AI Insights
The case involves the Income Tax Officer (ITO) challenging the decision of the Commissioner of Income-tax (Appeals) - 16, Mumbai, which had deleted the addition made under Section 68 of the Income Tax Act concerning the share premium received by M/s Geetamrut Agro Estate Pvt. Ltd. The ITO contended that the investors had no means during the year under consideration and that the sources of money claimed from Principal Mutual Funds were dubious. The CIT(A) found that the assessee had provided adequate documentation and evidence to substantiate the transactions, including income tax returns, PAN details, and bank statements showing transactions through normal banking channels. The tribunal agreed with the CIT(A)'s findings, noting that the assessee had discharged the onus under Section 68 by proving the identity, creditworthiness, and genuineness of the transactions.
Appeal Details
Counselvise Citation
[2023] 140 COUNSELVISE.COM (IT) 123640 (ITAT-MUMBAI)
Assessee PAN
Bench
Appeal Number
CRN Number
Duration Of Justice
2 year(s) 11 month(s) 23 day(s)
Appellant
Respondent
Appeal Type
Income Tax Appeal
Pronouncement Date
05-02-2023
Appeal Filed By
Department
Order Result
Dismissed
Bench Allotted
G
Next Hearing Date
15-12-2022
Assessment Year
2009-2010
Appeal Filed On
13-02-2020
Judgement Text
IN THE INCOME TAX APPELLATE TRIBUNAL MUMBAI BENCH “G” MUMBAI BEFORE SHRI OM PRAKASH KANT (ACCOUNTANT MEMBER) AND SHRI RAHUL CHAUDHARY (JUDICIAL MEMBER) ITA No. 1158/MUM/2020 Assessment Year: 2009-10 Income-tax Officer-9(3)(3), Room No. 471, 4 th floor, Aayakar Bhavan, Churchgate, Mumbai-400020. Vs. M/s Geetamrut Agro Estate Pvt. Ltd., (1) Shop No. 21, Anuradha Society, IRLA Bridge, Next to Fire Bridge, Andheri West, Mumbai-400058. (2) Shop 11, Suncity Garden, Varse, Roha, Railgad, Maharashtra-402109. PAN No. AADCG 1701 C Appellant Respondent Revenue by : Shri Sanyam Suresh Joshi, DR Assessee by : Shri Mani Jain Date of Hearing : 16/12/2022 Date of pronouncement : 06/02/2023 ORDER PER OM PRAKASH KANT, AM This appeal by the Revenue is directed against order dated 29.11.2019 passed by the Ld. Commissioner of Income-tax (Appeals)-16, Mumbai [in short ‘the Ld. CIT(A)’] for assessment year 2009-10, raising grounds as reproduced under: Whether on the facts, and in th and in law, the Ld. CIT(A) was justified in deleting the addition made U/S.68 of the Act overlooking the facts established by the AO in the assessment order that investors have no means during the year under consideration and it claim of sources of money from Principal Mutual Funds and its genuineness is doubtful?" Whether on the facts, and in the circumstances of the case and in law, the Ld. CIT(A) was justified in deleting the addition without appreciating the fact that merely of Income tax return and CIN/PAN of the investors do not prove the creditworthiness and genuineness of transaction in absence of supporting financial documents/statements during the assessment proceedings and the appellate proceedings?" 2. Briefly stated, facts of the case are the due to non regular return u/s 139(1) of the Income Act’) by the assessee, the Assessing Officer issued notice u/s 148 of the Act dated 30.03.2014 after recording reasons to believ income escaped assessment. In response, the assessee filed electronically on 03.09.2014 declaring loss of reassessment proceedings, to explain source of share premium received by the assessee company @ ₹1800/- face value of ₹10 per share future prospectus in the and the projections premium and invited share capital from two entities namely M/s Vinamra Universal Traders Pvt. Ltd. and Greenary Sez Infrastructure Pvt. Ltd. for 9 M/s Geetamrut Agro Estate Pvt. Ltd. Whether on the facts, and in the circumstances of the case and in law, the Ld. CIT(A) was justified in deleting the addition made U/S.68 of the Act overlooking the facts established by the AO in the assessment order that investors have no means during the year under consideration and it claim of sources of money from Principal Mutual Funds and its genuineness is doubtful?" Whether on the facts, and in the circumstances of the case and in law, the Ld. CIT(A) was justified in deleting the addition without appreciating the fact that merely of Income tax return and CIN/PAN of the investors do not prove the creditworthiness and genuineness of transaction in absence of supporting financial documents/statements during the assessment proceedings and the appellate proceedings?" fly stated, facts of the case are the due to non regular return u/s 139(1) of the Income-tax Act, 1961 (in short ‘the by the assessee, the Assessing Officer issued notice u/s 148 of dated 30.03.2014 after recording reasons to believ income escaped assessment. In response, the assessee filed electronically on 03.09.2014 declaring loss of ₹11,781/ reassessment proceedings, the Assessing Officer asked the assessee to explain source of share premium received by the assessee per share on allotment of 10408 10 per share. The assessee responded that in view of future prospectus in the field of contract farming, horticulture etc. and the projections made to the investors, the assessee charged premium and invited share capital from two entities namely M/s Vinamra Universal Traders Pvt. Ltd. and Greenary Sez Infrastructure Pvt. Ltd. for 9390 and 1018 shares respectively. The M/s Geetamrut Agro Estate Pvt. Ltd. ITA No. 1158/M/2020 2 e circumstances of the case and in law, the Ld. CIT(A) was justified in deleting the addition made U/S.68 of the Act overlooking the facts established by the AO in the assessment order that investors have no means during the year under consideration and its claim of sources of money from Principal Mutual Funds and its Whether on the facts, and in the circumstances of the case and in law, the Ld. CIT(A) was justified in deleting the addition without appreciating the fact that merely furnishing of Income tax return and CIN/PAN of the investors do not prove the creditworthiness and genuineness of transaction in absence of supporting financial documents/statements during the assessment proceedings and the appellate proceedings?" fly stated, facts of the case are the due to non-filing of tax Act, 1961 (in short ‘the by the assessee, the Assessing Officer issued notice u/s 148 of dated 30.03.2014 after recording reasons to believe that income escaped assessment. In response, the assessee filed return 11,781/-. During he Assessing Officer asked the assessee to explain source of share premium received by the assessee 10408 shares having The assessee responded that in view of horticulture etc. he assessee charged premium and invited share capital from two entities namely M/s Vinamra Universal Traders Pvt. Ltd. and Greenary Sez respectively. The Assessing Officer issued notice u/s 133(6) of the Act to both the parties. In response to which both the parties filed the details including financial statement and explained that share application money was sourced th Assessing Officer however, rejected the contention of the assessee in view of high share premium charged and financial statement not filed by one of the investor namely M/s Greenary Sez Infrastructure Pvt. Ltd. On further appeal, the Ld. CIT(A) after analyzing the submissions of the assessee held, that proviso to section 68 issuing company to explain the source of share capital and premium) has been introduced by the Finance Act, 2012 w.e.f. 01.04.2013 and does not have retrospective effect, decision of the Hon’ble Bombay High Court in the case of Gagandeep Infrastructure Pvt. Ltd. (ITA No. 1613 of 2014) Secondly, he observed that assessee has discharged his onus u/s 68 of the Act. The relevant finding of the Ld. CIT(A) is reproduced as under : “6.1.6 Further, from the documents and the details submitted by the appellant company during the assessment proceedings and the app all the documents has been submitted by the appellant company. The Appellant Company has provided investors Income Tax Return, acknowledgments with PAN numbers, copies of their bank account to show that th had been paid through normal banking channels, Copy of FROM No.2, Copy of FROM NO.23 AC/ 23ACA, share certificate, Board resolution copy and minutes of approving the M/s Geetamrut Agro Estate Pvt. Ltd. Assessing Officer issued notice u/s 133(6) of the Act to both the parties. In response to which both the parties filed the details including financial statement and explained that share application money was sourced through sale of principal mutual fund. The Ld. Assessing Officer however, rejected the contention of the assessee in view of high share premium charged and observation that financial statement not filed by one of the investor namely M/s Infrastructure Pvt. Ltd. On further appeal, the Ld. CIT(A) after analyzing the submissions of the assessee held, that proviso to section 68 (which creates an obligation on the issuing company to explain the source of share capital and been introduced by the Finance Act, 2012 w.e.f. s not have retrospective effect, decision of the Hon’ble Bombay High Court in the case of Gagandeep Infrastructure Pvt. Ltd. (ITA No. 1613 of 2014) ved that assessee has discharged his onus u/s 68 of the Act. The relevant finding of the Ld. CIT(A) is reproduced as Further, from the documents and the details submitted by the appellant company during the assessment proceedings and the appellant proceedings, it is observed that the almost all the documents has been submitted by the appellant company. The Appellant Company has provided investors Income Tax Return, acknowledgments with PAN numbers, copies of their bank account to show that the entire amount had been paid through normal banking channels, Copy of FROM No.2, Copy of FROM NO.23 AC/ 23ACA, share certificate, Board resolution copy and minutes of approving the M/s Geetamrut Agro Estate Pvt. Ltd. ITA No. 1158/M/2020 3 Assessing Officer issued notice u/s 133(6) of the Act to both the parties. In response to which both the parties filed the details including financial statement and explained that share application rough sale of principal mutual fund. The Ld. Assessing Officer however, rejected the contention of the assessee in observation that part of financial statement not filed by one of the investor namely M/s Infrastructure Pvt. Ltd. On further appeal, the Ld. CIT(A) after analyzing the submissions of the assessee held, firstly creates an obligation on the issuing company to explain the source of share capital and been introduced by the Finance Act, 2012 w.e.f. s not have retrospective effect, relying on the decision of the Hon’ble Bombay High Court in the case of CIT v. Gagandeep Infrastructure Pvt. Ltd. (ITA No. 1613 of 2014). ved that assessee has discharged his onus u/s 68 of the Act. The relevant finding of the Ld. CIT(A) is reproduced as Further, from the documents and the details submitted by the appellant company during the assessment proceedings observed that the almost all the documents has been submitted by the appellant company. The Appellant Company has provided investors Income Tax Return, acknowledgments with PAN numbers, e entire amount had been paid through normal banking channels, Copy of FROM No.2, Copy of FROM NO.23 AC/ 23ACA, share certificate, Board resolution copy and minutes of approving the approval of equity shares and hence when the appellant has furnished all t shareholders were existing. 6.1.7 As per the provision of sec 68 of the IT Act, primarily trio is required to discharge by the appellant company, the same is analsized hereunder: 1. IDENTITY the appellant application money has a valid CIN and PAN number. Further, both the investor companies has properly filed their income tax returns.. Further, they represent before the Ld. AO i response to the notice issued us 13316) of the IT Act. 2. CREDITWORTHINESS companies has been from the financial statement of both the established that Invest some borrowings also. Also, it is noticed that both the companies has invested small 3. GENUINENESS OF TRANSACTION: clearly seen from the transferred through the banking channel only. Further, it is notice from the assessment order that the Ld. AO has agreed with the share valuation DCF method. Further, the project prepared by the appellant company is related to the contract farming, horticulture and development of real estate and the appellant company has been in the same line of business and having expertise in the field. All the transaction was made purposefully as investor have the benefit of investing such a company who ha properly. 6.1.8 Therefore, the appellant company has discharged the initial onus under credibility and identity of the shareholders. 2.1 Further, the Ld. CIT(A) obs conducted inquiries however nothing found adverse and therefore, M/s Geetamrut Agro Estate Pvt. Ltd. approval of equity shares and hence when the appellant has furnished all the relevant details of shareholders and shareholders were existing. 6.1.7 As per the provision of sec 68 of the IT Act, primarily trio is required to discharge by the appellant company, the same is analsized hereunder: 1. IDENTITY - It is noted that investor companies from which the appellant company has been received the share application money has a valid CIN and PAN number. Further, both the investor companies has properly filed their income returns.. Further, they represent before the Ld. AO i response to the notice issued us 13316) of the IT Act. 2. CREDITWORTHINESS-: - It is noted that both the investor companies has been in the business of investment. Further, from the financial statement of both the companies, it is established that Investor Company has net owned capital and some borrowings also. Also, it is noticed that both the companies has invested small portion of their overall funds. 3. GENUINENESS OF TRANSACTION: - In this regard, it is clearly seen from the bank statement that all the shares were transferred through the banking channel only. Further, it is notice from the assessment order that the Ld. AO has agreed the share valuation DCF method. Further, the project prepared by the appellant company is related to the contract arming, horticulture and development of real estate and the appellant company has been in the same line of business and expertise in the field. All the transaction was made purposefully as investor have the benefit of investing such a company who has project and expertise to execute the 6.1.8 Therefore, the appellant company has discharged the initial onus under Section 68 of the Act, for establishing the credibility and identity of the shareholders.” Further, the Ld. CIT(A) observed that the Assessing Officer has conducted inquiries however nothing found adverse and therefore, M/s Geetamrut Agro Estate Pvt. Ltd. ITA No. 1158/M/2020 4 approval of equity shares and hence when the appellant has he relevant details of shareholders and 6.1.7 As per the provision of sec 68 of the IT Act, primarily trio is required to discharge by the appellant company, the same investor companies from which company has been received the share application money has a valid CIN and PAN number. Further, both the investor companies has properly filed their income returns.. Further, they represent before the Ld. AO in response to the notice issued us 13316) of the IT Act. It is noted that both the investor in the business of investment. Further, companies, it is or Company has net owned capital and some borrowings also. Also, it is noticed that both the portion of their overall funds. In this regard, it is he shares were transferred through the banking channel only. Further, it is notice from the assessment order that the Ld. AO has agreed the share valuation DCF method. Further, the project prepared by the appellant company is related to the contract arming, horticulture and development of real estate and the appellant company has been in the same line of business and expertise in the field. All the transaction was made purposefully as investor have the benefit of investing such a s project and expertise to execute the project 6.1.8 Therefore, the appellant company has discharged the Section 68 of the Act, for establishing the erved that the Assessing Officer has conducted inquiries however nothing found adverse and therefore, he was not justified in making the addition u/s 68 of the Act. The relevant observation of the Ld. CIT(A) are reproduced as under: “6.1.11 In the present which revealed that: i. The enquiries and documents revealed that the investor companies had filed their income tax returns regularly, which would show that the investors did have the proper identity and eligible to in premium. ii. The enquiries conducted by AO and material on record also specify that the investors has paid such heavily premium just because of getting major shareholding in the appellant company and simultaneously ap in that project for the purpose of which taking such new investment. iii. It is to be holed that which share premium is being received by the appellant company.” 3. Aggrieved with the abov is in appeal raising the grounds as reproduced above. 4. Before us, the Ld. Counsel of the assessee has filed a paperbook containing pages 1 to 136 which interalia include submissions filed before the Assessing Off 5. We have heard rival submission of the parties on the issue dispute and perused the relevant material on record. In the ground raised, the Revenue has challenged the finding of the Ld. CIT(A) mainly on the ground that source creditworthiness or genuineness has been established. From the M/s Geetamrut Agro Estate Pvt. Ltd. he was not justified in making the addition u/s 68 of the Act. The relevant observation of the Ld. CIT(A) are reproduced as under: 6.1.11 In the present case, the A.O. had conducted enquiry which revealed that: i. The enquiries and documents revealed that the investor companies had filed their income tax returns regularly, which would show that the investors did have the proper identity and eligible to invest funds for purchase of shares at a . The enquiries conducted by AO and material on record also specify that the investors has paid such heavily premium just because of getting major shareholding in the appellant company and simultaneously appellant company has invested in that project for the purpose of which taking such new . It is to be holed that the Ld. AO has also accept the rate at which share premium is being received by the appellant Aggrieved with the above finding of the Ld. CIT(A), the Revenue is in appeal raising the grounds as reproduced above. Before us, the Ld. Counsel of the assessee has filed a paperbook containing pages 1 to 136 which interalia include submissions filed before the Assessing Officer, remand report etc. We have heard rival submission of the parties on the issue dispute and perused the relevant material on record. In the ground raised, the Revenue has challenged the finding of the Ld. CIT(A) mainly on the ground that source of investment and no creditworthiness or genuineness has been established. From the M/s Geetamrut Agro Estate Pvt. Ltd. ITA No. 1158/M/2020 5 he was not justified in making the addition u/s 68 of the Act. The relevant observation of the Ld. CIT(A) are reproduced as under: case, the A.O. had conducted enquiry i. The enquiries and documents revealed that the investor companies had filed their income tax returns regularly, which would show that the investors did have the proper identity vest funds for purchase of shares at a . The enquiries conducted by AO and material on record also specify that the investors has paid such heavily premium just because of getting major shareholding in the appellant pellant company has invested in that project for the purpose of which taking such new has also accept the rate at which share premium is being received by the appellant e finding of the Ld. CIT(A), the Revenue is in appeal raising the grounds as reproduced above. Before us, the Ld. Counsel of the assessee has filed a paperbook containing pages 1 to 136 which interalia include remand report etc. We have heard rival submission of the parties on the issue-in- dispute and perused the relevant material on record. In the ground raised, the Revenue has challenged the finding of the Ld. CIT(A) of investment and no creditworthiness or genuineness has been established. From the order of the lower authorities and the submissions filed, we find that both the investor parties are having valid PAN Number and notice issued u/s 133(6) of the Act have be both the investors and therefore, identity of those two investors not in doubt. As far as source of money invested in the shares of the assessee-company is concerned both the parties have intimated that same was out of principal mut has not found anything share investors. The assessee has justified the amount of the share premium by way of filing valuation report of a Chartered Accountant, a copy which is ava 56. The valuer has made valuation following the flow method. Both the share investors have statement, the AO however observed that and loss account along with audited report was not filed in the case of the Greenary Sez Infrastructure Pvt. Ltd. same were again filed before the Ld. CIT(A). In the remand report, the Assessing Officer has a filed during the course of assessment proceedings and therefore, the basis of the Assessing Officer in the assessment order for justifying the addition loss account of investor opinion, the finding of the Ld. CIT(A) on the issue M/s Geetamrut Agro Estate Pvt. Ltd. order of the lower authorities and the submissions filed, we find that both the investor parties are having valid PAN Number and notice issued u/s 133(6) of the Act have been duly responded by both the investors and therefore, identity of those two investors in doubt. As far as source of money invested in the shares of company is concerned both the parties have intimated out of principal mutual funds. The Assessing Officer anything wrong in the said source explained by those share investors. The assessee has justified the amount of the share premium by way of filing valuation report of a Chartered Accountant, a copy which is available on paperbook page No. 54 to valuer has made valuation following the discounted od. Both the share investors have filed their , the AO however observed that balance sheet and profit and loss account along with audited report was not filed in the case of the Greenary Sez Infrastructure Pvt. Ltd. However, he find that filed before the Ld. CIT(A). In the remand report, the Assessing Officer has accepted that all the documents were duly filed during the course of assessment proceedings and therefore, the basis of the Assessing Officer in the assessment order for justifying the addition due to non-filing of balance sheet; profit and investor is not correct. In view of the above, in our opinion, the finding of the Ld. CIT(A) on the issue-in M/s Geetamrut Agro Estate Pvt. Ltd. ITA No. 1158/M/2020 6 order of the lower authorities and the submissions filed, we find that both the investor parties are having valid PAN Number and en duly responded by both the investors and therefore, identity of those two investors is in doubt. As far as source of money invested in the shares of company is concerned both the parties have intimated ual funds. The Assessing Officer wrong in the said source explained by those share investors. The assessee has justified the amount of the share premium by way of filing valuation report of a Chartered on paperbook page No. 54 to discounted cash filed their financial balance sheet and profit and loss account along with audited report was not filed in the case However, he find that filed before the Ld. CIT(A). In the remand report, ccepted that all the documents were duly filed during the course of assessment proceedings and therefore, the basis of the Assessing Officer in the assessment order for filing of balance sheet; profit and is not correct. In view of the above, in our in-dispute do not require any interference. Accordingly, we uphold the same. The grounds of appeal of the Revenue are accordingly dismissed. 6. In the result, the appeal of the Revenue is dismissed. Order pronounced 1963 on 06/02/2023. Sd/- (RAHUL CHAUDHARY JUDICIAL MEMBER Mumbai; Dated: 06/02/2023 Rahul Sharma, Sr. P.S. Copy of the Order forwarded to 1. The Appellant 2. The Respondent. 3. The CIT(A)- 4. CIT 5. DR, ITAT, Mumbai 6. Guard file. //True Copy// M/s Geetamrut Agro Estate Pvt. Ltd. require any interference. Accordingly, we uphold the same. The grounds of appeal of the Revenue are accordingly dismissed. result, the appeal of the Revenue is dismissed. Order pronounced under Rule 34(4) of the ITAT Rules, /2023. Sd/ RAHUL CHAUDHARY) (OM PRAKASH KANT JUDICIAL MEMBER ACCOUNTANT MEMBER Copy of the Order forwarded to : BY ORDER, (Sr. Private Secretary) ITAT, Mumbai M/s Geetamrut Agro Estate Pvt. Ltd. ITA No. 1158/M/2020 7 require any interference. Accordingly, we uphold the same. The grounds of appeal of the Revenue are accordingly dismissed. result, the appeal of the Revenue is dismissed. (4) of the ITAT Rules, Sd/- OM PRAKASH KANT) ACCOUNTANT MEMBER BY ORDER, (Sr. Private Secretary) ITAT, Mumbai
Other Referred Cases
Gagandeep Infrastructure Pvt. Ltd. (ITA No. 1613 of 2014)
Laws Referred To
Income-tax Act, 1961
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