TMI Blog2019 (9) TMI 1170X X X X Extracts X X X X X X X X Extracts X X X X ..... fficer challenging the applicability of section 68 on the ground that the relevant transactions of the issue of shares did not involve cash and it was not a case of receipt of any money through banking channel against the issue of shares. Neither the Directors of the assessee-company nor the Directors of the investor companies appeared before the AO for examination in response to summons issued under section 131 and the relevant details and documents were furnished by the Assessing Officer in an attempt to explain the relevant transactions as if section 68 was applicable. CIT(Appeals), however, overlooked this vital fact and allowed the relief to the assessee by deleting the addition made by the Assessing Officer under section 68 by relying on a new stand taken by the assessee in the light of additional evidence without giving any opportunity to the Assessing Officer to verify the same. Restore this issue to the file of the Assessing Officer for the limited purpose of verifying the claim of the assessee that the transactions in question of issue of shares did not involve any cash and there was no credit to the cash account and to decide the same accordingly in the light of th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... panies; (v) Investor-companies received share capital with huge premium, which in turn was invested in the assesseecompany as well as similar other companies. On the basis of the above findings recorded by him, the Assessing Officer arrived at a conclusion that there was absolutely no justification for the exorbitant premium received by the assessee-company on allotment of its equity shares. He also held that the claim of the assessee of having received exorbitant premium on allotment of its shares was not acceptable even in the light of preponderance of probability and normal human behaviour. Accordingly relying on the various judicial pronouncements discussed in his order, the Assessing Officer treated the entire amount of ₹ 9.81 crores received by the assessee-company on account of share capital and share premium as unexplained cash credit and addition to that extent was made by him to the total income of the assessee under section 68 in the assessment completed under section 143(3) vide an order dated 28.03.2015. 3. Against the order passed by the Assessing Officer under section 143(3), an appeal was preferred by the asse ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... as no sum credited in the books of account of the appellate and no money was received. The assessee had allotted its shares against the discharge of debts by journal entries in books. The AO failed to verify the facts of the case. The shares were allotted against the acquisition of investments under the agreements. The copies these documents were also filed during the appellate proceedings. I find that there is no real cash entry on the credit side of the cash book. The shares were issued against the share. It is merely a notional entry and there is no real credit in the cash book and bank account. The question of inclusion of the amount of the entry unexplained cash credit cannot arise. Therefore, the question of cash credit does not come in, there being no actual passing or receipt of cash. In other words, the transactions are mere book entries. The transactions showing the amount as received in cash or in kind and discharged were not actual case but only notional by journal entries. As far as the question of section 68 is concerned, the nature of the transactions and the entries clearly show that no cash, in fact, flowed. Therefore, consider ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ad appeared on behalf of the assessee during the course of assessment proceedings and in the written submission filed by the assessee, it was nowhere specifically pointed out that the amount of share capital and share premium in question was not received by the assessee in cash or by cheque. He invited our attention to the assessment order passed by the Assessing Officer to show that the Assessing Officer in the absence of such specific case made out by the assessee had no occasion to examine/verify the case of the assessee in the light of the decision of the Hon ble Calcutta High Court in the case of Jatia Investment Co. He contended that the ld. CIT(Appeals), however, overlooked this vital aspect and allowed a relief to the assessee by relying on the copies of agreements between the assessee and the share subscribers, which were filed for the first time before him. He contended that there is thus a clear violation of Rule 46A of Income Tax Rules, 1962 by the ld. CIT(Appeals) and urged that the matter may be sent back to the Assessing Officer for verification/examination of the case made out by the assessee for the first time before the dl. CIT(Appeals) by relying on the additiona ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... not applicable in the present context, where we are considering the applicability of section 68 to the transactions which do not involve any cash and there is no credit to the Cash Account. 7. As regards the third case of Smt. Rekha Krishna Raj (supra) relied upon by the ld. D.R., Section 68 was held to be applicable by the Hon ble Karnataka High Court even to an unexplained credit representing value of supplies made by suppliers on credit. While arriving at this conclusion, it was held by Their Lordships that there is no indication in section 68 that such a credit should be a cash credit. It was held that it may be a cash credit or it may be a credit representing the value of the supplies made by the suppliers on credit and the essence for applying section 68 is that the credit should be shown in the account of the assessee. Although this decision supports the case of the revenue on the issue under consideration, it is observed that the view taken by the Hon ble Karnataka High Court in the said case is contrary to the decision of the Hon ble Calcutta High Court in the case of Jatia Investment Co. (supra) relied upon by the ld. CIT(Appeals) to give relief to the a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Appeals) in his impugned order has recorded a finding of fact that no money was received through banking channel by the assessee and there was no cash transaction in the case of the assessee as the shares were issued against the shares of another companies, there was no such finding recorded by the Assessing Officer in the assessment order. As rightly pointed out by the ld. D.R., no such case, in fact, was specifically made out by the assessee before the Assessing Officer challenging the applicability of section 68 on the ground that the relevant transactions of the issue of shares did not involve cash and it was not a case of receipt of any money through banking channel against the issue of shares. As a matter of fact, neither the Directors of the assessee-company nor the Directors of the investor companies appeared before the Assessing Officer for examination in response to summons issued under section 131 and the relevant details and documents were furnished by the Assessing Officer in an attempt to explain the relevant transactions as if section 68 was applicable. It appears that the ld. CIT(Appeals), however, overlooked this vital fact and allowed the relief to the assessee by ..... X X X X Extracts X X X X X X X X Extracts X X X X
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