TaxTMI 
TaxTMI 
2019 (10) TMI 1383
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.... of search and seizure operation in the case of Shri Praveen Kumar Jain and his group concerns, it emerged that M/s. Fastline Multitrade Pvt. Ltd was engaged in providing accommodation entries only. Moreover, the notice issued u/s.133(6) of the Act to the said lender returned unserved. Accordingly, a show cause notice was issued to the assessee by the ld. AO show-causing as to why the said unsecured loan of Rs. 25 lakhs should not be brought to tax as unexplained cash credit u/s.68 of the Act in the hands of the assessee. In response, the assessee submitted vide letter dated 09/03/2015, confirmation from the lender, copy of return of income of the lender, financial statements of the lender etc., The ld. AO observed that merely filing confirmation does not establish that the transaction was genuine and in the search conducted by the Investigation Wing of the Income Tax department in the case of Shri Praveen Kumar Jain and his group of concerns, it had emerged that this lender was involved only in providing accommodation entries. The ld. AO observed that assessee had ploughed back its unaccounted income in the garb of unsecured loans and introduced the same in the books of accounts. ....
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....eceived by it. The ld. CIT(A) on perusal of the financial statements of the lender observed that the loan given to the assessee is duly reflected in the audited balance sheet of the lender under the head "short term loans and advances". The assessee has paid interest on this loan after deduction of tax at source. Further, the ld. AO had not provided to the assessee any evidences or other findings of the search action in the case of Shri Praveen Kumar Jain which could prove that the lender company has given to the assessee only accommodation entries. The ld CIT(A) observed that the ld. AO had not supplied copies of statement recorded from Shri Praveen Kumar Jain and other Directors of the lender company to the assessee to show that the loan given to the assessee by the lender company is only accommodation entry. 3.4. On the contrary, the assessee was able to prove on record that the lender company had duly offered the interest income received from the assessee and taken credit for the TDS thereon which has also been granted by the ld. AO of the lender company. The entire transactions are by account payee cheque. The assessee has filed the entire copies of its bank statements as wel....
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....duction of tax at source and that the said interest income has also been offered by the lender company and the revenue had given due credit for the TDS claim thereon in the assessment of lender company. Even in the hands of the assessee company, the interest paid on loans is allowed as deduction. From the elaborate findings given by the ld. CIT(A) above, we find that the assessee had duly discharged the necessary three ingredients of Section 68 of the Act in the instant case. Merely because the notice u/s.133(6) of the Act returned unserved, no adverse inference could be drawn on the assessee ignoring the various documentary evidences on record. Nothing prevented the ld. AO to make enquiries from his side with the Assessing Officer of the lender company, and examine the veracity of the loan taken by the assessee, the details of which are very much available before the ld. AO. We also find that the entire addition has been made merely by placing reliance on the statement recorded from Shri Praveen Kumar Jain during the course of his search action, which statement was also not furnished to the assessee for its rebuttal and cross examination, though specifically asked for in the cours....
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.... to why the same should not be treated as unexplained cash credit u/s.68 of the Act. The assessee filed a reply vide letter dated 09/03/2015 wherein it submitted copies of confirmation from the investors duly confirming the investment made by them in the assessee company, bank statements, ITR acknowledgements, their financial statements, share application forms, board resolution for making the investment, the letter confirming the investment made by them in the assessee company, return of allotment filed with Registrar of Companies for having allotted the shares at premium, bank statements evidencing the investment made in the assessee company together with its source of funds. The ld. AO however, disregarded the entire evidences filed by the assessee without finding any deficiencies in these documentary evidences submitted before him. The ld. AO merely placed reliance on the investigation report of the Investigation Department carried out in the case of Shri Shirish C Shah. Accordingly, he treated the receipt of share capital and share premium in the sum of Rs. 2,50,00,000/- as unexplained cash credit u/s.68 of the Act and completed the assessment. 7.2. The assessee submitted the....
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....it in bank a/c before issuing of cheque No cash deposit in bank a/c before issuing of cheque 3 Speciality Papers Ltd. Moral National Highway, Vapi Gujarat PAN:AECS0861Q ING Vysya Bank Ltd. Dadar Branch Mumbai A/cNo.56101101389 RTGS/Vysah 1129170458 3 18.10.2011 50,00,000 No cash deposit in bank a/c before Issuing of cheq lie 4 Emporis Projects Ltd. 209, Sarthik-2 Opp. RajpathClub Ahmedabad- 380015 ING Vysya Bank Ltd. Dadar Branch Mumbai A/cNo.561011013622 RTGS/ Vvsah 11263701474 Rs. 3000000 RTGS/ Vysah 11270703287 Rs. 2000000 Total Rs. 500000 20.09.2011 27.09,2011 50,00,000 No cash deposit in bank a/c before Issuing of cheque 5 Shri Ganesh Spinners Ltd./ Vantra Natural Resources Ltd. G.T. Road, Karnal Side, Village Simla Molana, Panipat 132103 PAN: AACCS4221Q ING Vysya Bank Ltd. Nariman Point Branch Mumbai A/ cNo.50001 1038954 NEFT/Vysah 11318707156 14.11.2011 50,00,000 (B) SOURCE FOR SHARE CAPITAL & SHARE PREMIUM S. No. Details of share Applicant Contribution's Capital as on 31.03.2011 (preceding F.Y. in which contribution made) Nature and amount of fund in the Balance sheet Amount/ Capita 1 contributed by the party to Ap....
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....le Jurisdictional High Court in the case of Vodafone India Services Pvt. Ltd., vs. Additional CIT reported in 368 ITR 1 (BOM) wherein it was held that the receipt of share capital and share premium was undoubtedly on capital account and there is no express provision in the Act to tax the same. The ld. CIT(A) also took note of the fact that CBDT vide its Instruction No.2/2016 dated 29/10/2016 directed the revenue not to file SLP before the Hon'ble Supreme Court against this High Court order. The ld. CIT(A) further placed reliance on the Co-ordinate Bench decision of this Tribunal in the case of ACIT vs. Gagandeep Infrastructure Pvt. Ltd., in ITA No.5784/Mum/2011 dated 23/04/2014 wherein it was held that the amendment in Section 56(2) (viib) of the Act wherein it is proposed to tax the premium received on shares which was in excess of fair market value of the shares, is prospective in nature and applicable only from A.Y.201314 onwards. The said judgment also held that the amendment in proviso to Section 68 of the Act is also applicable only from A.Y.2013-14 onwards. Accordingly, the receipt of share capital and share premium cannot be brought to tax u/s.68 of the Act up to A.Y.2012-1....