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2019 (5) TMI 1855 - AT - Income TaxAddition u/s 68 - Bogus subscription of shares along with premium - assessee argued acquiring shares of certain companies from certain shareholders without paying any cash consideration and instead the consideration was settled through issuance of shares to the respective parties - HELD THAT:- AO had erroneously invoked the provisions of section 68 of the Act to the facts of the instant case, which, in our considered opinion, are not at all applicable herein. This is a simple case of acquiring shares of certain companies from certain shareholders without paying any cash consideration and instead the consideration was settled through issuance of shares to the respective parties. Hence, we hold that provision of section 68 of the Act are not applicable in the instant case. It is a case of swapping of shares. The shares were allotted for consideration other than cash. This is kind of a barter transaction, that is, shares were issued by the assessee company to share subscribing companies, and these share subscribing companies, paid the consideration by way of paying equity shares. From journal entry, one can conclude that effect of this journal entry would be that investments in shares will be debited and the share capital and premium will be credited. The result of this journal entry clearly shows that there is no cash credit in the books of accounts i.e. there is no any sum crediting in the year under consideration and it is kind of a barter transaction, where one thing is being exchanged with other thing, hence the provisions of section 68 do not apply. A.O. has mechanically proceeded to make the addition without even appreciating whether it was a fit case for application of section 68. Moreover, the shares in the said 4 companies taken in the books of the assessee in exchange for share allotted to Gajvani Merchandize Pvt. Ltd. do provide the nature and source of the amounts of share capital allotted to Gajvani Merchandise Pvt. Ltd. In the present case, the additions have been made at the ends of the Gajvani Merchandise Pvt. Ltd. and 4 other private companies in respect of the shares raised in the said 5 companies. If addition is required to be made that can be only in the hands of the said 5 companies as have been done u/s 68 in the said companies. As regards, the assessee company there is no case of application of section 68, once it has been demonstrated by the assessee that it did not receive money and that shares were received against the allotment of shares. As application of section 68 is not correct, hence the A.O.’s action, therefore cannot be sustained. AO had erroneously invoked the provisions of section 68 of the Act, to the facts of the assessee`s case, which, in our considered opinion, are not at all applicable herein - Decided against revenue.
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