Case Law Details

Case Name : CIT, Central Vs Anshika Consultants Pvt. Ltd. (Delhi High Court)
Appeal Number : ITA 467/2014
Date of Judgement/Order : 15/05/2015
Related Assessment Year :
Courts : All High Courts (4419) Delhi High Court (1319)

Brief of the Case: In the cited case, Delhi High Court held that had the AO cared, the identity of the investors, the genuineness of the transaction and the creditworthiness of the share applicants would have been apparent. Even otherwise, the share applicants’ particulars were available with the AO in the form of balance sheets income tax returns, PAN details etc. While arriving at the conclusion the AO did not consider it worthwhile to make any further enquiry but based his order on the high nature of the premium and certain features which appeared to be suspect, to determine that the amount had been routed from the assessee’s account to the share applicants’ account. The true identity of the share applicants, their creditworthiness and genuineness of the transaction, are based on sound reasoning and do not call for interference.

Facts of the Case: During the A.Y 2006-07, the assessee had issued shares at a premium ranging from Rs.24000 to Rs.39000 to applicants which were companies. In the course of assessment proceedings, the AO had sought, details in particular of such share applicants. The assessee had provided the various details of such share applicants i.e. (Star Pleat Vincon Pvt. Ltd., Shree Mahavir Management Services Pvt. Ltd,. Bhuwania Brothers Pvt. Ltd. and Manush Marketing Pvt. Ltd.), such as the bank account statements, the Memorandum and Articles of Association, income tax return, balance sheet, PAN details etc. The AO considered the submissions and took note of the fact that the notices sent under Section 133(6) to the share applicants were returned unserved. After his analysis of the material placed on the record, the AO added back the sum of .12,78,60,000/-.

On appeal, the order of the AO was set aside concurrently by the CIT (A) and the ITAT.

The Revenue preferred appeal before the High Court questioning the correctness of the view taken by the Income Tax Appellate Tribunal.

Held by CIT (A): The CIT (A) rejected the appeal of the Revenue on the ground that the appellant had received share capital from 3 companies who are regularly assessed to tax, the companies have submitted the copies of the share application forms, the minutes of the Board’s resolution authorizing the companies to make the application for shares, copy of certificate of incorporation, copy of PAN etc. The AO had relied on the inquiry of the Inspector that the concerned companies were not found existing on the given addresses. On the other hand, the crucial fact is missed that these companies are regularly doing the business and file their tax returns on regular basis. The taxes are paid by them on the income so earned by them. The Principal Officers from the companies attended before the ADIT, Investigation in Kolkata and submitted that the investment in the appellant company has been made from the realization of sale of earlier investments held by the companies. In view of the totality of facts and circumstances, the addition of Rs.12,78,60,000/- made by the A.O. was deleted.

Held by ITAT: The ITAT affirmed the findings of the CIT (A).

Held by High Court: The High Court observed that the department was able to lay its hands on the addresses of the share applicants and where the share applicants are assessed. These companies are existing from long period. They have confirmed that they have contributed to the share capital of the assessee company.

The next aspect is their creditworthiness. The assessee has filed balance sheet of all the investors. The companies had sufficient balance in their balance sheets in the shape of investment as well loan and advances. These companies were existing more than 10 years.

The next issue is about the genuineness of the transaction. The assessee has produced the details of bank account. All the share application money have been issued through baking channel. They are in existence.

High Court also observed that had the AO cared, the identity of the investors, the genuineness of the transaction and the creditworthiness of the share applicants would have been apparent. Even otherwise, the share applicants’ particulars were available with the AO in the form of balance sheets income tax returns, PAN details etc. While arriving at the conclusion the AO did not consider it worthwhile to make any further enquiry but based his order on the high nature of the premium and certain features which appeared to be suspect, to determine that the amount had been routed from the assessee’s account to the share applicants’ account.

The High Court opined that the conclusions of AO were clearly baseless and false. High Court opined that the AO utterly failed to comply with his duty considers all the materials on record, ignoring specifically the most crucial documents. High court instructed to place these observations on the record and direct a copy of the judgment to be furnished to the concerned income tax authorities for appropriate action towards reflecting these observations suitably in service record of the concerned AO to avoid such instances in the future.

After examining the facts and circumstances, the High Court held that on the concurrent findings of fact, as to the true identity of the share applicants, their creditworthiness and genuineness of the transaction, are based on sound reasoning and do not call for interference.

Thus, the appeals were dismissed.

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Category : Income Tax (28345)
Type : Judiciary (12659)

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