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TMI Blog2020 (4) TMI 519X X X X Extracts X X X X X X X X Extracts X X X X ..... ance sheet, audit report, director s report and bank statements and for the remaining one company M/s. Matajwala Investments and Infrastructure Pvt. Ltd., it is noted by learned CIT(A) that the directors of the assessee company and that company are common and addition of the same amount was made in the hands of that company on this basis that source of investment could not be explained by that company. Once addition is made in the hands of the investor company for this reason that the source could not be explained by the investor company, it cannot be said that the amount of same investment is belonging to the investee company and addition cannot be made again in the hands of the investee company. We, therefore, delete the entire addition made in the present case. - Decided in favour of assessee. - ITA No.3258/Bang/2018 (Assessment year : 2012-13) - - - Dated:- 7-1-2020 - SHRI A. K. GARODIA, ACCOUNTANT MEMBER AND SHRI PAVAN KUMAR GADALE, JUDICIAL MEMBER Assessee by : Shri. Nitish Ranjan, CA Revenue by : Shri. C. H. Sundar Rao, CIT (DR)(ITAT), Bengaluru ORDER Per A.K. Garodia, Accountant Member This appeal is filed by the assessee and the same is ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... sed without application of mind. 11. The Ld. CIT (A) and the Ld. AO grossly erred in ignoring the landmark judgement of the Hon'ble Delhi High Court in the case Lovely Exports which was upheld by the Hon'ble Supreme Court of India in 216 CTR 195. 12. The Ld. CIT (A) and the Ld. AO ought to have noted that the obligation on an assessee to prove source of source cast under section 68 of the Act is applicable with prospective effect from A.Y. 2013-14 and thus, the entire premise upon which the impugned addition is made in the instant case, is illegal and liable to be deleted. 13. The Ld. CIT(A) and the Ld. AO erred in ignoring the various judgment of the High Courts and Tribunals wherein it has been settled that the amendment to section 68 with regard to explanation of source of source cannot be applied retrospectively including the judgement of the Hon'ble Bombay High Court in the case of CIT vs. Gagandeep Infrastructure Pvt. Ltd. reported in 394 ITR 680. 14. The Ld. CIT (A) while interpreting the amendment to section 68 of the Act has erred in disregarding the principles laid down by the Hon'ble Supreme Court of India in the case of Vatika Township [TS-57 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ents inter alia statements of bank accounts via which the impugned investment was made in the assessee company. He also submitted a copy of share valuation report of the assessee s shares in support of share premium amount received by the assessee from these investors. He pointed out that as per this share valuation report, the shares of the assessee company were valued by the valuer at ₹ 283 per share whereas the assessee has issued these shares of these investors at ₹ 250 per share including face value of ₹ 10 per share and share premium of ₹ 240 per share. He submitted that in view of this share valuation report of the assessee company, the share premium received by the assessee is not excessive or unreasonable. He also submitted that on pages 115 to 436 of Paper Book No.2 all the details of the investors are available such as share application, resolution passed by the investing company, audit report along with audited financial statements for the Financial Year 2011-12 and forms filed with ROC for change of address. He submitted that under these facts, the addition made by the AO and confirmed by the CIT(A) should be deleted. 3. As against this learn ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tworthiness of the creditor / investor and genuineness of the transaction. Since learned DR of the Revenue has placed reliance on the recent judgment of Hon ble Apex Court rendered in the case of NRA Iron Steel Pvt. Ltd., (supra), we first examine the applicability of this judgment in the present case. For ready reference, we reproduce para No. 3.9 and para Nos.12 to 16 of this judgment of Hon ble Apex Court. These paras are as under:- 3.9. On the basis of the detailed enquiries conducted, the A.O. held that the Assessee had failed to prove the existence of the identity of the investor companies and genuineness of the transaction. The A.O. found that : i. None of the investor-companies which had invested amounts ranging between ₹ 90,00,000 and ₹ 95,00,000 as share capital in the Respondent. Company - Assessee during the A.Y. 2009-10, could justify making investment at such a high premium of ₹ 190 for each share, when the face value of the shares was only ₹ 10; ii. Some of the investor companies were found to be non- existent; iii. Almost none of the companies produced the bank statements to establish the source of funds for making such a hug ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... y - Respondent, etc. iii. There was no explanation whatsoever offered as to why the investor companies had applied for shares of the Assessee Company at a high premium of ₹ 190 per share, even though the face value of the share was ₹ 10/- per share. iv. Furthermore, none of the so-called investor companies established the source of funds from which the high share premium was invested. v. The mere mention of the income tax file number of an investor was not sufficient to discharge the onus under Section 68 of the Act. 13. The lower appellate authorities appear to have ignored the detailed findings of the AO from the field enquiry and investigations carried out by his office. The authorities below have erroneously held that merely because the Respondent Company - Assessee had filed all the primary evidence, the onus on the Assessee stood discharged. The lower appellate authorities failed to appreciate that the investor companies which had filed income tax returns with a meagre or nil income had to explain how they had invested such huge sums of money in the Assesse Company Respondent. Clearly the onus to establish the credit worthiness of the investor compa ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ment with the assessee company and it has stated that the source of purchase of shares was sales proceeds of shares and it was received from M/s. Link Tradecom Pvt. Ltd. The address and PAN of M/s. Link Tradecom Pvt. Ltd. is also provided in the said letter. This company has also made a submission regarding justification for premium and it has been explained that information bulletin on working of company was received from one of close Director of the company at the time of subscription of shares and future working projection was very attractive and the Board of Directors was also in good reputation in Steel Industry. It was also explained that this information was available with the investor company that the assessee company was manufacturer of Billets and TMT Bars and this company was very fast growing company. Similarly, on pages 5 to 8 is the reply of the second company M/s. Dhanvanthi Projects Pvt. Ltd., and this company has also submitted copy of bank statements, copy of income tax returns along with audited balance sheet and auditors report. This company has also explained regarding justification for premium paid. Similarly, on pages 9 to 14 is the reply of 3rd company M/s. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ment. Similarly, the reply of 7th company M/s. Aroma Parter Pvt. Ltd. is available on pages 29-32 of the Paper Book No.3 and this company has also submitted copy of bank statement, copy of income of income tax returns along with audited balance sheet, directors report and auditors report and P L Account. Regarding source of investment, it was explained by this company that the source was sale proceeds of shares received from M/s. Link Tradecom Pvt. Ltd., whose address and PAN is also provided. This company has also provided the justification of premium payment. Similarly, the reply of 8th company M/s. Nector Business Solutions Pvt. Ltd., is on pages 33 36 of Paper Book No.3 and this company has also provided copy of bank statement, copy of income tax returns along with audited balance sheet, directors report and auditors report, balance sheet, etc., and this company has submitted the details of source of investments along with justification for premium payment. The reply of 9th company M/s. Nexus Barter Pvt. Ltd. is available on pages 37-40 of the Paper Book and this company has also submitted copy of bank statement, copy of income tax returns along with audited balance sheet, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Complete Softech Pvt. Ltd. And this company has submitted copy of bank statements, copy of income tax returns along with audited balance sheet, directors report and auditors report etc. and this company also has explained regarding source of investment and justification for premium payment. On pages 61-64 of Paper Book No.3 is the reply of 15th Company M/s. Suncity Niketan Pvt. Ltd. This company has also submitted copy of bank statement, copy of income tax returns along with audited balance sheet, directors report and auditors report, etc. and the source of investment and justification for premium payment is also explained. On pages 65 68 on Paper Book 3 is the reply of 16th Company M/s. Swarnarekha Dealcom Pvt. Ltd. This company has also provided all the relevant documents such as copy of bank statements, copy of income of income tax returns along with audited balance sheet, directors report and auditors report, etc. and the source of investment and justification for premium payment is also explained and it has been stated in this regard that there was receipts from sundry debtors and the details of such receipts is also given such as the name of the company from whom the amount ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... is seen that in respect of 19 companies from whom the assessee received the share application money, identity was established by the assessee company because reply along with relevant documents was filed by the 18 companies before ADIT, Investigation Unit 4(3), Kolkata and for the 19th company M/s. Matajwala Investments and Infrastructure Pvt. Ltd., bank statement was available before the AO also and the main objection of the AO as per para No.3.7 of the Assessment Order is that this company was not having substantial income but when it is shown that those companies were having share capital and the money is routed through banking channel and the bank statement is made available along with explanation regarding source of investments, it cannot be said and concluded that the company s identity is not established or its creditworthiness is not established mainly because the concerned company was not having substantial income. 11. In para 12 of his order, it is noted by learned CIT(A) that this was the claim of the assessee before him that in respect of receipt of ₹ 382.80 lakhs from M/s. Matajwala Investments and Infrastructure Pvt. Ltd., no addition is called for in the pre ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... share premium has been explained by filing the share valuation report. 13. As per the above discussion, we have seen that the assessee has submitted all necessary documents to establish the identity and creditworthiness of the investors and have also explained the genuineness of the transaction by providing explanation for share premium because apart from questioning the receipt of share premium, no question is raised by the revenue about genuineness and hence, the genuineness of this transaction is also established. We also find that there is no cash deposit in the bank accounts of the investor companies and therefore, in the absence of any corroborative material, it cannot be said that the money deposited in these bank accounts of these investor companies may be of the assessee company i.e. the investee company. We have also seen that the judgment of Hon ble Apex Court rendered in the case of M/s. NRA Iron Steel Pvt. Ltd., (supra) is not applicable in the present case because the facts are different. In the present case, out of 19 companies, 18 companies have made available their balance sheet, audit report, director s report and bank statements and for the remaining one co ..... X X X X Extracts X X X X X X X X Extracts X X X X
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