TMI Blog2019 (5) TMI 418X X X X Extracts X X X X X X X X Extracts X X X X ..... harged its onus to prove the identity, creditworthiness and genuineness of the share applicants. The PAN details, bank account statements, audited financial statements and Income Tax acknowledgments were placed on AO's record. Accordingly all the three conditions as required u/s. 68 of the Act i.e. the identity, creditworthiness and genuineness of the transaction was placed before the AO and the onus shifted to AO to disprove the materials placed before him. Without doing so, the addition made by the AO is based on conjectures and surmises cannot be justified. In the facts and circumstances of the case as discussed above, no addition was warranted under Section 68 - We are inclined to delete the addition confirmed by the Ld. CIT(A) and consequently the appeal of Assessee is allowed. - I.T.A. No. 2411/Kol/2017 - - - Dated:- 1-5-2019 - Shri A. T. Varkey, JM And Dr. A.L. Saini AM For the Appellant : Shri Subash Agarwal, Advocate For the Respondent : Shri Rabin Choudhury, Addl. CIT, Sr. DR ORDER PER SHRI A.T.VARKEY, JM This is an appeal preferred by the Assessee against the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... identity, creditworthiness and genuineness of the transactions, the AO issued notices in the addresses provided by the assessee to the share subscribers. The AO acknowledged that he got responses to letters u/s 133(6) of the Act, wherein the share subscribers confirmed the transaction which was received by the AO on 15th and 16th January, 2016 and filed the following documents: 1. Copy of letter regarding detailing share application money paid. 2. Copy of bank account statement. 3. Copy of extracts of minutes of meeting of board of directors. 4. Copy of letter of allotment of shares. 5. Copy of PAN card. 6. Copy of ITR for the assessment year 2012-13. 7. Copy of audited balance sheet. 5. The AO at page 3 has given the details of the share capital and share premium as well as the turnover and profit and loss accounts of the share subscribing companies and thereafter, taking note that the assessee failed to produce the directors of the share subscribing companies was pleased to take adverse view against them and made the addition of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... confirmation and details of Income Tax Returns filed by them 5 as also by producing copies of their bank statements and sources of funds out of which the loans had been given. Some of the depositors were even examined by the AO during the course of assessment proceedings and nothing has been brought on record by the AO to show that in their depositions they have denied giving the loans or that their creditworthiness was not established. Once the depositors have accepted the fact that the amounts 'have been advanced by them by way of banking channels and they have produced their bank statements in support of their contention no adverse inference can be drawn in the hands of the appellant merely on the ground that before the issue of loan cheques an equivalent amount was deposited in the account of the depositors. The onus to explain the deposit in their bank accounts is on the depositors and if any adverse inference has to be drawn on the basis of examination of these accounts unless nexus is established between the depositors in the bank accounts of the depositors and flow of fund from the appellant such adverse inference has to be drawn only in the hands of the depositors and ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... troduced with the capital of the assessee is only a fa ade for conversion of unaccounted money and thereafter, relied on the Hon ble Jurisdictional High Court decision in CIT vs Nivedan Vanijya Niyojan Ltd. 263 ITR 623 (Calcutta) and also the decision of Tribunal M/s. Subhalaxmi Vanijya Pvt. Ltd. as well as the decision of the Tribunal in M/s. Bishakha Sales Pvt. Ltd. vs CIT. The Learned DR also relied on the judgement of the Hon ble Calcutta High Court in the case of CIT vs Precision Finance Pvt. Ltd. 208 ITR 465 and also relied on the decision of the Hon ble Supreme Court in Konark Structural Engineers (P) Ltd. vs DCIT 96 taxmann.com 255 and relying on these decision the Learned DR submitted that the authorities below rightly made the addition of the share capital and share premium u/s 68 of the Act and does not want us to interfere with the order passed by the Ld. CIT(A). 9. We have heard both the parties and also perused the records. We note that the assessee has raised share capital of ₹ 1.80 crores during the year under consideration. This capital was raised by way of issue of 80,000 shares of ₹ 10/- each at a premium of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 11. We also note that from a perusal of the assessment order that the assessee had filed the audited balance sheet and other documents submitted by the investor companies before the AO and thus he could take note of the share capital, premium, turnover, P L Account etc. of the share subscribing companies. Even though the share subscribing companies filed all the aforesaid documents as stated in para 10 supra as well before the AO and they also confirmed the transaction with the assessee-company, still the AO made the addition u/s 68 of the Act which action had been confirmed by the Ld. CIT(A) which action is being challenged before us. Before we adjudicate as to whether the Ld. CIT(A) s action is right or erroneous, let us look at Section 68 of the Act. 12. Section 68 under which the addition has been made by the Assessing Officer reads as under: 68. Where any sum is found credited in the books of an assessee maintained for any previous year, and the assessee offers no explanation about the nature and source thereof or the explanation offered by him is not, in the opinion of the Assessing Officer, satisfactory, the sum so credit ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... laid down by the Supreme Court in the case of Orissa Corporation [1986] 159 ITR 78. In the said decision the Supreme Court has observed that when the assessee furnishes names and addresses of the alleged creditors and the GIR numbers, the burden shifts to the Department to establish the Revenue's case and in order to sustain the addition the Revenue has to pursue the enquiry and to establish the lack of creditworthiness and mere non-compliance of summons issued by the Assessing Officer under section 131, by the alleged creditors will not be sufficient to draw and adverse inference against the assessee. in the case of six creditors who appeared before the Assessing Officer and whose statements were recorded by the Assessing Officer, they have admitted having advanced loans to the assessee by account payee cheques and in case the Assessing Officer was not satisfied with the cash amount deposited by those creditors in their bank accounts, the proper course would have been to make assessments in the cases of those creditors by' treating the cash deposits in their bank accounts as unexplained investments of those creditors under section 69. 14. In the case of N ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ource(s) of the creditor and/or of the sub-creditor, the burden on the assessee under section 68 is definitely limited. This limit has been imposed by section 106 of the Evidence Act which reads as follows: Burden of proving fact especially within knowledge.-When any fact is especially within the knowledge of any person, the burden) of proving that fact is upon him. ******** What, thus, transpires from the above discussion is that white section 106 of the Evidence Act limits the onus of the assessee to the extent of his proving the source from which he has received the cash credit, section 68 gives ample freedom to the Assessing Officer to make inquiry not only into the source(s)of the creditor but also of his (creditor's) sub-creditors and prove, as a result, of such inquiry, that the money received by the assessee, in the form of loan from the creditor, though routed through the sub-creditors, actually belongs to, or was of, the assessee himself. In other words, while section 68 gives the liberty to the Assessing Officer to enquire into the source/source from where the creditor has received the money, section 106 mak ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... words, the genuineness as well as the creditworthiness of a creditor have to be adjudged vis-a-vis the transactions, which he has with the assessee. The reason why we have formed the opinion that it is not the business of the assessee to find out the actual source or sources from where the creditor has accumulated the amount, which he advances, as loan, to the assessee is that so far as an assessee is concerned, he has to prove the genuineness of the transaction and the creditworthiness of the creditor vis-a-vis the transactions which had taken place between the assessee and the creditor and not between the creditor and the sub-creditors, for, it is not even required under the law for the assessee to try to find out as to what sources from where the creditor had received the amount, his special knowledge under section 106 of the Evidence Act may very well remain confined only to the transactions, which he had' with the creditor and he may not know what transaction(s) had taken place between his creditor and the sub-creditor ********** In other words, though under section 68 an Assessing Officer is free to show, with the help of the inq ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... by the appellant from undisclosed sources. The learned Tribunal seriously fell into error in treating the said amounts as income derived by the appellant from. undisclosed sources merely on the failure of the sub-creditors to prove their creditworthiness. 15. Further, in the case of CIT v. S. Kamaljeet Singh [2005] 147 Taxman 18(All.) their lordships, on the issue of discharge of assessee's onus in relation to a cash credit appearing in his books of account, has observed and held as under:- 4. The Tribunal has recorded a finding that the assessee has discharged the onus which was on him to explain the nature and source of cash credit in question. The assessee discharged the onus by placing (i) confirmation letters of the cash creditors; (ii) their affidavits; (iii) their full addresses and GIR numbers and permanent account numbers. It has found that the assessee's burden stood discharged and so, no addition to his total income on account of cash credit was called for. In view of this finding, we find that the Tribunal was right in reversing the order of the AA C, setting aside the assessment order. 16. We also take no ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ess and also other documents, viz., confirmatory statements of the persons, of having advanced cash amount as against the supply of bidis. These evidence were duly considered by the Commissioner of Income-tax (Appeals). Therefore, the failure of the person to turn up pursuant to the summons issued to any witness is immaterial when the material documents made available, should have been accepted and indeed in subsequent year the same explanation was accepted by the Income-tax Officer. He further contended that when the Tribunal has relied on the entire judgment of the Commissioner of Income-tax (Appeals), therefore, it was not proper to take up some portion of the judgment of the Commissioner of Income-tax (Appeals) and to ignore the other portion of the same. The judicial propriety and fairness demands that the entire judgment both favourable and unfavourable should have been considered. By not doing so the Tribunal committed grave error in law in upsetting the judgment in the order of the Commissioner of Income-tax (Appeals). 9. In this connection he has drawn our attention to a decision of the Supreme Court in the case of Udhavdas Kewalram v. CIT [19671 66 ITR ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... inding on all contentions raised by the assessee and the Commissioner, in the light of the evidence and the relevant law. It is also ruled in the said judgment at page 465 that if the Tribunal does not discharge the duty in the manner as above then it shall be assumed the judgment of the Tribunal suffers from manifest infirmity. 12. Taking inspiration from the Supreme Court observations we are constrained to hold in this matter that the Tribunal has not adjudicated upon the case of the assessee in the light of the evidence as found by the Commissioner of Income-tax (Appeals). We also found no single word has been spared to up set the fact finding of the Commissioner of Income-tax (Appeals) that there are materials to show the cash credit was received from various persons and supply as against cash credit also made. 13. Hence, the judgment and order of the Tribunal is not sustainable. Accordingly, the same is set aside. We restore the judgment and order of the Commissioner of Income-tax (Appeals). The appeal is allowed. 18. When a question as to the creditworthiness of a creditor is to be adjudicated and if t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... iven to the AO, then the Department is free to proceed to reopen their individual assessments in accordance with law. Hence, we find no infirmity with the impugned judgment. 20. Our attention was also drawn to the decision of the Hon'ble Calcutta High Court while relying on the case of Lovely Exports, in the appeal of COMISSIONER OF INCOME TAX, KOLKATA-IV Vs ROSEBERRY MERCANTILE (P) LTD., ITAT No. 241 of 2010 dated 10- 01-2011 has held: On the facts and in the circumstances of the case, Ld. CIT(A) ought to have upheld the assessment order as the transaction entered into by the assessee was a scheme for laundering black money into white money or accounted money and the Ld. CIT (A) ought to have held that the assessee had not established the genuineness of the transaction. It appears from the record that in the assessment proceedings it was noticed that the assessee company during the year under consideration had brought ₹ 4, 00, 000/- and ₹ 20,00,000/- towards share capital and share premium respectively amounting to ₹ 24,00, 000/- from four shareholders being private limited companies. The Assessing Off ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... material to show that the share capital was the income of the assessee company and as such the addition made by the Assessing Officer under Section 68 of the Act was wrong. The learned Commissioner of Income Tax (Appeals) after hearing the department and the Assessee Company deleted the addition of ₹ 52, 03,500/- to the income of the assessee company during the Assessment Year in question. The learned Commissioner of Income Tax Appeals found that there were as many as 2155 allottees, whose names, addresses and respective shares allocation had been disclosed. The Commissioner of Income Tax Appeals, further found that the Assessee Company received the applications through bankers to the issue, who had been appointed under the guidelines of the Stock Exchange and the Assessee Company had been allotted shares on the basis of allotment approved by the Stock Exchange. The Assessee Company had duly filed the return of allotment with the Registrar of Companies, giving complete particulars of the allottees. The Commissioner of Income Tax (Appeals) found that inquires had confirmed the existence of most of the shareholders at the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... res out of 6, 12,000 shares were not found available at their addresses, and that too, in course of assessment proceedings in the year 1994, i.e., almost 3 years after the allotment. By an order dated 2nd May, 2001, this Court admitted the appeal on three questions which essentially centre around the question of whether the Appellate Commissioner erred in law in deleting the addition of ₹ 52, 03, 500/- to the income of the assessee as made by the Assessing Officer. We are of the view that there is no question of law involved in this appeal far less any substantial question of law. The learned Tribunal has concurred with the learned Commissioner on facts and found that there were materials to show that the assessee had disclosed the particulars of the shareholders. The factual findings cannot be interfered with, in appeal. We are of the view that once the identity and other relevant particulars of shareholders are disclosed, it is for those shareholders to explain the source of their funds and not for the assessee company to show wherefrom these shareholders obtained funds. 22. Further, our attention was drawn to the dec ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d the correct law which are required to be applied in the facts of the present case and, thus, we do not find any reason to interfere with the concurrent findings of fact based on materials on record. The appeal is, thus, devoid of any substance and is dismissed summarily as it does not involve any substantial question of law. 23. In the light of the aforesaid decisions of the Hon ble Apex and jurisdiction High court and other High Courts let us examine the present case in hand. We will examine each share subscribers totalling three (3). The Ld. AR took pains to bring out the relevant facts in respect of each share subscribers which will throw light as to the identity, creditworthiness and genuineness of the share subscribers. We note from pages 12 to 28 of the paper book wherein the details of M/s. Pragya Commodities Pvt. Ltd. is given. We note that this company invested a sum of ₹ 1.05 crores in the appellant company. The share application was made by account payee cheque. This company has filed its return of income electronically by filing ITR 6 and was having PANAABCP5764C. This company was having share capital of ₹ 7,63,30,550 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... l the share applicants are (i) income tax assessee s, (ii) they are filing their return of income, (iii) allotment letter is available on record, (iv) the share application money was made by account payee cheques, (v) the details of the bank accounts belonging to the share applicants and their bank statements, (vi) in none of the transactions the AO found deposit in cash before issuing cheques to the assessee company, (vii) the applicants are having substantial creditworthiness which is represented by a capital and reserve as noted above. 27. As noted from the judicial precedents cited above, where any sum is found credited in the books of an assessee then there is a duty casted upon the assessee to explain the nature and source of credit found in his books. In the instant case, the credit is in the form of receipt of share capital with premium from share applicants. The nature of receipt towards share capital is seen from the entries passed in the respective balance sheets of the companies as share capital and investments. In respect of source of credit, the assessee has to prove the three necessary ingredients i.e. identity of share applicants, genuineness of tra ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... by the assessee. The facts stated hereinabove remain undisputed are not reiterated herein for the sake of brevity. We find that the assessee had given the complete details about the share applicants clearly establishing their identity, creditworthiness and genuineness of transaction proved beyond doubt and had duly discharged its onus in full. Nothing prevented the Learned AO to make enquiries from the assessing officers of the concerned share applicants for which every details were very much made available to him by the assessee. We find that the reliance placed by the Learned Ld. CIT(1) on the decision of the Hon'ble Apex Court in the case of CIT vs Lovely Exports (P) Ud reported in (2008) 216 CTR 195 (SC) is very well founded, wherein, it has been very clearly held that the only obligation of the company receiving the share application money is to prove the existence of the shareholders and for which the assessee had discharged the onus of proving their existence and also the source of share application money received. 3.4. 1. We also find that the impugned issue is also covered by the decision of Hon'ble Calcutta High Court in the case of CIT vs Roseb ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... all the shareholders. The Learned AO on analyzing all the balance sheets observed that the shareholders have paltry income and small savings and none of them have any bank account and huge cash balances were shown in their hands out of which Pay orders were obtained. Based on this, the Learned AO concluded that these shareholders do not have creditworthiness to invest in the assessee company and brought the entire sum of ₹ 57,00,000/- to tax as unexplained cash credit u/s 68 of the Act. 4.2. On first appeal, the Learned CIT(A) observed that entire share application monies of ₹ 57,00,000/- we received during the previous year 2004-05 relevant to Asst Year 2005-06 from 20 persons and the shares were allotted to them during the asst year under appeal. He observed that the assessee had furnished details of the share applicants giving the date wise receipts, mode of payment, amount, name, address, income tax returns, PA No. of share applicants along with their balance sheet. The Learned CITA also observed that the assessee in its reply to show cause notice before the Learned AO had requested him to use his power and authority for the physical appearance of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ground no. 3 raised by the Revenue is dismissed. (b) The ITAT Kolkata in R.B Horticulture Animal Projects Co. Ltd, ITA No. 632/Koll2011 dated 13-01-2016. In this the decision the Ld. Tribunal held as follows: 6. We have heard the Learned DR and when the case was called on for hearing , none was present on behalf of the assessee. However, we find from the file that the assessee had filed a detailed paper book and written submissions. Hence the case is disposed off based on the arguments of the Learned DR and written submissions and paper book already available on record. The facts stated in the Learned CIT(A) were not controverted by the Learned DR before us. We find that the assessee had given the complete details about the share applicants clearly establishing their identity, creditworthiness and genuineness of transaction proved beyond doubt and had duly discharged its onus in full. Nothing prevented the Learned AO to make enquiries from the assessing officers of the concerned share applicants for which every details were very much made available to him by the assessee. We find that the reliance placed by the Learned CITA on the decision of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e decision of the Assessing Officer. On appeal, the Tribunal set aside the order of the Commissioner (Appeals) and deleted the additions. On further appeal: Held, dismissing the appeal, that the additional burden was on the department to show that even if the share applicants did not have the means to make the investment, the investment made by them actually emanated from the coffers of the assessee so as to enable it to be treated as the undisclosed income of the assessee. No substantial question of law arose. 6.3. We find that the argument of the Learned DR to set aside this issue to the file of the Learned AO for verification of share subscribers would not serve any purpose as the ratio decided in the above cases is that in any case, no addition could be made in the hands of the recipient assessee. In view of the aforesaid findings and respectfully following the decision of the apex court (supra), Jurisdictional High Court (supra) and Delhi High Court (supra) , we find no infirmity in the order of the Learned CIT(A) and accordingly, the grounds raised by the Revenue are dismissed. (c) The Ld. ITAT Kolkata in ITA No.1061/ ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e companies had duly replied to notice u/s. 133(6) and confirmed the transaction with all the evidences. The AO has not raised any objection on any of the information furnished before him. The AO has not asked the respective Company applicants also to explain the alleged discrepancy in the address. The AO has not brought any material on account of record to disbelief the evidences furnished with him and treat the transaction as not genuine. The assessee submitted the following material at the time of assessment. a) Copy of share applications from the share applicants (copies enclosed) b) Copy of Form 2 filed with Registrar of Companies, West Bengal (copy enclosed) c) Copy of Form 18 about the Registered Office of the applicants for change of address subsequent to the date of allotment, i.e. 31.03.2009 (copies enclosed) d) Members register e) Share application Allotment Register f) Copy of board resolution. g) Replies from Share applicants to the notice u/s. 133(6) issued to them by the AO seeking information and documents about the sources and to ex ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rthiness of The creditors as well as the genuineness of transactions. It is observed that all the three share applicant companies i.e. M/s. Shree Shyam Trexim Pvt. Ltd., M/s Navalco Commodities Pvt. Ltd. and M/s. Jewellock Trexim Pvt. Ltd. had filed their confirmations wherein each of them confirmed that they had applied for shares of the appellant -company. All the three companies provided- the cheque number, copy of bank statements and their PAN. It is observed that these companies also filed, copies of their return of income and financial statements for as well as copy of their assessment order u/s. 143(3) of the I. T Act for AY 2005-06. In the case of M/s. Jewellock Trexim Pvt. Ltd. the assessment for AY 2005-06 was completed by the ITO Ward 9(3), Kolkata and the assessments in the case of M/s. Navalco Commodities Pvt. Ltd. and M/s. Shree Shyam Trexim Pvt. Ltd. for A. Y.2005-06 and AY.2004-05 respectively were completed by the I TO, Ward 9(4), Kolkata. Under the circumstances, I am of the opinion that the AO was not justified in holding that the share applicant companies were not in existence. The assessment orders were completed on the address as provided by ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e Revenue, it cannot be said that the identity of the share applicants remained not proved by the assessee. The decision of the Hon'ble Allahabad High Court as well as ITA T Kolkata Bench on which reliance was placed by the learned counsel for the assessee also supports the view that for non production of directors of the investor company for examination by the AO it cannot be held that the identity of a limited company has not been established. For the reasons given above we uphold the order of CIT(A) and dismiss the appeal of the Revenue. 29. Reliance in this regard is also placed on the decision of the Delhi High Court in the case of CIT Vs Gangeshwari Metal (P) Ltd (ITA No. 597 of 2012) dated 21.01.2012. In this case the assessee had received share application money of ₹ 55.50 lacs during the year in question. The assessee filed the complete names, addresses of the share applicants, confirmatory letters from them, copies of bank statements of both the company as well as the share applicants and copies of share application forms. In spite of the aforesaid documentary evidences the AO held the explanation to be unacceptable and tre ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... was held that the issue in hands was on the lines of the decision of the Supreme Court in the case of CIT Vs Lovely Exports Pvt Ltd (319 ITR 5). Accordingly the addition made under Section 68 on account of share application was deleted. 30. We would like to reproduce the Hon'ble High Court order in CIT vs. Gangeshwari Metal P.Ltd. in ITA no. 597/2012 judgement dated 21.1.2013, the Hon'ble High Court after considering the decisions in the case of Nova Promoters and Finlease Pvt. Ltd. 342 ITR 169 and judgement in the case of CIT vs. Lovely Exports 319 ITR (Sat 5)(5. C) held as follows:- As can be seen from the above extract, two types of cases have been indicated. One in which the Assessing Officer carries out the exercise which is required in law and the other in which the Assessing Officer 'sits back with folded hands' till the assessee exhausts all the evidence or material in his possession and then comes forward to merely reject the same on the presumptions. The present case falls in the latter category. Here the Assessing Officer after noting the facts, merely rejected the same. This would be apparent from the observations of t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n law 31. The case on hand clearly falls in the category where there is lack of enquiry on the part of the A. O. as in the case of Ganjeshwari Metals (supra). b) In the case of Finlease Pvt Ltd. 342 ITR 169 (supra) in ITA 232/2012 judgement dt. 22.11.2012 at para 6 to 8/ it was held as follows. 6. This Court has considered the submissions of the parties. In this case the discussion by the Commissioner of Income Tax (Appeals) would reveal that the assessee has filed documents including certified copies issued by the ROC in relation to the share application affidavits of the directors, form 2 filed with the ROC by such applicants confirmations by the applicant for company's shares, certificates by auditors etc. Unfortunately, the Assessing Officer chose to base himself merely on the general inference to be drawn from the reading of the investigation report and the statement of Mr. Mahes Garg. To elevate the inference which can be drawn on the basis of reading of such material into judicial conclusions would be improper, more so when the assessee produced material. The least that the Assessing Officer ought to have done was to ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... own fund which is evident from the following figures culled out from their respective audited balance sheets- Sl No. Name of the shareholder company Own Fund (share Capital Reserves) Investment in assessee-company 1. Pragya Commodities Pvt. Ltd. ₹ 7,63,30,550/- + ₹ 71,03,31,901/- =₹ 78,66,62,451/- 1.05 crores 2. Samrat Finvestors Pvt. Ltd. ₹ 7,81,26,700/- + ₹ 70,82,16,536/- = ₹ 78,63,43,236/- 25 lakhs 4. Narayan Mercantiles Pvt. Ltd. ₹ 7,48,06,940/- + ₹ 76,26,98,268/- = ₹ 83,75,05,208/- 50 lakhs Further replies received u/s 133(6) from the shareholder companies are seen annexed in the paper book. Thus ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... erogative of the Board of Directors of the company to decide the premium amount and it is the wisdom of the shareholders whether they want to subscribe to such a heavy premium. And the aforesaid view of the ITAT has been upheld by the Hon'ble Bombay High Court order dated 20th March 2017. Further the Hon'ble High Court observed as under - (i) 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 it is declaratory . Therefore it is not open to give it retrospective effect, by proceeding on the basis that the addition of the p ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... are concerned. The CIT(A), after considering relevant facts has rightly deleted addition made by the AO. We do not find any error in the order of the CIT(A); hence, we are inclined to uphold the findings of the CIT(A) and dismiss the appeal filed by the revenue . 38. According to Ld AR, recently, Hon'ble M.P. High Court in the case of CIT vs. Chain House International (P) Ltd., order dated 07.08.2018, decision reported in 98 taxmann.com 47 has held at para 52 as under Issuing the share at a premium was a commercial decision. It is the prerogative of the Board of Directors of a company to decide the premium amount and it is the wisdom of shareholder whether they want to subscribe the shares at such a premium or not. This was a mutual decision between both the companies. In day to day market, unless and until, the rates if fixed by any Govt. Authority or unless there is any restriction on the amount of share premium under any law, the price of the shares is decided on the mutual understanding of the parties concerned. 39. It was also brought to our notice that the Hon ble Supreme Court has dismis ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... identity of the share holders. The genuineness of the transaction can also be safely concluded since the entire transaction has been done through the banking channels duly recorded in the books of accounts of the assessee duly reflected in the financial statement of the assessee. The bank statement is exhibited in which the transaction relating to the allotment of shares are duly reflected. (ii) According to the Ld Counsel the aforesaid order of Tribunal has been upheld by the Hon ble Bombay High Court by observing as under:- Mr. Chhotaray the learned counsel for the Revenue states that the share premium of ₹ 490/- per share defies all commercial prudence. Therefore it has to be considered to be cash credit. We find that the Tribunal has examined the case of the Revenue on the parameters of Section 68 of the Act and found on facts that it is not so hit. Therefore, Section 68 of the Act cannot be invoked. The revenue has not been able to show in any manner the factual finding recorded by the Tribunal is perverse in any manner. (h) The Mumbai Tribunal in the case of ACIT-1(1) vs. M/s. Gagand ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... se laws to the facts of this case, we are inclined to uphold the claim of the assessee. 42. To sum up section 68 of the Act provides that if any sum found credited in the year in respect of which the assessee fails to explain the nature and source shall be assessed as its undisclosed income. In the facts of the present case, both the nature source of the share application received was fully explained by the assessee. The assessee had discharged its onus to prove the identity, creditworthiness and genuineness of the share applicants. The PAN details, bank account statements, audited financial statements and Income Tax acknowledgments were placed on AO's record. Accordingly all the three conditions as required u/s. 68 of the Act i.e. the identity, creditworthiness and genuineness of the transaction was placed before the AO and the onus shifted to AO to disprove the materials placed before him. Without doing so, the addition made by the AO is based on conjectures and surmises cannot be justified. In the facts and circumstances of the case as discussed above, no addition was warranted under Section 68 of the Act. Therefore, we are inclined to delete the addition ..... X X X X Extracts X X X X X X X X Extracts X X X X
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