ITO, New Delhi V. M/s. Elative Building Solutions Pvt. Ltd., New Delhi

ITA 2498/DEL/2017

• Counselvise Citation: [2021] 108 COUNSELVISE.COM (IT) 8700 (ITAT-DELHI)
• Duration Of Justice: 3 year(s) 10 month(s) 28 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 24-03-2021
• Appeal Filed By: Department
• Order Result: Partly Allowed
• Bench Allotted: B
• Assessment Year: 2012-2013
• Appeal Filed On: 26-04-2017
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: JAGDISH SINGH
• Keywords: Unexplained cash credit; Depreciation; Income from undisclosed sources; Source of fund; Assessment record; Sham transactions
• Section: 133(6); 80G; 195; 13; 22; 131; 68

Judgement Text

IN TH E INCOME TAX APPELLATE TRIBUNAL DELHI BENCH : B : NEW DELHI BEFORE SHRI R. K. PANDA, ACCOUNTANT MEMBER AND MS SUCHITRA KAMBLE, JUDICIAL MEMBER ITA NO. 2498 /DEL/201 7 ASSESSMENT YEAR : 20 1 2 - 13 ITO, WARD - 8(2), CR BUILDING, N EW DELHI. VS ELATIVE BUILDING SOLUTIONS PVT. LTD. (FORMERLY M/S MAIDEN BUILDING SOLUTION PVT. LTD.), B - 5, NAND RAM PARK, BHAGAT ENCLAVE, UTTAM NAGAR, NEW DELHI. PAN: AA HCM7197A (APP ELL A NT ) (RESPONDENT) A SSESSEE BY : SHRI SUDESH GARG, ADVOCATE RE VENUE BY : SHRI JAGDISH SINGH, SR. DR DATE OF HEARING : 0 9 . 0 2 . 20 2 1 DATE OF PRONOUNCEMENT : 24 . 0 3 . 20 2 1 ORDER PER R. K. PANDA, AM : TH IS APPEAL FILED BY THE REVENUE IS DIRECTED AGAINST THE ORDER DATED 27 TH JANUARY, 2017 OF THE CIT(A) - 38 , N EW DELHI , RELATING TO ASSESSMENT YEAR 20 12 - 13. ITA NO .2498 /DEL/201 7 2 2. FACTS OF THE CASE, IN BRIEF, ARE THAT THE ASSESSEE IS A COMPANY ENGAGED IN THE BUSINESS OF REAL - ESTATE. IT FILED ITS RETURN OF INCOME ON 14 TH SEPTEMBER, 2012 DECLARING A LOSS OF RS.2,281/ - . DURING THE COURSE OF ASSESSMENT PROCEEDINGS, TH AO ASKED THE ASSESSEE TO GIVE THE DETAILS OF BANK ACCOUNTS INCLUDING FIXED DEPOSITS WITH RECONCILIATION, IF ANY. IN RESPONSE TO THE SAME, THE ASSESSEE REPLIED THAT THERE IS NO BANK ACCOUNT AS ON 31.03.2012 AND, HENCE, THE QUESTION OF BANK RECONCILIATION DOES NOT ARISE. IT WAS ALSO SUBMITTED THAT THE COMPANY DOES NOT HAVE OVERDRAFT FACILITY AND FDR DURING THE YEAR AS ON 31.03.2012. 3. THE AO FURTHER NOTED THAT THIS IS THE FIRST YEAR OF THE ASSESSEE COMPANY AND THE ASS ESSEE HAS SHOWN ITS SHARE CAPITAL AT RS.4,37,500/ - AND SHARE PREMIUM AT RS.6,71,62,500/ - . HE, THEREFORE, ASKED THE ASSESSEE TO EXPLAIN AS TO HOW IT HAS GOT SHARE PREMIUM OF RS.6,71,62,500/ - WHEN ITS AUTHORIZED CAPITAL WAS ONLY RS.5 LAKH AND ISSUED, SUBSCR IBE D AND PAID - UP CAPITAL IS RS.4,37,500/ - ONLY AND THERE IS NO FIXED ASSETS. HE FURTHER ASKED THE ASSESSEE TO GIVE THE NAMES AND PRESENT POSTAL ADDRESSES OF THE PARTIES FROM WHOM THE SAME HAVE BEEN RECEIVED DURING THE YEAR. HE ASKED THE ASSESSEE TO PROVE THEIR IDENTITY, CREDIT WORTHINESS AND GENUINENESS OF THE TRANSACTION BY FILING THEIR CONFIRMATIONS AS ON DATE AND THEIR CONFIRMATIONS MUST CONTAIN THE BANK ACCOUNT NUMBERS AND THE NAME OF BANK BRANCH FROM WHICH THEY HAVE GIVEN THE SAID AMOUNT, THEIR IT PA RTICULARS/PAN AND WARDS/CIRCLES WHERE ASSESSED TO TAX, COPY OF THEIR AUDITED BALANCE SHEET AND P&L ACCOUNT AND ITA NO .2498 /DEL/201 7 3 COPY OF THEIR INCOME - TAX RETURNS AND COMPUTATION OF INCOME AND COPIES OF EXTRACTS OF THEIR BANK STATEMENT FROM WHICH THE SAID AMOUNT HAS BEEN GI VEN. 4. IN RESPONSE TO THE SAME, THE ASSESSEE FILED THE FOLLOWING DETAILS SHOWING THE RECEIPT OF SHARE CAPITAL AND SHARE PREMIUM FROM FIVE CORPORATE ENTITIES THE DETAILS OF WHICH ARE AS UNDER: - S NO NAME OF ALLOTTEE ADDRESS NO. OF SHARES TOTAL AMOUNT OF S HARE CAPITAL & PREMIUM 1 M/S INSTENT CONSTRUCTION PVT. LTD. 234, 2ND FLOOR, LSC, DDA MARKET, NEAR MADRASI MANDIR, SMART ENCLAVE, NEW DELHI - 110034 6500 1,30,00,000/ - 2 M/S KESRI LAB ELECTRONICS PVT. LTD. 1837/138, SHANTI NAGAR TRI NAGAR, DELHI - 35 6750 1,3 5,00,000/ - 3 M/S FRESHTEX TECHNOLOGIES PVT. LTD. K.NO.797, BADA SHIV MANDIR ROAD, ALIPUR, DELHI - 36 6000 1,20,00,000/ - 4 M/S DELITE BUILDTECH PVT. LTD. A - 110, BHAGWATI VIHAR, UTTAM NAGAR, NEW DELHI - 59 7500 1,5 0 ,00,000/ - (WRONGLY TYPED AS 1,35,00,000/ - ) 5 M/S VISHWANIDHI CHEMICALS PVT. LTD. 2648, 1ST FLOOR, SHADIPUR MAIN MARKET, PATEL NAGAR, NEW DELHI - 110008 7000 1,40,00,000/ - TOTAL 33750 6,75,00,000/ - 5. ALONG WITH THESE DETAILS THE ASSESSEE ALSO FILED THEIR CONFIRMATIONS, AFFIDAVIT OF THE DIRECTORS, ACKNOWLEDGEMENT OF THEIR ITR FOR ASSESSMENT YEAR 2012 - 13, COPY OF THEIR BALANCE - SHEET AND P&L IN RESPECT OF THREE CORPORATE ENTITIES ONLY ACCOUNT AND FORM NO. 2 FILED WITH ROC , BUT , IN RESPECT OF M/S FRESHTEX TECHNOLIGIES PVT. LTD. P&L ACCOUNT NOT FILED A ND IN RESPECT OF M/S VISHWANIDHI CHEMICALS PVT. LTD. ONLY THE AFFIDAVIT OF THE DIRECTOR, UNDA TED CONFIRMATION AND CERTIFIED COPY OF ITA NO .2498 /DEL/201 7 4 ESOLUTION HAVE BEEN FILED. FROM THE VARIOUS DETAILS FURNISHED BY THE ASSESSEE, THE AO HAS OBSERVED AS UNDER: - 2(A): M/S IN STENT CONSTRUCTION PVT. LTD. IN ITS CONFIRMATION HAS STATED THAT M/S MAIDEN BUILDING SOLUTIONS PVT. LTD. HAS ISSUED 6500 EQUITY SHARES OF RS.10/ - EACH AT A PREMIUM OF RS.1990/ - TO IT (MEANS M/S INSTANT CONSTRUCTION PVT. LTD.) AND THEY (MEANS M/S INSTANT CO NSTRUCTION PVT. LTD.) HAVE SOLD THEM 13,000 EQUITY SHARES @ 10/ - EACH AT A PREMIUM OF RS.1000/ - PER SHARE OF M/S CORONET TELECOM PVT. LTD. THE BOOK VALUE OF ONE EQUITY SHARE OF CORONET TELECOM PVT. LTD. IS APPROX. RS.1610/ - . 2(B) M/S KESRI LAB (ELECTRONIC S) PVT. LTD. IN ITS CONFIRMATION HAS STATED THAT M/S MAIDEN BUILDING SOLUTIONS PVT. LTD. HAS ISSUED 6750 EQUITY SHARES OF RS.10/ - EACH AT A PREMIUM OF RS.1990/ - TO IT (MEANS M/S KESRI LAB ELECTRONICS PVT. LTD.) AND THEY (MEANS M/S KESRI LAB ELECTRONICS PVT . LTD) HAVE SOLD THEM 15000 EQUITY SHARES @ 10/ - EACH AT A PREMIUM OF RS.900/ - PER SHARE OF M/S GAJANAN REALCON PVT. LTD. THE BOOK VALUE OF ONE EQUITY SHARE OF GAJANAN REALCON PVT. LTD. IS APPROX. RS.996.16P. 2(C) M/S FRESHTEX TECHNOLOGIES PVT. LTD. IN IT S CONFIRMATION HAS STATED THAT M/S MAIDEN BUILDING SOLUTIONS PVT. LTD. HAS ISSUED 6000 EQUITY SHARES OF RS.10/ - EACH AT A PREMIUM OF RS.1990/ - TO IT (MEANS M/S FRESHTEX TECHNOLOGIES PVT. LTD.) AND THEY (MEANS M/S FRESHTEX TECHNOLOGIES PVT. LTD) HAVE SOLD T HEM 15000 EQUITY SHARES @ 10/ - EACH AT A PREMIUM OF RS.800/ - PER SHARE OF M/S OM JAI JAGDISH PVT. LTD. THE BOOK VALUE OF ONE EQUITY SHARE OF M/S OM JAI JAGDISH PVT. LTD. IS APPROX. RS.962.61 P. HOWEVER IT IS STRANGE TO SEE THAT THERE IS NO SUCH COMPANY IN THE NAME OF M/S OM JAI JAGDISH PVT. LTD. AS VERIFIED FROM THE MCA WEBSITE. THE ACTUAL COMPANY NAME IS M/S OM JAI JAGDISH INFRASTRUCTURE PVT. LTD., BUT ASSESSEE HAS NEVER WRITTEN THE CORRECT NAME NEITHER INTIMATED THIS FACT. 2(D) M/S DELITE BUILDTECH PVT. LTD. IN ITS CONFIRMATION HAS STATED THAT M/S MAIDEN BUILDING SOLUTIONS PVT. LTD. HAS ISSUED 7500 EQUITY SHARES OF RS.10/ - EACH AT A PREMIUM OF RS.1990/ - TO IT (MEANS M/S DELITE BUILDTECH PVT. LTD.) AND THEY (MEANS M/S DELITE BUILDTECH PVT. LTD) HAVE SOLD THEM 18750 EQUITY SHARES @ 10/ - EACH AT A PREMIUM OF RS.800/ - PER SHARE OF M/S PAWANSUT MEDIA SERVICES PVT. LTD. THE BOOK VALUE OF ONE EQUITY SHARE OF M/S PAWANSUT MEDIA SERVICES PVT. LTD. IS APPROX. RS.897.40P. 2(E) M/S VISHWANIDHI CHEMICALS PVT. LTD. IN ITS CONFIRMATION HAS STATED THAT M/S MAIDEN BUILDING SOLUTIONS PVT. LTD. HAS ISSUED 7000 EQUITY SHARES OF RS.10/ - EACH AT A PREMIUM OF RS.1990/ - TO IT (MEANS M/S VISHWANIDHI CHEMICALS PVT. LTD.) AND THEY (MEANS M/S VISHWANIDHI CHEMICALS PVT. LTD) HAVE SOL D THEM 17500 EQUITY SHARES @ 10/ - EACH AT A PREMIUM OF RS.800/ - PER ITA NO .2498 /DEL/201 7 5 SHARE OF M/S OXYGEN PROJECTS PVT. LTD. THE BOOK VALUE OF ONE EQUITY SHARE OF M/S OXYGEN PROJECT PVT. LTD. IS APPROX. RS.887.39P. 6. THE AO NOTED THAT IN SOME CASES OF HON BLE HIGH COURT HAS HELD THAT IF THE AO IS NOT SATISFIED WITH THE DOCUMENTS FILED BY THE ASSESSEE TO PROVE THE IDENTITY, CREDIT WORTHINESS AND GENUINENESS OF THE TRANSACTIONS AS PROVIDED IN SECTION 68, THEN, THE AO CAN EXERCISE HIS POWERS CONFERRED UPON HIM UNDER THE IT A CT TO MAKE FURTHER ENQUIRIES/INVESTIGATIONS. FROM THE ACKNOWLEDGEMENT OF THE INCOME - TAX RETURNS FILED BEFORE HIM, HE NOTED THAT THESE ARE NOT SATISFACTORY LOOKING TO THE VOLUME AND NATURE OF ALLEGED SHARE CAPITAL AND SHARE PREMIUM SHOWN TO HAVE BEEN RECEI VED FROM THEM. HE, THEREFORE, ISSUED SUMMONS U/S 131(1) TO THE FIVE CORPORATE ENTITIES AT THE ADDRESS GIVEN IN THEIR RESPECTIVE AFFIDAVITS/CONFIRMATIONS. HE ALSO ASKED THE ASSESSEE TO PRODUCE THE PRINCIPAL OFFICERS OF THE ABOVE COMPANIES. SINCE THE ASSE SSEE FAILED TO DISCHARGE THE ONUS CAST ON IT BY SUBSTANTIATING THE IDENTITY AND CREDIT WORTHINESS OF THE INVESTOR COMPANIES AND THE GENUINENESS OF THE TRANSACTION, THE AO DISBELIEVED THE SHARE CAPITAL AND SHARE PREMIUM AT RS.6,76,00,000/ - (CORRECT FIGURE R S.6,75,00,000/ - ) AND INVOKING THE PROVISIONS OF SECTION 68 MADE ADDITION OF THE SAME. WHILE DOING SO, HE HELD THAT MERE PRODUCTION OF INCORPORATION DETAILS, PAN NOS. OR THE FACT THAT THIRD PERSON 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. THE AO SIMILARLY MADE ADDITION OF RS.8,50,000/ - IN THE NAME OF M/S WAMIL CLOTHING PVT. LTD. TO BE UNEXPLAINED CREDITS IN THE BOOKS OF THE ASSESSEE AS THE SUM MONS U/S 131 ITA NO .2498 /DEL/201 7 6 WAS RECEIVED BACK UNSERVED. HE ACCORDINGLY DETERMINED THE TOTAL INCOME OF THE ASSESSEE AT RS.6,84,54,504/ - AS AGAINST THE RETURNED LOSS OF RS.2,281/ - . 7. BEFORE THE CIT(A), THE ASSESSEE SUBMITTED THAT: - 1. T HE SUM FOUND CREDITED IN THE BOOKS OF ACCOUNTS OF THE A SSESSEE IS NOT CASH OR CHEQUE, HENCE, SECTION 68 DOESN T GET TRIGGERED. 2. THE CREDIT IN THE BOOKS OF THE A SSESSEE AROSE ON ACCOUNT OF PURCHASE OF SHARES AND NOT ON ACCOUNT OF RECEIPT OF ANY MONEY FROM THE INVESTING COMPANIES. 3. THE I NVESTING COMPANIES FURNISHED ALL THE DOCUMENTS CONFIRMING THE TRANSACTIONS. 4. THERE WAS NO ALLEGATION OR EVIDENCE OF OPERATION BY AN ACCOMMODATION ENTRY OPERATOR. 5. THERE IS NO EVIDENCE FOR ALLEGATION OF CASH DEPOSITS IN EITHER THE BANK ACCOUNTS OF THE A SSESSEE OR THE INVESTING COMPANIES. 6. THE ALLEGATIONS ARE FOR PURCHASE OF SHARE AT HIGHER THAN REAL VALUE FROM THE INVESTING COMPANIES AND ALLOTTING SHARES TO THE INVESTING COMPANIES AT EQUALLY HIGH PRICE. IF THE HIGHER PRICE IS REDUCED TO THE LEVEL JUSTI FIED ACCORDING TO THE ASSESSING OFFICER, THEN ALSO THERE WILL NOT BE ANY INCOME OR TAX IMPLICATION TO THE A SSESSEE . 7. ENTIRE EXERCISE HAS NOT RESULTED INTO EARNING OF EVEN A SINGLE RUPEE TO THE A SSESSEE IN THE REVENUE ACCOUNT OR EVEN IN CAPITAL ACCOUNT. ITA NO .2498 /DEL/201 7 7 8. THE ASSESSING OFFICER HAS MIS - DIRECTED HIMSELF IN REFERRING TO VARIOUS CASES IN THE ASSESSMENT ORDER WITHOUT FULLY APPRECIATING THE FACTS OF THE CASE. AFTER EXPLAINING THE FACTS OF THE CASE, IT IS CLEAR THAT NONE OF THE CASES REFERRED BY THE AO HAS IMPL ICATIONS/ APPLICATIONS TO THE APPELLANT S CASE. IN ALL THE CASES REFERRED TO BY THE AO SUMS OF MONEY WERE RECEIVED BY THE TAX PAYER WHICH GAVE RISE TO APPLICATION OF SECTION 68. 9. SECTION 68 SPECIFICALLY CARRIES THE HEADING CASH CREDIT . IF THERE IS NO C ASH CREDIT THIS SECTION DOES NOT GET TRIGGERED. 10. IN THE APPELLANT S CASE CREDIT WORTHINESS OF THE SHAREHOLDERS CANNOT BE SUSPECTED AS THEY HAVE IN EFFECT NOT ADVANCED EVEN A SINGLE PENNY TO THE APPELLANT. 11. IDENTITY OF THE SHAREHOLDERS WAS INDISPUTA BLY ESTABLISHED. 12. SECTION 68 ESSENTIALLY ADDRESSES THE SITUATIONS WHERE MONEYS OR SUMS ARE RECEIVED BY THE TAXPAYER, CREDITED IN THE BOOKS OF ACCOUNTS BUT SOURCE OF THE MONEYS/SUMS RECEIVED IS NOT SATISFACTORY. 8. IT WAS ARGUED THAT THE AO HAS FAILED TO APPRECIATE THE FACTS OF THE CASE IN TOTALITY. HE HAS FALLEN IN ERROR IN NOT APPRECIATING THAT RS. 6,76,00,000/ - WHICH WAS PAYABLE TO 5 INVESTING COMPANIES ON ACCOUNT OF PURCHASE OF SHARES FROM THEM WAS ACTUALLY NOT PAID AS MONEYS IN CASH/CHEQUE BUT WAS ADJUSTED AGAINST THE ISSUE OF CAPITAL ON PREMIUM TO THEM. THE AO HAS ERRONEOUSLY TREATED THIS AMOUNT OF RS. 6,76,00,000/ - AS UNEXPLAINED CASH CREDITS WITHIN THE MEANING OF SECTION 68 OF THE ITA NO .2498 /DEL/201 7 8 INCOME TAX ACT, 1961 PRESUMING THIS TO BE UNEXPLAINED CASH RECEIVE D ON ACCOUNT OF ISSUE OF SHARES. IT WAS ARGUED T HAT THE A SSESSEE COMPANY WAS INCORPORATED ON 10.01.2012 AND THERE WAS HARDLY ANY PERIOD OF BUSINESS ACTIVITY AVAILABLE TO THE A SSESSEE DURING THE FINANCIAL YEAR UNDER CONSIDERATION. IN FACT THE AO HAS HIMSELF NOTED THAT THE APPELLANT IS NOT WORTHY OF ATTRACTING CAPITAL AT SUCH HIGH PREMIUM. 9. IT WAS FURTHER ARGUED THAT: - I. ALL THE TRANSACTIONS HAVE BEEN RECORDED ON THE 31.03.2012. II. THE TRANSACTIONS HAVE NOT RESULTED INTO ANY RECEIPT BY WAY OF CHEQUE OR CASH TO THE APPELLANT COMPANY. AS A CONSEQUENCE, IT CAN BE SAID THAT THE APPELLANT COMPANY HAS NOT GAINED ANYTHING IN TERMS, OF RECEIPT OF MONEY. III. ALLEGEDLY HUGE PREMIUMS HAVE BEEN CHARGED ON THE ALLOTMENT OF CAPITAL AND AT THE SAME TIME CONSIDERATION HAVE BEEN RECEIVED AS SHARES OF CERTAIN COMPANIES AT A PRICE ALLEGEDLY MUCH HIGHER THAN THE FACE VALUE OF THE SHARES ACQUIRED. IV. THE TRANSACTIONS HAVE NOT RESULTED INTO ANY INFLOW OR OUTFLOW TO THE APPELLANT COMPANY OR ANY OF THE TRANSACTING COMPANY . IN THAT SENSE, THE TRANSACTION IS CASH NEUTRAL. V. AS A RESULT OF THESE TRANSACTIONS, THE APPELLANT BECAME SHAREHOLDERS HAVING INVESTMENTS IN FOLLOWING COMPANIES : - (A) M/S CORONET TELECOM (P) LTD (B) M/S GAJANAN REALCON (P) LTD (C) M/S OM JAI JAGDISH ( P) LTD ITA NO .2498 /DEL/201 7 9 (D) M/S PAWANSUT MEDIA SERVICES (P) LTD (E) M/S OXYGEN PROJECTS (P) LTD VI. FURTHER, THE FOLLOWING COMPANIES BECAME SHAREHOLDERS OF THE APPELLANT : - (A) M/S INSTENT CONSTRUCTION PVT. LTD (B) M/S KESRI LAB ELECTRONICS (P) LTD (C) M/S FRESHTEX TECHNOLO GIES (P) LTD (D) M/S DELITE BUILDTECH (P) LTD (E) M/S VISHWANIDHI CHEMICALS (P) LTD 10. SO FAR AS THE ALLEGATION MADE BY THE AO THAT THE A SSESSEE HAS ALLOTTED SHARE AT A VALUE HUGELY DISPROPORTIONATE TO THE REAL VALUE IS CONCERNED, IT WAS ARGUED THAT THE ASSESSEE AT THE SAME TIME PURCHASED SHARES AT A VALUE MUCH HIGHER THAN THE REAL VALUE AND THE ALLOTMENT HAS BEEN MADE TO THE SAME PARTY FROM WHOM SHARES HAVE BEEN PURCHASED AND THERE IS NO INFLOW OR OUTFLOW OF MONEY EVEN THOUGH THE STATED CONSIDERATION IS INFLATED. IT WAS ARGUED THAT T HE AO, WHILE TAKING COGNIZANCE OF THIS SITUATION FROM THE TAX PERSPECTIVE HAVE LOOKED AT ONE SIDE OF THE TRANSACTION AND TOTALLY IGNORED THE OTHER SIDE OF THE TRANSACTION. IF, FOR THE ARGUMENT SAKE, ALL THE ALLEGATIONS ARE CON SIDERED TO BE TRUE, THEN THE RESULT WILL BE THAT THE ALLOTMENT OF SHARES SHOULD HAVE BEEN AT FACE VALUE AND THE PURCHASE OF THE SHARES FROM THE INVESTING COMPANIES SHOULD ALSO BE AT FACE VALUE. IF THE ACCOUNTS ARE ACCORDINGLY MODIFIED, THE BALANCE SHEET OF THE A SSESSEE WILL REMAIN SUBSTANTIVELY SAME AND THERE WILL STILL NOT BE ANY INCOME TAX IMPLICATIONS. IT WAS ACCORDINGLY ARGUED THAT ITA NO .2498 /DEL/201 7 10 EVEN IF ALL THE ARGUMENTS/ ALLEGATIONS OF THE AO ARE CONSIDERED TO BE TRUE AND SUSTAINABLE, THEN ALSO THERE SHOULD NOT BE A NY ADDITION TO THE INCOME OF THE A SSESSEE AS THERE IS NO TAX IMPLICATION IN THE CASE OF THE APPELLANT. 11. SO FAR AS THE VARIOUS DECISIONS RELIED ON BY THE AO ARE CONCERNED, IT WAS ARGUED THAT THESE DECISIONS ARE NOT APPLICABLE TO THE FACTS OF THE PRESEN T CASE SINCE, IN THE INSTANT CASE, THERE WAS NO TRANSACTION OF CASH AND, THEREFORE, THE PROVISIONS OF SECTION 68 ARE NOT APPLICABLE. REFERRING TO THE DECISION OF THE TRIBUNAL IN THE CASE OF ITO VS. M/S VITAL COMMUNICATIONS LTD., 2016 - TIOL - 1102 - ITAT - DEL, I T WAS ARGUED THAT UNDER IDENTICAL CIRCUMSTANCES THE TRIBUNAL HAS DISMISSED THE APPEAL FILED BY THE REVENUE HOLDING THAT MERE TRANSFER OF ENTRIES FROM ONE HEAD TO ANOTHER CANNOT BE TREATED AS SUM CREDITED IN THE ACCOUNT BOOKS FOR THE PURPOSE OF SECTION 68 O F THE ACT. FURTHER, EXCHANGE OF SHARES ALSO CANNOT BE BROUGHT INTO THE AMBIT OF SECTION 68 OF THE ACT. 12. BASED ON THE ARGUMENTS ADVANCED BY THE ASSESSEE, THE LD.CIT(A) DELETED THE ADDITION MADE BY THE AO. WHILE DOING SO, SHE HELD THAT THE SHARE TRAN SACTIONS BY THE ASSESSEE ARE ONLY ON PAPER AND ARE IN THE NATURE OF SWAPPING OF SHARES AT A VERY HIGH PREMIUM. THE SAID TRANSACTIONS AND ARRANGEMENTS HAVE NOT RESULTED IN EARNING/RECEIPT OF A SINGLE RUPEE AND NO CASH OR CHEQUE HAVE BEEN RECEIVED IN ASSES SEE S BANK ACCOUNT. THEREFORE, THE DECISION OF THE TRIBUNAL IN THE CASE OF VITAL COMMUNICATIONS (SUPRA) IS SQUARELY APPLICABLE TO THE FACTS OF THE PRESENT CASE. ITA NO .2498 /DEL/201 7 11 13. AGGRIEVED WITH SUCH ORDER OF THE CIT(A), THE REVENUE IS IN APPEAL BEFORE THE TRIBUNAL. 1. LD.CIT(A) ERRED IN LAW AND ON FACTS OF THE CASE IN DELETING THE ADDITION OF RS.6,76,00,000/ - MADE BY THE AO UNDER SECTION 68 OF THE IT ACT IN RESPECT OF ALLEGED SHARE CAPITAL AND PREMIUM. 2. LD. CIT(A) ERRED IN LAW AND ON FACTS OF THE CASE IN DELETING TH E ADDITION OF RS.8,50,000/ - MADE BY THE AO UNDER SECTION 68 OF THE IT ACT IN RESPECT OF ALLEGED CREDITOR. 3. THE APPELLANT CRAVES LEAVE, MODIFY, ADD OR FOREGO ANY GROUND(S) OF APPEAL AT ANY TIME BEFORE OR DURING THE HEARING OF THIS APPEAL. 14. THE LD. D R HEAVILY RELIED ON THE ORDER OF THE AO. HE SUBMITTED THAT IN THE INSTANT CASE, THE ASSESSEE HAS ISSUED SHARES AT A HIGH PREMIUM TO THE INVESTING COMPANIES AND HAS ALSO PURCHASED SHARES AT A HIGH PREMIUM FROM THE INVESTING COMPANIES. DESPITE BEING ASKED BY THE AO, THE ASSESSEE COMPANY FAILED TO PRODUCE THE DIRECTORS OF THE INVESTING SHAREHOLDER COMPANIES FOR THEIR PHYSICAL APPEARANCE AND THERE IS APPARENT CLOSE CONNECTION BETWEEN VARIOUS COMPANIES. HE ACCORDINGLY SUBMITTED THAT UNDER THE FACTS AND CIRCUMS TANCES OF THE CASE, THE LD.CIT(A) WAS NOT JUSTIFIED IN DELETING THE ADDITION MADE BY THE AO. 15. THE LD. COUNSEL FOR THE ASSESSEE , ON THE OTHER HAND, STRONGLY RELIED ON THE ORDER OF THE CIT(A) AND REITERATED THE ARGUMENTS ADVANCED BEFORE THE CIT(A). HE S UBMITTED THAT IN THE INSTANT CASE, THERE IS NO ALLEGATION OR EVIDENCE OF OPERATION OF ACCOMMODATION ENTRY OPERATOR AND THERE IS NO ALLEGATION OF CASH DEPOSITS IN EITHER THE BANK ACCOUNTS OF THE ASSESSEE OR THE INVESTING COMPANIES. THE ENTIRE EXERCISE HAS NOT RESULTED INTO EARNING OF EVEN A SINGLE RUPEE TO THE ASSESSEE EITHER IN THE ITA NO .2498 /DEL/201 7 12 REVENUE ACCOUNT OR IN THE CAPITAL ACCOUNT AND THE PROVISIONS OF SECTION 68 OF THE IT ACT ARE NOT APPLICABLE TO THE FACTS OF THE PRESENT CASE SINCE THERE WAS NO CASH TRANSACTION T AKEN PLACE. THE LD. COUNSEL FOR THE ASSESSEE DREW THE ATTENTION OF THE BENCH TO THE PROVISIONS OF SECTION 68 OF THE ACT AND SUBMITTED THAT IT BASICALLY CARRIES THE HEADING: CASH CREDIT. THEREFORE, IF THERE IS NO CASH TRANSACTION, THEN, THE SAID PROVIS IONS CANNOT BE APPLICABLE. REFERRING TO THE DECISION OF THE HON BLE CALCUTTA HIGH COURT IN THE CASE OF JATIA INVESTMENT COMPANY VS. CIT, 206 ITR 718, HE SUBMITTED THAT THE HON BLE HIGH COURT IN THE SAID DECISION HAS HELD THAT IF THERE WAS NO REAL CASH EN TRY ON THE CREDIT SIDE OF THE CASH BOOK, BUT, MERELY A NOTIONAL OR FICTITIOUS CASH ENTRY IS THERE, THERE IS NO REAL CREDIT OF CASH TO ITS CASH BOOK AND, THEREFORE, THE QUESTION OF INCLUSION OF THE AMOUNT OF THE ENTRY AS UNEXPLAINED CASH CREDIT CANNOT ARISE . REFERRING TO THE DECISION OF THE HON BLE MADRAS HIGH COURT IN THE CASE OF VR GLOBAL ENERGY PVT. LTD. VS. ITO, 96 TAXMANN.COM 647, HE SUBMITTED THAT THE HON BLE HIGH COURT IN THE SAID DECISION HAS HELD THAT WHERE ASSESSEE ALLOTTED SHARES TO A COMPANY IN S ETTLEMENT OF PRE - EXISTING LIABILITY OF ASSESSEE TO THE SAID COMPANY, SINCE NO CASH WAS INVOLVED IN TRANSACTION OF SUCH ALLOTMENT OF SHARES, CONVERSION OF THIS LIABILITY INTO SHARE CAPITAL AND SHARE PREMIUM COULD NOT BE TREATED AS UNEXPLAINED CASH CREDITS U /S 68 OF THE ACT. REFERRING TO VARIOUS DECISIONS, HE SUBMITTED THAT UNDER IDENTICAL CIRCUMSTANCES, THE ADDITION MADE U/S 68 OF THE ACT WAS DELETED BY THE TRIBUNAL SINCE THERE WAS NO ACTUAL CASH TRANSACTIONS. HE ALSO RELIED ON THE FOLLOWING DECISIONS: - ITA NO .2498 /DEL/201 7 13 I) JAT IA INVESTMENT CO. VS. CIT 206 ITR 718(CAL); II) ITO VS. M/S VITAL COMMUNICATION LTD., ITA NO.2448/DEL/2007, ORDER DATED 15.06.2016; III) V. R. GLOBAL ENERGY PVT. LTD. VS. ITO, 407 ITR 145 (MAD); IV) H.H. SRI RAMA VERMA VS. CIT, REPORTED IN 57 TAXMAN 149 (SC). V) CIT VS. SOHAN LAL SINGHANIA, (1999) 235 ITR 616 (ALL); VI) BLOOMING TRADELINK PVT. LTD. VS. ITO, ITA NO.2691/KOL/2018, ORDER DATED 28.02.2020; VII) ITO VS. M/S. SAFFRON COMTRADE PVT. LTD. , VIDE ITA NO.2029/KOL/2016, ORDER DATED 28.08.2019; VIII) ITO VS. M/S. PANSU COMMERCIAL P VT. LTD. , ITA NO.1859/KOL/2017, ORDER DATED 08.05.2019 AND IX) ITO VS. M/S. SUNGLOW DEALCOM PVT. LTD. , ITA NO.2178/KOL/2016, ORDER DATED 16.11.2018 ; AND X) ITO VS. M/S ANAND ENTERPRISES LTD., ITA NO.1614 /KOL/2016, ORDER DATED 26.09.2018. 16 . WE HAVE CONSIDER ED THE RIVAL ARGUMENTS MADE BY BOTH THE SIDES , PERUSED THE ORDERS OF THE ASSESSING OFFICER AND CIT(A) AND THE PAPER BOOK FILED ON BEHALF OF THE ASSESSEE. WE HAVE ALSO CONSIDERED THE VARIOUS DECISIONS CITED BEFORE US. WE FIND, THE ASSESSEE, IN THE INSTANT CASE, HAS RECEIVED THE SHARE CAPITAL OF RS.4,37,500/ - AND A SHARE PREMIUM OF RS. 6,71,62,500/ - BY ISSUE OF 33750 SHARES TO FIVE CORPORATE ENTITIES, THE DETAILS OF WHICH ARE GIVEN AT PARA 4 OF T HIS ORDER. ALTHOUGH THE ASSESSEE FILED THE CONFIRMATIONS, AFFI DAVIT OF THE DIRECTORS, ACKNOWLEDGEMENT OF THEIR ITRS FOR THE ASSESSMENT YEAR 2012 - 13, COPY OF THEIR BALANCE SHEET AND P&L ACCOUNT, ETC., HOWEVER, THE ASSESSEE FAILED TO PRODUCE THE DIRECTORS/PRINCIPAL OFFICERS OF THESE COMPANIES FOR RECORDING OF THEIR STA TEMENTS BY THE AO . ACCORDING TO THE AO, THE ASSESSEE HAS ISSUED SHARES OF CERTAIN CORPORATE ENTITIES AT A HIGH PREMIUM AND, AT THE SAME TIME, PURCHASED CERTAIN SHARES FROM THESE COMPANIES AT A HIGH PREMIUM AND ALL THE COMPANIES TO WHOM SHARES HAVE ITA NO .2498 /DEL/201 7 14 BEEN SO LD AND FROM WHOM SHARES HAVE BEEN PURCHASED ARE INTER - RELATED COMPANIES. HE, THEREFORE, INVOKING THE PROVISIONS OF SECTION 68 OF THE ACT, MADE ADDITION OF RS.6,76,00,000/ - TO THE INCOME OF THE ASSESSEE. SIMILARLY, HE ALSO MADE ADDITION OF RS.8,50,000/ - U /S 68 OF THE ACT IN RESPECT OF ONE CREDITOR, NAMELY, M/S WAMIL CLOTHING PVT. LTD., ON THE GROUND THAT THE SUMMONS ISSUED U/S 131 OF THE ACT WAS RECEIVED BACK UNSERVED AND, THEREFORE, THE PROVISIONS OF SECTION 68 OF THE ACT ARE APPLICABLE. WE FIND, THE LD. CIT(A), DELETED THE ADDITION BY RELYING ON THE DECISION OF THE TRIBUNAL IN THE CASE OF M/S VITAL COMMUNICATIONS LTD. (SUPRA) ON THE GROUND THAT THE SHARE TRANSACTIONS BY THE ASSESSEE ARE ONLY ON PAPER AND ARE IN THE NATURE OF SWAPPING OF SHARES AT A VERY H IGH PREMIUM. FURTHER, THE SAID TRANSACTIONS AND ARRANGEMENTS HAVE NOT RESULTED IN EARNING/RECEIPT OF A SINGLE RUPEE AND NO CASH OR CHEQUE HAVE BEEN RECEIVED IN ASSESSEE S BANK OR IN HAND. 17. WE DO NOT FIND ANY INFIRMITY IN THE ORDER OF THE LD.CIT(A) ON THIS ISSUE. ADMITTEDLY, THE ASSESSEE DOES NOT HAVE ANY BANK ACCOUNT DURING THE RELEVANT ASSESSMENT YEAR, A FACT BROUGHT ON RECORD BY THE AO HIMSELF. THE PROVISIONS OF SECTION 68 OF THE IT ACT, 1961 READ AS UNDER: - CASH CREDITS. 68. WHERE ANY SUM IS FOUN D CREDITED IN THE BOOKS OF AN ASSESSEE MAINTAINED FOR ANY PREVIOUS YEAR, AND THE ASSESSEE OFFERS NO EXPLANATION ABOUT THE NATURE AND SOURCE THEREOF OR THE EXPLANATION OFFERED BY HIM IS NOT, IN THE OPINION OF THE 79 [ASSESSING] OFFICER, SATISFACTORY, THE SUM SO CREDITED MAY BE CHARGED TO INCOME - TAX AS THE INC OME OF THE ASSESSEE OF THAT PREVIOUS YEAR : THE FOLLOWING PROVISOS SHALL BE INSERTED IN SECTION 68 BY THE FINANCE ACT, 2012, W.E.F. 1 - 4 - 2013 : ITA NO .2498 /DEL/201 7 15 PROVIDED THAT WHERE THE ASSESSEE IS A COMPANY, (NOT BEING A COMPANY IN WHICH THE PUBLIC ARE SUBSTANTIALLY INTERES TED) AND THE SUM SO CREDITED CONSISTS OF SHARE APPLICATION MONEY, SHARE CAPITAL, SHARE PREMIUM OR ANY SUCH AMOUNT BY WHATEVER NAME CALLED, ANY EXPLANATION OFFERED BY SUCH ASSESSEE - COMPANY SHALL BE DEEMED TO BE NOT SATISFACTORY, UNLESS ( A ) THE PERSON, BEI NG A RESIDENT IN WHOSE NAME SUCH CREDIT IS RECORDED IN THE BOOKS OF SUCH COMPANY ALSO OFFERS AN EXPLANATION ABOUT THE NATURE AND SOURCE OF SUCH SUM SO CREDITED; AND ( B ) SUCH EXPLANATION IN THE OPINION OF THE ASSESSING OFFICER AFORESAID HAS BEEN FOUND TO B E SATISFACTORY: PROVIDED FURTHER THAT NOTHING CONTAINED IN THE FIRST PROVISO SHALL APPLY IF THE PERSON, IN WHOSE NAME THE SUM REFERRED TO THEREIN IS RECORDED, IS A VENTURE CAPITAL FUND OR A VENTURE CAPITAL COMPANY AS REFERRED TO IN CLAUSE ( 23FB ) OF SECTION 10 . 18. AS PER THE ABOVE PROVISION W HERE ANY SUM IS FOUND CR EDITED IN THE BOOKS OF AN ASSESSEE MAINTAINED FOR ANY PREVIOUS YEAR, AND THE ASSESSEE OFFERS NO EXPLANATION ABOUT THE NATURE AND SOURCE THEREOF OR THE EXPLANATION OFFERED BY HIM IS NOT SATISFACTORY ACCORDING TO THE AO, THE SUM SO CREDITED MAY BE CHARGED TO INCOME - TAX AS THE INCOME OF THE ASSESSEE OF THAT PREVIOUS YEAR . ANY SUM HAS NOT BEEN DEFINED IN THE INCOME - TAX ACT . H OWEVER, THE HON BLE SUPREME COURT HAD AN OCCASION TO ANALYSE THE USE OF THE EXPRESSION: ANY SUMS PAID WHILE DECIDING A CASE U/S 80G O F THE ACT IN THE CASE OF H. H . SRI RAMA VERMA VS. CIT, REPORTED IN 57 TAXMAN 149 (SC). THE RELEVANT OBSERVATIONS OF THE HON BLE SUPREME COURT AT PARA 4 OF THE ORDER READS AS UNDER: - 4. THE LANGUAGE USED IN SECTION 80G(2)(A) IS CLEAR AND UNAMBIGUOUS. ON A PLAIN READING OF THE SECTION, IT IS APPARENT THAT AN ASSESSEE IS ENTITLED TO CLAIM DEDUCTION FROM HIS INCOME ON THE AMOUNT OF MONEY PAID BY HIM AS DONATION TO THE AUTHORITIES AND FOR THE CAUSES SPECIFIE D THEREIN. THE USE OF THE EXPRESSION 'ANY SUMS PAID' CONTEMPLATES PAYMENT OF AN AMOUNT OF MONEY. ONE OF THE DICTIONARY MEANINGS OF THE EXPRESSION 'SUM' MEANS ANY INDEFINITE ITA NO .2498 /DEL/201 7 16 AMOUNT OF MONEY. THE CONTEXT IN WHICH THE EXPRESSION 'SUMS PAID BY THE ASSESSEE' HA S BEEN USED MAKES THE LEGISLATIVE INTENT CLEAR THAT IT REFERS TO THE AMOUNT OF MONEY PAID BY THE ASSESSEE AS DONATION. THE ACT PROVIDES FOR ASSESSMENT OF TAX ON THE INCOME DERIVED BY AN ASSESSEE DURING T HE ASSESSMENT YEAR ; THE INCOME RELATES TO THE AMOUNT OF MONEY EARNED OR RECEIVED BY AN ASSESSEE. THEREFORE, FOR PURPOSES OF CLAIMING DEDUCTION FROM INCOME - TAX UNDER SECTION 80G(2)(A) , THE DONATION MUST BE A SUM OF MONEY PAID BY THE ASSESSEE. THE PLAIN MEANING OF THE WORDS USED IN THE SECTION DOES NOT CONTEMPLATE DONATIONS IN KIND. 5. ON A CAREFUL SCRUTINY OF THE TWO OPINIONS IN TH E AFORESAID JUDGMENTS, WE ARE IN AGREEMENT WITH THE VIEW TAKEN BY THE HIGH COURTS OF ANDHRA PRADESH, ALLAHABAD AND GUJARAT IN HOLDING THAT SECTION 80G(2)(A) CONTEMPLATES ONLY CASH AMOUNT OF MONEY AS DON ATION, FOR CLAIMING RELIEF OF DEDUCTION AND IT DOES NOT REFER TO ANY DONATION MADE IN KIND. 19. WE FIND, THE COORDINATE BENCH OF THE TRIBUNAL IN THE CASE OF VITAL COMMUNICATION LTD. (SUPRA) WHILE HOLDING THAT THE PROVISIONS OF SECTION 68 CANNOT BE APPLI CABLE WHERE SHARES WERE ISSUED AGAINST THE SHARES RECEIVED UNDER THE SWAPPING ARRANGEMENTS AND NO FRESH AMOUNT OF MONEY WAS BROUGHT INTO THE BOOKS BY WAY OF CASH/CHEQUE/DRAFT HAS OBSERVED AS UNDER : - 8.3 WE FIND FORCE IN THE LD. CIT(A)'S FINDING THAT THE A FORESAID ADDITION CANNOT BE SUSTAINED FOR ANOTHER LEGAL PREMISE ALSO. SECTION 68 OF THE I.T. ACT 1961 UNDER WHICH THESE ADDITIONS HAVE BEEN MADE BY THE ASSESSING OFFICER READS AS UNDER: - 'WHERE ANY SUM IS FOUND CREDITED IN THE BOOKS OF AN ASSESSEE MAINTAINED FOR ANY PREVIOUS YEAR, AND THE ASSESSEE OFFERS NO EXPLANATION ABOUT THE NATURE AND SOURCES 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.' 8.3.1 IT IS EVIDENT FROM THE PERUSAL OF THIS PROVISION THAT SECTION 68 CAN BE INVOKED ONLY IF ANY 'SUM' IS CREDITED IN THE ACCOUNT BOOKS OF THE ASSESSEE FOR ITA NO .2498 /DEL/201 7 17 WHICH NO SATISFACTORY EXPLANATIONS COULD BE FURNISHED BY THE ASSESSEE. 'SUM' DENOTES THE MONEY BROUGHT INTO THE ACCOUNT BOOKS BY WAY OF CASH / CHEQUE / DRAFT. MERE TRANSFER OF ENTRIES FROM ONE HEA D TO ANOTHER CANNOT BE TREATED AS SUM CREDITED IN THE ACCOUNT BOOKS FOR THE PURPOSE OF SEE 68 OF THE IT ACT . SIMILARLY, EXCHANGE OF SHARES ALSO CANNOT BE BROUGHT INTO THE AMBIT OF SECTION 68 OF THE IT ACT. IN THE PRESENT CASE, OUT OF THE ADDITION OF RS.27, 00 , 00 , 000 MADE U/S. 68 OF THE IT ACT , THE AMOUNT OF RS.25,00, 00 ,000 WAS NOT BROUGHT INTO THE ACCO UNT BOOKS BY WAY OF CASH / CHEQUE / DRAFT DURING THE RELEVANT PREVIOUS YEAR. SHARES WORTH RS.15,00,00,000 WERE ISSUED AGAINST THE OUTSTANDING LIABILITIES I.E THERE WERE ONLY THE TRANSFER OF ENTRIES FROM TRADE LIABILITY HEAD TO THE SHARE CAPITAL HEAD. NO FR ESH CAPITAL WAS BROUGHT INTO THE ACCOUNT BOOKS BY WAY OF CASH / CHEQUE / DRAFT. SIMILARLY, THE SHARES WORTH R S.10,00,00,000 WERE ISSUED AGAINST THE SHARES RECEIVED UNDER THE SWAPPING ARRANGEMENTS. HERE ALSO, NO FRESH AMOUNT OF MONEY WAS BROUGHT INTO THE BO OKS BY WAY OF CASH/ CHEQUE / DRAFT. HENCE, THE ADDITION MADE IN RESPECT OF THESE SHARE HOLDERS TO THE EXTENT OF RS.25, 00 ,00,000 DOES NOT COME INTO THE PURVIEW OF SECTION 68 OF THE IT ACT. ON THIS GROUND ALSO, THE SAID ADDITION CANNOT BE SUSTAINED. THOUGH THE SAID ADDITION MADE U/S 68 CANNOT BE SUSTAINED ON THE LEGAL GROUNDS ITS ELF AS DISCUSSED ABOVE. 8.4 WE FURTHER NOTE THAT DURING THE APPELLATE PROCEEDINGS, THE ASSESSEE'S AR HAS FILED THE COPIES OF LEDGE R ACCOUNTS OF ELEVEN TRADE CREDITORS TO WHOM THE SHARES WERE, ISSUED TO SETTLE THEIR OUTSTANDING LIABILITIES. THE SOFTWARE SUPPLIED BY SUCH CREDITORS SHARE HOLDERS TO THE ASSESSEE COMPANY WERE ALSO DEMONSTRATED DURING THE APPELLATE PROCEEDINGS ON 26 - 2 - 2007 BY THE DIRECTOR OF THE AASEESSEE COMPANY MR. J.P.MADAAN. THERE IS NO EVIDENCE BROUGHT ON RECORD THE SHOW THAT SUCH TRANSACTIONS OF PURCHASE OF SOFTWARES WERE SHAM TRANSACTIONS TO EVADE THE TAXES NOR THERE CAN BE ANY, SINCE THERE IS NO ADVANTAGE TO THE APP ELLANT COMPANY TO ENTER INTO SUCH SHAM TRANSACTIONS. ASSESSEE HAD NEITHER DEBITED SUCH EXPENSES ON PURCHASE OF SOFTWARE INTO THE P & L ACCOUNT NOR CLAIMED ANY DEPRECIATION THEREON. THESE WERE ONLY REFLECTED IN THE WORK IN PROGRESS IN THE BALANCE SHEET UNDE R HEAD FIXED ASSETS. THERE IS NO TAX IMPLICATION OF SUCH TRANSACTIONS. THE APPELLANT HAS ALSO FURNISHED THE COPIES OF AGREEMENTS IN RESPECT OF SHARES WITH THE OTHER THREE COMPANIES. SWAPPING OF SHARES IS A RECOGNIZED STANDARD ASSESSEE HAS ALSO FURNISHED TH E COPIES OF AGREEMENTS IN RESPECT OF SWAPPING THE COMMERCIAL PRACTICE AND CANNOT BE TREATED AS ANY TAX EVASION TECHNIQUE. THE TECHNICAL OBJECTIONS RAISED BY THE AO REGARDING THE DIFFERENCE IN THE DATE OF AGREEMENTS IS SATISFACTORILY EXPLAINED BY THE LD. AR . IT IS WORTHWHILE TO NOTE FROM THE ASSESSMENT RECORD, THAT ONE OF THE SHAREHOLDER NAMELY M/S WISDOM PUBLISHING PVT. LTD HAS EVEN CONFIRMED THE ALLOTMENT OF SHARES TO THEM DIRECTLY TO AO IN SWAP ARRANGEMENT TO THE EXTENT OF RS. 2,50,00,000/ - . IN VIEW OF TH E ABOVE, THERE IS NO QUESTION FOR MAKING ADDITION OF THIS AMOUNT. THUS THE ASSESSEE HAS SATISFACTORILY DISCHARGED THE ONUS LYING ON HIM BY PROVING THE IDENTITY OF EACH AND EVERY NEW SHAREHOLDER. FURTHER, PRESUMING THAT THE ASSESSEE IS REQUIRED TO PROVE THE OTHER TWO REQUIREMENTS OF SECTION 68 , I.E., CREDITWORTHINESS OF THE ITA NO .2498 /DEL/201 7 18 SHARE HOLDERS AND GENUINENESS OF TRANSACTIONS. ASSESSEE HAS PROVED BEYOND ANY IOTA OF DOUBT THAT ALL THE SHARE HOLDERS WERE CREDITWORT HY AND ALL THE TRANSACTIONS WERE GENUINE. IT IS SO EVIDENT FROM THE DOCUMENTS FILED DURING THE ASSESSMENT PROCEEDINGS. TO EXPLAIN THE CREDIT ENTRIES IN THE SAID BANK ACCOUNTS, THE BANK ACCOUNTS OF THE THIRD PARTIES IN THE CHAIN WERE ALSO FILED BY THE ASSES SEE. THUS THE ASSESSEE HAS NOT ONLY PROVED THE CREDITWORTHINESS OF THE SAID SHARE HOLDERS BUT ALSO PROVED THE SOURCE OF THE SOURCE, FOR WHICH THOUGH NO ONUS LIE ON HIM. 8.5 THE ASSESSEE HAS ALSO FURNISHED THE COPIES OF AGREEMENTS IN RESPECT OF SWAPPING TH E SHARES WITH THE OTHER THREE COMPANIES. SWAPPING OF SHARES IS A RECOGNIZED STANDARD COMMERCIAL PRACTICE AND CANNOT BE TREATED AS ANY TAX EVASION TECHNIQUE. THE TECHNICAL OBJECTIONS RAISED BY THE AO REGARDING THE DIFFERENCE IN THE DATE OF AGREEMENT IS SATI SFACTORILY EXPLAINED BY THE LD. AR BEFORE THE LD. CIT(A). IT IS PERTINENT TO MENTION HERE THAT THE SAID SWAPPING TRANSACTIONS HAVE BEEN ACCEPTED AS GENUINE BY THE ASSESSING OFFICERS HAVING JURISDICTION OVER THE OTHER COMPANIES WITH WHOM THE SHARES WERE SWA PPED. THEREFORE, HAVING FILED ABOVE EVIDENCES ESTABLISHING THE IDENTITY OF THE SHAREHOLDERS, GENUINENESS OF THE TRANSACTIONS AND CAPACITY OF THE SHAREHOLDER, THERE REMAINS NOTHING MORE FOR THE ASSESSEE TO PROVE AND ONUS IS DISCHARGED AND THUS ACTION OF A.O . IN TREATING THE ENTIRE INCREASE IN SHARE CAPITAL AS UNDISCLOSED INCOME OF THE ASSESSEE IS UNJUSTIFIED AND THEREFORE LD. CIT(A) HAS RIGHTLY DELETED THE ADDITION OF RS. 27 CRORES. 8.6 IN THE BACKGROUND OF THE AFORESAID DISCUSSIONS AND PRECEDENTS RELIED UPON, WE DO NOT FIND ANY INFIRMITY IN THE DETAILED AND WELL REASONED ORDER PASSED BY THE LD. CIT(A), HENCE, WE UPHOLD THE SAME BY DELETING THE ADDITION OF RS. 27 CRORES. AS A RESULT, THE GROUND RAISED BY THE REVENUE STANDS DISMISSED. 20. WE FIND, THE KO LKATA BENCH OF THE TRIBUNAL IN THE CASE OF ITO VS. M/S ANAND ENTERPRISES LTD., VIDE ITA NO.1614/KOL/2016 AND CO NO.56/KOL/2016, ORDER DATED 26 TH SEPTEMBER, 2018, WHILE DECIDING AN IDENTICAL ISSUE HAS OBSERVED AS UNDER: - 4. WE HAVE HEARD THE RIVAL SUBMISSI ONS. AT THE OUTSET, WE FIND THAT THE ASSESSEE HAD NOT RAISED ANY SHARE CAPITAL BY RECEIPT OF CASH CONSIDERATION IN THE INSTANT CASE. THE SHARES WERE ISSUED FOR CONSIDERATION OTHER THAN CASH IN LIEU OF ASSESSEE COMPANY MAKING INVESTMENT IN SHARES IN SOME OT HER COMPANY. EFFECTIVELY, THE ASSESSEE PURCHASED CERTAIN SHARES FROM THE AFORESAID SIX SHAREHOLDERS AND INSTEAD OF PAYING CASH TO THEM, THE ASSESSEE COMPANY ISSUED ITA NO .2498 /DEL/201 7 19 SHARES IN ITS OWN COMPANY TO THOSE SHAREHOLDERS. HENCE THE ASSESSEE HAD MADE INVESTMENTS IN SHARES OF ANOTHER COMPANY FOR WHICH CONSIDERATION WAS SETTLED THROUGH ISSUANCE OF ITS SHARES TO THOSE SHAREHOLDERS. NOW THE CRUCIAL POINT IS WHETHER THE PROVISIONS OF SECTION 68 COULD BE INVOKED IN THE IN STANT CASE FOR MAKING INVESTMENT TOWARDS SHARE CAPITAL. THERE WAS NO RECEIPT OF ANY SUM AS PROVIDED U/S 68 OF THE ACT IN THE INSTANT CASE. IT WOULD BE PERTINENT HERE TO REFER TO THE DECISION OF HON'BLE SUPREME COURT IN THE CASE OF SHRI H.H. RAMA VARMA VS. CIT REPORTED IN 187 ITR 308 (SC) WHEREIN IT WAS HELD THAT 'ANY SUM' MEANS 'SUM OF MONEY'. WE FIND THAT LD. CIT(A) HAD DELETED THE ADDITION BY OBSERVING AS UNDER: '6. ON CONSIDERATION OF THE AR'S SUBMISS ION, ESPECIALLY THE PORTION REPRODUCED ABOVE, IT IS SEEN THAT SECTION 68 OF I.T. ACT, 1961 DOES NOT APPLY TO CASES OF PURCHASE OF SHARE ASSETS AND ALLOTMENT OF SHARES BY THE APPELLANT WHEN PURCHASE AND A LLOTMENT ARE UNDER A BARTER SYSTEM. THE AO HAS NOT REFUTED THE APPELLANT'S CLAIM THAT SHARES WERE ALLOTTED IN EXCHANGE FOR ACQUISITION OF SHARES BY THE APPELLANT FROM THE COMPANIES WHICH SURRENDERED SUCH SHARES TO THE APPELLANT. THOUGH AS PER THE AO TO APP LY SECTION 68 TO MAKE THE SAID ADDITION IN THE APPELLANT'S HAND. TRANSACTIONS PURPORTEDLY EXECUTED BY ENTRY OPERATORS INVOLVE MULTIPLE LAYERS AND OTHER COMPLEXITIES, INTRODUCING DELAYS IN INTRODUCTION OF UNACCOUNTED CASH/MONEY AND MULTIPLE PLAYERS BEING INCORPORATED ENTITIES. MEASURES TAKEN BY THE AO IN THE COURSE OF THE ASSESSMENT PROCEEDING FALLS MUCH SHORT OF WHAT IS REQUIRED TO BE DONE IN SUCH CASE LAWS, WHICH HAVE EVOLVED ON THIS ISSUE, CALL FOR CONC ERTED ACTIONS ON THE PART OF THE AO PINPOINTING UTILIZATION OF UNEXPLAINED/UNACCOUNTED/UNTAXED MONEY AND THE PLAYERS AND THE BENEFICIARIES EFFECTIVELY USING THE WEBLIKE SCHEME TO PLUNDER BLACK MONEY. FOR EXAMPLE INTRODUCTION AND USE OF BLACK MONEY IN THE P RESENT CASE MAY BE AT A DIFFERENT POINT OF TIME AND IN DIFFERENT HANDS. THE AO'S ACTION IN THE PRESENT CASE CANNOT BE UPHELD IN LAW. I, THEREFORE, DELETE THE ADDITIONS AND GROUNDS OF APPEAL NOS. 3 & 4 ARE ALLOWED.' 4.1. WE FIND THAT THE HON'BLE ALLAHABAD HIGH COURT IN THE CASE OF CIT VS. SOHANLAL SINGHANIA REPORTED IN 235 ITR 616 (ALL) HAD HELD IN THE CONTEXT OF ALLOWABILITY OF DONATION AS DEDUCTION U/S 80G OF THE ACT THAT THE EXPRESSION 'ANY SUM PAID' USED IN THE SAID SECTION DENOTES ' SUM OF MONEY PAID' . HENCE IF CERTAIN SHARES WERE DONATED BY A PERSON, THEN THE SAME WOULD NOT FALL ELIGIBLE FOR DEDUCTION U/S 80G OF THE ACT. WE ALSO FIND THAT THE HON'BLE JURISDICTIONAL HIGH COURT IN THE CASE OF JATIA INVESTMENT COMPANY (CO.) VS. CIT REPORTED IN 206 ITR 718 (CAL) ALSO SUPPORTS THE CASE OF THE ASSESSEE HEREIN, WHEREIN IT WAS HELD AS UNDER: ITA NO .2498 /DEL/201 7 20 'IT IS FINALLY EMPHASISED BY LEARNED COUNSEL FOR THE ASSESSEE THAT THE ULTIMATE RESULT IS THAT THE FIRM BECOMES A D EBTOR TO GB AND CO. AND THE THREE NON - FINANCIAL COMPANIES OF THE GROUP GOT DISCHARGED. LEARNED COUNSEL ALSO EMPHASISED THAT, AT THE WORST, IT CAN BE SAID THAT THE ASSESSEE - FIRM HAS RECEIVED VALUABLE ASSETS BEING THE SAID SHARES OF THE EQUIVALENT VALUE OF T HE DEBT TAKEN OVER BY IT FROM THE COMPANIES, I.E., RS. 11.20 LAKHS. THEREFORE, THE QUESTION OF CASH CREDIT DOES NOT COME IN, THERE BEING NO ACTUAL PASSING OR RECEIPT OF CASH. IN OTHER WORDS, THE TRANSACTIONS ARE MERE BOOK ENTRIES. IT WAS CONTENDED THAT T HE FACT THAT THE ENTRIES PASSED THROUGH THE CASH BOOK COULD NOT DETRACT FROM OR EFFACE THE ESSENTIAL NATURE OF THE ENTRIES. IT WAS ALSO URGED THAT THE ENTRIES WERE PASSED THROUGH THE CASH BOOK SO THAT THE REPAYMENT OF LOANS BY THE SAID THREE COMPANIES COUL D BE ESTABLISHED BEFORE THE RESERVE BANK OF INDIA. BUT, ACCORDING TO SHRI BAJORIA, THAT DOES NOT MEAN THAT IT AMOUNTS TO AN ARTIFICE EMPLOYED TO DECEIVE ANY AUTHORITIES, BECAUSE THE TRANSACTIONS SHOWING THE AMOUNT AS RECEIVED IN CASH AND PAID AWAY SPONTANE OUSLY AND SIMULTANEOUSLY WERE NOT ACTUAL BUT ONLY NOTIONAL. HE, HOWEVER, STATED THAT, AS FAR AS THE QUESTION OF SECTION 68 IS CONCERNED, THE NATURE OF THE TRANSACTIONS AND THE ENTRIES CLEARLY SHOW THAT N O CASH, IN FACT, FLOWED. IT WAS FURTHER STRESSED THAT THE TRANSACTIONS ARE ABOVE BOARD. NO OUTSIDER IS INVOLVED. THE ENTRIES WERE MADE IN THE BOOKS OF THE CONCERNS OF THE SAME GROUP. THE SHARES IN QUESTION WERE ALSO OF THE COMPANIES OF THE GROUP. THERE WAS NO ATTEMPT AT HIDING THE TRANSACTIONS. NOR IS IT THE CASE OF ANY OF THE PARTIES TO THE TRANSACTION THAT THERE WAS ANY PASSING OF CASH. EVERY PARTY UNEQUIVOCALLY STATED THAT THE TRANSACTIONS WERE CARRIED INTO EFFECT MERELY BY WAY OF ADJUSTMENTS OF THE SAID LOANS AND THE SHARE TRANSFERS. SHRI A. C. MOITRA, THE LEARNED ADVOCATE FOR THE REVENUE, REITERATED THE GROUNDS ON WHICH THE TRIBUNAL HAS AFFIRMED THE ADDITION OF THE AMOUNT OF RS. 11.20 LAKHS AS UNEXPLAINED CASH CREDIT. HE PARTICULARLY EMPHASISED THAT T HE ASSESSEE'S CONTENTION THAT THE ENTRIES ARE ONLY ADJUSTMENT ENTRIES IS NOT ACCEPTABLE, BECAUSE THE ADJUSTMENT ENTRIES ARE NOT MADE THROUGH THE CASH BOOK. IT IS AN ACCEPTED PRINCIPLE OF ACCOUNTING THAT BOOK ADJUSTMENTS AND THE ENTRIES IN EFFECTING THEM AR E MADE BY JOURNAL ENTRIES AND NOT CASH ENTRIES. HE URGED THAT THE PURPORTED MOTIVE OF THE ENTRIES BEING THE REDUCTION OF LOANS OF THE THREE LIMITED COMPANIES DOES NOT EXPLAIN THE WHOLE MATTER, BECAUSE THE ENTRIES ARE CASH ENTRIES. THE FACT REMAINS THAT, AT EVERY STAGE, THE PARTIES SHOWED THE PAYMENTS AND RECEIPTS OF CASH EVEN WHEN THERE WAS NO CASH AVAILABLE FOR SUCH ENTRIES. THIS QUITE JUSTIFIES THE ADDITION AS SUSTAINED BY THE TRIBUNAL. ITA NO .2498 /DEL/201 7 21 WE HAVE PERUSED THE ASSESSMENT ORDER CAREFULLY. WE FIND THAT CASH D ID NOT PASS AT ANY STAGE THOUGH ENTRIES WERE MADE IN THE CASH BOOK SHOWING PAYMENTS AND RECEIPTS ; BUT SINCE THE ENTRIES MADE A COMPLETE ROUND, NO PASSING OF CASH WAS NECESSARY FOR THE PURPOSE OF MAKING THE ENTRIES. THAT THERE WAS NO PASSING OF CASH IS ALS O ADMITTED BY THE INCOME - TAX OFFICER HIMSELF. WE HAVE ALREADY EXTRACTED THE OBSERVATION OF THE INCOME - TAX OFFICER IN PARAGRAPH 14 OF HIS ASSESSMENT ORDER. THE INCOME - TAX OFFICER HAS CLEARLY OPINED THAT ALL THE RESPECTIVE PARTIES DID NOT RECEIVE CASH NOR DID PAY CASH AS NONE HAD ANY CASH FOR THE PURPOSE. THE ONLY POINT IN THE ASSESSMENT ORDER IS THAT THE ENTRIES NOT INVOLVING THE PASSING OF CASH SHOULD NOT HAVE FOUND A PLACE IN THE CASH BOOK, BUT IN THE LEDGER ACCOUNT THROUGH JOURNAL ENTRIES. THERE IS ANO THER SELF - CONTRADICTION IN THE INCOME - TAX OFFICER'S FINDING THAT, IF THERE WAS NO REAL CASH ENTRY ON THE CREDIT SIDE OF THE CASH BOOK, BUT MERELY A NOTIONAL OR FICTITIOUS CASH ENTRY, AS ADMITTED BY HIM, THERE IS NO REAL CREDIT OF CASH TO ITS CASH BOOK ; T HE QUESTION OF INCLUSION OF THE AMOUNT OF THE ENTRY AS UNEXPLAINED CASH CREDIT CANNOT ARISE. ONE OF THE GROUNDS OF THE TRIBUNAL FOR DISBELIEVING THE ASSESSEE'S CASE IS THAT THE ADJUSTMENT ENTRIES WERE MADE BY NOTIONAL CASH ENTRIES WITH A VIEW TO BRINGING DOWN THE DEBT - AND - CAPITAL RATIO, I.E., THAT WHILE BEING DISCHARGED OF THE DEBT THE SAID COMPANIES ALSO JETTISONED THEIR ASSETS, I.E., THE SHARES HELD BY THEM OF EQUIVALENT SUM WITHOUT ACHIEVING THE AVOWED PURPOSE. HERE THE TRIBUNAL CERTAINLY MISDIRECTED I TSELF. THE RATIO TO BE REDUCED IS OF THE LOAN IN RELATION TO THE SHARE CAPITAL AND THE RESERVES. JETTISONING THE SHARES HAD THE DESIRED EFFECT OF REDUCING THE BORROWED CAPITAL. AGAIN, AS REGARDS THE TRIBUNAL'S REFUSAL TO TAKE NOTICE OF THE DIRECTIONS OF THE RESERVE BANK, IT IS NOT CORRECT FOR THE TRIBUNAL TO HOLD THAT THE SAID DOCUMENT WAS A NEW EVIDENCE IN THE TRUE SENSE OF THE TERM. THE ASSESSEE HAS BEEN CONSISTENTLY PLEADING BEFORE THE LOWER AUTHORITIES THAT THE ENTRIES HAD TO BE MADE IN ORDER TO BRING THE COMPANIES IN CONFORMITY WITH THE SAID DIRECTION. MOREOVER, THE DIRECTION OF THE RESERVE BANK IS A PUBLIC DOCUMENT WITHIN THE MEANING OF SECTION 74 OF THE EVIDENCE ACT, 1872. DOCUMENTS OF A PUBLIC N ATURE AND PUBLIC AUTHORITY ARE GENERALLY ADMISSIBLE IN EVIDENCE SUBJECT TO THE MODE OF PROVING THEM AS LAID DOWN IN SECTIONS 76 AND 78 OF THE EVIDENC E ACT. IN OUR VIEW, THE EFFECT AND IMPORT OF THE TRANSACTIONS IS THAT THE ASSESSEE TOOK OVER THE LIABILITY OF THE AFORESAID NON - FINANCIAL COMPANIES TO GB AND CO. IN EXCHANGE FOR THE SHARES AS AFORESAID. ITA NO .2498 /DEL/201 7 22 IN THE PREMISES, WE ANSWER ALL THE QUESTIONS, IN THE AFFIRMATIVE AND IN FAVOUR OF THE ASSESSEE AND AGAINST THE REVENUE.' 4.2. IT WOULD BE PERTINENT TO NOTE THAT IN THE INSTANT CASE, THE LD. AO HAD NOT DOUBTED THE INVESTMENT MADE IN SHARES BY THE ASSESSEE COMPANY. THERE IS NO DISPUTE RAISED BY THE LD. AO WITH REGARD TO NUMBER OF SHARES; VALUE THEREON INVESTED BY THE ASSESSEE COMPANY. WE ALSO FIND THAT THE CO - ORDINATE BENCH DECISION OF PUNE TRIBUNAL IN THE CASE OF KANTILAL AND BROS. VS. ACIT REPORTED IN 52 ITD 412 (PUNE TRIB.) ALSO SUPPORTS THE CASE OF THE ASSESSEE. 4.3. IN VIEW OF THE AFORESAID OBSERVATIONS, IN THE FACTS AND CIRCUMSTANCES OF THE CASE AND RESPECTFULLY FOLLOWING THE AFORESAID JUDICIAL PRECEDENTS RELIED UPON HEREINABOVE, WE HOLD THAT THE LD. AO HAD ERRONEOUSLY INVOKED THE PROVISIONS OF SECTION 68 OF THE ACT TO THE FACTS OF THE INSTANT CASE, WHICH, IN OUR CONSIDERED OPINION, ARE NOT AT ALL APPLICABLE HEREIN. THIS IS A SIMPLE CASE OF ACQUIRING SHARES OF CERTAIN COMPANIES FROM CERTAIN SHAREHOL DERS WITHOUT PAYING ANY CASH CONSIDERATION AND INSTEAD THE CONSIDERATION WAS SETTLED THROUGH ISSUANCE OF SHARES TO THE RESPECTIVE PARTIES. MOREOVER, IN THE BALANCE SHEET OF THE ASSESSEE COMPANY IN THE SCHEDULE TO SHARE CAPITAL, IT IS VERY CLEARLY MENTIONED BY WAY OF NOTE THAT THE FRESH SHARE CAPITAL WAS RAISED DURING THE YEAR FOR CONSIDERATION OTHER THAN CASH. HENCE WE HOLD THAT PROVISION OF SECTION 68 OF THE ACT ARE NOT APPLICABLE IN THE INSTANT CASE AND ACCORDINGLY THE ENTIRE ADDITION DESERVES TO BE DELETED WHICH HAS RIGHTLY BEEN DONE BY THE LD. CIT(A) WHICH DOES NOT REQUIRE ANY INTERFERENCE. ACCORDINGLY, GROUNDS RAISED BY THE REVENUE ARE DISMISSED. 21. SIMILAR VIEW HAS BEEN TAKEN BY THE KOLKATA BENCH O F THE TRIBUNAL IN ITA NO.2691/KOL/2018, ORDER DATED 28 TH FEBRUARY, 2020 IN THE CASE OF BLOOMING TRADELINK PVT. LTD. VS. ITO BY OBSERVING AS UNDER: - 4. WE HAVE HEARD RIVAL SUBMISSIONS AND GONE THROUGH THE FACTS AND CIRCUMSTANCES OF THE CASE. THE ADDITION U /S. 68 OF THE ACT WAS RESORTED BY THE AO AND CONFIRMED BY THE LD. CIT(A) ON THE SHARE CAPITAL AND PREMIUM OF RS.5,01,00,000/ - . HOWEVER, ACCORDING TO THE ASSESSEE, NO SUM OF MONEY HAS BEEN COLLECTED FOR TRANSFER OF SHARES, WHEREAS SHARES HAVE BEEN RECEIVED BY THE ASSESSEE IN LIEU OF EXCHANGE OF ITS SHARES, THEREFORE, NO ADDITION U/S. 68 OF THE ACT CAN BE MADE. IN SUPPORT OF ITS SUBMISSION, THE LD. AR RELIED ON THE FOLLOWING CASE LAWS: XI) JATIA INVESTMENT CO. VS. CIT 206 ITR 718(CAL); XII) V. R. GLOBAL ENERGY PVT. LTD. VS. ITO, 407 ITR 145 (MAD); XIII) ITAT, KOLKATA BENCH IN THE CASE OF ITO VS. M/S. SAFFRON COMTRADE PVT. LTD. DATED 28.08.2019; ITA NO .2498 /DEL/201 7 23 XIV) ITAT, KOLKATA BENCH IN THE CASE OF ITO VS. M/S. PANSU COMMERCIAL PVT. LTD. DATED 08.05.2019 AND XV) ITAT, KOLKATA BENCH IN THE CAS E OF ITO VS. M/S. SUNGLOW DEALCOM PVT. LTD. DATED 16.11.2018. 5. WE NOTE THAT THIS ISSUE IS NO LONGER RES INTEGRA. WE ALSO FIND THAT THERE IS NO CASH TRANSFERRED FOR THE SHARES BY THE ASSESSEE. WE NOTE THAT THE ASSESSEE HAD SWAPPED SHARES IN LIEU OF SHAR ES. WE NOTE THAT THIS TRIBUNAL HAS ALREADY HELD THAT SECTION 68 OF THE ACT IS NOT ATTRACTED IN SUCH TRANSFER AND THE TRIBUNAL IN THE CASE OF ITA NO. 2178/KOL/2016, ITO VS. M/S. SUNGLOW DEALCOM PRIVATE LIMITED FOR AY 2012 - 13 ORDER DATED 16.11.2018 HAS HELD AS UNDER: 3. WE HAVE HEARD RIVAL CONTENTIONS. ON CAREFUL CONSIDERATION OF THE FACTS AND CIRCUMSTANCES OF THE CASE, PERUSAL OF THE PAPERS ON RECORD, ORDERS OF THE AUTHORITIES BELOW AS WELL AS CASE LAW CITED, WE HOLD AS FOLLOWS: - 4. THE UNDISPUTED FACT IN THIS CASE IS THAT THE ALLOTMENT OF SHARES WERE FOR CONSIDERATION OTHER THAN BY WAY OF CASH. THE FOUR COMPANIES WHICH APPLIED FOR ALLOTMENT OF SHARES, HAVE SOLD THEIR INVESTMENT TO THE ASSESSEE COMPANY AND THE ASSESSEE COMPANY, HAS AS CONSIDERATION FOR T HE PURCHASE OF THOSE SHARES HAD ALLOTTED SHARES AT A PREMIUM. IT IS A CASE OF SWAPPING OF SHARES. THE SHARES WERE ALLOTTED FOR CONSIDERATION OTHER THAN CASH. THE QUESTION IS WHETHER UNDER THESE FACTS AND CIRCUMSTANCES SECTION 68 OF THE ACT, WOULD BE ATTRAC TED. 4.1. THE LD. D/R, SUBMITS THAT THE PREMIUM IS NOT JUSTIFIED AND THAT THE LD. CIT(A) WAS WRONG IN HOLDING THAT THE ASSESSEE HAS PROVED THE IDENTITY, CREDITWORTHINESS AND GENUINENESS OF THE TRANSACTION. HE RELIED ON THE ORDER OF THE ASSESSING OFFICER. IN REPLY THE LD. COUNSEL FOR THE ASSESSEE, SUBMITS THAT EACH OF THE ABOVE COMPANIES HAVE FILED REPLIES BEFORE THE ASSESSING OFFICER TO THE NOTICE ISSUED U/S 133(6) OF THE ACT. HE FURTHER POINTED OUT THAT THE LD. CIT(A) CALLED FOR A REMAND REPORT THE ASSES SING OFFICER HAD NOT DISPUTED THE IDENTITY, CREDITWORTHINESS OF THE SHARE SUBSCRIBERS AS WELL AS THE GENUINENESS OF THE TRANSACTIONS. HE RELIED ON THE ORDER OF THE LD. CIT(A). 4.2. THE UNDISPUTED FACT IS THAT SHARES WERE ISSUED AT A PREMIUM, AS CONSIDERA TION FOR THE PURCHASE OF SHARES FROM THE SHARE APPLICANT COMPANIES. THIS ISSUE IS SQUARELY COVERED BY THE DECISION OF THE KOLKATA C BENCH OF THE TRIBUNAL IN THE CASE OF ITO VS. M/S. ANAND ENTERPRISES LTD., ITA NO. 1614/KOL/2016 & C.O. NO.56/KOL/2016; DT. 26/09/2018, WHEREIN UNDER IDENTICAL CIRCUMSTANCES, AT PARA 4.3. IT WAS HELD AS FOLLOWS: - ITA NO .2498 /DEL/201 7 24 4.3. IN VIEW OF THE AFORESAID OBSERVATIONS, IN THE FACTS AND CIRCUMSTANCES OF THE CASE AND RESPECTFULLY FOLLOWING THE AFORESAID JUDICIAL PRECEDENTS RELIED UPON HE REINABOVE, WE HOLD THAT THE ID. AO HAD ERRONEOUSLY INVOKED THE PROVISIONS OF SECTION 68 OF THE ACT TO THE FACTS OF THE INSTANT CASE, WHICH, IN OUR CONSIDERED OPINION, ARE NOT AT ALL APPLICABLE HEREIN. THIS IS A SIMPLE CASE OF ACQUIRING SHARES OF CERTAIN CO MPANIES FROM CERTAIN SHAREHOLDERS WITHOUT PAYING ANY CASH CONSIDERATION AND INSTEAD THE CONSIDERATION WAS SETTLED THROUGH ISSUANCE OF SHARES TO THE RESPECTIVE PARTIES. MOREOVER, IN THE BALANCE SHEET OF THE ASSESSEE COMPANY IN THE SCHEDULE TO SHARE CAPITAL, IT IS VERY CLEARLY MENTIONED BY WAY OF NOTE THAT THE FRESH SHARE CAPITAL WAS RAISED DURING THE YEAR FOR CONSIDERATION OTHER THAN CASH. HENCE WE HOLD THAT PROVISION OF SECTION 68 OF THE ACT ARE NOT APPLICABLE IN THE INSTANT CASE AND ACCORDINGLY THE ENTIRE ADDITION DESERVES TO BE DELETED WHICH HAS RIGHTLY BEEN DONE BY THE ID. CIT(A) WHICH DOES NOT REQUIRE ANY INTERFERENCE. ACCORDINGLY, GROUNDS RAISED BY THE REVENUE ARE DISMISSED. 4.2. THE HON BLE JURISDICTIONAL HIGH COURT IN THE CASE OF JATIA INVESTMENT C O .V. COMMISSIONER OF INCOME - TAX [1994] 206 ITR 718 (CAL.) HELD AS FOLLOWS: - SECTION 68 OF THE INCOME - TAX ACT, 1961 CASH CREDITS ASSESSMENT YEAR 1976 - 77 PARTNERS OF ASSESSEE - FIRM WERE MEMBERS OF ONE J GROUP RUNNING SEVERAL BUSINESSES AND INDUST RIES ACCOUNTS OF ASSESSEE - FIRM SHOWED THAT IT HAD BORROWED CERTAIN AMOUNT FROM GB, A PROPRIETARY CONCERN OF ONE OF ITS PARTNERS JM, WHICH WAS INVESTED IN PURCHASE OF SHARES ITO FOUND THAT GB HAD NO CASH BALANCE TO ADVANCE SAID AMOUNT TO ASSESSEE HE, THUS, CONCLUDED THAT SOURCE OF FUNDS FOR PURCHASE OF SHARES BY ASSESSEE WAS NOT EXPLAINED, AND CONSEQUENTLY, ASSESSED THAT AMOUNT AS INCOME FROM UNDISCLOSED SOURCES IT WAS CONTENDED BY ASSESSEE THAT NOTIONAL CASH ENTRIES WERE MADE TO REDUCE INDEBTEDNESS OF THREE COMPANIES OF J GROUP TO GB IN ORDER TO COMPLY WITH CERTAIN DIRECTIONS OF RBI ASSESSEE - FIRM SUBSTITUTED THREE COMPANIES OF J GROUP AS DEBTOR TO GB IT WAS FURTHER STATED THAT QUESTION OF CASH CREDIT DID NOT ARISE, THERE BEING NO ACTUAL PASSI NG OR RECEIPT OF CASH BUT TRANSACTIONS WERE MERE BOOK ENTRIES WHETHER, IN AFORESAID CIRCUMSTANCES, EFFECT AND IMPORT OF TRANSACTION WAS THAT ASSESSEE TOOK OVER LIABILITY OF AFORESAID THREE COMPANIES TO GB IN EXCHANGE FOR SHARES AND, THEREFORE, AMOUNT O F LOAN IN QUESTION COULD NOT BE TREATED AS ASSESSEE S INCOME FROM UNDISCLOSED SOURCES HELD, YES ITA NO .2498 /DEL/201 7 25 4.3. RECENTLY, THE HON BLE MADRAS HIGH COURT IN THE CASE OF V. R. GLOBAL ENERGY (P.) LTD. V. INCOME - TAX OFFICER, CORPORATE WARD 3(4), CHENNAI [2018] 96 TAX MANN.COM 647 (MADRAS) WHILE DEALING WITH A CASE WHERE CASH CREDIT TOWARDS SHARE CAPITAL WERE ADMITTEDLY, ONLY BY WAY OF BOOK ADJUSTMENTS AND NO ACTUAL CASH WAS RECEIVED TOWARDS SHARE SUBSCRIPTION MONEY HELD AS FOLLOWS: - 25. HOWEVER, THE SECOND QUESTION IS ANSWERED IN FAVOUR OF THE ASSESSEE AND AGAINST THE REVENUE BY THE JUDGMENT OF THE DIVISION BENCH OF THIS COURT IN ELECTRO POLYCHEM LTD., (SUPRA) AND STELLER INVESTMENT LTD., (SUPRA). 26. THIS CASE IS DISTINGUISHABLE FROM THE CASE OF CIT V. LOVELY EXPO RT (P.) LTD. [2008] 216 CTR 195 (SC) IN THAT THE TRANSACTIONS WERE ONLY BOOK TRANSACTIONS, AND THERE WAS NO CASH RECEIPT. THE DECISIONS IN (I) CIT V. FOCUS EXPORTS (P.) LTD. [2014] 51 TAXMANN.COM 46/228 TAXMAN 88 (DELHI) (MAG.); (II) CIT V. GLOBUS SECURITI ES & FINANCE PVT. LTD. [2014] 41 TAXMANN.COM 465/224 TAXMAN 237 (DELHI); (III) ONASSIS AXLES (P.) LTD. V. CIT [2014] 364 ITR 53/224 TAXMAN 80 (MAG.)/44 TAXMANN.COM 408 (DELHI); (IV) OLWIN TILES INDIA (P.) LTD. V. DY. CIT [2016] 382 ITR 291/237 TAXMAN 342/6 6 TAXMANN.COM 8 (GUJ.); (V) B.R. PETROCHEM (P.) LTD. V. ITO [2017] 81 TAXMANN.COM 424 (MAD.); AND (VI) RAJMANDIR ESTATES (P.) LTD. V. PR. CIT [2016] 386 ITR 162/240 TAXMAN 306/70 TAXMANN.COM 124 (CAL.), CITED ON BEHALF OF THE RESPONDENT ARE DISTINGUISHABLE , IN THAT THE CASH CREDITS TOWARDS SHARE CAPITAL WERE ADMITTEDLY ONLY BY WAY OF BOOK ADJUSTMENT AND NOT ACTUAL RECEIPTS WHICH COULD NOT BE SUBSTANTIATED AS RECEIPTS TOWARDS SHARE SUBSCRIPTION MONEY. 5. APPLYING THE PROPOSITIONS OF LAW LAID DOWN IN THE A BOVE CASES TO THE FACTS OF THIS CASE, WE UPHOLD THE ORDER OF THE LD. FIRST APPELLATE AUTHORITY AND DISMISS THIS APPEAL OF THE REVENUE. 6. IN THE FACTS AND CIRCUMSTANCES OF THE CASE AND RESPECTFULLY FOLLOWING THE AFORESAID JUDICIAL PRECEDENTS RELIED UPON HEREINABOVE, WE HOLD THAT THE AO HAD ERRONEOUSLY INVOKED THE PROVISIONS OF SECTION 68 OF THE ACT TO THE FACTS OF THE INSTANT CASE, WHICH, IN OUR CONSIDERED OPINION, ARE NOT AT ALL APPLICABLE HEREIN. THIS IS A SIMPLE CASE OF ACQUIRING SHARES OF CERTAIN COM PANIES FROM CERTAIN SHAREHOLDERS WITHOUT PAYING ANY CASH CONSIDERATION AND INSTEAD, THE CONSIDERATION WAS SETTLED THROUGH ISSUANCE OF SHARES TO THE RESPECTIVE PARTIES. HENCE WE HOLD THAT PROVISIONS OF SECTION 68 OF THE ACT ARE NOT APPLICABLE IN THE INSTANT CASE AND ACCORDINGLY, THE ENTIRE ADDITION DESERVES TO BE DELETED AND WE DELETE THE ADDITION AS CONFIRMED BY THE LD. CIT(A) AND ALLOW THE APPEAL OF THE ASSESSEE. ITA NO .2498 /DEL/201 7 26 7. IN THE RESULT, APPEAL OF ASSESSEE IS ALLOWED. 22. THE VARIOUS OTHER DECISIONS RELIED ON BY THE LD. COUNSEL FOR THE ASSESSEE IN THE PAPER BOOK ALSO SUPPORTS THE CASE OF THE ASSESSEE THAT PROVISIONS OF SECTION 68 ARE NOT APPLICABLE IN A CASE OF ACQUIRING SHARES OF CERTAIN COMPANIES FROM CERTAIN SHAREHOLDERS WITHOUT PA YING ANY CASH CONSIDERATIO N AND, INSTEAD, CONSIDERATIONS WERE SETTLED THROUGH ISSUANCE OF SHARES TO THE RESPECTIVE PARTIES. IN OTHER WORDS, PROVISIONS OF SECTION 68 OF THE ACT DOES NOT APPLY TO CASES OF PURCHASE OF SHARES AND ALLOTMENT OF SHARES WHEN THE PURCHASE AND ALLOTMENT ARE UNDER A BARTER SYSTEM. IN THIS VIEW OF THE MATTER, WE DO NOT FIND ANY INFIRMITY IN THE ORDER OF THE CIT(A) IN DELETING THE ADDITION OF RS.6,75,00,000 / - (WRONGLY TYPED IN THE GROUNDS AS RS.6,76,00,000/ - ) . THEREFORE, THE GROUND OF APPEAL NO.1 RAISED BY T HE REVENUE IS DISMISSED. 23. SO FAR AS GROUND OF APPEAL NO.2 OF THE REVENUE IS CONCERNED, WE FIND, THE AO MADE ADDITION OF RS.8,50,000/ - U/S 68 OF THE ACT ON THE GROUND THAT THE SAME IS SHOWN IN THE NAME OF M/S WAMIL CLOTHING PVT. LTD. AND THE SUMMONS ISS UED U/S 131 WAS RECEIVED BACK UNSERVED. WE FIND, THE ORDER OF THE AO IS VERY CRYPTIC ON THIS ISSUE AND THE LD.CIT(A) HAS NOT AT ALL GIVEN ANY FINDING ON THIS ISSUE. CONSIDERING THE TOTALITY OF THE FACTS AND IN THE INTEREST OF JUSTICE, WE DEEM IT PROPER T O RESTORE THE ISSUE TO THE FILE OF THE AO WITH A DIRECTION TO GIVE ONE FINAL OPPORTUNITY TO THE ASSESSEE TO SUBSTANTIATE ITS CASE AND DECIDE THE ISSUE AS PER FACT ITA NO .2498 /DEL/201 7 27 AND LAW. WE HOLD AND DIRECT ACCORDINGLY. THE SECOND GROUND RAISED BY THE REVENUE IS ACCORDING LY ALLOWED FOR STATISTICAL PURPOSES. 24. GROUND NO.3 BEING GENERAL IN NATURE IS DISMISSED. 25. IN THE RESULT, THE APPEAL FILED BY THE REVENUE IS PARTLY ALLOWED FOR STATISTICAL PURPOSES. THE DECISION WAS PRONOUNCED IN THE OPEN COURT ON 24 .0 3 .20 21 . SD/ - SD/ - ( SUCHITRA KAMBLE ) ( R. K. PANDA ) JUDICIAL MEMBER ACCOUNTANT MEMBER DATED: 24 TH MARCH, 2021. DK COPY FORWARDED TO 1. APPELLANT 2. RESPONDENT 3. CIT 4. CIT(A ) 5. DR ASSTT. REGISTRAR, ITAT, NEW DELHI