that too at a huge premium? Another noticeable factor was that as against subscribed share capital of ₹ 74.50, lacs, the share premium received by Fabrica was 5.53 crores, i.e. more than 7 times the amount of share capital received. All these facts c ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... #8377; 7,90,835/-. It is unimaginable as to how a company with gross receipts of less than 8 lacs would make a capital contribution of ₹ 25 lacs to the appellant Co .. Another feature which is prevalent in appellant's Balance Sheet as well as other Balance Sheets of capital contributors, including the Balance Sheet of S.S. Finvest (India) Pvt. Ltd., was the huge amount of share premium received which was appearing in Reserves and Surplus. Whereas subscribed share capital was only ₹ 5 lacs, share premium received was 6 times the share capital, i.e., ₹ 30 lacs. All these facts prove beyond doubt that the creditworthiness of 5.5. Finvest (India) Pvt. Ltd. could not be established. Furthermore, serious questions can be raised regarding the genuineness of transaction on the basis of aforesaid facts. The net result is that the addition of ₹ 25 lacs made on account of capital contribution of S.S. Finvest (India) Pvt. Ltd. is hereby sustained for failure to pass the creditworthiness of subscriber s test. (h) Chinu Press Parkashan Pvt. Ltd. E-10B, Jawahar Park, Laxmi Nagar, Delhi-110092 :- The Co. contributed 25 lacs to the share capital of the appel ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ealed that the day the amount was given by the Co., similar amount of deposits were received. Since the return of income was not submitted, it is presumed that no return of income was filed by it. As is the case with the appellant company and other capital contributor companies, the Company received a huge amount by way of share premium. As against subscribed share capital of ₹ 2 lacs, the share premium figuring under the head 'Reserves Surplus' is as high as 90 lacs. These facts establish that the creditworthiness could not be established by the appellant. Furthermore, the genuineness of transaction is highly doubtful, in view of the huge premium received by the appellant company from companies which, in turn, also, received huge amounts by way of share premium. The question which may arise in any rational mind is - why a person will pay such a hefty premium for investing in such companies which are non-descript and do not have any great reputation and business to command such a fat premium. Hence, I hold that the AO rightly made addition of ₹ 13 lacs on account of share contribution by Pride Realtech (P) Ltd. (k) Singh Chander Marketting Pvt. Ltd. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ce, on account of failure of tests laid down in Section 68, the addition of ₹ 25 lacs made on account of capital contribution by Vardhman Sales (P) Ltd. is hereby confirmed. 8. Rejecting the various submissions made by the assessee and relying on various decisions, the ld. CIT(A) sustained the addition of ₹ 2.77 crores in respect of the above 13 companies. 9. Aggrieved with such order of the ld. CIT(A), the assessee is in appeal before the Tribunal. 10. Ld. counsel for the assessee strongly objected to the order of the ld. CIT(A). He submitted that in the following five cases, the directors of the investor companies appeared before the Assessing Officer during the remand proceedings and in their statements recorded have confirmed to have invested the amount in the share of the assessee company :- Sl. No. Name of the person Company 1. Jasbir Singh Grover Pride Real Tech (P) Ltd. 2. Kuldeep Thakur Truth Tradex (P) Ltd. 3. Kuldeep Thakur ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nd creditworthiness of the investor companies and genuineness of the transactions. Therefore, addition could not have been made u/s 68 by the Assessing Officer and sustained by the ld. CIT(A). He submitted that in certain cases where the directors have appeared before the Assessing Officer during the remand proceedings, the ld. CIT(A) sustained the addition on the ground that the return of income filed by the investor companies show very meager income and therefore the company does not have any capacity to invest and in certain cases the directors could not substantiate the source of investment. He submitted that when the Balance Sheets of the respective companies show huge capital and free reserve and the directors have appeared before the Assessing Officer in the remand proceedings and confirmed to have invested in the shares of the assessee company the ld. CIT(A) without appreciating the facts properly could not have sustained the addition. Referring to various decisions, he submitted that meager income/low income cannot be a ground to doubt the creditworthiness of a company/concern if it has otherwise adequate capital. 14. So far as the remaining companies are concerned, he ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d address of the shareholders, their PAN, GIR numbers, cheque number, name of the bank. The Assessing Officer did nothing except issue summons which were returned with the remark not traceable . The Assessing Officer ought to have found out their details through PAN cards, Bank Account details or from the banker so as to reach the shareholder since all the relevant material details and particulars were given by the assessee to the Assessing Officer. The appeal filed by the Revenue was accordingly dismissed. 18. Referring to the decision of the Hon ble Delhi High Court in the case of Dwarkadheesh Investment reported in 330 ITR 298, he submitted that the Hon'ble High Court in the said decision has held that if the company establishes the identity of the subscriber, then burden shifts to the Department unless and until any evidence to show that funding was done by the company. 18.1 Referring to the decision of the Hon ble Bombay High Court in the case of Pr.CIT vs. Pardise in land shipping Pvt. Ltd. vide order dated 30.11.2017, he submitted that the Hon'ble High Court in the said decision, following the decision of the Hon'ble Supreme Court in the case Orissa Corpor ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... statements showing deposit of all these receipts, the assessee had discharged its primary onus as per law of proving the identity of all the shareholders. It was for the AO to put forth some adverse material in case he was not satisfied with the claim of the assessee. The AO should have brought such material on top of the table with an opportunity of rebuttal and/ or cross examination to the opposite party. The Court relied on the ruling in Lovely Exports case (SC). 20. Referring to the decision of Jaipur Bench of the Tribunal in the case of Bharti Syntex Ltd. vs. DCIT reported in (2011) 137 ITJ 82, he submitted that the Jaipur Bench of the Tribunal in the said decision has held that where amounts were received by cheque, the corporate share applicants are assessed to tax, confirmations with copies of share certificates, bank statement, memorandum of articles, copy of share application money, audited balance sheet and P L a/c are filed, the assessee has discharged its onus .Even if no cross - examination was allowed to the assessee, adverse inference can not be drawn. 21. Referring to the decision of the Hon ble Delhi High Court in the case of Pr.CIT vs. N.C. Cables report ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 377; 31,00,000/- share premium of ₹ 2,79,00,000/- from 15 companies/concerns, the details of which are already given in the preceding paragraphs. Since the assessee failed to prove before the Assessing Officer regarding the identity and creditworthiness of the share applicants and the genuineness of the transactions, the Assessing Officer, invoking the provisions of section 68 made addition of ₹ 3,10,00,000/- to the total income of the assessee. We find the assessee before the ld. CIT(A) filed certain additional evidences, which were admitted by the ld. CIT(A). The ld. CIT(A) called for a remand report from the Assessing Officer. After obtaining the remand report from the Assessing Officer, ld. CIT(A) deleted the share capital and share premium received from Express DSA Services Pvt. Ltd. at ₹ 28,00,000/- and S.K. Fashions at ₹ 5,00,000/- and sustained addition of ₹ 2,79,00,000/- in the case of remaining 13 companies for which the assessee is in appeal before the Tribunal. 25. So far as the amount deleted by the ld. CIT(A) amounting to ₹ 33,00,000/- in respect of the two companies are concerned, the Revenue is not in appeal before the Tribunal ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... elieve the capacity to invest an amount of ₹ 7,00,000/- in the assessee company. We, therefore, set-aside the order of the ld. CIT(A) and direct the Assessing Officer to allow the investment of ₹ 7,00,000/- by Truth Tradex (P) Ltd. 30. So far as Fabrika Industries is concerned, we find the assessee had filed the relevant documents and the director of the said company appeared before the Assessing Officer and confirmed to have made the investment. However, the ld. CIT(A) rejected the claim of the assessee on the ground that such director could not explain the source of investment. A perusal of the Balance Sheet of the above company, copy of which is placed at page 117 and 119 of the Paper Book shows that the share capital, share premium and reserves and surplus show an amount of ₹ 1.42 crores which was standing at ₹ 1.14 crores at the beginning of the year. Therefore, the investor company has sufficient funds to investment in the assessee company. Since the director of assessee company appeared before the Assessing Officer and the relevant details were furnished before the Revenue Department and the company has adequate share capital and free reserves, the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nies whose directors appeared before the Assessing Officer and whose statements were recorded and full details were filed substantiating the identity and creditworthiness of the investor companies and the genuineness of the transactions, cannot be doubted merely because companies have meager income or that the directors could not categorically answer the question of the Assessing Officer. The same in our opinion under the facts and circumstances of the case cannot be a ground to disbelieve the investment. Thus, the addition sustained by the ld. CIT(A) in the case of the above five companies amounting to ₹ 1,00,00,000/- is deleted. 33. Now coming to the remaining companies are concerned, we find the ld. CIT(A) sustained the addition basically on the ground that although full details were filed however, the Principal Officers of the above companies could not be produced before the Assessing Officer for recording their statements and the companies are showing meager income. As mentioned earlier, income in case of a concern cannot be the basis to disbelieve the creditworthiness if it has otherwise sufficient capital and free reserves. From various details furnished by the asse ..... X X X X Extracts X X X X X X X X Extracts X X X X
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