AAKASH UNIVERSAL LIMITED ( MERGED ENTITY RAJKIRAN TEXTILES PVT LTD),MUMBAI vs. INCOME TAX OFFICER WARD 13(3)(1), MUMBAI

IN THE INCOME TAX APPELLATE TRIBUNAL
“A” BENCH MUMBAI

BEFORE HON’BLE SHRI SANDEEP GOSAIN, JUDICIAL MEMBER &
HON’BLE SHRI PRABHASH SHANKAR, ACCOUNTANT MEMBER
Aakash Universal Ltd
(Merged entity Rajkiran
Textiles Pvt Ltd)
15A, Bharat Insurance Bldg,
3rd Floor, Horniman Circle,
Fort, Mumbai – 400 001. Vs.
ITO, ward 13(3)(1)
261, Aayakar Bhavan,
Maharishi Karve Road,
Mumbai – 400 020. PAN/GIR No. AAACA9755H (AAACR2245R)
(Applicant)
(Respondent)

Assessee by Shri Vimal Punmiya
Revenue by Shri Ram Krishn Kedia, Sr. DR

Date of Hearing
07.04.2025
Date of Pronouncement
13.05.2025

आदेश / ORDER

PER SANDEEP GOSAIN, JM:

The present appeal has been filed by the assessee challenging the impugned order dt. 19.01.2024 passed u/s 250 of the Income Tax Act, 1961 (‘the Act’), by the National
Faceless Appeal Centre, Delhi / CIT(A), for the A.Y 2010-
11. 2. First of all we take up Ground No.2, this ground No.
2.1
to 2.4
are interrelated and interconnected to 2
Akash Universal Ltd, Mumbai challenging the order of Ld. CIT(A) in confirming the additions made by AO u/s 68 of the Act. Therefore we have decided to take up all the grounds together and to adjudicate the same through the present consolidated order.
3. Ld. AR appearing on behalf of the assessee reiterated the same arguments as were raised by him before the revenue authorities and further relied upon his written submissions which are reproduced herein below:
•
The Appellant, M/s Rajkiran Textiles Pvt. Ltd. is intended to enter into the business of property during the year under assessment filed the return of income on 10-12-2010 declaring
Loss of Rs.28,419/- which was processed u/s 143(1) of the Income Tax Act, 1961 (the Act).
•
The case was reopened u/s 147 of the Act by issuing notice u/s 148 of the Act on 22.03.2016 and as required by assessing officer vide notice issued u/s 143(2) and 142(1) of the Act from time to time, the Appellant filed all the details as and when demanded by the Assessing Officer (AO).
•
The order u/s 143(3) r.w.s 147 of the Act was passed on 27-
12-2016 of the Act by adding a sum of Rs.2,50,00,000/- to the income of the Appellant, which was received by the Appellant towards the allotment of shares from various parties at a premium of Rs.990/- per share, on the ground that the purported share application money of Rs.2,50,00,000/-were treated as a cash credits in the books of the assessee company, whose nature and source is not explained and, therefore, deemed to be the assessee’s income as envisaged in Section 68 of the Income
Tax Act, 1961, without considering the details furnished by the parties in response to notices issued to them u/s 133(6) of the Act
•
As mentioned in the order that in case of four parties, three notices were returned with remark moved, these were never informed to the Appellant by the AO. The two parties in case of 3
Akash Universal Ltd, Mumbai notices returned unserved, the addresses of the parties have changed and are available at new addresses. However, the Appellant submitted copies of share application, copy of bank statements and copies of balance sheets of all the parties to whom the shares were allotted including these two parties where notice returned unserved.
•
For that on the facts and in the circumstances of the case, the Appellant never received any show cause notice mentioned in the order and the learned assessing officer was highly unjustified in completing the assessment without considering the facts of the case and ignoring the submissions made by the Appellant.

•
Aggrieved from the above assessee preferred and appeal before NATIONAL FACELESS APPEAL CENTRE (NFAC) and NFAC erred in confirming the addition made by Ld.Assessing officer.
•
Further aggrieved from the above assessee preferred this appeal before HON’BLE ITAT raising following grounds of appeal
:

Grounds of Appeal
1. FIRST GROUND OF APPEAL: - Order Bad in Law and on Facts

4
Akash Universal Ltd, Mumbai

During the year, the appellant company has issued shares at premium to the following companies :

•
In view of the aforesaid details, the Appellant submits that all the Investor companies have positive net worth and have only invested on an average 3.37% of their net worth in the Appellant.

5
Akash Universal Ltd, Mumbai
Hence, the creditworthiness of the Investor companies cannot be doubtful.
•
The Ld. Assessing officer noted that a)
There was always nominal bank balance in their bank account.
b)
There were immediate deposits in their bank account before investing into share application money of the appellant company.
c)
None of the parties have enough credit worthiness as most of the share applicants are showing negligible income and they don’t have accumulated profits.

•
Accordingly , the LD AO treated share capital and share moneyas unexplained cash credit u/s 68 of the Act and made an addition of Rs.2,50,00,000/-
1. During the course of assessment proceedings, the Ld.
Assessing Officer has asked the appellant to submit the documentary proof and evidences to substantiate the Creditworthiness of the parties who have subscribed to the shares of the appellant.
2. In response to this, appellant has submitted the following documents to prove the Identity,
Creditworthiness and Genuineness of the above share transaction even though the appellant was not required to prove :

To prove the identity, appellant has submitted the addresses,
PAN, certificate of incorporation, Memorandum and Articles of Association of the above subscribers who have subscribed to the shares.

To prove the creditworthiness of the subscribers, appellant has submitted the certificate of source of fund, Balance Sheet,
Profit & Loss a/c and Return of Income ofshare applicants.

To prove
Genuineness of above share transaction, appellant has submitted :
a)
Copy of Bank Statement of M/s Rajkiran Textiles Pvt. Ltd.
b)
Copy of Share Certificate Counterfoil

6
Akash Universal Ltd, Mumbai c)
Copy of Extract of Statement showing no. of parties along with the amount received as share application money during
AY 10-11 along with board resolution d)
Copy of Source of Funds Certificate e)
Copy of ITR Acknowledgement f)
Copy of Audit Report along with Balance Sheet g)
Copy of Certificate of Incorporation h)
Copy of Memorandum & Articles of Association i)
Company Master Data showing status active

At the outset, the Appellant would like to draw Your Honour’s kind attention to the text of Section 68 of the Act that reads as under:
“68.Where any sum is found credited in the books of an assessee maintained for any previous year, and the assessee offers no explanation about the nature and source thereof or the explanation offered by him is not, in the opinion of the Assessing officer, satisfactory, the sum so credited may be charged to income-tax as the income of the assessee of that previous year.”
From a reading of the above section, it is evident that the assessee should be able to provide satisfactory explanations about the sum found to be credited in the books of the assessee. It is a fairly settled legal position held by various decisions discussed subsequently that if the assessee proves the following things then the addition under section 68 of the Act cannot be made:
I.
Identity of the shareholder;
II.
Genuineness of the transaction;
III.
Credit worthiness of the shareholder

Your honor can refer the page nos.21-218 of the Paper
Book; the details in length were submitted.Each
&every share applicant has confirmed the transaction with the 7
Akash Universal Ltd, Mumbai appellant company. Therefore, the findings given by the Ld. AO were in contradiction of section 68 of the Act.

8
Akash Universal Ltd, Mumbai wherein the addition under section 68 of the Act on account of share application money was duly deleted by the Hon’ble Supreme Court, High Court and Tribunal
A.
Bharat Securities (P.) Ltd Vs. PCIT [2020] 113
taxmann.com 32 (SC) order passed on 11th September,
2019 in assessee’sfavour.
Held that once genuineness, creditworthiness and identity of investors are established, no addition could be made as cash credit on ground that shares were issued at excess premium
B.
Rohtak Chain Co. (P.) Ltd vs. PCIT [2019] 110
taxmann.com 59 (SC) order passed on 5th August, 2019
in assessee’sfavour.
Held that once genuineness, creditworthiness and identity of investors were established, no addition could be made as cash credit on ground that shares were issued at excess premium
C.
PCIT vs. Chain House International (P) Ltd [2019] 103
taxmann.com 435 (SC)order passed on 18th Februrary,
2019 in assessee’sfavour.
It was held that No reason to interfere. SLP dismissed.
High Court held there is no limitation on the amount of premium that can be charged. The AO cannot question the transaction merely because he thinks the investor could have managed by paying a lesser amount as share premium. It is the prerogative of the Board of Directors to decide the premium and it is the wi om of the shareholder whether they want to subscribe to shares at such a premium or not. S. 68 does not apply as the funds were received through banking channels and the identity, creditworthiness and genuineness of the investors was established

BOMBAY HIGH COURT :-
No. 1231 of 2017 order passed on 29th January, 2020 in assessee’sfavour.
In NRA Iron & Steel (P) Ltd (supra), the Assessing Officer had made independent and detailed inquiry including survey of the 9
Akash Universal Ltd, Mumbai investor companies.
The field report revealed that the shareholders were either non-existent or lacked credit- worthiness. It is in these circumstances, Supreme Court held that the onus to establish identity of the investor companies was not discharged by the assessee. The aforesaid decision is, therefore, clearly distinguishable on facts of the present case.
Held that identity of the creditors were not in doubt. Assessee had furnished PAN, copies of the income tax returns of the creditors as well as copy of bank accounts of the three creditors in which the share application money was deposited in order to prove genuineness of the transactions. In so far credit worthiness of the creditors were concerned, Tribunal recorded that bank accounts of the creditors showed that the creditors had funds to make payments for share application money and in this regard, resolutions were also passed by the Board of Directors of the three creditors.

Baba Bhootnath Trade & Commerce Ltd vs. ITO (ITAT
Kolkata)I.T.A. No.1494/Kol/2017 in Assessee’sfavour.
It was held that the judgement in PCIT vs. NRA Iron &
Steel 103 TM.com 48 (SC) is distinguishable on facts &
does not apply to a case where the assessee has discharged its onus to prove the identity, creditworthiness and genuineness of the share applicants by producing the PAN details, bank account statements, audited financial statements and Income
Tax acknowledgments and the investors have shown the source of source & personally appeared before the AO in response to s. 131 summons

SN
CITATION
OBSERVATIONS
1. In the case of Principal
Commissioner of Income-tax,
Central-1
v.Adamine
INCOME TAX: Where High
Court upheld
Tribunal's order deleting addition made under section 68 in respect of share application money received
Construction (P.)
Ltd.
before
SUPREME COURT
OF INDIASPECIAL
LEAVE PETITION
(CIVIL)
DIARY
NOS. 29917 OF 2018
by assessee on ground that assessee had brought on record sufficient documentary evidence to prove identity and creditworthiness of share applicants,
SLP filed against said order was to be dismissed
Section 68 of the Income-tax
Act,
1961
-
Cash credits
(Share capital) - Assessment year
2008
09
-
During relevant year assessee received share application money from share applicants
Assessing
Officer doubting identity and creditworthiness of those applicants, added said amount to assessee's income under section 68 -
Tribunal, however, deleted addition made by Assessing
Officer - High Court noted that both assessee and later share applicants upon receiving notice under section 131, had produced documentary proof
-
Documents so produced included assessments and returns filed by share applicants as well as confirmation and acknowledgment documents -
According to High court, if Assessing Officer wished to pursue matter, there were sufficient clues for him to have proceeded, for instance, of action - High Court thus upheld
Tribunal's order deleting addition made by Assessing Officer - Whether, on facts, SLP filed against order of High Court was to be dismissed - Held, yes [Para 2]
[In favour of assessee]
2. In the case of AdhoiVyapar(P.)
Ltd. v. Income- tax
Officer
IN THE ITAT
MUMBAI
BENCH
'A'
IT APPEAL
NOS.
7308
TO 7311 (MUM.) OF 2019
[ASSESSMENT
YEARS
2009-10
TO 2012-13]
INCOME TAX : Proviso to section 68, which provides that explanation furnished by assessee about nature and source of share application money, etc.
shall be not satisfactory unless person in whose name such credit is recorded offers an satisfactory explanation about nature and source of sum so credited, is applicable only from assessment year
2013-14
and is not retrospective in nature
INCOME
TAX
:
Where assessee had discharged initial onus of proving share application transactions and Assessing Officer could not establish that assessee generated unaccounted share-application money, addition under sections 68 and 69C is not sustainable in law
Section 68 of the Income-tax
Act, 1961 - Cash credit
(Proviso) - Assessment years
2009-10, 2010-11, 2011-12
and 2012-13 - Whether proviso inserted to section 68
by Finance Act, 2012 with effect from 1-4-2013, which provides that explanation furnished by assessee about nature and source of share- application money, share capital, share premium etc.
shall be deemed to be not satisfactory unless person in whose name such credit is recorded also offers an explanation about nature and source of sum so credited and such explanation is found to be satisfactory, is applicable only from assessment year
2013-14 and is not retrospective in nature - Held, yes [Para 6.5] [In favour of assessee] Section 68, read with sections 69C and 147, of the Income-tax Act, 1961 -
Cash credit (Burden of proof) -
Assessment years 2009-10,
2010-11, 2011-12 and 2012-
13 - Whether where assessee had discharged initial onus of proving share application assessee's documentary evidences and bring on record cogent material to establish that assessee generated unaccounted money and routed same through banking channels in garb of share- application money - Held, yes
- Whether unless such an investigation is shown to have been carried out, additions would not be sustainable in law since it is trite law that no addition could be made on basis of mere suspicion, conjectures and surmises - Held, yes
[Paras 6.4 and 6.8] [In favour of assessee]
3. In the case of Principal
Commissioner of Income-tax v.
Realvalue
Realtors (P.) Ltd before
HIGH
COURT
OF BOMBAYIT
APPEAL NO. 957
OF 2017†
INCOME
TAX:
Where assessee received share application money and Assessing
Officer made section 68
addition in hands of assessee on ground that assessee had failed to discharge onus of establishing genuineness of transaction and creditworthiness of shareholder, since substantial amount of said loan was received in earlier year and as regards balance, sufficient evidence was produced,
Section 68 of the Income-tax
Act, 1961 - Cash credit (Share capital) - Assessment year
2007 08 - Assessee was engaged in business of dealing in property and trading in shares and stock -
Assessing Officer noted that in relevant previous year assessee had received an amount from one shareholder as share application money but had failed to discharge onus of establishing genuineness of transaction and creditworthiness of same
- Assessing Officer treated said amount as unexplained cash credit - Commissioner
(Appeals) noted that substantial part of said sum was received in earlier assessment year and, thus, it could not be added in impugned assessment year -
Further, Commissioner
(Appeals) observed that as regards balance sum, sufficient evidence was produced in respect of identity and genuineness of shareholder and he, accordingly, deleted said addition - Tribunal confirmed said order - Whether on facts, no substantial question of law arose for consideration -
Held, yes [Para 7] [In favour of assessee]
4. In the case of Principal
Commissioner of Income-tax-1
v.
Ami
Industries
(India) (P.) Ltd.
before
HIGH
COURT
OF BOMBAY
IT APPEAL
NO.
1231 OF 2017
INCOME TAX: Where first appellate authority had returned a clear finding of fact that assessee had discharged its onus of proving identity of creditors, genuineness of transactions and credit worthiness of creditors which finding of fact stood affirmed by Tribunal and revenue had not been able to show any perversity in aforesaid findings of fact by authorities below,
Tribunal was right in holding that no addition could be made under section 68
Section 68 of the Income-tax
Act, 1961 - Cash credit (Share application money) -
Assessment year 2010-11 -
Assessing Officer noted that assessee had disclosed funds from three Kolkata based companies as share application money - But, since where abouts of above companies were doubtful and their identity could not be authenticated, Assessing
Officer treated aforesaid funds as money from unexplained sources and added same to income of assessee as unexplained cash credit under section 68 - assessee-company had furnished PAN, copies of income tax returns of creditors as well as copy of bank accounts of three creditors through which share application money was deposited in order to prove genuineness of transactions -
Further, insofar as creditworthiness of creditors were concerned, Tribunal recorded that bank accounts of creditors showed that creditors had funds to make payments for share application money and in this regard, resolutions were also passed by Board of Directors of three creditors Thus, first appellate authority had returned a clear finding of fact that assessee had discharged its onus of proving identity of creditors, genuineness of transactions and creditworthiness of creditors which finding of fact stood affirmed by Tribunal -
Revenue had not been able to show any perversity in aforesaid findings of fact by authorities below Whether therefore, Tribunal was right in confirming order passed by Commissioner (Appeals) and holding that no addition could be made under section 68 -
Held, yes [Paras 21, 23 and 24] [In favour of assessee]
5. In the case of Shree
Veer
Buildbest(P.)
Ltd. v. Income- tax
Officer
IN THE ITAT
AHMEDABAD
BENCH
'C'
IT APPEAL NO. 892
(AHD.) OF 2023
[ASSESSMENT
YEAR 2011-12]
INCOME
TAX
:
Where assessee received certain amount as share application money from a party and documents furnished by assessee established identity, creditworthiness and genuineness of share application money received, addition under section 68
was not justified

III. Section 68, of the Income- tax Act, 1961 - Cash credit
(Share application money)
Assessment year 2011-12 -
Assessee received certain amount as share application money from a party -
Assessing Officer added said amount to assessee’s income as unexplained under section 68 on protective basis -
Whether since documents furnished by assessee established identity, creditworthiness and genuineness of share application money received and there was no substantive addition in hands of aforesaid party and Assessing Officer’s failure to provide further substantial evidence or conduct thorough investigation meant that protective addition of section 68 was not justified -
Held, yes [Paras 15, 15.2 and 15.3] [In favour of assessee]
6. In the case of Principal
Commissioner of Income-tax v.
Esspal
International
(P.)
Ltd.D.B.
before
HIGH
COURT
OF RAJASTHAN
INCOME
TAX
APPEAL NO. 25
OF 2024
INCOME
TAX
:
Where assessee received share application money and had furnished each and every document required for proving identity, creditworthiness of share applicants and genuineness of transactions, impugned addition made under section 68 on ground that it was accommodation entry was to be deleted
Section 68 of Income-tax Act,
1961 - Cash credit (Share application money) -
Assessment year 2014-15 -
During a search conducted upon one SCS, it was found that he was engaged in providing accommodation entries of share capital, share premium, share application money, unsecured loans, long term capital gains, short term capital gains etc. in lieu of cash received by him and that it had also provided one-time entry of certain amount towards share application money to assessee-company through a broker and such transaction was not genuine -
Assessing Officer made addition under section 68 to account of same - It was noted that Tribunal had noted that assessee had furnished each and every document required for proving identity, creditworthiness of share applicants and genuineness of transactions, however,
Assessing Officer had not been able to brought on record any evidence to show that cash was paid by assessee to any person for obtaining accommodation entries in form of share application money - Further, on a glance at materials on record, it was found that Assessing Officer assessed assessee under section 143(3) only on basis of statement given by SCS - However, it was a matter of record that SCS had retracted his statements given before
Assessing Officer - Whether, on facts, impugned addition made by Assessing Officer was without any basis - Held, yes [Para 14] [In favour of assessee]
7. In the case of Principal
Commissioner of Income-tax v.
Siyaram
Metals
Udyog (P.) before
HIGH COURT OF GUJRAT
TAX
INCOME TAX : Provisions of section 68 could not be invoked, more particularly when addition was made on account of share premium and share application money by investors whose identity,
APPEAL NO. 508
OF 2023
creditworthiness and genuineness was proved by assessee
I. Section 68 of the Income-tax
Act, 1961 - Cash credit (Share application money)
Assessment year 2011-12 -
Assessee-company was incorporated in relevant assessment year by converting proprietary concern
-
Thereafter, assessee-company allotted shares at premium to proprietor and also to other investors - During course of assessment proceedings,
Assessing Officer noted that a search was conducted at premises of assessee wherein it was found that share certificates were not issued to investors - He, thus, made additions under section 68 of entire credit of share capital and premium - On appeal,
Commissioner
(Appeals) deleted said additions
-
Tribunal upheld said order on ground that identity of party was established by furnishing name, address and PAN detail, bank details, ITR etc. - Tribunal further held that it was first year of operation of assessee- company and declaration of dividend by company had nothing to do with share capital received by assessee under section 68 - Whether
Tribunal had rightly held that provisions of section 68 could not be invoked, more particularly when addition was made on account of share premium and share application money by investors whose identity, creditworthiness and genuineness was proved by assessee - Held, yes [Para 3]
[In favour of assessee]
8. In the case of Abhijavala
Developers
(P.)
Ltd.
v.
Income
Tax
Officer
9(1)(1),
Mumbai
IN THE ITAT
MUMBAI
BENCH
'A'
IT (APPEAL)
NO.
952
(MUM)
OF 2019
[ASSESSMENT
YEAR 2012-13]
INCOME
TAX
:
Where assessee received share capital and unsecured loan from several entities and produced documentary evidences such as copy of confirmation of accounts, copy of PAN card, bank statement
ITR acknowledgement and financial statements of all investors/lenders so as to substantiate these transactions and funds were transferred to assessee through proper banking channels, no addition under section 68
could be made on basis of third party statements
Section 68 of the Income- tax Act, 1961 - Cash credit
(Share capital and unsecured loan) Assessment year 2012-13 - During year, corporate entities - Assessing
Officer noted that summons issued under section 131 to these entities were returned back with remarks like not known/incomplete address and assessee was unable to produce any of these parties -
He further noted that an information was received from DGIT (Inv.) that all these entities were involved in providing bogus accommodation entries of varied nature - Accordingly, he held that unsecured loans as well as share application money received by assessee from all six entities was non- genuine and a sham and added these amount to income of assessee under section 68 - It was noted that assessee had furnished all documentary evidences such as copy of confirmation of accounts by lender/investor, copy of PAN Card, bank statement, ITR acknowledgement and copy of financial statements of all investor/lender entities -
Further, all these six entities had filed their return of income after paying taxes -
They had also duly confirmed transactions carried out with assessee - All funds were transferred to assessee through proper banking channels and there was no immediate cash deposits in their accounts before transfer of funds to assessee -
Allegations of revenue were not supported by any corroborative evidences - So far as information of DGIT
(Inv.) was concerned, these were found merely third party statements which were never confronted to assessee and those statements on standalone basis could not form basis of making additions in hands of assessee - Whether, on facts, impugned additions made under section 68 to income of assessee was unjustified and same was to be deleted -
Held, yes [Para 5] [In favour of assessee]
9. In the case of NextgenVyapaar
(P)
Ltd.
v.
Principal
Commissioner of Income
Tax-4,
KolkataIN
THE ITAT
KOLKATA
BENCH
'A'

IT APPEAL
NO.
1176 (KOL.) OF 2019
[ASSESSMENT
YEAR 2012-13]
Section 68, read with section 263, of the Income-tax Act,
1961 - Cash credit (Revision)
Assessment year 2012-13 -
Assessee company, engaged in business of dealing in shares and investments, filed its return of income
-
Assessing Officer passed an assessment order under section 143(3) making an addition of certain amount under section 68
as unexplained cash credit on by assessee during year -
Principal
Commissioner invoked revision juri iction under section 263
and directed Assessing Officer to carry out proper examination of books of account and bank accounts of assessee as well as investors
-
Assessing
Officer passed an order under section 263 determining total income of assessee at lesser amount by deleting addition under section 68 on ground that source of fund, identity, genuineness and creditworthiness of share applicants were verified and found in order
-
Pr.
Commissioner issued another notice under section 263 on ground that income determined as per impugned order under section 263 was less than total income as assessed under earlier original assessment order under section 143(3), therefore, impugned assessment order was prejudicial to interest of revenue It was noted that assessment orders of share applicant companies were passed under section 143(3) by revenue, thus, identity and creditworthiness of share applicant companies were -
Share applicant companies had responded to notices under section 133(6) and also appeared before
Assessing
Officer and furnished copy of I.T.
return/acknowledgement, copy of annual audited accounts, balance sheet and profit
&
loss account statement and copy of bank statement, etc. so as to prove genuineness of transactions -
Thus, Assessing Officer had taken a plausible view in his first order passed under section 263 - Such a view could not be termed as erroneous insofar as it was prejudicial to interest of revenue Whether, on facts, impugned invocation of revision juri iction under section 263
second time merely because total income determined by Assessing
Officer in revision order was less than income determined in original assessment proceedings, was unjustified
10. PCIT v/s
Himachal fibers
Ltd.
(2018)
98
taxmann.com 173
(SC)
In the case of PCIT v.
Himachal Fibers
Ltd
[2018]
98 taxmann.com 173 (SC) the Hon’ble Supreme Court has observed as under:
“Where in course of appellate proceedings, High Court set aside addition made by AO under section 68 in respect of share application money by was to be dismissed.”
11. CIT vs.
Steller
Investment
Ltd.
SC.
(2001)251
ITR 0236

It has been observed by the Supreme Court in the above case that, "According to High
Court, even if the subscribers to the increased share capital were not genuine the amount could not be regarded as undisclosed income of the assessee company and no question of law arose for reference-
Justified-No interference is called for.- CIT vs.
stellar
Investment
Ltd.
(1991) 99 CTR (Del) 40 :
(1991) 192 ITR 287 (SC): TC
55R.593 affirmed,."
12. M/s V. R. Global
Energy Pvt. Ltd.
v/s ITO Appeal No 246
of 2017
dated 01.09.2016
(HC)
Where assessee allotted shares to a company in settlement of pre-existing liability of assessee to said company, since no cash was involved in transaction of said allotment of shares, conversion of these liabilities into share capital and share premium could not be treated as unexplained cash credits under section 68

PCIT (Central) – 4
v/s M/s Acquatic
Remedies Pvt. Ltd
Thus, the initial burden was discharged by the respondent in respect of (HC) creditworthiness of the investor and nothing has been shown by the Revenue to doubt the same and/or steps taken and result thereof. Thus, this objection of lack of creditworthiness of the shareholder also does not survive. In fact, the impugned order of the Tribunal, on examination of facts, has come to the conclusion that the investment made by the shareholders is not hit by Section 68 of the Act.
13. CIT vs
Oasis
Hospitalities Pvt.
Ltd.
(ITA
No.
2093
of 2010),(HC)
“11. It is clear from the above that the initial burden is upon the assessee to explain the nature and source of the share application money received by the assessee.
In order to discharge this burden, the assessee is required to prove:

(a)
Identity of shareholder;

(b)
Genuineness of transaction; and (c) Credit worthiness of shareholders.

The assessee has to prima facie prove (1) the identity of the creditor/subscriber;
(2) the genuineness of the transaction, namely, whether it has been \transmitted through banking or other indisputable channels; (3) the creditworthiness or financial strength of the creditor/subscriber;
(4) if relevant details of the address or PAN identity of the creditor/subscriber are furnished to the Department along with copies of the transfer register, etc. it would constitute acceptable proof or acceptable explanation by the assessee; (5) the Department would not be justified in drawing an adverse inference only because the creditor/subscriber fails or neglects to respond to its notices; (6) the onus would not stand discharged if the creditor/subscriber denies or repudiates the transaction set up by the assessee nor should the AO take such repudiation at face value and construe it, without more, against the assessee; (7) the A0
is duty bound to investigate the creditworthiness of the creditor/subscriber, the genuineness of the transaction and the veracity of the repudiation"
15. Green infra ltd.
Vs.
ITO
(2014)
159
TTJ
0728(Mumbai)

"the transaction was tested in the light of the provisions of Sec. 68. As per Section 68 the initial onus was upon the assessee to establish identity, genuineness of the transaction and the capacity of the lender or the depositor.
The subscribers to the share capital were all companies.
The confirmations of the transactions had been received by the AO by issuing notice u/s. 133(6), therefore, identity had been established beyond all reasonable doubts.
The genuineness of the transaction could also be safely concluded since the entire transaction had been done through the banking channels duly recorded in the books of accounts of the assessee duly reflected in the financial statement of the assessee. The bank statement was exhibited in which the transactions relating to the allotment of shares were duly reflected."
16. Shree
GirirajFerromet
Pvt. Ltd v/s ITO
The Tribunal has considered that the Assessee has produced on record the documents to establish the genuineness of the party such as PAN of all the creditors along with the confirmation, their bank statements showing payment of share application money. It was also observed by the Tribunal that the Assessee has also produced the entire record regarding issuance of shares i.e.
allotment of shares to these parties, their share application forms, allotment letters and share certificates, so also the books of account. The balance sheet and profit and loss account of these persons discloses that these persons had sufficient
Assessee. In view of these voluminous documentary evidence, only because those persons had not appeared before the Assessing Officer would not negate the case of the Assessee. The judgment in case of Gagandeep
Infrastructure (P.) Ltd. (supra) would be applicable in the facts and circumstances of the present case.
17. Rajat
Exports
Import
(India)
Pvt. Ltd. v/s ITO
However, considering the facts of the case and in the light of the above discussion, it is clear that the initial burden upon the assessee to prove identity of the investors, their creditworthiness and genuineness of the transaction have been discharged by the assessee.
AO thereafter, did nothing in the matter, therefore, no addition could be made against the assessee. Therefore, in our view, it is not a fit case to remand matter to the CIT(A).
We are, therefore, of the view that assessee proved identity of the investors, their creditworthiness and genuineness of the transaction in the matter.
Therefore, no addition could be made against the •
•
•
CIT vs.Kamdhenu Steel &Aloys Ltd. &Ors. (2012) 80 CCH
027 Del HC
•
1(3)(2) v/s
M/s
Varsity
Education
Management Pvt.
Ltd. ITO ITA No.
6991/MUM/2016
S. 68 Bogus share premium:
The AO cannot assess the share premium as income on the ground that it is "excessive".
The share premium worked out in the Valuation Certificate is the minimum amount that can be collected by the assessee under RBI regulations.
There is no bar on collecting higher amount as share premium.
There are several factors that are taken into consideration while issuing the equity shares to shareholders/investors, such as Venture capital funds and Private
Equity funds.
The premium is determined between the parties on the basis of commercial considerations and cannot be questioned by the tax authorities. The AO is not entitled to sit on the arm chair of a businessman and regulate the manner of conducting business
(All judgements considered).
•
•
ITO vs. Lisha Trading P. Ltd., ITA No. 5845/Mum/2016
•
•
•
•
•
ACIT-30(3) vs.
Shreedham
Builders

ITO
•
ITO 7(1)(4) vs. Lisha Trading Pvt. Ltd. v/s ITO ITA No.
5845/MUM/2016
•
4723/MUM/2016
•
ITO 10(2)(4) vs. M/s Superline Construction Pvt. Ltd. ITA
No. 3645/MUM/2014
•
Sunshine Metals & Alloys Industries Pvt. Ltd vs. ITO-4(3)
(4), ITO ITA No. 3212/MUM/2014
•
•
ITO -6(1)(3), Mumbai vs. Arogya Bharti Health Park Pvt
Ltd. ITA No.2943/MUM/2014
•
ACIT,Circle-7(1)-1,
&
Apparel Park Ltd.
•
DCIT CC-2(2) vs. Diwali Capital & Finance Private Ltd ITA
No.3986/Mum/2017
•
Blue stock Investments Private Ltd vs. DCIT CC-2(3) ITA
No.2090/Mum/2018

FAILURE
TO DISCHARGE

DUTY
TO PROVE
THE TRANSACTION AS BOGUS :
The initial burden to prove that the transaction is genuine, is on the appellant which is discharged by producing the confirmation, bank statement, financials of shareholder
Company, and other relevant documents etc. Thus, the burden shifts on the department to prove that transactions are bogus.
However, the CIT(A) and AO have no material in possession to prove the same. They just made opinion on the basis of information from CCIT (C-oord), Mumbai and without any independent enquiry made by them. Thus, the CIT(A) and AO failed to discharge their duty. Hence, the addition cannot be made on leaps on the part of the revenue.

TRANSACTION
DULY
SUPPORTED
BY THE EVIDENCE,
CREDIT WORTHINESS AND GENUINESS OF THE PARTIES
ALSO PROVED :
The only observation made by the Ld AO is that “In view of the above discussion, it is evident that the creditworthiness of these four parties are not proved and at the same time the genuineness of the transaction in the form of share application money with premium raised by the assessee company is also not provided beyond doubt. The entire gamut of transactions shows that the funds of Rs. 250,00,000/- have been brought in by way of share application money' in the name of these four entities, whose credit worthiness and genuineness could not be established by the assessee company beyond doubt along with the source of the funds received by these entities in the form of share application money. Therefore, the purported share application money of Rs. 2,50,00,000/- is hereby treated as a ‘cash credit' in the books of the assessee company, whose nature and source is not explained and, therefore, deemed to be the assessee's income as envisaged in Section 68 of the Income Tax Act, 1961 and accordingly the same is added to the total Income of the assessee company during the previous year relevant to A.Y, 2010-11 and the same ishereby held to be not eligible for any deduction there against”
We can clearly observed that the addition is made mere on the basis of suspicion even when the assessee had given all the supporting documents to the Ld AO he made the addition without considering the same or without giving any specific reason to doubt the creditworthiness of these four parties and genuineness of the transaction.
Your appellant has already submitted the relevant details of party with their confirmations, their banks statements, their
ITR Acknowledgement which is also verify by the Ld. AO. Thus the addition purported to be made is made on suspicion. In present case transactions are duly supported by the documents
Therefore, the addition cannot be made.

Identity, Source of payment explained, Bank payment, Book account accepted, Then addition of book entries cannot be take place:
Babulal C
Borana
V/s
ITO
[282
ITR
251]
20. Moreover, it is not the case of the revenue that the investments made by the assessee are outside the books maintained by the assessee. It is not the case of the revenue that the Syndicate Bank account
No. 2668 in the name of M/s. Gautam Trading Co.
belongs to the assessee. It is also not the case of the revenue that the amounts withdrawn from the Syndicate Bank account No. 2668 has been received by the assessee. In the present case, the books maintained by the assessee has not been rejected by the Assessing Officer and in fact the addition is based on the entries made in the books of account maintained by the assessee. The fact that the said
Bipinkumar B. Shah has not paid sales tax payable on sale of 50 M.Ts. of HDPE or the fact that the search and claimed 10 M.Ts. of HDPE belatedly does not in any way affect the genuineness of the transaction. Having rejected the addition of the value of 40 M.T.s of HDPE powder, the Tribunal could not have sustained addition of the value of 10 M.Ts. of HDPE powder, when the nature and source of investment has been duly explained by the assessee.
21. For all the aforesaid reasons, we hold that the Tribunal was not justified in rejecting the explanation of the assessee and directing the Assessing Officer to add the value of 10 M.Ts. of HDPE as deemed income of the assessee.

Suspicious cannot take place the evidence
1. DCIT v. Shri Rajeev G. Kalathil, (Mum) (Trib) (ITA No.
6727/M/2012 dt.20/8/2014
2. K.P. Varghese v. ITO, (1981) 131 ITR 579 (SC);
3. CIT v. Roman & Co., (1968) : 67 ITR 11 (SC);
4. CIT v. Calcutta Discount Co. Ltd.', (1973) 91 ITR 8 (SC);
5. Umacharan Shaw & Bros v. CIT', (1959) 37 ITR 271 (SC

Income assessed without evidence is bad-in-law.
3. CIT V. KASHIRAM TEXTILE MILLS (P) LTD [2006]284 ITR 61
(GUJ)-
4. SARASWATHI OIL TRADERS V. CIT [2000] 254 ITR 259 (SC)

Income cannot be assessed on mere statement basis. For assessment there has to be some evidence.
Income cannot be assessed on mere retracted statement If not material to prove
1. Meghraj Jain V. UOI (Bombay High Court)
2. KailashbenManharlalChokshi v. CIT [2008] 174 Taxman
466 (Guj.)
3. M. Narayanan & Bros. v. Asstt. CIT [2011] 201 Taxman 207
(Mag.)
4. Bansal High Carbons (P)Ltd. 2009) 223 CTR 179 (Del).
5. Sanjeev Kumar Jain (2009) 310 ITR 178 (P&H)
6. CIT vs. K. Bhuvanendra and others (2008) 303 ITR 235 (Mad.)
7. Abid Malik Vs UOI, (2009TIOL272HC Del-FEMA)
8. CIT vs. Uttamchand Jain 320 ITR 554 (Bom),
9. SrinivasNaik (2009)117 ITD 201 (Bang)

Addition cannot be made on assumption basis.
There must be some material on record as evidence for addition. Addition made on the basis of presumption cannot be sustained in law.
1. CIT v. Roman & Co., (1968) : 67 ITR 11 (SC)
2. CIT v. Calcutta Discount Co. Ltd. (1973) 91 ITR 8 (SC)
3. Omar Salay Mohamed Sait V/s CIT 1959 37 ITR 151 (SC)
4. DhirajlalGirdharilal V/s CIT (26 ITR 734) (SC)
5. Dr. Anita Sahai V/s DIT (266 ITR 597) (All)
6. MODI Creations Pvt. Ltd. V/s ITO [2011] 13 taxmann.com 114
(Delhi)-It will have to be kept in mind that section 68 only sets up a presumption against the assessee whenever unexplained credits are found in the books of account of the assessee. It cannot but be gainsaid that the presumption is rebuttable. In refuting the presumption raised, the initial burden is on the assesse. This burden, which is placed on the assesse, shifts as soon as the assesse establishes the authenticity of transactions as executed between the assesse and its creditors.
7. CIT-
IV v.
Shree
Rama
Multi
Tech
Ltd
[2013]
34
taxmann.com 32 (Gujarat):-Expenditure cannot be disallowed on account of 'bogus purchase' only on basis of assumption and presumption
8. View taken in Modi creation Pvt. Ltd. Is also taken in following decision.
i.
CIT v/s Divine Leasing & Finance Ltd. 158 Taxmann 440
(Delhi) (2007).
ii.
Nemichand Kothari V/s CIT (136 Taxman 216) (Gau.) (2004).
iii.
CIT V/s Value Capital Services (P) Ltd. 307 ITR 334
(Delhi)(2008).
is evident that Case Laws relied upon by the Ld. CIT(A) are distinguishable on the facts in the above matter of appellant.
Similarly the share holders/ share applicants are identifiable and regular IT Assessee’s. The identity of the shareholders is established and also placed on record the relevant details of source of funds.

SUBMISSION :
1. The order dated 19.01.2024 passed by the Learned
Commissioner of Income Tax (Appeals) [CIT(A)] under Section 250 of the Income Tax Act, 1961 ("the Act") is bad in law and on facts.
2. The Appellant had already merged with Aakash
Universal Limited (PAN: AAACA9755H) vide the National
Company Law Tribunal (NCLT) order dated 31st October
2023, and thus, the Appellant ceased to exist as a separate legal entity prior to the passing of the CIT(A)’s order.
a)
The Learned
CIT(A) has committed a juri ictional error by passing an appellate order in the name of a non- existent entity, disregarding the legal effect of the approved amalgamation.
b) The NCLT’s order dated 31st October 2023, sanctioning the scheme of amalgamation, had the effect of dissolving the provisions of the Companies Act, 2013. c) The Hon’ble Supreme Court in Principal Commissioner of Income Tax vs. Maruti Suzuki India Limited (2019) 416
ITR
613
(SC) has categorically held that once an amalgamation is sanctioned, the transferor company ceases to exist, and no legal proceedings can be continued or initiated in its name.
d) Despite the merger being effective from 31st October 2023, the CIT(A) erroneously passed the order on 19.01.2024 in the name of the Appellant, which had no legal existence at the time.
e) The CIT(A) failed to appreciate that the proceedings ought to have been conducted in the name of the successor entity, i.e., Aakash Universal Limited, and not the Appellant.
3. Consequently, the impugned order dated 19.01.2024
is null and void, being passed against a non-existent entity, and deserves to be quashed.
4. Assessee relied on the following case laws :
CITATION
OBSERVATION
SUPREME COURT
OF INDIA
Principal Commi ssioner of Incom e Tax, New Delhi v.
Maruti Suzuki In dia Ltd.
CIVIL APPEAL NO.
5409 OF 2019
INCOME TAX :
Where assessee company was amalgamated with another company and thereby lost its existence, assessment order passed subsequently in name of said non-existing entity, would be without juri iction and was to be set aside
Section 170, read with section 292B, of the Income-tax Act,
1961
-
Succession to business otherwise than on death
(Validity of assessment) - Assessment year 2012-
13
-
Whether issuance of juri ictional notice and assessment order thereafter passed in name of non-existing company is a substantive section 292B - Held, yes - Whether, therefore, where assessee company was amalgamated with another company and thereby lost its existence, assessment order passed subsequently in name of said non- existing entity would be without juri iction and was to be set aside -
Held, yes [Paras 31, 33 and 34]In favour of assessee]
IN THE ITAT
PUNE BENCH 'C'

Liquidhub
Analytics (P.)
Ltd.
v.
NFAC, Delhi*

IT APPEAL
NO.1952 (PUN) OF 2024
[ASSESSMENT
YEAR 2020-21]
INCOME TAX : Where assessment had been framed by Assessing
Officer on a non-existing company despite knowing fact that assessee
-company had ceased to exist pursuant to its merger with another company, such assessment was invalid and was to be quashed
Section 143(3), read with section 144, of the Income-tax
Act,
1961
-
Assessment - (In case of company) -
Assessment year 2020-21 - Assessee company filed its return on 12-2-2021
- Since assessee had entered into certain international transactions,
Assessing Officer referred matter to TPO who proposed an upward adjustment - Thereafter, Assessing
Officer passed draft assessment order -
Before
DRP, assessee challenged validity of assessment order on ground that same was passed on non- existing entity - However, DRP upheld assessment order - It was noted that assessee company had ceased to exist pursuant to its merger with effect from 1-4-2020 which was duly approved by NCLT vide order dated
24-6-2021 - It was further noted that said fact was also brought to notice of Assessing Officer as well as DRP -
Whether since assessment had been framed by Assessing Officer on a non- existing company despite knowing fact of merger, assessment on non- existent company was invalid and was to be quashed - Held, yes [Para
18] [In favour of assessee]
IN THE ITAT
MUMBAI BENCH
'I'
Assistant
Commissioner of Income-tax 16(1) v.
Culver Max
Entertainment
(P.) Ltd.*
IT APPEAL
NO.6814 AND 6815 (MUM) OF 2024
CO NOS.36 AND 37 (MUM) OF 2025
[ASSESSMENT
YEARS 2014-15
AND 2015-16]

INCOME
TAX
:
Assessment order quashed for issuing notice to a company which was amalgamated with assessee, particularly when fact of amalgamation was duly intimated to Assessing
Officer before passing assessment order
Section 143 of the Income-tax Act,
1961 - Assessment - General (Merger)
-
Assessment years
2014-15
and 2015-16 - Notice under section 143(2) was issued to a company named
SPENI - High Court sanctioned scheme of amalgamation of SPENI with amalgamated company which had duly notified and intimated to Assessing
Officer about said amalgamation requesting him to drop assessment proceedings initiated in name of non-existing entity and issue a fresh notice in name of amalgamated entity -
Despite such intimation,
Assessing
Officer passed final assessment order in name of amalgamating entity -
Whether assessment made in name of a non- existent entity was without juri iction, and, hence, null and void ab initio and was liable to be quashed
- Held, yes [Para 8] [In favour of assessee]
IN THE ITAT
MUMBAI BENCH
'K'

Abbott India Ltd.
v.
ACIT*
IT APPEAL NO.
7778 (MUM.) OF 2012 AND 2032
(MUM.) OF 2014
[ASSESSMENT
YEARS 2008-09 &
2009-10]

INCOME TAX : Where a company was amalgamated with assessee- company and assessee had intimated to Assessing Officer and DRP about fact of amalgamation, assessment order passed in name of non-existent entity was void and liable to be quashed
Section 143, read with section 144C, of the Income-tax
Act,
1961
-
Assessment
-
General
(Non- existing company) - Assessment years
2008-09
and 2009-10
-
Whether where a company was amalgamated with assessee-company and assessee had intimated to Assessing Officer and DRP about fact of amalgamation, assessment order passed in name of non-existent entity was void and liable to be quashed - Held, yes
[Paras 21 and 22] [In favour of assessee]

In light of the above, the Appellant respectfully prays that theHon’ble Tribunal be pleased to Declare the impugned order dated 19.01.2024 as null and void;Grant such other relief(s) as deemed fit in the interest of justice.
HUMBLE PRAYER
On the basis of above submission, it is respectfully submitted that the Share allotment is genuine and duly supported by documentary evidences. Hence, the addition of Rs.2,50,00,000/- made by the Ld. AO and confirmed by CIT(A) requires to be deleted as the same was on assumption basisand requires to be deleted.
Thanking you,

Total
25000
250000
24750000
25000000
81571000
661018006
742589006
3.37
8. After analyzing the above details, we found that all the investor companies have positive net worth and have only invested on an average 3.37% of their total net worth in the assessee company. In order to prove the identity and creditworthiness of the subscribers and genuineness of the share transactions, the assessee had supplied / based on record all the documentary evidences which are at paper book 21 to 218 and the details of which are as under:
Dewpoint Agencies Pvt Ltd

Share Application Form
Copy of Bank Statement of M/s Dewpoint Agencies Pvt Ltd
Copy of BanK Statement of M/s RKTPL
Copy of Share Certificate Counterfoil
Copy of Extract of Minutes of BOD Meeting
Copy of Source of Funds Certificate
Copy of ITR Acknowledgement for AY 10-11
Copy of Audit Report along with Balance Sheet of AY 10-11
Copy of Certificate of Incorporation
Copy of Audit Report along with Balance Sheet of AY 10-11
Copy of Certificate of Incorporation
Copy of Memorandum & Articles of Association
Company Master Data showing status active

Kasturi Towers Ltd.

Share Application Form
Copy of Bank Statement of M/s Kasturi Towers Ltd.
Copy of Bank Statement of M/s RKTPL
Copy of Share Certificate Counterfoil
Copy of Source of Funds Certificate
Copy of ITR Acknowledgement for AY 10-11
Copy of Audit Report along with Balance Sheet of AY 10-11
Copy of Certificate of Incorporation
Copy of Memorandum & Articles of Association
Company Master Data showing status active

Mridang Commerce Pvt. Ltd.

Share Application Form
Copy of Bank Statement of M/s Mridang Commerce Pvt. Ltd.
Copy of Bank Statement of M/s RKTPL
Copy of Share Certificate Counterfoil
Copy of Source of Funds Certificate
Copy of ITR Acknowledgement for AY 10-11
Copy of Audit Report along with Balance Sheet of AY 10-11
Copy of Certificate of Incorporation
Copy of Memorandum & Articles of Association
Company Master Data showing status active
9. Now before proceeding further, it is necessary and imperative to evaluate the provisions of Sec. 68 of the Act, which reads as under:
68. Where any sum is found credited in the books of an assessee maintained for any previous year, and the assessee offers no explanation about the nature and source thereof or the explanation offered by him is not, in the opinion of the Assessing officer, satisfactory, the sum so credited may be charged to income-tax as the income of the assessee of that previous year."
10
From the plain reading of the above Section, it is clearly evident that the assessee should be able to provide satisfactory explanation about the sum found to be credited in the books of accounts. It is settled legal principles that if the assessee proves the identity and creditworthiness of the shareholders and genuineness of the transactions then in that eventuality no additions u/s 68 could be made.
11. To prove the above basic ingredients, the assessee has already placed on record sufficient documentary evidences which are at paper book page No. 21 to 218 but on the contrary the AO could not point out any defect in any of the documents, except the facts the merely some of the share applicants have low profits or maintain nominal balance in their bank account or some of the share applicants moved to other addresses. In our view this cannot be a reason for making additions. Further, if the AO wished to pursue the matter, then there were sufficient clues for him to have proceeded. For instance, it could have issued notices and obtained statements from bankers of share applicants or even balance sheet which existed in the records of their AO. The AO had not even called for any report or verification from the