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TMI Blog2025 (2) TMI 529X X X X Extracts X X X X X X X X Extracts X X X X ..... sting shareholders. The assessee also submitted the confirmation, audited Balance Sheet of Acquatic Exim Pvt. Ltd. which is placed on record.
From the record, we observed that Acquatic Exim Pvt. Ltd. is having revenue from operation of Rs. 15,49,75,300/- and having trading activities and declared a profit of Rs. 1,43,641.80. At the same time, we also observed that they have sufficient shareholders found. Therefore, we are inclined to allow the grounds raised by the assessee for the reason that the shares were issued at premium at the same rate which was issued to the existing shareholders.
Assessee has submitted the valuation report under Rule 11UA of the Income-tax Rules, 1962. Therefore, the assessee has subtitled all the conditions specified u/s 68 of the Act. Accordingly, the appeal filed by the assessee is allowed. X X X X Extracts X X X X X X X X Extracts X X X X ..... lant before the Ld.AO, thereby, discharging the burden u/s 68 of the Act 2. That the Ld. CIT(A). NFAC has grossly erred in law as well as on facts in not considering the fact that share capital and share premium amounting to Rs. 18,00,000/- was received in the previous years and therefore the same could not be added for the assessment year in concern. 3. That the order passed by Ld. CIT (A)/NFAC is bad in law as the same has been passed without appreciating that: a. The investor companies are separate income-tax assessee b. The explanation and documents sought have duly been furnished which have not been controverted and therefore cannot be rejected arbitrarily. c. No anomaly has been found in the books of the assessee. 4. That Ld. CIT(A)/NFAC has erred in law as well as on facts in confirming the order of Ld.AO without appreciating that such addition made without rejection of books of accounts u/s 145 of the IT Act, 1961 is bad in law. 5. That Ld. CIT (A)/NFAC erred in law as well as on facts in non-admission of additional evidence under Rule 46A merely stating that same has been filed before AO. 6. That the Ld. CIT (A)/NFAC has grossly erred in law as well as on f ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the Acton account of share capital invested by investor companies and which has been subsequently upheld by the Ld. CIT(A), NFAC. Rs. 99,00,000/- Rs. 45,00,000/- 2. Details of Investment made by the investor companies in preceding years. Total Rs. 18 Lacs (Rs. 9 Lacs by M/s Cee Aar Décor on 25.07.2014, Rs. 4.5 Lacs by M/s Rishikesh Buildcon on 25.07.2014 and Rs. 4.5 Lacs by M/s RSM Construction on 24.07.2014) N/A 3. Details of Investment made by the investor companies in the year in concern. M/s Herculese Builders (Coimbatore) Pvt. Ltd. (Rs. 45 Lacs on 13.10.2015) M/s Nu Ruchi Barter Pvt. Ltd. (Rs. 36 Lacs in March 2016) M/s Aquatic Exim Pvt. Ltd. (Rs. 30 Lacs on 15.10.2016 and Rs. 15 Lacs on 03.11.2016) 4. Information sought by the Ld. AO u/s 133(6). 133(6) Notice was complied by Cee Aar Décor Pvt. Ltd, Rishikesh Buildcon Pvt. Ltd., RSM Construction Pvt. Ltd. and could not be complied by Herculese Builder Pvt. Ltd. Further no information was sought from Nu Ruchi Barter Pvt. Ltd. No information was sought u/s 133(6) of the Act. 8. It is submitted that the Ld. CIT(A), NFAC has sustained the addition u/s 68 of the Act while holding that though the as ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t year, their investment could not be added in the income of the assessee in the current AY. However, such amount was also upheld by the Ld. CIT(A), NFAC for the concerned assessment year. In this connection various judicial pronouncements are relied upon, which are reproduced below :- A. In case of Naveen Aggarwal, New Delhi vs. Department of Income Tax ITA 2928/Del/2011 in Delhi ITAT it was held that "addition could not have been made u/s 68 of those amounts which appear as opening balances on 1.4.2006 as in all cases, the bank accounts have been produced to show that the amount have been received by cheque. And the amounts have been confirmed by the parties concerned and no addition can be made u/s. 68 in cases where the closing credit balances pertain to opening balance only". B. In case of CIT vs. Vardhman Overseas Ltd. ITA 774/2009 the Hon'ble Delhi High Court has confirmed the ITAT decision to the effect that "addition u/s 68 cannot be made when there are no fresh cash credits received during the year from sundry creditors and section 41(1) and section 28(iv) cannot be invoked to subject to tax the outstanding balances of sundry creditors". It was observed: "It was con ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e further submitted that in the paper book filed before this Bench, the assessee has furnished all the relevant documents which were furnished before the lower authorities though for some of the investors the investment was received in the preceding assessment year for which the addition cannot be made in assessment year in concern. Further as regards to the investment made by the investors during the present assessment year is concerned, it is necessary to explain for each investor and the relevant documents filed before the lower authorities. He submitted that a list of documents which are placed in the Paper Book in order to prove the genuineness of the transaction, identity & creditworthiness of the investor are listed herein below in a tabular format :- S.No Particulars 1. Copy of Certificate of Incorporation, along with MOA & AOA 2. Copy Auditor's report, Balance Sheet and trading and profit & loss account for the relevant AY along with notes to financial statement 3. Copy of acknowledgement of return of income along with computation of income tax for the year in concern 4. Copy of share application form. 5. Copy of confirmation of accounts. 6. Copy of ban ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ts it could not reach. The IT department also found faults and so upgraded their website later and various other issues are very well known to the public. It may be appreciated that on the part of the assessee it can only submit the documents and it was the duty of the AO to make necessary efforts and enquiry if required but cannot sit idle by not accepting the documents submitted by the assessee. The Ld. CIT(A) also merely on doubts ignored the documents but could not bring any material contrary during the appellate proceedings. 15. In view of the above, ld. AR submitted that the assessee has discharged its onus to prove the identity, creditworthiness and genuineness of the investor and thereafter the onus shifted to the income tax authorities to disprove the documents furnished by the assessee. 16. Ld. AR further relied on the following cases of Hon'ble High Courts and Supreme Court and Comparative analysis of Judgements as under :- S No. Facts Efforts made by the revenue authorities Judgements relied upon by assessee in submissions filed before lower authorities or in synopsis before the Hon'ble Bench or relied by the revenue authorities. 1. Assessee filed relevant docu ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... addition has to be sustained such as by not filing the bank particulars (NR Portfolio, NRA Iron & Steel), the assessee did not cooperate in the enquiry on the basis of investigation report (Nipun Builders, M/s Nova Promoters, Seema Jain, Navodaya Castle (P) Ltd., M/s Synergy Finlease (P) Ltd. 5. AO doubted the premium paid by the investors. Merely rejected the valuation report or valuation submitted by the assessee. PCIT v Rohtak Chain Co. (P.) Ltd. 59 [2019] 110 taxmann.com 59 (SC), PB-II Issuing share at a premium is a commercial decision and it is prerogative of Board of Directors of a company to decide premium amount and it is wisdom of shareholder whether they want to subscribe shares at such a premium or not and, ultimately, this is a mutual decision between both companies and their shareholders. 17. He further submitted that on similar facts & circumstances, ITAT, Delhi Bench in its recent decisions has deleted the addition and copies of those orders are placed in separate paper books which are running into 194 and 125 pages, respectively. Therefore, he prayed that the addition made by Ld.AO and confirmed by Ld. CIT(A) u/s 68 of the Act may kindly be deleted and the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... r any previous year and the assessee offered no explanation about the nature and source thereof or the explanation offered by him is not in the opinion of the AO is satisfied, the sum so credited may be charged to income-tax. In the given case, the assessee has received the cash during the previous assessment year and the same was credited in the previous assessment year, therefore, no addition can be made during the current assessment year under consideration based on the allotment of shares. Accordingly, the appeal filed by the assessee is allowed. 22. With regard to AY 2017-18, we observed that assessee has issued fresh shares of 1,50,000 shares to Acquatic Exim Pvt. Ltd. at the same rate as issued to the existing shareholders. The assessee also submitted the confirmation, audited Balance Sheet of Acquatic Exim Pvt. Ltd. which is placed on record. From the record, we observed that Acquatic Exim Pvt. Ltd. is having revenue from operation of Rs. 15,49,75,300/- and having trading activities and declared a profit of Rs. 1,43,641.80. At the same time, we also observed that they have sufficient shareholders found. Therefore, we are inclined to allow the grounds raised by the assessee ..... X X X X Extracts X X X X X X X X Extracts X X X X
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