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TMI Blog2019 (3) TMI 1131X X X X Extracts X X X X X X X X Extracts X X X X ..... umentary evidence produced. 3. Whether in the facts and circumstances of the case and in law, the ld. CIT(A) was justified in deleing the addition without appreciating the true nature of arrangements & ignoring the decision of Hon'b!e Supreme Court in the case of CIT vs P. Mohankala (2007) 291 lTR 278." 2. The brief facts of the case are that the assessee company is engaged in the business of tours and travels, filed its return of income for AY 2012-13 on 08-12-2012 declaring loss of Rs. 38,445. The case was selected for scrutiny and notices u/s 143(2) and 142(1) of the Act, were issued and served on the assessee. In response, the authorised representative of the assessee appeared from time to time and furnished various details, as called for. During the course of assessment proceedings, AO noticed that assessee has issued fresh share capital amounting to Rs,1.5 crores with a huge premium of Rs. 990 per share for shares having face value of Rs. 10 each. Therefore, in order to ascertain the correctness and genuineness of share capital, called upon the assessee to file complete details of subscribers to the share capital along with confirmation letters, etc. In response to not ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 's order. The assessee also relied upon plethora of judicial pronouncements including decision of Hon'ble Supreme Court in the case of CIT vs Lovely Exports Pvt Ltd (2008) 216 CTR 195 (SC). The Ld.CIT(A), after considering relevant submissions of the assessee and also on analysis of various details filed by the assessee in respect of 5 subscribers held that the assessee has satisfactorily proved identity of the investor, genuineness of transaction alongwith creditworthiness of the shareholders. Further, share application money paid by them was duly reflected in the bank account of the assessee. The CIT(A) further held that even though the AO has questioned charging share premium on the shares, but fact remains that before amendment of section 56(2)(vii)(b) of the Act, by the Finance Act wef 01-04-2013, the provisions of Rule 11U And 11UA were not applicable for the impugned assessment year and hence, the AO has to examine only the identity, creditworthiness and genuineness of transaction. Since the AO has not doubted the identity of the subscribers and their capacity, merely for the reason of charging higher premium, genuineness of transaction cannot be questioned. Theref ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Pvt. Ltd. - Rs. 25,00,000/-, the financial statement of the said company as on 31.03.2011 reveals the following: i. Equi ty capi tal of Rs. 7,05,250/- wi th high reserves and surplus of Rs. 5,99,51,207/- ii. Thus the Net Worth of the company was Rs. 6,06,56,457/- iii. The company has made investment of Rs. 30,86,25,000/- iv. The above mentioned details prove the credibility of the company and capacity to make investment in the appellant's company. v. Identity was proved by submitting PAN. Also notice u/s.133(6) were duly served. vi. The bank account of the .company reflects the payments made to the appellant company for investing in shares. There is no entry in the bank accounts which reflects that the appellant company has paid back the amount of investment. vii. The company in its response to notice u/s.133(6) has confirmed of having applied for the shares at premium. viii. Hence addition made in the assessment is not correct. IV. In the case of Seva Infrastructure Pvt. Ltd.-Rs.50,00,000/-, the financial statement of the said company as on 31.03.2011 reveals the following: i. Equity capital of Rs. 5,85,000/- with high reserves and surplus of Rs. 4,80,00,1 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... transactions is established as the transactions are routed through banking channels It was seen that the share application money was received through a/c payee cheques, detail of which had been filed by the assessee by filing the copy of the bank a/c of the share applicants. Thus where the return of income was filed by the creditors of the assessee and was accepted by the AG and payments were through a/c payee cheques the genuineness of the transaction cannot be doubted. The revenue could not prove that the money received by the appellant in the form of share application has come from its own sources. No evidences regarding this have been brought on record by the A 0. (ii) In CIT Vs. Divine Leasing & Finance Ltd. 299 JTR 268 the Hon'ble Delhi High Court held that burden of proof can seldom be discharged to the hilt by the assessee. If the AG. harbours doubts of the legitimacy of any subscription he is empowered, rather duty bound, to carry out thorough investigations. But ([the A. 0. fails to unearth any wrong or illegal dealings, he can/lot obdurately adhere to his suspicions and treat the subscribed capital as the undisclosed income of the company. If relevant details of a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... mpugned addition because once the °fate investors / share subscribers is proved, onus shifts on the revenue to establish that either the share applicants are bogus or the impugned money belongs to the assessee itself After filing of the affidavits of the said subscriber the appellant at no stage of the proceedings sought any opportunity to rebut the said affidavits. vi. In CIT Vs. Prayag Hospital & Research IT Appeal No.917of20W the Hon'ble Delhi High Court held that shareholders of the assessee company having appeared before the A0 and furnished affidavits alongwith supporting documents confirming their investment in the assessee, identity of the creditors is established and therefore, addition cannot be made in the hands of the assessee. vii. In CIT Vs. TDI Marketing (P) Ltd. IT Appeal No.340 of 2009 the Hon'ble Delhi High Court held that assessee company having furnished complete details of shareholders name, addresses, PAN and bankers and they having confirmed the investment and the AO having not given his specific comments on his enquiries pertaining to them except for nine shareholders, addition u/s.68 cannot be sustained. viii. In CIT vs. Gangour Investment ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 10 The cases cited by the IA. A.O. differs from the facts and circumstances of that of the appellant as pointed out by the appellant vide it's written submission reproduced in para 4 of this order. 5.11 In the instant east.. having regard to the documents furnished before me, am convinced about the identity of the investor, genuineness of transaction along with creditworthiness of the shareholders and the share subscription money paid by them duly reflected in the hank account of the Appellant assessee company. Hence, the facts do not warrant an addition under section 68 of the Act. Further, in the context Of share capital received from alleged bogus shareholders, the Hon'ble Supreme Court has 'unequivocally laid down the legal position as to whether additions can be made under section 68 of the Act, as under in case of Lovely Exports (P) Ltd. 216 CFR 195: "If the share application money is received by the assessee company from alleged bogus shareholders, whose names are given to the Assessing Officer, then the department is ,free to proceed to reopen their individual assessments in accordance with law but this amount of share money cannot be regarded as undisclosed ii7 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ion only for the reason that shares have been issued at a higher premium without appreciating the fact that issue of shares at a premium and subscription to such shares is a decision between two parties and the AO has no role to play as long as the identity and genuineness of transaction is proved. The Ld.AR further submitted that the AO has only questioned share premium ignoring the fact that Proviso inserted to section 68 of the Ac, by the Finance Act, 2012 wef 01-04-2013 has no application to the amounts received prior to that date. In this regard, he relied upon a plethora of judgements including the decision of Hon'ble Supreme Court in the case of CIT vs Lovely Exports Pvt Ltd (supra). The assessee also relied upon the following judgements:- Sr .No. Particulars Pg. No. 1 Pr. CIT v SDB Estate Pvt Ltd, ( I.T.A. No. 1356 012013), dated27/03/2018 8 (Bom)) 1-3 2 CIT v. Gagandeep Infrastructure Pvt. Ltd.(2017) 394 ITR 680(Bom)(HC) 4-8 3 CIT vs. Lovely Exports (P) Ltd. reported in (2008) 216 CTR 195 (SC) 9-10 4 Pr.CI1' v. Paradise Inland Shipping P.Ltd (2018) 400 ITR 439(Bom.)(HC) 11-16 5 V.R.Global Energy Pvt Ltd v. 110. (T.C.A. No. 246 of 2017), dated-06/ 0 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ences filed by the assessee in respect of 5 companies to prove identity and genuineness of transactions. In fact, the assessee has filed complete set of documents for all 5 subscribers. The parties have responded to notices u/s 133(6) by filing necessary evidences. Therefore, merely for the reason that the parties did not appear before the AO or the assessee could not produce the parties in person before the AO, the whole set of documents produced to prove the identity and genuineness of transactions, cannot be disregarded when the AO does not have anything more than suspicion in his possession to doubt the transactions. Therefore, we are of the considered view that the AO was erred in bringing to tax share capital received from 5 companies u/s 68 of the Income-tax Act, 1961 as unexplained credit. 8. Coming to the case laws relied upon by the assessee. The assessee has relied upon plethora of judgments including the decision of Hon'ble Supreme Court in the case of CIT vs Lovely Exports Pvt Ltd (supra). The Hon'ble Supreme Court in the said case held that if the share application money is received by the assessee company from alleged bogus shareholders, whose names were giv ..... X X X X Extracts X X X X X X X X Extracts X X X X
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