TMI Blog2021 (3) TMI 1058X X X X Extracts X X X X X X X X Extracts X X X X ..... this issue and the ld.CIT(A) has not at all given any finding on this issue. Considering the totality of the facts and in the interest of justice, we deem it proper to restore the issue to the file of the AO with a direction to give one final opportunity to the assessee to substantiate its case and decide the issue as per fact and law. We hold and direct accordingly. The second ground raised by the Revenue is accordingly allowed for statistical purposes. - ITA No. 2498/Del/2017 - - - Dated:- 24-3-2021 - SHRI R.K. PANDA, ACCOUNTANT MEMBER AND MS SUCHITRA KAMBLE, JUDICIAL MEMBER Assessee by : Shri Sudesh Garg, Advocate Revenue by : Shri Jagdish Singh, Sr. DR ORDER PER R. K. PANDA , AM : This appeal filed by the Revenue is directed against the order dated 27th January, 2017 of the CIT(A)-38, New Delhi, relating to assessment year 2012-13. 2. Facts of the case, in brief, are that the assessee is a company engaged in the business of real-estate. It filed its return of income on 14th September, 2012 declaring a loss of ₹ 2,281/-. During the course of assessment proceedings, th AO asked the assessee to give the details of bank accounts including fixed d ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 6000 1,20,00,000/- 4 M/s Delite Buildtech Pvt. Ltd. A-110, Bhagwati Vihar, Uttam Nagar, New Delhi-59 7500 1,50,00,000/- (wrongly typed as 1,35,00,000/-) 5 M/s Vishwanidhi Chemicals Pvt. Ltd. 2648, 1st floor, Shadipur Main market, Patel Nagar, New Delhi-110008 7000 1,40,00,000/- Total 33750 6,75,00,000/- 5. Along with these details the assessee also filed their confirmations, affidavit of the directors, acknowledgement of their ITR for assessment year 2012-13, copy of their balance-sheet and P L in respect of three corporate entities only account and form No. 2 filed with ROC, but, in respect of M/s Freshtex Technoligies Pvt. Ltd. P L account not filed and in respect of M/s Vishwanidhi Chemicals Pvt. Ltd. only the affidavit of the director, undated confirmation and certified copy of esolution have been filed. From the various details furnished by the assessee, the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 2(e) M/s Vishwanidhi Chemicals Pvt. Ltd. In its confirmation has stated that M/s Maiden Building Solutions Pvt. Ltd. has issued 7000 Equity shares of ₹ 10/- each at a premium of ₹ 1990/- to it (means M/s Vishwanidhi Chemicals Pvt. Ltd.) and they (means M/s Vishwanidhi Chemicals Pvt. Ltd) have sold them 17500 Equity shares @ 10/- each at a premium of ₹ 800/- per share of M/s Oxygen Projects Pvt. Ltd. The Book value of one Equity share of M/s Oxygen Project Pvt. Ltd. is Approx. ₹ 887.39p. 6. The AO noted that in some cases of Hon ble High Court has held that if the AO is not satisfied with the documents filed by the assessee to prove the identity, credit worthiness and genuineness of the transactions as provided in section 68, then, the AO can exercise his powers conferred upon him under the IT Act to make further enquiries/investigations. From the acknowledgement of the income-tax returns filed before him, he noted that these are not satisfactory looking to the volume and nature of alleged share capital and share premium shown to have been received from them. He, therefore, issued summons u/s 131(1) to the five corporate entities at the address give ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the case. After explaining the facts of the case, it is clear that none of the cases referred by the AO has implications/ applications to the appellant s case. In all the cases referred to by the AO sums of money were received by the tax payer which gave rise to application of section 68. 9. Section 68 specifically carries the heading cash credit . If there is no cash credit this section does not get triggered. 10. In the appellant s case credit worthiness of the shareholders cannot be suspected as they have in effect not advanced even a single penny to the appellant. 11. Identity of the shareholders was indisputably established. 12. Section 68 essentially addresses the situations where moneys or sums are received by the taxpayer, credited in the books of accounts but source of the moneys/sums received is not satisfactory. 8. It was argued that the AO has failed to appreciate the facts of the case in totality. He has fallen in error in not appreciating that ₹ 6,76,00,000/- which was payable to 5 investing companies on account of purchase of shares from them was actually not paid as moneys in cash/cheque but was adjusted against the issue of capital o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... zance of this situation from the tax perspective have looked at one side of the transaction and totally ignored the other side of the transaction. If, for the argument sake, all the allegations are considered to be true, then the result will be that the allotment of shares should have been at face value and the purchase of the shares from the investing companies should also be at face value. If the accounts are accordingly modified, the balance sheet of the assessee will remain substantively same and there will still not be any income tax implications. It was accordingly argued that even if all the arguments/ allegations of the AO are considered to be true and sustainable, then also there should not be any addition to the income of the assessee as there is no tax implication in the case of the appellant. 11. So far as the various decisions relied on by the AO are concerned, it was argued that these decisions are not applicable to the facts of the present case since, in the instant case, there was no transaction of cash and, therefore, the provisions of section 68 are not applicable. Referring to the decision of the Tribunal in the case of ITO vs. M/s Vital Communications Ltd., ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... llegation or evidence of operation of accommodation entry operator and there is no allegation of cash deposits in either the bank accounts of the assessee or the investing companies. The entire exercise has not resulted into earning of even a single rupee to the assessee either in the revenue account or in the capital account and the provisions of section 68 of the IT Act are not applicable to the facts of the present case since there was no cash transaction taken place. The ld. Counsel for the assessee drew the attention of the Bench to the provisions of section 68 of the Act and submitted that it basically carries the heading: Cash Credit. Therefore, if there is no cash transaction, then, the said provisions cannot be applicable. Referring to the decision of the Hon ble Calcutta High Court in the case of Jatia Investment Company vs. CIT, 206 ITR 718, he submitted that the Hon ble High Court in the said decision has held that if there was no real cash entry on the credit side of the cash book, but, merely a notional or fictitious cash entry is there, there is no real credit of cash to its cash book and, therefore, the question of inclusion of the amount of the entry as unexplain ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... recording of their statements by the AO. According to the AO, the assessee has issued shares of certain corporate entities at a high premium and, at the same time, purchased certain shares from these companies at a high premium and all the companies to whom shares have been sold and from whom shares have been purchased are inter-related companies. He, therefore, invoking the provisions of section 68 of the Act, made addition of ₹ 6,76,00,000/- to the income of the assessee. Similarly, he also made addition of ₹ 8,50,000/- u/s 68 of the Act in respect of one creditor, namely, M/s Wamil Clothing Pvt. Ltd., on the ground that the summons issued u/s 131 of the Act was received back unserved and, therefore, the provisions of section 68 of the Act are applicable. We find, the ld.CIT(A), deleted the addition by relying on the decision of the Tribunal in the case of M/s Vital Communications Ltd. (supra) on the ground that the share transactions by the assessee are only on paper and are in the nature of swapping of shares at a very high premium. Further, the said transactions and arrangements have not resulted in earning/receipt of a single rupee and no cash or cheque have been ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... levant observations of the Hon ble Supreme Court at para 4 of the order reads as under:- 4. The language used in Section 80G(2)(a) is clear and unambiguous. On a plain reading of the section, it is apparent that an assessee is entitled to claim deduction from his income on the amount of money paid by him as donation to the authorities and for the causes specified therein. The use of the expression any sums paid contemplates payment of an amount of money. One of the dictionary meanings of the expression sum means any indefinite amount of money. The context in which the expression sums paid by the assessee has been used makes the legislative intent clear that it refers to the amount of money paid by the assessee as donation. The Act provides for assessment of tax on the income derived by an assessee during the assessment year ; the income relates to the amount of money earned or received by an assessee. Therefore, for purposes of claiming deduction from income-tax under Section 80G(2)(a), the donation must be a sum of money paid by the assessee. The plain meaning of the words used in the section does not contemplate donations in kind. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e account books by way of cash / cheque / draft. Similarly, the shares worth ₹ 10,00,00,000 were issued against the shares received under the swapping arrangements. Here also, no fresh amount of money was brought into the books by way of cash/ cheque / draft. Hence, the addition made in respect of these share holders to the extent of ₹ 25,00,00,000 does not come into the purview of section 68 of the IT Act. On this ground also, the said addition cannot be sustained. Though the said addition made u/s 68 cannot be sustained on the legal grounds itself as discussed above. 8.4 We further note that during the appellate proceedings, the Assessee's AR has filed the copies of ledger accounts of eleven trade creditors to whom the shares were, issued to settle their outstanding liabilities. The software supplied by such creditors share holders to the assessee company were also demonstrated during the appellate proceedings on 26-2-2007 by the Director of the aaseessee company Mr. J.P.Madaan. There is no evidence brought on record the show that such transactions of purchase of softwares were sham transactions to evade the taxes nor there can be any, since there is no advan ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... have been accepted as genuine by the Assessing Officers having jurisdiction over the other companies with whom the shares were swapped. Therefore, having filed above evidences establishing the identity of the shareholders, genuineness of the transactions and capacity of the shareholder, there remains nothing more for the assessee to prove and onus is discharged and thus action of A.O. in treating the entire increase in share capital as undisclosed income of the assessee is unjustified and therefore Ld. CIT(A) has rightly deleted the addition of ₹ 27 crores. 8.6 In the background of the aforesaid discussions and precedents relied upon, we do not find any infirmity in the detailed and well reasoned order passed by the Ld. CIT(A), hence, we uphold the same by deleting the addition of ₹ 27 Crores. As a result, the ground raised by the Revenue stands dismissed. 20. We find, the Kolkata Bench of the Tribunal in the case of ITO vs. M/s Anand Enterprises Ltd., vide ITA No.1614/Kol/2016 and CO No.56/Kol/2016, order dated 26th September, 2018, while deciding an identical issue has observed as under:- 4. We have heard the rival submissions. At the outset, we find th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... me and in different hands. The AO's action in the present case cannot be upheld in law. I, therefore, delete the additions and grounds of appeal Nos. 3 4 are allowed. 4.1. We find that the Hon'ble Allahabad High Court in the case of CIT vs. Sohanlal Singhania reported in 235 ITR 616 (All) had held in the context of allowability of donation as deduction u/s 80G of the Act that the expression 'any sum paid' used in the said section denotes ' sum of money paid' . Hence if certain shares were donated by a person, then the same would not fall eligible for deduction u/s 80G of the Act. We also find that the Hon'ble Jurisdictional High Court in the case of Jatia Investment Company (Co.) vs. CIT reported in 206 ITR 718 (Cal) also supports the case of the assessee herein, wherein it was held as under: It is finally emphasised by learned counsel for the assessee that the ultimate result is that the firm becomes a debtor to GB and Co. and the three non-financial companies of the group got discharged. Learned counsel also emphasised that, at the worst, it can be said that the assessee-firm has received valuable assets being the said shares of the equiv ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ntries. This quite justifies the addition as sustained by the Tribunal. We have perused the assessment order carefully. We find that cash did not pass at any stage though entries were made in the cash book showing payments and receipts ; but since the entries made a complete round, no passing of cash was necessary for the purpose of making the entries. That there was no passing of cash is also admitted by the Income- tax Officer himself. We have already extracted the observation of the Income- tax Officer in paragraph 14 of his assessment order. The Income- tax Officer has clearly opined that all the respective parties did not receive cash nor did pay cash as none had any cash for the purpose. The only point in the assessment order is that the entries not involving the passing of cash should not have found a place in the cash book, but in the ledger account through journal entries. There is another self- contradiction in the Income-tax Officer's finding that, if there was no real cash entry on the credit side of the cash book, but merely a notional or fictitious cash entry, as admitted by him, there is no real credit of cash to its cash book ; the question of inclusion of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n 68 of the Act to the facts of the instant case, which, in our considered opinion, are not at all applicable herein. This is a simple case of acquiring shares of certain companies from certain shareholders without paying any cash consideration and instead the consideration was settled through issuance of shares to the respective parties. Moreover, in the balance sheet of the assessee company in the schedule to share capital, it is very clearly mentioned by way of note that the fresh share capital was raised during the year for consideration other than cash. Hence we hold that provision of section 68 of the Act are not applicable in the instant case and accordingly the entire addition deserves to be deleted which has rightly been done by the ld. CIT(A) which does not require any interference. Accordingly, grounds raised by the revenue are dismissed. 21. Similar view has been taken by the Kolkata Bench of the Tribunal in ITA no.2691/Kol/2018, order dated 28th February, 2020 in the case of Blooming Tradelink Pvt. Ltd. vs. ITO by observing as under:- 4. We have heard rival submissions and gone through the facts and circumstances of the case. The addition u/s. 68 of the Act w ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t each of the above companies have filed replies before the Assessing Officer to the notice issued u/s 133(6) of the Act. He further pointed out that the ld. CIT(A) called for a remand report the Assessing Officer had not disputed the identity, creditworthiness of the share subscribers as well as the genuineness of the transactions. He relied on the order of the ld. CIT(A). 4.2. The undisputed fact is that shares were issued at a premium, as consideration for the purchase of shares from the share applicant companies. This issue is squarely covered by the decision of the Kolkata C Bench of the Tribunal in the case of ITO vs. M/s. Anand Enterprises Ltd., ITA No. 1614/Kol/2016 C.O. No.56/Kol/2016; dt. 26/09/2018, wherein under identical circumstances, at para 4.3. it was held as follows:- 4.3. In view of the aforesaid observations, in the facts and circumstances of the case and respectfully following the aforesaid judicial precedents relied upon hereinabove, we hold that the Id. AO had erroneously invoked the provisions of section 68 of the Act to the facts of the instant case, which, in our considered opinion, are not at all applicable herein. This is a simple case of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e cash credit towards share capital were admittedly, only by way of book adjustments and no actual cash was received towards share subscription money held as follows:- 25. However, the second question is answered in favour of the assessee and against the Revenue by the judgment of the Division Bench of this Court in Electro Polychem Ltd., (supra) and Steller Investment Ltd., (supra). 26. This case is distinguishable from the case of CIT v. Lovely Export (P.) Ltd. [2008] 216 CTR 195 (SC) in that the transactions were only book transactions, and there was no cash receipt. The decisions in (i) CIT v. Focus Exports (P.) Ltd. [2014] 51 taxmann.com 46/228 Taxman 88 (Delhi) (Mag.); (ii) CIT v. Globus Securities Finance Pvt. Ltd. [2014] 41 taxmann.com 465/224 Taxman 237 (Delhi); (iii) Onassis Axles (P.) Ltd. v. CIT [2014] 364 ITR 53/224 Taxman 80 (Mag.)/44 taxmann.com 408 (Delhi); (iv) Olwin Tiles India (P.) Ltd. v. Dy. CIT [2016] 382 ITR 291/237 Taxman 342/66 taxmann.com 8 (Guj.); (v) B.R. Petrochem (P.) Ltd. v. ITO [2017] 81 taxmann.com 424 (Mad.); and (vi) Rajmandir Estates (P.) Ltd. v. Pr. CIT [2016] 386 ITR 162/240 Taxman 306/70 taxmann.com 124 (Cal.), cited on behalf of ..... X X X X Extracts X X X X X X X X Extracts X X X X
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