M/s. Pratik Syntex Private Ltd Vs. ITO (ITAT Mumbai)
In the instant appeal before us, the inspector was deputed by the AO to make field enquiries who could not locate these three shareholders and the assessee also could not furnish the current addresses of these three new shareholders. These in the instant case before us, these three shareholders did not have sufficient income to justify making these huge investments and factual matrix of the instant appeal before us justify confirming additions u/s 68 which are similar to the factual matrix in the case of Konark Structural Engineering Private Limited(supra). Similarly, learned DR rightly relied upon decision of Hon’ble Gujarat High Court in the case of Pavankumarm Sanghvi(supra) as in this case the loans made by the lenders to the tax-payer are preceded by credit entry of similar amounts in their bank account and the bank balance maintained in their bank account is miniscule , on that factual matrix the Hon’ble Gujarat High Court affirmed the additions. In the instant case before us, the factual matrix is similar as the investment in assessee company by these new shareholders as detailed by us is preceded by the credit entries in the bank account of these new shareholders of equivalent amount and the bank balance regularly maintained by these new shareholders is miniscule.
Thus, in our considered view based upon our detailed discussions and reasoning as given above, we are of the view that the assessee is not able to prove creditworthiness of these three investing companies and genuineness of these transactions of issuing share capital of Rs. 300 lacs( inclusive of share premium )by the assessee company could also not be proved and the additions were rightly made by the AO within deeming fiction of Provisions of Section 68 of the Act. The onus was on the assessee company to bring on record the cogent evidences to prove the creditworthiness of the share subscribers and genuineness of the transaction which in the instant case the assessee is not able to prove the same as per the facts emerging from the records and material before us as set out above and in our considered view in the instant case the transactions were nominal rather than real. The creditworthiness of the shareholders is not proved because they did not had their own money as every payments made by them towards share money in favour of the assessee is preceded by deposit in the bank account of the new shareholders and the balance maintained regularly in their bank accounts was miniscule. The genuineness of the transactions is also not proved as to how such a huge sum of money got invested by the share subscribers and that too at a huge share premium of Rs. 490 per share as no evidences as to the strength of its financial statement or details of some very lucrative profitable project carried on by the assessee is also not brought on record which could warrant justification of such as huge share premium as well justification for these unknown companies being new shareholders to have invested Rs. 300 lacs in the assessee company. These three new shareholders could not be traced and they could not be interrogated by the AO which was essential to unearth the truth as they were not traceable and assessee did not produced the shareholders before the authorities below. Merely saying that return of allotment in form no 2 was filed with the Ministry of Corporate Affairs or Resolutions were passed by the assessee or these companies have Corporate Identification Numbers is not sufficient as these are merely ministerial/administrative functions which needs to be done in any case by all the companies allotting shares but the moot question is as to the creditworthiness of these three new share holders to invest such a huge amount of Rs. 300 lacs in assessee company as well whether these share transactions raising Rs. 300 lacs from these three new shareholders at huge valuation/share premium were genuine and justified which we have wide detailed reasoning above held otherwise. Under these circumstances keeping in view of cumulative reasons and summation of our discussions as set out above, we are of the considered view that the Revenue has rightly made the addition of Rs. 300 lacs received as share subscription as unexplained cash credit u/s. 68 of the Act which we sustained and we do not found any infirmity in the orders of the learned CIT(A) which we sustain/upheld.
FULL TEXT OF THE ITAT ORDER IS AS FOLLOWS:-
This appeal, filed by the assessee, being ITA No. 6690/Mum/2016 , is directed against appellate order dated 08.09.2016 passed by learned Commissioner of Income Tax (Appeals)-21, Mumbai (hereinafter called “the CIT(A)”), for assessment year 2012-13, the appellate proceedings had arisen before learned CIT(A) from assessment order dated 28.03.2015 passed by learned Assessing Officer (hereinafter called “the AO”) u/s 143(3) of the Income-tax Act, 1961 (hereinafter called “the Act”) for AY 2012-13.
2. The grounds of appeal raised by the assessee in the memo of appeal filed with the Income-Tax Appellate Tribunal, Mumbai (hereinafter called “the tribunal”) read as under:-
1. On the facts and circumstances of the Appellant’s case and in law the Ld. Commissioner of Income Tax (Appeals) erred in confirming the addition made by the Ld. AO amounting to Rs. 3 Crores being share capital and premium by invoking the provisions of 68 of the Income Tax Act, 1961.”
3. The brief facts of the case are that the assessee is dealer in textiles yarn & is also commission agent. During the course of assessment proceedings u/s 143(3) r.w.s. 143(2), the AO observed that assessee has raised new share capital as per chart below for which the assessee was asked by the AO to prove identity and creditworthiness of all the new shareholders as well genuineness of transaction of raising share capital, detailed as hereunder:
