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TMI Blog2022 (12) TMI 685X X X X Extracts X X X X X X X X Extracts X X X X ..... s) under protest. The Ld. Assessing Officer ("AO") completed the assessment of all the three years on 31.03.2016 under section 143(3) r.w.s. 153C of the Act in which he made the following addition under section 68 of the Act: Assessment Year Addition 2011-12 Rs. 1,05,00,000 On protective basis Rs. 33,77,29,500 On substantive basis 2012-13 Rs. 6,60,00,000 On protective basis 2013-14 Rs. 1,44,00,000 On protective basis Rs. 1,35,10,464 On substantive basis 3. Aggrieved, the assessee carried the matter in appeal before the Ld. CIT(A). For AY 2011-12 the Ld. CIT(A) discussed the issue in para 5.4 of his order which is reproduced below: "a. With regard to factual ground it has been submitted by the appellant that during the year under assessment the assessee company invested in the shares / given loans and advances to companies of JP Minda group and in respect of amount so invested addition have been made in the hands of companies of JP Minda group u/s 68 of the Income Tax Act on substantive basis and the addition in the hands of appellant have been made on protective basis. The Assessing officer made the addition in the hands of the assessee company on protective basi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rence to documents submitted by the JPM Group companies but the AO has not pointed out discrepancy in the documents/information's submitted either by the investor companies or the JPM Group companies. The appellant's AR has also submitted that from the perusal of the Balance Sheet and Bank Statements etc filed during the course of assessment proceeding of the investor companies it may be observed that the companies have adequate net worth to invest in shares of the assessee company and the share application money were received by the appellant / JPM Group companies by way of account payee cheques through normal banking channels. 5.4.6 Basic facts are undisputed. The subscribing companies, including the subscriber for this AY, are existing assessee on the record of the department and are also regularly filing returns under the companies Act. The AO states that the income declared was not sufficient to subscribe to the share capital of the appellant company and pay premium thereon. It is to be noted that income is not the only criteria determining the ability to pay or investments by an entity depends on availability of funds/cash & it may not be current income. A payment may be m ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... er it had also not been disputed that the share application money was received by the assessee by way of account payee cheques, through normal banking channels. Admittedly, copies of applications for allotment of shares were also provided to the Assessing Officer. It was not the case of the AO that the share applications were not signed on behalf of the applicant companies and was forged documents. It was also not the case of the AO that the shares were not actually allotted to the companies. Therefore, the ground of the Assessing Officer for invoking provision of section 68 of the Income Tax Act is not justified. 5.4.7 No case have been made that cash have been deposited in the bank accounts of these companies before transferring the funds to the bank account of Assessee Company. The Assessing Officer has also referred to Inspector report in the assessment order. In this regard the appellant objected that the report of the Inspector was never made available before completing the assessment. Further all the notices issued u/s 133(6) of the Income Tax Act were duly served to the shareholders and the reply of the same have also been received by the Assessing Officer and these fact ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nds of appellant have been made on protective basis. The Assessing officer made the addition in the hands of the assessee company on protective basis on the ground that investment made in the companies of JP Minda group is not genuine. 5.4.2. The AO has made protective addition of Rs 1,44,00,000/- in case of the assessee on account of equity addition. The substantive addition was made in other group companies. As the additions there have been deleted, the infusion of share capital has to be examined in this case being singular entry point in light of the amended provisions of law. Further, the AO also made substantive addition of 1,35,10,464/- of such credit entries which ultimately enable the assessee to funnel the funds in the so called equity flow. Ld AR has stated m letter dated 27/10/2017 as under- "In continuation of our earlier submission we have to submit as under: In the assessment order it has been observed by the learned Assessing assessee failed to give the details of credit appearing in the observation made by the learned Assessing officer shows lack of application of mind. In this regard Para no 2 of the assessment order is being reproduced as under. 2 Assess ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... se be deleted. We hope you will find the above details in order. We shall be pleased to submit any further information as may be required in this connection with the above matter. " The addition to the extent of Rs 13510464/- cannot be made as it amounts to double taxation and the assessee is bound to be allowed the benefit of telescoping. This addition is, therefore, directed to be deleted. 5.4.3. In respect of the addition of Rs 14400000/- on account of equity on protective basis, it is required to refer to here the section 68 as amended effective from AY 2013-14 onwards. The section confers enhanced onus on the investing entity in the assessee by virtue of the proviso. This reads as under- "Cash credits. 68. Where any sum is found credited in the books of an assessee maintained for any previo us year, and the assessee offers no explanation about the nature and source thereof or the explanation offered by him is not, in the opinion of the Assessing Officer, satisfactory, the sum so credited may he charged to income-tax as the income of the assessee of that previous year: Provided that where the assessee is a company (not being a company in which the public are s ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... her sources , if, it is not, chargeable to income-tax under any of the heads specified in section 14, items A to E. (2) In particular and without prejudice to the generality of the provisions of sub-section (1), the following incomes, shall be chargeable to incometax under the head Income from other sources", namely :- ------- (viib) where a company, no, being a company in which the public are substantially interested, receives, in any previous year, from any person being a resident, any consideration for issue of shares that exceeds the face value of such shares, the aggregate consideration received for such shares as exceeds the fair market value of the shares: Provided that this clause shall not apply where the consideration for issue of shares is received- (i) by a venture capital undertaking from a venture capital company or a venture capital fund; or (ii) by a company from a class or classes of persons as may be notified by the Central Government in this behalf. Explanation-For the purposes of this clause,- (a) the fair market value of the shares shall be the value- (i) as may be determined in accordance with such method as may be prescribed or (ii) as may b ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e basis in AY 2012-13 and deleting the addition of Rs. 1,35,10,464/- allowing the assessee's claim of telescoping in AY 2013-14. 7. We have heard the Ld. Representative of the parties, considered their arguments and perused the material on the records. In so far as the AY 2011-12 and 2012-13 are concerned, we observe that the Ld. CIT(A) has recorded finding of fact and came to the conclusion that all the investments made by the assessee are genuine. The Ld. DR could not controvert the above finding recorded by the Ld. CIT(A) in both the years. We, therefore, decline to interfere with the order of the Ld. CIT(A) for both the years and reject the appeals of the Revenue for AY 2011-12 and 2012-13. 7.1 As regards the AY 2013-14 perusal of the appellate order would reveal that it was contended by the assessee that the substantive addition of Rs. 1,35,10,464/- is the amount credited to the bank account which have been realised by liquidation of investment/loans and advance. The amount so realised by liquidation of investment/loans and advance of Rs. 1,35,10,464/- have been invested in the companies of J.P. Minda Group in respect of which addition have been made on protective basis. As ..... X X X X Extracts X X X X X X X X Extracts X X X X
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