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TMI Blog2021 (6) TMI 607X X X X Extracts X X X X X X X X Extracts X X X X ..... ower authorities. Therefore, we are of the considered view that the issue needs to go back to file of the AO to verify additional evidences filed by the assessee. Hence, we set aside the appeal to file of the AO and direct him to relook the issue after considering additional evidences -Appeal filed by the assessee is treated as allowed for statistical purpose. - ITA No.: 626/CHNY/2020 - - - Dated:- 14-6-2021 - Shri Duvvuru Rl Reddy, Judicial Member And Shri G. Manjunatha, Accountant Member For the Appellant : Shri T. Banusekar, CA For the Respondent : Shri G. Johnson, Addl.CIT ORDER PER G. MANJUNATHA, AM: This appeal filed by the assessee is directed against the order of the Commissioner of Income Tax (Appeals), Coimbatore-3, dated 23.03.2020 and pertains to assessment year 2016-17. 2. The assessee has raised the following grounds of appeal:- 1. For that the order of the commissioner of Income Tax (Appeals) is contrary to-law, facts and circumstances of the case to the extent prejudicial to the interest of the appellant and at any rate is opposed to the principles of equity, natural justice and fair play. 2. For that the commissioner of Inc ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ed its return of income for the assessment year 2016-17, declaring total income of ₹ 8,46,737/-. During the year under consideration, the assessee company has increased its authorized share capital from ₹ 3 crores to ₹ 10 crores. The assessee company had also raised its paid up share capital from ₹ 2 crores to ₹ 10 crores by issue of shares to directors and shareholders. The case of the assessee was taken up for scrutiny and during the course of assessment proceedings, the AO called upon the assessee to file necessary evidences including name and address of the subscribers to share capital, their identity and other details. The AO on the basis of information furnished by the assessee, was of the opinion that the assessee has not substantiated capital introduced with necessary evidences and hence, he has made addition of ₹ 6,22,00,000/- u/s.68 of the Income Tax Act, 1961 (hereinafter the Act ) as unexplained cash credits. 4. Being aggrieved by the assessment order, the assessee preferred an appeal before the ld.CIT(A). Before the ld.CIT(A), the assessee submitted that it has filed all evidences to prove identity, genuineness of transactions ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he consent of the shareholders is accorded to increase the authorized share capital from 3 crores divided into 3 lakhs equity shares of ₹ 100/- each to ₹ 10 crores divided into 10 lakhs equity shares of ₹ 100/- each by creating an additional 7 lakhs equity shares of ₹ 100/- each. Assessee has also produced Form No SH-7 pursuant to section 64(1) of the Companies Act, 2013 and pursuant to Rule 15 of the Companies (Share capital Debentures) Rules 2014. On a perusal of Form No SH-7 it is seen that The Registrar of Companies has disclosed that the existing authorized share capital is increased from 3 crores to 10 crores. But the paid up capital of the company is still shown as 2 crores. The board s resolution which says that paid up capital will be increased from 2 crores to 10 crores is not mentioned in this form. The additional 8 crores brought in as paid up capital is not seen disclosed before the Registrar of Companies. Record of private placement offer to be kept by the company, in Form PAS-5 as per Section 42 (7) and Rule 14 (3) of Companies (Prospectus Allotment of Securities) Rules, 2014 is produced by the assessee. 7. It is not clear why assessee ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... f Non Banking Regulates, World Trade Centre, Mumbai the date of commencement of business is 23.11.2015. According to this letter addressed to the Chief General Manager the policies approved include the acquisition of assets, resolution of assets, investment of own surplus funds and rules of delegation of powers. These have been approved by the Board. As for as introduction of funds as share capital is concerned, they are through normal banking channels. As per Companies Act, 2013, within 60 days of receiving the share application money shares have to be allotted. Assessee s AR disclosed that been allotted shares, but assessee has not produced any share certificate as proof for the same. The money invested as share capital has not been utilized for the purpose it is meant to be. The share capital is utilized by the company for commencing its business, for purchase of fixed assets, to pay off debts of the company, to incur expenses for running the company etc. Share capital is to be utilized for working capital requirements of the company. Here in this case assessee share capital is lying as a TDR. In effect it is more akin to investment in an FD, only for name sake shares have been ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he High Court of Madras held that since the money was received from 4 companies and all companies accepted their investments - assessee had categorically established nature and source of said sum. The Hon ble Supreme Court of India in Pr.CIT Vs Himachal Fibres Ltd (2018) 98 taxmann.com 173 (SC) held that even though assessee was a sick company earlier, it pulled out of woods in the year 2020, the identity share applicants were clearly revealed but A.O. did not conduct any enquiry, the SLP filed against the order of the High Court was dismissed. In the case of CIT Vs Lovely Exports (P) Ltd the Supreme Court in (2008) 216 CTR 195 (SC), the Supreme Court dismissed the SLP filed holding that if share application money is received by assessee company from alleged bogus shareholders, department is free to proceed to reopen their individual assessments, the same cannot be regarded as undisclosed income u/s 68. Again in the case of ITO Vs V.R.Global Energy (P) Ltd (2020) 113 taxmann.com 31 (SC), SLP was dismissed by the Supreme Court holding that the cash credits towards share capital where only by way of book adjustments and not actual receipts, could not be treated as unexplained cash cr ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ness of subscribers to share capital. In fact, the assessee has placed all records to prove identity and creditworthiness because share capital has been raised from directors and their relatives. As regards, genuineness of transactions although the lower authorities have stated that the assessee has not proved genuineness of transactions beyond doubt, but fact remains that assessee has placed all possible evidences including bank statements of subscribers to prove genuineness of transactions. Moreover, once having accepted the fact that identity and creditworthiness of subscribers is not in doubtful, there is no reason for the AO as well as the ld.CIT(A) to doubt the genuineness of transactions merely for the reason that share certificates issued to shareholders was not furnished. In fact, the ld.CIT(A) himself has recorded in his appellate order that the assessee has filed all forms required to be filed before the Registrar of Companies for increase in authorized share capital. Once, necessary statutory forms are filed before competent authorities, then issue of share certificates to shareholders is only a formality. Therefore, for that reason doubting genuineness of transactions ..... X X X X Extracts X X X X X X X X Extracts X X X X
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