DCT - CC- 5(2), MUMBAI V. KAYGEE INVESTMENTS PVT. LTD., MUMBAI

ITA 3539/MUM/2018

• Counselvise Citation: [2019] 116 COUNSELVISE.COM (IT) 7005 (ITAT-MUMBAI)
• Duration Of Justice: 1 year(s) 2 month(s) 7 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 31-07-2019
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: H
• Assessment Year: 2009-2010
• Appeal Filed On: 23-05-2018
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: HARI S RAHEJA SH MANI JAIN ARS
• Assessee Lawyers: SRINIVAS
• Keywords: Unexplained cash credit; Income from undisclosed sources; Share purchase agreement; Corroborative evidences; Valuation report; Accommodation entries; Assessment record; Retraction; Sham transactions
• Section: 143(3); 195; 143(2); 68

Judgement Text

PIN THE INCOME TAX APPELLATE TRIBUNAL H BENCH, MUMBAI BEFORE SHRI G. MANJUNATHA, ACCOUNTANT MEMBER AND SHRI RAVISH SOOD, JUDICIAL MEMBER ITA NO.3539/MUM/2018 (ASSESSMENT YEAR: 2009-10) ITA NO.3540/MUM/2018 (ASSESSMENT YEAR: 2010-11) DEPUTY COMMISSIONER OF INCOME TAX, CENTRAL CIRCLE-5(2), MUMBAI . APPELLANT V/S M/S KAYGEE INVESTMENTS PVT LTD 203A, VASTU PRESTIGE, NEW LINK ROAD, ANDHERI (W), MUMBAI PAN-AAACK2876M . RESPONDENT ASSESSEEBY : SH. SRINIVAS, CIT-DR REVENUE BY :SH. HARI S. RAHEJA/ SH MANI JAIN, ARS DATE OF HEARING 13.06.2019 DATE OF ORDER - 31.07. 2019 O R D E R PER: MANJUNATHA G. THESE TWO APPEALS FILED BY THE REVENUE ARE DIRECTE D AGAINSTSEPARATE,BUT IDENTICAL ORDERS OF THE CIT(A)- 53, MUMBAI DATED 07.03.2018 AND THEY PERTAIN TO THE ASSESSMENT YEARS 2009-10 AND 2010-11. SINCE, FACTS ARE IDENTICAL AND ISSUES ARE COMMON,FOR THE 2 SAKE OF CONVENIENCE, THESE APPEALS WERE HEARD TOGET HER AND ARE DISPOSED OFF, BY THIS CONSOLIDATED ORDER. 2. THE ASSESSEE, HAS MORE OR LESS FILED COMMON GROU NDS OF APPEAL FOR BOTH ASSESSMENT YEARS. FOR THE SAKE OF B REVITY, GROUNDS OF APPEAL FILED FOR ASSESSMENT YEAR 2009-10 ARE AS UNDER:- I. WHETHER ON THE FACTS AND CIRCUMSTANCES OF THE C ASE AND IN LAW, THE LD CIT(A) ERRED IN DELETING THE ADDITION O F RS. 9,58,27,305/- MADE UNDER SECTION 68, BEING INVESTME NT IN SHARES OF ASSESSEECOMPANY?. II.WHETHER ON THE FACTS AND CIRCUMSTANCES OF THE CA SE AND IN LAW, THE LD CIT(A), FAILED TO APPRECIATE THAT THE S HARE APPLICANT HAD NO CREDIT WORTHINESS TO MAKE THE IMPU GNED INVESTMENT?. 3. THE BRIEF FACTS OF THE CASE ARE THAT A SEARCH AN D SEIZURE OPERATION UNDER SECTION 132(1) OF THE INCOME TAX AC T, 1961 WAS CONDUCTED IN THE CASE OF IPCA LABORATORIES LTD., AN D OTHERS ON 23.12.2014. DURING THE COURSE OF SEARCH, CERTAIN IN CRIMINATING MATERIALS WERE FOUND AND SEIZED. FURTHER, A STATEME NT UNDER SECTION 132(4) WAS RECORDED FROM VARIOUS PERSONS, INCLUDING DIRECTORS OF THE COMPANY IN RESPECT OF SHARE CAPITAL RECEIVED FR OM M/S APSARA TREXPVT. LTD., FOR WHICH IT WAS STATED THAT AMOUNT OF SHARE CAPITAL INVESTED IN ASSESSEES COMPANY BY M/S APSARA TREXPV T. LTD., IS NON GENUINE TRANSACTION WHICH WAS RAISED TO RE-ROOT ASS ESSEEOWN UNACCOUNTED INCOME IN THE BOOKS OF ACCOUNTS. IT WAS FURTHER STATED 3 THAT THE AMOUNT OF SHARE CAPITAL RECEIVED FROM APSA RA TREXPVT. LTD., AMOUNTING TO RS. 26,86,84,880/- WAS OFFERED AS ADDI TIONAL INCOME. 4. CONSEQUENT TO SEARCH, THE CASE OF THE ASSESSEE W AS CENTRALISED WITH DCIT, CIRCLE 5(2), MUMBAI, ACCORDI NGLY NOTICE UNDER SECTION 153(A) OF THE ACT,DATED 4.5.2016 WAS ISSUED AND DULY SERVED UPON THE ASSESSEE. IN RESPONSE, THE ASSESSEE HAD FILED A RETURN ON 15.6.2016 DECLARING TOTAL INCOME OF RS. 3 2,71,009/-. THEREAFTER, THE CASE HAS BEEN SELECTED FOR SCRUTINY AND NOTICES UNDER SECTION 143(2) AND 141(1) OF THE ACT, WERE IS SUED. IN RESPONSE TO NOTICE, THE AUTHORIZED REPRESENTATIVE O F THE ASSESSEEAPPEARED FROM TIME TO TIME AND FILED VARIOU S DETAILS, AS CALLED FOR. DURING THE COURSE OFASSESSMENT PROCEEDI NGS, THE AO NOTICED THAT DURING THE FINANCIAL YEAR 2008-09 RELE VANT TO ASSESSMENT YEAR 2009-10 THE ASSESSEE HAD ISSUED9,74 5 EQUITY SHARES WITH FACE VALUE OF RS. 10 @ RS. 17,735/- THE REFORE, CALLED UPON THE ASSESSEE TO FILE NECESSARY EVIDENCES INCLU DING VALUATION REPORT IF ANY, FOR JUSTIFICATION OF SHARES ISSUED W ITH A HUGE PREMIUM OF RS. 17,735/-. IN RESPONSE, THE ASSESSEEHAS FILED VARIOUS DETAILS INCLUDING NAME AND ADDRESS OF THE SUBSCRIBER, PAN N UMBER ALONGWITH FINANCIALS TO PROVE THAT TRANSACTIONS BET WEEN THE PARTIES ARE GENUINE WHICH ARE SUPPORTED BY NECESSARY EVIDEN CES. THE ASSESSEE HAD ALSO FILED VALUATION REPORT FROM VALUE R IN SUPPORT OF 4 SHARES ISSUED AT PREMIUM. THE AO AFTER CONSIDERING THE SUBMISSIONS OF ASSESSEE AND ALSO TAKEN NOTE OF STATEMENT RECORD ED FROM VARIOUS PERSONS INCLUDING SHRI. CHANDRESH KUMAR JAIN,ONE OF THE DIRECTORS OF APSARA TREXPVT. LTD., COMPANY CAME TO THE CONCLU SION THAT M/S APSARA TREXPVT. LTD., IS A SHAMCOMPANY WHICH IS CRE ATED MAINLY FOR PROVIDING ACCOMMODATION ENTRIES. THE AO FURTHER OBS ERVED THAT THE STATEMENTS RECORDED FROM VARIOUS PERSONS INCLUDING DIRECTORS AND EMPLOYEES OF APSARA TREXPVT. LTD., ALSO SUPPORT THE VIEW TAKEN BY THE DEPARTMENT, DURING THE COURSE OF SEARCH AS PER WHICH THIS COMPANY HAS BEEN USED TO PLUG IN ASSESSEES UNACCOU NTED MONEY INTO THE BOOKS OF ACCOUNTS IN THE FORM OF SHARE CAP ITAL WHICH IS EVIDENT FROM FACT THAT M/S APSARA TREXPVT. LTD., DO ES NOT HAVE ANY CREDIBLE BUSINESS ACTIVITY AND ALSO HAVE FINANCIAL STRENGTH TO EXPLAIN HUGE INVESTMENT IN SHARES OF ASSESSEES COMPANY. TH ESHARES HAVE BEEN SUBSCRIBED WITH A HUGE PREMIUM OF RS. 17,725/- FOR SHARE FOR WHICH NO EXPLANATION HAS BEEN OFFERED. THE AO HAD A LSO TAKEN SUPPORT FROM THE STATEMENT OF PREM CHAND GODHA, DIR ECTOR OF ASSESSEE COMPANY TO COME TO THE CONCLUSION THAT THE COMPANY HAS ACCEPTED THE FACT THAT IT HAS RECEIVED AMOUNT FROM APSARA TREX PVT. LTD., WHICH IS A NON-GENUINE TRANSACTION AND ACCORD INGLY, HE OPENED THAT THE ASSESSEE HAS FAILED TO PROVE GENUINENESS O F TRANSACTION AND ALSO CREDITWORTHINESS OF PARTIES, MORE PARTICULARLY IN THE LIGHT OF 5 FACTS BROUGHT OUT DURING THE COURSE OF SEARCH PROCE EDINGS AND ACCORDINGLY BY RELIED UPON JUDICIAL PRECEDENTS INCL UDING THE DECISION OF HONBLE SUPREME COURT IN THE CASE OF CIT VS. P. MOHANKALA (2007) 291 ITR 278 SC MADE ADDITIONS OF RS. 17,28,27,575/-AS UNEXPLAINED CASH CREDIT UNDER SECTION 68 OF THE INC OME TAX ACT, 1961. 5. AGGRIEVED BY THE ASSESSMENT ORDER, THE ASSESSEE PREFERRED APPEAL BEFORE THE CIT(A). THE ASSESSEE HAS FILED EL ABORATE WRITTEN SUBMISSIONS ON THE ISSUE WHICH HAS BEEN REPRODUCED AT PARA 4.7 ON PAGE 9 TO 19 OF LEARNED CIT(A) ORDER. THE SUM AND S UBSTANCE OF THE ARGUMENTS OF THE ASSESSEEBEFORE THE CIT(A) ARE THAT THE AO HAS MADE ADDITIONS OF SHARE CAPITAL RECEIVED FROM M/S A PSARA TREX PVT LTD., ONLY ON THE BASIS OF STATEMENT OF CERTAIN PER SONS IGNORING ALL EVIDENCE FILED INCLUDING IDENTITY OF SUBSCRIBER, GE NUINENESS OF TRANSACTIONS AND CREDITWORTHINESS OF THE PARTY. THE ASSESSEE FURTHER SUBMITTED THAT ALTHOUGH THE DIRECTOR OF THE ASSESSE E COMPANY SHRI. PREMCHANDRA GODHA,IN HIS STATEMENT RECORDED UNDER S ECTION 132(4)ADMITTED THAT SHARE CAPITAL RECEIVED FROM APS ARA TREX PVT LTD., HAD BEEN OFFERED AS ADDITIONAL INCOME,BUT SUC H ADMISSION HAS BEEN RETRACTED BEFORE THE AO BY FILING NECESSARY EV IDENCESINCLUDING THE DETAILS ABOVE THE TRANSACTIONS BETWEEN THE PART IES AND ALSO FILED NECESSARY EVIDENCES TO PROVE CREDITWORTHINESS OF TH E PARTIES. THE 6 ASSESSEE HAD ALSO EXPLAINED CIRCUMSTANCES UNDER WHI CH THE STATEMENT HAS BEEN GIVEN DURING THE COURSE OF SEARC H. 6. THE CIT(A) AFTER CONSIDERING THE SUBMISSIONS OF THE ASSESSEE AND ALSO TAKEN NOTE OF VARIOUS EVIDENCES FILED BY T HE ASSESSEEHELD THAT OUT OF TOTAL SHARE CAPITAL OF RS. 17,28,27,575 /- RECEIVED FROM APSARA TREXPVT LTD., A SUM OF RS. 15,53,00, 000/- H AS BEEN RECEIVED IN FINANCIAL YEAR 2007-08 RELEVANT TO ASSE SSMENT YEAR 2008-09 AND HENCE TO THAT EXTENT ADDITIONS COULD NO T BE MADE UNDER SECTION 68 OF THE I.T. ACT, 1961 FOR IMPUGNED ASSESSMENT YEAR, BECAUSE THE PROVISIONS OF SECTION 68 APPLIES ONLY TO THE CREDITORS WHICH ARE FOUND IN THE BOOKS OF ACCOUNTS OF THE ASSESSEE FOR WHICH NO EXPLANATION HAS BEEN OFFERED OR EXPLAN ATION OFFERED BY THE ASSESSEE IS NOT SATISFIED TO THE AO, THEN THE S AME CAN BE CONSIDERED AS UNEXPLAINED INCOME OF THAT ASSESSMENT YEAR. IN SO FAR AS, THE REMAINING AMOUNT OF SHARE CAPITAL RECEI VED FROM THE SUBSCRIBER, THE CIT(A) OBSERVED THAT THE ASSESSEE H AS EXPLAINED WITH NECESSARY EVIDENCES TO PROVE IDENTITY, GENUINE NESS OF TRANSACTIONS AND CREDITWORTHINESS OF THE SUBSCRIBER . THE ASSESSEE HAD ALSO EXPLAINED SOURCE OF SOURCE WHICH IS EVIDEN T FROM THE FINANCIAL STATEMENT FILED DURING APPELLATE PROCEEDI NGS WHICH CLEARLY PROVES M/S TREXPVT. LTD., HAS SOURCE OF INCOME TO E XPLAIN INVESTMENT IN ASSESSEE COMPANY. THE CIT(A) HAS ALSO NEGATED 7 OBSERVATIONS OF THE AO WITH REGARD TO SUBSEQUENT AM ALGAMATION OF M/S APSARA TREXPVT. LTD., WITH GODHA FAMILY AND HEL D THAT SUBSEQUENT TRANSACTIONS BETWEEN M/S APSARA TREXPVT. LTD., AND GODHA FAMILY HAS NOTHING TO DO WITH TRANSACTIONS BE TWEEN THE ASSESSEE AND THE SUBSCRIBER. THE CIT(A) HAD ALSO NE GATED OBSERVATIONS OF THE AO IN THE LIGHT OF STATEMENT OF SHRI. PREMCHANDRA GODHA AND OTHER PERSONS RECORDED DURING THE COURSE OF SEARCH AND HELD THAT MERE ADMISSION IS NOT SUFFI CIENT ENOUGH TO HELD THAT PARTICULAR RECEIPTIS INCOME UNLESS, IT IS SUPPORTED BY CIRCUMSTANTIAL EVIDENCES. IN THIS CASE, THE AO HAS MADE ADDITIONS MERELY ON THE BASIS OF STATEMENTS OF CERTAIN PERSON S WITHOUT THERE BEING ANY FURTHER EVIDENCES TO JUSTIFY HIS ACTION,T HEREFORE, HE OPENED THAT THE AO WAS ERRED IN MAKING ADDITIONS TO WARDS SHARE CAPITAL RECEIVED FROM M/S APSARA TREXPVT. LTD., UND ER SECTION 68 OF THE I.T. ACT, 1961. THE RELEVANT FINDING OF THE LEA RNED CIT(A)ARE AS UNDER:- 4.9HOWEVER, THERE ARE PECULIAR FACTS THAT MUST BE TAKEN JUDICIAL NOTE OF. IT IS NOTED THAT APSARA TREXPVT. LTD., INVESTED IN THE SHARES OF THE APPELLANT COMPANY. AN AMOUNT OF RS. 1 5,53,00,000/- WAS INVESTED IN AY 2008-09 AND CREDITED AS SHARE AP PLICATION MONEY AND THUS CLEARLY CANNOT BE PART OF ANY ADDITI ON U/S 68 SINCE THIS AMOUNT WAS RECEIVED AND CREDIT ENTRY IS SHOWN IN THE ASSESSEE'S BOOKS IN AY 2008-09. SINCE THE CRED IT OF THIS AMOUNT APPEARS IN THE BALANCE SHEET AS ON 31.3.2008, IT FA LLS OUTSIDE THE PURVIEW OF SECTION 68 IN AY 2009-10. THUS THIS CONT ENTION OF THE APPELLANT IS LEGALLY CORRECT AND IS ACCEPTED. 8 4.10. IT IS FURTHER OBSERVED THAT M/S.APSARATREXPVT .LTD. RAISED FUNDS BY WAY OF ISSUE OF SHARES AT PREMIUM IN EARLIER YEARS AS IS SEEN FROM ITS FINANCIALS FOR FY 2004-05 & 2005-06. THUS, AS ON 31 -03-2006 IT ALREADYHAD SHARE CAPITALAND RESERVES RAISED OF RS. 17,31,52,000/- BY WAY OF SHARE CAPITAL AND PREMIUM. SUCH RAISING OF FUNDS HAD BEEN ACCEPTED IN THE SCRUTINY ASSESSMENT U/S 143(3) FOR AY 2005-06 D ATED 19.2.2017. THERE IS EXPLICIT MENTION OF RAISING OF SHARE CAPIT AL OF RS 41 LAKHS ALONG WITH SHARE PREMIUM OF RS 365,40,000/- IN THE ASSESS MENT ORDER. THUS, ONCE THE FUNDS RAISED BY M/S.APSARA TREXPVT.LTD. HA S BEEN ACCEPTED IN THE PAST, IT FORMS IT FORMS THE SOURCE FOR THE SUBS EQUENT INVESTMENT BY IT IN THE APPELLANT COMPANY AND CANNOT BE IGNORED. I F THERE WERE ANY DOUBTS REGARDING THE FUNDS RAISEDBY M/S.APSARA TREX PVT.LTD. THE RECOURSE WAS TO MAKE THE ADDITION IN THOSE ASSESSMENT YEARS IN WHICH THE FUNDS WERE RAISED BY M/S.APSARA TREX PVT LTD. IT IS ALSO NOTED THAT THE PERIOD DURING WHICH THE FUNDS WERE RAISED WERE MUCH PRIOR TO THE TRANSACTION WITH THE APPELLANT COMPANY. SHRI PREMCHAND GODHA WA S NOWHERE RELATED WITH THE AFFAIRS OF M/S.APSARA TREXPVT.LTD. IN THE YEARS IN WHICH THE FUNDS WERE RAISED BY IT. THUS THE SOURCEOF FUNDS IS EXPLA INED. 4.11 THERE IS ANOTHER ASPECT WHICH MERITS ATTENTION . THERE IS AN ALLEGATION THAT THE GODHA FAMILY ACQUIRED SHARES OF M/S.APSARATREXPVT.LTD. AT PAR EVEN THOUGH ITS NET A SSET VALUE WAS MUCH MORE. IT IS ALSO ALLEGED THERE WERETRANSACTIONS OUT SIDE THE BOOKS IN RESPECT OF THE ACQUISITION OF THE SHARES OF M/S.APS ARA TREXPVT. LTD. DETAILS WERE CALLED IN THIS REGARD IN RESPECT OF SHARES ACQ UIRED IN M/S.APSARA TREXPVT.LTD..THE SHARES WERE ACQUIRED FROM NOVEMBER 15, 2007 ONWARDS BY THE GODHA FAMILY MEMBERS. IT IS SEEN THAT THESE TRANSACTIONS HAVE BEEN SOURCED BY THE INDIVIDUALS OF THE GODHA FAMILY FROM THEIR OWN FUNDS AND PAID TO THE SHAREHOLDERS OF M/S.APSARA TREXPVT. LTD. SHRI PRASHANT GODHA, SHRI NIKHIL PRAKASH JAIN AND SHRI ATUL NIRMA L JAIN BECAME DIRECTORS OF M/S.APSARA TREXPVT.LTD. ONLY IN FY 200 7-08. THERE IS NO ROLE OF THE APPELLANT COMPANY IN THESE TRANSACTIONS. THE INDIVIDUALS OF GODHA FAMILY AND THE APPELLANT COMPANY ARE TWO DISTINCT L EGAL ENTITIES AND CANNOT BE TREATED AS ONE FOR THE PURPOSE OF MAKING AN ASSESSMENT. IF JUSTIFIED AND EVIDENCE WAS FOUND, ADDITION COULD HA VE BEEN MADE IN THE HANDS OF THE GODHA FAMILY MEMBERS WHO ACQUIRED THE SHARES OF M/S. APSARA TREX PVT LTD. AT LESS THAN THE FAIR VALUE AS ALLEGED BY THE ASSESSING OFFICER AND THE SHAREHOLDERS OF M/S.APSAR ATREXPVT.LTD. WHO ARE ALLEGED TO HAVE RECEIVED CONSIDERATION NOT RECORDED . HOWEVER, THIS DOES NOT MEAN THAT THE ADDITION CAN BE SUSTAINED IN THE HANDS OF THE APPELLANT COMPANY. 9 4.12. NO DOUBT, THERE IS AN ACCEPTANCE BY SHRI PREM CHAND GODHA THIS STATEMENT RECORDED IN THE COARSE OF SEARCH THAT THE SOURCE OF INVESTMENT IN APPELLANT COMPANY IS UNVERIFIABLE AND HENCE ADDI TIONAL INCOME IS OFFERED IN THE HANDS OF THE APPELLANT. HOWEVER, SUC H STATEMENT CANNOT BE CONSIDERED IN ISOLATION WITHOUT CONSIDERING THE LEG AL ASPECTS AND THE FACTUAL POSITION RELEVANT TO THE TRANSACTION. IF AN ADDITION IS NOT LEGALLY ADMISSIBLE IN THE HANDS OF THE APPELLANT, A MERE AD MISSION CANNOT BE THE SOLE BASIS FOR THE SAME. IT IS NOTED THAT IN THE ST ATEMENT RECORDED ON 24.12.2014, SHRI ATUL JAIN IN ANSWER TO Q 22 STATED THAT THE MAJOR INVESTMENT BY M/S.APSARA TREXPVT.LTD. WAS IN M/S KA YGEE INVESTMENTS P. LTD. AND WAS SOURCED OUT OF ITS SHARE CAPITAL AND R ESERVES. IT WAS FURTHER STATED THAT THE BOOKS OF M/S.APSARA TREXPVT.LTD. FR OM 1.4.2007 WAS KEPT IN CORPORATE OFFICE OF M/S KAYGEE INVESTMENTS P. LT D. AT B 28 BUKHANWALA CHAMBER, 6TH FLOOR, LINK ROAD ANDHERI WEST. HE DID STATE THAT THE INVESTMENT WAS BASED ON THE VALUATION REPORT MADE B Y M/S NATVARLALVYAPARI& CO. FURTHER HE ALSO DID STATE THA T SHARES OF M/S.APSARA TREXPVT.LTD. WERE ACQUIRED BY GODHA FAMILY AT LACE VALUE AND THE ERSTWHILE OWNERS OF M/S.APSARA TREXPVT.LTD., WERE C OMPENSATED OUTSIDE BOOKS THOUGH HE DID NOT GIVE ANY DETAILS OF THE SAM E.THUS THERE IS NO ADMISSION NOR ANY DETAILS OF UNACCOUNTED MONEY BEIN G INTRODUCED BY WAY OF SHARE CAPITAL IN THE APPELLANT COMPANY. 4.13. IN THE STATEMENT RECORDED ON 23.12.2014 SHRI PREMCHAND GODHA WAS ASKED, INTERALIA, REGARDING INVESTMENTS MADE IN THE APPELLANT COMPANY. REGARDING SOURCE OF SUCH INVESTMENTS, IN A NSWER TO Q 21 HE STATED THAT IT IS OUT OF THE RESERVES OF THE INVEST ING COMPANIES. HIS STATEMENT WAS AGAIN RECORDED ON 24.12.2014 AND AGAI N ON 25.12.2014. IT IS IN THE STATEMENT RECORDED ON 25.12.2014 THAT SHR I PREMCHAND GODHA MADE THE OFFER OF RS 26 ,86, 84, 880 /- AS ADDITION AL INCOME WHICH IS THE BASIS FOR THE ADDITION MADE BY THE ASSESSING OFFICE R. NO SPECIFIC INCRIMINATING EVIDENCE WAS FOUND IN THE COURSE OF S EARCH TO SUBSTANTIATE THE ADDITION MADE. 4.14 TO CONCLUDE,THE AMOUNT OF RS. 15, 53,00,00/- W AS INVESTED IN AYCONSIDERED U/S 68 IN AY 2009-10, FURTHER, THE AMO UNTS RECEIVED AS SHARE APPLICATION MONEY IS SOURCED OUT OF SHARE CAP ITAL AND RESERVES OF THE INVESTOR COMPANY. SUCH FUNDS AS SHARE CAPITAL A ND RESERVES WERE RAISED BY THE INVESTOR MUCH EARLIER AND AT A TIME W HEN IT WAS NOT UNDER CONTROL OF GODHA FAMILY. EVEN IF CREDENCE IS GIVEN TO ALLEGATION THAT THE GODHA FAMILY UNDERSTATED THE PURCHASE VALUE OF SHAR ES OF THE INVESTOR AND PAID OUT OF BOOKS TO THE ERSTWHILE OWNER/ SHARE HOLDERS OF THE INVESTOR COMPANIES, REMEDY LIES IN TAKING APPROPRIATE ACTION IN THE HANDS OF THE SHAREHOLDERS AND NOT THE APPELLANT COMPANY. IN THES E FACTS THE ADDITIONS MADE OF RS. 17,28,27,575/- U/S.68 OF THE I.T. ACT I S DELETED. GROUNDS OF APPEAL NO. 1 & 2 ARE ALLOWED. 10 7. LD. DR SUBMITTED THAT THE LEARNED CIT(A) WAS ERR ED IN DELETING THE ADDITIONS MADE BY THE AO TOWARDS SHARE CAPITAL UNDER SECTION 68 OF THE I.T. ACT, 1961 WITHOUT APPRECIATING THE F ACT THAT THE AO HAD BROUGHT OUT VARIOUS FACTS DURING SEARCH PROCEED INGS IN THE CASE OF IPCA LABORATORY LIMITED AND OTHERS GROUP ON 20.3 .2014, WERE THE DIRECTORS OF THE COMPANY HAD CATEGORICALLY ADMI TTED THAT SHARE CAPITAL RECEIVED FROM M/S APSARA TREXPVT. LTD., IS NOT GENUINE TRANSACTIONS AND WHICH IS USED TO PLUG IN OWN UNACC OUNTED INCOME OF THE ASSESSEEINTO BOOKS OF ACCOUNTS. THE LEARNED DR FURTHER SUBMITTED THAT THE AO HAD ALSO BROUGHT OUT CLEAR FA CTS IN THE LIGHT OF THE STATEMENTS RECORDED FROM DIRECTORS OF M/S APSAR A TREXPVT. LTD., WHERE THEY HAVE CATEGORICALLY ADMITTED THAT THE COM PANY HAD A SHELL COMPANY WHICH IS MAINLY INVOLVED IN PROVIDING ACCOMMODATION ENTRY TO VARIOUS BENEFICIARIES. NO DOUBT, THE ASSES SEEHAS FILED VARIOUS DOCUMENTS INCLUDING THE IDENTITY OF THE SUB SCRIBERS, BUT THAT BY ITSELF WOULD NOT SUFFICIENT TO GET OUT OF SHADOW OF THE PROVISIONS OF SECTION 68 OF THE ACT, AND WHAT IS RELEVANT IS T O PROVE THREE INGREDIENTS INCLUDING IDENTITY, GENUINENESS OF TRAN SACTIONS AND CREDITWORTHINESS OF THE PARTIES. IN THIS CASE, ALTH OUGH THERE IS NO DOUBT ABOUT IDENTITY OF THE PARTIES, BUT REMAINING TWO ASPECTS I.E. GENUINENESS OF TRANSACTIONS AND CREDITWORTHINESS OF THE SUBSCRIBER IS IN DOUBTFUL. THE CONDUCT OF THE PARTIES AND SUBS EQUENT EVENT OF 11 AMALGAMATION OF SUBSCRIBER COMPANIES INTO ASSESSEE GROUP CLEARLY PROVE THE INTENTION OF THE PARTIES TO USE THIS COMP ANY AS CONDUIT FOR CONVERSION OF UNACCOUNTED INCOME IN THE GUISE OF SH ARE CAPITAL. THE CIT(A) WITHOUT APPRECIATING THESE FACTS,SIMPLY DELE TED THE ADDITIONS MADE BY THE AO. 8. THE LD. AR FOR THE ASSESSEE, ON THE OTHER HAND, STRONGLY SUPPORTED THE ORDERS OF THE CIT(A) SUBMITTED THAT T HE CIT(A) HAD APPRISED FACTS IN RIGHT PERSPECTIVE IN LIGHT OF VAR IOUS EVIDENCES FILED BY THE ASSESSEE DURING THE COURSE OF APPELLATE PROC EEDINGS, WHERE THE OBSERVATIONS MADE BY THE AO HAD BEEN COMPLETELY NEGATED. THE LD. AR FURTHER SUBMITTED THAT THERE IS NO DISPUTE W ITH REGARD TO THE IDENTITY OF THE PARTY, BECAUSE THE AO HAS NEVER DIS PUTED IDENTITY. THE AO HAD MADE ADDITIONS TOWARDS SHARE CAPITAL ONL Y ON THE GROUND THAT GENUINENESS OF TRANSACTIONS IS IN DOUBT FUL, BECAUSE THE ASSESSEE HAS ISSUED SHARES AT A HUGE PREMIUM WITHOU T ANY CORRESPONDING BUSINESS ACTIVITY AND FINANCIALS TO S UPPORT SUCH A HUGE VALUATION. BUT, FACT REMAINS THAT THE ASSESSEE HAS FILED COMPLETE DETAILS TO PROVE GENUINENESS OF TRANSACTIO NS AND ALSO EXPLAINED ISSUE OF SHARES AT A PREMIUM BY FILING NE CESSARY VALUATION REPORTS. AS REGARDS THE STATEMENT OF DIRECTORS OF S UBSCRIBER COMPANY, IT WAS CATEGORICALLY EXPLAINEDTHAT THEY WE RE NEVER STATED THAT THE TRANSACTIONS BETWEEN THE PARTIES WAS NON G ENUINE. 12 SIMILARLY, IN RESPECT OF STATEMENT OF PREMCHAND GOD HA, DIRECTOR OF ASSESSEE COMPANY, IT WAS EXPLAINED BEFORE THE AO TH AT UNDER WHAT CIRCUMSTANCES THE ADMISSION OF ADDITIONAL INCOME HA D BEEN GIVEN. THE AO IGNORING ALL EVIDENCES FILED BY THE ASSESSEE , MADE ADDITIONS ONLY ON THE BASIS OF STATEMENT OF DIRECTORS AND EMP LOYEES OF SUBSCRIBER COMPANY AND STATEMENT OF SHRI. PREMCHAND GODHA, IGNORING OTHER CRUCIAL ASPECTS INCLUDING SUBSEQUENT RETRACTION OF SAID STATEMENT BY THE DIRECTORS. IN THIS REGARD, HE RELI ED UPON VARIOUS JUDICIAL PRECEDENTS INCLUDING THE DECISION OF HONB LE SUPREME COURT IN THE CASE OF CIT VS. LOVELY EXPORTS PVT. LTD., (2008) 216 CTR 195. 9. WE HAVE HEARD BOTH THE PARTIES, PERUSED THE MATE RIALS ON RECORD AND GONE THROUGH ORDERS OF THE AUTHORITIES B ELOW. THE AO HAS MADE ADDITIONS TOWARDS SHARE CAPITAL RECEIVED F ROM APSARA TREXPVT. LTD., AMOUNTING TO RS. 17,28,27,575/- ON T HE GROUND THAT ALTHOUGH IDENTITY OF THE PARTIES WAS NOT IN DOUBT,B UT GENUINENESS OF TRANSACTIONS AND CREDITWORTHINESS OF SUBSCRIBER WAS NOT PROVED WITH NECESSARY EVIDENCES. THE AO HAS BROUGHT OUT VARIOUS FACTS IN HIS ASSESSMENT ORDER IN THE LIGHT OF SEARCH CONDUCTED I N THE CASE OF IPCA LABORATORIES LIMITED ON 23 RD DECEMBER, 2014 AND SUBSEQUENT STATEMENTS RECORDED FROM VARIOUS PERSONS INCLUDING DIRECTOR OF THE ASSESSEESHRI. PREMCHAND GODHA AND ALSO DIRECTORS AN D EMPLOYEES 13 OF SUBSCRIBER COMPANY, THAT M/S APSARA TREXPVT. LTD ., IS SHELL COMPANY WHICH WAS MAINLY INVOLVED IN PROVIDING ACCO MMODATION ENTRIES OF SHARE CAPITAL TO VARIOUS BENEFICIARIES. THE AO HAS ALSO TAKEN SUPPORT FROM STATEMENT RECORDED FROM SHRI. PR EMCHAND GODHA, DURING THE COURSE OF A SEARCH AS PER WHICH H E HAD CATEGORICALLY ADMITTED THAT AMOUNT OF SHARE CAPITAL RECEIVED FROM M/S APSARA TREXPVT. LTD., IS A NON-GENUINE TRANSACT ION AND ACCORDINGLY HE WOULD OFFER THE SAME AS ADDITIONAL I NCOME FOR TAX. EXCEPT THIS, THE AO HAS NOT BROUGHT OUT ANY OTHER I NDEPENDENT EVIDENCES TO PROVE THAT THE TRANSACTIONS BETWEEN TH E PARTIES IS NOT GENUINE. ON THE OTHER HAND, THE ASSESSEE HAS FILED COMPLETE DOCUMENTS INCLUDING NAME AND ADDRESS ALONGWITH PAN NUMBER OF THE SUBSCRIBER, INCLUDING THEIR INCOME TAX ITR ACKN OWLEDGMENT LEDGER ACCOUNT OF THE SUBSCRIBER ALONGWITHBANK STAT EMENT, AUDITED FINANCIALS OF THE SUBSCRIBERS FOR TWO YEARS, COPY O F RETURN OF ALLOTMENT IN FORM 2 FILED WITH MCA, EXTRACT OF MINU TE BOOK OF THE ASSESSEE APPROVING ALLOTMENT OF SHARES TO M/S APSAR A TREXPVT. LTD., COPY OF SHARE CERTIFICATE AND ASSESSMENT ORDER PASS ED IN THE CASE OF M/S APSARA TREXPVT. LTD., FOR ASSESSMENT YEAR 2005- 06. THE ASSESSEEHAD ALSO FILED SHARE VALUATION CERTIFICATE OF THE ASSESSEE COMPANY FROM INDEPENDENT VALUER JUSTIFYING ISSUE OF SHARES AT HUGE PREMIUM. ALL THESE PART OF ASSESSMENT RECORDS, AND THE AO NEVER 14 DISPUTED THE FACT THAT THE ASSESSEEHAS FILED ABOVE DOCUMENTS IN ORDER TO DISCHARGE ITS ONUS CASTE UPON UNDER SECTIO N 68 OF THE INCOME TAX ACT, 1961. IN SPITE OF FURNISHING COMPLE TE EVIDENCES IN RESPECT OF SHARE CAPITAL RECEIVED FROM M/S APSARA T REXPVT. LTD., THE AO DISBELIEVEDALL EVIDENCES AND CAME TO THE CONCLUS ION THAT TRANSACTIONS BETWEEN THE PARTIES IS SHAM TRANSACTIO NS WHICH WAS USED TO PLUG IN ASSESSEES OWN UNACCOUNTED INCOME I NTO BOOKS OF ACCOUNTS IN THE FORM OF SHARE CAPITAL. THE ABOVE FI NDING OF THE AO IS PRIMARILY BASED ON STATEMENTS OF DIRECTORS AND EMPL OYEES OF THE SUBSCRIBER COMPANY AND THE STATEMENT OF SHRI. PREMC HAND GODHA, DIRECTOR OF THE ASSESSEECOMPANY. THE AO HAD ALSO TA KEN SUPPORT OF SUBSEQUENT EVENT OF AMALGAMATION OF M/S APSARA TREX PVT. LTD., WITH GODHA GROUP. 10. PROVISIONS OF SECTION 68OF THE ACT, DEALS WITH CASES WHERE ANY SUM FOUND CREDITED IN BOOKS OF ACCOUNTS OF A ASSESS EEFOR WHICH NO EXPLANATION HAS BEEN OFFERED OR EXPLANATION OFFERED BY THE ASSESSEE, IN THE OPINION OF THE AO IS NOT SATISFIED , THEN SUM FOUND CREDITED IN MAY BE TREATED AS INCOME OF THE ASSESSE E FOR THAT ASSESSMENT YEAR. THEREFORE, IN ORDER TO FIX ANY CRE DIT WITHIN THE AMBIT OF SECTION 68 OF THE ACT, THEN THE AO NEEDS T O SATISFY ABOUT IDENTITY, GENUINENESS OF TRANSACTIONS AND CREDITWOR THINESS OF PARTIES. IN THIS CASE, IDENTITY OF PARTIES IS NOT I N DOUBTFUL. THE 15 REMAINING ASPECT OF GENUINENESS OF TRANSACTIONS AND CREDITWORTHINESS OF SUBSCRIBER, ALTHOUGH THE AO HAS DOUBTED THE ABOVE TWO ASPECTS, BUT LEARNED CIT(A) HAS NEGATED O BSERVATIONS OF THE AO WITH REGARD TO GENUINENESS OF TRANSACTIONS A ND CREDITWORTHINESS OF PARTIES. WE FURTHER NOTED THAT THE LD. CIT(A) RECORDED A CATEGORICAL FINDING THAT OUT OF TOTAL SH ARE CAPITAL RECEIVED FROM THE SUBSCRIBER AMOUNTING TO RS. 17,28,28,575/- A SUM OF RS. 15, 53,00,000/- HAS BEEN RECEIVED IN FINANCIAL YEAR RELEVANT TO ASSESSMENT YEAR 2008-09 AND THE SAME WAS OUTSIDE TH E PURVIEW OF PROVISIONS OF SECTION 68 OF THE INCOME TAX ACT, 196 1 AND SAID FINDINGS OF THE LEARNED CIT(A) HAS NOT BEEN CHALLEN GED BY THE REVENUE. WE FURTHER NOTED THE ABOVE FINDINGS OF THE LD. CIT(A) FURTHER SUPPORTED BY THE DECISION OF HONBLE DELHI HIGH COURT IN THE CASE OF CIT VS. USHA STUD FORMS LIMITED (2008) 301 ITR 384, WHERE IT WAS CATEGORICALLY HELD THAT AMOUNT OF CRED IT RECEIVED IN EARLIER FINANCIAL YEAR AND BROUGHT FORWARD TO SUBSE QUENT YEAR CANNOT BE TREATED AS UNEXPLAINED CREDIT UNDER SECTI ON 68 OF THE INCOME TAX ACT, 1961. AS REGARDS REMAINING AMOUNT O F SHARE CAPITAL, THE LD. CIT(A) HAS RECORDED A CATEGORICAL FINDING IN HIS ORDER AT PARA 4.10 AS PER WHICH M/S APSARA TREXPVT. LTD., HAS EXPLAINED THE SOURCE OF INVESTMENT IN ASSESSEE COMPANY WITH F INANCIAL STATEMENTS OF EARLIER YEARS. THE LD. CIT(A) FURTHER RECORDED THAT M/S 16 APSARA TREXPVT. LTD., HAD ISSUED SHARES WITH PREMIU M FOR ASSESSMENT YEARS 2004-05 AND 2005-06 AND THE SAME H AS BEEN UTILIZED FOR MAKING INVESTMENT IN THE SHARES OF ASS ESSEE COMPANY. THE LD. CIT(A) OBSERVED THAT ASSESSMENT PROCEEDINGS OF THE SUBSCRIBER COMPANY HAD BEEN COMPLETED UNDER SECTION 143(3) FOR ASSESSMENT YEAR 2005-06, WHERE THE AO HAD ACCEPTED FINANCIAL STATEMENT WITHOUT ANY ADDITIONS EITHER TOWARDS SOUR CE OF FUNDS OR INVESTMENTS IN SHARE CAPITAL OF ASSESSEE COMPANY. S IMILARLY, OTHER OBSERVATIONS MADE BY THE AO WITH REGARD TO SUBSEQUE NT AMALGAMATION OF M/S APSARA TREXPVT. LTD., WITH GODH A FAMILY, THE CIT(A) HAD NEGATED THE OBSERVATIONS OF THE AO IN TH E LIGHT OF THE EVIDENCES FILED BY THE ASSESSEE THAT SUBSEQUENT ARR ANGEMENT BETWEEN THE GODHA FAMILY AND M/S APSARA TREXPVT. LT D., HAS NOTHING TO DO WITH TRANSACTIONS BETWEEN THE ASSESSE E AND THE SUBSCRIBER COMPANY. SIMILARLY, THE LD. CIT(A) HAD N EGATED OBSERVATIONS OF THE AO WITH REGARD TO STATEMENT OF SHRI. PREMCHAND GODHA RECORDED DURING THE COURSE OF SEARCH AND HELD THAT SUCH STATEMENT CANNOT BE CONSIDERED IN ISOLATION WITHOUT CONSIDERING LEGAL ASPECTS AND FACTUAL POSITION RELEVANT TO THE TRANSACTIONS. HE, FURTHER OBSERVED THAT IF AN ADDITION IS NOT LEGALLY ADMISSIBLE IN THE HANDS OF THE ASSESSEE, MERE ADMISSION CANNOT BE SOL E BASIS FOR THE SAME. WE FIND THAT THE ABOVE FINDINGS OF THE LD. CI T(A) IS BASED ON 17 APPRAISAL OF FACTS AND ALSO SUPPORTED BY VARIOUS JU DICIAL PRECEDENTS INCLUDING THE DECISION OF HONBLE SUPREME COURT IN THE CASE OF PULLANGOD RUBBER PRODUCTS COMPANY LIMITED VS. STATE OF KERELA AND OTHERS 91 ITR 18 WHERE THE COURT HELD THAT ALTHOUGH ADMISSION IS A BEST PIECE OF EVIDENCE, BUT THAT ITS ELF IS NOT A CONCLUSIVE EVIDENCE UNLESS SAID ADMISSION IS SUPPOR TED BY CORROBORATIVE EVIDENCES. 11. IN THIS CASE, ON PERUSAL OF FACTS AVAILABLE ON RECORD, WE FIND THAT THE ASSESSEEHAS DISCHARGED ITS ONUS CASTE UPON UNDER SECTION 68 OF THE ACT, BY FILING ENORMOUS DETAILS ABOUT TRA NSACTIONS, INCLUDING IDENTITY, GENUINENESS OF TRANSACTIONS AND CREDITWORTHINESS OF THE SUBSCRIBER. WE FURTHER NOTED THAT THE ASSESS EE HAD ALSO EXPLAINED SUBSEQUENT TRANSACTIONS BETWEEN THE PARTI ES IN THE LIGHT OF THE DECISION OF HONBLE BOMBAY HIGH COURT, WHERE THE HONBLE HIGH COURT HAS APPROVED AMALGAMATION BETWEEN THE GO DHA FAMILY AND M/S APSARA TREXPVT. LTD, THEREFORE, THE SAME CA NNOT BE CONSIDERED AS SHAM TRANSACTIONS MERELY FOR THE REAS ON THAT THE COMPANY HAS BEEN AMALGAMATED WITH THE ASSESSEE GROU P. FURTHER, THE ASSESSEE HAD FILED VARIOUS EVIDENCES IN ORDER T O PROVE GENUINENESS OF TRANSACTIONS BETWEEN THE PARTIES AND ALSO EXPLAINED THE STATEMENT OF PARTIES RECORDED DURING THE COURSE OF SEARCH CANNOT BE READ IN ISOLATION WITH FACTS OF THE PRESE NT CASE. THEREFORE, 18 WE ARE OF THE CONSIDERED VIEW THAT THE AO WAS INCOR RECT IN MAKING ADDITIONS TOWARDS SHARE CAPITAL UNDER SECTION 68 OF THE INCOME TAX ACT, 1961 IN RESPECT OF AMOUNT RECEIVED FROM M/S AP SARA TREXPVT. LTD., IGNORING EVIDENCES FILED BY THE ASSESSEE. WE ARE FURTHER OF THE OPINION THAT THE HONBLE SUPREME COURT IN THE CASE OF CIT VS. LOVELY EXPORTS PVT. LTD., 2008 216 ITR 195 CATEGORICALLY HELD THAT IF THE ALLEGED SHARE CAPITAL IS RECEIVED BY TH E ASSESSEE COMPANY FROM ALLEGED BOGUS SHAREHOLDERS, WHOSE NAMES ARE GI VEN TO THE AO, THEN THE AO IS FREE TO PROCEED TO REOPEN THEIR INDI VIDUAL ASSESSMENTS IN ACCORDANCE WITH LAW, BUT IT CANNOT B E RECORDED AS UNDISCLOSED INCOME OF THE ASSESSEE COMPANY. THIS LE GAL PROPOSITION IS FURTHER SUPPORTED BY THE DECISION OF HONBLE SUP REME COURT IN THE CASE OF CIT VS. GOA SPUNG AND POWER LIMITED IN TAX APPEAL NO. 16 OF 2012, WHERE A SIMILAR VIEW HAS BEEN EXPRESSED . AS REGARDS ISSUE OF SHARES AT HUGE PREMIUM, THE ASSESSEEHAS EX PLAINED THE SAME WITH NECESSARY EVIDENCES INCLUDING VALUATION R EPORT FROM THE REGISTERED VALUER, WHERE THE VALUE OF THE SHAREIS M UCH HIGHER OR EQUIVALENT TO SHARES ISSUED TO M/S APSARA TREXPVT. LTD. IN ANY CASE, THE PROVISO INSERTED TO SECTION 68 BY THE FINANCE A CT, 2012 W.E.F. 01.04.2013 IS CONSIDERED TO BE PROSPECTIVE IN NATUR E AS HELD BY HONBLE BOMBAY HIGH COURT IN THE CASE OF CIT VS GAGANDEEP INFRASTRUCTURE LIMITED (2017) 394 ITR 680 WHERE THE HONBLE 19 BOMBAY HIGH COURT HELD THAT PROVISO INSERTED TO SEC TION 68 W.E.F. 01.04.2013 IS CONSIDERED TO BE PROSPECTIVE IN NATUR E AND APPLICABLE FROM ASSESSMENT YEAR 2013-14 ONWARDS. THE LD. CIT(A ) AFTER CONSIDERING ALL THESE ASPECTS HAS RIGHTLY DELETED T HE ADDITIONS MADE BY THE AO TOWARDS SHARE CAPITAL RECEIVED BY M/S APS ARA TREXPVT. LTD., UNDER SECTION 68 OF THE INCOME TAX ACT, 1961. WE DO NOT FIND ANY ERROR IN THE FINDINGS OF THE LD. CIT(A) AND HEN CE, WE ARE INCLINED TO UPHOLD FINDINGS OF THE LD. CIT(A) AND DISMISSED APPEAL FILED BY THE REVENUE. ITA NO. 3540/MUM/2018 12. THE FACTS AND ISSUE INVOLVED IN THIS APPEAL IS IDENTICAL TO THE FACTS AND ISSUE WHICH WE HAVE ALREADY CONSIDERED IN ITA NO. 3539/MUM/2018 FOR ASSESSMENT YEAR 2009-10. THE REAS ONS GIVEN BY US IN PRECEDING PARAGRAPHS SHALL MUTATIS MUTANDIS APPLY TO THIS APPEAL ALSO.THEREFORE, FOR DETAILED REASONS GIVEN B Y US IN ITA NO. 3539/MUM/2018, WE ARE OF THE CONSIDERED VIEW THAT T HE LD. CIT(A) HAS RIGHTLY DELETED THE ADDITIONS MADE BY THE AO TO WARDS SHARE CAPITAL RECEIVED FROM M/S SHREYA TIE UP PVT.LTD.,. HENCE,WE ARE 20 INCLINED TO UPHOLD FINDINGS OF THE LD. CIT(A) AND D ISMISSED THE APPEAL BY THE REVENUE. 13. IN THE RESULT,BOTH THE APPEALS FILED BY THE REV ENUE ARE DISMISSED. ORDER PRONOUNCED IN THE OPEN COURT ON.31.07.2019. SD/- SD/- (RAVISH SOOD) (G. MANJUNATHA) JUDICIAL MEMBER ACCOUNTANT MEMBER MUMBAI, DATED: 31.07.2019 COPY OF THE ORDER FORWARDED TO : (1) THE ASSESSEE; (2) THE REVENUE; (3) THE CIT(A); (4) THE CIT, MUMBAI CITY CONCERNED; (5) THE DR, ITAT, MUMBAI; (6) GUARD FILE. BY ORDER SH (DY./ASSTT.REGISTRAR) ITAT, MUMBAI