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TMI Blog2016 (1) TMI 1370X X X X Extracts X X X X X X X X Extracts X X X X ..... VERSUS OPTEC DISC MANUFACTURING [2008 (6) TMI 607 - ITAT CHANDIGARH] - no addition could be made in the hands of the assessee buyer - Decided in favour of assessee Addition towards share capital - Held that:- Assessee had given the complete details about the share applicants clearly establishing their identity , creditworthiness and genuineness of transaction proved beyond doubt and had duly discharged its onus in full. Nothing prevented the Learned AO to make enquiries from the assessing officers of the concerned share applicants for which every details were very much made available to him by the assessee - decision of the Hon’ble Apex Court in the case of CIT vs Lovely Exports (P) Ltd [2008 (1) TMI 575 - SUPREME COURT OF INDIA] is very well founded, wherein, it has been very clearly held that the only obligation of the company receiving the share application money is to prove the existence of the shareholders and for which the assessee had discharged the onus of proving their existence and also the source of share application money received. - Decided against revenue Addition u/s 68 made in respect of allotment of shares to 20 individuals - Held that:- We find from the details a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rted in 226 ITR 344 (Raj) and vehemently pleaded for confirmation of the order of the Learned AO. In response to this, the Learned AR vehemently supported the order of the Learned CIT(A). 2.3. We have heard the rival submissions and perused the materials available on record. The facts stated hereinabove remain undisputed are not reiterated for the sake of brevity. We find that in the case relied upon by the Learned DR in 226 ITR 344 (Raj) , it was held that "even inspite of specific query, the assessee failed to point out any mistake / lacuna in ascertaining the value of the plot of land by the value. In these circumstances, the only reasonable inference that can be drawn is that the assessee has shown less amount in the account books and sale deed than the actual consideration paid. Considering the comparable cases and the facts of the case, we find no ground to interfere in the addition made u/s 69B of the Act." We find that in the case before the Rajasthan High Court relied upon by the Learned AO, the higher cost of acquisition was taken in the hands of the purchaser on the basis of the report of the Department Valuation Officer (DVO) estimating the higher fair market value of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e of determination of market value by the State Revenue authorities for the purpose of computing payment of stamp duty. Clearly, adoption of such market value cannot distract from the consideration stated in the sale deed. Even the provisions of s. 50C pressed into the service by the AO are of no avail to sustain the instant addition. The fiction created by s. 50C is for the limited purpose of computing the capital gains. It only seeks to make a special provision for determining the full value of consideration in cases of transfer of immovable properties for the purpose of s. 48. Therefore, the fictional regime of s. 50C is not available with the AO in support of his case of invoking s. 69B against the present assessee. The stand of the AO is that the actual sale consideration paid by the assessee for purchase of land is ₹ 95,46,451. The case made out by the AO is that ₹ 46,50,000 has been paid by the assessee to the sellers in question and the balance of ₹ 48,96,451 has been actually paid by the assessee to the middlemen. In fact, for having made the payment of ₹ 48,96,451 to the middlemen there is not even an iota of evidence on record except the presumpti ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n terms of section 50C, is applicable in the hands of the seller of the property who has to compute capital gains u/s 48 pursuant to the transfer of a capital asset in the nature of land or building or both. On the contrary, section 69B, which is again a deeming provision, governs the cases in which investment made by the assessee is not fully disclosed. In other words, section 69B applies to the purchaser of an asset, in contradistinction to sec. 50C, which applies to the seller of an asset. The position about the substitution of 'stamp value' with the 'consideration received' in case the latter is lower than the former, in the hands of the seller only, leaving the differential investment made by the buyer untaxed, appears to have been realized by the Parliament. That is why, the legislature in its wisdom has inserted clause (vii) to section 56(2) by the Finance (No.2) Act, 2009 w.e.f. 1.10.2009, inter alia, providing that - where an individual or a Hindu undivided family receives, in any previous year, from any person or persons on or after the 1st day of October, 2009, (b) any immovable property, - (i) without consideration, the stamp duty value of which excee ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Ltd 10,00,000 Tropex Suppliers (P) Ltd 10,00,000 Trade Link Carrying Co (P) Ltd 10,00,000 Belfast Engineering (P) Ltd 3,50,000 62,50,000 From Directors Shri Dilip Kumar Agarwal 7,80,000 Shri Dinesh Kumar Agarwal 26,30,000 34,10,000 Smt. Meena Devi Agarwal (Wife of Shri Dilip Kumar Agarwal -Director) 25,00,000 Total monies received during the year 1,21,60,000 The movement of share application money and share capital account during the year is as follows:- Financial Year 2004-05 Particulars Amount (In Rupees Share Application Money (In Rupees) Share Capital (In Rupees) Opening Balance as on 01.04.2004 Nil 1,60,000 Share Application money received during the year a. From Individuals (other than Directors) 57,00,000 b. From Corporate Assessees 1,16,00,000 c. From Directors 27,60,000 2,00,60,000 N.A Shares Allotted during the year N.A Nil Closing Balance as on 31.03.2005 2,00,60,000 1,60,000 Financial Year 2005-06 Particulars Amount (In Rupees) Share Application Money (In Rupees) Share Capital (In Rupees) Opening Balance as on 01.04.2005 2,00,60,000 1,60,000 Share Application money received during the year a. From Individuals (other th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Ltd) and confirmed that all the payments were received through regular banking channels. He also found that both the director share applicants are assessed to tax in Circle -1, Siliguri. Infact one director, Shri Dinesh Kumar Agarwal even appeared before the Learned AO personally but the Learned AO chose not to record any statement from him. The Learned CITA observed that all the share applicants are regularly assessed to income tax and made the investment after observing the due formalities under the Companies Act, 1956 and investment in assessee company have been duly reflected in their respective balance sheets which were duly audited. The Learned CIT(A) duly distinguished each of the case laws relied upon by the Learned AO in his assessment order as to how the same are not applicable to the facts of the assessee case. He observed that the assessee has received share application money of ₹ 96,60,000/- (excluding money received from Meena Devi Agarwal) from six companies and two directors of the assessee company. Against that share application money, no shares were allotted in respect of ₹ 7,00,000/- which means the assessee has allotted shares against share applicat ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... decision of the Hon'ble Apex Court in the case of CIT vs Lovely Exports (P) Ltd reported in (2008) 216 CTR 195 (SC) is very well founded, wherein, it has been very clearly held that the only obligation of the company receiving the share application money is to prove the existence of the shareholders and for which the assessee had discharged the onus of proving their existence and also the source of share application money received. 3.4.1. We also find that the impugned issue is also covered by the decision of Hon'ble Calcutta High Court in the case of CIT vs Roseberry Mercantile (P) Ltd in GA No. 3296 of 2010 ITAT No. 241 of 2010 dated 10.1.2011, wherein the questions raised before their lordships and decision rendered thereon is as under:- "On the facts and in the circumstances of the case, Ld. CIT(A) ought to have upheld the assessment order as the transaction entered into by the assessee was a scheme for laundering black money into white money or accounted money and the Ld. CIT(A) ought to have held that the assessee had not established the genuineness of the transaction." Held After hearing the learned counsel for the appellant and after going through the decision of t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... observed that the assessee had furnished details of the share applicants giving the date wise receipts, mode of payment, amount, name, address, income tax returns, PA No. of share applicants along with their balance sheet. The Learned CITA also observed that the assessee in its reply to show cause notice before the Learned AO had requested him to use his power and authority for the physical appearance of the shareholders which was not exercised by the Learned AO. Instead the Learned AO continued to insist on the assessee to produce the shareholders before him. He ultimately concluded that the assessee had duly discharged its onus of providing complete details of the shareholders and in any case, no addition could be made u/s 68 of the Act in the asst year under appeal as no share application monies were received during the asst year under appeal. Aggrieved, the revenue is in appeal before us by filing the following ground:- "That in the facts and circumstances of the case, the Ld. CIT(A) has erred in deleting the addition made u/s 68 in respect of the allotment of shares to 20 numbers of individual investors for an amount of ₹ 57 lakhs, where genuineness of the transaction ..... X X X X Extracts X X X X X X X X Extracts X X X X
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