2017 (9) TMI 1613
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....ficer took the view that the share application money of Rs. 45 lakhs received by the assessee is assessable to tax and accordingly reopened the assessment by issuing notice u/s. 148 of the Act. Various evidences were furnished by the assessee were not accepted by the Assessing Officer and accordingly he added Rs. 45 lakhs to the total income of the assessee u/s. 68 of the Act. The learned CIT(A) deleted the same and hence the Revenue has filed this appeal before us. 3. It is pertinent to note that the Assessing Officer has assessed a sum of ` 45 lakhs, but according to the assessee it has received Rs. 40 lakhs only from the companies belonging to Shri Praveen Kumar Jain group as detailed below:- 1. Java India Impex Ltd - Rs.15.00 lakhs 2. Kush Hindustan Entertainment - Rs.10.00 lakhs 3. Lexus Infotech Ltd - Rs. 5.00 lakhs 4. Vanguard Jewels Ltd - Rs. 5.00 lakhs 5. Yash V Jewels Ltd - Rs. 5.00 lakhs Total Rs.40.00 lakhs 4. Learned Departmental Representative submitted that the impugned addition has been made by the Assessing Officer on the basis of admission made by Shri Praveen Kumar Jain in his sworn statement. Though the assessee has furnished d....
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....onfirmation letters are placed at page No. 128 to 135 of the paper book. These confirmation letters were filed before the learned CIT(A). Learned AR further submitted that the learned CIT(A) has followed decision rendered by Hon'ble Jurisdictional Bombay High Court in the case of Gagandeep Infrastructure (P) Ltd. (2017) 394 ITR 680 in deciding the issue in favour of the assessee. Hon'ble Bombay High Court has also held in the case of Principal CIT Vs. Paradise Inland Shipping (P) Ltd. (84 taxamnn.com 58) that once the assessee had produced documentary evidence to establish the existence of share applicant companies, burden would shift on the Revenue to establish their cases. He further submitted that the identical addition made in the case of M/s. SDB Estate Private Limited (ITA No. 584/Mum/2015) has been deleted by the Mumbai Tribunal vide its order dated 15.4.2015. 6. I have heard the rival contentions and perused the record. I noticed that the learned CIT(A) ahs deleted the addition by making following observations :- 6.3.1. I have considered the entire facts and circumstances of the case and have carefully considered the finding of AO, rival submission of the appellan....
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.... evidence which has been brought on record by the AO. No nexus is established as to circulating of funds or that cash was paid by the appellant company to obtain the cheques for share application. 6.3.5. The appellant has provided the identification of the parties. The same is supported by the income tax returns filed by the respective parties. The allegation of the AO that PAN is issued without verification of the applicant is not correct. The AO could have verified the jurisdiction of the respective parties and could have made enquiries with the respective AO's about the said five parties from the PAN available with him. 6.3.6. The appellant has submitted balance sheet and details of the said five parties to prove credentials and genuineness of the transactions. The three ingredients viz. identity, credentials and genuineness cannot be doubted. 6.3.7. The AO has heavily relied on information received from DDIT (Inv), Mumbai and that of the statement of Mr. Pravin Kumar Jain. The AO has not carried out independent enquiries to prove the case. On reading from the assessment order there is nothing corroborative brought on record to prove that the share application money recei....
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.... ITA No. 584/Mum/2015 on similar ground it has been decided that:- "In view of the above stated legal position and in the light of reliable evidences brought on record by assessee to substantiate identity, genuineness and creditworthiness of shareholders, which have not been controverted by the Revenue, the additions made solely on the basis of general statement of Shri Mukesh Chokshi cannot be held to be justified and the same are accordingly ordered to be deleted" 6.3.8. As regards issue involving addition of share premium amount alongwith share application money/share capital money, the jurisdictional ITAT, Mumbai has decided in many cases that it cannot be added. Further, the Honble High court has also decided the issue that the addition of share premium amount cannot be made in earlier years prior to amendment in the relevant provisions in the I.T.Act, 1961. In this regard, reference is made and reliance is placed 'to the various Judicial Pronouncements on the issue related to additions for share premium amount included in the share application money/share capital money. These are as under: (i) In the case of M/s. Vodafone India Services Pvt. Ltd vs. Addl. CIT reported....
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....T decided that "We have carefully perused the orders of the lower authorities. In our considered view, the issue of shares at premium is always a commercial decision which does not require any justification. Further the premium is a capital receipt which has to be dealt with in accordance with Sec. 78 of the Companies Act, 1956. Further, the company is not required to prove the genuineness, purpose or justification for charging premium of shares, share premium by its very nature in a capital receipts and is not income for its ordinary sense....... The entire dispute revolves around the fact that the assessee has charged a premium of Rs. 190/- per share. No doubt a non-est company or a zero balance sheet company asking for Rs. I90/- per share defies all commercial prudence but at the same time we cannot ignore the fact that it is a prerogative of the Board of Directors of the company to decide the premium amount and it is the wisdom of the share holders whether they want to subscribe to such a heavy premium. The Revenue authorities cannot question the charging of such huge premium without any bar from any legislated law of the land. The amendment has been brought in the Income Tax....
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....tment of shares had been done through banking channel and assessee had invested share premium in its three subsidiary companies, provisions of section 68 as suggested by revenue had also not applicable to instant case - field, yes.... No doubt a non est company or a zero balance company asking for a share premium of Rs. 490 per share defies all commercial prudence, but at the same time one cannot ignore the fact that it is a prerogative of the Board of Directors of a company to decide the premium amount and it is the wisdom of the shareholders whether they want to subscribe to such a very premium. The revenue authorities cannot question the charging of such of huge premium without any bar from any legislated law of the land." (v) In the case of CIT vs. Goa Sponge and Power Ltd reported in Appeal No. 16 of 2012, Hon'ble Bombay High Court decided that :- "Once the authorities have got all the details, including the name and addresses of the shareholders, their PAN/GIR number, so also the name of the Bank from which the alleged investors received money as share application, then, it cannot be termed as "bogus". The controversy is covered by the judgements rendered b y the Hon&#....
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.... not be a device of converting black money into white with the help of formation of an investment company, on the round that, even if it be assumed that the subscribers to the increased capital were not genuine, under no circumstances could the amount of share capital be regarded as undisclosed income, an appeal was taken by the Department to the Supreme Court. The Supreme Court dismissed the appeal holding that the Tribunal had come to a conclusion on facts and no interference was called for." (ix) In the case of CIT vs. Expo Globe India Ltd reported in 361 ITR 147, Hon'ble Delhi High Court decided that "It has been held by Hon'ble Supreme Court and various High Courts that no addition can be made on account of share application money once the names of the share applicants are given. In the instant case, identity of these persons are not or doubt and assessment particulars of all the persons are on record and there is no material to hold that creditworthiness of these persons are not established. The judgment of Hon'ble Supreme Court in the case of Lovely Export 216 CTR 195 and also the judgment of Hon'ble Delhi High Court in the case of CIT vs. Value Capital Se....
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.... of Rs. 45,00,000/- is deleted. 7. The assessing officer has made the impugned addition u/s 68 of the Act. Under the provisions of sec. 68 of the Act, the assessee is required to discharge initial burden of proof placed upon his shoulders, i.e., the assessee has to prove the identity of the creditor, the credit worthiness of the creditor and the genuineness of transactions. A perusal of documents filed before the tax authorities and also the observations made by Ld CIT(A) would show that the assessee has discharged the burden placed upon its shoulders. Once the assessee discharges its primary burden, then the burden to disprove the assessee's version would shift to the shoulders of the assessing officer. In the instant case, the assessing officer has simply relied upon the general statement given by Shri Praveen Kumar Jain. As contended by Ld A.R, it was not shown that the transactions of the assessee with the above said companies have been declared as accommodation entries. On the contrary, the assessee has furnished confirmation letters obtained from the share applicant companies before the Ld CIT(A), after the sworn statement was given by Shri Praveen Kumar Jain. In my consider....