9911796707
TMI Blog2016 (8) TMI 1484X X X X Extracts X X X X X X X X Extracts X X X X ..... are applicants from which the share application money was paid and the copy of account of the assessee in which the said amount was deposited, which was received by RTGS. Regarding credit-worthiness of the party, it has been proved from the bank account of these three companies that they had the funds to make payment for share application money and copy of resolution passed in the meeting of their Board of Directors. Regarding source of the source, Assessing Officer has already made enquiries through the DDI (Investigation), Kolkata and collected all the materials required which proved the source of the source, though as per settled legal position on this issue, assessee need not to prove the source of the source. Assessing Officer has not brought any cogent material or evidence on record to indicate that the shareholders were benamidars or fictitious persons or that any part of the share capital represent company s own income from undisclosed sources. Accordingly, no addition can be made u/s.68 of the Act. In view of above reasoned factual finding of CIT(A) needs no interference from our side - Decided in favour of assessee. Disallowance of 80% of the expenses claimed as interest ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... and deleting the addition of ₹ 5,05,87,952/- without appreciating the fact that these expenses have no relevance for business of the assessee, during the year." 3. Assessee filed its return of income at a loss of ₹ 5,04,64,311/-. Assessment was completed u/s.143(3) of the Act dated 28.03.2013 at income of ₹ 34,01,23,640/- where addition u/s.68 amounting to ₹ 34 crores and addition of ₹ 5.05 crores on account of expenditure of capital nature was made. Matter was carried before the First Appellate Authority, wherein various contentions were raised on behalf of assessee and having considered the same, CIT(A) granted relief to the assessee. 4. Same has been opposed before us on behalf of Revenue inter alia submitted that CIT(A) erred in deleting the addition made u/s.68 of the Act without appreciating the fact that assessee failed to discharge its onus to establish identity, genuineness and creditworthiness of companies, which had invested in share application money and the Assessing Officer established these to be non genuine. Further, ld. Departmental Representative submitted that in the circumstances of the case, CIT(A) erred in holding that Assessi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 21.02.2013 and according to which, the new address was as under: 7/1A, Grant Lane, 1st Floor, Room No.25, Kolkata, West Bengal - 700012. Notices issued thereafter were served on these three companies on new address. 5.3 Assessee company submitted before Assessing Officer following documents in respect of these three companies from whom share application money was received: a) PAN Number of the companies, b) Copies of Income Tax return filed by these three companies for assessment year 2010-11 c) Confirmation Letter in respect of share application money paid by them; and d) Copy of Bank statement through which cheques were issued. In the meantime, Assessing Officer referred the matter to the Investigation Wing at Kolkata for making inquiries of the three companies from whom share application money has been received. As mentioned by Assessing Officer in assessment order, he has received report from Investigation Wing of Kolkata together with the documents collected from these three companies and also copy of statement of Director recorded by them. Vide letter dated 20.03.2013, it was informed by assessee company through its Chartered Accountant that Investigation ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ted to the Assessing Officer that the enquiries were conducted by Investigation Wing, Kolkata and they have summoned the parties, recorded their statements and obtained the required documents and evidence including the ledger account of assessee as appearing in their books in support of the share application money paid by them. It was also informed that in view of these, it was not necessary for the assessee company to submit further evidences/ documents regarding share application money received by it. Assessing Officer has given its final finding that; i. These companies were merely entities on paper without proper address of their functioning and a single person controlling its affairs. ii. These companies have no funds of their own to make huge investment. iii. These companies have not responded to the letter written to them, which could have established their creditworthiness and held that the funds of ₹ 34 crores introduced by assessee company in the grab of share application money, as money from unexplained sources and, therefore, treated the same as unexplained cash credit u/s.68 of the Act. 5.6 We find that in respect of share application money received by ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ficer has drawn his own conclusion which was not based on any facts and figures as Assessing Officer has not mentioned anything in the order on what basis the conclusion was arrived on and what were the facts and materials available with him. Therefore, the addition made by him u/s.68 of the Act on account of share application money received without considering the various facts brought to the knowledge of Assessing Officer, which is not justified. 5.7 As per the provisions of Section 68 of the Act, for any cash credit appearing in the books of assessee, the assessee is required to prove the following- (a) Identity of the creditor (b) Genuineness of the transaction (c) Credit-worthiness of the party (i) In this case, the assessee has already proved the identity of the share applicant by furnishing their PAN, copy of IT return filed for asst. year 2010-11. (ii) Regarding the genuineness of the transaction, assessee has already filed the copy of the bank account of these three share applicants from which the share application money was paid and the copy of account of the assessee in which the said amount was deposited, which was received by RTGS. (iii) Regarding c ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n the manner of section 35D of the I.T. Act. There is no question on the nature of expenses for being for non business purpose or in the nature of capital expenditure as such, liable to be disallowed. There is no specific discussion to the effect that the expenses under question are disallowable for any of the specific reasons applicable under section 37 of the I.T. Act for this purpose, which have been claimed by the appellant in that manner. The grouping and description of expenses in the Books of accounts of the appellant is prima facie Revenue in nature as same have been recorded in the books and final accounts in that manner and also accepted in the Audit Report. It is also on record that the appellant has ongoing business and the expenses are stated to be relating to such ongoing business. The AC. has not brought on record any reason or material to contradict the nature of expenses, the entries in the account books as made and any cogent material that same are related to a different business of the appellant in a pre-operative stage. Under the circumstances, the AC. having allowed 1/51h of such expenditure acted erroneously, without basis and contrary to law as there is no di ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... submitted that earlier assessee company was manufacturing various types of automobile parts as per the requirement of customer from its factory at Pune, which is now closed and since A.Y. 2009-10, the assessee company has started manufacturing of AMR and other hardware material which were supplied to various clients and having its head office at Mumbai and branches at Hyderabad, Secunderabad, Kolkata, Baroda, Jaipur, Delhi, Pune, etc. Regarding the interest expenses also, full details were filed and explanation was given by letter dated 28.09.2013 which was partly incorporated in the assessment order in para 10.4. This being a specialized business wherein hardware and software both are required and it takes time to fully exploit the market and get the customers. Assessee company has got the fruits of these expenses and efforts in the subsequent years, which was clearly established from the following data of the sales, major expenses and net profit for last A.Ys. 2009-10, 2010-11 and subsequent A.Ys. 2011-12 and 2012-13 - statement showing Sales, Major Expenses and not profit are as under: PARTIULARS F.Y. 2008-09 A.Y. 2009-10 F.Y. 2009-10 A.Y. 2010-11 F.Y. 2010-11 A.Y. 2011-12 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... neither given any finding as to why any part of these expenses were to be disallowed, nor he has issued any show cause notice why he intends to disallow part of these expenses. 6.5 In view of above, CIT(A) was justified in granting relief to the assessee as discussed above. We are not inclined to interfere with the finding of CIT(A) on this issue. Same is upheld. 7. As a result, appeal filed by Revenue is dismissed. 8. In ITA No.353/Mum/2015 for A.Y. 2011-12, Revenue has filed appeal on following grounds: "1. On the facts and in the circumstances of the case and in law, the Ld. CIT(A) erred in deleting the addition made u/s.68 of I.T. Act, without appreciating the fact that assessee failed to discharge its onus to establish identity, genuineness and creditworthiness of companies, which had invested in share application money and the Assessing Officer established these to be non genuine. 2. On the facts and in the circumstances of the case and in law, without prejudice to (1) above and in the alternative, the Ld. CIT(A) erred in deleting the addition made U/s 68 of the I.T. Act, without appreciating the fact that assessee failed to explain the nature of premium of ͅ ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... related to exempt income in its profit & loss account and disallowed ₹ 14,58,412/-. On appeal, before the ld. Commissioner of Income tax (Appeals) broadly the stand taken in the assessment order was affirmed against which the assessee is in further appeal before this Tribunal. The totality of facts clearly indicates, as claimed by the assessee that no borrowed funds were utilized for earning the exempt income by the assessee and further the dividend were directly credited in the bank account of the assessee and no expenditure was claimed. What it may be, we find that the assessee only received ₹ 1,82,362/- as dividend income, therefore, there is no question of disallowance of ₹ 14,58.412/- by invoking section 14A r.w. Rule 8D under the facts available on record. It was also explained by the ld. counsel for the assessee that on identical fact in earlier years, no disallowance was made. In the present assessment year also, no borrowed funds were invested by the assessee for making investment in shares or for earning dividend income. At best, if any disallowance could be made that can be restricted to ₹ 1,485/- which were claimed as demat charges. Disallowance ..... X X X X Extracts X X X X X X X X Extracts X X X X
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