TaxTMI 
TaxTMI 
2018 (8) TMI 2079
X X X X Extracts X X X X
X X X X Extracts X X X X
....e Assessing Officer be restored 3. The appellant craves leave 10 amend or alter any grounds or add a new ground which may be necessary." 3. The brief facts of the case are that the assessee filed its return of income on 29.09.2011 declaring a total income to the tune of Rs. 18,04,980/- for the A.Y.2009-10. Thereafter, the case was reopened by issuance of notice u/s 148 of the Act dated 29.03.2014 which was served upon the assessee. In response to the said notice, the assessee filed its return of income 29.09.2011. Thereafter, the necessary notices u/s 143(2) & 142(1) of the Act were issued and served upon the assessee. The assessee received the share application money of Rs. 2,12,50,000/- from the following three parties having a face value of Rs. 10/- at share premium of Rs. 190/- per share totaling to Rs. 200/- per share. Sr. Name of the cases Amount (Rs) No. of shares Face Value @ Rs. 10/- each Premium @ Rs. 190/- each 1 Sagar Tax Creation P. Ltd. 2,00,00,000 1,00,000 10,00,000 1,90,00,000 2 Sidh Housing Development Company Ltd. (Now Known P. Ltd. Ispat & Energy Ltd.) as Bhadrawati 12,50,000 12,500 1,25,0....
X X X X Extracts X X X X
X X X X Extracts X X X X
....er companies clearly shows that the J"0mpanies are active and have maintained proper accounts which were duly *~ audited. it is also submitted that the shareholder companies are having Tax Pan Number. It is further observed from the assessment order that the appellant company had filed confirmation, copy of ITR, and copy of bank statements of the share applicant company. The appellant in its written submission has quoted and relied on the legal proposition enunciated by decisions of the Hon'ble Courts and ITAT on the issue as reproduced above. 6.4 It is noted that the A.Q. has held that the appellant has introduced income from undisclosed sources brought under the garb of share application money and share premium of Rs. 2,25,00,000/- from three companies and hence this amount of issue of the share application money and share premium was assessed as income of the appellant u/s 68 of the Act. In this case the appellant had received share capital and share premium from three private limited companies which are regularly assessed to tax, these companies had submitted the copies of the Audited accounts, copy of PAN, copy of Bank account etc. The A.Q. had concluded that base....
X X X X Extracts X X X X
X X X X Extracts X X X X
....ut the true identity of an investor, its creditworthiness and genuineness of a transaction was explained by the Supreme Court in CIT Vs, Lovely Exports (P) Ltd-, 216 CTR 295. Whilst, the A.Q, acted legitimately in enquiring into the matter, the inferences drawn by him were not justified at all in the circumstances of the case. Whether the assessee company charged a higher premium or not. should not have been the subject matter of the enquiry in the first Instead, the Issue here was whether the amount invested by tine share applicants was from legitimate sources. The objective of Section 68 is to avoid inclusion of amounts which are suspect. Therefore, the emphasis is on genuineness of all the three aspects, identity, creditworthiness and the transaction. What is peculiar in the present case is when the assessment was being completed the A,0, has not made much investigation except issuing of notices u/s 133(6) which were served on the share applicant companies and these investing companies were required to file confirmation, balance sheets and Bank details etc. which would have established that the identity of the investors, the genuineness of the transaction and the creditworthines....
X X X X Extracts X X X X
X X X X Extracts X X X X
....n the said amounts as investment in their books of accounts. The money was routed through banking channels and through account payee cheques/bank draft, undisputed given by the concerned parties. Even, the source of the application money and share premium was found in the bank account of the investing compares not by any cash deposit; but through account payee cheques. Therefore, when ail these documentary evidence is considered there appears not much basis for any addition. 6.6 It fs seen that in the latest decision, the Hon'ble Delhi High Court in the case of Oasis Hospitalities P Ltd (2011) 333 ITR 119 Del, after considering all the relevant decisions on the issue including the decision of the Hon'ble Supreme Court in the case of Lovely Exports P Ltd (supra), decision of the Full Bench of the Hon'ble Delhi High Court in the case of Sophia Finance Ltd reported in 205 ITR 98 (Del)(FB) and the decision m the case of Divine Leasing & Finance Ltd (supra) has observed as under: "It is clear from the above that the initial burden is upon the assessee to explain the nature and source of the share application money received by the assessee, in order to discharge....
X X X X Extracts X X X X
X X X X Extracts X X X X
.... investigation and (each the shareholders. The Assessing Officer did nothing except issuing summons which were ultimately returned back with an endorsement 'not traceable' In our considered view, the Assessing Officer ought to have found out their details through PAN cards, bank account details or from their bankers so as to reach the shareholders since all the relevant material details and particulars were given by the assessee to the Assessing Officer. In the above circumstances, the view taken by the Tribunal cannot be faulted. No substantial question of Jaw is involved in the appeal. In the result, the appeal is dismissed m limine with no order as to costs." The Hon'ble Bombay High court thus clearly held that once documents like PAN card, bank account details or details from the bankers were given by the s onus shifts upon the Assessing Officer and it is on him to reach the shareholders to ascertain the true facts. It is, thus, for the Assessing Officer to make further inquiries with regard to the status of these parties to bring on record any adverse findings regarding their creditworthy ness. This would be more so where the assesses is a public limited c....
X X X X Extracts X X X X
X X X X Extracts X X X X
....oing so, the legal position contained in section 68 of the Act was explained by the Supreme Court by assessing that a bare reading of section 68 of the Act suggests that (i) there has to be credit of amounts in the books Ltd. maintained by the assessee; (ii) such credit has Co be a sum of money during the previous year j and (iii) either la) the assessee offers no explanation about the nature and source of such credits found in the books, or (b) the explanation offered by the assessee, in the opinion of the Assessing Officer, is not satisfactory. It is only then that the sum so credited may be charged to income-tax as the income of the assessee of that previous year. The expression "the assessee offers no explanation" means the assessee offers no proper, reasonable and acceptable explanation as regards the sums found credited in the books maintained by the assessee. The opinion of the Assessing Officer for not accepting the explanation offered by the assessee as not satisfactory is required to be based on proper appreciation of material and other attending circumstances available on the record. The opinion of the Assessing Officer is required to be formed objectively with reference....
X X X X Extracts X X X X
X X X X Extracts X X X X
.... was also found in the respective bank accounts of the investing companies and there was no trace of cash deposit in the bank accounts of the investing companies, then, the action of the Assessing Officer due to the premium on shares without making further detailed enquiry to establish that the provisions of section 68 of the '/Income Tax Act were attracted in the present case, is difficult to sustain in appeal. The Assessing Officer has made addition on some doubts and suspicion but has not established any direct or indirect link of assesses own money flowing out and then again received by the assessee in the form of share capital and premium. The assesses had placed on record the evidence as well as copy of income-tax returns of the share applicants. Keeping in view all these evidence it cannot be held that the assessee did not establish the identity of the share applicants. The Hon'ble Delhi High Court in the case of CTT vs Gangeshwari Metal Pvt Ltd 2014 361 TTR 10 has held that: - "In fad, in Nova Promoters and Finlease (p) Ltd. (supra) itself this Court has observed, m the context of Lovely Exports (p) Ltd. (supra), as under: - The ratio of a decision....
X X X X Extracts X X X X
X X X X Extracts X X X X
....of the above discussion on the facts of the case and having regard to the decisions of courts and judicial precedents as noted above, the addition made by the A.O. of the share capital and premium of Rs. 2,25,00,000/- under section 68 of the I.T. Act, 1961 cannot be sustained in appeal and is directed to be deleted. Accordingly, this ground of appeal is allowed." 5. On appraisal of the above mentioned finding, we noticed that the CIT(A) has relied upon the documents submitted by the three parties namely (i) Sagar Tex Creation Pvt. Ltd, (ii) Sidh Housing Development Company Limited (iii) Ganeshwar Trading. It is to be seen which documents are given by the said parties: - (i) Sagar Tex Creation Pvt. Ltd...... Letter of Acceptance for subscription to share capital Share Application form along with Board resolution. Copy of bank statement reflecting the share application money Copy of financial statement for FY 2008-09 Copy of ITR V for A.Y. 2009-10 Confirmation letter. (ii) Sidh Housing Development ....... Letter of acceptance for subscription to share capital. Share application form along with Board resolution. Confirmation letter. ITR acknowled....