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TMI Blog2024 (10) TMI 704X X X X Extracts X X X X X X X X Extracts X X X X ..... e premium - onus to prove - AO disallowed the allotment of share capital relating to 8 parties by observing that assessee has not brought on record the respective Directors before him - HELD THAT:- The issue involved is allotment of shares and the assessee has clearly indicated that the assessee has received the cheque and made the allotment that means what is relevant is allotment of shares and confirmation made by the assessee that assessee has already received the relevant cash and as per the provisions of section 39 of the Companies Act, shares cannot be allotted before receipt of money. It is the obligation on the part of the assessee to allot the shares only upon realization of the case. Therefore, as per the information available on record, assessee has allotted the shares after receipt of cash only. Therefore, now claiming that the assessee has actually received or realised the cash in the subsequent year cannot be accepted and it is only an after-thought. Further, it is not brought on record why the payments were received through RTGS after six months of allotment of shares. Therefore, this argument of the assessee is rejected. Various documents submitted by the assessee b ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... areek, Judicialmember For the Assessee : Dr. Rakesh Gupta, Advocate For the Revenue : Shir Vivek K. Upadhyay, Sr. DR. ORDER PER S. RIFAUR RAHMAN, AM : 1. This appeal is filed by the assessee against the order of the Ld. Commissioner of Income Tax (Appeals-10), New Delhi dated 13.08.2018 for the Assessment Year 2012-13. Aggrieved with the above order, assessee is in appeal before us by raising following grounds of appeal :- i) The ld. CIT(A) has erred in law and on facts in upholding the assessment order passed by the Deputy Commissioner of Income Tax, Circle 26(1), New Delhi under section 143(3) of the Act, by making an addition of Rs. 7,23,72,000/- without appreciating the facts and circumstances of the case, the law as applicable and the submissions and the supporting evidence produced by the appellant. ii) The Ld. CIT(A) has erred in law and on facts in upholding the disallowance / addition of Rs. 3,72,000/- made by the DCIT as notional interest on interest free loans granted by the appellant out of the interest expense claimed by the appellant without appreciating the facts and circumstances of the case, the law as applicable and the submissions and the supporting evidence prod ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ed and owned funds in the business and the amount utilised for other purposes is very meager compared to surplus available in the business as held in the case of Reliance Utilities Power Ltd. (supra) when the assessee has huge surplus as well as borrowed funds, it is natural to presume that the funds diverted for non-business purpose is only from own funds. Therefore, the disallowance made by the Assessing Officer is uncalled for. Accordingly, the same is directed to be deleted. Hence, ground no.2 raised by the assessee is allowed. 6. With regard to ground no.3, the relevant facts are, during assessment proceedings, Assessing Officer observed that assessee has issued share capital along with share premium to the extent of Rs. 31,49,20,000/-. Details of shares issued and confirmations received are extracted by the Assessing Officer at pages 2 to 7 of the assessment order and ld. AR for the assessee submitted that assessee issued and allotted share capital to 27 shareholders. However, Assessing Officer has accepted shareholders 1 to 19 listed in the assessment order and he has not accepted shareholders listed at sl.no.2 and 20 to 26 with the observation that assessee has failed to pr ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s 68 could be made in the case where the actual sum has been credit in the subsequent year and mere book entry has been made in the account during the year under consideration: Manju Credit Pvt. Ltd. vs. ITO, ITA No. 351/Kol/2019 dated 13.01.2023, ITAT Kolkata Bench. 11.1. Out of this amount of Rs. 118.50 lacs received in the preceding year, Rs. 10 lacs was returned by the assessee. Shares have been issued and allotted to all the eighteen share subscribing companies on two different dates during the impugned year as per the chart extracted above. We note that Id. AO has made the addition of entire amount of Rs. 230 lacs as received during the year, ignoring the verifiable fact that out of this total of Rs. 230 lacs, an amount of Rs. 118.50 lacs was received during the preceding year. Considering the facts on record and the provisions of section 68 of the Act, no addition is called for in respect of amount received by the assessee during the preceding year which has been duly accounted and reported in its audited balance sheet (supra). We direct the Id. A O accordingly to delete the addition so made in this respect. Further reliance is placed on the decision of CIT vs. Sat Prakash A ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... written submissions before Ld. CIT(A). M/s Qmkareshwar Builders Pvt. Ltd. (inadvertently mentioned as Mr. Swaran Singh in Form 2) (Rs. 70,00,000/-) PB 56-57 is the copy of reply dated 18.03.2015 filed by assessee-company before Ld. AO submitting that assessee-company allotted 70,000 shares to M/s Omkareshwar Builders Pvt. Ltd. and has received Rs. 70,00,000/- from the said company. However, while filing Form 2 to ROC (PB 58-62), assessee-company inadvertently intimated ROC that shares are allotted to Swaran Singh, director of M/s Omkareshwar Builders Pvt. Ltd. The said error was rectified by the company by filing revised Form 2 (PB 63-69) rightly intimating that the share were actually allotted to M/s Omkareshwar Builders Pvt. Ltd. Moreover, in the next year i.e., AY 2013-14, M/s Omkareshwar Builders Pvt. Ltd. has sold their share and Form 20B was filed before ROC for such share transfer (PB 70-74). PB 58-62 is copy of Form 2 original filed wherein assessee-company inadvertently intimated ROC that 70,000 shares are allotted to Swaran Singh, director of M/s Omkareshwar Builders Pvt. Ltd. PB 63-69 is the copy of revised Form 2 filed by assessee-company before Ld. AO rightly intimatin ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... their tax jurisdiction which duly establishes their identity. PB 112-121 is the copy of their audited financial statements of M/s CJ Exim Pvt. Ltd. for AY 2012-13 perusal of which would show that they were engaged in the Job work and earning revenue from the same. Further, the investment made by them has duly been disclosed by them under non-current investments (PB 117). M/s Anni Shoes Pvt. Ltd. (Rs. 95,00,000/-) PB 122 is the copy of confirmation of M/s Anni Shoes Pvt. Ltd. wherein they have confirmed that they have invested Rs. 95,00,000/- in the assessee-company as share capital and shares were duly allotted to them. Further that the entire investment is made through proper banking channels. They have further confirmed their PAN details and complete address as well. PB 123 is the copy of bank statement of M/s Anni Shoes Pvt. Ltd. showing that the entire investment of Rs. 95,00,000/- in assessee-company was made by them through proper banking channel in the subsequent year i.e., AY 2013-14. It further shows their complete address. PB 124 is the copy of acknowledgment of ITR of M/s Anni Shoes Pvt. Ltd. showing their complete address, their tax jurisdiction which duly establishes t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ssee-company has duly been disclosed by under non-current investments (PB 153). M/s Entrench Construction Pvt. Ltd. (Rs. 90,00,000/-) PB 154 is the copy of confirmation of M/s Entrench Construction Pvt. Ltd. wherein they have confirmed that they have invested Rs. 90,00,000/- in the assessee-company as share capital and shares were duly allotted to them. Further that the entire investment is made through proper banking channels. They have further confirmed their PAN details and complete address as well. PB 156-157 is the copy of bank statement of M/s Entrench Construction Pvt. Ltd. showing that the entire investment of Rs. 90,00,000/- in assessee-company was made by them through proper banking channel in the subsequent year i.e., AY 2013-14. PB 155 is the copy of acknowledgment of ITR of M/s Entrench Construction Pvt. Ltd. showing their complete address, their tax jurisdiction which duly establishes their identity. PB 158-163 is the copy of their audited financial statements of M/s Entrench Construction Pvt. Ltd. for AY 2012-13 wherein the investment made by them in assessee-company has duly been disclosed by them under non-current investments (PB 163). M/s Black Cobra Construction ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... , the addition made by Ld. AO is without any basis, evidence or material and is merely based on surmises and conjectures and thus, deserves to be deleted. Further reliance is placed on the following judicial decision: M/s. Mantram Commodities Pvt. Ltd. Vs ITO, ITA.No.l05/Del./2021 dated 25.04.2022, ITAT Delhi Bench. CIT vs. Bwarkadhish Investment Pvt. Ltd., (2011) 330 ITR 298, High Court of Delhi. Pr.CIT-8 vs Softline Creations Pvt. Ltd., ITA 504/2016 dated 31.08.2016, the High Court of Delhi. Commissioner of Income Tax Ors. vs. Five Vision Promoters PVT. Ltd. Ors., (2016) 380 ITR 0289, High Court of Delhi. CIT vs Goel Sons Golden Estate (P) Ltd., ITA No. 212/2012, Date of order 11.04.2012, High Court of Delhi. CIT vs. Nishan Indo Commerce Ltd., (2014)101 DTR 413, Calcutta High Court. ITO vs Rakam Money Matters (P) Ltd., (2014) 41 CCH 0155 (Delhi Tribunal) PR. CIT vs Rakam Money Matters (P) Ltd., ITA No. 778/201 5 (High Court of Delhi), Date of order 13.10.2015 CIT vs. Vrindavan Farms (P) Ltd., ITA No.71/2015 (High Court of Delhi) Commissioner of Income Tax vs. Gangeshwari Metal Pvt. Ltd. (2014) 361 ITR0010 (Delhi) CIT vs Fair Finvest Ltd., (2013) 357 ITR 146, (High court of Delhi) ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the director of assessee-company, however, thereafter the company filed another conformation filed by M/s Omkareshwar Builders Ltd. in response to notice u/s 133(6) enclosed at PB 77. In the said reply that have clarified that they have invested Rs. 70,00,000/- in the share capital of the assessee-company for purchase of 70,000/- shares in AY 2012-13 which were sold by them in AY 2013-14. Further, even in the confirmation provided by them enclosed at PB 105, they have duly confirmed that they shares have been duly allotted to them against the 70,00,000/- invested by them. Therefore, this observation of Ld. AO is without any basis, evidence or material and deserves to be deleted. 4. Ld. AO at page 7 has mentioned that the assessee-company has not proved the creditworthiness, genuineness of the transaction in the respected of 8 companies (mentioned above). In this regard, it is respectfully submitted assessee has filed voluminous evidences as narrated above which duly establishes the creditworthiness, genuineness of the transaction in respect of all the of 8 companies. Therefore, this observation of Ld. AO deserves to be ignored. 5. Ld. AO at page 7 has also mentioned that the onus o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the Revenue heavily relied on the findings of the Assessing Officer and submitted that Assessing Officer made the addition after making proper investigation. He submitted that shares were allotted, however whether the shareholders are the actual investors is the issue in this case. He brought to our notice remand report submitted by the Assessing Officer which is reproduced at para 6.4 of the appellate order and also brought to our notice page 11 of the ld. CIT (A) s order. He submitted that the income declared by the shareholders is not sufficient to make such huge investments. Therefore, the shareholders do not have the capacity to make huge investments in the assessee company. Therefore, he supported the findings of lower authorities and submitted that the addition made by the authorities below after proper verification and enquiry. He also relied on the decision of Hon ble Bombay High Court in the case of M/s. Pratham Telecom India Pvt. Ltd. vs. DCIT dated 17.09.2018. 10. Considered the rival submissions and material placed on record. We observed that assessee has issued share capital with share premium during this year and the Assessing Officer called for various details to p ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ssue of receipt of payment in the subsequent assessment year for the share capital. We observed from the record submitted before us that assessee has allotted all the shares subscribed in the year i.e. before 31.03.2012. Assessee also submitted all relevant documents in support of such allotment before the authorities and all the relevant ROC forms were submitted to claim that the assessee has already allotted all the shares before the end of the year i.e. 31.03.2012. Now before us, the assessee has filed a chart indicating that the assessee has actually received/realised the amount in the FY 2012-13 and also relied on the decision of ITAT, Calcutta in the case of DCIT vs. M/s. Surya Alloys Industries Ltd. in ITA No.2253/Kol/2013 order dated 10.08.2016 and ITAT, Ahmedabad in the case of Deem Roll Tech Ltd. vs. DCIT in ITA No.437/Ahd/2018 order dated 11.08.2020. The first decision relied by the assessee is distinguishable considering the fact that in those decisions, the payments were received by them subsequently and the reasons for such late payments were explained and the issue involved in those cases are share application money and not share allotment. Thus, share application mo ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... trangely all the investors have the same source that application money was received for allotment of securities and there is no document submitted that all these companies have allotted the shares against such receipt of application pending for allotment. Therefore, all these shareholders have source which are doubtful and all of them have the same source of receipt of application money and all the application monies so received were all invested in the assessee company. This transaction does raise several questions on capacity of these shareholders. Even during remand proceedings, assessee has merely submitted the information what was already available on record and capacity of the shareholders who made the investments were never proved by the assessee. Therefore, we are inclined to agree with the tax authorities that assessee has proved the identity and failed miserably to prove the capacity of the investors. However, we are inclined to give conditional benefit to the assessee to submit the details of allotment of shares by the respective investors, who has shown the source of funds received as share application pending allotment. If the assessee submits the allotment of the shar ..... X X X X Extracts X X X X X X X X Extracts X X X X
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