TaxTMI 
TaxTMI 
2021 (9) TMI 501
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....sident corporate assessee is stated to be engaged in textile chemical, colors, food activities, etc. 2. The Ld. Sr. DR, drawing attention to the financial statements of the investor entities, submitted that these entities did not have sufficient income and the investments were sourced out of reserves & surplus. Hence, Ld. CIT(A) erred in deleting the additions. Reliance has been placed on the decision of Hon'ble Delhi High Court in the case of CIT V/s Independent Media Pvt. Ltd. (210 Taxman 14) as well as the decision of Hon'ble Apex Court in Durga Prasad More (82 ITR 540 26/08/1971). The Ld. AR, on the other hand, submitted that the assessee furnished all the requisite documents and demonstrated fulfillment of primary ingredients of Sec.68 and therefore, the impugned additions were rightly deleted in the appellate order. 3. Having heard rival submissions and after due consideration of material on record, our adjudication to the subject matter of appeal would be as given in succeeding paragraphs. Appellate Proceedings 4.1 During assessment proceedings, it transpired that the assessee issued 35250 number of shares of face value of Rs. 10/- each to as many as 14 corporate entitie....
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..... Thus the investment in Assessee Company was win-win situation for both the entities. Since the assessee required more funds, it approached various other persons and negotiated with them for issue of further shares. All such negotiations were well evidenced by exchange of letters as well as emails, the copies of which were furnished during appellate proceedings. Based on these negotiations, the assessee was able to fetch higher premium. The investments ultimately resulted into increase in assessee's turnover as well as Gross profits which were tabulated during appellate proceedings. In the said background, the assessee assailed the findings of Ld. AO. Regarding premium on shares, it was submitted that it was open for assessee to collect premium on issue of shares based on its market value of assets and goodwill. 5.2 The assessee also pointed out that Ld. AO failed to consider various documents filed by the assessee during assessment proceedings to establish the identity of the investor entities, their creditworthiness as well as genuineness of the transactions. These documents would, inter-alia include PAN of investor entities, their respective Income Tax Returns, financial state....
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....as also been mentioned in this Annexure. 5.4 The assessee assailed the remand report on the quantum of premium and relied on the decision of Hon'ble Supreme Court in CIT v/s. Lovely Exports (P) Ltd. (317 ITR 218) as well as the decision of Hon'ble Bombay High Court in the case of CIT Vs. Gagandeep Infrastructure Private Limited [80 Taxmann.com 272]. The assessee also submitted that Ld. AO had no power to determine the quantum of premium or the method of computing the premium since it was the assessee's own prerogative to charge premium on issue of shares and determine the same as per business negotiations. 5.5 The Ld. CIT(A), after due consideration of material on record, observed that Ld. AO merely doubted the genuineness of transactions because of the reason that the assessee charged different premium on shares. However, considering the market value of the property held by the assessee, the value per share would work out to Rs. 1418.49 per share. The assessee used his strength and goodwill to negotiate with the investor entities including an entity which had business dealing with the assessee. The matter of charging of premium and quantum thereof would be matter of discussion, ....
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....is important to understand the position of law u/s 68 of the Act which has evolved from a catena of judgments delivered by the Courts and Tribunals on this issue. The Hon'ble ITAT Mumbai in the case of ITO vs Anant Shelters Pvt. Ltd. (2012) 20 Taxmann.com 153 has enumerated certain principles which would be extremely useful in understanding the issue in hand. It has been stated in the said judgment that over the years, law regarding cash credits has evolved and taken a definite shape. A few aspects of law u/s 68 can be enumerated. 1. Sec. 68 can be invoked when there is a credit of amounts in the books maintained by the assessee, such credit is a sum of money during the previous year and either the assessee offers no explanation about the nature and source of such credits or the explanation given by the assessee in the opinion of the AO is not satisfactory. 2. The opinion of the AO for not accepting the explanation offered by the assessee as not satisfactory is required to be formed objectively with reference to the material on record. 3. Courts are of the firm view that the evidence produced by the assessee cannot be brushed aside in a casual manner. 4. The onus of pro....
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....e Application. 2. Parties confirmation for Investment. 3. Bank Statement 4. Income Tax acknowledgement. 5. Balance sheet for Net worth. 6. ROC Master Data- Active 7. 133 (6) replied by party -proof of registered A.D. VII. Blockdeal Suppliers Fvt Ltd:- 1. Share Application. 2. Income Tax acknowledgement. 3. Bank Statement. 4. Parties confirmation for Investment. 5. Balance sheet for Networth. 6. ROC Master Data-Active 7. 133 (6) replied by party -proof of registered A.D. VIII. Fastspeed Agencies Pvt Ltd:- 1. Parties confirmation for Investment 2. Bank Statement. 3. Income Tax acknowledgement. 4. Balance sheet for Networth. 5. ROC Master Data-Active 6. 133 (6) replied by party -proof of registered A.D. IX. Capable Marcom Pvt Ltd:- 1. Parties confirmation for Investment. 2. Bank Statement. 3. Income Tax acknowledgement. 4. Balance sheet for Networth. 5. ROC Master Data-Active 6. 133 (6) replied by party -proof of registered A.D. X. Luv KushVincom Pvt Ltd:- 1. Parties confirmation for Investment. 2. Income Tax acknowledgement. 3. Bank Statement. 4. Balance sheet for Networth. 5. ROC Master Data-Active 6. 133 (6) repl....
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.... the transactions. Therefore, the onus shifted to the AO. Further, in the remand report A.O. after enquiry reported "with regard to payment received from M/s. Rossari Biotech India Pvt. Ltd, during 'the course of remand proceedings, the assessee has submitted the financials, bank statement and copy of ITR of M/s. Rossari Biotech India Pvt. Ltd. Further, the director of M/s. Rossari Biotech India Pvt, Ltd, Shri Sunil Srinavas Chari also attended before the undersigned office and confirmed the transaction with the assessee company. Further, the A.O. has not brought any evidence on record in order to controvert the claims of the appellant. There is no finding by the AO that the evidences produced by the appellant were untrustworthy or lacked credibility. The nominal enquiry by issue of notices u/s. 133(6) to the parties on 17.03.2015 calling for reply by 25.03.2015 and completion of assessment on 28.03.2015 is insufficient and half hearted enquiry. It is also seen from the remand report that the investors replied, which was not considered by the AO in a hurry to complete the assessment. In other words, the AO did not make any attempt to discharge his burden of proof to rebut the e....
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....anation/justification of the respondent and invoked Section 68 of the Act to treat the amount ofRs. 7.53 crores i.e. the aggregate of the issue price and the premium on the shares issued as unexplained cash credit within the meaning of Section 68 of the Act. This addition was deleted by the CIT(A) and the Tribunal. Before the High Court, the department contended that the proviso to Section 68 of the Act which was introduced with effect from 1st April, 2013 would apply in the facts of the present case even for AY. 2008-09. The basis of the above submission was that the de hors the proviso also the requirements as set out therein would have to be satisfied. HELD by the High Court dismissing the appeal: (i) 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 i....
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....with the help of evidence, if any, received from the investigation wing, as has been claimed by the Revenue. The Revenue has nowhere proved that any malafide is done by the assessee. Failure to do so, vitiate the addition made under the set of facts. Reference can be made to the decision in CIT vs Orissa Corporation Pvt. Ltd. 158 ITR 78 (SC) and the ratio laid down in Khandelwal Construction vs CIT 227 ITR 900(Guw.). The satisfaction has to be derived from the relevant facts and that to on the basis of proper enquiry by the Assessing Officer and such enquiry must be ( i reasonable and just. In the present case, the Assessing Officer has not brought any evidence on record that the amounts received from M/s Alka Diamond Industries Ltd. and M/s Yash-V-Jewels Ltd. are merely accommodation entries. As mentioned earlier, the Ld. Assessing Officer has acted merely on the basis of information received from the Investigation wing. The ratio laid down by Hon'ble Delhi High Court in CITvs Vrindaban Farms Pvt. Ltd. squarely gives shelter to the assessee, wherein, it was held that if the identity and other details of share applicant are available, the share application money cannot be treat....
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....e facts of the appellant's case, the addition of Rs. 5,68,60,000 made by the AO u/s 68 is directed to be deleted. Ground No. 2 is accordingly allowed. Finally, the impugned additions were deleted. Aggrieved as aforesaid, the revenue is in further appeal before us. Our findings and Adjudication 6. Upon careful consideration of material fact, it could be gathered that the assessee has issued shares to various corporate entities at two different point of time. The initial allotment has been made to one of the suppliers of the assessee who happens to be the largest shareholder. The assessee has commanded a premium of Rs. 1370/- per share from this entity. Subsequently, the assessee has issued another set of shares to as many as 13 corporate entities at higher premium. At the outset, it could be noted that in terms of requirement of Sec.68, the assessee was required to prove the identity of the investor entities, their respective creditworthiness and genuineness of the transactions. After going through assessment order and appellate order, it could be observed that the assessee has filed all the requisite documents as well as confirmations from the investor entities to substantia....