TMI Blog2017 (11) TMI 1927X X X X Extracts X X X X X X X X Extracts X X X X ..... are applicable only on shares premium received on fair market value. In view of these facts, it is clear that share premium received cannot be considered as income for the year under consideration by invoking provisions of section 56(1) . - Decided against revenue. Addition u/s 68 - amount received the amount after deposit in cash/DD in respective bank A/cs - HELD THAT:- Not only the identity of the creditor has been proved but from the facts which have been culled out, the assessee has been able to prove the genuineness also. The fact that the explanation furnished by the creditor about the source from where he procured the money to be deposited or advanced to the assessee is not relevant for the purposes of rejecting the explanation furnished by the assessee and make additions of such deposits as income of the assessee from undisclosed sources by invoking section 68 unless it can be shown by the Department that source of such money comes from the assessee himself or such source could be traced to the assessee itself. See KANHAIALAL JANGID VERSUS ASSISTANT COMMISSIONER OF INCOME-TAX [ 2007 (1) TMI 496 - HIGH COURT OF RAJASTHAN] - Also decided in ARAVALI TRADING CO. VERSU ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... party and rely on those recitals. If all that an assessee who wants to evade tax has to have some recitals made in a document either executed by him or executed in his favour then the door will be left wide open to evade tax. A little probing was sufficient in the present case to show that the apparent was not the real. The taxing authorities were not required to put on blinkers while looking at the documents produced before them. They were not entitled to look into the surrounding circumstances to find out the reality of the recitals made in those documents. 17. In the above back ground of the facts and circumstances surrounding this case, it is hereby held that the receipt of share capital and share premium was part of a colourful transaction by way of which a sum of ₹ 3,40,00,000/- 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 ₹ 190/- 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 any assets, business activity, income or net wo ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 1,41,50,000 6,36,50,000 Motisons Buildtech Pvt. Ltd 758/14-15 2009-10 3,03,00,000 - 3,03,00,000 Motisons Buildtech Pvt. Ltd 759/14-15 2012-13 3,68,27,500 82,00,000 2,86,27,500 Godawari Estates Pvt. Ltd 769/14-15 2010-11 2,00,00,000 - 2,00,00,000 Godawari Estates Pvt. Ltd 768/14-15 2012-13 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 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 3,40,00,000 Motisons Entertainment (I) Pvt. Ltd 766/14-15 2011-12 1,95,00,000 - 1,95,00,000 Motisons Entertainment (I) Pvt. Ltd 756/14-15 2012-13 7,78,00,000 1,41,50,000 6,36,50,000 Motisons Buildtech Pvt. Ltd 758/14-15 2009-10 3,03,00,000 - 3,03,00,000 Motisons Buildtech Pvt. Ltd 759/14-15 2012-13 3,68,27,500 82,00,000 2,86,27,500 Godawari Estates Pvt. Ltd 769/14-15 2010-11 2,00,00,000 - 2,00,00,000 Godawari Estates Pvt. Ltd 768/14-15 2012-13 10,30,00,000 - 10,30,00,000 Bholenath Real Estates Pvt. Ltd. 770/14-15 2009-10 2,90,0 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e assessee allotted 1,70,000 equity shares of ₹ 10 each to various companies at a premium of ₹ 190/- per share detail of which is as under: - S.N. Name No. of Shares alloted/ applied during the year Amount adjusted against share capital Rate per share Amount adjusted against share premium Rate of premium per share Issue price of the share Total Consideration Received 1 Bholenath Traders Pvt. Ltd 17500 1,75,000 10 33,25,000 190 200 35,00,000 2 Debdaru Vinimay Pvt. Ltd 25000 2,50,000 10 47,50,000 190 200 50,00,000 3 Indigo Vinimay Pvt ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rging the share premium which is summarized as under: - Name of Company Reason for Charging Share Premium Motisons Entertainment (I) Pvt. Ltd 1.The assessee company booked a big space (meant for Cinema Hall) in under construction complex naming World Trade Park Further, the leasing out this space to world famous cinema theatre operator Cinepolis was under process. 2. Goodwill of Motisons Group. e) Share premium/Capital 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 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... identity of the companies who have purchased shares at a premium. The assessee has also filed bank details to explain the source of the share holders and the genuineness of the transaction was also established by filing copies of share application forms and Form No. 2 filed with the Registrar of Companies. The entire dispute revolves around the fact that the assessee has charged a premium of 190/- per share. No doubt a non-est company or a zero balance sheet company asking for 190/- per share defies all commercial prudence but at the same time we cannot ignore the fact that it is a prerogative of the Board of Directors of the company to decide the premium amount and it is the wisdom of the share holders whether they want to subscribe to such a heavy premium. The Revenue authorities cannot question the charging of such huge premium without any bar from any legislated law of the land. The amendment has been brought in the Income Tax Act under the head Income from other sources by inserting Clause (viib) to Sec. 56 of the Act wherein it has been provided that any consideration for issue of shares, that exceeds the fair value of such shares, the aggregate consideration received for s ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ount was received against share application i.e. capital receipt, therefore the same cannot be treated as income of the assessee. Further for treating the share capital/share premium as income of the assessee company no cogent reason has been given by ld. AO. Further, there is no deeming fiction has been given in section 56(1) of Income Tax Act, 1961 wherein the income can be taxed under deeming provision. h) By Finance Act 2012 a new clause (viib) was inserted in 56(2). Memorandum explaining the provisions in Finance Bill 2012 stated as under:- Share premium in excess of the fair market value is to be treated as income. Section 56(2) provides for the specific category of incomes that shall be chargeable to income tax under the head income from other sources . It is proposed to insert a new clause in 56(2). The new clause will apply where, accompany, not being a company in which the public are substantially interested, receives, in any previous year, from any person being a resident, any consideration for issue of shares. In such a case if the consideration received for issue of shares exceeds the face value of shares, the aggregate consideration received for such shares ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... in section 40A(3) is applicable for A.Y. 1989-90 as it is a substantive provision and since 269SS is a procedural provision, the effective date will be 1.4.89 i.e. previous year relevant to A.Y. 89-90. d) The five Judge Constitution Bench in the case of CIT V Vatika Township (P) Ltd. 367 ITR 466 had an occasion to consider as to whether Proviso added to section 113 of the I.T. Act, is prospective or retrospective. The Hon ble Apex Court while considering the various decisions held (as per page 469 Of ITR 367). That surcharge levied by assessing Officer for the block assessment pertaining to the period from June 1, 2002 was liable to be deleted. 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 perso ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... inclusive definition of income but the income should be look into its normal meaning. The income will not include capital receipts unless it is specified in Income Tax Act. This argument finds supports from the amendment made by Finance Act 2012 w.e.f. 1.4.2013 in section 56(viib) and clause (xvi) of section 2(24) 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)/ 2(24) of Income Tax Act, 1961 then there was no need to make these amendments in the Act. In case there is no charging provision for specific receipt, then it cannot be taxed. The five member Bench of the Apex Court in CIT V Vatika Township P Ltd 367 ITR 466 (PB pg 19/case Laws). Tax Laws are clearly in derogation of personal rights and property interests and are, therefore, subject to strict construction and any ambiguity must be resolved against imposition of the tax. In Billings V U.S 232 U.S.261 at page 265, 34 S.Ct 421 (1914), the Supreme Court clearly acknowledged this basic and long standing rule of statutory construction. Tax Statutes should be strictly construed, and, if any ambiguity be found to exist, it must be resolve ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e decision of Apex Court in the case of Travancore Rubber and Tea Co Ltd. V CIT 243 ITR 158 held that such receipt is capital receipt. Such Capital receipt is not taxable in view of judgment of Apex Court in D.P. Sandu Bros. Chembur (P) Ltd (Supra). Hence capital receipt is not taxable unless there is charging provision for a capital receipt and computation provisions are also applicable. v) The Hon ble Bombay High Court in the case of Vodafone India Services P. Ltd. V/s UOI 368 ITR 1 (PB 76-107/Case Laws) had an occasion to consider the difference between the share premium determined by revenue and the share premium charged as deemed loan and taxing of national interest on deemed loan. The Hon ble Bombay High Court has referred to the decision of Apex Court in the case of Mathuram Aggarwal V/s State of MP (1999) 8 SCC 667 for the test to interpret a taxing statue which reads as under: The intention of the legislature is a taxation statute is to be gathered from the language of the provisions particularly where the language is plain and unambiguous. In a taxing Act it is not possible to assume any intention or governing purpose of the statute more than what is stated in the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d is a capital receipt and consideration received cannot be considered as income for the year under consideration by applying the provisions of section 56(1) of Income Tax Act. k. The ld CIT(A) issued show cause notice to assessee to tax the share capital under section 68 of ITax Act as against 56(1) applied by ld AO but he satisfied about the ingredients of section 68 of I.Tax Act and no addition was sustained for AY 2009-10 even u/s 68 of I.Tax Act. The ld AO issued several notices to assessee to explain the share capital. The assessee submitted detailed reply and documents from time to time as under:- S.No Particulars Copy at PB pg No 1 Copy of query letter of AO dated 05.01.2015. 85-86 2 Copy of reply of assessee dated 13.01.2015 filed in response to query letter dated 05.01.2015. 87-91 3 Copy of show cause notice of AO dated 06.02.2015. 92-95 4 Copy of reply of assessee dated 13.02.2015 filed in response t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Copy of bank statement showing the entry of payment made to assessee. 106 Declaration of source of funds with party. 107-108 Copy of Ack. of ITR of AY 2009-10. 109 Copy of audit report and audited balance sheet along with annexure of 31.03.09 110-119 Copy of registration certificate issued by ROC 120 Debdaru Vinimay Pvt. Ltd Share application containing the name/address/PAN of party, detail of payment received etc. 121-122 Copy of board resolution 123 Copy of PAN card of party. 124 Declaration of source of funds with party 125 Copy of Ack. of ITR of AY 2009-10. 126 Copy of a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Copy of PAN card of party 176 Copy of bank statement showing the entry of payment made to assessee. 177 Declaration of source of funds with party. 178-179 Copy of Ack. of ITR of AY 2009-10. 180 Copy of audit report and audited balance sheet along with annexure of 31.03.09 181-191 Copy of registration certificate issued by ROC 192 Shreya Tie Up Pvt. Ltd Share application containing the name/address/PAN of party, detail of payment received etc. 193-196 Copy of board resolution 197 Copy of PAN card of party 198 Copy of bank statement showing the entry of payment made to assessee 199 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... a/c payee cheques and verifiable from bank statement of assessee as well as bank statement of the party. The onus u/s 68 of the assessee is to prove the identity, capacity and genuineness of the transactions has been discharged which may be seen from the followings:- i) Identity:- The assessee proved the identity of all the companies by filing the share application received from the parties and the parties are duly in existence and the existence of the parties can be verified from the official website of MCA. The ld. AO also not doubted the identity of the above named companies. Further the notice issued u/s 133(6) of Income Tax Act, 1961 was duly served on all the companies which also prove the identity of the parties. ii) Creditworthiness All the companies are Income Tax assessee and duly filing the Income Tax return and Balance sheets. There is sufficient source of funds with all the companies to investment share capital/share application in the assessee company. The assessee submitted the copies of bank account/declaration of source of funds with them of investor companies. The bank statement shows the huge transaction of high value in the accounts of the companie ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... creditworthiness is duly proved. iii) Genuineness The assessee submitted the Share Application Form received from above companies against the share application received from the companies. The share application is supported by Board Resolution passed in the investor companies. The assessee company has allotted the shares to the investor companies. The proper returns were filed before the ROC against allotment of the shares to these companies. Furthermore, the department has carried out intensive search operations over the assessee and no any incriminating material was found to show that the money against the share allotment was own money of the company. Shares certificates were issued against the allotment of the shares to these companies were not found from the possession of the assessee company or its director or employees. This fact shows that after allotment of shares by the appellant company share certificates were dispatched to the subscriber companies. No any entry in books of account or document was found showing payment of cash to these investor companies against receipt of cheques from these companies against allotment of shares. Therefore the genuineness of the t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n introduced by the Finance Act 2012 with effect from 1st April, 2013. Thus it would be effective only from the Assessment Year 201314 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 proviso to Section 68 of the Act is immaterial and does not change the interpretation of Section 68 of the Act both before and after the adding of the proviso. In any view of the matter the three essential tests while confirming the pre proviso Section 68 of the Act laid down by the Courts namely the genuineness of the transaction, identity and the capacity of the investor have all been examined by the impugned order of the Trib ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... The AO during the course of assessment proceeding observed that in the course of search and seizure action u/s 132 of the Act, cash, jewellery, valuables, stock-in-trade, documents, books of account and / or loose papers were found and / or seized from the premises of the members of the Motisons Group of which one such member happens to be the assessee. The AO also noted that the Group is involved in introducing large share capital on high premium in accounts of various group companies through the Kolkata based companies. The AO has mentioned these details at page 3 and 4 of his assessment order. The AO further noted that the receipt of share capital is ₹ 3,03,000/- and the premium is to the tune of ₹ 2,99,97,000/- during the year under consideration which is not only abnormal but also appeared to be part of a well planned exercise of tax evasion. Accordingly, the AO issued the show cause notice dated 6-02-2015 to the assessee company requiring the assessee to show cause as to why the amount of ₹ 3,03,00,000/- should not be treated as income of the assessee u/s 56(1) of the Act. The assessee submitted the reply before the AO who rejected the assessee's conten ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 5,00,000 Adhunik Dealmark Pvt. ltd 42,00,000 Axion Commodeal Pvt. ltd 36,00,000 Bholenath Traders Pvt. Ltd 1,03,00,000 Bhusan Distributors Pvt. Ltd 25,00,000 Contra Vanijya Pvt. Ltd 78,00,000 Debdaru Vinimay Pvt. Ltd 21,00,000 Deep Commosales Pvt. Ltd 50,00,000 Dhanlabh Tradelinks Pvt. Ltd 27,00,000 Puspa Dealers Pvt. Ltd 60,00,000 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Mayukh Vinimay Pvt. Ltd 2,24,50,000 Regent Dealers Pvt. Ltd 16,00,000 Rose Suppliers Pvt. Ltd 5,00,000 Total 4,41,00,000 5 Motisons Entertainment (I) Pvt. Ltd 2009-10 Bholenath Traders Pvt. Ltd 35,00,000 Debdaru Vinimay Pvt. Ltd 50,00,000 Indigo Vinimay Pvt. Ltd 50,00,000 Kingfisher Vinimay Pvt. Ltd 20,00,000 Reality Merchant Pvt. Ltd 25,00,000 Sh ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Rose Suppliers Pvt. Ltd 35,00,000 Total 7,78,00,000 8 Motisons Buildtech Pvt. Ltd 2009-10 Arcade Dealcom Pvt. Ltd 30,00,000 Debdaru Vinimay Pvt. Ltd 25,00,000 Debdoot Vinimay Pvt. Ltd 35,00,000 Matrabhumi Dealers Pvt. Ltd 44,00,000 Puja Tie-Up Pvt. Ltd 50,00,000 Pushpa Dealers Pvt. Ltd 25,00,000 Pushpa Trading Pvt. Ltd 40,00,000 Shreya Tie Up Pvt. Ltd ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Dhanlabh Tradelinks Pvt. Ltd 25,00,000 Devang Commercial Pvt. Ltd 50,00,000 Extent Vinimay Pvt. Ltd 25,00,000 Neha Deal Trade Pvt Ltd 20,00,000 Spring SalesPvt Ltd 67,00,000 Manali Tradecom Pvt Ltd. 50,00,000 Target Vincom Pvt Ltd 50,00,000 Bernstain Marketing Pvt Ltd 15,00,000 Kesarinandan Vanijya Pvt Ltd 5,00,000 Deep Commosale Pvt Ltd 50,00,000 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Total 2,90,00,000 13 Rainbow Buildcon Pvt Ltd 2009-10 Anuraj Securities Pvt Ltd 20,00,000 Matribhumi Dealers Pvt Ltd 25,00,000 Narottamka Trade Vyapaar Pvt Ltd 15,00,000 Puja Dealcom Pvt Ltd 40,00,000 Tarang Suppliers Pvt LTd 30,00,000 Vandana Dealers Pvt Ltd 30,00,000 Puja Tie-Up Pvt Ltd 40,00,000 Total 2,00,00,000 14 Shivansh Buildcon Pvt. Ltd 2 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Pvt. Ltd 367 ITR 306 (Delhi High Court): AO found that immediately before issuance of cheques for the purpose of making pay order or demand draft there was deposit of cash. In our case no cash deposit in the bank account of shareholder company. (v) CIT V/s MAF Academy Pvt. Ltd 206 (2014) DLT 277 (DB)(Del)/ 361 ITR 0285 (Del) : AO found that immediately before issuance of cheques for the purpose of making pay order or demand draft there was deposit 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. (vi) Rajmandir Estates Pvt. Ltd 70 Taxmann.com 124: Relates to order passed by CIT u/s 263 of ncome Tax Act, 1961. (vii) CIT v/s Sumati Dayal (1995) 80 Taxman 89 (SC) CIT V/s Durga Prasad More [1971] 82 ITR 540 (SC) : No application as ample evidence have been filed by assessee. Further no source of concealed income was found. Further no document was found as the result of intensive search operations to show outflow of unaccounted money against the receipts of share application money through the banking channels. This show the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ity of cross examination of Sh Santosh Choube, Sh Ajit Sharma Sh Rajesh Kumar Singh to the assessee. b) Charging of Premium on shares and taxability by applying the provisions of section 56(1) of Income Tax Act. c) Addition by applying the provisions of section 68 of Income Tax Act 2.1.4.2 (a) According opportunity to cross examine Sh Santosh Choube, Sh Ajit Sharma Sh Rajesh Kumar Singh But before asking for an opportunity for cross examining them, assessees has to disprove the correctness of their assertions as emanating from the statements recorded of Sh Santosh Choube, Sh Ajit Sharma and Sh Rajesh Kumar Singh. Corroborative evidences in form of bank statements obtained in this regard and their analysis further proves the theory of cash deposit prior to transfer of share application money. Vide show cause letter issued , assessee has already been confronted with the oral evidences gathered during the survey operation from aforementioned 3 persons by Investigation Directorate Kolkata. Further, the right of cross examination is not an absolute right as decided in Nath International Sales vs. UOI, AIR 1992 (Del) 295) wherein Hon'ble Supreme Court has also held th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 1. NBFC Company expecting good revenue. 2. Goodwill of Motisons Group Bholenath Real Estates Pvt Ltd (i) Owwing large chunk of agricultural land at Village Gaiji, Tehsil Mojamabad, Distt Jaipur (in between Bagru to Dudu at main NH Jaipur Ajmer Road) and planning development of township thereon. (ii) Market rate of land was very high than book value which was on cost. (iii) Goodwill of Motisons Group Rainbow Buildcon Pvt. Ltd 1. Owning large chunk of agricultural land at Village Gidani (Near Dudu at main NH Jaipur Ajmer Road and planning development of township thereon. 2. The market rate of this land was very high than book value. 3. Goodwill of Motisons Group Shivansh Buildcon Pvt. Ltd 1. Owning a valuable land in the heart of city at Seewad Area, Bapu Nagar, Jaipur and planning a commercial project thereon. 2. Goodwill of Motisons Group The ld AR has further submitted that that the shares were allotted to the investor companies at premium, after mutual discussion between assesse ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 56 of Income Tax Act, 1961. This amendment was made effective from 01/04/2013. Memorandum explaining the provisions in Finance Bill 2012 stated as under: Share premium in excess of the fair market value is to be treated as income. Section 56(2) provides for the specific category of incomes that shall be chargeable to income tax under the head income from other sources . It is proposed to insert a new clause in 56(2). The new clause will apply where, accompany, not being a company in which the public are substantially interested, receives, in any previous year, from any person being a resident, any consideration for issue of shares. In such a case if the consideration received for issue of shares exceeds the face value of shares, the aggregate consideration received for such shares as exceeds the fair market value of the shares shall be chargeable to income Tax, under the head income from other sources . The said amendment is effective from 1st April 2013, it will accordingly apply in relation to AY 2013-14 and subsequent AYs. In the memorandum it is mentioned that premium in excess of fair market value is to be treated as income. CBDT vide circular No.3 of 2012 dated 1 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... method) As per Method (B) (Discounted free cash flow method) Book Value of total assets less prepaid expenses preliminary expenses as on last B/s i.e. 31.03.2012 53,88,09,212 53,88,09,212 Add: - Appreciation in market value of assets (In excess to book value) Land at SB-110* NA 25,52,48,216 Total Assets (A) 53,88,09,212 79,40,57,428 Total Liabilities, excluding share capital and reserves Surplus (L) 76,56,570 76,56,570 Total amount of paid up equity share capital as shown in B/S (PE) 2,05,05,820 2,05,05,820 Paid up value of such equity shares (PV) 10 Fair market value of shares [(A-L)/PE]*PV [(53,88,09,212- 7656570)/2,05,05,820]*10 = ₹ 259 per shares [(79,40,57,428-7656570)/2,05,05,820]*10 = ₹ 384 per shares* For dec ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t order. During the course of assessment proceedings the assessee has submitted ample documents and satisfied the ld AO. The ld. AO being satisfied with the submission of assessee on section 68 of the Act, has not applied section 68 of the Act for the addition. The provisions of section 68 specified the authority mentioned as Assessing Officer . The CIT(A) is not assessing officer so he cannot step into the satisfaction of AO for making the addition when the ld AO has satisfied about the ingredients of section 68 of Income Tax Act. Hon ble ITAT Delhi Bench in the case of SH. SHAMSHER SINGH GILL C/O S.K. MONGA ASSOCIATES Versus ITO, WARD-2, HARIDWAR ITA No 2987/Del/2015 order dated 28/02/2017. It was further stated by ld AR that the assessee has submitted ample documents to prove identity, creditworthiness and genuineness of share capital. 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 the Act was made by inserting the following proviso to section 68 w.e.f. 01/04/2013 which require to prove source ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 0 1 98,00,000 Rainbow Buildcon Pvt. Ltd AY 2009-10 7 2,00,00,000 0 0 0 Total 94 35,29,50,000 0 41 15,59,00,000 2.1.4.3 Further, in response to show cause notice issued by me u/s 250 (4) of the Act, is submitted that the assessee has also carried out search over the ROC site and found that charge has been registered over the assets of some of the investor companies under Companies Act in favour of leading banks like SBI etc for crores of rupees which proves that the shareholder companies are not shell company-rather creating of charge proves creditworthiness of the companies. The assessee submitted the following chart with search report on ROC site: Name of Shareholder (Investor Company) Name of Assessee Company in which share were taken Amount of share capital of the investor company Amount, SRN and Charge Id and date of Charge created Name ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... I) Pvt. Ltd 20,00,000 101.94 Crore SRN B73228603 Charge Id 10419836 date 21/03/2013 Nawab Vyapar Pvt. Ltd Motisons Global Pvt. Ltd 50,00,000 9.95 Crore SRN C67525006 Charge Id 10345784 date 10/02/2012 Punjab National Bank Snowfall Commercial Pvt. Ltd Godawari Estates Pvt. Ltd 25,00,000 8.00 Crore SRN B94083011 Charge Id 10289761 date 04/05/2011 Bank of India Total 3,85,00,000 The assessee further clarified that out of above 10 cases, in 4 cases which have share capital of ₹ 1.15 crores with the following appellant Companies, notices u/s 133(6) sent by AO were also complied by these companies Name of assessee company Name of investor company Amount of Share application received Motisons Global Pvt. Ltd AY 2009-10 Kingfisher Vinimay Pvt. Ltd 20,00,000 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Ltd for AY 2009-10 was made in same circle i.e. Central Circle-2, Jaipur wherein addition of ₹ 10,54,95,000/- was made on account of its share capital by passing order u/s 143(3) r.w.s.263 of the Act. In other Companies cases, assessment for AY 200910 was made u/s 148 of the Act by their respective jurisdictional AO wherein their funds/ share capital was assessed. The share capital received from these companies are as under: S. No . Name of Compan y AY Detail of Share Capital issued Name of allottee Total Amount 3 Motisons Global Pvt. Ltd 2012-13 Alliance Tradecom Pvt. Ltd 3,05,00,000 Evershine Suppliers Pvt. Ltd 1,60,00,000 Alliance Tradecom Pvt. Ltd 3,95,58,900 Evershine Suppliers Pvt. Ltd 4,86,99,600 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 9 Motisons Buildtech Pvt. Ltd 2012-13 Alliance Tradecom Pvt. Ltd 1,80,00,000 Evershine Suppliers Pvt. Ltd 28,00,000 Regent Barter Pvt. Ltd 1,60,27,500 Total 3,68,27,500 14 Shivansh Buildcon Pvt. Ltd 2012-13 Evershine Suppliers Pvt. Ltd 90,00,000 Total 90,00,000 Total Additions 58,70,57,300 2.1.4.4 As regard Seized documents [party-1/Exhibit AS-3/Pge21], Sh Vijay Goyal, the Ld AR of the assessee has further clarified that FMV and maximum appreciation written 250/- and shares were also allotted for ₹ 250/- in that period. It is pertinent to also ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... eiterated 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 sharecapital 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. Dolphin Conpack Ltd. (2006) 283 ITR 190 (Del.) (iii) CIT vs. Gujarat Heavy Chemicals Ltd. (202) 256 ITR 795(SC) (iv) CIT vs. Kwick Travels (1992) 199 ITR (St.) 85 (SC) This issue h ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... remains within the realm of appreciation of evidence; and the Courts have consistently held that such a matter does not give rise to any substantial question of law. In the case of CIT v. Orissa Corpn. (P.) Ltd. [1986) 159 ITR 78 (SC), the Hon'ble Supreme Court held as under:- 13. In this case, the assessee had given the names and addresses of the alleged creditors. It was in the knowledge of the Revenue that the said creditors were income-tax assessees. Their index numbers were in the file of the Revenue. The Revenue, apart from issuing notices under s. 131 at the instance of the assessee, did not pursue the matter further. The Revenue did not examine 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 o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nly when the factual finding recorded had been entirely de hors the subject, or that it had been based on no reasoning, or based on absurd reasoning to the extent that no prudent man of average judicial capacity could ever reach to such conclusion, or that it had been found against any provision of law, then a case for formulation of substantial question of law on such finding can be said to have been made out. 11. In our view, no such error could be noticed by us in the impugned order because as observed supra, the Tribunal did go into the details of explanation offered by assessee and then accepted the explanation by placing reliance 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 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e proved all the ingredients of section 68 of the Act. Apart from this, it is also to be noted here that six companies involving share capital of ₹ 58,70,57,300/- to appellant companies were assessed by same AO for AY 2013-14 and in other cases as per the facts available from records non of the notices issued u/s 133(6) of the Act remained unserved and many of them have also made compliance to the notices issued u/s 133(6) of the Act. Further from search report of ROC, it is also seen that some of the investor companies have charge registered under Companies Act in favour of leading banks for crores of rupees. 2.1.4.6 Therefore, in view of the findings of Hon ble jurisdictional High Court, the identity, creditworthiness and genuineness of transaction of these companies cannot be held as doubtful and addition by applying the provisions of section 68 of the Act cannot be upheld. However, it is also to be seen that the Investigation Directorate has carried out investigation for deposit of cash/DD at fourth stage of channel source in some cases. The Chart showing cash deposit/DD deposit at 4th Channel as per inquiries made by Investigation wing is as under: ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Alliance Trade com P Ltd Swastik Traders and Global Securities Total 1,41,50,000 Motisons Global P Ltd 2012-2013 17,00,000 Rose Suppliers P Ltd Durga Enterprises and Shyam Fashion Motisons Global P Ltd 2012-2013 18,00,000 Rose Suppliers P Ltd Nibu Nagi Motisons Global P Ltd 2012-2013 19,00,000 Rose Suppliers P Ltd Nibu Nagi and Durga Enterprises Motisons Global P Ltd 2012-2013 3,50,000 Rose Suppliers P Ltd Durga Enterprises Motisons Global P Ltd 2012-2013 14,00,000 Rose Suppliers P Ltd Shyam Fashion Motisons Global P Ltd 2012-2013 18,50,000 Rose Suppliers P Ltd Durg ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t Dealers P Ltd Shyam Fashion Motisons Global Private Limited 2012-2013 22,00,000 Alliance Tradecom P Ltd PNB, Axis Bank Siliguri, Swastik Traders and Global Securities Motisons Global Private Limited 2012-2013 10,00,000 Alliance Tradecom P Ltd Swastik Traders Motisons Global Private Limited 2012-2013 35,00,000 Alliance Tradecom P Ltd M/s Swastik Traders , Global Securities Axis Bank Siliguri, Motisons Global Private Limited 2012-2013 20,00,000 Alliance Tradecom P Ltd Swastik Traders and Global Securities Motisons Global Private Limited 2012-2013 20,00,000 Alliance Tradecom P Ltd Swastik Traders and Global Securities Motisons Global Private Limited 2012-2013 16,00,000 Alliance Tradecom P ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... and balance is deleted, details given as under: Name of Appellant Company ITA No AY Addition Made by AO Addition Sustained Addition deleted/ Relief Given Motisons Global Pvt. Ltd 753/14 -15 2009- 10 2,75,00,000 ------------- 2,75,00,000 Motisons Global Pvt. Ltd 754/14 -15 2011- 12 6,96,50,000 --------------- 6,96,50,000 Motisons Global Pvt. Ltd 767/14 -15 2012- 13 42,07,29,600 5,94,47,727 36,12,81,873 Motisons Global Pvt. Ltd 755/14 -15 2013- 14 4,41,00,000 50,50,000 3,90,50,000 Motisons Entertainment (I) Pvt. Ltd 760/14 -15 2009- 10 3,40,00,000 ----------- ---- 3,40,00,000 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 9,800 2. Motisons Global Pvt Ltd 2013-14 2,24,50,000 3 Motisons Entertainment (India) Pvt Ltd 2012-13 1,55,00,000 Total 10,72,99,800 Further, it is also submitted that addition made by the AO tantamount to double addition. It is also mentioned here that as per Ld AR s request, appellate proceedings in case of M/s Mayukh Vinimay Pvt Ltd have been kept in abeyance till the disposal of appeal by Hon ble ITAT. In view of aforementioned findings, now additions made by the AO are being discussed with respect to grounds of appeal raised by the respective assessee in para below. Section 68 of the Act provides regarding any sum found credited in the books of an assesse maintained and explanation offered by the assessee is not satisfactory in the opinion of the AO then such sum credited be charged to income-tax as the income of the assessee of that previous year. The Section 68 reads as under:- Section 68 Cash Credits: Where any sum is found credited i ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... b-section (2) of Section 56;] To tax the income under the Act, it must come under the definition of income as provided u/s 2(24) of the I.T. Act, 1961. There were amendments in sec 2(24) of the Act and in section 56(2) of the Act w.e.f. 01-04-2013 are not applicable to A.Y. under consideration. By these amended provisions, any consideration received for issue of shares that exceeds the face market value of such shares the aggregate consideration received for such shares as exceeds the fair market value of the shares shall be taxable as per clause (viib) of sub-section 2 of section 56 of the Act. The CBDT vide Circular No. 3 of 2012 dated 12-06-2012 has also mentioned that provision of section 56(2)(viib) will be applicable for A.Y. 2013-14. Thus the relevant portion of CBDT Circular is reproduced is as under:- Share premium in excess of fair market value to be treated as income In the Finance Bill, 2012, it had been proposed [section 56(2), as sub-clause [(viib)] that in case of a company, not being a company in which the public are substantially interested, which receives, in any previous year, from any person being a resident, any consideration for issue of shares a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nces of the case and the case laws relied on by the ld.AR of the assessee (supra), it is clear that share premium received cannot be considered as income for the year under consideration by invoking provisions of section 56(1) of the Act. Therefore, in our considered view, the ld. CIT(A) has rightly deleted the addition of ₹ 3,03,00,000/- and we concur with his findings on the issue in question Thus the Revenue s appeal in ITA No. 481/JP/2017 is dismissed. 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 which shall apply mutatis mutandis in this appeal of Revenue also. Thus solitary ground of the Revenue s appeal for the A.Y. 2009-10 is dismissed. In the result the appeal of the Revenue in ITA No.483/JP/2017 stands dismissed. 4.1 Now we take up the appeal of the Revenue in ITA No.484/JP/2017 for the 2011-12 for adjudication wherein the Revenue has raised the solitary ground as under:- Whether on the facts and in the circumstances of the case the ld. CIT(A) was right in ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he 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. 5.2 In first appeal, the ld. CIT(A) has deleted the addition of ₹ 1,95,00,000/- made by the AO by observing at pages 96 of his order as under:- 3.2.2 I have considered assessee's submission and carefully gone through assessment order. I have also take 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 Buildtech Pvt. Ltd, details of which are as under:- Name of Appellant Company ITA No. A.Y. Addition made by AO Addition sustained Addition deleted/ Relief given Motisons Global Pvt Ltd 753/14-15 2009-10 2,75,00,000 - 2, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 85,42,09,373 In view of the above facts and circumstances of the case as discussed above, addition of ₹ 1,95,00, 000/- made on a/c of bogus share capital in the hands of M/s. Motisons Entertainment (India) Pvt. Ltd is hereby deleted. Assessee gets 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 Shri Ajit Sharma and also could not satisfactorily explain the reasons of cash deposits made to those accounts. Therefore, duly considering those facts as evidences (both documentary oral) gathered during search and Post-search operation, addition to the extent of ₹ 8,71,97,727/- is sustained and balance is deleted, details given as under:- Name of Appellant Company ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... - 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 ind 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 Amount 1. Motisons Global Pvt. Ltd 2012-13 6,93,49,800 2. Motisons Global Pvt. Ltd 2013-14 2,24,50,000 3. Motisons Entertainment (India)Pvt ltd. 2012-13 1,5 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... or the Assessment Year 2011-12 has raised the following grounds of appeal. 1. On the facts and in the circumstances of the case and in law the order passed u/s 153A read with section 153B of the I.T. Act, 1961 is bad in law, void ab initio and deserves to be annulled as the assessment for the A.Y. 2011-12 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 the case and in law the ld. CIT(A) erred in confirming the addition of ₹ 1,41,648/- made by AO by disallowing the entire expenses incurred during the year. 7.1 During the course of hearing, the ld.AR of the assessee has not pressed the Ground No. 1 and 2. Hence, the same are dismissed being not pressed. In the result, the appeal of the assessee in ITA No. 386/JP/2017 is dismissed. 8.1 The Revenue in ITA No.485/JP/2017 for the A.Y. 2012-13 has raised the solitary ground as under:- Whether on the facts and in the circumstances of the case the ld. CIT(A) was right in deleting the addition of ₹ 6,36,50,000/- out of total addition of ₹ 7,78,00,000/- made u/s 56(1) of the Act ignoring the fact ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ome Tax Act, 1961. The same is added back to the total income of the assessee. 9.2 In first appeal, the ld. CIT(A) has deleted the addition of ₹ 6,36,50,000/- out of addition of ₹ 7,78,00,000/- made by the AO and sustained the addition of ₹ 1,41,50,000/- by observing at pages 60 to 107 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 assessment u/s 143(3) of the Act was done in assessee s case for AY 2012-13 and the original return filed on 28.09.2012 declaring ₹ 1,99,770/- total income was only processed u/s 143(1) of the Act. Various courts have held that processing of returns u/s 143(1) of the Act is no assessment. It is obvious that if no incriminating material is found during search, then additions, if any, have to be made in the income shown in the return of income (in the case of pending assessments which abate) and to the computed income (in case of assessments were completed). Thus effectively, what was said in the case of Kab ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ious 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 income therefore will cover not only the income emanating from declared sources or any material placed before the Assessing Officer but from all sources including the undisclosed ones, or based on the unplaced material before the AO. Some related Judgments a) CIT vs. Kabul Chawla (Delhi High Court) : Completed assessments can be interfered with by the AO while making the assessment under Section 153 A only on the basis of some incriminating material unearthed during the course of search or requisition of documents or undisclosed income or property discovered in the course of search which were not b) Gurinder Singh Bawa vs. DCI ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... elhi 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 Section37. 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 132 of the Act, notice person searched requiringhim to file returns for six AYs immediately preceding the previous year relevant to the AY in which the search takes place. ii. Assessments and reassessments pending on the date of the search shall abate. The total income for such AYs will have to be computed by the AOs as a freshexercise. iii. The AO will exercise normal assessment powers in respect of the six years previous to the relevant AY in which the search takes place. The AO has the power to assess and reassess the 'total income' ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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 following legal issues were raised before the Hon'ble ITAT'1 Bench, Mumbai: 1. The Ld CIT (A) failed to appreciate the fact that no incriminating documents /evidences were found during the course of search of third party, and hence, re-computing the income u/s I53A is bad in law and liable to be quashed. 2. The Ld CIT (A) failed to appreciate the fact that original assessment was made u/s 143(3) vide order 31st August 200 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ring 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 situations - either the assessment was complete before the search or pending at that time. If the assessment was complete, and if any income which had escaped assessment in the regular assessment is found during proceedings u/s 153A, what is the AO supposed to do? He has no power to act u/s 147/148 because of the non-obstante clause. He is now precluded from invoking provisions of section 148 because of the conclusion drawn in Kabul Chawla. b) The situat ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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 propos ition 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 the Revenue. Similar sentiments hav e been expressed in the case of CIT v. Anil Kumar Bhatia 2013 352 ITR 493 (Del) where only one uns igned document dated 10.02.2003 showing a loan of ₹ 1,50,000/- was found during search conducted on 13.12.2005. The Hon ble High Court held that this material was enough to justify additions in all the 6 years. c) Recently, the Kerala High Court in Sunny Jacob Jewellers and Wedding Centre v. Sunny Jacob J ewellers ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s, 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. The Hon ble High Court held that this material was enough to justify additions in all the 6 years. c) Recently, the Kerala High Court in Sunny Jacob Jewellers and Wedding Centre v. Deputy Commissioner of Income-Tax [2014] 362 ITR 664 (Ker) has also very categorically stated that incriminating material found during search is not necessary in all the 6 years for additions to be made on other issues. Therefore, in view of above discussion with regard ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... see. 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 10,30,000 equity shares of ₹ 10 each to various companies at a premium of ₹ 40 90 on various dates detail of which is as under: - S.N. Name No. of Shares alloted/applied during the year Amount adjusted against share capital Rate per share Amount adjusted against share premium Rate of premium per share Issue ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Copy of board resolution. 117 Copy of bank statement showing the entry of payment made to assessee. 118-119 Declaration of source of funds with party. 120-121 Copy of Ack. of ITR and Computation of AY 2012-13. 122-123 Copy of audit report and audited balance sheet along with annexure of 31.03.12. 124-133 Copy of registration certificate issued by ROC. 134 Evershine Suppliers Pvt. Ltd Share application containing the name/address/PAN of party, detail of payment received etc. 135-138 Copy of board resolution. 139-140 Copy of PAN Card of party 141 Copy of bank statement showing the entry of payment made to assessee. 142-145 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... c. 221-230 Copy of board resolution. 231 Copy of PAN Card of party 232 Copy of bank statement showing the entry of payment made to assessee. 233-236 Declaration of source of funds with party. 237-238 Copy of Ack. of ITR and Computation of AY 2012-13. 239-240 Copy of audit report and audited balance sheet along with annexure of 31.03.12. 241-250 Copy of registration certificate issued by ROC. 251 Rose Suppliers Pvt. Ltd Share application containing the name/address/PAN of party, detail of payment received etc. 252-253 Copy of board resolution. 254 Copy of PAN Card of party 255 Copy of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... x return and Balance sheets. There is sufficient source of funds with all the companies to investment share capital/share application in the assessee company. The assessee submitted the copies of bank account/declaration of source of funds with them of investor companies. The bank statement shows the huge transaction of high 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 31.03.2012 Share capital and reserve surplus with Investor companies as on 31.03.2011 Share capital and reserve surplus with Investor companies as on 31.03.2009 Alliance Tradecom Pvt. Ltd 1,59,00,000 11,05,42,868 11,07,03,338 11,07,00,991 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... re application received from the companies. The share application is supported by Board Resolution passed in the investor companies. The assessee company has allotted the shares to the investor companies. The proper returns were filed before the ROC against allotment of the shares to these companies. Furthermore, the department has carried out intensive search operations over the assessee and no any incriminating material was found to show that the money against the share allotment was own money of the company. Shares certificates were issued against the allotment of the shares to these companies were not found from the possession of the assessee company or its director or employees. This fact shows that after allotment of shares by the appellant company share certificates were dispatched to the subscriber companies. No any entry in books of account or document was found showing payment of cash to these investor companies against receipt of cheques from these companies against allotment of shares. Therefore the genuineness of the transactions cannot be doubted. The department also carried out survey over the investor companies (Except Mayukh Vintrade Pvt. Ltd) and during the course ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e same were managed affairs of the assessee group. It is relevant to mention here that if someone is giving money to other one there is no compulsion that such funds should remain in his a/c for some period and no prudent business man will keep ideal the funds in its bank a/c. The transfer of funds across several accounts in a single day or within few days was because of the reason that before inflow of funds with the concerning party the outflow of fund was predetermined but the same does not lead to conclude that the same were own managed funds of the assessee. Further, if the source of investment in the hands of investor company is doubtful than the addition can be made in the hands of investor company not in the hands of the assessee. The assessee has no onus to prove source of source. Reliance is placed on the following decisions. i) CIT Vs Jai Kumar Bakliwal (2014) 101 DTR (Raj) 377 : (2014) 267 CTR (Raj) 396. Head notes of the case is as under:- Income from undisclosed sources─Cash credit─Genuineness and creditworthiness of transaction ─ Addition ─ Validity ─ Assessee was carrying on business of finance and earning income by way o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... emerge out of said order of the Tribunal. There was not any infirmity or perversity in the order of the ITAT so as to call for any interference. Revenue s appeal dismissed. 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 131notices 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) Aravali Trading Co Vs Income Tax Officer (2008) 8 DTR (Raj) 199. Once the existence of the creditors is proved and such persons own the credits, the assessee s onus stands discharged and the assessee is not required to prove the source from which the creditors could have acquired the money deposited with him. Held that merely because the depositors explanation about the sources of money was not acceptable to the AO, it cannot be presumed that the deposits made by the creditors is money belonging to the assessee itself. iv) CIT Vs Heera Lal Chagan Lal Tank (2002) 157 ITR ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... from these six companies an attempt to lift the curtain over the suspicious transactions. The assessee had made several transactions to hide the actual picture and a series of transactions was made to colour illegal transactions. The ld AO reproduced the share holding pattern of the various companies as on 19/02/2013. Submission of assessee: - From the chart of share holding produced at page 6 to 8 of Assessment order, it can be seen the shareholding pattern of the investor companies but this chart do not have any material to show that the inflow of funds was from the assessee company. All the companies are independent company separately assessed by the same AO. The chart of shareholding produced by the AO is totally irrelevant to establish that the undisclosed income of the assessee company was introduced under the garb of share capital. Also there is no introduction of any suspicious funds in the companies who subscribed the share capital of the assessee. The finding of ld. AO that series of transactions has been made to colour illegal transaction is not backed with any supporting documents and the same is only on the basis of presumption and assumptions. The ld. AO ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t there was asked to produce books of accounts of these companies. He informed that no books of accounts were kept at this office and that one Banwari Yogi of Jaipur used to send the final accounts to him from Jaipur, on the basis of which the ITR and audit reports were prepared by him. He further admitted that the bank accounts of these companies have been opened in the HDFC Bank at Jaipur. During the course of search at residence of Chhabra family the Tally accounts, MCA compliance data and importantly complete Tally accounts of six Kolkata shell companies was found in a pen drive belonging to Shri Banwari Lal Yogi. Submission of assessee: - i) In the chart of shareholding of investor companies given in para 12 of the assessment order the shareholding is given as on to 19.02.2013 i.e. relevant to AY 2013-14. It is not understandable that shareholding of some date of AY 2013-14 is how relevant to understand the transactions made during the year under consideration. However it is relevant to mention here that the shareholding mention in this para was same in AY 2011-12 and AY 2012-13. ii) During the year under consideration the first receipt from the investor companies ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ee company. When the department carried out intensive search over the assessee group and survey over the investor companies and during the course of both operations not a single evidence was found to show that the share application money received by the assessee was managed affairs to manage its unaccounted funds than how it can be presumed that the share application received by the assessee is non genuine. Admittedly those companies opened the bank accounts in HDFC, Jaipur but the same were because of the reason that they planned to made the investment in the assessee group and their directors were also residing in Jaipur, therefore in order to better smooth management to funds, the bank accounts were opened in Jaipur branch. Further for considering a transaction as genuine the genuineness of source of funds is to be examined which is well proved as genuine in this case. The maintaining bank a/c by the companies in Jaipur cannot be a basis for treating the transaction as non genuine. v) The assessee group was not maintaining the books of accounts of the investor companies and the same is evident from the search action carried out by the department as during the course of whic ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... outs of these companies. From detailed analysis it could easily be inferred that all of the companies are owned by the employees of Motisons Group. Submission of assessee: - i) The ld. AO is wrong in holding that the Motisons Group companies allotted the shares to the Kolkatta based companies at very high premium and the same shares in the very same years were allotted at very nominal prices to the family members and other group related concerns. From the examination of details of shares allotted during the year (Copy at PB Page 112 to 113) your honor will find that during the year under consideration no share was allotted by the assessee company to other group concerns or family members of directors. As regard to allotment of shares in other companies this is to submit that in the year under consideration only one company of the assessee group M/s Shivansh Buildcon Pvt. Ltd allotted the shares to M/s Evershine Suppliers Pvt. Ltd as well as to Shri Sanjay Chhabra and Shri Sandeep Chhabra and the same was allotted at the same rate. The shares to Evershine Suppliers Pvt. Ltd were allotted @ 20 per shares and shares to Shri Sanjay Chhabra and Shri Sandeep Chhabra were also al ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... investor company. The shares were issued to the investor companies at premium because of the reasons mentioned in coming paras. iii) 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 were funded by Motisons Group. Thus, if the ld. AO is not in possession of any positive material against the assessee or its investor companies to prove his contention than the addition cannot be made merely on guess, presumption and assumption. Further there is nothing positive in the inquiries to allege that the assessee has introduced its own unexplained money under the garb of share capital and share premium. iv) The allegation of ld. AO that the statement of affairs has been designed to introduce money through banking channels by the group in the form of share capital/share premium is completely wrong, perverse and contrary to the facts available on record. In forgoing paras we have submitted the detail of net worth of the investor companies and from examination of such net worth of the investor companies your honor will find that such companies owing their net worth much prior to ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... that systematic transfer of funds across several accounts at times as many as six accounts in a single day (or at the most two to three days) this is to submit that from this finding no where it proves that the funds were introduced in such companies by the assessee company. Whatever amount received by the assessee was received through a/c payee cheques and source with investor companies was also proved. It is relevant to mention here that if someone is investing the money in the assessee company he must be having the inflow of money from some source. What is the source of inflow with the investor company and how it is managing its affairs is not concern of the assessee. The transfer of funds across several accounts in a single day or within few days was because of the reason that the before inflow of funds with the concerning party the outflow of fund was predetermined but the same does not lead to conclude that the same were funds of the assessee. None of the above company is owned by the assessee company or group. ii) The excel sheet which is being discuss by ld. AO is not in knowledge of the assessee and the same is also not appearing in assessment order too. iii) The S ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... see and how the assessee is beneficiary of such funds. If the above named companied naming Faster Vinimay Pvt Ltd, Wise Merchants Pvt Ltd, Albatross Dealers Pvt. Ltd, Swati Vanijya Pvt. Ltd, Dover Distributors Pvt. Ltd and Olympic Vyapaar Pvt. Ltd having inflow of some suspicious funds and then the same is being utilizing by them then investigation of such funds should have been made in the case of such companies and the necessary action regarding to such should have been taken against such companies as these companies are independent assessee. There is no whisper in the assessment order that any short of inquiries were made from these companies in this regard. The ld AO has no positive material against the assessee to establish that alleged suspicious funds were belonging to assesses group. There is no finding and evidence as a result of search or as a result of investigation that all channel source were being managed by the assessee group. If in some intermediate channel source, some suspicious funds has been deployed than the action should be taken in their hands. The assessee cannot be held responsible for the default of third or fourth channel. The onus under the law is to pro ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rom the persons in whose hands the funds were finally reached and not from the person in whose bank a/c the cash was deposited. But as per establish and admitted legal position always the source of such cash deposit is being asked from the person who in owing the bank a/c and action is being taken against such person and not against other person to whom such funds were given. In these type of cases the action against another person can only be taken if any positive material/evidence against such person is found to show that such funds belong to him. In the case of the assessee there is no evidence to prove that the cash deposit in bank a/c of fourth/fifth channel belong to the assessee. If this kind of practice is approved than the owner of the bank a/c will enjoy by depositing the unaccounted/unexplained cash in bank a/c freely and on being caught by department to avoid the tax implication, penalties etc. they will shift their burden on some other one. 4) As regard to the statement of Shri Santosh Choubey this is to submit that as apparent from the assessment order this person admitted to deposit the cash in bank a/c in bank a/c of some of the concerns but he nowhere admitted t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ere it proves that the cash deposited in these bank a/c was from undisclosed source. There may be possibility that the cash may have been deposited out of disclosed sources. But the department has not made any inquiries in this regard from holders of these bank a/c s. 6) Regarding funds transferred in a/c of companies naming Faster Vinimay Pvt Ltd, Wise Merchants Pvt Ltd, Albatross Dealers Pvt. Ltd, Swati Vanijya Pvt. Ltd, Dover Distributors Pvt. Ltd and Olympic Vyapaar Pvt. Ltd through demand drafts of Bhutan National Bank and drunk PNB Bank ltd it is not clear from the assessment order that why the same are being treated as non genuine. There is no finding in the assessment order that some suspicious funds were introduced to obtain such demand drafts and if it is presumed to be so than still there no contrary material to show that the same was belonging to the assessee. There is no inquiry that how such demand drafts were originated and who managed such affairs. What was the source of funds to obtain the bank drafts. This also proves that the inquiries on which the department is relying are totally irrelevant for the determination of the share capital received by the assessee ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ls that money invested belongs to assessee than onus shifts on it. Onus is to be discharged by collecting evidences. Mentioning of modus operandi is not sufficient and it will not take the place of evidence. ii) The Hon ble Jurisdictional High Court in the case of CIT V/s Jai Kumar Bakliwal 366 ITR 217 has referred to the deposit of cash in the account of the creditor and observed as under: - Certainly, deposit of cash and immediate transfer of cheque or clearance of the cheque within a day or two casts a doubt as the transaction appears to be somewhat doubtful but suspicion howsoever strong it may be is not sufficient itself. In the case of the assessee, the assessee has provided all details and companies, which applied for shares are filing I. Tax return and investment is reflected in their Balance sheet. The Hon ble Raj High Court in the case of Jai Kumar Bakliwal (supra) has held that assessee is not required to prove the source of source. The Hon ble Jurisdictional High Court in the case of Jai Kumar Bakliwal (supra) has referred to some observations from some decisions and these are reproduced as under: Hon ble Apex Court in the case of CIT V Daulat Ram Rawatm ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rnished by the assessee and make additions of such deposits as income of the assessee from undisclosed sources by invoking Sec.68 unless it can be shown by the department that source of such money comes from the assessee himself or such source could be traced to the assessee itself. This Court, in the case of Aravali Trading Co. V ITO [2010] 187 Taxman 338 (Raj.) has gone to the extent of observing the fact that the explanation furnished by the four creditors about the sources where from they acquired the money was not acceptable by the revenue could not provide necessary nexus for drawing inference that the amount admitted to be deposited by these four persons belonged to the assessee. The assessee having discharged his burden by proving the existence of the depositors and the depositors owing their deposits, he was not further required to prove source of source. As observed herein above, though u/s 68, AO is free to show with the help of the enquiry conducted by him into the transaction which has taken place between the creditor and the sub-creditor that the transaction between two were not genuine and that the sub-creditor had no creditworthiness, it will not necessarily ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... (ROC), showing allotment of shares to the applicants. Therefore, the assessee discharged the onus cast upon it, as such the ld. CIT (A) was fully justified in deleting the impugned addition made by the AO. Furthermore the ld. CIT (A) while deciding the issue in favour of the assessee relied upon the judgment of the Hon ble Jurisdictional High Court in the case of CIT Vs Dwarkadshish Investment Pvt. Ltd. (supra) and the judgment of the Hon ble Supreme Court in the case of CIT Vs Lovely Exports (P) Ltd. (supra), therefore, we do not see any infirmity in the order of the ld. CIT (A) and accordingly do not see any merit in this appeal of the department. iv). The Hon ble Apex Court in the case of Lalchand Bhagat Ambica Ram V CIT 37 ITR 288 has held that no addition can be made on the basis of surmises and conjectures. In this case the A.O. made addition on the basis of surrounding circumstances and entertained a suspicion that assessee was indulging in smuggling of food grains to Bengal as was the notoriety of grain merchants. The assessee could not be said to be indulging in smuggling without an iota of evidence. The addition could not be made as the finding that sum of High denomin ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nd Alloys Ltd. 2014-TIOL-709-ITAT-Jaipur had an occasion to consider a case where search operations were conducted and the company has issued shares on premium. The ld. Jaipur Tribunal in Para 6 7 has mentioned as under: At the outset, the learned A.R. for the assessee argued that in assessee s own case in ITA No.972/2009 CIT Vs. Kamdhenu Steel and other company for A.Y. 2004-05 = 2012-TIOL-236-HC-DEL-IT held that the assessee had submitted the particulars of registration of the applicant company, the confirmation from the share applicants, bank account details from which payment through account payee cheques, it has been held by the Hon ble Delhi High Court that the assessee had discharged its initially onus. With the registration of the company, the identity has been established, the applicant company was having bank account, it had made the payments through account payee cheques. It is further held that it would not automatically follow that the said money belongs to the assessee and become unaccounted money. According the Hon ble High Court, the assessee appears to be correct on this aspect. The Hon ble Court felt that something more, which was necessary and required to be ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ess and creditworthiness of the subscribers. The learned Assessing Officer heavily relied upon the Inspector s report, which was against the natural justice as the copy was provided on 06.06.2011 to the appellant whereas assessment order was completed by the learned Assessing Officer on 26.12.2010. Jawahar Market is evident from the copy of bank account of subscriber, on which this address had been mentioned as well as on master detail of ROC. The share capital was subscribed in F.Y. 2005-06 and inquiries were made in F.Y. 2010-11. There is a time gap of near about 5 years, the share applicant might have changed their addresses, which could be verified from the ROC by the Assessing Officer to substantiate his findings, which has not been done by him. The learned CIT (A) has called for remand report from the Assessing Officer on furnishing of copy of bank account of M/s Megatronics Systems Pvt. Ltd. At the time of appellate proceedings. Further the Hon ble Delhi High Court has decided assessee s own case on similar facts in its favour in A.Y. 2006-07. The learned CIT D.R. has not controverted the findings given by the learned CIT (A). Therefore, we upheld the order of the learned CI ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... department itself in the assessment order of such companies. Once the department itself treated investments/assets of a company as genuine and if such company is reinvesting the funds realized from such investments/assets than how the same can be treated as non genuine. Without prejudice to our all submission it is submitted that the assessee received share application of ₹ 1,55,00,000/- from M/s Mayukh Vinimay Pvt. Ltd and the initial source of funds with Mayukh Vinimay has already been added as income of M/s Mayukh Vinimay Pvt. Ltd and the investment by this company in the assessee company was made out of rotation of such funds than how the same can be again added as income of the assessee. The same will resulted to the double addition of the same amount. 5. After being doubted the creditworthiness and genuineness of the transactions on the basis of reasons/inquiries/analysis discuss in para 4 above the ld. AO further doubted the creditworthiness and genuineness of the transactions for the following reasons as given in para 17 (a to c) and para 18 of the assessment order: - i) The assessee company was incorporated on 01.07.2007 with the subscribe capital of & ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... urther the assessee company is one of the group company of Motisons Group. The Motisons Group is very prestigious and well know group of the northern part of India, therefore the investor company invested the funds in the assessee company on the goodwill of the Motisons Group after knowing their future plans and future earnings. Therefore the share capital/share premium invested by investor companies was not on the basis of current affairs of the assessee company but the same was result of future business explanation plans coupled with goodwill of Motisons Group. iii) Admittedly when the share were issued the book value of the assets of the assessee company was not in commensurate to the value of the shares but while making the investments the current market value of the assets and future potentiality profitability of the project/assets are also taken into consideration and then the investments are made. There are lots of companies which issue the shares in market through IPO and the shares of such companies are subscribed on the basis of their declaration regarding their future business planning for which the funds raised in IPO. Thus the existing fixed assets of the company ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... to evade tax on the revenue by establishing facts and circumstances from which a reasonable inference can be drawn that the assessee has, in fact, attempted to evade tax lawfully paid by it. 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 apart from investment made in assessee group having other investments/assets which were treated as genuine by the depa ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ies. (vii) Registered address of all the companies is the same, which has been changed on 01.03.2012. (viii) Two of the said companies information on MCA website were examined in detail. M/s. Alliance 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. 7. In response to show cause notice the assessee filed its reply vide letter dated 13.02.2015 (Copy at PB Page 109 to 111). The submission of the assessee on the observations of ld. AO as mentioned above in para 6 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 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of the directors of the assessee, then also the transaction cannot be treated as not genuine as the main issue is availability of funds in the hands of the investor company and if that is 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 group the inves ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t is admitted facts that during the year under consideration as well as in previous years the assessee company is not having any such business activities wherefrom this much undisclosed income could be earned than how the same can be managed to brought in books of accounts in 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 h ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... investment made in the assessee group they have other investments/advances. As per declaration of source of funds submitted by them they realized money from their old investments and made the same money was utilized for making the investment in assessee company. These companies are assessee of Income Tax department and there assessment for AY 2009-10 and AY 2013-14 was made by the department wherein the source and application of funds were admitted as genuine. Only in the case of Mayukh Vinimay Pvt. Ltd the share premium received by this company was added as income of this company and such funds were utilized for investment in shares of assessee company than how the same can be added as income of the assessee considering the same as non genuine. 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 conjecture ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... essee company. If the ld. AO is having doubt regarding genuineness of source of funds with the investor companies he could have make the inquired in the case of such companies and if something found adverse than the necessary additions could have been made in the hands of such investor company only and in the inquiry if something positive reveals that the source of funds with such investor companies was funded by the assessee company than only the addition could be made in the hands 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 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. Further as a result of so called long inquires by investigation wing it could not be proved evidentiary that the assessee managed the funds in intermediate companies to brought the same in books of accounts in the shape of share capital/share premium. v) The finding of ld. AO that simply because some form of identification on paper has been provided does not mean that the transaction stand ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... (1) was a broad manifestation of the intent of revenue, sub section (2) which was more specific in content was introduced to take case of the misinterpretation confusion which was being derived out of sub section (4). It must be appreciated that introduction of sub section (2) of section 56 of the Act was only a specific expression of the manner in which a specific transaction requires to be dealt with the intent of legislature and the content thereof already existed within the same act and within the same section and in the preceding sub-section No new idea which was conceptually district from section 56(1) of the Act was brought into being. Hence, the assessee company cannot be allowed to escape the provision of law, simply because it contained a broader wider manifestation of its true intent which was enunciated 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 ac ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... in the Income Tax Act under the head income from other sources by inserting clause.(vii b) to section 56 of the Act wherein it has been provided that any consideration for issue of shares, that exceeds the fair value of such shares, the aggregate consideration received for such shares as exceeds the fair market value of the shares shall be treated as the income of the assessee but the legislature in its, wisdom has made. The provision applicable w.e.f. 1.4.2013 i.e. on and from A.Y. 2013-14. iii) The ld. AO taxed the share capital/share premium by holding that mere absence of a specific provision does not by itself mean that a particular colorable device or a sham transaction, acquires legal sanctity and a transaction, which is patently beyond the realms of acceptability and which also are embedded within 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 a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... is wholly incorrect to say that the allegation is based on surmises and conjectures. The facts clearly prove that the assessee had entered into sham transactions as part of a well planned exercise of introducing unexplained money in the form of share capital and share premium without any justification of the value having been provided either by the issuing company or the subscribing company. The money so received was then immediately invested in the subscription of share capital at high premium with other companies, who in turn continued the exercise in the same form. The assessee company was thus part of this circular ring whereby unjustified and unsubstantiated share premium was being introduced. Submission of assessee: - i) The finding of ld AO is patently wrong, perverse and not backed with 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 som ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... by holding that the assessee planned the funds of all the companies. There is no onus to prove source of source. In this regard, the assessee relies on the following decisions:- (i) Hon ble Rajasthan High Court in the case of Aravali Trading Co Vs Income Tax Officer (2008) 8 DTR (Raj) 199 has held that once the existence of the creditors is proved and such persons own the credits, the assessee s onus stands discharged and the assessee is not required to prove the source from which the creditors could have acquired the money deposited with him. Hon ble jurisdictional High Court has held that merely because the depositors explanation about the sources of money was not acceptable to the AO, it cannot be presumed that the deposit made by the creditors is money belonging to the assessee itself. (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 th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... sses or deriver, or 2) The value or worth of such assets or profits which the issues company may create in the further or may derive, for the proportionate benefit of the subscriber. In the instant case, both of above are absent. Neither does the issuing company possess any asset worth its name nor does it derive any profit. Neither does the assessee company hold any promise for the creation of assets or wealth in the future nor is there any foreseeable possibility of any profit being derived in the future. The question which thus arises is that what is it that the subscriber 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 has been accounted for by assessee company as per its own sweet ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... . From the financials of the assessee company the justification given by the assessee in forgoing para regarding acquisition of assets and future planning for earning of profit can be duly verify. Further as stated in forgoing paras the shares at premium is always a commercial decision between investor and investee companies which does not require any justification. e) Finding of ld. AO: - The Inquiries which are being discussed in show cause notice are in relation to allottee companies and as held in earlier paras that there are cross-holdings amongst six companies naming Alliance Tradecom Pvt. Ltd, Evershine Suppliers Pvt. Ltd, Regent Barter Pvt. Ltd, Regent Dealers Pvt. Ltd, Rose Suppliers Pvt. Ltd and Mayukh Vinimaya Pvt. Ltd, but major shareholding is of a 7th company, i.e., Mayukh Vintrade Pvt. Ltd. Thus, this latter company is the holding company of 6 companies, named earlier. The holding company is entirely owned by individuals or HUFs of Chhabra families. It is all clear that the web of companies through which transactions have been routed to create a corporate veil . It can easily be noticed that the payments to Sandeep Chhabra and Sanjay Chhabra have been reflected ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... and if some suspicious funds had been introduced in accounts of such companies then the explanation of such funds should have been called from concerning person/company and in case of failure to do so the action should have been taken in the case of concerning person. Instead of doing so the department adopted a short cut method of treating such suspicious money as unexplained money of the assessee and added the same income of the assessee without carrying necessary inquiries or taking necessary action against such persons by justifying its action on the basis of some irrelevant inquiries. There is no case or evidence with the department to presume that the assessee has introduced its explained 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 share capital and premium thereon was not genuine or unaccounted income was introduced in the garb of share premium but from the inquiries and modus operandi its reveals that the allottee companies are merely paper companies and providing accommodation entries. Therefore the indirect evidence/inquiries conducted gi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rough banking channels. What is disputed is whether the funds received by the assessee is actually genuine investment or the unaccounted income introduced in the garb of investment. This raises the question whether the apparent could be considered as real. In the present case the claim of the assessee having received genuine investment is incorrect. Submission of assessee: - i) As laid down by the Hon'ble Supreme Court in the case of CIT v/s Sumati Dayal (1995) 80 Taxman 89 (SC), (Also relied by ld. AO) apparent must be considered real until it is shown that there are reasons to look into the surrounding circumstances to find out the reality and the matter has to be considered by applying the test of human probabilities. The evidences have to be judged by applying the test of human probabilities. ii) The ld. AO is also admitting in this para that the amount has been received by the appellant from various companies and the funds have been received against the issue of shares and that the funds have been received through banking channels. The dispute is whether the funds received by the assessee are actually genuine capital application or the unaccounted income int ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... r: - a) 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 investor companies were against share application and the same is capital receipt which was adjusted against share capital and share premium. The money so received to assessee company was capital receipt and was not revenue receipt, therefore the same cannot be taxed in the hands of assessee company under section 56(1) of Income Tax Act, 1961 because this section deal with income and not with capital receipts. The investors who subscribed the share capital of assessee company is also showing the amount paid to assessee as their investment in shares of assessee company and necessary documents in this regard was submitted to ld. AO. Therefore the assessee has proved with documentary evidences that the amount was received against share application i.e. capital receipt, therefore the sam ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he law he must be taxed, however great the hardship may appear to the judicial mind to be. On the other hand, if the crown seeking to recover the tax, cannot bring the subject within the letter of the law, the subject is free, however apparently within the sprit of the law the case might otherwise appear to be As observed in Partington V Attomey General LR4HL100. Since for the year under consideration there was no provisions 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 placed in following cases: - i) The Hon ble Bombay High Court in the case of Cadell Wvg. Mills Co.(p) Ltd. V CIT 249 ITR 265 had an occasion to consider the taxability of a sum received in respect of consideration of tenancy Right. It was accepted both by revenue and the assessee that tenancy right is a Capital receipt. Income as defined in section 2(24)(vi) is the income chargeable u/s 45. Hence capital gain chargeable u/s 45 or not will be taxable in case the argument of the revenue is accepted. Legislature has not stopped with the word Capital gai ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ere is charging provision for a capital receipt and computation provisions are also applicable. e) The Hon ble Bombay High Court in the case of Vodafone India Services P. Ltd. V UOI 368 ITR 1 had an occasion to consider the difference between the share premium determined by revenue and the share premium charged as deemed loan and taxing of national interest on deemed loan. The Hon ble Bombay High Court has referred to the decision of Apex Court in the case of Mathuram Aggarwal V/s State of MP (1999) 8 SCC 667 for the test to interpret a taxing statue which reads as under: The intention of the legislature is a taxation statute is to be gathered from the language of the provisions particularly where the language is plain and unambiguous. In a taxing Act it is not possible to assume any intention or governing purpose of the statute more than what is stated in the plain language. It is not the economic results sought to be obtained by making the provision which is relevant in interpreting a fiscal statute. Equally impermissible is an interpretation which does not flow from the plain, unambiguous language of the statute. Words cannot be added to or substituted so as to give a m ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... sed to insert a new clause in 56(2). The new clause will apply where, accompany, not being a company in which the public are substantially interested, receives, in any previous year, from any person being a resident, any consideration for issue of shares. In such a case if the consideration received for issue of shares exceeds the face value of shares, the aggregate consideration received for such shares as exceeds the fair market value of the shares shall be chargeable to income Tax, under the head income from other sources . This amendment effective from 1st April 2013 and will accordingly apply in relation to assessment year 2013-14 and subsequent Assessment years. In the memorandum it is mentioned that premium in excess of fair market value is to be treated as income. This suggests that premium in excess of fair market value was not an income but is to be treated as income due to amended provision. 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 2013-14 and not the entire premium to be treated as income. CBDT vide circular No.3 o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... been recorded by Hon ble Raj, High Court in the case of Gotan Lime Stone Khanij Udhyog. The ratio of law in respect of amendment in 55(2) being held as prospective is applicable for 56(2)(vibe) and hence share premium in excess of fair market value can not be held taxable for A.Y. 2011-12. b) Recently the Hon ble Apex Court in the case of M.G. Pictures (Madras) Ltd V/s ACIT 373 ITR 39 held that amendment in section 40A(3) w.e.f. from 1.4.1996 is prospective and cannot be applied to previous years of Block period prior to F.Y. 1995-96. c) The figure of 10,000 was changed to 20,000 u/s 40A(3) of Income Tax Act, 1961 and 269SS of Income Tax Act, 1961 by Direct Tax Laws (Amendment) Act 1987 w.e.f. 1.4.1989. The CBDT vide circular No.522 dated 18.08.1988 stated that amendment in section 40A(3) is applicable for A.Y. 1989-90 as it is a substantive provision and since 269SS is a procedural provision, the effective date will be 1.4.89 i.e. previous year relevant to A.Y. 89-90. d) The five Judge Constitution Bench in the case of CIT V Vatika Township (P) Ltd. 367 ITR 466 had an occasion to consider as to whether Proviso added to section 113 of the I.T. Act, is prospective or re ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... not as per fair market value and held as taxable than still the amount received against share capital amounting to ₹ 1,03,00,000/- cannot be treated as income of the assessee. 10. In addition of above submission it is further submitted that the assessee submitted sufficient documents to prove identity, creditworthiness and genuineness of share capital. To support that shareholders were genuine and creditworthiness is proved, the assessee enclosed necessary details, in respect of incorporation of such companies 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. Therefore, the addition on share application received to the assessee neither can be made u/s 56(1) of Income Tax Act, 1961 nor can be made u/s 68 of Income Tax Act, 1961. The various judgments and arguments regarding addition made u/s 56(1) of Income Tax Act, 1961 has been submitted in forgoing paras. The reliance regarding addition cannot be made u/ ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ceived 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 case of ITO vs. Bhor Mal Dhansi Ram Ltd. in ITA No. 4670/Del/2007, dt. 3rd March, 2006. The copy of the said decision of Tribunal, Delhi Bench is placed on record. The learned counsel for the assessee Shri H.M. Singhvi, chartered accountant has also relied upon the decision of Hon ble Supreme Court of India on the said issue in the case of CIT vs. Lovely Exports (P) Ltd. (2008) 216 CTR (SC) 195 : (2008) 6 DTR (SC) 308 wherein it has been held 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, but it cannot be regarded as undisclosed income of assessee company. 28.6 The Hon ble Delhi High Court ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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. In the instant case, the share applicants are corporate assessees. 28.10 The Hon ble Delhi High Court in the case of CIT vs. Samir Bio-tech (P) Ltd. (supra) held that if investments have been shown by the share applicants in their audited balance sheet then the addition cannot be made under s. 68 of the Act. 28.11 In view of the legal position as discussed above, the AO was not justified in making the addition of ₹ 1.10 crore without bringing on record any material for the addition. Simply on the basis of information which is not substantiated in the course of assessment proceedings against the assessee, the AO could not have added the amount. (ii) The Honb le ITAT, Jaipur Bench, Jaipur in its recent judgment the case of M/s Jadau Jewellers Manufacturers Pvt. Ltd., B-1, Trimut ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... spect of the source of share application money at the time of making the investment in the assessee-company and thus the assessee has discharged its initial burden except in one case-As regards individual investors, the Tribunal found that identity of 9 out of 10 investors has been established and they have confirmed the fact of making investment in the shares of the assessee-company and no further enquiry was directed by the AO-Thus, additions were sustained only in respect of investments said to have been made by U, an individual investor and by W Ltd., for the reason that such investments were not proved-Finding of the Tribunal is essentially a finding of fact which is not vitiated in law-No substantial question of law arise for consideration iv) CIT vs. First Point Finance Ltd. (2006) 206 CTR (Raj) 626 : (2006) 286 ITR 77 (Raj) Income-Cash credit-Share application money-Tribunal found that the investors are genuinely existing persons and they have filed confirmations in respect of investments made by them and their statements were also recorded- Amount of share capital/share application money could not be treated as unexplained cash credits and no addition could be made unde ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e company-It was submitted by assessee that AO had failed to appreciate statements of any person recorded u/s 143(3) r.w.s. 147-That assessee-company had fully discharged burden of proof, onus of proof and explained source of share capital and advances received by established identity, creditworthiness and genuineness of transaction by banking instruments with documentary evidences-Assessee company substantiated details with documentary evidences as extracted from website of Ministry of Corporate Affairs, Government of India before AO-These facts had not been rebutted on behalf of Revenue-ITAT was not inclined to interfere with findings of CIT(A) who thus rightly deleted entire impugned additions of ₹ 40 lakhs made by AO u/s 68 on account of share capital subscription received by assessee-company Held: It was pointed out in the case of CIT vs. M/s. Lovely Exports (Pvt) Ltd, reported in [2008] 216 CTR 195 (SC) that if the share application money is received by the assessee company from alleged bogus shareholders 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 a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... o 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 register, 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 Delhi Stock Exchange-Complete details were furnished-Tribunal has further found that the AO has not brought any positive material or evidence which would indicate that the shareholders were benamidars or fictitious persons or that any part of the share capital represented company s own income from undisclosed sources-As regards receipt of share capital on issue of rights shares to five companie ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... banking channels, AO was not justified in disbelieving the capital invested by the shareholder companies-Similarly, AO was not justified in disbelieving the loan taken from DTL as the cheques were cleared through bank channels and confirmation and supporting evidence was filed- CIT(A) was justified in deleting the additions. xii) CIT vs STL Extrusion (P) Ltd. 333 ITR 269 (MP) Income-Cash credit-Share application money-Assessee has duly established the identity and source of credits-Assessee having duly furnished the name, age, address, date of filing the application of shares, number of shares of each subscriber there was no justification for the AO for making the impugned addition-Once the existence of the investors/share subscribers is proved, onus shifts on the Revenue to establish that either the share applicants are bogus or the impugned money belongs to the assessee itself-Additions not sustainable. xiii) CIT vs Arunanda Textiles (P) Ltd. , 333 ITR 116 (Karnataka) Income- Cash credit-Share application money-Assessee able to identify the shareholders-It is not for the assessee-company to establish but it is for the Department to enquire with the investors about the capac ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... CTR (SC) 195 Income-Cash credit-Share application money-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, but it cannot be regarded as undisclosed income of assessee company ii) CIT vs. Steller Investment Ltd. (200) 251 ITR 263 (SC) Even if the subscribers to the increased share capital of assessee-company were not genuine, the amount could not be regarded as undisclosed income of the assessee-company. iii) Commissioner of Income Tax Vs. Bhaval Synthetics (Raj HC) (2013) 84 DTR 0449 (Raj) Held that even in case of doubt about subscribers to increased share capital, amount 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 iv) Commissioner of Income Tax Vs. Akj Granites (P) Ltd. (Raj HC) (2008) 301 ITR 0298 held that in respect of share applications received from different places accompanied with share application money, no presumption can be ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 2012-13 7,78,00,000 1,41,50,000 6,36,50,000 Motisons Buildtech Pvt. Ltd 758/14-15 2009-10 3,03,00,000 --------------- 3,03,00,000 Motisons Buildtech Pvt. Ltd 759/14-15 2012-13 3,68,27,500 82,00,000 2,86,27,500 Godawari Estates Pvt. Ltd 769/14-15 2010-11 2,00,00,000 -------------- 2,00,00,000 Godawari Estates Pvt. Ltd 768/14-15 2012-13 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 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Motisons Entertainment (I) Pvt. Ltd 760/14-15 2009-10 3,40,00,000 - 3,40,00,000 Motisons Entertainment (I) Pvt. Ltd 766/14-15 2011-12 1,95,00,000 - 1,95,00,000 Motisons Entertainment (I) Pvt. Ltd 756/14-15 2012-13 7,78,00,000 1,41,50,000 6,36,50,000 Motisons Buildtech Pvt. Ltd 758/14-15 2009-10 3,03,00,000 - 3,03,00,000 Motisons Buildtech Pvt. Ltd 759/14-15 2012-13 3,68,27,500 82,00,000 2,86,27,500 Godawari Estates Pvt. Ltd 769/14-15 2010-11 2,00,00,000 - 2,00,00,000 Godawari Estates Pvt. Ltd 768/14-15 2012-13 10,30,00,000 - ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Submission of assessee:- The facts and circumstances of the issue raised in the departmental appeal for the AY 2012-13 under ground No 1 are exactly similar to Ground No 1 for AY 2009-10 in ITA No 486/JP/2017. The assessee has made detailed submission in AY 2009-10 for ITA No 486/JP/2017. In order to avoid repetition, we pray your honor kindly to consider the submission made for ITA No 486/JP/2017 for AY 2009-10 under para 2.01.2 above as also made for AY 2011-12 under Ground No 1 of ITA No 488/JP/2017. 9.5 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 appea ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ty of cross examination of Shri Santosh Choube, Shri Ajit Sharma and Sh Rajesh Kumar Singh and other persons; and c) confirming the addition of ₹ 1,41,50,000/- more so when he has categorically held that the addition made by ld. AO u/s 56(1) of Income Tax Act, 1961 is not sustainable and the identity, creditworthiness and genuineness of transaction of the transaction cannot be held as doubtful and the addition by applying the provisions of section 68 of I.Tax Act cannot be upheld. 2.On the facts and in the circumstances of the case and in law the ld. CIT(A) erred in confirming the addition of ₹ 2,36,274/- made by the AO by disallowing the entire expenses incurred during the year. 11.1 As regards ground no. 2 of the assessee regarding confirming the the addition of ₹ 2,36,274/- by the ld. CIT(A), the ld.AR of the assessee during the course of hearing has not pressed the Ground No. 2. Hence, the same is dismissed being not pressed. 12.1 In Ground No. 1 (ITA No. 387/JP/2017), the assessee is aggrieved that the ld. CIT(A) has confirmed the addition of ₹ 1,41,50,000/- in the hands of the assessee. The relevant observation of the ld. CIT(A) at page 51 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tainment P Ltd 2012-2013 16,00,000 Regent Dealers P Ltd Shyam Fashion Motisons Entertainment P Ltd 2012-2013 10,00,000 Regent Dealers P Ltd Durga Enterprises Motisons Entertainment P Ltd 2012-2013 8,00,000 Regent Dealers P Ltd Durga Enterprises and Shyam Fashion Motisons Entertainment P Ltd 2012-2013 29,00,000 Alliance Tradecom P Ltd Swastik Traders and Global Securities Tota 1,41,50,000 Motisons Global P Ltd 2012-2013 17,00,000 Rose Suppliers P Ltd Durga Enterprises and Shyam Fashion Motisons Global P Ltd 2012-2013 18,00,000 Rose Suppliers P Ltd Nibu Nagi Motisons Global P Ltd 2012-20 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 18,00,000 Regent Dealers P Ltd Durga Enterprises Motisons Global P Ltd 2012-2013 9,00,000 Regent Dealers P Ltd Kevihulie Sinotsu Motisons Global Private Limited 2012-2013 28,50,000 Regent Dealers P Ltd Durga Enterprises and Shyam Fashion Motisons Global Private Limited 2012-2013 18,50,000 Regent Dealers P Ltd Shyam Fashion Motisons Global Private Limited 2012-2013 22,00,000 Alliance Tradecom P Ltd PNB, Axis Bank Siliguri, Swastik Traders an Global Securities Motisons Global Private Limited 2012-2013 10,00,000 Alliance Tradecom P Ltd Swastik Traders Motisons Global Private Limited 2012-2013 35,00,000 Alliance Tradeom P Ltd M/s Swastik Traders , Global Securitie ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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 assessee has not controverted the facts narrated by Sh Santosh Choube, Sh Rajesh Kr Singh and Sh Ajit Sharma and also could not satisfactorily explain the reasons of cash deposits made to those accounts. Therefore, duly considering those facts and evidences( both documentary oral) gathered during search post-search operation , addition to the extent of ₹ 8,71,97,727/= is sustained and balance is deleted, details given as under: Name Appellant Company of ITA No. A.Y. Addition made by AO Addition sustained Addition deleted/ Relief given Motisons Global Pvt Ltd 753/14-15 2009-10 2,75,00,000 - 2,75,00,000 Motisons Global Pvt Ltd 754/14-15 2011-12 6,96,50,000 - 6,96,50,000 Moti ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ayukh Vinimay Pvt Ltd in AY 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.No Name of Company (under your appeal) Assessment Year Amount 1 Motisons Global Pvt Ltd 2012-13 6,93,49,800 2. Motisons Global Pvt Ltd 2013-14 2,24,50,000 3 Motisons Entertainment (India) Pvt Ltd 2012-13 1,55,00,000 Total 10,72,99,800 Further, it is also submitted that addition made by the AO tantamount to double addition. It is also mentioned here that as per Ld AR s request, appellate proceedings in case of M/s Mayukh Vinimay Pvt Ltd have been kept in abeyance till the disposal of appeal by Hon ble ITAT. In view of aforementioned findings, now additions made by the AO are being discussed with respect to grounds of appeal raised by the respective asse ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... .Tax Act however, he sustained the addition of ₹ 1,41,50,000/- on account of cash/DD deposited at 4th channel stage. The company wise breakup of this amount is given at pg 51-53 of the order of ld CIT(A). The details are as under:- Date Amount From Company Cash deposit /Demand draft at 4th Channel as per inquiry by investigation wing PB page No 12.12.2011 1800000 Rose Suppliers Private Limited Shyam Fashion and Durga Enterprises PB pg 681/2012-13 05.11.2011 4600000 Regent Barter Private Limited Durga Enterprises and Shyam Fashion PB pg 685-686/2012-13 21.11.2011 450000 Mayukh Vinimay Private Limited Shyam Fashion and Durga Enterprises PB pg 695/2012-13 25.11.2011 1000000 Mayukh Vinimay Private Limited Shyam Fashion and Durga Enterprises PB pg 6 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ax act as under:- (7A) Assessing Officer means the Assistant Commissioner 31[or Deputy Commissioner] 32[or Assistant Director] 31[or Deputy Director] or the Income-tax Officer who is vested with the relevant jurisdiction by virtue of directions or orders issued under sub-section (1) or sub-section (2) of section 120 or any other provision of this Act, and the 33[Additional Commissioner or] 34[Additional Director or] 35[Joint Commissioner or Joint Director] who is directed under clause (b) of sub-section (4) of that section to exercise or perform all or any of the powers and functions conferred on, or assigned to, an Assessing Officer under this Act ;] Therefore, CIT(A) is not assessing officer so he cannot invoke the provisions of section 68 for making the addition particularly when the Assessing Officer has satisfied about the ingredients of section 68 of Income Tax Act. In the case of the assessee the ld. AO has not framed an opinion that the explanation given by the assessee was not satisfactory but he framed an opinion after examining the facts, documents and explanation that the additions of share capital cannot be made u/s 68 but it should have been made u/s 56(1) of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Income Tax return and Balance sheets. There is sufficient source of funds with all the companies to investment share capital/share application in the assessee company. The assessee submitted the copies of bank account/declaration of source of funds with them of investor companies. The bank statement shows the huge transaction of high 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 31.03.2012 Share capital and reserve surplus with Investor companies as on 31.03.2011 Share capital and reserve surplus with Investor companies as on 31.03.2009 Alliance Tradecom Pvt. Ltd 1,59,00,000 11,05,42,868 11,07,03,338 11,0 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ainst the share application received from the companies. The share application is supported by Board Resolution passed in the investor companies. The assessee company has allotted the shares to the investor companies. The proper returns were filed before the ROC against allotment of the shares to these companies. Furthermore, the department has carried out intensive search operations over the assessee and no any incriminating material was found to show that the money against the share allotment was own money of the company. Shares certificates were issued against the allotment of the shares to these companies were not found from the possession of the assessee company or its director or employees. This fact shows that after allotment of shares by the appellant company share certificates were dispatched to the subscriber companies. No any entry in books of account or document was found showing payment of cash to these investor companies against receipt of cheques from these companies against allotment of shares. Therefore the genuineness of the transactions cannot be doubted. The department also carried out survey over the investor companies (Except Mayukh Vintrade Pvt. Ltd) and duri ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... case of Commissioner of Income Tax 1 Vs M/s. Gagandeep Infrastructure Pvt.Ltd held as under:- (e) We find that the proviso to Section 68 of the Act has been introduced by the Finance Act 2012 with effect from 1st April, 2013. Thus it would be effective only from the Assessment Year 201314 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 proviso to Section 68 of the Act is immaterial and does not change the interpretation of Section 68 of the Act both before and after the adding of the proviso. In any view of the matter the three essential tests while confirming the pre proviso Section 68 of the Act laid ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ed by me through the bank accounts of the above prop. concerns. The cash was received by me from Motisons Jewellers group from time to time and was deposited into a number of bank accounts including the two bank accounts of M/s Shyam Fashion (Prop. Ajit Sharma) and M/s Durga Enterprises (Prop. Rajesh Kr Singh) in IDBI, Girish Park Branch, Kolkata. In this regard it is quite interesting to note that a person stating that Motisons Jewellers group was the beneficiary of the accommodation entries arranged by him and he is also admitting that cash was received by him from Motisons Jewellers Group to deposit the same is bank accounts maintaining by him but no further questions were made from him to controvert that whatever he is stating is true or not. The important thing is that Motisons Jewellers group is not a human being therefore it was necessary and for the interest of equities, fairness, and justice to ask questions that : - What is the identity of the M/s Motisons Jewellers. In Jaipur where the Motisons Group exists? Who are the owners of this group? Who was the person who was contacting to him regarding cash dealing? How the cash reached to him? From ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... IT 26 ITR 775, But in the case of assessee, the ld AO and the investigating team has brushed aside all the principles of law and utilizing a statement which is totally irrelevant, unacceptable to frame a high-pitched assessment purely on surmises, conjectures and suspicion. c) In view of above mentioned the statements of this person have no legal sanctity and cannot be relied upon. From the reading statement of this person its appears that the investigating party recorded the statement by putting words in his mouth with sole motive to use the same against the assessee group to make a strong case against the assessee. Therefore we submit that the statement of this person is completely false, incorrect and not acceptable and therefore cannot be relied upon unless the opportunity of cross examination is not given to the assessee. d) In the light of above mentioned serious defects in the statement of this person the cross examination of this person is warranted to decided the matter in fair and just manner. It is further relevant to mention here that it is settle legal position that before using some material and statements against the assessee the opportunity of cross examin ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... l Jain and other persons, he specifically requested the AO to provide copies of such incriminating documents and statement of all various persons recorded in this regard and provide an opportunity to the assessee to cross examine such persons. However, the AO didn t provide to the assessee copies of such incriminating documents and statements of various persons recorded and allow the crossexamination of any of these persons. While doing so, the AO stated that in his statements, Bhanwarlal Jain had described that they are indulged in providing accommodation entries of bogus unsecured loans and advances through various Benami concerns (70) operated and managed by them. This admission automatically makes all the transactions done by them as mere paper transactions and in these circumstances, further as per the information name and address of assessee and the Benami Concern through which accommodation entry of unsecured loans was provided is appearing in the list of beneficiaries to whom the said Group has provided. This admission is sufficient to reject the contentions of the asseesse. Further, regarding cross examination, the AO stated that the right of cross examination is not an ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... in fairness disclose to the assessee the material on which he is going to find that estimate; and that in case he proposes to use against the assessee the result of any private inquiries made by him, he must communicate to the assessee the substance of the information so proposed to be utilized to such an extent as to put the assessee in possession of full particulars of the case he is expected to meet and that he should further give him ample opportunity to meet it. It was held in that case that In this case we are of the opinion that the Tribunal violated certain fundamental rules of justice in reaching its conclusions. Firstly, it did not disclose to the assessee what information had been supplied to it by the departmental representative. Next, it did not give any opportunity to the company to rebut the material furnished to it by him, and lastly, it declined to take all the material that the assessee wanted to produce in support of its case. The result is that the assessee had not had a fair hearing. The Hon ble Supreme Court in case of C. Vasantlal Co. Vs. CIT 45 ITR 206 (SC) has held that the ITO is not bound by any technical rules of the law of evidence. It is open ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e said that even without calling the manager of the bank in evidence to prove this letter, it could be taken into account as evidence. But before the income-tax authorities could rely upon it, they were bound to produce it before the assessee so that the assessee could controvert the statements contained in it by asking for an opportunity to cross examine the manager of the bank with reference to the statements made by him. 2.10 In light of above proposition in law and especially taking into consideration the decision of the Hon ble Supreme Court in case of C. Vasantlal Co. (supra) relied upon by the Revenue and which actually supports the case of the assessee, in the instant case, the assessment was completed by the AO relying solely on the information received from the investigation wing, statement recorded u/s 132(4) of Shri Bhanwarlal Jain and others, and various incriminating documentary evidence found from the search and seizure carried out by Investigation Wing, Mumbai on the Shri Bhanwarlal Jain group on 03.10.2013. It remains undisputed that the assessee was never provided copies of such incriminating documents and statements of Shri Bhanwarlal Jain and various perso ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... having PA numbers; and are being regularly assessed to tax. The appellate authorities cannot be said to have erred in deleting the additions in their regard too at the hands of assessee-company. 11. Ultimately, the question as to whether the source of investment or of credit has been satisfactorily explained or not remains within the realm of appreciation of evidence; and the Courts have consistently held that such a matter does not give rise to any substantial question of law. In the case of CIT v. Orissa Corpn. (P.) Ltd. [1986) 159 ITR 78 (SC), the Hon'ble Supreme Court held as under:- 13. In this case, the assessee had given the names and addresses of the alleged creditors. It was in the knowledge of the Revenue that the said creditors were income-tax assessees. Their index numbers were in the file of the Revenue. The Revenue, apart from issuing notices under s. 131 at the instance of the assessee, did not pursue the matter further. The Revenue did not examine 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 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... her words, this Court in its appellate jurisdiction under s. 260A ibid, would not again de novo hold yet another factual inquiry with a view to find out as to whether explanation offered by assessee and which found acceptance to the CIT(A) and Tribunal is good or bad, or whether it was rightly accepted, or not. It is only when the factual finding recorded had been entirely de hors the subject, or that it had been based on no reasoning, or based on absurd reasoning to the extent that no prudent man of average judicial capacity could ever reach to such conclusion, or that it had been found against any provision of law, then a case for formulation of substantial question of law on such finding can be said to have been made out. 11. In our view, no such error could be noticed by us in the impugned order because as observed supra, the Tribunal did go into the details of explanation offered by assessee and then accepted the explanation by placing reliance 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 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... and by W Ltd., for the reason that such investments were not proved- Finding of the Tribunal is essentially a finding of fact which is not vitiated in law-No substantial question of law arise for consideration. (iv) CIT vs. First Point Finance Ltd. (2006) 206 CTR (Raj) 626 : (2006) 286 ITR 477 (Raj HC). (PB pg 157 to 162/Case Laws) Income-Cash credit-Share application money- Tribunal found that the investors are genuinely existing persons and they have filed confirmations in respect of investments made by them and their statements were also recorded-Amount of share capital/share application money could not be treated as unexplained cash credits and no addition could be made under s. 68-No substantial question of law arises. (v) Commissioner of Income Tax Vs. Bhaval Synthetics (Raj HC) (2013) 84 DTR 0449 (Raj) (PB pg 163 to 165/Case Laws)Held that even in case of doubt about subscribers to increased share capital, amount 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 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e 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 Court in the case of Barkha Synthetics Ltd. vs. Asstt. CIT (2005) 197 CTR (Raj) 432 and also the decision of Tribunal, Jodhpur Bench in the case of Uma Polymers (P) Ltd. vs. Dy. CIT (dt. 27th 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 i ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... mpany-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 Delhi Stock Exchange-Complete details were furnished- Tribunal has further found that the AO has not brought any positive material or evidence which would indicate that the shareholders were 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 fr ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... quiry 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 ntice, 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 not squarely applicable on the facts of the case as there was short time available with the Assessing Officer as well as Investigation Wing of Kolkata. The copy 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 re ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... al in the case of DCIT V M/s Kamdhenu Steel and Alloys Ltd. 2014-TIOL-709ITAT- (PB pg 203 to 213/Case Laws) Case relates to search and issue of shares on premium. Held that the assessee had submitted the particulars of registration of the applicant company, the confirmation from the share applicants, bank account details from which payment through account payee cheques, so the assessee had discharged its initially onus. (v) M/s. ARL Infratech Ltd. vs. The ACIT ITA No. 619/JP/2013 (PB pg 268 to 281/Case Laws) ITAT Jaipur. The findings of Hon ble ITAT was as under:- Before, we proceed to decide the issue on merits, we would like to discuss the scheme of the Act and precedents on the issue involved in this appeal as under:- In cases where share application money is found recorded in the books of an assessee which may represent credit in the books and 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), 19 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... dings of Hon ble ITAT by deciding the appeal of revenue in DB ITA No 24/2014 vide order dated 28/09/2016 (c) Other High Courts (i) 2014 (8) TMI 605 - MADRAS HIGH COURT The Commissioner of Income Tax Versus Pranav Foundations Ltd. T. C. (A). No. 262 of 2014 Dated - 12 August 2014 (PB pg 343 to 346/Case Laws) 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 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 02/Case Laws) held that there is additional burden on the department to show that even if share applicants did not have the means to make investment, the investment made by them actually emanated from the coffers of the assessee so as to enable it to be treated as undisclosed income of the assessee. (v) CIT v/s STL Extrusion (P) Ltd. 333 ITR 269 (MP) (PB pg 347 to 350/Case Laws) Income-Cash credit- Share application money-Assessee has duly established the identity and source of credits- Additions not sustainable. (vi) CIT v/s Arunanda Textiles (P) Ltd. , 333 ITR 116 (Karnataka) (PB pg 351 to 353/Case Laws) Share application money-Assessee able to identify the shareholders-It is not for the assessee-company to establish but it is for the Department to enquire with the investors about the capacity to invest 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 reflect ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e of share capital and advances received by established identity, creditworthiness and genuineness of transaction by banking instruments with documentary evidences-Assessee company substantiated details with documentary evidences as extracted from website of Ministry of Corporate Affairs, Government of India before AO-These facts had not been rebutted on behalf of Revenue-ITAT was not inclined to interfere with findings of CIT(A) who thus rightly deleted entire impugned additions of ₹ 40 lakhs made by AO u/s 68 on account of share capital subscription received by assessee-company Held: It was pointed out in the case of CIT vs. M/s. Lovely Exports (Pvt) Ltd, reported in [2008] 216 CTR 195 (SC) that if the share application money is received by the assessee company from alleged bogus shareholders 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 th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s. Dy. CIT (2002) 74 TTJ (Del) 604 : (2002) 80 ITD 43 (Del); Income-Cash credit-Subscription to share capital and loan-In case of limited companies jurisdiction of AO would be limited only to see whether identity of shareholders is established and whether they exist or not-Once identity is established, then, possibly no further enquiries need to be made-Since the shareholders of assessee-company were in existence, they were assessed to tax, complete details were available, share capital money as well as loan were received through account payee cheques and they were cleared through proper banking channels, AO was not justified in disbelieving the capital invested by the shareholder companies- Similarly, AO was not justified in disbelieving the loan taken from DTL as the cheques were cleared through 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 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... high court in 264 CTR 472) AO noticed that extracts of bank account had been fabricated and AO found that immediately before issuance of cheques for the purpose of making pay order or demand draft there was deposit of cash. In our case no cash deposit in the bank account of shareholder company. d) CIT v/s Navodaya Castle Pvt. Ltd 367 ITR 306 (Delhi High Court)AO found that immediately before issuance of cheques for the purpose of making pay order or demand draft there was deposit of cash. In our case no cash deposit in the bank account of shareholder company. e) CIT V/s MAF Academy Pvt. Ltd 206 (2014) DLT 277 (DB)(Del)/ 361 ITR 0285 (Del) AO found that immediately before issuance of cheques for the purpose of making pay order or demand draft there was deposit 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 delete the addition of ₹ 1,41,50,000/- confirmed by ld CIT(A) 12.3 On the other hand, the ld. DR relied on the oreder of the AO. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... anction to make the addition u/s 68 of the Act. Ld. CIT(A) in his order at para 2.1.4.6 had clearly held that the identity, creditworthiness and genuineness of transactions of these companies cannot be held doubtful and addition by applying the provision of sec 68 of the Act cannot be upheld. The ld. CIT(A) has sustained the addition of ₹ 82.00 lacs without specifying any provision of Income tax Act. No such addition can be sustained without invoking the relevant provisions of the Act. Moreover, the addition has been sustained in the hands of that assessee where cash /DD was deposited at 4th Channel. Hon'ble Rajasthan High Court and other Hon'ble Courts held that assessee cannot be asked to explain the source of the source. The relevant portions of the verdicts given by Hon'ble High Courts in the following cases are as under:- (i) In the case of CIT vs Jai Kumar Bakliwal (2014) 366 ITR 217 (Raj):- Held, dismissing the appeal, that all the cash creditors were assessed to Income-tax and they provided a confirmation as well as their permanent account number. They had their own respective bank accounts which they had been operating and it was not the claim of the A ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... CTR (Raj): Observed that the fact that the explanation furnished by the four creditors about the sources where from they acquired the money was not acceptable by the Revenue could not provide necessary nexus for drawing inference that the amount admitted to be deposited by these four persons belonged to the assessee. The assessee having discharged his burden by proving the existence of the depositors and the depositors owing their deposits, he was not further required to prove source of source. Taking into consideration the facts and circumstances of the case and case laws relied on (supra), the ld. CIT(A) is not justified in confirming the addition of ₹ 82.00 lacs which is directed to be deleted. It is also noted that during the course of hearing of appeal before the ld. CIT(A), the assessee had requested for cross examination of Shri Sanbtosh Choubey Shri Ajit Sharma, Shri RajeshKumar Singh and other persons which was denied by the ld. CIT(A). The ITAT Coordinate Bench in the case of Prateek Kothari (supra) has given verdict that without providing opportunity of cross examination of the materials gathered and statement recorded behind the assessee cannot be used. However ..... X X X X Extracts X X X X X X X X Extracts X X X X
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