DCIT, CIRCLE - 1, SILIGURI, SILIGURI vs. M/S. MALDA FLOUR MILLS PVT. LTD.,, SILIGURI

The only issue to be decided in this appeal is as to whether the ld. CIT(A), was justified in deleting the addition made in the sum of Rs.77 Lakhs/- on account of share application money received by the assessee as unexplained cash credit u/s 68 of the Act, in the facts and circumstances of the case.

The brief facts of this issue is that the assessee is a Private Limited Company engaged in the business of running a flour and rice mill. The return of income for the Assessment Year 2014-15, was electronically filed on 25/09/2014, declaring total income of Rs.71,310/-. The ld. Assessing Officer observed from perusal of various documents filed by the assessee during the course of assessment proceedings that the Assessment Year: 2014-15 M/s. Malda Flour Mills Pvt. Ltd assessee had received a sum of Rs. 77 Lakhs/- on account of share application deposit from the following parties:- i. M/s. Highview Management Private Limited - Rs.76,00,000/- ii. Hemlata Maheshwari - Rs.1,00,000/- The aforesaid share application money was received from the aforesaid two parties with premium of Rs.400/- per share. The assessee furnished the audited financial statements of M/s. Highview Management Private Limited, for the Financial Year 2011-12 relevant to the Assessment Year 2012-13; assessment order u/s 144 of the Act, of M/s. Highview Management Private Limited, for Assessment Year 2012-13; name and address from whom capital and securities premium were received by M/s. Highview Management Private Limited and change in directorship of M/s. Highview Management Private Limited, since its incorporation. The assessee had also furnished the name and address of the shareholders, their PAN and their bank statements duly highlighting the transactions/ investments in share application money together with immediate source of credit. 3.1. With regard to investment made by Ms. Hemlata Maheshwari, in the sum of Rs.1 Lakh/- in the assessee company, it was pleaded that the return of income for the Assessment Year 2013-14 of Ms. Hemlata Maheshwari is sufficient to invest Rs.1 Lakh/- in the shares of assessee company. The evidences in the form of ITR acknowledgements, balance sheets, computation of income for the Assessment Year 2012-13, 2013-14 & 2014-15, were submitted in support of creditworthiness of share subscribers and genuineness of the investment made thereon. It was also pleaded that the company M/s. Highview Management Private Limited, had a bank balance of Rs. 1.05 Crores, as on 31/03/2014, proving the financial ability to make investment in the assessee company. The assessee vide its letter dt. 12/07/2016 also submitted that Shri Anirudh Maheswari and Shri Rajiv Kr. Maheshwari are now directors of M/s. Highview Management Private Limited and that Shri Anirudh Maheswari, is also the director of the assessee company. Hence it was concluded that monies were received from group companies of the assessee company having common directors thereby, the identity of the party, creditworthiness of the party and genuineness of the transactions stood conclusively proved. The ld. Assessing Officer observed that M/s. Highview Management Private Limited, was incorporated on 24/03/2012 and had total income of Rs.85,535/-, as net profit, and the income earned by that company does not justify the making of Assessment Year: 2014-15 M/s. Malda Flour Mills Pvt. Ltd investment of Rs.76 Lakhs/- as share application money in the assessee company. The ld. Assessing Officer invoked the provisions of proviso to Section 68 of the Act, introduced by the Finance Act, 2012, w.e.f. 01/04/2013, i.e., from Assessment Year 2013- 14, onwards and concluded that the assessee had not established the source of source. With regard to the sum of Rs.1 Lakh/-, received from Ms. Hemlata Maheshwari, the sum was received in cash and accordingly, the genuineness of the said transactions was also doubted by the Assessing Officer in the assessment. Accordingly, the ld. Assessing Officer proceeded to add the sum of Rs.77 Lakhs/- as unexplained cash credit u/s 68 of the Act, while framing the assessment.

Aggrieved the revenue is in appeal before us.

We have heard rival submission. The ld. A/R, placed on record the balance sheet of the assessee company as on 31/03/2014, relevant to the Assessment Year 2014-15. From the said balance sheet, we find that a sum of Rs.76 Lakhs/- was received by the assessee company from M/s. Highview Management Private Limited in the earlier Financial Year relevant to Assessment Year 2013-14. From the bank statement of M/s. Highview Management Private Limited, we find that these sums were paid on Assessment Year: 2014-15 M/s. Malda Flour Mills Pvt. Ltd 19/07/2012 and 25/07/2012, both dates falling in Assessment Year 2013-14. Hence, no addition u/s 68 of the Act, can be made during the year under consideration, in respect of the said sum. We find that during the year under appeal, this share application money pending allotment in the sum of Rs.76Lakhs/- as on 31/03/2013, was converted into share capital and share premium. There was no physical receipt of money during the year under appeal. Hence, we hold that there cannot be any addition u/s 68 of the Act, for the year under consideration. Accordingly, the grounds raised by the revenue are dismissed.

In the result, appeal of the revenue is dismissed.