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TMI Blog2019 (11) TMI 1823X X X X Extracts X X X X X X X X Extracts X X X X ..... f said order. The question as to whether such a swapping of shares invites unexplained cash credits addition u/s. 68 or not stands answered in assessee s favour in ITO Ward-5(3) Kolkata vs. M/s Bhagwat Marcom Pvt. Ltd [ 2019 (8) TMI 649 - ITAT KOLKATA] wherein as held when the cash did not pass at any stage and since the respective parties did not receive cash nor did pay any cash, there was no real credit of cash in the cash book and the question of inclusion of the amount of the entry as unexplained cash credit could not arise. We are of the view that even if the latter assessment accepting assessee s share applications / premium is held erroneous the same does not cause any prejudicial to the interest of the Revenue therefore. Hon'ble apex court s landmark decision in Malabar Industrial Co. Ltd. [ 2000 (2) TMI 10 - SUPREME COURT] settled the law long back that the CIT must satisfy himself that the assessment forming the subject-matter of revision simultaneously satisfies both limbs of erroneous as well as causing prejudice to interest of the revenue. We therefore accept assessee s arguments and restore the Assessing Officer s latter assessment order - Decided in favour of as ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d the concerned directors before the Assessing Officer. We find from the assessee s former paper book that Assessing Officer issued detailed notice(s) u/s 142(1) of the Act to all the six investor entities on 08.12.2016 followed by u/s 133(6) / 131 process to their directors who appeared and deposed in assessee s favour. Their statements, Assessing Officer s order-sheets, assessee s agreement(s)with the investors entities, its detailed explanation regarding statement of shares purchased / corresponding investments and justification of the share premium in letter dated 16.12.2016 stand completed in the above stated detailed paper book. The Assessing Officer observed in his latter assessment order dated 20.12.2016 that the assessee had successfully proved identity, genuineness and creditworthiness of its six investors regarding share application / premium amount of ₹ 51,05,35,000/-. It is the said assessment which stands revised in the PCIT s revision order under challenge in the instant lis to be suffering from lack of inquiry as under:- The contention of the Assessee is not acceptable. The assessee company is trying to prove that the identity, genuineness and creditworthiness ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... fficer has accepted and allowed the claim for the assessee without going into examine the authenticity of the claim by scrutinizing the material that were brought in record. it is evident that the bank accounts of the share subscriber companies were not analyzed properly and the source of the fund generated there in was required to be looked into which was not done. 4.2 Moreover, the Assessing Officer being a quasi judiciary authority was supposed to enquire into the mater judiciously under prevailing circumstances, as there are many instances throughout the country, especially in Kolkata region where the companies were reported to have taken bogus accommodation entry in the form of share capital to bring in there unaccounted money. The AO also failed to examine the reason for charging such huge premium. The AO further failed to examine the directors on oath regarding the genuineness of controlling interest and also not examined the bank statement to trace out the money trail to ascertain the genuineness of source of fund invested by shareholders. Thus the impugned order suffers from lack of enquiry making the same erroneous so as prejudicial to the interest of revenue. 4.3 On peru ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... xed at high value is not forthcoming. By not conducting any enquiry to ascertain and examine the crucial facts as above, severe prejudice to revenue has been caused and also the assessment order suffers from infirmity due to lack of proper and adequate enquiry. 4.6 Thus from the above facts, I am of the opinion that the impugned Assessment order passed u/s 143(3)/ 263 of the Act is erroneous so far as prejudicial to the interest of revenue. The interests of the revenue are not to be equated to superficially examine the inflow and outgo of money but to go much deeper to unearth the true colour and contour of transactions. Further, shall be prejudicial to the interest of revenue (Revenue Administration). Therefore the impugned Assessment order stands erroneous so far as prejudicial to the interest of revenue. The Assessing Officer is required to carry out proper examination of the books of account including bank accounts of assessee as well as investors and make a fresh assessee AO is also required to examine the genuineness of source of fund appearing in the nomenclature of share capital including premium and nature of transactions, identity of investor and its genuineness. Assessin ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... u/s. 263 dtd. 30-11-2016 directed AO to conduct sufficient amount of enquiries and finalize the ordered accordingly. Intention of said order u/s. 263 of the Act was to strengthen the assessment order passed dtd.31.03.2015, as it could stand the test of judicial proceedings. But subsequent order passed by the AO u/s 143(3) was made without conducting proper enquiries of transactions and creditworthiness of investors AO ought to have. Any order passed subsequent to order u/s. 263 must be in favour of revenue. Either earlier assessed income should be enhanced or should be same as earlier order but with enhanced enquiries so that addition should be strengthen to pass in appellate proceedings. But here the assessment order passed u/s.143(3) r.w.s. 263 was erroneous as addition made u/s. 68 on account of unexplained share capital//premium was allowed in favour of the assessee without taking sufficient enquiry. 5. Here is a case where a privates limited company has obtained share premium much more than its share value. In a recent judgment of Kerala High Curt [2018] 90 taxmann.com 43 it has been held that: In a case of a company in which public is not substantially interested, any premium ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... eds to be placed on such companies to also prove the source of money in the hands of shareholder or persons making payment towards issue of share as before such sum is accepted as genuine credit. If the company fails to discharge the additional onus, the sum shall be treated as income of the company and added to its income. 5.4 In a recent judgment on 05.03.2019 in the case of PCIT(Cen)-I, Delhi vs. M/s NRA Iron Steel Pvt. Ltd., the Supreme Court of India stated that the practice of conversion of unaccounted money through the cloak of Share Capital/Premium must be subjected to careful scrutiny. This would be particularly so in the case of private placement of shares, where a higher onus is required to be placed on the assessee since the information is within the personal knowledge of the Assessee. The Assessee is under a legal obligation to prove the receipt of share capital/premium to the satisfaction of the AO, failure of which, would justify addition of the said amount to the income of the Assessee. 5.4.1 In the said judgement Apex Court laid down the principles which emerge where sums of money are credited as Share Capital / Premium are: i. The assessee is under a legal obligat ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ll fruitful areas or enquiry are pursued the enquiry cannot be said to have been faithfully conducted. 6.1 The Hon'ble Supreme Court, further, in the case of Rampyari Devi Saraogi Vs. CIT (1968) 67 ITR (SC) and Smt. Tara Devi Aggarwal Vs. CIT (`1973) 8B ITR 323 (SC) has held that in absence of proper enquiries, the assessment order would become erroneous and prejudicial to the interest of the revenue. 6.2 The Hon'ble Delhi High Court in the case of Gee Vee Enterprise Vs Addl. CIT (1975) 99 ITR 375 has also held as under:- The reason is obvious. The position and function of the income tax officer is very different from that of a Civil Court. The statements made in a pleading proved by the minimum amount of evidence may be accepted by a Civil Court in the absence of rebuttal. The Civil Court is neutral. It simply gives decision on the basis of pleading and evidence which comes before it. The income tax officer is not only an adjudicator but also an investigator. He cannot remain passive in the face of return which is apparently in order but calls for further enquiry. It is his duty to ascertain the truth of facts stated in the return when the circumstances of case are such as ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... dings. He submitted that the PCIT herein has erred in law and on facts in exercising his revision jurisdiction despite the fact that the Assessing Officer had accepted the assessee s share application / premium in issue to have satisfied all the three parameters of identify, genuineness and creditworthiness of the six investors. He placed strong reliance on the CIT s revision directions in former round (supra) the assessee had duly discharged its onus by filing all necessary evidence before Assessing Officer case law Bariuns Chemical Ltd. and Another vs. A.J. Rana and Others (1972) SCC (1) 240 regarding interpretation of the clinching statutory expression considers employed in the statute sec.263 of the Act, case law M/s Gemini Oils Pvt. Ltd. vs. The ITO-2(1)(4) Mumbai ITA No.2563/Mum/2005 decided on 31.10.2012 regarding nature and scope of such a de novo assessment in light of the CIT s specific directions (supra) in revision proceedings; is also cited in support. Learned counsel then takes us to assessee s latter paper book containing compilation of following judicial precedents:- Sl. No. Cases 1 CIT vs. Sohan Lal Sighania 235 ITR 616 (All) 2 Jatia Investment Co. vs. CIT 206 ITR ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the cash credits. Our attention is time and again invited to the fact that various recent judicial precedents taken note of in the PCIT s revision order under challenge indicate a paradigm shift on the issue of bogus share capital / premium involving accommodation entry providers. He therefore seeks to affirm the PCIT s assumption of revision jurisdiction under challenge. 6. We have heard rival contentions. The assessee s detailed paper book(s) in pages 238 to 249 investment agreements with all the six investors; involving varying sums; respectively. We find that the assessee as well as all the six parties had swapped their shares than passing any cash credits in the respective accounts of all the six parties. They had not exchanged any consideration since the parties transferred their shareholdings to each other. This clinching fact has nowhere been rebutted at the Revenue s behest. Learned CIT-DR s strongly contended that this issue cannot be raised in the instant second round of revision proceedings. We find no force in the Revenue s instant plea since the assessee had objected to the CIT s former revision proceedings qua the instant legal aspect as it is evident from a perusal ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... belonging to the same group. Since the said loans were required to be liquidated as per the RBI guidelines and there was no cash available with the NBFCs to repay the loans, the shares held by the three NBFCs were transferred to a partnership firm namely Jaita Investment Co. and the amount receivable against the said sale of shares as adjusted by the NBFCs against the loan amount payable to proprietary concern. The partnership firm of M/s Jatia Investment Co. thus received shares from the three NBFCs and also took over the loans payable by the said NBFCs to the proprietary concern. These transactions were entered into in its books of account by the partnership firm through cash book by debiting the investment in shares and crediting the loan amount of the proprietary concern. This credit appearing in the books of account of the partnership firm M/s Jatia Investment Co. was treated by the AO as unexplained cash credit u/s. 68 and on confirmation of the same, when the mater reached to the Hon'ble Calcutta High Court, it was held by their lordship that when the cash did not pass at any stage and since the respective parties did not receive cash nor did pay any cash, there was no ..... X X X X Extracts X X X X X X X X Extracts X X X X
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