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TMI Blog2010 (11) TMI 1084X X X X Extracts X X X X X X X X Extracts X X X X ..... the assessment year under appeal. The only addition made in the assessment was for Rs. 69,30,000/- on account of introduction of fresh capital during the previous year relevant to assessment year under consideration. 3. The assessee-company M/s. Shaw Aromatics Pvt. Ltd. merged with M/s. Shaw Enterprises Ltd. w.e.f. 01/1/2006 by the order of Hon ble High Court at Calcutta. During the year under appeal, the assessee-company raised fresh capital of Rs. 69,30,000/- by issuing fully paid-up 6,93,000 shares of Rs. 10/- each. From the details provided by the assessee, the A.O. observed that the following three companies purchased the shares of the assessee-company and seven cheques/drafts of Rs. 9.9 lakhs each, all dated 28/3/2005, were deposited in the assesee s account with Allahabad Bank, Camac Street Branch on 29/03/2005 :- (a) Paramveer Distributors Pvt. Ltd. (b) VDR Consultant Pvt. Ltd. (c) Avanti Vyapaar Pvt. Ltd. On verification from Allahabad Bank and ABN Amro Bank, the A.O. observed that the cheques of the aforesaid three purchaser companies were issued from ABN Amro Bank, Brabaourne Road Branch, Kolkata, wherein all the aforesaid three companies were maintai ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... pany, there was no involvement of any broker or Stock Exchange and the shares sold were private placement of shares on matching of the offers of the purchasers of the shares with the terms of the assessee-company. It was further stated before the A.O. that the money raised by issue of shares were used for the purpose of the company and the shares were issued at par. The A.O., however, was not satisfied with the explanation of the assessee. According to him, the assessee-company was the final recipient rather beneficiary of the transaction in the form of share application money. Further, the assessee has not clarified as to how the company has used the capital obtained through issuance of shares and who valued the share price of the assessee-company. He observed that the capital of Rs. 69.30 lakhs claimed to have been raised by issue of shares was lying static in the following years and there was no expansion of the plant where money was needed. He further disbelieved the explanation of the assessee that as per guidance of family priest, the value of each cheque was Rs. 9.9 lakhs, inasmuch as, according to him, cheque transaction of Rs. 10 lakhs and above is required to be intima ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... in treating the credit of share capital amount in the appellant s books as unexplained credit u/s. 68 of the Act, The related question that is to be seen, whether the AO has conclusively proved that the unaccounted income of the appellant routed through the benami parties under the guise of share capital. The other basic question that is to be seen, whether the appellant has discharged its onus of proving the identity, creditworthiness of creditors (share applicants) and genuineness of transaction (share capital contribution) and whether the AO, thereafter, brought on record any material evidence to show that the three important parameters are not proved conclusively. 5.4 As seen from the records, the appellant has submitted all the relevant detail before me like name and address of share applicants, their assessment details including audited balance sheet, bank statement and acknowledgement of return filed and details bank account/statement of the appellant showing the mode of receipt by cheques/drafts. These details have also reported to have been filed before the A.O. and the A.O has acknowledged this fact. Thus the appellant on its part adduced necessary details/evidences i ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ney subsequently to one company named West Well Tie up Pvt. Limited. 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. The AO failed to show that the amounts which had come to the hands of West Well Tie up Pvt. Limited and to other companies had actually been received by these companies from the appellant. As such treating such share capital as income derived by the appellant from undisclosed sources is not correct. 5.6 Even otherwise, there are judicial rulings including Supreme Court decisions that amounts received towards share capital are totally outside the scope bf 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 ITR 263, the Hon ble Madras High Court in the case of CIT Vs. Electropolychem Ltd. (2007) 294 ITR 661 has adopted the above view. In the case of Jaya Securities Ltd. Vs. CIT (2008) 166 Taxman 7, the Hon ble Allahabad High Court held that no addition u/s. 68 can be mad ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... . Departmental Representative supported the order of the A.O. He submitted that there was no expansion of the business of the assessee to justify the introduction of fresh capital into the business of the asseseecompany and as rightly pointed out by the A.O., the fund allegedly received by the assesee-company by way of selling of its shares was simply lying static in the following years and it thus proved that the transaction was nothing but a strategy to enhance the official capital by infusing some unexplained source of fund. He further pointed out that the assessee-company as a ploy to avoid RBI with the requisite information of transaction of Rs. 10 lakhs and above, managed to get the share application money by way of seven cheques of identical amount of Rs. 9.9 lakhs and this casts doubt about the genuineness of the transaction. He further submitted that in the case of CIT vs. Divine Leasing Finance Ltd.; General Exports Credits Ltd. Lovely Exports Ltd. [299 ITR 268 (Del)], although the Hon ble Delhi High Court has deleted the addition on account of share capital u/s. 68 of the Act, but the facts in those cases were that the I.T.O. noted that the assessee was a public ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ing share application money of 6,93,000 fully paid-up shares of Rs. 10/- each aggregating to Rs. 69,30,000/- from the following three parties :- (a) Paramveer Distributors Pvt. Ltd. Rs. 29.70 lakhs (b) VDR Consultant Pvt. Ltd. Rs. 19.80 lakhs (c) Avanti Vyapaar Pvt. Ltd. Rs. 19.80 lakhs Total = Rs. 69.30 lakhs The A.O. disbelieved the said introduction of capital mainly on the ground that the registered office of all the three share applicant-companies were located at the same premises, that there was no expansion of the assessee s business to justify the raising of fresh capital, that there was no clearance from Registrar of Companies and that to avoid giving intimation to RBI, the assessee as a strategy managed to get cheque of below Rs. 10 lakhs each. There is no dispute that all the share applicant-companies are assessed to tax and their PAN and acknowledgement of I.T. return along with their audited balance sheet, bank statement showing transaction etc. were made available to the A.O. We also observe th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ee to prove whether that person itself has invested the said money or some person made investment in the name of that person. The burden then shifts on revenue to establish that such investment has come from assessee-company itself. In the case before us, department doubts introduction of share capital by the share applicants when it is stated by the A.O. that this is nothing but a ploy to enhance the official capital by infusing some unsatisfactorily explained source of fund. Vested interest of anybody can only be of the Assesee Company only . However, no evidence has brought on record by the department that the share application money has been brought in the name of the share applicants by the assessee-company. Hon ble Apex Court in the case of CIT vs. Daulat Rant Rawatmuli [87 ITR 349 (SC)] has held that onus to prove that the apparent is not the real is on the person who claims it to be so. Therefore, the onus is on the department to prove that the share application money subscribed to the share capital of the assesseecompany by the above named share applicants is not the money of the share applicants but of the assessee-company, is on the department. However, the department h ..... X X X X Extracts X X X X X X X X Extracts X X X X
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