TaxTMI 
TaxTMI 
2026 (9) TMI 780
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....the shareholders and the genuineness of the share capital/share premium transactions." 2. "Whether on the facts and in the circumstances of the case and in law, the CIT(A) erred in not appreciating the fact that that mere filing of primary documents such as PAN, ITRs, and demat statements does not discharge the assessee's onus under Section 68 of the Act, in view of binding decisions of Hon'ble Supreme Court in the case of PCIT v. NRA Iron & Steel Pvt. Ltd." 3. "Whether on the facts and in the circumstances of the case and in law, the Ld. CIT(A) has placed undue reliance on SEBI's finding and disregarded the AO's observation of circumstantial and financial irregularities, which justify an addition under the Act. This reliance neglects the fact that SEBI's scope does not extend to identifying undisclosed income or assessing tax liabilities under the Income Tax Act." 4. "Whether on the facts and in the circumstances of the case and in law, the Ld. CIT(A) erred in concluding that approvals of BSE/NSDL/CDSL establish genuineness of the share capital, without appreciating that such approvals do not verify the source of funds of the sharehol....
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....ts of the case as culled out from the records are that assessee is a company in which the public are substantially interested and is listed on the Bombay Stock Exchange (BSE). During the year under consideration, assessee filed its return of income on 30.06.2013, reporting total income at Rs. 5,22,060/-. During the same year, assessee made an allotment of equity shares, as under: No. of shares allotted 62,80,000 shares No. of shareholders 43 share holders Share capital received Rs. 62,80,000/- Share capital per share Re. 1/- per share Share premium received Rs. 13,81,60,000/- Share premium per share Rs. 22/- per share Prevailing market price in BSE Rs. 44.10 per share Listing in Stock Exchange Bombay Stock Exchange 5.1. Ld. Assessing Officer reopened the completed assessment by issuing notice u/s 148 on 31.03.2021, alleging that the entire share premium of Rs. 13,81,60,000/- received by assessee was excessive and had led to escapement of income. In response, assessee e-filed a return of income on 31.05.2021, reporting the same total income at Rs. 5,22,060/- and requested ld. Assessing Officer to provide a copy of the recorded reaso....
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....anjay V Parmar Rs. 57,50,000 1) PAN/A.O Details 2) I.T.Ack Receipt 3) D-Mat Statement / Client Master of Share Holder 1) Share Application Form 2) Share Allotment Letter 3) Own Bank Statement 4) D-mat Statement 5) Reply To Notice u/s 133(6) 6) Reply To Notice u/s 131 7) Statement U/s 131 1) I.T.Ack Receipt 2) Bank Statement 3) D-mat Statement 1.1 - 1.22 2 Vinod Goenka HUF Rs. 46,00,000 1) PAN/A.O Details 2) I.T.Ack Receipt 1) Share Application Form 2) Share Allotment Letter 3) Own Bank Statement 4) Reply To Notice u/s 133(6)/131 1) I.T.Ack Receipt 2.1 - 2.7 3 Rashmi Vinay Bhatt Rs. 29,90,000/- 1) PAN/A.O Details 2) I.T.Ack Receipt 3) D-Mat Statement / Client Master of Share Holder 1) Share Application Form 2) Share Allotment Letter 3) Own Bank Statement 4) D-mat Statement 5) Reply To Notice u/s 133(6)/131 1) I.T.Ack Receipt 2) Balance Sheet 3) D-mat Statement Allowed by Ld. AO 4 Amardeep Kadam Rs. 92,00,000 1) PAN/A.O Details 2) I.T.Ack Receipt 1) Share Application Form 2) Share Allotment Letter 3) O....
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....D-mat Statement 11.1 - 11.12 12 Govind Patodia Rs. 23,00,000 1) PAN/A.O Details 2) I.T.Ack Receipt 3) D-Mat Statement / Client Master of Share Holder 1) Share Application Form 2) Share Allotment Letter 3) Own Bank Statement 4) D-mat Statement 5) Reply To Notice u/s 133(6) 1) I.T.Ack Receipt 2) D-mat Statement 12.1 - 12.11 13 Abhishek Rao Rs. 23,00,000 1) PAN/A.O Details 2) I.T.Ack Receipt 3) D-Mat Statement / Client Master of Share Holder 1) Share Application Form 2) Share Allotment Letter 3) Own Bank Statement 1) I.T.Ack Receipt 13.1 - 13.6 14 Varsha Patodia Rs. 23,00,000 1) PAN/A.O Details 2) I.T.Ack Receipt 3) D-Mat Statement / Client Master of Share Holder 1) Share Application Form 2) Share Allotment Letter 3) Own Bank Statement 4) D-mat Statement 5) Reply To Notice u/s 133(6) 1) I.T.Ack Receipt 2) D-mat Statement 14.1 - 14.11 15 Akash Didwania Rs. 46,00,000 1) PAN/A.O Details 2) I.T.Ack Receipt 3) D-Mat Statement / Client Master of Share Holder 1) Share Application Form 2) Share Allotment....
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.... 2) I.T.Ack Receipt 3) D-Mat Statement / Client Master of Share Holder 1) Share Application Form 2) Share Allotment Letter 3) Own Bank Statement 1) I.T.Ack Receipt 24.1 - 24.7 25 Rasikbhai Ratnabhai Dhameliya Rs. 11,50,000 1) PAN/A.O Details 2) I.T.Ack Receipt 1) Share Application Form 2) Share Allotment Letter 3) Own Bank Statement 1) I.T.Ack Receipt 25.1 - 25.5 26 Sanjay Agarwal Rs. 46,00,000 1) PAN/A.O Details 2) I.T.Ack Receipt 3) D-Mat Statement / Client Master of Share Holder 1) Share Application Form 2) Share Allotment Letter 3) Own Bank Statement 1) I.T.Ack Receipt 26.1 - 26.7 27 Hansrajbhai Mohanbhai Virani Rs. 23,00,000 1) PAN/A.O Details 2) I.T.Ack Receipt 3) D-Mat Statement / Client Master of Share Holder 1) Share Application Form 2) Share Allotment Letter 3) Own Bank Statement 1) I.T.Ack Receipt 27.1 - 27.7 28 Mahesh P Vaghani Rs. 46,00,000 1) PAN/A.O Details 2) I.T.Ack Receipt 3) D-Mat Statement / Client Master of Share Holder 1) Share Application Form 2) Share Allotment Letter 3) Own Bank Statement ....
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....tatement / Client Master of Share Holder 1) Share Application Form 2) Share Allotment Letter 3) Own Bank Statement 1) I.T.Ack Receipt Allowed by Ld. AO 37 Arpit Tibrewala Rs. 23,00,000 1) PAN/A.O Details 2) D-Mat Statement / Client Master of Share Holder 1) Share Application Form 2) Share Allotment Letter 3) Own Bank Statement 4) D-mat Statement 5) Reply To Notice u/s 133(6) 1) D-mat Statement 37.1 - 37.9 38 Kalawati Ramlakhan Singh Rs. 23,00,000 1) PAN/A.O Details 2) I.T.Ack Receipt 3) D-Mat Statement / Client Master of Share Holder 1) Share Application Form 2) Share Allotment Letter 3) Own Bank Statement 4) D-mat Statement 5) Reply To Notice u/s 133(6)/131 1) I.T.Ack Receipt 2) D-mat Statement 38.1 - 38.10 39 Dharmendra J Shah Rs. 11,50,000 1) PAN/A.O Details 2) I.T.Ack Receipt 3) D-Mat Statement / Client Master of Share Holder 1) Share Application Form 2) Share Allotment Letter 3) Own Bank Statement 4) D-mat Statement 5) Reply To Notice u/s 133(6)/131 1) I.T.Ack Receipt 2) Balance Sheet 3) Bank Statement 4) D-mat....
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.... shares on 04.12.2012; 8) Certificates of NSDL and CSDL, crediting the shares to D-mat account of respective share-holders on 12.12.2012; 9) Information Memorandum dated 29.08.2012; 10) Notice of Annual General Meeting dated 28.09.2012, proposing to issue the shares; 11) Special Resolution dated 28.09.2012 passed in Annual General Meeting filed before BSE and ROC for allotment of shares; 12) Securities & Exchange Board of India (SEBI) Adjudication Order dated 30.07.2021; 13) Documents of all the share-holders, already tabulated above; 5.4. Despite detailed submissions made by the assessee explaining its case, supported by corroborative documentary evidence, ld. AO proposed to make the addition of Rs.14,44,40,000 under section 68, against which assessee resubmitted its reply that 1st proviso to Sec.68 shall not apply as the shares of assessee are listed on BSE and accordingly, assessee is a company in which public are substantially interested and therefore, addition proposed u/s 68 cannot be made solely for non-justification of source of funds of shareholders. It further submitted that entire shares were credited directly in D....
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....e notice 25.12.2023, 19.01.2024 & 07.02.2024 Replies filed by the assessee 16.01.2024, 03.02.2024, 04.03.2024 & 15.03.2024 Reassessment order u/s. 143(3) r.w.s.147 (impugned order) [Addition u/s 68 of Rs. 10,92,50,000/-] 28.03.2024 6. Aggrieved, assessee went in appeal before the ld. CIT(A). In 1st appeal, ld. CIT(A) carefully analyzed the documents filed by the assessee and furnished by share-holders u/s 133(6) and held that the assessee had proven the identity and credit-worthiness of share-holders and genuineness of share capital and premium and deleted the entire addition made in assessment u/s. 68 of Rs. 10,92,50,000/-. Ld. CIT(A) held that assessee had filed the PAN, I.T. acknowledgement receipt, Client master data, D-mat account of shareholders, share application forms, letter of allotment of shares, Special resolution filed before ROC, replies u/s. 133(6) of shareholders, I.T returns, balance sheet and bank statements of shareholders, which establishes the identity and creditworthiness of shareholders and genuineness of share capital and premium. He took cognizance of exhaustive documents with explanation placed on record. 6.1. Further, he noted that as....
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....planation in the opinion of the Assessing Officer aforesaid has been found to be satisfactory. Provided further, that nothing contained in the first proviso shall apply if the person, in whose name the sum referred to therein is recorded, is a venture capital fund or a venture capital company as referred to in clause (23FB) of section 10." 7.1. The first proviso provides that where the assessee company is not a company in which the public are substantially interested, the proviso would apply and it would need to explain the source of source. In other words, the said proviso is not applicable to the companies where public is substantially interested. This proviso casts an additional responsibility/onus on the assessee not only to explain the source in its hands, but also in the hands of the resident shareholders. For this additional responsibility/onus, the proviso carves out an exception for companies in which public is substantially interested, that is, public listed companies. It can thus, be said that with this proviso, the already existing ingredients of section 68, that is, proving identity, creditworthiness and genuineness of the transaction is not done away with,....
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....tion which has not been considered by ld. Assessing Officer in its proper perspective. According to him, the same amount of premium, that is Rs. 22/- per share, was charged from all the shareholders without discrimination. Ld. Assessing Officer accepted receipt of share premium and capital from 9 out of the total 43 shareholders, all of whom had contributed at the same rate of Rs. 22/- per share. Thus, ld. Assessing Officer was not justified in partially accepting and partially rejecting the share premium received from the same class of shareholders. 9. We have heard the rival contentions and perused the material on record. We have also given our thoughtful consideration on the submissions made before us as well as to the orders of the authorities below. Admittedly, the factual position emanating from the records is that assessee has furnished all the relevant details, explanations supported by corroborative documentary evidence, all of which is placed on record. These details are already extracted in the above paragraph by way of tabulation. List of documents furnished by the assessee for each of the shareholders as well as explaining its case is also listed above. It is also a....
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....in the case of Pranav foundations Ltd. [2015] 229 Taxman 58 (Mad) wherein it was held as under: "In view of the fact that all the four parties, who are subscribers of the shares, are limited companies and enquiries were made and received from the four companies and all the companies accepted their investment. Thus, the assessee has categorically established the nature and source of the said sum and discharged the onus that lies on it in terms of section 68. When the nature and source of the amount so invested is known, it cannot be said to undisclosed income. Therefore, the addition of such subscriptions as unexplained credit under section 68 is unwarranted." 9.3. Further, reliance is placed on the decision of Hon'ble Supreme Court in the case of CIT v. Orissa Corporation (P) Ltd. [1986] 159 ITR 78 (SC) wherein it was held as under: "In this case the assessee had given the names and addresses of the alleged creditors. It was in the knowledge of the revenue that the said creditors were the income-tax assessee's. Their index number was in the file of the revenue. The revenue, apart from issuing notices under section 131 at the instance of the assessee, did not pu....
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....e assessee. Once the assessee has submitted the documents relating to identity, genuineness of the transaction, and creditworthiness, then the AO must conduct an inquiry, and call for more details before invoking Section 68. If the Assessee is not able to provide a satisfactory explanation of the nature and source, of the investments made, it is open to the Revenue to hold that it is the income of the assessee, and there would be no further burden on the revenue to show that the income is from any particular source." 9.6. Further, in para 9 of the said decision, Hon'ble Supreme Court has observed as under: "9. The Judgments cited hold that the Assessing Officer ought to conduct an independent enquiry to verify the genuineness of the credit entries. In the present case, the Assessing Officer made an independent and detailed enquiry, including survey of the so-called investor companies from Mumbai, Kolkata and Guwahati to verify the credit-worthiness of the parties, the source of funds invested, and the genuineness of the transactions. The field reports revealed that the share-holders were either non-existent, or lacked creditworthiness." 9.7. Thereafter, ....
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....entral Circle 6(3), AY 2010-11, order dated 09.07.2024, taken a consistent view on an addition u/s 68 towards share capital and share premium raised from 18 share subscribing companies, holding that identity, creditworthiness and genuineness stand established where the subscribers are income-tax assessee's, have responded to notices u/s 131/133(6) and have furnished bank statements and financial statements evidencing their creditworthiness and that ld. Assessing Officer cannot sustain an addition without pointing to any specific defect or deficiency in such material. That order drew upon CIT v. Orchid Industries Pvt. Ltd. [2017] 397 ITR 136 (Bom) and PCIT v. Paradise Inland Shipping Pvt. Ltd. [2017] 84 taxmann.com 58 (Bom), both of the Hon'ble jurisdictional High Court, for the proposition that mere non-appearance of directors, once documentary evidence establishing the subscribers' existence has been furnished, shifts the burden to the Revenue. The facts of the present case, involving 43 shareholders of whom the identity and genuineness of all and the creditworthiness of 9, already stand accepted by ld. Assessing Officer himself, fall squarely within this consistent approach and w....
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....een added is under section 68, towards share capital and share premium received from 34 out of 43 shareholders, since assessee could not establish their creditworthiness. This addition rests on no new or tangible material, but on verification of the balance sheet filed by assessee along with its original return of income. Further, assessee is a public listed company in which the public are substantially interested, so that section 56(2)(vii)(b) does not apply to it and there is accordingly no occasion for the receipt of share premium to lead to escapement of income. Thus, on every count, the allegation of escapement of income on account of receipt of share premium fails and the initiation of reassessment proceedings and the reassessment order passed thereafter, are bad in law liable to be quashed ab initio. 14. On these submissions being put to ld. CIT DR, no effective rebuttal was placed on record, save reliance on the orders of the authorities below. 15. We have heard both the parties and perused the material on record. Giving thoughtful consideration to the submissions made before us, it is noted that the reasons to believe recorded by ld. Assessing Officer are on account ....