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TMI Blog2024 (12) TMI 488X X X X Extracts X X X X X X X X Extracts X X X X ..... produced Directors of any of the share applicant companies before the ld. Assessing Officer. He has not demonstrated as to how this company can command a huge share premium of Rs. 589/- per share having value of Rs. 1/- each. Therefore, we do not have any hesitation in holding that it is bogus share application money received by the assessee for the purpose of ulterior motive to system. Decided against assessee. - Shri Rajpal Yadav, Vice-President (KZ) And Shri Rajesh Kumar, Accountant Member For the Assessee : Shri Ankit Jalan, A.R. For the Revenue : Shri Arun Kumar Meena, Addl. CIT, Sr. D.R. ORDER PER RAJPAL YADAV, VICE-PRESIDENT (KZ): - The present appeal is directed at the instance of assessee against the order of ld. Commissioner of Income Tax (Appeals), National Faceless Appeal Centre (NFAC), Delhi dated 11th May, 2023 passed for Assessment Year 2012-13. 2. The assessee has taken five grounds of appeal, but its grievances revolve around a single issue, namely ld. CIT(Appeals) has erred in confirming the addition of Rs. 4,79,44,500/-, which was added by the ld. Assessing Officer with the aid of section 68 of the Income Tax Act. 3. The assessee has filed an application for pe ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... oduce any additional evidence either oral or documentary before the Tribunal. It only empowers the Tribunal to take on record any evidence, which can help the Tribunal to decide the appeal judiciously. Therefore, taking into consideration the pleadings of the assessee and the nature of evidence, it sought to produce. We deem it appropriate to take it on the record because such evidences will not be required to cross verify by the ld. Assessing Officer. These are the assessment orders passed in the case of share applicants and, therefore, their genuineness cannot be doubted. We allow this application and take these evidences on record for our consideration. 7. Brief facts of the case are that the assessee has filed its return of income on 25.03.2013 declaring NIL income. The case of the assessee was selected for scrutiny assessment and a notice under section 143(2) was duly issued and served upon the assessee. The ld. Assessing Officer thereafter issued notice under section 142(1). On scrutiny of the accounts, it revealed that the assessee has taken share application money from ten Companies, whose details have been tabulated by the ld. Counsel for the assessee in the written submis ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... r any previous year, is not satisfied in the present case. Hence, the invoked provision is not suitable in the present case and the addition made therein is liable to be deleted. In this regard we would also like to submit that the provision reads as sum credited in the books of accounts , and the word sum is not defined in the Act. Therefore, one has to consider a meaningful meaning of the word SUM , which in the present case clearly inclines towards cash or cash equivalent as the heading of the section suggests the same. Moreover, Your Honour, if any amount of money is not received/receivable by the appellant then, by no stretch of imagination, the appellant could be treated as have being earned taxable income. In the present facts of the case, the Ld. A.O. and Ld. CIT(A) failed to note that the appellant is not having any bank account and has not received a single sum of money from any of the shareholder. Moreover, both the lower authorities have failed to note that major of the shares were issued without any premium and at face value. There was no proper application of mind, before making the addition and from the perusal of the orders passed by the lower authorities, it is fou ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ade by the Id. A.O. invoking the provision of section 68 of the Income Tax Act, 1961 is bad in law, unsustainable and liable to be deleted. Your Honour, we would also like to submit that the appellant had provided complete details of the shareholders with their PAN and address, books of accounts, copy. All the shareholders (except promoters) are private limited companies and are having valid corporate identification number and are also assessed to income tax. It is pertinent to mention here that the share subscribers to whom shares were allotted on premium are all assessed to income tax u/s. 143(3) of the Income Tax Act, 1961 (Copy of the assessment orders are enclosed herewith for your kind consideration as Annexure B). Your Honour, the Ld. A.O. was having the PAN details of all the share subscribers, could have verified from the assessing officers of the share subscribers. However, no pain was taken by the Ld. A.O. to verify the details submitted by the appellant. Your Honour, as all the share subscribers are assessed by Income Tax Officer for the same assessment year, identity, creditworthiness and genuineness of the transaction could not be disputed by any stretch of imaginatio ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ch energy towards jurisprudence, but ld. 1st Appellate Authority has examined the facts in details. He further contended that a perusal of accounts of the assessee, i.e. balance-sheet, it would reveal that it has shown shareholders fund including reserve and surplus at Rs. 4,79,44,500/-. It s total revenue is zero. It has debited expenditure of only Rs. 5,500/-. It has not paid any taxes. It has issued subscribed and fully paid-up equity shares of 8,30,000 of Rs. 1/- each. It has not been doing any business. It is also a paper company and misusing the procedure by receiving the huge premium. As far as the assessment orders of other share applicants placed on record by the assessee are concerned, each applicant is not doing any genuine business, rather indulging themselves in accommodation entries by making investment in a Company, like the present one or some identical paper companies. There is no real business in the hands of any of the applicants. 10. Ld. Counsel for the assessee further contended that the assessee-company has received the shares under the barter system and, therefore, no addition under section 68 would be made. He put reliance on the order of ITAT dated 20th May ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ere any sum is found credited in the books of an assessee maintained for any previous year, and the assessee offers no explanation about the nature and source thereof or the explanation offered by him is not, in the opinion of the officer, satisfactory the sum so credited may be charged to income tax as the income of the assessee of that previous year. 12. A perusal of the section would indicate that basically this section contemplates three conditions required to be fulfilled by an assessee. In other words, the assessee is required to give explanation which will exhibit nature of transaction and also explain the source of such credit. The explanation should be to the satisfaction of the AO. In order to give such type of explanation which could satisfy the AO, the assessee should fulfill three ingredients viz. (a) identity of the share applicants, (b) genuineness of the transaction, and (c) credit-worthiness of share applicants. As far as construction of section 68 and to understand its meaning is concerned, there is no much difficulty. Difficulty arises when we apply the conditions formulated in this section on the given facts and circumstances. In other words, it has been propoun ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ed the identity of the share applicants, the genuineness of transactions and their creditworthiness; The Assessing Officer chose to proceed no further but merely added the amounts because of the absence of the directors to physically present themselves before him. 14. The Income-tax Appellate Tribunal has relied upon a decision of this court in CIT v. fair Finvest Ltd. [2013] 357 ITR 146 (Delhi), where in somewhat similar circumstances, it was stated as follows (page 152): This court has considered the submissions of the parties. In this case the discussion by the Commissioner of Income-tax (Appeals) would reveal that the assessee has filed documents including certified copies issued by the Registrar of Companies in relation to the share application, affidavits of the directors, Form 2 filed with the Registrar of Companies by such applicants confirmations by the applicant for company's shares, certificates by auditors etc. Unfortunately, the Assessing Officer chose to base himself merely on the general inference to be drawn from the reading of the investigation report and the statement of Mr. Mahesh Garg. To elevate the inference which can be drawn on the basis of reading of su ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n the department to have enforced attendance of Shri Mahesh Garg or the erstwhile Directors of the share applicant companies and confronted them with the evidences affidavits relied upon by the appellant and thereupon given opportunity to the assessee to cross examine these applicants. 16. In the light of above, we have examined the facts and circumstances. One of the share applicants is M/s. Kushal Commodities Pvt. Limited. Copy of the assessment order of this company is available on page no. 22. Apart from this copy of the assessment order, no other paper has been placed on record by the assessee except computation of income. In this case, ld. Assessing Officer has treated this company as a paper company, who is not doing any real business. There is no evidence placed on record that the assessee has sold its shares by swapping the shares of some other company. Perusal of this assessment order would reveal that this assessee has also raised huge share capital and ld. Assessing Officer has made addition of Rs. 5,60,36,170/-. Though the ld. Counsel for the assessee has tried to draw a parity from the order of ITAT in the case of M/s. Vishnu Distributors Pvt. Limited, but on facts, t ..... X X X X Extracts X X X X X X X X Extracts X X X X
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