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TMI Blog2024 (8) TMI 1178X X X X Extracts X X X X X X X X Extracts X X X X ..... atement was recorded by the AO. The said director has admitted to have issued equity shares from the assessee company to two group companies and it was also stated that the subscribing companies having substantial resources available to invest in the assessee company. It was also stated that the subscription proceeds were utilized for the purchase of flat. The statement of the said director is extracted. We note that despite all these evidences being furnished as stated above, the AO has only doubted the business of the assessee as well as the investing companies without disputing the evidences filed by the assessee or pointing out any defect/deficiency therein. CIT(A) simply affirmed the order by relying on the preponderance of human probability thereby ignoring the facts on record. We note that in the present case the assessee or its group companies are not shell companies engaged in providing accommodation entries and therefore we find that theory of the AO that the assessee s own money routed through these investing companies appears to be incorrect. As the assessee has filed all the evidences qua the investing companies and these share subscribers have also complied with the n ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e made to these group companies. It was also stated that the proceeds raised from issue of shares were utilized for purchase of flat which has also been noted by the AO at page no. 4 para 1 in the assessment order. The AO further noted that during FY 2013-14 there were purchases and sales of fabric by the assessee to the tune of Rs. 20,59,960/- and Rs. 21,94,080/- respectively. Pertinent to state that the AO in order to do verification of the share capital/ share premium also issued notices u/s 133(6) of the Act to both the subscribing companies and subscribing companies have duly furnished the details/evidences called for by the AO. From the details furnished by the assessee as well as by the subscribing companies, the AO observed that there were loan transactions and non-current investments only and thus he doubted the subscription of shares by these companies. The AO, thereafter, after discussing the provision of Section 68, added the amount of subscription received by way of share capital/share premium of Rs. 1,39,99,920/- to the income of the assessee u/s 68 of the Act in the assessment framed u/s 143(3) of the Act dated 23.12.2016. 4. In the appellate proceedings, the Ld. CIT ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rely on the basis of general observations that the assessee has routed its own funds to these companies is a presumption and is incorrect and against the facts on record as it is not the case of the AO that these were shell or bogus companies. The ld AR submitted that these are group companies and were having adequate sources. The ld AR therefore contended that the transactions were genuine and beyond any doubt. While distinguishing the decisions relied upon by the ld. CIT(A), the Ld. A.R submitted that these are applicable where the assessee has not furnished evidences before the tax authorities or where the truth has to gathered from the circumstantial evidences. The ld AR stated the theory of human probability is not applicable to the instant case and therefore reliance on the decisions of Hon ble Supreme Court in the case of CIT vs. Durga Prasad More [1971] 82 ITR 540 (SC), Sumati Dayal vs. CIT [1995] 214 ITR 801 (SC) and PCIT vs. NRA Iron Steel Pvt. Ltd. (2019) 412 ITR 161 is wrong as here all the evidences in the instant case were before the authorities below. Therefore human preponderance cannot be the basis of making the addition. The Ld. A.R referred to a series of decisio ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... and there was no compliance to the summons and therefore identity, genuineness and creditworthiness of the share applicants were not established. The Ld. A.R also drew attention to the Bench in para 4 of the impugned decision of the High court wherein it was stated that the assessee company was recently incorporated without any proven track record to justify the high share premium whereas in instant case before us, the assessee is an old company and has been continuously doing business over the years. The ld. A.R drew our attention to Para 11 of the impugned decision wherein it was stated that the equity shares were allotted on 30.03.2012 without any premium at the face value of Rs. 10/- whereas on very next day on 31.03.2012 shares were allotted at a share premium of Rs. 4,990/- per share while in the case of assessee allotment was made to two group companies of equity shares at a face value of Rs. 10/- each at premium of Rs. 80/-. The Ld. A.R therefore prayed that the facts of the case as decided by the Hon ble Calcutta High Court (supra) are clearly distinguishable and therefore the said ratio laid down by the Hon ble Court in the above decision is not applicable in the case of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... its group companies are not shell companies engaged in providing accommodation entries and therefore we find that theory of the AO that the assessee s own money routed through these investing companies appears to be incorrect. In our opinion, the assessee has filed all the evidences qua the investing companies and these share subscribers have also complied with the notices issued u/s 133(6) of the Act as well as summon issued u/s 131 of the Act. Therefore in our considered opinion the provisions of section 68 of the Act were wrongly invoked by the AO and Ld. CIT(A) affirmed the assessment order on the same reasoning which is not sustainable. We have also perused decision cited before us of the Hon ble Jurisdictional High Court in the case of Balgopal Merchants Pvt. Ltd. (supra) and find that the facts of the case are clearly distinguishable because in that case that the equity shares were allotted on two dates i.e. on 30.03.2012 and 31.03.2012. On 30.3.2012 at a face value of Rs. 10/- at nil premium and the next day 31.3.2012 at face value of Rs. 10/- each at a premium of Rs. 4,990/- per shares whereas in the present case before us the assessee has allotted equity shares to two gro ..... X X X X Extracts X X X X X X X X Extracts X X X X
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