TMI Blog2019 (3) TMI 471X X X X Extracts X X X X X X X X Extracts X X X X ..... the assessee has sufficiently discharged the onus cast upon it for the purpose of section 68 of the Act and no addition can be made on this account. CIT(A) had passed a detailed order while relying upon various judgments cited by the parties and also considering the principles laid down in the case of Lovely Exports Pvt. Ltd. [2008 (1) TMI 575 - SUPREME COURT OF INDIA] and moreover, no new facts have been brought on record before us in order to controvert or rebut the findings so recorded by CIT (A). Therefore, there are no reasons for us to interfere into or deviate from - Decided in favour of assessee. - I.T.A. No. 5955/Mum/2016, C.O. No. 6664/Mum/2017 - - - Dated:- 1-3-2019 - SHRI SANDEEP GOSAIN, JM And SHRI N. K. PRADHAN, AM Appellant by: Shri Abi Rama Karthikeyan, DR Respondent by: Shri Jitendra Jain Shri Mahesh Rajora, AR ORDER Per Sandeep Gosain, Judicial Member: The present appeal as well as cross objection have been filed by the revenue as well as assessee are against the order of Commissioner of Income Tax (Appeals)-21, Mumbai dated 29.07.16 for AY 2009-10. 2. Since, the facts raised in the appeal filed by the revenue as well as ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ng the additions made by AO u/s 68 of the Act. However, the order of reopening of assessment was upheld. Now before us, the revenue as well as assessee have preferred their appeal and cross objection respectively. Firstly we are dealing with the appeal filed by the revenue. Ground No. 1 to 3 5. Since all these grounds raised by the revenue are inter connected and inter related and relates to challenging the order of Ld. CIT(A) in deleting the addition of ₹ 3 crore as unexplained cash credit on account of share capital and share premium received by the assessee, therefore we thought it fit to dispose of the same by this common order. 6. We have heard the counsels for both the parties at length and we have also perused the material placed on record, judgment cited as well as the orders passed by revenue authorities. 7. Ld. DR appearing on behalf of the revenue relied upon the order passed by AO and submitted that the case of assessee was reopened after receiving information from the office of CCIT, Mumbai to the effect that the assessee had received premium for allotment of shares amounting to ₹ 7,60,00,000/- which comes to ₹ 190 per share. The i ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 027/2015). The assessee had also relied upon the decision of CIT vrs. Lovely Export Pvt. Ltd. 319 ITR 5 (SC), Green Infra Ltd. 7762/Mum/2012, Gagandeep Infrastructure Pvt. Ltd. 2014 TIOL-656, Umacharan Shah vrs. CIT 37 ITR 271 (SC), CIT Vrs. Dwarkadish Investment Pvt. 330 ITR 298, etc. 9. After having heard the counsels for both the parties at length and after appreciating the facts of the present case, we are of the view that before we decide the merits of the case, it is necessary to evaluate the orders passed by Ld. CIT(A). The Ld. CIT(A) has dealt with the above grounds raised by the revenue in para no. 6.1 to 6.19 of its order. The operative portion of the order of Ld. CIT(A) is contained in para no. 6.6 to 6.19, which is reproduced below:- 6.6. I have considered the facts on record and submissions carefully. The case of Major Metal Ltd. largely revolved on the issue of premium. However, in the present case the assessing officer has accepted the investment by M/s. SBPL Infrastructure Ltd. which has also subscribed to the share capital of the appellant at a premium amounting to a total of ₹ 500 lakhs. Thus, the fact that shares were issued at premium and the i ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... . In CIT v. Steller Investment Ltd. [1991] 192 ITR 287/59 Taxman 568 (Delhi) it was observed: Even if it be assumed that the subscribers to the increased share capital were not genuine, nevertheless, under no circumstances, can the amount of share capital be regarded as undisclosed income of the assessee. It may be that there are some bogus shareholders in whose names shares had been issued and the money may have been provided by some other persons. 6.11. Both the aforementioned decisions were again considered by the Division Bench of Hon'ble Delhi High Court in CIT v. Lovely Exports Ltd. 120081 299 ITR 268. Thereafter, in CIT v. Nova Promoters Finlease (P.) Ltd. [20121 342 ITR 169/206 Taxman 207/18 taxmann.com 217 (Delhi) it was observed as under: 38. The ratio of a decision is to be understood and appreciated in the background of the facts of that case. So understood, it will be seen that where the complete particulars of the share applicants such as their names and addresses, income tax file numbers, their creditworthiness, share application forms and shareholders' register, share transfer register etc. are furnished to the Assessing Officer and the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... enuine investment, acted as angel investors, after due diligence or for personal reasons. Thus, finding or a conclusion must be practicable, pragmatic and might in a given case take into account that the Assessee might find it difficult to unimpeachably establish creditworthiness of the shareholders.' 6.13. In CIT v. N.R. Protfolio (P.) Ltd. [2014] 222 Taxman 157/42 taxmann.corn 339 (Delhi) the need of the Assessee to satisfy the AO about the identity, creditworthiness and genuineness of the creditors was reiterated. It was pointed out that mere production of incorporation details, PAN Nos. or the fact that third persons or company had filed income tax details in case of a private limited company may not be sufficient when surrounding and attending facts predicate a cover up. These facts indicate and reflect proper paper work or documentation but genuineness, creditworthiness, identity are deeper an d obtrusive. Companies no doubt are artificial or juristic persons but they are soulless and are dependent upon the individuals behind them who run and manage the said companies. It is the persons behind the company who take the decisions, controls and manage them. 6. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... EPL u/s 131. Nor did he call for any other information from BEPL. BEPL is a company registered and operating from Kolkata. The assessing officer concluded that BEPL did not have credit worthiness since it did not have significant business activity and business income. The copy of audited accounts of BEPL was available before the assessing officer. He ignored the fact that the company had share capital and reserves of ₹ 35.30 crores and current liabilities of ₹ 12.50 crores as on 31.03.2009. It had made investments in various companies amounting to ₹ 42.85 crores including the investment of ₹ 3 crores in the appellant company. The assessing officer did not call for any further details from BEPL. BEPL is assessed to tax. The assessing officer has not proved that the money received by BEPL is unexplained money which is routed to the appellant. The money has been received by the appellant through banking channels. If there is any doubt as regards the money received by BEPL, additions can be made, if proved and justified, in the hands of BEPL but not the appellant here. BEPL is assessed to tax. 6.17. I am aware that the receipt towards shares issued by a pr ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... BEPL. However, admittedly, no additions were made in respect of premium received in the case of SBPL. It is important to mention here that from the above concerns, same share premium @ 190 per share was received by the assessee, but for the reasons best known to the AO, no additions were made in the case of premium received from SBPL. On this aspect, no satisfactory reply was given by Ld. DR, which goes to show that the AO cannot be allowed to approbate and reprobate in same breath and cannot have two different treatments in the case of same transactions. Otherwise also, the creditworthiness of BEPL was doubted only on the ground that BEPL had made huge investments in shares of various concerns which are high risk and had not made any fixed assets. Whereas from their own admissions, the AO had found that BEPL had received funds on account of share capital and share premium and out of such funds, investments have been made in the assessee s company, which goes to show that AO acknowledges the source of source of BEPL for investing in the assessee company. The assessee had produced record in order to show that investing concern was assessed to tax, therefore in such a circumstances a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... we are in agreement with the said reasoning. More particularly in the case of ITR vrs. M/s Sringeri Technologies Pvt. Ltd. ITA No. 3924/Mum/2014 decided on 29.12.17, the Coordinate Bench had distinguished the facts of M/s Major Metals vrs. CIT(Supra), it was observed that all the subscribers of share capital in the above cited case were not even assessed to income tax. 16. Ld. AR has also submitted that identical issue had already been decided by the Coordinate Bench of ITAT in ITA No. 3212/Mum/ 2014 in the case of Sunshine Metals and Alloys vrs. ITO decided on 12.10.18 and in ITA No. 2317/Mum/2017 in the case of DCIT vrs. Piramal Realty Pvt. Ltd, wherein in para no. 5 to 16 it was held as under:- 5. We have heard rival contentions and gone through the facts and circumstances of the case. The facts of the case are that the assessee company issued 59,850 1% NCCPs having face value of 10/- at a premium of ₹ 99,990/- to PCPL. These shares were issued in two tranches of 20,000 and 39,850/- shares respectively. In respect of first tranche of issue of shares was applied by PCPL and money for the same was received in earlier year i.e. year ended 31st March 20 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he said decision cannot be applied in the present case on facts of the case. He explained that the said decision is rendered on different set of facts as compared to the present case. He stated that the valuation of the share premium is to be looked into for the purpose of section 68 of the Act. The facts in that case were that equity shares were issued in the year under consideration to the promoters as well as three new parties. Both these classes of shareholders were issued equity shares. Promoters were issued shares at par whereas premium of ₹ 4901- per share was charged from the new parties and for this the Tribunal has made specific note of the following: Despite making such huge investment in the company, the company did not know the whereabouts of those shareholders (para 6, page 10 of the order). Ld counsel stated that no justification for such different issue price even within this relevant year under consideration is brought on record. The Tribunal noted that no doubt the price can be different in genuine transactions as well however the case got aggravated since the shareholders to whom premium was charged could not be traced (para 6, page 10 of the or ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... go through the decision relied on by the assessee of Hon'ble Bombay High Court in case of Gagandeep (supra) which reads as under:- (c) Being aggrieved, the Revenue carried the issue in the appeal to the Tribunal. The impugned order of the Tribunal holds that the respondent assessee had established the identity, genuineness and capacity of the shareholders who had subscribed to its shares. The identity was established by the very fact that the detailed names, addresses of the shareholders, PAN numbers, bank details and confirmatory letters were filed. The genuineness of the transaction was established by filing a copy of share application form, the form filed with the Registrar of Companies and as also bank details of the shareholders and their confirmations which would indicate both the genuineness as also the capacity of the shareholders to subscribe to the shares. Further the Tribunal while upholding the finding of CIT(A) also that the amount received on issue of share capital alongwith the premium received thereon, would be on capital receipt and not in the revenue field. Further reliance was also placed upon the decision of Apex Court in Lovely Exports (P) Ltd. (sup ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... : 3.Regarding question no.(ii): (a)Before the Tribunal, the Revenue raised a new plea viz. that the so called share premium has also to be judged on the touchstone of Section 68 of the Act which provides for cash credit being charged to tax. The impugned order of the Tribunal allowed the issue to be raised before it for the first time, overruling the objection of the respondent assessee. (b)The impugned order examined the applicability of Section 68 of the Act on the parameters of the identity of the subscriber to the share capital, genuineness of the transaction and the capacity of the subscriber to the share capital. It found that the identity of the subscribers was confirmed by virtue of the Assessing Officer issuing a notices under Section 133(6) of the Act to them. Further, it holds that the Revenue itself makes no grievance of the identity of the subscribers. So far as the genuineness of the transaction of share subscriber is concerned, it concludes as the entire transaction is recorded in the Books of Accounts and reflected in the financial statements of the assessee since the subscription was done through the banking channels as evidenced by bank statement ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ct is considered in the decision of Mumbai Tribunal in case of Green Infra Ltd. Vs. ITO (2013) 145 lTD 240, wherein Tribunal has held that it is a prerogative of the Board of Directors of a company to decide the premium amount and it is the wisdom of the shareholders whether they want to subscribe to such a heavy premium. The Revenue authorities cannot question the charging of such of huge premium without any bar from any legislated law of the land. The said decision has been affirmed by Hon'ble Jurisdictional high Court in case of Green Infra Ltd (Supra). 14. The Ld. Counsel for the assessee made another argument that the power of carrying valuation is not envisaged by the Legislature for the purpose of Section 68 of the Act. He argued that, wherever the Legislature intended to give the power to determine the value to the AO, it either prescribes Rule for valuation of a particular thing or vested upon the AO the power to refer to the Valuation officer. The power of AO to make a reference to the Valuation Officer is contained in section 142A of the Act. Section 142A of the Act as it stood for the year under consideration reads as under: 142. (1) For the purposes of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... valuation of share premium. This is further evident from a parallel amendment in section 56(2) of the Act which brings in its ambit so much of the share premium as charged by a company, not being a company in which the public are substantially interested, as it exceeds the fair market value of the shares. If one accepts the Ld CIT-DR's contentions that section 68 of the Act can he applied where the transaction is proved to be that of a share allotment that here the valuation for charging premium is not justified, it will make the provisions of section 56(2)(viib) of the Act redundant and nugatory. This cannot be the intention of the Legislature especially when the amendments in the two sections are brought in at the same time. In view of the matter, the Ld Counsel explained that it is a settled law that where two views are possible, the view favorable to the assesse should be adopted as held by Hon ble Supreme Court in case of CIT Vs. Vegetable Products Ltd. (1973) 88 ITR 192. In view of the above facts and circumstances, we are of the view that the assessee has discharged its onus by adequately disclosing the transaction in its books of accounts, filing statutory forms a ..... X X X X Extracts X X X X X X X X Extracts X X X X
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