TaxTMI 
TaxTMI 
2021 (9) TMI 501
X X X X Extracts X X X X
X X X X Extracts X X X X
.... while framing the assessment. The assessee being resident corporate assessee is stated to be engaged in textile chemical, colors, food activities, etc. 2. The Ld. Sr. DR, drawing attention to the financial statements of the investor entities, submitted that these entities did not have sufficient income and the investments were sourced out of reserves & surplus. Hence, Ld. CIT(A) erred in deleting the additions. Reliance has been placed on the decision of Hon'ble Delhi High Court in the case of CIT V/s Independent Media Pvt. Ltd. (210 Taxman 14) as well as the decision of Hon'ble Apex Court in Durga Prasad More (82 ITR 540 26/08/1971). The Ld. AR, on the other hand, submitted that the assessee furnished all the requisite documents and demonstrated fulfillment of primary ingredients of Sec.68 and therefore, the impugned additions were rightly deleted in the appellate order. 3. Having heard rival submissions and after due consideration of material on record, our adjudication to the subject matter of appeal would be as given in succeeding paragraphs. Appellate Proceedings 4.1 During assessment proceedings, it transpired that the assessee issued 35250 number of shares of fa....
X X X X Extracts X X X X
X X X X Extracts X X X X
.... Rs. 2.5 Crores in FY 2009-10 to around Rs. 8 Crores in FY 2010-11. Thus the investment in Assessee Company was win-win situation for both the entities. Since the assessee required more funds, it approached various other persons and negotiated with them for issue of further shares. All such negotiations were well evidenced by exchange of letters as well as emails, the copies of which were furnished during appellate proceedings. Based on these negotiations, the assessee was able to fetch higher premium. The investments ultimately resulted into increase in assessee's turnover as well as Gross profits which were tabulated during appellate proceedings. In the said background, the assessee assailed the findings of Ld. AO. Regarding premium on shares, it was submitted that it was open for assessee to collect premium on issue of shares based on its market value of assets and goodwill. 5.2 The assessee also pointed out that Ld. AO failed to consider various documents filed by the assessee during assessment proceedings to establish the identity of the investor entities, their creditworthiness as well as genuineness of the transactions. These documents would, inter-alia include PAN of inv....
X X X X Extracts X X X X
X X X X Extracts X X X X
....urce out of which the investments were made in the assessee company, has also been mentioned in this Annexure. 5.4 The assessee assailed the remand report on the quantum of premium and relied on the decision of Hon'ble Supreme Court in CIT v/s. Lovely Exports (P) Ltd. (317 ITR 218) as well as the decision of Hon'ble Bombay High Court in the case of CIT Vs. Gagandeep Infrastructure Private Limited [80 Taxmann.com 272]. The assessee also submitted that Ld. AO had no power to determine the quantum of premium or the method of computing the premium since it was the assessee's own prerogative to charge premium on issue of shares and determine the same as per business negotiations. 5.5 The Ld. CIT(A), after due consideration of material on record, observed that Ld. AO merely doubted the genuineness of transactions because of the reason that the assessee charged different premium on shares. However, considering the market value of the property held by the assessee, the value per share would work out to Rs. 1418.49 per share. The assessee used his strength and goodwill to negotiate with the investor entities including an entity which had business dealing with the assessee. The matter ....
X X X X Extracts X X X X
X X X X Extracts X X X X
....68 of the Act subject to the conditions laid down in the said section. Therefore, it is important to understand the position of law u/s 68 of the Act which has evolved from a catena of judgments delivered by the Courts and Tribunals on this issue. The Hon'ble ITAT Mumbai in the case of ITO vs Anant Shelters Pvt. Ltd. (2012) 20 Taxmann.com 153 has enumerated certain principles which would be extremely useful in understanding the issue in hand. It has been stated in the said judgment that over the years, law regarding cash credits has evolved and taken a definite shape. A few aspects of law u/s 68 can be enumerated. 1. Sec. 68 can be invoked when there is a credit of amounts in the books maintained by the assessee, such credit is a sum of money during the previous year and either the assessee offers no explanation about the nature and source of such credits or the explanation given by the assessee in the opinion of the AO is not satisfactory. 2. The opinion of the AO for not accepting the explanation offered by the assessee as not satisfactory is required to be formed objectively with reference to the material on record. 3. Courts are of the firm view t....
X X X X Extracts X X X X
X X X X Extracts X X X X
.... sheet for Net worth. 5. ROC Master Data- Active 6. 133 (6) replied by party -proof of registered A.D. V. Delta Deal TradeFvt Ltd:- 1 Parties confirmation for Investment. 2 Bank Statement. 3 Income Tax acknowledgement. 4 Balance sheet for Net worth. 5 ROC Master Data- Active 6 133 (6) replied by party -proof of registered A.D. VI. Metrol Industries Pvt Ltd:- 1. Share Application. 2. Parties confirmation for Investment. 3. Bank Statement 4. Income Tax acknowledgement. 5. Balance sheet for Net worth. 6. ROC Master Data- Active 7. 133 (6) replied by party -proof of registered A.D. VII. Blockdeal Suppliers Fvt Ltd:- 1. Share Application. 2. Income Tax acknowledgement. 3. Bank Statement. 4. Parties confirmation for Investment. 5. Balance sheet for Networth. 6. ROC Master Data-Active 7. 133 (6) replied by party -proof of registered A.D. VIII. Fastspeed Agencies Pvt Ltd:- 1. Parties confirmation for Investment 2. Bank Statement. 3. ....
X X X X Extracts X X X X
X X X X Extracts X X X X
....nk statements clearly show availability of funds in their respective bank accounts, out of which share application money was invested in the appellant company. Thus, there can be no question regarding the creditworthiness of the share applicants. Genuineness a) Appellant has received the share application through account payee cheques b) Bank statements of the share applicant depicting availability of funds c) Confirmation letter from the share applicant companies duly confirming the amount of share application money invested by them in the appellant company clearly proves the genuineness of the transaction. d) Form 2 i.e. allotment of shares filed with Registrar of Companies 4.13 In these circumstances, it can be said that the appellant had discharged the initial onus cast upon it to establish the identity and creditworthiness of the creditors as well as genuineness of the transactions. Therefore, the onus shifted to the AO. Further, in the remand report A.O. after enquiry reported "with regard to payment received from M/s. Rossari Biotech India Pvt. Ltd, during 'the course of remand proceedings, the assessee has submitted ....
X X X X Extracts X X X X
X X X X Extracts X X X X
....icer then the department can always proceed against them and if necessary reopen their individual assessments. The Hon'ble Bombay High Court in the case of CIT vs. Gagandeep Infrastructure Pvt. Ltd (Bombay): "During the previous relevant to the subject Assessment Year the assessee had increased its share capital from Rs,2,50,000/- Rs. 83.75 lakhs. During the assessment proceedings, the Assessing Officer noticed that the respondent had collected share premium to the extent of Rs. 6.69 crores. Consequently he called upon the respondent to justify the charging of share premium at Rs.l90/per share. The respondent furnished the list of its shareholders, copy of the share- application form, copy of share certificate and Form no.2 filed with the Registrar of Companies. The justification for charging share premium was on the basis of the future prospects of the business of the assessee. The Assessing Officer did not accept the explanation/justification of the respondent and invoked Section 68 of the Act to treat the amount ofRs. 7.53 crores i.e. the aggregate of the issue price and the premium on the shares issued as unexplained cash credit within the meaning of Section 68 of ....
X X X X Extracts X X X X
X X X X Extracts X X X X
....d the same to the assessee's income as unexplained cash credit." 4.15 Hon'ble ITAT, Mumbai in the case of Arceli Realty Ltd, ITA No. 6492/Mum/2016 dated 21/04/2017 has decided a similar issue. The operative portion of the decision is as under:- "If the totality of facts and the judicial pronouncements, discussed hereinabove, are analyzed, we are of the considered opinion that the onus caste upon the assessee, as provided u/s 68 of the Act, has been duly discharged by the assessee as the identity of the share subscribers, creditworthiness and genuineness of the transaction is not in doubt or it can be said that the same has been proved/explained by the assessee. Now, The onus has reverted back upon the Revenue to prove otherwise. The Ld. Assessing Officer merely relied upon the information received from the investigation wing and did not made any independent enquiry. The Assessing Officer was expected to disprove the claim of the assessee with the help of evidence, if any, received from the investigation wing, as has been claimed by the Revenue. The Revenue has nowhere proved that any malafide is done by the assessee. Failure to do so, vitiate the addition ....
X X X X Extracts X X X X
X X X X Extracts X X X X
....ormation, no addition can be made. Even otherwise, as per Article-265 of the Constitution of India, only legitimate taxes have to be levied and collected. In our humble opinion, the assessee has duly discharged the onus caste upon it, therefore, respectfully following the decisions from Hon'ble Apex Court, Hon'ble High Courts and Hon'ble jurisdictional High Court, we reverse the order of the Ld. Commissioner of Income Tax (Appeal), resultantly, this ground of the assessee is allowed. 4.16 In view the above factual and legal position when details of share application money and share holders are provided during the course of assessment proceedings and the same have been brought on record, the amount received as share capital and share premium cannot be treated as unexplained cash credit in the hands of receiver of such share application money. Respectfully following the order of the jurisdictional ITAT and High Court which are squarely applicable to the facts of the appellant's case, the addition of Rs. 5,68,60,000 made by the AO u/s 68 is directed to be deleted. Ground No. 2 is accordingly allowed. Finally, the impugned additions were deleted. Aggrieved a....