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TMI Blog2024 (6) TMI 599X X X X Extracts X X X X X X X X Extracts X X X X ..... ium to these investors despite the fact that the shares were allotted to the original promoters were at par. It is very reasonable for any company to issue shares to the outside investors at a premium in order to ensure that the promoter‟s stake in the company does not get diluted. Investors come forward with accepted mindset to make investment at a premium seeing the growth potential prevalent in the investee company. The assessee had duly discharged its primary onus cast on it by furnishing the requisite documents before the ld AO. Merely because the notice u/s 133(6) of the Act had not been replied or not served by the investors and directors of the investors company were not produced coupled with less income shown by the investors in their ITR, the transaction of making investment by the investors in the assessee company cannot be doubted. If the ld AO had entertained any doubt on the documents submitted by the assessee, nothing prevented him from issuing summons to the investors company and if none complied, take the proceedings further in the manner known to the law. Hence, the primary onus has been duly discharged by the assessee, the burden of proof therefore shifts t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... eferred to as the Act ) dated 31.03.2015 by the Assessing Officer, ITO, Ward-7(1), New Delhi (hereinafter referred to as ld. AO ). 3. Identical issues are involved in both the appeals and hence, they are taken up together and disposed off by this common order for the sake of convenience. 4. The revenue has raised the following grounds of appeal in ITA No. 6213/Del/2018 for AY 2012-13 before us:- 1. The Ld. Commissioner of Income Tax (Appeals) erred in law and on facts of the case in deleting the addition of Rs. 5,17,50,000/- made by the AO on account of share capital share premium Rs. 22,20,000/- on account of notional interest on interest free loan given to sister concern. 5. We have heard the rival submissions and perused the material available on record. The assessee company was incorporated on 17.02.2011. The year under consideration is the 2nd year of operation. The ld AO observed that no business activity was carried out by the assessee during the year under consideration or in the immediately preceding year. The only source of the income of the assessee company was interest received on fixed deposits. During the year under consideration, 103500 equity shares of Rs. 10 each w ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ment in the assessee company. This remained un-complied by the assessee. Accordingly, the ld AO concluded that the monies received from the corporate entities towards share capital and share premium are merely accommodation entries and that the assessee had failed to prove the identity and creditworthiness of the investor and genuineness of the transaction and proceeded to treat the sum of Rs. 5,17,50,000/- as unexplained cash credit u/s 68 of the Act. 6. Before the ld CIT(A), the assessee filed additional evidence with an application under Rule 46A of the Income Tax Rules and produced the following documents:- a. Share application forms b. PAN details c. Bank statements of investors d. Income tax returns of the investors e. Audited financial statement of the investors f. List of investments in its books of account g. Ledger confirmations h. Copy of PAN Cards i. Certificate of incorporation along with Memorandum and Articles of Association j. Copy of minutes of meeting of Board of Directors authorizing the fact of making investment in the assessee company k. Copy of confirmation in respect of application of shares of investor company 7. The ld CIT(A) accepted these additional evide ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ty and creditworthiness of the parties and to establish the genuineness of the transaction. In this case the AR of the appellant has filed various documents during the course of assessment proceedings and along with application under, Rule 46A application of all parties from whom share capital/premium money has been received, like Share Application Forms, PAN Details, Bank Statements, Income Tax Returns, Audited Balance Sheets and Profit and Loss Account, List of Investments in its books of accounts, Ledger Confirmations, Copy of PAN Cards, Certificate of Incorporation along with Memorandum and Articles of Association, Copy of Minutes of Meeting of Board of. Directors, Copy of Confirmation in Respect of Application of Shares etc. The appellant has given a specific investor wise list of documents filed by it in this respect which has been reproduced herein above in the portion of submissions of assessee. The AR also specifically highlighted Net Worth of each share applicant and compared the same with the amount invested by the said party. All these documents were forwarded to the AO for his comments on the same who has not given any specific comment and has merely stated that the sa ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... - on account of share premium received by the appellant from various parties. Grounds of appeal 1 to 4 are accordingly allowed and the addition is hereby deleted. 9. We find that the additional evidences submitted by the assessee before the ld CIT(A) were duly admitted by the ld CIT(A) vide para 2.5 of his order reproduced supra. It is a fact that the assessee had received share capital and share premium from certain investors during the year. Hence, primary onus cast on it is to establish the genuineness of the transaction together with identity and creditworthiness of the investors. On perusal of the order of the ld CIT(A), the assessee again in the rejoinder to the remand report had submitted the list of documents submitted before the ld CIT(A) investor wise. Each of the investors have sufficient net worth in its financial statements which clearly prove their creditworthiness and the investors are duly assessed to income tax and have been regularly filing their income tax returns and returns with Registrar of Companies. Hence, their identity is also proved beyond doubt. The transactions of investments made by the investors in assessee company were made through regular banking ch ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... in the addresses given by the assessee. The ld AO had also stated that cash was deposited by the investors before making investment in the assessee company, which fact was found to be incorrect on perusal of the bank statements. In view of the aforesaid observations, the ld CIT(A) had rightly deleted the addition made u/s 68 of the Act. 10. With regard to notional interest added in the sum of Rs. 22,20,000/- by the ld AO, we find that the same had been added completely on notional basis without having any support from the provisions of the Act. The assessee had indeed given interest free loans of Rs. 1.48 crores to M/s. Pacific Industries Ltd. The assessee had not claimed any deduction for interest payment on its borrowings. The ld AO s case is that there is no business connection between the assessee and M/s. Pacific Industries Ltd. Even then, there cannot be any addition towards notional interest. It is trite law that only real income should be brought to tax as has been held by the Hon'ble Supreme Court in the case of CIT Vs. Shoorji Vallabhdas and Co. reported in 46 ITR 144 (SC). Hence, we find that the ld CIT(A) had rightly deleted the addition. 11. Accordingly, ground No. ..... X X X X Extracts X X X X X X X X Extracts X X X X
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