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TMI Blog2022 (9) TMI 645X X X X Extracts X X X X X X X X Extracts X X X X ..... ooks in guise of share capital premium. The action of the AO is nothing but surmises and conjecture. It is trite law that suspicion how strong it is cannot be made basis for making any adverse inference against the assessee Assessee has fully discharged its onus cast under section 68 of the Act and proved the genuineness of the credit of the share capital and premium in its books of account. Once the transaction of share capital and premium thereon held to be genuine, there is no question of any commission expenses for getting alleged bogus entry on account of such transaction. Therefore we do not find any reason to interfere in the finding of the learned CIT-(A). - Decided in favour of assessee. - ITA No.498/Rjt/2015 - - - Dated:- 27-4-2022 - SHRI MAHAVIR PRASAD, JUDICIAL MEMBER AND SHRI WASEEM AHMED, ACCOUNTANT MEMBER Revenue by: Shri S.S. Rathi, Sr.D.R Assessee by: Shri Kalpesh Doshi, A.R ORDER PER WASEEM AHMED, ACCOUNTANT MEMBER: The captioned appeal has been filed at the instance of the Revenue against the order of the Learned Commissioner of Income Tax (Appeals)-1, Rajkot, dated 17/07/201 arising in the matter of assessment order passed u ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... jkot on the land acquired from GIDC. That area of the land was notified as industrial area by the Government of Gujarat which has resulted the hike in the price of the land area which eventually enhanced the project undertaken by it (the assessee). As such the project undertaken by the assessee became of very lucrative property. The assessee in order to develop its project has approached to the bank namely Rajkot Nagrik Shakari Bank Ltd for the finance which was accorded by the bank subject to the condition that the assessee shall enhance its share capital to the tune of Rs. 3 crores. The assessee, in order to comply the norms of the bank, has approached to the private investors who agreed to invest in the project of the assessee after carrying out due diligence/ verification of the marketability of the project. Furthermore, the shares were issued to the outside companies at a high premium than the premium at which shares were issued to the director promoters in order to have major shareholding in the company with the director promoters. 3.3 The viability of the project can also not be doubted as there was the survey proceedings under section 133A of the Act on account of the pr ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the commission expenses @ 3 % of gross transaction which comes at Rs. 6,75,00,000/- and added to the total income of the assessee. 4. Aggrieved assessee preferred an appeal to the learned CIT-A who deleted the addition made by the AO by observing as under: 4.4 I have perused the assessment order and the written submission filed by the Id. AR in this regard. 4.5 It is seen from the assessment order that, nowhere the AO has held as to where and how the appellant had failed to fulfill the basic ingredients leading to violation of provisions of section 68 of the I T Act. The AO observed that the appellant had raised new share capital 6f Rs. 4,50,000/- with premium of Rs. 2,20,50,000/- from various companies haying its registered office at Ahmedabad by allotting 45000 equity shares. It is undisputed fact that the shareholders made payment of Rs. 2,25,00,000/- through banking channel. The AO further alleged that the appellant company had obtained Rs.2,25,00,000/- in the guise of share capital which was in fact obtained by the appellant company by making compensatory payment of an equal amount of money in cash with payment @ 3% apart paid to middleman for arranging accommoda ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... y it. Therefore, the case of the appellant is squarely covered by the decision of Hon'ble Supreme Court in case of Lovely Exports P. Ltd, 4.9 Besides the undersigned had in the case of Captain Polyplast Ltd. in appeal No. CIT(A)/Jam/220/ll-12 vide order dated 26.06.2014 deleted the identical addition made. Thus the issue under consideration is also covered by various decisions. 4.10 In view of the above, it is held that, no addition on account of share capital within the meaning of section 68, remains in the hands of appellant. However, the AO is free to intimate the'AO of the subscribing companies, if he deems fit so. 4.11 The addition made of Rs. 2,25,00,000/- is therefore directed to be deleted. In the result, the appellant's appeal is allowed on this ground 5. When it has been held that the appellant had fulfilled the onus cast upon it to prove the share capital received by it, the question of making addition of Rs.6,75,000/- being the commission paid to the middleman to accommodate the movement of fund does not arise. This is particularly so because, there is absolutely no evidence to hold this fact. This ground of appeal is allowed. 5. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ions of section 68 of the Act wherein a proviso was inserted but the same is not applicable for the year under consideration. It was brought under the statute with effect from 1st April 2013 and the Hon ble Bombay High Court in the case of CIT vs. Gagandeep Infrastructure Pvt Ltd reported in 80 taxmann.com 272 where it was held that such amendment is prospective and applicable from A.Y. 2013-14 onward. The year before us relates to the assessment year 2012-13 which is not subject to the amendment in the proviso of section 68 of the Act. 8.2 Likewise, there was an amendment under the provisions of section 56(2)(viib) of the Act which states that if the shares have been issued by the closely held company at a price more than the fair market value, then such excess amount shall be treated as income of the assessee from other sources. However, such amendment was made effective with effect from 01-04-2013 from the assessment year 2013-14 which is not applicable in the year under consideration. 8.3 In the light of the above stated discussion we have to test this share capital received by the assessee in the year under consideration on the parameters provided under the provisions of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... It was for the assessee to prove the identity of the creditors, their creditworthiness and the genuineness of the transactions. On the facts of this case, the Tribunal did not take into account all these ingredients which had to be satisfied by the assessee. Mere furnishing of the particulars was not enough. 8.7 Now first we proceed to understand the identity of the party. The identity of the party refers existence of such party which can be proven based on evidences. As such the identity of a party can be established by furnishing the name, address and PAN detail, bank details, ITR etc. 8.8 The next stage comes to verify the genuineness of the transaction. Genuineness of transaction refers what has been asserted is true and authentic. A genuine transaction must be proved to be genuine in all respect not merely on a piece of a paper. The documentary evidences should not a mask to cover the actual transaction or designed in way to present the transaction as true but same is not. Genuineness of transaction can be proved by submitting confirmation of the party along details of mode of transaction but merely showing transaction carried out through banking channel is not ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... for making investment at such a high premium. In our considered view the action of the AO is not justifiable for the reason that the assessee has discharged the onus cast upon it under section 68 of the Act by furnishing necessary details to prove identity, genuineness of transaction and creditworthiness of the parties. However, the AO without pointing out any defect in the documentary evidences submitted by the assessee and investor companies in compliance to notice under section 133(6) treated the impugned transaction of share capital and premium as unexplained merely on basis of some surmise and conjecture. The AO has nowhere brought any material on record suggesting any defect in the evidences available before him. Similarly, there was no allegation that there were cash exchanged between assessee and investor companies. In the absence of any conclusive finding it is difficult to reach to the conclusion that the amount of share capital and premium received from outside companies are nothing but unaccounted money of the assessee taken in books in guise of share capital premium. The action of the AO is nothing but surmises and conjecture. It is trite law that suspicion how stron ..... X X X X Extracts X X X X X X X X Extracts X X X X
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