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Income Tax Appellate Tribunal, DELHI “DB” BENCH: NEW DELHI
Before: SHRI KUL BHARAT & SHRI M BALAGANESH
ORDER PER KUL BHARAT, JM : This appeal filed by the assessee is directed against the order of Ld. Commissioner of Income Tax (Appeals), Haldwani, dated 12/03/2018 pertaining to the Assessment Year 2016-17. The assessee has raised the following grounds of Appeals.
Maa Uma Agrifoods Pvt. Ltd. “1. We are not agree with the order u/s 250(6) of income Tax Act 1961.
Demand calculated by Commissioner of Income tax (Appeals) is Prejudicial to us and, if ITAT appeal is not allowed to be proceeded, it amounting to against the law.
• As per Assessee View :-
We filed an appeal before commissioner of income tax (Appeals) Haldwani for Our Company- MAA UMA AGRIFOODS PRIVATE LIMITED R/O Vill- Siroli Kalan, Barielly Road, Kichha U.S Nagar- Uttranchal-263148. On the basis of below documents we want to relief from Additional Income of Rs 67,70,000 as added by Assessing Officer (Income tax officer -1(4) Rudra pur)
1. Form -5 the Challan Payment of Rs 58171 on 14-03- 2013 for documents filed with Registrar of Companies situated at Kanpur Regional Office.
2. Altered memorandum of Association showing the altered Clause of share capital of Share Capital of 2 Crore at Page. 11
3. Share Certificates of all new Share holders
After increase of Authorized share capital of the company the company through private placement made infusion in the form of issue of equity shares of 67.70 lacks making the capital amount of Rs 167,53 lacs from 97.60 lacs
The Company (Assessee) possesses the adequate supportive documents /evidence justifying the capital infusion Transaction made during the financial year.
6. Bank statement of Company with amount of subscribed Fresh issued Equity shares during the year 2013-14 and sources of money of capital infusion
7. Identity proofs of subscribers.
The Statutory Auditor had done mistake in drafting the notes of financial Statement submitted with the department as a result AO Assessed the wrong ncome, which is just a typing mistake
The Assessee had adequate following evidences
• Bank Statements for receipt of money towards the share capital and also possess the letter.
• Intimation sent to the regional Director of Company Kanpur for the same. • Company had Adequate Documents for Sources of the flow of money in the form of Capital which is added in the assessment Order as undisclosed Income by the Assessing Officer
As per case Law Commissioner Of Income Tax vs Divine Leasing And Finance Ltd.
Where the Company increased Subscribed Share Capital and received Rs. 99, 80, 000 form Directors/Promoters and also by the way of public issue The sums were received through banking channels and complete records were maintained
In the present case, the subscribed capital of the assessed had been increased. The Income-tax Officer assessed the company and accepted the increase in the subscribed capital. The Commissioner of Income-tax came to the conclusion that the Assessing Officer did not carry out a detailed investigation inasmuch as there had been a device of converting black money into white by issuing shares with the help of formation of an investment company. The Commissioner of Income-tax further held
Maa Uma Agrifoods Pvt. Ltd. that the Assessing Officer did not make enquiries with regard to the genuineness of the subscribers of the share capital. He thereupon set aside the order of assessment It is evident that even if it be assumed that the subscribers to the increased share capital were not genuine, nevertheless, under no circumstances, can the amount of share capital be regarded as undisclosed income of the assessed. It may be that there are some bogus shareholders in whose names shares had been issued and the money may have been provided by some other persons. If the assessment of the persons who are alleged to have really advanced the money is sought to be reopened, that, would have made some sense but we fail to understand as to how this amount of increased share capital can be assessed in the hands of the company itself.
In the light of the proposition of law as enunciated by the Hon'ble Delhi High Court as above, in respect of the issue of examining the genuineness of subscription to the share capital of a company, vis-a-vis, section 68 of the Act, let me examine the facts of the case before me. In the present case, the facts which emanate from the assessment order and the submissions of the A/R are that:
Maa Uma Agrifoods Pvt. Ltd. a) the assessee had submitted the copies share application and money receipts in respect of the subscribers to its share capital, and the subscribers, in response to A.O.'s notices u/s.133(6) of the Act issued to them, submitted their addresses, their P.A.No.s and their respective balance sheets confirming subscription by them to the share capital of the assessee; b) none of the subscribers denied subscribing to share capital of the assessee, c) the subscription money was received by the assessee through banking channel by way of cheques. d) four of the subscribers appeared before the AO and confirmed the transaction; e) three of the subscribers communicate their inability to appear before the AO for the reason that they are senior citizens or they were disabled because of their illness.
In the light of the above facts of the case the explanation and proof furnished before the AO constitute acceptable proof and acceptable explanation as held by the Hon'ble Court in CIT v. Divine Leasing & Finance Ltd. (supra).
Maa Uma Agrifoods Pvt. Ltd. Therefore, it is held that the AO was not justified in treating the amount of share subscription money and of share premium to be assessee's unexplained cash credit u/s. 68 of the Act. Accordingly, the addition of Rs.65, 50,000/- made by the AO is deleted.
On the basis of above contention Assessee wants tax relief on Additional Income added by Assessing Officer (Income Tax Officer -1(4)-Rudra.”
At the time of hearing, no one attended the proceedings on behalf of the Assessee, it is seen from the records that no one has been attending the proceedings since 23rd April 2023, despite various opportunities, the assessee chose not to attend the proceedings, therefore, the Appeal is taken up for hearing in the absence of the assessee and is being disposed off on the basis of material available on records.
The facts in brief are that, in this case the original return of income was filed on 29/09/2014 through electronic mode declaring income at INR. 9,40,400/-. The case was selected for scrutiny assessment and the assessment was framed u/s 143(3) of the Income Tax Act, 1961 (hereinafter referred to as the ‘Act’). While
Maa Uma Agrifoods Pvt. Ltd. framing the assessment the Assessing Officer noticed that as per Note No. 1 of Financial Statement for the year under Appeal the assessee company has authorized capital to the tune of INR.
98,00,000/- in the form of 98,000/- equity shares, the assessee has disclosed the subscribed and used subscribed capital at INR.
1,65,30,000/- in the form of 16,53,000/- of equity shares @ Rs. 10 each. The increase of share capital is made by way of fresh issue of shares, the assessee before the Assessing Officer could not substantiate the basis for the increased share capital, therefore, the Assessing Officer made addition of INR. 67,70,000/- in this regard and assessed income at Rs. 77,10,400/- against the declared income of INR 9,40,400/-.
4. Aggrieved against this, the assessee preferred appeal before the Ld.CIT(A), who after obtaining the Remand Report from the Assessing Officer and giving opportunity to the assessee sustained the additions and dismissed the Appeal. Now, the assessee is in Appeal before this Tribunal.
Maa Uma Agrifoods Pvt. Ltd. 5. From the Grounds of Appeal, it is evident that same are not in accordance with Rules being argumentative in nature. It cannot be inferred from the Grounds what is the grievance of the assessee, however, Ld. Departmental Representative has supported the orders of the authorities below and submitted that the assessee could not substantiate its claim by proving the creditworthiness of the subscribers.
We have heard the Ld. Departmental Representative and perused the material available on record. We find that the Ld. CIT(A) has pointed out certain discrepancies in the reply filed by the assessee during the First Appellate Proceedings for the sake of clarity the finding of the Ld. CIT(A) in Para 5 of the Appellate Order is reproduced as under:-
“5. The contentions of the Appellant, its submissions thereon along with case laws relied upon, Report of the A.O and rejoinder of the Appellant to it have been considered. The issue in Appeal is the addition of Rs 67,70,000/- on account of Shares allotted to various shareholder which was considered as unverified by the AO and hence added to the Appellant's income. The Appellant has provided the following details in respect of these persons which are reproduced as under:-
SNo. Date Name of Amount Investor Evidences Investor/ PAN Equity Share Holder 1 22.04.2013 Upkar Singh 7,00,000.00 The Investor Land Holding is a Farmer Documents and not holding affidavit PAN confirming the investment at Page 1 to 30 2 27.04.2013 Jagdish 2,20,000.00 AAYPG7526P ITR, Bank Kuamr Statement & Affidavit confirming the investment at Page 4 to 8 3 07.06.2013 Nirmala Devi 1,30,000.00 ALCPD5920H ITR, Bank Statement & Affidavit confirming the investment at Page 9 to 13 4 06.08.2013 Vikas Garg 10,00,000.00 AMBPG7315D ITR & Affidavit 07.12.2013 6,20,000.00 confirming the 16,20,000.00 investment at Page 14 to 16 5 07.08.2013 Ramesh 16,00,000.00 ADEPA0450D ITR & 30.08.2013 Kuamr 23,00,000.00 Affidavit Agarwal 39,00,000.00 confirming the investment at Page 6 16.08.2013 Manoj Kuamr 2,00,00 AFKPA8027L ITR & Agarwal 0.00 Affidavit confirming the investment at Page 17 to 19
In view of the contentions of the Appellant and the evidences mentioned as above were submitted in Appeal, the A.O. was directed to carry out verification of the same.
Now in Remand proceedings the A.O. has found the following discrepancies:-
S Date Name of Amount Inve Evidence Remark No. Investor/Equity stor s claimed Share Holder PAN to be produced 1 22/04/2013 Upkar Singh 7,00,000 The Land In absence of Investor Holding return and is a documen personal Farmer ts & appearance the not Affidavit credit holding confirmin worthiness is PAN g the not verifiable investme nt Note: bank statemen ts is not given by the bank due to technical error.
2 27/07/2014 Jagdish Kuamr 2,20,000 AAYPG752 ITR, bank Also the 6P statement assessee failed and to produce this Affidavit share applicant confirming in persons the investment
3 07/06/2013 Nirmala Devi 1,30,000 ALCPD59 ITR, bank Returned 20H statement income and and investment is Affidavit not in confirming coherence the investment
4 06/08/2013 Vikas Garg 10,00,000 AMBPG7 ITR, bank Return income 315D statement not commensurate 07/12/2103 6,20,000 and with the amount of Affidavit investment 16,20,000 confirming and in absence the ofpersonal investment appearance, creditworthiness I not verifiable 5 07/08/2013 Ramesh Kumar 16,00,000 ADEPA04 ITR, bank No ITR was Agarwal 50D statement submitted and 30/08/2013 23,00,000 and in absence of Affidavit personal confirmin appearance, g the creditworthine investme ss is not nt verifiable
6 16/08/2013 Manoj Kumar 2,20,000 AFKPA ITR, bank Returned Agarwal 8027L statement income and and investment is Affidavit coherence confirmin g the investme nt
The above discrepancies could not be explained by the Appellant in its rejoinder to the Remand Report. Further the Appellant could not produced these persons before the Maa Uma Agrifoods Pvt. Ltd. AO in Remand proceedings. Further its request for further time is not justified as several months time was already allowed before the Remand Report was submitted and these persons were not produced before the AO. With regards to Share Capital addition u/s 68, the decision in Commissioner of Income-tax vs. Nova Promoters & Finlease (P) Ltd. [2012] 18 taxmann.com 217 needs to be considered, as also Hon'ble Delhi High Court in a recent decision in the case of Commissioner of Income-tax vs. Independent Media (P.) Ltd.210 TAXMANN 14(Delhi)(2012), and as in such cases, Section 68 would be very much need to be considered in the Appellant's case. Further these decisions are supported by the decision of Delhi High Court in CIT vs. Expire Buildtech (P) Ltd. 366 ITR 110 (Delhi) & in B.R. Petrochem (P) Ltd vs. ITO 81 Taxmann.com 424 (Madras) where the Madras High Court has held where assessee received Share capital from various contributors, where these contributors were persons of insignificant means and their creditworthiness is not established, the addition u/s 68 was justified. In the case of the Appellant, it failed to produce the shareholders before the AO despite being given sufficient time to do so and no plausible reason for the inability to do so was submitted. Further as pointed out by the AO in case of Upkar Singh no ITR or bank statement was submitted. In case of Ramesh Kr Agarwal no ITR was submitted and Maa Uma Agrifoods Pvt. Ltd. there is a deposit of Rs. 23,00,000/- on same day as the transfer to the Appellant. In the case of Nirmala Devi Rs. 1,30,000/- was deposited & same day transfer to Appellant. Further in case of the other persons also, their credit worthiness and source of funds could not be established. It may be mentioned that the onus of the assessee neither gets discharged merely by confirmatory letters nor does the fact that the amount was paid through banking channels makes it sacrosanct. CIT vs Precision Finance Pvt. Ltd. 208 ITR 465 (Cal) The assessee must prove all these a) identity, b) capacity of creditors, c) genuineness of the transaction, only then the burden shifts to the department CIT vs Biju Patnaik (SC) 160 ITR 674. Therefore in view of these facts and the Court decisions as discussed above, it is held that the Appellant has not satisfactorily established the credit worthiness of the Share subscribers and the genuineness of the transactions is also not established, accordingly the addition made by the A.O is held to be justified and is confirmed.
The above finding on fact is not controverted by the assessee by placing any contrary material on record, the assessee has not placed on record any evidence in support of its claim. In the absence of supporting evidence the contention of the assessee that Maa Uma Agrifoods Pvt. Ltd. the impugned addition is unjustified cannot be accepted. Therefore, we do not see merits on the grounds of Appeal, the same are dismissed.
In the result, the Appeal of the assessee is dismissed.
Order pronounced in the open Court on 23rd November, 2023