TMI Blog2017 (11) TMI 1809X X X X Extracts X X X X X X X X Extracts X X X X ..... our considered view, the ld. CIT(A) has rightly deleted the addition. See M/S. MOTISONS BUILDTECH PVT. LTD VERSUS THE ACIT CENTRAL CIRCLE-2 JAIPUR AND VICE-VERSA [2017 (10) TMI 1445 - ITAT JAIPUR] - Decided against revenue - ITA No. 391/JP/2017, 491/JP/2017 - - - Dated:- 6-11-2017 - SHRI BHAGCHAND, AM And SHRI KUL BHARAT, JM Assessee by: Shri Vijay Goyal, CA And Shri Gulshan Agarwal, CA Revenue by: Smt. Rolee Agarwal, CIT DR, Shri Praveen Kumar Mittal, DCIT, Shri Kamlesh Kumar Meena, DCIT ORDER PER BENCH Both these appeals are the cross appeals filed against the order of the ld. CIT(A)4-, Jaipur dated 31-03-2017 for the A.Y. 2009-10. 2.1 The assessee has raised the following grounds in its ITA No. 391/JP/2017 for the Assessment Year 2009-10. 1. On the facts and in the circumstances of the case and in law the order passed u/s 153A read with section 153B and 143(3) of the I.T. Act, 1961 is bad in law, void abinitio and deserves to be annulled as the assessment for the A.Y. 2009-10 was not abated and ld. CIT(A) erred in holding that the AO was justified in reassessing the completed assessment. 2. On the facts and in the circumstances of t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... art of a colourful transaction by way of which a sum of ₹ 2,00,00,000/- was introduced into the books of the assessee company in the form of share premium attached to the share capital. As discussion above the premium of ₹ 490/- per share was not justified at all on the basis of absolutely no assets commensurate to premium charged, no business activity, no income, no net worth nor any promise for creation of this much assets, business activity, income or net worth in the future. Accordingly, the charging and receipt of share premium/ share capital to the tune of ₹ 2,00,00,000/- is held to be income of the assessee company in the nature of income envisaged u/s 56(1) of the Income Tax Act, 1961. The same is added back to the total income of the assessee. 3.3 In first appeal, the ld. CIT(A) has deleted the addition of ₹ 2,00,00,000/- made by the AO by observing at pages 60 to 97 of his order as under:- 3.1.2 I have duly considered assessee's submission and carefully gone through assessment order. I have also taken a note of factual matrix of the case as well as applicable case laws relied upon. Facts of the case are that no scrutiny assessmen ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ears: Provided further that assessment or reassessment, if any, relating to any assessment year falling within the period of six assessment years referred to in this sub-section pending on the date of initiation of the search under section 132 or making of requisition under section 132A, as the case may be, shall abate. As per the provisions of this section where a search is initiated u/s 132 of the Act, the A.O shall issue a notice requiring the person searched to furnish his return of income in respect of each assessment year falling within six assessment years immediately preceding the assessment year relevant to the previous year in which such search is conducted or requisition is made. Once such returns are filed, the AO has to assess or reassess the total income of such six assessment years. (emphasis supplied by me). ( The decisive words used in the provisions are to 'assessee or reassess the total income' ). The A.O. is thus duty bound to determine the 'total income' of the assessee for such six assessment years and it is obvious that 'total income' refers to the sum total of income in respect of which a person is assessable. The total i ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... f the Act cannot be invoked on routine information or on income already accounted/disclosed in the original return, the assessment of which is complete. In this regard we may gainfully refer to the decision of the Mumbai Special Bench of the ITAT in the case of Al cargo Global Logistics Ltd vs. DCIT. Apart from above, there are several decisions of various judicial authorities where it has been held that in the absence of any incriminating material found during search, additions made on the assessed income are unsustainable in law. Some of these decisions are discussed in the following paragraphs: (i) In the case of CIT vs. Kabul Chawla reported in 281 CTR 45, Delhi it has been held by the Hon'ble Delhi High Court that: 37. On a conspectus of Section 153A(1) of the Act, read with the provisos thereto, and in the light of the law explained in the aforementioned decisions, the legal position that emerges is as under: i. Once a search takes place under Section 132 of the Act, notice under Section 153 A(l) will have to be mandatorily issued to the person searched requiring him to file returns for six AYs immediately preceding the previous year relevant to the AY ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 10 of the order has held that: Therefore, the question arises whether AO can make any addition in the reassessment proceedings u/s 153(A) after making inquiries which are not suggested by any d documents or asset seized during the search. It depends on the nature of addition. The facts and circumstances of the assessee clearly show that no incriminating document found relating to the land development expenses debited in the books of accounts. No material was on the record on that basis which income of assessee could be further assessed by Assessing Officer. Therefore, the assessing officer has no jurisdiction to make or to resort to roving and fishing inquiries to find out whether any income has escaped assessment during these reassessment proceedings. Particularly, when there is no incriminating material found and seized during the course of search u/s 132(1) of the Act and nothing is available in record to reassess the income of assessee. In view of the above, this is not a fit case for making the addition in the year under consideration, the same are deleted. (iii) In the case of M/s Ideal Appliance Company Pvt. Ltd. Vs. DCIT, Central Circle-44, Mumbai, the followi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ollowed by the Tribunal in the case of Gurinder Singh Bawa vs. CIT (supra) wherein it was held that where the assessment had been completed under summary scheme under section 143(1) and time limit for issue of notice under section 143(2) had expired on the date of search ..there was no assessment pending in such a case there was no question of abatement. Therefore, addition could be made only on the basis of incriminating material found during search. (v) The relevant issues as arising out of the decision in the case of Kabul Chawla as under: 1) When there is no condition in section 153A of the Act that additions cannot be made without relevance to or without nexus to seized material, then is it for the Courts to read that condition into the provisions of section 153A of the Act? The answer is NO for the reason that the application of section 148 of the Act has been ousted by the non-obstante clause with which section 153A starts. Therefore, even if no incriminating material is found during search, if any undisclosed income has to be assessed for the relevant 6 years, it has to be in the proceedings under section 153A of the Act. a) Now there are two ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of cases which have neither been completed nor are pending on the date of search. Kabul Chawla is silent on this situation, perhaps because it was not envisaged at that time. In view of these facts and legal position that the premise developed in Kabul Chawla, that additions can be made in the completed or abated assessments only if there is incriminating material in a proceeding u/s 153A, cannot and will not apply to such a situation. 4) Now we come to the question of whether it is necessary to have incriminating material in all the 6 years for an addition to me made on issues not covered by search. Though there is an attempt to interpret Kabul Chawla in a way that incriminating material is required in all the 6 years, this interpretation is incorrect because: a) this proposition has not been specifically spelt out in the Kabul Chawla case; b) the Delhi High Court in the case of CIT v. Chetan Das Lachman Das [2012] 211 Taxman 61 (Del.)/[2012] 254 CTR 392 (Del.) has specifically raised and then answered the question in favour of the revenue. It has stated that additions on nonsearch issues can be made even if there is incriminating material in even one year. Th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... in the completed or abated assessments only if there is incriminating material in a proceeding u/s 153A, cannot and will not apply to such a situation. Now we come to the question of whether it is necessary to have incriminating material in all the 6 years for an addition to me made on issues not covered by search. Though there is an attempt to interpret Kabul Chawla in a way that incriminating material is required in all the 6 years, this interpretation is incorrect because: a) this proposition has not been specifically spelt out in the Kabul Chawla case; b) the Delhi High Court in the case of CIT v. Chetan Das Lachman Das [2012] 211 Taxman 61 (Del.)/[2012] 254 CTR 392 (Del.) has specifically raised and then answered the question in favour of the revenue. It has stated that additions on non-search issues can be made even if there is incriminating material in even one year. This case is extremely important for us. Similar sentiments have been expressed in the case of CIT v. Anil Kumar Bhatia [2013] 352 ITR 493 (Del) where only one unsigned document dated 10.02.2003 showing a loan of ₹ 1,50,000/- was found during search conducted on 13.12.2005. Th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... cts, assessee s contention is not correct that AO was not justified in reassessing the completed assessment. Assessee s appeal fails in Gr No 1. 3.2 Ground No. 2 : Regarding addition of ₹ 2,00,00,000/- made by applying the provisions of section 56(1) of Income Tax Act, 1961 treating the share capital and premium thereon received from various companies as income of the assessee. Ground No. 3: On the facts and in the circumstances of the case and in law the ld. AO erred in holding that the receipt of share capital and premium during the year from various companies is not justifiable and part of a well planned exercise of introducing unaccounted money in the form of share capital and share premium more so when the assessee was no capable to earn such huge undisclosed income. 3.2.1 Submission made: Relevant extracts of which AR of the assessee are reproduced here as under: .. .. 1) During the year under consideration the assessee allotted 58,000 equity shares of ₹ 10 each to various companies at a premium of ₹ 490/- per share detail of which is as under: - ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... areholders and genuineness of transaction with investor companies which was added by ld. AO as income of the assessee: - Name of Shareholder Particulars of Documents submitted Copy at PB Page Anuraj Securities Pvt. Ltd Share application containing the name/address/PAN of party, detail of payment received etc. Copy of board resolution. Copy of PAN card of party. Copy of bank statement showing the entry of payment made to assessee. Declaration of source of funds with party. Copy of Ack. of ITR of AY 2009-10. Copy of audit report and audited balance sheet along with annexure of 31.03.09. Copy of registration certificate issued by ROC. 102 103 104 105 106-108 109 110-125 126 Matribhumi Dealer Pvt. Ltd. Share application containing the name/address/PAN of party, detail of payment received etc. Copy of board resolution. Copy of PAN card of party. Copy of b ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... stration certificate issued by ROC. 187 188 189 190 191 192 193-202 203 Vandana Dealers Pvt. Ltd Share application containing the name/address/PAN of party, detail of payment received etc. Copy of board resolution. Copy of PAN card of party. Copy of bank statement showing the entry of payment made to assessee. Declaration of source of funds with party. Copy of Ack. of ITR of AY 2009-10. Copy of audit report and audited balance sheet along with annexure of 31.03.09. Copy of registration certificate issued by ROC. 204-205 206 207 208 209-211 212 213-224 225 Puja Tie Up Pvt. Ltd Share application containing the name/address/PAN of party, detail of payment received etc. Copy of board resolution. Copy of PAN card of party. Copy of bank statement showing the entry of payment made to assessee. Declaration of source of funds ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Vyapaar Pvt Ltd 15,00,000 33,22,10,241 33,21,86,557 Puja Dealcom Pvt Ltd 40,00,000 13,54,55,817 13,54,51,613 Tarang Suppliers Pvt Ltd 30,00,000 2,55,00,000 2,55,00,000 Vandana Dealers Pvt Ltd 30,00,000 9,39,42,000 9,39,42,000 Puja Tie-Up Pvt Ltd 40,00,000 11,95,23,840 11,95,12,729 From the above chart it is clear that all the Investor companies were having their own share capital and Reserve surplus which was much more than to the amount invested in the assessee company. The above chart shows that the investor companies were having their own independent funds and having their independent source to invest in the shares of the assessee company. Apart from the investment made in the shares of assessee companies, the investor companies were also having investments in shares of other companies or l ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... - during the year under consideration was not only abnormal but also appeared to be a part of a well planned exercise of tax evasion as discussed earlier. Regarding these findings/observations of ld. AO we may submit as under: - i) Admittedly the assessee company received huge share premium without having major business activities but the same does not automatically make the share premium as non genuine and taxable in the hands of the assessee. The investment by the investee companies was made after being convinced with the future business planning of the assessee company. The assessee company has a large chunk of agricultural land at Village Gidani (Near Dudu at main NH Jaipur Ajmer Road and planning development of township thereon. The market rate of this land was very high. The assessee company was expecting good revenue from such township and the investor companies were convinced to be partner of such project, therefore they invested the funds in the assessee company. Thus the investment made by the investee companies in shares of the assessee company on the basis of future business expansion plans of the assessee company and outcome there from. ii) Admittedly ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ompany is not having any business than question of having any income either disclosed or undisclosed does not arise and when there is no income than how the tax can be evaded thereon. Therefore in view of finding given in these paras by the ld. AO it had to be proved first by the department that the assessee was having some income on which it has not paid the tax and the same brought in books of accounts in the form of share capital premium thereon. But in the instant case the department could not prove any kind of undisclosed source of income of the assessee as a result of search over assessee as well as during the course of assessment proceedings. As a result of so called long inquiries/analysis the department could not evidentiary proved that the assessee company managed its funds with investor companies to brought the same in books of accounts in the form of share capital premium thereon more so when the investor companies having their own sufficient funds to invest in the assessee company much prior to investment made in the assessee company and other investments made by such investor companies are much more than to the investment made in assessee company. Reli ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Tradecom M/s. Evershine suppliers Pvt. Ltd were incorporated on 25.11.2008 and 05.01.2009 respectively. The inflow of capital upon incorporation was through share sold at a very high premium and thereafter the said Capital was claimed to be invested in Unquoted shares worth ₹ 11.06 Crores and ₹ 10.39 Crores respectively. (ix) All above factors indicate systematic and deliberate creation of a colurable device to introduce share capital into Motisons Group Companies. 6. In response to show cause notice the assessee filed its reply vide letter dated 13.02.2015 (Copy at PB Page 96 to 99). The submission of the assessee on the observations of ld. AO as mentioned above in para 5 above is as under: - a) The share premium was decided by the company and investors mutually and share applicant companies have agreed to pay this share premium. There was no bar to issue shares on premium under Companies Act and Income Tax Act for the period under relevant. Further the ld. AO held that the ------it is clear that entire money has been introduced in the assessee company in the garb of share premium---- but the ld. AO did not clear that what was the source of such ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... explainable then no question is arise for treating the share capital as not genuine. (ii) The low creditability of directors of allottee company, their relationship with Motisons Group etc. have no relevance for examining the genuineness of share capital and creditworthiness of the investor company as in the case of assessee it is well proved by documentary evidence that the amount against share application money was received through genuine source of funds with investor companies and the amount was adjusted against allotment of shares. The source of funds with the investor companies which they invested in assessee company was also well explained genuinely. If department have some doubt regarding genuineness of funds with investor companies the necessary investigation of such funds should had been made in the case of investor companies and the necessary action should had been taken in their case. It is relevant to mention here that apart from the investment made in the assessee company the other assets/investment of such investor companies was much more which were also managed by those companies at their own. It is also relevant to notice here that why only the investment ma ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... any source of income from with this much of undisclosed income could be earned. When there is no income than how the same can be managed to brought in books of accounts in the form of share capital. In this case the department could not prove any kind of undisclosed source of income of the assessee as a result of search over assessee as well as during the course of assessment proceedings or as a result of inquiries. As a result of so called long inquiries the department could not evidentiary proved that the assessee company managed its funds with investor companies to brought the same in books of accounts in the form of share capital more so when the investor companies having their own sufficient funds to invest in the assessee company much prior to investment made in the assessee company. Thus, from the above submission and record it is well proved that the amount so received by the assessee company from above named companies was received against share capital and the investment was made by them by their own disclosed source, therefore no addition in any way can be made in the hands of the assessee. 7. After considering the reply of the assessee on show cause notice is ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s. As per declaration of source of funds submitted by them they realized money from their old investments/advances/assets and the same money was utilized for making the investment in the assessee company. These companies are assessee of Income Tax department and in case of any doubt, necessary action could be taken in the hands of these companies and if these companies failed to explain the source of investment, necessary addition can be made in the hands of these companies by applying the provisions of section 69 of Income Tax Act. However the ld. AO made the addition in the hands of assessee company under the complete disregard of provisions of Income Tax Act and merely on surmises and conjectures. The Hon ble apex Court in the case of CIT vs. Lovely Exports (P) Ltd. 216 CTR 0195/ 6 DTR 308 (SC) held that if the share capital money is received by the assessee company from alleged bogus shareholders then the Department is free to proceed to reopen the individual assessments of such shareholders in accordance with law. Such share application money cannot be regarded as undisclosed income of the assessee company (iii) As alleged by ld. AO the assessee is not attempted to limit ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nds of the assessee company. It is admitted facts that during the year under consideration the assessee company was not having any such source of income from which this much of undisclosed income could be earned and the ld. AO is completely silent on this issue that where from this much of money was earned by the assessee company. v) The finding of ld. AO that simply because some form of identification on paper has been provided does not mean that the transaction stands explained from the viewpoint of the credit worthiness and genuineness this is to submit that by filing the sufficient documents the assessee discharge its onus cast on it by the law and now onus in on the department to disprove the submission and documents of the assessee by positive evidence. The department has not discharged its onus and no inquired were carried out and no evidence is in possession with the department to disprove the claim of the assessee. One the one hand the ld. AO is claiming that the revenue authorities can examine the transaction from all possible angles and on the other hands the transactions are being doubted and added merely on surmises and conjectures. It is further submitted that i ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... only after the transaction took place. The contention of the assessee is a pervert argument deserves to be rejected. Submission of assessee: - i) Share premium is capital receipt: If shares are issued at premium then capital receipt aggregate amount of premium is to be transferred to an account called the share premium account. This share premium account is not distributable as income just like as any other capital assets. On winding up, the surplus monies in the share premium account is to be returned to the share holders as capital. So long as the company is a going concern, the monies in share premium account can never be returned to the shareholders except through the medium of a reduction petition, or, in other words, except under exactly the same conditions as those under which any other capital asset can reach the shareholders hands. Distribution of share premium amount is not permitted through dividend. It is taken out of the category of divisible profits. The provisions in respect of issue of shares at premium are the same in the old company Act as well as in the new company Act. Hence companies Act clearly mentions that amount received as premium is ca ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... hin here tax implications, that they need to be left alone only because there was no specific bar this is to submit that for bringing a transaction into a Income Tax territory first it is to proved by the revenue authorities that the transaction is colorable device or a sham transaction. In the case of the assessee the investor companies are confirming that they have gave the amount to the assessee company as share premium and the assessee company is entering such amount in its books of accounts as a share premium. There is no evidence on record to prove that the transaction is sham transactions or not real transaction. The onus is on department to prove that the transaction is sham or not real. The allegation should be based on the evidences. The ld. AO is duty bound to prove a transaction not real and not acceptable with evidences which is absent in the instant case. Admittedly there are numerous deeming provisions related to Gift, sale consideration on sale of assets under which the deemed income are taxed but the deeming fiction can only strictly applied on the transactions for which it was made applicable. The same cannot be extended further for other transactions until and un ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ith any supporting evidence. First of all regarding allegation that the assessee introduced its own unexplained money in the share capital and share premium this is to submit that the department carried out intensive search over the assessee and during the course of search not a single document/evidence was found to show that the assessee was having some undisclosed income or having some unexplained money. As a result of inquiries carried out by the investigation wing they also could not gathered any positive evidence to show that the assessee was having any undisclosed income or unexplained money. If there is no proof with the department to prove that the assessee was having some unexplained money than how it can be alleged that the assessee has introduced its unexplained money in the form of share capital and share premium. This is completely on the basis of surmises and conjectures. ii) As regard to not providing the justification of the value of shares this is to submit that the shares issued at high rates does not make the transactions itself shame or colourful device to evade the tax. From the record it is well proved that the amount was received from the investor compa ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... . (ii) CIT Vs Orissa Corporation (P) Ltd (1986) 159 ITR 79 (SC) The assessee had given named and addresses of the cash creditors, who were income tax assessees. Revenue apart from issuing summon u/s 131 notices to creditors, did not pursue the matter further- it did not examine creditworthiness of the creditors- assessee could not, under the circumstances do anything further. Held that the additions were rightly deleted. (iii) CIT Vs Heera Lal Chagan Lal Tank (2002) 157 ITR 281 (Raj) Burden of the assessee stands discharged when the identity of the creditors is established and he confirms the loans. It is further submitted that the investor companies were having sufficient accumulated funds in the form of share capital and reserves surplus much prior to the investment made in the assessee company and the same are much more than to investment made in the shares of assessee company. The same funds were being managed by such company at their own and having investment in shares of other companies/loans advances to various parties. The investment by such companies in the assessee company was of lesser amount in comparison to total investments made by su ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... scriber company paid for in form of the share having face value of ₹ 10. The assessee company has failed to answer this question even when a specific query in this regard had been raised thus the same creates doubts regarding genuineness of share capital and premium thereon credited in books of accounts Submission of assessee: - i) The transfer of share application into share capital share premium is not only based on accounting entries but they are supported by documentary evidence. It is not a case where the certain receipts have been accounted for by assessee company as per its own sweet will. The investor companies filed the share application forms to subscribe the shares of the assesses company and in the share application form the detail of share premium is also mentioned. Thus this is not a case where the claim of the assessee is based on accounting entries. There is no contra material with the department to prove that the adjustment made in books of accounts by the assessee is not correct or not based on documents. ii) The ld. AO himself admitted that the face value of a share is intrinsically capital in nature because it imparts to the subscriber ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he modus operandi of introduction of money in the shape of high share premium which is relevant in this case also as the shares were allotted in this case also at the rate higher to the justifiable amount. Submission of assessee: - i) Whatever inquiries are being discussed in the show cause notice as well as in assessment order are not applicable in the case of the assessee for the instant year as in the year under consideration no shares were issued to such companies on which the inquiries were conducted by the department. In this year no any inquiries was made from the investor companies who made investment in the year under consideration. ii) As regard to presuming the modus operandi based on the inquired carried out in the case of some other companies presuming that the same modus operandi was followed in each and every case, this is to submit that as per law the inquiries conduced in the case of particular person should be restricted from that person only and can made applicable for the transactions carried out from such person. The same cannot be extended to making any presumption assumption in each and every case where no inquiries were made. It is not co ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nt inquiries. There is no case or evidence with the department to presume that the assessee has introduced its unexplained money in accounts of such investor companies. f) Finding of ld. AO: - Admittedly during the course of search over Motisons Group no documents/evidence was found to show that the companies who made investment in shares of the assessee company are run/manage by Motisons Group but from the inquiries and modus operandi its reveals that the allotee companies are merely paper companies and providing accommodation entries. Therefore the indirect evidence/inquiries conducts given clear sign of introduction of large money in the company in the form of share capital/share premium more so when the justification of charging such higher rate not genuinely proved. Submission of AO: - i) In this para the ld. AO himself admitted that during the course of search over Motisons Group no documents/evidence was found to show that the companies who made investment in shares of the assessee company are run/managed by Motisons Group. Thus if the department is not in possession of any positive material against the assessee or its investor companies than how the inquir ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... y through banking channels-Assessee company also furnished written confirmations from the applicant companies, copies of certificates of incorporation, PAN cards, PAN details and company details etc. of the applicants-Finding of Tribunal that identity of the subscribers stood duly established from the documents produced by the assessee, cannot be said to be perverse-There is no legal bar to more than one company being registered at the same address-Merely because the applicants did not respond to the notices sent to them, AO was not justified in adding the amount of share application money to the income of the assessee. CIT v/s. Samir Bio-tech (P) Ltd. (2009) 17 DTR (Del) 224 Income-Cash credit-Share application money-Identity of the subscribers not being in doubt, share application money having been paid by account payee cheques, subscribers having shown the amounts in their audited balance sheets and having given complete details with regard to their returns and assessments, no addition could be made under s. 68 only because the subscribers did not initially respond to summons. h) Finding of ld. AO: - It is clear that what is apparent is not real and the as ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ource of income of assessee for the year under consideration by which this much of income could be earned which also proves that the share capital received by the assessee is genuine. CIT Vs Bharat Engineering and Construction Co. (1972) 83 ITR 187 (SC) In this case tribunal came to the conclusion that unexplained cash credit entries in the first year of business of engineering construction company could not be income of assessee. The High Court after careful examination of the various findings reached by the Tribunal has come to the conclusion that the Tribunal's findings are findings of fact. Hon ble Apex court confirmed that conclusion. This gives the answer in favor of the assessee that in this case the apparent should be considered as real as the assessee company is not having any source of income from which this much of undisclosed income could be earned than question of receiving of non genuine share capital to brought its unaccounted income in its books of accounts does not arise. iii) The assessing officer merely disbelieved the explanation/statements given by the assessee and has converted good proof into no proof. Hon ble Justice Hidayatullah of the Supre ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rtain deeming income has been charged as Income Tax Act which has been provided in section 56(2) of Income Tax Act, 1961 and as per provision of section 56(2) of Income Tax Act, 1961 the share premium received prior to AY 2013-14 were not taxable in any circumstances if the assessee has proved the identity, creditworthiness and genuineness of the transactions. c) The Income for the purpose of the Income Tax Act has a well understood meaning as defined in section 2(24) of the Income Tax Act 1961. It is true that section 2(24) of the Income Act 1961 contains inclusive definition but it cannot be disputed that income should have been look into its normal meaning. The income will not include capital receipts unless it is specified in Income Tax Act. This argument clarifies after the amendment made by Finance Act 2012 w.e.f. 1.4.2013 in section 56(viib) of Income Tax Act, 1961 wherein certain share premiums were made taxable w.e.f. 01.04.2013. If the same were already taxable u/s 56(1) o Income Tax Act, 1961 and the same was already included in the definition of Income than why this amendment was made. Therefore the ld. AO is wrong in making the addition u/s 56(1) of Income Tax Ac ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he revenue contended that section 14, it is mentioned as capital gain and not capital gain chargeable u/s 45. This contention was not accepted by the High Court. If the computation provision do not apply to a case then such a case will not be covered under charging section. At later stage, a reference will be made to 56 (vii b) inserted by Finance Act 2012 w.e.f. 1.4.2013 as the same will be a computation provision. For the A.Y. 2011-12, computation provision were not there. In absence of computation provision, entire value of share premium can not be taxed u/s 56. As for tenancy right, the full consideration can not be taxed u/s 56, similarly entire share premium is not taxable u/s 56(1). ii) The Hon ble Apex Court in the case of CIT V D.P. Sandu Bros. Chembur (P) Ltd 273 ITR 1 also hold that as per 2(24)(vi) only income which is chargeable u/s 45 is to be included in income and if computation provision u/s 45 fails then charging provisions will fail. Ref. to CIT V B.C. Srinivasa Setty 128 ITR 294. iv) The Hon ble Rajasthan High Court in the Case of CIT V Gotan Lime Stone Khanij Udyog 269 ITR 399 also held that in case computation provision u/s 48 could not be applied ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... any ambiguity regarding any of these ingredients in a taxation statute then there is no tax in law. Then it is for the legislature to do the needful in the matter. Hon ble Bombay High Court in this case (Vodafone case) observed that issue of shares at a premium is on capital account and gives rise to no income. 56(1) provides the income of every kind which is not excluded from the total income is chargeable under the head income from other sources. However before section 56 of the Act can be applied there must be income which arises. If the receipt is capital then it is not income. Hence share premium is not an income. f) The CBDT vide circular/instruction No.2 dated 29.01.2015 has stated as under [371 ITR 6(st)]. In reference to the above cited subject, I am directed to draw your attention to decision of the High Court of Bombay in the case of Vodafone India Services Pvt. Ltd V UOI for the Assessment year 2009-10 (WP No.871 of 2014) wherein the court has held interalia, that the premium on share issue was on account of a capital account transaction and does not give rise to income and hence, not liable to transfer pricing adjustment. It is hereby informed ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rom the total income under the Act shall be chargeable to income tax under the head. Income from other sources if it is not chargeable to income tax. Under any of the heads specified in section 14, items A to E. For an income to be taxed u/s 56, it has to satisfy three conditions. (a) It shall be classifiable as income as per the charging section of the Act. (b) It shall not be excluded from the total income (e.g. section10). (c) It is not chargeable to tax under any of the specified Heads in section 14, items A to E. The finance Bill 2012 as presented on 16th March 2012 included a new clause (viib) u/s 56(2) of I.T. Act [342 ITR1(st)]. No proposal in the original bill to insert a new clause u/s 2(24). Subsequently Notice of amendments to Finance Bill was given [See 343 ITR 37(st)] and amendments also included the in section of clause (xvi) in 2(24) of I.T. Act and such clause is as under: (xvi) Any consideration received for issue of shares as exceeds the fair market value of the shares referred to in clause (viib) of subsection (2) of 56. The amendment introduced in 2(24) signifies that section 56 is not a charging section. Unless the income w ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ted. An amendment made to a taxing statute can be said to be intended to remove hardships only of the assessee, not of the department. Imposing a retrospective levy on the assessee would have caused undue hardship and for that reason parliament specifically chose to make the proviso effective from June 1, 2002. Where a benefit is conferred by a legislation, the rule against a retrospective construction is different. In a legislation confers a benefit on some persons but without inflicting a corresponding detriment on some other person or on the public generally, and where to confer such benefit appears to have been the legislators objects, then presumption would be that such a legislation, giving it a purposive construction, would warrant it to be given a retrospective effect. This exactly is the justification to treat procedural provision as retrospective. Where a law is enacted for the benefit of community as a whole, even in the absence of a provision the statute may be held to be retrospective in nature. The Hon ble Apex Court further noticed that CBDT circular mentioned that proviso is applicable from 1.6.2002. In respect of 56(2)(vii b), CBDT vide circular N ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... l Gaudavan ITA No. 1162 and 1137/JP/2008 and addition on account of share capital was deleted. 28.5 On identical issue, the Tribunal, Jaipur Bench in the case of Hotel Gaudavan (P) Ltd. (supra) has held as under : 6. As regards the issue on merit in the Departmental appeal, we concur with the views of the learned CIT(A) that the AO has not considered the explanation of the assessee. The amount under consideration of ₹ 1.89 crore has been received by the assessee as share application money from M/s Jalkanta Technical Financial Service (P) Ltd. (JTFSPL) after a proper resolution passed by the board of directors of the aforesaid company through banking channel. M/s JTFSPL is having permanent account and filing its return of income regularly. The AO has nowhere mentioned that money belongs to the assessee company and therefore, provisions of s. 68 cannot be invoked. The learned CIT(A) has rightly relied upon the decision of Hon ble Delhi High Court in the case of CIT vs. Steller Investment Ltd. (2000) 164 CTR (SC) 287 which has been confirmed by the Hon ble Supreme Court of India. The learned CIT(A) has also relied upon the decision of Hon ble jurisdictional High C ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ourt as mentioned in (2007) 207 CTR (Del) 38 (supra). Income-Cash credit-Share application money-Burden of proof can seldom be discharged to the hilt by the assessee-If the AO harbours doubts of the legitimacy of any subscription he is empowered, nay duty-bound, to carry out thorough investigations-But if the AO fails to unearth any wrong or illegal dealings, he cannot obdurately adhere to his suspicions and treat the subscribed capital as the undisclosed income of the company-If relevant details of address and identity of the subscribers are furnished to the Department along with copies of the shareholders registers, share application forms, share transfer register etc. it would constitute acceptable proof or explanation by the assessee-Department would not be justified in drawing an adverse inference only because the creditor/subscriber fails or neglects to respond to its notices-Tribunal has noted that the assessee company is a public limited company which had received subscriptions to the public issue through banking channels and the shares were allotted in consonance with the provisions of Securities Contract (Regulation) Act, 1956, as also the rules and regulations of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ication, confirmation of the cash creditors, copy of PAN, copy of Board resolution, copy of Director s report, auditor s report, copy of balance sheet, copy of P L account, copy of bank account in all the cases to prove the identity, genuineness and creditworthiness of the cash creditors. The ld Assessing Officer made addition on the basis of investigation conducted by the ITO, Investigation Wing, Kolkata but the ld Assessing Officer of the assessee has not clarified what inquiry had been conducted and what evidences collected which goes against the assessee. The notice U/s 131 issued by the ITO, Investigation Wing, Kolkata were served in case of Vidya Agencies Pvt. Ltd. and Shivarpan Mercantiles Pvt. Ltd., but compliance could not be made on the given date because concerned officer was on leave. In case of Middleton Goods Pvt. Ltd. And Lactrodryer Marketing Pvt. Ltd., notices were served on the assessee and in compliance to the notice, the party submitted all the documents in the IT office. The case law referred by the ld CIT(A) i.e. decision of Hon ble Delhi High Court in the case of Nipun Builders and Developers Pvt. Ltd. Vs. CIT and Vijay Power Generator Ltd. Vs CIT (supra) are ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 2 August 2014 Addition u/s 68 Share application and share premium amount credited but not proved - Whether the Tribunal was right in upholding the order of the CIT(A) who deleted the addition made u/s 68, being the share application money and share premium amount credited by the assessee which was not proved Held that:- Following the decision in CIT v. Lovely Exports (P) Ltd. [2008 (1) TMI 575 - SUPREME COURT OF INDIA] - all the four parties, who are subscribers of the shares, are limited companies and enquiries were made and received from the four companies and all the companies accepted their investment - the assessee has categorically established the nature and source of the sum and discharged the onus that lies on it in terms of Section 68 of the Act - When the nature and source of the amount so invested is known, it cannot be said to be undisclosed income - the addition of such subscriptions as unexplained credit under Section 68 of the Act is unwarranted Decided against Revenue. (vi) INCOME TAX OFFICER vs. MS. SUPERLINE CONSTRUCTION P. LTD. ITAT, BOMBAY TRIBUNAL (A) ITA No. 3644 TO 3648, 3650, 3651Mum/2014 30th November, 2015 (2015) 45 CCH 0281 MumTrib ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t there was no documentary evidence against the assessee-company to support such impugned additions. It was further submitted by the assessee that the Assessing Officer failed to appreciate that the statements of any person recorded u/s 143(3) r.w.s. 147. The assessee-company had fully discharged the burden of proof, onus of proof and explained the source of share capital and advances received by established the identity, creditworthiness and genuineness of transaction by banking instruments with documentary evidences. The further stand of the assessee had been that the assessee-company substantiated the details with the documentary evidences as extracted from the website of Ministry of Corporate Affairs, Government of India before the Assessing Officer. These facts had not been rebutted on behalf of the Revenue. (para 2.4) In view of the facts and circumstances of the present case as well as considering the decisions as discussed above on the similar issue, ITAT was not inclined to interfere with the findings of the CIT(A) who had rightly deleted the entire impugned additions of ₹ 40 lakhs made by the Assessing Officer u/s 68 of the Act on account of share capita ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... re also received through banking channels and found to be valid by the jurisdictional AO-Therefore, no addition could be made under s. 68 ix) Bhav Shakti Steel Mines (P) Ltd. vs. CIT (2009) 18 DTR (Del) 194 Income-Cash credit- Genuineness-CIT(A) not only found that the identity of each of the shareholders stood established, but also examined the fact that each of them were income-tax assessees and had disclosed the share application money in their accounts which were duly reflected in their IT returns as well as in their balance sheets-Tribunal was not therefore justified in coming to the conclusion that the CIT(A) had not considered the matter in the right perspective-Order passed by Tribunal remanding the matter for examining the share applicants set aside and that of CIT(A) restored x) Meera Engineering Commercial Co. (P) Ltd. vs. Asstt. CIT (1997) 58 TTJ (Jab) 527 Income-Cash credits-Genuineness of share capital of company-All the 51 shareholders filed their affidavits and confirmatory letters and 24 of them filed their replies also to notice under s. 133(6)-Names of parties purchasing the shares with amount subscribed were furnished before AO-All documents clearl ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ct of share capital money, the assessee-company has to prove only the existence of the person in whose name share application is received-No further burden is cast on the assessee to prove whether that person himself has invested the money or some other person has made the investment in his name-Burden to prove that the money did not belong to him but to somebody else is on the Revenue-Distinction between a public company and a private company is not very material for this purpose-AO treated the investments made by ten shareholders in the assessee-company as bogus and made addition under s. 68 -Not justified-In all the cases except that of V, AO had obtained the bank statements of the shareholders which clearly show that the accounts were regularly maintained and the shareholders had made deposits-Further, the shareholders are also assessed to tax-Simply because scrutiny assessments were not made in the case of shareholders, such assessments could not be made in the course of assessment of the assessee-Having regard to the information collected by the AO from the banks, identity of the shareholders was fully established-If any shareholder is found to have made unexplained investmen ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... shed that share application money for augmenting the investment in business has flown from assessee s own money-No substantial question of law arises-Barkha Synthetics Ltd. vs. Asstt. CIT (2005) 197 CTR (Raj) 432 followed. In view of the above submission this is to submit that the addition made by ld. AO is unjustified and deserve to be deleted . 3.3 I have duly considered assessee's submission and carefully gone through assessment order. I have also taken a note of factual matrix of the case as well as applicable case laws relied upon. I have already given a detailed findings in para 2.1.4.7 wherein total of ₹ 8,71,97,727/= has been sustained in the hands of M/s Motisons Global Pvt Ltd, M/s Motisons Entertainment Pvt Ltd, M/s Motisons Buildtech Pvt Ltd and M/s Shivansh Buildcon Pvt Ltd, details of which are as under: Name of Appellant Company ITA No AY AY Addition Made by AO Addition Sustained Addition deleted/ Relief Given Motisons Global Pvt. Ltd 753/14-15 2009-10 2,75,00 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 2,00,00,000 --------------- 2,00,00,000 Shivansh Buildcon Pvt. Ltd 771/14-15 2012-13 90,00,000 3,50,000 86,50,000 Total additions 94,14,07,100 8,71,97,727 85,42,09,373 In view of above facts and circumstances of the case as discussed above, addition of ₹ 2,00,00,000/= made on a/c of bogus share capital in the hands of assessee M/s Rainbow Buildcon Pvt Ltd is hereby deleted. Assessee get relief in Gr No. 2 3. Para 2.1.4.7 reads of ld. CIT(A) s order as under:- 2.1.4.7 In view of the above findings, it is also seen that this cash /DD was deposited at 4th Channel of source/ stage. This money came to the hands of some of appellant companies through the six companies assessed in Jaipur. However, on perusal of written submissions and compliance to show cause letter, it is also seen that the assessee has not controverted the facts narrated by Shri Santosh Choube, Shri Rajesh Kr Singh and Sh ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 10,30,00,000 - 10,30,00,000 Bholenath Real Estates Pvt. Ltd. 770/14-15 2009-10 2,90,00,000 - 2,90,00,000 Rainbow Buildcon Pvt. Ltd 757/14-15 2009-10 2,00,00,000 - 2,00,00,000 Shivansh Buildcon Pvt. Ltd 771/14-15 2012-13 90,00,000 3,50,000 86,50,000 94,14,07,100 8,71,97,727 85,42,09,373 It is pertinent to mention here that M/s. Mayukh Vinimay Pvt.Ltd received share application of ₹ 10,54,95,000/- in AY 2009-10 which was added as income of M/s.Mayukh Vinimay Pvt. Ltd in A.Y. 2009-10. Thereafter in subsequent years the part of the funds owned by this company was invested in the companies under appeal as under:- S.N. Name of company (under your appeal) Assessment Year A ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 10 14,70,000 490 500 15,00,000 4 Puja Dealcom Pvt Ltd 8,000 80,000 10 39,20,000 490 500 40,00,000 5 Tarang Suppliers Pvt LTd 6,000 60,000 10 29,40,000 490 500 30,00,000 6 Vandana Dealers Pvt Ltd 6,000 60,000 10 29,40,000 490 500 30,00,000 7 Puja Tie-Up Pvt Ltd 8,000 80,000 10 39,20,000 490 500 40,00,000 Total 40,000 4,00,000 1,96,00,000 2,00,00,000 b). The ld. AO has not mad ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 3/77 dated 15.04.1977 the monies in the share premium account cannot be treated as free reserves, as they are in the nature of capital reserves. f) On the issue of shares at premium, the ld. ITAT, Mumbai Bench in the case of ACIT V/s Gagandeep Infrastructure Pvt. Ltd. 2014-T10L656-ITAT-Mum (PB pg 354-359 of case laws) observed that issue of shares at premium is always a commercial decision which does not require any justification. The finding of the ITAT was confirmed by Mumbai High Court in its decision dated 20.03.2017 in appeal No. 1613 of 2014. PB page 306-366 /Case Laws) Further the premium is a capital receipt which has to be dealt with in accordance with section 78 of companies Act 1956. Further the company is not required to prove the genuineness, purpose or justification for charging premium of shares, share premium by its very nature is a capital receipts and is not income for its ordinary sense. In the case before Mumbai bench has to consider a case where premium of ₹ 190 per share was charged. The Tribunal observed as under (pg 358 to 359/Case laws): 11. We have carefully perused the orders of the lower authorities. In our considered view, the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ters. 11.1. Considering all these undisputed facts, it can be safely concluded that the initial burden of proof as rested upon the assessee has been successfully discharged by the assessee . Even if it is held that excess premium has been charged, it does not become income as it is a capital receipt. The receipt is not in the revenue field. What is to be probed by the AO is whether the identity of the assessee is proved or not. In the case of share capital, if the identity is proved, no addition can be made u/s. 68 of the Act. We draw support from the decision of the Hon ble Supreme Court in the case of Loevely Exports Pvt. Ltd. 317 ITR 218. We, therefore do not find any error or infirmity in the findings of the Ld. CIT(A). Ground No. 1 is accordingly dismissed. g) As per provisions of section 56(1) of Income Tax Act, 1961 Income of every kind which is not to be excluded from the total income under this Act shall be chargeable to income-tax under the head Income from other sources , if it is not chargeable to income-tax under any of the heads specified in section 14, items A to E. In the case of the assessee company, the amount was received from investors were agai ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... vision. Before the amendment, consideration received as premium was not income. The legislature in its wisdom required the share premium in excess of fair market value to be income from Assessment year 201314 and not the entire premium to be treated as income . CBDT vide circular No.3 of 2012 dated 12.06.2012 has also mentioned that provisions of 56(2)(vii b) will be applicable for Assessment year 2013-14 onward. Therefore, amendment in section 56(2)(viib) of Income Tax Act, 1961 effective from 1st April 2013 and will accordingly apply in relation to assessment year 2013-14 and subsequent assessment years and the provisions of this section cannot be made applicable in previous years. In this regard the ratio has been laid down in following judgments: - a) By Finance Act 1994, section 55(2) was amended to provide that cost of acquisition of a tenancy right will be taken as Nil. The Hon ble Apex Court in the case of D.P. Sandu Bros. Chembur (P) Ltd (supra), held that amendment took effect from 1st April, 1995 and therefore will not be applicable for A.Y. 1987-88. Similar finding has been recorded by Hon ble Raj, High Court in the case of Gotan Lime Stone Khanij Udhyog. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... The Hon ble Apex Court further noticed that CBDT circular mentioned that proviso is applicable from 1.6.2002. In respect of 56(2)(vii b), CBDT vide circular No.3 of 2012 dated 12.06.2012 has also mentioned that provisions of 56(2)(vii b) will be applicable for assessment year 2013-14 onward. Hence Share premium even if in excess of Fair market value is not taxable u/s 56(1) for the A.Y. 2011-12. i) Section 56 is not a charging section. This section starts with the following sentence. Income of every kind which is not to be excluded from the total income under the Act shall be chargeable to income tax under the head. Income from other sources if it is not chargeable to income tax. Under any of the heads specified in section 14, items A to E. For an income to be taxed u/s 56, it has to satisfy three conditions. (a) It shall be classifiable as income as per the charging section of the Act. (b) It shall not be excluded from the total income (e.g. section10). (c) It is not chargeable to tax under any of the specified Heads in section 14, items A to E. The finance Bill 2012 as presented on 16th March 2012 included a new clause (viib) u/s 56(2) of I.T. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nce for the year under consideration there was no provision in Income Tax Act, 1961 wherein the fair value of share could be computed and the excess share premium could be taxed, therefore in absence of computation provision the same cannot be taxed. The reliance is also placed on following cases: - i) The Hon ble Bombay High Court in the case of Cadell Wvg. Mills Co.(p) Ltd. V CIT 249 ITR 265 (PB 2241/Case Laws) had an occasion to consider the taxability of a sum received in respect of consideration of tenancy Right. Hon ble High Court held that surrender of tenancy right which was not chargable to tax as capital gain under section 45 could not be taxed as casual and non recurring receipt under section 10(3) r.w. s. 56 under the head Income from other sources . ii) The Hon ble Apex Court in the case of CIT V D.P. Sandu Bros. Chembur (P) Ltd 273 ITR 1 (PB 4249/Case Laws) also hold that as per 2(24)(vi) only income which is chargeable u/s 45 is to be included in income and if computation provision u/s 45 fails then charging provisions will fail. Ref. to CIT V B.C. Srinivasa Setty 128 ITR 294. iii) The Hon ble Rajasthan High Court in the Case of CIT V Gotan Lime Sto ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ously convey the three components of the tax law i.e. subject of the tax, the person who is liable to pay the tax and the rate at which the tax is to be paid. If there is any ambiguity regarding any of these ingredients in a taxation statute then there is no tax in law. Then it is for the legislature to do the needful in the matter. Hon ble Bombay High Court in this case (Vodafone case) observed that issue of shares at a premium is on capital account and gives rise to no income. 56(1) provides the income of every kind which is not excluded from the total income is chargeable under the head income from other sources. However before section 56 of the Act can be applied there must be income which arises. If the receipt is capital then it is not income. Hence share premium is not an income. i) The CBDT vide circular/instruction No.2 dated 29.01.2015 has stated as under [371 ITR 6(st)]. In reference to the above cited subject, I am directed to draw your attention to decision of the High Court of Bombay in the case of Vodafone India Services Pvt. Ltd V UOI for the Assessment year 2009-10 (WP No.871 of 2014) wherein the court has held interalia, that the premium on share ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... addition under section 68 cannot be made, so he applied section 56(1) of ITax Act to make the addition. The assessee submitted detailed reply before ld CIT(A) vide letter dated 22/08/2016 (copy at PB pg 246-299). Ld CIT(A) when satisfied that the addition u/s 56(1) can t be made, he tried to sustain the addition by applying the provisions of section 68 of Income Tax Act. He issued a show cause notice vide letter dated 09/03/2017 (Copy at PB pg 300-346). The assessee submitted detailed reply on the show cause notice of ld CIT(A) vide letter dated 24-03-2017 28/03/2017 alongwith documents (Copy at Pb pg 347-430). To support that shareholders were genuine and creditworthiness is proved, the assessee has filed all details, in respect of incorporation/existence of investors and details of cheques vide which amounts were received. The capacity of shareholders is verifiable from the copy of the balance sheet of the shareholders. The shareholders have funds on a prior date from the allotment of shares given by the assessee company and such funds were more than the amount of share application. l) During the course of assessment proceedings the assessee submitted the following docume ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... board resolution. Copy of PAN card of party. Copy of bank statement showing the entry of payment made to assessee. Declaration of source of funds with party. Copy of Ack. of ITR of AY 2009-10. Copy of audit report and audited balance sheet along with annexure of 31.03.09. Copy of registration certificate issued by ROC. 169-170 171 172 173 174 175 176-185 186 Tarang Suppliers Pvt. Ltd Share application containing the name/address/PAN of party, detail of payment received etc. Copy of board resolution. Copy of PAN card of party. Copy of bank statement showing the entry of payment made to assessee. Declaration of source of funds with party. Copy of Ack. of ITR of AY 2009-10. Copy of audit report and audited balance sheet along with annexure of 31.03.09. Copy of registration certificate issued by ROC. 187 188 189 190 191 192 193-202 203 Vandana Dealers Pvt. Ltd Share application containing the name/ad ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... value in the accounts of the companies. The chart showing the amount invested by the above named companies in assessee company viz a viz own funds with the investor company are as under: - Name of the Investor company Amount invested in assessee company Share capital and reserve surplus with Investor companies as on 31.03.2009 Share capital and reserve surplus with Investor companies as on 31.03.2008 Anuraj Securities Pvt Ltd 20,00,000 3,90,10,000 3,90,10,000 Matribhumi Dealers Pvt Ltd 25,00,000 3,16,50,000 3,16,50,000 Narottamka Trade Vyapaar Pvt Ltd 15,00,000 33,22,10,241 33,21,86,557 Puja Dealcom Pvt Ltd 40,00,000 13,54,55,817 13,54,51,613 Tarang Suppliers Pvt Ltd 30,00,000 2,55,00,000 2,55,00,000 Vandana Dealers Pvt Ltd 30,00,00 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ssessee showing chain of source it is apparent that even there is no cash deposit till 4th stage of channel source ( Copy at Pb pg 669 to 698/ AY 2012-13 filed in the case of Motisons Entertainment (India) Pvt Ltd ITA No 485/JP/17). If there is any cash deposited at 4th channel or beyond to that stage then the inquiry should have been made from the concerns in whose bank a/c such funds floated and necessary action should have been taken in the cases of such concern but the assessee cannot be hold responsible for cash deposit in some account at 4th Channel. Under section 68 of Income Tax Act, 1961 the onus of the assessee is to prove the source of credit entry and there is no onus of assessee to prove the source of source or source of all channel sources. The amendment in section 68 of I. Tax was made by inserting the following proviso to section 68 w.e.f. 01/04/2013 which require to prove source of finds in the hands of shareholder company. Though not required by law but still the assessee has proved source of finds in the hands of shareholder company. The amended section even does not require to prove source of funds in the hands of 3rd or 4th stage. Further the amendment in ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... a submission on behalf of the Revenue that such large amount of share premium gives rise to suspicion on the genuineness (identity) of the shareholders i.e. they are bogus. The Apex Court in Lovely Exports (P) Ltd. (supra) in the context to the pre amended Section 68 of the Act has held that where the Revenue urges that the amount of share application money has been received from bogus shareholders then it is for the Income Tax Officer to proceed by reopening the assessment of such shareholders and assessing them to tax in accordance with law. It does not entitle the Revenue to add the same to the assessee's income as unexplained cash credit. (f) In the above circumstances and particularly in view of the concurrent finding of fact arrived at by the CIT(A) and the Tribunal, the proposed question of law does not give rise to any substantial question of law. Thus not entertained. But in the case of the assessee the fact remains that the assessee has also proved source of source by submitting the copy of bank statement of the share applicant company wherein no cash deposit was made against the share application money. Therefore, the addition on share application r ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... xamine the source of income of the said alleged creditors to find out whether they were credit-worthy or were such who could advance the alleged loans. There was no effort made to pursue the so-called alleged creditors. In those circumstances, the assessee could not do any thing further. In the premises, if the Tribunal came to the conclusion that the assessee has discharged the burden that lay on him, then it could not be said that such a conclusion was unreasonable or perverse or based on no evidence. If the conclusion is based on some evidence on which a conclusion could be arrived at, no question of law as such arises. 12. In the case of CIT v. Chandra Prakash Rana [2001] 48 DTR 271 (Raj.), this Court noticed similar nature grounds urged on behalf of the revenue and found the same not leading to any substantial question of law. This Court noticed, observed, and held as under:- 7. Learned counsel for the appellant (Revenue) contended that firstly Tribunal erred in accepting the explanation offered by assessee in relation to source of income. His second submission was that what was offered by assessee was no explanation and hence should not have been accepted and la ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ce on the documents filed by assessee. As a consequence thereof, the additions made by AO came to be deleted. 13. In CIT v. Shree Barkha Synthetics Ltd. [2004] 270 ITR 477 (Raj.), in a similar nature matter, this Court observed that the Tribunal having found that the companies from which the share application money had been received by the assessee-company were genuinely existing and the identity of the individual investors were also established and they had confirmed the fact of making investment, the finding that assessee had discharged initial burden and addition under Section 68 could not be sustained, was essentially a finding of fact. This Court said,- 19. A perusal of the aforesaid finding goes to show that deletion has been made on appreciation ofevidence, which was on record Finding that there was existence of investors and their confirmation has been obtained, were found to be satisfactory. All these conclusions are conclusions of fact based on material on record and, therefore, cannot be said to be perverse so as to give rise to question of law, which may be required to be considered in this appeal under s.260A of the IT Act. 14. The ratio of the dec ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nt of share capital could not be regarded as undisclosed income of company-Amount referable to share application could not be attributed to assessee and could not be assessed in its hands-Appeal dismissed (vi) Commissioner of Income Tax Vs. Akj Granites (P) Ltd. (Raj HC) (2008) 301 ITR 0298 (PB pg 166 to 168/Case Laws) held that in respect of share applications received from different places accompanied with share application money, no presumption can be drawn that same belong to the assessee and cannot be assessed in his hands as his undisclosed income unless some nexus is established that share application money for augmenting the investment in business has flown from assessee s own money-No substantial question of law arises-Barkha Synthetics Ltd. vs. Asstt. CIT (2005) 197 CTR (Raj) 432 followed. (vii) Commissioner of Income-Tax, Central, Jaipur Versus Supertech Diamond Tools (Pvt) Ltd. (Raj HC) D. B. IT Appeal No. 74 of 2012 Dated: - 12 December 2013. (PB pg 169 to 174/Case Laws) (viii) Commissioner of Income-tax - I, Jaipur Versus AL Lalpuria Construction (P.) Ltd (Raj HC) D.B. IT Appeal Nos. 256 of 2010 AND 26 39 of 2011 Dated: - 25 February 2013. (PB pg 175 t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... th Feb., 2006) [reported at (2006) 101 TTJ (Jd)(TM) 124-Ed.] where it has been held that the assessee has to prove the existence of the shareholders which in the present case is not under dispute. Therefore, the assessee has discharged the burden and therefore the AO was not justified in making any addition under s. 68 of the Act. The learned counsel for the assessee has referred to the decision of Hon ble Supreme Court of India in the case of Divine Leasing Finance Ltd. dt. 21st Jan., 2008, the copy of which is placed on record where it has been observed by the Supreme Court as under : Can the amount of share money be regarded as undisclosed income under s. 68 of IT Act, 1961 ? We find no merit in this SLP for the simple reason that if the share application money is received by the assessee company from alleged bogus shareholders, whose names are given to the AO, then the Department is free to proceed to reopen their individual assessments in accordance with law. Therefore, we find no infirmity in the order of the learned CIT(A), with the impugned judgment. The said decision of Hon ble Supreme Court of India has been followed by the Tribunal, Delhi Bench in the cas ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ere benamidars or fictitious persons or that any part of the share capital represented company s own income from undisclosed sources. 28.7 The Hon ble apex Court in the case of CIT vs. Lovely Exports (P) Ltd. (supra) held that if the share capital money is received by the assessee company from alleged bogus shareholders then the Department is free to proceed to reopen the individual assessments of such shareholders in accordance with law. Such share application money cannot be regarded as undisclosed income of the assessee company. 28.8 The Hon ble High Court in the case of First Point Finance Ltd. (supra) held that burden of proof on the assessee company lies to the extent of making out a case that investor exists and thereafter it is not for the assessee to further prove where they have brought money from to invest with it. 28.9 The Hon ble Delhi High Court in the case of CIT vs. United Bio-tech (P) Ltd. 2010 TIOL-533-HC-Del held that in case the identity of the share applicants has been established and it is found that the said applicants are corporate assessees who are assessed to tax with IT Department then there is no case of any substantial question of law ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of inquiry has not been provided by the Assessing Officer to the assessee. As per findings of the Hon'ble Delhi High Court in the case Nipun Builders and Developers Pvt. Ltd. Vs. CIT (supra), the Investigation Officer at Kolkata had not deputed Inspector to enquire the whereabouts of the company. The case laws referred by the assessee are squarely applicable on the facts and circumstances of the appellant s case, therefore, we reverse the order of the ld CIT(A) on technical ground as well as on merit also . (iii) Uma Polymer (P) Ltd. , 101 TTJ 124, Jodhpur (PB pg 282 to 318/Case Laws) Income-Cash credit- Share application money-In respect of share capital money, the assessee-company has to prove only the existence of the person in whose name share application is received-No further burden is cast on the assessee to prove whether that person himself has invested the money or some other person has made the investment in his name-Burden to prove that the money did not belong to him but to somebody else is on the Revenue-Distinction between a public company and a private company is not very material for this purpose- AO treated the investments made by ten shareholders in th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the share applicant is identified, that amount cannot be added in the assessee's hands u/s 68 of the Act. The Hon'ble Rajasthan High Court has repeatedly reiterated the above legal position. These cases are: (i) CIT vs. Shree Barkha Synthetics Ltd. 182 CTR 175 (Raj.) (ii) Barkha Synthetics Ltd. vs. ACIT (2005), 197 CTR 432 (Raj).13 In coming to the above conclusion, the Hon'ble Jurisdictional High Court has considered at length the relevant decisions on the issue like CIT vs. Steller Investment Ltd. (2000) 164 CTR (SC) 287 = 251 ITR 263 (SC) which has confirmed the decision of Hon'ble Delhi High Court reported in (1992) 192 ITR 287. The Hon'ble Court has gone to the extent of stating that even if it be assumed that the subscriber to the share capital are not genuine, nevertheless, under no circumstances can the amount of share capital be regarded as undisclosed income of the assessee. In this case, the share subscriber is identified. There can be no dispute regarding the above stated legal position. The following decisions also lay down the same ratio:- (i) CIT vs. Lovely Exports (P) Ltd. (2008) 6 DTR 308 (SC) (ii) CIT vs. Do ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... re made and received from the four companies and all the companies accepted their investment - the assessee has categorically established the nature and source of the sum and discharged the onus that lies on it in terms of Section 68 of the Act - When the nature and source of the amount so invested is known, it cannot be said to be undisclosed income - the addition of such subscriptions as unexplained credit under Section 68 of the Act is unwarranted Decided against Revenue. (ii) CIT vs. Illac Investment (P) Ltd. (2007) 207 CTR (Del) 687; (PB pg 341 to 342/Case Laws) assessee-company has satisfactorily established the identity of the share subscribers and deleted the addition under s. 68, no substantial question of law arises for consideration. (iii) CIT vs. Divine Leasing Finance Ltd. (2007) 207 CTR (Del) 38; (PB pg 321 to 340/Case Laws) Income-Cash credit-Share application money- Burden of proof can seldom be discharged to the hilt by the assessee-If the AO harbours doubts of the legitimacy of any subscription he is empowered, nay dutybound, to carryout thorough investigations-But if the AO fails to unearth any wrong or illegal dealings, he cannot obdurately adhere ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nvest the amount in the shares. (vii) Bhav Shakti Steel Mines (P) Ltd. vs. CIT (2009) 18 DTR (Del) 194 Income-Cash credit-Genuineness- CIT(A) not only found that the identity of each of the shareholders stood established, but also examined the fact that each of them were income-tax assessees and had disclosed the share application money in their accounts which were duly reflected in their IT returns as well as in their balance sheets-Tribunal was not therefore justified in coming to the conclusion that the CIT(A) had not considered the matter in the right perspective-Order passed by Tribunal remanding the matter for examining the share applicants set aside and that of CIT(A) restored (d) Other Benches of ITAT (i) ITO V M/s. Reliance Marketing Pvt. Ltd. 2015TIOL-319-TAT-Del (PB pg 367 to 375/Case Laws) identity of the creditors/share applicants by furnishing their PAN number and copy of acknowledgment of Income-tax Return. The amount on account of share application was received through banking channel, copies of the confirmation alongwith affidavit of the parties were furnished. The assessee also furnished the copy of share application forms, copy of Form no.2 filed ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... areholders whose name are given to the AO then the department is free to proceed to reopen their individual assessments in accordance with law but it cannot be regarded as undisclosed income of assessee company. (para 2.3) In this background, it was submitted on behalf of the assessee that the Assessing Officer failed to appreciate that there was no documentary evidence against the assessee-company to support such impugned additions. It was further submitted by the assessee that the Assessing Officer failed to appreciate that the statements of any person recorded u/s 143(3) r.w.s. 147. The assessee-company had fully discharged the burden of proof, onus of proof and explained the source of share capital and advances received by established the identity, creditworthiness and genuineness of transaction by banking instruments with documentary evidences. The further stand of the assessee had been that the assessee-company substantiated the details with the documentary evidences as extracted from the website of Ministry of Corporate Affairs, Government of India before the Assessing Officer. These facts had not been rebutted on behalf of the Revenue. (para 2.4) In view of the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ough bank channels and confirmation and supporting evidence was filed-CIT(A) was justified in deleting the additions. (v) 2017 (3) TMI 1047-ITAT AHMEDABAD Income Tax Officer, Ward 8 (1), Ahmedabad Versus Seven Star Aviation Services Pvt. Ltd (PB pg 400 to 404/Case Laws) Addition u/s 68 - share application money and unsecured loan received. Held that: - When the depositors are regular tax payers and the advances made by such depositors as also share application monies paid by such shareholders are duly accepted in their personal assessments, there cannot be any occasion to hold that these amounts are unexplained in the hands of the company. The credit worthiness or identity cannot be an issue in such a situation. (vi) 2016 (10) TMI 920 - ITAT HYDERABAD M/s. Hariom Concast and Steel Pvt. Ltd. Versus Income Tax Officer, Ward-2 (2) , Hyderabd (PB pg 405 to 411/Case Laws) Addition for shares issued on premium. Held that: - Share premium cannot be brought to tax invoking the provisions of Section 68, unless there is a link with either quid pro quo transaction or investing by assessee-company in their accounts so as to receive it back as share capital. No such evidence was brough ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... it of cash. In our case no cash deposit in the bank account of shareholder company. Further, the summons u/s section 131 of I.tax Act were sent to the shareholders which were received back unserved. In view of the above submission, the humble assessee prays your honor kindly to dismiss the appeal filed by the department. 3.6 We have heard the rival contentions and perused the materials available on record. It is pertinent to mention that the similar issue has been dealt with and decided by this Bench of ITAT vide its order dated 30-10-2017 in the case of ACIT, Central Circle-2, Jaipur vs Motisons Buildtech Pvt. Ltd in ITA No. 481/JP/2017 (Revenue s appeal) for the Assessment Year 2009-10. Since the issue raised by the Revenue in the present appeal is same as decided in the appeal of the Revenue in ITA No.481/JP/2017for the Assessment Year 2009-10 in the case of ACIT, Central Circle-2, Jaipur vs Motisons Buildtech Pvt. Ltd Jaipur (supra) which shall apply mutatis mutandis in the present appeal of Revenue also. Thus solitary ground of ITA No.491/JP/2017 for the A.Y. 2009-10 of Revenue s appeal is dismissed. 4.0 In the result, both the appeals filed by the assessee and b ..... X X X X Extracts X X X X X X X X Extracts X X X X
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