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TMI Blog2023 (6) TMI 1213X X X X Extracts X X X X X X X X Extracts X X X X ..... the investors in the present case to satisfy the test of creditworthiness of the investor and genuineness of the transaction, against which no contrary material has been brought on record. - Decided against revenue. - ITA no. 3788/Mum./2019 And Cross Objection no. 143/Mum./2021 (Arising out of ITA no. 3788/Mum./2019) - - - Dated:- 23-6-2023 - Shri S. Rifaur Rahman, Accountant Member And Shri Sandeep Singh Karhail, Judicial Member For the Assessee : Shri N.R. Agrawal For the Revenue : Smt Shailja Rai ORDER PER SANDEEP SINGH KARHAIL, J.M. The present appeal by the Revenue and cross objection by the assessee have been filed challenging the impugned order dated 29/03/2019, passed under section 250 of the Income Tax Act, 1961 ( the Act ) by the learned Commissioner of Income Tax (Appeals) 20, Mumbai, [ learned CIT(A) ], for the assessment year 2010 11. ITA no.3788/Mum./2019 Revenue s Appeal A.Y. 2010 11 2. In its appeal, the Revenue has raised the following grounds: 1. Whether on the facts and circumstances of the case and in law, the Learned CIT(A) was justified in deleting the addition of Rs. 21,21,90,000/- made by the AO as unex ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ct. The said objections were disposed off vide order dated 07/08/2017. During the proceedings under section 147 of the Act, the assessee submitted the list of 17 companies along with their name, address, PAN, number of shares, and the amount received. Pursuant thereto notices under section 133(6) of the Act were issued to these companies to verify their genuineness, creditworthiness, and identity. But the notice issued to 5 companies was returned unserved by the postal authorities. On perusal of details/documents, the Assessing Officer ( AO ) observed that 17 companies that have paid share application money have no genuineness and creditworthiness to invest in the equity shares of the assessee. It was further observed that 17 companies have very meagre income with respect to their turnover. Accordingly, the AO asked the assessee to explain why the entire share premium with capital received from 17 companies be not added under section 68 of the Act, as the assessee has failed to prove the genuineness and creditworthiness of the investor companies. In response thereto, the assessee submitted that these companies have share capital and reserves in the balance sheets, which run into cr ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... m of Rs. 490 per share, which no prudent investor would pay. Accordingly, the AO treated the entire share application money from 17 companies as unexplained cash credit and added the same to the income of the assessee under section 68 of the Act. 6. The learned CIT(A), vide impugned order, deleted the aforesaid addition by observing as under:- 4.4.3 I find that the appellant furnished the names and PAN of subscribers, the balance sheets of subscribers. There is also no dispute that the appellant received those sums from the payees. I also find from the assessment order that the appellant had furnished the copy of acknowledgment of return, balance sheet, profit and loss account, copy of PAN card, and ledger of share application money of the subscribers. The AO, however, refused to accept that any person would have actually subscribed to the shares in such high rates when the intrinsic value of the shares was only Rs. 10/- per share. The AO held that what was apparent was not real. He alleged that the purported investors had been used by the appellant for introduction of capital into its books in the garb of share application and the whole transaction is only a colourable dev ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... as returned unserved by the postal authorities. It was further submitted that the financial position of the assessee does not support receiving huge premiums from the investors. Further, there is no material available on record as to how the investors were contacted for making the investment. It was further submitted that some of the investor companies have common addresses, common directors, and auditors. Further, by referring to the details of the source of funds of these companies, the learned DR submitted that the funds were received from each other. By referring to the assessment orders passed under section 143(3) of the Act in the case of certain investor companies, the learned DR pointed out the transactions which have been found to be colourable by these entities. The learned DR further submitted that the reply by all the investors to the notice issued under section 133(6) of the Act is similar. 8. On the contrary, the learned Authorised Representative ( learned AR ) submitted that the assessee is not concerned with the bank balance of the shareholders/investors. It was submitted that all the investors have a huge share capital and reserves surplus. The learned AR furt ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... urn of income was processed u/s 143(1) of the I.T Act. 2. In this case AY 2013-14 was selected under CASS for the reason Large Share Premium receive On perusal of the details filled during the year the course of assessment proceedings for A.Y. 2013-14 it was seen that assessee company has raised share capital by the way of issue of shares at high premium during the previous year corresponding to the AY 2010-11. 3. During the assessment year 2010-11, the assessee had issued 4,23,380 shares of face value at Rs 10/- and charged premium of Rs 490 per share. The assessee had received Share Capital of Rs 42,33,800/- Share Premium of Rs. 20,74,56,200/-, the premium charged is 4900% of the face value and not comparable with the intrinsic value of the shares of company as on date of issue. The assessee has not earned any substantial profits or paid taxes in the year under consideration or in the preceding year which is apparent from record. The above facts of the case, do not justify issue of shares at a premium and the nature and sources of such unjustified premium is therefore required to be examined within the meaning of provisions of section 68 of the 1.T. Act 1961. Once the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... on record to show that after receipt of the aforesaid information the AO has raised any doubt regarding the information so furnished. 11. During the hearing, the learned DR submitted that all the replies to the notices issued under section 133(6) of the Act are similar. However, no material has been brought on record to deny the claim made in the reply to notices issued under section 133(6) of the Act. It was also submitted that some of the directors are common in some of the companies that have invested in shares of the assessee. However, nothing has been brought on record to show that the same has led to the alleged manipulation. Further, despite the above allegation the identity of such directors has not been questioned. It was also submitted that these companies have the same auditors. We find no prohibition in the law regarding the same. Further, it was alleged that the same directors have signed the financials of 2 companies at different locations on the same date. In this regard, it is pertinent to note that apart from making this allegation, no evidence/material has been brought on record by the Revenue that the assessee has in any manner controlled the affairs of these ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... relied upon by the learned DR, we find that the assessing officer found the circuitous transaction conducted by the taxpayer and investors in the facts of that case. However, in the present case, apart from making bald allegations, the Revenue did not bring any such material on record to substantiate its claim. Thus the said decision is factually distinguishable. Therefore, in view of our aforesaid findings and in light of the peculiar facts of the present case, we find no infirmity in the impugned order passed by the learned CIT(A). As a result, the grounds raised by the Revenue are dismissed. 15. In the result, the appeal by the Revenue is dismissed. Cross Objection no.143/Mum./2021 by Assessee (Arising out of Revenue s Appeal being ITA no.3788/Mum./2019 for A.Y. 2010 11 16. As we have dismissed the appeal filed by the Revenue, the cross-objection filed by the assessee becomes infructuous and is accordingly dismissed. 17. In the result, the cross-objection by the assessee is dismissed as infructuous. 18. To sum up, the appeal by the Revenue and cross objection by the assessee are dismissed. Order pronounced in the open Court on 23/06/2023 ..... X X X X Extracts X X X X X X X X Extracts X X X X
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