TaxTMI 
TaxTMI 
2019 (3) TMI 1131
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....investor companies stand proved only on the basis of documentary evidence produced. 3. Whether in the facts and circumstances of the case and in law, the ld. CIT(A) was justified in deleing the addition without appreciating the true nature of arrangements & ignoring the decision of Hon'b!e Supreme Court in the case of CIT vs P. Mohankala (2007) 291 lTR 278." 2. The brief facts of the case are that the assessee company is engaged in the business of tours and travels, filed its return of income for AY 2012-13 on 08-12-2012 declaring loss of Rs. 38,445. The case was selected for scrutiny and notices u/s 143(2) and 142(1) of the Act, were issued and served on the assessee. In response, the authorised representative of the assessee appeared from time to time and furnished various details, as called for. During the course of assessment proceedings, AO noticed that assessee has issued fresh share capital amounting to Rs,1.5 crores with a huge premium of Rs. 990 per share for shares having face value of Rs. 10 each. Therefore, in order to ascertain the correctness and genuineness of share capital, called upon the assessee to file complete details of subscribers to the share....
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....rs before the AO which has been reproduced at paras 2 to 10 of CIT(A)'s order. The assessee also relied upon plethora of judicial pronouncements including decision of Hon'ble Supreme Court in the case of CIT vs Lovely Exports Pvt Ltd (2008) 216 CTR 195 (SC). The Ld.CIT(A), after considering relevant submissions of the assessee and also on analysis of various details filed by the assessee in respect of 5 subscribers held that the assessee has satisfactorily proved identity of the investor, genuineness of transaction alongwith creditworthiness of the shareholders. Further, share application money paid by them was duly reflected in the bank account of the assessee. The CIT(A) further held that even though the AO has questioned charging share premium on the shares, but fact remains that before amendment of section 56(2)(vii)(b) of the Act, by the Finance Act wef 01-04-2013, the provisions of Rule 11U And 11UA were not applicable for the impugned assessment year and hence, the AO has to examine only the identity, creditworthiness and genuineness of transaction. Since the AO has not doubted the identity of the subscribers and their capacity, merely for the reason of chargin....
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.... company in its response to notice u/s.133(6) has confirmed of having applied for the shares at premium. viii. Hence addition made in the assessment is not correct. III. In the case of Satvichar Dealers Pvt. Ltd. - Rs. 25,00,000/-, the financial statement of the said company as on 31.03.2011 reveals the following: i. Equi ty capi tal of Rs. 7,05,250/- wi th high reserves and surplus of Rs. 5,99,51,207/- ii. Thus the Net Worth of the company was Rs. 6,06,56,457/- iii. The company has made investment of Rs. 30,86,25,000/- iv. The above mentioned details prove the credibility of the company and capacity to make investment in the appellant's company. v. Identity was proved by submitting PAN. Also notice u/s.133(6) were duly served. vi. The bank account of the .company reflects the payments made to the appellant company for investing in shares. There is no entry in the bank accounts which reflects that the appellant company has paid back the amount of investment. vii. The company in its response to notice u/s.133(6) has confirmed of having applied for the shares at premium. viii. Hence addition....
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....erse remark were made. 5.8 The issue regarding additions u/s.68 on share application money has been considered by various Hon'ble Courts. Besides the cases quoted by the appellant following are some of the relevant findings of Courts which are also considered as under:- 1 CIT VS Gangeshwari Metal P Ltd 361 ITR 10 (Delhi) (i) The Hon'ble High Court of Delhi has held that the genuineness of the transactions is established as the transactions are routed through banking channels It was seen that the share application money was received through a/c payee cheques, detail of which had been filed by the assessee by filing the copy of the bank a/c of the share applicants. Thus where the return of income was filed by the creditors of the assessee and was accepted by the AG and payments were through a/c payee cheques the genuineness of the transaction cannot be doubted. The revenue could not prove that the money received by the appellant in the form of share application has come from its own sources. No evidences regarding this have been brought on record by the A 0. (ii) In CIT Vs. Divine Leasing & Finance Ltd. 299 JTR 268 the Hon'ble Delhi Hig....
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....to establish the genuineness of the credits but in the present case the assessee has duly established the identity and source of credits. The Tribunal has also held that once the identity and source of the subscribers of the shares is established no addition can he made u/s 68. The assessee having duly furnished the name, age, address, date of filing tire application of shares, number of shares of each subscriber was no justification for the AO for making the impugned addition because once the °fate investors / share subscribers is proved, onus shifts on the revenue to establish that either the share applicants are bogus or the impugned money belongs to the assessee itself After filing of the affidavits of the said subscriber the appellant at no stage of the proceedings sought any opportunity to rebut the said affidavits. vi. In CIT Vs. Prayag Hospital & Research IT Appeal No.917of20W the Hon'ble Delhi High Court held that shareholders of the assessee company having appeared before the A0 and furnished affidavits alongwith supporting documents confirming their investment in the assessee, identity of the creditors is established and therefore, addition cannot be mad....
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....de point no.9 of written submissions proves its point regarding the justification of amount of share premium. In para 5.15 of the assessment order the Ld. A.O. has raised issue of high premium without any due diligence. The provisions of S.56(2)(vii)(b) of the Act and Rules 11U and 11 VA were inserted w.e.f 01.04.2013 i.e. assessment year 2013- 14 onwards. Thus for the year under consideration the Ld. A.O. has to examine only the identity, creditworthiness and genuineness of the transactions only. 5.10 The cases cited by the IA. A.O. differs from the facts and circumstances of that of the appellant as pointed out by the appellant vide it's written submission reproduced in para 4 of this order. 5.11 In the instant east.. having regard to the documents furnished before me, am convinced about the identity of the investor, genuineness of transaction along with creditworthiness of the shareholders and the share subscription money paid by them duly reflected in the hank account of the Appellant assessee company. Hence, the facts do not warrant an addition under section 68 of the Act. Further, in the context Of share capital received from alleged bogus shareholders, ....
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....cribers 6. The Ld.AR, on the other hand, strongly supporting the order of the Ld.CIT(A) submitted that it is a settled position of law that once assessee discharged its initial onus upon filing certain evidence to prove identity, genuineness of transaction and creditworthiness of the parties, then the onus shifts to the AO to prove otherwise. In this case, the AO has disregarded all evidences filed by the assessee so as to reach to a conclusion that the transaction between the assessee and the subscribers is not a genuine transaction only for the reason that shares have been issued at a higher premium without appreciating the fact that issue of shares at a premium and subscription to such shares is a decision between two parties and the AO has no role to play as long as the identity and genuineness of transaction is proved. The Ld.AR further submitted that the AO has only questioned share premium ignoring the fact that Proviso inserted to section 68 of the Ac, by the Finance Act, 2012 wef 01-04-2013 has no application to the amounts received prior to that date. In this regard, he relied upon a plethora of judgements including the decision of Hon'ble Supreme Court in the case....
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..... Once assessee discharges its initial burden cast upon under 68 of the Act by filing necessary evidences, then the burden shifts to the AO to prove otherwise. In order to fix a particular credit within the ambit of section 68 of the Act, the AO has to bring on record further evidences to prove that the sum found credited in the books of account of the assessee represents undisclosed income of the assessee. In this case, the AO, except doubting genuineness of transaction for charging higher premium on shares, did not bring on record any other evidence to disprove the voluminous evidences filed by the assessee in respect of 5 companies to prove identity and genuineness of transactions. In fact, the assessee has filed complete set of documents for all 5 subscribers. The parties have responded to notices u/s 133(6) by filing necessary evidences. Therefore, merely for the reason that the parties did not appear before the AO or the assessee could not produce the parties in person before the AO, the whole set of documents produced to prove the identity and genuineness of transactions, cannot be disregarded when the AO does not have anything more than suspicion in his possession to doubt ....