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TMI Blog2018 (5) TMI 2034X X X X Extracts X X X X X X X X Extracts X X X X ..... not produced any evidence before the AO and the Ld. CIT(A) admitted the additional evidence without appreciating the fact that assessee was to establish how and what prevented the assessee from filing the same evidence before the A.O". (iii) "Whether on the facts and circumstances of the case, Ld. CIT (A) erred in accepting the paper book submitted by the assessee and based on it has accepted the identity, genuineness and creditworthiness of the entities from whom the assessee has received monies". The appellant prays that the order of the CIT(A) on tjie above grounds be set aside and that of the AO be restored. 3. The grounds of appeal in assessee's appeal read as under: 1. On the facts and circumstances of the case and in law, the learned CIT(A) 16 has erred in confirming disallowance u/s. 68 of the Act, of Preference Share Capital amounting to Rs. 5,40,00,000/- received from M/s. Empower Industries India Limited. 2. The order under appeal is not only bad in law and invalid, but also against the natural law of equity and justice. 4. Brief facts of the case are as under: The assessee company is engaged in the business of buying and running infrastructure ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... r, the Assessing Officer noted that even by doing so, the assessee has not established the identity of the said shareholders as neither the concerned persons have been produced nor their books of accounts been furnished. The Assessing Officer further noted that as per the information available on the official website of RoC(MCA), the preference shareholders listed hereinabove have continued with the assessee company till 31.03.2012. The Assessing Officer noted that the assessee has repeatedly conveyed that it is in close contact with all the said concerns. However, the Assessing Officer noted that the assessee has not been able to produce those persons. The Assessing Officer further observed that the assessee have furnished photocopies of the share application and relevant bank statements to prove the creditworthiness of the said shareholders. However, the Assessing Officer held that these papers cannot be treated as evidence as they are not corroborated by the records and books of accounts of the shareholders. The Assessing Officer further held that by mere fact that the transactions have taken place through banking channels, it cannot be constituted that the transactions are gen ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... hat the Inspector has been deputed to find out some of the shareholders. The assessee made elaborate submissions before the ld. Commissioner of Income Tax (Appeals). The ld. Commissioner of Income Tax (Appeals) noted that the assessee has submitted various documents by way of additional evidences which include the following: i. Copy of acknowledgement of return of income and financial statement in case of Proficient Merchandise Private Limited&Raw Gold Securities Limited for A.Y. 2010-11 ii. Copy of signed application for applying to the issue of preference shares and board resolution of Priority Traders Private Limited iii. Copy of PAN card iv. Bank statements of shareholders v. Copy of signed confirmation for making investment in the preference shares of appellant company of the remaining shareholders. 8. The assessee stated that the assessee was not provided sufficient time to submit these evidences and some of the documents and register were destroyed in fire on 03.12.2011. The ld. Commissioner of Income Tax (Appeals) remanded the additional evidence to the Assessing Officer. Firstly, in the remand report, the Assessing Officer requested not to accept the addi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nd taken on record after considering the principles laid down by the jurisdictional High Court in the case of Smt Prabhavati S. Shah. Further, the appellant had submitted most of the details during the assessment: proceedings itself as can be seen from the record. Only part of the details are submitted now. Even the said fact is accepted by the AO in para 15 of the remand report which is reproduced heiein below, as pointed cut by the AR of die appellant . "The evidences and details furnished now are the same as were furnished before the AO ' V except, few additional evidences which were already furnished before the CIT(Appeals)." "4.2.5 During the remand proceedings, the AO had issued fresh notices u/s. 133(6) dt. 29.04.2015 to the shareholders who have subscribed shares of the appellant company asking them to file certain details which is reproduced in the remand report at para 9. In response to the above, 18 shareholders have filed the reply and submitted the details summary of which is reproduced in para 12 of the remand report. After examining the details and evidences filed by the shareholders, the AO observed that they have failed to furnish any new evidences a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d in response to notice u/ s. 133(6) notices in its submission and stated that the shareholders not only furnished the documentary evidences but also provided the explanation asked for by AO. Thus, AO is not correct in stating that they have failed to furnish any new evidences or information to establish the credit worthiness of the parties and the genuineness of the share application money claimed to be invested in the appellant company during the year. 4.2.8 As regards identity of the shareholder it has been stated in the remand report that the appellant company has merely furnished some documents but has not produced the parties for examination which AO wanted to carry out in the assessment proceedings. In response to the same the appellant company has submitted that identity is not said to be proved only if the parties are produced before Ld AO. Other documentary evidences such as PAN, IT return acknowledgement, financials of the company and the fact that notices u/s, 133(6) were delivered to the given addresses should not be ignored which proves the identity of the shareholder. And relied on decision in case of ACIT v. Kisco Casting (P.) Ltd (2013) 34 taxmann.com 37 ( ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... iii. CIT v. Nipuan Auto (P.) Ltd (2014) 49 taxmann.com 13 (Delhi) ix. CIT v. Vacmet Packaging (India) (P.) Ltd (2014) 45 taxmann.com 204 (Allahabad) x. CIT v. Misra Preservers (P.) Ltd. (2013) 31 taxmann.com 214 (Allahabad) xi. CIT v. Expo Globe India Ltd. (2014) 51 taxmann.com 208 (Delhi) ;;-::---,. xii. ACIT vs. Bahubali Dyes Ltd (2015) 55 taxmann.com 357 (Delhi - Trib) 5. I have gone through the assessment order, remand reports sent by the AO and submissions made by the appellant from time to time. The brief background of the case is that during the course of assessment proceedings, it was observed by the AO that the assessee had received an amount of Rs. 38,12,79,600 by issuing 3,17,733 8% noncumulative preference shares of Rs. 100 each at a premium of Rs. 1,100 to 19 parries. Notices under section 133 (6) and summons u/s. 131(1) were issued to 19 parties, in some cases the notices issued were returned back by the postal department and in some cases notices were served but no reply was received. The A.O. asked the aR of the assessee to produce those parties. Furhter, the AR of the assessee was also asked to explain why the amount received from such ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... self has stated in the order that as per the information on the official website of the ROC (MCA) the preference shareholders have continued with the appellant company till 31.03.2012. This, itself, proves the identity of shareholder as they were registered with ROC and their information was available on the website of the ROC. 5.1.4 Further during the remand proceeding the notices u/s. 133(6) were duly served to the shareholders and all the shareholders, except one, filed their replies with the AO. 5.1.5 Inspector posted in office of CIT(A)-16 visited the premises of the 7 shareholders and as per his report those parties actually existed on the addresses which are as per ROC site. 5.1.6 Further in case of M/s. Citygold Education Research Private Limited which is a group concern of the appellant company, same issue was raised for A.Y. 2010-11. The following parties have also invested in M/s. Citygold Education Research Private Limited. a. M/s. Prabhav Industries Ltd, Baroda b. M/s. Sonal International Ltd c. M/s. SonalSilChem Ltd d. M/s. Sonal Cosmetic Export Ltd e. M/s. Dynachem Pharmaceuticals Export Ltd f. M/s. Raw Gold Securities Pvt Ltd ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... lant company were also provided. (Ans to Q 9) iv. The shares were subscribed for the purpose of investment and through common acquaintances. (Ans to Q9) v. Investment registers, audited accounts, return of income and bank statements were provided for the FY 2009-10 of all four companies. (Ans to Q 10,11) vi. Source of funds for making investment in the appellant company were explained. It was explained that the funds have been paid out of the share capital and short-term loans and advances of the company. He submitted bank statements of all the 4 companies highlighting the payments made to the appellant.(Ans to Q 12). It was again stated that the companies had surplus funds in the form of share capital The said funds were extended as loans to various parties. The investments have been made out of the share capital and the short-term loans taken from other parties or loan repayment is received by these companies (.(Ans to Q 13) vii. Justification of investing in the shares issued with premium of appellant company was provided. It is stated that the appellant company was coming up with a township at Khalapur and looking at the prospective profits of the said project they have ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the authorised director is mentioned on the form and bank A/c itself proves the identity. 5.2.4 The appellant company had explained individual capacities of each shareholders to''snow its credibility to invest in shares of appellant company which is discussed in subsequent paragraphs of this order. 5.3 Genuineness of the transaction 5.3.1 AO stated that since appellant company had failed to prove the identity and creditworthiness of the shareholders, genuineness of the transaction is also not substantiated. 5.3.2 Although the mere fact that transaction have been taken through the banking channel would not constitute evidence of the genuineness of the transactions, however the fact cannot be ignored that the relevant books of accounts of the shareholders and their confirmation are also submitted. Further during the remand proceedings all the shareholders, except one, replied to the notice u/s. 133(6) and explained their source of investment also. Thus genuineness of the transaction cannot be doubted. 5.3.3 Further the AO had stated that notices were issued u/s. 133(6) to the bankers, shareholders and observed that there appears the name of the persons who were the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... eference shares of the appellant company. The observation made by the AO were before the above statement taken on oath. However now, there is no room for doubt." 1.3 The appellant had also filed its confirmation also on page 11 of paper book where the above company has confirmed of having applied for the shares at premium and has given details of payments made through RTGS & cheques. 1.4 The said company are holding till date the shares of the appellant company as stated by it in its reply to notice u/s. 133(6). 1.5 Hence addition made in the assessment is not correct. 2. In case of Sonal International Ltd (Rs. 2,00,40,000), the said company has produced 17th Annual Report in the year under consideration. This shows that the company is a very old company. The financial statement of the above company reveals the following: i. Equity share capital of Rs. 6,27,00,000. ii. Gross Block of Fixed assets of Rs. 2,92,33,813. iii. The company has huge investments of Rs. 3,13,62,987 2.1 The above details prove the credibility of the company and capacity to make investment in the appellant's company. 2.2 Identity was proved by submitting PAN card and registration a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... )-16 i.e. my predecessor in case of above mentioned company is reproduced herein below: "5.11.5 The above company has specifically confirmed the transaction of making investment in the shares of appellant company vide confirmation filed by tlie appellant at PB page 193 and also in the statement recorded on oath of u/s. 131 ofShri. Vimal Gala, director of SonalSil Chem Limited, he has confirmed the transaction of investing in the preference shares of the appellant company. The observation made by the AO were before the above statement taken on oath. However now, there is no room for doubt." 3.3 The appellant had also filed its confirmation also on page 31 of PB where the the above company has confirmed of having applied for the shares at premium and has given details of payments made through RTGS & cheques. 3.4 The said company are holding till date the shares of the appellant company as stated by it in its reply to notice u/s. 133(6). 3.5 Hence addition made in the assessment is not correct 4. In case of Dynachem Pharmaceuticals (Exports) Ltd. (Rs. 2,00,40,000), the said company has produced 20th Annual Report in the year under consideration. This shows that it is ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 133(6) were duly served. 5.3 The appellant had also filed its confirmation also on page 54 of PB where the the above company has confirmed of having applied for the shares at premium and has given details of payments made through RTGS &cheques. 5.4 The said company were holding till date the shares of the appellant company as stated by it in its reply to notice u/s. 133(6). . 5.5 Hence addition made in the assessment is not correct. 6. In case of Priority Traders Private Limited (Known as Choice Exterio and Interio Private Limited) (Rs. 2,50,80,000), the financial statement of the above company reveals the following: i. Equity share capital of Rs. 1,45,00,0007- with high reserves and surplus of Rs. 8,68,60,289/- ii. The company has huge cash and bank balances of Rs. 43,51,534/- iii. The company has huge investments of Rs. 12,43,10,000 6.1 The above details prove the credibility of the company and capacity to make investment in the appellant's company. 6.2 Identity was proved by submitting PAN card and registration address. Also notice u/s. 133(6) were duly served. 6.3 The appellant had also filed its confirmation also on page 86 of additional evidence ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ement of the said company reveals the following: i. Equity share capital of Rs. 95,35,000 with high reserves and surplus of Rs. 5,39,62,966/- ii. The company has huge operational income of Rs. 20,15,25,477/- 8.1 The above details prove the credibility of the company and capacity to make investment in the appellant's company. 8.2 Identity was proved by submitting PAN card and registration address. Also notice u/s. 133(6) were duly served. 8.3 The bank account of the said company reflects the payment made to the appellant company for investing in shares. But there is no entry in bank accounts which reflects that the appellant company has paid back the amount of investment. 8.4 The appellant had also filed its confirmation also on page 87 of additional evidence paperbook where the above company has confirmed of having applied for the shares at premium and has given details of payments made through RTGS & cheques. 8.5 The said company is holding till date the shares of the appellant company as stated by it in its reply to notice u/s. 133(6). 8.6 Hence addition made in the assessment is not correct 9. In ccase of Tac Technosoft Private Limited (Rs. 2,50,80,0 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 00), the financial statement of the said company reveals the following: i Equity share capital of Rs. 47,94,000/- with high reserves/and surplus of Rs. 11,02,79,070/- ii. The company has huge investments of Rs. 11,61,62,500/- 11.1 The above details prove the credibility of the company and capacity to make investment in the appellant's company. 11.2 Identity was proved by submitting PAN card and registration address. Also notice u/s. 133(6) were duly served. 11.3 The bank account of the said company reflects the payment made to the appellant company for investing in shares. But there is no entry in bank accounts which reflects that the appellant company has paid back the amount of investment. 11.4 The appellant had also filed its confirmation also on page 164 of paper book where the above company has confirmed of having applied for the shares at premium and has given details of payments made through RTGS & cheques. 11.5 The said company is holding till date the shares of the appellant company as stated by it in its reply to notice u/s. 133(6). 11.6 Hence addition made in the assessment is not correct 12. In case of Jagdamba Complex Private Limited (Rs. 1,0 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Mercantile Private Limited - Rs. 1,00,80,000, the financial statement of the said company reveals the following: i. Equity share capital of Rs. 38,64,6007- with high reserves and surplus of Rs. 9,03,92,393/- ii. The company has investment of Rs. 8,34,77,000/-. 14.1 The above details prove the credibility of the company and capacity to make investment in the appellant's company. 14.2 Identity was proved by submitting PAN card and registration address. Also notice u/s. 133(6) were duly served. 14.3 The bank account of the said company reflects the payment made to the appellant company for investing in shares. But there is no entry in bank accounts which reflects that the appellant company has paid back the amount of investment. 14.4 The appellant had also filed its confirmation which is placed on page 211 of PB where the the above company has confirmed of having applied for the shares at premium and has given details of payments made through RTGS & cheques. 14.5 The said company is holding till date the shares of the appellant company as stated by it in its reply to notice u/s. 133(6). 14.6 .Hence addition made in the assessment is not correct 15. In cas ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... . 133(6). "15;7;-,. Hence addition made in the assessment is not correct 16. In case of Raw Gold Securities Pvt Ltd - Rs. 3,00,39,600, the said company has given 14th Annual Report in the year under consideration. This shows that it is an old company. The financial statement of the above company reveals the following: i. Equity share capital of Rs. 1,34,31,500. ii. Capital Reserve of Rs. 4,76,920, securities premium of Rs. 12,21,22,500 and profit & & Loss A/c of Rs. 8,06,486. iii. The company has huge investments of Rs. 11,87,98,000. 16.1 The above details prove the credibility of the company and capacity to make investment in the appellant's company. 16.2 Identity was proved by submitting PAN card and registration address. Also notice u/s. 133(6) were duly served. Further, in case of M/s. Citygold Education Research Private Limited, the said party appeared before DDIT (Inv) and explained business activities carried on by them and also produced audited accounts, investment register, return of income, bank statement before DDIT(Inv), Unit - 1(3), Ahrnedabad. The observation of the CIT(A) - 16 i.e. rny predecessor is reproduced herein below: "5.10.4 Further, Repor ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ce u/s. 133(6). 16.6 Hence addition made in the assessment is not correct. 17. In case of Jyoti Foodstuffs Limited (known as Choice Paper N Products Limited) - Rs. 2,50,80,000, the said company has given 17th Annual Report in the year under consideration. This shows that it is an old company. The financial statement of the above company reveals the following: i. Equity share capital of Rs. 98,67;750/-, preference share capital of Rs. 5,00,000/and share premium of Rs. 9,98,15,160/- ii. The company has investment of Rs. 5,62,00,000/- iii. The company has operational income of Rs. 91,79,881/-. 17.1 The above details prove the credibility of the company and capacity to make investment in the appellant's company. 17.2 Identity was proved by submitting PAN card and registration address. Also notice u/s. 133(6) were duly served. 17.3 The bank account of the said company reflects the payment made to the appellant company for investing in shares. But there is no entry in bank accounts which reflects that the appellant company has paid back the amount of investment 17.4 The appellant had also filed its confirmation which is plaed on page 89 of additional evidence ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... confirmation which is placed on page 90 of additional evidence paperbook where the above company has confirmed of having applied for the shares at premium and lias given details of payments made through RTGS & cheques. 19.5 The said company is holding till date the shares of the appellant company as stated by it in its reply to notice u/s. 133(6). 19.6 Hence addition made in the assessment is not correct. 7. I now discuss all the cases relied upon by the AO in the assessment order as under:- i. In case of Nipun Builders & Developers Private Limited, 350 ITR 407 wherein it was held that: "if the assessee was serious enough to establish its case, it ought to have produced the principal officers of the subscribing companies before the Assessing Officer so that they could explain the sources from which the share-subscription was made. That would also have taken care of the difficulty of the assessee in proving the creditworthiness of the subscriber companies. Instead the assessee took an adamant, attitude and failed to comply with the direction of the Assessing Officer.... The assessee thus took a very extreme stand which was not justified; certainly it did nothin ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the nature and source thereof is, in the opinion of the Assessing Officer, not satisfactory." In the above case the assessee did not furnish any evidence which substantiates his claim. But the appellant company has submitted documentary evidences such as copy of correspondence with the shareholders, balance sheet of shareholders, bank account details of the shareholders, copy of share application and board resolution. In view of the above analysis the case laws relied upon by the AO do not support him as the facts of the appellant's case proves all the necessary requirements. 8. Now I will refer to the cases relied upon by the appellant. i. In case of CIT v. Creative World Telefilms Ltd. (2011) 15 taxmann.com 183 (Bom)(HC) assessee had received share application money from shareholders. In order to prove genuineness of said transactions, assessee company had given names and addresses of shareholders etc. Assessing Officer rejected assessee's explanation and added amount so received to its taxable income. Tribunal, however, set aside addition made by Assessing Officer holding that if share application money was received by assesseecompany from alleged ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ion with name, address and PAN Number, copy of income tax returns, balance sheet, profit and loss account and computation of total income in respect of all creditors/lenders were furnished and when it had been found that loans were furnished through cheques and loan account were duly reflected in balance sheet, Assessing Officer was not justified in making addition. vi. In case of CIT vs. Morani Automotives (P.) Ltd. (2014) 45 taxmann.com 473 (rRajasthan) it was found that contributors were all Income tax assessees and their return of income and copies of confirmation along with PAN numbers had been furnished by assessee and also identity of cash creditors were established. It was thus held that addition was not justified. vii. A regards share application money, in the case of CIT v. Nipuan Auto (P.) Ltd. (2014) 49 taxmann.com 13 (Delhi), the identity of the two companies which ir-sister companies stood established. Furthermore, this is not a case of mere furnishing of copies of bank accounts of the subscribers. But, in the present case, as noticed by the Commissioner (Appeals) the assessee had filed the IT returns of the subscriber companies as also their bank statement ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tax returns, balance sheets, ROC particulars and bank account statements of shareholders. Commissioner (Appeals) considering said materials held that share application money or source of share application money had been satisfactorily explained and deleted addition. Tribunal confirmed order of Commissioner (Appeals). Entire issue being purely factual, no interference was called for with Tribunal's order. xi. In case of ACIT vs. Bahubali Dyes Ltd (2015) 55 taxmann.com 357 (Delhi - Trib) it was held that share capital as well as share premium/ reserve of all companies was several times more than amount invested by them in share capital of assessee company proving their creditworthiness. Thus, no addition could be made on account of unexplained cash credit. xii. In case of ACIT v. Kisco Casting (P.) Ltd (2013) 34 taxmann.com 37 (Chandigarh - Trib) assessee-company shown receipt of certain sum on account of share application money. In assessment proceedings, assessee had filed affidavit, confirmation indicating number of shares, amount invested, mode of investment as cheque, bank account number, source of funds etc., to prove identity and existence of subscribers as also e ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... emaining amount of Rs. 33,12,39,600/- in respect of which evidences were furnished by the subscriber of share capital is deleted. 10. Against the above order, the assessee and the Revenue are in cross appeal before us. 11. We have heard both the counsel and perused the records. The ld. Departmental Representative relied upon the orders of the Assessing Officer. 12. Per contra, the ld. Counsel of the assessee submitted that the assessee has submitted all the necessary details. He further submitted that the amendment to section 68 has been held by the Hon'ble Bombay High Court to be prospective. The summary of the ld. Counsel of the assessee submissions are as under: 1. We are thankful to Your Honours for having patiently heard the above appeals on 07.03.2018 and granted leave to file brief written submissions with direction to file the current updated status of investors to ascertain whether these investors have been existing or not. Accordingly we would like to state and submit as hereunder. Background 2. The appellant is engaged in the business of maintaining and running infrastructure facilities and proper development. The return of income for A.Y.2010 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... as received through banking channel does not prove the creditworthiness of the creditors nor prove genuineness of transactions. The Assessing Officer also observed that bankers of some of the shareholders were same persons who were appearing in the list of Hawala Dealers furnished by the Sales Department of State of Maharashtra. The Assessing Officer also noted that the appellant had received share application money prior to passing of Special Resolution to increase its share capital. Therefore, the Assessing Officer concluded that the appellant has failed to prove the genuineness of preference share capital received by it. Accordingly, the total income was determined by the Assessing Officer vide assessment order dated 30.03.2013 passed u/s. 143(3) of the Act determining total income of the appellant as under:- Sr. No Particulars Rs. 1. Income from Business As per assessee's computation (-) 8,67,35,476, Add : Unexplained cash credits u/s. 68 38,12,79,600 Taxable income 29,45,44,124 Rounded off u/s.288A 29,45,44,120 2. Book profit u/s.H5JB of the Act As per assessee's computation (-) 8,79,47,093 20. The appellant filed appe ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rts Ltd., had appeared before DDIT(Inv) at Ahmedabad and Baroda. The parties at Ahmedabad had given statements that they had made investments and produced relevant records such as investment register, audited accounts, ledger accounts, bank statements, etc. [para 4.2.9, 5.1.6 of the GT(A)'s order]. iii. The Assessing Officer had himself stated in his order that information on the official website of the ROC(MCA), the preference shareholders had continued with the appellant company till 31.03.2012 [para 5.1.3 of the CIT(A)'s order] e. The creditworthiness of the shareholders was established in view of the following findings given in para 5.2 of the CIT(A): i. Statement of Shri Jagdish Kumar Gupta relied upon by the Assessing Officer does not prove that three companies referred in his list did not make investment in the appellant. ii. The investment was made in the appellant company subsequent to the date of search on J. Kumar Infra Projects Ltd. i.e. 26.08.2009. iii. The appellant company had furnished details which show the individual capacity of the shareholder which had been discussed at length in the appellate order f. The reasons given by the Assessing Offic ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... circumstances in the case of Citygold Education Research Ltd. and in the case of the appellant are identical. The order of the CIT(A) deleting the addition made u/s.68 of the Act in the case of Citygold Education Research Ltd. for A.Y.2010-11 has been upheld by the Hon'ble Tribunal in ITA no.4742/Mum/2015 vide its order dated 31.01.2018. A copy of the said order of the Hon'ble Tribunal has been submitted to the Hon'ble Bench and the learned DR during the course of the hearing. 27. On its perusal, it can be seen that the Assessing Officer had also made addition in respect of investment made by Empower. In the case of Citygold Education Research Ltd. which is listed on page 3 of the said order of the Hon'ble Tribunal. The discussion made by the CIT(A) in respect of this party has been extracted on page 10 of the said order of the Hon'ble Tribunal. On its perusal, it can be seen that the CIT(A) has deleted the addition on the basis of fact that statement of Shri Devang Dinesh Chandra Master, Director of Empower, was recorded u/s.131 of the Act on 12.03.2013 (i.e. before the Assessing Officer passed the assessment order in the case of appellant) wherein he had adm ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d formerly known as Priority Traders P. Ltd.) and Proficient Merchandise Ltd. in the paper book filed before Your Honours. 31. The Assessing Officer has duly submitted remand report taking into consideration the various details filed and no adverse material has been brought on record by the Assessing Officer to disprove the details filed by the appellant assessee. 32. It is submitted that the appellant assessee having discharged its primary onus and no adverse material on causing enquiries has been brought on record by the Assessing Officer, the addition made by the Assessing Officer u/s.68 of the Act should not be sustained. 33. It is submitted that the CIT(A) has deleted the addition after taking into account material available on the record and in accordance with the settled principles of law. 34. During the appellate proceedings, the Assessing Officer had caused fresh enquiries and furnished his remand report. The CIT(A) has also caused verification by deputing his inspector and found the information collected to be correct. Thus, it is submitted that it is not the case where no enquiries had been caused. The initial onus laid upon the assessee has been duly discharged ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... dition made u/s.68 of the Act in the case of Citygold Education Research Ltd. (supra) after taking into account that the investor companies are not shell companies or appear in the list prepared by Ministry of Corporate affairs and that the investors are very much on the register of Registrar of Companies. Hence, the order of the CIT(A) deleting the addition made by the CIT(A) may kindly be upheld. 15. We have heard both the counsels and perused the records. Upon careful consideration we note that assessee company in this case has received share application money from 19 corporate entities. The assessee has submitted that documentary evidences in connection with the share application money received. These included various details like name, address, company incorporation details, share application details, balance sheets, bank statements, permanent account number and income tax returns. The assessing officer has taken adverse inference because he noted that assessee has neither produced the concerned parties nor produced their books of accounts. The assessing officer also noted that his requisitions and notices to the above parties have not been responded. Before the ld. Co ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... planation about the nature and source of such sum so credited; and (b) such explanation in the opinion of the Assessing Officer aforesaid has been found to be satisfactory: Provided further that nothing contained in the first proviso shall apply if the person, in whose name the sum referred to therein is recorded, is a venture capital fund or a venture capital company as referred to in clause (23FB) of section 10. 17. The Hon'ble jurisdictional High Court had occasion to consider the addition of similar share applications u/s. 68 in several case laws. 18. We may gainfully refer to the Hon'ble jurisdictional High Court expositions in this case as under: 1) CIT vs. Gagandeep Infrastructure (P.) Ltd. [2017] 394 ITR 680 (Bom) had held as under: (e) We find that the proviso to section 68 of the Act has been introduced by the Finance Act 2012 with effect from 1st April, 2013. Thus it would be effective only from the Assessment Year 2013-14 onwards and not for the subject Assessment Year. In fact, before the Tribunal, it was not even the case of the Revenue that Section 68 of the Act as in force during the subject years has to be read/understood as thoug ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s considered that the Assessee has produced on record the documents to establish the genuineness of the party such as PAN of all the creditors along with the confirmation, their bank statements showing payment of share application money. It was also observed by the Tribunal that the Assessee has also produced the entire record regarding issuance of shares i.e. allotment of shares to these parties, their share application forms, allotment letters and share certificates, so also the books of account. The balance sheet and profit and loss account of these persons discloses that these persons had sufficient funds in their accounts for investing in the shares of the Assessee. In view of these voluminous documentary evidence, only because those persons had not appeared before the Assessing Officer would not negate the case of the Assessee. The judgment in case of Gagandeep Infrastructure (P.) Ltd. (supra) would be applicable in the facts and circumstances of the present case" 19. From the expositions, it is clear that the assessee's case clearly false under the realm of the above case laws. The proviso to section 68 has clearly and unambiguously been held to be prospective an ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nachem Pharmaceuticals (Exports) Ltd., Sonal International Ltd., Alken management and Financial Ltd. and Lilac Medicines Pvt. Ltd. All these parties have admitted the transactions and also filed financials of these companies showing the investment in shares of the assessee company. The CIT(A) after getting the remand report from the AO, deleted the addition. 7. We find that the AO proceeded to discredit the investors of the assessee, which is completely erroneous. The AO was looking for proof beyond doubt and proceeded on an element of suspicion that the amounts of investments are really those of the assessee, which have been ploughed back by the assessee. But the settle principle of law is that any amount of suspicion however, it strong might be, is no substitute for proof. Suspicion is not sufficient enough to lead to the conclusion that the investments received by the assessee company are all manipulated receipts and on that basis he can record a finding that the explanation of the assessee is not satisfactory. According to us, so long as the proof and identity of the investor and the payment received from him is through a doubtless channel like that of a banking channel, the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n 68 of the Act as in force during the subject years has to be read/understood as though the proviso added subsequently effective only from 1st April, 2013 was its normal meaning. The Parliament did not introduce to proviso to Section 68 of the Act with retrospective effect nor does the proviso so introduced states that it was introduced "for removal of doubts" or that it is "declaratory". Therefore it is not open to give it retrospective effect, by proceeding on the basis that the addition of the proviso to Section 68 of the Act is immaterial and does not change the interpretation ofSection 68 of the Act both before and after the adding of the proviso. In any view of the matter the three essential tests while confirming the pre-proviso Section 68 of the Act laid down by the Courts namely the genuineness of the transaction, identity and the capacity of the investor have all been examined by the impugned order of the Tribunal and on facts it was found satisfied. Further it was a submission on behalf of the Revenue that such large amount of share premium gives rise to suspicion on the genuineness (identity) of the shareholders i.e. they are bogus. The Apex Court in Lovely Exports (P. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... and circumstances of the present case" 10. We have also made enquiry from the learned Sr. Departmental Representative, whether the investors or this company is a Shell company or in the list prepared by Ministry of Corporate Affairs, Govt. of India. The learned Sr. DR, stated that this information is not available with the department. Further, we made enquiry from the learned Counsel for the assessee whether this company has been strike off from the Registrar Of Companies or not, the learned Counsel stated that it is very much on the register of Registrar Of Companies. In view of these facts, we reach to a conclusion that this is existing company and even the investors are existing. 11. In view of the above facts and circumstances of the case, we are of the view that CIT(A) has rightly deleted the addition and we confirm the same. This issue of revenue's appeal is dismissed 12. In the result, the appeal of Revenue is dismissed. 21. We find that deletion of addition by the ld. Commissioner of Income Tax (Appeals) in this case is in conformity with the expositions of the Hon'ble High Court and the decision of ITAT in assessee's group case as above. Further, we n ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Affairs. The Ministry of Corporate Affairs has struck off some of the shell companies/companies which are inactive with no activity for a long time. However, we also note that in a number of such cases where names have been struck off, fresh applications have been made by the CBDT with the Company Law Tribunal for restoration of those companies whose name has been struck of so that Department can pursue appeals related to them. In light of these facts, we deem it appropriate to remit the issue of addition in the case of Jagdamba Complex Private Limited to the file of the assessing officer so that assessing officer shall examine this case afresh. 23. In the case of M/s. Empower Industries India Limited we find that all the findings of the ld. Commissioner of Income Tax (Appeals) are identical as in case of all other share applicants, except that in this case there has been no reply to the requisition of the assessing officer under section 133(6). All the relevant details like name, address, PAN no., financial statements, income tax returns, bank statements were duly submitted. The ld. Commissioner of Income Tax (Appeals) has confirmed the addition only for the reason of non ..... X X X X Extracts X X X X X X X X Extracts X X X X
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