TMI Blog2021 (9) TMI 501X X X X Extracts X X X X X X X X Extracts X X X X ..... AO. It is trite law that no additions could be made merely on the basis of suspicion, conjectures or surmises There is no doubt that the revenue authorities were not required to put blinkers while looking at the documents produced before them and they were entitled to look into the surrounding circumstances to find out the reality of the documents produced before them - no such inquiries have been made by AO except for the allegations that the share application was bogus in nature only because the quantum of premium was high - there is nothing on record to substantiate the allegation that the assessee s own unaccounted money was routed in the books in the garb of share capital. In the absence of such findings, the impugned additions could not be sustained in law - Decided against revenue. - I.T.A. No. 103/Mum/2020 - - - Dated:- 3-9-2021 - Hon ble Shri Pavan Kumar Gadale, JM And Hon ble Shri Manoj Kumar Aggarwal, AM For the Revenue : Ms. Usha Gaikwad Ld. Sr. DR For the Assessee : Shri J. P. Bairagra Ld. AR ORDER MANOJ KUMAR AGGARWAL (ACCOUNTANT MEMBER) 1. Aforesaid appeal by revenue for Assessment Year (AY) 2012-13 arises out of the orde ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 4.2 In the course of assessment proceedings, the assessee was asked to justify the share premium and file supporting documents of all the investor entities to substantiate these transactions. The assessee submitted that the assessee had immoveable property / office premises at prime location of Lower Parel, the estimated value of which was more than ₹ 2000 Lacs. Based on the market vale, the value per share as on 31/03/2011 would be ₹ 1418.49 per share. Further, the assessee s overall sales and net profit reflected stable growth and therefore, the same would justify the premium. However, Ld. AO opined that the assessee did not provide any sound basis of valuation. Notices issues u/s 133(6) to investor entities to confirm the transactions did not elicit satisfactory response. On the basis of the same, it was concluded by Ld. AO that the assessee miserably failed to establish the genuineness of the transactions and also failed to justify high premium on issue of shares. Finally, in the light of various judicial pronouncements, the aforesaid receipts were added to assessee s income as unexplained cash credit u/s 68. Appellate Proceedings 5.1 During appellat ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tices u/s 133(6), it was submitted that the notices were sent on 17/03/2015 requiring the investors to furnish the reply on or before 25/03/2015. The assessee was asked to produce the directors of investor entities within a span of 2 days, which was not possible. The issue of confirmation was taken up by Ld. AO only at the fag-end of assessment proceedings which resulted into non-compliance of notices. In fact, M/s Rossari India Biotech Pvt. Ltd. furnished all the requisite information on 24/03/2015 itself. The assessment was completed on 28/03/2015 whereas the other entities had complied with notices u/s 133(6) during the month of April, 2015. There was failure on the part of Ld. AO to consider these documents. 5.3 Keeping in view the submissions made by the assessee and in view of the fact that replies received in response to notice u/s 133(6) were not considered by Ld. AO during assessment proceedings, a remand report was called from Ld. AO to consider all the replies received in response to notice u/s 133(6). The Ld. AO, in the remand report, inter-alia, confirmed that the assessee furnished required documents in case of M/s Rossari India Biotech Pvt. Ltd. and the director ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tion of shares would not be relevant for determining genuineness of the transaction for the purpose of Section 68 of the Act. It was held by Hon ble Bombay High Court that the genuineness of the transaction is proved since the entire transaction has taken place through banking channels. Further, it would be a prerogative of the Board of Directors of a company to decide the premium amount and it is the wisdom of the shareholders whether they want to subscribe to such a heavy premium. The Revenue authorities cannot question the charging of such of huge premium without any bar from any legislated law of the land. The Tribunal after examining the ingredients of Section 68 of the Act held that the addition of share premium u/s 68 of the Act cannot be sustained in the eyes of law. 5.6 Based on these decisions, it was held by Ld. CIT(A) that the legislature does not envisage any sort of valuation for the purpose of Sec. 68 and the addition made because of the fact that high premium was received, was liable to be deleted. Therefore, the concern raised by Ld. AO could not be upheld. 5.7 So far the fulfillment of primary requirements of Sec.68 was concerned, the Ld. CIT(A) observed ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ls by A/c payee cheque/ online/ digital transfer. Creditworthiness of the lender can be established by attending circumstances by firing the documents. 4.11 It is seen that during the course of assessment proceedings, the following documents were filed by the assessee before the AO as well as before this office. A. Rossari Biotech (India) Fvt Ltd :- 1. Income Tax acknowledgement. 2. Bank Statement. 3. Balance sheet for Net worth 4. ROC Master Data-Active 5. 133 (6) replied by party -proof of registered A.D. 6. Again submitted documents vide letter Dtd. 14/08/2017 7. E-mails between Appellant and Rossari Group regarding share application. B. CALCUTTA PARTIES:- I. Aryadeep Commotrade Pvt Ltd:- 1. Share Application. 2. Income Tax acknowledgement. 3. Bank Statement. 4. Parties confirmation for Investment. 5. Balance sheet for Net worth 6. ROC Master Data-Active 7. 133 (6) replied by party -proof of registered A.D. II. Anmolik Tracon Pvt Ltd:- 1 Share Application. 2 Income Tax acknowledgement. 3 Parties confirmation for Investment. 4 Bank Statement. 5 Balance s ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ledgement. 2. Balance sheet for Networth. 3. ROC Master Data-Active XII Venketeshwar Equipment Parts Fvt Ltd :- 1. IncomeTax acknowledgement. 2. Balance sheet for Networth. 3. ROC Master Data-Active XIII. Hitech Cloths Pvt Ltd :- 1. Income Tax acknowledgement. 2. Balance sheet for Net worth. 3. ROC Master Data-Active XIV. Correspondence and E-mails between appellant and following persons who are directors of the investing companies Mr. Harish Ram Mr. Parasnath Jaiswal Mr. Bharat Goenka Mr. Amit Kumar Mr. Kamal Kumar 4.12 If the above referred principles are applied to the facts of the case under consideration it can be seen that the identity of the creditors/ creditworthiness of the investors and genuineness of the transactions are established as under. Identity a) Permanent Account Number, b) Registration number issued by the Registrar of the Companies, c) Income tax returns filed by the Companies, d) Financial statements signed by the directors and the statutory auditors of the companies, e) Company Information such as history, formation, annual returns, share capital ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the evidences produced by the appellant or to bring any contrary material on record. Thus, the appellants contention that it had charged onus of establishing the identity and creditworthiness of the investor companies and genuineness of the transactions with the help of relevant supporting evidences which could not be disproved by the AO appears to be correct. It is seen that the Assessing Officer did not bring specific or incriminating evidence to show that appellant had given cash to the investors in lieu of alleged entry for share capital and share premium. When the investor company is filing regular Income tax returns of income and there are transactions through banking channel, no addition can be made by making surmises without having any contrary or cogent evidences in possession. 4.14 The Hon'ble Supreme Court in the case of CIT V/s Lovely Exports 6 DTR 308 has held If the share application money is received by the assessee company from alleged bogus share holders who's name are given to the Assessing Officer 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 a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nly 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 Tribunal and on facts it was found satisfied. (ii) Further it was a submission on behalf of the Revenue that such large amount of share premium gives rise to suspicion on the genuineness (identity) of the shareholders i.e. they are bogus. The Apex Court in CIT v/s. Lovely Exports (P)Ltd. 317 ITR 218 in the context to the preamended Section 68 of the Act has held that where the Revenue urges ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the share application money cannot be treated as undisclosed income in the hands of the company. In the present case, the assessee even has proved the source of soure, therefore, the creditworthiness was also proved, consequently, no addition made u/s 68of the Act can be said to be justified. The ratio laid down in Creative World Telefilms Ltd. (spra) by Hon'ble jurisdiction.il High Court squarely comes to the rescue of the assessee. The assessee duly furnished the proof of identity like PAN, bank account details from the bank, other relevant material, genuineness of the transaction, payment through banking channel and even the source of source, therefore, the assessee has proved the conditions laid down u/s 68 of the Act. It is also noted that in spite of repeated request, the Ld. Assessing Officer did not provide opportunity to cross examine the concerned persons and even the relevant information and allegation, if any, made therein, which has been used against 'the assessee, was not provided to the assessee. At this stage, we add here that mere information is not enough rather it has to be substantiated with facts. The information may and may not be correct. For fastenin ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ments as well as confirmations from the investor entities to substantiate these transactions. The notices u/s 133(6) has duly been responded by investor entity. The director of M/s Rossari India Biotech Pvt. Ltd. appeared before Ld. AO and confirmed the transactions. The findings, in this regard, have already been tabulated in Annexure-1 of impugned order and the same is not in dispute. Under these circumstances, it could very well be said that the assessee had duly discharged the onus in terms of requirement of Sec.68. The onus was on revenue to dislodge assessee s documentary evidences and rebut the same by bringing on record any cogent material to demonstrate that assessee s own money flew back in the shape of share application / share premium. However, nothing of that sort has been brought on record by Ld. AO. It is trite law that no additions could be made merely on the basis of suspicion, conjectures or surmises. 7. Proceeding further, we find that the only reason to treat the share application money as unexplained cash credit is the quantum of premium charged by the assessee. However, as rightly observed by Ld. CIT(A), the provisions of Sec.56(2)(viib) were not applicab ..... X X X X Extracts X X X X X X X X Extracts X X X X
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