Income Tax Officer, Ward-2(2), Jaipur V. M/s. Trugold Buildtech Private Limited, Jaipur

ITA 736/JPR/2018

• Counselvise Citation: [2019] 117 COUNSELVISE.COM (IT) 9915 (ITAT-JAIPUR)
• Duration Of Justice: 10 month(s) 3 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 01-04-2019
• Appeal Filed By: Department
• Order Result: Allowed
• Bench Allotted: B
• Assessment Year: 2009-2010
• Appeal Filed On: 29-05-2018
• Result in Favour of: Revenue
• Court: TRIBUNAL
• Department Lawyers: KARNI DAN
• Assessee Lawyers: S L PODDAR ADV DHK
• Keywords: Additional evidence; Fair market value
• Section: 56(2); 133(6); 147; 68; 148; 56; 144; 11

Judgement Text

VK;DJ VIHYH; VF/KDJ.K] T;IQJ U;K;IHB] T;IQJ IN THE INCOME TAX APPELLATE TRIBUNAL, JAIPUR BENCHES B, JAIPUR JH JES'K LH 'KEKZ] YS[KK LNL; ,OA JH FOT; IKY JKO] U;KF;D LNL; DS LE{K BEFORE: SHRI RAMESH C SHARMA, AM & SHRI VIJAY PAL RAO , JM VK;DJ VIHY LA-@ ITA NO. 736/JP/2018 FU/KZKJ.K O'KZ@ ASSESSMENT YEAR : 2009-10 I.T.O., WARD 2(2), JAIPUR. CUKE VS. M/S TRUGOLD BUILDTECH PVT. LTD., 203, AMBABARI, JHOTWARA, JAIPUR. LFKK;H YS[KK LA-@THVKBZVKJ LA-@ PAN/GIR NO.: AACCT 6983 E VIHYKFKHZ@ APPELLANT IZR;FKHZ@ RESPONDENT JKTLO DH VKSJ LS@ REVENUE BY : SHRI KARNI DAN (JCIT) FU/KZKFJRH DH VKSJ LS@ ASSESSEE BY : SHRI S.L. PODDAR (ADV.) LQUOKBZ DH RKJH[K@ DATE OF HEARING : 05/02/2019 MN?KKS'K.KK DH RKJH[K @ DATE OF PRONOUNCEMENT : 01/04/2019 VKNS'K@ ORDER PER: R.C. SHARMA, A.M. THIS IS AN APPEAL FILED BY REVENUE AGAINST THE ORDE R OF LD.CIT(A)-I, JAIPUR DATED 23/03/2018 FOR THE A.Y.2009-10 IN THE MATTER OF ORDER PASSED U/S 148/144 OF THE INCOME TAX ACT, 1961 (IN S HORT THE ACT). 2. RIVAL CONTENTIONS HAVE BEEN HEARD AND RECORD PER USED. 3. IN THIS APPEAL, THE REVENUE IS AGGRIEVED BY THE ORDER OF THE LD. CIT(A) DELETING THE ADDITION OF RS. 73,50,000/- MADE BY THE ASSESSING OFFICER ON ACCOUNT OF SHARE PREMIUM. ITA 736/JP/2018_ ITO VS. M/S TRUGOLD BUILDTECH PVT. LTD. 2 4. THE FACTS IN BRIEF ARE THAT THE ASSESSEE IS A PRI VATE LIMITED COMPANY AND IS ENGAGED IN THE BUSINESS OF TRADING OF CLOTHE S. ORIGINAL RETURN WAS FILED ON 29.09.2009 DECLARING LOSS OF RS. 1,54,628/ -. SUBSEQUENTLY ON RECEIPT OF INFORMATION FROM ITS/AIR/CIB/I&CI THE LEA RNED ASSESSING OFFICER ISSUED NOTICE U/S 148 ON 30.03.2016 ON THE GROUND THAT ASSESSEE ALLEGEDLY RECEIVED RS. 73,50,000/- SHARE APPLICATIO N MONEY/PREMIUM ON SUBSTANTIALLY HIGHER VALUE WITHOUT ANY JUSTIFICATION . A COPY OF NOTICE U/S 148 IS AVAILABLE ON PAPER BOOK PAGE NO. 1. THE ASSES SEE FURNISHED THE RETURN OF INCOME ELECTRONICALLY ON 27.04.2016 AND A LSO FURNISHED A HARD COPY ON 29.04.2016. THE ASSESSING OFFICER HAS COMPLE TED THE ASSESSMENT U/S 148/144 OF THE INCOME TAX ACT, 1961 16.12.2016 D ETERMINING TOTAL INCOME AT RS. 73,50,000/- BY MAKING ADDITION OF THE ALLEGED SHARES PREMIUM U/S 68 OF THE ACT AND TREATING THE SHARE PR EMIUM OF RS. 73,50,000/- AS INCOME OF THE ASSESSEE. 5. BY THE IMPUGNED ORDER, THE LD CIT(A) HAS DELETED THE ADDITION AFTER OBSERVING AS UNDER: 3.3.2 DETERMINATION : (I) I HAVE DULY CONSIDERED THE SUBMISSIONS OF THE A PPELLANT, ASSESSMENT ORDER, REMAND REPORT OF THE AO, REJOINDER OF THE AP PELLANT TO THE REMAND REPORT OF THE AO AND THE MATERIAL PLACED ON RECORD. IT IS NOTED THAT DURING THE YEAR UNDER CONSIDERATION THE APPELL ANT HAS ISSUED 15000 EQUITY SHARES OF FACE VALUE OF RS. 10/- EACH AT A PREMIUM OF RS. 490/- EACH I.E. 15000 EQUITY SHARES WERE ISSUED FOR A TOTAL ITA 736/JP/2018_ ITO VS. M/S TRUGOLD BUILDTECH PVT. LTD. 3 CONSIDERATION OF RS. 75 LAKH INCLUDING SHARE CAPITA L OF RS. 1,50,000/- AND SHARE PREMIUM OF RS. 73,50,000/-. IN THE ASSESS MENT ORDER, IT HAS BEEN OBSERVED BY THE AO THAT THE APPELLANT COMPANY HAS FAILED TO PROVE THE IDENTITY, CREDITWORTHINESS OF THE SHARE A PPLICANTS AND THE GENUINENESS OF THESE TRANSACTIONS. IT WAS FURTHER O BSERVED BY THE AO THAT THERE WAS NO JUSTIFICATION OF SUCH A HIGH PREM IUM CHARGED BY THE APPELLANT COMPANY VIS-A-VIS ITS FINANCIAL STATEMENT S. THE AO HAS DISCUSSED THE PROVISIONS OF SECTION 56(1) OF THE AC T ON PAGE NO. 15 OF THE ASSESSMENT ORDER, AND WAS OF THE VIEW THAT THE INSTANT TRANSACTIONS UNDER CONSIDERATION WERE DULY COVERED UNDER THE PROVISIONS OF SECTION 56(1) OF THE ACT, THOUGH A SP ECIFIC PROVISION WAS INSERTED IN SUBSECTION 2 OF SECTION 56 SUBSEQUENTLY . HOWEVER, THE AO HAS MADE AN ADDITION OF RS. 73,50,000/- U/S 68 OF T HE ACT BY OBSERVING THAT THE RECEIPT OF SHARE CAPITAL AND SHARE PREMIUM WAS PART OF A DEVICE OF COLOURFUL TRANSACTION BY WAY OF WHICH A S UM OF RS. 73,50,000/- WAS INTRODUCED INTO THE BOOKS OF ACCOUN TS OF THE APPELLANT COMPANY IN THE FORM OF SHARE PREMIUM ATTA CHED TO THE SHARE CAPITAL. IT WAS ALSO OBSERVED BY THE AO THAT THERE WAS NO JUSTIFICATION FOR PREMIUM OF RS. 490 PER EQUITY SHA RE. IT WAS ALSO HELD BY THE AO THAT THE APPELLANT COMPANY HAS FAILED TO PROVE THE IDENTITY, CREDITWORTHINESS OF THE SHARE APPLICANTS AND THE GE NUINENESS OF THE TRANSACTION. (II) IT IS TO BE NOTED THAT THOUGH THE AO HAS DISCU SSED THE PROVISIONS OF SECTION 56 OF THE ACT BUT DID NOT INVOKE THESE PROV ISIONS BUT HAS MADE ADDITION U/S 68 OF THE ACT. IT APPEARS THAT THE AO WAS CONFUSED WHETHER THE PROVISIONS OF SECTION 56 OR 68 ARE APPL ICABLE TO THE FACTS OF THE INSTANT CASE UNDER CONSIDERATION. IT IS STRA NGE THAT THE AO HAS ACCEPTED THE SHARE CAPITAL BUT DID NOT ACCEPT THE S HARE PREMIUM THOUGH THE SAME WERE RECEIVED TOGETHER. I FAIL TO U NDERSTAND THAT HOW ITA 736/JP/2018_ ITO VS. M/S TRUGOLD BUILDTECH PVT. LTD. 4 THE CREDITWORTHINESS, IDENTITY OF THE SHARE APPLICA NTS AND GENUINENESS OF THE TRANSACTIONS COULD BE ACCEPTED BY THE AO FOR SHARE CAPITAL BUT NOT FOR THE SHARE PREMIUM, THOUGH THE TRANSACTIONS WERE COMPOSITE ONE. IT APPEARS THAT THE AO HAS INVOKED THE PROVISI ONS OF SECTION 56(2) OF THE ACT IN THE GUISE OF SECTION 68 OF THE ACT AS ONLY SHARE PREMIUM WAS ADDED TO THE INCOME OF THE APPELLANT. (III) IT WOULD BE APPROPRIATE TO EXAMINE THE APPLIC ABILITY OF THE PROVISIONS OF SECTION 56 OF THE ACT TO THE FACTS OF THE INSTAN T CASE UNDER CONSIDERATION, WHICH READS AS UNDER:- '56. INCOME FROM OTHER SOURCES. (I) INCOME OF EVERY KIND WHICH IS NOT TO BE EXCLU DED FROM THE TOTAL INCOME UNDER THE ACT SHALL BE CHARGEABLE TO I NCOME TAX UNDER THE HEAD. INCOME FROM OTHER SOURCES', IF IT IS NOT CHARGEABLE TO INCOME TAX UNDER ANY OF THE HEADS SPE CIFIED IN SECTION 14, ITEMS A TO E. (IV) THE PROVISIONS OF SECTION 56(1) THE ACT CAN BE INVOKED TO TAX INCOME OF EVERY KIND WHICH IS NOT CHARGEABLE TO TAX UNDER ANY HEAD SPECIFIED IN SECTION 14, UNDER THE HEAD 'INCOME FROM OTHER SO URCES. THEREFORE, PROVISIONS OF SEC 56(1) ARE NOT APPLICABLE. FURTHER THE AMENDED PROVISIONS OF SEC 56 (2) OF THE ACT SPECIFY THE VAR IOUS INCOME TO BE ASSESSED UNDER THIS SECTION. THE PREMIUM ON SHARES HAS BEEN INCLUDED U/S SEC 56(2) (VIIIB) OF THE ACT W.E.F. 01.04.2014, WHICH IS REPRODUCED AS UNDER: '56(2) IN PARTICULAR, AND WITHOUT PREJUDICE TO THE GENERALITY OF THE PROVISIONS OF SUB-SECTION (I), THE FOLLOWING INCOME S, SHALL BE CHARGEABLE TO INCOME TAX UNDER THE HEAD 'INCOME FRO M OTHER SOURCES' NAMELY:- (I) DIVIDENDS (IA) TO (VIIA)... ITA 736/JP/2018_ ITO VS. M/S TRUGOLD BUILDTECH PVT. LTD. 5 (VIIB) WHERE A COMPANY, NOT BEING A COMPANY IN WHI CH THE PUBLIC ARE SUBSTANTIALLY INTERESTED, RECEIVES, IN ANY PREV IOUS YEAR, FROM ANY PERSON BEING A RESIDENT, ANY CONSIDERATION FOR ISSUE OF SHARES THAT EXCEEDS THE FACE VALUE OF SUCH SHORES, THE AGG REGATE CONSIDERATION RECEIVED FOR SUCH SHARES AS EXCEEDS T HE FAIR MARKET VALUE OF THE SHARES:' (V) A CORRESPONDING AMENDMENT HAS ALSO BEEN MADE IN THE DEFINITION OF INCOME U/S 2(24)OF THE ACT W.E.F. 01.04.2013. THE R ELEVANT PORTION READS AS UNDER:- '(XVI) ANY CONSIDERATION RECEIVED FOR ISSUE OF SHA RES AS EXCEEDS THE FAIR MARKET VALUE OF THE SHARE REFERRED TO IN CLAUS E (VIIB) OF SUB- SECTION (2) OF SECTION 56;]' (VI) IT IS TO BE NOTED THAT TO TAX THE INCOME UNDE R THE ACT, IT MUST COME UNDER THE DEFINITION OF INCOME AS PROVIDED U/S 2(24 ) OF THE I.T. ACT, 1961. THERE WERE AMENDMENTS IN SECTION 2(24) OF THE ACT AND IN SECTION 56(2) OF THE ACT W.E.F. 01.04.2013, WHICH A RE NOT APPLICABLE TO A.Y. UNDER CONSIDERATION. BY THESE AMENDED PROVISIO NS, ANY CONSIDERATION RECEIVED FOR ISSUE OF SHARES THAT EXC EEDS THE FAIR MARKET VALUE OF SUCH SHARES, THE AGGREGATE CONSIDERATION R ECEIVED FOR SUCH SHARES AS EXCEEDS THE FAIR MARKET VALUE OF THE SHAR ES SHALL BE TAXABLE AS INCOME AS PER CLAUSE (VIIB) OF SECTION 56(2) OF THE ACT. THE CBDT VIDE CIRCULAR NO. 3 OF 2012 DATED 12.06.2012 HAS AL SO MENTIONED THAT PROVISIONS OF SECTION 56(2) (VIIB) WILL BE APPLICAB LE FROM A.Y. 2013-14 ONWARDS. IT WOULD BE APPROPRIATE TO REPRODUCE THE R ELEVANT PORTION OF ABOVE REFERRED CBDT CIRCULAR AS UNDER:- SHARE PREMIUM IN EXCESS OF FAIR MARKET VALUE TO B E TREATED AS INCOME IN THE FINANCE BILL, 2012, IT HAD BEEN PROPO SED [SECTION 56(2), AS SUB-CLAUSE [(VIIB]] THAT IN CASE OF A COM PANY, NOT BEING A COMPANY IN WHICH THE PUBLIC ARE SUBSTANTIALLY INTER ESTED, WHICH RECEIVES, IN ANY PREVIOUS YEAR, FROM ANY PERSON BEI NG A RESIDENT, ANY CONSIDERATION FOR ISSUE OF SHARES AND THE CONSI DERATION ITA 736/JP/2018_ ITO VS. M/S TRUGOLD BUILDTECH PVT. LTD. 6 RECEIVED FOR ISSUE OF SUCH SHARES EXCEEDS THE FACE VALUE OF SUCH SHARES, THEN THE AGGREGATE CONSIDERATION RECEIVED F OR SUCH SHARES AS EXCEEDS THE FAIR MARKET VALUE OF THE SHARES SHAL L BE CHARGEABLE TO INCOME TAX. AN EXEMPTION WAS PROVIDED IN A CASE WHERE THE CONSIDERATION FOR ISSUE OF SHARES IS RECEIVED BY A VENTURE CAPITAL UNDERTAKING FROM A VENTURE CAPITAL COMPANY OR A VEN TURE CAPITAL FUND. (I) IT HAS NOW BEEN FURTHER PROVIDED THAT SUCH EXC ESS SHARE PREMIUM IS INCLUDED IN THE DEFINITION OF 'INCOME' U NDER SUB- CLAUSE (XVI) OF CLAUSE (24) OF SECTION 2. (II) CONSIDERING THAT THE PROPOSED AMENDMENT MAY C AUSE AVOIDABLE DIFFICULTY TO INVESTORS WHO INVEST IN STA RT-UPS WHERE THE FAIR MARKET VALUE MAY NOT BE DETERMINED ACCURATELY, IT IS PROPOSED TO PROVIDE AN EXEMPTION TO ANY OTHER CLASS OF INVES TORS AS MAY BE NOTIFIED BY THE CENTRAL GOVERNMENT. THESE AMENDMENTS WILL TAKE EFFECT FROM 1ST APRIL, 2013 AND WILL, ACCORDINGLY, APPLY IN RELATION TO THE ASSESSMENT YEAR 2013-14 AND SUBSEQUENT ASSESSMENT YEAR S. (VII) THE PROVISIONS OF SEC 56(2) (VIIB) OF INCOME- TAX ACT, 1961 ARE APPLICABLE W.E.F. 1ST APRIL, 2013 AND WILL ACCORDIN GLY APPLY IN RELATION TO AY 2013-14 AND SUBSEQUENT ASSESSMENT YEARS. THE INCOME AS MENTIONED IN SECTION 56(2) (VIIB) OF THE ACT IS INC LUDED IN DEFINITION OF SECTION 2(24) OF THE ACT W.E.F. 01-04-2013. THEREFO RE, THE PROVISIONS OF THESE SECTIONS CANNOT BE MADE APPLICABLE PRIOR TO A .Y. 2013-14. (VIII) RELIANCE IS PLACED ON THE JUDGEMENT DATED 30 .10.2017 OF HONBLE ITAT, JAIPUR IN THE CASE OF M/S. MOTISONS BUILDTECH PVT. LTD. VS ACIT IN ITA NO. 481 /JP/2017 FOR AY 2009-10, WHEREIN THE APPEAL OF THE REVENUE ON THE SAME ISSUE WAS DISMISSED. FURTHER, T HE ABOVE JUDGEMENT WAS FOLLOWED BY THE HONBLE ITAT, JAIPUR IN ITS JUDGEMENT DATED 06.11.2017 IN THE CASE OF M/S. RAIN BOW BUILDCON PVT. LTD VS ACIT IN ITA NO.491/JP/2017 FOR THE A.Y. 2009-10. ITA 736/JP/2018_ ITO VS. M/S TRUGOLD BUILDTECH PVT. LTD. 7 (IX) IT MAY BE MENTIONED THAT SECTION 68 OF THE ACT PROV IDES THAT IF ANY SUM FOUND CREDITED IN THE BOOKS OF AN ASSESSEE MAIN TAINED AND EXPLANATION OFFERED BY THE ASSESSEE IS NOT SATISFAC TORY IN THE OPINION OF THE AO, THEN SUCH SUM CREDITED BE CHARGED TO INC OME-TAX AS THE INCOME OF THE ASSESSEE OF THAT PREVIOUS YEAR. IT WO ULD BE APPROPRIATE TO REPRODUCE THE PROVISIONS OF SECTION 68 OF THE AC T AS UNDER:- SECTION 68 - CASH CREDITS: WHERE ANY SUM IS FOUND CREDITED IN THE BOOKS OF AN ASSESSEE MAINTAINED FOR ANY PREVIOU S YEAR, AND THE ASSESSEE OFFERS NO EXPLANATION ABOUT THE NATURE AND SOURCE THEREOF OR THE EXPLANATION OFFERED BY HIM IS NOT IN THE OPINION OF THE (ASSESSING) OFFICER, SATISFACTORY, THE SUM SO C REDITED MAY BE CHARGED TO INCOME-TAX AS THE INCOME OF THE ASSESSEE OF THAT PREVIOUS YEAR. (X) THUS, THE SUM RECEIVED BY THE APPELLANT, TOWARD S SHARE APPLICATION AND SHARE PREMIUM COULD HAVE BEEN TAXED AS INCOME U /S 68 OF THE ACT IN THE PREVIOUS YEAR IN WHICH SUCH SUM HAS BEEN REC EIVED BY THE APPELLANT. IT IS NOTED THAT IN ITS WRITTEN SUBMISSI ONS, IT HAS BEEN CLAIMED BY THE APPELLANT THAT THE SHARE CAPITAL AS WELL AS SHARE PREMIUM WAS RECEIVED BY IT DURING THE FY 2007-08 RE LEVANT TO THE AY 2008-09 AND NOT IN THE INSTANT YEAR UNDER CONSIDERA TION. IT MAY BE MENTIONED THAT DURING THE ASSESSMENT PROCEEDINGS, I T WAS STATED BY THE APPELLANT THAT THE SHARE CAPITAL WAS RECEIVED D URING THE FY 2007- 08 RELEVANT TO AY 2008-09 AND THE SHARES WERE ISSUE D DURING THE FY 2008-09 RELEVANT TO AY 2009-10 AS IS EVIDENT FROM P ARA NO. 8(D) ON PAGE NO. 13 OF THE ASSESSMENT ORDER. HOWEVER, IT AP PEARS THAT THE SAME WAS IGNORED BY THE AO. IT IS TO BE NOTED THAT DURING THE APPELLATE PROCEEDINGS, THE APPELLANT HAS FILED A NU MBER OF DOCUMENTS AS ADDITIONAL EVIDENCES INCLUDING SHARE APPLICATION S, BANK STATEMENT OF THE APPELLANT ETC., RELATING TO THE ISSUE UNDER CONSIDERATION, WHICH ALONG WITH WRITTEN SUBMISSION OF THE APPELLANT WERE FORWARDED TO THE ITA 736/JP/2018_ ITO VS. M/S TRUGOLD BUILDTECH PVT. LTD. 8 AO FOR ITS COMMENTS AND FOR MAKING NECESSARY ENQUIR IES, IF ANY. HOWEVER, IT APPEARS THAT NO ENQUIRIES WERE MADE BY THE AO EVEN DURING THE REMAND PROCEEDINGS THOUGH SUFFICIENT TIM E OF MORE THAN 5 MONTHS WERE ALLOWED TO IT. IT IS PERTINENT TO MENTI ON HERE THAT IN ITS REMAND REPORT, THE AO COULD NOT CONTROVERT THE ABOV E SUBMISSIONS OF THE APPELLANT BUT ONLY STATED THAT: IN COMPLIANCE TO THE LETTER U/S 133(6) THE ASSESS EE HAS FURNISHED WRITTEN REPLY ON 12.06.2014 (COPY ENCLOSE D). IN THE REPLY THE ASSESSEE ITSELF ACCEPTED THAT THE SHARE P REMIUM WAS RECEIVED DURING THE A.Y. 2009-10 AND NO DETAILS HAS FURNISHED DURING ASSESSMENT PROCEEDINGS. HENCE THE ALLEGATION OF THE ASSESSEE IS INCORRECT.' (XI) IT MAY BE MENTIONED THAT THE ABOVE REPLY OF TH E APPELLANT, AS RELIED UPON BY THE AO, COULD BE USED FOR INITIATING PROCEE DINGS U/S 147 OF THE ACT BUT NOT FOR MAKING ADDITION U/S 68 OF THE A CT AS THE SAME IS NOT SUPPORTED WITH ANY CORROBORATIVE EVIDENCE. THE AO MUST ASCERTAIN THE YEAR IN WHICH THE SUCH SUM WAS RECEIV ED BY THE APPELLANT AND THE AO SHOULD HAVE MADE NECESSARY VER IFICATION IN THIS REGARD. FOR MAKING ADDITION U/S 68 OF THE ACT, THE SUM MUST HAVE BEEN CREDITED IN THE BOOKS OF ACCOUNTS OF THE APPEL LANT, DURING THE YEAR UNDER CONSIDERATION AND THERE IS NO EVIDENCE O N RECORD, WHICH MAY ESTABLISH THAT THE SHARE CAPITAL AS WELL AS SHA RE PREMIUM WAS RECEIVED DURING THE YEAR UNDER CONSIDERATION AND TH US, THERE CANNOT BE ANY JUSTIFICATION FOR THE AO TO MAKE THE IMPUGNE D ADDITION. IF ANY ACTION HAS TO BE TAKEN U/S 68 OF THE ACT, THEN THE SAME HAS TO BE TAKEN IN THE FY 2007-08 RELEVANT TO THE AY 2008-09, IN WHICH THE SAID SUM WAS RECEIVED BY THE APPELLANT AND NOT IN THE YE AR UNDER CONSIDERATION. IT IS NOTED FROM THE BALANCE SHEET O F THE APPELLANT AS ON 31.03.2008 THAT THE APPELLANT HAS SHOWN SHARE AP PLICATION MONEY OF RS. 75 LAC UNDER THE HEAD CURRENT LIABILITIES & PROVISIONS IN ITA 736/JP/2018_ ITO VS. M/S TRUGOLD BUILDTECH PVT. LTD. 9 SCHEDULE-E TO THE BALANCE SHEET WHICH CLEARLY ESTAB LISH THAT THE AMOUNT FOR ISSUE OF SHARE CAPITAL WAS RECEIVED DURI NG THE FY. 2007-08 RELEVANT TO THE AY 2008-09 AND NOT DURING THE FY 20 08-09 RELEVANT TO THE AY 2009-10 I.E. THE YEAR UNDER CONSIDERATION. (XII) IT MAY BE MENTIONED THAT IN THE CASE OF ITO V S STANDARD LEATHER (P.) LTD. [2016] 76 TAXMANN.COM 109 (KOLKATA - TRIB.), T HE SIMILAR ISSUE WAS BEFORE THE HON'BLE TRIBUNAL AND IT WAS HELD THE REIN THAT: SIMILARLY IN THE CASE OF DY. CIT V. AMOD PETROCHE M (P.) LTD. [2008] 307 ITR 265 (GUJ, IT WAS HELD THAT AS PER SE CTION 68, THERE SHOULD BE CASH CREDITS OF PREVIOUS YEAR. THE SECTIO N PROVIDES FOR A DEEMING FICTION OF TREATING THE SUM FOUND CREDITED IN THE BOOKS OF ON ASSESSEE MAINTAINED FOR ANY PREVIOUS YEAR, BEING CHARGED TO INCOME-TAX AS THE INCOME OF THE ASSESSEE OF THAT PR EVIOUS YEAR, PROVIDED (I) THE ASSESSEE OFFERS NO EXPLANATION AS TO THE NATURE AND SOURCE OF THE CREDITS, OR (II) THE EXPLANATION OFFERED BY THE ASSESSEE IS NOT, IN THE OPINION OF THE ASSESSING OF FICER, SATISFACTORY. THE CRUX OF THE ISSUE, THEREFORE IS, THERE HAVE TO BE CREDITS OF ANY SUM IN THE BOOKS OF AN ASSESSEE MAIN TAINED FOR ANY PREVIOUS YEAR, ONLY THEN THE SUM SO CREDITED CA N BE BROUGHT TO TAX AS THE INCOME OF THE ASSESSEE OF THAT PREVIO US YEAR; IN OTHER WORDS, FIRST OF ALL, THERE HAVE TO BE CREDITS IN A PREVIOUS YEAR AND ONLY IN THE ASSESSMENT RELATABLE TO THAT P REVIOUS YEAR, NAMELY, YEAR OF CREDIT, THE SUM CAN BE BROUGHT TO T AX. IN CIT V. USHA STUD AGRICULTURAL FARMS LTD. [2008] 301 ITR 38 4/[2009] 183 TAXMAN 277 (DELHI), IT WAS HELD THAT SINCE IT IS A FINDING OF FACT RECORDED BY THE COMMISSIONER (APPEALS) THAT THE CRE DIT BALANCE APPEARING IN THE ACCOUNTS OF ASSESSEE, DID NOT PERT AIN TO THE YEAR UNDER CONSIDERATION, UNDER THESE CIRCUMSTANCES, THE ASSESSING OFFICER WAS NOT JUSTIFIED IN MAKING THE IMPUGNED AD DITION UNDER SECTION 68 AND AS SUCH NO FAULT COULD BE FOUND WITH THE ORDER OF THE TRIBUNAL WHICH HAD ENDORSED THE DECISION OF COM MISSIONER (APPEALS). IN MAHABIR PRASAD PREM CHAND JAIN V. ITO [1988] 40 TAXMAN 35 (MAG.)(DELHI), IT WAS HELD THAT AMOUNTS F OUND IN THE BOOKS OF ASSESSEE WERE IN EXISTENCE MUCH PRIOR TO T HE BEGINNING OF THE ACCOUNTING PERIOD CORRESPONDING TO THE RELEV ANT ITA 736/JP/2018_ ITO VS. M/S TRUGOLD BUILDTECH PVT. LTD. 10 ASSESSMENT YEAR AND THE SAME COULD NOT, THEREFORE, BE TREATED AS THE INCOME OF ASSESSEE EARNED DURING THE RELEVANT P REVIOUS YEAR. IN NUCHEM LTD. V. DY. CIT [2004] 87 TTJ 166 (DELHI - TRIB.), IT WAS HELD THAT REVENUE HAD FAILED TO PROVE THAT THE AMOU NTS WERE CREDITED TO THE BOOKS OF ACCOUNT OF THE ASSESSEE IN THE YEAR UNDER CONSIDERATION. THESE AMOUNTS WERE BROUGHT FORWARD F ROM EARLIER YEARS AND IT IS SETTLED LAW THAT THE ADDITION UNDER SECTION 68 COULD BE MADE ONLY IF THE AMOUNT WAS CREDITED IN TH E ACCOUNTS OF THE ASSESSEE IN THE RELEVANT FINANCIAL YEAR. IN SHRI VARDHMAN OVERSEAS LTD.'S CASE (SUPRA), IT WAS HELD THAT NO N EW AMOUNT HAD BEEN CREDITED BY ASSESSEE IN ITS ACCOUNT DURING THE YEAR UNDER CONSIDERATION. THEREFORE, APPLICABILITY OF SE CTION 68 IS ALSO RULED OUT AND ADDITION COULD NOT BE MADE UNDER SECTION 68. IN VIEW OF ABOVE THERE IS REASON TO INTERFERE IN TH E ORDER OF COMMISSIONER (APPEALS). HENCE, THIS GROUND OF REVEN UE IS DISMISSED. [PARA 13]' (EMPHASIS SUPPLIED) (XIII) IN THE CASE OF M/S. SOORAJ LEATHERS VS ITO I N I.T.A.NO.305/MDS./2016, IT WAS HELD BY HON'BLE TRIBUNAL THAT: 'IF THE LIABILITIES ARE OLD, NO CREDIT HAS BEEN MA DE IN SO FAR THOSE CREDITS IN THE BOOKS OF ACCOUNTS IN THE ASSESSMENT YEAR UNDER CONSIDERATION, SEC.68CANNOT BE APPLIED.' (XIV) IN THE CASE OF GLEN WILLIAMS VS ACIT IN ITA N O. 1078/BANG/2014, IT WAS HELD BY HONBLE TRIBUNAL THAT: 13. WE HAVE GIVEN A CAREFUL CONSIDERATION TO THE RIVAL SUBMISSIONS. ON ALMOST IDENTICAL FACTS, THE HON'BLE DELHI HIGH COURT IN THE CASE OF SHRI VARDHAMAN OVERSEAS LTD. ( SUPRA), HAS CLEARLY LAID DOWN THAT NEITHER SECTION 41(1) NOR SE CTION 68 OF THE ACT CAN BE APPLIED. ON THE APPLICABILITY OF SECTION 68, WE ARE OF THE VIEW THAT THOSE PROVISIONS WILL NOT APPLY AS THE BA LANCES SHOWN IN THE CREDITORS ACCOUNT DO NOT ARISE OUT OF ANY TRANS ACTION DURING THE PREVIOUS YEAR RELEVANT TO AY 2009-10. THE PROVI SIONS OF SEC. 68 ARE CLEAR INASMUCH AS THEY REFER TO 'SUM FOUND CRED ITED IN THE BOOKS OF ACCOUNT OF AN ASSESSEE MAINTAINED FOR ANY PREVIOUS YEAR. SINCE THE CREDIT ENTRIES IN QUESTION DO NOT RELATE TO PREVIOUS YEAR RELEVANT TO AY 2009-10, THE SAME CANNOT BE BRO UGHT TO TAX ITA 736/JP/2018_ ITO VS. M/S TRUGOLD BUILDTECH PVT. LTD. 11 U/S. 68 OF THE ACT. THE PROPER COURSE IN SUCH CASES FOR THE REVENUE WOULD BE TO FIND OUT THE YEAR IN WHICH THE CREDITS IN QUESTION WERE CREDITED IN THE BOOKS OF ACCOUNT AND THEREAFTER MAK E AN ENQUIRY IN THAT YEAR AND MAKE AN ADDITION IN THAT YEAR , IF OTHER CONDITIONS FOR APPLICABILITY OF SECTION 68 ARE SATISFIED.(EM PHASIS SUPPLIED.) (XV) IN VIEW OF THE ABOVE DISCUSSION AND LOOKING TO THE TOTALITY OF FACTS AND CIRCUMSTANCES OF THE CASE, IT IS HELD THAT THE AO W AS NOT JUSTIFIED IN MAKING ADDITION OF RS. 73.50 LAC U/S 68 OF THE ACT, DURING THE YEAR UNDER CONSIDERATION, AS THE SUCH SUM WAS NOT RECEIV ED BY THE APPELLANT DURING THE PREVIOUS YEAR RELEVANT TO THE ASSESSMENT YEAR UNDER CONSIDERATION AND HENCE, THE ADDITION MADE BY THE AO IS HEREBY DELETED. 6. AGAINST THE ABOVE SAID ORDER OF THE LD. CIT(A), T HE REVENUE IS IN FURTHER APPEAL BEFORE US WHEREIN FOLLOWING GROUNDS HA VE BEEN TAKEN BY THE REVENUE. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE AND IN LAW THE LD. CIT (APPEALS)-I. JAIPUR HAS ERRED IN:- 1. WHETHER ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE AND IN LAW THE LD. CIT(A) WAS JUSTIFIED IN DELETING THE AD DITION OF RS. 73,50,000/- MADE BY THE AO ON ACCOUNT UNEXPLAINED C REDIT OF SHARE PREMIUM? 2. WHETHER ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE AND IN LAW THE LD. CIT(A) WAS NOT JUSTIFIED IN IGNORING TH E FACT THAT THE ASSESSEE HAS DECLARED SHARE APPLICATION MONEY RECEI PT IN BALANCE SHEET FOR F.Y. 2008- 09 RELEVANT TO A.Y. 2009-10? 3. WHETHER ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE AND IN LAW THE LD. CIT(A) WAS NOT JUSTIFIED TO APPRECIATE THE FACTS THAT THE ASSESSEE HAS CREDITED THE SHARE APPLICATION MONEY D URING A.Y. 2009-10 ( IN BALANCE SHEET)? ITA 736/JP/2018_ ITO VS. M/S TRUGOLD BUILDTECH PVT. LTD. 12 4. WHETHER ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE AND IN LAW THE LD. CIT(A) WAS NOT JUSTIFIED IN IGNORING TH E FACTS THAT THE ASSESSEE HAS NOT FILED BANK STATEMENT AND CONFIRMAT IONS OF SHARE APPLICATION MONEY/SHARE PREMIUM RECEIVED DURING ASS ESSMENT PROCEEDING? 7. IT WAS ARGUED BY THE LD DR THAT THE ASSESSEE HAS NOT SATISFACTORILY EXPLAINED THE GENUINENESS AND CREDITWORTHINESS OF T HE APPLICANTS WITH REGARD TO THE AMOUNT OF SHARE PREMIUM PAID BY THEM. HE HAS FURTHER SUBMITTED THAT THE RECEIPT OF SHARE CAPITAL AND SHA RE PREMIUM WAS PART OF DEVICE OF COLOURABLE TRANSACTION BY WHICH THE ASSESS EE INTRODUCED RS. 73.50 LACS INTO BOOKS OF ACCOUNT IN THE FORM OF SHA RE PREMIUM ATTACHED TO THE SHARE CAPITAL. HE HAS FURTHER CONTENDED THAT THE LD. CIT(A) WAS NOT JUSTIFIED IN DELETING THE SAID ADDITION MERELY ON T HE GROUND THAT THE CREDIT IN THE BOOKS OF THE ASSESSEE WAS IN THE PRECEDING AS SESSMENT YEARS 2008-09. 8. ON THE OTHER HAND, THE LD AR OF THE ASSESSEE HAS CONTENDED THAT THE CREDIT IN THE BOOKS OF ACCOUNT DID NOT ARISE OU T OF ANY TRANSACTION ENTERED BY THE ASSESSEE DURING THE RELEVANT ASSESSM ENT YEAR 2009-10 UNDER CONSIDERATION. SINCE THE AMOUNT WAS NOT RECEIV ED DURING THE YEAR UNDER CONSIDERATION BUT WAS ALREADY IN THE BOOKS OF ACCOUNT AND MERE CARRY FORWARD DURING THE YEAR UNDER CONSIDERATION, T HE LD. CIT(A) WAS JUSTIFIED IN DELETING THE ADDITION ON THE GROUND TH AT THERE WAS NO FRESH CREDIT DURING THE YEAR UNDER CONSIDERATION. ITA 736/JP/2018_ ITO VS. M/S TRUGOLD BUILDTECH PVT. LTD. 13 9. WE HAVE CONSIDERED THE RIVAL CONTENTIONS AND CAR EFULLY GONE THROUGH THE ORDERS OF THE AUTHORITIES BELOW AS WELL AS THE REMAND REPORT CALLED BY THE ASSESSING OFFICER AND REJOINDER FILED BY THE ASSESSEE. FROM THE RECORD, WE FOUND THAT AFTER REOPENING OF THE ASS ESSMENT, THE ASSESSING OFFICER MADE ENQUIRY WITH REGARD TO SHARE CAPITAL AND SHARE PREMIUM SO RECEIVED BY THE ASSESSEE. HOWEVER, NOT SA TISFIED WITH THE ASSESSEES CONTENTION AND HAVING NOT FURNISHED DOCU MENTS REQUIRED BY THE ASSESSING OFFICER AND NOT APPEARING BEFORE THE ASSESSING OFFICER, THE ASSESSING OFFICER PASSED ORDER U/S 144 OF THE ACT A ND MADE ADDITION OF RS. 73,50,000/- ON ACCOUNT OF SHARE PREMIUM SO RECE IVED BY THE ASSESSEE. HOWEVER, NO ADDITION WAS MADE ON ACCOUNT OF SHARE CAPITAL. BY THE IMPUGNED ORDER, THE LD CIT(A) DELETED THE SAME B Y OBSERVING THAT THE SHARE CAPITAL AND SHARE PREMIUM WAS RECEIVED BY THE ASSESSEE IN THE PRECEDING YEAR AND NOT DURING THE YEAR UNDER CONSID ERATION, THEREFORE, NO ADDITION CAN BE MADE DURING THE YEAR UNDER CONSIDER ATION. FROM THE RECORD, IT APPEARS THAT BEFORE THE LD. CIT(A), THE A SSESSEE HAS FILED AUDITED BALANCE SHEET TO SHOW THAT THE AMOUNT OF SHA RE CAPITAL AND SHARE PREMIUM WAS RECEIVED DURING THE PRECEDING YEAR AND N OT DURING THE CURRENT YEAR UNDER CONSIDERATION. THEREAFTER, THE LD . CIT(A) HAS DELETED THE ADDITION BY OBSERVING THAT THE ACTION U/S 68 OF THE ACT CANNOT BE TAKEN IN THE ASSESSMENT YEAR 2009-10 UNDER CONSIDER ATION IN SO FAR AS THE ITA 736/JP/2018_ ITO VS. M/S TRUGOLD BUILDTECH PVT. LTD. 14 AMOUNT WAS RECEIVED IN THE PRECEDING YEAR. AS PER TH E BALANCE SHEET PLACED ON RECORD, IT APPEARS THAT THE ASSESSEE HAD SHOWN SHARE APPLICATION MONEY IN SCHEDULE-G UNDER THE HEAD CURR ENT LIABILITIES AND PROVISIONS. WE ALSO FOUND THAT THE ADDITIONAL EVIDE NCE FILED BEFORE THE LD. CIT(A) WAS SENT BY HIM TO THE ASSESSING OFFICER FOR H IS COMMENTS AND THE ASSESSING OFFICER IN HIS REMAND REPORT STATED THAT IN COMPLIANCE TO THE LETTER U/S 133(6) OF THE ACT, THE ASSESSEE HAS FURN ISHED WRITTEN REPLY ON 12/6/2014 AND IN THE REPLY, THE ASSESSEE HAS ACCEPT ED THAT THE SHARE PREMIUM WAS RECEIVED DURING THE A.Y. 2009-10 AND NO DETAILS HAS BEEN FURNISHED DURING THE ASSESSMENT PROCEEDINGS. HOWEVER , THE FINDINGS RECORDED BY THE LD. CIT(A) IS CONTRARY TO THE OBSERV ATION OF THE ASSESSING OFFICER IN HIS REMAND REPORT. THEREFORE, IN ALL THE FAIRNESS, WE RESTORE THE MATTER BACK TO THE FILE OF THE ASSESSING OFFICER FO R DECIDING THE ISSUE AFRESH AFTER CONSIDERING THE AUDITED BALANCE SHEET OF THE ASSESSEE FOR THE YEAR UNDER CONSIDERATION AS WELL AS THE BALANCE SHEE T FOR THE PRECEDING YEAR. IF THE ASSESSING OFFICER FOUND THAT THE AMOUN T ON ACCOUNT OF SHARE CAPITAL AND SHARE PREMIUM WAS RECEIVED AND CREDITED IN THE PRECEDING YEAR, NO ADDITION IS WARRANTED DURING THE YEAR UNDER CONSIDERATION IN TERMS OF VARIOUS DECISION OF HONBLE COURTS AS RELI ED ON BY THE LD. CIT(A) IN HIS ORDER. ACCORDINGLY, THE ASSESSING OFFICER IS TO DECIDE THE ISSUE AFRESH IN TERMS OF OUR ABOVE DIRECTION. ITA 736/JP/2018_ ITO VS. M/S TRUGOLD BUILDTECH PVT. LTD. 15 10. IN THE RESULT, APPEAL OF THE REVENUE IS ALLOWED FOR STATISTICAL PURPOSES IN TERMS INDICATED HEREINABOVE. ORDER PRONOUNCED IN THE OPEN COURT ON 01 ST APRIL, 2019. SD/- SD/- FOT; IKY JKO JES'K LH 'KEKZ (VIJAY PAL RAO) (RAMESH C SHARMA) U;KF;D LNL;@ JUDICIAL MEMBER YS[KK LNL;@ ACCOUNTANT MEMBER TK;IQJ@ JAIPUR FNUKAD@ DATED:- 01 ST APRIL, 2019 *RANJAN VKNS'K DH IZFRFYFI VXZSFKR @ COPY OF THE ORDER FORWARDED TO: 1. VIHYKFKHZ @ THE APPELLANT- THE I.T.O., WARD 2(2), JAIPUR. 2. IZR;FKHZ @ THE RESPONDENT- M/S TRUGOLD BUILDTECH PVT. LTD., JAIP UR. 3. VK;DJ VK;QDR @ CIT 4. VK;DJ VK;QDRVIHY @ THE CIT(A) 5. FOHKKXH; IZFRFUF/K] VK;DJ VIHYH; VF/KDJ.K] T;IQJ @ DR, ITAT, JAIPUR 6. XKMZ QKBZY @ GUARD FILE (ITA NO. 736/JP/2018) VKNS'KKUQLKJ @ BY ORDER, LGK;D IATHDKJ @ ASST. REGISTRAR