TMI Blog2021 (8) TMI 851X X X X Extracts X X X X X X X X Extracts X X X X ..... ooks, but cannot be asked to prove the source of the source Assessee had beyond doubt on the basis of substantial material filed with the A.O proved the identity, creditworthiness and genuineness of the transactions in question, therefore, the share premium of ₹ 2.25 crore received by it from the aforementioned 19 share subscribers could not have held as an unexplained cash credit within the meaning of Sec. 68 - We, thus, finding no infirmity in the view taken by the CIT(A) who had rightly held that as the assessee had duly discharged the onus that was cast upon it as regards proving the identity, creditworthiness and genuineness of transactions in question, therefore, the share premium of ₹ 2.25 crore received from the 19 share subscribers could not have been assessed as an unexplained cash credit u/s 68 of the Act, uphold his view. No infirmity in the very well reasoned order of the CIT(A), uphold the view taken by him that the share premium of ₹ 2.25 crore received by the assessee during the year under consideration could not be held as an unexplained cash credit within the meaning of Sec. 68 of the Act. Accordingly, finding no merit in the appeal of the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Commissioner of Income Tax (Central - 1) Vs NRA Iron Steel Pvt. Ltd. (arising out of SLP(civil) No.29855 of 2018) upholding the addition made by the assessing officer where it is held by the Apex Court that the practice of conversion of unaccounted money must be subjected to careful scrutiny. 6. The appellant prays that the order passed by Ld. CIT(A) be set aside that addition be restored. 7. The appellant craves leave to add, to amend and/ or t alter any of the grounds of appeal, if need be. 2. Briefly stated, the assessee company which is engaged in the business of manufacturing of machines had filed its return of income for A.Y 2011-12 on 05.08.2011, declaring a loss of Rs.(-) 6,280/-. Thereafter, a revised return of income was filed on 10.08.2010 disclosing a loss of Rs.(-) 12,280/-. The return of income filed by the assessee company was processed as such u/s 143(1) of the Act. 3. Search and seizure action u/s 132 and survey proceedings u/s 133A of the Act were carried out on Podar Education Group on 09.01.2018. As is discernible from the records, the search and post search investigations and enquiries revealed that the trusts/charitable institutions o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... eipt of information from the DGIT(Inv.), Mumbai, that the assessee company under the aforesaid scheme of arrangement that was unearthed during the course of the search and survey action conducted by the Investigation wing in the case of Podar group was found to have received share premium of ₹ 2.25 crore from the following non-existent persons/entities : Sr. No. Name of the concern from whom share Premium is received Amount in Rs. Date of transaction 1. Gyaneshwar Trading Finance Co. Ltd. 9,00,000 25.05.2010 2. Oshin Investment and Finance Pvt. Ltd. 9,00,000 25.05.2010 3. Sidh Housing Development Co. Ltd. 9,00,000 25.05.2010 4. Albatross Share Registry Pvt. Ltd. 13,50,000 26.05.2010 5. Artillegence Bio Innovation Ltd. 6,75,000 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... premium had merely received accommodation entries. Accordingly, in the backdrop of the fact that neither the assessee had carried out any activities nor shown any sign which would suggest that its shares could command such high premium during the year under consideration, i.e the first year of the company, the A.O reopened its case u/s 147 of the Act. Notice under Sec. 148 of the Act was issued to the assessee company on 27.03.2018. In compliance, the assessee company filed its return of income on 30.08.2018. On request by the assessee a copy of the reasons to believe on the basis of which the case was reopened were made available by the A.O on 17.11.2018. Objections filed by the assessee company to the validity of the jurisdiction assumed by the A.O for reopening its case u/s 147 of the Act were thereafter disposed off by the A.O vide his letter dated 12.12.2018. Subsequently, the A.O issued notices under Sec. 143(2) and 142(1) of the Act. 4. During the course of the assessment proceedings, the assessee in order to substantiate the authenticity of the share premium received during the year under consideration from the aforementioned 19 companies, therein placed on record su ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ontention the assessee relied on the judgment of the Hon ble High Court of Bombay in the case of CIT Vs. Gagandeep Infrastructure Pvt. Ltd., ITA No. 1613 of 2014, dated 23.03.2017. It was further submitted by the assessee that the allegation of the department that the donations given by charitable institutions/trusts of Podar group to other charitable institution/trusts were bogus and the donee trusts had thereafter withdrawn cash from their bank accounts and given it back to Podar Group, which thereafter was ploughed into the companies of the said group through a maze of bogus companies, was an incorrect and a baseless allegation. The assessee further placed on the assessment record the complete details of the 19 shares subscribers who were existing tax payers alongwith their complete addresses and income tax credentials. It was, thus, in the backdrop of the aforesaid facts submitted by the assessee that now when the complete details of the share subscribers along with their income tax credentials had been furnished with the department, the share application money received from them could not be regarded as its undisclosed income within the meaning of Sec. 68 of the Act. In suppor ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d refrained from commenting on the same. Rebutting the claim of the assessee that the material substantiating the donations given by the charitable/educational institutions of Podar group to other charitable /educational institutions, viz. mode of donations i.e cheques, name of the recipient trusts/institutions alongwith the correspondence to the said effect with them, coupled with the fact that neither any cash was seized nor any money trail had therein surfaced in the course of the search proceedings supported the authenticity of the said transactions, it was observed by the A.O that the modus operandi adopted i.e cheque for cash and layered transactions to cover the money trail that was brought back in the form of share application money, loan, share premium etc. was an age old practice adopted to camouflage the true nature of transactions and to give them a colour of genuine transactions. It was rather observed by the A.O that the confessions of the aforementioned persons, viz. Shri Kirit kumar Dharshibhai Suba, Shri Navin Nishar and Shri Naresh Kumar Sodani formed the cardinal circumstantial evidence qua the nefarious activities carried out by Podar group. Observing that such ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ec. 143(3) r.w.s 147, dated 28.12.2018 assessed the income of the assessee company at ₹ 2,25,00,000/-. 6. Aggrieved, the assessee assailed the assessment order passed by the A.O before the CIT(A). As is discernible from the order passed by the CIT(A), we find, that he had after deliberating at length on the different facets forming the basis and/or having a bearing qua the addition of ₹ 2.25 crores made by the A.O under Sec. 68 of the Act, deleted the same. It was observed by the CIT(A) that the view taken by the A.O that the trusts/charitable institutions of Podar Group were involved in siphoning of their receipts by making bogus donations to other charitable/educational institutions, which thereafter was received back in cash and ploughed in the garb of share application money, share premium, loans etc. into companies and other entities controlled by the said group was primarily based on the statements recorded during the course of the survey proceedings under Sec. 133A of certain persons who were stated to have facilitated the aforesaid arrangement, viz. (i). Statement of Shri. Kirit Kumar Dharishbhai Suba, a key person of the group who was working as a consulta ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 9 for A.Y 2011-12, therefore, the CIT(A) referred to his observations that were recorded while disposing off the said appeal. As the assessee had in the course of the proceedings before the CIT(A) sought admission of the affidavits that were filed by the aforementioned persons, viz. Shri. Kirit Kumar Dharishbhai Suba, Shri. Navin Nishar and Shri. Naresh Kumar Sodani, wherein they had retracted from their respective statements recorded in the course of the survey proceedings conducted u/s 133A on 11.01.2018, as additional evidence U/rule 46A of the Income-tax Rules, 1962, and had also sought their cross-examination, therefore, the CIT(A) called for a remand report from the A.O. Also, the CIT(A) taking cognizance of the assessee s claim that no incriminating material was found during the course of the search proceedings which would evidence that it had received funds out of those which were allegedly stated to have been siphoned from the charitable/educations trusts of Podar group, therefore, he directed the A.O to provide copies of the relevant incriminating material, if any, that were found during the course of the search proceedings evidencing the said fact. After lots of persua ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ) that the A.O had also taken exception to the aforesaid retractions, for the reason, that they were filed after substantial delay, viz. delay of 81 days in case of Shri. Kirit Kumar Dharishbhai Suba; delay of 5 months in case of Shri. Navin Nishar; and delay of 8 months in case of Shri. Naresh Kumar Sodani. However, the CIT(A) did not find favour with the summarily brushing aside of the retraction affidavits of the aforementioned persons by the A.O i.e without carrying out any independent enquiries and investigations of his own. It was observed by the CIT(A) that though all the aforementioned persons, viz. Shri. Kirit Kumar Dharishbhai Suba, Shri. Navin Nishar and Shri. Naresh Kumar Sodani had clearly stated in their respective statements recorded in the course of their cross-examination that they have retracted from their earlier statements that were recorded u/s 131 of the Act in the course of the survey proceedings on 11/12.01.2018, however, the A.O had failed to re-examine the said witnesses on the said crucial issue. As regards the merits of the addition qua treating of the share premium as an unexplained cash credit u/s 68 of the Act by the A.O, it was observed by the CIT(A) ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... discharged the onus that was cast upon it and proved the identity, genuineness and creditworthiness of the share applicants, which had not been dislodged or disproved by the A.O by carrying out any independent enquiries, the CIT(A) was of the view that the addition made by the A.O under Sec. 68 of the Act was not sustainable in the eyes of law. Referring to the view taken by him while disposing off the appeal in the case of M/s Goodluck Apparels Pvt. Ltd for A.Y 2011-12 in Appeal No. CIT(A)-47, Mumbai/10126/2018-19 for A.Y 2011-12, the CIT(A) after relying on a host of judicial pronouncements observed, that when the transactions are duly supported and evidenced by documentary evidence, the same, thus, could not be treated as bogus simply on the basis of the report of the Investigation wing or the statement of third parties. Apart from that, it was observed by the CIT(A) that qua the genuineness of the donations given by the charitable/educational trusts of Podar group to other charitable/educational trusts or institutions, the A.O had received replies from all the donee trusts to whom notices were issued u/s 133(6) of the Act and there were no shortcomings in the documents submitt ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... are premium, loans etc. It was, thus, observed by the CIT(A) that unless specific evidence was brought on record to controvert the validity and correctness of the documentary evidence produced by the assessee company, no liability could be validly fastened on it merely on the basis of assumptions and presumptions of the A.O. In support of his observation that no addition could be made merely on the basis of presumptions the CIT(A) had relied on a host of judicial pronouncements. Further, it was observed by the CIT(A) that all the statements relied upon by the A.O were recorded u/s 131 of the Act during the course of the survey operation conducted under Sec. 133A of the Act, viz. (i). statement of Shri. Kirit Kumar Dharishbhai Suba that was recorded on 11.01.2018 and 12.01.2018 during the course of the survey proceedings carried out u/s 133A in the case of M/s Suba Company at 102, Olive Apartment, Devidas Lane Corner, Link Road, Borivali (West), Mumbai 400 103; (ii). statement of Shri. Navin Nishar that was recorded on 11.01.2018 during the course of the survey proceedings carried out u/s 133A in the case of M/s Suba Company at 102, Olive Apartment, Devidas Lane Corner, Link R ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d by the CIT(A) that it was trite law that evidences brought on record by way of confession which stood retracted must be substantially corroborated by other independent and cogent evidences which would lead adequate assurance to the court that it may seek to rely thereupon. In support of his aforesaid observation reliance was placed by the CIT(A) on the CBDT Instruction F.No. 286/2/20003-IT(Inv-II), dated 10th March, 2003. It was observed by the CIT(A) that in its aforesaid Instruction the CBDT had emphasised that during the course of search and survey proceedings no attempt should be made by the tax officials to obtain confessions regarding the undisclosed income and the focus should be on collection of credible evidence. Again, the aforesaid directions were reiterated by the CBDT in its Circular No. F.No. 286/98/2013-IT,dated 18.12.2014. It was further noticed by the CIT(A) that though the A.O in the course of the remand proceedings was specifically directed to provide copies of the incriminating material, if any, found during the course of the search operation in relation to the additions made in the assessment order i.e incriminating material which would evidence siphoning off ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... f the Act was made by the A.O only on the basis of the statements of the aforementioned persons, viz. Shri. Kirit Kumar Dharishbhai Suba, Shri. Navin Nishar and Shri. Naresh Kumar Sodhani without bringing on record any corroborative evidence. It was further observed by the CIT(A), that as the A.O had neither placed on record any incriminating material supporting the aforesaid addition nor brought on record any material which would establish that the assessee was in collusion with the donee trusts, therefore, there was no justification in holding the share premium as an unexplained cash credit within the meaning of Sec. 68 of the Act. Apart from that, it was observed by the CIT(A) that now when the A.O had held the share capital received by the assessee company from the share applicants as genuine, therefore, it could safely be concluded that the identity, creditworthiness and genuineness of the share subscribers qua the transactions in question had been accepted by him. It was, thus, observed by the CIT(A) that after holding the share capital received by the assessee from the share applicants as genuine, it was incorrect on the part of the A.O to adopt an inconsistent approach and ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... amount received on issue of share capital as premium are on capital account, therefore, the same cannot be considered to be income. The Hon ble High Court while concluding as hereinabove had relied on its earlier order passed in the case of Vodafone India Services (P) Ltd. Accordingly, the CIT(A) on the basis of his aforesaid observations vacated the addition of ₹ 2.25 crores that was made by the A.O by treating the share premium received by the assessee as an unexplained cash credit u/s 68 of the Act. 8. The revenue being aggrieved with the order of the CIT(A) has carried the matter in appeal before us. We have heard the ld. Authorised representatives for both the parties, perused the orders of the lower authorities and the material available on record, as well as considered the judicial pronouncements that have been pressed into service by them to drive home their respective contentions. As observed by us hereinabove, the ld. CIT(A) had on the basis of an exhaustive order vacated the stamping of the share premium of ₹ 2.25 crore as an unexplained cash credit u/s 68 of the Act by the A.O. We shall, thus, deal with the sustainability of the multiple observations of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Innovation Ltd. 6,75,000 26.05.2010 6. One2E Solution India Pvt. Ltd. 13,50,000 26.05.2010 7. Aaram Tradin Pvt. Ltd. 13,50,000 09.10.2010 8. Onspec Infotech Ltd. 13,50,000 09.10.2010 9. Preet Mercantile Pvt. Ltd. 13,50,000 09.10.2010 10. Maheshwari Knit Export Ltd. 13,50,000 09.10.2010 11. Tinta Mercantile Pvt. Ld. 13,50,000 09.10.2010 12. Prabal Mercantile Pvt. Ltd. 13,50,000 09.10.2010 13. Ronit Mercantile Pvt. Ltd. 13,50,000 09.10.2010 14. Mansi Exprot Pvt. Ltd. 13 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Shri. Kirit Kumar Dharishbhai Suba (supra) had in his statement recorded during the course of survey action conducted u/s 133A had categorically stated that unaccounted cash amounting to ₹ 2.25 crore was introduced as share premium in the books of the assessee company, viz. Hemadari Machine Tools Pvt. Ltd. However, we find that it remains as a matter of fact borne from the record all the aforementioned persons had thereafter on the basis of their respective affidavits retracted from their earlier statements, viz. Shri. Kirit Kumar Dharishbhai Suba had retracted from the averments made in his statement recorded u/s 131 on 11.01.2018 and 12.01.2018 by filing an affidavit , dated 03.04.2018 on a non-judicial stamp paper duly affirmed before a notary; Shri. Navin Nishar retracted from his statement recorded u/s 131 on 11.01.2018 by filing an affidavit , dated 04.06.2018; and Shri. Naresh Kumar Sodani had retracted from his statement recorded u/s 131 on 11.01.2018 by filing an affidavit , dated 30.08.2018. Apart from that, all the aforementioned persons, viz. Shri. Kirit Kumar Dharishbhai, Shri. Navin Nishar and Shri. Naresh Kumar Sodani had in the course of their cross-exami ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ctory statements nor placed on record any material which would instill confidence as regards the incorrectness of the facts therein stated, as claimed by the A.O, on the basis of which such retractions were not to be considered. Be that as it may, we concur with the view taken by the CIT(A) that now when the statements of the aforementioned persons had been retracted, therefore, in was all the more onerous on the part of the A.O to substantiate on the basis of supporting/corroborative material that the averments made by the said persons in their respective statements recorded u/s 131 of the Act on 11/12.01.2018 revealed the correct state of affairs. We, thus, in the backdrop of our aforesaid observations are of the considered view that pursuant to the retraction of their respective statements by the aforementioned persons, it was obligatory on the part of the A.O to substantially corroborate the same by other independent and cogent evidence in support of the facts so claimed by him. Our aforesaid view is fortified by the following judicial pronouncements : (i). Vinod Solanki Vs. Union of India (2008) (16) Scale 31 (ii). Kailashben Manharlal Chokshi Vs. CIT (2008) 174 Taxm ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... CIT Vs. S. Khader Khan Son (2012) 25 taxmann.com 413 (SC). 9. Apart from that, we also find ourselves in agreement with the view taken by the CIT(A) that no incriminating material had been placed on record by the department which would evidence that the funds of the charitable/educational institutions of Podar group were, inter alia, routed as Share premium in the books of accounts of the assessee company before us. As observed by us hereinabove, the CIT(A) while calling for a remand report from the A.O had specifically directed him to provide copies of the incriminating material, if any, found during the course of the search operation in relation to the additions made in the assessment order i.e incriminating material which would evidence siphoning off the trust funds and introduction of the same as share premium in the books of account of the assessee company., Hwever, the A.O in his remand report had only placed reliance on the assessment order and no incriminating documents whatsoever were furnished by him. It was observed by the CIT(A) that the A.O while passing the assessment order as well as in his remand report had merely relied upon a so called digital evidence i.e a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the ground that it had acted as a facilitator for siphoning off the receipts of charitable/educational institutions of Podar group. On the contrary, we find that as observed by the CIT(A) that on the issue of siphoning of funds by the donee trusts there was no adverse observation by the A.O in his remand report. In the backdrop of the aforesaid facts, we are of a strong conviction, that now when the genesis of the controversy leading to the adverse inferences qua the genuineness of the share premium received by the assessee company i.e genuineness of the donations received by the donee trusts/institutions/trusts have not been disproved by the department, therefore, the very story of siphoning of funds of charitable/educational institutions of Podar trusts falls to ground, and thus, no adverse inferences on the said ground could have validly been drawn on the said basis in the hands of the assessee company. 10. We shall now advert to the observation of the CIT(A) that the assessee had duly discharged the onus that was cast upon it as regards proving the identity and creditworthiness of the shareholders and the genuineness of the transactions of receipt of share premium. As is ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 7; 2.25 crore and had added the same as an unexplained cash credit u/s 68 of the Act in the hands of the assessee. In our considered view, as observed by the CIT(A), and rightly so, there was no justification on the part of the A.O to hold the share capital received by the assessee from the 19 share applicants as genuine, while for at the same time adopt an inconsistent approach and treat the share premium received from the same shareholders as bogus. Qua the share premium charged by the assessee company, we are in agreement with the observation of the CIT(A) that as the same was duly supported by the valuation report of a registered valuer, viz. D.N Shetty Co., therefore, it could not have been summarily scrapped or discarded by the A.O. As observed by us hereinabove, not only the assessee had by placing on record clinching documentary evidence substantiated the identity and creditworthiness of the share subscribers and the genuineness of the transactions in question, the same as observed by us hereinabove had not been disproved or dislodged by the A.O. As a matter of fact, we find that the A.O had at no stage i.e in the course of the assessment proceedings or in the remand proc ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... fortified by the judgment of the Hon ble High Court of Bombay in the case of CIT Vs. Gagandeeep Infrastructure (P) Ltd. (2017) 394 ITR 680 (Bom), wherein it was observed as under : We find that the proviso to Section 68 of the Act has been introduced by the Finance Act 2012 with effect from 1st April, 2013. Thus it would be effective only from the Assessment Year 2013-14 onwards and not for the subject Assessment Year. In fact, before the Tribunal, it was not even the case of the Revenue that Section 68 of the Act as in force during the subject years has to be read/understood as though the proviso added subsequently effective only from 1st April, 2013 was its normal meaning. The Parliament did not introduce to proviso to Section 68 of the Act with retrospective effect nor does the proviso so introduced states that it was introduced for removal of doubts or that it is declaratory . Therefore it is not open to give it retrospective effect, by proceeding on the basis that the addition of the 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 t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... (ix). CIT Vs. Divine Leasing Finance Ltd. (2008) 299 ITR 268 (Del) (x). CIT Vs. Creative World Telefilm Ltd. (2011) 333 ITR 100 (Bom) (xi). CIT Vs. Value Capital Services Ltd. (2008) 307 ITR 334 (Del) (xii). DCIT Vs. Rohini Builders (2002) 256 ITR 360 (Guj) (xiii). CIT Vs. Apex Therm Packaging Pvt. Ltd. (2014) 222 Taxman 125 (Guj) (xiv). Orient Trading Co. Ltd. Vs. CIT (1963) 49 ITR 723 (Bom) (xv). CIT Vs. Ranchhod Jivabhai Nakhava (2012) 208 Taxman 35 (Guj) (xvi). PCIT Vs. Paradise Inland Shipping Pvt. Ltd. 84 taxmann.com 58 (Bom) (xvii). CIT Vs. Sahibganj Electric Cables Pvt. Ltd. (1978) 115 ITR 0408 (Cal) Accordingly, in the backdrop of the facts of the case r.w the settled position of law, we are of the considered view that as the assessee had beyond doubt on the basis of substantial material filed with the A.O proved the identity, creditworthiness and genuineness of the transactions in question, therefore, the share premium of ₹ 2.25 crore received by it from the aforementioned 19 share subscribers could not have held as an unexplained cash credit within the meaning of Sec. 68 of the Act. We, thus, finding no infirmity i ..... X X X X Extracts X X X X X X X X Extracts X X X X
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