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TMI Blog2024 (9) TMI 1447X X X X Extracts X X X X X X X X Extracts X X X X ..... ed 28/12/2018, passed by the learned Commissioner of Income Tax (Appeals) 1, Nagpur, [ learned CIT(A) ], for the assessment year 2012 13. 2. Following grounds have been raised by the Revenue: a. On the facts and circumstances of the case, the Ld. CIT(Appeals) has erred in deleting the addition by stating that there is no specific incriminating document linking investor to the appellant. However, in statement of Shri Praveen Kumar Jain on such company M/s. Viraj Mercantile Pvt Ltd is a share applicant in the case of Assessee Company. b. Ld. CIT (Appeals) erred in deleting the addition on the basis of conclusion drawn of not following principles of natural justice by not providing opportunity of cross examination, whereas the addition was not merely based on statement of Shri Praveen Kumar Jain. c. Ld. CIT (Appeals) erred in appreciating the facts mentioned by AO in Para 7 that in normal human probability, no company will invest with such hefty premium and his reliance on case of jurisdictional High Court In Major Metals Pvt Ltd Vs. Union of India 207 Taxmann 185 in support of his contention. d. Ld. CIT (Appeals) erred in appreciating the AO's point of view regarding furnishing o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ssee during the year from various companies mentioned hereunder holding the same to be not genuine and consequently making the addition under section 68 of the Act. The assessee had during the year received share application money amounting to ₹ 1,58,50,000, from the following companies: i) M/s Viraj Mercantile Pvt. Ltd. ₹ 16,50,000 ii) M/s Aatharva Business Pvt. Ltd. ₹ 37,00,000 iii) M/s Aditya Fashions Pvt. Ltd. ₹ 15,00,000 iv) M/s Kavya Shares and Securities Pvt. Ltd. ₹ 50,00,000 v) M/s Koina Trading Pvt. Ltd. ₹ 25,00,000 vi) M/s Wonder Procon Pvt. Ltd. ₹ 15,00,000 5. Against the addition so made by the Assessing Officer, the assessee preferred appeal before the first appellate authority. 6. The learned CIT(A), vide order dated 28/12/2018, deleted the entire addition made by the Assessing Officer amounted to ₹ 1,58,50,000, justifying the deletion of addition so made by the Assessing Officer which is reproduced herein below: 4.3 I have gone through the assessment order, the grounds of appeal and submission made by the appellant. During the year under consideration, the appellant company has received a sum of Rs. 1,58,50,000/- from t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... f income. The investor companies have also confirmed of giving share application money to the appellant company. Copy of bank statement, ledger account, tend sheet and undertaking/declaration of creditor companies Income tax return and audited accounts of the investor companies have been filed before the assessing officer and also in the appellate proceedings. The documents furnished by the appellant have not been doubted by the AO. 4.3.3 It can be seen from the observation of the Assessing Officer that he has only referred to the information related to the outcome of search in the case of Shri Pravin Kumar Jain who was providing accommodation entries but the Assessing Officer has failed to demonstrate any such evidence that the appellant has in reality obtained any accommodation entries. There is no direct specific mention of the appellant by the director or key persons of the investor company. There is no evidence of cash deposits linked to the investors. The assessing officer did not bring specific Incriminating evidence linking the investor to the appellant. The only link is that the investors have invested in appellant company. Opportunity for cross examination was not provide ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ndent could not do anything furtheyn the premises, if the Tribunal came to the conclusion that th.ne Respondent had discharged the burden that lay on it, then, it could not be said that such a conclusion was unreasonable or perverse or based on no evidence . 4.3.4 I find that the facts of appellant's case are identical to its own case for AY 2011-12 wherein under similar facts the Hon'ble ITAT, Nagpur bench vide order in ITA No.154/Nag/2017 dated 24.10.2018 has held as under- 13. We have heard rival contentions and perused the material available on record. The Assessing Officer has made impugned addition under section 68 of the Act, on the ground that although the assessee proved identity of the subscribers, but failed to prove the genuineness of transaction and creditworthiness of the parties. The Assessing Officer has taken support from the statement of Shri Praveen Kumar Jain, which was given under section 132 (4) of the Act at the time of search. Shri Praveen Kumar Jain, had also admitted that he was involved in issuing accommodation entries. Except this, the Assessing Officer has not carried out any independent enquiries in order to verify the genuineness of transactio ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rged by the assessee, the Assessing Officer has doubted the genuineness of transactions of the basis of share premium charged by the assessee. According to the Assessing Officer, the assessee has not justified issue of share at a huge premium of Rs. 490/- per share when there is no business activities and asset base. We do not find any merit in the finding of the Assessing Officer for the reason that the provisions to section 68 of the Act has been inserted by the Finance Act, 2012, w.e.f. 1 April 2013, to treat share capital and share premium within the ambit of provisions of section 68 of the Act. Prior to Insertion of provisions of section 68 of the Act, the question of establishing the source of source in respect of share capital and share premium did not arise. This fact has been supported by the decision of the Hon'ble Jurisdictional High Court in CIT v/s Gagandeep Infrastructures Pvt. Ltd., [2017] 394 ITR 680 (Bom.). Prior to insertion of provisions, as per the decision of the Hon'ble Supreme Court in Lovely Exports (supra), if the Assessing Officer regards the share premium as bogus, he has to assessee the shareholders but cannot assess the same as the unexplained c ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... cross examination is not permissible. Voluminous documents produced by the assessee cannot be discarded merely on the basis of statements of individuals contrary to such public documents. 10.8. Reliance further placed on CIT vs. Laxman Industrial Resources Pvt. Ltd. (Delhi HC) (2017) 397 ITR 106 wherein it has been held that the fact that the investigation wing's report alleged that the assessee was beneficiary to bogus transactions and that the identity of shareholders, genuineness etc was suspect is not sufficient. The AO is bound to conduct scrutiny of documents produced by the assessee and cannot rest content by placing reliance on the report of the investigation wing. 10.9. Reliance further placed on CIT Vs. Gagandeep Infrastructure Pvt. Ltd. (2017) 394 ITR 680 (Bombay HC) wherein it has been held that the proviso to s 68 (which creates an obligation on the issuing Co. To explain the source of share capital premium) has been introduced by the Finance Act 2012 with effect from 01.04.2013 and does not have retrospective effect. Prior thereto, as per Lovely Exports 317 ITR 218 (SC), if the AO regards the share premium as bogus, he has to assess the shareholders but cannot as ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... by the Assessing Officer not only on the statement of Shri Praveen Kumar Jain, but also on the facts and circumstances of the case which does not justify offer of shares at such huge premium of ₹ 490, against a face value of ₹ 10. 9. The learned A.R. appearing for the Assessee vehemently contested addition as made by the Assessing Officer and supported the order of the learned CIT(A) and submitted that the entire addition, as made by the Assessing Officer, is merely on conjecture and surmises, ignoring the evidence filed on record as well as grossly in violation of the principles of natural justice inasmuch as the statement of Shri Praveen Kumar Jain, was never accorded for cross examination. The learned A.R. invited our attention to Page 216 of the paper book wherein the assessee has enclosed a detailed chart showing share capital issued during the year wherein it is very clear that the amount of share capital issued to Wonder Procon Pvt. Ltd. of ₹ 15,00,000, was against investment in equity shares and not in cash as wrongly assumed by the Assessing Officer. Hence, the provisions of section 68 of the Act are not applicable. The learned A.R. further invited attent ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... are applicants have also been filed before the learned CIT(A) for the second time during the appellate proceedings thus emphasising the fact that the share applicants have independently confirmed the transaction of subscribing to share capital of the Assessee company. The learned A.R. further invited attention of the Bench to the copies of the audited financial statements of the share applicants forming part of the paper book and duly submitted before the Assessing Officer wherein the share applicants have more than sufficient capital and net worth to justify the creditworthiness to invest the sums with the Assessee. The learned A.R. further invited our attention of the Bench to the fact that in identical circumstances, the additions were also made in the hands of the Assessee, albeit pertaining to some other share applicants in the immediately preceding assessment year 2011-12 and which were deleted by the Co ordinate Bench of the Tribunal, Nagpur Bench, Nagpur, in ITA No.154/Nag./2017, vide order dated 26/10/2018. The learned A.R. on a conspectus of the above facts submitted before us that the addition so made by the Assessing Officer has been rightly deleted by the learned CIT(A ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tion 263 of the Act, held the order passed by the Assessing Officer under section 143(3) of the Act to be erroneous as well as prejudicial to the interests of the Revenue and pursuant to the order so passed under section 263 of the Act, the Assessing Officer then in the ensuing assessment proceedings held the amount received towards share application to be not genuine. The statement of Shri Praveen Kumar Jain, thus assumes significant importance in the facts and circumstance of the case and in the Assessing Officer coming to the conclusion that the amount so received were not genuine. We are in agreement with the submissions, as made by the learned A.R. inasmuch as the statement of Shri Praveen Kumar Jain, having been retracted does not hold evidentiary value so as to form the basis of any addition as illegally done in the case of the assessee. Further, it is an accepted fact that the said statement was never provided to the assessee for cross examination which has grossly violated the principles of natural justice which resulted in vitiating the addition made by the Assessing Officer. We are further in agreement with the learned A.R. that the assessee having submitted all the deta ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the Assessing Officer regards the share premium as bogus, he has to examine the shareholders but cannot assess the same as unexplained cash credit of the company issuing share capital. The decision of the Tribunal, Mumbai Benche, in Shri Praveen Kumar Jain (supra), as relied upon by the learned A.R. also does not support the case of the Revenue inasmuch as the same being part and parcel of evidence relating to Shri Praveen Kumar Jain, which is mentioned herein above was not afforded cross examination and not providing a copy of statement for its rebuttal to the assessee, cannot be held to be against the assessee so as to implicate the assessee in any manner. Further it is clear from Para 7 of the order wherein it is specified that the transaction forming part of the appeal pertain to one Spanco Group, which is in no way connected with the assessee making the findings therein distinct and inapplicable to the present case. In case, any reliance is to be accorded to the statement or evidence of Shri Praveen Kumar Jain, then too, no adverse inference or addition can be sustained in the hands of the assessee following the ratio of the decision of the Tribunal, Nagpur Bench, in assessee ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... on the following case laws: - i) ITO Vs. Wiz-Tech Solutions Pvt. Ltd. (ITAT Kolkata) (ITA No. 1162/Kol/2015); ii) DCIT VS. Alkon Biosciences Pvt Ltd. (ITAT Mumbai) (ITA No 1946/Mum/2016); iii) Umbrella Projects Pvt. Ltd. Vs. ITO (ITA No. 5955/Del/2014); iv) PCIT VS. Paradise Inland Shipping Pvt. Ltd. (Bombay HC) (ITA No. 66 of 2016); v) CIT Vs. Laxman Industrial Resources Pvt. Ltd. (Delhi HC) (2017) 397 ITR 106; and vi) CIT Vs. Gagandeep Infrastructure Pvt Ltd. (2017) 394 ITR 650 (Bombay HC). 12. On the other hand, the learned Departmental Representative strongly supporting the order of the learned Commissioner (Appeals), submitted that mere furnishing identity and bank statement does not prove the genuineness of transaction. It is not in dispute that the Assessing Officer has accepted the identity, but the assessee failed to prove the genuineness of the transaction in the backdrop of clear finding of the Assessing Officer on the basis of statement of Shri Praveen Kumar Jain, and information received from DGIT (Inv.). The learned Commissioner (Appeals) has rightly appreciated the facts as the assessee has not even justified issuance of share at a huge premium of 490 per share when ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ve the documents filed by the assessee in order to make additions under section 68 of the Act towards share application money. In this case, a perusal of the facts, we find that the Assessing Officer did not car out any independent enquiry in order to ascertain the genuineness transaction and creditworthiness of the parties. The Assessing Office made additions merely on the basis of statement of Shri Praveen Kumar Jain, ignoring the fact that the said statement has been subsequently retracted by filing affidavit. In the absence of any independent enquiry by the Assessing Officer, the documents filed by the assessee to prove the transaction cannot be disbelieve to make additions under section 68 of the Act. 14. Coming to the issue of share premium charged by the assessee, the Assessing Officer has doubted the genuineness of transactions on the basis of share premium charged by the assessee. According to the Assessing Officer, the assessee has not justified issue of share at a huge premium of 490 per share when there is no business activities and asset base. We do not find any merit in the finding of the Assessing Officer for the reason that the provisions to section 68 of the Act ha ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nus regarding the identity, creditworthiness and genuineness, the onus shifts to the AO to bring material or evidence to discredit the same. Further there must be material to implicate the assessee in a collusive arrangement with person who are accommodation entry providers. 10.7. Reliance further placed on PCIT Vs. Paradise Inland Shipping Pvt. Ltd. (Bombay HC) (ITA No. 66 of 2016) wherein it has been held that Companies which invest share capital cannot be treated as bogus if they are registered and have been assessed. Once the assessee has produced documentary evidence to establish the existence of such companies, the burden shifts to the Revenue to establish their case. Reliance on statements of third parties who have not been subjected to cross examination is not permissible. Voluminous documents produced by the assessee cannot be discarded merely on the basis of statements of individuals contrary to such public documents. 10.8. Reliance further placed on CIT Vs. Laxman Industrial Resources Pvt. Ltd. (Delhi HC) (2017) 397 ITR 106 wherein it has been held that the fact that the investigation wing's report alleged that the assessee was beneficiary to bogus transactions and t ..... X X X X Extracts X X X X X X X X Extracts X X X X
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