ITO,WARD-8(2),KOL, KOLKATA vs. M/S. INDUS REALTY PVT. LTD. , KOLKATA.

Per Rajpal Yadav, Vice-President (KZ):- The Revenue is in appeal before the Tribunal against the order of ld. Commissioner of Income Tax (Appeals),

Assessment Year: 2012-2013 M/s. Indus Realty Pvt. Limited 3. The Revenue has taken three grounds of appeal. The solitary grievance of the Revenue is that ld. CIT(Appeals) has erred in deleting the addition of Rs.3,00,00,000/-, which was treated by the ld. Assessing Officer as unexplained cash credit by disbelieving the receipt of share capital along with share premium. The ld. Assessing Officer has made the addition with the help of section 68 of the Income Tax Act.

5. The ld. CIT(Appeals), on the other hand, did not concur with the ld. Assessing Officer and deleted the addition. The finding recorded by the ld. CIT(Appeals) reads as under:- “5.3. DECISION:- The order u/s 154/143(3), the ground of appeal

, the statement of facts, and the submissions furnished by the appellant have been carefully considered. 5.3.1. The facts of the case are as mentioned in the above paras and need not be repeated again. Based on them, the following points emerge:-

1. All the 4 share applicant companies responded to notices u/s 133(6) vide their replies on 15.12.2014 with their documents to prove the genuineness of transaction.

2. Director of all the 4 share applicant companies personally appeared before the AO and their statements were recorded on oath u/s 131 of the Act. - thus the Identity was proven

3. The bank statement and audited accounts of share applicant companies were submitted to the AO who subsequently analysed it - Irrespective of the ‘ successful and correct analysis’ done by the AO, the balance sheets of the 4 applicant companies show sufficient strength to prove that 4 Assessment Year: 2012-2013 M/s. Indus Realty Pvt. Limited unless proven otherwise, there is no doubt on the creditworthiness of the applicant companies.

4. The share applicant companies had redeemed their mutual funds or utilized their refunded loan or their overdraft facility to apply for the shares of the Appellant company. - thus genuineness of the source of funds were established. The AO could not bring about any evidence to substantiate his suspicion that the source of funds was some unaccounted money which was being circulated in the guise of share application money.

6. As far as the question of excess share premium is concerned, it is true that the necessary provision for taxing the same has been incorporated in the statute in the form of Sec. 56(2)(viib) of the Act w.e.f. AY 13-14. Hence the Appellant cannot be hit by this provision for the relevant assessment year.

7. As far as addition u/s 68 of the Act is concerned, it is also true that the Proviso to Sec. 68 has been inserted w.e.f. 1.4.2013 i.e from AY 13-14. Hence the applicability of the provision for the relevant assessment year to the Appellant case is debatable.

Assessment Year: 2012-2013 M/s. Indus Realty Pvt. Limited

“5. After considering the above details, which have also been reproduced in the impugned order of the CIT(A), we note that the Assessee has proved the identity of the share subscribers. The share applicants are the Group companies of the assessee company and they are body corporate, registered with the ROC and they were available at the given address. The share applicants have furnished copy of PAN and are registered with ROC having CIN. All the data's of such companies are available with Income-tax Department & ROC. They are also assessed to Income-tax regularly. In respect of genuineness of the transaction the Id. Counsel has established that the share application money i/i/as received through proper banking channels; the share holders had sufficient fund for the purpose of investment & the investments are reflected in their books of account and Bank accounts of the shareholders confirmed the transactions. All are share holders are regularly assessed to Income Tax. So far as the need for share subscription money and the reason for the group companies to invest in the assessee company is concerned, in this regard it has been explained by the assessee that the assessee is a manufacturing company having turnover of more than Rs. 241 Crores and huge net worth. The assessee is mainly engaged in steel industry so the future prospect is great. Also the business of the assessee is heavily expanding in terms of both turnover and asset. That the assessee was in need of funds as the assessee was expanding its operations. The facts of the case itself suggest that during the impugned point of time there was heavy increase in fixed assets also the turnover increased by 73%. To expand the business assessee needed the funds, which were generated through issue of fresh shares. Further, that the reason to invest also included strategic relation and are made by the associate/group companies, having directors directly related to the assessee company's directors. We further find force in the contention of the Ld. AR that even the Assessing Officer or the CIT(A) has not brought on record any evidence to show that it was the assessee's own fund that was brought back in the form of share application money. The Ld. CIT(A), himself, has pointed out that the assessment order of the AO was cryptic and that no exercise was done by the AO to examine the records of the case.

Assessment Year: 2012-2013 M/s. Indus Realty Pvt. Limited Even the Ld. CIT(A), who has, himself, done the exercise of examining the documents has not pointed any doubt or discrepancy with regard to the identity of the investors. The only contention that has been raised by the CIT(A) in the impugned order is that the investor companies have low income. Assets in the form of investments have been created through rotation of money in between the group companies and that the assets mainly consist of cash and cash equivalents. The above contentions raised by the CIT(A), in our view, are not enough to prove that any unaccounted money of the assessee has been introduced in the assessee company, warranting addition under section 68 of the Income-tax Act. Even after making elaborate exercise of examining the documents, the Ld. CIT(A) could not point out any rebuttal to the above evidences furnished by the assessee to prove the identity, creditworthiness of the share subscribers and genuineness of the transaction. The hon'ble Jurisdictional Calcutta High Court, in the case of Pr. CIT v. Anmol Stainless (P.) Ltd. [2022] 138 taxmann.com 535 has held that that where it has been sufficiently established that share applicants had substantial creditworthiness and investments had been made by assessee's own sister concern/group companies having mostly common directors and thus, establishing creditworthiness and genuinity of investments, additions under section68 had been rightly been deleted. In view of the discussions made above, we do not find justification on the part of lower authorities in making/confirming the impugned additions, the same are accordingly ordered to be deleted. In the result, the appeal of the assessee is, hereby, allowed. ”

Assessment Year: 2012-2013 M/s. Indus Realty Pvt. Limited 2. CIT V. Kamdhenu Steel & Alloys Ltd in [2012] 19 taxmann.com 26 (Delhi), wherein the Hon’ble Delhi High Court has held that when full particulars, inclusive of confirmation with name, address and PAN Number, copy of income tax returns, balance sheet, profit and loss account and computation of total income in respect of all creditors/lenders were furnished and when it had been found that loans were furnished through cheques and loan account were duly reflected in balance sheet, the Assessing Officer was not justified in making addition.

4. Gagandeep Infrastructure Pvt. Ltd. vs. ACIT (Mumbai), the Hon’ble Mumbai Bench of ITAT. The Bombay High Court in the same appellant’s case in [2017] 80 taxmann.com 272 (Bombay) has held that-

“We find that the proviso to section 68 of the Act has been introduced by the Finance Act 2012 with effect from 1st April, 2013. Thus it would be effective only from the Assessment Year 2013-14 onwards and not for the subject Assessment Year. In fact, before the Tribunal, it was not even the case of the Revenue that Section 68 of the Act as in force during the subject years has to be read/understood as though the proviso added subsequently effective only from 1st April, 2013 was its normal meaning. The Parliament did not introduce to proviso to Section 68 of the Act with retrospective effect nor does the proviso so introduced states that it was introduced "for removal of doubts" or that it is "declaratory". Therefore it is not open to give it retrospective effect, by proceeding on the basis that the addition of the proviso to Section 68 of the Act is 8

Assessment Year: 2012-2013 M/s. Indus Realty Pvt. Limited immaterial and does not change the interpretation of Section 68 of the Act both before and after the adding of the proviso. In any view of the matter the three essential tests while confirming the pre-proviso Section 68 of the Act laid down by the Courts namely the genuineness of the transaction, identity and the capacity of the investor have all been examined by the impugned order of the Tribunal and on facts it was found satisfied. Further it was a submission on behalf of the Revenue that such large amount of share premium gives rise to suspicion on the genuineness (identity) of the shareholders i.e. they are bogus. The Apex Court in Lovely Exports (P.) Ltd. (supra) in the context to the pre-amended Section 68 of the Act has held that where the Revenue urges that the amount of share application money has been received from bogus shareholders then it is for the Income Tax Officer to proceed by reopening the assessment of such shareholders and assessing them to tax in accordance with law. It does not entitle the Revenue to add the same to the assessee's income as unexplained cash credit. 9.The Ld. AO has placed reliance on the decision of the Hon’ble Supreme Court in Sumati Dayal v. CIT (214 ITR 801) which is a landmark judgment for decision in cases wherein the surrounding circumstances are heavily evident and hence the true nature of a transaction has to be ascertained in the light of these surrounding circumstances. Any other conclusion would be a travesty of justice. In this instant case however, the reliance is misplaced as the AO’s self congratulatory ‘successful and correct’ analysis falls short of proving that the apparent is probably not real. The facts of this case are positively inclined towards the Appellant, rather than the Department. The Ld. AO has also stated that “All these circumstances clearly indicate that what is apparent s probably not real and on further investigation specially on logical analysis c* the sworn statement recorded from one fresh share subscriber it is established: that what is apparent is not real.”. However, the ‘logical analysis’ of the sworn statement is not spelled out at all in the impugned assessment order. Therefore the contention of the AO is unconvincing and hence unacceptable 5.3.2. Hence, in view of the above discussion and respectfully following the numerous judgments cited above, I am inclined to hold that the addition made under Sec. 68 of the Act by the Ld. AO is not Assessment Year: 2012-2013 M/s. Indus Realty Pvt. Limited factually and legally sustainable. Hence the same is deleted. Thus the Appellant succeeds and this Ground is ALLOWED”.

Assessment Year: 2012-2013 M/s. Indus Realty Pvt. Limited 8. On due consideration of the order of ld. CIT(Appeals), we are of the view that it does not call for any interference at our end. Accordingly, the appeal of the Revenue is dismissed on merit.