TMI Blog2019 (12) TMI 1259X X X X Extracts X X X X X X X X Extracts X X X X ..... idence before the AO. - Decided in favour of assessee. - ITA No. 9/MUM/2017 - - - Dated:- 20-12-2019 - Shri Mahavir Singh (Judicial Member) And Shri N.K. Pradhan (Accountant Member) For the Assessee : Ms. Vasanti B. Patel, AR For the Revenue : Mr. Anadi Varma, CIT- DR And Ms. Kavita Kaushik, DR ORDER PER N.K. PRADHAN, A.M. This is an appeal filed by the Revenue. The relevant assessment year is 2012-13. The appeal is directed against the order of the Commissioner of Income Tax-22, Mumbai [in short CIT(A) ] and arises out of the assessment completed u/s 143(3) of the Income Tax Act 1961, (the Act ). 2. The grounds of appeal read as under: 1. On the facts and circumstances of the case and in law, the Ld.CIT(A) erred in deleting an amount of ₹ 35 crores to total income treating the premium received on preferential shares as unexplained cash credit u/s 68 of the IT Act. 2. On the facts and circumstances of the case and in law, the Ld.CIT(A) erred in allowing the assessee s appeal on the ground that the invested company M/s ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... .2011 23:12.2011 100000 0 123226.80 cr. 26.12.2011 26.12.2011 0 700000 823226.80 cr. 28.12.2011 28.12.2011 0 1000000 1823226.80 cr. 28.12.2011 28.12.2011 652373 0 1170853.80 cr. 28.12.2011 28.12.2011. 825000 0 345853.80 cr. 28.12.2011 28.12.2011 0 5084.83 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... unds for making investment of ₹ 35,00,00,000/- in the shares of the assessee-company during the year, (iv) the payments were made through normal banking channels and are reflected in the balance sheet of M/s Prime Properties Pvt. Ltd. and the assesseecompany, (v) the investment is also reflected in the balance sheet of M/s Prime Properties Pvt. Ltd. (vi) copies of Form 2 and Board s resolution for addition to share capital are also on record. Observing as above, the Ld. CIT(A) noted that the assessee had sufficiently discharged its onus of establishing not only the identity but also the creditworthiness as well as the genuineness of the transaction as required u/s 68 of the Act. Referring to the decision of the Hon ble Delhi High Court in the case of CIT v. Value Capital Services P. Ltd . 307 ITR 334 (Del), wherein it is held that unless the Department is able to show that the amount received towards share capital actually emanated from the coffers of the assessee-company, no addition can be made in the hands of the assessee u/s 68 of the Act, the Ld. CIT(A) deleted the addition of ₹ 35,00,00,000/-. 5. Before us, the L ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ereof, to the satisfaction of the Assessing Officer. It involves three ingredients, namely, the proof regarding identity of the share applicants, their creditworthiness to purchase the shares and the genuineness of the transaction as a whole. The Tribunal failed to keep in mind these aspects of the matter and has chosen to dispose of the appeal on the limited question of the identity of the share holders. A Division Bench of this Court in the case of CIT vs. Nova Promoters and Finlease P. Ltd. (2012) 342 ITR 169 pointed out the circumstances in which the ratio of the judgment of the Supreme Court in Lovely Export (supra) can be applied and the circumstances where the ratio cannot be applied. In Independent Media Pvt. Ltd . (supra), the Hon ble Delhi High Court held that : 11. The Revenue is aggrieved by the aforesaid order of the Tribunal and has filed the present appeal. We are unable to uphold the view of the Tribunal that it is incumbent upon the Assessing Officer, on the facts and circumstances of the case, to establish with the help of material on record that the share monies had come or emanated from the assessee s coffers. Section 68 of t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e justified in directing the Assessing Officer to afford an opportunity to the assessee of cross-examining the persons who had allegedly given statements before the Investigation Wing implicating the assessee in the modus operandi adopted by them, namely, giving of accommodation entries for commission. The Assessing Officer had in his show- cause notice referred to these statements and the fact that the assessee had been named therein as one of the beneficiaries to whom entries to the extent of ₹ 2,20,00,000/- have been provided for commission. The assessee appears to have sought cross-examination of those persons but that opportunity was not given by the Assessing Officer as found by the Tribunal, a position not disputed before us on behalf of the Revenue. However, in the fresh round of proceedings it will be open to the Assessing Officer to make the addition in the hands of the assessee-company in case it appears to him, after complying with the directions of the Tribunal, that the explanation adduced by the assessee with regard to the identity and creditworthiness of the subscriber-companies and the genuineness of the transactions is not acceptable for valid reasons which ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... shortly after transfer of fund. According to the AO, subscription of the preference shares by P5AHIML was colourable device and not genuine transaction. The AO made addition u/s 68 of the Act in the hands of the assessee. On appeal, the CIT(A) upheld the order of the AO. On further appeal, the Tribunal concluded that P5AHIML was a company belonging to the Providence Equity Partners, a global private investment group. P5AHIML registered itself as a Foreign Venture Capital Investor (FVCI) with SEBI. The investment in holding company of the assessee was made after P5AHIML registered as a FVCI with SEBI and the assessee obtained the necessary approvals from the Foreign Investment Promotion Board (FIPB). In connection with the issue of holding company, the assessee submitted all the relevant details in the course of assessment proceedings. The Tribunal held that all the three ingredients of section 68 i.e. identity, genuineness and creditworthiness of investor were duly established, thus deleted the addition made by the AO. On further appeal by the revenue, the Hon ble Bombay High Court held that : 8. In its decision, the Tribunal noted that the inves ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... may be fully justified. However, when all the relevant factors are properly explained, including the fact that the payment of dividend was not the sole attraction for the investor and that the investor could expect a fair return on the investment, of course, subject to vagaries of the any business decision, the Assessing Officer had to advert to all such materials on record in proper perspective. As noted by the Tribunal, all necessary permissions and clearances were granted by the Government of India and other government authorities for such investment. The source of the funds in the hands of P5AHIML was also verified. Merely because multiple corporate bodies may have been involved in the entire process of collecting funds in P5AHIML and then investing the same in the assessee company, by itself would not be sufficient to establish a sham transaction or colourable device. 7.2 The instant case, the assessee-company has during the year under consideration offered right issue to its existing equity shareholders and also issued convertible preference shares. It issued and allotted 3,50,000 (0.10%) optionally convertible preference shares at a face value of ₹ 10 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ai 0.00 3,950.00 2,07,357.80Cr 08.12.2011 08.12.2011 Jaico Book H 000051 BOB RPC Mumbai 0.00 10,759.00 2,18,116.80Cr 08.12.2011 08.12.2011 Jaico Book H 000052 BOB RPC Mumbai 0.00 4,280.00 2,22,396.80Cr 08.12.2011 08.12.2011 ManghanJham 420768 SCB RPC Mumbai 0.00 830.00 2,23,226.80Cr 22.12.2011 22.12.2011 RTGS- KKBKH113 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Mumbai-Vakola 0.00 10,00,000.00 18,23,226.80Cr 28.12.2011 28.12.2011 MCGM Lokhandwala 756776 6,52,373.00 0.00 11,70,853.80 Cr 28.12.2011 28.12.2011. Kalpatru Heritage Coop Premi Lokhandwala 756786 8,25,000.00 0.00 3,45,853.80Cr 28.12.2011 28.12.2011 /003/911136/B RPC Mumbai 0.00 5,084.83 3,50,938.63Cr OB ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 000/-, thus leaving same balance of ₹ 2,23,226.80. On 23.12.2011 there is a deposit of ₹ 35,00,00,000/-. On the same date there is withdrawal of the above amount of ₹ 35,00,00,000/-, leaving the same balance of ₹ 2,23,226.80. Similar pattern we find in the bank account of the assessee-company, (A/c No. 000405100292 with ICICI Bank) which is as under : Date Value Date Particulars Location Chq. No. Withdrawals Deposits Balance (Rs.) 01.12.2011 B/F Mumbai Vakola 0.00 0.00 0.00 22.12.2011 22.12.2011 TRFR From : Kalpatru Mumbai Vakola ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... account of M/s Prime Properties Pvt. Ltd. and no balance in the accounts of the assessee-company, we are of the considered view that the genuineness of the transactions need verification. In such a situation, the present case of the assessee is distinguishable from the decision in Aditya Birla Telecom Ltd . (supra), relied on by the Ld. counsel. We find that as per the Notes to financial statements of Prime Properties Pvt. Ltd. (at page 135 of the Paper Book ), the assessee i.e. Abacus Real Estate Pvt. Ltd. is one of the other related parties . In NRA Iron Steel Pvt. Ltd. (supra), the Hon ble Supreme Court has held that the practice of conversion on unaccounted money through the cloak of share capital/premium must be subjected to careful scrutiny and this would be particularly so in the case of private placement of shares, where a higher onus is required to be placed on the assessee, since the information is within the personal knowledge of the assessee. It is further held that the assessee is under a legal obligation to prove the receipt of share capital/premium to the satisfaction of the AO, failure of which would justify addition of th ..... X X X X Extracts X X X X X X X X Extracts X X X X
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