TMI Blog2018 (4) TMI 875X X X X Extracts X X X X X X X X Extracts X X X X ..... ct of the matter of investments in preference shares and sales thereof into account and only after noticing the infirmities and defects in the investigation/enquiry by the AO, a conclusion was reached by the Ld. CIT(A) in the appellate order which is correct and deserved to be upheld. - Decided against revenue - ITA No.7058/M/2012 - - - Dated:- 16-4-2018 - SHRI C.N. PRASAD, JUDICIAL MEMBER AND SHRI RAJESH KUMAR, ACCOUNTANT MEMBER For The Assessee : Shri Chetan A. Karia, A.R. For The Revenue : Shri M.C. Omi Ningshen, D.R. ORDER Per Rajesh Kumar, Accountant Member: The present appeal has been preferred by the assessee against the order dated 12.07.2012 of the Commissioner of Income Tax (Appeals) [hereinafter referred to as the CIT(A)] relevant to assessment year 2006-07. 2. The following grounds raised by the Revenue: 1. On the facts and in the circumstances of the case and in law, the Hon'ble ClT(A) has erred in deleting the addition of ₹ 50,00,00/- u/s 68 of the IT Act, being disal lowance of unexplained cash credit. 2. On the facts and in the circumstances of the case and in law, the Hon'ble CIT(A) has erred in hol ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... g a search action u/s 132 of the Act on Shri Giriraj Vijayvargia on 26.04.07 who is a member of called Ankur Group and during the course of search it was found that Shri Giriraj Vijayvargia has given entries in the form of gifts and share application money to various entities which he admitted in the sworn statement under section 132(4) of the Act admitting that he was not having any source for gifts or share application money but the beneficiaries paid him the cash and he after deducting his commission ranging from 2% to 3% issued cheques and as per the statement of Shri Giriraj Vijayvargia the assessee was one of the beneficiaries of the said entities. Finally, the AO, after considering the contentions of the assessee, made the addition of ₹ 50 lakhs under section 68 of the Act on the ground that Shri Giriraj Vijayvargia has denied making such investments and directors of the company could not explain the valuation of the shares and how the share transfer forms were dated 20.10.05 and 04.10.05 and the payment was received on 25/26.11.05. The assessment was framed vide order dated 22.12.11 under section 143(3) read with section 147 of the Act. In the appellate proceedings ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ney in cash in lieu of the cheque issued, is not substantiated by documentary evidence. The inquiry officer, who has recorded the statement of Shri Giriraj has also not asked for any such evidence which can substantiate his claim of the transaction being only an accommodation entry. The AO during the course of assessment proceedings has also not brought on record any such evidence to prove that the money in cash was handed over to Shri Giriraj Vijayvargia in lieu of issue of cheque of ₹ 50 lakhs and further there is no evidence placed on record that the -commission of 2-3% was paid to turn for arranging this transaction. If the AO has to refute any contention of the appel lant then he has to place some evidence on record and on the basis of such evidence he has to prove his hypothesis of the transaction being the sham or bogus. The A.O. failed to place such an evidence on record and proceed to conclude that the transaction is sham, merely on the basis of the statement of Shri Giriraj, without questioning the authenticity of such a statement. 4.6. On the contrary there is evidence on record that Shri Giriraj Vijayvargia had issued the cheque of ₹ 50 Iakhs for purch ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... count before i s sue of the cheque in favour of the above companies. The evidence need to be placed on record regarding the channels of cash money from the appellant company to Shri Giriraj and how the same was utilized for the purchase of shares in question. No such investigations have been carried out by the AO. In the absence of any such investigations and placing on record any cor roborative evidence to substantiate the statement of Shr i Gririaj, it is dif f icult to accept the conclusions arrived by the AO regarding the sham nature of the transaction. It may be pointed out here that it is an establ ished proposition of law that apparent has to be held as real unless proved otherwise and onus squarely lies upon the person who claims otherwise and to bring the evidence on record to prove so. The documentary evidences like recording of the transaction by the above companies in their books of accounts, copy of the board resolution passed in the Board meeting of the above two companies dated: 04/12/2005 and 20/12/2005 confi rming the transfer of the 9900 and 800 shares of the above companies in the name of Shri Gir iraj Vi jayvargia, receipt of money in the account of the appellan ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... which were redeemable after 18 years but not before 20 years at a face value of ₹ 10/- along with a premium of ₹ 1000/- . The scheme was so formulated in order to avoid the substantial stamp duty. According to the AR, had the shares been issued at a face value of ₹ 1010/-, instead of ₹ 10/- with a premium of ₹ 1000/-, the stamp duty would have been payable on ₹ 1010/- and not ₹ 10/- as paid by these companies. I t is contended by the AR that at the time of redemption of these shares, Shri Giri raj Vi jayvargia would receive ₹ 100 Iakhs as against the investment of ₹ 50 lakhs. Such an investment is a profi table venture and a prudent businessman l ike decision. 4.10. I agree with the above arguments of the AR of the appellant that the above investment was a prof itable venture as outl ined above. For an investment of ₹ 50 lakhs, Shr i Giriraj Vi jayvargia would be getting ₹ 100 lakhs at the time of the redemption of the shares which is clear ly a prof itable venture and a prudent decision as a wise businessman and this disapprove the argument of the AO that this is not a prof itable venture and no prudent busine ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... hs u/s. 68 treating the money as unexplained is hereby deleted. 5. The Ld. D.R. vehemently submitted before us that order passed by the Ld. CIT(A) is fraught with several infirmities and defects. The Ld. D.R. argued that the Ld. CIT(A) has not given his findings as to how the decision based upon the admission of Shri Giriraj Vijayvargia during the search operation under section 132(4) of the Act is not correct in which he has clearly admitted that the assessee is a beneficiary of the sham transactions not investing any money but only after taking cash from the parties including assessee, cheques were issued after deducting commission from 2-3%. The Ld. D.R. contended that there was no justification for issuing preference shares of the face value of ₹ 10 at 50 times premium when the health of the companies issuing preference shares was not very sound and the assessee has very meager turnover and profit during the year. The Ld. D.R. finally prayed before the Bench that in view of these facts the order of Ld. CIT(A) should be reversed. 6. The Ld. A.R., on the other hand, argued that this is a genuine transaction which the assessee entered into in F.Y. 2003-04. The asses ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... perused the material on record. The undisputed facts are that the assessee purchased the preference shares of two concerns namely M/s. Sharda Cornpro Pvt. Ltd. and M/s. Silvershine Impex India Pvt. Ltd. for a consideration of ₹ 54,90,625/- which were shown in the balance sheet of the assessee. These shares were redeemable after a period of 18 years at a premium and the redemption value was one crore. The assessee sold these shares to Shri Giriraj Vijayvargia for a consideration of ₹ 50 lakhs, thus, incurred loss and duly shown the said transaction in the return of income filed on 27.06.06. Following a search action in the case of Shri Giriraj Vijayvargia, his statement was recorded under section 132(4) of the Act in which he admitted that the assessee was a beneficiary of entries which he has provided by accepting cash from the assessee and issuing cheque without making any reinvestment. The AO on the basis of said statement reopened the case of the assessee and made addition under section 68 of the Act on three points namely; i) Statement of Shri Giriraj Vijayvargia that he provided accommodation entries ii) No valid explanation as regards shares issued at a ..... X X X X Extracts X X X X X X X X Extracts X X X X
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