INCOME TAX OFFICER, BUNDI V. M/S ARAVALI PRIME CONSULTANTS PVT. LTD., BUNDI

ITA 801/JPR/2019

• Counselvise Citation: [2020] 110 COUNSELVISE.COM (IT) 6662 (ITAT-JAIPUR)
• Duration Of Justice: 1 year(s) 3 month(s) 17 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 14-09-2020
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: B
• Assessment Year: 2009-2010
• Appeal Filed On: 28-05-2019
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: BK GUPTA; RUNI PAUL
• Assessee Lawyers: S L PODDAR DHK
• Keywords: Unexplained cash credit; Source of fund; Additional evidence; Question of law; Fair market value; Valuation report; Accommodation entries; Onus to prove
• Section: 56(2); 133(6); 43; 13; 131; 6; 263; 68

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 JESK LH-'KEKZ] YS[KK LNL; ,O LAANHI XKSLKBZ] U;KF;D LNL; DS LE{K BEFORE: SHRI RAMESH C SHARMA, AM & SHRI SANDEEP GOS AIN, JM VK;DJ VIHY LA-@ ITA NO.801/JP/2019 FU/KZKJ.K O'K Z@ ASSESSMENT YEAR : 2009-10 THE ITO BUNDI CUKE VS. M/S. ARAVALI PRIME CONSULTANTS PVT. LTD. JAJOO SADAN, KHOJA GATE ROAD, BUNDI LFKK;H YS[KK LA-@THVKBZVKJ LA-@ PAN/GIR NO.: AAGCA6396 N VIHYKFKHZ@ APPELLANT IZR;FKHZ@ RESPONDENT JKTLO DH VKSJ LS@ REVENUE BY: SMT. RUNI PAUL , ADDL. CIT -. DR & SHRI B.K. GUPTA, CIT DR FU/KZKFJRH DH VKSJ LS@ ASSESSEE BY : SHRI S.L.PODDAR, ADVOCATE LQUOKBZ DH RKJH[K@ DATE OF HEARING : 08/09/2020 MN?KKS'K.KK DH RKJH[K@ DATE OF PRONOUNCEMENT: 14/09/2020 VKNS'K@ ORDER PER SANDEEP GOSAIN, J.M. THE PRESENT APPEAL HAS BEEN FILED BY THE REVENUE AGAINST THE ORDER OF LD.CIT (A), KOTA DATED 26.03.2019 FOR TH E ASSESSMENT YEAR 2009-10 PASSED UNDER SECTION 143(3)/263 OF THE INC OME TAX ACT, 1961 ON THE GROUND MENTIONED HEREINBELOW. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE , THE LD. CIT(A) HAS ERRED IN DELETING ADDITION MADE BY THE A O OF 2,63,15,000/- ON ACCOUNT OF DISALLOWANCE OF SHARE P REMIUM ITA NO. 801/JP/2019 ITO, BUNDI VS M/S. ARAVALI PRIME CONSULTANTS PVT. LT D., BUNDI 2 RECEIVED ON ISSUE OF SHARE WITHOUT APPRECIATING THE FACTS DISCUSSED BY THE AO IN THE ASSESSMENT ORDER. 2.1 BRIEF FACTS OF THE CASE ARE THAT THE ASSESSEE F ILED ITS RETURN OF INCOME ON 7-08-2008 DECLARING INCOME OF RS. 3600/-. IN THIS CASE, THE ASSESSMENT WAS COMPLETED U/S 143(3)/263 OF THE ACT ON 23-11-2017 THEREBY MAKING ADDITION OF RS. 2,63,15,000/- U/S 68 OF THE ACT BY THE AO. 2.2 AGGRIEVED BY THE ORDER OF THE AO, THE ASSESSEE PREFERRED APPEAL BEFORE THE LD. CIT(A) WHO AFTER CONSIDERING THE CAS E OF BOTH THE PARTIES PARTLY ALLOWED THE APPEAL OF THE ASSESSEE AND DIREC TED THE AO TO DELETE THE ADDITION. 2.3 NOW AGGRIEVED BY THE ORDER OF THE LD. CIT(A), R EVENUE FILED THE PRESENT APPEAL BEFORE US ON THE GROUND MENTIONED HE REINABOVE. 2.4 AT THE OUTSET OF THE HEARING, THE LD. DR APPEAR ING ON BEHALF OF THE REVENUE DREW OUR ATTENTION TO THE APPLICATION FILED BY THE REVENUE FOR ADMITTING THE ADDITIONAL EVIDENCES. THE APPLICATION FILED BY THE REVENUE IS REPRODUCED BELOW. PRAYER FOR ADMITTING ADDITIONAL EVIDENCE. IN THIS REGARD IT IS HUMBLY SUBMITTED THAT I WISH T O SUBMIT SOME COPIES OF VIEW DIRECTOR MASTER DATA AND COPY OF NAME OF COMPANIES AND ADDRESS TAKEN FROM MINISTR Y OF CORPORATE AFFAIRS PORTAL (MCA 21). ITA NO. 801/JP/2019 ITO, BUNDI VS M/S. ARAVALI PRIME CONSULTANTS PVT. LT D., BUNDI 3 I HUMBLY PRAY TO ADMIT THIS DOCUMENTS WHICH ARE ALS O AVAILABLE ON PUBLIC DOMAIN. THIS DOCUMENTS ARE LIKE BACKGROUND OR SURROUNDING SITUATIONS TO UNDERSTAND THE ISSUE AT HAND AND TO UNEARTH THE HARSH REALITY TO FIND OU T THE TRUTH. WITHOUT THESE DOCUMENTS MY ARGUMENTS WOULD BE PARTI AL AND INCOMPLETE. SO TO APPRECIATE THE MATTER IN TOTO AND FOR JUSTICE, THESE DOCUMENTS MAY KINDLY BE ADMITTED. TH ESE DOCUMENTS ARE VERY ESSENTIAL AND NECESSARY AS THE I SSUE AT HAND REVOLVES AROUND IT. 2.5 ON THE OTHER HAND, THE LD.AR OF THE ASSESSEE CO NTESTED THE SAID APPLICATION FILED BY THE REVENUE. 2.6 WE HAVE HEARD THE LD. COUNSEL FOR BOTH THE PART IES AND WE HAVE ALSO PERUSED THE MATERIALS PLACED ON RECORD, JUDGEMENTS CITED BY THE PARTIES AS WELL AS THE ORDERS PASSED BY THE REVENUE AUTHORITIE S. BEFORE WE DECIDE THE MERIT OF THIS APPLICATION, IT IS NECESSARY TO E VALUATE THE PROVISIONS OF RULE 29 OF APPELLATE TRIBUNAL RULES, 1963 AND THE SAME IS REPRODUCED BELOW. PRODUCTION OF ADDITIONAL EVIDENCE BEFORE THE TRI BUNAL THE PARTIES TO THE APPEAL SHALL NOT BE ENTITLED TO PRODUCE ADDITIONAL EVIDENCE EITHER ORAL OR DOCUMENTARY BEFO RE THE TRIBUNAL, BUT IF THE TRIBUNAL REQUIRES ANY DOCUMENT TO BE PRO DUCED OR ANY WITNESS TO BE EXAMINED OR ANY AFFIDAVIT TO BE FILED TO ENABLE IT PASS ORDERS OR FOR ANY OTHER SUBSTANTIAL CAUSE, OR , IF THE INCOME-TAX AUTHORITIES HAVE DECIDED THE CASE WITHOUT GIVING SU FFICIENT OPPORTUNITY TO THE ASSESSEE TO ADDUCE EVIDENCE EITH ER ON POINTS SPECIFIED BY THEM OR NOT SPECIFIED BY THEM, THE TRI BUNAL, FOR REASONS TO BE RECORDED, MAY ALLOW SUCH DOCUMENT TO BE PRODUCED ITA NO. 801/JP/2019 ITO, BUNDI VS M/S. ARAVALI PRIME CONSULTANTS PVT. LT D., BUNDI 4 OR WITNESS TO BE EXAMINED OR AFFIDAVIT TO BE FILED OR MAY ALLOW SUCH EVIDENCE TO BE ADDUCED] AFTER HAVING GONE THROUGH THE FACTS CONTAINED IN TH E APPLICATION AND ALSO THE PROVISION OF RULE 29 OF THE APPELLATE TRIBUNAL RULE, 1963, WE FOUND THAT IT HAS CATEGORICALLY BEEN MENTIONED IN THE SAI D PROVISION THAT PARTIES TO THE APPEAL SHALL NOT BE ENTITLED TO PRODUCE ADD ITIONAL EVIDENCE EITHER ORAL OR DOCUMENTARY BEFORE THE TRIBUNAL. HOWEVER, I F THE TRIBUNAL REQUIRES ANY DOCUMENT TO BE PRODUCED OR ANY WITNESS TO BE EXAMINED SO AS TO ENABLE IT TO PASS THE ORDER OR FOR ANY OTHER SUBSTANTIAL CAUSE THEN FOR THE REASONS TO BE RECORDED MAY ALLOW SUCH DOCUMENT TO BE PRODUCED OR WITNESS TO BE EXAMINED. HOWEVER, IN THE PRESENT CAS E, AS PER FACTS CONTAINED IN THE APPLICATION FILED BY THE REVENUE, IT HAS NOWHERE BEEN MENTIONED AS TO WHY THE DOCUMENTS NEED TO BE FILED AND EVEN NO EXPLANATION HAS BEEN PUT FORTH WITH REGARD TO CONNE CTIVITY OF THESE DOCUMENTS WITH THE CONTROVERSY IN QUESTION AND AS T O HOW IN THE ABSENCE OF THESE DOCUMENTS, THE TRIBUNAL WOULD NOT BE IN A POSITION TO DECIDE THE CONTROVERSY IN QUESTION EFFECTIVELY AND COMPLETELY. THEREFORE, IN OUR VIEW THE LD. DR HAS NOT BEEN ABLE TO DEMONSTRATE BE FORE US THAT THE CONTENTS OF THE APPLICATION REPRODUCED ABOVE FOR AD MITTING THE ADDITIONAL EVIDENCE ARE MEETING WITH THE INGREDIENTS CONTAINED IN THE RULE 29 OF ITA NO. 801/JP/2019 ITO, BUNDI VS M/S. ARAVALI PRIME CONSULTANTS PVT. LT D., BUNDI 5 APPELLATE TRIBUNAL RULES, 1963. THEREFORE, IN THE P RESENT FACTS AND CIRCUMSTANCES OF THE CASE, WE ARE NOT INCLINED TO A LLOW THE PRESENT APPLICATION FILED BY THE REVENUE. HENCE, THE SAME S TANDS DISMISSED. 3.1 APROPOS SOLITARY GROUND OF THE REVENUE REGARDIN G DELETING THE ADDITION OF RS. 2,63,15,000/- MADE BY THE AO ON ACC OUNT OF DISALLOWANCE OF SHARE PREMIUM RECEIVED ON THE ISSUE OF SHARES. T HE FACTS AS EMERGES FROM THE ORDER OF THE LD. CIT(A) IS AS UNDER:- AS REGARDS THE ADDITIONAL GROUND NO. 3, IT IS TO BE SEEN IN CONSONANCE WITH THE GROUND TAKEN IN ORIGINAL FORM N O. 35 FILED WHICH CHALLENGES THE ADDITION OF RS. 2, 63, 18,600/-MADE U/S 68. IN HIS ORDER PASSED ON 23.11.2017, THE A.O. HAS FIRST NARRATED T HE RELEVANT PORTION FROM THE ORDER U/S 263 IN WHICH IT IS MENTIONED THAT FOR A.Y. 2009-10 THE ASSESSEE HAD FILED DETAILS OF SHARE CAPITAL/PREMIUM TO THE EXTENT OF RS. 3,02,51,000/- & AFTER DEDUCTING THE PREMIUM OF RS. 39,36,000/- WHICH WAS OPENING BALANCE AS ON 01.04.2008, THE PREMIUM PERTA INING TO A.Y. 2009-10 CAME TO RS. 2,63,15,000/- WHICH NEEDED TO BE EXAMIN ED RELATED TO WHICH THE A.O. DID NOT MAKE ANY WORTHWHILE ENQUIRY. THUS, TWO THINGS BECAUSE CLEAR FROM THE OBSERVATIONS RECORDED IN THE ORDER U/S 263 THAT:- (I) THE COMPANY ALREADY HAD SHARES ON PREMIUM IN A.Y. 2008 -09 AMOUNTING TO RS. 39,36,000/- WHICH THE DEPARTMENT HAD NO T QUESTIONED OR FOUND DOUBTFUL [ALTHOUGH THE PER SHARE PREMIUM CONVERTED IN THAT YEAR WAS RS. 240/- AS COMPARED TO PREMIUM OF RS. 190/- PER SHARE RECEIVED DURING THE PRESENT YEAR UNDER APPEAL]. (II) THE ACTION U/S 263 WAS TAKEN BECAUSE THE A.O. WAS NOT FO UND TO HAVE MADE `WORTHWHILE' ENQUIRIES IN THE ORIGINAL ASSESSMENT TO THE EXPECTATION IN THE PRESENT ASSESSMENT WAS TO MAKE PROPER AND COGENT OR 'WORTHWHILE' ENQUIRIES IN RESPECT OF THE SHARE PREMIUM. ON A PERUSAL OF THE ASSESSMENT ORDER IT IS OBSERVED THAT THE INVESTMENTS WERE MADE MOSTLY BY RELATED PARTIES IN THE SHARES & SUBSCRIPTION FOR PREMIUM. THE APPELLANT IS PRIMARILY AS FINANCIAL CONSULTANCY COMPANY ANY AND THE MAIN BUSINESS APPEARS TO BE TO TRADE IN COMMODITIES SHARES SECURITIES ETC. THE A.O. HAS GENERALIZED HIS FINDINGS BY MENTIONING THAT PROPER INFORMATION WAS NOT SUBMITTED DESPITE G IVING SEVERAL OPPORTUNITIES. THE INFORMATION SOUGHT & THE DATES O F NOTICES REMAINING UNCOMPLIED WITH, IS NOWHERE RECORDED IN THE ORDER. SHARE CAPITAL/PREMIUM CAN BE ADDED U/S 68 IN THE HA NDS OF RECIPIENT-COMPANY ONLY WHEN IDENTITY OF INVESTORS ( INVESTING COMPANIES) AND THEIR CAPACITY TO INVEST ARE NOT PROVED. FURTHE R, AFTER INSERTION OF ITA NO. 801/JP/2019 ITO, BUNDI VS M/S. ARAVALI PRIME CONSULTANTS PVT. LT D., BUNDI 6 PROVISO TO SECTION 68, SOURCE OF INVESTMENT BY INVESTI NG COMPANY HAS ALSO TO BE PROVED. ONCE ASSESSEE-COMPANY IS ABLE TO ESTABLISH THE IDENTITY OF INVESTING COMPANIES AND PROVE THAT THEY HAVE INVESTED OUT OF THEIR OWN RES OURCES AND NO CASH IS DEPOSITED IN THEIR BANK ACCOUNT FOR MAKING INVESTME NT, THEN ONUS LYING ON THE ASSESSEE IS DISCHARGED. EXPLANATION OFFERED BY THE ASSESSEE ALONG WITH DOCUMENTARY SUPPORT ABOUT IDENTITY OF THE INVESTOR/LEND ER, TRANSFER OF MONEY TO THE ASSESSEE THROUGH BANKING CHANNELS AND ABSENCE OF E NQUIRY BY THE AO ON SUCH DOCUMENTS RENDER THE EXPLANATION OFFERED BY THE ASSESSEE NOT UNSATISFACTORY WITHIN THE MEANING OF SECTION 68. SO LONG AS THE INVESTING COMPANIES HAVE THEIR OWN W ORTH AND FUNDS FOR INVESTMENT WHICH THEY CAN EXPLAIN, THE EXPLANAT ION FURNISHED BY THE ASSESSEE IS NOT HELD AS UNSATISFACTORY OR FALSE, UNLE SS A LIVE NEXUS OF PAYMENT OF CASH BY ASSESSEE-COMPANY WITH THE INVESTME NT INTO ASSESSEE- COMPANY IS ESTABLISHED. AS REGARDS THE OBJECTION RELATED TO ADDRESSES OF THE INVESTORS, IT IS SEEN THAT THE A.O. HAS MENTIONED THAT THE ADDRESSES ARE NOT BEING EST ABLISHED BUT ALSO MENTIONS THAT THEY HAVE THE SAME ADDRESS AS THE ASSESSEE APPELLANT. HE HAS ALSO ACKNOWLEDGED THAT BALANCE SHEETS 86 BANK &, CAPITAL ACCOUNTS IN SOME CASES ARE NOT AVAILABLE. THIS FINDING IS NOT ENOUGH TO MAKE ADDITION U/S 68. IN A CASE WHERE ASSESSEE PROVES IDENTITY OF CREDITORS/ SHARE APPLICANTS BY EITHER FURN ISHING THEIR PAN NUMBERS OR INCOME-TAX ASSESSMENT NUMBERS AND SHOWS GENUINENESS OF TRANSACTION BY SHOWING MONEY IN HIS BOOKS EITHER BY ACCOUNT- PAYEE CHEQUE OR BY DRAFT OR BY ANY OTHER MODE, THEN ONUS O F PROOF WOULD SHIFT TO REVENUE AND JUST BECAUSE CREDITORS/SHARE APPLICANTS COULD NOT BE F OUND AT ADDRESS GIVEN, IT WOULD NOT GIVE REVENUE RIGHT TO INVOKE SECTION 68 . [CIT V DWARKADHISH INVESTMENT (P) LTD. [2010] 194 TAXMAN 43 (DELHIL]. HAVING NO BUSINESS ACTIVITY OR HAVING LOW INCOME IS NO CRITERIA TO HOLD THAT THE INVESTOR-COMPANIES DID NOT HAVE CREDITWORTHINESS. THEY M AY HAVE ADEQUATE SHARE CAPITAL, OTHER CREDITS OR ARE MERELY INVESTMENTS COMP ANIES NOT DOING ANY BUSINESS OR TRADE OR SAY THEY ARE NBFCS. WHAT IS IMPORTANT IS THAT INVESTMENT INTO ASSESSEE-COMPANY IS MADE OUT OF ITS OWN COFFERS. I N THIS REGARD, ONE MAY REFER TO FOLLOWING JUDGMENTS: IN CIT V. VALUE CAPITAL SERVICES (P.) LTD. 12008] 307 ITR 334 (DEL.), IT WAS HELD AS UNDER :- 'DISMISSING THE APPEAL, THAT THE ADDITIONAL BURDEN WAS ON THE DEPARTMENT TO SHOW THAT EVEN IF THE SHARE APPLICANTS DID NOT H AVE THE MEANS TO MAKE THE INVESTMENT, THE INVESTMENT MADE BY THEM ACTUALLY EM ANATED FROM THE COFFERS OF THE ASSESSEE SO AS TO ENABLE IT TO BE TREATED AS TH E UNDISCLOSED INCOME OF THE ASSESSEE. NO SUBSTANTIAL QUESTION OF LAW AROSE.' PRABHATAM INVESTMENT (P.) LTD. V. ACIT ITA.NOS.2523 TO 2525/DEL./2015, DATED 17.04.2017 - IT WAS HELD THAT:- (I) THE AO CANNOT IGNORE THE DOCUMENTATION PRODUCED BY THE ASSESSEE TO SHOW THAT THE INVESTORS ARE GENUINE, (II) SECTION 1 32(4) STATEMENT CANNOT BE RELIED UPON IF THE ASSESSEE IS NOT GIVE RIGHT OF CROSS-EXA MINATION, (III) FACT THAT THE SHAREHOLDERS DID NOT RESPOND TO SECTION 133(6) NOTI CES DOES NOT WARRANT AN ITA NO. 801/JP/2019 ITO, BUNDI VS M/S. ARAVALI PRIME CONSULTANTS PVT. LT D., BUNDI 7 ADVERSE INFERENCE, (IV) FACT THAT THE SHAREHOLDERS HAVE LOW INCOME DOES NOT WARRANT ADVERSE INFERENCE. CIT V. VRINDAVAN FARMS (P.) LTD. ETC., IN ITA.NO.71 OF 2015 DATED 12TH AUGUST, 2015 HELD AS UNDER :- 'THE SOLE BASIS FOR THE REVENUE TO DOUBT THEIR CRED ITWORTHINESS WAS THE LOW INCOME AS REFLECTED IN THEIR RETURN OF INCOME. IT W AS OBSERVED BY THE ITAT THAT THE AO HAD NOT UNDERTAKEN ANY INVESTIGATION OF THE VERA CITY OF THE DOCUMENTS SUBMITTED BY THE ASSESSEE, THE DEPARTMENTAL APPEAL WAS DISMISSED BY THE HON'BLE HIGH COURT.' EVEN THOUGH THE ASSESSEE IN SUPPORT OF HIS CASE THAT LOAN/ S HARE CAPITAL HAS BEEN RECEIVED THROUGH BANKING CHANNELS, PRODUCES BANK ACCOUNT OF THE LENDER/INVESTOR BUT AO HAS NOT CARRIED OUT INQUIRIES INTO THE CREDITS APPEARING IN THE BANK ACCOUNT OF THE CREDITORS. WHERE NO SUCH INQ UIRY IS CARRIED OUT BY AO, OR WHERE ENTRY APPEARING IN THE BANK ACCOUNT AND THER EAFTER TRANSFERRED TO ASSESSEE THROUGH BANKING CHANNELS IS EXPLAINED BY THE ASSESSEE OR THE INVESTOR, COURTS HAVE OPINED THAT THEN ADDITION U/S 68 WILL NO T BE JUSTIFIED. WHERE SHARE APPLICANTS, IN ADDITION TO THEIR CONFIRMATION L ETTERS, HAD PROVIDED THEIR PARTICULARS, PAN DETAILS, ASSESSMENT PARTICULARS, MODE OF PAYMENT FOR SHARE APPLICATION MONEY BUT ASSESSING OFFICER FAILED TO CON DUCT ANY SCRUTINY OF SAID DOCUMENTS, ADDITION MADE BY ASSESSING OFFICER MERELY ON B ASIS OF REPORT OF INVESTIGATION WING POINTING OUT THAT ASSESSEE WAS BENEFICIARY OF ACCOMMODATION ENTRIES WAS NOT JUSTIFIED. [PR. CIT V. LAXMAN INDUSTRIAL RESOURCES LTD. 12017] 88 TAXMANN.COM 648 (DELHI)]. WHERE LENDERS WERE REGULAR INCOME-TAX ASSESSEES AND THEIR PANS WERE ON RECORD, AMOUNT HAD BEEN ADVANCED THROUGH ACCOUNT-PAYEE CHEQUES A ND FURTHER, BEFORE ISSUING CHEQUES LENDERS HAD GOT SUFFICIENT BALANCE IN THEIR A CCOUNT, MOREOVER, AMOUNT HAD ALSO BEEN REPAID THROUGH ACCOUNT PAYEE CH EQUES, ADDITION OF LOAN U/S 68 WAS UNJUSTIFIED, MERELY ON THE GROUND THAT LENDERS WERE ENGAGED IN PROVIDING ACCOMMODATION ENTRIES. [CIT V. RAHUL VINEET TRADERS 120141 41 TAXMANN.COM 86/221 TAXMAN 46 (ALL.) (MAG.); CIT V. VIJAY KUMAR JAIN 120141 41 TAXMANN.COM 433/221 TAXMAN 180 (ALL.) (MAG.); ASSTT. CIT V. SHYAM INDUS POWER SOLUTIONS (P.) LTD. [2018] 90 TAXMANN.COM 424 (DELHI - TRIB.)]. AS REGARDS THE PREMIUM, THE A.O HAS MENTIONED THAT SINCE THE COMPANY WAS NEWLY FORMED (ON 20.11.2017) AND HAD NO SUBSTANTIAL INCOME, THE PREMIUM (NOT QUESTIONED IN A.Y. 2008-09 @ 240/- PER SHARE OF RS. 10/- EACH), WAS QUESTIONABLE IN THE PRESENT YEAR (@ 190/- PER SHARE OF RS. 1 0/- EACH). FURTHER IT IS NOT REQUIRED THAT SOME TRADING OR MANUFACTURING ACTIVIT Y HAS TO BE STARTED FOR ANY ENTITY TO COMMAND CONFIDENCE OF INVESTORS. THIS ASPECT CAN BE DUE TO PROSPECT 84 ENTERPRISE CAPACITY OF THE PERSONS INVOLVED. FURTHER, W HEN AS PER THE A.O. HIMSELF MOST OF THE INVESTORS WERE RELATED PARTIES, IF THEY DECIDE TO MOBILIZE FUNDS ON PREMIUM BASED ON THE PROSPECTS OF A 'CLOSE RELATIVE' O R PERSON OF ACQUAINTANCE, THEY WERE NOT DOING ANYTHING ILLEGAL. THE ITAT MUMBAI BENCH 'C' IN DEPUTY COMMISSIONER OF INCOME TAX, CIRCLE 7(3)(2), MUMBAI V. PIRAMAL REALTY (P.) LTD. 100 TAXMANN.COM 294 (MUMBAI - TRIB.) HELD- :- ITA NO. 801/JP/2019 ITO, BUNDI VS M/S. ARAVALI PRIME CONSULTANTS PVT. LT D., BUNDI 8 SECTION 68 OF THE INCOME-TAX ACT, 1961 - CASH CREDI T (SHARE PREMIUM) - ASSESSMENT YEAR 2012-13 - ASSESSEE-COMPANY ISSUED C ERTAIN NUMBER OF SHARES ON PREMIUM TO ONE, PEPL AND RECEIVED SHARE PREMIUM OF CERTAIN AMOUNT - ASSESSING OFFICER INVOKED PROVISIONS OF SECTION 68 AND ADDED SHARE PREMIUM RECEIVED BY ASSESSEE TO ITS INCOME - IT WAS NOTED T HAT ASSESSEE HAD FILED STATUTORY FORMS WITH ROC DISCLOSING NUMBER OF SHARE S, FACE VALUE AND PREMIUM PER SHARE AND ALSO NAME OF ALLOTTEE - ASSESSEE HAD ALSO FILED ITS ANNUAL RETURN WITH ROC DISCLOSING DETAILS OF ALLOTMENT OF SHARES, AND DETAIL OF SHAREHOLDER INCLUDING NAME, ADDRESS AND PAN OF SHAREHOLDER - FU RTHER, ASSESSING OFFICER HAD NOT QUESTIONED SHARE CAPITAL TO EXTENT OF FACE VALU E BUT HAD ONLY QUESTIONED SHARE PREMIUM WHETHER SINCE ASSESSEE HAD FILED SUFF ICIENT EVIDENCES VIZ., RETURN OF INCOME, SHARE ALLOTMENT, ANNUAL RETURN AND DETAI LS OF SHAREHOLDER AND SAME WAS NOT NEGATED BY ASSESSING OFFICER, MERELY BECAUS E ASSESSING OFFICER FELT THAT SHARE PREMIUM RECEIVED BY ASSESSEE WAS HIGH, GENUIN ENESS OF TRANSACTION COULD NOT BE DOUBTED FOR PURPOSE OF SECTION 68 - HELD, YE S THE ITAT REFERRED TO THE BOMBAY HIGH CORT JUDGEMENT IN TH E CASE OF CIT V. GREEN INFRA LTD. /2017] 78 TAXMANN.COM 340/392 ITR 7 (BOM.) WHICH IT HELD AS SQUARELY APPLICABLE TO THE CASE OF THE ASSESSEE- DESPITE BEING THE SPECIFIC ARGUMENT OF THE CIT-DR T HAT THE SHARE PREMIUM DEFIES COMMERCIAL PRUDENCE, HON'BLE JURISDICTIONAL HIGH COURT HAS HELD THAT GENUINENESS OF THE TRANSACTION IS PROVED SINCE THE ENTIRE TRANSACTION IS RECORDED IN THE BOOKS OF THE ASSESSEE AND THE TRANSACTION HAS T AKEN PLACE THROUGH BANKING CHANNELS. THE DECISION OF THE HON'BLE HIGH COURT HA S SPECIFICALLY HELD THAT 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 TH EY WANT TO SUBSCRIBE TO SUCH A HEAVY PREMIUM. THE REVENUE AUTHORITIES CANNOT QUEST ION THE CHARGING OF SUCH OF HUGE PREMIUM WITHOUT ANY BAR FROM ANY LEGISLATED LA W OF THE LAND. THE TRIBUNAL AFTER EXAMINING THE INGREDIENTS OF SECTION 68 OF TH E ACT HELD THAT THE ADDITION OF SHARE PREMIUM UNDER SECTION 68 OF THE ACT CANNOT BE SUSTAINED. WE HEREUNDER REPRODUCE THE RELEVANT PARAGRAPH OF THE DECISION OF HON'BLE JURISDICTIONAL HIGH COURT IN EASE OF GREEN INFRA LTD. (SUPRA) FOR READY REFERENCE: '3. REGARDING QUESTION NO.(II): (A) BEFORE THE TRIBUNAL, THE REVENUE RAISED A NEW PLEA VIZ. THAT THE SO CALLED SHARE PREMIUM HAS ALSO TO BE JUDGED ON THE T OUCHSTONE OF SECTION 68 OF THE ACT WHICH PROVIDES FOR CASH CREDI T BEING CHARGED TO TAX. THE IMPUGNED ORDER OF THE TRIBUNAL ALLOWED THE ISSUE TO BE RAISED BEFORE IT FOR THE FIRST TIME, OVERRULING THE OBJECTION OF THE RESPONDENTASS ESSEE. (B) THE IMPUGNED ORDER EXAMINED THE APPLICABILITY OF SE CTION 68 OF THE ACT ON THE PARAMETERS OF THE IDENTITY OF THE SUBSCR IBER TO THE SHARE CAPITAL, GENUINENESS OF THE TRANSACTION AND THE CAP ACITY OF THE SUBSCRIBERTO THE SHARE CAPITAL. IT FOUND THAT THE I DENTITY OF THE SUBSCRIBERS WAS CONFIRMED BY VIRTUE OF THE ASSESSIN G OFFICER ISSUING A NOTICES UNDER SECTION 133(6) OF THE ACT T O THEM. FURTHER, IT HOLDS THAT THE REVENUE ITSELF MAKES NO GRIEVANCE OF THE IDENTITY OF THE SUBSCRIBERS. SO FAR AS THE GENUINENESS OF TH E TRANSACTION OF SHARE SUBSCRIBER IS CONCERNED, IT CONCLUDES AS THE ENTIRE TRANSACTION IS RECORDED IN THE BOOKS OF ACCOUNT AND REFLECTED IN THE FINANCIAL STATEMENTS OF THE ASSESSEE SINCE THE SUBSCRIPTION WAS DONE THROUGH THE BANKING CHANNELS AS EVIDENCED BY BANK STATEMENTS WHICH WERE EXAMINED BY THE TRIBUNAL. WIT H REGARD TO THE CAPACITY OF THE SUBSCRIBERS THE IMPUGNED ORDER RECORDS A ITA NO. 801/JP/2019 ITO, BUNDI VS M/S. ARAVALI PRIME CONSULTANTS PVT. LT D., BUNDI 9 FINDING THAT 98% OF THE SHARES IS HELD BY IDFC PRIV ATE EQUITY FUND WHICH IS A FUND MANAGER OF IDFC LTD. MOREOVER, THE CONTRIBUTIONS IN IDFC PRIVATE EQUITY FUNDLL ARE ALL BY PUBLIC SEC TOR UNDERTAKINGS. MR.CHHOTARAY THE LEARNED COUNSEL FOR THE REVENUE STATES THAT THE IMPUGNED ORDER ITSELF HOLDS THAT SHARE PREMIUM OF R S.490/ PER SHARE DEFIES ALL COMMERCIAL PRUDENCE. THEREFORE IT HAS TO BE CONSIDERED TO BE CASH CREDIT. WE FIND THAT THE TRIB UNAL HAS EXAMINED THE CASE OF THE REVENUE ON THE PARAMETERS OF SECTION 68 OF THE ACT AND FOUND ON FACTS THAT IT IS NOT SO HIT. THEREFORE, SECTION 68 OF THE ACT CANNOT BE INVOKED. THE REVENU E HAS NOT BEEN ABLE TO SHOW IN ANY MANNER THE FACTUAL FINDING RECORDED BY THE TRIBUNAL IS PERVERSE IN ANY MANNER. (C) THUS, QUESTION NO.(II) AS FORMULATED DOES NOT GIVE RISE TO ANY SUBSTANTIAL QUESTION OF LAW AND THUS NOT ENTERTAINE D'. THE ITAT ALSO HIGHLIGHTED THAT- THE INSERTION OF THE PROVISO TO SECTION 68 OF THE A CT BY FINANCE ACT, 2012 CASTS AN ADDITIONAL ONUS ON THE CLOSELY HELD COMPANIES TO PR OVE SOURCE IN THE SHAREHOLDERS SUBSCRIBING TO THE SHARES OF COMPANIES. DURING THE COURSE OF THE HEARING, THE LD COUNSEL EXPLAINED THAT THE EXPLANATORY MEMORANDUM T O THE FINANCE BILL 2012 MAKES IT CLEAR THAT THE ADDITIONAL ONUS IS ONLY WIT H RESPECT TO SOURCE OF FUNDS IN THE HANDS OF THE SHAREHOLDERS BEFORE THE TRANSACTIO N CAN BE ACCEPTED AS A GENUINE ONE. EVEN THE AMENDED SECTION DOES NOT ENVI SAGE THE VALUATION OF SHARE PREMIUM. THIS IS FURTHER EVIDENT FROM A PARALLEL AM ENDMENT IN SECTION 56(2) OF THE ACT WHICH BRINGS IN ITS AMBIT SO MUCH OF THE SHARE PREMIUM AS CHARGED BY A COMPANY, NOT BEING A COMPANY IN WHICH THE PUBLIC AR E SUBSTANTIALLY INTERESTED, AS IT EXCEEDS THE FAIR MARKET VALUE OF THE SHARES. IF ONE ACCEPTS THE LD CIT-DR'S CONTENTIONS THAT SECTION 68 OF THE ACT CAN HE APPLI ED WHERE THE TRANSACTION IS PROVED TO BE THAT OF A SHARE ALLOTMENT THAT HERE TH E VALUATION FOR CHARGING PREMIUM IS NOT JUSTIFIED, IT WILL MAKE THE PROVISIO NS OF SECTION 56(2)(VIIB) OF THE ACT REDUNDANT AND NUGATORY. THIS CANNOT BE THE INTENTIO N OF THE LEGISLATURE ESPECIALLY WHEN THE AMENDMENTS IN THE TWO SECTIONS ARE BROUGHT IN AT THE SAME TIME. THE ITAT DELHI BENCH 'D' IN ASSISTANT COMMISSIONER OF I NCOME-TAX, CENTRAL CIRCLE- IX, NEW DELHI V. RAVNET SOLUTIONS (P .) LTD. 93 TAXMANN.COM 59 (DELHI - TRIB.) HELD- :- SECTION 68 OF THE INCOME-TAX ACT, 1961 - CASH CREDI T (SHARE APPLICATION MONEY) - ASSESSMENT YEARS 2005-06 TO 2008-09 - ASSESSING OFF ICER NOTED THAT ASSESSEE HAD SHOWN SOME RECEIPTS AS SHARE CAPITAL AND AS SHA RE PREMIUM - ASSESSEE WAS ASKED TO FILE EVIDENCES TO ESTABLISH IDENTITY AND C APACITY OF PERSONS WHO HAD GIVEN HIM SHARE CAPITAL AND SHARE PREMIUM - SINCE A SSESSEE HAD FAILED TO FURNISH ANY EVIDENCE TO ESTABLISH THEIR CREDIBILITY AND CAP ACITY, ASSESSING OFFICER MADE ADDITION UNDER SECTION 68 - ASSESSEE PLEADED THAT N O SUFFICIENT OPPORTUNITY HAD BEEN GIVEN TO HIM TO FILE REQUIRED DETAILS AND HE F ILED ADDITIONAL EVIDENCE, I.E., CONFIRMATION OF ACCOUNTS OF ALL INVESTORS, THEIR BO ARD RESOLUTION, COPY OF FORM NO. 2, COPY OF MASTER DATA, COPY OF PAN, COPY OF ITR, C OPY OF CERTIFICATE OF INCORPORATION, BANK STATEMENTS AND SHARE APPLICATIO N FORMS - SAID EVIDENCES CLEARLY PROVED IDENTITY OF INVESTORS, THEIR CREDITW ORTHINESS AND GENUINENESS OF TRANSACTION - WHETHER ASSESSING OFFICER WAS NOT JUS TIFIED IN TREATING SHARE CAPITAL AND SHARE PREMIUM AS UNEXPLAINED CREDITS UNDER SECT ION 68 - HELD, YES. ITA NO. 801/JP/2019 ITO, BUNDI VS M/S. ARAVALI PRIME CONSULTANTS PVT. LT D., BUNDI 10 IT MAY BE NOTED THAT COURTS HAVE OPINED THAT VALUATION IS N OT RELEVANT FOR DETERMINING GENUINENESS OF THE TRANSACTION FOR THE PURPOSE OF SECTION 68. IT IS A SETTLED LEGAL POSITION THAT 'APPARENT IS REAL' AND THE ONUS TO PROVE THAT THE APPARENT IS NOT THE REAL IS ON THE PARTY WHO CLAIMS IT TO BE SO. IF THE DEPARTMENT WANTS TO CONTEND THAT WHAT IS APPARENT IS NOT REAL, IT IS THE ONUS OF THE DEPARTMENT TO PROVE THAT IT WAS ASSESSEE'S OWN MON EY WHICH WAS ROUTED THROUGH A THIRD PARTY. ONLY THEN CAN BE PROVISION S OF SECTION 68 BE INVOKED. THE REVENUE AUTHORITIES CANNOT QUESTION THE CHARGING OF SUCH OF HUGE PREMIUM WITHOUT ANY BAR FROM ANY LEGISLATED LAW OF THE L AND. THE ASSESSING OFFICER DID NOT MAKE ANY EFFORT TO CONDUCT ANY ENQUIRY DI RECTLY FROM THESE INVESTORS. THE ASSESSING OFFICER DID NOT ISSUE NOTICES UNDER SECTION 133( 6) OR SUMMON UNDER SECTION 131 AGAINST THESE INVESTORS FOR RECORDING TH EIR STATEMENTS. THE ISSUANCE OF SHARES AT PREMIUM IS THE PREROGATIVE OF THE ISSUI NG COMPANY IN AN INVITATION OFFER. THERE IS NO STATUTORY RESTRICTION AND IT IS SOMETHING WHICH FALLS WITHIN THE DOMAIN OF CONTRACTUAL TERMS. IT IS FOR THE PROSPECTIVE SHAREHOLDERS TO JUDGE AND DECIDE AS TO WHETHER THE SHARE PREM IUM WAS JUSTIFIED FROM THEIR PERSPECTIVE AND WHEN THESE SHAREHOLDERS SO DECID E, THERE THE MATTER ENDS AND THE BUSINESS PRUDENCE OF THE INVESTORS IS NOT OPEN FOR QUESTIONING. THEREFORE, I DO NOT FIND THIS AS A GOOD GROUND FOR THE A SSESSING OFFICE TO DISBELIEVE THAT THE SHARES OF THE APPELLANT COMPANY OF TH E FACE VALUE OF RS. 10/- WERE SOLD AT PREMIUM, WITHOUT BRINGING ADVERSE MATERIAL ON RECORD AGAINST THE APPELLANT. AS REGARDS THE AMENDMENT IN THE I.T. ACT WHICH THE A.O. TALK S ABOUT IN THIS REGARD, THE SAME IS NOT RETROSPECTIVE 85 IS APPLICABLE FROM A.Y. 2013-14 AND NOT FROM THIS YEAR UNDER APPEAL. BESIDES THE ABOVE THERE IS NO OTHER FINDING IN THE ASSESSMENT ORDER AND BASED ON HIS ABOVE MENTIONED GENERAL OBSERVATIONS GONE ON TO MAKE AN ADD ITION OF RS. 2,63,15,000/- AS UNDISCLOSED INCOME OF THE ASSESSEE U/S 68. THE ASS ESSING OFFICER IS DUTY BOUND TO INVESTIGATE THE CREDIT-WORTHINESS OF TH E CREDITOR/SUBSCRIBER, VERIFY THE IDENTITY OF THE SUBSCRIBERS, AND A SCERTAIN WHETHER THE TRANSACTION IS GENUINE, OR THESE ARE BOGUS ENTRIES OF NAME-LEN DERS. IF THE ENQUIRIES AND INVESTIGATIONS REVEAL THAT THE IDENTITY OF THE CREDI TORS TO BE DUBIOUS OR DOUBTFUL, OR LACK CREDIT-WORTHINESS, THEN THE GENUINENESS OF THE TRANSACTION WOULD NOT BE ESTABLISHED. BUT WHERE, (1) IT IS NOT ESTABLISH ED THAT INVESTING COMPANIES ARE SHELL COMPANIES, (II) INVESTMENT INTO ASSESSEE COMPANY BY THE INVESTING COMPANIES HAS BEEN MADE FROM THEIR OWN RESOURCES, (III) IDENTITY OF THE INVESTING COMPANIES IS ESTABLISHED, (IV) THERE IS NO CASH DEPOSIT IN THE BANK ACCOUNT OF INVESTING COMPANIES, (V) CREDIT ENTRIES IN THE BANK A CCOUNT OF INVESTING COMPANIES ARE EXPLAINED, (VI) THERE IS NO EVIDENCE THAT MONEY O F THE ASSESSEE- COMPANY IS ROUTED THROUGH INVESTING COMPANY FOR MAKING INVEST MENT INTO ASSESSEE-COMPANY, THEN THE PRINCIPLES LAID DOWN BY THE HON'BLE AP EX COURT IN CIT V. LOVELY EXPORTS (P.) LTD. [2009] 319 ITR 5 CANNOT BE IGNORED. HE HAS NEITHER ANALYSED THE TAX STATUS, CREDIBILITY OR PERSONS INVOLVED IN THE SUBSCRIPTION OR PREMIUM, NOR HAS BE BROUGHT ON RECORD THE FACT THAT OUT OF 16 INVESTORS, 14 WERE BASED IN BUNDI AND WER E ALL BEING ASSESSED BY HIM ONLY. HE COULD HAVE CARRIED OUT MEANINGFUL AND I N DEPTH ENQUIRIES BY EVEN GOING INTO THE SOURCE OF SOURCE, JUSTIFICATION OF PREMIUM IN THE EYES OF THE INVESTORS, THEIR RELATION WITH THE MAIN PERSONS INVOLVED IN THE ASSESSEE COMPANY ETC. IT IS SEEN THAT THE ASSESSEE HAS SUBMITT ED A VALUATION REPORT FOR CHARGING OF PREMIUM BEFORE THE A.O. DURING THE ASSE SSMENT PROCEEDINGS BUT ITA NO. 801/JP/2019 ITO, BUNDI VS M/S. ARAVALI PRIME CONSULTANTS PVT. LT D., BUNDI 11 THE SAME HAS NEITHER BEEN MENTIONED, NOR BEEN CONTR OVERTED IN THE ORDER PASSED BY THE A.O. THE MAIN DIRECTION OF THE PR. CIT BEING TO EXAMINE THE SOU RCE OF THE SHARE PREMIUM AND CREDITWORTHINESS OF THE SHARE APPLICANTS, THE A.O. HAS NOT DONE EITHER OF THE TWO. IT IS SEEN THAT ALL THE DETAILS OF TH E SHARE HOLDERS SUCH AS THEIR COMPLETE ADDRESS, PAN, COPY OF TAX RETURN, BANK ACCOUNT ETC. ALONGWITH CONFIRMATIONS HAD BEEN FURNISHED TO THE A.O. BUT HE HAS NO T BROUGHT THESE DETAILS ON RECORD AND IGNORED THEM WHILE FINALIZING THE ORD ER. IT IS FURTHER OBSERVED THAT NOT EVEN A SINGLE NOTICE U/S 133(6) OR SUMMON U/S 1 31 WAS SENT BY THE A.O. TO EVEN CROSS VERIFY THE SUBSCRIBERS OF THE PREMIUM 86 SHARE CAPITAL. THUS EVEN IT SEEN FROM THE APPLICABILITY OF PROVISION S OF SECTION 68, THE ONUS OF PROVING THE IDENTITY, GENUINENESS 86 CREDITWORTHINESS O F THE SUBSCRIBERS HAD BEEN DISCHARGED BY THE ASSESSEE BEFORE THE A.O. HOWEVER, ON CE THE ONUS SHIFTED UPON THE A.O. HE FAILED TO DISCHARGE HIS OW N BURDEN BY CARRYING OUT INDEPENDENT ENQUIRIES. IF THE A.O. HAD ANY DOUBTS REGARDING THE SOURCE OF INVESTMENT OF THE SUBSCRIBERS, HE COULD HAVE EXAMINED THE BANK ACCOUNTS FROM WHERE TH E INVESTMENT WAS ROUTED. IN MOST CASED THE TRANSACTIONS ARE FOUND TO BE NUMEROUS & SUBSTANTIAL. NO EVIDENCE OF CASH DEPOSITS FOR COLLUDING WITH ASSESSEE BY RE-ROUTING UNACCOUNTED CASH THROUGH THE PREMIUM ROUTE IS ESTABLISHED VIDE THE BANK ACCOUNTS OR A.O.'S FINDINGS. IN FA CT AS COMPARED TO THE INVESTMENT MADE, SOME OF THE ENTITIES HAVE A MUCH HIGHER RESERVE T HAN THE INVESTMENT MADE IN THE PREMIUM FOR EXAMPLE. AXIS MULTIMETALS P. LTD. HAS RESERVES OF RS. 2,66,01,540/- WHI LE INVESTMENT IN THE PREMIUM IN THE APPELLATE COMPANY IS RS. 38 LA KHS. SIMILARLY, APEX EXPERTS CONSULTANTS HAS A RESERVE OF RS. 2.31 CRORES WHIL E INVESTMENT IN PREMIUM IN THE ASSESSEE COMPANY IN RS. 71.25 LAKHS. SIMILAR OTH ER INVESTORS INCLUDE ESQUIRE VYAPAR P. LTD. RESERVE RS.3.15 CR. & PREMIUM R S. 38 LAKHS, GEETANJALI REALCON HAS RESERVES OF RS. 2.31 CR AND PAID RS. 14. 25 LAKHS PREMIUM, TO NAME A FEW MORE. FURTHER IN CASES OF INDIVIDUALS LIKE SH. SATYA NARAIN THEBAD IA THE INVESTMENT IN MERELY RS. 3 LAKH WHILE HE HAS A INVESTMENT TOTALIN G RS. 29.67 LAKHS AS PER HIS BALANCE SHEET. SIMILARLY SH. KUSHAL CHAND JA JOO HAS INVESTED RS. 2.85 LAKHS IN PREMIUM WHILE HIS INVESTMENTS (ASSETS) AS PER TH E BALANCE SHEET AMOUNT TO RS. 63.48 LAKHS. IN FACT THE PREMIUM SUBSCRIBED BY 9 OUT OF 16 SUBSCRIBERS IS ONLY RS. 30, 40,000/ -. IT IS ONLY THE REMAIN ING OF ENTITIES ALL OF WHICH ARE CORPORATE ENTITIES WHO HAVE SUBSCRIBED THE BALANCE CAPITA L. SO IT WOULD HAVE BEEN A VERY REASONABLE ENQUIRY FOR THE A.O. TO CO NDUCT IF HE WANTED TO BE FAIR. HOWEVER, HE CHOSE THE EASIER ROUTE OF MAKING AN ADD ITION BASED PRIMARILY ON PRESUMPTION & DENIAL OF EVIDENCES FILED. AS REGARDS THE TWO COMPANIES NOT BASED IN BUNDI AND BEING BASED IN WEST BENGAL, SINCE THE TIME BETWEEN INITIATION OF T HE PROCEEDINGS AND FINAL ORDER BY THE A.O. WAS 7 MONTHS, THE A.O. COULD HAVE EASILY ISSUED COMMISSION FOR EXAMINATION BY THE CORRESPONDING OFF ICE OR ISSUED NOTICE U/S 133(6) & SOUGHT INDEPENDENT VERIFICATION. IN THE AB SENCE OF THE SAME, DISBELIEVING THE EVIDENCES FILED WITHOUT CONTROVERT ING THEM WITH OWN FINDINGS, IS NOT JUSTIFIED. IT IS ALSO NOTICED FROM THE SUBMISSION GIVEN DURING THE APPELL ATE PROCEEDINGS THAT MOST OF THE CORPORATE SUBSCRIBERS WERE FILING RET URNS EVEN TILL DATE AND ARE REGULARLY BEING ASSESSED TO TAX. NOT TO MENTION T HAT ALL INDIVIDUALS, MOST OF WHOM WERE CLOSELY ASSOCIATED WITH THE APPEL LANT ARE ALSO ITA NO. 801/JP/2019 ITO, BUNDI VS M/S. ARAVALI PRIME CONSULTANTS PVT. LT D., BUNDI 12 REGULAR TAXPAYERS TILL DATE AND THE A.O. HAS NOT BROUGHT ANY ADVERSE FINDING IN THIS REGARD ALSO IN HIS ORDER. THUS, THE ORDER OF THE A.O. IS NOT BASED ON ANY 'WORTHWHI LE' ENQUIRY OR CORRECT APPRECIATION OF THE LEGAL PRINCIPLES INVOLVED IN THE ISSUE. HE HAS NOT BEEN ABLE TO PROVE THAT THE PREMIUM CHARGED BY THE APPELLANT W AS UNJUSTIFIED OR BOGUS OR SOURCED FROM UNDISCLOSED OR UNEXPLAINED FUNDS /SO URCES. SUPREME COURT OF INDIA IN RICK LUNSFORD TRADE 8S INVE STMENT LTD. V. COMMISSIONER OF INCOME-TAX, KOLKATA-177 TAXMANN.COM 110 (SC) HELD:- SECTION 68 OF THE INCOME-TAX ACT, 1961 - CASH CREDI T (SHARE CAPITAL) - ASSESSMENT YEAR 1983-84 - HIGH COURT BY IMPUGNED OR DER HELD THAT ADDITION UNDER SECTION 68 WOULD BE JUSTIFIED ONLY OF UNEXPLA INED PART OF SHARE CAPITAL AND NOT WHOLE OF IT AS ASSESSEE HAD PARTLY PRODUCED EVIDENCE IN RESPECT OF CREDIT ENTRIES IN BOOKS, ACCOUNTED FOR AS SHARE CAP ITAL - HELD, YES - WHETHER SPECIAL LEAVE PETITION AGAINST SAID ORDER WAS TO BE DISMISSED - HELD, YES IN VIEW OF THE DISCUSSION MADE ON THE FACTS AND LEGAL PRECEDENTS ENUMERATED ABOVE IN THIS ORDER, FROM THE MATERIAL AVAILABLE O N RECORD, IT EMERGES THAT ASSESSEE DISCHARGED ITS PRIMARY ONUS IN TERMS OF SECTION 68 OF THE ACT. I AM THEREFORE NOT INCLINED TO UPHOLD THE ADDITION OF RS. 2,63,15,000/- MADE BY THE A.O. ON ACCOUNT OF SHARE PREMIUM ATTRIBUTABL E TO THE SHARE CAPITAL SUBSCRIBED. THE SAME IS DIRECTED TO BE DELETED. THIS GROU ND OF APPEAL IS TREATED AS ALLOWED. 3.2 DURING THE COURSE OF HEARING, THE LD. DR SUPPOR TED THE ORDER OF THE AO AND SUBMITTED THAT THE LD. CIT(A) HAS ERRED IN DELETING THE ADDITION OF RS. 2,63,15,000/- MADE BY THE AO. 3.3 ON THE OTHER HAND, THE LD.AR OF THE ASSESSEE RE LIED ON THE ORDER OF THE AO. 3.4 WE HAVE HEARD THE LD. COUNSELS FOR BOTH THE PAR TIES AND WE HAVE ALSO PERUSED THE MATERIALS PLACED ON RECORD, JUDGEM ENTS CITED BY THE PARTIES AS WELL AS THE ORDERS OF THE REVENUE AUTHOR ITIES . BRIEF FACTS OF THE CASE ARE THAT THE ASSESSEE IS A PRIVATE LIMITED COM PANY AND WAS ITA NO. 801/JP/2019 ITO, BUNDI VS M/S. ARAVALI PRIME CONSULTANTS PVT. LT D., BUNDI 13 INCORPORATED ON 20-11-2007. THE MAIN OBJECT OF THE COMPANY IS TO CARRY ON THE BUSINESS OF TRADING IN SHARES, SECURITIES, D EAL OR TRADE IN COMMODITY EXCHANGE, FINANCIAL CONSULTANCY ETC. THE RETURN WAS FILED ON 7-08-2009 BY THE ASSESSEE DECLARING INCOME OF RS. 3,600/- IN THIS CASE, IT IS NOTED THAT THE AO DURING THE COURSE OF ASSESSMENT PROCEED ING MADE THE ADDITION OF RS. 2,63,15,000/- (138500 SHARES X RS. 190 PER SHARE) ON ACCOUNT OF SHARE PREMIUM RECEIVED ON ISSUE OF SHARE S BY THE ASSESSEE COMPANY. THUS THE AO OBSERVED THAT THE AMOUNT OF RS . 2,63,15,000/- IS AN UNDISCLOSED INCOME OF THE ASSESSEE U/S 68 OF THE ACT AND MADE THE ADDITION ACCORDINGLY. IN APPEAL BEFORE THE LD. CIT( A), KOTA, THE AMOUNT OF RS. 2,63,15,000/- ON ACCOUNT OF SHARE PREMIUM AT TRIBUTABLE TO THE SHARE CAPITAL SUBSCRIBED WAS DELETED BY THE LD. CIT(A) BY OBSERVING AS UNDER:- IN VIEW OF THE DISCUSSION MADE ON THE FACTS AND LEGAL PRECEDENT S ENUMERATED ABOVE IN THIS ORDER, FROM THE MATERIAL AVAILABLE O N RECORD, IT EMERGES THAT ASSESSEE DISCHARGED ITS PRIMARY ONUS IN TERMS OF SECTION 68 OF THE ACT. I AM THEREFORE NOT INCLINED TO UPHOLD THE ADDITION OF RS. 2,63,15,000/- MADE BY THE A.O. ON ACCOUNT OF SHARE PREMIUM ATTRIBUTABL E TO THE SHARE CAPITAL SUBSCRIBED. THE SAME IS DIRECTED TO BE DELETED. THIS GROU ND OF APPEAL IS TREATED AS ALLOWED. IT IS NOT IMPERATIVE TO REPEAT THE FACTS OF THIS CA SE AS LD. CIT(A) HAS ELABORATELY DISCUSSED THE ISSUE IN QUESTION. HOWEVE R, WE HAVE DEEPLY GONE THROUGH THIS CASE OF THE ASSESSEE AND OBSERVED THE LD. CIT(A) HAS DEALT WITH THIS ISSUE METICULOUSLY THAT THE ORDER O F THE AO IS NOT BASED ITA NO. 801/JP/2019 ITO, BUNDI VS M/S. ARAVALI PRIME CONSULTANTS PVT. LT D., BUNDI 14 ON ANY WORTHWHILE ENQUIRY OR CORRECT APPRECIATION O F THE LEGAL PRINCIPLES INVOLVED IN THE ISSUES. THE AO HAS NOT B EEN ABLE TO PROVE THAT THE PREMIUM CHARGED BY THE ASSESSEE IS UNJUSTI FIED OR BOGUS OR SOURCED FROM UNDISCLOSED OR UNEXPLAINED FUNDS/ SOUR CE. IT IS ALSO NOTED FROM THE AVAILABLE RECORDS THAT MOST OF THE CORPORA TE SUBSCRIBERS WERE FILING RETURNS AND THEY WERE BEING REGULARLY ASSES SED TO TAX. THE AO HAS NOT BROUGHT ANY ADVERSE FINDINGS AGAINST THEM. IT IS ALSO NOTED FROM THE RECORDS THAT THE ASSESSEE HAD SUBMITTED A VALUA TION REPORT FOR CHARGING OF PREMIUM BEFORE THE AO DURING THE ASSESS MENT PROCEEDING BUT THE SAME HAD NEITHER BEEN MENTIONED NOR CONTROV ERTED IN THE ASSESSMENT ORDER BY THE AO. IT IS FURTHER NOTED THA T IF THE AO HAD ANY DOUBTS REGARDING THE SOURCE OF INVESTMENT OF THE SU BSCRIBERS, HE COULD HAVE EXAMINED THE BANK ACCOUNTS FROM WHERE THE INVE STMENT WAS ROUTED. THE AO IS DUTY BOUND TO INVESTIGATE THE CRE DITWORTHINESS OF THE CREDITORS/ SUBSCRIBERS, VERIFY THE IDENTITY OF THE SUBSCRIBERS AND ASCERTAIN WHETHER THE TRANSACTION IS GENUINE OR THE SE ARE BOGUS ENTRIES OF NAME LENDERS BUT IT WAS NOT PROPERLY DONE. HENCE , TAKING INTO CONSIDERATION ALL THESE FACTS, CIRCUMSTANCES OF THE CASE AND DECISIONS CITED BY THE LD. CIT(A), WE CONCUR WITH THE FINDING S OF THE LD. CIT(A). HENCE THE APPEAL FILED BY THE REVENUE IS DISMISSED. ITA NO. 801/JP/2019 ITO, BUNDI VS M/S. ARAVALI PRIME CONSULTANTS PVT. LT D., BUNDI 15 4.0 IN THE RESULT, THE APPEAL FILED BY THE REVENUE IS DISMISSED WITH NO ORDER AS TO COST. ORDER PRONOUNCED IN THE OPEN COURT ON 14 /09/2020 . SD/- SD/- JESK LH-'KEKZ LANHI XKSLKBZ (RAMESH C. SHARMA) (SANDEEP GOSAI N) YS[KKLNL;@ ACCOUNTANT MEMBER U;KF;D LNL;@ JUDICIAL MEMBER TK;IQJ@ JAIPUR FNUKAD@ DATED:- 14/09/2020. *MISHRA VKNS'K DH IZFRFYFI VXZSFKR@ COPY OF THE ORDER FORWARDED TO: 1. VIHYKFKHZ@ THE APPELLANT - THE ITO, BUNDI 2. IZR;FKHZ@ THE RESPONDENT-M/S. ARAVALI PRIME CONSULTANTS PVT. LTD. BUNDI 3. VK;DJ VK;QDR@ CIT 4. VK;DJ VK;QDR@ CIT(A) 5. FOHKKXH; IZFRFUF/K] VK;DJ VIHYH; VF/KDJ.K] T;IQJ@ DR, ITAT, JAIPUR . 6. XKMZ QKBZY@ GUARD FILE {ITA NO. 80/JP/2019} VKNS'KKUQLKJ@ BY ORDER, LGK;D IATHDKJ@ ASSTT. REGISTRAR