ITO 10 (2)(4), MUMBAI V. MEMPHIS INVESTMENT & TRADING CO. LTD., MUMBAI

ITA 6239/MUM/2019

• Counselvise Citation: [2022] 106 COUNSELVISE.COM (IT) 4478 (ITAT-MUMBAI)
• Duration Of Justice: 2 year(s) 9 month(s) 21 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 21-07-2022
• Appeal Filed By: Department
• Order Result: Allowed
• Bench Allotted: D
• Assessment Year: 2009-2010
• Appeal Filed On: 30-09-2019
• Result in Favour of: Revenue
• Court: TRIBUNAL
• Keywords: Additional evidence; Reassessment proceedings; Set aside
• Section: 68; 148; 144; 143(3); 143(1); 250; 143(2); 73

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL “D” BENCH, MUMBAI BEFORE SHRI PRAMOD KUMAR, VICE PRESIDENT & SHRI PAVAN KUMAR GADALE, JUDICIAL MEMBER ITA No. 6239/Mum/2019 (A.Y: 2009-10) DCIT – 10(2)(4), 2 nd Floor, Room No. 213, Aayakar Bhavan Churchgate, Mumbai-400020. Vs. M/s Memphis Investment & Trading Co. Ltd 146, Chinar Bldg, Sher-e-Punjab Society, Andheri (East), Mumbai-400093. PAN/GIR No. : AAACM6735B Appellant .. Respondent Assessee by : Shri.Salil Aggarwal, Sr.Adv & Shri.Shailesh Gupta.AR Revenue by : Shri.T. Shankar. CIT.DR Date of Hearing 28.04.2022 Date of Pronouncement 22.07.2022 आदेश / O R D E R PER PAVAN KUMAR GADALE JM: The revenue has filed an appeal against the order of the Commissioner of Income Tax (Appeals)-17, Mumbai passed u/s 143(3) r.w.s 147 and 250 of the Act. The revenue has raised the following grounds of appeal: ITA No. 6239/Mum/2019 Memphis Investment & Trading Co. Ltd, Mumbai. - 2 - 1. 1. "On the facts and circumstances of the case and in law the Ld. CIT(A) has erred in deciding that the assessee had discharged its onus ignoring the fact that the assessee had failed to establish the genuineness and creditworthiness of the transactions." 2. "on the facts and circumstances of the case and in law the Ld. CIT(A) has erred in not considering the decision of the Hon'ble Delhi High Court in the case of MIs. Navodaya Castle Pvt. Ltd. wherein the Hon'ble High Court has made observation with respect to creditworthiness 3. The appellant prays th at the order of the Ld.CIT(A) on th e above ground be set aside and that of the AO be restored. 4. The appellant craves leave to amend or alter any grounds or add a new ground which may be necessary. 2. The brief facts of the case are that the assessee company is engaged in the business of investments in shares and securities. The assessee has filed the return of income electronically for the A.Y 2009-10 on 26.09.2009 disclosing a total loss of Rs.8,209/- and the return of income was processed u/s 143(1) of the Act. Subsequently, the Assessing Officer (A.O.) has issued notice u/s 148 of the Act after recording the reasons that the assessee has issued 15,00,000 equity shares of Rs.10/- face value at a premium of Rs.15/- ITA No. 6239/Mum/2019 Memphis Investment & Trading Co. Ltd, Mumbai. - 3 - per share in the F.Y.2008-09. Whereas the shares are issued at huge amount of share premium compared to intrinsic value of the shares. In response to the notice the assessee has filed a letter dated 04.03.2015 to treat the return of income filed earlier as due compliance. Subsequently the notice u/s 143(2) and 142(1) of the Act are issued. The assessee was provided with the reasons for reopening of the assessment and the assessee has filed the letter on 23.03.2015 raising the objections. Whereas the A.O. has considered the objections and the submissions of the assessee and relied on the judicial decisions and disposed off the objections filed by the assessee dealt at page 3 and 4 of the assessment order. 3. The A.O. found that the case was reopened based on the tangible material available on record where the assessee in F.Y 2008-09 relevant to A.Y 2009-10, the assessee has issued equity share of Rs.10 paid up at a premium of Rs. 15 per share. The A.O is of the opinion that the intrinsic value of the shares as on 31.03.2008 and 31.03.2009 is much less, to command such a huge premium and observed that they are not genuine transactions. The AO has dealt on the facts, judicial ITA No. 6239/Mum/2019 Memphis Investment & Trading Co. Ltd, Mumbai. - 4 - decisions, and submissions of the assessee and provisions of sec 68 of the Act and has issued show cause notice dated 10-03-2015 and one of the director of the asseessee company appeared and the case was discussed. Finally the A.O. has invoked the Best judgment Assesseement under section 144 of the Act. The AO is of the opinion that the genuineness of the transaction is not proved and therefore held that the receipt of share premium of Rs 2.25 crores i.e (15,00,000 X 15) is treated as not genuine. Whereas the AO was satisfied with the paid up value of shares of Rs.1,50,00,000/-.On the disputed issue of share premium, the A.O. is of the opinion that the assessee has not satisfied the ingredients of the provisions of Sec.68 of the Act and made an addition of Rs.2,25,00,000/- and assessed the total income of Rs. 2,24,91,790/- and passed the order u/s 143(3) r.w.s 147 of the Act dated 30.03.2015. 4. Aggrieved by the order, the assessee has filed an appeal before the CIT(A). In the appellate proceedings the CIT(A) considered the grounds of appeal, submissions of the assessee, remand report, findings of the scrutiny proceedings. On the issue with respect ITA No. 6239/Mum/2019 Memphis Investment & Trading Co. Ltd, Mumbai. - 5 - to the validity of reassessment proceedings, the CIT(A) has dealt on the facts, provisions and the judicial decisions and upheld the validity of reassessment proceedings and dismissed the ground of appeal of the assessee. On the second disputed issue of addition of share premium, the assessee has filed an application for admission of additional evidence and the remand report was called for. The CIT(A) has observed that the details of shares investor Mr. Anil Balla were not filed before the A.O. and were filed in the appellate proceedings. The A.O. has submitted the remand report on the additional evidences and a copy was provided to the assessee to file the rebuttal. The assessee has filed the rebuttal on the remand report vide letter dated 16.05.2019. The CIT(A) has observed that there are three parts of the A.O.s comments on remand report first on the provisions of Rule 46A of the I T Rules and that the additional evidences should not be accepted. The CIT(A) has dealt on the admission of additional evidences referred at Para 5.1 of the order and was admitted. Finally on the merits of the case, the CIT(A) dealt on the provisions of Section 68 of the Act and the ingredients required u/s 68 of the ITA No. 6239/Mum/2019 Memphis Investment & Trading Co. Ltd, Mumbai. - 6 - Act being identity, creditworthiness and genuineness of the transactions of the investor. The CIT(A) dealt on the facts and has observed that the claim of the assessee cannot be overlooked and the assessee has filed the various details/ information of the share holder. Finally the CIT(A) was satisfied on facts, law and relied on the judicial decisions and directed the A.O. to delete the share premium addition of Rs. 2.25 crores u/s 68 of the Act and partly allowed the assessee appeal. Aggrieved by the order of the CIT(A), the revenue has filed an appeal before the Hon’ble Tribunal. 5. At the time of hearing, the ld. DR submitted that the CIT(A) has erred in deleting the addition of share premium irrespective of the facts that the assessee has failed to establish the genuineness and creditworthiness of the transaction and supported the order of the A.O. 6. Contra, the Ld. AR has submitted that the AO has doubted the genuineness and creditworthiness of the investor. Whereas the A.O. has accepted the paid up share capital to the extent of Rs. 10 per each share ITA No. 6239/Mum/2019 Memphis Investment & Trading Co. Ltd, Mumbai. - 7 - which worked out to Rs. 1.5 crores and there are no valid reasons for not considering the share premium of Rs.15 per share which works out to Rs.2.25 crores. The Ld. AR has made elaborate submissions on the law and facts and supported the order of the CIT(A) and substantiated the submissions relying on the judicial decisions and the paper book and prayed for dismissal of the revenue appeal. 7. We have heard the rival submissions and perused the material on record. The sole crux of the disputed issue envisaged by the Ld. DR that the CIT(A) has erred in deleting the premium received on the shares ignoring the fact that the assessee has not establish the genuineness and credit worthiness of the transactions . The Ld. AR submitted that the assessee has filed the complete details to satisfy the three ingredients u/s 68 of the Act i.e identity, genuineness and creditworthiness and the assessee has submitted the similar information and filed an application of additional evidence with the CIT(A) which was admitted and forwarded to the A.O. for comments/remand report. We find that the assessee company has issued 15 lakhs equity shares of Rs. 10 each paid up at a ITA No. 6239/Mum/2019 Memphis Investment & Trading Co. Ltd, Mumbai. - 8 - premium of Rs.15 per share, in the assessment proceedings the assessee has submitted the details substantiating the share application money received along with the premium from Mr. Anil Bhalla. The AO has accepted the facts of paid up value of shares to the extent of Rs. 1.5 crores and has made an addition u/s 68 of the Act share premium (1,50,00,000 x15) received Rs. 2.25 crores. On appeal, the CIT(A) has admitted the additional evidences u/rule 46A of the I T Rules, where the assesse company has furnished the vital information supporting the share application money. In the appellate proceedings, the assessee has filed the written submissions and relied on the judicial decisions. We find the CIT(A) has considered the additional evidence at Para 5.1 of the order. Further after admission of additional evidence and the comments of the AO, the CIT(A) has dealt on the facts, provisions and judicial decisions at Para 5.4 page 21 to 27 of the order and deleted the impugned addition u/sec68 of the Act. 8. We find that the Ld.AR has substantiated the submissions on the genuineness of the transaction with the judicial decisions and referred to the paper ITA No. 6239/Mum/2019 Memphis Investment & Trading Co. Ltd, Mumbai. - 9 - book at page 50 to 71, where the assessee has filed the written submissions on various dates which were considered by the CIT(A). Further, the CIT(A) has called for the remand report from the A.O. referred at page 73 to 79 of the paper book and the assessee was provided an opportunity to submit the comments on the remand report. The assessee has filed the rebuttal to the remand report on 16.05.2019 dealt at page 80 to 130 of paper book. The contentions of the Ld.AR are that the A.O. having accepted the paid up share capital in principle and made addition of share premium is contrary to the facts and referred to the judicial decisions. Further the Ld. AR relied on the jurisdictional High Court decision of CIT Vs. GaganDeep Infrastructure Pvt ltd (394 ITR 680) held as under: se c ti o n 6 8 o f th e in co me - t ax A c t, 1 9 6 1 - C as h cr e d it ( S h a r e C ap i t al ) - A s se s s m e n t ye ar 2 0 0 8 - pg - W h e th e r pr o v is o to se c ti o n 6 8 in tr o d u ce d by F in an c e A c t 2 0 1 2 wi th ef f ec t f ro m 1 - 4 .2 0 1 3 . Wo u l d n o t h av e r e tr o spe c tiv e e f f e c t - H e l d , v e s - Wh e th e r wh e r e as s e ss e e - c o m p an y h ad e s t ab l i s h ed id ent i t y, ge n u i n en e s s an d c ap ac i ty o f sh a r e h o l d e r s wh o h ad su bs cr ib e d to i ts s h ar e s , A ss e s s in g of f i ce r was n o t ju s tif ie d in ad d in g amo u n t of sh ar e c ap i t al su bs cr i p ti o n a s u n e x pl ai n e d cr e d i t - H e l d , ye s - W h e th e r wh e r e r e v en u e u r ge d th a t as se ss e e h ad r e c e i v e d s h ar e ap pl ic a tio n mo n e y f rom bo gu s s h ar e h o l d e r s , i t was f o r in co me - ta x Of f ic e r s to pr o c e e d ITA No. 6239/Mum/2019 Memphis Investment & Trading Co. Ltd, Mumbai. - 10 - b y r e o pe n in g as se s s me n t o f su ch sh ar e h o l d e r s an d a ss e s s in g th e m to t ax in ac c o r d an ce wi th l a w an d i t d i d n o t en ti tl e r e v en u e to ad d s a me to as s e s se e ' s i n c o me as u n e x pl ai n e d c a sh cr e d i t - H e l d , ye s [ P ar a 3 ] [ In f av o u r o f as s es s e e ] 9. We considering the overall facts, circumstances, judicial decisions and provisions of law find that on the one hand the A.O. has accepted the paid up share capital amount as genuine and on other hand disregarded the share premium received on shares as it does not satisfy the ingredients of Sec. 68 of the Act, though the source of transaction is the same person and there is no rationality of bifurcation of the source. We found that the CIT(A) has admitted the additional evidence and also provided an opportunity to the A.O. to make the comments and the assessee has filed the rebuttal/ rejoinder. Even before us, the Ld.DR has nothing specific to say except placing reliance on the stand of the Assessing Officer. However, once the issuance of share capital is accepted as genuine, it cannot be open to the Assessing Officer to treat share premium as unexplained credit under section 68 of the Act but the A.O. has done. A composite receipt of share application money cannot be partly explained and partly unexplained under section ITA No. 6239/Mum/2019 Memphis Investment & Trading Co. Ltd, Mumbai. - 11 - 68 of the Act. The Ld.CIT(A) for this reason was justified in deleting the impugned addition under section 68 of the Act. Accordingly, we do not find any infirmity in the order of the CIT(A) and uphold the same and dismiss the grounds of appeal of the revenue. 10. In the result, the appeal filed by the revenue is dismissed. Order pronounced in the open court on 22.07.2022 Sd/- Sd/- (PRAMOD KUMAR) (PAVAN KUMAR GADALE) VICE PRESIDENT JUDICIAL MEMBER Mumbai, Dated 22.07.2022 KRK, PS Copy of the Order forwarded to : 1. The Appellant 2. The Respondent. 3. The CIT(A) 4. Concerned CIT 5. DR, ITAT, Mumbai 6. Guard file. आदेशान ु सार/ BY ORDER, //True Copy// 1. ( Asst. Registrar) ITAT, Mumbai