TaxTMI 
TaxTMI 
2019 (8) TMI 1665
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....re similar to the facts the case decided by the Hon'ble Delhi High Court? 2. Whether the ld. CIT(A) was correct in rejecting the findings of the A.O. that the assessee-company has purposefully failed to discharge its onus of proving the genuineness of transactions and identity and creditworthiness of the subscribers and in not looking into the circumstances as to whether the shares of the company really command astronomically high premium and in relying upon the submission of the assessee-company despite the fact that the onus of proving the genuineness of share application money was lying on the assessee company which remained un-discharge and which was essential condition set by the Apex Court and also by the Hon'ble High Court in the case of CIT vs. Roseberry Mercantile P Ltd. ? 3. Whether the ld. CIT(A) was correct in not looking into the surrounding circumstances which warrant that the assessee company could not have been able to raise the share capital with unusually high premium with despite the fact that the book value of such shares was negligible? 4. That the appellant craves to add, delete or modify any of the grounds of appeal before or....
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.... since no money transaction took place between assessee and share subscribing companies. It is a simple case of shares being allotted in lieu of shares held by the share subscribers. Therefore, we note that it is just swapping of shares, i.e. one share is exchanged from another share and therefore section 68 does not attract in the assessee's case under consideration. For that we rely on the judgment of the Coordinate Bench in the case of M/s Anand Enterprises Ltd. in I.T.A. No. 1614/Kol/2016, order dated 26.09.2018 wherein it was held as follows: 4. We have heard the rival submissions. At the outset, we find that the assessee had not raised any share capital by receipt of cash consideration in the instant case. The shares were issued for consideration other than cash in lieu of assessee company making investment in shares in some other company. Effectively, the assessee purchased certain shares from the aforesaid six shareholders and instead of paying cash to them, the assessee company issued shares in its own company to those shareholders. Hence the assessee had made investments in shares of another company for which consideration was settled through issuance of its shar....
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....Act. We also find that the Hon'ble Jurisdictional High Court in the case of Jatia Investment Company (Co.) vs. CIT reported in 206 ITR 718 (Cal) also supports the case of the assessee herein, wherein it was held as under: "It is finally emphasised by learned counsel for the assessee that the ultimate result is that the firm becomes a debtor to GB and Co. and the three non-financial companies of the group got discharged. Learned counsel also emphasised that, at the worst, it can be said that the assessee-firm has received valuable assets being the said shares of the equivalent value of the debt taken over by it from the companies, i.e., Rs. 11.20 lakhs. Therefore, the question of cash credit does not come in, there being no actual passing or receipt of cash. In other words, the transactions are mere book entries. It was contended that the fact that the entries passed through the cash book could not detract from or efface the essential nature of the entries. It was also urged that the entries were passed through the cash book so that the repayment of loans by the said three companies could be established before the Reserve Bank of India. But, according to Shri Bajor....
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....all the respective parties did not receive cash nor did pay cash as none had any cash for the purpose. The only point in the assessment order is that the entries not involving the passing of cash should not have found a place in the cash book, but in the ledger account through journal entries. There is another self-contradiction in the Income-tax Officer's finding that, if there was no real cash entry on the credit side of the cash book, but merely a notional or fictitious cash entry, as admitted by him, there is no real credit of cash to its cash book ; the question of inclusion of the amount of the entry as unexplained cash credit cannot arise. One of the grounds of the Tribunal for disbelieving the assessee's case is that the adjustment entries were made by notional cash entries with a view to bringing down the debt-andcapital ratio, i.e., that while being discharged of the debt the said companies also jettisoned their assets, i.e., the shares held by them of equivalent sum without achieving the avowed purpose. Here the Tribunal certainly misdirected itself. The ratio to be reduced is of the loan in relation to the share capital and the reserves. Jettisoning the....
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....d that provision of section 68 of the Act are not applicable in the instant case and accordingly the entire addition deserves to be deleted which has rightly been done by the ld. CIT(A) which does not require any interference. Accordingly, grounds raised by the revenue are dismissed. 6. Our view is also fortified by the judgment of another Co-ordinate Bench of ITAT, Kolkata's decision in the case of M/s Sunglow Dealcom pvt. Ltd. in I.T.A. No. 2178/Kol/2016, order dated 16.11.2018 wherein it was held as follows: " 3. We have heard rival contentions. On careful consideration of the facts and circumstances of the case, perusal of the papers on record, orders of the authorities below as well as case law cited, we hold as follows:- 4. The undisputed fact in this case is that the allotment of shares were for consideration other than by way of cash. The four companies which applied for allotment of shares, have sold their investment to the assessee company and the assessee company, has as consideration for the purchase of those shares had allotted shares at a premium. It is a case of swapping of shares. The shares were allotted for consideration other than cash. The q....
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....ourt in the case of Jatia Investment Co .v. Commissioner of Income-tax [1994] 206 ITR 718 (CAL.) held as follows:- "Section 68 of the Income-tax Act, 1961 - Cash credits - Assessment year 1976- 77 - Partners of assessee-firm were members of one 'J' group running several businesses and industries - Accounts of assessee-firm showed that it had borrowed certain amount from GB, a proprietary concern of one of its partners JM, which was invested in purchase of shares - ITO found that GB had no cash balance to advance said amount to assessee - He, thus, concluded that source of funds for purchase of shares by assessee was not explained, and consequently, assessed that amount as income from undisclosed sources - It was contended by assessee that notional cash entries were made to reduce indebtedness of three companies of 'J' Group to GB in order to comply with certain directions of RBI - Assessee-firm substituted three companies of 'J' Group as debtor to GB - It was further stated that question of cash credit did not arise, there being no actual passing or receipt of cash but transactions were mere book entries - Whether, in aforesaid circumstances, effect and import of transacti....