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Income Tax Appellate Tribunal, MUMBAI BENCH “E”, MUMBAI
Before: SHRI ANIKESH BANERJEE & SHRI GIRISH AGRAWAL
& 5279/Mum/2025 Talentube Entertainment Pvt Ltd O R D E R Per Bench: The instant cross appeals of the assessee and revenue were filed against the order of the National Faceless Appeal Centre(NFAC), Delhi [hereinafter, ‘Ld.CIT(A)] order passed under section 250 of the Income-tax Act, 1961 (in short, ‘the Act’) for the Assessment Year 2012-13, date of order 20/06/2025. The impugned order was emanated from the order of the Ld. Income Tax Officer, Ward-16(1)(5), Mumbai (in short, ‘Ld.AO’), order passed under section 143(3) of the Act, date of order 31/03/2015.
The grounds of appeal raised by the parties are as follows:-
(Assessee’s appeal) “This Appeal, by the Assessee, is directed against the Order of the Leamed Commissioner of Income Tax (Appeals), National Faceless Appeals Centre (NFAC), Delhi dated 20 June 2025, pertaining to the Assessment Year 2012-2013. The Appellant has raised the followed grounds of appeal:
On facts and in law.
1] Under the facts and circumstances of the case The Learned CIT(A) has erred in confirming the addition of Rs. 74,98,262/", being the amount invested by a Non-Resident Indian, Mr. Rajivkumar Shyamsundar Kedia without properly appreciating the fact that this said investment was made through banking channels, and all supporting details in this regard were already furnished and available on record both before the Ld. Assessing officer and the Learned CIT(A).
2] That the Learned Authorities below have failed to consider documentary evidences substantiating the identity, creditworthiness of the investor, and genuineness of the transaction were already available on record, and hence the impugned addition is unsustainable in law as well as on facts.
4) The Appellant craves the permission to add, alter, amend or delete any of the above Grounds of Appeal before or at the time of hearing.”
(Revenue’s appeal) “1. "Whether on the facts and in the circumstances of the case and in lave, the Ld. CIT(A) erred in deleting the addition made as unexplained cash credit u/s.68 of the I.T. Act of Rs.4.25,01,740/-without properly appreciating the adverse findings by the AO that the shares of the company were issued at a high premium of Rs.8,688.68/-per share keeping in view that the company was incorporated only in the current year i.e. 2011-12 and has no past performance or business activity".
2. "Whether on the facts and in the circumstances of the case and in law, the Ld. CIT(A) erred in deleting the addition made as unexplained cash credit u/s.68 of the 1.T. Act of Rs.4,25,01,740/-without properly appreciating that assessee had failed to prove the creditworthiness and genuineness of the transaction towards issue of equity shares at a magnified and overstated share premium."
Since both the appeals have identical facts and common issue, for the sake of convenience, these appeals were heard together and are being disposed of by this common order. is taken as lead case.
The brief facts of the case are that the assessee e-filed its return of income declaring a total income of Nil. The return was processed under section 143(1) of the Act. Subsequently, the case was selected for scrutiny, and statutory notices under sections 143(2) and 142(1) were duly served upon the assessee. During the assessment proceedings, the Ld. AO observed that the assessee had issued 5,748 equity shares at a price of Rs. 8,698.68 per share, aggregating to Rs.5,00,00,012/-. Out of the total issue price of Rs. 8,698.68 per share, the face value was Rs. 10/- & 5279/Mum/2025 Talentube Entertainment Pvt Ltd and the premium component was Rs. 8,688.68 per share. The assessee is engaged in the business of production and marketing of motion pictures and operates a website for sourcing talent for such activities. The Ld. AO noted that the assessee-company had received substantial share premium of Rs. 8,688.68 per share and that the valuation had been carried out using the Discounted Cash Flow (DCF) method. The Ld. AO considered the valuation to be on the higher side and, accordingly, sought details of the subscribers. The assessee furnished a list of 15 subscribers who had invested in the share capital of the assessee-company. The list of investors is reproduced below: Name Date of Allotment Amount received Mr. Rajivkumar S Kedia 22/03/2012 74,98,262 Mr. Sajjan kumar Goenkar 22/03/2012 35,40,363 Mr. Suresh Goenka 22/03/2012 35,40,363 Mr. Narendra Goenka 22/03/2012 35,40,363 Mr. Neeraj Goenka (POA) 22.03.2012 35,49,061 Mr. Shailesh Goenka 22.03.2012 35,40,363 Mrs. Saritadevi Goenkar 22.03.2012 35,40,363 Mr. Rajendra Prasad 22/03/2012 40,97,078 Mr. Amit Dalmia (POA) 22.03.2012 6,95,894 Mrs. KusumDalmia 22.03.2012 1,04,384 Mr. Arunanshu Agarwal 22.03.2012 40,62,284 Mr. Vishwanshu Agarwal 22.03.2012 40,62,284 Mrs. Rachna Singhi 22.03.2012 40,62,284 Mrs. Deepika Vidur Nath 22.03.2012 40,62,284 & 5279/Mum/2025 Talentube Entertainment Pvt Ltd The Ld. AO initiated verification of these investors and ultimately treated the entire share capital and premium as bogus, though no objection whatsoever was raised regarding the valuation of shares under the DCF method. Consequently, the Ld. AO made an addition of Rs. 5,00,00,012/- under section 68 of the Act. Aggrieved, the assessee preferred an appeal before the Ld. CIT(A). The Ld. CIT(A) considered the submissions and examined the assessment records. A remand report was called for vide notice dated 16/10/2019. Upon perusal, the Ld. CIT(A) observed that notices under section 133(6) had been issued to all investors and that all notices were duly complied with. After verifying the evidence, the Ld. CIT(A) found that the assessee had satisfactorily established all three essential conditions under section 68 of the Act identity, genuineness, and creditworthiness in respect of all investors except one, namely Shri Rajivkumar Shyamsunder Kedia, an NRI investor who had contributed Rs.74,98,262/-. He failed to furnish documentary evidence such as financial statements, salary records, and bank statements to substantiate his creditworthiness during appellate proceedings. Accordingly, the Ld. CIT(A) upheld the addition only to this extent and deleted the balance addition of Rs. 4,25,01,740/-. Being aggrieved, both the assessee and the revenue filed appeals before us.
The Ld. DR supported the order of the Ld. AO, contending that the addition under section 68 was justified as the AO doubted the assessee’s capacity to attract high-value investments with significant share premium despite limited business activities. The investors’ creditworthiness, according to the Ld. DR, remained unsubstantiated. Although the valuation was performed using the DCF method to project future profitability, the Ld. DR admitted that the Ld. AO did not & 5279/Mum/2025 Talentube Entertainment Pvt Ltd raise any specific objection to the DCF valuation in the impugned assessment order. The Ld. DR therefore relied upon and supported the impugned assessment order.
The Ld. AR contended that the assessee had duly issued shares and received consideration from 15 investors. Notices under section 133(6) were issued to all investors, and every investor complied. The assessee had fully discharged the onus cast upon it under section 68 by proving the identity of the investors, the genuineness of the transactions, and the creditworthiness of the parties. Upon filing all supporting documents, the burden shifted to the department. The Ld. AR placed reliance on the findings of the Ld. CIT(A). The relevant observations are reproduced below: “8.2 Identity of the share applicants:- The appellant company has submitted the following documents before the Ld AD to establish the share subscribers' identities in this case 1. Name and address of the shareholders. (ii) Permanent Account Number (PAN). 1. Copy of acknowledgements of return filed by the shareholders. Furthermore, the Ld AO issued letters as per section 133(6) of the Act to the share subscribers who replied by furnishing documents verifying their identities. In fact the Ld. AO had no qualms about the identity of the share subscribers. Thus, the appellant company has proved the identities of the share subscribers, as demonstrated by the factual situation mentioned earlier.
8.3 The creditworthiness of share subscribers:- With the exception of an NRI case, the appellant submitted the following documents regarding the creditworthiness of share subscribers. 1. Audited financial statement of the shareholders.
The Ld AO issued notices under section 133(6) to verify the identity. creditworthiness, and genuineness of the parties involved in shares subscription. Based on the parties' replies to notices under section 133(6), the Ld. AO observed that many have significant capital on their balance sheets, but their reported income raises serious doubts about their creditworthiness to invest such a significant amount. The Ld.AO did not clarify the basis for concluding that the appellant company did not prove the creditworthiness of 14 share subscribers. From the above facts, it can be inferred that the Ld.AO ignored the explanation and documents provided by the appellant company and its share subscribers in support of their capacity to make investments in the matter, without providing any concrete proof on record. The appellant has discharged its primary onus under section 68 of the Act of proving the creditworthiness of 14 share subscribers by providing explanations and necessary documents. In the event that the AO is not pleased with the explanation and documents submitted by the assessee to prove the creditworthiness of the parties, he must conduct additional inquiries to verify the appellant's submission. The Ld AO simply stated that the income reported by share subscribers in their respective return of income did not match the large investment they made in shares despite no further inquiries. Furthermore, the appellant in the appellate proceeding provided tabular information regarding the income declared by each share subscriber in their returns, as previously indicated in the order. The income figures submitted by the appellant company demonstrate that the share subscribers reported more income than the investment they made. It appears that the Id AO's observation that the income reported by each of the fourteen share holders was lesser than the investment in shares was based on conjecture and surmise, not actual data. The primary source of subscription of funds, as observed by the AO, was Loans, which are equivalent to investments in shares and share premiums. If there are doubts about the genuineness of the loans used by share subscriptions to invest in shares of the appellant company, the Assessing Officer is entitled to carry out thorough investigations.
& 5279/Mum/2025 Talentube Entertainment Pvt Ltd 8.4 The Id. AO was erroneous in concluding that the appellant company did not demonstrate the capacity of the share subscribers to make substantial investments, despite his doubts about the creditworthiness of the share subscribers. In regards to RajivkumarShyamsundarKedia's creditworthiness, the Ld AO noted that the appellant had only furnished a letter written to the RBI to prove his creditworthiness. In addition, the Ld AO noted that the appellant failed to give any additional information, such as a balance sheet or source of income, to prove that the funds invested were his own. Accordingly, the Ld.AO concluded that the appellant company could not prove the investor's creditworthiness.
8.5 The appellant company in the appellate proceedings has stated that RajivkumarShyamsundarKedia is an NRI and the funds raised from him were received through banking channels. Furthermore, the Appellant company has asserted that they have submitted a Form FC-GPR to the Reserve Bank of India for issuing shares to NRI. As per the appellant, they submitted a certificate from the company secretary to the RBI for the distribution of shares to non-resident Indians. In addition, they sent a copy of the application, which included attachments, to the AO. According to them, the investments were made by NRI through proper banking channels. According to the appellant, Mr. Rajivkumar Shyamsunder Kedia works as a partner and employee with Flextrade Systems, Inc. in New York and earns a salary in excess of USD 250,000 (i.e. Approximately Rs. 1,50,00,000/-). To wrap up, the appellant contends that the AO's observation that Rajivkumar Shyamsunder Kedia's creditworthiness was not proved is inaccurate and there is no need for an addition in the facts and circumstances of the case.
8.6 I have perused the findings recorded by the Ld. AO, as well as the appellant's submission and the material available on record. The appellant's submission is limited to an explanation about the NRI's ability to invest in the shares of the appellant company, but there is no sufficient evidence to back it up. Furthermore, I observe that the appellant has not provided any documents, such as financial statements, salary statements, and bank statements, to establish the NRI's creditworthiness during the appellate proceedings. The appellant company has not provided any documentary evidence to prove the creditworthiness of the NRI involved, so it ITA 5666/Mum/2025 7. In the assessee’s appeal, the assessee has challenged the sustenance of the addition relating to the investment made by the NRI investor amounting to Rs.74,98,262/-. The Ld. AR submitted that the assessee has filed additional evidence before the Bench under Rule 29 of the Income-tax (Appellate Tribunal) Rules, 1963. Accordingly, the Ld. AR placed on record a paper book comprising pages 1 to 20. The additional evidence submitted consists of the following documents: 1. Copy of the bank statement of the NRI investor; and 2. Copies of documents earlier submitted during the proceedings before the Ld. CIT(A) pertaining to the said NRI investor. The Ld. AR fairly conceded that the assessee was unable to furnish these documents before the Ld. CIT(A). Therefore, he prayed that the Bench may be pleased to admit the additional evidence in the interest of justice.
The Ld. DR, while arguing the matter, did not raise any serious objection regarding the admission of the additional evidence.
We have heard the rival submissions and perused the material available on record. With respect to the revenue’s appeal, we note that the Ld. AO made an addition of Rs.5,00,00,012/- under section 68 of the Act on the ground that the assessee failed to establish the identity, creditworthiness, and genuineness of the & 5279/Mum/2025 Talentube Entertainment Pvt Ltd share applicants. However, on examination of the records, it is evident that the Ld. AO had issued notices under section 133(6) of the Act during the assessment proceedings, and all such notices were duly complied with. The transactions were routed through banking channels, and the assessee substantiated the creditworthiness of the investors by furnishing their income-tax returns and financial statements. The Ld. CIT(A) thoroughly examined the documents submitted in respect of 14 investors and found that all three conditions prescribed under section 68 of the Act, identity, creditworthiness, and genuineness were duly satisfied. We find no perversity or infirmity in the findings of the Ld. CIT(A). Accordingly, the deletion of the addition of Rs. 4,25,01,740/- by the Ld. CIT(A) is upheld.
In relation to the assessee’s appeal, we observe that the assessee has now furnished the bank statement of the NRI investor, evidencing that the investment was made through proper banking channels, which is a critical component for satisfying the requirements of section 68 of the Act. In our considered opinion, the additional evidence merits acceptance. Therefore, the issue concerning the investment made by Shri Rajivkumar Shyamsundar Kedia is remanded to the file of the Ld. CIT(A) for fresh verification. Needless to state, the assessee shall be afforded a reasonable opportunity of being heard during the set-aside appellate proceedings. Correspondingly, the assessee is expected to remain diligent and fully co-operative in the course of such proceedings.
Accordingly, appeal filed by the revenue stands dismissed and the appeal filed by the assessee is allowed for statistical purpose.
& 5279/Mum/2025 Talentube Entertainment Pvt Ltd 12. In the result, the appeal of the assessee bearing ITA 5066/Mum/2025 is allowed for statistical purpose and the appeal of the revenue bearing is dismissed.