9911796707
TMI Blog2019 (1) TMI 267X X X X Extracts X X X X X X X X Extracts X X X X ..... i, M. Balaganesh, Accountant Member For the Appellant : Shri Rabin Choudhury, Addl. CIT- Sr-DR For the Respondent : Shri A.K. Tibrewal, FCA And Shri Amit Agarwal, Advocate ORDER PER S.S.GODARA, JUDICIAL MEMBER:- This Revenue s appeal for assessment year 2012-13 arises against the Commissioner of Income Tax (Appeals)-23, Kolkata s order dated 09.05.2017 passed in case No.242/CIT(A)-23/Wd-6(1)/16-17 reversing Assessing Officer s action adding assessee s share capital of ₹3,17,00,000/-, involving proceedings u/s 143(3) of the Income Tax Act, 1961; in short the Act . Heard both the parties. Case file perused. 2. We find at the outset that CIT(A) s detailed discussion deleting the above sole addition of unexplained share capital u/s 68 of the Act reads as under:- Ground No. 1,2,3, 4 These ground relate to the addition of ₹ 3,17,00,000/- u/s 68 on account of share capital raised. 4. Submission of AR : We would like to inform that M/s. Dhara Vyapaar Private Limited is a private limited company incorporated in the year 2006. The company issued 317,000 equity shares of ₹ 10/- each at a premium of ₹ 90/- per share and all ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ge of the net assets or equity of the company, which includes available reserves accrued by the old shareholders (eg, through total or partial dividend waivers, allowing profits to be reinvested the company, rather than distributed). Thus Share Premium is distinct from Income, it is a capital. Again sir, Provisions of sections 41, 146, 150 of the Indian Companies Act, 1956 detail only the need for maintaining a register of shareholders and of making to the registrar of companies an annual return incorporating' changes in the register of members. Such records is .statutorily to be maintained and contains complete record of the number of shares subscribed, allotted and held, along with full and complete addresses of the shareholders. Nowhere the company law authorises the company to seek information from its shareholders regarding the source of their investment in shares. As per decided case law of Standard Cylinders (P.) Ltd. v. [1998] Taxation 89(4) 76 (Delhi-Trib.), it was held that the company was a separate juristic person and it cannot be asked to prove the source of investments by the shareholders for the subscriptions made by them for shares. It is sufficient ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... y him once the assessee proves the identity and creditworthiness of the creditor. It is beyond the scope of legitimate enquiry. As per decided case law of ITO v. Shanker Lal Narendra kumar [1995] XVIII Tax world 141 (Jpr.AT), there was a cash credit of ₹ 50,000 from Shri Babulal Chauhan who explained that he sold his car and deposited the amount with the assessee. The ITO asked the creditor about the source from which the car was purchased and it was observed that the assessee was not obliged to prove the source of source. Allotment of shares has all the features of a contract, viz., offer, acceptance, and its communication. The Supreme Court itself has observe in CIT v. Arvind Narottam [1988] 39 Taxman 368, that 'where the true effect on the construction of the deeds is clear the appeal to discourage tax avoidance is not a relevant consideration' Further the Tribunal did not approve the action of the Commissioner and cancelled the orders passed by him under section 263 on the following grounds: (a) No company is authorised to ask its shareholders to explain the source of their investment. (b) Whatever information a company is obliged to keep under the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... o our case as our matter relates to the A.Y. 2012-13. As per section 68 of the Income Tax Act, 1961 the primary onus is upon the assessee to establish identity of the shareholder, genuineness of the transaction and the capacity of the lender or the depositor. Hon. Supreme Court, in Kale Khan Mohd. Hanif Vs. CIT, pointed out that the onus on the assessee has to be understood concerning the facts of each case and proper inference drawn from the facts. The law after Section 68 is not different. If the prima facie inference .on the fact is that the assessee's explanation is probable, the onus will shift to the Revenue. As held in case of Sreelekha Banerjee v CIT [1963] 49 ITR 112 (SC), By merely rejecting unreasonably a good explanation, the department cannot convert good proof into 'no proof In fact, the principle of onus, which the assessee is required to establish the identity, prove the genuineness of the transaction and establish the creditworthiness of the donor, has been reiterated even' in a recent decision of Hon. Delhi High Court in the case of CIT vs. Oasis Hospitalities Pvt. Ltd., 333 ITR 119 (Delhi)(2011). In this case it was held by-the Hon. Court that ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ecome a NBFC company therefore, there is no question of doubting the identity and availability of funds with the share applicant companies. Thirdly, all the investing company to whom shares have been allotted during the F.Y. 2011-12 are also income tax assessee. The copy of IT Acknowledgement of the shareholders has been attached as Annexure. Further Copies of Allotment advice along with share certificates, share application forms and copy of affidavit of the director of the applicant companies for the purpose of verification of genuineness of transaction has been attached as Annexure. The genuineness of the transaction can also be safely concluded, since the entire transaction has been done through the banking channels duly recorded in the books of account of the assessee and duly reflected in the financial statement of the assessee. The related Bank Statements are attached hereto. In the Bank Statement, the transactions relating to the allotment of shares are duly reflected. Therefore, all the relevant documents have been provided that may be reasonably treated as sufficient to substantiate that the company has entered into a genuine transaction with the shareholders as well as b ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t was held that: Assessee-company having received subscriptions to the public/rights issue through banking channels and furnished complete details of the shareholders, no addition could be made under section 68 in the absence of any positive material or evidence to indicate that the shareholders were benamidars or fictitious persons or that any part of the share capital represented company's income from undisclosed sources. As per decided case Jaw of United Cores (P.) Ltd. v. Asstt. CIT [1998], it was held that since the company furnished documents and supporting material to prove the identity and capacity of subscribers and as they were regular assessees, the addition made was not held justified. In CIT v Sahibganj Electric cables (p) Ltd. [1978] 1151TR 408 (Cal.) where the amounts of loan received by cheques and repayments also made by cheques through assessee's bankers, the creditors gave confirmation letters mentioning therein their income tax file numbers. ITO without making any further enquiry, disbelieving the evidence of the assessee made addition. ITAT held the additions not justified as the assessee discharged the onus. High Court held that Tribunal i ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... arged. The company furnished documents and supporting material to prove the identity and capacity of subscribers and as they were regular assessees, the addition show caused not justified. As per decided case law of Standard Cylinders (P.) Ltd. v. [1998] Taxation 89(4) 76 (Delhi-Trib.), Further, as already stated earlier that share premium amount is capital for a company and should not be treated as undisclosed income of the assessee. All the relevant documents and information has been explained and provided for the purpose of verification of a) identity of shareholders b) genuineness of the transactions and c) creditworthiness of the shareholders. Therefore, no adverse inference needs to draw against the assessee. 1. That the assessee company has received 'share application from 1. M/s Renomex Dealers Private Limited. 2. M/s Riddhi Siddhi Tradevin Private Limited. 3. M/s Value Added IT Consultancy Private Limited. 4. M/s Contship Commodities Private Limited. 5. M/s Diamention Mercantile Private Limited. 6. M/s Giltedge Vincom Private Limited. 7. M/s Mirabelle Tradecomm Private Limited. 8. M/s Mubarak Lubricant Private Limited. 9. M/s Vanraj Mer ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... que no. 363783, 363784, 363785,363786 363787 dated 29/09/2011,01/10/2011,07/10/2011,08/10/2011 12/10/2011 of ₹ 3,00,000/-, ₹ 3,00,000/-, ₹ 3,00,000/-, ₹ 3,00,000/- ₹ 1,00,000/- respectively drawn on Karur Vysya Bank Limited, Burra bazar Branch. The Bank statement highlighting the payment portion has been attached. The source for the payment of such amount has been generated from sale of their investment to Jayshree Dealers Pvt. Ltd., Poddar Consultancy Pvt. Ltd., Renomex Dealers Pvt. Ltd. Som Dealers Pvt. Ltd., the amount has been received on 29/09/2011, 01/10/2011, 07/10/2011, 08/10/2011 12/10/2011 through cheque no. 53841, 957652, 375878, 957653, 53842 155794 of Rs. For ₹ 3,00,0001-, 3,00,000/-, 3,00,000/-, 2,00,0001-, 1,00,0001- ₹ 1,00,000/- respectively. The confirmation of accounts has been attached. The Investor Company has also provided their Financial Statement and copy of the ITR acknowledgement for Asst. Year 2012-13.They have provided Xerox copy of share certificate No. 000000051 vide registered folio no. 53 and distinctive no. 0000602001-0000615000 dt 31.03.2012 allotted to them along with their board resolution fo ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tion Form 4. Letter of allotment 5. Share Certificate 6. Bank Account 7. ITR acknowledgement 8. Financial Statements 9. ID proof and ITR Acknowledgement of the director 10. Affidavit by the Director 4. M/s Contship Commodities Private Limited having its registered office at 85, N S Road, Kolkata- 700001 The company has been allotted 25,000 equity shares of ₹ 101- each at a premium of ₹ 90/- per share. The payment has been made through cheque no. 385927 dated 27.03.2012 for ₹ 25,00,000/- drawn on Central Bank of India. The Bank statement highlighting the payment portion has been attached. The source for the payment of such amount has been generated from the receipt from sale of shares to Aradhna Commercial Pvt. Ltd. and Amritvani Sales Pvt. Ltd., the amount has been received on 26/03/2012 through cheque no. 529297 528996 for ₹ 20,00,0001- 5,00,000/- respectively. The confirmation of accounts has been attached. The Investor Company has also provided their Financial Statement and copy of the ITR acknowledgement for Asst. Year 2012-13.They have provided Xerox copy of share certificate. 000000033 vide registered folio no. 45 and dis ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nfirmation 2. Board resolution for investment 3. Share Application Form 4. Letter of Allotment 5. 11. Affidavit by the Director 6. Share Certificate 7. Bank Account 8. ITR Acknowledgement 9. Financial statements 10. Certificate of Registration from RBI 6. M/s Giltedge Vincom Private Limited having its registered office at 85, N S Road, Kolkata- 700001 The company has been allotted 80,000 equity shares of ₹ 10/- each at a premium of ₹ 90/- per share. The payment has been made through cheque no. 900448, 900457 900463 dated 23/03/2012,28/03/2012 30/03/2012 for ₹ 30,00,000/-, ₹ 25,00,000/- ₹ 25,00,000/- respectively drawn on Indian Bank. The Bank statement highlighting the payment portion has been attached. The source for the payment of such amount has been generated from the receipt from sale of shares to Anunay Sales Pvt. Ltd., Anubhav Comrnonsales Pvt. Ltd. Unique Dealtrade Pvt. Ltd., the amount has been received on 23/03/2012,28/03/2012 30/03/2012 through cheque no. 685958, 685907 685990 for ₹ 10,00,000/-, ₹ 10,00,000/- ₹ 10,00,000/- respectively. The confirmation of accounts has been att ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... along with their board resolution for their investment in our company. The investor company is registered NBFC (Non-Banking Financial company) registered with Reserve Bank Of India U/s 45 of the Reserve Bank of India Act 1934 vide registration no B.05.06607 dt. 16.02.2006. We hereby attached the share application form and their allotment advice duly signed by them. (Refer Annexure G ). The Investor Company has also forwarded their notarised affidavit confirming the above fact. List of documents submitted in Annexure G 1. Confirmation 2. Board resolution for investment 3. Share Application Form 4. Letter of Allotment 5. Share Certificate 6. Bank Account 7. ITR Acknowledgement 8. Financial statements 9. Certificate of Registration from RBI 10. Affidavit by the Director 8. M/s Mubarak Lubricant Private Limited having its registered office at 85, N S Road, Kolkata- 700001 The company has been allotted 25,000 equity shares of ₹ 10/- each at a premium of ₹ 90/- per share. The payment has been made through cheque no. 530128 dated 21/03/2012 for ₹ 25,00,0001- drawn on Central Bank of India. The Bank statement highlighting the pa ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... th their board resolution for their investment in our company. The Investor company is registered NBFC (Non-Banking Financial company) registered with Reserve Bank Of India U/s 45 of the Reserve Bank of India Act 1934 vide registration no B-05.03442 dt. 06.02.2004. We hereby attached the share application form' and their allotment advice duly signed by them. (Refer Annexure I ). The Investor Company has also forwarded their notarised affidavit confirming the above fact. List of documents submitted in Annexure I 1. Confirmation 2. Board resolution for investment 3. Share Application Form 4. Letter of Allotment 5. Share Certificate 6. Bank Account 7. ITR Acknowledgement 8. Financial statements 9. Certificate of Registration from RBI 10. Affidavit by the Director 10. M/s Vighnhar Marketing Private Limited having its registered office at 18A, Ramakanta Bose Street, Kolkata-700003 The company has been allotted 25,000 equity shares of ₹ 10/- each at a premium of ₹ 90/- per share. The payment has been made through cheque no. 284091 dated 31/03/2012 for ₹ 25,00,0001- drawn on Central Bank of India. The Bank statement highlighti ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d at ₹ 10/- each. Premium as on 31.03.2011 reported was ₹ 2,61,00,000/-. Quantity of equity share issued earlier year' was 300000. Average value of premium received as on 31.03.2011 calculated at Rs.(26100000 -:- 300000) = 87 per share. During the previous year authorized shares increased to 75000 numbers. Quantity of equity shares issued during previous year (617000-300000) =317000 number. Total premium received was Rs:(31700000-3170000) =285300001-. Premium received Rs.(25360000 -:- 317000) = 90/- per share. During the course of assessment proceeding Notice U/S 142(1) dated 10.10.2014 issued by ITO Wd-6(1), Kolkata. Case later on transferred to ITO, Wd-6(1), Kolkata There is no any record/correspondence made during the period 10.10.2014 to 04.02.2015. Show cause notice issued on 05.02.2015 by ITO, Wd-6(1), Kolkata on account of non-compliance of notice U/S issued 142(1). In compliance of show cause notice assessee filed application for adjournment of date to present the case in a proper way on 17.02.2015. Later on compliance made and recorded in order sheet. Summon u/s 131 issued to Director of assessee company, In compliance of summon one of the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e case have already been discussed as above. It is observed that in the year under consideration the appellant company had raised share capital! Share Premium of ₹ 3,17,00,000/- from 10 parties on face value of ₹ 10/- premium of ₹ 90/-. In the course of the assessment proceedings, to verify the receipt of share capital, the assessing officer issued notices u/s.131 to 09 share applicants and in response, they all confirmed the transactions and submitted the details/documents in respect of the subscription of shares of the appellant as necessitated by the assessing officer. The shareholders also submitted the details of the source of the fund. One of director of appellant company also attended his statement was recorded. Even director of two investor companies also attended. However, without taking into consideration of the details/documents filed in the course of the assessment proceedings, he made addition of the share capital of ₹ 3.17,00,000/-raised during the year U/s 68 of Income Tax Act. 6(2) All the documents related to identity, creditworthiness genuineness of transactions of investors were with assessing officer. at the time of framing ass ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 2011], the Calcutta High Court dismissed the appeal of the revenue holding as under: After hearing the learned Advocate for the appellant and after going through the materials on record, we are of the view that no substantial question of law is involved in this appeal. Both the Commissioner of Income Tax (Appeal) and the Tribunal below have in details considered the fact that the share application money was paid by account payee cheque, the creditor appeared before the Assessing Officer, disclosed its PAN number and also other details of the accounts but in spite of that the Assessing Officer did not enquire further from the assessing officer of the creditor but instead, himself proceeded to consider the profit and loss account of the creditor and opined that he had some doubt about the genuineness of such account. In our opinion, in such circumstances, the Assessing officer of the assessee cannot take the burden of assessing the profit and loss account of the creditor when admittedly the creditor himself is an income tax assessee. After getting the PAN number and getting the information that the creditor is assessed under the Act, the Assessing officer should enquire ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... mstances of the case, we are sorry to say, depict clear abuse of power of the assessing officer. We were inclined to impose exemplary costs upon the revenue but refrained from doing so because notice of this appeal has not been given to the respondent. No one has appeared, The question formulated in this case is answered in the affirmative and against the revenue. The appeal is, therefore. dismissed, In ITO versus M/s. Savera Suppliers (P) Ltd. (ITA No. 12/K0l/2010), the Kolkata Bench of the Income Tax Appellate Tribunal, following the order of the Calcutta High Court in the case of CIT Versus M/s. Dataware Private Limited (Supra), dismissed the revenue's appeal holding as under: 5. We have heard the rival submissions. As it is noticed from the assessment order that the assessee has placed before the AO copies of return of income, balance sheet and bank account details as also the PAN of the applicants the assessee has discharged its onus in respect of the share application money received by it. Further, in view of the decision of the Hon 'ble Jurisdictional High Court in the case of CIT vs M/s. Dataware Private Limited (supra) wherein it has been specifically ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... itute acceptable proof or acceptable explanation by the assessee. The revenue would not be justified in drawing an adverse inference only because the share applicant failed to respond to notices. As held by Hon'ble Delhi High Court Assessing officer is duty-bound to investigate the creditworthiness of the share applicant and the genuineness of the transaction. Further, the assessee has discharged its onus of proving the identity of the share applicants. In the given facts the Assessing officer had not brought any material or evidence which would indicate that the share applicants were (a) benamidars or (b) fictitious persons or (c) that any part of the share capital represented the company's own income from undisclosed sources. In view of the facts and precedent before us, we are of the view that CIT(A) has rightly deleted the addition and we confirm the order of CIT(A) on this issue. In ITO versus M/s. Cygnus Developers (I) Pvt. Ltd. [ITA No.282IKoIl2012], the Kolkata Bench of the IT A T held as under: 8. We have heard the submissions of the learned DR, who relied on the order of Assessing officer. The learned counsel for the assessee relied on the order of CIT(A) ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ng the previous year this investments have been liquidated and sale proceeds on such sale has gone into the bank account and the same has been utilised for making investments in the form of share application money in the assessee company by Jai Kali Properties (P) Ltd. Thus it is clear that the assessee has established the identity and creditworthiness and genuineness of the transactions of the receipt of share application money. We, therefore, hold that the addition made by the Assessing officer and sustained by CIT(A)should be deleted. In ACIT versus M/s. Kunj Alloys Pvt. Limited [ITA No. 257/CTK/2007], it was held as under: 9. We have heard the arguments of both the sides and also perused the relevant material available on record. Although the Id. D.R. has relied on the order of the Assessing officer in support of the Revenue's case on this issue, the Id. Counsel for the assessee has pointed out that the total amount of ₹ 19 .26 crores was raised towards shares by the assessee-Company as well as other group Companies including the amount in question during the assessment years 2001-02 to 2007-08. He has submitted that pursuant to the search conducted in the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... editworthiness and' genuineness of a transaction was explained by the Supreme Court in CIT Vs. Lovely Exports (P) Ltd., 216 CTR 195. Whilst, the Assessing Officer acted legitimately in enquiring into, the matter, the inferences drawn by him were not justified at all in the circumstances of the case. Whether the assessee company charged a higher premium or not, should not have been the subject matter of the enquiry in the first instance. Instead, the issue was whether the amount invested by the share applicants was from legitimate sources. The objective of Section 68 is to avoid inclusion of amount which is suspect. Therefore, the emphasis on genuineness of all the three aspects, identity, creditworthiness and the transaction. What -is disquieting in the present case is when the assessment was completed on 31.12.2007, the investigation report which was specifically called from the concerned department in Kolkata was available but not discussed by the Assessing Officer. Had he cared to do so, the identity of the investors, the genuineness of the transaction and the creditworthiness of the share applicants would have been apparent. Even otherwise, the share applicants' p ..... X X X X Extracts X X X X X X X X Extracts X X X X
|
