ASST CIT CIR 3(3)(2), MUMBAI V. VERITAS (INDIA) LTD, MUMBAI

ITA 3276/MUM/2016

• Counselvise Citation: [2019] 118 COUNSELVISE.COM (IT) 7685 (ITAT-MUMBAI)
• Duration Of Justice: 2 year(s) 8 month(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 10-01-2019
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: Not Allotted
• Assessment Year: 2010-2011
• Appeal Filed On: 10-05-2016
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: H N SINGH
• Keywords: Unexplained cash credit; Share purchase agreement; Source of fund; Deemed to accrue or arise in india; Onus to prove
• Section: 133A; 195; 68

Judgement Text

THE INCOME TAX APPELLATE TRIBUNAL C BENCH, MUMBAI BEFORE SHRI B.R. BASKARAN (AM) & SHRI RAMLAL NEGI (JM) I.T.A. NO. 3276 /MUM/ 201 6 (ASSESSMENT YEAR 20 10 - 11 ) ACIT, CIRCLE - 3(3)(2) ROOM NO. 609 6 TH FLOOR AAYAKAR BHAVAN M.K. ROAD MUMBAI - 400 020. V S . M/S . VERITAS (INDIA) LTD. 701, EMBASSY CENTRE NARIMAN POINT MUMBAI - 400 021. PAN : AAACD1654J ( APPELLANT ) ( RESPONDENT ) C.O.98/MUM/2018 (ASSESSMENT YEAR 2010 - 11) M/S. VERITAS (INDIA) LTD. 701, EMBASSY CENTRE NARIMAN POINT MUMBAI - 400 021. PAN : AAACD1654 J V S . ACIT, CIRCLE - 3(3)(2) ROOM NO. 609 6 TH FLOOR AAYAKAR BHAVAN M.K. ROAD MUMBAI - 400 020. ( APPELLANT ) ( RESPONDENT ) ASSESSEE BY SHRI VIJAY MEHTA DEPARTMENT BY SHRI H.N. SINGH DATE OF HEARING 08 .1 1 . 201 8 DATE OF PRONOUNCEMENT 10 . 1 . 201 9 O R D E R PER B.R. BASKARAN (AM) : THE REVENUE HAS FILED APPEAL AND THE ASSESSEE HAS FILED CROSS OBJECTION CHALLENGING THE ORDER DATED 22.2.2016 PASSED BY LEARNED CIT(A) - 8, MUMBAI AND IT RELATES TO A.Y. 2010 - 11. THE REVENUE IS AGGRIEVED BY THE DECISION OF LEARNED CIT(A) IN DELETING THE ADDITION OF RS . 5 0.00 CRORES MADE BY THE ASSESSING OFFICER U/S. 68 OF THE ACT. 2. THE F ACTS RELATING TO THE ISSUE ARE STATED IN BRIEF. THE ASSESSEE IS ENGAGED IN THE BUSINESS OF TRADING IN INDUSTRIAL GAS CYLINDERS, METAL S AND MACHI NERIES. IT IS ALSO ENGAGED IN THE BUSINESS OF GENERATION OF WIND POWER . DURING THE COURSE OF ASSESSMENT PROCEEDINGS FOR THE YEAR UNDER CONSIDERATION, M/S. VERITAS (INDIA) LTD. 2 THE ASSESSING OFFICER NOTICED THAT THE ASSESSEE HAS RECEIVED FUNDS FROM THE FOLLOWING COMPANIES BY ISSUING SHARES TO THEM : - SR. NO. NAME & OCCUPATION OF ALLOTTEE ADDRESS O F ALLOTTEE NATIONALITY OF THE ALLOTTEEE NUMBER O F SHARES ALLOTTED TOTAL AMOUNT PAID (INCLUDING PREMIUM) (IN RS.) TOTAL AMOUNT TO BE PAID ON CALLS (INCLUDING PREMIUM) OUTSTANDING (IN RS.) 1. M/S. GROUPE VERITAS LIMITED OCC: COMPANY 712A, EMBASSY CENTRE, NARIMAN POINT, MUMBAI - 400021. INDIAN BODY CORPORATE 25,0 00 3,12,50,000 NIL 2. M/S. AVENTIA GLOBAL LIM ITED OCC: COMPANY NERINE CHAMBERS, P.O.BOX 905, ROAD TOWN, TORTOLA, BRITISH VIRGIN I SLANDS. FOREIGN CORPORATE BODY 1,00,000 12,50,00,000 NIL 3. M/S. ONIX ASSETS LIMITED OCC: COMPANY NERINE CHAMBERS, P.O.BO X 905, ROAD 'OWN, 'ORTOLA, BRITISH VIRGIN I SLANDS. FOREIGN CORPORATE BODY 3,00,000 37,50,00,000 NIL 3. THE ASSESSEE HAD INITI ALLY ISSUED 4,25,000 SHARE WARRANTS TO THE ABOVE SAID COMPANIES ON 26.12.2009, WHICH ENTITLED THE M TO SUB SCRI BE FOR EQUIVALENT NUMBER OF EQUITY SHARES. ON 27.3.2010 , THE ABOVE SAID COMPANIES SURRENDERED SHARE WARRANTS AND SUBSCRIBED SHARES OF EQUIVALENT NUMBER AT A PRICE OF RS.1250 / - PER EQUITY SHARE (FACE VALUE OF RS.10 / - AND SHARE PREMIUM OF RS . 1 240/ - PER SHARE ) . M/S. VERITAS (INDIA) LTD. 3 4. THE ASSESSING OFFICER NOTICED THAT THE ASSESSEE HAS RECEIVED FUNDS AGGREGATING TO RS.50 .00 CRORES FROM TWO FOREIGN COMPANIES NAMED M/S. AVENTIA GLOBAL LIMITED AND M/S ONIX ASSETS LIMITED, WHICH WERE REGISTERED IN BRITISH VIRGIN ISLANDS, WHICH I S CONSIDERED TO BE A TAX HAVEN. THE ASSESSING OFFICER FURTHER NOTIC ED THAT THE ASSESSEE - COMPANY HAS APPLIED FOR POST FACTO APPROVAL TO FIPB DIVISION OF GOVERNMENT OF INDIA FOR APPROVING THE RECEIPT OF RS.50 .00 CRORES AS SHARE CAPITAL FROM THE ABOVE SAID T WO FOREIGN COMPANIES. THE AO NOTICED THAT THE FIPB DIVISION OF GOVERNMENT OF INDIA H AS REJECTED APPLICATION OF THE ASSESSEE FOR THE FOLLOWING REASONS: - NO FINANCIAL STATEMENTS OF M/S. ONIX ASSETS LIMITED, BVI AND M/S AVENTIA GLOBAL LIMITED, BVI, HAS B EEN FILED TO SHOW THE SOURCE OF INFLOW OF FUNDS FROM THE SAID ENTITIES TO THE ASSESSEE COMPANY I.E., M/S. VERITAS (INDIA) LTD. NO SUPPORTING DOCUMENTS TO S UBSTANTIATE THE IDENTITY, CREDITWORTHINESS AND GENUINENESS OF THE TRANSACTIONS HAS BEEN FILED EXC EPT FILING OF CERTIFICATE OF INCUMBENCY DATED 27/10/2011 ISSUED BY M/S. NERINE TRUST COMPANY (BVI) LIMITED, (THE REGISTERED AGENT OF FOREIGN INVESTOR). AS PER THE CERTIFICATE, THE ONLY EVIDENTIAL FACT IS THAT TH ESE COMPANIES ARE REGIST ERED IN BVI AND HAD PAID ALL THEIR DUES. FURTHER, NO INFORMATION IN RESPECT OF SOURCES OF FUNDS IN RESPECT OF SUCH INVESTMENTS ARE EVIDENT FROM THE SAID CERTIFICATE. FURTHER, THE EXAMINATION OF DOCUMENTS REVEAL THAT IN FACT THOUGH INVESTMENTS ARE MADE BY M /S. ONIX ASSETS LIMITED, BVI AND M/S AVENTIA GLOBAL LIMITED, BVI, BUT THESE COMPANIES RECEIVED FUNDS FROM THEIR OWN GROUP COMPANIES. IMPORTANTLY, 100% SHAREHOLDING OF M/S.ONIX ASSETS LTD., BVI HAS BEEN HELD BY M/S. HAMBRY VENTURE INCORPORATED, BVI. SIMILA RLY, 100% SHAREHOLDING OF M/S.AVENTIA GLOBAL LTD., BVI HAS BEEN HELD BY M/S. MEJIS MANAGEMENT LTD., BVI. INTERESTINGLY ALL THESE COMPANIES INCLUDING THE REGISTERED AGENT HAVING A COMMON REGISTERED ADDRESS I.E., NERINE CHAMBER, P.O. BOX 905, ROAD TOWN, TORT OLA, BRITISH VIRGIN ISLANDS. IT WAS ALSO OBSERVED BY THE FIPB THAT SUCH COMPANIES COULD NOT BE LOCATED BY THE INDIAN MISSION, UNDER MEA IN BRITISH VIRGIN ISLAND OR IN THE UNITED KINGDOM. IN VIEW OF THE ABOVE, THE ASSESSING OFFICER MADE A REFERENCE TO F T AND TR DIVISIONS OF CBDT ON 12.9.2012 SEEKING FOLLOWING INFORMATION: - M/S. VERITAS (INDIA) LTD. 4 A) FINANCIAL STATEMENTS OF M/S. ONIX ASSETS LIMITED, BVI AND M/S AVENTIA GLOBAL LIMITED, BVI ALONG WITH DETAILS OF NAME AND ADDRESS OF THE PROMOTERS / DIRECTORS OF THE SAID COMPANIES. B) S UPPORTING DOCUMENTS TO SUBSTANTIATE THE IDENTITY, CREDITWORTHINESS AND GENUINENESS OF THE TRANSACTIONS ALONG WITH SUPPORTING BANK STATEMENTS EVIDENCING THE FLOW OF FUNDS. THE ASSESSING OFFICER ALSO CONDUCTED SURVEY ACTION U/S. 133A OF THE ACT IN THE HANDS OF THE ASSESSEE AS WELL AS IN THE OFFICE OF SHARE TRANSFER AGENT, IN ORDER TO COLLECT EVIDENCE REGARDING SHARE CAPITAL RECEIVED BY THE ASSESSEE FROM THE ABOVE SAID FOREIGN COMPANIES. DURING THE COURSE OF SURVEY OPERATIONS, THE ASSESSING OFFICER ALSO RECOR DED STATEMENTS FROM THE DIRECTOR OF ASSESSEE - COMPANY NAMED SHRI NITIN KUMAR DIDWANIA AND ALSO FROM SOME OF THE OFFICIALS OF THE ASSESSEE COMPANY. 5. AFTER CONCLUSION OF THE SURVEY AND UPON EXAMINATION OF VARIOUS MATERIAL S AND STATEMENTS GIVEN BY THE DIRE CTOR AND OFFICIALS , THE ASSESSING OFFICER WAS OF THE VIEW THAT FOLLOWING FACTS WOULD EMERGE IN RESPECT OF SHARE CAPITAL MONEY RECEIVED BY THE ASSESSEE : - A) FOREIGN COMPANIES HAVE PROVIDED ONLY A CERTIFICATE OF INCORPORATION AND NO OTHER EVIDENCE WAS GIVEN T O ESTABLISH IDENTITY OF T HESE FOREIGN COMPANIES . B) NO FINANCIAL STATEMENTS/BANK ACCOUNT STATEMENTS ARE AVAILABLE WITH THE ASSESSEE TO ESTABLISH CREDITWORTHINESS OF THE FOREIGN COMPANIES. C) ORIGINAL SHARE CERTIFICATE IN RESPECT OF SHARES ALLOTTED TO THE FOREI GN COMPANIES WERE FOUND IN THE CUSTODY OF THE ASSESSEE. THE SHARE R EGISTRAR OF THE ASSESSEE HAS ALSO DISPATCHED ORIGINAL SHARE CERTIFICATE S TO THE ADDRESS OF THE ASSESSEE. D) THE DIRECTOR OF THE ASSESSEE - COMPANY SHRI NITIN K DIDWANIA HAD STATED THAT FUNDS W ERE ARRANGED THROUGH A BROKER NAMED MR. ZAFFER ALI OF M/S. ZAF BUSINESS SOLUTIONS BUT THE ASSESSEE HAS FAILED TO PROVE IN SUPPORT OF THE SAME. THE ASSESSEE HAS ALSO FAILED TO FURNISH DETAILS OF DIRECTORS OF FOREIGN COMPANIES AND ALSO ULTIMATE SOURCE OF FUN DS RECEIVED BY THE ASSESSEE. M/S. VERITAS (INDIA) LTD. 5 E) DURING THE COURSE OF SURVEY OPERATION, SOME E - MAIL COMMUNICATION BETWEEN THE DIDWANIA, HIS EMPLOYEE AND ONE MR. PRAKASH REGARDING INVESTMENT OF FUNDS BY THE FOREIGN COMPANIES WERE FOUND AND IMPOUNDED. HOWEVER, DIDWANIA FAILED TO PROVIDE SATISFACTORY EXPLANATION WITH REGARD TO THE SAME. 6. THE ASSESSING OFFICER FURTHER NOTICED THAT THE PROMOTERS OF THE ASSESSEE - COMPANY HAVE ALSO INTRODUCED SHARE CAPITAL IN THE IMMEDIATELY PRECEDING FINANCIAL YEAR . HOWEVER, THE SHARE PREMIUM CO LLECTED FROM THEM WAS ONLY RS.190 / - PER SHARE ON THE SHARE HAVING FACE VALUE OF RS.10 / - , W HEREAS THE ASSESSEE HAS COLLECTED SHARE PREMIUM OF RS.1240/ - PER SHARE FROM THE FOREIGN INVESTORS. THE ASSESSING OFFICER OBSERVED THAT THERE WAS NO DEVELOPMENT BETWEE N FINANCIAL YEAR 2008 - 09 AND 2009 - 10 , WHICH WOULD JUSTIFY HUGE JUMP IN THE PREMIUM COLLECTED BY TH E ASSESSEE. WHEN THE ASSESSMENT PROCEEDINGS WERE GOING ON , THE ASSESS ING OFFICER ALSO RECEIVED A REPORT DATED 31.12.2012 TITLED AS INTERIM REPORT FROM FT & TR DIVISION OF CBDT. FROM THE REPORT, THE ASSESSING OFFICER NOTICED THAT M/S. A VENTIA GLOBAL LIMITED WAS HAVING A DIRECTOR NAMED M/S. MEJIS MANAGEMENT LIMITED, WHICH WAS HOLDING SHARES ON BEHALF OF A PERSON NAMED MR. NAVNEE T DIDWANIA, WHO HAPPENED TO BE TH E BROTHER OF MR. NITIN KUMAR DIDWANIA, BEING THE DIRECTOR OF THE ASSESSEE - COMPANY. THE S HARE CAPITAL OF ONIX ASSETS LIMITED WAS HELD BY M/S. HAMBRY VENTURE INC., WH ICH HELD SHARE S ON BEHALF OF SMT. DEEPALI DIDWANIA, WIFE OF MR. NAVNEET DIDWANIA. ON NOTIC ING THE CLOSE RELATIONSHIP BETWEEN THE ULTIMATE OWNERS OF THE INVESTOR COMPANIES AND THE DIRECTOR OF THE ASSESSEE COMPANY, T HE ASSESSING OFFICER CAME TO THE CONCLUSION THAT FUNDS HAVE BEEN ROUTED TO THE ASSESSEE COMPANY BY WAY OF LAYERED TRANSACTION S THROU GH COMPANIES INCORPORATED IN BRITISH VIRGIN ISLAND (BVI) , WHICH IS CONSIDERED TO BE A TAX HAVEN. THE ASSESSING OFFICER NOTICED THAT THE INTERIM REPORT HAS STATED THAT BOTH THE COMPANIES WERE OPERATING FROM THE SAME ADDRESS BUT INDIAN MISSION COULD NOT LOCA TE THEM EITHER IN B V I OR IN UNITED KINGDOM. THE ASSESSING OFFICER ALSO NOTICED THAT THE REPORT DID NOT CONTAIN FINANCIAL STATEMENT S OF BOTH THE INVESTOR COMPANIES, VIZ., M/S ONIX ASSETS LIMITED AND M/S AVENTIA GLOBAL LIMITED . M/S. VERITAS (INDIA) LTD. 6 7. IN VIEW OF THE ABOVE , THE ASSESSING OFFICER ASKED THE ASSESSEE TO FURNISH DETAILS OF PERSONS ULTIMATE INVESTORS WHO ARE BEHIND THE COMPANIES , WHICH INVESTED IN THE ASSESSEE COMPANY . THE ASSESSEE FURNISHED A CERTIFICATE ISSUED BY M/S. ONE PARTNERSHIP PAC, SINGAPORE (AN ACCOUNTANT FI RM ) CERTIFYING REMITTANCES MADE BY MR. NAVNEET DIDWANIA AND SMT. DEEPALI DIDWANIA, CERTIFICATE OF MEANS AND CREDITWORTHINESS OF BOTH ABOVE SAID PERSONS. IT WAS SUBMITTED THAT BOTH THE ABOVE SAID PERSONS HAD INVESTED MONEY IN THE FOREIGN COMPANIES WHICH IN TURN , HA VE SUBSCRIBED THE SHARE S OF THE ASSESSEE - COMPANY. HOWEVER, THE ASSESSING OFFICER WAS NOT SATISFIED WITH THE SAME AND ACCORDINGLY ASKED THE ASSESSEE TO FURNISH FINANCIAL STATEMENT S AND ALSO COPIES OF RETURN S OF INCOME F ILED BY MR. NAVNEET DIDWANIA A ND MRS. DEEPALI DIDWANIA. 8. THEREAFTER THE ASSESSING OFFICER RECEIVED A LETTER DATED 24.1.2014 WRITTEN BY MR. NAVNEET DIDWANIA CLAIMING THAT HE AND HIS WIFE MRS. DEEPALI DIDWANIA ARE THE ULTIMATE INVESTORS IN THE ASSESSEE - COMPANY AND INVESTMENTS HAVE BEE N MADE THROUGH A BROKER LOCATED IN UAE. HE ALSO MENTIONED IN THE LETTER THAT SHARES WERE PURCHASE D OUT OF THEIR OWN RESOURCES AND THEY ARE HAVING GOOD NET WORTH. HOWEVER, THE ASSESSING OFFICER OBSERVED THAT MR. NAVNEET DIDWANAI HAS FAILED TO EXPLAIN HIS SO URCES FOR MAKING INVESTMENT IN FOREIGN COMPANIES. 9. IT IS PERTINENT TO NOTE THAT THE ASSESSING OFFICER FINALLY TOOK THE VIEW THAT THE ASSESSEE HAS ESTABLISHED IDENTITY OF INVESTORS AND SUBMITTED DOCUMENTS TO ESTABLISH CREDITWORTHINESS ALSO , BUT FAILED TO ESTABLISH GENUINENESS OF TRANSACTIONS , AS THE REMITTANCES HAV E NOT BEEN LINKED TO THE INVESTMENTS MADE IN THE ASSESSEE COMPANY . THE OBSERVATIONS MADE BY THE ASSESSING OFFICER ARE EXTRACTED BELOW FOR THE SAKE OF CONVENIENCE : - 5.20 HERE IN THIS CASE, THOUGH ASSESSEE HAS ESTABLISHED THE IDENTITY OF THE INVESTORS AND ALSO SUBMITTED DOCUMENTS TO ESTABLISH THE CREDITWORTHINESS. BUT THE ASSESSEE HAS FAILED TO ESTABLISH THE GENUINENESS OF THE TRANSACTION AS THE REMITTANCES HAVE NOT BEEN LINKED TO THE SOURCE. IN ABSENCE OF VITAL INFORMATION, IT CAN'T BE ACCEPTED THAT ASSESSEE HAS DISCHARGED ITS ONUS. M/S. VERITAS (INDIA) LTD. 7 5.21 UNLESS THE ASSESSEE COULD ESTABLISH A LINK BETWEEN THE GENUINE SOURCE OF FUND AND THE REMITTANCE, THE SAME CAN'T BE ACCEPTED AS THE 'GENUINE' AS THE VITAL L INK OF SOURCE IS MISSING. 5.22 FURTHER, THE ABOVE CONCLUSION DRAWN BY THE DEPARTMENT GATHERS MORE STRENGTH DUE TO OTHER CIRCUMSTANTIAL EVIDENCES WHICH PROVE THE ASSESSEE DELIBERATELY CONCEALED THE REAL 'IDENTITY' OF THE FOREIGN INVESTOR. THE VARIOUS DETAI LS WHICH WERE FILED DURING THE COURSE OF ASSESSMENT PROCEEDINGS IN FACT WERE SUBMITTED AS DEPARTMENT COULD ESTABLISH THAT INVESTMENT HAD COME FROM THE CLOSE RELATIONS BUT ASSESSEE HAD TRIED TO TAKE A STAND THAT INVESTMENT WERE MADE BY INDEPENDENT PARTIES I NCORPORATED AT BVI. 5.23 KEEPING IN VIEW, THE ALL FACTS AVAILABLE ON RECORDS IT CAN SAFELY BE CONCLUDED THAT THE INVESTMENT WAS AN ARRANGED AFFAIRS BETWEEN THE ASSESSEE AND THE FAMILY OF BROTHER OF THE DIRECTOR SHRI NITIN DIDWANIA. BUT TO CONCEAL THE IDEN TITY, WHICH MIGHT HAD RAISED SUSPICION, FRONT COMPANIES M/S. ONIX ASSETS LIMITED AND M/S. AVENTIA GLOBAL LIMITED WERE CREATED AND MONEY WAS ROUTED THROUGH THESE BRITISH VIRGIN ISLAND COMPANIES. THE ACTUAL COLLUSION WAS EVIDENT WHEN ALL SHARES IN PHYSICAL F ORM WERE RECOVERED FROM THE ASSESSEE'S OWN PREMISE AND DESPITE BEING QUESTIONED ABOUT THE IDENTITY OF THE 'INVESTOR', GROSS IGNORANCE WAS EXPRESSED. FURTHER, THE SHARES HAVE BEEN ACQUIRED AT VERY HIGH RATE OF RS.1,240/ - PER SHARES OF FACE VALUE OF RS. 10/ - , WHEREAS IN THE PRECEDING YEAR, DIRECTORS HAD SUBSCRIBED THE SHARES AT RS. 190/ - PER SHARE. THE PAYMENT OF VERY HIGH PREMIUM (MORE THAN 6 TIMES) APPEARS TO BE UNREASONABLE AS THERE IS NO SIGNIFICANT CHANGE IN THE NATURE OF BUSINESS, INCOME FROM BUSINESS ET C. FURTHER, NON SUBMISSION OF ANY EVIDENCE TO ESTABLISH THAT THE INVESTMENTS WAS MADE FROM THE KNOWN SOURCES OF INCOME OF SHRI NAVNEET & MRS. DEEPALI DIDWANIA (DESPITE: BEING ASKED SPECIFICALLY), CONCLUSIVELY PROVES THAT WHOLE TRANSACTION IS A DEVICE TO IN TRODUCE UNACCOUNTED MONEY' AS 'SHARE CAPITAL/SHARE PREMIUM' IN THE BOOKS OF ACCOUNT. 5.24 IN LIGHT OF THE ABOVE, ASSESSEE FAILED TO ESTABLISH THAT THE INVESTMENT WHICH WAS RECEIVED THROUGH MAZE OF COMPANIES IN TURN RELATED TO CLOSE RELATION OF THE DIRECTO R HAS COME THROUGH KNOWN AND DECLARED SOURCES. IN FACT, THE TRAIL OF MONEY BECOMES INCOMPLETE AS ASSESSEE FAILS TO ADDUCE ANY COGENT EVIDENCES AS TO SOURCE OF THE SAME. ACCORDINGLY, THE SAME IS CONSIDERED AS DEEMED INCOME WITHIN THE MEANING OF SECTION 68 O F THE ACT. ACCORDINGLY, AN ADDITION OF RS.50,00,00,000/ - IS MADE TO THE TOTAL INCOME OF THE ASSESSEE UNDER THE HEAD 'INCOME FROM OTHER SOURCE' M/S. VERITAS (INDIA) LTD. 8 10 . ACCORDINGLY, THE ASSESSING OFFICER ASSESSED THE SHARE CAPITAL AMOUNT OF RS . 50 .00 CRORES RECEIVED FROM THE TW O FOREIGN COMPANIES, CITED ABOVE, AS DEEMED INCOME OF THE ASSESSEE WITHIN THE MEANING OF SECTION 68 OF THE ACT. 11. IN THE APPELLATE PROCEEDINGS, THE LD CIT(A) DELETED THE ADDITION AND HENCE THE REVENUE HAS FILED THIS APPEAL. BEFORE LD CIT (A), THE ASSESSEE HAD ALSO RAISED A LEGAL ISSUE URGING THAT THE ASSESSMENT ORDER PASSED BY AO IS BARRED BY LIMITATION. SINCE THE LD CIT(A) HAS REJECTED THE SAME, THE ASSESSEE HAS FILED CROSS OBJECTION CHALLENGING THE SAID DECISION OF LD CIT(A). 12. W E SHALL FIRST TAKE UP THE APPEAL FILED BY THE REVENUE. THE LD D.R SUPPORTED THE ORDER PASSED BY THE AO. HE SUBMITTED THAT THE ASSESSEE HAS ISSUED SHARE CAPITAL TO THE TWO FOREIGN COMPANIES WITHOUT OBTAINING DUE APPROVAL FROM FIPB DIVISION OF GOVERNMENT O F INDIA. HE SUBMITTED THAT THE APPLICATION OF THE ASSESSEE FOR POST - FACTO APPROVAL HAS SINCE BEEN REJECTED BY FIPB. HE FURTHER SUBMITTED THAT THE ASSESSEE HAS ALLOTTED SHARES TO THE COMPANIES INCORPORATED IN BVI, WHICH IS A TAX HAVEN. THOSE COMPANIES AR E ONLY FRONT COMPANIES AND THE REAL INVESTORS ARE DIFFERENT PERSONS, WHICH FACT HAS SINCE BEEN FOUND BY THE DEPARTMENT THROUGH ITS INVESTIGATION. HE SUBMITTED THE COMPANIES LOCATED IN BVI, THE SHAREHOLDER COMPANIES ARE HAVING COMMON ADDRESSES. HE SUBMITT ED THAT THESE COMPAN YS ADDRESSES COULD NOT BE IDENTIFIED BY THE INDIAN MISSION. HE FURTHER SUBMITTED THAT THE SURVEY OPERATIONS REVEALED THAT THE SHARE CERTIFICATES ISSUED TO FOREIGN COMPANIES WERE LYING WITH THE ASSESSEE ONLY. HE FURTHER SUBMITTED THAT THE ASSESSEE HAS CLAIMED TO HAVE PROCURED FUNDS THROUGH A BROKER LOCATED IN DUBAI, BUT THE ULTIMATE INVESTOR WAS RESIDING IN SINGAPORE. THOSE ULTIMATE INVESTORS ARE FOUND TO BE CLOSE RELATIVES OF THE DIRECTOR OF THE ASSESSEE COMPANY. THE LD D.R SUBMITTE D THAT DESPITE THESE FACTS, THE DIRECTOR OF THE COMPANY HAS CLAIMED IGNORANCE ABOUT ULTIMATE INVESTORS AND WHEN HE WAS CONFRONTED WITH THE REPORT GIVEN BY FT & TR DIVISION, HE CAME OUT WITH TRUTH. HE SUBMITTED THAT IF THE TRANSACTIONS HAD BEEN TRUE TRANSA CTIONS, THERE WAS NOT NECESSITY FOR THE ASSESSEE TO HIDE THE DETAILS OF REAL INVESTORS. HE M/S. VERITAS (INDIA) LTD. 9 SUBMITTED THAT THE ENTIRE TRANSACTIONS WERE ONLY ARRANGED AFFAIRS ONLY IN ORDER TO ROUTE THE ASSESSEES OWN MONEY BY WAY OF SHARE CAPITAL. HE FURTHER SUBMITTED TH AT THE FINANCIAL STATEMENTS OF THE TWO INVESTOR COMPANIES WERE NOT FORWARDED TO THE AO BY FT & TR DIVISION . FURTHER, THE FINANCIAL STATEMENTS OF THE ULTIMATE INVESTORS WERE ALSO NOT FURNISHED TO THE AO BY THE ASSESSEE . FURTHER THE ASSESSEE HAS ALSO NOT F URNISHED COPIES OF BANK STATEMENTS OF BOTH THE INVESTOR COMPANIES AS WELL AS THE ULTIMATE INVESTORS. THE ASSESSEE ALSO COULD NOT FURNISH PROPER EXPLANATIONS WITH REGARD TO THE SO CALLED BROKERS WHO HAD ARRANGED FUNDS FOR THE ASSESSEE. 13. THE LD D. R FURTHER SUBMITTED THAT THE ASSESSEE HAD ISSUED SHARES AT A PREMIUM OF RS.190/ - PER SHARE TO THE PROMOTERS IN THE IMMEDIATELY PRECEDING YEAR. HOWEVER, THERE IS NO JUSTIFICATION FOR DETERMINING THE SHARE PREMIUM AMOUNT AT RS.1,240/ - ON THE SHARES ISSUED T O THE FOREIGN COMPANIES. THE LD D.R ACCORDINGLY CONDUCTED THAT THE ASSESSEE COULD NOT OFFER PROPER EXPLANATIONS ON VARIOUS QUERIES RAISED BY THE AO AND ALSO DID NOT PROVE THE CREDIT WORTHINESS OF THE INVESTORS AS WELL AS THE ULTIMATE INVESTORS. ACCORDING LY HE SUBMITTED THAT THE ASSESSEE HAS FAILED TO PROVE THE GENUINENESS OF THE TRANSACTIONS AS WELL AS THE CREDIT WORTHINESS OF THE INVESTOR COMPANIES AND THE ULTIMATE INVESTORS. THE LD D.R ALSO PLACED HIS RELIANCE ON THE DECISION RENDERED BY CO - ORDINATE BE NCH IN THE CASE OF ITO VS. SPARTACUS FARMS (P) LTD (2018)(91 TAXMANN.COM 15), WHEREIN THE ADDITION MADE U/S 68 OF THE ACT IN RESPECT OF SHARE APPLICATION MONEY RECEIVED BY THE ASSESSEE WAS SUSTAINED BY THE TRIBUNAL, WHEN THE ASSESSEE WAS NOT ABLE TO FURNIS H THE FINANCIAL STATEMENTS, ADDRESSES OF THE NRI INVESTOR. ACCORDINGLY HE SUBMITTED THAT THE ADDITION MADE BY THE AO SHOULD BE SUSTAINED. 14. THE LEARNED AR SUBMITTED T HAT THE ASSESSEE IS A LISTED COMPANY , MEANING THEREBY IT IS A WIDELY HELD COMPANY . HE SUBMITTED THAT THE ASSESSEE FURNISHED A LETTER DATED 20.11.2013 TO THE AO DURING THE COURSE OF ASSESSMENT PROCEEDINGS, WHEREIN IT FURNISHED ALL THE DETAILS INCLUDING FINANCIAL STATEMENT S OF BOTH THE INVESTOR COMPANIES . HE SUBMITTED THAT THE ASSESSING O FFICER DID M/S. VERITAS (INDIA) LTD. 10 NOT CONSIDER THE DETAILED REPLIES GIVEN BY THE ASSESSEE AS WELL AS DOCUMENTS FURNISHED BY THE ASSESSEE IN ORDER TO PROVE THE GENUINENESS OF SHARE CAPITAL RECEIVED BY IT FROM BOTH THE FOREIGN COMPANIES . THE LEARNED AR SUBMITTED THAT LETTER MENTIO NED ABOVE IS PLACED IN PAGE NO.1 OF THE PAPER BOOK. THE LEARNED AR SUBMITTED THAT FINANCIAL STATEMENT S OF M/S ONIX ASSETS LIMITED ARE PLACED FROM PAGE NO. 28 OF THE PAPER BOOK AND THE FINANCIAL STATEMENT S OF M/S. AVENTIA GLOBAL LIMITED ARE PLACED FROM PAG E NO. 60 OF THE PAPER BOOK. THE LEARNED AR SUBMITTED THAT THESE FINANCIAL STATEMENTS WOULD SHOW THAT THE ASSESSEE HAS PROVED CREDITWORTHINESS OF BOTH INVESTORS. THE LEARNED AR SUBMITTED THAT THE ASSESSING OFFICER WAS , IN FACT, SATISFIED WITH THE IDENTITY A ND CREDITWORTHINESS OF THE INVESTORS. HE WAS OF THE VIEW THAT GENUINENESS OF THE TRANSACTIONS HAS NOT BEEN PROVED. HOWEVER, THE DETAILS OF THE INVESTOR COMPANIES AND ALSO THE DETAILS OF ULTIMATE INVESTORS HAVE BEEN FURNISHED TO THE AO. FURTHER THE ASSESS EE HAS ALSO FURNISHED A CERTIFICATE OBTAINED FROM AN ACCOUNTANT SHOWING THE MOVEMENT OF THE FUNDS FROM ULTIMATE INVESTOR TO THE INVESTOR COMPANIES AND FROM INVESTOR - COMPANIES TO THE ASSESSEE - COMPANY. THE U LTIMATE INVESTOR HAS ALSO WRITTEN DIRECTLY TO THE A SSESSING OFFICER CONFIRMING THE TRANSACTIONS. THE ASSESSEE ALSO FURNISHED COPIES OF CORRESPONDENCE S THAT TOOK PLACE BETWEEN THE ASSESSEE AND THE AGENT, COMMISSION PAID TO THE AGENT FOR ARRANGING SHARE CAPITAL. THE ASSESSEE HAS ALSO FURNISHED CERTIFICATE O BTAINED FROM BANK FOR THE FUNDS RECEIVED BY IT. ACCORDINGLY, LEARNED AR SUBMITTED THAT THERE IS NO REASON TO SUSPECT GENUINENESS OF THE TRANSACTIONS AS THE ASSESSEE HAS PROVED MOVEMENT OF FUNDS FROM THE ULTIMATE INVESTORS TO THE ASSESSEE - COMPANY. 15. WITH REGARD TO THE PREMIUM CHARGED BY THE ASSESSEE, THE LEARNED AR SUBMITTED THAT HON'BLE BOMBAY HIGH COURT IN THE CASE OF CIT VS. GAGANDEEP INFRASTRUCTURE PVT. LTD. (2017) 394 ITR 690 HAS HELD THAT SHARE PREMIUM RECEIVED BY THE ASSESSEE HAS ALSO TO BE CONSIDE RED AS CASH CREDIT AND EXAMINED ON THE PARAMETERS OF SECTION 68 OF THE ACT. HE SUBMITTED THAT QUANTUM OF SHARE PREMIUM IS A MATTER TO BE DECIDED BETWEEN THE ASSESSEE - M/S. VERITAS (INDIA) LTD. 11 COMPANY AND INVE STOR COMPANY ON COMMERCIAL PRINCIPLES AND THE SAME CANNOT BE QUESTIONED BY THE ASSESSING OFFICER. THE LEARNED AR SUBMITTED THAT THE ASSESSEE IS A LISTED COMPANY. THE AVERAGE PRICE OF THE EQUITY SHARE S OF THE ASSESSEE COMPANY WAS QUOTED IN THE STOCK EXCHANGE AT RS. 380/ - IN THE YEAR 2009 AND AT RS. 7478/ - IN THE MONTH OF MAY, 20 10. ACCORDINGLY, THE LEARNED AR SUBMITTED THAT THE PREMIUM OF RS. 1240/ - COLLECTED BY T HE ASSESSEE CANNOT BE CONSIDERED TO BE UNREASONABLE . THE LEARNED AR FURTHER SUBMITTED THAT DURING THE YEAR UNDER CONSIDERATION THE ASSESSEE HAS ALSO ALLOTTED SHARES AT THE VERY SAME RATE OF RS. 1250/ - PER SHARE TO AN INDIAN COMPANY AND THE SAME HAS BEEN ACCEPTED BY THE AO . 16. WITH REGARD T O REJECTION OF APPLICATION SEEKING POST - FACTO APPROVAL BY FIPB BOARD OF GOVERNMENT OF INDIA, THE LEARNED AR SUBMITTED THAT TH E APPLICATION OF THE ASSESSEE WAS REJECTED TWO TIMES FOR WANT OF CERTAIN DETAILS. HENCE THE ASSESSEE HAS APPLIED FOR THE APPROVAL FOR THE THIRD TIME BEFORE FIPB AND IT HAS NOT SO FAR RECEIVED ANY NEGATIVE REPLY FROM THEM. HE SUBMITTED THAT IN ANY CASE DE CISION TAKEN BY FIPB MAY NOT RELEVANT FOR THE PURPOSE OF SECTION 68 OF THE ACT. 17. THE LEARNED AR FURTHER SUBMITTED THAT THE FIRST PROVISO INSERTED TO SECTION 68 OF THE ACT CANNOT BE APPLIED TO THE ASSESSEE FOR MORE THAN ONE REASONS. FIRST OF ALL, T HE SAID PROVISO SHALL TAKE EFFECT FROM 1.4.2013 ONLY AND HENCE IT WILL NOT APPLY TO THE YEAR UNDER CONSIDERATION . SECONDLY, THE SAID PROVISO SHALL APPLY ONLY TO A RESIDENT SHAREHOLDER AND NOT TO A NON - RESIDENT SHAREHOLDER. IN THE INSTANT CASE, THE SHARES H AVE BEEN PURCHASED BY NON - RESIDENT SHAREHOLDERS. THIRDLY, IT WOULD APPLY ONLY TO A CLOSELY HELD COMPANY , WHEREAS THE ASSESSEE HEREIN IS A WIDELY HELD COMPANY . ACCORDINGLY, HE SUBMITTED THAT ALL THE REASONS GIVEN BY THE AO TO MAKE THE IMPUGNED ADDITION WOU LD FAIL AND THE DECISION RENDERED BY LEARNED CIT(A) SHOULD BE UPHELD. 1 8 . WE HAVE HEARD THE RIVAL CONTENTIONS AND PERUSED RECORD. WE NOTICE THAT THE LD CIT(A) HAS PASSED A DETAILED AND REASONED ORDER IN THIS REGARD. FOR THE M/S. VERITAS (INDIA) LTD. 12 SAKE OF CONVENIENCE, WE EXTRA CT BELOW RELEVANT OBSERVATIONS MADE BY LEARNED CIT(A): - 5.2.1 THIS GROUND PERTAINS TO ADDITION UNDER SECTION 68 OF THE ACT OF RS. 50,00,00,OOO/ - BEING INVESTMENTS MADE BY NON - RESIDENTS. I HAVE GONE THROUGH THE DETAILED SUBMISSION MADE, PERU SED THE MATERIAL ON RECORD AND DULY CONSIDERED THE FACTUAL MATRIX OF THE CASE AS ALSO THE APPLICABLE LEGAL POSITION. THE APPELLANT DURING THE IMPUGNED YEAR, HAD ISSUED AND ALLOTTED 4,25,000 WARRANTS CONVERTIBLE INTO EQUITY SHARES OF RS.10/ - EACH TO BELOW M ENTIONED COMPANIES: SR. NO. NAME OF THE PARTY NO. OF S HARES ISSUE PRICE 1 GROUP VERITAS LIMITED 25,000 1 ,250/ - 2 ON IX ASSETS LTD (BV I COMPANY) 3,00,000 1 ,250/ - 3 AVENTIA GLOBAL LTD (BV I COMPANY) 1,00,000 1 ,250/ - 5.2.2 OUT OF ABOVE, TO TAL SHARES ISSUED TO NON - RESIDENTS DURING THE YEAR, SHARES ISSUED TO BV I COMPANIES FOR AN AMOUNT OF RS 50 CR (4,00,000 * 1.250/ - ) IS THE SUBJECT MATTER OF THE APPEAL . IT IS OBSERVED THAT THE ASSESSING OFFICER HAS INVOKED THE PROVISIONS OF SECTION 68 OF THE ACT AND MADE AN ADDITION OF THE TOTAL EQUITY SHARE CAPITAL AND SECURITIES PREMIUM AMOUNT OF RS. 50 CR. BY HOLDING THAT THE SAID INVESTMENT REMAINS UNEXPLAINED CASH CREDIT AS GENUINENESS OF THE TRANSACTIONS IS NOT PROVED ON FOLLOWING REASONS: (I) DURI NG THE SURVEY PROCEEDINGS, THE ORIGINAL WARRANTS, AND SHARE CERTIFICATES WERE FOUND TO BE IN THE CUSTODY OF APPELLANT COMPANY RATHER THA N DISPATCHING THE SAME TO INVESTORS; (II) THE FOREIGN COMPANIES HAVE INVESTED IN THE EQUITY SHARE CAPITAL AT A PREMI UM OF RS 1,2407 - PER SHARE WHICH IS NOT JUSTIFIABLE GIVING THE APPELLANT'S COMPANY'S SCALE OF OPERATION AND NET WORTH; (III) THE TRUE IDENTITY OF ULTIMATE SHAREHOLDERS OF ABOVE MENTIONED INVESTMENT WAS DELIBERATELY CONCEALED BY APPELLANT COMPANY AND TH E FUNDS WERE ROUTED THROUGH LAYERED TRANSACTIONS IN COMPANIES INCORPORATED IN BRITISH VIRGIN ISLAND WHICH IS A TAX HAVEN; (IV) NEITHER THE INVESTORS NOR THE APPELLANT COMPANY ABLE TO ESTABLISH THE SOURCE OF FUNDS IN THE HANDS OF INVESTORS; M/S. VERITAS (INDIA) LTD. 13 (V) THE C ONTRADICTORY STATEMENTS OF APPELLANT COMPANY AND INVESTORS EMERGED WHEREBY BOTH OF THEM CLAIMED THAT THE BROKER VIZ. ZAF BUSINESS SOLUTIONS, DUBAI, WAS ACTING ON THEIR BEHALF: (VI) THE INVESTORS IN REALTY ACQUIRED ONLY 5% STAKE IN THE COMPANY WHICH DOES NOT PROVIDE ANY SAY IN MANAGEMENT TO THE INVESTORS AND THEREFORE SUCH HIGH PREMIUM IS NOT JUSTIFIABLE. 5.2.3 ON THE OTHER HAND, THE APPELLANT SUBMITTED THAT THE ASSESSING OFFICER HAS WRONGLY INVOKED PROVISIONS OF SECTION 68. IT HAS BEEN SUBMITTED THAT TH E ASSESSING OFFICER FAILED TO CONSIDER THE APPELLANT'S SUBMISSION ON EACH OF THE ABOVE POINTS. THE FACTS WERE ALSO BROUGHT TO THE ATTENTION OF ASSESSING OFFICER TO COUNTER HIS ABOVE ALLEGATIONS AS F OL LOWS: (I) IN REGARD TO CUSTODY OF PHYSICAL SHARE WA RRANTS AND SHARE CERTIFICATES, IT WAS EXPLAINED AND CONFIRMED BY THE ULTIMATE INVE STOR MR. NAVNEET DIDWANIA VIDE HIS L ETTER DATED 24.01.2014 ADDRESSING TO ASSESSING OFFICER THAT APPELLANT COMPANY WAS AUTHORIZED THROUGH HIS BROKER TO RETAIN THE SHARE CERTIF ICATES FOR DEMATERIALIZATION AND SPLIT FORMALITIES COMPLETION. (II) TO PROVE THAT M/S. ZAF BUSINESS SOLUTIONS WAS ACTING AS AN AGENT BETWEEN INVESTORS AND APPELLANT COMPANY, CONFIRMATION FROM MR ZAFFAR ALI SHAIKH , MANAGING DIRECTOR OF M/S. ZAF BUSINESS SOLUTION HAS BEEN SUBMITTED AND ALSO DOCUMENT PROOF HAS BEEN SUBMITTED FOR PAYMENT OF AED 1,97,461 AS COMMISSION TOWARDS ITS CHARGES FOR THE SERVICE RENDERED. (III) AS REGARD PAYMENT OF HIGH PREMIUM FOR ACQUIRING A MINORITY STAKE, IT WAS SUBMITTED THA T, THE DECISION 10 INVEST AT A PARTICULAR PRICE OR TO ACQUIRE A PARTICULAR STAKE IN A COMPANY IS A COMMERCIAL DECISION BASED ON NEGOTIATIONS BETWEEN THE INVESTOR AND INVESTEE. FURTHER, IT WAS SUBMITTED THAT THE MARKET PRICE OF EQUITY SHARES OF APPELLANT CO MPANY WERE CONSISTENTLY ABOVE ISSUE PRICE POST THE ALLOTMENT OF ABOVE SHARES WHICH EVEN WENT TO ALL TIME HIGH OF RS 8.256A PER SHARE AS ON 10.05.2010. MARKET PRICE OF SHARES OF ASSESSEE COMPANY WAS RS.8,256 AS ON 10.05.2010 FOR WHICH NECESSARY EVIDENCE IN FORM OF SCREENSHOT OF MONEYCONTROL.COM HAS ALSO BEEN SUBMITTED BY THE APPELLANT COMPANY. EVEN THE CURRENT PRICE OF THE SCRIPT ON BOMBAY STOCK EXCHANGE IS AROUND RS.147/ - AFTER SPLIT I.E. IN OTHER WORDS, VALUE WILL BE RS. 1.470/ - BEFORE SPILT WHICH IS ALSO H IGHER THAN THE SUBSCRIBE PRICE. 5.2.4 FURTHER, IT HAS BEEN SUBMITTED THAT THE ASSESSING OFFICER'S CONTENTION IS FACTUALLY INCORRECT AS THE INVESTORS JOINTLY ACQUIRED THE M/S. VERITAS (INDIA) LTD. 14 SHARES TO THE EXTENT OF 16% OF SHARE CAPITAL OF APPELLANT COMPANY AND NOT 5% AS ALLEG ED BY AO. IT HAS BEEN SUBMITTED THAT APPELLANT HAS SATISFIED AND EXPLAINED THE NATURE AND SOURCE OF THE TRANSACTION BY SUBMITTING THE FOLLOWING DOCUMENTS: (A) REG. IDENTITY OF SHAREHOLDERS; - (I) SELF - CERTIFIED COPIES OF IDENTITY CARDS OF INVESTORS ISSUED BY GOVT OF SINGAPORE; (II) AUDITED BALANCE SHEET OF M/S. ONIX ASSETS LIMITED FOR YEAR ENDED 30/09/2012; (III) AUDITED BALANCE SHEET OF M/S. AVENTIA GLOBAL LIMITED FOR YEAR ENDED 30/09/2012; (IV) CER TIFICATE OF INCUMBENCY ISSUED BY INTERTRUST CORPORATE SERVICE (BVI) LIMITED; (V) DECLARATION OF TRUST DATED 25TH OCTOBER, 2011 ISSUED BY M/S. HAMBRY VENTURE INCORPORATED, THE SHAREHOLDER OF M/S. ONIX ASSETS LIMITED; (VI) DECLARATION OF TRUST DATED 25TH OCTOBER, 2011 ISSUED BY M/S. MEJIS M ANAGEMENT LIMITED, THE SHAREHOLDER OF M/S. AVENTIA GLOBAL LIMITED; (VII) COPY OF KYC FORMS SUBMITTED BY INVESTORS VIZ. AVENTIA GLOBAL LIMITED AND ONIX ASSETS LIMITED TO BANKS; (VIII) COPY OF NOTICES OF ASSESSMENT YEARS FRO M 2009 - 2013 FROM INLAND REVENUE AUTHORITY OF SINGAPORE FOR MR. NAVNEET DIDWANIA AND MRS. DEEPALI DIDWANIA. (B) REG. CREDIT WORTHINESS OF SHAREHO L DERS: - (I) CERTIFICATE IN ORIGINAL DULY NOTARISED AND APOSTILLED, ISSUED BY THE CERTIFIED PUBLIC AC COUNTANTS IN SINGAPORE OF MR NAVNEET DIDWANIA AND MS DEEPALI DIDWANIA FOR PROOF OF INVESTMENT MADE BY ULTIMATE INVESTOR. (II) CERTIFICATE IN ORIGINAL DULY NOTARISED AND APOSTILLED, ISSUED BY THE CERTIFIED PUBLIC ACCOUNTANTS IN SINGAPORE CERTIFYING IN VESTMENT BY ULTIMATE INVESTORS, M/S. VERITAS (INDIA) LTD. 15 (III) CERTIFICATE IN ORIGINAL DULY NOTARISED AND APOSTILLED, ISSUED BY THE CERTIFIED PUBLIC ACCOUNTANTS IN SINGAPORE OF MEANS & CREDITWORTHINESS OF ULTIMATE INVESTOR. (IV) AUDITED BALANCE SHEET OF M/S. ONIX ASSETS L IMITED FOR YEAR ENDED 30/09/2012 (V) AUDITED BALANCE SHEET OF M/S. AVENTIA GLOBAL LIMITED FOR YEAR ENDED 30/09/2012 (VI) NOTARISED COPY OF CA CERTIFICATE ON MEANS AND CREDIT WORTHINESS IN FAVOUR OF INVESTORS; (VII) NOTARISED COPY OF REINVESTMENT DEPOSIT STATEMENT OF INVESTORS WITH AXIS BANK, SINGAPORE AND BANK OF INDIA, SINGAPORE WHICH AGGREGATE TO $11.4 MILLION; (VIII) NOTARISED COPY OF PERSONAL FINANCIAL STATEMENT WITH BANK OF EAST ASIA FOR SGD 31.5 MILLION AS ON 2009. (C) GENUINENESS OF TRANSACTIONS: - (I) COPIES OF SWIFT ADVISES AND FIRCS ESTABLISHING REMITTANCE AND FLOW OF FUNDS FROM THE ULTIMATE INVESTORS ACCOUNT TO APPELLANT'S BANK ACCOUNT; (II) FORM FC - GPR SUBMITTED TO RBI & SWIFT COPIES; (III) CERTIFICATE I N ORIGINAL DULY NOTARISED AND APOSTILLED, ISSUED BY THE CERTIFIED PUOIIC ACCOUNTANTS IN SINGAPORE OF MR NAVNEET DIDWANIA AND MS DEEPALI DIDWANIA FOR PROOF OF INVESTMENT MADE BY ULTIMATE INVESTOR;. (IV) CER TIFIC ATE IN ORIGINAL DULY NOTARISED AND APOSTI LLED, ISSUED BY THE CERTIFIED PUBLIC ACCOUNTANTS IN SINGAPORE CERTIFYING INVESTMENT BY ULTIMATE INVESTORS; (V ) COPY OF ANNUAL RETURNS FOR YEAR ENDED MARCH, 2010 & MARCH, 2011 OF APPELLANT COMPANY THEREBY SHOWING PROPER RECEDING OF SAID SHARE TRANSACTIO N IN BOOKS OF ACCOUNTS; (VI) FORM A 2, DEBIT NOTE OF THE BROKER, FORM 15 CA AND FORM 15CB; (VII) COPY OF PRICING CERTIFICATE FROM STATUTORY AUDITORS OF THE COMPANY. M/S. VERITAS (INDIA) LTD. 16 5.2.5 FURTHER, IN ORDER TO ESTABLISH THE NEXUS BETWEEN SOURCE OF SOURCE OF FUNDS AN D TO PROVE THE GENUINENESS OF THE TRANSACTION, THE APPELLANT COMPANY HAS SUBMITTED A STATEMENT OF MOVEMENT OF FUNDS FROM BANK ACCOUNTS OF MR. NAVNEET DIDWANIA AND MRS. DEEPALI DIDWANIA TO BANK ACCOUNTS OF AVENTIA GLOBAL LIMITED AND ONIX ASSETS LTD. AND ULT IMATELY TO THE BANK ACCOUNTS OF APPELLANT COMPANY. 5.2.6 THE ASSESSING OFFICER HAD NOT POINTED OUT ANY DISCREPANCY IN DOCUMENTS F URNISHED BY THE APPELLANT ON RECORD. FURTHER, THE DOCUMENTS RELIED BEFORE ME GOES TO THE ROOT OF THE CASE AND ARE NECESS ARY TO BE CONSIDERED WHILE DECIDING THE APPEAL. ON PERUSING OF THE DOCUMENTS FURNISHED ON THE RECORD, IT IS OBSERVED THAT THE APPELLANT HAS FILED IDENTITY CARDS OF THE INVESTORS ISSUED BY GOVT. OF SINGAPORE, CERTIFICATE OF IN CORPORATION OF T HE BVI COMPANI ES, AND FINANCIAL S OF THE BVI COMPANIES AND OTHER DOCUMENTS WHICH ESTABLISHES THE IDENTITY OF THE SHAREHOLDERS. WITH REGARD TO CREDI T WORTHINESS OF THE SHAREHOLDERS, THE APPELLANT COMPANY HAS SUBMITTED DEPOSITS STATEMENTS AND PERSONAL FINANCIAL STATEMENTS OF THE ULTIMATE INVESTORS, AUDITED BALANCE SHEET AND FINANCIA L S OF THE BVI COMPANIES WHICH ESTABLISHES THE CREDITWORTHINESS OF THE SHAREHOLDERS. FURTHER, THE AO HAS ALSO ACCEPTED THE IDENTITY AND CREDITWORTHINESS OF THE SHAREHOLDERS AS STATED I N HIS ORDER IN PARA NO.5.20 ON PAGE NO. 36. IN VIEW OF THAT, THE APPELLANT HAS REASONABLY DISCHARGED ITS ONUS TO PROVE THE IDENTITY AND CREDITWORTHINESS OF THE SHAREHOLDERS AS REQUIRED U/S 68 OF THE ACT AND THEREFORE, PROVISIONS OF SEC TION 68 INVO KED IN TH IS CASE. 5.2.7 THE ABOVE PROPOSITION IS ALSO IN TERMS OF THE RULINGS GIVEN IN THE FOLLOWING DECISIONS OF THE COURTS AND TRIBUNALS: (I) ITO V. M/S. SUPERLINE CONSTRUCTION P.LTD. (I.T.A. NO. 3645/M/2008), WHEREIN THE HON'BLE MUMBAI ITAT (II) M/S. OR CHID INDUSTRIES PVT. LTD. V. DCIT (I.T.A. NO. 867/M/2012), WHEREIN THE HON'BLE MUMBAI ITAT (III) CIT V. LOVELY EXPORTS (P) LTD. [2008] 216 CTR 195 (SC) (IV) COMMISSIONER OF INCOME TAX V. ORISSA CORP. PVT. LTD.[1986] 25 TAXMAN 80F (SC) (V) CIT .V. N ISHAN INDO COMMERCE LTD. (2014) 101 DTR 413 (CAL.)(HC) (VI) THE COMM. OF INCOME TAX V. PRANAV FOUNDATIONS LTD [T.C.(A).NO.262 OF 2014 (DATED 12.08.2014)] M/S. VERITAS (INDIA) LTD. 17 (VII) COMMISSIONER OF INCOME - TAX (CENTRAL) V. SOM TOBACCO INDIA LTD [2014] 42 TAXMANN.COM 310 (AL LAHABAD HC) (VIII) RUSSIAN TECHNOLOGY CENTRE (P.) LTD. V. DEPUTY COMMISSIONER OF INCOME - TAX [2013] 37 TAXMANN.COM 400 (DELHI - TRIB.) (IX) HIGH COURT OF MADHYA PRADESH IN CASE OF COMMISSIONER OF INCOME - TAX, BHOPAL (M.P.) V. PEOPLES GENERAL HOSPITAL LT D [2013] 35 TAXMANN.COM 444 (MADHYA PRADESH) (X) PATE L VISHNUBHAI KANTILAL & CO. V. INCOME - TAX OFFICER [2013] 33 TAXMANN.COM 244 (AHMEDABAD - TRIB.) (XI) H ON'BLE DELHI HIGH COURT IN THE CASE OF COMMISSIONER O F INCOME TAX VS DIVINE LEASING AND FINANCE L TD [(2007) 207 CTR DEL 38, 2008 299 ITR 268 DELHI] (XII) CIT VS. GOA SPONGE AND POWER LTD. (APPEAL NO. 16 OF 2012)(BOMBAY HIGH COURT) (XIII) CIT VS. CREATIVE WORLD TELEFILMS LTD. 333 ITR 100 (BOMBAY HIGH COURT) (XIV) SDB ESTATE PVT. LTD. VS. ITO - ITA NO. 584/M/2015 (XV) CIT VS VICTORY SPINNING MILLS LTD. (2014) 90 CCH 55 (MAD - HIGH COURT) (XVI) CIT VS DWARKADHISH INVE S T MENT PVT LTD. 330 ITR 298 (DELHI H I GH COURT) (XVII) IT VS. YACMET PACKAGING INDIA PVT LID. 80 CCH 065 (ALL - HC) (XVIII) A CIT VS VENKATESHWAR ISPAT PVT. LTD. 319 ITR 393 (CHHATISGARH HIGH COURT) (XIX) MOD CREATIONS PVT LTD. VS. ITO - (2011) 354 ITR 282 (DELHI HC) 5.2.8 AS REGARD TO THE GENUINENESS OF THE TRANSACTIONS, THE ASSESSING OFFICER HAS FAILED TO APPRECIATE TH AT THE APPELLANT HAS SUBSTANTIATED THE TRANSACTIONS BY SUBMITTING THE BANK STATEMENTS, SWIFT COPIES AND SHARE CAPITAL LEDGER A/CS OF THE APPELLANT COMPANY, FINANCIALS OF ONIX ASSETS LTD. AND AVENTIA GLOBAL LTD., AND CERTIFICATE OF MOVEMENT OF FUNDS FROM ONE PARTNERSHIP PAC, CA IN SINGAPORE. FURTHER, THE DOCUMENTS SUBMITTED BY THE APPELLANT COMPANY OR THE INVESTORS WERE DULY CERTIFIED BY THE HIGH COMMISSION OF INDIA, SINGAPORE AND THE M/S. VERITAS (INDIA) LTD. 18 MINISTRY OF FOREIGN AFFAIRS AT SINGAPORE AS WELL AS BY TH E SINGAPORE ACADEMY OF LAW WHICH IN ITSELF SHOWS THE GENUINENESS WITH REGARD TO THE DOCUMENTS SO SUBMITTED. ON THE OTHER HAND, WHILE FRISKING THE SAID DISALLOWANCE, ASSESSING OFFICER H AS NOT BROUGHT ANY MATERIAL TO THE CONTRARY. HE HAS MERELY STATED THA T THE ASSESSEE WAS NOT ABLE TO PROVE THE GENUINENESS AND SOURCE OF INVESTMENTS IN THE HANDS OF SHARE APPLICANTS. EVEN ALL INFORMATION AS CA LL ED BY HIM DURING SURVEY AND SUMMON PROCEEDINGS U/S. 133 OF THE ACT WERE DULY SUBMITTED TO AO. THE ASSESSING OFFICER HAS NOT DISPUTED THE CORRECTNESS OF THE ABOVE STATED DOCUMENTS WHICH REASONABLY ESTABLISHES THE GENUINENESS OF THE TRANSACTION. FURTHER, APPELLANT'S BONAFIDE AND GENUINENESS IS FURTHER ESTABLISHED FROM THE FACTS THAT THE INVESTORS HAVE ALSO FILED A SUIT AGAINST THE APPELLANT COMPANY FOR REFUND OF THE FUNDS INVESTED BY THEM IN THE APPELLANT COMPANY. ACCORDINGLY, THE APPEL LANT HAS DISCHARGED ITS ONUS TO PROVE THE GENUINENESS. THE ASSESSING OFFICER HAD NOT DISCHARGED ITS ONUS AND HAD NOT BROUGHT ANY CO NTRARY MATERIAL TO RECORD AND TO DISPROVE THE TRANSACTION AND INVOLVEMENT OF UNACCOUNTED MONEY BELONGING TO THE APPELLANT. THE ASSESSING OFFICER IS NOT CORRECT IN SIMPLY BRUSHING ASIDE SUCH DOCUMENTS, THUS THE ADDITION MADE IS ASSESSMENT U/S 68 NEEDS TO BE DELETED. 5.2.9 FURTHER, WHERE THE MATTER CONCERNS MONEY RECEIPTS BY WAY OF SHARE CAPITAL FROM INVESTORS THROUGH BANKING CHANNEL, THE ASSESSEE HAS TO PROVE THE EXISTENCE OF THE PERSON IN WHOSE NAME THE SHARE APPLICATION IS RECEIVED. ONCE THE EXISTENCE OF THE INVESTOR PROVED, NO FURTHER BURDEN LIES ON THE ASSESSEE TO PROVE WHETHER THAT PERSON ITSELF HAS INVESTED THE SAID MONEY OR SOME OTHER PERSON HAS MADE INVESTMENT IN THE NAME OF THAT PERSON. THE BURDEN THEN SHIFTS ON TO THE REVENUE TO ESTABLISH THAT SUCH INVESTMENT HAS COME FROM THE ASSESSEE - COM PANY ITSELF. 5.2.10 IN THE INSTANT CASE, THE APPELLANT HAS SUBMITTED THE DETAILS OF MOVEMENT OF FUNDS FROM ULTIMATE INVESTORS TO THE APPELLANT COMPANY THROUGH BANKING CHANNELS. APPELLANT HAS ALREADY ESTABLISH ED THE IDENTITY OF THE SHAREHOLDERS. THEREFORE, ADDITION CANNOT BE MADE IN SUCH CASE WHERE INVESTMENT IS FUNDED THROUGH BANKING CHANNELS. THIS IS ALSO SUPPORTED BY VARIOUS DECISIONS AS UNDER: (I) SHREE BARKHA SYNTHETICS LTD. V. ASSTT. CIT [2006] 155 T AXMAN 289 (RAJ.) (II) COMMISSIONER OF INCOME - TAX - 1 V. APEX THERM PACKAGING (P.) LTD [2014] 42 TAXMANN.CORN 473 (GUJARAT HC) (III) CIT VS. GANGESHWARI METAL PVT. LTD. 361 ITR 10 (DELHI HIGH COURT) M/S. VERITAS (INDIA) LTD. 19 (IV) CIT VS SAMIR - BIO TECH PVT. LTD. (2010) 325 ITR 2 94 (DELHI HC) (V) TOLARAM DAGA V. CIT (1966) 59 ITR 632 (ASSAM), (VI) ADDI. CIT V. HANU M AN AGARWAL [1985] 151 ITR 150 PATNA HIGH COURT (VII) LABH CHAND BOHRA V. ITO [2008] 219 CTR 571 (RAJ.) (VIA) NEMI CHAND KOTHARI V. CIT [2003] 264 ITR 254 (GAU.), (I X) GUJARAT HIGH COURT IN THE CASE OF DCIT V. ROHINI BUILDERS [2002] 256 ITR 360 (X) CIT V. RANCHHOD JIVABHAI NAKHAVA [2012] 21 TAXMANN.COM 159(GUJ.) (XI) COMMISSIONER OF INCOME - TAX V. EXPO GLOBE INDIA LTD. (361 ITR 147) (DELHI HC). 5.2.11 THERE I S ALSO FORCE IN ARGUMENTS OF THE AUTHORISED REPRESENTATIVE THAT THE ADDITION U/S 68 CANNOT BE MADE AS SHARE PREMIUM MONEY IS HIGH AND NOT JUSTIFIED SINCE AMENDMENT IN PROVISIONS OF SECTION 68 INSERTED BY FINANCE ACT 2012 HAS BEEN MADE APPLICABLE ONLY FROM 01.04.2013 AND NOT APPLICABLE FOR AY 2010 - 11. THE SAID VIEW HAD BEEN ADOPTED IN 2 JURISDICTIONAL MU MBAI, ITAT DECIS IONS IN THE CASE OF M/S. GAGAND EEP INFRASTRUCTURE PVT. LTD. - 5784/M/2 0 11 - MUM ITAT AND M/S. GREEN INFRA LTD. VS. ITO - 38 TAX M ANN 253 MUM BAI ITA T WHEREIN IT WAS HELD THAT IT IS PREROGATIVE FOR THE BOARD OF DIRECTORS OF THE COMPANY TO DECIDE THE SHARE PREMIUM AND IT IS THE WISDOM OF THE SHARE APPLICANTS WHETHER THEY WANT TO SUBSCRIBE TO SUCH HEAVY PREMIUM OR NOT. THE REVENUE AUTHORITIES CANN OT QUESTION THE CHARGING OF SUCH HUGE PREMIUM WITHOUT ANY BAR FROM ANY LEGISLATIVE LAW OF LAND. FURTHER, THERE IS ALSO FORCE IN ARGUMENTS OF THE AR THAT THE AMENDMENT IN PROVISIONS OF SEC T ION 68 IS NOT APPLICABLE IN THE APPELLANT'S CASE SINCE THE APPELLANT IS A PUBLIC LISTED CO. AND INVESTING COMPANIES ARE NON - RESIDENT. 5.2.12 I HAVE CONSIDERED THE FINDINGS OF THE ENTIRE FACTS AND CIRCUMSTANCES OF THE CASE AS WELL AS THE JUDICIAL PRONOUNCEMENTS REFERRED AND RELIED ABOVE. ONE OF THE MAIN OBJECTIONS OF ASSES SING OFFICER WAS THAT THE INVESTMENT IN SHARES OF APPELLANT COMPANY IS NOT GENUINE AS THE SOURCE OF FUNDS HAS NOT BEEN ESTABLISHED. I DO NOT AGREE WITH THE SAID OBJECTION OF THE ASSESSING OFFICER AS IT IS SETTLED LAW THAT THE ASSESSEE IS NOT REQUIRED TO EX PLAIN THE SOURCE OF SOURCE OF FUNDS TO ESTABLISH THE GENUINENESS OF THE TRANSACTION. THIS IS SUPPORTED BY THE RULING GIVEN IN THE DECISION IN CASE OF TOLARAM DAGA V. CIT [1966] 59 ITR 632 (ASSAM), IRRESPECTIVE OF T H AT, THE APPELLANT COMPANY HAS SUBMITTED M/S. VERITAS (INDIA) LTD. 20 B ANK STATEMENTS, SWIFT COPIES AND SHARE CAPITAL LEDGER A/CS OF THE APPELLANT COMPANY, FINANCIALS OF ONIX ASSETS LTD. AND AVENTIA GLOBAL LTD., AND CERTIFICATE OF MOVEMENT OF FUNDS FROM ONE PARTNERSHIP PAC, CA IN SINGAPORE WHICH IS DULY NOTARIZED AND APO STIL L ED. THE APPELLANT COMPANY HAS DEMONSTRATED AND PROVED THE SOURCE OF RECEIPT FOR INVESTMENT IN RESPECT OF WARRANTS/EQUITY SHARES BY GIVING A STATEMENT SHOWING THE MOVEMENT OF FUNDS FROM MR. NAVNEET DIDWANIA AND MRS. DEEPALI DIDWANIA TO AVENTIA GLOBAL LTD. AND ONIX ASSETS LTD. AND FROM AVENTIA GLOBAL LTD. AND ONIX ASSETS LTD., ALONG WITH BANK STATEMENTS OF THE APPELLANT COMPANY SNOWING THAT THE REMITTANCE WAS EVENTUALLY MADE TO THE BANK ACCOUNTS OF THE APPELLANT COMPANY. THE SAME EXPLAINS THE MOVEMENT/S OURCE OF FUNDS WHICH ULTIMATELY PROVES THE GE NUINE NESS OF THE TRANSACTION AS THE INVESTMENT WAS PROPERLY LINKED TO THE SOURCE . THE SAME WAS ALSO SUBMITTED BEFORE ASSESSING OFFICER AND THE AO HAS NOT BROUGHT ANY CONTRARY MATERIAL ON RECORD AND ONLY ON MERE ALLEGATION AND SUSPICION, THE SUBMISSION OF THE APPELLANT COMPANY HAS BEEN REJECTED BY THE ASSESSING OFFICER. 5.2.13 THUS, IN THE INSTANT CASE, THE TRANSACTIONS HAVE BEEN GENUINELY CARRIED OUT BY THE ASSESSEE WHO HAS PROVED THE SOURCE OF INVESTMENTS. THE ASSESSING OFFICER'S CONTENTION THAT THE GENUINENESS OF THE TRANSACTION CANNOT BE PROVED BY THE APPELLANT ON THE REASONING THAT THE SOURCE O F FUNDS IS NOT PROVED BY THE APPELLANT IS INCORRECT. APPELLANT HAS SUBMITTED APPROPRIATE DOCUMENTS TO ESTABLISH THE G ENUINENESS OF THE TRANSACTION WHICH IS OBJECTED BY THE ASSESSING OFFICER. FURTHER, MONEY IS REMITTED BY NON - RESIDENTS, WHOSE IDENTITY IS NOT IN QUESTION, THROUGH THEIR BANK ACCOUNTS OUTSIDE INDIA AND ACCORDINGLY CANNOT BE TREATED AS INCOME UNDER SECTION 68 OF THE ACT. IN LIGHT OF T HE ABOVE FINDINGS, FACTUAL MA T RIX AND LEGAL POSITION, I ACCORDINGLY HOLD THAT THE APPELLANT COMPANY, HAS DISCHARGED ITS ONUS AS REQUIRED U/S 68 OF THE ACT. THE ASSESSING OFFICER HAD NOT BROUGHT ANY CONTRARY MATERIAL ON THE RECORD TO DISPROVE THE TRANSACTION AND HAD NOT ESTABLISHED THAT THE APPELLANT HAS INTRODUCED UNACCOUNTED MONEY IN GARB OF SHARE APPLICATION. ACCORDINGLY, I HOLD THAT THE ADDITION MADE IN ASSESSMENT OF SHARE APPLICATION MONEY OF RS.50 CRORES CANNOT BE SUSTAINED AN D IS HEREBY DELETED. I DIRECT THE ASSESSING OFFICER TO DELETE THE ADDITIONS U/S 68 OF RS.50 CRORES. IN THE RESULT, THE SAID GROUND OF APPELLANT'S APPEAL IS HEREBY ALLOWED. 19. WE NOTICED THAT THE ASSESSEE, VIDE ITS LETTER DATED 20.11.2013 , HAS FURNISHED FINANCIAL STATEMENT S OF BOTH THE INVESTOR COMPANIES. WE NOTICED THAT THE ASSESSING OFFICER HAS FAILED TO EXAMINE THE SAME. HOWEVER, A PERUSAL OF THE FINANCIAL STATEMENTS OF BOTH THE COMPANIES WOULD SHOW THAT THEY WERE HAVING FUNDS FOR MAKING INVESTMENT IN TO ASSESSEE - COMPANY AND HENCE M/S. VERITAS (INDIA) LTD. 21 CREDITWORTHINESS OF THE INVESTORS CANNOT BE DOUBTED WITH. IN FACT THE ASSESSING OFFICER WAS ALSO SATISFIED WITH THE CREDITWORTHINESS OF THE INVESTOR COMPANIES EVEN THOUGH HE DID NOT EXAMINE FINANCIAL STATEMENT S . HENCE THE AO WAS NOT RIGHT ON FACTS IN OBSERVING THAT THE FINANCIAL STATEMENTS OF INVESTOR COMPANIES HAVE NOT BEEN GIVEN. WHAT WE NOTICE THAT THE FT & TR DIVISION DID NOT SEND THE FINANCIAL STATEMENTS TO THE AO, WHILE THE ASSESSEE HAS FURNISHED THE SAME TO HIM. 20. DURING THE C O URSE OF ASSESSMENT PROCEEDINGS, WE NOTICE THAT THE ASSESSEE HAS FURNISHED DETAILS OF ULTIMATE INVESTORS AND ALSO CERTIFICATE OBTAINED FROM A FIRM OF ACCOUNTANTS. THE SAID CERTIFICATE GAVE DETAILS OF MOVEMENT OF FUNDS FROM THE ULTIMATE INVESTO RS TO THE INVESTOR COMPANIES AND FROM THE INVESTOR COMPANIES TO THE ASSESSEE COMPANY. THE SAME IS EXTRACTED BY LEARNED CIT(A) AT PAGE NO. 21 OF HIS ORDER AS UNDER: - DATE OF RECEIPT OUR BANK, BRANCH & ACCOUNT NO. AMOUNT IN USD AMOUNT IN INK NAME OF THE REMITTER REMITTER BANK & BRANCH DATE OF REMITTAN CE SOURCE OF FUNDS IN REMITTER ACCOUNT DATE & AMOUNT 24/12/09 STATE BANK OF IN DORE, DN ROAD BRANCH, MUM B AI A/C NO. 63002727231 2009646 93790179 ONIX ASSETS LTD STANDARD CHARTERE D BANK A/C NO. 01 - 7 - 021545 - 8 23/12/09 MS DEEPA LI D IDWANIA 'THROUGH HER UBS AG A /C 23/12/09 52015992.78 18/03/10 ICICI BANK LTD, BACK BAY RECLAMATION BRANCH, MUMBAI A/C NO. 039305003184 100000 4537000 O NIX ASSETS LTD STANDARD CHARTERE D BANK A/C NO. 01 - 7 - 021545 - 8 16/03/10 MS DEEPALI DIDWANIA THROUGH HER BARCLAYS BANK A/C 04/12/09 $29992.78 & 16/03/10 $69992.91 25/03/10 ICICI BANK LTD, BACK BAY RECLAMATION BRANCH, MU M BAI A/C NO. 0 39305003184 2.000,000 9,10,85,000 ONIX ASSETS LTD STANDARD CHARTERED BANK A/C NO. 01 - 7 - 021545 - 8 22/03/10 MS DEEPALI DIDWANIA THROUGH HER STANDARD CHARTERED BANK A/C 19/03/10 $700000 MS DEEPALI DIDWANIA THROUGH HER UBS AG A/C 1 9/03/10 $1299992.91 M/S. VERITAS (INDIA) LTD. 22 26/03/10 ICICI BANK LTD, BAC K BAY RECLAMATION BRANCH, MUMBAI A /C NO. 039305003184 4,100,000 18,60,99,000 ONIX ASSETS LTD STANDARD CHARTERED BANK A/C NO. 01 - 7 - 021545 - 8 23/03/10 MS DEEPALI DIDWANIA THROUGH HER BARCLAY S BANK A/C 23/03/10 $949992.91 MS DEEPALI DIDWANIA THROUGH HER DBS BANK LTD A/C 23/03/10 $1150000 MS DEEPALI DIDWANIA THROUGH HER BANK SARASIN & CIE AG A/C 13/03/10 $2000000 TOTAL 8,209,646 37,55,11,179 24/12/09 STATE BANK OF INDORE, D N ROAD BRANCH, MUMBAI A/C NO. 63002727231 669,882 3,12,63,193 AVENTIA GLOBAL LTD STANDARD CHARTERED BANK A/C NO. 01 - 7 - 021342 - 0 23/12/200 9 IVI R NAVNEET DIDWANIA THROUGH HIS BARCLAYS BANK ACCOUNT 2 2/12/09 $672020 17/03/10 ICICI BANK LTD BAC K BAY RECLAMATION BRANCH, MUMBAI A/C NO. 03930500318 4 2.070,000 939,15,900 AVENTIA GLOBAL LTD STANDARD CHARTERED BANK A / C NO. 01 - 7 - 021342 - 0 11/03/10 MR NAVNEET DIDWANIA THROUGH HIS BARCLAYS BA NK ACCOUNT 10/03/10 $2060020 TOTAL 2,739,882 12,51,79,093 GRAND TOTAL 10,949,528 50,06,90,272 ABOVE SAID TABLE WOULD SHOW MOVEMENT OF FUNDS FROM ULTIMATE INVESTORS TO THE ASSESSEE - COMPANY. FURTHER THE MOVEMENT HAS TAKEN PLACE THROUGH BANKING CHANNELS ONLY. FURTHER THE ULTIMATE INVESTORS HAVE ALSO WRITTEN LETTERS DIRECTLY TO THE ASSESSING OFFICER CONFIRMING THE TRANSACTIONS. WE NOTICE THAT THE AO DID NOT REBUT ANY OF THE DETAILS FURNISHED BY THE ASSESSEE. THE AO HAS OB SERVED THAT THE ASSESSEE HAS FAILED TO FURNISH THE FINANCIAL STATEMENTS OF INVESTOR COMPANIES AND , AS NOTICED EARLIER, THE SAME IS CONTRARY TO THE FACTS AVAILABLE ON RECORD. THE AO HAS OBSERVED THAT THE BANK STATEMENTS OF INVESTOR COMPANIES WERE NOT FURNI SHED TO HIM. WE NOTICE THAT THE ASSESSEE HAS M/S. VERITAS (INDIA) LTD. 23 FURNISHED BANK CERTIFICATES AND ALSO CERTIFICATE FROM A FIRM OF ACCOUNTANTS CERTIFYING THE MOVEMENT OF FUNDS THROUGH BANKING CHANNELS. WE NOTICE THAT THE AO DID NOT BRING AN Y MATERIAL TO SHOW THAT THE DOCUMENT S FURNISHED BY THEY ARE NOT RELIABLE, WHICH WOULD HAVE WARRANTED FURTHER PROBE. DURING THE COURSE OF ARGUMENTS, THE LD A.R SUBMITTED THAT THE ASSESSEE HAS FURNISHED ALL THE DETAILS AVAILABLE WITH IT IN ORDER TO DISCHARGE THE BURDEN PLACED UPON IT U/S 68 O F THE ACT. WE FIND MERIT IN THE SAID CONTENTIONS. WHEN IT IS SHOWN THAT THE FUNDS HAVE BEEN ROUTED THROUGH BANKING CHANNELS THROUGH AVAILABLE DOCUMENTS AND WHEN THE SAID DOCUMENTS WERE NOT FOUND FAULT WITH, IN OUR VIEW, THERE IS NO REASON TO SUSPECT THE G ENUINENESS OF THE TRANSACTIONS. 21. T HE AO HAS OBSERVED THAT THE ASSESSEE HAS FAILED TO FURNISH FINANCIAL STATEMENTS OF ULTIMATE INVESTORS. IN TERMS OF SEC.68, THE SAME MAY NOT BE REQUIRED, AS T HE IMMEDIATE INVESTORS ARE FOREIGN COMPANIES, WHOSE SOURCE HAS BEEN PROVED BY THE FINANCIAL STATEMENTS FILED BY THEM. THE CERTIFICATE ISSUED BY THE FIRM OF ACCOUNTANTS PROVES THE MOVEMENT OF FUNDS FROM ULTIMATE INVESTORS TO THE FOREIGN COMPANIES, WHICH INVESTED IN THE SHARES OF THE ASSESSEE COMPANY. THUS, THE S OURCE OF SOURCES ALSO PROVED, WHILE IT MAY NOT BE NECESSARY FOR THE PURPOSES OF SEC.68 OF THE ACT . THE ASSESSEE HAS ALSO FURNISHED DETAILS OF COMMISSION PAID BY IT FOR ARRANGING FUNDS. ALL THESE DOCUMENTS/INFORMATION, IN OUR VIEW, PROVE THE GENUINENESS OF TRANSACTIONS. HENCE, WE ARE OF THE VIEW THAT THE ASSESSING OFFICER WAS NOT RIGHT IN OBSERVING THAT THE ASSESSEE HAS FAILED TO PROVE GENUINENESS OF THE TRANSACTIONS. 2 2 . AS CONTENDED BY LEARNED AR, PROVISO TO SECTION 68, INSERTED W.E.F. 1.4.2013, REQUIRE S THE ASSESSEE TO PROVE SOURCES OF SOURCE. THE ABOVE SAID PROVISO SHALL APPLY TO FUNDS COLLECTED BY A CLOSELY HELD COMPANY FROM RESIDENT SHAREHOLDERS. HENCE, THE SAME WILL NOT BE APPLICABLE TO THE ASSESSEE AS THE ASSESSEE IS A PUBLICLY HELD COMPANY AND I NVESTORS ARE NON - RESIDENT ASSESSEES. FURTHER, THE SAID PROVISO SHALL TAKE EFFECT FROM AY 2013 - 14 ONWARDS ONLY. M/S. VERITAS (INDIA) LTD. 24 23 . THE AO HAS ALSO OBSERVED THAT THE FIPB DIVISION OF GOVERNMENT OF INDIA HAS REJECTED THE APPLICATION OF THE ASSESSEE SEEKING POST - FACTO APPROVAL OF SHARE CAPITAL RECEIVED BY IT TWICE. THE LD A.R SUBMITTED THAT THE ASSESSEE HAS MADE APPLICATION SEEKING APPROVAL FOR THE THIRD TIME AND IT HAS NOT RECEIVED ANY REPLY THEREON. IN ANY CASE, AS RIGHTLY CONTENDED BY LD A.R, THE APPROVAL OR REJEC TION OF THE POST - FACTO APPLICATION OF THE ASSESSEE MAY NOT BE RELEVANT FOR THE PURPOSES OF SEC.68 OF THE ACT. 2 4 . THE HONBLE BOMBAY HIGH COURT HAS HELD IN THE CASE OF GAGANDEEP INFRASTRUCTURE LTD (SUPRA) THAT THE SHARE CAPITAL/SHARE PREMIUM RECEIVED BY THE ASSESSEE HAS TO BE EXAMINED IN TERMS OF SEC.68 ONLY. FROM THE FOREGOING DISCUSSIONS, WE ARE OF THE VIEW THAT THE ASSESSEE HAS PROVED THE THREE MAIN INGREDIENTS THAT ARE REQUIRED TO BE PROVED U/S 68 OF THE ACT, VIZ., THE IDENTITY OF THE INVESTORS, T HE CREDITWORTHINESS OF THE INVESTORS AND GENUINENESS OF TRANSACTIONS. 25. HENCE WE ARE OF THE VIEW THAT THE ASSESSEE HAS DISCHARGED THE INITIAL BURDEN PLACED UPON IT U/S 68 OF THE ACT BY PROVING THE THREE MAIN INGREDIENTS, WHEREAS THE AO HAS FAILED TO DISCHARGE THE BURDEN SHIFTED TO HIS SHOULDERS. THE VARIOUS GROUNDS TAKEN BY THE AO FOR MAKING ADDITION U/S 68 OF THE ACT HAVE BEEN FOUND TO BE NOT CORRECT IN THE DISCUSSIONS MADE IN THE PRECEDING PARAGRAPHS . ACCORDINGLY WE ARE OF THE VIEW THAT THE LD CI T(A) WAS JUSTIFIED IN DELETING THE ADDITION OF RS.50.00 CRORES MADE U/S 68 OF THE ACT. ACCORDINGLY WE UPHOLD THE ORDER PASSED BY LD CIT(A) ON THIS ISSUE. 2 6 . IN THE CROSS OBJECTION, THE ASSESSEE HAS RAISED A LEGAL GROUND URGING THAT THE ASSESSMENT ORDE R IS BARRED BY LIMITATION. WE HAVE EARLIER NOTICED THAT THE LD CIT(A) HAS REJECTED THE SAME AND HENCE THE ASSESSEE HAS FILED THE CROSS OBJECTION URGING THE SAID LEGAL ISSUE. SINCE WE HAVE UPHELD THE ORDER OF LD CIT(A) IN DELETING THE ADDITION MADE U/S 68 OF THE ACT, IN OUR VIEW, IT WOULD BE AN ACADEMIC EXERCISE TO ADJUDICATE THE LEGAL GROUND URGED BY THE ASSESSEE. ACCORDINGLY WE DECLINE TO ADJUDICATE THE SAME. M/S. VERITAS (INDIA) LTD. 25 27 . IN THE RESULT, THE APPEAL OF THE REVENUE AS WELL AS THE CROSS OBJECTION OF THE ASSESSE E ARE DISMISSED. ORDER HAS BE EN PRONOUNCED IN THE COURT ON 10 . 1 . 201 9 . SD/ - SD/ - (RAMLAL NEGI) (B.R.BASKARAN) J U DICIAL MEMBER ACCOUNTANT MEMBER MUMBAI ; DATED : 10 / 1 / 20 1 9 COPY OF THE ORDER FORWARDED TO : 1. THE APPELLANT 2. THE RESPONDENT 3. THE CIT(A) 4. CIT 5. DR, ITAT, MUMBAI 6. GUARD FILE. BY ORDER, //TRUE COPY// ( SENIOR P RIVATE S ECRETARY ) PS ITAT, MUMBAI