Appeal Details
Counselvise Citation
[2017] 127 COUNSELVISE.COM (IT) 1923 (ITAT-JAIPUR)
Assessee PAN
Bench
Appeal Number
CRN Number
Duration Of Justice
5 month(s)
Appellant
Respondent
Appeal Type
Income Tax Appeal
Pronouncement Date
07-11-2017
Appeal Filed By
Department
Order Result
Dismissed
Bench Allotted
A
Assessment Year
2010-2011
Appeal Filed On
07-06-2017
Judgement Text
VK;DJ VIHYH; VF/KDJ.K] T;IQJ U;K;IHB] T;IQJ IN THE INCOME TAX APPELLATE TRIBU NAL, JAIPUR BENCHES , JAIPUR JH HKKXPUN] YS[KK LNL; ,O JH DQY HKKJR] U;KF;D L NL; DS LE{K BEFORE: SHRI BHAGCHAND, AM & SHRI KUL BHAR AT, JM VK;DJ VIHY LA-@ ITA NO. 493 & 494/JP/2017 FU/KZKJ.K O'K Z@ ASSESSMENT YEAR: 2010-11 & 2012-13 THE DCIT CENTRAL CIRCLE-2 JAIPUR CUKE VS. M/S. GODAWARI ESTATES PVT. LTD 20, MAHARISHI DEVENDRA ROAD BURRA BAZAR, KOLKATA 700 007 LFKK;H YS[KK LA-@THVKBZVKJ LA-@ PAN/GIR NO .: AAACG 9639 C VIHYKFKHZ@ APPELLANT IZR;FKHZ@ RESPONDENT C.O. NO. 26 & 27/JP/2017 (ARISING OUT OF VK;DJ VIHY LA-@ ITA NO. 493 & 494/JP/2017) FU/KZKJ.K O'K Z@ ASSESSMENT YEAR: 2010-11 & 2012-13 M/S. GODAWARI ESTATES PVT. LTD 20, MAHARISHI DEVENDRA ROAD BURRA BAZAR, KOLKATA 700 007 CUKE VS. THE DCIT CENTRAL CIRCLE-2 JAIPUR LFKK;H YS[KK LA-@THVKBZVKJ LA-@ PAN/GIR NO .: AAACG 9639 C VIHYKFKHZ@ APPELLANT IZR;FKHZ@ RESPONDENT JKTLO DH VKSJ LS@ REVENUE BY:SMT. ROLEE AGARWAL, CIT - DR SHRI PRAVEEN KUMAR MITTAL, DCIT SHRI KAMLESH KUMAR MEENA, DCIT FU/KZKFJRH DH VKSJ LS@ ASSESSEE BY: SHRI VIJAY GOYAL, CA AND SHRI GULSHAN AGARWAL, CA LQUOKBZ DH RKJH[K@ DATE OF HEARING : 11/10/2017 ?KKS'K .KK DH RKJH[K@ DATE OF PRONOUNCEMENT : 07/11/2017 VKNS'K@ ORDER PER BENCH BOTH THESE APPEALS HAVE BEEN FILED BY THE REVENUE A GAINST TWO SEPARATE ORDERS OF THE LD. CIT(A)4-, JAIPUR DATED 3 1-03-2017 FOR THE A.Y. ITA NO. 493/JP/2017 ACIT, CENTRAL CIRCLE-2, JAIPUR VS GODAWARI ESTATES PVT.LTD. KOLKATA 2 2010-11 AND 2012-13. THE ASSESSEE HAS FILED THE CRO SS OBJECTIONS AGAINST THESE APPEALS. 2.1 FIRST OF ALL, WE TAKE UP THE GROUNDS OF APPEAL NO.493/JP/17 OF THE REVENUE FOR THE ASSESSMENT YEAR 2010-11 RAISING SOL ITARY GROUND AS UNDER:- WHETHER ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE THE LD. CIT(A) WAS RIGHT IN DELETING THE ADDITION OF RS .2,00,00,000/- MADE U/S 56(1) OF THE ACT IGNORING THE FACT THAT AS SETS OF THE ASSESSEE COMPANY DONT COMMENSURATE TO PREMIUM CHARGED AND F URTHER IGNORING THE FACT THAT NEITHER ANY BUSINESS ACTIVIT Y WAS PERFORMED NOR ANY BUSINESS INCOME HAS BEEN SHOWN BY THE ASSESSEE. 2.2 APROPOS SOLITARY GROUND OF THE REVENUE, THE AO MADE THE ADDITION OF RS.2,00,00,000- U/S 56(1) OF THE ACT IN THE HAND S OF THE ASSESSEE COMPANY BY OBSERVING AS UNDER:- 16. HAVING DEALT WITH EACH OF THE CONTENTION OF T HE ASSESSEE AND HAVING FOUND THE SAME TO BE UNTENABLE IT IS IMP ORTANT TO PLACE ON RECORD CERTAIN ASPECTS WHICH HAVE A BEARING ON THE ISSUE AT HAND. IT IS TRUE THAT THE APPARENT MUST BE CONSIDERED REAL UNTI L IT IS SHOWN THAT THERE ARE REASONS TO BELIEVE THAT THE APPARENT IS N OT THE REAL. IN A CASE OF THE PRESENT KIND A PARTY WHO RELIES ON A RECITAL IN A DEED HAS TO ESTABLISH THE TRUTH OF THOSE RECITALS, OTHERWISE IT WILL BE VERY EASY TO MAKE SELF-SERVING STATEMENTS IN DOCUMENTS EITHER EX ECUTED OR TAKEN BY A PARTY AND RELY ON THOSE RECITALS. IF ALL THAT AN ASSESSEE WHO WANTS TO EVADE TAX IS TO HAVE SOME RECITALS MADE IN A DOCUM ENT EITHER EXECUTED BY HIM OR EXECUTED IN HIS FAVOUR THEN THE DOOR WILL BE LEFT WIDE OPEN TO EVADE TAX. A LITTLE PROBING WAS SUFFICIENT IN THE P RESENT CASE TO SHOW THAT THE APPARENT WAS NOT THE REAL. THE TAXING AUTH ORITIES WERE NOT REQUIRED TO PUT ON BLINKERS WHILE LOOKING AT THE DO CUMENTS PRODUCED BEFORE THEM. THEY WERE NOT ENTITLED TO LOOK INTO TH E SURROUNDING CIRCUMSTANCES TO FIND OUT THE REALITY OF THE RECITA LS MADE IN THOSE DOCUMENTS. ITA NO. 493/JP/2017 ACIT, CENTRAL CIRCLE-2, JAIPUR VS GODAWARI ESTATES PVT.LTD. KOLKATA 3 17. IN THE ABOVE BACK GROUND OF THE FACTS AND CIRCU MSTANCES SURROUNDING THIS CASE, IT IS HEREBY HELD THAT THE R ECEIPT OF SHARE CAPITAL AND SHARE PREMIUM WAS PART OF A COLOURFUL TRANSACTI ON BY WAY OF WHICH A SUM OF RS. 2,00,00,000/- WAS INTRODUCED INTO THE BOOKS OF THE ASSESSEE COMPANY IN THE FORM OF SHARE PREMIUM ATTAC HED TO THE SHARE CAPITAL. AS DISCUSSION ABOVE THE PREMIUM OF RS.90/- PER SHARE WAS NOT JUSTIFIED AT ALL ON THE BASIS OF ABSOLUTELY NO ASSETS COMMENSURATE TO PREMIUM CHARGED, NO BUSINESS ACTIVITY, NO INCOME, N O NET WORTH NOR ANY PROMISE FOR CREATION OF THIS MUCH ASSETS, BUSI NESS ACTIVITY, INCOME OR NET WORTH IN THE FUTURE. ACCORDINGLY, THE CHARGING AND RECEIPT OF SHARE PREMIUM/ SHARE CAPITAL TO THE TUNE OF RS. 2,00,00,000/- IS HELD TO BE INCOME OF THE ASSESSEE COMPANY IN THE NATURE OF INCOME ENVISAGED U/S 56(1) OF THE INCOME TAX ACT, 1961. TH E SAME IS ADDED BACK TO THE TOTAL INCOME OF THE ASSESSEE. 2.3 IN FIRST APPEAL, THE LD. CIT(A) HAS DELETED THE ADDITION OF RS. 2,00,00,000/- MADE BY THE AO BY OBSERVING AT PAGES 60 TO 97 OF HIS ORDER AS UNDER:- 3.1.2 I HAVE DULY CONSIDERED ASSESSEE'S SUBMISSION AND CAREFULLY GONE THROUGH ASSESSMENT ORDER. I HAVE ALS O TAKEN A NOTE OF FACTUAL MATRIX OF THE CASE AS WELL AS APPLICABLE CA SE LAWS RELIED UPON. FACTS OF THE CASE ARE THAT NO SCRUTINY ASSESSMENT U/S 143(3) OF THE ACT WAS DONE IN ASSESSEES CASE FOR AY 2010-11 AND THE ORIGINAL RETURN FILED ON 29.09.2010 DECLARING RS. 46.34.460/- TOTAL INCOME WAS ONLY PROCESSED U/S 143(1) OF THE ACT. VARIOUS COURTS HAVE HELD THAT PROCESSING OF RETURNS U/S 143(1) OF THE ACT IS NO A SSESSMENT. IT IS OBVIOUS THAT IF NO INCRIMINATING MATERIAL IS FOUND DURING S EARCH, THEN ADDITIONS, IF ANY, HAVE TO BE MADE IN THE INCOME SHOWN IN THE RET URN OF INCOME ( IN THE CASE OF PENDING ASSESSMENTS WHICH ABATE ) AND TO THE COMPUTED INCOME (IN CASE OF ASSESSMENTS WERE COMPLETED ) . THUS EFFECTIVELY, WHAT WAS SAID IN THE CASE OF KABUL CHAWLA WAS THAT MAKING ANY ADDITION IN THE RETURNED INCOME OR INCOME EARLIER A SSESSED WAS NOT ALLOWED IF NO MATERIAL WAS FOUND IN THE SEARCH WHIC H COULD LEAD TO AN ADDITION ON THE BASIS OF THE SAID MATERIAL. NOW IN THIS REGARD, I WOULD ITA NO. 493/JP/2017 ACIT, CENTRAL CIRCLE-2, JAIPUR VS GODAWARI ESTATES PVT.LTD. KOLKATA 4 LIKE TO DISCUSS THE ISSUE PERTAINING TO ASSESSMENT COMPLETED U/S 153A R.W.S 143(3) OF THE ACT WHEN NO INCRIMINATING DOCUM ENTS WERE FOUND FROM THE ASSESSEES PREMISES. BEFORE COMING TO THE FACTS OF THE PRESENT CASE IT WOULD BE APPROPRIATE TO MENTION SEC . 153A OF THE ACT, THE RELEVANT PART OF WHICH READS AS UNDER: ' 153A. (1) NOTWITHSTANDING ANYTHING CONTAINED IN SEC TION 139, SECTION 147, SECTION 148, SECTION 149, SECTION 151 AND SECTION 153, IN THE CA SE OF A PERSON WHERE A SEARCH IS INITIATED UNDER SECTION 132 OR BOOKS OF ACCOUNT, OTHER DOCUME NTS OR ANY ASSETS ARE REQUISITIONED UNDER SECTION 132A AFTER THE 31ST DAY OF MAY, 2003, THE ASSESSING OFFICER SHALL (A) ISSUE NOTICE TO SUCH PERSON REQUIRING HIM TO FURN ISH WITHIN SUCH PERIOD, AS MAY BE SPECIFIED IN THE NOTICE, THE RETURN OF INCOME IN RE SPECT OF EACH ASSESSMENT YEAR FALLING WITHIN SIX ASSESSMENT YEARS REFERRED TO IN CLAUSE ( B), IN THE PRESCRIBED FORM AND VERIFIED IN THE PRESCRIBED MANNER AND SETTING FORTH SUCH OTHER PARTICULARS AS MAY BE PRESCRIBED AND THE PROVISIONS OF THIS ACT SHALL, SO FAR AS MAY BE, APPLY ACCORDINGLY AS IF SUCH RETURN WERE A RETURN REQUIRED TO BE FURNISHED UNDER SECTION 139; (B) ASSESS OR REASSESS THE TOTAL INCOME OF SIX ASSESSME NT YEARS IMMEDIATELY PRECEDING THE ASSESSMENT YEAR RELEVANT TO THE PREVIO US YEAR IN WHICH SUCH SEARCH IS CONDUCTED OR REQUIS ITION IS MADE : PROVIDED THAT THE ASSESSING OFFICER SHALL ASSESS OR REASSESS THE TOTAL INCOME IN RESPECT OF EACH ASSESSMENT YEAR FALLING WITHIN SUC H SIX ASSESSMENT YEARS: PROVIDED FURTHER THAT ASSESSMENT OR REASSESSMENT, I F ANY, RELATING TO ANY ASSESSMENT YEAR FALLING WITHIN THE PERIOD OF SIX ASSESSMENT YE ARS REFERRED TO IN THIS SUB-SECTION PENDING ON THE DATE OF INITIATION OF THE SEARCH UNDER SECT ION 132 OR MAKING OF REQUISITION UNDER SECTION 132A, AS THE CASE MAY BE, SHALL ABATE . AS PER THE PROVISIONS OF THIS SECTION WHERE A SEARC H IS INITIATED U/S 132 OF THE ACT, THE A.O SHALL ISSUE A NOTICE REQUIR ING THE PERSON SEARCHED TO FURNISH HIS RETURN OF INCOME IN RESPECT OF EACH ASSESSMENT YEAR FALLING WITHIN SIX ASSESSMENT YEARS IMMEDIATEL Y PRECEDING THE ASSESSMENT YEAR RELEVANT TO THE PREVIOUS YEAR IN WH ICH SUCH SEARCH IS CONDUCTED OR REQUISITION IS MADE. ONCE SUCH RETURNS ARE FILED, THE AO HAS TO ASSESS OR REASSESS THE TOTAL INCOME OF SUCH SIX ASSESSMENT YEARS. (EMPHASIS SUPPLIED BY ME). ( THE DECISIVE WORDS USED IN THE PROVISIONS ARE TO 'ASSESSEE OR REASSESS THE TOTAL I NCOME' ). THE A.O. IS THUS DUTY BOUND TO DETERMINE THE 'TOTAL INCOME' OF THE ASSESSEE FOR SUCH SIX ASSESSMENT YEARS AND IT IS OBVIOUS THAT 'T OTAL INCOME' REFERS TO THE SUM TOTAL OF INCOME IN RESPECT OF WHICH A PERSO N IS ASSESSABLE. THE TOTAL INCOME THEREFORE WILL COVER NOT ONLY THE INCO ME EMANATING FROM DECLARED SOURCES OR ANY MATERIAL PLACED BEFORE THE ASSESSING OFFICER ITA NO. 493/JP/2017 ACIT, CENTRAL CIRCLE-2, JAIPUR VS GODAWARI ESTATES PVT.LTD. KOLKATA 5 BUT FROM ALL SOURCES INCLUDING THE UNDISCLOSED ONES , OR BASED ON THE UNPLACED MATERIAL BEFORE THE AO. SOME RELATED JUDGMENTS A) CIT VS. KABUL CHAWLA (DELHI HIGH COURT) : COMPLETED ASSESSMENTS CAN BE INTERFERED WITH BY THE AO WHILE MAKING THE ASSESS MENT UNDER SECTION 153 A ONLY ON THE BASIS OF SOME INCRIMINATING MATERI AL UNEARTHED DURING THE COURSE OF SEARCH OR REQUISITION OF DOCUMENTS OR UNDISCLOSED INCOME OR PROPERTY DISCOVERED IN THE COURSE OF SEARCH WHICH W ERE NOT B) GURINDER SINGH BAWA VS. DCIT (ITAT MUMBAI) : IN ALL CARGO GLOBAL LOGISTICS 137 ITD 287 (MUM)(SB), THE SPECIAL BENCH HELD THAT IN A CASE WHERE THE ASSESSMENT HAS ABATED THE AO CAN MAKE ADDI TIONS IN THE ASSESSMENT, EVEN IF NO INCRIMINATING MATERIAL HAS B EEN FOUND. HOWEVER, IN A CASE WHERE THE ASSESSMENT HAS NOT ABATED, . C) ANIL KUMAR BHATIA VS. ACIT (ITAT DELHI) : S. 153A DOES NOT AUTHORIZE THE MAKING OF A DE NOVO ASSESSMENT. WHILE UNDER THE 1ST PROVISO, THE AO IS EMPOWERED TO FRAME ASSESSMENT FOR SIX YEARS, UND ER THE 2ND PROVISO, ONLY THE ASSESSMENTS WHICH ARE PENDING ON THE DATE OF INITIATION OF SEARCH ABATE. D) SANJAY AGGARWAL VS. DCIT (ITAT DELHI) : S. 153A: ADDITION IN A SEARCH ASSESSMENT FOR A AY WHICH IS NOT PENDING CAN BE MADE ONLY IF INCRIMINATING MATERIAL IS FOUND DURING SEARCH (I) THE LANGUAGE OF S. 153A HAS BEEN STRUCTURED IN SUCH A WAY SO AS NOT TO PERMIT THE MAKING OF ADDITION FOR THE ASS ESSMENT E) TRISHUL HI-TECH INDUSTRIES VS. DCIT (ITAT KOLKATA) : IT HAS BEEN HELD BY THE ITAT, KOLKATA BENCH IN THE CASE OF LMJ INTERN ATIONAL LIMITED VS. DCIT 119 TTJ (KOL) 214 WHERE NOTHING INCRIMINATING IS FOUND IN THE COURSE OF SEARCH RELATING TO ANY ASSESSMENT YEARS, THE ASS ESSMENTS FOR. F) IT HAS BEEN HELD BY THE ITAT, KOLKATA BENCH IN THE CASE OF LMJ INTERNATIONAL LIMITED VS. DCIT 119 TTJ (KOL) 214 WHERE NOTHING INCRIMINATING IS FOUND IN THE COURSE OF SEARCH RELA TING TO ANY ASSESSMENT YEARS, THE ASSESSMENTS FOR SUCH ASSESSMENT YEARS CA NNOT BE DISTURBED U/S 153C OF THE ACT. THUS IT IS CLEAR THAT THE PROVI SIONS OF SECTION 153C OF THE ACT CANNOT BE INVOKED AUTOMATICALLY IN RESPECT O F ANY ASSESSMENT YEAR UNLESS THERE EXISTS INCRIMINATING DOCUMENTS FOR THA T PREVIOUS YEAR. THE PROVISION OF SECTION 153C OF THE ACT CANNOT BE INVOK ED ON ROUTINE INFORMATION OR ON INCOME ALREADY ACCOUNTED/DISCLOSE D IN THE ORIGINAL RETURN, THE ASSESSMENT OF WHICH IS COMPLETE. IN THI S REGARD WE MAY GAINFULLY REFER TO THE DECISION OF THE MUMBAI SPECI AL BENCH OF THE ITAT IN THE CASE OF AL CARGO GLOBAL LOGISTICS LTD VS. DCIT. ITA NO. 493/JP/2017 ACIT, CENTRAL CIRCLE-2, JAIPUR VS GODAWARI ESTATES PVT.LTD. KOLKATA 6 APART FROM ABOVE, THERE ARE SEVERAL DECISIONS OF VA RIOUS JUDICIAL AUTHORITIES WHERE IT HAS BEEN HELD THAT IN THE ABSENCE OF ANY INCRIMINATING MATERIAL FOUND DURING SEARCH, ADD ITIONS MADE ON THE ASSESSED INCOME ARE UNSUSTAINABLE IN LAW. SO ME OF THESE DECISIONS ARE DISCUSSED IN THE FOLLOWING PARAGRAPHS : (I) IN THE CASE OF CIT VS. KABUL CHAWLA REPORTED IN 281 CTR 45, DELHI IT HAS BEEN HELD BY THE HON'BLE DELHI HIGH COURT THAT: ON A CONSPECTUS OF SECTION 153A(1) OF THE ACT, READ WITH THE PROVISOS THERETO, AND IN THE LIGHT OF THE LAW EXPLAINED IN T HE AFOREMENTIONED DECISIONS, THE LEGAL POSITION THAT EMERGES IS AS UNDER: I. ONCE A SEARCH TAKES PLACE UNDER SECTION 132 OF THE ACT, NOTICE UNDERSECTION153 A(L) WILL HAVE TO BE MANDATORILY IS SUED TO THE PERSON SEARCHED REQUIRING HIM TO FILE RETURNS FOR S IX AYS IMMEDIATELY PRECEDING THE PREVIOUSYEARRELEVANT TO T HE AY IN WHICH THE SEARCH TAKES PLACE. II. ASSESSMENTS AND REASSESSMENTS PENDING ON THE DATE O F THE SEARCH SHALL ABATE. THE TOTAL INCOME FOR SUCH AYS WILL HAV E TO BE COMPUTED BY THE AO AS AFRESH EXERCISE. III. THE AO WILL EXERCISE NORMAL ASSESSMENT POWERS IN RE SPECT OF THE SIX YEARS PREVIOUS TO THE RELEVANT AY IN WHICH THE SEARCH TAKES PLACE. THE AO HAS THE POWER TO ASSESS AND REASSESS THE 'TOTAL INCOME' OF THE AFOREMENTIONED SIX YEARS IN SEPARATE ASSESSMENT ORDERS FOR EACH OF THE SIX YEARS. IN OTHER WORDS TH ERE WILL BE ONLY ONE ASSESSMENT ORDER IN RESPECT OF EACH OF THE SIX AYS 'IN WHICH BOTH THE DISCLOSED AND THE UNDISCLOSED INCOME WOULD BE BROUGHT TO TAX'. IV. ALTHOUGH SECTION 153 A DOES NOT SAY THAT ADDITIONS SHOULD BE STRICTLY MADE ON THE BASIS OF EVIDENCE FOUND IN THE COURSE OF THE SEARCH, OR OTHER POST-SEARCH MATERIAL OR INFORMATIO N AVAILABLE WITH THE AO WHICH CAN BE RELATED TO THE EVIDENCE FOUND, IT DOES NOT MEAN THAT THE ASSESSMENT 'CAN BE ARBITRARY OR MADE WITHOUT ANY RELEVANCE OR NEXUS WITH THE SEIZED MATE RIAL. OBVIOUSLY AN ASSESSMENT HAS TO BE MADE UNDER THIS SECTION ONL Y ON THE BASIS OF SEIZED MATERIAL.' V. IN ABSENCE OF ANY INCRIMINATING MATERIAL, THE CO MPLETED ASSESSMENT CAN BE REITERATED AND THE ABATED ASSESSM ENT OR REASSESSMENT CAN BE MADE. THE WORD 'ASSESS' IN SECTION 153 A IS ITA NO. 493/JP/2017 ACIT, CENTRAL CIRCLE-2, JAIPUR VS GODAWARI ESTATES PVT.LTD. KOLKATA 7 RELATABLE TO ABATED PROCEEDINGS (I.E. THOSE PENDING ON THE DATE OF SEARCH) AND THE WORD 'REASSESS' TO COMPLETED ASSESS MENT PROCEEDINGS. VI. INSOFAR AS PENDING ASSESSMENTS ARE CONCERNED , THE JURISDICTION TO MAKE THE ORIGINAL ASSESSMENT AND THE ASSESSMENT UNDER SE CTION 153A MERGES INTO ONE. ONLY ONE ASSESSMENT SHALL BE MADE SEPARAT ELY FOR EACH AY ON THE BASIS OF THE FINDINGS OF THE SEARCH AND ANY OTH ER MATERIAL EXISTING OR BROUGHT ON THE RECORD OF THE AO. VII. COMPLETED ASSESSMENTS CAN BE INTERFERED WITH BY THE AO WHILE MAKING THE ASSESSMENT UNDER SECTION 153 A ONLY ON THE BASI S OF SOME INCRIMINATING MATERIAL UNEARTHED DURING THE COURSE OF SEARCH OR REQUISITION OF DOCUMENTS OR UNDISCLOSED INCOME OR P ROPERLY DISCOVERED IN THE COURSE OF SEARCH WHICH WERE NOT PRODUCED OR NOT ALREADY DISCLOSED OR MADE KNOWN IN THE COURSE OF ORIGINAL ASSESSMENT. (II) IN THE CASE OF ACIT VS. PACL INDIA LTD. NEW DELHI, THE HON'BLE ITAT, F. BENCH, DELHI HAS CONSIDERED THE VARIOUS DECISIONS O F DIFFERENT JUDICIAL AUTHORITIES AND IN PARA 10 OF THE ORDER HAS HELD THAT: 'THEREFORE, THE QUESTION ARISES WHETHER AO CAN MAKE ANY ADDITION IN THE REASSESSMENT PROCEEDINGS U/S 153(A) AFTER MAKING IN QUIRIES WHICH ARE NOT SUGGESTED BY ANY D DOCUMENTS OR ASSET SEIZED DURING THE SEARCH. IT DEPENDS ON THE NATURE OF ADDITION. THE FACTS AND CIRCUMSTAN CES OF THE ASSESSEE CLEARLY SHOW THAT NO INCRIMINATING DOCUMENT FOUND RELATING TO THE LAND DEVELOPMENT EXPENSES DEBITED IN THE BOOKS OF ACCOUNTS. NO MATER IAL WAS ON THE RECORD ON THAT BASIS WHICH INCOME OF ASSESSEE COULD BE FURTHE R ASSESSED BY ASSESSING OFFICER. THEREFORE, THE ASSESSING OFFICER HAS NO JU RISDICTION TO MAKE OR TO RESORT TO ROVING AND FISHING INQUIRIES TO FIND OUT WHETHER ANY INCOME HAS ESCAPED ASSESSMENT DURING THESE REASSESSMENT PROCEE DINGS. PARTICULARLY, WHEN THERE IS NO INCRIMINATING MATERIAL FOUND AND S EIZED DURING THE COURSE OF SEARCH U/S 132(1) OF THE ACT AND NOTHING IS AVAILAB LE IN RECORD TO REASSESS THE INCOME OF ASSESSEE. IN VIEW OF THE ABOVE, THIS IS N OT A FIT CASE FOR MAKING THE ADDITION IN THE YEAR UNDER CONSIDERATION, THE SAME ARE DELETED.' (III) IN THE CASE OF M/S IDEAL APPLIANCE COMPANY PVT. LTD . VS. DCIT, CENTRAL CIRCLE-44, MUMBAI, THE FOLLOWING LEGAL ISSUES WERE RAISED BEFO RE THE HON'BLE ITAT'1' BENCH, MUMBAI: '1. THE LD CIT (A) FAILED TO APPRECIATE THE FACT TH AT NO INCRIMINATING DOCUMENTS /EVIDENCES WERE FOUND DURING THE COURSE O F SEARCH OF THIRD PARTY, AND HENCE, RE-COMPUTING THE INCOME U/S I53A IS BAD IN LAW AND LIABLE TO BE QUASHED. ITA NO. 493/JP/2017 ACIT, CENTRAL CIRCLE-2, JAIPUR VS GODAWARI ESTATES PVT.LTD. KOLKATA 8 2. THE LD CIT (A) FAILED TO APPRECIATE THE FACT TH AT ORIGINAL ASSESSMENT WAS MADE U/S 143(3) VIDE ORDER 31ST AUGUST 2007 AFTER C ONSIDERING ALL THE DOCUMENTS AND MATERIALS ON RECORD AND DUE APPLICATION FF MIND AND HENCE RE-COMPUTING THE INCOME BY MERELY CHANGING HEAD OF INCOME FOR THE SAID YEAR UNDER THE GRAB OF SECTION 153A BASED ON SAME DOCUME NTS AND MATERIALS, IS BAD IN LAW AND ORDER IS LIABLE TO BE QUASHED, 3. THE LD CIT (A) ERRED IN CONFIRMING THE ACTION OF TH E AO REASSESSING THE INCOME U/S 143(3) R.W.S I53A, WITHOUT APPRECIATING THE FAC T THAT ONLY PENDING ASSESSMENT ABET AND NOT THE COMPLETED ASSESSMENTS A ND HENCE THE ORDER U/S 143(3) R.W.S I53A IS BAD IN LAW AND LIABLE TO BE QU ASHED. 4. THE LD CIT (A) ERRED IN NOT ALLOWING THE DECISION O F JURISDICTIONAL HIGH COURT WHEREIN IT WAS HELD THAT NO ADDITION CAN BE MADE U/ S I53A IF NO INCRIMINATING MATERIAL / DOCUMENTS ARE FOUND DURING SEARCH. THERE FORE, THE ORDER OF THE CIT (A) IS BAD IN LAW.' (IV) ON THESE ISSUES, IT WAS HELD BY THE HON'BLE ITAT TH AT: '9. FROM THE ABOVE SETTLED LEGAL POSITION OF THE I SSUE THAT IN THE ABSENCE OF ANY INCRIMINATING MATERIAL FOUND DURING SEARCH, ADDITI ONS MADE ON THE ASSESSED INCOME ARE UNSUSTAINABLE IN LAW, WE ARE OF THE CONSIDERED OPINION THAT THE ADDITIONS MADE IN THE INSTANT CASE ARE NOT SUST AINABLE AND ACCORDINGLY, WE DELETE THE SAME. CONSIDERING OUR DECISION ON THE LE GAL ISSUE IN FAVOUR OF THE ASSESSEE, THE OTHER GROUNDS DEMAND NO SPECIFIC ADJU DICATION. THUS, ON THE LEGAL GROUND THE ASSESSEE SUCCEEDS AND REST OF THE GROUND S ARE DISMISSED AS ACADEMIC. 9.1. FURTHER, REGARDING THE NON-ABATED NATURE OF T HE ASSESSMENTS RELATING TO THE AYS 2007-2008, 2008-2009 AND 2009-2010, IT IS A DECIDED ISSUED THAT THE TIME LIMIT FOR THE ISSUE OF NOTICE U/S 143(2) IN THE SAID AYS SINC E EXPIRED ON 30.9.2008 AND THEY CONSTITUTE NON-ABATED ASSESSMENTS AND THEREFORE, TH E ASSESSMENTS FOR THOSE AYS HAVE TO BE REASSESSED UNDER THE SPECIAL PROVISIONS IN THE LIGHT OF THE INCRIMINATING MATERIAL SEIZED DURING THE SEARCH. THE ABOVE SAID R ATIO WAS ALSO FOLLOWED BY THE TRIBUNAL IN THE CASE OF GURINDER SINGH BAWA VS. CIT (SUPRA) WHEREIN IT WAS HELD THAT WHERE THE ASSESSMENT HAD BEEN COMPLETED UNDER SUMM ARY SCHEME UNDER SECTION 143(1) AND TIME LIMIT FOR ISSU E OF NOTICE UNDER SECTION 143(2) HAD EXPIRED ON THE DATE OF SEARCH ..THERE WAS NO ASSESSMENT PENDING IN SUCH A CASE THERE WAS NO QUESTION OF ABATEMENT. THEREFORE, ADDITION COULD BE MADE ONLY ON THE BASIS OF INCRIMI NATING MATERIAL FOUND DURING SEARCH.' (V) THE RELEVANT ISSUES AS ARISING OUT OF THE DECISION IN THE CASE OF KABUL CHAWLA AS UNDER: ITA NO. 493/JP/2017 ACIT, CENTRAL CIRCLE-2, JAIPUR VS GODAWARI ESTATES PVT.LTD. KOLKATA 9 1) WHEN THERE IS NO CONDITION IN SECTION 153A OF T HE ACT THAT ADDITIONS CANNOT BE MADE WITHOUT RELEVANCE TO OR WITHOUT NEXUS TO SEIZE D MATERIAL, THEN IS IT FOR THE COURTS TO READ THAT CONDITION INTO THE PROVISIONS O F SECTION 153A OF THE ACT? THE ANSWER IS NO FOR THE REASON THAT THE APPLICATION OF SECTION 148 OF THE ACT HAS BEEN OUSTED BY THE NON-OBSTANTE CLAUSE WITH WHICH S ECTION 153A STARTS. THEREFORE, EVEN IF NO INCRIMINATING MATERIAL IS FOU ND DURING SEARCH, IF ANY UNDISCLOSED INCOME HAS TO BE ASSESSED FOR THE RELEV ANT 6 YEARS, IT HAS TO BE IN THE PROCEEDINGS UNDER SECTION 153A OF THE ACT. A) NOW THERE ARE TWO SITUATIONS - EITHER THE ASSESS MENT WAS COMPLETE BEFORE THE SEARCH OR PENDING AT THAT TIME. IF THE ASSESSM ENT WAS COMPLETE, AND IF ANY INCOME WHICH HAD ESCAPED ASSESSMENT IN THE REGU LAR ASSESSMENT IS FOUND DURING PROCEEDINGS U/S 153A, WHAT IS THE AO SUPPOSE D TO DO? HE HAS NO POWER TO ACT U/S 147/148 BECAUSE OF THE NON-OBSTANTE CLAU SE. HE IS NOW PRECLUDED FROM INVOKING PROVISIONS OF SECTION 148 BECAUSE OF THE CONCLUSION DRAWN IN KABUL CHAWLA. B) THE SITUATION IS EVEN MORE SERIOUS IF A PENDING ASSESSMENT OR REASSESSMENT ABATES. WHAT IF A SHOW-CAUSE NOTICE HAD BEEN ISSUE D ON AN UNDISCLOSED INCOME PRIOR TO SEARCH? ACCORDING TO KABUL CHAWLA I F NO INCRIMINATING MATERIAL IS FOUND DURING SEARCH, THEN NO ACTION CAN BE TAKEN IN SUCH CASES ALSO. NO INTERPRETATION OF A PROVISION OF AN ACT CAN BE SUCH THAT IT LEADS TO RESULTS WHICH WERE NEVER INTENDED. BY DRAWING A CO NCLUSION THAT THE PRESENCE OF INCRIMINATING MATERIAL, AND ADDITION THEREON IS NECESSARY FOR MAKING AN ADDITION WHICH IS NOT BASED ON MATERIAL FOUND DURIN G SEARCH, KABUL CHAWLA HAS DONE EXACTLY THAT, AND SO IT HAS TO BE HELD THAT TH E CONCLUSION SO DRAWN IS PER INCURIAM. IN THIS REGARD I DRAW SOLACE FROM THE DECISION OF THE ALLAHABAD HIGH COURT IN THE CASE OF CIT V. RAJ KUMAR ARORA [2014] 367 ITR 517(ALL.) AND THE DECISION OF THE DELHI HIGH COURT IN THE CASE OF FILATEX INDIA LTD. V. CIT[2014] 49 TAXMANN.COM 465(DELHI) BOTH OF WHICH PRECEDE THE DECISION IN THE CASE OF KABUL CHAWLA. 2) THERE IS ANOTHER SITUATION WHICH HAS NOT BEEN AN TICIPATED IN KABUL CHAWLA. IN THAT CASE THE HONBLE HIGH COURT PROCEEDED ON THE GROUND S THAT PROCESSING OF A CASE U/S 143(1) WAS ALSO ASSESSMENT. IT ACCORDINGLY HEL D THAT EVEN IF THE RETURNS HAVE BEEN PROCESSED U/S 143(1) IT WILL BE TREATED AS IF THE ASSESSMENTS ARE COMPLETE. NOW AFTER THE DECISION OF THE HONBLE SUPREME COURT IN THE CASE OF DEPUTY COMMISSIONER OF INCOME-TAX V. ZUARI ESTATE DEVELOPM ENT & INVESTMENT CO. LTD. [2015] 373 ITR 661 (SC) AND ASSISTANT COMMISSIONER OF INCOME-TAX V. RAJESH JHAVERI STOCK BROKERS P. LTD. [2007] 291 ITR 500(SC) IT IS CLEAR THAT ITA NO. 493/JP/2017 ACIT, CENTRAL CIRCLE-2, JAIPUR VS GODAWARI ESTATES PVT.LTD. KOLKATA 10 PROCESSING OF A CASE U/S 143(1) IS NOT AN ASSESSMEN T, WHICH FACT HAS BEEN ADMITTED BY THE DELHI HIGH COURT IN THE CASE OF INDU LATA RANGWALA V. DEPUTY COMMISSIONER OF INCOME-TAX, WP(C) 1393/2002 IN THEIR DECISION DATED 18.05.2016. 3) HENCE, THERE NOW OCCURS A THIRD CATEGORY OF CA SES WHICH HAVE NEITHER BEEN COMPLETED NOR ARE PENDING ON THE DATE OF SEARCH. KA BUL CHAWLA IS SILENT ON THIS SITUATION, PERHAPS BECAUSE IT WAS NOT ENVISAGED AT THAT TIME. IN VIEW OF THESE FACTS AND LEGAL POSITION THAT THE PREMISE DEVELOPED IN KABUL CHAWLA, THAT ADDITIONS CAN BE MADE IN THE COMPLETED OR ABATED ASSESSMENTS ONLY IF THERE IS INCRIMINATING MATERIAL IN A PROCEEDING U/S 153A, CANNOT AND WILL NOT APPLY TO SUCH A SITUATION. 4) NOW WE COME TO THE QUESTION OF WHETHER IT IS NECESSARY TO HAVE INCRIMINATING MATERIAL IN ALL THE 6 YEARS FOR AN ADDITION TO ME M ADE ON ISSUES NOT COVERED BY SEARCH. THOUGH THERE IS AN ATTEMPT TO INTERPRET KAB UL CHAWLA IN A WAY THAT INCRIMINATING MATERIAL IS REQUIRED IN ALL THE 6 YEA RS, THIS INTERPRETATION IS INCORRECT BECAUSE: WHILE GIVING THESE DECISIONS, THE HON'BLE ITAT, MUM BAI AS WELL AS THE HON'BLE ITAT, DELHI BENCH HAS REFERRED TO THE DECISION OF THE HON 'BLE MUMBAI HIGH COURT IN THE CASE OF ALL CARGO GLOBAL LOGISTICS LIMITED VS. DCIT, CENTRA L CIRCLE-44, MUMBAI AND THE DECISION OF HON'BLE DELHI HIGH COURT IN THE CASE OF CIT VS. KABUL CHAWLA IN ITA NO. 707/2014 DATED 22.8.2015 . HERE IT IS PERTINENT TO MENTION THAT THE DEPARTMENT HAS NOT ACCEPTED ITA NO. 493/JP/2017 ACIT, CENTRAL CIRCLE-2, JAIPUR VS GODAWARI ESTATES PVT.LTD. KOLKATA 11 THE DECISIONS OF HON'BLE MUMBAI HIGH COURT IN THE C ASE OF M/S ALL CARGO GLOBAL LOGISTICS AS WELL AS CONTINENTAL WAREHOUSING (NHAVA SHEVA) LTD., AND SLP HAS BEEN FILED BEFORE THE HON'BLE SUPREME COURT. THE HON'BLE SUPREME COURT HAS GRANTED LEAVE VIDE ORDER DATED 12.10.2015 AS REPORTED IN 64 TAXMANN.COM 34 (S.C.). SIMILARLY, IN THE CASE OF KABUL CHAWLA SLP HAS ALSO BEEN FILED. NOW AFTER THE DECISION OF THE HONBLE SUPREME C OURT IN THE CASE OF DEPUTY COMMISSIONER OF INCOME-TAX V. ZUARI ESTATE D EVELOPMENT & INVESTMENT CO. LTD. [2015] 373 ITR 661 (SC) AND ASSISTANT COMMISSIONER OF INCOME-TAX V. RAJESH JHAVERI STOCK BROKERS P. LT D. [2007] 291 ITR 500(SC) IT IS CLEAR THAT PROCESSING OF A CASE U/S 143(1) I S NOT AN ASSESSMENT, WHICH FACT HAS BEEN ADMITTED BY THE DEL HI HIGH COURT IN THE CASE OF INDU LATA RANGWALA V. DEPUTY COMMISSIONER OF INCOME - TAX, WP(C) 1393/2002 IN THEIR DECISION DATED 18.05.2016. HENCE, THERE NOW OCCURS A THIRD CATEGORY OF CASES WHICH HAVE N EITHER BEEN COMPLETED NOR ARE PENDING ON THE DATE OF SEARCH. KABUL CHAWLA IS SILENT ON THIS SITUATION, PERHAPS BECAUSE IT WAS NO T ENVISAGED AT THAT TIME. IT IS MY CONTENTION THAT THE PREMISE DEVELOP ED IN KABUL CHAWLA , THAT ADDITIONS CAN BE MADE IN THE COMPLETED OR ABAT ED ASSESSMENTS ONLY IF THERE IS INCRIMINATING MATERIAL IN A PROCEE DING U/S 153A, CANNOT AND WILL NOT APPLY TO SUCH A SITUATION. NOW WE COME TO THE QUESTION OF WHETHER IT IS NECESS ARY TO HAVE INCRIMINATING MATERIAL IN ALL THE 6 YEARS FOR AN AD DITION TO ME MADE ON ISSUES NOT COVERED BY SEARCH. THOUGH THERE IS AN AT TEMPT TO INTERPRET KABUL CHAWLA IN A WAY THAT INCRIMINATING MATERIAL I S REQUIRED IN ALL THE 6 YEARS, THIS INTERPRETATION IS INCORRECT BECAUSE : A) THIS PROPOSITION HAS NOT BEEN SPECIFICALLY SPELT OUT IN THE KABUL CHAWLA CASE; B) THE DELHI HIGH COURT IN THE CASE OF CIT V. CHETAN DAS LACHMAN DAS [2012] 211 TAXMAN 61 (DEL.)/[2012] 254 CTR 392 (DEL.) HAS SPECIFICALLY RAISED AND THEN ANSWERED THE QUESTION IN FAVOUR OF THE REVENUE. IT HAS STATED THAT ADDITIONS ON NON-SEARCH ISSUES ITA NO. 493/JP/2017 ACIT, CENTRAL CIRCLE-2, JAIPUR VS GODAWARI ESTATES PVT.LTD. KOLKATA 12 CAN BE MADE EVEN IF THERE IS INCRIMINATING MATERIAL IN EVEN ONE YEAR. THIS CASE IS EXTREMELY IMPORTANT FOR US. SIMILAR SENTIMENTS HAVE BEEN EXPRESSED IN THE CASE OF CIT V. ANIL KUMAR BHATIA [2013] 352 ITR 493 (DEL) WHERE ONLY ONE UNSIGNED DOCUMENT DATED 10.02.2003 SHOWING A LOAN OF RS. 1,5 0,000/- WAS FOUND DURING SEARCH CONDUCTED ON 13.12.2005. THE HO NBLE HIGH COURT HELD THAT THIS MATERIAL WAS ENOUGH TO JUSTIFY ADDITIONS IN ALL THE 6 YEARS. C) RECENTLY, THE KERALA HIGH COURT IN SUNNY JACOB JEWELLERS AND WEDDING CENTRE V. DEPUTY COMMISSIONER OF INCOME-TAX [2014] 362 ITR 664 (KER) HAS ALSO VERY CATEGORICALLY STATED THAT INCRIMINATING MATERIAL FOUND DURING SEARCH IS NOT NECESSARY IN ALL THE 6 YEARS FOR ADDITIONS TO BE MADE ON OTHER ISSUE S. THEREFORE, IN VIEW OF ABOVE DISCUSSION WITH RE GARD TO THE PROVISIONS OF SEC 153A OF THE ACT, IT IS SEEN THAT FROM 01.06. 2003 ONWARDS THE NUMBER OF YEARS FROM WHICH ASSESSMENTS COULD BE FRA MED AFTER SEARCH WERE REDUCED FROM 10 TO SIX. SECTION 153A OF THE AC T HAS MANDATED THAT THERE HAVE TO BE 6 SEPARATE ASSESSMENTS INSTEA D OF A BLOCK ASSESSMENT. IT ALSO STARTED WITH A NON-OBSTANTE CLAUSE WHICH STATED THAT THE OPERATION OF SECTIONS 139, 147,148,149,151,AND 153 WAS OUSTED. IN OTHER WORDS WHEN AN ASSESSMENT WAS BEING COMPLETED U/S 153A, THE SECTIONS MENTIONED ABOVE COULD NOT BE INVOKED. THE SECTION DID NOT, REPEATS, AND DID NOT MENTION THAT FOR MAKING AN ASSESSMENT U /S 153A OF THE ACT , IT WAS NECESSARY TO HAVE SOME INCRIMINATING MATER IAL FOUND DURING SEARCH. IN THE CASE OF KABUL CHAWLA, IT WAS STATED THAT ASSESSMENTS HAD TO BE COMPLETED U/S 153A OF THE ACT THE MOMENT A SEARCH HAS TAKEN PLACE. THIS IS A COMMON GROUND IN ALL JUDICIAL PRONOUNCEMENTS, AND NOBODY HAS ANY OBJECTION TO THE SAID CONCLUSION. IT WAS ALSO STATED IN THE ABOVE CASE THAT, THOUGH NOT PRESCRIBED IN THE ACT, BUT ADDITIONS HAD TO BE MADE ON THE BASIS OF INCRIMINATING MATERIAL FOUND DURING SEARCH. THE AD DITIONS COULD NOT BE ARBITRARY. THIS CONCLUSION, AND OTHERS ARRIVED AT IN PARA 37 OF THE JUDGMENT STARTED THE PRESENT CONTROVERSY. IT IS OBV IOUS THAT IF NO ITA NO. 493/JP/2017 ACIT, CENTRAL CIRCLE-2, JAIPUR VS GODAWARI ESTATES PVT.LTD. KOLKATA 13 INCRIMINATING MATERIAL IS FOUND DURING SEARCH, THEN ADDITIONS, IF ANY, HAVE TO BE MADE IN THE INCOME SHOWN IN THE RETURN O F INCOME ( IN THE CASE OF PENDING ASSESSMENTS WHICH ABATE ) AND TO THE COMPUTED INCOME ( IN CASE OF ASSESSMENTS WERE COMPLETED) . THUS EFFECTIVELY, WHAT WAS SAID IN THE CASE OF KABUL CHAWLA WAS THAT MAKING ANY ADDITION IN THE RETURNED INCOME OR INCOME EARLIER A SSESSED WAS NOT ALLOWED IF NO MATERIAL WAS FOUND IN THE SEARCH WHIC H COULD LEAD TO AN ADDITION ON THE BASIS OF THE SAID MATERIAL. THEREFORE, FACTS OF CASE LAWS RELIED UPON BY THE ASSESSEE ARE QUITE DISTINGUISHABLE WITH THAT OF THE PRESENT CASE. IN V IEW OF THESE FACTS, ASSESSEES CONTENTION IS NOT CORRECT THAT AO WAS NOT JUSTIFIED IN REASSESSING THE COMPLETED ASSESSMENT. ASSESSEES AP PEAL FAILS IN GR NO 1. 3.2 GROUND NO. 2 & 3: REGARDING ADDITION OF RS. 2,00,00,000/- MADE BY APPLYING THE PROVISIONS OF SECTION 56(1) OF INCOME TAX ACT, 1961 TREATING THE SHARE C APITAL AND PREMIUM THEREON RECEIVED FROM VARIOUS COMPANIES AS INCOME OF THE ASSESSEE. 3.2.1 SUBMISSION MADE : RELEVANT EXTRACTS OF WHICH AR OF THE ASSESSEE ARE REPRODUCED HERE AS UNDER: .. .. 1) DURING THE YEAR UNDER CONSIDERATION THE ASSESSEE ALLOTTED 2,00,000 EQUITY SHARES OF RS. 10 EACH TO VARIOUS COMPANIES AT A PREM IUM OF RS. 90/- PER SHARE DETAIL OF WHICH IS AS UNDER: - S. N. NAME NO. OF SHARES ALLOTED/ APPLIED DURING THE YEAR AMOUNT ADJUSTED AGAINST SHARE CAPITAL RATE PER SHARE AMOUNT ADJUSTED AGAINST SHARE PREMIUM RATE OF PREMIUM PER SHARE ISSUE PRICE OF THE SHARE TOTAL CONSIDERATION RECEIVED 1. DEBDARU VINIMAY PVT. LTD 25,000 2,50,000 10 22,50,000 90 100 25,00,000 2. JAI PITRESHWAR VYAPAAR PVT. LTD 15,000 1,50,000 10 13,50,000 90 100 15,00,000 3. MAINAK VINCOM PVT. LTD 50,000 5,00,000 10 45,00, 000 90 100 50,00,000 4. PUSPA DEALERS PVT. LTD 50,000 5,00,000 10 45,00, 000 90 100 50,00,000 ITA NO. 493/JP/2017 ACIT, CENTRAL CIRCLE-2, JAIPUR VS GODAWARI ESTATES PVT.LTD. KOLKATA 14 5. SNOWFALL COMMERCIAL PVT. LTD 25,000 2,50,000 10 22,50,000 90 100 25,00,000 6. VIGNESH INFO SERVICES PVT. LTD 35,000 3,50,000 10 31,50,000 90 100 35,00,000 TOTAL 2,00,000 20,00,000 1,80,00,000 2,00,00,000 2) DURING THE COURSE OF ASSESSMENT PROCEEDINGS THE ASSESSEE SUBMITTED THE FOLLOWING DOCUMENTS TO PROVE THEIR IDENTITY OF SHAR EHOLDERS, CREDITWORTHINESS OF SHAREHOLDERS AND GENUINENESS OF TRANSACTION WITH TH EM: - NAME OF SHAREHOLDER PARTICULARS OF DOCUMENTS SUBMITTED COPY AT PB PAGE DEBDARU VINIMAY PVT. LTD SHARE APPLICATION CONTAINING THE NAME/ADDRESS/PAN OF PARTY, DETAIL OF PAYMENT RECEIVED ETC. COPY OF BOARD RESOLUTION. COPY OF PAN CARD OF PARTY. COPY OF ACK. OF ITR OF AY 2010-11. COPY OF AUDIT REPORT AND AUDITED BALANCE SHEET ALON G WITH ANNEXURE OF 31.03.10. COPY OF BANK STATEMENT SHOWING THE ENTRY OF PAYMENT MADE TO ASSESSEE. DECLARATION OF SOURCE OF FUNDS WITH PARTY. COPY OF REGISTRATION CERTIFICATE OF ROC. 46 TO 47 48 49 50 51 TO 60 61 TO 62 63 64 JAI PITRESHWAR VYAPAAR PVT. LTD SHARE APPLICATION CONTAINING THE NAME/ADDRESS/PAN OF PARTY, DETAIL OF PAYMENT RECEIVED ETC. COPY OF BOARD RESOLUTION. COPY OF PAN CARD OF PARTY. COPY OF BANK STATEMENT SHOWING THE ENTRY OF PAYMENT MADE TO ASSESSEE. COPY OF ACK. OF ITR OF AY 2010-11. COPY OF AUDIT REPORT AND AUDITED BALANCE SHEET ALON G WITH ANNEXURE OF 31.03.10. DECLARATION OF SOURCE OF FUNDS WITH PARTY. COPY OF REGISTRATION CERTIFICATE OF ROC. 65 66 67 68 69 70 TO 78 79 80 MAINAK VINCOM PVT. LTD SHARE APPLICATION CONTAINING THE NAME/ADDRESS/PAN O F PARTY, DETAIL OF PAYMENT RECEIVED ETC. COPY OF BOARD RESOLUTION. COPY OF PAN CARD OF PARTY. COPY OF ACK. OF ITR OF AY 2010-11. COPY OF AUDIT REPORT AND AUDITED BALANCE SHEET ALON G WITH ANNEXURE OF 31.03.10. DECLARATION OF SOURCE OF FUNDS WITH PARTY. COPY OF REGISTRATION CERTIFICATE OF ROC. 81 TO 84 85 86 87 88 TO 97 98 TO 99 100 ITA NO. 493/JP/2017 ACIT, CENTRAL CIRCLE-2, JAIPUR VS GODAWARI ESTATES PVT.LTD. KOLKATA 15 PUSPA DEALERS PVT. LTD SHARE APPLICATION CONTAINING THE NAME/ADDRESS/PAN O F PARTY, DETAIL OF PAYMENT RECEIVED ETC. COPY OF BOARD RESOLUTION. COPY OF PAN CARD OF PARTY. COPY OF BANK STATEMENT SHOWING THE ENTRY OF PAYMENT MADE TO ASSESSEE. COPY OF ACK. OF ITR OF AY 2010-11. COPY OF AUDIT REPORT AND AUDITED BALANCE SHEET ALON G WITH ANNEXURE OF 31.03.10. DECLARATION OF SOURCE OF FUNDS WITH PARTY. COPY OF REGISTRATION CERTIFICATE OF ROC. 101 TO 104 105 106 107 TO 109 110 111 TO 120 121 TO 122 123 SNOWFALL COMMERCIAL PVT. LTD SHARE APPLICATION CONTAINING THE NAME/ADDRESS/PAN O F PARTY, DETAIL OF PAYMENT RECEIVED ETC. COPY OF BOARD RESOLUTION. COPY OF PAN CARD OF PARTY. COPY OF ACK. OF ITR OF AY 2010-11. COPY OF AUDIT REPORT AND AUDITED BALANCE SHEET ALON G WITH ANNEXURE OF 31.03.10. DECLARATION OF SOURCE OF FUNDS WITH PARTY. COPY OF REGISTRATION CERTIFICATE OF ROC. 124 TO 125 126 127 128 129 TO 138 139 140 VIGNESH INFO SERVICES PVT. LTD SHARE APPLICATION CONTAINING THE NAME/ADDRESS/PAN O F PARTY, DETAIL OF PAYMENT RECEIVED ETC. COPY OF BOARD RESOLUTION. COPY OF PAN CARD OF PARTY. COPY OF BANK STATEMENT SHOWING THE ENTRY OF PAYMENT MADE TO ASSESSEE. COPY OF ACK. OF ITR OF AY 2010-11. COPY OF AUDIT REPORT AND AUDITED BALANCE SHEET ALON G WITH ANNEXURE OF 31.03.10. DECLARATION OF SOURCE OF FUNDS WITH PARTY. 141 TO 142 143 144 145 146 147 TO 158 159 3. ALL THE SHARE CAPITAL/SHARE APPLICATION WAS RECEI VED THROUGH A/C PAYEE CHEQUES AND VERIFIABLE FROM BANK STATEMENT OF ASSESSEE AS W ELL AS BANK STATEMENT OF THE PARTY. THE ONUS U/S 68 OF THE ASSESSEE IS TO PROVE THE IDENTITY, CAPACITY AND GENUINENESS OF THE TRANSACTIONS HAS BEEN DISCHARGED WHICH MAY BE SEEN FROM THE FOLLOWINGS:- I) IDENTITY:- THE ASSESSEE PROVED THE IDENTITY OF ALL THE COMPA NIES BY FILING THE SHARE APPLICATION RECEIVED FROM THE PARTIES AND THE PARTI ES ARE DULY IN EXISTENCE AND THE EXISTENCE OF THE PARTIES CAN BE VERIFIED FROM T HE OFFICIAL WEBSITE OF MCA. THE LD. AO ALSO NOT DOUBTED THE IDENTITY OF THE ABOVE NA MED COMPANIES. FURTHER THE NOTICE ISSUED U/S 133(6) OF INCOME TAX ACT, 1961 WAS DULY SERVED ON ALL THE COMPANIES WHICH ALSO PROVE THE IDENTITY OF THE PART IES. II) CREDITWORTHINESS ALL THE COMPANIES ARE INCOME TAX ASSESSEE AND DUL Y FILING THE INCOME TAX RETURN AND BALANCE SHEETS. THERE IS SUFFICIENT SOUR CE OF FUNDS WITH ALL THE COMPANIES TO INVESTMENT SHARE CAPITAL/SHARE APPLICA TION IN THE ASSESSEE COMPANY. THE ASSESSEE SUBMITTED THE COPIES OF BANK ACCOUNT/DECLARATION OF SOURCE OF FUNDS WITH THEM OF INVESTOR COMPANIES. TH E BANK STATEMENT SHOWS THE HUGE TRANSACTION OF HIGH VALUE IN THE ACCOUNTS OF T HE COMPANIES. THE CHART ITA NO. 493/JP/2017 ACIT, CENTRAL CIRCLE-2, JAIPUR VS GODAWARI ESTATES PVT.LTD. KOLKATA 16 SHOWING THE AMOUNT INVESTED BY THE ABOVE NAMED COMP ANIES IN ASSESSEE COMPANY VIZ A VIZ OWN FUNDS WITH THE INVESTOR COMPA NY ARE AS UNDER: - NAME OF THE INVESTOR COMPANY AMOUNT INVESTED IN ASSESSEE COMPANY SHARE CAPITAL AND RESERVE & SURPLUS WITH INVESTOR COMPANIES AS ON 31.03.2010 SHARE CAPITAL AND RESERVE & SURPLUS WITH INVESTOR COMPANIES AS ON 31.03.2009 DEBDARU VINIMAY PVT. LTD 25,00,000 16,26,16,947 14,20,06,978 JAI PITRESHWAR VYAPAAR PVT. LTD 15,00,000 56,65,000 1,00,000 MAINAK VINCOM PVT. LTD 50,00,000 15,41,21,655 15,41,13,205 PUSPA DEALERS PVT. LTD 50,00,000 13,16,36,604 13,16,22,036 SNOWFALL COMMERCIAL PVT. LTD 25,00,000 19,97,89,784 18,37,75,295 VIGNESH INFO SERVICES PVT. LTD 35,00,000 3,03,00,000 6,27,314 FROM THE ABOVE CHART IT IS CLEAR THAT ALL THE INVE STOR COMPANIES WERE HAVING THEIR OWN SHARE CAPITAL AND RESERVE & SURPLUS WHICH WAS MU CH MORE THAN TO THE AMOUNT INVESTED IN THE ASSESSEE COMPANY. THE ABOVE CHART SHOWS THAT THE INVESTOR COMPANIES WERE HAVING THEIR OWN INDEPENDEN T FUNDS AND HAVING THEIR INDEPENDENT SOURCE TO INVEST IN THE SHARES OF THE A SSESSEE COMPANY. APART FROM THE INVESTMENT MADE IN THE SHARES OF ASSESSEE COMPA NIES, THE INVESTOR COMPANIES WERE ALSO HAVING INVESTMENTS IN SHARES OF OTHER COMPANIES OR LOANS & ADVANCES TO PARTIES WHICH IS MUCH MORE THAN TO TH E AMOUNT INVESTED IN THE ASSESSEE COMPANY, THEREFORE FROM THE BANK STATEMENT AS WELL AS FINANCIALS STATEMENTS OF THE INVESTOR COMPANIES THEIR CREDITWO RTHINESS IS DULY PROVED. III) GENUINENESS THE ASSESSEE SUBMITTED THE SHARE APPLICATION FORM RECEIVED FROM ABOVE COMPANIES AGAINST THE SHARE APPLICATION RECEIVED FR OM THE COMPANIES. THE SHARE APPLICATION IS SUPPORTED BY BOARD RESOLUTION PASSED IN THE INVESTOR COMPANIES. THE ASSESSEE COMPANY HAS ALLOTTED THE SHARES TO THE INVESTOR COMPANIES. THE PROPER RETURNS WERE FILED BEFORE THE ROC AGAINST AL LOTMENT OF THE SHARES TO THESE COMPANIES. FURTHERMORE, THE DEPARTMENT HAS CARRIED OUT INTENSIVE SEARCH OPERATIONS OVER THE MOTISONS GROUP AND NO ANY INCRI MINATING MATERIAL WAS FOUND TO SHOW THAT THE MONEY AGAINST THE SHARE ALLO TMENT WAS OWN MONEY OF THE COMPANY. SHARES CERTIFICATES WERE ISSUED AGAINS T THE ALLOTMENT OF THE SHARES TO THESE COMPANIES WERE NOT FOUND FROM THE POSSESSI ON OF THE ASSESSEE GROUP OR ITS DIRECTOR OR EMPLOYEES. THIS FACT SHOWS THAT AFT ER ALLOTMENT OF SHARES BY THE APPELLANT COMPANY SHARE CERTIFICATES WERE DISPATCHE D TO THE SUBSCRIBER COMPANIES. NO ANY ENTRY IN BOOKS OF ACCOUNT OR DOCU MENT WAS FOUND SHOWING PAYMENT OF CASH TO THESE INVESTOR COMPANIES AGAINST RECEIPT OF CHEQUES FROM THESE COMPANIES AGAINST ALLOTMENT OF SHARES. THEREF ORE THE GENUINENESS OF THE TRANSACTIONS CANNOT BE DOUBTED. 4. THE LD. AO ALSO NOT DOUBTED THE IDENTITY OF THE S HAREHOLDERS AND HE ONLY DOUBTED THE CREDITWORTHINESS AND GENUINENESS OF THE TRANSACTIONS FOR THE FOLLOWING REASONS AS GIVEN IN PARA 11 (A TO C) AND PARA 12 OF THE ASSESSMENT ORDER: - I) THE ASSESSEE COMPANY WAS INCORPORATED ON 27.11 .1989 AND DURING THE YEAR THE ASSESSEE COMPANY RECEIVED THE HUGE SHA RE PREMIUM. ITA NO. 493/JP/2017 ACIT, CENTRAL CIRCLE-2, JAIPUR VS GODAWARI ESTATES PVT.LTD. KOLKATA 17 II) AS PER THE AUDITED P&L ACCOUNT AND BALANCE SHE ET THE ASSESSEE COMPANY DID NOT HAVE ANY BUSINESS COMMENSURATE OF S HARE PREMIUM. III) PERUSAL OF THE BALANCE SHEET OF THE ASSESSEE COMPANY REVEALED THAT THERE WERE NO PHYSICAL ASSETS/ASSETS ARE NOT IN COM MENSURATE TO VALUE OF SHARE WITH THE COMPANY WITHER IN THE FORM OF FIXED ASSETS , PLANT & MACHINERY ETC. IN THE ABOVE BACKGROUND THE RECEIPT OF SHARE CAPITA L RS. 20,00,000/- AND PREMIUM TO THE TUNE OF RS. 1,80,00,000/- DURING THE YEAR UNDER CONSIDERATION WAS NOT ONLY ABNORMAL BUT ALSO APPEARED TO BE A PART OF A WELL P LANNED EXERCISE OF TAX EVASION AS DISCUSSED EARLIER. REGARDING THESE FINDINGS/OBSERVATIONS OF LD. AO WE MAY SUBMIT AS UNDER: - I) ADMITTEDLY DURING THE YEAR UNDER CONSIDERATION THE A SSESSEE COMPANY RECEIVED HUGE SHARE PREMIUM BUT THE SAME DOES NOT AUTOMATICA LLY MAKE THE SHARE PREMIUM AS NON GENUINE AND TAXABLE IN THE HANDS OF THE ASSESSEE. THE INVESTMENT BY THE INVESTEE COMPANIES WAS MADE AFTER BEING CONVINCED WITH THE FUTURE BUSINESS PLANNING OF THE ASSESSEE COMPANY. T HE ASSESSEE COMPANY IN NBFC AND DUE TO INCREASE IN DEMAND OF LOANS IN MARK ET FROM NBFC THE ASSESSEE COMPANY WAS EXPECTING GOOD BUSINESS & REVE NUE IN NEAR FUTURE AND THE INVESTOR COMPANIES WERE CONVINCED TO BE PARTNER OF THE ASSESSEE COMPANY, THEREFORE THEY INVESTED THE FUNDS IN THE ASSESSEE C OMPANY. THUS THE INVESTMENT MADE BY THE INVESTEE COMPANIES IN SHARES OF THE ASS ESSEE COMPANY ON THE BASIS OF FUTURE BUSINESS PLANS OF THE ASSESSEE COMP ANY AND OUTCOME THERE FROM. II) ADMITTEDLY WHEN THE SHARE PREMIUM WAS RECEIVED, THE BUSINESS ACTIVITIES OF THE ASSESSEE COMPANY WAS NOT COMMENSURATE TO SHARES PRE MIUM BUT AS STATED EARLIER THE INVESTMENT WAS MADE BY THE INVESTEE COM PANIES IN SHARES OF THE ASSESSEE COMPANY ON THE BASIS OF FUTURE BUSINESS EX PANSION PLANS OF THE ASSESSEE COMPANY AND OUTCOME THERE FROM. FURTHER TH E ASSESSEE COMPANY IS ONE OF THE GROUP COMPANY OF MOTISONS GROUP. THE MOT ISONS GROUP IS VERY PRESTIGIOUS AND WELL KNOW GROUP OF THE NORTHERN PAR T OF INDIA, THEREFORE THE INVESTOR COMPANY INVESTED THE FUNDS IN THE ASSESSEE COMPANY ON THE GOODWILL OF THE MOTISONS GROUP AFTER KNOWING THEIR FUTURE PLANS AND FUTURE EARNINGS. THEREFORE THE SHARE CAPITAL/SHARE PREMIUM INVESTED BY INVESTOR COMPANIES WAS NOT ON THE BASIS OF CURRENT AFFAIRS OF THE ASSESSEE COMPANY BUT THE SAME WAS RESULT OF FUTURE BUSINESS EXPANSION PLANS COUPLED W ITH GOODWILL OF MOTISONS GROUP. III) ADMITTEDLY WHEN THE SHARE WERE ISSUED THE BOOK VALUE OF THE ASSETS OF THE ASSESSEE COMPANY WAS NOT IN COMMENSURATE TO THE VAL UE OF THE SHARES BUT WHILE MAKING THE INVESTMENTS THE CURRENT MARKET VAL UE OF THE ASSETS (INCLUDING GOODWILL) AND FUTURE POTENTIALITY & PROFITABILITY O F THE PROJECT/ASSETS ARE ALSO TAKEN INTO CONSIDERATION AND THEN THE INVESTMENTS A RE MADE. THERE ARE LOTS OF ITA NO. 493/JP/2017 ACIT, CENTRAL CIRCLE-2, JAIPUR VS GODAWARI ESTATES PVT.LTD. KOLKATA 18 COMPANIES WHICH ISSUE THE SHARES IN MARKET THROUGH IPO AND THE SHARES OF SUCH COMPANIES ARE SUBSCRIBED ON THE BASIS OF THEIR DECL ARATION REGARDING THEIR FUTURE BUSINESS PLANNING FOR WHICH THE FUNDS RAISED IN IPO . THUS THE EXISTING FIXED ASSETS OF THE COMPANY ALWAYS NOT TO BE THE CRITERIA FOR DECIDING THE INVESTMENT IN SHARES BY INVESTOR COMPANIES. IV) REGARDING OBSERVATION OF LD. AO THAT SHARE CAPITAL AN D PREMIUM APPEARED TO BE A PART OF A WELL PLANNED EXERCISE OF TAX EVASION AS DISCUSSED EARLIER THIS IS TO SUBMIT THAT TAXING EVENT AROSE WHEN THE INCOME IS E ARNED AND THE TAX EVASION IS AROSE WHEN THE UNDISCLOSED INCOME IS GENERATED. IN THE FORGOING PARAS THE LD. AO HIMSELF DOUBTED THE SHARE PREMIUM ON THE GROUND THAT THE ASSESSEE COMPANY DID NOT HAVE ANY BUSINESS COMMENSUR ATE OF SHARE PREMIUM. WHEN THE ASSESSEE COMPANY IS NOT HAVING ANY SUCH BUSINESS THAN QUESTION OF HAVING ANY INCOME EITHER DISCLOSED OR UNDISCLOSED DOES NOT ARISE AND WHEN THERE IS NO SUCH INCOME THAN HOW THE TAX CAN BE EVADED THEREON. THEREFORE IN VIEW OF FINDING GIVEN IN THESE PARAS BY THE LD. AO IT HAD TO BE PROVED FIRST BY THE DEPARTMENT THAT THE ASSESSEE WA S HAVING SOME INCOME ON WHICH IT HAS NOT PAID THE TAX AND THE SAME BROUGHT IN BOOKS OF ACCOUNTS IN THE FORM OF SHARE CAPITAL & PREMIUM THEREON. BUT IN THE INSTANT CASE THE DEPARTMENT COULD NOT PROVE ANY KIND OF UNDISCLOSED SOURCE OF I NCOME OF THE ASSESSEE AS A RESULT OF SEARCH OVER ASSESSEE GROUP AS WELL AS DUR ING THE COURSE OF ASSESSMENT PROCEEDINGS. AS A RESULT OF SO CALLED LONG INQUIRIES /ANALYSIS THE DEPARTMENT COULD NOT EVIDENTIARY PROVED THAT THE ASSESSEE COMP ANY MANAGED ITS FUNDS WITH INVESTOR COMPANIES TO BROUGHT THE SAME IN BOOKS OF ACCOUNTS IN THE FORM OF SHARE CAPITAL & PREMIUM THEREON MORE SO WHEN THE INVESTOR COMPANIES HAVING THEIR OWN SUFFICIENT FUNDS TO INVEST IN THE ASSESSEE COMP ANY MUCH PRIOR TO INVESTMENT MADE IN THE ASSESSEE COMPANY AND OTHER INVESTMENTS MADE BY SUCH INVESTOR COMPANIES ARE MUCH MORE THAN TO THE INVESTMENT MADE IN ASSESSEE COMPANY. RELIANCE IS PLACED ON THE DECISION OF HONBLE SUPRE ME COURT IN THE CASE OF COMMISSIONER OF INCOME TAX VS SMT. P. K. NOORJAHAN 23 7 ITR 570 (SC) AND CIT VS BHARAT ENGINEERING AND CONSTRUCTION CO. (197 2) 83 ITR 187 (SC) 5. THE LD. AO BY DOUBTING THE CREDITWORTHINESS AND G ENUINENESS OF THE SHARE CAPITAL/SHARE PREMIUM IN ABOVE PARAS ISSUED A SHOW CAUSE NOTICE DATED 06.02.2015 (COPY AT PB PAGE 37 TO 40) TO THE ASSESSEE FOR TREATING THE SHARE CAPITAL/PREMIUM AS INCOME OF THE ASSESSEE ON THE FO LLOWING GROUNDS: - A) SHARE PREMIUM/SHARE CAPITAL PAID BY INVESTOR COM PANIES IS NOT JUSTIFIED ON ANY ACCOUNT AND IT IS CLEAR THAT ENTIRE MONEY HAS BEEN INTRODUCED IN THE ASSESSEE COMPANY IN THE GARB OF SHARE PREMIUM. THE PURPOSE A ND JUSTIFICATION OF CHARGING THE SHARE PREMIUM IN EXCESS OF THE JUSTIFIABLE AMOU NT, WHICH IN THIS CASE CANNOT ITA NO. 493/JP/2017 ACIT, CENTRAL CIRCLE-2, JAIPUR VS GODAWARI ESTATES PVT.LTD. KOLKATA 19 BE MORE THAN RS.10/- PER SHARE, IS ABSENT FROM THE ABOVE EXERCISE OF ISSUE AND SUBSCRIPTION OF SHARES AT A PREMIUM OF RS.90 PER SHA RE. B) THE DETAILED ENQUIRIES REVEALED THAT MOST OF THE COMPANIES ARE KOLKATA BASED. DIRECTORS OF THESE COMPANIES ARE THE EMPLOYEES OF M OTI SONS GROUP OR THE FAMILY MEMBERS OF CHHABRA FAMILY. DETAILED ANALYSIS SHOWED THE FOLLOWING FACTS: (I) ALL THE DIRECTORS WERE RESIDENTS OF JAIPUR (II) INTERNET SEARCH SHOWED THAT DIRECTORS OF THES E KOLKATA BASED COMPANIES ARE RELATED TO MOTISONS GROUP COMPANIES THROUGH EMPLOYM ENT OR OTHERWISE (III) ITDMS AND ITD SEARCH ON PAN OF THESE DIRECTOR S CORROBORATED THE GIVEN ADDRESSES TO A LARGE EXTENT (IV) RESIDENTIAL ADDRESS OF RAJEEV JAIN WAS THE SAME AS THAT OF MOTISONS SHARES PVT. LTD., MENTIONED ON THE VISITING CARD OF HARIDW AR OFFICE AS BRANCH HEAD. (V) ALL THESE DIRECTORS APPOINTED BETWEEN 12 TH AND 17 TH OCTOBER 2011 WHICH WAS MORE THAN A COINCIDENCE (THE PREVIOUSLY EXISTING DI RECTORS RESIGNED IN FEBRUARY 2012) (VI) THE EMAIL ID GIVEN ON MCA WEBSITE FOR ALL THE COMPANIES IS COMMON AND THE SAME IS FOR MOTISONS GROUP COMPANIES. THE COMPLIANC E OFFICER MS. NEHA JAIN, COMPANY SECRETARY IS COMMON BETWEEN THESE AND MOTIS ONS GROUP COMPANIES, INDICATING ABSOLUTE CONTROL OF MOTISONS GROUP UPON THESE KOLKATA BASED COMPANIES. (VII) REGISTERED ADDRESS OF ALL THE COMPANIES IS TH E SAME, WHICH HAS BEEN CHANGED ON 01.03.2012. (VIII) TWO OF THE SAID COMPANIES INFORMATION ON MC A WEBSITE WERE EXAMINED IN DETAIL. M/S. ALLIANCE TRADECOM & M/S. EVERSHINE SUPPLIERS PV T. LTD WERE INCORPORATED ON 25.11.2008 AND 05.01.2009 RESPECTIVELY. THE INFL OW OF CAPITAL UPON INCORPORATION WAS THROUGH SHARE SOLD AT A VERY HIGH PREMIUM AND THEREAFTER THE SAID CAPITAL WAS CLAIMED TO BE INVESTED IN UNQUOTED SHARES WORTH RS.11.06 CRORES AND RS.10.39 CRORES RESPECTIVELY. (IX) ALL ABOVE FACTORS INDICATE SYSTEMATIC AND DELI BERATE CREATION OF A COLORABLE DEVICE TO INTRODUCE SHARE CAPITAL INTO MOTISONS GRO UP COMPANIES. 6. IN RESPONSE TO SHOW CAUSE NOTICE THE ASSESSEE FI LED ITS REPLY VIDE LETTER DATED 13.02.2015 (COPY AT PB PAGE 41 TO 44). THE SUBMISSION OF THE ASSESSEE ON THE OBSERVATIONS OF LD. AO AS MENTIONED ABOVE IN PAR A 5 ABOVE IS AS UNDER: - A) THE SHARE PREMIUM WAS DECIDED BY THE COMPANY AND INVESTORS MUTUALLY AND SHARE APPLICANT COMPANIES HAVE AGREED TO PAY THIS S HARE PREMIUM. THERE WAS ITA NO. 493/JP/2017 ACIT, CENTRAL CIRCLE-2, JAIPUR VS GODAWARI ESTATES PVT.LTD. KOLKATA 20 NO BAR TO ISSUE SHARES ON PREMIUM UNDER COMPANIES AC T AND INCOME TAX ACT FOR THE PERIOD UNDER RELEVANT. FURTHER THE LD. AO HELD T HAT THE ------IT IS CLEAR THAT ENTIRE MONEY HAS BEEN INTRODUCED IN THE ASSESSEE CO MPANY IN THE GARB OF SHARE PREMIUM---- BUT THE LD. AO DID NOT CLEAR THAT WHAT WAS THE SOURCE OF SUCH MONEY WITH THE ASSESSEE WHICH IT INTRODUCED IN THE GARB OF SHARE PREMIUM. THE SHOW CAUSE NOTICE AS WELL AS ASSESSMENT ORDER IS CO MPLETELY SILENT ON THIS ISSUE. WITHOUT HAVING SOME MONEY IT CANNOT BE INTRO DUCE IN BOOKS OF ACCOUNTS AND FOR HAVING THE MONEY THERE SHOULD BE SOME UNEXP LAINED SOURCE OF INCOME. IN THE CASE OF ASSESSEE THE DEPARTMENT AS A RESULT OF SEARCH AS WELL AS DURING ASSESSMENT PROCEEDINGS OR AS A RESULT OF INVESTIGAT ION COULD NOT PROVE THE SOURCE OF INCOME OF THE ASSESSEE WHEREFROM THIS MUC H OF MONEY WAS EARNED, THEREFORE THE FINDING OF LD. AO ON THIS ISSUE IS TOT ALLY INCORRECT AND DOES NOT MAINTAINABLE IN THE EYE OF LAW. THE ALLEGATION OF LD. AO IS PATENTLY WRONG, WITHOUT ANY BASIS AND MERELY ON SURMISES AND CONJECTURES. HONBLE JUSTICE HIDAYATULLAH OF THE SUPREME COURT IN THE CASE OF SREELEKHA BANERJEE VS CIT [1 963] 49 ITR 112 (SC); 120 OBSERVED THAT THE INCOME TAX DEPARTMENT CANNOT BY MERELY REJECTING UNREASONABLY A GOOD EXPLANATION, C ONVERT GOOD PROOF INTO NO PROOF HONBLE SUPREME COURT IN THE CASE OF UMA CHARAN SHAW & BROS CO VS CIT 37 ITR 271 HAS HELD THAT THE SURMISES AN D CONJECTURES, AND THE CONCLUSION IS THE RESULT OF SUS PICION WHICH CANNOT TAKE THE PLACE OF PROOF. HONBLE PUNJAB & HARYANA H IGH COURT IN THE CASE OF CIT VS ANUPAM KAPOOR (2008) 299 ITR 179 (P & H ) ALSO HELD THAT SUSPICION, HOWSOEVER STRONG CANNOT TAKE THE PLACE OF LEGAL PROOF. B) REGARDING THE INQUIRIES WHICH ARE BEING DISCUSS I N THE SHOW CAUSE NOTICE THIS IS TO SUBMIT THAT WHATEVER INQUIRED BEING DISCUSS BY L D. AO WAS NOT IN KNOWLEDGE OF THE ASSESSEE THAT WHAT SORT OF INQUIRIES HAS BEE N MADE BY THE DEPARTMENT AND WHAT ARE THE OUTCOMES OF SUCH INQUIRIES. THEREF ORE THE ASSESSEE REQUESTED FROM THE LD. AO TO PROVIDE THE DETAILS OF INQUIRIES CONDUCED IN THIS REGARD ALONG WITH SUPPORTING DOCUMENTS BUT THE SAME NOT PROVIDED TO THE ASSESSEE. HOWEVER ON THE ISSUE RAISED BY THE LD. AO ON THE BASIS OF SO CALLED INQUIRIES WE SUBMIT AS UNDER: - I) THE ABOVE FINDING OF THE LD AO IS NOT RELEVANT AT AL L IN DECIDING THE ISSUE OF CREDITWORTHINESS OF THE INVESTOR COMPANY AND GENUIN ENESS OF THE TRANSACTIONS. EVEN, IF IT IS PRESUMED THAT THE INVESTOR COMPANIES ARE UNDER THE CONTROL OF THE DIRECTORS OF THE ASSESSEE, THEN ALSO THE TRANSACTIO N CANNOT BE TREATED AS NOT GENUINE AS THE MAIN ISSUE IS AVAILABILITY OF FUNDS IN THE HANDS OF THE INVESTOR COMPANY AND IF THAT IS EXPLAINABLE THEN NO QUESTION IS ARISE FOR TREATING THE SHARE CAPITAL AS NOT GENUINE. (II) THE LOW CREDITABILITY OF DIRECTORS OF ALLOTTEE COMPANY, THEIR RELATIONSHIP WITH MOTISONS GROUP ETC. HAVE NO RELEVANCE FOR EXAMINING THE GENUINENESS OF SHARE CAPITAL AND CREDITWORTHINESS OF THE INVESTOR COMPAN Y AS IN THE CASE OF ASSESSEE IT IS WELL PROVED BY DOCUMENTARY EVIDENCE THAT THE AMOUNT AGAINST SHARE APPLICATION MONEY WAS RECEIVED THROUGH GENUINE SOUR CE OF FUNDS WITH INVESTOR COMPANIES AND THE AMOUNT WAS ADJUSTED AGAINST ALLOT MENT OF SHARES. THE SOURCE OF FUNDS WITH THE INVESTOR COMPANIES WHICH T HEY INVESTED IN ASSESSEE ITA NO. 493/JP/2017 ACIT, CENTRAL CIRCLE-2, JAIPUR VS GODAWARI ESTATES PVT.LTD. KOLKATA 21 COMPANY WAS ALSO WELL EXPLAINED GENUINELY. IF DEPAR TMENT HAVE SOME DOUBT REGARDING GENUINENESS OF FUNDS WITH INVESTOR COMPAN IES THE NECESSARY INVESTIGATION OF SUCH FUNDS SHOULD HAD BEEN MADE IN THE CASE OF INVESTOR COMPANIES AND THE NECESSARY ACTION SHOULD HAD BEEN TAKEN IN THEIR CASE. IT IS RELEVANT TO MENTION HERE THAT APART FROM THE INVEST MENT MADE IN THE ASSESSEE COMPANY THE OTHER ASSETS/INVESTMENT OF SUCH INVESTO R COMPANIES WAS MUCH MORE WHICH WERE ALSO MANAGED BY THOSE COMPANIES AT THEIR OWN. IT IS ALSO RELEVANT TO NOTICE HERE THAT WHY ONLY THE INVESTMEN T MADE BY THOSE INVESTMENT COMPANIES IN THE ASSESSEE COMPANY IS BEING TREATED AS NON GENUINE AND OTHER INVESTMENT/ASSETS OF THOSE COMPANY IS BEING TREATED AS GENUINE. THIS SHOWS THAT THE ASSESSMENT ORDER WAS PASSED BY LD. AO WITH SETTLED MINDSET THAT THE AMOUNT IS TO BE ADDED AS INCOME OF THE ASSESSEE. (III) FURTHER WHATEVER INQUIRIES/ANALYSIS DISCUSS B Y LD. AO IN HIS SHOW CAUSE NOTICE HAVE NO RELEVANCE IN THE CASE OF THE ASSESSEE BECAU SE FROM SUCH DISCUSSION ONLY IT CAN BE PROVED (NOT CONCLUSIVELY) THAT THE E MPLOYEES OF ASSESSEE GROUP WAS MANAGING AFFAIRS OF SOME OF THE COMPANIES WHO M ADE THE INVESTMENT IN SOME YEARS IN THE ASSESSEE/COMPANIES OF ASSESSEE GR OUP BUT SUCH INQUIRIES NOWHERE PROVES THAT THE FUNDS WITH SUCH COMPANIES W AS NOT FROM THEIR OWN INDEPENDENT SOURCES AND THE SAME WAS INTRODUCED BY THE ASSESSEE COMPANY. IN THE INSTANT CASE FOR ADDING THE SHARE CAPITAL/PREMI UM AS INCOME OF THE ASSESSEE THE DEPARTMENT HAS TO PROVE THAT THE AMOUN T SO RECEIVED WAS REVENUE RECEIPT OF THE ASSESSEE AND IN THE INSTANT CASE THE DEPARTMENT COULD NOT PROVE THE SAME AS A RESULT OF SEARCH PROCEEDINGS OVER THE ASSESSEE GROUP OR DURING THE COURSE OF ASSESSMENT PROCEEDINGS OR AS A RESULT OF INVESTIGATION/ANALYSIS. WITHOUT PROVING THE SOURCE OF INCOME OR WITHOUT PRO VING THAT AMOUNT SO RECEIVED IS INCOME OF THE ASSESSEE THE SAME CANNOT BE TREATE D AS INCOME OF THE ASSESSEE MERELY ON PRESUMPTION, ASSUMPTION AND SUSPICIOUS. (IV) THE ASSESSEE GROUP OR EMPLOYEES OF THE ASSESSE E GROUP DOES NOT HAVE ANY CONCERN FROM THE INVESTEE COMPANIES. C) THE LD. AO OPINED THAT THE ANALYSIS/INQUIRIES IND ICATE THE SYSTEMATIC AND DELIBERATE CREATION OF A COLORABLE DEVICE TO INTROD UCE SHARE CAPITAL IN MOTISONS GROUP COMPANIES. THE INVESTMENT IN SHARE CAPITAL OF ASSESSEE COMPANY BY ABOVE NAMED COMPANIES WAS INDEPENDENT DECISION/JUDG MENT OF THOSE COMPANIES. THE ASSESSEE HAS FILED COPY OF THE BOARD RESOLUTION OF THE INVESTOR COMPANY. THE INCOME TAX DEPARTMENT CARRIED OUT INTE NSIVE SEARCH OVER MOTISONS GROUP AND DURING THE COURSE OF SEARCH NO DOCUMENTS/ EVIDENCE WAS FOUND TO SHOW THAT THE COMPANIES WHO MADE INVESTMENT IN SHAR ES OF ASSESSEE COMPANY IN THE YEAR UNDER CONSIDERATION WERE FUNDED OR UNDI SCLOSED CASH WAS GIVEN BY MOTISONS GROUP. IF THESE INVESTOR COMPANIES HAVE TH EIR OWN INDEPENDENT FUNDS, THE SAME CAN BE INVESTED ANYWHERE. IT IS ADMITTED FACTS THAT DURING THE YEAR UNDER CO NSIDERATION AS WELL AS IN PREVIOUS YEARS THE ASSESSEE COMPANY IS NOT HAVING S UCH BUSINESS ACTIVITIES WHERE FROM THIS MUCH OF UNDISCLOSED INCOME COULD BE EARNED THAN QUESTION OF HAVING ANY UNDISCLOSED INCOME DOES NOT ARISE AND WH EN THERE IS NO UNDISCLOSED INCOME THAN HOW THE SAME CAN BE MANAGED TO BROUGHT IN BOOKS OF ACCOUNTS IN FORM OF SHARE CAPITAL. IN THIS CASE THE DEPARTMENT COULD NOT PROVE ANY KIND OF UNDISCLOSED SOURCE OF INCOME OF THE ASSESSEE AS A R ESULT OF SEARCH OVER ASSESSEE ITA NO. 493/JP/2017 ACIT, CENTRAL CIRCLE-2, JAIPUR VS GODAWARI ESTATES PVT.LTD. KOLKATA 22 GROUP AS WELL AS DURING THE COURSE OF ASSESSMENT PR OCEEDINGS OR AS A RESULT OF INQUIRIES. AS A RESULT OF SO CALLED LONG INQUIRIES T HE DEPARTMENT COULD NOT EVIDENTIARY PROVED THAT THE ASSESSEE COMPANY MANAGE D ITS FUNDS WITH INVESTOR COMPANIES TO BROUGHT THE SAME IN BOOKS OF ACCOUNTS IN THE FORM OF SHARE CAPITAL MORE SO WHEN THE INVESTOR COMPANIES HAVING THEIR OW N SUFFICIENT FUNDS TO INVEST IN THE ASSESSEE COMPANY MUCH PRIOR TO INVESTMENT MA DE IN THE ASSESSEE COMPANY. THUS, FROM THE ABOVE SUBMISSION AND RECORD IT IS W ELL PROVED THAT THE AMOUNT SO RECEIVED BY THE ASSESSEE COMPANY FROM ABOVE NAMED C OMPANIES WAS RECEIVED AGAINST SHARE CAPITAL AND THE INVESTMENT WAS MADE B Y THEM BY THEIR OWN DISCLOSED SOURCE, THEREFORE NO ADDITION IN ANY WAY CAN BE MADE IN THE HANDS OF THE ASSESSEE. 7. AFTER CONSIDERING THE REPLY OF THE ASSESSEE ON S HOW CAUSE NOTICE ISSUED BY LD. AO HE POINTED CERTAIN ISSUES IN THE REPLY OF THE ASS ESSEE WHICH HAVE BEEN DISCUSS ON PAGE 16 TO 23 (PARA 15 TO 17) OF ASSESSM ENT. THE FINDING OF LD. AO AND SUBMISSION OF ASSESSEE ON SUCH FINDINGS IS AS U NDER: - (A) FINDING OF AO: - IDENTITY, CREDIT WORTHINESS AND GENUINENESS OF THE TRANSACTIONS HAVE BEEN PROVED BY FILING CERTAIN DOC UMENTS. THE ASSESSEE COMPANY HAS ATTEMPTED TO LIMIT THE SCOPE WITHIN WHI CH REVENUE AUTHORITIES CAN OPERATE ONLY WITH A SELF SERVING INTEREST TO MAKE I T APPEAR THAT THE TRANSACTIONS ENTERED INTO GET JUSTIFIED. THE THREE ASPECTS CERTA INLY ARE SOME OF THOSE ANGLES, BUT TO SAY THAT THE REVENUE CANNOT GO BEYOND, IS NO T APPARENTLY VESTED WITH SELF SERVING INTEREST BUT ALSO WITH IGNORANCE OF LAW. CERTAINLY, SIMPLY BECAUSE SOME FORM OF IDENTIFICATI ON ON PAPER HAS BEEN PROVIDED DOES NOT MEAN THAT THE TRANSACTION STANDS EXPLAINED FROM THE VIEWPOINT OF THE CREDIT WORTHINESS AND GENUINENESS. SUBMISSION OF ASSESSEE: - I) THE ASSESSEE SUBMITTED AMPLE DOCUMENTS IN SUPPOR TED TO SHARE APPLICATION MONEY RECEIVED TO PROVE THE IDENTITY, CREDITWORTHIN ESS AND GENUINENESS OF TRANSACTIONS AND FROM EXAMINATION OF THOSE DOCUMENT S ITS PROVES THAT THE INVESTING COMPANIES WERE HAVING SUFFICIENT FUNDS TO MAKE INVESTMENT IN SHARE CAPITAL OF THE ASSESSEE COMPANY. THERE WAS NO CASH DEPOSIT IN BANK A/C OF THE INVESTOR COMPANY FOR SUBSCRIBING THE SHARE CAPITAL OF THE ASSESSEE COMPANY. THE LD. AO REJECTED THESE EVIDENCES ON SURMISES AND CONJECTURES. HONBLE JUSTICE HIDAYATULLAH OF THE SUPREME COURT IN THE CA SE OF SREELEKHA BANERJEE VS CIT [1963] 49 ITR 112 (SC); 120 OBSERVED THAT THE I NCOME TAX DEPARTMENT CANNOT BY MERELY REJECTING UNREASONABLY A GOOD EXPL ANATION, CONVERT GOOD PROOF INTO NO PROOF HONBLE SUPREME COURT IN THE CASE O F UMA CHARAN SHAW & BROS CO VS CIT 37 ITR 271 HAS HELD THAT THE SURMISES AND CONJECTURES, AND THE CONCLUSION IS THE RESULT OF SUSPICION WHICH CANNOT TAKE THE PLACE OF PROOF. HONBLE PUNJAB & HARYANA HIGH COURT IN THE CASE OF CIT VS ANUPAM KAPOOR (2008) 299 ITR 179 (P & H) ALSO HELD THAT SUSPICION, HOWSOEVER STRONG CANNOT TAKE THE PLACE OF LEGAL PROOF. ITA NO. 493/JP/2017 ACIT, CENTRAL CIRCLE-2, JAIPUR VS GODAWARI ESTATES PVT.LTD. KOLKATA 23 II) FROM EXAMINATION OF FINANCIAL STATEMENTS OF INV ESTOR COMPANIES YOUR HONOR WILL FIND THAT THE INVESTOR COMPANIES HAD HUGE SHARE CAP ITAL AND RESERVES. APART FROM THE INVESTMENT MADE IN THE ASSESSEE COMPANY TH EY HAVE HUGE OTHER INVESTMENTS/ADVANCES. AS PER DECLARATION OF SOURCE O F FUNDS SUBMITTED BY THEM THEY REALIZED MONEY FROM THEIR OLD INVESTMENTS/ADVA NCES AND MADE THE SAME MONEY WAS UTILIZED FOR MAKING THE INVESTMENT IN THE ASSESSEE COMPANY. THESE COMPANIES ARE ASSESSEE OF INCOME TAX DEPARTMENT AND IN CASE OF ANY DOUBT, NECESSARY ACTION COULD BE TAKEN IN THE HANDS OF THE SE COMPANIES AND IF THESE COMPANIES FAILED TO EXPLAIN THE SOURCE OF INVESTMEN T, NECESSARY ADDITION CAN BE MADE IN THE HANDS OF THESE COMPANIES BY APPLYING TH E PROVISIONS OF SECTION 69 OF INCOME TAX ACT. HOWEVER THE LD. AO MADE THE ADDITI ON IN THE HANDS OF THE ASSESSEE COMPANY UNDER THE COMPLETE DISREGARD OF PR OVISIONS OF INCOME TAX ACT AND MERELY ON SURMISES AND CONJECTURES. THE HONBLE APEX COURT IN THE CASE OF CIT VS. LOVELY EXPORTS (P) LTD. 216 CTR 0195/ 6 DTR 308 (SC) HELD THAT IF THE SHARE CAPITAL MONEY IS RECEIVED BY THE ASSESSE E COMPANY FROM ALLEGED BOGUS SHAREHOLDERS THEN THE DEPARTMENT IS FR EE TO PROCEED TO REOPEN THE INDIVIDUAL ASSESSMENTS OF SUCH SHAREHOLDER S IN ACCORDANCE WITH LAW. SUCH SHARE APPLICATION MONEY CANNOT BE REGAR DED AS UNDISCLOSED INCOME OF THE ASSESSEE COMPANY. (III) AS ALLEGED BY LD. AO THE ASSESSEE IS NOT ATTEMP TED TO LIMIT THE SCOPE WITHIN WHICH REVENUE AUTHORITIES CAN OPERATE AND THE ASSES SEE ALSO ACCEPT THAT THE REVENUE AUTHORITIES CAN EXAMINE THE TRANSACTIONS FR OM ALL POSSIBLE ANGLES. IN THE LAW IN THE CASE OF CREDIT ENTRY (SUCH AS LOAN, SHAR E CAPITAL ETC.) THE IDENTITY, GENUINENESS AND CREDITWORTHINESS OF THE CREDIT ENTR IES HAS TO BE EXAMINE AND IN THE INSTANT CASE THE ASSESSEE HAS PROVED ALL THESE THREE INGREDIENTS AND THE LD. AO DID NOT FIND ANY INFIRMITY IN SUCH DETAILS. IF TH E LD. AO IS HAVING DOUBT REGARDING THE DETAIL AND SUBMISSION FILED BY THE AS SESSEE THAN HE COULD SURELY GO BEYOND FOR FURTHER INQUIRIES BUT THE INQUIRIES S HOULD HAVE BEEN WITH THE ANGEL TO UNEARTH THE TRUTH OF THE TRANSACTIONS AND IN THE INSTANT CASE THE INQUIRIES SHOULD HAVE BEEN MADE WITH THE ANGEL TO FIND OUT TH E FOLLOWING: - THE HUGE AMOUNT RECEIVED IN THE FORM OF SHARE CAPIT AL/SHARE PREMIUM. WHETHER THE MONEY SO RECEIVED IS ACTUALLY CAPITAL RECEIPT I N THE HANDS OF THE ASSESSEE? WHETHER MONEY RECEIVED IN THE HANDS OF THE ASSESSEE COMPANY WAS FROM GENUINE SOURCE OR THE SAME WAS OWN FUNDS OF THE ASS ESSEE? IF THE MONEY WHICH FLOW IN THE HANDS OF THE ASSESS ES WAS MANAGED AFFAIRS OF THE ASSESSEE THAN WHAT WAS THE SOURCE OF INFLOW OF SUCH MONEY? IV) THE LD. AO HAS NOT CARRIED OUT ANY SHORT OF INQU IRIES IN THIS REGARD IN THE CASE OF THE ASSESSEE. NO INQUIRIES FROM THE SHAREHOLDERS, T HEIR BANKERS HAVE BEEN MADE TO PROVE THE CONTENTION OF THE ASSESSEE TO BE WRONG . THERE IS NO EVIDENCE THAT THE MONEY RECEIVED IS A/C OF THE ASSESSEES OWN UND ISCLOSED INCOME. THE ASSESSEE FILED SUFFICIENT DOCUMENTS TO PROVE THAT T HE AMOUNT SO RECEIVED WAS CAPITAL RECEIPT AND THE SAME WAS RECEIVED AGAINST S HARE CAPITAL/SHARE PREMIUM. THE SOURCE OF THE FUNDS FROM INVESTOR COMPANIES WAS ALSO PROVED AND THERE IS NO POSITIVE MATERIAL TO SHOW THAT THE INVESTOR COMP ANIES WAS NOT HAVING SUFFICIENT SOURCE TO INVEST THE MONEY IN THE ASSESS EE COMPANY. IF THE LD. AO IS HAVING DOUBT REGARDING GENUINENESS OF THE SOURCE OF FUNDS WITH THE INVESTOR ITA NO. 493/JP/2017 ACIT, CENTRAL CIRCLE-2, JAIPUR VS GODAWARI ESTATES PVT.LTD. KOLKATA 24 COMPANIES HE COULD HAVE MAKE THE INQUIRED IN THE CA SE OF SUCH COMPANIES AND IF SOMETHING FOUND ADVERSE THAN THE NECESSARY ADDITION S COULD HAVE BEEN MADE IN THE HANDS OF SUCH INVESTOR COMPANY ONLY AND IN THE INQUIRY IF SOMETHING POSITIVE REVEALS THAT THE SOURCE OF FUNDS WITH SUCH INVESTOR COMPANIES WAS FUNDED BY THE ASSESSEE COMPANY THAN ONLY THE ADDITION COULD B E MADE IN THE HANDS OF THE ASSESSEE COMPANY. IT IS ADMITTED FACTS THAT DURING THE YEAR UNDER CONSIDERATION THE ASSESSEE COMPANY WAS NOT HAVING SUCH SOURCE OF INCOME FROM WHICH THIS MUCH OF INCOME COULD BE EARNED AND THE LD. AO IS COM PLETELY SILENT ON THIS ISSUE THAT WHERE FROM THIS MUCH OF MONEY WAS EARNED BY TH E ASSESSEE COMPANY. V) THE FINDING OF LD. AO THAT SIMPLY BECAUSE SOME FO RM OF IDENTIFICATION ON PAPER HAS BEEN PROVIDED DOES NOT MEAN THAT THE TRANSACTIO N STANDS EXPLAINED FROM THE VIEWPOINT OF THE CREDIT WORTHINESS AND GENUINENESS THIS IS TO SUBMIT THAT BY FILING THE SUFFICIENT DOCUMENTS THE ASSESSEE DISCHA RGE ITS ONUS CAST ON IT BY THE LAW AND NOW ONUS IN ON THE DEPARTMENT TO DISPROVE T HE SUBMISSION AND DOCUMENTS OF THE ASSESSEE BY POSITIVE EVIDENCE. THE DEPARTMENT HAS NOT DISCHARGED ITS ONUS AND NO INQUIRED WERE CARRIED OU T AND NO EVIDENCE IS IN POSSESSION WITH THE DEPARTMENT TO DISPROVE THE CLAI M OF THE ASSESSEE. ONE THE ONE HAND THE LD. AO IS CLAIMING THAT THE REVENUE AUT HORITIES CAN EXAMINE THE TRANSACTION FROM ALL POSSIBLE ANGLES AND ON THE OTH ER HANDS THE TRANSACTIONS ARE BEING DOUBTED AND ADDED MERELY ON SURMISES AND CONJ ECTURES. IT IS FURTHER SUBMITTED THAT IF THE DOCUMENTS SUBMITTED BY THE AS SESSEE WAS NOT FELT SUFFICIENT TO ACCEPT THE TRANSACTION THAN THE LD. AO COULD ASK FROM ASSESSEE TO SUBMIT THE FURTHER DETAILS/DOCUMENTS WHICH IS FELT NECESSARY FOR DECIDING THE MATTER IN JUSTICE & FAIR MANNER BUT THE SAME WAS NO T DONE BY LD. AO. B) FINDING OF AO: - REGARDING NO BAR OF ISSUING OF SHARES AT PREMIUM, TH E ASSESSEE COMPANY HAS ATTEMPTED TO TAKE AN ADVANTAGE OUT OF THE ABSENCE OF A SPECIFIC PROVISION WHICH BARS THE ACCEPTANCE OF SHA RE PREMIUM WHICH DOES NOT MATCH THE NET WORTH OF THE ISSUING COMPANY. IN THIS REGARD, IT NEEDS TO BE POINTED OUT THAT MERE ABSENCE OF A SPECIFIC PROVISI ON DOES NOT BY ITSELF MEAN THAT A PARTICULAR COLORABLE DEVICE OR A SHAM TRANSACTION , ACQUIRES LEGAL SANCTITY, THERE ARE NUMEROUS PROVISIONS RELATED TO GIFT, SALE CONSI DERATION ON SALE OF ASSETS WHICH CAME INTO BEING AT A LATER STAGE, BUT THE IL LEGAL AND TAX CONTRAVENING TRANSACTIONS WERE STILL TAKEN UP AND TAXED BY REVEN UE AUTHORITY OF COURSE, AFTER THE SPECIFIC INCLUSION OF GOVERNING STATUTES, THE M ATTER REQUIRES TO BE DEALT WITHIN THE FRAMEWORK OF THE SPECIFIC PROVISION. BUT, TILL SUCH TIME IT CANNOT BE SAID ABOUT A TRANSACTION, WHICH IS PATENTLY BEYOND THE REALMS OF ACCEPTABILITY AND WHICH ALSO ARE EMBEDDED WITHIN HERE TAX IMPLICATIONS, THA T THEY NEED TO BE LEFT ALONE ONLY BECAUSE THERE WAS NO SPECIFIC BAR. SECTION 56 OF THE IT ACT HAS ALREADY BEEN EXISTENCE SINCE LONG AND SUBSECTION (1) OF SECTION 56 ADEQUATELY COVERED TRANSACTIONS LIKE THE ONE BEING DEALT WITH AT PRESENT. ONLY BECAUSE, SUB-SECTION (1) WAS A BROAD MANIFESTATION OF THE INTENT OF REVENUE, SUB SECTION (2) WHICH WAS MORE SPECIFIC IN CONTENT WAS INTRODUCED TO TAKE CASE OF THE MISINTERPRETATION & CONFUSION WHIC H WAS BEING DERIVED OUT OF ITA NO. 493/JP/2017 ACIT, CENTRAL CIRCLE-2, JAIPUR VS GODAWARI ESTATES PVT.LTD. KOLKATA 25 SUB SECTION (4). IT MUST BE APPRECIATED THAT INTROD UCTION OF SUB SECTION (2) OF SECTION 56 OF THE ACT WAS ONLY A SPECIFIC EXPRESSION OF THE MANNER IN WHICH A SPECIFIC TRANSACTION REQUIRES TO BE DEALT WITH THE INTENT OF LEGISLATURE AND THE CONTENT THEREOF ALREADY EXISTED WITHIN THE SAME ACT AND WITHIN THE SAME SECTION AND IN THE PRECEDING SUB-SECTION NO NEW IDEA WHICH WAS CONCEPTUALLY DISTRICT FROM SECTION 56(1) OF THE ACT WAS BROUGHT INTO BEING . HENCE, THE ASSESSEE COMPANY CANNOT BE ALLOWED TO E SCAPE THE PROVISION OF LAW, SIMPLY BECAUSE IT CONTAINED A BROADER & WIDER MANIF ESTATION OF ITS TRUE INTENT WHICH WAS ENUNCIATED ONLY AFTER THE TRANSACTION TOO K PLACE. THE CONTENTION OF THE ASSESSEE IS A PERVERT ARGUMENT & DESERVES TO BE REJECTED. SUBMISSION OF ASSESSEE: - I) SHARE PREMIUM IS CAPITAL RECEIPT: IF SHARES ARE ISSUED AT PREMIUM THEN CAPITAL RECEIP T AGGREGATE AMOUNT OF PREMIUM IS TO BE TRANSFERRED TO AN ACCOUNT CALLED T HE SHARE PREMIUM ACCOUNT. THIS SHARE PREMIUM ACCOUNT IS NOT DISTRIBUTABLE AS INCOME JUST LIKE AS ANY OTHER CAPITAL ASSETS. ON WINDING UP, THE SURPLUS MONIES I N THE SHARE PREMIUM ACCOUNT IS TO BE RETURNED TO THE SHARE HOLDERS AS CAPITAL. SO LONG AS THE COMPANY IS A GOING CONCERN, THE MONIES IN SHARE PREMIUM ACCOUNT CAN NEVER BE RETURNED TO THE SHAREHOLDERS EXCEPT THROUGH THE MEDIUM OF A RED UCTION PETITION, OR, IN OTHER WORDS, EXCEPT UNDER EXACTLY THE SAME CONDITIONS AS THOSE UNDER WHICH ANY OTHER CAPITAL ASSET CAN REACH THE SHAREHOLDERS HAND S. DISTRIBUTION OF SHARE PREMIUM AMOUNT IS NOT PERMITTED THROUGH DIVIDEND. I T IS TAKEN OUT OF THE CATEGORY OF DIVISIBLE PROFITS. THE PROVISIONS IN RE SPECT OF ISSUE OF SHARES AT PREMIUM ARE THE SAME IN THE OLD COMPANY ACT AS WELL AS IN THE NEW COMPANY ACT. HENCE COMPANIES ACT CLEARLY MENTIONS THAT AMOUNT RECEIVED AS PREMIUM IS CAPITAL RECEIPT AND NOT A REVENUE RECEIPT. THE SHAR E PREMIUM IS ALSO VERIFIABLE FROM RETURNS OF ALLOTMENT SUBMITTED IN ROC. AS PER DE PARTMENTAL CIRCULAR (MCA) NO. 3/77 DATED 15.04.1977 THE MONIES IN THE SHARE P REMIUM ACCOUNT CANNOT BE TREATED AS FREE RESERVES, AS THEY ARE IN THE NATURE OF CAPITAL RESERVES. II) ON THE ISSUE OF SHARES AT PREMIUM, THE LD. ITAT, MUM BAI BENCH IN THE CASE OF ACIT V/S GAGANDEEP INFRASTRUCTURE PVT. LTD. 2014-T10L- 656-ITAT-MUM OBSERVED THAT ISSUE OF SHARES AT PREMIUM IS ALWAYS A COMMERCIAL DECISION WHICH DOES NOT REQUIRE ANY JUSTIFICATION . FURTHER THE PREMIUM IS A CAPITAL RECEIPT WHICH HAS TO BE DEALT WITH IN ACCORDANCE WITH SECTI ON 78 OF COMPANIES ACT 1956. FURTHER THE COMPANY IS NOT REQUIRED TO PROVE THE GE NUINENESS, PURPOSE OR JUSTIFICATION FOR CHARGING PREMIUM OF SHARES, SHARE PREMIUM BY ITS VERY NATURE IS A CAPITAL RECEIPTS AND IS NOT INCOME FOR ITS ORDINA RY SENSE . IN THE CASE BEFORE MUMBAI BENCH HAS TO CONSIDER A CASE WHERE PREMIUM O F RS.190 PER SHARE WAS CHARGED. THE TRIBUNAL OBSERVED AS UNDER: NO DOUBT A NON-EST COMPANY OR A ZERO BALANCE SHEE T COMPANY ASKING FOR RS.190 PER SHARE DEFIES ALL COMMERCIAL PRUDENCE BUT AT THE SAME TIME WE CANNOT IGNORE THE FACT THAT IT IS A PREROGATIVE OF THE BOA RD OF DIRECTORS OF THE COMPANY TO DECIDE THE PREMIUM AMOUNT AND IT IS THE WISDOM OF T HE SHAREHOLDERS WHETHER ITA NO. 493/JP/2017 ACIT, CENTRAL CIRCLE-2, JAIPUR VS GODAWARI ESTATES PVT.LTD. KOLKATA 26 THEY WANT TO SUBSCRIBE TO SUCH A HEAVY PREMIUM. THE REVENUE AUTHORITIES CANNOT QUESTION THE CHARGING OF SUCH HUGE PREMIUM W ITHOUT ANY BAR FROM ANY LEGISLATED LAW OF THE LAND. THE AMENDMENT HAS BEEN BROUGHT IN THE INCOME TAX ACT UNDER THE HEAD INCOME FROM OTHER SOURCES BY IN SERTING CLAUSE.(VII B) TO SECTION 56 OF THE ACT WHEREIN IT HAS BEEN PROVIDED T HAT ANY CONSIDERATION FOR ISSUE OF SHARES, THAT EXCEEDS THE FAIR VALUE OF SUC H SHARES, THE AGGREGATE CONSIDERATION RECEIVED FOR SUCH SHARES AS EXCEEDS T HE FAIR MARKET VALUE OF THE SHARES SHALL BE TREATED AS THE INCOME OF THE ASSESS EE BUT THE LEGISLATURE IN ITS, WISDOM HAS MADE. THE PROVISION APPLICABLE W.E.F. 1. 4.2013 I.E. ON AND FROM A.Y. 2013-14. III) THE LD. AO TAXED THE SHARE CAPITAL/SHARE PREMIUM BY HOLDING THAT MERE ABSENCE OF A SPECIFIC PROVISION DOES NOT BY ITSELF MEAN THA T A PARTICULAR COLORABLE DEVICE OR A SHAM TRANSACTION, ACQUIRES LEGAL SANCTITY AND A TRANSACTION, WHICH IS PATENTLY BEYOND THE REALMS OF ACCEPTABILITY AND WHI CH ALSO ARE EMBEDDED WITHIN HERE TAX IMPLICATIONS, THAT THEY NEED TO BE LEFT ALONE ONLY BECAUSE THERE WAS NO SPECIFIC BAR THIS IS TO SUBMIT THAT FOR BRIN GING A TRANSACTION INTO A INCOME TAX TERRITORY FIRST IT IS TO PROVE BY THE REVENUE A UTHORITIES THAT THE TRANSACTION IS COLORABLE DEVICE OR A SHAM TRANSACTION. IN THE CASE OF THE ASSESSEE THE INVESTOR COMPANIES ARE CONFIRMING THAT THEY HAVE GAVE THE AM OUNT TO THE ASSESSEE COMPANY AS SHARE PREMIUM AND THE ASSESSEE COMPANY I S ENTERING SUCH AMOUNT IN ITS BOOKS OF ACCOUNTS AS A SHARE PREMIUM. THERE IS NO EVIDENCE ON RECORD TO PROVE THAT THE TRANSACTION IS SHAM TRANSACTIONS OR NOT REAL TRANSACTION. THE ONUS IS ON DEPARTMENT TO PROVE THAT THE TRANSACTION IS S HAM OR NOT REAL. THE ALLEGATION SHOULD BE BASED ON THE EVIDENCES. THE LD. AO IS DUT Y BOUND TO PROVE A TRANSACTION NOT REAL AND NOT ACCEPTABLE WITH EVIDEN CES WHICH IS ABSENT IN THE INSTANT CASE. ADMITTEDLY THERE ARE NUMEROUS DEEMING PROVISIONS RELATED TO GIFT, SALE CONSIDERATION ON SALE OF ASSETS UNDER WHICH TH E DEEMED INCOME ARE TAXED BUT THE DEEMING FICTION CAN ONLY STRICTLY APPLIED O N THE TRANSACTIONS FOR WHICH IT WAS MADE APPLICABLE. THE SAME CANNOT BE EXTENDED FU RTHER FOR OTHER TRANSACTIONS UNTIL AND UNLESS SUCH TRANSACTION IS C OVERED IN THE DEFINITION OF INCOME OR DEEMED INCOME AS PER INCOME TAX LAW. IF S OME SPECIFIC TRANSACTION IS NOT INCOME OR DEEMED INCOME IN THE INCOME TAX LAW T HAN THE SAME CANNOT BE PRESUMED AS INCOME BY THE REVENUE AUTHORITIES AT TH EIR OWN WITHOUT HAVING ANY POSITIVE MATERIAL TO PRESUME THAT THE SAME IS ACTUA LLY INCOME OF THE ASSESSEE. THESE TYPE OF TRANSACTION CAN ONLY BE DEALT WITHIN THE FRAMEWORK OF THE SPECIFIC PROVISION AFTER THE SPECIFIC INCLUSION OF GOVERNING STATUTES. IN THE INCOME TAX ACT THE CHARGING OF CERTAIN AMOUNTS SHARE PREMIUM DEEME D TO BE INCOME OF THE RECIPIENT COMPANIES W.E.F. 1.4.2013 I.E. ON AND FRO M A.Y. 2013-14 AND THE SAME CANNOT BE MADE APPLICABLE RETROSPECTIVELY. IV) ADMITTEDLY THE SECTION 56 OF THE IT ACT HAS ALREA DY BEEN EXISTENCE SINCE LONG AND BUT SUB-SECTION (1) OF SECTION 56 ONLY COVERS T HE TAXING THE REVENUE TRANSACTIONS WHICH NOT COVERED UNDER OTHER HEAD OF INCOME BUT THE SAME ARE INCLUDED IN THE DEFINITION OF INCOME. THE SECTION 5 6(1) DOES NOT COVER THE TAXING ITA NO. 493/JP/2017 ACIT, CENTRAL CIRCLE-2, JAIPUR VS GODAWARI ESTATES PVT.LTD. KOLKATA 27 THE DEEMING CAPITAL RECEIPTS AND SUCH RECEIPTS CAN ONLY TAXED UNDER SUB SECTION 56 (2) OF INCOME TAX ACT, 1961 IF CONSISTING SPECIFI C EXPRESSION OF THE MANNER IN WHICH A SPECIFIC TRANSACTION REQUIRES TO BE DEALT W ITH THE INTENT OF LEGISLATURE. IN THE INCOME TAX ACT THE CHARGING OF CERTAIN AMOUNTS O F SHARE PREMIUM DEEMED TO BE INCOME OF THE RECIPIENT COMPANIES W.E.F. 1.4.201 3 I.E. ON AND FROM A.Y. 2013- 14, THEREFORE THE SHARE PREMIUM RECEIVED PRIOR TO T HAT PERIOD CANNOT BE TAXED AS INCOME OF THE ASSESSEE. C) FINDING OF LD. AO: - IT IS WHOLLY INCORRECT TO SAY THAT THE ALLEGATION I S BASED ON SURMISES AND CONJECTURES. THE FACTS CLEARLY PROVE T HAT THE ASSESSEE HAD ENTERED INTO SHAM TRANSACTIONS AS PART OF A WELL PLANNED EX ERCISE OF INTRODUCING UNEXPLAINED MONEY IN THE FORM OF SHARE CAPITAL AND SHARE PREMIUM WITHOUT ANY JUSTIFICATION OF THE VALUE HAVING BEEN PROVIDED EIT HER BY THE ISSUING COMPANY OR THE SUBSCRIBING COMPANY. THE MONEY SO RECEIVED WAS THEN IMMEDIATELY INVESTED IN THE SUBSCRIPTION OF SHARE CAPITAL AT HIGH PREMIU M WITH OTHER COMPANIES, WHO IN TURN CONTINUED THE EXERCISE IN THE SAME FORM. TH E ASSESSEE COMPANY WAS THUS PART OF THIS CIRCULAR RING WHEREBY UNJUSTIFIED AND UNSUBSTANTIATED SHARE PREMIUM WAS BEING INTRODUCED. SUBMISSION OF ASSESSEE: - I) THE FINDING OF LD. AO IS PATENTLY WRONG, PERVERSE AND NOT BACKED WITH ANY SUPPORTING EVIDENCE. FIRST OF ALL REGARDING ALLEGAT ION THAT THE ASSESSEE INTRODUCED ITS OWN UNEXPLAINED MONEY IN THE SHARE C APITAL AND SHARE PREMIUM THIS IS TO SUBMIT THAT THE DEPARTMENT CARRIED OUT I NTENSIVE SEARCH OVER THE ASSESSEE GROUP AND DURING THE COURSE OF SEARCH NOT A SINGLE DOCUMENT/EVIDENCE WAS FOUND TO SHOW THAT THE ASSESSEE WAS HAVING SOME UNDISCLOSED INCOME OR HAVING SOME UNEXPLAINED MONEY. AS A RESULT OF INQUIR IES CARRIED OUT BY THE INVESTIGATION WING THEY ALSO COULD NOT GATHERED ANY POSITIVE EVIDENCE TO SHOW THAT THE ASSESSEE WAS HAVING ANY UNDISCLOSED INCOME OR UNEXPLAINED MONEY. IF THERE IS NO PROOF WITH THE DEPARTMENT TO PROVE THAT THE ASSESSEE WAS HAVING SOME UNEXPLAINED MONEY THAN HOW IT CAN BE ALLEGED T HAT THE ASSESSEE HAS INTRODUCED ITS UNEXPLAINED MONEY IN THE FORM OF SHA RE CAPITAL AND SHARE PREMIUM. THIS IS COMPLETELY ON THE BASIS OF SURMISE S AND CONJECTURES. II) AS REGARD TO NOT PROVIDING THE JUSTIFICATION OF THE VALUE OF SHARES THIS IS TO SUBMIT THAT THE SHARES ISSUED AT HIGH RATES DOES NOT MAKE THE TRANSACTIONS ITSELF SHAME OR COLORFUL DEVICE TO EVADE THE TAX. FROM THE RECOR D IT IS WELL PROVED THAT THE AMOUNT WAS RECEIVED FROM THE INVESTOR COMPANIES AGA INST SHARE CAPITAL & SHARE PREMIUM, THEREFORE THE TRANSACTION ARE BEING GENUIN E. AS STATED IN EARLIER PARAS, THE HONBLE ITAT, MUMBAI BENCH IN THE CASE OF ACIT V/S GAGANDEEP INFRASTRUCTURE PVT. LTD. 2014-T10L-656-ITAT-MUM OBSERVED THAT ISSUE OF SHARES AT PREMIUM IS ALWAYS A COMMERCIAL DECISION W HICH DOES NOT REQUIRE ANY JUSTIFICATION . FURTHER THE COMPANY IS NOT REQUIRE TO PROVE THE G ENUINENESS, PURPOSE OR JUSTIFICATION FOR CHARGING PREMIUM OF SH ARES, SHARE PREMIUM BY ITS VERY NATURE IS A CAPITAL RECEIPTS AND IS NOT INCOME FOR ITS ORDINARY SENSE . IV) THE ALLEGATION OF LD. AO IS THAT THE MONEY SO RECEIV ED WAS THEN IMMEDIATELY INVESTED IN THE SUBSCRIPTION OF SHARE CAPITAL AT HI GH PREMIUM WITH OTHER COMPANIES, WHO IN TURN CONTINUED THE EXERCISE IN TH E SAME FORM AND THE ASSESSEE COMPANY WAS THUS PART OF THIS CIRCULAR RIN G WHEREBY UNJUSTIFIED AND UNSUBSTANTIATED SHARE PREMIUM WAS BEING INTRODUCED. IN THIS REGARD THIS IS TO SUBMIT THAT IF SOMEONE IS INVESTING THE MONEY IN TH E ASSESSEE COMPANY HE MUST ITA NO. 493/JP/2017 ACIT, CENTRAL CIRCLE-2, JAIPUR VS GODAWARI ESTATES PVT.LTD. KOLKATA 28 BE HAVING THE INFLOW OF MONEY FROM SOME SOURCE. WHA T IS THE SOURCE OF INFLOW WITH THE INVESTOR COMPANY AND HOW IT IS MANAGING IT S AFFAIRS IS NOT CONCERN OF THE ASSESSEE. IN THE CASE OF THE ASSESSEE, IT HAS F ULL FILLED ITS LEGAL OBLIGATION. THE ASSESSEE HAS PROVED THE SOURCE OF MONEY WITH TH E INVESTOR COMPANIES. THUS IN THE CASE OF THE ASSESSEE THE SOURCE OF MONEY IS WELL PROVED. IF THE INVESTOR COMPANIES IS NOT HAVING PROPER SOURCE OF FUNDS WITH THEM THAN THE ACTION SHOULD HAVE BEEN TAKEN IN THEIR HANDS AND THE SAME CANNOT BE ADDED AS INCOME OF THE ASSESSEE MERELY BY HOLDING THAT THE ASSESSEE PLANNE D THE FUNDS OF ALL THE COMPANIES. THERE IS NO ONUS TO PROVE SOURCE OF SOUR CE. IN THIS REGARD, THE ASSESSEE RELIES ON THE FOLLOWING DECISIONS:- (I) HONBLE RAJASTHAN HIGH COURT IN THE CASE OF ARAVALI TRADING CO VS INCOME TAX OFFICER (2008) 8 DTR (RAJ) 199 HAS HELD THAT ONCE THE EXISTENCE OF THE CREDITORS IS PROVED AND SUCH PERSONS OWN THE CREDIT S, THE ASSESSEES ONUS STANDS DISCHARGED AND THE ASSESSEE IS NOT REQUIRED TO PROVE THE SOURCE FROM WHICH THE CREDITORS COULD HAVE ACQUIRED THE MONEY D EPOSITED WITH HIM. HONBLE JURISDICTIONAL HIGH COURT HAS HELD THAT MERELY BECA USE THE DEPOSITORS EXPLANATION ABOUT THE SOURCES OF MONEY WAS NOT ACCE PTABLE TO THE AO, IT CANNOT BE PRESUMED THAT THE DEPOSIT MADE BY THE CREDITORS IS MONEY BELONGING TO THE ASSESSEE ITSELF. (II) CIT VS ORISSA CORPORATION (P) LTD (1986) 159 ITR 7 9 (SC) THE ASSESSEE HAD GIVEN NAMED AND ADDRESSES OF THE CASH CREDITORS, WHO WERE INCOME TAX ASSESSEES. REVENUE APART FROM ISSUING SU MMON U/S 131 NOTICES TO CREDITORS, DID NOT PURSUE THE MATTER FURTHER- IT DI D NOT EXAMINE CREDITWORTHINESS OF THE CREDITORS- ASSESSEE COULD NOT, UNDER THE CIR CUMSTANCES DO ANYTHING FURTHER. HELD THAT THE ADDITIONS WERE RIGHTLY DELET ED. (III) CIT VS HEERA LAL CHAGAN LAL TANK (2002) 157 ITR 2 81 (RAJ) BURDEN OF THE ASSESSEE STANDS DISCHARGED WHEN THE IDENTITY OF THE CREDITORS IS ESTABLISHED AND HE CONFIRMS THE LOANS. IT IS FURTHER SUBMITTED THAT THE INVESTOR COMPANIE S WERE HAVING SUFFICIENT ACCUMULATED FUNDS IN THE FORM OF SHARE CAPITAL AND RESERVES & SURPLUS MUCH PRIOR TO THE INVESTMENT MADE IN THE ASSESSEE COMPAN Y AND THE SAME ARE MUCH MORE THAN TO INVESTMENT MADE IN THE SHARES OF THE A SSESSEE COMPANY. THE SAME FUNDS WERE BEING MANAGED BY SUCH COMPANY AT THEIR O WN AND HAVING INVESTMENT IN SHARES OF OTHER COMPANIES/LOANS & ADV ANCES TO VARIOUS PARTIES. THE INVESTMENT BY SUCH COMPANIES IN THE ASSESSEE CO MPANY WAS OF LESSER AMOUNT IN COMPARISON TO TOTAL INVESTMENTS MADE BY S UCH INVESTOR COMPANIES AND IF THE OTHER INVESTMENTS MADE BY SUCH COMPANIES ARE BEING TREATED AS GENUINE THAN HOW THE INVESTMENT MADE IN THE ASSESSE E COMPANY CAN ONLY BE NON GENUINE. FURTHER IF THE ALLEGATION OF THE DEPAR TMENT THAT THE ASSESSEE MANAGED ITS UNEXPLAINED FUNDS IN SUCH COMPANIES THA N THERE SHOULD BE INFLOW OF NEW CAPITAL IN SUCH COMPANIES ONLY FOR MAKING TH E PAYMENT TO THE ASSESSEE COMPANY WHICH HAS NOT BEEN DONE IN THE INSTANT CASE . THE INVESTMENT WAS MADE IN THE ASSESSEE COMPANY BY SOME OF THE COMPANI ES OUT OF FUNDS REALIZED FROM PREVIOUS INVESTMENTS/ADVANCES AND SOME OF THE COMPANIES OUT OF FUNDS REALIZED FROM ALLOTMENT OF SHARES. IF THE PAYMENT W AS MADE BY SOME OF THE COMPANIES BY REALIZING THE FUNDS ALREADY INVESTED B Y SUCH COMPANY HOW SUCH FUNDS CAN BE TREATED AS UNEXPLAINED MONEY OF THE AS SESSEE. ITA NO. 493/JP/2017 ACIT, CENTRAL CIRCLE-2, JAIPUR VS GODAWARI ESTATES PVT.LTD. KOLKATA 29 D) FINDING OF LD. AO: - THE CONTENTION OF THE ASSESSEE COMPANY IS ONLY BAS ED ON ACCOUNTING JUGGLERY BY WAY OF WHICH THE TRANSACTION HAS BEEN RECORDED IN THE BOOKS OF ACCOUNTS OF ALL SUCH PERSONS INCLUDING THE ASSESSEE COMPANY, WHO HAVE PARTICIPATED IN THIS EXERCISE. IT NEEDS TO BE UNDERSTOOD THAT MERELY BECAUSE THE ASSESSEE COMPANY ADJUSTED THE MONEY RECEIVED, A S SHARE CAPITAL/SHARE PREMIUM IN ITS BOOKS OF ACCOUNT, THE TRANSACTION CA NNOT BE SHOWED WITH THE CHARACTER OF A CAPITAL RECEIPT. IT MUST BE SAID THA T THE FACE VALUE OF A SHARE IS INTRINSICALLY CAPITAL IN NATURE BECAUSE IT IMPARTS TO THE SUBSCRIBER A RIGHT OF PARTICIPATION AND OWNERSHIP IN THE ISSUING COMPANY. HOWEVER, THE SHARE PREMIUM ATTACHED TO EACH SUCH SHARE DOES NOT ENTITL E THE SUBSCRIBED OF ANYTHING ELSE OTHER THAN WHAT THE FACE VALUE BY ITSELF HAS A CHIEVED FOR HIM. THIS PARTICIPATION AND OWNERSHIP IN THE ISSUING COMPANY REMAINS THE SAME. IT IS IN FACT A COST WHICH THE SUBSCRIBER BEARS FOR 1) THE VALUE OR WORTH OF ASSETS & PROFITS WHICH THE ISSUER COMPANY ALREADY POSSESSES OR DERIVER, OR 2) THE VALUE OR WORTH OF SUCH ASSETS OR PROFITS WH ICH THE ISSUES COMPANY MAY CREATE IN THE FURTHER OR MAY DERIVE, FOR THE PROPOR TIONATE BENEFIT OF THE SUBSCRIBER. IN THE INSTANT CASE, BOTH OF ABOVE ARE ABSENT. NEIT HER DOES THE ISSUING COMPANY POSSESS ANY ASSET WORTH ITS NAME NOR DOES IT DERIVE ANY PROFIT. NEITHER DOES THE ASSESSEE COMPANY HOLD ANY PROMISE FOR THE CREATION OF ASSETS OR WEALTH IN THE FUTURE NOR IS THERE ANY FORESEEABLE P OSSIBILITY OF ANY PROFIT BEING DERIVED IN THE FUTURE. THE QUESTION WHICH THUS ARISES IS THAT WHAT IS IT T HAT THE SUBSCRIBER COMPANY PAID FOR IN FORM OF THE SHARE HAVING FACE VALUE OF RS. 10. TH E ASSESSEE COMPANY HAS FAILED TO ANSWER THIS QUESTION EVEN WHEN A SPECIFIC QUERY IN THIS REGARD HAD BEEN RAISED THUS THE SAME CREATES DOUBTS REGARDING GENUINENESS OF SHARE CAPITAL AND PREMIUM THEREON CREDITED IN BOOKS OF AC COUNTS SUBMISSION OF ASSESSEE: - I) THE TRANSFER OF SHARE APPLICATION INTO SHARE CAP ITAL & SHARE PREMIUM IS NOT ONLY BASED ON ACCOUNTING ENTRIES BUT THEY ARE SUPPORTED BY DOCUMENTARY EVIDENCE. IT IS NOT A CASE WHERE THE CERTAIN RECEIPTS HAS BEEN A CCOUNTED FOR BY THE ASSESSEE COMPANY AS PER ITS OWN SWEET WILL. THE INVESTOR COM PANIES FILED THE SHARE APPLICATION FORMS TO SUBSCRIBE THE SHARES OF THE AS SESSES COMPANY AND IN THE SHARE APPLICATION FORM THE DETAIL OF SHARE PREMIUM IS ALSO MENTIONED. THUS THIS IS NOT A CASE WHERE THE CLAIM OF THE ASSESSEE IS BA SED ON ACCOUNTING ENTRIES. THERE IS NO CONTRA MATERIAL WITH THE DEPARTMENT TO PROVE THAT THE ADJUSTMENT MADE IN BOOKS OF ACCOUNTS BY THE ASSESSEE IS NOT CO RRECT OR NOT BASED ON DOCUMENTS. ITA NO. 493/JP/2017 ACIT, CENTRAL CIRCLE-2, JAIPUR VS GODAWARI ESTATES PVT.LTD. KOLKATA 30 II) THE LD. AO HIMSELF ADMITTED THAT THE FACE VALUE OF A SHARE IS INTRINSICALLY CAPITAL IN NATURE BECAUSE IT IMPARTS TO THE SUBSCRIBER A RI GHT OF PARTICIPATION AND OWNERSHIP IN THE ISSUING COMPANY AND STILL WHILE MA KING THE ADDITION HE MADE THE ADDITION OF THE SHARE CAPITAL AS WELL AS SHARE PREMIUM. FURTHER IF THE SHARES ARE ISSUED AT PREMIUM THEN CAPITAL RECEIPT AGGREGAT E AMOUNT OF PREMIUM IS TO BE TRANSFERRED TO AN ACCOUNT CALLED THE SHARE PREMIUM ACCOUNT. THE BOOK VALUE OF THE SHARE IS INCREASED BY THE AMOUNT CREDITED IN SH ARE PREMIUM ACCOUNT. THIS SHARE PREMIUM ACCOUNT IS NOT DISTRIBUTABLE AS INCOM E JUST LIKE AS ANY OTHER CAPITAL ASSETS. ON WINDING UP, THE SURPLUS MONIES I N THE SHARE PREMIUM ACCOUNT IS TO BE RETURNED TO THE SHARE HOLDERS AS CAPITAL. SO LONG AS THE COMPANY IS A GOING CONCERN, THE MONIES IN SHARE PREMIUM ACCOUNT CAN NEVER BE RETURNED TO THE SHAREHOLDERS EXCEPT THROUGH THE MEDIUM OF A RED UCTION PETITION, OR, IN OTHER WORDS, EXCEPT UNDER EXACTLY THE SAME CONDITIONS AS THOSE UNDER WHICH ANY OTHER CAPITAL ASSET CAN REACH THE SHAREHOLDERS HAND S. DISTRIBUTION OF SHARE PREMIUM AMOUNT IS NOT PERMITTED THROUGH DIVIDEND. T HE COMPANIES ACT CLEARLY MENTIONS THAT AMOUNT RECEIVED AS PREMIUM IS CAPITAL RECEIPT AND NOT A REVENUE RECEIPT. III) AS HIMSELF ADMITTED BY LD. AO ONE OF THE DECIDIN G FACTOR FOR SHARE PREMIUM IS THE VALUE OR WORTH OF SUCH ASSETS OR PROFITS WHICH THE ISSUES COMPANY MAY CREATE IN THE FURTHER OR MAY DERIVE, FOR THE PROPORTIONATE BE NEFIT OF THE SUBSCRIBER. IN FORGOING PARAS WE HAVE DESCRIBED THE FUTURE PLANNIN G OF THE ASSESSEE BY USING THE FUNDS RECEIVED FROM SHAREHOLDERS WHICH ALSO JUS TIFIED THE SHARE PREMIUM RECEIVED FROM THE INVESTOR COMPANIES. THEREFORE THE LD. AO IS WRONG IN HOLDING THAT IN THE INSTANT CASE NEITHER DOES THE ASSESSEE COMPANY HOLD ANY PROMISE FOR THE CREATION OF ASSETS OR WEALTH IN THE FUTURE NOR IS THERE ANY FORESEEABLE POSSIBILITY OF ANY PROFIT BEING DERIVED IN THE FUTURE. FROM THE FINANCIALS OF THE ASSESSEE COMPANY THE JUSTIFICATION GIVEN BY THE ASSESSEE IN FORGOING PARA REGARDING ACQUISITION OF ASSETS AND FUTURE PLANNING FOR EARNING OF PROFIT CAN BE DULY VERIFY. FURTHER AS STATED IN FORGOING PARAS THE SHARES AT PREMIUM IS ALWAYS A COMMERCIAL DECISION BETWEEN INVESTOR AND INVESTEE COMPANIES WHICH DOES NOT REQUIRE ANY J USTIFICATION. E) FINDING OF LD. AO: - THE INQUIRIES WHICH IS BEING DISCUSSED IN SHOW CAUS E NOTICE ADMITTEDLY HAVE NO RELEVANCE IN THE CASE OF THE ASSESSEE COMPANY AS NO SHARE CAPITAL WAS ISSUED TO THOSE COMPANIES. HOWEVE R THE INQUIRIES WERE DISCUSSED TO JUSTIFY THE MODUS OPERANDI OF INTRODUC TION OF MONEY IN THE SHAPE OF HIGH SHARE PREMIUM WHICH IS RELEVANT IN THIS CASE A LSO AS THE SHARES WERE ALLOTTED IN THIS CASE ALSO AT THE RATE HIGHER TO TH E JUSTIFIABLE AMOUNT. SUBMISSION OF ASSESSEE: - I) WHATEVER INQUIRIES ARE BEING DISCUSSED IN THE SHOW CAUSE NOTICE AS WELL AS IN ASSESSMENT ORDER ARE NOT APPLICABLE IN THE CASE OF THE ASSESSEE FOR THE INSTANT YEAR AS IN THE YEAR UNDER CONSIDERATION NO SHARES W ERE ISSUED TO SUCH ITA NO. 493/JP/2017 ACIT, CENTRAL CIRCLE-2, JAIPUR VS GODAWARI ESTATES PVT.LTD. KOLKATA 31 COMPANIES ON WHICH THE INQUIRIES WERE CONDUCTED BY THE DEPARTMENT. IN THIS YEAR NO ANY INQUIRY WAS MADE FROM THE INVESTOR COMP ANIES WHO MADE INVESTMENT IN THE YEAR UNDER CONSIDERATION. II) AS REGARD TO PRESUMING THE MODUS OPERANDI BASED ON T HE INQUIRED CARRIED OUT IN THE CASE OF SOME OTHER COMPANIES PRESUMING THAT THE SAME MODUS OPERANDI WAS FOLLOWED IN EACH AND EVERY CASE, THIS IS TO SUBMIT THAT AS PER LAW THE INQUIRIES CONDUCED IN THE CASE OF PARTICULAR PERSON SHOULD BE RESTRICTED FROM THAT PERSON ONLY AND CAN MADE APPLICABLE FOR THE TRANSACTIONS C ARRIED OUT FROM SUCH PERSON. THE SAME CANNOT BE EXTENDED TO MAKING ANY PRESUMPTI ON & ASSUMPTION IN EACH AND EVERY CASE WHERE NO INQUIRIES WERE MADE. IT IS NOT CORRECT TO PRESUME THAT ALL THE COMPANIES ARE OPERATING FROM MODUS OPERANDI . III) THERE IS NO EVIDENCE WITH THE DEPARTMENT TO PROVE T HAT THE COMPANIES TO WHOM SHARES WERE ISSUED DURING THE YEAR WERE BEING FUNDE D BY THE ASSESSEE COMPANY. ALL THE COMPANIES HAVE THEIR OWN INDEPENDEN T FUNDS TO INVEST AT THEIR WISDOM. IT IS FURTHER RELEVANT TO MENTION HERE THAT WHATEVER FUNDS PAID BY THE INVESTOR COMPANIES TO THE ASSESSEE COMPANY WERE TRA NSFERRED FROM THEIR OWN SOURCE OF FUNDS WHICH THEY WERE POSSESSING FROM THE IR OWN SOURCE AND BY NO STRETCH OF IMAGINATION IT CAN BE PRESUMED THAT THOS E FUNDS WERE INTRODUCED BY THE ASSESSEE COMPANY IN THE INVESTOR COMPANIES. IV) FURTHER FROM THE SHOW CAUSE INQUIRIES ON THE BASIS OF WHICH THE MODUS OPERANDI OF ISSUE OF SHARES ON SHARE PREMIUM IS BEING JUSTIF Y BY THE LD. AO NO WHERE IT PROVES THAT THE FUNDS WERE INTRODUCED IN SUCH COMPA NIES BY THE ASSESSEE COMPANY. THERE IS NO COGENT REASON TO HAVE SUCH PRE SUMPTION EITHER AS A RESULT OF SEARCH OVER THE ASSESSEE AS WELL AS INQUIRIES CA RRIED OUT BY THE DEPARTMENT. IF WE BELIEVE ON THE INQUIRIES CARRIED OUT BY THE DEPA RTMENT WHICH IS NOT IN KNOWLEDGE OF THE ASSESSEE, THAN THERE MAY BE INTROD UCTION OF SOME SUSPICIOUS FUNDS IN THE INTERMEDIATE COMPANIES WHERE FROM THE FLOW OF FUNDS STARTED FROM ONE COMPANY/PERSON TO OTHER COMPANY/PERSON AND PART OF SUCH WAS RECEIVED TO THE ASSESSEE COMPANY BUT STILL A QUESTION AROSE THA T HOW ITS PROVE THAT THE SAME WAS UNEXPLAINED MONEY OF THE ASSESSEE COMPANY. THE COMPANIES/PERSONS FROM WHOM THE ASSESSEE COMPANY RE CEIVED THE SHARE APPLICATION MONEY AND THE PERSONS/COMPANIES FROM WH OM THE INVESTOR COMPANIES OF THE ASSESSEE RECEIVED THE FUNDS ARE SE PARATE INCOME TAX ASSESSEE AND HAVING THEIR OWN NET WORTH, OWN SOURCE OF FUNDS MUCH PRIOR TO THE INVESTMENT MADE IN THE ASSESSEE COMPANY AND IF SOME SUSPICIOUS FUNDS HAD BEEN INTRODUCED IN ACCOUNTS OF SUCH COMPANIES THEN THE EXPLANATION OF SUCH FUNDS SHOULD HAVE BEEN CALLED FROM CONCERNING PERSO N/COMPANY AND IN CASE OF FAILURE TO DO SO THE ACTION SHOULD HAVE BEEN TAKEN IN THE CASE OF CONCERNING PERSON. INSTEAD OF DOING SO THE DEPARTMENT ADOPTED A SHORT CUT METHOD OF TREATING SUCH SUSPICIOUS MONEY AS UNEXPLAINED MONEY OF THE ASSESSEE AND ADDED THE SAME INCOME OF THE ASSESSEE WITHOUT CARRY ING NECESSARY INQUIRIES OR TAKING NECESSARY ACTION AGAINST SUCH PERSONS BY JUS TIFYING ITS ACTION ON THE ITA NO. 493/JP/2017 ACIT, CENTRAL CIRCLE-2, JAIPUR VS GODAWARI ESTATES PVT.LTD. KOLKATA 32 BASIS OF SOME IRRELEVANT INQUIRIES. THERE IS NO CAS E OR EVIDENCE WITH THE DEPARTMENT TO PRESUME THAT THE ASSESSEE HAS INTRODU CED ITS EXPLAINED MONEY IN ACCOUNTS OF SUCH INVESTOR COMPANIES. F) FINDING OF LD. AO: - ADMITTEDLY DURING THE COURSE OF SEARCH OVER MOTISON S GROUP NO DOCUMENTS/EVIDENCE WAS FOUND TO SHOW THAT THE COMPANIES WHO MADE INVESTMENT IN SHARES OF THE ASSESSEE COMPANY A RE RUN/MANAGE BY MOTISONS GROUP BUT FROM THE INQUIRIES AND MODUS OPE RANDI ITS REVEALS THAT THE ALLOTEE COMPANIES ARE MERELY PAPER COMPANIES AND PR OVIDING ACCOMMODATION ENTRIES. THEREFORE THE INDIRECT EVIDENCE/INQUIRIES CONDUCTS GIVEN CLEAR SIGN OF INTRODUCTION OF LARGE MONEY IN THE COMPANY IN THE F ORM OF SHARE CAPITAL/SHARE PREMIUM MORE SO WHEN THE JUSTIFICATION OF CHARGING SUCH HIGHER RATE NOT GENUINELY PROVED. SUBMISSION OF AO: - I) IN THIS PARA THE LD. AO HIMSELF ADMITTED THAT DU RING THE COURSE OF SEARCH OVER MOTISONS GROUP NO DOCUMENTS/EVIDENCE WAS FOUND TO S HOW THAT THE COMPANIES WHO MADE INVESTMENT IN SHARES OF THE ASSESSEE COMPA NY ARE RUN/MANAGED BY MOTISONS GROUP. THUS IF THE DEPARTMENT IS NOT IN PO SSESSION OF ANY POSITIVE MATERIAL AGAINST THE ASSESSEE OR ITS INVESTOR COMPA NIES THAN HOW THE INQUIRIES MADE IN THE CASE OF OTHER COMPANIES CAN BE USED AGA INST THE ASSESSEE MORE SO WHEN IN THE YEAR UNDER CONSIDERATION NO ANY TRANSAC TIONS WAS MADE FROM SUCH COMPANIES. FURTHER THERE IS NOTHING POSITIVE IN THE INQUIRIES TO ALLEGED THAT THE ASSESSEE HAS INTRODUCED ITS OWN UNEXPLAINED MONEY U NDER THE GARB OF SHARE CAPITAL AND SHARE PREMIUM. II) THE RATE OF SHARE WAS DECIDED AFTER DISCUSSION OF ASSESSEE COMPANY AND INVESTOR COMPANY. THE SHARES WERE ISSUED TO THE INV ESTOR COMPANIES AT PREMIUM BECAUSE OF THE REASONS MENTIONED IN FORGOING PARAS. FROM THE DOCUMENTS SUBMITTED TO THE AO NO WHERE IT PROVES THAT ALL THE COMPANIES ARE SIMPLY PAPER COMPANIES AND PROVIDING ONLY ACCOMMODATION ENTRIES AND THE INVESTMENT MADE BY THEM IN THE ASSESSEE COMPANY IS NOT GENUINE. THE FINDING OF THE LD. AO IS BASED ON THE ASSUMPTION AND PRESUMPTION. G) FINDING OF LD. AO: - IT IS ALSO TO BE NOTED HERE THAT THE NOTICES U/S 13 3(6) WERE ISSUED TO THE KOLKATA BASED COMPANIES FROM WHERE TH E ASSESSEE COMPANY RECEIVED SHARE CAPITAL/SHARE PREMIUM. TILL THE STIP ULATED DATE OF COMPLIANCE NONE OF THE COMPANY REPLIED TO THE ABOVE SAID NOTIC ES. SUBMISSION OF ASSESSEE: - I) THE LD. AO HAD ISSUED THE NOTICES U/S 133(6) OF INCO ME TAX ACT, 1961 AND HE ALLEGES THAT THE SAME WERE NOT COMPLIED BY THE INVE STOR COMPANIES. BUT THIS FACT WAS NOT BROUGHT TO THE NOTICE OF THE ASSESSEE. THE ASSESSEE HAS INQUIRED FROM THE INVESTOR COMPANIES AND THEY REPORTED THAT THEY HAVE SENT REPLY BY POST FOR ALL THE NOTICES RECEIVED BY THEM. II) FURTHER FROM THE ASSESSMENT ORDER IT IS NOT CLEAR T HAT WHAT SHORT OF INFORMATIONS WERE REQUIRED BY LD. AO FROM THE INVESTOR COMPANIES AND WHETHER THE SAME WAS OVER AND ABOVE TO THE INFORMATIONS/DOCUMENTS ALREA DY SUBMITTED BY THE ITA NO. 493/JP/2017 ACIT, CENTRAL CIRCLE-2, JAIPUR VS GODAWARI ESTATES PVT.LTD. KOLKATA 33 ASSESSEE. IF SUCH CALLED INFORMATION WERE THAT MUCH IMPORTANT THAN WHY THE SAME WERE NOT BROUGHT IN THE NOTICE OF THE ASSESSEE . THIS SHOWS THAT THE LD. AO WAS BENT FOR MAKING THE ASSESSMENT AND HE ISSUED TH E NOTICE TO THE INVESTOR COMPANIES JUST TO COMPLETE THE FORMALITIES. III) SIMPLY THAT THE PARTIES NOT RESPONDED THE NOTICE, I T DOES NOT EMPOWER TO THE LD. AO TO TREAT THE TRANSACTIONS AS NON GENUINE. RELIANC E IS PLACED ON FOLLOWING DECISIONS: - CIT V/S. WINSTRAL PETROCHEMICALS (P) LTD. (2010) 41 D TR (DEL) 139 INCOMECASE CREDITSHARE APPLICATION MONEYASSESSEE COMPANY WAS FOUND TO HAVE RECEIVED THE MONEY THROUGH BANKING CHANNELS ASSESSEE COMPANY ALSO FURNISHED WRITTEN CONFIRMATIONS FROM THE APPLICANT COMPANIES, COPIES OF CERTIFICATES OF INCORPORATION, PAN CARDS, PAN DETAILS AND COMPANY DETAILS ETC. OF THE APPLICANTSFINDING OF TRIBUNAL THAT IDENTITY OF THE SUBSCRIBERS STOOD DULY ESTABLISHED FROM THE DOCUMENTS PRODUCED BY THE ASSE SSEE, CANNOT BE SAID TO BE PERVERSETHERE IS NO LEGAL BAR TO MORE THAN ONE COM PANY BEING REGISTERED AT THE SAME ADDRESSMERELY BECAUSE THE APPLICANTS DID NOT RESPOND TO THE NOTICES SENT TO THEM, AO WAS NOT JUSTIFIED IN ADDING THE AM OUNT OF SHARE APPLICATION MONEY TO THE INCOME OF THE ASSESSEE. CIT V/S. SAMIR BIO-TECH (P) LTD. (2009) 17 DTR (DEL) 2 24 INCOMECASH CREDITSHARE APPLICATION MONEYIDENTITY OF THE SUBSCRIBERS NOT BEING IN DOUBT, SHARE APPLICATION MONEY HAVING BEEN PAID BY ACCOUNT PAYEE CHEQUES, SUBSCRIBERS HAVING SHOWN THE AMOUNTS IN TH EIR AUDITED BALANCE SHEETS AND HAVING GIVEN COMPLETE DETAILS WITH REGARD TO TH EIR RETURNS AND ASSESSMENTS, NO ADDITION COULD BE MADE UNDER S. 68 ONLY BECAUSE THE SUBSCRIBERS DID NOT INITIALLY RESPOND TO SUMMONS. H) FINDING OF LD. AO: - IT IS CLEAR THAT WHAT IS APPARENT IS NOT REAL AND T HE ASSESSEE'S CLAIM OF HAVING RECEIVED INVESTMENT IS N OT GENUINE. AS LAID DOWN BY THE HON'BLE SUPREME COURT IN THE CASE OF CIT VS SUM ATI DAYAL (1995) 80 TAXMAN 89 (SC), APPARENT MUST BE CONSIDERED REAL UNTIL IT IS SHOWN THAT THERE ARE REASONS TO LOOK INTO THE SURROUNDING CIRCUMSTAN CES TO FIND OUT THE REALITY AND THE MATTER HAS TO BE CONSIDERED BY APPLYING THE TES T OF HUMAN PROBABILITIES. THE EVIDENCES HAVE TO BE JUDGED BY APPLYING THE TEST OF HUMAN PROBABILITIES. IMPORTING THE RATIO OF THE HON'BLE SUPREME COURT OF INDIA AS PROPOUNDED IN THE CASE OF SUMATI DAYAL (SUPRA), THERE IS NO DISPUTE T HAT THE AMOUNT HAS BEEN RECEIVED BY THE APPELLANT FROM VARIOUS COMPANIES, S OME OF WHICH ARE LISTED COMPANIES, AND THE FUNDS HAVE BEEN RECEIVED AGAINST THE ISSUE OF SHARES AND THAT THE FUNDS HAVE BEEN RECEIVED THROUGH BANKING C HANNELS. WHAT IS DISPUTED IS WHETHER THE FUNDS RECEIVED BY THE ASSESSEE IS AC TUALLY GENUINE INVESTMENT OR THE UNACCOUNTED INCOME INTRODUCED IN THE GARB OF IN VESTMENT. THIS RAISES THE QUESTION WHETHER THE APPARENT COULD BE CONSIDERED A S REAL. IN THE PRESENT CASE THE CLAIM OF THE ASSESSEE HAVING RECEIVED GENUINE I NVESTMENT IS INCORRECT. SUBMISSION OF ASSESSEE: - I) AS LAID DOWN BY THE HON'BLE SUPREME COURT IN THE CASE OF CIT V/S SUMATI DAYAL (1995) 80 TAXMAN 89 (SC) , (ALSO RELIED BY LD. AO) APPARENT MUST BE ITA NO. 493/JP/2017 ACIT, CENTRAL CIRCLE-2, JAIPUR VS GODAWARI ESTATES PVT.LTD. KOLKATA 34 CONSIDERED REAL UNTIL IT IS SHOWN THAT THERE ARE RE ASONS TO LOOK INTO THE SURROUNDING CIRCUMSTANCES TO FIND OUT THE REALITY A ND THE MATTER HAS TO BE CONSIDERED BY APPLYING THE TEST OF HUMAN PROBABILIT IES. THE EVIDENCES HAVE TO BE JUDGED BY APPLYING THE TEST OF HUMAN PROBABILITIES. II) THE LD. AO IS ALSO ADMITTING IN THIS PARA THAT THE AMOUNT HAS BEEN RECEIVED BY THE APPELLANT FROM VARIOUS COMPANIES AND THE FUNDS HAVE BEEN RECEIVED AGAINST THE ISSUE OF SHARES AND THAT THE FUNDS HAVE BEEN RE CEIVED THROUGH BANKING CHANNELS. THE DISPUTE IS WHETHER THE FUNDS RECEIVED BY THE A SSESSEE ARE ACTUALLY GENUINE CAPITAL APPLICATION OR THE UNACCOUNTED INCOME INTRO DUCED IN THE FORM OF SHARE APPLICATION. IN THIS REGARD THIS IS TO SUBMIT THAT THERE IS NO REASON WITH THE DEPARTMENT TO PRESUME THAT THE AMOUNT RECEIVED FROM THE ABOVE MEN TIONED COMPANIES IS ACCOMMODATION ENTRIES TO BROUGHT THE UNACCOUNTED MO NEY OF THE ASSESSEE IN BOOKS OF ACCOUNTS. FURTHER DURING THE COURSE OF SEA RCH THE DEPARTMENT HAS NOT FOUND ANY UNDISCLOSED SOURCE OF INCOME OF ASSESSEE FOR THE YEAR UNDER CONSIDERATION BY WHICH THIS MUCH OF INCOME COULD BE EARNED WHICH ALSO PROVES THAT THE SHARE CAPITAL RECEIVED BY THE ASSESSEE IS GENUINE. CIT VS BHARAT ENGINEERING AND CONSTRUCTION CO. (1972) 83 ITR 187 (SC ) IN THIS CASE TRIBUNAL CAME TO THE CONCLUSION THAT UNEXPLAINED CA SH CREDIT ENTRIES IN THE FIRST YEAR OF BUSINESS OF ENGINEERING CONSTRUCTION COMPAN Y COULD NOT BE INCOME OF ASSESSEE. THE HIGH COURT AFTER CAREFUL EXAMINATION OF THE VARIOUS FINDINGS REACHED BY THE TRIBUNAL HAS COME TO THE CONCLUSION THAT THE TRIBUNAL'S FINDINGS ARE FINDINGS OF FACT. HONBLE APEX COURT CONFIRMED THAT CONCLUSION. THIS GIVES THE ANSWER IN FAVOR OF THE ASSESSEE THA T IN THIS CASE THE APPARENT SHOULD BE CONSIDERED AS REAL AS THE ASSESSEE COMPAN Y IS NOT HAVING ANY SOURCE OF INCOME FROM WHICH THIS MUCH OF INCOME COULD BE E ARNED THAN RECEIVED OF NON GENUINE SHARE CAPITAL TO BROUGHT ITS UNACCOUNTED IN COME IN ITS BOOKS OF ACCOUNTS DOES NOT ARISE. III) THE ASSESSING OFFICER MERELY DISBELIEVED THE EXPLAN ATION/STATEMENTS GIVEN BY THE ASSESSEE AND HAS CONVERTED GOOD PROOF INTO NO P ROOF. HONBLE JUSTICE HIDAYATULLAH OF THE SUPREME COURT IN THE CASE OF SREELEKHA BANERJEE VS CIT [1963] 49 ITR 112 (SC); 120 OBSERVED THAT THE INCOME TAX DEPARTMENT CANNOT BY MERELY REJECTING UNREASONABLY A GOOD EXPL ANATION, CONVERT GOOD PROOF INTO NO PROOF HONBLE SUPREME COURT IN THE CASE OF UMA CHARAN SHAW & BROS CO VS CIT 37 ITR 271 HAS HELD THAT THE SURMISES AND CONJECTURES, AND THE CONCLUSION IS THE RESULT OF SUSPICION WHICH CANNOT TAKE THE PLACE OF PROOF. HONBLE PUNJAB & HARYANA HIGH COURT IN THE CASE OF CIT V S ANUPAM KAPOOR (2008) 299 ITR 179 (P & H) ALSO HELD THAT SUSPICION, HOWSOEVER STRONG CANNOT TAKE THE PLACE OF LEGAL PROOF. ITA NO. 493/JP/2017 ACIT, CENTRAL CIRCLE-2, JAIPUR VS GODAWARI ESTATES PVT.LTD. KOLKATA 35 8. BY GIVING THE ABOVE FINDINGS THE LD. MADE ADDI TION OF RS. 2,00,00,000/- IN TOTAL INCOME OF THE ASSESSEE U/S 56(1) OF INCOME TAX ACT, 1961. REGARDING THE APPLYING THE PROVISIONS OF SECTION 56(1) OF INCOME TAX ACT, 1961 WE MAY SUBMIT AS UNDER: - A) AS PER PROVISIONS OF SECTION 56(1) OF INCOME TAX ACT, 1961 INCOME OF EVERY KIND WHICH IS NOT TO BE EXCLUDED FROM THE TOTAL INCOME U NDER THIS ACT SHALL BE CHARGEABLE TO INCOME-TAX UNDER THE HEAD 'INCOME FRO M OTHER SOURCES', IF IT IS NOT CHARGEABLE TO INCOME-TAX UNDER ANY OF THE HEADS SPE CIFIED IN SECTION 14 , ITEMS A TO E. IN THE CASE OF THE ASSESSEE COMPANY, THE AMOUNT WAS RECEIVED FROM INVESTOR COMPANIES WERE AGAINST SHARE APPLICATION AND THE SA ME IS CAPITAL RECEIPT WHICH WAS ADJUSTED AGAINST SHARE CAPITAL AND SHARE PREMIU M. THE MONEY SO RECEIVED TO ASSESSEE COMPANY WAS CAPITAL RECEIPT AND WAS NOT REVENUE RECEIPT, THEREFORE THE SAME CANNOT BE TAXED IN THE HANDS OF ASSESSEE C OMPANY UNDER SECTION 56(1) OF INCOME TAX ACT, 1961 BECAUSE THIS SECTION DEAL WI TH INCOME AND NOT WITH CAPITAL RECEIPTS. THE INVESTORS WHO SUBSCRIBED THE SHARE CAPITAL OF ASSESSEE COMPANY IS ALSO SHOWING THE AMOUNT PAID TO ASSESSEE AS THEIR INVESTMENT IN SHARES OF ASSESSEE COMPANY AND NECESSARY DOCUMENTS IN THIS REGARD WAS SUBMITTED TO LD. AO. THEREFORE THE ASSESSEE HAS PROV ED WITH DOCUMENTARY EVIDENCES THAT THE AMOUNT WAS RECEIVED AGAINST SHAR E APPLICATION I.E. CAPITAL RECEIPT, THEREFORE THE SAME CANNOT BE TREATED AS IN COME OF THE ASSESSEE. FURTHER FOR TREATING THE SHARE CAPITAL/SHARE PREMIUM AS INC OME OF THE ASSESSEE COMPANY NO COGENT REASON HAS BEEN GIVEN BY LD. AO. B) THERE IS NO DEEMING FICTION HAS BEEN GIVEN IN SE CTION 56(1) OF INCOME TAX ACT, 1961 WHEREIN THE INCOME CAN BE TAXED UNDER DEEMING PROVISION. CERTAIN DEEMING INCOME HAS BEEN CHARGED AS INCOME TAX ACT WH ICH HAS BEEN PROVIDED IN SECTION 56(2) OF INCOME TAX ACT, 1961 AND AS PER PROVISION OF SECTION 56(2) OF INCOME TAX ACT, 1961 THE SHARE PREMIUM RECEIVED PRIO R TO AY 2013-14 WERE NOT TAXABLE IN ANY CIRCUMSTANCES IF THE ASSESSEE HAS PR OVED THE IDENTITY, CREDITWORTHINESS AND GENUINENESS OF THE TRANSACTION S. C) THE INCOME FOR THE PURPOSE OF THE INCOME TAX ACT HAS A WELL UNDERSTOOD MEANING AS DEFINED IN SECTION 2(24) OF THE INCOME T AX ACT 1961. IT IS TRUE THAT SECTION 2(24) OF THE INCOME ACT 1961 CONTAINS INCLUS IVE DEFINITION BUT IT CANNOT BE DISPUTED THAT INCOME SHOULD HAVE BEEN LOOK INTO ITS NORMAL MEANING. THE INCOME WILL NOT INCLUDE CAPITAL RECEIPTS UNLESS IT IS SPEC IFIED IN INCOME TAX ACT. THIS ARGUMENT CLARIFIES AFTER THE AMENDMENT MADE BY FINA NCE ACT 2012 W.E.F. 1.4.2013 IN SECTION 56(VIIB) OF INCOME TAX ACT, 1961 WHEREIN CERTAIN SHARE PREMIUMS WERE MADE TAXABLE W.E.F. 01.04.2013. IF TH E SAME WERE ALREADY TAXABLE U/S 56(1) O INCOME TAX ACT, 1961 AND THE SAM E WAS ALREADY INCLUDED IN THE DEFINITION OF INCOME THAN WHY THIS AMENDMENT WA S MADE. THEREFORE THE LD. AO IS WRONG IN MAKING THE ADDITION U/S 56(1) OF INCO ME TAX ACT, 1961. ITA NO. 493/JP/2017 ACIT, CENTRAL CIRCLE-2, JAIPUR VS GODAWARI ESTATES PVT.LTD. KOLKATA 36 D) CHARGE OF TAX IS ON INCOME AS UNDERSTOOD IN THE I. TAX ACT AND MEASURE OF INCOME AS PER THE COMPUTATION PROVISION. IN CASE TH ERE IS NO CHARGING PROVISION FOR SPECIFIC RECEIPT, THEN IT CANNOT BE TAXED. THE FIVE MEMBER BENCH OF THE APEX COURT IN CIT V VATIKA TOWNSHIP P LTD 367 ITR 466 OBSERVED AT PAGE 494. TAX LAWS ARE CLEARLY IN DEROGATION OF PERSONAL RIG HTS AND PROPERTY INTERESTS AND ARE, THEREFORE, SUBJECT TO STRICT CONSTRUCTION AND ANY A MBIGUITY MUST BE RESOLVED AGAINST IMPOSITION OF THE TAX. IN BILLINGS V U.S 23 2 U.S.261 AT PAGE 265, 34 S.CT 421 (1914), THE SUPREME COURT CLEARLY ACKNOWLEDGED THIS BASIC AND LONG STANDING RULE OF STATUTORY CONSTRUCTION. TAX STATUTES SHOULD BE STRICTLY CONSTRUED, AND, IF ANY AMBIGUITY BE FOUND TO EXIST, IT MUST BE RESOLVED IN FAVOUR OF CITIZEN. IF A PERSON SOUGHT TO BE TAXED COMES WITHIN THE LE TTER OF THE LAW HE MUST BE TAXED, HOWEVER GREAT THE HARDSHIP MAY APPEAR TO THE JUDICI AL MIND TO BE. ON THE OTHER HAND, IF THE CROWN SEEKING TO RECOVER THE TAX, CANN OT BRING THE SUBJECT WITHIN THE LETTER OF THE LAW, THE SUBJECT IS FREE, HOWEVER APP ARENTLY WITHIN THE SPIRIT OF THE LAW THE CASE MIGHT OTHERWISE APPEAR TO BE AS OBSERV ED IN PARTINGTON V ATTOMEY GENERAL LR4HL100. SINCE FOR THE YEAR UNDER CONSIDERATION THERE WAS NO PROVISIONS IN INCOME TAX ACT, 1961 WHEREIN THE FAIR VALUE OF SHARE COULD BE COMPU TED AND THE EXCESS SHARE PREMIUM COULD BE TAXED, THEREFORE IN ABSENCE OF COM PUTATION PROVISION THE SAME CANNOT BE TAXED. THE RELIANCE IS PLACED IN FOLLOWIN G CASES: - I) THE HONBLE BOMBAY HIGH COURT IN THE CASE OF CADELL WVG. MILLS CO.(P) LTD. V CIT 249 ITR 265 HAD AN OCCASION TO CONSIDER THE TAXABILITY OF A SU M RECEIVED IN RESPECT OF CONSIDERATION OF TENANCY RIGHT. IT WA S ACCEPTED BOTH BY REVENUE AND THE ASSESSEE THAT TENANCY RIGHT IS A CAPITAL RE CEIPT. INCOME AS DEFINED IN SECTION 2(24)(VI) IS THE INCOME CHARGEABLE U/S 45. HENCE CAPITAL GAIN CHARGEABLE U/S 45 OR NOT WILL BE TAXABLE IN CASE THE ARGUMENT OF THE REVENUE IS ACCEPTED. LEGISLATURE HAS NOT STOPPED WITH THE WORD CAPITAL G AIN BUT HAS MENTIONED THAT CAPITAL GAIN CHARGEABLE U/S 45. BEFORE THE BOMBAY H IGH COURT, IT WAS ARGUED THAT IN CASE SURRENDER OF TENANCY RIGHTS IS NOT TAX ABLE U/S 45 THEN IT SHOULD FALL U/S 56 OF I.T. ACT. IF THE CAPITAL ASSET HAS NO COST THEN ENTIRE RECEIPT IS CAPITAL RECEIPT. BEFORE THE HONBLE HIGH COURT, THE REVENUE CONTENDED THAT SECTION 14, IT IS MENTIONED AS CAPITAL GAIN AND NOT CAPITAL GAIN C HARGEABLE U/S 45. THIS CONTENTION WAS NOT ACCEPTED BY THE HIGH COURT. IF T HE COMPUTATION PROVISION DO NOT APPLY TO A CASE THEN SUCH A CASE WILL NOT BE CO VERED UNDER CHARGING SECTION. AT LATER STAGE, A REFERENCE WILL BE MADE TO 56 (VII B) INSERTED BY FINANCE ACT 2012 W.E.F. 1.4.2013 AS THE SAME WILL BE A COMPUTATION P ROVISION. FOR THE A.Y. 2011- 12, COMPUTATION PROVISION WERE NOT THERE. IN ABSENC E OF COMPUTATION PROVISION, ENTIRE VALUE OF SHARE PREMIUM CANNOT BE TAXED U/S 5 6. AS FOR TENANCY RIGHT, THE FULL CONSIDERATION CANNOT BE TAXED U/S 56, SIMILARL Y ENTIRE SHARE PREMIUM IS NOT TAXABLE U/S 56(1). ITA NO. 493/JP/2017 ACIT, CENTRAL CIRCLE-2, JAIPUR VS GODAWARI ESTATES PVT.LTD. KOLKATA 37 II) THE HONBLE APEX COURT IN THE CASE OF CIT V D.P. SANDU BROS. CHEMBUR (P) LTD 273 ITR 1 ALSO HOLD THAT AS PER 2(24)(VI) ONLY INCOME WHICH IS CHARGEABLE U/S 45 IS TO BE INCLUDED IN INCOME AND IF COMPUTATI ON PROVISION U/S 45 FAILS THEN CHARGING PROVISIONS WILL FAIL. REF. TO CIT V B.C. SRINIVASA SETTY 128 ITR 294. IV) THE HONBLE RAJASTHAN HIGH COURT IN THE CASE OF CIT V GOTA N LIME STONE KHANIJ UDYOG 269 ITR 399 ALSO HELD THAT IN CASE COMPUTATION PROVISION U/S 48 COULD NOT BE APPLIED FOR WANT OF ASCERTAINABLE C OST OF ACQUISITION, THEN CAPITAL GAIN DOES NOT ARISE TO BE INCLUDED IN TOTAL INCOME ON ACCOUNT OF FAILURE OF APPLICABILITY OF COMPUTATION PROVISION. THE HONBLE HIGH COURT REFERRED TO DECISION OF BOMBAY HIGH COURT IN THE CASE OF CADELL WVG. MILLS CO (P) LTD. (SUPRA). V) THE HONBLE RAJASTHAN HIGH COURT IN THE CASE OF S. ZORAST ER AND CO. V/S CIT 322 ITR 35 HAD ON OCCASION TO CONSIDER THE TAXABILITY OF RECE IPT OF RS.20,000 RECEIVED BY VENDEE ON DEFAULT OF THE PURCH ASER AS PER AGREEMENT FOR SELL OF PREM PRAKASH TALKIES. THE HONBLE HIGH COUR T AFTER REFERRING TO THE DECISION OF APEX COURT IN THE CASE OF TRAVANCORE RUBBER AND TEA CO LTD. V CIT 243 ITR 158 HELD THAT SUCH RECEIPT IS CAPITAL RECEIPT. SUCH CAP ITAL RECEIPT IS NOT TAXABLE IN VIEW OF JUDGMENT OF APEX COURT IN D.P. SANDU BROS. CHEMBUR (P) LTD (SUPRA). HENCE CAPITAL RECEIPT IS NOT TAXAB LE UNLESS THERE IS CHARGING PROVISION FOR A CAPITAL RECEIPT AND COMPUTATION PRO VISIONS ARE ALSO APPLICABLE. E) THE HONBLE BOMBAY HIGH COURT IN THE CASE OF VODAFONE INDIA SERVICES P. LTD. V UOI 368 ITR 1 HAD AN OCCASION TO CONSIDER THE DIFFERENCE BETWEEN THE SHARE PREMIUM DETERMINED BY REVENUE AND THE SHARE P REMIUM CHARGED AS DEEMED LOAN AND TAXING OF NATIONAL INTEREST ON DEEM ED LOAN. THE HONBLE BOMBAY HIGH COURT HAS REFERRED TO THE DECISION OF A PEX COURT IN THE CASE OF MATHURAM AGGARWAL V/S STATE OF MP (1999) 8 SCC 667 FOR THE TEST TO INTERPRET A TAXING STATUE WHICH READS AS UNDER: THE INTENTION OF THE LEGISLATURE IS A TAXATION ST ATUTE IS TO BE GATHERED FROM THE LANGUAGE OF THE PROVISIONS PARTICULARLY WHERE THE L ANGUAGE IS PLAIN AND UNAMBIGUOUS. IN A TAXING ACT IT IS NOT POSSIBLE TO A SSUME ANY INTENTION OR GOVERNING PURPOSE OF THE STATUTE MORE THAN WHAT IS STATED IN THE PLAIN LANGUAGE. IT IS NOT THE ECONOMIC RESULTS SOUGHT TO BE OBTAINE D BY MAKING THE PROVISION WHICH IS RELEVANT IN INTERPRETING A FISCAL STATUTE. EQUALLY IMPERMISSIBLE IS AN INTERPRETATION WHICH DOES NOT FLOW FROM THE PLAIN, UNAMBIGUOUS LANGUAGE OF THE STATUTE. WORDS CANNOT BE ADDED TO OR SUBSTITUTED SO AS TO GIVE A MEANING TO THE STATUTE WHICH WILL SERVE THE SPENT AND INTENTION OF THE LEGISLATURE. THE STATUTE SHOULD CLEARLY AND UNAMBIGUOUSLY CONVEY THE THREE C OMPONENTS OF THE TAX LAW I.E. SUBJECT OF THE TAX, THE PERSON WHO IS LIABLE T O PAY THE TAX AND THE RATE AT WHICH THE TAX IS TO BE PAID. IF THERE IS ANY AMBIGU ITY REGARDING ANY OF THESE INGREDIENTS IN A TAXATION STATUTE THEN THERE IS NO TAX IN LAW. THEN IT IS FOR THE LEGISLATURE TO DO THE NEEDFUL IN THE MATTER. HONBLE BOMBAY HIGH COURT IN THIS CASE (VODAFONE CA SE) OBSERVED THAT ISSUE OF SHARES AT A PREMIUM IS ON CAPITAL ACCOUNT AND GIVES RISE TO NO INCOME. 56(1) PROVIDES THE INCOME OF EVERY KIND WHICH IS NOT EXCL UDED FROM THE TOTAL INCOME IS CHARGEABLE UNDER THE HEAD INCOME FROM OTHER SOURCES . HOWEVER BEFORE SECTION ITA NO. 493/JP/2017 ACIT, CENTRAL CIRCLE-2, JAIPUR VS GODAWARI ESTATES PVT.LTD. KOLKATA 38 56 OF THE ACT CAN BE APPLIED THERE MUST BE INCOME WH ICH ARISES. IF THE RECEIPT IS CAPITAL THEN IT IS NOT INCOME. HENCE SHARE PREMIUM IS NOT AN INCOME. F) THE CBDT VIDE CIRCULAR/INSTRUCTION NO.2 DATED 29 .01.2015 HAS STATED AS UNDER [371 ITR 6(ST)]. IN REFERENCE TO THE ABOVE CITED SUBJECT, I AM DIREC TED TO DRAW YOUR ATTENTION TO DECISION OF THE HIGH COURT OF BOMBAY IN THE CASE OF VODAFONE INDIA SERVICES PVT. LTD V UOI FOR THE ASSESSMENT YEAR 2009-10 (WP NO.871 OF 2014) WHEREIN THE COURT HAS HELD INTERALIA, THAT THE PREMIUM ON SHARE ISSUE WAS ON ACCOUNT OF A CAPITAL ACCOUNT TRANSACTION AND DOES NOT GIVE RISE TO INCOME AND HENCE, NOT LIABLE TO TRANSFER PRICING ADJUSTMENT. IT IS HEREBY INFORMED THAT THE BOARD HAS ACCEPTED T HE DECISION OF THE HIGH COURT OF BOMBAY IN THE ABOVE MENTIONED WRIT PETITION. IN VIE W OF THE ACCEPTANCE OF THE ABOVE JUDGMENT, IT IS DIRECTED THAT THE RATIO DECID ED OF THE JUDGMENT MUST BE ADHERED TO BY THE FIELD OFFICERS IN ALL CASES WHERE THE ISSUE IS INVOLVED. THIS MAY ALSO BE BROUGHT TO THE NOTICE OF THE ITAT, DRPS AND CIT (APPEALS). IN VIEW OF ABOVE INSTRUCTION, IT IS CLEAR THAT RATI O DECIDING OF TREATING OF SHARE PREMIUM AS CAPITAL RECEIPT IS BINDING ON REVENUE AUTHORITIE S. G) BY FINANCE ACT 2012 A NEW CLAUSE (VIIB) WAS INSER TED IN 56(2). MEMORANDUM EXPLAINING THE PROVISIONS IN FINANCE BILL 2012 STAT ED AS UNDER:- SHARE PREMIUM IN EXCESS OF THE FAIR MARKET VALUE IS TO BE TREATED AS INCOME. SECTION 56(2) PROVIDES FOR THE SPECIFIC CATEGORY O F INCOMES THAT SHALL BE CHARGEABLE TO INCOME TAX UNDER THE HEAD INCOME FROM OTHER SOURCE S. IT IS PROPOSED TO INSERT A NEW CLAUSE IN 56(2). THE NEW CLAUSE WILL APPLY WHER E, ACCOMPANY, NOT BEING A COMPANY IN WHICH THE PUBLIC ARE SUBSTANTIALLY INTER ESTED, RECEIVES, IN ANY PREVIOUS YEAR, FROM ANY PERSON BEING A RESIDENT, AN Y CONSIDERATION FOR ISSUE OF SHARES. IN SUCH A CASE IF THE CONSIDERATION RECEIVE D FOR ISSUE OF SHARES EXCEEDS THE FACE VALUE OF SHARES, THE AGGREGATE CONSIDERATI ON RECEIVED FOR SUCH SHARES AS EXCEEDS THE FAIR MARKET VALUE OF THE SHARES SHALL B E CHARGEABLE TO INCOME TAX, UNDER THE HEAD INCOME FROM OTHER SOURCES. THIS AMENDMENT EFFECTIVE FROM 1 ST APRIL 2013 AND WILL ACCORDINGLY APPLY IN RELATION TO ASSESSMENT YEAR 2013-14 AND SUBSEQUENT ASSESSMENT YEARS. IN THE MEMORANDUM IT IS MENTIONED THAT PREMIUM IN EXCESS O F FAIR MARKET VALUE IS TO BE TREATED AS INCOME. THIS SUGGESTS THAT PREMIUM IN EXCESS OF FAIR MARKET VALUE WAS NOT AN INCOME BUT IS TO BE TREATED AS INCOME DU E TO AMENDED PROVISION. BEFORE THE AMENDMENT, CONSIDERATION RECEIVED AS PRE MIUM WAS NOT INCOME. THE LEGISLATURE IN ITS WISDOM REQUIRED THE SHARE PREMIU M IN EXCESS OF FAIR MARKET VALUE TO BE INCOME FROM ASSESSMENT YEAR 2013-14 AND NOT THE ENTIRE PREMIUM TO BE TREATED AS INCOME. CBDT VIDE CIRCULAR NO.3 OF 2012 DATED 12.06.2012 HAS ALSO MENTIONED THAT PROVISIONS OF 56(2)(VII B) W ILL BE APPLICABLE FOR ASSESSMENT YEAR 2013-14 ONWARD . ITA NO. 493/JP/2017 ACIT, CENTRAL CIRCLE-2, JAIPUR VS GODAWARI ESTATES PVT.LTD. KOLKATA 39 H) SECTION 56 IS NOT A CHARGING SECTION. THIS SECTI ON STARTS WITH THE FOLLOWING SENTENCE. INCOME OF EVERY KIND WHICH IS NOT TO BE EXCLUDED F ROM THE TOTAL INCOME UNDER THE ACT SHALL BE CHARGEABLE TO INCOME TAX UNDER THE HEAD. INCOME FROM OTHER SOURCES IF IT IS NOT CHARGEABLE TO INCOME TAX. UNDER ANY OF TH E HEADS SPECIFIED IN SECTION 14, ITEMS A TO E. FOR AN INCOME TO BE TAXED U/S 56, IT HAS TO SATIS FY THREE CONDITIONS. (A) IT SHALL BE CLASSIFIABLE AS INCOME AS PER THE C HARGING SECTION OF THE ACT. (B) IT SHALL NOT BE EXCLUDED FROM THE TOTAL INCOME (E.G. SECTION10). (C) IT IS NOT CHARGEABLE TO TAX UNDER ANY OF THE SP ECIFIED HEADS IN SECTION 14, ITEMS A TO E. THE FINANCE BILL 2012 AS PRESENTED ON 16 TH MARCH 2012 INCLUDED A NEW CLAUSE (VIIB) U/S 56(2) OF I.T. ACT [342 ITR1(ST)]. NO PROPOSAL IN THE ORIGINAL BILL TO INSERT A NEW CLAUSE U/S 2(24). SUBSEQUENTLY NOTICE OF AMENDMENTS TO FINANCE BILL WAS GIVEN [SEE 343 ITR 37(ST)] AND AMENDMENTS ALSO INCLUDED TH E IN SECTION OF CLAUSE (XVI) IN 2(24) OF I.T. ACT AND SUCH CLAUSE IS AS UNDER: (XVI) ANY CONSIDERATION RECEIVED FOR ISSUE OF SHARES AS EXCEEDS THE FAIR MARKET VALUE OF THE SHARES REFERRED TO IN CLAUSE (VIIB) OF SUBSE CTION (2) OF 56. THE AMENDMENT INTRODUCED IN 2(24) SIGNIFIES THAT SE CTION 56 IS NOT A CHARGING SECTION. UNLESS THE INCOME WHICH IS TO BE TAXED U/S 56(2)(VI I B) IS INCLUDED IN THE DEFINITION OF INCOME, THEN IT CAN BE TAXED AND BE P ART OF TOTAL INCOME. NATURE OF INCOME AS MENTIONED IN SECTION 28(IIIA), (IIIB), (I IIC),(IIID) AND (IIIE) ARE ALSO INCLUDED IN DEFINITION OF INCOME. I) THIS AMENDMENT IF SECTION 56(2)(VIIB) OF INCOME TAX ACT, 1961 EFFECTIVE FROM 1 ST APRIL 2013 AND WILL ACCORDINGLY APPLY IN RELATION T O ASSESSMENT YEAR 2013-14 AND SUBSEQUENT ASSESSMENT YEARS AND THE PROVISIONS OF THIS SECTION CANNOT BE MADE APPLY IN PREVIOUS YEARS. IN THIS REGARD THE RA TIO HAS BEEN LAID DOWN IN FOLLOWING JUDGMENTS: - A) BY FINANCE ACT 1994, SECTION 55(2) WAS AMENDED TO PROVIDE THAT COST OF ACQUISITION OF A TENANCY RIGHT WILL BE TAKEN AS NIL . THE HONBLE APEX COURT IN THE CASE OF D.P. SANDU BROS. CHEMBUR (P) LTD (SUPRA), HELD THAT AMENDMENT TOOK EFFECT FROM 1 ST APRIL, 1995 AND THEREFORE WILL NOT BE APPLICABLE F OR A.Y. 1987- 88. SIMILAR FINDING HAS BEEN RECORDED BY HONBLE RA J, HIGH COURT IN THE CASE OF GOTAN LIME STONE KHANIJ UDHYOG. THE RATIO OF LAW IN RESPECT OF AMENDMENT IN 55(2) B EING HELD AS PROSPECTIVE IS APPLICABLE FOR 56(2)(VIBE) AND HENCE SHARE PREMIUM IN EXCESS OF FAIR MARKET VALUE CANNOT BE HELD TAXABLE FOR A.Y. 2011-12. ITA NO. 493/JP/2017 ACIT, CENTRAL CIRCLE-2, JAIPUR VS GODAWARI ESTATES PVT.LTD. KOLKATA 40 B) RECENTLY THE HONBLE APEX COURT IN THE CASE OF M.G. PICTURES (MADR AS) LTD V/S ACIT 373 ITR 39 HELD THAT AMENDMENT IN SECTION 40A(3) W.E.F. FROM 1.4.1996 IS PROSPECTIVE AND CANNOT BE APPLIED TO PR EVIOUS YEARS OF BLOCK PERIOD PRIOR TO F.Y. 1995-96. C) THE FIGURE OF 10,000 WAS CHANGED TO 20,000 U/S 4 0A(3) OF INCOME TAX ACT, 1961 AND 269SS OF INCOME TAX ACT, 1961 BY DIRECT TAX LAWS (AMENDMENT) ACT 1987 W.E.F. 1.4.1989. THE CBDT VIDE CIRCULAR NO.522 DATED 18.08.1988 STATED THAT AMENDMENT IN SECTION 40A(3) IS APPLICABLE FOR A.Y. 1989-90 AS IT IS A SUBSTANTIVE PROVISION AND SINCE 269SS IS A PROCEDUR AL PROVISION, THE EFFECTIVE DATE WILL BE 1.4.89 I.E. PREVIOUS YEAR RELEVANT TO A.Y. 89-90. D) THE FIVE JUDGE CONSTITUTION BENCH IN THE CASE OF CIT V VATIKA TOWNSHIP (P) LTD. 367 ITR 466 HAD AN OCCASION TO CONSIDER AS TO WHETHER PROVISO ADDED TO SECTION 113 OF THE I.T. ACT, IS PROSPECTIVE OR RETRO SPECTIVE. THE HONBLE APEX COURT WHILE CONSIDERING THE VARIOUS DECISIONS HELD (AS PER PAGE 469 OF ITR 367). THAT SURCHARGE LEVIED BY ASSESSING OFFICER FOR THE BLOCK ASSESSMENT PERTAINING TO THE PERIOD FROM JUNE 1, 2002 WAS LIABLE TO BE DE LETED. AN AMENDMENT MADE TO A TAXING STATUTE CAN BE SAID TO BE INTENDED TO REMOVE HARDSHIPS ONLY OF THE ASSESSEE, NOT OF THE DEPARTME NT. IMPOSING A RETROSPECTIVE LEVY ON THE ASSESSEE WOULD HAVE CAUSED UNDUE HARDSH IP AND FOR THAT REASON PARLIAMENT SPECIFICALLY CHOSE TO MAKE THE PROVISO E FFECTIVE FROM JUNE 1, 2002. WHERE A BENEFIT IS CONFERRED BY A LEGISLATION, THE RULE AGAINST A RETROSPECTIVE CONSTRUCTION IS DIFFERENT. IN A LEGISLATION CONFERS A BENEFIT ON SOME PERSONS BUT WITHOUT INFLICTING A CORRESPONDING DETRIMENT ON SOM E OTHER PERSON OR ON THE PUBLIC GENERALLY, AND WHERE TO CONFER SUCH BENEFIT APPEARS TO HAVE BEEN THE LEGISLATORS OBJECTS, THEN PRESUMPTION WOULD BE THAT SUCH A LEGISLATION, GIVING IT A PURPOSIVE CONSTRUCTION, WOULD WARRANT IT TO BE GIVE N A RETROSPECTIVE EFFECT. THIS EXACTLY IS THE JUSTIFICATION TO TREAT PROCEDURAL PR OVISION AS RETROSPECTIVE. WHERE A LAW IS ENACTED FOR THE BENEFIT OF COMMUNITY AS A WH OLE, EVEN IN THE ABSENCE OF A PROVISION THE STATUTE MAY BE HELD TO BE RETROSPECTI VE IN NATURE. THE HONBLE APEX COURT FURTHER NOTICED THAT CBDT CI RCULAR MENTIONED THAT PROVISO IS APPLICABLE FROM 1.6.2002. IN RESPECT OF 56(2)(VII B), CBDT VIDE CIRCULAR NO.3 OF 2012 DATED 12.06.2012 HAS ALSO MEN TIONED THAT PROVISIONS OF 56(2)(VII B) WILL BE APPLICABLE FOR A SSESSMENT YEAR 2013-14 ONWARD. HENCE SHARE PREMIUM EVEN IF IN EXCESS OF FAIR MARKE T VALUE IS NOT TAXABLE U/S 56(1) FOR THE A.Y. 2011-12. 9. IN VIEW OF THE ABOVE SUBMISSIONS, IT IS CLEAR TH AT SHARE PREMIUM RECEIVED IS A CAPITAL RECEIPT AND CONSIDERATION RECEIVED CANNOT B E CONSIDERED AS INCOME FOR THE YEAR UNDER CONSIDERATION. WITHOUT PREJUDICE TO OUR SUBMISSION IN THIS REGARD THIS IS TO SUBMIT IN THE IN THE SHOW CAUSE NOTICE T HE LD. AO MENTIONED THAT SHARE ITA NO. 493/JP/2017 ACIT, CENTRAL CIRCLE-2, JAIPUR VS GODAWARI ESTATES PVT.LTD. KOLKATA 41 PREMIUM/SHARE CAPITAL SHOULD BE TAXABLE IN THE HAND S OF ASSESSEE COMPANY U/S 56(1) OF INCOME TAX ACT, 1961 ON A/C OF SHARE PR EMIUM/SHARE CAPITAL ALLEGED TO BE NOT IN ACCORDANCE WITH THE VALUE OF T HE SHARES. IN THIS REGARD WITHOUT PREJUDICE TO OUR SUBMISSION ON THIS ISSUE T HIS IS TO SUBMIT THAT IN CASE THE SHARE PREMIUM IS MADE TAXABLE AS INCOME OF THE ASSESSEE ON THE GROUND THAT THE SAME IS NOT AS PER FAIR MARKET VALUE AND H ELD AS TAXABLE THAN STILL THE AMOUNT RECEIVED AGAINST SHARE CAPITAL AMOUNTING TO RS. 20,00,000/- CANNOT BE TREATED AS INCOME OF THE ASSESSEE. 10. IN ADDITION OF ABOVE SUBMISSION IT IS FURTHER S UBMITTED THAT THE ASSESSEE SUBMITTED SUFFICIENT DOCUMENTS TO PROVE IDENTITY, C REDITWORTHINESS AND GENUINENESS OF SHARE CAPITAL. TO SUPPORT THAT SHARE HOLDERS WERE GENUINE AND CREDITWORTHINESS IS PROVED, THE ASSESSEE ENCLOSED N ECESSARY DETAILS, IN RESPECT OF INCORPORATION OF SUCH COMPANIES AND DETAILS OF C HEQUES VIDE WHICH AMOUNTS WERE RECEIVED. THE CAPACITY OF SHAREHOLDERS IS VERI FIABLE FROM THE COPY OF THE BALANCE SHEET OF THE SHAREHOLDERS. THE SHAREHOLDERS HAVE FUNDS ON A PRIOR DATE FROM THE ALLOTMENT OF SHARES GIVEN BY THE ASSESSEE COMPANY AND SUCH FUNDS WERE MORE THAN THE AMOUNT OF SHARE APPLICATION. THE REFORE, THE ADDITION ON SHARE APPLICATION RECEIVED TO THE ASSESSEE NEITHER CAN BE MADE U/S 56(1) OF INCOME TAX ACT, 1961 NOR CAN BE MADE U/S 68 OF INCOM E TAX ACT, 1961. THE VARIOUS JUDGMENTS AND ARGUMENTS REGARDING ADDITION MADE U/S 56(1) OF INCOME TAX ACT, 1961 HAS BEEN SUBMITTED IN FORGOING PARAS. THE RELIANCE REGARDING ADDITION CANNOT BE MADE U/S 68 OF INCOME TAX CAT, 1 961 IS PLACED ON THE FOLLOWING DECISIONS: - I) SHALIMAR BUILDCON (P) LTD. VS ITO (2011) 128 ITD 039 6 (JAIPUR) IN THIS CASE HONBLE ITAT JAIPUR BENCH HAS RELIED ON I TS OLD DECISION IN THE CASE OF HOTEL GAUDAVAN ITA NO. 1162 AND 1137/JP/2008 AND ADDITION ON ACCOUNT OF SHARE CAPITAL WAS DELETED. 28.5 ON IDENTICAL ISSUE, THE TRIBUNAL, JAIPUR BENCH IN THE CASE OF HOTEL GAUDAVAN (P) LTD. (SUPRA) HAS HELD AS UNDER : '6. AS REGARDS THE ISSUE ON MERIT IN THE DEPARTMENTA L APPEAL, WE CONCUR WITH THE VIEWS OF THE LEARNED CIT(A) THAT THE AO HAS NOT CONS IDERED THE EXPLANATION OF THE ASSESSEE. THE AMOUNT UNDER CONSIDERATION OF RS. 1.89 CRORE HAS BEEN RECEIVED BY THE ASSESSEE AS SHARE APPLICATION MONEY FROM M/S JALKANTA TECHNICAL & FINANCIAL SERVICE (P) LTD. (JTFSPL) AFT ER A PROPER RESOLUTION PASSED BY THE BOARD OF DIRECTORS OF THE AFORESAID COMPANY THROUGH BANKING CHANNEL. M/S JTFSPL IS HAVING PERMANENT ACCOUNT AND FILING I TS RETURN OF INCOME REGULARLY. THE AO HAS NOWHERE MENTIONED THAT MONEY B ELONGS TO THE ASSESSEE COMPANY AND THEREFORE, PROVISIONS OF S. 68 CANNOT B E INVOKED. THE LEARNED CIT(A) HAS RIGHTLY RELIED UPON THE DECISION OF HON BLE DELHI HIGH COURT IN THE CASE OF CIT VS. STELLER INVESTMENT LTD. (2000) 164 CTR (SC) 287 WHICH HAS BEEN CONFIRMED BY THE HONBLE SUPREME COURT OF INDIA. TH E LEARNED CIT(A) HAS ALSO RELIED UPON THE DECISION OF HONBLE JURISDICTIONAL HIGH COURT IN THE CASE OF BARKHA SYNTHETICS LTD. VS. ASSTT. CIT (2005) 197 CTR (RAJ) 432 AND ALSO THE DECISION OF TRIBUNAL, JODHPUR BENCH IN THE CASE OF UMA POLYMERS (P) LTD. VS. DY. CIT (DT. 27TH FEB., 2006) [REPORTED AT (2006) 101 T TJ (JD)(TM) 124ED.] WHERE IT HAS BEEN HELD THAT THE ASSESSEE HAS TO PROVE THE EX ISTENCE OF THE SHAREHOLDERS WHICH IN THE PRESENT CASE IS NOT UNDER DISPUTE. THE REFORE, THE ASSESSEE HAS DISCHARGED THE BURDEN AND THEREFORE THE AO WAS NOT J USTIFIED IN MAKING ANY ADDITION UNDER S. 68 OF THE ACT. THE LEARNED COUNSEL FOR THE ASSESSEE HAS ITA NO. 493/JP/2017 ACIT, CENTRAL CIRCLE-2, JAIPUR VS GODAWARI ESTATES PVT.LTD. KOLKATA 42 REFERRED TO THE DECISION OF HONBLE SUPREME COURT O F INDIA IN THE CASE OF DIVINE LEASING & FINANCE LTD. DT. 21ST JAN., 2008, THE COP Y OF WHICH IS PLACED ON RECORD WHERE IT HAS BEEN OBSERVED BY THE SUPREME CO URT AS UNDER : CAN THE AMOUNT OF SHARE MONEY BE REGARDED AS UNDIS CLOSED INCOME UNDER S. 68 OF IT ACT, 1961 ? WE FIND NO MERIT IN THIS SLP FOR T HE SIMPLE REASON THAT IF THE SHARE APPLICATION MONEY IS RECEIVED BY THE ASSESSEE COMPANY FROM ALLEGED BOGUS SHAREHOLDERS, WHOSE NAMES ARE GIVEN TO THE AO, THEN THE DEPARTMENT IS FREE TO PROCEED TO REOPEN THEIR INDIVIDUAL ASSESSME NTS IN ACCORDANCE WITH LAW. THEREFORE, WE FIND NO INFIRMITY IN THE ORDER OF THE LEARNED CIT(A), WITH THE IMPUGNED JUDGMENT. THE SAID DECISION OF HONBLE SUPREME COURT OF INDIA HAS BEEN FOLLOWED BY THE TRIBUNAL, DELHI BENCH IN THE CASE OF ITO VS. BHOR M AL DHANSI RAM LTD. IN ITA NO. 4670/DEL/2007, DT. 3RD MARCH, 2006. THE COPY OF THE SAID DECISION OF TRIBUNAL, DELHI BENCH IS PLACED ON RECORD. THE LEARNED COUNSE L FOR THE ASSESSEE SHRI H.M. SINGHVI, CHARTERED ACCOUNTANT HAS ALSO RELIED UPON THE DECISION OF HONBLE SUPREME COURT OF INDIA ON THE SAID ISSUE IN THE CAS E OF CIT VS. LOVELY EXPORTS (P) LTD. (2008) 216 CTR (SC) 195 : (2008) 6 DTR (SC) 308 WHEREIN IT HAS BEEN HELD THAT IF THE SHARE APPLICATION MONEY IS RECEIVED BY THE ASSESSEE COMPANY FROM ALLEGED BOGUS SHAREHOLDERS, WHOSE NAMES ARE GIVEN T O THE AO, THEN THE DEPARTMENT IS FREE TO PROCEED TO REOPEN THEIR INDIV IDUAL ASSESSMENTS IN ACCORDANCE WITH LAW, BUT IT CANNOT BE REGARDED AS U NDISCLOSED INCOME OF ASSESSEE COMPANY.' 28.6 THE HONBLE DELHI HIGH COURT IN THE CASE OF CIT VS . DIVINE LEASING & FINANCE LTD. (SUPRA) HAD AN OCCASION TO CONSIDER THE ADDITI ON ON ACCOUNT OF SHARE APPLICATION MONEY. WE ARE REPRODUCING THE HELD PORT ION FROM THE DECISION OF HONBLE DELHI HIGH COURT AS MENTIONED IN (2007) 207 CTR (DEL) 38 (SUPRA). 'INCOMECASH CREDITSHARE APPLICATION MONEYBURDEN OF PROOF CAN SELDOM BE DISCHARGED TO THE HILT BY THE ASSESSEEIF THE AO HAR BOURS DOUBTS OF THE LEGITIMACY OF ANY SUBSCRIPTION HE IS EMPOWERED, NAY DUTY-BOUND, TO CARRY OUT THOROUGH INVESTIGATIONSBUT IF THE AO FAILS TO UNEA RTH ANY WRONG OR ILLEGAL DEALINGS, HE CANNOT OBDURATELY ADHERE TO HIS SUSPIC IONS AND TREAT THE SUBSCRIBED CAPITAL AS THE UNDISCLOSED INCOME OF THE COMPANYIF RELEVANT DETAILS OF ADDRESS AND IDENTITY OF THE SUBSCRIBERS ARE FURN ISHED TO THE DEPARTMENT ALONG WITH COPIES OF THE SHAREHOLDERS REGISTERS, SHARE AP PLICATION FORMS, SHARE TRANSFER REGISTER ETC. IT WOULD CONSTITUTE ACCEPTABLE PROOF OR EXPLANATION BY THE ASSESSEEDEPARTMENT WOULD NOT BE JUSTIFIED IN DRAWI NG AN ADVERSE INFERENCE ONLY BECAUSE THE CREDITOR/SUBSCRIBER FAILS OR NEGLE CTS TO RESPOND TO ITS NOTICES TRIBUNAL HAS NOTED THAT THE ASSESSEE COMPANY IS A P UBLIC LIMITED COMPANY WHICH HAD RECEIVED SUBSCRIPTIONS TO THE PUBLIC ISSU E THROUGH BANKING CHANNELS AND THE SHARES WERE ALLOTTED IN CONSONANCE WITH THE PROVISIONS OF SECURITIES CONTRACT (REGULATION) ACT, 1956, AS ALSO THE RULES AN D REGULATIONS OF DELHI STOCK EXCHANGECOMPLETE DETAILS WERE FURNISHEDTRIBUNAL H AS FURTHER FOUND THAT THE AO HAS NOT BROUGHT ANY POSITIVE MATERIAL OR EVI DENCE WHICH WOULD INDICATE THAT THE SHAREHOLDERS WERE BENAMIDARS OR FICTITIOUS PERSONS OR THAT ANY PART OF THE SHARE CAPITAL REPRESENTED COMPANYS OWN INCOME FROM UNDISCLOSED SOURCES.' ITA NO. 493/JP/2017 ACIT, CENTRAL CIRCLE-2, JAIPUR VS GODAWARI ESTATES PVT.LTD. KOLKATA 43 28.7 THE HONBLE APEX COURT IN THE CASE OF CIT VS. LOVE LY EXPORTS (P) LTD. (SUPRA) HELD THAT IF THE SHARE CAPITAL MONEY IS RECEIVED BY THE ASSESSEE COMPANY FROM ALLEGED BOGUS SHAREHOLDERS THEN THE DEPARTMENT IS F REE TO PROCEED TO REOPEN THE INDIVIDUAL ASSESSMENTS OF SUCH SHAREHOLDERS IN ACCO RDANCE WITH LAW. SUCH SHARE APPLICATION MONEY CANNOT BE REGARDED AS UNDIS CLOSED INCOME OF THE ASSESSEE COMPANY. 28.8 THE HONBLE HIGH COURT IN THE CASE OF FIRST POINT FINANCE LTD. (SUPRA) HELD THAT BURDEN OF PROOF ON THE ASSESSEE COMPANY LIES TO THE EXTENT OF MAKING OUT A CASE THAT INVESTOR EXISTS AND THEREAFTER IT IS NOT FOR T HE ASSESSEE TO FURTHER PROVE WHERE THEY HAVE BROUGHT MONEY FROM TO INVEST WITH I T. 28.9 THE HONBLE DELHI HIGH COURT IN THE CASE OF CIT VS . UNITED BIO-TECH (P) LTD. 2010 TIOL-533-HC-DEL HELD THAT IN CASE THE IDENTITY OF T HE SHARE APPLICANTS HAS BEEN ESTABLISHED AND IT IS FOUND THAT THE SAID APPLICANT S ARE CORPORATE ASSESSEES WHO ARE ASSESSED TO TAX WITH IT DEPARTMENT THEN THERE I S NO CASE OF ANY SUBSTANTIAL QUESTION OF LAW. IN THE INSTANT CASE, THE SHARE APP LICANTS ARE CORPORATE ASSESSEES. 28.10 THE HONBLE DELHI HIGH COURT IN THE CASE OF CIT VS . SAMIR BIO-TECH (P) LTD. (SUPRA) HELD THAT IF INVESTMENTS HAVE BEEN SHOWN BY THE SHARE APPLICANTS IN THEIR AUDITED BALANCE SHEET THEN THE ADDITION CANNO T BE MADE UNDER S. 68 OF THE ACT. 28.11 IN VIEW OF THE LEGAL POSITION AS DISCUSSED ABOVE, THE AO WAS NOT JUSTIFIED IN MAKING THE ADDITION OF RS. 1.10 CRORE WITHOUT BRING ING ON RECORD ANY MATERIAL FOR THE ADDITION. SIMPLY ON THE BASIS OF INFORMATION WH ICH IS NOT SUBSTANTIATED IN THE COURSE OF ASSESSMENT PROCEEDINGS AGAINST THE AS SESSEE, THE AO COULD NOT HAVE ADDED THE AMOUNT. (II) THE HONBLE ITAT, JAIPUR BENCH, JAIPUR IN ITS REC ENT JUDGMENT THE CASE OF M/S JADAU JEWELLERS & MANUFACTURERS PVT. LTD., B -1, TRIMUTRI CIRCLE, GOVIND MARG, JAIPUR IN ITA NO. 686/JP/2014 DATED 14. 12.2015 GAVE THE FOLLOWING FINDINGS:- .6.1 ON FACTS ALSO, THE ASSESSEE HAS PRODUCED BE FORE THE ASSESSING OFFICER COPY OF SHARE APPLICATION, CONFIRMATION OF THE CASH CREDITORS, COPY OF PAN, COPY OF BOARD RESOLUTION, COPY OF DIRECTORS REPORT, AUD ITORS REPORT, COPY OF BALANCE SHEET, COPY OF P&L ACCOUNT, COPY OF BANK ACCOUNT IN ALL THE CASES TO PROVE THE IDENTITY, GENUINENESS AND CREDITWORTHINESS OF THE C ASH CREDITORS. THE LD ASSESSING OFFICER MADE ADDITION ON THE BASIS OF INVE STIGATION CONDUCTED BY THE ITO, INVESTIGATION WING, KOLKATA BUT THE LD ASSESSIN G OFFICER OF THE ASSESSEE HAS NOT CLARIFIED WHAT INQUIRY HAD BEEN CONDUCTED AND W HAT EVIDENCES COLLECTED WHICH GOES AGAINST THE ASSESSEE. THE NOTICE U/S 131 ISSUED BY THE ITO, INVESTIGATION WING, KOLKATA WERE SERVED IN CASE OF VIDYA AGENCIES PVT. LTD. AND SHIVARPAN MERCANTILES PVT. LTD., BUT COMPLIANCE COU LD NOT BE MADE ON THE GIVEN DATE BECAUSE CONCERNED OFFICER WAS ON LEAVE. IN CAS E OF MIDDLETON GOODS PVT. LTD. AND LACTRODRYER MARKETING PVT. LTD., NOTICES WE RE SERVED ON THE ASSESSEE ITA NO. 493/JP/2017 ACIT, CENTRAL CIRCLE-2, JAIPUR VS GODAWARI ESTATES PVT.LTD. KOLKATA 44 AND IN COMPLIANCE TO THE NOTICE, THE PARTY SUBMITTE D ALL THE DOCUMENTS IN THE IT OFFICE. THE CASE LAW REFERRED BY THE LD CIT(A) I.E. DECISION OF HONBLE DELHI HIGH COURT IN THE CASE OF NIPUN BUILDERS AND DEVELOPERS PVT. LTD. VS. CIT AND VIJAY POWER GENERATOR LTD. VS CIT (SUPRA) ARE NOT SQUAREL Y APPLICABLE ON THE FACTS OF THE CASE AS THERE WAS SHORT TIME AVAILABLE WITH THE ASSESSING OFFICER AS WELL AS INVESTIGATION WING OF KOLKATA. THE COPY OF INQUIRY HAS NOT BEEN PROVIDED BY THE ASSESSING OFFICER TO THE ASSESSEE. AS PER FINDINGS OF THE HON'BLE DELHI HIGH COURT IN THE CASE NIPUN BUILDERS AND DEVELOPERS PVT . LTD. VS. CIT (SUPRA), THE INVESTIGATION OFFICER AT KOLKATA HAD NOT DEPUTED IN SPECTOR TO ENQUIRE THE WHEREABOUTS OF THE COMPANY. THE CASE LAWS REFERRED BY THE ASSESSEE ARE SQUARELY APPLICABLE ON THE FACTS AND CIRCUMSTANCES OF THE APPELLANTS CASE, THEREFORE, WE REVERSE THE ORDER OF THE LD CIT(A) ON TECHNICAL GROUND AS WELL AS ON MERIT ALSO. (III) CIT V/S. SHREE BARKHA SYNTHETICS LTD. (2003) 182 CT R (RAJ) 175 APPEAL(HIGH COURT)SUBSTANTIAL QUESTION OF LAWCASH CREDIT VIS-A-VIS SHARE APPLICATION MONEYTRIBUNAL FOUND THAT 6 OUT OF 7 CO MPANIES FROM WHICH THE SHARE APPLICATION MONEY HAD BEEN RECEIVED WERE GENU INELY EXISTING AND NO ENQUIRY WAS CONDUCTED IN RESPECT OF THE SOURCE OF S HARE APPLICATION MONEY AT THE TIME OF MAKING THE INVESTMENT IN THE ASSESSEE-C OMPANY AND THUS THE ASSESSEE HAS DISCHARGED ITS INITIAL BURDEN EXCEPT I N ONE CASEAS REGARDS INDIVIDUAL INVESTORS, THE TRIBUNAL FOUND THAT IDENT ITY OF 9 OUT OF 10 INVESTORS HAS BEEN ESTABLISHED AND THEY HAVE CONFIRMED THE FACT O F MAKING INVESTMENT IN THE SHARES OF THE ASSESSEE-COMPANY AND NO FURTHER ENQUI RY WAS DIRECTED BY THE AOTHUS, ADDITIONS WERE SUSTAINED ONLY IN RESPECT OF INVESTMENTS SAID TO HAVE BEEN MADE BY U, AN INDIVIDUAL INVESTOR AND BY W LTD ., FOR THE REASON THAT SUCH INVESTMENTS WERE NOT PROVEDFINDING OF THE TRIBUNAL IS ESSENTIALLY A FINDING OF FACT WHICH IS NOT VITIATED IN LAWNO SUBSTANTIAL QU ESTION OF LAW ARISE FOR CONSIDERATION IV) CIT VS. FIRST POINT FINANCE LTD. (2006) 206 CTR (RAJ) 626 : (2006) 286 ITR 77 (RAJ) INCOMECASH CREDITSHARE APPLICATION MONEYTRIBUNA L FOUND THAT THE INVESTORS ARE GENUINELY EXISTING PERSONS AND TH EY HAVE FILED CONFIRMATIONS IN RESPECT OF INVESTMENTS MADE BY THEM AND THEIR STATE MENTS WERE ALSO RECORDED AMOUNT OF SHARE CAPITAL/SHARE APPLICATION MONEY COUL D NOT BE TREATED AS UNEXPLAINED CASH CREDITS AND NO ADDITION COULD BE M ADE UNDER S. 68NO SUBSTANTIAL QUESTION OF LAW ARISES. (V) 2014 (8) TMI 605 - MADRAS HIGH COURT THE COMMISSIONER OF INCOME TAX VERSUS PRANAV FOUNDATIONS LTD. T. C. (A). NO. 262 OF 2014 DATED - 12 AUGUST 2014 ADDITION U/S 68 SHARE APPLICATION AND SHARE PREMIU M AMOUNT CREDITED BUT NOT PROVED - WHETHER THE TRIBUNAL WAS RIGHT IN UPHOLDIN G THE ORDER OF THE CIT(A) WHO DELETED THE ADDITION MADE U/S 68, BEING THE SHARE A PPLICATION MONEY AND SHARE PREMIUM AMOUNT CREDITED BY THE ASSESSEE WHICH WAS N OT PROVED HELD THAT:- FOLLOWING THE DECISION IN CIT V. LOVELY EXPORTS (P) LTD. [2008 (1) TMI 575 - SUPREME COURT OF INDIA] - ALL THE FOUR PARTIES, WHO A RE SUBSCRIBERS OF THE SHARES, ARE LIMITED COMPANIES AND ENQUIRIES WERE MA DE AND RECEIVED FROM THE FOUR COMPANIES AND ALL THE COMPANIES ACCEPTED THEIR INVESTMENT - THE ASSESSEE ITA NO. 493/JP/2017 ACIT, CENTRAL CIRCLE-2, JAIPUR VS GODAWARI ESTATES PVT.LTD. KOLKATA 45 HAS CATEGORICALLY ESTABLISHED THE NATURE AND SOURCE OF THE SUM AND DISCHARGED THE ONUS THAT LIES ON IT IN TERMS OF SECTION 68 OF THE ACT - WHEN THE NATURE AND SOURCE OF THE AMOUNT SO INVESTED IS KNOWN, IT CANNO T BE SAID TO BE UNDISCLOSED INCOME - THE ADDITION OF SUCH SUBSCRIPTIONS AS UNEX PLAINED CREDIT UNDER SECTION 68 OF THE ACT IS UNWARRANTED DECIDED AGAINST REVENU E. (VI) INCOME TAX OFFICER VS. MS. SUPERLINE CONSTRUCTION P. LTD. ITAT, BOMBAY TRIBUNAL (A) ITA NO. 3644 TO 3648, 3650, 3651M UM/2014 30TH NOVEMBER, 2015 (2015) 45 CCH 0281 MUMTRIB ADDITIONADDITION ON ACCOUNT OF BOGUS SHARE APPLICA TION MONEYASSESSEE WAS IN BUSINESS OF BUILDER AND DEVELOPERASSESSMENT WAS COMPLETED U/S 143(3) R.W.S. 147RE-ASSESSMENT PROCEEDINGS WERE INI TIATED ON BASIS OF INFORMATION RECEIVED FROM DIRECTORATE OF INCOME-TAX (INVESTIGATION) WITHOUT RECORDING AOS OWN SATISFACTION AND INFORMATION WAS ACCEPTED IN MECHANICAL MANNERAFTER REOPENING OF ASSESSMENT U/S 147, AO MAD E ADDITION OF RS.40 LAKHS RECEIVED BY ASSESSEE FROM VARIOUS CORPORATE E NTITIESADDITION WAS MADE BY AO ON ACCOUNT OF BOGUS SHARE APPLICATION MONEY UN DER PROVISIONS OF S 68 CIT(A) DELETED ADDITION MADE BY AOHELD, IN CASE OF CIT VS. M/S. LOVELY EXPORTS (PVT) LTD, REPORTED IN [2008] 216 CTR 195 (S C), IT WAS HELD THAT IF SHARE APPLICATION MONEY WAS RECEIVED BY ASSESSEE COMPANY FROM ALLEGED BOGUS SHAREHOLDERS WHOSE NAME WERE GIVEN TO AO THEN DEPART MENT WAS FREE TO PROCEED TO REOPEN THEIR INDIVIDUAL ASSESSMENTS IN A CCORDANCE WITH LAW BUT IT COULD NOT BE REGARDED AS UNDISCLOSED INCOME OF ASSE SSEE COMPANYIT WAS SUBMITTED BY ASSESSEE THAT AO HAD FAILED TO APPRECI ATE STATEMENTS OF ANY PERSON RECORDED U/S 143(3) R.W.S. 147THAT ASSESSEE -COMPANY HAD FULLY DISCHARGED BURDEN OF PROOF, ONUS OF PROOF AND EXPLA INED SOURCE OF SHARE CAPITAL AND ADVANCES RECEIVED BY ESTABLISHED IDENTITY, CRED ITWORTHINESS AND GENUINENESS OF TRANSACTION BY BANKING INSTRUMENTS W ITH DOCUMENTARY EVIDENCESASSESSEE COMPANY SUBSTANTIATED DETAILS WIT H DOCUMENTARY EVIDENCES AS EXTRACTED FROM WEBSITE OF MINISTRY OF CORPORATE AFFAIRS, GOVERNMENT OF INDIA BEFORE AOTHESE FACTS HAD NOT BE EN REBUTTED ON BEHALF OF REVENUEITAT WAS NOT INCLINED TO INTERFERE WITH FINDI NGS OF CIT(A) WHO THUS RIGHTLY DELETED ENTIRE IMPUGNED ADDITIONS OF RS.40 L AKHS MADE BY AO U/S 68 ON ACCOUNT OF SHARE CAPITAL SUBSCRIPTION RECEIVED BY A SSESSEE-COMPANY HELD: IT WAS POINTED OUT IN THE CASE OF CIT VS. M/S. LOV ELY EXPORTS (PVT) LTD, REPORTED IN [2008] 216 CTR 195 (SC) THAT IF THE SHARE APPLICA TION MONEY IS RECEIVED BY THE ASSESSEE COMPANY FROM ALLEGED BOGUS SHAREHOLDERS WH OSE NAME ARE GIVEN TO THE AO THEN THE DEPARTMENT IS FREE TO PROCEED TO REO PEN THEIR INDIVIDUAL ASSESSMENTS IN ACCORDANCE WITH LAW BUT IT CANNOT BE REGARDED AS UNDISCLOSED INCOME OF ASSESSEE COMPANY. (PARA 2.3) IN THIS BACKGROUND, IT WAS SUBMITTED ON BEHALF OF THE ASSESSEE THAT THE ASSESSING OFFICER FAILED TO APPRECIATE THAT THERE WA S NO DOCUMENTARY EVIDENCE AGAINST THE ASSESSEE-COMPANY TO SUPPORT SUCH IMPUGN ED ADDITIONS. IT WAS FURTHER SUBMITTED BY THE ASSESSEE THAT THE ASSESSING OFFICER FAILED TO APPRECIATE THAT THE STATEMENTS OF ANY PERSON RECORDED U/S 143( 3) R.W.S. 147. THE ASSESSEE- COMPANY HAD FULLY DISCHARGED THE BURDEN OF PROOF, O NUS OF PROOF AND EXPLAINED THE SOURCE OF SHARE CAPITAL AND ADVANCES RECEIVED B Y ESTABLISHED THE IDENTITY, CREDITWORTHINESS AND GENUINENESS OF TRANSACTION BY BANKING INSTRUMENTS WITH ITA NO. 493/JP/2017 ACIT, CENTRAL CIRCLE-2, JAIPUR VS GODAWARI ESTATES PVT.LTD. KOLKATA 46 DOCUMENTARY EVIDENCES. THE FURTHER STAND OF THE ASS ESSEE HAD BEEN THAT THE ASSESSEE-COMPANY SUBSTANTIATED THE DETAILS WITH THE DOCUMENTARY EVIDENCES AS EXTRACTED FROM THE WEBSITE OF MINISTRY OF CORPORATE AFFAIRS, GOVERNMENT OF INDIA BEFORE THE ASSESSING OFFICER. THESE FACTS HAD NOT BE EN REBUTTED ON BEHALF OF THE REVENUE. (PARA 2.4) IN VIEW OF THE FACTS AND CIRCUMSTANCES OF THE PRES ENT CASE AS WELL AS CONSIDERING THE DECISIONS AS DISCUSSED ABOVE ON THE SIMILAR ISS UE, ITAT WAS NOT INCLINED TO INTERFERE WITH THE FINDINGS OF THE CIT(A) WHO HAD R IGHTLY DELETED THE ENTIRE IMPUGNED ADDITIONS OF RS.40 LAKHS MADE BY THE ASSESSI NG OFFICER U/S 68 OF THE ACT ON ACCOUNT OF SHARE CAPITAL SUBSCRIPTION RECEIVE D BY THE ASSESSEE-COMPANY. (PARA 2.5) CONCLUSION: WHEN ASSESSEE-COMPANY HAD SUBSTANTIATED DETAILS WIT H DOCUMENTARY EVIDENCES AS EXTRACTED FROM WEBSITE OF MINISTRY OF CORPORATE AFFAIRS, GOVERNMENT OF INDIA BEFORE AO, THEN ADDITIONS MADE B Y AO U/S 68 ON ACCOUNT OF SHARE CAPITAL SUBSCRIPTION RECEIVED BY ASSESSEE- COMPANY WAS RIGHTLY DELETED. VII) CIT VS. ILLAC INVESTMENT (P) LTD. (2007) 207 CTR (DEL) 687; ASSESSEE- COMPANY HAS SATISFACTORILY ESTABLISHED THE IDENTITY OF THE SHARE SUBSCRIBERS AND DELETED THE ADDITION UNDER S. 68, NO SUBSTANTIAL QU ESTION OF LAW ARISES FOR CONSIDERATION. VIII) CIT VS. DIVINE LEASING & FINANCE LTD. (2007) 20 7 CTR (DEL) 38; INCOME CASH CREDITSHARE APPLICATION MONEYBURDEN OF PROOF CAN SELDOM BE DISCHARGED TO THE HILT BY THE ASSESSEEIF THE AO HAR BOURS DOUBTS OF THE LEGITIMACY OF ANY SUBSCRIPTION HE IS EMPOWERED, NAY DUTYBOUND, TO CARRYOUT THOROUGH INVESTIGATIONSBUT IF THE AO FAILS TO UNEA RTH ANY WRONG OR ILLEGAL DEALINGS, HE CANNOT OBDURATELY ADHERE TO HIS SUSPIC IONS AND TREAT THE SUBSCRIBED CAPITAL AS THE UNDISCLOSED INCOME OF THE COMPANYIF RELEVANT DETAILS OF ADDRESS AND IDENTITY OF THE SUBSCRIBERS ARE FURN ISHED TO THE DEPARTMENT ALONG WITH COPIES OF THE SHAREHOLDERS REGISTER, SHARE APP LICATION FORMS, SHARE TRANSFER REGISTER, ETC. IT WOULD CONSTITUTE ACCEPTABLE PROOF OR EXPLANATION BY THE ASSESSEEDEPARTMENT WOULD NOT BE JUSTIFIED IN DRAWI NG AN ADVERSE INFERENCE ONLY BECAUSE THE CREDITOR/SUBSCRIBER FAILS OR NEGLE CTS TO RESPOND TO ITS NOTICES TRIBUNAL HAS NOTED THAT THE ASSESSEE-COMPANY IS A P UBLIC LIMITED COMPANY WHICH HAD RECEIVED SUBSCRIPTIONS TO THE PUBLIC ISSU E THROUGH BANKING CHANNELS AND THE SHARES WERE ALLOTTED IN CONSONANCE WITH THE PROVISIONS OF SECURITIES CONTRACT (REGULATION) ACT, 1956, AS ALSO THE RULES AN D REGULATIONS OF DELHI STOCK EXCHANGECOMPLETE DETAILS WERE FURNISHEDTRIBUNAL H AS FURTHER FOUND THAT THE AO HAS NOT BROUGHT ANY POSITIVE MATERIAL OR EVI DENCE WHICH WOULD INDICATE THAT THE SHAREHOLDERS WERE BENAMIDARS OR FICTITIOUS PERSONS OR THAT ANY PART OF THE SHARE CAPITAL REPRESENTED COMPANYS OWN INCOME FROM UNDISCLOSED SOURCESAS REGARDS RECEIPT OF SHARE CAPITAL ON ISSUE OF RIGHTS SHARES TO FIVE COMPANIES, THESE COMPANIES WERE DULY INCORPORATED U NDER THE SIKKIMESE COMPANIES ACT AND WERE ASSESSED UNDER THE SIKKIMESE TAXATION MANUALTHEIR SHARE SUBSCRIPTIONS WERE ALSO RECEIVED THROUGH BANK ING CHANNELS AND FOUND TO BE VALID BY THE JURISDICTIONAL AOTHEREFORE, NO ADDI TION COULD BE MADE UNDER S. 68 IX) BHAV SHAKTI STEEL MINES (P) LTD. VS. CIT (2009) 18 DTR (DEL) 194 INCOME CASH CREDITGENUINENESSCIT(A) NOT ONLY FOUND THAT THE IDENTITY OF EACH OF THE ITA NO. 493/JP/2017 ACIT, CENTRAL CIRCLE-2, JAIPUR VS GODAWARI ESTATES PVT.LTD. KOLKATA 47 SHAREHOLDERS STOOD ESTABLISHED, BUT ALSO EXAMINED T HE FACT THAT EACH OF THEM WERE INCOME-TAX ASSESSEES AND HAD DISCLOSED THE SHA RE APPLICATION MONEY IN THEIR ACCOUNTS WHICH WERE DULY REFLECTED IN THEIR I T RETURNS AS WELL AS IN THEIR BALANCE SHEETSTRIBUNAL WAS NOT THEREFORE JUSTIFIED IN COMING TO THE CONCLUSION THAT THE CIT(A) HAD NOT CONSIDERED THE MATTER IN TH E RIGHT PERSPECTIVEORDER PASSED BY TRIBUNAL REMANDING THE MATTER FOR EXAMINI NG THE SHARE APPLICANTS SET ASIDE AND THAT OF CIT(A) RESTORED X) MEERA ENGINEERING & COMMERCIAL CO. (P) LTD. VS. A SSTT. CIT (1997) 58 TTJ (JAB) 527 INCOMECASH CREDITSGENUINENESS OF SHARE CAPITAL OF COMPANYALL THE 51 SHAREHOLDERS FILED THEIR AFFIDAVITS AND CONF IRMATORY LETTERS AND 24 OF THEM FILED THEIR REPLIES ALSO TO NOTICE UNDER S. 133(6) NAMES OF PARTIES PURCHASING THE SHARES WITH AMOUNT SUBSCRIBED WERE FURNISHED BEFORE AOALL DOCUMENTS CLEARLY SHOW THAT SHAREHOLDERS DO EXIST ASSESSEE-CO MPANY HAD DISCHARGED ITS ONUS OF EXPLAINING THE CASH CREDITS AS REQUIRED UND ER LAWIF THE COMPANY IS ABLE TO ESTABLISH THAT SHAREHOLDERS EXISTED AND THE Y HAVE INVESTED MONEY FOR PURCHASE OF SHARES BURDEN OF COMPANY TO PROVE THE C REDIT IS DISCHARGED IDENTITY OF SHAREHOLDERS NOT IN DISPUTEASSESSEE IS NOT REQUIRED TO PROVE CREDIT- WORTHINESS OF SHAREHOLDERSADDITION DELETED XI) ALLEN BRADLEY INDIA LTD. VS. DY. CIT (2002) 74 TTJ (DEL) 604 : (2002) 80 ITD 43 (DEL); INCOMECASH CREDITSUBSCRIPTION TO SHARE CAPITAL AN D LOANIN CASE OF LIMITED COMPANIES JURISDICTION OF AO WOULD B E LIMITED ONLY TO SEE WHETHER IDENTITY OF SHAREHOLDERS IS ESTABLISHED AND WHETHER THEY EXIST OR NOT ONCE IDENTITY IS ESTABLISHED, THEN, POSSIBLY NO FUR THER ENQUIRIES NEED TO BE MADESINCE THE SHAREHOLDERS OF ASSESSEE-COMPANY WER E IN EXISTENCE, THEY WERE ASSESSED TO TAX, COMPLETE DETAILS WERE AVAILAB LE, SHARE CAPITAL MONEY AS WELL AS LOAN WERE RECEIVED THROUGH ACCOUNT PAYEE CH EQUES AND THEY WERE CLEARED THROUGH PROPER BANKING CHANNELS, AO WAS NOT JUSTIFIED IN DISBELIEVING THE CAPITAL INVESTED BY THE SHAREHOLDER COMPANIESS IMILARLY, AO WAS NOT JUSTIFIED IN DISBELIEVING THE LOAN TAKEN FROM DTL A S THE CHEQUES WERE CLEARED THROUGH BANK CHANNELS AND CONFIRMATION AND SUPPORTI NG EVIDENCE WAS FILED CIT(A) WAS JUSTIFIED IN DELETING THE ADDITIONS. XII) CIT VS STL EXTRUSION (P) LTD. 333 ITR 269 (MP) INCOMECASH CREDITSHARE APPLICATION MONEYASSESSEE HAS DULY ESTABLISHED THE IDENTITY AND SOURCE OF CREDITSASSESSEE HAVING DULY FURNISHED THE NAME, AGE , ADDRESS, DATE OF FILING THE APPLICATION OF SHARES, NUMBER OF SHARES OF EACH SUBSCRIBER THERE WAS NO JUSTIFICATION FOR THE AO FOR MAKING THE IMPUGNED ADD ITIONONCE THE EXISTENCE OF THE INVESTORS/SHARE SUBSCRIBERS IS PROVED, ONUS SHI FTS ON THE REVENUE TO ESTABLISH THAT EITHER THE SHARE APPLICANTS ARE BOGU S OR THE IMPUGNED MONEY BELONGS TO THE ASSESSEE ITSELFADDITIONS NOT SUSTAIN ABLE. XIII) CIT VS ARUNANDA TEXTILES (P) LTD. , 333 ITR 116 (KARNATAKA) INCOME CASH CREDITSHARE APPLICATION MONEYASSESSEE ABLE TO IDENTIFY THE SHAREHOLDERSIT IS NOT FOR THE ASSESSEE-COMPANY TO ESTABLISH BUT IT IS FOR THE DEPARTMENT TO ENQUIRE WITH THE INVESTORS ABOUT THE CAPACITY TO INVEST THE AMOUNT IN THE SHARES XIV) UMA POLYMER (P) LTD. , 101 TTJ 124, JODHPUR INCOMECASH CREDITSHARE APPLICATION MONEYIN RESPECT OF SHARE CAPITAL MONEY , THE ASSESSEE-COMPANY HAS TO PROVE ONLY THE EXISTENCE OF THE PERSON IN WH OSE NAME SHARE APPLICATION IS RECEIVEDNO FURTHER BURDEN IS CAST ON THE ASSESSEE TO PROVE WHETHER THAT PERSON HIMSELF HAS INVESTED THE MONEY OR SOME OTHER PERSON HAS MADE THE ITA NO. 493/JP/2017 ACIT, CENTRAL CIRCLE-2, JAIPUR VS GODAWARI ESTATES PVT.LTD. KOLKATA 48 INVESTMENT IN HIS NAMEBURDEN TO PROVE THAT THE MON EY DID NOT BELONG TO HIM BUT TO SOMEBODY ELSE IS ON THE REVENUEDISTINCTION B ETWEEN A PUBLIC COMPANY AND A PRIVATE COMPANY IS NOT VERY MATERIAL FOR THIS PURPOSEAO TREATED THE INVESTMENTS MADE BY TEN SHAREHOLDERS IN THE ASSESSE E-COMPANY AS BOGUS AND MADE ADDITION UNDER S. 68 NOT JUSTIFIEDIN ALL THE CASES EXCEPT THAT OF V, AO HAD OBTAINED THE BANK STATEMENTS OF THE SHAREHOLDER S WHICH CLEARLY SHOW THAT THE ACCOUNTS WERE REGULARLY MAINTAINED AND THE SHAR EHOLDERS HAD MADE DEPOSITSFURTHER, THE SHAREHOLDERS ARE ALSO ASSESSE D TO TAXSIMPLY BECAUSE SCRUTINY ASSESSMENTS WERE NOT MADE IN THE CASE OF S HAREHOLDERS, SUCH ASSESSMENTS COULD NOT BE MADE IN THE COURSE OF ASSE SSMENT OF THE ASSESSEE HAVING REGARD TO THE INFORMATION COLLECTED BY THE A O FROM THE BANKS, IDENTITY OF THE SHAREHOLDERS WAS FULLY ESTABLISHEDIF ANY SHARE HOLDER IS FOUND TO HAVE MADE UNEXPLAINED INVESTMENT, THEN ADDITION OF SUCH INVESTMENT IS REQUIRED TO BE MADE IN THE HANDS OF THE SHAREHOLDER AND NOT IN THE ACCOUNT OF THE ASSESSEEU HAD INVESTED IN THE SHARE CAPITAL THROUGH CHEQUE EX CEPT FOR A SMALL SUM WHICH WAS RETURNED TO HERHER BANK ACCOUNT SHOWS SEVERAL ENTRIES, BOTH CREDIT AND DEBIT, WHICH HAVE NO RELATION WITH THE AMOUNT INVES TED WITH THE ASSESSEE- COMPANYMERELY BECAUSE SHE HAS NOT SUBMITTED HER RE TURNS AFTER THE ASST. YR. 1984-85, IT CANNOT BE SAID THAT SHE WAS NOT ASSESSE D TO TAXTHOUGH V HAS NOT BEEN SHOWN TO BE ASSESSED TO TAX, HE HAD MADE MAJOR PART OF INVESTMENTS TOWARDS SHARE CAPITAL THROUGH CHEQUES AND HIS IDENT ITY IS NOT DOUBTED ACCORDINGLY, SHARE CAPITAL ADVANCED BY U AND V IS AL SO TO BE ACCEPTED AS GENUINETHEREFORE, NO ADDITION OF SHARE CAPITAL MON EY COULD BE MADE IN THE HANDS OF THE ASSESSEE-COMPANY. 11. WITHOUT PREJUDICE TO ABOVE THIS IS TO SUBMIT TH AT THE SHARE APPLICATION MONEY CANNOT BE TREATED AS INCOME OF THE ASSESSEE. RELIAN CE IS PLACED IN FOLLOWING DECISIONS: - I) CIT VS. LOVELY EXPORTS (P) LTD. (2008) 216 CTR (SC) 195 INCOMECASH CREDITSHARE APPLICATION MONEYIF THE SHARE APPLICA TION MONEY IS RECEIVED BY THE ASSESSEE COMPANY FROM ALLEGED BOGUS SHAREHOLDER S, WHOSE NAMES ARE GIVEN TO THE AO, THEN THE DEPARTMENT IS FREE TO PROCEED TO REOPEN THEIR INDIVIDUAL ASSESSMENTS IN ACCORDANCE WITH LAW, BUT IT CANNOT B E REGARDED AS UNDISCLOSED INCOME OF ASSESSEE COMPANY II) CIT VS. STELLER INVESTMENT LTD. (200) 251 ITR 263 (SC) EVEN IF THE SUBSCRIBERS TO THE INCREASED SHARE CAPITAL OF ASSES SEE-COMPANY WERE NOT GENUINE, THE AMOUNT COULD NOT BE REGARDED AS UNDISC LOSED INCOME OF THE ASSESSEE-COMPANY. III) COMMISSIONER OF INCOME TAX VS. BHAVAL SYNTHETICS ( RAJ HC) (2013) 84 DTR 0449 (RAJ) HELD THAT EVEN IN CASE OF DOUBT ABOUT SUBSCRIBERS TO INCREASED SHARE CAPITAL, AMOUNT OF SHARE CAPITAL COULD NOT BE REGARDED AS UNDISCLOSED INCOME OF COMPANYAMOUNT REFERABLE TO SHARE APPLICA TION COULD NOT BE ATTRIBUTED TO ASSESSEE AND COULD NOT BE ASSESSED IN ITS HANDSAPPEAL DISMISSED IV) COMMISSIONER OF INCOME TAX VS. AKJ GRANITES (P) LTD. ( RAJ HC) (2008) 301 ITR 0298 HELD THAT IN RESPECT OF SHARE APPLICATIONS RECEIVED FROM DIFFERENT PLACES ACCOMPANIED WITH SHARE APPLICATION MONEY, NO PRESUM PTION CAN BE DRAWN THAT SAME BELONG TO THE ASSESSEE AND CANNOT BE ASSESSED IN HIS HANDS AS HIS UNDISCLOSED INCOME UNLESS SOME NEXUS IS ESTABLISHED THAT SHARE APPLICATION ITA NO. 493/JP/2017 ACIT, CENTRAL CIRCLE-2, JAIPUR VS GODAWARI ESTATES PVT.LTD. KOLKATA 49 MONEY FOR AUGMENTING THE INVESTMENT IN BUSINESS HAS FLOWN FROM ASSESSEES OWN MONEYNO SUBSTANTIAL QUESTION OF LAW ARISES BARKHA SYNTHETICS LTD. VS. ASSTT. CIT (2005) 197 CTR (RAJ) 432 FOLLOWED. IN VIEW OF THE ABOVE SUBMISSION THIS IS TO SUBMIT T HAT THE ADDITION MADE BY LD. AO IS UNJUSTIFIED AND DESERVE TO BE DELETED.. 3.2.2 I HAVE DULY CONSIDERED ASSESSEE'S SUBMISSION AND CA REFULLY GONE THROUGH ASSESSMENT ORDER. I HAVE ALSO TAKEN A NOTE OF FACTUAL MATRIX OF THE CASE AS WELL AS APPLICABLE CASE LAWS RELIED UPO N. I HAVE ALREADY GIVEN A DETAILED FINDINGS IN PARA 2.1.4.7 WHEREIN T OTAL OF RS. 8,71,97,727/= HAS BEEN SUSTAINED IN THE HANDS OF M/ S MOTISONS GLOBAL PVT LTD, M/S MOTISONS ENTERTAINMENT PVT LTD, M/S MO TISONS BUILDTECH PVT LTD AND M/S SHIVANSH BUILDCON PVT LTD, DETAILS OF W HICH ARE AS UNDER: NAME OF APPELLANT COMPANY ITA N O AY ADDITION MADE BY AO ADDITION SUSTAINED ADDITION DELETED/ RELIEF GIVEN MOTISONS GLOBAL PVT. LTD 753/14 - 15 2009 - 10 2,75,00,000 ------------- 2,75,00,000 MOTISONS GLOBAL PVT. LTD 754/14 - 15 2011 - 12 6,96,50,000 --------------- 6,96,50,000 MOTISONS GLOBAL PVT. LTD 767/14 - 15 2012 - 13 42,07,29,600 5,94,47,727 36,12,81,873 MOTISONS GLOBAL PVT. LTD 755/14 - 15 2013 - 14 4,41,00,000 50,50,000 3,90,50,000 MOTISONS ENTERTAINMENT (I) PVT. LTD 760/14 - 15 2009 - 10 3,40,00,000 --------------- 3,40,00,000 MOTISONS ENTERTAINMENT (I) PVT. LTD 766/14 - 15 2011 - 12 1,95,00,000 ---------------- 1,95,00,000 MOTISONS ENTERTAINMENT (I) PVT. LTD 756/14 - 15 2012 - 13 7,78,00,000 1,41,50,000 6,36,50,000 MOTISONS BUILDTECH PVT. LTD 758/14 - 15 2009 - 10 3,03,00,000 --------------- 3,03,00,000 MOTISONS BUILDTECH PVT. LTD 759/14 - 15 2012 - 13 3,68,27,500 82,00,000 2,86,27,500 GODAWARI ESTATES PVT. LTD 769/14 - 15 2010 - 11 2,00,00,000 -------------- 2,00,00,000 GODAWARI ESTATES PVT. LTD 768/14 - 15 2012 - 13 10,30,00,000 -------------- 10,30,00,000 BHOLENATH REAL ESTATES PVT LTD 770/14 - 15 2009 - 10 2,90,00,000 --------------- 2,90,00,000 RAINBOW BUILDCON PVT. LTD 757/14 - 15 2009 - 10 2,00,00,000 --------------- 2,00,00,000 SHIVANSH BUILDCON PVT. LTD 771/14 - 15 2012 - 13 90,00,000 3,50,000 86,50,000 TOTAL ADDITIONS 94,14,07,100 8,71,97,727 85,42,09,373 IN VIEW OF ABOVE FACTS AND CIRCUMSTANCES OF THE CAS E AS DISCUSSED ABOVE ADDITION OF RS. 2,00,00,000/= MADE ON A/C OF BOGUS SHARE CAPITAL IN THE HANDS OF ASSESSEE M/S GODAWARI ESTAT E PVT LTD IS HEREBY DELETED. ASSESSEE GETS RELIEF IN GR NO. 2 & 3. PARA 2.1.4.7 READS OF LD. CIT(A)S ORDER AS UNDER:- 2.1.4.7 IN VIEW OF THE ABOVE FINDINGS, IT IS ALSO SEEN THAT THIS CASH /DD WAS DEPOSITED AT 4 TH CHANNEL OF SOURCE/ STAGE. THIS MONEY CAME TO ITA NO. 493/JP/2017 ACIT, CENTRAL CIRCLE-2, JAIPUR VS GODAWARI ESTATES PVT.LTD. KOLKATA 50 THE HANDS OF SOME OF APPELLANT COMPANIES THROUGH TH E SIX COMPANIES ASSESSED IN JAIPUR. HOWEVER, ON PERUSAL OF WRITTEN SUBMISSIO NS AND COMPLIANCE TO SHOW CAUSE LETTER, IT IS ALSO SEEN THAT THE ASSESSEE HAS NOT CONTROVERTED THE FACTS NARRATED BY SHRI SANTOSH CHOUBE, SHRI RAJESH KR SIN GH AND SHRI AJIT SHARMA AND ALSO COULD NOT SATISFACTORILY EXPLAIN THE REASO NS OF CASH DEPOSITS MADE TO THOSE ACCOUNTS. THEREFORE, DULY CONSIDERING THOSE FACTS AS EVIDENCES (BOTH DOCUMENTARY & ORAL) GATHERED DURING SEARCH AND & PO ST-SEARCH OPERATION, ADDITION TO THE EXTENT OF RS. 8,71,97,727/- IS SUST AINED AND BALANCE IS DELETED, DETAILS GIVEN AS UNDER:- NAME OF APPELLANT COMPANY ITA NO. A.Y. ADDITION MADE BY AO ADDITION SUSTAINED ADDITION DELETED/RELIEF GIVEN MOTISONS GLOBAL PVT LTD 753/14-15 2009-10 2,75,00,000 - 2,75,00,000 MOTISONS GLOBAL PVT LTD 754/14-15 2011-12 6,96,50,000 - 6,96,50,000 MOTISONS GLOBAL PVT LTD 767/14-15 2012-13 42,07,29,600 5,94,47,727 36,12,81 ,873 MOTISONS GLOBAL PVT LTD 755/14-15 2013-14 4,41,00,000 50,50,000 3,90 ,50,000 MOTISONS ENTERTAINMENT (I) PVT. LTD 760/14-15 2009-10 3,40,00,000 - 3,40,00,000 MOTISONS ENTERTAINMENT (I) PVT. LTD 766/14-15 2011-12 1,95,00,000 - 1,95,00,000 MOTISONS ENTERTAINMENT (I) PVT. LTD 756/14-15 2012-13 7,78,00,000 1,41,50,000 6,36 ,50,000 MOTISONS BUILDTECH PVT. LTD 758/14-15 2009-10 3,03,00,000 - 3,03,00,000 MOTISONS BUILDTECH PVT. LTD 759/14-15 2012-13 3,68,27,500 82,00,000 2,8 6,27,500 GODAWARI ESTATES PVT. LTD 769/14-15 2010-11 2,00,00,000 - 2,00,00,000 GODAWARI ESTATES PVT. LTD 768/14-15 2012-13 10,30,00,000 - 10,30,00,000 BHOLENATH REAL ESTATES PVT. LTD. 770/14-15 2009-10 2,90,00,000 - 2,90,00,000 RAINBOW BUILDCON PVT. LTD 757/14-15 2009-10 2,00,00,000 - 2,00,00,000 SHIVANSH 771/14-15 2012-13 90,00,000 3,50 ,000 86,50,000 ITA NO. 493/JP/2017 ACIT, CENTRAL CIRCLE-2, JAIPUR VS GODAWARI ESTATES PVT.LTD. KOLKATA 51 BUILDCON PVT. LTD 94,14,07,100 8,71,97,727 85,42,09,373 IT IS PERTINENT TO MENTION HERE THAT M/S. MAYUKH V INIMAY PVT.LTD RECEIVED SHARE APPLICATION OF RS. 10,54,95,000/- IN AY 2009-10 WHI CH WAS ADDED AS INCOME OF M/S.MAYUKH VINIMAY PVT. LTD IN A.Y. 2009-10. THEREA FTER IN SUBSEQUENT YEARS THE PART OF THE FUNDS OWNED BY THIS COMPANY WAS INVESTE D IN THE COMPANIES UNDER APPEAL AS UNDER:- S.N. NAME OF COMPANY (UNDER YOUR APPEAL) ASSESSMENT YEAR AMOUNT 1. MOTISONS GLOBAL PVT. LTD 2012-13 6,93,49,800 2. MOTISONS GLOBAL PVT. LTD 2013-14 2,24,50,000 3. MOTISONS ENTERTAINMENT (INDIA)PVT LTD. 2012-13 1,55,00,000 TOTAL 10,72,29,800 FURTHER IT IS ALSO SUBMITTED THAT ADDITION MADE BY THE AO TANTAMOUNT TO DOUBLE ADDITION. IT IS ALSO MENTIONED HERE THAT AS PER LD. ARS REQUEST, APPELLATE PROCEEDINGS IN CASE OF M/S. MAYUKHVINIMAY PVT. LTD HAVE BEEN KE PT IN ABEYANCE TILL THE DISPOSTAL OF APPEAL BY HON'BLE ITAT. IN VIEW OF AFOREMENTIONED FINDINGS, NOW ADDITIONS M ADE BY THE AO ARE BEING DISCUSSED WITH RESPECT TO GROUNDS OF APPEAL RAISED BY THE RESPECTIVE ASSESSEE IN PARA BELOW. 2.4 DURING THE COURSE OF HEARING, THE LD. DR SUPPORTED THE ORDER OF THE AO AND SUBMITTED THAT THE ORDER OF THE LD. CIT(A) M AY BE SET ASIDE. 2.5 TO THIS EFFECT, THE LD.AR OF THE ASSESSEE FILE D THE FOLLOWING WRITTEN SUBMISSION PRAYING THEREIN TO DISMISS THE APPEAL OF THE DEPARTMENT. 2.01.2 SUBMISSION OF ASSESSEE:- ITA NO. 493/JP/2017 ACIT, CENTRAL CIRCLE-2, JAIPUR VS GODAWARI ESTATES PVT.LTD. KOLKATA 52 A) DURING THE YEAR UNDER CONSIDERATION THE ASSESSEE ALLOTTED 2,00,000 EQUITY SHARES OF RS. 10 EACH TO VARIOUS COMPANIES A T A PREMIUM OF RS. 90/- PER SHARE DETAIL OF WHICH IS AS UNDER: - S.N. NAME NO. OF SHARES ALLOTED/ APPLIED DURING THE YEAR AMOUNT ADJUSTED AGAINST SHARE CAPITAL RATE PER SHARE AMOUNT ADJUSTED AGAINST SHARE PREMIUM RATE OF PREMIUM PER SHARE ISSUE PRICE OF THE SHARE TOTAL CONSIDERATION RECEIVED 1. DEBDARU VINIMAY PVT. LTD 25,000 2,50,000 10 22,50,000 90 100 25,00,000 2. JAI PITRESHWAR VYAPAAR PVT. LTD 15,000 1,50,000 10 13,50,000 90 100 15,00,000 3. MAINAK VINCOM PVT. LTD 50,000 5,00,000 10 45,00,000 90 100 50,00,000 4. PUSPA DEALERS PVT. LTD 50,000 5,00,000 10 45,00,000 90 100 50,00,000 5. SNOWFALL COMMERCIAL PVT. LTD 25,000 2,50,000 10 22,50,000 90 100 25,00,000 6. VIGNESH INFO SERVICES PVT. LTD 35,000 3,50,000 10 31,50,000 90 100 35,00,000 TOTAL 2,00,000 20,00,000 1,80,00,000 2,00,00,000 B) INITIALLY VIDE SHOW CAUSE NOTICE DATED 06.02.201 5 (COPY AT PB PAGE 37-40) THE LD. AO OPINED THAT ENTIRE SHARE CAPITAL/SHARE PREMIUM OF RS. 3,40,00,000/- SHOULD BE ADDED IN TOTAL INCOME OF TH E ASSESSEE. C). THE LD. AO HAS NOT MADE THE ADDITION UNDER THE DEEMING PROVISIONS OF SECTION 68 OF INCOME TAX ACT. THE LD AO MADE THE AD DITION BY APPLYING THE PROVISIONS OF SECTION 56(1) OF INCOME TAX ACT ON THE GROUND THAT THE ASSETS OF THE ASSESSEE COMPANY DON T COMMENSURATE TO PREMIUM CHARGED AND ANY BUSINESS ACTIVITY WAS NOT P ERFORMED OR ANY BUSINESS INCOME HAS NOT BEEN SHOWN BY THE ASSESSEE. THE LD CIT(A) ITA NO. 493/JP/2017 ACIT, CENTRAL CIRCLE-2, JAIPUR VS GODAWARI ESTATES PVT.LTD. KOLKATA 53 HAS NOT CONFIRMED THE ADDITION MADE BY LD AO BY APP LYING THE PROVISIONS OF SECTION 56(1) OF INCOME TAX ACT, ON T HE BASIS OF HIS DETAILED FINDINGS AT PAGE 38-41 OF HIS ORDER. THE ASSESSEE RELIES ON THE FINDINGS OF LD CIT(A). D ) JUSTIFICATION OF CHARGING SHARE PREMIUM THE ASSESSEE HAS SUBMITTED THE JUSTIFICATION FOR CH ARGING THE SHARE PREMIUM WHICH IS SUMMARIZED AS UNDER: - NAME OF COMPANY REASON FOR CHARGING SHARE PREMIUM GODAWARI ESTATES PVT. LTD 1. NBFC COMPANY EXPECTING GOOD REVENUE. 2. GOODWILL OF MOTISONS GROUP. E) SHARE PREMIUM/CAPITAL IS CAPITAL RECEIPT: IF SHARES ARE ISSUED AT PREMIUM THEN CAPITAL RECEIP T AGGREGATE AMOUNT OF PREMIUM IS TO BE TRANSFERRED TO AN ACCOUNT CALLE D THE SHARE PREMIUM ACCOUNT. THIS SHARE PREMIUM ACCOUNT IS NOT DISTRIBU TABLE AS INCOME JUST LIKE AS ANY OTHER CAPITAL ASSETS. ON WINDING UP, TH E SURPLUS MONIES IN THE SHARE PREMIUM ACCOUNT IS TO BE RETURNED TO THE SHARE HOLDERS AS CAPITAL. SO LONG AS THE COMPANY IS A GOING CONCERN, THE MONIES IN SHARE PREMIUM ACCOUNT CAN NEVER BE RETURNED TO THE SHAREH OLDERS EXCEPT THROUGH THE MEDIUM OF A REDUCTION PETITION, OR, IN OTHER WORDS, EXCEPT UNDER EXACTLY THE SAME CONDITIONS AS THOSE UNDER WH ICH ANY OTHER CAPITAL ASSET CAN REACH THE SHAREHOLDERS HANDS. DIS TRIBUTION OF SHARE PREMIUM AMOUNT IS NOT PERMITTED THROUGH DIVIDEND. I T IS TAKEN OUT OF THE CATEGORY OF DIVISIBLE PROFITS. THE PROVISIONS I N RESPECT OF ISSUE OF SHARES AT PREMIUM ARE THE SAME IN THE OLD COMPANY A CT AS WELL AS IN THE NEW COMPANY ACT. HENCE COMPANIES ACT CLEARLY ME NTIONS THAT AMOUNT RECEIVED AS PREMIUM IS CAPITAL RECEIPT AND N OT A REVENUE RECEIPT. THE SHARE PREMIUM IS ALSO VERIFIABLE FROM RETURNS OF ALLOTMENT SUBMITTED IN ROC. AS PER DEPARTMENTAL CIRCULAR (MCA ) NO. 3/77 DATED 15.04.1977 THE MONIES IN THE SHARE PREMIUM ACCOUNT CANNOT BE TREATED AS FREE RESERVES, AS THEY ARE IN THE NATURE OF CAPI TAL RESERVES. F) ON THE ISSUE OF SHARES AT PREMIUM, THE LD. ITAT, MUMBAI BENCH IN THE CASE OF ACIT V/S GAGANDEEP INFRASTRUCTURE PVT. LTD. 2014-T1 0L- 656-ITAT-MUM (PB PG 354-359 OF CASE LAWS) OBSERVED THAT ISSUE OF ITA NO. 493/JP/2017 ACIT, CENTRAL CIRCLE-2, JAIPUR VS GODAWARI ESTATES PVT.LTD. KOLKATA 54 SHARES AT PREMIUM IS ALWAYS A COMMERCIAL DECISION W HICH DOES NOT REQUIRE ANY JUSTIFICATION . THE FINDING OF THE ITAT WAS CONFIRMED BY MUMBAI HIGH COURT IN ITS DECISION DATED 20.03.2017 IN APPEAL NO. 1613 OF 2014. PB PAGE 306-366 /CASE LAWS) FURTHER THE PREMIUM IS A CAPITAL RECEIPT WHICH HAS TO BE DEALT WITH IN ACC ORDANCE WITH SECTION 78 OF COMPANIES ACT 1956. FURTHER THE COMPANY IS NO T REQUIRED TO PROVE THE GENUINENESS, PURPOSE OR JUSTIFICATION FOR CHARG ING PREMIUM OF SHARES, SHARE PREMIUM BY ITS VERY NATURE IS A CAPIT AL RECEIPTS AND IS NOT INCOME FOR ITS ORDINARY SENSE . IN THE CASE BEFORE MUMBAI BENCH HAS TO CONSIDER A CASE WHERE PREMIUM OF RS.190 PER SHARE W AS CHARGED. THE TRIBUNAL OBSERVED AS UNDER ( PG 358 TO 359/CASE LAWS) : 11. WE HAVE CAREFULLY PERUSED THE ORDERS OF THE LO WER AUTHORITIES. IN OUR CONSIDERED VIEW, THE ISSUE OF SHARES AT PREMIUM IS ALWAYS A COMMERCIAL DECISION WHICH DOES NOT REQUIRE ANY JUST IFICATION. FURTHER THE PREMIUM IS A CAPITAL RECEIPT WHICH HAS TO BE DEALT WITH IN ACCORDANCE WITH SEC. 78 OF THE COMPANIES ACT, 1956. FURTHER, THE COMPANY IS NOT REQUIRED TO PROVE THE GENUINENESS, P URPOSE OR JUSTIFICATION FOR CHARGING PREMIUM OF SHARES, SHARE PREMIUM BY ITS VERY NATURE IN A CAPITAL RECEIPTS AND IS NOT INCOME FOR ITS ORDINARY SENSE. IT IS NOT IN DISPUTE THAT THE ASSESSEE HAD F ILED ALL THE REQUISITE DETAILS/DOCUMENTS WHICH ARE REQUIRED TO EXPLAIN CRE DITS IN THE BOOKS OF ACCOUNTS BY THE PROVISIONS OF SEC. 68 OF THE ACT . THE ASSESSEE HAS SUCCESSFULLY ESTABLISHED THE IDENTITY OF THE COMPAN IES WHO HAVE PURCHASED SHARES AT A PREMIUM. THE ASSESSEE HAS ALS O FILED BANK DETAILS TO EXPLAIN THE SOURCE OF THE SHARE HOLDERS AND THE GENUINENESS OF THE TRANSACTION WAS ALSO ESTABLISHED BY FILING C OPIES OF SHARE APPLICATION FORMS AND FORM NO. 2 FILED WITH THE REG ISTRAR OF COMPANIES. THE ENTIRE DISPUTE REVOLVES AROUND THE F ACT THAT THE ASSESSEE HAS CHARGED A PREMIUM OF 190/- PER SHARE. NO DOUBT A NON-EST COMPANY OR A ZERO BALANCE SHEET COMPANY ASK ING FOR 190/- PER SHARE DEFIES ALL COMMERCIAL PRUDENCE BUT AT THE SAME TIME WE CANNOT IGNORE THE FACT THAT IT IS A PREROGATIVE OF THE BOARD OF DIRECTORS OF THE COMPANY TO DECIDE THE PREMIUM AMOU NT AND IT IS THE WISDOM OF THE SHARE HOLDERS WHETHER THEY WANT TO SU BSCRIBE TO SUCH A HEAVY PREMIUM. THE REVENUE AUTHORITIES CANNOT QUEST ION THE CHARGING OF SUCH HUGE PREMIUM WITHOUT ANY BAR FROM ANY LEGISLATED LAW OF THE LAND. THE AMENDMENT HAS BEEN BROUGHT IN THE INCOME TAX ACT UNDER THE HEAD 'INCOME FROM OTHER SOURCES' BY I NSERTING CLAUSE (VIIB) TO SEC. 56 OF THE ACT WHEREIN IT HAS BEEN PR OVIDED THAT ANY CONSIDERATION FOR ISSUE OF SHARES, THAT EXCEEDS THE FAIR VALUE OF SUCH SHARES, THE AGGREGATE CONSIDERATION RECEIVED FOR SU CH SHARES AS EXCEEDS THE FAIR MARKET VALUE OF THE SHARES SHALL B E TREATED AS THE INCOME OF THE ASSESSEE BUT THE LEGISLATURE IN ITS W ISDOM HAS MADE THIS ITA NO. 493/JP/2017 ACIT, CENTRAL CIRCLE-2, JAIPUR VS GODAWARI ESTATES PVT.LTD. KOLKATA 55 PROVISION APPLICABLE W.E.F 1.4.2013 I.E. ON AND FRO M A.Y. 2013-14. IN SO FAR AS THE YEAR UNDER CONSIDERATION IS CONCERNED , THE TRANSACTION HAS TO BE CONSIDERED IN THE LIGHT OF THE PROVISIONS OF SEC. 68 OF THE ACT. THERE IS NO DISPUTE THAT THE ASSESSEE HAS GIVE N DETAILS OF NAMES AND ADDRESSES OF THE SHARE HOLDERS, THEIR PAN NOS, THE BANK DETAILS AND THE CONFIRMATORY LETTERS. 11.1. CONSIDERING ALL THESE UNDISPUTED FACTS, IT CA N BE SAFELY CONCLUDED THAT THE INITIAL BURDEN OF PROOF AS RESTE D UPON THE ASSESSEE HAS BEEN SUCCESSFULLY DISCHARGED BY THE ASSESSEE . EVEN IF IT IS HELD THAT EXCESS PREMIUM HAS BEEN CHARGED, IT DOES NOT B ECOME INCOME AS IT IS A CAPITAL RECEIPT. THE RECEIPT IS NOT IN THE REVENUE FIELD. WHAT IS TO BE PROBED BY THE AO IS WHETHER THE IDENTITY OF T HE ASSESSEE IS PROVED OR NOT. IN THE CASE OF SHARE CAPITAL, IF THE IDENTITY IS PROVED, NO ADDITION CAN BE MADE U/S. 68 OF THE ACT. WE DRAW SUPPORT FROM THE DECISION OF THE HONBLE SUPREME COURT IN THE CASE O F LOEVELY EXPORTS PVT. LTD. 317 ITR 218. WE, THEREFORE DO NOT FIND AN Y ERROR OR INFIRMITY IN THE FINDINGS OF THE LD. CIT(A). GROUND NO. 1 IS ACCORDINGLY DISMISSED. G) AS PER PROVISIONS OF SECTION 56(1) OF INCOME TAX ACT, 1961 INCOME OF EVERY KIND WHICH IS NOT TO BE EXCLUDED FROM THE TOT AL INCOME UNDER THIS ACT SHALL BE CHARGEABLE TO INCOME-TAX UNDER THE HEA D 'INCOME FROM OTHER SOURCES', IF IT IS NOT CHARGEABLE TO INCOME-T AX UNDER ANY OF THE HEADS SPECIFIED IN SECTION 14 , ITEMS A TO E. IN THE CASE OF THE ASSESSEE COMPANY, THE AMOUNT WAS RECEIVED FROM INVESTORS WER E AGAINST SHARE APPLICATION AND THE SAME IS CAPITAL RECEIPT WHICH W AS ADJUSTED AGAINST SHARE CAPITAL AND SHARE PREMIUM. THE MONEY SO RECEI VED TO ASSESSEE COMPANY WAS CAPITAL RECEIPT AND WAS NOT REVENUE REC EIPT, THEREFORE THE SAME CANNOT BE TAXED IN THE HANDS OF ASSESSEE COMPA NY UNDER SECTION 56(1) OF INCOME TAX ACT, 1961 BECAUSE THIS SECTION DEAL WITH INCOME AND NOT WITH CAPITAL RECEIPTS. THE INVESTORS WHO SU BSCRIBED THE SHARE CAPITAL OF ASSESSEE COMPANY IS ALSO SHOWING THE AMO UNT PAID TO ASSESSEE AS THEIR INVESTMENT IN SHARES OF ASSESSEE COMPANY A ND NECESSARY DOCUMENTS IN THIS REGARD WAS SUBMITTED TO LD. AO. T HEREFORE THE ASSESSEE HAS PROVED WITH DOCUMENTARY EVIDENCES THAT THE AMOUNT WAS RECEIVED AGAINST SHARE APPLICATION I.E. CAPITAL REC EIPT, THEREFORE THE SAME CANNOT BE TREATED AS INCOME OF THE ASSESSEE. FURTHE R FOR TREATING THE SHARE CAPITAL/SHARE PREMIUM AS INCOME OF THE ASSESS EE COMPANY NO COGENT REASON HAS BEEN GIVEN BY LD. AO. FURTHER, TH ERE IS NO DEEMING FICTION HAS BEEN GIVEN IN SECTION 56(1) OF INCOME T AX ACT, 1961 WHEREIN THE INCOME CAN BE TAXED UNDER DEEMING PROVI SION. ITA NO. 493/JP/2017 ACIT, CENTRAL CIRCLE-2, JAIPUR VS GODAWARI ESTATES PVT.LTD. KOLKATA 56 H) BY FINANCE ACT 2012 A NEW CLAUSE (VIIB) WAS INSE RTED IN 56(2). MEMORANDUM EXPLAINING THE PROVISIONS IN FINANCE BIL L 2012 STATED AS UNDER:- SHARE PREMIUM IN EXCESS OF THE FAIR MARKET VALUE IS TO BE TREATED AS INCOME. SECTION 56(2) PROVIDES FOR THE SPECIFIC CATEGORY O F INCOMES THAT SHALL BE CHARGEABLE TO INCOME TAX UNDER THE HEAD INCOME FROM OTHER SOURCES. IT IS PROPOSED TO INSERT A NEW CLAUSE IN 56(2). THE NEW CLAUSE WILL APPLY WHERE, ACCOMPANY, NOT BEING A COM PANY IN WHICH THE PUBLIC ARE SUBSTANTIALLY INTERESTED, RECEIVES, IN A NY PREVIOUS YEAR, FROM ANY PERSON BEING A RESIDENT, ANY CONSIDERATION FOR ISSUE OF SHARES. IN SUCH A CASE IF THE CONSIDERATION RECEIVED FOR ISSUE OF SHARES EXCEEDS THE FACE VALUE OF SHARES, THE AGGREGATE CONSIDERATI ON RECEIVED FOR SUCH SHARES AS EXCEEDS THE FAIR MARKET VALUE OF THE SHAR ES SHALL BE CHARGEABLE TO INCOME TAX, UNDER THE HEAD INCOME FR OM OTHER SOURCES. THIS AMENDMENT EFFECTIVE FROM 1 ST APRIL 2013 AND WILL ACCORDINGLY APPLY IN RELATION TO ASSESSMENT YEAR 2013-14 AND SU BSEQUENT ASSESSMENT YEARS. IN THE MEMORANDUM IT IS MENTIONED THAT PREMIUM IN EXCESS OF FAIR MARKET VALUE IS TO BE TREATED AS INCOME. THIS SUGGESTS THAT PREMIUM IN EXCESS OF FAIR MARKET VALU E WAS NOT AN INCOME BUT IS TO BE TREATED AS INCOME DUE TO AMENDE D PROVISION. BEFORE THE AMENDMENT, CONSIDERATION RECEIVED AS PRE MIUM WAS NOT INCOME. THE LEGISLATURE IN ITS WISDOM REQUIRED THE SHARE PREMIUM IN EXCESS OF FAIR MARKET VALUE TO BE INCOME FROM ASSES SMENT YEAR 2013- 14 AND NOT THE ENTIRE PREMIUM TO BE TREATED AS INCO ME. CBDT VIDE CIRCULAR NO.3 OF 2012 DATED 12.06.2012 HAS ALSO MEN TIONED THAT PROVISIONS OF 56(2)(VII B) WILL BE APPLICABLE FOR A SSESSMENT YEAR 2013-14 ONWARD . THEREFORE, AMENDMENT IN SECTION 56(2)(VIIB) OF INCOME TAX ACT, 1961 EFFECTIVE FROM 1 ST APRIL 2013 AND WILL ACCORDINGLY APPLY IN RELATION TO ASSESSMENT YEAR 20 13-14 AND SUBSEQUENT ASSESSMENT YEARS AND THE PROVISIONS OF T HIS SECTION CANNOT BE MADE APPLICABLE IN PREVIOUS YEARS. IN THIS REGAR D THE RATIO HAS BEEN LAID DOWN IN FOLLOWING JUDGMENTS: - A) BY FINANCE ACT 1994, SECTION 55(2) WAS AMENDED TO PROVIDE THAT COST OF ACQUISITION OF A TENANCY RIGHT WILL BE TAKEN AS NIL. THE HONBLE APEX COURT IN THE CASE OF D.P. SANDU BROS. CHEMBUR (P) LTD (SUPRA), HELD THAT AMENDMENT TOOK EFFECT FROM 1 ST APRIL, 1995 AND THEREFORE WILL NOT BE APPLICABLE ITA NO. 493/JP/2017 ACIT, CENTRAL CIRCLE-2, JAIPUR VS GODAWARI ESTATES PVT.LTD. KOLKATA 57 FOR A.Y. 1987-88. SIMILAR FINDING HAS BEEN RECORDED BY HONBLE RAJ, HIGH COURT IN THE CASE OF GOTAN LIME S TONE KHANIJ UDHYOG. THE RATIO OF LAW IN RESPECT OF AMENDMENT IN 55(2) BEING HELD AS PROSPECTIVE IS APPLICABLE FOR 56(2)(VIBE) AND HENCE SHARE PREMIUM IN EXCESS OF FA IR MARKET VALUE CAN NOT BE HELD TAXABLE FOR A.Y. 2011- 12. B) RECENTLY THE HONBLE APEX COURT IN THE CASE OF M.G. PICTURES (MADRAS) LTD V/S ACIT 373 ITR 39 HELD THAT AMENDMENT IN SECTION 40A(3) W.E.F. FROM 1.4.19 96 IS PROSPECTIVE AND CANNOT BE APPLIED TO PREVIOUS YE ARS OF BLOCK PERIOD PRIOR TO F.Y. 1995-96. C) THE FIGURE OF 10,000 WAS CHANGED TO 20,000 U/S 4 0A(3) OF INCOME TAX ACT, 1961 AND 269SS OF INCOME TAX ACT, 1961 BY DIRECT TAX LAWS (AMENDMENT) ACT 1987 W.E.F. 1.4.1989. THE CBDT VIDE CIRCULAR NO.522 DATED 18.08.1988 STATED THAT AMENDMENT IN SECTION 40A(3) IS APPLICABLE FOR A.Y. 1989-90 AS IT IS A SUBSTANTI VE PROVISION AND SINCE 269SS IS A PROCEDURAL PROVISION , THE EFFECTIVE DATE WILL BE 1.4.89 I.E. PREVIOUS YEAR RE LEVANT TO A.Y. 89-90. D) THE FIVE JUDGE CONSTITUTION BENCH IN THE CASE OF CIT V VATIKA TOWNSHIP (P) LTD. 367 ITR 466 HAD AN OCCASION TO CONSIDER AS TO WHETHER PROVISO ADDED TO SECTION 113 OF THE I.T. ACT, IS PROSPECTIVE OR RETROSPECTIVE. THE HONBLE APEX COURT WHILE CONSIDERING THE VARIOUS DECISIONS HELD (AS PER PAGE 469 OF ITR 367). THAT SURCHARGE LEVIED BY ASSESSING OFFICER FOR THE BLOCK ASSESSMENT PERTAINING TO THE PERIOD FROM JUNE 1, 2002 WAS LIABLE TO BE DELETED. AN AMENDMENT MADE TO A TAXING STATUTE CAN BE SAID TO BE INTENDED TO REMOVE HARDSHIPS ONLY OF THE ASSESSEE, NOT OF THE DEPARTMENT. IMPOSING A RETROSPECTIVE LEVY ON THE ASSESSEE WOULD HAVE CAUSE D UNDUE HARDSHIP AND FOR THAT REASON PARLIAMENT SPECIFICALLY CHOSE TO MAKE THE PROVISO EFFECTIVE FR OM JUNE 1, 2002. ITA NO. 493/JP/2017 ACIT, CENTRAL CIRCLE-2, JAIPUR VS GODAWARI ESTATES PVT.LTD. KOLKATA 58 WHERE A BENEFIT IS CONFERRED BY A LEGISLATION, THE RULE AGAINST A RETROSPECTIVE CONSTRUCTION IS DIFFER ENT. IN A LEGISLATION CONFERS A BENEFIT ON SOME PERSONS BUT WITHOUT INFLICTING A CORRESPONDING DETRIMENT ON SOM E OTHER PERSON OR ON THE PUBLIC GENERALLY, AND WHERE TO CONFER SUCH BENEFIT APPEARS TO HAVE BEEN THE LEGISL ATORS OBJECTS, THEN PRESUMPTION WOULD BE THAT SUCH A LEGISLATION, GIVING IT A PURPOSIVE CONSTRUCTION, WO ULD WARRANT IT TO BE GIVEN A RETROSPECTIVE EFFECT. THIS EXACTLY IS THE JUSTIFICATION TO TREAT PROCEDURAL PROVISION AS RETROSPECTIVE. WHERE A LAW IS ENACTED FOR THE BENEF IT OF COMMUNITY AS A WHOLE, EVEN IN THE ABSENCE OF A PROVISION THE STATUTE MAY BE HELD TO BE RETROSPECTI VE IN NATURE. THE HONBLE APEX COURT FURTHER NOTICED THAT CBDT CIRCULAR MENTIONED THAT PROVISO IS APPLICABLE FROM 1.6.2002. IN RESPECT OF 56(2)(VII B), CBDT VIDE CIRCULAR NO.3 OF 2012 DATED 12.06.2012 HAS ALSO MENTIONED THAT PROVISIONS OF 56(2)(VII B) WILL BE APPLICABLE FOR ASSESSMENT YEAR 2013-14 ONWARD. HENCE SHARE PREMIUM EVEN IF IN EXCESS OF FAIR MARKE T VALUE IS NOT TAXABLE U/S 56(1) FOR THE A.Y. 2011-12 . I) SECTION 56 IS NOT A CHARGING SECTION. THIS SECTI ON STARTS WITH THE FOLLOWING SENTENCE. INCOME OF EVERY KIND WHICH IS NOT TO BE EXCLUDED F ROM THE TOTAL INCOME UNDER THE ACT SHALL BE CHARGEABLE TO INCOME TAX UNDER THE HEAD. INCOME FROM OTHER SOURCES IF IT IS NOT CHARG EABLE TO INCOME TAX. UNDER ANY OF THE HEADS SPECIFIED IN SECTION 14, ITE MS A TO E. FOR AN INCOME TO BE TAXED U/S 56, IT HAS TO SATISFY THREE CONDITIONS. (A) IT SHALL BE CLASSIFIABLE AS INCOME AS PER THE C HARGING SECTION OF THE ACT. (B) IT SHALL NOT BE EXCLUDED FROM THE TOTAL INCOME (E.G. SECTION10). ITA NO. 493/JP/2017 ACIT, CENTRAL CIRCLE-2, JAIPUR VS GODAWARI ESTATES PVT.LTD. KOLKATA 59 (C) IT IS NOT CHARGEABLE TO TAX UNDER ANY OF THE SP ECIFIED HEADS IN SECTION 14, ITEMS A TO E. THE FINANCE BILL 2012 AS PRESENTED ON 16 TH MARCH 2012 INCLUDED A NEW CLAUSE (VIIB) U/S 56(2) OF I.T. ACT [342 ITR1(ST)]. NO PROPOSAL IN THE ORIGINAL BILL TO INSERT A NEW CLAUSE U/S 2(24). SUB SEQUENTLY NOTICE OF AMENDMENTS TO FINANCE BILL WAS GIVEN [SEE 343 ITR 3 7(ST)] AND AMENDMENTS ALSO MADE IN CHARGING SECTION 2(24) IN I NSERTING CLAUSE (XVI) IN 2(24) OF I.T. ACT W.E.F. 1.4.2013 READS AS UNDER: (XVI) ANY CONSIDERATION RECEIVED FOR ISSUE OF SHARE S AS EXCEEDS THE FAIR MARKET VALUE OF THE SHARES REFERRED TO IN CLAU SE (VIIB) OF SUBSECTION (2) OF 56. THE AMENDMENT MADE IN 2(24) IS ALSO APPLICABLE W.E. F. 01.04.2013 AND IT CANNOT BE APPLIED EARLIER TO 01-0 4-2013. J) THE INCOME FOR THE PURPOSE OF THE INCOME TAX ACT IS DEFINED IN SECTION 2(24) OF THE INCOME TAX ACT 1961. SECTION 2(24) OF THE INCOME ACT 1961 GIVES INCLUSIVE DEFINITION OF INCOME BUT THE I NCOME SHOULD BE LOOK INTO ITS NORMAL MEANING. THE INCOME WILL NOT INCLUD E CAPITAL RECEIPTS UNLESS IT IS SPECIFIED IN INCOME TAX ACT. THIS ARGU MENT FINDS SUPPORTS FROM THE AMENDMENT MADE BY FINANCE ACT 2012 W.E.F. 1.4.2013 IN SECTION 56(VIIB) AND CLAUSE (XVI) OF SECTION 2(24) OF INCOME TAX ACT, 1961 WHEREIN CERTAIN SHARE PREMIUMS WERE MADE TAXAB LE W.E.F. 01.04.2013. IF THE SAME WERE ALREADY TAXABLE U/S 56(1)/ 2(24) OF INCOME TAX ACT, 1961 THEN THERE WAS NO NEED TO MAKE THESE AMENDMENTS IN THE ACT. IN CASE THERE IS NO CHARGING PROVISION FOR SPECIFIC RECEIPT, THEN IT CANNOT BE TAXED. THE FIVE MEMBER BENCH OF THE APEX COURT IN CIT V VATIKA TOWNSHIP P LTD 367 ITR 4 66 (PB PG 19/CASE LAWS) . TAX LAWS ARE CLEARLY IN DEROGATION OF PERSONAL RIG HTS AND PROPERTY INTERESTS AND ARE, THEREFORE, SUBJECT TO S TRICT CONSTRUCTION AND ANY AMBIGUITY MUST BE RESOLVED AGA INST IMPOSITION OF THE TAX. IN BILLINGS V U.S 232 U.S.26 1 AT PAGE 265, 34 S.CT 421 (1914), THE SUPREME COURT CLEARLY ACKNOWLEDGED THIS BASIC AND LONG STANDING RULE OF S TATUTORY CONSTRUCTION. ITA NO. 493/JP/2017 ACIT, CENTRAL CIRCLE-2, JAIPUR VS GODAWARI ESTATES PVT.LTD. KOLKATA 60 TAX STATUTES SHOULD BE STRICTLY CONSTRUED, AND, IF ANY AMBIGUITY BE FOUND TO EXIST, IT MUST BE RESOLVED IN FAVOUR OF CITIZEN... IF A PERSON SOUGHT TO BE TAXED COMES WITHIN THE LETTER OF THE LAW HE MUST BE TAXED, HOWEVER GREAT T HE HARDSHIP MAY APPEAR TO THE JUDICIAL MIND TO BE. ON THE OTHER HAND, IF THE CROWN SEEKING TO RECOVER THE TAX, CANNOT BRING THE SUBJECT WITHIN THE LETTER OF THE LAW, THE SUBJECT IS FREE, HOWEVER APPARENTLY WITHIN THE SPRIT OF THE LAW THE CASE MIG HT OTHERWISE APPEAR TO BE AS OBSERVED IN PARTINGTON V ATTOMEY G ENERAL LR4HL100. SINCE FOR THE YEAR UNDER CONSIDERATION THERE WAS NO PROVISION IN INCOME TAX ACT, 1961 WHEREIN THE FAIR VALUE OF SHAR E COULD BE COMPUTED AND THE EXCESS SHARE PREMIUM COULD BE TAXE D, THEREFORE IN ABSENCE OF COMPUTATION PROVISION THE S AME CANNOT BE TAXED. THE RELIANCE IS ALSO PLACED ON FOLLOWING CASES: - I) THE HONBLE BOMBAY HIGH COURT IN THE CASE OF CADELL WVG. MILLS CO.(P) LTD. V CIT 249 ITR 265 (PB 22- 41/CASE LAWS) HAD AN OCCASION TO CONSIDER THE TAXABILITY OF A SUM RECEIVED IN RESPECT OF CONSIDER ATION OF TENANCY RIGHT. HONBLE HIGH COURT HELD THAT SURRENDER OF TENANCY RIGHT WHICH WAS NOT CHARGABLE TO TAX AS CAPITAL GAIN UNDER SECTION 45 COULD NOT BE T AXED AS CASUAL AND NON RECURRING RECEIPT UNDER SECTION 1 0(3) R.W. S. 56 UNDER THE HEAD INCOME FROM OTHER SOURCE S. II) THE HONBLE APEX COURT IN THE CASE OF CIT V D.P. SANDU BROS. CHEMBUR (P) LTD 273 ITR 1 (PB 42- 49/CASE LAWS) ALSO HOLD THAT AS PER 2(24)(VI) ONLY INCOME WHICH IS CHARGEABLE U/S 45 IS TO BE INCLUDED IN INCOME AND IF COMPUTATION PROVISION U/S 45 FAILS TH EN CHARGING PROVISIONS WILL FAIL. REF. TO CIT V B.C. SRINIVASA SETTY 128 ITR 294. III) THE HONBLE RAJASTHAN HIGH COURT IN THE CASE O F CIT V GOTAN LIME STONE KHANIJ UDYOG 269 ITR 399 ITA NO. 493/JP/2017 ACIT, CENTRAL CIRCLE-2, JAIPUR VS GODAWARI ESTATES PVT.LTD. KOLKATA 61 (PB 56-65/CASE LAWS) ALSO HELD THAT IN CASE COMPUTATION PROVISION U/S 48 COULD NOT BE APPLIED F OR WANT OF ASCERTAINABLE COST OF ACQUISITION, THEN CAP ITAL GAIN DOES NOT ARISE TO BE INCLUDED IN TOTAL INCOME ON ACCOUNT OF FAILURE OF APPLICABILITY OF COMPUTATION PROVISION. THE HONBLE HIGH COURT REFERRED TO DECIS ION OF BOMBAY HIGH COURT IN THE CASE OF CADELL WVG. MIL LS CO (P) LTD. (SUPRA). IV) THE HONBLE RAJASTHAN HIGH COURT IN THE CASE OF S. ZORASTER AND CO. V/S CIT 322 ITR 35 (PB 66- 68/CASE LAWS) HAD ON OCCASION TO CONSIDER THE TAXABILITY OF RECEIPT OF RS.20,000 RECEIVED BY VEND EE ON DEFAULT OF THE PURCHASER AS PER AGREEMENT FOR SELL OF PREM PRAKASH TALKIES. THE HONBLE HIGH COURT AFTER REFERRING TO THE DECISION OF APEX COURT IN THE CASE OF TRAVANCORE RUBBER AND TEA CO LTD. V CIT 243 ITR 158 HELD THAT SUCH RECEIPT IS CAPITAL RECEIPT. SUCH CAPITAL RECEIPT IS NOT TAXABLE IN VIEW OF JUDGMENT OF APEX COURT IN D.P. SANDU BROS. CHEMBUR (P) LTD (SUPRA). HENCE CAPITAL RECEIPT IS NOT TAXABLE UNLES S THERE IS CHARGING PROVISION FOR A CAPITAL RECEIPT AND COMPUTATION PROVISIONS ARE ALSO APPLICABLE. V) THE HONBLE BOMBAY HIGH COURT IN THE CASE OF VODAFONE INDIA SERVICES P. LTD. V/S UOI 368 ITR 1 (PB 76-107/CASE LAWS) HAD AN OCCASION TO CONSIDER THE DIFFERENCE BETWEEN THE SHARE PREMIUM DETERMINED BY REVENUE AND THE SHARE PREMIUM CHARGED AS DEEMED LOAN AND TAXING OF NATIONAL INTEREST ON DEEMED LOAN . THE HONBLE BOMBAY HIGH COURT HAS REFERRED TO THE DECISION OF APEX COURT IN THE CASE OF MATHURAM AGGARWAL V/S STATE OF MP (1999) 8 SCC 667 FOR THE TEST TO INTERPRET A TAXING STATUE WHICH READS AS UN DER: THE INTENTION OF THE LEGISLATURE IS A TAXATION ST ATUTE IS TO BE GATHERED FROM THE LANGUAGE OF THE PROVISIONS PARTICULARLY WHERE THE LANGUAGE IS PLAIN AND ITA NO. 493/JP/2017 ACIT, CENTRAL CIRCLE-2, JAIPUR VS GODAWARI ESTATES PVT.LTD. KOLKATA 62 UNAMBIGUOUS. IN A TAXING ACT IT IS NOT POSSIBLE TO ASSUME ANY INTENTION OR GOVERNING PURPOSE OF THE STATUTE MORE THAN WHAT IS STATED IN THE PLAIN LANGU AGE. IT IS NOT THE ECONOMIC RESULTS SOUGHT TO BE OBTAINED B Y MAKING THE PROVISION WHICH IS RELEVANT IN INTERPRET ING A FISCAL STATUTE. EQUALLY IMPERMISSIBLE IS AN INTERPR ETATION WHICH DOES NOT FLOW FROM THE PLAIN, UNAMBIGUOUS LANGUAGE OF THE STATUTE. WORDS CANNOT BE ADDED TO O R SUBSTITUTED SO AS TO GIVE A MEANING TO THE STATUTE WHICH WILL SERVE THE SPENT AND INTENTION OF THE LEGISLATU RE. THE STATUTE SHOULD CLEARLY AND UNAMBIGUOUSLY CONVEY THE THREE COMPONENTS OF THE TAX LAW I.E. SUBJECT OF THE TAX, THE PERSON WHO IS LIABLE TO PAY THE TAX AND THE RAT E AT WHICH THE TAX IS TO BE PAID. IF THERE IS ANY AMBIGU ITY REGARDING ANY OF THESE INGREDIENTS IN A TAXATION ST ATUTE THEN THERE IS NO TAX IN LAW. THEN IT IS FOR THE LEG ISLATURE TO DO THE NEEDFUL IN THE MATTER. HONBLE BOMBAY HIGH COURT IN THIS CASE (VODAFONE CASE) OBSERVED THAT ISSUE OF SHARES AT A PREMIUM IS ON CAPITAL ACCOUNT AND GIVES RISE TO NO INCOME. 56(1) PROVIDES THE INCOME OF EVERY KIND WHICH IS NOT EXCLUDED FROM THE TOTAL INCOME IS CHARGEABLE UNDER THE HEAD INCOME FROM OTHER SOURCES. HOWEVER BEFORE SECTION 56 OF THE ACT CAN BE APPLIED THERE MUST BE INCOME WHICH ARISES. IF THE RECEIPT IS CAPITAL THEN IT IS NOT INCOME. HENCE SHARE PREMIUM IS NOT AN INCOME. I) THE CBDT VIDE CIRCULAR/INSTRUCTION NO.2 DATED 29.01 .2015 HAS STATED AS UNDER [371 ITR 6(ST)]. IN REFERENCE TO THE ABOVE CITED SUBJECT, I AM DIRE CTED TO DRAW YOUR ATTENTION TO DECISION OF THE HIGH COURT OF BOM BAY IN THE CASE OF VODAFONE INDIA SERVICES PVT. LTD V UOI FOR THE ASSESSMENT YEAR 2009-10 (WP NO.871 OF 2014) WHEREIN THE COURT HAS HELD INTERALIA, THAT THE PREMIUM ON SHARE ISSUE WAS ON ACCOUNT OF A CAPITAL ACCOUNT TRANSACTION AND DOE S NOT GIVE RISE TO INCOME AND HENCE, NOT LIABLE TO TRANSFER PR ICING ADJUSTMENT. ITA NO. 493/JP/2017 ACIT, CENTRAL CIRCLE-2, JAIPUR VS GODAWARI ESTATES PVT.LTD. KOLKATA 63 IT IS HEREBY INFORMED THAT THE BOARD HAS ACCEPTED T HE DECISION OF THE HIGH COURT OF BOMBAY IN THE ABOVE M ENTIONED WRIT PETITION. IN VIEW OF THE ACCEPTANCE OF THE ABO VE JUDGMENT, IT IS DIRECTED THAT THE RATIO DECIDENDI OF THE JUDG MENT MUST BE ADHERED TO BY THE FIELD OFFICERS IN ALL CASES WHERE THE ISSUE IS INVOLVED. THIS MAY ALSO BE BROUGHT TO THE NOTICE OF THE ITAT, DRPS AND CIT (APPEALS). IN VIEW OF ABOVE INSTRUCTION, IT IS CLEAR THAT RATI O DECIDING OF TREATING OF SHARE PREMIUM AS CAPITAL RECEIPT IS BIN DING ON REVENUE AUTHORITIES. J. IN VIEW OF THE ABOVE SUBMISSIONS, IT IS CLEAR TH AT SHARE PREMIUM RECEIVED IS A CAPITAL RECEIPT AND CONSIDERATION REC EIVED CANNOT BE CONSIDERED AS INCOME FOR THE YEAR UNDER CONSIDERATI ON BY APPLYING THE PROVISIONS OF SECTION 56(1) OF INCOME TAX ACT. K. THE LD CIT(A) ISSUED SHOW CAUSE NOTICE TO ASSESS EE TO TAX THE SHARE CAPITAL UNDER SECTION 68 OF ITAX ACT AS AGAINST 56( 1) APPLIED BY LD AO BUT HE SATISFIED ABOUT THE INGREDIENTS OF SECTIO N 68 OF I.TAX ACT AND NO ADDITION WAS SUSTAINED FOR AY 2010-11 EVEN U /S 68 OF I.TAX ACT. THE LD AO ISSUED SEVERAL NOTICES TO ASSESSEE TO EX PLAIN THE SHARE CAPITAL. THE ASSESSEE SUBMITTED DETAILED REPLY AND DOCUMENTS FROM TIME TO TIME AS UNDER:- S.NO PARTICULARS COPY AT PB PG NO 1 COPY OF QUERY LETTER OF AO DATED 28.01.2015. 30-3 2 2 COPY OF REPLY OF ASSESSEE DATED 02.02.2015 33-36 3 COPY OF SHOW CAUSE NOTICE OF AO DATED 06.02.2015. 37-40 4 COPY OF REPLY OF ASSESSEE DATED 13.02.2015 41-44 5 COPIES OF DOCUMENTS FILED BEFORE AO ALONG WITH VARIOUS SUBMISSION IN RESPECT OF IDENTITY, CREDITWORTHINESS OF SHAREHOLDER AND GENUINENESS OF TRANSACTIONS 46-159 THE ASSESSEE HAS SUBMITTED SUFFICIENT DOCUMENTS BE FORE THE LD AO TO PROVE IDENTITY, CREDITWORTHINESS AND GENUINENESS OF SHARE CAPITAL AND LD AO SATISFIED THAT ADDITION UNDER SECTION 68 CANN OT BE MADE, SO HE APPLIED SECTION 56(1) OF ITAX ACT TO MAKE THE ADDIT ION. ITA NO. 493/JP/2017 ACIT, CENTRAL CIRCLE-2, JAIPUR VS GODAWARI ESTATES PVT.LTD. KOLKATA 64 THE ASSESSEE SUBMITTED DETAILED REPLY BEFORE LD C IT(A) VIDE LETTER DATED 16/08/2016 (COPY AT PB PG 160-213). LD CIT(A) WHEN SATISFIED THAT THE ADDITION U/S 56(1) CANT BE MADE , HE TRIED TO SUSTAIN THE ADDITION BY APPLYING THE PROVISIONS OF SECTION 68 OF INCOME TAX ACT. HE ISSUED A SHOW CAUSE NOTICE VIDE LETTER DATE D 09/03/2017 (COPY AT PB PG 214-260). THE ASSESSEE SUBMITTED DETAILED REPLY ON THE SHOW CAUSE NOTICE OF LD CIT(A) VIDE LETTER DATED 24-03-2 017 & 28/03/2017 ALONGWITH DOCUMENTS (COPY AT PB PG 261-347) . TO SUPPORT THAT SHAREHOLDERS WERE GENUINE AND CREDITWORTHINESS IS P ROVED, THE ASSESSEE HAS FILED ALL DETAILS, IN RESPECT OF INCORPORATION/ EXISTENCE OF INVESTORS AND DETAILS OF CHEQUES VIDE WHICH AMOUNTS WERE RECE IVED. THE CAPACITY OF SHAREHOLDERS IS VERIFIABLE FROM THE COPY OF THE BALANCE SHEET OF THE SHAREHOLDERS. THE SHAREHOLDERS HAVE FUNDS ON A PRIO R DATE FROM THE ALLOTMENT OF SHARES GIVEN BY THE ASSESSEE COMPANY A ND SUCH FUNDS WERE MORE THAN THE AMOUNT OF SHARE APPLICATION. L) DURING THE COURSE OF ASSESSMENT PROCEEDINGS THE ASSESSEE SUBMITTED THE FOLLOWING DOCUMENTS TO PROVE THEIR IDENTITY OF SHAREHOLDERS, CREDITWORTHINESS OF SHAREHOLDERS AND GENUINENESS OF TRANSACTION WITH THEM: - NAME OF SHAREHOLDER PARTICULARS OF DOCUMENTS SUBMITTED COPY AT PB PAGE DEBDARU VINIMAY PVT. LTD SHARE APPLICATION CONTAINING THE NAME/ADDRESS/PAN OF PARTY, DETAIL OF PAYMENT RECEIVED ETC. COPY OF BOARD RESOLUTION. COPY OF PAN CARD OF PARTY. COPY OF ACK. OF ITR OF AY 2010-11. COPY OF AUDIT REPORT AND AUDITED BALANCE SHEET ALON G WITH ANNEXURE OF 31.03.10. COPY OF BANK STATEMENT SHOWING THE ENTRY OF PAYMENT MADE TO ASSESSEE. DECLARATION OF SOURCE OF FUNDS WITH PARTY. COPY OF REGISTRATION CERTIFICATE OF ROC. 46 TO 47 48 49 50 51 TO 60 61 TO 62 63 64 ITA NO. 493/JP/2017 ACIT, CENTRAL CIRCLE-2, JAIPUR VS GODAWARI ESTATES PVT.LTD. KOLKATA 65 JAI PITRESHWAR VYAPAAR PVT. LTD SHARE APPLICATION CONTAINING THE NAME/ADDRESS/PAN OF PARTY, DETAIL OF PAYMENT RECEIVED ETC. COPY OF BOARD RESOLUTION. COPY OF PAN CARD OF PARTY. COPY OF BANK STATEMENT SHOWING THE ENTRY OF PAYMENT MADE TO ASSESSEE. COPY OF ACK. OF ITR OF AY 2010-11. COPY OF AUDIT REPORT AND AUDITED BALANCE SHEET ALON G WITH ANNEXURE OF 31.03.10. DECLARATION OF SOURCE OF FUNDS WITH PARTY. COPY OF REGISTRATION CERTIFICATE OF ROC. 65 66 67 68 69 70 TO 78 79 80 MAINAK VINCOM PVT. LTD SHARE APPLICATION CONTAINING THE NAME/ADDRESS/PAN OF PARTY, DETAIL OF PAYMENT RECEIVED ETC. COPY OF BOARD RESOLUTION. COPY OF PAN CARD OF PARTY. COPY OF ACK. OF ITR OF AY 2010-11. COPY OF AUDIT REPORT AND AUDITED BALANCE SHEET ALON G WITH ANNEXURE OF 31.03.10. DECLARATION OF SOURCE OF FUNDS WITH PARTY. COPY OF REGISTRATION CERTIFICATE OF ROC. 81 TO 84 85 86 87 88 TO 97 98 TO 99 100 PUSPA DEALERS PVT. LTD SHARE APPLICATION CONTAINING THE NAME/ADDRESS/PAN OF PARTY, DETAIL OF PAYMENT RECEIVED ETC. COPY OF BOARD RESOLUTION. COPY OF PAN CARD OF PARTY. COPY OF BANK STATEMENT SHOWING THE ENTRY OF PAYMENT MADE TO ASSESSEE. COPY OF ACK. OF ITR OF AY 2010-11. COPY OF AUDIT REPORT AND AUDITED BALANCE SHEET ALON G WITH ANNEXURE OF 31.03.10. DECLARATION OF SOURCE OF FUNDS WITH PARTY. COPY OF REGISTRATION CERTIFICATE OF ROC. 101 TO 104 105 106 107 TO 109 110 111 TO 120 121 TO 122 123 SNOWFALL COMMERCIAL PVT. LTD SHARE APPLICATION CONTAINING THE NAME/ADDRESS/PAN OF PARTY, DETAIL OF PAYMENT RECEIVED ETC. COPY OF BOARD RESOLUTION. COPY OF PAN CARD OF PARTY. COPY OF ACK. OF ITR OF AY 2010-11. COPY OF AUDIT REPORT AND AUDITED BALANCE SHEET ALON G WITH ANNEXURE OF 31.03.10. DECLARATION OF SOURCE OF FUNDS WITH PARTY. COPY OF REGISTRATION CERTIFICATE OF ROC. 124 TO 125 126 127 128 129 TO 138 139 140 ITA NO. 493/JP/2017 ACIT, CENTRAL CIRCLE-2, JAIPUR VS GODAWARI ESTATES PVT.LTD. KOLKATA 66 VIGNESH INFO SERVICES PVT. LTD SHARE APPLICATION CONTAINING THE NAME/ADDRESS/PAN OF PARTY, DETAIL OF PAYMENT RECEIVED ETC. COPY OF BOARD RESOLUTION. COPY OF PAN CARD OF PARTY. COPY OF BANK STATEMENT SHOWING THE ENTRY OF PAYMENT MADE TO ASSESSEE. COPY OF ACK. OF ITR OF AY 2010-11. COPY OF AUDIT REPORT AND AUDITED BALANCE SHEET ALON G WITH ANNEXURE OF 31.03.10. DECLARATION OF SOURCE OF FUNDS WITH PARTY. 141 TO 142 143 144 145 146 147 TO 158 159 M) ALL THE SHARE CAPITAL/SHARE APPLICATION WAS REC EIVED THROUGH A/C PAYEE CHEQUES AND VERIFIABLE FROM BANK STATEMENT OF ASSES SEE AS WELL AS BANK STATEMENT OF THE PARTY. THE ONUS U/S 68 OF THE ASSE SSEE IS TO PROVE THE IDENTITY, CAPACITY AND GENUINENESS OF THE TRANSACTI ONS HAS BEEN DISCHARGED WHICH MAY BE SEEN FROM THE FOLLOWINGS:- I) IDENTITY:- THE ASSESSEE PROVED THE IDENTITY OF ALL THE COMPA NIES BY FILING THE SHARE APPLICATION RECEIVED FROM THE PARTIES AND THE PARTIES ARE DULY IN EXISTENCE AND THE EXISTENCE OF THE PART IES CAN BE VERIFIED FROM THE OFFICIAL WEBSITE OF MCA. THE LD. AO ALSO NOT DOUBTED THE IDENTITY OF THE ABOVE NAMED COMPANIES. FURTHER THE NOTICE ISSUED U/S 133(6) OF INCOME TAX ACT, 1961 WA S DULY SERVED ON ALL THE COMPANIES WHICH ALSO PROVE THE ID ENTITY OF THE PARTIES. II) CREDITWORTHINESS ALL THE COMPANIES ARE INCOME TAX ASSESSEE AND DU LY FILING THE INCOME TAX RETURN AND BALANCE SHEETS. THERE IS SUFF ICIENT SOURCE OF FUNDS WITH ALL THE COMPANIES TO INVESTMEN T SHARE CAPITAL/SHARE APPLICATION IN THE ASSESSEE COMPANY. THE ASSESSEE SUBMITTED THE COPIES OF BANK ACCOUNT/DECLARATION OF SOURCE OF FUNDS WITH THEM OF INVESTOR COMPANIES. THE BANK STA TEMENT SHOWS THE HUGE TRANSACTION OF HIGH VALUE IN THE ACC OUNTS OF THE COMPANIES. THE CHART SHOWING THE AMOUNT INVESTED BY THE ABOVE NAMED COMPANIES IN ASSESSEE COMPANY VIZ A VIZ OWN FUNDS WITH THE INVESTOR COMPANY ARE AS UNDER: - NAME OF THE INVESTOR COMPANY AMOUNT INVESTED IN ASSESSEE COMPANY SHARE CAPITAL AND RESERVE & SURPLUS WITH INVESTOR SHARE CAPITAL AND RESERVE & SURPLUS WITH INVESTOR ITA NO. 493/JP/2017 ACIT, CENTRAL CIRCLE-2, JAIPUR VS GODAWARI ESTATES PVT.LTD. KOLKATA 67 COMPANIES AS ON 31.03.2010 COMPANIES AS ON 31.03.2009 DEBDARU VINIMAY PVT. LTD 25,00,000 16,26,16,947 14,20,06,978 JAI PITRESHWAR VYAPAAR PVT. LTD 15,00,000 56,65,000 1,00,000 MAINAK VINCOM PVT. LTD 50,00,000 15,41,21,655 15,41,13,205 PUSPA DEALERS PVT. LTD 50,00,000 13,16,36,604 13,16,22,036 SNOWFALL COMMERCIAL PVT. LTD 25,00,000 19,97,89,784 18,37,75,295 VIGNESH INFO SERVICES PVT. LTD 35,00,000 3,03,00,000 6,27,314 FROM THE ABOVE CHART IT IS CLEAR THAT ALL THE INVE STOR COMPANIES WERE HAVING THEIR OWN SHARE CAPITAL AND RESERVE & S URPLUS WHICH WERE MUCH MORE THAN TO THE AMOUNT INVESTED IN THE ASSESSEE COMPANY. FROM THE AUDITED P & L ACCOUNT OF THESE COMPANIES IT IS APPARENT THAT THESE COMPANIES HAD T RADING ACTIVITIES OF LARGE AMOUNT. THE ABOVE CHART SHOWS T HAT THE INVESTOR COMPANIES WERE HAVING THEIR OWN INDEPENDEN T FUNDS AND HAVING THEIR INDEPENDENT SOURCE TO INVEST IN TH E SHARES OF THE ASSESSEE COMPANY. APART FROM THE INVESTMENT MAD E IN THE SHARES OF ASSESSEE COMPANIES, THE INVESTOR COMPANIE S WERE ALSO HAVING INVESTMENTS IN SHARES OF OTHER COMPANIES OR LOANS & ADVANCES TO PARTIES WHICH IS MUCH MORE THAN TO THE AMOUNT INVESTED IN THE ASSESSEE COMPANY, THEREFORE FROM TH E BANK STATEMENT AS WELL AS FINANCIALS STATEMENTS OF THE I NVESTOR COMPANIES THEIR CREDITWORTHINESS IS DULY PROVED. III) GENUINENESS THE ASSESSEE SUBMITTED THE SHARE APPLICATION FORM RECEIVED FROM ABOVE COMPANIES AGAINST THE SHARE APPLICATION RECEIVED FROM THE COMPANIES. THE SHARE APPLICATION IS SUPPOR TED BY BOARD RESOLUTION PASSED IN THE INVESTOR COMPANIES. THE ASSESSEE COMPANY HAS ALLOTTED THE SHARES TO THE INV ESTOR COMPANIES. THE PROPER RETURNS WERE FILED BEFORE THE ROC AGAINST ALLOTMENT OF THE SHARES TO THESE COMPANIES. FURTHERMORE, THE DEPARTMENT HAS CARRIED OUT INTENSI VE SEARCH OPERATIONS OVER THE ASSESSEE AND NO ANY INCRIMINATI NG MATERIAL WAS FOUND TO SHOW THAT THE MONEY AGAINST THE SHARE ALLOTMENT WAS OWN MONEY OF THE COMPANY. SHARES CERTIFICATES W ERE ISSUED AGAINST THE ALLOTMENT OF THE SHARES TO THESE COMPANIES WERE NOT FOUND FROM THE POSSESSION OF THE ASSESSEE COMPANY OR ITS DIRECTOR OR EMPLOYEES. THIS FACT SHOWS THAT AFT ER ALLOTMENT OF SHARES BY THE APPELLANT COMPANY SHARE CERTIFICATES WERE DISPATCHED TO THE SUBSCRIBER COMPANIES. NO ANY ENTR Y IN BOOKS ITA NO. 493/JP/2017 ACIT, CENTRAL CIRCLE-2, JAIPUR VS GODAWARI ESTATES PVT.LTD. KOLKATA 68 OF ACCOUNT OR DOCUMENT WAS FOUND SHOWING PAYMENT OF CASH TO THESE INVESTOR COMPANIES AGAINST RECEIPT OF CHEQUES FROM THESE COMPANIES AGAINST ALLOTMENT OF SHARES. THEREFORE TH E GENUINENESS OF THE TRANSACTIONS CANNOT BE DOUBTED. N) ONUS TO PROVE SOURCE OF SOURCE FROM THE SHOW CAUSE NOTICE GIVEN BY LD CIT(A) AND EXCEL SHEET PROVIDED TO THE ASSESSEE SHOWING CHAIN OF SOURCE IT IS APPARENT THAT EVEN THERE IS NO CASH DEPOSIT TILL 4 TH STAGE OF CHANNEL SOURCE (COPY AT PB PG 669 TO 698/ AY 2012-13 FILED IN THE CASE OF M OTISONS ENTERTAINMENT (INDIA) PVT LTD ITA NO 485/JP/17) . IF THERE IS ANY CASH DEPOSITED AT 4 TH CHANNEL OR BEYOND TO THAT STAGE THEN THE INQUIRY SHOULD HAVE BEEN MADE FROM THE CONCERNS IN WHOSE BA NK A/C SUCH FUNDS FLOATED AND NECESSARY ACTION SHOULD HAVE BEEN TAKEN IN THE CASES OF SUCH CONCERN BUT THE ASSESSEE CANNOT BE HOLD RES PONSIBLE FOR CASH DEPOSIT IN SOME ACCOUNT AT 4 TH CHANNEL. UNDER SECTION 68 OF INCOME TAX ACT, 1961 THE ONUS OF THE ASSESSEE IS TO PROVE THE SOURCE OF CREDIT ENTRY AND THERE IS NO ONUS OF ASSESSEE TO PR OVE THE SOURCE OF SOURCE OR SOURCE OF ALL CHANNEL SOURCES. THE AMENDM ENT IN SECTION 68 OF I. TAX WAS MADE BY INSERTING THE FOLLOWING PR OVISO TO SECTION 68 W.E.F. 01/04/2013 WHICH REQUIRE TO PROVE SOURCE OF FINDS IN THE HANDS OF SHAREHOLDER COMPANY. THOUGH NOT REQUIRED BY LAW BUT STILL THE ASSESSEE HAS PROVED SOURCE OF FINDS IN THE HAND S OF SHAREHOLDER COMPANY. THE AMENDED SECTION EVEN DOES NOT REQUIRE TO PROVE SOURCE OF FUNDS IN THE HANDS OF 3 RD OR 4 TH STAGE. FURTHER THE AMENDMENT IN SECTION 68 OF I.TAX WAS MADE BY INSERTING THE FOLLOWING PROVISO TO SECTION 68 W.E.F . 01/04/2013 ' PROVIDED THAT WHERE THE ASSESSEE IS A COMPANY, (NOT BEING A COMPANY IN WHICH THE PUBLIC ARE SUBSTANTIALLY INTERESTED) A ND THE SUM SO CREDITED CONSISTS OF SHARE APPLICATION MONEY, SHARE CAPITAL, SHARE PREMIUM OR ANY SUCH AMOUNT BY WHATEVER NAME CALLED, ANY EXPLANATION OFFERED BY SUCH ASSESSEE-COMPANY SHALL BE DEEMED TO BE NOT SATISFACTORY, UNLESS (A) THE PERSON, BEING A RESIDENT IN WHOSE NAME SUC H CREDIT IS RECORDED IN THE BOOKS OF SUCH COMPANY ALSO OFFERS A N EXPLANATION ABOUT THE NATURE AND SOURCE OF SUCH SUM SO CREDITED; AND (B) SUCH EXPLANATION IN THE OPINION OF THE ASSESSI NG OFFICER AFORESAID HAS BEEN FOUND TO BE SATISFACTORY: ITA NO. 493/JP/2017 ACIT, CENTRAL CIRCLE-2, JAIPUR VS GODAWARI ESTATES PVT.LTD. KOLKATA 69 THE ABOVE PROVISO WAS INSERTED WITH EFFECT FROM THE 1ST DAY OF APRIL, 2013 SO IT CANNOT BE APPLIED RETROSPECTIVELY. THEREFORE AS PER LAW THE ASSESSEE HAS NO ONUS TO PROVE SOURCE OF SOURCE. HO NBLE MUMBAI HIGH COURT IN THE CASE OF COMMISSIONER OF INCOME TAX 1 VS M/S. GAGANDEEP INFRASTRUCTURE PVT.LTD HELD AS UNDER:- (E) WE FIND THAT THE PROVISO TO SECTION 68 OF THE ACT HAS BEEN INTRODUCED BY THE FINANCE ACT 2012 WITH EFFECT FROM 1ST APRIL, 2013. THUS IT WOULD BE EFFECTIVE ONLY FROM THE ASSESSMENT YEAR 201314 ONWARDS AND NOT FOR THE SUBJECT ASSESSMENT YEAR. IN FACT, BEFORE THE TRIBUNAL, IT WAS NOT EVEN THE CASE OF THE REVENUE T HAT SECTION 68 OF THE ACT AS IN FORCE DURING THE SUBJECT YEARS HAS TO BE READ/UNDERSTOOD AS THOUGH THE PROVISO ADDED SUBSEQUENTLY EFFECTIVE ONLY FROM 1ST APRIL, 2013 WAS ITS NORMAL MEANING. THE PARLIAMENT DID NOT INTRODUCE TO PROVISO TO SECTION 68 OF THE ACT WITH RETROSPECTIVE EFFECT NOR DOES THE PROVISO SO INTRODUCED STATES THAT IT W AS INTRODUCED FOR REMOVAL OF DOUBTS OR THAT IT IS DECLARATORY. THE REFORE IT IS NOT OPEN TO GIVE IT RETROSPECTIVE EFFECT, BY PROCEEDING ON THE BASIS THAT THE ADDITION OF THE PROVISO TO SECTION 68 OF THE AC T IS IMMATERIAL AND DOES NOT CHANGE THE INTERPRETATION OF SECTION 68 OF THE ACT BOTH BEFORE AND AFTER THE ADDING OF THE PROVISO. IN ANY VIEW OF THE MATTER THE THREE ESSENTIAL TESTS WHILE CONFIRMING THE PRE PROVISO SECTION 68 OF THE ACT LAID DOWN BY THE COURTS NAMELY THE GENUI NENESS OF THE TRANSACTION, IDENTITY AND THE CAPACITY OF THE INVES TOR HAVE ALL BEEN EXAMINED BY THE IMPUGNED ORDER OF THE TRIBUNAL AND ON FACTS IT WAS FOUND SATISFIED. FURTHER IT WAS A SUBMISSION ON BEH ALF OF THE REVENUE THAT SUCH LARGE AMOUNT OF SHARE PREMIUM GIVES RISE TO SUSPICION ON THE GENUINENESS (IDENTITY) OF THE SHAREHOLDERS I.E. THEY ARE BOGUS. THE APEX COURT IN LOVELY EXPORTS (P) LTD. (SUPRA) IN TH E CONTEXT TO THE PRE AMENDED SECTION 68 OF THE ACT HAS HELD THAT WHE RE THE REVENUE URGES THAT THE AMOUNT OF SHARE APPLICATION MONEY HA S BEEN RECEIVED FROM BOGUS SHAREHOLDERS THEN IT IS FOR THE INCOME T AX OFFICER TO PROCEED BY REOPENING THE ASSESSMENT OF SUCH SHAREHO LDERS AND ASSESSING THEM TO TAX IN ACCORDANCE WITH LAW. IT DO ES NOT ENTITLE THE REVENUE TO ADD THE SAME TO THE ASSESSEE'S INCOME AS UNEXPLAINED CASH CREDIT. (F) IN THE ABOVE CIRCUMSTANCES AND PARTICULARLY IN VIEW OF THE CONCURRENT FINDING OF FACT ARRIVED AT BY THE CIT(A ) AND THE TRIBUNAL, THE PROPOSED QUESTION OF LAW DOES NOT GIVE RISE TO ANY SUBSTANTIAL QUESTION OF LAW. THUS NOT ENTERTAINED. BUT IN THE CASE OF THE ASSESSEE THE FACT REMAINS TH AT THE ASSESSEE HAS ALSO PROVED SOURCE OF SOURCE BY SUBMITTING THE COPY OF BANK ITA NO. 493/JP/2017 ACIT, CENTRAL CIRCLE-2, JAIPUR VS GODAWARI ESTATES PVT.LTD. KOLKATA 70 STATEMENT OF THE SHARE APPLICANT COMPANY WHEREIN NO CASH DEPOSIT WAS MADE AGAINST THE SHARE APPLICATION MONEY. THEREFORE, THE ADDITION ON SHARE APPLICATION RECEI VED BY THE ASSESSEE CAN NEITHER BE MADE U/S 56(1) OF INCOME TAX ACT, 1 961 NOR U/S 68 OF INCOME TAX ACT, 1961. THE VARIOUS JUDGMENTS AND ARG UMENTS REGARDING ADDITION MADE U/S 56(1) OF INCOME TAX ACT , 1961 HAS BEEN SUBMITTED IN FORGOING PARAS. THE VARIOUS JUDGMENTS REGARDING ADDITION CANNOT BE MADE U/S 68 OF INCOME TAX ACT, 1961 ARE A S UNDER:- A) RAJASTHAN HIGH COURT: - (I) CIT-1, JAIPUR V/S M/S. ARL INFRATECH LTD, (PB P G 130 TO 143/CASE LAWS) WHEREIN HONBLE RAJASTHAN HIGH COURT HAS RECENTLY CONFIRMED THE FINDINGS OF HONBLE ITAT BY DECIDING THE APPEAL OF REVENUE IN D B ITA NO 24/2014 VIDE ORDER DATED 28/09/2016 REGARDIN G DELETION OF ADDITION OF SHARE CAPITAL MADE BY APPL YING THE PROVISIONS OF 68 OF INCOME TAX ACT, 1961. (II) COMMISSIONER OF INCOME-TAX, JAIPUR II VERSUS MORANI AUTOMOTIVES (P.) LTD. NO.- D.B. IT APPEAL NO. 619 OF 2011 DATED.- OCTOBER 23, 2013 (RAJASTHAN HIGH COURT) (PB PG 144 TO 149/CASE LAWS). THE FINDINGS OF HONBLE RAJASTHAN HIGH COURT WAS AS UNDER:- 10. THE POINTS AS SOUGHT TO BE RAISED BY THE APPELL ANT- REVENUE IN THE PRESENT CASE ARE ALL THE MATTERS REL ATING TO APPRECIATION OF EVIDENCE. THE RELEVANT FACTORS H AVE BEEN TAKEN INTO ACCOUNT AND CONSIDERED BY THE APPEL LATE AUTHORITIES BEFORE RETURNING THE FINDINGS IN FAVOUR OF THE ASSESSEE. EVEN AS REGARDS THE THREE REFERRED SHARE CAPITAL CONTRIBUTORS, IT IS NOTICED THAT THEY ARE E XISTING ASSESSEES HAVING PA NUMBERS; AND ARE BEING REGULARL Y ASSESSED TO TAX. THE APPELLATE AUTHORITIES CANNOT B E SAID TO HAVE ERRED IN DELETING THE ADDITIONS IN THEIR RE GARD TOO AT THE HANDS OF ASSESSEE-COMPANY. 11. ULTIMATELY, THE QUESTION AS TO WHETHER THE SOURCE OF INVESTMENT OR OF CREDIT HAS BEEN ITA NO. 493/JP/2017 ACIT, CENTRAL CIRCLE-2, JAIPUR VS GODAWARI ESTATES PVT.LTD. KOLKATA 71 SATISFACTORILY EXPLAINED OR NOT REMAINS WITHIN THE REALM OF APPRECIATION OF EVIDENCE; AND THE COURTS H AVE CONSISTENTLY HELD THAT SUCH A MATTER DOES NOT GIVE RISE TO ANY SUBSTANTIAL QUESTION OF LAW. IN THE CASE OF CIT V. ORISSA CORPN. (P.) LTD. [1986) 159 ITR 78 (SC), THE HON'BLE SUPREME COURT HELD AS UNDER:- '13. IN THIS CASE, THE ASSESSEE HAD GIVEN THE NAMES AND ADDRESSES OF THE ALLEGED CREDITORS. IT WA S IN THE KNOWLEDGE OF THE REVENUE THAT THE SAID CREDITOR S WERE INCOME-TAX ASSESSEES. THEIR INDEX NUMBERS WERE IN THE FILE OF THE REVENUE. THE REVENUE, APART FROM ISSUING NOTICES UNDER S. 131 AT THE INSTANCE OF THE ASSESSEE, DID NOT PURSUE THE MATTER FURTHER. THE REVENUE DID NOT EXAMINE THE SOURCE OF INCOME OF THE SAID ALLEGED CREDITORS TO FIND OUT WHETHER THEY WER E CREDIT-WORTHY OR WERE SUCH WHO COULD ADVANCE THE ALLEGED LOANS. THERE WAS NO EFFORT MADE TO PURSUE T HE SO-CALLED ALLEGED CREDITORS. IN THOSE CIRCUMSTANCES , THE ASSESSEE COULD NOT DO ANY THING FURTHER. IN THE PRE MISES, IF THE TRIBUNAL CAME TO THE CONCLUSION THAT THE ASS ESSEE HAS DISCHARGED THE BURDEN THAT LAY ON HIM, THEN IT COULD NOT BE SAID THAT SUCH A CONCLUSION WAS UNREASONABLE OR PERVERSE OR BASED ON NO EVIDENCE. IF THE CONCLUSION IS BASED ON SOME EVIDENCE ON WHICH A CONCLUSION COULD BE ARRIVED AT, NO QUESTION OF LAW AS SUCH ARISES.' 12. IN THE CASE OF CIT V. CHANDRA PRAKASH RANA [200 1] 48 DTR 271 (RAJ.), THIS COURT NOTICED SIMILAR NATUR E GROUNDS URGED ON BEHALF OF THE REVENUE AND FOUND TH E SAME NOT LEADING TO ANY SUBSTANTIAL QUESTION OF LAW . THIS COURT NOTICED, OBSERVED, AND HELD AS UNDER:- '7. LEARNED COUNSEL FOR THE APPELLANT (REVENUE) CONTENDED THAT FIRSTLY TRIBUNAL ERRED IN ACCEPTING THE EXPLANATION OFFERED BY ASSESSEE IN RELATION TO SOURCE OF INCOME. HIS SECOND SUBMISSION WAS THAT WHAT WAS OFFERED BY ASSESSEE WAS NO EXPLANATION AND HENCE SHOULD NOT HAVE BEEN ACCEPTED AND LASTLY LEAR NED COUNSEL MADE SINCERE ATTEMPT ON HIS PART AFTER TAKI NG US THROUGH FACTUAL SCENARIO OF THE EXPLANATION AND CONTENDED THAT IT CAN NEVER BE TAKEN AS SATISFACTOR Y EXPLANATION FOR DELETING THE ADDITION MADE BY AO. W E ITA NO. 493/JP/2017 ACIT, CENTRAL CIRCLE-2, JAIPUR VS GODAWARI ESTATES PVT.LTD. KOLKATA 72 DO NOT AGREE TO THIS SUBMISSION FOR MORE THAN ONE REASON. 8. IN THE FIRST PLACE, IT IS A PURE QUESTION OF FAC T, WHAT TO SAY QUESTION OF LAW, MUCH LESS SUBSTANTIAL QUESTION OF LAW. SECONDLY, THIS COURT CANNOT AGAIN IN THIS APPEAL UNDERTAKE THE EXAMINATION OF FACTUAL IS SUES NOR CAN DRAW FACTUAL INFERENCES ON THE BASIS OF EXPLANATION OFFERED BY ASSESSEE. THIRDLY, ONCE THE EXPLANATION IS ACCEPTED BY THE TWO APPELLATE CO URTS I.E. CIT(A) AND TRIBUNAL IN THIS CASE, THEN IN SUCH EVENT, A CONCURRENT FINDING RECORDED ON SUCH EXPLANATION B Y TWO APPELLATE COURTS IS BINDING ON THE HIGH COURT. 9. PERUSAL OF IMPUGNED FINDING QUOTED SUPRA WOULD GO TO SHOW THAT TRIBUNAL DID EXAMINE THE EXPLANATION OFFERED BY ASSESSEE IN DETAIL AND THEN RECORDED A FINDING FOR ITS ACCEPTANCE. SUCH FINDING WHEN CHALLENGED DOES NOT CONSTITUTE A SUBSTANTIAL QUESTION OF LAW WITHIN THE MEANING OF S. 260A IBID IN AN APPEAL ARISING OUT OF SUCH ORDER. 10. IN OUR OPINION, THEREFORE, ONCE THE CIT(A) AND TRIBUNAL ACCEPTED THE EXPLANATION OF ASSESSEE A ND ACCORDINGLY, DELETED CERTAIN ADDITIONS MADE BY AO HOLDING THE TRANSACTION OF SHARES TO BE GENUINE, TH EN IT WOULD NOT INVOLVE ANY SUBSTANTIAL ISSUE OF LAW AS S UCH. IN OTHER WORDS, THIS COURT IN ITS APPELLATE JURISDI CTION UNDER S. 260A IBID, WOULD NOT AGAIN DE NOVO HOLD YE T ANOTHER FACTUAL INQUIRY WITH A VIEW TO FIND OUT AS TO WHETHER EXPLANATION OFFERED BY ASSESSEE AND WHICH FOUND ACCEPTANCE TO THE CIT(A) AND TRIBUNAL IS GOOD OR BAD, OR WHETHER IT WAS RIGHTLY ACCEPTED, OR NOT. IT IS ONLY WHEN THE FACTUAL FINDING RECORDED HAD BEEN ENTIRELY DE HORS THE SUBJECT, OR THAT IT HAD BEEN BASED ON NO REASONING, OR BASED ON ABSURD REASONING TO THE EXTE NT THAT NO PRUDENT MAN OF AVERAGE JUDICIAL CAPACITY CO ULD EVER REACH TO SUCH CONCLUSION, OR THAT IT HAD BEEN FOUND AGAINST ANY PROVISION OF LAW, THEN A CASE FOR FORMULATION OF SUBSTANTIAL QUESTION OF LAW ON SUCH FINDING CAN BE SAID TO HAVE BEEN MADE OUT. ITA NO. 493/JP/2017 ACIT, CENTRAL CIRCLE-2, JAIPUR VS GODAWARI ESTATES PVT.LTD. KOLKATA 73 11. IN OUR VIEW, NO SUCH ERROR COULD BE NOTICED BY US IN THE IMPUGNED ORDER BECAUSE AS OBSERVED SUP RA, THE TRIBUNAL DID GO INTO THE DETAILS OF EXPLANATION OFFERED BY ASSESSEE AND THEN ACCEPTED THE EXPLANATI ON BY PLACING RELIANCE ON THE DOCUMENTS FILED BY ASSES SEE. AS A CONSEQUENCE THEREOF, THE ADDITIONS MADE BY AO CAME TO BE DELETED.' 13. IN CIT V. SHREE BARKHA SYNTHETICS LTD. [2004] 2 70 ITR 477 (RAJ.), IN A SIMILAR NATURE MATTER, THIS CO URT OBSERVED THAT THE TRIBUNAL HAVING FOUND THAT THE COMPANIES FROM WHICH THE SHARE APPLICATION MONEY HA D BEEN RECEIVED BY THE ASSESSEE-COMPANY WERE GENUINEL Y EXISTING AND THE IDENTITY OF THE INDIVIDUAL INVESTO RS WERE ALSO ESTABLISHED AND THEY HAD CONFIRMED THE FACT OF MAKING INVESTMENT, THE FINDING THAT ASSESSE E HAD DISCHARGED INITIAL BURDEN AND ADDITION UNDER SECTIO N 68 COULD NOT BE SUSTAINED, WAS ESSENTIALLY A FINDING O F FACT. THIS COURT SAID,- '19. A PERUSAL OF THE AFORESAID FINDING GOES TO SHOW THAT DELETION HAS BEEN MADE ON APPRECIATION OFEVIDENCE, WHICH WAS ON RECORD FINDIN G THAT THERE WAS EXISTENCE OF INVESTORS AND THEIR CONFIRMATION HAS BEEN OBTAINED, WERE FOUND TO BE SATISFACTORY. ALL THESE CONCLUSIONS ARE CONCLUSIONS OF FACT BASED ON MATERIAL ON RECORD AND , THEREFORE, CANNOT BE SAID TO BE PERVERSE SO AS TO G IVE RISE TO QUESTION OF LAW, WHICH MAY BE REQUIRED TO B E CONSIDERED IN THIS APPEAL UNDER S.260A OF THE IT AC T.' 14. THE RATIO OF THE DECISIONS AFORESAID DIRECTLY A PPLIES TO THE PRESENT CASE TOO. HEREIN, AS NOTICED, THE AP PELLATE AUTHORITIES HAVE RETURNED THE FINDINGS OF FACT IN FAVOUR OF THE ASSESSEE AFTER DUE APPRECIATION OF TH E EVIDENCE ON RECORD, ON RELEVANT CONSIDERATIONS, AND ON SOUND REASONINGS. THESE FINDINGS HAVE NEITHER BEEN SHOWN SUFFERING FROM ANY PERVERSITY NOR APPEAR ABSU RD NOR ARE OF SUCH NATURE THAT CANNOT BE REACHED AT AL L. THUS, NO CASE FOR INTERFERENCE IN THE FINDINGS OF T HE APPELLATE AUTHORITIES IS MADE OUT. ITA NO. 493/JP/2017 ACIT, CENTRAL CIRCLE-2, JAIPUR VS GODAWARI ESTATES PVT.LTD. KOLKATA 74 IN THE RESULT, THE APPEAL FAILS AND IS, THEREFORE, DISMISSED. (III) BARKHA SYNTHETICS LTD. VS. ASSTT. CIT (005) 197 CTR (RAJ) 432. (PB PG 150 TO 156/CASE LAWS) SUBSTANTIAL QUESTION OF LAWCASH CREDIT VIS-A-VIS S HARE APPLICATION MONEYTRIBUNAL FOUND THAT 6 OUT OF 7 COMPANIES FROM WHICH THE SHARE APPLICATION MONEY HA D BEEN RECEIVED WERE GENUINELY EXISTING AND NO ENQUIR Y WAS CONDUCTED IN RESPECT OF THE SOURCE OF SHARE APPLICATION MONEY AT THE TIME OF MAKING THE INVESTM ENT IN THE ASSESSEE-COMPANY AND THUS THE ASSESSEE HAS DISCHARGED ITS INITIAL BURDEN EXCEPT IN ONE CASEAS REGARDS INDIVIDUAL INVESTORS, THE TRIBUNAL FOUND TH AT IDENTITY OF 9 OUT OF 10 INVESTORS HAS BEEN ESTABLIS HED AND THEY HAVE CONFIRMED THE FACT OF MAKING INVESTME NT IN THE SHARES OF THE ASSESSEE-COMPANY AND NO FURTHE R ENQUIRY WAS DIRECTED BY THE AOTHUS, ADDITIONS WERE SUSTAINED ONLY IN RESPECT OF INVESTMENTS SAID TO HA VE BEEN MADE BY U, AN INDIVIDUAL INVESTOR AND BY W LTD ., FOR THE REASON THAT SUCH INVESTMENTS WERE NOT PROVE D FINDING OF THE TRIBUNAL IS ESSENTIALLY A FINDING OF FACT WHICH IS NOT VITIATED IN LAWNO SUBSTANTIAL QUESTIO N OF LAW ARISE FOR CONSIDERATION. (IV) CIT VS. FIRST POINT FINANCE LTD. (2006) 206 CT R (RAJ) 626 : (2006) 286 ITR 477 (RAJ HC). (PB PG 157 TO 162/CASE LAWS) INCOMECASH CREDITSHARE APPLICATION MONEY TRIBUNAL FOUND THAT THE INVESTORS ARE GENUINELY EXI STING PERSONS AND THEY HAVE FILED CONFIRMATIONS IN RESPEC T OF INVESTMENTS MADE BY THEM AND THEIR STATEMENTS WERE ALSO RECORDEDAMOUNT OF SHARE CAPITAL/SHARE APPLICATION MONEY COULD NOT BE TREATED AS UNEXPLAIN ED CASH CREDITS AND NO ADDITION COULD BE MADE UNDER S. 68NO SUBSTANTIAL QUESTION OF LAW ARISES. (V) COMMISSIONER OF INCOME TAX VS. BHAVAL SYNTHETICS ( RAJ HC) (2013) 84 DTR 0449 (RAJ) (PB PG 163 TO 165/CASE LAWS) HELD THAT EVEN IN CASE OF DOUBT ABOUT SUBSCRIBERS TO INCREASED SHARE CAPITAL, AMOUNT OF S HARE CAPITAL COULD NOT BE REGARDED AS UNDISCLOSED INCOME OF ITA NO. 493/JP/2017 ACIT, CENTRAL CIRCLE-2, JAIPUR VS GODAWARI ESTATES PVT.LTD. KOLKATA 75 COMPANYAMOUNT REFERABLE TO SHARE APPLICATION COULD NOT BE ATTRIBUTED TO ASSESSEE AND COULD NOT BE ASSE SSED IN ITS HANDSAPPEAL DISMISSED (VI) COMMISSIONER OF INCOME TAX VS. AKJ GRANITES (P ) LTD. ( RAJ HC) (2008) 301 ITR 0298 (PB PG 166 TO 168/CASE LAWS) HELD THAT IN RESPECT OF SHARE APPLICATIONS RECEIVED FROM DIFFERENT PLACES ACCOMPA NIED WITH SHARE APPLICATION MONEY, NO PRESUMPTION CAN BE DRAWN THAT SAME BELONG TO THE ASSESSEE AND CANNOT B E ASSESSED IN HIS HANDS AS HIS UNDISCLOSED INCOME UNL ESS SOME NEXUS IS ESTABLISHED THAT SHARE APPLICATION MO NEY FOR AUGMENTING THE INVESTMENT IN BUSINESS HAS FLOWN FROM ASSESSEES OWN MONEYNO SUBSTANTIAL QUESTION OF LAW ARISESBARKHA SYNTHETICS LTD. VS. ASSTT. CIT (2005) 197 CTR (RAJ) 432 FOLLOWED. (VII) COMMISSIONER OF INCOME-TAX, CENTRAL, JAIPUR VERSUS SUPERTECH DIAMOND TOOLS (PVT) LTD. (RAJ HC) D. B. IT APPEAL NO. 74 OF 2012 DATED: - 12 DECEMBER 2013. (PB PG 169 TO 174/CASE LAWS) (VIII) COMMISSIONER OF INCOME-TAX - I, JAIPUR VERSU S AL LALPURIA CONSTRUCTION (P.) LTD (RAJ HC) D.B. IT APPEAL NOS. 256 OF 2010 AND 26 & 39 OF 2011 DATED: - 25 FEBRUARY 2013. (PB PG 175 TO 176/CASE LAWS) (IX) COMMISSIONER OF INCOME-TAX, AJMER VERSUS HS. BUILDERS (P.) LTD. D.B. INCOME TAX (RAJ HC) APPEAL NO. 48 OF 2006 DATED: - 03 MARCH 2012. (PB PG 177 TO 185/CASE LAWS) (X) CIT VS JAI KUMAR BAKLIWAL (2014) 101 DTR (RAJ) 377 : (2014) 267 CTR (RAJ) 396 (PB PG 186 TO 192/CASE LAWS). NO LIABILITY TO PROVE SOURCE OF SOURCE. (XI) ARAVALI TRADING CO VS INCOME TAX OFFICER (2008 ) 8 DTR (RAJ) 199. (PB PG 193 TO 200/CASE LAWS) BURDEN OF THE ASSESSEE STANDS DISCHARGED WHEN THE IDENTITY OF THE CREDITORS IS ESTABLISHED AND HE CON FIRMS THE LOANS. ITA NO. 493/JP/2017 ACIT, CENTRAL CIRCLE-2, JAIPUR VS GODAWARI ESTATES PVT.LTD. KOLKATA 76 (XII) CIT VS HEERA LAL CHAGAN LAL TANK (2002) 157 I TR 281 (RAJ) (PB PG 201 TO 202/CASE LAWS) BURDEN OF THE ASSESSEE STANDS DISCHARGED WHEN THE IDENTITY OF THE CREDITORS IS ESTABLISHED AND HE CONFIRMS THE LOANS. B) ITAT JAIPUR/JODHPUR I) SHALIMAR BUILDCON (P) LTD. VS ITO (2011) 128 ITD 0396 (JAIPUR) (PB PG 214 TO 238/CASE LAWS) IN THIS CASE HONBLE ITAT JAIPUR BENCH HAS RELIED ON ITS OLD DECISION IN THE CASE OF HOTEL GAUDAVAN ITA NO. 1162 AND 1137/JP/2008 AND ADDITION ON ACCOUNT O F SHARE CAPITAL WAS DELETED. 28.5 ON IDENTICAL ISSUE, THE TRIBUNAL, JAIPUR BENCH IN THE CASE OF HOTEL GAUDAVAN (P) LTD. (SUPRA) HAS HEL D AS UNDER : '6. AS REGARDS THE ISSUE ON MERIT IN THE DEPARTMENT AL APPEAL, WE CONCUR WITH THE VIEWS OF THE LEARNED CIT (A) THAT THE AO HAS NOT CONSIDERED THE EXPLANATION OF T HE ASSESSEE. THE AMOUNT UNDER CONSIDERATION OF RS. 1.8 9 CRORE HAS BEEN RECEIVED BY THE ASSESSEE AS SHARE APPLICATION MONEY FROM M/S JALKANTA TECHNICAL & FINANCIAL SERVICE (P) LTD. (JTFSPL) AFTER A PROPER RESOLUTION PASSED BY THE BOARD OF DIRECTORS OF THE AFORESAID COMPANY THROUGH BANKING CHANNEL. M/S JTFSPL IS HAVING PERMANENT ACCOUNT AND FILING ITS RETURN OF INCOME REGULARLY. THE AO HAS NOWHERE MENTIONED THAT MONEY BELONGS TO THE ASSESSEE COMPAN Y AND THEREFORE, PROVISIONS OF S. 68 CANNOT BE INVOKE D. THE LEARNED CIT(A) HAS RIGHTLY RELIED UPON THE DECI SION OF HONBLE DELHI HIGH COURT IN THE CASE OF CIT VS. STELLER INVESTMENT LTD. (2000) 164 CTR (SC) 287 WHI CH HAS BEEN CONFIRMED BY THE HONBLE SUPREME COURT OF INDIA. THE LEARNED CIT(A) HAS ALSO RELIED UPON THE DECISION OF HONBLE JURISDICTIONAL HIGH COURT IN TH E CASE OF BARKHA SYNTHETICS LTD. VS. ASSTT. CIT (2005 ) 197 CTR (RAJ) 432 AND ALSO THE DECISION OF TRIBUNAL, JODHPUR BENCH IN THE CASE OF UMA POLYMERS (P) LTD. VS. DY. CIT (DT. 27TH FEB., 2006) [REPORTED AT (2006) 1 01 ITA NO. 493/JP/2017 ACIT, CENTRAL CIRCLE-2, JAIPUR VS GODAWARI ESTATES PVT.LTD. KOLKATA 77 TTJ (JD)(TM) 124ED.] WHERE IT HAS BEEN HELD THAT T HE ASSESSEE HAS TO PROVE THE EXISTENCE OF THE SHAREHOL DERS WHICH IN THE PRESENT CASE IS NOT UNDER DISPUTE. THEREFORE, THE ASSESSEE HAS DISCHARGED THE BURDEN A ND THEREFORE THE AO WAS NOT JUSTIFIED IN MAKING ANY ADDITION UNDER S. 68 OF THE ACT. THE LEARNED COUNSE L FOR THE ASSESSEE HAS REFERRED TO THE DECISION OF HONBL E SUPREME COURT OF INDIA IN THE CASE OF DIVINE LEASIN G & FINANCE LTD. DT. 21ST JAN., 2008, THE COPY OF WHICH IS PLACED ON RECORD WHERE IT HAS BEEN OBSERVED BY THE SUPREME COURT AS UNDER : CAN THE AMOUNT OF SHARE MONEY BE REGARDED AS UNDISCLOSED INCOME UNDER S. 68 OF IT ACT, 1961 ? WE FIND NO MERIT IN THIS SLP FOR THE SIMPLE REASON THA T IF THE SHARE APPLICATION MONEY IS RECEIVED BY THE ASSESSEE COMPANY FROM ALLEGED BOGUS SHAREHOLDERS, WHOSE NAMES ARE GIVEN TO THE AO, THEN THE DEPARTMENT IS F REE TO PROCEED TO REOPEN THEIR INDIVIDUAL ASSESSMENTS I N ACCORDANCE WITH LAW. THEREFORE, WE FIND NO INFIRMIT Y IN THE ORDER OF THE LEARNED CIT(A), WITH THE IMPUGNED JUDGMENT. THE SAID DECISION OF HONBLE SUPREME COURT OF INDIA HAS BEEN FOLLOWED BY THE TRIBUNAL, DELHI BENCH IN T HE CASE OF ITO VS. BHOR MAL DHANSI RAM LTD. IN ITA NO. 4670/DEL/2007, DT. 3RD MARCH, 2006. THE COPY OF THE SAID DECISION OF TRIBUNAL, DELHI BENCH IS PLACED ON RECORD. THE LEARNED COUNSEL FOR THE ASSESSEE SHRI H .M. SINGHVI, CHARTERED ACCOUNTANT HAS ALSO RELIED UPON THE DECISION OF HONBLE SUPREME COURT OF INDIA ON THE S AID ISSUE IN THE CASE OF CIT VS. LOVELY EXPORTS (P) LTD . (2008) 216 CTR (SC) 195 : (2008) 6 DTR (SC) 308 WHEREIN IT HAS BEEN HELD THAT IF THE SHARE APPLICAT ION MONEY IS RECEIVED BY THE ASSESSEE COMPANY FROM ALLEGED BOGUS SHAREHOLDERS, WHOSE NAMES ARE GIVEN T O THE AO, THEN THE DEPARTMENT IS FREE TO PROCEED TO REOPEN THEIR INDIVIDUAL ASSESSMENTS IN ACCORDANCE W ITH LAW, BUT IT CANNOT BE REGARDED AS UNDISCLOSED INCOM E OF ASSESSEE COMPANY.' 28.6 THE HONBLE DELHI HIGH COURT IN THE CASE OF CIT VS. DIVINE LEASING & FINANCE LTD. (SUPRA) HAD AN ITA NO. 493/JP/2017 ACIT, CENTRAL CIRCLE-2, JAIPUR VS GODAWARI ESTATES PVT.LTD. KOLKATA 78 OCCASION TO CONSIDER THE ADDITION ON ACCOUNT OF SHA RE APPLICATION MONEY. WE ARE REPRODUCING THE HELD PORT ION FROM THE DECISION OF HONBLE DELHI HIGH COURT AS MENTIONED IN (2007) 207 CTR (DEL) 38 (SUPRA). 'INCOMECASH CREDITSHARE APPLICATION MONEY BURDEN OF PROOF CAN SELDOM BE DISCHARGED TO THE HIL T BY THE ASSESSEEIF THE AO HARBOURS DOUBTS OF THE LEGITIMACY OF ANY SUBSCRIPTION HE IS EMPOWERED, NAY DUTY-BOUND, TO CARRY OUT THOROUGH INVESTIGATIONSBU T IF THE AO FAILS TO UNEARTH ANY WRONG OR ILLEGAL DEALIN GS, HE CANNOT OBDURATELY ADHERE TO HIS SUSPICIONS AND T REAT THE SUBSCRIBED CAPITAL AS THE UNDISCLOSED INCOME OF THE COMPANYIF RELEVANT DETAILS OF ADDRESS AND IDENTITY OF THE SUBSCRIBERS ARE FURNISHED TO THE DEPARTMENT ALO NG WITH COPIES OF THE SHAREHOLDERS REGISTERS, SHARE APPLICATION FORMS, SHARE TRANSFER REGISTER ETC. IT WOULD CONSTITUTE ACCEPTABLE PROOF OR EXPLANATION BY THE ASSESSEEDEPARTMENT WOULD NOT BE JUSTIFIED IN DRAWI NG AN ADVERSE INFERENCE ONLY BECAUSE THE CREDITOR/SUBSCRIBER FAILS OR NEGLECTS TO RESPOND TO ITS NOTICESTRIBUNAL HAS NOTED THAT THE ASSESSEE COMPAN Y IS A PUBLIC LIMITED COMPANY WHICH HAD RECEIVED SUBSCRIPTIONS TO THE PUBLIC ISSUE THROUGH BANKING CHANNELS AND THE SHARES WERE ALLOTTED IN CONSONANCE WITH THE PROVISIONS OF SECURITIES CONTRACT (REGULAT ION) ACT, 1956, AS ALSO THE RULES AND REGULATIONS OF DEL HI STOCK EXCHANGECOMPLETE DETAILS WERE FURNISHED TRIBUNAL HAS FURTHER FOUND THAT THE AO HAS NOT BROU GHT ANY POSITIVE MATERIAL OR EVIDENCE WHICH WOULD INDIC ATE THAT THE SHAREHOLDERS WERE BENAMIDARS OR FICTITIOUS PERSONS OR THAT ANY PART OF THE SHARE CAPITAL REPRE SENTED COMPANYS OWN INCOME FROM UNDISCLOSED SOURCES.' 28.7 THE HONBLE APEX COURT IN THE CASE OF CIT VS. LOVELY EXPORTS (P) LTD. (SUPRA) HELD THAT IF THE SH ARE CAPITAL MONEY IS RECEIVED BY THE ASSESSEE COMPANY F ROM ALLEGED BOGUS SHAREHOLDERS THEN THE DEPARTMENT IS F REE TO PROCEED TO REOPEN THE INDIVIDUAL ASSESSMENTS OF SUCH SHAREHOLDERS IN ACCORDANCE WITH LAW. SUCH SHARE APPLICATION MONEY CANNOT BE REGARDED AS UNDISCLOSED INCOME OF THE ASSESSEE COMPANY. ITA NO. 493/JP/2017 ACIT, CENTRAL CIRCLE-2, JAIPUR VS GODAWARI ESTATES PVT.LTD. KOLKATA 79 28.8 THE HONBLE HIGH COURT IN THE CASE OF FIRST POINT FINANCE LTD. (SUPRA) HELD THAT BURDEN OF PROOF ON T HE ASSESSEE COMPANY LIES TO THE EXTENT OF MAKING OUT A CASE THAT INVESTOR EXISTS AND THEREAFTER IT IS NOT FOR T HE ASSESSEE TO FURTHER PROVE WHERE THEY HAVE BROUGHT MONEY FROM TO INVEST WITH IT. 28.9 THE HONBLE DELHI HIGH COURT IN THE CASE OF CIT VS. UNITED BIO-TECH (P) LTD. 2010 TIOL-533-HC-DEL HELD THAT IN CASE THE IDENTITY OF THE SHARE APPLICA NTS HAS BEEN ESTABLISHED AND IT IS FOUND THAT THE SAID APPL ICANTS ARE CORPORATE ASSESSEES WHO ARE ASSESSED TO TAX WIT H IT DEPARTMENT THEN THERE IS NO CASE OF ANY SUBSTANTIAL QUESTION OF LAW. IN THE INSTANT CASE, THE SHARE APP LICANTS ARE CORPORATE ASSESSEES. 28.10 THE HONBLE DELHI HIGH COURT IN THE CASE OF CIT VS. SAMIR BIO-TECH (P) LTD. (SUPRA) HELD THAT IF INVESTMENTS HAVE BEEN SHOWN BY THE SHARE APPLICANTS IN THEIR AUDITED BALANCE SHEET THEN THE ADDITION CANNO T BE MADE UNDER S. 68 OF THE ACT. 28.11 IN VIEW OF THE LEGAL POSITION AS DISCUSSED ABOVE, THE AO WAS NOT JUSTIFIED IN MAKING THE ADDITION OF RS. 1.10 CRORE WITHOUT BRINGING ON RECORD ANY MATERIAL FOR THE ADDITION. SIMPLY ON THE BASIS OF INFORMATION WH ICH IS NOT SUBSTANTIATED IN THE COURSE OF ASSESSMENT PROCEEDINGS AGAINST THE ASSESSEE, THE AO COULD NOT HAVE ADDED THE AMOUNT. (II) THE HONBLE ITAT, JAIPUR BENCH, JAIPUR IN ITS JUDGMENT THE CASE OF M/S JADAU JEWELLERS & MANUFACTURERS PVT. LTD., B-1, TRIMUTRI CIRCLE, GOVIND MARG, JAIPUR IN ITA NO. 686/JP/2014 DATED 14.12.2015 (PB PG 239 TO 267/CASE LAWS) GAVE THE FOLLOWING FINDINGS:- .6.1 ON FACTS ALSO, THE ASSESSEE HAS PRODUCED BEF ORE THE ASSESSING OFFICER COPY OF SHARE APPLICATION, CONFIRMATION OF THE CASH CREDITORS, COPY OF PAN, CO PY OF BOARD RESOLUTION, COPY OF DIRECTORS REPORT, AUDITO RS REPORT, COPY OF BALANCE SHEET, COPY OF P&L ACCOUNT, COPY OF BANK ACCOUNT IN ALL THE CASES TO PROVE THE ITA NO. 493/JP/2017 ACIT, CENTRAL CIRCLE-2, JAIPUR VS GODAWARI ESTATES PVT.LTD. KOLKATA 80 IDENTITY, GENUINENESS AND CREDITWORTHINESS OF THE C ASH CREDITORS. THE LD ASSESSING OFFICER MADE ADDITION O N THE BASIS OF INVESTIGATION CONDUCTED BY THE ITO, INVESTIGATION WING, KOLKATA BUT THE LD ASSESSING OF FICER OF THE ASSESSEE HAS NOT CLARIFIED WHAT INQUIRY HAD BEEN CONDUCTED AND WHAT EVIDENCES COLLECTED WHICH GOES AGAINST THE ASSESSEE. THE NOTICE U/S 131 ISSUED BY THE ITO, INVESTIGATION WING, KOLKATA WERE SERVED IN CAS E OF VIDYA AGENCIES PVT. LTD. AND SHIVARPAN MERCANTILES PVT. LTD., BUT COMPLIANCE COULD NOT BE MADE ON THE GIVEN DATE BECAUSE CONCERNED OFFICER WAS ON LEAVE. IN CASE OF MIDDLETON GOODS PVT. LTD. AND LACTRODRYER MARKETING PVT. LTD., NOTICES WERE SERVED ON THE ASS ESSEE AND IN COMPLIANCE TO THE NOTICE, THE PARTY SUBMITTE D ALL THE DOCUMENTS IN THE IT OFFICE. THE CASE LAW REFERR ED BY THE LD CIT(A) I.E. DECISION OF HONBLE DELHI HIGH C OURT IN THE CASE OF NIPUN BUILDERS AND DEVELOPERS PVT. L TD. VS. CIT AND VIJAY POWER GENERATOR LTD. VS CIT (SUPR A) ARE NOT SQUARELY APPLICABLE ON THE FACTS OF THE CAS E AS THERE WAS SHORT TIME AVAILABLE WITH THE ASSESSING OFFICER AS WELL AS INVESTIGATION WING OF KOLKATA. T HE COPY OF INQUIRY HAS NOT BEEN PROVIDED BY THE ASSESS ING OFFICER TO THE ASSESSEE. AS PER FINDINGS OF THE HON 'BLE DELHI HIGH COURT IN THE CASE NIPUN BUILDERS AND DEVELOPERS PVT. LTD. VS. CIT (SUPRA), THE INVESTIGA TION OFFICER AT KOLKATA HAD NOT DEPUTED INSPECTOR TO ENQ UIRE THE WHEREABOUTS OF THE COMPANY. THE CASE LAWS REFER RED BY THE ASSESSEE ARE SQUARELY APPLICABLE ON THE FACT S AND CIRCUMSTANCES OF THE APPELLANTS CASE, THEREFORE, W E REVERSE THE ORDER OF THE LD CIT(A) ON TECHNICAL GRO UND AS WELL AS ON MERIT ALSO. (III) UMA POLYMER (P) LTD. , 101 TTJ 124, JODHPUR (PB PG 282 TO 318/CASE LAWS) INCOMECASH CREDIT SHARE APPLICATION MONEYIN RESPECT OF SHARE CAPITAL MONEY, THE ASSESSEE-COMPANY HAS TO PROVE ONLY THE EXISTENCE OF THE PERSON IN WHOSE NAME SHARE APPLICA TION IS RECEIVEDNO FURTHER BURDEN IS CAST ON THE ASSESS EE TO ITA NO. 493/JP/2017 ACIT, CENTRAL CIRCLE-2, JAIPUR VS GODAWARI ESTATES PVT.LTD. KOLKATA 81 PROVE WHETHER THAT PERSON HIMSELF HAS INVESTED THE MONEY OR SOME OTHER PERSON HAS MADE THE INVESTMENT IN HIS NAMEBURDEN TO PROVE THAT THE MONEY DID NOT BELONG TO HIM BUT TO SOMEBODY ELSE IS ON THE REVENUEDISTINCTION BETWEEN A PUBLIC COMPANY AND A PRIVATE COMPANY IS NOT VERY MATERIAL FOR THIS PURPO SE AO TREATED THE INVESTMENTS MADE BY TEN SHAREHOLDERS IN THE ASSESSEE-COMPANY AS BOGUS AND MADE ADDITION UNDER S. 68 NOT JUSTIFIEDIN ALL THE CASES EXCEPT THAT OF V, AO HAD OBTAINED THE BANK STATEMENTS OF THE SHAREHOLDERS WHICH CLEARLY SHOW THAT THE ACCOUNTS W ERE REGULARLY MAINTAINED AND THE SHAREHOLDERS HAD MADE DEPOSITSFURTHER, THE SHAREHOLDERS ARE ALSO ASSESSE D TO TAXSIMPLY BECAUSE SCRUTINY ASSESSMENTS WERE NOT MADE IN THE CASE OF SHAREHOLDERS, SUCH ASSESSMENTS COULD NOT BE MADE IN THE COURSE OF ASSESSMENT OF TH E ASSESSEEHAVING REGARD TO THE INFORMATION COLLECTED BY THE AO FROM THE BANKS, IDENTITY OF THE SHAREHOLD ERS WAS FULLY ESTABLISHEDIF ANY SHAREHOLDER IS FOUND T O HAVE MADE UNEXPLAINED INVESTMENT, THEN ADDITION OF SUCH INVESTMENT IS REQUIRED TO BE MADE IN THE HANDS OF THE SHAREHOLDER AND NOT IN THE ACCOUNT OF THE ASSES SEE U HAD INVESTED IN THE SHARE CAPITAL THROUGH CHEQUE EXCEPT FOR A SMALL SUM WHICH WAS RETURNED TO HERHE R BANK ACCOUNT SHOWS SEVERAL ENTRIES, BOTH CREDIT AND DEBIT, WHICH HAVE NO RELATION WITH THE AMOUNT INVES TED WITH THE ASSESSEE-COMPANYMERELY BECAUSE SHE HAS NOT SUBMITTED HER RETURNS AFTER THE ASST. YR. 1984- 85, IT CANNOT BE SAID THAT SHE WAS NOT ASSESSED TO TAXTHO UGH V HAS NOT BEEN SHOWN TO BE ASSESSED TO TAX, HE HAD MADE MAJOR PART OF INVESTMENTS TOWARDS SHARE CAPITA L THROUGH CHEQUES AND HIS IDENTITY IS NOT DOUBTED ACCORDINGLY, SHARE CAPITAL ADVANCED BY U AND V IS A LSO TO BE ACCEPTED AS GENUINETHEREFORE, NO ADDITION OF SHARE CAPITAL MONEY COULD BE MADE IN THE HANDS OF T HE ASSESSEE-COMPANY. ITA NO. 493/JP/2017 ACIT, CENTRAL CIRCLE-2, JAIPUR VS GODAWARI ESTATES PVT.LTD. KOLKATA 82 (IV) THE LD. JAIPUR TRIBUNAL IN THE CASE OF DCIT V M/S KAMDHENU STEEL AND ALLOYS LTD. 2014-TIOL-709- ITAT - (PB PG 203 TO 213/CASE LAWS) CASE RELATES TO SEARCH AND ISSUE OF SHARES ON PREMIUM. HELD THAT T HE ASSESSEE HAD SUBMITTED THE PARTICULARS OF REGISTRAT ION OF THE APPLICANT COMPANY, THE CONFIRMATION FROM THE SH ARE APPLICANTS, BANK ACCOUNT DETAILS FROM WHICH PAYMENT THROUGH ACCOUNT PAYEE CHEQUES, SO THE ASSESSEE HAD DISCHARGED ITS INITIALLY ONUS. (V) M/S. ARL INFRATECH LTD. VS. THE ACIT ITA NO. 619/JP/2013 (PB PG 268 TO 281/CASE LAWS) ITAT JAIPUR. THE FINDINGS OF HONBLE ITAT WAS AS UNDER:- BEFORE, WE PROCEED TO DECIDE THE ISSUE ON MERITS, W E WOULD LIKE TO DISCUSS THE SCHEME OF THE ACT AND PRE CEDENTS ON THE ISSUE INVOLVED IN THIS APPEAL AS UNDER:- IN CASES WHERE SHARE APPLICATION MONEY IS FOUND R ECORDED IN THE BOOKS OF AN ASSESSEE WHICH MAY REPRESENT CRE DIT IN THE BOOKS AND THE SHARE APPLICANT IS IDENTIFIED, THAT A MOUNT CANNOT BE ADDED IN THE ASSESSEE'S HANDS U/S 68 OF T HE ACT. THE HON'BLE RAJASTHAN HIGH COURT HAS REPEATEDLY REI TERATED THE ABOVE LEGAL POSITION. THESE CASES ARE: (I) CIT VS. SHREE BARKHA SYNTHETICS LTD. 182 CTR 17 5 (RAJ.) (II) BARKHA SYNTHETICS LTD. VS. ACIT (2005), 197 CT R 432 (RAJ).13 IN COMING TO THE ABOVE CONCLUSION, THE HON'BLE JURISDICTIONAL HIGH COURT HAS CONSIDERED AT LENGTH THE RELEVANT DECISIONS ON THE ISSUE LIKE CIT VS. STELLE R INVESTMENT LTD. (2000) 164 CTR (SC) 287 = 251 ITR 263 (SC) WHI CH HAS CONFIRMED THE DECISION OF HON'BLE DELHI HIGH COURT REPORTED IN (1992) 192 ITR 287. THE HON'BLE COURT HAS GONE T O THE EXTENT OF STATING THAT EVEN IF IT BE ASSUMED THAT T HE SUBSCRIBER TO THE SHARE CAPITAL ARE NOT GENUINE, NEVERTHELESS, UNDER NO CIRCUMSTANCES CAN THE AMOUNT OF SHARE CAPITAL BE RE GARDED AS UNDISCLOSED INCOME OF THE ASSESSEE. IN THIS CASE , THE SHARE SUBSCRIBER IS IDENTIFIED. THERE CAN BE NO DISPUTE R EGARDING THE ABOVE STATED LEGAL POSITION. THE FOLLOWING DECI SIONS ALSO LAY DOWN THE SAME RATIO:- (I) CIT VS. LOVELY EXPORTS (P) LTD. (2008) 6 DTR 30 8 (SC) (II) CIT VS. DOLPHIN CONPACK LTD. (2006) 283 ITR 19 0 (DEL.) (III) CIT VS. GUJARAT HEAVY CHEMICALS LTD. (202) 25 6 ITR 795(SC) ITA NO. 493/JP/2017 ACIT, CENTRAL CIRCLE-2, JAIPUR VS GODAWARI ESTATES PVT.LTD. KOLKATA 83 (IV) CIT VS. KWICK TRAVELS (1992) 199 ITR (ST.) 85 (SC) THIS ISSUE HAS BEEN DEALT AT LENGTH BY THE THIRD ME MBER IN THE CASE OF UMA POLYMERS (P) LTD. VS. DCIT, (2006) 101 TTJ (JD.) T.M. 126 = (2006) 284 ITR (AT) 1 JODHPUR. 2.6 ADVERTING, THE FACTS OF THE GIVEN CASE, WE ARE OF THE CONSIDERED OPINION THAT ALL THE SHARE APPLICANTS ST AND IDENTIFIED. THE ASSESSEE HAS PROVIDED PANS OF THE S HARE APPLICANTS. THE MODE OF PAYMENT HAS ALSO BEEN MADE EXPLAINED. THERE IS NO DIRECT OR INDIRECT RELATION BETWEEN THE ASSESSEE COMPANY AND THE SHARE APPLICANTS. THE STAT EMENTS RECORDED DURING SURVEY HAS GOT NO EVIDENTIARY VALUE AND THE LAW IS VERY MUCH SETTLED ON THIS ISSUE. IN ANY CASE , EVEN UNDER THE PROVISIONS OF SECTION 68 OF THE ACT, THE ASSESSEE CANNOT BE FORCED TO PROVE THE SOURCE OF THE SOURCE. THE LAW ON THIS SUBJECT IS ALSO SETTLED BY NUMEROUS DECISIO NS. THE ALLEGED REPORT OF THE INSPECTOR OF THE DEPARTMENT W HO IS STATED TO HAVE VISITED AT THE GIVEN ADDRESSES OF TH E SHARE APPLICANTS WAS NEVER PUT OR CONFRONTED TO THE ASSES SEE. THE CUMULATIVE EFFECTS OF THESE REASONS IS THAT THE IMP UGNED ADDITION CANNOT BE ADDED IN THE HANDS OF THE ASSESS EE COMPANY. ACCORDINGLY, WE ORDER TO DELETE THE ENTIRE ADDITIONS AND ALLOW THE APPEAL OF THE ASSESSEE. 3.0 IN THE RESULT, THE APPEAL OF THE ASSESSEE STAND S ALLOWED. THE DEPARTMENT FILED APPEAL BEFORE HONBLE RAJASTHAN HIGH COURT. HONBLE RAJASTHAN HIGH COURT CONFIRMED THE FINDINGS OF HONBLE ITAT BY DECIDING THE APPEAL OF REVENUE IN DB ITA NO 24/2014 VIDE ORDER DATED 28/09/2016 (C) OTHER HIGH COURTS (I) 2014 (8) TMI 605 - MADRAS HIGH COURT THE COMMISSIONER OF INCOME TAX VERSUS PRANAV FOUNDATIONS LTD. T. C. (A). NO. 262 OF 2014 DATED - 12 AUGUST 2014 (PB PG 343 TO 346/CASE LAWS) ADDITION U/S 68 SHARE APPLICATION AND SHARE PREMI UM AMOUNT CREDITED BUT NOT PROVED - WHETHER THE TRIBUN AL WAS RIGHT IN UPHOLDING THE ORDER OF THE CIT(A) WHO DELETED THE ADDITION MADE U/S 68, BEING THE SHARE APPLICATION MONEY AND SHARE PREMIUM AMOUNT CREDITED BY THE ASSESSEE WHICH WAS NOT PROVED HELD THAT:- FOLLOWING THE DECISION IN CIT V. LOVELY EXPORTS (P) LTD. [2008 (1) TMI 575 - SUPREME COURT OF ITA NO. 493/JP/2017 ACIT, CENTRAL CIRCLE-2, JAIPUR VS GODAWARI ESTATES PVT.LTD. KOLKATA 84 INDIA] - ALL THE FOUR PARTIES, WHO ARE SUBSCRIBERS OF THE SHARES, ARE LIMITED COMPANIES AND ENQUIRIES WERE MA DE AND RECEIVED FROM THE FOUR COMPANIES AND ALL THE COMPANIES ACCEPTED THEIR INVESTMENT - THE ASSESSEE HAS CATEGORICALLY ESTABLISHED THE NATURE AND SOURCE OF THE SUM AND DISCHARGED THE ONUS THAT LIES ON IT IN TERM S OF SECTION 68 OF THE ACT - WHEN THE NATURE AND SOURCE OF THE AMOUNT SO INVESTED IS KNOWN, IT CANNOT BE SAID TO BE UNDISCLOSED INCOME - THE ADDITION OF SUCH SUBSCRIPT IONS AS UNEXPLAINED CREDIT UNDER SECTION 68 OF THE ACT I S UNWARRANTED DECIDED AGAINST REVENUE. (II) CIT VS. ILLAC INVESTMENT (P) LTD. (2007) 207 C TR (DEL) 687; (PB PG 341 TO 342/CASE LAWS) ASSESSEE- COMPANY HAS SATISFACTORILY ESTABLISHED THE IDENTITY OF THE SHARE SUBSCRIBERS AND DELETED THE ADDITION UNDE R S. 68, NO SUBSTANTIAL QUESTION OF LAW ARISES FOR CONSIDERATION. (III) CIT VS. DIVINE LEASING & FINANCE LTD. (2007) 207 CTR (DEL) 38; (PB PG 321 TO 340/CASE LAWS) INCOMECASH CREDITSHARE APPLICATION MONEY BURDEN OF PROOF CAN SELDOM BE DISCHARGED TO THE HIL T BY THE ASSESSEEIF THE AO HARBOURS DOUBTS OF THE LEGITIMACY OF ANY SUBSCRIPTION HE IS EMPOWERED, NAY DUTYBOUND, TO CARRYOUT THOROUGH INVESTIGATIONSBUT IF THE AO FAILS TO UNEARTH ANY WRONG OR ILLEGAL DEALIN GS, HE CANNOT OBDURATELY ADHERE TO HIS SUSPICIONS AND TREA T THE SUBSCRIBED CAPITAL AS THE UNDISCLOSED INCOME OF THE COMPANYIF RELEVANT DETAILS OF ADDRESS AND IDENTITY OF THE SUBSCRIBERS ARE FURNISHED TO THE DEPARTMENT ALO NG WITH COPIES OF THE SHAREHOLDERS REGISTER, SHARE APPLICATION FORMS, SHARE TRANSFER REGISTER, ETC. IT WOULD CONSTITUTE ACCEPTABLE PROOF OR EXPLANATION BY THE ASSESSEEDEPARTMENT WOULD NOT BE JUSTIFIED IN DRAWI NG AN ADVERSE INFERENCE ONLY BECAUSE THE CREDITOR/SUBSCRIBER FAILS OR NEGLECTS TO RESPOND TO ITS NOTICESTRIBUNAL HAS NOTED THAT THE ASSESSEE-COMPAN Y IS A PUBLIC LIMITED COMPANY WHICH HAD RECEIVED SUBSCRIPTIONS TO THE PUBLIC ISSUE THROUGH BANKING CHANNELS AND THE SHARES WERE ALLOTTED IN CONSONANCE WITH THE PROVISIONS OF SECURITIES CONTRACT (REGULAT ION) ITA NO. 493/JP/2017 ACIT, CENTRAL CIRCLE-2, JAIPUR VS GODAWARI ESTATES PVT.LTD. KOLKATA 85 ACT, 1956, AS ALSO THE RULES AND REGULATIONS OF DEL HI STOCK EXCHANGECOMPLETE DETAILS WERE FURNISHED TRIBUNAL HAS FURTHER FOUND THAT THE AO HAS NOT BROU GHT ANY POSITIVE MATERIAL OR EVIDENCE WHICH WOULD INDIC ATE THAT THE SHAREHOLDERS WERE BENAMIDARS OR FICTITIOUS PERSONS OR THAT ANY PART OF THE SHARE CAPITAL REPRE SENTED COMPANYS OWN INCOME FROM UNDISCLOSED SOURCESAS REGARDS RECEIPT OF SHARE CAPITAL ON ISSUE OF RIGHTS SHARES TO FIVE COMPANIES, THESE COMPANIES WERE DULY INCORPORATED UNDER THE SIKKIMESE COMPANIES ACT AND WERE ASSESSED UNDER THE SIKKIMESE TAXATION MANUAL THEIR SHARE SUBSCRIPTIONS WERE ALSO RECEIVED THROUG H BANKING CHANNELS AND FOUND TO BE VALID BY THE JURISDICTIONAL AOTHEREFORE, NO ADDITION COULD BE MADE UNDER S. 68 (IV) CIT V/S VALUE CAPITAL SERVICES P LTD. 307 ITR 334 (DELHI) (PB PG 319-3202/CASE LAWS) HELD THAT THERE IS ADDITIONAL BURDEN ON THE DEPARTMENT TO SHOW THAT EV EN IF SHARE APPLICANTS DID NOT HAVE THE MEANS TO MAKE INVESTMENT, THE INVESTMENT MADE BY THEM ACTUALLY EMANATED FROM THE COFFERS OF THE ASSESSEE SO AS TO ENABLE IT TO BE TREATED AS UNDISCLOSED INCOME OF TH E ASSESSEE. (V) CIT V/S STL EXTRUSION (P) LTD. 333 ITR 269 (MP) (PB PG 347 TO 350/CASE LAWS) INCOMECASH CREDIT SHARE APPLICATION MONEYASSESSEE HAS DULY ESTABLISHED THE IDENTITY AND SOURCE OF CREDITS ADDITIONS NOT SUSTAINABLE. (VI) CIT V/S ARUNANDA TEXTILES (P) LTD. , 333 ITR 116 (KARNATAKA) (PB PG 351 TO 353/CASE LAWS) SHARE APPLICATION MONEYASSESSEE ABLE TO IDENTIFY THE SHAREHOLDERSIT IS NOT FOR THE ASSESSEE-COMPANY TO ESTABLISH BUT IT IS FOR THE DEPARTMENT TO ENQUIRE W ITH THE INVESTORS ABOUT THE CAPACITY TO INVEST THE AMOUNT I N THE SHARES. (VII) BHAV SHAKTI STEEL MINES (P) LTD. VS. CIT (200 9) 18 DTR (DEL) 194 INCOMECASH CREDITGENUINENESS CIT(A) NOT ONLY FOUND THAT THE IDENTITY OF EACH OF THE SHAREHOLDERS STOOD ESTABLISHED, BUT ALSO EXAMINED T HE ITA NO. 493/JP/2017 ACIT, CENTRAL CIRCLE-2, JAIPUR VS GODAWARI ESTATES PVT.LTD. KOLKATA 86 FACT THAT EACH OF THEM WERE INCOME-TAX ASSESSEES AN D HAD DISCLOSED THE SHARE APPLICATION MONEY IN THEIR ACCOUNTS WHICH WERE DULY REFLECTED IN THEIR IT RETU RNS AS WELL AS IN THEIR BALANCE SHEETSTRIBUNAL WAS NOT THEREFORE JUSTIFIED IN COMING TO THE CONCLUSION THA T THE CIT(A) HAD NOT CONSIDERED THE MATTER IN THE RIGHT PERSPECTIVEORDER PASSED BY TRIBUNAL REMANDING THE MATTER FOR EXAMINING THE SHARE APPLICANTS SET ASIDE AND THAT OF CIT(A) RESTORED (D) OTHER BENCHES OF ITAT (I) ITO V M/S. RELIANCE MARKETING PVT. LTD. 2015- TIOL-319-TAT-DEL (PB PG 367 TO 375/CASE LAWS) IDENTITY OF THE CREDITORS/SHARE APPLICANTS BY FURNI SHING THEIR PAN NUMBER AND COPY OF ACKNOWLEDGMENT OF INCOME-TAX RETURN. THE AMOUNT ON ACCOUNT OF SHARE APPLICATION WAS RECEIVED THROUGH BANKING CHANNEL, COPIES OF THE CONFIRMATION ALONGWITH AFFIDAVIT OF T HE PARTIES WERE FURNISHED. THE ASSESSEE ALSO FURNISHED THE COPY OF SHARE APPLICATION FORMS, COPY OF FORM NO.2 FILED WITH REGISTER OF COMPANIES (ROC), SHOWING ALLOTMENT OF SHARES TO THE APPLICANTS. THEREFORE, T HE ASSESSEE DISCHARGED THE ONUS CAST UPON IT, (II) INCOME TAX OFFICER VS. MS. SUPERLINE CONSTRUCTION P. LTD. ITAT, BOMBAY TRIBUNAL (A) ITA NO. 3644 TO 3648, 3650, 3651MUM/2014 30TH NOVEMBER, 2015 (2015) 45 CCH 0281 MUM TRIB. (PB PG 376 TO 392/CASE LAWS) ADDITIONADDITION ON ACCOUNT OF BOGUS SHARE APPLICATION MONEYASSESSEE WAS IN BUSINESS OF BUILDER AND DEVELOPERASSESSMENT WAS COMPLETED U/S 143(3) R.W.S. 147RE-ASSESSMENT PROCEEDINGS WERE INITIATED ON BASIS OF INFORMATION RECEIVED FROM DIRECTORATE OF INCOME-TAX (INVESTIGATION) WITHOUT RECORDING AOS OWN SATISFACTION AND INFORMATION WAS ACCEPTED IN MECHANICAL MANNERAFTER REOPENING OF ASSESSMENT U/S 147, AO MADE ADDITION OF RS.40 LAKHS RECEIVED BY ASSESSEE FROM VARIOUS CORPORATE ENTITIE S ADDITION WAS MADE BY AO ON ACCOUNT OF BOGUS SHARE APPLICATION MONEY UNDER PROVISIONS OF S 68CIT(A) DELETED ADDITION MADE BY AOHELD, IN CASE OF CIT VS . ITA NO. 493/JP/2017 ACIT, CENTRAL CIRCLE-2, JAIPUR VS GODAWARI ESTATES PVT.LTD. KOLKATA 87 M/S. LOVELY EXPORTS (PVT) LTD, REPORTED IN [2008] 2 16 CTR 195 (SC), IT WAS HELD THAT IF SHARE APPLICATION MONEY WAS RECEIVED BY ASSESSEE COMPANY FROM ALLEGED BOGUS SHAREHOLDERS WHOSE NAME WERE GIVEN TO AO THEN DEPARTMENT WAS FREE TO PROCEED TO REOPEN THEIR INDIVIDUAL ASSESSMENTS IN ACCORDANCE WITH LAW BUT I T COULD NOT BE REGARDED AS UNDISCLOSED INCOME OF ASSE SSEE COMPANYIT WAS SUBMITTED BY ASSESSEE THAT AO HAD FAILED TO APPRECIATE STATEMENTS OF ANY PERSON RECOR DED U/S 143(3) R.W.S. 147THAT ASSESSEE-COMPANY HAD FUL LY DISCHARGED BURDEN OF PROOF, ONUS OF PROOF AND EXPLA INED SOURCE OF SHARE CAPITAL AND ADVANCES RECEIVED BY ESTABLISHED IDENTITY, CREDITWORTHINESS AND GENUINEN ESS OF TRANSACTION BY BANKING INSTRUMENTS WITH DOCUMENT ARY EVIDENCESASSESSEE COMPANY SUBSTANTIATED DETAILS WITH DOCUMENTARY EVIDENCES AS EXTRACTED FROM WEBSIT E OF MINISTRY OF CORPORATE AFFAIRS, GOVERNMENT OF IND IA BEFORE AOTHESE FACTS HAD NOT BEEN REBUTTED ON BEHALF OF REVENUEITAT WAS NOT INCLINED TO INTERFER E WITH FINDINGS OF CIT(A) WHO THUS RIGHTLY DELETED EN TIRE IMPUGNED ADDITIONS OF RS.40 LAKHS MADE BY AO U/S 68 ON ACCOUNT OF SHARE CAPITAL SUBSCRIPTION RECEIVED B Y ASSESSEE-COMPANY HELD: IT WAS POINTED OUT IN THE CASE OF CIT VS. M/S. LOV ELY EXPORTS (PVT) LTD, REPORTED IN [2008] 216 CTR 195 ( SC) THAT IF THE SHARE APPLICATION MONEY IS RECEIVED BY THE ASSESSEE COMPANY FROM ALLEGED BOGUS SHAREHOLDERS WHOSE NAME ARE GIVEN TO THE AO THEN THE DEPARTMENT IS FREE TO PROCEED TO REOPEN THEIR INDIVIDUAL ASSESSME NTS IN ACCORDANCE WITH LAW BUT IT CANNOT BE REGARDED AS UNDISCLOSED INCOME OF ASSESSEE COMPANY. (PARA 2.3) IN THIS BACKGROUND, IT WAS SUBMITTED ON BEHALF OF THE ASSESSEE THAT THE ASSESSING OFFICER FAILED TO APPRE CIATE THAT THERE WAS NO DOCUMENTARY EVIDENCE AGAINST THE ASSESSEE-COMPANY TO SUPPORT SUCH IMPUGNED ADDITIONS . IT WAS FURTHER SUBMITTED BY THE ASSESSEE THAT THE ASSESSING OFFICER FAILED TO APPRECIATE THAT THE STATEMENTS OF ANY PERSON RECORDED U/S 143(3) R.W.S. 147. THE ASSESSEE-COMPANY HAD FULLY DISCHARGED THE BURDE N OF PROOF, ONUS OF PROOF AND EXPLAINED THE SOURCE OF ITA NO. 493/JP/2017 ACIT, CENTRAL CIRCLE-2, JAIPUR VS GODAWARI ESTATES PVT.LTD. KOLKATA 88 SHARE CAPITAL AND ADVANCES RECEIVED BY ESTABLISHED THE IDENTITY, CREDITWORTHINESS AND GENUINENESS OF TRANSACTION BY BANKING INSTRUMENTS WITH DOCUMENTARY EVIDENCES. THE FURTHER STAND OF THE ASSESSEE HAD BE EN THAT THE ASSESSEE-COMPANY SUBSTANTIATED THE DETAILS WITH THE DOCUMENTARY EVIDENCES AS EXTRACTED FROM THE WEBSITE OF MINISTRY OF CORPORATE AFFAIRS, GOVERNMEN T OF INDIA BEFORE THE ASSESSING OFFICER. THESE FACTS HAD NOT BEEN REBUTTED ON BEHALF OF THE REVENUE. (PARA 2.4) IN VIEW OF THE FACTS AND CIRCUMSTANCES OF THE PRESENT CASE AS WELL AS CONSIDERING THE DECISIONS A S DISCUSSED ABOVE ON THE SIMILAR ISSUE, ITAT WAS NOT INCLINED TO INTERFERE WITH THE FINDINGS OF THE CIT( A) WHO HAD RIGHTLY DELETED THE ENTIRE IMPUGNED ADDITIO NS OF RS.40 LAKHS MADE BY THE ASSESSING OFFICER U/S 68 OF THE ACT ON ACCOUNT OF SHARE CAPITAL SUBSCRIPTION RECEIVED BY THE ASSESSEE-COMPANY. (PARA 2.5) CONCLUSION: WHEN ASSESSEE-COMPANY HAD SUBSTANTIATED DETAILS WITH DOCUMENTARY EVIDENCES AS EXTRACTED FRO M WEBSITE OF MINISTRY OF CORPORATE AFFAIRS, GOVERNMEN T OF INDIA BEFORE AO, THEN ADDITIONS MADE BY AO U/S 6 8 ON ACCOUNT OF SHARE CAPITAL SUBSCRIPTION RECEIVED B Y ASSESSEE-COMPANY WAS RIGHTLY DELETED. (III) MEERA ENGINEERING & COMMERCIAL CO. (P) LTD. V S. ASSTT. CIT (1997) 58 TTJ (JAB) 527 (PB PG 393 TO 399/CASE LAWS) INCOMECASH CREDITSGENUINENESS OF SHARE CAPITAL OF COMPANYALL THE 51 SHAREHOLDERS FILED THEIR AFFIDAVITS AND CONFIRMATORY LETTERS AND 24 OF THEM FILED THEIR REPLIES ALSO TO NOTICE UNDER S. 13 3(6) NAMES OF PARTIES PURCHASING THE SHARES WITH AMOUNT SUBSCRIBED WERE FURNISHED BEFORE AOALL DOCUMENTS CLEARLY SHOW THAT SHAREHOLDERS DO EXIST ASSESSEE- COMPANY HAD DISCHARGED ITS ONUS OF EXPLAINING THE C ASH CREDITS AS REQUIRED UNDER LAWIF THE COMPANY IS ABL E TO ESTABLISH THAT SHAREHOLDERS EXISTED AND THEY HAVE INVESTED MONEY FOR PURCHASE OF SHARES BURDEN OF COMPANY TO PROVE THE CREDIT IS DISCHARGEDIDENTITY OF SHAREHOLDERS NOT IN DISPUTEASSESSEE IS NOT REQUIRE D TO ITA NO. 493/JP/2017 ACIT, CENTRAL CIRCLE-2, JAIPUR VS GODAWARI ESTATES PVT.LTD. KOLKATA 89 PROVE CREDIT-WORTHINESS OF SHAREHOLDERSADDITION DELETED (IV) ALLEN BRADLEY INDIA LTD. VS. DY. CIT (2002) 74 TTJ (DEL) 604 : (2002) 80 ITD 43 (DEL); INCOMECASH CREDITSUBSCRIPTION TO SHARE CAPITAL AND LOANIN CA SE OF LIMITED COMPANIES JURISDICTION OF AO WOULD BE LIMITED ONLY TO SEE WHETHER IDENTITY OF SHAREHOLDER S IS ESTABLISHED AND WHETHER THEY EXIST OR NOTONCE IDENTITY IS ESTABLISHED, THEN, POSSIBLY NO FURTHER ENQUIRIES NEED TO BE MADESINCE THE SHAREHOLDERS OF ASSESSEE-COMPANY WERE IN EXISTENCE, THEY WERE ASSES SED TO TAX, COMPLETE DETAILS WERE AVAILABLE, SHARE CAPI TAL MONEY AS WELL AS LOAN WERE RECEIVED THROUGH ACCOUNT PAYEE CHEQUES AND THEY WERE CLEARED THROUGH PROPER BANKING CHANNELS, AO WAS NOT JUSTIFIED IN DISBELIEV ING THE CAPITAL INVESTED BY THE SHAREHOLDER COMPANIES SIMILARLY, AO WAS NOT JUSTIFIED IN DISBELIEVING THE LOAN TAKEN FROM DTL AS THE CHEQUES WERE CLEARED THROUGH BANK CHANNELS AND CONFIRMATION AND SUPPORTING EVIDENCE WAS FILEDCIT(A) WAS JUSTIFIED IN DELETING THE ADDITIONS. (V) 2017 (3) TMI 1047-ITAT AHMEDABAD INCOME TAX OFFICER, WARD 8 (1), AHMEDABAD VERSUS SEVEN STAR AVIATION SERVICES PVT. LTD (PB PG 400 TO 404/CASE LAWS) ADDITION U/S 68 - SHARE APPLICATION MONEY AND UNSECURED LOAN RECEIVED. HELD THAT: - WHE N THE DEPOSITORS ARE REGULAR TAX PAYERS AND THE ADVAN CES MADE BY SUCH DEPOSITORS AS ALSO SHARE APPLICATION MONIES PAID BY SUCH SHAREHOLDERS ARE DULY ACCEPTED IN THEIR PERSONAL ASSESSMENTS, THERE CANNOT BE ANY OCC ASION TO HOLD THAT THESE AMOUNTS ARE UNEXPLAINED IN THE H ANDS OF THE COMPANY. THE CREDIT WORTHINESS OR IDENTITY CANNOT BE AN ISSUE IN SUCH A SITUATION. (VI) 2016 (10) TMI 920 - ITAT HYDERABAD M/S. HARIOM CONCAST AND STEEL PVT. LTD. VERSUS INCOME TAX OFFICER, WARD-2 (2) , HYDERABD (PB PG 405 TO 411/CASE LAWS) ADDITION FOR SHARES ISSUED ON PREMIUM. HELD THAT: - SHARE PREMIUM CANNOT BE BROUG HT TO TAX INVOKING THE PROVISIONS OF SECTION 68, UNLES S THERE IS A LINK WITH EITHER QUID PRO QUO TRANSACTIO N OR ITA NO. 493/JP/2017 ACIT, CENTRAL CIRCLE-2, JAIPUR VS GODAWARI ESTATES PVT.LTD. KOLKATA 90 INVESTING BY ASSESSEE-COMPANY IN THEIR ACCOUNTS SO AS TO RECEIVE IT BACK AS SHARE CAPITAL. NO SUCH EVIDENCE WAS BROUGHT ON RECORD. (E) SUPREME COURT I) CIT VS. LOVELY EXPORTS (P) LTD. (2008) 216 CTR (SC) 195 INCOMECASH CREDITSHARE APPLICATION MONEYIF THE SHARE APPLICATION MONEY IS RECEIVED BY THE ASSESSEE COMPANY FROM ALLEGED BOGUS SHAREHOLDER S, WHOSE NAMES ARE GIVEN TO THE AO, THEN THE DEPARTMEN T IS FREE TO PROCEED TO REOPEN THEIR INDIVIDUAL ASSES SMENTS IN ACCORDANCE WITH LAW, BUT IT CANNOT BE REGARDED A S UNDISCLOSED INCOME OF ASSESSEE COMPANY. II) CIT VS. STELLER INVESTMENT LTD. (200) 251 ITR 263 (SC) EVEN IF THE SUBSCRIBERS TO THE INCREASED SHARE CAPITAL OF ASSESSEE-COMPANY WERE NOT GENUINE, THE AMOUNT COULD NOT BE REGARDED AS UNDISCLOSED INCOME OF THE ASSESSEE-COMPANY. (III) CIT VS ORISSA CORPORATION (P) LTD (1986) 159 ITR 79 (SC) F) RATIO LAID DOWN IN FOLLOWING CASES NOT APPLICAB LE TO THE FACTS OF THE CASE OF ASSESSEE:- I) NOVA PROMOTERS & FINLEASE PVT. LTD (2012) 342 IT R 169 (DELHI HIGH COURT): - SUMMONS SENT TO THE COMPANIES RECEIV ED BACK UNSERVED AND OTHER SUMMONS REMAINED UNCOMPLIED WITH WHEREAS, IN THE CASE OF THIS ASSESSEE COMPANY, NOTI CE U/S 133(6) WAS SENT TO INVESTOR COMPANIES, ALL OF WHICH WERE SERVE D AND SOME OF THEM WERE COMPLIED WITH. II) CIT V/S N. R. PORTFOLIO PVT. LTD 206 (2014) DLT (DB) (DEL)/ 264 CTR 0258 (DEL) ASSESSED U/S 144 OF ITAX ACT. IN THIS CASE THE AO ISSUED SEVERAL NOTICES AND SHOW CAUSE NOTICE WHICH WAS NOT SERVED/COMPLIED AND ASSESSMENT WAS FRAMED U/S 144 O F INCOME TAX ACT. IN OUR CASE ALL THE COMPLIANCES WERE MADE AND EVIDENCES SUBMITTED. III) N TARIKS PROPERTIES PVT. LTD 227 TAXMANN.COM 3 73 (WITH REFERENCE TO DECISION OF DELHI HIGH COURT IN 264 CT R 472) AO ITA NO. 493/JP/2017 ACIT, CENTRAL CIRCLE-2, JAIPUR VS GODAWARI ESTATES PVT.LTD. KOLKATA 91 NOTICED THAT EXTRACTS OF BANK ACCOUNT HAD BEEN FABR ICATED AND AO FOUND THAT IMMEDIATELY BEFORE ISSUANCE OF CHEQUES FOR THE PURPOSE OF MAKING PAY ORDER OR DEMAND DRAFT THERE WAS DEPOS IT OF CASH. IN OUR CASE NO CASH DEPOSIT IN THE BANK ACCOUNT OF SHA REHOLDER COMPANY. IV) CIT V/S NAVODAYA CASTLE PVT. LTD 367 ITR 306 (D ELHI HIGH COURT) AO FOUND THAT IMMEDIATELY BEFORE ISSUANCE OF CHEQU ES FOR THE PURPOSE OF MAKING PAY ORDER OR DEMAND DRAFT THE RE WAS DEPOSIT OF CASH. IN OUR CASE NO CASH DEPOSIT IN THE BANK ACCOUNT OF SHAREHOLDER COMPANY. V) CIT V/S MAF ACADEMY PVT. LTD 206 (2014) DLT 277 (DB)(DEL)/ 361 ITR 0285 (DEL) AO FOUND THAT IMMEDIATELY BEFORE ISSUANCE OF CHEQUES FOR THE PURPOSE OF MAKING PAY ORDER OR DEMA ND DRAFT THERE WAS DEPOSIT OF CASH. IN OUR CASE NO CASH DEPOSIT IN THE BANK ACCOUNT OF SHAREHOLDER COMPANY. FURTHER, THE SUMMONS U/S SE CTION 131 OF I.TAX ACT WERE SENT TO THE SHAREHOLDERS WHICH WERE RECEIVED BACK UN- SERVED. IN VIEW OF THE ABOVE SUBMISSION, THE HUMBLE ASSESS EE PRAYS YOUR HONOR KINDLY TO DISMISS THE APPEAL FILED BY THE DEPARTMEN T. 2.6 WE HAVE HEARD THE RIVAL CONTENTIONS AND PERUSED THE MATERIALS AVAILABLE ON RECORD. IT IS PERTINENT TO MENTION THA T THE SIMILAR ISSUE HAS BEEN DEALT WITH AND DECIDED BY THIS BENCH OF ITAT V IDE ITS ORDER DATED 30-10-2017 IN THE CASE OF ACIT, CENTRAL CIRCLE-2, J AIPUR VS MOTISONS BUILDTECH PVT. LTD IN ITA NO. 481/JP/2017 (REVENUE S APPEAL) FOR THE ASSESSMENT YEAR 2009-10. SINCE THE ISSUE RAISED BY THE REVENUE IN THE PRESENT APPEAL IS SAME AS DECIDED IN THE APPEAL OF THE REVENUE IN ITA NO.481/JP/2017FOR THE ASSESSMENT YEAR 2009-10 IN TH E CASE OF ACIT, ITA NO. 493/JP/2017 ACIT, CENTRAL CIRCLE-2, JAIPUR VS GODAWARI ESTATES PVT.LTD. KOLKATA 92 CENTRAL CIRCLE-2, JAIPUR VS MOTISONS BUILDTECH PVT. LTD JAIPUR (SUPRA) WHICH SHALL APPLY MUTATIS MUTANDIS IN THE PRESENT A PPEAL OF REVENUE ALSO. THUS SOLITARY GROUND OF ITA NO.493/JP/2017 FOR THE A.Y. 2010-11 OF REVENUES APPEAL IS DISMISSED. 3.1 IN THE C.O. NO. 26/JP/2017 FOR THE ASSESSMENT Y EAR 2010-11, THE ASSESSEE HAS RAISED THE FOLLOWING GROUND:- 1. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE AND IN LAW THE AO ERRED IN MAKING ADDITION OF RS. 2,00,00,000/- BY APPLYING THE PROVISION OF SEC 56(1 ) OF THE I.T. ACT, 1961 TREATING THE SHARE CAPITAL AND PREMI UM THEREON RECEIVED FROM VARIOUS PVT. LTD. COMPANIES AS INCOME OF THE ASSESSEE AND THE LD. CIT(A) RIGHTLY DELETED THE ADD ITION MADE BY THE AO. 3.2 IT IS OBSERVD THAT THE CROSS OBJECTION FILED BY THE ASSESSEE IS SUPPORTIVE TO THE ORDER OF THE LD. CIT(A) WHICH IS INFRUCTUOUS. THUS THE C.O. OF THE ASSESSEE IS DISMISSED. 4.1 IN ITA NO. 494/JP/2017 FOR THE A.Y. 2012-13, TH E REVENUE HAS RAISED THE SOLITARY GROUND AS UNDER:- WHETHER ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE THE LD. CIT(A) WAS RIGHT IN DELETING THE ADDITION OF RS .10,30,00,000/- MADE U/S 56(1) OF THE ACT IGNORING THE FACT THAT AS SETS OF THE ASSESSEE COMPANY DONT COMMENSURATE TO PREMIUM CHARGED AND F URTHER IGNORING THE FACT THAT NEITHER ANY BUSINESS ACTIVIT Y WAS PERFORMED NOR ANY BUSINESS INCOME HAS BEEN SHOWN BY THE ASSESSEE. ITA NO. 493/JP/2017 ACIT, CENTRAL CIRCLE-2, JAIPUR VS GODAWARI ESTATES PVT.LTD. KOLKATA 93 4.2 APROPOS SOLITARY GROUND OF THE REVENUE, THE AO MADE THE ADDITION OF RS.10,30,00,000- U/S 56(1) OF THE ACT IN THE HAN DS OF THE ASSESSEE COMPANY BY OBSERVING AS UNDER:- 16. HAVING DEALT WITH EACH OF THE CONTENTION OF T HE ASSESSEE AND HAVING FOUND THE SAME TO BE UNTENABLE IT IS IMP ORTANT TO PLACE ON RECORD CERTAIN ASPECTS WHICH HAVE A BEARING ON THE ISSUE AT HAND. IT IS TRUE THAT THE APPARENT MUST BE CONSIDERED REAL UNTI L IT IS SHOWN THAT THERE ARE REASONS TO BELIEVE THAT THE APPARENT IS N OT THE REAL. IN A CASE OF THE PRESENT KIND A PARTY WHO RELIES ON A RECITAL IN A DEED HAS TO ESTABLISH THE TRUTH OF THOSE RECITALS, OTHERWISE IT WILL BE VERY EASY TO MAKE SELF-SERVING STATEMENTS IN DOCUMENTS EITHER EX ECUTED OR TAKEN BY A PARTY AND RELY ON THOSE RECITALS. IF ALL THAT AN ASSESSEE WHO WANTS TO EVADE TAX IS TO HAVE SOME RECITALS MADE IN A DOCUM ENT EITHER EXECUTED BY HIM OR EXECUTED IN HIS FAVOUR THEN THE DOOR WILL BE LEFT WIDE OPEN TO EVADE TAX. A LITTLE PROBING WAS SUFFICIENT IN THE P RESENT CASE TO SHOW THAT THE APPARENT WAS NOT THE REAL. THE TAXING AUTH ORITIES WERE NOT REQUIRED TO PUT ON BLINKERS WHILE LOOKING AT THE DO CUMENTS PRODUCED BEFORE THEM. THEY WERE NOT ENTITLED TO LOOK INTO TH E SURROUNDING CIRCUMSTANCES TO FIND OUT THE REALITY OF THE RECITA LS MADE IN THOSE DOCUMENTS. 17. IN THE ABOVE BACK GROUND OF THE FACTS AND CIRCU MSTANCES SURROUNDING THIS CASE, IT IS HEREBY HELD THAT THE R ECEIPT OF SHARE CAPITAL AND SHARE PREMIUM WAS PART OF A COLOURFUL TRANSACTI ON BY WAY OF WHICH A SUM OF RS.10,30,00,000/- WAS INTRODUCED INTO THE BOOKS OF THE ASSESSEE COMPANY IN THE FORM OF SHARE PREMIUM ATTAC HED TO THE SHARE CAPITAL. AS DISCUSSION ABOVE THE PREMIUM OF RS.990/- PER SHARE WAS NOT JUSTIFIED AT ALL ON THE BASIS OF ABSOLUTELY NO ASSETS COMMENSURATE TO PREMIUM CHARGED, NO BUSINESS ACTIVITY, NO INCOME, N O NET WORTH NOR ANY PROMISE FOR CREATION OF THIS MUCH ASSETS, BUSI NESS ACTIVITY, INCOME OR NET WORTH IN THE FUTURE. ACCORDINGLY, THE CHARGING AND RECEIPT OF SHARE PREMIUM/ SHARE CAPITAL TO THE TUNE OF RS. 10,30,00,000/- IS HELD TO BE INCOME OF THE ASSESSEE COMPANY IN THE NATURE OF INCOME ENVISAGED U/S 56(1) OF THE INCOME TAX ACT, 1961. THE SAME IS ADDED BACK TO THE TOTAL INCOME OF THE A SSESSEE. ITA NO. 493/JP/2017 ACIT, CENTRAL CIRCLE-2, JAIPUR VS GODAWARI ESTATES PVT.LTD. KOLKATA 94 4.3 IN FIRST APPEAL, THE LD. CIT(A) HAS DELETED THE ADDITION OF RS. 10,30,00,000/- MADE BY THE AO BY OBSERVING AT PAGES 57 TO 97 OF HIS ORDER AS UNDER:- 3.1.2 I HAVE DULY CONSIDERED ASSESSEE'S SUBMISSION AND CAREFULLY GONE THROUGH ASSESSMENT ORDER. I HAVE ALS O TAKEN A NOTE OF FACTUAL MATRIX OF THE CASE AS WELL AS APPLICABLE CA SE LAWS RELIED UPON. FACTS OF THE CASE ARE THAT NO SCRUTINY ASSESSMENT U/S 143(3) OF THE ACT WAS DONE IN ASSESSEES CASE FOR AY 2012-13 AND THE ORIGINAL RETURN FILED ON 26.09.2012 DECLARING RS. 15,31,050/- TOTAL INCOME WAS ONLY PROCESSED U/S 143(1) OF THE ACT. VARIOUS COURTS HAVE HELD THAT PROCESSING OF RETURNS U/S 143(1) OF THE ACT IS NO A SSESSMENT. IT IS OBVIOUS THAT IF NO INCRIMINATING MATERIAL IS FOUND DURING S EARCH, THEN ADDITIONS, IF ANY, HAVE TO BE MADE IN THE INCOME SHOWN IN THE RET URN OF INCOME ( IN THE CASE OF PENDING ASSESSMENTS WHICH ABATE ) AND TO THE COMPUTED INCOME (IN CASE OF ASSESSMENTS WERE COMPLETED ) . THUS EFFECTIVELY, WHAT WAS SAID IN THE CASE OF KABUL CHAWLA WAS THAT MAKING ANY ADDITION IN THE RETURNED INCOME OR INCOME EARLIER A SSESSED WAS NOT ALLOWED IF NO MATERIAL WAS FOUND IN THE SEARCH WHIC H COULD LEAD TO AN ADDITION ON THE BASIS OF THE SAID MATERIAL. NOW IN THIS REGARD, I WOULD LIKE TO DISCUSS THE ISSUE PERTAINING TO ASSESSMENT COMPLETED U/S 153A R.W.S 143(3) OF THE ACT WHEN NO INCRIMINATING DOCUM ENTS WERE FOUND FROM THE ASSESSEES PREMISES. BEFORE COMING TO THE FACTS OF THE PRESENT CASE IT WOULD BE APPROPRIATE TO MENTION SEC . 153A OF THE ACT, THE RELEVANT PART OF WHICH READS AS UNDER: ' 153A. (1) NOTWITHSTANDING ANYTHING CONTAINED IN SEC TION 139, SECTION 147, SECTION 148, SECTION 149, SECTION 151 AND SECTION 153, IN THE CA SE OF A PERSON WHERE A SEARCH IS INITIATED UNDER SECTION 132 OR BOOKS OF ACCOUNT, OTHER DOCUME NTS OR ANY ASSETS ARE REQUISITIONED UNDER SECTION 132A AFTER THE 31ST DAY OF MAY, 2003, THE ASSESSING OFFICER SHALL ITA NO. 493/JP/2017 ACIT, CENTRAL CIRCLE-2, JAIPUR VS GODAWARI ESTATES PVT.LTD. KOLKATA 95 (A) ISSUE NOTICE TO SUCH PERSON REQUIRING HIM TO FURN ISH WITHIN SUCH PERIOD, AS MAY BE SPECIFIED IN THE NOTICE, THE RETURN OF INCOME IN R ESPECT OF EACH ASSESSMENT YEAR FALLING WITHIN SIX ASSESSMENT YEARS REFERRED TO IN CLAUSE (B), IN THE PRESCRIBED FORM AND VERIFIED IN THE PRESCRIBED MANNER AND SETTING FORTH SUCH OTHER PARTICULARS AS MAY BE PRESCRIBED AND THE PROVISIONS OF THIS ACT SHALL, SO FAR AS MAY BE, APPLY ACCORDINGLY AS IF SUCH RETURN WERE A RETURN REQUIRED TO BE FURNISHED UNDER SECTION 139; (B) ASSESS OR REASSESS THE TOTAL INCOME OF SIX ASSESSME NT YEARS IMMEDIATELY PRECEDING THE ASSESSMENT YEAR RELEVANT TO THE PREVIO US YEAR IN WHICH SUCH SEARCH IS CONDUCTED OR REQUIS ITION IS MADE : PROVIDED THAT THE ASSESSING OFFICER SHALL ASSESS OR REASSESS THE TOTAL INCOME IN RESPECT OF EACH ASSESSMENT YEAR FALLING WITHIN SUC H SIX ASSESSMENT YEARS: PROVIDED FURTHER THAT ASSESSMENT OR REASSESSMENT, I F ANY, RELATING TO ANY ASSESSMENT YEAR FALLING WITHIN THE PERIOD OF SIX ASSESSMENT YE ARS REFERRED TO IN THIS SUB-SECTION PENDING ON THE DATE OF INITIATION OF THE SEARCH UNDER SECTI ON 132 OR MAKING OF REQUISITION UNDER SECTION 132A, AS THE CASE MAY BE, SHALL ABATE . AS PER THE PROVISIONS OF THIS SECTION WHERE A SEARC H IS INITIATED U/S 132 OF THE ACT, THE A.O SHALL ISSUE A NOTICE REQUIR ING THE PERSON SEARCHED TO FURNISH HIS RETURN OF INCOME IN RESPECT OF EACH ASSESSMENT YEAR FALLING WITHIN SIX ASSESSMENT YEARS IMMEDIATEL Y PRECEDING THE ASSESSMENT YEAR RELEVANT TO THE PREVIOUS YEAR IN WH ICH SUCH SEARCH IS CONDUCTED OR REQUISITION IS MADE. ONCE SUCH RETURNS ARE FILED, THE AO HAS TO ASSESS OR REASSESS THE TOTAL INCOME OF SUCH SIX ASSESSMENT YEARS. (EMPHASIS SUPPLIED BY ME). ( THE DECISIVE WORDS USED IN THE PROVISIONS ARE TO 'ASSESSEE OR REASSESS THE TOTAL I NCOME' ). THE A.O. IS THUS DUTY BOUND TO DETERMINE THE 'TOTAL INCOME' OF THE ASSESSEE FOR SUCH SIX ASSESSMENT YEARS AND IT IS OBVIOUS THAT 'T OTAL INCOME' REFERS TO THE SUM TOTAL OF INCOME IN RESPECT OF WHICH A PERSO N IS ASSESSABLE. THE TOTAL INCOME THEREFORE WILL COVER NOT ONLY THE INCO ME EMANATING FROM DECLARED SOURCES OR ANY MATERIAL PLACED BEFORE THE ASSESSING OFFICER BUT FROM ALL SOURCES INCLUDING THE UNDISCLOSED ONES , OR BASED ON THE UNPLACED MATERIAL BEFORE THE AO. SOME RELATED JUDGMENTS G) CIT VS. KABUL CHAWLA (DELHI HIGH COURT) : COMPLETED ASSESSMENTS CAN BE INTERFERED WITH BY THE AO WHILE MAKING THE ASSESS MENT UNDER SECTION 153 A ONLY ON THE BASIS OF SOME INCRIMINATING MATERI AL UNEARTHED DURING THE COURSE OF SEARCH OR REQUISITION OF DOCUMENTS OR UNDISCLOSED INCOME OR PROPERTY DISCOVERED IN THE COURSE OF SEARCH WHICH W ERE NOT H) GURINDER SINGH BAWA VS. DCIT (ITAT MUMBAI) : IN ALL CARGO GLOBAL LOGISTICS 137 ITD 287 (MUM)(SB), THE SPECIAL BENCH HELD THAT IN A CASE WHERE THE ASSESSMENT HAS ABATED THE AO CAN MAKE ADDI TIONS IN THE ITA NO. 493/JP/2017 ACIT, CENTRAL CIRCLE-2, JAIPUR VS GODAWARI ESTATES PVT.LTD. KOLKATA 96 ASSESSMENT, EVEN IF NO INCRIMINATING MATERIAL HAS B EEN FOUND. HOWEVER, IN A CASE WHERE THE ASSESSMENT HAS NOT ABATED, . I) ANIL KUMAR BHATIA VS. ACIT (ITAT DELHI) : S. 153A DOES NOT AUTHORIZE THE MAKING OF A DE NOVO ASSESSMENT. WHILE UNDER THE 1ST PROVISO, THE AO IS EMPOWERED TO FRAME ASSESSMENT FOR SIX YEARS, UND ER THE 2ND PROVISO, ONLY THE ASSESSMENTS WHICH ARE PENDING ON THE DATE OF INITIATION OF SEARCH ABATE. J) SANJAY AGGARWAL VS. DCIT (ITAT DELHI) : S. 153A: ADDITION IN A SEARCH ASSESSMENT FOR A AY WHICH IS NOT PENDING CAN BE MADE ONLY IF INCRIMINATING MATERIAL IS FOUND DURING SEARCH (I) THE LANGUAGE OF S. 153A HAS BEEN STRUCTURED IN SUCH A WAY SO AS NOT TO PERMIT THE MAKING OF ADDITION FOR THE ASS ESSMENT K) TRISHUL HI-TECH INDUSTRIES VS. DCIT (ITAT KOLKATA) : IT HAS BEEN HELD BY THE ITAT, KOLKATA BENCH IN THE CASE OF LMJ INTERN ATIONAL LIMITED VS. DCIT 119 TTJ (KOL) 214 WHERE NOTHING INCRIMINATING IS FOUND IN THE COURSE OF SEARCH RELATING TO ANY ASSESSMENT YEARS, THE ASS ESSMENTS FOR. L) IT HAS BEEN HELD BY THE ITAT, KOLKATA BENCH IN THE CASE OF LMJ INTERNATIONAL LIMITED VS. DCIT 119 TTJ (KOL) 214 WHERE NOTHING INCRIMINATING IS FOUND IN THE COURSE OF SEARCH RELA TING TO ANY ASSESSMENT YEARS, THE ASSESSMENTS FOR SUCH ASSESSMENT YEARS CA NNOT BE DISTURBED U/S 153C OF THE ACT. THUS IT IS CLEAR THAT THE PROVI SIONS OF SECTION 153C OF THE ACT CANNOT BE INVOKED AUTOMATICALLY IN RESPECT O F ANY ASSESSMENT YEAR UNLESS THERE EXISTS INCRIMINATING DOCUMENTS FOR THA T PREVIOUS YEAR. THE PROVISION OF SECTION 153C OF THE ACT CANNOT BE INVOK ED ON ROUTINE INFORMATION OR ON INCOME ALREADY ACCOUNTED/DISCLOSE D IN THE ORIGINAL RETURN, THE ASSESSMENT OF WHICH IS COMPLETE. IN THI S REGARD WE MAY GAINFULLY REFER TO THE DECISION OF THE MUMBAI SPECI AL BENCH OF THE ITAT IN THE CASE OF AL CARGO GLOBAL LOGISTICS LTD VS. DCIT. APART FROM ABOVE, THERE ARE SEVERAL DECISIONS OF VA RIOUS JUDICIAL AUTHORITIES WHERE IT HAS BEEN HELD THAT IN THE ABSENCE OF ANY INCRIMINATING MATERIAL FOUND DURING SEARCH, ADD ITIONS MADE ON THE ASSESSED INCOME ARE UNSUSTAINABLE IN LAW. SO ME OF THESE DECISIONS ARE DISCUSSED IN THE FOLLOWING PARAGRAPHS : (I) IN THE CASE OF CIT VS. KABUL CHAWLA REPORTED IN 281 CTR 45, DELHI IT HAS BEEN HELD BY THE HON'BLE DELHI HIGH COURT THAT: ON A CONSPECTUS OF SECTION 153A(1) OF THE ACT, READ WITH THE PROVISOS THERETO, AND IN THE LIGHT OF THE LAW EXPLAINED IN T HE AFOREMENTIONED DECISIONS, THE LEGAL POSITION THAT EMERGES IS AS UNDER: ITA NO. 493/JP/2017 ACIT, CENTRAL CIRCLE-2, JAIPUR VS GODAWARI ESTATES PVT.LTD. KOLKATA 97 I. ONCE A SEARCH TAKES PLACE UNDER SECTION 132 OF THE ACT, NOTICE UNDERSECTION 153 A(L) WILL HAVE TO BE MANDATORILY I SSUED TO THE PERSON SEARCHED REQUIRING HIM TO FILE RETURNS FOR S IX AYS IMMEDIATELY PRECEDING THE PREVIOUSYEARRELEVANT TO T HE AY IN WHICH THE SEARCH TAKES PLACE. II. ASSESSMENTS AND REASSESSMENTS PENDING ON THE DATE O F THE SEARCH SHALLABATE. THE TOTAL INCOME FOR SUCH AYS WILL HAVE TO BE COMPUTED BY THE AOS AS A FRESH EXERCISE. III. THE AO WILL EXERCISE NORMAL ASSESSMENT POWERS IN RE SPECT OF THE SIX YEARS PREVIOUS TO THE RELEVANT AY IN WHICH THE SEARCH TAKES PLACE. THE AO HAS THE POWER TO ASSESS AND REASSESS THE 'TOTAL INCOME' OF THE AFOREMENTIONED SIX YEARS IN SEPARATE ASSESSMENT ORDERS FOR EACH OF THE SIX YEARS. IN OTHER WORDS TH ERE WILL BE ONLY ONE ASSESSMENT ORDER IN RESPECT OF EACH OF THE SIX AYS 'IN WHICH BOTH THE DISCLOSED AND THE UNDISCLOSED INCOME WOULD BE BROUGHT TO TAX'. IV. ALTHOUGH SECTION 153 A DOES NOT SAY THAT ADDITIONS SHOULD BE STRICTLYMADEONTHE BASIS OF EVIDENCE FOUND IN THE CO URSE OF THE SEARCH,OROTHER POST-SEARCH MATERIAL OR INFORMATION AVAILABLE WITH THE AO WHICH CAN BE RELATED TO THE EVIDENCE FOUND, IT DOES NOT MEAN THAT THE ASSESSMENT 'CAN BE ARBITRARY OR MADEW ITHOUT ANY RELEVANCE OR NEXUS WITH THE SEIZED MATERIAL. OBVIOU SLY AN ASSESSMENT HAS TO BE MADE UNDER THIS SECTION ONLY O N THE BASIS OF SEIZED MATERIAL.' V. IN ABSENCE OF ANY INCRIMINATING MATERIAL, THE CO MPLETED ASSESSMENT CAN BE REITERATED AND THE ABATED ASSESSM ENT OR REASSESSMENT CAN BE MADE. THE WORD 'ASSESS' IN SECTION 153 A IS RELATABLE TO ABATED PROCEEDINGS (I.E. THOSE PENDING ON THE DATE OF SEARCH) AND THE WORD 'REASSESS' TO COMPLETED ASSESS MENT PROCEEDINGS. VI. INSOFAR AS PENDING ASSESSMENTS ARE CONCERNED , THE JURISDICTION TO MAKE THE ORIGINAL ASSESSMENT AND THE ASSESSMENT UNDER SE CTION 153A MERGES INTO ONE. ONLY ONE ASSESSMENT SHALL BE MADE SEPARAT ELY FOR EACH AY ON THE BASIS OF THE FINDINGS OF THE SEARCH AND ANY OTH ER MATERIAL EXISTING OR BROUGHT ON THE RECORD OF THE AO. VII. COMPLETED ASSESSMENTS CAN BE INTERFERED WITH BY THE AO WHILE MAKING THE ASSESSMENT UNDER SECTION 153 A ONLY ON THE BASI S OF SOME INCRIMINATING MATERIAL UNEARTHED DURING THE COURSE OF SEARCH OR REQUISITION OF DOCUMENTS OR UNDISCLOSED INCOME OR P ROPERLY DISCOVERED IN THE COURSE OF SEARCH WHICH WERE NOT PRODUCED OR NOT ALREADY DISCLOSED OR MADE KNOWN IN THE COURSE OF ORIGINAL ASSESSMENT. ITA NO. 493/JP/2017 ACIT, CENTRAL CIRCLE-2, JAIPUR VS GODAWARI ESTATES PVT.LTD. KOLKATA 98 (II) IN THE CASE OF ACIT VS. PACL INDIA LTD. NEW DELHI, THE HON'BLE ITAT, F. BENCH, DELHI HAS CONSIDERED THE VARIOUS DECISIONS O F DIFFERENT JUDICIAL AUTHORITIES AND IN PARA 10 OF THE ORDER HAS HELD TH AT: 'THEREFORE, THE QUESTION ARISES WHETHER AO CAN MAKE ANY ADDITION IN THE REASSESSMENT PROCEEDINGS U/S 153(A) AFTER MAKING IN QUIRIES WHICH ARE NOT SUGGESTED BY ANY D DOCUMENTS OR ASSET SEIZED DURING THE SEARCH. IT DEPENDS ON THE NATURE OF ADDITION. THE FACTS AND CIRCUMSTAN CES OF THE ASSESSEE CLEARLY SHOW THAT NO INCRIMINATING DOCUMENT FOUND RELATING TO THE LAND DEVELOPMENT EXPENSES DEBITED IN THE BOOKS OF ACCOUNTS. NO MATER IAL WAS ON THE RECORD ON THAT BASIS WHICH INCOME OF ASSESSEE COULD BE FURTHE R ASSESSED BY ASSESSING OFFICER. THEREFORE, THE ASSESSING OFFICER HAS NO JU RISDICTION TO MAKE OR TO RESORT TO ROVING AND FISHING INQUIRIES TO FIND OUT WHETHER ANY INCOME HAS ESCAPED ASSESSMENT DURING THESE REASSESSMENT PROCEE DINGS. PARTICULARLY, WHEN THERE IS NO INCRIMINATING MATERIAL FOUND AND S EIZED DURING THE COURSE OF SEARCH U/S 132(1) OF THE ACT AND NOTHING IS AVAILAB LE IN RECORD TO REASSESS THE INCOME OF ASSESSEE. IN VIEW OF THE ABOVE, THIS IS N OT A FIT CASE FOR MAKING THE ADDITION IN THE YEAR UNDER CONSIDERATION, THE SAME ARE DELETED.' (III) IN THE CASE OF M/S IDEAL APPLIANCE COMPANY PVT. LTD . VS. DCIT, CENTRAL CIRCLE-44, MUMBAI, THE FOLLOWING LEGAL ISSUES WERE RAISED BEFORE THE HON'BLE ITAT'1' BENCH, MUMBAI: '1. THE LD CIT (A) FAILED TO APPRECIATE THE FACT TH AT NO INCRIMINATING DOCUMENTS /EVIDENCES WERE FOUND DURING THE COURSE O F SEARCH OF THIRD PARTY, AND HENCE, RE-COMPUTING THE INCOME U/S I53A IS BAD IN LAW AND LIABLE TO BE QUASHED. 2. THE LD CIT (A) FAILED TO APPRECIATE THE FACT TH AT ORIGINAL ASSESSMENT WAS MADE U/S 143(3) VIDE ORDER 31ST AUGUST 2007 AFTER C ONSIDERING ALL THE DOCUMENTS AND MATERIALS ON RECORD AND DUE APPLICATION FF MIND AND HENCE RE-COMPUTING THE INCOME BY MERELY CHANGING HEAD OF INCOME FOR THE SAID YEAR UNDER THE GRAB OF SECTION 153A BASED ON SAME DOCUME NTS AND MATERIALS, IS BAD IN LAW AND ORDER IS LIABLE TO BE QUASHED, 5. THE LD CIT (A) ERRED IN CONFIRMING THE ACTION OF TH E AO REASSESSING THE INCOME U/S 143(3) R.W.S I53A, WITHOUT APPRECIATING THE FAC T THAT ONLY PENDING ASSESSMENT ABET AND NOT THE COMPLETED ASSESSMENTS A ND HENCE THE ORDER U/S 143(3) R.W.S I53A IS BAD IN LAW AND LIABLE TO BE QU ASHED. ITA NO. 493/JP/2017 ACIT, CENTRAL CIRCLE-2, JAIPUR VS GODAWARI ESTATES PVT.LTD. KOLKATA 99 6. THE LD CIT (A) ERRED IN NOT ALLOWING THE DECISION O F JURISDICTIONAL HIGH COURT WHEREIN IT WAS HELD THAT NO ADDITION CAN BE MADE U/ S I53A IF NO INCRIMINATING MATERIAL / DOCUMENTS ARE FOUND DURING SEARCH. THERE FORE, THE ORDER OF THE CIT (A) IS BAD IN LAW.' (IV) ON THESE ISSUES, IT WAS HELD BY THE HON'BLE ITAT TH AT: '9. FROM THE ABOVE SETTLED LEGAL POSITION OF THE I SSUE THAT IN THE ABSENCE OF ANY INCRIMINATING MATERIAL FOUND DURING SEARCH, ADDITI ONS MADE ON THE ASSESSED INCOME ARE UNSUSTAINABLE IN LAW, WE ARE OF THE CONSIDERED OPINION THAT THE ADDITIONS MADE IN THE INSTANT CASE ARE NOT SUST AINABLE AND ACCORDINGLY, WE DELETE THE SAME. CONSIDERING OUR DECISION ON THE LE GAL ISSUE IN FAVOUR OF THE ASSESSEE, THE OTHER GROUNDS DEMAND NO SPECIFIC ADJU DICATION. THUS, ON THE LEGAL GROUND THE ASSESSEE SUCCEEDS AND REST OF THE GROUND S ARE DISMISSED AS ACADEMIC. 9.1. FURTHER, REGARDING THE NON-ABATED NATURE OF T HE ASSESSMENTS RELATING TO THE AYS 2007-2008, 2008-2009 AND 2009-2010, IT IS A DECIDED ISSUED THAT THE TIME LIMIT FOR THE ISSUE OF NOTICE U/S 143(2) IN THE SAID AYS SINC E EXPIRED ON 30.9.2008 AND THEY CONSTITUTE NON-ABATED ASSESSMENTS AND THEREFORE, TH E ASSESSMENTS FOR THOSE AYS HAVE TO BE REASSESSED UNDER THE SPECIAL PROVISIONS IN THE LIGHT OF THE INCRIMINATING MATERIAL SEIZED DURING THE SEARCH. THE ABOVE SAID R ATIO WAS ALSO FOLLOWED BY THE TRIBUNAL IN THE CASE OF GURINDER SINGH BAWA VS. CIT (SUPRA) WHEREIN IT WAS HELD THAT WHERE THE ASSESSMENT HAD BEEN COMPLETED UNDER SUMM ARY SCHEME UNDER SECTION 143(1) AND TIME LIMIT FOR ISSU E OF NOTICE UNDER SECTION 143(2) HAD EXPIRED ON THE DATE OF SEARCH ..THERE WAS NO ASSESSMENT PENDING IN SUCH A CASE THERE WAS NO QUESTION OF ABATEMENT. THEREFORE, ADDITION COULD BE MADE ONLY ON THE BASIS OF INCRIMI NATING MATERIAL FOUND DURING SEARCH.' (V) THE RELEVANT ISSUES AS ARISING OUT OF THE DECISION IN THE CASE OF KABUL CHAWLA AS UNDER: 1) WHEN THERE IS NO CONDITION IN SECTION 153A OF T HE ACT THAT ADDITIONS CANNOT BE MADE WITHOUT RELEVANCE TO OR WITHOUT NEXUS TO SEIZE D MATERIAL, THEN IS IT FOR THE COURTS TO READ THAT CONDITION INTO THE PROVISIONS O F SECTION 153A OF THE ACT? THE ANSWER IS NO FOR THE REASON THAT THE APPLICATION OF SECTION 148 OF THE ACT HAS BEEN OUSTED BY THE NON-OBSTANTE CLAUSE WITH WHICH S ECTION 153A STARTS. THEREFORE, EVEN IF NO INCRIMINATING MATERIAL IS FOU ND DURING SEARCH, IF ANY UNDISCLOSED INCOME HAS TO BE ASSESSED FOR THE RELEV ANT 6 YEARS, IT HAS TO BE IN THE PROCEEDINGS UNDER SECTION 153A OF THE ACT. A) NOW THERE ARE TWO SITUATIONS - EITHER THE ASSESS MENT WAS COMPLETE BEFORE THE SEARCH OR PENDING AT THAT TIME. IF THE ASSESSM ENT WAS COMPLETE, AND IF ITA NO. 493/JP/2017 ACIT, CENTRAL CIRCLE-2, JAIPUR VS GODAWARI ESTATES PVT.LTD. KOLKATA 100 ANY INCOME WHICH HAD ESCAPED ASSESSMENT IN THE REGU LAR ASSESSMENT IS FOUND DURING PROCEEDINGS U/S 153A, WHAT IS THE AO SUPPOSE D TO DO? HE HAS NO POWER TO ACT U/S 147/148 BECAUSE OF THE NON-OBSTANTE CLAU SE. HE IS NOW PRECLUDED FROM INVOKING PROVISIONS OF SECTION 148 BECAUSE OF THE CONCLUSION DRAWN IN KABUL CHAWLA. B) THE SITUATION IS EVEN MORE SERIOUS IF A PENDING ASSESSMENT OR REASSESSMENT ABATES. WHAT IF A SHOW-CAUSE NOTICE HAD BEEN ISSUE D ON AN UNDISCLOSED INCOME PRIOR TO SEARCH? ACCORDING TO KABUL CHAWLA I F NO INCRIMINATING MATERIAL IS FOUND DURING SEARCH, THEN NO ACTION CAN BE TAKEN IN SUCH CASES ALSO. NO INTERPRETATION OF A PROVISION OF AN ACT CAN BE SUCH THAT IT LEADS TO RESULTS WHICH WERE NEVER INTENDED. BY DRAWING A CO NCLUSION THAT THE PRESENCE OF INCRIMINATING MATERIAL, AND ADDITION THEREON IS NECESSARY FOR MAKING AN ADDITION WHICH IS NOT BASED ON MATERIAL FOUND DURIN G SEARCH, KABUL CHAWLA HAS DONE EXACTLY THAT, AND SO IT HAS TO BE HELD THAT TH E CONCLUSION SO DRAWN IS PER INCURIAM. IN THIS REGARD I DRAW SOLACE FROM THE DECISION OF THE ALLAHABAD HIGH COURT IN THE CASE OF CIT V. RAJ KUMAR ARORA [2014] 367 ITR 517(ALL.) AND THE DECISION OF THE DELHI HIGH COURT IN THE CASE OF FILATEX INDIA LTD. V. CIT[2014] 49 TAXMANN.COM 465(DELHI) BOTH OF WHICH PRECEDE THE DECISION IN THE CASE OF KABUL CHAWLA. 2) THERE IS ANOTHER SITUATION WHICH HAS NOT BEEN AN TICIPATED IN KABUL CHAWLA. IN THAT CASE THE HONBLE HIGH COURT PROCEEDED ON THE GROUND S THAT PROCESSING OF A CASE U/S 143(1) WAS ALSO ASSESSMENT. IT ACCORDINGLY HEL D THAT EVEN IF THE RETURNS HAVE BEEN PROCESSED U/S 143(1) IT WILL BE TREATED AS IF THE ASSESSMENTS ARE COMPLETE. NOW AFTER THE DECISION OF THE HONBLE SUPREME COURT IN THE CASE OF DEPUTY COMMISSIONER OF INCOME-TAX V. ZUARI ESTATE DEVELOPM ENT & INVESTMENT CO. LTD. [2015] 373 ITR 661 (SC) AND ASSISTANT COMMISSIONER OF INCOME-TAX V. RAJESH JHAVERI STOCK BROKERS P. LTD. [2007] 291 ITR 500(SC) IT IS CLEAR THAT PROCESSING OF A CASE U/S 143(1) IS NOT AN ASSESSMEN T, WHICH FACT HAS BEEN ADMITTED BY THE DELHI HIGH COURT IN THE CASE OF INDU LATA RANGWALA V. DEPUTY COMMISSIONER OF INCOME-TAX, WP(C) 1393/2002 IN THEIR DECISION DATED 18.05.2016. 3) HENCE, THERE NOW OCCURS A THIRD CATEGORY OF CA SES WHICH HAVE NEITHER BEEN COMPLETED NOR ARE PENDING ON THE DATE OF SEARCH. KA BUL CHAWLA IS SILENT ON THIS SITUATION, PERHAPS BECAUSE IT WAS NOT ENVISAGED AT THAT TIME. IN VIEW OF THESE FACTS AND LEGAL POSITION THAT THE PREMISE DEVELOPED IN KABUL CHAWLA, THAT ADDITIONS CAN BE MADE IN THE COMPLETED OR ABATED ASSESSMENTS ONLY IF THERE IS INCRIMINATING MATERIAL IN A PROCEEDING U/S 153A, CANNOT AND WILL NOT APPLY TO SUCH A SITUATION. ITA NO. 493/JP/2017 ACIT, CENTRAL CIRCLE-2, JAIPUR VS GODAWARI ESTATES PVT.LTD. KOLKATA 101 4) NOW WE COME TO THE QUESTION OF WHETHER IT IS NECESSARY TO HAVE INCRIMINATING MATERIAL IN ALL THE 6 YEARS FOR AN ADDITION TO ME M ADE ON ISSUES NOT COVERED BY SEARCH. THOUGH THERE IS AN ATTEMPT TO INTERPRET KAB UL CHAWLA IN A WAY THAT INCRIMINATING MATERIAL IS REQUIRED IN ALL THE 6 YEA RS, THIS INTERPRETATION IS INCORRECT BECAUSE: WHILE GIVING THESE DECISIONS, THE HON'BLE ITAT, MUM BAI AS WELL AS THE HON'BLE ITAT, DELHI BENCH HAS REFERRED TO THE DECISION OF T HE HON'BLE MUMBAI HIGH COURT IN THE CASE OF ALL CARGO GLOBAL LOGISTICS LIM ITED VS. DCIT, CENTRAL CIRCLE- 44, MUMBAI AND THE DECISION OF HON'BLE DELHI HIGH C OURT IN THE CASE OF CIT VS. KABUL CHAWLA IN ITA NO. 707/2014 DATED 22.8.2015 . HERE IT IS PERTINENT TO MENTION THAT THE DEPARTMENT HAS NOT ACCEPTED THE DE CISIONS OF HON'BLE MUMBAI HIGH COURT IN THE CASE OF M/S ALL CARGO GLOB AL LOGISTICS AS WELL AS CONTINENTAL WAREHOUSING (NHAVA SHEVA) LTD., AND SLP HAS BEEN FILED BEFORE THE HON'BLE SUPREME COURT. THE HON'BLE SUPREME COURT HA S GRANTED LEAVE VIDE ORDER DATED 12.10.2015 AS REPORTED IN 64 TAXMANN.COM 34 (S.C.). SIMILARLY, IN THE CASE OF KABUL CHAWLA SLP HAS ALSO BEEN FILED. NOW AFTER THE DECISION OF THE HONBLE SUPREME C OURT IN THE CASE OF DEPUTY COMMISSIONER OF INCOME-TAX V. ZUARI ESTATE D EVELOPMENT & INVESTMENT CO. LTD. [2015] 373 ITR 661 (SC) AND ASSISTANT COMMISSIONER ITA NO. 493/JP/2017 ACIT, CENTRAL CIRCLE-2, JAIPUR VS GODAWARI ESTATES PVT.LTD. KOLKATA 102 OF INCOME-TAX V. RAJESH JHAVERI STOCK BROKERS P. LT D. [2007] 291 ITR 500(SC) IT IS CLEAR THAT PROCESSING OF A CASE U/S 143(1) I S NOT AN ASSESSMENT, WHICH FACT HAS BEEN ADMITTED BY THE DEL HI HIGH COURT IN THE CASE OF INDU LATA RANGWALA V. DEPUTY COMMISSIONER OF INCOME - TAX, WP(C) 1393/2002 IN THEIR DECISION DATED 18.05.2016. HENCE, THERE NOW OCCURS A THIRD CATEGORY OF CASES WHICH HAVE N EITHER BEEN COMPLETED NOR ARE PENDING ON THE DATE OF SEARCH. KABUL CHAWLA IS SILENT ON THIS SITUATION, PERHAPS BECAUSE IT WAS NO T ENVISAGED AT THAT TIME. IT IS MY CONTENTION THAT THE PREMISE DEVELOP ED IN KABUL CHAWLA , THAT ADDITIONS CAN BE MADE IN THE COMPLETED OR ABAT ED ASSESSMENTS ONLY IF THERE IS INCRIMINATING MATERIAL IN A PROCEE DING U/S 153A, CANNOT AND WILL NOT APPLY TO SUCH A SITUATION. NOW WE COME TO THE QUESTION OF WHETHER IT IS NECESS ARY TO HAVE INCRIMINATING MATERIAL IN ALL THE 6 YEARS FOR AN AD DITION TO ME MADE ON ISSUES NOT COVERED BY SEARCH. THOUGH THERE IS AN AT TEMPT TO INTERPRET KABUL CHAWLA IN A WAY THAT INCRIMINATING MATERIAL I S REQUIRED IN ALL THE 6 YEARS, THIS INTERPRETATION IS INCORRECT BECAUSE : A) THIS PROPOSITION HAS NOT BEEN SPECIFICALLY SPELT OUT IN THE KABUL CHAWLA CASE; B) THE DELHI HIGH COURT IN THE CASE OF CIT V. CHETAN DAS LACHMAN DAS [2012] 211 TAXMAN 61 (DEL.)/[2012] 254 CTR 392 (DEL.) HAS SPECIFICALLY RAISED AND THEN ANSWERED THE QUESTION IN FAVOUR OF THE REVENUE. IT HAS STATED THAT ADDITIONS ON NON-SEARCH ISSUES CAN BE MADE EVEN IF THERE IS INCRIMINATING MATERIAL IN EVEN ONE YEAR. THIS CASE IS EXTREMELY IMPORTANT FOR US. SIMILAR SENTIMENTS HAVE BEEN EXPRESSED IN THE CASE OF CIT V. ANIL KUMAR BHATIA [2013] 352 ITR 493 (DEL) WHERE ONLY ONE UNSIGNED DOCUMENT DATED 10.02.2003 SHOWING A LOAN OF RS. 1,5 0,000/- WAS FOUND DURING SEARCH CONDUCTED ON 13.12.2005. THE HO NBLE HIGH COURT HELD THAT THIS MATERIAL WAS ENOUGH TO JUSTIFY ADDITIONS IN ALL THE 6 YEARS. ITA NO. 493/JP/2017 ACIT, CENTRAL CIRCLE-2, JAIPUR VS GODAWARI ESTATES PVT.LTD. KOLKATA 103 C) RECENTLY, THE KERALA HIGH COURT IN SUNNY JACOB JEWELLERS AND WEDDING CENTRE V. DEPUTY COMMISSIONER OF INCOME-TAX [2014] 362 ITR 664 (KER) HAS ALSO VERY CATEGORICALLY STATED THAT INCRIMINATING MATERIAL FOUND DURING SEARCH IS NOT NECESSARY IN ALL THE 6 YEARS FOR ADDITIONS TO BE MADE ON OTHER ISSUE S. THEREFORE, IN VIEW OF ABOVE DISCUSSION WITH RE GARD TO THE PROVISIONS OF SEC 153A OF THE ACT, IT IS SEEN THAT FROM 01.06. 2003 ONWARDS THE NUMBER OF YEARS FROM WHICH ASSESSMENTS COULD BE FRA MED AFTER SEARCH WERE REDUCED FROM 10 TO SIX. SECTION 153A OF THE AC T HAS MANDATED THAT THERE HAVE TO BE 6 SEPARATE ASSESSMENTS INSTEA D OF A BLOCK ASSESSMENT. IT ALSO STARTED WITH A NON-OBSTANTE CLAUSE WHICH STATED THAT THE OPERATION OF SECTIONS 139, 147,148,149,151,AND 153 WAS OUSTED. IN OTHER WORDS WHEN AN ASSESSMENT WAS BEING COMPLETED U/S 153A, THE SECTIONS MENTIONED ABOVE COULD NOT BE INVOKED. THE SECTION DID NOT, REPEATS, AND DID NOT MENTION THAT FOR MAKING AN ASSESSMENT U /S 153A OF THE ACT , IT WAS NECESSARY TO HAVE SOME INCRIMINATING MATER IAL FOUND DURING SEARCH. IN THE CASE OF KABUL CHAWLA, IT WAS STATED THAT ASSESSMENTS HAD TO BE COMPLETED U/S 153A OF THE ACT THE MOMENT A SEARCH HAS TAKEN PLACE. THIS IS A COMMON GROUND IN ALL JUDICIAL PRONOUNCEMENTS, AND NOBODY HAS ANY OBJECTION TO THE SAID CONCLUSION. IT WAS ALSO STATED IN THE ABOVE CASE THAT, THOUGH NOT PRESCRIBED IN THE ACT, BUT ADDITIONS HAD TO BE MADE ON THE BASIS OF INCRIMINATING MATERIAL FOUND DURING SEARCH. THE AD DITIONS COULD NOT BE ARBITRARY. THIS CONCLUSION, AND OTHERS ARRIVED AT IN PARA 37 OF THE JUDGMENT STARTED THE PRESENT CONTROVERSY. IT IS OBV IOUS THAT IF NO INCRIMINATING MATERIAL IS FOUND DURING SEARCH, THEN ADDITIONS, IF ANY, HAVE TO BE MADE IN THE INCOME SHOWN IN THE RETURN O F INCOME ( IN THE CASE OF PENDING ASSESSMENTS WHICH ABATE ) AND TO THE COMPUTED INCOME ( IN CASE OF ASSESSMENTS WERE COMPLETED) . THUS EFFECTIVELY, WHAT WAS SAID IN THE CASE OF KABUL CHAWLA WAS THAT MAKING ANY ADDITION IN THE RETURNED INCOME OR INCOME EARLIER A SSESSED WAS NOT ALLOWED IF NO MATERIAL WAS FOUND IN THE SEARCH WHIC H COULD LEAD TO AN ADDITION ON THE BASIS OF THE SAID MATERIAL. ITA NO. 493/JP/2017 ACIT, CENTRAL CIRCLE-2, JAIPUR VS GODAWARI ESTATES PVT.LTD. KOLKATA 104 THEREFORE, FACTS OF CASE LAWS RELIED UPON BY THE ASSESS EE ARE QUITE DISTINGUISHABLE WITH THAT OF THE PRESENT CASE. IN V IEW OF THESE FACTS, ASSESSEES CONTENTION IS NOT CORRECT THAT AO WAS NOT JUSTIFIED IN REASSESSING THE COMPLETED ASSESSMENT. ASSESSEES AP PEAL FAILS IN GR NO 1. 3.2 GROUND NO. 2 : REGARDING ADDITION OF RS. 10,30,00,000/- MADE BY APPLYING THE PROVISIONS OF SECTION 56(1) OF INCOME TAX ACT, 1961 TREATING THE SHARE C APITAL AND PREMIUM THEREON RECEIVED FROM VARIOUS COMPANIES AS INCOME OF THE ASSESSEE. GROUND NO. 3: ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE AND IN LA W THE LD. AO ERRED IN HOLDING THAT THE RECEIPT OF SHARE CAPITAL AND PREMIUM DURI NG THE YEAR FROM VARIOUS COMPANIES IS NOT JUSTIFIABLE AND PART OF A WELL PLANNED EXERCI SE OF INTRODUCING UNACCOUNTED MONEY IN THE FORM OF SHARE CAPITAL AND SHARE PREMIUM MORE SO WHEN THE ASSESSEE WAS NO CAPABLE TO EARN SUCH HUGE UNDISCLOSED INCOME. 3.2.1 SUBMISSION MADE : RELEVANT EXTRACTS OF WHICH AR OF THE ASSESSEE ARE REPRODUCED HERE AS UNDER: .. .. 1) DURING THE YEAR UNDER CONSIDERATION THE ASSESSEE ALLOTTED 1,03,000 EQUITY SHARES OF RS. 10 EACH TO VARIOUS COMPANIES AT A PREM IUM OF RS. 990/- PER SHARE DETAIL OF WHICH IS AS UNDER: - S. N. NAME NO. OF SHARES ALLOTED/ APPLIED DURING THE YEAR AMOUNT ADJUSTED AGAINST SHARE CAPITAL RATE PER SHARE AMOUNT ADJUSTED AGAINST SHARE PREMIUM RATE OF PREMIUM PER SHARE ISSUE PRICE OF THE SHARE TOTAL CONSIDERATION RECEIVED 1 BAKLIWAL VYAPAAR PVT. LTD. 12,300 1,23,000 10 1,21,77,000 990 1000 1,23,00,000 2 JASMINE COMMODITIES PVT. LTD 6,500 65,000 10 64,35,000 99 0 1000 65,00,000 3 BUNIYAD VANIJYA PVT LTD 5,000 50,000 10 49,50,000 990 1000 50,00,000 4 PUJA BARTER PVT. LTD. 6,000 60,000 10 59,40,000 990 1000 60,00,000 5 DHANLABH TRADELINKS PVT. LTD 2,500 25,000 10 24,75,000 990 1000 25,00,000 ITA NO. 493/JP/2017 ACIT, CENTRAL CIRCLE-2, JAIPUR VS GODAWARI ESTATES PVT.LTD. KOLKATA 105 6 DEVANG COMMERCIAL PVT. LTD 5,000 50,000 10 49,50,000 990 1000 50,00,000 7 EXTENT VINIMAY PVT. LTD 2,500 25,000 10 24,75,000 990 1000 25,00,000 8 NEHA DEAL TRADE PVT LTD 2,000 20,000 10 19,80,000 990 1000 20,00,000 9 SPRING SALESPVT LTD 6,700 67,000 10 66,33,000 990 1000 67,00,000 10 MANALI TRADECOM PVT LTD. 5,000 50,000 10 49,50,000 990 1000 50,00,000 11 TARGET VINCOM PVT LTD 5,000 50,000 10 49,50,000 990 1000 50,00,000 12 BERNSTAIN MARKETING PVT LTD 1,500 15,000 10 14,85,000 990 1000 15,00,000 13 KESARINANDAN VANIJYA PVT LTD 500 5,000 10 4,95,000 990 1000 5,00,000 14 DEEP COMMOSALE PVT LTD 5,000 50,000 10 49,50,000 990 1000 50,00,000 15 APOLLO VINTRADE PVT LTD 2,500 25,000 10 24,75,000 990 1000 25,00,000 16 INNOVA COMMERCIAL PVT LTD 2,500 25,000 10 24,75,000 990 1000 25,00,000 17 PRAYASH DEALTRADE PVT LTD 4,000 40,000 10 39,60,000 990 1000 40,00,000 18 JUSTIFY VANIJYA PVT LTD 5,000 50,000 10 49,50,000 990 1000 50,00,000 19 SOLTY FINANCIAL CONSULTANTS PVT LTD 5,000 50,000 10 49,50,000 990 1000 50,00,000 20 ACHIEVER COMMOTRADE PVT LTD 5,000 50,000 10 49,50,000 990 1000 50,00,000 21 SISHMAHAL COMMOTRADE PVT. LTD 2,000 20,000 10 19,80,000 990 1000 20,00,000 ITA NO. 493/JP/2017 ACIT, CENTRAL CIRCLE-2, JAIPUR VS GODAWARI ESTATES PVT.LTD. KOLKATA 106 22 ADVANTAGE DEALTRADE PVT. LTD 2,500 25,000 10 24,75,000 990 1000 25,00,000 23 ORIGIN VINIMAYPVT LTD 4,000 40,000 10 39,60,000 990 1000 40,00,000 24 RUKMANI INTERNATIONAL PVT LTD 5,000 50,000 10 49,50,000 990 1000 50,00,000 TOTAL 1,03,000 10,30,000 10,19,70,000 10,30,00,000 2) DURING THE COURSE OF ASSESSMENT PROCEEDINGS THE ASSESSEE SUBMITTED THE FOLLOWING DOCUMENTS TO PROVE THEIR IDENTITY OF SHAR EHOLDERS, CREDITWORTHINESS OF SHAREHOLDERS AND GENUINENESS OF TRANSACTION WITH TH EM: - NAME OF SHAREHOLDER PARTICULARS OF DOCUMENTS SUBMITTED COPY AT PB PAGE BAKLIWAL VYAPAAR PVT. LTD. SHARE APPLICATION CONTAINING THE NAME/ADDRESS/PAN O F PARTY, DETAIL OF PAYMENT RECEIVED ETC. COPY OF BOARD RESOLUTION. COPY OF PAN CARD OF PARTY. COPY OF BANK STATEMENT SHOWING THE ENTRY OF PAYMENT MADE TO ASSESSEE. COPY OF ACK. OF ITR OF AY 2012-13. DECLARATION OF SOURCE OF FUNDS WITH PARTY. COPY OF REGISTRATION CERTIFICATE OF ROC. 47 TO 49 50 51 52 TO 53 54 55 56 JASMINE COMMODITIES PVT. LTD SHARE APPLICATION CONTAINING THE NAME/ADDRESS/PAN O F PARTY, DETAIL OF PAYMENT RECEIVED ETC. COPY OF BOARD RESOLUTION. COPY OF PAN CARD OF PARTY. COPY OF BANK STATEMENT SHOWING THE ENTRY OF PAYMENT MADE TO ASSESSEE. COPY OF ACK. OF ITR OF AY 2012-13. COPY OF AUDIT REPORT AND AUDITED BALANCE SHEET ALON G WITH ANNEXURE OF 31.03.12. DECLARATION OF SOURCE OF FUNDS WITH PARTY. COPY OF REGISTRATION CERTIFICATE OF ROC. 57 TO 60 61 62 63 TO 64 65 66 TO 78 79 80 BUNIYAD VANIJYA PVT LTD SHARE APPLICATION CONTAINING THE NAME/ADDRESS/PAN O F PARTY, DETAIL OF PAYMENT RECEIVED ETC. COPY OF BOARD RESOLUTION. COPY OF PAN CARD OF PARTY. COPY OF BANK STATEMENT SHOWING THE ENTRY OF PAYMENT MADE TO ASSESSEE. COPY OF ACK. OF ITR OF AY 2012-13. COPY OF AUDIT REPORT AND AUDITED BALANCE SHEET ALON G WITH ANNEXURE OF 31.03.12. DECLARATION OF SOURCE OF FUNDS WITH PARTY. COPY OF REGISTRATION CERTIFICATE OF ROC. 81 TO 84 85 86 87 88 89 TO 101 102 TO 103 104 ITA NO. 493/JP/2017 ACIT, CENTRAL CIRCLE-2, JAIPUR VS GODAWARI ESTATES PVT.LTD. KOLKATA 107 PUJA BARTER PVT. LTD. SHARE APPLICATION CONTAINING THE NAME/ADDRESS/PAN O F PARTY, DETAIL OF PAYMENT RECEIVED ETC. COPY OF BOARD RESOLUTION. COPY OF PAN CARD OF PARTY. COPY OF BANK STATEMENT SHOWING THE ENTRY OF PAYMENT MADE TO ASSESSEE. COPY OF REGISTRATION CERTIFICATE OF ROC. 105 TO 106 107 108 109 TO 110 111 DHANLABH TRADELINKS PVT. LTD SHARE APPLICATION CONTAINING THE NAME/ADDRESS/PAN OF PARTY, DETAIL OF PAYMENT RECEIVED ETC. COPY OF BOARD RESOLUTION. COPY OF PAN CARD OF PARTY. COPY OF BANK STATEMENT SHOWING THE ENTRY OF PAYMENT MADE TO ASSESSEE. COPY OF ACK. OF ITR OF AY 2012-13. COPY OF AUDIT REPORT AND AUDITED BALANCE SHEET ALON G WITH ANNEXURE OF 31.03.12. DECLARATION OF SOURCE OF FUNDS WITH PARTY. COPY OF REGISTRATION CERTIFICATE OF ROC. 112 TO 113 114 115 116 117 118 TO 130 131 132 DEVANG COMMERCIAL PVT. LTD SHARE APPLICATION CONTAINING THE NAME/ADDRESS/PAN OF PART Y, DETAIL OF PAYMENT RECEIVED ETC. COPY OF BOARD RESOLUTION. COPY OF PAN CARD OF PARTY. COPY OF BANK STATEMENT SHOWING THE ENTRY OF PAYMENT MADE TO ASSESSEE. COPY OF ACK. OF ITR OF AY 2012-13. COPY OF AUDIT REPORT AND AUDITED BALANCE SHEET ALON G WITH ANNEXURE OF 31.03.12. DECLARATION OF SOURCE OF FUNDS WITH PARTY. COPY OF REGISTRATION CERTIFICATE OF ROC. 133 TO 136 137 138 139 TO 140 141 142 TO 154 155 TO 156 157 EXTENT VINIMAY PVT. LTD SHARE APPLICATION CONTAINING THE NAME/ADDRESS/PAN OF PART Y, DETAIL OF PAYMENT RECEIVED ETC. COPY OF BOARD RESOLUTION. COPY OF PAN CARD OF PARTY. COPY OF BANK STATEMENT SHOWING THE ENTRY OF PAYMENT MADE TO ASSESSEE. COPY OF ACK. OF ITR OF AY 2012-13. COPY OF AUDIT REPORT AND AUDITED BALANCE SHEET ALON G WITH ANNEXURE OF 31.03.12. DECLARATION OF SOURCE OF FUNDS WITH PARTY. COPY OF REGISTRATION CERTIFICATE OF ROC. 158 TO 159 160 161 162 163 164 TO 175 176 177 NEHA DEAL TRADE PVT. LTD SHARE APPLICATION CONTAINING THE NAME/ADDRESS/PAN OF PARTY, DETAIL OF PAYMENT RECEIVED ETC. COPY OF BOARD RESOLUTION. COPY OF PAN CARD OF PARTY. COPY OF BANK STATEMENT SHOWING THE ENTRY OF PAYMENT MADE TO ASSESSEE. COPY OF ACK. OF ITR OF AY 2012-13. COPY OF AUDIT REPORT AND AUDITED BALANCE SHEET ALON G WITH ANNEXURE OF 31.03.12. DECLARATION OF SOURCE OF FUNDS WITH PARTY. COPY OF REGISTRATION CERTIFICATE OF ROC. 178 179 180 181 TO 182 183 184 TO 191 192 193 ITA NO. 493/JP/2017 ACIT, CENTRAL CIRCLE-2, JAIPUR VS GODAWARI ESTATES PVT.LTD. KOLKATA 108 SPRING SALES PVT. LTD SHARE APPLICATION CONTAINING THE NAME/ADDRESS/PAN OF PARTY, DETAIL OF PAYMENT RECEIVED ETC. COPY OF BOARD RESOLUTION. COPY OF PAN CARD OF PARTY. COPY OF BANK STATEMENT SHOWING THE ENTRY OF PAYMENT MADE TO ASSESSEE. COPY OF ACK. OF ITR OF AY 2012-13. COPY OF AUDIT REPORT AND AUDITED BALANCE SHEET ALON G WITH ANNEXURE OF 31.03.12. DECLARATION OF SOURCE OF FUNDS WITH PARTY. COPY OF REGISTRATION CERTIFICATE OF ROC. 194 TO 197 198 199 200 201 202 TO 214 215 TO 216 217 MANALI TRADECOM PVT LTD. SHARE APPLICATION CONTAINING THE NAME/ADDRESS/PAN OF PARTY, DETAIL OF PAYMENT RECEIVED ETC. COPY OF BOARD RESOLUTION. COPY OF PAN CARD OF PARTY. COPY OF BANK STATEMENT SHOWING THE ENTRY OF PAYMENT MADE TO ASSESSEE. COPY OF ACK. OF ITR OF AY 2012-13. COPY OF AUDIT REPORT AND AUDITED BALANCE SHEET ALON G WITH ANNEXURE OF 31.03.12. DECLARATION OF SOURCE OF FUNDS WITH PARTY. COPY OF REGISTRATION CERTIFICATE OF ROC. 218 TO 221 222 223 224 225 226 TO 238 239 TO 240 241 TARGET VINCOM PVT LTD SHARE APPLICATION CONTAINING THE NAME/ADDRESS/PAN OF PARTY, DETAIL OF PAYMENT RECEIVED ETC. COPY OF BOARD RESOLUTION. COPY OF PAN CARD OF PARTY. COPY OF BANK STATEMENT SHOWING THE ENTRY OF PAYMENT MADE TO ASSESSEE. COPY OF ACK. OF ITR OF AY 2012-13. COPY OF AUDIT REPORT AND AUDITED BALANCE SHEET ALON G WITH ANNEXURE OF 31.03.12. DECLARATION OF SOURCE OF FUNDS WITH PARTY. COPY OF REGISTRATION CERTIFICATE OF ROC. 242 TO 245 246 247 248 249 250 TO 262 263 TO 264 265 BERNSTAIN MARKETING PVT LTD SHARE APPLICATION CONTAINING THE NAME/ADDRESS/PAN O F PARTY, DETAIL OF PAYMENT RECEIVED ETC. COPY OF BOARD RESOLUTION. COPY OF PAN CARD OF PARTY. COPY OF BANK STATEMENT SHOWING THE ENTRY OF PAYMENT MADE TO ASSESSEE. COPY OF ACK. OF ITR OF AY 2012-13. COPY OF AUDIT REPORT AND AUDITED BALANCE SHEET ALON G WITH ANNEXURE OF 31.03.12. 266 267 268 269 270 271 TO 282 ITA NO. 493/JP/2017 ACIT, CENTRAL CIRCLE-2, JAIPUR VS GODAWARI ESTATES PVT.LTD. KOLKATA 109 KESARINANDAN VANIJYA PVT LTD SHARE APPLICATION CONTAINING THE NAME/ADDRESS/PAN O F PARTY, DETAIL OF PAYMENT RECEIVED ETC. COPY OF BOARD RESOLUTION. COPY OF PAN CARD OF PARTY. COPY OF BANK STATEMENT SHOWING THE ENTRY OF PAYMENT MADE TO ASSESSEE. COPY OF ACK. OF ITR OF AY 2012-13. COPY OF AUDIT REPORT AND AUDITED BALANCE SHEET ALON G WITH ANNEXURE OF 31.03.12. DECLARATION OF SOURCE OF FUNDS WITH PARTY. COPY OF REGISTRATION CERTIFICATE OF ROC. 283 284 285 286 287 288 TO 297 298 299 DEEP COMMOSALE PVT LTD COPY OF BOARD RESOLUTION. COPY OF PAN CARD OF PARTY. COPY OF BANK STATEMENT SHOWING THE ENTRY OF PAYMENT MADE TO ASSESSEE. COPY OF ACK. OF ITR OF AY 2012-13. COPY OF AUDIT REPORT AND AUDITED BALANCE SHEET ALON G WITH ANNEXURE OF 31.03.12. DECLARATION OF SOURCE OF FUNDS WITH PARTY. COPY OF REGISTRATION CERTIFICATE OF ROC. 300 301 302 TO 303 304 305 TO 317 318 319 APOLLO VINTRADE PVT LTD SHARE APPLICATION CONTAINING THE NAME/ADDRESS/PAN O F PARTY, DETAIL OF PAYMENT RECEIVED ETC. COPY OF BOARD RESOLUTION. COPY OF PAN CARD OF PARTY. COPY OF BANK STATEMENT SHOWING THE ENTRY OF PAYMENT MADE TO ASSESSEE. COPY OF ACK. OF ITR OF AY 2012-13. COPY OF AUDIT REPORT AND AUDITED BALANCE SHEET ALON G WITH ANNEXURE OF 31.03.12. DECLARATION OF SOURCE OF FUNDS WITH PARTY. COPY OF REGISTRATION CERTIFICATE OF ROC. 320 TO 321 322 323 324 325 326 TO 338 339 340 INNOVA COMMERCIAL PVT LTD SHARE APPLICATION CONTAINING THE NAME/ADDRESS/PAN O F PARTY, DETAIL OF PAYMENT RECEIVED ETC. COPY OF BOARD RESOLUTION. COPY OF PAN CARD OF PARTY. COPY OF BANK STATEMENT SHOWING THE ENTRY OF PAYMENT MADE TO ASSESSEE. COPY OF ACK. OF ITR OF AY 2012-13. COPY OF AUDIT REPORT AND AUDITED BALANCE SHEET ALON G WITH ANNEXURE OF 31.03.12. DECLARATION OF SOURCE OF FUNDS WITH PARTY. COPY OF REGISTRATION CERTIFICATE OF ROC. 341 TO 342 343 344 345 346 347 TO 359 360 361 ITA NO. 493/JP/2017 ACIT, CENTRAL CIRCLE-2, JAIPUR VS GODAWARI ESTATES PVT.LTD. KOLKATA 110 PRAYASH DEALTRADE PVT LTD SHARE APPLICATION CONTAINING THE NAME/ADDRESS/PAN O F PARTY, DETAIL OF PAYMENT RECEIVED ETC. COPY OF BOARD RESOLUTION. COPY OF PAN CARD OF PARTY. COPY OF BANK STATEMENT SHOWING THE ENTRY OF PAYMENT MADE TO ASSESSEE. COPY OF ACK. OF ITR OF AY 2012-13. COPY OF AUDIT REPORT AND AUDITED BALANCE SHEET ALON G WITH ANNEXURE OF 31.03.12. DECLARATION OF SOURCE OF FUNDS WITH PARTY. COPY OF REGISTRATION CERTIFICATE OF ROC. 362 TO 363 364 365 366 367 368 TO 380 381 382 JUSTIFY VANIJYA PVT LTD SHARE APPLICATION CONTAINING THE NAME/ADDRESS/PAN O F PARTY, DETAIL OF PAYMENT RECEIVED ETC. COPY OF BOARD RESOLUTION. COPY OF PAN CARD OF PARTY. COPY OF BANK STATEMENT SHOWING THE ENTRY OF PAYMENT MADE TO ASSESSEE. COPY OF ACK. OF ITR OF AY 2012-13. COPY OF AUDIT REPORT AND AUDITED BALANCE SHEET ALON G WITH ANNEXURE OF 31.03.12. DECLARATION OF SOURCE OF FUNDS WITH PARTY. COPY OF REGISTRATION CERTIFICATE OF ROC. 383 384 385 386 TO 389 390 391 TO 405 406 407 SOLTY FINANCIAL CONSULTANTS PVT LTD SHARE APPLICATION CONTAINING THE NAME/ADDRESS/PAN O F PARTY, DETAIL OF PAYMENT RECEIVED ETC. COPY OF BOARD RESOLUTION. COPY OF PAN CARD OF PARTY. COPY OF BANK STATEMENT SHOWING THE ENTRY OF PAYMENT MADE TO ASSESSEE. COPY OF ACK. OF ITR OF AY 2012-13. COPY OF AUDIT REPORT AND AUDITED BALANCE SHEET ALON G WITH ANNEXURE OF 31.03.12. DECLARATION OF SOURCE OF FUNDS WITH PARTY. COPY OF REGISTRATION CERTIFICATE OF ROC. 408 409 410 411 TO 414 415 416 TO 429 430 431 ACHIEVER COMMOTRADE PVT LTD SHARE APPLICATION CONTAINING THE NAME/ADDRESS/PAN O F PARTY, DETAIL OF PAYMENT RECEIVED ETC. COPY OF BOARD RESOLUTION. COPY OF PAN CARD OF PARTY. COPY OF BANK STATEMENT SHOWING THE ENTRY OF PAYMENT MADE TO ASSESSEE. COPY OF ACK. OF ITR OF AY 2012-13. COPY OF AUDIT REPORT AND AUDITED BALANCE SHEET ALON G WITH ANNEXURE OF 31.03.12. DECLARATION OF SOURCE OF FUNDS WITH PARTY. COPY OF REGISTRATION CERTIFICATE OF ROC. 432 TO 435 436 437 438 TO 439 440 441 TO 453 454 TO 455 456 ITA NO. 493/JP/2017 ACIT, CENTRAL CIRCLE-2, JAIPUR VS GODAWARI ESTATES PVT.LTD. KOLKATA 111 SISHMAHAL COMMOTRADE PVT. LTD SHARE APPLICATION CONTAINING THE NAME/ADDRESS/PAN O F PARTY, DETAIL OF PAYMENT RECEIVED ETC. COPY OF BOARD RESOLUTION. COPY OF PAN CARD OF PARTY. COPY OF BANK STATEMENT SHOWING THE ENTRY OF PAYMENT MADE TO ASSESSEE. COPY OF ACK. OF ITR OF AY 2012-13. COPY OF AUDIT REPORT AND AUDITED BALANCE SHEET ALON G WITH ANNEXURE OF 31.03.12. DECLARATION OF SOURCE OF FUNDS WITH PARTY. COPY OF REGISTRATION CERTIFICATE OF ROC. 457 458 459 460 TO 461 462 463 TO 469 470 471 ADVANTAGE DEALTRADE PVT. LTD SHARE APPLICATION CONTAINING THE NAME/ADDRESS/PAN O F PARTY, DETAIL OF PAYMENT RECEIVED ETC. COPY OF BOARD RESOLUTION. COPY OF PAN CARD OF PARTY. COPY OF BANK STATEMENT SHOWING THE ENTRY OF PAYMENT MADE TO ASSESSEE. COPY OF ACK. OF ITR OF AY 2012-13. COPY OF AUDIT REPORT AND AUDITED BALANCE SHEET ALON G WITH ANNEXURE OF 31.03.12. DECLARATION OF SOURCE OF FUNDS WITH PARTY. COPY OF REGISTRATION CERTIFICATE OF ROC. 472 TO 473 474 475 476 477 478 TO 490 491 492 ORIGIN VINIMAY PVT LTD SHARE APPLICATION CONTAINING THE NAME/ADDRESS/PAN O F PARTY, DETAIL OF PAYMENT RECEIVED ETC. COPY OF BOARD RESOLUTION. COPY OF PAN CARD OF PARTY. COPY OF BANK STATEMENT SHOWING THE ENTRY OF PAYMENT MADE TO ASSESSEE. COPY OF ACK. OF ITR OF AY 2012-13. COPY OF AUDIT REPORT AND AUDITED BALANCE SHEET ALON G WITH ANNEXURE OF 31.03.12. DECLARATION OF SOURCE OF FUNDS WITH PARTY. COPY OF REGISTRATION CERTIFICATE OF ROC. 493 TO 494 495 496 497 498 499 TO 511 512 513 RUKMANI INTERNATIONAL PVT LTD SHARE APPLICATION CONTAINING THE NAME/ADDRESS/PAN O F PARTY, DETAIL OF PAYMENT RECEIVED ETC. COPY OF BOARD RESOLUTION. COPY OF PAN CARD OF PARTY. COPY OF BANK STATEMENT SHOWING THE ENTRY OF PAYMENT MADE TO ASSESSEE. COPY OF ACK. OF ITR OF AY 2012-13. DECLARATION OF SOURCE OF FUNDS WITH PARTY. COPY OF REGISTRATION CERTIFICATE OF ROC. 514 515 516 517 518 519 520 3. ALL THE SHARE CAPITAL/SHARE APPLICATION WAS RECEI VED THROUGH A/C PAYEE CHEQUES AND VERIFIABLE FROM BANK STATEMENT OF ASSESSEE AS W ELL AS BANK STATEMENT OF THE PARTY. THE ONUS U/S 68 OF THE ASSESSEE IS TO PROVE THE IDENTITY, CAPACITY AND GENUINENESS OF THE TRANSACTIONS HAS BEEN DISCHARGED WHICH MAY BE SEEN FROM THE FOLLOWINGS:- I) IDENTITY:- THE ASSESSEE PROVED THE IDENTITY OF ALL THE COMPA NIES BY FILING THE SHARE APPLICATION RECEIVED FROM THE PARTIES AND THE PARTI ES ARE DULY IN EXISTENCE AND ITA NO. 493/JP/2017 ACIT, CENTRAL CIRCLE-2, JAIPUR VS GODAWARI ESTATES PVT.LTD. KOLKATA 112 THE EXISTENCE OF THE PARTIES CAN BE VERIFIED FROM T HE OFFICIAL WEBSITE OF MCA. THE LD. AO ALSO NOT DOUBTED THE IDENTITY OF THE ABOVE NA MED COMPANIES. FURTHER THE NOTICE ISSUED U/S 133(6) OF INCOME TAX ACT, 1961 WAS DULY SERVED ON ALL THE COMPANIES WHICH ALSO PROVE THE IDENTITY OF THE PART IES. II) CREDITWORTHINESS ALL THE COMPANIES ARE INCOME TAX ASSESSEE AND DUL Y FILING THE INCOME TAX RETURN AND BALANCE SHEETS. THERE IS SUFFICIENT SOUR CE OF FUNDS WITH ALL THE COMPANIES TO INVESTMENT SHARE CAPITAL/SHARE APPLICA TION IN THE ASSESSEE COMPANY. THE ASSESSEE SUBMITTED THE COPIES OF BANK ACCOUNT/DECLARATION OF SOURCE OF FUNDS WITH THEM OF INVESTOR COMPANIES. TH E BANK STATEMENT SHOWS THE HUGE TRANSACTION OF HIGH VALUE IN THE ACCOUNTS OF T HE COMPANIES. THE CHART SHOWING THE AMOUNT INVESTED BY THE ABOVE NAMED COMP ANIES IN ASSESSEE COMPANY VIZ A VIZ OWN FUNDS WITH THE INVESTOR COMPA NY (TO THE EXTENT OF INFORMATION AVAILABLE WITH ASSESSEE) ARE AS UNDER: - NAME OF THE INVESTOR COMPANY AMOUNT INVESTED IN ASSESSEE COMPANY SHARE CAPITAL AND RESERVE & SURPLUS WITH INVESTOR COMPANIES AS ON 31.03.2012 SHARE CAPITAL AND RESERVE & SURPLUS WITH INVESTOR COMPANIES AS ON 31.03.2011 BAKLIWAL VYAPAAR PVT. LTD. 1,23,00,000 JASMINE COMMODITIES PVT. LTD 65,00,000 8,23,03,270 8,22,88,527 BUNIYAD VANIJYA PVT LTD 50,00,000 17,91,08,448 17,91,02,827 PUJA BARTER PVT. LTD. 60,00,000 DHANLABH TRADELINKS PVT. LTD 25,00,000 16,42,60,142 16,42,53,102 DEVANG COMMERCIAL PVT. LTD 50,00,000 9,75,61,443 9,75,54,249 EXTENT VINIMAY PVT. LTD 25,00,000 17,70,65,476 17,70,59,555 NEHA DEAL TRADE PVT LTD 20,00,000 7,86,41,769 NA SPRING SALESPVT LTD 67,00,000 9,36,15,218 9,36,06,840 MANALI TRADECOM PVT LTD. 50,00,000 12,66,53,575 12,70,01,823 TARGET VINCOM PVT LTD 50,00,000 12,68,85,160 12,72,03,634 BERNSTAIN MARKETING PVT LTD 15,00,000 45,99,366 NA KESARINANDAN VANIJYA PVT LTD 5,00,000 1,37,50,000 NA DEEP COMMOSALE PVT LTD 50,00,000 18,37,03,758 18,47,07,445 APOLLO VINTRADE PVT LTD 25,00,000 13,41,91,072 13,41,04,727 INNOVA COMMERCIAL PVT LTD 25,00,000 16,33,53,003 16,37,04,726 PRAYASH DEALTRADE PVT LTD 40,00,000 13,49,75,685 13,50,51,859 JUSTIFY VANIJYA PVT LTD 50,00,000 17,75,81,367 17,41,00,509 SOLTY FINANCIAL CONSULTANTS PVT LTD 50,00,000 15,61,61,518 15,31,00,671 ACHIEVER COMMOTRADE PVT LTD 50,00,000 11,41,11,730 11,41,04,552 SISHMAHAL COMMOTRADE PVT. LTD 20,00,000 4,94,84,231 3,55,26,957 ADVANTAGE DEALTRADE PVT. LTD 25,00,000 11,46,36,221 11,46,15,253 ORIGIN VINIMAY PVT. LTD 40,00,000 9,68,62,423 9,68,55,538 RUKMANI INTERNATIONAL PVT. LTD 50,00,000 TOTAL 10,30,00,000 FROM THE ABOVE CHART IT IS CLEAR THAT ALL THE INVE STOR COMPANIES WERE HAVING THEIR OWN SHARE CAPITAL AND RESERVE & SURPLUS WHICH WAS MU CH MORE THAN TO THE AMOUNT INVESTED IN THE ASSESSEE COMPANY. THE ABOVE CHART SHOWS THAT THE INVESTOR COMPANIES WERE HAVING THEIR OWN INDEPENDEN T FUNDS AND HAVING THEIR INDEPENDENT SOURCE TO INVEST IN THE SHARES OF THE A SSESSEE COMPANY. APART FROM THE INVESTMENT MADE IN THE SHARES OF ASSESSEE COMPA NIES, THE INVESTOR ITA NO. 493/JP/2017 ACIT, CENTRAL CIRCLE-2, JAIPUR VS GODAWARI ESTATES PVT.LTD. KOLKATA 113 COMPANIES WERE ALSO HAVING INVESTMENTS IN SHARES OF OTHER COMPANIES OR LOANS & ADVANCES TO PARTIES WHICH IS MUCH MORE THAN TO TH E AMOUNT INVESTED IN THE ASSESSEE COMPANY, THEREFORE FROM THE BANK STATEMENT AS WELL AS FINANCIALS STATEMENTS OF THE INVESTOR COMPANIES THEIR CREDITWO RTHINESS IS DULY PROVED. III) GENUINENESS THE ASSESSEE SUBMITTED THE SHARE APPLICATION FORM RECEIVED FROM ABOVE COMPANIES AGAINST THE SHARE APPLICATION RECEIVED FR OM THE COMPANIES. THE SHARE APPLICATION IS SUPPORTED BY BOARD RESOLUTION PASSED IN THE INVESTOR COMPANIES. THE ASSESSEE COMPANY HAS ALLOTTED THE SHARES TO THE INVESTOR COMPANIES. THE PROPER RETURNS WERE FILED BEFORE THE ROC AGAINST AL LOTMENT OF THE SHARES TO THESE COMPANIES. FURTHERMORE, THE DEPARTMENT HAS CARRIED OUT INTENSIVE SEARCH OPERATIONS OVER THE MOTISONS GROUP AND NO ANY INCRI MINATING MATERIAL WAS FOUND TO SHOW THAT THE MONEY AGAINST THE SHARE ALLO TMENT WAS OWN MONEY OF THE COMPANY. SHARES CERTIFICATES WERE ISSUED AGAINS T THE ALLOTMENT OF THE SHARES TO THESE COMPANIES WERE NOT FOUND FROM THE POSSESSI ON OF THE ASSESSEE GROUP OR ITS DIRECTOR OR EMPLOYEES. THIS FACT SHOWS THAT AFT ER ALLOTMENT OF SHARES BY THE APPELLANT COMPANY SHARE CERTIFICATES WERE DISPATCHE D TO THE SUBSCRIBER COMPANIES. NO ANY ENTRY IN BOOKS OF ACCOUNT OR DOCU MENT WAS FOUND SHOWING PAYMENT OF CASH TO THESE INVESTOR COMPANIES AGAINST RECEIPT OF CHEQUES FROM THESE COMPANIES AGAINST ALLOTMENT OF SHARES. THEREF ORE THE GENUINENESS OF THE TRANSACTIONS CANNOT BE DOUBTED. 4. THE LD. AO ALSO NOT DOUBTED THE IDENTITY OF THE S HAREHOLDERS AND HE ONLY DOUBTED THE CREDITWORTHINESS AND GENUINENESS OF THE TRANSACTIONS FOR THE FOLLOWING REASONS AS GIVEN IN PARA 11 (A TO C) AND PARA 12 OF THE ASSESSMENT ORDER: - I) THE ASSESSEE COMPANY WAS INCORPORATED ON 27.11 .1989 AND DURING THE YEAR THE ASSESSEE COMPANY RECEIVED THE HUGE SHA RE PREMIUM. II) AS PER THE AUDITED P&L ACCOUNT AND BALANCE SHE ET THE ASSESSEE COMPANY DID NOT HAVE ANY BUSINESS COMMENSURATE OF S HARE PREMIUM. III) PERUSAL OF THE BALANCE SHEET OF THE ASSESSEE COMPANY REVEALED THAT THERE WERE NO PHYSICAL ASSETS/ASSETS ARE NOT IN COM MENSURATE TO VALUE OF SHARE WITH THE COMPANY WITHER IN THE FORM OF FIXED ASSETS , PLANT & MACHINERY ETC. IN THE ABOVE BACKGROUND THE RECEIPT OF SHARE CAPITA L RS. 10,30,000/- AND PREMIUM TO THE TUNE OF RS. 10,19,70,000/- DURING THE YEAR UNDER CONSIDERATION WAS NOT ONLY ABNORMAL BUT ALSO APPEARED TO BE A PART OF A WELL P LANNED EXERCISE OF TAX EVASION AS DISCUSSED EARLIER. REGARDING THESE FINDINGS/OBSERVATIONS OF LD. AO WE MAY SUBMIT AS UNDER: - V) ADMITTEDLY DURING THE YEAR UNDER CONSIDERATION THE A SSESSEE COMPANY RECEIVED HUGE SHARE PREMIUM BUT THE SAME DOES NOT AUTOMATICA LLY MAKE THE SHARE ITA NO. 493/JP/2017 ACIT, CENTRAL CIRCLE-2, JAIPUR VS GODAWARI ESTATES PVT.LTD. KOLKATA 114 PREMIUM AS NON GENUINE AND TAXABLE IN THE HANDS OF THE ASSESSEE. THE INVESTMENT BY THE INVESTEE COMPANIES WAS MADE AFTER BEING CONVINCED WITH THE FUTURE BUSINESS PLANNING OF THE ASSESSEE COMPANY. T HE ASSESSEE COMPANY IN NBFC AND DUE TO INCREASE IN DEMAND OF LOANS IN MARK ET FROM NBFC THE ASSESSEE COMPANY WAS EXPECTING GOOD BUSINESS & REVE NUE IN NEAR FUTURE AND THE INVESTOR COMPANIES WERE CONVINCED TO BE PARTNER OF ASSESSEE COMPANY, THEREFORE THEY INVESTED THE FUNDS IN THE ASSESSEE C OMPANY. THUS THE INVESTMENT MADE BY THE INVESTEE COMPANIES IN SHARES OF THE ASS ESSEE COMPANY ON THE BASIS OF FUTURE BUSINESS BUSINESS PLANS OF THE ASSE SSEE COMPANY AND OUTCOME THERE FROM. VI) ADMITTEDLY WHEN THE SHARE PREMIUM WAS RECEIVED, THE BUSINESS ACTIVITIES OF THE ASSESSEE COMPANY WAS NOT COMMENSURATE TO SHARES PRE MIUM BUT AS STATED EARLIER THE INVESTMENT WAS MADE BY THE INVESTEE COM PANIES IN SHARES OF THE ASSESSEE COMPANY ON THE BASIS OF FUTURE BUSINESS EX PANSION PLANS OF THE ASSESSEE COMPANY AND OUTCOME THERE FROM. FURTHER TH E ASSESSEE COMPANY IS ONE OF THE GROUP COMPANY OF MOTISONS GROUP. THE MOT ISONS GROUP IS VERY PRESTIGIOUS AND WELL KNOW GROUP OF THE NORTHERN PAR T OF INDIA, THEREFORE THE INVESTOR COMPANY INVESTED THE FUNDS IN THE ASSESSEE COMPANY ON THE GOODWILL OF THE MOTISONS GROUP AFTER KNOWING THEIR FUTURE PLANS AND FUTURE EARNINGS. THEREFORE THE SHARE CAPITAL/SHARE PREMIUM INVESTED BY INVESTOR COMPANIES WAS NOT ON THE BASIS OF CURRENT AFFAIRS OF THE ASSESSEE COMPANY BUT THE SAME WAS RESULT OF FUTURE BUSINESS EXPANSION PLANS COUPLED W ITH GOODWILL OF MOTISONS GROUP. VII) ADMITTEDLY WHEN THE SHARE WERE ISSUED THE BOOK VALUE OF THE ASSETS OF THE ASSESSEE COMPANY WAS NOT IN COMMENSURATE TO THE VAL UE OF THE SHARES BUT WHILE MAKING THE INVESTMENTS THE CURRENT MARKET VAL UE OF THE ASSETS (INCLUDING GOODWILL) AND FUTURE POTENTIALITY & PROFITABILITY O F THE PROJECT/ASSETS ARE ALSO TAKEN INTO CONSIDERATION AND THEN THE INVESTMENTS A RE MADE. THERE ARE LOTS OF COMPANIES WHICH ISSUE THE SHARES IN MARKET THROUGH IPO AND THE SHARES OF SUCH COMPANIES ARE SUBSCRIBED ON THE BASIS OF THEIR DECL ARATION REGARDING THEIR FUTURE BUSINESS PLANNING FOR WHICH THE FUNDS RAISED IN IPO . THUS THE EXISTING FIXED ASSETS OF THE COMPANY ALWAYS NOT TO BE THE CRITERIA FOR DECIDING THE INVESTMENT IN SHARES BY INVESTOR COMPANIES. VIII) REGARDING OBSERVATION OF LD. AO THAT SHARE CAPITAL AN D PREMIUM APPEARED TO BE A PART OF A WELL PLANNED EXERCISE OF TAX EVASION AS DISCUSSED EARLIER THIS IS TO SUBMIT THAT TAXING EVENT AROSE WHEN THE INCOME IS E ARNED AND THE TAX EVASION IS AROSE WHEN THE UNDISCLOSED INCOME IS GENERATED. IN THE FORGOING PARAS THE LD. AO HIMSELF DOUBTED THE SHARE PREMIUM ON THE GROUND T HAT THE ASSESSEE COMPANY DID NOT HAVE ANY BUSINESS COMMENSURATE OF S HARE PREMIUM. WHEN THE ASSESSEE COMPANY IS NOT HAVING ANY SUCH BUSINESS TH AN QUESTION OF HAVING ANY INCOME EITHER DISCLOSED OR UNDISCLOSED DOES NOT ARI SE AND WHEN THERE IS NO SUCH INCOME THAN HOW THE TAX CAN BE EVADED THEREON. THEREFORE IN VIEW OF FINDING GIVEN IN THESE PARAS BY THE LD. AO IT HAD TO BE PROVED FIRST BY THE DEPARTMENT THAT THE ASSESSEE WA S HAVING SOME INCOME ON WHICH IT HAS NOT PAID THE TAX AND THE SAME BROUGHT IN BOOKS OF ACCOUNTS IN THE FORM OF SHARE CAPITAL & PREMIUM THEREON. BUT IN THE INSTANT CASE THE DEPARTMENT COULD NOT PROVE ANY KIND OF UNDISCLOSED SOURCE OF I NCOME OF THE ASSESSEE AS A ITA NO. 493/JP/2017 ACIT, CENTRAL CIRCLE-2, JAIPUR VS GODAWARI ESTATES PVT.LTD. KOLKATA 115 RESULT OF SEARCH OVER ASSESSEE GROUP AS WELL AS DUR ING THE COURSE OF ASSESSMENT PROCEEDINGS. AS A RESULT OF SO CALLED LONG INQUIRIES /ANALYSIS THE DEPARTMENT COULD NOT EVIDENTIARY PROVED THAT THE ASSESSEE COMP ANY MANAGED ITS FUNDS WITH INVESTOR COMPANIES TO BROUGHT THE SAME IN BOOKS OF ACCOUNTS IN THE FORM OF SHARE CAPITAL & PREMIUM THEREON MORE SO WHEN THE INVESTOR COMPANIES HAVING THEIR OWN SUFFICIENT FUNDS TO INVEST IN THE ASSESSEE COMP ANY MUCH PRIOR TO INVESTMENT MADE IN THE ASSESSEE COMPANY AND OTHER INVESTMENTS MADE BY SUCH INVESTOR COMPANIES ARE MUCH MORE THAN TO THE INVESTMENT MADE IN ASSESSEE COMPANY. RELIANCE IS PLACED ON THE DECISION OF HONBLE SUPRE ME COURT IN THE CASE OF COMMISSIONER OF INCOME TAX VS SMT. P. K. NOORJAHAN 237 ITR 570 (SC) AND CIT VS BHARAT ENGINEERING AND CONSTRUCTION CO. (1972) 8 3 ITR 187 (SC) 5. THE LD. AO BY DOUBTING THE CREDITWORTHINESS AND G ENUINENESS OF THE SHARE CAPITAL/SHARE PREMIUM IN ABOVE PARAS ISSUED A SHOW CAUSE NOTICE DATED 06.02.2015 (COPY AT PB PAGE 35 TO 39) TO THE ASSESS EE FOR TREATING THE SHARE CAPITAL/PREMIUM AS INCOME OF THE ASSESSEE ON THE FO LLOWING GROUNDS: - A) SHARE PREMIUM/SHARE CAPITAL PAID BY INVESTOR COM PANIES IS NOT JUSTIFIED ON ANY ACCOUNT AND IT IS CLEAR THAT ENTIRE MONEY HAS BEEN INTRODUCED IN THE ASSESSEE COMPANY IN THE GARB OF SHARE PREMIUM. THE PURPOSE A ND JUSTIFICATION OF CHARGING THE SHARE PREMIUM IN EXCESS OF THE JUSTIFIABLE AMOU NT, WHICH IN THIS CASE CANNOT BE MORE THAN RS.10/- PER SHARE, IS ABSENT FROM THE ABOVE EXERCISE OF ISSUE AND SUBSCRIPTION OF SHARES AT A PREMIUM OF RS.990 PER SH ARE. B) THE DETAILED ENQUIRIES REVEALED THAT MOST OF THE COMPANIES ARE KOLKATA BASED. DIRECTORS OF THESE COMPANIES ARE THE EMPLOYEES OF M OTI SONS GROUP OR THE FAMILY MEMBERS OF CHHABRA FAMILY. DETAILED ANALYSIS SHOWED THE FOLLOWING FACTS: (I) ALL THE DIRECTORS WERE RESIDENTS OF JAIPUR (II) INTERNET SEARCH SHOWED THAT DIRECTORS OF THES E KOLKATA BASED COMPANIES ARE RELATED TO MOTISONS GROUP COMPANIES THROUGH EMPLOYM ENT OR OTHERWISE (III) ITDMS AND ITD SEARCH ON PAN OF THESE DIRECTOR S CORROBORATED THE GIVEN ADDRESSES TO A LARGE EXTENT (IV) RESIDENTIAL ADDRESS OF RAJEEV JAIN WAS THE SAME AS THAT OF MOTISONS SHARES PVT. LTD., MENTIONED ON THE VISITING CARD OF HARIDW AR OFFICE AS BRANCH HEAD. (V) ALL THESE DIRECTORS APPOINTED BETWEEN 12TH AND 17TH OCTOBER 2011 WHICH WAS MORE THAN A COINCIDENCE (THE PREVIOUSLY EXISTING DI RECTORS RESIGNED IN FEBRUARY 2012) (VI) THE EMAIL ID GIVEN ON MCA WEBSITE FOR ALL THE COMPANIES IS COMMON AND THE SAME IS FOR MOTISONS GROUP COMPANIES. THE COMPLIANC E OFFICER MS. NEHA JAIN, COMPANY SECRETARY IS COMMON BETWEEN THESE AND MOTIS ONS GROUP COMPANIES, INDICATING ABSOLUTE CONTROL OF MOTISONS GROUP UPON THESE KOLKATA BASED COMPANIES. ITA NO. 493/JP/2017 ACIT, CENTRAL CIRCLE-2, JAIPUR VS GODAWARI ESTATES PVT.LTD. KOLKATA 116 (VII) REGISTERED ADDRESS OF ALL THE COMPANIES IS TH E SAME, WHICH HAS BEEN CHANGED ON 01.03.2012. (VIII) TWO OF THE SAID COMPANIES INFORMATION ON MC A WEBSITE WERE EXAMINED IN DETAIL. M/S. ALLIANCE TRADECOM & M/S. EVERSHINE SUPPLIERS PV T. LTD WERE INCORPORATED ON 25.11.2008 AND 05.01.2009 RESPECTIVELY. THE INFL OW OF CAPITAL UPON INCORPORATION WAS THROUGH SHARE SOLD AT A VERY HIGH PREMIUM AND THEREAFTER THE SAID CAPITAL WAS CLAIMED TO BE INVESTED IN UNQUOTED SHARES WORTH RS.11.06 CRORES AND RS.10.39 CRORES RESPECTIVELY. (IX) ALL ABOVE FACTORS INDICATE SYSTEMATIC AND DE LIBERATE CREATION OF A COLORABLE DEVICE TO INTRODUCE SHARE CAPITAL INTO MOTISONS GROUP COMPANIES. 6. IN RESPONSE TO SHOW CAUSE NOTICE THE ASSESSEE FI LED ITS REPLY VIDE LETTER DATED 13.02.2015 (COPY AT PB PAGE 40 TO 43). THE SUBMISSI ON OF THE ASSESSEE ON THE OBSERVATIONS OF LD. AO AS MENTIONED ABOVE IN PARA 5 ABOVE IS AS UNDER: - A) THE SHARE PREMIUM WAS DECIDED BY THE COMPANY AND INVESTORS MUTUALLY AND SHARE APPLICANT COMPANIES HAVE AGREED TO PAY THIS S HARE PREMIUM. THERE WAS NO BAR TO ISSUE SHARES ON PREMIUM UNDER COMPANIES AC T AND INCOME TAX ACT FOR THE PERIOD UNDER RELEVANT. FURTHER THE LD. AO HELD T HAT THE ------IT IS CLEAR THAT ENTIRE MONEY HAS BEEN INTRODUCED IN THE ASSESSEE CO MPANY IN THE GARB OF SHARE PREMIUM---- BUT THE LD. AO DID NOT CLEAR THAT WHAT WAS THE SOURCE OF SUCH MONEY WITH THE ASSESSEE WHICH IT INTRODUCED IN THE GARB OF SHARE PREMIUM. THE SHOW CAUSE NOTICE AS WELL AS ASSESSMENT ORDER IS CO MPLETELY SILENT ON THIS ISSUE. WITHOUT HAVING SOME MONEY IT CANNOT BE INTRO DUCE IN BOOKS OF ACCOUNTS AND FOR HAVING THE MONEY THERE SHOULD BE SOME UNEXP LAINED SOURCE OF INCOME. IN THE CASE OF ASSESSEE THE DEPARTMENT AS A RESULT OF SEARCH AS WELL AS DURING ASSESSMENT PROCEEDINGS OR AS A RESULT OF INVESTIGAT ION COULD NOT PROVE THE SOURCE OF INCOME OF THE ASSESSEE WHEREFROM THIS MUC H OF MONEY WAS EARNED, THEREFORE THE FINDING OF LD. AO ON THIS ISSUE IS TOT ALLY INCORRECT AND DOES NOT MAINTAINABLE IN THE EYE OF LAW. THE ALLEGATION OF LD. AO IS PATENTLY WRONG, WITHOUT ANY BASIS AND MERELY ON SURMISES AND CONJECTURES. HONBLE JUSTICE HIDAYATULLAH OF THE SUPREME COURT IN THE CASE OF SREELEKHA BANERJEE VS CIT [1 963] 49 ITR 112 (SC); 120 OBSERVED THAT THE INCOME TAX DEPARTMENT CANNOT BY MERELY REJECTING UNREASONABLY A GOOD EXPLANATION, C ONVERT GOOD PROOF INTO NO PROOF HONBLE SUPREME COURT IN THE CASE OF UMA CHARAN SHAW & BROS CO VS CIT 37 ITR 271 HAS HELD THAT THE SURMISES AN D CONJECTURES, AND THE CONCLUSION IS THE RESULT OF SUS PICION WHICH CANNOT TAKE THE PLACE OF PROOF. HONBLE PUNJAB & HARYANA H IGH COURT IN THE CASE OF CIT VS ANUPAM KAPOOR (2008) 299 ITR 179 (P & H ) ALSO HELD THAT SUSPICION, HOWSOEVER STRONG CANNOT TAKE THE PLACE OF LEGAL PROOF. B) REGARDING THE INQUIRIES WHICH ARE BEING DISCUSS I N THE SHOW CAUSE NOTICE THIS IS TO SUBMIT THAT WHATEVER INQUIRED BEING DISCUSS BY L D. AO WAS NOT IN KNOWLEDGE OF THE ASSESSEE THAT WHAT SORT OF INQUIRIES HAS BEE N MADE BY THE DEPARTMENT ITA NO. 493/JP/2017 ACIT, CENTRAL CIRCLE-2, JAIPUR VS GODAWARI ESTATES PVT.LTD. KOLKATA 117 AND WHAT ARE THE OUTCOMES OF SUCH INQUIRIES. THEREF ORE THE ASSESSEE REQUESTED FROM THE LD. AO TO PROVIDE THE DETAILS OF INQUIRIES CONDUCED IN THIS REGARD ALONG WITH SUPPORTING DOCUMENTS BUT THE SAME NOT PROVIDED TO THE ASSESSEE. HOWEVER ON THE ISSUE RAISED BY THE LD. AO ON THE BASIS OF SO CALLED INQUIRIES WE SUBMIT AS UNDER: - V) THE ABOVE FINDING OF THE LD AO IS NOT RELEVANT AT AL L IN DECIDING THE ISSUE OF CREDITWORTHINESS OF THE INVESTOR COMPANY AND GENUIN ENESS OF THE TRANSACTIONS. EVEN, IF IT IS PRESUMED THAT THE INVESTOR COMPANIES ARE UNDER THE CONTROL OF THE DIRECTORS OF THE ASSESSEE, THEN ALSO THE TRANSACTIO N CANNOT BE TREATED AS NOT GENUINE AS THE MAIN ISSUE IS AVAILABILITY OF FUNDS IN THE HANDS OF THE INVESTOR COMPANY AND IF THAT IS EXPLAINABLE THEN NO QUESTION IS ARISE FOR TREATING THE SHARE CAPITAL AS NOT GENUINE. (II) THE LOW CREDITABILITY OF DIRECTORS OF ALLOTTEE COMPANY, THEIR RELATIONSHIP WITH MOTISONS GROUP ETC. HAVE NO RELEVANCE FOR EXAMINING THE GENUINENESS OF SHARE CAPITAL AND CREDITWORTHINESS OF THE INVESTOR COMPAN Y AS IN THE CASE OF ASSESSEE IT IS WELL PROVED BY DOCUMENTARY EVIDENCE THAT THE AMOUNT AGAINST SHARE APPLICATION MONEY WAS RECEIVED THROUGH GENUINE SOUR CE OF FUNDS WITH INVESTOR COMPANIES AND THE AMOUNT WAS ADJUSTED AGAINST ALLOT MENT OF SHARES. THE SOURCE OF FUNDS WITH THE INVESTOR COMPANIES WHICH T HEY INVESTED IN ASSESSEE COMPANY WAS ALSO WELL EXPLAINED GENUINELY. IF DEPAR TMENT HAVE SOME DOUBT REGARDING GENUINENESS OF FUNDS WITH INVESTOR COMPAN IES THE NECESSARY INVESTIGATION OF SUCH FUNDS SHOULD HAD BEEN MADE IN THE CASE OF INVESTOR COMPANIES AND THE NECESSARY ACTION SHOULD HAD BEEN TAKEN IN THEIR CASE. IT IS RELEVANT TO MENTION HERE THAT APART FROM THE INVEST MENT MADE IN THE ASSESSEE COMPANY THE OTHER ASSETS/INVESTMENT OF SUCH INVESTO R COMPANIES WAS MUCH MORE WHICH WERE ALSO MANAGED BY THOSE COMPANIES AT THEIR OWN. IT IS ALSO RELEVANT TO NOTICE HERE THAT WHY ONLY THE INVESTMEN T MADE BY THOSE INVESTMENT COMPANIES IN THE ASSESSEE COMPANY IS BEING TREATED AS NON GENUINE AND OTHER INVESTMENT/ASSETS OF THOSE COMPANY IS BEING TREATED AS GENUINE. THIS SHOWS THAT THE ASSESSMENT ORDER WAS PASSED BY LD. AO WITH SETTLED MINDSET THAT THE AMOUNT IS TO BE ADDED AS INCOME OF THE ASSESSEE. (III) FURTHER WHATEVER INQUIRIES/ANALYSIS DISCUSS B Y LD. AO IN HIS SHOW CAUSE NOTICE HAVE NO RELEVANCE IN THE CASE OF THE ASSESSEE BECAU SE FROM SUCH DISCUSSION ONLY IT CAN BE PROVED (NOT CONCLUSIVELY) THAT THE E MPLOYEES OF ASSESSEE GROUP WAS MANAGING AFFAIRS OF SOME OF THE COMPANIES WHO M ADE THE INVESTMENT IN SOME YEARS IN THE ASSESSEE/COMPANIES OF ASSESSEE GR OUP BUT SUCH INQUIRIES NOWHERE PROVES THAT THE FUNDS WITH SUCH COMPANIES W AS NOT FROM THEIR OWN INDEPENDENT SOURCES AND THE SAME WAS INTRODUCED BY THE ASSESSEE COMPANY. IN THE INSTANT CASE FOR ADDING THE SHARE CAPITAL/PREMI UM AS INCOME OF THE ASSESSEE THE DEPARTMENT HAS TO PROVE THAT THE AMOUN T SO RECEIVED WAS REVENUE RECEIPT OF THE ASSESSEE AND IN THE INSTANT CASE THE DEPARTMENT COULD NOT PROVE THE SAME AS A RESULT OF SEARCH PROCEEDINGS OVER THE ASSESSEE GROUP OR DURING THE COURSE OF ASSESSMENT PROCEEDINGS OR AS A RESULT OF INVESTIGATION/ANALYSIS. WITHOUT PROVING THE SOURCE OF INCOME OR WITHOUT PRO VING THAT AMOUNT SO RECEIVED IS INCOME OF THE ASSESSEE THE SAME CANNOT BE TREATE D AS INCOME OF THE ASSESSEE MERELY ON PRESUMPTION, ASSUMPTION AND SUSPICIOUS. (IV) THE ASSESSEE GROUP OR EMPLOYEES OF THE ASSESSE E GROUP DOES NOT HAVE ANY CONCERN FROM THE INVESTEE COMPANIES. ITA NO. 493/JP/2017 ACIT, CENTRAL CIRCLE-2, JAIPUR VS GODAWARI ESTATES PVT.LTD. KOLKATA 118 C) THE LD. AO OPINED THAT THE ANALYSIS/INQUIRIES IND ICATE THE SYSTEMATIC AND DELIBERATE CREATION OF A COLORABLE DEVICE TO INTROD UCE SHARE CAPITAL IN MOTISONS GROUP COMPANIES. THE INVESTMENT IN SHARE CAPITAL OF ASSESSEE COMPANY BY ABOVE NAMED COMPANIES WAS INDEPENDENT DECISION/JUDG MENT OF THOSE COMPANIES. THE ASSESSEE HAS FILED COPY OF THE BOARD RESOLUTION OF THE INVESTOR COMPANY. THE INCOME TAX DEPARTMENT CARRIED OUT INTE NSIVE SEARCH OVER MOTISONS GROUP AND DURING THE COURSE OF SEARCH NO DOCUMENTS/ EVIDENCE WAS FOUND TO SHOW THAT THE COMPANIES WHO MADE INVESTMENT IN SHAR ES OF ASSESSEE COMPANY IN THE YEAR UNDER CONSIDERATION WERE FUNDED OR UNDI SCLOSED CASH WAS GIVEN BY MOTISONS GROUP. IF THESE INVESTOR COMPANIES HAVE TH EIR OWN INDEPENDENT FUNDS, THE SAME CAN BE INVESTED ANYWHERE. IT IS ADMITTED FACTS THAT DURING THE YEAR UNDER CO NSIDERATION AS WELL AS IN PREVIOUS YEARS THE ASSESSEE COMPANY IS NOT HAVING S UCH BUSINESS ACTIVITIES WHERE FROM THIS MUCH OF UNDISCLOSED INCOME COULD BE EARNED THAN QUESTION OF HAVING ANY UNDISCLOSED INCOME DOES NOT ARISE AND WH EN THERE IS NO UNDISCLOSED INCOME THAN HOW THE SAME CAN BE MANAGED TO BROUGHT IN BOOKS OF ACCOUNTS IN FORM OF SHARE CAPITAL. IN THIS CASE THE DEPARTMENT COULD NOT PROVE ANY KIND OF UNDISCLOSED SOURCE OF INCOME OF THE ASSESSEE AS A R ESULT OF SEARCH OVER ASSESSEE GROUP AS WELL AS DURING THE COURSE OF ASSESSMENT PR OCEEDINGS OR AS A RESULT OF INQUIRIES. AS A RESULT OF SO CALLED LONG INQUIRIES T HE DEPARTMENT COULD NOT EVIDENTIARY PROVED THAT THE ASSESSEE COMPANY MANAGE D ITS FUNDS WITH INVESTOR COMPANIES TO BROUGHT THE SAME IN BOOKS OF ACCOUNTS IN THE FORM OF SHARE CAPITAL MORE SO WHEN THE INVESTOR COMPANIES HAVING THEIR OW N SUFFICIENT FUNDS TO INVEST IN THE ASSESSEE COMPANY MUCH PRIOR TO INVESTMENT MA DE IN THE ASSESSEE COMPANY. THUS, FROM THE ABOVE SUBMISSION AND RECORD IT IS WE LL PROVED THAT THE AMOUNT SO RECEIVED BY THE ASSESSEE COMPANY FROM ABOVE NAMED C OMPANIES WAS RECEIVED AGAINST SHARE CAPITAL AND THE INVESTMENT WAS MADE B Y THEM BY THEIR OWN DISCLOSED SOURCE, THEREFORE NO ADDITION IN ANY WAY CAN BE MADE IN THE HANDS OF THE ASSESSEE. 7. AFTER CONSIDERING THE REPLY OF THE ASSESSEE ON S HOW CAUSE NOTICE ISSUED BY LD. AO HE POINTED CERTAIN ISSUES IN THE REPLY OF THE ASS ESSEE WHICH HAVE BEEN DISCUSS ON PAGE 18 TO 25 (PARA 15 TO 17) OF ASSESSM ENT. THE FINDING OF LD. AO AND SUBMISSION OF ASSESSEE ON SUCH FINDINGS IS AS U NDER: - (A) FINDING OF AO: - IDENTITY, CREDIT WORTHINESS AND GENUINENESS OF THE TRANSACTIONS HAVE BEEN PROVED BY FILING CERTAIN DOC UMENTS. THE ASSESSEE COMPANY HAS ATTEMPTED TO LIMIT THE SCOPE WITHIN WHI CH REVENUE AUTHORITIES CAN OPERATE ONLY WITH A SELF SERVING INTEREST TO MAKE I T APPEAR THAT THE TRANSACTIONS ENTERED INTO GET JUSTIFIED. THE THREE ASPECTS CERTA INLY ARE SOME OF THOSE ANGLES, BUT TO SAY THAT THE REVENUE CANNOT GO BEYOND, IS NO T APPARENTLY VESTED WITH SELF SERVING INTEREST BUT ALSO WITH IGNORANCE OF LAW. CERTAINLY, SIMPLY BECAUSE SOME FORM OF IDENTIFICA TION ON PAPER HAS BEEN PROVIDED DOES NOT MEAN THAT THE TRANSACTION STANDS EXPLAINED FROM THE VIEWPOINT OF THE CREDIT WORTHINESS AND GENUINENESS. ITA NO. 493/JP/2017 ACIT, CENTRAL CIRCLE-2, JAIPUR VS GODAWARI ESTATES PVT.LTD. KOLKATA 119 SUBMISSION OF ASSESSEE: - I) THE ASSESSEE SUBMITTED AMPLE DOCUMENTS IN SUPPOR TED TO SHARE APPLICATION MONEY RECEIVED TO PROVE THE IDENTITY, CREDITWORTHIN ESS AND GENUINENESS OF TRANSACTIONS AND FROM EXAMINATION OF THOSE DOCUMENT S ITS PROVES THAT THE INVESTING COMPANIES WERE HAVING SUFFICIENT FUNDS TO MAKE INVESTMENT IN SHARE CAPITAL OF THE ASSESSEE COMPANY. THERE WAS NO CASH DEPOSIT IN BANK A/C OF THE INVESTOR COMPANY FOR SUBSCRIBING THE SHARE CAPITAL OF THE ASSESSEE COMPANY. THE LD. AO REJECTED THESE EVIDENCES ON SURMISES AND CONJECTURES. HONBLE JUSTICE HIDAYATULLAH OF THE SUPREME COURT IN THE CA SE OF SREELEKHA BANERJEE VS CIT [1963] 49 ITR 112 (SC); 120 OBSERVED THAT THE I NCOME TAX DEPARTMENT CANNOT BY MERELY REJECTING UNREASONABLY A GOOD EXPL ANATION, CONVERT GOOD PROOF INTO NO PROOF HONBLE SUPREME COURT IN THE CASE O F UMA CHARAN SHAW & BROS CO VS CIT 37 ITR 271 HAS HELD THAT THE SURMISES AND CONJECTURES, AND THE CONCLUSION IS THE RESULT OF SUSPICION WHICH CANNOT TAKE THE PLACE OF PROOF. HONBLE PUNJAB & HARYANA HIGH COURT IN THE CASE OF CIT VS ANUPAM KAPOOR (2008) 299 ITR 179 (P & H) ALSO HELD THAT SUSPICION, HOWSOEVER STRONG CANNOT TAKE THE PLACE OF LEGAL PROOF. II) FROM EXAMINATION OF FINANCIAL STATEMENTS OF INV ESTOR COMPANIES YOUR HONOR WILL FIND THAT THE INVESTOR COMPANIES HAD HUGE SHARE CAP ITAL AND RESERVES. APART FROM THE INVESTMENT MADE IN THE ASSESSEE COMPANY TH EY HAVE HUGE OTHER INVESTMENTS/ADVANCES. AS PER DECLARATION OF SOURCE O F FUNDS SUBMITTED BY THEM THEY REALIZED MONEY FROM THEIR OLD INVESTMENTS/ADVA NCES AND MADE THE SAME MONEY WAS UTILIZED FOR MAKING THE INVESTMENT IN THE ASSESSEE COMPANY. THESE COMPANIES ARE ASSESSEE OF INCOME TAX DEPARTMENT AND IN CASE OF ANY DOUBT, NECESSARY ACTION COULD BE TAKEN IN THE HANDS OF THE SE COMPANIES AND IF THESE COMPANIES FAILED TO EXPLAIN THE SOURCE OF INVESTMEN T, NECESSARY ADDITION CAN BE MADE IN THE HANDS OF THESE COMPANIES BY APPLYING TH E PROVISIONS OF SECTION 69 OF INCOME TAX ACT. HOWEVER THE LD. AO MADE THE ADDITI ON IN THE HANDS OF THE ASSESSEE COMPANY UNDER THE COMPLETE DISREGARD OF PR OVISIONS OF INCOME TAX ACT AND MERELY ON SURMISES AND CONJECTURES. THE HONBLE APEX COURT IN THE CASE OF CIT VS. LOVELY EXPORTS (P) LTD. 216 CTR 0195/ 6 DTR 3 08 (SC) HELD THAT IF THE SHARE CAPITAL MONEY IS RECEIVED BY THE ASSESSEE COM PANY FROM ALLEGED BOGUS SHAREHOLDERS THEN THE DEPARTMENT IS FREE TO PROCEED TO REOPEN THE INDIVIDUAL ASSESSMENTS OF SUCH SHAREHOLDERS IN ACCORDANCE WITH LAW. SUCH SHARE APPLICATION MONEY CANNOT BE REGARDED AS UNDISCLOSED INCOME OF THE ASSESSEE COMPANY (III) AS ALLEGED BY LD. AO THE ASSESSEE IS NOT ATTEMP TED TO LIMIT THE SCOPE WITHIN WHICH REVENUE AUTHORITIES CAN OPERATE AND THE ASSES SEE ALSO ACCEPT THAT THE REVENUE AUTHORITIES CAN EXAMINE THE TRANSACTIONS FR OM ALL POSSIBLE ANGLES. IN THE LAW IN THE CASE OF CREDIT ENTRY (SUCH AS LOAN, SHAR E CAPITAL ETC.) THE IDENTITY, GENUINENESS AND CREDITWORTHINESS OF THE CREDIT ENTR IES HAS TO BE EXAMINE AND IN THE INSTANT CASE THE ASSESSEE HAS PROVED ALL THESE THREE INGREDIENTS AND THE LD. AO DID NOT FIND ANY INFIRMITY IN SUCH DETAILS. IF TH E LD. AO IS HAVING DOUBT REGARDING THE DETAIL AND SUBMISSION FILED BY THE AS SESSEE THAN HE COULD SURELY GO BEYOND FOR FURTHER INQUIRIES BUT THE INQUIRIES S HOULD HAVE BEEN WITH THE ANGEL ITA NO. 493/JP/2017 ACIT, CENTRAL CIRCLE-2, JAIPUR VS GODAWARI ESTATES PVT.LTD. KOLKATA 120 TO UNEARTH THE TRUTH OF THE TRANSACTIONS AND IN THE INSTANT CASE THE INQUIRIES SHOULD HAVE BEEN MADE WITH THE ANGEL TO FIND OUT TH E FOLLOWING: - THE HUGE AMOUNT RECEIVED IN THE FORM OF SHARE CAPIT AL/SHARE PREMIUM. WHETHER THE MONEY SO RECEIVED IS ACTUALLY CAPITAL RECEIPT I N THE HANDS OF THE ASSESSEE? WHETHER MONEY RECEIVED IN THE HANDS OF THE ASSESSEE COMPANY WAS FROM GENUINE SOURCE OR THE SAME WAS OWN FUNDS OF THE ASS ESSEE? IF THE MONEY WHICH FLOW IN THE HANDS OF THE ASSESS ES WAS MANAGED AFFAIRS OF THE ASSESSEE THAN WHAT WAS THE SOURCE OF INFLOW OF SUCH MONEY? IV) THE LD. AO HAS NOT CARRIED OUT ANY SHORT OF INQU IRIES IN THIS REGARD IN THE CASE OF THE ASSESSEE. NO INQUIRIES FROM THE SHAREHOLDERS, T HEIR BANKERS HAVE BEEN MADE TO PROVE THE CONTENTION OF THE ASSESSEE TO BE WRONG . THERE IS NO EVIDENCE THAT THE MONEY RECEIVED IS A/C OF THE ASSESSEES OWN UND ISCLOSED INCOME. THE ASSESSEE FILED SUFFICIENT DOCUMENTS TO PROVE THAT T HE AMOUNT SO RECEIVED WAS CAPITAL RECEIPT AND THE SAME WAS RECEIVED AGAINST S HARE CAPITAL/SHARE PREMIUM. THE SOURCE OF THE FUNDS FROM INVESTOR COMPANIES WAS ALSO PROVED AND THERE IS NO POSITIVE MATERIAL TO SHOW THAT THE INVESTOR COMP ANIES WAS NOT HAVING SUFFICIENT SOURCE TO INVEST THE MONEY IN THE ASSESS EE COMPANY. IF THE LD. AO IS HAVING DOUBT REGARDING GENUINENESS OF THE SOURCE OF FUNDS WITH THE INVESTOR COMPANIES HE COULD HAVE MAKE THE INQUIRED IN THE CA SE OF SUCH COMPANIES AND IF SOMETHING FOUND ADVERSE THAN THE NECESSARY ADDITION S COULD HAVE BEEN MADE IN THE HANDS OF SUCH INVESTOR COMPANY ONLY AND IN THE INQUIRY IF SOMETHING POSITIVE REVEALS THAT THE SOURCE OF FUNDS WITH SUCH INVESTOR COMPANIES WAS FUNDED BY THE ASSESSEE COMPANY THAN ONLY THE ADDITION COULD B E MADE IN THE HANDS OF THE ASSESSEE COMPANY. IT IS ADMITTED FACTS THAT DURING THE YEAR UNDER CONSIDERATION THE ASSESSEE COMPANY WAS NOT HAVING SUCH SOURCE OF INCOME FROM WHICH THIS MUCH OF INCOME COULD BE EARNED AND THE LD. AO IS COM PLETELY SILENT ON THIS ISSUE THAT WHERE FROM THIS MUCH OF MONEY WAS EARNED BY TH E ASSESSEE COMPANY. V) THE FINDING OF LD. AO THAT SIMPLY BECAUSE SOME FO RM OF IDENTIFICATION ON PAPER HAS BEEN PROVIDED DOES NOT MEAN THAT THE TRANSACTIO N STANDS EXPLAINED FROM THE VIEWPOINT OF THE CREDIT WORTHINESS AND GENUINENESS THIS IS TO SUBMIT THAT BY FILING THE SUFFICIENT DOCUMENTS THE ASSESSEE DISCHA RGE ITS ONUS CAST ON IT BY THE LAW AND NOW ONUS IN ON THE DEPARTMENT TO DISPROVE T HE SUBMISSION AND DOCUMENTS OF THE ASSESSEE BY POSITIVE EVIDENCE. THE DEPARTMENT HAS NOT DISCHARGED ITS ONUS AND NO INQUIRED WERE CARRIED OU T AND NO EVIDENCE IS IN POSSESSION WITH THE DEPARTMENT TO DISPROVE THE CLAI M OF THE ASSESSEE. ONE THE ONE HAND THE LD. AO IS CLAIMING THAT THE REVENUE AUT HORITIES CAN EXAMINE THE TRANSACTION FROM ALL POSSIBLE ANGLES AND ON THE OTH ER HANDS THE TRANSACTIONS ARE BEING DOUBTED AND ADDED MERELY ON SURMISES AND CONJ ECTURES. IT IS FURTHER SUBMITTED THAT IF THE DOCUMENTS SUBMITTED BY THE AS SESSEE WAS NOT FELT SUFFICIENT TO ACCEPT THE TRANSACTION THAN THE LD. AO COULD ASK FROM ASSESSEE TO SUBMIT THE FURTHER DETAILS/DOCUMENTS WHICH IS FELT NECESSARY FOR DECIDING THE MATTER IN JUSTICE & FAIR MANNER BUT THE SAME WAS NO T DONE BY LD. AO. B) FINDING OF AO: - REGARDING NO BAR OF ISSUING OF SH ARES AT PREMIUM, THE ASSESSEE COMPANY HAS ATTEMPTED TO TAKE AN ADVANTAGE OUT OF T HE ABSENCE OF A SPECIFIC PROVISION WHICH BARS THE ACCEPTANCE OF SHARE PREMIU M WHICH DOES NOT MATCH THE NET WORTH OF THE ISSUING COMPANY. IN THIS REGARD, I T NEEDS TO BE POINTED OUT THAT ITA NO. 493/JP/2017 ACIT, CENTRAL CIRCLE-2, JAIPUR VS GODAWARI ESTATES PVT.LTD. KOLKATA 121 MERE ABSENCE OF A SPECIFIC PROVISION DOES NOT BY IT SELF MEAN THAT A PARTICULAR COLORABLE DEVICE OR A SHAM TRANSACTION, ACQUIRES LE GAL SANCTITY, THERE ARE NUMEROUS PROVISIONS RELATED TO GIFT, SALE CONSIDERA TION ON SALE OF ASSETS WHICH CAME INTO BEING AT A LATER STAGE, BUT THE ILLEGAL AND TAX CONTRAVENING TRANSACTIONS WERE STILL TAKEN UP AND TAXED BY REVEN UE AUTHORITY OF COURSE, AFTER THE SPECIFIC INCLUSION OF GOVERNING STATUTES, THE M ATTER REQUIRES TO BE DEALT WITHIN THE FRAMEWORK OF THE SPECIFIC PROVISION. BUT, TILL SUCH TIME IT CANNOT BE SAID ABOUT A TRANSACTION, WHICH IS PATENTLY BEYOND THE REALMS OF ACCEPTABILITY AND WHICH ALSO ARE EMBEDDED WITHIN HERE TAX IMPLICATIONS, THA T THEY NEED TO BE LEFT ALONE ONLY BECAUSE THERE WAS NO SPECIFIC BAR. SECTION 56 OF THE IT ACT HAS ALREADY BEEN EXISTENCE SINCE LONG AND SUBSECTION (1) OF SECTION 56 ADEQUATELY COVERED TRANSACTIONS LIKE THE ONE BEING DEALT WITH AT PRESENT. ONLY BECAUSE, SUB-SECTION (1) WAS A BROAD MANIFESTATION OF THE INTENT OF REVENUE, SUB SECTION (2) WHICH WAS MORE SPECIFIC IN CONTENT WAS INTRODUCED TO TAKE CASE OF THE MISINTERPRETATION & CONFUSION WHIC H WAS BEING DERIVED OUT OF SUB SECTION (4). IT MUST BE APPRECIATED THAT INTROD UCTION OF SUB SECTION (2) OF SECTION 56 OF THE ACT WAS ONLY A SPECIFIC EXPRESSION OF THE MANNER IN WHICH A SPECIFIC TRANSACTION REQUIRES TO BE DEALT WITH THE INTENT OF LEGISLATURE AND THE CONTENT THEREOF ALREADY EXISTED WITHIN THE SAME ACT AND WITHIN THE SAME SECTION AND IN THE PRECEDING SUB-SECTION NO NEW IDEA WHICH WAS CONCEPTUALLY DISTRICT FROM SECTION 56(1) OF THE ACT WAS BROUGHT INTO BEING . HENCE, THE ASSESSEE COMPANY CANNOT BE ALLOWED TO ES CAPE THE PROVISION OF LAW, SIMPLY BECAUSE IT CONTAINED A BROADER & WIDER MANIF ESTATION OF ITS TRUE INTENT WHICH WAS ENUNCIATED ONLY AFTER THE TRANSACTION TOO K PLACE. THE CONTENTION OF THE ASSESSEE IS A PERVERT ARGUMENT & DESERVES TO BE REJECTED. SUBMISSION OF ASSESSEE: - I) SHARE PREMIUM IS CAPITAL RECEIPT: IF SHARES ARE ISSUED AT PREMIUM THEN CAPITAL RECEIP T AGGREGATE AMOUNT OF PREMIUM IS TO BE TRANSFERRED TO AN ACCOUNT CALLED T HE SHARE PREMIUM ACCOUNT. THIS SHARE PREMIUM ACCOUNT IS NOT DISTRIBUTABLE AS INCOME JUST LIKE AS ANY OTHER CAPITAL ASSETS. ON WINDING UP, THE SURPLUS MONIES I N THE SHARE PREMIUM ACCOUNT IS TO BE RETURNED TO THE SHARE HOLDERS AS CAPITAL. SO LONG AS THE COMPANY IS A GOING CONCERN, THE MONIES IN SHARE PREMIUM ACCOUNT CAN NEVER BE RETURNED TO THE SHAREHOLDERS EXCEPT THROUGH THE MEDIUM OF A RED UCTION PETITION, OR, IN OTHER WORDS, EXCEPT UNDER EXACTLY THE SAME CONDITIONS AS THOSE UNDER WHICH ANY OTHER CAPITAL ASSET CAN REACH THE SHAREHOLDERS HAND S. DISTRIBUTION OF SHARE PREMIUM AMOUNT IS NOT PERMITTED THROUGH DIVIDEND. I T IS TAKEN OUT OF THE CATEGORY OF DIVISIBLE PROFITS. THE PROVISIONS IN RE SPECT OF ISSUE OF SHARES AT PREMIUM ARE THE SAME IN THE OLD COMPANY ACT AS WELL AS IN THE NEW COMPANY ACT. HENCE COMPANIES ACT CLEARLY MENTIONS THAT AMOUNT RECEIVED AS PREMIUM IS CAPITAL RECEIPT AND NOT A REVENUE RECEIPT. THE SHAR E PREMIUM IS ALSO VERIFIABLE FROM RETURNS OF ALLOTMENT SUBMITTED IN ROC. AS PER DE PARTMENTAL CIRCULAR (MCA) NO. 3/77 DATED 15.04.1977 THE MONIES IN THE SHARE P REMIUM ACCOUNT CANNOT BE TREATED AS FREE RESERVES, AS THEY ARE IN THE NATURE OF CAPITAL RESERVES. ITA NO. 493/JP/2017 ACIT, CENTRAL CIRCLE-2, JAIPUR VS GODAWARI ESTATES PVT.LTD. KOLKATA 122 VI) ON THE ISSUE OF SHARES AT PREMIUM, THE LD. ITAT, MUM BAI BENCH IN THE CASE OF ACIT V/S GAGANDEEP INFRASTRUCTURE PVT. LTD. 2014-T10 L-656-ITAT-MUM OBSERVED THAT ISSUE OF SHARES AT PREMIUM IS ALWAYS A COMMERCIAL DECISION WHICH DOES NOT REQUIRE ANY JUSTIFICATION. FURTHER T HE PREMIUM IS A CAPITAL RECEIPT WHICH HAS TO BE DEALT WITH IN ACCORDANCE WITH SECTI ON 78 OF COMPANIES ACT 1956. FURTHER THE COMPANY IS NOT REQUIRED TO PROVE THE GE NUINENESS, PURPOSE OR JUSTIFICATION FOR CHARGING PREMIUM OF SHARES, SHARE PREMIUM BY ITS VERY NATURE IS A CAPITAL RECEIPTS AND IS NOT INCOME FOR ITS ORDINA RY SENSE. IN THE CASE BEFORE MUMBAI BENCH HAS TO CONSIDER A CASE WHERE PREMIUM O F RS.190 PER SHARE WAS CHARGED. THE TRIBUNAL OBSERVED AS UNDER: NO DOUBT A NON-EST COMPANY OR A ZERO BALANCE SHEET COMPANY ASKING FOR RS.190 PER SHARE DEFIES ALL COMMERCIAL PRUDENCE BUT AT THE SAME TIME WE CANNOT IGNORE THE FACT THAT IT IS A PREROGATIVE OF THE BOA RD OF DIRECTORS OF THE COMPANY TO DECIDE THE PREMIUM AMOUNT AND IT IS THE WISDOM OF T HE SHAREHOLDERS WHETHER THEY WANT TO SUBSCRIBE TO SUCH A HEAVY PREMIUM. THE REVENUE AUTHORITIES CANNOT QUESTION THE CHARGING OF SUCH HUGE PREMIUM W ITHOUT ANY BAR FROM ANY LEGISLATED LAW OF THE LAND. THE AMENDMENT HAS BEEN BROUGHT IN THE INCOME TAX ACT UNDER THE HEAD INCOME FROM OTHER SOURCES BY IN SERTING CLAUSE.(VII B) TO SECTION 56 OF THE ACT WHEREIN IT HAS BEEN PROVIDED T HAT ANY CONSIDERATION FOR ISSUE OF SHARES, THAT EXCEEDS THE FAIR VALUE OF SUC H SHARES, THE AGGREGATE CONSIDERATION RECEIVED FOR SUCH SHARES AS EXCEEDS T HE FAIR MARKET VALUE OF THE SHARES SHALL BE TREATED AS THE INCOME OF THE ASSESS EE BUT THE LEGISLATURE IN ITS, WISDOM HAS MADE. THE PROVISION APPLICABLE W.E.F. 1. 4.2013 I.E. ON AND FROM A.Y. 2013-14. VII) THE LD. AO TAXED THE SHARE CAPITAL/SHARE PREMIUM BY HOLDING THAT MERE ABSENCE OF A SPECIFIC PROVISION DOES NOT BY ITSELF MEAN THA T A PARTICULAR COLORABLE DEVICE OR A SHAM TRANSACTION, ACQUIRES LEGAL SANCTITY AND A TRANSACTION, WHICH IS PATENTLY BEYOND THE REALMS OF ACCEPTABILITY AND WHI CH ALSO ARE EMBEDDED WITHIN HERE TAX IMPLICATIONS, THAT THEY NEED TO BE LEFT ALONE ONLY BECAUSE THERE WAS NO SPECIFIC BAR THIS IS TO SUBMIT THAT FOR BRIN GING A TRANSACTION INTO A INCOME TAX TERRITORY FIRST IT IS TO PROVE BY THE REVENUE A UTHORITIES THAT THE TRANSACTION IS COLORABLE DEVICE OR A SHAM TRANSACTION. IN THE CASE OF THE ASSESSEE THE INVESTOR COMPANIES ARE CONFIRMING THAT THEY HAVE GAVE THE AM OUNT TO THE ASSESSEE COMPANY AS SHARE PREMIUM AND THE ASSESSEE COMPANY I S ENTERING SUCH AMOUNT IN ITS BOOKS OF ACCOUNTS AS A SHARE PREMIUM. THERE IS NO EVIDENCE ON RECORD TO PROVE THAT THE TRANSACTION IS SHAM TRANSACTIONS OR NOT REAL TRANSACTION. THE ONUS IS ON DEPARTMENT TO PROVE THAT THE TRANSACTION IS S HAM OR NOT REAL. THE ALLEGATION SHOULD BE BASED ON THE EVIDENCES. THE LD. AO IS DUT Y BOUND TO PROVE A TRANSACTION NOT REAL AND NOT ACCEPTABLE WITH EVIDEN CES WHICH IS ABSENT IN THE INSTANT CASE. ADMITTEDLY THERE ARE NUMEROUS DEEMING PROVISIONS RELATED TO GIFT, SALE CONSIDERATION ON SALE OF ASSETS UNDER WHICH TH E DEEMED INCOME ARE TAXED BUT THE DEEMING FICTION CAN ONLY STRICTLY APPLIED O N THE TRANSACTIONS FOR WHICH IT WAS MADE APPLICABLE. THE SAME CANNOT BE EXTENDED FU RTHER FOR OTHER TRANSACTIONS UNTIL AND UNLESS SUCH TRANSACTION IS C OVERED IN THE DEFINITION OF INCOME OR DEEMED INCOME AS PER INCOME TAX LAW. IF S OME SPECIFIC TRANSACTION IS NOT INCOME OR DEEMED INCOME IN THE INCOME TAX LAW T HAN THE SAME CANNOT BE PRESUMED AS INCOME BY THE REVENUE AUTHORITIES AT TH EIR OWN WITHOUT HAVING ANY POSITIVE MATERIAL TO PRESUME THAT THE SAME IS ACTUA LLY INCOME OF THE ASSESSEE. ITA NO. 493/JP/2017 ACIT, CENTRAL CIRCLE-2, JAIPUR VS GODAWARI ESTATES PVT.LTD. KOLKATA 123 THESE TYPE OF TRANSACTION CAN ONLY BE DEALT WITHIN THE FRAMEWORK OF THE SPECIFIC PROVISION AFTER THE SPECIFIC INCLUSION OF GOVERNING STATUTES. IN THE INCOME TAX ACT THE CHARGING OF CERTAIN AMOUNTS SHARE PREMIUM DEEME D TO BE INCOME OF THE RECIPIENT COMPANIES W.E.F. 1.4.2013 I.E. ON AND FRO M A.Y. 2013-14 AND THE SAME CANNOT BE MADE APPLICABLE RETROSPECTIVELY. IV) ADMITTEDLY THE SECTION 56 OF THE IT ACT HAS ALREA DY BEEN EXISTENCE SINCE LONG AND BUT SUB-SECTION (1) OF SECTION 56 ONLY COVERS T HE TAXING THE REVENUE TRANSACTIONS WHICH NOT COVERED UNDER OTHER HEAD OF INCOME BUT THE SAME ARE INCLUDED IN THE DEFINITION OF INCOME. THE SECTION 5 6(1) DOES NOT COVER THE TAXING THE DEEMING CAPITAL RECEIPTS AND SUCH RECEIPTS CAN ONLY TAXED UNDER SUB SECTION 56 (2) OF INCOME TAX ACT, 1961 IF CONSISTING SPECIFI C EXPRESSION OF THE MANNER IN WHICH A SPECIFIC TRANSACTION REQUIRES TO BE DEALT W ITH THE INTENT OF LEGISLATURE. IN THE INCOME TAX ACT THE CHARGING OF CERTAIN AMOUNTS O F SHARE PREMIUM DEEMED TO BE INCOME OF THE RECIPIENT COMPANIES W.E.F. 1.4.201 3 I.E. ON AND FROM A.Y. 2013- 14, THEREFORE THE SHARE PREMIUM RECEIVED PRIOR TO T HAT PERIOD CANNOT BE TAXED AS INCOME OF THE ASSESSEE. C) FINDING OF LD. AO: - IT IS WHOLLY INCORRECT TO SAY THAT THE ALLEGATION IS BASED ON SURMISES AND CONJECTURES. THE FACTS CLEARLY PROVE T HAT THE ASSESSEE HAD ENTERED INTO SHAM TRANSACTIONS AS PART OF A WELL PLANNED EX ERCISE OF INTRODUCING UNEXPLAINED MONEY IN THE FORM OF SHARE CAPITAL AND SHARE PREMIUM WITHOUT ANY JUSTIFICATION OF THE VALUE HAVING BEEN PROVIDED EIT HER BY THE ISSUING COMPANY OR THE SUBSCRIBING COMPANY. THE MONEY SO RECEIVED WAS THEN IMMEDIATELY INVESTED IN THE SUBSCRIPTION OF SHARE CAPITAL AT HIGH PREMIU M WITH OTHER COMPANIES, WHO IN TURN CONTINUED THE EXERCISE IN THE SAME FORM. TH E ASSESSEE COMPANY WAS THUS PART OF THIS CIRCULAR RING WHEREBY UNJUSTIFIED AND UNSUBSTANTIATED SHARE PREMIUM WAS BEING INTRODUCED. SUBMISSION OF ASSESSEE: - I) THE FINDING OF LD. AO IS PATENTLY WRONG, PERVERSE AND NOT BACKED WITH ANY SUPPORTING EVIDENCE. FIRST OF ALL REGARDING ALLEGAT ION THAT THE ASSESSEE INTRODUCED ITS OWN UNEXPLAINED MONEY IN THE SHARE C APITAL AND SHARE PREMIUM THIS IS TO SUBMIT THAT THE DEPARTMENT CARRIED OUT I NTENSIVE SEARCH OVER THE ASSESSEE GROUP AND DURING THE COURSE OF SEARCH NOT A SINGLE DOCUMENT/EVIDENCE WAS FOUND TO SHOW THAT THE ASSESSEE WAS HAVING SOME UNDISCLOSED INCOME OR HAVING SOME UNEXPLAINED MONEY. AS A RESULT OF INQUIR IES CARRIED OUT BY THE INVESTIGATION WING THEY ALSO COULD NOT GATHERED ANY POSITIVE EVIDENCE TO SHOW THAT THE ASSESSEE WAS HAVING ANY UNDISCLOSED INCOME OR UNEXPLAINED MONEY. IF THERE IS NO PROOF WITH THE DEPARTMENT TO PROVE THAT THE ASSESSEE WAS HAVING SOME UNEXPLAINED MONEY THAN HOW IT CAN BE ALLEGED T HAT THE ASSESSEE HAS INTRODUCED ITS UNEXPLAINED MONEY IN THE FORM OF SHA RE CAPITAL AND SHARE PREMIUM. THIS IS COMPLETELY ON THE BASIS OF SURMISE S AND CONJECTURES. II) AS REGARD TO NOT PROVIDING THE JUSTIFICATION OF THE VALUE OF SHARES THIS IS TO SUBMIT THAT THE SHARES ISSUED AT HIGH RATES DOES NOT MAKE THE TRANSACTIONS ITSELF SHAME OR COLOURFUL DEVICE TO EVADE THE TAX. FROM THE RECO RD IT IS WELL PROVED THAT THE AMOUNT WAS RECEIVED FROM THE INVESTOR COMPANIES AGA INST SHARE CAPITAL & SHARE PREMIUM, THEREFORE THE TRANSACTION ARE BEING GENUIN E. AS STATED IN EARLIER PARAS, THE HONBLE ITAT, MUMBAI BENCH IN THE CASE OF ACIT V/ S GAGANDEEP INFRASTRUCTURE PVT. LTD. 2014-T10L-656-ITAT-MUM OBSE RVED THAT ISSUE OF SHARES ITA NO. 493/JP/2017 ACIT, CENTRAL CIRCLE-2, JAIPUR VS GODAWARI ESTATES PVT.LTD. KOLKATA 124 AT PREMIUM IS ALWAYS A COMMERCIAL DECISION WHICH DO ES NOT REQUIRE ANY JUSTIFICATION. FURTHER THE COMPANY IS NOT REQUIRE T O PROVE THE GENUINENESS, PURPOSE OR JUSTIFICATION FOR CHARGING PREMIUM OF SH ARES, SHARE PREMIUM BY ITS VERY NATURE IS A CAPITAL RECEIPTS AND IS NOT INCOME FOR ITS ORDINARY SENSE. VIII) THE ALLEGATION OF LD. AO IS THAT THE MONEY SO RECEIV ED WAS THEN IMMEDIATELY INVESTED IN THE SUBSCRIPTION OF SHARE CAPITAL AT HI GH PREMIUM WITH OTHER COMPANIES, WHO IN TURN CONTINUED THE EXERCISE IN TH E SAME FORM AND THE ASSESSEE COMPANY WAS THUS PART OF THIS CIRCULAR RIN G WHEREBY UNJUSTIFIED AND UNSUBSTANTIATED SHARE PREMIUM WAS BEING INTRODUCED. IN THIS REGARD THIS IS TO SUBMIT THAT IF SOMEONE IS INVESTING THE MONEY IN TH E ASSESSEE COMPANY HE MUST BE HAVING THE INFLOW OF MONEY FROM SOME SOURCE. WHA T IS THE SOURCE OF INFLOW WITH THE INVESTOR COMPANY AND HOW IT IS MANAGING IT S AFFAIRS IS NOT CONCERN OF THE ASSESSEE. IN THE CASE OF THE ASSESSEE, IT HAS F ULL FILLED ITS LEGAL OBLIGATION. THE ASSESSEE HAS PROVED THE SOURCE OF MONEY WITH TH E INVESTOR COMPANIES. THUS IN THE CASE OF THE ASSESSEE THE SOURCE OF MONEY IS WELL PROVED. IF THE INVESTOR COMPANIES IS NOT HAVING PROPER SOURCE OF FUNDS WITH THEM THAN THE ACTION SHOULD HAVE BEEN TAKEN IN THEIR HANDS AND THE SAME CANNOT BE ADDED AS INCOME OF THE ASSESSEE MERELY BY HOLDING THAT THE ASSESSEE PLANNE D THE FUNDS OF ALL THE COMPANIES. THERE IS NO ONUS TO PROVE SOURCE OF SOUR CE. IN THIS REGARD, THE ASSESSEE RELIES ON THE FOLLOWING DECISIONS:- (I) HONBLE RAJASTHAN HIGH COURT IN THE CASE OF ARAV ALI TRADING CO VS INCOME TAX OFFICER (2008) 8 DTR (RAJ) 199 HAS HELD THAT ONCE TH E EXISTENCE OF THE CREDITORS IS PROVED AND SUCH PERSONS OWN THE CREDITS, THE ASSESS EES ONUS STANDS DISCHARGED AND THE ASSESSEE IS NOT REQUIRED TO PROV E THE SOURCE FROM WHICH THE CREDITORS COULD HAVE ACQUIRED THE MONEY DEPOSITED W ITH HIM. HONBLE JURISDICTIONAL HIGH COURT HAS HELD THAT MERELY BECA USE THE DEPOSITORS EXPLANATION ABOUT THE SOURCES OF MONEY WAS NOT ACCE PTABLE TO THE AO, IT CANNOT BE PRESUMED THAT THE DEPOSIT MADE BY THE CREDITORS IS MONEY BELONGING TO THE ASSESSEE ITSELF. (II) CIT VS ORISSA CORPORATION (P) LTD (1986) 159 I TR 79 (SC) THE ASSESSEE HAD GIVEN NAMED AND ADDRESSES OF THE CASH CREDITORS, WHO WERE INCOME TAX ASSESSEES. REVENUE APART FROM ISSUING SU MMON U/S 131 NOTICES TO CREDITORS, DID NOT PURSUE THE MATTER FURTHER- IT DI D NOT EXAMINE CREDITWORTHINESS OF THE CREDITORS- ASSESSEE COULD NOT, UNDER THE CIR CUMSTANCES DO ANYTHING FURTHER. HELD THAT THE ADDITIONS WERE RIGHTLY DELET ED. (III) CIT VS HEERA LAL CHAGAN LAL TANK (2002) 157 I TR 281 (RAJ) BURDEN OF THE ASSESSEE STANDS DISCHARGED WHEN THE IDENTITY OF THE CREDITORS IS ESTABLISHED AND HE CONFIRMS THE LOANS. IT IS FURTHER SUBMITTED THAT THE INVESTOR COMPANIES WERE HAVING SUFFICIENT ACCUMULATED FUNDS IN THE FORM OF SHARE CAPITAL AND RESERVES & SURPLUS MUCH PRIOR TO THE INVESTMENT MADE IN THE ASSESSEE COMPAN Y AND THE SAME ARE MUCH MORE THAN TO INVESTMENT MADE IN THE SHARES OF THE A SSESSEE COMPANY. THE SAME FUNDS WERE BEING MANAGED BY SUCH COMPANY AT THEIR O WN AND HAVING INVESTMENT IN SHARES OF OTHER COMPANIES/LOANS & ADV ANCES TO VARIOUS PARTIES. THE INVESTMENT BY SUCH COMPANIES IN THE ASSESSEE CO MPANY WAS OF LESSER AMOUNT IN COMPARISON TO TOTAL INVESTMENTS MADE BY S UCH INVESTOR COMPANIES AND IF THE OTHER INVESTMENTS MADE BY SUCH COMPANIES ARE BEING TREATED AS GENUINE THAN HOW THE INVESTMENT MADE IN THE ASSESSE E COMPANY CAN ONLY BE ITA NO. 493/JP/2017 ACIT, CENTRAL CIRCLE-2, JAIPUR VS GODAWARI ESTATES PVT.LTD. KOLKATA 125 NON GENUINE. FURTHER IF THE ALLEGATION OF THE DEPAR TMENT THAT THE ASSESSEE MANAGED ITS UNEXPLAINED FUNDS IN SUCH COMPANIES THA N THERE SHOULD BE INFLOW OF NEW CAPITAL IN SUCH COMPANIES ONLY FOR MAKING TH E PAYMENT TO THE ASSESSEE COMPANY WHICH HAS NOT BEEN DONE IN THE INSTANT CASE . THE INVESTMENT WAS MADE IN THE ASSESSEE COMPANY BY SOME OF THE COMPANI ES OUT OF FUNDS REALIZED FROM PREVIOUS INVESTMENTS/ADVANCES AND SOME OF THE COMPANIES OUT OF FUNDS REALIZED FROM ALLOTMENT OF SHARES. IF THE PAYMENT W AS MADE BY SOME OF THE COMPANIES BY REALIZING THE FUNDS ALREADY INVESTED B Y SUCH COMPANY HOW SUCH FUNDS CAN BE TREATED AS UNEXPLAINED MONEY OF THE AS SESSEE. D) FINDING OF LD. AO: - THE CONTENTION OF THE ASSESSEE COMPANY IS ONLY BAS ED ON ACCOUNTING JUGGLERY BY WAY OF WHICH THE TRANSACTION HAS BEEN RECORDED IN THE BOOKS OF ACCOUNTS OF ALL SUCH PERSONS INCLUDING THE ASSESSEE COMPANY, WHO HAVE PARTICIPATED IN THIS EXERCISE. IT NEEDS TO BE UNDERSTOOD THAT MERELY BECAUSE THE ASSESSEE COMPANY ADJUSTED THE MONEY RECEIVED, A S SHARE CAPITAL/SHARE PREMIUM IN ITS BOOKS OF ACCOUNT, THE TRANSACTION CA NNOT BE SHOWED WITH THE CHARACTER OF A CAPITAL RECEIPT. IT MUST BE SAID THA T THE FACE VALUE OF A SHARE IS INTRINSICALLY CAPITAL IN NATURE BECAUSE IT IMPARTS TO THE SUBSCRIBER A RIGHT OF PARTICIPATION AND OWNERSHIP IN THE ISSUING COMPANY. HOWEVER, THE SHARE PREMIUM ATTACHED TO EACH SUCH SHARE DOES NOT ENTITL E THE SUBSCRIBED OF ANYTHING ELSE OTHER THAN WHAT THE FACE VALUE BY ITSELF HAS A CHIEVED FOR HIM. THIS PARTICIPATION AND OWNERSHIP IN THE ISSUING COMPANY REMAINS THE SAME. IT IS IN FACT A COST WHICH THE SUBSCRIBER BEARS FOR 1) THE VALUE OR WORTH OF ASSETS & PROFITS WHICH THE ISSUER COMPANY ALREADY POSSESSES OR DERIVER, OR 2) THE VALUE OR WORTH OF SUCH ASSETS OR PROFITS WH ICH THE ISSUES COMPANY MAY CREATE IN THE FURTHER OR MAY DERIVE, FOR THE PROPOR TIONATE BENEFIT OF THE SUBSCRIBER. IN THE INSTANT CASE, BOTH OF ABOVE ARE ABSENT. NEIT HER DOES THE ISSUING COMPANY POSSESS ANY ASSET WORTH ITS NAME NOR DOES IT DERIVE ANY PROFIT. NEITHER DOES THE ASSESSEE COMPANY HOLD ANY PROMISE FOR THE CREATION OF ASSETS OR WEALTH IN THE FUTURE NOR IS THERE ANY FORESEEABL E POSSIBILITY OF ANY PROFIT BEING DERIVED IN THE FUTURE. THE QUESTION WHICH THUS ARISES IS THAT WHAT IS IT T HAT THE SUBSCRIBER COMPANY PAID FOR IN FORM OF THE SHARE HAVING FACE VALUE OF RS. 10. THE ASSESSEE COMPANY HAS FAILED TO ANSWER THIS QUESTION EVEN WHEN A SPEC IFIC QUERY IN THIS REGARD HAD BEEN RAISED THUS THE SAME CREATES DOUBTS REGARDING GENUINENESS OF SHARE CAPITAL AND PREMIUM THEREON CREDITED IN BOOKS OF AC COUNTS SUBMISSION OF ASSESSEE: - I) THE TRANSFER OF SHARE APPLICATION INTO SHARE CAP ITAL & SHARE PREMIUM IS NOT ONLY BASED ON ACCOUNTING ENTRIES BUT THEY ARE SUPPORTED BY DOCUMENTARY EVIDENCE. IT IS NOT A CASE WHERE THE CERTAIN RECEIPTS HAS BEEN A CCOUNTED FOR BY THE ASSESSEE COMPANY AS PER ITS OWN SWEET WILL. THE INVESTOR COM PANIES FILED THE SHARE ITA NO. 493/JP/2017 ACIT, CENTRAL CIRCLE-2, JAIPUR VS GODAWARI ESTATES PVT.LTD. KOLKATA 126 APPLICATION FORMS TO SUBSCRIBE THE SHARES OF THE AS SESSES COMPANY AND IN THE SHARE APPLICATION FORM THE DETAIL OF SHARE PREMIUM IS ALSO MENTIONED. THUS THIS IS NOT A CASE WHERE THE CLAIM OF THE ASSESSEE IS BA SED ON ACCOUNTING ENTRIES. THERE IS NO CONTRA MATERIAL WITH THE DEPARTMENT TO PROVE THAT THE ADJUSTMENT MADE IN BOOKS OF ACCOUNTS BY THE ASSESSEE IS NOT CO RRECT OR NOT BASED ON DOCUMENTS. II) THE LD. AO HIMSELF ADMITTED THAT THE FACE VALUE OF A SHARE IS INTRINSICALLY CAPITAL IN NATURE BECAUSE IT IMPARTS TO THE SUBSCRIBER A RI GHT OF PARTICIPATION AND OWNERSHIP IN THE ISSUING COMPANY AND STILL WHILE MA KING THE ADDITION HE MADE THE ADDITION OF THE SHARE CAPITAL AS WELL AS SHARE PREMIUM. FURTHER IF THE SHARES ARE ISSUED AT PREMIUM THEN CAPITAL RECEIPT AGGREGAT E AMOUNT OF PREMIUM IS TO BE TRANSFERRED TO AN ACCOUNT CALLED THE SHARE PREMIUM ACCOUNT. THE BOOK VALUE OF THE SHARE IS INCREASED BY THE AMOUNT CREDITED IN SH ARE PREMIUM ACCOUNT. THIS SHARE PREMIUM ACCOUNT IS NOT DISTRIBUTABLE AS INCOM E JUST LIKE AS ANY OTHER CAPITAL ASSETS. ON WINDING UP, THE SURPLUS MONIES I N THE SHARE PREMIUM ACCOUNT IS TO BE RETURNED TO THE SHARE HOLDERS AS CAPITAL. SO LONG AS THE COMPANY IS A GOING CONCERN, THE MONIES IN SHARE PREMIUM ACCOUNT CAN NEVER BE RETURNED TO THE SHAREHOLDERS EXCEPT THROUGH THE MEDIUM OF A RED UCTION PETITION, OR, IN OTHER WORDS, EXCEPT UNDER EXACTLY THE SAME CONDITIONS AS THOSE UNDER WHICH ANY OTHER CAPITAL ASSET CAN REACH THE SHAREHOLDERS HAND S. DISTRIBUTION OF SHARE PREMIUM AMOUNT IS NOT PERMITTED THROUGH DIVIDEND. T HE COMPANIES ACT CLEARLY MENTIONS THAT AMOUNT RECEIVED AS PREMIUM IS CAPITAL RECEIPT AND NOT A REVENUE RECEIPT. III) AS HIMSELF ADMITTED BY LD. AO ONE OF THE DECIDIN G FACTOR FOR SHARE PREMIUM IS THE VALUE OR WORTH OF SUCH ASSETS OR PROFITS WHICH THE ISSUES COMPANY MAY CREATE IN THE FURTHER OR MAY DERIVE, FOR THE PROPORTIONATE BE NEFIT OF THE SUBSCRIBER. IN FORGOING PARAS WE HAVE DESCRIBED THE FUTURE PLANNIN G OF THE ASSESSEE BY USING THE FUNDS RECEIVED FROM SHAREHOLDERS WHICH ALSO JUS TIFIED THE SHARE PREMIUM RECEIVED FROM THE INVESTOR COMPANIES. THEREFORE THE LD. AO IS WRONG IN HOLDING THAT IN THE INSTANT CASE NEITHER DOES THE ASSESSEE COMPANY HOLD ANY PROMISE FOR THE CREATION OF ASSETS OR WEALTH IN THE FUTURE NOR IS THERE ANY FORESEEABLE POSSIBILITY OF ANY PRO FIT BEING DERIVED IN THE FUTURE. FROM THE FINANCIALS OF THE ASSESSEE COMPANY THE JUSTIFIC ATION GIVEN BY THE ASSESSEE IN FORGOING PARA REGARDING ACQUISITION OF ASSETS AND F UTURE PLANNING FOR EARNING OF PROFIT CAN BE DULY VERIFY. FURTHER AS STATED IN FORGOING P ARAS THE SHARES AT PREMIUM IS ALWAYS A COMMERCIAL DECISION BETWEEN INVESTOR AND I NVESTEE COMPANIES WHICH DOES NOT REQUIRE ANY JUSTIFICATION. E) FINDING OF LD. AO: - THE INQUIRIES WHICH IS BEING DISCUSSED IN SHOW C AUSE NOTICE ADMITTEDLY HAVE NO RELEVANCE IN THE CASE OF THE ASSESSEE COMPANY AS NO SHARE CAPITAL WAS ISSUED TO THOSE COMPANIES. HOWEVE R THE INQUIRIES WERE DISCUSSED TO JUSTIFY THE MODUS OPERANDI OF INTRODUC TION OF MONEY IN THE SHAPE OF HIGH SHARE PREMIUM WHICH IS RELEVANT IN THIS CASE A LSO AS THE SHARES WERE ALLOTTED IN THIS CASE ALSO AT THE RATE HIGHER TO TH E JUSTIFIABLE AMOUNT. SUBMISSION OF ASSESSEE: - ITA NO. 493/JP/2017 ACIT, CENTRAL CIRCLE-2, JAIPUR VS GODAWARI ESTATES PVT.LTD. KOLKATA 127 V) WHATEVER INQUIRIES ARE BEING DISCUSSED IN THE SHOW CAUSE NOTICE AS WELL AS IN ASSESSMENT ORDER ARE NOT APPLICABLE IN THE CASE OF THE ASSESSEE FOR THE INSTANT YEAR AS IN THE YEAR UNDER CONSIDERATION NO SHARES W ERE ISSUED TO SUCH COMPANIES ON WHICH THE INQUIRIES WERE CONDUCTED BY THE DEPARTMENT. IN THIS YEAR NO ANY INQUIRY WAS MADE FROM THE INVESTOR COMP ANIES WHO MADE INVESTMENT IN THE YEAR UNDER CONSIDERATION. VI) AS REGARD TO PRESUMING THE MODUS OPERANDI BASED ON T HE INQUIRED CARRIED OUT IN THE CASE OF SOME OTHER COMPANIES PRESUMING THAT THE SAME MODUS OPERANDI WAS FOLLOWED IN EACH AND EVERY CASE, THIS IS TO SUBMIT THAT AS PER LAW THE INQUIRIES CONDUCED IN THE CASE OF PARTICULAR PERSON SHOULD BE RESTRICTED FROM THAT PERSON ONLY AND CAN MADE APPLICABLE FOR THE TRANSACTIONS C ARRIED OUT FROM SUCH PERSON. THE SAME CANNOT BE EXTENDED TO MAKING ANY PRESUMPTI ON & ASSUMPTION IN EACH AND EVERY CASE WHERE NO INQUIRIES WERE MADE. IT IS NOT CORRECT TO PRESUME THAT ALL THE COMPANIES ARE OPERATING FROM MODUS OPERANDI . VII) THERE IS NO EVIDENCE WITH THE DEPARTMENT TO PROVE T HAT THE COMPANIES TO WHOM SHARES WERE ISSUED DURING THE YEAR WERE BEING FUNDE D BY THE ASSESSEE COMPANY. ALL THE COMPANIES HAVE THEIR OWN INDEPENDEN T FUNDS TO INVEST AT THEIR WISDOM. IT IS FURTHER RELEVANT TO MENTION HERE THAT WHATEVER FUNDS PAID BY THE INVESTOR COMPANIES TO THE ASSESSEE COMPANY WERE TRA NSFERRED FROM THEIR OWN SOURCE OF FUNDS WHICH THEY WERE POSSESSING FROM THE IR OWN SOURCE AND BY NO STRETCH OF IMAGINATION IT CAN BE PRESUMED THAT THOS E FUNDS WERE INTRODUCED BY THE ASSESSEE COMPANY IN THE INVESTOR COMPANIES. VIII) FURTHER FROM THE SHOW CAUSE INQUIRIES ON THE BASIS OF WHICH THE MODUS OPERANDI OF ISSUE OF SHARES ON SHARE PREMIUM IS BEING JUSTIF Y BY THE LD. AO NO WHERE IT PROVES THAT THE FUNDS WERE INTRODUCED IN SUCH COMPA NIES BY THE ASSESSEE COMPANY. THERE IS NO COGENT REASON TO HAVE SUCH PRE SUMPTION EITHER AS A RESULT OF SEARCH OVER THE ASSESSEE AS WELL AS INQUIRIES CA RRIED OUT BY THE DEPARTMENT. IF WE BELIEVE ON THE INQUIRIES CARRIED OUT BY THE DEPA RTMENT WHICH IS NOT IN KNOWLEDGE OF THE ASSESSEE, THAN THERE MAY BE INTROD UCTION OF SOME SUSPICIOUS FUNDS IN THE INTERMEDIATE COMPANIES WHERE FROM THE FLOW OF FUNDS STARTED FROM ONE COMPANY/PERSON TO OTHER COMPANY/PERSON AND PART OF SUCH WAS RECEIVED TO THE ASSESSEE COMPANY BUT STILL A QUESTION AROSE THA T HOW ITS PROVE THAT THE SAME WAS UNEXPLAINED MONEY OF THE ASSESSEE COMPANY. THE COMPANIES/PERSONS FROM WHOM THE ASSESSEE COMPANY RE CEIVED THE SHARE APPLICATION MONEY AND THE PERSONS/COMPANIES FROM WH OM THE INVESTOR COMPANIES OF THE ASSESSEE RECEIVED THE FUNDS ARE SE PARATE INCOME TAX ASSESSEE AND HAVING THEIR OWN NET WORTH, OWN SOURCE OF FUNDS MUCH PRIOR TO THE INVESTMENT MADE IN THE ASSESSEE COMPANY AND IF SOME SUSPICIOUS FUNDS HAD BEEN INTRODUCED IN ACCOUNTS OF SUCH COMPANIES THEN THE EXPLANATION OF SUCH FUNDS SHOULD HAVE BEEN CALLED FROM CONCERNING PERSO N/COMPANY AND IN CASE OF FAILURE TO DO SO THE ACTION SHOULD HAVE BEEN TAKEN IN THE CASE OF CONCERNING PERSON. INSTEAD OF DOING SO THE DEPARTMENT ADOPTED A SHORT CUT METHOD OF TREATING SUCH SUSPICIOUS MONEY AS UNEXPLAINED MONEY OF THE ASSESSEE AND ITA NO. 493/JP/2017 ACIT, CENTRAL CIRCLE-2, JAIPUR VS GODAWARI ESTATES PVT.LTD. KOLKATA 128 ADDED THE SAME INCOME OF THE ASSESSEE WITHOUT CARRY ING NECESSARY INQUIRIES OR TAKING NECESSARY ACTION AGAINST SUCH PERSONS BY JUS TIFYING ITS ACTION ON THE BASIS OF SOME IRRELEVANT INQUIRIES. THERE IS NO CAS E OR EVIDENCE WITH THE DEPARTMENT TO PRESUME THAT THE ASSESSEE HAS INTRODU CED ITS EXPLAINED MONEY IN ACCOUNTS OF SUCH INVESTOR COMPANIES. F) FINDING OF LD. AO: - ADMITTEDLY DURING THE COURSE OF SEARCH OVER MOTIS ONS GROUP NO DOCUMENTS/EVIDENCE WAS FOUND TO SHOW THAT THE COMPANIES WHO MADE INVESTMENT IN SHARES OF THE ASSESSEE COMPANY A RE RUN/MANAGE BY MOTISONS GROUP BUT FROM THE INQUIRIES AND MODUS OPE RANDI ITS REVEALS THAT THE ALLOTEE COMPANIES ARE MERELY PAPER COMPANIES AND PR OVIDING ACCOMMODATION ENTRIES. THEREFORE THE INDIRECT EVIDENCE/INQUIRIES CONDUCTS GIVEN CLEAR SIGN OF INTRODUCTION OF LARGE MONEY IN THE COMPANY IN THE F ORM OF SHARE CAPITAL/SHARE PREMIUM MORE SO WHEN THE JUSTIFICATION OF CHARGING SUCH HIGHER RATE NOT GENUINELY PROVED. SUBMISSION OF AO: - I) IN THIS PARA THE LD. AO HIMSELF ADMITTED THAT DU RING THE COURSE OF SEARCH OVER MOTISONS GROUP NO DOCUMENTS/EVIDENCE WAS FOUND TO S HOW THAT THE COMPANIES WHO MADE INVESTMENT IN SHARES OF THE ASSESSEE COMPA NY ARE RUN/MANAGED BY MOTISONS GROUP. THUS IF THE DEPARTMENT IS NOT IN PO SSESSION OF ANY POSITIVE MATERIAL AGAINST THE ASSESSEE OR ITS INVESTOR COMPA NIES THAN HOW THE INQUIRIES MADE IN THE CASE OF OTHER COMPANIES CAN BE USED AGA INST THE ASSESSEE MORE SO WHEN IN THE YEAR UNDER CONSIDERATION NO ANY TRANSAC TIONS WAS MADE FROM SUCH COMPANIES. FURTHER THERE IS NOTHING POSITIVE IN THE INQUIRIES TO ALLEGED THAT THE ASSESSEE HAS INTRODUCED ITS OWN UNEXPLAINED MONEY U NDER THE GARB OF SHARE CAPITAL AND SHARE PREMIUM. II) THE RATE OF SHARE WAS DECIDED AFTER DISCUSSION OF ASSESSEE COMPANY AND INVESTOR COMPANY. THE SHARES WERE ISSUED TO THE INV ESTOR COMPANIES AT PREMIUM BECAUSE OF THE REASONS MENTIONED IN FORGOING PARAS. FROM THE DOCUMENTS SUBMITTED TO THE AO NO WHERE IT PROVES THAT ALL THE COMPANIES ARE SIMPLY PAPER COMPANIES AND PROVIDING ONLY ACCOMMODATION ENTRIES AND THE INVESTMENT MADE BY THEM IN THE ASSESSEE COMPANY IS NOT GENUINE. THE FINDING OF THE LD. AO IS BASED ON THE ASSUMPTION AND PRESUMPTION. G) FINDING OF LD. AO: - IT IS ALSO TO BE NOTED HERE THAT THE NOTICES U/S 133(6) WERE ISSUED TO THE KOLKATA BASED COMPANIES FROM WHERE TH E ASSESSEE COMPANY RECEIVED SHARE CAPITAL/SHARE PREMIUM. TILL THE STIP ULATED DATE OF COMPLIANCE NONE OF THE COMPANY REPLIED TO THE ABOVE SAID NOTIC ES. SUBMISSION OF ASSESSEE: - IV) THE LD. AO HAD ISSUED THE NOTICES U/S 133(6) OF INCO ME TAX ACT, 1961 AND HE ALLEGES THAT THE SAME WERE NOT COMPLIED BY THE INVE STOR COMPANIES. BUT THIS FACT WAS NOT BROUGHT TO THE NOTICE OF THE ASSESSEE. THE ASSESSEE HAS INQUIRED FROM THE INVESTOR COMPANIES AND THEY REPORTED THAT THEY HAVE SENT REPLY BY POST FOR ALL THE NOTICES RECEIVED BY THEM. ITA NO. 493/JP/2017 ACIT, CENTRAL CIRCLE-2, JAIPUR VS GODAWARI ESTATES PVT.LTD. KOLKATA 129 V) FURTHER FROM THE ASSESSMENT ORDER IT IS NOT CLEAR T HAT WHAT SHORT OF INFORMATIONS WERE REQUIRED BY LD. AO FROM THE INVESTOR COMPANIES AND WHETHER THE SAME WAS OVER AND ABOVE TO THE INFORMATIONS/DOCUMENTS ALREA DY SUBMITTED BY THE ASSESSEE. IF SUCH CALLED INFORMATION WERE THAT MUCH IMPORTANT THAN WHY THE SAME WERE NOT BROUGHT IN THE NOTICE OF THE ASSESSEE . THIS SHOWS THAT THE LD. AO WAS BENT FOR MAKING THE ASSESSMENT AND HE ISSUED TH E NOTICE TO THE INVESTOR COMPANIES JUST TO COMPLETE THE FORMALITIES. VI) SIMPLY THAT THE PARTIES NOT RESPONDED THE NOTICE, I T DOES NOT EMPOWER TO THE LD. AO TO TREAT THE TRANSACTIONS AS NON GENUINE. RELIANC E IS PLACED ON FOLLOWING DECISIONS: - CIT V/S. WINSTRAL PETROCHEMICALS (P) LTD. (2010) 41 D TR (DEL) 139 INCOMECASE CREDITSHARE APPLICATION MONEYASSESSEE COMPANY WAS FOUND TO HAVE RECEIVED THE MONEY THROUGH BANKING CHANNELS ASSESSEE COMPANY ALSO FURNISHED WRITTEN CONFIRMATIONS FROM THE APPLICANT COMPANIES, COPIES OF CERTIFICATES OF INCORPORATION, PAN CARDS, PAN DETAILS AND COMPANY DETAILS ETC. OF THE APPLICANTSFINDING OF TRIBUNAL THAT IDENTITY OF THE SUBSCRIBERS STOOD DULY ESTABLISHED FROM THE DOCUMENTS PRODUCED BY THE ASSE SSEE, CANNOT BE SAID TO BE PERVERSETHERE IS NO LEGAL BAR TO MORE THAN ONE COM PANY BEING REGISTERED AT THE SAME ADDRESSMERELY BECAUSE THE APPLICANTS DID NOT RESPOND TO THE NOTICES SENT TO THEM, AO WAS NOT JUSTIFIED IN ADDING THE AM OUNT OF SHARE APPLICATION MONEY TO THE INCOME OF THE ASSESSEE. CIT V/S. SAMIR BIO-TECH (P) LTD. (2009) 17 DTR (DEL) 2 24 INCOMECASH CREDITSHARE APPLICATION MONEYIDENTITY OF THE SUBSCRIBERS NOT BEING IN DOUBT, SHARE APPLICATION MONEY HAVING BEEN PAID BY ACCOUNT PAYEE CHEQUES, SUBSCRIBERS HAVING SHOWN THE AMOUNTS IN TH EIR AUDITED BALANCE SHEETS AND HAVING GIVEN COMPLETE DETAILS WITH REGARD TO TH EIR RETURNS AND ASSESSMENTS, NO ADDITION COULD BE MADE UNDER S. 68 ONLY BECAUSE THE SUBSCRIBERS DID NOT INITIALLY RESPOND TO SUMMONS. H) FINDING OF LD. AO : - IT IS CLEAR THAT WHAT IS APPARENT IS NOT REAL A ND THE ASSESSEE'S CLAIM OF HAVING RECEIVED INVESTMENT IS N OT GENUINE. AS LAID DOWN BY THE HON'BLE SUPREME COURT IN THE CASE OF CIT VS SUM ATI DAYAL (1995) 80 TAXMAN 89 (SC), APPARENT MUST BE CONSIDERED REAL UNTIL IT IS SHOWN THAT THERE ARE REASONS TO LOOK INTO THE SURROUNDING CIRCUMSTAN CES TO FIND OUT THE REALITY AND THE MATTER HAS TO BE CONSIDERED BY APPLYING THE TES T OF HUMAN PROBABILITIES. THE EVIDENCES HAVE TO BE JUDGED BY APPLYING THE TEST OF HUMAN PROBABILITIES. IMPORTING THE RATIO OF THE HON'BLE SUPREME COURT OF INDIA AS PROPOUNDED IN THE CASE OF SUMATI DAYAL (SUPRA), THERE IS NO DISPUTE T HAT THE AMOUNT HAS BEEN RECEIVED BY THE APPELLANT FROM VARIOUS COMPANIES, S OME OF WHICH ARE LISTED COMPANIES, AND THE FUNDS HAVE BEEN RECEIVED AGAINST THE ISSUE OF SHARES AND THAT THE FUNDS HAVE BEEN RECEIVED THROUGH BANKING C HANNELS. WHAT IS DISPUTED IS WHETHER THE FUNDS RECEIVED BY THE ASSESSEE IS AC TUALLY GENUINE INVESTMENT OR THE UNACCOUNTED INCOME INTRODUCED IN THE GARB OF IN VESTMENT. THIS RAISES THE QUESTION WHETHER THE APPARENT COULD BE CONSIDERED A S REAL. IN THE PRESENT CASE THE CLAIM OF THE ASSESSEE HAVING RECEIVED GENUINE I NVESTMENT IS INCORRECT. SUBMISSION OF ASSESSEE: - ITA NO. 493/JP/2017 ACIT, CENTRAL CIRCLE-2, JAIPUR VS GODAWARI ESTATES PVT.LTD. KOLKATA 130 VI) AS LAID DOWN BY THE HON'BLE SUPREME COURT IN THE CAS E OF CIT V/S SUMATI DAYAL (1995) 80 TAXMAN 89 (SC), (ALSO RELIED BY LD. AO) APP ARENT MUST BE CONSIDERED REAL UNTIL IT IS SHOWN THAT THERE ARE REASONS TO LO OK INTO THE SURROUNDING CIRCUMSTANCES TO FIND OUT THE REALITY AND THE MATTE R HAS TO BE CONSIDERED BY APPLYING THE TEST OF HUMAN PROBABILITIES. THE EVIDE NCES HAVE TO BE JUDGED BY APPLYING THE TEST OF HUMAN PROBABILITIES. VII) THE LD. AO IS ALSO ADMITTING IN THIS PARA THAT THE A MOUNT HAS BEEN RECEIVED BY THE APPELLANT FROM VARIOUS COMPANIES AND THE FUNDS HAVE BEEN RECEIVED AGAINST THE ISSUE OF SHARES AND THAT THE FUNDS HAVE BEEN RE CEIVED THROUGH BANKING CHANNELS. THE DISPUTE IS WHETHER THE FUNDS RECEIVED BY THE A SSESSEE ARE ACTUALLY GENUINE CAPITAL APPLICATION OR THE UNACCOUNTED INCOME INTRO DUCED IN THE FORM OF SHARE APPLICATION. IN THIS REGARD THIS IS TO SUBMIT THAT THERE IS NO REASON WITH THE DEPARTMENT TO PRESUME THAT THE AMOUNT RECEIVED FROM THE ABOVE MEN TIONED COMPANIES IS ACCOMMODATION ENTRIES TO BROUGHT THE UNACCOUNTED MO NEY OF THE ASSESSEE IN BOOKS OF ACCOUNTS. FURTHER DURING THE COURSE OF SEA RCH THE DEPARTMENT HAS NOT FOUND ANY UNDISCLOSED SOURCE OF INCOME OF ASSESSEE FOR THE YEAR UNDER CONSIDERATION BY WHICH THIS MUCH OF INCOME COULD BE EARNED WHICH ALSO PROVES THAT THE SHARE CAPITAL RECEIVED BY THE ASSESSEE IS GENUINE. CIT VS BHARAT ENGINEERING AND CONSTRUCTION CO. (1972) 83 ITR 187 ( SC) IN THIS CASE TRIBUNAL CAME TO THE CONCLUSION THAT UNEXPLAINED CASH CREDIT ENTRIES IN THE FIRST YEAR OF BUSINESS OF ENGINEERING CONSTRUCTION COMPANY COULD NOT BE INCOME OF ASSESSEE. THE HIGH COURT AFTER CAREFUL EXAMINATION OF THE VAR IOUS FINDINGS REACHED BY THE TRIBUNAL HAS COME TO THE CONCLUSION THAT THE TRIBUN AL'S FINDINGS ARE FINDINGS OF FACT. HONBLE APEX COURT CONFIRMED THAT CONCLUSION. THIS GIVES THE ANSWER IN FAVOR OF THE ASSESSEE THA T IN THIS CASE THE APPARENT SHOULD BE CONSIDERED AS REAL AS THE ASSESSEE COMPAN Y IS NOT HAVING ANY SOURCE OF INCOME FROM WHICH THIS MUCH OF INCOME COULD BE E ARNED THAN RECEIVED OF NON GENUINE SHARE CAPITAL TO BROUGHT ITS UNACCOUNTED IN COME IN ITS BOOKS OF ACCOUNTS DOES NOT ARISE. VIII) THE ASSESSING OFFICER MERELY DISBELIEVED THE EXPLAN ATION/STATEMENTS GIVEN BY THE ASSESSEE AND HAS CONVERTED GOOD PROOF INTO NO P ROOF. HONBLE JUSTICE HIDAYATULLAH OF THE SUPREME COURT IN THE CASE OF SR EELEKHA BANERJEE VS CIT [1963] 49 ITR 112 (SC); 120 OBSERVED THAT THE INCOME TAX DEPARTMENT CANNOT BY MERELY REJECTING UNREASONABLY A GOOD EXPLANATION, C ONVERT GOOD PROOF INTO NO PROOF HONBLE SUPREME COURT IN THE CASE OF UMA CHARAN SHA W & BROS CO VS CIT 37 ITR 271 HAS HELD THAT THE SURMISES AND CONJECTURES, AND THE CONCLUSION IS THE RESULT OF SUSPICION WHICH CANNOT TAKE THE PLACE OF PROOF. HONBLE PUNJAB & HARYANA HIGH COURT IN THE CASE OF CIT VS ANUPAM KAPOOR (2008) 299 ITR 179 (P & H) ALSO HELD THAT SUSPICION, HOWSOEVER STRONG CANNOT TAKE THE PLACE OF LEGAL PROOF. 8. BY GIVING THE ABOVE FINDINGS THE LD. MADE ADDIT ION OF RS. 10,30,00,000/- IN TOTAL INCOME OF THE ASSESSEE U/S 56(1) OF INCOME TAX ACT, 1961. REGARDING THE ITA NO. 493/JP/2017 ACIT, CENTRAL CIRCLE-2, JAIPUR VS GODAWARI ESTATES PVT.LTD. KOLKATA 131 APPLYING THE PROVISIONS OF SECTION 56(1) OF INCOME TAX ACT, 1961 WE MAY SUBMIT AS UNDER: - A) AS PER PROVISIONS OF SECTION 56(1) OF INCOME TAX ACT, 1961 INCOME OF EVERY KIND WHICH IS NOT TO BE EXCLUDED FROM THE TOTAL INCOME U NDER THIS ACT SHALL BE CHARGEABLE TO INCOME-TAX UNDER THE HEAD 'INCOME FRO M OTHER SOURCES', IF IT IS NOT CHARGEABLE TO INCOME-TAX UNDER ANY OF THE HEADS SPE CIFIED IN SECTION 14 , ITEMS A TO E. IN THE CASE OF THE ASSESSEE COMPANY, THE AMOUNT WAS RECEIVED FROM INVESTOR COMPANIES WERE AGAINST SHARE APPLICATION AND THE SA ME IS CAPITAL RECEIPT WHICH WAS ADJUSTED AGAINST SHARE CAPITAL AND SHARE PREMIU M. THE MONEY SO RECEIVED TO ASSESSEE COMPANY WAS CAPITAL RECEIPT AND WAS NOT REVENUE RECEIPT, THEREFORE THE SAME CANNOT BE TAXED IN THE HANDS OF ASSESSEE C OMPANY UNDER SECTION 56(1) OF INCOME TAX ACT, 1961 BECAUSE THIS SECTION DEAL WI TH INCOME AND NOT WITH CAPITAL RECEIPTS. THE INVESTORS WHO SUBSCRIBED THE SHARE CAPITAL OF ASSESSEE COMPANY IS ALSO SHOWING THE AMOUNT PAID TO ASSESSEE AS THEIR INVESTMENT IN SHARES OF ASSESSEE COMPANY AND NECESSARY DOCUMENTS IN THIS REGARD WAS SUBMITTED TO LD. AO. THEREFORE THE ASSESSEE HAS PROV ED WITH DOCUMENTARY EVIDENCES THAT THE AMOUNT WAS RECEIVED AGAINST SHAR E APPLICATION I.E. CAPITAL RECEIPT, THEREFORE THE SAME CANNOT BE TREATED AS IN COME OF THE ASSESSEE. FURTHER FOR TREATING THE SHARE CAPITAL/SHARE PREMIUM AS INC OME OF THE ASSESSEE COMPANY NO COGENT REASON HAS BEEN GIVEN BY LD. AO. B) THERE IS NO DEEMING FICTION HAS BEEN GIVEN IN SE CTION 56(1) OF INCOME TAX ACT, 1961 WHEREIN THE INCOME CAN BE TAXED UNDER DEEMING PROVISION. CERTAIN DEEMING INCOME HAS BEEN CHARGED AS INCOME TAX ACT WH ICH HAS BEEN PROVIDED IN SECTION 56(2) OF INCOME TAX ACT, 1961 AND AS PER PROVISION OF SECTION 56(2) OF INCOME TAX ACT, 1961 THE SHARE PREMIUM RECEIVED PRIO R TO AY 2013-14 WERE NOT TAXABLE IN ANY CIRCUMSTANCES IF THE ASSESSEE HAS PR OVED THE IDENTITY, CREDITWORTHINESS AND GENUINENESS OF THE TRANSACTION S. C) THE INCOME FOR THE PURPOSE OF THE INCOME TAX ACT HAS A WELL UNDERSTOOD MEANING AS DEFINED IN SECTION 2(24) OF THE INCOME T AX ACT 1961. IT IS TRUE THAT SECTION 2(24) OF THE INCOME ACT 1961 CONTAINS INCLUS IVE DEFINITION BUT IT CANNOT BE DISPUTED THAT INCOME SHOULD HAVE BEEN LOOK INTO ITS NORMAL MEANING. THE INCOME WILL NOT INCLUDE CAPITAL RECEIPTS UNLESS IT IS SPEC IFIED IN INCOME TAX ACT. THIS ARGUMENT CLARIFIES AFTER THE AMENDMENT MADE BY FINA NCE ACT 2012 W.E.F. 1.4.2013 IN SECTION 56(VIIB) OF INCOME TAX ACT, 1961 WHEREIN CERTAIN SHARE PREMIUMS WERE MADE TAXABLE W.E.F. 01.04.2013. IF TH E SAME WERE ALREADY TAXABLE U/S 56(1) O INCOME TAX ACT, 1961 AND THE SAM E WAS ALREADY INCLUDED IN THE DEFINITION OF INCOME THAN WHY THIS AMENDMENT WA S MADE. THEREFORE THE LD. AO IS WRONG IN MAKING THE ADDITION U/S 56(1) OF INCO ME TAX ACT, 1961. D) CHARGE OF TAX IS ON INCOME AS UNDERSTOOD IN THE I. TAX ACT AND MEASURE OF INCOME AS PER THE COMPUTATION PROVISION. IN CASE TH ERE IS NO CHARGING PROVISION FOR SPECIFIC RECEIPT, THEN IT CANNOT BE TAXED. THE FIVE MEMBER BENCH OF THE APEX COURT IN CIT V VATIKA TOWNSHIP P LTD 367 ITR 466 OBS ERVED AT PAGE 494. ITA NO. 493/JP/2017 ACIT, CENTRAL CIRCLE-2, JAIPUR VS GODAWARI ESTATES PVT.LTD. KOLKATA 132 TAX LAWS ARE CLEARLY IN DEROGATION OF PERSONAL RIG HTS AND PROPERTY INTERESTS AND ARE, THEREFORE, SUBJECT TO STRICT CONSTRUCTION AND ANY AMBIGUITY MUST BE RESOLVED AGAINST IMPOSITION OF THE TAX. IN BILLINGS V U.S 232 U.S.261 AT PAGE 265, 34 S.CT 421 (1914), THE SUPREME COURT CLEARLY ACKNOWLEDGED THIS BASIC AND LONG STANDING RULE OF STATUTORY CONSTRUCTION. TAX STATUTES SHOULD BE STRICTLY CONSTRUED, AND, IF ANY AMBIGUITY BE FOUND TO EXIST, IT MUST BE RESOLVED IN FAVOUR OF CITIZEN. IF A PERSON SOUGHT TO BE TAXED COMES WITHIN THE LE TTER OF THE LAW HE MUST BE TAXED, HOWEVER GREAT THE HARDSHIP MAY APPEAR TO THE JUDICIAL MIND TO BE. ON THE OTHER HAND, IF THE CROWN SEEKING TO RECOVER THE TAX , CANNOT BRING THE SUBJECT WITHIN THE LETTER OF THE LAW, THE SUBJECT IS FREE, HOWEVER APPARENTLY WITHIN THE SPIRIT OF THE LAW THE CASE MIGHT OTHERWISE APPEAR T O BE AS OBSERVED IN PARTINGTON V ATTOMEY GENERAL LR4HL100. SINCE FOR THE YEAR UNDER CONSIDERATION THERE WAS NO PROVISIONS IN INCOME TAX ACT, 1961 WHEREIN THE FAIR VALUE OF SHARE COULD BE C OMPUTED AND THE EXCESS SHARE PREMIUM COULD BE TAXED, THEREFORE IN ABSENCE OF COMPUTATION PROVISION THE SAME CANNOT BE TAXED. THE RELIANCE IS PLACED IN FOL LOWING CASES: - I) THE HONBLE BOMBAY HIGH COURT IN THE CASE OF CAD ELL WVG. MILLS CO.(P) LTD. V CIT 249 ITR 265 HAD AN OCCASION TO CONSIDER THE TAXA BILITY OF A SUM RECEIVED IN RESPECT OF CONSIDERATION OF TENANCY RIGHT. IT WAS A CCEPTED BOTH BY REVENUE AND THE ASSESSEE THAT TENANCY RIGHT IS A CAPITAL RECEIP T. INCOME AS DEFINED IN SECTION 2(24)(VI) IS THE INCOME CHARGEABLE U/S 45. HENCE CA PITAL GAIN CHARGEABLE U/S 45 OR NOT WILL BE TAXABLE IN CASE THE ARGUMENT OF THE REVENUE IS ACCEPTED. LEGISLATURE HAS NOT STOPPED WITH THE WORD CAPITAL G AIN BUT HAS MENTIONED THAT CAPITAL GAIN CHARGEABLE U/S 45. BEFORE THE BOMBAY H IGH COURT, IT WAS ARGUED THAT IN CASE SURRENDER OF TENANCY RIGHTS IS NOT TAX ABLE U/S 45 THEN IT SHOULD FALL U/S 56 OF I.T. ACT. IF THE CAPITAL ASSET HAS NO COST THEN ENTIRE RECEIPT IS CAPITAL RECEIPT. BEFORE THE HONBLE HIGH COURT, THE REVENUE CONTENDED THAT SECTION 14, IT IS MENTIONED AS CAPITAL GAIN AND NOT CAPITAL GAIN C HARGEABLE U/S 45. THIS CONTENTION WAS NOT ACCEPTED BY THE HIGH COURT. IF T HE COMPUTATION PROVISION DO NOT APPLY TO A CASE THEN SUCH A CASE WILL NOT BE CO VERED UNDER CHARGING SECTION. AT LATER STAGE, A REFERENCE WILL BE MADE TO 56 (VII B) INSERTED BY FINANCE ACT 2012 W.E.F. 1.4.2013 AS THE SAME WILL BE A COMPUTATION P ROVISION. FOR THE A.Y. 2011- 12, COMPUTATION PROVISION WERE NOT THERE. IN ABSENC E OF COMPUTATION PROVISION, ENTIRE VALUE OF SHARE PREMIUM CANNOT BE TAXED U/S 5 6. AS FOR TENANCY RIGHT, THE FULL CONSIDERATION CANNOT BE TAXED U/S 56, SIMILARL Y ENTIRE SHARE PREMIUM IS NOT TAXABLE U/S 56(1). II) THE HONBLE APEX COURT IN THE CASE OF CIT V D.P . SANDU BROS. CHEMBUR (P) LTD 273 ITR 1 ALSO HOLD THAT AS PER 2(24)(VI) ONLY INCOM E WHICH IS CHARGEABLE U/S 45 IS TO BE INCLUDED IN INCOME AND IF COMPUTATION PROV ISION U/S 45 FAILS THEN CHARGING PROVISIONS WILL FAIL. REF. TO CIT V B.C. SR INIVASA SETTY 128 ITR 294. IX) THE HONBLE RAJASTHAN HIGH COURT IN THE CASE OF CIT V GOTAN LIME STONE KHANIJ UDYOG 269 ITR 399 ALSO HELD THAT IN CASE COMPUTATION PROVISION U/S 48 COULD ITA NO. 493/JP/2017 ACIT, CENTRAL CIRCLE-2, JAIPUR VS GODAWARI ESTATES PVT.LTD. KOLKATA 133 NOT BE APPLIED FOR WANT OF ASCERTAINABLE COST OF AC QUISITION, THEN CAPITAL GAIN DOES NOT ARISE TO BE INCLUDED IN TOTAL INCOME ON AC COUNT OF FAILURE OF APPLICABILITY OF COMPUTATION PROVISION. THE HONBLE HIGH COURT RE FERRED TO DECISION OF BOMBAY HIGH COURT IN THE CASE OF CADELL WVG. MILLS CO (P) LTD. (SUPRA). X) THE HONBLE RAJASTHAN HIGH COURT IN THE CASE OF S. ZORASTER AND CO. V/S CIT 322 ITR 35 HAD ON OCCASION TO CONSIDER THE TAXABILIT Y OF RECEIPT OF RS.20,000 RECEIVED BY VENDEE ON DEFAULT OF THE PURCHASER AS P ER AGREEMENT FOR SELL OF PREM PRAKASH TALKIES. THE HONBLE HIGH COURT AFTER REFER RING TO THE DECISION OF APEX COURT IN THE CASE OF TRAVANCORE RUBBER AND TEA CO L TD. V CIT 243 ITR 158 HELD THAT SUCH RECEIPT IS CAPITAL RECEIPT. SUCH CAPITAL RECEIPT IS NOT TAXABLE IN VIEW OF JUDGMENT OF APEX COURT IN D.P. SANDU BROS. CHEMBUR (P) LTD (SUPRA). HENCE CAPITAL RECEIPT IS NOT TAXABLE UNLESS THERE IS CHAR GING PROVISION FOR A CAPITAL RECEIPT AND COMPUTATION PROVISIONS ARE ALSO APPLICA BLE. E) THE HONBLE BOMBAY HIGH COURT IN THE CASE OF VOD AFONE INDIA SERVICES P. LTD. V UOI 368 ITR 1 HAD AN OCCASION TO CONSIDER THE DIFFER ENCE BETWEEN THE SHARE PREMIUM DETERMINED BY REVENUE AND THE SHARE PREMIUM CHARGED AS DEEMED LOAN AND TAXING OF NATIONAL INTEREST ON DEEMED LOAN . THE HONBLE BOMBAY HIGH COURT HAS REFERRED TO THE DECISION OF APEX COURT IN THE CASE OF MATHURAM AGGARWAL V/S STATE OF MP (1999) 8 SCC 667 FOR THE TE ST TO INTERPRET A TAXING STATUE WHICH READS AS UNDER: THE INTENTION OF THE LEGISLATURE IS A TAXATION STA TUTE IS TO BE GATHERED FROM THE LANGUAGE OF THE PROVISIONS PARTICULARLY WHERE THE L ANGUAGE IS PLAIN AND UNAMBIGUOUS. IN A TAXING ACT IT IS NOT POSSIBLE TO A SSUME ANY INTENTION OR GOVERNING PURPOSE OF THE STATUTE MORE THAN WHAT IS STATED IN THE PLAIN LANGUAGE. IT IS NOT THE ECONOMIC RESULTS SOUGHT TO BE OBTAINE D BY MAKING THE PROVISION WHICH IS RELEVANT IN INTERPRETING A FISCAL STATUTE. EQUALLY IMPERMISSIBLE IS AN INTERPRETATION WHICH DOES NOT FLOW FROM THE PLAIN, UNAMBIGUOUS LANGUAGE OF THE STATUTE. WORDS CANNOT BE ADDED TO OR SUBSTITUTED SO AS TO GIVE A MEANING TO THE STATUTE WHICH WILL SERVE THE SPENT AND INTENTION OF THE LEGISLATURE. THE STATUTE SHOULD CLEARLY AND UNAMBIGUOUSLY CONVEY THE THREE C OMPONENTS OF THE TAX LAW I.E. SUBJECT OF THE TAX, THE PERSON WHO IS LIABLE T O PAY THE TAX AND THE RATE AT WHICH THE TAX IS TO BE PAID. IF THERE IS ANY AMBIGU ITY REGARDING ANY OF THESE INGREDIENTS IN A TAXATION STATUTE THEN THERE IS NO TAX IN LAW. THEN IT IS FOR THE LEGISLATURE TO DO THE NEEDFUL IN THE MATTER. HONBLE BOMBAY HIGH COURT IN THIS CASE (VODAFONE CA SE) OBSERVED THAT ISSUE OF SHARES AT A PREMIUM IS ON CAPITAL ACCOUNT AND GIVES RISE TO NO INCOME. 56(1) PROVIDES THE INCOME OF EVERY KIND WHICH IS NOT EXCL UDED FROM THE TOTAL INCOME IS CHARGEABLE UNDER THE HEAD INCOME FROM OTHER SOURCES . HOWEVER BEFORE SECTION 56 OF THE ACT CAN BE APPLIED THERE MUST BE INCOME WH ICH ARISES. IF THE RECEIPT IS CAPITAL THEN IT IS NOT INCOME. HENCE SHARE PREMIUM IS NOT AN INCOME. F) THE CBDT VIDE CIRCULAR/INSTRUCTION NO.2 DATED 29 .01.2015 HAS STATED AS UNDER [371 ITR 6(ST)]. ITA NO. 493/JP/2017 ACIT, CENTRAL CIRCLE-2, JAIPUR VS GODAWARI ESTATES PVT.LTD. KOLKATA 134 IN REFERENCE TO THE ABOVE CITED SUBJECT, I AM DIREC TED TO DRAW YOUR ATTENTION TO DECISION OF THE HIGH COURT OF BOMBAY IN THE CASE OF VODAFONE INDIA SERVICES PVT. LTD V UOI FOR THE ASSESSMENT YEAR 2009-10 (WP NO.871 OF 2014) WHEREIN THE COURT HAS HELD INTER ALIA, THAT THE PREMIUM ON SHAR E ISSUE WAS ON ACCOUNT OF A CAPITAL ACCOUNT TRANSACTION AND DOES NOT GIVE RISE TO INCOME AND HENCE, NOT LIABLE TO TRANSFER PRICING ADJUSTMENT. IT IS HEREBY INFORMED THAT THE BOARD HAS ACCEPTED T HE DECISION OF THE HIGH COURT OF BOMBAY IN THE ABOVE MENTIONED WRIT PETITION. IN VIEW OF THE ACCEPTANCE OF THE ABOVE JUDGMENT, IT IS DIRECTED THAT THE RATIO DECID ED OF THE JUDGMENT MUST BE ADHERED TO BY THE FIELD OFFICERS IN ALL CASES WHERE THE ISSUE IS INVOLVED. THIS MAY ALSO BE BROUGHT TO THE NOTICE OF THE ITAT, DRPS AND CIT (APPEALS). IN VIEW OF ABOVE INSTRUCTION, IT IS CLEAR THAT RATI O DECIDING OF TREATING OF SHARE PREMIUM AS CAPITAL RECEIPT IS BINDING ON REVENUE AU THORITIES. G) BY FINANCE ACT 2012 A NEW CLAUSE (VIIB) WAS INSER TED IN 56(2). MEMORANDUM EXPLAINING THE PROVISIONS IN FINANCE BILL 2012 STAT ED AS UNDER:- SHARE PREMIUM IN EXCESS OF THE FAIR MARKET VALUE IS TO BE TREATED AS INCOME. SECTION 56(2) PROVIDES FOR THE SPECIFIC CATEGORY O F INCOMES THAT SHALL BE CHARGEABLE TO INCOME TAX UNDER THE HEAD INCOME FRO M OTHER SOURCES. IT IS PROPOSED TO INSERT A NEW CLAUSE IN 56(2). THE NEW C LAUSE WILL APPLY WHERE, ACCOMPANY, NOT BEING A COMPANY IN WHICH THE PUBLIC ARE SUBSTANTIALLY INTERESTED, RECEIVES, IN ANY PREVIOUS YEAR, FROM AN Y PERSON BEING A RESIDENT, ANY CONSIDERATION FOR ISSUE OF SHARES. IN SUCH A CASE I F THE CONSIDERATION RECEIVED FOR ISSUE OF SHARES EXCEEDS THE FACE VALUE OF SHARES, T HE AGGREGATE CONSIDERATION RECEIVED FOR SUCH SHARES AS EXCEEDS THE FAIR MARKET VALUE OF THE SHARES SHALL BE CHARGEABLE TO INCOME TAX, UNDER THE HEAD INCOME FR OM OTHER SOURCES. THIS AMENDMENT EFFECTIVE FROM 1ST APRIL 2013 AND WI LL ACCORDINGLY APPLY IN RELATION TO ASSESSMENT YEAR 2013-14 AND SUBSEQUENT ASSESSMENT YEARS. IN THE MEMORANDUM IT IS MENTIONED THAT PREMIUM IN EXCESS O F FAIR MARKET VALUE IS TO BE TREATED AS INCOME. THIS SUGGESTS THAT PREMIUM IN EXCESS OF FAIR MARKET VALUE WAS NOT AN INCOME BUT IS TO BE TREATED AS INCOME DU E TO AMENDED PROVISION. BEFORE THE AMENDMENT, CONSIDERATION RECEIVED AS PRE MIUM WAS NOT INCOME. THE LEGISLATURE IN ITS WISDOM REQUIRED THE SHARE PREMIU M IN EXCESS OF FAIR MARKET VALUE TO BE INCOME FROM ASSESSMENT YEAR 2013-14 AND NOT THE ENTIRE PREMIUM TO BE TREATED AS INCOME. CBDT VIDE CIRCULAR NO.3 OF 20 12 DATED 12.06.2012 HAS ALSO MENTIONED THAT PROVISIONS OF 56(2)(VII B) WILL BE APPLICABLE FOR ASSESSMENT YEAR 2013-14 ONWARD. H) SECTION 56 IS NOT A CHARGING SECTION. THIS SECTI ON STARTS WITH THE FOLLOWING SENTENCE. INCOME OF EVERY KIND WHICH IS NOT TO BE EXCLUDED F ROM THE TOTAL INCOME UNDER THE ACT SHALL BE CHARGEABLE TO INCOME TAX UNDER THE HEAD. INCOME FROM OTHER ITA NO. 493/JP/2017 ACIT, CENTRAL CIRCLE-2, JAIPUR VS GODAWARI ESTATES PVT.LTD. KOLKATA 135 SOURCES IF IT IS NOT CHARGEABLE TO INCOME TAX. UNDE R ANY OF THE HEADS SPECIFIED IN SECTION 14, ITEMS A TO E. FOR AN INCOME TO BE TAXED U/S 56, IT HAS TO SATISFY THREE CONDITIONS. (A) IT SHALL BE CLASSIFIABLE AS INCOME AS PER THE C HARGING SECTION OF THE ACT. (B) IT SHALL NOT BE EXCLUDED FROM THE TOTAL INCOME (E.G. SECTION10). (C) IT IS NOT CHARGEABLE TO TAX UNDER ANY OF THE SP ECIFIED HEADS IN SECTION 14, ITEMS A TO E. THE FINANCE BILL 2012 AS PRESENTED ON 16TH MARCH 20 12 INCLUDED A NEW CLAUSE (VIIB) U/S 56(2) OF I.T. ACT [342 ITR1(ST)]. NO PROPO SAL IN THE ORIGINAL BILL TO INSERT A NEW CLAUSE U/S 2(24). SUBSEQUENTLY NOTICE OF AMENDM ENTS TO FINANCE BILL WAS GIVEN [SEE 343 ITR 37(ST)] AND AMENDMENTS ALSO INCLU DED THE IN SECTION OF CLAUSE (XVI) IN 2(24) OF I.T. ACT AND SUCH CLAUSE IS AS UND ER: (XVI) ANY CONSIDERATION RECEIVED FOR ISSUE OF SHARES AS EXCEEDS THE FAIR MARKET VALUE OF THE SHARES REFERRED TO IN CLAUSE (VIIB) OF SUBSE CTION (2) OF 56. THE AMENDMENT INTRODUCED IN 2(24) SIGNIFIES THAT SE CTION 56 IS NOT A CHARGING SECTION. UNLESS THE INCOME WHICH IS TO BE TAXED U/S 56(2)(VII B) IS INCLUDED IN THE DEFINITION OF INCOME, THEN IT CAN BE TAXED AND BE P ART OF TOTAL INCOME. NATURE OF INCOME AS MENTIONED IN SECTION 28(IIIA), (IIIB), (I IIC),(IIID) AND (IIIE) ARE ALSO INCLUDED IN DEFINITION OF INCOME. I) THIS AMENDMENT IF SECTION 56(2)(VIIB) OF INCOME TAX ACT, 1961 EFFECTIVE FROM 1ST APRIL 2013 AND WILL ACCORDINGLY APPLY IN RELATION T O ASSESSMENT YEAR 2013-14 AND SUBSEQUENT ASSESSMENT YEARS AND THE PROVISIONS OF THIS SECTION CANNOT BE MADE APPLY IN PREVIOUS YEARS. IN THIS REGARD THE RA TIO HAS BEEN LAID DOWN IN FOLLOWING JUDGMENTS: - A) BY FINANCE ACT 1994, SECTION 55(2) WAS AMENDED TO PROVIDE THAT COST OF ACQUISITION OF A TENANCY RIGHT WILL BE TAKEN AS NIL . THE HONBLE APEX COURT IN THE CASE OF D.P. SANDU BROS. CHEMBUR (P) LTD (SUPRA) , HELD THAT AMENDMENT TOOK EFFECT FROM 1ST APRIL, 1995 AND THEREFORE WILL NOT BE APPLICABLE FOR A.Y. 1987-88. SIMILAR FINDING HAS BEEN RECORDED BY HONB LE RAJ, HIGH COURT IN THE CASE OF GOTAN LIME STONE KHANIJ UDHYOG. THE RATIO OF LAW IN RESPECT OF AMENDMENT IN 55(2) B EING HELD AS PROSPECTIVE IS APPLICABLE FOR 56(2)(VIBE) AND HENCE SHARE PREMIUM IN EXCESS OF FAIR MARKET VALUE CANNOT BE HELD TAXABLE FOR A.Y. 2011-12. B) RECENTLY THE HONBLE APEX COURT IN THE CASE OF M.G. PICTURES (MADR AS) LTD V/S ACIT 373 ITR 39 HELD THAT AMENDMENT IN SECTION 40A(3) W.E.F. FROM 1.4.1996 IS PROSPECTIVE AND CANNOT BE APPLIED TO PR EVIOUS YEARS OF BLOCK PERIOD PRIOR TO F.Y. 1995-96. C) THE FIGURE OF 10,000 WAS CHANGED TO 20,000 U/S 4 0A(3) OF INCOME TAX ACT, 1961 AND 269SS OF INCOME TAX ACT, 1961 BY DIRECT TAX LAWS (AMENDMENT) ACT 1987 ITA NO. 493/JP/2017 ACIT, CENTRAL CIRCLE-2, JAIPUR VS GODAWARI ESTATES PVT.LTD. KOLKATA 136 W.E.F. 1.4.1989. THE CBDT VIDE CIRCULAR NO.522 DATE D 18.08.1988 STATED THAT AMENDMENT IN SECTION 40A(3) IS APPLICABLE FOR A.Y. 19 89-90 AS IT IS A SUBSTANTIVE PROVISION AND SINCE 269SS IS A PROCEDURAL PROVISION , THE EFFECTIVE DATE WILL BE 1.4.89 I.E. PREVIOUS YEAR RELEVANT TO A.Y. 89-90. D) THE FIVE JUDGE CONSTITUTION BENCH IN THE CASE OF CIT V VATIKA TOWNSHIP (P) LTD. 367 ITR 466 HAD AN OCCASION TO CONSIDER AS TO WHETHER PROVISO ADDED TO SECTION 113 OF THE I.T. ACT, IS PROSPECTIVE OR RETRO SPECTIVE. THE HONBLE APEX COURT WHILE CONSIDERING THE VARIOUS DECISIONS HELD (AS PER PAGE 469 OF ITR 367). THAT SURCHARGE LEVIED BY ASSESSING OFFICER FOR THE BLOCK ASSESSMENT PERTAINING TO THE PERIOD FROM JUNE 1, 2002 WAS LIABLE TO BE DE LETED. AN AMENDMENT MADE TO A TAXING STATUTE CAN BE SAID TO BE INTENDED TO REMOVE HARDSHIPS ONLY OF THE ASSESSEE, NOT OF THE DEPARTME NT. IMPOSING A RETROSPECTIVE LEVY ON THE ASSESSEE WOULD HAVE CAUSED UNDUE HARDSH IP AND FOR THAT REASON PARLIAMENT SPECIFICALLY CHOSE TO MAKE THE PROVISO E FFECTIVE FROM JUNE 1, 2002. WHERE A BENEFIT IS CONFERRED BY A LEGISLATION, THE RULE AGAINST A RETROSPECTIVE CONSTRUCTION IS DIFFERENT. IN A LEGISLATION CONFERS A BENEFIT ON SOME PERSONS BUT WITHOUT INFLICTING A CORRESPONDING DETRIMENT ON SOM E OTHER PERSON OR ON THE PUBLIC GENERALLY, AND WHERE TO CONFER SUCH BENEFIT APPEARS TO HAVE BEEN THE LEGISLATORS OBJECTS, THEN PRESUMPTION WOULD BE THAT SUCH A LEGISLATION, GIVING IT A PURPOSIVE CONSTRUCTION, WOULD WARRANT IT TO BE GIVE N A RETROSPECTIVE EFFECT. THIS EXACTLY IS THE JUSTIFICATION TO TREAT PROCEDURAL PR OVISION AS RETROSPECTIVE. WHERE A LAW IS ENACTED FOR THE BENEFIT OF COMMUNITY AS A WH OLE, EVEN IN THE ABSENCE OF A PROVISION THE STATUTE MAY BE HELD TO BE RETROSPECTI VE IN NATURE. THE HONBLE APEX COURT FURTHER NOTICED THAT CBDT CI RCULAR MENTIONED THAT PROVISO IS APPLICABLE FROM 1.6.2002. IN RESPECT OF 56(2)(VII B ), CBDT VIDE CIRCULAR NO.3 OF 2012 DATED 12.06.2012 HAS ALSO MENTIONED THAT PROVISIONS OF 56(2)(VII B) WILL BE APPLICABLE FOR ASSESSMENT YEAR 2013-14 ONWARD. HENCE SHARE PRE MIUM EVEN IF IN EXCESS OF FAIR MARKET VALUE IS NOT TAXABLE U/S 56(1) FOR THE A.Y. 2 011-12. 9. IN VIEW OF THE ABOVE SUBMISSIONS, IT IS CLEAR TH AT SHARE PREMIUM RECEIVED IS A CAPITAL RECEIPT AND CONSIDERATION RECEIVED CANNOT B E CONSIDERED AS INCOME FOR THE YEAR UNDER CONSIDERATION. WITHOUT PREJUDICE TO OUR SUBMISSION IN THIS REGARD THIS IS TO SUBMIT IN THE IN THE SHOW CAUSE NOTICE T HE LD. AO MENTIONED THAT SHARE PREMIUM/SHARE CAPITAL SHOULD BE TAXABLE IN THE HAND S OF ASSESSEE COMPANY U/S 56(1) OF INCOME TAX ACT, 1961 ON A/C OF SHARE PR EMIUM/SHARE CAPITAL ALLEGED TO BE NOT IN ACCORDANCE WITH THE VALUE OF T HE SHARES. IN THIS REGARD WITHOUT PREJUDICE TO OUR SUBMISSION ON THIS ISSUE T HIS IS TO SUBMIT THAT IN CASE THE SHARE PREMIUM IS MADE TAXABLE AS INCOME OF THE ASSESSEE ON THE GROUND THAT THE SAME IS NOT AS PER FAIR MARKET VALUE AND H ELD AS TAXABLE THAN STILL THE AMOUNT RECEIVED AGAINST SHARE CAPITAL AMOUNTING TO RS. 10,30,000/- CANNOT BE TREATED AS INCOME OF THE ASSESSEE. 10. IN ADDITION OF ABOVE SUBMISSION IT IS FURTHER S UBMITTED THAT THE ASSESSEE SUBMITTED SUFFICIENT DOCUMENTS TO PROVE IDENTITY, C REDITWORTHINESS AND ITA NO. 493/JP/2017 ACIT, CENTRAL CIRCLE-2, JAIPUR VS GODAWARI ESTATES PVT.LTD. KOLKATA 137 GENUINENESS OF SHARE CAPITAL. TO SUPPORT THAT SHARE HOLDERS WERE GENUINE AND CREDITWORTHINESS IS PROVED, THE ASSESSEE ENCLOSED N ECESSARY DETAILS, IN RESPECT OF INCORPORATION OF SUCH COMPANIES AND DETAILS OF C HEQUES VIDE WHICH AMOUNTS WERE RECEIVED. THE CAPACITY OF SHAREHOLDERS IS VERI FIABLE FROM THE COPY OF THE BALANCE SHEET OF THE SHAREHOLDERS. THE SHAREHOLDERS HAVE FUNDS ON A PRIOR DATE FROM THE ALLOTMENT OF SHARES GIVEN BY THE ASSESSEE COMPANY AND SUCH FUNDS WERE MORE THAN THE AMOUNT OF SHARE APPLICATION. THE REFORE, THE ADDITION ON SHARE APPLICATION RECEIVED TO THE ASSESSEE NEITHER CAN BE MADE U/S 56(1) OF INCOME TAX ACT, 1961 NOR CAN BE MADE U/S 68 OF INCOM E TAX ACT, 1961. THE VARIOUS JUDGMENTS AND ARGUMENTS REGARDING ADDITION MADE U/S 56(1) OF INCOME TAX ACT, 1961 HAS BEEN SUBMITTED IN FORGOING PARAS. THE RELIANCE REGARDING ADDITION CANNOT BE MADE U/S 68 OF INCOME TAX CAT, 1 961 IS PLACED ON THE FOLLOWING DECISIONS: - I) SHALIMAR BUILDCON (P) LTD. VS ITO (2011) 128 ITD 0396 (JAIPUR) IN THIS CASE HONBLE ITAT JAIPUR BENCH HAS RELIED O N ITS OLD DECISION IN THE CASE OF HOTEL GAUDAVAN ITA NO. 1162 AND 1137/JP/2008 AND ADD ITION ON ACCOUNT OF SHARE CAPITAL WAS DELETED. 28.5 ON IDENTICAL ISSUE, THE TRIBUNAL, JAIPUR BENCH IN THE CASE OF HOTEL GAUDAVAN (P) LTD. (SUPRA) HAS HELD AS UNDER : '6. AS REGARDS THE ISSUE ON MERIT IN THE DEPARTMENTA L APPEAL, WE CONCUR WITH THE VIEWS OF THE LEARNED CIT(A) THAT THE AO HAS NOT CONS IDERED THE EXPLANATION OF THE ASSESSEE. THE AMOUNT UNDER CONSIDERATION OF RS. 1.89 CRORE HAS BEEN RECEIVED BY THE ASSESSEE AS SHARE APPLICATION MONEY FROM M/S JALKANTA TECHNICAL & FINANCIAL SERVICE (P) LTD. (JTFSPL) AFT ER A PROPER RESOLUTION PASSED BY THE BOARD OF DIRECTORS OF THE AFORESAID COMPANY THROUGH BANKING CHANNEL. M/S JTFSPL IS HAVING PERMANENT ACCOUNT AND FILING I TS RETURN OF INCOME REGULARLY. THE AO HAS NOWHERE MENTIONED THAT MONEY B ELONGS TO THE ASSESSEE COMPANY AND THEREFORE, PROVISIONS OF S. 68 CANNOT B E INVOKED. THE LEARNED CIT(A) HAS RIGHTLY RELIED UPON THE DECISION OF HON BLE DELHI HIGH COURT IN THE CASE OF CIT VS. STELLER INVESTMENT LTD. (2000) 164 CTR (SC) 287 WHICH HAS BEEN CONFIRMED BY THE HONBLE SUPREME COURT OF INDIA. TH E LEARNED CIT(A) HAS ALSO RELIED UPON THE DECISION OF HONBLE JURISDICTIONAL HIGH COURT IN THE CASE OF BARKHA SYNTHETICS LTD. VS. ASSTT. CIT (2005) 197 CTR (RAJ) 432 AND ALSO THE DECISION OF TRIBUNAL, JODHPUR BENCH IN THE CASE OF UMA POLYMERS (P) LTD. VS. DY. CIT (DT. 27TH FEB., 2006) [REPORTED AT (2006) 101 T TJ (JD)(TM) 124ED.] WHERE IT HAS BEEN HELD THAT THE ASSESSEE HAS TO PROVE THE EX ISTENCE OF THE SHAREHOLDERS WHICH IN THE PRESENT CASE IS NOT UNDER DISPUTE. THE REFORE, THE ASSESSEE HAS DISCHARGED THE BURDEN AND THEREFORE THE AO WAS NOT J USTIFIED IN MAKING ANY ADDITION UNDER S. 68 OF THE ACT. THE LEARNED COUNSEL FOR THE ASSESSEE HAS REFERRED TO THE DECISION OF HONBLE SUPREME COURT O F INDIA IN THE CASE OF DIVINE LEASING & FINANCE LTD. DT. 21ST JAN., 2008, THE COP Y OF WHICH IS PLACED ON RECORD WHERE IT HAS BEEN OBSERVED BY THE SUPREME CO URT AS UNDER : CAN THE AMOUNT OF SHARE MONEY BE REGARDED AS UNDIS CLOSED INCOME UNDER S. 68 OF IT ACT, 1961 ? WE FIND NO MERIT IN THIS SLP FOR THE SIM PLE REASON THAT IF THE SHARE APPLICATION MONEY IS RECEIVED BY THE ASSESSEE COMPA NY FROM ALLEGED BOGUS SHAREHOLDERS, WHOSE NAMES ARE GIVEN TO THE AO, THEN THE DEPARTMENT IS FREE TO ITA NO. 493/JP/2017 ACIT, CENTRAL CIRCLE-2, JAIPUR VS GODAWARI ESTATES PVT.LTD. KOLKATA 138 PROCEED TO REOPEN THEIR INDIVIDUAL ASSESSMENTS IN A CCORDANCE WITH LAW. THEREFORE, WE FIND NO INFIRMITY IN THE ORDER OF THE LEARNED CIT(A ), WITH THE IMPUGNED JUDGMENT. THE SAID DECISION OF HONBLE SUPREME COURT OF INDIA HAS BEEN FOLLOWED BY THE TRIBUNAL, DELHI BENCH IN THE CASE OF ITO VS. BHOR M AL DHANSI RAM LTD. IN ITA NO. 4670/DEL/2007, DT. 3RD MARCH, 2006. THE COPY OF THE SAID DECISION OF TRIBUNAL, DELHI BENCH IS PLACED ON RECORD. THE LEARNED COUNSEL FOR THE ASSESSEE SHRI H.M. SINGHVI, CHARTERED ACCOUNTANT HAS ALSO RELIED UPON THE DECIS ION OF HONBLE SUPREME COURT OF INDIA ON THE SAID ISSUE IN THE CASE OF CIT VS. LOVE LY EXPORTS (P) LTD. (2008) 216 CTR (SC) 195 : (2008) 6 DTR (SC) 308 WHEREIN IT HAS BEEN HELD THAT IF THE SHARE APPLICATION MONEY IS RECEIVED BY THE ASSESSEE COMPANY FROM ALLE GED BOGUS SHAREHOLDERS, WHOSE NAMES ARE GIVEN TO THE AO, THEN THE DEPARTMENT IS FR EE TO PROCEED TO REOPEN THEIR INDIVIDUAL ASSESSMENTS IN ACCORDANCE WITH LAW, BUT IT CANNOT BE REGARDED AS UNDISCLOSED INCOME OF ASSESSEE COMPANY.' 28.6 THE HONBLE DELHI HIGH COURT IN THE CASE OF CIT VS. DIVIN E LEASING & FINANCE LTD. (SUPRA) HAD AN OCCASION TO CONSIDER THE ADDITION ON ACCOUN T OF SHARE APPLICATION MONEY. WE ARE REPRODUCING THE HEL D PORTION FROM THE DECISION OF HONBLE DELHI HIGH COURT AS MENTIONED IN (2007) 207 CTR (DEL) 38 (SUPRA). 'INCOMECASH CREDITSHARE APPLICATION MONEYBURDEN OF PROOF CAN SELDOM BE DISCHARGED TO THE HILT BY THE ASSESSEEIF THE AO HAR BOURS DOUBTS OF THE LEGITIMACY OF ANY SUBSCRIPTION HE IS EMPOWERED, NAY DUTY-BOUND, TO CARRY OUT THOROUGH INVESTIGATIONSBUT IF THE AO FAILS TO UNEA RTH ANY WRONG OR ILLEGAL DEALINGS, HE CANNOT OBDURATELY ADHERE TO HIS SUSPIC IONS AND TREAT THE SUBSCRIBED CAPITAL AS THE UNDISCLOSED INCOME OF THE COMPANYIF RELEVANT DETAILS OF ADDRESS AND IDENTITY OF THE SUBSCRIBERS ARE FURN ISHED TO THE DEPARTMENT ALONG WITH COPIES OF THE SHAREHOLDERS REGISTERS, SHARE AP PLICATION FORMS, SHARE TRANSFER REGISTER ETC. IT WOULD CONSTITUTE ACCEPTABLE PROOF OR EXPLANATION BY THE ASSESSEEDEPARTMENT WOULD NOT BE JUSTIFIED IN DRAWI NG AN ADVERSE INFERENCE ONLY BECAUSE THE CREDITOR/SUBSCRIBER FAILS OR NEGLE CTS TO RESPOND TO ITS NOTICES TRIBUNAL HAS NOTED THAT THE ASSESSEE COMPANY IS A P UBLIC LIMITED COMPANY WHICH HAD RECEIVED SUBSCRIPTIONS TO THE PUBLIC ISSU E THROUGH BANKING CHANNELS AND THE SHARES WERE ALLOTTED IN CONSONANCE WITH THE PROVISIONS OF SECURITIES CONTRACT (REGULATION) ACT, 1956, AS ALSO THE RULES AN D REGULATIONS OF DELHI STOCK EXCHANGECOMPLETE DETAILS WERE FURNISHEDTRIBUNAL H AS FURTHER FOUND THAT THE AO HAS NOT BROUGHT ANY POSITIVE MATERIAL OR EVI DENCE WHICH WOULD INDICATE THAT THE SHAREHOLDERS WERE BENAMIDARS OR FICTITIOUS PERSONS OR THAT ANY PART OF THE SHARE CAPITAL REPRESENTED COMPANYS OWN INCOME FROM UNDISCLOSED SOURCES.' 28.7 THE HONBLE APEX COURT IN THE CASE OF CIT VS. LOVELY EX PORTS (P) LTD. (SUPRA) HELD THAT IF THE SHARE CAPITAL MONEY IS RECEIVED B Y THE ASSESSEE COMPANY FROM ALLEGED BOGUS SHAREHOLDERS THEN THE DE PARTMENT IS FREE TO PROCEED TO REOPEN THE INDIVIDUAL ASSESSMENTS OF SUC H SHAREHOLDERS IN ACCORDANCE WITH LAW. SUCH SHARE APPLICATION MONEY C ANNOT BE REGARDED AS UNDISCLOSED INCOME OF THE ASSESSEE COMPANY. 28.8 THE HONBLE HIGH COURT IN THE CASE OF FIRST POINT FINAN CE LTD. (SUPRA) HELD THAT BURDEN OF PROOF ON THE ASSESSEE COMPANY LIES T O THE EXTENT OF MAKING OUT A ITA NO. 493/JP/2017 ACIT, CENTRAL CIRCLE-2, JAIPUR VS GODAWARI ESTATES PVT.LTD. KOLKATA 139 CASE THAT INVESTOR EXISTS AND THEREAFTER IT IS NOT FOR THE ASSESSEE TO FURTHER PROVE WHERE THEY HAVE BROUGHT MONEY FROM TO INVEST WITH I T. 28.9 THE HONBLE DELHI HIGH COURT IN THE CASE OF CIT VS. UNITE D BIO-TECH (P) LTD. 2010 TIOL-533-HC-DEL HELD THAT IN CASE THE IDENTITY OF THE SHARE APPLICANTS HAS BEEN ESTABLISHED AND IT IS FOUND THA T THE SAID APPLICANTS ARE CORPORATE ASSESSEES WHO ARE ASSESSED TO TAX WITH IT DEPARTMENT THEN THERE IS NO CASE OF ANY SUBSTANTIAL QUESTION OF LAW. IN THE INSTANT CASE, THE SHARE APPLICANTS ARE CORPORATE ASSESSEES. 28.10 THE HONBLE DELHI HIGH COURT IN THE CASE OF CIT VS. SAMIR BIO-TECH (P) LTD. (SUPRA) HELD THAT IF INVESTMENTS HAVE BEEN SHOWN BY THE SH ARE APPLICANTS IN THEIR AUDITED BALANCE SHEET THEN THE ADDITION CA NNOT BE MADE UNDER S. 68 OF THE ACT. 28.11 IN VIEW OF THE LEGAL POSITION AS DISCUSSED AB OVE, THE AO WAS NOT JUSTIFIED IN MAKING THE ADDITION OF RS. 1.10 CRORE WITHOUT BRING ING ON RECORD ANY MATERIAL FOR THE ADDITION. SIMPLY ON THE BASIS OF INFORMATION WH ICH IS NOT SUBSTANTIATED IN THE COURSE OF ASSESSMENT PROCEEDINGS AGAINST THE AS SESSEE, THE AO COULD NOT HAVE ADDED THE AMOUNT. (II) THE HONBLE ITAT, JAIPUR BENCH, JAIPUR IN ITS RECENT J UDGMENT THE CASE OF M/S JADAU JEWELLERS & MANUFACTURERS PVT. LTD., B -1, TRIMUTRI CIRCLE, GOVIND MARG, JAIPUR IN ITA NO. 686/JP/2014 DATED 14. 12.2015 GAVE THE FOLLOWING FINDINGS:- .6.1 ON FACTS ALSO, THE ASSESSEE HAS PRODUCED BE FORE THE ASSESSING OFFICER COPY OF SHARE APPLICATION, CONFIRMATION OF THE CASH CREDITORS, COPY OF PAN, COPY OF BOARD RESOLUTION, COPY OF DIRECTORS REPORT, AUD ITORS REPORT, COPY OF BALANCE SHEET, COPY OF P&L ACCOUNT, COPY OF BANK ACCOUNT IN ALL THE CASES TO PROVE THE IDENTITY, GENUINENESS AND CREDITWORTHINESS OF THE C ASH CREDITORS. THE LD ASSESSING OFFICER MADE ADDITION ON THE BASIS OF INVE STIGATION CONDUCTED BY THE ITO, INVESTIGATION WING, KOLKATA BUT THE LD ASSESSIN G OFFICER OF THE ASSESSEE HAS NOT CLARIFIED WHAT INQUIRY HAD BEEN CONDUCTED AND W HAT EVIDENCES COLLECTED WHICH GOES AGAINST THE ASSESSEE. THE NOTICE U/S 131 ISSUED BY THE ITO, INVESTIGATION WING, KOLKATA WERE SERVED IN CASE OF VIDYA AGENCIES PVT. LTD. AND SHIVARPAN MERCANTILES PVT. LTD., BUT COMPLIANCE COU LD NOT BE MADE ON THE GIVEN DATE BECAUSE CONCERNED OFFICER WAS ON LEAVE. IN CAS E OF MIDDLETON GOODS PVT. LTD. AND LACTRODRYER MARKETING PVT. LTD., NOTICES WE RE SERVED ON THE ASSESSEE AND IN COMPLIANCE TO THE NOTICE, THE PARTY SUBMITTE D ALL THE DOCUMENTS IN THE IT OFFICE. THE CASE LAW REFERRED BY THE LD CIT(A) I.E. DECISION OF HONBLE DELHI HIGH COURT IN THE CASE OF NIPUN BUILDERS AND DEVELOPERS PVT. LTD. VS. CIT AND VIJAY POWER GENERATOR LTD. VS CIT (SUPRA) ARE NOT SQUAREL Y APPLICABLE ON THE FACTS OF THE CASE AS THERE WAS SHORT TIME AVAILABLE WITH THE ASSESSING OFFICER AS WELL AS INVESTIGATION WING OF KOLKATA. THE COPY OF INQUIRY HAS NOT BEEN PROVIDED BY THE ASSESSING OFFICER TO THE ASSESSEE. AS PER FINDINGS OF THE HON'BLE DELHI HIGH COURT IN THE CASE NIPUN BUILDERS AND DEVELOPERS PVT . LTD. VS. CIT (SUPRA), THE ITA NO. 493/JP/2017 ACIT, CENTRAL CIRCLE-2, JAIPUR VS GODAWARI ESTATES PVT.LTD. KOLKATA 140 INVESTIGATION OFFICER AT KOLKATA HAD NOT DEPUTED IN SPECTOR TO ENQUIRE THE WHEREABOUTS OF THE COMPANY. THE CASE LAWS REFERRED BY THE ASSESSEE ARE SQUARELY APPLICABLE ON THE FACTS AND CIRCUMSTANCES OF THE APPELLANTS CASE, THEREFORE, WE REVERSE THE ORDER OF THE LD CIT(A) ON TECHNICAL GROUND AS WELL AS ON MERIT ALSO. (III) CIT V/S. SHREE BARKHA SYNTHETICS LTD. (2003) 182 CTR (RAJ) 175 APPEAL(HIGH COURT) SUBSTANTIAL QUESTION OF LAWCASH CREDIT VIS-A-VIS SHARE APPLICATION MONEYTRIBUNAL FOUND THAT 6 OUT OF 7 CO MPANIES FROM WHICH THE SHARE APPLICATION MONEY HAD BEEN RECEIVED WERE GENU INELY EXISTING AND NO ENQUIRY WAS CONDUCTED IN RESPECT OF THE SOURCE OF S HARE APPLICATION MONEY AT THE TIME OF MAKING THE INVESTMENT IN THE ASSESSEE-C OMPANY AND THUS THE ASSESSEE HAS DISCHARGED ITS INITIAL BURDEN EXCEPT I N ONE CASEAS REGARDS INDIVIDUAL INVESTORS, THE TRIBUNAL FOUND THAT IDENT ITY OF 9 OUT OF 10 INVESTORS HAS BEEN ESTABLISHED AND THEY HAVE CONFIRMED THE FACT O F MAKING INVESTMENT IN THE SHARES OF THE ASSESSEE-COMPANY AND NO FURTHER ENQUI RY WAS DIRECTED BY THE AOTHUS, ADDITIONS WERE SUSTAINED ONLY IN RESPECT OF INVESTMENTS SAID TO HAVE BEEN MADE BY U, AN INDIVIDUAL INVESTOR AND BY W LTD ., FOR THE REASON THAT SUCH INVESTMENTS WERE NOT PROVEDFINDING OF THE TRIBUNAL IS ESSENTIALLY A FINDING OF FACT WHICH IS NOT VITIATED IN LAWNO SUBSTANTIAL QU ESTION OF LAW ARISE FOR CONSIDERATION IV) GR. NO. 4 COVERED IN THE SUBMISSION MADE FOR GR. NO . 1 TO 3. WITH REGARD TO QUANTUM ADDITION, IN GR NO 2 ASSESSEES A PPEAL HAS BEEN PARTLY ALLOWED. INCOMECASH CREDITSHARE APPLICATION MONEY TRIBUNAL FOUND THAT THE INVESTORS ARE GENUINELY EXI STING PERSONS AND THEY HAVE FILED CONFIRMATIONS IN RESPECT OF INVESTMENTS MADE BY THEM AND THEIR STATEMENTS WERE ALSO RECORDEDAMOUNT OF SHARE CAPITAL/SHARE AP PLICATION MONEY COULD NOT BE TREATED AS UNEXPLAINED CASH CREDITS AND NO ADDIT ION COULD BE MADE UNDER S. 68NO SUBSTANTIAL QUESTION OF LAW ARISES. (V) 2014 (8) TMI 605 - MADRAS HIGH COURT THE COMMISSIONER OF INCOME TAX VERSUS PRANAV FOUNDATIONS LTD. T. C. (A). NO. 26 2 OF 2014 DATED - 12 AUGUST 2014 ADDITION U/S 68 SHARE APPLICATION AND SHARE PREMI UM AMOUNT CREDITED BUT NOT PROVED - WHETHER THE TRIBUNAL WAS RIGHT IN UPHOLDIN G THE ORDER OF THE CIT(A) WHO DELETED THE ADDITION MADE U/S 68, BEING THE SHARE A PPLICATION MONEY AND SHARE PREMIUM AMOUNT CREDITED BY THE ASSESSEE WHICH WAS N OT PROVED HELD THAT:- FOLLOWING THE DECISION IN CIT V. LOVELY EXPORTS (P) LTD. [2008 (1) TMI 575 - SUPREME COURT OF INDIA] - ALL THE FOUR PARTIES, WHO A RE SUBSCRIBERS OF THE SHARES, ARE LIMITED COMPANIES AND ENQUIRIES WERE MA DE AND RECEIVED FROM THE FOUR COMPANIES AND ALL THE COMPANIES ACCEPTED THEIR INVESTMENT - THE ASSESSEE HAS CATEGORICALLY ESTABLISHED THE NATURE AND SOURCE OF THE SUM AND DISCHARGED THE ONUS THAT LIES ON IT IN TERMS OF SECTION 68 OF THE ACT - WHEN THE NATURE AND SOURCE OF THE AMOUNT SO INVESTED IS KNOWN, IT CANNO T BE SAID TO BE UNDISCLOSED INCOME - THE ADDITION OF SUCH SUBSCRIPTIONS AS UNEX PLAINED CREDIT UNDER SECTION 68 OF THE ACT IS UNWARRANTED DECIDED AGAINST REVENU E. ITA NO. 493/JP/2017 ACIT, CENTRAL CIRCLE-2, JAIPUR VS GODAWARI ESTATES PVT.LTD. KOLKATA 141 (VI) INCOME TAX OFFICER VS. MS. SUPERLINE CONSTRUCTION P. LTD. IT AT, BOMBAY TRIBUNAL (A) ITA NO. 3644 TO 3648, 3650, 3651 MUM/2014 30TH NOVEMBER, 2015 (2015) 45 CCH 0281 MUMTRIB ADDITIONADDITION ON ACCOUNT OF BOGUS SHARE APPLICA TION MONEYASSESSEE WAS IN BUSINESS OF BUILDER AND DEVELOPERASSESSMENT WAS COMPLETED U/S 143(3) R.W.S. 147RE-ASSESSMENT PROCEEDINGS WERE INI TIATED ON BASIS OF INFORMATION RECEIVED FROM DIRECTORATE OF INCOME-TAX (INVESTIGATION) WITHOUT RECORDING AOS OWN SATISFACTION AND INFORMATION WAS ACCEPTED IN MECHANICAL MANNERAFTER REOPENING OF ASSESSMENT U/S 147, AO MAD E ADDITION OF RS.40 LAKHS RECEIVED BY ASSESSEE FROM VARIOUS CORPORATE E NTITIESADDITION WAS MADE BY AO ON ACCOUNT OF BOGUS SHARE APPLICATION MONEY UN DER PROVISIONS OF S 68 CIT(A) DELETED ADDITION MADE BY AOHELD, IN CASE OF CIT VS. M/S. LOVELY EXPORTS (PVT) LTD, REPORTED IN [2008] 216 CTR 195 (S C), IT WAS HELD THAT IF SHARE APPLICATION MONEY WAS RECEIVED BY ASSESSEE COMPANY FROM ALLEGED BOGUS SHAREHOLDERS WHOSE NAME WERE GIVEN TO AO THEN DEPART MENT WAS FREE TO PROCEED TO REOPEN THEIR INDIVIDUAL ASSESSMENTS IN A CCORDANCE WITH LAW BUT IT COULD NOT BE REGARDED AS UNDISCLOSED INCOME OF ASSE SSEE COMPANYIT WAS SUBMITTED BY ASSESSEE THAT AO HAD FAILED TO APPRECI ATE STATEMENTS OF ANY PERSON RECORDED U/S 143(3) R.W.S. 147THAT ASSESSEE -COMPANY HAD FULLY DISCHARGED BURDEN OF PROOF, ONUS OF PROOF AND EXPLA INED SOURCE OF SHARE CAPITAL AND ADVANCES RECEIVED BY ESTABLISHED IDENTITY, CRED ITWORTHINESS AND GENUINENESS OF TRANSACTION BY BANKING INSTRUMENTS W ITH DOCUMENTARY EVIDENCESASSESSEE COMPANY SUBSTANTIATED DETAILS WIT H DOCUMENTARY EVIDENCES AS EXTRACTED FROM WEBSITE OF MINISTRY OF CORPORATE AFFAIRS, GOVERNMENT OF INDIA BEFORE AOTHESE FACTS HAD NOT BE EN REBUTTED ON BEHALF OF REVENUEITAT WAS NOT INCLINED TO INTERFERE WITH FINDI NGS OF CIT(A) WHO THUS RIGHTLY DELETED ENTIRE IMPUGNED ADDITIONS OF RS.40 L AKHS MADE BY AO U/S 68 ON ACCOUNT OF SHARE CAPITAL SUBSCRIPTION RECEIVED BY A SSESSEE-COMPANY HELD: IT WAS POINTED OUT IN THE CASE OF CIT VS. M/S. LOVELY EXPORTS (PVT) LTD, REPORTED IN [2008] 216 CTR 195 (SC) THAT IF THE SHARE APPLICATION MONEY IS RECEIVED BY THE ASSESSEE COMPANY FROM ALLEGED BOGUS SHAREHOLDERS WHOSE NAME ARE GIVEN TO THE AO THEN THE DEPARTMENT IS FRE E TO PROCEED TO REOPEN THEIR INDIVIDUAL ASSESSMENTS IN ACCORDANCE WITH LAW BUT I T CANNOT BE REGARDED AS UNDISCLOSED INCOME OF ASSESSEE COMPANY. (PARA 2.3) IN THIS BACKGROUND, IT WAS SUBMITTED ON BEHALF OF THE ASSESSEE THAT THE ASSESSING OFFICER FAILED TO APPRECIATE THAT THERE WA S NO DOCUMENTARY EVIDENCE AGAINST THE ASSESSEE-COMPANY TO SUPPORT SUCH IMPUGN ED ADDITIONS. IT WAS FURTHER SUBMITTED BY THE ASSESSEE THAT THE ASSESSING OFFICER FAILED TO APPRECIATE THAT THE STATEMENTS OF ANY PERSON RECORDED U/S 143( 3) R.W.S. 147. THE ASSESSEE- COMPANY HAD FULLY DISCHARGED THE BURDEN OF PROOF, O NUS OF PROOF AND EXPLAINED THE SOURCE OF SHARE CAPITAL AND ADVANCES RECEIVED B Y ESTABLISHED THE IDENTITY, CREDITWORTHINESS AND GENUINENESS OF TRANSACTION BY BANKING INSTRUMENTS WITH DOCUMENTARY EVIDENCES. THE FURTHER STAND OF THE ASS ESSEE HAD BEEN THAT THE ASSESSEE-COMPANY SUBSTANTIATED THE DETAILS WITH THE DOCUMENTARY EVIDENCES AS EXTRACTED FROM THE WEBSITE OF MINISTRY OF CORPORATE AFFAIRS, GOVERNMENT OF INDIA BEFORE THE ASSESSING OFFICER. THESE FACTS HAD NOT BE EN REBUTTED ON BEHALF OF THE REVENUE. ITA NO. 493/JP/2017 ACIT, CENTRAL CIRCLE-2, JAIPUR VS GODAWARI ESTATES PVT.LTD. KOLKATA 142 (PARA 2.4) IN VIEW OF THE FACTS AND CIRCUMSTANCES OF THE PRES ENT CASE AS WELL AS CONSIDERING THE DECISIONS AS DISCUSSED ABOVE ON THE SIMILAR ISS UE, ITAT WAS NOT INCLINED TO INTERFERE WITH THE FINDINGS OF THE CIT(A) WHO HAD R IGHTLY DELETED THE ENTIRE IMPUGNED ADDITIONS OF RS.40 LAKHS MADE BY THE ASSESSI NG OFFICER U/S 68 OF THE ACT ON ACCOUNT OF SHARE CAPITAL SUBSCRIPTION RECEIVE D BY THE ASSESSEE-COMPANY. (PARA 2.5) CONCLUSION: WHEN ASSESSEE-COMPANY HAD SUBSTANTIATED DETAILS WIT H DOCUMENTARY EVIDENCES AS EXTRACTED FROM WEBSITE OF MINISTRY OF CORPORATE AFFAIRS, GOVERNMENT OF INDIA BEFORE AO, THEN ADDITIONS MADE B Y AO U/S 68 ON ACCOUNT OF SHARE CAPITAL SUBSCRIPTION RECEIVED BY ASSESSEE- COMPANY WAS RIGHTLY DELETED. VII) CIT VS. ILLAC INVESTMENT (P) LTD. (2007) 207 CTR (DEL) 687 ; ASSESSEE- COMPANY HAS SATISFACTORILY ESTABLISHED THE IDENTITY OF THE SHARE SUBSCRIBERS AND DELETED THE ADDITION UNDER S. 68, NO SUBSTANTIAL QU ESTION OF LAW ARISES FOR CONSIDERATION. VIII) CIT VS. DIVINE LEASING & FINANCE LTD. (2007) 207 CTR ( DEL) 38; INCOME CASH CREDITSHARE APPLICATION MONEYBURDEN OF PROOF CAN SELDOM BE DISCHARGED TO THE HILT BY THE ASSESSEEIF THE AO HAR BOURS DOUBTS OF THE LEGITIMACY OF ANY SUBSCRIPTION HE IS EMPOWERED, NAY DUTYBOUND, TO CARRYOUT THOROUGH INVESTIGATIONSBUT IF THE AO FAILS TO UNEA RTH ANY WRONG OR ILLEGAL DEALINGS, HE CANNOT OBDURATELY ADHERE TO HIS SUSPIC IONS AND TREAT THE SUBSCRIBED CAPITAL AS THE UNDISCLOSED INCOME OF THE COMPANYIF RELEVANT DETAILS OF ADDRESS AND IDENTITY OF THE SUBSCRIBERS ARE FURN ISHED TO THE DEPARTMENT ALONG WITH COPIES OF THE SHAREHOLDERS REGISTER, SHARE APP LICATION FORMS, SHARE TRANSFER REGISTER, ETC. IT WOULD CONSTITUTE ACCEPTABLE PROOF OR EXPLANATION BY THE ASSESSEEDEPARTMENT WOULD NOT BE JUSTIFIED IN DRAWI NG AN ADVERSE INFERENCE ONLY BECAUSE THE CREDITOR/SUBSCRIBER FAILS OR NEGLE CTS TO RESPOND TO ITS NOTICES TRIBUNAL HAS NOTED THAT THE ASSESSEE-COMPANY IS A P UBLIC LIMITED COMPANY WHICH HAD RECEIVED SUBSCRIPTIONS TO THE PUBLIC ISSU E THROUGH BANKING CHANNELS AND THE SHARES WERE ALLOTTED IN CONSONANCE WITH THE PROVISIONS OF SECURITIES CONTRACT (REGULATION) ACT, 1956, AS ALSO THE RULES AN D REGULATIONS OF DELHI STOCK EXCHANGECOMPLETE DETAILS WERE FURNISHEDTRIBUNAL H AS FURTHER FOUND THAT THE AO HAS NOT BROUGHT ANY POSITIVE MATERIAL OR EVI DENCE WHICH WOULD INDICATE THAT THE SHAREHOLDERS WERE BENAMIDARS OR FICTITIOUS PERSONS OR THAT ANY PART OF THE SHARE CAPITAL REPRESENTED COMPANYS OWN INCOME FROM UNDISCLOSED SOURCESAS REGARDS RECEIPT OF SHARE CAPITAL ON ISSUE OF RIGHTS SHARES TO FIVE COMPANIES, THESE COMPANIES WERE DULY INCORPORATED U NDER THE SIKKIMESE COMPANIES ACT AND WERE ASSESSED UNDER THE SIKKIMESE TAXATION MANUALTHEIR SHARE SUBSCRIPTIONS WERE ALSO RECEIVED THROUGH BANK ING CHANNELS AND FOUND TO BE VALID BY THE JURISDICTIONAL AOTHEREFORE, NO ADDI TION COULD BE MADE UNDER S. 68 IX) BHAV SHAKTI STEEL MINES (P) LTD. VS. CIT (2009) 18 DTR (D EL) 194 INCOME CASH CREDITGENUINENESSCIT(A) NOT ONLY FOUND THAT THE IDENTITY OF EACH OF THE SHAREHOLDERS STOOD ESTABLISHED, BUT ALSO EXAMINED T HE FACT THAT EACH OF THEM WERE INCOME-TAX ASSESSEES AND HAD DISCLOSED THE SHA RE APPLICATION MONEY IN THEIR ACCOUNTS WHICH WERE DULY REFLECTED IN THEIR I T RETURNS AS WELL AS IN THEIR ITA NO. 493/JP/2017 ACIT, CENTRAL CIRCLE-2, JAIPUR VS GODAWARI ESTATES PVT.LTD. KOLKATA 143 BALANCE SHEETSTRIBUNAL WAS NOT THEREFORE JUSTIFIED IN COMING TO THE CONCLUSION THAT THE CIT(A) HAD NOT CONSIDERED THE MATTER IN TH E RIGHT PERSPECTIVEORDER PASSED BY TRIBUNAL REMANDING THE MATTER FOR EXAMINI NG THE SHARE APPLICANTS SET ASIDE AND THAT OF CIT(A) RESTORED X) MEERA ENGINEERING & COMMERCIAL CO. (P) LTD. VS. ASST T. CIT (1997) 58 TTJ (JAB) 527 INCOMECASH CREDITSGENUINENESS OF SHARE CAPITAL O F COMPANYALL THE 51 SHAREHOLDERS FILED THEIR AFFIDAVITS AND CONF IRMATORY LETTERS AND 24 OF THEM FILED THEIR REPLIES ALSO TO NOTICE UNDER S. 133(6) NAMES OF PARTIES PURCHASING THE SHARES WITH AMOUNT SUBSCRIBED WERE FURNISHED BEFORE AOALL DOCUMENTS CLEARLY SHOW THAT SHAREHOLDERS DO EXIST ASSESSEE-CO MPANY HAD DISCHARGED ITS ONUS OF EXPLAINING THE CASH CREDITS AS REQUIRED UND ER LAWIF THE COMPANY IS ABLE TO ESTABLISH THAT SHAREHOLDERS EXISTED AND THE Y HAVE INVESTED MONEY FOR PURCHASE OF SHARES BURDEN OF COMPANY TO PROVE THE C REDIT IS DISCHARGED IDENTITY OF SHAREHOLDERS NOT IN DISPUTEASSESSEE IS NOT REQUIRED TO PROVE CREDIT- WORTHINESS OF SHAREHOLDERSADDITION DELETED XI) ALLEN BRADLEY INDIA LTD. VS. DY. CIT (2002) 74 TTJ (DE L) 604 : (2002) 80 ITD 43 (DEL) ; INCOMECASH CREDITSUBSCRIPTION TO SHARE CAPITAL AND LOANIN CASE OF LIMITED COMPANIES JURISDICTION OF AO WOULD B E LIMITED ONLY TO SEE WHETHER IDENTITY OF SHAREHOLDERS IS ESTABLISHED AND WHETHER THEY EXIST OR NOT ONCE IDENTITY IS ESTABLISHED, THEN, POSSIBLY NO FUR THER ENQUIRIES NEED TO BE MADESINCE THE SHAREHOLDERS OF ASSESSEE-COMPANY WER E IN EXISTENCE, THEY WERE ASSESSED TO TAX, COMPLETE DETAILS WERE AVAILAB LE, SHARE CAPITAL MONEY AS WELL AS LOAN WERE RECEIVED THROUGH ACCOUNT PAYEE CH EQUES AND THEY WERE CLEARED THROUGH PROPER BANKING CHANNELS, AO WAS NOT JUSTIFIED IN DISBELIEVING THE CAPITAL INVESTED BY THE SHAREHOLDER COMPANIESS IMILARLY, AO WAS NOT JUSTIFIED IN DISBELIEVING THE LOAN TAKEN FROM DTL A S THE CHEQUES WERE CLEARED THROUGH BANK CHANNELS AND CONFIRMATION AND SUPPORTI NG EVIDENCE WAS FILED CIT(A) WAS JUSTIFIED IN DELETING THE ADDITIONS. XII) CIT VS STL EXTRUSION (P) LTD. 333 ITR 269 (MP) INCOMECASH CREDITSHARE APPLICATION MONEYASSESSEE HAS DULY ESTABLISHED THE IDENTITY AND SOURCE OF CREDITSASSESSEE HAVING DULY FURNISHED THE NAME, AGE , ADDRESS, DATE OF FILING THE APPLICATION OF SHARES, NUMBER OF SHARES OF EACH SUBSCRIBER THERE WAS NO JUSTIFICATION FOR THE AO FOR MAKING THE IMPUGNED ADD ITIONONCE THE EXISTENCE OF THE INVESTORS/SHARE SUBSCRIBERS IS PROVED, ONUS SHI FTS ON THE REVENUE TO ESTABLISH THAT EITHER THE SHARE APPLICANTS ARE BOGU S OR THE IMPUGNED MONEY BELONGS TO THE ASSESSEE ITSELFADDITIONS NOT SUSTAIN ABLE. XIII) CIT VS ARUNANDA TEXTILES (P) LTD. , 333 ITR 116 (KARNA TAKA) INCOME CASH CREDITSHARE APPLICATION MONEYASSESSEE ABLE TO IDENTIFY THE SHAREHOLDERSIT IS NOT FOR THE ASSESSEE-COMPANY TO ESTABLISH BUT IT IS FOR THE DEPARTMENT TO ENQUIRE WITH THE INVESTORS ABOUT THE CAPACITY TO INVEST THE AMOUNT IN THE SHARES XIV) UMA POLYMER (P) LTD. , 101 TTJ 124, JODHPUR INCOME CASH CREDITSHARE APPLICATION MONEYIN RESPECT OF SHARE CAPITAL MONEY , THE ASSESSEE-COMPANY HAS TO PROVE ONLY THE EXISTENCE OF THE PERSON IN WH OSE NAME SHARE APPLICATION IS RECEIVEDNO FURTHER BURDEN IS CAST ON THE ASSESSEE TO PROVE WHETHER THAT PERSON HIMSELF HAS INVESTED THE MONEY OR SOME OTHER PERSON HAS MADE THE INVESTMENT IN HIS NAMEBURDEN TO PROVE THAT THE MON EY DID NOT BELONG TO HIM ITA NO. 493/JP/2017 ACIT, CENTRAL CIRCLE-2, JAIPUR VS GODAWARI ESTATES PVT.LTD. KOLKATA 144 BUT TO SOMEBODY ELSE IS ON THE REVENUEDISTINCTION B ETWEEN A PUBLIC COMPANY AND A PRIVATE COMPANY IS NOT VERY MATERIAL FOR THIS PURPOSEAO TREATED THE INVESTMENTS MADE BY TEN SHAREHOLDERS IN THE ASSESSE E-COMPANY AS BOGUS AND MADE ADDITION UNDER S. 68 NOT JUSTIFIEDIN ALL THE CASES EXCEPT THAT OF V, AO HAD OBTAINED THE BANK STATEMENTS OF THE SHAREHOLDER S WHICH CLEARLY SHOW THAT THE ACCOUNTS WERE REGULARLY MAINTAINED AND THE SHAR EHOLDERS HAD MADE DEPOSITSFURTHER, THE SHAREHOLDERS ARE ALSO ASSESSE D TO TAXSIMPLY BECAUSE SCRUTINY ASSESSMENTS WERE NOT MADE IN THE CASE OF S HAREHOLDERS, SUCH ASSESSMENTS COULD NOT BE MADE IN THE COURSE OF ASSE SSMENT OF THE ASSESSEE HAVING REGARD TO THE INFORMATION COLLECTED BY THE AO FROM THE BANKS, IDENTITY OF THE SHAREHOLDERS WAS FULLY ESTABLISHEDIF ANY SHARE HOLDER IS FOUND TO HAVE MADE UNEXPLAINED INVESTMENT, THEN ADDITION OF SUCH INVESTMENT IS REQUIRED TO BE MADE IN THE HANDS OF THE SHAREHOLDER AND NOT IN THE ACCOUNT OF THE ASSESSEEU HAD INVESTED IN THE SHARE CAPITAL THROUGH CHEQUE EX CEPT FOR A SMALL SUM WHICH WAS RETURNED TO HERHER BANK ACCOUNT SHOWS SEVERAL ENTRIES, BOTH CREDIT AND DEBIT, WHICH HAVE NO RELATION WITH THE AMOUNT INVES TED WITH THE ASSESSEE- COMPANYMERELY BECAUSE SHE HAS NOT SUBMITTED HER RE TURNS AFTER THE ASST. YR. 1984-85, IT CANNOT BE SAID THAT SHE WAS NOT ASSESSE D TO TAXTHOUGH V HAS NOT BEEN SHOWN TO BE ASSESSED TO TAX, HE HAD MADE MAJOR PART OF INVESTMENTS TOWARDS SHARE CAPITAL THROUGH CHEQUES AND HIS IDENT ITY IS NOT DOUBTED ACCORDINGLY, SHARE CAPITAL ADVANCED BY U AND V IS AL SO TO BE ACCEPTED AS GENUINETHEREFORE, NO ADDITION OF SHARE CAPITAL MON EY COULD BE MADE IN THE HANDS OF THE ASSESSEE-COMPANY. 11. WITHOUT PREJUDICE TO ABOVE THIS IS TO SUBMIT TH AT THE SHARE APPLICATION MONEY CANNOT BE TREATED AS INCOME OF THE ASSESSEE. RELIAN CE IS PLACED IN FOLLOWING DECISIONS: - I) CIT VS. LOVELY EXPORTS (P) LTD. (2008) 216 CTR (SC) 195 INCOMECASH CREDITSHARE APPLICATION MONEYIF THE SHARE APPLICA TION MONEY IS RECEIVED BY THE ASSESSEE COMPANY FROM ALLEGED BOGUS SHAREHOLDER S, WHOSE NAMES ARE GIVEN TO THE AO, THEN THE DEPARTMENT IS FREE TO PROCEED TO REOPEN THEIR INDIVIDUAL ASSESSMENTS IN ACCORDANCE WITH LAW, BUT IT CANNOT B E REGARDED AS UNDISCLOSED INCOME OF ASSESSEE COMPANY II) CIT VS. STELLER INVESTMENT LTD. (200) 251 ITR 263 (SC) EVEN IF THE SUBSCRIBERS TO THE INCREASED SHARE CAPITAL OF ASSES SEE-COMPANY WERE NOT GENUINE, THE AMOUNT COULD NOT BE REGARDED AS UNDISC LOSED INCOME OF THE ASSESSEE-COMPANY. III) COMMISSIONER OF INCOME TAX VS. BHAVAL SYNTHETICS (RAJ H C) (2013) 84 DTR 0449 (RAJ) HELD THAT EVEN IN CASE OF DOUBT ABOUT SUBSCRIBERS TO INCREASED SHARE CAPITAL, AMOUNT OF SHARE CAPITAL CO ULD NOT BE REGARDED AS UNDISCLOSED INCOME OF COMPANYAMOUNT REFERABLE TO S HARE APPLICATION COULD NOT BE ATTRIBUTED TO ASSESSEE AND COULD NOT BE ASSE SSED IN ITS HANDSAPPEAL DISMISSED IV) COMMISSIONER OF INCOME TAX VS. AKJ GRANITES (P) LTD. (RAJ HC) (2008) 301 ITR 0298 HELD THAT IN RESPECT OF SHARE APPLICATIONS RECEIVE D FROM DIFFERENT PLACES ACCOMPANIED WITH SHARE APPLICATION MONEY, NO PRESUMPTION CAN BE DRAWN THAT SAME BELONG TO THE ASSESSEE AND CANNOT B E ASSESSED IN HIS HANDS AS HIS UNDISCLOSED INCOME UNLESS SOME NEXUS IS ESTA BLISHED THAT SHARE ITA NO. 493/JP/2017 ACIT, CENTRAL CIRCLE-2, JAIPUR VS GODAWARI ESTATES PVT.LTD. KOLKATA 145 APPLICATION MONEY FOR AUGMENTING THE INVESTMENT IN BUSINESS HAS FLOWN FROM ASSESSEES OWN MONEYNO SUBSTANTIAL QUESTION OF LAW ARISESBARKHA SYNTHETICS LTD. VS. ASSTT. CIT (2005) 197 CTR (RAJ) 4 32 FOLLOWED. IN VIEW OF THE ABOVE SUBMISSION THIS IS TO SUBMIT T HAT THE ADDITION MADE BY LD. AO IS UNJUSTIFIED AND DESERVE TO BE DELETED. 3.2.2 I HAVE DULY CONSIDERED ASSESSEE'S SUBMISSION AND CA REFULLY GONE THROUGH ASSESSMENT ORDER. I HAVE ALSO TAKEN A NOTE OF FACTUAL MATRIX OF THE CASE AS WELL AS APPLICABLE CASE LAWS RELIED UPO N. I HAVE ALREADY GIVEN A DETAILED FINDINGS IN PARA 2.1.4.7 WHEREIN T OTAL OF RS. 8,71,97,727/= HAS BEEN SUSTAINED IN THE HANDS OF M/ S MOTISONS GLOBAL PVT LTD, M/S MOTISONS ENTERTAINMENT PVT LTD, M/S MO TISONS BUILDTECH PVT LTD AND M/S SHIVANSH BUILDCON PVT LTD, DETAILS OF W HICH ARE AS UNDER: NAME OF APPELLANT COMPANY ITA NO AY ADDITION MADE BY AO ADDITION SUSTAINED ADDITION DELETED/ RELIEF GIVEN MOTISONS GLOBAL PVT. LTD 753/14 - 15 2009 - 10 2,75,00,000 ------------- 2,75,00,000 MOTISONS GLOBAL PVT. LTD 754/14 - 15 2011 - 12 6,96,50,000 --------------- 6,96,50,000 MOTISONS GLOBAL PVT. LTD 767/14 - 15 2012 - 13 42,07,29,600 5,94,47,727 36,12,81,873 MOTISONS GLOBAL PVT. LTD 755/14 - 15 2013 - 14 4,41,00,000 50,50,000 3,90,50,000 MOTISONS ENTERTAINMENT (I) PVT. LTD 760/14 - 15 2009 - 10 3,40,00,000 --------------- 3,40,00,000 MOTISONS ENTERTAINMENT (I) PVT. LTD 766/14 - 15 2011 - 12 1,95,00,000 ---------------- 1,95,00,000 MOTISONS ENTERTAINMENT (I) PVT. LTD 756/14 - 15 2012 - 13 7,78,00,000 1,41,50,000 6,36,50,000 MOTISONS BUILDTECH PVT. LTD 758/14 - 15 2009 - 10 3,03,00,000 --------------- 3,03,00,000 MOTISONS BUILDTECH PVT. LTD 759/14 - 15 2012 - 13 3,68,27,500 82,00,000 2,86,27,500 GODAWARI ESTATES PVT. LTD 769/14 - 15 2010 - 11 2,00,00,000 -------------- 2,00,00,000 GODAWARI ESTATES PVT. LTD 768/14 - 15 2012 - 13 10,30,00,000 -------------- 10,30,00,000 BHOLENATH REAL ESTATES PVT LTD 770/14 - 15 2009 - 10 2,90,00,000 --------------- 2,90,00,000 RAINBOW BUILDCON PVT. LTD 757/14 - 15 2009 - 10 2,00,00,000 --------------- 2,00,00,000 SHIVANSH BUILDCON PVT. LTD 771/14 - 15 2012 - 13 90,00,000 3,50,000 86,50,000 TOTAL ADDITIONS 94,14,07,100 8,71,97,727 85,42,09,373 IN VIEW OF ABOVE FACTS AND CIRCUMSTANCES OF THE CAS E AS DISCUSSED ABOVE ADDITION OF RS. 10,30,00,000/= MADE ON A/C O F BOGUS SHARE CAPITAL IN THE HANDS OF ASSESSEE M/S GODAWARI ESTAT ES PVT LTD IS HEREBY DELETED. ASSESSEE GETS RELIEF IN GR NO. 2 & 3. PARA 2.1.4.7 READS OF LD. CIT(A)S ORDER AS UNDER:- ITA NO. 493/JP/2017 ACIT, CENTRAL CIRCLE-2, JAIPUR VS GODAWARI ESTATES PVT.LTD. KOLKATA 146 2.1.4.7 IN VIEW OF THE ABOVE FINDINGS, IT IS ALSO SEEN THAT THIS CASH /DD WAS DEPOSITED AT 4 TH CHANNEL OF SOURCE/ STAGE. THIS MONEY CAME TO THE HANDS OF SOME OF APPELLANT COMPANIES THROUGH TH E SIX COMPANIES ASSESSED IN JAIPUR. HOWEVER, ON PERUSAL OF WRITTEN SUBMISSIO NS AND COMPLIANCE TO SHOW CAUSE LETTER, IT IS ALSO SEEN THAT THE ASSESSEE HAS NOT CONTROVERTED THE FACTS NARRATED BY SHRI SANTOSH CHOUBE, SHRI RAJESH KR SIN GH AND SHRI AJIT SHARMA AND ALSO COULD NOT SATISFACTORILY EXPLAIN THE REASO NS OF CASH DEPOSITS MADE TO THOSE ACCOUNTS. THEREFORE, DULY CONSIDERING THOSE FACTS AS EVIDENCES (BOTH DOCUMENTARY & ORAL) GATHERED DURING SEARCH AND & PO ST-SEARCH OPERATION, ADDITION TO THE EXTENT OF RS. 8,71,97,727/- IS SUST AINED AND BALANCE IS DELETED, DETAILS GIVEN AS UNDER:- NAME OF APPELLANT COMPANY ITA NO. A.Y. ADDITION MADE BY AO ADDITION SUSTAINED ADDITION DELETED/RELIEF GIVEN MOTISONS GLOBAL PVT LTD 753/14-15 2009-10 2,75,00,000 - 2,75,00,000 MOTISONS GLOBAL PVT LTD 754/14-15 2011-12 6,96,50,000 - 6,96,50,000 MOTISONS GLOBAL PVT LTD 767/14-15 2012-13 42,07,29,600 5,94,47,727 36,12,81 ,873 MOTISONS GLOBAL PVT LTD 755/14-15 2013-14 4,41,00,000 50,50,000 3,90 ,50,000 MOTISONS ENTERTAINMENT (I) PVT. LTD 760/14-15 2009-10 3,40,00,000 - 3,40,00,000 MOTISONS ENTERTAINMENT (I) PVT. LTD 766/14-15 2011-12 1,95,00,000 - 1,95,00,000 MOTISONS ENTERTAINMENT (I) PVT. LTD 756/14-15 2012-13 7,78,00,000 1,41,50,000 6,36 ,50,000 MOTISONS BUILDTECH PVT. LTD 758/14-15 2009-10 3,03,00,000 - 3,03,00,000 MOTISONS BUILDTECH PVT. LTD 759/14-15 2012-13 3,68,27,500 82,00,000 2,8 6,27,500 GODAWARI ESTATES PVT. LTD 769/14-15 2010-11 2,00,00,000 - 2,00,00,000 GODAWARI ESTATES PVT. LTD 768/14-15 2012-13 10,30,00,000 - 10,30,00,000 BHOLENATH REAL ESTATES PVT. LTD. 770/14-15 2009-10 2,90,00,000 - 2,90,00,000 ITA NO. 493/JP/2017 ACIT, CENTRAL CIRCLE-2, JAIPUR VS GODAWARI ESTATES PVT.LTD. KOLKATA 147 RAINBOW BUILDCON PVT. LTD 757/14-15 2009-10 2,00,00,000 - 2,00,00,000 SHIVANSH BUILDCON PVT. LTD 771/14-15 2012-13 90,00,000 3,50,000 86,50,000 94,14,07,100 8,71,97,727 85,42,09,373 IT IS PERTINENT TO MENTION HERE THAT M/S. MAYUKH V INIMAY PVT.LTD RECEIVED SHARE APPLICATION OF RS. 10,54,95,000/- IN AY 2009-10 WHI CH WAS ADDED AS INCOME OF M/S.MAYUKH VINIMAY PVT. LTD IN A.Y. 2009-10. THEREA FTER IN SUBSEQUENT YEARS THE PART OF THE FUNDS OWNED BY THIS COMPANY WAS INVESTE D IN THE COMPANIES UNDER APPEAL AS UNDER:- S.N. NAME OF COMPANY (UNDER YOUR APPEAL) ASSESSMENT YEAR AMOUNT 1. MOTISONS GLOBAL PVT. LTD 2012-13 6,93,49,800 2. MOTISONS GLOBAL PVT. LTD 2013-14 2,24,50,000 3. MOTISONS ENTERTAINMENT (INDIA)PVT LTD. 2012-13 1,55,00,000 TOTAL 10,72,29,800 FURTHER IT IS ALSO SUBMITTED THAT ADDITION MADE BY THE AO TANTAMOUNT TO DOUBLE ADDITION. IT IS ALSO MENTIONED HERE THAT AS PER LD. ARS REQUEST, APPELLATE PROCEEDINGS IN CASE OF M/S. MAYUKHVINIMAY PVT. LTD HAVE BEEN KE PT IN ABEYANCE TILL THE DISPOSTAL OF APPEAL BY HON'BLE ITAT. IN VIEW OF AFOREMENTIONED FINDINGS, NOW ADDITIONS M ADE BY THE AO ARE BEING DISCUSSED WITH RESPECT TO GROUNDS OF APPEAL RAISED BY THE RESPECTIVE ASSESSEE IN PARA BELOW. 4.4 DURING THE COURSE OF HEARING, THE LD. DR SUPPOR TED THE ORDER OF THE AO AND SUBMITTED THAT THE ORDER OF THE LD. CIT(A) M AY BE SET ASIDE. 4.5 TO THIS EFFECT, THE LD.AR OF THE ASSESSEE FILED THE FOLLOWING WRITTEN SUBMISSION PRAYING THEREIN TO DISMISS THE APPEAL OF THE DEPARTMENT. ITA NO. 493/JP/2017 ACIT, CENTRAL CIRCLE-2, JAIPUR VS GODAWARI ESTATES PVT.LTD. KOLKATA 148 2.03.1.2 SUBMISSION OF ASSESSEE:- THE FACTS AND CIRCUMSTANCES OF THE ISSUE RAISED IN THE DEPARTMENTAL APPEAL FOR THE AY 2012-13 UNDER GROUND NO 1 ARE EXA CTLY SIMILAR TO GROUND NO 1 FOR AY 2010-11 IN ITA NO 493/JP/2017. T HE ASSESSEE HAS MADE DETAILED SUBMISSION IN AY 2010-11 FOR ITA NO 493/JP/2017. IN ORDER TO AVOID REPETITION, WE PRAY YOUR HONOR KI NDLY TO CONSIDER THE SUBMISSION MADE FOR ITA NO 493/JP/2017 FOR AY 2010- 11 UNDER PARA 2.01.2 ABOVE AS ALSO MADE FOR AY 2012-13 UNDER GROU ND NO 1 OF ITA NO 494/JP/2017. IN VIEW OF THE ABOVE SUBMISSION, THE HUMBLE ASSESSE E PRAYS YOUR HONOR KINDLY TO DISMISS THE APPEAL FILED BY TH E DEPARTMENT. 4.6 WE HAVE HEARD THE RIVAL CONTENTIONS AND PERUSED THE MATERIALS AVAILABLE ON RECORD. IT IS PERTINENT TO MENTION THA T THE SIMILAR ISSUE HAS BEEN DEALT WITH AND DECIDED BY THIS BENCH OF ITAT V IDE ITS ORDER DATED 30-10-2017 IN THE CASE OF ACIT, CENTRAL CIRCLE-2, J AIPUR VS MOTISONS BUILDTECH PVT. LTD IN ITA NO. 481/JP/2017 (REVENUE S APPEAL) FOR THE ASSESSMENT YEAR 2009-10. SINCE THE ISSUE RAISED BY THE REVENUE IN THE PRESENT APPEAL IS SAME AS DECIDED IN THE APPEAL OF THE REVENUE IN ITA NO.481/JP/2017FOR THE ASSESSMENT YEAR 2009-10 IN TH E CASE OF ACIT, ITA NO. 493/JP/2017 ACIT, CENTRAL CIRCLE-2, JAIPUR VS GODAWARI ESTATES PVT.LTD. KOLKATA 149 CENTRAL CIRCLE-2, JAIPUR VS MOTISONS BUILDTECH PVT. LTD JAIPUR (SUPRA) WHICH SHALL APPLY MUTATIS MUTANDIS IN THE PRESENT A PPEAL OF REVENUE ALSO. THUS SOLITARY GROUND OF ITA NO.494/JP/2017 FOR THE A.Y. 2012-13 OF REVENUES APPEAL IS DISMISSED. 5.1 IN THE C.O. NO. 27/JP/2017 FOR THE ASSESSMENT Y EAR 2012-13, THE ASSESSEE HAS RAISED THE FOLLOWING GROUND:- 1. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE AND IN LAW THE AO ERRED IN MAKING ADDITION OF RS. 10,30,00,000/- BY APPLYING THE PROVISION OF SEC 56( 1) OF THE I.T. ACT, 1961 TREATING THE SHARE CAPITAL AND PREMI UM THEREON RECEIVED FROM VARIOUS PVT. LTD. COMPANIES AS INCOME OF THE ASSESSEE AND THE LD. CIT(A) RIGHTLY DELETED THE ADD ITION MADE BY THE AO. 5.2 IT IS NOTED THAT THE CROSS OBJECTION FILED BY T HE ASSESSEE IS SUPPORTIVE TO THE ORDER OF THE LD. CIT(A) WHICH IS INFRUCTUOUS. THUS THE C.O. OF THE ASSESSEE IS DISMISSED. ITA NO. 493/JP/2017 ACIT, CENTRAL CIRCLE-2, JAIPUR VS GODAWARI ESTATES PVT.LTD. KOLKATA 150 6.0 IN THE RESULT, THE APPEALS FILED BY THE REVENUE AND CROSS OBJECTIONS FILED BY THE ASSESSEE ARE DISMISSED. ORDER PRONOUNCED IN THE OPEN COURT ON 07 -11-2017 . SD/- SD/- DQY HKKJR HKKXPUN (KUL BHARAT) ( BHAGCHAND) U;KF;D LNL; / JUDICIAL MEMBER YS[KK LNL;@ ACCOUNTANT MEMBER TK;IQJ@ JAIPUR FNUKAD@ DATED:- 07/11/ 2017 *MISHRA VKNS'K DH IZFRFYFI VXZSF'KR@ COPY OF THE ORDER FORWARDED TO: 1. VIHYKFKHZ@ THE APPELLANT- THE DCIT, CENTRAL CIRCLE-2 JAIPUR 2. IZR;FKHZ@ THE RESPONDENT- M/S. GODAWARI ESTATES PVT LTD. KOL KATA 3. VK;DJ VK;QDRVIHY@ CIT(A). 4. VK;DJ VK;QDR@ CIT, 5. FOHKKXH; IZFRFUF/K] VK;DJ VIHYH; VF/KDJ.K] T;IQJ@ DR, ITAT, JAIPUR 6. XKMZ QKBZY@ GUARD FILE (ITA NO. 493 /JP/2017) VKNS'KKUQLKJ@ BY ORDER, LGK;D IATHDKJ @ ASSISTANT. REGISTRAR
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