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TMI Blog2023 (12) TMI 584X X X X Extracts X X X X X X X X Extracts X X X X ..... s including profit and they continue their operations and activities till date. How such corporate entities which are still existing and running their business activities and complying with the statutory requirements can be said to be bogus. Once these parties were allotted redeemable preference shares and have been redeemed much before any search taken place in the case of Shri Pravin Kumar Jain, then we are unable to agree with the contention of the department that simply because, some of the entities belong to Shri Praveen Kumar Jain, the transaction itself is bogus. Is there any evidence or material found qua this transaction showing that right from subscription to redemption something has been found to mere paper formality or some kind of bogus or accommodation entry. At the time of redemption, these parties have redeemed at Rs. 100 + Rs. 10/- and in such case it cannot be held that there was any manipulation at the investment stage by these companies that preference shares were issued with premium by taking cash then assessee bought back by paying extra Rs. 10 which is otherwise taxable in the hands of the investors. Thus, in the peculiar facts when all these corporate ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... gh the entities engaged in providing accommodation entries on commission basis on the basis of documentary evidence such as PAN, IT return, confirmation, Bank Statement etc without considering the facts that subscriber was a paper company and not a genuine investor. 5. On the facts and circumstances of the case and in law, the Ld. CIT (A) erred in deleting the addition u/s 68 on account of non-genuine share capital with premium received through the entities engaged in providing accommodation entries on the basis of documentary evidence such as PAN, IT return, confirmation, Bank Statement etc without considering the ratio of the decision of Supreme Court in the case of Sumati Dayal and Modowell relied upon by the AO in the assessment order. 6. On the facts and circumstances of the case and in law, the Ld. CIT (A) erred in accounting the plea of the assessee that repayment to subscribers of preferential shares justify the genuineness of credit entries from these entities when the main person of these entities namely Shri Pravin Jain had categorically admitted that these entities were involved in providing accommodation entries.. For these and other grounds that may ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 3. 2006-07 Kush Hindustan Entertainment Ltd Absolute Buildings Co. Pvt. Ltd. AAGCA3853L 4 2006-07 Alka Diamond Industries Ltd. Absolute Buildings Co. Pvt. Ltd. AAGCA3853L 5. 2006-07 Javda India Impex Ltd Absolute Buildings Co. Pvt. Ltd. AAGCA3853L 6 2006-07 Lexus Infotech Ltd Absolute Buildings Co. Pvt. Ltd. AAGCA3853L 7 2006-07 Vangaud Jewels Ltd Absolute Buildings Co. Pvt. Ltd. AAGCA3853L 8 2006-07 Yash V- Jewels Ltd Absolute Buildings Co. Pvt. Ltd. AAGCA3853L Amount of investment Date of payment Name of the Praveen Kumar Jain bank through which transaction made ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 0/- 26/04/2006 Hema Trading. Co. P. Ltd 25,00,000/- 26/04/2006 Real gold Tr.P.Ltd 25,00,000/- 26/04/2006 Artillegence Bio-Innovations Ltd. 25,00,000/- 26/04/2006 Artillegence Bio-Innovations Ltd. 25,00,000/- 29/06/2006 Sotcknet International Ltd. 25,00,000/- 29/06/2006 Engineering Professional Company Pvt. Ltd, 25,00,000/- 29/06/2006 Engineering Professional Company Pvt- Ltd. 25,00,000/- 29/06/2006 Kalpana Steelcon Pvt. Ltd. 25,00,000/- 29/06/2006 Reynolds Petro Chems Ltd. 25,00,000/- 29/06/2006 Reynolds Petro Chems Ltd. 25,00,000/- 14/07/2006 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... with the appellant. ii) the companies being corporate entities could not produce the parties in person but the appellant has filed various documents before the AO, like that of share applications, PAN numbers, copies of memorandum of association and articles of association, confirmations from the parties, and also bank statements, IT return details, annual reports of the parties and discharged the onus of proving identity and creditworthiness of the creditors and the genuineness of the transaction iii)The share subscriber is under no legal obligation to deliver/divulge any information to the appellant beyond this in terms of laws of the land Accordingly it is beyond the legal rights of the appellants to seek any further information from share subscribers iv) all the transactions were through banking channels by paying cheques. v) the AO has made the disallowances from the 3 parties belonging to Praveen Jain group to whom notices were issued but returned back with a postal remark as left even after the amount was repaid along with premium of Rs 10/- over and above the subscription of Rs 100/- by the parties and after lapse of about 5 years from the date of rep ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... h a premium of Rs. 90 from 15 concerns. The AO has made a disallowance of entire share application money ie premium value as well as value on par since the appellant has not satisfactorily proved the identity and creditworthiness of the creditors and the genuineness of the transaction. I do not agree with the decision of the AO for the following reasons- Firstly, the appellant has submitted various details like confirmations, bank statements, IT particulars, annual reports etc. of the investors to prove the identity and creditworthiness of the creditors and the genuineness of transaction. However, the AO has not taken them into cognizance without proving how these documents are insufficient and cannot be relied on Secondly, the shares issued were Redeemable Preference Shares and were redeemed within 2 years of the date of allotment. It is also noted that these shares were redeemed much before the AO has noticed such allotment of shares to the so- called bogus entities in the FY 2013-14 ie much before the search and seizure operation in Praveen Jain group which was on 1/10/2013 and well before the notice for reopening the assessment was issued by the AO on 24/3/2014. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ircumstances, the transaction of share application money is correct. He further submitted that it is not the issue of taxability of premium but the issue of genuineness of the whole credit appearing in the books of accounts and thus, the observation of the ld. CIT (A) is incorrect. 10. On the other hand, ld. Counsel for the assessee submitted that assessee before the AO had filed following documents:- a. Copy of share applications. b. PAN of the investors. c. Copies of Memorandum of Association of Articles of Association. d. Confirmations from the parties, and e. Bank statements, IT Returns, annual reports of the parties. None of these documents have been considered by the ld. AO. One very important fact is that here it is not a simple case of share application money, albeit, it is a case of redeemable preference shares which have been redeemed within two years of date of allotment. Therefore, it cannot be any leakage of Revenue or anything shady transaction which ld. AO has perceived. He drew our attention to the bank statements of the investors which had huge sufficient fund invest in the assessee company. He further submitted that assessee was never confront ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 12.01.2009 Yes fi Lexus Infolech Limited (TRIANGULAR 1NFOCOM LIMITED) Under Voluntary Liquidation 9,74,381 Yes Replied 31/01/2007 27.01.2009 Yes i Vanpuard Jewels Limited Active 272 5,55,237 Yes Replied 31/01/2007 27.01.2009 Yes 8 Javda India Impex Limited Active 267 19,99,371 Yes Replied 31/01/2007 27.01.2009 Yes 9 Stocknet International Limited Active 271 - Yes Left Out 31/01/2007 23.12.2008 No 10 Artillcgencc Bio Innovation Limited Active 263 - ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... .00 221.37 Hema Trading Company Pvt. Ltd. Sr. No. Financial / Business Parameters Amount in F.Y. 2005-06 Amount in F.Y. 2006-07 Year-on-Year Growth (in %) 1 Equity Share Capital 1,76,00,000.00 2,00,00,000.00 13.64 2 Reserves Surplus 3,33,155.00 33,26,373.00 898.45 3 Sales / Revenue from Operations 6,17,737.00 13,85,686.00 124.32 4 Profit Before Tax 2,81,263.00 8,74,231.00 210.82 5 Profit After Tax 1,73,263.00 5,90,649.00 240.90 Real Goid Trading Company Pvt. Ltd. Sr. No. Financial / Business Parameters Amount in F.Y. 2005-06 Amount in F.Y. 2006-07 Year-on-Year G ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... -11,31,649.00 7,04,781.00 162.28 Lexus Info tech Limited Sr. No. Financial / Business Parameters Amount in F.Y. 2005-06 Amount in F.Y. 2006-07 Year-on-Year Growth (in %) i Equity Share Capital 2,02,20,000.00 2,48,22,000.00 22.76 2 Reserves Surplus 1,19,339.00 55,83,264.00 4,578.49 3 Sales / Revenue from Operations 10,52,176.00 27,73,785.00 163.62 4 Profit Before Tax 26,499.00 9,74,381.00 3,577.05 5 Profit After Tax -12,458.00 7,57,037.00 6,176.71 Volplast Limited Sr. No. Financial / Business Parameters Amount in F.Y. 2005-06 Amount in F.Y. 2006-07 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... A NA 5 Profit After Tax NA NA NA 13. Based on these documents it was submitted that these parties are not only genuine but had also shown creditworthiness for subscribing the shares. 14. We have heard the rival submissions and perused the relevant finding given in the impugned order as well as materials referred to before us and the details we had sought for from the records. Here one very important fact is that it is not a case of share application money simplicitor, albeit, assessee had issued optionally convertible non-cumulative preference shares at face value of Rs. 10/- and premium of Rs. 90/- to 15 parties. All these shares have been redeemed within two years after the date of issuance. Out of these 15 parties, the maximum amount of preference shares allotted to one person namely Mr. Kunal Shroff for sums aggregating to Rs. 3.90 Crores which have been accepted. However, for the balance amount of Rs. 4,75,00,000/- received from 14 parties have been added u/s. 68. Here, in this case the date of issuance of preference shares was 31/01/2007 and all the shares wer ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... . 15. Once these parties were allotted redeemable preference shares and have been redeemed much before any search taken place in the case of Shri Pravin Kumar Jain, then we are unable to agree with the contention of the department that simply because, some of the entities belong to Shri Praveen Kumar Jain, the transaction itself is bogus. Is there any evidence or material found qua this transaction showing that right from subscription to redemption something has been found to mere paper formality or some kind of bogus or accommodation entry. At the time of redemption, these parties have redeemed at Rs. 100 + Rs. 10/- and in such case it cannot be held that there was any manipulation at the investment stage by these companies that preference shares were issued with premium by taking cash then assessee bought back by paying extra Rs. 10 which is otherwise taxable in the hands of the investors. 16. Thus, in the peculiar facts when all these corporate entities are still existing and doing business and have credentials till date, then it cannot be held that they are sham and bogus entities. Here it is a case of issuance of preference shares which has been redeemed on premium by th ..... X X X X Extracts X X X X X X X X Extracts X X X X
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