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TMI Blog2023 (1) TMI 770X X X X Extracts X X X X X X X X Extracts X X X X ..... .35D - HELD THAT:- We do not find any infirmity in the order of the ld.CIT(A) on this issue in absence of furnishing of any details or evidence in support of the claim that the expenditure falls under any of the categories mentioned in provisions of section 35D(2) of the I.T.Act. We, therefore, do not find any infirmity in the order of the ld.CIT(A) on this issue and accordingly, the same is upheld. The grounds raised by the assessee is accordingly dismissed. Addition u/s. 68 - assessee could not substantiate with evidence to his satisfaction regarding the identity and creditworthiness of the 13 investors who have invested in the share capital of the assessee company and the genuineness of the transaction - HELD THAT:- We find during the remand proceeding, the assessee had given the list of the 13 shareholders with their source. However, it is seen from the source of investment that the investors themselves received loan from others to invest in the shares of the assessee company. It is also important to note that none of the shareholders are assessed to tax and all of them have borrowed money from others, who are again agriculturists and the agriculturists are again not asses ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rd together and are being disposed-of by this common order for the sake of convenience. 2. No one appeared on behalf of the assessee at the time of hearing. It was seen from the order sheet entries that no one is attending the hearings since last two years despite service of notice. Finally, the notices were served through the Revenue through affixture as there was nobody available at the given address as per Form No.36. Under these circumstances, we have no other option but to adjudicate the appeals on the basis of material available on record and after hearing the ld. DR. ITA No.937/HYD/2014 for AY 2009-10 (By Assessee) 3. Facts of the case, in brief, are that the assessee is a company engaged in manufacture and sale of FMCG. It filed its return of income on 17.11.2009 declaring total income at Rs.85,23,300/-. A survey u/s. 133A was conducted on 31.01.2011 during which it was noticed that the assessee company has infused an amount of Rs.3.21 crores towards share capital/share premium during the year 2008-09 relevant to AY 2009-10. During the survey, Shri M.Srinivas Reddy, Managing Director of the assessee company could not properly explain about the veracity of inves ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... is tyre retreading shop, past savings and borrowals from friends and relatives. He could neither furnish any documentary evidence to prove his identity nor for the sources of his income such as copies of income tax returns/ bank statement etc for accumulation of past savings for investment. Therefore, the genuineness of the claim of investment is not proven. 4.4 Alluri Vijaya Rama Raju: In the statement recorded on 28.12.11, this person confirmed to have subscribed Rs,10 lakh towards share capital. The source of investment was stated to be out of his past savings and borrowals from friends and relatives. He could neither furnish any documentary evidence to prove his identity nor for the sources of his income such as copies of income tax returns/bank statements etc for accumulation of past savings for investment. Therefore, the genuineness of the claim of investment is not proven, 4.5 Sommula Gangadhar Reddy: In the statement recorded on 28.12,11, this person confirmed to have subscribed Rs,30 lakh towards share capital, The source of investment was stated to be out of his past savings and borrowals from friends and relatives, He could not identify himself and also did not ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s for share capital. Overall, there were 13 shareholders who had subscribed towards share capital. These share holders have issued cheques to company towards share capital. None of them are assessed to income-tax. All of them have in turn borrowed from others. All borrowals were made from agriculturists. All these agriculturists are again not assessed to income -tax None of them have any income from taxable sources. None of them have any bank account. All these agriculturists have paid the money in cash. Further, some of them have put their left thumb impression on the confirmation letters. But the confirmations are written in English. How the illiterate/semi-literate persons could understand and file confirmation letter in English could not be explained by the appellant. What is surprising is that all the agriculturists were contributing money in lakhs, none of them have used banking channels to lend the money to the shareholders. Even in written submissions, the AR is not clear, whether the farmers invested the money in company through shareholders or they have lent the money to shareholders. The submissions of the AR are inconsistent. However, the statement of shareholders clear ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ng grounds:- 1. The order of the Hon'ble CIT(A) is erroneous in law as well as on facts. 2. In the facts and circumstances of the case, the Hon'ble CIT(A) ought to have deleted the addition of Rs.3,78,642/-made by the assessing officer by invoking provisions of section 40A(3) of the I.T Act. 3 . The Hon'ble CIT(A) erred in dismissing the alternative claim with regard to allowing of 1/5th of the expenditure of Rs.2,75,000/- in the light of provisions of section 35D of the 1T Act. 4. The Hon ble C1T(A) ought to have deleted the addition made by the assessing officer treating the share capital of Rs.3,21,50,000/- as unexplained investment. 5. In the facts and circumstances of the case, the Hon'ble CIT(A) ought to have observed that the requirements mentioned u/s.6B of the IT Act were satisfied and therefore there was no scope to treat the amount of Rs.3,21,50,000- as unexplained investment in the hands of the assessee company in which public are substantially interested. 6. The Hon'ble CIT(A) erred in upholding the determination of the total income at Rs. 4,13,26,942/- as against the income admitted of Rs.85,23,300/- and therefore the a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... before us to take a contrary view then the view taken by the AO and ld.CIT(A) on this issue, therefore, the ground raised by the assessee is dismissed. 12. In ground of appeal no.3, the assessee has challenged the order of the ld.CIT(A) in sustaining the addition of Rs.2,75,000/- by not allowing 1/5th of the same u/s. 35D of the I.T.Act. 12.1 After hearing the ld.DR and on perusal of the record, we find the AO disallowed the amount as this was incurred towards subscription fee for increasing share capital which is capital in nature. We find the ld.CIT(A) rejected the claim of the assessee to allow the same u/s.35D of the I.T.Act by observing as under:- 6.4 Such expenditure can be allowed at the rate of 1/5th for 5 consecutive years starting from the year of production. The AR has not submitted any details or evidence in support of his claim that the expenditure incurred falls under any of the categories mentioned above. Further, the AR explained that this amount was paid to Company Law Board as a fee to enhance the share capital. He was requested to produce the receipt given by the Company Law Board, however, the same was not submitted. Therefore, this ground of appeal is ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... IT(A) while sustaining the addition made by the AO u/s. 68 of the I.T.Act at Rs.3,21,50,000/-, we do not find any infirmity in the same. Accordingly, the order of the ld.CIT(A) on this issue is upheld and the grounds raised by the assessee on this issue are dismissed. 15. Ground of appeal No.6 being general in nature is dismissed. 16. In the result, the appeal filed by the assessee is dismissed. ITA No.655/HYD/2015 for AY 2010-11 (By Revenue) 17. Facts of the case, in brief, are that the assessee filed its return of income on 12.10.2010 declaring total income of Rs. 2,62,15,827/-. The return was processed u/s. 143(1) of the Act. Subsequently, the case was converted to scrutiny and statutory notices u/s. 143(2) and 142(1) were issued. In response to the same, the AR of the assessee appeared before the AO from time to time and filed the requisite details. The AO completed the assessment u/s. 143(3) on 22.03.2013 determining the total income at Rs.9,49,89,417/- wherein he made the following additions. A - Disallowance of Rs.27,56,900/- being fee paid to ROC for increase in share capital B - Addition of Rs.4,00,00,000/- as unexplained share capital u/s. 68 of the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 5,34,000 66,75,000 0 4 Shri V.Srinu, Occupation:Business H.No.1-55(B)-1, Pothavaram, Khambpadu village, Podili Mandal, Praksam Dist-523 240 Indian 5,34,000 66,75,000 0 5 Amt.A.madhavailatha, Ocupation:Business H.No.2-22- 1/105, Shanti Apts, Bhagya Nagar colony, Kukatpally, Hyderabad-500 072 Indian 5,34,000 66,75,000 0 6 Smt.S.Bharathi, Occupation:Business H.No.EWS.No. 1-5-29-581: KPHB Colony, Kukatpally, Hyderabad- 500 072 Indian 5,30,000 66,25,000 0 Total 32,00,000 4,00,00,000 0 20. Since the assessee did not furnish the confirmation letters, income-tax returns, bank statements of the share subscribe ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e the details of sources in the hands of subscribers along with bank statement and copies of income-tax returns. such details were not produced during the assessment proceedings. However, during appeal proceedings the appellant submitted confirmation letters and bank statement of share subscriber s, which were sent to the assessing officer for verification and the assessing officer reported that the identity of subscriber and the genuineness of such transactions were proved and further reported that as none of them were assessed to tax, information pertaining to investment was being forwarded to the jurisdictional Assessing Officer. In this background, it may be reasonable to hold that, where the appellant has submitted the names, addresses, PAN numbers and confirmation letters from the subscribers, indicating the identity of the creditors and the genuineness of transactions, the ratio of the decision of the Hon ble Supreme Court in the case of Lovely Exports 216 CTR 195, can be applied and it may be further reasonable to hold that no addition can be made as undisclosed income in the hands of the company. However, the Assessing Officer is directed to communicate the details regardi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... serviceman and did not invest in M/s. Farmax India Ltd. and he further stated that he did not have any contact with M/s. Farmax India Ltd. He submitted that the ld.CIT(A) did not go through the remand report properly where the AO had specifically pointed out in the remand report that the creditworthiness of the persons investing in the share capital has not been proved. He submitted that the decision of the Hon ble Delhi High Court in the case of Lovely Exports Pvt.Ltd. 216 CTR 195 by the ld.CIT(A) is totally misplaced, since in the said case the AO did not investigate the matter in detail for which the appeal of the assessee was allowed. However, in the instant case neither the assessee nor the subscribers to the share capital furnished information before the Assessing Officer. The Assessing Officer issued summons to the subscribers and out of 6 subscribers, 5 of them did not respond and the remaining one denied having made any transaction with the assessee. Thus, the Assessing Officer had made the addition us.68 on the basis of his investigation and the evidence on record. Thus, the ratio of Lovely Exports (P) Limited is not applicable here. Secondly, even in the remand report, t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... are capital given in foam of cash. Similarly at page No.62-63, in respect of Sri Malla Reddy, the same trend was followed i.e., cash deposited of same amount before payment to appellant. Further. the assessee is non filer. On perusal of page No.66 to 82, in respect of Sri V.Srinu, the previous year profit earned is hardly Rs.10 lakhs as against subscribed Rs.10 lakhs. Further, cash deposits in his bank account. just before transfer to appellant. The amount of cash deposits in account are incommensurate with the gross receipts of the business which is only Rs.28.42,153/- during the' financial year 2009-10. On perusal of page No.84 in respect of smt. Bharathi, same deposit immediately transferred to M/s. Farmax Pvt.Ltd. No income tax returns /BOA etc. On perusal of page No.93 in respect of smt.Madhavi Latha, subscriptions in cash and deposit before the transfer. 26. The ld. DR relied on the following decisions and submitted that the order of the ld.CIT(A) is not in confirmity with law and therefore, the same should be reversed and that of the order of the AO be restored. i.CIT vs.M/s. Jansampark Advertising and Marketing (P) Ltd.in ITA 525/2014 (Del.HC ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ld. DR that some of the investors have immediately deposited money just before issuing cheque to the assessee company, Further, Mr. Venkata Narasimha Raju Datla has not filed any bank statement. Under these circumstances, the decision relied on by the ld.CIT(A) that where the assessee has submitted the name, address, PAN number and confirmation letters from the subscribers indicating the identity of the creditors and genuineness of the transaction, it can reasonably be held that no addition can be made, in our opinion is incorrect. 28. Further, as per the various decisions, the powers of the ld.CIT(A) are coterminous with that of the powers of the AO. The ld.CIT(A) can do which the AO has failed to do. However, in the instant case despite the report of the AO that none of the investors has established his/her creditworthiness, the ld.CIT(A), without going through the remand report of the AO properly has deleted the addition which, in our opinion, is not correct. We find the Hon ble Delhi High Court in the case of CIT vs. Titan Securities Pvt.Ltd. reported in 84 CCH 184, after considering the decision of Hon ble Supreme Court in the case of M/s. Lovely Exports Pvt.Ltd. (supra) ha ..... X X X X Extracts X X X X X X X X Extracts X X X X
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