TMI Blog2022 (4) TMI 1507X X X X Extracts X X X X X X X X Extracts X X X X ..... parties who had extended unsecured loan shows that they have sufficient capacity to extend the loan to Mr. Taranpal Singh Kandhari who in turn had invested in the shares of the assessee company. There is no evidence on record to show that the funds of the assessee company has gone to these persons which in turn had come back to the assessee company. Secondly, the A.O. has referred to the statements of Shri Pradeep Kumar Shastri and Shri Varindar Pal Singh Kandhari. However, these statements pertain to M/s. Indogulf Infrastructure and Investment Pvt. Ltd. and M/s. MSG Finance India Pvt. Ltd., and these statements do not have any relevance to the case of the assessee. We, therefore, find merit in the submissions of the Learned Counsel for the Assessee that reference to these statements is infructuous. Thirdly, one of the observations of the A.O. is that the profit declared by the investor companies over the years is negligible and even the turnover declared by the investor companies is not very significant in most of the cases. However, the assessee company has received share capital and share premium only from one individual namely Shri Taranpal Singh Kandhari and, therefore, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ncentrate and other raw material procured from Coca Cola in the capacity of bottler and distributor of Coca Cola products in India. It filed its return of income on 28.11.2015 declaring the total income at Rs.14,81,76,850/-. A search and seizure operation u/s 132 of the IT Act was carried out on 28th March, 2015 in the case of M.M Aggarwal group of cases. The case of the assessee was also covered in the search u/s 132(1) of the IT Act. During the course of search carried out at different premises of M.M. Aggarwal group, documents, data storage devices, etc. belonging to the assessee were found and seized. 2.1. The A.O. during the course of assessment proceedings noted that the assessee company has received share capital and share premium of Rs.4,87,99,855/- including share premium of Rs.4,61,62,025/- on account of issue of 263783 equity shares of Rs.10/- each at a premium of Rs.175/-. 3. The AO noted that during the course of pre search enquiries, it was gathered that the assessee group had received substantial amount of share capital and share premium from various non descript and shell companies which did not have any factual identity and, creditworthiness. It was also gath ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... olytech Pvt. Ltd was nothing but its own unexplained income from undisclosed sources of these two companies introduced in the names of other entities. Therefore, he admitted to offer for taxation a sum of Rs.8,63,36,000/- in the hands of M/s Indogulf Infrastructure Investment Pvt. Ltd for the F.Y. 2008-09 and further sum of Rs.3,50,00,000/- in the hands of M/s MSG Finance Pvt. Ltd for the F.Y. 2010- 11, aggregating to Rs. 12,13,36,000/-. 8. The AO, in order to verify the issue called for the bank statements of some of the investor companies for his examination. He observed from the bank statements that these are back to back transactions of same amount i.e., credit and debit of the same amount on the same date/following dates with no other deposits and transactions. According to the AO, no investor was produced by the assessee group which clearly shows that the assessee failed to furnish any documentary evidence regarding the existence of such investors. According to him, mere filing of confirmations from parties does not discharge the onus cast on the assessee. Further, according to him, it cannot be believed that investors invest their crores of rupees in a non-listed company ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... . After considering the identities and financials and creditworthiness of the investors and genuineness of transaction and source and availability of fund by investor, I am of the considered view that the AO has merely accepted the appraisal report of the Investigation Wing without meeting the touchstone tests of section 68 like credit worthiness, identities and genuineness of transaction. Further AO has made such addition stating that the income declared by the investor companies over the years is negligible. The bank statements of the investor filed by the Ld. AR clearly indicates the availability of funds in his hands. The observation of the AO is against the material on record because the investor is not a company but an individual. Further, even the AO himself has admitted in para 4.22 of the assessment order that the investor is a salaried employee. iii. The AO has also referred to the statements of Sh. Pradeep Kumar Shastri and Sh. Varinder Pal Singh Kandhari but these statements pertain to M/s Indogulf Infrastructure Investment Pvt. Ltd. and M/s MSG Finance India Pvt. Ltd. and hence, are not relevant in the case of the appellant. The investor, Sh. Tar an Pal Singh ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... , 2011-TIOL-69-HC-DEL-IT, CIT vs. Pratham Projects Finlease Ltd., ITA 638/2010, Delhi High Court, and contendedthat the appellant duly discharged the initial burden to establish the identity, creditworthiness and genuineness by submitting necessary documentary evidences in respect of the share application money. Reliance is also placed on the judgments in CIT v. Lovely ExportsPvt.Ltd.319ITR(ST.), CIT vs. Winstral Petrochemicals Pvt. Ltd., (2010) 41 DTR 139 (Del), ITO VsNeelkanthFinbuild Ltd; 2015-TIOL- 1082-ITAT- DEL, Root Invest Pvt Ltd Vs ITO; 2015-TIOL-238-ITATDEL, ITO Vs Reliance Marketing Pvt Ltd; 2015-TIOL-319-ITAT-DEL, ACIT Vs Divine (India) Infrastructure Pvt Ltd; 2015-TIOL-106-ITATDEL. d) After going through all these documents and the case laws, all the three criteria, i.e., identity creditworthiness of the investor as well as the genuineness of the transaction is clearly proved. The AO has simply made the addition on the basis of information received from the investigation wing. He has not brought any material on record to disprove the contents of these documents filed before AO. iv. As regards the valuation of shares at a premium of Rs. 175/-, the Ld. AR ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... advance Rs. 4.87 Crores to the company. 4. That the Ld. CIT(A) has erred on facts and in law by ignoring the basic fact that Mr. Taran Pal Singh Kandhari (the person who advanced the loan of Rs. 4.87 crores) doesn't have the creditworthiness of advancing such a big amount. 5. That the Ld. CIT(A) has erred on facts and in law by accepting the high valuation of shares @ Rs 185 per share ( Rs. 175 premium on Rs. 10/ face value). 6. The appellant craves leave to add, amend any/all the grounds of appeal before or during the course of hearing of the appeal. 11. The ld. DR heavily relied on the order of the AO. He submitted that the assessee, in the instant case, has miserably failed to discharge the onus cast on it by proving the credit worthiness of Mr.Taran Pal Singh Kandhari. He submitted that Shri Taran Pal Singh Kandhari has shown salary income of Rs.24 lakhs and, therefore, his capacity to invest such huge amount of Rs.4.88 crores remains suspicious. He submitted that the ld.CIT(A) without any valid reason has deleted the addition which is not justified under the facts and circumstances of the case. Relying on various decisions he submitted that the order of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ut of which it has invested the amount of Rs.4,87,99,855/-. So far as the unsecured loan of Rs.4,78,000/- is concerned, he submitted that the assessee has raised unsecured loan of Rs.4,78,000/- the details of which are as under:- S. No. Particulars Amount(Rs.) 1 M/s SE Finvest Pvt. Ltd. 75,00,000 2 M/s Glacier Tradex Pvt. Ltd. 60,00,000 3 M/s K. G. Finvest Ltd. 1,40,00,000 4 M/s Glacier Communication Pvt. Ltd. 10,00,000 5 M/s Perigee Land Housing Pvt. Ltd. 25,00,000 6 M/s Perigee Power Infrastructure Pvt. Ltd. 25,00,000 7 Sh. Saranjit Singh Chadha 50,00,000 8 M/s G. C. Bhala Sons (HUF) 93,00,000 Total 4,78,00,000 15. The ld. Counsel for the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... alaried employee earning annual salary income of Rs. 6,75,000/- form M/s European Works Pvt. Ltd. during AY 2015-16 besides being partner in M/s Jagat Auto Sales with 40% share in profit. He has earned Rs. 8,81,520 as remuneration and interest and Rs. 94,046 as share in profit. During the year, he has earned Capital gain of Rs. 552.55 lacs from sale of property. He is being assessed to income tax regularly vide PAN No. AAMPC3706E. 22. So far as M/s G. C. Bhala Sons [HUF] is concerned, during AY 2015- 16, the HUF has declared gross total income of Rs. 13.80 lacs besides long term capital gain of Rs. 218.20 lacs. The HUF has duly filed his return of income in AY 2015-16 and declared all income. The HUF is being assessed to income tax regularly vide PAN No. AAAHG6765N. 23. He accordingly submitted that source of funds in respect of share application of Rs.4,87,99,855/- in the hands of Shri Taran Pal Singh Kandhari is conclusively proved. 24. So far as the allegation of the AO at para 4.10 of the assessment order that the profit declared by the investor companies over the years is negligible and even the turnover declared by the investor companies is also not very significan ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... . Associates, qualified chartered accountants. The valuation report was also filed before the Ld. CIT(A) to satisfy this requirement, though the issue did not emanate from the assessment order. The valuation as per rule 11UA on the basis of book value of the assets and liabilities as appearing in audited accounts of the assessee has been determined at Rs.185/- per share and the assessee has also raised its share capital at a value of Rs.185/- per share including premium. Therefore, from perusal of the valuation report and audited accounts of the assessee, it is very clear that the issue price of shares is justified. 27. The ld. Counsel for the assessee submitted that the addition in the instant case has been made by the AO on mere surmises and conjectures and while making the addition, there was absolutely no evidence from which any inference could be drawn against the assessee that it was the assessee who has provided funds to the investor for making the investment. He submitted that the AO has not brought on record any evidence to substantiate the allegation against the assessee. He accordingly submitted that the order of the CIT(A) being in accordance with law should be uph ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... antiate the identity and creditworthiness of the investor and genuineness of the transaction. a) Form PAS-3 filed before ROC b) Confirmation from the investor c) Statements of bank account of the investor showing payments towards share application money. d) Share Application form duly filled by the investor. e) Copy of PAN card of the investor. f) A copy of the acknowledgement of the Income tax return filed for AY 2015-16 by the investor along with the statement of affairs for the year ended 31st March 2015. 29.1. We find the A.O. has not found anything adverse on these evidences. We find the assessee has given the source of Mr. Taranpal Singh Kandhari according to which he has received unsecured loan of Rs.4,78,00,000/- from the following 08 parties apart from salary of Rs.24,00,000/-. S. No. Particulars Amount(Rs.) 1 M/s SE Finvest Pvt. Ltd. 75,00,000 2 M/s Glacier Tradex Pvt. Ltd. 60,00,000 3 M/s K. G. Finvest Ltd. 1,40,00,000 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ium only from one individual namely Shri Taranpal Singh Kandhari and, therefore, we find merit in the argument of the Learned Counsel for the Assessee that this observation of the A.O. is infructuous. Even otherwise also the assessee company has filed sufficient details to not only prove the source but the source of the source. We, therefore, hold that addition could not have been made on this issue also. 29.6. So far as the allegation of the A.O. that the investor was not produced by the assessee group is concerned, the submissions of the Learned Counsel for the Assessee that the A.O. never asked the assessee to produce any investor, could not be controverted by the Ld. D.R. The assessee filed the requisite details in response to summon under section 131 of the I.T. Act, 1961 and the order nowhere speaks that the A.O. had asked the assessee to produce the investor. 29.7. So far as the valuation under section 11UA of the I.T. Act, 1961 as per Section 56(2)(viib) is concerned, we find the A.O. has not made any addition on the issue of justification of share premium u/s 56(2)(viib). The addition has been made by the AO u/s 68 of the I.T. Act, 1961. For addition u/s 68, the only ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... assessee exhausts all the evidence or material in his possession and then comes forward to merely reject the same on the presumptions. The present case falls in the latter category. Here the assessing officer, after noting the facts, merely rejected the same.... 10. The facts of Nova Promoters and Finlease (P) Ltd. (supra) fall in the former category and that is why this Court decided in favour of the revenue in that case. However, the facts of the present case are clearly distinguishable and fall in the second category and are more in line with facts of Lovely Exports (P) Ltd. (supra). There was a clear lack of inquiry on the part of the assessing officer once the assessee had furnished all the material which we have already referred to above. In such an eventuality no addition can be made under section 68 of the Act. Consequently, the question is answered in the negative. The decision of the Tribunal is correct in law. 29.10. We find the Hon ble Delhi High Court in the case of CIT vs. Kamdhenu Steel Alloys Ltd., 2012-TIOL-236-HC-DEL-IT held as under : The initial burden is upon the assessee to explain the nature and source of the share application money recei ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... SLP filed in this case by the Department has been dismissed by the Hon'ble SC vide order dated 27/09/2012 in CC15640/2012. 29.11. We find the Hon ble Delhi High Court in the case of CIT vs. Oasis Hospitalities Pvt. Ltd., 201 l-TIOL-69-HC-DEL-IT held as under : That addition could not be sustained as the primary onus was discharged by the assessee by producing PAN no., Bank Account, copies of Income Tax Return of the share applicants, etc. AO was influenced by the information received from the investigation wing and on that basis generally modus operandi by such entry operator was discussed in detail. 29.12. We find the Hon ble Delhi High Court in the case of CIT vs. Pratham Projects Finlease Ltd., in ITA 638/2010 held as under : Since the confirmation letters, copies of Income tax return, PAN no. and certificate of the incorporation of the companies were placed on the record by the assessee, the identities of the share applicants had been established. Moreover, the payments had been received through normal banking channels and there was nothing to do with the creditworthiness of the said applicants. The appeal is dismissed 29.13. We find the Hon b ..... 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