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TMI Blog2022 (1) TMI 727X X X X Extracts X X X X X X X X Extracts X X X X ..... hree ingredients required to be proved under Section 68 of the Act. In fact, the addition even thereafter is not sustainable in the absence of any adequate enquiry made by the Revenue. As relying on decision of the ITAT, Kolkata Bench in the case of ITO Vs. Savera Towers P.Ltd., [ 2019 (1) TMI 1328 - ITAT KOLKATA ] wherein it was observed that all the share subscribers are duly assessed to income tax and the transaction with the assessee company are duly routed through banking channels and are duly reflected in their respective audited balance sheets, as were placed on record. Once the receipt of share capital has been accepted as genuine within the purview of section 68 of the Act, there is no reason for the ld.AO to doubt the share premium component received from the very same shareholders as bogus. This fact is identical to that of the fact available with us. At the cost of repetition, we would like to mention that addition under section 68 cannot be justified in the absence of any inquiry done by the ld.AO by exercising powers conferred under the statutory provisions as already observed by us hereinabove. Thus, in the absence of proper inquiry made by the ld.AO, impugn ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... was not satisfied with the credit-worthiness of the creditors and genuineness of the transaction. The directors of shareholding companies, since not appeared though directed the duty cast upon the appellant to prove genuineness of the share allotment was not discharged, and therefore, share premium to the tune of ₹ 11,77,50,000/- has been added to the total income of the assessee, treating the same as bogus by invoking provisions of section 68 of the Act. The ld.AO, as we find from these order, discussed at length about the high premium and accepted ₹ 28,31,888/- towards share capital (at ₹ 9.62 per equity share), but treated ₹ 11,49,18,112/- being the excessive share premium. However, no addition under section 56(2)(viib) of the Act was made while doing so. The relevant observation of the ld.AO is reproduced hereinbelow: 5.21 In view of the above, computation ii is clear that the fair market value of the allotted equity shares amounts to ₹ 9.62/- per equity shares. The assessee company has allotted 2,94,375/- equity shares during the period and fair market value of these shares amount to ₹ 28,31,888/-. The assessee company has received ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... uineness and credit worthiness is not proved. 2.7 That when the assessee has proved the identity and also the transaction is through banking channels for which the bank statements are also furnished, the summons issued have also been served and replied, the ingredients of proving share capital is proved. For this proposition reliance is placed on following decisions:- i)Honorable Rajasthan High Court in the case of Barkha Synthetics Ltd. Vs. ACIT reported in 283 ITR 0377 held that the principle relating to burden of proof concerning the assesse is that where the matter concern the money receipt by way of share application from investors through banking channel the assessee has to prove existence of person in whose name share application is received. Once the existence of investor is proved, it is no further burden of assessee to prove whether that person itself has invested said money or some other person had made investment in the name of that person. The burden then shifts on revenue to establish that such investment has come from assessee-company itself. -CIT vs. Shree Barkha Synthetics Ltd. (2003) 182.CTR (Raj) 175 followed ii) Honorable Delhi High Court in the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Reported in 292 ITR 0241 held that the source of CR was not essential to be proved inasmuch as the assessee had been able to prove the identity, entry and source of the third party and it should be regarded that the assessee has been able to discharge the onus. In view of the aforesaid, as far as the transaction relating to purchase of silver made by the assessee firm from CR on credit basis which finds mention in the books of accounts it could not have been added on the basis of suppression. vii)Honorable Delhi High court in the case of CIT vs. Divine Leasing Finance Ltd. Reported in 207 CTR 0038 held that there cannot be two opinions on the aspect that the pernicious practice of conversion of unaccounted money through the masquerade or channel of investment in the share capital of a company must be firmly excoriated by the revenue. Equally, where the preponderance of evidence indicates absence of culpability and complexity of the assessee is should not be harassed by the revenue's insistence that it should prove the negative. In the case of a public issue, the company concerned cannot be expected to know every detail pertaining to the identity as well as financial wo ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of CIT vs. Kansal Fincap Ltd. Reported in 221 Taxman 151 Section 68: Cash credits -Share application money - No addition shall be made in the hands of the assessee where transaction related to the receipt of share application money are genuine and are fully recorded by the share applicants. x) HONORABLE AHMEDABAD, IT AT TRIBUNAL (A) In The Case of ITO vs. APEX THERM PACKAGING PVT. LTD. When full particulars, inclusive of confirmation with mane, address and PAN Numbers, copy of Income Tax Returns, balance sheet, profits and loss accounts and computation of total income in respect of all creditors were furnished and when it had been found that loan received through cheques and loan account were duly reflected in balance sheet, AO was not justified in making addition u/s 68. xi)Honorable Delhi High court in the case of CIT vs. Expo Globe India Ltd. 82 CCH 0477 Income - Cash credits Share application money - AO held assessee/ respondents to have received share application money to extend of Rs. X and disallowed same on ground that assessee had not provided satisfactorily explanation - CIT (A) delete disallowance and ITA T upheld same - held, AO had initially concluded on ba ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... (Appeals), up held the addition. On appeal to the Tribunal, the Tribunal held that since the identity of share applicants had not been established, the initial onus laid down under section 68 had not been discharged and thus addition made to be upheld. In view of the facts of the case and case laws cited above, the addition of ₹ 117750000/- made by the AO u/s.68 is illegal and wrong. The same therefore requires to be deleted. 4. However, relying upon certain judgments as mentioned in the impugned order, the ld.CIT(A) confirmed the addition with the following observations: . .. The appellant company was obliged to prove:- (a)The identity of the alleged share holders. (b) The credit worthiness of the share holders. (c)The genuineness of the transactions. But it is clear from the facts as discussed above that the appellant could not prove the same, therefore, in the light of above facts and case laws as discussed above, I am of the considered view that the AO was justified to make addition u/s 68 of the IT Act. Therefore, the addition made by the AO amounting to ₹ 11,77,50,000/- is confirmed. Therefore, the appeal on these grounds ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... se mentioned above. It is also a trite law that an addition made without making any investigation and/or inquiry and only on surmise and conjectures is required to be deleted. The AO under statutory provisions has to carry out his own investigation by exercising powers conferred under section 131 of the Act, which is absent in the instant case before us. On this issue, the following judgments as relied upon by the ld.AO has been considered by us carefully: i) PCIT Vs. M/s.Chain House (MP High Court, 408 ITR 561 (SLIP of Revenue dismissed) ii) CIT Vs. M/s.Ami Industries (India) P.Ltd., (Bom-HC) iii) PCIT Vs. NRA Iron Steel P.Ltd.(SC) iv) PCIT Vs. Parth Enterprises (Bombay HC), 103 CCH 0398 v) CIT Vs. Divind Leasing, 299 ITR 268 (Del) vi) PCIT Vs. Himachal Fibres Ltd., 259 Taxman 4 (Del) (SLP of Revenue dismissed vii) Nishant Finance P.Ltd. (ITAT Indore) viii) M/s.Janani Infrastructure P.Ltd. Vs. ACIT (ITAT, Bangalore) ix) ITO Vs. M/s.Baba Bhootnath Trade Commerce Ltd. (ITATKolkata) x) Hariom Concast Steel P.Ltd., (ITAT Hyd) xi) DCIT, Mumbai Vs. ACRO Exports Trading P.Ltd. (ITAT-Mum) 8. We also note that there must be more than the bare su ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... -worthiness of the share holders and genuineness of the transactions being the balance sheet, bank statement, audited accounts, and the affidavit of the companies provided share premium were not doubted as non-genuine. The Ld. AO accepted genuineness of the share capital to the extent of its par value, it can be concluded that the Ld. AO was satisfied with three ingredients required to be proved under Section 68 of the Act. In fact, the addition even thereafter is not sustainable in the absence of any adequate enquiry made by the Revenue. On this aspect, we have relied upon the judgment passed by the Coordinate Bench in the case of Nishant Finance P.Ltd. in ITA No.181 and 472/Indi/2017. Relevant portion of this order reads as follows: In the light of above judgments and given facts and circumstances of the case are of the considered view that the appellant i.e. the assessee has been successful to prove the genuineness, creditworthiness and identity of the alleged cash creditors on account of the fact that all the relevant details and supporting-documents are placed on record. The documents filed in support of identity, creditworthiness and genuineness i.e. Profit loss a ..... X X X X Extracts X X X X X X X X Extracts X X X X
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