SYNTENSIA NETWORK SECURITY INDIA P.LTD, MUMBAI V. ITO 11(2)(4), MUMBAI

ITA 2927/MUM/2017

• Counselvise Citation: [2018] 125 COUNSELVISE.COM (IT) 5802 (ITAT-MUMBAI)
• Duration Of Justice: 1 year(s) 3 month(s) 3 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 27-07-2018
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: Not Allotted
• Assessment Year: 2012-2013
• Appeal Filed On: 24-04-2017
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: V JUSIN
• Keywords: Unexplained cash credit; Gift; Income from undisclosed sources; Residential status; Source of fund; Deemed to accrue or arise in india; Question of law; Corroborative evidences; Notional interest; Capital receipt; Onus to prove
• Section: 5(2); 69; 68

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL E , BENCH MUMBAI BEFORE SHRI R.C.SHARMA, AM & SHRI RAM LAL NEGI , JM ITA NO. 2927 / MUM/20 17 ( ASSESSMENT YEAR : 2012 - 13 ) M/S. SYNTENSIA NETWORK SECURITY INDIA PVT. LTD., 506, LAXMI MALL LAXMI INDUSTRIAL ESTATE N EW LINK ROAD, ANDHERI (W) MUMBAI - 400053 VS. ITO 11(2)(4) CHURCHGATE, MUMBAI - 400020 PAN/GIR NO. AALCS1143G APPELLANT ) .. RESPONDENT ) ASSESSEE BY SHRI FIROZ ANDHYARUJINA AND SHRI VIMAL PUNAMIYA REVENUE BY SHRI V. JUSIN DA TE OF HEARING 15/06/2018 DATE OF PRONOUNCEME NT 27 / 07 /201 8 / O R D E R PER R.C.SHARMA (A.M) : THIS IS AN APPEAL FILED BY THE ASSESSEE AGAINST THE ORDER OF CIT(A) - 18, MUMBAI DATED 17/01/2017 FOR THE A.Y.2012 - 13 IN THE MATTER OF ORD ER PASSED U/S.143(3) OF THE IT ACT. 2. IN THIS APPEAL, ASSESSEE IS AGGRIEVED FOR ADDITION MADE U/S.68 OF THE IT ACT IN THE A.Y.2012 - 13 3. RIVAL CONTENTIONS HAVE BEEN HEARD AND RECORD PERUSED. 4. FACTS IN BRIEF ARE THAT T HE ASSESSEE IS A CLOSELY HELD COMPAN Y ENGAGED IN THE BUSINESS OF MARKETING OF PUBLIC ISSUE FOR INDUSIND BANK ITA NO. 2927/MUM/2017 M/S. SYNTENSIA NETWORK SECURITY INDIA PVT. LTD., 2 LTD ., DURING THE YEAR UNDER AN APPEAL, T HE ASSESSEE FILED HIS RETURN OF INCOME FOR A.Y.2012 - 13 ON 29.09.2012 AFTER DECLARING NIL INCOME THEREIN AFTER CLAIMING BROUGHT FORWARD LOSSES O F A.Y. 2008 - 09. THE LD. AO MADE AN ADDITION OF RS.2,02,79,380/ - U/S. 68 OF THE INCOME TAX ACT ( IN SHORT 'THE ACT') ON ACCOUNT OF UNEXPLAINED CASH CREDIT OF SHARE ALLOTMENT. THE ASSESSEE HAS RECEIVED SHARE APPLICATION MONEY OF RS. 14624696/ - DURING THE FINA NCIAL YEAR 2007 - 08 AND SHARE APPLICATION MONEY OF RS. 5654634/ - DURING THE FINANCIAL YEAR 2008 - 09 AND THEREAFTER MADE ALLOTMENT OF SHARES AGAINST THE SAID RECEIPT OF SHARE APPLICATION MONEY DURING THE FINANCIAL YEAR 2011 - 12 RELEVANT TO A.Y.2012 - 13 UNDER CON SIDERATION . THE AO TAXED THE ENTIRE RECEIPT DURING THE YEAR UNDER CONSIDERATION U/S.68. 5 . BY THE IMPUGNED ORDER, CIT(A) CONFIRMED THE ACTION OF THE AO AGAINST WHICH ASSESSEE IS IN FURTHER APPEAL BEFORE US. 6 . ASSESSEE HAS ALSO RAISED AN ALTERNATE ARGUMENT AS TO ALLOW SET OFF OF BROUGHT FORWARD LOSSES AGAINST ADDITION SO MADE. 7 . WE HAVE HEARD THE RIVAL CONTENTIONS AND CAREFULLY GONE THROUGH THE ORDERS OF THE AUTHORITIES BELOW. FROM THE RECORD, WE FOUND THAT T HE ASSESSEE COMPANY HAS RECEIVED AN AMOUNT OF R S,2,02,79,380/ - AGAINST THE SHARE APPLICATION MONEY IN A.Y.2008 - 09 AND 2009 - 10. THUS IN THE A.Y.2012 - 13, THERE WAS A OPENING BALANCE OF RS.2,02,79,380/ - UNDER THE HEAD OF SHARE APPLICATION MONEY PENDING FOR ALLOTMENT AGAINST WHICH THE ASSESSEE COMPANY HAS TRANSFERRED AN AMOUNT TO SHARE CAPITAL ACCOUNT AFTER ALLOTMENT OF SHARES. THE ASSESSEE HAS NOT RECEIVED ANY SINGLE AMOUNT IN A.Y.2012 - 13 UNDER CONSIDERATION FOR THE ALLOTMENT OF SHARES. ITA NO. 2927/MUM/2017 M/S. SYNTENSIA NETWORK SECURITY INDIA PVT. LTD., 3 UNDER SECTION 68, THE AMOUNT WHICH REPRESENTS CREDIT OF THE YEAR THAT CAN BE ADDED AS UNEXPLAINED CREDIT FOR THAT YEAR. OPENING BALANCE IS NOT SUBJECT ED TO TAX U/S. 68 OF THE ACT AS THE SAME IS REPRESENTING THE CREDIT OF ANOTHER PREVIOUS YEAR. FOR THIS PURPOSE RELIANCE IS PLACED BY LEARNED AR ON THE FOLLOWING JUDICIAL PRONOU NCEMENTS: 1. [2016] 157 ITD 924 (KOLKATA TRIB.) DCIT VS. GLOBAL MERCANTILES (P.) LTD. [IDENTICAL ISSUE .] IT: WHERE ASSESSEE RECEIVED SHARE APPLICATION MONIES IN EARLIER YEAR AND ONLY SHARES WERE ALLOTTED TO APPLICANTS DURING ASSESSMENT YEAR UNDER APPEA L, PROVISIONS OF SECTION 68 COULD NOT BE INVOKED TO MAKE ADDITION III. SECTION 68 OF THE INCOME - TAX ACT, 1961 - CASH CREDITS (SHARE APPLICATION MONEY) - ASSESSMENT YEAR 2006 - 07 - DURING ASSESSMENT YEAR 2005 - 06 ASSESSEE RECEIVED SHARE APPLICATION MONIES FRO M 20 INDIVIDUALS BUT SHARES WERE ALLOTTED TO THEM DURING ASSESSMENT YEAR UNDER APPEAL - WHETHER SINCE NO MONIES WERE RECEIVED DURING ASSESSMENT YEAR UNDER APPEAL THERE WAS NO SCOPE FOR INVOKING PROVISIONS OF SECTION 68 - HELD, YES [PARA 4.4.1] FIN FAVOUR O F ASSESSEE 2. [2014] 225 TAXMAN 190 (GUJARAT) ( MAG.) CIT VS. JAGATKUMAR SATISHBHAI PATEL AKIL KURESHI, J 1. REVENUE IS IN APPEAL AGAINST THE JUDGMENT OF THE INCOME - TAX APPELLATE TRIBUNAL, AHMEDABAD [HEREINAFTER REFERRED TO AS, 'THE TRIBUNAL'] DATED 16TH NOVEMBER, 2011, RAISING FOLLOWING SUBSTANTIAL QUESTION OF LAW FOR OUR CONSIDERATION : 'WHETHER ON THE FACTS AND CIRCUMSTANCES OF THE CASE, THE HON'BLE TRIBUNAL WAS JUSTIFIED IN REVERSING THE ORDER OF CIT (A) IN DELETING THE ADDITION OF RS. 10,09,000/= O N ACCOUNT OF UNEXPLAINED CASH CREDIT UNDER SECTION 68 OF THE ACT CONSIDERING MAJOR AMOUNT OF CASH CREDIT AS OPENING BALANCE EVEN THOUGH NO RETURN WAS FILED IN EARLIER YEAR AND BOOKS OF ACCOUNT WERE NOT MAINTAINED BY THE ASSESSEE?' 3. HAVING PERUSED THE DO CUMENTS ON RECORD, WE NOTICE THAT THE COMMISSIONER (APPEALS) HAD CONFIRMED THE ASSESSING OFFICER'S ORDER MAKING AN ADDITION OF RS. 10,09.000/= UNDER SECTION 68 OF THE INCOME - TAX ACT, 1961. THE TRIBUNAL, HOWEVER, DELETED SUCH ADDITION IN THE FOLLOWING MANNE R: ITA NO. 2927/MUM/2017 M/S. SYNTENSIA NETWORK SECURITY INDIA PVT. LTD., 4 '10. THE ORDER ISSUE IN A.Y 2000 - 01 IS ADDITION MADE BY THE ASSESSING OFFICER OF RS. 10,09,000/= ON ACCOUNT OF UNSECURED LOAN. IN THIS REGARD, WE FIND THAT OUT OF THESE LOAN OF THIS AMOUNT, ONLY RS. 50,000/= WAS RECEIVED IN THE PRESENT YEAR AND THE BA LANCE IS ON ACCOUNT OF OPENING BALANCE. HENCE, ONLY THIS AMOUNT OF RS. 50,0007= CAN BE CONSIDERED FOR ADDITION UNDER SECTION 68 IN THIS YEAR. WE, THEREFORE, DELETE THE BALANCE ADDITION. NOW ON ACCOUNT OF THE LOAN OF RS. 50,000/= RECEIVED BY THE ASSESSEE IN THE PRESENT YEAR, WE FEEL THAT ALTHOUGH THE ASSESSEE COULD NOT PROPERLY EXPLAIN THE SAME BUT THE ASSESSEE DESERVES THE BENEFIT OF TELESCOPING AGAINST THE ADDITION IN THE INCOME MADE BY THE ASSESSING OFFICER, WHICH IS CONFIRMED BY US. AS AGAINST A LOSS OF RS. 1,22,1007= DECLARED BY THE ASSESSEE IN THE ROI, INCOME ASSESSED BY THE A.O IS RS. 36,5067= WHICH MEANS THAT TOTAL ADDITION MADE BY THE A.O WHICH IS CONFIRMED BY US ALSO IS RS. 1,58,6067= WHEREAS THE FRESH LOAN IS ONLY RS. 50,0007= ONLY. HENCE, THIS ADD ITION, OF RS 50 0007= IS ALSO DELETED GROUND NO. 3 IS ALLOWED. GROUND NO. 1 WAS NOT PRESSED AND HENCE, REJECTED AS NOT PRESSED. GROUND NO. 4 IS CONSEQUENTIAL AND GROUND NO. 5 IS GENERAL.' 3. FROM THE ABOVE, IT CAN BE SEEN THAT BARRING A SUM OF RS. 50,000 / =, REMAINING PORTION OF THE ADDITION WAS DELETED ON THE GROUND THAT ONLY RS. 50,000 / = WERE RECEIVED IN THE YEAR UNDER CONSIDERATION AND BALANCE WAS OPENING BALANCE IN THE ACCOUNT OF THE ASSESSEE. ON THAT BASIS, THE TRIBUNAL FOUND THAT THE AMOUNT OF RS. 9,6 1,000 / = COULD NOT HAVE BEEN CONSIDERED DURING THE YEAR UNDER CONSIDERATION. WE SEE NO ERROR IN TRIBUNAL'S VIEW. 2. [2008 ) 301 ITR 384 (DELHI) CIT VS. USHA STUD AGRICULTURAL FARMS LTD. SECTION 68 OF THE INCOME - TAX ACT, 1961 - CASH CREDITS - ASSESSMENT YEA R 1999 - 2000 - DURING ASSESSMENT PROCEEDINGS, ASSESSING OFFICER NOTICED THAT ASSESSEE HAD SHOWN CERTAIN AMOUNT AS ADVANCE FROM ONE 'B 1 - AS ASSESSEE FAILED TO FILE CONFIRMATION FROM B, ASSESSING OFFICER MADE ADDITION OF THAT AMOUNT UNDER SECTION 68 - ON APP EAL. COMMISSIONER (APPEALS) DELETED ADDITION ON GROUND THAT SAID CASH CREDIT WAS APPEARING IN BOOKS OF ASSESSEE OVER PAST FOUR TO FIVE YEARS AND, THUS, IT WAS NOT FRESH CREDIT ENTRY PERTAINING TO RELEVANT ASSESSMENT YEAR TRIBUNAL DISMISSED APPEAL FILED B Y REVENUE - WHETHER FINDING RECORDED BY COMMISSIONER (APPEALS) WAS A FINDING OF FACT AND, AS SUCH, NO FAULT COULD BE FOUND WITH ORDER OF TRIBUNAL IN ENDORSING DECISION OF COMMISSIONER (APPEALS) - HELD, YES 3. [2012 ) 349 ITR 260 (ALLAHABAD) CIT VS. RAQHURA II AQRO INDUSTRIES (P.) LTD., IT : WHERE DURING PRECEDING YEAR ASSESSEE WAS SHOWING TWO FIGURES, VIZ., UNSECURED LOAN OF RS. 60 LAKHS AND SHARE APPLICATION MONEY OF RS. 40 LAKHS BUT DURING RELEVANT ITA NO. 2927/MUM/2017 M/S. SYNTENSIA NETWORK SECURITY INDIA PVT. LTD., 5 ASSESSMENT YEAR THESE WERE CLUBBED TOGETHER AND CONSOLIDA TED BALANCE OF RS. 1 CRORE WAS SHOWN AS UNSECURED LOAN, NO ADDITION COULD BE MADE ON ACCOUNT OF DIFFERENCE BETWEEN CLOSING BALANCE AND OPENING BALANCE OF UNSECURED LOAN . SECTION 68 OF THE INCOME - TAX ACT, 1961 - CASH CREDITS [LOANS] - ASSESSMENT YEAR 2003 - 04 - DURING ASSESSMENT PROCEEDINGS ASSESSING OFFICER NOTICED THAT OPENING BALANCE OF UNSECURED LOANS WAS RS. 1 CRORE WHILE CLOSING BALANCE OF UNSECURED LOANS IN PRECEDING YEAR WAS RS. 60 LAKHS - HE ADDED AMOUNT OF DIFFERENCE AS UNDISCLOSED INCOME OF ASSESS EE - ASSESSEE EXPLAINED THAT DURING EARLIER YEAR AMOUNT OF RS. 1 CRORE WAS HAVING TWO ELEMENTS, I.E., UNSECURED LOAN OF RS. 60 LAKHS AND SHARE CAPITAL MONEY OF RS. 40 LAKHS, BUT DURING RELEVANT ASSESSMENT YEAR, THESE WERE CLUBBED TOGETHER AND CONSOLIDATED BALANCE OF RS. 1 CRORE WAS SHOWN - WHETHER ON FACTS NO MONEY HAD GONE OUT FROM BOOKS OF ACCOUNT AND THERE WAS MERELY ADJUSTMENT OF ENTRIES, I.E., TRANSFER OF FIGURE FROM ONE HEAD TO ANOTHER HEAD AND, THEREFORE, INFERENCE DRAWN BY ASSESSING OFFICER COULD NO T BE SUSTAINED - HELD, YES [PARA 7] [IN FAVOUR OF ASSESSEE] 4. ITA NO. 153/MUM/2010 - ITO VS SHRI NASIR KHAN J. MAHADIK (ITAT MUMBAI) MUMBAI ITAT HAS IN THE FOLLOWING CASE DELETED THE ADDITIONS MADE ON ACCOUNT OF OPENING BALANCES OF UNSECURED LOANS AND TH E NOTIONAL INTEREST ON SUCH LOANS. THE TRIBUNAL HELD THAT ONLY FRESH LOANS OR ADDITIONS TO THE LOANS DURING THE YEAR IN QUESTION CAN BE CONSIDERED FOR THE PURPOSE OF ADDITION. PREVIOUS YEARS LOANS CANNOT BE ADDED TO SUBSEQUENT YEAR'S INCOME BY CLAIMING THE M TO BE UNEXPLAINED. 5. ITA NO. 305/MUM/2016 - SOORAI LEATHERS (ITAT CHENNAI) IN A RECENT JUDGMENT, ITAT CHENNAI HAS STATED THAT CONSENT/ACCEPTANCE GIVEN BY ASSESSEE COULD NOT GIVE JURISDICTION AND A RIGHT TO THE ASSESSING AUTHORITY TO MAKE AN ADDI TION. THE TAXING AUTHORITY CAN ACT ONLY IF THERE IS POWER UNDER THE STATUTE TO DO SO. IT FURTHER HELD THAT IF THE LIABILITIES ARE OLD REPRESENTING OPENING BALANCES ONLY, SECTION 68 CANNOT BE APPLIED. 6. [2008 ) 21 SOT 22 (DELHIUURO) SURAJ BHAN BAJAJ VS. ITO SECTION 68 OF THE INCOME - TAX ACT, 1961 - CASH CREDITS - ASSESSMENT YEAR 1995 - 96 - ASSESSEE CONSTRUCTED A RESIDENTIAL HOUSE DURING PERIOD FROM JULY 1994 TO APRIL 1996 - WHETHER WHILE INVOKING DEEMING PROVISIONS FOR MAKING ADDITION, INCOME - TAX ACT D OES NOT EMPOWER REVENUE AUTHORITIES TO INCLUDE CERTAIN RECEIPT AS INCOME OF YEAR WHICH ACTUALLY PERTAINS TO SOME OTHER YEARS - HELD, YES - ASSESSING OFFICER ASKED ASSESSEE TO EXPLAIN SOURCE OF INVESTMENT IN HOUSE - ASSESSEE EXPLAINED THAT GIFTS AND LOANS WER E RECEIVED IN EARLIER YEARS FROM HIS CLOSE RELATIONS AND FAMILY FRIENDS - ASSESSEE FURNISHED CASH FLOW STATEMENT AND EXPLAINED RECEIPT OF GIFTS IN EACH ASSESSMENT YEAR - HE ALSO PRODUCED AFFIDAVITS FROM ALL DONORS WHO CATEGORICALLY ACCEPTED ITA NO. 2927/MUM/2017 M/S. SYNTENSIA NETWORK SECURITY INDIA PVT. LTD., 6 FACT OF GIVING GIFT, REASON FOR GIVING GIFT AND THEIR SOURCE OF INCOME - HOWEVER, ASSESSING OFFICER MADE ADDITION OF WHOLE OF GIFTED AMOUNT IN ASSESSMENT YEAR IN QUESTION - ON APPEAL. COMMISSIONER (APPEALS) DELETED GIFTS AND LOANS WHICH WERE NOT PERTAINING TO YEAR UNDER CONSIDERATION AND WERE RECEIVED BY ASSESSEE IN EARLIER YEARS - WHETHER COMMISSIONER (APPEALS) CORRECTLY DELETED ADDITION - HELD, YES 7. [2006) 6 SOT 301 (DELHI) PARMOD KUMAR DANG VS. JCIT SECTION 68 OF THE INCOME - TAX ACT, 1961 - CASH CREDITS - ASSE SSMENT YEAR 1996 - 97 - ASSESSEE RECEIVED AMOUNTS OF RS. 2,50,000 AND RS. 2 LAKHS ON 28 - 9 - 1995 AND 3 - 10 - 1995, RESPECTIVELY, BY WAY OF CASH CREDIT FROM ONE R - HE ALSO RECEIVED AMOUNT OF RS. 97,886 ON 28 - 9 - 1995 BY WAY OF CASH CREDIT FROM ONE P - ASSESSING OFFI CER TREATED SAID AMOUNTS AS UNEXPLAINED CASH CREDITS UNDER SECTION 68 AND ADDED SAME TO INCOME OF ASSESSEE - ACCOUNT STATEMENT OF R REVEALED THAT THERE WAS AN OPENING CREDIT BALANCE OF RS. 4.50.000 WHICH WAS REPAID IN CASH ON 15 - 4 - 1995 AND 26 - 4 - 1995 AND SA ME HAD BEEN RECEIVED BACK BY ASSESSEE IN CASH ON 28 - 9 - 1995 AND 3 - 10 - 1995 - FURTHER ACCOUNT STATEMENT OF P REVEALED THAT THERE WAS AN OPE NING CREDIT BALANCE OF RS. 5,34, 000 OUT OF WHICH RS. 97.886 WAS REPAID IN CASH ON 4 - 4 - 1995 AND 1O - 4 - 1995 AND SAME HAD BE EN R ECEIVED BACK BY ASSESSEE ON 28 - 9 - 2005 - ASSESSING OFFICER HAD CHOSEN TO TREAT UNEXPLAINED ONLY AMOUNTS RECEIVE D BACK BY ASSESSEE AND HAD NOT DOUBTED AMOUNTS REPAID ALTHOUGH EVIDENCE AVAILABLE WITH ASSESSEE FOR BOTH T RANSACTIONS WAS SAME - WHETHER IF RE CEIPT OF MONEY WAS DOUBTED, PAYMENT ALSO HAD TO BE DISREGARDED - HELD, YES - WHETHER IN ANY CASE SINCE STARTING POINTS OF CASH CREDITS WERE OPENING BALANCES IN BOTH ACCOUNTS WHICH HAD BEEN BROUGHT FORWARD FROM EARLIER YEARS, NO ADDITION WAS MERITED UNDER S ECTION 68 - HELD, YES 8 . IT WAS ALSO ARGUED BY LEARNED AR THAT CASH CREDIT ON ACCOUNT OF SHARE APPLICATION MONEY RECEIVED FROM NON - RESIDENT COMPANY IS NOT SUBJECT TO DEEMED ADDITION U/S. 68 OF THE ACT. IN THIS RESPECT, IT IS BETTER TO PRODUCE THE VERDICT OF SECTION 68 WHICH 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 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: PROVIDED THAT WHERE THE ASSESEE IS A COMPANY, (NOT BEING A COMPANY IN WHICH THE PUBLIC ARE SUBSTANTIALLY INTERESTED) AND THE SUM SO CREDITED CONSISTS OF SHARE APPLICATION MONEY, SHARE CAPITAL, SHARE PREMIUM OR ANY SUCH AMOUNT ITA NO. 2927/MUM/2017 M/S. SYNTENSIA NETWORK SECURITY INDIA PVT. LTD., 7 BY WHATEVER NAME CALLED, ANY EXPLANATION OFFERED BY SUCH ASSESSEE - COMPANY SHALL BE DEEMED TO BE NOT SATISFACTORY, UNLESS - A) THE PER SON, BEING 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 FOUN D TO BE 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 REFERRED TO IN CLAUSE (23FB) OF SECT ION 10. 9 . A S PER LEARNED AR A FTER GOING THROUGH THE ABOVE PROVISION, THE LAW IS VERY CLEAR THAT THE ADDITION CANNOT BE MADE UNDER SECTION 68 OF THE ACT, AS THE AMOUNT WAS RECEIVED FROM SYNTHENSIA AB WHICH IS A FOREIGN COMPANY. HENCE, AMOUNT RECEIVED FROM FOREIGN COMPANY IS NOT SUBJECT TO TAX UNDER D EEMING PROVISION OF SECTION 68 O F THE ACT. 1 0 . F URTHERMORE, IT WAS ARGUED THAT THE LAW OF SECTION 68 CAN NOT BE APPLIED TO REMITTANCES MADE IN INDIA BY NON - RESIDENT IS STRENGTHENED BY THE PROVISO TO U/S.68 INSE RTED W.E.F. ASST. YR. 2013 - 14. ACCORDING TO THE SAID PROVISO, IF AN ASSESSEE COMPANY, IN WHICH PUBLIC ARE NOT SUBSTANTIALLY INTERESTED, RECEIVES MONEY BY WAY OF SHARE CAPITAL, THEN THE SOURCE OF FUNDS OF RESIDENT SHAREHOLDER HAS TO BE ESTABLISHED BY THE AS SESSEE IN ORDER TO GET OUT OF THE KIN OF THE DEEMING PROVISION UNDER SECTION 68. HENCE, THE PROVISO TALKS OF THE SOURCE BEING ESTABLISHED ONLY WHEN THE SHAREHOLDER IS A RESIDENT OF INDIA. THERE IS NO SUCH REQUIREMENT IF SHAREHOLDER IS A NON - RESIDENT. THERE FORE, THE CREDITWORTHINESS OF THE SHAREHOLDERS AS PER LEARNED AR , IF HE IS A NON - RESIDENT, DOES NOT HAVE TO BE ESTABLISHED BY THE ASSESSEE IN RESPECT OF REMITTANCE RECEIVED BY HIM. ITA NO. 2927/MUM/2017 M/S. SYNTENSIA NETWORK SECURITY INDIA PVT. LTD., 8 IN THIS RESPECT CIRCULAR NO.5 IN F.NO.73A/2(69) - IT (A - 11), DT. 20 TH FEB,196 9 WAS RELIED ON AND WHICH READS AS UNDER: - 1.'MIGRANT ASSESSEES MONEY REMITTED TO INDIA THROUGH BANKS - ENQUIRIES BY ITOS REGARDING ORIGIN OF MONEY - INSTRUCTIONS REGARDING: IT HAS BEEN REPRESENTED TO THE BOARD THAT PERSONS OF INDIAN ORIGIN RESIDING ABROAD BUT INTENDING TO RETURN TO INDIA AND SETTLE HERE PERMANENTLY APPREHEND THAT THE MONEY BROUGHT IN OR REMITTED FROM ABROAD BY SUCH PERSONS MIGHT BE SUBJECTED TO INCOME - TAX IN INDIA. THE APPREHENSION APPEARS TO BE DUE TO LACK OF INFORMATION REGARDING THE CORRECT LEGAL POSITION ABOUT THE TAXABILITY OF THE REMITTANCES OF MONEY FROM ABROAD. THE GENERAL POSITION, IN THIS REGARD, IS CLARIFIED BELOW: 2. MONEY BROUGHT INTO INDIA BY NON - RESIDENTS FOR INVESTMENTS OR OTHER PURPOSES IS NOT LIABLE TO INDIAN INCOME - TAX. THERE FORE, THERE IS NO QUESTION OF A REMITTANCE INTO THE COUNTRY BEING SUBJECTED TO INCOME - TAX IN INDIA. THE QUESTION OF ASSESSMENT TO TAX ARISES ONLY WHEN THERE IS NO EVIDENCE TO SHOW THAT THE AMOUNT IN QUESTION, IN FACT REPRESENTS SUCH REMITTANCE, IN OTHER WO RDS, IN THE ABSENCE OF PROPER SUPPORTING EVIDENCE, THE TAXPAYERS' STORY THAT THE MONEY HAS BEEN BROUGHT INTO INDIA FROM OUTSIDE MAY BE DISBELIEVED BY THE ITO WHO MAY THEN PROCEED TO HOLD THAT THE MONEY HAD IN FACT BEEN EARNED IN INDIA. 3. IF THE MONEY HAS BEEN BROUGHT INTO INDIA THROUGH BANKING CHANNELS OR IN THE FORM OF ASSETS LIKE PLANT AND MACHINERY OR STOCK - IN - TRADE, FOR WHICH THE NECESSARY IMPORT PERMITS HAD BEEN OBTAINED, NO QUESTIONS AT ALL ARE ASKED BY THE ITOS AS TO THE ORIGIN OF THE MONEY OR ASSET S BROUGHT IN. IT IS ONLY IN CASES WHERE THE MONEY IS CLAIMED TO HAVE BEEN BROUGHT FROM OUTSIDE OTHERWISE THAN THROUGH BANKING CHANNELS AND THERE IS NO EVIDENCE REGARDING THE TRANSFER OF MONEY THAT THE DEPARTMENT HAS TO MAKE ENQUIRIES ABOUT THE SOURCE THERE OF. EVEN IN THESE CASES, HAVING REGARD TO THE DIFFICULTIES EXPERIENCED BY PERSONS MIGRATING FROM PAKISTAN, BURMA AND EAST AFRICAN COUNTRIES, INSTRUCTIONS HAVE BEEN ISSUED TO THE ITOS THAT SUCH CLAIMS SHOULD BE FREELY ADMITTED UP TO THE LIMIT OF RS. 50,000 IN EACH CASE PROVIDED THE FOLLOWING CONDITIONS ARE SATISFIED : (A) THE ASSESSEE MIGRATED TO INDIA ON OR AFTER THE DATES MENTIONED BELOW FROM THE COUNTRIES SHOWN AGAINST EACH AND HAD NO SOURCE OF INCOME IN INDIA : (/) 30TH JULY, 1962 - MOZAMBIQUE (VIDE MIN ISTRY OF FINANCE PRESS NOTE DT. 22ND MAY, 1967); (/'/) 1ST NOV., 1963 (SIC.) - ZANZIBAR, KENYA, TANZANIA AND UGANDA (VIDE MINISTRY OF FINANCE PRESS NOTE DT. 22ND MAY, 1967); (///) 1ST JAN., 1964 - EAST PAKISTAN AND BURMA (VIDE MINISTRY OF FINANCE PRESS NOT E DT. 25TH JUNE. 1964722ND MAY. 1965); (IV) 1ST OCT.. 1965 - WEST PAKISTAN (VIDE MINISTRY OF FINANCE PRESS NOTE DT. 3RD FEB.. 1969). (B) HE HAD SUFFICIENT RESOURCES IN THE FOREIGN COUNTRY. ITA NO. 2927/MUM/2017 M/S. SYNTENSIA NETWORK SECURITY INDIA PVT. LTD., 9 (C) HE HAD NO SOURCE OF INCOME EITHER IN INDIA OR IN ANY FOREIGN COUNTRY, OTHER THAN THE COUNTRY FROM WHICH HE MIGRATED, PRIOR TO MIGRATION, AND HE WAS NOT ASSESSED AS 'RESIDENT' IN INDIA, EITHER FOR THE ASSESSMENT YEAR PRECEDING THE YEAR IN WHICH HE MIGRATED OR FOR EARLIER YEARS; AND (D) THE AMOUNT BROUGHT IN HAS BEEN DULY INTRODUCED IN THE BOOKS REGULARLY MAINTAINED IN INDIA AND AN INTIMATION OF SUCH INTRODUCTION IS GIVEN TO THE (TO WITHIN TWO MONTHS OF THE MIGRANT'S ARRIVAL.' 1 1 . IN SUPPORT OF THE CONTENTION THAT ABOVE ADDITION IS NOT JUSTIFIED, RELIANCE WAS ALSO PL ACED ON THE FOLLOWING JUDICIAL PRONOUNCEMENTS: - 1. (2013) 25 ITR(T) 521 (DELHI - TRIB) RUSSIAN TECHNOLOGY CENTRE (P.) LTD. DCIT IT: IF IDENTITY OF NON - RESIDENT REMITTER IS ESTABLISHED AND MONEY HAS COME IN THROUGH BANKING CHANNELS, IT CANNOT BE TREATED AS DEEMED. SECTION 68, READ WITH SECTION 69, OF THE INCOME - TAX ACT, 1961 - CASH CREDIT [SHARE APPLICATION MONEY] - ASSESSMENT YEARS 2002 - 03, 2003 - 04, 2005 - 06 AND 2006 - 07 - WHETHER MONEYS REMITTED BY NON - RESIDENTS, WHOSE IDENTITY IS NOT IN QUESTION, THROUGH THEIR BANK ACCOUNTS OUTSIDE INDIA HAVE TO BE HELD AS. CAPITAL RECEIPTS NOT ELIGIBLE TO TAX, AND CANNOT BE TREATED AS DEEMED INCOME UNDER SECTION 68 OR SECTION 69 - HELD, YES [PARA 11.7] [IN FAVOUR OF ASSESSEE]. 2. ( 2003) 86 ITD 626 (DELHI) DCIT VS. FINLA Y CORPORATION LTD. SECTION 5 OF THE INCOME - TAX ACT, 1961 OF THE INCOME - TAX ACT, 1961 - INCOME - ACCRUAL OF - ASSESSMENT YEAR 1996 - 97 - WHETHER UNDER SECTION 5(2), IF ANY INCOME IS ALREADY RECEIVED OUTSIDE INDIA, SAME CANNOT BE TAXED IN INDIA MERELY ON GROU ND THAT IT IS BROUGHT IN INDIA BY WAY OF REMITTANCES - HELD, YES - WHETHER THERE IS A CONFLICT BETWEEN PROVISIONS OF SECTION 5(2) ON ONE HAND AND SECTION 68 OR 69 ON OTHER HAND ONLY WITH REGARD TO BURDEN OF PROOF AND NOT ON ISSUE OF TAXABILITY OF INCOME - HELD, YES - WHETHER ISSUE AS TO WHETHER INCOME OF A NON RESIDENT IS TAXABLE OR NOT IS TO BE DECIDED WITH REFERENCE TO PROVISIONS OF SECTION 5(2) AND PROVISIONS OF SECTION 68 OR 69 CANNOT ENLARGE SCOPE OF SECTION 5(2) AND, THEREFORE, WHAT IS NOT TAXABLE UND ER SECTION 5(2) CANNOT BE TAXED UNDER SECTION 68 OR 69 - HELD, YES - WHETHER, CONSEQUENTLY, SECTION 68 OR 69 WOULD BE APPLICABLE IN CASE OF A NON - RESIDENT ONLY WITH REFERENCE TO THOSE AMOUNTS WHOSE ORIGIN OF SOURCE CAN BE LOCATED IN INDIA - HELD, YES - ITA NO. 2927/MUM/2017 M/S. SYNTENSIA NETWORK SECURITY INDIA PVT. LTD., 10 WHET HER WHERE BANK CERTIFICATES IN RESPECT OF REMITTANCES FROM ABROAD CREDITED IN NRE ACCOUNT IN INDIA WERE IN PRESCRIBED FORM AND SHOWED THAT AMOUNTS WERE REMITTED FROM ASSESSEE'S OWN BANK ACCOUNT WITH BANKS AT NEW YORK, COMMISSIONER (APPEALS) WAS JUSTIFIED I N COMING TO CONCLUSION THAT INCOME, IF ANY, WAS ALREADY RECEIVED IN NEW YORK AND, CONSEQUENTLY, IT COULD NOT BE SAID THAT SUCH INCOME WAS RECEIVED IN INDIA AGAIN - HELD, YES SECTION 68 OF THE INCOME - TAX ACT, 1961 - CASH CREDITS - ASSESSMENT YEAR 1996 - 97 - WHETHER WHAT IS NOT TAXABLE UNDER SECTION 5(2) CANNOT BE TAXED UNDER SECTION 68 OR 69 - HELD, YES - WHETHER PROVISIONS OF SECTION 68 OR 69 WOULD BE APPLICABLE IN CASE OF NON - RESIDENT ONLY WITH REFERENCE TO THOSE AMOUNTS WHOSE ORIGIN OF SOURCE CAN BE LOCAT ED IN INDIA AND THEREFORE, PROVISIONS OF SECTION 68 OR 69 HAVE LIMITED APPLICATION IN CASE OF A NON - RESIDENT - HELD - YES. PRAYER; AFTER GOING THROUGH THE ABOVE MENTIONED PROVISO, THE LAW IS VERY CLEAR THAT AMOUNT RECEIVED FROM THE NON - RESIDENT IS CANNOT BE TA XED U/S. 68 OF THE ACT. THEREFORE, WE WOULD REQUEST THE HON'BLE BENCH TO DELETE THE ADDITION MADE ON THIS GROUND. 1 2 . IT WAS ALSO ARGUED THAT A MOUNT TRANSFERRED THROUGH JOURNAL ENTRY IS NOT LIABLE TO TAX UNDER SECTION 68 OF THE ACT. M/S. SYNTENSIA AB (SW EDEN COMPANY) WANTED TO SET - UP NEW BUSINESS OF INTERNET SECURITY SYSTEM WITH ADMINISTRATIVE OFFICE SET - UP AT PUNE & MUMBAI AND HENCE SUBSIDY COMPANY, I.E. ASSESSEE COMPANY, WAS FORMED AND INCORPORATED ON 30.O7.2007 WITH PAID UP SHARE CAPITAL OF RS.1,00,000 / - . SINCE THE ASSESSEE COMPANY WAS FORMED WITH LOW PAID UP CAPITAL, THE ENTIRE LONG TERM FINANCIAL OBLIGATION BY WAY OF SHARE APPLICATION WERE MET BY ITS HOLDING COMPANY, I.E. M/S, SYNTENSIA AB (SWEDEN COMPANY), ON BEHALF OF THE ASSESSEE COMPANY IN A.Y.200 8 - 09 AND A.Y.2009 - 10. THE ASSESSEE COMPANY AND ITS HOLDING COMPANY, I.E. M/S. SYNTENSIA AB (SWEDEN COMPANY) HAS MUTUALLY DECIDED TO ALLOT SHARES AGAINST SUCH SHARE APPLICATION MONEY. AND HENCE, AFTER COMPLETION OF RBI PROCEDURE, THE ITA NO. 2927/MUM/2017 M/S. SYNTENSIA NETWORK SECURITY INDIA PVT. LTD., 11 ASSESSEE COMPANY HAS IS SUED SHARES TO M/S. SYNTENSIA AB (SWEDEN COMPANY). UNDER TH ESE FACTS AND CIRCUMSTANCES OF THE CASE, AS PER LEARNED AR , THE AMOUNT OF SHARE APPLICATION MONEY [THE AMOUNT WHICH TRANSFERRED THR OUGH JOURNAL ENTRY / BOOK ENTRY DURING THE YEAR, SHOULD NOT BE TRE ATED AS UNEXPLAINED CASH CREDIT IN THE HANDS OF THE ASSESSEE COMPANY. THEREFORE, AMOUNT TRANSFERRED THROUGH JOURNAL ENTRY SHOULD NOT BE TREATED AS UNEXPLAINED CASH CREDIT IN TH E HANDS OF THE ASSESSEE COMPANY DURING THE A.Y.2012 - 13 UNDER CONSIDERATION. 1 3 . IN SUPPORT OF ABOVE PROPOSITION, RELIANCE WAS PLACED ON THE DECISION OF CALCUTTA HIGH COURT IN CASE OF JATIA INVESTMENT CO. 206 ITR 718 WHEREIN COURT OBSERVED AS UNDER: - SECTION 68 OF THE INCOME - TAX ACT, 1961 - CASH CREDITS - ASSESSMENT YEAR - PARTNERS OF ASSESSEE - FIRM WERE MEMBERS OF ONE 'J' GROUP RUNNING ;RAL BUSINESSES AND INDUSTRIES - ACCOUNTS OF ASSESSEE - FIRM SHOWED THAT IT BORROWED CERTAIN AMOUNT FROM GB, A PROPRIETARY CONCERN OF ONE OF ITS PARTNERS JM, WHICH WAS INVESTED IN PURCHASE OF SHARES - IT O 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 CONTE NDED 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 S TATED THAT QUESTION OF CASH CREDIT DID NOT ARISE, THERE BEING NO ACTUAL PASSING 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 AFOR ESAID THREE COMPANIES TO 'GB' IN EXCHANGE FOR SHARES AND, THEREFORE, AMOUNT OF LOAN IN QUESTION COULD NOT BE TREATED AS ASSESSEE'S INCOME FROM UNDISCLOSED SOURCES - HELD, YES ITA NO. 2927/MUM/2017 M/S. SYNTENSIA NETWORK SECURITY INDIA PVT. LTD., 12 1 4 . IT WAS ALSO CONTENTION OF LEARNED AR THAT THE ASSESSEE HAS PROVED IDENTITY, GENUINENESS AND CREDIT WORTHINESS OF THE SHARE APPLICANTS HENCE ADDITION SO MADE U/S.68 IS REQUIRE D TO BE DELETED . 15. ON THE OTHER HAND LEARNED DR RELIED ON THE ORDER OF LOWER AUTHORITIES. 1 6 . WE HAVE CONSIDERED RIVAL CONTENTIONS AND CAREFULLY GONE THRO UGH THE ORDERS OF THE AUTHORITIES BELOW. WE HAD ALSO DELIBERATED ON THE JUDICIAL PRONOUNCEMENTS REFERRED BY LOWER AUTHORITIES IN THEIR RESPECTIVE ORDERS AS WELL AS CITED BY LEARNED AR AND DR DURING THE COURSE OF HEARING BEFORE US. FROM THE RECORD WE FOUND THAT THE ASSESSEE COMPANY WAS INCORPORATED ON 30.07.2007. M/ S. SYNTENSISA ASIA PTE. LTD. - SINGAPORE [FOREIGN COMPANY] WAS THE HOLDING COMPANY OF THE ASSESSEE COMPANY AND M/S. SYNTENSISA AB - SWEDEN [FOREIGN COMPANY REGISTERED AT SWEDEN] WAS THE ULTIMATE HO LDING COMPANY OF THE ASSESSEE COMPANY. DURING THE A.Y. 2008 - 09, THE ASSESSEE HAS RECEIVED FURTHER SHARE APPLICATION MONEY OF RS.1,46,24,695/ - ($366749.52)FROM M/S. SYNTENSIA AB (SWEDEN COMPANY - ULTIMATE HOLDING COMPANY), I.E. SHARE APPLICANT. DURING THE A.Y. 2009 - 10, THE ASSESSEE HAS RECEIVED SHARE APPLICATION MONEY OF RS.56,54,634/ - ($137580.19) AGAIN FROM M/S. SYNTENSIA AB (SWEDEN COMPANY), [PAGE 25,30,36 & 37] A ND THE AGGREGATE AMOUNT OF RS.2,02,79,329/ - W AS BROUGHT FORWARDED TILL A.Y.20 11 - 12 AS TH E APPLICATION FOR ALLOTMENT OF SHARES TO FOREIGN COMPANY WAS NOT APPROVED BY RBI. FROM THE RECORD WE FOUND THAT ITA NO. 2927/MUM/2017 M/S. SYNTENSIA NETWORK SECURITY INDIA PVT. LTD., 13 THE ASSESSEE COMPANY HAS SUBMITTED FOLLOWING DOCUMENTS BEFORE THE LOWER AUTHORITIES. I. I NCORPORATION CERTIFICATE OF SHARE APPLICANT COMPAN Y II. BANK STATEMENT III. FORM NO.20B FOR YEAR END ON 31 . 03.2012 IV. FORM NO. 2 V . BOARD RESOLUTION PASSED BY ASSESSEE COMPANY TO ALLOT SHARES 17 . DURING THE A.Y. 2012 - 13, I.E. THE ASSESSMENT YEAR UNDER AN APPEAL, THE ASSESSEE COMPANY HAS ALLOTTED 10, 13,969 SHARES AT FACE VALUE OF RS.10/ - PER SHARE WITH PREMIUM OF RS.10/ - PER SHARE AMOUNTING TO RS.1,01,39,690/ - SHARE CAPITAL AND RS.1,01,39,690/ - SHARE PREMIUM ON 13.12.2011. THE ENTIRE AMOUNT OF SHARE APPLICATION MONEY OF RS.20279380/ - (I.E. RS.1,46,24,6 96/ - PLUS RS.56,54,634/ - ) WAS TRANSFERRED THROUGH A JOURNAL ENTRY OF RS.2,02,79,380/ - TO SHARE CAPITAL ACCOUNT AND SHARE PREMIUM ACCOUNT RESPECTIVELY. THUS, T HE ASSESSEE HAS NOT RECEIVED ANY SINGLE AMOUNT IN A.Y.2012 - 13 FOR THE ALLOTMENT OF SHARES. UNDER S ECTION 68, THE AMOUNT WHICH REPRESENTS CREDIT OF THE YEAR THAT CAN BE ADDED AS UNEXPLAINED CREDIT FOR THAT YEAR. OPENING BALANCE IS NOT SUBJECT TO TAX U/S. 68 OF THE ACT AS THE SAME IS REPRESENTING THE CREDIT OF ANOTHER PREVIOUS YEAR. SHARES WERE ALLOTTED BY THE ASSESSEE COMPANY TO ITS HOLDING COMPANY AT 100% PREMIUM IN EXPECTATION OF GOOD FUTURE EARNINGS AND PROSPECTUS. HONBLE CALCUTTA TRIBUNAL IN THE CASE OF GLOBAL MERCANTILES (P) LTD., 157 ITD 924 HELD THAT WHERE ASSESSEE RECEIVED ITA NO. 2927/MUM/2017 M/S. SYNTENSIA NETWORK SECURITY INDIA PVT. LTD., 14 SHARE APPLICATION MON IES IN EARLIER YEAR AND ONLY SHARES WERE ALLOTTED TO APPLICANTS DURING ASSESSMENT YEAR UNDER APPEAL, PROVISIONS OF SECTION 68 COULD NOT BE INVOKED TO MAKE ADDITION . 1 8 . IN VIEW OF THE ABOVE JUDICIAL PRONOUNCEMENTS AS THE AMOUNT RS.2,02,79,380/ - REPRESENTIN G CREDIT OF EARLIER YEARS, I.E. A.Y.2008 - 09 & 20O9 - 10, ADDITION CANNOT BE MADE IN ASSESSMENT YEAR UNDER AN APPEAL MERELY BECAUSE OF ALLOTMENT IS MADE IN A.Y.2012 - 13. [OPENING BALANCE CANNOT BE ADDED IN A.Y.2012 - 13 ). 19 . FURTHERMORE, THE LAW IS SECTION 68 I S NOT APPLY TO REMITTANCES MADE IN INDIA BY NON - RESIDENT IS STRENGTHENED BY THE PROVISO TO U/S.68 INSERTED W.E.F. ASST. YR. 2013 - 14. ACCORDING TO THE SAID PROVISO, IF AN ASSESSEE COMPANY, IN WHICH PUBLIC ARE NOT SUBSTANTIALLY INTERESTED, RECEIVES MONEY BY WAY OF SHARE CAPITAL, THEN THE SOURCE OF FUNDS OF RESIDENT SHAREHOLDER HAS TO BE ESTABLISHED BY THE ASSESSEE IN ORDER TO GET OUT OF THE KIN OF THE DEEMING PROVISION UNDER S. 68. HENCE, THE PROVISO TALKS OF THE SOURCE BEING ESTABLISHED ONLY WHEN THE SHAREHO LDER IS A RESIDENT OF INDIA. THERE IS NO SUCH REQUIREMENT IF SHAREHOLDER IS A NON - RESIDENT. THEREFORE, THE CREDITWORTHINESS OF THE SHAREHOLDERS, IF HE IS A NON - RESIDENT, DOES NOT HAVE TO BE ESTABLISHED BY THE ASSESSEE IN RESPECT OF REMITTANCE RECEIVED BY H IM. 20 . FROM THE RECORD, WE ALSO FOUND THAT T HE ASSESSEE COMPANY HAS RECEIVED 2 LETTERS OF CONFIRMATION IN RESPECT OF MONEY PAID BY SYNTENSIA AB (SWEDEN COMPANY) TOWARDS SHARE APPLICATION FOR INVESTMENT IN SHARES ITA NO. 2927/MUM/2017 M/S. SYNTENSIA NETWORK SECURITY INDIA PVT. LTD., 15 OF THE ASSESSEE COMPANY I.E. ONE CONFIRMATI ON OF US $ 369249.52 AS ON 31.03.2008 AND ANOTHER CONFIRMATION OF US $ 137580.19 AS ON 03.06.2008, A COPY OF WHICH ARE PLACED ON RECORD .US $ 369249.52 AS ON 31.03.2008 IN INDIAN CURRENCY COMES RS 14624695.40 AND US $ 137580. 19 AS ON 03.06.2008 IN INDIAN CU RRENCY COMES RS 5654634.01. FURTHERMORE, THE ASSESSEE COMPANY CANNOT ALLOT SHARES TO THE NON - RESIDENT WITHOUT PRIOR PERMISSION OF RBI. THE ASSESSEE COMPANY HAS FILED AN APPLICATION DATED 3 RD DECEMBER 2008 WITH YES BANK LIMITED ON 26 TH DE CEMBER 2008 WITH ENCLOSURE OF THE REQUIRED DOCUMENTS AND FIRC RECEIVED BY THE COMPANY AND A LETTER DATED 3 RD DECEMBER 2008 TO RESERVE BANK OF INDIA . AT PARA NO.5 OF THE ASSESSMENT ORDER THE ASSESSING OFFICER FURTHER DISCUSSED ABOUT THE EXCESSIVE PREMIUM CH ARGED BY THE ASSESSEE . IN THIS REGARD WE OBSERVE THAT BASIS OF PREMIUM WAS NOT REQUIRED TILL AY 2012 - 13 AND AMENDMENT ABOUT BASIS OF PREMIUM ON ALLOTMENT OF SHARES CAME THEREAFTER. MOREOVER THE ASSESSEE WAS A SUBSIDIARY OF THE COMPANY TO WHOM SHARES WERE ALLOTTED. REASONS FOR PREMIUM HAS BEEN ELABORATED VIDE PAGE 2 OF THE LETTER DATED 10.03.2015 FILED WITH THE ASSESSING OFFICER DURING THE ASSESSMENT PROCEEDINGS . WE OBSERVE THAT THERE WAS PROPERTY JUSTIFICATION FOR THE SHARES ISSUED TO HOLDING COMPANY AT PR EMIUM OF RS.10.00 PER SHARE. 2 1. IN VIEW OF THE ABOVE DISCUSSION AND CONSIDERING THE TOTALITY OF FACTS AND CIRCUMSTANCES OF THE CASE, WE DO NOT FIND ANY MERIT FOR THE ADDITION SO MADE BY THE AO. ITA NO. 2927/MUM/2017 M/S. SYNTENSIA NETWORK SECURITY INDIA PVT. LTD., 16 18. IN THE RESULT, APPEAL OF THE ASSESSEE IS ALLOWED. O RDER PRONOUNCED IN THE OPEN COURT ON THIS 27 / 07 /201 8 SD/ - ( RAM LAL NEGI ) SD/ - ( R.C.SHARMA ) JUDICIAL MEMBER ACCOUNTANT MEMBER MUMBAI ; DATED 27 / 07 /201 8 KARUNA SR. PS CO PY OF THE ORDER FORWARDED TO : BY ORDER, ( ASSTT. REGISTRAR) ITAT, MUMBAI 1. THE APPELLANT 2. THE RESPONDENT. 3. THE CIT(A), MUMBAI. 4. CIT 5. DR, ITAT, MUMBAI 6. GUARD FILE. //TRUE COPY//