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Income Tax Appellate Tribunal, “A” BENCH, MUMBAI
Before: HON’BLE SHRI MAHAVIR SINGH, JM & HON’BLE SHRI MANOJ KUMAR AGGARWAL, AM
आयकरअपील सं./ (िनधा"रण वष" / Assessment Year:2010-11) DCIT – 12(1)(1) M/s. Amrise Infracreators Pvt Ltd. (earlier known as M/s Tirtha Industries Pvt. Ltd.) Aaykar Bhavan, बनाम/ 302, Koshal Apts, Shankar Lane, M.K Road Vs. Kandivali(W) Mumbai – 400 020 Mumbai – 400 067. "थायीलेखासं./जीआइआरसं./PAN/GIR No. AAACT-3320-M (अपीलाथ"/Appellant) (""थ" / Respondent) : Revenue by : Shri Satish Chandra Rajore – Ld. DR Assessee by : Shri Dharmesh Shah – Ld. AR सुनवाई की तारीख/ : 07/08/2019 Date of Hearing घोषणा की तारीख / : 22/08/2019 Date of Pronouncement आदेश / O R D E R Manoj Kumar Aggarwal (Accountant Member): - 1.
As per the provisions of Section 68 of the Income Tax Act, 1961, where any sum is found credited in the assessee’s books and assessee offers no explanation about the nature and source thereof or the explanation furnished is found to be unsatisfactory, the sum so credited may be charged to Income-Tax as the income of the assessee of that previous year. A proviso has been inserted to the said section by 2 M/s. Amrise Infracreators Private Limited Assessment Year:2010-11 Finance Act, 2012 w.e.f. 01/04/2013 to provide that where the assessee is a company and the sum so credited consists of share application money, share capital, share premium etc., the explanation furnished by the assessee shall be deemed to be not satisfactory unless the person in whose name such credit is recorded also offers an explanation about nature and source of sum so credited and such explanation is found to be satisfactory. However, this proviso is applicable only from AY 2013-14 and the same is not retrospective in nature as held by Hon’ble Bombay High Court in the case of CIT Vs. Gagandeep Infrastructure Private Limited [80 Taxmann.com 272].
2. It is settled position of law that to avoid the rigors of Section 68, the assessee must prove the identity, creditworthiness of the lenders / investors to advance such monies and genuineness of the transactions. Once these three ingredients are fulfilled by the assessee, the primary onus casted upon him, in this regard, could be said to have been discharged and accordingly, the onus would shift upon revenue to dislodge the assessee’s claim by bringing on record material evidences and unless this onus is discharged by the revenue, no addition could be sustained u/s 68. The Hon’ble Supreme Court in the case of Lovely Exports P. Ltd. [319 ITR 5], dismissing revenue’s appeal, observed as under: - 2. Can the amount of share money be regarded as undisclosed income under section 68 of IT 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.
3. Subject to the above, Special Leave Petition is dismissed.
3 M/s. Amrise Infracreators Private Limited Assessment Year:2010-11 The ratio of said decision has subsequently been followed by various judicial authorities in catena of judicial pronouncements. The said decision has been followed by Hon’ble Bombay High Court in the case of CIT Vs. Gagandeep Infrastructure Private Limited [80 Taxmann.com 272] & subsequently in CIT Vs. Orchid Industries Private Limited [88 Taxmann.com 502]. The Hon’ble Delhi High Court followed the said decision in Pr. CIT V/s Adamine Construction Pvt. Ltd. [107 Taxmann.com 84] against which revenue’s Special Leave petition was dismissed by Hon’ble Supreme Court reported at 107 Taxmann.com 85. Similar is the position of decision of Hon’ble Delhi High Court rendered in Pr. CIT V/s Himachal Fibers Ltd. [98 Taxmann.com 72] against which revenue’s Special Leave Petition was dismissed by Hon’ble Supreme Court reported at 98 Taxmann.com 173. Similar is the decision of Hon’ble High Court of Madhya Pradesh in Pr. CIT V/s Chain House International Pvt. Ltd. [98 Taxmann.com 47] against which revenue’s Special Leave Petition has recently been dismissed by Hon’ble Supreme Court on 18/02/2019 reported at 103 Taxmann.com 435.
Further, as a principle of natural justice, it is obligatory on the part of revenue authorities to confront the adverse material used against the assessee and provide an opportunity to rebut the same. The failure to do so would render the assessment proceedings nullity in the eyes of law. The additions made merely on the basis of third-party statements and the denial to provide an opportunity to cross-examine the concerned parties would lead to violation of principle of natural justice rendering the assessment proceedings nullity as held by Hon’ble Apex Court in 4 M/s. Amrise Infracreators Private Limited Assessment Year:2010-11 Andaman Timber Industries [Civil Appeal No.4228 of 2006 02/09/2015].
4. Keeping in view the above legal position in mind, we find that revenue is under appeal before us for AY 2010-11 against the order of Ld. Commissioner of Income-Tax (Appeals)-20, Mumbai [in short referred to as ‘CIT(A)’], Appeal No. CIT(A)-20/ITO-12(1)(1)/IT- 1006/2015-16 dated 12/05/2017 qua deletion of addition u/s 68. The grounds raised
by the revenue read as under: -
1. Whether on the facts and in the circumstances of the case and in law, the Ld. CIT (A) erred in deleting the addition of share capital and premium of Rs.2,15,00,000/- u/s. 68 of I.T.Act without appreciating the fact that many of these parties from whom share capital is received, had been banned by SEBI for indulging in money laundering activities and did not respond to notices of inquiries.
2. Whether on the facts and in the circumstances of the case and in law, the Ld. CIT (A) erred in deleting the addition u/s 68 of share premium and share capital without appreciating the fact that the parties had no creditworthiness to justify such high amount of share premium.
5.1 Facts on record would reveal that the assessee being resident corporate assessee stated to be engaged in the business of trading in shares, tour and travel operators and civil construction was assessed for impugned AY u/s 143(3) on 25/03/2013 wherein the income of the assessee was determined at Rs.215.33 Lacs, inter- alia, after addition of Rs.215 Lacs u/s 68 as against Nil return e-filed by the assessee on 12/10/2010. 5.2 During assessment proceedings, upon perusal of assessee’s financial statements, it transpired that the assessee had issued fresh equity share capital consisting of 1 Lacs equity shares of face value of Rs.100/- each at a premium of Rs.100/- per share to as many as 15 corporate entities as per the following details: - 5 M/s. Amrise Infracreators Private Limited Assessment Year:2010-11 No. Name of the PAN No. of Share Share Total investor Shares Capital Premium 1. Alka Diamond AAACA5236D 10000 1000000 1000000 2000000 Industries 2. Kush Hindustan AACCK3597M 5000 500000 500000 1000000 Entertainment Ltd.
3. Triangular Infocom AAACL4646G 10000 1000000 1000000 2000000 Ltd.
Duke Business AABCJ6245N 5000 500000 500000 1000000 Pvt.Ltd.
Casper Enterprises AAACO7955M 5000 500000 500000 1000000 Pvt.Ltd.
Nakshatra Business AABCH4279G 10000 1000000 1000000 2000000 Pvt. Ltd.
Majestic Exim AAFCM9489H 5000 500000 500000 1000000 Pvt.Ltd.
Spark Financial AAMCS8638R 10000 1000000 1000000 2000000 Advisors Pvt.Ltd.
Algorithm Financial AAHCA6077B 10000 1000000 1000000 2000000 Services Pvt.Ltd.
Synopsis Financial AAMCS8637A 5000 500000 500000 1000000 Services Pvt.Ltd.
Lilac Medicines Pvt AABCL4309H 5000 500000 500000 1000000 Ltd.
Skylar Chemicals Ltd AALCS5301C 5000 500000 500000 1000000 13. Hormony Energy Pvt. AABCH9957P 5000 500000 500000 1000000 Ltd.
Eldor Retail Pvt. Ltd. AABCE9439P 5000 500000 500000 1000000 15. Ansh Merchandise AABCN8176E 5000 500000 500000 1000000 (P.) Ltd. Total 10000000 10000000 20000000 5.3 Notices u/s 133(6) were issued by Ld. AO during assessment proceedings to examine the claim towards receipt of share capital and share premium. However, the notices remained unserved in case of 9 entities, however, 2 entities filed confirmation subsequently. It was noted that entities listed at serial nos. 1 to 3 were banned by SEBI from operating in stock market since they were found to be engaged in carrying out suspicious banking transactions. The activities of entity listed at serial no. 3 was also held to be non-genuine/ sham while framing assessment orders for various years. In the above circumstances, Ld. AO proceeded to 6 M/s. Amrise Infracreators Private Limited Assessment Year:2010-11 invoke the provisions of Section 68 against the assessee and the assessee was directed to substantiate the claim of receipt of share capital / share premium with supporting documentary evidences. 5.4 The assessee defended the transactions, vide reply dated 04/03/2013, by submitting various documents in the shape of Share Application Forms, Letter of Allotment, PAN of Shareholders, Copies of Form No. 2 & 5 filed with