ITO, Ward-10(4), Kolkata, Kolkata V. M/s Gateway Enclave Pvt.Ltd., Kolkata

ITA 2269/KOL/2016

• Counselvise Citation: [2019] 117 COUNSELVISE.COM (IT) 6907 (ITAT-KOLKATA)
• Duration Of Justice: 2 year(s) 5 month(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 01-05-2019
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: C
• Assessment Year: 2012-2013
• Appeal Filed On: 01-12-2016
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: SHANKAR HALDER
• Assessee Lawyers: MANISH TIWARI
• Keywords: Source of fund; Retrospective amendment; Question of law; Fair market value; Capital receipt; Onus to prove
• Section: 260A; 133(6); 68

Judgement Text

1 ITA NO. 2269/KOL/2016 M/S. GATEWAY ENCLAVE PVT. LTD., AY 2012-13 , C , IN THE INCOME TAX APPELLATE TRIBUNAL C BENCH: KOL KATA ( ) . . , . ' # $% % , '( ) [BEFORE SHRI A. T. VARKEY, JM & DR. A. L. SAINI, A M] I.T.A. NO. 2269/KOL/2016 ASSESSMENT YEAR: 2012-13 INCOME-TAX OFFICER, WD-10(4), KOLKATA. VS. M/S. GATEWAY ENCLAVE PVT. LTD. (PAN: AAECG 0052 F) APPELLANT RESPONDENT DATE OF HEARING 12.02.2019 DATE OF PRONOUNCEMENT 01.05.2019 FOR THE APPELLANT SHRI SHANKAR HALDER, JCIT, SR. DR FOR THE RESPONDENT SHRI MANISH TIWARI, FCA ORDER PER SHRI A.T.VARKEY, JM THIS APPEAL PREFERRED BY THE REVENUE IS AGAINST THE ORDER OF THE LD. CIT(A)-4, KOLKATA DATED 29.09.2016 FOR AY 2012-13. THE MAIN G RIEVANCE OF THE REVENUE IS AGAINST THE ACTION OF THE LD. CIT(A) IN DELETING THE SHARE PREMIUM COLLECTED BY THE ASSESSEE WHICH WAS ADDED BY THE AO U/S 68 OF THE ACT. 2. THE BRIEF FACTS OF THE CASE IS THAT THE AO NOTED THAT THE ASSESSEE-COMPANY RAISED SHARE CAPITAL OF RS. 25,100/- AS WELL AS SHARE PREM IUM OF RS. 1,25,24,900/- FROM SIX SHARE SUBSCRIBERS WHICH ARE CORPORATE ENTITIES. THE AO AFTER MAKING ENQUIRIES ACCEPTED THE SHARE CAPITAL AMOUNTING TO RS. 25,100/-, HOWEVER MADE ADDITION OF RS. 1,25,24,900/- WHICH WA S COLLECTED BY THE ASSESSEE BY SHARE PREMIUM AS UNEXP LAINED CASH CREDIT U/S 68 OF THE ACT. AGGRIEVED THE ASSESSEE PREFERRED APPEAL BEFORE THE LD. CIT(A) WHO WAS PLEASED TO DELETE THE SAME. AGGRIEVED, THE REVENUE IS BEFORE US. 3. WE HAVE HEARD RIVAL SUBMISSIONS AND CAREFULLY PE RUSED THE MATERIAL AVAILABLE ON RECORD. ASSAILING THE ORDER OF THE LD. CIT(A) THE L D. DR HAS SUBMITTED THAT LD. CIT(A) HAS 2 ITA NO. 2269/KOL/2016 M/S. GATEWAY ENCLAVE PVT. LTD., AY 2012-13 GRANTED RELIEF MAINLY BY RELYING ON THE HONBLE SUP REME COURTS DECISION IN CIT VS. LOVELY EXPORTS LTD. (2008) 216 CTR 195(SC). HOWEVER, ACCOR DING TO LD. DR, THE SAID DECISION IS NOT APPLICABLE IN THE INSTANT CASE AS LOVELY EXPORT S LTD. WAS A PUBLIC LIMITED COMPANY AND THE ASSESSEE M/S. GATEWAY ENCLAVE PVT. LTD. IS NOT A PUBLIC LIMITED COMPANY. ACCORDING TO HIM, IT IS A WELL-SETTLED LEGAL POSITION THAT EVERY CASE DEPENDS ON ITS OWN FACTS AND THE RATIO OF ANY JUDGEMENT CANNOT BE SEEN DIVORCED FROM ITS F ACTS. THE LD DR DREW OUR ATTENTION TO HON'BLE CALCUTTA HIGH COURTS DECISION IN THE CASE OF CIT VS. MITHAN INTERNATIONAL (2015) 277 CTR 65 (CAL) / 375 ITR 123 (CAL) WHEREIN THEIR LORDSHIPS HAS EXAMINED THE DECISION OF M/S. LOVELY EXPORTS LTD. AND HAS EXPRESSED THE V IEW WHICH IS REPRODUCED AS UNDER: 'THIS REASONING MUST APPLY A PORTION TO LARGE SCALE SUBSCRIPTIONS TO THE SHARES OF A PUBLIC COMPANY WHERE THE LATTER MAY HAVE NO MATERIAL OTHER THAN THE APPLICATION FORMS AND BANK TRANSACTION DETAILS TO GIVE SOME INDICATION OF THE IDENTITY OF THESE SUBSCRIBERS. IT MAY NOT APPLY IN CIRCUMSTANCES WHERE THE SHARES ARE ALLOTTED DIRE CTLY BY THE COMPANY / ASSESSEE OR TO CREDITORS OF THE ASSESSEE. THIS IS WHY THIS COURT H AS ADOPTED A VERY STRICT APPROACH TO THE BURDEN BEING LAID ALMOST ENTIRELY ON AN ASSESSEE WH ICH RECEIVES ... THE LD. DR SUBMITTED THAT IN SIMILAR SET OF FACTS H ONBLE CALCUTTA HIGH COURT IN THE CASE OF M/S. RAJAMANDIR ESTATES PVT. LTD. VS. CIT (2016) 70 TAXMANN.COM 124 (CAL) HAS DISTINGUISHED THE DECISION OF M/S. LOVELY EXPORTS L TD. CASE. IT WAS POINTED OUT THAT THE SAID DECISION OF HONBLE CALCUTTA HIGH COURT HAS BEEN C ONFIRMED BY HONBLE SUPREME COURT REPORTED IN (2017) 77 TAXMANN.COM 284. 4. THE LD. DR ALSO SUBMITTED THAT BESIDES IT HAS BE EN HELD IN VARIOUS JUDICIAL PRONOUNCEMENTS THAT BURDEN OF PROOFS VIZ. IDENTITY OF THE CREDITOR, HIS CREDITWORTHINESS AND GENUINENESS OF THE TRANSACTION U/S.68 ARE REQUIRED TO BE DISCHARGED BY THE ASSESSEE ONLY. THE HON'BLE JURISDICTIONAL HIGH COURT IN CIT VS. KORLAY TRADING CO. LTD. (1998) 232 ITR 820 (CAL) HELD MERE FILING OF INCOME TAX FILE NO. OF TH E CREDITORS TO PROVE GENUINENESS OF THE CASH CREDIT. THE CREDITOR SHOULD BE IDENTIFIED, THE TRANSACTION SHOULD BE GENUINE AND THERE SHOULD BE CREDITWORTHINESS. THE LD. DR FURTHER SUB MITTED THAT IN K.M. SADHUKHAN AND SONS PVT. LTD. VS CIT (1999) 239 ITR 77 (CAL) IT HA S BEEN HELD THAT BURDEN LIES UPON THE ASSESSEE TO PROVE THE NOTED THREE CONDITIONS. IN C IT VS. PRECISION FINANCE PVT. LTD. (1994) 208 ITR 465 (CAL) THE HON'BLE HIGH COURT HELD THAT 'IT IS FOR THE ASSESSEE TO PROVE THE 3 ITA NO. 2269/KOL/2016 M/S. GATEWAY ENCLAVE PVT. LTD., AY 2012-13 IDENTITY OF THE CREDITORS, THEIR CREDITWORTHINESS A ND THE GENUINENESS OF THE TRANSACTIONS. MERE FURNISHING OF THE PARTICULARS IS NOT ENOUGH'. THE LD. DR ALSO SUBMITTED THAT IN CIT VS. NIPUN BUI LDERS AND DEVELOPERS PVT. LTD. (2013) 350 ITR 407 (DEL) THE HON'BLE COURT WHILE DECIDING THE ISSUE IN FAVOUR OF REVENUE HAS REITERATED THAT - '29 IN.. IN CASE OF PRIVATE LIMITED COMPANI ES GENERALLY PERSONS KNOWN TO THE DIRECTORS OR SHAREHOLDERS, DIRECTLY OR INDIRECTLY, BUY OR SUBSCRIBE TO SHARES UPON RECEIPT OF MONEY, THE SHARE SUBSCRIBERS DO NOT LOSE TOUCH AND BECOME INCOMMUNICADO. CALL MONIES, DIVIDENDS, WARRANTS ETC. HAVE TO BE SENT AND THE RE LATIONSHIP IS A CONTINUING ONE. IN SUCH CASES THEREFORE THE ASSESSEE CANNOT SIMPLY FURNISH DETAIL S AND REMAIN QUIET EVEN WHEN SUMMONS ISSUED TO THE SHAREHOLDERS U/S.131 ... 30 . .. WHAT WE PERCEIVE AND REGARD AS CORRECT POSITION OF LAW IS THAT THE COURT OR TRIBUNAL SHOULD BE CONVINCED ABOUT THE IDENTITY, CR EDITWORTHINESS AND GENUINENESS OF THE TRANSACTION. THE ONUS TO PROVE THE TREE FACTUM IS O N THE ASSESSEE AS THE FACTS ARE WITHIN THE ASSESSEE'S KNOWLEDGE. MERE PRODUCTION OF INCORPORAT ION DETAILS PAN NOS. OR THE FACT THAT THIRD PERSONS OR COMPANY HAD FILED INCOME TAX DETAILS IN CASE OF A PRIVATE LIMITED COMPANY MAY' NOT BE SUFFICIENT WHEN SURROUNDING AND ATTENDING FACTS PREDICATE A COVER UP. THESE FACTS INDICATE AND REFLECT PROPER PAPER WORK OR DOCUMENTATION BUT GENUINENESS, CREDITWORTHINESS, IDENTITY ARE DEEPER AND OBTRUSIVE. COMPANIES NO DOUBT ARE AR TIFICIAL OR JURISTIC PERSONS BUT THEY ARE SOLELESS AND ARE DEPENDENT UPON THE INDIVIDUALS BEH IND THEM WHO RUN AND MANAGE THE SAID COMPANIES. IT IS THE PERSONS BEHIND THE COMPANY WHO TAKE DECISIONS, CONTROLS AND MANAGE THEM.' 5. THE HON'BLE DELHI HIGH COURT IN CIT VS. NAVODAY A CASTLES PVT. LTD. (2014) 367 ITR 306 (DEL) HELD THAT SHARE CAPITAL IN CASE OF A CLOS ELY HELD COMPANY IS REQUIRED TO BE EXAMINED BY THE AO IN TERMS OF THE SEC.68 AND THE F AILURE OF THE ASSESSEE TO SATISFY THE AO CALLS FOR AN ADDITION U/S.68. THE SAID DECISION OF THE HIGH COURT HAS BEEN UPHELD BY THE HON'BLE SUPREME COURT AS REPORTED IN NAVODAYA CASTL ES PVT. LTD. VS. CIT (2015) 230 TAXMANN 268 (SC). 6. ACCORDING TO HIM, THE HON'BLE JURISDICTIONAL HI GH COURT IN CIT VS. ACTIVE TRADERS PVT. LTD. HAS HELD THAT THE ASSESSING OFFICER IN TH E ASSESSMENT OF A COMPANY HAS JURISDICTION TO ASK FOR INFORMATION FROM THE SHAREHOLDERS REGARD ING THE SOURCE OF INVESTMENT MADE IN THE COMPANY. THEIR LORDSHIPS OBSERVED THAT - 'IF A CASH CREDIT IS SHOWN BY THE COMPANY IN ITS BO OKS OF ACCOUNTS AND IF THE SOURCE CANNOT BE EXPLAINED PROPERLY THE ITO MAY ASSESS THE SUM AS IN COME OF THE COMPANY FROM UNDISCLOSED SOURCE.' 4 ITA NO. 2269/KOL/2016 M/S. GATEWAY ENCLAVE PVT. LTD., AY 2012-13 7. THE HON'BLE JURISDICTIONAL HIGH COURT IN CIT VS NIVEDAN VANIJYA NIYOJAN LTD. (2003) 263 ITR 623 (CAL) HAS HELD THAT WHERE THE AS SESSEE COMPANY DID NOT PRODUCE THE SUBSCRIBERS OF ITS SHARE CAPITAL WHEN REQUIRED TO D O SO, IT FAILED TO ESTABLISH THE IDENTITY OF THE SUBSCRIBERS, PROVE THEIR CREDITWORTHINESS AND T HE GENUINENESS OF THE TRANSACTION AND THEREFORE ADDITION U/S.68 WAS JUSTIFIED. IN THE SAI D DECISION THE HON'BLE COURT HAS PLACED ITS RELIANCE ON THE EARLIER TWO DECISIONS OF THE CALCUT TA HIGH COURT NAMELY M/S. HINDUSTAN TEA TRADING COMPANY LTD. AND M/S.RUBY TRADERS AND EXPOR TERS LTD. 8. WHEN THE ISSUE AROSE REGARDING TAXABILITY OF SH ARE PREMIUM WHICH IS A CAPITAL RECEIPT, THE ITAT KOLKATA CLARIFIED IN THE CASE OF M/S. SUBHALAKSHMI VANIJYA PVT. LTD. VS. CIT, 155 ITD 171, THAT THE QUESTION BEING ADDRESSED IS NOT WHETHER SHARE PREMIUM IS CHARGEABLE TO TAX BUT ABOUT THE TAXABILITY OR OTHER WISE OF SUCH SHARE CAPITAL & PREMIUM IN TERMS OF SEC.68. 9. FURTHER RELIANCE WAS ALSO PLACED BY THE LD. CIT, DR ON THE FOLLOWING DECISIONS: (I) CIT VS. N. R. PORTFOLIO PVT. LTD. (2014) 222 TA XMANN 157 (DEL) PARA 24 & 25. (II) CIT VS. N. TARIKA PROPERTIES INVESTMENTS ITA N O.2080 OF2010 DELHI HIGH COURT DTD.21.11.13. (III) CIT VS. NOVA PROMOTERS AND FINLEASE PVT. LTD. (2012) 342 ITR 169 (DEL). (IV) VISAKHA SALES PVT. LTD. VS. CIT (2014) 52 TAXM ANN.COM 305. 10. CITING THE AFORESAID JUDICIAL PRECEDENTS , THE LD DR WANT US TO OVER-TURN THE DECISION OF LD CIT(A) WHICH IS IMPUGNED BEFORE US. PER CONTR A, THE LD. AR RELIED ON SEVERAL JUDGMENTS OF HONBLE JURISDICTIONAL HIGH COURT AND HONBLE SUPREME COURT TO SUPPORT THE ORDER OF LD. CIT(A) WHICH DECISION WE WILL DISCUSS INFRA WHILE ADJUDICATING THE APPEAL AND HE DOES NOT WANT US TO INTERFERE WITH THE ORDER OF THE LD. CIT(A). 11. HAVING HEARD BOTH SIDES AND PERUSED THE RECORDS , WE NOTE THAT THE ASSESSEE HAD RAISED SHARE CAPITAL OF RS.25,100/- DURING THE YEAR AND AL SO THE SHARE PREMIUM OF RS.1,25,24,900/-. WHEN ASKED BY THE AO TO EXPLAIN THE NATURE AND SOUR CE OF THE SHARE CAPITAL AND SHARE 5 ITA NO. 2269/KOL/2016 M/S. GATEWAY ENCLAVE PVT. LTD., AY 2012-13 PREMIUM RAISED BY THE ASSESSEE, THE ASSESSEE FILED BEFORE THE AO THE DETAILS OF THE SIX CORPORATE BODIES WHICH SUBSCRIBED THE SHARE CAPITAL ALONG WITH THE SHARE PREMIUM. BEFORE THE AO, THE ASSESSEE HAD FILED PAPER BOOK TO SUBSTA NTIATE THE SHARE CAPITAL ALONG WITH THE SHARE PREMIUM. THE DOCUMENTS FURNISHED BEFORE THE AO, INTER ALIA, INCLUDED (I) COPIES OF ACKNOWLEDGEMENT OF FILING OF INCOME T AX RETURN OF SHAREHOLDERS, (II) THE STATEMENT OF SOURCE OF FUNDS, (III) AUDITED FINANCIAL STATEMENTS, (IV) COPIES OF RELEVANT BANK STATEMENTS IN RESPECT OF ACCOUNTS FROM WHICH SHARE APPLICATION MONIES WERE PAID, (V) PAN, ADDRESS OF SHARE SUBSCRIBERS FOR THE YEAR ENDED 31.03.2012. (VI) COPY OF THE RETURN ALLOTMENT IN FORM 2 EVIDENC ING THE ALLOTMENT OF SHARES TO THE SIX SHARE APPLICANTS, VII) CERTIFICATE OF INCORPORATION OF SHARE APPLICAN TS VIII) CONFIRMATION BY SHARE-SUBSCRIBERS AND TH EY REPLIED TO NOTICES U/S 133(6) OF THE ACT. 12. WE NOTE THAT THE SHARE SUBSCRIBER COMPANIES WER E REGULARLY ASSESSED TO TAX AND THE PAYMENTS WERE MADE THROUGH THE BANK ACCOUNTS AND PU RSUANT TO THE NOTICE ISSUED BY THE AO U/S. 133(6) AND 131 OF THE ACT TO ALL THE SIX SHARE SUBSCRIBERS, THE NOTICES WERE SERVED AND THE SHARE SUBSCRIBERS FURNISHED THE REQUISITE DOCUM ENTARY EVIDENCE AS REQUISITIONED BY THE AO. THE SHARE APPLICANTS HAVE FURNISHED THEIR AUDI TED FINANCIAL STATEMENTS AND INCOME TAX ACKNOWLEDGMENT FOR FILING OF RETURN FOR AY 2012-13. THUS, THE IDENTITY OF SHARE SUBSCRIBERS IS PROVED. FROM THE BANK STATEMENT OF THE SHARE SU BSCRIBERS IT WAS POINTED OUT TO THE AO THAT THERE WAS NO CASH DEPOSITS PRIOR TO ISSUE OF C HEQUES TO THE ASSESSEE COMPANY. EVEN THE LD. AR OF THE ASSESSEE EXPLAINED TO THE AO THE IMME DIATE SOURCE OF PAYMENT OF SHARE APPLICATION MONIES TO THE ASSESSEE COMPANY. AND THE SHARE CAPITAL AND PREMIUM WERE PAID THROUGH BANKING CHANNEL TO THE ASSESSEE COMPANY. T HUS THE GENUINENESS OF THE TRANSACTION CANNOT BE DISPUTED. THUS, ACCORDING TO LD. AR OF TH E ASSESSEE, THE ASSESSEE HAD DISCHARGED THE ONUS CASTED UPON IT TO PROVE THE IDENTITY, CRED ITWORTHINESS AND GENUINENESS OF THE SHARE SUBSCRIBERS. ON PERUSAL OF THE AUDITED BALANCE SHE ET OF THE SHARE SUBSCRIBING COMPANIES 6 ITA NO. 2269/KOL/2016 M/S. GATEWAY ENCLAVE PVT. LTD., AY 2012-13 REVEAL THAT THE SHAREHOLDERS POSSESSED SUFFICIENT C APITAL AND RESERVES OUT OF WHICH SHARE SUBSCRIPTION AMOUNTS WERE PAID THROUGH ACCOUNT PAYE E CHEQUES. THE CHART IS GIVEN BELOW TO BETTER UNDERSTAND THE FUND POSITION OF EACH SHAR E APPLICANT: NAME OF THE COMPANY INVESTIBLE FUNDS AVAILABLE AS PER FINANCIALS AMOUNT INVESTED IN THE APPELLANT COMPANY ATLANTIC MERCHANTS PVT. LTD. RISEWELL VINTRADE (P) LTD. SUBHBIJAY AGENCIES (P) LTD. SUPERIOR ENCLAVE (P) LTD. TOPAZ ENCLAVE (P) LTD. TOPLAKE COMMERCIAL (P) LTD. 49,16,25,344/- 38,11,65,832/- 45,62,16,492/- 2,50,70,945/- 2,50,25,132/- 49,48,01,760/- 31,00,000/- 7,00,000/- 11,00,000/- 25,00,000/- 49,00,000/- 2,50,000/- TOTAL 1,25,50,000/- ON PERUSAL OF THE AFORESAID CHART IT REVEALS THAT T HE NET OWNED FUNDS OF EACH SHARE APPLICANT WERE SEVERAL TIMES MORE THAN THE INVESTMENT MADE IN EQUITY OF THE ASSESSEE. IT IS EVIDENT THAT EACH SHARE APPLICANT HAD SUBSTANTIAL RESOURCES OF THEIR OWN COMPARED WITH THE TOTAL INVESTIBLE FUNDS AVAILABLE WITH EACH SHARE APPLICA NTS AND THAT INVESTMENT MADE IN THE EQUITY SHARES AND THE ASSESSEE COMPANY WAS NOT SIGNIFICANT . WE NOTE THAT THE AO DID NOT POINT OUT ANY DEFECT OR INFIRMITY IN THE DOCUMENTS PLACED ON RECORD BY THE ASSESSEE AS WELL AS THE SHARE SUBSCRIBERS. THUS THE CREDITWORTHINESS OF THE AFORESAID SHARE SUBSCRIBERS CANNOT BE DISPUTED. 13. WE NOTE THAT THE ASSESSEE HAD PRODUCED THE AFOR ESAID DOCUMENTS TO EXPLAIN THE NATURE AND SOURCE OF THE SHARE CAPITAL ALONG WITH SHARE PR EMIUM OF THE SIX CORPORATE SHAREHOLDERS. WE NOTE THAT THE AO HAD ACCEPTED THE SHARE CAPITAL SUBSCRIBED BY THESE SIX CORPORATE ENTITIES. HOWEVER, WITHOUT POINTING OUT ANY DEFECTS HAS WHI MSICALLY WITHOUT GIVING ANY REASON BY A CRYPTIC ORDER HAS ADDED THE ENTIRE SHAR E PREMIUM WHICH WAS ALSO GIVEN BY THE VERY SAME SIX CORPORATE ENTITIES U/S 68 OF THE ACT. THE LD. AR BROUGHT TO OUR NOTICE THAT THE SIMILAR ADDITIONS WERE MADE BY THE ASSESSING OFFIC ER IN FIVE CASES WHEREIN THE AO ACCEPTED THE SHARE CAPITAL BUT ADDED THE SHARE PREM IUM WHICH ACTION OF THE AO WAS NOT UPHELD BY THE TRIBUNAL. THE FOLLOWING CASES ARE GI VEN BELOW: 7 ITA NO. 2269/KOL/2016 M/S. GATEWAY ENCLAVE PVT. LTD., AY 2012-13 I) ITO VS. TREND INFRA DEVELOPERS PVT. LTD. & HAPPY BAGANS PVT. LTD., ITA NO. 2270/KOL/2016 & 2273/KOL/2016 ORDER DATED 26.10.201 8. II) ITO VS. SAVERA TOWERS PVT. LTD. ITA NO. 2275/KO L/2016 ORDER DATED 05.12.2018. III) ITO VS. BSNL COMMERCIAL PVT. LTD. ITA NO.686/K OL/2017 ORDER DATED 22.11.2018. IV) ITO VS. TANISH DEALERS PVT. LTD. ITA NO. 1636/K OL/2016 ORDER DATED 07.12.2018. V) ITO VS. DREAMZ MET CONSTRUCTION PROJECTS PVT. LT D. ITA NO. 2047/KOL/2016 ORDER DATED 07.12.2018 14. THE LD. AR DREW OUR ATTENTION TO THE 1 ST CASE OF TREND INFRA DEVELOPERS PVT. LTD., (SUPRA), WHICH ACCORDING TO LD. AR WAS A GROUP OF C OMPANY WHEREIN ALSO THE SAME KIND OF ADDITION WAS MADE AFTER ACCEPTING THE SHARE CAPITAL AND ADDING THE SHARE PREMIUM. ACCORDING TO LD. AR, SHARE PREMIUM CANNOT BE ADDED IN THE HANDS OF THE ASSESSEE U/S. 68 OF THE ACT SINCE THE PROVISO WAS INSERTED U/S 68 OF THE ACT ONLY FROM AY 2013-14 AND SIMILAR ADDITIONS MADE ONLY ON SHARE PREMIUM WAS DI RECTED TO BE DELETED AND WHICH ACTION HAS BEEN UPHELD BY THE HONBLE BOMBAY HIGH COURT IN PR. CIT VS. APEAK INFOTECH REPORTED IN 88 TAXMAN.COM 695 DATED 08.06.2017. THE LD. AR DREW OUR ATTENTION TO PAGE 18 OF THE CASE LAW PAPER BOOK AND DREW OUR ATTENTION TO THE O RDER PASSED BY THE TRIBUNAL IN TREND INFRA DEVELOPMENT PVT. LTD., SUPRA, WHEREIN WE NOTE IN SIMILAR FACTS THE TRIBUNAL WAS PLEASED TO DELETE THE ADDITION MADE ONLY ON SHARE P REMIUM BY THE AO FOR AY 2012-13. THE TRIBUNAL HELD AS UNDER: 3.3. WE HAVE HEARD THE RIVAL SUBMISSIONS. THE FACT STATED HEREINABOVE REMAIN UNDISPUTED BEFORE US BY EITHER OF THE PARTIES AND HENCE THE SAME ARE NOT RE ITERATED FOR THE SAKE OF BREVITY. AT THE OUTSET, WE FIND THAT THE ASSESSEE HAD RECEIVED SHARE CAPITAL OF RS. 57,9 00/- FROM SIX SHAREHOLDERS AND RS. 2,88,92,100/- FR OM THE VERY SAME SHAREHOLDERS TOWARDS SHARE PREMIUM. THE SHARE CAPITAL RECEIVED BY THE ASSESSEE HAS BEEN DUL Y ACCEPTED BY THE LD. AO WITHIN THE KEN OF SECTION 68 OF THE ACT. HOWEVER, SHARE PREMIUM COMPONENT HAS B EEN DOUBTED BY THE LD. AO. WE FIND THAT THE ASSESSEE IN THE INSTANT CASE HAD DULY COMPLIED WITH BY FURNISH ING THE COMPLETE DETAILS OF SHARE SUBSCRIBERS TO PROVE THEI R IDENTITY, GENUINENESS OF THE TRANSACTION AND CREDITWORTHINESS OF SHARE SUBSCRIBERS BEYOND DOUBT. THESE ARE DULY SUPPORTED BY THE DOCUMENTARY EVIDEN CES WHICH ARE ENCLOSED IN THE PAPER BOOK. THE LD. AO HA D NOT FOUND ANY FALSITY OR ANY ADVERSE INFERENCE OF THE SAID DOCUMENTS. WE FIND THAT THE LD. CIT(A) HAD PL ACED HEAVY RELIANCE ON THESE DOCUMENTS AND HAD GRAN TED RELIEF TO THE ASSESSEE. ALL THE SHARE SUBSCRIBERS A RE DULY ASSESSED TO INCOME TAX AND THE TRANSACTION WITH THE ASSESSEE COMPANY ARE DULY ROUTED THROUGH BANKING CH ANNELS AND ARE DULY REFLECTED IN THEIR RESPECTIVE AUDITED BALANCE SHEETS WHICH ARE ALSO PLACED ON REC ORD BEFORE US. IN ANY CASE, ONCE THE RECEIPT OF SHA RE CAPITAL HAS BEEN ACCEPTED AS GENUINE WITHIN THE KEN OF SECTION 68 OF THE ACT, THERE IS NO REASON FOR T HE LD. AO TO DOUBT THE SHARE PREMIUM COMPONENT RECEIVED FROM THE VERY SAME SHAREHOLDERS AS BOGUS. WE HELD THAT A LL THE THREE NECESSARY INGREDIENTS OF SECTION 68 HAD B EEN DULY COMPLIED WITH BY THE ASSESSEE WITH PROPER DOCUMENTARY EVIDENCES. WE FIND THAT NOTICES ISSUED U/S 133(6) HAVE BEEN DULY COMPLIED WITH. THE ONLY 8 ITA NO. 2269/KOL/2016 M/S. GATEWAY ENCLAVE PVT. LTD., AY 2012-13 GRIEVANCE OF THE LD. AO WAS THAT THE ASSESSEE COULD NOT PRODUCE THE DIRECTORS OF THE SHARE SUBSCRIBING COMPANIES. IN OUR CONSIDERED OPINION, FOR THIS REAS ON ALONE, THERE CANNOT BE ANY ADDITION U/S 68 OF TH E ACT AS HELD BY THE HONBLE SUPREME COURT IN THE CASE OF CIT VS. ORISSA CORPORATION PVT. LTD. REPORTED IN 1 59 ITR 78 (SC). WE FIND THAT THE DECISION OF HONBLE D ELHI HIGH COURT IN THE CASE OF NOVO PROMOTERS AND FINELEASE PVT. LTD. REPORTED IN 342 ITR 169 (DEL) V EHEMENTLY RELIED UPON BY THE LD. DR BEFORE US, IS N OT APPLICABLE IN THE INSTANT CASE, AS IN THE FACTS BEF ORE THE HONBLE DELHI HIGH COURT, THE NOTICES U/S 133(6) HAVE NOT BEEN DULY COMPLIED WITH. HENCE THE DECISIO N RENDERED BY THE HONBLE DELHI HIGH COURT IN THE C ASE REFERRED TO SUPRA IS NOT APPLICABLE TO THE FACTS OF THE INSTANT CASE AND IS FACTUALLY DISTINGHUISHABLE . 3.3.1. WE FIND THAT THE RELIANCE PLACED BY THE LD. AR IN THE DECISION OF HONBLE BOMBAY HIGH COURT IN PR. CIT VS. APEAK INFOTECH REPORTED IN 88 TAXMANN.COM 6 95 DT 08.06.2017 WHEREIN THE QUESTION RAISED BEFORE THE HONBLE BOMBAY HIGH COURT ARE AS UNDER: A. WHETHER ON THE FACTS AND CIRCUMSTANCES OF THE C ASE AND IN LAW, THE TRIBUNAL WAS CORRECT TO UPHOLD THE DECISION ON COMMISSIONER OF INCOME TAX ( APPEALS) THAT THE SHARE PREMIUM RECEIVED BY THE ASSESSEE-COMPANY CANNOT BE TAXED UNDER SECTION 68 OF THE ACT IGNORING THE RATIO LAID DOWN BY THIS COURT IN ITS DECISION REPORTED IN THE CASE OF MAJOR METALS LTD. VS. UNION OF INDIA [2013] 359 ITR 450 (BOM)? B. WHETHER ON THE FACTS AND CIRCUMSTANCES OF THE CA SE AND IN LAW, THE TRIBUNAL AS WELL AS THE COMMISSIONER OF INCOME TAX (APPEALS) WAS RIGHT IN D ELETING ADDITION MADE BY THE ASSESSING OFFICER, BY HOLDING THAT THE SHARE PREMIUM RECEIPT IS CAPITA L IN NATURE? THE HONBLE COURT HELD AS UNDER: REGARDING QUESTION A : (A) THE ISSUE RAISED BY THE REVENUE IN THIS QUESTION IS TO BRING TO TAX THE SHARE PREMIUM RECEIVED UNDER SECTION 68 OF THE ACT. WE FIND THAT THE ISSUE OF BRINGING THE SHARE PREMIUM TO TAX UNDER SECTION 68 OF THE ACT WAS NOT AN ISSUE WHICH WAS UR GED BY THE APPELLANT REVENUE BEFORE THE TRIBUNAL. THE ONLY ISSUE WHICH WAS URGED BEFORE THE TRIBUNAL AS RECORDED IN PARA 11 OF THE IMPUGNED ORDER IS THE ADDITION OF SHARE CAPITAL AND SHARE APPLICATION MONEY IN THE HANDS OF THE ASSESSEE AS INCOME UNDER SECTION 28(IV) OF THE ACT. WE FIND THAT THE COMMISSIONER OF INCOME-TAX (APPEALS) DID CONSIDER THE ISSUE OF APPL ICABILITY OF SECTION 68 OF THE ACT AND CONCLUDED THAT IT DOES NOT APPLY. THE REVENUE SEEMS TO HAVE ACCEPTED THE SAME AND DID NOT URGE THIS ISSUE BEFORE THE TRIBUNAL. MR. BHOOT, LEA RNED COUNSEL APPEARING FOR THE REVENUE ALSO FAIRLY STATES THAT THE ISSUE OF APPLICABILITY OF SECTION 68 OF THE ACT WAS NOT URGED BY THE REVENUE BEFORE THE TRIBUNAL. (B) IT IS A SETTLED POSITION IN LAW AS HELD BY THIS C OURT IN CIT V. TATA CHEMICALS LTD. [2002] 122 TAXMAN 643/256 ITR 395 (BOM.) THAT IN AN APPEAL UNDER SECTION 260A OF THE ACT, T HE HIGH COURT CAN ONLY DECIDE A QUESTION IF IT HAD BEEN RAI SED BEFORE THE TRIBUNAL EVEN IF NOT DETERMINED BY THE TRIBUNAL. THEREFORE, NO OCCASION TO CONSIDER THE QUESTION AS PRAYED FOR ARISES. (C) IN ANY CASE, WE MAY POINT OUT THAT THE AMENDMENT TO SECTION 68 OF THE ACT BY THE ADDITION OF PROVISO THERETO TOOK PLACE WITH EFFECT FROM APRIL 1 , 2013. THEREFORE, IT IS NOT APPLICABLE FOR THE SUBJECT ASSESSMENT YEAR 2012-13. SO FOR AS THE PRE-AMENDED SECTION 68 OF THE ACT IS CONCERNED, THE SAME CANNOT BE INVOKED IN THIS CASE, AS EVIDENCE WAS LED BY THE RESPONDENTS- ASSESSEES BEFORE THE ASSESSING OFFICER WITH REGARD TO IDENTITY, CAPACITY OF THE INVESTOR AS WELL AS THE GENUINENESS OF THE INVESTMENT. THEREFORE, AD MITTEDLY, THE ASSESSING OFFICER DID NOT INVOKE SECTION 68 OF THE ACT TO BRING THE SHARE PRE MIUM TO TAX. SIMILARLY, THE COMMISSIONER OF INCOME-TAX (APPEALS) ON CONSIDERATION OF FACTS, FOU ND THAT SECTION 68 OF THE ACT CANNOT BE INVOKED. IN VIEW OF THE ABOVE, IT IS LIKELY THAT TH E REVENUE MAY HAVE TAKEN AN INFORMED DECISION NOT TO URGE THE ISSUE OF SECTION 68 OF THE ACT BEFORE THE TRIBUNAL. 9 ITA NO. 2269/KOL/2016 M/S. GATEWAY ENCLAVE PVT. LTD., AY 2012-13 (D) WE MAY ALSO POINT OUT THAT DECISION OF THIS COURT IN MAJOR METALS LTD. V. UNION OF INDIA [2012] 19 TAXMANN.COM 176/207 TAXMAN 185/[2013] 359 ITR 450 BOM . PROCEEDED ON ITS OWN FACTS TO UPHOLD THE INVOCATION OF SECTION 68 OF THE ACT BY THE SETTLEMENT COMMISSION. IN THE ABOVE CASE, THE SETTLEMENT COMMISSION ARRIVED AT A FINDING OF FACT THAT THE SUBSCRIBERS TO SHARES OF THE ASSESSEE'COMPANY WERE NOT CREDITWOR THY INASMUCH AS THEY DID NOT HAVE FINANCIAL STANDING WHICH WOULD ENABLE THEM TO MAKE AN INVESTMENT OF RS. 6,00,00,000 AT PREMIUM AT RS. 990 PER SHARE. IT WAS THIS FINDING O F THE FACT ARRIVED AT BY THE SETTLEMENT COMMISSION WHICH WAS NOT DISTURBED BY THIS COURT IN ITS WRIT JURISDICTION. IN THE PRESENT CASE THE PERSON WHO HAVE SUBSCRIBED TO THE SHARE AND PAI D SHARE PREMIUM HAVE ADMITTEDLY MADE STATEMENT ON OATH BEFORE THE ASSESSING OFFICER AS R ECORDED BY THE TRIBUNAL. NO FINDING IN THIS CASE HAS BEEN GIVEN BY THE AUTHORITIES THAT SHAREHO LDER/SHARE APPLICANTS WERE UNIDENTIFIABLE OR BOGUS. (E) IN THE ABOVE VIEW QUESTION NO. A IS NOT BEING ENT ERTAINED IN VIEW OF THE DECISION IN TATA CHEMICAL LTD. (SUPRA). ACCORDINGLY, THE QUESTION (A ) IS NOT ENTERTAINED. REGARDING QUESTION B : (A) WE FIND THAT THE IMPUGNED ORDER OF THE TRIBUNAL U PHELD THE VIEW OF THE COMMISSIONER OF INCOME-TAX (APPEALS) TO HOLD THAT SHARE PREMIUM IS CAPITAL RECEIPT AND THEREFORE, CANNOT BE TAXED AS INCOME. THIS CONCLUSION WAS REACHED BY THE IMPUGNED ORDER FOLLOWING THE DECISION OF THIS COURT IN VODAFONE INDIA SERVICES (P.) LTD. (SUPRA) AND OF THE APEX COURT IN G. S. HOMES AND HOTEL (P.) LTD. (SUPRA). IN BOTH THE ABOVE CASE S THE COURT HAS HELD THAT THE AMOUNT RECEIVED ON ISSUE OF SHARE CAPITAL INCLUDING PREMIU M ARE ON CAPITAL ACCOUNT AND CANNOT BE CONSIDERED TO BE INCOME. (B) IT IS FURTHER PERTINENT TO NOTE THAT THE DEFINITI ON OF INCOME AS PROVIDED UNDER SECTION 2(24) OF THE ACT AT THE RELEVANT TIME DID NOT DEFINE AS INCO ME ANY CONSIDERATION RECEIVED FOR ISSUE OF SHARE IN EXCESS OF ITS FAIR MARKET VALUE. THIS CAME INTO THE STATUTE ONLY WITH EFFECT FROM APRIL 1, 2013 AND THUS, WOULD HAVE, NO APPLICATION TO THE SHARE PREMIUM RECEIVED BY THE RESPONDENT'ASSESSEE IN THE PREVIOUS YEAR RELEVANT TO THE ASSESSMENT YEAR 2012-13. SIMILARLY, THE AMENDMENT TO SECTION 68 OF THE ACT B Y ADDITION OF PROVISO WAS MADE SUBSEQUENT TO PREVIOUS YEAR RELEVANT TO THE SUBJECT ASSESSMENT YEAR 2012-13 AND CANNOT BE INVOKED. IT MAY BE POINTED OUT THAT THIS COURT IN CIT V. GAGAND EEP INFRASTRUCTURE (P.) LTD. [2017] 80 TAXMANN.COM 272/247 TAXMAN 245/394 ITR 680 (BOM.) HAS WHILE REFUSING TO ENTERTAIN A QUESTION WITH REGARD TO SECTION 68 OF THE ACT HAS H ELD THAT THE PROVISO TO SECTION 68 OF THE ACT INTRODUCED WITH EFFECT FROM APRIL 1, 2013 WILL NOT HAVE RETROSPECTIVE EFFECT AND WOULD BE EFFECTIVE ONLY FROM THE ASSESSMENT YEAR 2013-14. (C) IN VIEW OF THE ABOVE, QUESTION NO. B AS PROPOSED ALSO DOES NOT GIVE RISE TO ANY SUBSTANTIAL QUESTION OF LAW AS IT IS AN ISSUE CONCLUDED BY THE DECISION OF THIS COURT IN VODAFONE INDIA SERVICES (P.) LTD. (SUPRA) AND IN THE APEX COURT IN G. S. HOMES AND HOTELS (P.) LTD. (SUPRA). THUS NOT ENTERTAINED. THEREFORE, ALL THE SIX APPEALS ARE DISMISSED. NO OR DER AS TO COSTS. 3.3.2. IN VIEW OF THE AFORESAID OBSERVATIONS IN THE FACTS AND CIRCUMSTANCES OF THE CASE AND RESPECTFUL LY FOLLOWING THE JUDICIAL PRECEDENT RELIED UPON HEREIN ABOVE, WE HOLD THAT THE LD. CIT(A) HAD RIGHTLY GRA NTED RELIEF TO THE ASSESSEE IN THE PECULIAR FACTS AND CI RCUMSTANCES OF THE CASE, WHICH IN OUR CONSIDERED OP INION, DOES NOT REQUIRE ANY INTERFERENCE. ACCORDINGLY, GRO UNDS RAISED BY THE REVENUE ARE DISMISSED. 41. WE ARE INCLINED TO AGREE WITH THE CIT(APPEALS) , AND CONSEQUENTLY WITH ITAT, TO THE EXTENT OF THEIR CONCLUSION THAT THE ASSESSEE HEREIN HAD COME UP WITH SOME PROOF OF IDENTITY OF 10 ITA NO. 2269/KOL/2016 M/S. GATEWAY ENCLAVE PVT. LTD., AY 2012-13 SOME OF THE ENTRIES IN QUESTION. BUT, FROM THIS INF ERENCE, OR FORM THE FACT THAT THE TRANSACTIONS WERE THROUGH BANKING CHANNELS, IT DOES NOT NECESSAR ILY FOLLOWING THAT SATISFACTION AS TO THE CREDITWORTHINESS OF THE PARTIES OR THE GENUINENESS OF THE TRANSACTIONS IN QUESTION WOULD ALSO HAVE BEEN ESTABLISHED. 42. THE AO HERE MAY HAVE FAILED TO DISCHARGE HIS OB LIGATION TO CONDUCT A PROPER INQUIRY TO TAKE THE MATTER TO LOGICAL CONCLUSION. BUT CIT(APPE ALS), HAVING NOTICED WANT OF PROPER INQUIRY, COULD NOT HAVE CLOSED THE CHAPTER SIMPLY B Y ALLOWING THE APPEAL AND DELETING THE ADDITIONS MADE. IT WAS ALSO THE OBLIGATION OF THE F IRST APPELLATE AUTHORITY, AS INDEED OF ITAT, TO HAVE ENSURED THAT EFFECTIVE INQUIRY WAS CARRIED OUT, PARTICULARLY IN THE FACT OF THE ALLEGATIONS OF THE REVENUE THAT THE ACCOUNT STATEME NTS REVEAL UNIFORM PATTERN OF CASH DEPOSITS OF EQUAL AMOUNTS IN THE RESPECTIVE ACCOUNTS PRECEDI NG THE TRANSACTIONS IN QUESTION. THIS NECESSITATED A DETAILED SCRUTINY OF THE MATERIAL SU BMITTED BY THE ASSESSEE IN RESPONSE TO THE NOTICE UNDER SECTION148 ISSUED BY THE AO, AS ALSO T HE MATERIAL SUBMITTED AT THE STAGE OF APPEALS, IF DEEMED PROPER BY WAY OF MAKING OR CAUSI NG TO BE MADE A 'FURTHER INQUIRY IN EXERCISE OF THE POWER UNDER SECTION 250(4). HIS APP ROACH NOT HAVING BEEN ADOPTED, THE IMPUGNED ORDER OF ITAT, AND CONSEQUENTLY THAT OF CI T(APPEALS), CANNOT BE APPROVED OR UPHELD.' RESPECTFULLY FOLLOWING THE RATIO LAID BY THE TRIBUN AL, AND TAKING NOTE OF THAT FACTS AND LAW GOVERNING THE ISSUE WERE THE SAME AND THOUGH THE LD . DR VEHEMENTLY ASSAILED THE ORDER OF THE LD. CIT(A) COULD NOT POINT OUT ANY DIFFERENCE I N THE FACTS AND LAW IN THE CASE ON HAND WITH THE AFORESAID ORDER, THEREFORE, FOLLOWING THE ORDER OF THE TRIBUNAL AND TAKING NOTE OF THE HONBLE BOMBAY HIGH COURTS ORDER IN APEAK INFOTECH (SUPRA), WE UPHOLD THE ORDER OF THE LD. CIT(A) AND DISMISS THE APPEAL OF THE REVENUE. 15. IN THE RESULT, APPEAL OF REVENUE IS DISMISSED. ORDER IS PRONOUNCED IN THE OPEN COURT ON 1ST M AY, 2019. SD/- SD/- (DR. A. L. SAINI) (A. T. VARKEY) ACCOUNTANT MEMBER JUDICIAL MEMBER DATED: 1ST MAY, 2019 BISWAJIT (SR.P.S.) 11 ITA NO. 2269/KOL/2016 M/S. GATEWAY ENCLAVE PVT. LTD., AY 2012-13 COPY OF THE ORDER FORWARDED TO: 1 APPELLANT ITO, WARD 10(4), P-7, CHOWRINGHEE SQU ARE, 3 RD FLOOR, KOLKATA 700 069. 2 RESPONDENT M/S. GATEWAY ENCLAVE PVT. LTD., 13, K. B. SARANI, BLOCK-C303, DUMDUM, KOLKATA 700 080. 3 4 5 CIT(A) -4, KOLKATA CIT , KOLKATA. DR, KOLKATA BENCHES, KOLKATA / TRUE COPY, BY ORDER, ASSISTANT REGISTRAR ITAT, KOLKATA