DEPUTY.COMMISSIONER OF INCOME TAX, CENTRAL CIRCLE-4(4),KOLKATA, AAYAKAR BHAWAN POORVA V. PCJ FINVEST PRIVATE LIMITED, SILIGURI, WEST BENGAL

ITA 1301/KOL/2023

AI Insights

The case involves an appeal by the Revenue against the order of the CIT(A) which had deleted the addition of \\u20b925,56,00,000 made by the Assessing Officer (AO) on account of share capital/share premium being treated as unexplained credit under Section 68 of the Income Tax Act. The assessee, PCJ Finvest Private Limited, had issued shares at a premium to 29 corporate entities, which the AO initially added to the income as unexplained cash credit. The CIT(A) allowed the appeal of the assessee after detailed examination of the evidences provided during the remand proceedings, which included the identity and creditworthiness of the investors and the genuineness of the transactions. The Tribunal upheld the CIT(A)'s decision, emphasizing that the legal provisions applicable at the time of the transaction did not require the assessee to explain the 'source of source' for the investments.

• Counselvise Citation: [2025] 140 COUNSELVISE.COM (IT) 473864 (ITAT-KOLKATA)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 28-03-2025
• Appeal Filed By: Department
• Order Result: Allowed
• Bench Allotted: C
• Assessment Year: 2008-2009
• Result in Favour of: Revenue
• Court: TRIBUNAL
• Department Lawyers: GURU BHASHYAM
• Assessee Lawyers: SOUMITRA CHOUDHRY
• Keywords: Set aside; Additional evidence; Retrospective amendment; Question of law; Unexplained cash credit; Fair market value; Onus to prove; Source of fund; Assessment record; Revision of order
• Section: 143(3); 142(1); 263; 56; 68; 131; 56(2); 133(6); 13

Judgement Text

" IN THE INCOME TAX APPELLATE TRIBUNAL “C” BENCH, KOLKATA BEFORE SHRI RAJESH KUMAR, AM AND SHRI SONJOY SARMA, JM ITA No.1301/KOL/2023 (Assessment Year:2008-09) DCIT Aaykar Bhavan Poorva, 5 th Floor, Room No.509, 110-Shanti Pally, Kolkata-700107, West Bengal Vs. PCJ Finvest Private Limited 4th Floor, Commercial Block 2nd Mile Metro Heights, Sevoke road, Siliguri-734001, West Bengal (Appellant) (Respondent) PAN No. AABCP8375R Assessee by : Shri Soumitra Choudhry, AR Revenue by : Shri Guru Bhashyam, CIT DR Date of hearing: 06.02.2025 Date of pronouncement : 28.02.2025 O R D E R Per Rajesh Kumar, AM: This is an appeal preferred by the Revenue against the order of the National Faceless Appeal Centre, Delhi (hereinafter referred to as the “Ld. CIT(A)”] dated 20.10.2023 for the AY 2008-09. 02. The only issue raised by the Revenue is against the deletion of addition of ₹25,56,00,000/- by the ld. CIT (A) as made by the ld. AO on account of share capital / share premium being unexplained credit u/s 68 of the Act. 03. The facts in brief are that the assessee filed the return of income on 31.03.2009, declaring total income at ₹16,889/-. The assessment was Page | 2 ITA No.1301/KOL/2023 PCJ Finvest Private Limited; A.Y. 2008-09 originally framed u/s 147/143(3) of the Act vide order dated 25.11.2010, assessing the total income at ₹1,02,610/-, which was rectified on 30.03.2012, determining the total income at ₹1,23,627/-. Thereafter, the ld. PCIT, observed from the assessment records that the assessee has received share capital/ share premium amounting to ₹25,56,00,000/- during F.Y. 2007-08 and the ld. AO has not made an in-depth enquiry while passing the order u/s 147/ 143(3) of the Act, dated 25.11.2010. Accordingly, the assessment was revised vide order dated 08.03.2013, passed u/s 263 of the Act by PCIT for de-novo assessment. Accordingly, in the set aside proceeding, the notice u/s 142(1) of the Act, along with questionnaires were issued. However, according to the AO no one attended the proceeding nor any documents/ details were filed explaining the share capital/ share premium. Thereafter, AO issued summons u/s 131 of the Act to the directors of the assessee company as well as to the directors of the share subscribers which again remained non-complied. Finally, the amount of share capital/ share premium was treated as unexplained cash credit u/s 68 of the Act and added to the income of the assessee in the assessment framed u/s 147/143(3)/ 263 of the Act vide order dated 21.03.2014. 04. In the appellate proceedings, before the ld. CIT (A), the assessee furnished all the evidences/ details concerning the 29 share subscribers who were all corporate entities and ld. CIT (A) also admitted the additional evidences under Rule 46A of the Income Tax Rules, 1962, and called for the remand report from the ld. Assessing Officer. In the remand proceedings, the assessee produced all the evidences/details qua 29 share subscribers proving the identity and creditworthiness of the investors as well as the genuineness of the transactions. The ld. AO submitted two remand reports, one dated Page | 3 ITA No.1301/KOL/2023 PCJ Finvest Private Limited; A.Y. 2008-09 28.09.2018 and 2nd dated 08.08.2022. The ld. CIT (A), after taking into consideration, the remand reports and the rejoinder filed by the assessee, allowed the appeal by observing and holding as under:- “7. I have carefully examined the entire material on record including the assessment order. the submissions of the appellant, including the paper book, remand report and rejoinder to remand report. 7.1 Since the grounds 6 & 7 agitate only a solitary issue and since these grounds are inter-related, they are being disposed as one. The only issue involved is whether the premium money (excluding share capital) received from 29 Investing companies, cumulatively amounting to Rs.25,56,00,000/- on issue of equity shares to these 29 companies, invites the provisions of sec. 68 of the Act or not. Facts are that during the year the appellant company raised share capital including share premium of Rs.25,56,00,000/- from 29 share subscribers who are body corporate entities. The appellant before me illustrated the entire facts along with all the relevant documentary evidence. The appellant before me has submitted that he furnished the relevant details of share applicant companies which included the address and PAN of the allottees, the identity and address proof of the directors of the share applicant companies, share application forms, bank statements highlighting the transactions, PAN Cards of the applicants, financial statements with ITR acknowledgements for AY 2008-09. along with details of sources of funds, with supporting documentary evidences. The documentary evidence along with submissions were send to the AO for remand on 10.06.2022. 7.2 During the remand proceedings, the AO issued notice for hearing and the same was attended by the A/R of the appellant. Upon the receipt of this remand report, the copy of report was forwarded to the appellant company and a rejoinder was filed by the appellant later on. The appellant in its rejoinder explained its case with reference to the assessment proceedings and remand proceedings by AO that the share capital along with share premium raised by it was explained with evidences and hence, it has discharged the onus cast upon it u/s 68 of the Act. Appellant, having furnished all the details and documents before the AO and the AO has not pointed out any discrepancy or insufficiency in the said evidences and details furnished by the appellant before him. As observed above, the appellant having discharged its initial burden casted upon him to furnish the evidences to prove the identity and creditworthiness of the share subscribers and genuineness of the transaction. Again, reliance is placed in the case of \"One Point Commercial Pvt. Ltd. Vs. ITO, ITA No. 473/Kol/2019, dated 23/02/2023\" where the Hon'ble ITAT Kolkata held the following: \"Considering the facts and circumstances of the case and the material placed on record, we find that assessee has discharged its onus to prove the identity and creditworthiness of the share subscribing companies and the genuineness of the transactions towards sum of Rs.4,78,50,000/- received during the impugned year. Accordingly, considering these facts and in the light of the judicial precedence referred above, we set aside the order of the Ld. CIT(A) and direct the Ld. AO to delete the addition made towards share capital and share Page | 4 ITA No.1301/KOL/2023 PCJ Finvest Private Limited; A.Y. 2008-09 premium u/s 68 of the Act. Accordingly, ground taken by the assessee in this respect is allowed.\". The same view has been taken by the Hon'ble Bombay High Court in the case of CIT vs.Gagandeep Infrastructure Pvt. Ltd. (80 Taxmann.com) and the Hon'ble Apex Court in the case of Pr.CIT vs. Chain House International (P) Ltd. (90 Taxmann.com 47) (MP) while dismissing the SLP filed by the Revenue. Further, in the case of CIT, Dehi Vs. Ms.Mayawati, 338 ITR 563 (Def), 03/08/2011, the Hon'ble Delhi High court held the following: \"The capacity of any person does not mean how they earn monthly or annually but the term capacity is a wide term and that can be pursued by how wealthy he is. All the formalities, as per the law are made by the assessee and donors as well.\" 7.4 In the present case it is found that the corporate share applicants are registered under the companies Act, 1956/2013 and are on the records of Registrar of Companies functioning under Ministry of Corporate Affairs, Government of India and are having Permanent Account Numbers (PAN). They have also been filing their returns with the Income Tax Department. The share applicants had disclosed their PAN along with acknowledgement of submissions of their return of income and furnished audited financial statements. The confirmations and source of funds have been submitted and been examined by the AO in remand. All the other material necessary for establishing the identities, creditworthiness and genuineness have also been submitted. It is also observed that each of the share applicants maintained bank accounts and copies of their respective bank accounts from which they had made payments to the appellant for subscribing to the shares issued to them, was filed by each of them before the AO. Further each of the share applicants accepted the fact that they had subscribed to the shares issued by the appellant at a premium and that such transactions were duly reflected in their respective books of accounts, as well as in their audited Balance Sheets. 7.5 Also It was brought to my notice that the proviso to section 68 which required the assessee to prove the source of source was introduced from AY 2013-14 and thus prior to AY 2013-14 there was no obligation upon the assessee to explain the source of source and therefore this requirement did not exist for the impugned AY. Similar fact has been discussed at length in Kanchan Plywood Products Pvt. Ltd. -vs.- ITO (order dated 01.05.2019, Kolkata ITAT). In this connection, the Hon'ble Bombay High Court has gone into an in-depth discussion of the matter. In CIT vs Gagandeep infrastructure (p.) Itd in Income Tax appeal number 1613 OF 2014, in a decision delivered on 20.03.2017, the Hon'ble Court has examined the issue of retrospectively or otherwise of the amendment to section 68 of the Act via which the proviso to the said section was inserted from 01.04.2013. Reliance may be placed through the judgement of Hon'ble High Court in the case of \"Pr.CIT vs Apeak Infoteck (397 ITR 148/2017), where the Hon'ble Court held that: Page | 5 ITA No.1301/KOL/2023 PCJ Finvest Private Limited; A.Y. 2008-09 \"So for as the pre-amended section 68 of the Act was concerned, the same cannot beInvoked in this case, as evidence was led by the Respondents Assessee before the assessing officer with regard to identity, capacity of the investor as well as the genuineness of the investment. Therefore, admittedly, the assessing officer did not invoke section 68 of the Act to bring the share premium under tax\" Further, the assessee rely up on the citation of the Apex Court in the case of Ms. G.S.Homes and Hotel Pvt. Ltd. Where the court has held that: \"the amount received on issue of share capital including premium are on capital account and cannot be considered to be income. It was further pertinent to note that the definition of Income as provided u/s 2(24) of the Act at the relevant time did not define as income and any consideration received for issue of share in excess of its fair market value. This came into the statute only with effect from 1st April 2013 and thus would have no application to the share premium received by the Respondent-Assessees in the previous year relevant to the assessment year 2012-13. Similarly, the amendment to section 68 of the Act by addition of proviso was made subsequent to previous year relevant to the subject assessment year 2012-13 and cannot be invoked.\" 7.6 Further, it has to be noted that in order to prove the creditworthiness of a company, it is not always necessary to look only for these investments to have been made from the profits of the company. It is by now an accepted position in law that net profits are not the only indicators of the investment making capacity of an entity. What has to be examined is the net worth of entity as well the availability of money with it. There are plethora of judicial decisions that have expounded this proposition. The Hon'ble Delhi High Court in the case of CIT vs. Vrindavan Farms Pvt. Ltd., etc. ITA.No.71 of 2015 dated 12th August, 2015 (Del.), has observed in this connection that, \"The sole basis for the Revenue to doubt their creditworthiness was the low income as reflected in their retum of income. It was observed by the ITAT that the AO had not undertaken any investigation of the veracity of the documents submitted by the assessee, the departmental appeal was dismissed by the Hon'ble High Court.\" In the case of Carissa Investment (P) Ltd. Vs ACIT (ITAT Delhi) in ITA. No. 6448/Del./2016 dated 22.01.2021 the Hon'ble Tribunal found that the assessee submitted the audited financial statements, bank statements and assessment orders u/s 143(3) of the creditors. It held that, \"Thus, the assessee-company has been able to prove that both the creditors have availability of sufficient funds to give loan to the assessee-company in assessment year under appeal. Merely because income was low declared by both the creditors, is no ground\". I find that in ACIT Vs. Brindavan Agencies Pvt. Ltd. (ITAT Delhi) in ITA no. 5272/Del/2016 dated 23.12.2020 for the same AY as the instant one, that is, AY 2008- 09, it was held that, ...........it is seen that the appellant has filed sufficient documents e.g. Permanent Account Numbers, bank statements, etc. to establish the identities of the four share applicants. The copies of the bank statements of the share subscribers wherein the transactions are reflectedas well as the fact that they are assessed to Page | 6 ITA No.1301/KOL/2023 PCJ Finvest Private Limited; A.Y. 2008-09 income tax, along with copies of their final accounts wherein investments made by them in the appellant company are not only shown but constitute a small portion of their total investments, establish the creditworthiness of the parties concemed. The incomes of the four shareholders for the year under appeal may have been meagre, as pointed out by the Assessing Officer, but creditworthiness of a party is not gauged merely from income of a particular year. The balance sheets of the four shareholders companies reveal that they had ample share capital to invest in the appellant company. In fact, the Income Tax scrutiny assessments of all four share subscribers were completed in March, 2015, a few days after the finalization of the impugned assessment order and in three of the four cases, the returns filed by them have been accepted, thereby implying that the Assessing Officer of those three companies have accepted the fact of their investment in the appellant company. The same proposition as stated above, has been underlined in very many other cases, several having been cited by the appellant, in fact the same view has been reiterated by the jurisdictional Tribunal in the case of M/s. Evergreen Residency Pvt. Ltd vs ITO, Ward - 8(2), Kolkata on 09.08.2019 in ITA no. 416/Kol/2018, in which it was held. \"A copy of the chart of source of funds, ITR acknowledgment, Annual Accounts for the FY 2011 12 and the relevant Bank Statement are attached at Page 80108 of the Paper Book. On a perusal of the Balance Sheet, it can be seen that the own funds of the company is Rs. 9,83,20,364/. This very clearly shows the high creditworthiness of the company to make investment in the assessee company. Further, the entire inflow and outflow of funds was made through regular banking channels as supported by Bank Statements of both the companies.\" Applying the above discussed propositions of law in this regard, it is found that the creditworthiness of the companies are to be examined with respect to net worth of these companies, which would either justify or not justify the premium paid. Depending upon only one criterion, that of low net profits, could lead to erroneous conclusions, based on inadequate appraisal of facts. The share appellant has submitted a table of the net worth of the investing companies, derived from the audited balance sheets of these companies. These balance sheets form part of the paper book. An analysis of the financial statements of the investing companies shows that all the investing companies had sufficient net worth of their own to make the investments. In most cases the percentage of net worth so-invested is at a very reasonable level, hovering at a very low percentage of their net worth. Even in the three cases where this percentage is slightly higher, it has gone up to only a reasonable level of 11 to 19% of the net worth of the share applicant company which is not unreasonable and not enough to cause destabilization of the fund position of the investors. Even though, on this subject, several judicial authorities have already been cited by the appellant in his submissions, while some of them have been discussed supra, I find that it is worthwhile to cite what the Hon'ble jurisdictional Tribunal of Kolkata has stated on this subject in the decision of the Hon'ble ITAT Kolkata in the case of ITO vs. Good point Commodeal (P) Ltd in ITA No. 1204/Kol/ 2015for AY 2008-09, order dated 07.06.2019 \"Thus, we note that we find all the four share subscribers have been assessed by the Department and that too u/s. 143(3) of the Act and the genuineness of the transactions, cannot be disputed since the payment have been made through banking channel and we note that there cannot be any dispute in respect to creditworthiness of the share subscribing companies since they had sufficient net worth/own fund in its kitty to invest in the assessee company. It would be worthwhile to take note of the Page | 7 ITA No.1301/KOL/2023 PCJ Finvest Private Limited; A.Y. 2008-09 observation by Hon'ble Justice A. K. Sikri while delivering the judgment in CIT Vs. Mayawati when His Lordship then was in Hon'ble Delhi High court reported in 338 ITR 563 (Del) observed that \"The capacity of any person does not mean how they eam monthly or annually but the term capacity is a wide term and that can be pursued by how wealthy he is. All the formalities, as per the law are made by the assessee and donors as well. Therefore, the Hon'ble High Court was pleased to uphold the action of the Tribunal in deleting the addition made by the Department against the assessee Mayawat. It is therefore a settled principle that the creditworthiness of any share applicant cannot be dismissed only on the basis of its annual profits or income without first discussing the financial \"capacity of the investor to make the impugned investment. This financial \"capacity to invest is a function of the investable wealth of the investor, which, in turn, is reflected in the net worth of such an investor. 7.7 In this context, what also has to be examined is whether, given the net worth of an investor, the amount of investment as a percentage of this net worth was reasonable or not. Even though an investment decision is strictly a business and strategic decision, and not within the province of the AO's investigations, but, during such an examination, what can be and has to be examined by the AO, is the possibility of a rational prudent person making the said strategic decision for making an investmerit. In this case, I find that the investment levels, as compared to the net worth of the investing companies are quite low and acceptable and would not pose a risk to the investing company on account of a significant depletion of its net worth. It is quite clear that the investing companies had sufficient funds of their own to make the impugned investments. Beside demonstrating the net worth of the share applicant and that they had invested only a very small proportion of their net worth in the appellant company, all the share applicants have also demonstrated their respective sources and their means for arranging funds from genuine soürces for making investment in appellant company. Therefore, in this case the share application money or premium paid by such share applicant companies cannot be treated as unexplained u/s 68 of the Act by holding that the share applicants were not credit worthy since nowhere has it been shown that the share applicants did not have the required financial wherewithal to make the impugned investment in share application as well as premium. This is particularly so when the AO himself has accepted the share capital as genuine and to be fully explained, in terms of the identity of the share applicants, their creditworthiness and the genuineness of the transaction and the mode of the transaction. 7.8 Coming to another aspect of this matter, which is pertinent in cases like the present one. This pertains to the question whether, since the said amount of share premium could not be added u/s 68, it could have been added u/s 56(2) of the Act; since section 56(2) (viib) envisages a situation where a company receives consideration for issue of shares which is in excess of the fair market value of the shares, then such consideration can be added to his Income under this clause as income from other sources. The appellant, in this connection,has explained that although the justification for premium was not a requirement of law during the relevant assessment year but even then the share premium has been justified by the Page | 8 ITA No.1301/KOL/2023 PCJ Finvest Private Limited; A.Y. 2008-09 appellant with reference to the explanation filed by it with reference to relevant facts and figures. It has been explained that this premium was paid on account of the anticipated future prospects of the appellant company and the fact that it was felt by the investing companies\" Boards that it would be prudent to invest in the appellant company. 7.9 I find that the cases of Green Infra Ltd; CIT-v.- Gagandeep Infrastructure (P.) Ltd. (Bom) (supra) and in the case of Trend Infra Developers Pvt Ltd, ITA-2270/KOL/2016 - which is the jurisdictional Tribunal, along with several other decisions also cited supra, the issue of retrospective application of amendments, both, in section 68-the insertion of the Proviso to that section, as well as in section 56(2) the insertion of clause (vilb), have been discussed and adjudicated upon. It has been held by the judicial authorities that since the said amendments were made from 01.04.2013, they would have prospective effect and that they could not be applied to AYs 2008-09 or earlier, since they were not declaratory clarificatory or were for the removal of doubts or were expressly held by the Parliament to be applied with retrospective effect. Therefore, the share premiums could not be added u/s 56(2)(viib) of the Act 7.10 In view of the above discussions and judicial pronouncements, respectfully following the judgments referred herein above by the Hon'ble Courts and also considering the facts and circumstances of the case, I am of the view that since the assessee has placed sufficient documents and materials on record to prove the identity, creditworthiness of the share applicants and the genuineness of the transactions of receiving share capital and share premium, invoking the provisions of Section 68 of the Act was not justified in the Instant case. Hence the AO is directed to delete the addition of Rs. 25,56,00,000/- made u/s 68 of the Act and allow the grounds of appeal 6 & 7 of the assessee. Hence, the assessee are allowed.” 05. The ld. DR vehemently submitted that though the ld. CIT (A) had called for the remand report from the ld. AO which was furnished on three times one dated 21.02.2017 , second dated 28.09.2018 and 3rd dated 08.08.2022. The ld. DR pointed out that though the assessee has filed all the evidences in the remand proceedings and the same were confirmed by the ld. Assessing Officer however, the fact remains that the creditworthiness of the investors and the genuineness of the transactions were under doubt as many of the subscribers were not having substantial income even. The ld. DR also referred to the balance sheets, bank statements and ITRs furnished by the assessee qua the subscribers and pointed out that the subscribers would not have sufficient income and the ld. CIT (A) while dealing with the remand report in the appellate order has not given and dealt with Page | 9 ITA No.1301/KOL/2023 PCJ Finvest Private Limited; A.Y. 2008-09 full facts. The ld. DR relied heavily on the order of Principal Commissioner of Income-tax (Central)-2 vs. BST Infratech Ltd. [2024] 161 taxmann.com 668 (Calcutta)/[2024] 468 ITR 111 (Calcutta)[23- 04-2024], wherein the issue has been decided against the assessee under similar facts. The ld. DR argued that the ld. AO could not verify the transactions and the credentials of the investors when there was no compliance to the summons u/s 131 of the Act by the subscribers as well as by the directors of the assessee company and therefore, no deposition could be recorded. Therefore, the ld. DR prayed before us that the order of ld. CIT (A) may be reversed and that of ld. AO may be restored. (i) The ld. AR on the other hand strongly supported the order passed by the ld. CIT (A) by submitting that though the assessee has not filed any evidences in the assessment proceedings, however during the remand proceedings, the assessee has furnished all the documents comprising names, address, ITRs, audited balance sheets, Bank statements, confirmation and assessments framed u/s 143(3)/143(1) of the Act in the case of subscribers which adequately demonstrated that the assessee has proven the identity, creditworthiness of the investors and the genuineness of the transactions. The ld. AR submitted that in the assessment proceedings, the ld. AO has merely made the addition on the ground that there was no compliance to the summons issued u/s 131 of the Act which cannot be a ground for making the addition. The ld. AR submitted that during the year the assessee has issued 25,56,000 equity of face value of ₹10 each at a premium of ₹90, therefore, resulting to ₹25,56,00,000/- from 29 subscribers which were all corporate entities having the PAN No. and sufficient resources for making investments in the assessee company. The ld. AR further Page | 10 ITA No.1301/KOL/2023 PCJ Finvest Private Limited; A.Y. 2008-09 submitted that the ld. AO has not drawn adverse inference from these evidences, therefore, the additions has rightly been deleted by the ld. Commissioner of Income-tax (Appeals). The ld. AR vehemently submitted before us that the AO has failed to conduct an enquiry into evidences filed by the assessee qua the share subscribers as well as its own during remand proceedings. The ld. Counsel for the assessee submitted that during the relevant financial year, the assessee has issued equity shares to 29 subscribers at a face value of Rs. 10 each at a premium of Rs.90/- by issuing 25,56,000 equity shares. The ld. AR stated that the ld. AO simply added amount of share capital/share premium of ₹25,56,00,000/- to the income of the assessee on the ground that there was no compliance to the summons u/s 131 of the Act by the directors of the subscriber companies as well as by the directors of the assessee company. The ld AR argued that though the directors of the assessee company did not appear before the AO but furnished all the evidences as called for by the AO. The ld. Counsel for the assessee submitted that in the appellate proceedings, all the evidences/details qua share capital/share premium were furnished along with written submission. The ld. Counsel for the assessee submitted that assessee filed the share application forms along with allotment letters, the proof of ITRs of the subscribers, payment of share application through cheques, bank accounts ,also proof of share subscribers having substantial net worth and assessment orders u/s 143(3)/143(1) of the Act in the case of subscribers. The ld. AR submitted that it is not the case of the ld. AO that cash was deposited in the banks of the subscribers before the making investments in the assessee company. The ld. AR further submitted that the addition cannot be made on the ground that there was no compliance to the summons issued u/s 131 of the Act and in defense he is relied on the Page | 11 ITA No.1301/KOL/2023 PCJ Finvest Private Limited; A.Y. 2008-09 following decisions (i) CIT Vs. Orissa Corporation Pvt. Ltd. (1986) 159 ITR 78 (SC) (ii) CIT Vs. Orchid Industries Ltd. 397 ITR 136 (Bom);(iii)Crystal Networks Pvt. Ltd. Vs. CIT 353 ITR 171 (Kol); (iv)ITO Vs. M/s. Cygnus Developers India Pvt. Ltd.(ITA No. 282/Kol/2012) and (v) Joy Consolidated Pvt. Ltd. Vs. ITO (ITA No. 547/Kol/2020. 06. Further, the ld. AR submitted that there was no bar in issuing equity shares at a high premium during the instant assessment year and the proviso to Section 68 of the Act has been introduced by Finance Act, 2012, with effect from 01.04.2013, and was accordingly, applicable from A.Y. 20131-4 onwards. Therefore, the observation of the AO that the equity shares were issued at a very high premium is devoid of any marits. The ld. Counsel for the assessee stated that the proviso to Section 68 of the Act has not been inserted with retrospective effect nor it is the proviso so introduced that it is for the removable of doubts or it is directory. The ld. Counsel for the assessee in defense of his argument relied on the CIT Vs.Gagandeep Infrastructure Private Limited (80 taxmann.com 272 (Bom). 07. After hearing the rival contentions and perusing the material on record, we find that the assessee has furnished before the AO in the remand proceedings as well as before the Ld. CIT(A) all the evidences qua the share capital/ share premium raised during the instant financial year comprising the names , addresses ,proofs of voter IDs, Driving licenses, PAN cards, list of directors with share holders with DIN, copies of ITRs, copies of bank statements and assessment orders u/s 143(3)/143(1) of the Act etc in case of share subscribers. We find that though the directors of the assessee company and also the subscribers companies did not comply with summons u/s 131 of the Page | 12 ITA No.1301/KOL/2023 PCJ Finvest Private Limited; A.Y. 2008-09 Act. We even note that the AO has not issued notices u/s 133(6) of the Act to the share subscribers despite the assessee furnishing all the details/evidences as called by the AO in the remand proceedings. We note that the AO has not pointed any defect of any kind whatsoever in the documents furnished before the AO. Besides the AO has harped on the fact that these shares were allotted at very high premium by ignoring the facts that there was no bar on issue of shares of high premium in the AY 2012-13 because Clause (viib) to Clause 2 section 56 inserted by Finance Act, 2012 w.e.f 01.04.2013 and was applicable and effective from AY 2013-14. Similarly, the provisions in Finance Act, 2012 that the assessee company issuing share premium have to prove source of source has been inserted w.e.f 1.4.2013 is also not applicable in the case of assessee as the same is applicable from AY 2013-14 onwards. The case of the assessee finds support from the decision of the Hon’ble Bombay High Court in the case of CIT vs. Gangadeep Infrastructure Pvt. Ltd. in 80 taxmann.com 272 (Bom). Therefore, the appellate order passed by the Ld. CIT(A) upholding the assessment order which lacked any enquiry on the evidences filed by the assessee and also failure on the part of the AO to bring any substantive evidences on record to the conrary, we are unable to sustain the appellate order. In our opinion, the addition cannot be made merely on the ground that the summon issued u/s 131 to the directors of the assessee company and also to the subscriber companies were not complied with whereas on the other hand the assessee has filed all the evidences called for by the AO qua the subscribers. Under the circumstances, we are not in a position to sustain the order of Ld. CIT(A). We find support from the decision of Hon’ble Supreme Court in the case of Orissa Corporation Page | 13 ITA No.1301/KOL/2023 PCJ Finvest Private Limited; A.Y. 2008-09 Ltd. (supra) while coming to the above conclusion. The operative part is extracted below: “That in this case the respondent 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 Section 131 at the instance of the respondent, 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 creditworthy. There was no effort made to pursue the so-called alleged creditors. In those circumstances, the respondent could not do anything further. In the premises, if the Tribunal came to the conclusion that the respondent had discharged the burden that lay on it, then it could not be said that such a conclusion was unreasonable or perverse or based on no evidence. I f the conclusion was based on some evidence on which a conclusion could be arrived at, no question of law as such arose. The High Court was right in refusing to state a case.” 08. The case of the assessee is also squarely covered by the decisions of Hon’ble Calcutta High Court in the case of Crystal Networks Pvt. Ltd. vs. CIT (supra ) wherein it has held that where all the evidences were filed by the assessee proving the identity and creditworthiness of the loan transactions , the fact that summon issued were returned un- served or no body complied with them is of little significance to prove the genuineness of the transactions and identity and creditworthiness of the creditors. 09. The case of is also covered by the decision of the coordinate bench by ITO Vs M/s Cygnus Developers India Pvt. Ltd. (supra).Similar ratio has been laid down by the Hon’ble Mumbai High Court in the case of CIT Vs Orchid Industries (P) Ltd CIT Vs. Orchid Industries Ltd. 397 ITR 136 (Bom) by holding that provisions of section 68 of the Act can not be invoked for the reasons that the person has not appeared before the AO where the assessee had produced on records documents to establish genuineness of the party such as PAN ,financial and bank statements showing share application money. Similar ratio has been laid down in the DCIT Vs Rohni Builders (2002)256 ITR 360. Page | 14 ITA No.1301/KOL/2023 PCJ Finvest Private Limited; A.Y. 2008-09 010. In the instant case before us also, the assessee has furnished all the evidences proving identity and creditworthiness of the investors and genuineness of the transactions and the AO has not drawn any adverse inference in the remand proceedings. Under these facts and circumstances and considering underlying facts in the light of ratio laid down in the decisions as discussed above , we do not find any reason of interference in the appellate order which is a very reasoned and speaking order passed after taking into account all the facts and ratio laid in various decisions discussed by the ld CIT(A).The decision relied by the revenue in the case of Principal Commissioner of Income- tax (Central)-2 vs. BST Infratech Ltd.(supra) is distinguishable on fact and is not applicable to the present case. We are ,therefore , inclined to uphold the order of Ld. CIT(A) by dismissing the appeal of the revenue. 011. In the result, the appeal of the revenue is dismissed. Order pronounced in the open court on 28.03.2025. Sd/- Sd/- (SONJOY SARMA) (RAJESH KUMAR) (JUDICIAL MEMBER) (ACCOUNTANT MEMBER) Kolkata, Dated: 28.03.2025 Sudip Sarkar, Sr.PS Page | 15 ITA No.1301/KOL/2023 PCJ Finvest Private Limited; A.Y. 2008-09 Copy of the Order forwarded to : 1. The Appellant 2. The Respondent 3. CIT 4. DR, ITAT, 5. Guard file. BY ORDER, True Copy// Sr. Private Secretary/ Asst. Registrar Income Tax Appellate Tribunal, Kolkata "