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TMI Blog2018 (11) TMI 1131X X X X Extracts X X X X X X X X Extracts X X X X ..... pted as genuine within the ken of section 68 of the Act, there is no reason for the ld. AO to doubt the share premium component received from the very same shareholders as bogus - all the three necessary ingredients of section 68 had been duly complied with by the assessee with proper documentary evidences Only grievance of the AO was that the assessee could not produce the directors of the share subscribing companies In our considered opinion, for this reason alone, there cannot be any addition u/s 68 of the Act as held by the Hon ble Supreme Court in the case of CIT vs. Orissa Corporation Pvt. Ltd.[1986 (3) TMI 3 - SUPREME COURT] - Decided in favour of assessee. X X X X Extracts X X X X X X X X Extracts X X X X ..... company to examine the receipt of premium and the assessee was also directed to produce the directors of the share holder companies for examination of identity, genuineness of transactions and creditworthiness of the investors. The ld. AO observed that the summons issued u/s 131 of the Act remained partially complied and the assessee did not produce the directors of the investor companies before the ld AO. For non-compliance of the summons u/s 131 of the Act in part, by not producing the directors of the share holder companies, the ld. AO concluded that the share premium raised by the assessee in the sum of ₹ 288,92,100/- as unexplained cash credit u/s 68 of the Act. The ld. AO however accepted the receipt of share capital in the sum of ₹ 57,900/- from the very same shareholders as genuine in the assessment. 3.1. The assessee pleaded before the ld. CIT(A) that it had furnished various documentary evidences substantiating the share capital along with share premium. The documents so furnished inter alia included copies of income tax return acknowledgement of shareholders, the statement of source of funds, audited financial statements, copies of relevant bank statements i ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... um is on capital account and that the same cannot be subject to tax as income. Specific submissions were also made in the context of introduction of section 56(2)(viib) inserted by the Finance Act, 2012 with effect from 01.04.2013 which reads as under: "[(viib) Where a company, not being a company in which the public are substantially interested, receives, in any previous year, from any person being a resident, any consideration for issue of shares that exceeds the face value of such shares, the aggregate consideration received for 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 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of the share applicants maintained bank statement which are part of the paper book, from where, it is evident that all the transactions were routed through proper banking channels and duly reflected in their respective books of accounts which proves the genuineness of the transaction beyond doubt. He also observed that all the share applicants explained their respective source of funds in their replies to 133(6) notice directly before the ld. AO and that the net worth of each of the share subscribers are far higher than the amount of investments made by them in the assessee company, which clearly proved the creditworthiness of the share subscribers to make investments in the assessee company. He held that the very fact that notices u/s 133(6) were duly served on the respective share subscribers and that they were duly replied with by them directly before the ld. AO, proves their identity beyond doubt. Hence, he held that all the three ingredients of section 68 namely the identity of the share subscribers, creditworthiness of the share subscribers and genuineness of the transaction were proved in the instant case by the assessee. 3.2. He also held that the provision of section 56( ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ces issued u/s 133(6) have been duly complied with. The only grievance of the ld. AO was that the assessee could not produce the directors of the share subscribing companies. In our considered opinion, for this reason alone, there cannot be any addition u/s 68 of the Act as held by the Hon'ble Supreme Court in the case of CIT vs. Orissa Corporation Pvt. Ltd. reported in 159 ITR 78 (SC). We find that the decision of Hon'ble Delhi High Court in the case of Novo Promoters and Finelease Pvt. Ltd. reported in 342 ITR 169 (Del) vehemently relied upon by the ld. DR before us, is not applicable in the instant case, as in the facts before the Hon'ble Delhi High Court, the notices u/s 133(6) have not been duly complied with. Hence the decision rendered by the Hon'ble Delhi High Court in the case referred to supra is not applicable to the facts of the instant case and is factually distinghuishable.. 3.3.1. We find that the reliance placed by the ld. AR in the decision of Hon'ble Bombay High Court in Pr. CIT vs. Apeak Infotech reported in 88 Taxmann.com 695 dt 08.06.2017 wherein the question raised before the Hon'ble Bombay High Court are as under: "A. Whether on the facts and circumstances ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Assessing Officer with regard to identity, capacity of the investor as well as the genuineness of the investment. Therefore, admittedly, the Assessing Officer did not invoke section 68 of the Act to bring the share premium to tax. Similarly, the Commissioner of Income-tax (Appeals) on consideration of facts, found that section 68 of the Act cannot be invoked. In view of the above, it is likely that the Revenue may have taken an informed decision not to urge the issue of section 68 of the Act before the Tribunal. (d) We may also point out that decision of this court in Major Metals Ltd. v. Union of India [2012] 19 taxmann.com 176/207 Taxman 185/[2013] 359 ITR 450 Bom. proceeded on its own facts to uphold the invocation of section 68 of the Act by the Settlement Commission. In the above case, the Settlement Commission arrived at a finding of fact that the subscribers to shares of the assesseeâ€"company were not creditworthy inasmuch as they did not have financial standing which would enable them to make an investment of ₹ 6,00,00,000 at premium at ₹ 990 per share. It was this finding of the fact arrived at by the Settlement Commission which was not distu ..... X X X X Extracts X X X X X X X X Extracts X X X X
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