THE DY. C.I.T., CENTRAL CIR. 2(1),, NAGPUR vs. M/S MAHAVIR COAL RESOURCES PVT. LTD.,,

Date of Hearing – 26/12/2024 Date of Order – 08/01/2025

O R D E R PER K.M. ROY, A.M.

Captioned appeal by the Revenue is against the impugned order dated 15/05/2014, passed by the learned Commissioner of Income Tax (Appeals)– III, Nagpur, [“learned CIT(A)”], for the assessment year 2011–12.

“1) On the facts and in the circumstances of the case and in law, whether the Ld. CIT(A) erred in ignoring the outcome of the independent enquiries conducted by the Assessing Officer, with regard to the creditworthiness of the 16 companies which had invested in M/s. Torrent Vinimay Pvt. Ltd., which in turn had been invested in the assessee company, as share capital and share application money. The enquiries revealed that all the 16 companies are paper companies having meager income or loss, which were started 6 to 12 months prior to investment in M/s. Torrent Vinimay Pvt. Ltd., which is a closely held company of Uttamchand Jain and his family members. 2) On the facts and in the circumstances of the case and in law, whether the Ld. CIT(A) erred in ignoring the fact that the DDIT (Inv.), Kolkata, could

2 M/s. Mahavir Coal Resources Pvt. Ltd. Assessment Year – 2011–12 not find the company, M/s. Torrent Vinimay Pvt. Ltd., at the given address, and the assessee failed to furnish the changed address of the said company, even subsequent to this. 3) On the facts and in the circumstances of the case and in law, whether the Ld. CIT(A) erred in relying on the decision of Hon‟ble High Court of Madhya Pradesh, which is reported in 245 ITR 160, to state that source of source cannot be asked, whereas in the case of the assessee, the Assessing Officer made independent enquiries with regard to the concerns, which had invested in M/s Torrent Vinimay Pvt. Ltd., which is in accordance with the decision of the Hon‟ble High Court. 4) Reliance is placed on the decision of Hon‟ble High Court of Delhi in the case of CIT vs. Globus Securities & Finance Pvt. Ltd. (2014), reported in 41 Taxmann.com 465, in which reference was also made to the decision in the case of Lovely Export Pvt. Ltd. The Hon‟ble High Court in this case, had held as under: “In respect of issuing shares Tribunal had noticed but not given due credence to surrounding circumstances which included a huge premium equivalent to four times of face value of shares, credit entries in bank accounts before transfer of money etc. Identity creditworthiness of the shareholders and genuineness of the transactions in all cases is not established by only showings that the transaction was through banking channel or account payee instrument. Surrounding and corroborative factual details are equally important before it is held that onus is discharged.” 5) The Ld. CIT(A) ought to have appreciated the fact that the enquiries conducted by the A.O. revealed that the companies which had invested in M/s. Torrent Vinimay Pvt. Ltd., did not have any creditworthiness, and hence, the sources of investment in the assessee company are unexplained. 6) The appellant craves leave to add, alter, modify, delete, and amend any of the grounds, as per the circumstances of the case. 7) The appellant prays leave to adduce such further evidence to substantiate its case, as the occasion may demand.”

3 M/s. Mahavir Coal Resources Pvt. Ltd. Assessment Year – 2011–12 income of ` 3,13,21,770. The Assessing Officer has observed in assessment order that the assessee had raised the capital by issue of Share Application and Share Premium. A total of ` 6,68,98,000, has been received as Share Application money and Share Premium by assessee from corporate entity M/s Torrent Vinimay Pvt. Ltd., which is a Kolkata based company. The Assessing Officer asked the assessee to prove the identity, creditworthiness as well as genuineness of transactions from the said company. Though, the assessee furnished the detailed submissions during the assessment proceedings to the Assessing Officer, he was not satisfied about the same and accordingly has treated the same as unexplained credits and held that the assessee has routed its unaccounted money in the guise of share application and share premium. The Assessing Officer accordingly made addition of ` 668.98 lakh to the total income of the assessee.

“Ground No.1 to 5: Addition in respect to Share Application Money and Share Premium. A) The assessee has received contribution towards share capital from corporate shareholder. Assessee had submitted complete details being Financial Statements, Bank Statements, copy of PAN and details of income tax returns to substantiate the contribution of share capital. The amount was received through proper banking channel and corporate shareholder is assessed to tax. Onus to explain the share capital contribution was discharged by establishing identity and creditworthiness of shareholders. The genuineness of transaction was satisfactorily explained. i) Acknowledgement and Computation of Income along with Audit Report for Asstt. Year 2012-13 of M/s. Torrent Vinimay Pvt. Ltd. (P- 3 – 18) ii) Acknowledgement and Computation of Income along with Audit Report for Asstt. Year 2011-12 of M/s. Torrent Vinimay Pvt. Ltd. (P- 19 – 31) iii) Copy of UBI Bank Statement of M/s. Torrent Vinimay Pvt. Ltd. (P- 32 – 36) iv) Copy of Master Data as per ROC Record (P- 37) v) Copy of PAN verification (P- 38) B) Investment made in assessee company was confirmed by M/s. Torrent Vinimay Pvt. Ltd. before Investigation Wing of Income Tax Department at Kolkata pursuance to enquiry made at the instance of A.O. Details of payment made to assessee company and Audited Financial statement along with Acknowledgement of Income Tax Return were also submitted before Investigation Wing by Corporate share applicant. i) Reply by M/s. Torrent Vinimay Pvt. Ltd. in respect to summons issued (P- 1 – 2) C) Share capital contribution made by M/s. Torrent Vinimay Pvt. Ltd. is reflected as investment in balance sheet of such company. (P – 2 & 14)

5 M/s. Mahavir Coal Resources Pvt. Ltd. Assessment Year – 2011–12

D) A.O. has verified the transaction by obtaining the details from website of Ministry of Corporate Affairs. Details obtained corroborated the contribution of share capital and nothing adverse was noted found. (Para 4.4 of assessment order) E) A.O. has verified bank statement of corporate share holder and it was noted that there are no cash deposit in the bank account of corporate share holder. Nothing adverse can be considered from the details on record. (Para 4.4 of assessment order). F) The Hon‟ble Bombay High Court has concluded that prior to Asstt. Year 2013-14 law laid down by Hon‟ble Apex Court in the case of Lovely Exports (P) Ltd. will be applied and thus revenue is not entitled to assess the share capital as unexplained cash credit. Reliance on: i) of 2014 in the case of M/s. Gagandeep Infrastructures vide order dated 20/03/2017. (P- 10 – 16) (14, 15) [Vol. – II] G) It is settled proposition of law that contribution to share capital is capital receipt. The shareholder is corporate shareholder assessed to income tax. Assessee has established identity, creditworthiness of share applicant and genuineness of transaction by placing legal evidences on record. No addition can be made for the same as unexplained income. Reliance on: i) (2008) 216 CTR 0195 (SC) CIT vs. Lovely Exports (P) Ltd. (P- 1 – 2) [Vol.- II] ii) (2008) 307 ITR 0334 (Delhi) CIT vs. Value Capital Services (P) Ltd. (P- 3 – 5) (4) [Vol.- II] iii) Hon‟ble Bombay High Court order in ITA (L) No.2182 of 2009 in the case of M/s. Creative World Telefilms Ltd. (Earlier known as Link International Services Pvt. Ltd.) vide order dated 12/10/2009. (P- 6 – 7) [Vol.- II] iv) Hon‟ble Bombay High Court in Tax Appeal No.16 of 2012 in the case of Goa Sponge and Power Ltd. vide order dated 13/02/2012. (P- 8 – 9) [Vol.- II] v) Hon‟ble High Court of Bombay in of 2014 in the case of M/s. Gagandeep Infrastructure Pvt. Ltd. vide order dated 20/03/2017 (P- 10 – 16) (14, 15) [Vol.- II] vi) (2014) 368 ITR 0001 (Bom.) Vodafone India Services Pvt. Ltd. vs. ACIT P- 17 – 49) (42, 43) [Vol.- II]

6 M/s. Mahavir Coal Resources Pvt. Ltd. Assessment Year – 2011–12 vii) Hon‟ble Haryana High Court in of 2010 (O & M) in the case of M/s. K.C. Pipes Pvt. Ltd. vide order dated 02/08/2016. (P- 50 – 51) (51) [Vol.- II] viii) Hon‟ble Bombay High Court in Writ Petition No.3027 of 2015 in the case of Khubchandan Healthparks Pvt. Ltd. vide order dated 10/02/2016 (P- 52 – 60) (58, 59) [Vol.- II] H) The contribution of share capital is explained on the basis of legal documents and evidences placed on record. In the course of extensive search at Mahavir Global Coal Ltd. and residential premises of the Directors of MGCL no incriminating evidences or material were found to indicate any adverse evidence in respect to contribution of share capital of assessee company. In absence of any adverse/incriminating evidence addition made by A.O. is unjustified. I) Perusal of assessment order would indicate that there is no shred of adverse evidence on record for which share capital addition can be made by A.O. Addition made by A.O. is without there being any adverse evidence on record is unjustified and unsustainable. J) It is settled proposition of law that assessee cannot be asked to explain source of the source. Reliance on: i) (2011) 330 ITR 298 (Del.) CIT vs. Dwarkadhish Investment (P) Ltd. ii) (2000) 245 ITR 160 (MP) CIT vs. Metachem iii) Hon‟ble High Court of Bombay in of 2014 in the case of M/s. Gagandeep Infrastructure Pvt. Ltd. vide order dated 20/03/2017 (P- 10 -16) [Vol.- II] iv) Hon‟ble Haryana High Court in ITA No.386 of 2010 (O & M) in the case of M/s. K.C. Pipes Pvt. Ltd. vide order dated 02/08/2016(P- 50 – 51) [Vol.- II] K) A.O. has made addition and same is not based on any incriminating evidence or material found in the course of search on Mahavir Global Coal Ltd. (MGCL). The present assessment is framed u/s 153C of I.T. Act 1961. Only addition made is in respect to Share Capital and that too not based on any incriminating material found during the course of search. Addition made not based on incriminating material unsustainable as A.O. has no jurisdiction to make such addition u/s 153C of I.T. Act 1961. Reliance on: i) Hon‟ble Bombay High Court order in ITA No.923 of 2012 in the case of Bharati Vidyapeeth vide order dated11/09/2014.

7 M/s. Mahavir Coal Resources Pvt. Ltd. Assessment Year – 2011–12

L) Decision of Hon‟ble Delhi High Court in the case of CIT vs. Globus Securities & Finance Pvt. Ltd. relied upon by revenue is distinguishable on facts and is inapplicable to the facts in the case of assessee.”

i) Acknowledgement and Computation of Income along with Audit Report for Asstt. Year 2012-13 of M/s. Torrent Vinimay Pvt. Ltd. (P- 3 – 18) ii) Acknowledgement and Computation of Income along with Audit Report for Asstt. Year 2011-12 of M/s. Torrent Vinimay Pvt. Ltd. (P- 19 – 31) iii) Copy of UBI Bank Statement of M/s. Torrent Vinimay Pvt. Ltd. (P- 32 – 36) v) Copy of Master Data as per ROC Record (P- 37) vi) Copy of PAN verification (P- 38)

8 M/s. Mahavir Coal Resources Pvt. Ltd. Assessment Year – 2011–12

9 M/s. Mahavir Coal Resources Pvt. Ltd. Assessment Year – 2011–12 which discredits the legal evidence on record to explain the cash credit. Even in search conducted no incriminating evidence is found in respect to contribution of share capital contribution. On the above undisputed factual position, the addition in respect to share capital contribution under section 68 of the Act is unjustified and unsustainable.

“(e) We find that the proviso to Section 68 of the Act has been introduced by the Finance Act 2012 with effect from 1st April, 2013. Thus it would be effective only from the Assessment Year 2013-14 onwards and not for the subject Assessment Year. In fact, before the Tribunal, it was not even the case of the Revenue that Section 68 of the Act as in force during the subject years has to be read/understood as though the proviso added subsequently effective

10 M/s. Mahavir Coal Resources Pvt. Ltd. Assessment Year – 2011–12 only from 1st April, 2013 was its normal meaning. The Parliament did not introduce to proviso to Section 68 of the Act with retrospective effect nor does the proviso so introduced states that it was introduced “for removal of doubts” or that it is “declaratory”. Therefore it is not open to give it retrospective effect, by proceeding on the basis that the addition of the proviso to Section 68 of the Act is immaterial and does not change the interpretation of Section 68 of the Act both before and after the adding of the proviso. In any view of the matter the three essential tests while confirming the pre-proviso Section 68 of the Act laid down by the Courts namely the genuineness of the transaction, identity and the capacity of the investor have all been examined by the impugned order of the Tribunal and on facts it was found satisfied. Further it was a submission on behalf of the Revenue that such large amount of share premium gives rise to suspicion on the genuineness (identity) of the shareholders i.e. they are bogus. The Apex Court in Lovely Exports (P) Ltd. (supra) in the context to the 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.”

Ratio laid down by the decision of Hon’ble Jurisdictional High Court squarely applies to the facts in the case of the assessee and respectfully following the same addition made in assessee’s case is held to be unjustified. The addition made by the Assessing Officer is contrary to law laid down by the Hon’ble Jurisdictional High Court referred to hereinabove. On the facts and evidences on record, the assessee has established and satisfied all the three ingredients being identity, creditworthiness and genuineness of share capital contribution to explain credit in terms of provisions of section 68 of the Act. The argument of the learned Departmental Representative that the assessee had obligation to explain source of source is unjustified and unsustainable and contrary to law laid down by Hon’ble Jurisdictional High Court and has no merit. On the above facts, share capital contribution cannot be said to be unexplained credit.

11 M/s. Mahavir Coal Resources Pvt. Ltd. Assessment Year – 2011–12

i) CIT v/s Lovely Exports Pvt. Ltd. [2008] 216 CTR 195 (SC); “2. Can the amount of share money be regarded as undisclosed income under s. 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.” ii) CIT v/s Value Capital Services (P) Ltd. [2008] 307 ITR 0334 (Del.) “7. In any case, what is clinching is the additional burden of the Revenue. It must show that even if the applicant does not have the means to make the investments, the investment made by the applicant actually emanated from the coffers of the assessee so as to enable it to be treated as the undisclosed income of the assessee. This has not been done insofar as the present case is concerned and that has been noted by the Tribunal also.”

12 M/s. Mahavir Coal Resources Pvt. Ltd. Assessment Year – 2011–12 iii) Hon‟ble Bombay High Court order in ITA (L) No.2182 of 2009 in the case of M/s. Creative World Telefilms Ltd. (Earlier known as Link International Services Pvt. Ltd.) vide order dated 12/10/2009 “2. The question sought to be raised in the appeal was also raised before the Tribunal and the Tribunal was pleased to follow the judgment of the Apex Court in the case of CIT V/s. Lovely Exports (P) Ltd. reported in [2008] 216 CTR 195 (SC) wherein the Apex Court observed that if the share application money is received by the assessee company from alleged bogus shareholders, whose names are given to the assessing officer, then the department can always proceed against them and if necessary reopen their individual assessments. In the case in hand, it is not disputed that the assessee had given the details of name and address of the shareholder, their PA / GIR number and had also given the cheque number, name of the bank. It was expected on the part of the assessing officer to make proper investigation and reach the shareholders. The assessing officer did nothing except issuing summons which were ultimately returned back with an endorsement 'not traceable'. In our considered view, the assessing officer ought to have found out their details through PAN cards, Bank account details or from their bankers so as to reach the shareholders since all the relevant material details and particulars were given by the assessee to the assessing officer. In the above circumstances, the view taken by the Tribunal cannot be faulted. No substantial question of law is involved in the appeal. In the result, the appeal is dismissed in limini with no order as to costs.” iv) Hon‟ble Bombay High Court in Tax Appeal No.16 of 2012 in the case of Goa Sponge and Power Ltd. vide order dated 13/02/2012. “Once the authorities have got all the details, including the names and addresses of the shareholders, their PAN/GIR number, so also the name of the Bank from which the alleged investors received money as share application, then, it cannot be termed as “bogus”. xxxxxxxxxxxxxxxxx, we are of the view that the Tribunal‟s finding that there is no justification in the addition made under section 68 o the Income Tax Act, 1961 neither suffers from any perversity nor gives rise to any substantial question of law.” v) Vodafone India Services Pvt. Ltd. v/s ACIT, [2014] 368 ITR 001 (Bom.) “FINDINGS: The amounts received on issue of share capital including the premium are undoubtedly on capital account.” xx xx xx xx xx xx In view of the above, we find considerable substance in the Petitioner‟s case that neither the capital receipts received by the Petitioner on issue of equity shares to its holding company, a non-resident entity, nor the alleged short-fall between the so called fair market price of it equity

13 M/s. Mahavir Coal Resources Pvt. Ltd. Assessment Year – 2011–12 shares and the issue price of the equity shares can be considered as income within the meaning of the expression as defined under the Act.” vi) Hon‟ble Punjab & Haryana High Court in of 2010 (O & M) in the case of M/s. K.C. Pipes Pvt. Ltd. vide order dated 02/08/2016. (P- 50 – 51) (51) [Vol.- II] “If the shareholders have acquired the money illegally, the respondent – assessee cannot be held liable. There is nothing to show that the money belongs to the Company/assessee itself. The revenue must then proceed against the shareholders.” vii) Hon‟ble Bombay High Court in Writ Petition No.3027 of 2015 in the case of Khubchandani Healthparks Pvt. Ltd. vide order dated 10/02/2016. (P- 52 – 60) (58, 59) [Vol.- II] “We are of the view that the basis of the impugned Notice stands concluded by the decision of this Court in Vodafone India Services Ltd. Vs. CIT 368 ITR 01, wherein it has been held that the share premium being on the capital amount cannot be subjected to tax as income” viii) CIT v/s Dwarkadhish Investment (P) Ltd. [2011] 330 ITR 298 (Del.) “8. In any matter, the onus of proof is not a static one. Though in s. 68 proceedings, the initial burden of proof lies on the assessee yet once he proves the identity of the creditors/share applicants by either furnishing their PAN or income-tax assessment number and shows the genuine– ness of transaction by showing money in his books either by account payee cheque or by draft or by any other mode, then the onus of proof would shift to the Revenue. Just because the creditors/share applicants could not be found at the address given, it would not give the Revenue the right to invoke s.

Ratio laid down by the abovementioned judgment fully supports the submission of the assessee. Respectfully following the judgments referred to hereinabove, we hold that the addition made in assessee’s case u/s 68 of the Act, is not in accordance with law and is unjustified.

14 M/s. Mahavir Coal Resources Pvt. Ltd. Assessment Year – 2011–12

16. Having noted the above, we may now advert to the orders passed by the authorities below.

15 M/s. Mahavir Coal Resources Pvt. Ltd. Assessment Year – 2011–12 a) PAN number of the companies; b) Copies of Income Tax return filed by these three companies for assessment year 2010-11; c) Confirmation Letter in respect of share application money paid by them; and d) Copy of Bank Statement through which cheques were issued.

16 M/s. Mahavir Coal Resources Pvt. Ltd. Assessment Year – 2011–12 u/s.68 of the Act. In view of above reasoned factual finding of CIT(A) needs no interference from our side. We uphold the same."

21. Therefore, on a thorough consideration of the matter, we are of the view that the first appellate authority had returned a clear finding of fact that assessee had discharged its onus of proving identity of the creditors, genuineness of the transactions and credit-worthiness of the creditors which finding of fact stood affirmed by the Tribunal. There is, thus, concurrent findings of fact by the two lower appellate authorities. Appellant has not been able to show any perversity in the aforesaid findings of fact by the authorities below.

22. Under these circumstances, we find no error or infirmity in the view taken by the Tribunal. No question of law, much less any substantial question of law, arises from the order of the Tribunal. Consequently, the appeal is dismissed. However, there shall be no order as to cost.”

The ratio laid down by the aforesaid decision of the Hon’ble Bombay High Court squarely applies to the facts in the case of assessee. The addition made in the case of the assessee company is held to be unjustified and not in accordance with law in terms of law laid down by the Hon’ble Jurisdictional High Court as discussed hereinabove.

17 M/s. Mahavir Coal Resources Pvt. Ltd. Assessment Year – 2011–12

18 M/s. Mahavir Coal Resources Pvt. Ltd. Assessment Year – 2011–12 nothing adverse remains in the judgment of Hon’ble Delhi High Court in the case of Globus Securities & Finance Pvt. Ltd., as finally addition made in the aforesaid case is held to be unjustified and stands deleted.