ITO 9(1)(4), MUMBAI V. BALAJI TEXTILE MILLS P.LTD, MUMBAI

ITA 3197/MUM/2010

• Counselvise Citation: [2011] 140 COUNSELVISE.COM (IT) 55064 (ITAT-MUMBAI)
• Duration Of Justice: 1 year(s) 4 month(s) 7 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 30-08-2011
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: H
• Next Hearing Date: 12-08-2011
• Assessment Year: 2007-2008
• Appeal Filed On: 23-04-2010
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: GOLI SRINIVAS RAO
• Assessee Lawyers: SHAMBHUNATH KATARUKA
• Keywords: Unexplained cash credit; Unexplained investment; Capital asset; Income from undisclosed sources; Share purchase agreement; Question of law; Cost of acquisition; Valuation report; Capital receipt
• Section: 68; 69; 56; 2; 133(6)

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL H BENCH, MUMBAI BEFORE SHRI, J. SUDHAKAR REDDY, ACCOUNTANT MEMBER A ND SHRI VIJAY PAL RAO, JUDICIAL MEMBER ITA NO. 3197/MUM./2010 (ASSESSMENT YEAR : 2007-08 ) INCOME TAX OFFICER WARD-9(1)(4), AAYAKAR BHAVAN 101, M.K. ROAD, MUMBAI 400 020 .. APPELLANT V/S M/S. BALAJI TEXTILE MILLS PVT. LTD. A-601, KENT RESIDENCY CHANDAVARKER, BORIVALI (W) MUMBAI 400 072 PAN AACCB7849P .... RESPONDENT REVENUE BY : MR. GOLI SRINIVAS RAO ASSESSEE BY : MR. SHAMBHUNATH KATARUKA DATE OF HEARING 12.8.2011 DATE OF ORDER 30.8.2011 O R D E R PER J. SUDHAKAR REDDY, A.M. THIS APPEAL PREFERRED BY THE REVENUE, IS DIRECTED AGAINST THE IMPUGNED ORDER DATED 25 TH FEBRUARY 2010, PASSED BY THE COMMISSIONER (APPEALS)-XIX, MUMBAI, FOR ASSESSMENT YEAR 2007-08. THE SOLE DISPUTE IN THIS APPEAL IS, WHETHER OR NOT THE COMMISSIONER (AP PEALS) WAS JUSTIFIED IN DELETING THE ADDITION OF ` 2,53,35,000 MADE BY THE ASSESSING OFFICER UNDER M/S. BALAJI TEXTILE MILLS P. LTD. ITA NO.3197/M./2010 2 SECTION 68 OF THE INCOME TAX ACT, 1961 (FOR SHORT THE ACT ) AS UNEXPLAINED CASH CREDITS IN THE BOOKS OF THE ASSESSEE. 2. BRIEF FACTS OF THE CASE ARE THAT, THE ASSESSEE IS A PRIVATE LIMITED COMPANY AND WAS YET TO COMMENCE BUSINESS ACTIVITY D URING THE YEAR. IT FILED ITS RETURN OF INCOME ON 2 ND NOVEMBER 2007, DECLARING INTEREST INCOME OF ` 5,69,797. THE ASSESSEE RECEIVED INTEREST INCOME AS FOLLOWS:- I) INTEREST FROM M/S. BERG TRADING PVT. LTD. ` 7,15,785 II) INTEREST ON PROJECT LOAN ` 1,23,931 III) INTEREST ON BANK FDR ` 20,084 TOTAL INTEREST RECEIVED ` 8,59,798 3. OUT OF THE TOTAL INTEREST RECEIVED, THE ASSESSEE OF FERED ` 5,91,854, AS REVENUE RECEIPT AND TREATED THE BALANCE INTEREST AS CAPITAL RECEIPT AND REDUCED THE SAME FROM THE COST OF ACQUISITION OF TH E CAPITAL ASSETS. THE ASSESSING OFFICER CALLED FOR AN EXPLANATION AS TO W HY THE DIFFERENCE INTEREST INCOME SHOULD NOT BE TAXED AS A REVENUE RECEIPT UND ER SECTION 56 OF THE ACT. AFTER CONSIDERING THE EXPLANATION OF THE ASSESSEE, THE ASSESSING OFFICER CONSIDERED ONLY ` 1,44,015 AS PRE-OPERATIVE INCOME AND TREATED THE B ALANCE UNDER THE HEAD INCOME FROM OTHER SOURCES . THE ASSESSEE ACCEPTED THIS FINDING OF THE ASSESSING OFFICER. THIS ISSUE IS NOT IN DISPUTE BEFORE US. 4. FURTHER, THE ASSESSING OFFICER FOUND THAT SHARES WE RE ISSUED AT A PREMIUM AND 23 SHARES HOLDERS APPLIED FOR SHARE CAP ITAL OF A FACE VALUE OF ` 48,90,000 AT A PREMIUM ON THE SHARES OF ` 2,53,35,000 DURING THE YEAR. THE ASSESSEE WAS ASKED TO FURNISH DETAILS, CONFIRMATION AND JUSTIFICATION FOR THE CHARGE OF SHARE PREMIUM, FOR THE SHARES SUBSCRIBED DURING THE YEAR. THE ASSESSEE FURNISHED A LIST OF SHAREHOLDERS ALONG WIT H THE ORIGINAL HOLDINGS AND DATA RELATING TO THE ALLOTMENT OF SHARES MADE IN TH E RELEVANT PREVIOUS YEAR, PREMIUM CHARGED, ETC. OUT OF 23 SHAREHOLDERS, THE A SSESSEE FURNISHED M/S. BALAJI TEXTILE MILLS P. LTD. ITA NO.3197/M./2010 3 PERMANENT ACCOUNT NUMBER OF 22 SHARE APPLICANTS ALO NG WITH OTHER PARTICULARS. 5. ONLY IN CASE OF SHWETA YOGESH JASRAPURIA, AT SR. NO .12, PAN WAS NOT GIVEN, BUT A LETTER WAS ISSUED UNDER SECTION 133(6) OF THE ACT BY THE ASSESSING OFFICER AND SHE MADE DUE COMPLIANCE, AS H AS BEEN RECORDED IN PARA-5.4 OF THE ASSESSMENT ORDER. THE ASSESSING OFF ICER, VIDE LETTER DATED 11 TH SEPTEMBER 2009, CALLED FOR FURTHER DETAILS SUCH AS CONFIRMATIONS, BANK STATEMENTS, AND SOURCE OF INVESTMENTS MADE BY THE S HAREHOLDER. THE ASSESSEE WAS ALSO ASKED TO JUSTIFY THE QUANTUM OF P REMIUM COLLECTED ON SHARE CAPITAL. IT WAS ASKED TO EXPLAIN AND SUBSTANT IATE THE SHARE PREMIUM COLLECTED WITH DOCUMENTS FOR ARRIVING AT SUCH VALUA TIONS. INFORMATION WAS ALSO CALLED FOR FROM ALL THE PARTIES BY ISSUING NOT ICE UNDER SECTION 133(6) OF THE ACT. SOME OF THE PARTIES COMPLIED WITH THE NOTI CE, BUT REMAINED SILENT ON THE JUSTIFICATION FOR THE SHARE PREMIUM. PARTIES AT SR. NO.8, 13, 14, 15, 17, 18, 19, 21 AND 22, DID NOT COMPLY. PARTIES AT SR. N O.16, 20 AND 23, WERE NOT TRACEABLE AT THE ADDRESS GIVEN. THE ASSESSEE WAS AS KED TO PRODUCE THE PARTIES AND ALSO FURNISHED FURTHER DETAILS VIDE LET TER DATED 31 ST DECEMBER 2009. IN RESPONSE, THE ASSESSEE VIDE LETTER DATED 2 6 TH NOVEMBER 2009, MADE SUBMISSIONS JUSTIFYING THE VALUATION OF SHARE PREMIUM. WITH REGARD TO NON-COMPLIANCE BY CERTAIN PARTIES TO THE NOTICES IS SUED UNDER SECTION 133(6), THE ASSESSEE, DURING THE COURSE OF HEARING, FILED A NUMBER OF DOCUMENTS PERTAINING TO THE PARTIES, WHICH ARE LIST ED AT PARA-5.6 OF THE ORDER OF THE ASSESSING OFFICER. THE DOCUMENTS INCLUDED CO PY OF AUDITED ANNUAL ACCOUNTS, INCOME TAX ACKNOWLEDGEMENT, LEDGER ACCOUN T COPIES, BOARD RESOLUTION, SHARE APPLICATION FORMS, COPY OF MEMORA NDUM AND ARTICLE OF ASSOCIATION, ETC. THE ASSESSEE ALSO FILED EXPLANATI ON AND JUSTIFICATION OF SHARE PREMIUM CHARGED. THE ASSESSING OFFICER CONSIDERED T HE EXPLANATION OF THE ASSESSEE JUSTIFYING THE CHARGING OF SHARE PREMIUM B ETWEEN ` 50 AND ` 90 PER SHARE ON ALLOTMENT AND REJECTED THE SAME AS UNJ USTIFIED ON VARIOUS REASONS GIVEN IN THE ASSESSMENT ORDER. SUFFICE TO S AY, THE ASSESSING OFFICER DID NOT AGREE WITH THE METHOD OF VALUATION AND VALU ATION REPORTS OF THE M/S. BALAJI TEXTILE MILLS P. LTD. ITA NO.3197/M./2010 4 ASSESSEE. THEREAFTER, HE REFERRED TO SECTION 68 OF THE ACT AND TREATED THE AMOUNT OF ` 2,53,35,000, AS UNEXPLAINED CASH CREDIT AND MADE A N ADDITION. 6. AGGRIEVED, THE ASSESSEES CARRIED THE MATTER IN FIRS T APPEAL, WHEREIN THE COMMISSIONER (APPEALS) CONSIDERED VARIOUS ARGUM ENTS OF THE ASSESSEE AND, VIDE PARA-6.4 OF HIS ORDER, RECORDED THAT THE ASSESSEE HAS FURNISHED DOCUMENTARY EVIDENCE WITH RESPECT TO EACH AND EVERY CREDIT AND THAT THERE IS NO FINDING IN THE ASSESSMENT ORDER DISPUTING THE EVIDENCE FILED. THE COMMISSIONER (APPEALS) OBSERVED THAT THE ASSESSING OFFICER ACCEPTED A PART OF THE TRANSACTIONS AS EXPLAINED WHILE CONSIDERING THE REST OF THE TRANSAC- TIONS AS UNEXPLAINED AND HELD THAT A PART OF THE SA ME TRANSACTIONS PERTAINING TO THE SAME PARTY CANNOT BE TREATED AS UNEXPLAINED. HE FURTHER HELD THAT THE IDENTITY, CAPACITY AND GENUINENESS OF THE TRANSACTI ONS STOOD EXPLAINED. THE COMMISSIONER (APPEALS) SPECIFICALLY HELD THAT NO AD DITION IS WARRANTED UNDER SECTION 68, ON THE SOLE GROUND THAT CHARGING OF A C ERTAIN PREMIUM ON SHARES IS NOT JUSTIFIED, EITHER ON THE BASIS OF PROFITABIL ITY OR ASSET VALUE OF THE COMPANY. IT IS NOT THE CASE THAT THEY ARE BOGUS SHA REHOLDERS. AGGRIEVED, THE REVENUE IS IN APPEAL BEFORE THE TRIBUNAL. 7. BEFORE US, LEARNED DEPARTMENTAL REPRESENTATIVE, MR. GOLI SRINIVAS RAO, SUBMITS THAT THERE IS NO JUSTIFICATION WHATSOEVER I N THE SHARE PREMIUM CHARGED BY THE ASSESSEE. HE SUBMITS THAT THE VALUAT ION IN QUESTION HAS NOT BEEN FIXED ON ANY OF THE TWO METHODS OF VALUATION I .E., (I) INTRINSIC WORTH OF NET ASSETS METHOD; AND (II) NET ASSETS ON BOOK VALU E METHOD. HE REFERRED TO PARA-5.7.1 TO 5.7.7 OF THE ASSESSMENT ORDER AND REL IED ON THE FINDINGS THEREIN. HE ARGUES THAT CHARGING OF SHARE PREMIUMS AT UNJUSTIFIED HIGH VALUE, WARRANTS ADDITION UNDER SECTION 68. 8. LEARNED COUNSEL FOR THE ASSESSEE, MR. SHAMBHUNATH K ATARUKA, STRONGLY SUPPORTED THE ORDER OF THE COMMISSIONER (A PPEALS). HE SUBMITS THAT, BASICALLY, THE RECEIPT IS A CAPITAL RECEIPT, AS ITS SHARE CAPITAL RECEIPT. HE SUBMITS THAT THE ADDITION WAS MADE UNDER SECTION 68 AND ARGUED THAT SUCH ADDITION CAN BE MADE ONLY WHEN THE ASSESSEE FAILS T O OFFER AN EXPLANATION M/S. BALAJI TEXTILE MILLS P. LTD. ITA NO.3197/M./2010 5 ABOUT THE IDENTITY, CAPACITY AND GENUINENESS OF THE CREDITOR. HE POINTS OUT THAT, IN THIS CASE, ALL THESE THREE ITEMS HAVE NOT BEEN DISPUTED BY THE ASSESSING OFFICER. HE JUSTIFIED THE VALUATION OF TH E SHARES AND SUBMITTED THAT NO ADDITION CAN BE MADE UNDER SECTION 68 ON THE GRO UND THAT EXCESSIVE SHARE PREMIUM HAS BEEN CHARGED. HE SUBMITTED A VALU ATION REPORT GIVEN BY GMJ & CO., CHARTERED ACCOUNTANTS, AND TOOK THIS BEN CH THROUGH THE SIX METHODS OF VALUATION. HE REFERRED TO THE PROFIT EAR NING CAPACITY METHOD BASED ON FUTURE WORKING RESULTS AND EARNING CAPITAL IZATION METHOD BASED ON PROJECTED FIGURES AS WELL AS THE DISCOUNTED CASH FL OW METHOD AND SUBMITS THAT THOUGH, DIFFERENT VALUES ARE ARRIVED AT, CONSI DERING THE APPROPRIATE ASPECTS OF THE CASE, DISCOUNTING CASH FLOW METHOD W AS RECOMMENDED WHICH GAVE THE VALUE AT A MUCH LOWER FIGURE THAN OTHER ME THODS. HE FURTHER SUBMITS THAT THE VALUATION IS A SUBJECTIVE MATTER A ND THE ASSESSING OFFICER CANNOT IMPOSE HIS DECISION. ON APPLICATION OF SECTI ON 68 TO SHARE CAPITAL, HE RELIED ON THE FOLLOWING CASE LAWS:- 1. CIT V/S STELLER INVESTMENT LTD., (2001) 251 ITR 263 (SC); 2. CIT V/S LOVELY EXPORTS P. LTD., (2008) 6 DTR 30 (SC ); 3. CIT V/S DIVINE LEASING & FINANCE LTD., (2008) 299 I TR 268 (DEL.); 4. CIT V/S LANCO INDUSTRIES LTD. (2000) 110 TAXMAN 172 (AP); 5. BARKHA SYNTHETICS LTD. V/S ACIT, (2006) 283 ITR 377 (RAJ.); 6. CIT V/S FIRST POINT FINANCE LTD. (2006) 286 ITR 477 (RAJ.); 7. CREATIVE WORLD TELEFILMS LTD., 333 ITR 100 (BOM.); 8. CIT V/S ELECTRO POLYCHEM LTD., 294 ITR 661 (MAD.); 9. PRAKASH NARAIN V/S CIT, (1981) 20 CTR (ALL.) 147; A ND 10.CIT V/S P.K. NOORJAHAN, 237 ITR 570 (SC). 9. HE SUBMITS THAT, AS THE IDENTITY, CREDITWORTHINESS OF THE SHARE HOLDERS AND GENUINENESS OF THE TRANSACTIONS ARE ESTABLISHED , NO ADDITION CAN BE MADE UNDER SECTION 68 OF THE ACT. HE ALSO PLACED RE LIANCE ON THE DECISION OF M/S. BALAJI TEXTILE MILLS P. LTD. ITA NO.3197/M./2010 6 THIS TRIBUNAL IN DCIT V/S SAHARA INDIA FINANCE CORP ORATION LTD., 81 TTJ 389 (LUCK.), AND SUBMITS THAT THE ISSUE IS SQUARELY COV ERED BY THIS DECISION OF THE TRIBUNAL, LUCKNOW BENCH. HE FINALLY SUBMITS THA T THE FIRST APPELLATE AUTHORITY WAS RIGHT IN HOLDING THAT THE TRANSACTION S CANNOT BE DIVIDED INTO TWO PARTS AND ONE PART BE ACCEPTED AND THE OTHER PA RT TREATED AS UNEXPLAINED. HE EMPHASISED THAT BOTH SHARE CAPITAL AND SHARE PREMIUM ARE CONCERNING A SINGLE TRANSACTION AND PART CANNOT BE ACCEPTED AS GENUINE AND THE OTHER PART CANNOT BE TREATED AS NON-GENUINE. 10. FINALLY, HE SUBMITS THAT THE ASSESSEE COMPANY HAS N OT COMMENCED HIS BUSINESS NOR HAS ANY BUSINESS ACTIVITY TAKEN PLACE AND HENCE, THE QUESTION OF THE ASSESSEE EARNING INCOME DOES NOT ARISE. HE R ELIED ON THE JUDGMENT OF HON'BLE SUPREME COURT IN CIT V/S SMT. P.K. NOORJAHA N, (1999) 237 ITR 570 (SC). HE DISTINGUISHED THE CASE LAWS RELIED UPON BY THE ASSESSING OFFICER. 11. RIVAL CONTENTIONS HEARD. ON A CAREFUL CONSIDERATION OF THE FACTS AND CIRCUMSTANCES OF THE CASE AND ON PERUSAL OF THE PAP ERS ON RECORD, AS WELL AS THE CASE LAWS CITED BEFORE US, WE HOLD AS FOLLOWS:- 12. THE SOLE GRIEVANCE OF THE REVENUE IN THIS APPEAL IS AGAINST DELETION OF ADDITION OF ` 2,53,35,000, MADE BY THE ASSESSING OFFICER UNDER S ECTION 68 OF THE ACT BY THE CIT(A). THE ASSESSEE HAD CREDITED IN ITS BOOKS OF ACCOUNT A SUM OF ` 48,90,000, AS SHARE CAPITAL BEING FACE VALUE OF SH ARES SUBSCRIBED AND ` 2,53,35,000, AS PREMIUM ON SHARE CAPITAL. THE ASSE SSING OFFICER CALLED FOR DETAILS AND OUT OF 23 SHARES HOLDERS WHO HAVE SUBSCRIBED TO THE SHARES AT A PREMIUM. IN CASE OF 22 APPLICANTS, THE ASSESSEE HAD FURNISHED PERMANENT ACCOUNT NUMBER. ONLY IN CASE OF SHWETA YO GESH JASRAPURIA, THOUGH THE PAN DETAILS WERE NOT FURNISHED, SHE COMP LIED WITH THE LETTER ISSUED UNDER SECTION 133(6) AND FILED THE DETAILS D IRECTLY WITH THE ASSESSING OFFICER. THUS, DETAILS WERE FILED BEFORE THE ASSESS ING OFFICER IN THE CASE OF ALL THE SHARE HOLDERS. THE ASSESSING OFFICER, FOR THE S ECOND TIME, CALLED UPON THE ASSESSEE TO FURNISH COMPLETE DETAILS CONCERNING THE INCREASE IN SHARE CAPITALS WITH NAME, ADDRESS, PAN DETAILS, BANK STAT EMENTS AND SOURCES OF M/S. BALAJI TEXTILE MILLS P. LTD. ITA NO.3197/M./2010 7 INVESTMENTS. SIMULTANEOUSLY, THE ASSESSING OFFICER ISSUED LETTER UNDER SECTION 133(6) TO ALL THE SHAREHOLDERS. OUT OF 23 P ARTIES, ONLY 11 PARTIES COMPLIED WITH THE DIRECTIONS CONTAINED IN THE LETTE RS ISSUED UNDER SECTION 133(6), EXCEPT FOR FILING JUSTIFICATION OF THE PAYM ENT OF PREMIUM. THE ASSESSING OFFICER SOUGHT FURTHER DETAILS AND EXPLAN ATION AND IN REPLY THE ASSESSEE SUPPORTED THE CHARGING OF PREMIUM ON SHARE S. THE ASSESSEE COLLECTED INFORMATION AND EVIDENCE FROM SHAREHOLDER S, WHO HAD NOT RESPONDED TO THE NOTICE UNDER SECTION 133(6) AND SU BMITTED THE SAME BEFORE THE ASSESSING OFFICER. FOLLOWING DETAILS OF EACH SHAREHOLDER WERE FILED:- I) COPY OF SHARE APPLICATION; II) COPY OF BOARD RESOLUTION IN CASE OF CORPORATE SHARE HOLDERS; III) COPY OF BANK STATEMENT IN CASE OF CORPORATE SHAREHO LDERS; IV) PAN OF SHAREHOLDERS / APPLICANTS; V) COPY OF ACKNOWLEDGMENT OF I.T. RETURN FILED BY THE ASSESSEE; VI) COPY OF LEDGER ACCOUNT OF THE ASSESSEE COMPANY IN T HE BOOKS OF ACCOUNT OF THE SHAREHOLDERS; AND VII) THE LATEST ADDRESS OF THE PARTIES WERE FURNISHED WH EREVER THE ASSESSEE WAS NOT AVAILABLE AT THE GIVEN ADDRESS; 13. THE ASSESSING OFFICER HAS, IN FACT, ACCEPTED THE ID ENTITY, CREDITWORTHI- NESS AND GENUINENESS OF THE TRANSACTION CONCERNING THE SUBSCRIPTION OF SHARE CAPITAL BY ALL THESE 23 PARTIES TO THE EXTENT OF TH E FACE VALUE OF SHARES AMOUNTING TO ` 48,90,000. THE ASSESSING OFFICER ONLY DOUBTED THE PREMIUM PAID BY THE AFORESAID PARTIES ON THE GROUND THAT TH E VALUATIONS ARE NOT FAIR AND WERE EXCESSIVE AND ADDED THE AMOUNT UNDER SECTI ON 68 OF THE ACT. 14. THE ENTIRE ADDITION IN THIS CASE HAS BEEN MADE UNDE R SECTION 68, BASED NO THE GROUND THAT THE ASSESSEE WAS NOT ABLE TO SUBSTANTIATE THE VALUATION OF SHARES FOR THE DETERMINATION OF PREMIU M. IN OUR CONSIDERED M/S. BALAJI TEXTILE MILLS P. LTD. ITA NO.3197/M./2010 8 OPINION, SUCH AN ADDITION UNDER SECTION 68, IS BAD- IN-LAW. THE FACT THAT THE AMOUNTS WERE RECEIVED FROM 23 PERSONS, WHOSE IDENTI TY AND CAPACITY ARE NOT DISPUTED. THE FACT THAT THE VALUATION OF SHARES HAS BEEN DONE BY AN EXPERT IN THAT FIELD IS NOT DISPUTED. THE A.O, IS N OT AN EXPERT IN THE FIELD OF VALUATION. WHEN AN A.O WANTS TO DISPUTE AN EXPERT O PINION, HE CANNOT DO SO BY TAKING RECOURSE TO A LAYMAN APPROACH BUT HE SHOU LD REFER THE MATTER TO AN EXPERT IN THAT FIELD. IF HE CHOOSES TO RELY ON S UCH AN OPINION OF AN EXPERT, THEN HE SHOULD GIVEN AN OPPORTUNITY TO THE ASSESSEE TO NOT ONLY GIVE ITS VIEW ON SUCH AN OPINION BUT TO ALSO, IF A REQUEST IS MAD E, TO CROSS-EXAMINE SUCH EXPERT. MERE HOLDING THAT THE PREMIUM SEEMS TO BE E XCESSIVE IN THE ANALYSIS OF THE A.O., DOES NOT JUSTIFY THE ADDITION. GENERAL LY, A COMPANY TAKES A DECISION AS TO WHETHER ANY PREMIUM IS TO BE CHARGED ON THE SHARES OFFERED FOR SUBSCRIPTION. IF IT SO DECIDES, IT FIXES THE QU ANTUM OF PREMIUM, AFTER CONSIDERING MANY FACTORS INCLUDING THE FUTURE GROWT H, MARKET TRENDS, PROJECTIONS AND ALSO CERTAIN INTANGIBLE PROJECTED B ENEFITS. VALUATION OF SHARES AND DETERMINATION OF PREMIUM ARE TO BE LEFT TO THE EXPERTS IN THAT FIELD AS IT IS A SPECIALISED AND TECHNICAL SUBJECT. A NUMBER OF ELEMENTS GO INTO THE VALUATION OF A SHARE AND IN FIXING A PARTICULAR PRE MIUM. DETERMINATION OF SHARE PREMIUM IS AN ISSUE CONCERNING THE COMPANY AN D ITS SUBSCRIBER AND IT IS NOT FOR THE A.O TO IMPOSE ANY CRITERIA OR EVEN T O HOLD THAT A COMPANY SHOULD HAVE ISSUED THE SHARES AT PAR ONLY OR AT A P ARTICULAR PREMIUM. EVEN IF IT IS HELD THAT EXCESS PREMIUM HAS BEEN CHARGED, IT DOES NOT BECOME INCOME AS IT IS A CAPITAL RECEIPT. THE RECEIPT IS NOT IN T HE REVENUE FIELD. WHAT IS TO BE PROBED BY THE A.O IS, WHETHER THE IDENTITY OF THE S UBSCRIBER IS PROVED OR NOT. IN THE CASE OF SHARE CAPITAL, IF THE IDENTITY IS PR OVED, NO ADDITION CAN BE MADE U/S 68. IN THE CASE ON HAND, THE A.O. ACCEPTED A PART OF TRANSACTION I.E., SUBSCRIPTION TO THE EXTENT OF SHARE CAPITAL A T PAR AND MADE NO ADDITION ON THIS AMOUNT. THIS DEMONSTRATES THAT THE IDENTITY OF THE PERSON AND GENUINENESS OF THE TRANSACTION HAVE BEEN ACCEPTED. WHILE SO, THERE CAN BE NO JUSTIFICATION FOR TREATING, AS UNACCOUNTED MONEY , THE SHARE PREMIUM WHICH ALSO ARISES OUT OF THE VERY SAME SHARE TRANSACTION AND T HEN MAKING AN ADDITION U/S 68. M/S. BALAJI TEXTILE MILLS P. LTD. ITA NO.3197/M./2010 9 SUCH CONDITION IS BAD-IN-LAW AND AGAINST THE LAW LA ID DOWN BY VARIOUS JUDGMENTS OF THE HON'BLE SUPREME COURT AND HONBLE HIGH COURTS. 15. COMING TO THE VALUATION OF SHARES, THE VALUER AFTER DESCRIBING THE VARIOUS METHODS OF VALUATION AND ASSUMPTIONS, ETC., IN THE VALUATION REPORT FILED, FOLLOWING FINAL ANALYSIS IS GIVEN:- S.N. METHOD VALUE PER EQUITY SHARE 1. NET ASSET VALUE BASED ON BOOK VALUE OF ASSETS N.A. 2. NET ASSET VALUE BASED ON INTRINSIC WORTH OF ASSETS N.A. 3. EARNING CAPITALISATION METHOD PROJECTED FIGURES ` 94 4. PROFIT EARNING CAPACITY METHOD PROJECTED FIGURES ` 489 5. DISCOUNTED CASH FLOW METHOD ` 142 6. MARKET QUOTATION OF EQUITY SHARES NOT APPLICABLE SINCE DIFFERENT VALUES ARE ARRIVED AT, CONSIDERING THE MOST IMPORTANT SPECIFICS OF THE CASE THAT THE CURRENT PROMOTERS AR E EXPERIENCED AND HAVE A GOOD TRACK RECORD THE DISCOUNTED CASH FLOW M ETHOD IS RECOMMENDED FOR VALUATION OF THE EQUITY SHARES OF M /S. BALAJI TEXTILE MILLS PVT. LTD. THE VALUE PER EQUITY SHARE COULD BE AROUND ` 118 PER SHARE BEING THE AVERAGE OF EARNING CAPITALISATION M ETHOD AND DISCOUNTED CASH FLOW METHOD . 7. IN OUR VIEW, THE METHOD OF VALUATION ADOPTED BY THE VALUER CANNOT BE SUMMARILY REJECTED WITH SHOWING VALID AND COGENT RE ASON. WHEN ALL THE METHODS ADOPTED ARE ACCEPTED METHODS AND ARE WIDELY PRACTICED AND IN FACT PRESCRIBED BY CERTAIN AUTHORITIES, ONE CANNOT IGNOR E SUCH METHODS AND HOLD THAT ONLY ONE OF THE METHODS IS ACCEPTABLE. IT IS W ELL SETTLED THAT WHEN THERE IS MORE THAN ONE METHOD OF VALUATION, THE CHOICE OF METHOD RESTS WITH THE ASSESSEE. M/S. BALAJI TEXTILE MILLS P. LTD. ITA NO.3197/M./2010 1 0 8. IN VIEW OF THE ABOVE DISCUSSION, WE UPHOLD THE CONT ENTION OF THE ASSESSEE THAT THE VALUATION DONE BY THE EXPERT VALU ER HAS TO BE ACCEPTED AND THAT NO ADDITION CAN BE MADE ON THE GROUND THAT VALUATION IS EXCESSIVE. 9. FURTHER, THE COMMISSIONER (APPEALS), AT PARA-6.5, H ELD AS FOLLOWS:- 6.5 FROM A READING OF THE ASSESSMENT ORDER, IT IS D EDUCED THAT THE DOCUMENTARY EVIDENCES AS FILED WERE ACCEPTED BY THE A.O. THERE IS NO FINDING TO THE CONTRARY IN THE ASSESSMENT ORDER. NO WHERE IN THE ASSESSMENT ORDER HAS THE A.O. DISPUTED THE EVIDENCE S AS FILED. FURTHER, THE A.O. ACCEPTED A PART OF THE TRANSACTIO N AS EXPLAINED WHILE CONSIDERING THE REST OF THE TRANSACTION AS UNEXPLAI NED. THE CREDIT TOWARDS SHARE CAPITAL OF ` 48,90,000 WAS TREATED AS EXPLAINED BUT CREDIT TOWARDS SHARE PREMIUM OF ` 2,53,35,000 WAS TREATED AS UNEXPLAINED. IT CANNOT BE THAT A PART OF THE SAME T RANSACTION PERTAINING TO THE SAME PARTY CAN BE TREATED AS EXPL AINED AND BALANCE TREATED AS UNEXPLAINED. IN FACT, ON THE BASIS OF MA TERIAL / EVIDENCES AS FURNISHED, THE BURDEN ON THE APPELLANT COMPANY TO P ROVE THE IDENTITY OF THE SUBSCRIBER, GENUINENESS OF THE TRANSACTION A ND CREDITWORTHINESS OF THE SUBSCRIBER STOOD DISCHARGED. THE ONUS HAS NO W SHIFTED TO THE A.O. BUT HE HAS NOT BROUGHT ANY MATERIAL ON RECORD TO DISPROVE THE GENUINENESS OF THE PART INVESTMENT. IT IS HELD THAT SINCE THE IDENTITY, CAPACITY AND THE GENUINENESS OF THE TRANSACTION STO OD ESTABLISHED ON THE BASIS OF THE DOCUMENTARY EVIDENCES AS FILED WHI CH ALSO INCLUDED THE BANK STATEMENTS OF THE INVESTORS HIGHLIGHTING T HE INVESTMENT AS MADE, THE SAID CREDIT TOWARDS SHARE PREMIUM CANNOT BE BROUGHT UNDER THE AMBIT OF S. 68. IN FACT, THE ONLY BASIS ON WHIC H THE A.O. BROUGHT THE PART INVESTMENT UNDER THE MISCHIEF OF S. 68, IS THE UNACCEPTABILITY OF THE APPELLANTS JUSTIFICATION FOR CHARGING SHARE PREMIUM. THE A.O. HAS TREATED THE INVESTMENT ON ACCOUNT OF PREMIUM AS NOT PROVED SOLELY ON THE GROUND THAT THE CHARGING PREMIUM IS N OT JUSTIFIED ON THE BASIS OF THE PROFITABILITY AND ASSET VALUE OF THE C OMPANY. IT IS HELD THAT THIS CANNOT BE A BASIS FOR TREATING THE CREDIT AS U NDISCLOSED INCOME OF THE APPELLANT UNDER S. 68 ESPECIALLY WHEN THE SOURC E OF INVESTMENT HAS NOT BEEN DOUBTED AND IDENTITIES HAD BEEN ESTABLISHE D. IN FACT, THERE IS NO CASE THAT THERE ARE BOGUS SHAREHOLDERS. THEREFOR E, IT IS HELD THAT ON THE FACTS OF THE CASE, THE A.O. ERRED IN BRINGING T O TAX THE AMOUNT COLLECTED TOWARDS SHARE PREMIUM OF ` 2,53,35,000 AS UNEXPLAINED CREDIT UNDER S. 68 OF THE ACT. THE ADDITION AS MADE UNDER S. 68 IS HEREBY DELETED. THIS GROUND IS ALLOWED. 10. WE FULLY AGREE WITH THESE FINDINGS AS IT IS LEGALLY INCORRECT TO TREAT SHARE APPLICATION MONEY TO THE EXTENT OF FACE VALUE AS A GENUINE TRANSACTION WARRANTING NO ADDITION UNDER SECTION 68 AND, THEREA FTER, TREATING THE PREMIUM AMOUNT RECEIVED ON THE VERY SAME SHARE APPL ICATION, FROM THE VERY SAME SHARE, FROM THE VERY SAME PERSON AS NOT GENUIN E. BOTH THE SHARE M/S. BALAJI TEXTILE MILLS P. LTD. ITA NO.3197/M./2010 11 CAPITAL AND SHARE PREMIUM ARE CONCERNING A SINGLE T RANSACTION AND IT CANNOT BE SPLIT INTO TWO AND DECIDED DIFFERENTLY. A PART O F CREDIT OF A SINGLE SUM OF MONEY OR OF A SINGLE TRANSACTION CANNOT, BY ANY STR ETCH OF IMAGINATION BE TREATED AS PART EXPLAINED AND PART UNEXPLAINED. THE LUCKNOW BENCH OF THE TRIBUNAL IN DCIT V/S SAHARA SAHARA INDIA FINANCE CO RPORATION LTD. (SUPRA), CONSIDERED AN ADDITION COMPRISING OF SHARE CAPITAL, SHARE PREMIUM AS WELL AS SHARE APPLICATION MONEY AND HELD THAT ALL THAT THE ASSESSEE HAS TO SHOW IS THAT SHAREHOLDERS OR INVESTORS EXIST AND IF THEIR IDENTITY AND EXISTENCE ARE PROVED, NO ADDITION CAN BE MADE UNDER SECTION 68. I N THIS CASE, THE EXISTENCE OF THE SHARE HOLDER IS NOT IN DOUBT. 11. IN THE CASE OF SHARE APPLICATION MONEY, ON THE ISSU E OF ADDITION UNDER SECTION 68, A NUMBER OF DECISIONS OF VARIOUS COURTS ARE AVAILABLE. THE LAW IS WELL SETTLED. WE HEREIN BELOW GIVE SOME OF THE CASE LAWS:- 1. CIT V/S STELLER INVESTMENT LTD., (2001) 251 ITR 263 (SC); FROM THE DECISION OF THE HIGH COURT (SEE [1991] 192 ITR 287) DECLINING TO CALL FOR A REFERENCE FROM THE DECISION OF THE APPELLATE TRIBUNAL THAT THE INCREASE IN SUBSCRIBED CAPITAL OF THE RESPONDENT- COMPANY COULD NOT BE A DEVICE OF CONVERTING BLACK M ONEY INTO WHITE WITH THE HELP OF FORMATION OF AN INVESTMENT COMPANY , ON THE GROUND THAT, EVEN IF IT BE ASSUMED THAT THE SUBSCRIBERS TO THE INCREASED CAPITAL WERE NOT GENUINE, UNDER NO CIRCUMSTANCES CO ULD THE AMOUNT OF SHARE CAPITAL BE REGARDED AS UNDISCLOSED INCOME, AN APPEAL WAS TAKEN BY THE DEPARTMENT TO THE SUPREME COURT. THE SUPREME COURT DISMISSED THE APPEAL HOLDING THAT THE TRIBUNAL HAD COME TO A CONCLUSION ON FACTS AND NO INTERFERENCE WAS CALLED FOR. DECISION OF THE DELHI HIGH COURT IN CIT V. STELLAR INVESTMENT LTD. [1991] 192 ITR 287 AFFIRMED. 2. CIT V/S LOVELY EXPORTS P. LTD., (2008) 6 DTR 30 (SC ); IF THE SHARE APPLICATION MONEY IS RECEIVED BY THE ASSESSEE COMPANY FROM ALLEGED BOGUS SHAREHOLDERS, WHOSE NAMES ARE GI VEN TO THE A.O. THEN THE DEPARTMENT IS FREE TO PROCEED TO REOPEN TH EIR INDIVIDUAL ASSESSMENTS IN ACCORDANCE WITH LAW, BUT IT CANNOT B E REGARDED AS UNDISCLOSED INCOME OF THE ASSESSEE COMPANY . [EMPHASIS SUPPLIED ] 3. CIT V/S DIVINE LEASING & FINANCE L. (2008) 299 ITR 268 (DEL.); HELD - DISMISSING THE APPEALS, THAT THE TRIBUNAL H AD CATEGORICALLY HELD THAT THE ASSESSEE HAS DISCHARGED ITS ONUS OF PROVI NG THE IDENTITY OF M/S. BALAJI TEXTILE MILLS P. LTD. ITA NO.3197/M./2010 12 THE SHARE SUBSCRIBERS. HAD ANY SUSPICION STILL REM AINED IN THE MIND OF THE ASSESSING OFFICER HE COULD HAVE INITIATED COER CIVE PROCESS BUT THIS COURSE OF ACTION HAD NOT BEEN ADOPTED. THE DEL ETION OF THE ADDITIONS WAS JUSTIFIED. 4. BARKHA SYNTHETICS LTD. V/S ACIT, (2006) 283 ITR 377 (RAJ.); WHERE THE SHARE APPLICATION MONEY IS RECEIVED BY T HE ASSESSEE COMPANY THROUGH BANKING CHANNEL, THE ASSESSEE HAS O NLY TO PROVE THE EXISTENCE OF THE PERSON IN WHOSE NAME SHARE APPLICA TION IS RECEIVED; ADDITIONS COULD NOT BE SUSTAINED WHERE THE EXISTENC E OF THE INVESTORS IS NOT DOUBTED AND THE INVESTMENT IS NOT SHOWN TO H AVE BEEN MADE BY SOMEBODY ELSE. 5. CIT V/S FIRST POINT FINANCE LTD. (2006) 286 ITR 477 (RAJ.); THE TRIBUNAL HAVING FOUND THAT THE INVESTORS ARE G ENUINELY EXISTING PERSONS AND THEY HAVE FILED CONFIRMATIONS IN RESPEC T OF INVESTMENTS MADE BY THEM AND THEIR STATEMENTS WERE ALSO RECORDE D, THE AMOUNT OF SHARE CAPITAL / SHARE APPLICATION MONEY COULD NOT B E TREATED AS UNEXPLAINED CASH CREDITS AND NO ADDITION COULD BE M ADE UNDER SECTION 68. 6. CREATIVE WORLD TELEFILMS LTD., 333 ITR 100 (BOM.); IN THE CASE IN HAND, IT IS NOT DISPUTED THAT THE ASSESSEE HAD GIVEN THE DETAILS OF NAME AND ADDRESS OF THE SHAREHOLDER, THEIR PAN/GIR NUMBER AND HAD ALSO GIVEN THE CHEQUE NUMBER, NAME O F THE BANK. IT WAS EXPECTED ON THE PART OF THE ASSESSING OFFICER T O MAKE PROPER INVESTIGATION AND REACH THE SHAREHOLDERS. THE ASSES SING OFFICER DID NOTHING EXCEPT ISSUING SUMMONS WHICH WERE ULTIMATEL Y RETURNED BACK WITH AN ENDORSEMENT 'NOT TRACEABLE'. IN OUR CONSIDE RED VIEW, THE ASSESSING OFFICER OUGHT TO HAVE FOUND OUT THEIR DET AILS THROUGH PAN CARDS, BANK ACCOUNT DETAILS OR FROM THEIR BANKERS SO AS TO REACH THE SHAREHOLDERS SINCE ALL THE RELEVANT MATERIAL DETAI LS AND PARTICULARS WERE GIVEN BY THE ASSESSEE TO THE ASSESSING OFFICE R. IN THE ABOVE CIRCUMSTANCES, THE VIEW TAKEN BY THE TRIBUNAL CANN OT BE FAULTED. NO SUBSTANTIAL QUESTION OF LAW IS INVOLVED IN THE APP EAL. 7. CIT V/S ELECTRO POLYCHEM LTD., 294 ITR 661 (MAD.); THE ASSESSEE FILED ITS RETURNS FOR THE ASST. YRS. 1 998-99 AND 1999- 2000. THE AO MADE ADDITIONS IN RESPECT OF THE SHARE APPLICATION MONEY UNDER S. 68 OF THE ACT, FINDING THAT THE ASSE SSEE HAD BROUGHT THE UNDISCLOSED INCOME BY WAY OF SHARE APPLICATIONS IN FICTITIOUS NAME AND PASSED ORDER ACCORDINGLY. HENCE, THE ASSESSEE P REFERRED APPEALS TO THE CIT(A). THE CIT(A) DELETED THE ADDITION MADE BY THE AO FOR THE ASST. YR. 1998-99 AND UPHELD THE ADDITION MADE FOR THE ASST. YR. 19992000. AGAINST THE SAID ORDER, THE REVENUE AS WE LL AS THE ASSESSEE PREFERRED APPEALS BEFORE THE TRIBUNAL. THE TRIBUNAL ALLOWED THE APPEAL PREFERRED BY THE ASSESSEE AND DISMISSED THE APPEAL PREFERRED BY THE REVENUE. HENCE, THE ABOVE APPEALS. M/S. BALAJI TEXTILE MILLS P. LTD. ITA NO.3197/M./2010 13 3. IN CIT VS. STELLAR INVESTMENT LTD. (1991) 99 CTR (DEL) 40 : (1991) 192 ITR 287 (DEL), WHERE THE INCREASE IN SUBSCRIBED CAPITAL OF THE RESPONDENT COMPANY, ACCEPTED BY THE ITO AND REJECTE D BY THE CIT ON THE GROUND THAT A DETAILED INVESTIGATION WAS REQUIR ED REGARDING THE GENUINENESS OF SUBSCRIBERS TO SHARE CAPITAL, AS THE RE WAS A DEVICE OF CONVERTING BLACK MONEY BY ISSUING SHARES, WITH THE HELP OF FORMATION OF AN INVESTMENT, WHICH WAS REVERSED BY THE TRIBUNA L, THE DELHI HIGH COURT HELD THAT EVEN IF IT BE ASSUMED THAT THE SUBS CRIBERS TO THE INCREASED SHARE CAPITAL WERE NOT GENUINE, UNDER NO CIRCUMSTANCES THE AMOUNT OF SHARE CAPITAL COULD BE REGARDED AS UNDISC LOSED INCOME OF THE COMPANY. 4. THE VIEW TAKEN BY THE DELHI HIGH COURT IN CIT VS . STELLAR INVESTMENT LTD. CITED SUPRA, WAS CONFIRMED BY THE A PEX COURT AND THE SAME WAS REPORTED IN CIT VS. STELLAR INVESTMENT LTD . (2000) 164 CTR (SC) 287 : (2001) 251 ITR 263 (SC). 5. APPLYING THE RATIO LAID DOWN IN THE DECISION CIT ED SUPRA, WE DO NOT FIND ANY SUBSTANTIAL QUESTION OF LAW ARISES FOR OUR CONSIDERATION. ACCORDINGLY, THESE APPEALS ARE DISMISSED. CONSE-QUE NTLY, MP NO. 1 OF 2007 IS ALSO DISMISSED. 8. CIT V/S LANCO INDUSTRIES LTD. (2000) 110 TAXMAN 172 (AP); THE TRIBUNAL NO DOUBT SHOULD HAVE CONSIDERED THE Q UESTION OF RELIABILITY OF CONFIRMATION LETTERS ON THE INTRINSI C WORTH AND TENOR OF SUCH LETTERS. IF CRUCIAL FACTS THROWING LIGHT ON TH E SOURCE OF INVESTMENT ARE NOT DISCERNIBLE FROM THE LETTERS, THE TRIBUNAL COULD HAVE VERY WELL SCHEWED THOSE LETTERS FROM CONSIDERATION. BUT, THIS IS A MATTER OF APPRECIATION OF EVIDENCE AND WE DO NOT THINK THAT A SUBSTANTIAL QUESTION OF LAW RISES ON THAT ACCOUNT. MOREOVER, WE FAIL TO SEE HOW MERELY BY REASON OF UNSATISFACTORY EXPLANATION RELA TING TO THE SOURCE OF INVESTMENT BY THE SHAREHOLDERS, THE MONEY INVEST ED ON SHARES SHOULD BE TREATED AS INCOME OF THE ASSESSEE. IF THE OSTENSIBLE SHAREHOLDERS FAILED TO EXPLAIN THE MEANS OF INVESTM ENT, THAT SHOULD HAVE BEEN TREATED AS UNEXPLAINED INVESTMENT IN THEI R HANDS. IN ORDER TO ADD IT TO THE INCOME OF THE ASSESSEE, THERE MUST BE A FURTHER FINDING THAT IN FACT THE SHAREHOLDERS WERE MERE NAME-LENDER S AND THE MONEY ALLEGEDLY INVESTED BY THEM REALLY BELONGED TO THE D IRECTORS OF THE ASSESSEE COMPANY. IN THE ABSENCE OF A FINDING THAT THE PERSONS TO WHOM THE SHARE CERTIFICATES WERE ISSUED ON RECEIPT OF CONSIDERATION AS PER THE BOOK ENTRIES WERE IN FACT DUMMIES OR STOOGE S OF THE DIRECTORS OF THE ASSESSEE COMPANY, THE SAME CANNOT BE TREATED AS UNACCOUNTED INCOME OF THE ASSESSEE. THERE WAS NO SUCH FINDING B Y THE ASSESSING AUTHORITY . [EMPHASIS SUPPLIED ] 12. APPLYING THE PROPOSITIONS LAID DOWN IN THESE JUDGME NTS TO THE FACTS OF THE CASE, WE HAVE TO NECESSARILY HOLD THAT NO ADDIT ION BE MADE IN THE HANDS M/S. BALAJI TEXTILE MILLS P. LTD. ITA NO.3197/M./2010 14 OF THE ASSESSEE UNDER SECTION 68, AS THE IDENTITY O F THE SHARE HOLDER IS NOT IN DOUBT. EVEN IF IT IS ALLEGED THAT THE SHARE CAPITAL WAS RECEIVED FROM BOGUS SHAREHOLDERS, AS PER THE JUDGMENT OF HON'BLE SUPREM E COURT IN LOVELY EXPORTS P. LTD. (SUPRA), NO ADDITION CAN BE MADE IN THE HANDS OF THE ASSESSEE COMPANY. THE REVENUE IS FREE TO PROCEED AG AINST THE SHARE APPLICANTS. TO HOLD THAT THE SHARE HOLDER IS A BENA MI OF THE ASSESSEE COMPANY OR ITS DIRECTORS, THE TESTS LAID DOWN BY TH E HONBLE ALLAHABAD HIGH COURT IN PRAKASH NARAIN (SUPRA). THIS JUDGMENT WAS APPLIED BY THE HYDERABAD BENCH OF THE TRIBUNAL IN VALULINE SECURIT IES (I) LTD. V/S ACIT, 108 ITD 639 (PARA-43):- 13. IN THIS CASE, THE ASSESSEE HAS DISCHARGED THE ONUS THAT LAY ON IT AND, HENCE, NO ADDITION CAN BE MADE UNDER SECTION 68 OF THE ACT. EVEN OTHERWISE, AS THE ASSESSEE COMPANY HAS NOT STARTED ITS BUSINES S ACTIVITY, THE QUESTION OF EARNING UNDISCLOSED INCOME DOES NOT ARISE. IN CI T V/S P.K. NOORJAHAN (SUPRA), THE HON'BLE SUPREME COURT, IN A CASE WHERE THE ASSESSEE HAD NO SOURCE OF INCOME, HELD THAT AN ADDITION CANNOT BE M ADE UNDER SECTION 69 AND THE WORD MAY USED IN SECTION 69 CANNOT BE READ AS SHALL . IT HELD THAT THE ITO IS NOT OBLIGED TO TREAT SUCH SOURCE OF INV ESTMENTS AS INCOME IN EVERY CASE WHERE AN EXPLANATION OFFERED BY THE ASSE SSEE IS FOUND TO BE NOT SATISFACTORY AND THAT DISCRETION HAS TO BE EXERCISE D KEEPING IN VIEW THE FACTS AND CIRCUMSTANCES OF A PARTICULAR CASE. IN THAT CASE, THE TRIBUNAL HELD THAT EVEN THOUGH THE EXPLANATION ABOUT THE NATURE AND SO URCE OF PURCHASE MONEY WAS NOT SATISFACTORY BUT IN THE FACTS AND CIR CUMSTANCES OF THE CASE, IT IS NOT POSSIBLE FOR THAT ASSESSEE TO EARN THE AMOUN T INVESTED IN THE PROPERTIES. IT HELD THAT, BY NO STRETCH OF IMAGINAT ION, COULD THE ASSESSEE BE CREDITED FOR HAVING EARNED THIS INCOME, IN THE COUR SE OF ASSESSMENT YEAR NOR WAS SHE IN A POSITION TO EARN IT FOR A DECADE OR MO RE. THE CASE WAS OF A MUSLIM LADY WHO IS AGED ABOUT 20 YEARS. IN THE CASE ON HAND, THE ASSESSEE COMPANY WAS IN THE PROCESS OF SETTING-UP OF A PROJE CT AND HAS NOT COMMENCED PRODUCTION DURING THE YEAR AND THERE WAS NO POSSIBILITY OF THE ASSESSEE COMPANY EARNING ANY SUCH INCOME DURING THE COURSE OF THIS M/S. BALAJI TEXTILE MILLS P. LTD. ITA NO.3197/M./2010 15 ASSESSMENT YEAR. THE RECEIPT IN QUESTION BEING RECE IPT OF SHARE PREMIUM, IS A CAPITAL RECEIPT AND CANNOT BE BROUGHT TO TAX. AS ALREADY HELD, THE ADDITION IS NOT WARRANTED UNDER SECTION 68 OF THE ACT. HENCE , WE UPHOLD THE ORDER OF THE FIRST APPELLATE AUTHORITY AND DISMISS THIS GROU ND RAISED BY THE REVENUE. 14. IN THE RESULT, REVENUES APPEAL IS DISMISSED. ORDER PRONOUNCED IN THE OPEN COURT ON 30 TH AUGUST 2011 SD/- VIJAY PAL RAO JUDICIAL MEMBER SD/- J. SUDHAKAR REDDY ACCOUNTANT MEMBER MUMBAI, DATED: 30 TH AUGUST 2011 COPY TO : (1) THE ASSESSEE; (2) THE RESPONDENT; (3) THE CIT(A), MUMBAI, CONCERNED; (4) THE CIT, MUMBAI CITY CONCERNED; (5) THE DR, H BENCH, ITAT, MUMBAI. TRUE COPY BY ORDER PRADEEP J. CHOWDHURY ASSISTANT REGISTRAR SR. PRIVATE SECRETARY ITAT, MUMBAI BENCHES, MUMBAI