IN THE INCOME TAX APPELLATE TRIBUNAL, DELHI `D' BENCH,
NEW DELHI
BEFORE SHRI BHAVNESH SAINI, JUDICIAL MEMBER, AND
SHRI T.S. KAPOOR, ACCOUNTANT MEMBER,
ITA No. 402/DEL/2015
[Assessment Year: 2011-12]
M/s M.A. Projects Pvt. Ltd. DCIT,
BA-17A,DDA Flats, Central Circle-03,
Ashok Vihar, Phase-I, New Delhi
Delhi-110052
PAN-AAECM2372E
Appellant Respondent
Assessee by Shri S. K. Gupta
Revenue by Ms. Rinku Singh-DR
Date of Hearing 06/08/2019
Date of Pronouncement 09/08/2019
ORDER
PER T. S. KAPOOR, ACCOUNTANT MEMBER,
This is an appeal filed by the assessee against the order of Ld.
CIT(A)-II, dated 03/11/2014. The grounds of appeal taken by the
assessee are reproduced below:-
1. "The ld. CIT(A)-II both on facts and in law and also in the circumstances of
the case has erred in confirming the addition of Rs.50,00,000/- u/s 68 of the I.T. Act
on account of acceptance of share application money from M/s Indlon Hosiery Pvt.
Ltd. based on the conjecture and surmises ignoring the fact that there was no
adverse material before the AO to doubt the identity and creditworthiness of the
above share applicant."
2. At the outset, the Ld. AR submitted that the assessee is engaged
in the business of development of real estate and during the year under
2 ITA No.402/Del/2015
consideration, it had received share application money amounting to
Rs.50 lakhs from M/s Indlon Hosiery (P.) Ltd. and the Assessing Officer
during assessment proceedings raised a query regarding identity,
genuineness and creditworthiness of the investor and therefore investor
company was issued notice u/s 133(6) of the Act and was required to
furnish various documents/information. The Ld. AR submitted that in
respect to the notice u/s 133(6), the investor company had submitted a
copy of audited balance sheet, copy of income tax return along with copy
of PAN Number and name and addresses of its directors. It was
submitted that the Assessing Officer wanted the assessee to explain the
source of investment by the invester company and to which the
assessee had filed complete reply and in this respect our attention was
invited to copy of assessment order where the reply given by assessee
company was reproduced by the Assessing Officer. The ld. AR
submitted that the assessee had filed all the relevant documents which
proved the identity, creditworthiness and genuineness of the transactions
but the Assessing Officer did not agree with the contentions of the
assessee. The Ld. AR in this respect submitted that the case laws relied
on by the Assessing Officer are not applicable to the facts and
circumstances of the case. The Ld. AR also tried to distinguish the facts
of the case law in the case of NRA Iron Pvt. Ltd. decided by the Hon'ble
Supreme Court and filed a chart distinguishing the facts of the present
3 ITA No.402/Del/2015
case. The Ld. AR also took us to copy of the audited accounts of the
investor company placed at paper book page 9 to 13 and argued that
investor company had sufficient funds of its own and had made the
investment in due course of its business therefore, it was prayed that the
appeal filed by the assessee allowed.
3. The Ld. DR on the other hand, heavily placed her reliance on the
order of the authorities below and also relied on a number of case laws
and filed written synopsis. The ld. DR specifically relied on the case of
Hon'ble Supreme Court in the case of PCIT vs NRA Iron P. Ltd and it
was argued that the transactions was not genuine and the assessee is
required to prove all the ingredients such as identity, creditworthiness
and genuineness of the transactions and which he has failed as the
audited accounts of the invest company itself do not warrant such
investment and that too a huge premium.
4. We have heard the rival parties and have gone through the
material placed on record. We find that the assessee has received share
application money from one of M/s Indlon Hosiery Pvt. Ltd. A copy of
audited accounts for financial year 2010-11 is placed at paper book page
9 to 13. On examination of balance sheet, we observe that the major
source of funds of the investor company is reserves and surplus which
itself are on account of share premium. The examination of profit & loss
4 ITA No.402/Del/2015
account of the investor company reveals that turnover of the assessee
was only Rs.8,81,675/- and net profit was only Rs.95,000/-. We further
observe from the balance sheet of the investor company that most of the
funds are locked up in, investment and loans and advances. The funds
locked up in investment are Rs.89 lakhs whereas funds locked up in
loans and advances are to the extent of Rs.2,56,45,000/-. Turnover of
the assessee company is quite low as compared to the funds of the
company which clearly demonstrates that the investor company is
indulging into sham transactions. Further we find that the investor
company has invested in the share capital of the assessee company at a
premium of Rs.90 per share. The share application money for a share of
Rs.10 has been received by the assessee @ Rs.100 per share. The
examination of the audited accounts of the investee company
demonstrates that assessee had not carried out any significant activities.
The examination of balance sheet of investee company reveals that the
funds of the company are in the form of reserves and surplus and share
application money and application of funds is in loans and advances.
The financials of the investee company does not warrant that it deserves
share premium of Rs.90 per share, therefore, all these facts prove that
the transactions of share application money is not a genuine transaction.
The Hon'ble Apex Court in the case of PCIT vs NRA Iron & Steel Pvt.
Ltd. vide its order dated 05/03/2019 has held that the practice of
5 ITA No.402/Del/2015
conversion of unaccounted money through cloak of share
capital/premium must be subjected to careful scrutiny especially in
private placement of shares. Filing primary evidence is not sufficient and
the onus to establish creditworthiness of the investor companies is on
the assessee. The Hon'ble Court has held that the assessee is under
legal obligation to prove the receipt of share capital/premium to the
satisfaction of the Assessing Officer, failure of which, would justify
addition of the said amount to the income of the assessee. In the present
case, though the assessee has received an amount through banking
channel but the analysis of the financial statements of investor company
do not warrant any justification for having invested in the investee
company at a huge premium of Rs.90 per share, specifically keeping in
view the fact that investee company is also not engaged in significant
activities. Therefore, in view of the facts and circumstances, the appeal
of the assessee is dismissed.
5. Finally, the appeal filed by the assessee is dismissed.
The order is pronounced in the open court on 09/08/2019.
Sd/- Sd/-
[BHAVNESH SAINI] [T.S. KAPOOR]
JUDICIAL MEMBER ACCOUNTANT MEMBER
Delhi; Dated: 09/08/2019.
f{x~{tÜ? fÜA P.S
6 ITA No.402/Del/2015
Copy forwarded to:
1. Appellant
2. Respondent
3. CIT
4. CIT(A)
5. DR
Asst. Registrar,
ITAT, New Delhi
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