TaxTMI 
TaxTMI 
2018 (1) TMI 1032
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.... in the case of M/s. Spectrum Coal & Power Limited, New Delhi. 3. The Departmental Appeal as well as Cross Objection by assessee are directed against the order of the Ld. CIT(A)-27, New Delhi, dated 09.09.2016 for A.Y. 2007-2008. 4. Briefly, the facts of the case are that search, seizure and survey operations under section 132/133A of the I.T. Act were conducted on 12th April, 2012 in the case of the assessee along with other cases of Aryan Sainik Group at various residential and business premises. These cases were centralised. The first reference for exchange of information was made by Investigation Wing on 28th December, 2012 and the part information was received by the Pr. CIT, Central-II, New Delhi on 27th May, 2015 from FT & TR CBDT, New Delhi. The A.O. issued notice under section 153A of the I.T. Act on 09th October, 2013 and the assessee in response thereto filed return declaring income at Rs. 6,93,41,849 on 16th May, 2014. The assessee furnished details, filed submissions and produced the documents. The assessee declared income under the head "Income from Business", Income from House Property and Income from "Other sources". The A.O. noted that during the F.Y....
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....the assessee. The information was called for the assessment year from the assessee and assessment was completed vide order under section 143(3) dated 14.12.2009 wherein the A.O. made small additions on account of donation, disallowance of repair and maintenance of Road and disallowance of depreciation on plant and machinery with disallowance of late deposit of employees share to P.F. and after giving the deduction on account of depreciation and deduction under section 80G, income of assessee has been computed at Rs. 7.63 crores. The original assessment order was subject to appeals before Appellate Authorities. Thereafter, search action was undertaken on assessee company on 12th April, 2012 after completion of the assessment under section 143(3) as noted above. It was, therefore, submitted that the assessment order framed by A.O. under section 153A is illegal, invalid and bad in law because addition made by the A.O. did not have any connection or linkage with any incriminating documents or evidence found as a result of search proceedings. It was submitted that additions under section 153A could be made only on recovery of incriminating material during the course of search. Nothing i....
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....ated on 1st January, 1996 and the turnover and net profit of the assessee has been substantial, from its year of incorporation till A.Y. 2014-2015 details of which are noted at page-28 of the appellate order. Assessee also explained that it is engaged in business of coal benefications and setting-up Thermal Power Generation Plants and it has set-up two coal benefication plants in the State of Chattisgarh and Orissa. The promoters have vast experience in this line and assessee company have been granted various credit facilities and many investors made investment in assessee company. The details of loans and bank guarantees are noted at page-29 of order. M/s. STL Investor has also made investment in earlier years considering the worth of the assessee-company following RBI and FEMA Rules. In earlier year, the same share capital/premium have been accepted by the Revenue Department from M/s.STL. The assessee received the amount in question through banking channel which have been supported by the Bank Statement of the Investor, Balance Sheet and Foreign Inward Remittance Certificate. With a view to verify the credentials of M/s. STL, reference was sent to Mauritius Revenue Authorities an....
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....re and surmises. Therefore, the addition of Rs.3,57,80,000/- in A.Y. 2007-08 should kindly be deleted." 8. The Ld. CIT(A) considering the material on record in the light of submissions of both the parties, deleted the entire addition and his findings in para 8.4 of the impugned order at pages 80 to 113 are reproduced as under : "8.4. Finding : I have considered the written submissions of the appellant, assessment records, case laws and have gone through the assessment order passed u/s 143(3) r.w.s. 153A of the Act. I have also considered the arguments of the ARs. In the relevant year, the Appellant had allotted 40,00,000 equity shares on 02.08.2006 having face value of Rs.I01- each at a premium of Rs. 15/- to the following investors. S. No. Name of the shareholder No. of shares issued 1 Spectrum Technologies Ltd. 14,31,200 2 Dr. A V Mohan Rao 536 3 Dynamic Generation Pvt. Ltd. 968,264 4 Sarvesh Coal tech Pvt. Ltd. 16,00,000 Total 40,00,000 In the opinion of the AO the Appellant had failed to establish the genuineness of the money received as Share Capital and Share Premium amounting ....
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....e same price. Since the AO has not raised any objection on the price at which shares were allotted to any other investor, and not brought any evidence on record to distinguish the allotment of shares to M/s STL from any other investor, the premium charged from M/s STL cannot be questioned. Thus, the appellant's prima facie contention is accepted. Additionally, it is of significance to recount that the Appellant had been incorporated on 01.01.1996. During AY 2007-08, the appellant company was constructing 11 MTPA coal washery on BOO basis for APGENCO, neared completion of 7.5 MTPA washery for which commercial production was to be commenced soon. The appellant company also planned to set up a 2x25 MW thermal power plant adjacent to its washery at Korba, for which it had already procured the land and the necessary agreements/ permissions for setting up of the power plant. The existing washery was designed using State of the Art Technology and during the year, was running 6th year of full scale operations, and did not need any new technology absorption. Further, it is seen that the promoters, various investors of repute had started investing in the Appellant Compa....
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.... is seen that during the course of said search, no incriminating material was found that would suggest that the amount received as Share Capital or as Share Premium was bogus, was Appellant's unaccounted money or was liable to be taxed as unexplained cash credit u/s 68 of the I. T. Act. As a matter of fact, the AO has also nowhere claimed that he had found any incriminating material during the course of search that would warrant making the said addition. Instead, the AO has tried to justify the addition of Rs. 3,57,80,000/- on the basis of information gathered during the course of post search enquiries. It is also seen from the records that during the course of post search Investigation/ enquiries, the Appellant was called upon to establish the identity and creditworthiness of the entities that had subscribed to the Share Capital and Share Premium and to establish the genuineness of the transactions. The appellant had furnished sufficient documentary evidence to substantiate the identity and creditworthiness of the investors. The investigation wing had in the case of M/s STL referred the matter to the FT & TR division for obtaining necessary informati....
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....nt Company in last few FYs was far from rewarding and did not command such huge premium. The EPS of the Appellant Company for FYs 2005-06, 2006-07 and 2007-08 were Rs.1.84, Rs.1.03 and Rs.3.58 respectively. (vii) There was no other 'performance indicator' of the appellant company which would warrant such a huge share premium. (viii) The case of huge premium charged by the. Appellant on allotment of share is also hit by the provision of section 56(1) of I.T. Act. In support of his action of making of addition of Rs.3,57,80,000 in AY 2007-08, the AO also relied upon various case laws and prepositions in Para 5.10.1 to 5.10.13 and in Para 5.11 of the said assessment order. The AO has also put forth an argument that the huge premium charged by the Appellant was also hit by the provision of section 56(1) of the Act. I have perused all the records including the assessment records, the detailed written submissions filed by the Ld. ARs and have heard the various arguments put forth by the Ld. ARs during the course of Appellant proceedings. The objections of the AO can broadly be clubbed into;- (I) Questioning the credentials of ....
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....2,34,81,066 4,39,63,30,559 11,66,98,649 2014-15 2,47,56,25,037 19,09,22,404 4,48,64,68,349 11,66,98,649 The Appellant was constructing an 11 MTPA coal washery on BOO basis for APGENCO, and neared completion of 7.5 MTPA washery for which commercial production was to be commenced soon. The appellant company also planned to set up a 2x25 MW thermal power plant adjacent to its washery at Korba, for which it had already procured the land and the necessary agreements/permissions for setting up of the power plant. The existing washery was designed using State of the Art Technology and during the year, was running 6th year of full scale operations, and did not need any new technology absorption. The appellant is engaged in the business of coal beneficiations and setting up of thermal power generation' plants.' The appellant company set up two coal beneficiation plants at:- - Ratija ( in the State of Chhattisgarh} and - Kalinga (in the State of Orissa) The Ratija plant was commissioned in December 1999 with a capacity of 2.50 million tons per annum. The capacity was expanded to 5.00 million tons per annum in 200....
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....al of 40,00,000 shares were issued by the appellant company to 4 investors including STL at the same rate and under the same terms and conditions. Thus the same price was charged from each of the 4 investors, and the AO has not raised any question on the premium charged from other 3 investors. Based on verification of appellant's submissions, documentary evidence and assessment records, it is found that the appellant's contention is correct. The price at which shares were issued by the appellant company to M/s STL is the same price at which shares were issued on the same date to M/s Dynamic Technologies Limited, M/s Sarvesh Coaltech Ltd. and Dr. A V Mohan Rao. During the course of entire assessment proceedings, the AO has never questioned the premium charged from such other investors, thereby implying that the premium charged (wherever applicable) is justified. In such a case, the same amount of premium charged from M/s STL cannot be questioned. In case a differential price had been charged from M/s STL, then the same could have been questioned. This grievance of the AO is therefore ill founded. The AO has tried to step into the issue of the investor Share....
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....AO has stated that "the case of huge premium charged by the assessee on allotment of share is also hit by the provisions of section 56(1} of the IT Act". Sec 56(1) as it stood in AY 2007 -08 was as under: - "Income of every kind which is not to be exclude from the total income under this Act shall be chargeable to incometax under the head "Income from other sources") if it is not chargeable to income-tax under any of the heads specified in section 14) items A to E. » Sec. 56(1) merely states about the scope of the head of income. The said section nowhere states that share premium or any other receipt/ income would be hit by the provisions of see 56(1) of the IT Act. Thereafter, the AO has also enumerated certain points on the basis of which share premium will be hit by the provisions of see 56(1) of the IT Act. The Appellant has rightly pointed out the following facts:- 1. "The appellant did not issue the shares by arbitrarily charging the premium. The premium was based on past track record, current performance and, future projections of the company. Thus the premium was based on fundamentals and was not decided arbitrarily. The same....
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.... granted various credit facilities like term loans, Working capital loans, Guarantee limits etc. from a consortium of public sector and private sector banks and other financial institutions the details of which have been given in our submissions made in response to Para 5.10 above. 5. In the context of deciding the Share Premium, the Appellant's submission that the Appellant Company and the appellant group had also shown substantial growth in the subsequent years, is extremely relevant. As submitted earlier, while deciding the premium, the investor and the company always keep in mind the future growth potential of the Company. Looking at the exponential growth in the Appellant's profit in subsequent years, the decision of the investors was vindicated. The Appellants had rightly pointed out that the relevant provision that regulated the price on which a company would issue its shares is contained in sec. 56(2)(viib) of the Act. It is also a fact that the said provision was notified by the CBDT wide notification dated 29.11.2012 and the said provision was to come into effect w.e.f. A.Y. 2013-14. The Appellant had correctly settled that provisions of sec. 56(....
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....emium is a Revenue Receipt or Capital Receipt? As a matter of principle, Share Premium like Share Capital is a Capital Receipt. Since Share Premium is a Capital Receipt, the same cannot be per-se brought to tax. This view finds support from following case laws:- - CIT vs. Allahabad Bank Ltd. [1969J 73ITR 745 (SC) - CIT vs. Vacuum Oil Co. [1966} 59 ITR 685 (SC) - Punjab State Industrial Corporation LTd. vs. CIT [1997J 225 ITR 792 (SC) - Brooke Bond India Ltd. vs. eIT [1997J 225 ITR 798 (SC) - ACIT vs. am Oils and Oil Seeds Ltd. f19851 152 ITR 552 (Del HCl - CIT vs. Krishnaram Baldeo Bank (P) Ltd. [1983J 144 ITR 600 (MP HC) - Vodafone India Services Private Limited vs. UOI [2014] 368 ITR 1 (Bom HC) which was later adopted by the UOI and no further appeal was filed vide press release dated 28.01.2015 (iv) In A.Ys 2007-08 and 2008-09 there was no mention of Share Premium in Section 68 of the Act. By inserting the Amendment in Finance Act 2012, the Legislature brought Share Premium in the ambit of Section 68 w.e.f 01.04.2013. This reaffirms the Appellant's contention that prior to 01.04.2013, Share Premium was n....
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....tworthiness of M/s STL, Mauritius. In his opinion M/s STL did not have the business income as well as the resources to contribute such huge share capital/ share premium amounting to Rs.3.57 crores in Appellant Company. As stated earlier, M/ s STL being a Mauritius entity, a reference was sent by the investigation wing as well as the AO to enquire into their credentials and creditworthiness. In response to the said reference, the Mauritius Revenue Authority (MRA) sent a very comprehensive reply. The information regarding M/s STL was received from Mauritius Revenue Authority vide their Ref: 25-007487/ITU/LTD/MT/02 dated 29th July, 2015. A copy of letter from MRA and its Annexures were furnished to .the Appellant by the AO vide his letter F. No. ACIT/CC-17 /2015-16/1745 dated 23.03.2016. The relevant extract of AO's letter conveying the information received from MRA is reproduced as under:- "Spectrum Technologies Limited a) Prior to the removal of the company from the register of companies, the registered office address of Spectrum Technologies (Mauritius) Limited ("STML") was 5, Duke of Edinburg Avenue, Port Louis, Republic of Mauritius; ....
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....s. iv) The information also confirmed that M/s STL was a part of a group concern of Akula Energy Ventures LLC. v) The holding company of MI s STL was Akula Energy Ventures, LLC (previously known as Spectrum Investment Group USA LLC) vi) The audited financial statement of M/s STL disclosed the amounts of investment in the appellant company in respective years As regards the holding company of M/s STL, the AO had furnished the following information as received from Mauritius Revenue Authority f) "The details of the holding company are as follows: Name of the holding company Address of holding company Name of director Address of Director Akula Energy Ventures, LLC (previously known as Specturm Investment Group USA, LLC) 200, Lanidex Plaza, 2^nd Floor, Parsipanny, NJ, 07054, USA 1.Dr.A.V.Mohan Rao 15. Warren Street, Apartment 210, Jersey City, New Jersey, 07302-6457, USA 2.Srikant Akula 15. Warren Street, Apartment 210, Jersey City, New Jersey, 07302-6457, USA It is apparent from a perusal of information provided by none other than the Ld AO, the following facts cannot be denied:- ....
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....s the transfer of such shell company to persons who requires such companies for converting their unaccounted income and the third limb is when the shell companies, after been taken over, encashed the assets/ inventories of such shell companies. In the case under appeal, neither the Appellant Company nor the investor companies are shell companies. Even the AO has not been able to pin point or allege that the Appellant had laundered its unaccounted money at what stage. As stated earlier, the Appellant neither created a shell company, nor acquired a shell company nor converted the inventories/ investments/ Loans and advances into funds for legitimate business. 'The Appellant had filed the bank statements of the investors and the Department had also obtained the same through the FT & TR. It was apparent from the said bank statements that no cash had been deposited in the bank accounts of the investors. On a plain reading of the judgment of Bisakha read with the facts of the Appellant's case, it is evident that the facts of Bisakha's case were completely different from the case of Appellant: The AO has cited the observations of the Hon'....
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....ts of the cited case being entirely different from the Appellant's case, the ratio laid down in the relied upon case cannot be applied to the Appellant's case. The AO has relied upon the case of Independent Media (P) Ltd. 210 TAXMANN 14 (Delhi) (2012. The AO has himself recorded on page 25 of the Assessment Order as under:- "In the case of Independent Media (P) Ltd. 210 TAXMANN 14 (Delhi) (2012) that came up before the Hon'ble High Court, Delhi where it was reported by the Investigation wing that the assessee company received share capital from those persons who had given statements before Investigation wing that they were entry providers giving accommodation entries after receiving cash and after charging their commission .... » In the case under Appeal there was no report from the investigation wing alleging that the Appellant had received share capital from those persons who had given statements before investigation wing that they were entry providers giving accommodation entry after receiving cash and after charging their commission. In the case of Commissioner of Income Tax-IV, New Delhi us Focus Exports Pvt Ltd ITA No. 218/2012 (He....
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....ceived cash from third parties and that the said cash was deposited in the bank accounts and cheques were issued to the same parties from the said bank account. It was further admitted that this entry providing activity was carried on by charging a commission @ 25 paise. In the case under Appeal there is no admission from the investor namely M/s.STL that they had received cash from the Appellant in 'lieu of giving cheques to the Appellant' towards Share Capital. Obviously, there is no admission to providing accommodation entry or of charging any commission in that regard. Contrary to the facts of the relied upon case, the Appellant is seen to have furnished complete details, extended fullest cooperation during the course of search, post search enquires and assessment proceedings. The Appellant did not try to block or obstruct enquiries and complied with all notices and summons. In comparison to the Appellant, the relied upon company had neither exported any goods nor had received any export orders. It had claimed to have done nominal fabrication on job work basis. The income declared in the relevant year was only Rs. 10,880/-. Therefore, there was hardly a....
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....ders (including foreign Shareholders) was done. The observation of the Hon'ble Court regarding doctrine of "source of source" or "origin of origin" has been made in the light of the factum of the relied upon case where almost all the 31 Shareholders were untraceable or unavailable for verification. Only under such like circumstances looking into source of source or origin of origin was warranted. The Hon'ble Court had clarified as under: "However, when there is surrounding evidence and material manifesting and revealing involvement of the assessee in the «transaction" and that it was not entirely an arm's length transaction, resort or reliance to the said doctrine may be counterproductive and contrary to equity and justice. » In the Appellant's case, the Shareholders were available and were verified. Therefore, the 'surrounding evidence and material revealed that it was entirely an arm's length transaction between the Appellant and bona-fide renowned investors, hence there was no need to resort to look into source of source or origin of origin. The AO has also placed reliance on certain judicial decisi....
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....inter-alia established: 1. Shri. Praveen Kumar Jain has indulged in providing only accommodation entries and has not carried out any genuine business. 2. Books of account of all shell companies are under the control of Shri Praveen Kumar Jain. 3. There is no place from where any genuine business activity is carried out. 4. In view of the above facts and the material available on record, it is clear that the accommodation entry of share capital (share Application/ investments) cumulatively amounting to Rs.120, 00, 000/ introduced during the financial year 2006-07 relevant to A. Y. 2007-08 in the books of accounts of M/s Om Vinyls Pvt Ltd is non genuine and a bogus accommodation entry. In the appellant's case issue involved is neitherreopening u/ s 148 of the I. T. Act nor having received Share capital from any admittedly accommodation entry provider. On account of the facts of the cited case being entirely different from the Appellant's case, the ratio laid down in the relied upon case cannot be applied to the Appellant's case. On page 27 of the Assessment order the AO has stated that "the case of huge premium charged....
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.... there was no mention of Share Premium in Section 68 of the Act. By inserting the Amendment in Finance Act 2012, the Legislature brought Share Premium in the ambit of Section 68 w.e.f 01.04.2013. This reaffirms the Appellant's contention that prior to 01.04.2013, Share Premium was not under the ambit of Section 68. In the relevant assessment years, the obligation of the assessee Company was only to show its' "Source" and not "Source's Source". The Appellant Company had duly discharge its' onus of showing the "Source" as having come from M/s PIL and Indian Coal Agency. The AO has admitted the "Source" of the Appellant's funds. The AO has illegally made the additions in the impugned assessment order by questioning the "Source's Source" by questioning the sources of M/s STL. (v) Even after the aforesaid amendment, the Share Capital and Share Premium received from nonresident entities and from well regulated share holder entities or from Venture Capitalists etc has been kept out of the ambit of Section 68. M/s STL is a Mauritius based non-resident entity and it is promoted by well regulated Akula Energy Group which is world renowned Pr....
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.... viii. 205 ITR 98 (Del) CIT vs. Sophia Finance Ltd. ix. 361 ITR 195 (Del.) CIT vs. Nipuan Auto (P) Ltd. After critically examining the assessment records, the written submissions filed by the Appellant, the arguments put forth by the Ld ARs, the relevant statutory provisions and the relevant Case Laws it is observed that the Appellant Company was engaged in bona-fide business activities, was having diverse business interests and was having impeccable track record of performance, growth and rewarding the Share holders through liberal bonus issues and regularly paying substantial amounts as dividend. The Appellant was called upon to establish the identity and creditworthiness of the investors and genuine of the transactions firstly by the investigation wing and later by the AO. It is confirmed from the records that the Appellant had fully discharged the initial onus caste upon the Appellant by furnishing all the relevant details such as Name of the Party, Address of the Party,Confirmation from the Party; Evidence that the money had come through Banking Channels, Copy of Bank Statements showing relevant transactions, Source from where the investment am....
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....n such shares were issued to existing shareholders at the same price. No differential price wascharged from any of the investors. The investment of Rs. 3.57 Crores made by M/s STL fully satisfies the various tests that have been agreed upon by various judicial pronouncements of the Honourable Apex Court and Honourable High Courts. In view of above the addition of Rs. 3,57,80,000/- made u/s 68 of the Act by treating the said amount as unexplained credit, stands deleted. In light of the above, the Grounds No.8, 9, 10 and 11 stand allowed." 9. The Revenue is in appeal challenging the order of Ld. CIT(A) in deleting the addition of Rs. 3,57,80,000 under section 68 of the I.T. Act and in deleting the addition in violation of Rule 46A of the I.T. Rules. 10. The assessee in the cross objection has supported the order of the Ld. CIT(A) in deleting the addition. The assessee also moved application for admission of additional ground of cross objection which reads as under : "1. That the unabated assessments can be interfered with by the Assessing Officer while making the assessment under section 153A, only, on the basis of some incriminating material....
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....No.3221/2016, the Ld. D.R. referred to pages 8 and 13 of the assessment order to highlight that details in respect of share application money/share premium received from various Mauritius based companies have been retrieved from the seized documents, hard disks seized and impounded during the course of search. The Ld. D.R, therefore, submitted that additional ground may not be admitted. The Ld. D.R. submitted that provisions of Section 153A are clear and do not mandate requirement of incriminating documents for the purpose of finalization of assessment or re-assessment under section 153A of the I.T. Act. The Ld. D.R. submitted that the provisions of taxing statute should be construed strictly and the language of the statute should be read as it is. The Ld. D.R. referred to decisions of other High Courts and submitted that assessment under section 153A need not necessarily be based on incriminating material and relied upon following decisions : (i) EN Gopakumar vs. CIT (2016) 75 taxmann.com 215 (Kerala) (ii) CIT vs. Kesarwani Zarda Bhandar Sahson, Allahabad, ITA.270 of 2014 (Alld.) (HCt) (iii) CIT vs. St. Francis Clay Décor Tiles 385 ITR 624 (Kerala....
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....e unearthed during the course of search. The Ld. CIT(A) decided the legal issue against the assessee because the decision of the Hon'ble Delhi High Court in the case of Kabul Chawla (supra) have not been finally confirmed by the Apex Court. It is, therefore, clear that the additional ground is legal in nature and arising out of the orders of the authorities below. The Ld. CIT(A) has also given his findings though on incorrect reasons. The facts are, therefore, on record and do not require any investigation of the facts at this stage. Since the issue is legal in nature and is arising out of the orders of the authorities below, therefore, following the decision of the Hon'ble Supreme Court in the case of National Thermal Power Company Ltd., (supra), we admit the additional ground of cross objection for the purpose of hearing and disposal of the cross objection filed by the assessee. 15. The assessee has relied upon the decision of the jurisdictional Delhi High Court in the case of CIT vs. Kabul Chawla 380 ITR 573 in which it was held as under : "Completed assessments can be interfered with by the A.O. while making the assessment under section 153A only on the basis of som....
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....ppeal. It, therefore, stands proved on record that on the date of search original assessment has completed and subsequently on 12.04.2012, no incriminating material was found during the course of search against the assessee so as to prove that assessee has received any bogus share capital/share premium so as to make addition under section 68 of the I.T. Act. During the course of hearing also nothing is produced before us to prove if any, incriminating material was found during the course of search against the assessee so as to make the above addition. No assessment was pending on the date of search against the assessee. Reference was made for exchange of information by Investigation Wing on 28th December, 2012 and part information was received on 27th May, 2015 from FT & TR, CBDT, New Delhi subsequent to the conclusion of the search. Therefore, such reference and part report received later on could not be construed as recovery of any incriminating material against the assessee during the course of search. It is received in post search enquiry. The information supplied by Mauritius revenue authorities provides as to how the Mauritius companies have invested in assessee-company throu....
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.... above discussion, we are of the view that invocation of section 153A by the A.O. for assessment year under appeal was without any legal basis as there were no incriminating material found in search for assessment year under appeal. The issue is therefore, covered in favour of the assessee by Judgments of the jurisdictional High Court in the case of Kabul Chawla and Meeta Gut Gutia (supra). In view of the above, no addition could be made against the assessee of Rs. 3,57,80,000 under section 68 of the I.T. Act. We, accordingly, set aside the orders of the authorities below and delete the entire addition. 20. In the result, additional ground of cross objection of assessee is allowed and the Departmental Appeal is dismissed. 21. In view of the above findings, that no addition could be made in order under section 153A of the I.T. Act, there is no need to decide Departmental Appeal on merit but, we find it appropriate to decide the issue on merit because it would be coming up in other group cases also. 22. The Ld. D.R. relied upon the order of the A.O. The A.O. made addition under section 68 of the I.T. Act. The A.O. though referred to conditions of Section 56 of the I.T. Act i....
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.... search but nothing against the assessee was found. He has submitted that assessee filed various documents on record to prove the identity of the investor, its creditworthiness and genuineness of the transaction in the matter, on which, no enquiry have been conducted by the A.O. and no material is produced on record to dispute the documentary evidences. M/s. STL also made investment in the assessee company in earlier years which have been accepted by the A.O. Assessee also explained its turnover, profit and net worth upto A.Y. 2014-2015. There is no violation of any laws pointed out by the A.O. Other companies have also made investment in assessee company which have not been disputed. He has submitted that prior to amendment under section 68 of the I.T. Act by Finance Act, 2012 w.e.f. 01.04.2013, there were no requirement to give explanation as to source of the source of share capital/premium received by the assessee. CBDT in Circular No.2 of 2015 dated 30.01.2015 accepted this proposition. The audited financial statements of M/s. STL disclosed the amount of investment in assessee company in respective years. Learned Counsel for the Assessee relied upon the following decisions : ....
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.... STL, Investor has invested in assessee company in earlier years as well which have been accepted in assessment orders under section 143(3). How its identity, creditworthiness and genuineness of the transaction can be disputed in the year under appeal. The enquiry conducted by the Investigation Wing, the A.O. and FT & TR Division, fully supported the identity and creditworthiness of the investors and genuineness of the transaction in the matter. Ld. D.R, during the course of hearing, was directed to produce the details received from Mauritius revenue authorities through FT & TR Division. The Ld. D.R. produced (i) Pen Drive in sealed cover and (ii) One Envelope in sealed cover containing Mauritius Revenue Authorities Reports. We have perused the same and found that whatever information was received by the FT & TR Division from Mauritius Revenue Authorities have disclosed the names of Investor Company, their worth and that they have made investment in assessee company. The report received from Mauritius Revenue Authorities have been reproduced in impugned order. M/s. STL is an associate concern of Akula Energy Ventures LLC who contributed funds to M/s. STL which is enough to establis....
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....e any enquiry on the documentary evidence filed by the assessee. The assessee filed details of its turnover, net profit, net worth and dividend declared which have not been disputed by the authorities below. These were the sufficient reasons for foreign investor to make investment in the assessee company. The Ld. CIT(A) discussed the issue of creditworthiness of M/s. STL, Mauritius and genuineness of the transaction in the matter and referred to the report received from Mauritius Revenue Authorities and reproduced the same in the impugned order which proved existence of M/s. STL, Mauritius and its financial strength and creditworthiness. The Ld. CIT(A) was, therefore, justified in holding that assessee proved creditworthiness of the investor and genuineness of the transaction in the matter. We may rely upon the following decisions : 27. CIT vs. Fair Investment Ltd., 357 ITR 146 in which it was held that A.O. did not summon investors and did not make efforts. There is no finding that material disclosed was untrustworthy. The Appellate Authorities rightly deleted the addition. 28. Decision of Supreme Court in the case of CIT vs. Lovely Exports Pvt. Ltd., (2008) 216 CTR 195 in w....
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....ovided several documents that could have showed light into whether truly the transactions were genuine. The assessee provided details of share applicants i.e. copy of the PAN, Assessment particulars, mode of amount invested through banking channel, copy of resolution and copies of the balance sheet. The AO failed to conduct any scrutiny of the document, the departmental appeal was accordingly dismissed. 32. Decision of the Hon'ble Supreme Court in the case of Earth Metal Electric Pvt. Ltd., vs. CIT dated 30th July, 2010 in SLP.No.21073 of 1999, in which it was held as under : "We have examined the position, we find that the shareholders are genuine parties. They are not bogus and fictitious therefore, the impugned order is set aside." 33. Decision of Hon'ble jurisdictional High Court in the case of Divine Leasing & Finance Ltd., 299 ITR 268, in which it was held as under : "No adverse inference should be drawn if shareholders failed to respond to the notice by A.O. 34. Decision of Hon'ble M.P. High Court in the case of CIT vs. Peoples General Hospital Ltd., (2013) 356 ITR 65, in which it was held as under : "Dismissing the appeals, that if the as....
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....ital of the assessee. The Assessing Officer sought an explanation of the assessee about this addition in the share capital. The assessee offered a detailed explanation. However, according to the Assessing Officer, the assessee failed to explain the addition of share application money from five of its subscribers. Accordingly, the Assessing Officer made an addition of Rs.35,50,000/- with the aid of section 68 of the Act, 1961 on account of unexplained cash credits appearing in the books of the assessee. However, in appeal, the Commissioner of Income-tax (Appeals) deleted the addition on the ground that the assessee had proved the existence of the shareholders and the genuineness of the transaction. The Income-tax Appellate Tribunal confirmed the order of the Commissioner of Income-tax (Appeals) as it was also of the opinion that the assessee had been able to prove the identity of the share applicants and the share application money had been received by way of account payee cheques. On appeal to the High Court: Held, dismissing the appeals, that the deletion of addition was justified." 36. Decision of Hon'ble jurisdictional High Court in the case of CIT vs. Winstral Petrochemicals....
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....d genuineness of the transaction. 39. It may be also be noted here that A.O. has referred to provisions of Section 56(2)(viib) of the I.T. Act in the assessment order but he did not make any addition against the assessee under this provision because ultimately the addition is made under section 68 of the I.T. Act. No ground of appeal have also been raised by the revenue for invoking the provisions of Section 56(2)(viib) of the I.T. Act against the assessee. The Ld. CIT(A) also discussed this issue in the appellate order and correctly found that the said provision was notified by the CBDT vide Notification dated 29.11.2012, the said provision would come into effect w.e.f. A.Y. 2013-2014 i.e., from 01.04.2013 for dealing with share premium. Otherwise, there were no provision prior to it to govern share premium. The CBDT in its Circular No.2/15 dated 30.01.2015 accepted the decision of Bombay High Court in case of Vodafone India Services P. Ltd., (supra) in which it was held that "premium on share issue was on account of capital account transaction and does not give rise to income." Therefore, no infirmity have been pointed in the order of the Ld. CIT(A) with reference to provision....
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....8 (supra). Since, issues are same, therefore, facts are not mentioned in detail in remaining appeals which are of same group i.e., Aryan Sainik Group on same facts. The remaining appeals are decided as under. ITA.No.6104/Del./2016 & C.O.No.16/Del./2017 - A.Y. 2008-2009: in the case of M/s. Spectrum Coal & Power Ltd., New Delhi. 42. The Departmental Appeal as well as Cross Objection by assessee are directed against the order of the Ld. CIT(A)-27, New Delhi, dated 09.09.2016 for A.Y. 2008-2009. 43. The Revenue challenged the deletion of addition of Rs. 50,43,04,900 on account of unexplained credit as share capital/share premium in violation of Rule 46A of I.T. Rules. The cross objection is filed in support of the order of Ld. CIT(A) in deleting the addition on merit. The assessee similarly raised additional ground of cross objection challenging the assessment under section 153A of I.T. Act and addition on merit as again no incriminating material was found unearthed during the course of search so as to make assessment under section 153A of the I.T. Act. ITA.No.5585/Del./2016 & C.O.No.210/Del./2017 - A.Y. 2008-2009 in the case of ....
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....t on account of share application money/share premium. 50. The assessee in the cross objection, has supported the order of Ld. CIT(A) in deleting both the addition. He also challenged the order of Ld. CIT(A) in confirming the assessment under section 153A of the I.T. Act and addition because no incriminating material was discovered pursuant to search under section 132 of the I.T. Act and the original assessment had already stood completed on the date of search. ITA.No.3222/Del./2016 & C.O.No.248/Del./2016 - A.Y. 2010-2011 in the case of M/s. Shyam Indus Power Solutions Pvt. Ltd., New Delhi 51. The Departmental Appeal as well as Cross Objection by assessee are directed against the order of the Ld. CIT(A)-27, New Delhi, dated 11.03.2016 for A.Y. 2010-2011. 52. In the Departmental Appeal, the Revenue challenged the deletion of addition of Rs. 24,22,134 on account of VAT penalty and in deleting addition of Rs. 33.81 crores on account of unexplained cash credit under section 68 of the I.T. Act on account of share application money/share premium. 53. The assessee in the cross objection, has supported the order of Ld. CIT(A) in deleting both the addi....
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.... and confirming the assessment orders under section 153A of the I.T. Act because there is no recovery of incriminating material found during the course of search against the assessee. The assessee pleaded that all these issues are covered by the judgment of jurisdictional High Court in the case of CIT vs. Kabul Chawla (supra). In the case of Spectrum Coal Power Ltd., (supra), we have admitted the additional ground in cross objection because it is legal in nature and arising out of the order of the authorities below. Therefore, following the same reasons for decision, we admit all the additional grounds raised in the respective cross objections in the remaining cross-objections. The issue of addition under section 68 of the I.T. Act is same as have been decided in the leading case of Spectrum Coal Power Ltd., (supra). In some of the remaining Departmental Appeals, there are other issues involved in deleing the addition under section 14A of the I.T. Act. We may note that in those cases the assessee pleaded that it did not incur any expenditure to earn exempt income. No satisfaction under section 14A of the I.T. Act as required by law has been recorded by the A.O. A.O. re-stated addit....