TMI Blog2022 (5) TMI 884X X X X Extracts X X X X X X X X Extracts X X X X ..... lant by : Shri S. S. Shukla, Sr. DR Respondent by : Shri M. K. Patel, A.R. ORDER PER MADHUMITA ROY, JM: The instant appeal filed by the Revenue is directed against the order dated 23.12.2015 passed by the Ld. Commissioner of Income Tax (Appeals)-1, Vadodara arising out of the order dated 27.03.2015 passed by the ITO, Ward- 1(1)(2), Vadodara under Section 143(3) of the Income Tax Act, 1961 (hereinafter referred to as the Act ) for A.Y. 2012-13 with the following grounds: 1. On the facts and circumstances of the case and law, the Ld.CIT(A) has erred in by deleting the addition without appreciating the facts on record and merit of the case on the issue of addition made by the AO on fresh share capital introduced by the assessee of Rs. 20100000/- which is unexplained cash credit u/s 68 of the Income tax Act, 1961 for A.Y. 2012-13. 2. The appellant craves leave to add to, amend or alter the above grounds as may be deemed necessary. 2. The brief facts leading to the case is this that the assessee a dealer and trader of paper and board filed its return of income on 29.09.2012 declaring total income at Rs. 3,49,190/-. 3. The c ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 12 7. Sheetal Agarwal - 5,000 5,000 6.49% 31.03.2012 Total 10,000 67,000 77,000 100% In fact, 67000 shares were allotted having face value of 10 rupees per share at a premium of Rs. 290 per share to 7 shareholders totaling to Rs. 2,01,00,000 ( Rs. 6,70,000 + 1,94,30,000). It was further found that all the shareholders have taken loan for investing the share capital fund from M/s. Bigiwn Paper Distributors Pvt. Ltd. Mumbai which was transferred through HDFC Bank by cheques only. Having found the said amount of Rs. 2,01,00,000/- not genuine, the same was treated as unexplained cash credit and added to the total income of the assessee under Section 68 of the Act by the AO which was, in turn, deleted by the Ld. CIT(A). Hence, the instant appeal before us. 4. As per the submissions made by the Ld. D.R. it is the case of the Revenue that the Bigwin Paper Distributors Pvt. Ltd. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... areholders. On this aspect, he has supplied the assessment order dated 03.07.2019 passed by the Ld. CIT(A) for A.Y. 2012-13 of M/s. Bigwin Paper Distributors Pvt. Ltd. confirming the fact that the same is a genuine company. The Ld. Counsel appearing for the assessee also distinguished the judgment referred by the Ld. DR in support of the Ld. A.O. 6. We have heard the rival submissions made by the respective parties, we have further considered the relevant materials on records including the orders passed by the authorities below. 7. Upon perusal of the assessment order we find that the Ld. AO upon considering the entire aspect of the matter came to a finding that no concrete plans, about the future expansions, growth etc. were submitted before him. Furthermore, the balance sheet of the assessee does not suggest that that value of shares of Rs. 10/- per share to be valued at Rs. 300 per share at a premium value of Rs. 290/- in the absence of any supporting evidence. Apart from that the assessee company debited Rs. 1,02,885/- are as ROC charges and Stamp Duty of Rs. 24,500/- claiming the same as revenue expenditure. A further show-cause has been issued to justify the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rther submits that amount had been only received from family members of promoters. 2.5 Your appellant submits that it has offered the proper explanation regarding the nature and source of the transaction. The appellant had discharged the initial onus with respect to share application money received from all seven shareholders. Once the onus was fulfilled by the appellant, it was for the Assessing Officer to examine and bring any material on record which may help in rebutting the onus of appellant. However, the Assessing Officer has not brought any incriminating material on record. The AO has only made an assumption without any supporting evidence. 2.6 Your appellant further submits that where the appellant has proved the identity of shareholders and the amount were received by account payee cheques, the initial burden on the appellant is discharged. 10. In support of the case made out by the assessee following judgments were relied upon: (i) DCIT vs. Rohini Builders, reported in (2002) 256 ITR 360 (Guj.) (ii) CIT vs. Vacmetn Packaging India (P.) Ltd., reported in (2014) 45 taxmann.com 204 (Allahabad) (iii) CIT vs. Al Anam Agro Foods (P.) Lt ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 13. The assessee further submitted as follows: 6.1 The appellant company had submitted the working of Fair Market Value of equity shares in accordance with DCF method vide submission dated 26.12.2014. The said working is reproduced herewith as Annexure -13. The appellant company had also gave justification regarding issue of shares at a premium vide submission dated 06.01.2015. The reply is reproduced herewith as Annexure 14. (Pg. No. 153 to 154) 6.2 However, AO disregarded the valuation of shares at a premium by contenting that the cash flow with growth @ 25% is not acceptable as such no concrete plans about the future expansion, growth were submitted. 6.3 Your appellant submits that the learned AO further contended that premium is decided on the basis of net worth of the company and not on the basis of future plans of the company. The year under consideration is first year and hence it is not an established company and therefore share premium charged by the appellant company is not acceptable. 6.4 Your appellant submits that share premium is to be decided by the Board of Directors and there is no prohibition under the Companies Act so far as ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ned all details of the depositors; their confirmations were clear with all addresses; and that they were on the departmental records as tax-payers. In the aforesaid factual background, the Tribunal was of the view that the respondent had sufficiently discharged its burden of explaining the same. The Tribunal further observed that the department has not brought any material on record to show that the depositors were bogus. According to the Tribunal none of the decisions relied upon by the revenue had held that the assessee was required to establish the credit worthiness of the share applicants strictly in the manner understood in the context of cash credits under section 68 of the Act. The Tribunal was of the view that the assessee had given the names and addresses of the share applicants, it was within the know/edge of the revenue that the said share applicants were assessed to Income-tax, hence the burden was on the revenue to make further inquiry. The Tribunal placed reliance upon the decision of the Apex Court in the case of CIT v. Divine Leasing Finance Co. wherein it has been held that when the assessee company had given the name of the shareholders, the department was free to ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... respondent assessee. We find no reason in absence of any illegality much less any perversity too to interfere with the order of both these authorities, who have concurrently held the due details having been proved. What of the assessee-company had noted to prove it had presented the necessary worth proof before both the authorities and it is not excepted by the assessee company to further prove the source of the deceased. This tax appeal resultantly raises no question of law and therefore do not merit for the consideration and is dismissed. 4.3.3 Both these decisions are based upon the decision of honourable Supreme Court of India in the case of Lovely Exports Private Limited, [2010] 14 SCC 761. Following this decision, the honourable High Court of Gujarat again in its decision in the case of[ 2013 ] 33 taxmann.com 271 (Gujarat), Namastey Chemicals (P.) Ltd., has held as follows: 5. Having heard the learned counsel for Revenue we do not find that the Tribunal committed any error. The Supreme Court in the case of Lovely Export (P.) Ltd. (supra) observed as under: Delay condoned. Can the amount of share application money be regarded as undisclosed income under sec ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 19 passed by the Ld. CIT(A) does not suggest the same. 16. We have further considered the judgment relied upon by the Ld. DR. We find that the Ld. A.R. distinguished the said judgments in the following manner: (i) Pragati Financial Management Pvt. Ltd. vs. CIT, reported in 82 taxmann.com 12 (Cal). In this case, the appeal is against order u/s.263 of the Act, whereby the CIT had set aside the assessment as it was framed without conducting any inquiries. There is no decision on merits. Actually it is specifically mentioned that the court is not deciding on retrospective application of proviso to section 68 (Para 13 of the order) (ii) Blessing Construction vs. ITO, reported in 32 taxmann.com 366 (Guj.). In this case, the finding of fact is that there were huge deposits in cash in accounts of depositors and immediately the entire amounts were withdrawn to issue cheques. Further, the capacity of the depositors to raise such cash amount was also not established. These facts are clearly not applicable to present appeal. (iii) Ayaana Comtrade Pvt. Ltd. vs. ITO, reported in 104 taxmann.com 66 (Ahd.). In this case only one person had appeared and confirmed the transac ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ch has been followed by the Hon ble Jurisdictional High Court in the case of Namastey Chemicals Pvt. Ltd., reported in (2013) 33 taxmann.com 271 (Gujarat) with the following observation: 5. Having heard the learned counsel for Revenue we do not find that the Tribunal committed any error. The Supreme Court in the case of Lovely Export (P.) Ltd. (supra) observed as under: Delay condoned. Can the amount of share application money be regarded as undisclosed income under section 68 of the Income-tax 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 names are given to the Assessing Officer, then the Department is free to proceed to reopen their individual assessments in accordance with law. Hence, we find no infirmity with the impugned judgment. 6. In the present case also, the respondent assessee has received share application money from different subscribers. It was found that large number of subscribers had responded to the letters issued by the Assessing Officer or summons issued by him and submitted their affidavits. ..... 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