NIYOJIT FINANCIAL CONSULTANCY P.LTD, MUMBAI V. ITO 14(2)(3), MUMBAI

ITA 1543/MUM/2017

• Counselvise Citation: [2019] 118 COUNSELVISE.COM (IT) 8500 (ITAT-MUMBAI)
• Duration Of Justice: 1 year(s) 9 month(s) 27 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 03-01-2019
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: Not Allotted
• Assessment Year: 2009-2010
• Appeal Filed On: 06-03-2017
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: RAJESH KUMAR MISHRA LD
• Assessee Lawyers: SATISH R MODYLD
• Keywords: Unexplained cash credit; Depreciation; Retrospective amendment; Tangible material; Reassessment proceedings
• Section: 147; 68; 148; 143(3); 133(6); 143(1)

Judgement Text

ITA NO.1543/MUM/2017 NIYOJIT FINANCIAL CONSULTANCY PRIVATE LIMITED ASSESSMENT YEAR :2009-10 1 IN THE INCOME TAX APPELLATE TRIBUNAL B BENCH, MUMBAI . . , , BEFORE HONBLE SHRI C.N. PRASAD, JM AND HONBLE SHRI MANOJ KUMAR AGGARWAL, AM ./ I.T.A. NO.1543/MUM/2017 ( / ASSESSMENT YEAR: 2009-10) NIYOJIT FINANCIAL CONSULTANCY P VT. LTD. (NOW KNOWN AS RSK DIAMONDS IMPEX P. LTD.) A-E, 2020, TOWER A BHARAT DIAMOND BOURSE BANDRA KURLA COMPLEX BANDRA (E), MUMBAI-400 051. / VS. INCOME TAX OFFICER - 1 4( 2 ) (3) ROOM NO.431, 4 TH FLOOR AAYKAR BHAVAN, MK ROAD CHURCHGATE MUMBAI-400 020. ./ ./PAN/GIR NO. AACCN-7613-H ( ! /APPELLANT ) : ( ' ! / RESPONDENT ) AS SESSEE BY : SATISH R. MODY- LD. AR REVENUE BY : RAJESH KUMAR MISHRA - LD.DR / DATE OF HEARING : 12/12/2018 / DATE OF PRONOUNCEMENT : 03/01/2019 / O R D E R PER MANOJ KUMAR AGGARWAL (ACCOUNTANT MEMBER) 1. AFORESAID APPEAL BY ASSESSEE FOR ASSESSMENT YEAR [AY] 2009-10 CONTEST THE ORDER OF LD. COMMISSIONER OF INCOME-TAX (APPEALS)-22, MUMBAI, [CIT(A)], APPEAL NO. CIT(A)-22/IT/93/2015-16 DATED 10/01/2017 ON FOLLOWING EFFECTIVE GROUNDS OF APPEAL : - ITA NO.1543/MUM/2017 NIYOJIT FINANCIAL CONSULTANCY PRIVATE LIMITED ASSESSMENT YEAR :2009-10 2 1. TO DELETE ADDITION OF RS.3,59,70,275/- U/S.68 O F THE ACT ON ACCOUNT OF SECURITIES PREMIUM RECEIVED FROM INVESTORS. 2. TO DECLARE THE ASSESSMENT ORDER AS NULL AND VO ID AS RE-OPENING OF THE ASSESSMENT U/S. 147 OF THE INCOME TAX ACT IS BAD IN LAW. THE ASSESSEE BEING RESIDENT CORPORATE ENTITY STATED TO BE ENGAGED IN RENDERING SERVICES IN THE AREA OF FINANCIAL & MANAGEMENT CONSULTANCY WAS SUBJECTED TO REASSESSMENT PROCEEDINGS VIDE ORDE R U/S 143(3) READ WITH SECTION 147 ON 26/03/2015 WHEREIN THE INCOME OF THE ASSESSEE W AS DETERMINED AT RS.349.72 LACS AFTER CERTAIN ADDITION S AS AGAINST RETURNED LOSS OF RS.15.33 LACS FILED BY THE ASSESSEE ON 26/0 9/2009 WHICH WAS PROCESSED U/S 143(1). AS EVIDENT FROM GROUNDS OF AP PEAL, THE SOLE SUBJECT MATTER OF APPEAL BEFORE US IS CERTAIN ADDIT IONS U/S 68 FOR RS.359.70 LACS AS MADE BY LD. AO AND UPHELD BY FIRS T APPELLATE AUTHORITY. THE ASSESSEE HAS ALSO CONTESTED THE VALI DITY OF THE REASSESSMENT PROCEEDINGS ON LEGAL GROUNDS. 2.1 PURSUANT TO RECEIPT OF CERTAIN SPECIFIC INFORMA TION REGARDING ISSUE OF SHARES AT A HIGH PREMIUM, THE ASSESSEE WAS SUBJECTE D TO REASSESSMENT PROCEEDINGS VIDE NOTICE U/S 148 DATED 18/03/2014. I N RESPONSE, THE ASSESSEE OFFERED THE ORIGINAL RETURN OF INCOME AND SOUGHT REASONS FOR REOPENING, WHICH WERE DULY SUPPLIED TO THE ASSESSEE . DURING ASSESSMENT PROCEEDINGS, IT TRANSPIRED THAT THE ASSE SSEE ISSUED 3025 SHARES AT A PREMIUM OF RS.11,891/- PER SHARE [WRONGLY REFERRED TO AS RS.11,894/- IN QUANTUM ORDER] AMOUNTING TO RS.359.70 LACS TO SIX PERSONS, THE DETAILS OF WHICH HAVE ALREADY BEEN EXT RACTED AT PARA-3 OF THE QUANTUM ASSESSMENT ORDER. ACCORDINGLY, THE ASSE SSEE WAS ASKED TO JUSTIFY THE PREMIUM ON THE SHARES INCLUDING NATURE AND SOURCE OF SHARE APPLICATION MONEY. ITA NO.1543/MUM/2017 NIYOJIT FINANCIAL CONSULTANCY PRIVATE LIMITED ASSESSMENT YEAR :2009-10 3 2.2 IN JUSTIFICATION OF SHARE PREMIUM, IT WAS SUBMI TTED THAT THE ASSESSEE WAS INCORPORATED DURING 2008 AND THE SHARE S WERE ISSUED TO HIGH NET-WORTH NON-RESIDENT ANGEL INVESTORS WHO MADE THE INVESTMENT ON THE BASIS OF BUSINESS PROJECTIONS. IT WAS FURTHER S UBMITTED THAT THE BUSINESS MODEL OF THE ASSESSEE WAS BASED ON EXISTIN G SUCCESSFUL BUSINESS ALREADY IN EXISTENCE RUN BY ONE OF THE PRO MOTERS WITH A REALISTIC PLAN WHICH PROMISED GOOD RETURN ON INVESTMENT. THE VALUATION WAS JUSTIFIED ON THE BASIS OF PROJECTED EARNINGS OF THE ASSESSEE. 2.3 IN SUPPORT OF SHARE ALLOTMENT, THE ASSESSEE, VI DE REPLY DATED 02/03/2015 SUBMITTED RETURN OF ALLOTMENT OF SHARES IN FORM 2 FILED WITH REGISTRAR OF COMPANIES , BOARD RESOLUTION FOR ALLOTMENT OF SHARES, LIST OF INVESTORS FILED WITH ROC, ANNUAL RETURN IN FORM NO. 20B FILED WITH ROC WITH DETAILS AND CHALLANS ETC. FURTHER DOCUMENTARY EVIDENCES IN THE SHAPE OF DETAILS / MODE OF RECEIPT OF SHARE APPLICA TION MONEY, A NOTE ON JUSTIFICATION OF HIGH PREMIUM, VALUATION OF SHARES, SOURCE AND NATURE OF THE RECEIPTS, ACCOUNT CONFIRMATIONS, TAX RELATED DO CUMENTS OF INVESTORS, DETAILS / DOCUMENTS RELATING TO CREDITWORTHINESS OF INVESTORS AND CORRESPONDENCE WITH INVESTORS WERE ALSO FILED DURIN G THE ASSESSMENT PROCEEDINGS TO ESTABLISH THE GENUINENESS OF THE TRA NSACTIONS. 2.4 HOWEVER, LD. AO SUSPECTED THE HIGH PREMIUM AND VALUATION OF SHARES AND WAS NOT SATISFIED WITH THE WORKINGS SUBM ITTED BY THE ASSESSEE. FINALLY, LD. AO OPINED THAT THE ASSESSEE FAILED TO SATISFY THE THREE PRIMARY INGREDIENTS VIZ. IDENTITY, CREDITWORT HINESS AND GENUINENESS OF THE TRANSACTIONS AS ENVISAGED BY SECTION 68 AND THEREFORE, TREATING AN AMOUNT OF RS.359.70 LACS AS UNEXPLAINED CASH CREDIT , ADDED THE SAME TO THE INCOME OF THE ASSESSEE. ITA NO.1543/MUM/2017 NIYOJIT FINANCIAL CONSULTANCY PRIVATE LIMITED ASSESSMENT YEAR :2009-10 4 3. AGGRIEVED, THE ASSESSEE AGITATED THE STAND OF LD . AO WITHOUT ANY SUCCESS BEFORE LD. CIT(A) VIDE IMPUGNED ORDER DATED 10/01/2017. DURING APPELLATE PROCEEDINGS, THE ASSESSEE CONTESTE D THE ADDITION ON MULTIPLE GROUNDS, THE RELEVANT EXTRACT OF WHICH HAS ALREADY BEEN REPRODUCED IN PARA 4.4 OF THE IMPUGNED ORDER. UPON PERUSAL OF THE SAME, IT COULD BE GATHERED THAT THE ASSESSEE JUSTIF IED THE VALUATION OF SHARES AND SUBMITTED THAT THE THREE INGREDIENTS OF SECTION 68 WERE DULY FULFILLED BY THE ASSESSEE AND THEREFORE, THE ADDITI ONS WERE NOT JUSTIFIED. RELIANCE WAS PLACED ON THE JUDGMENT OF HONBLE APEX COURT RENDERED IN CIT VS. LOVELY EXPORTS LTD. [299 ITR 268]. IT WAS ALSO CONTENDED THAT THE ASSESSEE CAME INTO EXISTENCE ONLY DURING THE YEAR 2 008 & ITS BUSINESS OPERATIONS COMMENCED AT A LATER STAGE AND THEREFORE , THE IMPUGNED ADDITION, BY NO STRETCH, COULD BE HELD TO BE UNACCO UNTED MONEY OF THE ASSESSEE. HOWEVER, NOT CONVINCED, LD. AO CONFIRMED THE STAND OF LD. AO BY MAKING FOLLOWING OBSERVATIONS: - 4.5 I HAVE CONSIDERED THE FACTS OF THE CASE AND THE APPELLANTS SUBMISSIONS. SECTION 68 OF THE INCOME TAX ACT, 1961 READS AS UND ER: WHERE ANY SUM IS FOUND CREDITED IN THE BOOKS OF AN ASSESSEE MAINTAINED FOR ANY PREVIOUS YEAR, AND ASSESSEE OFFERS NO EXPLANATI ON 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. IT IS CLEAR FROM A PLAIN READING OF THE SECTION AS ABOVE THAT THE NATURE AND SOURCE OF ANY SUM FOUND CREDITED IN THE BOOKS OF ANY ASSESSEE HAS TO BE EXPLAINED TO THE SATISFACTION OF THE ASSESSING OFFICER. THE APPELLAN T HAS CONTENDED THAT IN RESPECT OF THE SHARE APPLICATION MONEY RECEIVED FROM INVESTORS , THE APPELLANT COMPANY HAS ONLY TO PROVE THE EXISTENCE OF THE PERSONS IN WHOSE NAME SHARED APPLICATION WAS RECEIVED. THAT NO FURTHER BURDEN WAS CASTED UPON TH E ASSESSEE TO PROVE WHETHER THAT PERSON HIMSELF MADE INVESTED THE SAID MONEY OR SOME OTHER PERSON MADE INVESTMENT IN HIS NAME. THE APPELLANT HAS RELIED ON VARIOUS JUDICIAL DECISIONS IN SUPPORT OF ITS CONTENTION THAT NO ADDITION U/S 68 O F THE ACT CAN BE MADE IN ITS CASE. THE APPELLANTS CONTENTION IS NEITHER TENABLE NOR A CCEPTABLE. IT IS SETTLED PRINCIPLE OF LAW THAT THE ONUS IS ON THE ASSESSEE TO SATISFACTOR ILY ESTABLISHED IDENTITY, CREDITWORTHINESS AND GENUINENESS OF THE TRANSACTION S IN RESPECT OF ANY SUM FOUND CREDITED IN ITS BOOKS. ALL OF THESE THREE CONDITION S HAVE TO BE FULFILLED IN RESPECT OF ITA NO.1543/MUM/2017 NIYOJIT FINANCIAL CONSULTANCY PRIVATE LIMITED ASSESSMENT YEAR :2009-10 5 THE SUM FOUND CREDITED IN ITS BOOKS. IT IS SEEN THA T NO PRIMARY EVIDENCES SUCH AS CONFIRMATION FROM THE INVESTORS, THEIR BANK ACCOUNT STATEMENTS, BALANCE SHEETS, INCOME TAX RETURNS ETC. FURNISHED DURING ASSESSMENT PROCEEDINGS. THESE HAVE NOT BEEN PRODUCED DURING APPELLATE PROCEEDINGS EITHER. I AM, THEREFORE, OF THE CONSIDERED OPINION THAT THE APPELLANT HAS FAILED TO SATISFACTORILY DISCHARGE THE OWNERS CAST ON IT AS PER THE PROVISIONS OF SECTION 68 OF THE ACT. THE ADDITION RS.3,59,70,275/0 U/S 68 OF THE ACT MADE BY THE ASSE SSING OFFICER IS, THEREFORE, SUSTAINED. THE APPELLANTS GROUNDS OF APPEAL IS DIS MISSED. AGGRIEVED, THE ASSESSEE IS IN FURTHER APPEAL BEFORE US. 4. THE LD. AUTHORIZED REPRESENTATIVE FOR ASSESSEE [ AR], SHRI SATISH R. MODY, ON THE STRENGTH OF DOCUMENTS PLACED IN THE PAPER-BOOK AGITATED THE VALIDITY OF REASSESSMENT PROCEEDINGS A ND SUBMITTED THAT PROCESS OF ACQUIRING VALID REASSESSMENT JURISDICTIO N STOOD VITIATED BY LAW AS WELL AS SETTLED JUDICIAL PRONOUNCEMENTS. ON MERI TS, OUR ATTENTION HAS BEEN DRAWN TO THE DOCUMENTS FILED BY THE ASSESSEE T O DEMONSTRATE FULFILMENT OF PRIMARY INGREDIENTS OF SECTION 68. P ER CONTRA, LD. DEPARTMENTAL REPRESENTATIVE [DR], SHRI RAJESH KUMAR MISHRA SUBMITTED THAT PROCEEDINGS WERE VALIDLY INITIATED AND THE ADD ITIONS WERE JUSTIFIED. 5.1 WE HAVE CAREFULLY HEARD THE RIVAL SUBMISSIONS, PERUSED RELEVANT MATERIAL ON RECORD INCLUDING DOCUMENTS PLACED IN TH E PAPER-BOOK AND JUDICIAL PRONOUNCEMENTS CITED BEFORE US. AT THE OUT SET, SINCE LEGAL ISSUE GOES TO THE ROOT OF THE MATTER, WE DEAL WITH THE PE RTINENT ISSUE OF LEGALITY OF REASSESSMENT PROCEEDINGS AS INITIATED BY LD. AO. THE ROOT OF REASSESSMENT PROCEEDING LIES IN THE REASONS RECORDE D FOR REOPENING THE ASSESSMENT, THE RELEVANT PORTION OF WHICH COULD BE EXTRACTED IN THE FOLLOWING MANNER: - M/S NIYOJIT FINANCIAL CONSULTANCY PVT. LTD. AY 2009-10 REASONS FOR REOPENING THE CASE ITA NO.1543/MUM/2017 NIYOJIT FINANCIAL CONSULTANCY PRIVATE LIMITED ASSESSMENT YEAR :2009-10 6 IN THIS CASE THE ASSESSEE COMPANY HAS FILED RETURN OF INCOME FOR AY 2009-10 AND THE SAME WAS PROCESSED UNDER SECTION 143(1) OF THE IT A CT AND NO SCRUTINY ASSESSMENT WAS COMPLETED FOR THE SAID AY 2009-10 IN THE CASE OF AB OVE NAMED ASSESSEE. IN THE CASE OF THE ABOVE NAMED ASSESSEE THERE WAS I NFORMATION AND DETAILS AVAILABLE WITH REGARD TO ISSUE OF SHARES AT HUGE PREMIUM PER SHARE TO THE FOLLOWING PARTIES AS PER DETAILS GIVEN BELOW: THE SAID SHARES WERE ISSUED TO THE FOLLOWING PERSON S AS PER DETAILS BELOW: DURING THE COURSE OF ASSESSMENT PROCEEDINGS FOR AY 2010-11, NOTICES UNDER SECTION 133(6) WAS ISSUED TO THE ABOVE PARTIES. HOWEVER, TH E SAME WERE RETURNED UNSERVED. THEREFORE, THE SAID PARTIES ARE NON-EXISTING AT THE GIVEN ADDRESS. THEREFORE, THE CLAIM OF THE ASSESSEE TO HAVE ISSUED SHARES AT HUGE PREMIUM AS STATED ABOVE TO THE ABOVE PARTIES, REQUIRES TO BE EXAMINED WITH REGARD TO THEIR GENUINENESS, IDENTITY AND CREDIT WORTHINESS. THEREFORE, I HAVE R EASON TO BELIEVE THAT INCOME CHARGEABLE TO TAX HAS ESCAPED ASSESSMENT IN THIS CASE AND, THE REFORE, CASE OF THE ASSESSEE IS REOPENED WITHIN THE MEANING OF SECTION147 READ WITH EXPLANATION 2 CLAUSE (B) OF THE IT ACT AS THE ASSESSEE HAS NOT FILED THE RETURN OF INCOME AND NO SCRUTINY ASSESSMENT HAS BEEN COMPLETED FOR AY 2007-08 IN THE CASE OF THE ABOVE N AMED ASSESSEE. IN VIEW OF THE ABOVE, YOUR KIND SANCTION FOR ISSUE OF NOTICE UNDER SECTION 148 OF THE IT ACT AS REQUIRED BY THE PROVISIONS OF SECTION 151(2) OF THE IT ACT, MAY BE GRANTED IN THE ABOVE CASE FOR AY 2007-08. UPON CAREFUL PERUSAL OF THE SAME, WE FIND THAT REAS SESSMENT PROCEEDINGS GOT TRIGGERED IN VIEW OF THE FACT THAT DURING ASSESSMENT PROCEEDINGS FOR 2010-11, NOTICES ISSUED U/S 133(6) TO CERTAIN PARTIES WERE RETURNED BACK UNSERVED AND THEREFORE, THE SAID PARTIES WERE NON- EXISTENT AT THE GIVEN ADDRESS. IN VIEW OF THE SAME, THE CLAIM OF THE ASSESSEE FOR WITH RESPECT TO ISSUE OF SHARES AT HUG E PREMIUM WAS REQUIRED TO BE EXAMINED WITH REGARD TO GENUINENESS, IDENTITY AND SR. NO. SHARE TYPE ISSUE ON CASH DT. OF ISSUE - ISSUED IN CASH NO. OF SHARES ISSUED ON PREMIUM ON CASH NOMINAL VALUE PER SHARE- ISSUED ON CASH SHARE PREMIUM PER SHARE TOTAL PREMIUM AMOUNT ON CASH ISSUE 1 EQUITY 10.04.2008 3025 10 11891 3,59,70,275 SL NO. NAME OF INVESTOR NO. OF SHARES PREMIUM PER SHA RE AMOUNT OF SHARE PREMIUM 1. ANANTH DORASWAMY 210 11894 2497900 2. KIRAN DATAR 210 11894 2497900 3. NAGANAND DORASWAMY 210 11894 2497900 4. PRAKASH GRAMA 210 11894 2497900 5. PRAMOD GRAMA 210 11894 2497900 6. SUBRA IYER 1975 11894 23480775 TOTAL 3,59,70,275 ITA NO.1543/MUM/2017 NIYOJIT FINANCIAL CONSULTANCY PRIVATE LIMITED ASSESSMENT YEAR :2009-10 7 CREDITWORTHINESS. THE REASONS FURTHER STATE THAT TH E CASE OF THE ASSESSEE WAS BEING REOPENED WITHIN THE MEANING OF SECTION 14 7 READ WITH EXPLANATION 2, CLAUSE (B) AS THE ASSESSEE HAS NOT F ILED THE RETURN OF INCOME AND NO SCRUTINY ASSESSMENT HAS BEEN COMPLETE D FOR AY 2007-08 WHICH IS FACTUALLY INCORRECT SINCE THE RETURN OF IN COME WAS ALREADY FILED BY THE ASSESSEE ON 26/09/2009 AND THE IMPUGNED AY W AS 2009-10 AND NOT 2007-08 AS WRONGLY NOTED BY LD. AO. ASSUMING TH E WRONG MENTIONING OF AY AND FACT OF RETURN OF INCOME TO BE MERELY A TECHNICAL LAPSE AS CANVASSED BY LD. CIT-DR, THE FACT REMAINS THAT THE ONLY MATERIAL AVAILABLE WITH THE REVENUE TO INVOKE REASS ESSMENT PROCEEDINGS IS THAT FACT THAT NOTICES U/S 133(6) ISSUED TO CERT AIN PARTIES DURING ASSESSMENT PROCEEDINGS FOR AY 2010-11 REMAINED UNSE RVED AND THEREFORE, THE CLAIM OF THE ASSESSEE FOR AY 2009-10 WITH RESPECT TO ISSUE OF SHARES AT HUGE PREMIUM WAS REQUIRED TO BE EXAMINED WITH REGARD TO GENUINENESS, IDENTITY AND CREDITWORTHINES S. HOWEVER, IT IS DIFFICULT TO ACCEPT THE INFERENCE THAT MERE NON-SER VICE OF NOTICE U/S 133(6) IN SUBSEQUENT YEARS IN THE CASE OF SHARE ALLOTTEES WOULD AUTOMATICALLY LEAD TO AN INFERENCE THAT ASSESSEES INCOME FOR AY 2009-10 HAD ESCAPED ASSESSMENT PARTICULARLY WHEN THERE WAS NO O THER TANGIBLE MATERIAL IN THE POSSESSION OF REVENUE SO AS TO DRAW SUCH AN INFERENCE. 5.2 THE LD. AR HAS ALSO CONTENDED THAT THE APPROVAL BY SANCTIONING AUTHORITY WAS GIVEN IN A MECHANICAL MANNER WITHOUT DUE APPLICATION OF MIND AND THEREFORE, THE JURISDICTION ACQUIRED BY LD . AO WAS BAD IN LAW. THE FORM FOR RECORDING THE REASONS FOR INITIATING P ROCEEDINGS U/S 148 & FOR OBTAINING THE APPROVAL OF THE ADDL. COMMISSIONE R OF INCOME TAX ITA NO.1543/MUM/2017 NIYOJIT FINANCIAL CONSULTANCY PRIVATE LIMITED ASSESSMENT YEAR :2009-10 8 2(2), MUMBAI, AS PLACED ON RECORD, COULD BE EXTRACT ED IN THE FOLLOWING MANNER: - FORM FOR RECORDING THE REASONS FOR INITIATING PROCE EDINGS UNDER SECTION 148 & FOR OBTAINING, THE APPROVAL OF THE ADDL. COMMISSIONER OF INCOME TAX -2(2), MUMBAI 1 NAME AND ADDRESS OF THE ASSESSEE M/S NIYOJIT FIN ANCIAL CONSULTANCY PVT. LTD. 2 PERMANENT ACCOUNT NO. : AACCN7613H 3 STATUS : COMPANY 4. DISTRICT/ CIRCLE/ RANGE : I.T.O. 2(2)(4), MUMBAI 5. ASSESSMENT YEAR IN RESPECT OF WHICH IT IS PROPOSE D TO ISSUE NOTICE UNDER SECTION 148 : 2009-10 6. THE QUANTUM OF INCOME WHICH HAS ESCAPED ASSESSME NT : 7. WHETHER THE PROVISIONS OF SEC. 147(A) OR 147(B) ARE APPLICABLE OR BOTH THE SECTIONS ARE APPLICABLE 147(B) OF THE IT ACT 8. WHETHER THE ASSESSMENT IS PROPOSED TO BE MADE FO R FIRST TIME YES (A) WHETHER ANY VOLUNTARY RETURN HAD ALREADY BEEN FILED AND YES (B) IF SO, THE DATE OF FILING THE SAID RETURN 26. 09.2009 9. IF THE ANSWER TO ITEM 8 IS IN THE NEGATIVE PLEAS E STATE (A) THE INCOME ORIGINALLY ASSESSED NIL (B) WHETHER IT IS A CASE OF UNDER-ASSESSMENT, ASSESSMENT AT TOO LOW RATE, ASSESSMENT WHICH HAS BE EN MADE THE SUBJECT OF EXCESSIVE RELIEF OR ALLOWING OF RELE VANT LOSS OR DEPRECIATION 10 WHETHER THE PROVISIONS OF SEC.150(1) ARE APPLICAB LE IF THE REPLY IS IN THE AFFIRMATIVE, THE RELEVANT FACTS MAY BE STATED AGAINST ITEM NO.11 AND IT MAY ALSO BE BROUGHT OUT T HAT THE PROVISIONS OF SEC. 150(2) WOULD NOT STAND IN THE WAY OF INITIATING PROCEEDINGS UNDER SECTION 147 YES 11. REASON FOR THE BELIEF THAT INCOME HAS ESCAPED A SSESSMENT AS PER ANNOUNCER SD/- (PA HOTKAR) INCOME TAX OFFICER 2(2)(4) MUMBAI 12 WHETHER THE ADDL. COMMISSIONER IS SATISFIED ON TH E REASON RECORDED BY THE ASSESSING OFFICER THAT IT IS A FIT C ASE OF NOTICE UNDER SECTION 148 YES SD/- (MOHIT JAIN) ADDL. COMMISSIONER OF INCOME-TAX RANGE 2(2), MUMBAI DATED . 07.03.2014 A CAREFUL PERUSAL OF THE SAME REVEAL THAT THE SANCT IONING AUTHORITY HAS GRANTED THE APPROVAL IN A MECHANICAL MANNER WITHOUT DUE APPLICATION OF MIND AND SIMPLY STATED YES IN COLUMN NO. 12 OF THE SANCTION FORM. AS PER SECTION 151(2), THE SANCTIONING AUTHORITY WAS R EQUIRED TO SATISFY HIMSELF THAT IT WAS A FIT CASE FOR REOPENING THE AS SESSMENT. THE SANCTION, AS PER SETTLED LEGAL POSITION, WAS TO BE AN OBJECTI VE SATISFACTION AND THE SAME MUST REFLECT DUE APPLICATION OF MIND BY THE SA NCTIONING AUTHORITY. ITA NO.1543/MUM/2017 NIYOJIT FINANCIAL CONSULTANCY PRIVATE LIMITED ASSESSMENT YEAR :2009-10 9 THIS BECOMES ALL THE MORE IMPORTANT WHEN THE ONLY M ATERIAL AVAILABLE IN THE HANDS OF THE REVENUE TO INVOKE THE REASSESSMENT PROCEEDINGS WAS THE FACT THAT NOTICES ISSUED U/S 133(6) DURING AY 2 010-11 ON CERTAIN SHARE ALLOTTEES REMAINED UNSERVED AND THEREFORE, ASSESSEES CLAIM A S TO SHARE ALLOTMENT IN AY 2009-10 WAS REQUIRED TO BE EXAMINED. THIS BEING THE CASE, WE FIND CERTAIN FORCE, ALTHOUGH NOT CONCLUSIVE, IN THE LEGAL ARGUMENTS RAISED BY LD. AR BEFORE US. 5.3 SO FAR AS THE MERITS OF THE CASE IS CONCERNED, WE FIND THAT THE IMPUGNED ADDITIONS HAVE BEEN MADE AS UNEXPLAINED CA SH CREDIT U/S 68 WHICH CASTED ON ONUS UPON THE ASSESSEE TO DEMONSTRA TE FULFILMENT OF THREE PRIMARY CONDITIONS VIZ. THE IDENTITY OF THE I NVESTOR, CREDITWORTHINESS OF THE INVESTORS AND LASTLY THE GENUINENESS OF THE TRANSACTIONS. UPON PERUSAL OF ORDERS OF BOTH THE LOWER AUTHORITIES, IT IS NOTED THAT IN SUPPORT OF THE TRANSACTIONS THE ASSESSEE FILED VOLUMINOUS D OCUMENTARY EVIDENCES IN THE SHAPE OF RETURN OF ALLOTMENT OF SHARES IN FORM 2 FILED WITH REGISTRAR OF COMPANIES , BOARD RESOLUTION AUTHORIZING ALLOTMENT OF SHARES, LIST OF INVESTORS FILED WITH ROC, ANNUAL RE TURN IN FORM NO. 20B FILED WITH ROC . ALL THESE DOCUMENTS WERE REQUIRED TO BE FILED BY THE ASSESSEE UNDER LAW WHICH ASSESSEE HAD FULFILLED. TO ESTABLISH THE FULFILMENT OF THREE PRIMARY INGREDIENTS, THE ASSESS EE HAD FILED ACCOUNT CONFIRMATIONS, TAX RELATED DOCUMENTS OF THE INVESTO RS, DOCUMENTS SHOWING RECEIPT OF MONEY THROUGH BANKING CHANNELS, DETAILS / DOCUMENTS RELATING TO CREDITWORTHINESS OF INVESTORS AND CORRE SPONDENCES MADE WITH INVESTORS ETC. UNDISPUTEDLY, THE TRANSACTIONS WERE THOUGH BANKING CHANNELS. THE AFORESAID DOCUMENTS ARE NOT UNDER DIS PUTE. THESE DOCUMENTS, IN OUR OPINION, SATISFIED THE THREE PRIM ARY INGREDIENTS AS ITA NO.1543/MUM/2017 NIYOJIT FINANCIAL CONSULTANCY PRIVATE LIMITED ASSESSMENT YEAR :2009-10 10 ENVISAGED BY SECTION 68 VIZ. ESTABLISHMENT OF IDENT ITY OF THE INVESTOR, CREDITWORTHINESS OF THE INVESTOR AND GENUINENESS OF THE TRANSACTIONS. 5.4 THE MAIN PREMISE ON WHICH THE ADDITIONS ARE MAD E BY THE REVENUE IS THE FACT THAT THE SHARES WERE ISSUED AT HIGH PRE MIUM SINCE THE FINANCIALS OF THE COMPANY DID NOT JUSTIFY ISSUE OF SHARES AT HIGH PREMIUM. HOWEVER, WE FIND THAT THE NOTHING IN LAW PROHIBITS ISSUE OF SHARES AT HIGH PREMIUM AND THE ASSESSEE HAD DULY COMPLIED WITH STA TUTORY REQUIREMENTS AS TO SHARES ALLOTMENT. IMPORTANTLY, T HE PROVISIONS OF SECTION 56(2)(VIIB) WERE NOT APPLICABLE TO THE ASSE SSEE SINCE THESE PROVISIONS ARE INSERTED BY FINANCE ACT, 2012 AND ARE APPLICABLE WITH EFFECT FROM 01/04/2013 ONLY. THE REVENUE, IN OUR OP INION, BY QUESTIONING THE WISDOM OF THE INVESTOR, COULD NOT MAKE ADDITION IN THE HANDS OF THE ASSESSEE AS UNEXPLAINED CASH CREDIT U/S 68 UNLESS I T WAS ESTABLISHED THAT THE ASSESSEES UNACCOUNTED MONEY WAS ROUTED IN THE BOOKS THROUGH THE MECHANISM OF FICTITIOUS SHARE ALLOTMENT . NOTHING ON RECORD DEMONSTRATE SUCH EXCHANGE OF CASH BETWEEN THE INVES TOR AND THE ASSESSEE. ANOTHER IMPORTANT FACT TO BE NOTED IS THA T THE ASSESSEE WAS INCORPORATED ONLY DURING THE YEAR 2008 AND IT WAS I N THE PROCESS OF SETTING UP ITS BUSINESS OPERATIONS. UNDER THIS SCEN ARIO, IS DIFFICULT TO INFER THAT THE ASSESSEE HAD SUCH HUGE UNACCOUNTED MONEY I N ITS POSSESSION WHICH WAS ROUTED IN THE ACCOUNTS THROUGH THE MECHAN ISM OF SHARE ALLOTMENT. 5.5 LAST BUT NOT THE LEAST, SO FAR AS THE NATURE OF PROVISO TO SECTION 68 AS INTRODUCED BY FINANCE ACT, 2012 WITH EFFECT FROM 01/04/2013 IS CONCERNED, THE SAME HAS APTLY BEEN SETTLED BY JURIS DICTIONAL BOMBAY ITA NO.1543/MUM/2017 NIYOJIT FINANCIAL CONSULTANCY PRIVATE LIMITED ASSESSMENT YEAR :2009-10 11 HIGH COURT IN CIT VS. GAGANDEEP INFRASTRUCTURE PRIVATE LIMITED [8 0 TAXMANN.COM 272] WHEREIN IT HAS BEEN HELD AS UNDER: - ( E ) WE FIND THAT THE PROVISO TO SECTION 68 OF THE ACT HAS BEEN INTR ODUCED BY THE FINANCE ACT 2012 WITH EFFECT FROM 1S T APRIL, 2013. THUS IT WOULD BE EFFECTIVE ONLY FROM THE ASSESSMENT YEAR 2013- 14 ONWARDS AND NOT FOR THE SUBJECT ASSESSMENT YEAR. IN FACT, BEFORE THE TRIBUNAL, IT W AS NOT EVEN THE CASE OF THE REVENUE THAT SECTION 68 OF THE ACT AS IN FORCE DURI NG THE SUBJECT YEARS HAS TO BE READ/UNDERSTOOD AS THOUGH THE PROVISO ADDED SUBSEQUENTLY EFFECTIVE ONLY FROM 1ST APRIL, 2013 WAS ITS NORMAL MEANING. THE PA RLIAMENT DID NOT INTRODUCE TO PROVISO TO SECTION 68 OF THE ACT WIT H RETROSPECTIVE EFFECT NOR DOES THE PROVISO SO INTRODUCED STATES THAT IT WAS INTRODUCED 'FOR REMOVAL OF DOUBTS' OR THAT IT IS 'DECLARATORY'. THEREFORE IT IS NOT OPEN TO GIVE IT RETROSPE CTIVE EFFECT, BY PROCEEDING ON THE BASIS THAT THE ADDITION OF THE PR OVI SO TO SECTION 68 OF THE ACT IS IMMATERIAL AND DOES NOT CHANGE THE INTERPRET ATION OF SECTION 68 OF THE ACT BOTH BEFORE AND AFTER THE ADDING OF THE PROVISO . IN ANY VIEW OF THE MATTER THE THREE ESSENTIAL TESTS WHILE CONFIRMING THE PRE- PROVISO SECTION 68 OF TH E ACT LAID DOWN BY THE COURTS NAMELY THE GENUINENE SS OF THE TRANSACTION, IDENTITY AND THE CA PACITY OF THE INVESTOR HAVE ALL BEEN EXAMINED BY TH E IMPUGNED ORDER OF THE TRIBUNAL AND ON FACTS IT WAS FOUND SAT ISFIED. FURTHER IT WAS A SUBMISSION ON BEHALF OF TH E REVENUE THAT SUCH LARGE AMOUNT OF SHARE PREMIUM GIVES RISE TO SUSPICION ON THE GENUINENESS (IDENTITY) OF THE SHAREHOLDERS I.E. THEY ARE BOGUS. THE APEX COURT IN LOVELY EXPORTS (P.) LTD. ( SUPRA ) IN THE CONTEXT TO THE PRE-AMENDED SECTION 68 OF T HE ACT HAS HELD THAT WHERE THE REVENUE URGES THAT THE AMOUNT OF SHARE APPLICATION MONEY HAS BEEN RECEIV ED FROM BOGUS SHAREHOLDERS THEN IT IS FOR THE INCOM E TAX OFFICER TO PROCEED BY REOPENING THE ASSESSMENT OF SUCH SHAREHO LDERS AND ASS ESSING THEM TO TAX IN ACCORDANCE WITH LAW. IT DOES NOT ENT ITLE THE REVENUE TO ADD THE SAME TO THE ASSESSEE'S INCOME AS UNEXPLAINED CASH C REDIT. RESPECTFULLY FOLLOWING THE SAME, WE FIND SUBSTANTIA L FORCE IN THIS ARGUMENT ADVANCED BY LD. AR THAT THE ASSESSEE WAS R EQUIRED TO PROVE THE SOURCE OF THE MONEY ONLY AND NOTHING BEYOND. WE FIND THAT THE ASSESSEE HAS DEMONSTRATED THE SAME BY FILING THE RE QUISITE DOCUMENTS IN THIS REGARD TO THE REVENUE AUTHORITIES. 5.6 THE TOTALITY OF THE ABOVE FACTUAL MATRIX AS WEL L AS SETTLED LEGAL POSITION LEAD US TO FORM A BELIEF THAT THE IMPUGNED ADDITIONS U/S 68, IN THE HANDS OF THE ASSESSEE, WERE NOT JUSTIFIED. BY D ELETING THE SAME, WE ALLOW THE APPEAL. ITA NO.1543/MUM/2017 NIYOJIT FINANCIAL CONSULTANCY PRIVATE LIMITED ASSESSMENT YEAR :2009-10 12 6. THE APPEAL STANDS ALLOWED IN TERMS OF OUR ABOVE ORDER. ORDER PRONOUNCED IN THE OPEN COURT ON 03 RD JANUARY, 2019. SD/- SD/- (C.N. PRASAD) (MANOJ KUMAR AGGARWAL) / JUDICIAL MEMBER / ACCOUNTANT MEMBER MUMBAI; DATED : 03/01/2019 SR.PS, JAISY VARGHESE #$%&'& / COPY OF THE ORDER FORWARDED TO : 1. ! / THE APPELLANT 2. ' ! / THE RESPONDENT 3. ) ( ) / THE CIT(A) 4. ) / CIT CONCERNED 5. *+ $ , , / DR, ITAT, MUMBAI 6. +-./ / GUARD FILE / BY ORDER, / (DY./ASSTT.REGISTRAR) , / ITAT, MUMBAI.