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TMI Blog2024 (1) TMI 56X X X X Extracts X X X X X X X X Extracts X X X X ..... ised under the head share capital and premium by it in AY 2012-13 are explained in the hands of TEVPL, consequently, we find it appropriate to affirm the decision of Ld CIT(A) to vacate the addition received as share capital from M/s TEVPL. Share applicants money received from the second share applicant, M/s Moon Shine Mercantile Pvt. Ltd. AR furnished all the necessary documents Qua the source and also pertaining to source of source to establish that the funds received by the assessee company are duly explained, but, the same were not found satisfactory for the reason that the financials of the Share subscriber i.e., M/s Moon shine Mercantile Pvt. Ltd. and its source company i.e., M/s Rudra Mukhi Financials Pvt. Ltd. have shown merger / negative income in their ITR also audited financials of the source of source M/s Rule Mukhi Financials Pvt. Ltd. are not found furnished before us. From the records available it is evident that such information was not furnished before the revenue authorities too, thus the onus cast upon the assessee in terms of 1st proviso to section 68 was not satisfied at any stage of assessment proceedings or appellate proceedings. Thus, it can be conclu ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he Ld. CIT(A) has erred in law in drawing a conclusion which cannot be drawn by any reasonable person or authority, on the material and facts placed before it? 7. The order of the Ld. CIT(A) is erroneous both in law and on facts. 8. Any other ground that may be adduced at the time of hearing of appeal. 3. Grounds of appeal raised by the assessee in its Cross objection no. 08/RPR/2018 are as under: 1. That under the facts and the law the learned CIT(Appeals), after considering the facts and law of the case, has rightly deleted the addition of Rs. 5,07,50,000/- 4. In brief, facts of the case culled out from records are that the assessee company has filed its return of income for the A.Y. 2014-15 on 18.03.2015 showing a total income of Nil. The case of the assessee was subsequently selected for scrutiny under CASS . Necessary statutory notices were issued and in response the counsel of the assessee have attended the assessment proceedings from time to time. The books of accounts have been examined on test check basis and return submission filed by the assessee are placed on records. During the assessment proceedings Ld. AO observed that the assessee company has raised ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... to section 68 of the Act. Aggrieved by the impugned order of Ld. AO, assessee preferred an appeal before the Ld. CIT(A), wherein the Ld. CIT(A) has observed that the assessee company has discharged its onus in respect of Identity, Capacity, Genuineness, and source of investment of the share subscribers and therefore the addition made by Ld. AO was vacated. 5. The order of the Ld. CIT(A) was not considered as satisfactory by the department and, therefore, they had preferred the present appeal before us. 6. The controversy raised by department by raising 8 grounds, are with regard to a single controversy with respect to receipt of share capital from shell / brief case companies by the assessee company and therefore the same should be considered as bogus income of the assessee company for the AY 2014-15 applying the provisions of section 68 of the Act. 7. At the outset Ld. AR on behalf of the assessee has submitted that the assessee has received share capital from two companies namely M/s Third Eye Vinimay Pvt. Ltd. for Rs. 4,84,50,000/- and M/s Moonshine Mercantile Pvt. Ltd. for Rs. 23,00,000/-. It was the submission of Ld. AR that the assessee has duly submitted all the nec ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ted 20.02.2018. In the para 7 of the remand report dated 08.03.2018 has not objected to the admission of the additional evidence. Accordingly, the additional evidence filed by the assessee are admitted and appeal is decided after considering the additional evidence. The appellant has also submitted further application u/r 46A requesting for admittance of the additional evidences to explain the sources of the source. 2. In GOA No. 4, the addition made for share application money and share premium of Rs. 5,07,50,000/- is decided as under: - (i) The assessee has issued at par 50,75,000 equity shares of Rs. 10 each and has received Rs. 5,07,50,000/- Out of this amount share application money of Rs. 4,84,50,000/- was received from Third Eye Vinimay Pvt Ltd and amount of Rs. 23,00,000/- was received from M/S Moon Shine Mercantile Pvt Ltd. The AO was not satisfied with the explanation of the assessee about source of amount invested by share applicant company hence he treated share application of Rs. 5,07,50,000/- as unexplained cash credit and added under section 68. (ii) The AO has made the addition because the assessee company was not carrying on any business activity during ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d investment was invested by the share applicant company as share application money in the assessee company. In support of this contention, the assessee filed the copy of bank statement etc of firm / company to whom M/s Third Eye Vinimay Pvt Ltd and M/S Moon Shine Mercantile Pvt. Ltd. the old investment of share was sold. The assessment order nor in the remand out any defect or deficiency in the assessee and bank statement, balance person to whom share applicant company shares or in the bank statement of share which suggest the non-genuineness application money transaction. (vi) Further both the share applicant companies Third Eye Vinimay Pvt Ltd. and M/S Moon Shine Mercantile Pvt Ltd are regular assessee of income tax and it is not the case of the AO of the assessee company that the AO of M/S Third Eye Vinimay Pvt Ltd and M/S Moon Shine Mercantile Pvt Ltd has not accepted these companies explanation about Source of investment in the assessee company. The amount invested by M/S Third Eye Vinimay Pvt Ltd and M/S Moon Shine Mercantile Pvt Ltd in the assessee company is appearing in their audited balance sheet. (vii) In the case of CIT vs. Abdul Aziz (2012) 251 CTR 0058 the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ine Mercantile Pvt Ltd. Accordingly, the AO was not justified in treating share capital of Rs. 5,07,50,000/- received by the assessee during the previous year relevant to assessment year 2014-15 as unexplained adding the same to the income of the assessee. (x) In result, the addition of Rs. 5,07,50,000/- is directed to be deleted. 8. Apropos, the share capital receives from M/s Third Eye Vinimay Pvt. Ltd., Ld. AR has further apprised before us that, the case of the Third Eye Vinimay Pvt. Ltd. for the AY 2012-13 was taken-up for scrutiny assessment, wherein the funds raised during the year in the form of Share capital and share premium has been entirely added to the income of Third Eye Vinimay amounting to Rs. 12,77,50,000/-, treating the same as unexplained income u/s 68 of the I.T. Act. Aggrieved by the said assessment order passed u/s 143(3) dated 25.03.2015, Third Eye Vinimay has preferred an appeal before the Ld. Jurisdictional CIT(A), however while the appeal with the 1st appellate authority was pending, the total demand raised by the Assessing Officer for Rs. 5,63,69,948/- for the AY 2012-13, which was disputed by the assessee, has been offered to be settled under th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... as Scheme (VSVS), thus, it was the submission that the tax paid funds of the share applicant considered under VSVS should be treated as explained funds received by the assessee company in the present case. Ld. AR drew our attention to the share capital and share premium figures in the aforesaid summary of balance sheet for 3 Assessment years and has shown that there was no change in the share capital and funds of the Third Eye Vinimay Pvt. Ltd., therefore, it is evident that the funds invested in the assessee company are sourced out of the share capital receipt of the investor company in the AY 2012-13, which has already been offered for tax under the VSVS, resultantly the same became the income of the investor company and as such are to be treated as explained funds, thus, without any further dispute the funds invested are characterized as explained. There is no scope to consider such funds as bogus within the provisions of section 68. 11. With regard to the remaining share capital received by the assessee company from another share subscriber company M/s Moon Shine Mercantile Pvt. Ltd. for Rs. 23/- lacs, Ld. AR has strongly trusted upon the documents of the share applicant and ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... orm of financials of the TEVPL, thus, sounds to be worth concurrence, thus, in terms of aforesaid observations, we are of the considered opinion that, the amount of share capital received by the assessee from TEVPL of Rs. 4,84,50,000/- are tax paid funds thus in the nature of explained sources, the same can t be taxed again by bringing the same in the sweep of provisions section 68 of the I.T. Act. Thus, on account of declaration by the investor company under VSVS and payment of taxes on the disputed addition, the funds raised under the head share capital and premium by it in AY 2012-13 are explained in the hands of TEVPL, consequently, we find it appropriate to affirm the decision of Ld CIT(A) to vacate the addition to the extent of Rs. 4,84,50,000/- received as share capital from M/s TEVPL. 15. Regarding share applicants money received from the second share applicant, M/s Moon Shine Mercantile Pvt. Ltd. (MSMPL) for Rs. 23,00,000/ , Ld. AR furnished all the necessary documents Qua the source and also pertaining to source of source to establish that the funds received by the assessee company are duly explained, but, the same were not found satisfactory for the reason that the f ..... X X X X Extracts X X X X X X X X Extracts X X X X
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