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TMI Blog2018 (11) TMI 1540X X X X Extracts X X X X X X X X Extracts X X X X ..... of reopening and merits of the addition are remitted to the file of the ld. CIT(A) for fresh adjudication by passing a speaking order on the subject. - Revenue’s appeal and the assessee’s cross objection are allowed for statistical purposes. - I.T.A. No. 523/Mum/2016, C.O. No. 234/Mum/2017 - - - Dated:- 19-9-2018 - Shri Shamim Yahya, AM And Shri Ram Lal Negi, JM For the Assessee : Shri Jitendra Jain For the Revenue : Shri Anadi Yarma ORDER PER SHAMIM YAHYA, A. M.: This appeal by the Revenue and cross objection (C.O. for short) by the assessee arise out of the order of the learned Commissioner of Income Tax (Appeals)-12, Mumbai ( ld.CIT(A) for short) dated 02.11.2015 and pertain to the assessment year (A.Y. for short) 2009-10. 2. The grounds of appeal raised in Revenue s appeal read as under: 1. On the facts and circumstances of case and in law, the Ld.CIT(A) erred in deleting the addition of ₹ 14,74,78,500/- made by the Assessing Officer u/s.68 towards unexplained cash credit . 2. On the facts and circumstances of case and in law, the Ld.CIT(A) erred in deleting the addition without appreciating the fact that the nature and the creditw ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d other details. From the reply of the assessee, the A.O. noted that for justification of the charging of the huge share premium, the assessee company had submitted the valuation report dated 28.01.2015, determining the face value of the equity share as on 31.03.2008 at ₹ 597/- per share. He noted that the valuation is based on DCF method. The A.O. further observed that the projected profit on the basis of which valuation has been done does not match with the actual performance. Upon the A.O. s query that why this amount should not be treated as unexplained income within the meaning of section 68, the assessee submitted the copy of return filed of Omkar, the audited financial statement and bank statement. 5. However, the A.O. was not satisfied. He observed that these submissions of the assessee are not acceptable as the nature of the transaction was very unnatural and suspicious. That the valuation was done based upon imaginary profit figures. That the valuer has passed the valuation only on the basis of the financial projections. That there was no basis of any working given in the copy of the report filed by the assessee on record. Hence, the A.O. held that the assessee w ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... not be held to be unexplained credit. In this regard, the ld. CIT(A) did not mention as to on the basis of what documents and which fact and figure he was of the opinion that the assessee company has explained the creditworthiness of the investor. Furthermore, the ld. CIT(A) held that the assessee has received share capital including share premium from Omkar Energy P. Ltd. (OPEL). He observed that OPEL is wholly owned subsidiary company of Omkar Realtors Developers P. Ltd. (ORDPL). He observed that this company belongs to a well known Omkar Group engaged in the business of real estate development. That both the companies are profit making companies and are regularly assessed to income tax. That the shares have been issued at a premium based on DCF method and it has been duly accounted for in the books of account and also reflected in the audited accounts. That the balance sheet of OPEL as on 31.03.2009 and also that of ORDPL as on 31.03.2009 duly justifies the same. The ld. CIT(A) in this regard did not mention any facts and figures from the balance sheet of investor company. The ld. CIT(A) proceeded to hold that the share premium receipt is a commercial decision of the Board of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nsel of the assessee also relied upon the Hon ble Apex Court decision in the case of Dy. CIT vs. Zuari Estate Development Investment Co. Ltd. [2015] 63 taxmann.com 177 (SC). The ld. Counsel of the assessee has submitted that the reasons for reopening were not at all adequate. He submitted that the reasons recorded cannot be substantially improved upon. In this regard, he referred to decision of Hindustan Lever Ltd. vs. R. B. Wadkar [2004] 268 ITR 332 (Bom). The ld. Counsel of the assessee further relied upon the decision of the Khubchandani Healthparks (P.) Ltd. vs. ITO [2016] 384 ITR 322 (Bom) He submitted that in this case, the Hon'ble Apex Court decision in the case of Zuari Estate Development Investment Co. Ltd. (supra) has been duly considered. On merits of the case, the ld. Counsel of the assessee submitted that the ld. CIT(A) has properly considered the issue that the investors in this case are established companies. That they are not fly by night operators. That the detailed reasons for the loss incurred and the project not going on the projected basis has been given duly by the A.O. Furthermore, the ld. Counsel of the assessee submitted that the issue ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... f the reopening has been dismissed, in merely four lines by mentioning that the A.O. had tangible material and the transaction was sham. No reference to the content of tangible material or reason of reopening is there in this order. 13. As regards the merits of the case also the ld. CIT(A) s order is very cryptic. He has held that the creditworthiness of the investor companies cannot be doubted as they are profit making companies and are regularly assessed to income tax. That there balance sheet justifies the same. In this regard, no reference has been made whatsoever to the facts and figure from the balance sheet which according to the ld. CIT(A) justify the creditworthiness. The A.O., on the other hand, has duly mentioned that the investor company has only ₹ 1 lac paid up capital and has no asset but has made investment in assessee s company for huge share premium. If the ld. CIT(A) was to dislodge this finding he ought to have referred to the facts and figures from the balance sheet of the investor company. By merely referring that the balance sheet justifies , does not make the order of the ld. CIT(A) sustainable in law. Furthermore, the ld. CIT(A) has observed that t ..... X X X X Extracts X X X X X X X X Extracts X X X X
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