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Income Tax Appellate Tribunal, MUMBAI BENCH “F” MUMBAI
Before: SHRI OM PRAKASH KANT & SHRI RAHUL CHAUDHARY
This appeal by the Revenue is directed against order dated 03.06.2023 passed by the Ld. Commissioner of Income-tax (Appeals) – National Faceless Appeal Centre, Delhi [in short ‘the Ld. CIT(A)’] for assessment year 2012-13, raising following grounds:
1. On the facts and in the circumstances of the case and in law the la. CIT(A) erred in deleting the entire addition of Rs 20.74 croces made
M/s Jaymala Infrastructure P. Ltd. M/s Jaymala Infrastructure P. Ltd. u/s. 68 of the Act ignoring the fact that the credit worthiness of u/s. 68 of the Act ignoring the fact that the credit worthiness of u/s. 68 of the Act ignoring the fact that the credit worthiness of shareholders is not proved considering the low inco shareholders is not proved considering the low income of applicants. me of applicants.
2. On the facts and in the circumstances of the case and in law the La. On the facts and in the circumstances of the case and in law the La. On the facts and in the circumstances of the case and in law the La. CIT(A) erred in deleting the entire addition of Rs:20.74 crores made CIT(A) erred in deleting the entire addition of Rs:20.74 crores made CIT(A) erred in deleting the entire addition of Rs:20.74 crores made u/s 68 of the Act ignoring the fact that assessee has riot given any u/s 68 of the Act ignoring the fact that assessee has riot given any u/s 68 of the Act ignoring the fact that assessee has riot given any documentary evidences for valua documentary evidences for valuation of its shares, thus creating tion of its shares, thus creating doubt regarding the valuation, of shares as well as subscription of doubt regarding the valuation, of shares as well as subscription of doubt regarding the valuation, of shares as well as subscription of shares. 3.
3. The appellant prays that the order of the CIT(A) on the above 3. The appellant prays that the order of the CIT(A) on the above 3. The appellant prays that the order of the CIT(A) on the above grounds be set aside and that of the Assessing Officer be restored grounds be set aside and that of the Assessing Officer be restored grounds be set aside and that of the Assessing Officer be restored.
Briefly stated facts of the case are that the assessee is engaged ated facts of the case are that the assessee is engaged ated facts of the case are that the assessee is engaged in the civil construction and renting of immovable properties. For in the civil construction and renting of immovable properties. For in the civil construction and renting of immovable properties. For the year under consideration, the assessee filed return of income on the year under consideration, the assessee filed return of income the year under consideration, the assessee filed return of income 30/09/2012 declaring total income of Rs. 2,95,57,061/-. The 30/09/2012 declaring total income of Rs. 2,95,57,061/ 30/09/2012 declaring total income of Rs. 2,95,57,061/ return of income filed by the assessee was selected for scrutiny and filed by the assessee was selected for scrutiny and filed by the assessee was selected for scrutiny and statutory notices under the Income statutory notices under the Income-tax Act, 1961 (in short ‘the Act’) tax Act, 1961 (in short ‘the Act’) were issued and complied with. In the assessment completed u/s were issued and complied with. In the assessment completed u/s were issued and complied with. In the assessment completed u/s 143(3) of the Act dated 27.03.2015, the Assessing Officer made 143(3) of the Act dated 27.03.2015, the Assessing Officer 143(3) of the Act dated 27.03.2015, the Assessing Officer addition for the share capital addition for the share capital allotted amounting to Rs.20.74 crores amounting to Rs.20.74 crores treating the same as unexplained cash credit in terms of section 68 treating the same as unexplained cash credit in terms of section 68 treating the same as unexplained cash credit in terms of section 68 of the Act. Before the Ld. CIT(A), the assessee filed complete details of the Act. Before the Ld. CIT(A), the assessee filed complete details of the Act. Before the Ld. CIT(A), the assessee filed complete details of the share subscribers which were forward of the share subscribers which were forwarded by the Ld. CIT(A) to ed by the Ld. CIT(A) to the Assessing Officer but no comments the Assessing Officer but no comments were sent by the Assessing by the Assessing Officer despite specific reminders Officer despite specific reminders ,therefore, the Ld. CIT(A) after therefore, the Ld. CIT(A) after analyzing the details and documentary evidence analyzing the details and documentary evidences on record s on record , deleted the additions made by the Asse deleted the additions made by the Assessing Officer u/s 68 of the ssing Officer u/s 68 of the Act. Aggrieved, the Revenue is in appeal before the Tribunal by way the Revenue is in appeal before the Tribunal by way the Revenue is in appeal before the Tribunal by way of raising grounds as reproduced above. of raising grounds as reproduced above.
M/s Jaymala Infrastructure P. Ltd. M/s Jaymala Infrastructure P. Ltd.
Before us, the Ld. counsel for the assessee has filed a Paper Before us, the Ld. counsel for the assessee has filed a Paper Before us, the Ld. counsel for the assessee has filed a Paper Book containing paged 1 to 501 which Book containing paged 1 to 501 which interalia include include documents filed by the assessee before the lower authorities in support of filed by the assessee before the lower authorities in support of filed by the assessee before the lower authorities in support of identity, creditworthiness of the share subscribers and genuineness identity, creditworthiness of the share subscribers and genuineness identity, creditworthiness of the share subscribers and genuineness of the transaction of share capital of share capital.
Before Before Before us, us, us, the the the Ld. Ld. Ld. Departmental Departmental Departmental Representative Representative Representative (DR) (DR) (DR) submitted that asses submitted that assessee has failed to discharge its onus u/s 68 of see has failed to discharge its onus u/s 68 of the Act for justifying identity, creditworthiness and genuineness of the Act for justifying identity, creditworthiness and genuineness of the Act for justifying identity, creditworthiness and genuineness of the transaction. He further submitted that though the assessment the transaction. He further submitted that though the assessment the transaction. He further submitted that though the assessment year involved is 2012 year involved is 2012-13, which is prior to the assessment year which is prior to the assessment year 2013-14 i.e. the year when amendment has been brought into the the year when amendment has been brought into the the year when amendment has been brought into the Act for justifying ‘source of source source of source’ in case of share capital received share capital received, still there are decisions still there are decisions of courts wherein assessment year wherein assessment years prior to the AY 2013-14, also the assessee was required to justify sou also the assessee was required to justify sou also the assessee was required to justify source of source. He referred to following decisions: source. He referred to following decisions:
(i) Hon’ble High Court in the case of Commissioner of Income v. (i) Hon’ble High Court in the case of Commissioner of Income v. (i) Hon’ble High Court in the case of Commissioner of Income v. Biju Patnaik [1986] 160 ITR 674 (SC) Biju Patnaik [1986] 160 ITR 674 (SC) (ii) Co-ordinate Bench of the ITAT Lucknow Bench in the case of ordinate Bench of the ITAT Lucknow Bench in the case of ordinate Bench of the ITAT Lucknow Bench in the case of M/s Gaurav Pigments Pvt. Ltd. v. M/s Gaurav Pigments Pvt. Ltd. v. Commissioner of Income Tax Commissioner of Income Tax (Appeals)-II for assessment year 1991 II ITA No. 61/LUC/2000 for assessment year 1991 II ITA No. 61/LUC/2000 for assessment year 1991-92. (iii) Hon’ble High Court of Kerala in Income Hon’ble High Court of Kerala in Income-tax Officer v. Diza tax Officer v. Diza Holdings (P.) Ltd. reported in (2002) 255 ITR 573 (Kerala). Holdings (P.) Ltd. reported in (2002) 255 ITR 573 (Kerala). Holdings (P.) Ltd. reported in (2002) 255 ITR 573 (Kerala).
M/s Jaymala Infrastructure P. Ltd. M/s Jaymala Infrastructure P. Ltd.
(iv) Hon’ble High Court of Delhi in the ca (iv) Hon’ble High Court of Delhi in the case of Indus Valley se of Indus Valley Promoters Ltd. v. Commissioner of Income Promoters Ltd. v. Commissioner of Income-tax (2008) 305 ITR tax (2008) 305 ITR 202 (Delhi)
(v) Hon’ble High Court of Bombay in the case of Commissioner of (v) Hon’ble High Court of Bombay in the case of Commissioner of (v) Hon’ble High Court of Bombay in the case of Commissioner of Income-tax, Karnataka (Central) Bengalore v. Sadiq Sheikh [2020] tax, Karnataka (Central) Bengalore v. Sadiq Sheikh [2020] tax, Karnataka (Central) Bengalore v. Sadiq Sheikh [2020] 429 ITR 163 (Bombay) 429 ITR 163 (Bombay)
4.1 The Ld. DR further submitted that the share subscriber further submitted that the share subscriber further submitted that the share subscribers were either having very low or n either having very low or nil income in the relevant assessment year il income in the relevant assessment year therefore, their creditworthiness to acquire shares with high therefore, their creditworthiness to acquire shares with high therefore, their creditworthiness to acquire shares with high premium is not justified. In view of the above submissions, the Ld. premium is not justified. In view of the above submission premium is not justified. In view of the above submission DR submitted that order of the Ld. CIT(A) might be set aside and mitted that order of the Ld. CIT(A) might be set aside and mitted that order of the Ld. CIT(A) might be set aside and order of the Assessing Officer might be restored. order of the Assessing Officer might be restored.
On the contrary, the Ld. counsel for the assessee submitted On the contrary, the Ld. counsel for the assessee submitted On the contrary, the Ld. counsel for the assessee submitted that the specific provision for establishing source of source for that the specific provision for establishing source of source that the specific provision for establishing source of source introduction of share hare capital has been made effecti capital has been made effective only from assessment year 2013 assessment year 2013-14 by way proviso to section 68 of the Act. section 68 of the Act. The relevant proviso is reproduced as is reproduced as under:
“Provided further further that] where the assessee is a company (not being a where the assessee is a company (not being a company in which the public are substantially interested), and the sum company in which the public are substantially interested), and the sum company in which the public are substantially interested), and the sum so credited consists of share application money, share capital, share so credited consists of share application money, share capital, share so credited consists of share application money, share capital, share premium or any such amount by whatever name called, any explanation premium or any such amount by whatever name called, any explanation premium or any such amount by whatever name called, any explanation offered by such assessee ffered by such assessee-company shall be deemed to be not company shall be deemed to be not satisfactory, unless satisfactory, unless— (a) the person, being a resident in whose name such credit is (a) the person, being a resident in whose name such credit is (a) the person, being a resident in whose name such credit is recorded in the books of such company also offers an explanation recorded in the books of such company also offers an explanation recorded in the books of such company also offers an explanation about the nature and source of such sum so credit about the nature and source of such sum so credited; and ed; and (b) such explanation in the opinion of the Assessing Officer (b) such explanation in the opinion of the Assessing Officer (b) such explanation in the opinion of the Assessing Officer aforesaid has been found to be satisfactory: aforesaid has been found to be satisfactory:”
M/s Jaymala Infrastructure P. Ltd. M/s Jaymala Infrastructure P. Ltd.
5.1 The Ld. counsel for the assessee relied on the decision of the The Ld. counsel for the assessee relied on the decision of the The Ld. counsel for the assessee relied on the decision of the in the case of M/s Tribunal Co-ordinate Bench ordinate Bench of the Tribunal in the case of Tanish Homes & & & Construction Construction Construction Pvt. Pvt. Pvt. Ltd. Ltd. Ltd. in and CO No. 144/Mum/2021 for AY 2011-12, 113/Mum/2021 and CO No. 144/Mum/2021 for 113/Mum/2021 and CO No. 144/Mum/2021 for wherein it has been decided that in assessment years prior to wherein it has been decided that in assessment ye wherein it has been decided that in assessment ye assessment year 2013 assessment year 2013-14, the assessee is not required to , the assessee is not required to demonstrate ‘source of the source source of the source’ in respect of credit ’ in respect of credit received. The Ld. counsel also relied on the decision in the case of Income-tax Ld. counsel also relied on the decision in the case of Ld. counsel also relied on the decision in the case of Officer v. Winstar Ecom (P.) Ltd. [2024] 159 taxmann.com 1531 Officer v. Winstar Ecom (P.) Ltd. [2024] 159 taxmann.com 1531 Officer v. Winstar Ecom (P.) Ltd. [2024] 159 taxmann.com 1531 (Mumbai-Trib.).
6. We have heard rival submission of the parties and perused the We have heard rival submission of the parties and perused the We have heard rival submission of the parties and perused the relevant material on record. aterial on record. As far as addition in dispute is As far as addition in dispute is concerned, we find that the Ld. CIT(A) has divided the entire e find that the Ld. CIT(A) has divided the entire e find that the Ld. CIT(A) has divided the entire addition of Rs.20.74 crores into three categories. The first category addition of Rs.20.74 crores into three categories. The addition of Rs.20.74 crores into three categories. The is addition of Rs.11,25,00,000/ addition of Rs.11,25,00,000/-, where the share application where the share application money was received in financial year 2010-11 i.e. corresponding to i.e. corresponding to assessment year 2011 assessment year 2011-12, which was duly verified by the Assessing which was duly verified by the Assessing Officer in the scrutiny proceedings u/s 143(3) for assessment year Officer in the scrutiny proceedings u/s 143(3) for assessment year Officer in the scrutiny proceedings u/s 143(3) for assessment year 2011-12 and no addition has 12 and no addition has been made. The second category second category addition is of Rs. 1,58,50,000/ 1,58,50,000/- , where share application money where share application money has been received from the has been received from the same parties from whom share from whom share application money was received in the assessment year 2011-12 application money was received in the assessment year 2011 application money was received in the assessment year 2011 and which has been verified by the Assessing Officer and no which has been verified by the Assessing Officer and no which has been verified by the Assessing Officer and no . The third category addition is amounting to addition was made . addition is amounting to M/s Jaymala Infrastructure P. Ltd. M/s Jaymala Infrastructure P. Ltd.
Rs.7,90,00,000/-, where fresh share application money has been where fresh share application money has been where fresh share application money has been received in the year under consideration received in the year under consideration . The arguments of both The arguments of both parties in respect of these categories have been considered and parties in respect of these categories have been considered and parties in respect of these categories have been considered and issue in dispute is adjudicated as under: pute is adjudicated as under:
6.1 As far as addition of Rs.11,25,00,000/ As far as addition of Rs.11,25,00,000/- is concerned , the is concerned , the money for share application money for share application was received in assessment year 2011 ved in assessment year 2011- 12. The Ld. CIT(A) in para 5h(ii) of the impugned order has he Ld. CIT(A) in para 5h(ii) of the impugned order has he Ld. CIT(A) in para 5h(ii) of the impugned order has reproduced the list of parties from whom said amount was received of parties from whom said amount was received of parties from whom said amount was received. The finding of ld CIT(A) in respect of the addition is extracted as The finding of ld CIT(A) in respect of the addition The finding of ld CIT(A) in respect of the addition under:
“5.h. (ii) It has been shown from records that out of an addition of Rs. 5.h. (ii) It has been shown from records that out of an addition of Rs. 5.h. (ii) It has been shown from records that out of an addition of Rs. 20,74,00,000 made by the Assessing Officer, the following am 20,74,00,000 made by the Assessing Officer, the following am 20,74,00,000 made by the Assessing Officer, the following amounts and the following entities pertain to previous financial year: the following entities pertain to previous financial year: Sr. No. Share Applicant Share Applicant Amount received in FY Amount received in FY 2010-11 11 1. Jaymala M Vitkar Jaymala M Vitkar 20,50,000 20,50,000 2. Gaurav M Vitkar Gaurav M Vitkar 18,50,000 18,50,000 3. Mukund K Vitkar Mukund K Vitkar 6,50,000 6,50,000 4. Empower India Limited Empower India Limited 5,00,00,000 5,00,00,000 5. Assam Trading Private Limited Trading Private Limited 50,00,000 50,00,000 6. Arjit Securities Private Limited Arjit Securities Private Limited 50,00,000 50,00,000 7. Better Buildcon Private Limited Better Buildcon Private Limited 50,00,000 50,00,000 8. Henna Textile Limited Henna Textile Limited 50,00,000 50,00,000 9. Ronit Capital management Limited Ronit Capital management Limited 1,50,00,000 1,50,00,000 10. Unike Word export Limited Unike Word export Limited 1,50,00,000 1,50,00,000 11. Nanshi Exports private Limited Exports private Limited 50,00,000 50,00,000 12. Arishta Infotech Limited (One Spec Infotech Ltd) Arishta Infotech Limited (One Spec Infotech Ltd) 1,50,00,000 1,50,00,000 13. Pundits Business Private Limited Pundits Business Private Limited 75,00,000 75,00,000 14. Ronit Mercantile private Limited TAX DEPAR Ronit Mercantile private Limited TAX DEPAR 50,00,000 50,00,000 15. Ronit Textile private Limited Ronit Textile private Limited 1,00,00,000 1,00,00,000 16. Vishesh infotechnics Limited infotechnics Limited 1.00,00,000 1.00,00,000 17. SNB mercantile private Limited SNB mercantile private Limited 50,00,000 50,00,000 18. Yamroosh investment private Limited Yamroosh investment private Limited 50,00,000 50,00,000 19. Terry Towel Industries Limited Terry Towel Industries Limited 20. Anagi Trading Private Limited Anagi Trading Private Limited 21. Anurodh Commodities private Limited Anurodh Commodities private Limited 22. Devasenapati sales Agency Private Limited Devasenapati sales 23. Flutron marketing and advertisement private limited Flutron marketing and advertisement private limited 24. Shandhiya marketing and advertising private limited Shandhiya marketing and advertising private limited 25. Speciality papers Limited Speciality papers Limited
M/s Jaymala Infrastructure P. Ltd. M/s Jaymala Infrastructure P. Ltd.
Reconciliation Reconciliation Jayamala M Vitkar Jayamala M Vitkar 20,50,000 20,50,000 Gaurav M Vitkar Gaurav M Vitkar 18,50,000 18,50,000 Mukund K Vitkar Mukund K Vitkar 6,50,000 6,50,000 Empower India Limited Empower India Limited 5,00,00,000 5,00,00,000 Total Share application money as per BS Share application money as per BS 11,25,00,000 11,25,00,000
I have examined the balance sheet as on 31/03/2012, part of records, I have examined the balance sheet as on 31/03/2012, part of records, I have examined the balance sheet as on 31/03/2012, part of records, and have seen that the figure 1125000 (In Rs. 00) is mentioned as Share and have seen that the figure 1125000 (In Rs. 00) is mentioned as Share and have seen that the figure 1125000 (In Rs. 00) is mentioned as Share application money pending allotment, as on 31/03/2011. Opening money pending allotment, as on 31/03/2011. Opening money pending allotment, as on 31/03/2011. Opening balances cannot be considered as deemed income under section 68 of the balances cannot be considered as deemed income under section 68 of the balances cannot be considered as deemed income under section 68 of the IT Act. Further, these share IT Act. Further, these share-applicants have been accepted as genuine applicants have been accepted as genuine during assessment proceedings u/s 143(3) of the IT Act in the AY during assessment proceedings u/s 143(3) of the IT Act in the AY during assessment proceedings u/s 143(3) of the IT Act in the AY 2011- 12. As such, the amount of Rs. 11,25,00,000 out of Rs. 20,74,00,000/ 12. As such, the amount of Rs. 11,25,00,000 out of Rs. 20,74,00,000/ 12. As such, the amount of Rs. 11,25,00,000 out of Rs. 20,74,00,000/- is ordered to be deleted from the addition made under Sec. 68 of the IT Act ordered to be deleted from the addition made under Sec. 68 of the IT Act ordered to be deleted from the addition made under Sec. 68 of the IT Act in the assessment order. in the assessment order.” 6.2 Regarding the above addition, the Ld. DR also Regarding the above addition, the Ld. DR also Regarding the above addition, the Ld. DR also could not controvert as share application as share application money was received in the earlier was received in the earlier year, which was duly examined by the Assessing Officer in was duly examined by the Assessing Officer in was duly examined by the Assessing Officer in assessment year 2011 assessment year 2011-12 in order passed u/s 143(3) of the Act. In 12 in order passed u/s 143(3) of the Act. In our opinion, this addition is beyond the scope of the assessment for this addition is beyond the scope of the assessment for this addition is beyond the scope of the assessment for the year under consideration, therefore consideration, therefore, the Ld. CIT(A) is justified in , the Ld. CIT(A) is justified in deleting the same.
6.3 Regarding the addition of Rs.1,58,50,000/ Regarding the addition of Rs.1,58,50,000/- the Ld. CIT(A) has the Ld. CIT(A) has reproduced the list of the parties in para 5h(i) of the impugned reproduced the list of the parties in para 5h(i) of the impugned reproduced the list of the parties in para 5h(i) of the impugned order, which is extracted as under: which is extracted as under:
“5.h.(i) Continuing with the factual examination, as per chart of receipt of 5.h.(i) Continuing with the factual examination, as per chart of receipt of 5.h.(i) Continuing with the factual examination, as per chart of receipt of share application money, following share share application money, following share-applicants are common applicants are common between AY 2011 between AY 2011-12 and AY 2012-13: Sr. No. Share Applicant Share Applicant Amount received Amount received in FY Amount received in FY in FY 2010-11 2011-12 2011 1. Share Applicant Share Applicant 20,50,000 6,00,000 6,00,000 2. Jaymala M Vitkar Jaymala M Vitkar 18,50,000 8,00,000 8,00,000 3. Gaurav M Vitkar Gaurav M Vitkar 6,50,000 19,50,000 19,50,000 50,00,000 9 Ronit Ronit Capital Capital management management 1,50,00,000 50,00,000 Limited
M/s Jaymala Infrastructure P. Ltd. M/s Jaymala Infrastructure P. Ltd.
12 Arishta Infotech Limited (One Arishta Infotech Limited (One 1,50,00,000 50,00,000 50,00,000 Spec Infotech Ltd) Infotech Ltd) 15 Ronit Textile private Limited Ronit Textile private Limited 1,00,00,000 25,00,000 25,00,000 Total 1,58,50,000 1,58,50,000
Evidence of assessment proceedings and final order of AY 2011 Evidence of assessment proceedings and final order of AY 2011 Evidence of assessment proceedings and final order of AY 2011-12 has been submitted wherein the department has accepted these share been submitted wherein the department has accepted these share been submitted wherein the department has accepted these share- applicants as genuine. As such, without any applicants as genuine. As such, without any credible evidence against credible evidence against these applicants, the department cannot hold them as being bogus share these applicants, the department cannot hold them as being bogus share these applicants, the department cannot hold them as being bogus share applicants. Since Id. AO has not brought any material on record to applicants. Since Id. AO has not brought any material on record to applicants. Since Id. AO has not brought any material on record to suggest that these share suggest that these share-applicants were bogus, the addition made on applicants were bogus, the addition made on account of such share account of such share-applicants, amounting to Rs. 1,58,50,000/ pplicants, amounting to Rs. 1,58,50,000/- is ordered to be deleted from the total addition of Rs. 20,74,00,000 under ordered to be deleted from the total addition of Rs. 20,74,00,000 under ordered to be deleted from the total addition of Rs. 20,74,00,000 under Sec. 68.” 6.4 In respect of these parties, the Assessing Officer has duly In respect of these parties, the Assessing Officer has duly In respect of these parties, the Assessing Officer has duly accepted all the documents in respect of identity, creditworthiness accepted all the documents in respect of identity, creditworthine accepted all the documents in respect of identity, creditworthine and genuineness of the transaction in the assessment year 2011-12 and genuineness of the transaction in the assessment year 2011 and genuineness of the transaction in the assessment year 2011 and identical documents have been filed in the year under identical documents have been filed in the year under identical documents have been filed in the year under consideration by the assessee consideration by the assessee, but have been rejected by the Ld. been rejected by the Ld. Assessing Officer. We do not find any reason for rejection of the Assessing Officer. We do not find any reason for rejection Assessing Officer. We do not find any reason for rejection same documents which have same documents which have been accepted by the Assessing Officer been accepted by the Assessing Officer in the earlier assessment year. in the earlier assessment year. Further, no inquiry of any kind Further, no inquiry of any kind including issue of notice u/s 133(6) of the Act or issue of summon including issue of notice u/s 133(6) of the Act or issue of summon including issue of notice u/s 133(6) of the Act or issue of summon u/s 131 of the Act was u/s 131 of the Act was carried out by the Assessing Office by the Assessing Officer for verification ,therefore, therefore, addition merely on the conjuncture merely on the conjuncture and surmises is not permitted surmises is not permitted. Accordingly, we do not find any infirmity e do not find any infirmity in the order of the Ld. CIT(A) on the issue in dispute and we uphold in the order of the Ld. CIT(A) on the issue in dispute and we uphold in the order of the Ld. CIT(A) on the issue in dispute and we uphold the same.
6.5 The The third third category category of of addition addition is is amounting to Rs.7,90,00,000/-. The relevant finding of the Ld. CIT(A) is . The relevant finding of the Ld. CIT(A) is . The relevant finding of the Ld. CIT(A) is reproduced as under: reproduced as under:
M/s Jaymala Infrastructure P. Ltd. M/s Jaymala Infrastructure P. Ltd.
“5.h.iii. The adjudication with respect to the balance amount of Rs. 5.h.iii. The adjudication with respect to the balance amount of Rs. 5.h.iii. The adjudication with respect to the balance amount of Rs. 7,90,00,000 (derived from 7,90,00,000 (derived from 20.74-11.25-1.58) is as follows: Ld. AO has not cared to bifurcate Ld. AO has not cared to bifurcate this amount. As such, ratio laid down in this amount. As such, ratio laid down in the Hon. ITAT order in is directly applicable on this the Hon. ITAT order in ITA No 33/Kol/2020 is directly applicable on this the Hon. ITAT order in ITA No 33/Kol/2020 is directly applicable on this case. Without any bifurcation, it is difficult to uphold the addition by Id case. Without any bifurcation, it is difficult to uphold the addition by Id case. Without any bifurcation, it is difficult to uphold the addition by Id AO, as it is not possible to come to any definite conclusion rega AO, as it is not possible to come to any definite conclusion rega AO, as it is not possible to come to any definite conclusion regarding specific share-applicants. applicants. In addition, Ld. AO has not examined the material on record submitted by In addition, Ld. AO has not examined the material on record submitted by In addition, Ld. AO has not examined the material on record submitted by the applicant with respect to these share-applicants. There is no There is no the applicant with respect to these share mention of any enquiry carried out by the Ld AO. mention of any enquiry carried out by the Ld AO. As such, without As such, without any evidence, the any evidence, the conclusions can be said to be based only on conclusions can be said to be based only on conjectures and surmises. conjectures and surmises. Lastly, but importantly, the legal position of Sec. 68 during the AY 2012 Lastly, but importantly, the legal position of Sec. 68 during the AY 2012 Lastly, but importantly, the legal position of Sec. 68 during the AY 2012- 13 did not require the appellant to delve into the source of the source and 13 did not require the appellant to delve into the source of the source and 13 did not require the appellant to delve into the source of the source and seek further information from the cr seek further information from the creditors. It was however, open for the editors. It was however, open for the AO to do any and all such enquiries. Ld. AO has miserably failed in the AO to do any and all such enquiries. Ld. AO has miserably failed in the AO to do any and all such enquiries. Ld. AO has miserably failed in the discharge of such onus. The appellant has submitted necessary details, discharge of such onus. The appellant has submitted necessary details, discharge of such onus. The appellant has submitted necessary details, including PAN, Confirmation and extracts from the Books of accounts as including PAN, Confirmation and extracts from the Books of accounts as including PAN, Confirmation and extracts from the Books of accounts as well as Bank statements of the Share as Bank statements of the Share-applicants. The AO has been applicants. The AO has been unsuccessful in holding that the Share unsuccessful in holding that the Share-applicants were bogus. This is applicants were bogus. This is true for the entire amount of share true for the entire amount of share-application money of 20.74 Crores application money of 20.74 Crores held as deemed income by the AO. As such, the case of t held as deemed income by the AO. As such, the case of the applicant is he applicant is squarely covered by the ratio laid by Hon. Apex Court in the matter of squarely covered by the ratio laid by Hon. Apex Court in the matter of squarely covered by the ratio laid by Hon. Apex Court in the matter of Lovely Exports vs CIT, 216 CTR 195. It is held that as per the ratio, the Lovely Exports vs CIT, 216 CTR 195. It is held that as per the ratio, the Lovely Exports vs CIT, 216 CTR 195. It is held that as per the ratio, the onus was successfully discharged by the appellant and the AO failed to onus was successfully discharged by the appellant and the AO failed to onus was successfully discharged by the appellant and the AO failed to make any case for consid make any case for consideration of such share-applicants as bogus. applicants as bogus. Respectfully adhering to the ratio of this judgement, and also the multiple Respectfully adhering to the ratio of this judgement, and also the multiple Respectfully adhering to the ratio of this judgement, and also the multiple judgements cited by the appellant in support of their grounds of appeal, judgements cited by the appellant in support of their grounds of appeal, judgements cited by the appellant in support of their grounds of appeal, the factual matrix and material on record, the entire addition o the factual matrix and material on record, the entire addition o the factual matrix and material on record, the entire addition of Rs. 20,74,00,000 made under Sec. 68 is ordered to be deleted. The grounds 20,74,00,000 made under Sec. 68 is ordered to be deleted. The grounds 20,74,00,000 made under Sec. 68 is ordered to be deleted. The grounds of appeal succeed in entirety. of appeal succeed in entirety.” 6.6 The Ld. CIT(A) on page 47 to 49 of the impugned order has The Ld. CIT(A) on page 47 to 49 of the impugned order has The Ld. CIT(A) on page 47 to 49 of the impugned order has reproduced entire list of the share application money of reproduced entire list of the share application money of reproduced entire list of the share application money of Rs.20,74,00,000/- which has b which has been bifurcated by him as amount een bifurcated by him as amount received in financial year 2010 received in financial year 2010-11 i.e. corresponding to assessment 11 i.e. corresponding to assessment year 2011-12 and amount receiving in financial year 2011 12 and amount receiving in financial year 2011 12 and amount receiving in financial year 2011-12 i.e. amount corresponding to the asses amount corresponding to the assessment year under consideration. sment year under consideration. The Ld. CIT(A) during the The Ld. CIT(A) during the appellate proceedings forwarded the appellate proceedings forwarded the documents in respect of amount received of Rs.7.9 crores to the documents in respect of amount received of Rs.7.9 crores to the documents in respect of amount received of Rs.7.9 crores to the M/s Jaymala Infrastructure P. Ltd. M/s Jaymala Infrastructure P. Ltd.
Assessing Officer calling for calling for comments regarding the source of comments regarding the source of money in the hands of those share subscribers. The Ld. CIT(A) money in the hands of those share subscribers. The Ld. CIT(A) money in the hands of those share subscribers. The Ld. CIT(A) noted that money was received i noted that money was received in their hands from another n their hands from another the assessee filed detailed concerns. Before the Ld. CIT(A) efore the Ld. CIT(A), the assessee filed detailed submission regarding identity, creditworthiness which the Ld. submission regarding identity, creditworthiness which the Ld. submission regarding identity, creditworthiness which the Ld. CIT(A) has reproduced as under: CIT(A) has reproduced as under:
The appellant has made detailed submissions and provided all 6. The appellant has made detailed submissions and provided all 6. The appellant has made detailed submissions and provided all necessary details, including extracts from books of accounts and Bank details, including extracts from books of accounts and Bank details, including extracts from books of accounts and Bank statements of the share statements of the share-applicants. 1.1 It is stated that appellant company has duly submitted the Audited It is stated that appellant company has duly submitted the Audited It is stated that appellant company has duly submitted the Audited Annual accounts of all the companies to whom the share capital has been Annual accounts of all the companies to whom the share capital has been Annual accounts of all the companies to whom the share capital has been issued. Further issued. Further the schedules of Profit & Loss account are forming part of the schedules of Profit & Loss account are forming part of the Audited Annual Accounts and the same has been duly submitted to the Audited Annual Accounts and the same has been duly submitted to the Audited Annual Accounts and the same has been duly submitted to your honour vide our submission dated 20.11.2019. It is submitted that your honour vide our submission dated 20.11.2019. It is submitted that your honour vide our submission dated 20.11.2019. It is submitted that each of the Annual account has Profit and loss account alo each of the Annual account has Profit and loss account alo each of the Annual account has Profit and loss account alongwith the relevant schedules. Further your honour is kindly requested to refer the relevant schedules. Further your honour is kindly requested to refer the relevant schedules. Further your honour is kindly requested to refer the pages of the paperbook submitted with our submission dated 20.11.2019 pages of the paperbook submitted with our submission dated 20.11.2019 pages of the paperbook submitted with our submission dated 20.11.2019 as under :- Sr. No. Share applicant company Share applicant company Paperbook pages No. 1. Anagi Trading Private Limited Anagi Trading Private Limited 55-67 2. Anurodh Commodities Private Limited Anurodh Commodities Private Limited 74 - 88 3. Devasenapati Sales Agency Private Limited Devasenapati Sales Agency Private Limited 108 - 109 4. Flutron Marketing & Advertising Private Limited Flutron Marketing & Advertising Private Limited 131 - 142 5. Onspec Infotech Limited Onspec Infotech Limited 175 - 186 6. Ronit Capital Management Limited Ronit Capital Management Limited 195 - 207 7. Ronit Textiles Private Limited Ronit 217 - 233 8. Shandhiya Marketing & Advertising Private 242-281 Shandhiya Marketing & Advertising Private Shandhiya Marketing & Advertising Private Limited 242 - 254 Limited 242 Speciality Paper Limited 9. Speciality Paper Limited 258 - 281 10. Terry Towel Industries Limited Terry Towel Industries Limited 282-311
1.2 Further it is submitted that the documents submitted by the 1.2 Further it is submitted that the documents submitted by the 1.2 Further it is submitted that the documents submitted by the appellant company majorly company majorly consists of Audited Annual Accounts, Confirmation, Share consists of Audited Annual Accounts, Confirmation, Share Certificates, Bank Statements and Acknowledgement of Income Tax Certificates, Bank Statements and Acknowledgement of Income Tax Certificates, Bank Statements and Acknowledgement of Income Tax Return in order to prove the identity, genuineness and source of Return in order to prove the identity, genuineness and source of Return in order to prove the identity, genuineness and source of transaction regarding the share capital and share premium. Further all transaction regarding the share capital and share premium. Further all transaction regarding the share capital and share premium. Further all
M/s Jaymala Infrastructure P. Ltd. M/s Jaymala Infrastructure P. Ltd. the documents submitted are proper and legible which can the documents submitted are proper and legible which can the documents submitted are proper and legible which can beseen from naked eyes. 3.3 Further we are submitting the details of share capital and Reserves 3.3 Further we are submitting the details of share capital and Reserves 3.3 Further we are submitting the details of share capital and Reserves and Surplus of the share applicants to further justify the credit and Surplus of the share applicants to further justify the credit and Surplus of the share applicants to further justify the credit worthiness:
Name of the Share capital Share capital Reserve and Shareholders fund Shareholders fund Balance sheet Size company surplus (Total Asset side) Anagi Trading 1,00,000 84,444 1,84,444 10,61,61,856 Private Limited Anurodh 25,57,080 12,03,96,920 12,29,54,000 14,29,62,266 Commodities Private Limited (As at 31st March 2011) Devasenapati 1,00,000 1,29,838 2,29,838 16,21,69,230 Sales Agency Private Limited Flutron Marketing 1,00,000 25,138 1,25,138 4,04,98,791 & Advertising Private Limited Onspec Infotech 7,48,12,500 7,48,12,500 - 7,48,12,500 10,27,23,893 Limited (As at 31st March 2011) Ronit Capital 50,00,000 8,75,20,400 9,25,20,400 24,84,14,289 Management Limited (formerly known as Hiteshi Capital Management Limited) Ronit Textiles 1,44,50,500 1,44,50,500 14,17,49,644 15,61,99,644 30,18,10,950 Private Limited (As at 31st March 2013) Shandhiya 1,00,000 71,293 1,71,293 2,77,12,293 Marketing & Advertising Private Limited 242 - 254 Speciality Paper 7,68,16,760 7,68,16,760 1,72,08,14,208 1,79,76,30,968 1,91,50,53,995 Limited Terry Towel 1,00,00,000 1,00,00,000 8,71,68,075 9,71,68,075 1,90,099,702 Industries Limited 6.7 Despite specific report called Despite specific report called for by the Ld. CIT(A) for for by the Ld. CIT(A) for verification of the source of source verification of the source of source, no such report was sent by the no such report was sent by the Assessing Officer. The relevant observation of the Ld. CIT(A) are Assessing Officer. The relevant observation of the Ld. CIT(A) are Assessing Officer. The relevant observation of the Ld. CIT(A) are reproduced as under: reproduced as under:
M/s Jaymala Infrastructure P. Ltd. M/s Jaymala Infrastructure P. Ltd.
“5.e. Efforts were made by this office to obtain necessary information 5.e. Efforts were made by this office to obtain necessary information 5.e. Efforts were made by this office to obtain necessary information with respect to h respect to creditworthiness of the Share-applicants. Since the applicants. Since the assessment order has not even reproduced the names of the Share assessment order has not even reproduced the names of the Share assessment order has not even reproduced the names of the Share- applicants from whom an amount of Rs. 20,74,00,000 has been said to applicants from whom an amount of Rs. 20,74,00,000 has been said to applicants from whom an amount of Rs. 20,74,00,000 has been said to have been received and no factual enquiry was present in th have been received and no factual enquiry was present in th have been received and no factual enquiry was present in the order of assessment, this office, in accordance with the powers granted under the assessment, this office, in accordance with the powers granted under the assessment, this office, in accordance with the powers granted under the IT Act, issued specific query vide remand report dated 23/12/2022. IT Act, issued specific query vide remand report dated 23/12/2022. IT Act, issued specific query vide remand report dated 23/12/2022. Repeated reminders were issued, as per note sheet. However, no Repeated reminders were issued, as per note sheet. However, no Repeated reminders were issued, as per note sheet. However, no response has been received from the office response has been received from the office of Assessing Officer. of Assessing Officer. Considering that necessary material on record is available to adjudicate Considering that necessary material on record is available to adjudicate Considering that necessary material on record is available to adjudicate the matter, a final order is being issued accordingly as per law. the matter, a final order is being issued accordingly as per law. the matter, a final order is being issued accordingly as per law. An effort was further made to question the appellant on the financial aspects of was further made to question the appellant on the financial aspects of was further made to question the appellant on the financial aspects of the share-applicants and the fact that they display the characteristics of licants and the fact that they display the characteristics of licants and the fact that they display the characteristics of shell companies; however, the appellant ha strongly refuted the shell companies; however, the appellant ha strongly refuted the shell companies; however, the appellant ha strongly refuted the contentions and has submitted a chart showing asset position of such contentions and has submitted a chart showing asset position of such contentions and has submitted a chart showing asset position of such companies. This coupled with the facts that a majority of sha companies. This coupled with the facts that a majority of sha companies. This coupled with the facts that a majority of share- applicants have been accepted during the previous AY 2011 applicants have been accepted during the previous AY 2011 applicants have been accepted during the previous AY 2011-12, after enquiry, I am of the opinion that final order in this case needs to be enquiry, I am of the opinion that final order in this case needs to be enquiry, I am of the opinion that final order in this case needs to be issued after considering entirety of material and the legal position of pre issued after considering entirety of material and the legal position of pre issued after considering entirety of material and the legal position of pre- amended Sec. 68, to meet the ends of j amended Sec. 68, to meet the ends of justice. 5.f. The Assessing Officer is an empowered authority who can make all The Assessing Officer is an empowered authority who can make all The Assessing Officer is an empowered authority who can make all possible enquiries as per Act in order to determine a true and correct possible enquiries as per Act in order to determine a true and correct possible enquiries as per Act in order to determine a true and correct income of the assessee. An AO is required to issue a speaking order. income of the assessee. An AO is required to issue a speaking order. income of the assessee. An AO is required to issue a speaking order. Unfortunately, in this case, the order Unfortunately, in this case, the order is cryptic. It does not even mention is cryptic. It does not even mention the names of the Share the names of the Share-applicants. It is faulty as it does not consider the applicants. It is faulty as it does not consider the factual aspects of the case, most importantly that it also considers factual aspects of the case, most importantly that it also considers factual aspects of the case, most importantly that it also considers opening balance as the current year investment in shares and instead of opening balance as the current year investment in shares and instead of opening balance as the current year investment in shares and instead of concentrating on the Share oncentrating on the Share-application money received during the year, application money received during the year, goes on to add the entire amount received in FY 2010 goes on to add the entire amount received in FY 2010-11 (previous AY) 11 (previous AY) and the FY 2011 and the FY 2011-12 (impugned AY). There is no whisper of an effort to 12 (impugned AY). There is no whisper of an effort to understand as to what happened in the assessme understand as to what happened in the assessment proceedings during nt proceedings during the previous AY. The fact that there are common share the previous AY. The fact that there are common share-applicants, and applicants, and the department has already accepted the identity, creditworthiness and the department has already accepted the identity, creditworthiness and the department has already accepted the identity, creditworthiness and genuineness of transactions in the assessment proceedings of the genuineness of transactions in the assessment proceedings of the genuineness of transactions in the assessment proceedings of the erstwhile AY has not been co erstwhile AY has not been considered. There is an absolute lack of effort nsidered. There is an absolute lack of effort in specifying as to what were the defects in the submissions made by the in specifying as to what were the defects in the submissions made by the in specifying as to what were the defects in the submissions made by the assessee which have lead the Id AO to form a belief that the onus under assessee which have lead the Id AO to form a belief that the onus under assessee which have lead the Id AO to form a belief that the onus under Sec. 68 of the It Act has not been discharged by the assessee. Sec. 68 of the It Act has not been discharged by the assessee. Sec. 68 of the It Act has not been discharged by the assessee.” 6.8 Further, the Ld. CIT(A) has noted that in the assessment Further, the Ld. CIT(A) has noted that in the assessment Further, the Ld. CIT(A) has noted that in the assessment order, the Assessing Officer has neither produce order, the Assessing Officer has neither produced d the list of the shareholders nor even even mentioned the name of the subscribers the name of the subscribers companies or the ground on which the transaction of share companies or the ground on which the transaction of share companies or the ground on which the transaction of share subscription was held to be held to be not genuine.
M/s Jaymala Infrastructure P. Ltd. M/s Jaymala Infrastructure P. Ltd.
Tribunal in the case of M/s Tanish 6.9 The coordinate bench of 6.9 The coordinate bench of Tribunal in the case of M/s Homes & Construction Pvt. Ltd. (supra) Homes & Construction Pvt. Ltd. (supra) after considering the after considering the decision of the Hon’ble Jurisdictional High Court in the case of decision of the Hon’ble Jurisdictional High Court in the case of decision of the Hon’ble Jurisdictional High Court in the case of PCIT v. Veedhata Tower Pvt. Ltd. (sup PCIT v. Veedhata Tower Pvt. Ltd. (supra) held that prior to held that prior to adding proviso to section 68 requiring verification of the source of source to section 68 requiring verification of the source of source to section 68 requiring verification of the source of source introduced by the Finance introduced by the Finance Act, 2012 w.e.f. 01.04.2013, t Act, 2012 w.e.f. 01.04.2013, the Assessing Officer was not authorized Assessing Officer was not authorized to examine source of source to examine source of source. The relevant finding of the Co The relevant finding of the Co-ordinate Bench is reproduced as rdinate Bench is reproduced as under:
“4.5. We further hold that for the year under consideration, the We further hold that for the year under consideration, the We further hold that for the year under consideration, the assessee is not legally bound to prove the source of source of assessee is not legally bound to prove the source of source of assessee is not legally bound to prove the source of source of share applicants share applicants. We find that assessee had given direct evidences to . We find that assessee had given direct evidences to prove that there was no cash deposits in the bank statements of share prove that there was no cash deposits in the bank statements of share prove that there was no cash deposits in the bank statements of share applicants immediately before making investments in assessee company. applicants immediately before making investments in assessee company. applicants immediately before making investments in assessee company. Reliance in this regard is placed on the decision of the Hon Reliance in this regard is placed on the decision of the Hon Reliance in this regard is placed on the decision of the Hon‟ble Jurisdictional High Court in the case of PCIT vs. Veedhata Tower Pvt. PCIT vs. Veedhata Tower Pvt. Jurisdictional High Court in the case of Ltd., reported in 403 ITR 415 (Bom) Ltd., reported in 403 ITR 415 (Bom) wherein it was held that once the wherein it was held that once the payer had confirmed the transaction of making investment in a company payer had confirmed the transaction of making investment in a company payer had confirmed the transaction of making investment in a company towards share capital and share premium, th towards share capital and share premium, the revenue cannot invoke the e revenue cannot invoke the provisions of Section 68 of the Act in the hands of the recipient even if the provisions of Section 68 of the Act in the hands of the recipient even if the provisions of Section 68 of the Act in the hands of the recipient even if the monies were received from bogus shareholders. The assessee had duly monies were received from bogus shareholders. The assessee had duly monies were received from bogus shareholders. The assessee had duly discharged the onus which is cast upon it in terms of pre discharged the onus which is cast upon it in terms of pre discharged the onus which is cast upon it in terms of pre-amended Section 68 of th Section 68 of the Act by filing the necessary confirmation letters of the e Act by filing the necessary confirmation letters of the share applicants, their affidavits, their full address with their PAN etc. share applicants, their affidavits, their full address with their PAN etc. share applicants, their affidavits, their full address with their PAN etc. The said decision also held that the proviso to Section 68 of the The said decision also held that the proviso to Section 68 of the The said decision also held that the proviso to Section 68 of the Act which was introduced by the Finance Act 2012 w.e.f. Act which was introduced by the Finance Act 2012 w.e.f. Act which was introduced by the Finance Act 2012 w.e.f. 01/04/2013 would be effective only from A.Y.2013 1/04/2013 would be effective only from A.Y.2013- -14 onwards and not for the earlier assessment years. and not for the earlier assessment years. We hold that in any case, that in any case, the receipt of share capital and share premium would the receipt of share capital and share premium would only have to be only have to be construed as capital receipt not chargeable to tax as has construed as capital receipt not chargeable to tax as has been held by the Hon‟ble Jurisdictional High Court in the case of Vodafone ble Jurisdictional High Court in the case of Vodafone India ble Jurisdictional High Court in the case of Vodafone Services Pvt. Ltd., vs. Addl. CIT reported in 368 ITR 1 (Bom). It was Services Pvt. Ltd., vs. Addl. CIT reported in 368 ITR 1 (Bom). It was Services Pvt. Ltd., vs. Addl. CIT reported in 368 ITR 1 (Bom). It was held specifically that the share capital / share premium is not of the specifically that the share capital / share premium is not of the specifically that the share capital / share premium is not of the Revenue field and would not partake field and would not partake the character of income as defined the character of income as defined u/s 2(24) of the Act. The relevant operative portion of the said decision is of the Act. The relevant operative portion of the said decision is of the Act. The relevant operative portion of the said decision is reproduced hereunder: reproduced hereunder:- 24. A plain reading of Section 92(1) of the Act very clearly brings 24. A plain reading of Section 92(1) of the Act very clearly brings 24. A plain reading of Section 92(1) of the Act very clearly brings out that out that income arising from a International Transaction is a Transaction is a condition precedent for condition precedent for application of Chapter X of the Act. This application of Chapter X of the Act. This has already been so held by the order has already been so held by the order dated 29 November 2013 dated 29 November 2013
M/s Jaymala Infrastructure P. Ltd. M/s Jaymala Infrastructure P. Ltd. of this Court in Vodafone of this Court in Vodafone-III. We could have straight III. We could have straight way held that the issue of examining the jurisdiction to a that the issue of examining the jurisdiction to apply Chapter X of pply Chapter X of the Act stands concluded by the order in Vodafone Act stands concluded by the order in Vodafone-III. III.
But we have examined the issue afresh. The word income for 25. But we have examined the issue afresh. The word income for 25. But we have examined the issue afresh. The word income for the purpose of the purpose of the Act has a well understood meaning as defined the Act has a well understood meaning as defined in Section 2(24) of the Act. in Section 2(24) of the Act. This even when the definiti This even when the definition in Section 2(24) of the Act is an inclusive Section 2(24) of the Act is an inclusive definition. It cannot be definition. It cannot be disputed that income will not in its normal meaning disputed that income will not in its normal meaning disputed that income will not in its normal meaning include capital receipts unless it is so specified, as in Section 2(24) (vi) of capital receipts unless it is so specified, as in Section 2(24) (vi) of capital receipts unless it is so specified, as in Section 2(24) (vi) of the Act. In such a case, Capital Gains chargeable to Act. In such a case, Capital Gains chargeable to tax under Act. In such a case, Capital Gains chargeable to Section 45 of the Act Section 45 of the Act are, defined to be income. The amounts are, defined to be income. The amounts received on issue of share capital received on issue of share capital including the premium is including the premium is undoubtedly on capital account. Share premium have undoubtedly on capital account. Share premium have undoubtedly on capital account. Share premium have been made taxable by a legal fiction under Section 56(2)(viib) of the Act taxable by a legal fiction under Section 56(2)(viib) of the Act taxable by a legal fiction under Section 56(2)(viib) of the Act and the same is enumerated as Income in Section 2(24)(xvi) of the Act. same is enumerated as Income in Section 2(24)(xvi) of the Act. same is enumerated as Income in Section 2(24)(xvi) of the Act. However, what is However, what is bought into the ambit of income is the premium bought into the ambit of income is the premium received from a resident in received from a resident in excess of the fair market value of the excess of the fair market value of the shares. In this case what is being sought to shares. In this case what is being sought to be taxed be taxed is capital not received from a non received from a non-resident i.e. premium allegedly not resident i.e. premium allegedly not received on application of ALP. Therefore, absent express legislation, no on application of ALP. Therefore, absent express legislation, no on application of ALP. Therefore, absent express legislation, no amount amount received, received, accrued accrued or or arising arising on on capital capital account account transaction can be subjected to transaction can be subjected to tax as Income. This is tax as Income. This is settled by the decision of this Court in Cadell Weaving the decision of this Court in Cadell Weaving Mill Co. v. CIT [2011] Mill Co. v. CIT [2011] 249 ITR 265/116 Taxman 77 was upheld by the Apex 249 ITR 265/116 Taxman 77 was upheld by the Apex 249 ITR 265/116 Taxman 77 was upheld by the Apex Court in CIT v. D.P Sandu Bros. Chember (P.) Ltd. [2005] 273 ITR 1/142 CIT v. D.P Sandu Bros. Chember (P.) Ltd. [2005] 273 ITR 1/142 CIT v. D.P Sandu Bros. Chember (P.) Ltd. [2005] 273 ITR 1/142 Taxman 713. This Court has in Cadell Weaving Mills Co. (s Taxman 713. This Court has in Cadell Weaving Mills Co. (s Taxman 713. This Court has in Cadell Weaving Mills Co. (supra) inter alia, inter alia, observed as under:— 'It is well settled that all receipts are not taxable under the 'It is well settled that all receipts are not taxable under the Income tax Act. Section 2(24) defines "income". It is no Act. Section 2(24) defines "income". It is no doubt an inclusive definition. However, a capital receipt is However, a capital receipt is not income under section2(24) unless it is chargeable to tax as capital gains under Section 45. It is for this reason tax as capital gains under Section 45. It is for this reason that under section 2(24)(vi) that the Legislature has that under section 2(24)(vi) that the Legislature has expressly stated, inter alia, that income shall include any inter alia, that income shall include any capital gains chargeable under section 45. Under Section section 45. Under Section 2(24)(vi), the Legislature has not included all 4)(vi), the Legislature has not included all capital gains as income. It is only capital gains chargeable under as income. It is only capital gains chargeable under Section 45 which has been treated as income under 45 which has been treated as income under Section 2(24). If the argument of the Department is argument of the Department is accepted then all capital gains whether chargeable under argeable under section 45 of not, would come within the definition of section 45 of not, would come within the definition of the word "income" under section 2(24). Further, under section word "income" under section 2(24). Further, under section 2(24)(vi) the Legislature has not stated that "any capital the Legislature has not stated that "any capital gains" will be covered under the word income. On the under the word income. On the contrary, the Legislature has advisedly stated that only stated that only capital gains which are chargeable under Section 45 of capital gains which are chargeable under Section 45 of the Act could be treated as income. In other words, capital Act could be treated as income. In other words, capital gains not chargeable to tax under section 45 fall outside chargeable to tax under section 45 fall outside the definition of the word "income" in section 2(24) of the section 2(24) of the Act. It is true that section 2(24) of the Act is an inclusive Act is an inclusive
M/s Jaymala Infrastructure P. Ltd. M/s Jaymala Infrastructure P. Ltd. definition However, in this case, we are required to definition However, in this case, we are required to ascertain the scope of Section 2(24)(vi) and for that ascertain the scope of Section 2(24)(vi) and for that purpose we have to read the sub section strictly. We read the sub section strictly. We cannot widen the scope of sub section by saying that the saying that the definition as a whole is inclusive and not exhaustive. In definition as a whole is inclusive and not exhaustive. In the present case, the words "chargeable under section 45" the present case, the words "chargeable under section 45" are very important. They are not being read by the important. They are not being read by the Department. These words cannot be omitted. cannot be omitted. In fact, the prior history shows that capital gains were not chargeable not chargeable before 1946. They were not chargeable between 1948 and before 1946. They were not chargeable between 1948 and 1956. Therefore, whenever an amount which is other wise 1956. Therefore, whenever an amount which is other wise a capital receipt is to be charged to tax, section 2(24) receipt is to be charged to tax, section 2(24) specifically so provides.' In view of the above, we find considerable substance in the In view of the above, we find considerable substance in the In view of the above, we find considerable substance in the Petitioner's case that Petitioner's case that neither the capital receipts received by the neither the capital receipts received by the Petitioner on issue of equity shares to Petitioner on issue of equity shares to its holding company, a non its holding company, a non- resident entity, nor the alleged short resident entity, nor the alleged short-fall between the n the so called fair market price of its equity shares and the issue price of the fair market price of its equity shares and the issue price of the fair market price of its equity shares and the issue price of the equity shares can be considered as income within the meaning of shares can be considered as income within the meaning of shares can be considered as income within the meaning of the expression as the expression as defined under the Act.” 6.10. The Hon’ble Bombay High Court in the case of The Hon’ble Bombay High Court in the case of The Hon’ble Bombay High Court in the case of Mr Gaurav Triyugi Singh in Income Singh in Income-tax Appeal No. 1750 of 2017 tax Appeal No. 1750 of 2017 relying on the finding in the case of the finding in the case of Veedhata Tower P Ltd (supra Veedhata Tower P Ltd (supra) held that assessee was not required to explain assessee was not required to explain ‘source of source source of source’ for discharging its onus under section 68 of the Act. Relevant finding of discharging its onus under section 68 of the Act. Relevant finding of discharging its onus under section 68 of the Act. Relevant finding of the Hon’ble Court is reproduced as under: Hon’ble Court is reproduced as under:
“14 In Principal Commissioner of Income Tax vs. Veedhata Tower 14 In Principal Commissioner of Income Tax vs. Veedhata Tower 14 In Principal Commissioner of Income Tax vs. Veedhata Tower Pvt. Ltd., (2018) 403 ITR Pvt. Ltd., (2018) 403 ITR 415 (Bom), this court has held that 415 (Bom), this court has held that assessee is only assessee is only required to explain the source of the credit. There required to explain the source of the credit. There is no requirement under no requirement under the law to explain the source of the law to explain the source of the source. In the instant case, there is no dispute as source. In the instant case, there is no dispute as to the identity of to the identity of the creditor. There is also no dispute the creditor. There is also no dispute about the genuineness of the about the genuineness of the transaction. That apart, transaction. That apart, the creditor has explained as to how the the creditor has explained as to how the credit was credit was given to the assessee. Thus assessee had discharged ven to the assessee. Thus assessee had discharged the onus which was on him as per the requirement of the onus which was on him as per the requirement of the onus which was on him as per the requirement of section 68 of the Act. What the Assessing Officer held of the Act. What the Assessing Officer held was that sources of was that sources of the source were suspect i.e., he the source were suspect i.e., he suspected the two sources Shri suspected the two sources Shri Rajendra Bahadu Rajendra Bahadur Singh and Smt. Sarojini Thakur of the source and Smt. Sarojini Thakur of the source Smt. Savitri Smt. Savitri Thakur. 15 In view of discharge of burden by the 15 In view of discharge of burden by the assessee, burden shifted assessee, burden shifted to the revenue; but revenue to the revenue; but revenue could not prove or bring any material could not prove or bring any material
M/s Jaymala Infrastructure P. Ltd. M/s Jaymala Infrastructure P. Ltd. to impeach the to impeach the source of the credit. Though Mr. Walve, source of the credit. Though Mr. Walve, learned standing counsel, has pointed out that the creditor had standing counsel, has pointed out that the creditor had standing counsel, has pointed out that the creditor had no regular source of income to justify the source of income to justify the advancement of the credit to the advancement of the credit to the assessee, we are of assessee, we are of the view that the assessee had discharged the view that the assessee had discharged the onus the onus which was on him to explain the three require which was on him to explain the three requirements, as noted above. It was not required for the assessee noted above. It was not required for the assessee to explain the sources of the source. In other words, he sources of the source. In other words, he was not required to was not required to explain the sources of the money explain the sources of the money provided by the creditor Smt. provided by the creditor Smt. Savitri Thakur i.e. Shri Savitri Thakur i.e. Shri Rajendra Bahadur Singh and Smt. Rajendra Bahadur Singh and Smt. Sarojini Thakur. Thakur.” 6.11 In view of the decision In view of the decisions of jurisdictional high court that proviso of jurisdictional high court that proviso to section 68 authorising verification of source of source of share to section 68 authorising verification of source of source of share to section 68 authorising verification of source of source of share capital is effective only form AY 2013 capital is effective only form AY 2013-14 , the decisions relied upon 14 , the decisions relied upon by the ld DR are not applicable over the facts of the case. by the ld DR are not applicable over the facts of the case. by the ld DR are not applicable over the facts of the case.
6.12 In view of above discussion, the argument of the Ld. DR that f above discussion, the argument of the Ld. DR that f above discussion, the argument of the Ld. DR that assessee was required to justify the source of source are not found assessee was required to justify the source of source are not found assessee was required to justify the source of source are not found to be applicable and same are rejected. Moreover, the Ld. CIT(A) to be applicable and same are rejected. Moreover, the Ld. CIT(A) to be applicable and same are rejected. Moreover, the Ld. CIT(A) provided due opportunity to the Assessing Officer provided due opportunity to the Assessing Officer, however he did , however he did not avail such opportunity opportunity and given any adverse remark regarding and given any adverse remark regarding source of source. The assessee has already discharged its onus The assessee has already discharged its onus The assessee has already discharged its onus under section 68 of the Act by way producing required documents under section 68 of the Act by way producing required documents under section 68 of the Act by way producing required documents before the AO but the AO neither issue before the AO but the AO neither issued any notice u/ any notice u/s 133(6) nor summon u/s 131 of the Act for verification of the parties or mmon u/s 131 of the Act for verification of the parties or mmon u/s 131 of the Act for verification of the parties or documents filed in respect of those parties. documents filed in respect of those parties. The The Ld CIT(A) duly verified the documents and concluded that those subscribers were verified the documents and concluded that those subscriber verified the documents and concluded that those subscriber having sufficient creditworthiness to invest in the share capital of having sufficient creditworthiness to invest in the share capital o having sufficient creditworthiness to invest in the share capital o the assessee company. The Revenue has failed to rebut the finding the assessee company. The Revenue has failed to rebut the finding the assessee company. The Revenue has failed to rebut the finding of ld CIT(A) before us. of ld CIT(A) before us. In the facts and circumstance, we do not find In the facts and circumstance, we do not find
M/s Jaymala Infrastructure P. Ltd. M/s Jaymala Infrastructure P. Ltd. any infirmity in the order of the Ld. CIT(A) in respect of addition of in the order of the Ld. CIT(A) in respect of addition of in the order of the Ld. CIT(A) in respect of addition of Rs.7.9 crores.
Accordingly, we uphold the f Accordingly, we uphold the finding of the Ld. CIT(A) in respect inding of the Ld. CIT(A) in respect of deletion of the addition of Rs.20.74 tion of the addition of Rs.20.74 crores, which was made by which was made by the Assessing Officer u/s 68 of the Act. The grounds raised by the the Assessing Officer u/s 68 of the Act. The grounds raised by the the Assessing Officer u/s 68 of the Act. The grounds raised by the Revenue are accordingly dismissed. Revenue are accordingly dismissed.
In the result, the appeal of the Revenue is dism In the result, the appeal of the Revenue is dism In the result, the appeal of the Revenue is dismissed.