DCIT, JAIPUR vs. BHOLENATH REAL ESTATES PVT. LTD., JAIPUR

PER BENCH

The assessee has filed an appeal against the order of the ld.

CIT(A)-4, Jaipur dated 31-03-2017 for the assessment year 2009-10

raising therein solitary ground as under:-.

‘’Whether on the facts and in the circumstances of the case the ld. CIT(A) was right in deleting the addition of Rs. 2,90,00,000/- made u/s 56(1) of the Act ignoring the fact that assets of the assessee company don’t commensurate to premium charged and further

ITA No. 492/JP/2017 DCIT, Central Circle-2, Jaipur vs M/s. Bholenath Real Estates Pvt.Ltd. Jaipur

ignoring the fact that neither any business activity was performed nor any business income has been shown by the assessee.’’

2.1 Apropos solitary ground of the Revenue, the AO made the addition

of Rs.2,90,00,000/- u/s 56(1) of the Act in the hands of the assessee

company by observing as under:-

‘’16. Having dealt with each of the contention of the assessee and having found the same to be untenable it is important to place on record certain aspects which have a bearing on the issue at hand. It is true that the apparent must be considered real until it is shown that there are reasons to believe that the apparent is not the real. In a case of the present kind a party who relies on a recital in a deed has to establish the truth of those recitals, otherwise it will be very easy to make self-serving statements in documents either executed or taken by a party and rely on those recitals. If all that an assessee who wants to evade tax has to have some recitals made in a document either executed by him or executed in his favour then the door will be left wide open to evade tax. A little probing was sufficient in the present case to show that the apparent was not the real. The taxing authorities were not required to put on blinkers while looking at the documents produced before them. They were not entitled to look into the surrounding circumstances to find out the reality of the recitals made in those documents. 17. In the above back ground of the facts and circumstances surrounding this case, it is hereby held that the receipt of share capital and share premium was part of a large sham transaction by way of which a sum of Rs. 2,90,00,000/- was introduced into the books of the assessee company in the form of share premium attached to the share capital. As discussion above, the premium of Rs. 490/- per share was not justified at all on the basis of absolutely no assets, no business activity, no income, no net worth nor any promise for creation of any assets, business activity, income or net worth in the future. Accordingly, the charging and receipt of share premium to the tune of Rs. 2,90,00,000/- is held to be sham. The said amount is further held to be the income of the assessee company in the nature of income envisaged u/s 56(1) of the Income Tax Act, 1961. The same is added back to the total income of the assessee.’’

ITA No. 492/JP/2017 DCIT, Central Circle-2, Jaipur vs M/s. Bholenath Real Estates Pvt.Ltd. Jaipur

2.2 In first appeal, the ld. CIT(A) has deleted the addition of Rs.

2,90,00,000/- made by the AO by observing at pages 97 & 98 of his

order as under:-

‘’3.2.2 I have considered assessee's submission and carefully gone through assessment order. I have also take a note of factual matrix of the case as well as applicable case laws relied upon. I have already given a detailed findings in para 2.1.4.7 wherein total of Rs. 8,71,97,727/- has been sustained in the hands of M/s. . Motisons Global Pvt. Ltd, M/s. Motisons Entertainment Pvt. Ltd, M/s. Motisons Buildtech Pvt. Ltd and M/s. Shivansh Buildtech Pvt. Ltd, details of which are as under:-

Name of ITA No. A.Y. Addition made Addition Addition Appellant by AO sustained deleted/Relief Company given Motisons 753/14-15 2009-10 2,75,00,000 - 2,75,00,000 Global Pvt Ltd Motisons 754/14-15 2011-12 6,96,50,000 - 6,96,50,000 Global Pvt Ltd Motisons 767/14-15 2012-13 42,07,29,600 5,94,47,727 36,12,81,873 Global Pvt Ltd Motisons 755/14-15 2013-14 4,41,00,000 50,50,000 3,90,50,000 Global Pvt Ltd Motisons 760/14-15 2009-10 3,40,00,000 - 3,40,00,000 Entertainment (I) Pvt. Ltd Motisons 766/14-15 2011-12 1,95,00,000 - 1,95,00,000 Entertainment (I) Pvt. Ltd Motisons 756/14-15 2012-13 7,78,00,000 1,41,50,000 6,36,50,000 Entertainment (I) Pvt. Ltd Motisons 758/14-15 2009-10 3,03,00,000 - 3,03,00,000 Buildtech Pvt. Ltd Motisons 759/14-15 2012-13 3,68,27,500 82,00,000 2,86,27,500 Buildtech Pvt. Ltd Godawari 769/14-15 2010-11 2,00,00,000 - 2,00,00,000 Estates Pvt. Ltd Godawari 768/14-15 2012-13 10,30,00,000 - 10,30,00,000 Estates Pvt. Ltd Bholenath 770/14-15 2009-10 2,90,00,000 - 2,90,00,000

ITA No. 492/JP/2017 DCIT, Central Circle-2, Jaipur vs M/s. Bholenath Real Estates Pvt.Ltd. Jaipur

Real Estates Pvt. Ltd. Rainbow 757/14-15 2009-10 2,00,00,000 - 2,00,00,000 Buildcon Pvt. Ltd Shivansh 771/14-15 2012-13 90,00,000 3,50,000 86,50,000 Buildcon Pvt. Ltd 94,14,07,100 8,71,97,727 85,42,09,373

In view of the above facts and circumstances of the case as discussed above, addition of Rs. 2,90,00,000/- made on a/c of bogus share capital in the hands of M/s.Bholenath Real Estate Pvt. Ltd is hereby deleted. Assessee gets relief in Gr No. 2 & 3.’’

Para 2.1.4.7 reads of ld. CIT(A)’s order as under:-

‘’2.1.4.7 In view of the above findings, it is also seen that this cash /DD was deposited at 4th Channel of source/ stage. This money came to the hands of some of appellant companies through the six companies assessed in Jaipur. However, on perusal of written submissions and compliance to show cause letter, it is also seen that the assessee has not controverted the facts narrated by Shri Santosh Choube, Shri Rajesh Kr Singh and Shri Ajit Sharma and also could not satisfactorily explain the reasons of cash deposits made to those accounts. Therefore, duly considering those facts as evidences (both documentary & oral) gathered during search and & Post-search operation, addition to the extent of Rs. 8,71,97,727/- is sustained and balance is deleted, details given as under:-

Name of ITA No. A.Y. Addition made Addition Addition Appellant by AO sustained deleted/Relief Company given Motisons 753/14-15 2009-10 2,75,00,000 - 2,75,00,000 Global Pvt Ltd Motisons 754/14-15 2011-12 6,96,50,000 - 6,96,50,000 Global Pvt Ltd Motisons 767/14-15 2012-13 42,07,29,600 5,94,47,727 36,12,81,873 Global Pvt Ltd Motisons 755/14-15 2013-14 4,41,00,000 50,50,000 3,90,50,000 Global Pvt Ltd Motisons 760/14-15 2009-10 3,40,00,000 - 3,40,00,000 Entertainment (I) Pvt. Ltd Motisons 766/14-15 2011-12 1,95,00,000 - 1,95,00,000 Entertainment

ITA No. 492/JP/2017 DCIT, Central Circle-2, Jaipur vs M/s. Bholenath Real Estates Pvt.Ltd. Jaipur

(I) Pvt. Ltd Motisons 756/14-15 2012-13 7,78,00,000 1,41,50,000 6,36,50,000 Entertainment (I) Pvt. Ltd Motisons 758/14-15 2009-10 3,03,00,000 - 3,03,00,000 Buildtech Pvt. Ltd Motisons 759/14-15 2012-13 3,68,27,500 82,00,000 2,86,27,500 Buildtech Pvt. Ltd Godawari 769/14-15 2010-11 2,00,00,000 - 2,00,00,000 Estates Pvt. Ltd Godawari 768/14-15 2012-13 10,30,00,000 - 10,30,00,000 Estates Pvt. Ltd Bholenath 770/14-15 2009-10 2,90,00,000 - 2,90,00,000 Real Estates Pvt. Ltd. Rainbow 757/14-15 2009-10 2,00,00,000 - 2,00,00,000 Buildcon Pvt. Ltd Shivansh 771/14-15 2012-13 90,00,000 3,50,000 86,50,000 Buildcon Pvt. Ltd 94,14,07,100 8,71,97,727 85,42,09,373

It is pertinent to mention here that M/s. Mayukh Vinimay Pvt.Ltd received share application of Rs. 10,54,95,000/- in AY 2009-10 which was added as income of M/s.Mayukh Vinimay Pvt. Ltd ind A.Y. 2009-10. Thereafter in subsequent years the part of the funds owned by this company was invested in the companies under appeal as under:-

S.N. Name of company Assessment Year Amount (under your appeal) 1. Motisons Global 2012-13 6,93,49,800 Pvt. Ltd 2. Motisons Global 2013-14 2,24,50,000 Pvt. Ltd 3. Motisons 2012-13 1,55,00,000 Entertainment (India)Pvt ltd. TOTAL 10,72,29,800

Further it is also submitted that addition made by the AO tantamount to double addition. It is also mentioned here that as per Ld. ARs request, appellate proceedings

ITA No. 492/JP/2017 DCIT, Central Circle-2, Jaipur vs M/s. Bholenath Real Estates Pvt.Ltd. Jaipur

in case of M/s. MayukhVinimay Pvt. Ltd have been kept in abeyance till the disposal of appeal by Hon'ble ITAT.

In view of aforementioned findings, now additions made by the AO are being discussed with respect to grounds of appeal raised by the respective assessee in para below.’’

During the course of hearing, the ld. DR supported the order of the 2.3

AO and submitted that the order of the ld. CIT(A) may be set aside .

2.4 On the other hand, the ld.AR supported the order of the ld. CIT(A)

for which the ld.AR of the assessee filed the following written submission

praying therein to dismiss the appeal of the department.

‘’2.01.2 Submission of assessee:-

a) During the year under consideration the assessee allotted 58,000 equity shares of Rs. 10 each to various companies at a premium of Rs. 490/- per share detail of which is as under: -

Sr. No. Name No. of Shares Amount Rate per Amount Rate of Issue Total alloted/ Adjusted share adjusted against premium price of Consideration applied against share share premium per share the Received during the capital share year

1 Lavender Dealcom 6000 60,000 10 29,40,000 490 500 30,00,000 Pvt. Ltd. 2 Arcade Dealcom 4000 40,000 10 19,60,000 490 500 20,00,000 Pvt. Ltd 3 Tarang Suppliers 3000 30,000 10 14,70,000 490 500 15,00,000 Pvt. Ltd 4 Transit Vinimay Pvt. 12400 1,24,000 10 60,76,000 490 500 62,00,000 Ltd 5 Vandana Dealers 19600 1,96,000 10 96,04,000 490 500 98,00,000 Pvt. Ltd 6 Variety Dealcom 5000 50,000 10 24,50,000 490 500 25,00,000 Pvt. Ltd

ITA No. 492/JP/2017 DCIT, Central Circle-2, Jaipur vs M/s. Bholenath Real Estates Pvt.Ltd. Jaipur

7 Vanila Vinimay Pvt. 3000 30,000 10 14,70,000 490 500 15,00,000 Ltd 8 Outlook Tracom 5000 50,000 10 24,50,000 490 500 25,00,000 Pvt. Ltd Total 58000 5,80,000 2,84,20,000 2,90,00,000

b). The ld. AO has not made the addition under the deeming provisions of section 68 of Income Tax Act. The ld AO made the addition by applying the provisions of section 56(1) of Income Tax Act on the ground that the assets of the assessee company don’t commensurate to premium charged and any business activity was not performed or any business income has not been shown by the assessee. The ld CIT(A) has not confirmed the addition made by ld AO by applying the provisions of section 56(1) of Income Tax Act, on the basis of his detailed findings at page 39-42 of his order. The assessee relies on the findings of ld CIT(A). d) Justification of Charging share premium The assessee has submitted the justification for charging the share premium which is summarized as under: -

Name of Company Reason for Charging Share Premium Bholenath Real (i) Owning large chunk of agricultural land at Village Gaiji, Tehsil Estates Pvt Ltd Mojamabad, Distt Jaipur (in between Bagru to Dudu at main NH Jaipur Ajmer Road) and planning development of township thereon.

(ii) Market rate of land was very high than book value which was on cost.

(iii) Goodwill of Motisons Group.

e) Share premium/Capital is capital receipt: If shares are issued at premium then capital receipt aggregate amount of premium is to be transferred to an account called the share premium account. This share premium account is not distributable as income just like as any other capital assets. On winding up, the surplus monies in the share premium account is to be returned to the share holders as capital. So long as the company is a going concern, the monies in share premium account can never be returned to the shareholders except through the medium of a reduction petition, or, in other words, except

ITA No. 492/JP/2017 DCIT, Central Circle-2, Jaipur vs M/s. Bholenath Real Estates Pvt.Ltd. Jaipur

under exactly the same conditions as those under which any other capital asset can reach the shareholders hands. Distribution of share premium amount is not permitted through dividend. It is taken out of the category of divisible profits. The provisions in respect of issue of shares at premium are the same in the old company Act as well as in the new company Act. Hence Companies Act clearly mentions that amount received as premium is capital receipt and not a revenue receipt. The share premium is also verifiable from returns of allotment submitted in ROC. As per departmental circular (MCA) No. 3/77 dated 15.04.1977 the monies in the share premium account cannot be treated as free reserves, as they are in the nature of capital reserves.

f) On the issue of shares at premium, the ld. ITAT, Mumbai Bench in the case of ACIT V/s Gagandeep Infrastructure Pvt. Ltd. 2014-T10L- 656-ITAT-Mum (PB pg 354-359 of case laws) observed that issue of shares at premium is always a commercial decision which does not require any justification. The finding of the ITAT was confirmed by Mumbai High Court in its decision dated 20.03.2017 in appeal No. 1613 of 2014. PB page 306-366 /Case Laws) Further the premium is a capital receipt which has to be dealt with in accordance with section 78 of companies Act 1956. Further the company is not required to prove the genuineness, purpose or justification for charging premium of shares, share premium by its very nature is a capital receipts and is not income for its ordinary sense. In the case before Mumbai bench has to consider a case where premium of Rs.190 per share was charged. The Tribunal observed as under (pg 358 to 359/Case laws):

“11. We have carefully perused the orders of the lower authorities. In our considered view, the issue of shares at premium is always a commercial decision which does not require any justification. Further the premium is a capital receipt which has to be dealt with in accordance with Sec. 78 of the Companies Act, 1956. Further, the company is not required to prove the genuineness, purpose or justification for charging premium of shares, share premium by its very nature in a capital receipts and is not income for its ordinary sense. It is not in dispute that the assessee had filed all the requisite details/documents which are required to explain credits in the books of accounts by the provisions of Sec. 68 of the Act. The assessee has successfully established the identity of the companies who have purchased shares at a premium. The assessee has also filed bank details to explain the source of the share holders and the genuineness of the transaction was also established by filing copies of share application forms and Form No. 2 filed with the Registrar of Companies. The entire dispute revolves around the fact that the

ITA No. 492/JP/2017 DCIT, Central Circle-2, Jaipur vs M/s. Bholenath Real Estates Pvt.Ltd. Jaipur

assessee has charged a premium of � 190/- per share. No doubt a non-est company or a zero balance sheet company asking for � 190/- per share defies all commercial prudence but at the same time we cannot ignore the fact that it is a prerogative of the Board of Directors of the company to decide the premium amount and it is the wisdom of the share holders whether they want to subscribe to such a heavy premium. The Revenue authorities cannot question the charging of such huge premium without any bar from any legislated law of the land. The amendment has been brought in the Income Tax Act under the head "Income from other sources" by inserting Clause (viib) to Sec. 56 of the Act wherein it has been provided that any consideration for issue of shares, that exceeds the fair value of such shares, the aggregate consideration received for such shares as exceeds the fair market value of the shares shall be treated as the income of the assessee but the legislature in its wisdom has made this provision applicable w.e.f 1.4.2013 i.e. on and from A.Y. 2013-14. In so far as the year under consideration is concerned, the transaction has to be considered in the light of the provisions of Sec. 68 of the Act. There is no dispute that the assessee has given details of names and addresses of the share holders, their PAN Nos, the bank details and the confirmatory letters.

11.1. Considering all these undisputed facts, it can be safely concluded that the initial burden of proof as rested upon the assessee has been successfully discharged by the assessee . Even if it is held that excess premium has been charged, it does not become income as it is a capital receipt. The receipt is not in the revenue field. What is to be probed by the AO is whether the identity of the assessee is proved or not. In the case of share capital, if the identity is proved, no addition can be made u/s. 68 of the Act. We draw support from the decision of the Hon’ble Supreme Court in the case of Loevely Exports Pvt. Ltd. 317 ITR 218. We, therefore do not find any error or infirmity in the findings of the Ld. CIT(A). Ground No. 1 is accordingly dismissed.”

g) As per provisions of section 56(1) of Income Tax Act, 1961 “Income of every kind which is not to be excluded from the total income under this Act shall be chargeable to income-tax under the head "Income from other sources", if it is not chargeable to income-tax under any of the heads specified in section 14, items A to E.” In the case of the assessee company, the amount was received from investors were against share application and the same is capital receipt which was adjusted against share capital and share premium. The money so received to assessee company was capital receipt and was not revenue receipt, therefore the same cannot be taxed in the hands of assessee company under section 56(1) of Income Tax Act, 1961 because this section deal with income

ITA No. 492/JP/2017 DCIT, Central Circle-2, Jaipur vs M/s. Bholenath Real Estates Pvt.Ltd. Jaipur

and not with capital receipts. The investors who subscribed the share capital of assessee company is also showing the amount paid to assessee as their investment in shares of assessee company and necessary documents in this regard was submitted to ld. AO. Therefore the assessee has proved with documentary evidences that the amount was received against share application i.e. capital receipt, therefore the same cannot be treated as income of the assessee. Further for treating the share capital/share premium as income of the assessee company no cogent reason has been given by ld. AO. Further, there is no deeming fiction has been given in section 56(1) of Income Tax Act, 1961 wherein the income can be taxed under deeming provision. h) By Finance Act 2012 a new clause (viib) was inserted in 56(2). Memorandum explaining the provisions in Finance Bill 2012 stated as under:- Share premium in excess of the fair market value is to be treated as income. “Section 56(2) provides for the specific category of incomes that shall be chargeable to income tax under the head “income from other sources”. It is proposed to insert a new clause in 56(2). The new clause will apply where, accompany, not being a company in which the public are substantially interested, receives, in any previous year, from any person being a resident, any consideration for issue of shares. In such a case if the consideration received for issue of shares exceeds the face value of shares, the aggregate consideration received for such shares as exceeds the fair market value of the shares shall be chargeable to income Tax, under the head “income from other sources”. This amendment effective from 1st April 2013 and will accordingly apply in relation to assessment year 2013-14 and subsequent Assessment years. In the memorandum it is mentioned that premium in excess of fair market value is to be treated as income. This suggests that premium in excess of fair market value was not an income but is to be treated as income due to amended provision. Before the amendment, consideration received as premium was not income. The legislature in its wisdom required the share premium in excess of fair market value to be income from Assessment year 2013- 14 and not the entire premium to be treated as income. CBDT vide circular No.3 of 2012 dated 12.06.2012 has also mentioned that provisions of 56(2)(vii b) will be applicable for Assessment year 2013-14 onward. Therefore, amendment in section 56(2)(viib) of

ITA No. 492/JP/2017 DCIT, Central Circle-2, Jaipur vs M/s. Bholenath Real Estates Pvt.Ltd. Jaipur

Income Tax Act, 1961 effective from 1st April 2013 and will accordingly apply in relation to assessment year 2013-14 and subsequent assessment years and the provisions of this section cannot be made applicable in previous years. In this regard the ratio has been laid down in following judgments: - a) By Finance Act 1994, section 55(2) was amended to provide that cost of acquisition of a tenancy right will be taken as Nil. The Hon’ble Apex Court in the case of D.P. Sandu Bros. Chembur (P) Ltd (supra), held that amendment took effect from 1st April, 1995 and therefore will not be applicable for A.Y. 1987-88. Similar finding has been recorded by Hon’ble Raj, High Court in the case of Gotan Lime Stone Khanij Udhyog. The ratio of law in respect of amendment in 55(2) being held as prospective is applicable for 56(2)(vibe) and hence share premium in excess of fair market value can not be held taxable for A.Y. 2011-12. b) Recently the Hon’ble Apex Court in the case of M.G. Pictures (Madras) Ltd V/s ACIT 373 ITR 39 held that amendment in section 40A(3) w.e.f. from 1.4.1996 is prospective and cannot be applied to previous years of Block period prior to F.Y. 1995-96. c) The figure of 10,000 was changed to 20,000 u/s 40A(3) of Income Tax Act, 1961 and 269SS of Income Tax Act, 1961 by Direct Tax Laws (Amendment) Act 1987 w.e.f. 1.4.1989. The CBDT vide circular No.522 dated 18.08.1988 stated that amendment in section 40A(3) is applicable for A.Y. 1989-90 as it is a substantive provision and since 269SS is a procedural provision, the effective date will be 1.4.89 i.e. previous year relevant to A.Y. 89-90. d) The five Judge Constitution Bench in the case of CIT V Vatika Township (P) Ltd. 367 ITR 466 had an occasion to consider as to whether Proviso added to section 113 of the I.T. Act, is prospective or retrospective. The Hon’ble Apex Court while considering the various decisions held (as per page 469 Of ITR 367).

ITA No. 492/JP/2017 DCIT, Central Circle-2, Jaipur vs M/s. Bholenath Real Estates Pvt.Ltd. Jaipur

That surcharge levied by assessing Officer for the block assessment pertaining to the period from June 1, 2002 was liable to be deleted. An amendment made to a taxing statute can be said to be intended to remove hardships only of the assessee, not of the department. Imposing a retrospective levy on the assessee would have caused undue hardship and for that reason parliament specifically chose to make the proviso effective from June 1, 2002. Where a benefit is conferred by a legislation, the rule against a retrospective construction is different. In a legislation confers a benefit on some persons but without inflicting a corresponding detriment on some other person or on the public generally, and where to confer such benefit appears to have been the legislators objects, then presumption would be that such a legislation, giving it a purposive construction, would warrant it to be given a retrospective effect. This exactly is the justification to treat procedural provision as retrospective. Where a law is enacted for the benefit of community as a whole, even in the absence of a provision the statute may be held to be retrospective in nature. The Hon’ble Apex Court further noticed that CBDT circular mentioned that proviso is applicable from 1.6.2002. In respect of 56(2)(vii b), CBDT vide circular No.3 of 2012 dated 12.06.2012 has also mentioned that provisions of 56(2)(vii b) will be applicable for assessment year 2013-14 onward. Hence Share premium even if in excess of Fair market value is not taxable u/s 56(1) for the A.Y. 2011-12. i) Section 56 is not a charging section. This section starts with the following sentence. “Income of every kind which is not to be excluded from the total income under the Act shall be chargeable to income tax under the head.” Income from other sources if it is not chargeable to income tax. Under any of the heads specified in section 14, items A to E.

ITA No. 492/JP/2017 DCIT, Central Circle-2, Jaipur vs M/s. Bholenath Real Estates Pvt.Ltd. Jaipur

For an income to be taxed u/s 56, it has to satisfy three conditions. (a) It shall be classifiable as income as per the charging section of the Act. (b) It shall not be excluded from the total income (e.g. section10). (c) It is not chargeable to tax under any of the specified Heads in section 14, items A to E. The finance Bill 2012 as presented on 16th March 2012 included a new clause (viib) u/s 56(2) of I.T. Act [342 ITR1(st)]. No proposal in the original bill to insert a new clause u/s 2(24). Subsequently Notice of amendments to Finance Bill was given [See 343 ITR 37(st)] and amendments also made in charging section 2(24) in inserting clause (xvi) in 2(24) of I.T. Act w.e.f. 1.4.2013 reads as under: (xvi) Any consideration received for issue of shares as exceeds the fair market value of the shares referred to in clause (viib) of subsection (2) of 56. The amendment made in 2(24) is also applicable w.e.f. 01.04.2013 and it cannot be applied earlier to 01-04-2013. j) The Income for the purpose of the Income Tax Act is defined in section 2(24) of the Income Tax Act 1961. Section 2(24) of the Income Act 1961 gives inclusive definition of income but the income should be look into its normal meaning. The income will not include capital receipts unless it is specified in Income Tax Act. This argument finds supports from the amendment made by Finance Act 2012 w.e.f. 1.4.2013 in section 56(viib) and clause (xvi) of section 2(24) of Income Tax Act, 1961 wherein certain share premiums were made taxable w.e.f. 01.04.2013. If the same were already taxable u/s 56(1)/ 2(24) of Income Tax Act, 1961 then there was no need to make these amendments in the Act. In case there is no charging provision for specific receipt, then it cannot be taxed. The five member Bench of the Apex Court in CIT V Vatika Township P Ltd 367 ITR 466 (PB pg 19/case Laws). “Tax Laws are clearly in derogation of personal rights and property interests and are, therefore, subject to strict construction and any ambiguity must be resolved against

ITA No. 492/JP/2017 DCIT, Central Circle-2, Jaipur vs M/s. Bholenath Real Estates Pvt.Ltd. Jaipur

imposition of the tax. In Billings V U.S 232 U.S.261 at page 265, 34 S.Ct 421 (1914), the Supreme Court clearly acknowledged this basic and long standing rule of statutory construction. Tax Statutes should be strictly construed, and, if any ambiguity be found to exist, it must be resolved in favour of citizen...” “…If a person sought to be taxed comes within the letter of the law he must be taxed, however great the hardship may appear to the judicial mind to be. On the other hand, if the crown seeking to recover the tax, cannot bring the subject within the letter of the law, the subject is free, however apparently within the sprit of the law the case might otherwise appear to be” As observed in Partington V Attomey General LR4HL100. Since for the year under consideration there was no provision in Income Tax Act, 1961 wherein the fair value of share could be computed and the excess share premium could be taxed, therefore in absence of computation provision the same cannot be taxed. The reliance is also placed on following cases: - i) The Hon’ble Bombay High Court in the case of Cadell Wvg. Mills Co.(p) Ltd. V CIT 249 ITR 265 (PB 22- 41/Case Laws) had an occasion to consider the taxability of a sum received in respect of consideration of tenancy Right. Hon’ble High Court held that surrender of tenancy right which was not chargable to tax as capital gain under section 45 could not be taxed as casual and non recurring receipt under section 10(3) r.w. s. 56 under the head “Income from other sources”. The Hon’ble Apex Court in the case of CIT V D.P. ii) Sandu Bros. Chembur (P) Ltd 273 ITR 1 (PB 42- 49/Case Laws) also hold that as per 2(24)(vi) only income which is chargeable u/s 45 is to be included in income and if computation provision u/s 45 fails then charging provisions will fail. Ref. to CIT V B.C. Srinivasa Setty 128 ITR 294. iii) The Hon’ble Rajasthan High Court in the Case of CIT V Gotan Lime Stone Khanij Udyog 269 ITR 399

ITA No. 492/JP/2017 DCIT, Central Circle-2, Jaipur vs M/s. Bholenath Real Estates Pvt.Ltd. Jaipur

(PB 56-65/Case Laws) also held that in case computation provision u/s 48 could not be applied for want of ascertainable cost of acquisition, then capital gain does not arise to be included in total income on account of failure of applicability of computation provision. The Hon’ble High Court referred to decision of Bombay High Court in the case of Cadell Wvg. Mills Co (P) Ltd. (Supra). iv) The Hon’ble Rajasthan High Court in the case of S. Zoraster and Co. V/s CIT 322 ITR 35 (PB 66- 68/Case Laws) had on occasion to consider the taxability of receipt of Rs.20,000 received by vendee on default of the purchaser as per agreement for sell of Prem Prakash Talkies. The Hon’ble High Court after referring to the decision of Apex Court in the case of Travancore Rubber and Tea Co Ltd. V CIT 243 ITR 158 held that such receipt is capital receipt. Such Capital receipt is not taxable in view of judgment of Apex Court in D.P. Sandu Bros. Chembur (P) Ltd (Supra). Hence capital receipt is not taxable unless there is charging provision for a capital receipt and computation provisions are also applicable. v) The Hon’ble Bombay High Court in the case of Vodafone India Services P. Ltd. V/s UOI 368 ITR 1 (PB 76-107/Case Laws) had an occasion to consider the difference between the share premium determined by revenue and the share premium charged as deemed loan and taxing of national interest on deemed loan. The Hon’ble Bombay High Court has referred to the decision of Apex Court in the case of Mathuram Aggarwal V/s State of MP (1999) 8 SCC 667 for the test to interpret a taxing statue which reads as under: “ The intention of the legislature is a taxation statute is to be gathered from the language of the provisions particularly where the language is plain and unambiguous. In a taxing Act it is not possible to assume any intention or governing purpose of the statute more than what is stated in the plain language. It is not the economic results sought to be obtained by making the provision which is relevant in interpreting a fiscal statute. Equally impermissible is an interpretation

ITA No. 492/JP/2017 DCIT, Central Circle-2, Jaipur vs M/s. Bholenath Real Estates Pvt.Ltd. Jaipur

which does not flow from the plain, unambiguous language of the statute. Words cannot be added to or substituted so as to give a meaning to the statute which will serve the spent and intention of the legislature. The statute should clearly and unambiguously convey the three components of the tax law i.e. subject of the tax, the person who is liable to pay the tax and the rate at which the tax is to be paid. If there is any ambiguity regarding any of these ingredients in a taxation statute then there is no tax in law. Then it is for the legislature to do the needful in the matter.” Hon’ble Bombay High Court in this case (Vodafone case) observed that issue of shares at a premium is on capital account and gives rise to no income. 56(1) provides the income of every kind which is not excluded from the total income is chargeable under the head income from other sources. However before section 56 of the Act can be applied there must be income which arises. If the receipt is capital then it is not income. Hence share premium is not an income. i) The CBDT vide circular/instruction No.2 dated 29.01.2015 has stated as under [371 ITR 6(st)]. “In reference to the above cited subject, I am directed to draw your attention to decision of the High Court of Bombay in the case of Vodafone India Services Pvt. Ltd V UOI for the Assessment year 2009-10 (WP No.871 of 2014) wherein the court has held interalia, that the premium on share issue was on account of a capital account transaction and does not give rise to income and hence, not liable to transfer pricing adjustment. It is hereby informed that the Board has accepted the decision of the High Court of Bombay in the above mentioned writ petition. In view of the acceptance of the above judgment, it is directed that the ratio decidendi of the judgment must be adhered to by the field officers in all cases where the issue is involved. This may also be brought to the notice of the ITAT, DRP’s and CIT (Appeals).”

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In view of above instruction, it is clear that ratio deciding of treating of share premium as capital receipt is binding on revenue authorities. j. In view of the above submissions, it is clear that share premium received is a capital receipt and consideration received cannot be considered as income for the year under consideration by applying the provisions of section 56(1) of Income Tax Act. k. The ld CIT(A) issued show cause notice to assessee to tax the share capital under section 68 of ITax Act as against 56(1) applied by ld AO but he satisfied about the ingredients of section 68 of I.Tax Act and no addition was sustained for AY 2009-10 even u/s 68 of I.Tax Act. The ld AO issued several notices to assessee to explain the share capital. The assessee submitted detailed reply and documents from time to time as under:- S.No Particulars Copy at PB pg No 1 Copy of query letter of AO dated 05.11.2014. 43-46 2 Copy of reply of assessee dated 20.11.2014 filed in 47-53 response to query letter dated 05.11.2014. 3 Copy of query letter of AO dated 31.12.2014. 54-55 4 Copy of reply of assessee dated 10.01.2015 filed in 56-57 response to query letter dated 31.12.2014. 5 Copy of show cause notice of AO dated 06.02.2015. 58-61 6 Copy of reply of assessee dated 13.02.2015 filed in 62-65 response to show cause notice dated 06.02.2015. 7 Copy of reply of assessee dated 03.03.2015. 66 8 Copies of documents filed before AO along with 67-233 various submission in respect of identity, creditworthiness of shareholder and genuineness of transactions

The assessee has submitted sufficient documents before the ld AO to prove identity, creditworthiness and genuineness of share capital and ld AO satisfied that addition under section 68 cannot be made, so he applied section 56(1) of ITax Act to make the addition. The assessee submitted detailed reply before ld CIT(A) vide letter dated 12/07/2016 (copy at PB pg 234-287). Ld CIT(A) when

ITA No. 492/JP/2017 DCIT, Central Circle-2, Jaipur vs M/s. Bholenath Real Estates Pvt.Ltd. Jaipur

satisfied that the addition u/s 56(1) can’t be made, he tried to sustain the addition by applying the provisions of section 68 of Income Tax Act. He issued a show cause notice vide letter dated 09/03/2017 (Copy at PB pg 288-334). The assessee submitted detailed reply on the show cause notice of ld CIT(A) vide letter dated 24-03-2017 & 28/03/2017 alongwith documents (Copy at Pb pg 335-421). To support that shareholders were genuine and creditworthiness is proved, the assessee has filed all details, in respect of incorporation/existence of investors and details of cheques vide which amounts were received. The capacity of shareholders is verifiable from the copy of the balance sheet of the shareholders. The shareholders have funds on a prior date from the allotment of shares given by the assessee company and such funds were more than the amount of share application. l) During the course of assessment proceedings the assessee submitted the following documents to prove their identity of shareholders, creditworthiness of shareholders and genuineness of transaction with them: -

Name of Particulars of Documents submitted Copy at Shareholder PB Page � Share application containing the name/address/PAN Lavender Dealcom 71-74 of party, detail of payment received etc. Pvt. Ltd. � Copy of board resolution. 75 � Copy of PAN card of party. 76 � Copy of bank statement showing the entry of 77-78 payment made to assessee. � Declaration of source of funds with party. 79 � Copy of Ack. of ITR of AY 2009-10. 80 � Copy of audit report and audited balance sheet along 81-90 with annexure of 31.03.09. � Copy of registration certificate issued by ROC. 91 � Share application containing the name/address/PAN Arcade Dealcom 92-93 of party, detail of payment received etc. Pvt. Ltd � Copy of board resolution. 94 � Copy of PAN card of party. 95 � Copy of bank statement showing the entry of 96 payment made to assessee. � Declaration of source of funds with party. 97 � Copy of Ack. of ITR of AY 2009-10. 98 � Copy of audit report and audited balance sheet along 99-109 with annexure of 31.03.09. � Copy of registration certificate issued by ROC. 110

ITA No. 492/JP/2017 DCIT, Central Circle-2, Jaipur vs M/s. Bholenath Real Estates Pvt.Ltd. Jaipur

� Share application containing the name/address/PAN Tarang Suppliers 111 Pvt. Ltd. of party, detail of payment received etc. 112 � Copy of board resolution. 113 � Copy of PAN card of party. 114 � Copy of bank statement showing the entry of payment made to assessee. 115 � Copy of Ack. of ITR of AY 2009-10. 116-126 � Copy of audit report and audited balance sheet along with annexure of 31.03.09. 127 � Copy of registration certificate issued by ROC. � Share application containing the name/address/PAN Transit Vinimay Pvt. 128-135 of party, detail of payment received etc. Ltd � Copy of board resolution. 136 � Copy of PAN card of party. 137 � Copy of bank statement showing the entry of 138-140 payment made to assessee. � Declaration of source of funds with party. 141-143 � Copy of Ack. of ITR of AY 2009-10. 144 � Copy of audit report and audited balance sheet along 145-155 with annexure of 31.03.09. � Copy of registration certificate issued by ROC. 156 � Share application containing the name/address/PAN Vandana Dealers 157-161 of party, detail of payment received etc. Pvt. Ltd � Copy of board resolution. 162 � Copy of PAN card of party. 163 � Copy of bank statement showing the entry of 164-166 payment made to assessee. � Copy of Ack. of ITR of AY 2009-10. 167 � Copy of audit report and audited balance sheet along 168-178 with annexure of 31.03.09. � Share application containing the name/address/PAN Variety Dealcom 179-180 of party, detail of payment received etc. Pvt. Ltd. � Copy of board resolution. 181 � Copy of PAN card of party. 182 � Copy of bank statement showing the entry of 183 payment made to assessee. � Declaration of source of funds with party. 184 � Copy of Ack. of ITR of AY 2009-10. 185 � Copy of audit report and audited balance sheet along 186-195 with annexure of 31.03.09. � Copy of registration certificate issued by ROC. 196

ITA No. 492/JP/2017 DCIT, Central Circle-2, Jaipur vs M/s. Bholenath Real Estates Pvt.Ltd. Jaipur

� Share application containing the name/address/PAN Vanila Vinimay Pvt. 197-198 of party, detail of payment received etc. Ltd � Copy of board resolution. 199 � Copy of PAN card of party. 200 � Copy of bank statement showing the entry of 201 payment made to assessee. � Declaration of source of funds with party. 202 � Copy of Ack. of ITR of AY 2009-10. 203 � Copy of audit report and audited balance sheet along 204-213 with annexure of 31.03.09. � Copy of registration certificate issued by ROC. 214 � Share application containing the name/address/PAN Outlook Tracom 215-216 of party, detail of payment received etc. Pvt. Ltd � Copy of board resolution. 217 � Copy of PAN card of party. 218 � Copy of bank statement showing the entry of 219 payment made to assessee. � Declaration of source of funds with party. 220 � Copy of Ack. of ITR of AY 2009-10. 221 � Copy of audit report and audited balance sheet along 222-232 with annexure of 31.03.09. � Copy of registration certificate issued by ROC. 233

m) All the share capital/share application was received through a/c payee cheques and verifiable from bank statement of assessee as well as bank statement of the party. The onus u/s 68 of the assessee is to prove the identity, capacity and genuineness of the transactions has been discharged which may be seen from the followings:-

i) Identity:- The assessee proved the identity of all the companies by filing the share application received from the parties and the parties are duly in existence and the existence of the parties can be verified from the official website of MCA. The ld. AO also not doubted the identity of the above named companies. Further the notice issued u/s 133(6) of Income Tax Act, 1961 was duly served on all the companies which also prove the identity of the parties.

ii) Creditworthiness All the companies are Income Tax assessee and duly filing the Income Tax return and Balance sheets. There is sufficient source of funds with all the companies to investment share capital/share application in the assessee company. The assessee submitted the copies of bank account/declaration of source of

ITA No. 492/JP/2017 DCIT, Central Circle-2, Jaipur vs M/s. Bholenath Real Estates Pvt.Ltd. Jaipur

funds with them of investor companies. The bank statement shows the huge transaction of high value in the accounts of the companies. The chart showing the amount invested by the above named companies in assessee company viz a viz own funds with the investor company are as under: -

Name of the Investor Amount Share capital Share capital company invested in and reserve & and reserve & assessee surplus with surplus with company Investor Investor companies as companies as on 31.03.2009 on 31.03.2008 Lavender Dealcom Pvt. 30,00,000 7,97,50,000 7,97,50,000 Ltd. Arcade Dealcom Pvt. Ltd 20,00,000 11,71,00,000 11,71,00,000 Tarang Suppliers Pvt. Ltd 15,00,000 2,55,00,000 2,55,00,000 Transit Vinimay Pvt. Ltd 62,00,000 14,47,02,766 14,47,00,000 Vandana Dealers Pvt. Ltd 98,00,000 9,39,42,000 9,39,42,000 Variety Dealcom Pvt. Ltd 25,00,000 12,15,57,203 12,15,50,000 Vanila Vinimay Pvt. Ltd 15,00,000 12,54,50,000 12,54,50,000 Outlook Tracom Pvt. Ltd 25,00,000 8,60,00,000 8,60,00,000 From the above chart it is clear that all the Investor companies were having their own share capital and Reserve & surplus which were much more than to the amount invested in the assessee company. From the audited P & L Account of these companies it is apparent that these companies had trading activities of large amount. The above chart shows that the investor companies were having their own independent funds and having their independent source to invest in the shares of the assessee company. Apart from the investment made in the shares of assessee companies, the investor companies were also having investments in shares of other companies or loans & advances to parties which is much more than to the amount invested in the assessee company, therefore from the bank statement as well as financials statements of the investor companies their creditworthiness is duly proved.

iii) Genuineness The assessee submitted the Share Application Form received from above companies against the share application received from the companies. The share application is supported by

ITA No. 492/JP/2017 DCIT, Central Circle-2, Jaipur vs M/s. Bholenath Real Estates Pvt.Ltd. Jaipur

Board Resolution passed in the investor companies. The assessee company has allotted the shares to the investor companies. The proper returns were filed before the ROC against allotment of the shares to these companies. Furthermore, the department has carried out intensive search operations over the assessee and no any incriminating material was found to show that the money against the share allotment was own money of the company. Shares certificates were issued against the allotment of the shares to these companies were not found from the possession of the assessee company or its director or employees. This fact shows that after allotment of shares by the appellant company share certificates were dispatched to the subscriber companies. No any entry in books of account or document was found showing payment of cash to these investor companies against receipt of cheques from these companies against allotment of shares. Therefore the genuineness of the transactions cannot be doubted. n) Onus to prove source of source From the show cause notice given by ld CIT(A) and excel sheet provided to the assessee showing chain of source it is apparent that even there is no cash deposit till 4th stage of channel source (Copy at Pb pg 669 to 698/ AY 2012-13 filed in the case of Motisons Entertainment (India) Pvt Ltd ITA No 485/JP/17). If there is any cash deposited at 4th channel or beyond to that stage then the inquiry should have been made from the concerns in whose bank a/c such funds floated and necessary action should have been taken in the cases of such concern but the assessee cannot be hold responsible for cash deposit in some account at 4th Channel. Under section 68 of Income Tax Act, 1961 the onus of the assessee is to prove the source of credit entry and there is no onus of assessee to prove the source of source or source of all channel sources. The amendment in section 68 of I. Tax was made by inserting the following proviso to section 68 w.e.f. 01/04/2013 which require to prove source of finds in the hands of shareholder company. Though not required by law but still the assessee has proved source of finds in the hands of shareholder company. The amended section even does not require to prove source of funds in the hands of 3rd or 4th stage. Further the amendment in section 68 of I.Tax was made by inserting the following proviso to section 68 w.e.f. 01/04/2013

ITA No. 492/JP/2017 DCIT, Central Circle-2, Jaipur vs M/s. Bholenath Real Estates Pvt.Ltd. Jaipur

"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:

The above proviso was inserted with effect from the 1st day of April, 2013 so it cannot be applied retrospectively. Therefore as per law the assessee has no onus to prove source of source. Hon’ble Mumbai High Court in the case of Commissioner of Income Tax 1 Vs M/s. Gagandeep Infrastructure Pvt.Ltd held 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 201314 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 it was a submission on behalf of the Revenue that such large amount of share premium gives rise to suspicion on the genuineness (identity) of the shareholders i.e. they are bogus. The Apex Court in Lovely Exports (P) Ltd. (supra) in the context to the

ITA No. 492/JP/2017 DCIT, Central Circle-2, Jaipur vs M/s. Bholenath Real Estates Pvt.Ltd. Jaipur

pre amended Section 68 of the Act has held that where the Revenue urges that the amount of share application money has been received from bogus shareholders then it is for the Income Tax Officer to proceed by reopening the assessment of such shareholders and assessing them to tax in accordance with law. It does not entitle the Revenue to add the same to the assessee's income as unexplained cash credit. (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.

But in the case of the assessee the fact remains that the assessee has also proved source of source by submitting the copy of bank statement of the share applicant company wherein no cash deposit was made against the share application money.

Therefore, the addition on share application received by the assessee can neither be made u/s 56(1) of Income Tax Act, 1961 nor u/s 68 of Income Tax Act, 1961. The various judgments and arguments regarding addition made u/s 56(1) of Income Tax Act, 1961 has been submitted in forgoing paras. The various judgments regarding addition cannot be made u/s 68 of Income Tax Act, 1961 are as under:-

a) Rajasthan High Court: - (i) CIT-1, Jaipur V/s M/s. ARL Infratech Ltd, (PB pg 130 to 143/Case Laws) wherein Hon’ble Rajasthan High Court has recently confirmed the findings of Hon’ble ITAT by deciding the appeal of revenue in DB ITA No 24/2014 vide order dated 28/09/2016 regarding deletion of addition of share capital made by applying the provisions of 68 of Income Tax Act, 1961.

(ii) Commissioner of Income-tax, Jaipur –II Versus Morani Automotives (P.) Ltd. No.- D.B. IT Appeal No. 619 of 2011 Dated.- October 23, 2013 (Rajasthan High Court) (PB pg 144 to 149/Case Laws).

The findings of Hon’ble Rajasthan High Court was as under:-

ITA No. 492/JP/2017 DCIT, Central Circle-2, Jaipur vs M/s. Bholenath Real Estates Pvt.Ltd. Jaipur

"13. In this case, the assessee had given the names and addresses of the alleged creditors. It was in the knowledge of the Revenue that the said creditors were income-tax assessees. Their index numbers were in the file of the Revenue. The Revenue, apart from issuing notices under s. 131 at the instance of the assessee, did not pursue the matter further. The Revenue did not examine the source of income of the said alleged creditors to find out whether they were credit-worthy or were such who could advance the alleged loans. There was no effort made to pursue the so-called alleged creditors. In those circumstances, the assessee could not do any thing further. In the premises, if the Tribunal came to the conclusion that the assessee has discharged the burden that lay on him, then it could not be said that such a conclusion was unreasonable or perverse or based on no evidence. If the conclusion is based on some evidence on which a conclusion could be arrived at, no question of law as such arises."

ITA No. 492/JP/2017 DCIT, Central Circle-2, Jaipur vs M/s. Bholenath Real Estates Pvt.Ltd. Jaipur

grounds urged on behalf of the revenue and found the same not leading to any substantial question of law. This Court noticed, observed, and held as under:-

"7. Learned counsel for the appellant (Revenue) contended that firstly Tribunal erred in accepting the explanation offered by assessee in relation to source of income. His second submission was that what was offered by assessee was no explanation and hence should not have been accepted and lastly learned counsel made sincere attempt on his part after taking us through factual scenario of the explanation and contended that it can never be taken as satisfactory explanation for deleting the addition made by AO. We do not agree to this submission for more than one reason.

ITA No. 492/JP/2017 DCIT, Central Circle-2, Jaipur vs M/s. Bholenath Real Estates Pvt.Ltd. Jaipur

another factual inquiry with a view to find out as to whether explanation offered by assessee and which found acceptance to the CIT(A) and Tribunal is good or bad, or whether it was rightly accepted, or not. It is only when the factual finding recorded had been entirely de hors the subject, or that it had been based on no reasoning, or based on absurd reasoning to the extent that no prudent man of average judicial capacity could ever reach to such conclusion, or that it had been found against any provision of law, then a case for formulation of substantial question of law on such finding can be said to have been made out.

"19. A perusal of the aforesaid finding goes to show that deletion has been made on appreciation ofevidence, which was on record Finding that there was existence of investors and their confirmation has been obtained, were found to be satisfactory. All these conclusions are conclusions of fact based on material on record and, therefore, cannot be said to be perverse so as to give rise to question of law, which may be required to be considered in this appeal under s.260A of the IT Act."

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In the result, the appeal fails and is, therefore, dismissed.”

(iii) Barkha Synthetics Ltd. vs. Asstt. CIT (005) 197 CTR (Raj) 432. (PB pg 150 to 156/Case Laws) Substantial question of law—Cash credit vis-a-vis share application money—Tribunal found that 6 out of 7 companies from which the share application money had been received were genuinely existing and no enquiry was conducted in respect of the source of share application money at the time of making the investment in the assessee-company and thus the assessee has discharged its initial burden except in one case—As regards individual investors, the Tribunal found that identity of 9 out of 10 investors has been established and they have confirmed the fact of making investment in the shares of the assessee-company and no further enquiry was directed by the AO—Thus, additions were sustained only in respect of investments said to have been made by U, an individual investor and by W Ltd., for the reason that such investments were not proved— Finding of the Tribunal is essentially a finding of fact which is not vitiated in law—No substantial question of law arise for consideration.

(iv) CIT vs. First Point Finance Ltd. (2006) 206 CTR (Raj) 626 : (2006) 286 ITR 477 (Raj HC). (PB pg 157 to 162/Case Laws) Income—Cash credit—Share application money— Tribunal found that the investors are genuinely existing persons and they have filed confirmations in respect of

ITA No. 492/JP/2017 DCIT, Central Circle-2, Jaipur vs M/s. Bholenath Real Estates Pvt.Ltd. Jaipur

investments made by them and their statements were also recorded—Amount of share capital/share application money could not be treated as unexplained cash credits and no addition could be made under s. 68—No substantial question of law arises.

(v) Commissioner of Income Tax Vs. Bhaval Synthetics (Raj HC) (2013) 84 DTR 0449 (Raj) (PB pg 163 to 165/Case Laws)Held that even in case of doubt about subscribers to increased share capital, amount of share capital could not be regarded as undisclosed income of company—Amount referable to share application could not be attributed to assessee and could not be assessed in its hands—Appeal dismissed

(vi) Commissioner of Income Tax Vs. Akj Granites (P) Ltd. (Raj HC) (2008) 301 ITR 0298 (PB pg 166 to 168/Case Laws)held that in respect of share applications received from different places accompanied with share application money, no presumption can be drawn that same belong to the assessee and cannot be assessed in his hands as his undisclosed income unless some nexus is established that share application money for augmenting the investment in business has flown from assessee’s own money—No substantial question of law arises—Barkha Synthetics Ltd. vs. Asstt. CIT (2005) 197 CTR (Raj) 432 followed.

(vii) Commissioner of Income-Tax, Central, Jaipur Versus Supertech Diamond Tools (Pvt) Ltd. (Raj HC) D. B. IT Appeal No. 74 of 2012 Dated: - 12 December 2013. (PB pg 169 to 174/Case Laws)

(viii) Commissioner of Income-tax - I, Jaipur Versus AL Lalpuria Construction (P.) Ltd (Raj HC) D.B. IT Appeal Nos. 256 of 2010 AND 26 & 39 of 2011 Dated: - 25 February 2013. (PB pg 175 to 176/Case Laws)

(ix) Commissioner of Income-tax, Ajmer Versus HS. Builders (P.) Ltd. D.B. INCOME Tax (Raj HC) APPEAL NO. 48 OF 2006 Dated: - 03 March 2012. (PB pg 177 to 185/Case Laws)

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(x) CIT Vs Jai Kumar Bakliwal (2014) 101 DTR (Raj) 377 : (2014) 267 CTR (Raj) 396 (PB pg 186 to 192/Case Laws). No liability to prove source of source.

(xi) Aravali Trading Co Vs Income Tax Officer (2008) 8 DTR (Raj) 199. (PB pg 193 to 200/Case Laws) Burden of the assessee stands discharged when the identity of the creditors is established and he confirms the loans.

(xii) CIT Vs Heera Lal Chagan Lal Tank (2002) 157 ITR 281 (Raj) (PB pg 201 to 202/Case Laws) Burden of the assessee stands discharged when the identity of the creditors is established and he confirms the loans.

b) ITAT Jaipur/Jodhpur

i) Shalimar Buildcon (P) Ltd. vs ITO (2011) 128 ITD 0396 (Jaipur) (PB pg 214 to 238/Case Laws) In this case Hon’ble ITAT Jaipur Bench has relied on its old decision in the case of Hotel Gaudavan ITA No. 1162 and 1137/JP/2008 and addition on account of share capital was deleted.

28.5 On identical issue, the Tribunal, Jaipur Bench in the case of Hotel Gaudavan (P) Ltd. (supra) has held as under :

"6. As regards the issue on merit in the Departmental appeal, we concur with the views of the learned CIT(A) that the AO has not considered the explanation of the assessee. The amount under consideration of Rs. 1.89 crore has been received by the assessee as share application money from M/s Jalkanta Technical & Financial Service (P) Ltd. (JTFSPL) after a proper resolution passed by the board of directors of the aforesaid company through banking channel. M/s JTFSPL is having permanent account and filing its return of income regularly. The AO has nowhere mentioned that money belongs to the assessee company

ITA No. 492/JP/2017 DCIT, Central Circle-2, Jaipur vs M/s. Bholenath Real Estates Pvt.Ltd. Jaipur

and therefore, provisions of s. 68 cannot be invoked. The learned CIT(A) has rightly relied upon the decision of Hon’ble Delhi High Court in the case of CIT vs. Steller Investment Ltd. (2000) 164 CTR (SC) 287 which has been confirmed by the Hon’ble Supreme Court of India. The learned CIT(A) has also relied upon the decision of Hon’ble jurisdictional High Court in the case of Barkha Synthetics Ltd. vs. Asstt. CIT (2005) 197 CTR (Raj) 432 and also the decision of Tribunal, Jodhpur Bench in the case of Uma Polymers (P) Ltd. vs. Dy. CIT (dt. 27th Feb., 2006) [reported at (2006) 101 TTJ (Jd)(TM) 124—Ed.] where it has been held that the assessee has to prove the existence of the shareholders which in the present case is not under dispute. Therefore, the assessee has discharged the burden and therefore the AO was not justified in making any addition under s. 68 of the Act. The learned counsel for the assessee has referred to the decision of Hon’ble Supreme Court of India in the case of Divine Leasing & Finance Ltd. dt. 21st Jan., 2008, the copy of which is placed on record where it has been observed by the Supreme Court as under :

‘Can the amount of share money be regarded as undisclosed income under s. 68 of IT Act, 1961 ? We find no merit in this SLP for the simple reason that if the share application money is received by the assessee company from alleged bogus shareholders, whose names are given to the AO, then the Department is free to proceed to reopen their individual assessments in accordance with law. Therefore, we find no infirmity in the order of the learned CIT(A), with the impugned judgment.’

The said decision of Hon’ble Supreme Court of India has been followed by the Tribunal, Delhi Bench in the case of ITO vs. Bhor Mal Dhansi Ram Ltd. in ITA No. 4670/Del/2007, dt. 3rd March, 2006. The copy of the said decision of Tribunal, Delhi Bench is placed on record. The learned counsel for the assessee Shri H.M. Singhvi, chartered accountant has also relied upon the decision of Hon’ble Supreme Court of India on the said issue in the case of CIT vs. Lovely Exports (P) Ltd.

ITA No. 492/JP/2017 DCIT, Central Circle-2, Jaipur vs M/s. Bholenath Real Estates Pvt.Ltd. Jaipur

(2008) 216 CTR (SC) 195 : (2008) 6 DTR (SC) 308 wherein it has been held that if the share application money is received by the assessee company from alleged bogus shareholders, whose names are given to the AO, then the Department is free to proceed to reopen their individual assessments in accordance with law, but it cannot be regarded as undisclosed income of assessee company."

28.6 The Hon’ble Delhi High Court in the case of CIT vs. Divine Leasing & Finance Ltd. (supra) had an occasion to consider the addition on account of share application money. We are reproducing the held portion from the decision of Hon’ble Delhi High Court as mentioned in (2007) 207 CTR (Del) 38 (supra).

"Income—Cash credit—Share application money— Burden of proof can seldom be discharged to the hilt by the assessee—If the AO harbours doubts of the legitimacy of any subscription he is empowered, nay duty-bound, to carry out thorough investigations—But if the AO fails to unearth any wrong or illegal dealings, he cannot obdurately adhere to his suspicions and treat the subscribed capital as the undisclosed income of the company—If relevant details of address and identity of the subscribers are furnished to the Department along with copies of the shareholders registers, share application forms, share transfer register etc. it would constitute acceptable proof or explanation by the assessee—Department would not be justified in drawing an adverse inference only because the creditor/subscriber fails or neglects to respond to its notices—Tribunal has noted that the assessee company is a public limited company which had received subscriptions to the public issue through banking channels and the shares were allotted in consonance with the provisions of Securities Contract (Regulation) Act, 1956, as also the rules and regulations of Delhi Stock Exchange—Complete details were furnished— Tribunal has further found that the AO has not brought any positive material or evidence which would indicate that the shareholders were benamidars or fictitious

ITA No. 492/JP/2017 DCIT, Central Circle-2, Jaipur vs M/s. Bholenath Real Estates Pvt.Ltd. Jaipur

persons or that any part of the share capital represented company’s own income from undisclosed sources."

28.7 The Hon’ble apex Court in the case of CIT vs. Lovely Exports (P) Ltd. (supra) held that if the share capital money is received by the assessee company from alleged bogus shareholders then the Department is free to proceed to reopen the individual assessments of such shareholders in accordance with law. Such share application money cannot be regarded as undisclosed income of the assessee company.

28.8 The Hon’ble High Court in the case of First Point Finance Ltd. (supra) held that burden of proof on the assessee company lies to the extent of making out a case that investor exists and thereafter it is not for the assessee to further prove where they have brought money from to invest with it.

28.9 The Hon’ble Delhi High Court in the case of CIT vs. United Bio-tech (P) Ltd. 2010 TIOL-533-HC-Del held that in case the identity of the share applicants has been established and it is found that the said applicants are corporate assessees who are assessed to tax with IT Department then there is no case of any substantial question of law. In the instant case, the share applicants are corporate assessees.

28.10 The Hon’ble Delhi High Court in the case of CIT vs. Samir Bio-tech (P) Ltd. (supra) held that if investments have been shown by the share applicants in their audited balance sheet then the addition cannot be made under s. 68 of the Act.

28.11 In view of the legal position as discussed above, the AO was not justified in making the addition of Rs. 1.10 crore without bringing on record any material for the addition. Simply on the basis of information which is not substantiated in the course of assessment proceedings against the assessee, the AO could not have added the amount.

ITA No. 492/JP/2017 DCIT, Central Circle-2, Jaipur vs M/s. Bholenath Real Estates Pvt.Ltd. Jaipur

(ii) The Honb’le ITAT, Jaipur Bench, Jaipur in its judgment the case of M/s Jadau Jewellers & Manufacturers Pvt. Ltd., B-1, Trimutri Circle, Govind Marg, Jaipur in ITA No. 686/JP/2014 dated 14.12.2015 (PB pg 239 to 267/Case Laws) gave the following findings:- “.6.1 On facts also, the assessee has produced before the Assessing Officer copy of share application, confirmation of the cash creditors, copy of PAN, copy of Board resolution, copy of Director’s report, auditor’s report, copy of balance sheet, copy of P&L account, copy of bank account in all the cases to prove the identity, genuineness and creditworthiness of the cash creditors. The ld Assessing Officer made addition on the basis of investigation conducted by the ITO, Investigation Wing, Kolkata but the ld Assessing Officer of the assessee has not clarified what inquiry had been conducted and what evidences collected which goes against the assessee. The notice U/s 131 issued by the ITO, Investigation Wing, Kolkata were served in case of Vidya Agencies Pvt. Ltd. and Shivarpan Mercantiles Pvt. Ltd., but compliance could not be made on the given date because concerned officer was on leave. In case of Middleton Goods Pvt. Ltd. And Lactrodryer Marketing Pvt. Ltd., notices were served on the assessee and in compliance to the notice, the party submitted all the documents in the IT office. The case law referred by the ld CIT(A) i.e. decision of Hon’ble Delhi High Court in the case of Nipun Builders and Developers Pvt. Ltd. Vs. CIT and Vijay Power Generator Ltd. Vs CIT (supra) are not squarely applicable on the facts of the case as there was short time available with the Assessing Officer as well as Investigation Wing of Kolkata. The copy of inquiry has not been provided by the Assessing Officer to the assessee. As per findings of the Hon'ble Delhi High Court in the case Nipun Builders and Developers Pvt. Ltd. Vs. CIT (supra), the Investigation Officer at Kolkata had not deputed Inspector to enquire the whereabouts of the company. The case laws referred by the assessee are squarely applicable on the facts and circumstances of the appellant’s case, therefore, we reverse the order of the ld CIT(A) on technical ground as well as on merit also….”

ITA No. 492/JP/2017 DCIT, Central Circle-2, Jaipur vs M/s. Bholenath Real Estates Pvt.Ltd. Jaipur

(iii) Uma Polymer (P) Ltd. , 101 TTJ 124, Jodhpur (PB pg 282 to 318/Case Laws) Income—Cash credit— Share application money—In respect of share capital money, the assessee-company has to prove only the existence of the person in whose name share application is received—No further burden is cast on the assessee to prove whether that person himself has invested the money or some other person has made the investment in his name—Burden to prove that the money did not belong to him but to somebody else is on the Revenue—Distinction between a public company and a private company is not very material for this purpose— AO treated the investments made by ten shareholders in the assessee-company as bogus and made addition under s. 68 —Not justified—In all the cases except that of V, AO had obtained the bank statements of the shareholders which clearly show that the accounts were regularly maintained and the shareholders had made deposits—Further, the shareholders are also assessed to tax—Simply because scrutiny assessments were not made in the case of shareholders, such assessments could not be made in the course of assessment of the assessee—Having regard to the information collected by the AO from the banks, identity of the shareholders was fully established—If any shareholder is found to have made unexplained investment, then addition of such investment is required to be made in the hands of the shareholder and not in the account of the assessee— U had invested in the share capital through cheque except for a small sum which was returned to her—Her bank account shows several entries, both credit and debit, which have no relation with the amount invested with the assessee-company—Merely because she has not submitted her returns after the asst. yr. 1984-85, it cannot be said that she was not assessed to tax—Though V has not been shown to be assessed to tax, he had made major part of investments towards share capital through cheques and his identity is not doubted— Accordingly, share capital advanced by U and V is also to be accepted as genuine—Therefore, no addition of share capital money could be made in the hands of the assessee-company.

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(iv) The ld. Jaipur Tribunal in the case of DCIT V M/s Kamdhenu Steel and Alloys Ltd. 2014-TIOL-709- ITAT- (PB pg 203 to 213/Case Laws) Case relates to search and issue of shares on premium. Held that the assessee had submitted the particulars of registration of the applicant company, the confirmation from the share applicants, bank account details from which payment through account payee cheques, so the assessee had discharged its initially onus. (v) M/s. ARL Infratech Ltd. vs. The ACIT ITA No. 619/JP/2013 (PB pg 268 to 281/Case Laws) ITAT Jaipur. The findings of Hon’ble ITAT was as under:- Before, we proceed to decide the issue on merits, we would like to discuss the scheme of the Act and precedents on the issue involved in this appeal as under:- ‘’In cases where share application money is found recorded in the books of an assessee which may represent credit in the books and the share applicant is identified, that amount cannot be added in the assessee's hands u/s 68 of the Act. The Hon'ble Rajasthan High Court has repeatedly reiterated the above legal position. These cases are: (i) CIT vs. Shree Barkha Synthetics Ltd. 182 CTR 175 (Raj.) (ii) Barkha Synthetics Ltd. vs. ACIT (2005), 197 CTR 432 (Raj).13 In coming to the above conclusion, the Hon'ble Jurisdictional High Court has considered at length the relevant decisions on the issue like CIT vs. Steller Investment Ltd. (2000) 164 CTR (SC) 287 = 251 ITR 263 (SC) which has confirmed the decision of Hon'ble Delhi High Court reported in (1992) 192 ITR 287. The Hon'ble Court has gone to the extent of stating that even if it be assumed that the subscriber to the share capital are not genuine, nevertheless, under no circumstances can the amount of share capital be regarded as undisclosed income of the assessee. In this case, the share subscriber is identified. There can be no dispute regarding the above stated legal position. The following decisions also lay down the same ratio:- (i) CIT vs. Lovely Exports (P) Ltd. (2008) 6 DTR 308 (SC) (ii) CIT vs. Dolphin Conpack Ltd. (2006) 283 ITR 190 (Del.) (iii) CIT vs. Gujarat Heavy Chemicals Ltd. (202) 256 ITR 795(SC) (iv) CIT vs. Kwick Travels (1992) 199 ITR (St.) 85 (SC)

ITA No. 492/JP/2017 DCIT, Central Circle-2, Jaipur vs M/s. Bholenath Real Estates Pvt.Ltd. Jaipur

This issue has been dealt at length by the Third Member in the case of Uma Polymers (P) Ltd. vs. DCIT, (2006) 101 TTJ (Jd.) T.M. 126 = (2006) 284 ITR (AT) 1 Jodhpur.’’ 2.6 Adverting, the facts of the given case, we are of the considered opinion that all the share applicants stand identified. The assessee has provided PANs of the share applicants. The mode of payment has also been made explained. There is no direct or indirect relation between the assessee company and the share applicants. The statements recorded during survey has got no evidentiary value and the law is very much settled on this issue. In any case, even under the provisions of Section 68 of the Act, the assessee cannot be forced to prove the source of the source. The law on this subject is also settled by numerous decisions. The alleged report of the Inspector of the Department who is stated to have visited at the given addresses of the share applicants was never put or confronted to the assessee. The cumulative effects of these reasons is that the impugned addition cannot be added in the hands of the assessee company. Accordingly, we order to delete the entire additions and allow the appeal of the assessee. 3.0 In the result, the appeal of the assessee stands allowed. The department filed appeal before Hon’ble Rajasthan High Court. Hon’ble Rajasthan High Court confirmed the findings of Hon’ble ITAT by deciding the appeal of revenue in DB ITA No 24/2014 vide order dated 28/09/2016

(c) Other High Courts

(i) 2014 (8) TMI 605 - MADRAS HIGH COURT The Commissioner of Income Tax Versus Pranav Foundations Ltd. T. C. (A). No. 262 of 2014 Dated - 12 August 2014 (PB pg 343 to 346/Case Laws) Addition u/s 68 – Share application and share premium amount credited but not proved - Whether the Tribunal was right in upholding the order of the CIT(A) who deleted the addition made u/s 68, being the share application money and share premium amount credited by the assessee which was not proved – Held that:- Following the decision in CIT v. Lovely Exports (P) Ltd. [2008 (1) TMI 575 - SUPREME COURT OF INDIA] - all the four parties, who are subscribers of the

ITA No. 492/JP/2017 DCIT, Central Circle-2, Jaipur vs M/s. Bholenath Real Estates Pvt.Ltd. Jaipur

shares, are limited companies and enquiries were made and received from the four companies and all the companies accepted their investment - the assessee has categorically established the nature and source of the sum and discharged the onus that lies on it in terms of Section 68 of the Act - When the nature and source of the amount so invested is known, it cannot be said to be undisclosed income - the addition of such subscriptions as unexplained credit under Section 68 of the Act is unwarranted – Decided against Revenue.

(ii) CIT vs. Illac Investment (P) Ltd. (2007) 207 CTR (Del) 687; (PB pg 341 to 342/Case Laws) assessee- company has satisfactorily established the identity of the share subscribers and deleted the addition under s. 68, no substantial question of law arises for consideration.

(iii) CIT vs. Divine Leasing & Finance Ltd. (2007) 207 CTR (Del) 38; (PB pg 321 to 340/Case Laws) Income—Cash credit—Share application money— Burden of proof can seldom be discharged to the hilt by the assessee—If the AO harbours doubts of the legitimacy of any subscription he is empowered, nay dutybound, to carryout thorough investigations—But if the AO fails to unearth any wrong or illegal dealings, he cannot obdurately adhere to his suspicions and treat the subscribed capital as the undisclosed income of the company—If relevant details of address and identity of the subscribers are furnished to the Department along with copies of the shareholders register, share application forms, share transfer register, etc. it would constitute acceptable proof or explanation by the assessee—Department would not be justified in drawing an adverse inference only because the creditor/subscriber fails or neglects to respond to its notices—Tribunal has noted that the assessee-company is a public limited company which had received subscriptions to the public issue through banking channels and the shares were allotted in consonance with the provisions of Securities Contract (Regulation) Act, 1956, as also the rules and regulations of Delhi Stock Exchange—Complete details were furnished—

ITA No. 492/JP/2017 DCIT, Central Circle-2, Jaipur vs M/s. Bholenath Real Estates Pvt.Ltd. Jaipur

Tribunal has further found that the AO has not brought any positive material or evidence which would indicate that the shareholders were benamidars or fictitious persons or that any part of the share capital represented company’s own income from undisclosed sources—As regards receipt of share capital on issue of rights shares to five companies, these companies were duly incorporated under the Sikkimese Companies Act and were assessed under the Sikkimese Taxation Manual— Their share subscriptions were also received through banking channels and found to be valid by the jurisdictional AO—Therefore, no addition could be made under s. 68

(iv) CIT v/s Value Capital services P Ltd. 307 ITR 334 (Delhi) (PB pg 319-3202/Case Laws) held that there is additional burden on the department to show that even if share applicants did not have the means to make investment, the investment made by them actually emanated from the coffers of the assessee so as to enable it to be treated as undisclosed income of the assessee. CIT v/s STL Extrusion (P) Ltd. 333 ITR 269 (MP) (v) (PB pg 347 to 350/Case Laws) Income—Cash credit— Share application money—Assessee has duly established the identity and source of credits— Additions not sustainable. (vi) CIT v/s Arunanda Textiles (P) Ltd. , 333 ITR 116 (Karnataka) (PB pg 351 to 353/Case Laws) Share application money—Assessee able to identify the shareholders—It is not for the assessee-company to establish but it is for the Department to enquire with the investors about the capacity to invest the amount in the shares.

(vii) Bhav Shakti Steel Mines (P) Ltd. vs. CIT (2009) 18 DTR (Del) 194 Income—Cash credit—Genuineness— CIT(A) not only found that the identity of each of the shareholders stood established, but also examined the fact that each of them were income-tax assessees and had disclosed the share application money in their

ITA No. 492/JP/2017 DCIT, Central Circle-2, Jaipur vs M/s. Bholenath Real Estates Pvt.Ltd. Jaipur

accounts which were duly reflected in their IT returns as well as in their balance sheets—Tribunal was not therefore justified in coming to the conclusion that the CIT(A) had not considered the matter in the right perspective—Order passed by Tribunal remanding the matter for examining the share applicants set aside and that of CIT(A) restored

(d) Other Benches of ITAT (i) ITO V M/s. Reliance Marketing Pvt. Ltd. 2015- TIOL-319-TAT-Del (PB pg 367 to 375/Case Laws) identity of the creditors/share applicants by furnishing their PAN number and copy of acknowledgment of Income-tax Return. The amount on account of share application was received through banking channel, copies of the confirmation alongwith affidavit of the parties were furnished. The assessee also furnished the copy of share application forms, copy of Form no.2 filed with Register of Companies (ROC), showing allotment of shares to the applicants. Therefore, the assessee discharged the onus cast upon it, (ii) INCOME TAX OFFICER vs. MS. SUPERLINE CONSTRUCTION P. LTD. ITAT, BOMBAY TRIBUNAL (A) ITA No. 3644 TO 3648, 3650, 3651Mum/2014 30th November, 2015 (2015) 45 CCH 0281 Mum Trib. (PB pg 376 to 392/Case Laws) Addition—Addition on account of bogus share application money—Assessee was in business of builder and developer—Assessment was completed u/s 143(3) r.w.s. 147—Re-assessment proceedings were initiated on basis of information received from Directorate of Income-tax (Investigation) without recording AO’S own satisfaction and information was accepted in mechanical manner—After reopening of assessment u/s 147, AO made addition of Rs.40 lakhs received by assessee from various corporate entities— Addition was made by AO on account of bogus share application money under provisions of s 68—CIT(A) deleted addition made by AO—Held, in case of CIT vs. M/s. Lovely Exports (Pvt) Ltd, reported in [2008] 216 CTR 195 (SC), it was held that If share application

ITA No. 492/JP/2017 DCIT, Central Circle-2, Jaipur vs M/s. Bholenath Real Estates Pvt.Ltd. Jaipur

money was received by assessee company from alleged bogus shareholders whose name were given to AO then department was free to proceed to reopen their individual assessments in accordance with law but it could not be regarded as undisclosed income of assessee company—It was submitted by assessee that AO had failed to appreciate statements of any person recorded u/s 143(3) r.w.s. 147—That assessee-company had fully discharged burden of proof, onus of proof and explained source of share capital and advances received by established identity, creditworthiness and genuineness of transaction by banking instruments with documentary evidences—Assessee company substantiated details with documentary evidences as extracted from website of Ministry of Corporate Affairs, Government of India before AO—These facts had not been rebutted on behalf of Revenue—ITAT was not inclined to interfere with findings of CIT(A) who thus rightly deleted entire impugned additions of Rs.40 lakhs made by AO u/s 68 on account of share capital subscription received by assessee-company

Held: It was pointed out in the case of CIT vs. M/s. Lovely Exports (Pvt) Ltd, reported in [2008] 216 CTR 195 (SC) that if the share application money is received by the assessee company from alleged bogus shareholders whose name are given to the AO then the department is free to proceed to reopen their individual assessments in accordance with law but it cannot be regarded as undisclosed income of assessee company. (para 2.3) In this background, it was submitted on behalf of the assessee that the Assessing Officer failed to appreciate that there was no documentary evidence against the assessee-company to support such impugned additions. It was further submitted by the assessee that the Assessing Officer failed to appreciate that the statements of any person recorded u/s 143(3) r.w.s. 147. The assessee-company had fully discharged the burden of proof, onus of proof and explained the source of share capital and advances received by established the identity, creditworthiness and genuineness of

ITA No. 492/JP/2017 DCIT, Central Circle-2, Jaipur vs M/s. Bholenath Real Estates Pvt.Ltd. Jaipur

transaction by banking instruments with documentary evidences. The further stand of the assessee had been that the assessee-company substantiated the details with the documentary evidences as extracted from the website of Ministry of Corporate Affairs, Government of India before the Assessing Officer. These facts had not been rebutted on behalf of the Revenue. (para 2.4) In view of the facts and circumstances of the present case as well as considering the decisions as discussed above on the similar issue, ITAT was not inclined to interfere with the findings of the CIT(A) who had rightly deleted the entire impugned additions of Rs.40 lakhs made by the Assessing Officer u/s 68 of the Act on account of share capital subscription received by the assessee-company. (para 2.5) Conclusion: When Assessee-company had substantiated details with documentary evidences as extracted from website of Ministry of Corporate Affairs, Government of India before AO, then additions made by AO u/s 68 on account of share capital subscription received by assessee-company was rightly deleted.

(iii) Meera Engineering & Commercial Co. (P) Ltd. vs. Asstt. CIT (1997) 58 TTJ (Jab) 527 (PB pg 393 to 399/Case Laws) Income—Cash credits—Genuineness of share capital of company—All the 51 shareholders filed their affidavits and confirmatory letters and 24 of them filed their replies also to notice under s. 133(6)— Names of parties purchasing the shares with amount subscribed were furnished before AO—All documents clearly show that shareholders do exist— Assessee- company had discharged its onus of explaining the cash credits as required under law—If the company is able to establish that shareholders existed and they have invested money for purchase of shares burden of company to prove the credit is discharged—Identity of shareholders not in dispute—Assessee is not required to prove credit-worthiness of shareholders—Addition deleted

ITA No. 492/JP/2017 DCIT, Central Circle-2, Jaipur vs M/s. Bholenath Real Estates Pvt.Ltd. Jaipur

(iv) Allen Bradley India Ltd. vs. Dy. CIT (2002) 74 TTJ (Del) 604 : (2002) 80 ITD 43 (Del); Income—Cash credit—Subscription to share capital and loan—In case of limited companies jurisdiction of AO would be limited only to see whether identity of shareholders is established and whether they exist or not—Once identity is established, then, possibly no further enquiries need to be made—Since the shareholders of assessee-company were in existence, they were assessed to tax, complete details were available, share capital money as well as loan were received through account payee cheques and they were cleared through proper banking channels, AO was not justified in disbelieving the capital invested by the shareholder companies— Similarly, AO was not justified in disbelieving the loan taken from DTL as the cheques were cleared through bank channels and confirmation and supporting evidence was filed—CIT(A) was justified in deleting the additions.

(v) 2017 (3) TMI 1047-ITAT AHMEDABAD Income Tax Officer, Ward 8 (1), Ahmedabad Versus Seven Star Aviation Services Pvt. Ltd (PB pg 400 to 404/Case Laws)Addition u/s 68 - share application money and unsecured loan received. Held that: - When the depositors are regular tax payers and the advances made by such depositors as also share application monies paid by such shareholders are duly accepted in their personal assessments, there cannot be any occasion to hold that these amounts are unexplained in the hands of the company. The credit worthiness or identity cannot be an issue in such a situation. (vi) 2016 (10) TMI 920 - ITAT HYDERABAD M/s. Hariom Concast and Steel Pvt. Ltd. Versus Income Tax Officer, Ward-2 (2) , Hyderabd (PB pg 405 to 411/Case Laws) Addition for shares issued on premium. Held that: - Share premium cannot be brought to tax invoking the provisions of Section 68, unless there is a link with either quid pro quo transaction or investing by assessee-company in their accounts so as to receive it back as share capital. No such evidence was brought on record.

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(e) Supreme Court

i) CIT vs. Lovely Exports (P) Ltd. (2008) 216 CTR (SC) 195 Income—Cash credit—Share application money—If the share application money is received by the assessee company from alleged bogus shareholders, whose names are given to the AO, then the Department is free to proceed to reopen their individual assessments in accordance with law, but it cannot be regarded as undisclosed income of assessee company. ii) CIT vs. Steller Investment Ltd. (200) 251 ITR 263 (SC) Even if the subscribers to the increased share capital of assessee-company were not genuine, the amount could not be regarded as undisclosed income of the assessee-company. (iii) CIT Vs Orissa Corporation (P) Ltd (1986) 159 ITR 79 (SC)

f) Ratio Laid down in following cases not applicable to the facts of the case of assessee:-

i) Nova Promoters & Finlease Pvt. Ltd (2012) 342 ITR 169 (Delhi High Court): - Summons sent to the companies received back unserved and other summons remained uncomplied with Whereas, in the case of this assessee company, notice u/s 133(6) was sent to investor companies, all of which were served and some of them were complied with.

ii) CIT V/s N. R. Portfolio Pvt. Ltd 206 (2014) DLT (DB) (Del)/ 264 CTR 0258 (del) Assessed u/s 144 of Itax Act. In this case the AO issued several notices and show cause notice which was not served/complied and assessment was framed u/s 144 of Income Tax Act. In our case all the compliances were made and evidences submitted.

iii) N Tariks Properties Pvt. Ltd 227 Taxmann.com 373 (with reference to decision of Delhi high court in 264 CTR 472) AO noticed that extracts of bank account had been fabricated and AO found that immediately before issuance of cheques for the purpose of making pay order or demand draft there was deposit of cash. In

ITA No. 492/JP/2017 DCIT, Central Circle-2, Jaipur vs M/s. Bholenath Real Estates Pvt.Ltd. Jaipur

our case no cash deposit in the bank account of shareholder company.

iv) CIT v/s Navodaya Castle Pvt. Ltd 367 ITR 306 (Delhi High Court)AO found that immediately before issuance of cheques for the purpose of making pay order or demand draft there was deposit of cash. In our case no cash deposit in the bank account of shareholder company. v) CIT V/s MAF Academy Pvt. Ltd 206 (2014) DLT 277 (DB)(Del)/ 361 ITR 0285 (Del) AO found that immediately before issuance of cheques for the purpose of making pay order or demand draft there was deposit of cash. In our case no cash deposit in the bank account of shareholder company. Further, the summons u/s section 131 of I.tax Act were sent to the shareholders which were received back un- served. In view of the above submission, the humble assessee prays your honor kindly to dismiss the appeal filed by the department.’’

2.5 We have heard the rival contentions and perused the materials

available on record. It is pertinent to mention that the similar issue has

been dealt with and decided by this Bench of ITAT vide its order dated

30-10-2017 in the case of ACIT, Central Circle-2, Jaipur vs Motisons

Buildtech Pvt. Ltd in ITA No. 481/JP/2017 (Revenue’s appeal) for the

Assessment Year 2009-10 by observing as under:-

‘’4.6 We have heard the rival contentions and perused the materials available on record. Brief facts of the case are that the Department carried out search over Motisons Group on 31-10-2012. The AO during the course of assessment proceeding observed that in the course of search and seizure action u/s 132 of the Act, cash, jewellery, valuables, stock-in-trade, documents, books of account and / or loose papers were found and / or seized from the premises of the members of the Motisons Group of which one such member happens to be the assessee. The AO also noted that the Group is involved in introducing large share capital on high premium in accounts

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of various group companies through the Kolkata based companies. The AO has mentioned these details at page 3 and 4 of his assessment order. The AO further noted that the receipt of share capital is Rs. 3,03,000/- and the premium is to the tune of Rs. 2,99,97,000/- during the year under consideration which is not only abnormal but also appeared to be part of a well planned exercise of tax evasion. Accordingly, the AO issued the show cause notice dated 6-02-2015 to the assessee company requiring the assessee to show cause as to why the amount of Rs. 3,03,00,000/- should not be treated as income of the assessee u/s 56(1) of the Act. The assessee submitted the reply before the AO who rejected the assessee's contention and made the addition of Rs. 3,03,00,000/- u/s 56(1) of the Act in the hands of the assessee company. In first appeal, the ld. CIT(A) has deleted the addition of Rs. 3,03,00,000/- made by the AO. The relevant portion of ld. CIT(A)’s order from para 2.1.4.2 to 2.1.47 is reproduced hereunder:- ‘’2.1.4.2 Final observation :

2.1.4.2.1 I have considered assessee’s submission and also taken a note of judicial pronouncements relied upon by the appellant as well as the factual matrix of the case. The brief facts of the case are that “Motisons Group” has several companies. These Companies issued share capital on premium to various other companies. The AO held that the receipts on account of share capital on premium is taxable income u/s 56(1) of I. Tax Act, accordingly he made the additions in the hands of various companies as under:-

S. No. Name of Company AY Detail of Share Capital issued

Name of allottee Total Amount of Share capital and Premium.

1 Motisons Global Pvt. Ltd 2009-10 Bholenath Traders Pvt. Ltd 25,00,000

Debraj Vincom Pvt. Ltd 15,00,000

Kingfisher Vinimay Pvt. Ltd 20,00,000

Nawab Vyapar Pvt. Ltd 50,00,000

Reality Merchant Pvt. Ltd 47,00,000

Sanmukh Vincom Pvt. Ltd 15,00,000

Shreya Tie Up Pvt. Ltd 53,00,000

Victor Tradcom Pvt. Ltd 50,00,000

Total 2,75,00,000

2 Motisons Global Pvt. Ltd 2011-12 Adarsh Deal Trade Pvt. Ltd 5,00,000

Adhunik Dealmark Pvt. ltd 42,00,000

Axion Commodeal Pvt. ltd 36,00,000

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S. No. Name of Company AY Detail of Share Capital issued

Name of allottee Total Amount of Share capital and Premium.

Bholenath Traders Pvt. Ltd 1,03,00,000

Bhusan Distributors Pvt. Ltd 25,00,000

Contra Vanijya Pvt. Ltd 78,00,000

Debdaru Vinimay Pvt. Ltd 21,00,000

Deep Commosales Pvt. Ltd 50,00,000

Dhanlabh Tradelinks Pvt. Ltd 27,00,000

Puspa Dealers Pvt. Ltd 60,00,000

Puspa Trading Pvt. Ltd 12,50,000

Rupa Tracom Pvt. Ltd 60,00,000

Spangle Dealtrade Pvt. Ltd 70,00,000

Surya Deal Trade Pvt. Ltd 14,00,000

Swabhiman Dealers Pvt. Ltd 68,00,000

Vikash Tradecom Pvt. Ltd 25,00,000

Total 6,96,50,000

3 Motisons Global Pvt. Ltd 2012-13 Alliance Tradecom Pvt. Ltd 3,05,00,000

Evershine Suppliers Pvt. Ltd 1,60,00,000

Alliance Tradecom Pvt. Ltd 3,95,58,900

Evershine Suppliers Pvt. Ltd 4,86,99,600

Mayukh Vinimay Pvt. Ltd 6,93,49,800

Mayukh Vintrade Pvt. Ltd 13,99,800 Regent Barter Pvt. Ltd 4,04,71,800 Regent Dealers Pvt. Ltd 7,59,99,900 Rose Suppliers Pvt. Ltd 9,87,49,800 Total 42,07,29,600

4 Motisons Global Pvt. Ltd 13-14 Alliance Tradecom Pvt. Ltd 50,50,000

Evershine Suppliers Pvt. Ltd 1,45,00,000

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DCIT, Central Circle-2, Jaipur vs M/s. Bholenath Real Estates Pvt.Ltd. Jaipur

S. No. Name of Company AY Detail of Share Capital issued

Name of allottee Total Amount of Share capital and Premium.

Mayukh Vinimay Pvt. Ltd 2,24,50,000

Regent Dealers Pvt. Ltd 16,00,000

Rose Suppliers Pvt. Ltd 5,00,000

Total 4,41,00,000

5 Motisons Entertainment (I) Pvt. Ltd 2009-10 Bholenath Traders Pvt. Ltd 35,00,000

Debdaru Vinimay Pvt. Ltd 50,00,000

Indigo Vinimay Pvt. Ltd 50,00,000

Kingfisher Vinimay Pvt. Ltd 20,00,000

Reality Merchant Pvt. Ltd 25,00,000

Shreya Tie Up Pvt. Ltd 75,00,000

Sumeru Vincom Pvt. Ltd 35,00,000

Victor Tradcom Pvt. Ltd 50,00,000

Total 3,40,00,000

6 Motisons Entertainment (I) Pvt. Ltd 2011-12 Access Tradelink Pvt. Ltd 20,00,000

Bholenath Traders Pvt. Ltd 40,00,000

Chakra Deal Trade Pvt. Ltd 15,00,000

Debdaru Vinimay Pvt. Ltd 15,00,000

Interlink Saving and Finance P Ltd 25,00,000

Puja Tie Up Pvt. Ltd 15,00,000

Sanmukh Vincom Pvt. Ltd 45,00,000

Tara Vinimay Pvt. Ltd 20,00,000

Total 1,95,00,000

7 Motisons Entertainment (I) Pvt. Ltd 2012-13 Alliance Tradecom Pvt. Ltd 1,59,00,000

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DCIT, Central Circle-2, Jaipur vs M/s. Bholenath Real Estates Pvt.Ltd. Jaipur

S. No. Name of Company AY Detail of Share Capital issued

Name of allottee Total Amount of Share capital and Premium.

Evershine Suppliers Pvt. Ltd 93,00,000

Evershine Suppliers Pvt. Ltd 17,00,000

Mayukh Vinimay Pvt. Ltd 1,55,00,000

Regent Barter Pvt. Ltd 1,79,00,000

Regent Dealers Pvt. Ltd 1,40,00,000

Rose Suppliers Pvt. Ltd 35,00,000

Total 7,78,00,000

8 Motisons Buildtech Pvt. Ltd 2009-10 Arcade Dealcom Pvt. Ltd 30,00,000

Debdaru Vinimay Pvt. Ltd 25,00,000

Debdoot Vinimay Pvt. Ltd 35,00,000

Matrabhumi Dealers Pvt. Ltd 44,00,000

Puja Tie-Up Pvt. Ltd 50,00,000

Pushpa Dealers Pvt. Ltd 25,00,000

Pushpa Trading Pvt. Ltd 40,00,000

Shreya Tie Up Pvt. Ltd 10,00,000

Taranh Suppliers Pvt. Ltd 34,00,000

Vandana Dealers Pvt. Ltd 10,00,000

Total 3,03,00,000

9 Motisons Buildtech Pvt. Ltd 2012-13 Alliance Tradecom Pvt. Ltd 1,80,00,000

Evershine Suppliers Pvt. Ltd 28,00,000

Regent Barter Pvt. Ltd 1,60,27,500

Total 3,68,27,500

10 Godawari Estates Pvt. Ltd 2010-11 Debdaru Vinimay Pvt. Ltd 25,00,000

Jai Pitreshwar Vyapaar Pvt. Ltd 15,00,000

Mainak Vincom Pvt. Ltd 50,00,000

ITA No. 492/JP/2017

DCIT, Central Circle-2, Jaipur vs M/s. Bholenath Real Estates Pvt.Ltd. Jaipur

S. No. Name of Company AY Detail of Share Capital issued

Name of allottee Total Amount of Share capital and Premium.

Puspa Dealers Pvt. Ltd 50,00,000

Snowfall Commercial Pvt. Ltd 25,00,000

Vignesh Info Services Pvt. Ltd 35,00,000

Total 2,00,00,000

11 Godawari Estates Pvt. Ltd 2012-13 Bakliwal Vyapaar Pvt. Ltd. 1,23,00,000

Jasmine Commodities Pvt. Ltd 65,00,000

Buniyad Vanijya Pvt Ltd 50,00,000

Puja Barter Pvt. Ltd. 60,00,000

Dhanlabh Tradelinks Pvt. Ltd 25,00,000

Devang Commercial Pvt. Ltd 50,00,000

Extent Vinimay Pvt. Ltd 25,00,000

Neha Deal Trade Pvt Ltd 20,00,000

Spring SalesPvt Ltd 67,00,000

Manali Tradecom Pvt Ltd. 50,00,000

Target Vincom Pvt Ltd 50,00,000

Bernstain Marketing Pvt Ltd 15,00,000

Kesarinandan Vanijya Pvt Ltd 5,00,000

Deep Commosale Pvt Ltd 50,00,000

Apollo Vintrade Pvt Ltd 25,00,000

Innova Commercial Pvt Ltd 25,00,000

Prayash Dealtrade Pvt Ltd 40,00,000

Justify Vanijya Pvt Ltd 50,00,000

Solty Financial Consultants P Ltd 50,00,000

Achiever Commotrade Pvt Ltd 50,00,000

Sishmahal Commotrade Pvt. Ltd 20,00,000

ITA No. 492/JP/2017

DCIT, Central Circle-2, Jaipur vs M/s. Bholenath Real Estates Pvt.Ltd. Jaipur

S. No. Name of Company AY Detail of Share Capital issued

Name of allottee Total Amount of Share capital and Premium.

Advantage Dealtrade Pvt. Ltd 25,00,000

Origin VinimayPvt Ltd 40,00,000

Rukmani International Pvt Ltd 50,00,000

Total 10,30,00,000

12 Bholenath Real Estates Pvt. Ltd 2009-10 Lavender Dealcom Pvt. Ltd. 30,00,000

Arcade Dealcom Pvt. Ltd 20,00,000

Tarang Suppliers Pvt. Ltd 15,00,000

Transit Vinimay Pvt. Ltd 62,00,000

Vandana Dealers Pvt. Ltd 98,00,000

Variety Dealcom Pvt. Ltd 25,00,000

Vanila Vinimay Pvt. Ltd 15,00,000

Outlook Tracom Pvt. Ltd 25,00,000

Total 2,90,00,000

13 Rainbow Buildcon Pvt Ltd 2009-10 Anuraj Securities Pvt Ltd 20,00,000

Matribhumi Dealers Pvt Ltd 25,00,000

Narottamka Trade & Vyapaar Pvt Ltd 15,00,000

Puja Dealcom Pvt Ltd 40,00,000

Tarang Suppliers Pvt LTd 30,00,000

Vandana Dealers Pvt Ltd 30,00,000

Puja Tie-Up Pvt Ltd 40,00,000

Total 2,00,00,000

14 Shivansh Buildcon Pvt. Ltd 2012-13 Evershine Suppliers Pvt. Ltd 90,00,000

Total 90,00,000

Total Additions 94,14,07,100

ITA No. 492/JP/2017

DCIT, Central Circle-2, Jaipur vs M/s. Bholenath Real Estates Pvt.Ltd. Jaipur

During the appellate proceeding, Sh Vijay Kr Goyal has requested to keep the appellate matter pending for time being in case of M/s Mayukh Vinimay Pvt Ltd as the appeal against the order of 263 is pending for adjudication before the Hon’ble ITAT Kolkata where matter pertaining to jurisdiction of CIT who passed the order of 263, has been challenged. It is further submitted that assessee has also made request to ITAT Kolkata to transfer the said case to ITAT Jaipur which is still pending for consideration. In respect of addition made on a/c of bogus share capital, AO has also made similar addition of Rs. 10,54,95,000/= in the hands of M/s Mayukh Vinimay P Ltd, tantamounts to double addition. After duly taking a note of the same, appellate order in case of M/s Mayukh Vinimay Pvt Ltd is being kept in abeyance till the disposal of said appeal by Hon’ble ITAT. With regard to decisions relied upon by the undersigned, Sh Vijay Goyal were differentiated on facts as under:

(i) Nova Promoters & Finlease Pvt. Ltd (2012) 342 ITR 169 (Delhi High Court): Summons sent to the companies received back unserved and other summons remained uncomplied with Whereas, in the case of assessee companies, notice u/s 133(6) was sent to investor companies, all of which were served and most of them were complied with.

(ii) CIT V/s N. R. Portfolio Pvt. Ltd 206 (2014) DLT (DB) (Del)/ 264 CTR 0258 (del) : Assessed u/s 144 of Itax Act. In this case the AO issued several notices and show cause notice which was not served/complied and assessment was framed u/s 144 of Income Tax Act. In our case all the compliances were made and evidences submitted.

(iii) N Tariks Properties Pvt. Ltd 227 Taxmann.com 373 (with reference to decision of Delhi high court in 264 CTR 472) :AO noticed that extracts of bank account had been fabricated and AO found that immediately before issuance of cheques for the purpose of making pay order or demand draft there was deposit of cash. In our case no cash deposit in the bank account of shareholder company.

(iv) CIT v/s Navodaya Castle Pvt. Ltd 367 ITR 306 (Delhi High Court): AO found that immediately before issuance of cheques for the purpose of making pay order or demand draft there was deposit of cash. In our case no cash deposit in the bank account of shareholder company.

(v) CIT V/s MAF Academy Pvt. Ltd 206 (2014) DLT 277 (DB)(Del)/ 361 ITR 0285 (Del) : AO found that immediately before issuance of cheques for the purpose of making pay order or demand draft there was deposit of cash. In our case no cash deposit in the bank account of Shareholder Company.

Further, the summons u/s section 131 of I.tax Act were sent to the shareholders which were received back unserved.

(vi) Rajmandir Estates Pvt. Ltd 70 Taxmann.com 124: Relates to order passed by CIT u/s 263 of ncome Tax Act, 1961.

(vii) CIT v/s Sumati Dayal (1995) 80 Taxman 89 (SC) & CIT V/s Durga Prasad More [1971] 82 ITR 540 (SC) : No application as ample evidence have been filed by assessee. Further no source of concealed income was found. Further no document was found as the result of intensive search operations to show outflow of unaccounted money against the receipts of share application money through the banking channels. This show the preponderance of probabilities is in favour of assessee.

(viii) CIT V/s Mussadilal Ram Bharose [1987] 165 ITR 14 This judgment relates to penalty u/s 271(1)(c).

In support of its contention, assessee through AR has relied upon following judgments fact of which are identical to the fact of the case of assessee:

Jurisdictional Rajasthan High Court

ITA No. 492/JP/2017

DCIT, Central Circle-2, Jaipur vs M/s. Bholenath Real Estates Pvt.Ltd. Jaipur

(i) CIT-1, Jaipur V/s M/s. ARL Infratech Ltd, wherein Hon’ble Rajasthan High Court has recently confirmed the findings of Hon’ble ITAT by deciding the appeal of revenue in DB ITA No 24/2014 vide order dated 28/09/2016.

(ii) Commissioner of Income-tax, Jaipur –II Versus Morani Automotives (P.) Ltd. No.- D.B. IT Appeal No. 619 of 2011 Dated.- October 23, 2013 (Rajasthan High Court).

(iii) Barkha Synthetics Ltd. vs. Asstt. CIT (005) 197 CTR (Raj) 432.

(iv) CIT vs. First Point Finance Ltd. (2006) 206 CTR (Raj) 626 : (2006) 286 ITR 477 (Raj HC).

(v) Commissioner of Income Tax Vs. Bhaval Synthetics (Raj HC) (2013) 84 DTR 0449 (Raj).

(vi) Commissioner of Income Tax Vs. AKJ Granites (P) Ltd. (Raj HC) (2008) 301 ITR 0298.

i) Commissioner of Income-Tax, Central, Jaipur Versus Supertech Diamond Tools (Pvt) Ltd. (Raj HC) D. B. IT Appeal No. 74 of 2012 Dated: - 12 December 2013.

viii) Commissioner of Income-tax - I, Jaipur Versus AL Lalpuria Construction (P.) Ltd (Raj HC) D.B. IT Appeal Nos. 256 of 2010 AND 26 & 39 of 2011 Dated: - 25 February 2013.

(ix) Commissioner of Income-tax, Ajmer Versus HS. Builders (P.) Ltd. D.B. INCOME Tax (Raj HC) APPEAL NO. 48 OF 2006 Dated: - 03 March 2012.

(x) CIT Vs Jai Kumar Bakliwal (2014) 101 DTR (Raj) 377 : (2014) 267 CTR (Raj) 396. No liability to prove source of source

(xi) Aravali Trading Co Vs Income Tax Officer (2008) 8 DTR (Raj) 199. Burden of the assessee stands discharged when the identity of the creditors is established and he confirms the loans.

(xii) CIT Vs Heera Lal Chagan Lal Tank (2002) 157 ITR 281 (Raj) Burden of the assessee stands discharged when the identity of the creditors is established and he confirms the loans.

Since, the common issues are involved in all these 15 companies therefore, for convenience, I am dealing the issue in composite manner first on the basis of facts and then on legality also. The followings facts issues emerge from the findings of AO and submissions submitted by ld AR.

a) Issue of according opportunity of cross examination of Sh Santosh Choube, Sh Ajit Sharma & Sh Rajesh Kumar Singh to the assessee.

b) Charging of Premium on shares and taxability by applying the provisions of section 56(1) of Income Tax Act.

c) Addition by applying the provisions of section 68 of Income Tax Act

2.1.4.2 (a) According opportunity to cross examine Sh Santosh Choube, Sh Ajit Sharma & Sh Rajesh Kumar Singh

But before asking for an opportunity for cross examining them, assessees has to disprove the correctness of their assertions as emanating from the statements recorded of Sh Santosh Choube, Sh Ajit Sharma and Sh Rajesh Kumar Singh. Corroborative evidences in form of bank statements obtained in this regard and their analysis further proves the theory of cash deposit prior to transfer of share application money. Vide show cause letter issued , assessee has already been confronted with the oral evidences gathered during the survey operation from aforementioned 3 persons by Investigation Directorate Kolkata. Further, the right of cross examination is not an absolute right as decided in Nath International Sales vs. UOI, AIR 1992 (Del) 295) wherein Hon'ble Supreme Court has also held that the right of hearing does not necessarily include right of cross examination. The right of cross examination must depend upon the circumstances of each case. In this regard, assessee is trying to use this shield of “absence of opportunity to cross-examine” of Sh Santosh Choube, Sh Ajit Sharma and Sh Rajesh Kumar Singh. It will be

ITA No. 492/JP/2017

DCIT, Central Circle-2, Jaipur vs M/s. Bholenath Real Estates Pvt.Ltd. Jaipur

miscarriage of justice if assessee be given benefit on this a/c. It is also not possible to allow opportunity of cross-examination of each parties. Assessee is supposed to controvert all facts gathered from the oral evidences as well as from bank enquiries. In view of these facts, assessee’s grievance is not justified as proper opportunity during the appellate proceeding has already been given to controvert those findings as mentioned in the show-cause letter.

2.1.4.2 (b) Charging of premium on shares & its taxability.

The AO has observed that companies have received abnormal share premium whereas as per the audited P&L account and balance sheet, these companies, do not have any business/profit and physical assets/assets are not in commensurate to value of share with the companies which appeared to be a part of a well planned exercise of tax evasion. In this regard, Ld AR has submitted following reasons for Charging of premium:

Name of Company Reason for Charging Share Premium Motisons Global Pvt. Ltd 1. Owing a big and valuable land in the heart of city at Lal Kothi, Tonk Road, Jaipur and constructin one of the most beautiful building of Jaipur city thereon. 2. Goodwill of Motisons Group.

Motisons Entertainment (I) Pvt. Ltd 1. The assessee company booked a big space (meant for Cinema Hall) in under construction comple naming “World Trade Park” Further, the leasing out this space to world famous cinema theatre operator “Cinepolis” was under process. 2. Goodwill of Motisons Group.

Motisons Buildtech Pvt. Ltd 1. Owing a big and valuable agriculture land at Village Dudu, Gidani Nolya (At Ajmer Road, Near Dudu) for which planning of township was there. 2. Owning valuable land in the heart of city at C-Scheme and constructing the building thereon 2. Goodwill of Motisons Group.

Godawari Estates Pvt. Ltd 1. NBFC Company expecting good revenue. 2. Goodwill of Motisons Group. Bholenath Real Estates Pvt Ltd (i) Owwing large chunk of agricultural land at Village Gaiji, Tehsil Mojamabad, Distt Jaipur (in between Bagru to Dudu at main NH Jaipur Ajmer Road) and planning development of township thereon. (ii) Market rate of land was very high than book value which was on cost. (iii) Goodwill of Motisons Group. Rainbow Buildcon Pvt. Ltd 1. Owning large chunk of agricultural land at Village Gidani (Near Dudu at main NH Jaipur Ajmer Road and planning development of township thereon. 2. The market rate of this land was very high than book value. 3. Goodwill of Motisons Group.

Shivansh Buildcon Pvt. Ltd 1. Owning a valuable land in the heart of city at Seewad Area, Bapu Nagar, Jaipur and planning a commercial project thereon. 2. Goodwill of Motisons Group. The ld AR has further submitted that that the shares were allotted to the investor companies at premium, after mutual discussion between assessee companies and investor companies. “Motisons Group” enjoys very high reputation and goodwill in market which was main reason for high premium. Hon’ble ITAT, Mumbai Bench in the case of ACIT Vs. Gagandeep Infrastructure Pvt. Ltd. 2014-T10L-656-ITAT-Mum has held that issue of shares at premium is always a commercial decision which does not require any justification. The assessee further submitted that wherever the authorized share capital is required to be increase, the same has been increased, it was purely a commercial decision of the companies on which income-tax Department cannot step into shoes of assessee. In view of this, it would be worthwhile to reproduce section 56(1) of the Act here as under:

“Income of every kind which is not to be excluded from the total income under this Act shall be chargeable to income-tax under the head "Income from other sources", if it is not chargeable to income- tax under any of the heads specified in section 14, items A to E.”

Here, I find that the money so received against the share capital and share premium is capital receipt and not revenue receipt, therefore the same cannot be taxed in the hands of assessee companies under section 56(1) of Income Tax Act, 1961. The CBDT vide circular/instruction No.2 dated 29.01.2015 has stated as under [371 ITR 6(st)].

ITA No. 492/JP/2017

DCIT, Central Circle-2, Jaipur vs M/s. Bholenath Real Estates Pvt.Ltd. Jaipur

In reference to the above cited subject, I am directed to draw your attention to decision of the High Court of Bombay in the case of Vodafone India Services Pvt. Ltd V UOI for the Assessment year 2009-10 (WP No.871 of 2014) wherein the court has held interalia, that the premium on share issue was on account of a capital account transaction and does not give rise to income and hence, not liable to transfer pricing adjustment.

It is hereby informed that the Board has accepted the decision of the High Court of Bombay in the above mentioned writ petition. In view of the acceptance of the above judgment, it is directed that the ratio decidendi of the judgment must be adhered to by the field officers in all cases where the issue is involved. This may also be brought to the notice of the ITAT, DRP’s and CIT (Appeals).

In view of above instruction of CBDT share premium cannot be treated as revenue receipt taxable u/s 56(1) of Income Tax Act. Further this should be seen with reference to amendment made by Finance Act 2012 by insertion of clause (viib) to section 56 of Income Tax Act, 1961. This amendment was made effective from 01/04/2013. Memorandum explaining the provisions in Finance Bill 2012 stated as under:

“Share premium in excess of the fair market value is to be treated as income.

“Section 56(2) provides for the specific category of incomes that shall be chargeable to income tax under the head “income from other sources”. It is proposed to insert a new clause in 56(2). The new clause will apply where, accompany, not being a company in which the public are substantially interested, receives, in any previous year, from any person being a resident, any consideration for issue of shares. In such a case if the consideration received for issue of shares exceeds the face value of shares, the aggregate consideration received for such shares as exceeds the fair market value of the shares shall be chargeable to income Tax, under the head “income from other sources”. The said amendment is effective from 1st April 2013, it will accordingly apply in relation to AY 2013-14 and subsequent AYs. In the memorandum it is mentioned that premium in excess of fair market value is to be treated as income. CBDT vide circular No.3 of 2012 dated 12.06.2012 has also mentioned that provisions of 56(2)(vii b) will be applicable for Assessment year 2013-14 onward. In all the cases of following assessee companies share capital and premium was received in the assessment years earlier to AY 2013-14 except the following one:-

Name of Detail of Share Capital issued Company Name of allottee No of Share Capital @ Share Premium Rate of Premium Total Amount shares Rs. 10 per share per share

Motisons Global Alliance Tradecom Pvt. Ltd 12625 1,26,250 49,23,750 390 50,50,000 Pvt. Ltd

Evershine Suppliers Pvt. Ltd 36250 3,62,500 1,41,37,500 390 1,45,00,000

Mayukh Vinimay Pvt. Ltd 56125 5,61,250 2,18,88,750 390 2,24,50,000

Regent Dealers Pvt. Ltd 4000 40,000 15,60,000 390 16,00,000

Rose Suppliers Pvt. Ltd 1250 12,500 4,87,500 390 5,00,000

Total 1,10,250 11,02,500 4,29,97,500 4,41,00,000

Therefore in view of clause (viib) of section 56 of I.Tax Act, the share premium charged by M/s Motisons Global Pvt Ltd in AY 2013-14 can be examined whether it exceeds the fair market value of the shares or not. In this regard the assessee has explained that the share premium in excess to value computed as per manner & method provided in this section r.w.r. 11UA of Income Tax Rules 1962 can only be taxed by applying provisions of section 56(viib) of the Act. The value of shares of the assessee company computed as per manner & method of this rules is as under:

Particulars As per Method (A) As per Method (B) (Net assets value method) (Discounted free cash flow method) Book Value of total assets less prepaid expenses & preliminary 53,88,09,212 53,88,09,212 expenses as on last B/s i.e. 31.03.2012

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DCIT, Central Circle-2, Jaipur vs M/s. Bholenath Real Estates Pvt.Ltd. Jaipur

Add: - Appreciation in market value of assets (In excess to book value) NA 25,52,48,216 Land at SB-110* Total Assets (A) 53,88,09,212 79,40,57,428 Total Liabilities, excluding share capital and reserves & Surplus (L) 76,56,570 76,56,570 Total amount of paid up equity share capital as shown in B/S (PE) 2,05,05,820 2,05,05,820 Paid up value of such equity shares (PV) 10 Fair market value of shares [(53,88,09,212- [(79,40,57,428-7656570)/2,05,05,820]*10 = Rs. 384 per shares* [(A-L)/PE]*PV 7656570)/2,05,05,820]*10 = Rs. 259 per shares For deciding the issue price of shares the assessee company choose the price as determined by option 2 and considering the value of goodwill & enhancement in value of other assets the issue price of shares decided Rs. 400 per shares which is quite reasonable. The assessee has further clarified that the market value of land at SB-110, Tonk Road Jaipur, is taken on the basis of value of adjacent land at SB-111 purchased during the year under consideration (just adjoining to land at SB-110) and area of both the lands are almost same. It was further stated by the assessee that in option two the appreciation in value of assets has been taken only in respect to land as for this the direct evidence is available. The value of other assets & goodwill is not taken in above computations. However while deciding the value of shares the same should also be taken into consideration.

Therefore, I found the explanation of assessee in case of Motisons Global Pvt Ltd that the issue price of the shares in AY 2013-14 is in accordance with the value of shares as computed as per rule 11UA of Income Tax Rules 1962 and it is acceptable. Accordingly, no addition can be made in AY 2013-14 also as income of M/s Motisons Global Pvt Ltd as per provisions of section 56(2)(viib)of the Act 1961. Therefore, AO’s action in this regard is not correct as per the applicable provisions of the Act.

2.1.4.2 (c) Addition by applying the provisions of section 68 of the Act

The assessee submitted that in all the cases, credit entries are supported by Share application containing (i) name/ address /PAN of party, (ii) detail of payment received, (iii) Copy of board resolution, (iv) Copy of PAN card of party , (v) Copy of bank statement showing the entry of payment made to assessee, (vi) Declaration of source of funds with party (vii) Copy of Ack. of ITR and Computation, (viii) Copy of audit report and audited balance sheet along with annexure. None of notice sent u/s 133(6) received back as “Un-served”. Further it is also submitted that the ld AO has not made the addition by applying the provisions of section 68 of the Act so it cannot be applied by CIT(A). As per section 251 (1)(a) of Income Tax Act, 1961 the CIT (A) have the power “in an appeal against an order of assessment he may confirm, reduce, enhance or annual the assessment” but he has no power to modify the basic theme of assessment order. During the course of assessment proceedings the assessee has submitted ample documents and satisfied the ld AO. The ld. AO being satisfied with the submission of assessee on section 68 of the Act, has not applied section 68 of the Act for the addition. The provisions of section 68 specified the authority mentioned as “Assessing Officer”. The CIT(A) is not assessing officer so he cannot step into the satisfaction of AO for making the addition when the ld AO has satisfied about the ingredients of section 68 of Income Tax Act. Hon’ble ITAT Delhi Bench in the case of SH. SHAMSHER SINGH GILL C/O S.K. MONGA & ASSOCIATES Versus ITO, WARD-2, HARIDWAR ITA No 2987/Del/2015 order dated 28/02/2017. It was further stated by ld AR that the assessee has submitted ample documents to prove identity, creditworthiness and genuineness of share capital. Under section 68 of Income Tax Act, 1961 the onus of the assessee is to prove the source of credit entry and there is no onus of assessee to prove the source of source or source of all channel sources. The amendment in section 68 of the Act was made by inserting the following proviso to section 68 w.e.f. 01/04/2013 which require to prove source of funds in the hands of shareholder company. Though not required by law but still the assessee proved source of funds in the hands of shareholder company. The amended section even does not require to prove source of funds in the hands of 3rd or 4th stage. I have also perused the case records. In this regard, I find that the AO has issued notice u/s 133(6) of the Act to inquiry the identity, creditworthiness and genuineness of transactions. AO has issued total 94 notices for share capital of Rs. 35,29,50,000/-. On perusal of case records, it is seen that compliance was made for 41 notices issued u/s 133(6) of the Act which involvesd share capital amounting to total of Rs. 15,59,00,000/-. The status of notices issued u/s 133(6) of Income Tax Act can be seen from chart given below:

ITA No. 492/JP/2017

DCIT, Central Circle-2, Jaipur vs M/s. Bholenath Real Estates Pvt.Ltd. Jaipur

Name of assessee company Total Notice Total Amount for Received un- Number of Amount under issued Notice issued served Compliance compliance

Motisons Global Pvt. Ltd AY 2009-10 8 2,75,00,000 0 4 1,00,00,000

Motisons Global Pvt. Ltd AY 20111-12 16 6,96,50,000 0 9 3,64,00,000

Motisons Entertainment (I) Pvt. Ltd (AY 2009-10) 8 3,40,00,000 0 3 1,20,00,000

Motisons Entertainment (I) Pvt. Ltd (AY 2011-12) 8 1,95,00,000 0 3 75,00,000

Motisons Buildtech Pvt. Ltd

AY 2009-10 10 3,03,00,000 0 3 70,00,000

Godawari Estates Pvt. Ltd AY 2010-11 6 2,00,00,000 0 3 1,10,00,000

Godawari Estates Pvt. Ltd AY 2012-13 24 10,30,00,000 0 15 6,22,00,000

Bholenath Real Estates Pvt. Ltd

AY 2009-10 7 2,90,00,000 0 1 98,00,000

Rainbow Buildcon Pvt. Ltd

AY 2009-10 7 2,00,00,000 0 0 0

Total 94 35,29,50,000 0 41 15,59,00,000

2.1.4.3 Further, in response to show cause notice issued by me u/s 250 (4) of the Act, is submitted that the assessee has also carried out search over the ROC site and found that charge has been registered over the assets of some of the investor companies under Companies Act in favour of leading banks like SBI etc for crores of rupees which proves that the shareholder companies are not shell company-rather creating of charge proves creditworthiness of the companies. The assessee submitted the following chart with search report on ROC site:

Name of Shareholder (Investor Name of Assessee Amount of share Amount, SRN and Name of Bank/Financial Company) Company in which capital of the Charge Id and date of Institution in whose favou share were taken investor company Charge created charge was created

ITA No. 492/JP/2017

DCIT, Central Circle-2, Jaipur vs M/s. Bholenath Real Estates Pvt.Ltd. Jaipur

Name of Shareholder (Investor Name of Assessee Amount of share Amount, SRN and Name of Bank/Financial Company) Company in which capital of the Charge Id and date of Institution in whose favou share were taken investor company Charge created charge was created

Axis Bank Ltd Rukmani International Pvt Ltd Godawari Estates Pvt. 50,00,000 50 Crore SRN Ltd C05684162 Charge Id 10501185 date 24/03/14

Union Bank of India Narottamka Trade & Vyapaar Pvt Ltd Rainbow Buildcon Pvt 15,00,000 85.50 Crore SRN Ltd C72436744 Charge Id 10606561 date 30/09/15

Vikash Tradecom Pvt. Ltd Motisons Global Pvt. 25,00,000 9.43 Crore SRN Punjab National Bank. Ltd C67525196 Charge Id 10345786 date10/02/2012

Arcade Dealcom Pvt. Ltd Motisons Buildtech 30,00,000 3.22 Crore SRN Punjab National Bank. Pvt. Ltd B44276514 Charge Id 10366837 date 29/06/2012

Arcade Dealcom Pvt. Ltd Bholenath Real Estates 20,00,000 3.22 Crore SRN Punjab National Bank. Pvt. Ltd B44276514 Charge Id 10366837 date 29/06/2012

Axis Bank Ltd Matribhumi Dealers Pvt Ltd Rainbow Buildcon Pvt 25,00,000 50.00 Crore SRN Ltd C05683776 Charge Id 10501186 date 24/03/2014

Puja Tie Up Pvt. Ltd (i) Motisons 15,00,000 2.50 Crore SRN Punjab National Bank. Entertainment (I) Pvt. C71816029 Charge Id Ltd 10431745 date 24/05/2013

(ii) Motisons 50,00,000 2.25 Crore SRN Buildtech Pvt. Ltd C718166656 Charge Id 10431744 date 24/05/2013

(iii) Rainbow 40,00,000 1.65 Crore SRN Buildcon Pvt Ltd C71814016 Charge Id 10431742 date 18/05/2013

1.95 Crore SRN C71817654 Charge Id 10431746 date 22/05/2013

ITA No. 492/JP/2017

DCIT, Central Circle-2, Jaipur vs M/s. Bholenath Real Estates Pvt.Ltd. Jaipur

Name of Shareholder (Investor Name of Assessee Amount of share Amount, SRN and Name of Bank/Financial Company) Company in which capital of the Charge Id and date of Institution in whose favou share were taken investor company Charge created charge was created

State Bank of India Kingfisher Vinimay Pvt. Ltd (i) Motisons Global 20,00,000 87.50 Crore SRN Pvt. Ltd C03615010 Charge Id 10490641 date 31/03/2014

(ii) Motisons 20,00,000 101.94 Crore SRN Entertainment (I) Pvt. B73228603 Charge Id Ltd 10419836 date 21/03/2013

Punjab National Bank Nawab Vyapar Pvt. Ltd Motisons Global Pvt. 50,00,000 9.95 Crore SRN Ltd C67525006 Charge Id 10345784 date 10/02/2012

Bank of India Snowfall Commercial Pvt. Ltd Godawari Estates Pvt. 25,00,000 8.00 Crore SRN Ltd B94083011 Charge Id 10289761 date 04/05/2011

Total 3,85,00,000

The assessee further clarified that out of above 10 cases, in 4 cases which have share capital of Rs. 1.15 crores with the following appellant Companies, notices u/s 133(6) sent by AO were also complied by these companies

Name of assessee company Name of investor company Amount of Share application received Motisons Global Pvt. Ltd AY 2009-10 Kingfisher Vinimay Pvt. Ltd 20,00,000 Motisons Global Pvt. Ltd AY 2011-12 Vikash Trade Com Pvt Ltd 25,00,000 Motisons Entertainment (I) Pvt. Ltd (AY 2009-10) Kingfisher Vinimay Pvt. Ltd 20,00,000 Godawari Estates Pvt. Ltd (AY 2012-13) Rukmani International Pvt Ltd 50,00,000 Total 1,15,00,000

However, in case of following 9 parties cases having share capital of Rs. 2.70 crores with following appellant companies, notices u/s 133(6) issued remained un-complied or not complied, but their identity and creditworthiness is further proved from registration of charge under Companies Act

Name of assessee company Name of investor company Amount of Share application received Motisons Global Pvt. Ltd (AY 2009-10) Nawab Vyapar Pvt Ltd 50,00,000 Motisons Buildtech Pvt. Ltd (AY 2009-10) Arcade Dealcom Pvt. Ltd 30,00,000 Motisons Buildtech Pvt. Ltd (AY 2009-10) Puja Tie Up Pvt. Ltd 50,00,000 Motisons Entertainment (I) Pvt. Ltd (AY 2011-12) Puja Tie Up Pvt. Ltd 15,00,000 Godawari Estates Pvt. Ltd (AY 2010-11) Snowfall Commercial Pvt. Ltd 25,00,000 Bholenath Real Estates Pvt Ltd (AY 2009-10) Arcade Dealcom Pvt. Ltd 20,00,000 Rainbow Buildcon Pvt Ltd (AY 2009-10) Matribhumi Dealers Pvt Ltd 25,00,000 Rainbow Buildcon Pvt Ltd (AY 2009-10) Puja Tie Up Pvt Ltd 40,00,000 Rainbow Buildcon Pvt Ltd (AY 2009-10) Narottama Trade & Yyapaar Pvt Ltd 15,00,000 Total 2,70,00,000

Further six share applicant companies were assessed by the same AO for AY 2013-14 wherein genuineness of these companies were not doubted. Further, out of these six companies, the assessment of one M/s Mayukha Vinimay Pvt Ltd

ITA No. 492/JP/2017

DCIT, Central Circle-2, Jaipur vs M/s. Bholenath Real Estates Pvt.Ltd. Jaipur

for AY 2009-10 was made in same circle i.e. Central Circle-2, Jaipur wherein addition of Rs. 10,54,95,000/- was made on account of its share capital by passing order u/s 143(3) r.w.s.263 of the Act. In other Companies cases, assessment for AY 2009- 10 was made u/s 148 of the Act by their respective jurisdictional AO wherein their funds/ share capital was assessed. The share capital received from these companies are as under:

S. No. Name of Company AY Detail of Share Capital issued

Name of allottee Total Amount

3 Motisons Global Pvt. Ltd 2012-13 Alliance Tradecom Pvt. Ltd 3,05,00,000

Evershine Suppliers Pvt. Ltd 1,60,00,000

Alliance Tradecom Pvt. Ltd 3,95,58,900

Evershine Suppliers Pvt. Ltd 4,86,99,600

Mayukh Vinimay Pvt. Ltd 6,93,49,800

Regent Barter Pvt. Ltd 4,04,71,800

Regent Dealers Pvt. Ltd 7,59,99,900

Rose Suppliers Pvt. Ltd 9,87,49,800

Total 41,93,29,800

4 Motisons Global Pvt. Ltd 13-14 Alliance Tradecom Pvt. Ltd 50,50,000

Evershine Suppliers Pvt. Ltd 1,45,00,000

Mayukh Vinimay Pvt. Ltd 2,24,50,000

Regent Dealers Pvt. Ltd 16,00,000

Rose Suppliers Pvt. Ltd 5,00,000

Total 4,41,00,000

7 Motisons Entertainment (I) Pvt. Ltd 2012-13 Alliance Tradecom Pvt. Ltd 1,59,00,000

Evershine Suppliers Pvt. Ltd 93,00,000

Evershine Suppliers Pvt. Ltd 17,00,000

Mayukh Vinimay Pvt. Ltd 1,55,00,000

Regent Barter Pvt. Ltd 1,79,00,000

Regent Dealers Pvt. Ltd 1,40,00,000

Rose Suppliers Pvt. Ltd 35,00,000

Total 7,78,00,000

ITA No. 492/JP/2017

DCIT, Central Circle-2, Jaipur vs M/s. Bholenath Real Estates Pvt.Ltd. Jaipur

S. No. Name of Company AY Detail of Share Capital issued

Name of allottee Total Amount

9 Motisons Buildtech Pvt. Ltd 2012-13 Alliance Tradecom Pvt. Ltd 1,80,00,000

Evershine Suppliers Pvt. Ltd 28,00,000

Regent Barter Pvt. Ltd 1,60,27,500

Total 3,68,27,500

14 Shivansh Buildcon Pvt. Ltd 2012-13 Evershine Suppliers Pvt. Ltd 90,00,000

Total 90,00,000

Total Additions 58,70,57,300

2.1.4.4 As regard Seized documents [party-1/Exhibit AS-3/Pge21], Sh Vijay Goyal, the Ld AR of the assessee has further clarified that FMV and maximum appreciation written 250/- and shares were also allotted for Rs. 250/- in that period. It is pertinent to also note that there is no Incriminating noting to show that share capital was acquired against the unaccounted cash of assessee group. As regard Tally accounts, the ld AR of assessee has explained that the tally accounts of six companies (assessed by same AO for AY 2013-14) were found in Pen drive of accountant Shri Banwari lal Yogi found and seized from residence of Chhabra Brothers. Same were received for reconciliation purpose. Since the up to date accounts were not there in Tally and missing supporting bills and vouchers from the searched premise clearly indicates that assessee group was not maintaining the books of account of shareholder companies. Further in such tally account there is no entry of outflow of any In this regard, it is also seen that the assessment of these six companies were made by same AO for AY 2013-14 wherein he has not made any adverse comments. Further, the tally account have no material to show that the appellant companies obtained the share capital by giving unaccounted cash. As regard the statements of employees of Motisons Group/directors of these six investor companies, the AR of the appellant Companies has given a plausible explanation that employees of Motisons Group were directors of Six companies. Major Share Holding company of these Six companies was M/s Mayukh Vintrade Pvt. Ltd and shareholder of this company was Chhabra family members (Owner of Motisons Group), therefore the known director were appointed in these Six Companies. Further none of the employee admitted to have managed the unaccounted money of the assessee company routed in its books through share capital.

2.1.4.5 Hon’ble Rajasthan High Court in the case of CIT -1, Jaipur Vs M/s. ARL Infratech Ltd, has recently confirmed the findings of Hon’ble ITAT by deciding the appeal of revenue in DB ITA No 24/2014 vide order dated 28/09/2016. Hon’ble ITAT Jaipur Bench in this case has made the following findings :

“…..Before, we proceed to decide the issue on merits, we would like to discuss the scheme of the Act and precedents on the issue involved in this appeal as under:

‘’In cases where share application money is found recorded in the books of an assessee which may represent credit in the books and the share applicant is identified, that amount cannot be added in the assessee's hands u/s 68 of the Act. The Hon'ble Rajasthan High Court has repeatedly reiterated the above legal position. These cases are:

(i) CIT vs. Shree Barkha Synthetics Ltd. 182 CTR 175 (Raj.)

(ii) Barkha Synthetics Ltd. vs. ACIT (2005), 197 CTR 432 (Raj).13

In coming to the above conclusion, the Hon'ble Jurisdictional High Court has considered at length the relevant decisions on the issue like CIT vs. Steller Investment Ltd. (2000) 164 CTR (SC) 287 = 251 ITR 263 (SC) which has confirmed the decision of Hon'ble Delhi High Court reported in (1992) 192 ITR

ITA No. 492/JP/2017

DCIT, Central Circle-2, Jaipur vs M/s. Bholenath Real Estates Pvt.Ltd. Jaipur

(i) CIT vs. Lovely Exports (P) Ltd. (2008) 6 DTR 308 (SC)

(ii) CIT vs. Dolphin Conpack Ltd. (2006) 283 ITR 190 (Del.)

(iii) CIT vs. Gujarat Heavy Chemicals Ltd. (202) 256 ITR 795(SC)

(iv) CIT vs. Kwick Travels (1992) 199 ITR (St.) 85 (SC)

This issue has been dealt at length by the Third Member in the case of Uma Polymers (P) Ltd. vs. DCIT, (2006) 101 TTJ (Jd.) T.M. 126 = (2006) 284 ITR (AT) 1 Jodhpur.’’

2.6 Adverting, the facts of the given case, we are of the considered opinion that all the share applicants stand identified. The assessee has provided PANs of the share applicants. The mode of payment has also been made explained. There is no direct or indirect relation between the assessee company and the share applicants. The statements recorded during survey has got no evidentiary value and the law is very much settled on this issue. In any case, even under the provisions of Section 68 of the Act, the assessee cannot be forced to prove the source of the source. The law on this subject is also settled by numerous decisions. The alleged report of the Inspector of the Department who is stated to have visited at the given addresses of the share applicants was never put or confronted to the assessee. The cumulative effects of these reasons is that the impugned addition cannot be added in the hands of the assessee company. Accordingly, we order to delete the entire additions and allow the appeal of the assessee.

3.0 In the result, the appeal of the assessee stands allowed…..”

The Department filed appeal before Hon’ble Rajasthan High Court. Hon’ble Rajasthan High Court confirmed the findings of Hon’ble ITAT by deciding the appeal of revenue in DB ITA No 24/2014 vide order dated 28/09/2016.

Further, Hon’ble Rajasthan High Court in another case Commissioner of Income-tax, Jaipur–II Versus Morani Automotives (P.) Ltd. No. D.B. IT Appeal No. 619 of 2011 Dated.- October 23, 2013 held that :

"13. In this case, the assessee had given the names and addresses of the alleged creditors. It was in the knowledge of the Revenue that the said creditors were income-tax assessees. Their index numbers were in the file of the Revenue. The Revenue, apart from issuing notices under s. 131 at the instance of the assessee, did not pursue the matter further. The Revenue did not examine the source of income of the said alleged creditors to find out whether they were credit-worthy or were such who could advance the alleged loans. There was no effort made to pursue the so-called alleged creditors. In those circumstances, the assessee could not do any thing further. In the premises, if the Tribunal came to the conclusion that the assessee has discharged the burden that lay on him, then it could not

ITA No. 492/JP/2017

DCIT, Central Circle-2, Jaipur vs M/s. Bholenath Real Estates Pvt.Ltd. Jaipur

be said that such a conclusion was unreasonable or perverse or based on no evidence. If the conclusion is based on some evidence on which a conclusion could be arrived at, no question of law as such arises."

"7. Learned counsel for the appellant (Revenue) contended that firstly Tribunal erred in accepting the explanation offered by assessee in relation to source of income. His second submission was that what was offered by assessee was no explanation and hence should not have been accepted and lastly learned counsel made sincere attempt on his part after taking us through factual scenario of the explanation and contended that it can never be taken as satisfactory explanation for deleting the addition made by AO. We do not agree to this submission for more than one reason. 8. In the first place, it is a pure question of fact, what to say question of law, much less substantial question of law. Secondly, this Court cannot again in this appeal undertake the examination of factual issues nor can draw factual inferences on the basis of explanation offered by assessee. Thirdly, once the explanation is accepted by the two appellate Courts i.e. CIT(A) and Tribunal in this case, then in such event, a concurrent finding recorded on such explanation by two appellate Courts is binding on the High Court. 9. Perusal of impugned finding quoted supra would go to show that Tribunal did examine the explanation offered by assessee in detail and then recorded a finding for its acceptance. Such finding when challenged does not constitute a substantial question of law within the meaning of s. 260A ibid in an appeal arising out of such order. 10. In our opinion, therefore, once the CIT(A) and Tribunal accepted the explanation of assessee and accordingly, deleted certain additions made by AO holding the transaction of shares to be genuine, then it would not involve any substantial issue of law as such. In other words, this Court in its appellate jurisdiction under s. 260A ibid, would not again de novo hold yet another factual inquiry with a view to find out as to whether explanation offered by assessee and which found acceptance to the CIT(A) and Tribunal is good or bad, or whether it was rightly accepted, or not. It is only when the factual finding recorded had been entirely de hors the subject, or that it had been based on no reasoning, or based on absurd reasoning to the extent that no prudent man of average judicial capacity could ever reach to such conclusion, or that it had been found against any provision of law, then a case for formulation of substantial question of law on such finding can be said to have been made out. 11. In our view, no such error could be noticed by us in the impugned order because as observed supra, the Tribunal did go into the details of explanation offered by assessee and then accepted the explanation by placing reliance on the documents filed by assessee. As a consequence thereof, the additions made by AO came to be deleted." 13. In CIT v. Shree Barkha Synthetics Ltd. [2004] 270 ITR 477 (Raj.), in a similar nature matter, this Court observed that the Tribunal having found that the companies from which the share application money had been received by the assessee-company were genuinely existing and the identity of the individual investors were also established and they had confirmed the fact of making investment, the finding that assessee had discharged initial burden and addition under Section 68 could not be sustained, was essentially a finding of fact. This Court said,- "19. A perusal of the aforesaid finding goes to show that deletion has been made on appreciation ofevidence, which was on record Finding that there was existence of investors and their confirmation has been obtained, were found to be satisfactory. All these conclusions are conclusions of fact based on material on record and, therefore, cannot be said to be perverse so as to give rise to question of law, which may be required to be considered in this appeal under s.260A of the IT Act." 14. The ratio of the decisions aforesaid directly applies to the present case too. Herein, as noticed, the appellate authorities have returned the findings of fact in favour of the assessee after due appreciation of the evidence on record, on relevant considerations, and on sound reasonings. These findings have neither been shown suffering from any perversity nor appear absurd nor are of such nature that cannot be reached at all. Thus, no case for interference in the findings of the appellate authorities is made out.

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DCIT, Central Circle-2, Jaipur vs M/s. Bholenath Real Estates Pvt.Ltd. Jaipur

In the result, the appeal fails and is, therefore, dismissed.”

Ld AR Sh Vijay Goyal has also submitted that the decisions of jurisdictional High Court is binding for all the revenue authorities as held by Hon’ble Apex Court in the case of CIT Vs G.M Mittal Stainless Steel (P), CIT (2003) 263 ITR 255 wherein it has held by Hon’ble Supreme Court that decision of jurisdictional High Court is binding on the Revenue authorities within the State. Revenue authorities within the State cannot refuse to follow the jurisdictional High Court’s decision on the ground that the decision of some other High Court was pending disposal before the Supreme Court. There are no material change in the facts of the appellant Companies with the facts of the above cited cases decided by Hon’ble Rajasthan High Court as the appellant Companies have submitted documents such as (i) Share application containing the name/address/PAN of party, (ii) detail of payment received etc. (iii) Copy of board resolution, (iv) Copy of PAN card of party, (v) Copy of bank statement showing the entry of payment made to assessee,(vi) Declaration of source of funds with party (vii) Copy of Ack. of ITR and Computation, (viii) Copy of audit report and audited balance sheet along with annexure proved all the ingredients of section 68 of the Act. Apart from this, it is also to be noted here that six companies involving share capital of Rs. 58,70,57,300/- to appellant companies were assessed by same AO for AY 2013-14 and in other cases as per the facts available from records non of the notices issued u/s 133(6) of the Act remained unserved and many of them have also made compliance to the notices issued u/s 133(6) of the Act. Further from search report of ROC, it is also seen that some of the investor companies have charge registered under Companies Act in favour of leading banks for crores of rupees.

2.1.4.6 Therefore, in view of the findings of Hon’ble jurisdictional High Court, the identity, creditworthiness and genuineness of transaction of these companies cannot be held as doubtful and addition by applying the provisions of section 68 of the Act cannot be upheld. However, it is also to be seen that the Investigation Directorate has carried out investigation for deposit of cash/DD at fourth stage of channel source in some cases. The Chart showing cash deposit/DD deposit at 4th Channel as per inquiries made by Investigation wing is as under:

Company A.Y. Amount From Company Cash deposit /Demand draft at 4th Channel per inquiry by investigation wing

Motisons Buildtech P Ltd 2012-2013 15,00,000 Evershine Suppliers P Ltd Swastik Traders

Motisons Buildtech P Ltd 2012-2013 20,00,000 Alliance Tradecom P Ltd Swastik Traders and Global Securities

Motisons Buildtech P Ltd 2012-2013 17,00,000 Alliance Tradecom P Ltd Swastik Traders

Motisons Buildtech P Ltd 2012-2013 30,00,000 Alliance Tradecom P Ltd Swastik Traders

Total 82,00,000

Motisons Entertainment P Ltd 2012-2013 18,00,000 Rose Suppliers P Ltd Shyam Fashion and Durga Enterprises

Motisons Entertainment P Ltd 2012-2013 46,00,000 Regent Barter P Ltd Durga Enterprises and Shyam Fashion

Motisons Entertainment P Ltd 2012-2013 4,50,000 Mayukh Vinimay P Ltd Shyam Fashion and Durga Enterprises

Motisons Entertainment p Ltd 2012-2013 10,00,000 Mayukh Vinimay P Ltd Shyam Fashion and Durga Enterprises

Motisons Entertainment P Ltd 2012-2013 16,00,000 Regent Dealers P Ltd Shyam Fashion

Motisons Entertainment P Ltd 2012-2013 10,00,000 Regent Dealers P Ltd Durga Enterprises

Motisons Entertainment P Ltd 2012-2013 8,00,000 Regent Dealers P Ltd Durga Enterprises and Shyam Fashion

Motisons Entertainment P Ltd 2012-2013 29,00,000 Alliance Tradecom P Ltd Swastik Traders and Global Securities

Total 1,41,50,000

ITA No. 492/JP/2017

DCIT, Central Circle-2, Jaipur vs M/s. Bholenath Real Estates Pvt.Ltd. Jaipur

Company A.Y. Amount From Company Cash deposit /Demand draft at 4th Channel per inquiry by investigation wing

Motisons Global P Ltd 2012-2013 17,00,000 Rose Suppliers P Ltd Durga Enterprises and Shyam Fashion

Motisons Global P Ltd 2012-2013 18,00,000 Rose Suppliers P Ltd Nibu Nagi

Motisons Global P Ltd 2012-2013 19,00,000 Rose Suppliers P Ltd Nibu Nagi and Durga Enterprises

Motisons Global P Ltd 2012-2013 3,50,000 Rose Suppliers P Ltd Durga Enterprises

Motisons Global P Ltd 2012-2013 14,00,000 Rose Suppliers P Ltd Shyam Fashion

Motisons Global P Ltd 2012-2013 18,50,000 Rose Suppliers P Ltd Durga Enterprises

Motisons Global P Ltd 2012-2013 18,00,000 Regent Barter P Ltd Nibu Nagi

Motisons Global P Ltd 2012-2013 18,00,000 Mayukh Vinimay P Ltd Nibu Nagi and Kevilhulie Sunotsu

Motisons Global P Ltd 2012-2013 35,00,000 Mayukh Vinimay P Ltd Shyam Fashion and Durga Enterprises

Motisons Global P Ltd 2012-2013 16,00,000 Mayukh Vinimay P Ltd Durga Enterprises

Motisons Global P Ltd 2012-2013 15,00,000 Mayukh Vinimay P Ltd Shyam Fashion and Durga Enterprises

Motisons Global P Ltd 2012-2013 41,00,000 Mayukh Vinimay P Ltd Shyam Fashion and Durga Enterprises

Motisons Global P Ltd 2012-2013 16,47,727 Evershine Suppliers P Ltd PNB, Axis Bank, Siliguri

Motisons Global P Ltd 2012-2013 36,00,000 Evershine Suppliers P Ltd Durga Enterprises and Shyam Fashion

Motisons Global P Ltd 2012-2013 18,00,000 Evershine P Ltd Durga Enterprises

Motisons Global P Ltd 2012-2013 9,00,000 Regent Dealers P Ltd Nibu Nagi

Motisons Global P Ltd 2012-2013 18,00,000 Regent Dealers P Ltd Durga Enterprises

Motisons Global P Ltd 2012-2013 9,00,000 Regent Dealers P Ltd Kevihulie Sinotsu

Motisons Global Private Limited 2012-2013 28,50,000 Regent Dealers P Ltd Durga Enterprises and Shyam Fashion

Motisons Global Private Limited 2012-2013 18,50,000 Regent Dealers P Ltd Shyam Fashion

Motisons Global Private Limited 2012-2013 22,00,000 Alliance Tradecom P Ltd PNB, Axis Bank Siliguri, Swastik Traders an Global Securities

Motisons Global Private Limited 2012-2013 10,00,000 Alliance Tradecom P Ltd Swastik Traders

Motisons Global Private Limited 2012-2013 35,00,000 Alliance Tradecom P Ltd M/s Swastik Traders , Global Securities Axis Bank Siliguri,

Motisons Global Private Limited 2012-2013 20,00,000 Alliance Tradecom P Ltd Swastik Traders and Global Securities

Motisons Global Private Limited 2012-2013 20,00,000 Alliance Tradecom P Ltd Swastik Traders and Global Securities

ITA No. 492/JP/2017

DCIT, Central Circle-2, Jaipur vs M/s. Bholenath Real Estates Pvt.Ltd. Jaipur

Company A.Y. Amount From Company Cash deposit /Demand draft at 4th Channel per inquiry by investigation wing

Motisons Global Private Limited 2012-2013 16,00,000 Alliance Tradecom P Ltd Durga Enterprises

Motisons Global Private Limited 2012-2013 9,50,000 Alliance Tradecom P Ltd Shyam Fashion

Motisons Global Private Limited 2012-2013 10,00,000 Alliance Tradecom P Ltd Shyam Fashion and Durga Enterprises

Motisons Global Private Limited 2012-2013 3000000 Alliance P Ltd Shyam Fashion and Durga Enterprises

Motisons Global Private Limited 2012-2013 16,00,000 Alliance P Ltd P Ltd Nibu Nagi

Motisons Global Private Limited 2012-2013 19,50,000 Alliance Tradecom P Ltd Durga Enterprises

Motisons Global Private Limited 2013-2014 5050000 Alliance Tradecom P Ltd Shyam Fashion and Durga Enterprises

Total 6,44,97,727

Shivansh Buildcon P Ltd 2012-2013 3,50,000 Evershine Suppliers P Ltd Durga Enterprises, Swastik and Shyam Fash

Total 3,50,000

Grand Total 8,71,97,727

In view of above findings, it is also seen that this cash/DD was deposited at 4th Channel of source/stage. This 2.1.4.7 money came to the hands of some of appellant companies through the six companies assessed in Jaipur. However, on perusal of written submissions and compliance to show cause letter , it is also seen that assessee has not controverted the facts narrated by Sh Santosh Choube, Sh Rajesh Kr Singh and Sh Ajit Sharma and also could not satisfactorily explain the reasons of cash deposits made to those accounts. Therefore, duly considering those facts and evidences( both documentary & oral) gathered during search & post-search operation , addition to the extent of Rs. 8,71,97,727/= is sustained and balance is deleted, details given as under:

Name of Appellant Company ITA No AY Addition Made Addition Addition deleted/ Relief Given by AO Sustained

Motisons Global Pvt. Ltd 753/14-15 2009-10 2,75,00,000 ------------- 2,75,00,000 Motisons Global Pvt. Ltd 754/14-15 2011-12 6,96,50,000 --------------- 6,96,50,000 Motisons Global Pvt. Ltd 767/14-15 2012-13 42,07,29,600 5,94,47,727 36,12,81,873 Motisons Global Pvt. Ltd 755/14-15 2013-14 4,41,00,000 50,50,000 3,90,50,000 Motisons Entertainment (I) Pvt. Ltd 760/14-15 2009-10 3,40,00,000 --------------- 3,40,00,000 Motisons Entertainment (I) Pvt. Ltd 766/14-15 2011-12 1,95,00,000 ---------------- 1,95,00,000 Motisons Entertainment (I) Pvt. Ltd 756/14-15 2012-13 7,78,00,000 1,41,50,000 6,36,50,000 Motisons Buildtech Pvt. Ltd 758/14-15 2009-10 3,03,00,000 --------------- 3,03,00,000 Motisons Buildtech Pvt. Ltd 759/14-15 2012-13 3,68,27,500 82,00,000 2,86,27,500 Godawari Estates Pvt. Ltd 769/14-15 2010-11 2,00,00,000 -------------- 2,00,00,000 Godawari Estates Pvt. Ltd 768/14-15 2012-13 10,30,00,000 -------------- 10,30,00,000 Bholenath Real Estates Pvt Ltd 770/14-15 2009-10 2,90,00,000 --------------- 2,90,00,000 Rainbow Buildcon Pvt. Ltd 757/14-15 2009-10 2,00,00,000 --------------- 2,00,00,000 Shivansh Buildcon Pvt. Ltd 771/14-15 2012-13 90,00,000 3,50,000 86,50,000 Total additions 94,14,07,100 8,71,97,727 85,42,09,373

ITA No. 492/JP/2017 DCIT, Central Circle-2, Jaipur vs M/s. Bholenath Real Estates Pvt.Ltd. Jaipur

It is pertinent to mention here that M/s Mayukh Vinimay Pvt Ltd received share application of Rs. 10,54,95,000/- in AY 2009-10 which was added as income of M/s Mayukh Vinimay Pvt Ltd in AY 2009-10. Thereafter in subsequent years the part of the funds owned by this company was invested in the companies under appeal as under: S.No Name of Company (under your appeal) Assessment Year Amount 1 Motisons Global Pvt Ltd 2012-13 6,93,49,800 2. Motisons Global Pvt Ltd 2013-14 2,24,50,000 3 Motisons Entertainment (India) Pvt Ltd 2012-13 1,55,00,000 Total 10,72,99,800

Further, it is also submitted that addition made by the AO tantamount to double addition. It is also mentioned here that as per Ld AR’s request, appellate proceedings in case of M/s Mayukh Vinimay Pvt Ltd have been kept in abeyance till the disposal of appeal by Hon’ble ITAT. In view of aforementioned findings, now additions made by the AO are being discussed with respect to grounds of appeal raised by the respective assessee in para below. ‘’ Section 68 of the Act provides regarding any sum found credited in the books of an assesse maintained and explanation offered by the assessee is not satisfactory in the opinion of the AO then such sum credited be charged to income-tax as the income of the assessee of that previous year. The Section 68 reads as under:-

Section 68 – Cash Credits: 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.’’

Thus the sum so received by assessee towards share application and share premium could have been taxed as income u/s 68 of the Act. However, the AO has not invoked provisions of sec 68 of the Act. The AO invoked the provisions of sec 56(1) of the Act which reads as under:- Income from other sources. ‘’56. (1) “Income of every kind which is not to be excluded from the total income under the Act shall be chargeable to income tax under the head.” Income from other sources’’, if it is not chargeable to income tax under any of the heads specified in section 14, items A to E.’’ The provisions of Section 56(1) the Act can be invoked to tax income of every kind which is not chargeable to tax under any head specified in Section 14 from Item No. A to E is chargeable under the head ‘Income from other sources’’ by the provisions of section 56 of the Act. . Therefore, provisions of sec 56(1) are not applicable. Further the amended provisions of sec 56 (2) of the I.T. Act, 1961 specify the various income to be assessed under this section. The premium on shares has been included by provision of sec 56(2)(viiib)of the Act w.e.f. 01-04-2014 which is reproduced as under:

ITA No. 492/JP/2017 DCIT, Central Circle-2, Jaipur vs M/s. Bholenath Real Estates Pvt.Ltd. Jaipur

‘’56(2) In particular, and without prejudice to the generality of the provisions of sub-section (1), the following incomes, shall be chargeable to income tax under the head ‘’Income from other sources’’ namely:- (i) dividends (ia) to (viia)… (viib) Where a company, not being a company in which the public are substantially interested, receives, in any previous year, from any person being a resident, any consideration for issue of shares that exceeds the face value of such shares, the aggregate consideration received for such shares as exceeds the fair market value of the shares:’’

This has also been included in the definition of income u/s 2(24)of the Act w.e.f. 01- 04-2013. The relevant portion reads as under:-

‘’(xvi) any consideration received for issue of shares as exceeds the fair market value of the share referred to in clause (viib) of sub-section (2) of Section 56;]’’ To tax the income under the Act, it must come under the definition of income as provided u/s 2(24) of the I.T. Act, 1961. There were amendments in sec 2(24) of the Act and in section 56(2) of the Act w.e.f. 01-04-2013 are not applicable to A.Y. under consideration. By these amended provisions, any consideration received for issue of shares that exceeds the face market value of such shares the aggregate consideration received for such shares as exceeds the fair market value of the shares shall be taxable as per clause (viib) of sub-section 2 of section 56 of the Act. The CBDT vide Circular No. 3 of 2012 dated 12-06-2012 has also mentioned that provision of section 56(2)(viib) will be applicable for A.Y. 2013-14. Thus the relevant portion of CBDT Circular is reproduced is as under:-

‘Share premium in excess of fair market value to be treated as income In the Finance Bill, 2012, it had been proposed [section 56(2), as sub-clause [(viib)] that in case of a company, not being a company in which the public are substantially interested, which receives, in any previous year, from any person being a resident, any consideration for issue of shares and the consideration received for issue of such shares exceeds the face value of such shares, then the aggregate consideration received for such shares as exceeds the fair market value of the shares shall be chargeable to income tax. An exemption was provided in a case where the consideration for issue of shares is received by a venture capital undertaking from a venture capital company or a venture capital fund. (i) It has now been further provided that such excess share premium is included in the definition of "income" under sub-clause (xvi) of clause (24) of section 2. (ii) Considering that the proposed amendment may cause avoidable difficulty to investors who invest in start-ups where the fair market value may not be determined accurately, it is proposed to provide an exemption to any other class of investors as may be notified by the Central Government. These amendments will take effect from 1st April, 2013 and will, accordingly, apply in relation to the assessment year 2013-14 and subsequent assessment years.’’

ITA No. 492/JP/2017 DCIT, Central Circle-2, Jaipur vs M/s. Bholenath Real Estates Pvt.Ltd. Jaipur

The provisions of sec 56(2)(viib) of Income-tax Act, 1961 are applicable w.e.f. 1st April, 2013 and will accordingly apply in relation to Assessment Year 2013-14 and subsequent Assessment Years. The income as mentioned in section 56(2)(viib) is included in definition of section 2(24) of the Act w.e.f. 01-04-2013. Therefore, the provisions of these sections cannot be made applicable prior to that A.Y. 2013-14. It is pertinent to note that the ld. CIT(A) had issued the show cause notice to the assessee to tax the share capital under section 68 of the I.T. Act, 1961 as against section 56(1) applied by the AO. However, he had not made any addition under section 68 of the Act. His observation on this issue is in para 2.1.4.6 which reads as under:- ‘’2.1.4.6 Therefore, in view of the findings of Hon'ble Jurisdictional High Court, the identity, creditworthiness and genuineness of transaction of these companies cannot be held as doubtful and addition by applying the provisions of sec 68 of the Act cannot be upheld.’’’ The Revenue has not preferred appeal against this findings the ld. CIT(A). It is also pertinent to note that AO has made whole addition by invoking section 56 of the Act, hence the amended provision w.e.f. 01-04-2013 are applicable only on shares premium received on fair market value. In view of these facts, circumstances of the case and the case laws relied on by the ld.AR of the assessee (supra), it is clear that share premium received cannot be considered as income for the year under consideration by invoking provisions of section 56(1) of the Act. Therefore, in our considered view, the ld. CIT(A) has rightly deleted the addition of Rs. 3,03,00,000/- and we concur with his findings on the issue in question Thus the Revenue’s appeal in ITA No. 481/JP/2017 is dismissed.’’

Since the issue raised by the Revenue in the present appeal is same as

decided in the appeal of the Revenue in ITA No.481/JP/2017for the

Assessment Year 2009-10 in the case of ACIT, Central Circle-2, Jaipur vs

Motisons Buildtech Pvt. Ltd Jaipur shall apply mutatis mutandis in this

appeal of Revenue also. Thus solitary ground of the Revenue’s appeal in

ITA No.492/JP/2017 for Assessment Year 2009-10 is dismissed.

ITA No. 492/JP/2017 DCIT, Central Circle-2, Jaipur vs M/s. Bholenath Real Estates Pvt.Ltd. Jaipur

3.0 In the result, the appeal filed by the Revenue is dismissed Order pronounced in the open Court on 02 -11-2017. Sd/- Sd/- ¼dqy Hkkjr½ ¼HkkxpUn½ (KUL BHARAT) (Bhagchand) U;kf;d lnL; /Judicial Member ys[kk lnL;@Accountant Member

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