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TMI Blog2018 (5) TMI 1085X X X X Extracts X X X X X X X X Extracts X X X X ..... gs of the Assessing Officer is that the Directors of said companies did not appear in response to summons issued u/s.131 of the Act All the corporate shareholders are assessed to income tax and have PAN Numbers. The CIT(A) could have made enquiries from the respective Assessing Officers and ascertained the current addresses. This has not been done. Further, as noted above, the Assessing Officer categorically accepts in the assessment order that summons issued u/s.131 of the Act was received by four share applicants. Thus, there is contradiction in the findings of the Assessing Officer and the CIT(A). It shall be in the interest of justice to set aside the orders of lower authorities and remand the matter back to the file of the Assessing Officer with a direction to make necessary enquiries from four corporate share applicants after allowing reasonable and proper opportunity of hearing to the assessee. The assessee is directed to co-operate with the Assessing Officer in verifying the four corporate share applicants. With these directions, this part of the ground is allowed for statistical purposes - ITA No. 160 / CTK/2017 - - - Dated:- 15-5-2018 - Shri N. S. Saini, Account ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Officer s decision to hold that they do not have creditworthiness is not correct. The assessee submitted the following particulars of the four company shareholders: SI No. Name Total Assets 86150303 Total Liabilities Net worth a) M/s Auoplast Merchandise (P) Ltd. P-41, Princep Street, 6 th Floor, Kolkata-700072 PAN: AACCA7162J 5899529 80250774 b) c) Saffire Exports Agency(P) Ltd. Mercantile Building, 3rd Floor, 9, Lai Bazar Street, Kolkata-1, PAN.-AAECS0708A 80462456 10612652 69849804 Sun Rays Agencies Private Ltd. Mercantile Building, Room No. 3/A/7, 3 td Floor, 9, Lai Bazar Street, Kolkata-1, 89198422 6984378 82214044 Present Address: 9, Jag Mohan Mallick Lane, 4 th Floor, Kolkata-700007 PAN.-AAECS03921 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... on revealed that Shri Naresh Kumar Chhaparia has remained one of the directors in two of the above companies in the duration mentioned below: i) M/s. Sun Rays Agencies Pvt Ltd., from 18.2.2005 to 5.5.2009 ii) M/s. Vindya Agencies Pvt Ltd., from 14.1.2005 to 3.3.2011. 9. The list of the companies in which he is the controller was provided in the soft copy. Further, in the remand report, it was stated that as the available record, dubious role was played by Shri Naresh Kumar Chhaparia, non- availability of the individuals/ directors of all these companies, non-existence of these companies on physical verification(Inspector's Report attached); these companies appears to be bogus companies, which are being used as conduit for rotating the money despite no real business or physical existence. Hence, M/s Auroplast Merchandise Pvt Ltd, M/s Saffire Export Agency Pvt Ltd, M/s Sun Rays Agencies Pvt Ltd and M/s Vindya Agencies Pvt Ltd definitely fail on the ground of Identity Credit worthiness and Genuineness of Transaction as these are nothing but shell companies. All efforts to trace the Directors of these companies went in vain and that at the registered address of t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 6 1000 197 21.06.2004 1.87 195.1 195130 Shiv Om Investment Ltd. 17.02.200 6 3000 197.1 24.06.2004 1.87 195.2 585690 Total Long term capital gain Ltd. 1343698 It is seen that the appellant has claimed capital gain of 4410% in the case of Sudama Trading Investment Ltd and 10435%, in the case of Shiv Om Investment Ltd in nearly one year. Both of these companies are non- descript companies and the sale rates have been pushed through manipulation. Even the fortune 500 companies have not reported such fantastic gains in one year. 4.8 In the case of Aman Agarwal, it is seen from his return of income for A.Y. 200607 that he has shown total income of ₹ 1,20,000/-. It appears that the alleged investment in the company has been m ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... eged corporate share holders but they did not appear before the assessing officer. On field enquiries by the Investigation Wing of Income Tax Department, none of these corporate share holders are found to exist. If these 4 corporate share holders are raising genuine capital and investing in the other companies, how could they be untraceable. So much so that nobody in the building has even heard about them. In my opinion, these alleged corporate share holders are nothing but shell companies, about whom only the documents have been produced, but there is no substance in their transations. 4.11 In the following cases when the share holders were not traceable or did not respond to the summon of the assessing officer, the share capital is held as appellant's undisclosed income: (i) Commissioner of Income-Tax vs. Youth Construction (P) Ltd. reported in [2014J 44 taxmann.com 364 (Delhi). Section 68 of the Income-tax Act, 1961 - Cash credit - Assessment year 2000-01 -Sole fact that share applicants had established their identity by filing confirmation letters and copies of their income-tax returns is not sufficient for purpose of discharging creditworthiness of share app ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ares back at a discount of 90 per cent - In order to ascertain genuineness of share transactions, Assessing Officer issued notices to Kolkata based company and other alleged shareholders which were returned by postal authorities with a remark 'left' - He also visited respective banks through which money was routed by these investors and found that cash was deposited immediately prior to issue of cheque to assessee and accounts of those companies were closed immediately after transfer of funds - Assessing Officer thus taking a view that share transactions were not genuine, added amount in question to assessee's taxable income - Whether on facts, impugned order passed by Assessing Officer did not require any interference - Held, yes [para 9] [In favour of revenue] (iv) Commissioner of Income Tax vs Ultra Modern Exports (P.) Ltd. reported in (2013) 40 taxmann.com 458(Delhi). Section 68 of the Income-tax Act, 1961 - Cash credits [Share application money] -Assessment year 2007-08 - In course of assessment, Assessing Officer noticed that assessee received share application money from nine applicants - Upon enquiry, five out of nine notices issued to share applicants ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... mann.com 339(Delhi). Section 68 of the Income-tax Act, 1961 - Cash credit [Share money] - Assessment years 2002-03 and 2003-04 - Whether creditworthiness or genuineness of transaction depends on whether two parties are related or known to each, manner or mode by which parties approached each other, whether transaction was entered into through written documentation to protect investment, whether investor professes and was an angel investor, quantum of money, creditworthiness of recipient, object and purpose for which payment/investment was made, etc. - Held, yes - Whether certificate of incorporation of company, payment by banking channel, etc. cannot in all cases tantamount to satisfactory discharge of onus - Held, yes - Assessee was a private limited company and had received from other companies substantial amount of share application money of ₹ 63.80 lakhs and ₹ 75.60 lakhs in two consecutive years - Other than share application forms, no other agreement between assessee-company and third companies had been placed on record - Persons behind these companies were not produced by assessee - On other hand, assessee-company adopted non-cooperative attitude before Asse ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the Assessing Officer. (ix) Commissioner of Income Tax vs MAF Academy (P.) Ltd. reported in [2 taxmann.com 377 (Delhi). Section 68 of the Income-tax Act, 1961 - Cash credits [Share trans. Assessment year 2002-03 - Whether where, assessee, a private limited company, sold its shares to unrelated parties at a huge premium and thereupon within short span of tin shares were purchased back even at a loss i.e. less than their face value, revenue ai. rightly concluded that share transactions in question were bogus and, therefore, am received from said transactions was to be added to assessee's taxable income under 68 - Held, yes [Para 35] [In favour of revenue] (x) Agrwal Coal Corporation (P.) Ltd. vs. Additional Commissioner of Income Tax, reported in 19 taxmann.com 209 (Indore). Section 68 of the Income-tax Act, 1961 - Cash credits - Assessment year 2005-06 and 2006-07 - Assessee-company had received share application money from HCL and OTL - Du scrutiny proceedings, Assessing Officer referred to report of Assistant Commissioner, wherein he had confirmed that investigation carried out in some other cases, it was : that HCL and OTL did not exist at given address an ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ularly when the Assessing officer required the assessee to produce the share applicants and particularly when at the stated address the share applicants were not found to exist, it could not be said that the amount received by the assessee was proved to be towards share capital. When the identity of the person itself was not proved, the amount received by the assessee could not be considered to be genuinely received. It was also to be noted that the assessee-company was stated to have issued shares at premium nine times its face value. How the premium was fixed was not forthcoming. All the facts put together revealed that neither the identity of the d was proved nor justification for share premium had been proved. In such circ. court could not put blinker on the eye and look only at the papers presented before it. (xii) SubhJakshmi Vanijya (P.) Ltd. vs Commissioner of Income- tax-I. reported in [2015J 60 taxmann.com 60 (Kolkata -Trib.) Section 68 of the Income-tax Act, 1961 - Cash credit (Proviso) - Assessment Year 2008-09 to 2010-11 - Whether amendment to section 68 by insertion of proviso to Finance Act, 2012 which casts onus on closely held company to explain source of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... er in view of aforesaid, impugned order passed by Tribunal was to be set aside - Held, yes [In favour of revenue] (ii) Pennar Aqua Exports (P.) Ltd. vs Asst. Commissioner of Income Tax, Hyderabad reported in [2013] 40 taxmann.com 105(Hyderabad -Trib.) Section 68, read with section 254, of the Income-tax Act, 1961 - Cash credit [Share capital of Company] - Assessment year 1994-95 - Assessing Officer found huge cash credit in books of account of assessee-company on very first day it commenced its business - He disbelieved share capital introduced by 25 shareholders amounting to ₹ 38.40 lakhs and did not accept investment made by them - Assessee contended that company did not derive any income and had no source of income during relevant previous year and investment was made by shareholders and that Assessing Officer should have accepted their confirmation letter and their capabilities to invest - Tribunal meticulously mentioned arguments of assessee and point raised by him, considered case law relied upon by assessee and thereafter, passed a speaking order for not entertaining claim of assessee - While rejecting claim of assessee, Tribunal distinguished judgment of Sup ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ellant has failed to establish creditworthiness of the individual share holders and has failed to establish genuineness of the transaction and identity and creditworthiness of the alleged corporate share holders. Therefore, the decision of the assessing officer to hold an amount of ₹ 66,08,000/- as undisclosed income of the appellant is upheld and the ground of appeal is dismissed. 12. Before us, ld A.R. reiterated the submissions made before the lower authorities and ld D.R. fully justified the orders of lower authorities. 13. We have heard the rival submissions, perused the orders of lower authorities and materials available on record. In the instant case, the assessee claimed to have received share application money during the year under consideration from two Directors of the company and four Privat Limited Companies aggregating to ₹ 66,08,000/-. The Assessing Officer has not accepted the said share application money as genuine on the ground that in spite of notices being issued and several opportunities being allowed, the share-holders did not appear before him for examination. Therefore, he held the share application money as unexplained share capital intr ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... , 2012 w.e.f. 1.4.2013 by adding a proviso to Section 68, which reads as under: Provided that where the assessee is a company (not being a company in which the public are substantially interested), and the sum so credited consists of share application money, share capital, share premium or any such amount by whatever name called, any explanation offered by such assessee company shall be deemed to be not satisfactory, unless- (a) The person, being a resident in whose name such credit is recorded in the books of such company also offers an explanation about the nature and source of such sum so credited; and (b) Such explanation in the opinion of the AO aforesaid has been found to be satisfactory. 18. The assessment year under appeal before us is assessment year 2006-07. The said proviso is not applicable to the case of the assessee in hand. We, therefore, respectfully following Full Bench of the Hon ble Delhi High Court in the case of Sophia Finance Ltd (supra) and decision of Hon ble Supreme Court in the case of Lovely Export Pvt Ltd (supra), set aside the orders of lower authorities and delete the addition of share application money of ₹ 12,58,000/- receiv ..... X X X X Extracts X X X X X X X X Extracts X X X X
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