TMI Blog2019 (4) TMI 401X X X X Extracts X X X X X X X X Extracts X X X X ..... he process of setting up its business operations. Under this scenario, is difficult to infer that the assessee had such huge unaccounted money in its possession which was routed in the accounts through the mechanism of share allotment. The assessee was required to prove the source of the money only and nothing beyond. We find that the assessee has demonstrated the same by filing the requisite documents in this regard to the revenue authorities. Totality of the above factual matrix as well as settled legal position lead us to form a belief that the impugned additions u/s 68, in the hands of the assessee, were not justified. By deleting the same, we allow the appeal of assessee - I.T.A. No.1543/Mum/2017 - - - Dated:- 3-1-2019 - Shri C.N. Prasad, JM And Shri Manoj Kumar Aggarwal, AM For the Assessee : Satish R. Mody- Ld. AR For the Revenue : Rajesh Kumar Mishra - Ld.DR ORDER PER MANOJ KUMAR AGGARWAL (ACCOUNTANT MEMBER) 1. Aforesaid appeal by assessee for Assessment Year [AY] 2009-10 contest the order of Ld. Commissioner of Income-Tax (Appeals)-22, Mumbai, [CIT(A)], Appeal No. CIT(A)-22/IT/93/2015-16 dated 10/01/2017 on following effective Grounds o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he assessee, vide reply dated 02/03/2015 submitted return of allotment of shares in Form 2 filed with Registrar of Companies , Board resolution for allotment of shares, list of investors filed with ROC, Annual Return in Form No. 20B filed with ROC with details and challans etc. Further documentary evidences in the shape of details / mode of receipt of share application money, a note on justification of high premium, valuation of shares, source and nature of the receipts, account confirmations, tax related documents of investors, details / documents relating to creditworthiness of investors and correspondence with investors were also filed during the assessment proceedings to establish the genuineness of the transactions. 2.4 However, Ld. AO suspected the high premium and valuation of shares and was not satisfied with the workings submitted by the assessee. Finally, Ld. AO opined that the assessee failed to satisfy the three primary ingredients viz. identity, creditworthiness and genuineness of the transactions as envisaged by Section 68 and therefore, treating an amount of ₹ 359.70 Lacs as unexplained cash credit , added the same to the income of the assessee. 3. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rily established identity, creditworthiness and genuineness of the transactions in respect of any sum found credited in its books. All of these three conditions have to be fulfilled in respect of the sum found credited in its books. It is seen that no primary evidences such as confirmation from the investors, their bank account statements, balance sheets, income tax returns etc. furnished during assessment proceedings. These have not been produced during appellate proceedings either. I am, therefore, of the considered opinion that the appellant has failed to satisfactorily discharge the owners cast on it as per the provisions of section 68 of the act. The addition ₹ 3,59,70,275/0 u/s 68 of the act made by the Assessing Officer is, therefore, sustained. The appellant s grounds of appeal is dismissed. Aggrieved, the assessee is in further appeal before us. 4. The Ld. Authorized Representative for assessee [AR], Shri Satish R. Mody, on the strength of documents placed in the paper-book agitated the validity of reassessment proceedings and submitted that process of acquiring valid reassessment jurisdiction stood vitiated by law as well as settled judicial pronouncement ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 2497900 3. Naganand Doraswamy 210 11894 2497900 4. Prakash Grama 210 11894 2497900 5. Pramod Grama 210 11894 2497900 6. Subra Iyer 1975 11894 23480775 Total 3,59,70,275 During the course of assessment proceedings for AY 2010-11, notices under section 133(6) was issued to the above parties. However, the same were returned unserved. Therefore, the said parties are non-existing at the given address. Therefore, the claim of the assessee to have issued shares at huge premium as stated above to the above parties, requires to be examined with regard to their genuineness, identity and credit worthiness. Therefore, I have reason to believe that income chargeable to tax has escaped ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... al by sanctioning authority was given in a mechanical manner without due application of mind and therefore, the jurisdiction acquired by Ld. AO was bad in law. The form for recording the reasons for initiating proceedings u/s 148 for obtaining the Approval of the Addl. Commissioner of Income Tax 2(2), Mumbai, as placed on record, could be extracted in the following manner: - Form for recording the reasons for initiating proceedings under section 148 for obtaining, the approval of the Addl. Commissioner of Income Tax-2(2), Mumbai 1 Name and address of the assessee M/s Niyojit Financial consultancy Pvt. Ltd. 2 Permanent Account No. : AACCN7613H 3 Status : Company 4. District/ Circle/ Range : I.T.O. 2(2)(4), Mumbai 5. Assessment year in respect of which it is proposed to issue notice under section 148 : ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... perusal of the same reveal that the sanctioning authority has granted the approval in a mechanical manner without due application of mind and simply stated Yes in Column No. 12 of the sanction form. As per Section 151(2), the sanctioning authority was required to satisfy himself that it was a fit case for reopening the assessment. The sanction, as per settled legal position, was to be an objective satisfaction and the same must reflect due application of mind by the sanctioning authority. This becomes all the more important when the only material available in the hands of the revenue to invoke the reassessment proceedings was the fact that notices issued u/s 133(6) during AY 2010-11 on certain Share Allottees remained unserved and therefore, assessee s claim as to Share Allotment in AY 2009-10 was required to be examined. This being the case, we find certain force, although not conclusive, in the legal arguments raised by Ld. AR before us. 5.3 So far as the merits of the case is concerned, we find that the impugned additions have been made as unexplained cash credit u/s 68 which casted on onus upon the assessee to demonstrate fulfilment of three primary conditions viz. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... icult to infer that the assessee had such huge unaccounted money in its possession which was routed in the accounts through the mechanism of share allotment. 5.5 Last but not the least, so far as the nature of proviso to Section 68 as introduced by Finance Act, 2012 with effect from 01/04/2013 is concerned, the same has aptly been settled by jurisdictional Bombay High Court in CIT Vs. Gagandeep Infrastructure Private Limited [80 Taxmann.com 272] wherein it has been held as under: - ( e ) We find that the proviso to section 68 of the Act has been introduced by the Finance Act 2012 with effect from 1st April, 2013. Thus it would be effective only from the Assessment Year 2013-14 onwards and not for the subject Assessment Year. In fact, before the Tribunal, it was not even the case of the Revenue that Section 68 of the Act as in force during the subject years has to be read/understood as though the proviso added subsequently effective only from 1st April, 2013 was its normal meaning. The Parliament did not introduce to proviso to Section 68 of the Act with retrospective effect nor does the proviso so introduced states that it was introduced for removal of doubts or that ..... X X X X Extracts X X X X X X X X Extracts X X X X
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