TMI Blog2019 (1) TMI 681X X X X Extracts X X X X X X X X Extracts X X X X ..... he amounts have been received from investing company have Come through banking channel which are duly reflected in the Balance sheet of the assessee company. Therefore, there cannot be any doubt about the genuineness of the transaction. So far as credit worthiness is concerned the investing company is regularly assessed to income tax and they are disclosing substantial income. Even these transactions are disclosed in the audited accounts filed along with the return of income. As the facts are identical to AY 2007-08 and the reason recorded by CIT(A) while deleting the addition in AY 2007-08 are also exactly identical. In such circumstances, we have already confirmed the order of CIT(A) deleting the addition and hence, following the earlier years order as decided above, we delete the addition. - Decided in favour of assessee - ITA No. 2091/Mum/2018 And ITA No. 3986/Mum/2017 - - - Dated:- 10-1-2019 - SRI MAHAVIR SINGH, JM AND SRI MANOJ KUMAR AGGARWAL, AM For The Appellant : Shri Vimal Punamiya, AR For The Respondent : Shri Shri Chaitanya Anjaria, DR ORDER PER MAHAVIR SINGH, JM: In these appeals, one appeal filed by Revenue and one by assessee, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ic racket of converting unaccounted income into purported share capital was deleted which caused loss to the Nation by depriving the revenue on its unaccounted income. 4. Briefly stated facts are that the assessee is a Private Limited Company engaged in the business of Investments, Loans Advances. Assessee-company invested in shares and securities for a long term perspective and gives loans and advances. It is the main investment company of the Vardhman Group engaged in the business of Builders and Developers for more than 35 years and has substantial stake in the flagship company of the Group. The valuation of the company is derived from the underlying assets being equity of its flagship company. It was claimed by the assessee that it is neither a shell company nor a beneficiary of the accommodation entries. The Original return of income was filed by the assessee on 22.10.2007 for the AY 2007-08. This return was processed under section 143(1) of the Act. Subsequently, the AO issued notice under section 148 of the Act, dated 26.03.2014. The AO for issuing notice under section 148 of the Act recorded the following reasons: - it is seen from the records that M/s Alka Diam ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t the AO made addition of share application money of ₹ 4 crores as unexplained under section 68 of the Act by observing in vide Para 4.6 and 4.7 as under:- 4.6 Huge Share premium charged is not justified It is seen that the assessee company has filed return of income showing total income of ₹ 611/-. The assessee company has no reserves, no fixed assets, no substantial profit earned. The book value of the shares of the assessee company is nominal and meagre figure. However, the above said parties have claimed to have subscribed to the shares of the assessee company at a huge premium of ₹ 290/-. The high share premium valued is totally unjustified in the light of the above facts. No prudent investor would invest in such a company and that too at a huge premium. Further stating that the assessee company is part of another group and therefore the claim that premium charged is justified is not acceptable simply because the investors have claimed to have applied for shares of assessee company and not any other company. And as per financial statements of the assessee company the share premium charged is totally unjustified. And from the balance sheet it is see ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... other 4 companies. The reopening of the assessment made under section.143(3) was done on the basis of such information ignoring the fact that during the course of assessment proceedings in the case of M/s. Blue Stock Investments Pvt. Ltd in AY 2007-08, M/s Alka Diamond Industries Ltd. has explained the share investments hence, the very basis of reason is having no foundation. It is pertinent to mention that the Ld. Assessing Officer has only referred the general statement of Mr. Praveen Jain given during the course of search who had not specified as to which company is non-existing company and which one has given accommodation entry. It is to be also noted that in response to the notice under section 133(6), M/s Alka Diamond Industries Ltd. had furnished all the evidences by letter dated 30.01.2015 submitting the complete set of income tax return of AY 2007-08, copy of Ledger Account confirming the investments, cop of its bank account revealing the investments and clarification regarding source of investments. The Ld. Assessing Officer has admitted the veracity of such evidences, as she has not rebutted it with contrary evidence. Further, she has not refuted the explanation of the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... lloys Pvt. Ltd. 90 ITD 63 has held that proceedings u/s 147 of the Act could not be restored to for making roving inquiries. Thus, I find that such issue of notice under section 148 is not sustainable in the light of decisions in the cases of Sound Casting Pvt. Ltd. vs. DCIT 250 CTR 119 (Bom), ACIT vs. Resham Petrotech Ltd. (2012), 136 ITD (Ahmd.), Jaishan Textile Mills Pvt. Ltd. vs. DCIT (2006) 284 ITR 542 (Bom) and German Remedies Ltd. vs. DCIT (2006) 287 ITR 494 (Bom). Motilal R. Todi Vs. ACIT 7(3), ITA No. 2910/Mum/2013 and Shaft Broadcast Pvt. Ltd. vs. ACIT 9(3), ITA No. 1819/Mum/2012, order dated 17.04.2013. thus, the Ground No. 1 is allowed. 6. The CIT(A) even allowed the claim of assessee on merits vide Para 3.5 and 3.6 as under: - 3.5. As regards merit of the case related to addition u/s 68, it is pertinent to mention that in response to the notice u/s.133(6), as mentioned earlier, investor companies have furnished all the necessary evidences hence, nothing was left for the Appellant to explain with further evidence to the Assessing Officer. It is also to be noted that after receipt of various evidences from the investors, Ld. Assessing Officer has not brought o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... oted that appellant is not a Shell company or Hawala entry operator because the Ld. Assessing Officer has accepted the genuineness of Company-Appellant. It has made investment in Flat and has given loans and advances to other parties Inter corporate deposit is there. The Appellant has shown interest income in Profit and Loss account. The Ld. Assessing Officer has accepted such accounts. It can be seen that merely on the basis of doubt she has made addition. There is no reference of specific statement that Mr. Pravin Jain that he has admitted that these companies are benami companies, nor is there any specific clarification about bogus share money of them Therefore, only on the basis of general statement, no such addition could be made. The Hon ble ITAT in the case of Shaft Broadcast Pvt. Ltd. vs. ACIT, ITA No. 1819/Mum/2012, order dated 17/04/2013 has held that merely on the basis of general statement of such person, no addition could be made in the case of such assessee. Aggrieved, now Revenue is in second appeal before Tribunal. 7. Before us, the learned Sr. Departmental Representative relied on the assessment order and for re-opening of assessment he relied on the reaso ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ason that Shri Praveen Kumar Jain has made a statement before the Investigation Wing that he is being issued bogus share capital to various parties. We find that the AO has invalidated the balance sheet of share applicants on her own presumption without making any reference to documentary evidences produce by assessee. We find that the name of Shri Praveen Kumar Jain or his group as mentioned in respect of four parties out of five parties except the Alka Diamond Industries Ltd. Thus, it is evident that despite the fact that share applicant have responded to the notice issue under section 133(6) of the Act and details filed along with relevant documents for establishing identity of the parties and genuineness of transaction. We also noted that the AO was excessively influenced by the information received from DDIT, Investigation Wing, Mumbai regarding search action conducted in the case of one Shri Praveen Kumar Jain and his group and the statement recorded of Shri Praveen Kumar Jain. The AO has not independently proved that the share application money is bogus and not travelled through bank account. It is a fact that these companies are duly registered under the Companies Act, 1956 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... alleged unexplained cash credit u/s 68 of the Income Tax Act that too by recording incorrect fact and findings and without observing the principle of natural justice. The learned CIT(A) has also failed to appreciate the fact that the appellant has discharged the onus cast upon it to establish the identity and creditworthiness of the share applicants and genuineness of the transactions. 2. On the facts and in the circumstances of the case and in law, the learned CIT(A) has erred in confirming the action of Ld. A. 0. in making an ad-hoc addition of ₹ 1,75,000/- on account of alleged estimated unexplained expenditure u/s 69C of the Income Tax Act at the rate of 5% of the amount of addition made as alleged unexplained cash credit u/s 68 of the Act. 11. The brief facts relating to the issue are already enumerated in ITA No. 3986/Mum/2017 for AY 2007-08 above. Fort this year, the assessee received a sum of ₹ 35 lacs as share application money from Alka Diamond Industries Limited and the AO reopened the assessment on the basis of information received from DGIT (Investigation), Mumbai, in consequent to search conducted in the case of Praveen kumar Jain Group ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e website of Ministry of Corporate Affairs (MCA). Such data are in respect of investing company Alka Diamond Industries Ltd. The state of the investing company as on 25.10.2017 is active. Therefore, the company is still in existence and active. The master data also discloses that Balance sheet up to 31.03.2016 has been filed in respect of each of the companies mentioned above. Therefore, there cannot be any doubt about the identity of the company. The amounts have been received from investing company have Come through banking channel which are duly reflected in the Balance sheet of the assessee company. Therefore, there cannot be any doubt about the genuineness of the transaction. So far as credit worthiness is concerned the investing company is regularly assessed to income tax and they are disclosing substantial income. Even these transactions are disclosed in the audited accounts filed along with the return of income. 14. As the facts are identical to AY 2007-08 and the reason recorded by CIT(A) while deleting the addition in AY 2007-08 are also exactly identical. In such circumstances, we have already confirmed the order of CIT(A) deleting the addition and hence, following th ..... X X X X Extracts X X X X X X X X Extracts X X X X
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