PRABHU DHAN INFRASTRUCTURE PVT LTD.,KOLKATA vs. D.C.I.T CIR - 10,KOL, KOLKATA

The only ground of appeal

We have heard the rival submissions. The facts with regard to the receipt of share application money of 5,00,000/- from Jay Kali Properties (P)Ltd and Rs.10,00,000/- Kalisaran Properties (P) Ltd are as follows :- To satisfactorily explain the receipt of share application money from Jai Kali Properties (P) Ltd., the assessee filed a copy of the balance sheet of Jai Kali Properties (P) Ltd to prove the genuineness and creditworthiness of the transactions of receipt of share application money. The AO found that Schedule-D of the balance sheet so filed, gave list of loans and advances. Under the sub-head ‘Investment’ Rs.5,00,000/- appeared in the balance sheet as on 31.03.2004 and 31.03.2005. Since there was no change in the figure of investments on both the aforesaid dates the AO was of the view that no investments could not have been made by Jai Kali Properties (P)Ltd during the previous year. In reply to the query of the AO in this regard the assessee filed a letter signed by Shri Bijay Kr.Dabriwal, Director of Jai Kali Properties (P) Ltd in which it was explained that investment appearing in the balance sheet on 31.03.20o4 was an investment by Jai Kali Properties (P)Ltd in the shares of Prabhudhan Securities (P) Ltd. During the previous year relevant to A.Y.2005-06 the assessee sold the aforesaid investment and out of the sales proceeds Rs.5,00,000/- was invested in assesse company. The AO was of the view that no evidence of sale of investments in Prabhudhan Securities (P)Ltd was filed by the assessee. The AO called upon the assessee to produce Shri Bijay Kr.Dabriwal on 28.12.2007, but the assessee did not produce Shri Bijay Kr.Dabriwal. AO therefore concluded that the investment by Jai Kali Properties (P)Ltd. In the form of share application money was not proved. The assessee had also filed a copy of the bank account of Jai Kali Properties (P)Ltd. The same is places at pages 10-12 of the assessee’s paper book. A perusal of the bank account shows that as on 11.02.2005 the balance in the account of Jai Kali Properties Prabhu Dhan Infrastructure Pvt.Ltd., ,A.Y.2005-06 (P)Ltd with Federal Bank Limited was a sum of Rs.1,55,370/-. On .14.02.2005 a sum of Rs.1,50,000/- had been invested as share application money in the assessee company by Jai Kali Properties (P)Ltd. Thereafter on 15.02.2005, 17.02.2005 and 22.02.2005 the assessee has received sale proceeds of Rs.1,50,000/- each on sale of shares of Prabhudhan Securities Pvt. Ltd. The assessee has issued three cheques for Rs.1,50,000/- each on 16.02.2005, 18.02.2005 and another cheque for Rs.50,000/- on 23.02.2005 towards share application money of the assessee company. The AO was of the view that the money was deposited in the bank account just before the investment by Jai kali Properties (P)Ltd in the assessee company. According to the AO the very nature of deposits and withdrawals proved that Jai Kali Properties (P)Ltd. Was floated to provide adjustment entry. The AO thus concluded that a sum of Rs.5,00,000/- credited to the account of the assessee company as share application money was not satisfactorily explained.

The CIT(A) concurred with the view of the AO.

We have heard the rival submissions and are of the view that addition made by the AO and sustained by CIT(A) deserves to be deleted. It is clear from the evidence on record that Jai Kali Properties (P)Ltd held that investment was Rs.5,00,000/- in Prabhudan Securities Pvt.Ltd as on 31.03.2004. During the previous year this investments have been liquidated and sale proceeds on such sale has gone into the bank account and the same has been utilised for making investments in the form of share application money in the assessee company by Jai Kali Properties (P) Ltd. Thus it is clear that the assessee has established the identity and creditworthiness and genuineness of the transactions of the receipt of share application money. We, therefore, hold that the addition made by the AO and sustained by CIT(A)should be deleted.

As far as receipt of share application money from Kalisaran Properties (P)Ltd is concerned the facts are almost identical. Kalisaran Properties (P)Ltd held Prabhu Dhan Infrastructure Pvt.Ltd., ,A.Y.2005-06 investments worth Rs.10,00,000/- in Prabhudhan Securities (P)Ltd as on 31.03.2004. These investments were liquidated and utilised in making investments in share application money with the assessee. The letter of Kalisaran Properties (P)Ltd in this regard is at page 1 of the paper book. Pages 3 and 4 is the bank statement of Kalisaran Properties (P)Ltd with Federal Bank. The entries in the bank account clearly demonstrates the factum of realisation of investment in Prabhudan Securities Pvt.Ltd by Kali Saran Properties (P)Ltd and such proceeds being utilised to make investments in share application money of the assessee company. The reasons assigned by the and CIT(A) for making addition u/s 68 of the Act are identical as were given while treating the investments by Jai Kali Properties (P)Ltd as unexplained. It is clear from the evidence on record that the assessee has established the identity and creditworthiness and genuineness of the transactions of the receipt of share application money from M/S.Kalisaran Properties (P) Ltd. We, therefore, hold that the addition made by the AO and sustained by CIT(A)should be deleted.

A copy of the source of funds of Jai Kali Properties (P)Ltd and Kalisaran Properties (P)Ltd for making investment in share application of the assessee is given as annexure to this order. In the light of the evidence on record we are satisfied that the action of the revenue authorities while making the impugned addition u/s 68 of the Act cannot be sustained. Accordingly the said addition is directed to be deleted.

In the result the appeal of the assessee is allowed. Order pronounced in the Court on 20.01.2016.