DCIT 6(2)(2), MUMBAI V. EDESK SERVICES LTD, MUMBAI

ITA 7113/MUM/2016

• Counselvise Citation: [2019] 117 COUNSELVISE.COM (IT) 6919 (ITAT-MUMBAI)
• Duration Of Justice: 2 year(s) 4 month(s) 27 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 02-05-2019
• Appeal Filed By: Department
• Order Result: Allowed
• Bench Allotted: Not Allotted
• Assessment Year: 2012-2013
• Appeal Filed On: 05-12-2016
• Result in Favour of: Revenue
• Court: TRIBUNAL
• Department Lawyers: O P MEENA
• Keywords: Unexplained cash credit; Depreciation; Search and seizure; Opportunity of being heard; Principle of natural justice; Wholly owned subsidiary; Valuation report; Capital receipt; Onus to prove; Set aside
• Section: 143(3); 142(1); 56(2); 260A; 68

Judgement Text

E IN THE INCOME TAX APPELLATE TRIBUNAL E BENCH, MUMBAI BEFORE SHRI MAHAVIR SINGH, JUDICIAL MEMBER AND SHRI RAMIT KOCHAR, ACCOUNTANT MEMBER ./ I.T.A. NO.7113/ MUM/2016 ( / ASSESSMENT YEAR: 2012 - 13) DCIT 6(2)(2) R.NO. 56 3, AAYAKAR BHAVAN, M.K ROAD, CHURCHGATE, MUMBAI 400020 / V. M/S. EDESK SERVICES LTD. 6 - A, LALWANI INDL. ESTATE 14, G.D. AMBEKAR ROAD, WADALA, MUMBAI 400031 ./ PAN : AAB CB5087H CO. NO.62/ MUM/2018 ARISING OUT OF ./ I.T.A. NO. 7113/ MUM/2016 ( / ASSESSMENT YEAR: 2012 - 13) M/S. EDESK SERVICES LTD. 6 - A, LALWANI INDL. ESTATE 14, G.D. AMBEKAR ROAD, WADALA, MUMBAI 400031 / V. ITO 6(2)(1) MUMBAI ./ PAN : AAB CB5087H ( / APPELLANT ) .. ( / RESPONDENT ) REVENUE BY: SHRI. O.P MEENA (DR) ASSESSEE BY : SHRI. JAYESH DADIA / DATE OF HEARING : 05 - 02 - 2019 / DATE OF PRONOUNCEMENT : 02 .05 .2019 / O R D E R PER RAMIT KOCHAR, ACCOUNTANT MEMBER THIS APPEAL, FILED BY THE R EVENUE, BEING ITA NO. 7113/MUM/2016 FOR ASSESSMENT YEAR(AY) 2012 - 13 AND CROSS OBJECTIONS(CO) BEARING NO. 62/MUM/2018 ARISING OUT OF ITA NO. 7113/MUM/2016 FOR AY 2012 - 13 FILED BY THE A SSESSEE , ARE BOTH DIRECTED AGAINST THE APPELLATE ORDER IN APPEAL NO. CIT(A) - 12/ITO - 6(2)(2)/158/15 - 16 DATE D 08.09.2016 PASSED BY LEARNED I.T.A. NO.7113/MUM/2016 CO. NO.62/MUM/2018 2 | P A G E COMMISSIONER OF INCOME - TAX (APPEALS) - 12, MUMBAI (HEREINAFTER CALLED THE CIT(A)) FOR ASSESSMENT YEAR 2012 - 13, THE APPELLATE PROCEEDINGS HAD ARISEN BEFORE LEARNED CIT(A) FROM THE ASSESSMENT ORDER DATED 31.03.2015 PASSED BY LEARNED ASSESSING OFFICER (HEREINAFTER CALLED THE AO) U/S 143(3) OF THE INCOME - TAX ACT, 1961 (HEREINAFTER CALLED THE ACT). 2. THE GROUNDS OF APPEAL RAISED BY THE REVENUE IN THE MEMO OF APPEAL FILED WITH THE INCOME - TAX APPELLATE TRIBUNAL, MUMBAI (HERE INAFTER CALLED THE TRIBUNAL) READ AS UNDER: - 1. 'ON THE FACTS AND CIRCUMSTANCES OF CASE AND IN LAW, THE LD.CIT(A) ERRED IN DELETING THE ADDITION OF RS.7,04,90,000/ - ON ACCOUNT OF UNEXPLAINED SHARE PREMIUM U/S 68 OF THE ACT, BEING A SHAM TRANSACTION' . 2. 'ON THE FACTS AND CIRCUMSTANCES OF CASE AND IN LAW, THE LD.CIT(A) ERRED IN DELETING THE ADDITION OF RS.7,04,90,000/ - WITHOUT APPRECIATING THE FACT THAT THE GENUINENESS OF THE TRANSACTION AND THE CREDITWORTHINESS OF THE PARTY M/S. VARAAD VENTURES LTD., WHICH SUBSCRIBED TO THE SHARES WAS NOT SATISFACTORILY EXPLAINED '. 3. 'ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE AND IN LAW, THE CIT(A) HAS ERRED ON RELYING ON THE HON'BLE MUMBAI ITAT'S ORDER IN THE CASE OF M/S GAGANDEEP INFRASTR UCTURE PVT. LTD. IN APPEAL NO. I TA 5784/MUM/2011 DATED 23.04.2014 WHICH HAS BEEN NOT ACCEPTED BY THE DEPARTMENT AND APPEA L HAS BEEN FILED BEFORE THE HON BIE HIGH COURT'. 4. THE APPELLANT PRAYS THAT THE ORDER OF THE CIT (APPEALS) ON THE ABOVE GROUNDS BE SET ASIDE AND THAT OF THE AO BE RESTORED. 5. THE APPELLANT CRAVES LEAVE TO AMEND OR ALTER ANY GROUND OR TO SUBMIT ADDITIONAL NEW GROUND, WHICH MAY BE NECESSARY. 2.2 THE ASSESSEE HAS FILED CROSS OBJECTIONS VIDE CO NO.62/MUM/2018 ARISING OUT OF APPEAL IN ITA NO. 7113/MUM/2016 FOR AY 2012 - 13 , IN WHICH FOLLOWING CROSS OBJECTIONS ARE TAKEN BY THE ASSESSEE: 1. SHARE PREMIUM FROM VAARAD VENTURES LIMITED ON THE FACTS AND CIRCUMSTANCE OF THE CASE AND AS PER PROVISION OF LAW THE LD. ASSESSING OFFICE IS DI SALLOWING OF RS. 7,04,90,000/ - SHARE PREMIUM PAID FOR THE PURCHASE OF THE DIVISION UNDER (SLUMP SALE) OF VAARAD VENTURES LIMITED AS UNEXPLAINED SHARE PREMIUM. I.T.A. NO.7113/MUM/2016 CO. NO.62/MUM/2018 3 | P A G E ON THE FACTS AND CIRCUMSTANCE OF THE CASE AND AS PER PROVISION OF LAW THE LD. A.O. HAS DISALLOWE D THE SHARE PREMIUM OF RS. 7,04,90,000/ - AS UNREASONABLE AND UNJUSTIFIED WHEN THERE IS NO PROHIBITION UNDER THE COMPANIES ACT, 1956 OR ANY OTHER LAW PROVIDING ANY LIMIT ON THE QUANTUM OF SHARE PREMIUM THAT COULD BE CHARGED AND ISSUING SHARES AT A PREMIUM W AS A COMMERCIAL DECISION WHICH HAS BEEN RECORDED IN THE BOOKS OF ACCOUNTS AND MINUTES ON RECORD OF BOTH COMPANIES. ON THE FACTS AND CIRCUMSTANCE OF THE CASE AND AS PER PROVISION OF LAW, THE LD. A.O. HAS ERRED IN TREATING THE SHARE PREMIUM AS UNEXPLAINED SH ARE PREMIUM WHEN THE IDENTITY OF THE SELLER COMPANY IS CONFIRMED BY THE A.O. HIMSELF AS THE PURCHASER COMPANY IS 100% SUBSIDIARY OR SELLER COMPANY AND THE WHOLE TRANSACTION IS A SLUMP SALE WHICH IS CONFIRMED BY BOTH THE PARTIES. ON THE FACTS AND CIRCUMSTAN CE OF THE CASE AND IN LAW, THE LD. A.O. HAS FAILED TO APPRECIATE THAT THE SHARE PREMIUM RECEIVED BY THE TAXPAYER IS IN THE NATURE OF CAPITAL RECEIPT AS ESTABLISHED BY VARIOUS SUPREME COURT RULING SUCH AS CIT VS. ALLAHABAD BANK (1969) 73 ITR 645 AND PSIDC V S. CIT (1997) 225 ITR 792(SC) AND HENCE NOT LIABLE TO TAX UNDER THE ACT AND CANNOT BE CONSIDERED A SHAM TRANSACTION. THE RESPONDENT CRAVES THAT THIS MATTER BE DISPOSED OFF IN THE INTEREST OF SAVING VALUABLE TIME OF THE HONBLE COURT. 3. THE BRIEF FACTS OF THE CASE ARE THAT D URING THE COURSE OF ASSESSMENT PROCEEDINGS CONDUCTED BY THE AO U/S. 143(3) R.W.S. 143(2) OF THE 1961 AC T , IT WAS OBSERVED BY THE AO THAT THE ASSESSEE HAS ISSUED SHARE CAPITAL AT PREMIUM. THE ASSESSEE WAS ASKED TO SUBM IT COMPLETE DETAILS. THE ASSESSEE SUBMITTED THAT M/S. VARAAD VENTURES LTD. (FORMERLY KNOW N AS M/S. ATCO CORPORATION LTD.) HAS SOLD ITS GOING CONCERN ON SLUMP BASIS TO THE ASSESSEE. THE VALUE OF SLUMP SALE WAS DECIDED TO BE AT RS. 7,42,00,000/ - . 3.2 IT WA S OBSERVED BY THE AO THAT T HE ASSESSEE AND M/S VARAAD VENTURES LIMITED HAD ENTERED INTO AN AGREEMENT FOR SALE OF UNDERTAKING DATED 30.09.2011 IN WHICH IT WAS AGREED BY BOTH THE PARTIE S THAT M/S. VARAAD VENTURE S LTD. WILL SELL AND TRANSFER ITS ONGOING DIVI SION W.E.F. 30.09.2011 ON AS IS WHERE IS BASIS TO THE ASSESSEE FOR TOTAL CONSIDERATION OF RS. 7,42,00,000/ - . IT WAS OBSERVED BY THE AO ON PERUSAL OF THE AGREEMENT FOR SALE OF UNDERTAKING DATED 30.09.2011 THAT T HE ASSESSEE HAS AGREED TO ISSUE AND ALLOT 3 7 ,10,000 EQUITY SHARE OF RS. 1/ - EACH AT A PRICE OF RS. 20/ - PER EQUITY SHARE AS FULLY PAID UP , AS CONSIDERATION PAID TOWARDS ACQUISITION OF I.T.A. NO.7113/MUM/2016 CO. NO.62/MUM/2018 4 | P A G E UNDERTAKING ACQUIRED BY THE ASSESSEE FROM M/S VARAAD VENTURES LIMITED W.E.F. 30.09.2011 . THE ASSESSEE SUBMITTED BE FORE THE AO CERTIFIED TRUE COPY OF THE R ESOLUTION PASSED IN THE MEETING OF BOARD OF DI RECTOR S ON 30.09.2011. FURTHER, F ORM NO. 2 SUBMITTED WITH THE MINISTRY OF CORPORATE AFFAIRS BY THE ASSESSEE WAS ALSO FURNISHED BEFORE THE AO . THE ASSESSEE ALSO FURNISHED BEFORE THE AO , COPY OF LEDGER ACCOUNT OF THE TRANSACTION IN ITS BOOKS OF ACCOUNTS WHICH HAD TAKEN PLACE WITH AFORE SAID VARAAD VENTURES LIMITED ., WHICH SHOWED THAT PAYMENT OF RS. 37,10,000/ - WAS BOOKED UNDER THE HEAD SHARE CAPITAL AND RS. 7,04,90,000/ - WAS BOOKED UNDER THE HEAD SHARE PREMIUM. 3.3 . THE AO OBSERVED THAT M/S VARAAD VENTURES LIMITED DID NOT GET ANY SALE CONSIDERATION IN TERMS OF MONEY OUT OF THE SLUMP SALE TO THE ASSESSEE. THE AO OBSERVED THAT THE ASSESSEE HAD IN LIEU OF SALE CONSIDERATION ISSUED 37,10,000 EQUITY SHARES OF RS. 1/ - EACH AT RS. 20/ - PER SHARE AS FULLY PAID UP TO M/S VARAAD VENTURES LIMITED. THUS, IT WA S OBSERVED BY THE AO THAT OUT OF RS. 7,42,00,000/ - PAYABLE BY THE ASSESSEE TOWARDS CONSIDERATION FOR PURCHASE OF UNDERTAKING FROM VARAAD VENTURES LIMITED, THE ASSES S EE HAS ISSUED E QUITY SHARES OF FACE VALUE OF RS. 37,10,000/ - WHILE THE BALANCE AMOUNT OF RS. 7,04,90,000/ - WAS RAISED TOWARDS SHARE PREMIUM. THE AO ALSO OBSERVED THAT SINCE THE ASSESSEE ACQUIRED THE ONGOING BUSINESS OF M/S VARAAD VENTURES LIMITED ON SLUMP SALE BASIS WHIC H MEANS THAT THE VALUATION OF EACH AND EVERY ASSET WAS NOT DONE. THE ASSESSEE ALSO DID NOT FURNISHED ANY DETAILS REGARDING VALUATION OF ITS SHARES . 3.4 T HE AO OBSERVED THAT T HE PRIMARY ONUS IS ON THE ASSESSEE TO PROVE THAT THE TRANSACTION IN ITS BOOKS OF ACCOUNTS ARE TRUE, GENUINE AND JUSTIFIED AND THAT THE CONSIDER ATION PAID TO THE SELLER OF THE ASSETS IS GENUINE. THE AO OBSERVED THAT ONUS TO PROVE IDENTITY , CREDITWORTHINESS AND CAPACITY , VALUE OF SHARES WAS ALSO PRIMARILY ON THE ASSESSEE COMPANY ONLY . THE AO OBSERVED THAT THE ASSESSEE HAD FAILED TO ESTABLISH THAT THE EQUITY SHARES COMMANDED SUCH A HIGH VALUE OF PREMIUM. THE AO OB SERVED THAT THE ASSESSEE HAS A N EARNING PER SHARE (EPS) OF RS. ( - )1.22 , WHICH AS PER AO REFLECTS THAT EVEN THE EQUITY SHARES HAVE LOST ITS FACE VALUE. THE AO OBSERVED THAT IT DOES NOT JUSTIFY ISSUANCE OF EQUITY SHARE AT A PREMIUM OF RS. 19 PER EQUITY SHARE AS AGAINST FACE VALUE OF RS. 1 PER EQUITY SHARE. FURTHER, THE AO ALSO OBSERVED THAT NO DETAILS HAVE BEEN FURNISHED BY THE ASSESSEE AS TO VALUATION OF ITS I.T.A. NO.7113/MUM/2016 CO. NO.62/MUM/2018 5 | P A G E ONGOING BUSINESS WHI CH IS PURCHASED BY THE ASSESSEE. THE AO RELIED UPO N FOLLOWING JUDICIAL PRECEDENTS TO HOLD AGAINST THE ASSESSEE : A) CIT V. KORLAY TRADING CO. LTD. 232 ITR 820(CAL.) B) CIT V. PRECISION FINANCE PRIVATE LIMITED 208 ITR 465(CAL.) C) K.C.N.CHANDRASEKHAR V. ACIT , 66 TTJ 355(ITAT BANGALORE) D) CIT V. UNITED COMMERCIAL & INDUSTRIAL CO. PRIVATE LIMITED 187 ITR 596(CAL.) THE AO OBSERVED THAT THE ASSESSEE DID NOT COMPLY WITH THE REQUISITE DETAILS ASKED FOR DURIN G THE COURSE OF ASSESSMENT PROCEEDINGS VIDE NOTICE ISSUED U/S 142(1) OF THE 1961 ACT AND THE AO CONSIDER ED SHARE PREMIUM OF RS. 7,04,90,000/ - AS SHAM TRANSACTION WHICH WAS THEN ADDED TO THE INCOME OF THE ASSESSEE BY THE AO BY INVOKING PROVISIONS OF SECTIO N 68 OF THE 1961 ACT , VIDE ASSESSMENT ORDER DATED 31.03.2015 PASSED BY THE AO U/S 143(3) OF THE 1961 ACT . 4 . AGGRIEVED BY AN ASSESSMENT FRAMED BY THE AO U/S 143(3) OF THE 1961 ACT , THE ASSESSEE FILED FIRST APPEAL WITH LEARNED CIT(A) WHO WAS PLEASED TO DELETE THE ADDITIONS TO THE INCOME MADE BY THE AO VIDE APPELLATE ORDER DATED 08.09.2016, WHEREIN LD. CIT(A) OBSERVED THAT THE SE ARE TRANSACTION S BETWEEN HOLD ING COMPANY AND SUBSIDIARY COMPANY. THE LEARNED CIT(A) HELD THAT RECEIPT BY WAY OF SHARE PREMIU M IS IN THE NATURE OF CAPITAL RECEIPT AND ISSUANCE OF EQUITY SHARE S OF FACE VALUE OF RS. 1 EACH AT A SHARE PREMIUM OF RS. 19/ - PER SHARE WAS A COMMERCIAL DECISION WHICH IS PERMITTED BY COMPANIES ACT . I T WAS ALSO OBSERVED BY LD. CIT(A) THAT IDENTITY OF THE CREDITOR WAS ESTABLISHED AS THE TRANSACTION S WERE BETWEEN HOLDING AND SUBSIDIARY COMPANIES , THE TRANSACTION FOR SLUM SALE OF UNDERTAKING AND ISSUANCE OF SHARES AT PREMIUM IS A GENUINE TRANSACTION AS IT IS THROUGH BANKING CHANNEL AND IT WAS ALSO OBSERVED B Y LD.CIT(A) THAT CAPAC ITY OF THE SHAREHOLDERS IS NOT IN DOUBT , WHEREIN LD. CIT(A) VIDE APPELLATE ORDER DATED 08.09.2016 HELD AS UNDER: - I.T.A. NO.7113/MUM/2016 CO. NO.62/MUM/2018 6 | P A G E I HAVE CAREFULLY PERUSED THE ASSESSMENT ORDER AS WELL AS THE WRITTEN SUBMISSION OF THE APPELLANT. THE AO HAS MADE A N ADDITION OF RS. 7,04,90,000/ - AS UNEXPLAINED SHARE PREMIUM U/S. 68. HOWEVER, IT IS SEEN THAT THE AO HAS ERR ED IN DISALLOWING RS.7,04,90,00 0/ - SHARE PREMIUM PAID FOR THE PURCHASE OF SHARES OF VAARAD VENTURES LIMITED. IT IS SEEN THAT THE A.O. HAS ERRED IN INFERRING THAT THE PAYMENT OF SHARES AT A PREMIUM IS AN UNNATURAL AND SUSPICIOUS TRANSACTION. THERE IS NO PROHIBITION UNDER THE COMPANIES ACT OR ANY OTHER LAW PROVIDING A LIMIT ON THE QUANTUM OF SHARE PREMIUM THAT CAN BE CHARGED SINCE ISSUING SHARES AT A PREMIUM IS A COMMERCIAL DECISION. THE SHARE PREMIUM IS IN THE NATURE OF CAPITAL RECEIPT AND HENCE NOT LIABLE TO TAX UNDER THE IT. ACT. RELIANCE IS PLACED IN THIS REGARD ON THE HON. SUPREME COURT ORDERS IN THE CASES OF CIT VS STANDARD VACUUM OIL C O. (1966) 59 ITR 685, CIT VS ALLAHABAD BANK LTD. (1969) 73 ITR 745 AND PUNJAB STATE INDUSTRIAL DEVELOPMENT CORPORATION LTD. VS CIT (1997) 225 ITR 792 (SC). THE A.O. HAS ERRED IN TREATING THE SHARE PREMIUM OF RS.7,04,90,000/ - AS UNEXPLAINED CASH CREDIT WHEN THE IDENT ITY OF THE SELLER COMPANY IS ITSELF CONFIRMED BY THE A.O. AS THE PURCHASER COMPANY IS 100% SUBSIDIARY OF SELLER COMPANY. THUS, THE WHOLE TRANSACTION OF RS.7,04,90,000/ - IS A SLUMP SALE WHICH IS CONFIRMED BY BOTH THE PARTIES. THE ISSUANCE OF SHARES AT A PRE MIUM WAS A COMMERCIAL DECISION OF THE BOARD OF DIRECTORS. THERE IS NO PROHIBITION UNDER THE COMPANIES ACT SO FAR AS THE AMOUNT OF PREMIUM IS CONCERNED. IT IS THE PREROGATIVE OF THE BOARD OF DIRECTORS TO DECIDE THE PREMIUM AMOUNT AND IT IS THE WISDOM OF THE SHARE HOLDERS WHETHER THEY WANT TO SUBSCRIBE TO SUCH A HEAVY PREMIUM. THEIR INTEGRITY AND CREDIBILITY CANNOT BE DOUBTED. IT IS A SETTLED PROPOSITION OF LAW THAT CAPITAL RECEIPTS, UNLESS SPECIFICALLY TAXED UNDER ANY PROVISIONS OF THE ACT ARE EXCLUDED FROM INCOME. AS PER SECTION 68 THE APPELLANT COMPANY HAS DISCHARGED ITS ONUS TO ESTABLISH IDENTITY, GENUINENESS OF THE TRANSACTION AND THE CAPACITY OF THE LENDER OR THE DEPOSITOR. THE IDENTITY HAS BEEN ESTABLISHED. THE GENUINENESS IS ALSO ESTABLISHED SINCE THE ENTIRE TRANSACTION HAS BEEN DONE THROUGH THE BANKING CHANNELS DULY RECORDED IN THE BOOKS OF ACCOUNT OF THE APPELLANT COMPANY AND DULY REFLECTED IN ITS FINANCIAL STATEMENT. HERE, THE CAPACITY OF THE SHAREHOLDER IS ALSO NOT IN DOUBT. THUS, IT IS SEEN THAT TH E A.O. HAS ERRED IN INVOKING THE PROVISIONS OF SECTION 68 OF THE ACT. RELIANCE IS PLACED ON THE RECENT JUDGMENTS OF THE HON. MUMBAI ITAT IN THE CASE OF GREEN INFRA LTD. VS ITO (ITA 7762/MUM/2012) DATED 23.8.2013 AND ACIT VS GAGANDEEP INFRASTRUCTURE PVT. LT D. (ITA 5784/MUM/2011) DATED 23.4.2014 WHICH ARE SQUARELY APPLICABLE IN THE CASE OF THE APPELLANT AND BINDING ON THE UNDERSIGNED AS BEING THAT OF JURISDICTIONAL ITAT. THUS, RESPECTFULLY, FOLLOWING THE HON. MUMBAI ITAT, THE AO IS DIRECTED TO DELETE THE ADDI TIONS OF RS. 7,04,90,000/ - . 5 . NOW, AGGRIEVED BY THE APPELLATE ORDER DATED 08.09.2016 PASSED BY LEARNED CIT(A), THE REVENUE IS IN APPEAL BEFORE THE TRIBUNAL , WHILE THE I.T.A. NO.7113/MUM/2016 CO. NO.62/MUM/2018 7 | P A G E ASSESSEE HAS FILED CROSS OBJECTIONS AGAINST AN APPEAL FILED BY REVENUE. T HE LD. COUNSEL FOR THE ASSESSEE AT THE OUTSET SUBMITTED THAT PROVISIONS OF S ECTION 56(2)(VIIB) OF THE 1961 ACT WAS BROUGHT INTO STATUTE BY FINANCE ACT 2012, W.E.F. 01.04.2013 , WHILE THE IMPUGNED ASSESSMENT YEAR BEFORE THE TRIBUNAL IS AY 2012 - 13 . IT WAS SUBMITTED THAT M/S. VARAAD VENTURE S LTD. IS A LISTED COMPANY AND IS 100% HOLDING COMPANY OF THE ASSESSEE COMPANY. IT WAS SUBMITTED THAT EVEN PRIOR TO THE ISSUANCE OF EQUITY SHARE S BY THE ASSESSEE COMPANY IN CONSIDERATION OF SLUMP SALE OF SOFTWARE DIVISION OF M/S. VARAAD VENTURE S LTD. TO THE TUNE OF RS. 7,42,00,000/ - , THE ASSESSEE WAS 100% SUBSIDIARY COMPANY OF VARAAD VENTURES LIMITED AND EVEN POST ALLOTMENT OF THE AFORESAID EQUITY SHARES, THE ASSESSEE COMPANY CONTINUES TO BE 100% SUBSIDIARY OF M/S. VARAA D VENTURE S LTD.. I T WAS SUBMITTED THAT SOFTWARE BUSINESS OF M/S. VARAAD VENTURE S LTD. WAS TAKEN OVER BY THE ASSESSEE COMPANY FOR RS. 7,42,00,000/ - W.E.F. 30.09.2011 ON SLUMP SALE BASIS AND CONSIDERATION WAS PAID BY ASSESSEE COMPANY BY ISSUANCE OF 37,10,000 EQUITY SHARES OF FACE VALUE RS. 1 EACH AT A SHARE PREMIUM OF RS. 19 PER SHARE , AGGREGATING TO RS. 7,42,00,000/ - . THE LD. COUNSEL FOR THE ASSESSEE DREW OUR ATTENTION TO THE AUDITED FINANCIAL STATEMENT OF THE ASSESSEE COMPANY FOR THE IMPU GNED ASSESSMENT YEAR . OUR ATTENTION WAS ALSO DRAWN TO AUDITED FINANCIAL STATEMENT OF M/S. VARAAD VENTURE S LTD. FOR THE YEAR UNDER CONSIDERATION . OUR ATTENTION WAS ALSO DRAWN TO THE AGREEMENT DATED 30.09.2011 FOR THE SALE OF SOFTWARE DIVIS ION OF M/S. VARAAD VENTURE LTD. . THESE DOCUMENTS ARE PLACED IN FILE. THE LD. DR ON THE OTHER HAND RELIED UPON THE ASSESSMENT ORDER PASSED BY THE AO. 7. WE HAVE CONSIDER ED RIVAL CONTENTION S AND PERUSED THE MATERIAL ON RECORD . W E HAVE OBSERVED THAT THE ASSESSEE HAD DURING THE IMPUGNED AS SESSMENT YEAR UNDER CONSIDERATION STATED TO HAVE ACQUIRED SOFTWARE DIVISION OF M/S. VARAAD VENTURE S LTD. W.E.F. 30.09.2011 ON GOING CONCERN BASIS ON SLUMP SALE BASIS FOR A TOTAL CONSIDERATION OF RS. 7,42,00,000/ - . THE CONSIDERATION FOR THE SAID ACQUISITION OF SOFTWARE UNDERTAKING BY THE ASSESSEE COMPANY FROM M/S VARAAD VENTURES LIMITED OF RS. 7,42,00,000/ - WAS DISCHARGED BY ASSESSEE COMPANY BY ISSUING 37,10,000/ - EQUITY SHARES OF FACE VALUE OF RS. 1 EACH AT SHARE PREMIUM OF RS. 19 PER EQUITY SHARES, AGGREGATING TO RS. 7,42,00,000/ - . THUS, THE AFORESAID CONSIDERATION OF RS. 7,42,00,000/ - WAS NOT DISCHARGED BY ASSESSEE COMPANY IN MONETARY TERMS I.T.A. NO.7113/MUM/2016 CO. NO.62/MUM/2018 8 | P A G E BY PAYMENT THROUGH BANKING CHANNEL BUT WAS DISCHARGED BY ISSUE OF ITS E QUITY SHARES AT PREMIUM, AS DETAILED ABOVE IN FAVOUR OF M/S VARAAD VENTURES LIMITED. IT IS PERTINENT TO MENTION THAT M/S VARAAD VENTURES LIMITED WAS 100% HOLDING COMPANY OF THE ASSESSEE COMPANY PRIOR TO THIS TRANSACTION OF ACQUISITION OF SOFTWARE UNDERTA KING BY THE ASSESSEE COMPANY FROM SAID VARAAD VENTURES LIMITED W.E.F. 30.09.2011 AND CONTINUED TO BE HOLDING COMPANY POST ACQUISITION OF THE SAID SOFTWARE UNDERTAKING BY THE ASSESSEE COMPANY FROM M/S VARAAD VENTURES LIMITED. THE ASSESSEE HAS PLACED ON RECO RD BEFORE THE AUTHORITIES BELOW RESOLUTION PASSED BY BOARD OF DIRECTORS OF BOTH THE COMPANY AS WELL FORM NO. 2 FILED WITH MINISTRY OF CORPORATE AFFAIRS INTIMATING ABOUT THE AFORESAID ALLOTMENT OF EQUITY SHARES BY THE ASSESSEE COMPANY IN FAVOUR OF VARAAD VE NTURES LIMITED. T HE SAID AGRE EMENT DATED 30.09.2011 IS FILED BEFORE THE TRIBUNAL AND IS PLACED IN FILE. THE ASSESSEE HAS ALSO PLACED ON RECORD BEFORE TRIBUNAL , THE AUDITED FINANCIAL STATEMENTS OF BOTH THE ASSESSEE AS WELL OF THE VARAAD VENTURES LIMITED F OR THE YEAR ENDED 31.03.2012.P ERUSAL OF THE SAID AGREEMENT DATED 30.09.2011 WILL REVEAL THAT THE ASSESSEE HAS ACQUIRED WEB BASE APPLICATIONS ALONG WITH SOURCE CODES, MOVABLE ASSETS , EMPLOYEES AS GOING CONCERN , AS DETAILED IN THREE SCHEDULES ATTACHED TO THE AGREEMENT DATED 30.09.2011 , WHICH ARE REPRODUCED HERE UNDER: - FIRST SCHEDULE VAARAD VENTURES LIMITED LIST OF WEB BASED APPLICATION ALONGWITH ITS SOURCE CODES COMPANY HAS DEVELOPED WEB BASED APPLICATION SUCH AS MY OFFICE UNLIMITED MY OFFICE UNLIMITED DELIVERS INNOVATIVE NICHE WEB APPLICATIONS IN THE AREAS OF OFFICE AUTOMATION THAT CAN BE USED BY EMPLOYEES IN EVERY INDUSTRY. IT ENHANCES CONNECTIVITY THROUGH DATA AND REPORTS WHICH ENHANCES HUGELY EMPLOYEE PRODUCTIVITY. ALLOWS THEM TO WORK FROM HOME WITHOUT THE DISADVANTAGE OF NOT BEING IN OFFICE MY OFFICE UNLIMITED CREATES A VIRTUAL OFFICE FOR THE CUSTOMER WHICH CAN BE ACCESSED FROM ANY CORNER OF THE WORLD IT IS POSSIBLE TO BUILD BRANDS, MANAGE CUSTOMER LISTS, TRACK MARKETING CAMPAIGNS AS WELL A S DO QUICK SEARCH FOR RETRIEVAL OF RELEVANT DOCUMENTS - AND MUCH MORE - ALL FROM A SINGLE POINT SOURCE I.T.A. NO.7113/MUM/2016 CO. NO.62/MUM/2018 9 | P A G E DMS IT IS A DATABASE MARKETING SERVICE WHICH PROVIDES DATABASE MANAGEMENT AND E - MARKETING SOLUTIONS DMS HAS ACCURATE, WELL - IDENTIFIED DATABASES OF 600,000 KEY INDUSTRIAL AND BUSINESS PROFESSIONAL WHO ARE DECISION MAKERS AND INFLUENCERS. DMS DELIVER FOCUSED TARGETING OF MARKETING CAMPAIGNS FOR CUSTOMERS IN A COST EFFECTIVE MANNER. SOME SERVICES ARE: SNAIL MAIL MARKETING PERMISSION BASED E - M AIL MARKETING TARGETED SMS MARKETING DCM - DEMAND CHAIN MANAGEMENT AN EFFICIENT DEMAND CHAIN OF AN ORGANIZATION CONSISTING OF GEOGRAPHICALLY DISTRIBUTED CHANNEL PARTNERS LIKE C&F AGENTS, DISTRIBUTORS, RETAILERS, STOCKISTS, SUPERSTOCKISTS, WHOLESELL ERS, ETC., ALLOWS IT TO BE HIGHLY PROACTIVE TO CUSTOMER PREFERENCES THE DCM SERVICE PROVIDES AUTOMATION OF ALL CHANNEL PARTNERS WITH ALL ENTITIES FULLY INTEGRATED BY ONLINE CONNECTIVITY SECOND SCHEDULE VAARAD VENTURES LIMITED LIST OF MOVABLE ASSETS SR. NO . DESCRPTION NOS 1. COMPUTERS - DESKTOPS 10 NOS IBALL BRAND 2. COMPUTERS PERIPHERALS 4 NOS THIRD SCHEDULE VAARAD VENTURES LIMITED LIST OF EMPLOYEES SR. NO. . NAME DESIGNATION 1. MR. BHAVESH PATEL SR. SOFTWARE DEVELOPER 2. MR. MEHUL GURJAR PROJECT LEADER 3. MR. HRISHIKESH PATEL PROJECT LEADER I.T.A. NO.7113/MUM/2016 CO. NO.62/MUM/2018 10 | P A G E 7.2 . T HE ASSESSEE DID NOT SUBMITTED VALUATION REPO RT OF THE SOFTWARE UNDERTAKING OF VARAAD VENTURES LIMITED ACQUIRED BY IT VIDE AGREEMENT DATED 30.09.2011. THE ASSESSEE ALSO DID NOT SUBMITTED ANY VALUATION REPORT JUSTIFYING ISSUE OF EQUITY SHARES OF THE ASSESSEE COMPANY OF FACE VALUE OF RS. 1 EACH ON A SH ARE PREMIUM OF RS. 19 PER EQUITY SHARES. THESE DOCUMENTS WERE SPECIFICALLY ASKED BY THE AO BUT THE ASSESSEE CHOSE NOT TO FILE THE SAME BEFORE THE AO. 7.3 D URING THE COURSE OF ASSESSMENT PROCEEDING , T HERE WERE TWO REASONS WHICH PROMPTED THE AO TO MAKE ADDITION S TO THE INCOME OF THE ASSESSEE TO THE TUNE OF RS. 7,04,90,000/ - BY TREATING SHARE PREMIUM AS SHAM TRANSACTION , FIRSTLY INGREDIENTS OF SECTION 68 WERE NOT COMPLIED WITH AS THE ASSESSEE DID NOT FURNISH DETAILS OF VALUATION OF THE BUSINESS ACQUIRED BY IT FROM ITS PARENT COMPANY VARAAD VENTURES LIMITED FOR TOTAL CONSIDERATION OF RS. 7,42,00,000/ - ON SLUMP SALE BASIS ON GOING CONCERN BASIS . THUS, IT WAS IN NUTSHELL HELD THAT GENUINENESS OF THE VALUATION OF THE TRANSACTION OF ACQUISITION OF THE SOFTWAR E UNDERTAKING FOR RS. 7,42,00,000/ - BY THE ASSESSEE FROM ITS PARENT COMPANY NAMELY M/S VARAAD VENTURES LIMITED COULD NOT BE PROVED BY THE ASSESSEE . THUS, THE TRANSACTION WAS HELD TO BE NOT PROVED TO BE A GENUINE TRANSACTION WHICH WAS HELD TO BE HIT BY PR OVISIONS OF SECTION 68 OF THE 1961 ACT. SECONDLY, THE ADDITIONS WERE MADE BY THE AO FOR THE REASONS THAT SHARE PREMIUM OF RS. 19 PER EQUITY SHARE AS AGAINST THE FACE VALUE OF EQUITY S HARE OF RS. 1 PER SHARE WAS NOT JUSTIFIABLE AND SUPPORTED BY ITS EARNIN GS BECAUSE EPS OF THE ASSESSEE WAS INFACT NEGATIVE. THE ASSESSEE ALSO DID NOT SUBMITTED ANY JUSTIFICATION FOR ISSUE OF EQUITY SHARES OF FACE VALUE OF RS. 1 PER SHARE ON SHARE PREMIUM OF RS. 19 PER SHARE. WE HAVE OBSERVED SO FAR AS ADDITION MADE ON THE GR OUND THAT SHARE PREMIUM OF RS. 19 PER EQUITY SHARE BEING EXCESSIVE VIS - A - VIS ITS FAIR VALUE BASED ON EARNINGS/INTRINSIC WORTH ETC WAS RIGHTLY DISCARDED BY LD. CIT(A) ON THE GROUNDS THAT ISSUANCE OF SHARE S AT SHARE PREMIUM WAS A COMMERCIAL DECISION BETWEEN TWO CONTRACTING PARTIES WHEREIN THERE IS NO BAR UNDER COMPANIES ACT AS WELL OTHER LAWS FOR ISSUING SHARES AT PREMIUM AT CONTRACTED VALUE MORE - SO PROVISIONS OF SECTION 56 (2)(VIIB) OF THE 1961 ACT WAS INSERTED IN THE STATUTE BY FINANCE ACT 2012 W.E.F. 01.04 .2013 AND PRESENTLY WE ARE CONCERN ED WITH ASSESSMENT YEAR 2012 - 13 WHICH IS PRIOR TO I.T.A. NO.7113/MUM/2016 CO. NO.62/MUM/2018 11 | P A G E INSERTION OF SECTION 56(2)(VIIB) AND HENCE 56(2) (VIIB) CANNOT BE INVOKED FOR THE IMPUGNED ASSESSMENT YEAR . 7.4 NO W COMING TO THE NEXT CO UNT ON WHICH ADDITIONS WERE MADE BY INVOCATION OF PROVISIONS OF S ECTION 68 OF THE 1961 ACT. SECTION 68 OF THE 1961 ACT CREATES A DEEMING FICTION WHEN ANY SUM IS FOUND CREDITED IN THE BOOKS OF ACCOUNTS OF THE TAX - PAYER, THEN THE TAX - PAYER WILL BE REQUIRED TO SATISFY THREE INGREDIENTS OF SECTION 68 OF THE 1961 ACT VIZ. TO PROVE IDENTITY AND CREDITWORTHINESS OF THE CREDITOR AND TO PROVE GENUINENESS OF THE TRANSACTION , OTHERWISE SAID CREDIT AS IS FOUND TO BE APPEARING IN BOOKS OF ACCOUNTS OF THE ASSESSEE WILL BE DEEMED TO BE INCOME OF THE AS SESSEE . THE ONUS IS ON THE ASSESSEE TO PROVE AFORESAID THREE INGREDIENTS OF SECTION 68 OF THE 1961 ACT . I T IS NOT NECESSARY FOR INVOCATION OF SECTION 6 8 OF THE 1961 ACT THAT CREDIT AS IS APPEARING IN BOOKS OF ACCOUNTS IS SUPPORTED BY INFLOW OF CASH OR BAN KING TRANSACTION , AS SECTION 68 WILL GET INVOKED WHEN ANY SUM IS FOUND CREDITED IN BOOKS OF ACCOUNTS WHICH COULD BE A CREDIT ENTRY APPEARING TOWARDS PAYABLE TO CREDITORS FOR PURCHASES MADE BY THE TAX - PAYER . REFERENCE IS DRAWN TO THE DECISION OF HONBLE MA DHYA PRADESH HIGH COURT IN THE CASE OF V.I.S.P. PRIVATE LIMITED V. CIT(2004) 265 ITR 202(MP), WHEREIN HONBLE HIGH COURT HELD AS UNDER: 1. THIS APPEAL UNDER SECTION 260A OF THE INCOME - TAX ACT, 1961 (HEREINAFTER FOR SHORT, 'THE ACT OF 1961'), HAS BEEN PRE FERRED BY THE ASSESSEE AGAINST THE ORDER PASSED BY THE INCOME - TAX APPELLATE TRIBUNAL ON APRIL 15, 2002, IN I.T. APPEAL NO. 402 (INDORE) OF 1995 PERTAINING TO THE ASSESSMENT YEAR 1990 - 91. 2. BEFORE THE INCOME - TAX APPELLATE TRIBUNAL THE ASSESSEE HAD RAISED T HREE GROUNDS. THE APPELLATE TRIBUNAL DID NOT AGREE WITH THE CONTENTION OF THE ASSESSEE WITH REGARD TO GROUND NO. 2 (WRONGLY MENTIONED AS GROUND NO. 3 IN PARA 9), AND AFFIRMED THE FINDING OF FACT, RECORDED BY THE ASSESSING OFFICER AND THE COMMISSIONER OF IN COME - TAX (APPEALS) WITH REGARD TO THE ADDITION OF RS. 72,100 UNDER SECTION 68 OF THE ACT. THE ASSESSEE DERIVED THE INCOME FROM PURCHASE AND SALES OF SINTEX WATER TANKS, ETC., AGENTS OF SINTER PLAST CONTAINERS, KALOL, AND BHOPAL. DURING THE RELEVANT FINANCI AL YEAR, THE ASSESSEE CLAIMED THAT IT HAD PURCHASED WATER TANKS FROM SURYA SERVICES OF RS. 72,100 AND MADE THE ENTRY IN THE BOOKS OF ACCOUNT AS A LIABILITY. THE ASSESSING OFFICER, AFTER RECORDING THE STATEMENT OF MR. ANURAG SHRIVASTAVA, ONE OF THE PARTNERS OF THE ASSESSEE, WHO WAS ALLEGED TO BE THE PROPRIETOR OF SURYA SERVICES AND AFTER EXAMINING THE BANK ACCOUNTS OF THE SURYA SERVICES, FOUND THAT THE WHOLE TRANSACTION OF ALLEGED PURCHASE BY THE ASSESSEE TO BE BOGUS AND THE ENTRY MADE IN THE TRADE ACCOUNT A S A LIABILITY, WAS, I.T.A. NO.7113/MUM/2016 CO. NO.62/MUM/2018 12 | P A G E ONLY A PAPER ENTRY. THIS FINDING OF FACT HAS BEEN AFFIRMED BY THE COMMISSIONER OF INCOME - TAX (APPEALS). THE COMMISSIONER OF INCOME - TAX (APPEALS) HAS HELD AS UNDER : '3. THE LEARNED AUTHORISED REPRESENTATIVE HAS CONTENDED THAT MR. ANURAG SHRIVASTAVA, ONE OF THE PARTNERS, IS A PROPRIETOR OF M/S. SURYA SERVICES, FROM WHOM GOODS WORTH RS. 72,100 WERE PURCHASED BY THE APPELLANT AND MR. SHRIVASTAVA IS RESPONSIBLE FOR THE SALES AND ALL THE TRANSACTIONS OF THE APPELLANT. SINCE MR. SHRIVASTAVA IS ALWAYS ON TOUR AND AWAY FROM INDORE, HE DOES NOT HAVE ANY KNOWLEDGE OF OFFICE ADMINISTRATION, ACCOUNTS, FINANCE, ETC., AND THESE THINGS ARE BEING LOOKED AFTER BY MR. INIT SHRIVASTAVA. ABOUT THE POSSESSION OF TANKS OF VARIOUS SIZES WITH M/S. SURYA SERVICES FROM WHOM THE APPELLANT HAD PURCHASED GOODS WORTH RS. 72,100, IT IS EXPLAINED THAT DATE OF BILL IS APRIL 3, 1980, AND DELIVERY CHALLAN IS DATED MARCH 28, 1989, AND MARCH 30, 1989, AND CHEQUE DATED FOR PAYMENT IS APRIL 15, 1989. ABOUT THE CHEQUE OF THE ASS ESSING OFFICER THAT THERE WAS PRE - DATING OF INVOICES FROM SURYA SERVICES, IT IS POINTED OUT THAT THE BILL WAS MADE ON TRANSFER OF GOODS AND PURCHASES BILLS WERE RECEIVED AFTERWARDS AND THE GOODS WERE IN THE POSSESSION OF M/S. SURYA SERVICES THROUGH DELIVER Y CHALLAN WHICH CAN BE VERIFIED FROM M/S. SINTEX PLAST CONTAINERS, KALOL (N.G.). AFTER CONSIDERING THE FACTS AND SUBMISSIONS OF THE APPELLANT IT IS NOTICED THAT M/S. SURYA SERVICES BELONGING TO THE SAME GROUP WAS NOT ASSESSED TO TAX AND ITS CREDENTIALS ARE DOUBTFUL AND THE BOOKS OF ACCOUNT ARE STATED TO BE LOST WHEN THE APPELLANT WAS CORNERED ABOUT THE GOODS ALLEGEDLY PURCHASED FROM THAT SISTER CONCERN. FOR THE REASONS DISCUSSED IN DETAIL BY THE ASSESSING OFFICER ADDITION OF RS. 72,100 IS IN ORDER AND UPHEL D.' AGAINST THIS FINDING OF FACT, THE ASSESSEE PREFERRED AN APPEAL BEFORE THE INCOME - TAX APPELLATE TRIBUNAL, WHO, AFTER EXAMINING THE DOCUMENTS IN DETAIL, FOUND, THAT NO INFIRMITY CAN BE ATTRIBUTED TO THE ORDER OF THE ASSESSING OFFICER FROM THE COMMISSIONE R OF INCOME - TAX (APPEALS). THUS, THE CONTENTION OF THE ASSESSEE WAS REJECTED. 3. LEARNED COUNSEL, APPEARING FOR THE ASSESSEE PLACING RELIANCE ON THE DECISION OF THE SUPREME COURT IN BALADIN RAM V. CIT [1969] 71 ITR 427 AND THE DECISIONS OF THE BOMBAY AND ALLAHABAD HIGH COURTS IN CIT V. BHAICHAND H. GANDHI [1983] 141 ITR 67 1 AND SUNDAR LAL JAIN V. CIT [1979] 117 ITR 316 , RESPECTIVELY, CONTENDED, THAT SECTION 68 OF THE ACT CAN BE INVOKED ONLY, WHEN, THE BOOKS O F ACCOUNT OF THE ASSESSEE SHOW THE CASH ENTRY AND NOT OTHERWISE. 4. WE ARE AFRAID, SUCH A NARROW AND RESTRICTED INTERPRETATION OF THE PROVISIONS, CONTAINED IN SECTION 68 WAS ADVANCED BY LEARNED COUNSEL FOR THE APPELLANT/ASSESSEE, CANNOT BE ACCEPTED. IF TH E LIABILITY SHOWN IN THE SAID ACCOUNT, WHICH, IS FOUND TO BE BOGUS AND IN THE ABSENCE OF ANY PLAUSIBLE AND REASONABLE EXPLANATION OFFERED BY THE ASSESSEE, THEN, CERTAINLY, THE AMOUNT CAN BE ADDED TOWARDS THE INCOME OF ASSESSEE AND BROUGHT TO TAX IN THE HAN DS OF THE ASSESSEE. I.T.A. NO.7113/MUM/2016 CO. NO.62/MUM/2018 13 | P A G E 7.5 THUS, IT IS CLEAR FROM ABOVE DECISION THAT RESTRICTED MEANING CANNOT BE ASSIGNED TO PROVISIONS OF SECTION 68 OF THE 1961 ACT TO CREDIT APPEARING IN BOOKS OF ACCOUNTS SUPPORTED BY CASH OR INFLOW THROUGH BANKING CHANNEL WHEREAS ANY SUM FOUND CREDITED IN THE BOOKS OF ACCOUNTS OF THE ASSESSEE EVEN THOUGH IT IS NOT SUPPORTED BY MOVEMENT OF MONEY BY WAY OF INFLOW OF CASH OR THROUGH B ANKING TRANSACTION WILL BE HIT BY SECTION 68 OF THE 1961 ACT. IN THE INSTANT CASE, W E HA VE OBSERVED THAT RS. 7,42,00,000/ - WAS FOUND TO BE CREDITED IN THE BOOKS OF ACCOUNTS OF THE ASSESSEE DURING THE YEAR UNDER CONSIDERATION TOWARDS EQUITY SHARE CAPITAL AND SHARE PREMIUM FOR WHICH CONSIDERATION FOR ISSUE OF SAID EQUITY SHARES AT PREMIUM WAS ACQUISITION OF SOFTWARE DIVISION BY ASSESSEE COMPANY FROM ITS PARENT COMPANY NAMELY VARAAD VENTURES LIMITED . THUS, THE ASSESSEE WAS REQUIRED TO SATISFY THREE INGREDIE NTS OF SECTION 68 OF THE 1961 ACT . THE IDENTITY OF THE PARENT COMPANY M/S VARAAD VENTURES LIMITED IS NOT IN DISPUTE AS IT IS DULY REGISTERED WITH MINISTRY OF CORPORATE AFFAIRS AND ITS AUDIT ED FINANCIAL STATEMENT S FOR THE PREVIOUS YEAR ENDED 31.03.2012 WAS DULY FILED BY THE ASSESSEE AS WELL FORM NO. 2 SUBMITTED WITH MINISTRY OF CORPORATE AFFAIRS INTIMATING ABOUT ALLOTMENT OF EQUITY SHARE S IN FAVOUR OF VARAAD VENTURES LIMITED AND HENCE UNDOUBTEDLY IDENTITY OF THE CREDITOR STOOD PROVED. HOWEVER, DESPITE AO CALLING UPON THE ASSESSEE TO FILE THE VALUATION REPORT OF THE SOFTWARE UNDERTAKING ACQUIRED BY IT FROM SAID VARAAD VENTURES L IMITED TO JUSTIFY THE GENUINENESS OF THE ENTIRE TRANSACTION OF SLUMP SALE OF SOFTWARE BUSINESS OF THE PARENT COMPANY TO THE ASSESSE E FOR RS. 7,42,00,000/ - , THE SAME WAS NOT FILED BY THE ASSESSEE BEFORE THE AUTHORITIES BELOW AS WELL AS IT IS NOT FILED EVEN BEFORE US. THE ITEMISED VALUATION OF THE TANGIBLE AND INTANGIBLES ACQUIRED BY THE ASSESSEE IS ALSO NOT ON RECORD. THUS GENUINENESS OF THE TRANSACTION FOR PURCHASE OF SOFTWARE UNDERTAKING COULD NOT BE ESTABLISHED BY THE ASSESSEE FOR WHICH THE ONUS WAS ON THE ASSESSEE . IT I S PERTINENT TO MENTION THAT THE ACQUISITION OF SOFTWARE DIVISION OF VARAAD VENTURES LIMITED FOR RS. 7,42,00,000/ - ON SLUMP SALE BASIS AS GOING CONCERN WELL CONSEQUENTLY LEAD TO CAPITALISATION OF THE INTANGIBLES AND TANGIBLE ASSETS ACQUIRED BY THE ASSESSEE IN ITS BOOKS OF ACCOUNTS AND WILL ENTAIL CLAIM BY THE ASSESSEE OF DEDUCTION OF DEPRECIATION ON THESE TANGIBLE AND INTANGIBLE ASSETS SO ACQUIRED IN THE COMING YEARS INCLUDING YEAR UNDER CONSIDERATION AND HENCE IT IS VITAL THAT GENUINENESS OF THE TRANSACTION IS REQUIRED TO BE PROVED AS IS REQUIRED UNDER SECTION 68 OF THE 1961 ACT . WE I.T.A. NO.7113/MUM/2016 CO. NO.62/MUM/2018 14 | P A G E HAVE PERUSED THE APPEL LATE ORDER PASSED BY LEARNED CIT(A) WHEREIN IT HAS BEEN HELD BY LEARNED CIT(A) THAT ALL THREE INGREDIENTS OF SECTION 68 OF THE 1961 ACT STOOD PROVED BY THE ASSESSEE WITH RESPECT TO TRANSACTION FOR PURCHASE OF SOFTWARE DIVISION OF VARAAD VENTURES LIMITED. W E COULD NOT FIND ANY BASIS/REASONING IN THE APPELLATE ORDER OF THE LEARNED CIT(A) FOR ARRIVING AT THE CONCLUSION THAT HOW GENUINENESS OF THE TRANSACTION FOR PURCHASE OF SOFTWARE UNDERTAKING OF VARAAD VENTURES LIMITED STOOD ACCEPTED BY THE LEARNED CIT(A). T HERE IS A LSO AN PERVERSE FINDING OF FACT RECORDED BY LEARNED CIT(A) THAT THE TRANSACTION FOR PURCHASE OF SOFTWARE DIVISION OF VARRAD VENTURES LIMITED WERE ROUTED/PA ID THROUGH BANKING CHANNELS WHICH IS ABSOLUTELY INCORRECT FINDING OF FACT RECORDED BY LEARNE D CIT(A) AS THE CONSIDERATION STOOD PAID BY WAY OF ISSUANCE BY THE ASSESSEE OF 37,10,000 EQUITY SHARES OF FACE VALUE OF RS 1 EACH AT SHARE PREMIUM OF RS. 19 PER SHARE , AGGREGATING TO RS. 7,42,00,000/ - IN FAVOUR OF VARAAD VENTURES LIMITED . NOR THERE IS ANY REASONING GIVEN BY LEARNED CIT(A) AS TO THE BASIS ON WHICH IT WAS ACCEPTED THAT THE CREDITWORTHINESS OF VARAAD VENTURES STOOD PROVED. IT IS TIME AND AGAIN HELD BY SUPERIOR COURTS THAT IN JUDICIAL ORDERS, THE REASONING FOR ARRIVING AT THE CONCLUSIONS /DECI SION IS VERY IMPORTANT TO ENABLE HIGHER COURTS TO SEE WHAT REASONS WERE ADOPTED BY LOWER AUTHORITIES TO ARRIVE A PARTICULAR DECISION. UNFORTUNATELY, WE DID NOT GET THE BENEFIT OF REASONING IN THE APPELLATE ORDER PASSED BY LEARNED CIT(A) IN ACCEPTING THE CO NTENTION OF THE ASSESSEE AS TO THE GENUINENESS OF TRANSACTION FOR PURCHASE OF SOFTWARE DIVISION OF VARAAD VENTURES LIMITED FOR RS. 7,42,00,000/ - . NO DETAILS AS TO BASIS FOR ARRIVING VALUATION OF SOFTWARE UNDERTAKING OF VARAAD VENTURES LIMITED AT RS. 7,42, 00,000/ - IS FILED BY THE ASSESSEE . THE VALUATION REPORT CALLED BY THE AO WAS NOT FURNISHED BY THE ASSESSEE , AND EVEN BEFORE US INDEPENDENT VALUATION REPORT OF THE EXPERTS VALUING SOFTWARE DIVISION OF VARAAD VENTURES LIMITED SO ACQUIRED BY THE ASSESSEE IS NOT FILED . UNDER THESE CIRCUMSTANCES WE ARE INCLINE D TO SET ASIDE AND RESTORE THE MA TTER BACK TO THE FILE OF THE LEARNED CIT(A) FOR FRESH ADJUDICATION OF THE ISSUE IN ACCORDANCE WITH LAW . THE ASSESSEE IS DIRECTED TO PRODUCE VALUATION REPORT BY INDEPENDENT EXPERTS OF THE SOFTWARE D IVISION ACQUIRED BY THE ASSESSEE JUSTIFYING THE BASIS ON WHICH PRICE OF RS. 7,42,00,000/ - WAS ARRIVED AT TO ACQUIRE THE SAME ON SLUMP SALE BASIS AND ALSO TO PRODUCE OTHER RELEVANT EVIDENCES TO PROVE THAT THE TRANSACTION WAS GENUIN E AND ALSO TO PROVE THE CREDITWORTHINESS OF THE PARENT CO MPANY M/S. VARAAD VENTURE LTD. . NEEDLESS I.T.A. NO.7113/MUM/2016 CO. NO.62/MUM/2018 15 | P A G E TO SAY THAT LEARNED CIT(A) SHALL GAVE PROPER AND ADEQUATE OPPORTUNITY OF BEING HEARD TO THE ASSESSEE IN ACCORDANCE WITH PRINCIPLE OF NATURAL JUSTICE IN ACCORDANCE WITH LAW . T HE LEARNED CIT(A) SHALL ADMIT ALL RELEVANT EVIDENCES AND EXPLANATION S SUBMITTED BY THE ASSESSEE DURING THE COURSE OF DE - NOVO APPELLATE PRO CE E DING IN ITS DEFENCE AND SHALL ADJUDICATE THE ISSUES ON MERITS IN ACCORDAN CE WITH LAW. NEEDLESS TO SAY THAT POWERS OF LEARNED CIT(A) ARE CO - TERMINUS WITH POWERS OF THE AO. AT THIS STAGE , WE WOULD LIKE TO REFER TO RECENT DECISION OF HONBLE SUPREME COURT IN THE CASE OF PCIT V. NRA IRON AND STEEL PRIVATE LIMITED REPORTED IN (2019 ) 412 ITR 161(SC). THE APPEAL OF THE REVENUE AND CO FILED BY THE ASSESSEE ARE ALLOWED FOR STATISTICAL PURPOSES. WE ORDER ACCORDINGLY. 8. THE APPEAL OF THE R EVENUE AS WELL CO FILED BY THE ASSESSEE ARE ALLOWED FOR STATISTICAL PURPOSES . ORDER PRONOUNCED I N THE OPEN COURT ON 0 2 . 0 5 .2019 0 2 . 0 5 .2019 S D / - S D / - (MAHAVIR SINGH ) (RAMIT KOCHAR) JUDICIAL MEMBER ACCOUNTANT MEMBER MUMBAI, DATED: 0 2 . 0 5 .2019 NISHANT VERMA SR. PRIVATE SECRETARY COPY TO 1 . THE APPELLANT 2 . THE RESPONDENT 3 . THE CIT(A) CONCERNED, MUMBAI 4 . THE CIT - CONCERNED, MUMBAI 5 . THE DR BENCH, 6 . MASTER FILE I.T.A. NO.7113/MUM/2016 CO. NO.62/MUM/2018 16 | P A G E // TUE COPY// BY ORDER DY/ASSTT. REGISTRAR ITAT, MUMBAI