TaxTMI 
TaxTMI 
2019 (12) TMI 1259
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..../s Prime Property Pvt. Ltd. had its own funds to make investments in the assessee- company. 3. Briefly stated, the facts of the case are that the assessee filed its return of income for the assessment year (AY) 2012-13 on 21.08.2012 declaring total income of Rs. Nil. During the course of assessment proceedings, the Assessing Officer (AO) observed that the assessee had received share premium of Rs. 35,00,00,000/- from one party viz. M/s Prime Properties Pvt. Ltd. From the bank statements of M/s Prime Properties Pvt. Ltd filed by the assessee, the AO observed that there were certain credits which were followed by equivalent debits in the bank statements, leaving a meagre balance at the end of the year. The AO has reproduced those details in the assessment order, which read as under : Date Value Date Withdrawals Deposits Balance (Rs.) 08.12.2011 08.12.2011 0 830 223226.80 cr. 22.12.2011 22.12.2011 0 1650000000 1650223226.80 cr. 22.12.2011 22.12.2011 950000000 0 700223226.80 cr. 22.12.2011 22.12.2011 700000000 0 223226.80 cr. 23.12.2011 23.12.2011 0 350000000 350223226.....
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....share capital are also on record. Observing as above, the Ld. CIT(A) noted that the assessee had sufficiently discharged its onus of establishing not only the identity but also the creditworthiness as well as the genuineness of the transaction as required u/s 68 of the Act. Referring to the decision of the Hon'ble Delhi High Court in the case of CIT v. Value Capital Services P. Ltd. 307 ITR 334 (Del), wherein it is held that unless the Department is able to show that the amount received towards share capital actually emanated from the coffers of the assessee-company, no addition can be made in the hands of the assessee u/s 68 of the Act, the Ld. CIT(A) deleted the addition of Rs. 35,00,00,000/-. 5. Before us, the Ld. Departmental Representatives (DRs) rely on the decision in PCIT v. NRA Iron & Steel (P.) Ltd. (2019)103 taxmann.com 48 (SC); CIT v. Youth Construction (P.) Ltd. (2014) 44 taxmann.com 364 (Delhi); CIT v. Independent Media Pvt. Ltd. (ITA No. 456/2011) by Delhi High Court; Rajmandir Estates (P.) Ltd. v. PCIT (2016) 386 ITR 162 (Cal); Pragati Financial Management (P.) Ltd. v. CIT (2017) 394 ITR 27 (Cal) and M/s Gaurav Pigments Pvt. Ltd. v. CIT (ITA No. 61/LUC/2000....
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....he judgment of the Supreme Court in Lovely Export (supra) can be applied and the circumstances where the ratio cannot be applied." In Independent Media Pvt. Ltd. (supra), the Hon'ble Delhi High Court held that : "11. The Revenue is aggrieved by the aforesaid order of the Tribunal and has filed the present appeal. We are unable to uphold the view of the Tribunal that it is incumbent upon the Assessing Officer, on the facts and circumstances of the case, to establish with the help of material on record that the share monies had come or emanated from the assessee's coffers. Section 68 of the Act casts no such burden upon the Assessing Officer. This aspect has been considered more than 50 years back by the Supreme Court in the case of A. Govindarajulu Mudaliar v. CIT, (1958) 34 ITR 807 where precisely the same argument was advanced before the Supreme Court on behalf assessee. The argument was rejected by the Court. Venkatarama Iyer, J. speaking for the Court observed as under (page 810 of the report): - 'Now the contention of the appellant is that assuming that he had failed to establish the case put forward by him, it does not follow as a matter of law that the am....
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....ven by the Assessing Officer as found by the Tribunal, a position not disputed before us on behalf of the Revenue. However, in the fresh round of proceedings it will be open to the Assessing Officer to make the addition in the hands of the assessee-company in case it appears to him, after complying with the directions of the Tribunal, that the explanation adduced by the assessee with regard to the identity and creditworthiness of the subscriber-companies and the genuineness of the transactions is not acceptable for valid reasons which must be clearly spelt out. He will not, however, be under any duty to further show or establish that the monies emanated from the coffers of the assessee company. To place such a burden on him, an impossible one at that, would be quite contrary to the judgments of the Supreme Court cited above. We may only state that the Assessing Officer shall act in accordance with law. The directions of the Tribunal, quoted above are modified to this extent." In Rajmandir Estates (P.) Ltd. (supra), the Hon'ble Calcutta High Court held that the submission that the source of source is not a relevant inquiry does not appear to be correct. Again the Hon'ble Calcutta....
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....y, the assessee submitted all the relevant details in the course of assessment proceedings. The Tribunal held that all the three ingredients of section 68 i.e. identity, genuineness and creditworthiness of investor were duly established, thus deleted the addition made by the AO. On further appeal by the revenue, the Hon'ble Bombay High Court held that : "8. In its decision, the Tribunal noted that the investment made by P5AHIML was done registering itself with SEBI and after obtaining necessary approvals from Ministry of Finance. The application made to the Ministry of Finance contained full details of the investment, the background of the transaction, the terms of the agreement, identity of the investor and the investor group. The Tribunal noted that P5AHIML was an investment arm of Providence Equity Partners and the Tribunal had perused the financial statements which disclosed the flow of funds in the said P5AHIML. The Tribunal further recorded that while making such investment, the investor not only looks for dividend or interest but also expects return on such investment as capital appreciation, when the investment finally gets converted into equity shares. The Tribuna....
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.... by itself would not be sufficient to establish a sham transaction or colourable device." 7.2 The instant case, the assessee-company has during the year under consideration offered right issue to its existing equity shareholders and also issued convertible preference shares. It issued and allotted 3,50,000 (0.10%) optionally convertible preference shares at a face value of Rs. 10/- each at a premium of Rs. 990/- per share aggregating to Rs. 35,00,00,000/- to Prime Properties Pvt. Ltd. on 19.01.2012. The AO has mentioned in the assessment order, the bank statement of M/s Prime Properties Pvt. Ltd. We produce below the said bank statement (A/c No. 000405002748 with ICICI Bank) : Date Value Date Particulars Location Chq. No. Withdrawals Deposits Balance (Rs.) 01.12.2011 B/F RPC Mumbai 0.00 0.00 3,22,898.80 Cr 03.12.2011 03.12.2011 Arjan Lal 010204 BOI RPC Mumbai 0.00 2,316.00 3,25,214.80Cr 05.12.2011 05.12.2011 BIL/0002733588 04/IDTAX/63904 8105122011 Nariman Point 20,285.00 0.00 3,04,929.80Cr 07.12.2011 07.12.2011 Kalpatru Heritage Coop Premis ....
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....il Ventures Pvt./KKBK Backbay Reclamation 756791 1,00,00,00,000.00 0.00 3,50,938.63Cr 30.12.2011 30.12.2011 MGB and Co. Nariman Point 756778 27,575.00 0.00 3,23,363.63Cr 30.12.2011 30.12.2011 INF/0000045375 78/IFT-Prime/0 Nariman Point 0.00 35,00,00,000.00 35,03,23,363.63Cr 30.12.2011 30.12.2011 RTGS: Kalpatru Retail Ventures Pvt./KKBK Backbay Reclamation 756792 35,00,00,000.00 0.00 3,23,363.63Cr 30.12.2011 30.12.2011 By Cash - Nariman Point Nariman Point 0.00 1,00,000.00 4,23,363.63.00 It is seen that on 08.12.2011 there is a balance of Rs. 2,23,226.80. On 22.12.2011 there is a deposit of Rs. 1,65,00,00,000/- in the above account. On the same date there is withdrawal of Rs. 95,00,00,000/- and Rs. 70,00,00,000/-, thus leaving same balance of Rs. 2,23,226.80. On 23.12.2011 there is a deposit of Rs. 35,00,00,000/-. On the same date there is withdrawal of the above amount of Rs. 35,00,00,000/-, leaving the same balance of Rs. 2,23,226.80. Similar pattern we find in the bank account of the assessee-company, (A/c No. 000405100292 with....