TMI Blog2017 (9) TMI 1613X X X X Extracts X X X X X X X X Extracts X X X X ..... al burden of proof placed upon him u/s 68 of the Act, no addition could be made. It was further held that if the revenue’s case was that the share applicants are bogus shareholders, then it was for the revenue to proceed by reopening of assessments of such shareholders and assessing them to tax in accordance with the law and it would not entitle the revenue to add same in assessee’s hand. - Decided in favour of assessee - I.T.A. No. 3647/Mum/2017 (Assessment Year 2007-08) - - - Dated:- 21-9-2017 - Shri B.R. Baskaran, J. Assessee by Shri Sailesh Parmar Department by Shri Ram Tiwari ORDER The appeal filed by the Revenue is directed against the order dated 10.2.2017 passed by the learned CIT(A)-9, Mumbai and it pertains to A.Y. 2007-08. The Revenue is aggrieved by the decision of the learned CIT(A) in deletion the addition of ₹ 45 lakhs made u/s. 68 of the Act. 2. The assessee-company is engaged in the business of manufacture and sale of clothes. The Assessing Officer received information that the assesseecompany has received share application money to the tune of ₹ 45 lakhs from various companies belonging to Shri Praveen Kumar Jain group. The ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... urt in the case of Lovely Exports (P) Ltd. (Application No. 11993 of 2007 dated 11.1.2008). 5. On the contrary, learned AR submitted that the assessee has raised share capital of ₹ 90 lakhs during the instant year, which consists of share capital amount of ₹ 18 lakhs and share premium amount of ₹ 72 lakhs. Out of the amount of ₹ 90 lakhs; a sum of ₹ 40 lakhs only received as share capital from the companies belonging to Shri Praveen Kumar Jain and the remaining amounts were received from outsiders. He submitted that the AO has accepted the genuineness of the balance amount of ₹ 50.00 lakhs. He further submitted that the assessee has fully utilised entire capital for capital work-inprogress purposes. He submitted that the decision rendered by the Indore Bench of the ITAT in the case of Agrawal Coal Corporation (P) Ltd. (supra) would not apply to the facts of the present case, since in the case before the Indore Bench, the identity of share applicants were not proved. Learned AR submitted that the assessee, in the instant case, has discharged the initial burden placed upon it u/s. 68 of the Act by establishing the identity of share applicants, t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ere has been increase in capital work in progress reflected under the head fixed assets amounting to ₹ 1.07 crores. 6.3.2. Of the said sum of ₹ 90,00,000/-, the appellant has issued equity capital including premium amounting to ₹ 40,00,000/- to the above mentioned five parties. The AO has considered sum of ₹ 5,00,0001- received from Lexus Infotech Limited twice and hence, computed sum of ₹ 45,00,000/-. The correct amount received from above parties stands at ₹ 40,00,000/, The appellant company has issued equity shares and that no share application money is outstanding from the said five parties at the yearend as on 31-03-2007. 6.3.3. The appellant has submitted confirmation from the said five parties confirming the investments made along with copy of acknowledgement of return of income filed for the AY 2007-08, audited balance sheet, extracts of diretorship of the said five companies and copy of bank statements evidencing amount of share application received through banking channels. On going through the details submitted it is observed that all the five companies have filed their respective return of income and the balance sheet shows subs ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... areholders, whose names are given to Assessing Officer, then Department is free to proceed to reopen their individual assessments in accordance with law but this amount of share money cannot be regarded as undisclosed income under section 68 of assessee-company (ii) In the case of CIT vs. Creative World Telefilms Ltd. [2011](333 ITR 100)(Bombay) the court has held as under:- In the case in hand, it was not disputed that the assessee had given the details of name and address of the shareholder, their PAN/GIR number and had also -given the die que number, name of the bank. It was expected on the part of the Assessing Officer to make proper investigation and reach the shareholders. The Assessing Officer did nothing except issuing summons which were ultimately returned back with an endorsement not traceable'. 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 could not be faulted. No substantial question of l ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... value of the shares. In this case what is being sought to be taxed is capital not received from a non-resident i.e. premium allegedly not received an application of ALP. Therefore, absent express legislation, no amount received, accrued or arising on capital account transaction can be subjected to tax as Income. Court finds considerable substance in the Petitioner's case that neither the capital receipts received by the Petitioner on issue of equity shares to its holding company, a nonresident entity, nor the alleged short-fall between the so called fair market price of its equity shares and the issue price of the equity shares can be considered as income within the meaning of the expression as defined under the Act. (ii) The CBDT vide instructions No - 02/2015 dated 29/1/2015 directed the revenue not to file the SLP before Hon'ble to Supreme Court and directed Ld AOs to accept the High Court order. The relevant instructions is as under :- In reference to the above cited subject, I am directed to draw your attention to the decision of the High Court of Bombay in the case Of Vodafone India Services Pvt. Ltd for A.Y. 2009-10 (WP No.871/2014) = 2014-TH-19-HC-MUM-TP, wh ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... on and from A. Y. 201 Insofar as the year under consideration is consideration is concerned, the transaction has to be considered in the light of the provision of Sec. 68 of the Act. There is no dispute that the assessee has given details of names and addresses of the share holders, their PAN Nos, the bank details and the confirmatory letters... Considering all these undisputed facts, it can be safely concluded that the initial burden of proof as rested upon the assessee has been successfully discharged by the assessee. Even if it is held that excess premium has been charged, it does not become income as it is a capital receipt. The receipt is not in the revenue field. What is to be probed by the AO is whether the identity of the assessee is proved or not. In the case of share capital, if the identity is proved, no addition can be made u/s.68 of the Act. We draw support from the decision of the Hon'hle Supreme Court in the case of Lovely Exports Pvt Ltd. 317 ITR 218. We, therefore do not find any error or infirmity in the findings of the Ld CIT(A). Ground No.I is accordingly dismissed. (iv) In the case of Green Infra Ltd vs. ITO reported in 38 taxmann.com 253-ITAT) dated 23 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... on of law. (vi) In the case of CIT vs. Creative World Telefilms Ltd reported in 333 ITR 100. Hon'ble Bombay High Court decided that :- the Tribunal was pleased to follow the judgment of the apex Court in the case of CIT vs. Lovely Exports (P) Lid. (2008) 216 CTR (SC) 195: (2008) 6 DTR (SC) 308: (2009) 319 ITR 5 (St.) wherein the apex Court observed that if the share application money is received by the assessee-company from alleged bogus shareholders, whose names are given to the AG, then the Department can always proceed against them and if necessary reopen their individual assessments. In the case in hand, it is not disputed that the assessee had given the details of name and address of the shareholder, their PAiV/GIR number and had also given the cheque number, name of the bank. It was expected on the part of the AG to make proper investigation and reach the shareholders. The AG did nothing except issuing summons which were ultimately returned back with an endorsement not traceable . In our considered view, the AO ought to have found out their details through PAN cards, bank 'count details or from their bankers so as to reach the shareholders since all the rel ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... f SLP before Supreme Court of India and SLP has been dismissed by Supreme Court in both the cases. In view of above said facts of case and position of law, I hereby direct the AO to delete the addition of ₹ 69,75,000/-. (x) In the case of CIT v. Vacmet Packaging (India) Pvt Ltd reported in 88 CCH 065, Hon'ble Allahabad High Court decided that Held, assessee had filed documentary evidence to prove genuineness of share application money consisting of N share application forms; (ii) copies of bank accounts of share applicants; (iii) copies of income tax returns of share allottees; (iv)balance sheets; and (v) copies of share allotment certificates and of Board's resolution of the share applicants - Identity of applicants was established by production of copies of PAN cards and registration certificate with the Registrar of Companies - Financial capacity was also proved by filing of copies of the bank accounts from where the share application money was transferred through banking channels to the assessee- Assessee had discharged onus placed upon him by 68- Concurrent finding offacts also rendered by CIT(A) and tribunal in this regard - No substantial question of law ..... X X X X Extracts X X X X X X X X Extracts X X X X
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