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2020 (9) TMI 757
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....ition of Rs. 2,63,15,000/- u/s 68 of the Act by the AO. 2.2 Aggrieved by the order of the AO, the assessee preferred appeal before the ld. CIT(A) who after considering the case of both the parties partly allowed the appeal of the assessee and directed the AO to delete the addition. 2.3 Now aggrieved by the order of the ld. CIT(A), Revenue filed the present appeal before us on the ground mentioned hereinabove. 2.4 At the outset of the hearing, the ld. DR appearing on behalf of the Revenue drew our attention to the application filed by the Revenue for admitting the additional evidences. The application filed by the Revenue is reproduced below. ''Prayer for admitting additional evidence. In this regard it is humbly submitted that I wish to submit some copies of View Director Master data and copy of name of companies and address taken from ministry of Corporate Affairs portal (MCA 21). I humbly pray to admit this documents which are also available on public domain. This documents are like background or surrounding situations to understand the issue at hand and to unearth the harsh reality to find out the truth. Without these documents my arguments would be pa....
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....tion to decide the controversy in question effectively and completely. Therefore, in our view the ld. DR has not been able to demonstrate before us that the contents of the application reproduced above for admitting the additional evidence are meeting with the ingredients contained in the Rule 29 of Appellate Tribunal Rules, 1963. Therefore, in the present facts and circumstances of the case, we are not inclined to allow the present application filed by the Revenue. Hence, the same stands dismissed. 3.1 Apropos solitary ground of the Revenue regarding deleting the addition of Rs. 2,63,15,000/- made by the AO on account of disallowance of share premium received on the issue of shares. The facts as emerges from the order of the ld. CIT(A) is as under:- As regards the additional Ground no. 3, it is to be seen in consonance with the Ground taken in original form no. 35 filed which challenges the addition of Rs. 2, 63, 18,600/-made u/s 68. In his order passed on 23.11.2017, the A.O. has first narrated the relevant portion from the order u/s 263 in which it is mentioned that for A.Y. 2009-10 the assessee had filed details of share capital/premium to the extent of Rs. 3,02,51,....
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.... investing companies have their own worth and funds for investment which they can explain, the explanation furnished by the assessee is not held as unsatisfactory or false, unless a live nexus of payment of cash by assessee-company with the investment into assesseecompany is established. As regards the objection related to addresses of the investors, it is seen that the A.O. has mentioned that the addresses are not being established but also mentions that they have the same address as the assessee appellant. He has also acknowledged that balance sheets 86 bank &, capital accounts in some cases are not available. This finding is not enough to make addition u/s 68. In a case where assessee proves identity of creditors/ share applicants by either furnishing their PAN numbers or income-tax assessment numbers and shows genuineness of transaction by showing money in his books either by accountpayee cheque or by draft or by any other mode, then onus of proof would shift to revenue and just because creditors/share applicants could not be found at address given, it would not give revenue right to invoke section 68. [CIT v Dwarkadhish Investment (P) Ltd. [2010] 194 Taxman 4....
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....en addition u/s 68 will not be justified. Where share applicants, in addition to their confirmation letters, had provided their particulars, PAN details, assessment particulars, mode of payment for share application money but Assessing Officer failed to conduct any scrutiny of said documents, addition made by Assessing Officer merely on basis of report of investigation wing pointing out that assessee was beneficiary of accommodation entries was not justified. [Pr. CIT v. Laxman Industrial Resources Ltd. 12017] 88 taxmann.com 648 (Delhi)]. where lenders were regular income-tax assessees and their PANs were on record, amount had been advanced through account-payee cheques and further, before issuing cheques lenders had got sufficient balance in their account, moreover, amount had also been repaid through account payee cheques, addition of loan u/s 68 was unjustified, merely on the ground that lenders were engaged in providing accommodation entries. [CIT v. Rahul Vineet Traders 120141 41 taxmann.com 86/221 Taxman 46 (All.) (Mag.); CIT v. Vijay Kumar Jain 120141 41 taxmann.com 433/221 Taxman 180 (All.) (Mag.); Asstt. CIT v. Shyam Indus Power Solutions (P.) Ltd. [2018] 90 taxma....
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....defies commercial prudence, Hon'ble Jurisdictional High Court has held that genuineness of the transaction is proved since the entire transaction is recorded in the books of the assessee and the transaction has taken place through banking channels. The decision of the Hon'ble High Court has specifically held that it is a prerogative of the Board of Directors of a company to decide the premium amount and it is the wisdom of the shareholders whether they want to subscribe to such a heavy premium. The Revenue authorities cannot question the charging of such of huge premium without any bar from any legislated law of the land. The Tribunal after examining the ingredients of section 68 of the Act held that the addition of share premium under section 68 of the Act cannot be sustained. We hereunder reproduce the relevant paragraph of the decision of Hon'ble Jurisdictional High Court in ease of Green Infra Ltd. (supra) for ready reference: "3. Regarding question no.(ii): (a) Before the Tribunal, the Revenue raised a new plea viz. that the so called share premium has also to be judged on the touchstone of Section 68 of the Act which provides for cash credit bein....
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....t to source of funds in the hands of the shareholders before the transaction can be accepted as a genuine one. Even the amended section does not envisage the valuation of share premium. This is further evident from a parallel amendment in section 56(2) of the Act which brings in its ambit so much of the share premium as charged by a company, not being a company in which the public are substantially interested, as it exceeds the fair market value of the shares. If one accepts the Ld CIT-DR's contentions that section 68 of the Act can he applied where the transaction is proved to be that of a share allotment that here the valuation for charging premium is not justified, it will make the provisions of section 56(2)(viib) of the Act redundant and nugatory. This cannot be the intention of the Legislature especially when the amendments in the two sections are brought in at the same time. THE ITAT DELHI BENCH 'D' in Assistant Commissioner of Income-tax, Central Circle- IX, New Delhi v. Ravnet Solutions (P.) Ltd. 93 taxmann.com 59 (Delhi - Trib.) held- :- Section 68 of the Income-tax Act, 1961 - Cash credit (Share application money) - Assessment years 2005-06 ....
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.... questioning. Therefore, I do not find this as a good ground for the Assessing Office to disbelieve that the shares of the appellant company of the face value of Rs. 10/- were sold at premium, without bringing adverse material on record against the appellant. As regards the amendment in the I.T. Act which the A.O. talks about in this regard, the same is not retrospective 85 is applicable from A.Y. 2013-14 and not from this year under appeal. Besides the above there is no other finding in the assessment order and based on his above mentioned general observations gone on to make an addition of Rs. 2,63,15,000/- as undisclosed income of the assessee u/s 68. The Assessing Officer is duty bound to investigate the credit-worthiness of the creditor/subscriber, verify the identity of the subscribers, and ascertain whether the transaction is genuine, or these are bogus entries of name-lenders. If the enquiries and investigations reveal that the identity of the creditors to be dubious or doubtful, or lack credit-worthiness, then the genuineness of the transaction would not be established. But where, (1) it is not established that investing companies are shell companies, (ii....
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....was routed. In most cased the transactions are found to be numerous & substantial. No evidence of cash deposits for colluding with assessee by re-routing unaccounted cash through the premium route is established vide the bank accounts or A.O.'s findings. In fact as compared to the investment made, some of the entities have a much higher reserve than the investment made in the premium for example. Axis Multimetals P. Ltd. has reserves of Rs. 2,66,01,540/- while investment in the premium in the appellate company is Rs. 38 lakhs. Similarly, Apex Experts Consultants has a reserve of Rs. 2.31 crores while investment in premium in the assessee company in Rs. 71.25 lakhs. Similar other investors include Esquire Vyapar P. Ltd. Reserve Rs. 3.15 cr. & Premium Rs. 38 lakhs, Geetanjali Realcon has Reserves of Rs. 2.31 Cr and paid Rs. 14.25 lakhs premium, to name a few more. Further in cases of individuals like Sh. Satya Narain Thebadia the investment in merely Rs. 3 lakh while he has a investment totaling Rs. 29.67 lakhs as per his balance sheet. Similarly Sh. Kushal Chand Jajoo has invested Rs. 2.85 lakhs in premium while his investments (assets) as per the balance sheet....
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....see discharged its primary onus in terms of Section 68 of the Act. I am therefore not inclined to uphold the addition of Rs. 2,63,15,000/- made by the A.O. on account of Share Premium attributable to the share Capital subscribed. The same is directed to be deleted. This ground of appeal is treated as allowed.'' 3.2 During the course of hearing, the ld. DR supported the order of the AO and submitted that the ld. CIT(A) has erred in deleting the addition of Rs. 2,63,15,000/- made by the AO. 3.3 On the other hand, the ld.AR of the assessee relied on the order of the AO. 3.4 We have heard the ld. counsels for both the parties and we have also perused the materials placed on record, judgements cited by the parties as well as the orders of the Revenue authorities. Brief facts of the case are that the assessee is a Private Limited Company and was incorporated on 20-11-2007. The main object of the company is to carry on the business of trading in shares, securities, deal or trade in commodity exchange, financial consultancy etc. The return was filed on 7-08-2009 by the assessee declaring income of Rs. 3,600/- In this case, it is noted that the AO during the course of assessment pr....