AI OCR 
TaxTMI 
TaxTMI 
TaxTMI 
2019 (5) TMI 418
X X X X Extracts X X X X
X X X X Extracts X X X X
....000/- as premium on share subscribed by three Private Limited Companies. Thus the AO noted that the total investment credited in the balance sheet on this count accounted to Rs. 1.80 crores inclusive of the face value of the shares. The details of the share capital, premium etc. hold by share subscribers is evident from the chart given below: Sl No. Name of investor co. No. of shares Total value of shares Total premium received 1. M/s. Pragya Commodities Pvt. Ltd. 10500 Rs. 1,05,00,000/- Rs. 1,03,95,000/- 2. M/s. Samrat Finvestors Pvt. Ltd. 2500 Rs. 25,00,000/- Rs. 24,75,000/- 3. M/s. Narayan Mercantiles Pvt. Ltd. 5000 Rs. 50,00,000/- Rs. 49,50,000/- Total 18000 Rs. 1,80,00,000/- Rs. 1,78,20,000/- 4. Taking note of the aforesaid facts, the AO in order to verify the identity, creditworthiness and genuineness of the transactions, the AO issued notices in the addresses provided by the assessee to the share subscribers. The AO acknowledged that he got responses to letters u/s 133(6) of the Act, wherein the share subscribers confirmed the transaction which was received by the AO on 15th and 16th January, 2016 and filed the following do....
X X X X Extracts X X X X
X X X X Extracts X X X X
....e source of funds of the investor companies, the AO noted that the funds from other companies have been received by the investor companies and transferred to the assessee's bank account on the same day. According to the Learned AR no adverse view can be drawn only on this fact and drew our attention to the decision of the Hon'ble High Court of Calcutta in the case of CIT vs Jamna Dass Gupta wherein the lordship on similar facts have held as under: "The primary onus u/s. 68 cast on the appellant has been discharged by the appellant by furnishing the complete name & address of the depositors by furnishing their confirmation and details of Income Tax Returns filed by them 5 as also by producing copies of their bank statements and sources of funds out of which the loans had been given. Some of the depositors were even examined by the AO during the course of assessment proceedings and nothing has been brought on record by the AO to show that in their depositions they have denied giving the loans or that their creditworthiness was not established. Once the depositors have accepted the fact that the amounts 'have been advanced by them by way of banking channels and they have produce....
X X X X Extracts X X X X
X X X X Extracts X X X X
.... had a meagre return of income in the year under consideration and therefore, question of any person subscribing such high premium to the shares of the assessee-company cannot be believed. According to the Learned DR when the income of the assessee is meagre, the action of the share subscribing companies in giving astronomical prices for the shares is against preponderance of probabilities and cited the decision of the Hon'ble Supreme Court as well as Delhi High Court in CIT vs N.R. Portfolio Pvt. Ltd. According to the Learned DR, the share capital with high premium introduced with the capital of the assessee is only a façade for conversion of unaccounted money and thereafter, relied on the Hon'ble Jurisdictional High Court decision in CIT vs Nivedan Vanijya Niyojan Ltd. 263 ITR 623 (Calcutta) and also the decision of Tribunal M/s. Subhalaxmi Vanijya Pvt. Ltd. as well as the decision of the Tribunal in M/s. Bishakha Sales Pvt. Ltd. vs CIT. The Learned DR also relied on the judgement of the Hon'ble Calcutta High Court in the case of CIT vs Precision Finance Pvt. Ltd. 208 ITR 465 and also relied on the decision of the Hon'ble Supreme Court in Konark Structural Engineers (P) Lt....
X X X X Extracts X X X X
X X X X Extracts X X X X
....y also confirmed the transaction with the assessee-company, still the AO made the addition u/s 68 of the Act which action had been confirmed by the Ld. CIT(A) which action is being challenged before us. Before we adjudicate as to whether the Ld. CIT(A)'s action is right or erroneous, let us look at Section 68 of the Act. 12. Section 68 under which the addition has been made by the Assessing Officer reads as under: "68. Where any sum is found credited in the books of an assessee maintained for any previous year, and the assessee offers no explanation about the nature and source thereof or the explanation offered by him is not, in the opinion of the Assessing Officer, satisfactory, the sum so credited may be charged to income-tax as the income of the assessee of that previous year. " The phraseology of section 68 is clear. The Legislature has laid down that in the absence of a satisfactory explanation, the unexplained cash credit may be charged to income-tax as the income of the assessee of that previous year. In this case the legislative mandate is not in terms of the words 'shall' be charged to income-tax as the income of the assessee of that previous year". The Supreme Court w....
X X X X Extracts X X X X
X X X X Extracts X X X X
....ill not be sufficient to draw and adverse inference against the assessee. in the case of six creditors who appeared before the Assessing Officer and whose statements were recorded by the Assessing Officer, they have admitted having advanced loans to the assessee by account payee cheques and in case the Assessing Officer was not satisfied with the cash amount deposited by those creditors in their bank accounts, the proper course would have been to make assessments in the cases of those creditors by' treating the cash deposits in their bank accounts as unexplained investments of those creditors under section 69. 14. In the case of Nemi Chand Kothari 136 Taxman 213, (supra), the Hon'ble Guahati High Court has thrown light on another aspect touching the issue of onus on assessee under section 68, by holding that the same should be decided by taking into consideration the provision of section 106 of the Evidence Act which says that a person can be required to prove only such facts which are in his knowledge. The Hon'ble Court in the said case held that, once it is found that an assessee has actually taken money from depositor/lender who has been fully identified, the assess....
X X X X Extracts X X X X
X X X X Extracts X X X X
....edit, section 68 gives ample freedom to the Assessing Officer to make inquiry not only into the source(s)of the creditor but also of his (creditor's) sub-creditors and prove, as a result, of such inquiry, that the money received by the assessee, in the form of loan from the creditor, though routed through the sub-creditors, actually belongs to, or was of, the assessee himself. In other words, while section 68 gives the liberty to the Assessing Officer to enquire into the source/source from where the creditor has received the money, section 106 makes the assessee liable to disclose only the source(s) from where he has himself received the credit and IT is not the burden of the assessee to prove the creditworthiness of the source(s) of the sub-creditors. If section 106 and section 68 are to stand together, which they must, then, the interpretation of section 68 are to stand together, which they must, then the interpretation of section 68 has to be in such a way that it does not make section 106 redundant. Hence, the harmonious construction of section 106 of the Evidence Act and section 68 of the Income- tax Act will be that though apart from establishing the identity of the credi....
X X X X Extracts X X X X
X X X X Extracts X X X X
....under the law for the assessee to try to find out as to what sources from where the creditor had received the amount, his special knowledge under section 106 of the Evidence Act may very well remain confined only to the transactions, which he had' with the creditor and he may not know what transaction(s) had taken place between his creditor and the sub-creditor... " ********** "In other words, though under section 68 an Assessing Officer is free to show, with the help of the inquiry conducted by him into the transactions, which have taken place between the creditor and the sub-creditor, that the transaction between the two were not genuine and that the sub-creditor had no creditworthiness, it will not necessarily mean that the loan advanced by the sub-creditor to the creditor was income of the assessee from undisclosed source unless there is evidence, direct or circumstantial, to show that the amount which has been advanced by the sub-creditor to the creditor, had actually been received by the sub-creditor from the assessee ...." ********** "Keeping in view the above position of law, when we turn to the factual matrix of the present case, we find that so far as the appe....
X X X X Extracts X X X X
X X X X Extracts X X X X
....ash creditors; (ii) their affidavits; (iii) their full addresses and GIR numbers and permanent account numbers. It has found that the assessee's burden stood discharged and so, no addition to his total income on account of cash credit was called for. In view of this finding, we find that the Tribunal was right in reversing the order of the AA C, setting aside the assessment order." 16. We also take note of the decision of the Hon'ble High Court, Calcutta in the case of S.K. Bothra & Sons, HUF v. Income-tax Officer, Ward- 46(3), Kolkata 347 ITR 347 wherein the Court held as follows: "15. It is now a settled law that while considering the question whether the alleged loan taken by the assessee was a genuine transaction, the initial onus is always upon the assessee and if no explanation is given or the explanation given by the appellant is not satisfactory, the Assessing Officer can disbelieve the alleged transaction of loan. But the law is equally settled that if the initial burden is discharged by the assessee by producing sufficient materials in support of the loan transaction, the onus shifts upon the Assessing Officer and after verification, he can call for further exp....
X X X X Extracts X X X X
X X X X Extracts X X X X
....d unfavourable should have been considered. By not doing so the Tribunal committed grave error in law in upsetting the judgment in the order of the Commissioner of Income-tax (Appeals). 9. In this connection he has drawn our attention to a decision of the Supreme Court in the case of Udhavdas Kewalram v. CIT [19671 66 ITR 462. In this judgment it is noticed that the Supreme Court as proposition of law held that the Tribunal must In deciding an appeal, consider with due care, all the material facts and record its finding on all the contentions raised by the assessee and the Commissioner in the light of the evidence and the relevant law. 10. We find considerable force of the submissions of the learned counsel for the appellant that the Tribunal has merely noticed that since the summons issued before assessment returned unserved and no one came forward to prove. Therefore, it shall be assumed that the assessee failed to prove the existence of the creditors or for that matter the creditworthiness. As rightly pointed out by the learned counsel that the Commissioner of Income-tax (Appeals) has taken the trouble of examining of all other materials and documents, viz., confirmatory sta....
X X X X Extracts X X X X
X X X X Extracts X X X X
....t and order of the Commissioner of Income-tax (Appeals). The appeal is allowed. 18. When a question as to the creditworthiness of a creditor is to be adjudicated and if the creditor is an Income Tax assessee, it is now well settled by the decision of the Calcutta High Court that the creditworthiness of the creditor cannot be disputed by the AO of the assessee but the AO of the creditor. In this regards our attention was drawn to the decision of the Hon'ble High Court, Calcutta in the COMMISSIONER OF INCOME TAX, KOLKA TA-Ill Versus DATAWARE PRIVATE LIMITED ITAT No. 263 of 2011 Date: 21st September, 2011 wherein the Court held as follows: "In our opinion, in such circumstances, the Assessing officer of the assessee cannot take the burden of assessing the profit and loss account of the creditor when admittedly the creditor himself is an income tax assessee. After getting the PAN number and getting the information that the creditor is assessed under the Act, the Assessing officer should enquire from the Assessing Officer of the creditor as to the genuineness" of the transaction and whether such transaction has been accepted by the Assessing officer of the creditor but instead ....
X X X X Extracts X X X X
X X X X Extracts X X X X
....companies. The Assessing Officer on his part called for the details from the assessee and also from the share applicants and analyzed the facts and ultimately observed certain abnormal features, which were mentioned in the assessment order. The Assessing Officer, therefore, concluded that nature and source of such money was questionable and evidence produced was unsatisfactory. Consequently, the Assessing Officer invoked the provisions under Section 68/69 of the Income Tax Act and made addition of Rs. 24,00,000/-. On appeal the Learned CIT (A) by following the decision of the Supreme Court in the case of Cl. T. vs. M/s. Lovely Exports Pvt. Ltd., reported in (2008) 216 CTR 195 allowed the appeal by holding -that share capital/premium of Rs. 24,00,000/- received from the investors was not liable to be treated under Section 68 as unexplained credits and it should not be taxed in the hands of the appellant company. As indicated earlier, the Tribunal below dismissed the appeal filed by the Revenue. After hearing the learned counsel for the appellant and after going through the decision of the Supreme Court in the case of Cl. T. vs. M/s. Lovely Exports Pvt. Ltd. [supra], we are a....
X X X X Extracts X X X X
X X X X Extracts X X X X
....basis of some extraneous reasons. The Commissioner of Income Tax (Appeals) took note of the observation of the Assessing Officer that enquiry conducted by the Income Tax Inspector had revealed that nine persons making applications for 900 shares were not available at the given address and rightly concluded that the total share capital issued by the Assessee Company could not be added as unexplained cash credit under 'Section 68 of the Income Tax Act. Moreover, if the nature and source of investment by any shareholder, in shares of the Assessee Company remained unexplained, liability could not be foisted on the company. The concerned shareholders would have to explain the source of their fund. The learned Commissioner on considering the submissions of the, respective parties and considering the materials, found that the Assessing Officer had applied the provisions of Section 68 of the Income Tax Act arbitrarily and illegally and in any case without giving the assessee adequate opportunity of representation and/or hearing. Learned Tribunal agreed with the factual findings of the learned Commissioner and accordingly the learned Tribunal dismissed the appeal of the Revenue and ....
X X X X Extracts X X X X
X X X X Extracts X X X X
....ax (Appeals) and the Tribunal below erred in law in deleting the addition of Rs. 8,52,000/-, Rs. 91,50,000/- and Rs. 13,00,000/- made by the Assessing Officer on account of share capital, share application money and investment in HTCCL respectively. After hearing Md. Nizamuddin, learned Advocate appearing on behalf of the appellant and after going through the materials on record, we find that all such application money were received by the assessee by way of account payee cheques and the assessee also disclosed the complete list of shareholders with their complete addresses and GIR Numbers for the relevant assessment years in which share application was contributed. It further appears that all the payments were made by the applicants by account payee cheques. It appears from the Assessing Officers order that his grievance was that the assessee was not willing to produce the parties who had allegedly advanced the fund. In our opinion, both the Commissioner of Income-tax (Appeals) and the Tribunal below were justified in holding that after disclosure of the full particulars indicated above, the initial onus of the assessee was shifted and it was the duty of the Assessing Office....
X X X X Extracts X X X X
X X X X Extracts X X X X
....of M/s. Samrat Finvestors Pvt. Ltd. our attention was drawn to page 29 to 38 of the Paper Book from where we note that this company has invested a sum of Rs. 25 lakhs in the appellant company. The share application was made by account payee cheque. This company has filed its return of income electronically by filing ITR - 6 and was having PAN AADCS4698G. This company was having a paid up Capital of Rs. 7,81,26,700/- and Reserves & Surplus of Rs. 70,82,16,536/- as on 31.03.2012. The copy of the bank statement of the Company is available at page 37 of the Paper Book. On examination of the bank statement it is taken note that there is no deposit of cash. The details of source of funds from which this company had made the share application are also available from a perusal of the bank statement and other details filed in the paper book. 25. In respect of M/s. Narayan Mercantiles Pvt. Ltd. our attention was drawn to page 39 to 46 of the Paper Book from where we note that this company is invested a sum of Rs. 50 lakhs in the appellant company. The share application was made by account payee cheque. This company has filed its return of income electronically by filing ITR - 6 and was bei....
X X X X Extracts X X X X
X X X X Extracts X X X X
....ess is proved. Even if there was any doubt if any regarding the creditworthiness of the share applicants was still subsisting, then AO should have made enquiries from the AO of the share subscribers as held by Hon'ble jurisdictional High Court in CIT vs DATAWARE (supra) which has not been done, so no adverse view could have been drawn. Third ingredient is genuineness of the transactions, for which we note that the monies have been directly paid to the assessee company by account payee cheques out of sufficient bank balances available in their bank accounts on behalf of the share applicants. It will be evident from the paper book that the appellant has even demonstrated the source of money deposited into their bank accounts which in turn has been used by them to subscribe to the assessee company as share application. Hence the source of source of source is proved by the assessee in the instant case though the same is not required to be done by the assessee as per law as it stood/ applicable in this assessment year. The share applicants have confirmed the share application in response to the notice u/s 133(6) of the Act and have also confirmed the payments which are duly corroborated....
X X X X Extracts X X X X
X X X X Extracts X X X X
....l for the appellant and after going through the decision of the Supreme Court in the cases of CIT vs M/s Lovelv Exports Pvt Ltd, we are at one with the tribunal below that the point involved in this appeal is covered by the said Supreme Court decision in favour of the assessee and thus, no substantial question of law is involved in this appeal. The appeal is devoid of any substance and is dismissed. 3.4.2. In view of the aforesaid findings and respectfully following the decision of the apex court (supra) and Jurisdictional High Court (supra) , we find no infirmity in the order of the Learned CIT(A) and accordingly, the ground no.2 raised by the Revenue is dismissed. 4. The last ground to be decided in this appeal of the Revenue is as to whether the Learned CIT(A) is justified in deleting the addition u/s 68 of the Act made in respect of allotment of shares to 20 individuals for an amount of Rs. 57,00,000/- in the facts and circumstances of the case. 4. 1. The brief fact of this issue is that the assessee had received share application monies from 20 individuals in the earlier year which were kept in share application money account. During the asst year under appeal, the asses....
X X X X Extracts X X X X
X X X X Extracts X X X X
.... lakhs, where genuineness of the transactions and creditworthiness of the investors were not established." 4.3. The Learned DR prayed for admission of the additional ground raised before us and vehemently supported the order of the Learned AO. In response to this, the Learned AR fairly conceded to admission of this additional ground and vehemently supported the order of the Learned CIT(A). 4.4. We have heard the rival submissions and perused the materials available on record including the detailed paper book filed by the assessee. We find that the additional ground raised by the assessee separately before us vide its covering letter dated 9. 12.2011 is admitted as it appears to be a genuine and bonafide error of omission on the part of the Revenue from not raising this ground in the original grounds of appeal filed along with the memorandum of appeal. Moreover, it does not require any fresh examination of facts. Hence the same is admitted herein for the sake of adjudication. 4.4. 1. We find from the details available on record that the share application monies from 20 individuals in the sum of Rs. 57,00,000/- has been received by the assessee during the financial year 2004-05....
X X X X Extracts X X X X
X X X X Extracts X X X X
....rder as the transaction entered into by the assessee was a scheme for laundering black money into white money or accounted money and the Ld. CIT(A) ought to have held that the assessee had not established the genuineness of the transaction." Held After hearing the learned counsel for the appellant and after going through the decision of the Supreme Court in the cases of CIT vs M/s Lovely Exports Pvt Ltd, we are at one with the tribunal below that the point involved in this appeal is covered by the said Supreme Court decision in favour of the assessee and thus, no substantial question of law is involved in this appeal. The appeal is devoid of any substance and is dismissed." 6.2. We find that the issue is also covered by the decision of Hon'ble Delhi High Court in the case of CIT vs Value Capital Services P Ltd reported in (2008) 307 ITR 334 (Del) , wherein it was held that: "In respect of amounts shown as received by the assessee towards share application money from 33 persons, the Assessing Officer required the assessee to produce all these persons. While accepting the explanation and ITA No. 632/KoI12011--C-AM M/s. R.B Horticulture 6 & Animal Proj. Co. Ltd the statements ....
X X X X Extracts X X X X
X X X X Extracts X X X X
....gued that the letters should not have been served at the given address by the assessee. He served a show a cause notice dated 09.12.2011 asking for the explanation from the assessee as to how the notices u/s. 133(6) could be served to these nine companies who had different address as per ROC records. The AO was explained vide letter dated 20.12.2011 of the assessee that those companies had changed their addresses since filing of Form 2 with the Registrar. Further, it was none of the business of the assessee to question the addresses of the applicants as long as they affirm the address. The applicants were duly incorporated bodies under the Companies Act. 1956 since long. They have been regularly filing their returns of income under the Income Tax Act and are being assessed by the Revenue since long. Some of them are even registered as Non-Banking Financial Companies with Reserve bank of India. They have been filing returns regularly with Registrar of Companies and RBI since long. The letters might have been received at their old addresses because in case of change in the address, people instruct the incumbents at old addresses not to refuse the receipt of letters and receive the sa....
X X X X Extracts X X X X
X X X X Extracts X X X X
.... not brought anything on record to controvert the findings of the Ld. CIT(A). In view of above we find no reason to interfere in the order of the Id. CIT(A). Accordingly the ground raised by Revenue is dismissed." (d) The Ld ITAT Kolkata in ITO vs Cygnus Developers (I) P Ltd in ITA No. 282/Kol/2012 dated 2.3.2016. In this the decision the Ld. Tribunal held as follows: "6. On appeal by the assessee the CIT(A) deleted the addition made by the AO observing as follows "6) I have considered the submission of the appellant and perused the assessment order. I have also gone through the details and documents filed by the appellant company in the course of assessment: proceedings vide letter dt. 3-10-2007. On careful consideration of the facts and in law I am of the opinion that the AO was not justified in making, the addition aggregating to Rs. 54,00,000/- u/s.68 of the Act being the amount of share application money by holding that the appellant company has failed to prove the identity, and creditworthiness of The creditors as well as the genuineness of transactions. It is observed that all the three share applicant companies i.e. M/s. Shree Shyam Trexim Pvt. Ltd., M/s Navalco Co....
X X X X Extracts X X X X
X X X X Extracts X X X X
....ng of the ITAT Kolkata bench in the case of ITO vs Devinder Singh Shant in IT A No.20BIKo112009 vide order dated 17.04.2009. 9. We have considered the rival submissions., We are of the view that order of CIT(A) does not call for any interference. It may be seen from the grounds of appeal raised by the Revenue that the Revenue disputed only the proof of identity of the shareholder. In this regard it is seen that for A Y.2004-05 Shree Shyam Trexim Pvt. Ltd., was assessed by ITO, Ward- 9(4), Kolkata and the order of assessment u/s/143(3) dated 25.01.2006 is placed in the paper book. Similarly Navalco Commodities Pvt. Ltd., was assessed to tax u/s 143(3) for A Y.2005- 06 by I TO, Ward- 9(4), Kolkata by order dated 20.03.2007. Similarly Jewellock Trexim Pvt. Ltd was assessed to tax for A Y.2005-06 by the very same ITO- Ward- 9(3), Kolkata assessing the Assessee. In the light of the above factual position which is not disputed by the Revenue, it cannot be said that the identity of the share applicants remained not proved by the assessee. The decision of the Hon'ble Allahabad High Court as well as ITA T Kolkata Bench on which reliance was placed by the learned counsel for the asse....
X X X X Extracts X X X X
X X X X Extracts X X X X
.... "accommodation entry providers". The Assessing Officer in the latter case was able to prove with enough material that the share subscription was a pre-meditated plan to route unaccounted monies. In the present case however the Department was unable to bring any material whatsoever shows that share application was in the nature of accommodation entries. The Court observed that the appellant had filed sufficient documentary evidences to establish the identity and creditworthiness of the share applicant and the genuineness of the transaction. The AO however chose to sit back with folded hands till the assessee exhausted all the evidence in his possession and then merely reject the same without conducting any inquiry or verification whatsoever. The Court thus held that the decision of CIT Vs Novo Promoters & Finlease (P) Ltd (342 ITR 169) was not applicable to the facts of the case. Instead it was held that the issue in hands was on the lines of the decision of the Supreme Court in the case of CIT Vs Lovely Exports Pvt Ltd (319 ITR 5). Accordingly the addition made under Section 68 on account of share application was deleted. 30. We would like to reproduce the Hon'ble High Court ....
X X X X Extracts X X X X
X X X X Extracts X X X X
....sessee has furnished inaccurate particulars of its income/ penalty proceedings under Section 271(1)(c) are being initiated separately. The facts of Nova Promoters and Finlease (P) Ltd. (supra) fall in the former category and that is why this Court decided in favour of the revenue in that case. However, the facts of the present case are clearly distinguishable and fall in the second category and are more in line with facts of Lovely Exports (P) Ltd. (supra). There was a clear lack of inquiry on the part of the Assessing Officer once the assessee had furnished all the material which we have already referred to above. In such an eventuality no addition can be made under Section 68 of the Income Tax Act 1961. Consequently, the question is answered in the negative. The decision of the Tribunal is correct in law" 31. The case on hand clearly falls in the category where there is lack of enquiry on the part of the A. O. as in the case of Ganjeshwari Metals (supra). b) In the case of Finlease Pvt Ltd. 342 ITR 169 (supra) in ITA 232/2012 judgement dt. 22.11.2012 at para 6 to 8/ it was held as follows. "6. This Court has considered the submissions of the parties. In this case the discu....
X X X X Extracts X X X X
X X X X Extracts X X X X
....ssee had submitted name and address of investing companies and notice u/s 133(6) were issued and confirmations were received confirming the assessee's claim, In the confirmations, investing companies forwarded PAN, copy of the IT Return, bank statements, copy of audited accounts, source of the funds details of share application money paid, extracts of minutes of meeting of the board of directors and letter of allotment of shares are also provided and their PAN number and address are also given. From the copies of the final audited accounts of the investor companies placed in the paper book, it can be seen that the investment made by the investor companies in the assessee company is a fraction of their own fund which is evident from the following figures culled out from their respective audited balance sheets- Sl No. Name of the shareholder company Own Fund (share Capital & Reserves) Investment in assessee-company 1. Pragya Commodities Pvt. Ltd. Rs. 7,63,30,550/- + Rs. 71,03,31,901/- =Rs. 78,66,62,451/- 1.05 crores 2. Samrat Finvestors Pvt. Ltd. Rs. 7,81,26,700/- + Rs. 70,82,16,536/- = Rs. 78,63,43,236/- 25 lakhs 4. Narayan Mercantiles Pvt. Ltd. Rs. 7,4....
X X X X Extracts X X X X
X X X X Extracts X X X X
....ase of Gagandeep Infrastructure Pvt. Ltd., (supra) has held that it is a prerogative of the Board of Directors of the company to decide the premium amount and it is the wisdom of the shareholders whether they want to subscribe to such a heavy premium. And the aforesaid view of the ITAT has been upheld by the Hon'ble Bombay High Court order dated 20th March 2017. Further the Hon'ble High Court observed as under - " (i) We find that the proviso to Section 68 of the Act has been introduced by the Finance Act 2012 with effect from 1st April, 2013. Thus it would be effective only from the Assessment Year 2013-14 onwards and not for the subject Assessment Year. In fact, before the Tribunal, it was not even the case of the Revenue that Section 68 of the Act as in force during the subject years has to be read/understood as though the proviso added subsequently effective only from 1st April, 2013 was its normal meaning. The Parliament did not introduce to proviso to Section 68 of the Act with retrospective effect nor does the proviso so introduced states that it was introduced "for removal of doubts" or that it is "declaratory". Therefore it is not open to give it retrospective ef....
X X X X Extracts X X X X
X X X X Extracts X X X X
....e CIT(A), after considering relevant facts has rightly deleted addition made by the AO. We do not find any error in the order of the CIT(A); hence, we are inclined to uphold the findings of the CIT(A) and dismiss the appeal filed by the revenue. " 38. According to Ld AR, recently, Hon'ble M.P. High Court in the case of CIT vs. Chain House International (P) Ltd., order dated 07.08.2018, decision reported in 98 taxmann.com 47 has held at para 52 as under - "Issuing the share at a premium was a commercial decision. It is the prerogative of the Board of Directors of a company to decide the premium amount and it is the wisdom of shareholder whether they want to subscribe the shares at such a premium or not. This was a mutual decision between both the companies. In day to day market, unless and until, the rates if fixed by any Govt. Authority or unless there is any restriction on the amount of share premium under any law, the price of the shares is decided on the mutual understanding of the parties concerned." 39. It was also brought to our notice that the Hon'ble Supreme Court has dismissed departmental SLP against the above decision vide its order dated 18.02.2019. 40. It was....
X X X X Extracts X X X X
X X X X Extracts X X X X
.... in the books of accounts of the assessee duly reflected in the financial statement of the assessee. The bank statement is exhibited in which the transaction relating to the allotment of shares are duly reflected." (ii) According to the Ld Counsel the aforesaid order of Tribunal has been upheld by the Hon'ble Bombay High Court by observing as under:- Mr. Chhotaray the learned counsel for the Revenue states that the share premium of Rs. 490/- per share defies all commercial prudence. Therefore it has to be considered to be cash credit. We find that the Tribunal has examined the case of the Revenue on the parameters of Section 68 of the Act and found on facts that it is not so hit. Therefore, Section 68 of the Act cannot be invoked. The revenue has not been able to show in any manner the factual finding recorded by the Tribunal is perverse in any manner." (h) The Mumbai Tribunal in the case of ACIT-1(1) vs. M/s. Gagandeep Infrastructure Pvt. Ltd. the ITAT has held as under: "We have carefully perused the orders of the lower authorities. In our considered view, the issue of shares at premium is always a commercial decision which does not require any justification. Further the ....