TMI Blog2022 (12) TMI 685X X X X Extracts X X X X X X X X Extracts X X X X ..... ed by liquidation of investment/loans and advance have been invested in the companies in respect of which addition have been made on protective basis. CIT(A) agreed with the above contention of the assessee and recorded the finding that the addition to the extent of Rs. 1,35,10,464/- cannot be made as it amounts to double taxation and the assessee deserved to be allowed the benefit of telescoping. Accordingly, the Ld. CIT(A) directed deletion of this addition. We agree with the approach of the Ld. CIT(A). Addition on account of equity on protective basis, the Ld. CIT(A) examined the issue in the light of the proviso to section 68 inserted by the Finance Act, 2012 w.e.f. 1.4.2013. He observed that the onus which lay upon the assessee has not been discharged as the assessee has neither produced the investors nor arranged to provide the requisite information and documents directly from it. He, therefore, sustained the addition of Rs. 1,44,00,000/- (made by the Ld. AO on protective basis) on substantive basis. CIT(A) looked into the matter from the angle of the provision of section 56(2)(viib) brought on the statute book by the Finance Act, 2012 w.e.f. 01.04.2013. He observed ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... y the appellant that during the year under assessment the assessee company invested in the shares / given loans and advances to companies of JP Minda group and in respect of amount so invested addition have been made in the hands of companies of JP Minda group u/s 68 of the Income Tax Act on substantive basis and the addition in the hands of appellant have been made on protective basis. The Assessing officer made the addition in the hands of the assessee company on protective basis on the ground that investment made in the companies of JP Minda group is not genuine. During the appellate proceeding in the case of companies of JP Minda group it has been held ( in the case of Jay Fe Cylinders Ltd vide appeal no 59/16-17 dated 16/08/2017 and other companies of JP Minda group in which appellant invested) in the page no 55 of appeal order that :- AO has not rebutted the submission and explanations placed by the assessee. In this regard, the appellant s AR has submitted that in order to prove the identity, credit worthiness and senuineness of the investors complete details of share capital issued along with the name of the subscribers to the share application money along with the I ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... g the subscriber for this AY, are existing assessee on the record of the department and are also regularly filing returns under the companies Act. The AO states that the income declared was not sufficient to subscribe to the share capital of the appellant company and pay premium thereon. It is to be noted that income is not the only criteria determining the ability to pay or investments by an entity depends on availability of funds/cash it may not be current income. A payment may be made out of existing capital or out of past savings or out of borrowed funds. Investments can also be made out of existing capital or out of borrowed funds. Therefore, no case for addition in the present. The AO has not cared to even examine basic facts. There is no evidence of any collateral consideration or any cash payment even after the appellant was subjected to search and rigorous investigation. Thus, the conclusions reached by the AO are not on sound footing. It is also trite that companies are legal entities and shift address along with change of ownership. Thus, if the companies exist on the records of Income Tax department and Registrar of Companies (ROC), the fact that any company could not ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... f these companies before transferring the funds to the bank account of Assessee Company. The Assessing Officer has also referred to Inspector report in the assessment order. In this regard the appellant objected that the report of the Inspector was never made available before completing the assessment. Further all the notices issued u/s 133(6) of the Income Tax Act were duly served to the shareholders and the reply of the same have also been received by the Assessing Officer and these facts have also been quoted by the Assessing Officer while passing the order. The AR of the appellant also contended that the observing made by the Assessing Officer that valuation report were not filed during the course of assessment proceeding is contrary to the facts on record. In the Assessment order it has been admitted by the Assessing Officer that the assessee filed the valuation report in respect of shares. It has also been submitted that JPM Group has turnover of around 2500 crore during the FY 2014-15 and is a market leader in the manufacture of Automotive Components. Further traded price of the shares on stock exchange of Jay Ushin Ltd is more than Rs 100 (last 52 weeks High is Rs 324 and l ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ly enable the assessee to funnel the funds in the so called equity flow. Ld AR has stated m letter dated 27/10/2017 as under- In continuation of our earlier submission we have to submit as under: In the assessment order it has been observed by the learned Assessing assessee failed to give the details of credit appearing in the observation made by the learned Assessing officer shows lack of application of mind. In this regard Para no 2 of the assessment order is being reproduced as under. 2 Assessee has shown income under the head income from business and profession. Correctness of assessee's income was examined and various claims of the assessee were verified during the assessment proceeding. Assessee s replies and explanations were duly considered. Assesses. Produced books of accounts which were examined and bank account entries were verified from the account books. From the perusal of the above it may be observed that it has been admitted by the learned Assessing officer that during the course of assessment proceedings the assessee produced books of accounts and bank statements. The Assessing officer examined the books of accounts and the transaction appearing in ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e assessee by virtue of the proviso. This reads as under- Cash credits. 68. Where any sum is found credited in the books of an assessee maintained for any previo us year, and the assessee offers no explanation about the nature and source thereof or the explanation offered by him is not, in the opinion of the Assessing Officer, satisfactory, the sum so credited may he charged to income-tax as the income of the assessee of that previous year: Provided that where the assessee is a company (not being a company in which the public are substantially interested), and the sum so credited consists of share application money, share capital, share premium or any such amount by whatever name called, any explanation offered by such assessee-company shall be deemed to be not satisfactory, unless- (a) the person, being a resident in whose name such credit is recorded in the books of such company also offers an explanation about the nature and so urce of such sum so credited; and (b) such explanation in the opinion of the Assessing Officer aforesaid has been found to be satisfactory: 5.4.4. As the appellant has neither produced the investors nor arranged to pr ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... such shares as exceeds the fair market value of the shares: Provided that this clause shall not apply where the consideration for issue of shares is received- (i) by a venture capital undertaking from a venture capital company or a venture capital fund; or (ii) by a company from a class or classes of persons as may be notified by the Central Government in this behalf. Explanation-For the purposes of this clause,- (a) the fair market value of the shares shall be the value- (i) as may be determined in accordance with such method as may be prescribed or (ii) as may be substantiated by the company to the satisfaction of the Assessing Officer, based on the value, on the date of issue of shares, of its assets, including intangible assets being goodwill, know-how, patents, copyrights, trademarks, licences, franchises or any other business or commercial rights of similar nature, whichever is higher; (b) venture capital company , venture capital fund and venture capital undertaking shall have the meanings respectively assigned to them in clause (a), clause (b) and clause (c) of 94[Explanation] to clause (23FB) of section 10;] [ emphasis supplied] 5.4.6. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... der of the Ld. CIT(A) for both the years and reject the appeals of the Revenue for AY 2011-12 and 2012-13. 7.1 As regards the AY 2013-14 perusal of the appellate order would reveal that it was contended by the assessee that the substantive addition of Rs. 1,35,10,464/- is the amount credited to the bank account which have been realised by liquidation of investment/loans and advance. The amount so realised by liquidation of investment/loans and advance of Rs. 1,35,10,464/- have been invested in the companies of J.P. Minda Group in respect of which addition have been made on protective basis. As such the sum of Rs. 1,35,10,464/- is part of the amount of Rs. 1,44,00,000/-. 7.2 The Ld. CIT(A) agreed with the above contention of the assessee and recorded the finding that the addition to the extent of Rs. 1,35,10,464/- cannot be made as it amounts to double taxation and the assessee deserved to be allowed the benefit of telescoping. Accordingly, the Ld. CIT(A) directed deletion of this addition. We agree with the approach of the Ld. CIT(A). 7.3 Regarding the addition of Rs. 1,44,00,000/- on account of equity on protective basis, the Ld. CIT(A) examined the issue in the light of ..... X X X X Extracts X X X X X X X X Extracts X X X X
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