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2017 (11) TMI 2062

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..... shares the aggregate consideration received for such shares as exceeds the fair market value of the shares shall be taxable as per clause (viib) of sub-section 2 of section 56 of the Act. The CBDT vide Circular No. 3 of 2012 dated 12-06-2012 has also mentioned that provision of section 56(2)(viib) will be applicable for A.Y. 2013-14. The provisions of sec 56(2)(viib) of Income-tax Act, 1961 are applicable w.e.f. 1st April, 2013 and will accordingly apply in relation to Assessment Year 2013-14 and subsequent Assessment Years. The income as mentioned in section 56(2)(viib) is included in definition of section 2(24) of the Act w.e.f. 01-04-2013. Therefore, the provisions of these sections cannot be made applicable prior to that A.Y. 2013-14. It is pertinent to note that the ld. CIT (A) had issued the show cause notice to the assessee to tax the share capital under section 68 of the I.T. Act, 1961 as against section 56(1) applied by the AO. However, he had not made any addition under section 68 of the Act. Revenue has not preferred appeal against this findings the ld. CIT(A). It is also pertinent to note that AO has made whole addition by invoking section 56 of the Act, hence the amen .....

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..... s not done any exercise in this regard and the entire amount received against share capital during this year amounting to Rs. 4,41,00,000/- was taxed u/s 56(1) of Income Tax Act. For the year under consideration, the amended law is applicable. The share premium/ capital received in excess of fair market value of the shares shall be taxed. The ld. CIT (A) deleted the addition. However, in the interest of equity and justice, the AO is directed to calculate the fair market value of the share in accordance with the provisions of section 56(2)(viib) of I.Tax Act and if the amount received against share capital during the year is found in excess of fair market value of shares, then the addition to that extent the excess of fair market value of shares shall be made in the hands of the assessee company. Thus the appeal of the Revenue is allowed for Statistical purposes. - Shri Bhagchand, AM And Shri Kul Bharat, JM For the Assessee : Shri Vijay Goyal, CA and Shri Gulshan Agarwal, CA. For the Revenue : Smt. Rolee Agarwal, CIT DR Shri Praveen Kumar Mittal, DCIT Shri Kamlesh Kumar Meena, DCIT. ORDER PER BENCH The Assessee has filed appeal for the A.Y. 2012-13 and 2013-14 and the Revenue have .....

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..... not justified at all on the basis of absolutely no assets, no business activity, no income, no net worth nor any promise for creation of any assets, business activity, income or net worth in the future. Accordingly, the charging and receipt of share premium/ share capital to the tune of Rs. 2,75,00,000/- is held to be income of the assessee company in the nature of income envisaged u/s 56(1) of the Income Tax Act, 1961. The same is added back to the total income of the assessee. 2.3 In first appeal, the ld. CIT (A) has deleted the addition of Rs. 2,75,00,000/- made by the AO by observing at pages 96 97 of his order as under:- 3.2.2 I have considered assessee's submission and carefully gone through assessment order. I have also take a note of factual matrix of the case as well as applicable case laws relied upon. I have already given a detailed findings in para 2.1.4.7 wherein total of Rs. 8,71,97,727/- has been sustained in the hands of M/s. Motisons Global Pvt. Ltd, M/s. Motisons Entertainment Pvt. Ltd, M/s. Motisons Buildtech Pvt. Ltd and M/s. Shivansh Buildtech Pvt. Ltd, details of which are as under:- Name of Appellant Company ITA No. A.Y. Addition made by AO Addition sust .....

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..... Ltd 754/14-15 2011-12 6,96,50,000 - 6,96,50,000 Motisons Global Pvt Ltd 767/14-15 2012-13 42,07,29,600 5,94,47,727 36,12,81,873 Motisons Global Pvt Ltd 755/14-15 2013-14 4,41,00,000 50,50,000 3,90,50,000 Motisons Entertainment (I) Pvt. Ltd 760/14-15 2009-10 3,40,00,000 - 3,40,00,000 Motisons Entertainment (I) Pvt. Ltd 766/14-15 2011-12 1,95,00,000 - 1,95,00,000 Motisons Entertainment (I) Pvt. Ltd 756/14-15 2012-13 7,78,00,000 1,41,50,000 6,36,50,000 Motisons Buildtech Pvt. Ltd 758/14-15 2009-10 3,03,00,000 - 3,03,00,000 Motisons Buildtech Pvt. Ltd 759/14-15 2012-13 3,68,27,500 82,00,000 2,86,27,500 Godawari Estates Pvt. Ltd 769/14-15 2010-11 2,00,00,000 - 2,00,00,000 Godawari Estates Pvt. Ltd 768/14-15 2012-13 10,30,00,000 - 10,30,00,000 Bholenath Real Estates Pvt. Ltd. 770/14-15 2009-10 2,90,00,000 - 2,90,00,000 Rainbow Buildcon Pvt. Ltd 757/14-15 2009-10 2,00,00,000 - 2,00,00,000 Shivansh Buildcon Pvt. Ltd 771/14-15 2012-13 90,00,000 3,50,000 86,50,000 94,14,07,100 8,71,97,727 85,42,09,373 It is pertinent to mention here that M/s. Mayukh Vinimay Pvt. Ltd received share application of Rs. 10,54,95,000/- in AY 2009-10 which was added as income of M/s. Mayukh Vinimay Pvt. Ltd A.Y. 2 .....

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..... cause notice dated 06.02.2015 (Copy at PB Page 93-96) the ld. AO opined that entire share capital/share premium of Rs. 4,75,00,000/- should be added in total income of the assessee but after considering the submission and details of the assessee the share capital/share premium if Rs. 2,00,00,000/- received from Shri Sanjay Chhabra and Shri Sandeep Chhabra was treated as explained and the amount of Rs. 2,75,00,000/- received from various companies was added as income of the assessee. c). The ld. AO has not made the addition under the deeming provisions of section 68 of Income Tax Act. The ld AO made the addition by applying the provisions of section 56(1) of Income Tax Act on the ground that the assets of the assessee company don t commensurate to premium charged and any business activity was not performed or any business income has not been shown by the assessee. The ld CIT (A) has not confirmed the addition made by ld AO by applying the provisions of section 56(1) of Income Tax Act, on the basis of his detailed findings at page 38-42 of his order. The assessee relies on the findings of ld CIT(A). d) Justification of Charging share premium The assessee has submitted the justificati .....

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..... a capital receipts and is not income for its ordinary sense. In the case before Mumbai bench has to consider a case where premium of Rs. 190 per share was charged. The Tribunal observed as under (pg 358 to 359/Case laws): 11. We have carefully perused the orders of the lower authorities. In our considered view, the issue of shares at premium is always a commercial decision which does not require any justification. Further the premium is a capital receipt which has to be dealt with in accordance with Sec. 78 of the Companies Act, 1956. Further, the company is not required to prove the genuineness, purpose or justification for charging premium of shares, share premium by its very nature in a capital receipts and is not income for its ordinary sense. It is not in dispute that the assessee had filed all the requisite details/documents which are required to explain credits in the books of accounts by the provisions of Sec. 68 of the Act. The assessee has successfully established the identity of the companies who have purchased shares at a premium. The assessee has also filed bank details to explain the source of the share holders and the genuineness of the transaction was also establis .....

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..... o be excluded from the total income under this Act shall be chargeable to income-tax under the head Income from other sources , if it is not chargeable to income-tax under any of the heads specified in section 14, items A to E. In the case of the assessee company, the amount was received from investors were against share application and the same is capital receipt which was adjusted against share capital and share premium. The money so received to assessee company was capital receipt and was not revenue receipt, therefore the same cannot be taxed in the hands of assessee company under section 56(1) of Income Tax Act, 1961 because this section deal with income and not with capital receipts. The investors who subscribed the share capital of assessee company is also showing the amount paid to assessee as their investment in shares of assessee company and necessary documents in this regard was submitted to ld. AO. Therefore the assessee has proved with documentary evidences that the amount was received against share application i.e. capital receipt, therefore the same cannot be treated as income of the assessee. Further for treating the share capital/share premium as income of the asse .....

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..... in the case of D.P. Sandu Bros. Chembur (P) Ltd (supra), held that amendment took effect from 1st April, 1995 and therefore will not be applicable for A.Y. 1987-88. Similar finding has been recorded by Hon ble Raj, High Court in the case of Gotan Lime Stone Khanij Udhyog. The ratio of law in respect of amendment in 55(2) being held as prospective is applicable for 56(2)(vibe) and hence share premium in excess of fair market value can not be held taxable for A.Y. 2011-12. b) Recently the Hon ble Apex Court in the case of M.G. Pictures (Madras) Ltd V/s ACIT 373 ITR 39 held that amendment in section 40A(3) w.e.f. from 1.4.1996 is prospective and cannot be applied to previous years of Block period prior to F.Y. 1995-96. c) The figure of 10,000 was changed to 20,000 u/s 40A(3) of Income Tax Act, 1961 and 269SS of Income Tax Act, 1961 by Direct Tax Laws (Amendment) Act 1987 w.e.f. 1.4.1989. The CBDT vide circular No. 522 dated 18.08.1988 stated that amendment in section 40A(3) is applicable for A.Y. 1989-90 as it is a substantive provision and since 269SS is a procedural provision, the effective date will be 1.4.89 i.e. previous year relevant to A.Y. 89-90. d) The five Judge Constitution .....

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..... ction 10). (c) It is not chargeable to tax under any of the specified Heads in section 14, items A to E. The finance Bill 2012 as presented on 16th March 2012 included a new clause (viib) u/s 56(2) of I.T. Act [342 ITR 1 (st)]. No proposal in the original bill to insert a new clause u/s 2(24). Subsequently Notice of amendments to Finance Bill was given [See 343 ITR 37(st)] and amendments also made in charging section 2(24) in inserting clause (xvi) in 2(24) of I.T. Act w.e.f. 1.4.2013 reads as under: (xvi) Any consideration received for issue of shares as exceeds the fair market value of the shares referred to in clause (viib) of subsection (2) of 56. The amendment made in 2(24) is also applicable w.e.f. 01.04.2013 and it cannot be applied earlier to 01-04-2013. j) The Income for the purpose of the Income Tax Act is defined in section 2(24) of the Income Tax Act 1961. Section 2(24) of the Income Act 1961 gives inclusive definition of income but the income should be look into its normal meaning. The income will not include capital receipts unless it is specified in Income Tax Act. This argument finds supports from the amendment made by Finance Act 2012 w.e.f. 1.4.2013 in section 56( .....

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..... ls then charging provisions will fail. Ref. to CIT V B.C. Srinivasa Setty 128 ITR 294. iii) The Hon ble Rajasthan High Court in the Case of CIT V Gotan Lime Stone Khanij Udyog 269 ITR 399 (PB 56-65/Case Laws) also held that in case computation provision u/s 48 could not be applied for want of ascertainable cost of acquisition, then capital gain does not arise to be included in total income on account of failure of applicability of computation provision. The Hon ble High Court referred to decision of Bombay High Court in the case of Cadell Wvg. Mills Co (P) Ltd. (Supra). iv) The Hon ble Rajasthan High Court in the case of S. Zoraster and Co. V/s CIT 322 ITR 35 (PB 66- 68/Case Laws) had on occasion to consider the taxability of receipt of Rs. 20,000 received by vendee on default of the purchaser as per agreement for sell of Prem Prakash Talkies. The Hon ble High Court after referring to the decision of Apex Court in the case of Travancore Rubber and Tea Co Ltd. V CIT 243 ITR 158 held that such receipt is capital receipt. Such Capital receipt is not taxable in view of judgment of Apex Court in D.P. Sandu Bros. Chembur (P) Ltd (Supra). Hence capital receipt is not taxable unless there .....

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..... for the Assessment year 2009-10 (WP No. 871 of 2014) wherein the court has held inter alia, that the premium on share issue was on account of a capital account transaction and does not give rise to income and hence, not liable to transfer pricing adjustment. It is hereby informed that the Board has accepted the decision of the High Court of Bombay in the above mentioned writ petition. In view of the acceptance of the above judgment, it is directed that the ratio decidendi of the judgment must be adhered to by the field officers in all cases where the issue is involved. This may also be brought to the notice of the ITAT, DRP s and CIT (Appeals). In view of above instruction, it is clear that ratio deciding of treating of share premium as capital receipt is binding on revenue authorities. j. In view of the above submissions, it is clear that share premium received is a capital receipt and consideration received cannot be considered as income for the year under consideration by applying the provisions of section 56(1) of Income Tax Act. k. The ld CIT (A) issued show cause notice to assessee to tax the share capital under section 68 of I Tax Act as against 56(1) applied by ld AO but h .....

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..... Documents submitted Copy at PB Page Share application containing the name/address/PAN of party, detail of payment received etc. 103-105 Copy of board resolution. 106 Copy of PAN card of party. 107 Copy of bank statement showing the entry of payment made to assessee. 108-109 Declaration of source of funds with party. 110-111 Copy of Ack. of ITR of AY 2009-10. 112 Copy of audit report and audited balance sheet along with annexure of 31.03.09. 113-122 Copy of registration certificate issued by ROC. 123 Debraj Vincom Pvt. Ltd Share application containing the name/address/PAN of party, detail of payment received etc. 124-125 Copy of board resolution. 126 Copy of PAN card of party. 127 Copy of bank statement showing the entry of payment made to assessee. 128-129 Declaration of source of funds with party. 130 Copy of Ack. of ITR of AY 2009-10. 131 Copy of audit report and audited balance sheet along with annexure of 31.03.09. 132-141 Copy of registration certificate issued by ROC. 142 Kingfisher Vinimay Pvt. Ltd Share application containing the name/address/PAN of party, detail of payment received etc. 143-144 Copy of board resolution. 145 Copy of PAN card of party. 146 Copy of bank stat .....

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..... e to assessee. 245-146 Declaration of source of funds with party. 247 Copy of Ack. of ITR of AY 2009-10. 248 Copy of audit report and audited balance sheet along with annexure of 31.03.09. 249-257 Copy of registration certificate issued by ROC. 258 m) All the share capital/share application was received through a/c payee cheques and verifiable from bank statement of assessee as well as bank statement of the party. The onus u/s 68 of the assessee is to prove the identity, capacity and genuineness of the transactions has been discharged which may be seen from the followings:- i) Identity:- The assessee proved the identity of all the companies by filing the share application received from the parties and the parties are duly in existence and the existence of the parties can be verified from the official website of MCA. The ld. AO also not doubted the identity of the above named companies. Further the notice issued u/s 133(6) of Income Tax Act, 1961 was duly served on all the companies which also prove the identity of the parties. ii) Creditworthiness All the companies are Income Tax assessee and duly filing the Income Tax return and Balance sheets. There is sufficient source of funds .....

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..... the department has carried out intensive search operations over the assessee and no any incriminating material was found to show that the money against the share allotment was own money of the company. Shares certificates were issued against the allotment of the shares to these companies were not found from the possession of the assessee company or its director or employees. This fact shows that after allotment of shares by the appellant company share certificates were dispatched to the subscriber companies. No any entry in books of account or document was found showing payment of cash to these investor companies against receipt of cheques from these companies against allotment of shares. Therefore the genuineness of the transactions cannot be doubted. n) Onus to prove source of source From the show cause notice given by ld CIT (A) and excel sheet provided to the assessee showing chain of source it is apparent that even there is no cash deposit till 3rd stage of channel source (Copy at Pb pg 526 to 557/ AY 2013-14). If there is any cash deposited at 4th channel or beyond to that stage then the inquiry should have been made from the concerns in whose bank a/c such funds floated and .....

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..... ction 68 of the Act with retrospective effect nor does the proviso so introduced states that it was introduced for removal of doubts or that it is declaratory . Therefore it is not open to give it retrospective effect, by proceeding on the basis that the addition of the proviso to Section 68 of the Act is immaterial and does not change the interpretation of Section 68 of the Act both before and after the adding of the proviso. In any view of the matter the three essential tests while confirming the pre proviso Section 68 of the Act laid down by the Courts namely the genuineness of the transaction, identity and the capacity of the investor have all been examined by the impugned order of the Tribunal and on facts it was found satisfied. Further it was a submission on behalf of the Revenue that such large amount of share premium gives rise to suspicion on the genuineness (identity) of the shareholders i.e. they are bogus. The Apex Court in Lovely Exports (P) Ltd. (supra) in the context to the pre amended Section 68 of the Act has held that where the Revenue urges that the amount of share application money has been received from bogus shareholders then it is for the Income Tax Officer .....

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..... anies. The AO has mentioned these details at page 3 and 4 of his assessment order. The AO further noted that the receipt of share capital is Rs. 3,03,000/- and the premium is to the tune of Rs. 2,99,97,000/- during the year under consideration which is not only abnormal but also appeared to be part of a well planned exercise of tax evasion. Accordingly, the AO issued the show cause notice dated 6-02-2015 to the assessee company requiring the assessee to show cause as to why the amount of Rs. 3,03,00,000/- should not be treated as income of the assessee u/s 56(1) of the Act. The assessee submitted the reply before the AO who rejected the assessee's contention and made the addition of Rs. 3,03,00,000/- u/s 56(1) of the Act in the hands of the assessee company. In first appeal, the ld. CIT (A) has deleted the addition of Rs. 3,03,00,000/- made by the AO. The relevant portion of ld. CIT(A) s order from para 2.1.4.2 to 2.1.47 is reproduced hereunder:- 2.1.4.2 Final observation : 2.1.4.2.1 I have considered assessee s submission and also taken a note of judicial pronouncements relied upon by the appellant as well as the factual matrix of the case. The brief facts of the case are that .....

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..... nk Pvt. Ltd 20,00,000 Bholenath Traders Pvt. Ltd 40,00,000 Chakra Deal Trade Pvt. Ltd 15,00,000 Debdaru Vinimay Pvt. Ltd 15,00,000 Interlink Saving and Finance P Ltd 25,00,000 Puja Tie Up Pvt. Ltd 15,00,000 Sanmukh Vincom Pvt. Ltd 45,00,000 Tara Vinimay Pvt. Ltd 20,00,000 Total 1,95,00,000 7 Motisons Entertainment (I) Pvt. Ltd. 2012-13 Alliance Tradecom Pvt. Ltd 1,59,00,000 Evershine Suppliers Pvt. Ltd 93,00,000 Evershine Suppliers Pvt. Ltd 17,00,000 Mayukh Vinimay Pvt. Ltd 1,55,00,000 Regent Barter Pvt. Ltd 1,79,00,000 Regent Dealers Pvt. Ltd 1,40,00,000 Rose Suppliers Pvt. Ltd 35,00,000 Total 7,78,00,000 8 Motisons Buildtech Pvt. Ltd 2009-10 Arcade Dealcom Pvt. Ltd 30,00,000 Debdaru Vinimay Pvt. Ltd 25,00,000 Debdoot Vinimay Pvt. Ltd 35,00,000 Matrabhumi Dealers Pvt. Ltd 44,00,000 Puja Tie-Up Pvt. Ltd 50,00,000 Pushpa Dealers Pvt. Ltd 25,00,000 Pushpa Trading Pvt. Ltd 40,00,000 Shreya Tie Up Pvt. Ltd 10,00,000 Taranh Suppliers Pvt. Ltd 34,00,000 Vandana Dealers Pvt. Ltd 10,00,000 Total 3,03,00,000 9 Motisons Buildtech Pvt. Ltd 2012-13 Alliance Tradecom Pvt. Ltd 1,80,00,000 Evershine Suppliers Pvt. Ltd 28,00,000 Regent Barter Pvt. Ltd 1,60,27,500 Total 3,68,27,500 10 Godawari Esta .....

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..... to ITAT Jaipur which is still pending for consideration. In respect of addition made on a/c of bogus share capital, AO has also made similar addition of Rs. 10,54,95,000/= in the hands of M/s Mayukh Vinimay P Ltd, tantamounts to double addition. After duly taking a note of the same, appellate order in case of M/s Mayukh Vinimay Pvt Ltd is being kept in abeyance till the disposal of said appeal by Hon ble ITAT. With regard to decisions relied upon by the undersigned, Sh Vijay Goyal were differentiated on facts as under: (i) Nova Promoters Finlease Pvt. Ltd (2012) 342 ITR 169 (Delhi High Court): Summons sent to the companies received back unserved and other summons remained uncomplied with Whereas, in the case of assessee companies, notice u/s 133(6) was sent to investor companies, all of which were served and most of them were complied with. (ii) CIT V/s N. R. Portfolio Pvt. Ltd 206 (2014) DLT (DB) (Del)/ 264 CTR 0258 (del) : Assessed u/s 144 of I. tax Act. In this case the AO issued several notices and show cause notice which was not served/complied and assessment was framed u/s 144 of Income Tax Act. In our case all the compliances were made and evidences submitted. (iii) N Tarik .....

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..... First Point Finance Ltd. (2006) 206 CTR (Raj) 626 : (2006) 286 ITR 477 (Raj HC). (v) Commissioner of Income Tax Vs. Bhaval Synthetics (Raj HC) (2013) 84 DTR 0449 (Raj). (vi) Commissioner of Income Tax Vs. AKJ Granites (P) Ltd. (Raj HC) (2008) 301 ITR 0298. (vii) Commissioner of Income-Tax, Central, Jaipur Versus Supertech Diamond Tools (Pvt) Ltd. (Raj HC) D. B. IT Appeal No. 74 of 2012 Dated: - 12 December 2013. (viii) Commissioner of Income-tax - I, Jaipur Versus AL Lalpuria Construction (P.) Ltd (Raj HC) D.B. IT Appeal Nos. 256 of 2010 AND 26 39 of 2011 Dated: - 25 February 2013. (ix) Commissioner of Income-tax, Ajmer Versus HS. Builders (P.) Ltd. D.B. INCOME Tax (Raj HC) APPEAL NO. 48 OF 2006 Dated: - 03 March 2012. (x) CIT Vs Jai Kumar Bakliwal (2014) 101 DTR (Raj) 377 : (2014) 267 CTR (Raj) 396. No liability to prove source of source (xi) Aravali Trading Co Vs Income Tax Officer (2008) 8 DTR (Raj) 199. Burden of the assessee stands discharged when the identity of the creditors is established and he confirms the loans. (xii) CIT Vs Heera Lal Chagan Lal Tank (2002) 157 ITR 281 (Raj) Burden of the assessee stands discharged when the identity of the creditors is established and h .....

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..... t companies have received abnormal share premium whereas as per the audited P L account and balance sheet, these companies, do not have any business/profit and physical assets/assets are not in commensurate to value of share with the companies which appeared to be a part of a well planned exercise of tax evasion. In this regard, Ld AR has submitted following reasons for Charging of premium: Name of Company Reason for Charging Share Premium Motisons Global Pvt. Ltd 1. Owing a big and valuable land in the heart of city at Lal Kothi, Tonk Road, Jaipur and constructing one of the most beautiful building of Jaipur city thereon. 2. Goodwill of Motisons Group. Motisons Entertainment (I) Pvt. Ltd 1. The assessee company booked a big space (meant for Cinema Hall) in under construction complex naming World Trade Park Further, the leasing out this space to world famous cinema theatre operator Cinepolis was under process. 2. Goodwill of Motisons Group. Motisons Buildtech Pvt. Ltd 1. Owing a big and valuable agriculture land at Village Dudu, Gidani Nolya (At Ajmer Road, Near Dudu) for which planning of township was there. 2. Owning valuable land in the heart of city at C-Scheme and constructing .....

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..... am directed to draw your attention to decision of the High Court of Bombay in the case of Vodafone India Services Pvt. Ltd V UOI for the Assessment year 2009-10 (WP No. 871 of 2014) wherein the court has held interalia, that the premium on share issue was on account of a capital account transaction and does not give rise to income and hence, not liable to transfer pricing adjustment. It is hereby informed that the Board has accepted the decision of the High Court of Bombay in the above mentioned writ petition. In view of the acceptance of the above judgment, it is directed that the ratio decidendi of the judgment must be adhered to by the field officers in all cases where the issue is involved. This may also be brought to the notice of the ITAT, DRP s and CIT (Appeals). In view of above instruction of CBDT share premium cannot be treated as revenue receipt taxable u/s 56(1) of Income Tax Act. Further this should be seen with reference to amendment made by Finance Act 2012 by insertion of clause (viib) to section 56 of Income Tax Act, 1961. This amendment was made effective from 01/04/2013. Memorandum explaining the provisions in Finance Bill 2012 stated as under: Share premium in .....

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..... les is as under: Particulars As per Method (A) (Net assets value method) As per Method (B) (Discounted free cash flow method) Book Value of total assets less prepaid expenses preliminary expenses as on last B/s i.e. 31.03.2012 53,88,09,212 53,88,09,212 Add: - Appreciation in market value of assets (In excess to book value) Land at SB-110* NA 25,52,48,216 Total Assets (A) 53,88,09,212 79,40,57,428 Total Liabilities, excluding share capital and reserves Surplus (L) 76,56,570 76,56,570 Total amount of paid up equity share capital as shown in B/S (PE) 2,05,05,820 2,05,05,820 Paid up value of such equity shares (PV) 10 Fair market value of shares [(A-L)/PE]*PV [(53,88,09,212- 7656570)/2,05,05,820]*10 = Rs. 259 per shares [(79,40,57,428-7656570)/2,05,05,820]*10 = Rs. 384 per shares* For deciding the issue price of shares the assessee company choose the price as determined by option 2 and considering the value of goodwill enhancement in value of other assets the issue price of shares decided Rs. 400 per shares which is quite reasonable. The assessee has further clarified that the market value of land at SB-110, Tonk Road Jaipur, is taken on the basis of value of adjacent land at SB-111 pu .....

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..... for making the addition when the ld AO has satisfied about the ingredients of section 68 of Income Tax Act. Hon ble ITAT Delhi Bench in the case of SH. SHAMSHER SINGH GILL C/O S.K. MONGA ASSOCIATES Versus ITO, WARD-2, HARIDWAR ITA No 2987/Del/2015 order dated 28/02/2017. It was further stated by ld AR that the assessee has submitted ample documents to prove identity, creditworthiness and genuineness of share capital. Under section 68 of Income Tax Act, 1961 the onus of the assessee is to prove the source of credit entry and there is no onus of assessee to prove the source of source or source of all channel sources. The amendment in section 68 of the Act was made by inserting the following proviso to section 68 w.e.f. 01/04/2013 which require to prove source of funds in the hands of shareholder company. Though not required by law but still the assessee proved source of funds in the hands of shareholder company. The amended section even does not require to prove source of funds in the hands of 3rd or 4th stage. I have also perused the case records. In this regard, I find that the AO has issued notice u/s 133(6) of the Act to inquiry the identity, creditworthiness and genuineness of t .....

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..... Dealcom Pvt. Ltd Motisons Buildtech Pvt. Ltd 30,00,000 3.22 Crore SRN B44276514 Charge Id 10366837 date 29/06/2012 Punjab National Bank. Arcade Dealcom Pvt. Ltd Bholenath Real Estates Pvt. Ltd 20,00,000 3.22 Crore SRN B44276514 Charge Id 10366837 date 29/06/2012 Punjab National Bank. Matribhumi Dealers Pvt Ltd Rainbow Buildcon Pvt Ltd 25,00,000 50.00 Crore SRN C05683776 Charge Id 10501186 date 24/03/2014 Axis Bank Ltd Puja Tie Up Pvt. Ltd (i) Motisons Entertainment (I) Pvt. Ltd 15,00,000 2.50 Crore SRN C71816029 Charge Id 10431745 date 24/05/2013 Punjab National Bank. (ii) Motisons Buildtech Pvt. Ltd 50,00,000 2.25 Crore SRN C718166656 Charge Id 10431744 date 24/05/2013 (iii) Rainbow Buildcon Pvt Ltd 40,00,000 1.65 Crore SRN C71814016 Charge Id 10431742 date 18/05/2013 1.95 Crore SRN C71817654 Charge Id 10431746 date 22/05/2013 Kingfisher Vinimay Pvt. Ltd (i) Motisons Global Pvt. Ltd 20,00,000 87.50 Crore SRN C03615010 Charge Id 10490641 date 31/03/2014 State Bank of India (ii) Motisons Entertainment (I) Pvt. Ltd 20,00,000 101.94 Crore SRN B73228603 Charge Id 10419836 date 21/03/2013 Nawab Vyapar Pvt. Ltd Motisons Global Pvt. Ltd 50,00,000 9.95 Crore SRN C67525006 Charge Id 1034578 .....

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..... of the Act by their respective jurisdictional AO wherein their funds/ share capital was assessed. The share capital received from these companies are as under: S. No. Name of Company AY Detail of Share Capital issued Name of allottee Total Amount 3 Motisons Global Pvt. Ltd 2012-13 Alliance Tradecom Pvt. Ltd 3,05,00,000 Evershine Suppliers Pvt. Ltd 1,60,00,000 Alliance Tradecom Pvt. Ltd 3,95,58,900 Evershine Suppliers Pvt. Ltd 4,86,99,600 Mayukh Vinimay Pvt. Ltd 6,93,49,800 Regent Barter Pvt. Ltd 4,04,71,800 Regent Dealers Pvt. Ltd 7,59,99,900 Rose Suppliers Pvt. Ltd 9,87,49,800 Total 41,93,29,800 4 Motisons Global Pvt. Ltd 13- Alliance Tradecom Pvt. Ltd 50,50,000 Evershine Suppliers Pvt. Ltd 1,45,00,000 Mayukh Vinimay Pvt. Ltd 2,24,50,000 Regent Dealers Pvt. Ltd 16,00,000 Rose Suppliers Pvt. Ltd 5,00,000 Total 4,41,00,000 7 Motisons Entertainment (I) Pvt. Ltd 2012-13 Alliance Tradecom Pvt. Ltd 1,59,00,000 Evershine Suppliers Pvt. Ltd 93,00,000 Evershine Suppliers Pvt. Ltd 17,00,000 Mayukh Vinimay Pvt. Ltd 1,55,00,000 Regent Barter Pvt. Ltd 1,79,00,000 Regent Dealers Pvt. Ltd 1,40,00,000 Rose Suppliers Pvt. Ltd 35,00,000 Total 7,78,00,000 9 Motisons Buildtech Pvt. 2012-13 Alliance .....

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..... case has made the following findings : ..Before, we proceed to decide the issue on merits, we would like to discuss the scheme of the Act and precedents on the issue involved in this appeal as under: In cases where share application money is found recorded in the books of an assessee which may represent credit in the books and the share applicant is identified, that amount cannot be added in the assessee's hands u/s 68 of the Act. The Hon'ble Rajasthan High Court has repeatedly reiterated the above legal position. These cases are: (i) CIT vs. Shree Barkha Synthetics Ltd. 182 CTR 175 (Raj.) (ii) Barkha Synthetics Ltd. vs. ACIT (2005), 197 CTR 432 (Raj).13 In coming to the above conclusion, the Hon'ble Jurisdictional High Court has considered at length the relevant decisions on the issue like CIT vs. Steller Investment Ltd. (2000) 164 CTR (SC) 287 = 251 ITR 263 (SC) which has confirmed the decision of Hon'ble Delhi High Court reported in (1992) 192 ITR 287. The Hon'ble Court has gone to the extent of stating that even if it be assumed that the subscriber to the sharecapital are not genuine, nevertheless, under no circumstances can the amount of share capital be re .....

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..... ur of the assessee. Even as regards the three referred share capital contributors, it is noticed that they are existing assessees having PA numbers; and are being regularly assessed to tax. The appellate authorities cannot be said to have erred in deleting the additions in their regard too at the hands of assessee-company. 11. Ultimately, the question as to whether the source of investment or of credit has been satisfactorily explained or not remains within the realm of appreciation of evidence; and the Courts have consistently held that such a matter does not give rise to any substantial question of law. In the case of CIT v. Orissa Corpn. (P.) Ltd. [1986) 159 ITR 78 (SC), the Hon'ble Supreme Court held as under:- 13. In this case, the assessee had given the names and addresses of the alleged creditors. It was in the knowledge of the Revenue that the said creditors were income-tax assessees. Their index numbers were in the file of the Revenue. The Revenue, apart from issuing notices under s. 131 at the instance of the assessee, did not pursue the matter further. The Revenue did not examine the source of income of the said alleged creditors to find out whether they were credit- .....

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..... transaction of shares to be genuine, then it would not involve any substantial issue of law as such. In other words, this Court in its appellate jurisdiction under s. 260A ibid, would not again de novo hold yet another factual inquiry with a view to find out as to whether explanation offered by assessee and which found acceptance to the CIT (A) and Tribunal is good or bad, or whether it was rightly accepted, or not. It is only when the factual finding recorded had been entirely de hors the subject, or that it had been based on no reasoning, or based on absurd reasoning to the extent that no prudent man of average judicial capacity could ever reach to such conclusion, or that it had been found against any provision of law, then a case for formulation of substantial question of law on such finding can be said to have been made out. 11. In our view, no such error could be noticed by us in the impugned order because as observed supra, the Tribunal did go into the details of explanation offered by assessee and then accepted the explanation by placing reliance on the documents filed by assessee. As a consequence thereof, the additions made by AO came to be deleted. 13. In CIT v. Shree B .....

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..... such as (i) Share application containing the name/address/PAN of party, (ii) detail of payment received etc. (iii) Copy of board resolution, (iv) Copy of PAN card of party, (v) Copy of bank statement showing the entry of payment made to assessee,(vi) Declaration of source of funds with party (vii) Copy of Ack. of ITR and Computation, (viii) Copy of audit report and audited balance sheet along with annexure proved all the ingredients of section 68 of the Act. Apart from this, it is also to be noted here that six companies involving share capital of Rs. 58,70,57,300/- to appellant companies were assessed by same AO for AY 2013-14 and in other cases as per the facts available from records non of the notices issued u/s 133(6) of the Act remained unserved and many of them have also made compliance to the notices issued u/s 133(6) of the Act. Further from search report of ROC, it is also seen that some of the investor companies have charge registered under Companies Act in favour of leading banks for crores of rupees. 2.1.4.6 Therefore, in view of the findings of Hon ble jurisdictional High Court, the identity, creditworthiness and genuineness of transaction of these companies cannot be .....

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..... 2013 35,00,000 Mayukh Vinimay P Ltd Shyam Fashion and Durga Enterprises Motisons Global P Ltd 2012-2013 16,00,000 Mayukh Vinimay P Ltd Durga Enterprises Motisons Global P Ltd 2012-2013 15,00,000 Mayukh Vinimay P Ltd Shyam Fashion and Durga Enterprises Motisons Global P Ltd 2012-2013 41,00,000 Mayukh Vinimay P Ltd Shyam Fashion and Durga Enterprises Motisons Global P Ltd 2012-2013 16,47,727 Evershine Suppliers P Ltd PNB, Axis Bank, Siliguri Motisons Global P Ltd 2012-2013 36,00,000 Evershine Suppliers P Ltd Durga Enterprises and Shyam Fashion Motisons Global P Ltd 2012-2013 18,00,000 Evershine P Ltd Durga Enterprises Motisons Global P Ltd 2012-2013 9,00,000 Regent Dealers P Ltd Nibu Nagi Motisons Global P Ltd 2012-2013 18,00,000 Regent Dealers P Ltd Durga Enterprises Motisons Global P Ltd 2012-2013 9,00,000 Regent Dealers P Ltd Kevihulie Sinotsu Motisons Global Private Limited 2012-2013 28,50,000 Regent Dealers P Ltd Durga Enterprises and Shyam Fashion Motisons Global Private Limited 2012-2013 18,50,000 Regent Dealers P Ltd Shyam Fashion Motisons Global Private Limited 2012-2013 22,00,000 Alliance Tradecom P Ltd PNB, Axis Bank Siliguri, Swastik Traders and Global Securities Motisons .....

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..... 12,81,873 Motisons Global Pvt. Ltd 755/14-15 2013-14 4,41,00,000 50,50,000 3, 90,50,000 Motisons Entertainment (I) Pvt. Ltd 760/14-15 2009-10 3,40,00,000 --------------- 3,40,00,000 Motisons Entertainment (I) Pvt. Ltd 766/14-15 2011-12 1,95,00,000 ---------------- 1,95,00,000 Motisons Entertainment (I) Pvt. Ltd 756/14-15 2012-13 7,78,00,000 1,41,50,000 6,36,50,000 Motisons Buildtech Pvt. Ltd 758/14-15 2009-10 3,03,00,000 --------------- 3,03,00,000 Motisons Buildtech Pvt. Ltd 759/14-15 2012-13 3,68,27,500 82,00,000 2,86,27,500 Godawari Estates Pvt. Ltd 769/14-15 2010-11 2,00,00,000 -------------- 2,00,00,000 Godawari Estates Pvt. Ltd 768/14-15 2012-13 10,30,00,000 -------------- 10,30,00,000 Bholenath Real Estates Pvt Ltd 770/14-15 2009-10 2,90,00,000 --------------- 2,90,00,000 Rainbow Buildcon Pvt. Ltd 757/14-15 2009-10 2,00,00,000 --------------- 2,00,00,000 Shivansh Buildcon Pvt. Ltd 771/14-15 2012-13 90,00,000 3,50,000 86,50,000 Total additions 94,14,07,10 8,71,97,727 85,42,09,373 It is pertinent to mention here that M/s Mayukh Vinimay Pvt Ltd received share application of Rs. 10,54,95,000/- in AY 2009-10 which was added as income of M/s Mayukh Vinimay Pvt Ltd in AY 2009-10. T .....

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..... 56(1) are not applicable. Further the amended provisions of sec 56 (2) of the I.T. Act, 1961 specify the various income to be assessed under this section. The premium on shares has been included by provision of sec 56(2)(viiib)of the Act w.e.f. 01-04-2014 which is reproduced as under: 56(2) In particular, and without prejudice to the generality of the provisions of sub-section (1), the following incomes, shall be chargeable to income tax under the head Income from other sources namely:- (i) dividends (ia) to (viia) (viib) Where a company, not being a company in which the public are substantially interested, receives, in any previous year, from any person being a resident, any consideration for issue of shares that exceeds the face value of such shares, the aggregate consideration received for such shares as exceeds the fair market value of the shares: This has also been included in the definition of income u/s 2(24)of the Act w.e.f. 01- 04-2013. The relevant portion reads as under:- (xvi) any consideration received for issue of shares as exceeds the fair market value of the share referred to in clause (viib) of sub-section (2) of Section 56;] To tax the income under the Act, it mu .....

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..... in definition of section 2(24) of the Act w.e.f. 01-04-2013. Therefore, the provisions of these sections cannot be made applicable prior to that A.Y. 2013-14. It is pertinent to note that the ld. CIT (A) had issued the show cause notice to the assessee to tax the share capital under section 68 of the I.T. Act, 1961 as against section 56(1) applied by the AO. However, he had not made any addition under section 68 of the Act. His observation on this issue is in para 2.1.4.6 which reads as under:- 2.1.4.6 Therefore, in view of the findings of Hon'ble Jurisdictional High Court, the identity, creditworthiness and genuineness of transaction of these companies cannot be held as doubtful and addition by applying the provisions of sec 68 of the Act cannot be upheld. The Revenue has not preferred appeal against this findings the ld. CIT(A). It is also pertinent to note that AO has made whole addition by invoking section 56 of the Act, hence the amended provision w.e.f. 01-04-2013 are applicable only on shares premium received on fair market value. In view of these facts, circumstances of the case and the case laws relied on by the ld.AR of the assessee (supra), it is clear that share pr .....

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..... pparent was not the real. The taxing authorities were not required to put on blinkers while looking at the documents produced before them. They were not entitled to look into the surrounding circumstances to find out the reality of the recitals made in those documents. 17. In the above back ground of the facts and circumstances surrounding this case, it is hereby held that the receipt of share capital and share premium was part of a colourful transaction by way of which a sum of Rs. 6,96,50,000/- was introduced into the books of the assessee company in the form of share premium attached to the share capital. As discussion above the premium of Rs. 900/- per share was not justified at all on the basis of absolutely no assets, no business activity, no income, no net worth nor any promise for creation of any assets, business activity, income or net worth in the future. Accordingly, the charging and receipt of share premium/ share capital to the tune of Rs. 6,96,50,000/- is held to be income of the assessee company in the nature of income envisaged u/s 56(1) of the Income Tax Act, 1961. The same is added back to the total income of the assessee. 3.3 In first appeal, the ld. CIT (A) has .....

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..... letter, it is also seen that the assessee has not controverted the facts narrated by Shri Santosh Choube, Shri Rajesh Kr Singh and Shri Ajit Sharma and also could not satisfactorily explain the reasons of cash deposits made to those accounts. Therefore, duly considering those facts as evidences (both documentary oral) gathered during search and Post-search operation, addition to the extent of Rs. 8,71,97,727/- is sustained and Name of Appellant Company ITA No. A.Y. Addition made by AO Addition sustained Addition deleted/ Relief given Motisons Global Pvt Ltd 753/14-15 2009-10 2,75,00,000 - 2,75,00,000 Motisons Global Pvt Ltd 754/14-15 2011-12 6,96,50,000 - 6,96,50,000 Motisons Global Pvt Ltd 767/14-15 2012-13 42,07,29,600 5,94,47,727 36,12,81,873 Motisons Global Pvt Ltd 755/14-15 2013-14 4,41,00,000 50,50,000 3,90,50,000 Motisons Entertainment (I) Pvt. Ltd 760/14-15 2009-10 3,40,00,000 - 3,40,00,000 Motisons Entertainment (I) Pvt. Ltd 766/14-15 2011-12 1,95,00,000 - 1,95,00,000 Motisons Entertainment (I) Pvt. Ltd 756/14-15 2012-13 7,78,00,000 1,41,50,000 6,36,50,000 Motisons Buildtech Pvt. Ltd 758/14-15 2009-10 3,03,00,000 - 3,03,00,000 Motisons Buildtech Pvt. Ltd 759/14-15 2012-13 .....

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..... available on record. It is pertinent to mention that the similar issue has been dealt with and decided by this Bench of ITAT vide its order dated 30-10-2017 in the case of ACIT, Central Circle-2, Jaipur vs Motisons Buildtech Pvt. Ltd in ITA No. 481/JP/2017 (Revenue s appeal) for the Assessment Year 2009-10. Since the issue raised by the Revenue in the present appeal is same as decided in the appeal of the Revenue in ITA No. 481/JP/2017 for the Assessment Year 2009-10 in the case of ACIT, Central Circle-2, Jaipur vs Motisons Buildtech Pvt. Ltd Jaipur (supra) which shall apply mutatis mutandis in this appeal of Revenue also. Thus solitary ground of the Revenue s appeal in ITA No. 487/JP/2017 for the A.Y. 2011-12 is dismissed. In the result, the appeal of the Revenue in ITA No. 487/JP/2017 stands dismissed. 4.1 The Revenue in ITA No. 488/JP/2017 for the A.Y. 2012-13 has raised the solitary ground as under:- Whether on the facts and in the circumstances of the case the ld. CIT (A) was right in deleting the addition of Rs. 36,12,81,873/- out of total addition of Rs. 42,07,29,600/- made u/s 56(1) of the Act ignoring the fact that assets of the assessee company don t commensurate to premi .....

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..... peal, the ld. CIT (A) has deleted the addition of Rs. 36,12, 81,873/- out of addition of Rs. 42,07, 29,600/- made by the AO and sustained the addition of Rs. 5,94,47,727/- by observing at pages 59 to 111 of his order as under:- 3.1.2 I have duly considered assessee's submission and carefully gone through assessment order. I have also taken a note of factual matrix of the case as well as applicable case laws relied upon. Facts of the case are that no scrutiny assessment u/s 143(3) of the Act was done in assessee s case for AY 2012-13 and the original return filed on 30.09.2012 declaring nil total income was only processed u/s 143(1) of the Act. Various courts have held that processing of returns u/s 143(1) of the Act is no assessment. It is obvious that if no incriminating material is found during search, then additions, if any, have to be made in the income shown in the return of income (in the case of pending assessments which abate) and to the computed income (in case of assessments were completed). Thus effectively, what was said in the case of Kabul Chawla was that making any addition in the returned income or income earlier assessed was not allowed if no material was found .....

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..... f such six assessment years.(emphasis supplied by me). (The decisive words used in the provisions are to 'assessee or reassess the total income'). The A.O. is thus duty bound to determine the 'total income' of the assessee for such six assessment years and it is obvious that 'total income' refers to the sum total of income in respect of which a person is assessable. The total income therefore will cover not only the income emanating from declared sources or any material placed before the Assessing Officer but from all sources including the undisclosed ones, or based on the unplaced material before the AO. Some related Judgments a) CIT vs. Kabul Chawla (Delhi High Court) : Completed assessments can be interfered with by the AO while making the assessment under Section 153 A only on the basis of some incriminating material unearthed during the course of search or requisition of documents or undisclosed income or property discovered in the course of search which were not b) Gurinder Singh Bawa vs. DCIT (ITAT Mumbai) : In All Cargo Global Logistics 137 ITD 287 (Mum)(SB), the Special Bench held that in a case where the assessment has abated the AO can make additi .....

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..... aforementioned decisions, the legal position that emerges is as under: i. Once a search takes place under Section 132 of the Act, notice under Section 153 A(l) will have to be mandatorily issued to the person searched requiring him to file returns for six AYs immediately preceding the previous year relevant to the AY in which the search takes place. ii. Assessments and reassessments pending on the date of the search shall abate. The total income for such AYs will have to be computed by the AOs as a fresh exercise. iii. The AO will exercise normal assessment powers in respect of the six years previous to the relevant AY in which the search takes place. The AO has the power to assess and reassess the 'total income' of the aforementioned six years in separate assessment orders for each of the six years. In other words there will be only one assessment order in respect of each of the six AYs in which both the disclosed and the undisclosed income would be brought to tax . iv. Although Section 153 A does not say that additions should be strictly made on the basis of evidence found in the course of the search, or other post search material or information available with the AO whi .....

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..... d to reassess the income of assessee. In view of the above, this is not a fit case for making the addition in the year under consideration, the same are deleted. (iii) In the case of M/s Ideal Appliance Company Pvt . Ltd. Vs. DCIT, Central Circ le-44, Mumbai, the following legal i s sues were rai sed before the Hon'ble ITAT 1 Bench, Mumbai : 1. The Ld CIT (A) failed to appreciate the fact that no incriminating documents /evidences were found during the course of search of third party, and hence, re-computing the income u/s 153A is bad in law and liable to be quashed. 2. The Ld CIT (A) failed to appreciate the fact that original assessment was made u/s 143(3) vide order 31st August 2007 after considering all the documents and materials on record and due application ff mind and hence re-computing the income by merely changing head of income for the said year under the grab of section 153A based on same documents and materials, is bad in law and order is liable to be quashed, 3. The Ld CIT (A) erred in confirming the action of the AO reassessing the income u/s 143(3) r.w.s 153A, without appreciating the fact that only pending assessment abet and not the completed assessments and h .....

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..... iminating material is found during search, if any undisclosed income has to be assessed for the relevant 6 years, it has to be in the proceedings under section 153A of the Act. a) Now there are two situations - either the assessment was complete before the search or pending at that time. If the assessment was complete, and if any income which had escaped assessment in the regular assessment is found during proceedings u/s 153A, what is the AO supposed to do? He has no power to act u/s 147/148 because of the non-obstante clause. He is now precluded from invoking provisions of section 148 because of the conclusion drawn in Kabul Chawla. b) The situation is even more serious if a pending assessment or reassessment abates. What if a show-cause notice had been issued on an undisclosed income prior to search? According to Kabul Chawla if no incriminating material is found during search, then NO ACTION can be taken in such cases also. No interpretation of a provision of an Act can be such that it leads to results which were never intended. By drawing a conclusion that the presence of incriminating material, and addition thereon is necessary for making an addition which is not based on mat .....

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..... nue. It has stated that additions on nonsearch issues can be made even if there is incriminating material in even one year. This case is extremely important for the Revenue. Similar sentiments have been expressed in the case of CIT v. Anil Kumar Bhatia [2013] 352 ITR 493 (Del) where only one unsigned document dated 10.02.2003 showing a loan of Rs. 1,50,000/- was found during search conducted on 13.12.2005. The Hon ble High Court held that this material was enough to justify additions in all the 6 years. c) Recently, the Kerala High Court in Sunny Jacob Jewellers and Wedding Centre v. Deputy Commissioner of Income-Tax [2014] 362 ITR 664 (Ker) has also very categorically stated that incriminating material found during search is not necessary in all the 6 years for additions to be made on other issues. While giving these decisions, the Hon'ble ITAT, Mumbai as well as the Hon'ble ITAT, Delhi Bench has referred to the decision of the Hon'ble Mumbai High Court in the case of Al l Cargo Global Logistics Limited Vs. DCIT, Central Circle-44, Mumbai and the decision of Hon'ble Delhi High Court in the case of CIT Vs. Kabul Chawla in ITA No. 707/2014 dated 22.8.2015. Here it is .....

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..... found during search conducted on 13.12.2005. The Hon ble High Court held that this material was enough to justify additions in all the 6 years. c) Recently, the Kerala High Court in Sunny Jacob Jewellers and Wedding Centre v. Deputy Commissioner of Income-Tax [2014] 362 ITR 664 (Ker) has also very categorically stated that incriminating material found during search is not necessary in all the 6 years for additions to be made on other issues. Therefore, in view of above discussion with regard to the provisions of Sec 153A of the Act, it is seen that from 01.06.2003 onwards the number of years from which assessments could be framed after search were reduced from 10 to six. Section 153A of the Act has mandated that there have to be 6 separate assessments instead of a block assessment. It also started with a non-obstante clause which stated that the operation of sections 139, 147,148,149,151, and 153 was ousted. In other words when an assessment was being completed u/s 153A, the sections mentioned above could not be invoked. The section did not, repeats, and did not mention that for making an assessment u/s 153A of the Act, it was necessary to have some incriminating material found du .....

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..... Ltd 64000 6,40,000 10 1,53,60,000 240 250 1,60,00,000 Evershine Suppliers Pvt. Ltd 162332 16,23,320 10 4,70,76,280 290 300 4,86,99,600 3. Mayukh Vinimay Pvt. Ltd 231166 23,11,660 10 6,70,38,140 290 300 6,93,49,800 4. Mayukh Vintrade Pvt. Ltd 4666 46,660 10 13,53,140 290 300 13,99,800 5. Regent Barter Pvt. Ltd 134906 13,49,060 10 3,91,22,740 290 300 4,04,71,800 6. Regent Dealers Pvt. Ltd 253333 25,33,330 10 7,34,66,570 290 300 7,59,99,900 7. Rose Suppliers Pvt. Ltd 329166 32,91,660 32,91,660 9,54,58,140 290 300 9,87,49,800 Total 1433432 1,43,34,320 40,63,95,280 42,07,29,600 2) During the course of assessment proceedings the assessee submitted the following documents to prove their identity of shareholders, creditworthiness of shareholders and genuineness of transaction with them: - Name of Shareholder Particulars of Documents submitted Copy at PB Page Alliance Tradecom Pvt. Ltd 1. Share application containing the name/address/PAN of party, detail of payment received etc. 328-339 341-346 2. Copy of board resolution. 340 347 3. Copy of PAN card of party. 348-349-356 4. Copy of bank statement showing the entry of payment made to assessee. 349-356 5. Declaration of source of funds with .....

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..... Declaration of source of funds with party. 624-628 6. Copy of Ack. of ITR of AY 2012-13. 629-630 7. Copy of audit report and audited balance sheet along with annexure of 31.03.12. 631-639 Rose Suppliers Pvt. Ltd 1. Share application containing the name/address/PAN of party, detail of payment received etc. 640 2. Copy of board resolution. 641 3. Copy of PAN card of party. 642 4. Copy of bank statement showing the entry of payment made to assessee. 643 5. Declaration of source of funds with party. 644 6. Copy of Ack. Of ITR A.Y. 2012-13 645-646 7. Copy of audit report and audited balance sheet along with annexure of 31.03.12. 647-656 3. All the share capital/share application was received through a/c payee cheques and verifiable from bank statement of assessee as well as bank statement of the party. The onus u/s 68 of the assessee is to prove the identity, capacity and genuineness of the transactions has been discharged which may be seen from the followings:- i) Identity:- The assessee proved the identity of all the companies by filing the share application received from the parties and the parties are duly in existence and the existence of the parties can be verified from the offic .....

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..... kh Vintrade Pvt. Ltd 13,99,800 36,54,820 35,01,038 NA Regent Barter Pvt. Ltd 4,04,71,800 10,51,11,109 10,52,03,352 10,52,01,041 Regent Dealers Pvt. Ltd 7,59,99,900 9,33,85,686 9,34,53,097 9,34,50,971 Rose Suppliers Pvt. Ltd 9,87,49,800 10,34,93,371 10,35,53,105 10,35,51,183 From the above chart it is clear that all the Investor companies were having their own share capital and Reserve surplus which were more than to the amount invested in the assessee company. The above chart shows that the investor companies were having their own independent funds and having their independent source to invest in the shares of the assessee company. Apart from the investment made in the shares of assessee group, the investor companies were also having investments in shares of other companies or loans advances to other parties, therefore from the bank statement as well as financials statements of the investor companies their creditworthiness is duly proved. Further assessment of above named companies for AY 2009-10 (Except M/s Mayukh Vintrade Pvt. Ltd) was completed by the department wherein the source of funds with these companies whereby the net worth of these companies was created was accepted by .....

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..... ion made by investigation wing and no independent inquiries were made by ld. AO at his own. Further whatever material/inquiries which is being discuss by ld. AO and on which the ld. AO is relying were collected behind the back of the assessee and the same was never brought in knowledge of the assessee and opportunity to confront the material was not provided to the assessee. The finding of ld. AO on such modus operandi and submission of the assessee on such is as under: - a) Finding of ld. AO (Para 10): - On examination by the investigation wing it is clearly found that systematic transfer of funds across several accounts, at time as many as six accounts, in a single day (or at the most two to three days). Major exercise has been done in two of the six companies Alliance Tradecom Pvt. Ltd and Evershine Suppliers Pvt. Ltd. Submission of assessee: - From this finding no where it proves that the funds were introduced in such companies by the assessee company. Whatever amount received by the assessee was received through a/c payee cheques and source with investor companies was also proved. The investor company has also confirmed the investment in shares of assessee company made by them .....

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..... ng that source of cash creditors was not required to be proved by assessee once identity, capacity and genuineness stands proved ITAT dismissed revenue s appeal Held, all cash creditors had affirmed in their examination that they had advanced money to assessee from their own respective bank accounts Therefore, when there was categorical finding even by AO that money came from respective bank accounts of creditors, which did not flow in shape of money, then, such addition could not be sustained and had been rightly deleted by both two appellate authorities. There was no clinching evidence in present case nor AO had been able to prove that money actually belonged to none but assessee himself Action of AO was based on mere suspicion. Accordingly, ITAT, after appreciation of evidence had rightly dismissed revenue s appeal. It was pure finding of fact. Revenue s appeal dismissed Held: All cash creditors had affirmed in their examination that they had advanced money to assessee from their own respective bank accounts. Therefore, when there was categorical finding even by AO that money came from respective bank accounts of creditors, which did not flow in shape of money, then, such additi .....

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..... pany naming M/s Mayukh Vintrade Pvt. Ltd and this company is major shareholder in other companies wherefrom the substantial amount of share capital was received to the assessee group. But this shareholding pattern is not of the year under consideration and the same was also as on 31.03.2011 too. Rather this proves the genuineness and creditworthiness of the transaction. Here the moot question is from where the inflow of the funds was- whether it was undisclosed income of the assessee company or from the independent funds of the investor companies. Further holding of share capital by director or their family members of the assessee company in one of the company who is holding the shares in investor companies does not mean that the funds in such investor companies were given by the assessee company more so when the funds from such companies is available with them from 31.03.2009 i.e. much prior to the investment made in the assessee company and assessment of AY 2009-10 of such companies (Except Mayukh Vintrade Pvt. Ltd) were made by the department wherein such funds and assets/investments against such funds was treated as genuine and in one other company M/s Mayukh Vinimay Pvt Ltd hu .....

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..... bra which was invested in assessee company Alliance Tradecom Pvt. Ltd 3,20,00,000 (Page 361) 40,00,000 (PB Page 360-361) Evershine Suppliers Pvt. Ltd Nil 51,00,000 (PB Page 421) Thus part of the funds were invested by the investor companies out of the funds received from the above named persons which has been treated as genuine by ld. AO in their hands, therefore there is no reason to treat such funds as non genuine in the hands of the assessee company. This shows that the huge additions were made by ld. AO on surmises and conjecture, with pre set mind to make the additions and without having adverse evidences in possessions. The ld. AO as a result to search or as a result of long inquiries failed to prove that any short of suspicious funds has been transferred to the assessee and the full proof evidences submitted by the assessee has been disbelieve by ld. AO merely on surmises and conjectures. d) Finding of ld. AO (para 13): - It can be noticed from the above tables that the first receipts in the Motisons Group entities are evidenced on 12.7.2011. Subsequently, there have been receipts from various companies and up to 8.12.2011, they have necessarily gone to Motisons Group entiti .....

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..... a pen drive belonging to Shri Banwari Lal Yogi. Submission of assessee: - i) In the chart of shareholding of investor companies given in para 12 of the assessment order the shareholding is given as on to 19.02.2013 i.e. relevant to AY 2013-14. It is not understandable that shareholding of some date of AY 2013-14 is how relevant to understand the transactions made during the year under consideration. However it is relevant to mention here that the shareholding mention in this para was same in AY 2011-12 and AY 2012-13 (except in the case of Mayukh Vintrade Pvt. Ltd). In the case of M/s Mayukh Vintrade Pvt. Ltd the major shareholding was same as in AY 2011-12 and only further few shares were issued to existing shareholders in AY 2012-13. ii) Admittedly during the year under consideration the first receipt from the investor companies was from 12.07.2011 and the same received up to March-2012 but the funds which were invested by the investor companies in the assessee company were being owned by them much prior to the investment made in the assessee company and the investment was made by them by realizing the funds previously invested by them at some other place. This is not a case wher .....

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..... s not a single evidence was found to show that the share application money received by the assessee was managed affairs to manage its unaccounted funds than how it can be presumed that the share application received by the assessee is non genuine. Admittedly those companies opened the bank accounts in HDFC, Jaipur but the same were because of the reason that they planned to made the investment in the assessee group and their directors were also residing in Jaipur, therefore in order to better smooth management to funds, the bank accounts were opened in Jaipur branch. Further for considering a transaction as genuine the genuineness of source of funds is to be examined which is well proved as genuine in this case. The maintaining bank a/c by the companies in Jaipur cannot be a basis for treating the transaction as non genuine. v) The assessee group was not maintaining the books of accounts of the investor companies and the same is evident from the search action carried out by the department as during the course of which no physical record i.e. books of accounts, bank statements etc. found from the premises of the assessee group and the same were found at Kolkatta office of these comp .....

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..... he ld. AO is wrong in holding that the Motisons Group companies allotted the shares to the Kolkatta based companies at very premium and the same shares in the very same years were allotted at very nominal prices to the family members and other group related concerns. From the examination of details of shares allotted during the year (Copy at PB Page 118 to 121) your honor will find that during the year under consideration no share was allotted by the assessee company to other group concerns or family members of directors. As regard to allotment of shares in other companies this is to submit that in the year under consideration only one company of the assessee group M/s Shivansh Buildcon Pvt. Ltd allotted the shares to M/s Evershine Suppliers Pvt. Ltd as well as to Shri Sanjay Chhabra and Shri Sandeep Chhabra and the same was allotted at the same rate. The shares to Evershine Suppliers Pvt. Ltd were allotted @ 20 per shares and shares to Shri Sanjay Chhabra and Shri Sandeep Chhabra were also allotted @ 20 per shares. Thus this finding of ld. AO is wrong, perverse with sole motive to influence the appellate authorities by mentioning the wrong facts. ii) The investor companies acquire .....

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..... de investment in shares of the assessee company were funded by Motisons Group. Thus, if the ld AO is not in possession of any positive material against the assessee or its investor companies to prove his contention than the addition cannot be made merely on guess, presumption and assumption. Further there is nothing positive in the inquiries to allege that the assessee has introduced its own unexplained money under the garb of share capital and share premium. iv) The allegation of ld. AO that the statement of affairs has been designed to introduce money through banking channels by the group in the form of share capital/share premium is completely wrong, perverse and contrary to the facts available on record. In forgoing paras we have submitted the detail of net worth of the investor companies and from examination of such net worth of the investor companies your honor will find that such companies owing their net worth much prior to investment made in the assessee company which has also been assessed and accepted by the department in their assessment proceedings. Further the net worth of those companies were being owned from the year when they were no way related/concerned from asse .....

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..... evant to mention here that if someone is investing the money in the assessee company he must be having the inflow of money from some source. What is the source of inflow with the investor company and how it is managing its affairs is not concern of the assessee. The transfer of funds across several accounts in a single day or within few days was because of the reason that the before inflow of funds with the concerning party the outflow of fund was predetermined but the same does not lead to conclude that the same were funds of the assessee. Non of the above company is owned by the assessee company or group. ii) The excel sheet which is being discuss by ld. AO is not in knowledge of the assessee and the same is also not appearing in assessment order too. iii) The Six investor companies have not received the monies from hidden sources. Initially these companies received the money from sales of their own shares which they invested in previous years and they invested in the assessee company by realizing their old investment. Therefore the source in the hands of the investor company was not hidden. The ld. AO held that the money in the six companies were transferred from the companies n .....

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..... y action regarding to such should have been taken against such companies as these companies are independent assessee. There is no whisper in the assessment order that any short of inquiries were made from these companies in this regard. The ld AO has no positive material against the assessee to establish that alleged suspicious funds were belonging to assesses group. There is no finding and evidence as a result of search or as a result of investigation that all channel source were being managed by the assessee group. If in some intermediate channel source, some suspicious funds has been deployed than the action should be taken in their hands. The assessee cannot be held responsible for the default of third or fourth channel. The onus under the law is to prove source and not source of source. Here the ld AO is putting the responsibility of the assessee to prove source of all sources. 2) The ld. AO held that moneys in the a/c of companies naming Faster Vinimay Pvt Ltd, Wise Merchants Pvt Ltd, Albatross Dealers Pvt. Ltd, Swati Vanijya Pvt. Ltd, Dover Distributors Pvt. Ltd and Olympic Vyapaar Pvt. Ltd were deposited from four proprietorship concerns and in bank a/c of such concerns the .....

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..... only be taken if any positive material/evidence against such person is found to show that such funds belong to him. In the case of the assessee there is no evidence to prove that the cash deposit in bank a/c of fourth/fifth channel belong to the assessee. If this kind of practice is approved than the owner of the bank a/c will enjoy by depositing the unaccounted/unexplained cash in bank a/c freely and on being caught by department to avoid the tax implication, penalties etc. they will shift their burden on some other one. 4) As regard to the statement of Shri Santosh Choubey this is to submit that as apparent from the assessment order this person admitted to deposit the cash in bank a/c in bank a/c of some of the concerns but he nowhere admitted that he deposited the unaccounted cash in the bank a/c. There is no finding in bank a/c in this regard. There may be possibility that he may deposit the cash from disclose source but it appears that no investigation has been made in this regard. Further this is to submit that the assessee group or its investor companies have no concern with the concerns managed by person naming Samtosh Choubey. Further if Santosh Choubey is admitting that .....

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..... d and Olympic Vyapaar Pvt. Ltd through demand drafts of Bhutan National Bank and drunk PNB Bank ltd it is not clear from the assessment order that why the same are being treated as non genuine. There is no finding in the assessment order that some suspicious funds were introduced to obtain such demand drafts and if it is presumed to be so than still there no contrary material to show that the same was belonging to the assessee. There is no inquiry that how such demand drafts were originated and who managed such affairs. What was the source of funds to obtain the bank drafts. This also proves that the inquiries on which the department is relying are totally irrelevant for the determination of the share capital received by the assessee is own fund of the assessee group. h) It is again relevant to mention here whatever finding/inquiries discussed above was never bought in the knowledge of the assessee and the same was never confronted from the assesses. Now it is settled law that evidences filed by assessee are to be evaluated and be accepted and the exception is when A.O. collects material in support of his finding, confronts it to the assessee, gives him reasonable opportunity of re .....

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..... ue within a day or two casts a doubt as the transaction appears to be some what doubtful but suspicion howsoever strong it may be is not sufficient itself. In the case of the assessee, the assessee has provided all details and companies, which applied for shares are filing I. Tax return and investment is reflected in their Balance sheet. The Hon ble Raj High Court in the case of Jai Kumar Bakliwal (supra) has held that assessee is not required to prove the source of source. The Hon ble Jurisdictional High Court in the case of Jai Kumar Bakliwal (supra) has referred to some observations from some decisions and these are reproduced as under: Hon ble Apex Court in the case of CIT V Daulat Ram Rawatmul [1973] 87 ITR 349 held as under: The onus to prove that the apparent is not the real is on the party who claims it to be so. As it was the department which claimed that the amount of fixed deposit receipt belonged to the respondent firm even though the receipt had been issued in the name of Biswanath, the burden lay on the department to prove that the respondent was the owner of the amount despite the fact that the receipt was in the name of Biswanath. A simple way of discharging the onu .....

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..... the money was not acceptable by the revenue could not provide necessary nexus for drawing inference that the amount admitted to be deposited by these four persons belonged to the assessee. The assessee having discharged his burden by proving the existence of the depositors and the depositors owing their deposits, he was not further required to prove source of source. As observed herein above, though u/s 68, AO is free to show with the help of the enquiry conducted by him into the transaction which has taken place between the creditor and the sub-creditor that the transaction between two were not genuine and that the sub-creditor had no creditworthiness, it will not necessarily mean that loan advanced by the sub-creditor to the creditors was income of the assessee from undisclosed sources unless there is evidence direct or circumstantial, to show that the amount which had been advanced by the sub-creditor to the creditor had actually been received by the sub-creditor from the assessee. The logical interpretation will be that while the assessee has to prove as special knowledge i.e. from where he has received the credit and once he disclosed the source from which he has received mone .....

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..... we do not see any infirmity in the order of the ld. CIT (A) and accordingly do not see any merit in this appeal of the department. iv). The Hon ble Apex Court in the case of Lalchand Bhagat Ambica Ram V CIT 37 ITR 288 has held that no addition can be made on the basis of surmises and conjectures. In this case the A.O. made addition on the basis of surrounding circumstances and entertained a suspicion that assessee was indulging in smuggling of food grains to Bengal as was the notoriety of grain merchants. The assessee could not be said to be indulging in smuggling without an iota of evidence. The addition could not be made as the finding that sum of High denomination notes was secreted profits was based on surmises, suspicious and conjectures. v). The Hon ble Jurisdictional High Court in the case of CIT V AKJ Granites P. Ltd 301 ITR 298 observed that share application money given by various persons can not be presumed that same belongs to assessee and can not be assessed in his hands as undisclosed sources unless some nexus is established that share application money for augmenting the investment in business has flowed from the assessee s own money. vi). The Hon ble Delhi High Cou .....

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..... nts, bank account details from which payment through account payee cheques, it has been held by the Hon ble Delhi High Court that the assessee had discharged its initially onus. With the registration of the company, the identity has been established, the applicant company was having bank account, it had made the payments through account payee cheques. It is further held that it would not automatically follow that the said money belongs to the assessee and become unaccounted money. According the Hon ble High Court, the assessee appears to be correct on this aspect. The Hon ble Court felt that something more, which was necessary and required to be done by the Assessing Officer, was not done. The Assessing Officer failed to carry his suspicion to logical conclusion by further investigation. The learned A.R. further drawn our attention on the findings given by the Hon ble Court that just because of the creditor/share applicant could not be found at the addresses given, it would not give the revenue a right to invoke Section 68 of the IT Act without any additional material to support such a move. The Hon ble Delhi High Court also not allowed to remit back the issue to the Assessing Offi .....

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..... gap of near about 5 years, the share applicant might have changed their addresses, which could be verified from the ROC by the Assessing Officer to substantiate his findings, which has not been done by him. The learned CIT (A) has called for remand report from the Assessing Officer on furnishing of copy of bank account of M/s Megatronics Systems Pvt. Ltd. At the time of appellate proceedings. Further the Hon ble Delhi High Court has decided assessee s own case on similar facts in its favour in A.Y. 2006-07. The learned CIT D.R. has not controverted the findings given by the learned CIT (A). Therefore, we upheld the order of the learned CIT (A). j) Thus in view of above submission this is to submit that there is no cogent reason with ld. AO either as a result of search over the assessee as well as on inquiries carried out by the department to presume that the assessee introduced its unaccounted money in books of accounts in the form of share capital/share premium. The intermediate companies/persons are separate Income tax assessee and having their own net worth, own source of funds much prior to the investment made in the assessee company and if some suspicious funds had been intro .....

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..... company in the assessee company was made out of rotation of such funds than how the same can be again added as income of the assessee. The same will resulted to the double addition of the same amount. 5. After being doubted the creditworthiness and genuineness of the transactions on the basis of reasons/inquiries/analysis discuss in para 4 above the ld. AO further doubted the creditworthiness and genuineness of the transactions for the following reasons as given in para 11 (a to c) and para 18 of the assessment order: - i) The assessee company was incorporated on 16.08.07 with the subscribe capital of Rs. 1,00,000/- only. The assessee company received the huge share premium just after few year of its incorporation. ii) As per the audited P L account and balance sheet the assessee company did not have any business what so ever. iii) Perusal of the balance sheet of the assessee company revealed that there were no physical assets/assets are not in commensurate to value of share with the company wither in the form of fixed assets, plant machinery etc. In the above background the receipt of share capital Rs. 1,43,34,320/- and premium to the tune of Rs. 40,63,95,280/- during the year un .....

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..... investments are made. There are lots of companies which issue the shares in market through IPO and the shares of such companies are subscribed on the basis of their declaration regarding their future business planning for which the funds raised in IPO. Thus the existing fixed assets of the company always not to be the criteria for deciding the investment in shares by investor companies. The assessee company is also in business of real estate and it is an admitted fact that market value of immovable assets increase and book value does not represent the real value. Shares of real estate companies command premium. The reasonableness of share premium is justifiable from the following details :- Real Estate Company face value High 2010 High 2011 5 year period High Low DLF 2 322 270 392 104 India bulls Real 2 207 137 212 42 Unitech 2 87.8 66.9 97 8 Sobha Devlopers 10 367 272 558 8 HDIL 10 290 183. 296.3 26.9 Godrej Enterprises 5 361 372 378 155 Brigade Enterprises 10 148 94 173. 40.9 iv) Regarding observation of ld. AO that share capital and premium appeared to be a part of a well planned exercise of tax evasion as discussed earlier this is to submit that taxing event arose when the inc .....

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..... to the assessee for treating the share capital/premium as income of the assessee on the following grounds: - a) Share premium/Share capital paid by investor companies is not justified on any account and it is clear that entire money has been introduced in the assessee company in the garb of share premium. The purpose and justification of charging the share premium in excess of the justifiable amount, which in this case cannot be more than Rs. 10/- per share, is absent from the above exercise of issue and subscription of shares at a premium of Rs. 290 per share. b) The detailed enquiries revealed that most of the companies are Kolkatta based. Directors of these companies are the employees of Moti Sons Group or the family members of Chhabra family. Detailed analysis showed the following facts: (i) All the Directors were residents of Jaipur (ii) Internet search showed that Directors of these Kolkatta based Companies are related to MotiSons Group companies through employment or otherwise (iii) ITDMS and ITD search on PAN of these directors corroborated the given addresses to a large extent (iv) Residential address of Rajeev Jain was the same as that of MotiSons Shares Pvt. Ltd., mentio .....

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..... rom this much of money was earned, therefore the finding of ld. AO on this issue is totally incorrect and does not maintainable in the eye of law. The allegation of ld. AO is patently wrong, without any basis and merely on surmises and conjectures. Hon ble Justice Hidayatullah of the Supreme Court in the case of Sreelekha Banerjee Vs CIT [1963] 49 ITR 112 (SC); 120 observed that the Income Tax Department cannot by merely rejecting unreasonably a good explanation, convert good proof into no proof Hon ble Supreme Court in the case of Uma Charan Shaw Bros Co Vs CIT 37 ITR 271 has held that the surmises and conjectures, and the conclusion is the result of suspicion which cannot take the place of proof. Hon ble Punjab Haryana High Court in the case of CIT Vs Anupam Kapoor (2008) 299 ITR 179 (P H) also held that suspicion, howsoever strong cannot take the place of legal proof. b) Regarding the inquiries which are being discuss in the show cause notice this is to submit that whatever inquired being discuss by ld. AO was not in knowledge of the assessee that what sort of inquiries has been made by the department and what are the outcomes of such inquiries. Therefore the assessee requested .....

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..... ng affairs of some of the companies who made the investment in some years in the assessee/companies of assessee group but such inquiries nowhere proves that the funds with such companies was not from their own independent sources and the same was introduced by the assessee company. In the instant case for adding the share capital/premium as income of the assessee the department has to prove that the amount so received was revenue receipt of the assessee and in the instant case the department could not prove the same as a result of search proceedings over the assessee group or during the course of assessment proceedings or as a result of investigation/analysis. Without proving the source of income or without proving that amount so received is income of the assessee the same cannot be treated as income of the assessee merely on presumption, assumption and suspicious. c) The ld. AO opined that the analysis/inquiries indicate the systematic and deliberate creation of a colourable device to introduce Share capital in Motisons group companies. The investment in share capital of assessee company by above named companies was independent decision/judgment of those companies. The assessee ha .....

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..... ot go beyond, is not apparently vested with self serving interest but also with ignorance of law. Certainly, simply because some form of identification on paper has been provided does not mean that the transaction stands explained from the viewpoint of the credit worthiness and genuineness. Submission of assessee: - i) The assessee submitted ample documents in supported to share application money received to prove the identity, creditworthiness and genuineness of transactions and from examination of those documents its proves that the investing companies were having sufficient funds to make investment in share capital of the assessee company. There was no cash deposit in bank a/c of the investor company for subscribing the share capital of assessee company. The ld. AO rejected these evidences on surmises and conjectures. Hon ble Justice Hidayatullah of the Supreme Court in the case of Sreelekha Banerjee Vs CIT [1963] 49 ITR 112 (SC); 120 observed that the Income Tax Department cannot by merely rejecting unreasonably a good explanation, convert good proof into no proof Hon ble Supreme Court in the case of Uma Charan Shaw Bros Co Vs CIT 37 ITR 271 has held that the surmises and conje .....

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..... and creditworthiness of the credit entries has to be examine and in the instant case the assessee has proved all these three ingredients and the ld. AO did not find any infirmity in such details. If the ld. AO is having doubt regarding the detail and submission filed by the assessee than he could surely go beyond for further inquiries but the inquiries should have been with the angel to unearth the truth of the transactions and in the instant case the inquiries should have been made with the angel to find out the following: - The huge amount received in the form of share capital/share premium. Whether the money so received is actually capital receipt in the hands of the assessee? Whether money received in the hands of the assessee company was from genuine source or the same was own funds of the assessee? If the money which flow in the hands of the assesses was managed affairs of the assessee than what was the source of inflow of such money? iv) The ld. AO has not carried out any short of inquiries in this regard in the case of the assessee. No inquiries from the shareholders, their bankers have been made to prove the contention of the assessee to be wrong. There is no evidence tha .....

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..... tra against the assessee. It is further submitted that if the documents submitted by the assessee was not felt sufficient to accept the transaction than the ld. AO could ask from assessee to submit the further details/documents which is felt necessary for deciding the matter in justice fair manner but the same was not done by ld. AO. b) Finding of AO: - Regarding no bar of issuing of shares at premium, the assessee company has attempted to take an advantage out of the absence of a specific provision which bars the acceptance of share premium which does not match the net worth of the issuing company. In this regard, it needs to be pointed out that mere absence of a specific provision does not by itself mean that a particular colorable device or a sham transaction, acquires legal sanctity, there are numerous provisions related to Gift, sale consideration on sale of assets which came into being at a later stage, but the illegal and tax contravening transactions were still taken up and taxed by revenue authority of course, after the specific inclusion of governing statutes, the matter requires to be dealt within the framework of the specific provision. But, till such time it cannot be .....

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..... remium is capital receipt and not a revenue receipt. The share premium is also verifiable from returns of allotment submitted in ROC. As per departmental circular (MCA) No. 3/77 dated 15.04.1977 the monies in the share premium account cannot be treated as free reserves, as they are in the nature of capital reserves. ii) On the issue of shares at premium, the ld. ITAT, Mumbai Bench in the case of ACIT V/s Gagandeep Infrastructure Pvt. Ltd. 2014-TIOL-656-ITAT-Mum observed that issue of shares at premium is always a commercial decision which does not require any justification. Further the premium is a capital receipt which has to be dealt with in accordance with section 78 of companies Act 1956. Further the company is not required to prove the genuineness, purpose or justification for charging premium of shares, share premium by its very nature is a capital receipts and is not income for its ordinary sense. In the case before Mumbai bench has to consider a case where premium of Rs. 190 per share was charged. The Tribunal observed as under: No doubt a non-est company or a Zero balance sheet company asking for Rs. 190 per share defies all commercial prudence but at the same time we cann .....

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..... ion is covered in the definition of Income or deemed income as per Income Tax Law. If some specific transaction is not income or deemed income in the Income tax law than the same cannot be presumed as income by the revenue authorities at their own without having any positive material to presume that the same is actually income of the assessee. These type of transaction can only be dealt within the framework of the specific provision after the specific inclusion of governing statutes. In the Income Tax Act the charging of certain amounts share premium deemed to be income of the recipient companies w.e.f. 1.4.2013 i.e. on and from A.Y. 2013-14 and the same cannot be made applicable retrospectively. iv) Admittedly the Section 56 of the IT Act has already been existence since long and but subsection (1) of section 56 only covers the taxing the revenue transactions which not covered under other head of income but the same are included in the definition of income. The section 56(1) does not cover the taxing the deeming capital receipts and such receipts can only taxed under sub section 56 (2) of Income Tax Act, 1961 if consisting specific expression of the manner in which a specific tran .....

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..... e the transaction are being genuine. As stated in earlier paras, the Hon ble ITAT, Mumbai Bench in the case of ACIT V/s Gagandeep Infrastructure Pvt. Ltd. 2014-TIOL-656-ITAT-Mum observed that issue of shares at premium is always a commercial decision which does not require any justification. Further the company is not require to prove the genuineness, purpose or justification for charging premium of shares, share premium by its very nature is a capital receipts and is not income for its ordinary sense. iii) The allegation of ld. AO is that the money so received was then immediately invested in the subscription of share capital at high premium with other companies, who in turn continued the exercise in the same form and the assessee company was thus part of this circular ring whereby unjustified and unsubstantiated share premium was being introduced. In this regard this is to submit that if someone is investing the money in the assessee company he must be having the inflow of money from some source. What is the source of inflow with the investor company and how it is managing its affairs is not concern of the assessee. In the case of the assessee, it has full filled its legal obliga .....

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..... ee managed its unexplained funds in such companies than there should be inflow of new capital in such companies for making the payment to the assessee company which has not been done in the instant case. The investment was made in the assessee company out of funds realized from previous investments/advances. If the payment was made by realizing the funds already invested by such company how such funds can be treated as unexplained money of the assessee. d) Finding of ld. AO: - The contention of the assessee company is only based on accounting jugglery by way of which the transaction has been recorded in the books of accounts of all such persons including the assessee company, who have participated in this exercise. It needs to be understood that merely because the assessee company adjusted the money received, as share capital/share premium in its books of account, the transaction cannot be showed with the character of a capital receipt. It must be said that the face value of a share is intrinsically capital in nature because it imparts to the subscriber a right of participation and ownership in the issuing company. However, the share premium attached to each such share does not ent .....

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..... the share is increased by the amount credited in share premium account. This share premium account is not distributable as income just like as any other capital assets. On winding up, the surplus monies in the share premium account is to be returned to the share holders as capital. So long as the company is a going concern, the monies in share premium account can never be returned to the shareholders except through the medium of a reduction petition, or, in other words, except under exactly the same conditions as those under which any other capital asset can reach the shareholders hands. Distribution of share premium amount is not permitted through dividend. The companies Act clearly mentions that amount received as premium is capital receipt and not a revenue receipt. iii) As himself admitted by ld. AO one of the deciding factor for share premium is the value or worth of such assets or profits which the issues company may create in the further or may derive, for the proportionate benefit of the subscriber. In forgoing paras we have described the future planning of the assessee by using the funds received from shareholders which also justified the share premium received from the in .....

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..... funds paid by the investor companies to the assessee company were transferred from their own source of funds which they were possessing much prior to investment made in the assessee company and by no stretch of imagination it can be presumed that the those funds were introduced by the assessee company in the investor companies. iii) Further from the show cause inquiries on the basis of which the modus operandi of issue of shares on share premium is being justify by the ld. AO no where it proves that the funds were introduced in such companies by the assessee company. There is no cogent reason to have such presumption either as a result of search over the assessee as well as inquiries carried out by the department. If we believe on the inquiries carried out by the department than there may be introduction of some suspicious funds in the intermediate companies where from the flow of funds started from one company/person to other company/person and part of such was received to the assessee company but still a question arose that how its prove that the same was unexplained money of the assessee company. The companies/persons from whom the assessee company received the share applicatio .....

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..... capital and share premium. ii) The rate of share was decided after discussion of assessee company and investor company. The shares were issued to the investor companies at premium because of the reasons mentioned in forgoing paras. From the documents submitted to the AO no where it proves that all the companies are simply paper companies and providing only accommodation entries and the investment made by them in the assessee company is not genuine. The finding of the ld. AO is based on the assumption and presumption. g) Finding of ld. AO: - It is clear that what is apparent is not real and the assessee's claim of having received investment is not genuine. As laid down by the Hon'ble Supreme Court in the case of CIT vs Sumati Dayal (1995) 80 TAXMAN 89 (SC), apparent must be considered real until it is shown that there are reasons to look into the surrounding circumstances to find out the reality and the matter has to be considered by applying the test of human probabilities. The evidences have to be judged by applying the test of human probabilities. Importing the ratio of the Hon'ble Supreme Court of India as propounded in the case of Sumati Dayal (supra), there is no .....

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..... nfirmed that conclusion. This gives the answer in favor of the assessee that in this case the apparent should be considered as real as the assessee company is not having any source of income from which this much of income could be earned than received of non genuine share capital to brought its unaccounted income in its books of accounts does not arise. iii) The assessing officer merely disbelieved the explanation/statements given by the assessee and has converted good proof into no proof. Hon ble Justice Hidayatullah of the Supreme Court in the case of Sreelekha Banerjee Vs CIT [1963] 49 ITR 112 (SC); 120 observed that the Income Tax Department cannot by merely rejecting unreasonably a good explanation, convert good proof into no proof Hon ble Supreme Court in the case of Uma Charan Shaw Bros Co Vs CIT 37 ITR 271 has held that the surmises and conjectures, and the conclusion is the result of suspicion which cannot take the place of proof. Hon ble Punjab Haryana High Court in the case of CIT Vs Anupam Kapoor (2008) 299 ITR 179 (P H) also held that suspicion, howsoever strong cannot take the place of legal proof. 9. By giving the above findings the ld. made addition of Rs. 42,07,29, .....

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..... unless it is specified in Income Tax Act. This argument clarifies after the amendment made by Finance Act 2012 w.e.f. 1.4.2013 in section 56(viib) of Income Tax Act, 1961 wherein certain share premiums were made taxable w.e.f. 01.04.2013. If the same were already taxable u/s 56(1) o Income Tax Act, 1961 and the same was already included in the definition of Income than why this amendment was made. Therefore the ld. AO is wrong in making the addition u/s 56(1) of Income Tax Act, 1961. d) Charge of tax is on income as understood in the I. Tax Act and measure of income as per the computation provision. In case there is no charging provision for specific receipt, then it cannot be taxed. The five member Bench of the Apex Court in CIT V Vatika Township P Ltd 367 ITR 466 observed at page 494. Tax Laws are clearly in derogation of personal rights and property interests and are, therefore, subject to strict construction and any ambiguity must be resolved against imposition of the tax. In Billings V U.S 232 U.S.261 at page 265, 34 S.Ct 421 (1914), the Supreme Court clearly acknowledged this basic and long standing rule of statutory construction. Tax Statutes should be strictly construed, an .....

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..... Bros. Chembur (P) Ltd 273 ITR 1 also hold that as per 2(24)(vi) only income which is chargeable u/s 45 is to be included in income and if computation provision u/s 45 fails then charging provisions will fail. Ref. to CIT V B.C. Srinivasa Setty 128 ITR 294. iv) The Hon ble Rajasthan High Court in the Case of CIT V Gotan Lime Stone Khanij Udyog 269 ITR 399 also held that in case computation provision u/s 48 could not be applied for want of ascertainable cost of acquisition, then capital gain does not arise to be included in total income on account of failure of applicability of computation provision. The Hon ble High Court referred to decision of Bombay High Court in the case of Cadell Wvg. Mills Co (P) Ltd. (Supra). v) The Hon ble Rajasthan High Court in the case of S. Zoraster and Co. V/s CIT 322 ITR 35 had on occasion to consider the taxability of receipt of Rs. 20,000 received by vendee on default of the purchaser as per agreement for sell of Prem Prakash Talkies. The Hon ble High Court after referring to the decision of Apex Court in the case of Travancore Rubber and Tea Co Ltd. V CIT 243 ITR 158 held that such receipt is capital receipt. Such Capital receipt is not taxable in .....

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..... ttention to decision of the High Court of Bombay in the case of Vodafone India Services Pvt. Ltd V UOI for the Assessment year 2009-10 (WP No. 871 of 2014) wherein the court has held interalia, that the premium on share issue was on account of a capital account transaction and does not give rise to income and hence, not liable to transfer pricing adjustment. It is hereby informed that the Board has accepted the decision of the High Court of Bombay in the above mentioned writ petition. In view of the acceptance of the above judgment, it is directed that the ratio decidendi of the judgment must be adhered to by the field officers in all cases where the issue is involved. This may also be brought to the notice of the ITAT, DRP s and CIT (Appeals). In view of above instruction, it is clear that ratio deciding of treating of share premium as capital receipt is binding on revenue authorities. g) By finance Act 2012 a new clause (viib) was inserted in 56(2). Memorandum explaining the provisions in Finance Bill 2012 stated as under:- Share premium in excess of the fair market value is to be treated as income. Section 56(2) provides for the specific category of incomes that shall be chargea .....

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..... ) of I.T. Act and such clause is as under: (xvi) Any consideration received for issue of shares as exceeds the fair market value of the shares referred to in clause (viib) of subsection (2) of 56. The amendment introduced in 2(24) signifies that section 56 is not a charging section. Unless the income which is to be taxed u/s 56(2)(vii b) is included in the definition of income, then it can be taxed and be part of total income. Nature of income as mentioned in section 28(iiia), (iiib), (iiic),(iiid) and (iiie) are also included in definition of income. i) This amendment if section 56(2)(viib) of Income Tax Act, 1961 effective from 1st April 2013 and will accordingly apply in relation to assessment year 2013-14 and subsequent assessment years and the provisions of this section cannot be made apply in previous years. In this regard the ratio has been laid down in following judgments: - a) By Finance Act 1994, section 55(2) was amended to provide that cost of acquisition of a tenancy right will be taken as Nil. The Hon ble Apex Court in the case of D.P. Sandu Bros. Chembur (P) Ltd (supra), held that amendment took effect from 1st April, 1995 and therefore will not be applicable for A.Y .....

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..... in the absence of a provision the statute may be held to be retrospective in nature. The Hon ble Apex Court further noticed that CBDT circular mentioned that proviso is applicable from 1.6.2002. In respect of 56(2)(vii b), CBDT vide circular No. 3 of 2012 dated 12.06.2012 has also mentioned that provisions of 56(2)(vii b) will be applicable for assessment year 2013-14 onward. Hence Share premium even if in excess of Fair market value is not taxable u/s 56(1) for the A.Y. 2011-12. 9. In view of the above submissions, it is clear that share premium received is a capital receipt and consideration received cannot be considered as income for the year under consideration. Without prejudice to our submission in this regard this is to submit in the in the show cause notice the ld. AO mentioned that share premium/share capital should be taxable in the hands of assessee company u/s 56(1) of Income Tax Act, 1961 on a/c of share premium/share capital alleged to be not in accordance with the value of the shares. In this regard without prejudice to our submission on this issue this is to submit that in case the share premium is made taxable as income of the assessee on the ground that the same .....

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..... T vs. Steller Investment Ltd. (2000) 164 CTR (SC) 287 which has been confirmed by the Hon ble Supreme Court of India. The learned CIT (A) has also relied upon the decision of Hon ble jurisdictional High Court in the case of Barkha Synthetics Ltd. vs. Asstt. CIT (2005) 197 CTR (Raj) 432 and also the decision of Tribunal, Jodhpur Bench in the case of Uma Polymers (P) Ltd. vs. Dy. CIT (dt. 27th Feb., 2006) [reported at (2006) 101 TTJ (Jd)(TM) 124 Ed.] where it has been held that the assessee has to prove the existence of the shareholders which in the present case is not under dispute. Therefore, the assessee has discharged the burden and therefore the AO was not justified in making any addition under s. 68 of the Act. The learned counsel for the assessee has referred to the decision of Hon ble Supreme Court of India in the case of Divine Leasing Finance Ltd. dt. 21st Jan., 2008, the copy of which is placed on record where it has been observed by the Supreme Court as under : Can the amount of share money be regarded as undisclosed income under s. 68 of IT Act, 1961 ? We find no merit in this SLP for the simple reason that if the share application money is received by the assessee compa .....

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..... through banking channels and the shares were allotted in consonance with the provisions of Securities Contract (Regulation) Act, 1956, as also the rules and regulations of Delhi Stock Exchange Complete details were furnished Tribunal has further found that the AO has not brought any positive material or evidence which would indicate that the shareholders were benamidars or fictitious persons or that any part of the share capital represented company s own income from undisclosed sources. 28.7 The Hon ble apex Court in the case of CIT vs. Lovely Exports (P) Ltd. (supra) held that if the share capital money is received by the assessee company from alleged bogus shareholders then the Department is free to proceed to reopen the individual assessments of such shareholders in accordance with law. Such share application money cannot be regarded as undisclosed income of the assessee company. 28.8 The Hon ble High Court in the case of First Point Finance Ltd. (supra) held that burden of proof on the assessee company lies to the extent of making out a case that investor exists and thereafter it is not for the assessee to further prove where they have brought money from to invest with it. 28.9 .....

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..... High Court in the case of Nipun Builders and Developers Pvt. Ltd. Vs. CIT and Vijay Power Generator Ltd. Vs CIT (supra) are not squarely applicable on the facts of the case as there was short time available with the Assessing Officer as well as Investigation Wing of Kolkata. The copy of inquiry has not been provided by the Assessing Officer to the assessee. As per findings of the Hon'ble Delhi High Court in the case Nipun Builders and Developers Pvt. Ltd. Vs. CIT (supra), the Investigation Officer at Kolkata had not deputed Inspector to enquire the whereabouts of the company. The case laws referred by the assessee are squarely applicable on the facts and circumstances of the appellant s case, therefore, we reverse the order of the ld CIT (A) on technical ground as well as on merit also . (iii) CIT v/s. Shree Barkha Synthetics Ltd. (2003) 182 CTR (Raj) 175 Appeal(High Court) Substantial question of law Cash credit vis-a-vis share application money Tribunal found that 6 out of 7 companies from which the share application money had been received were genuinely existing and no enquiry was conducted in respect of the source of share application money at the time of making the inves .....

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..... . 3644 TO 3648, 3650, 3651/Mum/2014 30th November, 2015 (2015) 45 CCH 0281 MumTrib Addition Addition on account of bogus share application money Assessee was in business of builder and developer Assessment was completed u/s 143(3) r.w.s. 147 Re-assessment proceedings were initiated on basis of information received from Directorate of Income-tax (Investigation) without recording AO S own satisfaction and information was accepted in mechanical manner After reopening of assessment u/s 147, AO made addition of Rs. 40 lakhs received by assessee from various corporate entities Addition was made by AO on account of bogus share application money under provisions of s 68 CIT(A) deleted addition made by AO Held, in case of CIT vs. M/s. Lovely Exports (Pvt) Ltd, reported in [2008] 216 CTR 195 (SC), it was held that If share application money was received by assessee company from alleged bogus shareholders whose name were given to AO then department was free to proceed to reopen their individual assessments in accordance with law but it could not be regarded as undisclosed income of assessee company It was submitted by assessee that AO had failed to appreciate statements of any person recorded .....

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..... f the Act on account of share capital subscription received by the assessee-company. (para 2.5) Conclusion: When Assessee-company had substantiated details with documentary evidences as extracted from website of Ministry of Corporate Affairs, Government of India before AO, then additions made by AO u/s 68 on account of share capital subscription received by assessee-company was rightly deleted. vii) CIT vs. Illac Investment (P) Ltd. (2007) 207 CTR (Del) 687; assessee-company has satisfactorily established the identity of the share subscribers and deleted the addition under s. 68, no substantial question of law arises for consideration. viii) CIT vs. Divine Leasing Finance Ltd. (2007) 207 CTR (Del) 38; Income Cash credit Share application money Burden of proof can seldom be discharged to the hilt by the assessee If the AO harbours doubts of the legitimacy of any subscription he is empowered, nay dutybound, to carryout thorough investigations But if the AO fails to unearth any wrong or illegal dealings, he cannot obdurately adhere to his suspicions and treat the subscribed capital as the undisclosed income of the company If relevant details of address and identity of the subscribers .....

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..... t shareholders do exist Assessee-company had discharged its onus of explaining the cash credits as required under law If the company is able to establish that shareholders existed and they have invested money for purchase of shares burden of company to prove the credit is discharged Identity of shareholders not in dispute Assessee is not required to prove credit-worthiness of shareholders Addition deleted xi) Allen Bradley India Ltd. vs. Dy. CIT (2002) 74 TTJ (Del) 604 : (2002) 80 ITD 43 (Del); Income Cash credit Subscription to share capital and loan In case of limited companies jurisdiction of AO would be limited only to see whether identity of shareholders is established and whether they exist or not Once identity is established, then, possibly no further enquiries need to be made Since the shareholders of assessee-company were in existence, they were assessed to tax, complete details were available, share capital money as well as loan were received through account payee cheques and they were cleared through proper banking channels, AO was not justified in disbelieving the capital invested by the shareholder companies Similarly, AO was not justified in disbelieving the loan take .....

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..... is required to be made in the hands of the shareholder and not in the account of the assessee U had invested in the share capital through cheque except for a small sum which was returned to her Her bank account shows several entries, both credit and debit, which have no relation with the amount invested with the assessee-company Merely because she has not submitted her returns after the asst. yr. 1984- 85, it cannot be said that she was not assessed to tax Though V has not been shown to be assessed to tax, he had made major part of investments towards share capital through cheques and his identity is not doubted Accordingly, share capital advanced by U and V is also to be accepted as genuine Therefore, no addition of share capital money could be made in the hands of the assessee-company. 11. Without prejudice to above this is to submit that the share application money cannot be treated as income of the assessee. Reliance is placed in following decisions: - i) CIT vs. Lovely Exports (P) Ltd. (2008) 216 CTR (SC) 195 Income Cash credit Share application money If the share application money is received by the assessee company from alleged bogus shareholders, whose names are given to th .....

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..... t (I) Pvt. Ltd 760/14-15 2009-10 3,40,00,000 - 3,40,00,000 Motisons Entertainment (I) Pvt. Ltd 766/14-15 2011-12 1,95,00,000 - 1,95,00,000 Motisons Entertainment (I) Pvt. Ltd 756/14-15 2012-13 7,78,00,000 1,41,50,000 6,36,50,000 Motisons Buildtech Pvt. Ltd 758/14-15 2009-10 3,03,00,000 - 3,03,00,000 Motisons Buildtech Pvt. Ltd 759/14-15 2012-13 3,68,27,500 82,00,000 2,86,27,500 Godawari Estates Pvt. Ltd 769/14-15 2010-11 2,00,00,000 - 2,00,00,000 Godawari Estates Pvt. Ltd 768/14-15 2012-13 10,30,00,000 - 10,30,00,000 Bholenath Real Estates Pvt. Ltd. 770/14-15 2009-10 2,90,00,000 - 2,90,00,000 Rainbow Buildcon Pvt. Ltd 757/14-15 2009-10 2,00,00,000 - 2,00,00,000 Shivansh Buildcon Pvt. Ltd 771/14-15 2012-13 90,00,000 3,50,000 86,50,000 94,14,07,100 8,71,97,727 85,42,09,373 In view of the above facts and circumstances of the case as discussed above, addition of Rs. 36,12,81,873/- made on a/c of bogus share capital in the hands of M/s. Motisons Global Pvt. Ltd is hereby deleted. Assessee gets relief in Gr No. 2 3. Para 2.1.4.7 reads of ld. CIT(A) s order as under:- 2.1.4.7 In view of the above findings, it is also seen that this cash /DD was deposited at 4th Channel of source/ stage. T .....

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..... 55,00,000 TOTAL 10,72,29,800 Further it is also submitted that addition made by the AO tantamount to double addition. It is also mentioned here that as per Ld. ARs request, appellate proceedings in case of M/s. MayukhVinimay Pvt. Ltd have been kept in abeyance till the disposal of appeal by Hon'ble ITAT. In view of aforementioned findings, now additions made by the AO are being discussed with respect to grounds of appeal raised by the respective assessee in para below. 4.4 During the course of hearing, the ld. DR supported the order of the AO and submitted that the order of the ld. CIT (A) may be set aside. 4.5 To this effect, the ld.AR of the assessee filed the following written submission praying therein to dismiss the appeal of the department. 2.03.1.2 Submission of assessee:- The facts and circumstances of the issue raised in the departmental appeal for the AY 2012-13 under ground No 1 are exactly similar to Ground No 1 for AY 2009-10 in ITA No 486/JP/2017. The assessee has made detailed submission in AY 2009-10 for ITA No 486/JP/2017. In order to avoid repetition, we pray your honor kindly to consider the submission made for ITA No 486/JP/2017 for AY 2009-10 under para 2.0 .....

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..... Durga Enterprises 13.07.2011 1647727 Evershine Suppliers Private Limited PNB, Axis Bank, Siliguri 14.10.2011 3600000 Evershine Suppliers Private Limited Durga Enterprises and Shyam Fashion 19.10.2011 1800000 Evershine Suppliers Private Limited Durga Enterprises 09.12.2011 1500000 Mayukh Vinimay Private Limited Shyam Fashion and Durga Enterprises 13.12.2011 4100000 Mayukh Vinimay Private Limited Shyam Fashion and Durga Enterprises 15.10.2011 1800000 Mayukh Vinimay Private Limited Nibu Nagi and Kevilhulie Sunotsu 17.10.2011 3500000 Mayukh Vinimay Private Limited Shyam Fashion and Durga Enterprises 27.10.2011 1600000 Mayukh Vinimay Private Limited Durga Enterprises 15.10.2011 1800000 Regent Barter Private Limited Nibu Nagi 02.12.2011 2850000 Regent Dealers Private Limited Durga Enterprises and Shyam Fashion 08.12.2011 1850000 Regent Dealers Private Limited Shyam Fashion 14.10.2011 900000 Regent Dealers Private Limited Nibu Nagi 19.10.2011 1800000 Regent Dealers Private Limited Durga Enterprises 27.10.2011 900000 Regent Dealers Private Limited Kevihulie Sinotsu 02.12.2011 1400000 Rose Suppliers Private Limited Shyam Fashion 07.12.2011 1850000 Rose Suppliers Private Limited Durga Enter .....

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..... iry by investigation wing Motisons Buildtech P Ltd 2012-2013 15,00,000 Evershine Suppliers P Ltd Swastik Traders Motisons Buildtech P Ltd 2012-2013 20,00,000 Alliance Tradecom P Ltd Swastik Traders and Global Securities Motisons Buildtech P Ltd 2012-2013 17,00,000 Alliance Tradecom P Ltd Swastik Traders Motisons Buildtech P Ltd 2012-2013 30,00,000 Alliance Tradecom P Ltd Swastik Traders Total 82,00,000 Motisons Entertainment P Ltd 2012-2013 18,00,000 Rose Suppliers P Ltd Shyam Fashion and Durga Enterprises Motisons Entertainment P Ltd 2012-2013 46,00,000 Regent Barter P Ltd Durga Enterprises and Shyam Fashion Motisons Entertainment P Ltd 2012-2013 4,50,000 Mayukh Vinimay P Ltd Shyam Fashion and Durga Enterprises Motisons Entertainment p Ltd 2012-2013 10,00,000 Mayukh Vinimay P Ltd Shyam Fashion and Durga Enterprises Motisons Entertainment P Ltd 2012-2013 16,00,000 Regent Dealers P Ltd Shyam Fashion Motisons Entertainment P Ltd 2012-2013 10,00,000 Regent Dealers P Ltd Durga Enterprises Motisons Entertainment P Ltd 2012-2013 8,00,000 Regent Dealers P Ltd Durga Enterprises and Shyam Fashion Motisons Entertainment P Ltd 2012-2013 29,00,000 Alliance Tradecom P Ltd Swastik Traders and Gl .....

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..... l Private Limited 2012-2013 16,00,000 Alliance Trade com P Ltd Durga Enterprises Motisons Global Private Limited 2012-2013 9,50,000 Alliance Trade com P Ltd Shyam Fashion Motisons Global Private Limited 2012-2013 10,00,000 Alliance Trade com P Ltd Shyam Fashion and Durga Enterprises Motisons Global Private Limited 2012-2013 3000000 Alliance P Ltd Shyam Fashion and Durga Enterprises Motisons Global Private Limited 2012-2013 16,00,000 Alliance P Ltd P Ltd Nibu Nagi Motisons Global Private Limited 2012-2013 19,50,000 Alliance Trade com P Ltd Durga Enterprises Motisons Global Private Limited 2013-2014 5050000 Alliance Trade com P Ltd Shyam Fashion and Durga Enterprises Total 6,44,97,727 Shivansh Buildcon P Ltd 2012-2013 3,50,000 Evershine Suppliers P Ltd Durga Enterprises, Swastik and Shyam Fash Total 3,50,000 Grand Total 8,71,97,727 2.1.4.7 In view of above findings, it is also seen that this cash/DD was deposited at 4th Channel of source/stage. This money came to the hands of some of appellant companies through the six companies assessed in Jaipur. However, on perusal of written submissions and compliance to show cause letter , it is also seen that assessee has not controverted the f .....

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..... also mentioned here that as per Ld AR s request, appellate proceedings in case of M/s Mayukh Vinimay Pvt Ltd have been kept in abeyance till the disposal of appeal by Hon ble ITAT. In view of aforementioned findings, now additions made by the AO are being discussed with respect to grounds of appeal raised by the respective assessee in para below. Thus the ld. CIT (A) confirmed the addition of Rs. 5,94,47,727 in the hands of the assessee. 7.2 During the course of hearing, the ld.AR of the assessee prayed for deletion of addition confirmed by the ld. CIT (A) amounting to Rs. 5,94,47,727/- for which the ld.AR of the assessee filed the following written submission. 2.04.1.2 Submission of Assessee:- a) The assessee has submitted sufficient documents before the ld AO to prove identity, creditworthiness and genuineness of share capital and ld AO satisfied that addition under section 68 cannot be made. The ld AO made the addition of Rs. Rs. 42,07,29,600/- on account of share capital received by the assessee during this year by applying the provisions of section 56(1) of Income Tax Act on the ground that the assets of the assessee company don t commensurate to premium charged and any busine .....

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..... B pg 875/2012-13 20.07.2011 2000000 Alliance Tradecom Private Limited Swastik Traders and Global Securities PB pg 870/2012-13 20.09.2011 950000 Alliance Tradecom Private Limited Shyam Fashion PB pg 875/2012-13 21.07.2011 2000000 Alliance Tradecom Private Limited Swastik Traders and Global Securities PB pg 870/2012-13 21.09.2011 1000000 Alliance Tradecom Private Limited Shyam Fashion and Durga Enterprises PB pg 875/2012-13 26.09.2011 3000000 Alliance Tradecom Private Limited Shyam Fashion and Durga Enterprises PB pg 875/2012-13 Total 20800000 13.07.2011 1647727 Evershine Suppliers Private Limited PNB, Axis Bank, Siliguri PB pg 877/2012-13 14.10.2011 3600000 Evershine Suppliers Private Limited Durga Enterprises and Shyam Fashion PB pg 878/2012-13 19.10.2011 1800000 Evershine Suppliers Private Limited Durga Enterprises PB pg 879/2012-13 Total 7047727 09.12.2011 1500000 Mayukh Vinimay Private Limited Shyam Fashion and Durga Enterprises PB pg 897/2012-13 13.12.2011 4100000 Mayukh Vinimay Private Limited Shyam Fashion and Durga Enterprises PB pg 897/2012-13 15.10.2011 1800000 Mayukh Vinimay Private Limited Nibu Nagi and Kevilhulie Sunotsu PB pg 895/2012-13 17.10.2011 3500000 Mayukh Vinim .....

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..... the explanation offered by him is not, in the opinion of the Assessing Officer, satisfactory, the sum so credited may be charged to income-tax as the income of the assessee of that previous year. Therefore, addition under section 68 of ITax Act can be made only he the explanation of the assessee is not satisfactory in the opinion of Assessing Officer . The Assessing Officer has been defined u/s 2(7A) of Income Tax act as under:- (7A) Assessing Officer means the Assistant Commissioner 31[or Deputy Commissioner] 32[or Assistant Director] 31[or Deputy Director] or the Income-tax Officer who is vested with the relevant jurisdiction by virtue of directions or orders issued under sub-section (1) or sub-section (2) of section 120 or any other provision of this Act, and the 33[Additional Commissioner or] 34[Additional Director or] 35[Joint Commissioner or Joint Director] who is directed under clause (b) of sub-section (4) of that section to exercise or perform all or any of the powers and functions conferred on, or assigned to, an Assessing Officer under this Act ;] Therefore, CIT (A) is not assessing officer so he cannot invoke the provisions of section 68 for making the addition particu .....

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..... The copies of assessment order are at PB pg 223 to 225, 239 to 241, 255 to 257, 273 to 275, 289 to 291, 305 to 307. It is further relevant to mention here that the department also carried out the survey operations over these parties (Except Mayukh Vintrade Pvt. Ltd) which also prove the existence of these parties. ii) Creditworthiness All the companies are Income Tax assessee and duly filing the Income Tax return and Balance sheets. There is sufficient source of funds with all the companies to investment share capital/share application in the assessee company. The assessee submitted the copies of bank account/declaration of source of funds with them of investor companies. The bank statement shows the huge transaction of high value in the accounts of the companies. The chart showing the amount invested by the above named companies in assessee company viz a viz own funds with the investor company are as under: - Name of the Investor company Amount invested in assessee company Share capital and reserve surplus with Investor companies as on 31.03.2012 Share capital and reserve surplus with Investor companies as on 31.03.2011 Share capital and reserve surplus with Investor companies as .....

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..... panies. Furthermore, the department has carried out intensive search operations over the assessee and no any incriminating material was found to show that the money against the share allotment was own money of the company. Shares certificates were issued against the allotment of the shares to these companies were not found from the possession of the assessee company or its director or employees. This fact shows that after allotment of shares by the appellant company share certificates were dispatched to the subscriber companies. No any entry in books of account or document was found showing payment of cash to these investor companies against receipt of cheques from these companies against allotment of shares. Therefore the genuineness of the transactions cannot be doubted. The department also carried out survey over the investor companies (Except Mayukh Vintrade Pvt. Ltd) and during the course of survey no material was found to presume that the investment made by them is not genuine. B) Onus to prove source of source From the show cause notice given by ld CIT (A) and excel sheet provided to the assessee showing chain of source it is apparent that even there is no cash deposit till .....

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..... In fact, before the Tribunal, it was not even the case of the Revenue that Section 68 of the Act as in force during the subject years has to be read/understood as though the proviso added subsequently effective only from 1st April, 2013 was its normal meaning. The Parliament did not introduce to proviso to Section 68 of the Act with retrospective effect nor does the proviso so introduced states that it was introduced for removal of doubts or that it is declaratory . Therefore it is not open to give it retrospective effect, by proceeding on the basis that the addition of the proviso to Section 68 of the Act is immaterial and does not change the interpretation of Section 68 of the Act both before and after the adding of the proviso. In any view of the matter the three essential tests while confirming the pre proviso Section 68 of the Act laid down by the Courts namely the genuineness of the transaction, identity and the capacity of the investor have all been examined by the impugned order of the Tribunal and on facts it was found satisfied. Further it was a submission on behalf of the Revenue that such large amount of share premium gives rise to suspicion on the genuineness (identit .....

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..... t is quite interesting to note that a person stating that Motisons Jewellers group was the beneficiary of the accommodation entries arranged by him and he is also admitting that cash was received by him from Motisons Jewellers Group to deposit the same is bank accounts maintaining by him but no further questions were made from him to controvert that whatever he is stating is true or not. The important thing is that Motisons Jewellers group is not a human being therefore it was necessary and for the interest of equities, fairness, and justice to ask questions that : - What is the identity of the M/s Motisons Jewellers. In Jaipur where the Motisons Group exists? Who are the owners of this group? Who was the person who was contacting to him regarding cash dealing? How the cash reached to him? From whom he was communicating and how he was communicating? What are his telephone number. Whether he ever visited the office of Motisons Group, or ever meet to owners or their employees of Motisons Group? Who were the brokers of Kolkatta through whom he know the Motisons Group? As this person had admitted that he received the cash from Motisons Jewellers Group then he should know the answers of .....

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..... n its appears that the investigating party recorded the statement by putting words in his mouth with sole motive to use the same against the assessee group to make a strong case against the assessee. Therefore we submit that the statement of this person is completely false, incorrect and not acceptable and therefore cannot be relied upon unless the opportunity of cross examination is not given to the assessee. d) In the light of above mentioned serious defects in the statement of this person the cross examination of this person is warranted to decided the matter in fair and just manner. It is further relevant to mention here that it is settle legal position that before using some material and statements against the assessee the opportunity of cross examination and confrontation should have been provided to the assessee. Therefore the circumstances strongly warranted in this case for cross examination of statement of this person. In this regard we would like to refer the recent judgment of Jaipur Bench of ITAT passed in the case of Shri Prateek Kothari in appeal No. 159/JP/16 wherein it was held as under: - 2.8 We have heard the rival contentions and perused the material available o .....

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..... he AO stated that in his statements, Bhanwarlal Jain had described that they are indulged in providing accommodation entries of bogus unsecured loans and advances through various Benami concerns (70) operated and managed by them. This admission automatically makes all the transactions done by them as mere paper transactions and in these circumstances, further as per the information name and address of assessee and the Benami Concern through which accommodation entry of unsecured loans was provided is appearing in the list of beneficiaries to whom the said Group has provided. This admission is sufficient to reject the contentions of the assessee. Further, regarding cross examination, the AO stated that the right of cross examination is not an absolute right and it depends upon the circumstances of each case and also on the statute concerned. In the present case, no such circumstances are warranted as in the list of beneficiaries to whom accommodation entries were provided by the said group categorically contains the name and address of the assessee. Further the group has categorically admitted to providing of accommodation entries of unsecured loans through various benami concerns. .....

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..... to meet it. It was held in that case that In this case we are of the opinion that the Tribunal violated certain fundamental rules of justice in reaching its conclusions. Firstly, it did not disclose to the assessee what information had been supplied to it by the departmental representative. Next, it did not give any opportunity to the company to rebut the material furnished to it by him, and lastly, it declined to take all the material that the assessee wanted to produce in support of its case. The result is that the assessee had not had a fair hearing. The Hon ble Supreme Court in case of C. Vasantlal Co. Vs. CIT 45 ITR 206 (SC) has held that the ITO is not bound by any technical rules of the law of evidence. It is open to him to collect material to facilitate assessment even by private enquiry. But, if he desires to use the material so collected, the assessee must be informed about the material and given adequate opportunity to explain it. The statements made by Praveen Jain and group were material on which the IT authorities could act provided the material was disclosed and the assessee had an opportunity to render their explanation in that regard. The Hon ble Supreme Court in .....

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..... specially taking into consideration the decision of the Hon ble Supreme Court in case of C. Vasantlal Co. (supra) relied upon by the Revenue and which actually supports the case of the assessee, in the instant case, the assessment was completed by the AO relying solely on the information received from the investigation wing, statement recorded u/s 132(4) of Shri Bhanwarlal Jain and others, and various incriminating documentary evidence found from the search and seizure carried out by Investigation Wing, Mumbai on the Shri Bhanwarlal Jain group on 03.10.2013. It remains undisputed that the assessee was never provided copies of such incriminating documents and statements of Shri Bhanwarlal Jain and various persons and an opportunity to cross examine such persons though he specifically asked for such documents and cross examination. On the other hand, the burden was sought to be shifted on the ITA No. 159/JP/16 The ACIT, Central -2, Jaipur vs. M/s Prateek Kothari, Jaipur 21 assessee by the A.O. It is clear case where the principle of natural justice stand violated and the additions made under section 68 therefore are unsustainable in the eye of law and we hereby delete the same. The o .....

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..... . Orissa Corpn. (P.) Ltd. [1986) 159 ITR 78 (SC), the Hon'ble Supreme Court held as under:- 13. In this case, the assessee had given the names and addresses of the alleged creditors. It was in the knowledge of the Revenue that the said creditors were income-tax assessees. Their index numbers were in the file of the Revenue. The Revenue, apart from issuing notices under s. 131 at the instance of the assessee, did not pursue the matter further. The Revenue did not examine the source of income of the said alleged creditors to find out whether they were credit-worthy or were such who could advance the alleged loans. There was no effort made to pursue the so-called alleged creditors. In those circumstances, the assessee could not do any thing further. In the premises, if the Tribunal came to the conclusion that the assessee has discharged the burden that lay on him, then it could not be said that such a conclusion was unreasonable or perverse or based on no evidence. If the conclusion is based on some evidence on which a conclusion could be arrived at, no question of law as such arises. 12. In the case of CIT v. Chandra Prakash Rana [2001] 48 DTR 271 (Raj.), this Court noticed simil .....

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..... apacity could ever reach to such conclusion, or that it had been found against any provision of law, then a case for formulation of substantial question of law on such finding can be said to have been made out. 11. In our view, no such error could be noticed by us in the impugned order because as observed supra, the Tribunal did go into the details of explanation offered by assessee and then accepted the explanation by placing reliance on the documents filed by assessee. As a consequence thereof, the additions made by AO came to be deleted. 13. In CIT v. Shree Barkha Synthetics Ltd. [2004] 270 ITR 477 (Raj.), in a similar nature matter, this Court observed that the Tribunal having found that the companies from which the share application money had been received by the assessee-company were genuinely existing and the identity of the individual investors were also established and they had confirmed the fact of making investment, the finding that assessee had discharged initial burden and addition under Section 68 could not be sustained, was essentially a finding of fact. This Court said,- 19. A perusal of the aforesaid finding goes to show that deletion has been made on appreciation .....

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..... ecorded Amount of share capital/share application money could not be treated as unexplained cash credits and no addition could be made under s. 68 No substantial question of law arises. (v) Commissioner of Income Tax Vs. Bhaval Synthetics (Raj HC) (2013) 84 DTR 0449 (Raj) (PB pg 163 to 165/Case Laws)Held that even in case of doubt about subscribers to increased share capital, amount of share capital could not be regarded as undisclosed income of company Amount referable to share application could not be attributed to assessee and could not be assessed in its hands Appeal dismissed (vi) Commissioner of Income Tax Vs. Akj Granites (P) Ltd. (Raj HC) (2008) 301 ITR 0298 (PB pg 166 to 168/Case Laws)held that in respect of share applications received from different places accompanied with share application money, no presumption can be drawn that same belong to the assessee and cannot be assessed in his hands as his undisclosed income unless some nexus is established that share application money for augmenting the investment in business has flown from assessee s own money No substantial question of law arises Barkha Synthetics Ltd. vs. Asstt. CIT (2005) 197 CTR (Raj) 432 followed. (vii) C .....

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..... the Hon ble Supreme Court of India. The learned CIT (A) has also relied upon the decision of Hon ble jurisdictional High Court in the case of Barkha Synthetics Ltd. vs. Asstt. CIT (2005) 197 CTR (Raj) 432 and also the decision of Tribunal, Jodhpur Bench in the case of Uma Polymers (P) Ltd. vs. Dy. CIT (dt. 27th Feb., 2006) [reported at (2006) 101 TTJ (Jd)(TM) 124 Ed.] where it has been held that the assessee has to prove the existence of the shareholders which in the present case is not under dispute. Therefore, the assessee has discharged the burden and therefore the AO was not justified in making any addition under s. 68 of the Act. The learned counsel for the assessee has referred to the decision of Hon ble Supreme Court of India in the case of Divine Leasing Finance Ltd. dt. 21st Jan., 2008, the copy of which is placed on record where it has been observed by the Supreme Court as under : Can the amount of share money be regarded as undisclosed income under s. 68 of IT Act, 1961 ? We find no merit in this SLP for the simple reason that if the share application money is received by the assessee company from alleged bogus shareholders, whose names are given to the AO, then the Dep .....

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..... isions of Securities Contract (Regulation) Act, 1956, as also the rules and regulations of Delhi Stock Exchange Complete details were furnished Tribunal has further found that the AO has not brought any positive material or evidence which would indicate that the shareholders were benamidars or fictitious persons or that any part of the share capital represented company s own income from undisclosed sources. 28.7 The Hon ble apex Court in the case of CIT vs. Lovely Exports (P) Ltd. (supra) held that if the share capital money is received by the assessee company from alleged bogus shareholders then the Department is free to proceed to reopen the individual assessments of such shareholders in accordance with law. Such share application money cannot be regarded as undisclosed income of the assessee company. 28.8 The Hon ble High Court in the case of First Point Finance Ltd. (supra) held that burden of proof on the assessee company lies to the extent of making out a case that investor exists and thereafter it is not for the assessee to further prove where they have brought money from to invest with it. 28.9 The Hon ble Delhi High Court in the case of CIT vs. United Bio-tech (P) Ltd. 201 .....

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..... t. Ltd. Vs. CIT and Vijay Power Generator Ltd. Vs CIT (supra) are not squarely applicable on the facts of the case as there was short time available with the Assessing Officer as well as Investigation Wing of Kolkata. The copy of inquiry has not been provided by the Assessing Officer to the assessee. As per findings of the Hon'ble Delhi High Court in the case Nipun Builders and Developers Pvt. Ltd. Vs. CIT (supra), the Investigation Officer at Kolkata had not deputed Inspector to enquire the whereabouts of the company. The case laws referred by the assessee are squarely applicable on the facts and circumstances of the appellant s case, therefore, we reverse the order of the ld CIT (A) on technical ground as well as on merit also . (iii) Uma Polymer (P) Ltd., 101 TTJ 124, Jodhpur (PB pg 282 to 318/Case Laws) Income Cash credit Share application money In respect of share capital money, the assessee-company has to prove only the existence of the person in whose name share application is received No further burden is cast on the assessee to prove whether that person himself has invested the money or some other person has made the investment in his name Burden to prove that the mone .....

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..... ct and precedents on the issue involved in this appeal as under:- In cases where share application money is found recorded in the books of an assessee which may represent credit in the books and the share applicant is identified, that amount cannot be added in the assessee's hands u/s 68 of the Act. The Hon'ble Rajasthan High Court has repeatedly reiterated the above legal position. These cases are: (i) CIT vs. Shree Barkha Synthetics Ltd. 182 CTR 175 (Raj.) (ii) Barkha Synthetics Ltd. vs. ACIT (2005), 197 CTR 432 (Raj).13 In coming to the above conclusion, the Hon'ble Jurisdictional High Court has considered at length the relevant decisions on the issue like CIT vs. Steller Investment Ltd. (2000) 164 CTR (SC) 287 = 251 ITR 263 (SC) which has confirmed the decision of Hon'ble Delhi High Court reported in (1992) 192 ITR 287. The Hon'ble Court has gone to the extent of stating that even if it be assumed that the subscriber to the share capital are not genuine, nevertheless, under no circumstances can the amount of share capital be regarded as undisclosed income of the assessee. In this case, the share subscriber is identified. There can be no dispute regarding the .....

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..... INDIA] - all the four parties, who are subscribers of the shares, are limited companies and enquiries were made and received from the four companies and all the companies accepted their investment - the assessee has categorically established the nature and source of the sum and discharged the onus that lies on it in terms of Section 68 of the Act - When the nature and source of the amount so invested is known, it cannot be said to be undisclosed income - the addition of such subscriptions as unexplained credit under Section 68 of the Act is unwarranted Decided against Revenue. (ii) CIT vs. Illac Investment (P) Ltd. (2007) 207 CTR (Del) 687; (PB pg 341 to 342/Case Laws) assessee-company has satisfactorily established the identity of the share subscribers and deleted the addition under s. 68, no substantial question of law arises for consideration. (iii) CIT vs. Divine Leasing Finance Ltd. (2007) 207 CTR (Del) 38; (PB pg 321 to 340/Case Laws) Income Cash credit Share application money Burden of proof can seldom be discharged to the hilt by the assessee If the AO harbours doubts of the legitimacy of any subscription he is empowered, nay dutybound, to carryout thorough investigations B .....

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..... the Department to enquire with the investors about the capacity to invest the amount in the shares. (vii) Bhav Shakti Steel Mines (P) Ltd. vs. CIT (2009) 18 DTR (Del) 194 Income Cash credit Genuineness CIT (A) not only found that the identity of each of the shareholders stood established, but also examined the fact that each of them were income-tax assessees and had disclosed the share application money in their accounts which were duly reflected in their IT returns as well as in their balance sheets Tribunal was not therefore justified in coming to the conclusion that the CIT (A) had not considered the matter in the right perspective Order passed by Tribunal remanding the matter for examining the share applicants set aside and that of CIT (A) restored (d) Other Benches of ITAT (i) ITO V M/s. Reliance Marketing Pvt. Ltd. 2015- TIOL-319-TAT-Del (PB pg 367 to 375/Case Laws) identity of the creditors/share applicants by furnishing their PAN number and copy of acknowledgment of Income-tax Return. The amount on account of share application was received through banking channel, copies of the confirmation alongwith affidavit of the parties were furnished. The assessee also furnished the .....

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..... sessee company from alleged bogus shareholders whose name are given to the AO then the department is free to proceed to reopen their individual assessments in accordance with law but it cannot be regarded as undisclosed income of assessee company. (para 2.3) In this background, it was submitted on behalf of the assessee that the Assessing Officer failed to appreciate that there was no documentary evidence against the assessee-company to support such impugned additions. It was further submitted by the assessee that the Assessing Officer failed to appreciate that the statements of any person recorded u/s 143(3) r.w.s. 147. The assessee-company had fully discharged the burden of proof, onus of proof and explained the source of share capital and advances received by established the identity, creditworthiness and genuineness of transaction by banking instruments with documentary evidences. The further stand of the assessee had been that the assessee-company substantiated the details with the documentary evidences as extracted from the website of Ministry of Corporate Affairs, Government of India before the Assessing Officer. These facts had not been rebutted on behalf of the Revenue. (p .....

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..... nk channels and confirmation and supporting evidence was filed CIT(A) was justified in deleting the additions. (v) 2017 (3) TMI 1047-ITAT AHMEDABAD Income Tax Officer, Ward 8 (1), Ahmedabad Versus Seven Star Aviation Services Pvt. Ltd (PB pg 400 to 404/Case Laws)Addition u/s 68 - share application money and unsecured loan received. Held that: - When the depositors are regular tax payers and the advances made by such depositors as also share application monies paid by such shareholders are duly accepted in their personal assessments, there cannot be any occasion to hold that these amounts are unexplained in the hands of the company. The credit worthiness or identity cannot be an issue in such a situation. (vi) 2016 (10) TMI 920 - ITAT HYDERABAD M/s. Hariom Concast and Steel Pvt. Ltd. Versus Income Tax Officer, Ward-2 (2), Hyderabad (PB pg 405 to 411/Case Laws) Addition for shares issued on premium. Held that: - Share premium cannot be brought to tax invoking the provisions of Section 68, unless there is a link with either quid pro quo transaction or investing by assessee-company in their accounts so as to receive it back as share capital. No such evidence was brought on record. (e) .....

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..... pany. Further, the summons u/s section 131 of I.tax Act were sent to the shareholders which were received back unserved. In view of the above submission, the humble assessee prays your honor kindly to delete the addition of Rs. 5,94,47,727/- confirmed by ld CIT(A) 7.3 On the other hand, the ld. DR relied on the order of the AO. 7.4 We have heard the rival contentions and perused the materials available on record. It is pertinent to mention that the similar issue has been dealt with and decided by this Bench of ITAT in the case of Motisons Buildtech Pvt. Ltd vs ACIT, Central Circle-2, Jaipur vide its order dated 30-10-2017 in ITA No. 385/JP/2017 (Assessee's appeal)for the Assessment Year 2012-13 by observing as under:- 8.4 We have heard the rival contentions and perused the materials available on record. In this ground, it is noted that the AO made the addition of Rs. 3,68,27,500/- out of which the ld CIT (A) deleted the addition of Rs. 2,86,27,500/- and sustained the addition of Rs. 82.00 lacs as mentioned at para 3.2.2. and 2.1.4.6 2.1.4.7 of the ld. CIT(A) s order (supra). The question arises as to whether the ld CIT (A) can make the addition u/s 68 of the Act or not. For thi .....

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..... (2014) 366 ITR 217 (Raj):- Held, dismissing the appeal, that all the cash creditors were assessed to Income-tax and they provided a confirmation as well as their permanent account number. They had their own respective bank accounts which they had been operating and it was not the claim of the Assessing Officer that the assessee was operating their bank accounts. Most of the cash creditors appeared before the Assessing Officer and their statements under section 131 of the Income-tax Act, 1961, were also recorded on oath. There was no clinching evidence nor had the Assessing Officer been able to prove that the money actually belonged to none but the assessee. The addition of Rs. 17,27,250 under section 68 was not justified. (ii) In the case of Nemi Chand Kothari vs CIT (2003) 264 ITR 254 (Gau): Held that it is not the business of the assessee to find out the source or sources from where the creditor had accumulated the amount which he had advanced in the form of loan to the assessee and section 68 cannot be read to show that in the case of failure of sub-creditors to prove their creditworthiness the amount advanced as loan to the assessee by the creditor shall have to be read as coro .....

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..... rsons which was denied by the ld. CIT(A). The ITAT Coordinate Bench in the case of Prateek Kothari (supra) has given verdict that without providing opportunity of cross examination of the materials gathered and statement recorded behind the assessee cannot be used. However, we hold that Revenue is free to initiate proceedings in the hands of these concerns who have received the amount after deposit in cash/DD in respective bank A/cs. Thus Ground No. 1 of the assessee is allowed. It may be further noted that the issue raised by the assessee in Ground No. 1 of the present appeal is same and the decision taken in the appeal of the assessee in ITA No. 385/JP/2017 for the Assessment Year 2012-13 in the case of Motisons Builtech vs ACIT, Central Circle-2, Jaipur (supra) shall apply mutatis mutandis in the present ground of appeal No. 1 of the assessee. Thus Ground No. 1 of the assessee s appeal in ITA No. 388/JP/2017 is allowed. 8.1 The solitary ground of the Revenue in ITA No. 489/JP/2017 for the Assessment Year 2013-14 is as under:- 1. Whether on the facts and in the circumstances of the case the ld. CIT (A) was right in deleting the addition of Rs. 3,90,50,000/- out of the total addit .....

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..... saged u/s 56(1) of the Income Tax Act, 1961. The same is added back to the total income of the assessee. 8.3 In first appeal, the ld. CIT (A) has deleted the addition of Rs. 3,90,50,000/- out of the total addition of Rs. 4,41,00,000/-made by the AO by observing at pages 108 109 of his order as under:- 3.2.2 I have considered assessee's submission and carefully gone through assessment order. I have also take a note of factual matrix of the case as well as applicable case laws relied upon. I have already given a detailed findings in para 2.1.4.7 wherein total of Rs. 8,71,97,727/- has been sustained in the hands of M/s. . Motisons Global Pvt. Ltd, M/s. Motisons Entertainment Pvt. Ltd, M/s. Motisons Buildtech Pvt. Ltd and M/s. Shivansh Buildtech Pvt. Ltd, details of which are as under:- Name of Appellant Company ITA No. A.Y. Addition made by AO Addition sustained Addition deleted/Relief given Motisons Global Pvt Ltd 753/14-15 2009-10 2,75,00,000 - 2,75,00,000 Motisons Global Pvt Ltd 754/14-15 2011-12 6,96,50,000 - 6,96,50,000 Motisons Global Pvt Ltd 767/14-15 2012-13 42,07,29,600 5,94,47,727 36,12,81,873 Motisons Global Pvt Ltd 755/14-15 2013-14 4,41,00,000 50,50,000 3,90,50,000 Mo .....

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..... 2011-12 1,95,00,000 - 1,95,00,000 Motisons Entertainment (I) Pvt. Ltd 756/14-15 2012-13 7,78,00,000 1,41,50,000 6,36,50,000 Motisons Buildtech Pvt. Ltd 758/14-15 2009-10 3,03,00,000 - 3,03,00,000 Motisons Buildtech Pvt. Ltd 759/14-15 2012-13 3,68,27,500 82,00,000 2,86,27,500 Godawari Estates Pvt. Ltd 769/14-15 2010-11 2,00,00,000 - 2,00,00,000 Godawari Estates Pvt. Ltd 768/14-15 2012-13 10,30,00,000 - 10,30,00,000 Bholenath Real Estates Pvt. Ltd. 770/14-15 2009-10 2,90,00,000 - 2,90,00,000 Rainbow Buildcon Pvt. Ltd 757/14-15 2009-10 2,00,00,000 - 2,00,00,000 Shivansh Buildcon Pvt. Ltd 771/14-15 2012-13 90,00,000 3,50,000 86,50,000 94,14,07,100 8,71,97,727 85,42,09,373 It is pertinent to mention here that M/s. Mayukh Vinimay Pvt. Ltd received share application of Rs. 10,54,95,000/- in AY 2009-10 which was added as income of M/s. Mayukh Vinimay Pvt. Ltd in A.Y. 2009-10. Thereafter in subsequent years the part of the funds owned by this company was invested in the companies under appeal as under:- S.N. Name of company (under your appeal) Assessment Year Amount 1. Motisons Global Pvt. Ltd 2012-13 6,93,49,800 2. Motisons Global Pvt. Ltd 2013-14 2,24,50,000 3. Motisons Entertainment (Ind .....

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..... ceedings the assessee submitted the following documents to prove their identity of shareholders, creditworthiness of shareholders and genuineness of transaction with them: - Name of Shareholder Particulars of Documents submitted Particulars of Documents submitted Alliance Tradecom Pvt. Ltd 8. Share application containing the name/address/PAN of party, detail of payment received etc. 119-120 9. Copy of board resolution. 11 10. Copy of PAN card of party. 122 11. Copy of bank statement showing the entry of payment made to assessee. 123-124 12. Declaration of source of funds with party. 125 13. Copy of Ack. of ITR and Computation of AY 13-14. 126-128 14. Copy of audit report and audited balance sheet along with annexure of 31.03.13. 129-141 Evershine Suppliers Pvt. Ltd 1. Share application containing the name/address/PAN of party, detail of payment received etc. 142-146 2. Copy of board resolution. 147 3. Copy of PAN card of party. 148 4. Copy of bank statement showing the entry of payment made to assessee. 149-150 5. Declaration of source of funds with party. 151 6. Copy of Ack. of ITR and Computation of AY 13-14 152-154 7. Copy of audit report and audited balance sheet along with ann .....

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..... ition under section 68 cannot be made. Therefore, the ld. AO has not made the addition under the deeming provisions of section 68 of Income Tax Act. The ld AO made the addition of Rs. 4,41,00,000/- on account of share capital received by the assessee during this year by applying the provisions of section 56(1) of Income Tax Act on the ground that the assets of the assessee company don t commensurate to premium charged and any business activity was not performed or any business income has not been shown by the assessee. c) However, the ld CIT (A) issued show cause notice to assessee to tax the share capital under section 68 of ITax Act as against 56(1) applied by ld AO. The assessee submitted detailed reply before ld CIT (A) vide letter dated 12/07/2016 (copy at PB pg 331-403). The ld CIT (A) has not confirmed/sustained the addition made by ld AO by applying the provisions of section 56(1) of Income Tax Act, on the basis of his detailed findings at page 39-43 of his order. Ld CIT (A) when satisfied that the addition u/s 56(1) can t be made, he tried to sustain the addition by applying the provisions of section 68 of Income Tax Act. He issued a show cause notice vide letter dated 09/ .....

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..... Land at SB-110* NA 25,52,48,216 Total Assets (A) 53,88,09,212 79,40,57,428 Total Liabilities, excluding share capital and reserves Surplus (L) 76,56,570 76,56,570 Total amount of paid up equity share capital as shown in B/s (PE) 2,05,05,820 2,05,05,820 Paid up value of such equity shares (PV) 10 10 Fair market value of shares [(A-L)/PE]*PV [(53,88,09,212- 7656570)/2,05,05,820]*10 = Rs. 259 per shares [(79,40,57,428- 7656570)/2,05,05,820]*10 = Rs. 384 per shares* For deciding the issue price of shares the assessee company choose the price as determined by option 2 and considering the value of goodwill enhancement in value of other assets the issue price of shares decided Rs. 400 per shares which is quite reasonable. * Note 1: - The market value of land at SB-110 is taken on the basis of value of adjacent land at SB-111 purchased during the year under consideration (just adjoining to land at SB-110) and area of both the lands are almost same. Note 2: - In option two the appreciation in value of assets has been increased in the case of land only as for this the direct evidence of increase in market value is available. The value of other assets goodwill is not taken in above computati .....

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..... FB) of section 10]; It is also pertinent to menton that Rule 11UA (2) of Income Tax Rules, 1962 provides the method of calculation of fair market value of unquoted shares in term of explanation (a) (i) to section 56(2)(viib). In the assessee s case, the company has issued 1,10,250/- equity shares at the premium of Rs. 390/-per share. In view of the amended provisions of section 56(2)(viib) of Income Tax Act, the AO should have calculated the fair market value of the shares as mentioned in explanation (a) of section 56(viib) of the Act and excess amount of fair market value of the shares received if any could have been taxed u/s 56(2) of Income Tax Act. However, the AO has not done any exercise in this regard and the entire amount received against share capital during this year amounting to Rs. 4,41,00,000/- was taxed u/s 56(1) of Income Tax Act. For the year under consideration, the amended law is applicable. The share premium/ capital received in excess of fair market value of the shares shall be taxed. The ld. CIT (A) deleted the addition. However, in the interest of equity and justice, the AO is directed to calculate the fair market value of the share in accordance with the prov .....

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..... e identity, creditworthiness and genuineness of transaction of these companies cannot be held as doubtful and addition by applying the provisions of section 68 of the Act cannot be upheld. However, it is also to be seen that the Investigation Directorate has carried out investigation for deposit of cash/DD at fourth stage of channel source in some cases. The Chart showing cash deposit/DD deposit at 4th Channel as per inquiries made by Investigation wing is as under: Company A.Y. Amount From Company Cash deposit /Demand draft at 4th Channel per inquiry by investigation wing Motisons Buildtech P Ltd 2012-2013 15,00,000 Evershine Suppliers P Ltd Swastik Traders Motisons Buildtech P Ltd 2012-2013 20,00,000 Alliance Trade com P Ltd Swastik Traders and Global Securities Motisons Buildtech P Ltd 2012-2013 17,00,000 Alliance Tradecom P Ltd Swastik Traders Motisons Buildtech P Ltd 2012-2013 30,00,000 Alliance Trade com P Ltd Swastik Traders Total 82,00,000 Motisons Entertainment P Ltd 2012-2013 18,00,000 Rose Suppliers P Ltd Shyam Fashion and Durga Enterprises Motisons Entertainment P Ltd 2012-2013 46,00,000 Regent Barter P Ltd Durga Enterprises and Shyam Fashion Motisons Entertainment P Lt .....

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..... ance Trade com P Ltd PNB, Axis Bank Siliguri, Swastik Traders and Global Securities Motisons Global Private Limited 2012-2013 10,00,000 Alliance Trade com P Ltd Swastik Traders Motisons Global Private Limited 2012-2013 35,00,000 Alliance Trade com P Ltd M/s Swastik Traders, Global Securities Axis Bank Siliguri, Motisons Global Private Limited 2012-2013 20,00,000 Alliance Trade com P Ltd Swastik Traders and Global Securities Motisons Global Private Limited 2012-2013 20,00,000 Alliance Trade com P Ltd Swastik Traders and Global Securities Motisons Global Private Limited 2012-2013 16,00,000 Alliance Trade com P Ltd Durga Enterprises Motisons Global Private Limited 2012-2013 9,50,000 Alliance Trade com P Ltd Shyam Fashion Motisons Global Private Limited 2012-2013 10,00,000 Alliance Trade com P Ltd Shyam Fashion and Durga Enterprises Motisons Global Private Limited 2012-2013 3000000 Alliance P Ltd Shyam Fashion and Durga Enterprises Motisons Global Private Limited 2012-2013 16,00,000 Alliance P Ltd P Ltd Nibu Nagi Motisons Global Private Limited 2012-2013 19,50,000 Alliance Trade com P Ltd Durga Enterprises Motisons Global Private Limited 2013-2014 5050000 Alliance Trade com P Ltd Shyam .....

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..... 4,95,000/- in AY 2009-10 which was added as income of M/s Mayukh Vinimay Pvt Ltd in AY 2009-10. Thereafter in subsequent years the part of the funds owned by this company was invested in the companies under appeal as under: S.No Name of Company (under your appeal) Assessment Year Amount 1 Motisons Global Pvt Ltd 2012-13 6,93,49,800 2. Motisons Global Pvt Ltd 2013-14 2,24,50,000 3 Motisons Entertainment (India) Pvt Ltd 2012-13 1,55,00,000 Total 10,72,99,800 Further, it is also submitted that addition made by the AO tantamount to double addition. It is also mentioned here that as per Ld AR s request, appellate proceedings in case of M/s Mayukh Vinimay Pvt Ltd have been kept in abeyance till the disposal of appeal by Hon ble ITAT. In view of aforementioned findings, now additions made by the AO are being discussed with respect to grounds of appeal raised by the respective assessee in para below. Thus the ld. CIT (A) confirmed the addition of Rs. 50,50,000/- in the hands of the assessee. 11.2 During the course of hearing, the ld.AR of the assessee prayed for deletion of addition confirmed by the ld. CIT (A) amounting to Rs. 50,50,000/- for which the ld.AR of the assessee filed the foll .....

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