TMI Blog2021 (12) TMI 1209X X X X Extracts X X X X X X X X Extracts X X X X ..... o not admit these additional evidences and reject the application filed by Revenue under rule 29 of the Rules. Addition u/s 56 - lower authorities had made an addition under the head income from other sources without mentioning the relevant section under which the addition is sought to be made. If the same is to be considered as an addition made u/s 56(1) of the Act, then the receipt should be income - lower authorities had categorically accepted to the fact that the nature of receipt was only share capital and share premium from the investor companies. Their only allegation is that these investor companies had paid share capital and share premium to the assessee company and that the share capital component at par value is acceptable and reasonable, but the premium component at ₹ 350/- per share was not justifiable since assessee is a nascent company. Provisions of section 56(1) of the Act are general provisions and gets triggered for a receipt having the character of income u/s 2(24) of the Act and not getting taxed under Chapter IV A to IV E of the Act. Though the ld. Special Counsel for the Revenue argued the case on the basis of applicability of provisions ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e to tax at all under any of the provisions of the Act, atleast for the year under consideration. Hence a receipt , once it is not chargeable to tax at all under any of the provisions of the Act, it cannot be brought to tax under the head Income from other sources . Receipt of share capital and share premium had been construed to be capital receipts not chargeable to tax by the decision of the Hon ble Bombay High Court in the case of Vodafone India Services Pvt. Ltd.,[ 2014 (10) TMI 278 - BOMBAY HIGH COURT] -We find that this decision was accepted by the CBDT and instruction No.2/2015 dated 29/01/2015 was issued by CBDT to all its Field Officers to accept the said decision. - Thus we hold that the addition made under the head income from other sources is hereby directed to be deleted. Accordingly, the grounds raised in this regard are allowed. Addition u/s 68 - The assessee cannot be held responsible for enquiries conducted by the Mumbai Investigation Wing at the wrong address. However, the assessee had furnished all the relevant details that were called for by the ld. AO with regard to the said investor company. All the eight entities had filed their income tax retu ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ical finding on more than one occasion at several places of his order, that the receipt of share capital at par value from the promoters category (which includes the holding company i.e. Caremel Asia) and outsiders category are accepted as genuine and reasonable. This has been admittedly done by the ld. AO after considering all the relevant documents with supporting evidences furnished by the assessee company including the direct confirmations filed by those investor companies before the ld. AO in response to the notices issued u/s.133(6) or summons u/s.131 of the Act. Hence, the ld. AO in the light of these supporting documents had indeed taken a possible view. We find that the ld. CIT by invoking his revisionary powers is only trying to substitute his view in place of the view already taken by the ld. AO. This is not permitted in the light of the decision of the Hon ble Bombay High Court in the case of Gabriel India Ltd.[ 1993 (4) TMI 55 - BOMBAY HIGH COURT] . The main case of the ld. CIT in his revision order is only directing the ld. AO to examine source of source. We hold that the assessee is not bound to establish the source of source of the investor company - we hold that ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the special bench and it had merely recommended that the matter be heard outside Andhra Pradesh. Since the Regular Bench had not recommended constitution of the special bench, no reason at all is found in the order of the president in constitution of the special bench. The president entertained a request in a matter which was seized by the Regular Bench, from a party to the litigation, passed an order without hearing the other side, without any reasons, and posted the entire matter before the special bench. This course of action was in breach of principles of natural justice and lacking in fairness. The Vice president, who played a dominant role in decision making, entertained the representative of one party to the litigation privately without notice to the other side, and introduced a completely irrelevant concept of 'political sensitivity' in the process, which by itself vitiates the decision making. Even otherwise, all the factors cumulatively, it has to be declared that the entire course of action adopted to constitute a special bench was opposed to the rule of law, fairness, transparency and cannot be sustained. We do so declare accordingly. 2.1. We also noted f ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... division benches of the ITAT unless it is factually distinguishable or there is a contrary decision of a higher court. Huge revenue impact also cannot be a reasonable ground for constitution of a special bench to hear the appeal. So far as the contention of the learned Departmental Representative that the decision of the Tribunal will have serious on the proceedings before the CBI and Enforcement Directorate, we are to say that while the CBI and Enforcement Directorate are investigating and prosecuting agencies, the Tribunal is a quasi-judicial body adjudicating on disputes arising out of assessments made under direct tax laws. The decisions of the Tribunal rendered upon considering the facts and materials on record, the statutory provisions and the law laid down by the Supreme Court and High Courts and also different benches of the Tribunal. The degree of appreciation of evidence varies between the proceedings before the Tribunal and the proceedings initiated by the CBI and Enforcement Directorate. 18. At the same time, however, there is enormous political sensitivity involved in the present appeal filed by a company, whose chief promoter is a Member of Parliament and son o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t is a statutory phrase. A special bench is constituted under Section 255(3). The Regular Bench was not expected to use this term in vague sense leaving the reader to debate as to whether when it said an Appropriate Bench it actually meant a 'special bench'. In fact, the reading of order shows that the Regular Bench negatived almost all grounds urged by the Board for constitution of a special bench. Thereafter it stated that since there was 'political sensitivity' and the decision would have widespread ramifications. The Regular Bench opined that it will be advisable to have the matter heard outside Andhra Pradesh. The Bench opined that, to ensure the continuous faith of taxpayers and tax administration and people at large that the Tribunal has been enjoying over decades, the president may constitute appropriate Bench outside Andhra Pradesh. 2.2. We find that this decision of Hon ble Bombay High Court was contested by ITAT by filing a Special Leave Petition (SLP) before the Hon ble Supreme Court in 2015 and registered as under:- Diary No. 42483/2015 filed on 18/12/2015 04:00PM (Section-IX) Case N ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ppraised of the fact that there is SLP filed in the Supreme Court against the judgment of Hon ble Bombay High Court. Both the Counsels categorically stated that there is no stay of operation of judgment of Hon ble Bombay High Court and Tribunal can hear this matter. In terms of this, this matter was heard by our Bench in Mumbai. 3. The ground Nos.1, 5 6 raised by the assessee are general in nature and does not require any specific adjudication. 4. The ground No.2 raised by the assessee was stated to be not pressed at the time of hearing by the ld. AR. Accordingly, the same is dismissed as not pressed. 5. The ground No.3 raised by the assessee is challenging the addition made on account of share premium in the sum of ₹ 277,56,88,650/- as income from other sources. The ground No. 4 raised by the assessee is challenging the addition made on account of share premium in the sum of ₹ 15,00,00,000/- as unexplained cash credit u/s 68 of the Act. 6. The brief facts of this issue are that the assessee company is engaged in the business of publishing Telangana Newspaper Sakshi . The assessee company was incorporated in the year 2006 as private limited compan ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 277776 350 15.10.2007 10,00,00,000 2. MATRIX GROUP ALPHAVILLAS PVT.LTD 2008-09 4,16,666 350 15.10.2007 150,000,000 TOTAL 4,16,666 150,000,000 ALPHA AVENUES PVT.LTD 2008-09 2,50,000 350 15.10.2007 90,000,000 2008-09 166666 350 14.02.2008 60,000,000 TOTAL 4,16,666 150,000,000 GILCHRIST INVESTMENTS PVT.LTO 2008-09 5,55,554 350 15.10.2007 199999440 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 1,38,888 350 13.03.2008 4,99,99,680 GROUP TOTAL 1,38,888 49,99,99,680 5. HETERO GROUP (CHAIRMAN MR .PARTHASARTHY REDDY) HETERO DRUGS LTD. 2008-09 13888 350 14.02.2008 50,00,000 2008-09 27778 350 13.03.2008 1,00,00,000 TOTAL 41,666 15,000,000 HETERO LABS LTD 2008-09 27777 350 14.02.2008 1,00,00,000 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 2,77,776 10,00,00,000 7 INVESTMENTS SORUCED FROM M/S. RAMKY GROUP TWC INFRASTRUCTURE PVT.LTD 2008-09 55,555 350 14.02.2008 2,00,00,000 ERES PROJECTS PVT.LTD 2008-09 222,222 350 13.03.2008 8,00,00,000 GROUP TOTAL 2,77,777 10,00,00,000 8. PENNAR CEMENTS GROUP PIONEER INFRASTRUCTURE HOLDING LTD. 2008-09 5,55,555 350 14.02.2008 20,00,00,0 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 00 14 KIRTI ELECTRO SYSTEMS PVT.LTD., NITYANAND NAGAR, BAKULTALLA, HOWRAH 2008-09 13,888 350 14.02.2008 5,000,000 15 MOON ENTERPRISES LTD. NO.901/902, Everest Building, Opp:Sashtri Maidan, Umbada Chowk,Rajkot-360001 Shifted to Mumbai. 2008-09 69,444 350 14.02.2008 25,000,000 16 STOCKNET INTERNATIONAL LTD, AMRITHDHAM SUIT# 5 6, NITYANAND NAGAR, BAKULTALLA, HOWRAH -711109 2008-09 27,777 350 14.02.2008 10,000,000 GRAND TOTAL 81981001 3,740,706,920 6.1. The ld. AO noted that there are two categories of investors in the assessee company (i) promoters category holding 7,35,67,800 shares which were allotted at face value at ₹ 10/- totalling to & ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... adhi Reddy, Promoter of Hetero Drugs Group-held 1,11,109 JPPL shares, through Hetero Health Care Ltd., Hetero Care Ltd., Hetero Drugs Ltd., and Hetero Labs was allotted land for two SEZs at Nakkapalli and Jadcherla. Building rules were relaxed in respect of a hotel to be constructed at Road No.2, Banjara Hills, Hyderabad, Shri P. Pratap Reddy, Promoter of Pennar Cements, who holds 5,55,555 of JPPL shares through one of the concerns, in which he has substantial interest i.e. Pioneer Infrastructure Holding Ltd., Land was allotted in Nadargul, Ranga Reddy District to concerns relating to Shri Prasad V. Potluri, who has substantial interest in M/s. PVP Business Ventures Ltd., which invested in 13,88,888 shares of JPPL. Number of companies with no credentials situated in Kolkata, Gujarat, Chennai, Bangalore and Maharashtra invested in JPPL shares. 6.2. The ld. AO carried out enquiries with the aforesaid investors falling in the outsiders category by issuing notice u/s.133(6) of the Act, issuing commissions / summons u/s. 131 of the Act and notices u/s 133(6) of the Act. The ld. AO observed that shareholders falling in promoters category were allotted sh ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... le. He also observed that despite substantial funding is made by the second category of shareholders (i.e. other than promoters), the major voting power still vests only with the promoter s family and accordingly, he concluded that the premium received by the assessee company is not justified. He also observed that the investors had not been given any return on their investments by way of dividend by the assessee company. The ld. AO specifically observed that with regard to share capital and share premium received from second category investors i.e. other than promoters group, that assessee company is only a private limited company and not listed company and that the gain in share market on sale of shares cannot be a reason for getting huge premium. The ld. AO observed that the major group of companies i.e. Aurobindo Group, Matrix Group etc had invested mainly in their subsidiaries and had invested in outside business for the first time at a high premium. Accordingly, he concluded that it gives a possibility that investors had derived other benefits from their association with key management personnel of the assessee company, either directly or indirectly. 6.5. The ld. AO with ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... investing in assessee s company. Certain entities did not respond to summons issued u/s.131 of the Act when they were asked to appear before the ld. AO. The assessee company was also asked to produce shareholders which it had failed to do so. 6.6. By making the aforesaid observations, the ld. AO sought to treat the amount received towards share capital and share premium from the following companies as unexplained cash credit u/s.68 of the Act:- Sr. No. Name Amount(Rs.) 1. Artillegence Bio Innovations Ltd., 50,00,000/- 2. Kirti Electro Systems Pvt. Ltd., 50,00,000/- 3. Delton Exim Pvt.Ltd., 1,00,00,000/- 4. Stocknet International Ltd., 25,00,000 5. Hingora Finvest Pvt. Ltd., 25,00,000/- 6. Moon Enterprises Pvt. Ltd., 2,50,00,000/- 7. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ation letter together with Income Tax assessment particulars of the said company. The ld. AO observed that immediately preceding the date of making investment by this shareholder in the assessee company, there were certain money transfers that had happened through RTGS credits. The said money received by the shareholder company did not stay with it and were immediately transferred either to assessee company or to other shareholders company which in turn had made similar kind of investment in assessee company towards share capital and share premium. He observed that the nature of money received by the said shareholder company through RTGS credit could not be explained by the assessee herein. In other words, the ld. AO observed that source of source of the investor company was not proved by the assessee in the instant case. b) Kirti Electro Systems Pvt. Ltd Investment made ₹ 50,00,000/- The ld. AO made similar observations as was made in the case of Artillegence Bio Innovations Ltd., He further observed that on perusal of the bank statement of the investor company a sum of ₹ 35,00,000/- was received from Online Information Technology Ltd., and immediately ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ount with Bank of India which showed opening bank balance of ₹ 3,60,50,718/- which money was utilised for making investment in assessee company. The ld. AO however, observed that the opening bank balance as reflected thereon, remain unverifiable and in effect concluded that assessee has not proved the source of source of the investor company. g) Eres Project Pvt. Ltd., Hyderabad Investment made : ₹ 8,00,00,000/- The assessee furnished latest address of the said investor company. Notice u/s.133(6) of the Act was issued by the ld. AO. In response to the same, the ld. AO observed that the said shareholder company furnished all the requisite details through post. He further observed that as per the bank account of the investor company, the source was explained as amount routed through Axis Bank Account No.008010200058362. The ld. AO also observed that the said bank statement of the investor company revealed that the investment was made on assessee company on 18/02/2008 vide Cheque No.941418 for ₹ 8,00,00,000/-. The said amount was sourced from transfer of funds from Ramky Estates and Farms Pvt. Ltd., on 15/02/2008. He observed that prior to transfer of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... irector that two of its group companies were awarded the project but not the investor companies in the assessee company. 6.13. In respect of share capital and share premium received from Aurobindo group of companies totalling to ₹ 10,00,00,000/- for allotment of 2,27,776 shares at a premium of ₹ 350/- per share, the ld. AO observed that as per the statement recorded u/s.131 of the Act from its Director Shri K. Prasad Reddy, it was noticed that family related group concern i.e. Aurobindo Pharma Ltd., was allotted SEZ land at Mahboob Nagar by the Government of Andhra Pradesh. 6.14. In respect of share capital and share premium received from Hetero Group of companies, totalling to ₹ 4,50,00,000/- for allotment of 1,24,997 shares at a premium of ₹ 350/- per share, the ld. AO observed that as per the statement recorded u/s.131 of the Act from its Director Shri G Srinivasa Reddy, it was noticed that their group concerns had been allotted 75 acres of SEZ land on lease basis for a period of 33 years by Government of Andhra Pradesh. 6.15. In respect of share capital and share premium received from two companies i.e. Sandesh Labs Pvt. Ltd., (₹ 24, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... be taxed under the head income from other sources. . While doing so, the ld. AO did not mention the Section under which he wishes to tax the said amount of ₹ 277,56,88,650/- under the head income from other sources . 6.18. In effect, (i) The ld. AO in respect of share capital and share premium received from outside shareholders (other than promoters) observed that share premium component of ₹ 277,56,88,650/- represents benefit derived by the assessee in terms of Section 28(iv) of the Act which is taxable as business income of the assessee or alternatively the same is taxable under the head income from other sources . However, the share capital portion at par value of ₹ 10 per share from the very same shareholders were accepted to be genuine by the ld AO. Similarly the share capital portion at par value of ₹ 10 per share received from the promoters category were also accepted to be genuine by the ld AO. (ii) The ld. AO observed that in respect of share capital and share premium received in the sum of ₹ 15,00,00,000/- from shareholders at Kolkata, Bangalore, Mumbai and Hyderabad comprising of eight parties, the genuineness of the invest ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... receipt of said amounts towards share premium, from those other investors, were during the period prior to commencement of business in the case of the appellant company, as noticed from the chart furnished by the AO relating to the details of investment in share capital made in the case of the appellant in para 5 of the assessment order. Under these circumstances and having regard to the above provision of Section 28(iv) of the Act, the said amounts received in form of share premium, amounting to ₹ 277,56,88,650/-, in my considered view, cannot be taxed treating as business income under that section. 8.1. The revenue is not in appeal before us against this finding of the ld. CIT(A) by deleting the addition made u/s 28(iv) of the Act. 8.2. The ld. CIT(A) thereafter proceeded to tax the said receipt of share premium in the sum of ₹ 277,56,88,650/- as income from other sources and for which purpose he proceeded to adjudicate the valuation reports submitted by M/s. Jagadisan and Co., Chartered Accountants and M/s. Deloitte. At the outset, he agreed that these two valuation reports were duly submitted before the ld. AO which justified premium of ₹ 350/- ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t parties listed supra, observed that those parties had not responded to summons issued u/s.131 or notice u/s 133(6) of the Act and that the Investigation Wing had reported that these parties did not exist at the addresses provided; income offered by these parties in their respective income tax returns were very negligible; and that the assessee company had failed to prove the existence of these investors / identity of these shareholders since it could not produce the investor parties. The ld. CIT(A) also observed that the ld. AO had rightly observed that assessee has not been able to establish the creditworthiness of the investors and genuineness of the investments made in assessee company. With these observations, the ld. CIT(A) confirmed the addition made in the sum of ₹ 15,00,00,000/- as unexplained cash credit u/s.68 of the Act in respect of share capital and share premium received from eight companies listed supra. 9. At the outset the ld. AR vehemently submitted that the entire investments made by the investors in assessee company towards share capital and share premium were made based on the valuation reports of two Chartered Accountants namely M/s. Jagadisan C ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... source of information for preparing the valuation report together with information and explanations provided to them are as under:- (a) Key Management Personnel of assessee company (b) Business plan of assessee company (c) Market assessment of news paper industry prepared by assessee company. (d) Project cost reports, Revenue and cost projections for five years beginning April 2008, cash flows, projected profit and loss account and projected balance sheet for the first five years of operation of assessee company. (e) Profile of key management personnel of assessee company. 9.3. The ld. AR also drew the attention from the paper book containing the valuation report issued by Jagadisan and Co., dated 12.7.2007, wherein they had adopted Discounted Cash Flow (DCF) method to be the proper method for the purpose of valuing the shares of the assessee company by stating that the assessee company is at nascent stage and hence, it would be appropriate to value the company based on discounted cash flow method of valuation. In the said valuation report, since assessee is in nascent stage, the potential risk in news paper business would be moderate and accordingly, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... DR at the outset argued that department had filed certain additional evidences in terms of Rule 29 of the Income Tax Appellate Tribunal Rules. In this regard, he drew the attention of this Bench to the 14 paper books filed by the department and referred to various documents thereon. He requested for admission of those additional evidences as according to him, those documents would be relevant for disposal of the impugned appeal. 11. Per contra, the ld. AR vehemently objected to the admission of additional evidences filed by the department in the assessee s appeal. The legality of admission of these additional evidences is dealt with hereinbelow in detail. Admissibility of Additional Evidences filed by the Revenue: 12. The Revenue vide letter dated 16.04.2013 vide F.No.DC-2(3)/AABCJ7667G/13-14 filed five paper books containing pages 1 to 229 and also requested that the documents contain the statements and the informations in these paper books in 5 volumes and these documents constitute additional evidences. It was requested that as per rule 29 of the Income Tax (Appellate Tribunal) Rules, 1963 (hereinafter the Rules ) the same may be admitted. Similar applicatio ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... could not be accessed with due diligence exercised by the Assessing Officer. It is further submitted that as the additional documents sought to be relied on are directly relatable to the dispute before this Hon ble Tribunal, the said documents would be necessary for decision by this Hon'ble Tribunal. 5. The entire list of documents, the brief description of the documents and the relevance of the same to the issue in appeal is stated in the tabulated form as per Annexure enclosed. The Annexure to this application may kindly be treated as part and parcel of this application. 6. It is submitted that as the entire documents are forming part of the chargesheet filed by the CBI authorities, the same is also within the knowledge of the appellant. The entire set of documents referred to in the Annexure has already been served on the appellant at the time of filing of the same before this Hon ble Tribunal. 7. It is submitted that insofar as the statements recorded by the Assessing Officer in the course of the penalty proceedings under section 271(1)(c) of the Act and the Statements recorded in the course of assessment proceedings for the subsequent assessment years ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... co dated 1.11.2006 in the case of Carmel Asia Holdings Pvt. Ltd. seized from office of Jagadisan and co by CBI authorities on 11.02.2012. In the valuation report dated 01/11/2006, M/s. Jagati Publications Pvt. Ltd. was valued between ₹ 178 Cr to ₹ 196 Cr in contradiction with later reports of contemporaneous period of very high value though there is no change in Circumstances. 1-23 I 2 Projected P L statement of M/s. Jagati Publication Pvt. Ltd. for theperiod 2000 - 09 2012 - 2013 as per the valuation report of DeloiteTouche Tohmatsu India Pvt. Ltd figures shown by Deloitte and Jagadisan (in Sl No 1 above) vary widely though both are projections and the management of the assessee has taken different figures which vary widely in different reports 24-25 I 3 Sworn Statement of Sri. P.N.Sudarshan dated28.12.2010 before ACIT-2(1) Sr.Director In Deloitte Already part of evidence on record 26-28 I 4 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 11 Letter from AurobindoPharma Ltd. to MD, APIIC dated 17/11/2006 requesting allotment of 75 acres land at Jadcherla SEZ Application by Aurobindo group in contemporaneous period 13 II 12 Approval letter dated 17/11/2006 from MD, APIIC allotting 75 acres to AurobindoPharma Ltd. at Jadcherla SEZ Application by Hetero group in the contemporaneous period requesting allotment at ₹ 7 lakhs/acre though the price fixation committee values at ₹ 15 lakh/acre 14 15 II 13 Copy of letter dated 17/11/2006 from Hetero Group to MD, APIIC requesting allotment of 75 acres land at Jadcherla SEZ Application by Hetero group in the contemporaneous period requesting allotment at ₹ 7 lakhs/acre though the price fixation committee values at ₹ 15 lakhs/acre 16-18 II 14 Copy of order sheet notings of APIIC dated 14/11/2006 indicating approval of SEZ at Jadcherla ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ng SEZ at Jadcherla. Establishes that the Jand at SEZ wa, allotted to M/s AurobindoPharma Ltd and M/s Hetero Drugs Ltd even pin, to the notification of the SEZ by the GOI 38-40 II 21 Order sheet notings dated 26/06/2007 and 19/07/2007 of APIIC allotting land to M/s AurobindoPharma Ltd and M/s Hetero Drugs Ltd. shows that though the price was recommended by APPIC authorities at 15 lakhs/acre and extent was recommended at 50 acres as against the request by the applicants for ₹ 7 lakhs/acre and 75 acres extent, the request of the applicants was accepted at the instance of Chief Minister. 41-42 II 22 Letter dated 26/06/2007 of APIIC to AurobindoPharma Ltd allotting 75 acres at ₹ 7 lakhs/acre. Letter of allotment at lower rate and larger extent. 43-45 II 23 Letter dated 26/06/2007 of APIIC to Hetero Drugs Ltd allotting 75 acres at ₹ 7 lakhs/acre. Letter of allotm ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 31 Cheques and pay in-slips showing investment by Smt K. Rajeswari and Trident Life Sciences in the assessee. 77-88 II 32 Application for loan by Shri P.V. Ramprasad Reddy from IL FS dated 27/11/2007 and sanction by IL FS for renewal of loan dated 10/12/2007 and sanction of loan dated 11/12/2007. 89-104 II 33 Minutes of meeting held in the chamber of CM on 11/09/2004 regarding reduction of No development zone from 1 Km to 500 meters. The documents show that in the case of land of 2143 acres allotted to Pharma City developed by Ramky group at Parwada, Visakhapatnam, the green belt zone which was supposed to be 1 km within the boundaries of Pharma City land was reduced to 250 meters and the balance was transferred to outside lands adjacent to the boundary of Pharma City (with a reduced limit of 250 meters). Even the 250 meters inside the boundary of Pharma City was apparently reduced to meters. In fact, the whole issue was subject to revision much later 1n ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Ananthapur District. Shows that thousands of acres of land was acquired from public at low cost, allotted to Indu group who have practically invested no amount and did no developmental activity. Besides, the lands valued for the purpose of pledging to Financial Institutions at high value and the Government permitted pledge of the lands by the Indu group with Financial Institutions to obtain huge loans. The allotment was not through any tender process. The entire process started in the contemporaneous period of investment in the assessee. 8-13 III 44 MOU between Lepakshi Knowledge Hub Pvt Ltd and Govt of AP dated 22/12/2008 for development ofKnowledge Hub in Ananthapur District. 14-23 III 45 Letter dated 29/10/2008 from APIIC accepting to offer allotment of 8000 to 10000 acres in AnanthpurDistrict 24-25 III 46 Letter dated 26/11/2008 from APIIC allotting 3190 acres land to Lepakshi Knowledge Hub Pvt Ltd in Ananthpur District ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Statement of Shri TataswamyRamaswamyKannanbefore Metropolitan Magistrate dated 13/01/2012 140-141 III 57 Statement of Shri MadhavRamachandra before CBIauthorities on 01/02/2012 09/03/2012 Businessman of Dubai attends 142-145 III 58 Statement of Shri MadhavRamachandra dated09/02/2012 before Metropolitan Magistrate Meeting of the CM at Dubai, expresses intention of investment in India. However, the said interest is being followed by the promoters of assessee through its key personnel and investment is insisted. He invests and States that he was cheated. He states that itis nota voluntary investment 146 147 III 59 Statement of DandamudiAvanindra Kumar beforeCBI authorities on 14/02/2012 and 27/03/2012 Shri Dandamudi states that he was advised by One Sridhar of JPPL to invest on the basis of valuation report of Deloitte and he invested. Subsequently he expressed that he was cheated by misrepr ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... report of Deloitte. Demonstrates that investment in assessee was not business prudence and the same was a consideration for allotment of land and other concessions by APIIC flouting the norms of regulations. The process of allotment of land and investment were contemporaneous 16-19 V 67 Statement of Shri M.Srinivasa Reddy (of Hetero Group) on 08/01/2013 during penalty proceedings First he denies that there was valuation report and next he says that there was internal valuation report of the assessee, which does not exist. The process of allotment of land and investment were contemporaneous 20-28 V 68 Statement of Shri B.Parthasarathy Reddy (of Hetero group) recorded on 18/01/2013 during penalty proceedings Demonstrates that there was no business prudence in the investment In assessee 29-31 V 69 Statement of Shri B.P. Acharya (ex MD APIIC) dated21/01/2013 recording during penalty proceedings De ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... V 77 Statement of Shri A. AyodhyaRami Reddy (Chairman, Ramky group) recorded on 08/01/2013 in penalty proceedings Establishment of RamkyPharmacity during contemporaneous period 86-90 V 78 Statement of Shri M. Sambasiva Rao (TWC Infrastructure) recorded on 08/01/2013 in penalty proceedings TWC infrastructure was a loss making company, no activity and no creditworthiness 91-96 V 79 Statement of Shri E. Rajesekhar Reddy recorded on 08/01/2013 in penalty proceedings Eres Projects Ltd has no activity and no creditworthiness 97-101 V 80 Statement of Shri M. Vasudeva Reddy recorded on 22/01/2013 in penalty proceedings Shows that TWC and Eres are onlyconduits and do not have creditworthiness. 102-106 V 81 Statement of Shri M. Rama Krishna Reddy recorded ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... escribed in detail the modus operandi of accommodation entries done by him and admits that the investments in the assessee are not genuine. This enquiry was for subsequent year and the assessee was given full opportunity to produce directors/key persons of the investors and he did not produce them nor did he appear at Kolkata for cross examination when AO issued summons and examined the witness. The witness clearly states that the entire activity was bogus and neither Shri Vijay Sai Reddy or one Mr. SatyaReddy arranged investor meet in Kolkata as claimed by Shri Vijay Sai Reddy 156 157 V 86 Chart indicating routing of money to paper companies at Kolkata for investment in M/s. Jagati Publications Pvt. Ltd. Demonstrates in detail the layering transactions in the form of accommodation entries through various companies for investment in assessee for subsequent assessment year. No creditworthiness of genuineness of any of the companies. The assessee was requested to produce the directors and key persons at Kolkata but he did not. The assessee also did not appear for cross examination even ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ontrol register of Carmel Asia Holdings Pvt. Ltd. Shows that the very same investors ofthe assessee invested in Carmel at a premium of ₹ 265 and Carmel is major shareholder in the assessee. The funds of the promoters in the assessee are also provided by the same investors through Carmel Asia also at a premium showing that the effective investment by the promoters is negligible. Yet they control more than 90% shares whereas the alleged investors control minor share with huge investment. 220-221 V 97 GOMS No: 76 dated 26/02/2009 by Govt of AP granting mining license at Tandur to Penna group Benefits bestowed on Penna group who are investors in assessee including the transfer of mining lease and also grant of fresh mining leases 222 223 V 98 GOMS No: 25 dated 29/01/2009 permitting change of name from WalchandTandur Cement Company Ltd to PennaTandur Cement Company Ltd 224 225 V 99 GOMS No: 91 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Order sheet notings of I I Dept with reference to bids on development of regional airports 45-57 VI 107 MOU between RAK Investment Authority and Govt of AP for development of Vanpic Project dated 11/03/2008 58-67 VI 108 Letter dated 29/03/2008 from RAK Investment Authority to Govt of AP authorizing M/s MatmnxEnport Holdings Pvt Ltd (Nimmagadda group) to act as their representative 68 VI 109 GOMs No: 30 of Govt of AP approving concession agreement with Vanpic Demonstrates extraordinary benefits received by Nimmagadda group vis-a-vis similar other ports 69 70 VI 110 Comparison of concession agreements with Vanpic, Krishnapatnam and Gangavaram ports by Feedback Infra showing extraordinary benefits conferred on Vanpic group 71-84 VI 111 Statemen ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 116 Letter of Special SecyI IDept to various epartments to attend meeting by CM to discuss modifications in proposed Ongole and Nellore Airport projects 118 119 VI 117 Minutes of meeting held by CM on 13/12/2008 120-128 VI 118 Comparative analysis of Project Development Agreement of On gole Airport with that of Rajiv Gandhi International Airport and approved PDS for PPP Projects 129-135 VI 119 Order sheet noting wherein CM rejected the view of Chief Secretary objecting to extending of state support to On gole Airport 136-142 VI 120 Statement of Shri V. Vijay Sai Reddy recorded on 07/01/2013 in penalty roceedings and proceedings for A.Y 2010-11 The assertions made by Shri V. Vijay Sai Reddy that it was open private placement was unsubstantiated because enquiries with the prospective investors named by him in his statement and the a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... oughed back to the assessee group. 15 16 VII 127 Report of Income Tax Inspector after physical visit to the alleged premises of CliftonsPearsons Export Agencies Ltd, Ganga Builders Lid, Shivlaxmi. Exports Ltd and Super Finance Ltd dated 27/02/2013 In the proceedings for subsequent year, enquiries were made and it was found that no such companies who invested in the assessee were existent at the given address. 17 VII 128 Statement of ShriRavindra Singh resident of Room No: 102, 6thFloor, Stephen House, BBD Baug, Kolkata dated 27/02/2013 18 19 VII 129 Search list of CBI dated 18/08/2011 Demonstrates that during search of CBI in 18/08/2011, the premises stated to be housing M/s Artificial Big Innovations Ltd, Kirti Electro Systems Ltd, Charishma Engineering, Globex Corporation Lt, Shakti Ispat Industries Pvt Ltd and Bay Inland Pvt Ltd were locked and no one was available. The premises were sealed by CBI ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n approvals, noting sheets of various department etc. which are at Sl. No.8 to 54, 97 to 110 115 to 119. (iii) Statements of various persons recorded during penalty proceedings at Sl. No.64 to 83, 85 120 to 121. (iv) Copy of CAG report on allotment of land for the period 2006 to 2011 at Sl. No.84. (v) Investments made by Kolkata companies and related statements recorded during search at Sl. No.86 to 96. (vi) Various statements recorded under section 164 of Cr P C at Sl. No.55 to 63 and 111 to 114. (vii) Letters from various investors at Sl. No.122 to 126 (viii) Verification report of Income Tax Inspector of the premises of the investors at Sl. No.127 to 128. (ix) Search list of CBI and various charge sheets filed by CBI at Sl. no. 129 to 136. 12.4. From the above, Ld. Special Counsel for the Revenue Mr. K.V. Aravind stated that the Revenue has filed all the evidences/documents which have come to knowledge of the ld. AO and CIT(A) subsequent to the completion of assessment and appellate proceedings. The Ld. Special Counsel for the Revenue referred to rule 29 of the Rules and argued that the respondent can also file additional evidence befo ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ded from Shri J. Prabhakar of Jagadisan Co., Chartered Accountants before DSP, CBI. The Ld. Special Counsel for the Revenue was trying to drive home the point that the valuation reports issued by two independent professionals were back dated and the said valuation reports have been heavily relied upon by the investors for making investment in assessee company at a huge premium. He also referred to paper book 4 filed by the Revenue in the form of additional evidence containing CBI charge sheet of Aurobindo Pharma Group and Hetero Group. He also referred to certain observations made in the charge sheet in connection with Ramky Group Matrix Group regarding environmental clearance regulations, among others, which question the genuineness of the investor companies making investment in assessee company. 12.6. The Ld. Special Counsel for the Revenue placed reliance on paper book filed containing additional evidences which contain statements recorded by the ld. AO from various persons during penalty proceedings and in the assessment proceedings of subsequent years. These statements recorded during penalty proceedings, in the opinion of the Ld. Special Counsel for the Revenue, are r ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ted the fact that what was received by the assessee company was only share capital and share premium. Hence, the character and nature of receipt being share capital and share premium does not change. Even the additional evidences sought to be relied upon by the ld. Special Counsel for the Revenue did not state that what was received by the assessee company was not share capital and share premium. In fact the ld. AO observed that the shareholders had over paid for the share price by virtue of QUID PRO QUO. Even assuming it to be correct, it still remains only as a share consideration and not otherwise. The law is very well settled that up to A.Y. 2012-13, the receipt of share premium would only have to be construed as a capital receipt and no examination could be made on the same. Reliance in this regard was placed on the decision of Hon ble Bombay High Court in the case of Vodafone India Services Ltd. reported in 368 ITR 1 (Bom.), which was accepted by the CBDT by not preferring further appeal to Hon ble Supreme Court. 13.4. The ld. AR also submitted with regard to the statements recorded by the ld. AO in penalty proceedings which were sought to be relied upon by the ld. Speci ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... iament in the year 2009 and Member of Legislative Assembly (MLA) in the year 2014. Hence at the relevant time of transactions, he was not holding any public office. The ld. AR also pointed out in paper books 8, 11, 12, 13 14 filed in the form of additional evidences by ld. Special Counsel for the Revenue, the assessee company was not even mentioned as an accused in the CBI charge sheet. In paper book 4 containing CBI charge sheet, the assessee company was mentioned as accused No.12 and sections applied to assessee company were section 120, 420, 409 and 477A of IPC. The ld. AR argued that none of these provisions have any relation to any income. The main allegation of CBI in their charge sheet is cheating. If amount invested by the investor companies is for share capital and share premium, then it cannot be cheating. 13.7. With the above observations, the ld. AR vehemently argued that the additional evidences filed by the revenue and relied upon by the ld. Special Counsel for the Revenue have got nothing to do with the income of assessee company and they are only on the aspect of conspiracy of cheating. 13.8. The ld. AR further argued that with respect to the statements ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e matters and routine correspondences exchange by certain corporates with government. Those correspondences have got absolutely no relevance for determination of income in the hands of the assessee company. Hence, those additional evidences are not required to be admitted. With all these observations, the ld. AR submitted that the additional evidences filed by the Revenue do not deserve to be admitted as they are absolutely irrelevant for adjudication of the appeal before us. 14. We have considered the additional evidences filed by the Revenue and noted that the main emphasis of the Revenue on these additional evidences was to prove that there was QUID PRO QUO arrangement between the assessee and all the investor companies. Even the CBI charge sheets filed in the paper books are merely allegations of CBI as regards to criminal conspiracy. We find from the charge sheets that these are filed with the CBI Special Court and adjudication on this is awaited but these CBI charge sheets are allegations of criminal conspiracy and not relating to assessment of income of assessee company. The charge sheets filed by the CBI are only allegations leveled and nothing is proved as on the date ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he instant case permitting the additional evidence by the Tribunal, is apposite? It is undisputed that Rule 29 of the Rules is akin to Order 41 Rule 27(1) of the Code of Civil Procedure. The true test in this behalf, as laid down by the Courts, is whether the Appellate Court is able to pronounce judgment on the materials before it without taking into consideration the additional evidence sought to be adduced. The legitimate occasion, therefore, for exercise of discretion under this rule is not before the Appellate Court hears and examines the case before it, but arises when on examining the evidence as it stands, some inherent lacuna or defect becomes apparent to the Appellate Court coming in its way to pronounce judgment, the expression to enable it to pronounce judgment‟ can be invoked. Reference is not to pronounce any judgment or judgment in a particular way, but is to pronounce its judgment satisfactory to the mind of Court delivering it. The provision does not apply where with existing evidence on record the Appellate Court can pronounce a satisfactory judgment. It is also apparent that the requirement of the Court to enable it to pronounce judgment cannot refer to pro ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... set aside and the matter is remitted to the Tribunal for disposal on merit in accordance with law. The order of the High Court is set aside as above and the appeal is disposed of accordingly. 14.4. We noted that the issue before Hon ble Supreme Court was that the appeal was decided by the Tribunal without adjudication, whether admitted or not admitted, of the additional evidences filed in terms of Rule 29 of the Rules. But in the present case, first we are adjudicating the admissibility of the additional evidences and then we will proceed for adjudication of appeal before us. 14.5. We noted that the Department has filed paper books Nos.1 to 14 in the form of additional evidences, mainly the documents being relied upon by the Department is in the form of charge sheets, statements filed by the CBI, correspondence is of the investors with the Govt. of Andhra Pradesh, details of other investors etc. We noted from the orders of the lower authorities i.e. the ld. AO as well as the CIT(A) that the Department has completed its enquiry and investigation for the concerned assessment year during the course of said proceedings and there was sufficient time for framing of assessment ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... view of the matter, the question of a party claiming a right to adduce additional evidence cannot arise. The Tribunal has, however, been given a power to require any document to be produced or any witness to be examined or any affidavit to be filed to enable it to pass order or for any other sufficient cause. For this purpose also, the Tribunal has to record the reasons. It is evident that in the present case the Tribunal did not think it necessary to require the production of any other document at the stage of final hearing as in its opinion the orders could be passed in the case before it on the basis of the material on record. In such a situation, no fault can be found with the order of the Tribunal refusing to admit the additional evidence sought to be produced by the revenue before it at the time of hearing of the appeal. 6. The learned counsel for the revenue submits that if a party wants to produce additional evidence, the Tribunal should not refuse to admit the same. According to the learned counsel, discretion is vested with the Tribunal in the matter which should be exercised judiciously. 7. We have considered the above submission. We, however, find it diffi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... assessee company was made. He argued that the department cannot take cognizance of these news paper articles since they are merely based on hearsay and in the nature of surmises and conjectures and cannot be construed to be key evidence in any manner to fasten any addition in the hands of the assessee company. In fact the ld. AO had even recorded statements from the Director of Matrix group, Aurobindo Pharma group and Hetero Group during the course of assessment proceedings u/s.131 of the Act. He argued that there has been no acceptance from any of the single party that there was any quid-pro-quo arrangements as has been alleged by the ld. AO based on news paper article. He argued that the ld. AO had completely failed to bring forth any tangible or material evidence to support his contention that investments made in the assessee company are not in the nature of capital receipts but received as a consideration for benefit being granted to such parties by Government of Andhra Pradesh. 15.1. The ld. AR with regard to the valuation report filed by the assessee company for valuation of share premium which are prepared by M/s. Jagadisan Co., dated 12.7.2007 and M/s. Deloitte date ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... was not achieved by the assessee company as projected in view of the fact that the vernacular advertisement market which dropped steeply due to economic recession in the year 2008 2009 coupled with political instability, Telangana issue, lack of political readership in terms of the rate and volume. He also pointed out that one of the strong reasons is that the monopoly status of Eenadu newspaper was not challenged till the assessee entered the market and after the entry of the assessee, Eenadu newspaper reduced their advertising tariff, which forced the assessee also to reduce the tariff, being a newcomer. This fact is also evident from the dropping profit margins of Eenadu i.e. ₹ 107.29 Crores from publication division as on 31/03/2008 to ₹ 21.76 Crores at the end of 31/03/2009. This has contributed to the slump in revenue of assessee also and consequent loss which majorly includes depreciation loss. Hence, he argued that the projections and cost estimates used by the management and submitted to the valuer for preparation of valuation reports were very scientific and strategized and is close to actual achievements. The ld. AR further submitted that as per the India ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... at burden cannot be said to be discharged by merely referring to the chargesheets filed by CBI which are yet to reach finality /conclusion before the Hon ble Special Court of CBI. 15.5. The ld AR stated that no additions can be made on the basis of charge sheets filed by CBI. In support of this proposition, he placed reliance on the co-ordinate bench decision of Chennai Tribunal in the case of ACIT vs Shri Ramcharan Tej Konidala in ITA No. 2074/Chny/2018 dated 28/04/2021. He also pointed out that Chennai Tribunal also placed reliance on the decision of Hon ble Madras High Court in the case of CIT vs N Swamy reported in 241 ITR 363 (Mad) wherein it was held that the burden of showing that the assessee had undisclosed income is on the revenue and the burden cannot be said to be discharged by merely referring to the third party statements. 15.6. The ld AR also placed reliance on the decision of Bangalore Tribunal in the casee of Shri Ratan Babulal Lath vs DCIT in ITA No. 355/Bang/2017 dated 15/06/2018 wherein that assessee s case was reopened since he was interrogated by CBI in connection with providing of accommodation entries to companies of Shri Y S Jagan Mohan Reddy and ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d hence, there was no justification for the valuer M/s. Jagadisan Co., to give higher value at ₹ 3459 Crores in his second report dated 12/07/2007. The ld. AR specifically submitted that there is a complete change in business plan from AY 2007-08 right from the numbers with regard to newspaper circulation figures between the first valuation and the second valuation report. He specifically drew our attention that in the first valuation report dated 01/11/2006, the management of the assessee company had projected sale of only six lakh copies per day in year 5, which figure had increased to ₹ 15 lakhs in the second valuation report dated 12/07/2007. This specifically shows that the entire business plan and business model has undergone a drastic change based on subsequent development. Hence, the valuation figure of the assessee company is bound to be different and have to project significant improvement. He also drew our attention to page 598 of the case law paper book-3 filed by the assessee more specifically at page 601 wherein the ld. AO had recorded a statement u/s.131 of the Act on 13/12/2010 from Shri Nimmagadda Prakash who is a Director in M/s. Alpha Avenues Pvt. L ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he basis of admission the assessee could not have been subjected to additions unless and until some corroborative evidence was found in support of such admission. 15.11. The ld AR submitted that the documentary evidences submitted by the assessee in the instant case were not at all doubted by the lower authorities. The said documentary evidences substantiates the contention of the assessee that the issue of shares during the year under consideration was genuine. 15.12. Finally, he argued that in any case, the ld. AO and the ld. CIT(A) had categorically accepted that the nature of receipt was only share premium from these investor companies. Their only allegation is that these investor companies had paid share capital and share premium to the assessee company and that the share capital component at par value is acceptable and reasonable, but the premium component at ₹ 350/- per share was not justifiable since assessee is a nascent company. The ld. AR vehemently argued that the character of receipt being share capital and share premium does not change at all in the instant case. Even additional evidences filed by the Revenue, even if admitted, does not state that the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... guishable with that of the assessee by stating that the ld. AO took divergent stand in quantum and penalty proceedings. Hence, the Hon ble Supreme Court held that evidences gathered in subsequent penalty proceedings need to be considered in quantum proceedings as assessee did not furnish any details in quantum proceedings originally. Any decision rendered thereon by the Apex Court should be seen from the facts peculiar to that case and cannot be applied universally without going into the specific facts related to assessee. 15.14. The ld AR submitted that the ld CIT(A) had confirmed the addition made under the head income from other sources , though no section thereon was mentioned. Even assuming that the revenue intended to apply the provisions of section 56(2)(viib) of the Act where the issue of share premium was made taxable as income by a legal fiction with effect from 01/04/2013 relevant to Asst Year 2013-14 and onwards, the ld AR submitted that the said provision cannot be made applicable for the year under consideration. Hence no addition could have been made u/s 56(2)(viib) of the Act by the lower authorities in the instant case. Further it was submitted that the amou ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... aforesaid finding of fact recorded by the ITAT are based on the material available on record which is a finding based on appreciation of evidence on record. 52. Issuing the share at a premium was a commercial decision. It is the prerogative of the Board of Directors of a company to decide the premium amount and it is the wisdom of shareholder whether they want to subscribe the shares at such a premium or not. This was a mutual decision between both the companies. In day to day market, unless and until, the rates is fixed by any Govt. Authority or unless there is any restriction on the amount of share premium under any law, the price of the shares is decided on the mutual understanding of the parties concerned. 53. Once the genuineness, creditworthiness and identity are established, the revenue should not justifiably claim to put itself in the armchair of a businessman or in the position of the Board of Directors and assume the role of ascertaining how much is a reasonable premium having regard to the circumstances of the case. 15.15. The ld AR submitted that the share premium cannot be taxed in the hands of the assessee company u/s 56(1) of the Act as the said ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ubmitting basic evidences proving identity, creditworthiness and genuineness of transactions and once the same is discharged, then the burden shifts to the department to prove that the said credit entry is fictitious and not genuine. This has apparently not done by the department in the instant case. The ld AR also placed reliance on the following decisions in support of its proposition, among other decisions:- a) Decision of Hon ble Delhi High Court in the case of CIT vs Oasis Hospitalities P Ltd reported in 333 ITR 119 (Del) b) Decision of Hon ble Delhi High Court in the case of CIT vs Kamadhenu Steel Alloys Ltd Ors reported in 361 ITR 220 (Del). SLP of revenue against this decision was dismissed by the Hon ble Supreme Court in SLP No. CC 15640/2012 dated 17/09/2012. c) Decision of Hon ble Gauhati High Court in the case of Nemi Chand Kothari vs CIT Another reported in 264 ITR 254 (Gau) 15.17. The ld. AR argued that out of the 28 parties from whom share application money was received, it is submitted that the ld. AO has made additions u/s. 68 of the Act in the case of the following investor companies:- Sr. No. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tements etc. The ld AR submitted that the ld. AO has also confirmed that he was in possession of the Income Tax Returns filed by these eight investor companies, wherein he has discussed that the income of these parties were meagre. Further, the assessee company had furnished the correct address of M/s. TWC Infrastructure Pvt. Ltd. and M/s. ERES Projects Pvt. Ltd. before the ld. AO vide letter dated 09.12.2010. 15.19. The ld. AR further submitted that the assessee has proved the identity of shareholders by furnishing the copy of PAN card of all the investor companies and copy of acknowledgement of income tax returns filed by all the investor companies. The ld. AR submitted that to prove the genuineness of the transactions, the assessee has furnished confirmations from four investor companies; copy of bank statements of all the investor companies showing amounts received by them via bank transfers and not through cash deposits and payments made to the assessee company towards share subscription; copy of Board resolutions passed in their respective hands for making investment in assessee company at a premium; the six companies mentioned in Sr. No.1-6 duly complied with the notice ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ish the creditworthiness of the investor companies only to the extent of the investment made by them in the assessee company. Therefore, once these parties have produced the bank statements from where it could be seen that they had sufficient bank balances in their kitty to make investment and confirmed the transaction and the share capital is received through banking channel the creditworthiness of the investor companies to the extent of the investment made in the assessee company stands proved. 15.22. The ld. AR also submitted that assessee, by discharging the initial burden of proof by proving the three necessary ingredients of Section 68 of the Act, is not obliged to prove the source of source of the investor companies atleast for the year under consideration. Once the primary onus is discharged by the assessee, then the onus of proof shifts to the Revenue and just because the share applicants could not be found at the address given, it would not give the Revenue an automatic right to make an addition u/s.68 of the Act. The ld. AR also stated that one must not lose sight of the fact that it is the Revenue which has all the power and wherewithal to trace any person. Relianc ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the value of the assessee company at ₹ 3,450 crores. 16.1. The ld. Special Counsel for the Revenue vehemently argued that the ld. CIT(A) had sustained the addition under the head income from other sources in respect of share premium received from outsiders category in the sum of ₹ 277,56,88,650/-. He argued that though the ld. CIT(A) had not mentioned the section under which such addition had been sustained, from the reading of the order of the ld. CIT(A) and the order of ld. AO, it could be reasonably inferred that the lower authorities were only trying to apply the provisions of Section 68 of the Act. The ld. Special Counsel for the Revenue also pointed out that Section 68 also falls under the head income from other sources . He argued that the head of income i.e. income from other sources falls under Chapter IV F and Section 68 also would fall under the same. Hence, he pleaded that the entire addition made on account of share premium should be viewed from the context of provisions of Section 68 of the Act and not otherwise. To counter this argument, the ld. AR objected that Section 68 does not fall under Chapter-IV F of the Act. He drew the attention of th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... asad Reddy and Smt. K. Rajeshwari. e. Penna Cements Group: Pioneer Infrastructure Holdings Ltd., f. India Cements Group: India Cements Ltd., g. P.V.P. Group: P.V.P. Business Ventures Pvt. Ltd., h. Sandesh Labs Group: Sandesh Labs Pvt. Ltd., Spume Solutions Pvt. Ltd., and Shri G.Srinivasaraju i. Shri A.K.Dandamudi j. Shrine Finance and Investments Pvt. Ltd., and Satabdi Investments Pvt. Ltd., k. Artillegence Bio Innovations Pvt. Ltd., Kirti Electrosystems Pvt. Ltd., Delton Exim Pvt. Ltd., Stocknet Internaitonal Ltd., Hingora Finvest Pvt. Ltd., and Moon Enterprises Pvt. Ltd., 16.4. The ld. Special Counsel for the Revenue in respect of the aforesaid parties reiterated what is mentioned in the Assessment order and additionally also placed reliance on the charge-sheets filed by the CBI before the Hon ble Special Court of CBI in respect of certain parties. The ld. AR vehemently argued that he had already made his submissions for non-admission of additional evidences filed by the department in the instant case. Hence, any reference made by the ld. Special Counsel for the Revenue to those additional evidences should not be given any weightage as they ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... o be noted is both the ld. AO as well as the ld. CIT(A) had only made addition on account of share premium addition made for ₹ 277.57 Crores only under the head income from other sources and that Section 68 of the Act does not fall under the head income from other sources as they fall in different chapters of the Act altogether. Not even a single word has been mentioned on account of section 68 of the Act by the lower authorities while making the addition on account of share premium in the sum of ₹ 277.57 Crores. The ld. AR also pointed out that the ld. AO had time and again mentioned that the nature and character of receipt in the hands of the assessee was share capital and share premium and that the share capital portion received at par value of ₹ 10/- per share is accepted and found to be reasonable and that the share premium portion received from very same investors alone has been concluded to be beyond human probabilities. He also argued that the ld. Special Counsel for the Revenue had vehemently argued that this premium component had arose to the assessee only pursuant to quid pro quo arrangement in view of the investors and their allied companies gettin ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... o share premium portion? Reliance in this regard was placed by the ld AR on the decision of Kolkata Tribunal in the case of ITO vs. Trend Infra Developers Pvt. Ltd., in ITA No.2270/Kol/2016 for A.Y.2012-13 dated 26/10/2018, wherein under similar facts and circumstances, the share capital was accepted by the Revenue as genuine and share premium was sought to be taxed u/s.68 of the Act which was deleted by the Kolkata Tribunal. 16.6. With regard to addition made u/s.68 of the Act in the sum of ₹ 15 Crores, the ld. AO as well as the ld. Special Counsel for the Revenue by placing reliance on various documents produced by the assessee and various information gathered by them, vehemently argued that monies were invested by ERES Projects Pvt. Ltd., and TWC Infrastructure Pvt. Ltd., totalling to ₹ 10 Crores in assessee company and that those two parties were provided funds by Ramky group. This is a classic case of department itself proving the source of source of the investor company. He argued that the provisions of Section 68 of the Act pre-supposes introduction of assessee s own money. When the orders of the lower authorities itself state that monies have been provided ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... or the Revenue had placed heavy reliance on the additional evidences in the form of CBI chargesheets, statements recorded during penalty proceedings, various correspondences between investor and their group companies with the Government of Andhra Pradesh for their routine business matters, share valuation report etc. We have already held hereinabove that these charge sheets are not admissible as they are not relevant for adjudication of the issues before us and also in view of the fact that most of them do not fall under the category of being construed as an evidence . With regard to various paper books relied upon by the learned special counsel for the revenue in the form of additional evidences, though these additional evidences were not admitted by this tribunal for reasons stated elaborately hereinabove, the bench still gave the liberty to the learned special counsel for the revenue to refer to those evidences for addressing the issue in dispute. 17.1. We hold that the chargesheets filed before the Hon ble CBI Court are nothing but mere allegations levelled on various parties involved thereon and absolutely loses the character of having any evidentiary value thereon to be ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... en if it is adverse, is of no relevance for the impugned appeals. 17.3. It is not in dispute that the investor companies had decided to make investments in the assessee company at a premium of ₹ 350 per share by placing reliance on the valuation reports issued by M/s Jagadisan Co., Chartered Accountants dated 12/07/2007 and by M/s Deloitte dated 16/11/2007. Admittedly, these two valuers had valued the assessee company at more than ₹ 3000 crores, by taking into account the proposed publication of Sakshi newspaper and the untapped market in the news paper readership in Andhra Pradesh which is later certified by the Audit Bureau of Circulations, Mumbai, which justifies the allotment of shares to the investor companies at a premium of ₹ 350 per share. We find from the perusal of the valuation reports, they had clearly defined the various parameters used by them for valuing the assessee company together with the method used for valuation after due consideration of the financial projections given by the management of the assessee company and after duly considering the market forces and the datas available in respect of competitors and others in the market. The ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ore the CBI authorities is self-contradictory since he himself has admitted that the date of valuation report is academic as the date for which valuation of the company remained unchanged. Further Shri P.N. Sudarshan has submitted that the valuation was based on future projections and as such change of date of valuation report would not impact the valuation per se. This is a very crucial factor in as much as even if some adverse inference is to be drawn on the aspect of valuation report being pre-dated , still it would not impact the valuation, as the date for which valuation is done would be relevant and not the date of valuation report. 17.3.3. One more crucial fact which requires consideration is that there was a complete change in business plan from A.Y. 2007-08 right from the numbers with regard to newspaper circulation figures between the first valuation and the second valuation report given by M/s Jagadisan Co., Chartered Accountants. In this regard, we find that in the first valuation report dated 01/11/2006, the management of the assessee company ahd projected sale of only 600000 copies per day in Year 5, which figure had increased to 1500000 copies per day in the s ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 29 Crores from publication division as on 31/03/2008 to ₹ 21.76 Crores at the end of 31/03/2009. This has contributed to the slump in revenue of assessee also and consequent loss which majorly includes depreciation loss. It is well accepted principle that the projections and actual performance would always differ and as long as the difference is not alarming or huge, the figures reflected in the projections attain greater credibility. Hence in the DCF method used by the valuer wherein the projections and cost estimates used by the management and submitted to the valuers for preparation of valuation reports were prepared in a very scientific manner. The ld. AR had also pointed out that as per the Indian Readership Survey (IRS), which is the survey conducted by Media Research Users Council (MRUC), an autonomous body of advertising agencies and publications, around the year provides results of publications every quarter. The IRS number of Sakshi for the average issue readership is 48.16 per quarter while that of the total issue readership is 133.78 lakhs per quarter which can be tabulated as under: Readership Sakshi Eenad ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... l whatsoever has been brought on record by the revenue by conducing independent inquiry , which could serve as an evidence linking the transactions between the investor companies and the assessee company to show that the capital investment in the assessee company was due to the grant of any land or project by the Government of Andhra Pradesh, even after a lapse of more than 10 years from the end of the assessment year under consideration. The various documentary evidences submitted by the assessee in the instant case were not at all doubted by the lower authorities. The said documentary evidences substantiates the contention of the assessee that the issue of shares during the year under consideration was genuine. The burden of proof to show that the assessee company as alleged had such an arrangement for fastening such huge additions is on the revenue and that burden cannot be said to be discharged by merely referring to the chargesheets filed by CBI which are yet to reach finality /conclusion before the Hon ble Special Court of CBI. In any case, these charge sheets are not admitted as additional evidences by this tribunal for elaborate reasons stated supra. 17.5. We find that ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Chapter IV A to IV E of the Act. We find that the provisions of section 56(2) of the Act reads as under:- Section 56(2) In particular, and without prejudice to the generality of the provisions of sub-section (1) , the following incomes, shall be chargeable to income-tax under the head Income from other sources , namely :- (i) . , (ia) .. , (ib) , (ic) .. and (id) .. (ii) . (iii) . (iv) . (v) . (vi) .. (vii) .. (viia) . Inserted by Finance Act, 2010 w.e.f. 1-6-2010 (viib) .. Inserted by Finance Act, 2012 w.e.f. 1-4-2013 (viii) Inserted by Finance (No.2) Act, 2009 w.e.f. 1-4-2010 (ix) Inserted by Finance (No.2) Act, 2014 w.e.f. 1-4-2015 (x) Inserted by Finance Act, 2016 w.e.f. 1-4-2017 17.5.2. We find that the ld. Special Counsel for the Revenue vehemently argued that the addition was sought to be made u/s 68 of the Act by the lower authorities under the head income from other sources . In this regard, the ld. Special Counsel for the Revenue placed reliance on the proviso to section 68 of the Act to drive home the point that share premium cou ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ld be seen from the aforesaid submissions of the ld. AR that assessee had indeed duly proved the three necessary ingredients of section 68 of the Act in the instant case, in view of the fact that those factual submissions remain uncontroverted by the revenue before us. Hence we hold that the provisions of section 68 of the Act are not applicable in respect of addition of ₹ 277.57 crores in the facts and circumstances of the instant case. Hence all the case laws that were relied upon by the ld. Special Counsel for the Revenue in the context of provisions of section 68 of the Act, need not be gone into at all, as they are not germane to the issue before us. 17.5.4. We are now left only with one section i.e section 56(1) of the Act. Let us see whether the addition made by the lower authorities fit into the said section. We find that the said section starts with the expression income of every kind . As observed earlier, first the receipt of share capital and share premium should be income u/s 2(24) of the Act. It is trite law that the receipt of share capital and share premium are only capital receipts, not chargeable to tax at all under any of the provisions of the Act, at ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nable doubts nor the Revenue authorities have questioned the identity of the share holders. The genuineness of the transaction can also be safely concluded since the entire transaction has been done through the banking channels duly recorded in the books of accounts of the assessee duly reflected in the financial statement of the assessee. The bank statement is exhibited at pages 101 and 102 of the Paper book in which the transaction relating to the allotment of shares are duly reflected . In the instant case, the capacity of the share holders cannot be doubted as has been pointed out elsewhere in our order that 98% of the share is held by IDFC Private Equity Fund-II which is a front manager of IDFC Ltd., and the contributors in IDFC Private Equity Fund-II are LIC, Union of India, Oriental Bank of Commerce, Indian Overseas Bank and Canara Bank which are public sector undertakings. 11.2 Now the only point of dispute is the nature of transaction which according to the Revenue authorities is beyond any logical sense and which is the charging of share premium at the rate of ₹ 490/- per share. According to the Revenue authorities this is a sham transaction . So far till now ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... stone of Section 68 of the Act which provides for cash credit being charged to tax. The impugned order of the Tribunal allowed the issue to be raised before it for the first time, overruling the objection of the respondent-assessee. (b) The impugned order examined the applicability of Section 68 of the Act on the parameters of the identity of the subscriber to the share capital, genuineness of the transaction and the capacity of the subscriber to the share capital. It found that the identity of the subscribers was confirmed by virtue of the Assessing Officer issuing a notices under Section 133(6) of the Act to them. Further, it holds that the Revenue itself makes no grievance of the identity of the subscribers. So far as the genuineness of the transaction of share subscriber is concerned, it concludes as the entire transaction is recorded in the Books of Accounts and reflected in the financial statements of the assessee since the subscription was done through the banking channels as evidenced by bank statements which were examined by the Tribunal. With regard to the capacity of the subscribers the impugned order records a finding that 98% of the shares is held by IDFC Privat ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... at the ratio decidendi of the judgment must be adhered to by the field officers in all cases where this issue is involved. This may also be brought to the notice of the ITAT, DRPs and CsIT (Appeals). 3. This issues with the approval of Chairperson, CBDT. ■■ 17.5.7. Same views were also expressed in yet another decision of Hon ble Bombay High Court in the case of Shell India Markets Pvt. Ltd., vs. ACIT reported in 369 ITR 516 (Bom). 17.5.8. We are in agreement with the argument advanced by the ld AR that the decision to arrive at the share premium amount for a private limited company is based on commercial negotiations and the business expectations of the investors. In the instant case, though the assessee is private limited company had obtained 2 valuation reports from independent experts in support of allotment of shares at a premium of ₹ 350 per share, despite the fact that there was no bar in law for the assessee to charge high premium. The revenue cannot step into the shoes of the assessee company and question the business decision taken by it by questioning the premium component charged by the assessee company, especially for the year under ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... is regard are allowed. 18. With regard to the addition made in the sum of ₹ 15 crores u/s 68 of the Act is concerned, we find that the ld . AO had sought to add both the share capital and share premium received from the following companies :- Sr. No. Name of Party Amount of Addition (Rs.) 1. Artillence Bio-Innovations Limited 50,00,000/- 2. Kirti Electro Systems Pvt. Ltd. 50,00,000/- 3. Delton Exim Pvt. Ltd. 1,00,00,000/- 4. Stocknet International Ltd. 25,00,000/- 5. Hingora Finvest Pvt. Ltd. 25,00,000/- 6. Moon Enterprises Pvt. Ltd. 2,50,00,000/- 7. Eres Projects Pvt. Ltd. 8,00,00,000/- 8. TWC Infrastructure Pvt. Ltd. 2,00,00,000/- ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Ltd., Copy of share application form Copy of PAN Card Copy of Board Resolution Copy of Memorandum of Association and Articles of Association Copy of Certificate of Incorporation TWC Infrastructure Pvt. Ltd., Copy of share application form Copy of PAN Card Copy of Board Resolution Copy of Memorandum of Association and Articles of Association Copy of Certificate of Incorporation 18.2. Apart from above, we find that the ld AO had stated that M/s. Delton Exim Pvt. Ltd., had responded to the ld. AO on 24/12/2010 by deputing its Director in person. Further, the other three companies i.e. Artilligence Bio-Innovations, Kirti Electro Systems Pvt. Ltd., and Stocknet International Ltd., had also responded and filed confirmation letters before the ld. AO on 27/12/2010. This fact has been duly acknowledged by the ld. AO in his assessment order. The assessee company had also furnished the correct address of M/s. ERES Projects Pvt. Ltd., and TWC Infrastructure Pvt. Ltd. Before the ld. AO vide letter dated 09/12/2010. Thereafter notices were issued to the two parties by the ld. AO calling for certain details and the two pa ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ed either to M/s. Hingora Finvest Pvt. Ltd. or the assessee company. Further, it has been accepted in the report itself that the premises found is not having the same address of M/S. Hingora Finvest Pvt. Ltd. However, the assessee had already provided the present address before the ld. AO. However, no inquiry was conducted by the ld. AO at the given address. The assessee had duly discharged its onus by even taking pains by furnishing the present address of the investor company. It is the bounden duty of the ld. AO to make necessary enquiries at the latest address furnished by the assessee. Without discharging the said duty, the ld. AO cannot merely place reliance on the investigation report by ignoring all the relevant statutory documents filed before him proving the three necessary ingredients of Section 68 of the Act. Hence, we are inclined to accept the argument advanced by the ld AR in this regard. 18.3.3. As far as the letter of Shri Pradeep Ratanlal Parikh, wherein he has stated he does not remember having made investment in assessee company is concerned and that he does not remember having any relations with the promoter / director of the assessee company, it was submit ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of the investor companies. Reliance for this contention has been rightly placed on the judgement of Hon'ble Delhi High Court in the case of CIT Others vs. Five Vision Promoters Pvt Ltd. Others reported at 380 ITR 0289 (Del), wherein the Hon ble Delhi High Court held as under:- 41. Detailed findings have been given by the ITAT in the present cases after a thorough examination of the records. These have been extracted hereinabove. The Court finds no reason to differ from the decision of the ITAT in its rejection of the very same contentions urged before the Court by the Revenue. In particular, the Court concurs with tin ITAT that the mere fact that some of the investors have a common address is not a valid basis to doubt their identity or genuineness. 18.3.6. In our considered opinion, the assessee cannot be held responsible for enquiries conducted by the Mumbai Investigation Wing at the wrong address. However, the assessee had furnished all the relevant details that were called for by the ld. AO with regard to the said investor company. 18.4. All the aforesaid eight entities had filed their income tax returns regularly, which fact had been acknowledged by th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... year under consideration. If at all, the ld. AO is entertaining any doubt on the unverifiable nature of the credits appearing in the bank statements of investor companies, then suitable action need to be taken in their hands by the income tax department in the manner known to law. We hold that assessee company cannot be faulted for the same and no adverse inference could be drawn on the assessee company. In fact, the Kolkata Investigation report dated 23.10.2009 categorically states that all these companies have huge amounts as reserves and surplus which has been raised annually through share premium consequent to increase in their share capital. This clearly explains the source for those Kolkata companies to make investment in assessee company. This is a classic case of Investigation report of Kolkata which has been relied upon by the ld AO, but which findings are actually in favour of the assessee company. 18.6. We find with regard to ERES projects Pvt. Ltd and TWC Infrastructure Pvt. Ltd., the ld. AO records in page 48 of his Assessment order that monies were transferred by Ramky Group of companies which were in turn utilised by these two companies to make investments in t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... urav Triyugi Singh v. ITO [ITA No. 1750 of 2017, dated 22-01-2020] which also considered its earlier decision of Pr. CIT v. Veedhata Towers (P.) Ltd. [2018] 403 ITR 415. 2. It is settled position of law that to avoid the rigors of section 68, the assessee must prove the identity, creditworthiness of the lenders/investors to advance such monies and genuineness of the transactions. Once these three ingredients are fulfilled by the assessee, the primary onus casted upon him, in this regard, could be said to have been discharged and accordingly, the onus would shift upon revenue to dislodge the assessee's claim by bringing on record material evidences and unless this onus is discharged by the revenue, no addition could be sustained u/s. 68. The Hon'ble Supreme Court in the case of CIT v. Lovely Exports (P.) Ltd. [2008] 216 CTR 195, dismissing revenue's appeal, observed as under: - 2. Can the amount of share money be regarded as undisclosed income under section 68 of IT Act, 1961? We find no merit in this Special Leave Petition for the simple reason that if the share application money is received by the assessee company from alleged bogus shareholders, whose n ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... preme Court in Pr. CIT v. NRA Iron Steel Pvt. Ltd. He, therefore, submits that the finding returned by the Tribunal is wholly erroneous and requires to be interfered with by this Court. 11. Per contra, Mr. Padvekar, learned counsel for the respondent submits that from the facts and circumstances of the case, it is quite evident that assessee had discharged its burden to prove identity of the creditors, genuineness of the transactions and credit worthiness of the creditors. He submits that the legal position is very clear in as much as assessee is only required to explain the source and not source of the source. Decision of the Supreme Court in NRA Iron Steel (P.) Ltd. (supra) is not the case law for the aforesaid proposition. In fact, the said decision nowhere states that assessee is required to prove source of the source. 11.1 Referring to the orders passed by the authorities below, Mr. Padvekar submits that in the present case, the investigation wing of the department had carried out detailed investigation at Kolkata and found the source of the credit to be genuine. This report of the investigation wing was not taken into consideration by the Assessing Officer. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... hat the identity of the creditors to be dubious or doubtful, or lack credit-worthiness, then the genuineness of the transaction would not be established. In such a case, the assessee would not have discharged the primary onus contemplated by Section 68 of the Act. 15. It is also a settled proposition that assessee is not required to prove source of source. In fact, this position has been clarified by us in the recent decision in Gaurav Triyugi Singh v. Income-tax Officer-24(3)(1). 16. Having noted the above, we may now advert to the orders passed by the authorities below. 17. In so far order passed by the Assessing Officer is concerned, he came to the conclusion that the three companies who provided share application money to the assessee were mere entities on paper without proper addresses. The three companies had no funds of their own and that the companies had not responded to the letters written to them which could have established their credit worthiness. In that view of the matter, Assessing Officer took the view that funds aggregating ₹ 34 Crores introduced in the return of income in the garb of share application money was money from unexpl ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... efore, doubted credit worthiness of the three creditors. Finally, Tribunal held as under: 5.7 As per the provisions of Section 68 of the Act, for any cash credit appearing in the books of assessee, the assessee is required to prove the following (a) Identity of the creditor (b) Genuineness of the transaction (c) Credit-worthiness of the party (i) In this case, the assessee has already proved the identity of the share applicant by furnishing their PAN, copy of IT return filed for asst. year 2010-11. (ii) Regarding the genuineness of the transaction, assessee has already filed the copy of the bank account of these three share applicants from which the share application money was paid and the copy of account of the assessee in which the said amount was deposited, which was received by RTGS. (iii) Regarding credit-worthiness of the party, it has been proved from the bank account of these three companies that they had the funds to make payment for share application money and copy of resolution passed in the meeting of their Board of Directors. (iv) Regarding source of the source, Assessing Officer has already made enquiries through the DDI (Investigat ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ent findings of fact by the two lower appellate authorities. Appellant has not been able to show any perversity in the aforesaid findings of fact by the authorities below. 22. Under these circumstances, we find no error or infirmity in the view taken by the Tribunal. No question of law, much less any substantial question of law, arises from the order of the Tribunal. Consequently, the appeal is dismissed. However, there shall be no order as to cost. 4. Keeping above said legal position in mind, we find that the assessee is under appeal before us for Assessment Years [in short referred to as 'AY'] 2011-12 2012-13 contesting the order of learned first appellate authority confirming certain addition u/s. 68. 18.8. We hold that when all the relevant details of the investor companies were indeed furnished by the assessee company, merely because the share subscribers could not be found at the given address when sought to be verified by the revenue at the relevant point in time, it does not mean automatically that adverse inference could be drawn on the assessee and conclude that assessee had indeed routed its undisclosed income in the form of share capital a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... applicants. The sole basis for the Revenue to doubt their creditworthiness was the low income as reflected in their Income Tax Returns. The entire details of the share applicants were made available to the AO by the Assessee. This included their PAN numbers, confirmations, their bank statements, their balance sheets and profit and loss accounts and the certificates of incorporation etc. It was observed by the ITAT that the AO had not undertaken any investigation of the veracity of the above documents submitted to him. It has been righty commented by the ITAT that without doubting the documents, the AO completed the assessment only on the presumption that low return of income was sufficient to doubt the credit worthiness of the share holders. 4. The Court is of the view that the Assessee by produced sufficient documentation discharged its initial onus of showing the genuineness and creditworthiness of the share applicants. It was incumbent to the AO to have undertaken some inquiry and investigation before coming to a conclusion on the issue of creditworthiness. In para 39 of the decision in Amy/ Promoters (supra), the Conn has taken note of a situation where the complete par ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... in the garb of share capital and share premium in assessee company. 18.12. From the aforesaid observations, it could be seen that the assessee had duly discharges its onus by proving the identity, creditworthiness of the investors and the genuineness of the transactions being the three necessary ingredients of the Section 68 of the Act. Once, the assessee has discharged its initial burden as required u/s.68 of the Act, the burden shifts to the ld. AO by putting forth any evidence on record to justify an addition u/s.68 of the Act. This had apparently not being done by the ld. AO, failing which no addition could be fastened in the hands of the assessee company u/s.68 of the Act. Reliance in this regard had been rightly placed on the decision of Hon ble Allahabad High Court in the case of CIT vs. Vacmet Packaging (India) Pvt. Ltd., reported in 367 ITR 217 The relevant operation portion of the said order is reproduced hereinbelow:- 8. In the present case the assessee had discharged the onus of establishing the identity, credit worthiness and genuineness of the transactions which had formed the basis of the addition that was made under Section 68. Ultimately, whether the do ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... or the A.Y.2008-09 was filed by the assessee company engaged in the business of publishing of news paper Sakshi was filed on 29/09/2008 declaring total loss of ₹ 19,91,51,382/-. The assessment was completed u/s.143(3) of the Act on 31/12/2010 determining total income ₹ 272,65,37,270/-. In the said assessment, the following additions were made by the ld. AO. a. Addition made u/s.28(iv) of the Act in respect of share premium component received from various investor companies belonging to non-promoters category (i.e. outsiders category- ₹ 277,56,88,650) b. Addition made u/s.68 of the Act in respect of share capital portion and share premium portion from investor companies belonging to Kolkata, Mumbai and Hyderabad, totalling to 8 parties ₹ 15 Crores (outsiders category) 21.1. The assessee had preferred an appeal before the ld. CIT(A)-III, Hyderabad and the said appeal was disposed of by ld. CIT(A) on 30/12/2011 dismissing the appeal of the assessee. 21.2. Later, the assessment which was already confirmed by the ld. CIT(A) for A.Y.2008-09 was sought to be revised by the ld. CIT by invoking revision jurisdiction u/s.263 of the Act. Accordin ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rejudicial to the interest of the Revenue. It was also pointed out that assessee has indeed proved the source of Caramel Asia to make investment in assessee company. The source of source for the holding company is not required to be proved by the assessee company. It was submitted that if at all the same is to be verified, the ld. AO assessing the holding company should examine it in the assessment of holding company and not in assessee company s hands. 21.5. However, the aforesaid contentions of the assessee were rejected by the ld. CIT and a revision order was passed u/s.263 of the Act by treating the order of the ld. AO as erroneous and prejudicial to the interest of the Revenue on the limited aspect of examining the receipt of share capital from Caramel Asia. The final observations of ld. CIT are as under:- 12. I am not able to agree with the views of the ld. AR. I agree with the views of Sri. Y.V.S.T. Sai, Addl. CIT, Range-2. The ld. AR has relied on the decision in CIT vs. G.M Mittal Stainless Steel Pvt. Ltd., (263 ITR 255). This is not a case of simple investment to apply the ratio of the decision on which the ld. AR relied on. The assessee s case has to be viewed ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... a Holdings Pvt. Ltd., is a holding company of assessee having stake of 89.80% shares in assessee company as on 31/03/2008. The address together with PAN of the holding company was also furnished by the assessee. The assessee also furnished a copy of Form No.2 filed with Registrar of Companies for allotment of shares to its holding company. Further, we find that the ld. AO vide letter dated 01/12/2010 addressed to the assessee company sought confirmation from various investor companies which admittedly included Caramel Asia Holdings Pvt. Ltd., also. The evidence in this regard is enclosed in page 16 of the paper book filed before us. 21.7. We find that M/s. Caramel Asia Holdings Pvt. Ltd., (i.e. holding company) had indeed furnished confirmation vide letter dated 02/12/2010 enclosed in page 17(i) of the paper book confirming the fact that they had invested in the share capital of assessee company comprising of 23525000 equity shares of ₹ 10/- each. In the said confirmation, the holding company had also mentioned the date of making investments, cheque number, amount and their bank details from which cheques were issued to the assessee company. This confirmation letter was ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... received by the holding company during A.Y.2008-09 amounting to ₹ 18,78,05,268/- was sought to be added as unsubstantiated credit. 21.11. Hence, it could be seen that entire share capital and share premium received by Caramel Asia Holdings Pvt. Ltd., i.e. the holding company during A.Ys. 2007-08 and 2008-09 had already been the subject matter of addition in the hands of holding company. While this is so, even if assessee company is called upon to prove the source of source of Caramel Asia (i.e. its holding company), still the same gets clearly proved and established by the assessment orders of the Assessing Officer framed in the hands of the holding company for A.Ys. 2007-08 and 2008-09 as referred supra. In other words, the re-assessment orders framed in the hands of the holding company itself clearly establishes the source of source and that money itself is available for making investment in the assessee company herein. Hence, where is the question of examining this issue in the hands of assessee company for the purpose of making any addition in the hands of assessee on the ground that assessee company has not proved the source of the holding company when the same has ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ee herein, was already considered in the hands of the holding company by initially making the addition and thereafter, the said additions getting deleted by Bangalore Tribunal on merits also. 21.14. We find in pages 4-8 of the impugned order of the ld. CIT, the ld. CIT had only discussed about quid pro quo arrangements that are the subject matter of CBI chargesheets and that Caramel Asia Holdings Ltd., did not have the capacity to raise share capital and share premium from its shareholders which money had eventually passed on to the assessee company. In other words, the ld. CIT had only doubted the transactions on receipt of share capital and share premium received by Caramel Asia Holdings Ltd., from its shareholders. Finally, however, the ld. CIT has passed on this responsibility to the ld. AO to identify whether there is any quid pro quo arrangement involved in the said transaction in his concluding para. This only goes to prove that the revision order has been made only to make fishing and roving enquiries for a concluded matter by passing on the bug / responsibility from the hands of the ld. CIT to ld. AO and giving a fresh innings to the ld. AO. We find that the ld. CIT i ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d not resorted to make any enhancement thereon. Hence, the very same issue is now the subject matter of revision jurisdiction u/s.263 of the Act by the ld. CIT , was very much available for consideration before the ld. CIT(A) and the same issue has already been considered and decided by the ld. CIT(A). Hence, the doctrine of merger would come into operation here. The order of Assessing Officer gets merged with order of the ld. CIT(A). Moreover, in view of the explicit provisions of Explanation 1(c) to Section 263(1) of the Act, an issue which has already been considered and decided by the ld. CIT(A) cannot be the subject matter of revision u/s.263 of the Act by the ld. Administrative CIT. On this ground also, the revision order passed by the ld. CIT deserves to be quashed apart from merits. 21.16. In any event, it is not in dispute that assessee company has allotted shares to its holding company only at par i.e. at face value of 10/- each per share. If the allegations of ld. CIT that there is quid pro quo arrangement, is to be accepted, then how can there be any quid pro quo arrangement for the share capital allotment at par. We have already held in ITA No.18/Hyd/2012 that no ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... CIT reported in 243 ITR 83 were duly considered. 21.18. Further, the main case of the ld. CIT in his revision order is only directing the ld. AO to examine source of source. We hold that the assessee is not bound to establish the source of source of the investor company. Reliance in this regard is placed on the decision of Hon ble Bombay High Court in the case of CIT vs. Nirav Modi reported in 390 ITR 292 wherein it was specifically held as under:- 9. It was next submitted that no enquiry was done by the Assessing Officer to find out whether the donor Mr Deepak Modi (father) had received money from M/s. Chang Jiang as claimed. Nor any inquiry was done to find out whether the sister had in fact earned amounts on account of Foreign Exchange Transactions as claimed by her. We find that this enquiry of a source of source is not the requirement of law. Once the Assessing Officer is satisfied with the explanation offered on inquiry, it is not open to the CIT in exercise of his revsional powers direct that further enquiry has to be done. At the very highest, the case of the Revenue is that this is a case of inadequate inquiry and not of no enquiry. It is well settled that the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ther the gifts were genuine and, if not, then the Assessment could be completed on application of Section 68 of the Act. In this case, the order passed by the Assessing Officer is not per se erroneous and further the CIT has not given any reasons to conclude that the order is erroneous. In fact, he directs the Assessing Officer to find out whether the order is erroneous by making further enquiry. This the decision of the Delhi High Court in D.G. Housing Projects Ltd. (supra), clearly negates. In the above view, the decision of Delhi High Curt in D.G. Housing Projects Ltd. (supra) would not assist the Revenue in the present facts. 21.19. We further find that the revision proceedings u/s.263 of the Act could not be invoked for making fishing and roving enquiry. Reliance in this regard was placed on the Co-ordinate Bench decision of Mumbai Tribunal in the case of Lotus Energy India Ltd., vs. CIT reported in (2017) 53 ITR (Trib.) 227 (Mum) dated 14/12/2016. 21.20. One more excruciating fact which has to be seen in the instant case when the very same issue that is sought to be revised by invoking revision jurisdiction u/s.263 of the Act by the ld. CIT has already been the sub ..... X X X X Extracts X X X X X X X X Extracts X X X X
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