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TMI Blog2021 (1) TMI 728X X X X Extracts X X X X X X X X Extracts X X X X ..... HYA (AM) :- These are appeals by the assessee against respective orders of learned Commissioner of Income Tax (Appeals) [in short learned CIT(A)] for assessment years 2009-10 and 2010-11 respectively. 2. Since the appeals have common issues and were heard together, these are being consolidated and disposed of by this, common order. 3. The grounds of appeal raised are common except for the amounts, the grounds of appeal for assessment year 2009-10 are reproduced hereunder for the sake of reference :- GROUNDS OF APPEAL IN APPEAL AGAINST ORDER DT. 22.11.2018 OF CIT(A) U/S. 250 R.W.S. 143( 3) S. 147 I. Re-opening and Re-assessment 1. The Ld. CIT(A) erred in law and on facts in upholding the action of Id. AO in re-opening the completed assessment and in re-assessing the total income without any basis in law and any valid reason to believe that Income has escaped the assessment and without application of mind by relying upon the information received from ADIT (Inv.), Unit 7(4) and in violations of various provisions of law. 2. Your appellant submits that Ld. CIT(A) was not in possession of any information nor any mind was applied by him to such alleged infor ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... o facts from A.Y. 2009-10. 5. Brief facts of the case are that in this case, return of income was filed on 12.11.2009 declaring total income at NIL. The assessee company was earlier known as M/s. Concept Land Developers Builders Pvt. Ltd. The Hon ble Bombay High Court vide order dated 04.04.2014 sanctioned the scheme of amalgamation of Ketal Builders Land Developers Pvt. Ltd., Raja Food Products Pvt. Ltd. and Teejay Sugars Pvt. Ltd. with Concept Land Developers Builders Pvt. Ltd. Subsequently on 20-03-2015, the assessee-company changed its name to M/s. Moraj Realty Pvt.Ltd. A search action was carried out in Gurnani Group on 04.02.2016 and Shri Vipul Vidur Bhatt on 05.02.2016. Based on the information received from the Investigation Wing that the amalgamating companies were the beneficiaries of the accommodation entries provided by the companies operated by Shri Vipul Vidur Bhatt (hereafter call VVB), notice u/s. 148 dated 31.03.2016 was issued in the cases of amalgamating companies i.e. M/s. Raja Food Products Pvt. Ltd. and M/s. Teejay Sugars Ltd. In response the assessee company stated that the return of income earlier filed by the amalgamating companies should be treate ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... g companies did not have financials to justify such huge infusion of funds towards share capital. These two companies did not have any history of declaring dividend prior to the allotment of shares or after this allotment of shares. Thus, no genuine investor could have subscribed to the shares of these two amalgamating companies. There was always a meager balance in the bank account of the investors. The financials of the investor companies were also examined by the Assessing Officer. The Assessing Officer noted that these investing companies had invested in shares in other companies, on which there was no returns received. There was no dividend received. Further, source of the funding of the investor companies showed that the shares in the two amalgamating companies have been allotted at huge premium, which forms the substantial portion in the financials of the invested companies. Though the investor companies have shown to have received huge unsecured loans exceeding ₹ 50,00,000/- as on 31.03.2009, no interest has been paid on such huge borrowings. Thus, the on 31.3.2009, no interest has been paid on such huge borrowings. That thus, the only possibility was the huge rese ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... td. which amalgamated with Concept Land Developers and Builders Private Ltd. now known as Moraj reality the assessee company. That the share applicants were operated by VVB. That these two amalgamating company did not have financial track record that any 3rd party would subscribe to their capital. That the investor companies have negligible profit. That there cannot be clinching evidence of cash deposits before issue of cheques since the Hawala Operators operate a sophisticated system in which the needs of persons seeking cash and persons offering cash are squared up and all cash does not show up clearly in the bank accounts. That however, in such large scale operation of Hawala Syndicates, one to one correlation is impossible. That Shri Vipul Vidur Bhatt had admitted to providing accommodation entry for commission in the course of search when confronted with the evidences found. That there cannot be any allegation of threat or coercion in recording of the statements. 10. Thereafter learned CIT(A) referred to several case laws including Delhi High Court decision in the case of N R portfolio, N. Tarika Property Ltd., Empire Buildtech, ITAT decision in the case of Subhalakshmi Van ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ssessee was never provided an opportunity to cross examine the alleged bogus entry operator the search in whose case is the basis of action of the assessing officer. In this regard learned counsel of the assessee referred to several case laws including that from Supreme Court in the case of M/s. Andaman Timber Industries Vs. Commissioner of Central Excise (Civil Appeal No. 4228 of 2006). The learned counsel further submitted that even the said VVB in his statement never mentioned the name of the assessee as beneficiary of bogus entry operation. Moreover the said VVB had duly retracted the statement. The learned counsel of the assessee further submitted that Assessing Officer has referred a notice issued u/s. 133(6) of the Act for A.Y. 2009-10. That the assessee has asked under RTI information about the said notice under section 133(6) issued by the assessing officer to only one of the shareholders. Learned counsel submitted that in response it was stated that copies of notice issued under section 133(6) were not available. Hence, learned counsel submitted that the so called inquiry by the Assessing Officer is an incomplete one lacking credibility. 14. Per contra learned departme ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e assessee s plea is that assessee has duly discharged its onus. That all the necessary details regarding the shareholders have been provided. In this regard we note that assessee has clearly provided the details of source of share capital. All the details of bank statement. Registrar of company (ROC), details, income tax details financials and confirmation by the investing companies were submitted. Hence assessee has duly discharged its onus. The amended provisions of section 68 which empower the Assessing Officer to examine the source of source were brought into the statute books with effect from 1.4.2013. The honourable Bombay High Court in the case of Gagandeep Infrastructure has clearly provided that the said provisions are not retrospective and are applicable for A.Y. 2013-14 onwards. Hence the adverse inference drawn by the authorities below in this regard is not sustainable. 17. Moreover, except for relying on the statement of VVB the Assessing Officer has not done any inquiry himself except for referring to a notice issued under section 133(6) in A.Y. 2009-10 only. The learned counsel of the assessee has challenged the very veracity of this observation. He has submit ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... roviso 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 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 of Section 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 ex ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... iction. In the present case the person who have subscribed to the share and paid share premium have admittedly made statement on oath before the Assessing Officer as recorded by the Tribunal. No finding in this case has been given by the Authorities that shareholder/share applicants were unidentifiable or bogus. High Court find that the impugned order of the Tribunal upheld the view of the CIT(A) to hold that share premium is capital receipt and therefore, cannot be taxed as Income. This conclusion was reached by the impugned order following the decision of this Court in Vodafone India Services Pvt. Ltd. (supra) and of the Apex Court in M/s G.S. Homes and Hotel P. Ltd. (supra). In both the above cases the Court has held that the amount received on issue of share capital including premium are on capital account and cannot be considered to be income. It was further pertinent to note that the definition of income as provided under Section 2(24) of the Act at the relevant time did not define as income any consideration received for issue of share in excess of its fair market value. This came into the statute only with effect from 1st April, 2013 and thus, would have, no applicatio ..... X X X X Extracts X X X X X X X X Extracts X X X X
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