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TMI Blog2022 (11) TMI 538X X X X Extracts X X X X X X X X Extracts X X X X ..... e basis of details/information furnished by the assessee that the assessee has issued fresh equity shares worth Rs. 1,08,00,000/- to two investor companies comprising share capital of Rs. 6,75,000/- and share premium of Rs. 1,01,25,000/- during the year ended 31.03.2012. The AO called upon the assessee to furnish the details/evidences proving the identity, creditworthiness of the investors and genuineness of the transactions. Simultaneously, the AO issued summons u/s 131 of the Act to the share subscribers namely M/s Knitworth Exports Ltd. and M/s Piyush Commodities Pvt. Ltd. However only the director of M/s Knitworth Exports Ltd. had appeared and their statements were recorded u/s 131 of the Act on two occasions i.e. on 27.02.2015 and 26.03.2015 whereas M/s Piyush Commodities Pvt. Ltd. did not comply with the summons u/s 131 of the Act. The AO also issued notices u/s 133(6) of the Act to both the investors calling for bank statements evidencing the source of funds, audited financial statements, IT acknowledgments and confirmations etc. which were duly furnished by both these parties by responding to the notices issued u/s 133(6) of the Act and are part of the assessment record. Th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ces/commercial spaces at Lucknow by referring to the balance sheet which was duly shown as investment in property. Thus the A.R strongly controverted the conclusion drawn by both the authorities below that there was no business in the assessee company and the shares was issued at a high premium. The ld AR argued that real estate projects have longer gestation period as it takes fairly long time to develop and sell the projects. The Ld. A.R. submitted that the AO had issued notices u/s 133(6) of the Act to the investors and has also summoned them for personal appearance u/s 131 of the Act. The Ld. A.R. submitted the notices u/s 133(6) were duly complied by both the investor companies by filing all the necessary details comprising ITRs, PANs, audited balance sheets, copies of bank statements etc. The Ld. A.R also stated that M/s Knitworth exports Ltd. had even complied with the summons issued u/s 131 of the Act in the assessment proceedings and statements were recorded on two occasions on 27.02.2015 and 26.03.2015. The ld AR while referring to these statements argued that on both the occasions the director of the investor company M/S Knitworth Exports Ltd. confirmed to have invested ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... erty which is apparent from the balance sheet. The Ld. A.R. submitted that the AO has not appreciated the fact that investment in shares and securities is one of the business activity of NBFC as per Section 45IA of the RBI Act, 1934. The Ld. A.R. therefore submitted that the assessee company is NBFC under RBI Act and having registration No. B.05.06081 vide certificate of Registration dated 29.01.2004. The Ld. A.R. submitted that the assessee company had issued 67,500/- equity shares of Rs. 10/- each at a premium of Rs. 150/- per share to two investor company namely M/s Knitworth Exports Ltd. (Rs. 58,00,00/-)and M/s Piyush Commodity Pvt. Ltd. (Rs. 50,00,000/-). The Ld. A.R. submitted that all the payments were received through banking channel and all the evidences were placed before the authorities below which proved the identity, creditworthiness of the investors and genuineness of the transactions. The Ld. A.R. submitted that these shares were issued to these investors after complying with all the necessary formalities under the Companies Act. The Ld. A.R also submitted that even the share premium which was not required to be justified by the assessee company as it had share capit ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... assessed to tax u/s 143(1) of the Act and AY 2014-15 company was also assessed u/s 143(3) of the Act. The net worth of the company is at Rs. 4.50 crores out of it had invested 50 Lakhs in the shares of the assessee company. The Ld. A.R. also submitted that the said funds were raised by liquidating the investments and thus it invested its own funds in the shares of the assessee company. The Ld. A.R. submitted that since the investment was made through banking channel and source was proved therefore there was no iyota of doubt with respect to identity and creditworthiness of the investor and genuineness of the transactions. The Ld. A.R. also referred to the fact that the AO has made the addition to the tune of Rs. 1,08,00,000/- by invoking first proviso to Section 68 of the Act which states that the assessee is required to prove the source of source of such credit but as a matter of fact the proviso was inserted to the section by Finance Act, 2012 w.e.f 01.04.2013 and therefore was applicable for AY 2013-14 onwards. The Ld. A.R. finally submitted that in view of these facts, the appellate order is contrary to the provision of the Act and may kindly be set aside by allowing the appeal ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... were not carrying any business for sufficient source of funds and investing their money out of their own funds. M/s Knitworth Exports Ltd. subscribed shares amounting to Rs. 58 Lakhs whereas M/s Piyush Commodity Pvt. Ltd. subscribed share of Rs. 50 Lakhs. Needless to mention that the equity shares of 67,500/- at face value of Rs. 10/- each at a premium of Rs. 150/-, we note that both these companies were existing on the other record and regularly filed return of income with the department. In the case of M/s Knitworth Exports Ltd. even the scrutiny assessment was framed for AY 2007-08 and in which department was stated which was adjusted against the refund for AY 2014-15 which proved that there is no doubt about genuineness of the said company besides the said company added net worth of Rs. 3crores and out of that funds the said investor companies invested in the share of the assessee company. Similarly in the case of M/s Piyush Commodity Pvt. Ltd. was regularly filing its return of income and as well as with ROC and for AY 2014-15 the assessee was also having net worth of Rs. 4 crores whereas the investment in the assessee company was only Rs. 50 Lakhs. We note that the said inve ..... X X X X Extracts X X X X X X X X Extracts X X X X
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