TMI Blog2017 (12) TMI 1635X X X X Extracts X X X X X X X X Extracts X X X X ..... to the issue of shares at a premium merit in the findings of the AO for the reason that the issue of shares at a premium and subscription to such shares is within the knowledge of the company and the subscribers to the share capital and the AO cannot have any role to play as long as the assessee has prove the genuineness of transactions. We further notice that the AO cannot question the issue of shares at a premium and also cannot bring to tax such share premium within the provisions of section 68 of the Act, before insertion of Proviso to section 68 by the Finance Act, 2012 wef 01-04-2013 which evident from the fact that the Hon’ble Bombay High Court has held that Proviso inserted to section 68 is retrospective in nature. Therefore, we are of the considered view that the AO has treated share capital and share premium as unexplained credit u/s 68 of the Act, on flimsy grounds ignoring all evidences filed by the assessee. - decided against revenue - I.T.A No.3924/Mum/2014 - - - Dated:- 29-12-2017 - Shri Mahavir Singh And Shri G Manjunatha, JJ. Appellant by Shri Manjunath Swami Respondent by Shri Prakash Jhunjhunwala ORDER G Manjunatha, This appeal fil ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ) CIT Vs. NR Portifolio (Pvt.) Ltd. (2014) (42taxmann.com339), wherein after discussing the judgement in the case of Lovely Exports it was held that amounts shown to have been received as share application money has to be taxed as undisclosed income of the assesssee within the meaning of section 68 if the assessee fails to establish the genuineness of the transactions and financial capacity of the said investors. 2. The brief facts of the case are that the assessee company was incorporated on 05-03-2010, filed its return of income for the assessment year 2010-11 on 06-10-2010 declaring total income at Nil. The assessee has subscribed share capital of ₹ 3,86,540,500 and share premium of ₹ 12,60,00,000. During the year under consideration, the assessee company has issued shares with a face value of ₹ 10 at a premium of ₹ 90 per share for all outside parties, however, issued shares to its directors at a face value f ₹ 10/-. Out of the total share capital received of ₹ 16,46,50,500 the assessee company has received share capital of ₹ 12 crores from 9 companies, out of which 3 companies are registered with Registrar of Companies (ROC), Mumba ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of Kolkata parties wherein the Inspector attached to the DDIT(Inv), Kolkata submitted the report that the parties were not available at the given address. The AO has given his own reasons to come to the conclusion that the alleged share capital received from 9 companies is not genuine and such findings has been given in has assessment order on page 3 to 27. The AO has relied upon various decisions and also distinguished case laws relied upon by the assessee to come to the conclusion that the assessee has failed to establish genuineness of transaction and creditworthiness of the parties and accordingly made addition of ₹ 12 crores u/s 68 as unexplained credit. 3. Aggrieved by the assessment order, the assessee preferred appeal before the CIT(A) . Before the CIT(A), the assessee has filed elaborate written submissions which are reproduced in CIT(A) s order on pages 14-18. The assessee also relied upon plethora of judgements including decision of Hon ble Supreme Court in the case of CIT vs Lovely Exports Pvt Ltd Hon ble Bombay High Court in the case of CIT vs Goa Sponge Power Ltd. The sum and substance of the assessee s submission is that it has filed various details to ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... pital u/s 68 of the Income-tax Ac6, 1961. Aggrieved by the order of CIT(A), the revenue is in appeal before us. 5. The Ld.DR submitted that the Ld.CIT(A) erred in deleting the addition of ₹ 12 crores made on account of share application money received treating it as unexplained income of the assessee u/s 68 of the Act. The Ld.DR further submitted that the Ld.CIT(A) erred in not appreciating the fact that neither the financial position of the said investors is strong enough to substantiate the investment of enormous sums, nor the financial position of the assessee company justifies charging of premium of ₹ 90 per share having face value of ₹ 10 per share. The Ld.DR further submitted that the assessee was incorporated in the financial year relevant to AY 2009-10 and without there being any business activity charging huge premium of ₹ 90 per share and subscription of share capital with a huge premium of ₹ 90 per share of unknown companies appears to be sham transaction. Though the assessee has filed various details to prove identity of the subscribers, the shell companies formed by hawala operators always keep documents to prove identity. But the fact ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 1-12 and 2012-13, where this issue was not found place in assessment order. The Ld.AR further submitted that merely because notices issued u/s 133(6) were returned unserved, addition cannot be made towards genuine transactions despite furnishing of all evidences before the AO at the time of completion of assessment. The Ld.AR further submitted that it is incorrect on the part of the AO to come to the conclusion that the assessee has routed its own funds in the form of share capital from those companies without appreciating the fact that the assessee company was incorporated on 05-03-2010 and not even carried out business activity for one month during the relevant financial year. On the other hand, the assessee has furnished enormous documents to prove the transaction as genuine subscription of share capital but the AO has ignored all evidences only on flimsy grounds by considering the facts which were favourable to the revenue ignoring the fact that the transactions with assessee company are genuine transactions. The Ld.AR further referring to the certificate issued by the Chartered Accountant, M/s Poojan Mehta Co dated 10-11-2017 submitted that all these companies are active in ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ITA No. 1613 of 2014 (Bombay High Court) dated 20/03/2017 3 CIT vs Creative World Teleflims Ltd 333 ITR 100 (Bom-High Court) 4 CIT vs Goa Sponge and Power Ltd ITA No.16 of 2012 (Bombay High Court) 5 CIT vs Green Infra Ltd ITA No. 1162 of 2014 6 CIT vs Lovely Exports (P) Ltd 216 CTR 195 (SC) 7 CIT vs Steller Investment Ltd 251 ITR 263 (SC) 8 Jaya Securities Ltd vs CIT (2008) 166 Taxman 7 (All) (SLP of dept dismissed) 9 CIT vs Jay Dee Securities Finance Ltd 27-28 32 Taxmanncom 91(All-High_Court) 10 CIT vs Expo Globe India Ltd 361 LTR 0147 (Del-High Court) 11 CIT vs Gangeshwari Metal Pvt Ltd (2014) 361 ITR 10 (Del-High Court) 12 CIT vs Dwarkadhish Investment (P) Ltd 6 (2011) 330 ITR298 (Del High Court) 13 CIT vs Vrindavan Farms (P) Ltd ITA 71/2015 (HC-Del) 14 CIT vs Nay Bharat Duplex Ltd (2013) 35 Taxmann.com 289 (All High Court) 15 Mod Creations Pvt Ltd vs ITO (2011) 62 DTR 25 (Del-High Court) 8. We have heard both the parties, perused materials available on record and gone through the orders of authorities below. The only issue that needs to be resolved is whether, on the facts and in the circumstances of the case, share capital received f ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... eals with the case where the sum so credited consists of share application money, share capital, share premium, by whatever name called and explanation offered by such assessee shall be deemed to be not satisfactory unless such person being a recipient in whose name such credit is recorded in the books of such company also offers an explanation about the nature and source of such sum so credited. As per the Proviso, if the assessee fails to explain the source of source of share capital or share application money, then the addition can be made towards share capital, and share application money in the hands of the assessee u/s 68 of the Income-tax Act, 1961. Whether Proviso inserted by the Finance Act w.e.f. 01-04-2013 is applicable prospectively or retrospectively, has been decided by various courts. According to the ratio laid down by the Hon ble Bombay High Court in the case of CIT vs Gagandeep Infrastructure Ltd (2017) 394 ITR 680 (Bom) the Hon ble Court observed that Proviso inserted to section 68 w.e.f. 01-04-2013 is considered to be prospective in nature and applicable from A.Y.2013-14 onwards. Therefore, we are of the view that no addition can be made u/s 68 of the Income-tax ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the conclusion that the assessee has failed to prove the genuineness of transaction and creditworthiness of the parties on the ground that the assessee has filed enormous details in respect of 9 companies including their PAN details, CIN master data, affidavits sworn before Executive Magistrate, reply to the notices issued u/s 133(6). The assessee also filed copies of assessment order passed u/s 143(3) by the department in respect of 4 companies. The assessee also filed a certificate from a Chartered Accountant certifying the active status of the company in the website of Ministry of Corporate Affairs. On going through various detailed filed by the assessee, we find that there is no reason for the AO to doubt the genuineness of transactions of creditworthiness of the parties. We further notice that all 9 companies are active in the website of ROC and also they have filed their balance-sheet upto 31-03-2016 and in some cases upto 31-03-2017. We further notice that the AO has furnished a report accepting the fact that all these companies are active in the website of MCA and none of the companies name is struck off from the list published by the MCA as shell company. We further notic ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ection 68 of the Act, before insertion of Proviso to section 68 by the Finance Act, 2012 wef 01-04-2013 which evident from the fact that the Hon ble Bombay High Court has held that Proviso inserted to section 68 is retrospective in nature. Therefore, we are of the considered view that the AO has treated share capital and share premium as unexplained credit u/s 68 of the Act, on flimsy grounds ignoring all evidences filed by the assessee. 13. Coming to the case laws relied upon by the assessee. The assessee has relied upon plethora of judgements including the decision of Hon ble Supreme Court in the case of CIT vs Lovely Exports Pvt Ltd (2008) 216 CTR 195 (SC). In the case laws relied upon by the assessee, the issue has been dealt as under:- CIT vs. Goa Sponge and Power Ltd (13/02/2012) Tax Appeal No. 16 of 2012 (High Court-Bombay) 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'ble Supreme Court ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e assumed that the subscribers to the increased capital were not genuine, tinder 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. CIT vs. Nav Bharat Duolex Ltd (2013) 35 Taxmann.com 289 (All-High Court) We have considered the arguments of the counsel for the parties. CIT(A) found that five companies subscribing the equity shares amounting to ₹ 25,00.000/- were identified and they had submitted their bank statements, cash extracts and returns filing receipts. As such identity of the share applicant companies and purchase of share had been proved by the assessee. Supreme Court in the cases of CIT v. Steller Investments Ltd. [2001] 251 ITR 263 and Lovely Exports case (supra), has held that the identity of the shareholder alone is required to be proved, in case of the capital contributed by the shareholders. Accordingly CIT(A) and the Tribunal has not committed any illegality in allowing the appeal of the assessee. We do not find any illegality ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... by itself which is based on assumption will not pass muster in law. The Revenue would be required to bridge the gap between the suspicions and proof in order to bring home this allegation. The Tribunal without adverting to the principle laid stress on the fact that despite opportunities, the assessee and/or the creditors had not proved the genuineness of the transaction. Based on this it construed the intentions of the assessee as being mala fide. The Tribunal ought to have analysed the material rather than be burdened by the fact that some of the creditors had chosen not to make a personal appearance before the Assessing Officer. If the Assessing Officer had any doubt about the material placed on record, which was largely bank statements of the creditors and their income-tax returns, it could gather the necessary information from the sources to which the information was attributable......If it had any doubts with regard to their creditworthiness, the Revenue could always bring the sum in question to tax in the hands of the creditors or sub- creditors. CIT vs. Al Anam Agro Foods (P.) Ltd (2013) 38 Taxmann.corn 375 (All-High Court) Tribunal , however , held that since identit ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... . The assessee had established the identity of the investor who had provided the share subscription and that the transaction was genuine. Though the assessee's contention was that the creditworthiness of the creditor was also established, in this case, the establishment of the identity of the investor alone was to be seen. Thus, the addition was rightly deleted. CIT vs. Shree Rama Multi Tech Ltd (2013) 34 Taxmann.com 177 (Guj-HC) It is noted that Commissioner (Appeals) as well as the Tribunal have duly considered issue and having found complete details of the receipts of share application money, a/on gwith the form names and addresses, PAN and other requisite details, they found complete absence of the grounds noted for invoking the provision of section 68. Moreover, both rightly had applied the decision of CIT vs. Lovely Exports (P) Ltd to the case of the assessee. Therefore, no reason was found in absence of any illegality much less any perversity too to interfere with the order of the both these authorities, who had concurrently held the due details having been proved. The assessee company had presented the necessary worth proof before both the authorities and it was ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... see company. The companies did not have any business activity to establish their financial capacity. Under those facts and circumstances , the Hon ble Calcutta High Court came to the conclusion that the assessee has failed to establish genuineness of transactions and creditworthiness of the parties and hence confirmed addition made by the AO u/s 68 of the Income-tax Act, 1961. Insofar as the Hon ble Bombay High Court in the case o M/s Major Metals vs CIT (supra), the facts of the case are entirely different wherein the issue before the Hon ble High Court was whether the assessee was able to establish genuineness of transaction in the light of the clear finding recorded by Settlement Commission wherein it was observed that all the subscribers of share capital were not even assessed to income-tax and they did not have any source of income to explain financial capacity. Under these circumstances, the Hon ble Court came to the conclusion that the assessee was unable to explain the issue of share at a huge premium and hence confirmed addition made by the AO u/s 68 of the Act. 15. In this case, on perusal of the facts available on record we find that the assessee has filed enormous de ..... X X X X Extracts X X X X X X X X Extracts X X X X
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