ITO, WARD- 15(3), NEW DELHI vs. LIVEWIRE COMMERCIAL PVT. LTD., DELHI

The present appeal filed by the Revenue is directed against the order dated 25.09.2018 passed by the CIT(A)-32, New Delhi, arising out of the Assessment Order dated 24.03.2015 passed by the ITO, 15(3) New 1

Delhi, under Section 143(3) of the Income Tax Act, 1961 (for short ‘the

Act’) for Assessment Year 2012-13.

3. The Revenue has raised the following grounds of appeal before us:

“1. On the facts and in the circumstances of the case, the Ld. CIT(A) has erred in law in deleting the additions of Rs.25,00,00,000/- U/s 68 of the IT Act, in respect of share capital received which were not found genuine during assessment proceedings.

3. On the facts and in the circumstances of the case, the Ld. CIT(A) has erred in law in deleting the additions of Rs.6,35,930/- U/s 14A of the IT Act.

4. That the appellant are craves leaves to add, alter, amend or forgo any ground(s) of appeal raised above at the time of hearing.”

Subsequently, notice u/s 142(1) along with questionnaire was also issued. time to time before the ld. Assessing Officer and filed the details.

“6.5 In this regard, the assessment order and the written submission of the appellant have duly been considered. It is noted that in this case, shares of four companies were purchased by the appellant on 06.03.2012 from Zeal Consultancy Pvt Ltd for a sum of Rs.25,01,75,000/-. Subsequently, in lieu of purchase of the above mentioned shares, the appellant company issued its own 5,00,000 shares of face value of Rs. 10/- and a premium of Rs.490/- for a total sum of Rs.25,00,00,000/- to M/s Zeal Consultancy Pvt Ltd on 30.03.2012. It is submitted that the remaining amount of Rs.1,75,000/- was paid by the appellant company to Zeal Consultancy Pvt Ltd by cheque. The AO observed that this transaction was completed by book entries only. It is submitted by the appellant that the AO has not been able to bring out any adverse material and concrete evidence against the transactions carried out by the appellant and the addition has been made on the basis of suspicion and surmises. It is also submitted that in response to notice u/s 133(6) to the share holders, the details were furnished by such parties. It is also submitted by the appellant that in the case of Zeal Consultancy Services Pvt Ltd, from which shares were purchased by the appellant, assessment order was passed u/s 143(3) of the Act on 27.02.2015 accepting the returned income. It is contended that when the sale of shares by the Zeal Consultancy Services Pvt Ltd to the appellant company is accepted by the Department, the purchase of shares amounting to Rs.25,01,75,000/- by the appellant cannot be doubted and treated as sham transaction by the AO of the appellant. The appellant has vehemently relied upon the decision of the Hon'ble Supreme Court in the case of CIT vs Lovely Exports Pvt Ltd [2008] 216 CTR (SC) 195. The appellant has also relied upon the decision of the Hon'ble Gujrat High Court in the case of PCIT, Surat-1 vs Tejua Rohit Kumar Kaparia in Tax Appeal no.691 of 2017. The SLP of the Revenue against the aforesaid order was dismissed by the Hon'ble Supreme Court vide order dated 04.05.2018. The AR of the appellant has relied upon various judicial pronouncements of the jurisdictional Delhi High Court, other High Courts and ITAT.

6.6 In this case, it is noted that the amount of Rs.25,00,00,000/- has been credited to the books of the company by way of book entry only. The appellant has shown purchase of shares of different companies from Zeal Consultancy Services Pvt Ltd for an amount of Rs.25,01,75,000/- and in lieu of the purchase consideration, 5,00,000 shares of face value of Rs. 10/- at a premium of Rs.490/- of the appellant company itself were issued to Zeal Consultancy Services Pvt Ltd for a total sum of Rs.25,00,00,000/-. Therefore, the above transactions are in the nature of swap arrangement of shares only. The credit arose only because purchase of shares by the appellant from Zeal Consultancy Services Pvt Ltd. Had there been no purchase of shares by the appellant, there would not have been any credit. There was no money brought into the account books of the appellant by way of cash / cheque / draft. It is further noted that the appellant has discharged the onus in respect of the identity of the share holders as relevant documents were produced before the AO and there was compliance by the parties, involved in the transaction, to notice u/s 133(6) issued by the AO. The appellant also submitted copy of the return of income, Tax audit report and the copy of the assessment order in respect of the creditor M/s Zeal Consultancy Services Pvt. Ltd. The appellant has relied upon various judicial pronouncements in this regard and has submitted that there was no question of any addition in the hands of the appellant company.

In this regard, Full Bench of Hon'ble jurisdictional Delhi High Court in case of CIT vs Sophiya Finance Limited 205 ITR 98 held that once identity of the shareholder is established, no addition on account of share capital can be made in the hands of the company-assessee. Further, it was held by Hon'ble Delhi High Court in the case of CIT vs. Steller Investment Limited 192 ITR 287 that addition of share capital cannot be made in the hands of the assessee company. The above decision was later on affirmed in CIT vs Steller Investment Ltd 251 ITR 263 (Supreme Court). In this regard, reference was made to the following decisions also:

Anima Investment (P) Ltd. VS. ACIT 73 ITD 125 (Delhi) (TM)

- Share application money - Where the share application money is received by the assessee company through banking channel, the assessee has only to prove the existence of the person in whose name share application is received Additions could not be sustained where the existence of the investors is not doubted and the investment is not shown to have been made by somebody else - BARKHA SYNTHETICS LTD. VS. ASSTT. CIT 197 CTR 432 (RAJ) - Share application money Assessee having proved genuineness of subscribers of share capital, addition under section 68 could not be made on the ground that it did not establish genuineness of source of subscribers - SUMAK POWERCAP LIMITED VS. ASSTT.CIT 90 TTJ 420 (LUCKNOW). Share application money Registered shareholders having not denied subscription to shares standing in their names, amount could not be regarded as undisclosed income of assessee company even if the subscribers were not genuine BALDEO COLD STORAGE & ICE FACTORY PVT.LTD. VS. ACIT 89 TJ 908 (AGRA).

20. Now the aggrieved Revenue is in appeal against the deletion of addition by the ld. CIT(A).

any exempt income during the year under consideration. Since there is no exempt income earned by the assessee during the year, there cannot be any disallowance u/s 14A of the Act. This issue is by now well settled in favour of the assessee and against the revenue by the decision of the 318 which was affirmed by the Hon'ble High Court of Delhi. Same view is taken by the Hon'ble Gujarat High Court in the case of Corrtech Energy

(P) Ltd 372 ITR 97. In view of the above, we decline to interfere with the findings of the ld. CIT(A). Respectfully following the above mentioned judicial decisions, Ground No. 3 raised by the Revenue is dismissed. dismissed.