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TMI Blog2019 (12) TMI 1259X X X X Extracts X X X X X X X X Extracts X X X X ..... g heard to the assessee. We direct the assessee to file the relevant documents/evidence before the AO. - Decided in favour of assessee. X X X X Extracts X X X X X X X X Extracts X X X X ..... ) the investment in the assessee-company was explained to be out of its own advances received in the course of business and disclosed as liabilities in its balance sheet ; perusal of the balance sheet shows that under the head "Other Liabilities" an amount of ₹ 200,31,41,720/- has been shown under the sub-head "Deposits" as on 31.03.2012 as against ₹ 45,50,000/- as on 31.03.2011; this shows that M/s Prime Properties Pvt. Ltd. had sufficient funds for making investment of ₹ 35,00,00,000/- in the shares of the assessee-company during the year, (iv) the payments were made through normal banking channels and are reflected in the balance sheet of M/s Prime Properties Pvt. Ltd. and the assesseecompany, (v) the investment is also reflected in the balance sheet of M/s Prime Properties Pvt. Ltd. (vi) copies of Form 2 and Board's resolution for addition to share capital are also on record. Observing as above, the Ld. CIT(A) noted that the assessee had sufficiently discharged its onus of establishing not only the identity but also the creditworthiness as well as the genuineness of the transaction as required u/s 68 of the Act. Referring to the decision of the Hon'ble Delhi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ssee." In Youth Construction (P.) Ltd. (supra), the Hon'ble Delhi High Court held that : "There can be no dispute that Section 68 applies equally to share application monies received by an assessee and, therefore, the burden is on the assessee to prove the nature and source thereof, to the satisfaction of the Assessing Officer. It involves three ingredients, namely, the proof regarding identity of the share applicants, their creditworthiness to purchase the shares and the genuineness of the transaction as a whole. The Tribunal failed to keep in mind these aspects of the matter and has chosen to dispose of the appeal on the limited question of the identity of the share holders. A Division Bench of this Court in the case of CIT vs. Nova Promoters and Finlease P. Ltd. (2012) 342 ITR 169 pointed out the circumstances in which the ratio of the judgment of the Supreme Court in Lovely Export (supra) can be applied and the circumstances where the ratio cannot be applied." In Independent Media Pvt. Ltd. (supra), the Hon'ble Delhi High Court held that : "11. The Revenue is aggrieved by the aforesaid order of the Tribunal and has filed the present appeal. We are unable to uphold the vie ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... (1969) 72 ITR 194 (SC). 12. In the light of the aforesaid exposition of the legal position the view taken by the Tribunal cannot be upheld. The Tribunal, however, may be justified in directing the Assessing Officer to afford an opportunity to the assessee of cross-examining the persons who had allegedly given statements before the Investigation Wing implicating the assessee in the modus operandi adopted by them, namely, giving of accommodation entries for commission. The Assessing Officer had in his show- cause notice referred to these statements and the fact that the assessee had been named therein as one of the beneficiaries to whom entries to the extent of ₹ 2,20,00,000/- have been provided for commission. The assessee appears to have sought cross-examination of those persons but that opportunity was not given by the Assessing Officer as found by the Tribunal, a position not disputed before us on behalf of the Revenue. However, in the fresh round of proceedings it will be open to the Assessing Officer to make the addition in the hands of the assessee-company in case it appears to him, after complying with the directions of the Tribunal, that the explanation adduced by th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... at the assessee opened a bank account only for receipt of funds which was closed shortly after transfer of fund. According to the AO, subscription of the preference shares by P5AHIML was colourable device and not genuine transaction. The AO made addition u/s 68 of the Act in the hands of the assessee. On appeal, the CIT(A) upheld the order of the AO. On further appeal, the Tribunal concluded that P5AHIML was a company belonging to the Providence Equity Partners, a global private investment group. P5AHIML registered itself as a Foreign Venture Capital Investor (FVCI) with SEBI. The investment in holding company of the assessee was made after P5AHIML registered as a FVCI with SEBI and the assessee obtained the necessary approvals from the Foreign Investment Promotion Board (FIPB). In connection with the issue of holding company, the assessee submitted all the relevant details in the course of assessment proceedings. The Tribunal held that all the three ingredients of section 68 i.e. identity, genuineness and creditworthiness of investor were duly established, thus deleted the addition made by the AO. On further appeal by the revenue, the Hon'ble Bombay High Court held that : "8. I ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... possible returns, may be fully justified. However, when all the relevant factors are properly explained, including the fact that the payment of dividend was not the sole attraction for the investor and that the investor could expect a fair return on the investment, of course, subject to vagaries of the any business decision, the Assessing Officer had to advert to all such materials on record in proper perspective. As noted by the Tribunal, all necessary permissions and clearances were granted by the Government of India and other government authorities for such investment. The source of the funds in the hands of P5AHIML was also verified. Merely because multiple corporate bodies may have been involved in the entire process of collecting funds in P5AHIML and then investing the same in the assessee company, by itself would not be sufficient to establish a sham transaction or colourable device." 7.2 The instant case, the assessee-company has during the year under consideration offered right issue to its existing equity shareholders and also issued convertible preference shares. It issued and allotted 3,50,000 (0.10%) optionally convertible preference shares at a face value of ₹ ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 8.12.2011. Kalpatru Heritage Coop Premi Lokhandwala 756786 8,25,000.00 0.00 3,45,853.80Cr 28.12.2011 28.12.2011 /003/911136/B RPC Mumbai 0.00 5,084.83 3,50,938.63Cr OB 29.12.2011 29.12.2011 INF/0000045348 93/IFT-Prime/0 Nariman Point 0.00 1,00,00,00,000.00 1,00,03,50,938.63Cr 30.12.2011 30.12.2011 RTGS: Kalpatru Retail Ventures Pvt./KKBK Backbay Reclamation 756791 1,00,00,00,000.00 0.00 3,50,938.63Cr 30.12.2011 30.12.2011 MGB and Co. Nariman Point 756778 27,575.00 0.00 3,23,363.63Cr 30.12.2011 30.12.2011 INF/0000045375 78/IFT-Prime/0 Nariman Point 0.00 35,00,00,000.00 35,03,23,363.63Cr 30.12.2011 30.12.2011 RTGS: Kalpatru Retail Ventures Pvt./KKBK Backbay Reclamation 756792 35,00,00,000.00 0.00 3,23,363.63Cr 30.12.2011 30.12.2011 By Cash - Nariman Point Nariman Point 0.00 1,00,000.00 4,23,363.63.00 It is seen that on 08.12.2011 there is a balance of ₹ 2,23,226.80. On 22.12.2011 there is a deposit of ₹ 1,65,00,00,000/- in the above account. On the same date there is withdrawal of ₹ 95,00,00,000/- and ₹ 70,00,00,000/-, thus leaving same b ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ted to careful scrutiny and this would be particularly so in the case of private placement of shares, where a higher onus is required to be placed on the assessee, since the information is within the personal knowledge of the assessee. It is further held that the assessee is under a legal obligation to prove the receipt of share capital/premium to the satisfaction of the AO, failure of which would justify addition of the said amount to the income of the assessee. Proving the genuineness of transaction is one of the ingredients of section 68 of the Act. We may again refer to the judgment of the Hon'ble Supreme Court in NRA Iron & Steel (P.) Ltd. (supra), wherein their Lordships, at para 11, have held : "11. The principles which emerge where sums of money are credited as Share Capital/Premium are : i. The assessee is under a legal obligation to prove the genuineness of the transaction, the identity of the creditors, and credit-worthiness of the investors who should have the financial capacity to make the investment in question, to the satisfaction of the AO, so as to discharge the primary onus. ii. The Assessing Officer is duty bound to investigate the credit-worthiness of the ..... X X X X Extracts X X X X X X X X Extracts X X X X
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