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TMI Blog2025 (1) TMI 367X X X X Extracts X X X X X X X X Extracts X X X X ..... 3 and the same is more than the share premium of Rs. 190/- per share charged by the assessee. We, therefore, considering the facts of the case are satisfied that the assessee has successfully proved the genuineness of the transaction. Assessee has been able to explain the identity and creditworthiness of share applicant and genuineness of transaction and, therefore, there was no justification of invoking sec. 68 of the Act on the given transaction of receiving alleged share capital and share premium. In the assessment orders of the alleged share applicants the source of source of share application money which has been received by the assessee has already been taxed in the hands of the share applicants and taxing the same again in the hands of the assessee would tantamount to double additions. See Mahaveer Kumar Jain [ 2018 (4) TMI 1078 - SUPREME COURT] - Decided in favour of assessee. - Dr. Manish Borad, Accountant Member And Shri Sonjoy Sarma, Judicial Member For the Assessee : Shri S. K. Tulsiyan, Advocate Ms. Puja Somani, CA Shri Narendra Kedia, AR For the Revenue : Shri Pradip Biswas, Addl. CIT ORDER PER DR. MANISH BORAD, ACCOUNTANT MEMBER: The captioned appeal filed by the a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d other judgments and ultimately the appeal was dismissed. On an appeal preferred by the assessee before the Tribunal, the concurrent findings recorded by the Assessing Officer and the CIT(A) have been set aside and the appeal has been allowed. The impugned order passed by the Tribunal runs to 14 pages and in paragraph 11 of the impugned order, the learned Tribunal has recorded that from the bare perusal of the paper book and the documents placed, it is revealed that all the share applicants are income tax assessees, they are filing their income tax returns, share application form and allotment letter is available on record which were filed in response to the notice under section 133(6), share application money was made by account payee cheques, details of the bank accounts belonging to the share applicants and their bank statements have been furnished and all the share applicants are having substantial creditworthiness represented by their capital and reserves. Though such is the findings recorded by the Tribunal, it is not supported by facts. The Assessing Officer has held that the assessee was a Private Limited company which cannot issue shares in the same manner in which Public ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ed before the learned Tribunal and if any further documents are to be submitted, leave of the Tribunal may be obtained and thereafter submitted. 4. In direction of the Hon ble jurisdictional High court, we proceed to adjudicate the issue of unexplained share capital and share premium u/s. 68 of the Act amounting to Rs. 4,78,50,000/-. 5. Brief facts of the case are that the assessee which is a Private Limited Company declared income of Rs. 55,200/- in the return furnished on 24.09.2012 pertaining to AY 2012-13. After the case being selected for scrutiny through CASS followed by validly serving notice u/s. 143(2) and 142(1) of the Act, Ld. AO proceeded to examine the financial transactions entered into by the assessee company. Ld. AO observed that the assessee had issued 2,48,750 equity shares of face value of Rs. 10/- and share premium of Rs. 190/- per share was received on issue of 2,38,750 equity shares. In other words, 10000 equity shares were issued at face value of Rs. 10/- and 2,38,750 equity shares issued at Rs. 200/- per share (Rs.10/- face value and Rs. 190/- share premium). To examine/verify the identity and creditworthiness of the shareholders notice u/s. 131 of the Act w ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... hare premium of Rs. 190/- is justified considering the valuation certificate issued by a Chartered Accountant on 16.12.2022 calculating the fair market value at Rs. 193.63 as on the date of issue of alleged share capital. He thus, summarized that whatever best is needed to prove the identity and creditworthiness of the share applicants and genuineness of the transaction has duly been placed by the assessee before the revenue authorities and before this Tribunal. 8. Second fold of contention is that the share applicants have also been assessed to tax and passed through scrutiny proceeding u/s. 143(3) of the Act for AY 2012-13 and in the assessment orders additions have been made in their hands and details of the same are placed at pages 4 and 5 of the written submission. He thus, contended that when share applicants have already been subjected to the additions, the source is explained and the assessee cannot be subjected to alleged addition as the same would tantamount to double additions. Reliance placed on the judgment of Hon ble Apex Court in the case of Mahaveer Kumar Jain Vs. CIT dated 19.04.2018, AIR on line 2018 SC 1461 Civil Appeal No. 4166 of 2006 dated 19.04.2018. 9. On th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ny previous year, and the assessee offers no explanation about the nature and source thereof or 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: [Provided that where the assessee is a company (not being a company in which the public are substantially interested), and the sum so credited consists of share application money, share capital, share premium or any such amount by whatever name called, any explanation offered by such assessee company shall be deemed to be not satisfactory, unless (a) the person, being a resident in whose name such credit is recorded in the books of such company also offers an explanation about the nature and source of such sum so credited; and (b) such explanation in the opinion of the Assessing Officer aforesaid has been found to be satisfactory: Provided further that nothing contained in the first proviso shall apply if the person, in whose name the sum referred to therein is recorded, is a venture capital fund or a venture capital company as referred to in clause (23FB)of section 10. 12. From perusal of the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ontemplated by Section 68 of the Act. 10. The Hon ble Supreme Court, thus, has held that once the assessee has submitted the documents relating to identity, genuineness of the transaction, and credit-worthiness of the subscribers, then the AO is duty bound to conduct an independent enquiry to verify the same. 11. Now to test the documents filed by the assessee in the light of the above principles laid down by the Hon ble Apex Court, we notice that the assessee had furnished following details of each of the share applicant company which have also been filed by the respective share applicants in reply to the notice u/s. 133(6) of the Act. A. Swastik Polyplast Pvt. Ltd In response to notice u/s 133(6) of the Act the company had confirmed the transaction and provided the following documents. (i) Confirmation: In response to notice u/s 133(6) of the Act this company has confirmed the transaction with the appellant company. (ii) Acknowledgement of Income Tax Return filed (iii) Audited Balance Sheet, Profit and Loss Account and annexure to the financial statement (iv) PAN number The above documents are filed in Paper Book in Sl. No. 3, Pages 21 to 33 B. UP Account law services Pvt. Ltd In ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... fit and Loss Account and annexure to the financial statement (V) PAN number The above documents are filed in Paper Book in Sl. No. 8, Pages 87 to 102 12. Now on going through all these details which mainly include audited financial statements, ITR, PAN and confirmation, we note that the share applicants are Pvt. Limited Company duly registered with the Ministry of Corporate Affairs. It is not a mere registration with MCA but the private limited company are also required to file annual return and upload the audited Balance sheet and P L Account in the format given on the MCA portal. There is a continuous check and verification of such details by the office of Registrar of Companies. So the identity of the share applicant companies remains undisputed. 13(a). Now, coming to the creditworthiness of the share applicant companies, we have perused the financial statement of all these companies. We take note of Swastik Polyplast Pvt. Ltd. and the Balance Sheet shown that as on 31.03.2022 the share capital along with reserve and surplus amounts to Rs. 2.90 Cr and there are current liabilities of Rs. 6.89 Cr. Now, the alleged sum received by the assessee from Swastik Polyplast Pvt. Ltd. is o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... for procuring fund through issue of equity share capital. Investment in the equity share capital apart from being based on the current financial strength of the investee company is also based on the perspective of the future business which can either give rise to profits and even losses. 14(b). So far as the case in hand is concerned, assessee company after having contacted various other private limited companies was able to convince the alleged share applicants to make investment in its equity share capital. Though the assessee company in the year under consideration is not having a huge turnover but the book value of each of its equity share on the date of issue is Rs. 193.63. A certificate dated 16.12.2022 to this effect has been given by the Chartered Accountant Firm placed at page 185 of the paper book giving information about the fixed assets, current assets and then after reducing the net current liabilities from the total of the asset side, book value has been calculated by dividing the remaining sum with a number of equity shares. The book value so arrived is Rs. 5,75,07,068/- and on dividing the same by number of equity shares i.e. 2,97,000 the book value per share is Rs ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ubmitted the reply. The documents annexed to the reply were classified under three categories namely: to establish the identity of the lender, to prove the genuineness of the transactions and to establish the creditworthiness of the lender. The Assessing Officer had brushed aside these documents and in a very casual manner had stated that merely filing the permanent account number details, and balance sheet did not absolve the assessee from his responsibility of proving the nature of the transaction. There was no discussion by the Assessing Officer on the correctness of the stand taken by the assessee. Thus, going by the records placed by the assessee, it could be safely held that the assessee had discharged his initial burden and the burden shifted onto the Assessing Officer to enquire further into the matter which he failed to do. In more than one place the Assessing Officer used the expression money laundering . Such usage was uncalled for as the allegation of money laundering is a very serious allegation and the effect of a case of money laundering under the relevant Act is markedly different. The order passed by the Assessing Officer was utterly perverse and had been rightly s ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... be interpreted in such a manner that its effect will be to cast a burden twice over for the payment of tax on the taxpayer unless the language of the Statute is so compelling that the court has no alternative than to accept it. In a case of reasonable doubt, the construction most beneficial to the taxpayer is to be adopted. So, it is clear enough that the income in the present case is taxable only under one law. By virtue of clause (k) to Article 371F of the Constitution which starts with a non-obstante clause, it would be clear that only the Sikkim Regulations on Income-tax would be applicable in the present case. Therefore, the income cannot be brought to tax any further by applying the rates of the IT Act. 19. Considering the ratio laid down by the Hon ble Apex Court and on finding that the alleged share applicants have been subjected to substantial addition, we find merit in the second fold of argument of the Ld. Counsel for the assessee and, therefore, on this ground also the impugned addition u/s. 68 of the Act is uncalled for. We accordingly, set aside the finding of the Ld. CIT(A) and delete the addition u/s. 68 of the Act made by the AO. Effective grounds of appeal of the ..... X X X X Extracts X X X X X X X X Extracts X X X X
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