KSM SECURITIES & FINANCE P.LTD, MUMBAI V. CIT 1, MUMBAI

ITA 2980/MUM/2015

• Counselvise Citation: [2018] 121 COUNSELVISE.COM (IT) 6832 (ITAT-MUMBAI)
• Duration Of Justice: 3 year(s) 20 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 07-06-2018
• Appeal Filed By: Assessee
• Order Result: Dismissed
• Bench Allotted: A
• Next Hearing Date: 18-09-2017
• Assessment Year: 2010-2011
• Appeal Filed On: 18-05-2015
• Result in Favour of: Revenue
• Court: TRIBUNAL
• Department Lawyers: K S RAJENDRA KUMAR
• Assessee Lawyers: NEHA PARANJAPE
• Keywords: Unexplained cash credit; Gift
• Section: 143(3); 14A; 68; 263; 11

Judgement Text

IN THE INC OME TAX APPELLATE TRIBUNAL H BENCH, MUMBAI BEFORE HONBLE SH. R. C. SHARMA , AM & HONBLE SH. SANDEEP GOSAIN, JM ./ I.T.A. NO . 2980 /MUM/201 5 ( / ASSESSMENT YEAR: 2010 - 11 ) KSM SECURITIES & FINANCE PVT. LTD. 2 ND FLOOR, NATIONAL INSURANCE BLDG, 204, D. N. ROAD , FORT MUMBAI - 400001 . / VS. CIT - 1 3 RD FLOOR, ROOM NO. 387. AAYAKARBHAVAN, M.K. ROAD, MUMBAI - 400020 ./ ./ PAN/GIR NO. AAACK4080F ( / APPELLANT ) : ( / RESPONDENT ) / APPELLANT BY : SHRI K. GOPAL & MS. NEHA PARANJAPE , AR / RESPONDENTBY : SHRI K. S. RAJENDRA KUMAR , DR / DATE OF HEARING : 16 /0 4 /201 8 / DATE OF PRONOUNCEMENT : 07/06/2018 / O R D E R PER SANDEEP GOSAIN, J UDICIAL MEMBER : THE P RESENT APPE AL FILED BY THE ASSESSEE IS AGAINST THE ORDER OF LD. COMMISSIONER OF INCOME TAX - 1 , MUMBAI, DATED 2 I.T.A. NO. 2980 /MUM/201 5 KSM SECURITIES & FINANCE PVT. LTD. 25.03.15 FOR AY 20 10 - 11 O N THE GROUNDS MENTIONED HEREIN BELOW: - 1) THE LEARNED COMMISSIONER OF INCOME TAX ERRED IN INITIATING PROCEEDINGS UNDERSECTION 263 OF THE INCOME TAX ACT, 1961. YOUR APPELLANTS THEREFORE SUBMIT THAT THE INITIATION OF PROCEEDINGS UNDER SECTION 263 OF THE INCOME TAX ACT, 1961 IS ILLEGAL AND BAD IN LAW AND ORDER OF THE LEARNED COMMISSIO NER OF INCOME TAX BE QUASHED OR SET ASIDE. 2) THE LEARNED COMMISSIONER OF INCOME TAX ERRED IN SETTING ASIDE THE ASSESSMENTMADE BY THE ASSESSING OFFICER UNDER SECTION 143(3) OF THE INCOME TAX ACT, 1961 AND DIRECTING THE ASSESSING OFFICER TO MAKE A FRESH ASS ESSMENT. YOUR APPELLANTS SUBMIT THAT SETTING ASIDE OF ASSESSMENT IS ILLEGAL AND BAD IN LAW. 3) THE LEARNED COMMISSIONER OF INCOME TAX ERRED IN HOLDING THAT PREMIUM RECEIVED ONISSUE OF SHARES IS NOT EXPLAINED AND THEREFORE CHARGEABLE TO TAX UNDER SECTION 68 OF THE INCOME TAX ACT, 1961. YOUR APPELLANT SUBMITS THAT THE PREMIUM RECEIVED ON ISSUE OF SHARES WAS FULLY EXPLAINED TO THE ASSESSING OFFICER DURING THE COURSE OF ASSESSMENT PROCEEDINGS AND THEREFORE THE DIRECTIONS GIVEN BY THE LEANED COMMISSIONER OF INCO ME - TAX TO REFRAME THE ASSESSMENT BE QUASHED OR SET ASIDE. 3 I.T.A. NO. 2980 /MUM/201 5 KSM SECURITIES & FINANCE PVT. LTD. 4) THE LEARNED COMMISSIONER OF INCOME TAX ERRED IN DIRECTING THE ASSESSING OFFICER TOREFRAME THE ASSESSMENT ORDER AFTER CONSIDERING THE STOCK - IN - TRADE FOR CALCULATING DISALLOWANCE UNDER SECTION 14A OF THE INCOME TAX ACT, 1961. YOUR APPELLANT SUBMIT THAT THE ASSESSING OFFICER HAS APPLIED HIS MIND WHILE CALCULATING THE DISALLOWANCE UNDER SECTION 14A OF THE INCOME TAX ACT, 1961 AND HAS CALCULATED THE SAME WHILE PASSING ASSESSMENT ORDER UNDER SECTION 143 (3) OF THE INCOME TAX ACT, 1961. YOUR APPELLANT SUBMITS THAT THE DIRECTION GIVEN BY THE LEARNED COMMISSIONER OF INCOME TAX IS VOID AND BAD IN LAW AND OUGHT TO BE QUASHED OR SET ASIDE. 5) YOUR APPELLANT FURTHER RESERVES THE RIGHT TO ADD, AMEND OR ALTER THE AFORESAIDGROUNDS OF APPEAL AS THEY MAY THINK FIT BY THEMSELVES OR BY THEIR REPRESENTATIVES. 2 . AS PER THE FACTS OF THE PRESENT CASE, T HE RETURN OF INCOME FOR THE YEAR UND ER CONSIDERATION WAS FILED BY THE ASSESSEE ON 12.10.10 DECLARI NG TOTAL INCOME AT RS. 15,77,305/ - . THE ASSESSMENT WAS COMPLETED U/S 143(3) OF IT. ACT ON 06.03.13 DETERMINING TOTAL INCOME AT RS. 29,80,920/ - . THERE AFTER, THE CIT PASSED ORDER U/S 263 OF THE I.T. ACT, THEREBY HOLDING THAT THE 4 I.T.A. NO. 2980 /MUM/201 5 KSM SECURITIES & FINANCE PVT. LTD. ORDER PASSED BY THE AO WAS ERRONEOUS AND WAS PREJUDI CIAL TO THE INTEREST OF THE REVENUE. AGGRIEVED BY THE ORDER OF LD. CIT , ASSESSEE HAS PREFERRED THE PRESENT APPEAL BY RAISING THE ABOVE GROUNDS. GROUND NO. 1 TO 4 . 3. SINCE ALL THE ABOVE GROUNDS RAISED BY THE ASSESSEE ARE INTER - CONNECTED AND INTER - RELATE D AND RELATES TO CHALLENGING THE ORDER OF LD. CIT IN INITIATING THE P ROCEEDINGS U/S 263 OF I.T. ACT, THEREFORE WE THOUGHT IT FIT TO DISPOSE OF THE SAME BY THIS COMMON ORDER. 4. WE HAVE HEARD COUNSELS FOR BOTH THE PARTIES AT LENGTH AND WE HAVE ALSO PERUSE D THE MATERIAL PLACED ON RECORD, JUDGMENT CITED BY BOTH THE PARTIES AS WELL AS THE ORDERS PASSED BY REVENUE AUTHORITIES. BEFORE WE DECIDE THE MERITS OF THE CASE, IT IS NECESSARY TO EVALUATE THE ORDERS PASSED BY LD. CIT . THE LD. CIT HAD INITIATED THE PROCE EDINGS U/S 263 OF THE I.T. ACT AND THE OPERATIVE PORTION 5 I.T.A. NO. 2980 /MUM/201 5 KSM SECURITIES & FINANCE PVT. LTD. IS CONTAINED IN PARA NO. 6 TO 7 OF ITS ORDER AND THE SAME IS REPRODUCED BELOW: - 6. THE TWO ISSUES ARE DISCUSSED HERE - BELOW: - 6.1 ISSUE OF SHARE PREMIUM THE OBJECTION THAT CAN BE GAUGED FROM UN - AUTHEN TICATED SUBMISSIONS ARE AS UNDER: - (A) IN THE COURSE OF ASSESSMENT - PROCEEDINGS, CONFIRMATION OF PARTIES WITH RESPECT TO INCREASE IN SHARE CAPITAL WAS FILED. ALSO, THE COPIES OF RESOLUTION PASSED IN THE - BOARD MEETING WERE FILED. (B) THE PROVISO TO SECTION 68 OF THE ACT WHICH REFERS TO SHARE PREMIUM IS EFFECTIVE FROM 1.4.2013 AND IS PROSPECTIVE IN NATURE. THEREFORE, IN THE PROCEEDINGS UNDER CONSIDERATION FOR A.Y.2010 - 1 1, THE PROVISIONS CANNOT BE INVOKED. (C) THE PERCENTAGE OF SHARE HOLDING BY EACH SHARE - HOL DER PRIOR TO ISSUE OF SHARE PREMIUM ON THE ONE HAND AND SUBSEQUENT TO THE EVENT ON THE OTHER HAND HAS REMAINED UNCHANGED. THEREFORE, PREMIUM AMOUNT CANNOT BE ADDED TO INCOME. 6.1.1 I HAVE PERUSED THE FACTS OF THE CASE. THE FACT THAT THE RATIO OF SHARE HOL DING OF EACH SHARE - HOLDER REMAINED UNCHANGED AFTER ISSUE OF SHARE PREMIUM IS OF 6 I.T.A. NO. 2980 /MUM/201 5 KSM SECURITIES & FINANCE PVT. LTD. NO CONSEQUENCE FOR THE PURPOSE AT HAND. THIS IS BECAUSE, IN WHAT FOLLOWS, IT IS THE NATURE OF RECEIPT OF PREMIUM AS ENVI SAGED IN SECTION 68 WHICH IS EMPHASIZED FOR THE PURP OSE OF PROCEEDINGS U/S.263 OF THE AC T. IT IS THIS NATURE WHICH THE A.O. HAS NOT LOOKED INTO AT ALL. ALSO, THE FACT THAT PROVISO IS NOT APPLICABLE TO THE ASSESSMENT YEAR UNDER CONSIDERATION IS AGAIN OF NO SIGNIFICANCE BECAUSE THE ISSUE IS REVOLVING AROUND THE M AIN SECTION 68 WITHOUT ANY REFERENCE T O THE PROVISO. T HE THIRD OBJECTION APPARENT IS THAT THE ISSUE OF SHARE CAPITAL WAS ANALYZED BY A.O. AND THEREFORE IT CANNOT BE RE - VISITED U/S.263 OF THE ACT. IN THIS CONNECTION, IT IS RELEVANT TO POINT OUT THAT THE ISS UE OF SHARE CAPITAL WAS ANALYZED BY A.O. BUT HE ABSOLUTELY FAILED TO REALIZE THAT SHIRE PREMIUM FALLS INTO AN ALTOGETHER DIFFERENT TERRITORY. A PERUSAL OF RECORDS FURTHER REVEALED THAT WHILE ISSUE OF SHARES WAS ANALYZED BY THE A.O. IN TERMS OF S ECTION 68 O F THE INCOME TAX ACT, HE TOTALLY IGNORED TO LOOK AT THE ENTIRE ISSUE FROM THE ANGLE OF JUSTIFICATION OF THE PREMIUM. HE TOTALLY MISSED THE FACT THAT SECTION 68 REQUIRED NATURE ALSO TO BE LOOKED INTO FOR ESTABLISHING GENUINENESS OF THE TRANSACTION THIS SECTION READS AS UNDER 4 WHERE ANY SUM IS FOUND CREDITED IN THE B OOKS OF AN ASSESSEE MAINTAINED FOR ANY PREVIOUS YEAR, AND THE ASSESSEE OFFERS NO EXPLANATION ABOUT THE NATURE AND 7 I.T.A. NO. 2980 /MUM/201 5 KSM SECURITIES & FINANCE PVT. LTD. SOURCE THEREOF OR THE 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 I N COME TAX AS THE INCOME OF THE ASSESSEE OF THAT PREVIOUS YEAR.' (STRESS PROVIDED) 6.1,2 THE TWIN REQUIRE MENTS OF NATURE AND SO URCE ARE CUMULATIVE; CONJOINED BY THE PHRASE 'AND'. THE 'NATURE' THEREFORE COULD NOT HAVE BEEN IGNORED BY ASSESSING OFFICER. A PERUSAL OF RECORDS FURTHER REVEALS THAT WHILE THE A.O. INVESTIGATED THE SOURCE OF THE, AMOUNT THUS RECEIVED; HE DID NOT AT ALL DW ELVE INTO THE NATURE OF THE RECEIPTS 6.1.3 I HAVE ALREADY EXPLAINED IN PRECEDING PARAGRAPHS THAT THE ORDER OF ASSESSMENT IS ERRONEOUS BECAUSE THE A.O. DID NOT AT ALL CARE TO ANALYZE THE 'NATURE' OF RECEIPTS IN TERMS OF SECTION 68 OF THE ACT. THERE WAS NO R ATIONALE FOR RECEIPTS OF HUGE PREMIUM WHEN THE PS OF ASSESSEE IS 'NIL'. IT IS THEREFORE HELD THAT THE ORDER OF ASSESSMENT UNDER CONSIDERATION IS ERRONEOUS. IT IS PREJUDICIAL TO THE INTEREST OF REVENUE FOR THE FOLLOWING REASONS: - (1) THE SHARE PREMIUM AMOUN T RECEIVED BY ASSESSEE WHILE INCREASINGTHE ASSETS IN BALANCE - SHEET IN 8 I.T.A. NO. 2980 /MUM/201 5 KSM SECURITIES & FINANCE PVT. LTD. THE FORM OF CASH/BANK BALANCE DOES NOT CREATE ANY LIABILITY IN THE BALANCE - SHEET. THIS AMOUNT OF PREMIUM GETS REFLECTED IN THE RESERVES AND UNDER THE COMPANY'S ACT THE NATURE OF THESE RE SERVES ARE SUCH WHICH CAN BE DISTRIBUTED TO THE SHARE HOLDERS IN THE FORM OF BONUS SHARES. THE RELEVANT PROVISIONS OF COMPANY'S A CT APPLICABLE TO SHARE PREMIUM ARE U/S.78 OF COMPANY'S ACT. WHAT CAN BE DISTRIBUTED TO SHARE HOLDERS OF ASSESSEE ARE ONLY PROFI TS OR ACCUMULATED PROFITS. THEREFORE, PRIMARY NATURE OF PREMIUM RECEIPT IS 'REVENUE' AND THEREFORE CHARGEABLE TO TAX. IN THE ALTERNATIVE, SINCE THE N ATURE OF RECEIPT HAS NOT BEEN E XP L AINED, THE PREMIUM AMOUNT CREDITED IN THE BOOKS OF ACCOUNT IS OF THE ACT. 6.1.4 IT FOLLOWS THAT THE ORDER OF ASSESSMENT IS PREJUDICIAL TO THE INTEREST OF REVENUE. THIS IS PARTICULARLY SO BECAUSE IN ADMINISTERING THE I.T. ACT, THE A.O. FAILED TO UNDERSTAND THE REQUIREMENTS OF SECTION 68 OF THE ACT LEADING TO A PERVERSE INVOCATI ON OF PRINCIPLES OF SECTION 68. THE PREMIUM AMOUNT RECEIVEDHAVING NO JUSTIFICATION SHOULD HAVE BEEN CHARGED TO TAX AS INCOME OF ASSESSEE OR SHOULD HAVE BEEN TREATED UNEXPLAINED CASH CREDIT U/S.68 OF THE ACT. 6.1.5 IN VIEW OF THE ABOVE, THE ASSESSMENT ORDER IS SET ASIDE WITH THE DIRECTION TO THE A.O. TO FRAME THE 9 I.T.A. NO. 2980 /MUM/201 5 KSM SECURITIES & FINANCE PVT. LTD. ASSESSMENT AFRESH TAKING INTO ACCOUNT THE OBSERVATIONS MADE IN THIS ORDER HEREIN ABOVE ON THE ISSUE UNDER CONSIDERATION. 6.2 ISSUE OF DISALLOWANCE U/S. 14A 6.2.1 IN WORKING OF THE DISALLOWANCE U/S. 14A OF THE ACT, THE A.O. HAS TAKEN INTO ACCOUNT THE VALUE OF SHARES HELD AS INVESTMENT. HE HOWEVER, IGNORED THE FACT THAT ASSESSEE WAS ALSO HOLDING SHARES AS STOCK - IN - TRADE ON WHICH INCOME NOT CHARGEABLE TO TAX IN THE FORM OF DIVIDEND WAS BEING EARNED. THE VALUE OF THESE SHARES SHOULD ALSO HAVE BEEN INCLUDED IN THE WORKING OF DISALLOWANCE WHICH HAS NOT BEEN DONE BY A.O. THE A.O. FAILED TO UNDERSTAND THE PHILOSOPHY OF SECTION 14A WHICH REQUIRES THE A.O. TO TAKE INTO ACCOUNT THOSE INVESTMENTS WHICH YIELD INCO ME TO ASSESSEE WHICH IS NOT CHARGEABLE TO TAX. THE A.O. WAS MISLED BY THE THOUGHT THAT SHARES HELD AS STOCK - IN - TRADE WERE FOR EARNING PROFIT BY WAY OF PURCHASE AND SALE ONLY. HE TOTALLY MISSED THE FACT THAT ASSESSEE WAS ALSO EARNING DIVIDEND ON STOCK - IN - TR ADE. THERE WAS THEREFORE NO APPLICATION OF MIND ON THIS ISSUE. IT IS THEREFORE HELD THAT ON THIS ACCOUNT ALSO ORDER OF ASSESSMENT IS ERRONEOUS. THE DECISION OF THE ASSES SING OFFICER IS THEREFORE A GROSS ERROR CONSEQUENT UPON ABSOLUTE NON APPLICATION OF MIN D. 10 I.T.A. NO. 2980 /MUM/201 5 KSM SECURITIES & FINANCE PVT. LTD. 7. THE ORDER OF ASSESSMENT IS THEREFORE SE T ASIDE WITH THE DIRECTION TO THE A.O. TO FRAME THE ASSESSMENT AFRESH TAKING INTO ACCOUNT THE OBSERVATIONS MADE IN THIS ORDER HEREIN ABOVE. AFTER HAVING GONE THROUGH THE FACTS OF THE PRESENT CASE AS WELL AS CONSIDERING THE ORDERS PASSED BY REVENUE AUTHORITIES , JUDGMENT CITED AND SUBMISSIONS MA DE BY BOTH THE PARTIES, WE FIND TH AT THE ORIGINAL ORDER OF ASSESSMENT WAS PASSED ON 06.03.13 U/S 143(3) OF I.T. ACT AND LATER ON, LD. CIT ON PERUSAL OF THE REQUIRED RECO RD OF ASSESSMENT FOUND THAT ASSESSEE HAD ISSUED SHARE CAPITAL AT A PREMIUM OF RS. 170/ - PER SHARE AND HAD THUS OBTAINED RS. 90 LACS AS AGGREGATE AMOUNT OF PREMIUM. FROM THE RECORDS, WE NOTICE THAT DURING THE COURSE OF ORIGINAL ASSESSMENT, AO HAD LOOKED INTO THE SOURCE OF SHARE CAPITAL BUT DID NOT AT ALL ANALYZE THE FACT OF P REMIUM AND THE N ATURE OF THAT PREMIUM . WE FURTHER NOTICE THAT THE BOOK VALUE OF ASSESSEE CO MPANY IS NEGATIVE, THEREFORE PRIMA FACIE THERE WAS NO RATIONALE FOR RECEIPTS OF PREMIUM ON ISSUE OF FRESH SHARES . T HEREAFTER A SHOW CAUSE NOTICE U/S 263 OF THE I.T. ACT WAS ISSUED PROPOSING TO REVISE THE ASSESSMENT. 11 I.T.A. NO. 2980 /MUM/201 5 KSM SECURITIES & FINANCE PVT. LTD. WE FURTHER NOTICE THAT A LTHOUGH, A DETA IL REPLY WAS FILED BY THE ASSESSEE, BUT THE LD. CIT HAD PROPOSED TO REVISE THE ORDER OF ASSESSMENT ON TWO ISSUES I.E. I) SHARE PREMIUM AND II) DISALLOWANCE U/S 14A. AS FAR AS ISSUE NO. (I) WITH REGARD TO SHARE PREMIUM IS CONCERNED, WE NOTICE THAT ASSESSEE HAD ISSUED SHARE CAPITAL AT A PREMIUM OF RS. 170 PER SHARE AND HAD THUS OBTAINED 90 LAKH AS AGGREGATE AMOUNT OF PREMIUM AND IN THIS RESPECT, THE ISSUE OF SHARE CAPITAL WAS ANALYZED BY THE AO WHILE PASSING THE ORIGINAL ORDER OF ASSESSMENT, BUT THE AO HAD A DMITTEDLY FAILED TO REALIZE THAT SHARE PREMIUM FALLS INTO AN ALTOGETHER DIFFERENT TERRITORIES. THE AO HAD ANALYZED THE ISSUE OF SHARE IN TERMS OF SECTION 68 OF THE INCOME TAX ACT, BUT HE HAD TOTALLY IGNORED TO LOOK AT THE ENTIRE ISSUE FROM THE ANGLE OF JUSTIFICATION OF THE PREMIUM. THE AO HAD TOTALLY MISSED THE FACT THAT SECTION 68 REQUIRED NATURE ALSO TO BE LOOKED INTO FOR ESTABLISHING GENUINENESS OF THE TRANSACTION . WE ANALYZE D THE PROVISIONS OF SECTION 68 OF THE I.T. ACT AND FIND THAT THE TWIN REQUI REMENTS OF NATURE AND SOURCE ARE CUMULATIVE, CONJOINED BY THE PHRASE AND . THIS SECTION READS AS UNDER : - 12 I.T.A. NO. 2980 /MUM/201 5 KSM SECURITIES & FINANCE PVT. LTD. WHERE ANY SUM IS FOUND CREDITED IN THE B OOKS OF AN ASSESSEE MAINTAINED FOR ANY PREVIOUS YEAR, AND THE ASSESSEE OFFERS NO EXPLANATION ABOUT THE NATURE AND SOURCE THEREOF OR THE 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 I N COME TAX AS THE INCOME OF THE ASSESSEE OF TH AT PREVIOUS YEAR.' AFTER HAVING GONE THROUGH THE PROVISIONS AS MENTIONED ABOVE, WE FIND THAT THE 'NATURE' THEREFORE COULD NOT HAVE B EEN IGNORED BY AO AND ON THE PERUSAL OF RECORDS , IT REVEALS THAT WHILE THE A.O. INVESTIGATED THE SOURCE OF THE AMOUNT , THU S RECEIVED AND HE DID NOT AT ALL DWELVE INTO THE NATURE OF THE RECEIPTS OF PREMIUM AS ENVISAGED IN SECTION 68 OF I.T. ACT. WE FURTHER NOTICE THAT LD. CIT WHILE PASSING THE ORDER, HAS CATEGORICALLY HELD THAT THE ORDER OF ASSESSMENT IS ERRONEOUS BECAUSE THE A.O. DID NOT AT ALL CARE TO ANALYZE THE ' NATURE ' OF RECEIPTS OF PREMIUM IN TERMS OF SECTION 68 OF THE ACT. IT WAS ALSO POINTED OUT BY LD. CIT THAT T HERE WAS NO RATIONALE FOR RECEIPTS OF HUGE PREMIUM WHEN THE E PS OF ASSESSEE IS 'NIL'. THEREFORE, IT 13 I.T.A. NO. 2980 /MUM/201 5 KSM SECURITIES & FINANCE PVT. LTD. WAS HELD BY LD. CIT THAT THE ORDER OF A SSESSMENT UNDER CONSIDERATION WAS ERRON EOUS AND PREJUDICIAL TO THE INTEREST OF REV ENUE FOR THE FOLLOWING REASONS, WHICH ARE REPRODUCED BELOW: - ( I ) THE SHARE PREMIUM AMOUNT RECEIVED BY ASSESSEE WHILE INCREASING THE ASSETS IN BALANCE - SHEET IN THE FORM OF CASH/BANK BALANCE DOES NOT CREATE ANY LIABILITY IN THE BALANCE - SHEET. THIS AMOUNT OF PREMIUM GETS REFLECTED IN THE RESERVES AND UNDER THE COMPANY'S ACT THE NATURE OF THESE RESERVES ARE SUCH WHICH CAN BE DISTRIBUTED TO THE SHARE HOLDERS IN THE FORM OF BONUS SHARES. THE RELEVANT PROVISIONS OF COMPANY'S ACT APPLICABLE TO SHARE PREMIUM ARE U/S.78 OF COMPANY'S ACT. WHAT CAN BE DISTRIBUTED TO SHARE HOLDERS OF ASSESSEE ARE ONLY PROFITS OR ACCUMULATED PROFITS. THEREFORE, PRIMARY NATURE OF PREMIUM RECEIPT IS 'REVENUE' AND THEREFORE CHARGEABLE TO TAX. ( II ) IN THE ALTERNATIVE, SINCE THE NATURE OF RECEIPT HAS NOT BEEN EXPLAINED, THE PREMIUM AMOUNT CREDITED IN THE BOOKS OF ACCOUNT IS OF THE ACT. THEREFORE, WE OBSERVED THAT THE HIGH PREMIUM RECEI PT ON ACCOUNT OF ALLOTMENT OF SHARE HAD NO JUSTIFICATION WHEN THE EPS 14 I.T.A. NO. 2980 /MUM/201 5 KSM SECURITIES & FINANCE PVT. LTD. OF ASSESSEE WAS NIL, THEREFORE THE SAID AMOUNT SHOULD HAVE BEEN CHARGED TO TAX AS INCOME OF ASSESSEE OR SHOULD HAVE BEEN TREATED AS UN - EXPLAINED CASH CREDIT U/S 68 OF THE I.T. ACT. THE AO WHILE PASSING THE ORDER HAS NOT CARRIED OUT ANY ENQUIRY ON THIS ASPECT, THEREFORE IT CANNOT BE TERMED THAT THERE WERE TWO OPINIONS. APART FROM THAT , LD. AR DRAWN OUR ATTENTION TOWARDS ORDERS PASSED BY THE COORDINATE BENCH OF HONBLE ITAT IN THE CA SE OF GREEN INFRA LTD. VRS. ITO (2013) 145 ITD 240/38 TAXMANN.COM 253 (MUM - TRIB). AFTER HAVING GONE THROUGH THE FAC TS OF THE PRESENT CASE, WE FIND THAT THE FACTS CONTAINED IN THE PRESENT CASE ARE DIFFERENT TO THE FACTS CONTAINED IN THE CASE OF GREEN INFRA L TD. VRS. ITO. IN THE SAID CASE, IN RESPECT OF THE CAPACITY OF THE SUBSCRIBER, IT WAS RECORDED THAT 98% OF THE CONTRIBUTORS WERE BY PUBLIC SECTOR UNDERTAKING. LD. AR ALSO DRAWN OUR ATTENTION TOWARDS ORDERS PASSED BY THE HONBLE HIGH COURT IN THE CASE OF CIT VRS. NIRAV MODI (2016) 71 TAXMANN.COM 272 (BOMBAY), WHEREIN IT WAS HELD AS UNDER: - 15 I.T.A. NO. 2980 /MUM/201 5 KSM SECURITIES & FINANCE PVT. LTD. SECTION 68, READ WITH SECTION 263 OF THE INCOME - TAX ACT, 1961 - CASH CREDIT (GIFT) - ASSESSMENT YEARS 2007 - 08 AND 2008 - 09 - DURING RELEVANT YEARS, ASSESSEE RECEIVED CERT AIN AMOUNT AS GIFTS FROM HIS FATHER AND SISTER WHO WERE NON - RESIDENTS IN INDIA - ASSESSING OFFICER AFTER MAKING DETAILED ENQUIRIES, TOOK A VIEW THAT ASSESSEE HAD DULY PROVED IDENTITY, SOURCE AND CREDITWORTHINESS OF DONORS - HE THUS ACCEPTED TRANSACTION OF GIFT DECLARED BY ASSESSEE - COMMISSIONER, HOWEVER, PASSED A REVISIONAL ORDER UNDER SECTION 263 DIRECTING ASSESSING OFFICER TO ENQUIRE INTO CAPACITY OF DONORS AND TO DECIDE ABOUT GENUINENESS OF GIFTS AFRESH - TRIBUNAL SET ASIDE REVISIONAL ORDER - IT WAS NOT ED THAT COMMISSIONER IN HIS ORDER OF REVISION, DID NOT INDICATE ANY DOUBT IN RESPECT OF GENUINENESS OF EVIDENCE PRODUCED BY ASSESSEE - MOREOVER, SATISFACTION OF ASSESSING OFFICER ON BASIS OF DOCUMENTS PRODUCED WAS NOT SHOWN TO BE ERRONEOUS - WHETHER ON FAC TS, IT WAS A CASE WHERE A VIEW HAD BEEN TAKEN BY ASSESSING OFFICER AFTER MAKING PROPER ENQUIRY AND, THUS, TRIBUNAL WAS JUSTIFIED IN SETTING ASIDE IMPUGNED REVISIONAL ORDER - HELD, YES [PARAS 9 AND 12] [IN FAVOUR OF ASSESSEE] AFTER HAVING GONE THROUGH THE FACTS OF THE ABOVE CASE, WE FIND THAT THE FACTS OF THE ABOVE CASE ARE DISTINGUISHABLE TO THE 16 I.T.A. NO. 2980 /MUM/201 5 KSM SECURITIES & FINANCE PVT. LTD. FACTS OF THE PRESENT CASE. IN THIS CASE, THE ASSESSEE HAD RECEIVED GIFT FROM THE DONAR I.E THE ASSESSEES FATHER AND SISTER AND THE AO HAD MADE DETAIL ENQUIRY AND TOOK A VIEW THAT ASSESSEE HAD DULY PROVED THE IDENTITY, SOURCE AND CREDITWORTHINESS OF DONORS . THEREFORE, IN T HAT EVENTUALITY, THE ORDER OF REVISION PASSED BY LD. CIT WAS SET ASIDE ON THE GROUND THAT LD. CIT HAD NOT INDICATED ANY DOUBT IN RESPECT OF EVIDENCE PRODUCED BY THE ASSESSEE . BUT IN THE PRESENT CASE, THE ASSESSEE HAD RECEIVED SHARE PREMIUM AND THE AO HAD NOT EXAMINED AT ALL JUSTIFICATION OF THE SHARE PREMIUM AND THUS IT IS THE NATURE, WHICH THE AO HAD NOT LOOK ED INTO AT ALL , WHICH IS THE TWIN REQUIREMENT OF SECTION 68 OF THE I.T. ACT AND MORE PARTICULARLY, PRIMA FACIE THERE WAS NO RATIONALE FOR RECEIPTS OF HUGE PREMIUM WHEN THE EPS OF ASSESSEE WAS NIL. THEREFORE, THERE IS A SPECIFIC FINDING RECORDED BY LD. CIT THAT THE ORDER OF ASSESSMENT FOR THE YEAR UNDER CONSIDERATION WAS ERRONEOUS AND PREJUDICIAL TO THE INTEREST OF REVENUE . HENCE, THE JUDGMENT CITED BY LD. AR ARE DISTINGUISHABLE ON FACTS AND THUS NOT APPLICABLE IN THE PRESENT CASE. THE ORDER OF LD. CIT IN THE PRESENT CASE ARE NOT ON THE GROUND THAT THE AO HAD MADE INADEQUATE ENQUIRIES , BUT IS A CASE OF NO ENQUIRY . IN THIS RESPECT, WE RELY UPON THE 17 I.T.A. NO. 2980 /MUM/201 5 KSM SECURITIES & FINANCE PVT. LTD. JUDGMENT IN THE CASE OF CIT VRS. SHREEPATI HOLDING AND FINANCE LTD, ITA 1879/M/13, HONBLE DELHI HIGH COURT JUDGMENT IN THE CASE OF CIT VRS. VIKASH POLYMARS (2012) 341 ITR 537 AND JUDGMENT IN THE CASE OF DG HOUSING PROJECTS. THE LD. CIT HAS ALSO PASSED A DETAILED OR DER OF REVISION IN RESPECT OF SECOND ISSUE OF DISALLOWANCE U/S 14A OF THE I.T. ACT AND THE SAME IS CONTAINED IN PARA NO. 6.2 OF ITS ORDER. LD. AR ALSO DRAWN OUR ATTENTION TO THE PAPER BOOK TO JUSTIFY THAT ALL THE DOCUMENTS REQUIRED BY THE AO IN RESPECT O F SHARE PREMIUM AS WELL AS MAKING DISALLOWANCE U/S 14A OF THE I.T. ACT WERE FURNISHED. HOWEVER, WE ARE OF THE VIEW THAT LD. CIT HAD CORRECTLY EXERCISED THE POWER U/S 263 OF THE I.T. ACT AFTER CONSIDERING ALL THE DOCUMENTS AND JUDGMENTS CITED BY THE PARTIES . T HE JUDGMENTS REFERRED BY THE ASSESSEE ARE NOT FOUND TO BE APPLICABLE AS PER THE FACTS OF THE PRESENT CASE. MOREOVER, N O NEW FACTS OR CONTRARY JUDGMENTS HAVE BEEN BROUGHT ON RECORD BEFORE US I N ORDER TO CONTROVERT OR REBUT THE 18 I.T.A. NO. 2980 /MUM/201 5 KSM SECURITIES & FINANCE PVT. LTD. FINDINGS SO RECORDED BY L D CIT . THEREFORE, THERE ARE NO REASON S FOR US TO INTERFERE INTO OR DEVIATE FROM THE FINDINGS RECORDED BY THE LD. CIT . HENCE , WE ARE OF THE CONSIDERED VIEW THAT THE FINDINGS SO RECORDED BY THE LD. CIT (A) ARE JUDICIOUS AND ARE WE LL REASONED. RESULTANTLY, THE SE GROUND RAISED BY THE ASSESSEE STANDS DISMISSED . GROUND NO. 5 5 . THIS GROUND IS GENERAL IN NATURE, THUS REQUIRES NO SPECIFIC ADJUDICATION. 6 . IN THE NET RESULT, THE APPEAL FILED BY THE ASSESSEE STANDS DISMISSED . ORDER PRONOUNCED IN THE OPEN COURT ON 7 TH JUNE , 2018. SD/ - SD/ - (R.C. SHARMA ) ( SANDEEP GOSAIN) / ACCOUNTANT MEMBER / JUDICIAL MEMBER MUMBAI ; DATED : 07 . 06 . 201 8 SR. RS. DHANANJAY 19 I.T.A. NO. 2980 /MUM/201 5 KSM SECURITIES & FINANCE PVT. LTD. / COPY OF THE ORDER FORWARDED TO : 1. / THE APPELLANT 2. / THE RESPONDENT 3. ( ) / THE CIT 4. / CIT - CONCERNED 5. , , / DR, ITAT, MUMBAI 6. / GUARD F I LE / BY ORDER, . / (DY./ASSTT.REGISTRAR) , / ITAT, MUMBAI