DCIT CENTRAL CIRCLE-2(2), MUMBAI vs. M/S SUCHIR CHEMICALS PVT LTD, MUMBAI.

N THE INCOME TAX APPELLATE TRIBUNAL MUMBAI BENCHES “A”, MUMBAI BEFORE SHRI AMIT SHUKLA, HON'BLE JUDICIAL MEMBER AND SHRI S. RIFAUR RAHMAN, HON'BLE ACCOUNTANT MEMBER ITA NO.677/MUM/2022 (A.Y: 2010-11) DCIT –Central Circle – 2(2) v. M/s. Suchir Chemicals Pvt. Ltd., Old CGO Building (Amalgamated Company – Manan Pharma Pvt Ltd. w.e.f 01.04.2013) Room No. 806, 8th Floor 2nd Floor, Shiv Ashish M.K. Road, Mumbai - 400020 Andheri Prade, Mumbai - 400005 PAN: AACCM7533K (Appellant) (Respondent) Assessee by : Ms. Pooja Rander & Shri Rushabh Mehta Department by : Shri Manoj Sinha

Date of Hearing : 27.09.2022 Date of Pronouncement : 20.12.2022

O R D E R PER S. RIFAUR RAHMAN (AM)

2 ITA NO.677/MUM/2022 (A.Y: 2010-11) M/s. Suchir Chemicals Pvt. Ltd., profit computed u/s. 115JB at ₹.3,80,259/- and the return was processed u/s. 143(1) of Income-tax Act, 1961 (in short “Act”) by accepting the returned income. Subsequently information was received by the Assessing Officer that assessee has issued 2,79,500 shares at ₹.100 per share with share premium of ₹.90 per share. Accordingly, Assessing Officer initiated the re-assessment proceedings by issue of notice u/s. 148 of the Act dated 31.03.2015 and the same was served on the assessee. Notice u/s.143(2) was issued and served on the assessee. In response, AR of the assessee attended and submitted the relevant information as called for. Assessee was communicated the reasons recorded for reopening its case for assessment vide order sheet dated 28.01.2016. The relevant reasons recorded are part of the Assessment Order at Para No.3 of the order. In response assessee filed objections relating to re-assessment proceedings vide letter dated 02.03.2016. The Assessing Officer has dealt with the objections raised by the assessee order dated 07.03.2016. The same was reproduced in the Assessment Order at Para No. 3.2 of the order.

3 ITA NO.677/MUM/2022 (A.Y: 2010-11) M/s. Suchir Chemicals Pvt. Ltd., with the names, addresses of the share applicants. The assessee submitted the relevant information through Authorised Representative on 29.02.2016. In order to verify the submissions of the assessee and to verify identity, creditworthiness and genuineness of the share application money received, summons u/s. 131 of the Act were issued on 01.03.2016 asking the share applicant to appear personally on various dates ranging from 04.03.2016 to 08.03.2016 with relevant documents. The Assessing Officer observed that some summons return unserved whereas in the other cases none attended on the appointed date. Accordingly, a show cause notice 11.03.2016 was issued to the assessee along with the notice u/s. 142(1) of the Act to submit the requisite details as per summons issued and produce the persons for verification. The Assessing Officer tabulated the names, addresses, Number of shares, share capital, Share Premium and remarks of summons issued to various parties and no-one attended on the given date all the 15 parties which are tabulated by Assessing Officer in his order at Page No. 9.

4 ITA NO.677/MUM/2022 (A.Y: 2010-11) M/s. Suchir Chemicals Pvt. Ltd., assessee failed to produce the persons/share applicants for verification and not complied with the directions of the Assessing Officer, Assessing Officer proceeded to make the addition u/s. 68 of the Act by relying on various decisions as listed in his order to the extent of share premium received by the assessee a sum of ₹. 2,51,55,000/-.

5 ITA NO.677/MUM/2022 (A.Y: 2010-11) M/s. Suchir Chemicals Pvt. Ltd., Rs.10/- and at a premium of Rs. 90/- per share. According to the AO, total share premium received during the year is Rs. 2,51,55,000/-. However, in the e-filed return, securities premium account has been shown at NIL. In this backdrop, financials of the assessee company was analyzed by the AO. 7.3 After analysis the financials of the assessee company, the AO pointed out that the shares of the assessee company do not qualify to fetch a premium and hence, the nature of such capital increase was not justified. At the assessment stage, to verify the identity, creditworthiness of the share applicants and genuineness of the share application money received, summons u/s. 131 of the I. T. Act, 1961 were issued to the share applicants on 01.03.2016 asking to appear personally on various dates ranging from 04.03.2016 to 08.03.2016 with relevant documents. However, some summons returned un-served whereas in the other cases none attended on the appointed date. Hence, a show cause notice dated 11.03.2016 was issued to the assessee company along-with notice u/s 142(1) to submit the requisite details as per the summons issued and produce the persons for verification. In the said notice it was mentioned that- "Some of the persons could not be traced on the addresses furnished by you and none attended on the appointed date of the summons and have failed to comply with the summons. 7.4 In response to the said show cause, the assessee filed a letter dtd 18.03.2016 Justifying the share premium and stating that all the documents have been filed pertaining to the share applicants. The AO considered the submission but did not accept the same. According to the AO, though the assessee was given an opportunity to submit the details and was asked to produce the persons for verification, the same was not complied with till date of passing the assessment order. Accordingly, the AO disallowed and added back Rs.2,51,55,000/- as unexplained cash credits u/s 68 of the I. T. Act 1961. 7.5 At the appellate stage, the appellant has contended that the AO has not given precise reason for the addition of the share premium Rs.2,51,55,000/-. It is observed that during assessment proceedings, the appellant had submitted all documentary evidence to establish identity, credit worthiness as well as source of the investment made- (1) Name, address, PAN cards of shareholders; number of shares applied & allotted (ii) Details of cheques received and copies of respective bank statements,

6 ITA NO.677/MUM/2022 (A.Y: 2010-11) M/s. Suchir Chemicals Pvt. Ltd., (iii) Copies of ITR and annual statement of accounts of the shareholders These details are also filed during the appellate proceedings. From the details it is observed that share premium to the extent of Rs. 96,75,000/- was received prior to 01.04.2009 i.e., prior to AY 2010-11. The receipts with dates are as below-

7 ITA NO.677/MUM/2022 (A.Y: 2010-11) M/s. Suchir Chemicals Pvt. Ltd.,

8 ITA NO.677/MUM/2022 (A.Y: 2010-11) M/s. Suchir Chemicals Pvt. Ltd., Admittedly, as far as AY 2010-11 is concerned, disallowance u/s section 68 will not apply to receipts prior to 01.04.2009. 7.6 With respect to the share application money received during the year under consideration, I find that the appellant has filed complete names, addresses and PAN of shareholders along with details of their application money and share premium charged. Such applicants have filed income tax returns, copies of acknowledgement along with Balance Sheets of such RoI are filed during the assessment as well as appellate proceedings. Moreover, it is also claimed that the requisite information of shares, in Form 2 have also been the ROC. In the background of these information on record, which pertain to FY 2009- 10 relevant to AY 2010-11, the AO has issued summons to these companies on 01.03.2016 ie., after a gap of around 6 to 7 years. As stated above, some of the summons were returned un-served whereas in some cases, none attended on the appointed date. Details of such parties are given in page 8-9 of the assessment order. 7.7 From the details of 15 parties, to whom summons are issued, with respect to 6 parties, summons were properly served. Hence, existence of such 6 parties cannot be denied. Just because, these 6 parties did not choose to attend before the AO, whose complete details are already available with the AO, it cannot be said that identity, credit worthiness as well as source of the investment are not established. As far as remaining 9 parties are where summons remained "Un-served" by postal authorities, with respect to 3 parties i.e., Hindustan Ltd., HEMKUTA Sugar and Allied Industries Ltd. and G-Tech Info Training Ltd., entire share application money were received prior to FY 2009-10 relevant to AY 2010-11. This is clear from details in para 7.5 above. As far as balance 6 parties are there, where summons cold not be served, only part of share capital and share premium were received during the year under consideration. Now the question arises, when complete details of such parties and transactions were submitted to during assessment proceedings and no deficiency in the documentary evidences are found by the AO, whether impugned addition can be made just because summons were not served on such 6 parties, at the given address after a lapse of 6 to 7 years of the transactions. 7.8 One cannot lost sight of the fact that the impugned AY is 2010- 11 and pre-amended section 68 will be applicable. Hon'ble Apex Court in Lovely Exports (P) Ltd., in the context to the pre-amended Section 68 of the Act, has clearly held that where the Revenue urges that the amount of share application money has been received from bogus shareholders then it is for the Revenue 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 ITA NO.677/MUM/2022 (A.Y: 2010-11) M/s. Suchir Chemicals Pvt. Ltd., Apart from the above, identical issue came for consideration before various Other Courts and the Courts are unanimous that no such addition in the hands of the assessee can be made, as in the present situation. A few landmark decisions are discussed as below. 7.9. Hon'ble Bombay High Court decision in CIT vs. Gagandeep infrastructure Pvt. Ltd. (394 ITR 680), is one of the most relevant to decide the present issue. In the said decision, the AY was 2008-09 and the appellant, Gagandeep infrastructure Pvt. Ltd. had also issued share of premium of Rs.190/-. The AO for the reasons of justification of premium had added the share premium as income of the appellant. It is observed from the decision that M/s Gagandeep infrastructure Pvt. Ltd. had also filed similar details as the present appellant viz. their annual statements, bank statements, Identity, etc. On these facts, the CIT(A) and Hon'ble ITAT has deleted the addition. In appeal to the High Court, the Hon'ble Jurisdictional High Court has upheld the decision of the learned CIT(A) and Hon'ble ITAT stating as under:- "(e) 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 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 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

10 ITA NO.677/MUM/2022 (A.Y: 2010-11) M/s. Suchir Chemicals Pvt. Ltd., 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. (f) In the above circumstances and particularly in view of the concurrent finding of fact arrived at by the CIT(A) and the Tribunal, the proposed question of law does not give rise to any substantial question of law. Thus not entertained". (emphasis supplied) 7.10 Before proceeding further, the provisions of section 68 are reproduced as under: "Cash credits. 68. Where any sum is found credited in the books of an assessed 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 to credited may be charged to income-tax as the income of the assessee of that previous year: Provided that where the assessee is a company (not being a company in which the public are substantially interested), and the sum so credited consists of share application money, share capital, share premium or any such amount by whatever name called, any explanation offered by such assessee-company shall be deemed to be not satisfactory, unless- (a) the person, being a resident in whose name such credit is recorded in the books of such company also offers an explanation about the nature and source of such sum so credited; and (b) Such explanation in the opinion of the Assessing Officer aforesaid has been found to be satisfactory: Provided further that nothing contained in the first proviso shall apply if the person, in whose name the sum referred to therein is recorded, is a venture capital fund or a venture capital company as referred to in clause (23FB) of section 10". 7.11 The 1st proviso to sec. 68 was introduced by the Finance Act 2012 with effect from 1st April, 2013. The impugned AY is 2010-11. As held by Hon'ble jurisdictional High Court, the proviso will not be applicable for the period prior to AY 2013-14. Certainly, AY 2010-11 will not be covered. Hence, the claim of the appellant that there is no

11 ITA NO.677/MUM/2022 (A.Y: 2010-11) M/s. Suchir Chemicals Pvt. Ltd., requirement to establish "source" of "source" is in order. The requirement of the law is to offer explanation about the nature and source, which should be satisfactory. In the instant case, the appellant company has received share premium of Rs.2,51,55,000/- from fifteen entities. The amount is credited in the books of the appellant. Details of this sum credited is submitted before the A.O. The identity of the investor companies; their creditworthiness and genuineness of the transactions are brought on record. The A.O. has not pointed out any lacuna in the evidences produced. Hence, onus is on the AO to highlight the deficiencies in the documentary evidences or explanation offered before him. He has not brought any such deficiency or lacuna in it. Hence in my humble opinion, no addition u/s.68 can be made to the facts of the case. 7.12 Hon'ble Bombay High Court in another landmark case of Pr. CIT vs Ami Industries (India) (P.) Ltd. [2020] 116 taxmann.com 34 (Bombay) has deeply examined the present controversy relevant to AY 2010-11. The relevant portion of the judgment is reproduced as below "14. Section 68 of the Act has received considerable judicial attention through various pronouncements of the Courts. It is now well settled that under section 68 of the Act, the assessee is required to prove identity of the creditor; genuineness of the transaction; and credit worthiness of the creditor. In fact, in NRA Iron & Steel (P.) Ltd. (supra), Supreme Court surveyed the relevant judgments and culled out the following principles:- "11. The principles which emerge where sums of money are credited as Share Capital/Premium are: i. The assessee is under a legal obligation to prove the genuineness of the transaction, the identity of the creditors, and credit- worthiness of the investors who should have the financial capacity to make the investment in question, to the satisfaction of the AO, so as to discharge the primary onus. ii. The Assessing Officer is duty bound to investigate the credit- worthiness of the creditor/subscriber, verify the identity of the subscribers, and ascertain whether the transaction is genuine, or these are bogus entries of name-lenders. iii. If the inquiries and investigations reveal that the identity of the creditors to be dubious or doubtful, or lack credit- worthiness, then the genuineness of the transaction would not be established. In such a case, the assessee would not have discharged the primary onus contemplated by Section 68 of the Act."

12 ITA NO.677/MUM/2022 (A.Y: 2010-11) M/s. Suchir Chemicals Pvt. Ltd., 15. It is also a settled proposition that assessee is not required to prove source of source. In fact, this position has been clarified by us in the recent decision in Gaurav Triyugi Singh v. ITO [IT Appeal No. 1750 of 2017, dated 22-1-2020]. 16. Having noted the above, we may now advert to the orders passed by the authorities below. 17. In so far order passed by the Assessing Officer is concerned, he came to the conclusion that the three companies who provided share application money to the assessee were mere entities on paper without proper addresses. The three companies had no funds of their own and that the I companies had not responded to the letters written to them which could have established their credit worthiness. In that view of the matter, Assessing Officer took the view that funds aggregating Rs. 34 Crores introduced in the return of income in the garb of share application money was money from unexplained source and added the same to the income of the assessee as unexplained cash credit under section 68 of the Act. 18. In the first appellate proceedings, it was held that assessee had produced sufficient evidence in support of proof of identity of the creditors and confirmation of transactions by many documents, such as, share application form etc. First appellate authority also noted that there was no requirement under section 68 of the Act to explain source of source. It was not necessary that share application money should be invested out of taxable income only. It may be brought out of borrowed funds. It was further held that non-responding to notice would not ipso facto mean that the creditors had no credit worthiness. In such circumstances, the first appellate authority held that where all material evidence in support of explanation of credits in terms of identity, genuineness of the transaction and credit- worthiness of the creditors were available, without any infirmity in such evidence and the explanation required under section 68 of the Act having been discharged, Assessing Officer was not justified in making the additions. Therefore, the additions were deleted. 19. In appeal, Tribunal noted that before the Assessing Officer, assessee had submitted the following documents of the three creditors:- (a) PAN number of the companies; (b) Copies of Income-tax return filed by these three companies for assessment year 2010-11;

13 ITA NO.677/MUM/2022 (A.Y: 2010-11) M/s. Suchir Chemicals Pvt. Ltd., (c) Confirmation Letter in respect of share application money paid by them; and (d) Copy of Bank Statement through which cheques were issued. 20. Tribunal noted that Assessing Officer had referred the matter to the investigation wing of the department at Kolkata for making inquiries into the three creditors from whom share application money was received. Though report from the investigation wing was received, Tribunal noted that the same was not considered by the Assessing Officer despite mentioning of the same in the assessment order, besides not providing a copy of the same to the assessee. In the report by the investigation wing, it was mentioned that the companies were in existence and had filed income tax returns for the previous year under consideration but the Assessing Officer recorded that creditors had very meagre income as disclosed in their returns of income and therefore, doubted credit worthiness of the three creditors. Finally, Tribunal held as under:- "5.7 As per the provisions of Section 68 of the Act, for any cash credit appearing in the books of assessee, the assessee is required to prove the following- (a) Identity of the creditor (b) Genuineness of the transaction (c) Credit-worthiness of the party i) In this case, the assessee has already proved the identity of the share applicant by furnishing their PAN, copy of IT return filed for asst. year 2010-11. (ii) Regarding the genuineness of the transaction, assessee has already filed the copy of the bank account of these three share applicants from which the share application money was paid and the copy of account of the assessee in which the said amount was deposited, which was received by RTGS iii) Regarding source of the source, Assessing Officer has already made enquiries through the DDI (Investigation), Kolkata and collected all the materials required which proved the source of the source, though as per settled legal position on this issue, assessee need not to prove the source of the source. iv) Regarding credit-worthiness of the party, it has been proved from the bank account of these three companies that they had

14 ITA NO.677/MUM/2022 (A.Y: 2010-11) M/s. Suchir Chemicals Pvt. Ltd., the funds to make payment for share application money and copy of resolution passed in the meeting of their Board of Directors. (v) Assessing Officer has not brought any cogent material or evidence on record to indicate that the shareholders were benamidars or fictitious persons or that any part of the share capital represent company's own income from undisclosed sources. Accordingly, no addition can be made u/s.68 of the Act. In view of above reasoned factual finding of CIT(A) needs no interference from our side. We uphold the same." 21. From the above, it is seen 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. Though, assessee was not required to prove source of the source, nonetheless, Tribunal took the view that Assessing Officer had made inquiries through the investigation wing of the department at Kolkata and collected all the materials which proved source of the source. 22. In NRA Iron & Steel (P.) Ltd. (supra), the Assessing Officer had made independent and detailed inquiry including survey of the 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. 23. Therefore, on a thorough consideration of the matter, we are of the that assessee had discharged its onus of proving identity of the creditors, genuineness of the transactions and credit-worthiness of the creditors which finding of fact stood affirmed by the Tribunal. There is, thus, concurrent findings of fact by the two lower appellate authorities. Appellant has not been able to show any perversity in the aforesaid findings of fact by the authorities below.

15 ITA NO.677/MUM/2022 (A.Y: 2010-11) M/s. Suchir Chemicals Pvt. Ltd., 24. Under these circumstances, we find no error or infirmity in the view taken by the Tribunal. No question of law, much less any substantial question of law, arises from the order of the Tribunal. Consequently, the appeal is dismissed. However, there shall be no order as to cost." (Emphasis supplied) Facts and evidence submitted in the above case is similar to the facts of the instant case. The appellant has discharged its onus of proving identity of the creditors, genuineness of the transactions and credit-worthiness of the creditors. Hence, the ratio of the judgment will apply in the present case. 7.13 In yet another judgment, Hon'ble Bombay High Court in PCIT vs Apeak Infotech [2017] 88 taxmann.com 695 (Bombay), has held that the amount received on issue of share capital as premium are on capital account and cannot be considered to be income. The relevant portion of the judgment is reproduced as below- "3. Although numerous questions of law has been raised in the six appeals, Mr. A. J. Bhoot learned counsel for the appellant urges only the following questions of law for our consideration in all these appeals. A. Whether on the facts and in the circumstances of the case and in law, the Tribunal was correct to uphold the decision on Commissioner of Income-tax (Appeals) that the share premium received by the assessee company cannot be taxed under section 68 of the Act ignoring the ratio laid down by this court in its decision reported in the case of Major Metals Ltd. v. Union of India 120131 359 ITR 450 (Bom) 7 B. Whether on the facts and in the circumstances of the case and in law, the Tribunal as well as the Commissioner of Income-tax (Appeals) was right in deleting addition made by the Assessing Officer, by holding that the share premium receipt is capital in nature ?" 4. During the previous year relevant to the subject assessment year 2012-13, all the respondent-assessees had increased their share capital by issuing its shares at a premium. During the course of assessment, the Assessing Officer negatived the respondent-assessees contention that the share premium received by it on issue of shares was a capital receipt and hence could not be taxed as income. The Assessing Officer held that the respondent-assessees did not have any significant business at the time of issue of share capital to warrant receipt of share premium. Thus, the Assessing Officer while passing the assessment order under section 143(3) of the Act in five of the

16 ITA NO.677/MUM/2022 (A.Y: 2010-11) M/s. Suchir Chemicals Pvt. Ltd., six proceedings, on March 18, 2015 and in one proceeding on March 20, 2015 added the share premium received to its income as profits and gains of business under section 28(iv) of the Act. 5. Being aggrieved by the above assessment orders, the respondent-asses sees in all the six appeals carried the above issue in appeal to the Commissioner of Income-tax (Appeals) (CIT(A)). By six distinct orders all dated March 15, 2016 (one in respect of each respondent-assessee) held that section 28(iv) of the Act would have no application, as it dealt with the benefit other than cash or money arising out of business as held by this court in Mahindra & Mahindra Ltd. v. CIT [2003] 128 Taxman 394/261 ITR 501 (Bom.). It is also to be noted that the Commissioner of Income-tax (Appeals) also held that section 68 of the Act will not apply as during the course of assessment proceedings, complete details of the investor i.e. the PAN, balance-sheet of IT return, copies of bank statements, resolution of the board authorising the parties and also the parties who made the investment have confirmed the transaction in assessment proceedings. In his remand report also the Assessing Officer did not dispute the above position. Thus, the six appeals of the respondent-assessees were allowed by six orders dated March 15, 2016 of the Commissioner of Income-tax (Appeals). 6. Being aggrieved the Revenue carried the above issue in appeal to the Tribunal. Admittedly, the only issue which was urged before the Tribunal is the addition of share capital premium received by the respondents-assessees to its income under the head of profits and gains of business under section 28(iv) of the Act. On the only issue urged before it, the impugned order of the Tribunal holds that section 28(iv) of the Act will have application only on the amounts received as income and not on capital account. The impugned order placed reliance upon the decision of this court in the case of Vodafone India Services (P.) Ltd. v. Union of India [20151228 Taxman 50/12014] 50 taxmann.com 300/368 ITR 1 (Bom) wherein, it has been held that the amount received on share capital including premium are undoubtedly on capital account in absence of express legislation. Further reliance was placed upon the decision of the hon'ble apex court in G. S. Homes & Hotels (P) Ltd. v. Dy. CIT [20161 73 taxmann.com 120/242 Taxman 58/387 ITR 126 wherein, the decision of the Karnataka High Court holding that the amount received on account of shares from various share holders be treated as business income was reversed. The (Impugned order also made reference to the

17 ITA NO.677/MUM/2022 (A.Y: 2010-11) M/s. Suchir Chemicals Pvt. Ltd., unreported decision of this court in Idea Cellular Ltd. v. Union of India 120131 40 taxmann.com 112 wherein, this court while dealing with issue of non-granting of stay of demand in its writ jurisdiction has observed that any benefit which is received on capital account cannot be subject matter of Income-tax under section 28(iv) of the Act. Thus, the appeals of the Revenue were dismissed by following the decision of this court and of apex court that the receipt of share premium is on capital account and cannot be brought to tax as income. 7. In the of the above facts, we shall now decide the above two questions which arise for our consideration. Regarding Question A: (a) The issue raised by the Revenue in this question is to bring to tax the share premium received under section 68 of the Act. We find that the issue of bringing the share premium to tax under section 68 of the Act was not an issue which was urged by the appellant "Revenue before the Tribunal. The only issue which was urged before the Tribunal as recorded in para 11 of the impugned order is the addition of share capital and share application money in the hands of the assessee as income under section 28(iv) of the Act. We find that the Commissioner of Income-tax (Appeals) did consider the issue of applicability of section 68 of the Act and concluded that it does not apply. The Revenue seems to have accepted the same and did not urge this issue before the Tribunal. Mr. Bhoot, learned counsel appearing for the Revenue also fairly states that the issue of applicability of section 68 of the Act was not urged by the Revenue before the Tribunal. (b) It is a settled position in law as held by this court in CIT v. Tata Chemicals Ltd. [2002] 122 Taxman 643/256 ITR 395 (Bom.) that in an appeal under section 260A of the Act, the High Court can only decide a question if it had been raised before the Tribunal even if not determined by the Tribunal. Therefore, no occasion to consider the question as prayed for arises. (c) In any case, we may point out that the amendment to section 68 of the Act by the addition of proviso thereto took place with effect from April 1, 2013. Therefore, it is not applicable for the subject assessment year 2012- 13. So for as the pre-amended section 68 of the Act is concerned, the same I cannot be invoked in this case, as evidence was led by the respondents- assessees before the Assessing Officer with regard to identity, capacity of the investor as well as the genuineness

18 ITA NO.677/MUM/2022 (A.Y: 2010-11) M/s. Suchir Chemicals Pvt. Ltd., of the investment. Therefore, admittedly, the Assessing Officer did not invoke section 68 of the Act to bring the share premium to tax. Similarly, the Commissioner of Income-tax (Appeals) on consideration of facts, found that section 68 of the Act cannot be invoked. In view of the above, it is likely that the Revenue may have taken an informed decision not to urge the issue of section 68 of the Act before the Tribunal. (d) We may also point out that decision of this court in Major Metals Ltd. v. Union of India [2012] 19 taxmann.com 176/207 Taxman 185/120131 359 ITR 450 Bom. proceeded on its own facts to uphold the invocation of section 68 of the Act by the Settlement Commission. In the above case, the Settlement Commission arrived at a finding of fact that the subscribers to shares of the assessee "company were not creditworthy inasmuch as they did not have financial standing which would enable them to make an investment of Rs. 6,00,00,000 at premium at Rs. 990 per share. It was this finding of the fact arrived at by the Settlement Commission which was not disturbed by this court in its writ jurisdiction. In the present case the person who have subscribed to the share and paid share premium have admittedly made statement on oath before the Assessing Officer as recorded by the Tribunal. No finding in this case has been given by the authorities that shareholder/share applicants were unidentifiable or bogus. (e) In the above view Question No. A is not being entertained in view of the decision in Tata Chemical Ltd. (supra). Accordingly, the question (A) is not entertained. Regarding Question B: (a) We find that the impugned order of the Tribunal upheld the view of the Commissioner of Income-tax (Appeals) to hold that share premium is capital receipt and therefore, cannot be taxed as income. This conclusion was reached by the impugned order following the decision of this court in Vodafone India Services (P) Ltd. (supra) and of the apex court in G. S. Homes and Hotel (P.) Ltd. (supra). In both the above cases the court has held that the amount received on issue of share capital including premium are on capital account and cannot be considered to be income. (b) It is further pertinent to note that the definition of income as provided under section 2(24) of the Act at the relevant time did not define as income any consideration received for issue of share in excess of its fair market value. This came into the statute only with effect from April 1, 2013 and thus, would

19 ITA NO.677/MUM/2022 (A.Y: 2010-11) M/s. Suchir Chemicals Pvt. Ltd., have, no application to the share premium received by the respondent "assessee in the previous year relevant to the assessment year 2012-13. Similarly, the amend ment to section 68 of the Act by addition of proviso was made subsequent to previous year relevant to the subject assessment year 2012-13 and cannot be invoked. It may be pointed out that this court in CIT v. Gagandeep Infrastructure (P) Ltd. [20171 80 taxmann.com 272/247 Taxman 245/394 ITR 680 (Rom.) has while refusing to entertain a question with regard to section 68 of the Act has held that the proviso to section 68 of the Act introduced with effect from April 1, 2013 will not have retrospective effect and would be effective only from the assessment year 2013-14. (c) In view of the above, question No. B as proposed also does not give rise to any substantial question of law as it is an issue concluded by the decision of this court in Vodafone India Services (P) Ltd. (supra) and in the apex court in G. S. Homes and Hotels (P.) Ltd. (supra). Thus not entertained. Therefore, all the six appeals are dismissed. No order as to costs." (Emphasis Supplied) The decision of Major Metals Ltd. v. Union of India [2012] (19 taxmann.com 176) has been distinguished by Hon'ble Jurisdictional High Court in this case. 7.14 The following case laws are also worth mentioning here: (i) The Commissioner of Income Tax v. Shree Rama Multi Tech Ltd. [2013] [34 Taxmann.com 177] (GUJ.) In this case, the Hon'ble High Court has decided that where the assessee company had furnished complete details of receipt of share application money along with share application forms, names, addresses. PAN and other relevant details of share applicants, share application money could not be added as cash credit under section 68 of the Act. The extract of para 7 from the sold judgment is reproduced as under: "7. It can be noted from the submissions made by learned counsels as also from the material on record that both CTT (Appeals) as well as the Tribunal have duly considered issue and having found complete details of the receipt of share application money, along with the form names and addresses, PAN and other requisite details they found complete absence of the grounds noted for invoking the provision of section 68 of the Income tax Act. Moreover, both rightly had applied the

20 ITA NO.677/MUM/2022 (A.Y: 2010-11) M/s. Suchir Chemicals Pvt. Ltd., decision of Lovely exports (P) Ltd. (supra) to the case of the respondent assesse. We find no reason in absence of any illegality much less any perversity too to interfere with the order of both these authorities who have concurrently held the due details having been proved. What if the company had noted to prove it had presented the necessary worth proof before both the authorities and it is not accepted by the assessee company to further prove the source of the deceased? This tax appeal resultantly raises no question of law and therefore do not merit for the consideration and is dismissed." (ii) ACIT CC 32 vs. M/s. Jogia Properties Ltd, Mumbai in ITA No.6106 6107/M/2012 dated 18.12.2015 In this case, the Hon'ble ITAT has held that in cases where making an investment by way of share application money invested by the companies has to be accepted in the absence of incriminating documents found during the course of search and seizure action. There was no evidence on record to show that assessee had given its own money to the investing company for the purpose of making investments. No addition of share application money therefore can be made. The ratio of this decision is applicable to the facts of the appellant's case. There is no evidence on record to prove that the appellant had invested its own money through five entities, no such evidence has been brought on record by the A.O. and therefore, the amount cannot be added to the income of the appellant. (iii) ACIT Cir 7 Jaipur vs. Dhanlaxmi Equipment Pvt.Ltd. in ITA No.1103/JP/2011 dated 21.03.2016. In this decision, the ITAT Jaipur, has held that the A.O. had not considered the evidences filed by the assessee during the course of assessment proceedings i.e. affidavit confirming the transaction, PAN No., complete address of creditors, copy of Balance Sheet, ITR, bank statements etc. The assessee had discharged its onus by providing the requisite evidence to prove the identity, genuineness and creditworthiness of the cash creditors and therefore, once the transaction is established no addition can be made. The relevant extracts from this decision is reproduced as under: "We have heard the rival contentions of both the parties and perused the materials available on record. The Ld. Assessing Officer during the course of assessment proceedings, noticed

21 ITA NO.677/MUM/2022 (A.Y: 2010-11) M/s. Suchir Chemicals Pvt. Ltd., that the assessee has shown deposits, fresh capital of Rs.6,11,50,000/- in different form ie unsecured loan, reserve and surplus and share capital money. The Ld. Assessing Officer verified the information submitted by the assessee through ADIT, Kolkata, who had sent interim report, which was received on 14.12.2010 whereas assessment was completed on 30.12.2010. In interim report, as per Assessing Officer in 9 cases, notices were returned back but it was not informed to the assessee about the conclusion of the enquiry by the ADIT, Kolkata or Assessing Officer of the assessee. The Ld. Assessing Officer heavily relied on the Inspector's report in confirming the addition but result of the enquiry of the inspector has not been communicated to the assessee, which is against the principles of natural justice. As per Assessing Officer, in case of 5 companies the source of fund was not found explained. The Ld. Assessing Officer again gave show cause notice on 23.12.2010. The assessee filed reply on 27.12.2010 and it was claimed before the Assessing Officer that no enquiry has been made by the Assessing Officer on changed addresses. The Ld. Assessing Officer had not considered the evidence filed by the assessee during the course of assessment proceedings i.e. affidavits confirming the transaction PAN number, complete addresses of creditors, copy of balance sheet, ITR for A.Y. 2008-09, bank statement and form No18. The assessee had discharged its onus by providing the requisite evidences to prove the identity, genuineness and creditworthiness of the cash creditors. The Ld. Assessing Officer herself had accepted the remaining cash creditors to the tune of Rs.3.95 crores explained on the basis of similar evidences produced by the assessee as genuine. The loan/ share capitals were received from the private limited companies. They also are filling return under the company's law and all information is available on MCA website. The ADIT report was not conclusive to hold that the cash creditors were not genuine. It is not required under the law to prove the source of source u/s.68 of the Act. Primary burden lies on the assessee has been discharged by filing the requisite evidences before the Assessing Officer and shifted on the Assessing Officer to disprove the cash creditors transactions are not genuine or bogus. The share application money was received by the appellant and subsequently returned though banking channel. In case of 7 companies, the notices were served on it

22 ITA NO.677/MUM/2022 (A.Y: 2010-11) M/s. Suchir Chemicals Pvt. Ltd., on given addresses. There is no evidence directly or indirectly with the Assessing Officer that the assessee had routed undisclosed money in the guise of share application money or loan. The Ld. DR's argument have also not convinced us that these parties were in accommodation entries in form of loan and share application money after charging certain commission as such no survey/ search has been carried out on the creditors to prove that these companies are habitual to provide loan/share application money even there is no evidence with the Ld DR for making such allegation during the course of written submissions. The case laws relied by the Ld. AR are squarely applicable on the given facts and circumstances. The Ld. DR has also not controverted the finding given by the Ld CIT(A). Accordingly, we uphold the order of the Ld. CIT(A)." The ratio of this decision is also squarely applicable to the facts of the appellant's case. The appellant has discharged its primary onus of filling all the necessary information regarding the share transaction before the A.O. in original assessment as well as re- assessment proceedings. No flaws in these transactions were found by the A.O. Invoking of section 68 was therefore not warranted and unreasonable. All the more, when the genuineness of the said transaction once accepted at the time of original assessment, the addition therefore cannot be sustained. The A.O. has not brought any material on record to disprove the evidence filed by the appellant. The addition of Rs.2,51,55,000 therefore cannot be sustained from any angle. 3.17 In view of the above, it is submitted that the addition made by the Assessing Officer on account of share application money of Rs.2,51,55,000/- may kindly be deleted." 7.15. In view of totality of overall facts and circumstances of the issue involved as well as respectfully following the jurisdictional High Court decisions as cited above, the addition of Rs. 2,51,55,000/- made by AO u/s. 68 of the Act, is deleted. Thus, ground of appeal no. 3 is Allowed.

23 ITA NO.677/MUM/2022 (A.Y: 2010-11) M/s. Suchir Chemicals Pvt. Ltd., 6. Aggrieved revenue is in appeal before us raising following grounds in its appeal: - 1. Whether the Ld. CIT(A) has erred both in law and on facts in deleting the addition Rs. 2,51,55,000/- representing the share application money as unexplained cash credit. 2. Whether, the Ld. CIT(A) has erred both in law and on facts, in failing to appreciating that the assessing officer had considered the submissions of the assessee and did not find them to be satisfactory and also has failed to appreciate the findings, details/justification given by the AO in the assessment order with respect to the bogus share application money. 3. Whether on the facts and circumstances of the case and in law, the Ld. CIT(A) has erred in not relying upon the decision of Hon'ble Supreme Court of India NRA Iron & Steel Pvt. Ltd [SLP (Civil) No. 29855 of 2018. 4. Whether on the facts and circumstances of the case and in law, the Ld. CITA) has erred in deleting the addition of 96,50,000 out of the total share application money on the basis that the same was received prior to 01.04.2009, without appreciating that the assessee had shown it as "Securities Premium Reserve only in the previous year relevant to AY 2010-11.

24 ITA NO.677/MUM/2022 (A.Y: 2010-11) M/s. Suchir Chemicals Pvt. Ltd., parties known to the assessee. Therefore he heavily relied on the orders passed by the Assessing Officer and the case laws relied by the Assessing Officer.

25 ITA NO.677/MUM/2022 (A.Y: 2010-11) M/s. Suchir Chemicals Pvt. Ltd., relevant to pre-amend section 68 of the Act will be applicable to the present case. We observe that Ld.CIT(A) has applied the ratios of the Hon'ble Supreme Court in the case of Lovely Exports (P.) Ltd and Hon'ble Jurisdictional High Court decision in the case of CIT v. Gagandeep infrastructure Pvt. Ltd., (394 ITR 680) and deleted the addition made by the Assessing Officer. After considering the detailed analysis of the Ld.CIT(A), we do not see any reason to infer any other reasons except agreeing with the findings of the Ld.CIT(A). Accordingly, dismiss all the issues raised by the revenue in the grounds of appeal. Accordingly, Ground No. 1 and 2 are dismissed.

26 ITA NO.677/MUM/2022 (A.Y: 2010-11) M/s. Suchir Chemicals Pvt. Ltd., assessment year 2009-10, for purchase of shares at such a high premium. (iii) There was no explanation whatsoever offered as to why the investor companies had applied for shares of the assessee at a high premium of Rs. 190 per share, even though the face value of the share was Rs. 10 per share. (iv) Furthermore, none of the so-called investor companies established the source of funds from which the high share premium was invested. (v) The mere mention of the income-tax file number of an investor was not sufficient to discharge the onus under section 68 of the Act. The appellate authorities had ignored the detailed findings of the Assessing Officer from the field enquiry and investigations carried out by his office and erroneously held that merely because the assessee had filed all the primary evidence, the onus on the assessee stood discharged. The investor companies which had filed income-tax returns with a meagre or nil income had to explain how they had invested such huge sums of money in the assessee. Clearly the onus to establish the creditworthiness of the investor companies was not discharged. The entire transaction seemed bogus, and lacked credibility. The field enquiry conducted by the Assessing Officer revealed that in several cases the investor companies were found to be non-existent, and the onus to establish the identity of the investor companies, was not discharged by the assessee. On the facts, the Assessing Officer was justified in adding back the amounts to the assessee's income.”

27 ITA NO.677/MUM/2022 (A.Y: 2010-11) M/s. Suchir Chemicals Pvt. Ltd., 12. With regard to Ground No. 4 raised by the revenue, revenue observed that Ld.CIT(A) has deleted the addition of ₹. 96,50,000/- out of the total share application money on the basis that the same was received prior to 01.04.2009 and Ld.CIT(A) failed to appreciate that assessee itself has shown the share premium reserve in the previous year relevant to A.Y. 2010-11.

28 ITA NO.677/MUM/2022 (A.Y: 2010-11) M/s. Suchir Chemicals Pvt. Ltd., of difference ₹.96,75,000 is only a passing reference which has no relevance on the decision of the Ld.CIT(A). Accordingly, this ground of the revenue is dismissed.

Order pronounced in the open court on 20th December, 2022

Sd/- Sd/- (AMIT SHUKLA) (S. RIFAUR RAHMAN) JUDICIAL MEMBER ACCOUNTANT MEMBER Mumbai /Dated 20.12.2022 Giridhar, Sr.PS Copy of the Order forwarded to: 1. The Appellant 2. The Respondent. 3. The CIT(A), Mumbai. 4. CIT 5. DR, ITAT, Mumbai 6. Guard file. //True Copy// BY ORDER

(Asstt. Registrar) ITAT, Mum