Loading judgment…
No AI summary yet for this case.
Income Tax Appellate Tribunal, “C” BENCH, MUMBAI
Before: HON’BLE SHRI MAHAVIR SINGH, VP & HON’BLE SHRI MANOJ KUMAR AGGARWAL, AM
Manoj Kumar Aggarwal (Accountant Member)
Aforesaid appeal by revenue for Assessment Year (AY) 2009-10 arises out of the order of learned Commissioner of Income-Tax (Appeals)-49, Mumbai [CIT(A)] dated 12/04/2019 in the matter of assessment framed by learned Assessing Officer (AO) u/s 143(3) r.w.s. 147 on 19/12/2016. The sole ground urged by the revenue read as under: - In the circumstances and on the facts of the case and in law, the CIT(A) has erred in deleting the addition of Rs.3,23,50,000/- made by the AO as unexplained cash credit received from M/s. Emma Auto Ancillary Pvt. Ltd. in the form of share
application money u/s. 68 of the Act without considering the fact that the statement of Shri Satish Agrawal and other related concerns were recorded u/s. 131 of the Act wherein they had stated that the above mentioned company was engaged in the business of providing accommodation entries.
Having heard rival submissions and after careful consideration of material on record including the orders of lower authorities, our adjudication to the subject matter of appeal would be as given in succeeding paragraphs. Assessment Proceedings
1 The material facts are that the assessee being resident corporate assessee is stated to be engaged as builder and developer. The assessee is stated to be part of Lotus group. The original return of income filed by the assessee was processed u/s 143(1). However, the case was reopened pursuant to search action u/s 132 on M/s Lotus / Kamdhenu / Green Valley group on 09/10/2014. During the search action, statement of Shri Satish Agarwal (director of Assessee Company) was recorded wherein he could not provide the details of the share application money of Rs.349.50 Lacs as received by the assessee company during AYs 2009-10 & 2010-11. The said money was accepted to be unexplained cash credit in the hands of the assessee company. Accordingly, the case was reopened and notice u/s 148 was issued on 28/03/2016. In response to the same, the assessee offered the original return of income.
2 During the course of assessment proceedings, the assessee was show-caused as to why the share application money of Rs.323.50 Lacs as received during this year from sole share-applicant i.e., M/s Emma Auto Ancillary Private Ltd. (EAAPL) be not treated as unexplained cash credit in view of admission made by Shri Satish Agarwal in the recorded
statement. However, the assessee maintained that the primary onus as required u/s 68 to prove the identity of the share applicant, their creditworthiness and genuineness of the transactions stood discharged by various documentary evidences viz. Copies of Income Tax return of share applicant, their financial statements, bank statement, copy of PAN card and duly signed forms filed with ministry of corporate affairs. Regarding receipt of share premium, it was stated that due procedure was followed and the premium was received keeping in view the future prospects of the business. It was the prerogative of Board of Directors to decide the premium amount and it would be the wi om of the share holders whether they want to subscribe to shares at a premium. It was also submitted that the admission was made under pressure and the statement stood retracted by the director on 16/10/2014. Further, share application money was utilized to make advances to another group concern i.e., M/s Lotus Spaces Pvt. Ltd. for ongoing project at Lotus Park, Thane. The copy of retraction statement was fled before Ld. AO wherein it was submitted that the statement was given under pressure and undue influence.
3 Keeping in view the submissions made by the assessee, another statement was recorded u/s 131 from Shri Satish Agarwal on 19/12/2016 wherein it was confirmed by him that the earlier statement was given under undue pressure and the same stood retracted on 16/10/2014. The relevant portion of the same has been extracted in the assessment order. However, the retraction was disregarded by Ld. AO in the light of various judicial pronouncements. It was also held that there was no logic for the investor to subscribe to share at huge premium. The assessee company did not carry out any business since its incorporation. Similarly,
no business was carried out by EAAPL and its returned income was ‘Nil’. However, it was noted that the investor entity i.e., EAAPL had received Share Application money of Rs.403.35 Lacs and invested the same in the assessee company. The investor entity did not have funds of its own. It was alleged that the funds invested in the assessee company were sourced from other fictitious entities. No logic explains the commercial expediency for investor entity to make investment in the assessee company. To verify the transactions, summons was issued u/s 131 to directors of investor entity but none attended. The field enquiries by ward inspector revealed that no office existed at the given address and no business activity was being carried out from that premises. Therefore, it was held that assessee was unable to prove the creditworthiness of the investor entity. Finally, the share application money as received by the assessee was added as unexplained cash credit u/s 68. Appellate Proceedings
During appellate proceedings, the assessee challenged the validity of reassessment proceedings which were rejected by Ld. CIT(A). On merits, the assessee drew attention to the documentary evidences filed by it to establish identity of the investor entity, its creditworthiness and genuineness of the transaction. It was reiterated that it was the prerogative of Board of Directors to decide the premium amount and it would be the wi om of the share-holders whether they want to subscribe to shares at a premium. It was submitted that the share- application was duly supported by the financial statements. The transactions took place through banking channels and all the credits stood explained. The attention was also drawn to the fact that the share- application money received by the assessee was invested in another
group entity for an ongoing project. As per the decision of Hon’ble Bombay High Court in CIT V/s Gagandeep Infrastructure Private Ltd. (80 Taxmann.com 272), the assessee was not required to prove the source of the source since amendment to Sec.68 was introduced only w.e.f. AY 2013-14. Reliance was placed on many other decisions to support the fact that onus casted upon assessee, in terms of requirement of Sec.68, stood discharged and therefore, no addition could be sustained u/s 68. 5. The submissions filed by the assessee found favor with Ld. CIT(A). Concurring with the same, the Ld. CIT(A) rendered the following findings:-
3 I have carefully considered the assessment order and the submissions of the learned counsel. Search was conducted on Lotus group on 09.10.2014. During the course of search, statement of Mr. Satish Aggarwal was recorded on 09.10.2014 wherein he stated that Share application money of Rs.3,49,50,000/- received by the assessee from M/s. Emma Auto Ancillary Pvt. Ltd. is only an accommodation arrangement and the amount of Rs.3,49,50,000/- is an unexplained credit in the books of the appellant. During the year under consideration, the appellant has received share application money of Rs.3,23,50,000/- from M/s. Emma Auto Ancillary Pvt. Ltd. and the balance amount was received in AY 2010-11. The main issue involved in the present appeal is in relation to addition u/s. 68 of Rs.3,23,50,000/- in respect of share application money received by the appellant from M/s. Emma Auto Ancillary Pvt. Ltd. during the year under consideration. The assessee claims that no addition of Rs.3,23,50,000/- is called for as it has completely established the three ingredients viz. identity, genuineness and creditworthiness as envisaged u/s. 68 of the Act with voluminous documents placed on record whereas the AO has treated the same to be bogus and added the same u/s. 68 of the Act merely on surmises and conjectures. Thus, the essential dispute is with regard to the share application money received by the appellant from M/s. Emma Auto Ancillary Pvt. Ltd. and whether the assessee has discharged its onus cast upon by the provisions of section 68 of the Act.
The assessee has submitted documents as under in the course of assessment as well as before me: i) Copy of PAN of investor ii) Copy of duly signed Share Application forms filed by the alleged Investor with the appellant company while applying the shares. iii) Financial Statements & ITR Acknowledgement of the alleged investor company, iv) Copy of relevant extract of Bank Statement of the alleged investor company and of the appellant company reflecting the said transactions, v) Copy of confirmation of investor
vi) Copy of the Return of Allotment (Form 2) filed with the