INCOME TAX OFFICER 12(1)(4), MUMBAI V. CYMBAL MERCANTILE PRIVATE LIMITED, MUMBAI

ITA 5367/MUM/2017

• Counselvise Citation: [2019] 116 COUNSELVISE.COM (IT) 7386 (ITAT-MUMBAI)
• Duration Of Justice: 1 year(s) 11 month(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 17-07-2019
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: C
• Assessment Year: 2012-2013
• Appeal Filed On: 17-08-2017
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Assessee Lawyers: V CHANDRASEKHAR
• Keywords: Unexplained cash credit; Valuation report; Accommodation entries; Onus to prove
• Section: 133(6); 131; 68

Judgement Text

1 IN THE INCOME-TAX APPELLATE TRIBUNAL C BENCH MUMB AI BEFORE SHRI G.S. PANNU, VICE- PRESIDENT AND SHRI PAWAN SINGH, JUDICIAL MEMBER ITA NO. 5367/MUM/2017 (ASSESSMENT YEAR 2012-13 ) ITO-12(1)(4) ROOM NO. 145A, AAYAKAR BHAVAN, M.K. ROAD, CHURCH GATE, MUMBAI-400020. VS. M/S CYMBAL MERCANTILE PVT. LTD. B-204, KESAR BAUG, L.T. ROAD, BORIVALI (EAST), MUMBAI-400092. PAN: AAECC7675C APPELLANT RESPONDE NT APPELLANT BY : SHRI PRAMOD NIKALJE (DR) RESPONDENT BY : SHRI V. CHANDRASEKHAR (AR) DATE OF HEARING : 23.04.2019 DATE OF PRONOUNCEMEN T : 17.07.2019 ORDER UNDER SECTION 254(1)OF INCOME TAX ACT PER PAWAN SINGH, JUDICIAL MEMBER; 1. THIS APPEAL BY REVENUE UNDER SECTION 253 OF INCOME- TAX ACT (ACT) IS DIRECTED AGAINST THE ORDER OF LD. COMMISSIONER OF I NCOME-TAX (APPEALS)- 20, MUMBAI [HEREINAFTER REFERRED AS LD. CIT(A)] DAT ED 01.05.2015 FOR ASSESSMENT YEAR 2012-13. THE REVENUE HAS RAISED THE FOLLOWING GROUNDS OF APPEAL: 1. WHETHER ON THE FACTS AND CIRCUMSTANCE OF THE CAS E, THE LD. CIT(A) WAS JUSTIFIED IN DELETING THE ADDITION OF RS. 1.40 CROR ES MADE BY THE A.O. U/S. 68 OF THE I.T. ACT TREATING THE SHARE PREMIUM RECEIVED BY THE ASSESSEE COMPANY AS UNEXPLAINED CASH CREDIT. 2. WHETHER ON THE FACTS AND CIRCUMSTANCE OF THE CAS E, THE LD. CIT(A) WAS JUSTIFIED IN DELETING THE ADDITION MADE BY THE A.O. OF UNREASONABLE SHARE PREMIUM, ESPECIALLY IN THE BACKDROP OF POOR PERFORM ANCE OF THE ASSESSEE COMPANY. ITA NO. M/S CYMBAL MERCANTILE PVT. LTD. 2 3. WHETHER ON THE FACTS AND CIRCUMSTANCE OF THE CAS E, THE LD. CIT(A) WAS JUSTIFIED IN DELETING THE ADDITION OF UNREASONABLE SHARE PREMIUM IN THE LIGHT OF INFORMATION RECEIVED FROM THE INVESTIGATION WING THAT THE CONTRIBUTOR OF THIS SHARE PREMIUM M/S. ALLIED COMPUTERS INTERNATIO NAL (ASIA) LTD. WAS ONE OF THE SHELL COMPANY FLOATED BY MR. SARISH C. S HAH THROUGH WHICH ACCOMMODATION ENTRIES FOR SHARE INVESTMENTS, ETC. W ERE GIVEN. 4. WHETHER ON THE FACT AND CIRCUMSTANCES OF THE CAS E, THE LD.CIT(A) WAS JUSTIFIED IN DELETING THE ADDITION IN THE BACKDROP OF RULING OF HON'BLE TRIBUNALS IN THE CASE OF CIT V/S. MAF ACADEMY PVT. LTD. 96 DTR (DEL.) 317 AND CIT V/S. NR PORTFOLIO PVT. LTD. 96 DTR 281 (DEL.) WHEREIN IT IS RULED THAT PRODUCTION OF PAN NUMBERS, RETURNS ETC. IS NOT SUFFICIENT TO PROVE THE CREDITWORTHINESS AND GENUINENESS OF THE TRANSAC TION. 5. WHETHER ON THE FACT AND CIRCUMSTANCES OF THE CAS E, THE LD.CIT(A) WAS JUSTIFIED IN DELETING THE ADDITION OF SHARE PREMIUM WITHOUT ADHERING TO CARDINAL PRINCIPLE LAID DOWN BY THE HON 'BLE DELHI HIGH COURT IN THE CASE OF CIT V/S. JANSAMPARK ADVERTISING & MARKETING (P) LTD . 375 ITR 373 (DELHI) WHEREIN IT IS RULED THAT IT IS AN OBLIGATION OF THE FIRST APPELLATE AUTHORITY TO HAVE ENSURED THAT EFFECTIVE INQUIRY MAY BE CARRIED OUT IF A.O. HAS FAILED TO DO IT PROPERLY. 6. WHETHER ON THE FACT AND CIRCUMSTANCES OF THE CAS E, THE LD.CIT(A) WAS JUSTIFIED IN RULING THAT WITHOUT ANY FURTHER PROBE TO PROVE CONTRARY BY THE A.O. THE ADDITION U/S. 68 IN THE HANDS OF THE ASSES SEE CANNOT BE MADE. 2. BRIEF FACTS OF THE CASE ARE THAT THE ASSESSEE-COMPA NY IS ENGAGED IN THE BUSINESS OF READYMADE GARMENTS, FILED ITS RETURN OF INCOME FOR ASSESSMENT YEAR 2009-10 ON 30.11.2012 DECLARING TOT AL INCOME OF RS. 38,385/-. THE RETURN OF INCOME WAS SELECTED FOR SCR UTINY. DURING THE ASSESSMENT, THE ASSESSING OFFICER NOTED THAT THE AS SESSEE HAS RAISED EQUITY SHARE IN EARLIER FINANCIAL YEAR 2010-11 TO 1 5,50,000 SHARES FACE VALUE OF EACH SHARE OF RS. 10/-. FROM THE BALANCE-S HEET, PROFIT & LOSS ACCOUNT NOTE SHARE HELD BY SHAREHOLDERS HOLDING MOR E THAN 5% OF ITA NO. M/S CYMBAL MERCANTILE PVT. LTD. 3 AGGREGATE SHARE IN THE ASSESSEE-COMPANY. THE ASSESS ING OFFICER FURTHER NOTED THAT AT THE COMMENCEMENT OF BUSINESS IN FINAN CIAL YEAR 2010-11, THE DIRECTOR, MUKESH GUPTA, SATYENDRA ROOPNARAYAN M AURYA HAD HELD 5,000/- SHARE EACH AT 50% HOLDING DURING THE YEAR U NDER CONSIDERATION, THE AUTHORIZED SHARE CAPITAL OF ASSESSEE WAS INCREA SED 10,000 TO 15,50,000 EQUITY SHARE THEREBY INCREASING SHARE CAP ITAL FROM RS. 1,00,000/- TO 1. 55 CRORE OUT OF THE INCREASED EQUI TY SHARE OF 3,52,500 SHARE EACH HAS BEEN ALLOTTED TO NEW DIRECTOR I.E. S HRI ANIL VASANJI SHAH, SMT. BHARTI ANIL SHAH, HITEN SHAH, SHAH PAYAL HITEN . THE ASSESSEE ALSO ALLOTTED 1,40,000 SHARE PARTLY PAID AT RS. 2/- EACH OF FACE VALUE OF RS. 10/- TO ALLIED COMPUTERS INTERNATIONAL (ASIA) LIMIT ED. THEREFORE, NEW SHAREHOLDING PATTERN AS ON 31.03.2012 WAS SHOWN AS 22.74% HOLDING BY EACH OF THE FOUR DIRECTORS AND 9.03 HOLDING BY ALLI ED COMPUTERS INTERNATIONAL (ASIA) LTD. THE ASSESSING OFFICER ASK ED THE ASSESSEE TO MAKE SUBMISSION, THE IDENTITY, CREDITWORTHINESS AND GENUINENESS OF THE PARTIES FROM WHOM THE ASSESSEE HAS RECEIVED SHARE A PPLICATION MONEY. THE ASSESSEE FILED ITS REPLY, IN THE REPLY BESIDES THE OTHER SUBMISSION, THE ASSESSEE CONTENDED THAT NO NEW ENQUIRY IS WARRA NTED IN THE CASE AS SECTION 56(2)(VIIB) WAS INSERTED BY FINANCE ACT, 20 12 W.E.F. 01.04.2013 AND WAS NOT APPLICABLE TO THE ORDER UNDER CONSIDERA TION. IT WAS FURTHER STATED THAT ISSUE CANNOT BE EXAMINED UNDER SECTION 68 REGARDING DISPROPORTIONATE SHARE PREMIUM AS IT RELATES TO THE PROVISION OF SECTION ITA NO. M/S CYMBAL MERCANTILE PVT. LTD. 4 56(2)(VIIB). THE ASSESSEE ALSO FURNISHED CERTAIN DO CUMENTARY EVIDENCE TO ESTABLISH THE SOURCE OF RECEIPT AND NATURE OF TRANS ACTION. THE ASSESSING OFFICER ISSUED ONE NOTICE UNDER SECTION 133(6) IN O RDER TO VERIFY THE NATURE AND SOURCE OF THE RECEIPT OF FUNDS. M/S ALLI ED COMPUTERS INTERNATIONAL (ASIA) LIMITED FILED NECESSARY DETAIL S IN RESPONSE TO THE NOTICE ISSUED BY ASSESSING OFFICER. THE ASSESSING O FFICER REPLIED BY M/S ALLIED COMPUTERS INTERNATIONAL (ASIA) LIMITED W AS NOT ACCEPTED BY ASSESSING OFFICER HOLDING THAT THE ASSESSEE FAILED TO FULFILL THE BASIS THREE CONDITIONS LIKE IDENTITY OF PARTIES, CAPACITY OF CREDITORS AND GENUINENESS OF TRANSACTION. THE ASSESSING OFFICER F URTHER NOTED THAT HE HAS RECEIVED INFORMATION FROM INVESTIGATION WING TH AT ALLIED COMPUTERS INTERNATIONAL (ASIA) LIMITED (SUPRA) WAS IN THE LIS T OF COMPANIES FLOATED BY SHRI SARISH C. SHAH WHICH WERE ENGAGED IN PROVID ING ACCOMMODATION ENTRIES AND SHARE APPLICATION MONEY A ND UNSECURED LOAN. THE ASSESSING OFFICER MADE ADDITION HOLDING T HAT NAME OF ALLIED COMPUTERS INTERNATIONAL (ASIA) LIMITED APPEARED IN THE LIST OF COMPANIES FLOATED BY SHRI SARISH C. SHAH. M/S ALLIED COMPUTER S INTERNATIONAL (ASIA) LTD IS A COMPANY LISTED IN BSE AND THAT WHY A LISTED COMPANY IN BSE PURCHASE SHARE OF UNLISTED COMPANY AT A PREMIUM OF RS. 490/- AND SALE THE SAME WITHIN A YEAR OF PURCHASE. THE ASSESS ING OFFICER CONCLUDED THAT M/S ALLIED COMPUTERS INTERNATIONAL ( ASIA) LTD IS A CONDUIT COMPANY FLOATED WITH A VIEW TO CHANNELIZE T HE UNACCOUNTED ITA NO. M/S CYMBAL MERCANTILE PVT. LTD. 5 MONEY. THE ASSESSING OFFICER TREATED THE AMOUNT OF RS. 1.40 CRORE RECEIVED FROM M/S ALLIED COMPUTERS INTERNATIONAL (A SIA) LIMITED IN THE FORM OF SHARE APPLICABLE MONEY AS UNEXPLAINED CASH CREDIT. ON APPEAL BEFORE THE LD. CIT(A), THE ENTIRE ADDITION WAS DELE TED. THUS, AGGRIEVED BY THE ORDER OF LD. CIT(A), THE REVENUE HAS FILED T HE PRESENT APPEAL BEFORE US. 3. WE HAVE HEARD THE SUBMISSION OF LD. DEPARTMENT REPR ESENTATIVE (DR) FOR THE REVENUE AND LD. AUTHORIZED REPRESENTATIVE ( AR) OF THE ASSESSEE AND PERUSED THE MATERIAL AVAILABLE ON RECORD. THE L D. DR FOR THE REVENUE SUBMITS THAT THE ASSESSING OFFICER RECEIVED INFORMA TION FROM PRINCIPAL DIRECTOR OF INCOME TAX (PR DIT) THAT ONE MR. SARISH SHAH FLOATED BOGUS COMPANY AND PROVIDED BOGUS ENTRIES OF SHARE CAPITA L, SHARE PREMIUM, SHARE APPLICATION MONEY AND UNSECURED LOAN ETC. THE LIST OF BENEFICIARY WAS ALSO FURNISHED BY PR DIT. THE NAME OF ASSESSEE ALSO APPEARED IN THE SAID LIST. THE ASSESSEE AVAILED THE BOGUS ENTRY FRO M SAID SARISH SHAH. THE INVESTOR COMPANY IS A LISTED COMPANY WITH BOM BAY STOCK EXCHANGE. THE INVESTOR COMPANY PURCHASED A SHARES O F THE UNLISTED COMPANY (ASSESSEE COMPANY) AT A PREMIUM OF RS. 490/ - AND SOLD THE SAME WITHIN YEAR AT THE SAME PRICE, WHICH CREATE DO UBT ABOUT THE TRANSACTIONS. THE LD CIT(A) DELETED THE ENTIRE ADDI TIONS BY IGNORING THE EVIDENCE ON RECORD. IN SUPPORT OF HIS SUBMISSIONS T HE LD DR FOR THE ITA NO. M/S CYMBAL MERCANTILE PVT. LTD. 6 REVENUE RELIED ON THE DECISION OF HONBLE SUPREME C OURT IN NRA IRON AND STEEL PVT LTD. IN SLP(CIVIL) NO. 29855 OF 2018. 4. ON THE OTHER HAND THE LD AR FOR THE ASSESSEE SUBMIT S THAT THE DURING THE RELEVANT PERIOD THE ASSESSEE ALLOTTED 1,40,000 EQUI TY SHARES OF RS. 10/- EACH AT A PREMIUM OF RS. 490/- PER SHARE (I.E. RS. 500 PER SHARE ) TO M/S ALLIED COMPUTERS INTERNATIONAL (ASIA) LTD AND RECEI VE A SUM OF RS. 1.40 CRORE FROM THE SAID COMPANY (INVESTOR), AS PART PAY MENT, AGAINST THE SAID ALLOTMENT DURING THE IMPUGNED ASSESSMENT YEAR. THIS AMOUNT WAS RECEIVED THROUGH NORMAL BANKING CHANNEL. THE ASSESS ING OFFICER, DURING THE ASSESSMENT PROCEEDING REQUIRED THE ASSESSEE TO FILE DETAILS OF PAYMENT RECEIVED AND THE DETAILS OF ALLIED COMPUTER S INTERNATIONAL (ASIA) LTD IN ORDER TO SATISFIED HIMSELF THAT THE A MOUNT WAS INDEED RECEIVED FROM THE SAID INVESTOR AND THAT THE INVEST OR HAD MEANS AND CAPABILITY OF MAKING SUCH PAYMENTS. THE ASSESSEE FU RNISHED DETAILS OF ADDRESS, PAN, BANK ACCOUNT STATEMENT OF INVESTOR, F INANCIAL STATEMENT, AND CONFIRMATION LETTER FROM INVESTORS. THE ASSESSI NG OFFICER ALSO MADE ENQUIRIES UNDER SECTION 133(6) AND CALL FOR DETAILS ABOUT INVESTOR, WHICH WERE RESPONDED BY THE INVESTOR. THE ASSESSING OFFIC ER DESPITE BEING PROVIDED WITH ALL NECESSARY PROOF OF PAYMENT RECEIV ED, PROCEEDED TO MAKE ADDITION OF THE AMOUNT OF RS. 1.40 CRORE UNDER SECTION 68, TO THE INCOME OF ASSESSEE. THE ASSESSING OFFICER HELD IN T HE ASSESSMENT ORDER THAT IT DOES NOT MAKE COMMERCIAL SENSE FOR INVESTOR TO PURCHASE A SHARE ITA NO. M/S CYMBAL MERCANTILE PVT. LTD. 7 WITH THE FACE VALUE OF RS. 10/- FOR RS. 500/-, PAYI NG A PREMIUM OF RS. 490/- PER SHARE. THE FINANCIAL OF THE ASSESSEE COMP ANY DO NOT JUSTIFY A PREMIUM OF RS. 490/- PER SHARE. THE ASSESSEE COMPAN Y STARTED ONLY IN NOVEMBER 2010 AND THAT FINANCIAL YEAR 2011-12 RELEV ANT TO THE IMPUGNED ASSESSMENT YEAR 2012-13 WAS EFFECTIVELY TH E YEAR IN WHICH THE ASSESSEE HAS COMMENCED ITS COMMERCIAL OPERATION AND HAS A MEAGER NET PROFIT OF RS. 25,885/-. THE ASSESSING OFFICER I N PARA-10.5 OF THE ASSESSMENT ORDER ALSO CONCLUDED THAT FROM THE BALAN CE-SHEET THAT THE SHARES HAD NO CAPABILITY AND NO BASIC VALUE TO GIVE RISE TO PREMIUM. THEREFORE, THE PREMIUM TAKES THE NATURE OF A WINDFA LL BECAUSE THE OTHER PART OF THE TRANSACTION NORMALLY THE WORTH OF THE C OMPANY IS NON- EXISTENT. THERE IS NO CORRESPONDING ASSERTION TO TH E ASSETS/WORTH OF THE COMPANY WHICH COULD JUSTIFY THE ALLEGED BE PREMIUM RECEIVED ON THE SHARES. THERE IS NO MATERIAL BASIS/INGREDIENTS WHIC H COULD JUSTIFY SUCH TRANSACTION IN SUBSTANCE AND ALSO IN LAW. THE ASSES SING OFFICER IN ITS INVESTIGATION HAS BROUGHT OUT THE FACT IN THE ASSES SMENT THAT THE ASSESSEE RECEIVED A SUM OF RS. 1.40 CRORE FROM ALLIED COMPUT ERS INTERNATIONAL (ASIA) LTD AND TRANSFERRED THE SAME TO M/S PAVITHRA MALL MANAGEMENT PRIVATE LTD, A COMPANY BELONGING TO ALLIED COMPUTER S INTERNATIONAL (ASIA) LTD GROUP AND WHICH IN TURN TRANSFERRED THE MONEY TO ALLIED COMPUTERS INTERNATIONAL (ASIA) LTD. THUS, THE MONEY RECEIVED FROM THE SHAREHOLDER GOES BACK TO SHAREHOLDER. IN PARA-11.2 OF THE ASSESSMENT ITA NO. M/S CYMBAL MERCANTILE PVT. LTD. 8 ORDER, THE ASSESSING OFFICER OBSERVED THAT THE INVE STORS WHICH WAS ALLOTTED 1,40,000 SHARES AT RS. 500/- PER SHARE HAS SUBSTANTIALLY SOLD 35,000 OF THESE SHARE TO M/S INTETRICK DEVELOPER PR IVATE LIMITED AT RS. 501/- PER SHARE AND 105000 SHARES TO SALLY MEDIA & ENTERTAINMENT PRIVATE LTD AT RS. 501/- PER SHARE. THE ASSESSING O FFICER ALSO STATES THAT AS ON 31 ST MARCH 2013, FOUR DIRECTORS OF ASSESSEE COMPANY ARE THE ONLY SHAREHOLDERS OF THE ASSESSEE COMPANY AND IT IS TO B E INFERRED THAT THESE DIRECTORS HAVE ACQUIRED THE SHARES ALLOTTED TO INVE STORS. IN PARA-12.5 OF THE ASSESSMENT ORDER, THE ASSESSING OFFICER DRAWS C ONCLUSION THAT THIS CASE OF THE ASSESSEE IS A CLASSIC CASE OF SALE OF S HARES FOR CREATING CAPITAL BY A COMPANY. THE ASSESSEE HAS RESORTED TO THE DEVI CE OF BUILDING SHARE CAPITAL THROW CIRCULAR TRANSACTION OF SHARE AND COR RESPONDING AMOUNT OF PAPER TRANSACTION OF LOAN AND ADVANCES. IT IS DISCO VERED THE TRANSACTION OF SHARE CAPITAL AND TRANSACTIONS OF LOANS AND ADVA NCES ARE ONLY A BOOK AND DEVICE TO AUGMENT SHARE CAPITAL. IN PARA-12.6 T HE ASSESSING OFFICER CONCLUDED THAT, IN VIEW OF THE FACT AND CIRCUMSTANC ES OF THE CASE, THE SUBMISSION OF THE ASSESSEE IS NOT ACCEPTED AND ACCO RDINGLY ADDITION OF RS. 1.50 CRORE RECEIVED FROM INVESTORS IN THE NAME OF SHARE APPLICATION AND SHARE PREMIUM MONEY, REQUIRED TO BE TREATED AS UNEXPLAINED CASH CREDIT IN THE HANDS OF ASSESSEE COMPANY UNDER SECTI ON 68 OF THE INCOME TAX ACT. THE LEARNED AR OF THE ASSESSEE SUBMITS THA T THE ADDITIONS UNDER SECTION 68 IS BAD IN LAW AND DESERVE TO BE DELETED. ITA NO. M/S CYMBAL MERCANTILE PVT. LTD. 9 5. IN SUPPORT OF HIS SUBMISSION THE LEARNED AR OF THE ASSESSEE RELIED UPON THE DECISION OF DELHI HIGH COURT IN CASE OF CIT VS DWARKADHISH INVESTMENT PRIVATE LTD (330 ITR 298 DELHI), WHEREIN IT WAS HELD THAT WHERE ASSESSEE PROVES THE IDENTITY OF THE CREDITOR BY PROVIDING THEIR PAN AND SHOWS THE TRANSACTION IS THROUGH BANKING CH ANNEL, THEN THE ONUS TO PROVE THE ACT CONTRARY WOULD SHIP TO THE RE VENUE. ON THE DECISION OF HONORABLE SUPREME COURT IN CASE OF CIT VERSUS LOVELY EXPORTS PRIVATE LTD (216 CTR 195), WHEREIN IT WAS H ELD THAT, IF THE SHARE APPLICATION MONEY IS RECEIVED BY THE ASSESSEE COMPA NY FROM ALLEGED BOGUS SHAREHOLDERS, WHOSE NAMES ARE GIVEN TO THE AS SESSING OFFICER, THEN THE DEPARTMENT IS FREE TO PROCEED TO REOPEN THEIR I NDIVIDUAL ASSESSMENT IN ACCORDANCE WITH LAW, BUT IT CANNOT BE REGARDED A S UNDISCLOSED INCOME OF THE ASSESSEE COMPANY. 6. THE LEARNED AR FOR THE ASSESSEE SUBMITS THAT IN THE PRESENT CASE THE ASSESSING OFFICER FAILED TO APPRECIATE THAT ASSESSE E HAS DISCHARGED THE PRIMARY ONUS BY SUBMITTING NAME AND ADDRESS OF THE INVESTOR AND WHO ARE INCOME TAX ASSESSEE AND THEY HAVE PROVIDED THER E PAN, GIR NUMBER, COPY OF RETURNS FILED, CONFIRMATION LETTERS , AND FURTHER THE TRANSACTIONS ARE THROUGH BANKING CHANNELS AND THUS, THE ASSESSEE HAS DISCHARGED THE CAPACITY OF THE CREDITORS, AND THE G ENUINENESS OF THE TRANSACTION. THE LEARNED AR OF THE ASSESSEE ALSO RE LIED UPON THE DECISION OF GUJARAT HIGH COURT IN CASE OF DCIT VERSUS ROHINI BUILDER (256 ITR ITA NO. M/S CYMBAL MERCANTILE PVT. LTD. 10 360 GUJARAT), WHERE IT IS HELD THAT THE ONUS ON THE ASSESSEE IS TO PROVE THE IDENTITY OF THE CREDITOR AND GENUINENESS OF TRA NSACTION. MADRAS HIGH COURT IN CASE OF CIT VERSUS PRANAV FOUNDATION LTD ( 51 TAXMANN.COM 198), WHEREIN IT WAS HELD THAT WHERE THE ASSESSEE I S CATEGORICALLY ESTABLISHED THE NATURE AND SOURCE OF THE SAID SUM I S AND DISCHARGE THE ONUS THAT LIES ON IT IN TERM OF SECTION 68. WHEN TH E NATURE AND SOURCE OF THE AMOUNT SO INVESTED IS KNOWN, IT CANNOT BE SA ID TO BE IN DISCLOSED INCOME. THEREFORE, THE AFORESAID ADDITION UNDER SEC TION 68 ON ACCOUNT OF UNEXPLAINED CREDIT IS UNWARRANTED. 7. THE LEARNED AR ALSO RELIED UPON THE DECISION OF MUM BAI TRIBUNAL IN CASE ITO VS SUPER LINE CONSTRUCTION P LTD (ITA NO.3645/M UMBAI 2014), ELDER ROYALTY SOLUTION PRIVATE LTD VERSUS CIT (ITA. NO. 3325/ MUM/ 2014) 8. THE LEARNED AR OF THE ASSESSEE SUBMITS THAT RELIANC E OF LEARNED DR ON THE LATEST DECISION OF HONBLE APEX COURT IN PCIT V S NRA IRON AND STEEL PRIVATE LTD SLP( CIVIL) NO. 29855 OF 2018, WH EREIN HONBLE COURT CONFIRMED THE ADDITION UNDER SECTION 68, THE FACT O F THAT CASE ARE NOT SAME AS OF ASSESSEE. IN CASE OF ASSESSEE THE INVEST OR HAD A STRONG FINANCIAL CAPITAL OF RS. 119 CRORE AS SHOWN ITS BAL ANCE SHEET, REGULARLY ASSESSED TO TAX AND IS A LISTED COMPANY. THE SAID C OMPANY CONFIRMED THAT THEY ARE INVESTING MONEY IS. THE ENQUIRY CONDU CTED BY ASSESSING OFFICER DOES NOT PROVED ANY INFORMATION PROVIDED BY ASSESSEE ABOUT THE ITA NO. M/S CYMBAL MERCANTILE PVT. LTD. 11 INVESTOR COMPANY TO BE FALSE. THE ASSESSING OFFICER IS NOT CONVINCED THAT SHARE OF ASSESSEE COMPANY DESIRES A PREMIUM OF RS. 490/- PERCENT. THE ASSESSEE HAD FILED A VALUATION REPORT IN SUPPORT OF FIXATION A PREMIUM. THE LEARNED AR OF THE ASSESSEE FURTHER SUBMITS THAT HE HAS FURNISHED THE COMPARATIVE CHART SHOWING THE DIFFERENCE IN FACT A CASE OF ASSESSEE WITH THAT OF NRA IRON AND STEEL CASE (SUPRA). 9. THE LEARNED AR IN ALTERNATIVE AND WITHOUT PREJUDICE SUBMISSION SUBMITS THAT IF THE ASSESSING OFFICER WAS OF THE OPINION TH AT AMOUNT OF PREMIUM RECEIVED WAS NOT JUSTIFIABLE IN VIEW OF THE COMMERC IAL OF THE ASSESSEE COMPANY AND THAT WHAT WAS RECEIVED BY WAY OF PREMIU M OF A WINDFALL, AS CONCLUDED IN PARA-10.5 OF THE ASSESSMENT ORDER, THEN THE ASSESSING OFFICER OUGHT TO HAVE TAXED THE SAME UNDER THE HEAD INCOME FROM OTHER SOURCES AND NOT AS UNEXPLAINED CASH CREDIT UNDER SECTION 68 OF THE ACT. 10. IN OTHER ALTERNATIVE AND WITHOUT PREJUDICE SUBMISSI ON THE LEARNED AR FURTHER SUBMITS THAT, IF ASSESSING OFFICER WAS OF T HE OPINION THAT IT IS A CASE OF CIRCULAR TRANSACTION UNDERTAKEN BY THE ASSE SSEE WITH THE INTENDED PURPOSE OF BUILDING UP SHARE CAPITAL ONLY ON PAPER AND TRANSACTION ARE ONLY PAPER TRANSACTION AND NOT REAL TRANSACTION, TH EN THE QUESTION OF THE ASSESSEE BEING TEXT DOES NOT ARISE INASMUCH AS IT I S A CASE OF THE ASSESSING OFFICER THAT THE ASSESSEE RECEIVED MONEY TOWARD ALLOTMENT OF SHARES AND THE SAME FINDS IT IS WAY BACK TO THE INV ESTORS. SO, THE MONEY ITA NO. M/S CYMBAL MERCANTILE PVT. LTD. 12 RECEIVED FROM THE INVESTOR HIS RETURN TO HIM THROUG H A COMPANY BELONGING TO INVESTOR GROUP. THE MONEY RECEIVED IN SHOWN AS A SHARE CAPITAL AND MONEY WRITTEN IS SHOWN AS ADVANCES. IN THIS SCENARIO, THE QUESTION OF ANY UNEXPLAINED CASH CREDIT DOES NOT AR ISE AND NO ADDITION CAN BE MADE UNDER SECTION 68 OF THE ACT. THE LEARNE D AR FOR THE ASSESSEE PRAYED FOR DISMISSAL OF THE APPEAL FILED B Y REVENUE. 11. WE HAVE CONSIDERED THE RIVAL SUBMISSION OF THE PART IES AND HAVE GONE THROUGH THE ORDERS OF AUTHORITIES BELOW. DURING THE ASSESSMENT THE ASSESSING OFFICER NOTED THAT THE ASSESSEE HAS SHOWN INCREASING THE SHARE CAPITAL OF RS. 1.40 CRORE. THE ASSESSEE RECEIVED SH ARE APPLICATION MONEY FROM ALLIED COMPUTERS INTERNATIONAL ASIA LTD. THE A SSESSEE WAS ASKED TO FURNISH DETAIL REGARDING RECEIPT OF FUNDS AND TO JU STIFY CHARGING OF SUCH HIGH PREMIUM. THE ASSESSEE FILED ITS DETAILED REPLY . ALONG WITH THE REPLY THE ASSESSEE FURNISHED DOCUMENTARY EVIDENCE TO ESTA BLISH THE NATURE OF TRANSACTION AND SOURCE OF RECEIPT OF SUCH FUNDS. TH E ASSESSING OFFICER IN ORDER TO VERIFY THE NATURE AND SOURCE OF THE ALLEGE D RECEIPT OF FUNDS, ISSUED NOTICES UNDER SECTION 133(6) TO THE INVESTOR . THE INVESTOR COMPLIED THE NOTICE SERVED BY ASSESSING OFFICER AND ALSO FURNISHED THE REQUIRED DOCUMENTS. THE DETAILS FURNISHED BY INVEST OR WERE NOT FOUND ACCEPTABLE BY THE ASSESSING OFFICER BY TAKING VIEW THAT THE BASIC THREE CONDITIONS LIKE PROOF OF IDENTITY OF CREDITOR, CAPA CITY OF CREDITORS TO LEND MONEY AND GENUINENESS OF TRANSACTION WAS NOT PROVED . THE ASSESSING ITA NO. M/S CYMBAL MERCANTILE PVT. LTD. 13 OFFICER TOOK HIS VIEW THAT INFORMATION WAS RECEIVED FROM INVESTIGATION WING THAT ALLIED COMPUTERS INTERNATIONAL (ASIA) LTD WAS IN THE LIST OF COMPANIES FLOATED BY SHRI SARISH C. SAHA, GROUP OF COMPANIES WHICH WERE ENGAGED IN PROVIDING ACCOMMODATION ENTRIES IN THE FORM OF SHARE APPLICATION MONEY AND UNSECURED LOANS ETC. THE ASSE SSING OFFICER CONCLUDED THAT THE INVESTOR WAS NOT ENGAGE IN GENUI NE BUSINESS ACTIVITIES; RATHER THE COMPANY WAS CONTROLLED BY SU RESH SHAH AND ENGAGED ONLY IN PROVIDING EXPEDITION ENTRIES. THE A SSESSING OFFICER CONCLUDED THAT ASSESSEE FAILED TO EXPLAIN THE IDENT ITY OF PERSON, GENUINENESS OF TRANSACTION AND TO ESTABLISH THE CRE DITWORTHINESS OF THE INVESTOR. THE ASSESSING OFFICER TREATED THE SHARE A PPLICATION MONEY AS UNEXPLAINED CASH CREDIT WITHIN THE MEANING OF SECTI ON 68 OF THE ACT. WE HAVE NOTED THAT NO FINDING WAS GIVEN BY ASSESSING O FFICER ON THE DOCUMENTARY EVIDENCES FURNISHED BY ASSESSEE AS WELL AS BY ALLIED COMPUTERS INTERNATIONAL (ASIA) LTD. 12. BEFORE LEARNED CIT (A) THE ASSESSEE MADE DETAILED SUBMISSIONS. IT WAS EXPLAINED THAT AS PER SECTION 68, AFTER 1 ST APRIL 2013 (I.E. AY 2013-14 ONWARDS) WHERE A COMPANY, NOT BEING A COMPANY IN WH ICH THE PUBLIC ARE SUBSTANTIALLY INTERESTED, RECEIVED SHARE CAPITA L IN ANY PREVIOUS YEAR FROM ANY PERSON BEING A RESIDENT, ANY SHARE CAPITAL AND THE NATURE AND SOURCE OF SUCH CREDITED IS NOT EXPLAINED THEN THE S AID AMOUNT IS TO BE TREATED AS CASH CREDIT. IT WAS EXPLAINED THAT THE P ROVISION OF SECTION 68 IS ITA NO. M/S CYMBAL MERCANTILE PVT. LTD. 14 NOT APPLICABLE IN CASE OF ASSESSEE DUE TO THE REASO NS;(I) THE ASSESSEE HAD EXPLAIN NATURE AND SOURCE OF THE SHARE APPLICATION MONEY TO THE ASSESSING OFFICER ABOUT THE IDENTITY, GENUINENESS O F CREDITWORTHINESS OF THE PARTIES, AS SUCH THE ASSESSEE HAS NOT FAILED TO PROVIDE THE EXPLANATION TO THE ASSESSING OFFICER, (II) THE AMENDED PROVISIO NS OF SECTION 68 IS APPLICABLE FROM ASSESSMENT YEAR 2013-14 ONWARDS AND NOT RETROSPECTIVELY FROM ASSESSMENT YEAR 2011-12. IT WA S FURTHER EXPLAINED THAT SHARE APPLICANT WAS ITSELF A LISTED COMPANY, T HE SHARE APPLICANTS ITSELF FURNISH DETAIL EXPLANATION AND SOURCE TO TH E ASSESSING OFFICER IN RESPONSE TO THE NOTICE IS ISSUED UNDER SECTION 133( 6). THE ASSESSING OFFICER TREATED THE SHARE CAPITAL AND SHARE PREMIUM RECEIVED AGAINST ISSUE OF SHARE AS UNEXPLAINED CASH CREDIT UNDER SEC TION 68 WITHOUT CONSIDERING THE FACT THAT ASSESSEE FURNISH DETAIL E XPLANATION AND PROVE THE IDENTITY, GENUINENESS AND CREDITWORTHINESS OF T HE INVESTOR THE ASSESSEE ALSO FURNISHED THE DETAILS AND JUSTIFICATI ON FOR HIGH PREMIUM IN THE FORM OF PROJECT REPORT SHOWING PROJECTION AND V ALUATION OF THE ASSESSEE COMPANY BY NET WORTH, RESIDUAL VALUE AND E ARNING CAPACITY. THE ASSESSEE HAD JUSTIFIED THE HIGH PREMIUM CONSIDE RING THE FUTURE PROSPECTS AND PROJECTS. JUST FOR THE REASONS THAT T HE INVESTORS COMPANY I.E. ALLIED COMPUTERS INTERNATIONAL (ASIA) LTD WAS APPEARING IN THE LIST OF SUSPECTED COMPANIES, THE SAME CANNOT BE A BASIS FOR MAKING ADDITION MERELY ON THE BASIS OF SURMISES AND PRESUMPTIONS TH E INFORMATION OF THE ITA NO. M/S CYMBAL MERCANTILE PVT. LTD. 15 INVESTIGATION DEPARTMENT WAS VERY GENERAL IN NATURE AND NOTHING SPECIFIC NOR EVEN ANY LIVE LINK WAS THEIR AGAINST THE ASSESS EE. IT WAS ALSO BROUGHT TO THE NOTICE OF LEARNED CIT (A) THAT SHOW CAUSE NO TICE WAS ISSUED ON 9 TH MARCH 2015, WHEREIN THE ASSESSEE WAS ASKED TO REPLY BY 12 MARCH 2015. THE TIME ALLOWED WAS ONLY THREE DAYS AND THE ASSESS EE COULD NOT FILE REPLY TO THE SAID SHOW CAUSE NOTICE DUE TO PAUCITY OF TIME. 13. THE LEARNED COMMISSIONER (APPEALS) AFTER CONSIDERIN G THE SUBMISSION OF THE ASSESSEE OBSERVED THAT THE ASSESSEE FILED CO PY OF PAN CARD, BANK STATEMENT, BALANCE-SHEET AND P&L ACCOUNT OF SHARE A PPLICANT ALONG WITH SHARE APPLICATION FORM TO INVEST IN THE ASSESSEE CO MPANY. THE INVESTOR COMPANY HAD DULY RECORDED THE INVESTMENT IN THE ASS ESSEE COMPANY IN THEIR BOOKS OF ACCOUNTS DURING THE RELEVANT FINANCI AL YEAR. THE INVESTMENT INVESTOR COMPANY HAS DEMONSTRATED THESE BALANCES IN THEIR BALANCE SHEET IN THE SHAPE OF INVESTMENT AS WELL LO AN AND ADVANCES. FOR GENUINENESS OF TRANSACTION, THE LEARNED CIT (A) OBS ERVED THAT THE ASSESSEE PRODUCED THE DETAILS OF BANK ACCOUNT, SHAR E APPLICATION MONEY AND SHARE PREMIUM HAS BEEN ISSUED THROUGH BANKING C HANNEL. THERE IS NO CASH TRANSACTION WHICH COULD COMPEL ONESELF TO A SSUME THE TRANSACTION WAS NOT GENUINE. THE ASSESSEE DISCHARGE D ITS ONUS ABOUT THE IDENTITY OF INVESTOR, CREDITWORTHINESS AND GENUINEN ESS OF TRANSACTION. THE LEARNED CIT(A) FURTHER OBSERVED THAT OBJECT OF SECTION 68 IS TO AVOID THE INCLUSION OF THE AMOUNT WHICH ARE SUSPECT. THE LEARNED CIT(A) ITA NO. M/S CYMBAL MERCANTILE PVT. LTD. 16 FURTHER OBSERVED THAT ASSESSING OFFICER HAS NOT MAD E MUCH INVESTIGATION EXCEPT ISSUING NOTICE UNDER SECTION 133(6), WHICH W AS DULY SERVED ON THE INVESTOR AND THE REPLIES WAS FILED. BEFORE ASSE SSING OFFICER THE DETAILS OF SHARE APPLICANTS, PARTICULARS INCLUDING TAX AUDI T REPORT, INCOME TAX RETURN, PAN DETAILS WERE AVAILABLE, THE ASSESSING O FFICER WHILE ARRIVING AT THE CONCLUSION NOT CONSIDERED THOSE EVIDENCE WORTHW HILE TO MAKE ANY FURTHER INQUIRY BUT BASED ITS ORDER ON THE BASIS OF SUSPECT, TO DETERMINE THAT AMOUNT HAD BEEN ROUTED FROM THE ASSESSEE COMPA NY TO THE SHARE APPLICANTS ACCOUNT. THERE IS NO FINDING TO THE FACT THAT HOW THE ALLEGED UNACCOUNTED CASH/MONEY OF THE ASSESSEE COMPANY ROUT ED THROUGH VARIOUS LEVELS AND IT FINALLY REACHED TO THE ASSESS EE. THE ASSESSING OFFICER NOT BROUGHT ANY EVIDENCE OR MATERIAL ON REC ORD TO SHOW THAT THE SAID AMOUNT REPRESENTING THE SHARE CAPITAL AND PREM IUM MOVED FROM ASSESSEE AND REACHED TO THE ASSESSEE. ON THE BASIS OF ABOVE OBSERVATION THE LEARNED CIT(A) CONCLUDED THAT THE ASSESSEE COMP ANY HAS RECEIVED THE MONEY THROUGH BANKING CHANNEL AND IN INVESTOR H AS SHOWN THE SAID AMOUNT AS INVESTMENT IN ITS BOOKS OF ACCOUNT. THE M ONEY ROUTED THROUGH BANKING CHANNEL AND THROUGH ACCOUNT PAYEE C HEQUES OR BANK DRAFTS. THE SOURCE OF SHARE APPLICATION MONEY AND P REMIUM WAS FOUND IN THE BANK ACCOUNT OF INVESTING COMPANY NOT BY ANY CASH DEPOSIT BUT THROUGH ACCOUNT PAYEE CHEQUES. ALL THESE DOCUMENTAR Y EVIDENCES CLEARLY PROVE THE GENUINENESS OF TRANSACTION. THE L EARNED CIT(A) ITA NO. M/S CYMBAL MERCANTILE PVT. LTD. 17 REFERRED VARIOUS CASE LAWS OF DIFFERENT HIGH COURTS TO STRENGTHEN HIS CONCLUSION INCLUDING THE DECISION OF DELHI HIGH COU RT IN CASE OF OASIS HOSPITALITIES PRIVATE LTD (333 ITR 119 DELHI), SOFI A FINANCE LTD (205 ITR 98 DELHI), CIT VERSUS STELLAR INVESTMENT LTD (1 92 ITR 287 DELHI), CIT VERSUS GANGESHWARI METAL PRIVATE LTD (361 ITR 1 0), BOMBAY HIGH COURT IN CASE OF CIT VERSUS CREATIVE WORLD TELEFILM S (ITA NO. 2182 OF 2009) DECIDED ON 12 TH OCTOBER 2009 (333 ITR 100). 14. WE HAVE SEEN THAT THE LD CIT(A) HAS GIVEN CATEGORIC AL FINDING THAT ASSESSEE HAS PROVED THE IDENTITY OF INVESTOR, CREDI TWORTHINESS AND GENUINENESS OF TRANSACTION. NO CONTRARY FACTS OF LA W IS BROUGHT TO OUR NOTICE THAT THE FINDING OF THE LD CIT(A) IS NOT BA SED ON THE MATERIAL AVAILABLE ON RECORD. WITH UTMOST REGARD TO THE DECI SION OF THE HONBLE APEX COURT, WE FIND THAT THE RATIO IN CASE LAW IN N RA IRON AND STEEL LTD (SUPRA) RELIED BY LD. DR FOR THE REVENUE IS NOT APP LICABLE ON THE FACTS OF THE PRESENT CASE AS THE FACTS OF THE PRESENT CASE A RE AT VARIANCE. IN THE SAID CASE SIX OF THE PARTIES WERE NOT IN EXISTENCE, NO PROOF OF CREDITWORTHY WAS FILED IN THE SAID CASE. HOWEVER, I N THE PRESENT CASE THE INVESTOR COMPANY IS A LISTED COMPANY, HAS PROVED IT CREDITWORTHY BEFORE THE LOWER AUTHORITIES BY FILING THE AUDITED REPORT AND THE BANK STATEMENT. NO JUSTIFICATION OF PREMIUM WAS GIVEN; IN THE PRESE NT CASE THE ASSESSEE FILED THE VALUATION REPORT. IN THE SAID CASE NONE A PPEARED WHEN THE NOTICE UNDER SECTION 131 WAS ISSUED TO THE INVESTOR, HOWEV ER, NO SUCH NOTICE ITA NO. M/S CYMBAL MERCANTILE PVT. LTD. 18 WAS ISSUED BY THE ASSESSING OFFICER. HENCE, WE DO N OT FIND ANY REASON TO INTERFERE WITH THE FINDING OF THE LD CIT(A), WHICH WE AFFIRMS. 15. IN THE RESULT, APPEAL OF THE REVENUE IS DISMISSED. ORDER PRONOUNCED IN THE OPEN COURT ON 17/07/2019. SD/- SD /- G.S. PANNU PAWAN SINGH VICE-PRESIDENT JUDICIAL MEMBER MUMBAI, DATE: 17.07.2019 SK COPY OF THE ORDER FORWARDED TO : 1. ASSESSEE 2. RESPONDENT 3. THE CONCERNED CIT(A) 4. THE CONCERNED CIT 5. DR H BENCH, ITAT, MUMBAI 6. GUARD FILE BY ORDER, DY./ASST. REGISTRAR ITAT, MUMBAI