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TMI Blog2019 (9) TMI 147X X X X Extracts X X X X X X X X Extracts X X X X ..... fact that assessee s unaccounted money got routed back in the garb of share capital. AO, while confirming the addition, has already admitted that the bank statements of the investors were duly furnished and there is no allegation of any immediate cash deposits in those accounts. No adverse inference could be drawn on bare facts that shares were subsequently repurchased by the promoters or similar shares were issued to the promoters at face value during the year unless the said facts were corroborated by any adverse evidences, which we are unable to find. Similarly, so far as the valuation of shares is concerned, we find that the assessee had justified the valuation by adopting discounted Cash Flow Method and the onus was on revenue to rebut the method of valuation. We are unable to find any such exercise by revenue Lastly, it is trite law that no addition could be made merely on the basis of suspicion, conjectures or surmises. The extent and degree of investigation carried out by Ld. AO do not inspire us to concur with the submissions made by Ld. DR before us. We are of the considered opinion that the revenue was not able to discharge the burden of disproving the genuineness of th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... individual assessments in accordance with law. Hence, we find no infirmity with the impugned judgment. 3. Subject to the above, Special Leave Petition is dismissed. The ratio of said decision has subsequently been followed by various judicial authorities in catena of judicial pronouncements. The said decision has been followed by Hon'ble Bombay High Court in the case of CIT Vs. Gagandeep Infrastructure Private Limited [80 Taxmann.com 272] & subsequently in CIT Vs. Orchid Industries Private Limited [88 Taxmann.com 502]. The Hon'ble Delhi High Court followed the said decision in Pr.CIT V/s Adamine Construction Pvt. Ltd. [107 Taxmann.com 84] against which revenue's Special Leave petition was dismissed by Hon'ble Supreme Court reported at 107 Taxmann.com 85. Similar is the position of decision of Hon'ble Delhi High Court rendered in Pr. CIT V/s Himachal Fibers Ltd. [98 Taxmann.com 72] against which revenue's Special Leave Petition was dismissed by Hon'ble Supreme Court reported at 98 Taxmann.com 173. Similar is the decision of Hon'ble High Court of Madhya Pradesh in Pr. CIT V/s Chain House International Pvt. Ltd. [98 Taxmann.com 47] against which revenue's Special Leave Petition h ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... re Capital Amount of Share Premium 1. Casper Enterprises Pvt. Ltd 10,000 ₹ 1.00 Lacs ₹ 24.00 Lacs 2. Kush Hindustan Entertainment Ltd 16,000 ₹ 1.60 Lacs ₹ 38.40 Lacs 3. Olive Overseas Pvt. Ltd 22,000 ₹ 2.20 Lacs ₹ 52.80 Lacs 4. Nakshatra Business Pvt. Ltd. 16,000 ₹ 1.60 Lacs ₹ 38.40 Lacs 5. Rigveda Properties Ltd 10,000 ₹ 1.00 Lacs ₹ 24.00 Lacs 6. Aquastel Water Purification System P. Ltd 6,000 ₹ 0.60 Lacs ₹ 14.40 Lacs 7. Utkantha Trading and Properties Ltd. 6,000 ₹ 0.60 Lacs ₹ 14.40 Lacs 8. A&A Shelters Pvt. Ltd. 14,000 ₹ 1.40 Lacs ₹ 33.60 Lacs Total 1,00,000 ₹ 10 Lacs ₹ 240 Lacs Accordingly, the assessee was directed to file the requisite details thereof and documentary evidences to substantiate the fulfillment or primary ingredients of Section 68. In response, the assessee, vide submissions dated 23/01/2015, inter-alia, submitted that following documents in support of the transactions: - -Address, PAN of the Shareholders, Number of Shares issued -Copies of Share Application Form -Detail ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... al with assessee company. 5.4 At the same time, the assessee also submitted Copy of Income Tax Return, financial statement of entity listed at Serial No.8 in support of genuineness of the transaction with respect to the said party. The assessee also filed valuation report to justify the premium received on the share transactions. 5.5. in the above circumstances, the assessee pleaded for acceptance of the stated transactions. 5.6 However, the Ld. AO, at para 5.2, observed that mere filing of declarations by directors of entities listed at serial nos. 1 to 4 that the shares have been subscribed would not serve any purpose since Shri Pravin Kumar Jain has not proved the source of funding and also not made any attempt to counter evidences unearthed during the search proceedings and therefore, these affidavits would have no value in the eyes of law. The Ld. AO also disregarded the valuation arrived at by the assessee using Discounted Cash Flow method. At para 5.4, Ld. AO observed that all the shares subscribed during the year were transferred in Financial Year 2013-14 to Mr. Rajender K. Agarwal, promoter shareholder and Managing Director of the assessee company at face value. No sati ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... view of the entire evidence including the difficulties, which the assessee may face to unimpeachably establish creditworthiness of the shareholders. 5.14 On the question of creditworthiness and genuineness, there is no doubt that the money was received through banking channels, but did not reflect actual genuine business activity. The share subscribers do not have their own profit-making apparatus and were not involved in business activity. They merely rotated money, which was coming through the bank accounts, which means deposits by way of cash and issue of cheques. The bank accounts, therefore, did not reflect their creditworthiness or even genuineness of the transaction. 5.15 Correct position of law is that the revenue authorities or the judiciary should be convinced about the identity, creditworthiness and genuineness of the transactions. The onus to prove the three factum is on the assessee as the facts are within the assessee's knowledge. Mere production of incorporation details, PAN Nos. or the fact that third persons or company had filed income tax details in case of a private limited company may not be sufficient when surrounding and attending facts predicate a cover ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t back by the promoters was sought to be rebutted in the strength that those transactions happened in AY 2014-15 and the investors had the option to liquidate the investment depending upon the market situation and various other relevant factors. Therefore, the subsequent events would not change the character of transactions that took placed in AY 2012-13. Since the assessee fulfilled the primary ingredients as envisaged by Section 68, the said provisions could not be invoked to make additions in the hands of the assessee. It was also pleaded that the Ld. AO did not contradicted the evidences produced before him and merely relied upon the statement of certain person ignoring the fact that these statements were retracted later on. 6.2 The Ld. first appellate authority, after due consideration of documentary evidences submitted by the assessee in support of the transactions, observed that the peculiar facts may have caused suspicion in the mind of Ld. AO, but there was no evidence or any other material on record to hold that the assessee had routed its own money in the garb of share capital. It was also noted that the assessee filed sufficient documentary evidences as tabulated by us ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... upon the findings and conclusion of Ld. first appellate authority. Reliance has similarly been placed on numerous judicial pronouncements favoring the assessee. 8.1 We have carefully considered the rival submissions, relevant material on record and deliberated on judicial pronouncements as cited before us. From perusal of factual matrix, the undisputed position that emerges is the fact the assessee has issued share capital to as many as 8 corporate entities during the year at certain premium. In support of the transactions, the assessee placed on record plethora of documents as tabulated by us in para 5.1. On the strength of this same, it was pleaded that the assessee proved the identity of the investor, creditworthiness of the transactions and genuineness of the transactions. We also find that out of 8 entities, 4 entities are stated to be belonging to Shri Pravin Kumar Jain whereas 3 entities are stated to be belonging to Shri Abhishek Morarka group. One entity is stated to be an independent entity. From the perusal of quantum assessment order, we find that Ld. AO has heavily relied upon the statements given by Shri Pravin Kumar Jain during search proceedings. Reliance was al ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ook. (k) In the balance sheet of the company as on 31.3.2012. The total investments are reflected at ₹ 37,66,93,889/-. Please refer to page no. 63. The break up of the same is on page No. 66. 6. As Aquastel Water Purification Systems Pvt. Ltd. is concerned please refer to pages 111 to 154 of the paper book We are enclosing herewith the following information. (a) The total number of share issued is 6,000 and our client received ₹ 15,00,000/- . Out of this ₹ 60,000/- towards share capital and ₹ 14,40,000/- towards share premium. (b) Share application form -page No.lll to 112. (c) Details of the payments made by the party giving cheque No., date, name of the bank & the branch -page No. 113. (d) Party confirmation giving cheque No., date, name of the bank, branch, Funding confirmation, PAN no. -page No. 114. (e) The copies of the bank statement -where such investments are reflected - page No.115. (f) Copy of PAN card - page No. 116. (g) Audited financial statements for year ending 31.3.2012 -page No.117 to 127. (h) Board resolution passed at the meeting of the Board of Directors held on 09/03/2012 for making investments in the shares of the c ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... mber of share issued is 16,000 and our client received ₹ 40,00,000/-. Out of this ₹ 1,60,000/- towards share capital and ₹ 38,40,000/- towards share premium. (b) Share application form -page No. 175. (c) Details of the payments made by the party giving cheque No., date, name of the bank & the branch -page No. 176. (d) Party confirmation giving cheque Aa, date, name ^:the bank, branch, Funding confirmation, PAN no. -page No. 177. (e) The copies of the bank statement where such investments are reflected ~ page No. 178. (f) Copy of PAN card -page No. 179. (g) The copy of the Form No. 23AC for the year ending 31.03.2012 being the form filed by the company disclosing the financial statements to the registrar of Company in Form XBRL is enclosed. Please refer to page . No. 180 to 207. (h) Board resolution passed at the meeting of the Board of Directors held on 03.01.2012 for making investments in the shares of the client -page No. 208, (i) Copy of income tax return filed for A.Y. 2011-12-page No.209 to 210. (j) Please note that the net -worth of the investor company as on 31.3.2011 is ₹ 3,94,43,600/- and as 31.3.2012 is ₹ 4,08,01,953/-. Both ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the financial statements to the Registrar of Company in Form XBRL is enclosed. In the balance sheet the company has borrowed funds of ₹ 70,77,19,419/-as on 31.3.2011 and ₹ 56,61,48,543/- as on 31.3.2012. Please refer to page No. 346. The company has made investments in shares of other companies amounting to ₹ 35,57,77,437/-. Please refer to page No. 346. 11. As regards Olive Overseas Pvt. Ltd. is concerned please refer to pages 357 to 425 of the paper book We are enclosing herewith the following Information. (a) The total number of share issued is 22,000 and our client received ₹ 55,00,000/-. Out of this ₹ 2,20,0007- towards share capital and ₹ 52,80,000/- towards share premium. (b) Share application form -page No. 357 to 358. (c) Details of the payments made by the party giving cheque No., date, name of the bank & the branch -page No. 359 to 360. (d) Party confirmation giving cheque No,, date, name of the bank, branch, Funding confirmation, PAN no. -page No. 361 to 362_. (e) The copies of the bank statement where such investments are reflected - page No. 363 to 364. f) Copy of PAN card-page No. 365_. g)copy of the Form No. 2 3A ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... me, we find that the assessee had, inter-alia, not only furnished copies of bank statements but also placed on record financial statements reflecting the source stated investments in the assessee company. This is coupled with the admitted fact that Shri Abhishek Morarka, director of as many as 3 entities visited the office of Ld. AO twice but still nothing adverse could be brought on record by Ld. AO to contradict the claim the assessee. In fact, none of the evidences submitted by the assessee were ever rebutted by Ld. AO but heavy reliance was placed on third party statements which were never confronted to the assessee and no opportunity of cross-examination was ever provided to the assessee. Nothing has been brought on record to establish the fact that any cash got exchanged between the assessee and investors which would corroborate the fact that assessee's unaccounted money got routed back in the garb of share capital. The Ld. AO, while confirming the addition, has already admitted that the bank statements of the investors were duly furnished and there is no allegation of any immediate cash deposits in those accounts. 8.3 Proceeding further, we are of the considered opinion tha ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... olkata Companies, the response came through DAK only and nobody appeared. Further, the bank statements were not produced in most of the cases to establish the source of funds for making huge investments. However, the factual matrix, before us, in the present case is quite different. As noted in earlier paragraphs, the assessee has duly discharged the initial onus of proving the identity of the investors, creditworthiness of the transactions and genuineness of the transactions. Therefore, the ratio of aforesaid decision, in our respectful submission, do not apply to the facts of the case. 8.7 The decision of Hon'ble Delhi High Court in CIT V/s N.R. Portfolio Pvt. Ltd. [supra] has been rendered in peculiar circumstances wherein the assessee company adopted noncooperative attitude before Ld. AO with a view to thwart the investigation, which is not the case here. The perusal of facts in the case of CIT V/s MAF Academy Pvt. Ltd. [supra] would reveal that there was immediate cash deposit before making investment in the assessee company, which is not the allegations here. Similarly, the decision of Ahmedabad Tribunal in Pavankumar M.Sanghvi V/s ITO [81 Taxmann.com 308] deals with the tra ..... X X X X Extracts X X X X X X X X Extracts X X X X
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