TMI Blog2018 (9) TMI 1779X X X X Extracts X X X X X X X X Extracts X X X X ..... hri S.S.Viswanethra Ravi, JM For the Appellant : Shri G.Hangshing, CIT DR For the Respondent : Shri S.M. Surana, Ld. AR ORDER Per M.Balaganesh, AM 1. This appeal by the Revenue and the Cross Objection by the assessee arise out of the order of the Learned Commissioner of Income Tax(Appeals)-5, Kolkata [in short the ld CIT(A)] in Appeal No. 29/CIT(A)-5/Wd-14(4)/15-16 dated 28.06.2016 against the order passed by the ITO, Ward-14(4), Kolkata [ in short the ld AO] under section 143(3) of the Income Tax Act, 1961 (in short the Act ) dated 25.03.2015 for the Assessment Year 2012-13. 2. The only issue to be decided in the appeal of the revenue is as to whether the ld. CIT(A) was justified in deleting the addition of ₹ 20,07,60,000/- made u/s 68 of the Act, in the facts and circumstances of the case. 3. The brief facts of this issue is that the assessee is a public limited company engaged in the business of trading and investment in shares and securities and the assessee company was incorporated on 30.04.1981. The return of income for assessment year 2012-13 was filed by the assessee on 31.3.2013 declaring total income of Rs. Nil. The ld. AO in para 2 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e assessee shareholder, the assessee or company in which the assessee has invested, as a pre-designed set of transactions executed to introduce unaccounted money in the garb of share capital and share premium. He held that the three necessary ingredients of section 68 of the Act viz. identity of shareholder; creditworthiness of the shareholder and genuineness of the transactions are not proved in the instant case. Accordingly, an addition of ₹ 20,07,60,000/- made u/s 68 of the Act in the assessment. This was deleted by the ld. CIT(A). Aggrieved the revenue is in appeal before us. 4. We have heard the rival submissions. At the outset, we find that the assessee had not raised any share capital by receipt of cash consideration in the instant case. The shares were issued for consideration other than cash in lieu of assessee company making investment in shares in some other company. Effectively, the assessee purchased certain shares from the aforesaid six shareholders and instead of paying cash to them, the assessee company issued shares in its own company to those shareholders. Hence the assessee had made investments in shares of another company for which consideration was set ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... u/s 80G of the Act. We also find that the Hon ble Jurisdictional High Court in the case of Jatia Investment Company (Co.) vs. CIT reported in 206 ITR 718 (Cal) also supports the case of the assessee herein, wherein it was held as under: It is finally emphasised by learned counsel for the assessee that the ultimate result is that the firm becomes a debtor to GB and Co. and the three non-financial companies of the group got discharged. Learned counsel also emphasised that, at the worst, it can be said that the assessee-firm has received valuable assets being the said shares of the equivalent value of the debt taken over by it from the companies, i.e., ₹ 11.20 lakhs. Therefore, the question of cash credit does not come in, there being no actual passing or receipt of cash. In other words, the transactions are mere book entries. It was contended that the fact that the entries passed through the cash book could not detract from or efface the essential nature of the entries. It was also urged that the entries were passed through the cash book so that the repayment of loans by the said three companies could be established before the Reserve Bank of India. But, according to Sh ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... respective parties did not receive cash nor did pay cash as none had any cash for the purpose. The only point in the assessment order is that the entries not involving the passing of cash should not have found a place in the cash book, but in the ledger account through journal entries. There is another selfcontradiction in the Income-tax Officer's finding that, if there was no real cash entry on the credit side of the cash book, but merely a notional or fictitious cash entry, as admitted by him, there is no real credit of cash to its cash book ; the question of inclusion of the amount of the entry as unexplained cash credit cannot arise. One of the grounds of the Tribunal for disbelieving the assessee's case is that the adjustment entries were made by notional cash entries with a view to bringing down the debt-and-capital ratio, i.e., that while being discharged of the debt the said companies also jettisoned their assets, i.e., the shares held by them of equivalent sum without achieving the avowed purpose. Here the Tribunal certainly misdirected itself. The ratio to be reduced is of the loan in relation to the share capital and the reserves. Jettisoning the shares had t ..... X X X X Extracts X X X X X X X X Extracts X X X X
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