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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 ..... iating the fact that assessee failed to establish the genuineness and creditworthiness of the investing companies. 2. Whether on the facts and circumstances of the case and in law, the Learned CIT(A) is erred in deleting the addition of Rs. 21,21,90,000/- made u/s. 68 of the I.T. Act. by following judgment of M/s. Lovely Exports without appreciating the fact that the case of Lovely Exports is distinguishable from the facts of this case and the assessee did not discharge the onus cast on it u/s 68 of the I.T. Act. 3. The appellant prays that the order of the Ld. CIT(A) on the grounds be set aside and that of the Assessing Officer be restored. 4. The appellant craves leave to amend or alter any grounds or add a new ground which may be necessary." 3. The only grievance of the Revenue in its appeal is against the deletion of addition made under section 68 of the Act on account of the share application money received by the assessee. 4. The brief facts of the case as emanating from the record are: The assessee is engaged in the business of dealing in shares and securities as investment and trading. For the year under consideration, the assessee filed its return of income on 27/0 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ese shareholders. The assessee also submitted that it made sure that all the shareholders file their reply to the notice issued under section 133(6) of the Act with documentary evidence. 5. The AO vide order dated 20/12/2017 passed under section 143(3) read with section 147 of the Act did not agree with the submissions of the assessee and held that all the 17 companies have huge transactions in the balance sheets but hardly any income was derived by these companies from its business activities. The AO also held that there is a very systematically arranged business ventures and all the funds are routed through proper banking channels. However, the basic element of these companies, i.e. earning profit or income is missing and thus these companies have hardly shown any income in their return. The AO further held that perusal of the financials of all the companies shows that practically no tax was paid and there were huge sundry creditors and advances in relation to purchases shown in the respective books of accounts. Accordingly, the AO held that these attributes are peculiar to the concern engaged in issuing accommodation entries. The AO also noted that the assessee has received a p ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he explanation of the appellant satisfactory. 4.4.4 I find that the facts of this case are covered by the decision of the Hon'ble Supreme Court in the case of Lovely Exports [2008] 216 CTR 195 (SC). In that case the Hon'ble Supreme Court, while dismissing the SLP of the Revenue observed as under: "If the share application money is received by the assessee company from alleged bogus shareholders, whose names are given to the Assessing Officer, then the department is free to proceed to reopen their individual assessments in accordance with law but this amount of share money cannot be regarded as undisclosed income under section 68 of the assessee company." 4.4.5 In my view, the AO erred in not following the decision of the Hon'ble R Supreme Court. The AO has relied on the decision in the case of Vodafone International Holdings B.V. (supra). I find that the decision was in the context of transaction between related parties. 4.4.6 The AO has stated that the transaction (subscription of shares at a premium of Rs. 490/-) is extremely unreasonable. On examining the transaction, I find that the excess amount paid by the subscribers were in effect about Rs. 60.70 per sha ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s of the assessee, however, there was no further investigation by the AO. Further, the AO also did not conduct any enquiry from where the money came in the accounts of the investor. The learned AR further submitted that all the investors are duly filing the return of income and in some of them, scrutiny assessment proceedings were also conducted. It was further submitted that the assessee followed up with all the investors for filing the reply without waiting for the notices issued under section 133 (6) of the Act and thus, all the replies were filed before the AO. 9. We have considered the submissions of both sides and perused the material available on record. In the present case, it is an accepted fact that the return of income filed by the assessee on 27/09/2010 was processed under section 143(1) of the Act. In the assessment year 2013-14, the case of the assessee was selected under CASS for the reason large share premium was received. On the perusal of data filed by the assessee during the scrutiny assessment proceedings for the assessment year 2013-14, it was observed that the assessee has raised share capital by way of the issue of shares at a high premium during the previou ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tax as the income of the assessee of that previous year. Hence, the credit appearing in assessee's books under the head share/security premium is taxable in the hands of the assessee u/s 68 of the Act. The assessee has not disclosed these facts in the return filed. 4. Considering above facts, I have reasons to believe that the income of the assessee escaped assessment within the meaning of section 147 of the IT Act, 1961. Therefore, I am satisfied that this is a fit case to issue notice u/s 148 of the 1.T.Act, 1961". 10. During the course of proceedings under section 147 of the Act, notice under section 133(6) of the Act was issued to all the 17 companies who had invested in shares of the assessee. Out of the aforesaid 17 companies, notices in the case of 5 companies were returned unserved by the postal authorities. However, it is an undisputed fact that the assessee filed replies of all 17 companies to the notice issued under section 133(6) of the Act, which forms part of the paper book from pages 396-417. In order to substantiate the identity of these companies, the assessee also furnished ITR for the year under consideration filed by these companies. The assessee has also ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... g the financial statement. However, no such adverse findings have been brought on record. It is reiterated that most of these companies are assessed to tax and have been subjected to scrutiny proceedings at some point in time. 12. By referring to the assessment orders, forming part of the paper book, of these companies it was alleged that bogus transactions of share application have been found by the Revenue in these companies. In this regard, it is pertinent to note that all the allegations of the Revenue while passing the assessment orders are not in respect of investment made in the assessee company, rather the same was in respect of some other companies, and in most of the cases, the assessment orders do not pertain to the year under consideration. 13. In the present case, the assessee has placed on record the source of funds received by all 17 companies for investing in the shares of the assessee. During the hearing, the learned DR submitted that these sources of funds are from each other. However, from the perusal of the details, forming part of the paper book from pages 418-424, we find 5 such companies have invested in shares of the other companies, which are part of the ..... 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