DCIT- 3(2)(1), MUMBAI vs. JAGAON FRANCHISEE PVT. LTD., MUMBAI

Per Joginder Singh (Judicial Member) The Revenue is aggrieved by the impugned order dated 25/01/2016 of the Ld. First Appellate Authority, Mumbai, deleting the addition of Rs.13,06,80,000/- made u/s 68 of the Income Tax Act, 1961 (hereinafter the Act), without appreciating the fact and the decision from Hon'ble Apex Court in Benerjee vs CIT 49 ITR 112 (Supreme Court) and Hon'ble jurisdictional High Court in Major Metals Ltd. vs UOI (2007) taxman 185 (Bom.) and further approving share premium of Rs.99 per share merely relying upon the estimated profit for future 10 years and also ignoring that the assessee has no assets, as on date, to earn the estimated profit, based on which the earning per share was quantified at Rs.197 per share, by the assessee.

3 Jalgam Franchisee Pvt Ltd. that there is a negative earning/loss. Likewise, at page 290 also, the figures were explained to be of negative earning.

Our attention was further invited to page 150 of the paper book by explaining that all these years, there is a loss. Our attention was further invited to page 290, asserting that in every year, there is a loss, thus, there is exact reverse situation against the claim made by the assessee. Reliance was placed upon the decision in Commissioner Of Income- Tax vs Precision Finance Pvt. Ltd. 208 ITR 465 (Cal.), Commissioner Of Income Tax vs Vir Bhan And Sons, order dated 2 August, (2004) 273 ITR 206 (P & H) and another decision from Hon'ble Delhi High Court in CIT vs Jansampark (ITA No.525 /2014) order dated 11/03/2015.

2.1. On the other hand, the Ld. counsel for the assessee, Shri K. Gopal, defended the impugned order by contending that the assessee has fulfilled the conditions contained in section 68 of the Act. It was pleaded that the Bank approved the loan for which our attention was invited to page 181 of the paper book containing the loan sanctioned letter, page-183, terms and conditions, page- 170, containing valuation report and other pages like 173,

4 Jalgam Franchisee Pvt Ltd. 177, 168, 192 of the paper book. It was pleaded that the identity is not in dispute that the assessee has discharged the onus so cast upon. Reliance was placed upon the decision CIT vs Gagandeep Infrastructure Pvt. Ltd. (2017)

80 taxman.com 272 (Bom.), CIT vs Green Infra Ltd. (2017)

78 taxmann.com 340 (Bom.) and the decision of the Tribunal in Green Infra Ltd. Further reliance was placed upon the decision in DCIT vs Alcom Bioscience P. Ltd. (ITA No.1946/Mum/2016), order dated 28/02/2018. Assessee has also filed written submissions, which are kept on record and considered.

2.2. We have considered the rival submissions and perused the material available on record. The facts, in brief, are that assessee is a private limited company, engaged in the business of Food court and franchise of Max Life Style incorporated with the share capital of rupees one lakh held by the share holders namely (i) Crescent Entertainment Tourism Ltd. (hereinafter CETL) (purchased 50000 shares at the face value of Rs.1 each) amounting to Rs.50,000/- and (ii)Speciality Logistics Pvt. Ltd. (hereinafter SLPL) having equal shares also at the face value of Rs.1 each.

5 Jalgam Franchisee Pvt Ltd. Thereafter, the aforementioned share holders sold their (hereinafter RSCPL) and Mr. Ritesh Rishabh Jain. The details are summarized as under:-

Date of No. of Transferor Transferee Transfer transfer shares value transferred 29.04.2010 50,000 “CETL” “RSCPL” Rs.50,000/- 03.06.2010 50,000 “SLPL” Rishabh Rs.50,000/- Jain Total 1,00,000 Rs.1,00,000/- 2.3. M/s. "RSCPL" transferred 1,000 shares to Mr. Rishabh Jain on 10/06/2010. As per the assessee, Mr. Rishabh Jain is a qualified person.

The Ld. counsel for the assessee, in his written submission, claimed that the initial investment of Rs. 26.40 crore was required out of which the amount of Rs.15.4 crores was taken from M/s.

2.4. As per the assessee, funds to the tune of Rs.13.20 crores were raised by making right issue to the existing share holders by way of equity shares/preferential share capital. The share premium which is under the 6 Jalgam Franchisee Pvt Ltd. dispute was decided at Rs. 99/- per share. The total funds were raised which is already reproduced by the learned Assessing Officer at Page No: 2 of his assessment order. The details are as under:

Name of the share Towards Equity Share Towards Preference holders Capital and share Share Capital and Share premium Premium Mr. Rishabh Jain Rs. 3,06,00,000/- Rs. 3,67,20,000/- (3,06,000 shares at Rs. (3,67,200 shares at Rs. 100/- which includes 100/- which includes Rs. 1 towards share Rs. 1towards s h a r e capital and Rs.99 c a p i t a l a n d R s . 9 9 towards share premium) towards share premium)

Rs. 3,52,80,000/- “ RSCPL Rs 2,94,00,000/ (3,52,800 shares at Rs. (2,94,000 shares at Rs. 100/- which includes Rs. 1 100/- which includes towards share capital Rs. 1 towards share towards share premium) capital and Rs.99 towards share premium) Total `.6,00,00,000/- `.7,72,00,000/- `13,20,00,000/- Grand Total 2.5. After raising the aforesaid funds and the loan from the said bank, the assessee acquired the said leasehold property by entering into an agreement with M/s. Crescent Entertainment & Tourism Ltd on 15,10.2010 for Rs. 26 40 Cr for 27 years. The said agreement is annexed at Page No: 192-198 of the Paper Book.

2.6. The assessee filed its return of income

7 Jalgam Franchisee Pvt Ltd. declaring total loss of Rs. 32,09,094/- on 29/09/2011, which was processed u/s 143(1) of the Act. The case was thereafter selected for the scrutiny assessment and the notice u/s 143(2) was served on the assessee on 27/09/2012. During the course of the assessment proceedings, the learned assessing officer noticed the share premium of Rs.13,06,80,000/- received by it during the year under consideration is very unrealistic, therefore, asked the assessee to explain the same. In pursuant to the aforesaid query, the assessee filed various submissions from time to time before the learned assessing officer. However, the learned Assessing Officer added the entire share premium of Rs.13,06,80,000/- u/s 68 of the Act. The learned assessing officer observed that the assessee had allotted the shares to two more companies in the previous year at face value and no such premium was charged at that time. Further, the learned assessing officer concluded that the assessee did not have any uniform practice of charging the 8 Jalgam Franchisee Pvt Ltd. premium and disbelieved the premium charged by the assessee on the observation that the assessee did not have any valuable assets except some plant and machinery and incurred losses for both the assessment years. i.e. A.Y. 2010-11 and 2011-12. The Ld. Assessing Officer placed reliance upon the decision in a. Zars Trading Pvt. Ltd. (2010) 10L-308-ITAT Del Vide order dated 26.02.2010 in Income Tax Act, 1961 No. 3284/De1/2009 b. Kushara Real Estate Pvt. Ltd. — Income Tax Act, 1961 No. 4247/De1/2009 2.7. At Page No. 6 of the Assessment Order, the learned assessing officer after relying upon the aforesaid decisions, came to the conclusion that section 56(2)(viib) of the Act as introduced by the Finance Act,2012 w.e.f 01.04.2013 is clarificatory and retrospective. The learned assessing officer found support for his conclusion from the decision of Hon'ble Bombay High Court in case of Major Metals Ltd. vs. Union of India 359 ITR 450 (Bom.). Finally, the learned assessing officer on the basis of all the aforesaid conclusions treated the share premium

9 Jalgam Franchisee Pvt Ltd. as non-genuine and added the same u/s 68 of the Act.

2.8. On appeal, before the Ld. Commissioner of Income Tax (Appeal), various contentions of the assessee were considered and the additions made u/s 68 of the Act, by the Ld. Assessing Officer were deleted.

2.9. The Revenue felt aggrieved and preferred appeal before this Tribunal. So far as, the arguments from both sides are concerned, we have already discussed in earlier paras of this order. The crux of the argument on behalf of the assessee is that the share premium of Rs.99/- is out of commercial expediency. The contention of the assessee is that the entire funds were raised and the share premium was collected from the existing shareholders by way of a right issue for the purpose of complying with the condition put by M/s. IDBI Bank Ltd and thereafter acquiring the leasehold premises for the purpose of business which was purely based on commercial expediency. During hearing, the ld. counsel for the assessee, drew our attention to various pages like Pages 192-198 of the Paper Book which contains a copy of the agreement of lease deed entered into

10 Jalgam Franchisee Pvt Ltd. by the Respondent with M/s. Crescent Entertainment & Tourism Ltd on 15/10/2010. It was submitted that the period of the leasehold premises was 27 years in which the assessee had got substantial rights. Our attention was invited to Clause 2.1. Before us, the ld. counsel for the assessee, contended that the learned assessing officer doubted the quantum of share premium without appreciating the entire facts under consideration. The ld. counsel invited our attention to section 68 of the Act by claiming that the assessee has discharged the onus.

2.10. The Ld. counsel also contended that sec 56(2)(viib)of the Act is prospective and is charging one, which brings to tax an excess consideration including a share premium received which is otherwise a capital receipt not chargeable to tax in consideration of issue of shares by a company in which public is not substantially interested.

2.11. If the observation made in the assessment order, leading to addition made to the total income, conclusion drawn in the impugned order, material available on record, assertions made by the ld. respective counsel, if kept in juxtaposition and analyzed, before adverting further we may mention a decision from Hon'ble

11 Jalgam Franchisee Pvt Ltd. jurisdictional High Court in the case of CIT vs Gagandeep Infrastructure Pvt. Ltd. (2017) 80 taxmann.com 272(Bom.) with respect to section 68 of the Act and its effect. “1. This Appeal under section 260-A of the Income Tax Act, 1961 (the Act) challenges the order dated 23' April, 2014 passed by the Income Tax Appellate Tribunal (the Tribunal). The impugned order is in respect of Assessment Year 2008-09.

2. Mr. Suresh Kumar, the learned counsel appearing for the Revenue urges the following re-framed questions of law for our consideration:-

(1) Whether on the facts and in the circumstances of the case and in law, the Tribunal was justified in deleting the addition of Rs.7,53,50,000/- under Section 68 of the Act being share capital/share premium received during the year when the Assessing Officer held the same as unexplained cash credit? (ii) Whether on the facts and in the circumstances of the case and in law, the Tribunal was justified in restricting the disallowance under Section 14A of the Act only to the amount of expenditure claimed by the assessee in the absence of any such restriction under Section 14A and/or Rule SD?

3. Regarding question no.(i):- During the previous relevant to the subject Assessment (a) Year the respondent-assessee had increased its share capital from Rs.2,50,000/- to Rs.83.75 lakhs. During the assessment proceedings, the Assessing Officer noticed that the respondent had collected share premium to the extent of Rs.6.69 crores. Consequently he called upon the respondent to justify the charging of share premium at Rs.190/- per share. The respondent furnished the list of its shareholders, copy of the share application form, copy of share certificate and Form no.2 filed with the Registrar of Companies. The justification for charging share premium was on the basis of the future prospects of the business of the respondent-assessee. The Assessing Officer did not accept the explanation/justification of the respondent and invoked Section 68 of the Act to treat the amount of Rs.7.53 crores i.e. the aggregate of the issue

12 Jalgam Franchisee Pvt Ltd. price and the premium on the shares issued as unexplained cash credit within the meaning of Section 68 of the Act.

(b) Being aggrieved, the respondent carried the issue in appeal. By an order dated 24th May, 2011 the Commissioner of Income Tax (Appeals) (CIT(A)) deleted the addition of Rs.7.53 crores made by the Assessing Officer by holding that the Assessing Officer had given no reason to conclude that the investment made (inclusive of premium) was not genuine. This inspite of evidence being furnished by the respondent in support of the genuineness of the transactions. Further he held that the appropriate valuation of the shares is for the subscriber/investor to decide and not a subject of enquiry by the Revenue. Finally he relied upon the decision of the Apex Court in CIT v/s. Lovely Exports (P)Ltd. 317 ITR 218 to hold that if the amounts have been subscribed by bogus shareholders it is for the Revenue to proceed against such shareholders. Therefore it held the Assessing Officer was not justified in adding the amount of share capital subscription including the share premium as unexplained credit tinder Section 68 of the Act.

(c) Being aggrieved, the Revenue carried the issue in the appeal to the Tribunal. The impugned order of the Tribunal holds that the respondent- assessee had established the identity, genuineness and capacity of the shareholders who had subscribed to its shares. The identity was established by the very fact that the detailed names, addresses of the shareholders, PAN numbers, bank details and confirmatory letters were filed. The genuineness of the transaction was established by filing a copy of share application form, the form filed with the Registrar of Companies and as also bank details of the shareholders and their confirmations which would indicate both the genuineness as also the capacity of the shareholders to subscribe to the shares. Further the Tribunal while upholding the finding of CIT(A) also that the amount received on issue of share capital alongwith the premium received thereon, would be on capital receipt and not in the revenue field. Further reliance was also placed upon

13 Jalgam Franchisee Pvt Ltd. the decision of Apex Court in Lovely Exports (P) Ltd. (supra) to uphold the finding of the CIT(A) and dismissing the Revenue's appeal. (d) Mr. Suresh Kumar, the learned counsel appearing for the Revenue contends that proviso to Section 68 of the Act which was introduced with effect from 1st April, 2013 would apply in the facts of the present case even for A.Y. 2008-09. The basis of the above submission is that the de hors the proviso also the requirements as set out therein would have to be satisfied. (e) We find that the proviso to Section 68 of the Act has been introduced by the Finance Act 2012 with effect from 1st April, 2013. Thus it would be effective only from the Assessment Year 2013-14 onwards and not for the subject Assessment Year. In fact, before the Tribunal, it was not even the case of the Revenue that Section 68 of the Act as in force during the subject years has to be read/understood as though the proviso added subsequently effective only from 1st April, 2013 was its normal meaning. The Parliament did not introduce to proviso to Section 68 of the Act with retrospective effect nor does the proviso so introduced states that it was introduced "for removal of doubts" or that it is "declaratory". Therefore it is not open to give it retrospective effect, by proceeding on the basis that the addition of the proviso to Section 68 of the Act is immaterial and does not change the interpretation of Section 68 of the Act both before and after the adding of the proviso. In any view of the matter the three essential tests while confirming the pre-proviso Section 68 of the Act laid down by the Courts namely the genuineness of the transaction, identity and the capacity of the investor have all been examined by the impugned order of the Tribunal and on facts it was found satisfied. Further 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

14 Jalgam Franchisee Pvt Ltd. 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.

4.(a) Admit the substantial question of law at (ii) above.

(b) The issue arising in question no. (ii) is essentially whether application of Rule 8D(2)(iii) of the Income Tax Rules would not permit the Revenue to disallow expenditure not claimed i.e. much larger than the expenditure/debited in earning its total income. The Counsel inform us that there is no decision on this issue of any Court available and it would effect a large number of cases whether similar issues arise. Therefore, this issue would require an early determination. In the above view, at the request of the Counsel, the appeal is kept for hearing on 17th April 2017 at 3.00P.M. subject to overnight part heard.

5. Registry is directed to communicate a copy of this order to the Tribunal. This would enable the Tribunal to keep the papers and proceedings relating to the present appeal available, to be produced when sought for by the Court.”

2.12. In another case, the Hon'ble jurisdictional High Court in CIT vs Green Infra Ltd. (2017) 78 taxmann.com 340(Bom.) held as under:- “1. This Appeal under Section 260-A of the Income Tax Act, 1961 (the Act) challenges the order dated 23rd August, 2013 passed by the Income Tax Appellate Tribunal (the Tribunal). The impugned order is in respect of Assessment Year 2011-12.

2. Mr. Chhotaray, the learned counsel urges only the following questions of law for our consideration :— "(i) Whether on the facts and in the circumstances of the case and in law, the Tribunal was justified in holding that an amount of Rs.490/- per share received by the respondent- assessee constituted share premium of the assessee

company?

(ii) Whether on the facts and in the circumstances of the case and in law, the Tribunal was justified in disagreeing with invocation of Section 68 of the Act to tax share premium?

(iii) Whether on the facts and in the circumstances of the case and in law, the Tribunal is justified in holding that because its subsidiary company has started manufacturing and therefore interest income from fixed deposit is to be charged as business income?"

Regarding question no. (ii) 3. (a) Before the Tribunal, the Revenue raised a new plea viz. that the so called share premium has also to be judged on the touchstone of Section 68 of the Act which provides for cash credit being charged to tax. The impugned order of the Tribunal allowed the issue to be raised before it for the first time, overruling the objection of the respondent-assessee. (b) The impugned order examined the applicability of Section 68 of the Act on the parameters of the identity of the subscriber to the share capital, genuineness of the transaction and the capacity of the subscriber to the share capital. It found that the identity of the subscribers was confirmed by virtue of the Assessing Officer issuing a notices under Section 133(6) of the Act to them. Further, it holds that the Revenue itself makes no grievance of the identity of the subscribers. So far as the genuineness of the transaction of share subscriber is concerned, it concludes as the entire transaction is recorded in the Books of Accounts and reflected in the financial statements of the assessee since the subscription was done through the banking channels as evidenced by bank statements which were examined by the Tribunal. With regard to the capacity of the subscribers the impugned order records a finding that 98% of the shares is held by IDFC Private Equity Fund-II which is a Fund Manager of IDFC Ltd. Moreover, the contributions in IDFC Private Equity Fund-II are all by public sector undertakings. (c) Mr. Chhotaray the learned counsel for the Revenue states that the impugned order itself holds that share premium of Rs.490/- per share defies all commercial prudence. Therefore it has to be considered to be cash credit. We find that the Tribunal has examined the case of 16 Jalgam Franchisee Pvt Ltd. the Revenue on the parameters of Section 68 of the Act and found on facts that it is not so hit. Therefore, Section 68 of the Act cannot be invoked. The Revenue has not been able to show in any manner the factual finding recorded by the Tribunal is perverse in any manner. (d) Thus, question no. (ii) as formulated does not give rise to any substantial question of law and thus not entertained. Regarding question no. (iii) 4. (a) During the course of Assessment, the Assessing Officer noticed that the respondent had earned interest income on fixed deposits amounting to Rs.6.09 lakhs which was shown under the heading "Profits and Gains Business'. The Assessing Officer was of the view that the respondent had not commenced its business nor was it in the business of money lending therefore the interest on bank fixed deposit would be taxable as income from other sources and not as business income. Consequent reclassification of income was done in the Assessment Order dated 23rd December, 2011. (b) In appeal the Commissioner of Income Tax (Appeals) upheld the view of the Assessing Officer. On further appeal the Tribunal in the impugned order records the fact that the three fixed deposit were for a period of 1 day, 28 days and 90 days respectively. Considering the nature of business of the respondent-assessee, the Tribunal, was of the view that the interest earned would be taxable under the head 'business income'. In support reliance was placed by the impugned order upon the decision of this Court in CIT v. Indo Swiss Jewels Ltd. [2006] 284 ITR 389. (c) The grievance of the Revenue is that the respondent- assessee had not commenced its business. Therefore it is not entitled to claim that the income earned on the fixed deposits even for a short period is no business income. (d) We find that the claim for depreciation and expenditure in the subject assessment year, had been disallowed by the Assessing Officer and the disallowance was upheld by the Commissioner of Income Tax (Appeals). This disallowance was on account of non commencement of business. However the same has been reversed by the Tribunal in the impugned order. It has taken a view that the business of the respondent- assessee was of financing, investing, sourcing, operating, green or clean technological products and services had commenced. Therefore, consequently, allowed the claim made for depreciation and expenses to determine 17 Jalgam Franchisee Pvt Ltd. business profits. The above finding of the Tribunal that the business of the respondent had commenced is not challenged before us by the Revenue. It needs no emphasis that setting up a business or commencement of business cannot vary dependent upon the claim being made i.e. for expenses it has commenced and for income it has not commenced. Therefore it is not open to the Revenue to contend that the business was not set up/commenced for the purposes of holding that the income earned is not income from business. (e) Further in the context of the respondent's business and the period of fixed deposits, the impugned order holds the interest earned on them is taxable as business income. In fact this Court is almost similar circumstances in Indo Swiss Jewels Ltd. (supra) has held interest earned on short term deposits on the money kept apart for the purposes of business had to be treated as income earned from business and could not be treated as income from other sources. Considering the short duration in which the amounts were kept in fixed deposit awaiting use in its business operations would necessarily mean income earned on account of business following the ratio of this Court in Indo Swiss Jewels Ltd. (supra). (f) In the above view, question (iii) as formulated does not give rise to any substantial question of law. Thus not entertained. (g) The Appeal admitted on the substantial question of law at question no. (i).

5. Registry is directed to communicate a copy of this order to the Tribunal. This would enable the Tribunal to keep the papers and proceedings relating to the present appeal available, to be produced when sought for by the Court.” 2.13. Now, we shall deal with the cases relied upon by the Ld. CIT-DR. In the case of CIT vs Jansampark (ITA No.525 /2014)((supra)), the relevant portion of the order is reproduced hereunder:-

1. This appeal under Section 260-A of Income Tax Act, 1961 assails the order dated 14.06.2013 passed by Income Tax Appellate Tribunal (hereinafter referred to as “the ITAT”) in 18 Jalgam Franchisee Pvt Ltd. appeal No. 4839/Del/2009 respecting the respondent (“the assessee”) for the assessment year (AY) 2004-05. The following substantial question of law was framed by order dated 25.11.2014:- ― 2.1 Whether in the facts and circumstances of the case ld. ITAT was correct in allowing the appeal of the assessee in regard to addition of ₹71,00,000/- on account of unexplained credit u/s 68 of the Income Tax Act. 2.2 Whether in the facts and circumstances of the case ld. ITAT was correct in allowing the appeal of the assessee in regard to addition of ₹1,42,000/- on account of commission paid on entry taken from entry provider.

4. During the assessment proceedings, thus re-opened, the AO noticed that the assessee had raised share capital from the following parties to the extent indicated against each:- 1. M/s Labh - Tronics Overseas (P) Ltd. 5,00,000/- 2. M/s F.N.S. Consultancy 7,00,000/- 3. M/s C.V. Metal Powder 5,00,000/- 4. M/s Maestro Mktg.(P) Ltd. 4,00,000/- 5. M/s Dignity Finvest (P) Ltd. 4,00,000/- 6. M/s Ethnic Creation (P) Ltd. 3,00,000/- 7. M/s M.V. Marketing (P) Ltd. 3,00,000;':· 8. M/s Akshay Sales (P) Ltd. 5,00,000/- 9. M/s S.G.C. Publishing (P) Ltd. 10,00,000/- 10. M/s Maestro Mktg. & Advertising (P) Ltd. 13,00,000/- 11. M/s Fair N Square Exports (P) Ltd. 5,00,000/- 12. M/s Jain Projects & Fin. Consultants (P) Ltd. 7,00,000/- TOTAL 71,00,000/- 5. It is the case of the Revenue that on examination of the details, and as per the information collected on the basis of investigation carried out, it was found that share capital had been received from the following three entry operators who are allegedly engaged in the business of giving accommodation entries: a. Maestro Mktg. & Advertising (P) Ltd. b. Fair N Square Exports (P) Ltd.

20 Jalgam Franchisee Pvt Ltd. c. Jain Projects & Fin. Consultants (P) Ltd.

21 Jalgam Franchisee Pvt Ltd. (ii) Assessee had discharged the preliminary burden in terms of Sec. 68 for the existence of the creditors – The parties from whom it has received share application money by filing copy of application for subscription of shares, confirmations, copy of Company Master Data from the office of ROC. Acknowledgment of Filing of Income Tax Return with Permanent Account Number etc. (iii) The credit worthiness of the parties to pay such Share Application Money to the Appellant Company has been established on the basis of copy of Annual Accounts of the subscriber Companies, copy of Bank Statements etc., filed during assessment proceedings. (iv) The genuineness of the transaction i.e. the nature of receipts by the Assessee Company by way of Share Application Money is established by the fact that the amounts were received through banking channels, shares were allotted against the amounts received, vide return of allotment dated 29.06.2004, filed with ROC.‖ 10. The appeal was allowed by the CIT (Appeals) deleting the additions made by the AO, inter alia, relying upon CIT v. Lovely Exports Pvt. Ltd., (2008) 216 CTR 195 (SC). The Revenue having preferred appeal (ITA No. 4839/Del/2009), to which the assessee had also filed counter-objection (No. 103/Del/2011), was unsuccessful before ITAT.

23 Jalgam Franchisee Pvt Ltd.

31 Jalgam Franchisee Pvt Ltd. Out of the 22 companies whose names figured in the information given by them to the investigation wing, 15 companies had provided the so-called ―share subscription monies‖ to the assessee. There was thus specific involvement of the assessee company in the modus operandi followed by Mukesh Gupta and Rajan Jassal. Thus, on crucial factual aspects the present case stands on a completely different footing from the case of CIT v Oasis Hospitalities P. Ltd. (supra).‖ [emphasis supplied] 30. The judgment in the case of CIT v. Gangeshwari Metal Pvt. Ltd. (supra), which has been referred by the ITAT in the impugned order followed the same line of reasoning but with adverse result for the Revenue because, on facts, it was held that the assessee having furnished all the requisite material, there had been a failure on the part of the AO to conduct proper inquiry.

32 Jalgam Franchisee Pvt Ltd.

38 Jalgam Franchisee Pvt Ltd. 2.14. Likewise, Hon'ble Calcutta High Court in the case Commissioner Of Income-Tax vs Precision Finance Pvt. Ltd. 208 ITR 465 (Cal.), held as under:-

“1. In this reference under Section 256(2) of the Income-tax Act, 1961, for the assessment years 1978-79 and 1979-80, the following question has been referred to this court : "Whether, on the facts and in the circumstances of the case, the Tribunal was justified in law in deleting the addition of Rs. 5,64,631 and Rs. 4,84,205 as unexplained credits and interest thereon for the assessment years 1978-79/1979-80, respectively ?" Shortly stated the facts leading to this reference are that the assessee is Messrs. Precision Finance Pvt. Ltd. and the assessment years involved are 1978-79 and 1979-80 for which the accounting periods ended on June 30, 1977, and June 30, 1978, respectively. The business of the assessee-company is loan financing. In the assessment for the assessment year 1978-79, there were two assessments under Section 144 due to non-compliance by the assessee but both the ex parte assessments were reopened under Section 146 of the Income-tax Act, 1961. The present assessment was a third assessment made under Section 143(3)/146 on March 11, 1986. In the course of assessment proceedings for the year 1978-79, the Assessing Officer found that the following cash credits appeared in the books of account of the assessee for which the income-tax file numbers of the creditors as furnished by the assessee were as under : Sl. No. Name of the creditors Cash credit I.T. file Nos.

7. Mahalakshmi Bastralaya 50,000 11-051-PY-7837 Cal/VI/C 8. Sohanlal Suresh Kumar 25,000 V(1)/734-S/G 9. Mulchand Chabra 25,000 11-011-PX-9410 Cal/IV(2)/M 10. Somani Supply Syndicate Company 1,00,000 11-054-FQ- 0953 Total 5,45,000 The Assessing Officer deputed his inspector to make investigation about the above loan creditors. On enquiry, it was found that the income-tax file numbers given in respect of Mohanlal Golcha (Sl. No. 1) was not available and the said party was not also available at the given address at 161/1, M.G. Road, Calcutta. In respect of Assam Jute Supply Company (Sl. No. 2), the assessee neither filed the confirmatory letter nor the address was fully given which could be verified by the inspector. In respect of Associated Syndicate Co. (Sl. No. 3), the inspector could not find the file in District (1), C-Ward, Calcutta. Moreover, the creditor, Messrs. Associated Syndicate Company, was not traceable at the given address at 2, Nawab Badruddin Street, Calcutta. In respect of Sun Enterprises (Sl. No. 4), on enquiry the file could not be found in District V(2), F-Ward. The said party was also not traceable at the given address at 4, Wood Street, Calcutta. In respect of Rajasthan Jute Supply Company (Sl. No. 5), the file could not be found in District VI also. The party was not traceable at the given address at 11, Pollock Street, Calcutta. Subsequently, the assessee in respect of this party had furnished a file number of District 7(1) but the file also could not be found out. In respect of Probhat Trading Company (Sl. No. 6), the file could not be found out in District II(2), B-Ward. In respect of Mahalakshmi Bastralaya (Sl. No. 7), the file number given by the assessee could not be found out in C-Ward, District VI. In respect of Sohanlal Suresh Kumar (Sl. No. 8), the file number given could not be found out in District V(1), Calcutta. Moreover, the party was not traceable at the given address. In respect of Mulchand Chabra it was found on examination of the income-tax assessment records that the party had income from commission and interest. His balance-sheet for the relevant year did not reflect the alleged loan given to the assessee-company. In respect of Somani Supply Syndicate Company (Sl. No. 10), it was found on enquiry that the loan given to the assessee-company was not reflected in the balance-sheet. For the aforesaid reasons, the Assessing Officer made an addition of Rs. 4,45,000 as cash credits

40 Jalgam Franchisee Pvt Ltd. and also disallowed interest relatable to those loans amounting to Rs. 19,631 for the assessment year 1978-79. Similarly, for the assessment year 1979-80, the Assessing Officer made an addition of Rs. 4,50,000 as income from other sources as he found similar defects in respect of cash credits from the following parties :

1. 1. Mohanlal Chola. 2. Rajasthan Jute Supply Company. 3. Assam Jute Supply Company. 4. Rajendra Kumar Gupta. 5. Hemraj Sagarmal. 6. Lakshmi Narayan Botanlal. 7. Sitaram Khaitan.

8. Kedarnath Ramratan. The Assessing Officer also added interest relatable to the fictitious loans amounting to Rs. 37,512 for the assessment year 1979-80.

2. Aggrieved by the orders of the Assessing Officer, the assessee filed appeals before the Commissioner of Income-tax (Appeals). The Commissioner of Income-tax (Appeals), considering the facts and circumstances of the case, confirmed the additions.

3. Being aggrieved, the assessee came up in appeal before the Tribunal. The Tribunal found that all the parties were old parties. It also found that the Assessing Officer made enquiries in the old districts of the Department but did not try his hand in the survey circles of the Department to find out the creditors. Therefore, the Tribunal held that it could not be said that efforts were made by the Assessing Officer to trace the income-tax files of the cash creditors. The Tribunal also held that the Assessing Officer was expected to find out the truth from all districts. In this case all the transactions were made by account payee cheques. The assessee urged the Assessing Officer to verify the bank accounts of the parties to find out the truth of the transactions which he did not do. The Tribunal further found that since the Assessing Officer did not verify the bank accounts of the creditors, it should be held that the creditworthiness and genuineness of the transactions have been established. By so holding the Tribunal deleted the additions made by the Assessing Officer for the two years under reference.

41 Jalgam Franchisee Pvt Ltd.

42 Jalgam Franchisee Pvt Ltd. There was no such file in District II(2)/ L-Ward 80,000 11-043- PX-2648 Cal/2(2)/L (g) Mahalakshmi Bastralaya There is no such file in District VI/G- Ward, and moreover in District V(I)/G-Ward also 50,000 11- 051-PY-7837 Cal/VI(C)/L (h) Sohanlal Suresh Kumar There is no such file in District V(I)/G-Ward, and moreover the assessee is not available at 203/1, M. G. Road, Calcutta 25,000 V(I)/734/8/G (i) Moolchand Chabra He has shown commission on interest for bogus name-lending business. His balance-sheet for the relevant year does not reflect the loans given to the assessee 25,000 11- 011-PX-9410 Cal/IV(2)/M (j) Somani Supply Syndicate Co. The loans advanced to the assessee to the tune of Rs. 50,000 were not reflected in the balance-sheet of the firm as on March 31, 1977. But the party filed photostat copy of the balance-sheet where loans were reflected. The loans were not reflected in the balance-sheet filed by the party with Income-tax Officer, District V(I). Hence, the loan of Rs. 1,00,000 could not be regarded as genuine and is added back 1,00,000 11-054-FQ-0953 Cal/C/VI(C) It appears from the order of the Commissioner of Income-tax (Appeals) that the Income-tax Officer allowed opportunity to the assessee for about 7 1/2 years starting from September 16, and ending on February 24, 1986, to produce the relevant documents in support of the contentions that the loans were genuine. Those opportunities were not availed of. Nothing was produced before the Commissioner of Income-tax (Appeals). Enquiries were conducted through the inspector on different dates and it was found that either the files do not exist as per details given by the assessee or the records do not tally with the facts mentioned by the assessee, except in two cases where the records were available in respect of Moolchand Chhabra and Somani Supply Syndicate Company and in all other cases creditors were not even found at the addresses given by the appellant. Apart from having enquiries made by the inspectors several letters were also issued to the assessee between January 16, 1982, and February 24, 1986, bringing to its notice that the loans could not be verified and adequate proof is required. At no stage have the appellant's 43 Jalgam Franchisee Pvt Ltd. representatives responded properly. Nowhere was the question of checking up the bank account raised.

6. There will be no order as to costs.” 2.15. The Hon'ble Punjab & Haryana High Court in the case of Commissioner Of Income Tax vs Vir Bhan And Sons, order dated 2 August, (2004) 273 ITR 206 (P & H) held as under:-

“1. Revenue has filed this appeal under Section 260A of the IT Act, 1961 (for short "the Act"), against the order of the ITAT, Delhi Bench 'A', New Delhi (for short "the Tribunal"), dt. 28th July, 2003, pertaining to asst. yr. 1992-93.

44 Jalgam Franchisee Pvt Ltd. 2. Revenue is aggrieved by the order of the Tribunal whereby its appeal against the order of the CIT(A) deleting the additions of Rs. 22,01,500 on account of unexplained cash credits and Rs. 94,602 on account of interest claimed thereon has been dismissed. The relevant facts pertaining to this issue may first be noticed.

Rs. 1. Smt. Sarla Rani 49,000 2. Shri Lokesh Kumar 2,54,000 3. Smt. Priti Singla 91,000 4. Shri Bhupesh Kumar 97,500 5. Shri Vir Bhan 4,10,000 6. M/s Riba Textiles (P) Ltd. 8,00,000 7. Adarsh Woollen Inds. 5,00,000 ---------- Total : 22,01,500 ----------

He required the assessee to file confirmation with permanent account numbers from the creditors and also produce them for examination. Since the assessee failed to produce the creditors, a show-cause notice was issued by the AO requiring it to explain as to why the said amount be not treated as unexplained cash credit under Section 68 of the Act and added to its income. No reply to the show-cause notice was furnished by the assessee and, accordingly, while framing the assessment on 20th March, 1995, the AO treated the cash credits of Rs. 22,01,500 as unexplained and added it to the income as income from undisclosed sources under Section 68 of the Act. As a corollary thereto, interest paid on these unexplained credits amounting to Rs. 94,602 was also disallowed.

The assessee challenged these additions in appeal before the CIT(A) before whom he furnished the following written submissions :

45 Jalgam Franchisee Pvt Ltd. "The appellant has already annexed a chart in the statement of facts giving complete data of all the seven creditors, a perusal of which would leave no doubt that all payments were received by payee's account cheques and all of them were existing assessees with the ITO, Panipat. And first five were being assessed by the AO himself. Your honour would kindly appreciate that it is a case of investigation circle and to make an addition of Rs. 22 lakhs and odd in respect of amounts received by a/c payee cheques, is nothing but framing an assessment in a manner like ex parte. The appellant relies on Addl. CIT v. Bahti Bios. (P) Ltd. (1985) 154 ITR 244 (Pat). The Hon'ble High Court held "lenders making payment to assessee by a/c payee cheques and assessee paying interest and cash credits cannot be treated as income'. In the facts and circumstances of the appellant's case, the learned AO should not have made an addition of such a huge amount when all the amounts were proven receipts from existing assessees through a/c payee cheques. The appellant seeks permission before your honour to place the relevant copies and documents to prove the genuineness of these loans. It is hoped that in presence of the facts stated in memorandum of appeal and the relevant data being produced with your honour's permission, the addition made shall be deleted."

The two additions were deleted by the CIT(A) vide his order dt. 4th Dec., 1995. We deem it appropriate to reproduce his findings on these issues as under:

"2.3 I have perused the assessment order. I have also considered the written submissions of the appellant as well as his contention pleaded during the course of hearing of appeal and I feel inclined to agree with the same. As has been brought to my notice, these creditors except M/s Riba Textiles (P) Ltd. are being assessed by the AO who has completed the assessment under appeal and I am further informed that the relevant records of these creditors are also lying with the said AO from where he could conveniently make a countercheck and verification of the version of the appellant with regard to these credits. It is also pointed out that even the case of M/s Riba Textiles (P) Ltd. was being assessed with another AO in IT office, Panipat, itself and their return and balance sheet could be available for verification of credit appearing in the accounts of appellant. I am of the view that the learned AO should have tried to carry out the requisite verification from such records which could be 46 Jalgam Franchisee Pvt Ltd. so easily available. The appellant has also invited my attention to Patna High Court judgment in the case of Addl. CIT v. Bahti BIOS. (P) Ltd. (1985) 154 ITR 244 (Pat) wherein it is held that :

'Lenders making payment to assessee by a/c payee cheques and assessee paying interest and cash credits cannot be treated as income'.

The appellant also sought permission to submit relevant copies and documents to prove the genuineness of these loans. Since these documents are in accordance with the accounts and records available with the AO, the filing of these in appeal would not amount to fresh evidence and hence, permitted. I have looked into the same and find that these fully support the version of the appellant. The amounts of the credits were received by the appellant by means of cross a/c payee cheques, the creditors were existing income-tax assessees and the AO had access to their records for verification. Under these circumstances, I feel convinced that the AO was not right in treating these creditors as not genuine and was not justified in making the addition of Rs. 22,01,500. I also feel that it would not be fair to restore the issue back to AO since the mode of receiving these creditors from existing assessee in the absence of any incriminating or contradictory information do not cast any doubt on the genuineness of credits as far as appellant's case is concerned. If at all there could be any deficiency on the part of creditors who give these amounts by a/c payee cheques, the action could have been considered in the cases of these creditors instead of the appellant's case. Considering all the relevant facts aspects of the matter I hold that the addition of Rs. 22,01,500 is not justified and, hence, the same is deleted. This ground of appeal is allowed. xx xx

11. It is submitted by the appellant that this ground of appeal

is consequential to issue dealt with in ground of appeal No.

2. I have perused the same. The AO had treated the credits of Rs. 22,01,500 as not genuine and had also disallowed the under reference interest of Rs. 94,602 shown as payable by appellant on said credits. Since I have held the addition of said credits as uncalled for, the interest on the same is also considered as allowable. The addition of Rs. 94,602 is deleted. This ground of appeal is allowed."

47 Jalgam Franchisee Pvt Ltd. 4. Aggrieved by the order of the CIT(A), Revenue preferred an appeal before the Tribunal which vide the impugned order has upheld the findings of the CIT(A) in the following terms :

"6. After hearing the learned Departmental Representative and perusing the record, we do not find any justification to interfere with the order of the CIT(A) since all the records are available with the AO from where he could conveniently make a counter-check and verification of the version of the assessee with regard to the credits. The AO should have tried to carry out the requisite verification from such records which could be easily available but he has not done so. Therefore, this ground fails."

5. We have purposely reproduced the findings of the two appellate authorities in extenso as we are of the view that their approach has been totally erroneous. The assessment order clearly shows that the assessee did not care to respond to the show-cause notice issued by the AO requiring it to explain, why in the absence of production of the creditors, the amount standing to their credit be not treated as unexplained cash credit under Section 68 of the Act. It was not the case of the assessee that the creditors were not responding to his letters or refusing to attend the office. The assessee did not even make a request to the AO to make the necessary verification. The assessee appears to have furnished certain material before the CIT(A) who has straightaway accepted the same. The order does not show that he afforded any opportunity to the AO to verify the correctness of the material produced before him. He has also not recorded a finding that he has himself made any verification from the records of the creditors. The main reason for deletion of additions is that the AO ought to have made counter-check and verification from the records of the creditors who, except for M/s Riba Textiles (P) Ltd. were being assessed by him whereas M/s Riba Textiles (P) Ltd. was being assessed by another AO at Panipat itself. This is also the reason given by the Tribunal for upholding the action of the CIT(A).

6. It is true that the assessee may have discharged the initial onus by furnishing the permanent account numbers and copies of accounts of the creditors showing receipts and payments by way of account payee cheques. This, however, cannot conclusively prove the genuineness of the creditors. The AO is fully competent to make further verification to satisfy himself that the transactions are 48 Jalgam Franchisee Pvt Ltd. genuine. The appellate authorities have failed to appreciate that in the present case the assessee had totally failed to respond to the notice of the AO. Further, even if they were of the view that the AO should have made cross-verification with the records of the creditors available with him, they ought to have directed the AO to do so instead of straightaway accepting the assessee's version without affording any opportunity to the AO to make the verification. In the alternative, the appellate authorities could have themselves verified the material placed before them with the records of the creditors. This has not been done. Accordingly, we are satisfied that the appellate authorities have not dealt with the matter properly.

7. In this view of the matter, we set aside the findings of the AO and the two appellate authorities on this issue and restore the matter to the file of the AO for fresh adjudication. The assessee shall place before him all the material filed by it before the CIT(A) and the AO shall make further verifications from the records of the creditors, if necessary. In case, required information is not available in the records of the assessee, the AO shall be at liberty to require the assessee to produce the creditors along with the records.

The appeal is, accordingly, allowed in the above terms.”

2.16. In the light of the aforesaid discussion, now we shall deal with provisions of section 68 of the Act, the assessee is expected to offer an explanation with respect to the nature and source of cash credits to the satisfaction of the Assessing Officer. For ready reference section 68 of the Act is reproduced hereunder:-

“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

49 Jalgam Franchisee Pvt Ltd. 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.”

2.17. As per section 68 of the Act, onus is upon the assessee to discharge the burden so cast upon. First burden is upon the assessee to satisfactorily explain the credit entry contained in his books of accounts. The burden has to be discharged with positive material (Oceanic Products Exporting Company vs CIT 241 ITR 497 (Kerala.). The legislature had laid down that in the absence of satisfactory explanation, the unexplained cash credit may be charged u/s 68 of the Act. Our view is fortified by the ratio laid down in Hon’ble Apex Court in P. Mohankala

50 Jalgam Franchisee Pvt Ltd. (2007)(291 ITR 278)(SC). A close reading of section 68 and 69 of the Act makes it clear that in the case of section 68, there should be credit entry in the books of account whereas in the case of 69 there may not be an entry in such books of account. The law is well settled, the onus of proving the source of a sum, found to be received/transacted by the assessee, is on him and where it is not satisfactorily explained, it is open to the Revenue to hold that it is income of the assessee and no further burden lies on the Revenue to show that income is from any other particular source. Where the assessee failed to prove satisfactorily the source and nature of such credit, the Revenue is free to make the addition. The principle laid down in Ganpati Mudaliar (1964) 53 ITR 623/A. Govinda Rajulu Mudaliar (34 ITR 807)(SC) and also CIT vs Durga Prasad More (72 ITR 807)(SC) are the landmark decisions.

The ratio laid down therein are that if the explanation of the assessee is unsatisfactory, the amount can be treated as income of the assessee. The ratio laid down in Daulat Ram Rawatmal 87 ITR 349 (SC) further supports the case of the assessee. In the case of a cash entry, it is necessary

51 Jalgam Franchisee Pvt Ltd. for the assessee to prove not only the identity of the creditor but also the capacity of the creditor and genuineness of the transactions. The onus lies on the assessee, under the facts available on record. A harmonious construction of section 106 of the evidence Act and section 68 of the Income Tax Act will be that apart from establishing the identity of the creditor, the assessee must establish the genuineness of the transaction as well as the creditworthiness of the creditors. In CIT vs Korlay Trading Company Ltd. 232 ITR 820 (Cal.), it was held that mere mention of file number of creditor will not suffice and each entry has to be explained separately by the assessee (CIT vs R.S. Rathaore) 212 ITR 390 (Raj.). The Hon’ble Guwahati High Court in Nemi Chandra Kothari vs CIT (264 ITR 254)(Gau) held that transaction by cheques may not be always sacrosanct.

2.18. The ratio laid down in ACIT vs Rajeev Tandon 294 ITR (AT) 219 (Del.), which was confirmed by Hon’ble High Court, in 294 ITR 488, supports the case of the Revenue. Before us, the ld. counsel for the assessee time and again asserted that the case of the assessee is covered

52 Jalgam Franchisee Pvt Ltd. by the decision from Hon'ble jurisdictional High Court in CIT vs Gangadeep Infrastructure Pvt. Ltd. and CIT vs Green Infra Ltd. ((supra)), whereas, the Ld. CIT-DR invited out attention to the cases relied upon by him, as mentioned earlier and proviso to section 68 of the Act. We find that the Hon'ble jurisdictional High Court vide order dated 16/01/2017 in the case of Green Infra Ltd. and another decision dated 20/03/2017 in the case of Gagandeep Infrastructure Ltd. deliberated upon section 68 and on the issue whether the proviso to section 68, introduced by the Finance Act, 2012 w.e.f. 01/04/2013 would be retrospective in effect and also where the assessee has established identity, genuineness and capacity whether the Ld. Assessing Officer was justified to make an addition as unexplained credit. It was decided in favour of the assessee. The relevant portion of the order, we have already reproduced in earlier paras of this order. It is worth mentioning that while coming to a particular conclusion, the Hon'ble High Court referred to the decision in the case of CIT vs Lovely Export Pvt. Ltd. (2008) 216 CTR 195 (Supreme Court). The Hon'ble jurisdictional High Court

53 Jalgam Franchisee Pvt Ltd. has also considered the effect of proviso to section 68 and its applicability to the earlier assessment years by holding that though proviso to section 68 has been reproduced w.e.f. 01/04/2013, thus, it would be effect only from Assessment Year 2013-14 onwards and not to earlier Assessment Years. It was further observed that the legislature did not introduce proviso to section 68 of the Act with retrospective effect nor does the proviso so introduced states that it was introduced ‘for removal of doubt’ or that it is ‘declaratory in nature’. Identical ratio was laid down in the case of Green Infra Ltd. ((supra)). The Hon'ble High Court while coming to the particular conclusion affirmed the decision of the Tribunal in the case of Green Infra Ltd. vs Income Tax Officer (2013) 38 taxmann.com 253 (Mum. Trib.) and also considered the decision taken in the case of CIT vs Indo Swiss Jewells Ltd. (2006) 284 ITR 389 (Bom.) along with the decision from Hon'ble Apex Court in the case of McDowell Company Ltd. vs CTO (1985) 154 ITR 148(Supreme Court) and invocation of provision of 156(1) of the Act. The decisions in the case of CIT vs Ramdeo Samadhi (1986) 160 ITR 179 (Raj.), CIT

54 Jalgam Franchisee Pvt Ltd. vs Smt. Shanti Mettal (1973) 90 ITR 385(All.) and Madras High Court in CIT vs K. Thangamani (2009) 309 ITR 15 (Mad.) and also the decision from Hon'ble jurisdictional High Court in CIT vs Mogul Line Ltd. (1962) 46 ITR 590(Bom.) were also considered. The Ld. CIT DR, before us, also relied upon the decision from Hon'ble Apex Court in the case of CIT vs Durga Prasad More (1971) 82 ITR 540(Supreme Court) and in Sumati Dayal vs CIT[1995] 214 ITR 801 (Supreme Court). We find that both these decisions have been considered along with the decision in the case of Shri Lekha Banerjee vs CIT (1963) 49 ITR 112. In the case of Green Infra Ltd. vs Income Tax Officer ((supra)), the hold dispute resolves around the charging of share premium of Rs.490 per share on a book value of Rs. 10/- each. Thus, the contention of the Ld. CIT-DR that such a transaction may raise eyebrows with respect to genuineness of transaction is concerned, this has also been considered by the Tribunal in its order dated 23/08/2013 in the case of Green Infra Ltd. ((2013)) 38 taxmann.com 253(Mum. Trib.), which has been affirmed by the Hon'ble High Court, vide order dated 16/01/2017 (2017) 78 taxmann.com

55 Jalgam Franchisee Pvt Ltd. 340(Bom.). Another question raised by the Ld. CIT-DR is with respect to heavy premium is concerned, this issue has also been considered by holding that it is a prerogative of the Board of the Directors of 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 further the Revenue authorities cannot question the charging of such a premium. The board of directors is associated with a person of high intelligence, therefore, their integrity and credibility cannot be doubted. This issue is also considered by the Bench of this Tribunal in the case of Green Infra Ltd. ((supra)). So far as, application of the provision of section 56 of the Act and testing the transaction within the parameter of section 68 is concerned, no evidence has been produced by the Revenue before us and also before the First Appellate Authority, which could lead to the conclusion that the transaction was sham. So far as, the cases relied upon Ld. CIT-DR is concerned, the Hon'ble Court reached to a conclusion considering the facts of those cases, therefore, may not help the Revenue. The assessee has duly discharged its 56 Jalgam Franchisee Pvt Ltd. onus, therefore, considering the order of the Tribunal and respectfully following the aforementioned decisions from Hon'ble jurisdictional High Court, we don’t find infirmity in the conclusion drawn by the Ld. Commissioner of Income Tax (Appeal). It is affirmed, resulting into dismissal of appeal filed by the assessee.

Finally, the appeal of the Revenue is dismissed.

This Order was pronounced in the open court on 13/07/2018.

Sd/- Sd/- (G. Manjunatha) (Joginder Singh) लेखा सद�य / ACCOUNTANT MEMBER �या�यक सद�य / JUDICIAL MEMBER मुंबई Mumbai; �दनांक Dated : 13/07/2018 f{x~{tÜ? P.S/.�न.स., आदेश क� ��त�ल�प अ�े�षत/Copy of the Order forwarded to : अपीलाथ� / The Appellant 1. 2. ��यथ� / The Respondent. 3. आयकर आयु�त,(अपील) / The CIT, Mumbai. 4. आयकर आयु�त / CIT(A)- , Mumbai 5. �वभागीय ��त�न�ध, आयकर अपील�य अ�धकरण, मुंबई / DR, ITAT, Mumbai 6. गाड� फाईल / Guard file. आदेशानुसार/ BY ORDER,