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TMI Blog2025 (4) TMI 27X X X X Extracts X X X X X X X X Extracts X X X X ..... he assessee has received share capital/ share premium amounting to Rs. 25,56,00,000/- during F.Y. 2007-08 and the ld. AO has not made an in-depth enquiry while passing the order u/s 147/ 143(3) of the Act, dated 25.11.2010. Accordingly, the assessment was revised vide order dated 08.03.2013, passed u/s 263 of the Act by PCIT for de-novo assessment. Accordingly, in the set aside proceeding, the notice u/s 142(1) of the Act, along with questionnaires were issued. However, according to the AO no one attended the proceeding nor any documents/ details were filed explaining the share capital/ share premium. Thereafter, AO issued summons u/s 131 of the Act to the directors of the assessee company as well as to the directors of the share subscribers which again remained non-complied. Finally, the amount of share capital/ share premium was treated as unexplained cash credit u/s 68 of the Act and added to the income of the assessee in the assessment framed u/s 147/143(3)/ 263 of the Act vide order dated 21.03.2014. 04. In the appellate proceedings, before the ld. CIT (A), the assessee furnished all the evidences/ details concerning the 29 share subscribers who were all corporate entities an ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... its case with reference to the assessment proceedings and remand proceedings by AO that the share capital along with share premium raised by it was explained with evidences and hence, it has discharged the onus cast upon it u/s 68 of the Act. Appellant, having furnished all the details and documents before the AO and the AO has not pointed out any discrepancy or insufficiency in the said evidences and details furnished by the appellant before him. As observed above, the appellant having discharged its initial burden casted upon him to furnish the evidences to prove the identity and creditworthiness of the share subscribers and genuineness of the transaction. Again, reliance is placed in the case of "One Point Commercial Pvt. Ltd. Vs. ITO, ITA No. 473/Kol/2019, dated 23/02/2023" where the Hon'ble ITAT Kolkata held the following: "Considering the facts and circumstances of the case and the material placed on record, we find that assessee has discharged its onus to prove the identity and creditworthiness of the share subscribing companies and the genuineness of the transactions towards sum of Rs. 4,78,50,000/- received during the impugned year. Accordingly, considering these fac ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... hus prior to AY 2013-14 there was no obligation upon the assessee to explain the source of source and therefore this requirement did not exist for the impugned AY. Similar fact has been discussed at length in Kanchan Plywood Products Pvt. Ltd. -vs.- ITO (order dated 01.05.2019, Kolkata ITAT). In this connection, the Hon'ble Bombay High Court has gone into an in-depth discussion of the matter. In CIT vs Gagandeep infrastructure (p.) Itd in Income Tax appeal number 1613 OF 2014, in a decision delivered on 20.03.2017, the Hon'ble Court has examined the issue of retrospectively or otherwise of the amendment to section 68 of the Act via which the proviso to the said section was inserted from 01.04.2013. Reliance may be placed through the judgement of Hon'ble High Court in the case of "Pr.CIT vs Apeak Infoteck (397 ITR 148/2017), where the Hon'ble Court held that: "So for as the pre-amended section 68 of the Act was concerned, the same cannot be Invoked in this case, as evidence was led by the Respondents Assessee before the assessing officer with regard to identity, capacity of the investor as well as the genuineness of the investment. Therefore, admittedly, the assess ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t funds to give loan to the assessee-company in assessment year under appeal. Merely because income was low declared by both the creditors, is no ground". I find that in ACIT Vs. Brindavan Agencies Pvt. Ltd. (ITAT Delhi) in ITA no. 5272/Del/2016 dated 23.12.2020 for the same AY as the instant one, that is, AY 2008- 09, it was held that, ...........it is seen that the appellant has filed sufficient documents e.g. Permanent Account Numbers, bank statements, etc. to establish the identities of the four share applicants. The copies of the bank statements of the share subscribers wherein the transactions are reflectedas well as the fact that they are assessed to income tax, along with copies of their final accounts wherein investments made by them in the appellant company are not only shown but constitute a small portion of their total investments, establish the creditworthiness of the parties concemed. The incomes of the four shareholders for the year under appeal may have been meagre, as pointed out by the Assessing Officer, but creditworthiness of a party is not gauged merely from income of a particular year. The balance sheets of the four shareholders companies reveal that they ha ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... onable and not enough to cause destabilization of the fund position of the investors. Even though, on this subject, several judicial authorities have already been cited by the appellant in his submissions, while some of them have been discussed supra, I find that it is worthwhile to cite what the Hon'ble jurisdictional Tribunal of Kolkata has stated on this subject in the decision of the Hon'ble ITAT Kolkata in the case of ITO vs. Good point Commodeal (P) Ltd in ITA No. 1204/Kol/ 2015for AY 2008-09, order dated 07.06.2019 "Thus, we note that we find all the four share subscribers have been assessed by the Department and that too u/s. 143(3) of the Act and the genuineness of the transactions, cannot be disputed since the payment have been made through banking channel and we note that there cannot be any dispute in respect to creditworthiness of the share subscribing companies since they had sufficient net worth/own fund in its kitty to invest in the assessee company. It would be worthwhile to take note of the observation by Hon'ble Justice A. K. Sikri while delivering the judgment in CIT Vs. Mayawati when His Lordship then was in Hon'ble Delhi High court reported in ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... stment in share application as well as premium. This is particularly so when the AO himself has accepted the share capital as genuine and to be fully explained, in terms of the identity of the share applicants, their creditworthiness and the genuineness of the transaction and the mode of the transaction. 7.8 Coming to another aspect of this matter, which is pertinent in cases like the present one. This pertains to the question whether, since the said amount of share premium could not be added u/s 68, it could have been added u/s 56(2) of the Act; since section 56(2) (viib) envisages a situation where a company receives consideration for issue of shares which is in excess of the fair market value of the shares, then such consideration can be added to his Income under this clause as income from other sources. The appellant, in this connection, has explained that although the justification for premium was not a requirement of law during the relevant assessment year but even then the share premium has been justified by the appellant with reference to the explanation filed by it with reference to relevant facts and figures. It has been explained that this premium was paid on account o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... antial income even. The ld. DR also referred to the balance sheets, bank statements and ITRs furnished by the assessee qua the subscribers and pointed out that the subscribers would not have sufficient income and the ld. CIT (A) while dealing with the remand report in the appellate order has not given and dealt with full facts. The ld. DR relied heavily on the order of Principal Commissioner of Income-tax (Central)-2 vs. BST Infratech Ltd. [2024] 161 taxmann.com 668 (Calcutta)/[2024] 468 ITR 111 (Calcutta)[23- 04-2024], wherein the issue has been decided against the assessee under similar facts. The ld. DR argued that the ld. AO could not verify the transactions and the credentials of the investors when there was no compliance to the summons u/s 131 of the Act by the subscribers as well as by the directors of the assessee company and therefore, no deposition could be recorded. Therefore, the ld. DR prayed before us that the order of ld. CIT (A) may be reversed and that of ld. AO may be restored. (i) The ld. AR on the other hand strongly supported the order passed by the ld. CIT (A) by submitting that though the assessee has not filed any evidences in the assessment proceedings, h ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e application through cheques, bank accounts, also proof of share subscribers having substantial net worth and assessment orders u/s 143(3)/143(1) of the Act in the case of subscribers. The ld. AR submitted that it is not the case of the ld. AO that cash was deposited in the banks of the subscribers before the making investments in the assessee company. The ld. AR further submitted that the addition cannot be made on the ground that there was no compliance to the summons issued u/s 131 of the Act and in defense he is relied on the following decisions (i) CIT Vs. Orissa Corporation Pvt. Ltd. (1986) 159 ITR 78 (SC) (ii) CIT Vs. Orchid Industries Ltd. 397 ITR 136 (Bom);(iii)Crystal Networks Pvt. Ltd. Vs. CIT 353 ITR 171 (Kol); (iv)ITO Vs. M/s. Cygnus Developers India Pvt. Ltd.(ITA No. 282/Kol/2012) and (v) Joy Consolidated Pvt. Ltd. Vs. ITO (ITA No. 547/Kol/2020. 06. Further, the ld. AR submitted that there was no bar in issuing equity shares at a high premium during the instant assessment year and the proviso to Section 68 of the Act has been introduced by Finance Act, 2012, with effect from 01.04.2013, and was accordingly, applicable from A.Y. 20131-4 onwards. Therefore, the observ ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e on the part of the AO to bring any substantive evidences on record to the conrary, we are unable to sustain the appellate order. In our opinion, the addition cannot be made merely on the ground that the summon issued u/s 131 to the directors of the assessee company and also to the subscriber companies were not complied with whereas on the other hand the assessee has filed all the evidences called for by the AO qua the subscribers. Under the circumstances, we are not in a position to sustain the order of Ld. CIT(A). We find support from the decision of Hon'ble Supreme Court in the case of Orissa Corporation Ltd. (supra) while coming to the above conclusion. The operative part is extracted below: "That in this case the respondent had given the names and addresses of the alleged creditors. It was in the knowledge of the Revenue that the said creditors were income-tax assessee's. Their index numbers were in the file of the Revenue. The Revenue, apart from issuing notices under Section 131 at the instance of the respondent, did not pursue the matter further. The Revenue did not examine the source of income of the said alleged creditors to find out whether they were creditworthy. The ..... X X X X Extracts X X X X X X X X Extracts X X X X
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