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Income Tax Appellate Tribunal, MUMBAI BENCH “G” MUMBAI
Before: SHRI OM PRAKASH KANT & SHRI RAHUL CHAUDHARY
This appeal by the Revenue is directed against order dated 29.11.2019 passed by the Ld. Commissioner of Income-tax (Appeals)-16, Mumbai [in short ‘the Ld. CIT(A)’] for assessment year 2009-10, raising grounds as reproduced under:
M/s Geetamrut Agro Estate Pvt. Ltd. M/s Geetamrut Agro Estate Pvt. Ltd. 2 ITA No. 1158/M/2020 Whether on the facts, and in th Whether on the facts, and in the circumstances of the case e circumstances of the case and in law, the Ld. CIT(A) was justified in deleting the and in law, the Ld. CIT(A) was justified in deleting the and in law, the Ld. CIT(A) was justified in deleting the addition made U/S.68 of the Act overlooking the facts addition made U/S.68 of the Act overlooking the facts addition made U/S.68 of the Act overlooking the facts established by the AO in the assessment order that investors established by the AO in the assessment order that investors established by the AO in the assessment order that investors have no means during the year under consideration and it have no means during the year under consideration and it have no means during the year under consideration and its claim of sources of money from Principal Mutual Funds and its claim of sources of money from Principal Mutual Funds and its claim of sources of money from Principal Mutual Funds and its genuineness is doubtful?" genuineness is doubtful?" Whether on the facts, and in the circumstances of the case Whether on the facts, and in the circumstances of the case Whether on the facts, and in the circumstances of the case and in law, the Ld. CIT(A) was justified in deleting the and in law, the Ld. CIT(A) was justified in deleting the and in law, the Ld. CIT(A) was justified in deleting the addition without appreciating the fact that merely addition without appreciating the fact that merely addition without appreciating the fact that merely furnishing of Income tax return and CIN/PAN of the investors do not of Income tax return and CIN/PAN of the investors do not of Income tax return and CIN/PAN of the investors do not prove the creditworthiness and genuineness of transaction in prove the creditworthiness and genuineness of transaction in prove the creditworthiness and genuineness of transaction in absence of supporting financial documents/statements during absence of supporting financial documents/statements during absence of supporting financial documents/statements during the assessment proceedings and the appellate proceedings?" the assessment proceedings and the appellate proceedings?" the assessment proceedings and the appellate proceedings?"
Briefly stated, facts of the case are the due to non fly stated, facts of the case are the due to non-filing of fly stated, facts of the case are the due to non regular return u/s 139(1) of the Income regular return u/s 139(1) of the Income-tax Act, 1961 (in short ‘the tax Act, 1961 (in short ‘the Act’) by the assessee, the Assessing Officer issued notice u/s 148 of by the assessee, the Assessing Officer issued notice u/s 148 of by the assessee, the Assessing Officer issued notice u/s 148 of the Act dated 30.03.2014 after recording reasons to believ dated 30.03.2014 after recording reasons to believ dated 30.03.2014 after recording reasons to believe that income escaped assessment. In response, the assessee filed return income escaped assessment. In response, the assessee filed income escaped assessment. In response, the assessee filed electronically on 03.09.2014 declaring loss of ₹11,781/ electronically on 03.09.2014 declaring loss of 11,781/-. During reassessment proceedings, reassessment proceedings, the Assessing Officer asked the assessee he Assessing Officer asked the assessee to explain source of share premium received by the assessee to explain source of share premium received by the assessee to explain source of share premium received by the assessee company @ ₹1800/- per share on allotment of 10408 10408 shares having face value of ₹10 per share 10 per share. The assessee responded that in view of The assessee responded that in view of future prospectus in the future prospectus in the field of contract farming, horticulture etc. horticulture etc. and the projections and the projections made to the investors, the assessee charged he assessee charged premium and invited share capital from two entities namely M/s premium and invited share capital from two entities namely M/s premium and invited share capital from two entities namely M/s Vinamra Vinamra Vinamra Universal Universal Universal Traders Traders Traders Pvt. Pvt. Pvt. Ltd. Ltd. Ltd. and and and Greenary Greenary Greenary Sez Sez Sez Infrastructure Pvt. Ltd. for 9 Infrastructure Pvt. Ltd. for 9390 and 1018 shares respectively. The respectively. The M/s Geetamrut Agro Estate Pvt. Ltd. M/s Geetamrut Agro Estate Pvt. Ltd. 3 ITA No. 1158/M/2020 Assessing Officer issued notice u/s 133(6) of the Act to both the Assessing Officer issued notice u/s 133(6) of the Act to both the Assessing Officer issued notice u/s 133(6) of the Act to both the parties. In response to which both the parties filed the details parties. In response to which both the parties filed the details parties. In response to which both the parties filed the details including financial statement and explained that share application including financial statement and explained that share application including financial statement and explained that share application money was sourced th money was sourced through sale of principal mutual fund. The Ld. rough sale of principal mutual fund. The Ld. Assessing Officer however, rejected the contention of the assessee in Assessing Officer however, rejected the contention of the assessee in Assessing Officer however, rejected the contention of the assessee in view of high share premium charged and view of high share premium charged and observation that observation that part of financial statement not filed by one of the investor namely M/s financial statement not filed by one of the investor namely M/s financial statement not filed by one of the investor namely M/s Greenary Sez Infrastructure Pvt. Ltd. On further appeal, the Ld. Infrastructure Pvt. Ltd. On further appeal, the Ld. Infrastructure Pvt. Ltd. On further appeal, the Ld. CIT(A) after analyzing the submissions of the assessee held, firstly CIT(A) after analyzing the submissions of the assessee held, CIT(A) after analyzing the submissions of the assessee held, that proviso to section 68 that proviso to section 68 (which creates an obligation on the creates an obligation on the issuing company to explain the source of share capital and issuing company to explain the source of share capital and issuing company to explain the source of share capital and premium) has been introduced by the Finance Act, 2012 w.e.f. been introduced by the Finance Act, 2012 w.e.f. been introduced by the Finance Act, 2012 w.e.f. 01.04.2013 and does not have retrospective effect, s not have retrospective effect, s not have retrospective effect, relying on the decision of the Hon’ble Bombay High Court in the case of CIT v. decision of the Hon’ble Bombay High Court in the case of decision of the Hon’ble Bombay High Court in the case of Gagandeep Infrastructure Pvt. Ltd. (ITA No. 1613 of 2014). Gagandeep Infrastructure Pvt. Ltd. (ITA No. 1613 of 2014) Gagandeep Infrastructure Pvt. Ltd. (ITA No. 1613 of 2014) Secondly, he observed that assessee has discharged his onus u/s ved that assessee has discharged his onus u/s ved that assessee has discharged his onus u/s 68 of the Act. The relevant finding of the Ld. CIT(A) is reproduced as 68 of the Act. The relevant finding of the Ld. CIT(A) is reproduced as 68 of the Act. The relevant finding of the Ld. CIT(A) is reproduced as under :
“6.1.6 Further, from the documents and the details submitted Further, from the documents and the details submitted Further, from the documents and the details submitted by the appellant company during the assessment proceedings by the appellant company during the assessment proceedings by the appellant company during the assessment proceedings and the app and the appellant proceedings, it is observed that the almost observed that the almost all the documents has been submitted by the appellant all the documents has been submitted by the appellant all the documents has been submitted by the appellant company. The Appellant Company has provided investors company. The Appellant Company has provided investors company. The Appellant Company has provided investors Income Tax Return, acknowledgments with PAN numbers, Income Tax Return, acknowledgments with PAN numbers, Income Tax Return, acknowledgments with PAN numbers, copies of their bank account to show that th copies of their bank account to show that the entire amount e entire amount had been paid through normal banking channels, Copy of had been paid through normal banking channels, Copy of had been paid through normal banking channels, Copy of FROM No.2, Copy of FROM NO.23 AC/ 23ACA, share FROM No.2, Copy of FROM NO.23 AC/ 23ACA, share FROM No.2, Copy of FROM NO.23 AC/ 23ACA, share certificate, Board resolution copy and minutes of approving the certificate, Board resolution copy and minutes of approving the certificate, Board resolution copy and minutes of approving the M/s Geetamrut Agro Estate Pvt. Ltd. M/s Geetamrut Agro Estate Pvt. Ltd. 4 ITA No. 1158/M/2020 approval of equity shares and hence when the appellant has approval of equity shares and hence when the appellant has approval of equity shares and hence when the appellant has furnished all t furnished all the relevant details of shareholders and he relevant details of shareholders and shareholders were existing. shareholders were existing. 6.1.7 As per the provision of sec 68 of the IT Act, primarily trio 6.1.7 As per the provision of sec 68 of the IT Act, primarily trio 6.1.7 As per the provision of sec 68 of the IT Act, primarily trio is required to discharge by the appellant company, the same is required to discharge by the appellant company, the same is required to discharge by the appellant company, the same is analsized hereunder: is analsized hereunder:
1.
IDENTITY 1. IDENTITY - It is noted that investor companies from which investor companies from which the appellant the appellant company has been received the share company has been received the share application money has a valid CIN and PAN number. Further, application money has a valid CIN and PAN number. Further, application money has a valid CIN and PAN number. Further, both the investor companies has properly filed their income both the investor companies has properly filed their income both the investor companies has properly filed their income tax returns.. Further, they represent before the Ld. AO i returns.. Further, they represent before the Ld. AO in returns.. Further, they represent before the Ld. AO i response to the notice issued us 13316) of the IT Act. response to the notice issued us 13316) of the IT Act. response to the notice issued us 13316) of the IT Act.
2. CREDITWORTHINESS 2. CREDITWORTHINESS-: - It is noted that both the investor It is noted that both the investor companies has been companies has been in the business of investment. Further, in the business of investment. Further, from the financial statement of both the from the financial statement of both the companies, it is companies, it is established that Invest established that Investor Company has net owned capital and or Company has net owned capital and some borrowings also. Also, it is noticed that both the some borrowings also. Also, it is noticed that both the some borrowings also. Also, it is noticed that both the companies has invested small companies has invested small portion of their overall funds. portion of their overall funds.
3. GENUINENESS OF TRANSACTION: 3. GENUINENESS OF TRANSACTION: - In this regard, it is In this regard, it is clearly seen from the clearly seen from the bank statement that all the shares were he shares were transferred through the banking channel only. Further, it is transferred through the banking channel only. Further, it is transferred through the banking channel only. Further, it is notice from the assessment order that the Ld. AO has agreed notice from the assessment order that the Ld. AO has agreed notice from the assessment order that the Ld. AO has agreed with the share valuation DCF method. Further, the project the share valuation DCF method. Further, the project the share valuation DCF method. Further, the project prepared by the appellant company is related to the contract prepared by the appellant company is related to the contract prepared by the appellant company is related to the contract farming, horticulture and development of real estate and the arming, horticulture and development of real estate and the arming, horticulture and development of real estate and the appellant company has been in the same line of business and appellant company has been in the same line of business and appellant company has been in the same line of business and having expertise in the field. All the transaction was made expertise in the field. All the transaction was made expertise in the field. All the transaction was made purposefully as investor have the benefit of investing such a purposefully as investor have the benefit of investing such a purposefully as investor have the benefit of investing such a company who ha company who has project and expertise to execute the s project and expertise to execute the project properly. 6.1.8 Therefore, the appellant company has discharged the 6.1.8 Therefore, the appellant company has discharged the 6.1.8 Therefore, the appellant company has discharged the initial onus under initial onus under Section 68 of the Act, for establishing the Section 68 of the Act, for establishing the credibility and identity of the shareholders. credibility and identity of the shareholders.” 2.1 Further, the Ld. CIT(A) obs Further, the Ld. CIT(A) observed that the Assessing Officer has erved that the Assessing Officer has conducted inquiries however nothing found adverse and therefore, conducted inquiries however nothing found adverse and therefore, conducted inquiries however nothing found adverse and therefore,
M/s Geetamrut Agro Estate Pvt. Ltd. M/s Geetamrut Agro Estate Pvt. Ltd. 5 ITA No. 1158/M/2020 he was not justified in making the addition u/s 68 of the Act. The he was not justified in making the addition u/s 68 of the Act. The he was not justified in making the addition u/s 68 of the Act. The relevant observation of the Ld. CIT(A) are reproduced as under: relevant observation of the Ld. CIT(A) are reproduced as under: relevant observation of the Ld. CIT(A) are reproduced as under:
6.1.11 In the present 6.1.11 In the present case, the A.O. had conducted enquiry case, the A.O. had conducted enquiry which revealed that: which revealed that: i. The enquiries and documents revealed that the investor i. The enquiries and documents revealed that the investor i. The enquiries and documents revealed that the investor companies had filed their income tax returns regularly, which companies had filed their income tax returns regularly, which companies had filed their income tax returns regularly, which would show that the investors did have the proper identity would show that the investors did have the proper identity would show that the investors did have the proper identity and eligible to in and eligible to invest funds for purchase of shares at a vest funds for purchase of shares at a premium. ii. The enquiries conducted by AO and material on record also . The enquiries conducted by AO and material on record also . The enquiries conducted by AO and material on record also specify that the investors has paid such heavily premium just specify that the investors has paid such heavily premium just specify that the investors has paid such heavily premium just because of getting major shareholding in the appellant because of getting major shareholding in the appellant because of getting major shareholding in the appellant company and simultaneously ap company and simultaneously appellant company has invested pellant company has invested in that project for the purpose of which taking such new in that project for the purpose of which taking such new in that project for the purpose of which taking such new investment. iii. It is to be holed that . It is to be holed that the Ld. AO has also accept the rate at has also accept the rate at which share premium is being received by the appellant which share premium is being received by the appellant which share premium is being received by the appellant company.
Aggrieved with the abov Aggrieved with the above finding of the Ld. CIT(A), the Revenue e finding of the Ld. CIT(A), the Revenue is in appeal raising the grounds as reproduced above. is in appeal raising the grounds as reproduced above. is in appeal raising the grounds as reproduced above.
Before us, the Ld. Counsel of the assessee has filed a Before us, the Ld. Counsel of the assessee has filed a Before us, the Ld. Counsel of the assessee has filed a paperbook containing pages 1 to 136 which interalia include paperbook containing pages 1 to 136 which interalia include paperbook containing pages 1 to 136 which interalia include submissions filed before the Assessing Off submissions filed before the Assessing Officer, remand report etc. remand report etc.
We have heard rival submission of the parties on the issue We have heard rival submission of the parties on the issue We have heard rival submission of the parties on the issue-in- dispute and perused the relevant material on record. In the ground dispute and perused the relevant material on record. In the ground dispute and perused the relevant material on record. In the ground raised, the Revenue has challenged the finding of the Ld. CIT(A) raised, the Revenue has challenged the finding of the Ld. CIT(A) raised, the Revenue has challenged the finding of the Ld. CIT(A) mainly on the ground that source mainly on the ground that source of investment and no of investment and no creditworthiness or genuineness has been established. From the creditworthiness or genuineness has been established. From the creditworthiness or genuineness has been established. From the M/s Geetamrut Agro Estate Pvt. Ltd. M/s Geetamrut Agro Estate Pvt. Ltd. 6 ITA No. 1158/M/2020 order of the lower authorities and the submissions filed, we find order of the lower authorities and the submissions filed, we find order of the lower authorities and the submissions filed, we find that both the investor parties are having valid PAN Number and that both the investor parties are having valid PAN Number and that both the investor parties are having valid PAN Number and notice issued u/s 133(6) of the Act have be notice issued u/s 133(6) of the Act have been duly responded by en duly responded by both the investors and therefore, identity of those two investors is both the investors and therefore, identity of those two investors both the investors and therefore, identity of those two investors not in doubt. As far as source of money invested in the shares of in doubt. As far as source of money invested in the shares of in doubt. As far as source of money invested in the shares of the assessee-company is concerned both the parties have intimated company is concerned both the parties have intimated company is concerned both the parties have intimated that same was out of principal mut out of principal mutual funds. The Assessing Officer ual funds. The Assessing Officer has not found anything anything wrong in the said source explained by those wrong in the said source explained by those share investors. The assessee has justified the amount of the share share investors. The assessee has justified the amount of the share share investors. The assessee has justified the amount of the share premium by way of filing valuation report of a Chartered premium by way of filing valuation report of a Chartered premium by way of filing valuation report of a Chartered Accountant, a copy which is ava Accountant, a copy which is available on paperbook page No. 54 to on paperbook page No. 54 to 56. The valuer has made valuation following the valuer has made valuation following the discounted discounted cash flow method. Both the share investors have od. Both the share investors have filed their filed their financial statement, the AO however observed that , the AO however observed that balance sheet and profit balance sheet and profit and loss account along with audited report was not filed in the case and loss account along with audited report was not filed in the case and loss account along with audited report was not filed in the case of the Greenary Sez Infrastructure Pvt. Ltd. of the Greenary Sez Infrastructure Pvt. Ltd. However, he find that However, he find that same were again filed before the Ld. CIT(A). In the remand report, filed before the Ld. CIT(A). In the remand report, filed before the Ld. CIT(A). In the remand report, the Assessing Officer has a the Assessing Officer has accepted that all the documents were duly ccepted that all the documents were duly filed during the course of assessment proceedings and therefore, filed during the course of assessment proceedings and therefore, filed during the course of assessment proceedings and therefore, the basis of the Assessing Officer in the assessment order for the basis of the Assessing Officer in the assessment order for the basis of the Assessing Officer in the assessment order for justifying the addition justifying the addition due to non-filing of balance sheet; profit and filing of balance sheet; profit and loss account of investor investor is not correct. In view of the above, in our is not correct. In view of the above, in our opinion, the finding of the Ld. CIT(A) on the issue opinion, the finding of the Ld. CIT(A) on the issue-in in-dispute do not M/s Geetamrut Agro Estate Pvt. Ltd. M/s Geetamrut Agro Estate Pvt. Ltd. 7 ITA No. 1158/M/2020 require any interference. Accordingly, we uphold the same. The require any interference. Accordingly, we uphold the same. The require any interference. Accordingly, we uphold the same. The grounds of appeal of the Revenue are accordingly dismissed. grounds of appeal of the Revenue are accordingly dismissed. grounds of appeal of the Revenue are accordingly dismissed.
In the result, the appeal of the Revenue is dismissed. result, the appeal of the Revenue is dismissed. result, the appeal of the Revenue is dismissed.