TaxTMI 
TaxTMI 
2019 (8) TMI 649
X X X X Extracts X X X X
X X X X Extracts X X X X
..... 1/- with premium of Rs. 999/- per share. During the course of assessment proceedings, notices u/s 131 were issued by the AO to the directors of the share applicant companies requiring them to appear personally along with the relevant details and documents to justify the investment made in the assessee company. As stated by the AO in the assessment order, none however appeared before him in response to the notices issued u/s 131. The AO, therefore, required the assessee company to produce the directors of the share applicant companies along with the relevant details and documents for verification. As noted by the AO in the assessment order, the assessee however failed to comply with the said requirement. The AO, therefore, treated the share application money received by the assessee during the year under consideration as unexplained cash credit and addition of Rs. 9,85,00,000/- made by him to the total income of the assessee in the assessment completed u/s 143(3) vide an order dated 04.03.2015. 3. Against the order passed by the AO u/s 143(3), an appeal was preferred by the assessee before the Ld. CIT(A) challenging the addition made by the AO u/s 68 and after considering the sub....
X X X X Extracts X X X X
X X X X Extracts X X X X
....liberately ignored the replies and confirmations filed by the share applicants against his own notices only. The A0, for the reasons known to him, did not mention these vital facts in his order. The logic of the A0 to defy the existence of such replies is beyond comprehension. There is no adverse finding by AO about the investment made by subscribers. Even the source of the source of investment made to Assessee Company is aptly explained. The AO did not assert that the explanation given by the assessee is false. The appellant state that the explanation was supported by the documents, authenticity thereof was also not in doubt. Thirdly, the explanation provided by the assessee was not unsatisfactory as the AO had not rebutted the same. Mere stating in the order that the explanation is not satisfactory without any logic or reasoning is bad in law. The AO during the course of proceeding also verified the source of sources too and detail of which is available in the paper book having page no 268 to 287. The AO issued notice u/s 133(6) to the source of source companies and verified the transaction. The detail of such notices issued and replied filed are as mentioned in the submissio....
X X X X Extracts X X X X
X X X X Extracts X X X X
.... wherein the respective AO adjudicated/referred the amount raised by the respective Assessee towards share subscription are as mentioned in the submission of the appellate. It was plead by the appellant that the sum so raised by the respective assessee (share subscriber) of the appellant, has been utilized to acquire the investments by them. The Share subscribers after holding the investments over a period sold and transferred the some of the investment to the appellant. The appellant in turn, allotted its own equity shares in consideration thereof. The transaction was recorded in books by journal entries only. All the share applicants are assessed to income tax and had regularly filed their income tax and ROC returns. The AR has also brought to notice with copy of assessment order where the assessment of these shareholder companies were completed u/s 143 (3) of the act by the different assessing officers in different years. Hence, the identity of the share applicants was duly proved. These companies are being assessed u/s 143(3) of IT Act by respective AOs. The AR further argued that the transaction will not come under the preview of cash credit, as there is no cash receipt or r....
X X X X Extracts X X X X
X X X X Extracts X X X X
....8 Says:- Cash credits 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 observation of the Hon'ble Jurisdictional High Court decision in the case of Jatia Investment Co vs CIT (1994) 206 ITR 718 (CAL.) dated 06.08.1992 in the similar matter are as under:- "there is no real cash entry on the credit side of the cash book, but merely a notional or fictitious cash entry there is no real credit of cash any its cash book, the question of inclusion of the amount of the entry unexplained cash credit cannot arise" The facts of the case are similar to the facts of the cases of the Hon'ble Jurisdictional High Court in the of Jatia Investment Co, [1994] 206 ITR 718 (CAL.). The AO placed his reliance on the various judgments as mentioned in the assessment order. However AO's action in making addition u/s 68 by relying upon the decisions are totally mispla....
X X X X Extracts X X X X
X X X X Extracts X X X X
....amount as received in cash or in kind and discharged were not actual case but only notional by journal entries As far as the question of section 68 is concerned, the nature of the transactions and the entries clearly show that no cash, in fact, flowed. Therefore, considering the totality of the facts and circumstances of the case, I find substance in the argument of the AR that there is no cash involved in the issue of share capital in the appellate case, In view of the aforesaid findings and respectfully following the decisions of Hon'ble jurisdictional High Court decision in the case of Jatia Investment Co, I have come to the conclusion that the issue is squarely covered by the decision of Jurisdictional High Court as mentioned and discussed above, I have no option but to accept the arguments tendered by the AR of the appellant in this respect that there is no sum was credited in the book of account as per the provision of u/s 68 of the Act. Accordingly, the case of appellate does not come under the preview of the section 68 of the Act, Further, I have no hesitation to hold that the impugned addition made by invoking the provisions of section 68 by the AO is not justified i....
X X X X Extracts X X X X
X X X X Extracts X X X X
....t of relevant details and documents furnished by the assessee before the Ld. CIT(A) which were not available to the AO. 5. The learned counsel for the assessee, on the other hand, submitted that the shares at premium were issued by the assessee company during the year under consideration to other companies in lieu of the shares held by the said companies and since no cash was involved in these transactions, section 68 was not applicable as rightly held by the Ld. CIT(A) by relying on the decision of Hon'ble Calcutta High Court in the case of Jatia Investment Co. He contended that the ratio of the said decision of the Hon'ble jurisdictional High Court is squarely applicable to the facts of the present case and distinction sought to be made by the learned DR is not correct. He also invited our attention to the voluminous papers placed in the Paper Book and submitted that the same filed before the AO as well as before the Ld. CIT(A) were sufficient to establish the identity and capacity of the concerned share applicants as well as the genuineness of the relevant transactions. He contended that the AO completely overlooked this vital and relevant documentary evidence filed by the asse....