9911796707
TMI Blog2025 (2) TMI 124X X X X Extracts X X X X X X X X Extracts X X X X ..... .
Since no cash was involved in transaction of said allotment of shares, conversion of these liabilities into share capital and share premium could not be treated as unexplained cash credits u/s 68 of the IT Act.
Even if the allegation is of sham companies being operated by the assessee to channelize its unaccounted money into books of the assessee, then, for the year under consideration as observed above, no funds were actually received. The premium shown to be charged is not received as a 'sum' credited in the books of account so as to be ultimately used during the year. If the case of the AO is accepted, then also, at the time of liquidation of the investments received as consideration of the share capital and share premium could be examined when actually received, which was not the case of the Department so far. Decided in favour of assessee. X X X X Extracts X X X X X X X X Extracts X X X X ..... shares by swapping of shares in absence of receipt of cash cannot result in addition u/s 68 of the Act. Ld. CIT(A) relied on judgement of Hon'ble ITAT Delhi in the case of ITO vs Vital Communication Ltd. (ITA No. 2448/Del/2007) 4. Revenue is in appeal raising following grounds; "i. That on facts and circumstances of the case and in law, the Id. CIT(A) has erred in deleting the addition of Rs.4.99 crore u/s 68 of the IT Act as unexplained credit. ii. That on facts and circumstances of the case and in law, the Id. CIT(A) has erred in allowing the equity shares of Rs.10 each at a premium of Rs.490/- per share inspite of the fact that assessee company was incorporated on 27.06.2008 and no business activity has commenced in the company. iii. That on facts and circumstances of the case and in law, the Id. CIT(A) has erred in deleting the addition made by AO without examining and giving her own finding about the identity and creditworthiness of the purported investors of the share premium of 4.99 crore. iv. The appellant craves to be allowed to add any fresh ground(s) of appeal and /or delete or amend any of the ground(s) of appeal." 5. Ld. AR has primarily contended that S ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the test prescribed under section 68 of the Act. It was submitted that the identity, credit worthiness and genuineness of share issue has been properly explained by the assessee and the Ld. CIT(A) passed his order after properly appreciating the same. It was submitted that Ld. AO had issued notice under section 133(6) of the Act to all the subscribers, which was duly served and replied. Ld. AO had also made certain enquiry from ROC, New Delhi, in which no adverse finding was received against the assessee. 7. Ld. DR has submitted that the ld.CIT(A) has failed to examine the expenses in correct perspective. It was submitted that details of investment purchased in lieu of share allotment as provided by the assessee at page 446 of the paper book would show that the investments of similar companies were held by the investing companies and they have been valued differently. It was submitted that all the documentation required for the transfer of shares was concluded in one day. The ld. DR, thus, submitted that the transactions were mere paper transactions and sham transactions of investor companies which had no substantial basis for investment on a high premium in the assessee company. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ) on which one of us (Judicial Member) was a party, while dealing with the provisions of section 68, has held that it is not just an entry of cash credit in the books of account that would create liability of explanation from the assessee, but, there should be an actual flow of funds. Once the flow of funds is established, then, the question of explanation from the assessee actually arises. Similar was the view in Acres Buildwell Pvt. Ltd. V ITO Ward 1(3) New Delhi ITA no. 2191/DEL/2022 order dated 22/5/2024. In DCIT versus NCR Business Park (P) Ltd. 2022 141 taxmann.com 563( Delhi-Trib) the revenue's appeal was dismissed by following the this proposition of law. Thus there is no error in the finding of Ld CIT(A) holding non-applicability of provision of section 68 of the Act. 8.1 Even if the allegation is of sham companies being operated by the assessee to channelize its unaccounted money into books of the assessee, then, for the year under consideration as observed above, no funds were actually received. The premium shown to be charged is not received as a 'sum' credited in the books of account so as to be ultimately used during the year. If the case of the AO is accepted, then ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... book xii. Copy of Form 3 filed by assessee for share allotment, copies made available at, pages 430 to pages 432 of Paper book xiii. Challan evidencing Stamp Duty paid for increasing authorized capital, copies made available at pages 433 to pages 434 of Paper book xiv. Copy of EGM Notice and Resolution for increasing authorized capital, copies made available at pages 435 to pages 439 of Paper book xv. Details of shares of other companies received in consideration for allotment of shares of appellant, copies made available at Page 446 of Paper book. 10. In fact as with regard to the capacity of the investor companies the ld. AR has cited before us a chart, where by financials of the investor companies are shown and we reproduce the same below:- Particulars Amount invested in assessee company Net worth 31.03.2010 (in Rs.) Paper Book page No. Tara Developers Pvt. Ltd. 47,50,000.00 2,19,19,812.00 224 Kanahiya Impex Limited 59,00,000.00 2,96,75,000.00 174 Salasarji Infosoft Pvt. Ltd. 57,00,000.00 2,66,00,000.00 159 Jai Durgay Garments Pvt. Ltd 52,00,000.00 2,87,50,000.00 259 Mangal Kalas Services Pvt. Ltd. 58,00,000.00 2,18,30,000.00 273 Bhavya Aluminiu ..... X X X X Extracts X X X X X X X X Extracts X X X X
|
