TaxTMI 
TaxTMI 
2022 (11) TMI 586
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.....2011 stating that the income of the assessee has escaped assessment. Thereafter during the course of reassessment proceedings, the AO called for various details/evidences substantiating/corroborating share application money received from share applicants thereby establishing identity and creditworthiness of the investors and genuineness of the transactions. During the course of reassessment proceedings, the AO even made an independent enquiry from some share holders by issuing notices u/s 133(6) of the Act which were duly served and responded by the said shareholders by filing the requisite documents and evidences comprising of copies of bank statements, audited financial statements, ITRs etc. and the AO after examining the details filed by the assessee as well as by the share applicants framed the assessment u/s 147/143(3) dated 30.09.2011 assessing the income at Rs. 31,207/-. 5. Thereafter the PCIT upon perusal of the assessment records exercised the revisionary jurisdiction and issued show cause notice dated 05.02.2014 u/s 263 of the Act as to why the order passed u/s 147/143(3) should not be treated as erroneous and prejudicial to the interest of the revenue on the ground t....
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....d the AO to delete the addition by discussing each and every share applicant at length in the appellate order. For the sake of ready reference the operative part is reproduced as under: 5. Observations, Findings and Decision 5.1. I have carefully considered the submissions made by the Ld. AR of the appellant and the findings recorded by the Ld. AO in the impugned order. I have also perused the documents furnished in the paper book on which the Ld. AR of the appellant relied in his submissions as also the decisions cited by him in support of the grounds taken in the appeal. From the facts on record it is noted that the original return of income filed by the appellant for AY 2008-09 was originally processed u/s 143(1) of the Act. The assessment of the appellant was thereafter reopened u/s 148 of the Act. In the reassessment proceedings the AO had verified the share application monies received by the appellant on test check basis. Being satisfied with the material available on record, the AO framed the assessment u/s 147/143(3) on 30.09.2011 at total income of Rs.31,270/-. In this reassessment order, no adverse inference was drawn against the share subscription monie....
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....dependent enquiries conducted u/s 133(6) of the Act. It is also not the AO's case that the assessee had failed to furnish any documents in support of the subscription amounts received from the fifteen corporate entities. In order to verify the genuineness of the assessee's share transactions; summons u/s 131 of the Act were issued to the Director of the appellant. According to AO, although the Director of the appellant attended the summons and he was deposed under oath but he failed to produce the Directors of the share subscribing entities. The AO therefore held that the high premium charged by the assessee from the shareholders remained unexplained, for which he assessed the entire share capital of Rs.11,07,50,000/- raised by the appellant during the FY 2008-09 by way of its unexplained cash credit u/s 68 of the Act. 5.4 On the above facts therefore the question is whether the addition u/s 68 made in the impugned order was validly made. It is noted that the issue with regard to addition u/s 68 in respect of share subscription amounts received has engaged attention of judicial authorities for quite some time. The jurisdictional High Court as also various Other High Courts....
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....oted that the share applicant is assessed under the PAN AABCE9869R. It has invested sum of Rs. 97,00,000/- in the appellant company's shares during the relevant FY 2008-09. The investments made are supported by the shareholder company's net worth (Rs 16.31 crores) which is at Page No. 158 of the Paperbook. The AO issued notice u/s 133(6) on the shareholder company, which was served and duly complied by the shareholder company, copy of which is provided at Pages 148-180 of the Paperbook. In the said reply, the shareholder company furnished copies of IT Acknowledgement and audited financials, enclosed at Pages 163 to 164 of the Paperbook, along with investment schedule evidencing investment made in appellant company. Further, copies of relevant and corresponding bank statement were submitted (enclosed at Page 152 of Paperbook), evidencing that-funds were transferred to the appellant company on 23.01.2008, through proper banking channels. Copy of the share application form along with allotment advice was also submitted. The shareholder company has also furnished explanation regarding the source of these funds,, viz., share application money received from Swift Tracom (P) Ltd. In suppo....
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....t Pages 63 to 705 of the paper book. I have examined the relevant facts furnished by each share subscribers which throws light as to their identity^ creditworthiness and genuineness of the transactions. Each of the share subscribers has thus been separately discussed below: (a) In the case of Allied Vintrade Pvt Ltd., it is noted that the share applicant is assessed under the PAN AAHCA2813M. It has invested a sum of Rs. 85,00,000/- in the shares of the appellant company during the relevant FY 2008-09. The investments made are supported by the shareholder company's net worth (Rs 10.04 crores) which is at Page No. 72 of the Paperbook. The notice issued u/s 133(6) by the AO on the shareholder company, was served and duly complied by the shareholder company, copy of which is provided at Pages 63-115 of the Paperbook. In the said reply, the shareholder company furnished copies of IT Acknowledgement and audited financials, enclosed at Pages 67to 80 of the Paperbook, evidencing investment made in appellant company. Further, copies of relevant and corresponding bank statement were submitted (enclosed at Page 66 of Paperbook), evidencing that funds were transferred to the appellant....
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.... application form along with allotment advice was also submitted. The shareholder company has also furnished explanation regarding the source of these funds, viz., sale of investments to Jazz Commotrade (P) Ltd. along with its the Financial Statements, Bank Statement and IT Acknowledgement, in support thereof. The AG has not pointed out any defect in the documents furnished by the shareholder company in response to notice u/s 133(6) of the Act. (f) In the case of Naman Merchants Pvt. Ltd., it is noted that the share applicant is assessed under the PAN AACCN7838E. It has invested sum of Rs. 45,00,000/- in the appellant company's shares during the relevant FY 2008-09. The investments made are supported by the shareholder company's net worth (Rs 11.75 crores) which is at Page No. 267 of the Paperbook. The AO issued notice u/s 133(6) on the shareholder company, which was served and duly complied by the shareholder company, copy of which is provided at Pages 255-289 of the Paperbook. In the said reply, the shareholder company furnished copies of IT Acknowledgement and audited financials, enclosed at Pages 261 to 273 of the Paperbook, evidencing investment made in appellant comp....
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....,00,000/- in the appellant company's shares during the relevant FY 2008-09. The investments made are supported by the shareholder company's net worth (Rs 15.54 crores) which is at Page No. 352 of the Paperbook. The AO issued notice u/s 133(6) on the shareholder company, which was served and duly complied by the shareholder company, copy of which is provided at Pages 343-377 of the Paperbook. In the said reply, the shareholder company furnished copies of IT Acknowledgement and audited financials, enclosed at Pages 347 to 360 of the Paperbook, along with investment schedule evidencing investment made in appellant company. Further, copies of relevant and corresponding bank statement were submitted (enclosed at Page 346 of Paperbook), evidencing that funds were transferred to the appellant company on 11.02.2009, through proper banking channels. Copy of the share application form was also submitted. The shareholder company has also furnished explanation regarding the source of these funds, viz., share application money received from Simplex Commotrade (P) Ltd. along with its the Financial Statements, Bank Statement and IT Acknowledgement, in support thereof. The AO has not pointed out a....
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....red to the appellant company on 19.01.2009, 20.01.2009 & 02.02.2009, through proper banking channels. The shareholder company has also furnished explanation regarding the source of these funds, viz., share application money received from Prime Tradelink Pvt. Ltd., and Wonder Vintrade Pvt. Ltd. along with the Financial Statements, Bank Statement and IT Acknowledgement of the said source-payer companies. The AO has not pointed out any defect in the documents furnished by the shareholder company in response to notice u/s 133(6) of the Act. (k) In the case of Simplex Commotrade Pvt. Ltd., it is noted that the share applicant is assessed under PAN AAMCS3520J. It has invested a sum of Rs. 91,00,000/- in the shares of the appellant company during the relevant FY 2008-09. The investments made are supported by the shareholder company's net worth (Rs 10.43 crores) which is at Page No. 474 of the Paperbook. The notice issued u/s 133(6) by the AO on the shareholder company, was served and duly complied by the shareholder company, copy of which is provided at Pages 463-515 of the Paperbook. In the said reply, the shareholder company furnished copies of IT Acknowledgement and audited fi....
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....chno Commodeal Pvt. Ltd., it is noted that the share applicant is assessed under PAN AAICS8900L. It has invested a sum of Rs. 81,00,000/- in the shares of the appellant company during the relevant FY 2008-09. The investments made are supported by the shareholder company's net worth (Rs 10.58 crores) which is at Page No.564 of the Paperbook. The notice issued u/s 133(6) by the AO on the shareholder company, was served and duly complied by the shareholder company, copy of which is provided at Pages 553-621 of the Paperbook. In the said reply, the shareholder company furnished copies of IT Acknowledgement and audited financials, enclosed at Pages 559-570 of the Paperbook, evidencing investment made in appellant company. Further, copies of relevant and corresponding bank statement were submitted (enclosed at Page 558 of Paperbook), evidencing that funds were transferred to the appellant company on 18.09.2008 & 19.02.2009, through proper banking channels. Copy of the share application form and allotment advice was also submitted. The shareholder company has also furnished explanation regarding the source of these funds, viz., (i) share application monies received from Wonder Vintrade (P....
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.... shareholder company, copy of which is provided at Pages 673-705 of the Paperbook. In the said reply, the shareholder company furnished copies of IT Acknowledgement and audited financials, enclosed at Pages 678-689 of the Paperbook, along with investment schedule evidencing investment made in appellant company. Further, corresponding bank statements were submitted (enclosed at Page 677 of Paperbook), evidencing that funds were transferred to the appellant company on 03.02.2009, through proper banking channels. Copy of the share application form was also submitted. The shareholder company has also furnished explanation regarding the source of these funds, viz., share application money received from Allied Vintrade (P) Ltd. In support thereof, the Financial Statements, Bank Statement and IT Acknowledgement of the source-payer was also provided. The AO has not pointed out any defect in the documents furnished by the shareholder company in response to notice u/s 133(6) of the-Act. 5.7 To sum up the above, it is observed that all the notices u/s 133(6) were served at the respective addresses of each of the fifteen shareholders by registered post. The share subscribers had furni....
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....ials. The AO did not draw any adverse inference against the appellant upon examination of their Director under oath. It is further observed that the AO had not issued summons upon any of the shareholders. I thus find merit in the contention of the Ld. AR that, without issuing summon u/s 131 to any of the shareholders, the AO was wrong to allege that the appellant had evaded attendance of share applicants. 5.9 The material available on record shows that the AO had chosen to make independent enquiries from the shareholders u/s 133(6) rather than Section 131 of the Act. The facts and documents furnished by the shareholders supported the AR's contention that the identity of all the fifteen share subscribing companies stood established. Referring to the copies of the bank statements, the AR established that payment of subscription amounts were recorded in the bank statements of the respective companies. The entries in the bank statement proved that the share subscription amount was transacted through banking channel. Besides the entries in the bank statements also substantiated that before payment of share subscription amounts, no cash was deposited in the bank accounts of the ....
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....ecision has since bee(r) dismissed by the Hon'ble Supreme Court. 5.11 I find that in the appellant's case, the AO did precious little to bring on record any affirmative evidence which proved that issue of shares was not genuine. On the contrary; the materials on record showed that the assessee had furnished documents requisitioned which established that each company had subscribed to the equity shares of the assessee. The A/R brought to my attention judgments of the Delhi High Court wherein the issue concerning the applicability of Section 68 in the contextof receipt of share application monies was judicially considered. The relevant decisions are in the cases of CIT Vs Gangeshwari Metal (P) Ltd in ITA No. 597 of 2012 dated 21.01.2012 and CIT Vs Kamdhenu Steel 81 Alloys Limited (361ITR 220), CIT Vs Vrindavan Farms (P) Ltd [ITA No. 71 of 2015]. In these decisions the earlier judgment in the case of Nova Promoters & Finlease Pvt Ltd (342 ITR 169) was considered and the Hon'ble Delhi High Court refused to follow the ratio laid down in the earlier judgment. On the contrary the Hon'ble Delhi High Court took note of the fact that in the later cases each share applicant was regul....
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....sessing Officer, therefore, concluded that nature and source of such money was questionable and evidence produced was unsatisfactory. Consequently, the Assessing Officer invoked the provisions under Section 68/69 of the Income Tax Act and made addition of Rs.24,00,000/-. On appeal the Learned CIT (A) by following the decision of the Supreme Court in the case of Cl. T. vs. M/s. Lovely Exports Pvt. Ltd., reported in (2008) 216 CTR 195 allowed the appeal by holding -that share capitalpremium of Rs. 24,00,000/ received from the investors was not liable to be treated under Section 68 as unexplained credits and it should not be taxed in the hands of the appellant company. As indicated earlier, the Tribunal below dismissed the appeal filed by the Revenue. After hearing the learned counsel for the appellant and after going through the decision of the Supreme Court in the case of Cl. T. vs. M/s. Lovely Exports Pvt. Ltd. [supra], we are at one with the Tribunal below that the point involved in this appeal is covered by the said Supreme Court decision in favour of the assessee and thus, no substantial question of law is involved in this appeal. The appeal is devoid ....
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....d. 19. In appeal, Tribunal noted that before the Assessing Officer, assessee had submitted the following documents of the three creditors:- (a) PAN number of the companies; (b) Copies of Income-tax return filed by these three companies for assessment year 2010-11; (c) Confirmation Letter in respect of share application money paid by them; and (d) Copy of Bank Statement through which cheques were issued. 21. From the above, it is seen that identity of the creditors were not in doubt. Assessee had furnished PAN, copies of the income tax returns of the creditors as well as copy of bank accounts of the three creditors in which the share application money was deposited in order to prove genuineness of the transactions. In so far credit worthiness of the creditors were concerned, Tribunal recorded that bank accounts of the creditors showed that the creditors had funds to make payments for share application money and in this regard, resolutions were also passed by the Board of Directors of the three creditors. Though, assessee was not required to prove source of the source, nonetheless, Tribunal took the view that Assessing Officer had....
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....ly distinguishable and does not advance the case of the revenue. 6.18. We also find that the Hon'ble Apex Court recently in the case of Principal CIT vs Vaishnodevi Refoils & Solvex reported in (2018) 96 taxmann.com 469 (SC) wherein the SLP of the Revenue has been dismissed by the Hon'ble Apex Court. The brief facts were that the addition u/s 68 of the Act was made by the Assessing Officer in respect of capital contributed by the partner of the firm. The Hon'ble High Court noted that when the concerned partner had confirmed before the Assessing Officer about his fact of making capital contribution in the firm and that the said investment is also reflected in his individual books of accounts, then no addition could be made u/s 68 of the Act. The decision of Hon'ble Gujarat High Court is reported in (2018) 89 taxmann.com 80 (Guj HC). The SLP of the revenue against this judgment was dismissed by the Hon'ble Supreme Court. 6.19. To sum up, section 68 of the Act provides that ifany sum found credited in the year in respect of which the assessee fails to explain the nature and source shall be assessed as its income of the previous year in whichthesam....
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.... the high nature of the premium and certain features which appeared to be suspect, to determine that the amount had been routed from the assessee's account to the share applicants' account. As held concurrently by the Commissioner (Appeals) and the Tribunal, these conclusions were clearly baseless and false." 5.16 Identical view is noted to have been expressed by the Hon'ble Madhya Pradesh High Court in the case of GT vs. Chain House International (P) Ltd.( 98 taxmann.com 47). The relevant findings of the Hon'ble High Court are as follows: "52. Issuing the share at a premium was a commercial decision. It is the prerogative of the Board of Directors of a company to decide the premium amount and it is the wisdom of shareholder whether they want to subscribe the shares at such a premium or not. This was a mutual decision between both the companies. In day to day market, unless and until, the rates is fixed by any Govt. Authority or unless there is any restriction on the amount of share premium under any law, the price of the shares is decided on the mutual understanding of the parties concerned. 53. Once the genuineness, creditworthiness and identity....
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....igh premium without any justification therefore and has failed to produce the directors of the investor companies and therefore the verification required to be done could not be carried out. The ld DR while admitting that the evidences were produced before the authorities below comprising which proved identity of the parties and also the creditworthiness but the genuineness of the transactions remained unsubstantiated. Therefore, the order of Ld. CIT(A) is wrong and deserved to be reversed. 9. The Ld. A.R. on the other hand relied heavily on the appellate order passed by the ld CIT(A) and various case laws referred in the appellate order and took us through each and every details in respect of assessee as well as share investors as filed from page 58 to 705 of PB submitted that the assessee has duly proved identity and creditworthiness of the investors and genuineness of the transactions by filing necessary evidences qua the investors which comprised of share application forms and allotment of shares, bank statements, IT acknowledgments, audited financial statements, explanation qua the source of funds and also filing the details such as copies of bank statements, PAN cards, fin....
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....s. We observe from the records before us and also from the appellate order that the assessee has furnished all the details/evidences qua the share applicants furnishing the names and addresses, PAN cards, share application forms, share allotment advices, confirmations, audited financial statements and also proof of source of source by furnishing necessary documents of the third parties. We note that even the notices issued u/s 133(6) of the Act were duly complied with by the share applicant and they furnished all the evidences as called for by the AO which proved identity and creditworthiness of the investors and genuineness of the transactions as the source of source was also proved. Even the summons issued to the director of the assessee company was complied with by the personal appearance of Shri Arvind Agarwal before the AO. We also note that all these details were also filed during the reassessment proceedings which were completed by the order dated 30.09.2011 passed u/s 147/143(3) wherein the AO made the addition on the ground that the premium is very high and the assessee has failed to produce directors of the investor companies. In our opinion, the basis of making addition ....