M/S.FROHAR TRADING PRIVATE LIMITED, MUMBAI V. INCOME TAX OFFICER 6(3)1, MUMBAI

ITA 543/MUM/2018

• Counselvise Citation: [2021] 108 COUNSELVISE.COM (IT) 1939 (ITAT-MUMBAI)
• Duration Of Justice: 3 year(s) 2 month(s) 7 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 06-04-2021
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: F
• Assessment Year: 2012-2013
• Appeal Filed On: 29-01-2018
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: LEENA SRIVASTAV
• Assessee Lawyers: VISHNU AGGARWAL
• Keywords: Unexplained cash credit; Income from undisclosed sources; Source of fund; Scheme of amalgamation; Set aside
• Section: 143(1); 113; 68

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL, MUMBAI BENCH F, MUMBAI BEFORE SHRI RAJESH KUMAR, ACCOUNTANT MEMBER AND SHRI AMARJIT SINGH, JUDICIAL MEMBER ITA NO.543/M/2018 ASSESSMENT YEAR: 2012-13 M/S. FROHAR TRADING PVT. LTD., L/7, A-001 PRATIKSHA NAGAR, NEW MHADA COLONY, SION, MUMBAI-400022 PAN: AACCF0551A VS. INCOME TAX OFFICER 6(3)(1), 5 TH FLOOR, 524, AAYAKAR BHAVAN, M.K. ROAD, MUMBAI - 400020 (APPELLANT) (R ESPONDENT) ITA NO.544/M/2018 ASSESSMENT YEAR: 2012-13 M/S. FULTON CORPORATION PVT. LTD., L/7, A-001 PRATIKSHA NAGAR, NEW MHADA COLONY, SION, MUMBAI-400022 PAN: AACCF0551A VS. INCOME TAX OFFICER 6(3)(1), 5 TH FLOOR, 524, AAYAKAR BHAVAN, M.K. ROAD, MUMBAI - 400020 (APPELLANT) (R ESPONDENT) PRESENT FOR: ASSESSEE BY : SHRI VISHNU AGGARWAL, A.R. REVENUE BY : SHRI LEENA SRIVASTAV, D.R. DATE OF HEARING : 04.01.2021 DATE OF PRONOUNCEMENT : 06.04.2021 O R D E R PER RAJESH KUMAR, ACCOUNTANT MEMBER: THE PRESENT APPEAL HAS BEEN PREFERRED BY TWO DIFFE RENT ASSESSEES AGAINST THE ORDERS EVEN DATED 03.04.2017 OF THE COMMISSIONER OF INCOME TAX (APPEALS) [HEREINAFTER R EFERRED TO AS THE CIT(A)] RELEVANT TO ASSESSMENT YEAR 2012-13. SI NCE THE ITA NO.543/M/2018 & ITA NO.544/M/2018 M/S. FROHAR TRADING PVT. LTD. & M/S. FULTON CORPORA TION PVT. LTD. 2 ISSUES RAISED IN BOTH THE APPEALS ARE COMMON, THERE FORE THESE ARE BEING DISPOSED OFF TOGETHER FOR THE SAKE OF BRE VITY AND CONVENIENCE. FIRST WE SHALL TAKE UP ITA NO.543/M/20 18.THE GROUND RAISED BY THE ASSESSEE ARE AS UNDER: 1. ON THE FACTS AND CIRCUMSTANCES OF THE CASE AND IN LAW, THE LEARNED CIT(A) ERRED IN ADDING THE SHARE CAPITAL MONEY OF RS.27,98 ,10,900/- U/S 68 OF THE INCOME TAX ACT 1961, WITHOUT CONSIDERING THE FACTS OF THE CASE. 2. THE ONLY ISSUE RAISED BY THE ASSESSEE IS AGAINST THE ORDER OF LD. CIT(A) CONFIRMING THE ADDITION OF RS.27,98,10,9 00/- AS MADE BY THE AO TOWARDS SHARE CAPITAL MONEY UNDER SECTION 68 OF THE ACT. 3. THE FACTS IN BRIEF ARE THAT THE ASSESSEE FILED R ETURN OF INCOME ON 19.02.2013 SHOWING AN INCOME OF RS.1050/- WHICH WAS PROCESSED UNDER SECTION 143(1) OF THE ACT. THE CASE OF THE ASSESSEE WAS SELECTED FOR SCRUTINY AND STATUTORY NO TICES WERE DULY ISSUED AND SERVED UPON THE ASSESSEE. THE AO O BSERVED THAT ASSESSEE HAD SHARE CAPITAL OF RS.1 LAKH COMPRI SING 10,000 EQUITY SHARES OF RS.10 EACH AND DURING THE YEAR IS SUED 5,81,180 SHARES WITH FACE VALUE OF RS.10 EACH AT A PREMIUM OF RS.490 THEREBY INCREASING THE PAID UP CAPITAL BY RS . 58,11,800 AND SHARE PREMIUM BY RS.27,98,10,000/-. ACCORDING TO THE AO THESE TRANSACTIONS WERE SUSPICIOUS AND UNNATURAL AN D ACCORDINGLY CALLED UPON THE ASSESSEE TO PROVE THE I DENTITY, CREDITWORTHINESS AND GENUINENESS OF THE TRANSACTION S. THE ASSESSEE FILED BEFORE THE AO THE NECESSARY EVIDENCE S IN THE FORM OF NAMES AND ADDRESSES OF THE SHAREHOLDERS, MODE OF PAYMENT BY WAY OF CHEQUES, INVESTMENTS TRANSFERRED TO THE A SSESSEE FROM THE INVESTORS IN C LIEU OF ALLOTMENT OF SHARES AND CONFIRMATION FROM THE SAID SHAREHOLDERS. HOWEVER, THE AO WAS NO T CONVINCED ITA NO.543/M/2018 & ITA NO.544/M/2018 M/S. FROHAR TRADING PVT. LTD. & M/S. FULTON CORPORA TION PVT. LTD. 3 WITH THE GENUINENESS OF THESE TRANSACTIONS AND ADDE D THE ENTIRE AMOUNT AS UNEXPLAINED CASH CREDIT IN THE BOOKS OF T HE ASSESSEE. 4. IN THE APPELLATE PROCEEDINGS ALSO THE LD. CIT(A) DISMISSED THE APPEAL OF THE ASSESSEE BY UPHOLDING THE ORDER O F AO THAT ASSESSEE HAS FAILED TO PROVE THE GENUINENESS OF THE SE TRANSACTIONS. 5. THE LD. A.R. SUBMITTED BEFORE THE BENCH THAT BOT H THE AUTHORITIES HAVE FAILED TO APPRECIATE THE TRUE CHAR ACTER OF THESE SHARES TRANSACTIONS. THE LD AR SUBMITTED THAT THE A SSESSEE HAS NOT RECEIVED ANY MONEY IN CONSIDERATION OF ALLOTMEN T OF SHARES AND ONLY RECEIVED ANY SUM OF MONEY. THE LD. AR SUBM ITTED THAT PROVISIONS OF SECTION 68 OF THE ACT ARE APPLICABLE TO A CASE OF MONEY CREDITED IN THE BOOKS OF ACCOUNTS OF THE ASSE SSEE AND NOT TO A BARTER SYSTEM FOR DISCHARGE OF CONSIDERATION. IN DEFENCE OF HIS ARGUMENT THE LD. A.R. RELIED ON THE FOLLOWING D ECISIONS: 1. ITO VS. BHAGWAT MARKCOM (P) LTD. 109 TAXMANN.COM 330 (KOLKATA TRIB.) 2. ITO VS. SAFFRON COMTRADE PVT. LTD. ITA 2029/KOL/2016 (KOLKATA TRIB.) 3. ITO VS. KANER INVESTMENTS LTD. ITA 2095/KOL/2017 (KOLKATA TRIB) 4. ITO VS. ARYVARAT CONSTRUCTION PVT. LTD. ITA 2203/KOL/2017 (KOLKATA TRIB) 5. ITO VS. SARVLOK VANIJYA PVT. LTD. ITA 501/KOL/201 7 (KOLKATA TRIB) 6. ITO VS. VISHWADHAM TRADERS P. LTD. ITA 803/KOL/2017 (KOLKATA TRIB) 7. ACCESS GLOBAL LIMITED VS. ITO ITA 13/KOL/2018 (KOLKATA TRIB) 8. ITO VS. ANAND ENTERPRISES LTD. ITA 1614/KOL/2016 (KOLKATA TRBI) 9. ABA EARTHLINE COMMUNICATIONS LTD. VS. ITO ITA 1141/KOL/2017 (KOLKATA TRBI) ITA NO.543/M/2018 & ITA NO.544/M/2018 M/S. FROHAR TRADING PVT. LTD. & M/S. FULTON CORPORA TION PVT. LTD. 4 10. ITO VS. SUNGLOW DEALCOM PVT. LTD. ITA 2178/KOL/2016 (KOLKATA TRBI) 11. DCIT VS. P.N. MEMORIAL NEURO CENTRE & RESEARCH LTD. ITA 1383/KOL/2015 (KOLKATA TRBI) 12. ITO VS. DSR IMPEX PVT. LTD. ITA 2087/KOL/2017 (KOLKATA TRBI) 13. JATIA INVESTMENT VS. CIT LTD. 206 ITR 718 (CAL- HC) 14. ITO VS. V.R. GLOBAL ENERGY (P) LTD. 113 TAXMANN .COM 31 (SC) 15. V.R. GLOBAL ENERGY (P) LTD. VS. ITO 96 TAXMANN.C OM 647 (MADRAS HC) 16. ACIT VS. PARAS HEALTHCARE P. LTD. ITA 2207/DEL/ 2012 (DELHI TRIB) 6. THE LD. D.R., ON THE OTHER HAND, RELIED HEAVILY ON THE ORDER OF AUTHORITIES BELOW. 7. WE HAVE HEARD THE RIVAL SUBMISSIONS OF BOTH THE PARTIES AND PERUSED THE MATERIAL ON RECORD. THE PRIMARY CON TENTION OF THE LD. A.R. BEFORE US WAS THAT THE PROVISIONS OF S ECTION 68 OF THE ACT ARE NOT ATTRACTED TO THE PRESENT CASE AS TH E SHARES WERE NOT ISSUED FOR A CONSIDERATION WHICH WAS DISCHARGED IN TERMS OF MONEY. THE CONSIDERATION WAS DISCHARGED BY ACCEPTIN G THE INVESTMENTS IN THE HANDS OF THE INVESTORS WHICH WER E DULY SHOWN IN THEIR HANDS OF THE INVESTORS PRIOR TO THE DATE OF SAID TRANSFER TO THE ASSESSEE COMPANY AND THEREAFTER DUL Y SHOWN IN THE BALANCE SHEET OF THE ASSESSEE. THE LD. A.R. SU BMITTED THAT THIS IS A BARTER SYSTEM OF GIVING INVESTMENTS TO TH E ASSESSEE COMPANY IN LIEU OF ALLOTMENT OF SHARES AT A PREMIUM AND THEREFORE THE PROVISIONS OF SECTION 68 ARE NOT APPL ICABLE. WE HAVE ALSO EXAMINED THE CASE LAWS STATED BY THE ASSE SSEE IN DEFENCE OF HIS ARGUMENTS AND THE RELEVANT PORTIONS OF THE CASE LAWS CITED BY THE LD. A.R. ARE REPRODUCED AS UNDER: 1. 1TO VS. BHAGWATMARCOM (P) LTD. (SUPRA) ITA NO.543/M/2018 & ITA NO.544/M/2018 M/S. FROHAR TRADING PVT. LTD. & M/S. FULTON CORPORA TION PVT. LTD. 5 NO ADDITION COULD BE MADE UNDER SECTION 68 WHERE ASSESSEE COMPANY ISSUED ITS SHARES AT PREMIUM TO CERTAIN COMPANIES IN LIEU OF SHARES HELD BY SAID COMPANIES AND THERE WAS NO INFLOW OF CASH. ' 'SECTION 68 OF T HE I. T. ACT, 1961 - CASH CREDIT (SHARE APPLICATION MONEY) - A.Y. 2012-13 - DURING Y EAR UNDER CONSIDERATION, ASSESSEE-COMPANY ISSUED ITS SHARES AT PREMIUM TO CE RTAIN COMPANIES IN LIEU OF SHARES HELD BY SAID COMPANIES- SAID TRANSACTIONS WE RE ENTERED IN BOOKS OF ACCOUNT - WHETHER THERE BEING NO REAL INFLOW OF CASH INVOLVED IN AFORESAID TRANSACTIONS, AMOUNT OF ENTRY COULD NOT BE TREATED AS UNEXPLAINED CASH CREDIT UNDER SECTION 68 - HELD, YES (IN FAVOR OF ASSESSEE). 2. ITO VS. SAFFRON COMTRADEPVT LTD. (SUPRA) SECTION 68 OF THE ACT IS NOT APPLICABLE ON THE FAC TS OF THE ASSESSEES CASE, SINCE NO MONEY TRANSACTION TOOK PLACE BETWEEN ASSESSEE AND S HARE SUBSCRIBING COMPANIES. IT IS A SIMPLE CASE OF SHARES BEING ALLOTTED IN LIE U OF SHARES HELD BY THE SHARE SUBSCRIBERS. THAT IS, IT IS JUST SWAPPING OF SHARES , I.E. SHARES ARE EXCHANGED FROM ANOTHER SHARES, THEREFORE, SECTION 68 DOES NOT ATTR ACT IN THE ASSESSEE'S CASE UNDER CONSIDERATION. 3. ITO VS. KANER INVESTMENTS LTD (SUPRA) 'SECTION 68 OF THE ACT IS NOT APPLICABLE ON THE FAC TS OF THE ASSESSEE S CASE, SINCE NO MONEY TRANSACTION TOOK PLACE BETWEEN ASSESSEE AND S HARE SUBSCRIBING COMPANIES. IT IS A SIMPLE CASE OF SHARES BEING ALLOTTED IN LIE U OF SHARES HELD BY THE SHARE SUBSCRIBERS. THAT IS, IT IS JUST SWAPPING OF SHARES , I.E. SHARES ARE EXCHANGED FROM ANOTHER SHARES, THEREFORE, SECTION 68 DOES NOT ATTR ACT IN THE ASSESSEE'S CASE UNDER CONSIDERATION. ' 4. ITO VS. ARYVARAT CONSTRUCTION PVT. LTD. (SUPR A) 'THE ASSESSEE HAS ALLOTTED THE SHARES OF THE COMPAN Y IN EXCHANGE FOR ACQUISITION OF SHARES FROM THOSE COMPANIES (SHARE APPLICANT COMPAN IES) AND THEREBY, WE NOTE THAT NO SUM OF MONEY/CASH WAS TRANSFERRED BETWEEN T HE ASSESSEE AND THE SHARE SUBSCRIBERS AND THE LD. CIT (A) PASSED THE IMPUGNED ORDER TAKING NOTE OF THE DECISIONS GIVEN BY THIS TRIBUNAL IN THE CASE OF I T O VS. ANUPAM NANDI IN ITA NO. 774/KOL/2012 AND THE HON 'BLE CALCUTTA HIGH COURT I N THE CASE OF JATIA INVESTMENT CO. VS. CIT 206 ITR 718 AND OTHER CASES. WE NOTE TH AT IN THIS CASE, THE SHARES SUBSCRIBERS HAVE GIVEN SHARES IN EXCHANGE OF THE SH ARES OF THE ASSESSEE AND NO SUM OF MONEY HAS BEEN TRANSFERRED TO THE ASSESSEE ON TH IS SCORE. IN SIMILAR CASE, THE TRIBUNAL IN THE CASE OF ANAND ENTERPRISES LTD. IN I TA NO. 1614/KOL/2016 DATED 26.09.2018 WHEREIN IN SIMILAR ISSUE AROSE. 5. ITO VS. SARVLOKVANIJYAPVT LTD. (SUPRA) 'WE NOTE THAT ASSESSEE COMPANY ALLOTTED 25,800 EQUI TY SHARES TO 3 APPLICANT COMPANIES FOR RS. 1,29,00,000/- IN CONSIDERATION FO R PURCHASE OF EQUITY SHARES HELD ITA NO.543/M/2018 & ITA NO.544/M/2018 M/S. FROHAR TRADING PVT. LTD. & M/S. FULTON CORPORA TION PVT. LTD. 6 BY THESE APPLICANT COMPANIES. PHOTOCOPIES OF THE AG REEMENTS ENTERED IN THIS REGARD ARE ENCLOSED IN PAPER BOOK. WE NOTE THAT THE SHARES WERE ALLOTTED AGAINST CONSIDERATION FOR PURCHASE OF EQUITY SHARES HELD BY THESE APPLICANT COMPANIES; HENCE IT IS A BARTER SYSTEM THEREFORE, PROVISIONS O F SECTION 68 DOES NOT APPLY. ' 6. ITO VS. VISHWADHAM TRADERS P. LTD. (SUPRA) 'SECTION 68 OF THE ACT IS NOT APPLICABLE ON THE FAC TS OF THE ASSESSEE S CASE, SINCE NO MONEY TRANSACTION TOOK PLACE BETWEEN ASSESSEE AND S HARE SUBSCRIBING COMPANIES. IT IS A SIMPLE CASE OF SHARES BEING ALLOTTED IN LIE U OF SHARES HELD BY THE SHARE SUBSCRIBERS. THAT IS, IT IS JUST SWAPPING OF SHARES , I.E. SHARES ARE EXCHANGED FROM ANOTHER SHARES, THEREFORE, SECTION 68 DOES NOT ATTR ACT IN THE ASSESSEE'S CASE UNDER CONSIDERATION. ' 7. ACCESS GLOBAL LIMITED VS. ITO (SUPRA) WE NOTE THAT LDCIT(A), WITHOUT PROPERLY APPRECIATIN G THE FACTS AND EVIDENCES FILED BEFORE HIM CONFIRMED THE ADDITION MADE BY AO. WHERE AS NO SHARE WERE ISSUED DURING THE YEAR EITHER BY THE ASSESSEE COMPANY OR T HE COMPANIES AMALGAMATED WITH IT. THE INCREASE IN SHARE PREMIUM WAS NOTHING BUT THE ADDITION OF SHARE PREMIUM ACCOUNT OF THE AMALGAMATING COMPANIES WITH THE CORRESPONDING FIGURE OF THE ASSESSEE COMPANY, THEREFORE, THERE IS NO CASH I NVOLVED IN THIS TRANSACTION, HENCE PROVISIONS OF SECTION 68 DOES NOT APPLY. WE N OTE THAT LD. CIT(A) ERRED IN CONFIRMING THE ADDITION MADE U/S. 68 PARTICULARLY W HEN THE INITIAL ONUS WERE DULY DISCHARGED BY THE ASSESSEE STATING THAT IT IS ONLY AN ADJUSTMENT ENTRY DURING THE AMALGAMATION SCHEME. THEREFORE, IN THE FACTS AND CI RCUMSTANCES OF THE CASE AND RESPECTFULLY FOLLOWING THE AFORESAID JUDICIAL PRECE DENTS RELIED UPON HEREINABOVE, WE HOLD THAT THE ID. AO HAD ERRONEOUSLY INVOKED THE PROVISIONS OF SECTION 68 OF THE ACT TO THE FACTS OF THE INSTANT CASE, WHICH, IN OUR CONSIDERED OPINION, ARE NOT AT ALL APPLICABLE HEREIN. THIS IS A SIMPLE CASE OF ACQUIRI NG SHARES DURING AMALGAMATION SCHEME, THAT IS, THE INCREASE IN SHARE CAPITAL IS O NLY DUE TO SCHEME OF AMALGAMATION APPROVED BY HONORABLE CALCUTTA HIGH COURT, HENCE, A DDITION UNDER SECTION 68 SHOULD NOT BE MADE. ' 8. ITO VS. ANAND ENTERPRISES LTD (SUPRA) 'IN VIEW OF THE AFORESAID OBSERVATIONS, IN THE FACT S AND CIRCUMSTANCES OF THE CASE AND RESPECTFULLY FOLLOWING THE AFORESAID JUDICIAL P RECEDENTS RELIED UPON HEREINABOVE, WE HOLD THAT THE ID. AO HAD ERRONEOUSL Y INVOKED THE PROVISIONS OF SECTION 68 OF THE ACT TO THE FACTS OF THE INSTANT C ASE, WHICH, IN OUR CONSIDERED OPINION, ARE NOT AT ALL APPLICABLE HEREIN. THIS IS A SIMPLE CASE OF ACQUIRING SHARES OF CERTAIN COMPANIES FROM CERTAIN SHAREHOLDERS WITHOUT PAYING ANY CASH CONSIDERATION AND INSTEAD THE CONSIDERATION WAS SETTLED THROUGH I SSUANCE OF SHARES TO THE RESPECTIVE PARTIES. MOREOVER, IN THE BALANCE SHEET OF THE ASSESSEE COMPANY IN THE SCHEDULE TO SHARE CAPITAL, IT IS VERY CLEARLY MENTI ONED BY WAY OF NOTE THAT THE FRESH SHARE CAPITAL WAS RAISED DURING THE YEAR FOR CONSID ERATION OTHER THAN CASH. HENCE WE HOLD THAT PROVISION OF SECTION 68 OF THE ACT ARE NOT APPLICABLE IN THE INSTANT CASE AND ACCORDINGLY THE ENTIRE ADDITION DESERVES TO BE DELETED WHICH HAS RIGHTLY BEEN ITA NO.543/M/2018 & ITA NO.544/M/2018 M/S. FROHAR TRADING PVT. LTD. & M/S. FULTON CORPORA TION PVT. LTD. 7 DONE BY THE ID. CIT (A) WHICH DOES NOT REQUIRE ANY INTERFERENCE. ACCORDINGLY, GROUNDS RAISED BY THE REVENUE ARE DISMISSED. ' 9. ABA EARTHLINE COMMUNICATIONS LTD VS. ITO (SUP RA) 'THE ID. COUNSEL FOR THE ASSESSEE SUBMITTED THAT, I N THIS CASE, THE ASSES SEE HAS ALLOTTED SHARES AT A PREMIUM, AS PURCHASE CONSIDERA TION FOR PURCHASE OF SHARES IN THE SHARE APPLICANT COMPANIES. SHARES WERE PURCHASE D FROM THE COMPANIES WHO HAD APPLIED FOR SHARES IN THE ASSESSEE COMPANY AND GOT ALLOTTED THE SAME. HE SUBMITTED THAT THE SHARES WERE ALLOTTED FOR CONSIDE RATION OTHER THAN CASH AND HENCE SECTION 68 OF THE ACT, DOES NOT APPLY. HE REL IED ON THE ORDER OF THE 'C' BENCH OF THIS TRIBUNAL IN THE CASE OF ITO VS. M/S. ANAND ENTERPRISES LTD., ITA NO. 1614/KOL/2016 & C.O. NO.56/KOL/2016; DT. 26/09/2018 .' 'APPLYING THE PROPOSITION OF LAW LAID DOWN IN THE C ASE-LAW CITED ABOVE, TO THE FACTS OF THE CASE ON HAND, WE DELETE THE ADDITI ON IN QUESTION MADE U/S 68 OF THE ACT. ' 10. ITO VS. SUNGLOW DEALCOM PRIVATE LIMITED (SUPRA) 'THE ASSESSEE IS A COMPANY AND IS IN THE BUSINESS O F INVESTMENT. AN ADDITION OF UNEXPLAINED CASH CREDIT U/S 68 OF THE ACT, WERE MAD E BY THE ASSESSING OFFICER ON THE GROUND THAT THE ASSESSEE FAILED TO EXPLAIN THE SOURCES OF FUNDS FOR THE SHARE CAPITAL RECEIVED BY IT AT A PREMIUM. ON APPEAL THE ID. FIRST APPELLATE AUTHORITY, HELD THAT THE ALLOTMENT OF SHARES IN THIS CASE WAS A NON -CASH TRANSACTIONS AND THAT THEY WERE SUBSCRIBED THROUGH BOOK ENTRIES. HE HELD THAT SECTION 68 OF THE ACT, DOES NOT APPLY AS THE ASSESSEE HAS PROVED THE IDENTITY, CRED ITWORTHINESS AND GENUINENESS OF THE TRANSACTIONS. HE GAVE A FACTUAL FINDING AND DEL ETED THE ADDITION. ' 'APPLYING THE PROPOSITIONS OF LAW LAID DOWN IN THE ABOVE CASES TO THE FACTS OF THIS CASE, WE UPHOLD THE ORDER OF THE ID. FIRST APPELLAT E AUTHORITY AND DISMISS THIS APPEAL OF THE REVENUE. ' 11. DCIT VS. P.N. MEMORIAL NEURO CENTRE & RESEARCH LTD. (SUPRA) 'SECTION 68 OF THE ACT IS NOT APPLICABLE ON THE FAC TS OF THE ASSESSEE* S CASE, SINCE NO MONEY TRANSACTION TOOK PLACE BETWEEN ASSESSEE AND S HARE SUBSCRIBING COMPANIES. IT IS A SIMPLE CASE OF SHARES BEING ALLOTTED IN LIE U OF SHARES HELD BY THE SHARE SUBSCRIBERS. THAT IS, IT IS JUST SWAPPING OF SHARES , I.E. SHARES ARE EXCHANGED FROM ANOTHER SHARES, THEREFORE, SECTION 68 DOES NOT ATTR ACT IN THE ASSESSEE'S CASE UNDER CONSIDERATION. ' 12. ITOVS. DSR IMPEX PVT LTD (SUPRA) 'WE HAVE HEARD ID. D.R. FOR THE REVENUE AND PERUSED THE MATERIALS AVAILABLE ON RECORD. WE NOTE THAT THE ID. CIT (A) HAS RIGHTLY OB SERVED THAT SHARES HAVE BEEN ISSUED AGAINST THE SHARES THEREFORE IT IS NOTHING B UT BARTER SYSTEM OF ISSUING SHARES IN LIEU OF SHARES. THEREFORE SECTION 68 OF THE ACT DOES NOT APPLY AND FOR THAT WE RELY ITA NO.543/M/2018 & ITA NO.544/M/2018 M/S. FROHAR TRADING PVT. LTD. & M/S. FULTON CORPORA TION PVT. LTD. 8 ON THE JUDGMENT OF CO-ORDINATE BENCH OF IT AT KOLK ATA IN THE CASE OF M/S ANAND ENTERPRISES LTD. IN ITA NO. 1614/KOL/20L6 FOR A.Y. 2012-13 DATED 26/09/2018 13. JATIA INVESTMENT CO. VS. CIT (SUPRA) 'SECTION 68 OF THE INCOME TAX ACT, 1961 CASH CREDIT S - ASSESSMENT YEAR 1976-77 - PARTNERS OF ASSESSEE-FIRM WERE MEMBERS OF ONE 'J' G ROUP RUNNING SEVERAL BUSINESSES AND INDUSTRIES - ACCOUNTS OF ASSESSEE-FI RM SHOWED THAT IT HAD BORROWED CERTAIN AMOUNT FROM GB, A PROPRIETARY CONCERN OF ON E OF ITS PARTNERS JM, WHICH WAS INVESTED IN PURCHASE OF SHARES - ITO FOUND THAT GB HAD NO CASH BALANCE TO ADVANCE SAID AMOUNT TO ASSESSEE - HE, THUS, CONCLUDED THAT SOURCE OF FUNDS FOR PURCHASE OF SHARES BY ASSESSEE WAS NOT EXPLAINED, AND CONSEQUEN TLY, ASSESSED THAT AMOUNT AS INCOME FROM UNDISCLOSED SOURCES IT WAS CONTENDED BY ASSESSEE THAT NOTIONAL CASH ENTRIES WERE MADE TO REDUCE INDEBTEDNESS OF TH REE COMPANIES OF 'J' GROUP TO GB IN ORDER TO COMPLY WITH CERTAIN DIRECTIONS OF RB I ASSESSEE-FIRM SUBSTITUTED THREE COMPANIES OF 'J' GROUP AS DEBTOR TO GB - IT W AS FURTHER STATED THAT QUESTION OF CASH CREDIT DID NOT ARISE, THERE BEING NO ACTUAL PA SSING OR RECEIPT OF CASH BUT TRANSACTIONS WERE MERE BOOK ENTRIES - WHETHER, IN A FORESAID CIRCUMSTANCES, EFFECT AND IMPORT OF TRANSACTION WAS THAT ASSESSEE TOOK OV ER LIABILITY OF AFORESAID THREE COMPANIES TO 'GB' IN EXCHANGE FOR SHARES AND, THERE FORE, AMOUNT OF LOAN IN QUESTION COULD NOT BE TREATED AS ASSESSEE 'S INCOME FROM UNDISCLOSED SOURCES - HELD, YES.' 14. ITO VS. V.R. GLOBAL ENERGY (P) LTD (SUPRA) SLP DISMISSED AGAINST HIGH COURT RULING THAT WHERE ASSESSEE ALLOTTED SHARES TO A COMPANY IN SETTLEMENT OF PRE-EXISTING LIABILITY OF ASSESSEE TO SAID COMPANY, SINCE NO CASH WAS INVOLVED IN TRANSACTION OF SAID ALLOTME NT OF SHARES, CONVERSION OF THESE LIABILITIES INTO SHARE CAPITAL AND SHARE PREMIUM CO ULD NOT BE TREATED AS UNEXPLAINED CASH CREDITS UNDER SECTION 68. ' ''SECTION 68 OF THE INCOME-TAX ACT, 1961 - CASH CRE DIT (SHARE CAPITAL) - ASSESSMENT YEAR 2012-13 - ASSESSEE-COMPANY ALLOTTED SHARE TO O NE VR IN SETTLEMENT OF PRE- EXISTING LIABILITY OF ASSESSEE TO SAID COMPANY -ASS ESSING OFFICER TREATED VALUE OF SHARES ALLOTTED AS UNEXPLAINED CASH CREDITS UNDER S ECTION 68 - HIGH COURT BY IMPUGNED ORDER HELD THAT CASH CREDITS TOWARDS SHARE CAPITAL WERE ONLY BY WAY OF BOOK ADJUSTMENT AND NOT ACTUAL RECEIPTS, THUS, SAME COULD NOT BE TREATED AS RECEIPTS TOWARDS SHARE SUBSCRIPTION MONEY - IT FURT HER HELD THAT SINCE NO CASH WAS INVOLVED IN TRANSACTION OF SAID ALLOTMENT OF SHARES , CONVERSION OF THESE LIABILITIES INTO SHARE CAPITAL AND SHARE PREMIUM, COULD NOT BE TREATED AS UNEXPLAINED CASH CREDITS UNDER SECTION 68 WHETHER SPECIAL LEAVE PET ITION FILED AGAINST IMPUGNED ORDER WAS TO BE DISMISSED - HELD, YES [PARA 27] [IN FAVOR OF ASSESSEE]. ' 15. V.R. GLOBAL ENERGY (P) LTD VS. ITO (SUPRA) 'WHERE ASSESSEE ALLOTTED SHARES TO A COMPANY IN SET TLEMENT OF PREEXISTING LIABILITY OF ASSESSEE TO SAID COMPANY, SINCE NO CASH WAS INVO LVED IN TRANSACTION OF SAID ALLOTMENT OF SHARES, CONVERSION OF THESE LIABILITIE S INTO SHARE CAPITAL AND SHARE PREMIUM COULD NOT BE TREATED AS UNEXPLAINED CASH CR EDITS UNDER SECTION 68. ' 'SECTION 68 OF THE INCOME-TAX ACT, 1961 - CASH CRED IT (SHARES, ALLOTMENT OF) - ITA NO.543/M/2018 & ITA NO.544/M/2018 M/S. FROHAR TRADING PVT. LTD. & M/S. FULTON CORPORA TION PVT. LTD. 9 ASSESSMENT YEAR 2012-13 - ASSESSEE-COMPANY ALLOTTED SHARE TO ONE VR IN SETTLEMENT OF PRE-EXISTING LIABILITY OF ASSESSEE TO SAID COMPANY - ASSESSING OFFICER TREATED VALUE OF SHARES ALLOTTED AS UNEXPLAINED CAS H CREDITS UNDER SECTION 68 - WHETHER CASH CREDITS TOWARDS SHARE CAPITAL WERE ONL Y BY WAY OF BOOK ADJUSTMENT AND NOT ACTUAL RECEIPTS, THUS, SAME COULD NOT BE TR EATED AS RECEIPTS TOWARDS SHARE SUBSCRIPTION MONEY - HELD, YES - WHETHER SINCE NO C ASH WAS INVOLVED IN TRANSACTION OF SAID ALLOTMENT OF SHARES, CONVERSION OF THESE LI ABILITIES INTO SHARE CAPITAL AND SHARE PREMIUM, COULD NOT BE TREATED AS UNEXPLAINED CASH CREDITS UNDER SECTION 68 - HELD, YES [PARA 27] [IN FAVOR OF ASSESSEE].' 16. ACIT VS. PARAS HEALTHCARE P. LTD (SUPRA) 'THE ASSESSING OFFICER, THOUGH HAD NOT MENTIONED UN DER WHICH PROVISION THE ADDITIONS ARE BEING MADE. IT APPEARS THAT THE SAID ADDITIONS HAVE BEEN MADE U/S 68 OF THE ACT BECAUSE IT IS THE ONLY SECTION UNDER WHI CH ANY SUM FOUND CREDITED IN THE BOOKS OF ACCOUNT CAN BE ADDED BACK. IN THE CASE OF JAFFA INVESTMENT CO. IN 206ITR 718 AT PAGE 725, IT IS HELD THAT IN CASE NO CASH HA S BEEN RECEIVED BY THE ASSESSEE, THEN NO ADDITION CAN BE MADE U/S 68 OF THE ACT. SIM ILARLY, THE PUNE BENCH OF THE TRIBUNAL ALSO HELD SO IN THE CASE OF KANTILAL& BROS . VS. ACIT IN 52 ITD 412 8. THUS, IT IS CLEAR FROM THE ABOVE THAT SECTION 68 IS NOT TO BE INVOKED WHERE CONSIDERATION IS DISCHARGED BY WAY OF BARTER SYSTEM AND NOT BY PAYING ANY SUM OF MONEY. WE, THE REFORE, RESPECTFULLY FOLLOWING THE AFORESAID DECISIONS, SET ASIDE THE ORDER OF LD. CIT(A) AND DIRECT THE AO TO DELETE THE DISAL LOWANCE. 9. APPEAL OF THE ASSESSEE ALLOWED. ITA NO.544/M/2018 10. THE ISSUE INVOLVED IN THE PRESENT APPEAL IS IDE NTICAL TO THE ONE AS STATED ABOVE IN ITA NO.543/M/2018 FOR A.Y. 2 012-13. THEREFORE, OUR FINDING IN ITA NO.543/M/2018 FOR A.Y . 2012-13 WOULD, MUTATIS MUTANDIS, APPLY TO THIS APPEAL AS WE LL. ACCORDINGLY, THE APPEAL OF THE ASSESSEE IS ALLOWED. ITA NO.543/M/2018 & ITA NO.544/M/2018 M/S. FROHAR TRADING PVT. LTD. & M/S. FULTON CORPORA TION PVT. LTD. 10 11. IN THE RESULT, BOTH THE APPEALS OF THE ASSESSEE S ARE ALLOWED. ORDER PRONOUNCED IN THE OPEN COURT ON 06.04.2021. SD/- SD/- ( AMARJIT SINGH) (RAJESH KUMAR) JUDICIAL MEMBER ACCOUNTANT MEMBER MUMBAI, DATED: 06.04.2021. * KISHORE, SR. P.S. COPY TO: THE APPELLANT THE RESPONDENT THE CIT, CONCERNED, MUMBAI THE CIT (A) CONCERNED, MUMBAI THE DR CONCERNED BENCH //TRUE COPY// [ BY ORDER DY/ASS TT. REGISTRAR, ITAT, MUMBAI.