The Dy. CIT 4(1), Indore V. M/s. Vijayshri Packaging Ltd. , Indore

ITA 721/Ind/2019

• Counselvise Citation: [2021] 109 COUNSELVISE.COM (IT) 4154 (ITAT-INDORE)
• Duration Of Justice: 1 year(s) 7 month(s) 19 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 09-02-2021
• Appeal Filed By: Department
• Order Result: Allowed
• Bench Allotted: DB
• Next Hearing Date: 10-12-2020
• Assessment Year: 2015-2016
• Appeal Filed On: 20-06-2019
• Result in Favour of: Revenue
• Court: TRIBUNAL
• Department Lawyers: LALCHAND; S AJAY TULSIYAN; RANJAN
• Assessee Lawyers: WAY OF UNSECURED LOANS
• Keywords: Unexplained cash credit; Income from undisclosed sources; Opportunity of cross examination; Source of fund; Question of law; Fair market value; Validity of assessment; Accommodation entries; Scheme of amalgamation; Capital receipt; Onus to prove; TDS; Bogus
• Section: 131; 68; 6; 56; 143(3); 142(1); 195; 201; 251; 143(2); 13; 22; 20

Judgement Text

, , IN THE INCOME TAX APPELLATE TRIBUNAL, INDORE BENCH, INDORE BEFORE HON'BLE KUL BHARAT, JUDICIAL MEMBER AND HON'BLE MANISH BORAD, ACCOUNTANT MEMBER REVENUE BY SHRI LAL CHAND , CIT APPELLANT BY S/ SHRI AJAY TULSIYAN & RANJAN AGRAWAL, CAS DATE OF HEARING 12.01.2021 DATE OF PRONOUNCEMENT 09 .02.2021 O R D E R PER MANISH BORAD, AM. THE ABOVE CAPTIONED APPEAL AND CROSS OBJECTION FILE D AT THE INSTANCE OF REVENUE AND ASSESSEE RESPECTIVELY PERTA INING TO ITA NO.721/IND/2019 ASSESSMENT YEAR: 2015-16 DCIT-4(1), INDORE VS. M/S. VIJAYSHRI PACKAGING LIMITED, 34-C/2, INDUSTRIAL ESTATE LAXMI BAI NAGAR, INDORE (REVENUE ) (APPELLANT) PAN NO.AA B C V0048B C.O.NO.11/IND/2020 ASSESSMENT YEAR: 2015-16 M/S. VIJAYSHRI PACKAGING LIMITED, 34-C/2, INDUSTRIAL ESTATE LAXMI BAI NAGAR, INDORE VS. DCIT-4(1), INDORE (APPELLANT) (REVENUE ) PAN NO. AABCV0048B ITA NO.721/IND/2019 & C.O.11/IND/2020 VIJAYSHRI PACKAGING LIMITED. 2 ASSESSMENT YEAR 2015-16 IS DIRECTED AGAINST THE ORD ER OF COMMISSIONER OF INCOME TAX (APPEALS)-III (IN SHORT LD.CIT], INDORE DATED 30.03.2019 WHICH IS ARISING OUT OF THE ORDER U/S 143(3) OF THE INCOME TAX ACT 1961(IN SHORT THE ACT) DATED 28.12 .2017, FRAMED BY ACIT-4(1), INDORE. 2. REVENUE HAS RAISED FOLLOWING GROUNDS OF APPEAL : - 1. WHETHER THE LD.(CIT(A) ERRED IN GROSSLY IN ADJUDICA TING THE CREDITWORTHINESS OF THE SUBSCRIBER ENTITIES AND THE GENUINENESS OF T HE TRANSACTIONS, AND IN NOT APPRECIATING THE FACT THAT THE ULTIMATE SOURCE O! F UNDS UTILIZED TO SUBSCRIBE TO THE SHARES OF THE ASSESSEE COMPANY BY THE SUBSCRIBE R ENTITIES WERE SECURITIES PREMIUM RECEIVED AT A SUBSTANTIAL PREMIUM DURING THEIR EXISTENCE IN WEST BENGAL DESPITE BEING PAPER ENTITIES WITH NO BUSINESS ACTIVITIES, COMPLETE LACK OF WORTH IN TERMS OF FINANCIAL PERFOR MANCE, AND NO ASSETS TO JUSTIFY RECEIPT OF SUCH LARGE SHARE PREMIUM 2. WHETHER THE LD. CIT(A) ERRED GROSSLY IN ADJUDICATIN G THE CREDITWORTHINESS OF THE SUBSCRIBER HUF ENTITY AND THE GENUINENESS OF TH E TRANSACTIONS, AND IN NOT APPRECIATING THE I FACT THAT THE SUBSCRIBER HUF ENTITY FAILED TO EXPLAIN THE SOURCE OF SOURCE, ETC. OF THE FUNDS UTILIZED FOR IN VESTING IN THE ASSESSEE COMPANY. 3. WHETHER THE LD. CITCA) ERRED GROSSLY IN APPRECIATI NG THE SIGNIFICANCE OF THE PROVISO TO SECTION 68 OF THE IT ACT, 1961 WHICH STA TES THAT THE EXPLANATION OF THE CREDITOR, ESPECIALLY REGARDING HER CREDITWORTHI NESS, AND THE GENUINENESS OF THE TRANSACTIONS, NEED TO BE, 'IN THE OPINION O F THE ASSESSING OFFICER, SATISFACTORY', WHICH IT WASN'T FOUND TO BE IN THIS CASE. 4. WHETHER THE LD.CIT(A) IGNORED LANDMARK 'DECISION S OF THE APEX COURT SUCH ITA NO.721/IND/2019 & C.O.11/IND/2020 VIJAYSHRI PACKAGING LIMITED. 3 AS COMMISSIONER OF INCOME-TAX VS. DURGA PRASAD MOR E (214 ITR 801), SUMATI DAYAL VS. COMMISSIONER OF INCOME-TAX 1995 A IR 2109, MCDOWELL & CO. LTD. VS THE COMMERCIAL TAX OFFICER 1986 AIR 649 , AND NRA IRON & STEEL PVT. LTD VS PCIT(2019),AND THEIR APPLICABILITY IN T HE CASE ON HAND. 5. THE APPELLANT CRAVES LEAVE TO ADD TO OR DEDUCT F ROM OR OTHERWISE AMEND THE ABOVE GROUNDS OF APPEAL. 3. ASSESSEE HAS RAISED FOLLOWING CROSS OBJECTIONS: - 1. THAT ON THE FACTS AND IN THE CIRCUMSTANCES, THE LD. CIT(A) ERRED IN NOT QUASHING THE ORDER PASSED BY LD. A.O U/S 143(3) OF THE ACT, WHICH IS BAD IN LAW AND VOID-AB-INITIO, SINCE IT IS PASSED: A) WITHOUT FOLLOWING THE GUIDELINES ISSUED BY THE C BDT IN RESPECT OF LIMITED SCRUTINY AND CONVERTED THE LIMITED SCRUTINY IN TO F ULL SCRUTINY WITHOUT PRIOR APPROVAL OF THE HIGHER AUTHORITY. B) WITHOUT VERIFYING THE SUBMISSIONS AND EVIDENCES SUBMITTED BY APPELLANT. C) WITHOUT PROVIDING THE STATEMENTS RECORDED U/S13 1 AND WITHOUT GIVING OPPORTUNITY OF CROSS EXAMINATION. 2. THAT ON THE FACTS AND IN THE CIRCUMSTANCES, THE LD. CIT(A) ERRED IN NOT APPRECIATING THE CONTENTION OF THE APPELLANT THAT THE AMOUNT RECEIVED AS SHARE CAPITAL AND SHARE PREMIUM IS CAPITAL RECEIPT AND THEREFORE CANNOT BE ADDED U/S 68 OF THE ACT. 3. THAT THE APPELLANT CRAVES LEAVE TO ADD, TO ALTER , AMEND, MODIFY, SUBSTITUTE, DELETE AND/OR RESCIND ALL OR ANY OF THE GROUNDS OF APPEAL. 3. BRIEF FACTS OF THE CASE AS CULLED OUT FROM THE R ECORDS AND AS NARRATED BY THE LD. COUNSEL FOR THE ASSESSEE ARE TH AT THE ASSESSEE IS A LIMITED COMPANY ENGAGED IN THE BUSINESS OF MAN UFACTURING OF PACKAGING ITEMS. E-RETURN OF INCOME WAS FILED ON 31 .10.2015 ITA NO.721/IND/2019 & C.O.11/IND/2020 VIJAYSHRI PACKAGING LIMITED. 4 DECLARING INCOME AT RS. 81,04,162/-. CASE WAS SELEC TED FOR LIMITED SCRUTINY THROUGH COMPUTER ASSESS SCRUTINY SYSTEM(CA SS) FOLLOWED BY SERVING OF NOTICES U/S 143(2) & 142(1) OF THE AC T. NECESSARY INFORMATION WAS CALLED WHICH WAS DULY SUBMITTED. TH E DETAILS FILED WERE EXAMINED BY THE ASSESSING OFFICER. DURING THE YEAR ASSESSEE RECEIVED RS.3,47,01,225/- TOWARDS SHARE CAPITAL AND SHARE PREMIUM FROM THREE SUBSCRIBERS. HE WAS SATISFIED WI TH THE VALUATION OF THE SHARE PREMIUM CHARGED BY THE ASSES SEE AND OBSERVED THAT THE PROVISIONS OF SECTION 56(1)(VIIB) ARE NOT APPLICABLE ON THE ALLEGED TRANSACTION. HOWEVER, LD. ASSESSING OFFICER WAS NOT SATISFIED WITH THE GENUINENESS OF THE TRANSACTION A ND CREDITWORTHINESS OF THE SUBSCRIBERS AS UNDERSTOOD W ITHIN THE MEANING OF THE PROVISIONS OF SECTION 68 OF THE ACT. LD. ASSESSING OFFICER COMPLETED THE ASSESSMENT AFTER MAKING ADDIT ION FOR THE ALLEGED BOGUS SHARE PREMIUM/SHARE CAPITAL U/S 68 OF THE ACT AT RS. 3,47,01,225/- AND ASSESSED THE INCOME AT RS.4,28,05 ,387/-. THE ADDITION OF BOGUS SHARE PREMIUM/SHARE CAPITAL U/S 6 8 OF THE ACT WAS MADE TOWARDS THE FOLLOWING AMOUNT: NAME NO. OF SHARES SUBSCRIBED AMOUNT PAID @ RS.75/- PER SHARE ITA NO.721/IND/2019 & C.O.11/IND/2020 VIJAYSHRI PACKAGING LIMITED. 5 PRITESH JAIN HUF 93,333 69,99,975 ARMAAN BARTER PVT. LTD. 76,000 57,00,000 PUSHPAK FINCON PVT. LTD. 2,93,350 2,20,01,250 TOTAL 3,47,01,225/- 4. AGGRIEVED, ASSESSEE PREFERRED AN APPEAL BEFORE T HE LD. CIT(A) AND FILED DETAILED SUBMISSIONS ALONG WITH GIVING TRAIL OF TRANSACTION SO AS TO PROVE SOURCE OF SHARE OF THE SHARE CAPITAL AN D CAPITAL PREMIUM RECEIVED. DETAILS WERE ALSO FILED FOR THE TWO SHARE HOLDERS WHICH WERE PRIVATE LIMITED COMPANIES AND WERE EXISTING SHAREHO LDERS AND 3 RD INVESTOR NAMELY PRITESH JAIN HUF WAS RELATIVE OF TH E ASSESSEE HAVING SUFFICIENT FINANCIAL SOURCES. RELIANCE WAS A LSO PLACED ON PLETHORA OF JUDGMENTS. LD. CIT(A) AFTER CONSIDERING THE SAME AND ANALYSING THE FACTS IN THE LIGHT OF THE SETTLED JUD ICIAL PRECEDENCE WAS OF THE VIEW THAT LD. ASSESSING OFFICER WAS NOT JUST IFIED IN MAKING THE ADDITION U/S 68 OF THE ACT AT RS.3,47,01,225/-. THUS, ON MERIT LD. CIT(A) ALLOWED THE GROUNDS RAISED BY THE ASSESS EE. HOWEVER, ASSESSEE COULD NOT SUCCEED ON THE LEGAL GROUNDS CHA LLENGING THE VALIDITY OF ASSESSMENT PROCEEDINGS ON THE GROUND TH AT THE ASSESSING OFFICER HAS EXCEEDED HIS JURISDICTION AND HAS GONE BEYOND THE POWERS PROVIDED FOR CONDUCTING THE LIMITED SCRUTINY AS HE DID NOT TOOK NECESSARY APPROVAL FROM THE CONCERNED AUTHORIT IES. ITA NO.721/IND/2019 & C.O.11/IND/2020 VIJAYSHRI PACKAGING LIMITED. 6 5. AGGRIEVED REVENUE IS NOW IN APPEAL CHALLENGING T HE FINDING OF LD. CIT(A) ON MERITS DELETING THE ADDITIONS U/S 68 OF T HE ACT AND THE ASSESSEE HAS RAISED CROSS OBJECTION WITH REGARD TO THE DISMISSAL OF LEGAL GROUND BY LD. CIT(A). WE WILL FIRST TAKE UP REVENUES APPEAL CHALLENGING THE DELETION OF ADDITION U/S 68 OF THE ACT AT RS.3,47,01,225/-. 6. LD. DR VEHEMENTLY ARGUED SUPPORTING THE ORDER OF THE LD. ASSESSING OFFICER AND ALSO REFERRED TO THE PAPER BO OK FILED ON 10.12.2020 WHICH MERELY CONTAINED COPY OF THE ASSES SMENT ORDER AND COPY OF THE IMPUGNED ORDER. 7. PER CONTRA LD. COUNSEL FOR THE ASSESSEE, APART F ROM RELYING ON THE DETAILED FINDING OF THE LD. CIT(A) AND THE DECISION S REFERRED THEREIN ALSO TOOK THROUGH PAPER BOOK FILED ON 02.11.2020 RU NNING FROM PAGE NO.1 TO 327 WHICH CONTAINED AUDITED FINANCIAL STATEMENT OF THE ASSESSEE COMPANY, VALUATION OF SHARES AS PER SECTIO N 56(2)(VIIB) OF THE ACT, VARIOUS DOCUMENTS TO PROVE THE CREDITWORTH INESS OF THE THREE INVESTORS AND GENUINENESS OF THE TRANSACTIONS AND THE WRITTEN SUBMISSIONS FILED BEFORE FIRST APPELLATE AUTHORITY. LD. COUNSEL FOR THE ASSESSEE ALSO REFERRED THROUGH THE WRITTEN SYNO PSIS CONTAINED ITA NO.721/IND/2019 & C.O.11/IND/2020 VIJAYSHRI PACKAGING LIMITED. 7 DETAILS OF THE CORPORATE SUBSCRIBER AND THE 3 RD SUBSCRIBER PRITESH JAIN HUF, DETAILS OF TRAIL OF TRANSACTION TO PROVE THE SOURCE OF SHARE OF THE FUNDS USED FOR SUBSCRIBING SHARE CAPITAL/SHA RE PREMIUM AND ALSO REFERRED TO VARIOUS INSTANCES WHEREIN ADVERSE BELIEF OR OPINION HAS BEEN FORMED BY THE LD. ASSESSING OFFICER WHICH ARE NEITHER AS PER FACTS OF THE CASE NOR THEY HAVE BEEN PROPERLY E STABLISHED. A SUMMARY OF ALL SUCH OBSERVATIONS AND THE ASSESSEES RESPONSE ARE TABULATED AS UNDER: PARA NO. & PAGE NO. OF ORDER AOS OBSERVATIONS ASSESSEES RESPONSE PARA 2.6 PAGE 6 ROUTE ADOPTED BY THE ASSESSEE FOR ENSURING THE INFLOW OF ITS UNACCOUNTED FUNDS BACK INTO BOOKS. THE ENTIRE AMOUNT RECEIVED FROM THE SHARE APPLICANTS WAS ALREADY APPEARING IN THE BOOKS OF THE ASSESSEE AND ITS SISTER CONCERNS. ALL SUCH CONCERNS ARE REGULARLY ASSESSED TO TAX AND THERE WAS NO UNACCOUNTED FUND. ALL THE SUBSCRIBER HAVE ALREADY INVESTED IN THE ASSESSEE IN THE EARLIER YEARS. PARA 4.2 PAGE 10 SHRI JAIN & FAMILY CHOSE TO INVEST IN A NON DESCRIPT COMPANY SITUATED IN FAR FLUNG KOLKATA WITH NO BUSINESS ACTIVITY OR FUTURE PROSPECTS, THAT TOO AT SUCH A HIGH PREMIUM, REMAINED A MYSTERY. SHRI RAJENDRA JAIN & FAMILY HAVE INVESTED IN THE COMPANY DURING THE FY 2008-09 LOOKING TO THE FACT THAT THE COMPANY WAS A REGISTERED NBFC WHICH IS INSTRUMENTAL IN INTER GROUP MOVEMENT OF FUNDS. SHRI RAJENDRA JAIN & FAMILY HAS INVESTED IN THE SHARES OF THE COMPANY AND THEREFORE THERE APPEARS TO BE NO REASON TO CONSIDER THE AMOUNT AS UNACCOUNTED FUNDS. PARA 4.3 PAGE 11 ONLY A PAPER COMPANY WHICH HAS BEEN RUNNING SOLELY FOR THE COMPANY IS A REGISTERED NBFC WHOSE MAJOR SOURCE OF ITA NO.721/IND/2019 & C.O.11/IND/2020 VIJAYSHRI PACKAGING LIMITED. 8 THE PURPOSE OF LAUNDERING THE PROMOTERS UNACCOUNTED WEALTH AND ROUTING HIS UNACCOUNTED MONEY BACK INTO THE BOOKS OF THE ASSESSEE COMPANY. INCOME IS INTEREST ON LOANS & ADVANCES. NO FRESH FUNDS HAVE BEEN RECEIVED IN THE COMPANY SINCE LAST 7-8 YEARS AND THEREFORE NO AMOUNT WAS BROUGHT IN BOOKS. NO EVIDENCE / INFORMATION WAS GIVEN AS TO WHICH MONEY WAS LAUNDERED OR HOW IT WAS LAUNDERED. PARA 4.8 PAGE 13 EXIST ENTIRELY FOR THE PURPOSE O F PROVIDING ACCOMMODATION ENTRIES THE RATIONALE BEHIND ARRIVING AT SUCH CONCLUSION WAS NOT GIVEN. FROM PERUSAL OF THE COMPUTATION INTEREST INCOME FROM THE ASSESSEE, PRITESH JAIN & ACCRUAL ESTATE & DEVELOPERS (A RELATED CONCERN). THE SHARE APPLICANT IS A HUF OF THE DIRECTOR OF THE ASSESSEE. ONLY SOURCE OF INCOME WAS INTEREST INCOME FROM ASSOCIATED CONCERNS AND CAPITAL GAIN ON WHICH DUE TAXES HAVE BEEN PAID AND THEREFORE THERE IS NO UNDISCLOSED INCOME. PARA 5.1 PAGE 14 SIMPLY WITH THE INTENTION OF ROUTING UNACCOUNTED FUNDS BACK INTO THE BOOKS OF THE ASSESSE COMPANY THE AMOUNTS HAVE BEEN INVESTED BY SHRI RAJENDRA JAIN AND FAMILY IN EARLIER YEARS AND NO FUNDS WERE RECEIVED FROM OTHER AVENUES AND THEREFORE THERE ARE NO UNACCOUNTED FUNDS. THE ENTIRE FUNDS OF THE SHARE APPLICANT CONCERNS WERE ALREADY APPEARING IN THE BOOKS OF ASSESSEE AND SISTER CONCERN IN THE NATURE OF UNSECURED LOAN AND ONLY FOR MEETING THE DEBT EQUITY RATIO FOR AVAILING BANK FINANCE FOR EXPANSION, THE NOMENCLATURE WAS CHANGED FROM UNSECURED LOAN TO CAPITAL. PARA 5.3 PAGE 15 IT IS THE ASSESSEES RESPONSIBILITY AND ONUS TO EXPLAIN NOT JUST THE SOURCE OF FUNDS, BUT THE SOURCE OF SOURCE, THE SOURCE OF SOURCE OF SOURCE AND SO ON PROVISO TO SECTION 68 REQUIRES EXPLANATION AND ESTABLISHMENT OF SOURCE OF SOURCE AND DOES NOT TRAVELS BEYOND THAT POINT. IN THE INSTANCE CASE THE TRANSACTIONS HAVE BEEN EXPLAINED AND SOURCE HAS BEEN EXPLAINED FOR MORE THAN ITA NO.721/IND/2019 & C.O.11/IND/2020 VIJAYSHRI PACKAGING LIMITED. 9 THREE SOURCES FOR WHICH NO ADVERSE OBSERVATION FOUNDS. THE IMMEDIATE SOURCE AND ITS SOURCE HAVE BEEN EXAMINED BY THE AO AND HAVE BEEN ACCEPTED IN PARA 5.4 AND 5.7 THE ONLY CONTENTION OF THE LD. AO WAS INVESTMENT MADE BY SHRI RAJENDRA JAIN AND FAMILY IN THE COMPANIES BASED AT KOLKATA DURING THE FY 07-08. IF ANY COGNIZANCE OF THE INVESTMENT IS REQUIRED TO BE TAKEN, IT IS REQUIRED TO BE TAKEN IN THE HANDS OF THE SHRI RAJENDRA JAIN & FAMILY AND THAT TOO IN THE FY 2007-08 AND NOT IN THE HANDS OF THE ASSESSEE IN THE CURRENT YEAR. PARA 5.4 PAGE 15 SOURCE OF THIS MONEY COMING FROM SARTHAK DEVELOPERS WAS ALSO NOT PROPERLY EXPLAINED BY THE ASSESSEE COMPANY AND THE IDENTITY, GENUINENESS AND CREDITWORTHINESS OF THE TRANSACTION WAS ALSO NOT ESTABLISHED. THE QUERY WAS NOT RAISED TO THE ASSESSEE DURING THE ASSESSMENT PROCEEDINGS. THE AMOUNT RECEIVED FROM SARTHAK WAS REPAYMENT OF LOAN GIVEN TO THE PARTY ON 21.07.14 FOR AN AMOUNT OF RS.45,00,000/- ON WHICH INTEREST OF RS.2,70,000/- HAS BEEN CHARGED, TDS OF RS.27,000/- HAS BEEN DEDUCTED AND REFLECTED IN THE COMPUTATION OF INCOME. ESTABLISHING IDENTITY, GENUINENESS AND CREDITWORTHINESS IS NOT APPLICABLE AS TRANSACTION IS REPAYMENT OF LOAN GIVEN AND NOT LOAN TAKEN. PARA 5.4 PAGE 16 THUS, PROVISO TO SECTION 68 IS CLEAR: THE CREDITWORTHINESS AND GENUINENESS OF THE SUBSCRIBER ENTITIES NEEDS TO BE PROVED IN THE YEAR UNDER CONSIDERATION, THE YEAR IN WHICH THEY ARE PAYING THAT MONEY. THE LD. AO HAS VERY CATEGORICALLY STATED THAT THE TRANSACTIONS NEEDS TO BE TESTED WITHIN THE VIGOR OF SEC.68 DURING THE YEAR IN WHICH TRANSACTION IS EXECUTED. THE ASSESSEE AND THE SHARE SUBSCRIBER HAVE FURNISHED THE SOURCE OF MONEY, SOURCE OF SOURCE OF MONEY AND SOURCE OF SOURCE OF SOURCE OF MONEY FOR MORE THAN THREE TRANSACTIONS AND OTHER DETAILS FOR THE YEAR UNDER ITA NO.721/IND/2019 & C.O.11/IND/2020 VIJAYSHRI PACKAGING LIMITED. 10 CONSIDERATION. DESPITE OF THE ABOVE, THE LD. AO IS SEEKING RATIONALE BEHIND INVESTMENT BY MADE SHRI RAJENDRA JAIN & FAMILY IN THESE COMPANIES WAY BACK IN FY 07-08 WHICH IS NOT REQUIRED BY THE LAW. PARA 5.5 PAGE 17 FURTHER APPREHENSION, SUCH AS RS.90 LAKH GIVEN OUT AS ADVANCE FOR PURCHASE OF PROPERTY. WHAT WAS THIS PURCHASE OF PROPERTY? NO EXPLANATION OR CORROBORATIVE EVIDENCE WAS PROVIDED AT ANY STAGE THE OBSERVATION MADE IS PATENTLY WRONG AND CONTRARY TO THE ACTUAL STATE. DETAIL OF THE TRANSACTION FOR ADVANCE OF THE PROPERTY WAS FURNISHED DURING THE ASSESSMENT PROCEEDINGS VIDE REPLY DT. 27.12.17 IN PARA NO.2.11 (APPEARING AT PAGE NO.84 OF PAPER BOOK). BESIDES THE WRITTEN EXPLANATION, DOCUMENT FOR BOOKING THE PROPERTY AS WELL AS CANCELLATION AGREEMENT WERE ALSO FURNISHED WHICH HAVE BEEN COMPLETELY OVERLOOKED. PARA 5.7 PAGE 17 ARMAAN HAD ALSO RECEIVED RS.55 LAKHS FROM ACCRUAL EARLIER IN THE YEAR, WHICH WAS THEN GIVEN OUT TO AN ENTITY CALLED SILVER SKY PARK. NONE OF THESE TRANSACTION/ SOURCE OF FUND/ FUND FLOWS HAVE BEEN EXPLAINED. THE QUERY WAS NOT RAISED TO THE ASSESSEE DURING THE ASSESSMENT PROCEEDINGS. EVEN OTHERWISE FROM THE PERUSAL OF THE BANK STATEMENT OF ARMAAN APPEARING AT PAGE NO.200 OF PAPER BOOK IT IS EVIDENT THAT THE AMOUNT OF RS.50 LACS WAS GIVEN TO SILVER SKY PARK ON 07.10.14 BY ARMAAN WHICH WAS RETURNED BACK ON 13.01.15. PARA 5.11 PAGE 20 MERELY OUTLINED THE FLOW OF FUNDS FROM VIJAYSHRI TO RR PACKAGING TO THE HUF BACK TO VIJAYSHRI. BUT THERE WAS NO MENTION OR DETAIL OF THE SOURCE OF RS.76 LAKH LENT BY THE HUF TO RR PACKAGING THE HUF LENT THE AMOUNT TO R R PACKAGING IN EARLIER YEAR AND THE SAID LOAN WAS REPAID BY RR PACKAGING TO THE HUF DURING THIS YEAR. PARA 5.12 PAGE 21 FINALLY, WHEN WE LOOK AT THE SOURCE, SOURCE OF SOURCE, AND SO ON, OF THE FUNDS MADE AVAILABLE TO PUSHPAK FINCON, ARMAAN BARTER AND PRITESH JAIN HUF, THEY CAN ALL BE THE LD. AO IN VERY CLEAR AND IN UNAMBIGUOUS TERMS HAS STATED THAT NOT ONLY THE SOURCE OF THE FUNDS, BUT THE SOURCE OF SOURCE OF FUND HAS ALSO BEEN EXPLAINED. ITA NO.721/IND/2019 & C.O.11/IND/2020 VIJAYSHRI PACKAGING LIMITED. 11 TRACED EVENTUALLY TO THE FUNDS OF THE ASSESSEE COMPANY OR ITS SISTER CONCERN M/S. VIJAYSHRI NOTE BOOK PVT. LTD. HOWEVER IT IS NOT CLEAR HOW SUCH FUNDS WERE AVAILABLE TO THESE COMPANIES IT HAS ALSO BEEN ACCEPTED THAT THE FUNDS WERE LYING IN THE ASSESSEE AND THE SISTER CONCERN. PARA 5.12 PAGE 21 A LONG TRAIL HAS BEEN SUGGESTED DURING THE COURSE OF THE ASSESSMENT PROCEEDINGS REGARDING FUNDS FLOWING TO THE ASSESSEE COMPANY AND TO VIJASYHRI NOTE BOOKS THROUGH SEVERAL LAYERS, ORIGINALLY LINKED TO SALE OF SAME LAND. BUT THIS CLAIMS WERE NOT SUBSTANTIATED THE OBSERVATION IS WRONG AND NOT AS PER THE FACTS OF THE CASE. DETAILS IN RESPECT OF TRANSACTION OF LAND WAS EXPLAINED VIDE REPLY DT. 29.12.17 WHICH IS APPEARING AT PAGE NO.79 OF PAPER BOOK. IT WAS EXPLAINED THAT THE FAMILY MEMBERS HAD EARNED A CAPITAL GAIN OF RS.3,40,31,055/- ON SALE OF LAND AND THE AMOUNT SO EARNED AND RECEIVED DURING THE YEAR WAS UTILIZED FOR MAKING ADVANCES TO VARIOUS GROUP ENTITIES. THEREFORE, THIS ALLEGATION OF THE LEARNED AO IS NOT CORRECT. 8. WE HAVE HEARD RIVAL CONTENTIONS AND PERUSED THE RECORDS PLACED BEFORE US AND CAREFULLY GONE THROUGH THE DECISIONS REFERRED BY THE LOWER AUTHORITIES AS WELL AS THE ASSESSEE IN ITS WR ITTEN SUBMISSIONS FILED BEFORE THE LD. CIT(A). THE REVENUES SOLE GRI EVANCE IS AGAINST THE FINDING OF LD. CIT(A) DELETING THE ADDITION OF RS. 3,47,01,225/- MADE BY THE ASSESSING OFFICER INVOKING THE PROVISIO NS OF SECTION 68 OF THE ACT WITH REGARD TO THE CASH CREDIT RECEIVED DURING THE YEAR IN THE FORM OF EQUITY SHARE CAPITAL AND SHARE PREMIUM RECEIVED FROM FOLLOWING PARTIES: ITA NO.721/IND/2019 & C.O.11/IND/2020 VIJAYSHRI PACKAGING LIMITED. 12 NAME NO. OF SHARES SUBSCRIBED AMOUNT PAID @ RS.75/- PER SHARE PRITESH JAIN HUF 93,333 69,99,975 ARMAAN BARTER PVT. LTD. 76,000 57,00,000 PUSHPAK FINCON PVT. LTD. 2,93,350 2,20,01,250 TOTAL 3,47,01,225/- 9. WE OBSERVE THAT THE ASSESSEE PROVIDED THE DETAIL S OF ABOVE STATED THREE SUBSCRIBERS INCLUDING THEIR ADDRESS, PERMANEN T ACCOUNT NO., AUDITED FINANCIAL STATEMENT, BANK STATEMENT, SALE O F TRANSACTION TO PROVE SOURCE OF SHARE, INFORMATION THAT COMPANY SUB SCRIBERS WERE EXISTING SHAREHOLDERS AND THE 3 RD SUBSCRIBER NAMELY PRITESH JAIN IS A RELATIVE OF ONE OF THE DIRECTOR OF ASSESSEE COMPA NY. ASSESSEE ALSO PLACED RELIANCE ON VARIOUS DECISIONS FILED BEFORE F IRST APPELLATE AUTHORITY WHO AFTER CONSIDERING ALL THE ABOVE REFER RED FACTS AND THE SETTLED JUDICIAL PRECEDENCE, DELETED THE IMPUGNED A DDITION OBSERVING AS UNDER: 7.0 GROUND NO. 2 & 3: ADDITION ON ACCOUNT OF SHARE CAPITAL AND SHARE PREMIUM OF RS.3,47,OL,225 /- RECEIVED BY CONSIDERING IT AS NON GENUINE U/S 68 OF THE ACT. 7.1 I HAVE CONSIDERED THE ENTIRE FACTS AND CIRCUMST ANCES OF THE CASE AND CAREFULLY CONSIDERED THE FINDING OF A.O., RIVAL SUBMISSION OF THE APPELLANT AND EVIDENCE ON RECORD. 7.2 DURING THE YEAR UNDER CONSIDERATION THE APPELLA NT CO HAS ALLOTTED 462683 EQUITY SHARES OF RS. 10 EACH AT A P REMIUM OF RS. 65.00 PER SHARE TO THE 3 PARTIES AND RECEIVED T OTAL SHARE PREMIUM OF RS. 3,00,74,295/-, DETAILS OF WHICH ARE REPRODUCED ON PAGE 4 AND 5 OF THE ASSESSMENT ORDER. FOR THE DETAILED OBSERVATIONS MADE IN THE ASSESSMENT ORDER THE AO TREATED THE SAME AS UNEXPLAINED CASH CREDIT AND MAD E ITA NO.721/IND/2019 & C.O.11/IND/2020 VIJAYSHRI PACKAGING LIMITED. 13 ADDITION U/S 68. HOWEVER, IN MY CONSIDERED VIEW THE ADDITION SO- MADE CANNOT BE SUSTAINED AND IS DIRECTED TO BE DELETED FOR THE DETAILED REASONS DISCUSSED BELOW. 7.3 SHARES HAVE BEEN ISSUED TO GROUP CONCEMS AND EX ISTING SHAREHOLDERS- THE APPELLANT COMPANY HAD ISSUED SHAR ES TO. VARIOUS PERSONS UNDER THE SCHEME OF AMALGAMATION APPROVED BY THE HONORABLE HIGH COURT OF KOLKATTA AND INDORE. APART FROM THE SHARES SO ISSUED, THE APPELL ANT COMPANY HAD ALSO ISSUED SHARES TO THREE SHARE APPLI CANTS VIZ M/S ARMAAN BARTER PVT. LTD., PUSHPAK FINCON PVT. LTD. AND PRITESH JAIN HUF DURING THE YEAR. M/S. ARMAAN BARTER PVT. LTD. & PUSHPAK FINCON PVT. LTD. ARE COMPANIES IN WHICH DIRECTOR OF THE APPE1LANT COMPANY ARE ALSO DIRECTOR . FURTHER, PRITESH JAIN HUF, IS HUF OF PRITESH JAIN, WHO IS AL SO ONE OF THE DIRECTOR OF THE APPELLANT COMPANY THE TWO COMP ANIES WHICH HAVE SUBSCRIBED TO THE SHARE APPLICATION VIZ M/S. ARMAAN BARTER PVT. LTD., PUSHPAK PINCON PVT, LTD. WERE ALREADY THE SHARE HOLDERS OF THE APPELLANT COMPANY BEFORE THE ISSUANCE OF FRESH SHARES UNDER CONSIDERATION. F URTHER, PRITESH JAIN IS A DIRECTOR AND SHAREHOLDER OF THE A PPELLANT COMPANY AND HAS SUBSCRIBED TO THE SHARE APPLICATION OF THE APPELLANT COMPANY IN THE CAPACITY OF KARTA OF PRITESH JAIN HUF. NONE OF THE PARTY FROM WHOM THE SHARE APPLICAT ION MONEY WAS RECEIVED WAS A THIRD PARTY OR AN OUTSIDER . THESE FACTS ARE UNDISPUTED. 7.4 IDENTITY OF THE SHARE APPLICANT ESTABLISHED - A LL THE SHARE APPLICANTS ARE PART OF THE GROUP OF THE APPELLANT W HICH FACT HAS BEEN STATED BY THE APPELLANT COMPANY DURING THE ASSESSMENT PROCEEDINGS AND HAS BEEN WELL ACCEPTED BY THE AO. TWO OUT OF THE THREE SHARE APPLICANTS WERE EXISTING SHAREHOLDERS OF THE APPELLANT AND THE THIRD IS A HUF OF ONE OF THE DIRECTOR OF THE APPELLANT. ON THE PERUSAL OF THE SUBMISSION, IT IS EVIDENT THAT DURING THE ASSESSMEN T PROCEEDINGS, THE AO HAS ISSUED SUMMONS TO THE ABOVE SHARE APPLICANTS, WHO APPEARED AND GAVE THEIR STATEMENT A ND CONFIRMED THE TRANSACTIONS WITH THE APPELLANT COMPA NY. 7.5 THE IDENTITY OF THE SHARE APPLICANTS WAS ALSO ESTABLISHED THROUGH THE PAN CARD, INCOME TAX RETURN AND THE BALANCE SHEET OF THE SHARE APPLICANT AS ON 31.03.14 & 31.03.15. COPIES OF MASTER STATUS OF COMPANIES WITH REGISTRAR OF COMPANIES WAS ALSO FURNISHED WHICH ESTABLISHES THAT THE COMPANIES WERE IN EXISTENCE AN D ARE REPRESENTED BY MR. RAJENDRA .IAIN AND MR. PRITESH J AIN, DIRECTORS OF THE APPELLANT COMPANY. VARIOUS OTHER D OCUMENTS LIKE MEMORANDUM OF ASSOCIATION, ARTICLES OF ASSOCIA TION, ITA NO.721/IND/2019 & C.O.11/IND/2020 VIJAYSHRI PACKAGING LIMITED. 14 BANK STATEMENTS REFLECTING MOVEMENT OF FUNDS, ORDER PASSED BY THE REGIONAL DIRECTOR, COMPANY LAW BOARD WEST BE NGAL FOR SHIFTING OF THE REGISTERED OFFICE OF THE SHARE APPLICANT COMPANIES TO THE STATE OF MADHYA PRADESH, CERTIFICA TE OF REGISTRATION AS NON-BANKING FINANCE COMPANY (NBFC) ISSUED BY THE RESERVE BANK OF LNDIA IN CASE OF M/S. PUSHPAK FINCON PVT. LTD. AND THE STATUTORY REGISTER AS REQUIRED TO BE MAINTAINED UNDER THE COMPANIES ACT WERE FURNISHED W HICH ESTABLISHES THAT THE SHARE APPLICANT ARE IN EXISTEN CE FOR A CONSIDERABLE TIME PERIOD AND ARE OPERATIONAL. 7.6 CREDITWORTHINESS OF THE SHARE APPLICANT - THE V ARIOUS SHARE APPLICANTS WHO HAVE SUBSCRIBED TO THE SHARE C APITAL OF THE APPELLANT COMPANY WERE CAPABLE OF DOING SO, IS ESTABLISHED THROUGH THEIR RESPECTIVE BALANCE SHEET AND INCOME TAX RETURN. THE SALIENT FACTORS WHICH ESTABL ISH THE CREDITWORTHINESS OF THE PARTIES ARE AS UNDER: A) ARMAAN BARTER PVT. LTD. - THE COMPANY WAS INCORPORA TED IN MARCH 2007 AND WAS TAKEN OVER BY SHRI RAJENDRA JAIN , DIRECTOR OF THE APPELLANT COMPANY AND HIS FAMILY ME MBERS DURING THE FY 08-09. ON THE PERUSAL OF THE AUDITED BALANCE SHEET OF THE COMPANY AS ON 31.03.2014, IT IS SEEN T HAT THE COMPANY HAD SUBSCRIBED CAPITAL OF RS.11,00,000/- AN D ACCUMULATED RESERVE OF RS.89,37,394/- I.E. A TOTAL FUNDS OF RS.1,OO,37,394/-. OUT OF THE TOTAL NET OWNED FUNDS OF RS.100.37 LACS, AT THE BEGINNING OF THIS YEAR, THE COMPANY HAD ALREADY INVESTED IN THE SHARE CAPITAL OF THE AP PELLANT COMPANY A SUM OF RS.42.00 LACS AND AN AMOUNT OF RS. SS.99 LACS WAS INVESTED IN M/ S. ACCRUAL ESTATE & DEVELOPERS, A FIRM IN WHICH THE COMPANY IS A PARTNER. IN ORDER TO FURTHER SUBSCRIBE TO THE SHARE CAPITAL OF THE APPELLANT COM PANY, THE INVESTOR HAD REDUCED ITS INVESTMENT IN THE PARTNERS HIP FIRM M/S. ACCRUAL ESTATE & DEVELOPERS AND WITHDREW AN AMOUNT OF RS.57 LACS AND HAD UTILISED THE SAME FOR MAKING INVESTMENT IN THE APPELLANT. THUS, AT THE END OF TH E YEAR OUT OF THE TOTAL FUNDS OF RS.I00.07 LACS, AN AMOUNT OF RS.97 LACS WAS INVESTED IN SHARE CAPITAL OF THE APPELLANT FIRM . THE COMPANY IS AN INVESTMENT ARM AND THE ONLY ACTIVITY UNDERTAKEN IS INVESTMENT IN THE GROUP CONCERN. THE APPELLANT HAS ALSO EMPHASIZED THE FACT THAT THIS SHARE APPLIC ANT HAS NOT INTRODUCED ANY FRESH FUNDS EITHER IN THE FORM O F SHARE CAPITAL OR IN THE FORM OF LOANS DURING LAST TEN YEA RS, WHICH FACT FURTHER SUBSTANTIATE THE CREDITWORTHINESS OF T HE SHARE APPLICANT. B)PUSHPAK FINCON PVT. LTD. - THE COMPANY WAS INCORP ORATED IN MARCH 1993 AND WAS TAKEN OVER BY SHRI RAJENDRA J AIN, ITA NO.721/IND/2019 & C.O.11/IND/2020 VIJAYSHRI PACKAGING LIMITED. 15 DIRECTOR OF THE APPELLANT COMPANY AND HIS FAMILY ME MBERS DURING THE FY 08-09. THE COMPANY IS REGISTERED AS N ON- BANKING FINANCE COMPANY (NBFC) WITH RESERVE BANK OF INDIA WHICH HAS ACKNOWLEDGED THE CHANGE OF MANAGEME NT. VARIOUS DOCUMENTS HAVE BEEN FILED WHICH ESTABLISHES THAT SHRI RAJENDRA JAIN AND HIS FAMILY MEMBERS HAVE BEEN CONTROLLING THE COMPANY SINCE TAKING OVER THE COMPA NY. ON THE PERUSAL OF THE AUDITED BALANCE SHEET OF THE COM PANY AS ON 31.03.2014, IT IS SEEN THAT THE COMPANY HAD SUBS CRIBED CAPITAL OF RS.11,OO,OOO/- AND ACCUMULATED RESERVE OF RS.3,60,09,238/- I.E. A TOTAL FUNDS OF RS.4,29,69,238/-. OUT OF THE TOTAL FUNDS OF RS.429.69. LACS, AT THE BEGIN NING OF THE YEAR THE COMPANY HAD ALREADY INVESTED IN THE SHARE CAPITAL OF THE APPELLANT COMPANY A SUM OF RS.120.00 LACS AN D A SUM OF RS.92 LACS IN THE SHARE CAPITAL OF M/S, VIJA YSHRI NOTE BOOKS M. LTD. AND ALSO AN AMOUNT OF RS.51.11 LACS WAS INVESTED IN M/S. ACCRUAL ESTATE. & DEVELOPERS AND M/ S. SHRI RAJ ENTERPRISES, PARTNERSHIP FIRMS IN WHICH THE COMPANY IS A PARTNER. FURTHER, THE COMPANY HAS GIVE N AN AMOUNT OF RS.159.69 LACS AS LOANS AND ADVANCE ON WH ICH INTEREST INCOME HAS BEEN EARNED. FOR THE FY 13-14, THE COMPANY HAD EARNED AN INCOME OF RS.6,59,148/- BEFOR E TAX. IN ORDER TO SUBSCRIBE TO THE SHARE APPLICATION OF THE APPELLANT COMPANY, THE INVESTOR HAD REDUCED THE INVESTMENT IN THE PARTNERSHIP FIRM AND FUNDS GIVEN ON LOANS BY RS.220.01 LACS AND HAD UTILISED THE SAME FOR. MA KING INVESTMENT IN THE APPELLANT COMPANY. THE COMPANY HA S EARNED AN INCOME OF RS.4,70,331/BEFORE TAX FOR THE YEAR UNDER CONSIDERATION. THE APPELLANT HAS ALSO EMPHASI ZED THE FACT THAT THIS SHARE APPLICANT HAS ALSO NOT INT RODUCED ANY FRESH FUNDS EITHER IN THE FORM OF SHARE CAPITAL OR IN THE FORM OF LOANS DURING LAST TEN YEARS, WHICH FACT FUR THER SUBSTANTIATE THE CREDITWORTHINESS OF THE SHARE APPL ICANT. C) PRITESH JAIN HUF - COPY OF INCOME TAX RETURN AND COMPUTATION OF INCOME OF THE SHARE APPLICANT FOR TH E AY 15- 16 HAS BEEN FURNISHED. ON THE PERUSAL OF THE COMPUT ATION OF INCOME, IT IS SEEN THAT IT HAS EARNED INTEREST I NCOME OF RS.14,57,177/- FOR THE YEAR UNDER CONSIDERATION WITHOUT ANY INTEREST OUTGO. IT HAS ALSO EARNED LONG TERM CA PITAL GAINS OF RS. 37,40,741 J -. THIS SHARE APPLICANT IS THE HUF OF THE DIRECTOR OF THE APPELLANT AND THE APPELLANT STA TED THAT IT IS REGULARLY FILING ITS RETURN OF INCOME. CONSIDERI NG THESE FACTS, THE CREDITWORTHINESS OF THIS SHARE APPLICANT ALSO STANDS ESTABLISHED. 7.7 APART FROM THE BALANCE SHEET OF THE TWO SHARE A PPLICANT ITA NO.721/IND/2019 & C.O.11/IND/2020 VIJAYSHRI PACKAGING LIMITED. 16 COMPANIES AND INCOME TAX RETURNS OF ALL THE SHARE APPLICANTS, THE APPELLANT COMPANY HAS FURNISHED COP IES OF BANK STATEMENT OF ALL THE SUBSCRIBERS, FROM THE PER USAL OF WHICH IT IS REFLECTED THAT THE FUNDS HAVE BEEN FLOW N FROM THE ASSOCIATE CONCERNS AND THERE WAS NO FRESH FUNDS RECEIVED FROM ANY THIRD PARTY BY THESE INVESTORS FO R MAKING INVESTMENT IN THE APPELLANT. FURTHER THERE WERE NO INSTANCES OF CASH DEPOSIT IN THE BANK. 7.8 TRANSACTION ESTABLISHED AS GENUINE - THE APPELL ANT COMPANY HAS FURNISHED A PICTORIAL CHART AS WELL AS A TABULAR CHART OF THE MOVEMENT OF FUNDS TO AND FROM THE SHARE APPLICANT~ WHICH HAS ALSO BEEN ABSTRACTED BY THE AO IN HIS ASSESSMENT ORDER AND ACCEPTED AS WELL WHICH REFLECT S THAT THE AMOUNT WHICH WERE UTILIZED FOR. SUBSCRIBING TO THE SHARE APPLICATION WAS ALREADY LYING WITH THE APPELLANT CO MPANY OR ITS SISTER CONCERN M/S. VIJAYSHRI NOTE BOOKS PVT. L TD. THE APPELLANT COMPANY AND BOTH THE IMPUGNED SHARE HOLDE R COMPANIES WERE PARTNER IN M/S. ACCRUAL ESTATE & DEVELOPERS AND M/S. RAJ ENTERPRISES. THESE FIRMS ARE UNDER THE SAME MANAGEMENT, IN WHICH THE SURPLUS FUNDS AVAILABLE WI TH THE SHARE APPLICANT COMPANIES WERE INVESTED EARLIER AS THEIR CAPITAL. THE PARTNERSHIP FIRM IN EARLIER YEAR HAD G IVEN FUNDS TO THE APPELLANT COMPANY (WHICH IS ALSO A PARTNER I N THE FIRM] AND WAS REFLECTED AS OVERDRAWN AMOUNT FROM THE FIRM IN THE AUDITED ACCOUNTS OF THE APPELLANT COMPANY. THE APPE LLANT COMPANY WAS IN THE PROCESS OF EXPANSION AND IN ORD ER TO MEET THE REQUIREMENT OF THE BANKS FOR INCREASING TH E SHARE CAPITAL, STRENGTHENING THE DEBT EQUITY RATIO, THE A PPELLANT COMPANY RETURNED THE FUNDS BACK TO THE FIRM, WHICH IN TURN RETURNED THE CAPITAL INVESTMENT MADE BY ITS PARTNER S I.E. THE SUBSCRIBER COMPANIES. THESE COMPANIES IN TURN INVES TED IN THE SHARE APPLICATION OF THE APPELLANT COMPANY. 7.9 COPIES OF LEDGER ACCOUNT OF VARIOUS CONCERNS WE RE FURNISHED WHICH CONFIRMS THE FLOW OF FUNDS WITHIN T HE GROUP INTERSE. IT IS ALSO EVIDENT THAT ALL THE TRANSACTIO NS HAVE BEEN MADE THROUGH BANKING CHANNELS. BANK STATEMENT OF THE APPELLANT COMPANY AND ALSO OF THE FIRMS IN WHICH IN VESTMENT WAS MADE EARLIER AND ALSO OF THE SHARE APPLICANT CO MPANIES WERE FURNISHED WHICH ESTABLISHED THAT THE FUNDS FOR THE SHARE APPLICATION FLOWED FROM THE APPELLANT COMPANY ITSELF. THESE FACTS ARE ALSO ACCEPTED IN THE ASSESSMENT ORD ER. 7.10 THE APPELLANT HAS REITERATED THAT NO FRESH CAP ITAL HAS BEEN RECEIVED IN THE BALANCE SHEET OF THE VARIOUS ASSOCIATE CONCERNS AND THE SHARE APPLICANT COMPANIES AND THER EFORE THE QUESTION OF INTRODUCING ANY UNACCOUNTED MONEY I N THE ITA NO.721/IND/2019 & C.O.11/IND/2020 VIJAYSHRI PACKAGING LIMITED. 17 SYSTEM CANNOT ARISE AT ALL AS THE FUNDS WHICH WAS L YING IN THE SYSTEM WAS ONLY UTILIZED FOR SUBSCRIBING THE SH ARE CAPITAL OF THE APPELLANT. 7.11 ON THE PROCEDURAL FRONT ALSO, THE TRANSACTIONS WERE ESTABLISHED AS GENUINE THROUGH FURNISHING OF VARIOU S DOCUMENTS. COPIES OF THE RESOLUTION PASSED BY THE A PPELLANT COMPANY FOR INCREASING THE SHARE CAPITAL, COPIES OF RESOLUTION PASSED BY THE SHARE SUBSCRIBER COMPANIES TO INVEST IN THE SHARES OF THE APPELLANT COMPANY, SHARE APPLICATION FORM FOR SUBSCRIBING TO THE SHARES, COPIES OF PAN CARD, COPIES OF AUDITED BALANCE SHEET, COPIES OF INCOME TAX RETURN, COPIES OF BANK STATEMENT REFLECTING THE FUNDS FOR INVESTMENT IN THE SHARE APPLICANT WERE FURNISHED. IT IS SEEN THAT THE TRANSACTION HAS BEEN ENTERED AFTER FOLLOWING THE VA RIOUS FORMALITIES REQUIRED 'UNDER THE STATUE AND HAVE NOT BEEN UNDERTAKEN IN HASTE OR IN VIOLATION OF ANY LAW. 7.12 PREMIUM CHARGED BY THE APPELLANT COMPANY WAS JUSTIFIED - THE APPELLANT COMPANY HAS ISSUED SHARES TO THE SHARE APPLICANTS' AT A PRICE OF RS.75 PER SHARE WHI CH COMPRISES OF FACE VALUE OF SHARES OF RS.10/- AND TH E PREMIUM OF RS.65. IN ORDER TO ARRIVE AT THE PRICE FOR THE ISSUANCE OF THE SHARES, VALUATION AS REQUIRED U/S 56(2)(VIIB) R.W.R. RULE -11UA(2) WAS FURNISHED DURI NG THE ASSESSMENT PROCEEDINGS WHICH WORKS OUT TO RS.76.06 PER SHARE AS ON 31.03.14. THUS, THE PRICE AT WHICH SHAR ES HAVE BEEN ALLOTTED BY THE APPELLANT COMPANY IS IN ACCORDANCE WITH THE PROVISIONS 1PF INCOME TAX ACT AND THE RULES FRAMED THERE UNDER AND THE AMOUNT SO RECEIVED WAS NOT EXCESSIVE. THE VALUATION WORKED OUT BY THE APPE LLANT STAND ACCEPTED BY THE AO IN PARA 2.2 OF THE ASSESSM ENT ORDER AND THERE ARE NO ADVERSE COMMENTS IN THIS REG ARD. DURING THE COURSE OF THE DISCUSSION IT WAS EMPHASIZ ED THAT THE PRICE AT WHICH THE SHARES HAVE '!BEEN ISSUED IS THE LOWEST PRICE AT WHICH THE SHARES COULD HAVE BEEN AL LOTTED, AS IT WAS BASED 'UPON, THE B.9OK VALUES OF VARIOUS ASSETS AND LIABILITIES OF THE APPELLANT COMPANY WHICH DID NOT FACTOR IN THE GOODWILL, TECHNICAL KNOWHOW, APPRECIA TION IN THE VALUE OF THE ASSETS WHICH COULD HAVE BEEN USED FOR AUGMENTING THE PRICE HAD THE APPELLANT COMPANY OBTA INED A VALUATION CERTIFICATE FROM THE ACCOUNTANT OR MERC HANT BANKER. 7.13 SOURCE OF SOURCE AND SO ON - THE APPELLANT COM PANY DURING THE COURSE OF ITS SUBMISSION BEFORE ME HAD S TATED THAT IT HAS ESTABLISHED THE SOURCE OF SOURCE, SOURC E OF SOURCE OF SOURCE AND SO ON UP TO THREE LEVEL DURING THE ITA NO.721/IND/2019 & C.O.11/IND/2020 VIJAYSHRI PACKAGING LIMITED. 18 COURSE OF THE ASSESSMENT PROCEEDINGS. IT WAS STATED THAT THE FUNDS HAVE BEEN LYING IN THE APPELLANT COMPANIE S AND ITS SISTER CONCERN M/S. VIJAYSHRI NOTE BOOKS PVT. LTD WHICH WERE REPAID BACK TO VARIOUS FIRMS FROM WHICH THE SA ME WERE BORROWED BY THEM, WHICH IN TURN WERE RETURNED TO THE INVESTOR, WHICH WAS UTILIZED FOR SUBSCRIBING TO THE SHARE CAPITAL OF THE APPELLANT COMPANY. THAT THERE WAS NO FRESH FLOW OF THE FUNDS IN THE SYSTEM AND. THAT THE AMOUN T WAS ONLY RECLASSIFIED FROM LOANS TO SHARE CAPITAL THROU GH PROPER BANKING CHANNELS. ATTENTION WAS DRAWN TO THE PARA 5.12 ON PAGE 21 OF THE ASSESSMENT ORDER WHEREIN THE AO HAS CATEGORICALLY STATED THAT AFTER LOOKING AT THE SOUR CE, SOURCE OF SOURCE AND SO ON, THEY CAN ALL BE TRACED EVENTUA LLY TO THE FUNDS OF THE APPELLANT COMPANY OR ITS SISTER CONCER N M/S. VIJAYSHRI NOTE BOOKS PVT. LTD AND IT WAS VEHEMENTLY ARGUED THAT THIS PROPOSITION STAND VERY WELL ACCEPT ED IN THE ASSESSMENT ORDER. IT WAS STATED THAT SINCE THE AO HIMSELF WAS SATISFIED THAT THE FUNDS WERE IN THE GROUP AND NO NEW FUNDS HAVE BEEN INTRODUCED, THERE IS NO ANY PLAUSIB LE REASON FOR DOUBTING THE SOURCE OF SOURCE AND SO ON. 7.14 THUS, CONSIDERING ALL THE ABOVE FACTS, IN MY CONSIDERED VIEW THE SHARE APPLICANTS BEING PART OF THE PROMOTER GROUP, TWO COMPANIES BEING ALREADY EXISTIN G SHAREHOLDERS THE THIRD HUF SHAREHOLDER IS REPRESENTED BY THE DIRECTOR OF THE APPELLANT ITSELF; THE IDENTITY CANNOT BE QUESTIONED. THE SHARE APPLICANTS ARE SUFFICIENTLY POSSESSED OF THEIR OWN FUNDS, WITH NO INFUSION OF F RESH OUTSIDE FUNDS, THE ISSUE OF CREDITWORTHINESS IS ALS O SATISFACTORILY EXPLAINED. THE APPELLANT HAVING JUST IFIED THE NEED OF INCREASING SHARE CAPITAL, HAS ALSO PROPERLY SUBSTANTIATED THE SOURCE OF SOURCE AND ALSO THE SOU RCE THEREOF, THE SHARES HAVING BEEN ISSUED AT A VALUE PERMISSIBLE UNDER THE INCOME TAX ACT AND NOT AT AN EXCESSIVE PREMIUM, THE GENUINENESS OF THE TRANSACTI ON IS ALSO SATISFACTORILY EXPLAINED. THE APPELLANT HAS EF FECTIVELY AND PROPERLY SUBSTANTIATED ALL THE THREE INGREDIENT S OF SECTION 68 VIZ IDENTITY AND CREDITWORTHINESS OF THE SHARE APPLICANTS AS WELL AS THE GENUINENESS OF THE TRANSA CTIONS. 7.15 COMING TO THE OBSERVATIONS MADE BY THE AO IN T HE ASSESSMENT ORDER, I FIND THAT THE AO HAS TIME AND A GAIN ALLEGED THAT UNACCOUNTED FUNDS HAVE BEEN BROUGHT IN TO THE BOOKS THROUGH THE IMPUGNED SHARE ALLOTMENT TRANSACT IONS. FROM THE OBSERVATIONS MADE IN PARA 4.1 TO 4.3 OF TH E ASSESSMENT ORDER REGARDING THE SHARE APPLICANT M/ S PUSHPAK FINCON PVT. LTD. IT IS SEEN THAT THE SHARE APPLICANT ITA NO.721/IND/2019 & C.O.11/IND/2020 VIJAYSHRI PACKAGING LIMITED. 19 IS ASSUMED TO BE A PAPER COMPANY AND A SERIOUS ALLEGATION IS MADE THAT THE COMPANY IS SOLELY RUNNI NG FOR THE' PURPOSE OF ROUTING UNACCOUNTED MONEY INTO THE BOOKS OF THE APPELLANT COMPANY. IDENTICAL OBSERVATIONS HA VE BEEN MADE IN RESPECT OF ARMAN BARTER PVT. LTD. IN PARA 4 .4 TO 4.6 OF THE ASSESSMENT ORDER. 7.16 HOWEVER, NEITHER THERE IS ANY COGENT MATERIAL BROUGHT ON RECORD NOR ANY OTHER BASIS GIVEN IN THE ORDER WHICH COULD SUPPORT SUCH SERIOUS ALLEGATION. IN FACT, THE FLOW OF FUNDS I.E. THE INITIAL POINT FROM WHERE THE FUNDS MOVED TO THE FINAL DESTINATION HAS BEEN PROPERLY SUBSTANTIATED BY THE APPELLANT . THE CHAIN OF EVENTS CULMINATING INTO THE FINAL RECE IPT OF FUNDS BY THE APPELLANT HAS ALSO BEEN ABSTRACTED ON PAGE 6 & 7 OF THE ASSESSMENT ORDER BY THE AO HIMSELF, FROM W HERE IT IS SEEN THAT THERE IS NO SCOPE FOR INFUSION OF A NY FRESH FUNDS INTO THE SYSTEM IN THE ENTIRE CHAIN, AS THE F UNDS LYING WITH THE APPELLANT ,ITSELF OR WITH ONE OF ITS ANOTHER SISTER CONCERN VIJAYSHRI NOTE BOOK PVT. LTD. HAVE O NLY FLOWN BACK TO THE APPELLANT. IN SUCH EVENTUALITY WHEN NO FRESH FUNDS HAVE COME INTO THE SYSTEM AT ANY POINT OF TIM E, THE QUESTION OF INTRODUCING UNACCOUNTED MONEY DOES NOT ARISE. IT IS PARAMOUNT PROPOSITION THAT ONLY IF ANY FRESH FUNDS FROM ANY OUTSIDER OR THIRD PARTY WOULD HAVE COME INTO THE SYSTEM AT. ANY POINT OF TIME, THEN ONLY TILE ISSUE OF INTRODUCTION OF UNACCOUNTED MONEY COULD HAVE, IF AT AN BEEN RAISED. 7.17 THE OBSERVATION IN THE ASSESSMENT ORDER THAT B OTH THE SHARE APPLICANT COMPANIES PERFORM NO OTHER' ACTIVIT IES AND- HAVE NO BUSINESS WORTH IS ALSO MISPLACED AND THE FA CT THAT SUCH INVESTMENT COMPANIES HAVE GENERALLY NO OTHER A CTIVITIES OTHER THAN MAKING INVESTMENT IN THE GROUP COMPANIES HAS BEEN TOTALLY LOST SIGHT OF. 7.18 WITH RESPECT TO THE OBSERVATIONS MADE IN PARA 4.2 AND 4.5 'AND ALSO IN PARA 5 REGARDING ACQUISITION OF BO TH THE SHARE APPLICANT COMPANIES BY MR. RAJENDRA JAIN IN F Y 2008- 09 THROUGH SISTER CONCERNS OF THE APPELLANT COMPANY , WHICH LATER ON MERGED WITH THE APPELLANT COMPANY, IT DOES NOT, IN ANY MANNER, SUPPORT AND JUSTIFY THE ADDITION MADE B Y THE AO IN THE IMPUGNED YEAR' I.E. AY 2015-16. FURTHER THE DECISION OF SHRI RAJENDRA JAIN TO ACQUIRE THESE INV ESTMENT COMPANIES OUGHT NOT TO HAVE BEEN QUESTIONED BY THE AO, AS SUCH DECISIONS ARE THE SOLE PREROGATIVE OF A BUSINE SSMAN. 7.19 WITH REGARD TO THE THIRD SHARE APPLICANT M/S PRITESH JAIN HUF OF WHICH MR. PRITESH JAIN IS THE KARTA WHO IS A DIRECTOR OF THE APPELLANT COMPANY IT IS OBSERVED BY THE AO I N PARA 4.8 ITA NO.721/IND/2019 & C.O.11/IND/2020 VIJAYSHRI PACKAGING LIMITED. 20 AND ALSO PARA 5.10 THAT THE SAID HUF HAS EARNED BOGUS LONG TERM CAPITAL GAIN WHICH HAS BEEN ADDED IN THE ASSES SMENT ORDER PASSED U/ S 143(3), THE APPELLANT DREW ATTENTION TO PARA 7~6 OF THE ASSESSMENT ORDER WHEREIN IT IS ACCE PTED BY THE AO THAT IT WAS NEVER SAID THAT THE SOURCE OF FU NDS OF PRITESH JAIN HUF FOR INVESTING IN THE COMPANY WAS B OGUS LTCG AND THIS OBSERVATION WAS ONLY CITED AS AN EXAM PLE TO QUESTION THE CREDITWORTHINESS. IN THE SAME PARA THE AO HAS ACCEPTED THE FACT THAT THE SOURCE OF FUNDS OF PRITE SH JAIN HUF WAS REPAYMENT OF A LOAN FROM R R PACKAGING (INDIA) PVT. LTD. THEREFORE, THE OBSERVATION MADE IN PARA 4.8 OF THE ASSESSMENT ORDER DOES NOT HOLD ANY GROUND, 7.20 I T IS ALSO SEEN THAT THE AO HAS ATTEMPTED TO CAST A DOUBT IN RESPECT OF SHARES ISSUED BY PUSHPAK AND SHARE PR EMIUM RECEIVED THEREON SIX YEARS BACK AND ON THE BASIS OF THIS DOUBT HAS TRIED TO HOLD THAT THE MONEY INTRODUCED S IX YEARS AGO IN PUSHPAK IS THE SOURCE OF THE MONEY BEING INTRODUCED IN THE YEAR UNDER CONSIDERATION IN THE APPELLANT CO MPANY IN THE FORM OF SHARE CAPITAL AND SHARE PREMIUM, THIS OBSERVATION ESTABLISHES THE CONTENTION OF THE APPEL LANT THAT NO FRESH FUNDS HAVE BEEN INTRODUCED IN THE SHARE AP PLICANT COMPANIES DURING LAST MANY YEARS AND ALSO SUGGESTS THAT THIS FACT WAS ALSO CLEAR IN THE MIND OF THE AO. IN MY CONSIDERED VIEW RAISING ANY DOUBT IN RESPECT OF TRA NSACTIONS WHICH TOOK PLACE SIX YEARS AGO CANNOT JUSTIFY THE ADDITIO N MADE IN THE YEAR UNDER CONSIDERATION. 7.21 THE AO HAS FURTHER OBSERVED THAT IN TERMS OF SECTION 68 THE CREDITWORTHINESS OF THE SUBSCRIBER ENTITIES AND GENUINENESS OF THE TRANSACTIONS NEEDS TO BE PROVED IN THE YEAR UNDER CONSIDERATION I.E. THE YEAR IN WHICH THE Y HAVE MADE INVESTMENT IN THE APPELLANT. I FULLY AGREE WITH THIS CONTENTION OF THE AO WHICH IS THE CRUX OF THE MATTER WHILE DEALING WITH THE TRANSACTIONS COVERED U/S 68. THE APPELLANT IS REQUIRED TO EXPLAIN THE IDENTITY AND CREDITWORTHINE SS OF THE SHARE APPLICANT FOR THE YEAR UNDER CONSIDERATION IN WHICH THE TRANSACTIONS WITH THE APPELLANT TOOK PLACE AND IS R EQUIRED TO SUBSTANTIATE THE GENUINENESS OF THE PARTICULAR TRAN SACTION UNDER CONSIDERATION, WHICH ALL CONDITIONS, IN MY CO NSIDERED VIEW HAVE BEEN DULY MET BY THE APPELLANT. THE AO WAS NOT JUSTIFIED IN MAKING THE ADDITIONS U/S 68 IN THE YEAR UNDER CONSIDERATION MERELY ON THE BASIS OF SUSPICION AND DOUBTS IN RESPECT OF TRANSACTIONS OF THE SHARE APPLICANT WHIC H TOOK PLACE SIX YEARS AGO. IT IS SEEN THAT THERE IS NO CO GENT REASON BROUGHT ON RECORD EVEN FOR RAISING SUSPICION IN RES PECT OF SUCH TRANSACTIONS WHICH TOOK PLACE SIX YEARS BEFORE THE' YEAR ITA NO.721/IND/2019 & C.O.11/IND/2020 VIJAYSHRI PACKAGING LIMITED. 21 UNDER CONSIDERATION. THE MOOT ISSUE FOR CONSIDERATI ON IS WHETHER THERE WAS ANY DEFECT IN RESPECT OF THE IMPU GNED TRANSACTIONS UNDER CONSIDERATION, WHICH TOOK PLACE IN THIS YEAR AND WHICH HAVE BEEN ADDED BY THE AO. IN MY CONSIDERED VIEW NO SUCH DEFECT IN THE IMPUGNED TRAN SACTION PERSE IS FOUND AND THEREFORE, THE ADDITION U/S 68 I N THE YEAR UNDER CONSIDERATION WAS NOT WARRANTED, THE AO IS FREE TO TAKE ANY ACTION IN THE CASE OF PUSHPAK FINCON PVT. LTD. IN THE YEAR IN WHICH IT ISSUED SHARES AND RECEIVED SHARE P REMIUM. BUT BY NO STRETCH OF IMAGINATION, LOGIC OR ON THE B ASIS OF ESTABLISHED LEGAL AND ACCOUNTING PRINCIPLES; THE AD DITION CAN BE MADE IN THE YEAR UNDER QUESTION AND THAT TOO IN THE APPELLANT COMPANY. 7.22 IT IS ALSO SEEN THAT THE AO HAS DISCUSSED VARIOUS O THER TRANSACTIONS IN THE ASSESSMENT ORDER AND ALLEGED TH AT NO JUSTIFICATION OR EXPLANATION WAS GIVEN BY THE APPEL LANT SUCH AS TRANSACTION FOR PURCHASE OF PROPERTY BY PU SHPAK, SOURCE OF FUNDS IN THE HANDS OF PRITESH .IAIN HUF GIVEN TO M/S R R P ACKAGING (INDIA) PVT LTD: ETC. THE APPELLANT REFERR ING TO ITS VARIOUS WRITTEN SUBMISSIONS FILED DURING THE ASSESSMENT PROCEEDINGS AND ENCLOSED IN THE PAPER BOOK, PARTICULARLY SUBMISSION DATED 27.12.2017 (AT PAGE NO.79 OF PAPER BOOK) AND SUBMISSION DATED 29.12.2017 (AT PAGE NO. 79 OF PAPER BOOK) EXPLAINED DURING THE APPELLATE PROCEEDINGS TH AT NONETHELESS THESE ISSUES WERE NOT CONNECTED WITH TH E ISSUE OF SHARE APPLICATION MONEY RECEIVED BY THE APPELLAN T, STILL THE ISSUES RAISED BY THE AO WERE PROPERLY EXPLAINED ALO NG WITH DOCUMENTARY EVIDENCES. INSPITE OF THIS FACT THE AO HAS DELIBERATELY STATED THAT NO EXPLANATION WAS FURNISH ED. 7.23 I ALSO FIND THAT THE CONCERNS RAISED IN THE AS SESSMENT ORDER REGARDING THE OFFICE PREMISES OF THE TWO SHAR E APPLICANT COMPANIES ARE ALSO TOO FARFETCHED IN THE LIGHT OF THE FACT THAT THE IDENTITY OF BOTH THE COMPANIES WAS ES TABLISHED ON RECORD BEING EXISTING SHAREHOLDERS AND ALSO BEIN G PART OF THE PROMOTER GROUP AND IS UNDISPUTED. THE SUBMISS ION OF THE APPELLANT ON THIS ISSUE WITH REGARD TO SHIFTING OF THE REGISTERED OFFICE OF BOTH THE SHARE APPLICANT COMPANIES TO INDORE AND THE EXPLANATION FILED DURING THE ASSESSM ENT PROCEEDINGS (AT PAGE NO. 85 OF PAPER BOOK) SUFFICIE NTLY TAKES CARE OF THE CONCERNS RAISED IN THIS BEHALF. 7.24 IT IS SEEN THAT IN PARA 5.12 THE AO HAS STATED THAT LOOKING AT THE SOURCE, SOURCE OF SOURCE, AND SO ON, OF THE FUNDS MADE AVAILABLE TO ALL THE THREE SHARE APPLICA NTS, THEY CAN ALL BE TRACED EVENTUALLY TO THE FUNDS OF THE AP PELLANT COMPANY OR ITS SISTER CONCERNS M/S VIJAYSHRI NOTEBOOK PVT. ITA NO.721/IND/2019 & C.O.11/IND/2020 VIJAYSHRI PACKAGING LIMITED. 22 LTD. THE APPELLANT EMPHASIZED THAT THIS OBSERVATION OF THE AO IN THE ASSESSMENT ORDER EXPLAINED THE ENTIRE CASE O F THE APPELLANT AND CATEGORICALLY ESTABLISHES THAT THE SO URCE AND ALSO SOURCE OF SOURCE STOOD EXAMINED AND ACCEPTED B Y THE AO. IN MY OPINION ONCE THE APPELLANT HAS EXPLAINED NOT ONLY THE IMMEDIATE SOURCE BUT ALSO THE ULTIMATE SOURCE, AS ALSO ACCEPTED BY THE AO, ON THIS PROPOSITION ALONE THE ADDITION MADE U/S 68 OUGHT NOT TO HAVE BEEN SO MADE. 7.25 THE RELIANCE PLACED ON VARIOUS JUDICIAL PRONOU NCEMENT IN RESPECT OF SURROUNDING CIRCUMSTANCES, PREPONDERA NCE OF PROBABILITIES, LIFTING THE VEIL ETC SUCH AS DURGA P RASAD MORE, HERSHWIN CHADHA, SUMITI DAYAL AND ME DOWELL, IT WOU LD BE SUFFICE TO HOLD THAT THE PROPOSITIONS LAID DOWN IN THESE CASES DOES NOT APPLY TO THE INSTANT CASE SINCE THE FACTS ARE CLEARLY DISTINGUISHABLE. MUCH WATER HAVE FLOWN SINCE THE DA YS OF ME DOWELL AND IT HAS BEEN HELD BY VARIOUS COURTS TH AT THE LEGITIMATE ACTS OF A TAXPAYERS IN THE ORDINARY COUR SE OF CONDUCTING HIS AFFAIRS CANNOT BE BRANDED AS QUESTIO NABLE ON THE ANVIL OF ME DOWELL WHICH ALSO STAND IN A WAY OV ERRULED BY THE SUBSEQUENT DECISION OF THE HON'BLE APEX COUR T IN AZADI BACHAO ANDOLAN. THE APPELLANT'S CASE IS ALSO WELL SUPPORTED BY THE PLETHORA OF DECISIONS RELIED UPON BY IT THROUGH ITS WRITTEN SUBMISSIONS ON VARIOUS PROPOSIT ION WHICH ARE NOT BEING REPEATED HERE FOR THE SAKE OF BREVITY . 7.26 THEREFORE, IN VIEW OF THE ABOVE, AFTER CONSIDE RING ALL THE CONTENTIONS OF THE AO IN THE ASSESSMENT ORDER CAREF ULLY AND ALSO CONSIDERING THE SUBMISSIONS OF THE APPELLANT A S ALREADY DISCUSSED AT LENGTH, THE ADDITION MADE U/ S 68 IS WRONG ON FACTS AND IN CIRCUMSTANCES OF THE CASE AND IS HEREB Y DELETED. THE ADDITION MADE BY THE AO IS NOT SUSTAIN ABLE EVEN IN LAW, FOR WHICH I WISH TO DRAW SUPPORT FROM THE FOLLOWING JUDICIAL PRONOUNCEMENTS. 7.27 AS. REGARDS ISSUE INVOLVING ADDITION OF SHARE PREMIUM AMOUNT ALONGWITH SHARE APPLICATION MONEY/SHARE CAPI TAL MONEY, IT HAS DECIDED IN MANY CASES THAT IT CANNOT BE ADDED. IN THIS REGARD; REFERENCE IS MADE AND RELIANCE IS P LACED TO THE VARIOUS JUDICIAL PRONOUNCEMENTS. ON THE ISSUE RELAT ED TO ADDITIONS FOR SHARE PREMIUM AMOUNT INCLUDED IN THE SHARE APPLICATION MONEY/SHARE CAPITAL MONEY. THESE ARE AS UNDER: (I) IN THE CASE OF M/S. VODAFONE INDIA SERVICES PVT . LTD VS. ADDL CIT REPORTED IN 368ITR 001, HON'BLE BOMBAY HIGH COURT DECIDED THAT: THE AMOUNTS RECEIVED ON ISSUE OF SHARE CAPITAL INC LUDING THE PREMIUM ARE UNDOUBTEDLY ON CAPITAL ACCOUNT. SHARE P REMIUM HAVE BEEN MADE TAXABLE BY A LEGAL FICTION UNDER SECTION ITA NO.721/IND/2019 & C.O.11/IND/2020 VIJAYSHRI PACKAGING LIMITED. 23 562)(VIIB)OF THE ACT AND THE SAME IS ENUMERATED AS INCOME IN SECTION 2(24)(XVI) OF THE. ACT. HOWEVER, WHAT IS BOUGHT INTO THE AMBIT OF INCOME IS THE PREMIUM RECEIVED FROM A RESIDENT IN EXCESS OF THE FAIR MARKET VALUE OF THE SHARES. IN T HIS CASE WHAT IS BEING SOUGHT TO BE TAXED IS CAPITAL NOT RECEIVED FROM A NON-RESIDENT I.E. PREMIUM ALLEGEDLY NOT RECEIVED A N APPLICATION OF ALP. THEREFORE, ABSENT EXPRESS LEGIS LATION.. NO AMOUNT RECEIVED, ACCRUED OR ARISING ON CAPITAL ACCO UNT TRANSACTION CAN BE SUBJECTED TO TAX AS INCOME. COURT FINDS CONSIDERABLE SUBSTANCE IN THE PETITIONER'S CASE THAT NEITHER THE CAPITAL RECEIPTS RECEIVED BY THE PETITIONER ON ISSU E OF EQU.ITY SHARES TO ITS HOLDING COMPANY, A NON RESIDENT ENTIT Y, NOR THE ALLEGED SHORT [ALL BETWEEN THE SO CALLED FAIR MARKET PRICE OF ITS EQUITY SHARES AND THE ISSUE PRICE OF THE EQUITY SHA RES CAN BE CONSIDERED AS INCOME WITHIN THE MEANING OF THE EXPR ESSION AS DEFINED UNDER THE ACT.' (II) THE CBDT VIDE INSTRUCTIONS NO - 02/2015 DATED 29/1/2015 DIRECTED THE REVENUE NOT TO FILE THE SLP BEFORE DIRECTED LD .AOS TO ACCEPT THE HIGH COURT ORDER. TH E RELEVANT INSTRUCTIONS IS AS UNDER:- 1N REFERENCE TO THE ABOVE CITED SUBJECT, I AM DIRECTED TO DRAW YOUR ATTENTION TO THE DECISION OF THE HIGH COURT OF BOMBAY IN THE CASE OF VO DAFONE INDIA SERVICES PVT. LTD FOR A. Y. 2009-10 (WP NO.871J2014) = 2014-TH-19-HC-MUM-TP, WHEREIN IN THE COURT HAS HELD, INTER-ALIA, THAT THE PREMIUM ON SHA RE ISSUE WAS ON ACCOUNT OF A CAPITAL ACCOUNT TRANSACTION AND DOES NOT GIVE RISE TO INCOME AND, HENCE, NOT LIABLE TO TRANS FER PRICING ADJUSTMENT. .. IT IS HEREBY INFORMED THAT THE BOARD HAS ACCEPTED THE DECISION OF THE HIGH COURT OF BOMBAY I N THE ABOVE MENTIONED WRIT PETITION. IN VIEW OF THE ACCEP TANCE OF THE ABOVE JUDGEMENT, IT IS DIRECTED THAT THE RATIO DECI DED OF THE JUDGEMENT MUST BE ADHERED TO BY THE FIELD OFFICERS IN ALL CASES WHERE THIS ISSUE IS INVOLVED. THIS MAY ALSO BE BROUGHT TO- THE NOTICE OF THE IF AT, DRPS AND CIT (APPEALS,' (III) IN THE CASE OF ACIT VS. GAGANDEEP INFRASTRUCTURE PVT. LTD BEARING ITA' NO. 5784/MUM/20 11 DATED 23/4/2014, HON'BLE MUMBAI ITAT DECIDED THAT 'WE HAVE CAREFULLY PERUSED THE ORDERS OF THE LOWER AUTHORITIES. IN OUR CONSIDERED VIEW, THE ISSUE OF S HARES AT PREMIUM IS ALWAYS A COMMERCIAL DECISION WHICH DOES NOT REQUIRE ANY JUSTIFICATION. FURTHER THE PREMIUM IS A CAPITAL RECEIPT 'WHICH HAS TO BE DEALT WITH IN ACCORDANCE W ITH SEC. 78 OF THE COMPANIES ACT, . 1956. FURTHER, THE COMPANY IS NOT REQUIRED TO PROVE THE GENUINENESS, PURPOSE OR. JUSTIFICATION FO R CHARGING PREMIUM OF SHARES, SHARE PREMIUM BY ITS' VERY ITA NO.721/IND/2019 & C.O.11/IND/2020 VIJAYSHRI PACKAGING LIMITED. 24 NATURE IN A CAPITAL RECEIPTS AND IS NOT INCOME FOR ITS ORDINARY SENSE. THE ENTIRE DISPUTE REVOLVES AROUND THE FACT THAT TH E ASSESSEE HAS CHARGED A PREMIUM OF RS. 190/- PER SHA RE. NO DOUBT A NON-EST COMPANY OR A ZERO BALANCE SHEET COM PANY ASKING FOR RS, 190/ _ PER SHARE DEFIES ALL COMMERCIAL PRUDENCE BUT AT THE SAME TIME WE CANNOT IGNORE THE FACT THAT IT IS A PREROGATIVE OF THE BOARD OF DIRECTORS OF TH E COMPANY TO DECIDE THE PREMIUM AMOUNT AND IT IS THE WISDOM OF T HE SHAREHOLDERS WHETHER THEY WANT TO SUBSCRIBE TO SUCH A HEAVY PREMIUM. THE REVENUE AUTHORITIES CANNOT QUESTION TH E CHARGING OF SUCH HUGE PREMIUM WITHOUT ANY BAR FROM ANY LEGISLATED LAW OF THE LAND. THE AMENDMENT HAS BEEN BROUGHT IN THE INCOME TAX ACT UNDER THE HEAD 'INCOME FROM O THER SOURCES' BY INSERTING CLAUSE (VIIB) TO SEC. 56 OF THE ACT WHEREIN IT HAS BEEN PROVIDED THAT ANY CONSIDERATION FOR ISSUE OF SHARES, THAT EXCEEDS THE FAIR VALUE OF SUCH SHAR ES, THE AGGREGATE CONSIDERATION RECEIVED FOR SUCH SHARES AS EXCEEDS THE FAIR MARKET VALUE OF THE SHARES SHALL BE TREATE D AS THE INCOME OF THE ASSESSEE BUT THE LEGISLATURE IN ITS WISDOM HAS MADE THIS PROVISION APPLICABLE W.E.F 1.4.2013 I.E. ON AND FROM A. Y. 2014-15, IN SO JAR AS THE YEAR UNDER CONSIDERATION IS CONSIDERATION IS CONCERNED, THE TRANSACTION HAS TO CONSIDERED IN THE LIGHT OF THE PROVISION OF SEC, 68 OF THE ACT, THERE IS NO DISPUTE THAT THE ASSESSEE HAS GIVEN DETAILS OF NAMES AND ADDRESSES OF THE SHAREHOLDERS, THEIR PAN NOS, THE BANK DETAILS AND THE CONFIRMATORY LETTERS. CONSIDER ING ALL THESE UNDISPUTED FACTS, IT CAN BE SAFELY CONCLUDED THAT THE INITIAL BURDEN OF PROOF AS RESTED UPON THE ASSESSEE HAS BEEN SUCCESSFULLY DISCHARGED BY THE ASSESSEE. EVEN IF IT IS HELD THAT EXCESS PREMIUM HAS BEEN CHARGED, IT DOES NOT BECOME INCOME AS IT IS A CAPITAL RECEIPT THE RECEIPT IS NOT IN THE REVENUE FIELD. WHAT IS TO BE PROBED BY THE AO IS WHETHER THE IDENTITY OF THE ASSESSEE IS PROVED OR NOT. IN THE CASE OF SHARE CAPITAL, 'IF THE IDENTITY IS PROVED, NO ADDITION CAN BE MADE U/ S: 68 OF THE ACT. WE DRAW SUPPORT FROM THE- DECISION OF THE HON'BLE SUPREME COURT IN THE CASE OF LOVELY EXPORTS PUT LTD. 317 ITR 218. WE, THEREFORE DO NOT FIND ANY ERROR OR INFIRMITY IN THE FINDINGS OF THE LD CIT(A). GROUND NO.L IS ACCORDINGLY DISMISSED. ' (IV) IN THE CASE OF GREEN INFRA LTD VS. ITO REPORTE D IN 38 TAXMANN.COM 253-ITATDATED 23/812013, HON'BLE MUMBAI ITAT DECIDED THAT 'DURING PREVIOUS YEAR ENDING ON 31-3-2009, IT HAD CO LLECTED SHARE PREMIUM ON ALLOTMENT OF SHARES OF FACE VALUE OF RS. 10 EACH AT A PREMIUM OF RS. 490 PER SHARE - IT HAD CREDITED SAID ITA NO.721/IND/2019 & C.O.11/IND/2020 VIJAYSHRI PACKAGING LIMITED. 25 AMOUNT IN BALANCE-SHEET UNDER HEAD SHARE PREMIUM ACC OUNT - IT CLAIMED THAT SHORE PREMIUM WAS A CAPITAL RECEIPT NOT EXIGIBLE TO TAX - ASSESSING OFFICER HAD TAXED SHARE PREMIUM UNDER SECTION 56(1) AS ASSESSEE'S INCOME FROM OTHER SOURCES - WHETHER SINCE EXPENDITURE AND RECEIPTS DIRECTLY RELAT ING TO SHARE CAPITAL OF A COMPANY ARE OF CAPITAL IN NATURE , SHARE PREMIUM COLLECTED BY ASSESSEE COULD NOT BE TAXED UNDE R SECTION 56(1) AS INCOME FROM OTHER SOURCES - HELD, YES - WHETHER SINCE ENTIRE TRANSACTION RELATING TO ALLOTMENT OF SHARES HAD BEEN DONE THROUGH BANKING CHANNEL AND ASSESSEE HAD INVESTED SHARE PREMIUM IN ITS THREE SUBSIDIARY COMPA NIES, PROVISIONS OF SECTION 68 AS SUGGESTED BY REVENUE HAD ALSO NOT APPLICABLE TO INSTANT CASE - FIELD, YES .... NO DOUBT A NON EST COMPANY OR A ZERO BALANCE COMPANY ASKING FOR A SHARE PREMIUM OF RS. 490 PER SHARE DEFIES ALL COMMERCIAL PRUDENCE; BUT AT THE SAME TIME ONE CANNOT IGNORE THE FACT THA T IT IS A PREROGATIVE OF THE BOARD OF DIRECTORS OF A COMPANY TO DECIDE THE PREMIUM AMOUNT AND IT IS THE WISDOM OF THE SHAREHOLDERS WHETHER THEY WANT TO SUBSCRIBE TO SUCH A VERY PREMIUM. THE REVENUE AUTHORITIES CANNOT QUESTION THE CHARGING OF SUCH OF HUGE PREMIUM WITHOUT ANY BAR FROM ANY LEGISLATED LAW OF THE LAND.' (V) IN THE CASE OF CIT VS. LOVELY EXPORTS (P) LTD R EPORTED IN 216 CTR 195, HON'BLE APEX COURT DECIDED THAT: 'IF THE SHARE APPLICATION MONEY IS RECEIVED BY THE A SSESSEE COMPANY FROM ALLEGED BOGUS SHAREHOLDERS, WHOSE NAMES ARE GIVEN TO THE AO, THEN THE DEPARTMENT IS FREE TO PROCEED TO REOPEN THEIR INDIVIDUAL ASSESSMENTS IN ACCORDANCE WITH LAW, BUT IT CANNOT BE REGARDED AS UNDISCLOSED INCOME OF ASSESSEE COMPANY.' (VI} IN THE CASE OF CIT VS. STELLER- INVESTMENT LTD- REPORTED IN 251 ITR 263, HON'BLE APEX COURT DECIDED THAT 'THAT THE INCREASE IN SUBSCRIBED CAPITAL OF THE RES PONDENT COMPANY COULD NOT BE A DEVICE OF CONVERTING BLACK M ONEY INTO WHITE WITH THE HELP OF FORMATION OF AN INVESTMENT C OMPANY, ON THE ROUND THAT, EVEN IF IT BE ASSUMED THAT THE SUBSCRIBERS TO THE INCREASED CAPITAL WERE NOT GENUINE, UNDER NO CIRCUMSTANCES COULD THE AMOUNT OF SHARE CAPITAL BE REGARDED AS UNDISCLOSED INCOME, AN APPEAL WAS TAKEN BY THE DEPARTMENT TO THE SUPREME COURT. THE SUPREME COURT DISMISSED THE APPEAL HOLDING THAT THE TRIBUNAL HAD COME TO A CONCLUSION ON FACTS AND NO INTERFERENCE WAS CALLED FOR. ' (VII) IN THE CASE OF CIT VS. EXPO GLOBE INDIA LTD REPORTED IN 361 ITR 147, HON'BLE DELHI HIGH COURT DECIDED THAT 'IT HAS BEEN HELD BY HON'BLE SUPREME COURT AND VARI OUS HIGH ITA NO.721/IND/2019 & C.O.11/IND/2020 VIJAYSHRI PACKAGING LIMITED. 26 COURTS THAT NO ADDITION CAN BE MADE ON ACCOUNT OF S HARE APPLICATION MONEY ONCE THE NAMES OF THE SHARE APPLI CANTS ARE GIVEN. IN THE INSTANT CASE, IDENTITY OF THESE PERSO NS ARE NOT ON DOUBT AND ASSESSMENT PARTICULARS OF ALL THE PERSONS ARE ON RECORD AND THERE IS NO MATERIAL TO HOLD THAT CREDITWORTHINESS OF THESE PERSONS ARE NOT ESTABLISHED. THE JUDGMENT OF HON'BLE SUPREME COURT IN THE CASE OF LOVELY EXPORT 216 CTR 195 AND ALSO THE JUDGMENT OF HON'BLE DELHI HIGH COURT I N THE CASE OF CIT VS. VALUE CAPITAL SERVICES PVT LID 307 ITR 334 ARE RELEVANT ON THIS ISSUE. IT WAS HELD BY HON'BLE MADRAS HIGH COURT IN THE CASE OF CIT VS. ELECIRO POLYCHEM LTD. 294 ITR 661 AND HON'BLE ALLAHABAD HIGHCOURT IN THE CASE OF JAYA SECURITIES LTD. 166 TAXMAN 7 THAT NO ADDITION CAN BE MADE ON ACCOUNT OF SHARE APPLICATION MONEY EVEN IF SUBSCRIBER TO CAPITAL ARE NOT GENUINE. THE ABOVE SAID JUDGEMENTS WERE CHALLENGED BY THE DEPARTMENT BY WAY OF SLP BEFORE S UPREME COURT OF INDIA AND SLP HAS BEEN DISMISSED BY SUPREM E COURT IN BOTH THE CASES. IN VIEW OF ABOVE SAID FACTS OF CASE AND POSITION OF LAW, I HEREBY DIRECT THE AO TO DELETE THE ADDITION OF RS.69,75,000/-. (VIII) IN THE CASE OF CL'T V . VACMET PACKAGING (IN DIA) PVT LTD REPORTED IN 88 CCH 065, HON'BLE AL1AHABAD HIGH COUR T DECIDED THAT 'HELD, ASSESSEE HAD FILED DOCUMENTARY . EVIDENCE TO PROVE GENUINENESS OF SHARE APPLICATION MONEY CONSISTING O F (I) SHARE APPLICATION FORMS; (II) COPIES OF BANK ACCOUNTS OF SHARE APPLICANTS; (III) COPIES OF INCOME TAX RETURNS OF S HARE ALLOTTEES; (IV)BALANCE SHEETS; AND (V) COPIES OF SHARE ALLOTME NT CERTIFICATES AND OF BOARD'S RESOLUTION OF THE SHARE APPLICANTS IDENTITY OF APPLICANTS WAS ESTABLISHED BY PRODUCTION OF COPIES OF PAN CARDS AND REGISTRATION CERTIFICATE WITH THE REGISTRAR OF COMPANIES - FINANCIAL CAPACITY WAS ALSO PROVED BY FILING OF COPIES OF THE BANK ACCOUNTS- FROM WHERE THE SHARE APPLICATION MONEY WAS TRANSFERRED THROUGH BANKING CHANNELS TO THE ASSESSE E - ASSESSEE HAD DISCHARGED ONUS PLACED UPON HIM BY 68- CONCURRENT FINDING OF FACTS ALSO TENDERED BY CIT'(A) AND TRIBUNAL IN THIS REGARD -_ NO SUBSTANTIAL QUESTION OF LAW ARISES- REVE NUE'S APPEAL DISMISSED' 7.28 BEFORE CONCLUDING, IT WILL BE IN PLACE TO DISC USS THE RECENT ORDER OF THE HONORABLE SUPREME COURT IN THE CASE OF P CIT V/S NRA IRON & STEEL PVT. LTD. ARISING OUT OF SLP (CIVIL) NO.29855 OF 2018 ON 05.03.19 IN RESPECT OF WHICH THE AO HAS ALSO FIL ED A SUBMISSION DURING THE APPELLATE PROCEEDINGS AND THE APPELLANT HAS ALSO MED A WRITTEN SUBMISSION IN THIS RESPECT. THE AO HAS PLACED RELIANCE ON THIS DECISION OF THE APEX COURT AND SUPPORTED ITA NO.721/IND/2019 & C.O.11/IND/2020 VIJAYSHRI PACKAGING LIMITED. 27 THE ADDITION MADE BY HIM. THE SUBMISSION SO MADE BY THE AO IS REPRODUCED AS BELOW: 'IN THIS CASE, ASSESSMENT ORDER U/S 1 43(3) OF THE IT ACT 1961 FOR THE AY 2015- 16 WAS PASSED BY THE UNDER-SIGNED ON 28.12.2017. DURING THE COURSE OF ASSESSMENT PROCEEDINGS, THE ASSESSEE COMPANY HAD FAILED TO PROVE THE GENUINENESS AND CREDITWORTHINESS, AS UNDERSTOOD WITHIN THE MEANING OF PROVISO TO SECTION 68 OF THE IT ACT. 1961. OF THE THREE (3) SUBSCRIBER ENTITIES WHICH HAD INTRODUCED SHARE PREMIUM AND SHARE CAPITAL DURING KY 2014-15. THEREFORE, THE AMOUNTS RECEIVED FROM THESE ENTITIES, UNDER THE GARB OF SHARE CAPITA L AND SECURITIES PREMIUM, I.E. RS. 3,47,01,225/, WAS TREATED AS UNEXPLAINED CASH CREDITS U/ S 68 OF THE IT ACT, AND ADDED TO THE TOTAL INCOME OF THE ASSESSEE. A DETAILED SPEAKING ORDER HAS BEEN PASSED IN THIS EASE WHICH HAS CONCLUSIVELY ESTABLISHED THE BOGUS NATURE OF THE SHARE PREMIUM A ND SHARE CAPITAL. REMAND REPORTS HAVE ALSO BEEN SENT IN THIS CASE ON TWO EARLIER OCCASIONS, AS PER YOUR DIRECTIONS. IN FURTHERANCE OF THE ABOVE. 1 WOULD LIKE TO DRAW YOUR HONOUR'S ATTENTION TO THE RECENT LANDMARK JUDGMENT OF THE HON'BLE SUPREME COURT DATED 05.03.2019. WHEREIN THE ORDER OF THE AO WAS UPHELD AND RESTORED BY THE APEX COURT DESPITE BEING DISMISSED BY THE HON'BLE HIGH COURT, AND PREVIOUSLY BY THE HONBLE ITAT AND THE LD. CIT (A). THIS IS IN THE CASE OF PR. CIT CENTRAL VS. NRA IRON AND STEEL PUT LTD. / TS 1 06-SC 201 9]. IN THIS CASE, ADDITION WAS MADE U/ S 68 OF SHARE CAPITAL AND PREMIUM RECEIVED FROM KOLKATA BASED COMPANIES. AS THE FACTS AND CIRCUMSTANCES OF THE CASE THE ASSESSEE M/ S VIJAYSHRI PACKAGING LTD. ARE IDENTICAL TO THAT OF THE ABOVE LANDMARK JUDGMENT (WHICH HAS NOT BECOME A SETTLED P OSITION OF LAW, REVENUE WOULD LIKE TO PLACE RELIANCE ON THE SAME IN THIS CASE. THUS, THE UNDER SIGNED REQUEST YOUR TO KINDLY TAKE COGNIZANCE OF THE SAME WHILE DECIDING THE MATTER, IN ADDITION TO THE ORIGINAL. I LOOK FORWARD TO JUSTICE BEING. DELIVERED THROUGH YOUR GOOD OFFICE IN .THIS CASE WHICH IS BASED ON A SINISTER DESIGN TO' CHEAT THE REVENUE AUTHORITIES AND OTHER ARMS OF THE GOVERNMENT, CONVERSION OF UNACCOUNTED MONEY, AND WI LFUL EVASION OF TAXES THOUGH DELIBERATE PLANNING AND STRATEGY. 7.29 HOWEVER, THE APPELLANT HAS STATED THAT THE ABO VE DECISION OF THE APEX COURT IN THE CASE OF PCIT V/ S NRA IRON & STEEL PV T. LTD. ARISING OUT OF SLP (CIVIL) NO.29855 OF 2018 IS NOT APPLICABLE IN ITS CASE AND THE FACTS OF THE CASE ARE CLEARLY DISTINGUISHABLE IN THE MANNER LAID AS BELOW: WE WOULD LIKE TO SUBMIT BEFORE THE HONOUR AS TO WHY THE ITA NO.721/IND/2019 & C.O.11/IND/2020 VIJAYSHRI PACKAGING LIMITED. 28 DECISION OF THE APEX COURT IN THE CASE OF PCIT / IS NRA IRON & STEEL PVT. LTD, ARISING OUT OF SLP(CIVIL) NO. 29855 OF 2018 IS NOT APPLICABLE TO THE CASE OF APPELLANT AS THE FACTS OF THE CASE ARE DISTINGUISHABLE IN MANNER LAID BELOW: 1.1 BRIEF FACTS OF THE CASE OF THE SUPREME COURT IN THE CASE OF PCIT V/ S NRA IRON & STEEL PUT. LTD. ARISING OUT OF SLP (CIVIL) NO.29855 OF 2018 A. THE ASSESSEE COMPANY CASE WAS REOPENED U/ S 148 OF THE ACT AS IT HAS SHOWN IN RETURN OF INCOME MONEY AGGREGATING TO RS.17,60,OO,OOO/- RECEIVED THROUGH SHARE CAPITAL/ P REMIUM FOR THE FINANCIAL YEAR 2009-10 FROM VARIOUS LEGAL ENTITIES AND THE ASSESSEE CO WAS CALLED UPON TO FURNISH/ PROVE BY COGENT AND RELIABLE EVIDENCE THE IDENTITY OF THE INVESTOR COMPANIES, THE CREDITWORTHINESS OF THE INVESTOR AND GENUINENESS OF THE TRANSACTION, TO THE SATISFACTION OF THE A.O. , SO AS TO DETERMINE WHETHER THE AMOUNT RAISED THROUGH SHARE CAPITAL/ PR EMIUM IS GENUINE OR NOT. B. THE ASSESSEE CO. SUBMITTED THAT ENTIRE SHARE CAPITAL/ PREMIUM HAD BEEN RECEIVED THROUGH NORMAL BANKING CH ANNELS BY ACCOUNT PAYEE CHEQUE/ DEMAND DRAFTS AND PRODUCED DOCUMENTS SUCH AS INCOME TAX RETURN ACKNOWLEDGEMENTS TO ESTABLISH THE IDENTITY AND GENUINENESS OF THE TRANSACTION AND HENCE THERE WAS NO CAUSE TO TAKE RECOURSE TO SECTION. 68 OF THE ACT, AND THAT THE ONUS ON THE ASSESSEE CO. STOOD FULLY DISCHARGED. C. HOWEVER, THE LEARNED A 0. DID NOT CONSIDER THE ABOVE AND CONDUCTED INDEPENDENT FIELD ENQUIRIES WITH RESPECT TO THE IDENTITY AND CREDITWORTHINESS OF THE INVESTOR AND G ENUINENESS OF THE TRANSACTION. THE AO ISSUED SUMMONS TO THE REPRESENTATIVE OF THE INVESTOR COMPANIES AND NONE APPEARED AND IN FEW CASES, SUBMISSIONS WERE RECEIVED ONLY THROUGH DAK WITHOUT JUSTIFYING MAKING THE INVESTMENT AT SUC H A HIGH PREMIUM OF RS.190/ - AND NOR PRODUCED BANK STATEMEN TS TO SUBSTANTIATE THE SOURCE OF FUNDS FOR MAKING SUCH A HUGE INVESTMENT IN SHARES WHILE THEY WERE DECLARING A VERY MEAGRE INCOME IN THEIR RETURNS. HENCE, THE AO. HELD THAT THE ASSESSEE FAILED TO PROVE THE IDENTITY AND CREDITWORTHINESS OF THE INVESTOR C O. AND GENUINENESS OF THE TRANSACTION AND HENCE ADDED BACK THE AMOUNT OF RS. 17,60, 00,000/ TO THE TOTAL INCOME OF THE ASSESSEE CO. D. ON APPEAL BY THE ASSESSEE CO., THE CJT (A) DELETED THE ADDITION MADE BY THE A.O. BY FOLLOWING THE DECISION OF THE DELHI HIGH COURT M THE CASE OF CIT V LOVELY EXPORTS LTD. (2008) 299 JTR 268 (DEL.)ON THE GROUND THAT THE ASSESSEE , HAD FILED CONFIRMATIONS FROM INVESTOR COMPANIES, THEIR INCOME TAX RETURN ITA NO.721/IND/2019 & C.O.11/IND/2020 VIJAYSHRI PACKAGING LIMITED. 29 ACKNOWLEDGEMENTS WITH PAN, COPIES OF THEIR BANK ACCOUNT TO SHOW THAT ENTIRE AMOUNT HAD BEEN PAID THROUGH NORMAL BANKING CHANNELS AND THEREFORE HAS SATISFACTORILY D ISCHARGED THE INITIAL ONUS AS ENVISAGED U/ S 68 OF THE ACT FOR ESTABLISHING THE CREDIBILITY AND IDENTITY OF THE SH AREHOLDERS. E. ON APPEAL BY THE DEPARTMENT, THE TRIBUNAL ALSO- UPH ELD THE ACTION LD. CIT (A) AND HELD THAT THE ASSESSEE HAD DISCHARGED THEIR PRIMARY ONUS TO ESTABLISH THE IDENTITY AND CREDITWORTHINESS OF THE INVESTORS, ESPECIALLY WHEN THE INVESTOR COMPANIES HAD FILED THEIR RETURNS AND WERE BEING- ASSESSED. F. ON FURTHER APPEAL PREFERRED BY THE DEPARTMENT, THE HON'BLE HIGH COURT. AFFIRMED THE DECISION OF TRIBUNAL ON THE GROUND THAT THE ISSUES RAISED BEFORE IT, WERE URGED ON FACTS, AND THE LOWER AUTHORITIES HAD TAKEN SUFFICIENT CARE TO CONSI DER THE RELEVANT CIRCUMSTANCES AND AS SUCH THERE IS NO SUBSTANTIAL QUESTION OF LAW FOR CONSIDERATION. G. THE REVENUE PREFERRED SPECIAL LEAVE PETITION BEF ORE THE SUPREME COURT AGAINST THE ORDER OF THE HIGH COURT. ARGUMENTS OF THE ASSESSEE THE ASSESSEE CONTENDED THAT. IT HAS CLEARLY PROVED THE IDENTITY AND CREDITWORTHINESS OF THE INVESTOR AND G ENUINENESS OF TRANSACTION AS ENVISAGED IN SECTION 68 OF THE ACT. A. IDENTITY OF THE INVESTOR: IT HAD FILED CONFIRMATION S FROM INVESTOR COMPANIES AND THEIR INCOME TAX RETURN ACKNOWLEDGEMENTS WITH PAN. B. GENUINENESS OF TRANSACTION: COPIES OF THEIR BANK ACCOUNT TO SHOW THAT ENTIRE AMOUNT HAD BEEN PAID THROUGH NORMAL BANKING CHANNELS AND HENCE THE PRIMARY BURDEN IS BEEN DISCHARGED. . . ARGUMENTS OF THE DEPARTMENT THE LEARNED A.O. MADE THE ADDITION OF RS.17. 60 CRORES ON ACCOUNT OF SHARE CAPITAL/ SHARE PREMIUM AS THE EXPL ANATION GIVEN BY THE ASSESSEE WAS CONSIDERED UNSATISFACTORY FOR THE FOLLOWING REASONS. A. NONE OF THE COMPANIES WHICH HAD INVESTED AMOUNTS RANGING BETWEEN RS. 90 TO 95 LAKHS COULD JUSTIFY INVESTMENTS AT SUCH A HIGH PREMIUM OF RS. 190/ - PER SHARE. B. SOME OF THE COMPANIES WERE FOUND TO BE NON- EXISTENT. C. ALMOST NONE OF THE COMPANIES PRODUCED BANK STATE MENTS TO ESTABLISH SOURCE OF FUNDS FOR MAKING SUCH A HUGE IN VESTMENT EVEN THOUGH THEY WERE DECLARING MEAGRE INCOME IN THEIR RETURNS. D. NONE OF THE INVESTOR COMPANIES APPEARED IN PERSO N BUT SENT WRITTEN RESPONSE THROUGH MAIL. RULING OF THE SUPREME COURT ITA NO.721/IND/2019 & C.O.11/IND/2020 VIJAYSHRI PACKAGING LIMITED. 30 ON THE SLP FILED BY THE REVENUE, WHERE THE ASSESSEE WAS NOT REPRESENTED DESPITE NOTICE, THE SUPREME COURT LAID D OWN THREE PRINCIPLES AFTER ANALYZING VARIOUS DECISIONS WITH REFERENCE TO TREATMENT OF SUMS OF MONEY CREDITED AS SHARE CAPITAL/ PREMIUM: (I) THE _ASSESSEE IS UNDER A 1EGAL OBLIGATION TO PROVE THE GENUINENESS OF THE TRANSACTION, THE IDENTITY OF THE CREDITORS, AND THE CREDIT WORTHINESS OF THE INVESTORS WHO SHOU LD HAVE HAD THE FINANCIAL CAPACITY TO MAKE THE INVESTMENT IN QUESTION, TO THE SATISFACTION OF THE AO, SO AS TO DISCHARGE THE PRIMARY ONUS. (II) THE ASSESSING OF FICER IS DUTY BOUND ID INVESTIGATE THE CREDIT- WORTHINESS OF THE CREDITOR / SUBSCRIBER, VERIFY THE IDENTITY O F THE SUBSCRIBERS, AND ASCERTAIN WHETHER THE TRANSACTION IS GENUINE, OR THERE ARE BOGUS ENTRIES OF NAME- LENDERS. (III) IF THE ENQUIRIES AND INVESTIGATIONS REVEAL THAT THE ID ENTITY OF THE CREDITORS TO BE DUBIOUS OR DOUBTFUL, OR LACK CREDIT WORTHINESS, THEN THE GENUINENESS OF THE TRANSACTION WOULD NOT BE ESTABLISHED. THE SUPREME COURT APPLIED THE AFORESAID PRINCIPLES OF THE FACTS AND CONCLUDED THAT (I) THERE WAS NO MATERIAL TO PROVE OR TO SUGGEST THAT THE SHARE MONEY WAS RECEIVED FROM INDEPENDENT ENTITIES. THE GENUINENESS OF THE TRANSACTION WAS FOUND TO BE COMPLETELY DOUBTFUL. (II) THE INVESTOR COMPANIES HAD FILED RETURNS FOR A NEGLIGIBLE TAXABLE INCOME WHICH WOULD SHOW THAT THE INVESTORS DID NOT HAVE THE FINANCIAL CAPACITY TO INVEST FUNDS RANGING BETWEEN RS. 90 TO RS. 95_LAKHS. (III) . THERE WAS NO EXPLANATION OFFERED REGARDING WHY THE INVESTOR COMPANIES HAD APPLIED FOR SHARES OF THE AS SESSEE COMPANY AT A HIGH PREMIUM OF RS. 190/- PER SHARE, EVEN THOUGH THE FACE VALUE OF THE SHARE WAS RS. 10/- PER SHARE. (IV) THE INVESTOR COMPANIES DID NOT ESTABLISH THEIR SOURCE OF FUNDS FROM WHICH THE HIGH SHARE PREMIUM WAS INVESTE D. (V) THE MERE MENTION OF THE INCOME TAX NUMBER OF AN INVESTOR WAS NOT SUFFICIENT TO DISCHARGE THE ONUS UNDER SECTION 68 OF THE ACT. THE LOWER AUTHORITIES APPEAR TO HAVE IGNORED THE DE TAILED FINDINGS OF THE AO. FROM THE FIELD ENQUIRY AND INVESTIGATIONS CARRIED OUT BY HIS OFFICE AND HAVE ERRONEOUSLY HELD THAT MERELY BECAUSE THE ASSESSEE HAD FILED ALL THE PRIMA RY EVIDENCE, THE ONUS ON THE ASSESSEE STOOD DISCHARGED . 7.30 ON THE BASIS OF ABOVE ANALYSIS OF THE DECISION OF HON'BLE SUPREME COURT IN THE CASE OF PCIT V/S NRA I RON & ITA NO.721/IND/2019 & C.O.11/IND/2020 VIJAYSHRI PACKAGING LIMITED. 31 STEEL PVT. LTD., THE APPELLANT DISTINGUISHED ITS CA SE AND SUBMITTED THAT: (I) 'IN THE PRESENT CASE IT WAS CLEARLY PROVED THAT THE SHARE MONEY WAS RECEIVED BY THE APPELLANT FROM ASSOCIATE CONCERNS INCLUDING EXISTING SHAREHOLDERS WHO ARE INDEPENDENT ENTITIES. THE APPELLANT C O. HAD SUBMITTED A STATEMENT OF SHARE APPLICATION MONEY RECEIVED ALONG WITH NAME, ADDRESS , PAN, _BANK STATEMENTS, INCOME TAX RETURNS AND AUDITED BALANCE SHEET BEFORE THE AO TO PROVE THE IDENTITY OF THE SU BSCRIBERS (REFER PARA 2.3 ON PAGE 4 OF THE ASSESSMENT ORDER). APART FROM FURNISHING OF ABOVE DOCUMENTARY DETAILS, SUMMO NS WERE ISSUED U/S 131 TO ATTEND M PERSON TO MR. RAJENDRA JAIN, MR. PRITESH JAIN, M/ S ARMAAN BARTER PRIVATE LIMITED AND M/ S PUSHPAK FINCON PRIVATE LIMITED (ALL THE SUBSCRIBERS TO THE SHARE CAPITAL/ SHARE PREMIUM). ALL THE PARTIES APPE ARED BEFORE THE AO AND FURNISHED THE DETAILS. THE APPEARANCE OF VARIOUS PERSONS AND RECORDING OF STATEMENT UNDER OA TH ITSELF ESTABLISHES THE IDENTITY OF THE SUBSCRIBERS. WHEREAS IN THE CASE BEFORE THE HON'BLE APEX COURT THE FACT WAS THAT CERTAIN NOTICES RETURNED UNSERVED AND THE SHARE APPLICANTS WERE EITHER NOT TRACEABLE OR NONEXISTENT SOME OF THE SHARE HOLDERS DID NOT FILED ANY RESPONSE TO THE SUMMONS. ISSUED AND SOME OF THE SHARE HOLDERS WHO . RESPONDED DID NOT PRODUCED THEIR BANK: STATEMENTS. THEREFORE, THE FACTS OF THE APPELLANT A RE CLEARLY DISTINGUISHABLE AND ARE ON A VERY STRONG FO OTING. (II) WITH RESPECT TO THE FINANCIAL CAPACITY/ SOURCE OF INVESTMENT, THE APPELLANT CO. HAS SUBMITTED CLEAR EXPLANATION BEFORE THE AD. ALONGWITH THE DOCUMENTARY EVIDENCES SUCH AS BALANCE SHEET / BANK STATEMENTS OF THE SUBSCRIBERS TO STATE THAT THE INVESTORS M/ S. PUSHPAK FINCON PUT. LTD. HAD ASSETS WORTH RS.4.33 CRORES AND M/S. ARMAAN BARTER PUT: LTD. HAD ASSETS WORTH RS.L.00 CRORES WHICH BY NO IMAGINATION CAN BE STATED NOMINAL (REFER PARA 2.10 ON PAGE 4 AND 2.15 ON PAGE 5 OF THE 6TH SUBMISSION BEFORE THE A. 0.). APART FROM THE CREDITWORTHINESS, THE APPELLANT ALSO EXPLAINED THE SOURCE OF THE SOURCE, THAT THESE FUNDS WERE LYING IN THE GROUP ONLY, WHICH HAVE BEEN OPTIMALLY UTILIZED AND TRANSACTION REROUTED SO THAT THE DIFFERENT BALANCE LYING IN VARIOUS COMPANIES/ FIRMS ARE REDUCED. ALSO THAT THERE ARE NO OUTSIDE PARTY INVOLVED IN THE TRANSACTION. AND THE SOURCES OF CAPITAL OF THE SUBSCRIBERS WERE ESTABLISHED DURING THE RESPECTIVE ASSESSMENT PROCEEDINGS AND HENCE THE APPELLANT CO. HAS DISCHARGE THE ONUS CAST UPON IT HOWEVER IN THE CASE BEFORE THE HONOURABLE APEX COURT MOST OF THE INVESTORS DID NOT EVEN FILED THEIR BANK STATEMENTS AND DECLARED VERY MEAGE R INCOME. ITA NO.721/IND/2019 & C.O.11/IND/2020 VIJAYSHRI PACKAGING LIMITED. 32 (III) IN RESPECT OF JUSTIFICATION OF PRICE, IT WAS SUBMIT TED THAT THE FAIR MARKET VALUE OF SHARES OF THE APPELLANT CO. AS ON 31.03.2014 WAS RS. 76.06 PER SHARES AS PER THE FORM ULA PRESCRIBED U/ 56(2)(VIIB) R.W.RULE11UA AND THE DET AILED CALCULATION WAS ALSO PROVIDED TO THE A.O. (REFER PARA 2.2 ON PAGE 4 OF THE ASSESSMENT ORDER). HOWEVER, THE APPELLANT CO. HAS ALLOTTED ITS SHARES AT A PRICE OF RS.75 PER SHARE WHICH IS LOWER THAN THE FAIR MARKET PRICE AND HENCE THE PROV ISIONS OF SEC. 56 (2)(VIIB) ARE NOT APPLICABLE TO THE SHARE PREMIUM RECEIVED AND HENCE SHARE PREMIUM CANNOT BE TAXED AS A REVENUE RECEIPT. FURTHER THE APPELLANT IS A REPUTED COMPANY ENGAGED IN THE BUSINESS OF PRINTING AND PACKAGING SINCE 1988 HAVING SUBSTANTIAL TURNOVER AND BUSINESS ON YEAR TO YEAR BASIS AND DECLARING SUBSTANTIAL INCOME. HOWEVE R, IN THE CASE OF NRA IRON AND STEEL PVT. LTD., THE SHARE WER E ISSUED AT A PREMIUM OF RS. 190 PER SHARE WITHOUT ANY JUSTIFI CATION OF MAKING INVESTMENT ON SUCH HIGH PREMIUM. THEREFORE, THE FACT .ARE CLEARLY DISTINGUISHABLE ON THIS FRONT AS WELL. (IV) AS STATED IN POINT B. ABOVE, THE APPELLANT CLE ARLY MENTIONED THAT IT DID NOT ONLY EXPLAIN THE SOURCE OF FUNDS BUT ALSO PROVED THE SOURCE OF SOURCE. OF FUNDS AS MANDATED BY THE AMENDED PROVISIONS OF SECTION 68 OF THE ACT WHICH WAS NOT DONE M THE CASE BEFORE THE HON'BLE APEX COURT (V) THE APPELLANT CO. DID NOT ONLY PROVIDE WITH TH E PAN NO. OF THE SUBSCRIBERS BUT WHEN THE SUMMONS WERE ISSUED AL L THE SUBSCRIBERS APPEARED BEFORE THE A. 0, AND FURNISHED THE DETAILS. THE APPEARANCE OF VARIOUS PERSONS AND RECO RDING OF STATEMENT UNDER OATH ITSELF ESTABLISHES THE IDENTIT Y OF THE SUBSCRIBERS, WHICH WAS NOT THE FACT IN THE CASE OF NRA IRON AND STEEL PVT. LTD WHERE IN FACT NO BODY APPEARED B EFORE THE AO. THUS, THE APPELLANT HAS CLEARLY DEMONSTRATED THAT THE RATIO PROPOUNDED BY THE HONOUROBLE APEX COURT IN THE CASE OF NRA IRON AND STEEL PIN: LTD. CANNOT BE APPLIED IN ITS CASE AS THE FACTS EN ARE CM A TOTALLY DIVERGENT ALLEY. ON THE. CONTRARY THE CASE OF NRA IRON AND STEEL PVT. LTD SUPPORTS THE CASE OF THE APPELLANT WHEN TESTED ON THE TOUCH STONE OF THE PRINCIPLES LAID BY THE HONOURABLE APEX COURT IN ITS LATEST DECISION AS ALREADY DISCUSSED ABOVE.' 7.31 IN MY CONSIDERED VIEW, THE APPELLANT HAS CLEAR LY DEMONSTRATED THAT THE RATIO PROPOUNDED BY THE HON'B LE APEX COURT IN THE CASE OF NRA IRON AND STEEL PVT. LTD. C ANNOT BE APPLIED IN ITS CASE AS THE FACTS OR ARE ON A TOTALL Y DIVERGENT ALLEY. THE UNDISPUTED FACTS ARE THAT IN THE CASE OF NRA IRON AND STEEL PVT. LTD. SHARES WERE ISSUED TO AS MANY A S 19 ITA NO.721/IND/2019 & C.O.11/IND/2020 VIJAYSHRI PACKAGING LIMITED. 33 COMPANIES WHICH WERE ALL OUTSIDERS AND NOT RELATED TO THE ASSESSEE AT ALL AND ON TOP OF THIS WHEN SUMMONS WER E ISSUED TO THE INVESTORS COMPANIES, NOBODY APPEARED ON THEIR BEHALF. IN SOME CASES, SUBMISSIONS WERE FILED THROU GH DAK. EVEN ON MAKING INDEPENDENT FILED ENQUIRIES, SOME OF THE NOTICES WERE NOT SERVED AS THE ENTITIES WERE NOT FO UND AT THE GIVEN ADDRESS, IN SOME CASES IN SPITE OF SERVICE OF NOTICE, THE SAME WERE NOT RESPONDED AND REPLIES WERE NOT FILED. THESE FACTS ARE IN CLEAR CONTRAST TO THE FACTS OF THE PRE SENT CASE BEFORE ME WHERE THE INVESTORS ARE NOT ONLY CLEARLY IDENTIFIED ENTITIES, IN FACT THEY WERE ALREADY EXISTING SHAREH OLDERS OF THE APPELLANT EVEN PRIOR TO THE ISSUANCE OF SHARE C APITAL UNDER CONSIDERATION AND ALL OF THEM PRODUCED THEMSE LVES BEFORE THE AO AND THEIR STATEMENTS WERE RECORDED. T HUS, THE IDENTITY OF THE INVESTORS WAS NEVER AN ISSUE IN THE PRESENT APPEAL. FURTHER THE INVESTMENT IN SHARES OF NRA WAS MADE AT A PREMIUM OF RS. 190 PER SHARE AND EVIDENTLY THERE WAS NO JUSTIFICATION FOR SUCH A HIGH PREMIUM WHEREAS IN THE PRESENT APPEAL THE SHARES ARE ISSUED OF A FLAGSHIP COMPANY OF THE GROUP HAVING SUBSTANTIAL TURNOVER AND ALSO PROFITABILITY OVER THE YEARS AND THE SHARES HAVE BE EN ISSUED AT THE FMV WORKED OUT ON THE BASIS OF PREVALENT PROVISIONS AND APPLICABLE RULES WHICH ALSO STAND ACCEPTED WITH OUT ANY ADVERSE REMARKS. IT IS ALSO SEEN THAT THE INVESTORS IN THE CASE OF NRA DID NOT MED THEIR BANK STATEMENTS TO SUBSTANTIATE THE SOURCE OF FUNDS WHEREAS IN THE PRE SENT CASE NOT ONLY THE BANK STATEMENTS AND OTHER FINANCI AL DETAILS WERE MED BUT ALSO SOURCE OF FUNDS, SOURCE T HEREOF AND SOURCE OF SOURCE HAS BEEN EXPLAINED AT LENGTH A ND DULY SUPPORTED BY COGENT MATERIAL. THE APPELLANT HAS EXP LAINED NOT ONLY THE IMMEDIATE SOURCE BUT ALSO THE ULTIMATE SOURCE OF THE IMPUGNED FUNDS RECEIVED BY IT DURING THE YEAR U NDER CONSIDERATION. THE APPELLANT HAS ALSO SUBSTANTIATED THE GENUINENESS OF THE TRANSACTIONS. THUS, I FIND THAT IN THE CASE OF NRA BEFORE THE HON'BLE SUPREME COURT, THE ASSESSEE COULD NOT EXPLAIN ANY OF THE THREE INGREDIENTS OF S ECTION 68 VIZ IDENTITY AND CREDITWORTHINESS OF THE SHARE APPL ICANTS AND SO THE GENUINENESS OF THE TRANSACTIONS, WHEREAS IN THE PRESENT CASE THE APPELLANT HAS CLEARLY DEMONSTRATED THE IDENTITY AS WELL AS CREDITWORTHINESS OF THE SHARE A PPLICANTS AND SO ALSO THE GENUINENESS OF THE TRANSACTIONS. TH US, THE CASE OF NRA IRON AND STEEL PVT. LTD. IN FACT SUPPOR TS THE CASE OF THE APPELLANT WHEN TESTED ON THE TOUCH STONE OF THE PRINCIPLES LAID BY THE HON'BLE APEX COURT IN ITS LATEST DECISION AS ALREADY DISCUSSED ABOVE. ITA NO.721/IND/2019 & C.O.11/IND/2020 VIJAYSHRI PACKAGING LIMITED. 34 7.32 SECTION 68 OF THE INCOME TAX ACT IS ONE OF THE POWE RFUL TOOL AVAILABLE WITH THE AUTHORITIES TO. CURB THE MALPRACTICES UNDERTAKEN BY THE INCOME TAX PAYERS TO BRING THEIR UNACCOUNTED INCOME IN THE SYSTEM THROUGH VARIOUS ME THODS WHICH DO. NOT APPEAR SO TO A COMMON PERSON. BUT IT IS ALSO IMPERATIVE THAT THE SAME IS TESTED IN THE RIGHT PER SPECTIVE AND IS ON RIGHT UNDERSTANDING OF THE FACTS SO AS TO STAND THE TEST OF JUDICIAL SCRUTINY AND FACTS. IN THE INSTANT CASE, THE AO HAS OVERLOOKED THE SUBMISSION MADE BY THE APPELLANT AND HAS GENERICALLY STATED THAT IT HAS FAILED TO ESTABL ISH THE GENUINENESS OF THE TRANSACTIONS AND CREDITWORTHINES S OF THE SUBSCRIBER. AS FAR AS THE CREDITWORTHINESS OR FINAN CIAL STRENGTH OF THE CREDITOR/SUBSCRIBER IS CONCERNED, T HAT CAN BE PROVED BY PRODUCING THE BANK STATEMENT OF THE CREDI TORS / SUBSCRIBERS SHOWING THAT IT HAD SUFFICIENT BALANCE IN ITS ACCOUNTS TO ENABLE IT TO SUBSCRIBE TO THE SHARE CAP ITAL. ONCE THESE DOCUMENTS ARE PRODUCED, THE ASSESSEE WOULD HA VE SATISFACTORILY DISCHARGED THE ONUS CAST UPON HIM. T HEREAFTER, IT IS FOR THE ASSESSING OFFICER TO SCRUTINIZE THE S AME AND IN CASE HE NURTURES ANY DOUBT ABOUT THE VERACITY OF TH ESE DOCUMENTS, TO PROBE THE MATTER FURTHER. HOWEVER, TO DISCREDIT THE DOCUMENTS PRODUCED BY THE ASSESSEE ON THE AFORE SAID ASPECTS, THERE HAS TO BE SOME COGENT REASONS AND MA TERIALS FOR THE ASSESSING OFFICER AND HE CANNOT GO INTO THE REALM OF SUSPICION. THUS ELEMENT OF CREDIT WORTHINESS AND SATISFACTION OF AO THEREAFTER IS SUBJECTIVE AND REQ UIRES MORE EFFORTS/INQUIRY ON THE PART OF THE AO TO GIVE A FIN DING IN THE ORDER THAT LENDER IS NOT CREDIT WORTHY. IT IS NOTED THAT THAT THE AO HAS DOUBTED THE TRANSACTION AND TRIED TO EST ABLISH THAT THE COMPANIES ARE NOT CREDITWORTHY AS THERE WA S NO RATIONALE BEHIND OBTAINING CONTROL OF THE COMPANIES BASED AT WEST BENGAL. HOWEVER, HE HAS FAILED TO ESTABLISH TH AT A TRANSACTION WHICH WAS DONE 10 YEARS BACK COULD AFFE CT THE TRANSACTION OF SHARE APPLICATION RECEIVED DURING TH E YEAR. IF AT ALL, ANY CONSIDERATION NEEDS TO BE TAKEN FOR THE ABOVE TRANSACTION OF OBTAINING CONTROL OF THE COMPANIES, THE SAME IS REQUIRED TO BE DONE IN THE HANDS OF THE SHARE HO LDERS IN THE YEAR IN WHICH THE CONTROL WAS OBTAINED AND IS N OT RELEVANT IN THE CASE OF APPELLANT COMPANY FOR THE Y EAR UNDER CONSIDERATION. THEREFORE, CONSIDERING THE ABOVE DISCUSSION THE ADD ITION MADE BY THE AO IS DELETED. THESE GROUNDS OF APPEAL ARE ACCORDINGLY ALLOWED. 8.0 GROUND NO.4. ADDITION ON ACCOUNT OF SHARE CAPITAL AND SHARE PREMIUM OF RS.3,47,01,225/- RECEIVED ON BASIS OF ITA NO.721/IND/2019 & C.O.11/IND/2020 VIJAYSHRI PACKAGING LIMITED. 35 STATEMENT OF THIRD PARTY WITHOUT GIVING ANY OPPORTU NITY OF CROSS EXAMINATION WHICH IS AGAINST PRINCIPLE OF NAT URAL JUSTICE. 8.1 I HAVE CONSIDERED THE FACTS AND ARGUMENTS OF THE APPELLANT. HOWEVER, SINCE THE ADDITION MADE U/ S 68 HAS ALREADY BEEN DELETED, THIS GROUND OF APPEAL BECOMES ACADEMIC AND DOES NOT REQUIRE ANY INDEPENDENT FINDI NG AND IS ACCORDINGLY DISMISSED. 9.0 GROUND NO. 5: SHARE CAPITAL AND SHARE PREMIUM OF RS.3;47,O1,225 ,-RECEIVED 'IS A CAPITAL RECEIPT AND CANNOT BE ADDED U/S 68 OF THE ACT. 9.1 I HAVE CONSIDERED THE FACTS AND ARGUMENTS OF THE APPELLANT. HOWEVER, SINCE THE ADDITION MADE U/S 68 HAS ALREADY BEEN DELETED, THIS GROUND OF APPEAL BECOMES . ACADEMIC AND DOES NOT REQUIRE ANY INDEPENDENT FINDI NG AND IS ACCORDINGLY DISMISSED. 10.0 AS A RESULT, THE APPEAL IS PARTLY ALLOWED. 10. WE FURTHER OBSERVE THAT LD. DR HAS NOT CONTROVE RTED ANY OF THE ABOVE STATED FACTS NARRATED BY THE ASSESSEE WHICH W ERE DULY FOUND TO BE CORRECT BY LD. CIT(A) BY PLACING ANY CONTRARY MATERIAL TO DISPROVE THE FACTS SO STATED. IT IS IMPORTANT TO NO TE THAT TWO SUBSCRIBERS COMPANIES NAMELY ARMAAN BARTER PRIVATE LIMITED AND PUSHPAK FINCON PRIVATE LIMITED ARE EXISTING SHAREHO LDERS OF THE COMPANY AND HOLDS EQUITY SHARES SINCE MANY YEARS. T HE GENUINENESS OF THIS TRANSACTION IN THE PAST HAS NOT BEEN DOUBTED BY THE REVENUE AUTHORITIES. BOTH THE COMPANIES ARE MAJ ORLY OWNED BY MR. RAJENDRA JAIN ( WHO IS ALSO THE DIRECTOR OF RES PONDENT ASSESSEE) ITA NO.721/IND/2019 & C.O.11/IND/2020 VIJAYSHRI PACKAGING LIMITED. 36 AND FAMILY SINCE THE YEAR CLOSE 2009. IMPORTANT FEA TURES OF THE TWO CORPORATE SUBSCRIBERS CAN BE TABULATED IN FOLLOWING FORM: S. NO. PARTICULARS ARMAN BARTER PVT. LTD PUSHPAK FINCON PVT. LTD. 1 DATE OF INCORPORATION 09/03/2007 31/03/1993 2 PRESENT ADDRESS AMALGAMATED WITH PUSHPAK FINCON PVT. LTD. W.E.F. 01/04/2016 61/4, R. R. INDUSTRIAL PARK NEAR SUPER CORRIDOR ROB VILLAGE BARDARI 3 DIRECTORS RAJENDRA JAIN PRITESH JAIN RAJENDRA JAIN PRITESH JAIN 4 OWNED BY SHRI RAJENDRA JAIN & FAMILY SINCE 09/02/2009 31/03/2009 5 NET WORTH AS ON 31.03.2014 1,00,37,394/- 4,29,69, 238/- 6 LAST SHARE CAPITAL RAISED ON 31/03/2007 31/03/20 08 11. IN ORDER TO ESTABLISH THE GENUINENESS OF THE TR ANSACTIONS OF THE SAID TWO INVESTOR COMPANIES WITH THE ASSESSEE COMPA NIES, FOLLOWING DOCUMENTS WERE FURNISHED FROM TIME TO TIME: S. NO. PARTICULARS (I) COPY OF SHARE APPLICATION FORM. (II) DETAILS OF APPLICANTS, THEIR ADDRESSES, PAN NO., NO . OF SHARE, AMOUNT ETC. ITA NO.721/IND/2019 & C.O.11/IND/2020 VIJAYSHRI PACKAGING LIMITED. 37 (III) COPIES OF ITRS OF SHARE APPLICANTS. (IV) BOARD RESOLUTIONS FOR SHARE ALLOTMENT. (V) FORM PAS-3 FOR ALLOTMENT FILED WITH ROC. (VI) AUDITED BALANCE SHEETS OF THE SHARE APPLICANTS. (VII) BANK STATEMENTS OF THE SHARE APPLICANTS REFLECTING THE MOVEMENTS OF FUNDS. (VIII) BANK STATEMENT OF THE ASSESSEE COMPANY. (IX) COPIES OF MOA AND AOA OF THE SHARE APPLICANTS COMPANIES. (X) NBFC REGISTRATION CERTIFICATE ISSUED BY RBI AND COP IES OF RETURNS FILED WITH RBI IN CASE OF M/S PUSHPAK FINCON PVT. LTD. (XI) DETAILS ABOUT THE SOURCE OF MONEY IN THE HANDS OF T HE SHARE APPLICANTS. (XII) COPIES OF ORDER PASSED BY THE REGIONAL DIRECTOR, COMPANY LAW BOARD WEST BENGAL SHIFTING THE REGISTERED OFFICE OF THE SHARE APPLICANT COMPANIES TO THE STATE OF MADHYA PRADESH. (XIII) RELEVANT ABSTRACT OF STATUTORY REGISTERS OF THE SHA RE APPLICANT COMPANIES TO ESTABLISH THE FACT THAT NO F RESH SHARE CAPITAL MONEY WAS INTRODUCED IN THESE TWO COMPANIES IN LAST 8 10 YEARS. (XIV) TO PROVE SOURCE OF SOURCE AND SOURCE THEREOF COPI ES OF RELEVANT LEDGER ACCOUNTS OF THE SHARE APPLICANTS IN THE BOOKS OF THE ENTITIES FROM WHOM THE SHARE APPLICANTS SOURCED THE AMOUNT AS WELL AS TO SUBSTANTIATE EVEN THE PRECEDING SOURCE AND SOURCE THEREOF, ALONG WITH RELEVANT BANK STATEMENTS, THUS ESTABLISHING MINIMUM THREE LAYERS OF SOURCE. 12. FURTHER IN ORDER TO PROVE CREDITWORTHINESS OF T HE TWO INVESTORS PRIVATE LIMITED COMPANIES HAS FURNISHED THE TRAIL O F THE FUNDS INVESTED BY THESE TWO INVESTOR COMPANIES WERE FILED BEFORE THE LOWER AUTHORITIES AND BEFORE US READS AS UNDER: ITA NO.721/IND/2019 & C.O.11/IND/2020 VIJAYSHRI PACKAGING LIMITED. 38 FOR ARMAAN BARTER PRIVATE LIMITED VIJAYSHRI PACKAGING LIMITED RS.145 LACS (REPAYMENT OF DEBIT BALANCE IN FIRM) ACCRUAL ESTATE & DEVELOPERS RS.57 LACS (REPAYMENT OF CREDIT BALANCE IN FIRM) ARMAAN BARTER PVT LTD RS.57 LACS (SHARE APPLICATION MONEY GIVEN TO THE ASSESSEE) SHARE CAPITAL OF VIJAYSHRI PACKAGING LIMITED FOR PUSHPAK FINCON PRIVATE LIMITED TRANSACTION 1 VIJAYSHRI PACKAGING LIMITED RS.145 LACS (REPAYMENT OF DEBIT BALANCE IN FIRM) ACCRUAL ESTATE & DEVELOPERS RS.88 LACS (REPAYMENT OF CREDIT BALANCE IN FIRM) PUSHPAK FINCON PRIVATE LIMITED RS.87 LACS (SHARE APPLICATION MONEY GIVEN TO THE ASSESSEE) SHARE CAPITAL OF VIJAYSHRI PACKAGING LIMITED TRANSACTION 2 VIJAYSHRI NOTE BOOKS PRIVATE LIMITED RS.140 LACS (REPAYMENT OF DEBIT BALANCE IN FIRM) ACCRUAL ESTATE & DEVELOPERS RS.134 LACS (REPAYMENT OF CREDIT BALANCE IN FIRM) BLAISE DISTRIBUTORS PRIVATE LIMITED RS.134 LACS (CAPITAL INTRODUCTION IN FIRM) SHREE RAJ ENTERPRISES RS.131.62 LACS (REPAYMENT OF CREDIT BALANCE IN FIRM) PUSHPAK FINCON PRIVATE LIMITED RS.133.00 LACS (SHARE APPLICATION MONEY GIVEN TO THE ASSESSEE) SHARE CAPITAL OF VIJAYSHRI PACKAGING LIMITED ITA NO.721/IND/2019 & C.O.11/IND/2020 VIJAYSHRI PACKAGING LIMITED. 39 13. THE ABOVE FLOW OF FUNDS SHOWS THAT MAJOR FUND W AS ALREADY LYING WITH THE ASSESSEE COMPANY IN THE FORM OF LOAN S/ADVANCE FROM PARTNERSHIP FIRMS WHERE THE ASSESSEE IS PARTNERS WH ICH WAS REFUNDED TO THE RESPECTIVE ENTITIES AND WERE RECEIV ED BACK FROM THE SHARE APPLICANTS IN THE FORM OF SHARE APPLICATION M ONEY BY THE ASSESSEE. SO THERE REMAINS NO QUESTION OF DOUBT ABO UT THE GENUINENESS OF ALLEGED TRANSACTION AND CREDITWORTHI NESS OF THE TWO INVESTOR PVT. LTD. COMPANIES WITH REGARD TO SHARE C APITAL AND SHARE PREMIUM RECEIVED FROM THEM DURING THE YEAR. 14. AS REGARDS 3 RD INVESTOR NAMELY PRITESH JAIN HUF WHO HAS SUBSCRIBED 93333 EQUITY SHARES FOR WHICH IT PAID RS .9,33,330/- TOWARDS THE SHARE CAPITAL AND RS.60,66,645/- TOWARD S SHARE PREMIUM AS MENTIONED ABOVE, THE COPY OF INCOME TAX PAN CARD, COPY OF INCOME TAX RETURN AND BANK STATEMENT REFLEC TING THE TRANSACTION WAS FURNISHED. KARTA OF HUF IS RELATIVE OF MR. RAJENDRA JIAN WHO IS DIRECTOR IN THE ASSESSEE COMPANY. SO GE NUINENESS OF TRANSACTION IS PROVED BEING CARRIED AT THROUGH BANK ING CHANNEL AND WITH A RELATED PARTY WHO KNOWS THE ASSESSEE COMPANY . AS REGARDS THE CREDITWORTHINESS AND THE SOURCE OF FUNDS USED T O MAKE ITA NO.721/IND/2019 & C.O.11/IND/2020 VIJAYSHRI PACKAGING LIMITED. 40 INVESTMENT TAIL OF FUND HAS BEEN PROVIDED IN THIS C ASE ALSO WHICH IS SUMMARIZED AS UNDER: PRITESH JAIN - RS.98 LACS (INTRODUCTION OF FUNDS IN ASSESSEE BY WAY OF UNSECU RED LOANS) VIJAYSHRI PACKAGING LIMITED RS.150 LACS (TRANSFER OF AMOUNT ALONGWITH BALANCE IN CASH CREDI T ACCOUNT AS INTER UNIT TRANSACTION) R.R. PACKAGING (I) PVT. LTD RS.76.11 LACS (REPAYMENT OF UNSECURED LOAN LYING WITH THE COMPANY ) PRITESH JAIN HUF RS.69.99 LACS (SHARE APPLICATION MONEY GIVEN TO THE ASSESSEE) SHARE CAPITAL OF VIJAYSHRI PACKAGING LIMITED 15. THE ABOVE DETAILS OF FUNDS LEAVE NO SCOPE TO DO UBT THE GENUINENESS OF CREDITWORTHINESS OF THE INVESTOR PRI TESH JAIN, HUF. WE, THEREFORE, IN THE GIVEN FACTS AND CIRCUMSTANCES OF THE CASE AND ALSO THE SETTLED JUDICIAL PRECEDENCE APPLICABLE IN THE CASE OF ITA NO.721/IND/2019 & C.O.11/IND/2020 VIJAYSHRI PACKAGING LIMITED. 41 ASSESSEE WHICH WAS FOUND TO BE IN THE FAVOUR OF ASS ESSEE BY LD. CIT(A) WHO HAS DEALT WITH THE DECISION IN DETAIL AS REFERRED BY US IN THE PRECEDING PARAS AND HAS ALSO DIFFERENTIATED THE FACTS WITH THE CASES RELIED BY THE ASSESSING OFFICER. THUS, WE ARE OF THE VIEW THAT THE ASSESSEE HAS PROVED THE IDENTITY OF THE ALLEGED SHAREHOLDERS AND THERE CREDITWORTHINESS AND HAS ALSO PROVED THE GENU INENESS OF TRANSACTIONS OF APPLYING FOR EQUITY SHARE ALONG WIT H SHARE PREMIUM PAID THEREON. SINCE BOTH THE LOWER AUTHORITIES HAVE NOT FOUND ANY IOTA OF EVIDENCE TO DISPROVE THE FACTS FILED BY THE ASSESSEE TO DISCREDIT THE DOCUMENTS PRODUCED BEFORE THEM AS WEL L AS BEFORE US, NO ADDITION WAS CALLED FOR U/S 68 OF THE ACT FOR TH E ALLEGED AMOUNT OF EQUITY SHARE CAPITAL AND SHARE PREMIUM RECEIVED AT RS.3,47,01,225/-. THUS, THERE IS NO REASON TO INTER FERE IN THE FINDING OF LD. CIT(A) AND THE SAME STANDS CONFIRM. ACCORDINGLY ALL THE GROUNDS RAISED BY THE REVENUE STANDS DISMISSED. 16. AS REGARDS, CROSS OBJECTION FILED BY THE ASSESS EE CHALLENGING THE VALIDITY OF ASSESSMENT PROCEEDINGS, ON THE GROU ND THAT THE ASSESSING OFFICER HAS EXCEEDED THE POWERS OF LIMITE D SCRUTINY, WE ARE OF THE VIEW THAT SINCE WE HAVE ALREADY DELETED THE IMPUGNED ITA NO.721/IND/2019 & C.O.11/IND/2020 VIJAYSHRI PACKAGING LIMITED. 42 ADDITION MADE BY THE ASSESSING OFFICER U/S 68 OF TH E ACT AND HAVE CONFIRMED THE FINDING OF LD. CIT(A), IT WILL BE MER ELY ACADEMIC TO DEAL WITH THIS GROUND, THEREFORE, THE CROSS OBJECTI ON BECOMES INFRUCTUOUS. 17. IN THE RESULT, APPEALS OF THE REVENUE FOR A.Y. 2015-16 IS DISMISSED AND CROSS OBJECTION BY THE ASSESSEE IS DI SMISSED AS INFRUCTUOUS. THE ORDER PRONOUNCED IN THE OPEN COURT ON 09. 02.2 021. SD/- SD/- (KUL BHARAT) (MANISH B ORAD) JUDICIAL MEMBER ACCOUNTANT MEMBER DATED : 9 TH FEBRUARY, 2021 PATEL/PS COPY TO: THE APPELLANT/RESPONDENT/CIT CONCERNED/CIT (A) CONCERNED/ DR, ITAT, INDORE/GUARD FILE. BY ORDER, ASSTT. REGISTRAR, I.T.A.T., INDORE