TMI Blog2018 (11) TMI 1131X X X X Extracts X X X X X X X X Extracts X X X X ..... nt received from the very same shareholders as bogus - all the three necessary ingredients of section 68 had been duly complied with by the assessee with proper documentary evidences Only grievance of the AO was that the assessee could not produce the directors of the share subscribing companies In our considered opinion, for this reason alone, there cannot be any addition u/s 68 of the Act as held by the Hon ble Supreme Court in the case of CIT vs. Orissa Corporation Pvt. Ltd.[1986 (3) TMI 3 - SUPREME COURT] - Decided in favour of assessee. - I.T.A No. 2270/Kol/2016, I.T.A No. 2273/Kol/2016 - - - Dated:- 26-10-2018 - Shri A T Varkey And Shri M. Balaganesh, JJ. For the Appellant : Shri Altaf Hussain, Addl. CIT Sr. DR For the Respondent : Shri Manish Tiwari, FCA ORDER M.Balaganesh, 1. These appeals by the Assessee arise out of the common order of the Learned Commissioner of Income Tax(Appeals)-4, Kolkata [in short the ld CIT(A)] in Appeal Nos. CIT(A)/Kolkata-4/10387 10393/15-16 dated 29.09.2016 against the order passed by the ITO, Ward-10(4) , Kolkata [ in short the ld AO] under section 143(3) of the Income Tax Act, 1961 (in short the Act ) date ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... istered office of some of the companies were same with common directors. Accordingly, the ld. AO alleged on the connivance of the assessee with the shareholder companies. The summons u/s 131 of the Act was issued to the directors of the assessee company to examine the receipt of premium and the assessee was also directed to produce the directors of the share holder companies for examination of identity, genuineness of transactions and creditworthiness of the investors. The ld. AO observed that the summons issued u/s 131 of the Act remained partially complied and the assessee did not produce the directors of the investor companies before the ld AO. For non-compliance of the summons u/s 131 of the Act in part, by not producing the directors of the share holder companies, the ld. AO concluded that the share premium raised by the assessee in the sum of ₹ 288,92,100/- as unexplained cash credit u/s 68 of the Act. The ld. AO however accepted the receipt of share capital in the sum of ₹ 57,900/- from the very same shareholders as genuine in the assessment. 3.1. The assessee pleaded before the ld. CIT(A) that it had furnished various documentary evidences substantiating the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s contentions. The assessee specifically argued before the Ld. CIT(A) that the allotment of shares at a premium cannot be considered as sham or income of the assessee. It was pleaded at a preliminary level that the receipt of share capital and share premium is on capital account and that the same cannot be subject to tax as income. Specific submissions were also made in the context of introduction of section 56(2)(viib) inserted by the Finance Act, 2012 with effect from 01.04.2013 which reads as under: [(viib) Where a company, not being a company in which the public are substantially interested, receives, in any previous year, from any person being a resident, any consideration for issue of shares that exceeds the face value of such shares, the aggregate consideration received for such shares as exceeds the fair market value of the shares: Provided that this clause shall not apply where the consideration for issue of shares is received- (i) by a venture capital undertaking from a venture capital company or a venture capital fund; or (ii) by a company from a class or classes of persons as may be notified by the Central Government in this behalf. Explanation.-For the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e duly and fully reflected in their audited books of accounts as well as in their income tax returns which are part of the paper book. The notices u/s 133(6) of the Act issued by the ld. AO to each of the share subscribers also stood duly complied with. He held that each of the share applicants maintained bank statement which are part of the paper book, from where, it is evident that all the transactions were routed through proper banking channels and duly reflected in their respective books of accounts which proves the genuineness of the transaction beyond doubt. He also observed that all the share applicants explained their respective source of funds in their replies to 133(6) notice directly before the ld. AO and that the net worth of each of the share subscribers are far higher than the amount of investments made by them in the assessee company, which clearly proved the creditworthiness of the share subscribers to make investments in the assessee company. He held that the very fact that notices u/s 133(6) were duly served on the respective share subscribers and that they were duly replied with by them directly before the ld. AO, proves their identity beyond doubt. Hence, he hel ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... is no reason for the ld. AO to doubt the share premium component received from the very same shareholders as bogus. We held that all the three necessary ingredients of section 68 had been duly complied with by the assessee with proper documentary evidences. We find that notices issued u/s 133(6) have been duly complied with. The only grievance of the ld. AO was that the assessee could not produce the directors of the share subscribing companies. In our considered opinion, for this reason alone, there cannot be any addition u/s 68 of the Act as held by the Hon ble Supreme Court in the case of CIT vs. Orissa Corporation Pvt. Ltd. reported in 159 ITR 78 (SC). We find that the decision of Hon ble Delhi High Court in the case of Novo Promoters and Finelease Pvt. Ltd. reported in 342 ITR 169 (Del) vehemently relied upon by the ld. DR before us, is not applicable in the instant case, as in the facts before the Hon ble Delhi High Court, the notices u/s 133(6) have not been duly complied with. Hence the decision rendered by the Hon ble Delhi High Court in the case referred to supra is not applicable to the facts of the instant case and is factually distinghuishable.. 3.3.1. We find that ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ereto took place with effect from April 1, 2013. Therefore, it is not applicable for the subject assessment year 2012-13. So for as the pre-amended section 68 of the Act is concerned, the same cannot be invoked in this case, as evidence was led by the respondents-assessees before the Assessing Officer with regard to identity, capacity of the investor as well as the genuineness of the investment. Therefore, admittedly, the Assessing Officer did not invoke section 68 of the Act to bring the share premium to tax. Similarly, the Commissioner of Income-tax (Appeals) on consideration of facts, found that section 68 of the Act cannot be invoked. In view of the above, it is likely that the Revenue may have taken an informed decision not to urge the issue of section 68 of the Act before the Tribunal. (d) We may also point out that decision of this court in Major Metals Ltd. v. Union of India [2012] 19 taxmann.com 176/207 Taxman 185/[2013] 359 ITR 450 Bom. proceeded on its own facts to uphold the invocation of section 68 of the Act by the Settlement Commission. In the above case, the Settlement Commission arrived at a finding of fact that the subscribers to shares of the assessee compan ..... X X X X Extracts X X X X X X X X Extracts X X X X
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