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TMI Blog2019 (5) TMI 2025X X X X Extracts X X X X X X X X Extracts X X X X ..... ission of the assessee, The sole issue for my consideration is that whether the sum of Rs. 4,53,00,000/- received by the appellant from sore share applicant M/s Lakshmirarnan Investment: & Finance L.td can be considered as unexplained cash credit in the hands of the appellant u/s 68 of the Act. I find that during the relevant assessment year the appellant has allotted 90,600 equity: shares of Rs. 10/- each at a premium of Rs. 490/- per share. The, AR has explained that out of the total sum of Rs. 4,53,00,000/- only Rs. 3,21,00,000/- was received a share application money in earlier financial year i.e 2010-11. I find from the audited accounts as well as the ledger copies filed in the paper book that indeed the appellant has received the sum of Rs. 3,21,00,00/- in FY 2010-11. Thus, I am of the considered opinion that addition u/s 68 can be made only for the sum of money found credit during the relevant previous year and it cannot have any applicability on sum of money received in earlier year. Thus the .AO is directed to delete the addition of Rs. 3,21,00,000/- as it was not received during the relevant: assessment year. As regards the remaining addition of Rs. 1,32,00,000/- (Rs. 4 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... about the source as well as the source of source of fund for making the investment in the appellant company. I find that the share applicant had filed explanation for justification of premium paid for acquiring the shares of the appellant company. None of the documents furnished or explanation furnished by either the share applicant or the appellant was found to be incorrect or none genuine. The AO has not been to point out any discrepancy in these documents. It is further observed that the corporate share applicant are registered under the Companies Act, 1956 as well as an NBFC with the RBI and is on the records of Registrar of Companies functioning under Ministry of Corporate Affairs, Government of India and is also having Permanent Account Number. In fact, the share subscriber have responded to the statutory notices issued to them u/s 131 of the Act. In compliance to notice u/s 131 the share subscriber had, disclosed, inter alia, it's Permanent Account Numbers along with the acknowledgment of submission of their return of income and furnished audit report and financial statements which in my humble opinion proves their identities. It is also observed that the share applic ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... by the share applicant. It is observed that the onus, which lay on the appellant, in relation to s. 68 of the Act, has been duly discharged by it and nothing further remains to be proved by it on the issue. There is no evidence on record to show that the identity of the share applicant is not proved and/or that the introduction of share capital by the share applicant is not genuine and/or the source of investment was not fully explained to the satisfaction of the AO. Since the conditions precedent for discharging of burden under the provisions of s. 68. of the Act are met with adequate evidences, the addition made under such pretext deserves to be deleted. I also find from the audited accounts of the share applicant company as well as that of appellant company that those are not: merely paper company. The companies are engaged in the business of finance & investments. The gross revenue of Lakshmiraman Investment &.Finance Ltd as per was Rs. 8,,89,37,551/- and that of appellant company was Rs. 9,33,189/-. The assessee is almost 100% subsidiary of Lakshmiraman Investments & Finance Ltd and has common director who appeared u/s 131 and has confirmed the transactions & explained tile ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... r appellate proceedings. 5. The assessee on the other hand draws strong support from the CIT(A)'s action deleting the impugned addition. It first of all submits that the impugned share application amount has come from the holding company / sister concern M/s Lakshmiraman Investment & Finance Ltd. in lieu of allotment of 90,600 shares. We are taken to page 3 of the CIT(A)''s order making it clear that the alottee company in question acted as assessee's holding company on 31.03.2012. Coupled with this, all the relevant details of the said investor(s) namely address proof, memorandum/articles of association, NBFC certificate, copy of annual return to ROC, copies of financial statement for the financial year 2010-11, bank statement, details source of fund as well as explanation regarding the premium paid is quoted in support during the course of hearing before us. We wish make it clear here that this is not the Revenue's case that CIT(A) has admitted any additional evidence during the course of lower appellate proceedings meaning thereby the assessee had filed all the said details of its holding company having made the impugned investment in share capital during the course of assessme ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... o that of the Company but the Assessing Officer surprisingly mentions on Page-4 that they prima facie are not found correct. He has also filed the Confirmation of Account, Audited Accounts, Income Tax Returns and Copy of PAN Card of all the shareholders of General Capital and Holding Company Pvt Ltd. He, therefore concluded that the investment is an accommodation entry, it is a sham transaction and thereafter from Page 5 to 8 reproducing various decisions concluded that the entire share application money received by the appellant company from the said General Capital and Holding Company Pvt. Ltd. is unexplained inasmuch as the party was not in de-factor existence and thus he added the same u/s. 68 of the Income Tax Act. The appellant being dissatisfied and aggrieved by the same, submits the following: (1) The assessee is a public limited company registered under the Companies Act and the copy of Certificate of Incorporation and commencement of business are enclosed as per Page 1. The appellant issued an IPO and admitted to dealing on the national Stock exchange and Bombay Stock Exchange on 27.10.2010 raising a capital of Rs. 54.67 crores from public issue. Copy of the listing n ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ng Account payee cheque. The bank statement of this company clearly proves that there is no cash deposit whatsoever. The bank statement of the appellant company clearly proves that the entire amount has been received by account payee cheque. (7) The Assessing Officer has made the additions relying on various decisions as stated in Para-3.8 of the Order, which are not at all relevant and applicable to the facts of the case. The appellant is enclosing herewith full decision of all the cases cited by the Assessing Officer and submits how they are just not applicable. (i) High Court of Delhi in the case of CIT vs. Nova Promoters & Finlease (P) Ltd. 342 ITR 769 (Delhi) In this case the assessee received information from Investigation Wing that the assessee had obtained accommodation entries in garb of share application monies. On inquiry by issuing summons two persons, namely, M and R did not appear. M and R had given accommodation entries and later on by Affidavits refracted the statements. The Assessing Officer did no accept the affidavits and made the additions. Both Mr. M and R had appeared before A.D.I, and admitted that they were acting as accommodation entry providers and h ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nce of any financial credibility of the gift, the same was treated as income of the assessee. In appellant's case the appellant is a listed Public Company and had received more than Rs. 54.67 crores as Public issue. The Investing company, who had given Rs. 9,99,99,900/- had shown all evidences of ITA No. 102/Ahd/14 [DCIT vs. Gyscoal Alloys Ltd. ] A.Y. 2010-11 - 5 - genuineness and creditworthiness which could not be disproved by the Assessing Officer. (v) ITAT Delhi Bench "B" in the case of Magnet Trading & Chit Fund (P) Ltd. vs. ACIT - 11 SOT 520 (Delhi) Here the assessee company received Rs. 11,75,000/- which the Assessing Officer added as unexplained cash credit u/s. 68. The Company failed to prove and established identity of the subscriber, genuineness and creditworthiness. The assessee failed to provide any information regarding the real owner of the same. Addition made by the Assessing Officer held justified. In appellant's case the appellant is a listed Public Company and had received more than Rs. 54.67 crores as Public Issue. The Investing company, who had given Rs. 9,99,99,900/- had shown all evidences of genuineness and creditworthiness which could not be d ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tworthiness, particularly so because Mr. Viral Shah, who appeared on behalf of General Capital & Holding Pvt. Ltd. is Managing Director of the Assessee company. General Capita/ & Holding Pvt. Ltd. has filed its Income Tax Returns and balance sheets with Income Tax authorities and Company Law authorities and the same are fully approved and accepted. The appellant finally relies on the very well established and accepted principle that if the assessee discharges its onus and proves (in our case beyond doubt) the identity, genuineness and creditworthiness, then addition just cannot be made u/s. 68 of the Income Tax Act. (1) High Court of Gujarat in the case of CIT vs. Indrajit Singh Suri reported in 33 Taxman 281 (Gujarat) (2) High Court of Madhya Pradesh in the case of CIT vs. Peoples General Hospital Ltd. 35 Taxmann 444 (MP) (3) High Court of Delhi in the case of CIT vs. Gangeshwari Metal (P) Ltd. in reported in 30 Taxmann 328 (Delhi) (4) ITAT Lucknow Bench in the case of Vishnu Jaiswal vs. CIT reported in 23 Taxmann 374 (Luck)(TM) (5) ITAT Mumbai Bench in the case of ITO vs. Anant Sheltees (P) Ltd. reported in 20 Taxmann 153 Mum) " 2.3 Decision: I have carefully consid ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ny had furnished complete details of receipt of share application money along with share application forms, names, addresses, PAN and other relevant details of share applicants, share application money could not be added as cash credit under section 68 - Held, yes [Para 7] [In favour of assessee] 2. CIT vs. Himatsu Bimet Ltd. [2011] 12 taxmann.com 87 (GUJ) Section 68 of the Income-tax Act, 1961 - Cash credits - Assessment year 1997-98 - Assessee was a company, engaged in manufacturing of beam/ess strips and bearings at its factory - In assessment proceedings, assessee was asked to give details of unexplained share application money - Since assessee was avoiding giving details without reasonable cause, Assessing Officer made addition to assessee's income by way of unexplained share application money - On appeal, Commissioner (Appeals) upheld order of Assessing Officer - On second appeal. Tribunal noticed that assessee had filed confirmations from all share applicants with details of share capital paid which contained details such as full addresses, permanent account numbers and tax jurisdiction of depositors - Tribunal further noted that all payments were received by cheques a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... se of NR Portfolio Pvt. Ltd, supra, the share applicant did not respond to Summons but in the present case the director of the applicant company attended and gave the details. In the case of Rajeev Tandon, supra, the addition was upheld on the ground that no other corroborative evidence was given. In the present case the appellant has given copies of bank account as well as the audited balance sheet of the share applicant company wherein the share application investment has been duly reflected. Similarly the other cases are also different to the present case and are accordingly respectfully distinguished. In view of the above mentioned discussion the addition, made by the A.O in respect of share application money and share premium amounting to Rs. 9,99,99,900/- is directed to be deleted." 3. Learned CIT(DR) vehemently submits during the course of hearing that the Assessing Officer had rightly made the addition in question for the reason that the same is in the nature of a sham transaction being an accommodation entry. She seeks to highlight the fact that the group investor is a paper company being run from a house only without any employee. She then quotes assessment findings t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... counts, its replies to the Assessing Officer during the course of assessment proceedings, copy of ledger account of the investor entity in its books alongwith bank statement indicating the money in question to have come through banking channel, reply to Assessing Officer's notice issued u/s. 133(6) of the Act dated 09.01.2013 alongwith necessary consequential correspondence dated 18.01.2013 at pages 94 & 95, its ledger maintained in investor entity's books page 96, bank statement page 97, summons issued u/s. 131(1A) to investor entity as well as its details of PAN card, audited accounts, income tax returns, confirmation, share holders' details, Demat statements of the investor entity, Inspector's inquiry report, Mr. Viral Shah's statement (supra) recorded during scrutiny in support of the ITA No. 102/Ahd/14 [DCIT vs. Gyscoal Alloys Ltd.] A.Y. 2010-11 - 10 - impugned investment; respectively, sufficiently indicate that the assessee has been able to support its case of having received the investment in question from the group entity only. The Revenue's case is that all the said details failed to prove genuineness and creditworthiness element. We see no reason to concur with this argu ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... a) before the Assessing Officer alongwith all necessary details and confirmation despite the fact that such a personal appearance is required as per Section 68 (First proviso) inserted by the Finance Act, 2012 applicable w.e.f. 01.04.2013 only whereas we are dealing with assessment year 2010-11. We thus affirm the CIT(A)'s findings under challenge. The Revenue's sole substantive grievance is accordingly declined." The Revenue's Tax Appeal No. 1180 of 2018 in hon'ble Gujarat high court against the said decision stood dismissed on 01.10.2018 as follows:- "The issue pertains to the share application money received by the respondent-assessee-company. The Assessing Officer added a sums of Rs. 9.99 crores [rounded off] in the hands of the assessee with the aid of Section 68 of the Income-tax Act, 1961 ["The Act" for short].... CIT[A] deleted such addition primarily on the ground that the assessee had established the source, genuineness of the transactions and the creditworthiness of the investors. In further detailed consideration, the Tribunal confirmed the view of CIT[A], making the following observations:- 'I have carefully considered the facts of the case, the assessment ord ..... X X X X Extracts X X X X X X X X Extracts X X X X
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