M/S EVAN VINIMAY PVT. LTD.,AGRA vs. PR, C.I.T.-4, KOLKATA

1 ITA No. 235/Kol/2020 Evan Vinimay Pvt. Ltd., AY 2012-13 IN THE INCOME TAX APPELLATE TRIBUNAL “A” BENCH, KOLKATA (सम�)�ी पी. एम.जगताप,उपा�� एवं �ी ए.टी. वक�,�ाियक सद�) [Before Shri P.M. Jagtap, Vice President (KZ) & Shri A. T. Varkey, JM] I.T.A. No. 235/Kol/2020 Assessment Year: 2012-13

Evan Vinimay Pvt. Ltd. Vs. PCIT-4, Kolkata (PAN:AACCE 7545 H) Appellant Respondent

Date of Hearing 29.11.2021 Date of Pronouncement 07.01.2022 Appeared for the Appellant Shri Miraj D. Shah, A.R Appeared for the Respondent Shri Devi Sharan Singh, CIT, DR

ORDER Per Shri A.T.Varkey, JM This is an appeal preferred by the assessee company against the action of the Ld. Pr. CIT-4, Kolkata passed u/s. 263 of the Income-tax Act, 1961 (hereinafter referred to as the “Act”) dated 12.03.2019 for AY 2012-13.

2 ITA No. 235/Kol/2020 Evan Vinimay Pvt. Ltd., AY 2012-13 3. Brief facts of the case are that the assessee company filed its return of income for AY 2012-13 on 14-09-2012 declaring total income of Rs. 3,506/-. The case was selected for scrutiny u/s. 143(3) of the Act which was completed on 21.03.2015 determining the total income at Rs.20,41,03,510/- making an addition of Rs.20,41,00,000/- u/s. 68 of the Act was passed by the AO (hereinafter referred to as the “first original assessment order’) was passed by the AO (hereinafter referred to as the ‘First AO’). Thereafter, the Ld. Pr. CIT-4, Kolkata (hereinafter referred to as ‘the first Ld. Pr. CIT) by order dated 02.02.2016 (hereinafter the first revisional order u/s. 263 of the Act) has set aside the first assessment order with the direction to examine the books of account of the assessee company as well as the books of account of share subscriber companies and to examine the source of share application money, identity of the investors and its genuineness after giving the assessee proper opportunity of being heard. Thereafter, the Ld. Pr. CIT-4, Kolkata passed a specific direction which is reproduced as under: “Considering the facts and circumstances of the case as discussed above and as per the submission of the assessee, the assessment order was passed without making inquiries or verifications which should have been made and therefore the order passed on 21.03.2015 stands erroneous insofar as prejudicial to the interest of the revenue and is set aside de novo with a direction to the AO to carry out proper examination of the books of accounts and bank accounts of assessee as well as investors. AO is also directed to examine the source of share application, identity of investor and its genuineness. The assessment proceedings may be initiated at the earliest and to be completed without waiting time barring date. The AO must provide sufficient opportunity of being heard to the assessee in order to meet natural justice, equity and fairness.”

3 ITA No. 235/Kol/2020 Evan Vinimay Pvt. Ltd., AY 2012-13 “In my considered opinion, this is a case of lack of enquiry on the part of the AO. The decision on this issue could be taken only after examining and verifying the facts/submission of the AR on this score. Not collecting the full facts and not taking enquiry to logical end which could enable AO to take decision based on the totality of facts makes this order erroneous in so far as prejudicial to the interest of revenue. After having considered the position of law and facts and circumstances of the instant case, I am of the considered opinion that the assessment order passed by the A.O. is erroneous in so far as it is prejudicial to the interest of revenue in accordance with the Explanation 2(c) below section 263 (1) of the Act. Accordingly, the issue is set aside to the table of A.O. The A.O on the issue as outlined in para-2 above is directed to provide reasonable opportunity to the assessee company to produce documents & evidences which it may choose to rely upon for substantiating its own claim. The AO is further directed to adjudicate the said issue de novo and pass a fresh assessment order in accordance with the relevant provisions of law.”

Aggrieved by the aforesaid action of the Ld. Pr. CIT the assessee is before us challenging the action of the Second Ld. Pr. CIT by mainly preferring the legal issue which is against the action of the Ld. Pr. CIT to have usurped the jurisdiction (revisional) u/s. 263 of the Act without fulfilling the essential condition precedent as laid down in section 263 of the Act. Since it is a legal issue and if it is decided in favour of the assessee it goes to the root of the matter, therefore, this issue is taken up first for adjudication.

4 ITA No. 235/Kol/2020 Evan Vinimay Pvt. Ltd., AY 2012-13 out proper examination of the books of account of the investor, (iii) to examine the source of share application, (iv) to examine the identity of the investor and the AO to examine the genuineness of the share transactions. According to Ld. AR, all the aforesaid directions of the first Ld. Pr. CIT were obeyed by the second AO while passing the second assessment order dated 23.06.2016 which order the Ld. Pr. CIT has interfered with on the specious ground of lack of enquiry on the part of AO when the AO had conducted proper enquiry on the share capital and premium. In order to show that second AO has conducted enquiry, Shri Miraj D Shah brought to our notice that the second AO had issued notice u/s. 142(1) of the Act dated 17.03.2016 which fact is discernible from the certified copy of the order sheet entry of AO and that on 19.05.2016 he issued summons u/s 131 of the Act placed at page 29 of the paper book. Thereafter, he again drew our attention to the order sheet of the assessment proceedings which is placed at pages 29 to 32 of the paper book wherein the AO has recorded that the director of share subscribers M/s. Lilygold Dealtrade Pvt. Ltd. has appeared on 31.06.2016 before him along with regular books of account and copy of bank statement in response to the summons u/s. 131 of the Act and that he has verified the transaction and in that process has recorded the statement of Smt. Shalini Jain, director of M/s. Lilygold Dealtrade Pvt. Ltd. Likewise, he has recorded the fact of appearances of respective directors of the share subscribing company viz., M/s. Graceful Sales Pvt. Ltd. and on 01.06.2016 the following directors of the share subscribing companies who came along with their books of account pursuant to the summon of AO u/s. 131 of the Act and the AO had acknowledged to have perused the copy of bank statements of all of these companies and in that process has verified their share transactions with the assessee company and the AO has recorded in the order sheet that the directors of all the share subscribing companies’ statements were recorded by him. On 1.06.2016 the directors of the following companies appeared: (i) M/s Approach Dealers Pvt. Ltd. (ii) M/s Alex Tradecom Pvt. Ltd., (iii) M/s Birdhi Distributors Pvt. Ltd. (iv) Cherry Marcom Pvt. Ltd (v) M/s Trends Deal Mark Pvt. Ltd. (vi) Circular Tie Up Pvt. Ltd. and

5 ITA No. 235/Kol/2020 Evan Vinimay Pvt. Ltd., AY 2012-13 (viii) Vayu Market Pvt. Ltd.

6 ITA No. 235/Kol/2020 Evan Vinimay Pvt. Ltd., AY 2012-13 to Shri Miraj D Shah, if this practice is allowed, there will be no end to the assessment proceedings, since if the next i.e. third or fourth Pr. CIT does not like the next assessment orders being passed by an AO under his jurisdiction, in the way he thought it as proper enquiry to have been conducted in a given case or subject matter, then he will interfere and ask the AO to re-do the assessment again and again, which is not permissible and that is exactly why the Parliament in its wisdom has brought in safe- guards, restrictions & conditions precedent to be satisfied strictly before assumption of revisional jurisdiction. According to Shri Miraj D Shah, the conditions precedent is that the Ld. Pr. CIT should find that assessment order framed by the AO as erroneous in so far as prejudicial to the Revenue. According to Shri Miraj D Shah, the Second Ld. Pr. CIT without satisfying this condition precedent has invoked the revisional jurisdiction (second time), so all his actions are ab initio void. The Ld. AR also pointed out that only from the next AY i.e. AY 2013-14 i.e. with effect from 01.04.2013, the Parliament has inserted sub-clause (vii) (b) in sub-section(2) to section 56 of the Act by which the share premium could have been ascertained and brought to tax. The Ld. AR also pointed out that only from AY 2013-14, the AO when considering section 68 of the Act could have even looked for the second source of the share capital & premium. In this assessment year (AY 2012-13) the onus on the assessee in respect of credit found in the books was confined to prove the identity, creditworthiness and genuineness of the Source i.e. only the first source not the second source also. And since that was the requirement of law, according to Ld AR, when the assessee face the scrutiny proceedings before the AO, he is bound to satisfy the AO as per the law in force during this relevant assessment year (AY 2012-13) and it cannot be expected from him/assessee to be a clairvoyant to anticipate the requirement of law for future years and satisfy those also before the AO in the present AY, when there is no such requirement of law that the assessee must be aware of the source of source of the share-applicant at the time when he collects the share capital itself and according to him, if it is insisted then it is unfair and unreasonable. According to Ld. AR, when the law was only that assessee need to be aware of first source only then the AO could not have gone and verified beyond the source of the share applicants from whom the assessee had received the share capital. So when the requirement of law is only that assessee must ascertain that the share-applicant, who proposed to invest in assessee’s

7 ITA No. 235/Kol/2020 Evan Vinimay Pvt. Ltd., AY 2012-13 company’s share capital has proper identity and creditworthiness and is capable of investing in the assessee, then the AO in turn can verify the identity, creditworthiness and genuineness of the share subscriber from whom the assessee received the share capital and verify whether the identity is proper, whether the transaction took place through banking channel, etc. and the creditworthiness of the share applicant etc. According to Ld AR, if the AO or even the Ld. Pr. CIT expecting/asking the assessee to find out the source of source of share-applicant, when the Law does not in this AY requires assessee to fulfill, then it would be quiet unreasonable, harsh and unfair practice, which action is against the Rule of Law, which is a basic feature of the Constitution of India. Since the law was that assessee should furnish the source of share capital it received in this A.Y, assessee by producing all documents in respect of share-applicants had discharged its onus, then burden shifts to the shoulder of AO to find fault with the documents or test the veracity of the documents. Despite the law was as such, then also AO in the second round, pursuant to the specific direction of the First Ld. Pr. CIT-4, issued summons u/s. 131 of the Act to all the directors of share applicants/subscribers. Pursuant to the summons, all the directors of the nine (9) share subscribing companies have appeared before the AO and the AO has examined them and verified their respective books of account and examined the share transaction with assessee company as well as their source of income for applying for the share capital and premium, thus it was pointed out by the Ld AR that the source of source was also disclosed before the second AO and also furnished inter-alia information that they are having PAN and regularly filing tax returns. Therefore, according to Ld. AR, the AO has conducted enquiries which fact is crystal clear from perusal of the order sheet of second AO placed at page 29-32 of PB-I wherein the AO has recorded these facts and, therefore, order of the AO who is a quasi-judicial authority vested with the power to assess the income of an assessee cannot be termed as erroneous for lack of enquiry. Further according to Ld. AR, the view of the second AO on the facts of the case is a plausible view and the Second Ld. Pr. CIT has not termed the view of second AO to be unsustainable in Law. So the Ld AR contented that the very action of invoking of jurisdiction u/s. 263 of the Act by the Second Ld. Pr. CIT is bad in law and so has to be quashed.

8 ITA No. 235/Kol/2020 Evan Vinimay Pvt. Ltd., AY 2012-13 7. Per contra, the Ld CIT/DR Shri Devi Sharan Singh vehemently opposed the contention of the Ld. AR and contended that the Second Ld. Pr. CIT had the jurisdiction to interfere by exercising his jurisdiction u/s. 263 of the Act and pointed out to us that the words used in Section 263 does not bar in any way second or third or fourth exercise of revisional jurisdiction, if he finds the assessment order/re- assessment order of AO is erroneous in so far as prejudicial to the Revenue. And also he pointed out that the first Ld. Pr. CIT while setting aside the original/first assessment order has ordered the Second AO to frame re-assessment/second assessment de- novo meaning that AO was given full liberty to enquire on all issues including share capital and premium collected by assessee. So according to Ld. CIT/DR the contention of Ld. AR that the second Ld. Pr. CIT cannot have directed fresh assessment on share capital & premium is devoid of merit and no merger took place as contended by the Ld. AR, so the doctrine of merger did not take place in this case because the Ld. Pr. CIT (First) has directed de novo assessment. So according to Ld. CIT DR, the Second Ld. Pr. CIT’s impugned action is correct since the AO’s second assessment order was erroneous for lack of enquiry. And, therefore, he does not want us to interfere.

9 ITA No. 235/Kol/2020 Evan Vinimay Pvt. Ltd., AY 2012-13 pleased to accept the assessee’s transaction in respect of collection of share capital of Rs. 43,00,000/- and share premium of Rs. 19,98,00,000/- total to the tune of Rs. 20,41,00,000/- and made addition of only Rs. 55,994/- u/s. 14A of the Act. Thereafter, the new incumbent in the office of Pr. CIT-4, Kolkata issued show cause notice dated 24-12-2018 (hereinafter referred to as the Second SCN) and conveyed his intention to revise the re- assessment/second assessment order of the second AO dated 23-06-2016. After hearing the assessee, the second Ld. Pr. CIT has set aside the said re-assessment/second assessment order of the AO dated 23-06-2016, wherein the Second Ld. Pr. CIT, Kolkata-4, Kolkata vide order dated 12-03-2019 directed the AO to pass a fresh assessment order.

10 ITA No. 235/Kol/2020 Evan Vinimay Pvt. Ltd., AY 2012-13 incorrect application of law; or (iii)Assessing Officer's order is in violation of the principle of natural justice; or (iv) if the order is passed by the Assessing Officer without application of mind; (v) if the AO has not investigated an issue before him; (because AO has to discharge dual role of an investigator as well as that of an adjudicator) then in aforesaid an event then the assessment order passed by the Assessing Officer can be termed as an erroneous order. Coming next to the second limb, which is required to be examined is as to whether the actions of the AO can be termed as prejudicial to the interest of Revenue. When this aspect is examined one has to understand what is prejudicial to the interest of the revenue? The Hon'ble Supreme Court in the case of Malabar Industries (supra) held that this phrase i.e. "prejudicial to the interest of the revenue" has to be read in conjunction with an erroneous order passed by the Assessing Officer. Their Lordship held that it has to be remembered that every loss of revenue as a consequence of an order of Assessing Officer cannot be treated as prejudicial to the interest of the revenue. When the Assessing Officer adopted one of the courses permissible in law and it has resulted in loss to the revenue, or where two views are possible and the Assessing Officer has taken one view with which the Pr. CIT/CIT does not agree, it cannot be treated as an erroneous order prejudicial to the interest of the revenue "unless the view taken by the Assessing Officer is unsustainable in law."

“Considering the facts and circumstances of the case as discussed above and as per the submission of the assessee, the assessment order was passed without making inquiries or

11 ITA No. 235/Kol/2020 Evan Vinimay Pvt. Ltd., AY 2012-13 verifications which should have been made and therefore the order passed on 21.03.2015 stands erroneous insofar as prejudicial to the interest of the revenue and is set aside de novo with a direction to the AO to carry out proper examination of the books of accounts and bank accounts of assessee as well as investors. AO is also directed to examine the source of share application, identity of investor and its genuineness. The assessment proceedings may be initiated at the earliest and to be completed without waiting time barring date. The AO must provide sufficient opportunity of being heard to the assessee in order to meet natural justice, equity and fairness.”

12 ITA No. 235/Kol/2020 Evan Vinimay Pvt. Ltd., AY 2012-13 assessment order erroneous in so far as prejudicial to the interest of the revenue. The second Ld. Pr. CIT also opines that the AO’s order dated 23-06-2016 of the AO (second assessment/re-assessment order) attracts Explanation 2(c) below section 263(1) of the Act (supra), there the order is erroneous by deeming fiction of law.

13 ITA No. 235/Kol/2020 Evan Vinimay Pvt. Ltd., AY 2012-13 capital received by assessee was not verifiable from documents. Since, all the share capital were received from companies duly registered with ROC, have Income Tax Permanent Account No. and are filling regular returns of income which are enough one to prove identity of share applicants. In respect of creditworthiness of share applicants, all share applicants had sufficient funds in form of share capital and reserves which were duly reflected in their audited financial statements. Further, regarding genuineness of transactions, share capital had been raised through proper credits in the bank for amount received from various shareholders from time to time and there was no cash deposits in accounts of any of the share applicants. (e) In course of assessment proceedings. summons u/s.131 of the I T Act was issued and various details/documents were requested to furnish apart from personal appearance. In this respect, all requisite details/documents were duly submitted before the A.O and due to illness of one director; A.O was requested for providing another dale of hearing for personal appearance. However, without considering the assessee's request assessment order was passed. Even, show cause notice in respect of points of additions to be made was also given, which is also against the principal of natural justice, equity and fairness.”[Emphasis given]

14 ITA No. 235/Kol/2020 Evan Vinimay Pvt. Ltd., AY 2012-13 without any adverse material to rebut the evidence submitted by the assessee/share subscribers. The First Ld. Pr. CIT found fault with the AO for not bothering to examine the written submission as well as the documents filed by the assessee or to bring on record anything against the assessee and according to him, the AO has simply placed on record all the documents and relied on certain judicial precedents and treated the share capital as unexplained cash credit. Therefore, according to the First Ld. Pr. CIT the first original assessment order framed u/s. 143(3) dated 21-03-2015 was against the principle of natural justice and, therefore, he found it fit to order denovo assessment and gave specific direction to enquire in respect of share capital & premium collected by assessee.

15 ITA No. 235/Kol/2020 Evan Vinimay Pvt. Ltd., AY 2012-13 v) The AO to complete the assessment at the earliest without waiting for the time barring date.

16 ITA No. 235/Kol/2020 Evan Vinimay Pvt. Ltd., AY 2012-13 draw any adverse inference against the share capital and premium collected by the assessee after carrying out the aforesaid exercise as directed by the First Ld. Pr. CIT to him. This exercise carried out by the second AO while framing the second assessment/re-assessment has been faulted as a case of lack of enquiry by the second Ld. Pr.CIT and the precise question is whether the action of second AO in respect of share capital and premium collected by the assessee can be termed as a case of lack of enquiry.

Section 68: Where any sum is found credited in the books of an assessee maintained for any previous year, and the assessee offers no explanation about the nature and source thereof or the explanation offered by him is not, in the opinion of the Assessing Officer,

17 ITA No. 235/Kol/2020 Evan Vinimay Pvt. Ltd., AY 2012-13 satisfactory, the sum so credited may be charged to income tax as the income of the assessee of that previous year: Provided that where the assessee is a company (not being a company in which the public are substantially interested), and the sum so credited consists of share application money, share capital, share premium or any such amount by whatever name called, any explanation offered by such assessee company shall be deemed to be not satisfactory, unless- (a) The person, being a resident in whose name such credit is recorded in the books of such company also offers an explanation about the nature and source of such sum so credited; and (b) Such explanation in the opinion of the Assessing officer aforesaid has been found to be satisfactory:

Provided further that nothing contained in the first proviso shall apply if the person, in whose name the sum referred to therein is recorded, is a venture capital fund or a venture capital company as referred to in clause (23FB) of section 10].

18 ITA No. 235/Kol/2020 Evan Vinimay Pvt. Ltd., AY 2012-13 value), which for the purpose of complete understanding of the law though not applicable is reproduced as under:- Section 56(2)(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:

Provided that this clause shall not apply where the consideration for issue of shares is received- (i) By a venture capital undertaking from a venture capital company or a venture capital fund, or (ii) By a company from a class or classes of persons as may be notified by the Central Government in this behalf. Explanation- For the purposes of this clause, (a) The fair market value of the shares shall be the value- (i) As may be determined in accordance with such method as may be prescribed, or (ii) As may be substantiated by the company to the satisfaction of the Assessing Officer based on the value, on the date of issue of shares, of its assets, including intangible assets being goodwill, know-how, patents, copyrights, trademarks, licences, franchises or any other business or commercial rights of similar nature. Whichever is higher: (b) Venture capital company, venture capital fund, and venture capital undertaking shall have the meanings respectively assigned to them in clause (a), clause (b) and clause (c) of Explanation to clause (23FB) of section 10]”. ********1` 28. So we note that in this assessment year before us i.e. AY 2012-13, the law in force was that if any sum is found credited in the books of an assessee in a financial year and, if the AO asks for the explanation of assessee in respect of the nature and source thereof, then the assessee is duty bound to explain the nature and source of the credit entry in the books and if the assessee fails to explain or if the AO is not satisfied, he may charge to income tax the sum so credited. So, the assessee is bound to explain before the AO the nature and source of share capital, i.e. the identity, creditworthiness and genuineness of the share capital. In this AY 2012-13, the assessee is bound to know about the share applicants

19 ITA No. 235/Kol/2020 Evan Vinimay Pvt. Ltd., AY 2012-13 who wish to invest share capital & premium the following i.e. their identity, whether they have the financial capacity (creditworthiness) and whether they are genuine investors in their company (assessee). In this AY 2012-13, the assessee is not bound by law at the time of collection of share capital to ask the share-applicants from where it is getting the money found to invest in the assessee’s company. And we also note that share premium can be taxed if it exceeds the fair market value only from next AY i.e. AY 2013-14 and not in this A.Y because section 56(2)(viib) has been inserted Section 56(2)(viib) has been inserted (treating premium in excess of fair value as an income from Other Source) with effect from assessment year 2013-2014 and are not applicable in the year under assessment, i.e. till A.Y 2012-13, there was no law/provisions in relation to the amount of premium at which the shares should have been issued. It has to be borne in mind that in the subsequent years too the law has not treated excess premium as a cash credit. It has merely deemed the premium received as an Income from other Source instead of a Capital Receipt as it was treated in earlier years . For coming to such a conclusion let us discuss few case laws: (A) Coming to the share premium, it is noted that this Tribunal in ITA-2411/KOL/2017 in the case of Kanchan Plywood Products Pvt. Ltd. –vs.- ITO vide order dated 01.05.2019 has taken note that - Per contra, the Learned DR vehemently supported the order of the authorities below and wondered us to how the assessee-company issued share to three Private Limited Companies when its face value of Rs. 10/- at a premium of Rs. 990/-. According to the Learned DR, the assessee-company had a meager return of income in the year under consideration and therefore, question of any person subscribing such high premium to the shares of the assessee-company cannot be believed. A:cording to the Learned DR when the income of the assessee is meager, the action of the share subscribing companies in giving astronomical prices for the shares is against preponderance of probabilities and cited the decision of the Hon'ble Supreme Court as well as Delhi High Court in CIT vs N .R. Portfolio Pvt. Ltd. Further, according to Ld. AR in the case of unlisted companies, it is common knowledge that premium fixed is a matter of mutual agreement and ITAT Mumbai in the case of Gagandeep Infrastructure Pvt. Ltd., (supra) has held 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 shareholders whether they want to subscribe to such a heavy premium. And the aforesaid view of the ITAT has been upheld by the Hon'ble Bombay High Court order dated 20th March 2017. Further the Hon'ble High Court observed as under- “(i) We find that the proviso to Section 68 of the Act has been introduced by the Finance Act 2012 with effect from 1stApril, 2013. Thus it would be effective only from the Assessment Year 2013-14 onwards and not for the subject Assessment Year. In fact, before the Tribunal, it was not even the case of the Revenue that Section 68 of the Act as in force during the subject years has to be read/understood as though the proviso added subsequently effective only from 1stApril, 2013 was its normal meaning. The Parliament did not introduce to Section 68 of the Act with retrospective effect nor does the proviso so introduced 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

20 ITA No. 235/Kol/2020 Evan Vinimay Pvt. Ltd., AY 2012-13 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 has found satisfied. (ii) 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 CIT vis. Lovely Exports (P) Ltd. 317 ITR 218 in the context to the pre-amended Section 68 of the Act has held that where the Revenue urges that the amount of share application money has been received from bogus shareholders then it is for the Income Tax Officer to proceed by reopening the assessment of such shareholders and assessing them to tax in accordance with law. It does not entitle the Revenue to add the same to the assessee's income as unexplained cash credit. "

(B) The Tribunal Mumbai Bench in the case of DCIT vs. M/s. Alcon Biosciences (P) Ltd., ITA No. 1946/M/2016, Order dated 28.02.2018 held as under· "As regards the AOs observation with regard to the issue of shares at a face value of Rs.10/- issued at a premium of Rs.990 per share, we find that there is no merit in the findings of the AO for the reason that the issue of shares at a premium and subscription to such shares is within the knowledge of the company and the subscribers to the share application money and the AO does not have any role to play as long as the assessee has proved genuineness of transactions. We further notice that the AO cannot question issue of shares at a premium and also cannot bring to tax such share premium within the provisions of section 68 of the Act, before (supra) held that Proviso inserted to section 68 is prospective in nature. Hon'ble M.P. High Court in the case of CIT vs. Chain House International (P) Ltd., order dated 07.08.2018, decision reported in 98 taxmann.com47 has held at para 52 as under- "Issuing the share at a premium was a commercial decision. It is the prerogative of the Board of Directors of a company to decide the premium amount and it is the wisdom of shareholder whether they want to subscribe the shares at such a premium or not. This was a mutual decision between both the companies. In day to day market, unless and until, the rates if fixed by any Govt. Authority or unless there is any restriction on the amount of share premium under any law, the price of the shares is decided on the mutual understanding of the parties concerned ..”.

(C) The Mumbai Tribunal in the case of ACIT-l(l) vs. M/s. Gagandeep Infrastructure Pvt. Ltd. the ITAT has held as under:

"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 receipt 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 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. 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 Lovely Exports Ltd. 317 ITR 218. "

21 ITA No. 235/Kol/2020 Evan Vinimay Pvt. Ltd., AY 2012-13 (D) ITA-2270/KOL/2016 –Trend Infra Developers Pvt. Ltd. The assessee specifically argued before the ld. CIT(A) that the allotment of shares at a premium cannot be considered as sham or income of the assessee. It was pleaded at a preliminary level that the receipt of share capital and share premium is on capital account and that the same cannot be subject to tax as income. Specific submissions were also made in the context of introduction of section 56(2)(viib) inserted by the Finance Act, 2012 with effect from 01.04.20l3 which reads as under:

"(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:

Provided that this clause shall not apply where the consideration for issue of shares is received- (iii) By a venture capital undertaking from a venture capital company or a venture capital fund, or (iv) By a company from a class or classes of persons as may be notified by the Central Government in this behalf. Explanation- For the purposes of this clause, (c) The fair market value of the shares shall be the value- (iii) As may be determined in accordance with such method as may be prescribed, or (iv) As may be substantiated by the company to the satisfaction of the Assessing Officer based on the value, on the date of issue of shares, of its assets, including intangible assets being goodwill, know-how, patents, copyrights, trademarks, licences, franchises or anyother business or commercial rights of similar nature, whichever is higher: (d)Venture capital company, venture capital fund, and venture capital undertaking shall have the meanings respectively assigned to them in clause (a), clause (b) and clause (c) of Explanation to clause (23FB) of section 10]”.

It was pleaded that the aforesaid provisions cannot be made applicable for the year under appeal. Accordingly, it was argued that the issuance of shares of premium cannot be brought to tax under any section of the Income Tax Act up to assessment year 2012- 13.

We find that the reliance placed by the Id. AR in the decision of Hon'ble Bombay High Court in Pr. CIT vs. Apeak Infotech reported in 88 Taxmann.com 695 dt 08.06.2017 wherein the question raised before the Hon'ble Bombay High Court are as under:

22 ITA No. 235/Kol/2020 Evan Vinimay Pvt. Ltd., AY 2012-13

A. Whether on the facts and circumstances of the case and in law, the Tribunal was correct to uphold the decision on Commissioner of Income Tax (Appeals) that the share premium received by the assessee-company cannot be taxed under Section 68 of the Act ignoring the ratio laid down by this Court in its decision reported in the case of Major Metals Ltd. vs. Union of India [2013J 3591TR 450 (Bom)?

B. Whether on the facts and circumstances of the case and in law, the Tribunal as well as the Commissioner of Income Tax (Appeals) was right in deleting addition made by the Assessing Officer, by holding that the share premium receipt is capital in nature?"

The Hon'ble Court held as under:

Regarding Question A:

(a) The issue raised by the Revenue in this question is to bring to tax the share premium received under section 68 of the Act. We find that the issue of bringing the share premium to tax under section 68 of the Act was not an issue which was urged by the appellant Revenue before the Tribunal. The only issue which was urged before the Tribunal as recorded in paraJ J of the impugned order is the addition of share capital and share application money in the hands of the assessee as income under section 28(iv) of the Act. We find that the Commissioner of Income-tax (Appeals) did consider the issue of applicability of section 68 of the Act and concluded that it does not apply. The Revenue seems to have accepted the same and did not urge this issue before the Tribunal. Mr. Bhoot, learned counsel appearing for the Revenue also fairly states that the issue of applicability of section 68 of the Act was not urged by the Revenue before the Tribunal.

(b) It is a settled position in law as held by this court in CIT v. Tata Chemicals Ltd. [2002] 122 Taxman 6431 256 ITR 395 (Bom.) that in an appeal under section 260A of the Act, the High Court can only decide a question if it had been raised before the

23 ITA No. 235/Kol/2020 Evan Vinimay Pvt. Ltd., AY 2012-13 Tribunal even if not determined by the Tribunal. Therefore, no occasion to consider the question as prayed for arises.

(c) In any case, we may point out that the amendment to section 68 of the Act by the addition of proviso thereto took place with effect from April 1, 2013. Therefore, it is not applicable for the subject assessment year 2012-13. So for as the pre-amended section 68 of the Act is concerned, the same cannot be invoked in this case, as evidence was led by the respondents-assessees before the Assessing Officer with regard to identity, capacity of the investor as well as the genuineness of the investment. Therefore, admittedly, the Assessing Officer did not invoke section 68 of the Act to bring the share premium to tax. Similarly, the Commissioner of Income- tax (Appeals) on consideration of facts, found that section 68 of the Act cannot be invoked. In view of the above, it is likely that the Revenue may have taken an informed decision not to urge the issue of section 68 of the Act before the Tribunal.

(d) We may also point out that decision of this court in Major Metals Ltd. v. Union of India [20121 19 taxmann.com 1761207 Taxman 185/[20131 359 ITR 450 Bom. proceeded on its own facts to uphold the invocation of section 68 of the Act by the Settlement Commission. In the above case, the Settlement Commission arrived at a finding of fact that the subscribers to shares of the assessee-company were not creditworthy inasmuch as they did not have financial standing which would enable them to make an investment of Rs. 6,00,00,000 at premium at Rs. 990 per share. It was this finding of the fact arrived at by the Settlement Commission which was not disturbed by this court in its writ jurisdiction. In the present case the person who have subscribed to the share and paid share premium have admittedly made statement on oath before the Assessing Officer as recorded by the Tribunal. No finding in this case has been given by the authorities that shareholder/share applicants were unidentifiable or bogus.

(e) In the above view Question No. A is not being entertained in view of the decision in Tata Chemical Ltd. (supra). Accordingly, the question (A) is not entertained.

24 ITA No. 235/Kol/2020 Evan Vinimay Pvt. Ltd., AY 2012-13 Regarding Question B :

(a) We find that the impugned order of the Tribunal upheld the view of the Commissioner of Income-tax (Appeals) to hold that share premium is capital receipt and therefore, cannot be taxed as income. This conclusion was reached by the impugned order following the decision of this court in Vodafone India Services (P.) Ltd. (supra) and of the apex court in G. S. Homes and Hotel (P.)Ltd. (supra). In both the above cases the court has held that the amount received on issue of share capital including premium are on capital account and cannot be considered to be income.

(c) It is further pertinent to note that the definition of income as provided under section 2(24) of the Act at the relevant time did not define as income any consideration received for issue of share in excess of its fair market value. This came into the statute only with effect from April 1, 2013 and thus, would have. no application to the share premium received by the respondent-assessee in the previous year relevant to the assessment year 2012-13. Similarly, the amendment to section 68 of the Act by addition of proviso was made subsequent to previous year relevant to the subject assessment year 2012-13 and cannot be invoked. It may be pointed out that this court in CIT v. Gagandeep Infrastructure (P.) Ltd. [2017] 80 taxmann.com 272/247 Taxman 245/394 ITR 680 (Bom.) has while refusing to entertain a question with regard to section 68 of the Act has held that the proviso to section 68 of the Act introduced with effect from April 1, 2013 will not have retrospective effect and would be effective only from the assessment year 2013-14.

(c) In view of the above. question No. B as proposed also does not give rise to any substantial question of law as it is an issue concluded by the decision of this court in Vodafone India Services (P.) Ltd. (supra) and in the apex court in G. S. Homes and Hotels (P.)Ltd. (supra).Thus not entertained. 29. Relying on the aforesaid judicial precedents of Hon’ble High courts and the Tribunal, we are of the opinion that in this AY i.e. AY 2012-13, the amendment in section 68 of the Act took place wherein the addition of proviso was with effect from 01.04.2013 and so is

25 ITA No. 235/Kol/2020 Evan Vinimay Pvt. Ltd., AY 2012-13 not applicable in this AY 2012-13. Further, as noted, the definition of income as provided under section 2(24) of the Act at the relevant time (AY 2012-13) did not define as income any consideration received for issue of shares in excess of its fair market value. This came into effect from 01.04.2013 and thus would have no application to the share premium received by the assessee in the previous year relevant to AY 2012-13.

"68. Where any sum is found credited in the books of an assessee maintained for any previous year, and the assessee offers no explanation about the nature and source thereof or the explanation offered by him is not, in the opinion of the Assessing Officer, satisfactory, the sum so credited may be charged to income-tax as the income of the assessee of that previous year. "

The phraseology of section 68 is clear. The Legislature has laid down that in the absence of a satisfactory explanation, the unexplained cash credit may be charged to income-tax as the income of the assessee of that previous year. In this case the legislative mandate is not in terms of the words ‘shall’ be charged to income-tax as the income of the assessee of that previous year". The Hon’ble Supreme Court while interpreting similar phraseology used in section 69 has held that in creating the legal fiction the phraseology employs the word "may" and not "shall". Thus the un-satisfactoriness of the explanation does not and need not automatically result in deeming the amount credited in the books as the income of the assessee as held by the Hon’ble Supreme Court in the case of CIT v. Smt. P. K. Noorjahan [1999] 237 ITR 570.

26 ITA No. 235/Kol/2020 Evan Vinimay Pvt. Ltd., AY 2012-13 32. In a case wherein the AO made the addition u/s 68 of the Act because the lenders of loan to assessee did not turn up before him [AO], the Hon'ble Apex Court in the case of Orissa Corpn. (P) Ltd. (supra) 159 ITR 78 has held that onus of the assessee (in whose books of account credit appears) stands fully discharged if the identity of the creditor is established and actual receipt of money from such creditor is proved. In case, the Assessing Officer is dissatisfied about the source of cash deposited in the bank accounts of the creditors, the proper course would be to assess such credit in the hands of the creditor (after making due enquiries from such creditor). In arriving at this conclusion, the Hon'ble Court has further stressed the presence of word "may" in section 68. The Hon’ble Apex Court ratio was taken note by the Hon’ble Gujarat High Court in the case of Dy CIT vs Rohini Builders (2002) 256 ITR360 wherein the Hon’ble High Court observed at pages 369 and 370 of this order are reproduced hereunder:-

"Merely because summons issued to some of the creditors could not be served or they failed to attend before the Assessing Officer, cannot be a ground to treat the loans taken by the assessee from those creditors as non-genuine in view of the principles laid down by the Supreme Court in the case of Orissa Corporation [1986] 159 ITR 78. In the said decision the Supreme Court has observed that when the assessee furnishes names and addresses of the alleged creditors and the GIR numbers, the burden shifts to the Department to establish the Revenue's case and in order to sustain the addition the Revenue has to pursue the enquiry and to establish the lack of creditworthiness and mere non-compliance of summons issued by the Assessing Officer under section 131, by the alleged creditors will not be sufficient to draw and adverse inference against the assessee. in the case of six creditors who appeared before the Assessing Officer and whose statements were recorded by the Assessing Officer, they have admitted having advanced loans to the assessee by account payee cheques and in case the Assessing Officer was not satisfied with the cash amount deposited by those creditors in their bank accounts, the proper course would have been to make assessments in the cases of those creditors by' treating the cash deposits in their bank accounts as unexplained investments of those creditors under section 69.

27 ITA No. 235/Kol/2020 Evan Vinimay Pvt. Ltd., AY 2012-13 depositor/lender who has been fully identified, the assessee/borrower cannot be called upon to explain, much less prove the affairs of such third party, which he is not even supposed to know or about which he cannot be held to be accredited with any knowledge. In this view, the Hon'ble Court has laid down that section 68 of Income-tax Act, should be read along with section 106 of Evidence Act. The relevant observations at page 260 to 262, 264 and 265 of the order are reproduced herein below:-

"While interpreting the meaning and scope of section 68, one has to bear in mind that normally, interpretation of a statute shall be general, in nature, subject only to such exceptions as may be logically permitted by the statute itself or by some other law connected therewith or relevant thereto. Keeping in view these fundamentals of interpretation of statutes, when we read carefully the provisions of section 68, we notice nothing in section 68 to show that the scope of the inquiry under section 68 by the Revenue Department shall remain confined to the transactions, which have taken place between the assessee and the creditor nor does the wording of section 68 indicate that section 68 does not authorize the Revenue Department to make inquiry into the source(s) of the credit and/or sub-creditor. The language employed by section 68 cannot be read to impose such limitations on the powers of the Assessing Officer. The logical conclusion, therefore, has to be, and we hold that an inquiry under section 68 need not necessarily be kept confined by the Assessing Officer within the transactions, which took place between the assessee and his creditor, but that the same may be extended to the transactions, which have taken place between the creditor and his sub-creditor. Thus, while the Assessing Officer is under section 68, free to look into the source(s) of the creditor and/or of the sub-creditor, the burden on the assessee under section 68 is definitely limited. This limit has been imposed by section 106 of the Evidence Act which reads as follows:

"Burden of proving fact especially within knowledge.-When any fact is especially within the knowledge of any person, the burden) of proving that fact is upon him. "

********

What, thus, transpires from the above discussion is that white section 106 of the Evidence Act limits the onus of the assessee to the extent of his proving the source from which he has received the cash credit, section 68 gives ample freedom to the Assessing Officer to make inquiry not only into the source(s)of the creditor but also of his (creditor's) sub-creditors and prove, as a result, of such inquiry, that the money received by the assessee, in the form of loan from the creditor, though routed through

28 ITA No. 235/Kol/2020 Evan Vinimay Pvt. Ltd., AY 2012-13 the sub-creditors, actually belongs to, or was of, the assessee himself. In other words, while section 68 gives the liberty to the Assessing Officer to enquire into the source/source from where the creditor has received the money, section 106 makes the assessee liable to disclose only the source(s) from where he has himself received the credit and IT is not the burden of the assessee to prove the creditworthiness of the source(s) of the sub-creditors. If section 106 and section 68 are to stand together, which they must, then, the interpretation of section 68 are to stand together, which they must, then the interpretation of section 68 has to be in such a way that it does not make section 106 redundant. Hence, the harmonious construction of section 106 of the Evidence Act and section 68 of the Income- tax Act will be that though apart from establishing the identity of the creditor, the assessee must establish the genuineness of the transaction as well as the creditworthiness of his creditor, the burden of the assessee to prove the genuineness of the transactions as well as the creditworthiness of the creditor must remain confined to the transactions, which have taken place between the assessee and the creditor. What follows, as a corollary, is that it is not the burden of the assessee to prove the genuineness of the transactions between his creditor and sub-creditors nor is it the burden of the assessee to prove that the sub- creditor had the creditworthiness to advance the cash credit to the creditor from whom the cash credit has been. eventually, received by the assessee. It, therefore, further logically follows that the creditor's creditworthiness has to be Judged vis-a-vis the transactions, which have taken place between the assessee and the creditor, and it is not the business of the assessee to find out the source of money of his creditor or of the genuineness of the transactions, which took between the creditor and sub-creditor and/or creditworthiness of the sub- creditors, for, these aspects may not be within the special knowledge of the assessee. "

**********

" ... If a creditor has, by any undisclosed source, a particular amount of money in the bank, there is no limitation under the law on the part of the assessee to obtain such amount of money or part thereof from the creditor, by way of cheque in the form of loan and in such a case, if the creditor fails to satisfy as to how he had actually received the said amount and happened to keep the same in the bank, the said amount cannot be treated as income of the assessee from undisclosed source. In other words, the genuineness as well as the creditworthiness of a creditor have to be adjudged vis-a-vis the transactions, which he has with the assessee. The reason why we have formed the opinion that it is not the business of the assessee to find out the actual source or sources from where the creditor has accumulated the amount, which he advances, as loan, to the assessee is that so far as an assessee is concerned, he has to

29 ITA No. 235/Kol/2020 Evan Vinimay Pvt. Ltd., AY 2012-13 prove the genuineness of the transaction and the creditworthiness of the creditor vis-a-vis the transactions which had taken place between the assessee and the creditor and not between the creditor and the sub-creditors, for, it is not even required under the law for the assessee to try to find out as to what sources from where the creditor had received the amount, his special knowledge under section 106 of the Evidence Act may very well remain confined only to the transactions, which he had' with the creditor and he may not know what transaction(s) had taken place between his creditor and the sub-creditor… "

**********

"In other words, though under section 68 an Assessing Officer is free to show, with the help of the inquiry conducted by him into the transactions, which have taken place between the creditor and the sub-creditor, that the transaction between the two were not genuine and that the sub-creditor had no creditworthiness, it will not necessarily mean that the loan advanced by the sub-creditor to the creditor was income of the assessee from undisclosed source unless there is evidence, direct or circumstantial, to show that the amount which has been advanced by the sub-creditor to the creditor, had actually been received by the sub-creditor from the assessee …."

**********

"Keeping in view the above position of law, when we turn to the factual matrix of the present case, we find that so far as the appellant is concerned, he has established the identity of the creditors, namely, Nemichand Nahata and Sons (HUF) and Pawan Kumar Agarwalla. The appellant had also shown, in accordance with the burden, which rested on him under section 106 of the Evidence Act, that the said amounts had been received by him by way of cheques from the creditors aforementioned. In fact the fact that the assessee had received the said amounts by way of cheques was not in dispute. Once the assessee had established that he had received the said amounts from the creditors aforementioned by way of cheques, the assessee must be taken to have proved that the creditor had the creditworthiness to advance the loans. Thereafter the burden had shifted to the Assessing Officer to prove the contrary. On mere failure on the part of the creditors to show that their sub-creditors had creditworthiness to advance the said loan amounts to the assessee, such failure, as a corollary, could not have been and ought not to have been, under the law, treated as the income from the undisclosed sources of the assessee himself, when there was neither direct nor circumstantial evidence on record that the said loan amounts actually belonged to, or were owned by, the assessee. Viewed from this angle, we have no hesitation in holding that in the case at hand, the Assessing Officer had failed to show that the amounts,

30 ITA No. 235/Kol/2020 Evan Vinimay Pvt. Ltd., AY 2012-13 which had come to the hands of the creditors from the hands of the sub-creditors, had actually been received by the sub-creditors from the assessee. In the absence of any such evidence on record, the Assessing Officer could not have treated the said amounts as income derived by the appellant from undisclosed sources. The learned Tribunal seriously fell into error in treating the said amounts as income derived by the appellant from. undisclosed sources merely on the failure of the sub-creditors to prove their creditworthiness.”

"4. The Tribunal has recorded a finding that the assessee has discharged the onus which was on him to explain the nature and source of cash credit in question. The assessee discharged the onus by placing (i) confirmation letters of the cash creditors; (ii) their affidavits; (iii) their full addresses and GIR numbers and permanent account numbers. It has found that the assessee's burden stood discharged and so, no addition to his total income on account of cash credit was called for. In view of this finding, we find that the Tribunal was right in reversing the order of the AA C, setting aside the assessment order.”

“15. It is now a settled law that while considering the question whether the alleged loan taken by the assessee was a genuine transaction, the initial onus is always upon the assessee and if no explanation is given or the explanation given by the appellant is not satisfactory, the Assessing Officer can disbelieve the alleged transaction of loan. But the law is equally settled that if the initial burden is discharged by the assessee by producing sufficient materials in support of the loan transaction, the onus shifts upon the Assessing Officer and after verification, he can call for further explanation from the assessee and in the process, the onus may again shift from the Assessing Officer to assessee.

31 ITA No. 235/Kol/2020 Evan Vinimay Pvt. Ltd., AY 2012-13 36. In a case where the issue was whether the assessee availed cash credit as against future sale of product, the AO issued summons to the creditors who did not turn up before him, so AO disbelieved the existence of creditors and saddled the addition, which was overturned by Ld. CIT(A). However, the Tribunal reversed the decision of the Ld. CIT(A) and upheld the AO’s decision, which action of Tribunal was challenged in the Hon'ble High Court, Calcutta in the case of Crystal Networks (P.) Ltd. v. Commissioner of Income-tax 353 ITR 171 wherein the Tribunal’s decision was overturned and decision of Ld. CIT(A) upheld and the Hon’ble High Court held that when the basic evidences are on record the mere failure of the creditor to appear cannot be basis to make addition. The court held as follows:

32 ITA No. 235/Kol/2020 Evan Vinimay Pvt. Ltd., AY 2012-13 the trouble of examining of all other materials and documents, viz., confirmatory statements, invoices, challans and vouchers showing supply of bidis as against the advance. Therefore, the attendance of the witnesses pursuant to the summons issued, in our view, is not important. The important is to prove as to whether the said cash credit was received as against the future sale of the product of the assessee or not. When it was found by the Commissioner of Income- tax (Appeals) on facts having examined the documents that the advance given by the creditors have been established the Tribunal should not have ignored this -fact finding. Indeed the Tribunal did not really touch the aforesaid fact finding of the Commissioner of Income-tax (Appeals) as rightly pointed out by the learned counsel. The Supreme Court has already stated as to what should be the duty of the learned Tribunal to decide in this situation. In the said judgment noted by us at page 464, the Supreme Court has observed as follows:

"The Income-tax Appellate Tribunal performs a judicial function under the Indian Income-tax Act; it is invested with authority to determine finally all questions of fact. The Tribunal must, in deciding an appeal, consider with due care all the material facts and record its finding on all the contentions raised by the assessee and the Commissioner, in the light of the evidence and the relevant law. "

33 ITA No. 235/Kol/2020 Evan Vinimay Pvt. Ltd., AY 2012-13 was drawn to the decision of the Hon'ble High Court, Calcutta in the COMMISSIONER OF INCOME TAX, KOLKA TA-Ill Versus DATAWARE PRIVATE LIMITED ITAT No. 263 of 2011 Date: 21st September, 2011 wherein the Hon’ble Court held as follows:

“In our opinion, in such circumstances, the Assessing officer of the assessee cannot take the burden of assessing the profit and loss account of the creditor when admittedly the creditor himself is an income tax assessee. After getting the PAN number and getting the information that the creditor is assessed under the Act, the Assessing officer should enquire from the Assessing Officer of the creditor as to the genuineness" of the transaction and whether such transaction has been accepted by the Assessing officer of the creditor but instead of adopting such course, the Assessing officer himself could not enter into the return of the creditor and brand the same as unworthy of credence.

So long it is not established that the return submitted by the creditor has been rejected by its Assessing Officer, the Assessing officer of the assessee is bound to accept the same as genuine when the identity of the creditor and the genuineness" of transaction through account payee cheque has been established.

We find that both the Commissioner of Income Tax (Appeal) and the Tribunal below followed the well-accepted principle which are required to be followed in considering the effect of Section 68 of the Act and we thus find no reason to interfere with the concurrent findings of fact recorded by both the authorities.”

"Can the amount of share money be regarded as undisclosed income under section 68 of the Income tax Act, 1961? We find no merit in this special leave petition 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. Hence, we find no infirmity with the impugned judgment.

34 ITA No. 235/Kol/2020 Evan Vinimay Pvt. Ltd., AY 2012-13 "On the facts and in the circumstances of the case, Ld. CIT(A) ought to have upheld the assessment order as the transaction entered into by the assessee was a scheme for laundering black money into white money or accounted money and the Ld. CIT (A) ought to have held that the assessee had not established the genuineness of the transaction. "

It appears from the record that in the assessment proceedings it was noticed that the assessee company during the year under consideration had brought Rs. 4, 00, 000/- and Rs.20,00,000/- towards share capital and share premium respectively amounting to Rs.24,00, 000/- from four shareholders being private limited companies. The Assessing Officer on his part called for the details from the assessee and also from the share applicants and analyzed the facts and ultimately observed certain abnormal features, which were mentioned in the assessment order. The Assessing Officer, therefore, concluded that nature and source of such money was questionable and evidence produced was unsatisfactory. Consequently, the Assessing Officer invoked the provisions under Section 68/69 of the Income Tax Act and made addition of Rs.24,00,000/-.

On appeal the Learned CIT (A) by following the decision of the Supreme Court in the case of Cl. T. vs. M/s. Lovely Exports Pvt. Ltd., reported in (2008) 216 CTR 195 allowed the appeal by holding -that share capital/premium of Rs. 24,00,000/- received from the investors was not liable to be treated under Section 68 as unexplained credits and it should not be taxed in the hands of the appellant company.

As indicated earlier, the Tribunal below dismissed the appeal filed by the Revenue.

After hearing the learned counsel for the appellant and after going through the decision of the Supreme Court in the case of Cl. T. vs. M/s. Lovely Exports Pvt. Ltd. [supra], we are at one with the Tribunal below that the point involved in this appeal is covered by the said Supreme Court decision in favour of the assessee and thus, no substantial question of law is involved in this appeal. The appeal is devoid of any substance and is dismissed.

“The Assessing Officer was of the view that the increase in share capital by RS.52,03,500/- was nothing but the introduction of the assessee's own undisclosed funds/income into the books of accounts of the assessee company. The Assessing Officer accordingly treated the investment as unexplained credit under Section 68 of the Income Tax Act and added the same to the income of the assessee.

35 ITA No. 235/Kol/2020 Evan Vinimay Pvt. Ltd., AY 2012-13 Being aggrieved, the assessee filed an appeal before the Commissioner of Income Tax (Appeals) being the First Appellate Authority and contended that the Assessing Officer had no material to show that the share capital was the income of the assessee company and as such the addition made by the Assessing Officer under Section 68 of the Act was wrong.

The learned Commissioner of Income Tax (Appeals) after hearing the department and the Assessee Company deleted the addition of Rs. 52, 03,500/- to the income of the assessee company during the Assessment Year in question. The learned Commissioner of Income Tax Appeals found that there were as many as 2155 allottees, whose names, addresses and respective shares allocation had been disclosed.

The Commissioner of Income Tax Appeals, further found that the Assessee Company received the applications through bankers to the issue, who had been appointed under the guidelines of the Stock Exchange and the Assessee Company had been allotted shares on the basis of allotment approved by the Stock Exchange. The Assessee Company had duly filed the return of allotment with the Registrar of Companies, giving complete particulars of the allottees.

The Commissioner of Income Tax (Appeals) found that inquires had confirmed the existence of most of the shareholders at the addresses intimated to the Assessing Officer, but the Assessing Officer took the view that their investment in the Assessee Company was not genuine, on the basis of some extraneous reasons. The Commissioner of Income Tax (Appeals) took note of the observation of the Assessing Officer that enquiry conducted by the Income Tax Inspector had revealed that nine persons making applications for 900 shares were not available at the given address and rightly concluded that the total share capital issued by the Assessee Company could not be added as unexplained cash credit under 'Section 68 of the Income Tax Act. Moreover, if the nature and source of investment by any shareholder, in shares of the Assessee Company remained unexplained, liability could not be foisted on the company. The concerned shareholders would have to explain the source of their fund.

The learned Commissioner on considering the submissions of the, respective parties and considering the materials, found that the Assessing Officer had applied the provisions of Section 68 of the Income Tax Act arbitrarily and illegally and in any case without giving the assessee adequate opportunity of representation and/or hearing.

Learned Tribunal agreed with the factual findings of the learned Commissioner and accordingly the learned Tribunal dismissed the appeal of the Revenue and affirmed the decision of the learned Commissioner.

Mr. Dutta appearing on behalf of the petitioners cited judgment of the Division Bench of this Court in Commissioner of Income Tax Vs. Ruby Traders and Exporters Limited reported in

36 ITA No. 235/Kol/2020 Evan Vinimay Pvt. Ltd., AY 2012-13 236 (2003) ITR 3000 where a Division Bench of this Court held that when Section 68 is resorted to, it is incumbent on the assessee company to prove and establish the identity of the subscribers, their credit worthiness and the genuineness of the transaction.

The aforesaid judgment was rendered in the context of the factual background of the aforesaid case where, despite several opportunities being given to the assessee, nothing was disclosed about the identity of the shareholders. In the instant case, the assessee disclosed the identity and address and particulars of share allocation of the shareholders. It was also found on the facts that all the shareholders were in existence. Only nine shareholders subscribing to about 900 shares out of 6, 12,000 shares were not found available at their addresses, and that too, in course of assessment proceedings in the year 1994, i.e., almost 3 years after the allotment.

By an order dated 2nd May, 2001, this Court admitted the appeal on three questions which essentially centre around the question of whether the Appellate Commissioner erred in law in deleting the addition of Rs. 52, 03, 500/- to the income of the assessee as made by the Assessing Officer. We are of the view that there is no question of law involved in this appeal far less any substantial question of law.

The learned Tribunal has concurred with the learned Commissioner on facts and found that there were materials to show that the assessee had disclosed the particulars of the shareholders. The factual findings cannot be interfered with, in appeal. We are of the view that once the identity and other relevant particulars of shareholders are disclosed, it is for those shareholders to explain the source of their funds and not for the assessee company to show wherefrom these shareholders obtained funds.”

“The only question raised in this appeal is whether the Commissioner of Income-tax (Appeals) and the Tribunal below erred in law in deleting the addition of Rs.8,52,000/-, Rs. 91,50,000/- and Rs. 13,00,000/- made by the Assessing Officer on account of share capital, share application money and investment in HTCCL respectively.

After hearing Md. Nizamuddin, learned Advocate appearing on behalf of the appellant and after going through the materials on record, we find that all such application money were received by the assessee by way of account payee cheques and the assessee also disclosed the complete list of shareholders with their complete addresses and GIR Numbers for the relevant assessment years in which share application was contributed. It further appears that all the payments were made by the applicants by account payee cheques.

37 ITA No. 235/Kol/2020 Evan Vinimay Pvt. Ltd., AY 2012-13 It appears from the Assessing Officers order that his grievance was that the assessee was not willing to produce the parties who had allegedly advanced the fund.

In our opinion, both the Commissioner of Income-tax (Appeals) and the Tribunal below were justified in holding that after disclosure of the full particulars indicated above, the initial onus of the assessee was shifted and it was the duty of the Assessing Officer to enquire whether those particulars were correct or not and if the Assessing Officer was of the view that the particulars supplied were insufficient to detect the real share applicants, to ask for further particulars.

The Assessing Officer has not adopted either of the aforesaid courses but has simply blamed the assessee for not producing those share applicants.

In our view, in the case before us so long the Assessing Officer was unable to arrive at a finding that the particulars given by the assessee were false, there was no scope of adding those money under section 68 of the Income- tax Act and the Tribunal below rightly held that the onus was validly discharged.

We, thus, find that both the authorities below, on consideration of the materials on record, rightly applied the correct law which are required to be applied in the facts of the present case and, thus, we do not find any reason to interfere with the concurrent findings of fact based on materials on record.

The appeal is, thus, devoid of any substance and is dismissed summarily as it does not involve any substantial question of law.

(a)The First Ld. Pr. CIT has recorded a finding after perusal of the first assessment records/folder that during the first round of scrutiny proceeding, the assessee company

38 ITA No. 235/Kol/2020 Evan Vinimay Pvt. Ltd., AY 2012-13 produced the following documents before the first AO in the original assessment to satisfy the AO in respect of identity, creditworthiness and genuineness of share subscribers:- (i) audited financial statements including balance sheet & P & L accounts; (ii) copy of Form filed with the ROC; (iii) copy of PAN Card of the assessee company; (iv) details and copy of share applicants; (v) bank statement reflecting the transaction; (vi) records relating to investors in order to establish identity, genuineness and creditworthiness of the share subscribers.

39 ITA No. 235/Kol/2020 Evan Vinimay Pvt. Ltd., AY 2012-13 its genuineness”. (emphasis given by us). He also directed that the assessment proceedings to be initiated at the earliest and to be completed without waiting for time bar limit. With the aforesaid specific direction, the First Ld. Pr. CIT has set aside the first original assessment order dated 21-03-2015.

40 ITA No. 235/Kol/2020 Evan Vinimay Pvt. Ltd., AY 2012-13 acknowledges that he has taken note of enhancement of share capital and he directed the Ld. A.R. to appear on 20.06.2016. From page 29 of the PB which is the continuation of the order sheet it is noted that at page 30 PB, on 01.06.2016 Smt Shalini Jain, the director of M/s Lily gold Deal Trade Pvt. Ltd. (share subscribing company) appeared pursuant to the summons issued by the AO u/s 131 of the Act. According to AO the director produced with the regular books of accounts, copy of bank statement and he has verified the documents, transaction and has recorded the statement of the director and signature of Smt Shalini Jain was also affixed on it.

41 ITA No. 235/Kol/2020 Evan Vinimay Pvt. Ltd., AY 2012-13 books of accounts, copy of bank statement and he has verified the documents, transaction and has recorded the statement of the director and signature of Shri Dhan Kumar was also obtained on it.

42 ITA No. 235/Kol/2020 Evan Vinimay Pvt. Ltd., AY 2012-13 entries from 17.03.2016 to 23.06.2016 it is noted that Second AO had summoned u/s 131 of the Act the directors of all the nine (9) share subscribers and has recorded their statements and has acknowledged that they had come with the regular books of account and copy of the bank statements. The AO has acknowledged to have verified the transaction and got their signature affixed on order sheet. Thus we note that the AO has summoned all the share subscribers companies and had verified their books and have also verified share capital transaction with the assessee. The AO has also gone through the books of accounts as well as verify the transaction and has recorded the assessee’s investment into equity shares. Thus we note that from the order sheet entries as well as paper book filed before us, it transpires that the following documents were furnished namely viz., (i) copy of ITR, (ii) audited accounts, (iii) details of directors, (iv) the details of the share-applicants, (v) details of business activity, (vi) details of increase in share capital, (vii) Form 2, (viii) Form 5, (ix) bank statements evidencing payment through banking transaction, which fact the AO has acknowledged in the reassessment order. [And here we should keep in mind that the First Ld. Pr. CIT’s finding of fact after perusal of original assessment records that assessee in the first round before AO has produced requisitioned audited financial statements, ROC details of the share applicants and pursuant to section 133(6) notice the investor companies have filed their financial, bank statements reflecting the transaction, records relating to investors to establish identity, creditworthiness & genuineness.] After examining these documents, we also find that the second AO issued summons u/s. 131 of the Act to all the nine (9) share applicants and pursuant to the notice, all the shareholders have filed their respective (i) PAN details, (ii) CIN detail, (iii) Audited Annual Report for FY 2011-12 (AY 2012-13), (iv) ITR acknowledgment for AY 2012-13 which the AO acknowledges that he verified the same and thus we note that the identity of the investors were duly furnished by the assessee’s A.R; and the AO verified the veracity of the same from all the share applicants by issuing summons u/s 131 of the Act and the AO had recorded the statements of the directors of all the nine (9) share applicant and moreover it is common knowledge that in this computer/digital era, the AO on a click of the mouse, could have easily verified the identity of the share applicant which is available in the website of Ministry of Corporate Affairs and the ITR Acknowledgments filed by them, will enable the AO to cross verify and collect details from the AO of the respective share applicants and independently from the Revenue’s departmental data base. We note that all the share subscribing parties filed all the

43 ITA No. 235/Kol/2020 Evan Vinimay Pvt. Ltd., AY 2012-13 documents called for by the AO [PB-1, pages 41-95] and were also examined by the AO along with audited accounts from which these details show their identity i.e. their CIN, PAN & ITR filling status are as follows: -

ITR filed for Name CIN PAN Sl.No. AY 2012-13 ALEX 1 TRADECOM U74999WB2011PTC164126 AAJCA6146P Yes PVT. LTD. LILYGOLD 2 DEALTRADE (p) U74999UP2011PTC087074 AACCL0458L Yes LTD. GRACEFUL 3 SALES PVT. U74999UP2011PTC087044 AAECG3059N Yes LTD. TRENDS 4 DEALMARK (P) U74999WB2011PTC164140 AADCT8923D Yes LTD. CHERRY 5 MARCON PVT. U74999WB2011PTC164134 AAECC4513B Yes LTD. BRIDHI 6 DISTRIBUTORS U74999UP2011PTC087366 AAECB6026E Yes PVT. LTD. APPROACH 7 DEALERS PVT. U74999WB2011PTC164128 AAJCA6145Q Yes LTD. VAYU MARKET 8 U52190WB2011PTC164702 AADCV7283J Yes PVT. LTD. CIRCULAR TIE 9 U52190WB2011PTC163991 AAECC4437G Yes UP PVT. LTD.

44 ITA No. 235/Kol/2020 Evan Vinimay Pvt. Ltd., AY 2012-13 discussed their identity cannot be disbelieved and the AO’s satisfaction in respect of identity of the shareholders is a possible view and cannot be termed as unsustainable in law or facts.

TOTAL 20,41,00,000 57. So, from a perusal of the above chart, we note that the assessee and the shareholders have brought to the notice of Second AO that they (share subscribers) have enough net worth to invest in the assessee company and the share subscribing companies pursuant to the AO’s summons u/s. 131 of the Act have furnished through their Directors their respective audited accounts from which the aforesaid facts are clearly discernible and moreover the share subscribers have also filed before the second AO the source from which

45 ITA No. 235/Kol/2020 Evan Vinimay Pvt. Ltd., AY 2012-13 they subscribed to shares of assessee (though not required as per law in force for AY 2012- 13), bank statement, audited balance sheet. Thus the assessee had discharged the onus on it about the creditworthiness of the share-holders. So we note that the source of the investments has been clearly brought to the notice of the second AO during the assessment/reassessment proceedings. Further, the bank statements of all the shareholders as well as that of assessee were filed before the AO, which revealed that the share capital and premium have been subscribed by them through banking channel (NEFT or cheque) which goes on to show that the assessee has discharged the onus in respect of genuineness of the transaction. Based on the documents and materials called for by the AO who accepted the same after verification is an act of enquiry. And we note that revenue has not brought on record any material to challenge the veracity of the documents referred to above. Moreover, the second Ld. Pr. CIT in his impugned order has not brought any material to rebut the presumption of second AO to justify his intervention u/s. 263 of the Act and which would have upset the decision of the second AO’s factual view on the identity, creditworthiness and genuinity of the share transaction. In such a scenario, the second AO’s view based on the documents referred to by him is a plausible view and in consonance with judicial precedents (supra) which we would like to discuss/examine each share subscribers totaling nine (9) infra;-

(a)Alex Tradecom Private Limited: Documents regarding this share subscriber is seen placed at page 41 to 47 of the PB-I and page 97 of PB-II. This Company invested a sum of Rs.2,00,00,000/- in the appellant company. The share application is seen to have been made by account payee cheque. This company was incorporated on 24/06/2011 and was having company identification number U74999WB2011PTC164126. This company has filed its return of income before ITO Ward 10(1), Kolkata and was having PAN AAJCA6146P. This company was having a paid up capital with free reserves and surplus of Rs.14,71,01,307/- as on 31/03/2012. The copy of the Balance Sheet of the Company is found placed at page 97 of the paper book II. The copy of the bank statement of the Company is duly available in the paper book I at page no. 44 - 46. On examination of the bank statement it is seen that there is no deposit of cash. The details of source of funds from which this company had made the share application is found placed in the paper book 1 on page no. 47. The Director of this Company appeared in response to the summons issued

46 ITA No. 235/Kol/2020 Evan Vinimay Pvt. Ltd., AY 2012-13 u/s131 of the Act and produced their books of accounts, bank statements and their statements were recorded by the Assessing Officer and confirmed the transactions of share application before the assessing officer and the AO after verification has accepted the nature and source of credit from this entity.

(b) Lilygold Dealtrade Pvt. Ltd.: Documents regarding this share subscriber is seen placed at page 48 to 51 of the PB-I and page 98 of PB-II. This Company invested a sum of Rs.20,00,000/- in the appellant company. The share application is seen to have been made by account payee cheque. This company was incorporated on 29/06/2011 and was having company identification number U74999UP2011PTC087074. This company has filed its return of income before ITO Ward 10(1), Kolkata and was having PAN AACCL0458L. This company was having a paid-up capital with free reserves and surplus of Rs.20,94,520/- as on 31/03/2012. The copy of the Balance Sheet of the Company is found placed at page no. 98 of PB-2. The copy of the bank statement of the Company found placed in the paper book 1 at page no. 50. On examination of the bank statement it is seen that there is no deposit of cash. The details of source of funds from which this company had made the share application is found placed in the paper book 1 at page no. 51. The Director of this Company appeared in response to the summons issued u/s 131 of the Act and produced their books of accounts, bank statements and their statements were recorded by the Assessing Officer and confirmed the transactions of share application before the assessing officer and the AO after verification has accepted the nature and source of credit from this entity.

(c) Graceful Sales Pvt. Ltd. Documents regarding this share subscriber is seen placed at page 52 to 55 of the PB-I and page 99 of PB-II. This Company invested a sum of Rs.20,00,000/-in the appellant company. The share application is seen to have been made by account payee cheque. This company was incorporated on 25/06/2011 and was having company identification number U74999UP2011PTC087044 This company has filed its return of income before ITO Ward 10(1), Kolkata and was having PAN AAECG3059N. This company was having a paid up capital with free reserves and surplus of Rs.20,93,314/- as on 31/03/2012. The copy of the Balance Sheet of the Company found placed at para no. 99 of the paper book 2.The copy of the bank statement of the Company found placed in the paper book 1 on page no. 54. On examination of the bank statement it is seen that there is no

47 ITA No. 235/Kol/2020 Evan Vinimay Pvt. Ltd., AY 2012-13 deposit of cash. The details of source of funds from which this company had made the share application is found placed in the paper book 1 at page no. 55. The Director of this Company appeared in response to the summons issued u/s 131 of the Act and produced their books of accounts, bank statements and their statements were recorded by the Assessing Officer and confirmed the transactions of share application before the assessing officer and the AO after verification has accepted the nature and source of credit from this entity.

(d) Trends Dealmark Pvt. Ltd. Documents regarding this share subscriber is seen placed at page 56 to 63 of the PB-I and page 100 of PB-II. This Company invested a sum of Rs.4,00,00,000/- in the appellant company. The share application is seen to have been made by account payee cheque. This company was incorporated on 24/06/2011 and was having company identification number U74999WB2011PTC164140 This company has filed its return of income before ITO Ward 10(1), Kolkata and was having PAN AADCT8923D. This company was having a paid up capital with free reserves and surplus of Rs.20,41,02,272/- as on 31/03/2012. The copy of the Balance Sheet of the Company is found placed in the paper book 2 at page no. 100.The copy of the bank statement of the Company is found placed in the paper book 1 on page no. 60-62. On examination of the bank statement it will be seen that there is no deposit of cash. The details of source of funds from which this company had made the share application is found placed in the paper book 1 at page no. 63. The Director of this Company appeared in response to the summons issued u/s 131 of the Act and produced their books of accounts, bank statements and their statements were recorded by the Assessing Officer and confirmed the transactions of share application before the assessing officer and the AO after verification has accepted the nature and source of credit from this entity.

(e) Cherry Marcom Pvt. Ltd. Documents regarding this share subscriber is seen placed at page 64 to 69 of the PB-I and page 101 of PB-II. This Company invested a sum of Rs.2,00,00,000/- in the appellant company. The share application is seen to have been made by account payee cheque. This company was incorporated on 24/06/2011 and was having company identification number U74999WB2011PTC164134 This company has filed its return of income before ITO Ward 10(1), Kolkata and was having PAN AAECC4513B.

48 ITA No. 235/Kol/2020 Evan Vinimay Pvt. Ltd., AY 2012-13 This company was having a paid up capital with free reserves and surplus of Rs.12,21,02,480/- as on 31/03/2012. The copy of the Balance Sheet of the Company is found placed in the paper book 2 on page no. 101 .The copy of the bank statement of the Company is found placed in the paper book 1 at page no. 67-68. On examination of the bank statement it is seen that there is no deposit of cash. The details of source of funds from which this company had made the share application is found placed in the paper book 1 at page no. 69. The Director of this Company appeared in response to the summons issued u/s 131 of the Act and produced their books of accounts, bank statements and their statements were recorded by the Assessing Officer and confirmed the transactions of share application before the assessing officer and the AO after verification has accepted the nature and source of credit from this entity.

(f) Bridhi Distributors Pvt. Ltd. Documents regarding this share subscriber is seen placed at page 70 to 76 of the PB-I and page 102 of PB-II. This Company invested a sum of Rs.4,00,00,000/- in the appellant company. The share application is seen to have been made by account payee cheque. This company was incorporated on 24/06/2011 and was having company identification number U74999UP2011PTC087366 This company has filed its return of income before ITO Ward 10(1), Kolkata and was having PAN AAECB6026E. This company was having a paid up capital with free reserves and surplus of Rs.20,41,02,998/- as on 31/03/2012. The copy of the Balance Sheet of the Company is found placed in the paper book 2 on page no. 102.The copy of the bank statement of the Company is found placed in the paper book 1 on page no. 75. On examination of the bank statement it is seen that there is no deposit of cash. The details of source of funds from which this company had made the share application is found placed in the paper book 1 at page no. 76. The Director of this Company appeared in response to the summons issued u/s 131 of the Act and produced their books of accounts, bank statements and their statements were recorded by the Assessing Officer and confirmed the transactions of share application before the assessing officer and the AO after verification has accepted the nature and source of credit from this entity. (g) Approach Dealers Pvt. Ltd. Documents regarding this share subscriber is seen placed at page 77-81 of the PB-I and page 103 of PB-II. This Company invested a sum of Rs.2,00,00,000/- in the appellant company. The share application is seen to have been made

49 ITA No. 235/Kol/2020 Evan Vinimay Pvt. Ltd., AY 2012-13 by account payee cheque. This company was incorporated on 24/06/2011 and was having company identification number U74999WB2011PTC164128 This company has filed its return of income before ITO Ward 10(1), Kolkata and was having PAN AAJCA6145Q. This company was having a paid up capital with free reserves and surplus of Rs.12,21,02,114/- as on 31/03/2012. The copy of the Balance Sheet of the Company is found placed in the paper book 2 on page no. 103.The copy of the bank statement of the Company is found placed in the paper book 1 at page no. 80. On examination of the bank statement it is seen that there is no deposit of cash. The details of source of funds from which this company had made the share application is found placed in the paper book 1 at page no. 81. The Director of this Company appeared in response to the summons issued u/s 131 of the Act and produced their books of accounts, bank statements and their statements were recorded by the Assessing Officer and confirmed the transactions of share application before the assessing officer and the AO after verification has accepted the nature and source of credit from this entity. (h)Vayu Marketing Pvt. Ltd. Documents regarding this share subscriber is seen placed at page 82-89 of the PB-I and page 104 of PB-II. This Company invested a sum of Rs.4,00,00,000/- in the appellant company. The share application is seen to have been made by account payee cheque. This company was incorporated on 08/07/2011 and was having company identification number U52190WB2011PTC164702 This company has filed its return of income before ITO Ward 9(2), Kolkata and was having PAN AADCV7283J. This company was having a paid up capital with free reserves and surplus of Rs.89,57,52,560/- as on 31/03/2012. The copy of the Balance Sheet of the Company is found placed in the paper book 2 on page no. 104.The copy of the bank statement of the Company is found placed in the paper book 1 on page no. 85-88. On examination of the bank statement it will be seen that there is no deposit of cash. The details of source of funds from which this company had made the share application is found placed in the paper book 1 on page no. 89. All the relevant documents for this company are available on pages 82-89 of the paper book 1. The Director of this Company appeared in response to the summons issued u/s 131 of the IT Act 1961 and produced their books of accounts, bank statements and their statements were recorded by the Assessing Officer and confirmed the transactions of share application before the assessing officer and the AO after verification has accepted the nature and source of credit from this entity.

50 ITA No. 235/Kol/2020 Evan Vinimay Pvt. Ltd., AY 2012-13

(i) Circular Tie up Pvt. Ltd. Documents regarding this share subscriber is seen placed at page 90 to 95 of the PB-I and page 105 of PB-II. This Company invested a sum of Rs.2,00,00,000/-in the appellant company. The share application is seen to have been made by account payee cheque. This company was incorporated on 21/06/2011 and was having company identification number U52190WB2011PTC163991 This company has filed its return of income before ITO Ward 9(3), Kolkata and was having PAN AAECC4437G. This company was having a paid up capital with free reserves and surplus of Rs.51,26,00,998/- as on 31/03/2012. The copy of the Balance Sheet of the Company is found placed in the paper book 2 at page no. 105.The copy of the bank statement of the Company is found placed in the paper book 1 at page no. 93-94. On examination of the bank statement it will be seen that there is no deposit of cash. The details of source of funds from which this company had made the share application is found placed in the paper book 1 at page at. 95. The Director of this Company appeared in response to the summons issued u/s 131 of the Act and produced their books of accounts, bank statements and their statements were recorded by the Assessing Officer and confirmed the transactions of share application before the assessing officer and the AO after verification has accepted the nature and source of credit from this entity.

51 ITA No. 235/Kol/2020 Evan Vinimay Pvt. Ltd., AY 2012-13 by the AO dated 21.03.2015. In other words, in the impugned order the second Ld. Pr. CIT has not found fault with the action of the second AO in giving effect to the specific directions given by him while passing the first revisional order on 02.02.2016. Thus, we note that when the second AO while framing the reassessment order pursuant to the specific direction of the First Ld. Pr. CIT’s order dated 2.02.2016 (first revisional order) has complied with the specific directions of the First Ld. Pr. CIT and based on the inquiry conducted and after perusal of the documents running more than 95 pages which reveals the identity, creditworthiness and genuineness of the share capital and premium collected by the assessee from the share subscribers, the satisfaction of AO as envisaged in sec. 68 of the Act is a plausible view and the fact that the share subscribers responded to sec. 133(6) notice and produced all documents along with the audited financial statements and other documents referred supra, the assessee had discharged the onus upon it about the identity creditworthiness and genuineness of the share capital and premium collected by the assessee from the respective share subscribers. Since the aforesaid exercise was carried out by the second AO in the reassessment proceedings and the documents referred to above are in the assessment folder, the Second Ld. Pr. CIT erred in holding the reassessment order of the AO in respect of share capital and premium collected by the assessee as erroneous as well as prejudicial to the interest of the revenue. In the light of the aforesaid discussions and on perusal of the documents, we are of the view that AO’s view to accept the identity, creditworthiness and genuineness of the share capital and premium collected from the share subscribers was a plausible view and at any rate can be termed as an unsustainable view on law or facts

52 ITA No. 235/Kol/2020 Evan Vinimay Pvt. Ltd., AY 2012-13 pointed out the adverse fact, if any, which the Second Ld. Pr. CIT has not made in the impugned order. So the inference that can be drawn is that the veracity of the factual contents of the documents running more than 105 pages (PB-2) could not be factually controverted by the Second Ld. Pr. CIT. And still if the Ld. Pr. CIT is not satisfied and wanted to interfere invoking jurisdiction u/s. 263 of the Act, he has to show that the enquiry conducted by AO was flawed or the enquiry conducted by AO was on a wrong direction or on wrong assumption of fact/law or that the AO misdirected himself in factual investigation or applied the law erroneously in respect of the facts collected by him. For doing so, in the facts discussed supra, he second (Ld. Pr. CIT) should himself had conducted an enquiry or at least conducted a preliminary enquiry and was able to bring some evidence/material on record to upset the AO’s satisfaction in respect of identity, creditworthiness or genuineness of the share subscribers and thus recorded a finding of fact that the decision of AO’s enquiry was faulted or wrong and in that process tried to show that it has resulted in a view which is “unsustainable in law” which would have justified his action of passing the impugned order u/s. 263 of the Act, which unfortunately is not the case. Since the AO’s view on the facts collected and discussed is definitely a possible view, so in the factual background discussed in detail, we are of the considered opinion that Ld. second Pr. CIT ought not to have interfered with the AO’s reassessment order which in any case can be classified as ‘unsustainable in law’ since it is in line with plethora of judicial decisions of the subject.

53 ITA No. 235/Kol/2020 Evan Vinimay Pvt. Ltd., AY 2012-13 that the actions/omission of AO in conducting the investigation was erroneous, which unfortunately is not the case before us. And equally bad is the bald allegation/fault that second AO has not collected total facts cannot be accepted being vague and based on conjectures and surmises and so meritless. Since the assessee company has discharged its onus as discussed supra, and still if the Second Pr. CIT had to find the order of Second AO erroneous for lack of enquiry or for not collecting the entire facts, then the Second Pr. CIT ought to have called for the additional facts which he thinks that the Second AO has not collected from the assessee or the shareholders and then explained in his impugned order as to what effect those additional documents would have made on the second assessment order/reassessment order or in other words the impact on the decision making process of framing the second assessment order due to the failure of second AO’s omission to collect the additional documents. However, we note that the Second Pr. CIT has not carried out any such exercise or even spelled out in his impugned order, which all documents the second AO failed to collect for considering the total facts; and even if we presume he has conducted such an exercise, then he has not been able to bring out any adverse factual finding to upset the view of Second AO. So we find no merit in the vague allegation of second Pr. CIT that the second AO has not collected the full facts necessary to decide the issue of share capital & premium.So we note that the Second AO, the assessing authority who is a quasi- judicial office has discharged his dual role as an investigator as well as an adjudicator. Looking from another angle of doctrine of merger canvassed before us, we note from the facts of this case that the second Ld. Pr. CIT – 4 by passing the second revisional order dated 12.03.2019 has substituted the First Pr. CIT’s order passed u/s. 263 of the Act dated 2.02.2016 with his own order which he cannot do since the second assessment order/re-assessment of the Second AO dated 23.06.2016 was pursuant to the first revisional order of the First Ld. Pr. CIT and on the very same subject matter on which specific directions/instructions were given by the First Ld. Pr.CIT, which direction since having been complied by the AO, brings into operation the doctrine of merger the subject matter i.e. share capital & premium collected by assessee company. Resultantly the second Ld. Pr.CIT, again cannot rake-up the same subject matter without the second Ld. Pr.CIT in the second revisional order spells out where the error happened to second AO as an investigator or adjudicator, which exercise the Second Ld. Pr.CIT has not done, so the second Ld. Pr. CIT cannot be permitted to again ask the AO to start the investigation in the way he thinks it proper on the very same subject

54 ITA No. 235/Kol/2020 Evan Vinimay Pvt. Ltd., AY 2012-13 on which merger has taken place by virtue of the order of First Ld. Pr. CIT. And if this practice is allowed, then there will be no end to the assessment proceedings meaning no finality to assessment proceedings and that is exactly why the Parliament in its wisdom has brought in safe-guards, restrictions & conditions precedent to be satisfied strictly before assumption of revisional jurisdiction. Be that as it may be, as discussed above, we find that the Second Ld. Pr. CIT without satisfying the condition precedent u/s 263 of the Act has invoked the revisional jurisdiction (second time), so all his actions are ab initio void.

55 ITA No. 235/Kol/2020 Evan Vinimay Pvt. Ltd., AY 2012-13 ground number 2&3 of the original grounds raised by the assessee, the other additional grounds are left open. As discussed the impugned order of Ld Pr CIT is quashed.

Order is pronounced in the open court on 7th January, 2022 Sd/- Sd/- (P. M. Jagtap) (Aby. T. Varkey) Vice President Judicial Member

Dated : 7th January, 2022 SB, Sr. PS

Copy of the order forwarded to:

/True Copy, By order,

Senior Private Secretary/DDO ITAT, Kolkata.