ACIT Vs Supreme Placement Services (P) Ltd. (ITAT Delhi)
Conclusion: Addition on account of unexplained share capital/premium was not justified as AO merely doubted the financial capacity of the Investors because they had reported low income in their return of income. This could not be the sole basis to doubt the explanation of assessee. It might be suspicion of the AO only without bringing any evidence on record.
Held: A search under section 132 was conducted in Bhushan Steel Group of cases on 03.03.20. The case of assessee was centralized with this case. Assessee attended the proceedings and filed necessary details before AO for completion of the assessment. AO noted the relevant facts/circumstances leading to the search in the Bhushan Steel Group of cases. During enquiries by the Income Tax Department, it was noticed that the flagship company of the Group Bhushan Steel Limited had introduced a substantial amount of money into its books as share application money. This money was routed through number of group companies and by a series of transactions before reaching Bhushan Steel Limited. The last line of companies from which this amount originated were found to be companies with meager resources and small turnovers. Assessee-company happened to be one such company. On perusal of the return of income and other details submitted, AO noticed that assessee company had invested a substantial amount of money into M/s. Bhushan Steel Limited. The balance-sheet of assessee company revealed that assessee-company had raised this money through share capital/share premium received during assessment year under appeal. During the course of assessment proceedings, assessee was asked to furnish the details of share premium and share capital received during F.Y. 2007-2008. In response to the same, assessee submitted the details of increase in share capital/share premium during assessment year under appeal. AO observed that all the Investors were based out in Kolkata and it was beyond the limit of human reasonableness that these Companies would invest such a large amount in the assessee company. All the companies invested in the assessee did not have any significant income and their source of fund was share premium and share capital. AO, therefore, noted that the creditworthiness of the creditors had not been established and the genuineness of the transactions was also in doubt. AO accordingly made an addition of Rs.4.96 crores on account of unexplained share capital/premium. It was held that AO merely doubted the financial capacity of the Investors because they had reported low income in their return of income. This could not be the sole basis to doubt the explanation of assessee. It might be suspicion of the AO only without bringing any evidence on record. Rather the documentary evidences produced on record clearly support the explanation of assessee. Therefore, the issue was covered in favour of assessee by the Judgment of Hon’ble Delhi High Court in the case of M/s. Adamine Construction Pvt., Ltd.,.
FULL TEXT OF THE ORDER OF ITAT DELHI
This appeal by Revenue has been directed against the Order of the Ld. CIT(A)-1, New Delhi, Dated 25.07.20 13, for the A.Y. 2008-2009, on the following grounds :
1. “ The order of Ld. CIT (A) is not correct in law and
2. On the facts and circumstances of the case the Ld. CIT(A) has erred in deleting the addition of Rs.4,96,00,000/- made by AO on account of unexplained share premium and Share Capital received by assessee from M/s Taranga Vyapar Pvt. Ltd., UDIT Vyapar Private Limited, Remo Engineering Works Pvt. Ltd., Mysol Engineering Pvt. Ltd., Twenty First Century (India) Ltd., as the assessee failed in proving the creditworthiness of the investors and the genuineness of the transactions. M/s Taranga Vyapar Pvt. Ltd does not have any significant funds of its own for investment in the unlisted company like the assessee company.
3. On the facts and circumstances of the case the Ld. CIT(A) has erred in law deleting the addition of Rs.4,84,00,000/- made by AO on a/c of unexplained share premium and Share capital received by assessee from Saumitra Investment and Finance Pvt. Ltd., Viva Trade-link Pvt. Ltd., Hingora Finvest Pvt. Ltd., Doldrum Investment and Finance Pvt. Ltd. & Oshin Investment and Finance Pvt. Ltd. As the assessee failed in proving the creditworthiness of the investors as all the investors are showing nominal income.”
2. We have heard the Learned Representative of both the parties and perused the material available on record.
3 The facts of the case are that assessee has filed the return of income declaring total income of Rs.3,93,976/- on 24.09.2008. Notice under section 143(2) was issued and served upon the assessee. A search under section 132 was conducted in Bhushan Steel Group of cases on 03.03.20 10. The case of assessee was centralized with this case. The assessee attended the proceedings and filed necessary details before A.O. for completion of the assessment. The A.O. noted the relevant facts/circumstances leading to the search in the Bhushan Steel Group of cases. During enquiries by the Income Tax Department, it was noticed that the flagship company of the Group Bhushan Steel Limited had introduced a substantial amount of money into its books as share application money. This money was routed through number of group companies and by a series of transactions before reaching Bhushan Steel Limited. The last line of companies from which this amount originated are found to be companies with meager resources and small turnovers. The assessee company happens to be one such company.
3.1. On perusal of the return of income and other details submitted, A.O. noticed that assessee company had invested a substantial amount of money into M/s. Bhushan Steel Limited. The balance-sheet of the assessee company reveal that the assessee company has raised this money through share capital/share premium received during assessment year under appeal. During the course of assessment proceedings, the assessee was asked to furnish the details of share premium and share capital received during F.Y. 2007-2008. In response to the same, assessee submitted the details of increase in share capital/share premium during assessment year under appeal. On analysis of the details submitted, A.O. noted that assessee has received share capital and share premium from various companies situated at Kolkata of Rs.4,96,00,000/-. The details as per the table are given below :
