RAINBOW BUILDCON PVT. LTD., Jaipur v. ACIT, Jaipur

ITA 391/JPR/2017 | 2009-2010
Pronouncement Date: 06-11-2017 | Result: Dismissed

Appeal Details

RSA Number 39123114 RSA 2017
Assessee PAN AABCR7091L
Bench Jaipur
Appeal Number ITA 391/JPR/2017
Duration Of Justice 5 month(s) 20 day(s)
Appellant RAINBOW BUILDCON PVT. LTD., Jaipur
Respondent ACIT, Jaipur
Appeal Type Income Tax Appeal
Pronouncement Date 06-11-2017
Appeal Filed By Assessee
Tags No record found
Order Result Dismissed
Bench Allotted B
Tribunal Order Date 06-11-2017
Assessment Year 2009-2010
Appeal Filed On 17-05-2017
Judgment Text
VK;DJ VIHYH; VF/KDJ.K] T;IQJ U;K;IHB] T;IQJ IN THE INCOME TAX APPELLATE TRIBUNAL JAIPUR BENCHES JAIPUR JH HKKXPUN] YS[KK LNL; O JH DQY HKKJR] U;KF;D L NL; DS LE{K BEFORE: SHRI BHAGCHAND AM & SHRI KUL BHAR AT JM VK;DJ VIHY LA-@ ITA NO. 391/JP/2017 FU/KZKJ.K O'K Z@ ASSESSMENT YEAR: 2009-10 M/S. RAINBOW BUILDCON PVT. LTD SB-110 7 TH FLOOR TONK ROAD JAIPUR CUKE VS. THE ACIT CENTRAL CIRCLE-2 JAIPUR LFKK;H YS[KK LA-@THVKBZVKJ LA-@ PAN/GIR NO .: AABCR 7091 L VIHYKFKHZ@ APPELLANT IZR;FKHZ@ RESPONDENT VK;DJ VIHY LA-@ ITA NO. 491/JP/2017 FU/KZKJ.K O'K Z@ ASSESSMENT YEAR: 2009-10 THE ACIT CENTRAL CIRCLE-2 JAIPUR CUKE VS. M/S. RAINBOW BUILDCON PVT. LTD SB-110 7 TH FLOOR TONK ROAD JAIPUR LFKK;H YS[KK LA-@THVKBZVKJ LA-@ PAN/GIR NO .: AABCR 7091 L VIHYKFKHZ@ APPELLANT IZR;FKHZ@ RESPONDENT FU/KZKFJRH DH VKSJ LS@ ASSESSEE BY: SHRI VIJAY GOYAL CA AND SHRI GULSHAN AGARWAL CA JKTLO DH VKSJ LS@ REVENUE BY:SMT. ROLEE AGARWAL CIT - DR SHRI PRAVEEN KUMAR MITTAL DCIT SHRI KAMLESH KUMAR MEENA DCIT LQUOKBZ DH RKJH[K@ DATE OF HEARING : 11/10/2017 ?KKS'K .KK DH RKJH[K@ DATE OF PRONOUNCEMENT : 06 /11/2017 VKNS'K@ ORDER PER BENCH BOTH THESE APPEALS ARE THE CROSS APPEALS FILED AGAI NST THE ORDER OF THE LD. CIT(A)4- JAIPUR DATED 31-03-2017 FOR THE A .Y. 2009-10. ITA NO. 391/JP/2017 M/S. RAINBOW BUILDCON PVT.LTD. JAIPUR VS AC IT CENTRAL CIRCLE-2 JAIPUR 2 2.1 THE ASSESSEE HAS RAISED THE FOLLOWING GROUNDS I N ITS ITA NO. 391/JP/2017 FOR THE ASSESSMENT YEAR 2009-10. 1. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE AND IN LAW THE ORDER PASSED U/S 153A READ WITH SECTION 153B AND 143(3) OF THE I.T. ACT 1961 IS BAD IN LAW VOID AB- INITIO AND DESERVES TO BE ANNULLED AS THE ASSESSMEN T FOR THE A.Y. 2009-10 WAS NOT ABATED AND LD. CIT(A) ERRED IN HOLDING THAT THE AO WAS JUSTIFIED IN REASSESSING TH E COMPLETED ASSESSMENT. 2. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE AND IN LAW THE LD. CIT(A) ERRED IN CONFIRMING THE ADDITION OF RS. 7 30 487/- MADE BY THE AO BY DISALL OWING THE ENTIRE EXPENSES INCURRED DURING THE YEAR. 2.2 DURING THE COURSE OF HEARING THE LD.AR OF THE ASSESSEE HAS NOT PRESSED THE GROUND NO. 1 AND 2 HENCE THE SAME ARE DISMISSED BEING NOT PRESSED. THUS THE APPEAL OF THE ASSESSEE IN ITA NO. 391/JP/2017 IS DISMISSED. 3.1 NOW WE TAKE UP THE APPEAL OF THE REVENUE IN ITA NO.491/JP/2017 FOR THE A.Y. 2009-10 WHEREIN THE REVENUE HAS RAIS ED THE SOLITARY GROUND AS UNDER:- WHETHER ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE THE LD. CIT(A) WAS RIGHT IN DELETING THE ADDITION OF RS .2 00 00 000/- MADE U/S 56(1) OF THE ACT IGNORING THE FACT THAT AS SETS OF THE ASSESSEE COMPANY DONT COMMENSURATE TO PREMIUM CHARGED AND F URTHER ITA NO. 391/JP/2017 M/S. RAINBOW BUILDCON PVT.LTD. JAIPUR VS AC IT CENTRAL CIRCLE-2 JAIPUR 3 IGNORING THE FACT THAT NEITHER ANY BUSINESS ACTIVIT Y WAS PERFORMED NOR ANY BUSINESS INCOME HAS BEEN SHOWN BY THE ASSESSEE. 3.2 APROPOS SOLITARY GROUND OF THE REVENUE THE AO MADE THE ADDITION OF RS.2 00 00 000- U/S 56(1) OF THE ACT IN THE HAND S OF THE ASSESSEE COMPANY BY OBSERVING AS UNDER:- 16. HAVING DEALT WITH EACH OF THE CONTENTION OF T HE ASSESSEE AND HAVING FOUND THE SAME TO BE UNTENABLE IT IS IMP ORTANT TO PLACE ON RECORD CERTAIN ASPECTS WHICH HAVE A BEARING ON THE ISSUE AT HAND. IT IS TRUE THAT THE APPARENT MUST BE CONSIDERED REAL UNTI L IT IS SHOWN THAT THERE ARE REASONS TO BELIEVE THAT THE APPARENT IS N OT THE REAL. IN A CASE OF THE PRESENT KIND A PARTY WHO RELIES ON A RECITAL IN A DEED HAS TO ESTABLISH THE TRUTH OF THOSE RECITALS OTHERWISE IT WILL BE VERY EASY TO MAKE SELF-SERVING STATEMENTS IN DOCUMENTS EITHER EX ECUTED OR TAKEN BY A PARTY AND RELY ON THOSE RECITALS. IF ALL THAT AN ASSESSEE WHO WANTS TO EVADE TAX IS TO HAVE SOME RECITALS MADE IN A DOCUM ENT EITHER EXECUTED BY HIM OR EXECUTED IN HIS FAVOUR THEN THE DOOR WILL BE LEFT WIDE OPEN TO EVADE TAX. A LITTLE PROBING WAS SUFFICIENT IN THE P RESENT CASE TO SHOW THAT THE APPARENT WAS NOT THE REAL. THE TAXING AUTH ORITIES WERE NOT REQUIRED TO PUT ON BLINKERS WHILE LOOKING AT THE DO CUMENTS PRODUCED BEFORE THEM. THEY WERE NOT ENTITLED TO LOOK INTO TH E SURROUNDING CIRCUMSTANCES TO FIND OUT THE REALITY OF THE RECITA LS MADE IN THOSE DOCUMENTS. 17. IN THE ABOVE BACK GROUND OF THE FACTS AND CIRCU MSTANCES SURROUNDING THIS CASE IT IS HEREBY HELD THAT THE R ECEIPT OF SHARE CAPITAL AND SHARE PREMIUM WAS PART OF A COLOURFUL TRANSACTI ON BY WAY OF WHICH A SUM OF RS. 2 00 00 000/- WAS INTRODUCED INTO THE BOOKS OF THE ASSESSEE COMPANY IN THE FORM OF SHARE PREMIUM ATTAC HED TO THE SHARE CAPITAL. AS DISCUSSION ABOVE THE PREMIUM OF RS.490/- PER SHARE WAS NOT JUSTIFIED AT ALL ON THE BASIS OF ABSOLUTELY NO ASSETS COMMENSURATE TO PREMIUM CHARGED NO BUSINESS ACTIVITY NO INCOME N O NET WORTH NOR ANY PROMISE FOR CREATION OF THIS MUCH ASSETS BUSI NESS ACTIVITY INCOME OR NET WORTH IN THE FUTURE. ACCORDINGLY THE CHARGING AND ITA NO. 391/JP/2017 M/S. RAINBOW BUILDCON PVT.LTD. JAIPUR VS AC IT CENTRAL CIRCLE-2 JAIPUR 4 RECEIPT OF SHARE PREMIUM/ SHARE CAPITAL TO THE TUNE OF RS. 2 00 00 000/- IS HELD TO BE INCOME OF THE ASSESSEE COMPANY IN THE NATURE OF INCOME ENVISAGED U/S 56(1) OF THE INCOME TAX ACT 1961. TH E SAME IS ADDED BACK TO THE TOTAL INCOME OF THE ASSESSEE. 3.3 IN FIRST APPEAL THE LD. CIT(A) HAS DELETED THE ADDITION OF RS. 2 00 00 000/- MADE BY THE AO BY OBSERVING AT PAGES 60 TO 97 OF HIS ORDER AS UNDER:- 3.1.2 I HAVE DULY CONSIDERED ASSESSEE'S SUBMISSION AN D CAREFULLY GONE THROUGH ASSESSMENT ORDER. I HAVE ALSO TAKEN A NOTE OF FACTUAL MATRIX O F THE CASE AS WELL AS APPLICABLE CASE LAWS RELIED U PON. FACTS OF THE CASE ARE THAT NO SCRUTINY ASSESSMENT U/S 143(3) OF THE ACT WAS DONE IN ASSESSEES CASE FOR AY 2009-10 AND THE ORIGINAL RETURN FILED ON 23.09.2009 DECLARING RS. 6 56 487/- TOTAL INCOME WAS ONLY PROCESSED U/S 143(1) OF THE ACT. VARIOUS COURTS HAVE HELD THAT PROCESSING OF RETURN S U/S 143(1) OF THE ACT IS NO ASSESSMENT. IT IS OBVIOUS THAT IF NO INCRIMINATING MATERIAL IS FOUND DURING SEARCH THEN ADDITIONS IF ANY HAVE TO BE MADE IN THE INCOME SHOWN IN THE RETURN OF INCOME ( IN THE CASE OF PENDING ASSESSMENTS WHICH ABATE ) AND TO THE COMPUTED INCOME (IN CASE OF ASSESSMENTS WERE COMPLETED ) . THUS EFFECTIVELY WHAT WAS SAID IN THE CASE OF KABUL CHAWLA WAS THAT MAKING ANY ADDITION IN THE RETURNED INCOME OR INCOME EARLIER A SSESSED WAS NOT ALLOWED IF NO MATERIAL WAS FOUND IN THE SEARCH WHICH COULD LEAD TO AN ADDITION ON THE B ASIS OF THE SAID MATERIAL. NOW IN THIS REGARD I WO ULD LIKE TO DISCUSS THE ISSUE PERTAINING TO ASSESSMENT COMPLETED U/S 153A R.W.S 143(3) OF THE ACT WHEN NO INCRIMINATING DOCUMENTS WERE FOUND FROM THE ASSESSE ES PREMISES. BEFORE COMING TO THE FACTS OF THE PRESENT CASE IT WOULD BE APPROPRIATE TO MENTION SEC . 153A OF THE ACT THE RELEVANT PART OF WHICH READS AS UNDER: ' 153A. (1) NOTWITHSTANDING ANYTHING CONTAINED IN SEC TION 139 SECTION 147 SECTION 148 SECTION 149 SECTION 151 AND SECTION 153 IN THE CA SE OF A PERSON WHERE A SEARCH IS INITIATED UNDER SECTION 132 OR BOOKS OF ACCOUNT OTHER DOCUME NTS OR ANY ASSETS ARE REQUISITIONED UNDER SECTION 132A AFTER THE 31ST DAY OF MAY 2003 THE ASSESSING OFFICER SHALL (A) ISSUE NOTICE TO SUCH PERSON REQUIRING HIM TO FURN ISH WITHIN SUCH PERIOD AS MAY BE SPECIFIED IN THE NOTICE THE RETURN OF INCOME IN R ESPECT OF EACH ASSESSMENT YEAR FALLING WITHIN SIX ASSESSMENT YEARS REFERRED TO IN CLAUSE ( B) IN THE PRESCRIBED FORM AND VERIFIED IN THE PRESCRIBED MANNER AND SETTING FORTH SUCH OTHER PARTICULARS AS MAY BE PRESCRIBED AND THE PROVISIONS OF THIS ACT SHALL SO FAR AS MAY BE APPLY ACCORDINGLY AS IF SUCH RETURN WERE A RETURN REQUIRED TO BE FURNISH ED UNDER SECTION 139; (B) ASSESS OR REASSESS THE TOTAL INCOME OF SIX ASSESSME NT YEARS IMMEDIATELY PRECEDING THE ASSESSMENT YEAR RELEVANT TO THE PREVIOUS YEAR IN WHICH SUCH SEARCH IS CONDUCTED OR REQUISITION IS MADE : ITA NO. 391/JP/2017 M/S. RAINBOW BUILDCON PVT.LTD. JAIPUR VS AC IT CENTRAL CIRCLE-2 JAIPUR 5 PROVIDED THAT THE ASSESSING OFFICER SHALL ASSESS OR REASSESS THE TOTAL INCOME IN RESPECT OF EACH ASSESSMENT YEAR FALLING WITHIN SUC H SIX ASSESSMENT YEARS: PROVIDED FURTHER THAT ASSESSMENT OR REASSESSMENT I F ANY RELATING TO ANY ASSESSMENT YEAR FALLING WITHIN THE PERIOD OF SIX ASSESSMENT Y EARS REFERRED TO IN THIS SUB-SECTION PENDING ON THE DATE OF INITIATION OF THE SEARCH UN DER SECTION 132 OR MAKING OF REQUISITION UNDER SECTION 132A AS THE CASE MAY BE SHALL ABATE . AS PER THE PROVISIONS OF THIS SECTION WHERE A SEARC H IS INITIATED U/S 132 OF THE ACT THE A.O SHALL ISSUE A NOTICE REQUIRING THE PERSON SEARCHED TO FURNISH HIS RETURN OF INCOME IN RESPECT OF EACH ASSESSMENT YEAR FALLING WITHIN SIX ASSESSMENT YEARS IMMEDIATELY PRECEDING THE ASSESSMENT YEAR RELEVANT TO THE PREVIOUS YEAR IN WHICH SUCH SEARCH IS CONDUCTED OR REQUISITION IS MADE. ONCE SUCH RETURNS ARE FILED THE AO HAS TO ASSESS OR REASSESS THE TOTAL INCOME OF SUCH SIX ASSESSMENT YEARS.(EMPHASIS SUPPLIED BY ME). ( THE DECISIVE WORDS USED IN THE PROVISIONS ARE TO 'A SSESSEE OR REASSESS THE TOTAL INCOME' ). THE A.O. IS THUS DUTY BOUND TO DETERMINE THE 'TO TAL INCOME' OF THE ASSESSEE FOR SUCH SIX ASSESSMENT YEARS AND IT IS OBVIOUS THA T 'TOTAL INCOME' REFERS TO THE SUM TOTAL OF INCOME IN RESPECT OF WHICH A PERSON IS ASSESSABLE. THE TOTAL INCOME THEREFORE WILL COVER NOT ONLY THE INCOME EMANATING FROM DECLARED SOURCES OR ANY MATERIAL PLA CED BEFORE THE ASSESSING OFFICER BUT FROM ALL SOURCES INCLUDING THE UNDISCLOSED ONES OR BASED ON THE UNPLACED MATERIAL BEFORE THE AO. SOME RELATED JUDGMENTS A) CIT VS. KABUL CHAWLA (DELHI HIGH COURT) : COMPLETED ASSESSMENTS CAN BE INTERFERED WITH BY THE AO WHILE MAKING THE ASSESSMENT UNDER SE CTION 153 A ONLY ON THE BASIS OF SOME INCRIMINATING MATERIAL UNEARTHED DURING THE CO URSE OF SEARCH OR REQUISITION OF DOCUMENTS OR UNDISCLOSED INCOME OR PROPERTY DISCOVE RED IN THE COURSE OF SEARCH WHICH WERE NOT B) GURINDER SINGH BAWA VS. DCIT (ITAT MUMBAI) : IN ALL CARGO GLOBAL LOGISTICS 137 ITD 287 (MUM)(SB) THE SPECIAL BENCH HELD THAT IN A CASE WHERE THE ASSESSMENT HAS ABATED THE AO CAN MAKE ADDITIONS IN THE ASSESSMENT EVEN IF NO INCRIMINATING MATERIAL HAS BEEN FOUND. HOWEVER IN A CASE WHERE THE ASSESS MENT HAS NOT ABATED . C) ANIL KUMAR BHATIA VS. ACIT (ITAT DELHI) : S. 153A DOES NOT AUTHORIZE THE MAKING OF A DE NOVO ASSESSMENT. WHILE UNDER THE 1ST PROVISO TH E AO IS EMPOWERED TO FRAME ASSESSMENT FOR SIX YEARS UNDER THE 2ND PROVISO ON LY THE ASSESSMENTS WHICH ARE PENDING ON THE DATE OF INITIATION OF SEARCH ABATE. D) SANJAY AGGARWAL VS. DCIT (ITAT DELHI) : S. 153A: ADDITION IN A SEARCH ASSESSMENT FOR A AY WHICH IS NOT PENDING CAN BE MADE ONLY IF INCRI MINATING MATERIAL IS FOUND DURING SEARCH (I) THE LANGUAGE OF S. 153A HAS BEEN STRUCTURED IN SUCH A WAY SO AS NOT TO PERMIT THE MAKING OF ADDITION FOR THE ASSESSMENT E) TRISHUL HI-TECH INDUSTRIES VS. DCIT (ITAT KOLKATA) : IT HAS BEEN HELD BY THE ITAT KOLKATA BENCH IN THE CASE OF LMJ INTERNATIONAL LIMI TED VS. DCIT 119 TTJ (KOL) 214 WHERE NOTHING INCRIMINATING IS FOUND IN THE COURSE OF SEARCH RELATING TO ANY ASSESSMENT YEARS THE ASSESSMENTS FOR. F) IT HAS BEEN HELD BY THE ITAT KOLKATA BENCH IN THE CASE OF LMJ INTERNATIONA L LIMITED VS. DCIT 119 TTJ (KOL) 214 WHERE NOTHING INCRIMINATING IS FOUND IN THE COURSE OF SEARCH RELATING TO ANY ASSESSMENT YEARS THE ASSESSMENTS F OR SUCH ASSESSMENT YEARS CANNOT BE ITA NO. 391/JP/2017 M/S. RAINBOW BUILDCON PVT.LTD. JAIPUR VS AC IT CENTRAL CIRCLE-2 JAIPUR 6 DISTURBED U/S 153C OF THE ACT. THUS IT IS CLEAR THA T THE PROVISIONS OF SECTION 153C OF THE ACT CANNOT BE INVOKED AUTOMATICALLY IN RESPECT OF A NY ASSESSMENT YEAR UNLESS THERE EXISTS INCRIMINATING DOCUMENTS FOR THAT PREVIOUS YEAR. THE PROVISION OF SECTION 153C OF THE ACT CANNOT BE INVOKED ON ROUTINE INFORMATION OR ON INCO ME ALREADY ACCOUNTED/DISCLOSED IN THE ORIGINAL RETURN THE ASSESSMENT OF WHICH IS COM PLETE. IN THIS REGARD WE MAY GAINFULLY REFER TO THE DECISION OF THE MUMBAI SPECIAL BENCH O F THE ITAT IN THE CASE OF AL CARGO GLOBAL LOGISTICS LTD VS. DCIT. APART FROM ABOVE THERE ARE SEVERAL DECISIONS OF V ARIOUS JUDICIAL AUTHORITIES WHERE IT HAS BEEN HELD THAT IN THE ABSENCE OF ANY INCRIMINATING MATER IAL FOUND DURING SEARCH ADDITIONS MADE ON THE ASSESSED INCOME ARE UNSUSTAINABLE IN LAW. SOME OF T HESE DECISIONS ARE DISCUSSED IN THE FOLLOWING PARAGRAPHS: (I) IN THE CASE OF CIT VS. KABUL CHAWLA REPORTED IN 281 CTR 45 DELHI IT HAS BEEN HELD BY THE HON'BLE DELHI HIGH COURT THAT: 37. ON A CONSPECTUS OF SECTION 153A(1) OF THE ACT READ WITH THE PROVISOS THERETO AND IN THE LIGHT OF THE LAW EXPLAINED IN THE AFOREM ENTIONED DECISIONS THE LEGAL POSITION THAT EMERGES IS AS UNDER: I. ONCE A SEARCH TAKES PLACE UNDER SECTION 132 OF T HE ACT NOTICE UNDER SECTION 153 A(L) WILL HAVE TO BE MANDATORILY ISSUED TO THE PERSON SEARCHED REQUIRING HIM TO FILE RETURNS FOR SIX AYS IMMEDIATELY PRECEDING THE PREVIOUS YEAR RELEVANT TO THE AY IN WHICH THE S EARCH TAKES PLACE. II. ASSESSMENTS AND REASSESSMENTS PENDING ON THE DA TE OF THE SEARCH SHALL ABATE. THE TOTAL INCOME FOR SUCH AYS WILL HAVE TO B E COMPUTED BY THE AOS AS A FRESH EXERCISE. III. THE AO WILL EXERCISE NORMAL ASSESSMENT POWERS IN RE SPECT OF THE SIX YEARS PREVIOUS TO THE RELEVANT AY IN WHICH THE SEAR CH TAKES PLACE. THE AO HAS THE POWER TO ASSESS AND REASSESS THE 'TOTAL INCOME' OF THE AFOREMENTIONED SIX YEARS IN SEPARATE ASSESSMENT ORD ERS FOR EACH OF THE SIX YEARS. IN OTHER WORDS THERE WILL BE ONLY ONE ASSESS MENT ORDER IN RESPECT OF EACH OF THE SIX AYS 'IN WHICH BOTH THE DISCLOSED AN D THE UNDISCLOSED INCOME WOULD BE BROUGHT TO TAX'. IV. ALTHOUGH SECTION 153 A DOES NOT SAY THAT ADDITI ONS SHOULD BE STRICTLY MADE ON THE BASIS OF EVIDENCE FOUND IN THE COURSE O F THE SEARCH OR OTHER POST-SEARCH MATERIAL OR INFORMATION AVAILABLE WITH THE AO WHICH CAN BE RELATED TO THE EVIDENCE FOUND IT DOES NOT MEAN THA T THE ASSESSMENT 'CAN BE ARBITRARY OR MADE WITHOUT ANY RELEVANCE OR NEXUS WITH THE SEIZED MATERIAL. OBVIOUSLY AN ASSESSMENT HAS TO BE MADE UN DER THIS SECTION ONLY ON THE BASIS OF SEIZED MATERIAL.' V. IN ABSENCE OF ANY INCRIMINATING MATERIAL THE CO MPLETED ASSESSMENT CAN BEREITERATED AND THE ABATED ASSESSMENT OR REASSESSM ENT CAN BE MADE. THE WORD 'ASSESS' IN SECTION 153 A IS RELATABLE TO ABATED PR OCEEDINGS (I.E. THOSE PENDING ON THE DATE OF SEARCH) AND THE WORD 'REASSE SS' TO COMPLETED ASSESSMENT PROCEEDINGS. ITA NO. 391/JP/2017 M/S. RAINBOW BUILDCON PVT.LTD. JAIPUR VS AC IT CENTRAL CIRCLE-2 JAIPUR 7 VI. INSOFAR AS PENDING ASSESSMENTS ARE CONCERNED THE JURISDICTION TO MAKE THE ORIGINAL ASSESSMENT AND THE ASSESSMENT UNDER SECTIO N 153A MERGES INTO ONE. ONLY ONE ASSESSMENT SHALL BE MADE SEPARATELY FOR EA CH AY ON THE BASIS OF THE FINDINGS OF THE SEARCH AND ANY OTHER MATERIAL EXIST ING OR BROUGHT ON THE RECORD OF THE AO. VII. COMPLETED ASSESSMENTS CAN BE INTERFERED WITH BY THE AO WHILE MAKING THE ASSESSMENT UNDER SECTION 153 A ONLY ON THE BASIS OF SOME INCRIMINATING MATERIAL UNEARTHED DURING THE COURSE OF SEARCH OR REQUISITIO N OF DOCUMENTS OR UNDISCLOSED INCOME OR PROPERLY DISCOVERED IN THE CO URSE OF SEARCH WHICH WERE NOT PRODUCED OR NOT ALREADY DISCLOSED OR MADE KNOWN IN THE COURSE OF ORIGINAL ASSESSMENT. (II) IN THE CASE OF ACIT VS. PACL INDIA LTD. NEW DELHI THE HON'BLE ITAT F. BENCH DELHI HAS CONSIDERED THE VARIOUS DECISIONS O F DIFFERENT JUDICIAL AUTHORITIES AND IN PARA 10 OF THE ORDER HAS HELD TH AT: 'THEREFORE THE QUESTION ARISES WHETHER AO CAN MAKE ANY ADDITION IN THE REASSESSMENT PROCEEDINGS U/S 153(A) AFTER MAKING IN QUIRIES WHICH ARE NOT SUGGESTED BY ANY D DOCUMENTS OR ASSET SEIZED DURING THE SEARC H. IT DEPENDS ON THE NATURE OF ADDITION. THE FACTS AND CIRCUMSTANCES OF THE ASSESS EE CLEARLY SHOW THAT NO INCRIMINATING DOCUMENT FOUND RELATING TO THE LAND D EVELOPMENT EXPENSES DEBITED IN THE BOOKS OF ACCOUNTS. NO MATERIAL WAS ON THE RECOR D ON THAT BASIS WHICH INCOME OF ASSESSEE COULD BE FURTHER ASSESSED BY ASSESSING OFF ICER. THEREFORE THE ASSESSING OFFICER HAS NO JURISDICTION TO MAKE OR TO RESORT TO ROVING AND FISHING INQUIRIES TO FIND OUT WHETHER ANY INCOME HAS ESCAPED ASSESSMENT DURIN G THESE REASSESSMENT PROCEEDINGS. PARTICULARLY WHEN THERE IS NO INCRIMI NATING MATERIAL FOUND AND SEIZED DURING THE COURSE OF SEARCH U/S 132(1) OF THE ACT A ND NOTHING IS AVAILABLE IN RECORD TO REASSESS THE INCOME OF ASSESSEE. IN VIEW OF THE ABO VE THIS IS NOT A FIT CASE FOR MAKING THE ADDITION IN THE YEAR UNDER CONSIDERATION THE S AME ARE DELETED.' (III) IN THE CASE OF M/S IDEAL APPLIANCE COMPA NY PVT. LTD. VS. DCIT CENTRAL CIRCLE-44 MUMBAI THE FOLLOWING LEGAL ISSU ES WERE RAISED BEFORE THE HON'BLE ITAT'1' BENCH MUMBAI: '1. THE LD CIT (A) FAILED TO APPRECIATE THE FACT TH AT NO INCRIMINATING DOCUMENTS /EVIDENCES WERE FOUND DURING THE COURSE OF SEARCH O F THIRD PARTY AND HENCE RE-COMPUTING THE INCOME U/S I53A IS BAD IN LAW AND LIABLE TO BE QUASHED. 2. THE LD CIT (A) FAILED TO APPRECIATE THE FACT TH AT ORIGINAL ASSESSMENT WAS MADE U/S 143(3) VIDE ORDER 31ST AUGUST 2007 AFTER CONSID ERING ALL THE DOCUMENTS AND MATERIALS ON RECORD AND DUE APPLICATION FF MIND AND HENCE RE-COMPUTING THE INCOME BY MERELY CHANGING HEAD OF INCOME FOR THE SA ID YEAR UNDER THE GRAB OF SECTION 153A BASED ON SAME DOCUMENTS AND MATERIALS IS BAD IN LAW AND ORDER IS LIABLE TO BE QUASHED 3. THE LD CIT (A) ERRED IN CONFIRMING THE ACTION OF TH E AO REASSESSING THE INCOME U/S 143(3) R.W.S I53A WITHOUT APPRECIATING THE FACT TH AT ONLY PENDING ASSESSMENT ABET AND NOT THE COMPLETED ASSESSMENTS AND HENCE THE ORDER U /S 143(3) R.W.S I53A IS BAD IN LAW AND LIABLE TO BE QUASHED. 4. THE LD CIT (A) ERRED IN NOT ALLOWING THE DECISION O F JURISDICTIONAL HIGH COURT WHEREIN IT WAS HELD THAT NO ADDITION CAN BE MADE U/S I53A I F NO INCRIMINATING MATERIAL / DOCUMENTS ARE FOUND DURING SEARCH. THEREFORE THE O RDER OF THE CIT (A) IS BAD IN LAW.' ITA NO. 391/JP/2017 M/S. RAINBOW BUILDCON PVT.LTD. JAIPUR VS AC IT CENTRAL CIRCLE-2 JAIPUR 8 (IV) ON THESE ISSUES IT WAS HELD BY THE HON'BLE ITAT TH AT: '9. FROM THE ABOVE SETTLED LEGAL POSITION OF THE I SSUE THAT IN THE ABSENCE OF ANY INCRIMINATING MATERIAL FOUND DURING SEARCH ADDITI ONS MADE ON THE ASSESSED INCOME ARE UNSUSTAINABLE IN LAW WE ARE OF THE CONS IDERED OPINION THAT THE ADDITIONS MADE IN THE INSTANT CASE ARE NOT SUSTAINABLE AND ACCORDI NGLY WE DELETE THE SAME. CONSIDERING OUR DECISION ON THE LEGAL ISSUE IN FAVOUR OF THE AS SESSEE THE OTHER GROUNDS DEMAND NO SPECIFIC ADJUDICATION. THUS ON THE LEGAL GROUND TH E ASSESSEE SUCCEEDS AND REST OF THE GROUNDS ARE DISMISSED AS ACADEMIC. 9.1. FURTHER REGARDING THE NON-ABATED NATURE OF T HE ASSESSMENTS RELATING TO THE AYS 2007- 2008 2008-2009 AND 2009-2010 IT IS A DECIDED ISSU ED THAT THE TIME LIMIT FOR THE ISSUE OF NOTICE U/S 143(2) IN THE SAID AYS SINCE EXPIRED ON 30.9.2008 AND THEY CONSTITUTE NON-ABATED ASSESSMENTS AND THEREFORE THE ASSESSMENTS FOR THOS E AYS HAVE TO BE REASSESSED UNDER THE SPECIAL PROVISIONS IN THE LIGHT OF THE INCRIMINATIN G MATERIAL SEIZED DURING THE SEARCH. THE ABOVE SAID RATIO WAS ALSO FOLLOWED BY THE TRIBUNAL IN THE CASE OF GURINDER SINGH BAWA VS. CIT (SUPRA) WHEREIN IT WAS HELD THAT WHERE THE ASSESSMENT HAD BEEN COMPLETED UNDER SUMMARY SCHEME UNDER SECTION 143(1) AND TIME LIMIT FOR ISSUE OF NOTICE UNDER SECTION 143(2) HAD EXPIRED ON THE DATE OF SEA RCH ..THERE WAS NO ASSESSMENT PENDING IN SUCH A CASE THERE WAS NO QUESTION OF ABATEMENT. THEREFORE ADDITION COULD BE MADE ONLY ON THE BASIS OF INCRIMINATING MA TERIAL FOUND DURING SEARCH.' (V) THE RELEVANT ISSUES AS ARISING OUT OF THE DECISION IN THE CASE OF KABUL CHAWLA AS UNDER: 1) WHEN THERE IS NO CONDITION IN SECTION 153A OF T HE ACT THAT ADDITIONS CANNOT BE MADE WITHOUT RELEVANCE TO OR WITHOUT NEXUS TO SEIZED MATERIAL T HEN IS IT FOR THE COURTS TO READ THAT CONDITION INTO THE PROVISIONS OF SECTION 153A OF THE ACT? THE ANSWER IS NO FOR THE REASON THAT THE APPLICATION OF SECTION 148 OF THE ACT HAS BEEN OUST ED BY THE NON-OBSTANTE CLAUSE WITH WHICH SECTION 153A STARTS. THEREFORE EVEN IF NO INCRIMIN ATING MATERIAL IS FOUND DURING SEARCH IF ANY UNDISCLOSED INCOME HAS TO BE ASSESSED FOR THE RELEV ANT 6 YEARS IT HAS TO BE IN THE PROCEEDINGS UNDER SECTION 153A OF THE ACT. A) NOW THERE ARE TWO SITUATIONS - EITHER THE ASSESS MENT WAS COMPLETE BEFORE THE SEARCH OR PENDING AT THAT TIME. IF THE ASSESSMENT WAS COMPLE TE AND IF ANY INCOME WHICH HAD ESCAPED ASSESSMENT IN THE REGULAR ASSESSMENT IS FOU ND DURING PROCEEDINGS U/S 153A WHAT IS THE AO SUPPOSED TO DO? HE HAS NO POWER TO ACT U/ S 147/148 BECAUSE OF THE NON-OBSTANTE CLAUSE. HE IS NOW PRECLUDED FROM INVOKING PROVISIO NS OF SECTION 148 BECAUSE OF THE CONCLUSION DRAWN IN KABUL CHAWLA. B) THE SITUATION IS EVEN MORE SERIOUS IF A PENDING ASSESSMENT OR REASSESSMENT ABATES. WHAT IF A SHOW-CAUSE NOTICE HAD BEEN ISSUED ON AN UNDISCLOS ED INCOME PRIOR TO SEARCH? ACCORDING TO KABUL CHAWLA IF NO INCRIMINATING MATERIAL IS FOU ND DURING SEARCH THEN NO ACTION CAN BE TAKEN IN SUCH CASES ALSO. NO INTERPRETATION OF A PROVISION OF AN ACT CAN BE SUCH THAT IT LEADS TO RESULTS WHICH WERE NEVER INTENDED. BY DRAWING A CONCLUSION THAT THE PRESENCE OF INCRIMINATING MATERIAL AND ADDITION THEREON IS NECESSARY FOR MAKING AN ADD ITION WHICH IS NOT BASED ON MATERIAL FOUND DURING SEARCH KABUL CHAWLA HAS DONE EXACTLY THAT AND SO IT HAS TO BE HELD THAT THE CONCLUSION SO DRAWN IS PER INCURIAM. ITA NO. 391/JP/2017 M/S. RAINBOW BUILDCON PVT.LTD. JAIPUR VS AC IT CENTRAL CIRCLE-2 JAIPUR 9 IN THIS REGARD I DRAW SOLACE FROM THE DECISION OF THE ALLAHABAD HIGH COURT IN THE CASE OF CIT V. RAJ KUMAR ARORA [2014] 367 ITR 517(ALL.) AND THE DECISION OF THE DELHI HIGH COURT IN THE CASE OF FILATEX INDIA LTD. V. CIT[2014] 49 TAXMANN.COM 465( DELHI) BOTH OF WHICH PRECEDE THE DECISION IN THE CASE OF K ABUL CHAWLA. 2) THERE IS ANOTHER SITUATION WHICH HAS NOT BEEN AN TICIPATED IN KABUL CHAWLA. IN THAT CASE THE HONBLE HIGH COURT PROCEEDED ON THE GROUNDS THAT PR OCESSING OF A CASE U/S 143(1) WAS ALSO ASSESSMENT. IT ACCORDINGLY HELD THAT EVEN IF THE R ETURNS HAVE BEEN PROCESSED U/S 143(1) IT WILL BE TREATED AS IF THE ASSESSMENTS ARE COMPLETE. NOW AFTER THE DECISION OF THE HONBLE SUPREME COURT IN THE CASE OF DEPUTY COMMISSIONER OF INCOME-TAX V. ZUARI ESTATE DEVELOPM ENT & INVESTMENT CO. LTD. [2015] 373 ITR 661 (SC) AND ASSISTANT COMMISSIONER OF INCOME-TAX V. RAJESH JHAV ERI STOCK BROKERS P. LTD. [2007] 291 ITR 500(SC) IT IS CLEAR THAT PROCESSING OF A CASE U/S 143(1) I S NOT AN ASSESSMENT WHICH FACT HAS BEEN ADMITTED BY THE DEL HI HIGH COURT IN THE CASE OF INDU LATA RANGWALA V. DEPUTY COMMISSIONER OF INCOME-TAX WP(C ) 1393/2002 IN THEIR DECISION DATED 18.05.2016. 3) HENCE THERE NOW OCCURS A THIRD CATEGORY OF CA SES WHICH HAVE NEITHER BEEN COMPLETED NOR ARE PENDING ON THE DATE OF SEARCH. KABUL CHAWLA IS SILE NT ON THIS SITUATION PERHAPS BECAUSE IT WAS NOT ENVISAGED AT THAT TIME. IN VIEW OF THESE FACTS AND LEGAL POSITION THAT THE PREMISE DEVELOPED IN KABUL CHAWLA THAT ADDITIONS CAN BE MADE IN THE COMPLETED OR ABATED ASSESSMENTS ONLY IF THERE IS INCRIMINATING MATERIAL IN A PROCEEDING U/S 153A CANNOT AND WILL NOT APPLY TO SUCH A SITUATION. 4) NOW WE COME TO THE QUESTION OF WHETHER IT IS NECESSARY TO HAVE INCRIMINATING MATERIAL IN ALL THE 6 YEARS FOR AN ADDITION TO ME MADE ON ISSUES NOT CO VERED BY SEARCH. THOUGH THERE IS AN ATTEMPT TO INTERPRET KABUL CHAWLA IN A WAY THAT INCRIMINATI NG MATERIAL IS REQUIRED IN ALL THE 6 YEARS THIS INTERPRETATION IS INCORRECT BECAUSE: A) THIS PROPOSITION HAS NOT BEEN SPECIFICALLY SPELT OU T IN THE KABUL CHAWLA CASE; B) THE DELHI HIGH COURT IN THE CASE OF CIT V. CHET AN DAS LACHMAN DAS [2012] 211 TAXMAN 61 (DEL.)/[2012] 254 CTR 392 (DEL.) HAS SPEC IFICALLY RAISED AND THEN ANSWERED THE QUESTION IN FAVOUR OF THE REVENUE. IT HAS STATED THAT ADDITIONS ON NON- SEARCH ISSUES CAN BE MADE EVEN IF THERE IS INCRIMIN ATING MATERIAL IN EVEN ONE YEAR. THIS CASE IS EXTREMELY IMPORTANT FOR THE REVENUE. SIMILAR SENTIMENTS HAVE BEEN EXPRESSED IN THE CASE OF CIT V. ANIL KUMAR BHATIA [2013] 352 ITR 493 (DEL) WHERE ONLY ONE UNSIGNED DO CUMENT DATED 10.02.2003 SHOWING A LOAN OF RS. 1 50 000/- WAS FOUND DURING S EARCH CONDUCTED ON 13.12.2005. THE HONBLE HIGH COURT HELD THAT THIS MATERIAL WAS ENOUGH TO JUSTIFY ADDITIONS IN ALL THE 6 YEARS. C) RECENTLY THE KERALA HIGH COURT IN SUNNY JACOB JEWELLERS AND WEDDING CENTRE V. DEPUTY COMMISSIONER OF INCOME-TAX [2014] 362 ITR 664 (KER) HAS ALSO VERY CATEGORICALLY STATED THAT INCRIMINATING MATERIAL FOUND DURING SEA RCH IS NOT NECESSARY IN ALL THE 6 YEARS FOR ADDITIONS TO BE MADE ON OTHER ISSUES. WHILE GIVING THESE DECISIONS THE HON'BLE ITAT MUM BAI AS WELL AS THE HON'BLE ITAT DELHI BENCH HAS REFERRED TO THE DECIS ION OF THE HON'BLE MUMBAI HIGH COURT IN THE CASE OF ALL CARGO GLOBAL L OGISTICS LIMITED VS. DCIT CENTRAL CIRCLE-44 MUMBAI AND THE DECISION OF HON'BLE DELHI HIGH ITA NO. 391/JP/2017 M/S. RAINBOW BUILDCON PVT.LTD. JAIPUR VS AC IT CENTRAL CIRCLE-2 JAIPUR 10 COURT IN THE CASE OF CIT VS. KABUL CHAWLA IN ITA NO. 707/2014 DATED 22.8.2015 . HERE IT IS PERTINENT TO MENTION THAT THE DEPARTMENT HAS NOT ACCEPTED THE DECISIONS OF HON'BLE MUMBAI HIGH COURT IN THE CASE OF M/S ALL CARGO GLOBAL LOGISTICS AS WELL AS CONTINENTAL W AREHOUSING (NHAVA SHEVA) LTD. AND SLP HAS BEEN FILED BEFORE THE HON' BLE SUPREME COURT. THE HON'BLE SUPREME COURT HAS GRANTED LEAVE VIDE OR DER DATED 12.10.2015 AS REPORTED IN 64 TAXMANN.COM 34 (S.C.). SIMILARLY IN THE CASE OF KABUL CHAWLA SLP HAS ALSO BEEN FILED. NOW AFTER THE DECISION OF THE HONBLE SUPREME C OURT IN THE CASE OF DEPUTY COMMISSIONER OF INCOME-TAX V. ZUARI ESTATE DEVELOPMENT & INVESTMENT CO. LTD. [2015] 373 ITR 661 (SC) AND ASSISTANT COMMISSIONER OF INCOME-TAX V. RAJESH JHAV ERI STOCK BROKERS P. LTD. [2007] 291 ITR 500(SC) IT IS CLEAR THAT PROCESSING OF A CASE U/S 143(1) I S NOT AN ASSESSMENT WHICH FACT HAS BEEN ADMITTED BY THE DELHI HIGH COURT IN THE CASE OF INDU LATA RANGWALA V. DEPUTY COMMISSIONER OF INCOME-TAX WP(C) 1393/2002 IN THEIR DECISION DATED 18.05.2016. HENCE THERE N OW OCCURS A THIRD CATEGORY OF CASES WHICH HAVE NEITHER BEEN COMPLET ED NOR ARE PENDING ON THE DATE OF SEARCH. KABUL CHAWLA IS SILENT ON THIS SITUATION PERHAPS BECAUSE IT WA S NOT ENVISAGED AT THAT TIME. IT IS MY CONTENTION THAT THE PREMISE DEVELOPED IN KABUL CHAWLA THAT ADDITIONS CAN BE MADE IN THE COMPLETED OR ABATED ASSESSMENTS ONLY IF THERE IS INCRIMINATIN G MATERIAL IN A PROCEEDING U/S 153A CANNOT AND WIL L NOT APPLY TO SUCH A SITUATION. NOW WE COME TO THE QUESTION OF WHETHER IT IS NECESS ARY TO HAVE INCRIMINATING MATERIAL IN ALL THE 6 YEARS FOR AN ADDITION TO ME MADE ON ISSUE S NOT COVERED BY SEARCH. THOUGH THERE IS AN ATTEMPT TO INTERPRET KABUL CHAWLA IN A WAY THAT INC RIMINATING MATERIAL IS REQUIRED IN ALL THE 6 YEARS THIS INTERPRETATION IS INCORRECT BECAUSE : A) THIS PROPOSITION HAS NOT BEEN SPECIFICALLY SPELT OUT IN THE KABUL CHAWLA CASE; B) THE DELHI HIGH COURT IN THE CASE OF CIT V. CHETAN DAS LACHMAN DAS [2012] 211 TAXMAN 61 (DEL.)/[2012] 254 CTR 392 (DEL.) HAS SPECIFICALLY RAISED AND THEN ANSWERED THE QUESTION IN FAVOUR OF THE REVENUE. IT HAS STATED THAT ADDITIONS ON NON-SEARCH ISSUES CAN BE MADE EVEN IF THERE IS INCRIMINATING MATERIAL IN EVEN ONE YEAR. THIS CASE IS EXTREMELY IMPORTANT FOR US. SIMILAR SENTIMENTS HAVE BEEN EXPRESSED IN THE CASE OF CIT V. ANIL KUMAR BHATIA [2013] 352 ITR 493 (DEL) WHERE ONLY ONE UNSIGNED DOCUMENT DATED 10.02.2003 SHOWING A LOAN OF RS. 1 50 000/- WAS FOUND DURING SEARCH CONDUCTED ON 13.12.2005. THE HONBLE HIGH COURT HELD THAT THIS MATERIAL WAS ENOUGH TO JUSTIFY ADDIT IONS IN ALL THE 6 YEARS. C) RECENTLY THE KERALA HIGH COURT IN SUNNY JACOB JEWELLERS AND WEDDING CENTRE V. DEPUTY COMMISSIONER OF INCOME-TAX [2014] 362 ITR 664 (KER) HAS ALSO VERY CATEGORICALLY STATED THAT INCRIMINATING MATERIAL FOUND DURING SEARCH IS NOT NECESSARY IN ALL THE 6 YEARS FOR ADDITIONS TO BE MADE ON OTHER ISSUES. THEREFORE IN VIEW OF ABOVE DISCUSSION WITH RE GARD TO THE PROVISIONS OF SEC 153A OF THE ACT IT I S SEEN THAT FROM 01.06.2003 ONWARDS THE NUMBER OF YEA RS FROM WHICH ASSESSMENTS COULD BE FRAMED AFTER SEARCH WERE REDUCED FROM 10 TO SIX. SECTION 153A OF THE ACT HAS MANDATED THAT THERE HAVE TO BE 6 SEPARATE ASSESSMENTS INSTEAD OF A BLOCK ASSESSMENT. IT ALSO STARTED WITH A NON-OBSTANTE CLAUSE WHICH STATED THAT THE OPERATION OF SECTIONS 139 147 148 149 151 AND 153 WAS OUSTED. IN OTHER WORDS WHEN AN ASSESSMENT WAS BEING COMPLETED U/S 153A THE SECTIO NS MENTIONED ABOVE COULD NOT BE INVOKED. THE ITA NO. 391/JP/2017 M/S. RAINBOW BUILDCON PVT.LTD. JAIPUR VS AC IT CENTRAL CIRCLE-2 JAIPUR 11 SECTION DID NOT REPEATS AND DID NOT MENTION THAT FOR MAKING AN ASSESSMENT U /S 153A OF THE ACT IT WAS NECESSARY TO HAVE SOME INCRIMINATING MATERIAL F OUND DURING SEARCH. IN THE CASE OF KABUL CHAWLA IT WAS STATED THAT ASSESSMENTS HAD TO BE COMPLETED U/S 153A OF THE ACT THE MOMENT A SEARCH HAS TAKEN PLACE. THIS IS A COMMON GROUND IN ALL JUDICIAL PRO NOUNCEMENTS AND NOBODY HAS ANY OBJECTION TO THE SAID CONCLUSION. IT WAS ALSO STATED IN THE ABOVE CASE THAT THOUGH NOT PRESCRIBED IN TH E ACT BUT ADDITIONS HAD TO BE MADE ON THE BASIS OF INCRIMINAT ING MATERIAL FOUND DURING SEARCH. THE ADDITIONS COULD NOT BE ARBITRARY. THIS CONCLUSION AND OTHER S ARRIVED AT IN PARA 37 OF THE JUDGMENT STARTED THE PRESENT CONTROVERSY. IT IS OBVIOUS THAT IF NO INCRI MINATING MATERIAL IS FOUND DURING SEARCH THEN ADDITIONS IF ANY HAVE TO BE MADE IN THE INCOME SH OWN IN THE RETURN OF INCOME ( IN THE CASE OF PENDING ASSESSMENTS WHICH ABATE ) AND TO THE COMPUTED INCOME ( IN CASE OF ASSESSMENTS WERE COMPLETED) . THUS EFFECTIVELY WHAT WAS SAID IN THE CASE OF KABUL CHAWLA WAS THAT MAKING ANY ADDITION IN THE RETURNED INCOME OR INCOME EARLIER ASSESSED WAS NOT ALLOWED IF NO MATERIAL WAS FOUND IN THE SEARCH WHICH COULD LEAD TO AN ADDITION ON THE BASIS OF THE SAID MATERIAL. THEREFORE FACTS OF CASE LAWS RELIED UPON BY THE AS SESSEE ARE QUITE DISTINGUISHABLE WITH THAT OF THE PRESENT CASE. IN VIEW OF THESE FACTS ASSESSEE S CONTENTION IS NOT CORRECT THAT AO WAS NOT JUSTIFIED IN REASSESSING THE COMPLETED ASSESSMENT. ASSESSEES APPEAL FAILS IN GR NO 1. 3.2 GROUND NO. 2 : REGARDING ADDITION OF RS. 2 00 00 000/- MADE BY AP PLYING THE PROVISIONS OF SECTION 56(1) OF INCOME TAX ACT 1961 TREATING T HE SHARE CAPITAL AND PREMIUM THEREON RECEIVED FROM VARIOUS COMPANIES AS INCOME OF THE AS SESSEE. GROUND NO. 3: ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE AND IN LAW THE LD. AO ERRED IN HOLDING THAT THE RECEIPT OF SHARE CAPITAL AND PR EMIUM DURING THE YEAR FROM VARIOUS COMPANIES IS NOT JUSTIFIABLE AND PART OF A WELL PLA NNED EXERCISE OF INTRODUCING UNACCOUNTED MONEY IN THE FORM OF SHARE CAPITAL AND SHARE PREMIU M MORE SO WHEN THE ASSESSEE WAS NO CAPABLE TO EARN SUCH HUGE UNDISCLOSED INCOME. 3.2.1 SUBMISSION MADE : RELEVANT EXTRACTS OF WHICH AR OF THE ASSESSEE ARE R EPRODUCED HERE AS UNDER: .... 1) DURING THE YEAR UNDER CONSIDERATION THE ASSESSEE ALLOTTED 58 000 EQUITY SHARES OF RS. 10 EACH TO VARIOUS COMPANIES AT A PREMIUM OF RS. 490/- PER SHA RE DETAIL OF WHICH IS AS UNDER: - SR. NO. NAME NO. OF SHARES ALLOTED/ APPLIED DURING THE YEAR AMOUNT ADJUSTED AGAINST SHARE CAPITAL RATE PER SHARE AMOUNT ADJUSTED AGAINST SHARE PREMIUM RATE OF PREMIUM PER SHARE ISSUE PRICE OF THE SHARE TOTAL CONSIDERATION RECEIVED 1 ANURAJ SECURITIES PVT LTD 4 000 40 000 10 19 60 000 490 500 20 00 000 2 MATRIBHUMI DEALERS PVT LTD 5 000 50 000 10 24 50 000 490 500 25 00 000 ITA NO. 391/JP/2017 M/S. RAINBOW BUILDCON PVT.LTD. JAIPUR VS AC IT CENTRAL CIRCLE-2 JAIPUR 12 3 NAROTTAMKA TRADE & VYAPAAR PVT LTD 3 000 30 000 10 14 70 000 490 500 15 00 000 4 PUJA DEALCOM PVT LTD 8 000 80 000 10 39 20 000 490 500 40 00 000 5 TARANG SUPPLIERS PVT LTD 6 000 60 000 10 29 40 000 490 500 30 00 000 6 VANDANA DEALERS PVT LTD 6 000 60 000 10 29 40 000 490 500 30 00 000 7 PUJA TIE-UP PVT LTD 8 000 80 000 10 39 20 000 490 500 40 00 000 TOTAL 40 000 4 00 000 1 96 00 000 2 00 00 000 2) DURING THE COURSE OF ASSESSMENT PROCEEDINGS THE ASSESSEE SUBMITTED THE FOLLOWING DOCUMENTS TO PROVE THEIR IDENTITY OF SHAREHOLDERS CREDITWORTHIN ESS OF SHAREHOLDERS AND GENUINENESS OF TRANSACTION WITH INVESTOR COMPANIES WHICH WAS ADDED BY LD. AO AS INCOME OF THE ASSESSEE: - NAME OF SHAREHOLDER PARTICULARS OF DOCUMENTS SUBMITTED COPY AT PB PAGE ANURAJ SECURITIES PVT. LTD SHARE APPLICATION CONTAINING THE NAME/ADDRESS/PAN O F PARTY DETAIL OF PAYMENT RECEIVED ETC. COPY OF BOARD RESOLUTION. COPY OF PAN CARD OF PARTY. COPY OF BANK STATEMENT SHOWING THE ENTRY OF PAYMENT MADE TO ASSESSEE. DECLARATION OF SOURCE OF FUNDS WITH PARTY. COPY OF ACK. OF ITR OF AY 2009-10. COPY OF AUDIT REPORT AND AUDITED BALANCE SHEET ALON G WITH ANNEXURE OF 31.03.09. COPY OF REGISTRATION CERTIFICATE ISSUED BY ROC. 102 103 104 105 106-108 109 110-125 126 MATRIBHUMI DEALERS PVT. LTD SHARE APPLICATION CONTAINING THE NAME/ADDRESS/PAN O F PARTY DETAIL OF PAYMENT RECEIVED ETC. COPY OF BOARD RESOLUTION. COPY OF PAN CARD OF PARTY. COPY OF BANK STATEMENT SHOWING THE ENTRY OF PAYMENT MADE TO ASSESSEE. DECLARATION OF SOURCE OF FUNDS WITH PARTY. COPY OF ACK. OF ITR OF AY 2009-10. COPY OF AUDIT REPORT AND AUDITED BALANCE SHEET ALON G WITH ANNEXURE OF 31.03.09. COPY OF REGISTRATION CERTIFICATE ISSUED BY ROC. 127-129 130 131 132 133-134 135 136-144 145 ITA NO. 391/JP/2017 M/S. RAINBOW BUILDCON PVT.LTD. JAIPUR VS AC IT CENTRAL CIRCLE-2 JAIPUR 13 NAROTTAMKA TRADE & VYAPAAR PVT. LTD SHARE APPLICATION CONTAINING THE NAME/ADDRESS/PAN O F PARTY DETAIL OF PAYMENT RECEIVED ETC. COPY OF BOARD RESOLUTION. COPY OF PAN CARD OF PARTY. COPY OF BANK STATEMENT SHOWING THE ENTRY OF PAYMENT MADE TO ASSESSEE. DECLARATION OF SOURCE OF FUNDS WITH PARTY. COPY OF ACK. OF ITR OF AY 2009-10. COPY OF AUDIT REPORT AND AUDITED BALANCE SHEET ALON G WITH ANNEXURE OF 31.03.09. COPY OF REGISTRATION CERTIFICATE ISSUED BY ROC. REGISTRATION CERTIFICATE WITH RBI FOR NBFC 146-147 148 149 150 151 152 153-166 167 168 PUJA DEALCOM PVT. LTD SHARE APPLICATION CONTAINING THE NAME/ADDRESS/PAN O F PARTY DETAIL OF PAYMENT RECEIVED ETC. COPY OF BOARD RESOLUTION. COPY OF PAN CARD OF PARTY. COPY OF BANK STATEMENT SHOWING THE ENTRY OF PAYMENT MADE TO ASSESSEE. DECLARATION OF SOURCE OF FUNDS WITH PARTY. COPY OF ACK. OF ITR OF AY 2009-10. COPY OF AUDIT REPORT AND AUDITED BALANCE SHEET ALON G WITH ANNEXURE OF 31.03.09. COPY OF REGISTRATION CERTIFICATE ISSUED BY ROC. 169-170 171 172 173 174 175 176-185 186 TARANG SUPPLIERS PVT. LTD SHARE APPLICATION CONTAINING THE NAME/ADDRESS/PAN O F PARTY DETAIL OF PAYMENT RECEIVED ETC. COPY OF BOARD RESOLUTION. COPY OF PAN CARD OF PARTY. COPY OF BANK STATEMENT SHOWING THE ENTRY OF PAYMENT MADE TO ASSESSEE. DECLARATION OF SOURCE OF FUNDS WITH PARTY. COPY OF ACK. OF ITR OF AY 2009-10. COPY OF AUDIT REPORT AND AUDITED BALANCE SHEET ALON G WITH ANNEXURE OF 31.03.09. COPY OF REGISTRATION CERTIFICATE ISSUED BY ROC. 187 188 189 190 191 192 193-202 203 VANDANA DEALERS PVT. LTD SHARE APPLICATION CONTAINING THE NAME/ADDRESS/PAN O F PARTY DETAIL OF PAYMENT RECEIVED ETC. COPY OF BOARD RESOLUTION. COPY OF PAN CARD OF PARTY. COPY OF BANK STATEMENT SHOWING THE ENTRY OF PAYMENT MADE TO ASSESSEE. DECLARATION OF SOURCE OF FUNDS WITH PARTY. COPY OF ACK. OF ITR OF AY 2009-10. COPY OF AUDIT REPORT AND AUDITED BALANCE SHEET ALON G WITH ANNEXURE OF 31.03.09. COPY OF REGISTRATION CERTIFICATE ISSUED BY ROC. 204-205 206 207 208 209-211 212 213-224 225 ITA NO. 391/JP/2017 M/S. RAINBOW BUILDCON PVT.LTD. JAIPUR VS AC IT CENTRAL CIRCLE-2 JAIPUR 14 PUJA TIE UP PVT. LTD SHARE APPLICATION CONTAINING THE NAME/ADDRESS/PAN O F PARTY DETAIL OF PAYMENT RECEIVED ETC. COPY OF BOARD RESOLUTION. COPY OF PAN CARD OF PARTY. COPY OF BANK STATEMENT SHOWING THE ENTRY OF PAYMENT MADE TO ASSESSEE. DECLARATION OF SOURCE OF FUNDS WITH PARTY. COPY OF ACK. OF ITR OF AY 2009-10. COPY OF AUDIT REPORT AND AUDITED BALANCE SHEET ALON G WITH ANNEXURE OF 31.03.09. COPY OF REGISTRATION CERTIFICATE ISSUED BY ROC. 226-227 228 229 230 231 232 233-244 245 3. ALL THE SHARE CAPITAL/SHARE APPLICATION WAS RECE IVED THROUGH A/C PAYEE CHEQUES AND VERIFIABLE FROM BANK STATEMENT OF ASSESSEE AS WELL AS BANK STA TEMENT OF THE PARTY. THE ONUS U/S 68 OF THE ASSESSEE IS TO PROVE THE IDENTITY CAPACITY AND GEN UINENESS OF THE TRANSACTIONS HAS BEEN DISCHARGED WHICH MAY BE SEEN FROM THE FOLLOWINGS:- I) IDENTITY:- THE ASSESSEE PROVED THE IDENTITY OF ALL THE COMPA NIES BY FILING THE SHARE APPLICATION RECEIVED FROM THE PARTIES AND THE PARTIES ARE DULY IN EXISTE NCE AND THE EXISTENCE OF THE PARTIES CAN BE VERIFIED FROM THE OFFICIAL WEBSITE OF MCA. THE LD. AO ALSO NOT DOUBTED THE IDENTITY OF THE ABOVE NAMED COMPANIES. FURTHER THE NOTICE ISSUED U/S 133( 6) OF INCOME TAX ACT 1961 WAS DULY SERVED ON ALL THE COMPANIES WHICH ALSO PROVE THE IDENTITY OF THE PARTIES. II) CREDITWORTHINESS ALL THE COMPANIES ARE INCOME TAX ASSESSEE AND DUL Y FILING THE INCOME TAX RETURN AND BALANCE SHEETS. THERE IS SUFFICIENT SOURCE OF FUNDS WITH AL L THE COMPANIES TO INVESTMENT SHARE CAPITAL/SHARE APPLICATION IN THE ASSESSEE COMPANY. THE ASSESSEE SUBMITTED THE COPIES OF BANK ACCOUNT/DECLARATION OF SOURCE OF FUNDS WITH THEM OF INVESTOR COMPANIES. THE BANK STATEMENT SHOWS THE HUGE TRANSACTION OF HIGH VALUE IN THE ACC OUNTS OF THE COMPANIES. THE CHART SHOWING THE AMOUNT INVESTED BY THE ABOVE NAMED COMPANIES IN ASSESSEE COMPANY VIZ A VIZ OWN FUNDS WITH THE INVESTOR COMPANY ARE AS UNDER: - NAME OF THE INVESTOR COMPANY AMOUNT INVESTED IN ASSESSEE COMPANY SHARE CAPITAL AND RESERVE & SURPLUS WITH INVESTOR COMPANIES AS ON 31.03.2009 SHARE CAPITAL AND RESERVE & SURPLUS WITH INVESTOR COMPANIES AS ON 31.03.2008 ANURAJ SECURITIES PVT LTD 20 00 000 3 90 10 000 3 90 10 000 MATRIBHUMI DEALERS PVT LTD 25 00 000 3 16 50 000 3 16 50 000 NAROTTAMKA TRADE & VYAPAAR PVT LTD 15 00 000 33 22 10 241 33 21 86 557 PUJA DEALCOM PVT LTD 40 00 000 13 54 55 817 13 54 51 613 TARANG SUPPLIERS PVT LTD 30 00 000 2 55 00 000 2 55 00 000 VANDANA DEALERS PVT LTD 30 00 000 9 39 42 000 9 39 42 000 PUJA TIE-UP PVT LTD 40 00 000 11 95 23 840 11 95 12 729 FROM THE ABOVE CHART IT IS CLEAR THAT ALL THE INVE STOR COMPANIES WERE HAVING THEIR OWN SHARE CAPITAL AND RESERVE & SURPLUS WHICH WAS MUCH MORE T HAN TO THE AMOUNT INVESTED IN THE ASSESSEE COMPANY. THE ABOVE CHART SHOWS THAT THE IN VESTOR COMPANIES WERE HAVING THEIR OWN INDEPENDENT FUNDS AND HAVING THEIR INDEPENDENT SOUR CE TO INVEST IN THE SHARES OF THE ASSESSEE COMPANY. APART FROM THE INVESTMENT MADE IN THE SHAR ES OF ASSESSEE COMPANIES THE INVESTOR COMPANIES WERE ALSO HAVING INVESTMENTS IN SHARES OF OTHER COMPANIES OR LOANS & ADVANCES TO ITA NO. 391/JP/2017 M/S. RAINBOW BUILDCON PVT.LTD. JAIPUR VS AC IT CENTRAL CIRCLE-2 JAIPUR 15 PARTIES WHICH IS MUCH MORE THAN TO THE AMOUNT INVES TED IN THE ASSESSEE COMPANY THEREFORE FROM THE BANK STATEMENT AS WELL AS FINANCIALS STATEMENTS OF THE INVESTOR COMPANIES THEIR CREDITWORTHINESS IS DULY PROVED. III) GENUINENESS THE ASSESSEE SUBMITTED THE SHARE APPLICATION FORM RECEIVED FROM ABOVE COMPANIES AGAINST THE SHARE APPLICATION RECEIVED FROM THE COMPANIES. THE SHARE APPLICATION IS SUPPORTED BY BOARD RESOLUTION PASSED IN THE INVESTOR COMPANIES. THE AS SESSEE COMPANY HAS ALLOTTED THE SHARES TO THE INVESTOR COMPANIES. THE PROPER RETURNS WERE FIL ED BEFORE THE ROC AGAINST ALLOTMENT OF THE SHARES TO THESE COMPANIES. FURTHERMORE THE DEPART MENT HAS CARRIED OUT INTENSIVE SEARCH OPERATIONS OVER THE ASSESSEE AND NO ANY INCRIMINATI NG MATERIAL WAS FOUND TO SHOW THAT THE MONEY AGAINST THE SHARE ALLOTMENT WAS OWN MONEY OF THE COMPANY. SHARES CERTIFICATES WERE ISSUED AGAINST THE ALLOTMENT OF THE SHARES TO THESE COMPANIES WERE NOT FOUND FROM THE POSSESSION OF THE ASSESSEE COMPANY OR ITS DIRECTOR OR EMPLOYEES. THIS FACT SHOWS THAT AFTER ALLOTMENT OF SHARES BY THE APPELLANT COMPANY SHARE CERTIFICATES WERE DISPATCHED TO THE SUBSCRIBER COMPANIES. NO ANY ENTRY IN BOOKS OF ACCO UNT OR DOCUMENT WAS FOUND SHOWING PAYMENT OF CASH TO THESE INVESTOR COMPANIES AGAINST RECEIPT OF CHEQUES FROM THESE COMPANIES AGAINST ALLOTMENT OF SHARES. THEREFORE THE GENUINEN ESS OF THE TRANSACTIONS CANNOT BE DOUBTED. 4. THE LD. AO ALSO NOT DOUBTED THE IDENTITY OF THE SHAREHOLDERS AND HE ONLY DOUBTED THE CREDITWORTHINESS AND GENUINENESS OF THE TRANSACTION S FOR THE FOLLOWING REASONS AS GIVEN IN PARA 11 (A TO C) AND PARA 12 OF THE ASSESSMENT ORDER: - I) THE ASSESSEE COMPANY WAS INCORPORATED ON 07.07 .2000 WITH THE SUBSCRIBE CAPITAL OF RS. 1 00 000/- ONLY. THE ASSESSEE COMPANY RECEIVED THE HUGE SHARE PREMIUM AFTER NINE YEAR OF ITS INCORPORATION WITHOUT HAVING MAJOR BUSINESS ACT IVITIES. II) AS PER THE AUDITED P&L ACCOUNT AND BALANCE SH EET THE ASSESSEE COMPANY DID NOT HAVE ANY BUSINESS WHAT SO EVER. III) PERUSAL OF THE BALANCE SHEET OF THE ASSESSEE COMPANY REVEALED THAT THERE WERE NO PHYSICAL ASSETS/ASSETS ARE NOT IN COMMENSURATE TO V ALUE OF SHARE WITH THE COMPANY WITHER IN THE FORM OF FIXED ASSETS PLANT & MACHINERY ETC. IN THE ABOVE BACKGROUND THE RECEIPT OF SHARE CAPITA L RS. 4 00 000/- AND PREMIUM TO THE TUNE OF RS. 1 96 00 000/- DURING THE YEAR UNDER CONSIDERATION W AS NOT ONLY ABNORMAL BUT ALSO APPEARED TO BE A PART OF A WELL PLANNED EXERCISE OF TAX EVASION AS DISCUSSED EARLIER. REGARDING THESE FINDINGS/OBSERVATIONS OF LD. AO W E MAY SUBMIT AS UNDER: - I) ADMITTEDLY THE ASSESSEE COMPANY RECEIVED HUGE SHARE PREMIUM WITHOUT HAVING MAJOR BUSINESS ACTIVITIES BUT THE SAME DOES NOT AUTOMATICALLY MAKE THE SHARE PREMIUM AS NON GENUINE AND TAXABLE IN THE HANDS OF THE ASSESSEE. THE INVESTMEN T BY THE INVESTEE COMPANIES WAS MADE AFTER BEING CONVINCED WITH THE FUTURE BUSINESS PLANNING O F THE ASSESSEE COMPANY. THE ASSESSEE COMPANY HAS A LARGE CHUNK OF AGRICULTURAL LAND AT V ILLAGE GIDANI (NEAR DUDU AT MAIN NH JAIPUR AJMER ROAD AND PLANNING DEVELOPMENT OF TOWNS HIP THEREON. THE MARKET RATE OF THIS LAND WAS VERY HIGH. THE ASSESSEE COMPANY WAS EXPECTING GOOD REVENUE FROM SUCH TOWNSHIP AND THE ITA NO. 391/JP/2017 M/S. RAINBOW BUILDCON PVT.LTD. JAIPUR VS AC IT CENTRAL CIRCLE-2 JAIPUR 16 INVESTOR COMPANIES WERE CONVINCED TO BE PARTNER OF SUCH PROJECT THEREFORE THEY INVESTED THE FUNDS IN THE ASSESSEE COMPANY. THUS THE INVESTMENT MADE BY THE INVESTEE COMPANIES IN SHARES OF THE ASSESSEE COMPANY ON THE BASIS OF FUTURE BUSINES S EXPANSION PLANS OF THE ASSESSEE COMPANY AND OUTCOME THERE FROM. II) ADMITTEDLY WHEN THE SHARE PREMIUM WAS RECEIVED THE RE WAS NO BUSINESS IN THE ASSESSEE COMPANY BUT AS STATED EARLIER THE INVESTMENT WAS MA DE BY THE INVESTEE COMPANIES IN SHARES OF THE ASSESSEE COMPANY ON THE BASIS OF FUTURE BUSINES S EXPANSION PLANS OF THE ASSESSEE COMPANY AND OUTCOME THERE FROM. IT IS WRONG TO SAY THAT AS ON THE DATE OF ISSUE OF SHARES THE ASSESSEE COMPANY WAS NOT OWING ANY ASSETS. THE ASSESSEE COMP ANY HAS A LARGE CHUNK OF AGRICULTURAL LAND AT VILLAGE GIDANI (NEAR DUDU AT MAIN NH JAIPUR AJMER ROAD AND PLANNING DEVELOPMENT OF TOWNSHIP THEREON. THIS LAND WAS PURCHASED IN PRE VIOUS YEARS AND THE MARKET RATE OF THIS LAND WAS VERY HIGH. FURTHER THE ASSESSEE COMPANY IS ONE OF THE GROUP COMPANIES OF MOTISONS GROUP. THE MOTISONS GROUP IS VERY PRESTIGIOUS AND WELL KNO W GROUP OF THE NORTHERN PART OF INDIA THEREFORE THE INVESTOR COMPANY INVESTED THE FUNDS I N THE ASSESSEE COMPANY ON THE GOODWILL OF THE MOTISONS GROUP AFTER KNOWING THEIR FUTURE PLANS AND FUTURE EARNINGS. THEREFORE THE SHARE CAPITAL/SHARE PREMIUM INVESTED BY INVESTOR COMPANIE S WAS NOT ON THE BASIS OF CURRENT AFFAIRS OF THE ASSESSEE COMPANY BUT THE SAME WAS RESULT OF FUT URE BUSINESS EXPLANATION PLANS COUPLED WITH GOODWILL OF MOTISONS GROUP. III) ADMITTEDLY WHEN THE SHARE WERE ISSUED THE BOOK VALU E OF THE ASSETS OF THE ASSESSEE COMPANY WAS NOT IN COMMENSURATE TO THE VALUE OF THE SHARES BUT WHILE MAKING THE INVESTMENTS THE CURRENT MARKET VALUE OF THE ASSETS AND FUTURE POTENTIALITY & PROFITABILITY OF THE PROJECT/ASSETS ARE ALSO TAKEN INTO CONSIDERATION AND THEN THE INVESTMENTS A RE MADE. THERE ARE LOTS OF COMPANIES WHICH ISSUE THE SHARES IN MARKET THROUGH IPO AND THE SHAR ES OF SUCH COMPANIES ARE SUBSCRIBED ON THE BASIS OF THEIR DECLARATION REGARDING THEIR FUTURE B USINESS PLANNING FOR WHICH THE FUNDS RAISED IN IPO. THUS THE EXISTING FIXED ASSETS OF THE COMPANY ALWAYS NOT TO BE THE CRITERIA FOR DECIDING THE INVESTMENT IN SHARES BY INVESTOR COMPANIES. IV) REGARDING OBSERVATION OF LD. AO THAT SHARE CAPITAL AND PREMIUM APPEARED TO BE A PART OF A WELL PLANNED EXERCISE OF TAX EVASION AS DISCUSSED EARLIE R THIS IS TO SUBMIT THAT TAXING EVENT AROSE WHEN THE INCOME IS EARNED AND THE TAX EVASION IS AR OSE WHEN THE UNDISCLOSED INCOME IS GENERATED. IN THE FORGOING PARAS THE LD. AO HIMSELF DOUBTED THE SHARE PREMIUM ON THE GROUND THAT THE ASSESSEE COMPANY DID NOT HAVE ANY BUSINESS SO EVER. WHEN THE ASSESSEE COMPANY IS NOT HAVING ANY BUSINESS THAN QUESTION OF HAVING ANY INC OME EITHER DISCLOSED OR UNDISCLOSED DOES NOT ARISE AND WHEN THERE IS NO INCOME THAN HOW THE TAX CAN BE EVADED THEREON. THEREFORE IN VIEW OF FINDING GIVEN IN THESE PARAS BY THE LD. AO IT HAD TO BE PROVED FIRST BY THE DEPARTMENT THAT THE ASSESSEE WAS HAVING SOME INCOME ON WHICH IT HAS NOT PAID THE TAX AND THE SAME BROUGHT IN BOOKS OF ACCOUNTS IN THE FORM OF SH ARE CAPITAL & PREMIUM THEREON. BUT IN THE INSTANT CASE THE DEPARTMENT COULD NOT PROVE ANY KIN D OF UNDISCLOSED SOURCE OF INCOME OF THE ASSESSEE AS A RESULT OF SEARCH OVER ASSESSEE AS WEL L AS DURING THE COURSE OF ASSESSMENT PROCEEDINGS. AS A RESULT OF SO CALLED LONG INQUIRIE S/ANALYSIS THE DEPARTMENT COULD NOT EVIDENTIARY PROVED THAT THE ASSESSEE COMPANY MANAGE D ITS FUNDS WITH INVESTOR COMPANIES TO BROUGHT THE SAME IN BOOKS OF ACCOUNTS IN THE FORM O F SHARE CAPITAL & PREMIUM THEREON MORE SO WHEN THE INVESTOR COMPANIES HAVING THEIR OWN SUFFIC IENT FUNDS TO INVEST IN THE ASSESSEE COMPANY ITA NO. 391/JP/2017 M/S. RAINBOW BUILDCON PVT.LTD. JAIPUR VS AC IT CENTRAL CIRCLE-2 JAIPUR 17 MUCH PRIOR TO INVESTMENT MADE IN THE ASSESSEE COMPA NY AND OTHER INVESTMENTS MADE BY SUCH INVESTOR COMPANIES ARE MUCH MORE THAN TO THE INVEST MENT MADE IN ASSESSEE COMPANY. RELIANCE IS PLACED ON THE DECISION OF HONBLE SUPR EME COURT IN THE CASE OF COMMISSIONER OF INCOME TAX VS SMT. P. K. NOORJAHAN 237 ITR 570 (SC) AND CIT VS BHARAT ENGINEERING AND CONSTRUCTION CO. (1972) 83 ITR 187 (SC) 5. THE LD. AO BY DOUBTING THE CREDITWORTHINESS AND GENUINENESS OF THE SHARE CAPITAL/SHARE PREMIUM IN ABOVE PARAS ISSUED A SHOW CAUSE NOTICE D ATED 06.02.2015 (COPY AT PB PAGE 92 TO 95) TO THE ASSESSEE FOR TREATING THE SHARE CAPITAL/ PREMIUM AS INCOME OF THE ASSESSEE ON THE FOLLOWING GROUNDS: - A) SHARE PREMIUM/SHARE CAPITAL PAID BY INVESTOR COM PANIES IS NOT JUSTIFIED ON ANY ACCOUNT AND IT IS CLEAR THAT ENTIRE MONEY HAS BEEN INTRODUCED IN T HE ASSESSEE COMPANY IN THE GARB OF SHARE PREMIUM. THE PURPOSE AND JUSTIFICATION OF CHARGING THE SHARE PREMIUM IN EXCESS OF THE JUSTIFIABLE AMOUNT WHICH IN THIS CASE CANNOT BE MO RE THAN RS.10/- PER SHARE IS ABSENT FROM THE ABOVE EXERCISE OF ISSUE AND SUBSCRIPTION OF SHARES AT A PREMIUM OF RS. 490 PER SHARE. B) THE DETAILED ENQUIRIES REVEALED THAT MOST OF THE COMPANIES ARE KOLKATTA BASED. DIRECTORS OF THESE COMPANIES ARE THE EMPLOYEES OF MOTI SONS GROU P OR THE FAMILY MEMBERS OF CHHABRA FAMILY. DETAILED ANALYSIS SHOWED THE FOLLOWING FACT S: (I) ALL THE DIRECTORS WERE RESIDENTS OF JAIPUR (II) INTERNET SEARCH SHOWED THAT DIRECTORS OF THES E KOLKATTA BASED COMPANIES ARE RELATED TO MOTISONS GROUP COMPANIES THROUGH EMPLOYMENT OR OTHE RWISE (III) ITDMS AND ITD SEARCH ON PAN OF THESE DIRECTO RS CORROBORATED THE GIVEN ADDRESSES TO A LARGE EXTENT (IV) RESIDENTIAL ADDRESS OF RAJEEV JAIN WAS THE SA ME AS THAT OF MOTISONS SHARES PVT. LTD. MENTIONED ON THE VISITING CARD OF HARIDWAR OFFICE AS BRANCH H EAD. (V) ALL THESE DIRECTORS APPOINTED BETWEEN 12TH AND 17TH OCTOBER 2011 WHICH WAS MORE THAN A COINCIDENCE (THE PREVIOUSLY EXISTING DIRECTORS RESI GNED IN FEBRUARY 2012) (VI) THE EMAIL ID GIVEN ON MCA WEBSITE FOR ALL THE COMPANIES IS COMMON AND THE SAME IS FOR MOTISONS GROUP COMPANIES. THE COMPLIANCE OFFICER MS . NEHA JAIN COMPANY SECRETARY IS COMMON BETWEEN THESE AND MOTISONS GROUP COMPANIES INDICATING ABSOLUTE CONTROL OF MOTISONS GROUP UPON THESE KOLKATA BASED COMPANIES. (VII) REGISTERED ADDRESS OF ALL THE COMPANIES IS T HE SAME WHICH HAS BEEN CHANGED ON 01.03.2012. (VIII) TWO OF THE SAID COMPANIES INFORMATION ON MC A WEBSITE WERE EXAMINED IN DETAIL. M/S. ALLIANCE TRADECOM & M/S. EVERSHINE SUPPLIERS PVT. LTD WERE I NCORPORATED ON 25.11.2008 AND 05.01.2009 RESPECTIVELY. THE INFLOW OF CAPITAL UPON INCORPORATION WAS THROUGH SHARE SOLD AT A VERY HIGH PREMIUM AND THEREAFTER THE SAID CAPITAL W AS CLAIMED TO BE INVESTED IN UNQUOTED SHARES WORTH RS.11.06 CRORES AND RS.10.39 CRORES RE SPECTIVELY. ITA NO. 391/JP/2017 M/S. RAINBOW BUILDCON PVT.LTD. JAIPUR VS AC IT CENTRAL CIRCLE-2 JAIPUR 18 (IX) ALL ABOVE FACTORS INDICATE SYSTEMATIC AND DEL IBERATE CREATION OF A COLURABLE DEVICE TO INTRODUCE SHARE CAPITAL INTO MOTISONS GROUP COMPANI ES. 6. IN RESPONSE TO SHOW CAUSE NOTICE THE ASSESSEE FI LED ITS REPLY VIDE LETTER DATED 13.02.2015 (COPY AT PB PAGE 96 TO 99). THE SUBMISSION OF THE ASSESSE E ON THE OBSERVATIONS OF LD. AO AS MENTIONED ABOVE IN PARA 5 ABOVE IS AS UNDER: - A) THE SHARE PREMIUM WAS DECIDED BY THE COMPANY AND INVESTORS MUTUALLY AND SHARE APPLICANT COMPANIES HAVE AGREED TO PAY THIS SHARE PREMIUM. TH ERE WAS NO BAR TO ISSUE SHARES ON PREMIUM UNDER COMPANIES ACT AND INCOME TAX ACT FOR THE PERIOD UNDER RELEVANT. FURTHER THE LD. AO HELD THAT THE ------IT IS CLEAR THAT ENTIRE MONEY HAS BEEN INTRODUCED IN THE ASSESSEE COMPANY IN THE GARB OF SHARE PREMIUM---- BUT THE L D. AO DID NOT CLEAR THAT WHAT WAS THE SOURCE OF SUCH MONEY WITH THE ASSESSEE WHICH IT INT RODUCED IN THE GARB OF SHARE PREMIUM. THE SHOW CAUSE NOTICE AS WELL AS ASSESSMENT ORDER IS CO MPLETELY SILENT ON THIS ISSUE. WITHOUT HAVING SOME MONEY IT CANNOT BE INTRODUCE IN BOOKS OF ACCOU NTS AND FOR HAVING THE MONEY THERE SHOULD BE SOME UNEXPLAINED SOURCE OF INCOME. IN THE CASE O F ASSESSEE THE DEPARTMENT AS A RESULT OF SEARCH AS WELL AS DURING ASSESSMENT PROCEEDINGS OR AS A RESULT OF INVESTIGATION COULD NOT PROVE THE SOURCE OF INCOME OF THE ASSESSEE WHEREFROM THIS MUCH OF MONEY WAS EARNED THEREFORE THE FINDING OF LD. AO ON THIS ISSUE IS TOTALLY INCORREC T AND DOES NOT MAINTAINABLE IN THE EYE OF LAW. THE ALLEGATION OF LD. AO IS PATENTLY WRONG WITH OUT ANY BASIS AND MERELY ON SURMISES AND CONJECTURES. HONBLE JUSTICE HIDAYA TULLAH OF THE SUPREME COURT IN THE CASE OF SREELEKHA BANERJEE VS CIT [1963] 49 ITR 112 (SC) ; 120 OBSERVED THAT THE INCOME TAX DEPARTMENT CANNOT BY MERELY REJECTING UNREASONABLY A GOOD EXPLANATION CONVERT GOOD PROOF INTO NO PROOF HONBLE SUPREME COURT IN THE CASE OF UMA CHARAN SHAW & BROS CO VS CIT 37 ITR 271 HAS HELD THAT THE SURMISES AND CO NJECTURES AND THE CONCLUSION IS THE RESULT OF SUSPICION WHICH CANNOT TAKE THE PLACE OF PROOF. HONBLE PUNJAB & HARYANA HIGH COURT IN THE CASE OF CIT VS ANUPAM KAPOOR (2008) 29 9 ITR 179 (P & H) ALSO HELD THAT SUSPICION HOWSOEVER STRONG CANNOT TAKE THE PLACE O F LEGAL PROOF. B) REGARDING THE INQUIRIES WHICH ARE BEING DISCUSS IN THE SHOW CAUSE NOTICE THIS IS TO SUBMIT THAT WHATEVER INQUIRED BEING DISCUSS BY LD. AO WAS NOT I N KNOWLEDGE OF THE ASSESSEE THAT WHAT SORT OF INQUIRIES HAS BEEN MADE BY THE DEPARTMENT AND WH AT ARE THE OUTCOMES OF SUCH INQUIRIES. THEREFORE THE ASSESSEE REQUESTED FROM THE LD. AO TO PROVIDE THE DETAILS OF INQUIRIES CONDUCED IN THIS REGARD ALONG WITH SUPPORTING DOCUMENTS BUT THE SAME NOT PROVIDED TO THE ASSESSEE. HOWEVER ON THE ISSUE RAISED BY THE LD. AO ON THE BA SIS OF SO CALLED INQUIRIES WE SUBMIT AS UNDER: - I) THE ABOVE FINDING OF THE LD. AO IS NOT RELEVANT AT ALL IN DECIDING THE ISSUE OF CREDITWORTHINESS OF THE INVESTOR COMPANY AND GENUINENESS OF THE TRANSAC TIONS. EVEN IF IT IS PRESUMED THAT THE INVESTOR COMPANIES ARE UNDER THE CONTROL OF THE DIR ECTORS OF THE ASSESSEE THEN ALSO THE TRANSACTION CANNOT BE TREATED AS NOT GENUINE AS THE MAIN ISSUE IS AVAILABILITY OF FUNDS IN THE HANDS OF THE INVESTOR COMPANY AND IF THAT IS EXPLAI NABLE THEN NO QUESTION IS ARISE FOR TREATING THE SHARE CAPITAL AS NOT GENUINE. (II) THE LOW CREDITABILITY OF DIRECTORS OF ALLOTTEE COMPANY THEIR RELATIONSHIP WITH MOTISONS GROUP ETC. HAVE NO RELEVANCE FOR EXAMINING THE GENUINENES S OF SHARE CAPITAL AND CREDITWORTHINESS OF THE INVESTOR COMPANY AS IN THE CASE OF ASSESSEE IT IS WELL PROVED BY DOCUMENTARY EVIDENCE THAT THE AMOUNT AGAINST SHARE APPLICATION MONEY WAS RECE IVED THROUGH GENUINE SOURCE OF FUNDS WITH ITA NO. 391/JP/2017 M/S. RAINBOW BUILDCON PVT.LTD. JAIPUR VS AC IT CENTRAL CIRCLE-2 JAIPUR 19 INVESTOR COMPANIES AND THE AMOUNT WAS ADJUSTED AGAI NST ALLOTMENT OF SHARES. THE SOURCE OF FUNDS WITH THE INVESTOR COMPANIES WHICH THEY INVEST ED IN ASSESSEE COMPANY WAS ALSO WELL EXPLAINED GENUINELY. IF DEPARTMENT HAVE SOME DOUBT REGARDING GENUINENESS OF FUNDS WITH INVESTOR COMPANIES THE NECESSARY INVESTIGATION OF S UCH FUNDS SHOULD HAD BEEN MADE IN THE CASE OF INVESTOR COMPANIES AND THE NECESSARY ACTION SHOU LD HAD BEEN TAKEN IN THEIR CASE. IT IS RELEVANT TO MENTION HERE THAT APART FROM THE INVEST MENT MADE IN THE ASSESSEE COMPANY THE OTHER ASSETS/INVESTMENT OF SUCH INVESTOR COMPANIES WAS MU CH MORE WHICH WERE ALSO MANAGED BY THOSE COMPANIES AT THEIR OWN. IT IS ALSO RELEVANT T O NOTICE HERE THAT WHY ONLY THE INVESTMENT MADE BY THOSE INVESTMENT COMPANIES IN THE ASSESSEE COMPANY IS BEING TREATED AS NON GENUINE AND OTHER INVESTMENT/ASSETS OF THOSE COMPANY IS BEI NG TREATED AS GENUINE. THIS SHOWS THAT THE ASSESSMENT ORDER WAS PASSED BY LD. AO WITH SETTLED MINDSET THAT THE AMOUNT IS TO BE ADDED AS INCOME OF THE ASSESSEE. (III) FURTHER WHATEVER INQUIRIES/ANALYSIS DISCUSS B Y LD. AO IN HIS SHOW CAUSE NOTICE HAVE NO RELEVANCE IN THE CASE OF THE ASSESSEE BECAUSE FROM SUCH DISCUSSION ONLY IT CAN BE PROVED (NOT CONCLUSIVELY) THAT THE EMPLOYEES OF ASSESSEE GROUP WAS MANAGING AFFAIRS OF SOME OF THE COMPANIES WHO MADE THE INVESTMENT IN SOME YEARS IN THE ASSESSEE/COMPANIES OF ASSESSEE GROUP BUT SUCH INQUIRIES NOWHERE PROVES THAT THE FUNDS WI TH SUCH COMPANIES WAS NOT FROM THEIR OWN INDEPENDENT SOURCES AND THE SAME WAS INTRODUCED BY THE ASSESSEE COMPANY. IN THE INSTANT CASE FOR ADDING THE SHARE CAPITAL/PREMIUM AS INCOME OF T HE ASSESSEE THE DEPARTMENT HAS TO PROVE THAT THE AMOUNT SO RECEIVED WAS REVENUE RECEIPT OF THE A SSESSEE AND IN THE INSTANT CASE THE DEPARTMENT COULD NOT PROVE THE SAME AS A RESULT OF SEARCH PROCEEDINGS OVER THE ASSESSEE GROUP OR DURING THE COURSE OF ASSESSMENT PROCEEDINGS OR A S A RESULT OF INVESTIGATION/ANALYSIS. WITHOUT PROVING THE SOURCE OF INCOME OR WITHOUT PROVING THA T AMOUNT SO RECEIVED IS INCOME OF THE ASSESSEE THE SAME CANNOT BE TREATED AS INCOME OF TH E ASSESSEE MERELY ON PRESUMPTION ASSUMPTION AND SUSPICIOUS. C) THE LD. AO OPINED THAT THE ANALYSIS/INQUIRIES IN DICATE THE SYSTEMATIC AND DELIBERATE CREATION OF A COLOURABLE DEVICE TO INTRODUCE SHARE CAPITAL IN M OTISONS GROUP COMPANIES. THE INVESTMENT IN SHARE CAPITAL OF ASSESSEE COMPANY BY ABOVE NAMED CO MPANIES WAS INDEPENDENT DECISION/JUDGMENT OF THOSE COMPANIES. THE ASSESSEE HAS FILED COPY OF THE BOARD RESOLUTION OF THE INVESTOR COMPANY. THE INCOME TAX DEPARTMENT CARRIED OUT INTENSIVE SEARCH OVER MOTISONS GROUP AND DURING THE COURSE OF SEARCH NO DOCUMENTS/EVIDEN CE WAS FOUND TO SHOW THAT THE COMPANIES WHO MADE INVESTMENT IN SHARES OF ASSESSEE COMPANY I N THE YEAR UNDER CONSIDERATION WERE FUNDED OR UNDISCLOSED CASH WAS GIVEN BY MOTISONS GR OUP. IF THESE INVESTOR COMPANIES HAVE THEIR OWN INDEPENDENT FUNDS THE SAME CAN BE INVEST ED ANYWHERE. IT IS ADMITTED FACTS THAT DURING THE YEAR UNDER CO NSIDERATION AS WELL AS IN PREVIOUS YEARS THE ASSESSEE COMPANY IS NOT HAVING ANY BUSINESS ACTIVIT IES OR NOT HAVING ANY SOURCE OF INCOME FROM WITH THIS MUCH OF UNDISCLOSED INCOME COULD BE EARNE D. WHEN THERE IS NO INCOME THAN HOW THE SAME CAN BE MANAGED TO BROUGHT IN BOOKS OF ACCOUNTS IN THE FORM OF SHARE CAPITAL. IN THIS CASE THE DEPARTMENT COULD NOT PROVE ANY KIND OF UNDISCLO SED SOURCE OF INCOME OF THE ASSESSEE AS A RESULT OF SEARCH OVER ASSESSEE AS WELL AS DURING TH E COURSE OF ASSESSMENT PROCEEDINGS OR AS A RESULT OF INQUIRIES. AS A RESULT OF SO CALLED LONG INQUIRIES THE DEPARTMENT COULD NOT EVIDENTIARY PROVED THAT THE ASSESSEE COMPANY MANAGED ITS FUNDS WITH INVESTOR COMPANIES TO BROUGHT THE SAME IN BOOKS OF ACCOUNTS IN THE FORM OF SHARE CAPI TAL MORE SO WHEN THE INVESTOR COMPANIES HAVING THEIR OWN SUFFICIENT FUNDS TO INVEST IN THE ASSESSEE COMPANY MUCH PRIOR TO INVESTMENT MADE IN THE ASSESSEE COMPANY. ITA NO. 391/JP/2017 M/S. RAINBOW BUILDCON PVT.LTD. JAIPUR VS AC IT CENTRAL CIRCLE-2 JAIPUR 20 THUS FROM THE ABOVE SUBMISSION AND RECORD IT IS WE LL PROVED THAT THE AMOUNT SO RECEIVED BY THE ASSESSEE COMPANY FROM ABOVE NAMED COMPANIES WAS REC EIVED AGAINST SHARE CAPITAL AND THE INVESTMENT WAS MADE BY THEM BY THEIR OWN DISCLOSED SOURCE THEREFORE NO ADDITION IN ANY WAY CAN BE MADE IN THE HANDS OF THE ASSESSEE. 7. AFTER CONSIDERING THE REPLY OF THE ASSESSEE ON S HOW CAUSE NOTICE ISSUED BY LD. AO HE POINTED CERTAIN ISSUES IN THE REPLY OF THE ASSESSEE WHICH H AVE BEEN DISCUSS ON PAGE 15 TO 23 (PARA 15 TO 17) OF ASSESSMENT. THE FINDING OF LD. AO AND SUBMIS SION OF ASSESSEE ON SUCH FINDINGS IS AS UNDER: - (A) FINDING OF AO: - IDENTITY CREDIT WORTHINESS AN D GENUINENESS OF THE TRANSACTIONS HAVE BEEN PROVED BY FILING CERTAIN DOCUMENTS. THE ASSESSEE CO MPANY HAS ATTEMPTED TO LIMIT THE SCOPE WITHIN WHICH REVENUE AUTHORITIES CAN OPERATE ONLY W ITH A SELF SERVING INTEREST TO MAKE IT APPEAR THAT THE TRANSACTIONS ENTERED INTO GET JUSTIFIED. T HE THREE ASPECTS CERTAINLY ARE SOME OF THOSE ANGLES BUT TO SAY THAT THE REVENUE CANNOT GO BEYON D IS NOT APPARENTLY VESTED WITH SELF SERVING INTEREST BUT ALSO WITH IGNORANCE OF LAW. CERTAINLY SIMPLY BECAUSE SOME FORM OF IDENTIFICA TION ON PAPER HAS BEEN PROVIDED DOES NOT MEAN THAT THE TRANSACTION STANDS EXPLAINED FROM THE VIEWPOINT OF THE CREDIT WORTHINESS AND GENUINENESS. SUBMISSION OF ASSESSEE: - I) THE ASSESSEE SUBMITTED AMPLE DOCUMENTS IN SUPPOR T TO SHARE APPLICATION MONEY RECEIVED TO PROVE THE IDENTITY CREDITWORTHINESS AND GENUINENES S OF TRANSACTIONS AND FROM EXAMINATION OF THOSE DOCUMENTS ITS PROVES THAT THE INVESTING COMPA NIES WERE HAVING SUFFICIENT FUNDS TO MAKE INVESTMENT IN SHARE CAPITAL OF THE ASSESSEE COMPANY . THERE WAS NO CASH DEPOSIT IN BANK A/C OF THE INVESTOR COMPANY FOR SUBSCRIBING THE SHARE CAPI TAL OF ASSESSEE COMPANY. THE LD. AO REJECTED THESE EVIDENCES ON SURMISES AND CONJECTURE S. HONBLE JUSTICE HIDAYATULLAH OF THE SUPREME COURT IN THE CASE OF SREELEKHA BANERJEE VS CIT [1963] 49 ITR 112 (SC); 120 OBSERVED THAT THE INCOME TAX DEPARTMENT CANNOT BY MERELY REJ ECTING UNREASONABLY A GOOD EXPLANATION CONVERT GOOD PROOF INTO NO PROOF HONBLE SUPREME COURT IN THE CASE OF UMA CHARAN SHAW & BROS CO VS CIT 37 ITR 271 HAS HELD THAT THE SURMI SES AND CONJECTURES AND THE CONCLUSION IS THE RESULT OF SUSPICION WHICH CANNOT TAKE THE PLACE OF PROOF. HONBLE PUNJAB & HARYANA HIGH COURT IN THE CASE OF CIT VS ANUPAM KAPOOR (2008) 29 9 ITR 179 (P & H) ALSO HELD THAT SUSPICION HOWSOEVER STRONG CANNOT TAKE THE PLACE O F LEGAL PROOF. II) FROM EXAMINATION OF FINANCIAL STATEMENTS OF INV ESTOR COMPANIES YOUR HONOR WILL FIND THAT THE INVESTOR COMPANIES HAD HUGE SHARE CAPITAL AND RESER VES. APART FROM THE INVESTMENT MADE IN THE ASSESSEE COMPANY THEY HAVE HUGE OTHER INVESTMENTS/A DVANCES/ASSETS. AS PER DECLARATION OF SOURCE OF FUNDS SUBMITTED BY THEM THEY REALIZED MON EY FROM THEIR OLD INVESTMENTS/ADVANCES/ASSETS AND THE SAME MONEY WAS UTILIZED FOR MAKING THE INVESTMENT IN THE ASSESSEE COMPANY. THESE COMPANIES ARE ASSESSEE OF I NCOME TAX DEPARTMENT AND IN CASE OF ANY DOUBT NECESSARY ACTION COULD BE TAKEN IN THE HANDS OF THESE COMPANIES AND IF THESE COMPANIES FAILED TO EXPLAIN THE SOURCE OF INVESTMENT NECESSA RY ADDITION CAN BE MADE IN THE HANDS OF THESE COMPANIES BY APPLYING THE PROVISIONS OF SECTION 69 OF INCOME TAX ACT. HOWEVER THE LD. AO MADE THE ADDITION IN THE HANDS OF ASSESSEE COMPANY UNDER THE COMPLETE DISREGARD OF PROVISIONS OF INCOME TAX ACT AND MERELY ON SURMISES AND CONJEC TURES. THE HONBLE APEX COURT IN THE CASE OF CIT VS. LOVELY EXPORTS (P) LTD. 216 CTR 0195/ 6 DTR 308 (SC) HELD THAT IF THE SHARE CAPITAL MONEY IS RECEIVED BY THE ASSESSEE COMPANY FROM ALLE GED BOGUS SHAREHOLDERS THEN THE ITA NO. 391/JP/2017 M/S. RAINBOW BUILDCON PVT.LTD. JAIPUR VS AC IT CENTRAL CIRCLE-2 JAIPUR 21 DEPARTMENT IS FREE TO PROCEED TO REOPEN THE INDIVID UAL ASSESSMENTS OF SUCH SHAREHOLDERS IN ACCORDANCE WITH LAW. SUCH SHARE APPLICATION MONEY C ANNOT BE REGARDED AS UNDISCLOSED INCOME OF THE ASSESSEE COMPANY (III) AS ALLEGED BY LD. AO THE ASSESSEE IS NOT ATTE MPTED TO LIMIT THE SCOPE WITHIN WHICH REVENUE AUTHORITIES CAN OPERATE AND THE ASSESSEE ALSO ACCEP T THAT THE REVENUE AUTHORITIES CAN EXAMINE THE TRANSACTIONS FROM ALL POSSIBLE ANGLES. IN THE L AW IN THE CASE OF CREDIT ENTRY (SUCH AS LOAN SHARE CAPITAL ETC.) THE IDENTITY GENUINENESS AND C REDITWORTHINESS OF THE CREDIT ENTRIES HAS TO BE EXAMINE AND IN THE INSTANT CASE THE ASSESSEE HAS PR OVED ALL THESE THREE INGREDIENTS AND THE LD. AO DID NOT FIND ANY INFIRMITY IN SUCH DETAILS. IF T HE LD. AO IS HAVING DOUBT REGARDING THE DETAIL AND SUBMISSION FILED BY THE ASSESSEE THAN HE COULD SURELY GO BEYOND FOR FURTHER INQUIRIES BUT THE INQUIRIES SHOULD HAVE BEEN WITH THE ANGEL TO UNEART H THE TRUTH OF THE TRANSACTIONS AND IN THE INSTANT CASE THE INQUIRIES SHOULD HAVE BEEN MADE WI TH THE ANGEL TO FIND OUT THE FOLLOWING: - THE HUGE AMOUNT RECEIVED IN THE FORM OF SHARE CAPIT AL/SHARE PREMIUM. WHETHER THE MONEY SO RECEIVED IS ACTUALLY CAPITAL RECEIPT IN THE HANDS O F THE ASSESSEE? WHETHER MONEY RECEIVED IN THE HANDS OF THE ASSESSEE COMPANY WAS FROM GENUINE SOURCE OR THE SAME WAS OWN FUNDS OF THE ASSESSEE? IF THE MONEY WHICH FLOW IN THE HANDS OF THE ASSESS ES WAS MANAGED AFFAIRS OF THE ASSESSEE THAN WHAT WAS THE SOURCE OF INFLOW OF SUCH MONEY? IV) THE LD. AO HAS NOT CARRIED OUT ANY SHORT OF INQ UIRIES IN THIS REGARD IN THE CASE OF THE ASSESSEE. NO INQUIRIES FROM THE SHAREHOLDERS THEIR BANKERS H AVE BEEN MADE TO PROVE THE CONTENTION OF THE ASSESSEE TO BE WRONG. THERE IS NO EVIDENCE THAT THE MONEY RECEIVED IS A/C OF THE ASSESSEES OWN UNDISCLOSED INCOME. THE ASSESSEE FILED SUFFICIENT D OCUMENTS TO PROVE THAT THE AMOUNT SO RECEIVED WAS CAPITAL RECEIPT AND THE SAME WAS RECEI VED AGAINST SHARE CAPITAL/SHARE PREMIUM. THE SOURCE OF THE FUNDS FROM INVESTOR COMPANIES WAS ALSO PROVED AND THERE IS NO POSITIVE MATERIAL TO SHOW THAT THE INVESTOR COMPANIES WAS NO T HAVING SUFFICIENT SOURCE TO INVEST THE MONEY IN ASSESSEE COMPANY. IF THE LD. AO IS HAVING DOUBT REGARDING GENUINE OF SOURCE OF FUNDS WITH THE INVESTOR COMPANIES HE COULD HAVE MAKE THE INQUIRED IN THE CASE OF SUCH COMPANIES AND IF SOMETHING FOUND ADVERSE THAN THE NECESSARY ADDIT IONS COULD HAVE BEEN MADE IN THE HANDS OF SUCH INVESTOR COMPANY ONLY AND IN THE INQUIRY IF SO METHING POSITIVE REVEALS THAT THE SOURCE OF FUNDS WITH SUCH INVESTOR COMPANIES WAS FUNDED BY TH E ASSESSEE COMPANY THAN ONLY THE ADDITION COULD BE MADE IN THE HANDS OF THE ASSESSEE COMPANY. IT IS ADMITTED FACTS THAT DURING THE YEAR UNDER CONSIDERATION THE ASSESSEE COMPANY WAS NOT HA VING ANY SUCH SOURCE OF INCOME FROM WHICH THIS MUCH OF UNDISCLOSED INCOME COULD BE EARN ED AND THE LD. AO IS COMPLETELY SILENT ON THIS ISSUE THAT WHERE FROM THIS MUCH OF MONEY WAS E ARNED BY THE ASSESSEE COMPANY. V) THE FINDING OF LD. AO THAT SIMPLY BECAUSE SOME F ORM OF IDENTIFICATION ON PAPER HAS BEEN PROVIDED DOES NOT MEAN THAT THE TRANSACTION STANDS EXPLAINED FROM THE VIEWPOINT OF THE CREDIT WORTHINESS AND GENUINENESS THIS IS TO SUBMIT THAT B Y FILING THE SUFFICIENT DOCUMENTS THE ASSESSEE DISCHARGE ITS ONUS CAST ON IT BY THE LAW AND NOW ON US IN ON THE DEPARTMENT TO DISPROVE THE SUBMISSION AND DOCUMENTS OF THE ASSESSEE BY POSITIV E EVIDENCE. THE DEPARTMENT HAS NOT DISCHARGED ITS ONUS AND NO INQUIRED WERE CARRIED OU T AND NO EVIDENCE IS IN POSSESSION WITH THE DEPARTMENT TO DISPROVE THE CLAIM OF THE ASSESSEE. O NE THE ONE HAND THE LD. AO IS CLAIMING THAT THE REVENUE AUTHORITIES CAN EXAMINE THE TRANSACTION FROM ALL POSSIBLE ANGLES AND ON THE OTHER ITA NO. 391/JP/2017 M/S. RAINBOW BUILDCON PVT.LTD. JAIPUR VS AC IT CENTRAL CIRCLE-2 JAIPUR 22 HANDS THE TRANSACTIONS ARE BEING DOUBTED AND ADDED MERELY ON SURMISES AND CONJECTURES. IT IS FURTHER SUBMITTED THAT IF THE DOCUMENTS SUBMITTED B Y THE ASSESSEE WAS NOT FELT SUFFICIENT TO ACCEPT THE TRANSACTION THAN THE LD. AO COULD ASK FROM ASSE SSEE TO SUBMIT THE FURTHER DETAILS/DOCUMENTS WHICH IS FELT NECESSARY FOR DECIDING THE MATTER IN JUSTICE & FAIR MANNER BUT THE SAME WAS NOT DONE BY LD. AO. B) FINDING OF AO: - REGARDING NO BAR OF ISSUING OF SHARES AT PREMIUM THE ASSESSEE COMPANY HAS ATTEMPTED TO TAKE AN ADVANTAGE OUT OF THE ABSENCE O F A SPECIFIC PROVISION WHICH BARS THE ACCEPTANCE OF SHARE PREMIUM WHICH DOES NOT MATCH TH E NET WORTH OF THE ISSUING COMPANY. IN THIS REGARD IT NEEDS TO BE POINTED OUT THAT MERE ABSENC E OF A SPECIFIC PROVISION DOES NOT BY ITSELF MEAN THAT A PARTICULAR COLORABLE DEVICE OR A SHAM T RANSACTION ACQUIRES LEGAL SANCTITY THERE ARE NUMEROUS PROVISIONS RELATED TO GIFT SALE CONSIDERA TION ON SALE OF ASSETS WHICH CAME INTO BEING AT A LATER STAGE BUT THE ILLEGAL AND TAX CONTRAVE NING TRANSACTIONS WERE STILL TAKEN UP AND TAXED BY REVENUE AUTHORITY OF COURSE AFTER THE SPECIFIC INCLUSION OF GOVERNING STATUTES THE MATTER REQUIRES TO BE DEALT WITHIN THE FRAMEWORK OF THE SP ECIFIC PROVISION. BUT TILL SUCH TIME IT CANNOT BE SAID ABOUT A TRANSACTION WHICH IS PATENTLY BEYO ND THE REALMS OF ACCEPTABILITY AND WHICH ALSO ARE EMBEDDED WITH IN HERE TAX IMPLICATIONS THAT TH EY NEED TO BE LEFT ALONE ONLY BECAUSE THERE WAS NO SPECIFIC BAR. SECTION 56 OF THE IT ACT HAS ALREADY BEEN EXISTENCE SINCE LONG AND SUBSECTION (1) OF SECTION 56 ADEQUATELY COVERED TRANSACTIONS LIKE THE ONE BEING DEALT WITH AT PRESENT. ONLY BECAUSE SUB- SECTION (1) WAS A BROAD MANIFESTATION OF THE INTENT OF REVENUE SUB SECTION (2) WHICH WAS MORE SPECIFIC IN CONTENT WAS INTRODUCED TO TAKE CASE OF THE MISINTERPRETATION & CONFUSION WHICH WAS BEING DERIVED OUT OF SUB SECTION (4). IT MUST BE AP PRECIATED THAT INTRODUCTION OF SUB SECTION (2) OF SECTION 56 OF THE ACT WAS ONLY A SPECIFIC EXPRES SION OF THE MANNER IN WHICH A SPECIFIC TRANSACTION REQUIRES TO BE DEALT WITH THE INTENT OF LEGISLATURE AND THE CONTENT THEREOF ALREADY EXISTED WITHIN THE SAME ACT AND WITHIN THE SAME SEC TION AND IN THE PRECEDING SUB-SECTION NO NEW IDEA WHICH WAS CONCEPTUALLY DISTRICT FROM SECTION 5 6(1) OF THE ACT WAS BROUGHT INTO BEING. HENCE THE ASSESSEE COMPANY CANNOT BE ALLOWED TO ES CAPE THE PROVISION OF LAW SIMPLY BECAUSE IT CONTAINED A BROADER & WIDER MANIFESTATION OF ITS TR UE INTENT WHICH WAS ENUNCIATED ONLY AFTER THE TRANSACTION TOOK PLACE. THE CONTENTION OF THE ASSES SEE IS A PERVERT ARGUMENT & DESERVES TO BE REJECTED. SUBMISSION OF ASSESSEE: - I) SHARE PREMIUM IS CAPITAL RECEIPT: IF SHARES ARE ISSUED AT PREMIUM THEN CAPITAL RECEIP T AGGREGATE AMOUNT OF PREMIUM IS TO BE TRANSFERRED TO AN ACCOUNT CALLED THE SHARE PREMIUM ACCOUNT. THI S SHARE PREMIUM ACCOUNT IS NOT DISTRIBUTABLE AS INCOME JUST LIKE AS ANY OTHER CAPI TAL ASSETS. ON WINDING UP THE SURPLUS MONIES IN THE SHARE PREMIUM ACCOUNT IS TO BE RETURNED TO T HE SHARE HOLDERS AS CAPITAL. SO LONG AS THE COMPANY IS A GOING CONCERN THE MONIES IN SHARE PRE MIUM ACCOUNT CAN NEVER BE RETURNED TO THE SHAREHOLDERS EXCEPT THROUGH THE MEDIUM OF A REDUCTI ON PETITION OR IN OTHER WORDS EXCEPT UNDER EXACTLY THE SAME CONDITIONS AS THOSE UNDER WH ICH ANY OTHER CAPITAL ASSET CAN REACH THE SHAREHOLDERS HANDS. DISTRIBUTION OF SHARE PREMIUM A MOUNT IS NOT PERMITTED THROUGH DIVIDEND. IT IS TAKEN OUT OF THE CATEGORY OF DIVISIBLE PROFITS. THE PROVISIONS IN RESPECT OF ISSUE OF SHARES AT PREMIUM ARE THE SAME IN THE OLD COMPANY ACT AS WELL AS IN THE NEW COMPANY ACT. HENCE COMPANIES ACT CLEARLY MENTIONS THAT AMOUNT RECEIVED AS PREMIUM IS CAPITAL RECEIPT AND NOT A REVENUE RECEIPT. THE SHARE PREMIUM IS ALSO VERIFIAB LE FROM RETURNS OF ALLOTMENT SUBMITTED IN ROC. AS PER DEPARTMENTAL CIRCULAR (MCA) NO. 3/77 DA TED 15.04.1977 THE MONIES IN THE SHARE ITA NO. 391/JP/2017 M/S. RAINBOW BUILDCON PVT.LTD. JAIPUR VS AC IT CENTRAL CIRCLE-2 JAIPUR 23 PREMIUM ACCOUNT CANNOT BE TREATED AS FREE RESERVES AS THEY ARE IN THE NATURE OF CAPITAL RESERVES. II) ON THE ISSUE OF SHARES AT PREMIUM THE LD. ITAT MU MBAI BENCH IN THE CASE OF ACIT V/S GAGANDEEP INFRASTRUCTURE PVT. LTD. 2014-T10L-656-IT AT-MUM OBSERVED THAT ISSUE OF SHARES AT PREMIUM IS ALWAYS A COMMERCIAL DECISION WHICH DOES NOT REQUIRE ANY JUSTIFICATION. FURTHER THE PREMIUM IS A CAPITAL RECEIPT WHICH HAS TO BE DEALT WITH IN ACCORDANCE WITH SECTION 78 OF COMPANIES ACT 1956. FURTHER THE COMPANY IS NOT REQU IRED TO PROVE THE GENUINENESS PURPOSE OR JUSTIFICATION FOR CHARGING PREMIUM OF SHARES SHARE PREMIUM BY ITS VERY NATURE IS A CAPITAL RECEIPTS AND IS NOT INCOME FOR ITS ORDINARY SENSE. IN THE CASE BEFORE MUMBAI BENCH HAS TO CONSIDER A CASE WHERE PREMIUM OF RS.190 PER SHARE W AS CHARGED. THE TRIBUNAL OBSERVED AS UNDER: NO DOUBT A NON-EST COMPANY OR A ZERO BALANCE SHEET COMPANY ASKING FOR RS.190 PER SHARE DEFIES ALL COMMERCIAL PRUDENCE BUT AT THE SAME TIME WE CANNOT IGNORE THE FACT THAT IT IS A PREROGATIVE OF THE BOARD OF DIRECTORS OF THE COMPANY TO DECIDE THE PREMIUM AMOUNT AND IT IS THE WISDOM OF THE SHAREHOLDERS WHETHER THEY WANT TO SUBSCRIBE TO SUCH A HEAVY PREMIUM. THE REVENUE AUTHORITIES CANNOT QUESTION THE CHARGING OF SUCH HUGE PREMIUM W ITHOUT ANY BAR FROM ANY LEGISLATED LAW OF THE LAND. THE AMENDMENT HAS BEEN BROUGHT IN THE INC OME TAX ACT UNDER THE HEAD INCOME FROM OTHER SOURCES BY INSERTING CLAUSE.(VII B) TO SECTI ON 56 OF THE ACT WHEREIN IT HAS BEEN PROVIDED THAT ANY CONSIDERATION FOR ISSUE OF SHARES THAT EX CEEDS THE FAIR VALUE OF SUCH SHARES THE AGGREGATE CONSIDERATION RECEIVED FOR SUCH SHARES AS EXCEEDS THE FAIR MARKET VALUE OF THE SHARES SHALL BE TREATED AS THE INCOME OF THE ASSESSEE BUT THE LEGISLATURE IN ITS WISDOM HAS MADE. THE PROVISION APPLICABLE W.E.F. 1.4.2013 I.E. ON AND FR OM A.Y. 2013-14. III) THE LD. AO TAXED THE SHARE CAPITAL/SHARE PREMIUM BY HOLDING THAT MERE ABSENCE OF A SPECIFIC PROVISION DOES NOT BY ITSELF MEAN THAT A PARTICULAR COLORABLE DEVICE OR A SHAM TRANSACTION ACQUIRES LEGAL SANCTITY AND A TRANSACTION WHICH IS PATENTLY BEYOND THE REALMS OF ACCEPTABILITY AND WHICH ALSO ARE EMBEDDED WITHIN HERE TAX IMPLICA TIONS THAT THEY NEED TO BE LEFT ALONE ONLY BECAUSE THERE WAS NO SPECIFIC BAR THIS IS TO SUBMIT THAT FOR BRINGING A TRANSACTION INTO A INCOME TAX TERRITORY FIRST IT IS TO PROVED BY THE REVENUE AUTHORITIES THAT THE TRANSACTION IS COLORABLE DEVICE OR A SHAM TRANSACTION. IN THE CASE OF THE AS SESSEE THE INVESTOR COMPANIES ARE CONFIRMING THAT THEY HAVE GAVE THE AMOUNT TO THE ASSESSEE COMP ANY AS SHARE PREMIUM AND THE ASSESSEE COMPANY IS ENTERING SUCH AMOUNT IN ITS BOOKS OF ACC OUNTS AS A SHARE PREMIUM. THERE IS NO EVIDENCE ON RECORD TO PROVE THAT THE TRANSACTION IS SHAM TRANSACTIONS OR NOT REAL TRANSACTION. THE ONUS IS ON DEPARTMENT TO PROVE THAT THE TRANSAC TION IS SHAM OR NOT REAL. THE ALLEGATION SHOULD BE BASED ON THE EVIDENCES. THE LD. AO IS DUT Y BOUND TO PROVE A TRANSACTION NOT REAL AND NOT ACCEPTABLE WITH EVIDENCES WHICH IS ABSENT IN TH E INSTANT CASE. ADMITTEDLY THERE ARE NUMEROUS DEEMING PROVISIONS RELATED TO GIFT SALE C ONSIDERATION ON SALE OF ASSETS UNDER WHICH THE DEEMED INCOME ARE TAXED BUT THE DEEMING FICTION CAN ONLY STRICTLY APPLIED ON THE TRANSACTIONS FOR WHICH IT WAS MADE APPLICABLE. THE SAME CANNOT BE EXTENDED FURTHER FOR OTHER TRANSACTIONS UNTIL AND UNLESS SUCH TRANSACTION IS C OVERED IN THE DEFINITION OF INCOME OR DEEMED INCOME AS PER INCOME TAX LAW. IF SOME SPECIFIC TRAN SACTION IS NOT INCOME OR DEEMED INCOME IN THE INCOME TAX LAW THAN THE SAME CANNOT BE PRESUMED AS INCOME BY THE REVENUE AUTHORITIES AT THEIR OWN WITHOUT HAVING ANY POSITIVE MATERIAL TO P RESUME THAT THE SAME IS ACTUALLY INCOME OF ITA NO. 391/JP/2017 M/S. RAINBOW BUILDCON PVT.LTD. JAIPUR VS AC IT CENTRAL CIRCLE-2 JAIPUR 24 THE ASSESSEE. THESE TYPE OF TRANSACTION CAN ONLY BE DEALT WITHIN THE FRAMEWORK OF THE SPECIFIC PROVISION AFTER THE SPECIFIC INCLUSION OF GOVERNING STATUTES. IN THE INCOME TAX ACT THE CHARGING OF CERTAIN AMOUNTS SHARE PREMIUM DEEMED TO BE INCOM E OF THE RECIPIENT COMPANIES W.E.F. 1.4.2013 I.E. ON AND FROM A.Y. 2013-14 AND THE SAME CANNOT BE MADE APPLICABLE RETROSPECTIVELY. IV) ADMITTEDLY THE SECTION 56 OF THE IT ACT HAS ALR EADY BEEN EXISTENCE SINCE LONG AND BUT SUB- SECTION (1) OF SECTION 56 ONLY COVERS THE TAXING TH E REVENUE TRANSACTIONS WHICH NOT COVERED UNDER OTHER HEAD OF INCOME BUT THE SAME ARE INCLUDE D IN THE DEFINITION OF INCOME. THE SECTION 56(1) DOES NOT COVER THE TAXING THE DEEMING CAPITAL RECEIPTS AND SUCH RECEIPTS CAN ONLY TAXED UNDER SUB SECTION 56 (2) OF INCOME TAX ACT 1961 IF CONSISTING SPECIFIC EXPRESSION OF THE MANNER IN WHICH A SPECIFIC TRANSACTION REQUIRES TO BE DEAL T WITH THE INTENT OF LEGISLATURE. IN THE INCOME TAX ACT THE CHARGING OF CERTAIN AMOUNTS OF SHARE PR EMIUM DEEMED TO BE INCOME OF THE RECIPIENT COMPANIES W.E.F. 1.4.2013 I.E. ON AND FROM A.Y. 201 3-14 THEREFORE THE SHARE PREMIUM RECEIVED PRIOR TO THAT PERIOD CANNOT BE TAXED AS INCOME OF T HE ASSESSEE. C) FINDING OF LD. AO: - IT IS WHOLLY INCORRECT TO S AY THAT THE ALLEGATION IS BASED ON SURMISES AND CONJECTURES. THE FACTS CLEARLY PROVE THAT THE ASSES SEE HAD ENTERED INTO SHAM TRANSACTIONS AS PART OF A WELL PLANNED EXERCISE OF INTRODUCING UNEXPLAIN ED MONEY IN THE FORM OF SHARE CAPITAL AND SHARE PREMIUM WITHOUT ANY JUSTIFICATION OF THE VALU E HAVING BEEN PROVIDED EITHER BY THE ISSUING COMPANY OR THE SUBSCRIBING COMPANY. THE MONEY SO RE CEIVED WAS THEN IMMEDIATELY INVESTED IN THE SUBSCRIPTION OF SHARE CAPITAL AT HIGH PREMIUM W ITH OTHER COMPANIES WHO IN TURN CONTINUED THE EXERCISE IN THE SAME FORM. THE ASSESSEE COMPANY WAS THUS PART OF THIS CIRCULAR RING WHEREBY UNJUSTIFIED AND UNSUBSTANTIATED SHARE PREMIUM WAS B EING INTRODUCED. SUBMISSION OF ASSESSEE: - I) THE FINDING OF LD. AO IS PATIENTLY WRONG PERVER SE AND NOT BACKED WITH ANY SUPPORTING EVIDENCE. FIRST OF ALL REGARDING ALLEGATION THAT THE ASSESSEE INTRODUCED ITS OWN UNEXPLAINED MONEY IN THE SHARE CAPITAL AND SHARE PREMIUM THIS IS TO SUBMIT T HAT THE DEPARTMENT CARRIED OUT INTENSIVE SEARCH OVER THE ASSESSEE AND DURING THE COURSE OF S EARCH NOT A SINGLE DOCUMENT/EVIDENCE WAS FOUND TO SHOW THAT THE ASSESSEE WAS HAVING SOME UND ISCLOSED INCOME OR HAVING SOME UNEXPLAINED MONEY. AS A RESULT OF INQUIRIES CARRIED OUT BY THE INVESTIGATION WING THEY ALSO COULD NOT GATHERED ANY POSITIVE EVIDENCE TO SHOW THAT THE ASSESSEE WAS HAVING ANY UNDISCLOSED INCOME OR UNEXPLAINED MONEY. IF THERE IS NO PROOF WITH THE DEPARTMENT TO PROVE THAT THE ASSESSEE WAS HAVING SOME UNEXPLAINED MONEY THAN HOW IT CAN BE AL LEGED THAT THE ASSESSEE HAS INTRODUCED ITS UNEXPLAINED MONEY IN THE FORM OF SHARE CAPITAL AND SHARE PREMIUM. THIS IS COMPLETELY ON THE BASIS OF SURMISES AND CONJECTURES. II) AS REGARD TO NOT PROVIDING THE JUSTIFICATION OF THE VALUE OF SHARES THIS IS TO SUBMIT THAT THE SHA RES ISSUED AT HIGH RATES DOES NOT MAKE THE TRANSACTIONS ITSELF SHAME OR COLOURFUL DEVICE TO EVADE THE TAX. FROM THE RECORD IT IS WELL PROVED THAT THE AMO UNT WAS RECEIVED FROM THE INVESTOR COMPANIES AGAINST SHARE CAPITAL & SHARE PREMIUM THEREFORE TH E TRANSACTION ARE BEING GENUINE. AS STATED IN EARLIER PARAS THE HONBLE ITAT MUMBAI BENCH IN THE CASE OF ACIT V/S GAGANDEEP INFRASTRUCTURE PVT. LTD. 2014-T10L-656-ITAT-MUM OBS ERVED THAT ISSUE OF SHARES AT PREMIUM IS ALWAYS A COMMERCIAL DECISION WHICH DOES NOT REQUIRE ANY JUSTIFICATION. FURTHER THE COMPANY IS NOT REQUIRE TO PROVE THE GENUINENESS PURPOSE OR JU STIFICATION FOR CHARGING PREMIUM OF SHARES SHARE PREMIUM BY ITS VERY NATURE IS A CAPITAL RECEI PTS AND IS NOT INCOME FOR ITS ORDINARY SENSE. IV) THE ALLEGATION OF LD. AO IS THAT THE MONEY SO RECEI VED WAS THEN IMMEDIATELY INVESTED IN THE SUBSCRIPTION OF SHARE CAPITAL AT HIGH PREMIUM WITH OTHER COMPANIES WHO IN TURN CONTINUED THE EXERCISE IN THE SAME FORM AND THE ASSESSEE COMPANY WAS THUS PART OF THIS CIRCULAR RING WHEREBY ITA NO. 391/JP/2017 M/S. RAINBOW BUILDCON PVT.LTD. JAIPUR VS AC IT CENTRAL CIRCLE-2 JAIPUR 25 UNJUSTIFIED AND UNSUBSTANTIATED SHARE PREMIUM WAS B EING INTRODUCED. IN THIS REGARD THIS IS TO SUBMIT THAT IF SOMEONE IS INVESTING THE MONEY IN TH E ASSESSEE COMPANY HE MUST BE HAVING THE INFLOW OF MONEY FROM SOME SOURCE. WHAT IS THE SOURC E OF INFLOW WITH THE INVESTOR COMPANY AND HOW IT IS MANAGING ITS AFFAIRS IS NOT CONCERN OF TH E ASSESSEE. IN THE CASE OF THE ASSESSEE IT HAS FULL FILLED ITS LEGAL OBLIGATION. THE ASSESSEE HAS PROVED THE SOURCE OF MONEY WITH THE INVESTOR COMPANIES. THUS IN THE CASE OF THE ASSESSEE THE SOU RCE OF MONEY IS WELL PROVED. IF THE INVESTOR COMPANIES IS NOT HAVING PROPER SOURCE OF FUNDS WITH THEM THAN THE ACTION SHOULD HAVE BEEN TAKEN IN THEIR HANDS AND THE SAME CANNOT BE ADDED A S INCOME OF THE ASSESSEE MERELY BY HOLDING THAT THE ASSESSEE PLANNED THE FUNDS OF ALL THE COMP ANIES. THERE IS NO ONUS TO PROVE SOURCE OF SOURCE. IN THIS REGARD THE ASSESSEE RELIES ON THE FOLLOWING DECISIONS:- (I) HONBLE RAJASTHAN HIGH COURT IN THE CASE OF ARA VALI TRADING CO VS INCOME TAX OFFICER (2008) 8 DTR (RAJ) 199 HAS HELD THAT ONCE THE EXISTENCE OF THE CREDITORS IS PROVED AND SUCH PERSONS OWN THE CREDITS THE ASSESSEES ONUS STANDS DISCHAR GED AND THE ASSESSEE IS NOT REQUIRED TO PROVE THE SOURCE FROM WHICH THE CREDITORS COULD HAVE ACQU IRED THE MONEY DEPOSITED WITH HIM. HONBLE JURISDICTIONAL HIGH COURT HAS HELD THAT MERELY BECA USE THE DEPOSITORS EXPLANATION ABOUT THE SOURCES OF MONEY WAS NOT ACCEPTABLE TO THE AO IT C ANNOT BE PRESUMED THAT THE DEPOSIT MADE BY THE CREDITORS IS MONEY BELONGING TO THE ASSESSEE IT SELF. (II) CIT VS ORISSA CORPORATION (P) LTD (1986) 159 ITR 79 (SC) THE ASSESSEE HAD GIVEN NAMED AND ADDRESSES OF THE CASH CREDITORS WHO WERE INCOME TAX ASSESSEES. REVENUE APART FROM ISSUING SUMMON U/S 13 1 NOTICES TO CREDITORS DID NOT PURSUE THE MATTER FURTHER- IT DID NOT EXAMINE CREDITWORTHINES S OF THE CREDITORS- ASSESSEE COULD NOT UNDER THE CIRCUMSTANCES DO ANYTHING FURTHER. HELD THAT TH E ADDITIONS WERE RIGHTLY DELETED. (III) CIT VS HEERA LAL CHAGAN LAL TANK (2002) 157 ITR 281 (RAJ) BURDEN OF THE ASSESSEE STANDS DISCHARGED WHEN THE IDENTITY OF THE CREDITORS IS ESTABLISHED AND HE CONFIRMS THE LOANS. IT IS FURTHER SUBMITTED THAT THE INVESTOR COMPANIES WERE HAVING SUFFICIENT ACCUMULATED FUNDS IN THE FO RM OF SHARE CAPITAL AND RESERVES & SURPLUS MUCH PRIOR TO THE INVESTMENT MADE IN THE ASSESSEE COMPANY AND THE SAME ARE MUCH MORE THAN TO INVESTME NT MADE IN THE SHARES OF ASSESSEE COMPANY. THE SAME FUNDS WERE BEING MANAGED BY SUCH COMPANY AT THEIR OWN AND HAVING INVESTMENT IN SHARES OF OTHER COMPANIES/LOANS & ADV ANCES TO VARIOUS PARTIES. THE INVESTMENT BY SUCH COMPANIES IN THE ASSESSEE COMPANY WAS OF LESSE R AMOUNT IN COMPARISON TO TOTAL INVESTMENTS MADE BY SUCH INVESTOR COMPANIES AND IF THE OTHER INVESTMENTS MADE BY SUCH COMPANIES ARE BEING TREATED AS GENUINE THAN HOW THE INVESTMENT MADE IN THE ASSESSEE COMPANY CAN ONLY BE NON GENUINE. FURTHER IF THE ALLEGATION OF THE DEPARTMENT IS THAT THE ASSESSEE MANAGED ITS UNEXPLAINED FUNDS IN SUCH COMPANIES THA N THERE SHOULD BE INFLOW OF NEW CAPITAL IN SUCH COMPANIES ONLY FOR MAKING THE PAYMENT TO THE A SSESSEE COMPANY WHICH HAS NOT BEEN DONE IN THE INSTANT CASE. THE INVESTMENT WAS MADE IN THE ASSESSEE COMPANY BY INVESTOR COMPANIES OUT OF FUNDS REALIZED FROM PREVIOUS INVESTMENTS/ADVANCE S/ASSETS. IF THE PAYMENT WAS MADE BY REALIZING THE FUNDS ALREADY INVESTED BY SUCH COMPAN Y HOW SUCH FUNDS CAN BE TREATED AS UNEXPLAINED MONEY OF THE ASSESSEE. D) FINDING OF LD. AO: - THE CONTENTION OF THE ASSES SEE COMPANY IS ONLY BASED ON ACCOUNTING JUGGLERY BY WAY OF WHICH THE TRANSACTION HAS BEEN R ECORDED IN THE BOOKS OF ACCOUNTS OF ALL SUCH PERSONS INCLUDING THE ASSESSEE COMPANY WHO HAVE PA RTICIPATED IN THIS EXERCISE. IT NEEDS TO BE UNDERSTOOD THAT MERELY BECAUSE THE ASSESSEE COMPANY ADJUSTED THE MONEY RECEIVED AS SHARE CAPITAL/SHARE PREMIUM IN ITS BOOKS OF ACCOUNT THE TRANSACTION CANNOT BE SHOWED WITH THE ITA NO. 391/JP/2017 M/S. RAINBOW BUILDCON PVT.LTD. JAIPUR VS AC IT CENTRAL CIRCLE-2 JAIPUR 26 CHARACTER OF A CAPITAL RECEIPT. IT MUST BE SAID THA T THE FACE VALUE OF A SHARE IS INTRINSICALLY CAPITAL IN NATURE BECAUSE IT IMPARTS TO THE SUBSCRI BER A RIGHT OF PARTICIPATION AND OWNERSHIP IN THE ISSUING COMPANY. HOWEVER THE SHARE PREMIUM ATT ACHED TO EACH SUCH SHARE DOES NOT ENTITLE THE SUBSCRIBED OF ANYTHING ELSE OTHER THAN WHAT THE FACE VALUE BY ITSELF HAS ACHIEVED FOR HIM. THIS PARTICIPATION AND OWNERSHIP IN THE ISSUING COM PANY REMAINS THE SAME. IT IS IN FACT A COST WHICH THE SUBSCRIBER BEARS FOR 1) THE VALUE OR WORTH OF ASSETS & PROFITS WHICH THE ISSUER COMPANY ALREADY POSSESSES OR DERIVER OR 2) THE VALUE OR WORTH OF SUCH ASSETS OR PROFITS WH ICH THE ISSUES COMPANY MAY CREATE IN THE FURTHER OR MAY DERIVE FOR THE PROPORTIONATE BENEFIT OF THE SUBSCRIBER. IN THE INSTANT CASE BOTH OF ABOVE ARE ABSENT. NEIT HER DOES THE ISSUING COMPANY POSSESS ANY ASSET WORT H ITS NAME NOR DOES IT DERIVE ANY PROFIT. NEITHER DOES THE ASSESSEE COMPANY HOLD ANY PROMISE FOR THE CREATION OF ASSETS OR WEALTH IN THE FUTURE NOR IS THERE ANY FORESEEABLE POSSIBILITY OF ANY PRO FIT BEING DERIVED IN THE FUTURE. THE QUESTION WHICH THUS ARISES IS THAT WHAT IS IT T HAT THE SUBSCRIBER COMPANY PAID FOR IN FORM OF THE SHARE HAVING FACE VALUE OF RS. 10. THE ASSESSEE COM PANY HAS FAILED TO ANSWER THIS QUESTION EVEN WHEN A SPECIFIC QUERY IN THIS REGARD HAD BEEN RAISE D THUS THE SAME CREATES DOUBTS REGARDING GENUINENESS OF SHARE CAPITAL AND PREMIUM THEREON CR EDITED IN BOOKS OF ACCOUNTS SUBMISSION OF ASSESSEE: - I) THE TRANSFER OF SHARE APPLICATION INTO SHARE CAP ITAL & SHARE PREMIUM IS NOT ONLY BASED ON ACCOUNTING ENTRIES BUT THEY ARE SUPPORTED BY DOCUME NTARY EVIDENCE. IT IS NOT A CASE WHERE THE CERTAIN RECEIPTS HAVE BEEN ACCOUNTED FOR BY ASSESSE E COMPANY AS PER ITS OWN SWEET WILL. THE INVESTOR COMPANIES FILED THE SHARE APPLICATION FORM S TO SUBSCRIBE THE SHARES OF THE ASSESSES COMPANY AND IN THE SHARE APPLICATION FORM THE DETAI L OF SHARE PREMIUM IS ALSO MENTIONED. THUS THIS IS NOT A CASE WHERE THE CLAIM OF THE ASSESSEE IS BASED ON ACCOUNTING ENTRIES. THERE IS NO CONTRA MATERIAL WITH THE DEPARTMENT TO PROVE THAT T HE ADJUSTMENT MADE IN BOOKS OF ACCOUNTS BY THE ASSESSEE IS NOT CORRECT OR NOT BASED ON DOCUMEN TS. II) THE LD. AO HIMSELF ADMITTED THAT THE FACE VALUE OF A SHARE IS INTRINSICALLY CAPITAL IN NATURE BECAUSE IT IMPARTS TO THE SUBSCRIBER A RIGHT OF PAR TICIPATION AND OWNERSHIP IN THE ISSUING COMPANY AND STILL WHILE MAKING THE ADDITION HE MADE THE ADDITION OF THE SHARE CAPITAL AS WELL AS SHARE PREMIUM. FURTHER IF THE SHARES ARE ISSUED AT PREMIUM THEN CAPITAL RECEIPT AGGREGATE AMOUNT OF PREMIUM IS TO BE TRANSFERRED TO AN ACCOUN T CALLED THE SHARE PREMIUM ACCOUNT. THE BOOK VALUE OF THE SHARE IS INCREASED BY THE AMOUNT CREDITED IN SHARE PREMIUM ACCOUNT. THIS SHARE PREMIUM ACCOUNT IS NOT DISTRIBUTABLE AS INCOM E JUST LIKE AS ANY OTHER CAPITAL ASSETS. ON WINDING UP THE SURPLUS MONIES IN THE SHARE PREMIUM ACCOUNT IS TO BE RETURNED TO THE SHARE HOLDERS AS CAPITAL. SO LONG AS THE COMPANY IS A GOI NG CONCERN THE MONIES IN SHARE PREMIUM ACCOUNT CAN NEVER BE RETURNED TO THE SHAREHOLDERS E XCEPT THROUGH THE MEDIUM OF A REDUCTION PETITION OR IN OTHER WORDS EXCEPT UNDER EXACTLY THE SAME CONDITIONS AS THOSE UNDER WHICH ANY OTHER CAPITAL ASSET CAN REACH THE SHAREHOLDERS HAND S. DISTRIBUTION OF SHARE PREMIUM AMOUNT IS ITA NO. 391/JP/2017 M/S. RAINBOW BUILDCON PVT.LTD. JAIPUR VS AC IT CENTRAL CIRCLE-2 JAIPUR 27 NOT PERMITTED THROUGH DIVIDEND. THE COMPANIES ACT C LEARLY MENTIONS THAT AMOUNT RECEIVED AS PREMIUM IS CAPITAL RECEIPT AND NOT A REVENUE RECEIP T. III) AS HIMSELF ADMITTED BY LD. AO ONE OF THE DECID ING FACTOR FOR SHARE PREMIUM IS THE VALUE OR WORTH OF SUCH ASSETS OR PROFITS WHICH THE ISSUES COMPANY MAY CREATE IN THE FURTHER OR MAY DERIVE FOR THE PROPORTIONATE BENEFIT OF THE SUBSCRIBER. IN FOR GOING PARAS WE HAVE DESCRIBED THE FUTURE PLANNING OF THE ASSESSEE WHICH ALSO JUSTIFIED THE S HARE PREMIUM RECEIVED FROM THE INVESTOR COMPANIES. THEREFORE THE LD. AO IS WRONG IN HOLDING THAT IN TH E INSTANT CASE NEITHER DOES THE ASSESSEE COMPANY HOLD ANY PROMISE FOR THE CREATION OF ASSETS OR WEAL TH IN THE FUTURE NOR IS THERE ANY FORESEEABLE POSSIBILITY OF ANY PROFIT BEING DERIVED IN THE FUTU RE. FROM THE FINANCIALS OF THE ASSESSEE COMPANY THE JUSTIFICATION GIVEN BY THE ASSESSEE IN FORGOING PARA REGARDING ACQUISITION OF ASSETS AND FUTURE PLANNING FOR EARNING OF PROFIT CAN BE DULY V ERIFY. FURTHER AS STATED IN FORGOING PARAS THE SHARES AT PREMIUM IS ALWAYS A COMMERCIAL DECISION B ETWEEN INVESTOR AND INVESTEE COMPANIES WHICH DOES NOT REQUIRE ANY JUSTIFICATION. E) FINDING OF LD. AO: - THE INQUIRIES WHICH IS BE ING DISCUSSED IN SHOW CAUSE NOTICE ADMITTEDLY HAVE NO RELEVANCE IN THE CASE OF ASSESSE E COMPANY AS NO SHARE CAPITAL WAS ISSUED TO THOSE COMPANIES. HOWEVER THE INQUIRIES WERE DISCUSS ED TO JUSTIFY THE MODUS OPERANDI OF INTRODUCTION OF MONEY IN THE SHAPE OF HIGH SHARE PR EMIUM WHICH IS RELEVANT IN THIS CASE ALSO AS THE SHARES WERE ALLOTTED IN THIS CASE ALSO AT THE R ATE HIGHER TO THE JUSTIFIABLE AMOUNT. SUBMISSION OF ASSESSEE: - I) WHATEVER INQUIRIES ARE BEING DISCUSSED IN THE SHOW CAUSE NOTICE AS WELL AS IN ASSESSMENT ORDER ARE NOT APPLICABLE IN THE CASE OF THE ASSESSEE FOR THE INSTANT YEAR AS IN THE YEAR UNDER CONSIDERATION NO SHARES WERE ISSUED TO SUCH COMPANIES ON WHICH TH E INQUIRIES WERE CONDUCTED BY THE DEPARTMENT. IN THIS YEAR NO ANY INQUIRIES WAS MADE FROM THE INVESTOR COMPANIES WHO MADE INVESTMENT IN THE YEAR UNDER CONSIDERATION. II) AS REGARD TO PRESUMING THE MODUS OPERANDI BASED ON THE INQUIRED CARRIED OUT IN THE CASE OF SOME OTHER COMPANIES PRESUMING THAT THE SAME MODUS OPERA NDI WAS FOLLOWED IN EACH AND EVERY CASE THIS IS TO SUBMIT THAT AS PER LAW THE INQUIRIES CON DUCED IN THE CASE OF PARTICULAR PERSON SHOULD BE RESTRICTED FROM THAT PERSON ONLY AND CAN MADE AP PLICABLE FOR THE TRANSACTIONS CARRIED OUT FROM SUCH PERSON. THE SAME CANNOT BE EXTENDED TO MA KING ANY PRESUMPTION & ASSUMPTION IN EACH AND EVERY CASE WHERE NO INQUIRIES WERE MADE. I T IS NOT CORRECT TO PRESUME THAT ALL THE COMPANIES ARE OPERATING FROM SAME MODUS OPERANDI. III) THERE IS NO EVIDENCE WITH THE DEPARTMENT TO PROVE T HAT THE COMPANIES TO WHOM SHARES WERE ISSUED DURING THE YEAR WERE BEING FUNDED BY THE ASS ESSEE COMPANY. ALL THE COMPANIES WERE HAVING THEIR OWN INDEPENDENT FUNDS TO INVEST AT THE IR WISDOM. IT IS FURTHER RELEVANT TO MENTION HERE THAT WHATEVER FUNDS PAID BY THE INVESTOR COMPA NIES TO THE ASSESSEE COMPANY WERE TRANSFERRED FROM THEIR OWN SOURCE OF FUNDS WHICH TH EY WERE POSSESSING MUCH PRIOR TO INVESTMENT MADE IN THE ASSESSEE COMPANY AND BY NO STRETCH OF I MAGINATION IT CAN BE PRESUMED THAT THOSE FUNDS WERE INTRODUCED BY THE ASSESSEE COMPANY IN TH E INVESTOR COMPANIES. ITA NO. 391/JP/2017 M/S. RAINBOW BUILDCON PVT.LTD. JAIPUR VS AC IT CENTRAL CIRCLE-2 JAIPUR 28 IV) FURTHER FROM THE SHOW CAUSE INQUIRIES ON THE BASIS OF WHICH THE MODUS OPERANDI OF ISSUE OF SHARES ON SHARE PREMIUM IS BEING JUSTIFY BY THE LD. AO NO WHERE IT PROVES THAT THE FUNDS WERE INTRODUCED IN SUCH COMPANIES BY THE ASSESSEE COMPAN Y. THERE IS NO COGENT REASON TO HAVE SUCH PRESUMPTION EITHER AS A RESULT OF SEARCH OVER THE A SSESSEE AS WELL AS INQUIRIES CARRIED OUT BY THE DEPARTMENT. IF WE BELIEVE ON THE INQUIRIES CARRIED OUT BY THE DEPARTMENT WHICH IS NOT IN KNOWLEDGE OF THE ASSESSEE THAN THERE MAY BE INTROD UCTION OF SOME SUSPICIOUS FUNDS IN THE INTERMEDIATE COMPANIES WHERE FROM THE FLOW OF FUNDS STARTED FROM ONE COMPANY/PERSON TO OTHER COMPANY/PERSON AND PART OF SUCH WAS RECEIVED TO THE ASSESSEE COMPANY BUT STILL A QUESTION AROSE THAT HOW ITS PROVE THAT THE SAME WAS UNEXPLAI NED MONEY OF THE ASSESSEE COMPANY. THE COMPANIES/PERSONS FROM WHOM THE ASSESSEE COMPANY RE CEIVED THE SHARE APPLICATION MONEY AND THE PERSONS/COMPANIES FROM WHOM THE INVESTOR COMPAN IES OF THE ASSESSEE RECEIVED THE FUNDS ARE SEPARATE INCOME TAX ASSESSEE AND HAVING THEIR OWN N ET WORTH OWN SOURCE OF FUNDS AND IF SOME SUSPICIOUS FUNDS HAD BEEN INTRODUCED IN ACCOUNTS OF SUCH COMPANIES THEN THE EXPLANATION OF SUCH FUNDS SHOULD HAVE BEEN CALLED FROM CONCERNING PERSON/COMPANY AND IN CASE OF FAILURE TO DO SO THE ACTION SHOULD HAVE BEEN TAKEN IN THE CASE OF CONCERNING PERSON. INSTEAD OF DOING SO THE DEPARTMENT ADOPTED A SHORT CUT METHOD OF TREATI NG SUCH SUSPICIOUS MONEY AS UNEXPLAINED MONEY OF THE ASSESSEE AND ADDED THE SAME AS INCOME OF THE ASSESSEE WITHOUT CARRYING NECESSARY INQUIRIES OR TAKING NECESSARY ACTION AGAINST SUCH P ERSONS BY JUSTIFYING ITS ACTION ON THE BASIS OF SOME IRRELEVANT INQUIRIES. THERE IS NO CASE OR EVID ENCE WITH THE DEPARTMENT TO PRESUME THAT THE ASSESSEE HAS INTRODUCED ITS UNEXPLAINED MONEY IN AC COUNTS OF SUCH INVESTOR COMPANIES. F) FINDING OF LD. AO: - ADMITTEDLY DURING THE COU RSE OF SEARCH OVER MOTISONS GROUP NO DOCUMENTS/EVIDENCE WAS FOUND TO SHOW THAT THE COMPA NIES WHO MADE INVESTMENT IN SHARES OF THE ASSESSEE COMPANY ARE RUN/MANAGE BY MOTISONS GRO UP BUT FROM THE INQUIRIES AND MODUS OPERANDI ITS REVEALS THAT THE ALLOTEE COMPANIES ARE MERELY PAPER COMPANIES AND PROVIDING ACCOMMODATION ENTRIES. THEREFORE THE INDIRECT EVIDE NCE/INQUIRIES CONDUCTS GIVEN CLEAR SIGN OF INTRODUCTION OF LARGE MONEY IN THE COMPANY IN THE F ORM OF SHARE CAPITAL/SHARE PREMIUM MORE SO WHEN THE JUSTIFICATION OF CHARGING SUCH HIGHER RATE NOT GENUINELY PROVED. SUBMISSION OF AO: - I) IN THIS PARA THE LD. AO HIMSELF ADMITTED TH AT DURING THE COURSE OF SEARCH OVER MOTISONS GROUP NO DOCUMENTS/EVIDENCE WAS FOUND TO S HOW THAT THE COMPANIES WHO MADE INVESTMENT IN SHARES OF THE ASSESSEE COMPANY ARE RU N/MANAGED BY MOTISONS GROUP. THUS IF THE DEPARTMENT IS NOT IN POSSESSION OF ANY POSITIVE MAT ERIAL AGAINST THE ASSESSEE OR ITS INVESTOR COMPANIES THAN HOW THE INQUIRIES MADE IN THE CASE O F OTHER COMPANIES CAN BE USED AGAINST THE ASSESSEE MORE SO WHEN IN THE YEAR UNDER CONSIDERATI ON NO ANY TRANSACTIONS WAS MADE FROM SUCH COMPANIES. FURTHER THERE IS NOTHING POSITIVE IN THE INQUIRIES TO ALLEGED THAT THE ASSESSEE HAS INTRODUCED ITS OWN UNEXPLAINED MONEY UNDER THE GARB OF SHARE CAPITAL AND SHARE PREMIUM. II) THE RATE OF SHARE WAS DECIDED AFTER DISCUSSIO N OF ASSESSEE COMPANY AND INVESTOR COMPANY. THE SHARES WERE ISSUED TO THE INVESTOR COM PANIES AT PREMIUM BECAUSE OF THE REASONS MENTIONED IN FORGOING PARAS. FROM THE DOCUMENTS SUB MITTED TO THE AO NO WHERE IT PROVES THAT ALL THE COMPANIES ARE SIMPLY PAPER COMPANIES AND PR OVIDING ONLY ACCOMMODATION ENTRIES AND THE INVESTMENT MADE BY THEM IN THE ASSESSEE COMPANY IS NOT GENUINE. THE FINDING OF THE LD. AO IS BASED ON THE ASSUMPTION AND PRESUMPTION. G) FINDING OF LD. AO: - IT IS ALSO TO BE NOTED HE RE THAT THE NOTICES U/S 133(6) WERE ISSUED TO THE KOLKATA BASED COMPANIES FROM WHERE THE ASSES SEE COMPANY RECEIVED SHARE CAPITAL/SHARE ITA NO. 391/JP/2017 M/S. RAINBOW BUILDCON PVT.LTD. JAIPUR VS AC IT CENTRAL CIRCLE-2 JAIPUR 29 PREMIUM. TILL THE STIPULATED DATE OF COMPLIANCE NON E OF THE COMPANY REPLIED TO THE ABOVE SAID NOTICES. SUBMISSION OF ASSESSEE: - I) THE LD. AO HAD ISSUED THE NOTICES U/S 133(6) OF INC OME TAX ACT 1961 AND HE ALLEGES THAT THE SAME WERE NOT COMPLIED BY THE INVESTOR COMPANIES. B UT THIS FACT WAS NOT BROUGHT TO THE NOTICE OF THE ASSESSEE. THE ASSESSEE HAS INQUIRED FROM THE IN VESTOR COMPANIES AND THEY REPORTED THAT THEY HAVE SENT REPLY BY POST FOR ALL THE NOTICES RECEIVE D BY THEM. II) FURTHER FROM THE ASSESSMENT ORDER IT IS NOT CLEAR T HAT WHAT SHORT OF INFORMATIONS WERE REQUIRED BY LD. AO FROM THE INVESTOR COMPANIES AND WHETHER T HE SAME WAS OVER AND ABOVE TO THE INFORMATIONS/DOCUMENTS ALREADY SUBMITTED BY THE AS SESSEE. IF SUCH CALLED INFORMATION WERE THAT MUCH IMPORTANT THAN WHY THE SAME WERE NOT BROUGHT I N THE NOTICE OF THE ASSESSEE. THIS SHOWN THAT THE LD. AO WAS BENT FOR MAKING THE ASSESSMENT AND HE ISSUED THE NOTICE TO THE INVESTOR COMPANIES JUST TO COMPLETE THE FORMALITIES. III) SIMPLY THAT THE PARTIES NOT RESPONDED THE NOTICE I T DOES NOT EMPOWER TO THE LD. AO TO TREAT THE TRANSACTIONS AS NON GENUINE. RELIANCE IS PLACED ON FOLLOWING DECISIONS: - CIT V/S. WINSTRAL PETROCHEMICALS (P) LTD. (2010) 41 DTR (DEL) 139 INCOMECASE CREDITSHARE APPLICATION MONEYASSESSEE COMPANY WAS FOUND TO HAVE RECEIVED THE MONEY THROUGH BANKING CHANNELSASSESSEE COMPANY ALS O FURNISHED WRITTEN CONFIRMATIONS FROM THE APPLICANT COMPANIES COPIES OF CERTIFICATES OF INCORPORATION PAN CARDS PAN DETAILS AND COMPANY DETAILS ETC. OF THE APPLICANTSFINDING OF T RIBUNAL THAT IDENTITY OF THE SUBSCRIBERS STOOD DULY ESTABLISHED FROM THE DOCUMENTS PRODUCED BY THE ASSESSEE CANNOT BE SAID TO BE PERVERSETHERE IS NO LEGAL BAR TO MORE THAN ONE COM PANY BEING REGISTERED AT THE SAME ADDRESSMERELY BECAUSE THE APPLICANTS DID NOT RESPO ND TO THE NOTICES SENT TO THEM AO WAS NOT JUSTIFIED IN ADDING THE AMOUNT OF SHARE APPLICATION MONEY TO THE INCOME OF THE ASSESSEE. CIT V/S. SAMIR BIO-TECH (P) LTD. (2009) 17 DTR (DEL ) 224 INCOMECASH CREDITSHARE APPLICATION MONEYIDENTITY OF THE SUBSCRIBERS NOT BEING IN DOUBT SHARE APPLICATION MONEY HAVING BEEN PAID BY ACCOUNT PAYEE CHEQUES SUBSCRIBERS HAVING SHOWN THE AMOUNTS IN THEIR AUDITED BALANCE SHEETS AND HAVING GIVEN COMPLETE DETAILS WITH REGARD TO THEIR RETURNS AND ASSESSMENTS NO ADDITION COULD BE MADE UNDER S. 68 ONLY BECAUSE THE SUBSCRIBERS DID NOT INITIALLY RESPOND TO SUMMONS. H) FINDING OF LD. AO: - IT IS CLEAR THAT WHAT IS APPARENT IS NOT REAL AND THE ASSESSEE'S CLAIM OF HAVING RECEIVED INVESTMENT IS NOT GENUINE. AS LAID DOWN BY THE HON'BLE SUPREME COURT IN THE CASE OF CIT V/S SUMATI DAYAL (1995) 80 TAXMA N 89 (SC) APPARENT MUST BE CONSIDERED REAL UNTIL IT IS SHOWN THAT THERE ARE REASONS TO LO OK INTO THE SURROUNDING CIRCUMSTANCES TO FIND OUT THE REALITY AND THE MATTER HAS TO BE CONSIDERED BY APPLYING THE TEST OF HUMAN PROBABILITIES. THE EVIDENCES HAVE TO BE JUDGED BY APPLYING THE TES T OF HUMAN PROBABILITIES. IMPORTING THE RATIO OF THE HON'BLE SUPREME COURT OF INDIA AS PROPOUNDED IN THE CASE OF SUMATI DAYAL (SUPRA) THERE IS NO DISPUTE THAT THE AMOUNT HAS BEEN RECEIVED BY THE APPELLANT FROM VARIOUS COMPANIES SOME OF WHICH ARE LISTED COMPANIES AND THE FUNDS HAVE B EEN RECEIVED AGAINST THE ISSUE OF SHARES AND THAT THE FUNDS HAVE BEEN RECEIVED THROUGH BANKING C HANNELS. WHAT IS DISPUTED IS WHETHER THE FUNDS RECEIVED BY THE ASSESSEE IS ACTUALLY GENUINE INVESTMENT OR THE UNACCOUNTED INCOME INTRODUCED IN THE GARB OF INVESTMENT. THIS RAISES T HE QUESTION WHETHER THE APPARENT COULD BE CONSIDERED AS REAL. IN THE PRESENT CASE THE CLAIM O F THE ASSESSEE HAVING RECEIVED GENUINE INVESTMENT IS INCORRECT. ITA NO. 391/JP/2017 M/S. RAINBOW BUILDCON PVT.LTD. JAIPUR VS AC IT CENTRAL CIRCLE-2 JAIPUR 30 SUBMISSION OF ASSESSEE: - I) AS LAID DOWN BY THE HON'BLE SUPREME COURT IN THE CA SE OF CIT V/S SUMATI DAYAL (1995) 80 TAXMAN 89 (SC) (ALSO RELIED BY LD. AO) APPARENT MU ST BE CONSIDERED REAL UNTIL IT IS SHOWN THAT THERE ARE REASONS TO LOOK INTO THE SURROUNDING CIRC UMSTANCES TO FIND OUT THE REALITY AND THE MATTER HAS TO BE CONSIDERED BY APPLYING THE TEST OF HUMAN PROBABILITIES. THE EVIDENCES HAVE TO BE JUDGED BY APPLYING THE TEST OF HUMAN PROBABILITI ES. II) THE LD. AO IS ALSO ADMITTING IN THIS PARA THAT THE AMOUNT HAS BEEN RECEIVED BY THE APPELLANT FROM VARIOUS COMPANIES AND THE FUNDS HAVE BEEN RECE IVED AGAINST THE ISSUE OF SHARES AND THAT THE FUNDS HAVE BEEN RECEIVED THROUGH BANKING CHANNE LS. THE DISPUTE IS WHETHER THE FUNDS RECEIVED BY THE A SSESSEE ARE ACTUALLY GENUINE CAPITAL APPLICATION OR THE UNACCOUNTED INCOME INTRODUCED IN THE FORM OF SHARE APPLICATION. IN THIS REGARD THIS IS TO SUBMIT THAT THERE IS NO REASON WITH THE DEPARTMENT TO PRESUME THAT THE AMOUNT RECEIVED FROM THE ABOVE MENTIONED COMPANIES IS ACCOMMODATION ENTRIES TO BROUGHT THE UNACCOUNTED MONEY OF THE ASSESSEE IN BOOKS OF ACCOU NTS. FURTHER DURING THE COURSE OF SEARCH THE DEPARTMENT HAS NOT FOUND ANY UNDISCLOSED SOURCE OF INCOME OF ASSESSEE FOR THE YEAR UNDER CONSIDERATION BY WHICH THIS MUCH OF INCOME COULD BE EARNED WHICH ALSO PROVES THAT THE SHARE CAPITAL RECEIVED BY THE ASSESSEE IS GENUINE. CIT VS BHARAT ENGINEERING AND CONSTRUCTION CO. (1972) 83 ITR 187 (SC) IN THIS CASE TRIBUNAL CAME T O THE CONCLUSION THAT UNEXPLAINED CASH CREDIT ENTRIES IN THE FIRST YEAR OF BUSINESS OF ENG INEERING CONSTRUCTION COMPANY COULD NOT BE INCOME OF ASSESSEE. THE HIGH COURT AFTER CAREFUL EX AMINATION OF THE VARIOUS FINDINGS REACHED BY THE TRIBUNAL HAS COME TO THE CONCLUSION THAT THE TR IBUNAL'S FINDINGS ARE FINDINGS OF FACT. HONBLE APEX COURT CONFIRMED THAT CONCLUSION. THIS GIVES THE ANSWER IN FAVOR OF THE ASSESSEE THA T IN THIS CASE THE APPARENT SHOULD BE CONSIDERED AS REAL AS THE ASSESSEE COMPANY IS NOT H AVING ANY SOURCE OF INCOME FROM WHICH THIS MUCH OF UNDISCLOSED INCOME COULD BE EARNED THAN QUE STION OF RECEIVING OF NON GENUINE SHARE CAPITAL TO BROUGHT ITS UNACCOUNTED INCOME IN ITS BO OKS OF ACCOUNTS DOES NOT ARISE. III) THE ASSESSING OFFICER MERELY DISBELIEVED THE EXPLAN ATION/STATEMENTS GIVEN BY THE ASSESSEE AND HAS CONVERTED GOOD PROOF INTO NO PROOF. HONBLE JUS TICE HIDAYATULLAH OF THE SUPREME COURT IN THE CASE OF SREELEKHA BANERJEE VS CIT [1963] 49 ITR 112 (SC); 120 OBSERVED THAT THE INCOME TAX DEPARTMENT CANNOT BY MERELY REJECTING UNREASONA BLY A GOOD EXPLANATION CONVERT GOOD PROOF INTO NO PROOF HONBLE SUPREME COURT IN THE CASE OF UMA CHARAN SHA W & BROS CO VS CIT 37 ITR 271 HAS HELD THAT THE SURMISES AND CONJECTURES AND THE CONCLUSION IS THE RESULT OF SUSPICION WHICH CANNOT TAKE THE PLACE OF PROOF. HONBLE PUNJAB & HARYANA HIGH COURT IN THE CASE OF CIT VS ANUPAM KAPOOR (2008) 299 ITR 179 (P & H) ALSO HELD THAT SUSPICION HOWSOEVER STRONG CAN NOT TAKE THE PLACE OF LEGAL PROOF. 8. BY GIVING THE ABOVE FINDINGS THE LD. MADE ADDITI ON OF RS. 2 00 00 000/- IN TOTAL INCOME OF THE ASSE SSEE U/S 56(1) OF INCOME TAX ACT 1961. REGARDING THE AP PLYING THE PROVISIONS OF SECTION 56(1) OF INCOME TAX ACT 1961 WE MAY SUBMIT AS UNDER: - A) AS PER PROVISIONS OF SECTION 56(1) OF INCOME TAX ACT 1961 INCOME OF EVERY KIND WHICH IS NOT TO BE EXCLUDED FROM THE TOTAL INCOME UNDER THIS ACT SHALL BE CHARGEABLE TO INCOME-TAX UNDER THE ITA NO. 391/JP/2017 M/S. RAINBOW BUILDCON PVT.LTD. JAIPUR VS AC IT CENTRAL CIRCLE-2 JAIPUR 31 HEAD 'INCOME FROM OTHER SOURCES' IF IT IS NOT CHAR GEABLE TO INCOME-TAX UNDER ANY OF THE HEADS SPECIFIED IN SECTION 14 ITEMS A TO E. IN THE CASE OF THE ASSESSEE COMPANY THE AMOUNT WAS RECEIVED FROM INVESTOR COMPANIES WERE AGAINST SHARE APPLICATION AND THE SAME IS CAPITAL RECEIPT W HICH WAS ADJUSTED AGAINST SHARE CAPITAL AND SHARE PREMIUM. THE MONEY SO RECEIVED TO ASSESSEE CO MPANY WAS CAPITAL RECEIPT AND WAS NOT REVENUE RECEIPT THEREFORE THE SAME CANNOT BE TAXED IN THE HANDS OF ASSESSEE COMPANY UNDER SECTION 56(1) OF INCOME TAX ACT 1961 BECAUSE THIS SECTION DEAL WITH INCOME AND NOT WITH CAPITAL RECEIPTS. THE INVESTORS WHO SUBSCRIBED THE SHARE CAPITAL OF ASSESSEE COMPANY IS ALSO SHOWING THE AMOUNT PAID TO ASSESSEE AS THEIR INVEST MENT IN SHARES OF ASSESSEE COMPANY AND NECESSARY DOCUMENTS IN THIS REGARD WAS SUBMITTED TO LD. AO. THEREFORE THE ASSESSEE HAS PROVED WITH DOCUMENTARY EVIDENCES THAT THE AMOUNT WAS RECE IVED AGAINST SHARE APPLICATION I.E. CAPITAL RECEIPT THEREFORE THE SAME CANNOT BE TREATED AS IN COME OF THE ASSESSEE. FURTHER FOR TREATING THE SHARE CAPITAL/SHARE PREMIUM AS INCOME OF THE ASSESS EE COMPANY NO COGENT REASON HAS BEEN GIVEN BY LD. AO. B) THERE IS NO DEEMING FICTION HAS BEEN GIVEN IN SE CTION 56(1) OF INCOME TAX ACT 1961 WHEREIN THE INCOME CAN BE TAXED UNDER DEEMING PROVISION. CERTA IN DEEMING INCOME HAS BEEN CHARGED AS INCOME TAX ACT WHICH HAS BEEN PROVIDED IN SECTION 5 6(2) OF INCOME TAX ACT 1961 AND AS PER PROVISION OF SECTION 56(2) OF INCOME TAX ACT 1961 THE SHARE PREMIUM RECEIVED PRIOR TO AY 2013-14 WERE NOT TAXABLE IN ANY CIRCUMSTANCES IF TH E ASSESSEE HAS PROVED THE IDENTITY CREDITWORTHINESS AND GENUINENESS OF THE TRANSACTION S. C) THE INCOME FOR THE PURPOSE OF THE INCOME TAX ACT HAS A WELL UNDERSTOOD MEANING AS DEFINED IN SECTION 2(24) OF THE INCOME TAX ACT 1961. IT IS TRU E THAT SECTION 2(24) OF THE INCOME ACT 1961 CONTAINS INCLUSIVE DEFINITION BUT IT CANNOT BE DISP UTED THAT INCOME SHOULD HAVE BEEN LOOK INTO ITS NORMAL MEANING. THE INCOME WILL NOT INCLUDE CAPITAL RECEIPTS UNLESS IT IS SPECIFIED IN INCOME TAX ACT. THIS ARGUMENT CLARIFIES AFTER THE AMENDMEN T MADE BY FINANCE ACT 2012 W.E.F. 1.4.2013 IN SECTION 56(VIIB) OF INCOME TAX ACT 1961 WHEREIN CERTAIN SHARE PREMIUMS WERE MADE TAXABLE W.E.F. 01.04.2013. IF THE SAME WERE ALREADY TAXABLE U/S 56(1) O INCOME TAX ACT 1961 AND THE SAME WAS ALREADY INCLUDED IN THE DEFINITION OF INCO ME THAN WHY THIS AMENDMENT WAS MADE. THEREFORE THE LD. AO IS WRONG IN MAKING THE ADDITIO N U/S 56(1) OF INCOME TAX ACT 1961. D) CHARGE OF TAX IS ON INCOME AS UNDERSTOOD IN THE I. TAX ACT AND MEASURE OF INCOME AS PER THE COMPUTATION PROVISION. IN CASE THERE IS NO CHARGING PROVISION FOR SPECIFIC RECEIPT THEN IT CANNOT BE TAXED. THE FIVE MEMBER BENCH OF THE APEX COURT I N CIT V VATIKA TOWNSHIP P LTD 367 ITR 466 OBSERVED AT PAGE 494. TAX LAWS ARE CLEARLY IN DEROGATION OF PERSONAL RIG HTS AND PROPERTY INTERESTS AND ARE THEREFORE SUBJECT TO STRICT CONSTRUCTION AND ANY AMBIGUITY MU ST BE RESOLVED AGAINST IMPOSITION OF THE TAX. IN BILLINGS V U.S 232 U.S.261 AT PAGE 265 34 S.CT 421 (1914) THE SUPREME COURT CLEARLY ACKNOWLEDGED THIS BASIC AND LONG STANDING RULE OF S TATUTORY CONSTRUCTION. TAX STATUTES SHOULD BE STRICTLY CONSTRUED AND IF ANY AMBIGUITY BE FOUND TO EXIST IT MUST BE RESOLVE D IN FAVOUR OF CITIZEN. ITA NO. 391/JP/2017 M/S. RAINBOW BUILDCON PVT.LTD. JAIPUR VS AC IT CENTRAL CIRCLE-2 JAIPUR 32 IF A PERSON SOUGHT TO BE TAXED COMES WITHIN THE LE TTER OF THE LAW HE MUST BE TAXED HOWEVER GREAT THE HARDSHIP MAY APPEAR TO THE JUDICIAL MIND TO BE. ON THE OTHER HAND IF THE CROWN SEEKING TO RECOVER THE TAX CANNOT BRING THE SUBJECT WITHIN TH E LETTER OF THE LAW THE SUBJECT IS FREE HOWEVER APPARENTLY WITHIN THE SPRIT OF THE LAW THE CASE MIG HT OTHERWISE APPEAR TO BE AS OBSERVED IN PARTINGTON V ATTOMEY GENERAL LR4HL100. SINCE FOR THE YEAR UNDER CONSIDERATION THERE WAS NO PROVISIONS IN INCOME TAX ACT 1961 WHEREIN THE FAIR VALUE OF SHARE COULD BE COMPUTED AND THE EXCES S SHARE PREMIUM COULD BE TAXED THEREFORE IN ABSENCE OF COMPUTATION PROVISION THE SAME CANNOT BE TAXED. THE RELIANCE IS PLACED IN FOLLOWING CASES: - I) THE HONBLE BOMBAY HIGH COURT IN THE CASE OF CAD ELL WVG. MILLS CO.(P) LTD. V CIT 249 ITR 265 HAD AN OCCASION TO CONSIDER THE TAXABILITY OF A SUM RECEIVED IN RESPECT OF CONSIDERATION OF TENANCY RIGHT. IT WAS ACCEPTED BOTH BY REVENUE AND THE ASSESSEE THAT TENANCY RIGHT IS A CAPITAL RECEIPT. INCOME AS DEFINED IN SECTION 2(24)(VI) IS THE INCOME CHARGEABLE U/S 45. HENCE CAPITAL GAIN CHARGEABLE U/S 45 OR NOT WILL BE TAXABLE IN CA SE THE ARGUMENT OF THE REVENUE IS ACCEPTED. LEGISLATURE HAS NOT STOPPED WITH THE WORD CAPITAL G AIN BUT HAS MENTIONED THAT CAPITAL GAIN CHARGEABLE U/S 45. BEFORE THE BOMBAY HIGH COURT IT WAS ARGUED THAT IN CASE SURRENDER OF TENANCY RIGHTS IS NOT TAXABLE U/S 45 THEN IT SHOULD FALL U/S 56 OF I.T. ACT. IF THE CAPITAL ASSET HAS NO COST THEN ENTIRE RECEIPT IS CAPITAL RECEIPT. BEF ORE THE HONBLE HIGH COURT THE REVENUE CONTENDED THAT SECTION 14 IT IS MENTIONED AS CAPIT AL GAIN AND NOT CAPITAL GAIN CHARGEABLE U/S 45. THIS CONTENTION WAS NOT ACCEPTED BY THE HIGH CO URT. IF THE COMPUTATION PROVISION DO NOT APPLY TO A CASE THEN SUCH A CASE WILL NOT BE COVERE D UNDER CHARGING SECTION. AT LATER STAGE A REFERENCE WILL BE MADE TO 56 (VII B) INSERTED BY FI NANCE ACT 2012 W.E.F. 1.4.2013 AS THE SAME WILL BE A COMPUTATION PROVISION. FOR THE A.Y. 2011- 12 COMPUTATION PROVISION WERE NOT THERE. IN ABSENCE OF COMPUTATION PROVISION ENTIRE VALUE OF S HARE PREMIUM CAN NOT BE TAXED U/S 56. AS FOR TENANCY RIGHT THE FULL CONSIDERATION CAN NOT BE TA XED U/S 56 SIMILARLY ENTIRE SHARE PREMIUM IS NOT TAXABLE U/S 56(1). II) THE HONBLE APEX COURT IN THE CASE OF CIT V D.P . SANDU BROS. CHEMBUR (P) LTD 273 ITR 1 ALSO HOLD THAT AS PER 2(24)(VI) ONLY INCOME WHICH IS CHA RGEABLE U/S 45 IS TO BE INCLUDED IN INCOME AND IF COMPUTATION PROVISION U/S 45 FAILS THEN CHAR GING PROVISIONS WILL FAIL. REF. TO CIT V B.C. SRINIVASA SETTY 128 ITR 294. IV) THE HONBLE RAJASTHAN HIGH COURT IN THE CASE OF CIT V GOTAN LIME STONE KHANIJ UDYOG 269 ITR 399 ALSO HELD THAT IN CASE COMPUTATION PROVISIO N U/S 48 COULD NOT BE APPLIED FOR WANT OF ASCERTAINABLE COST OF ACQUISITION THEN CAPITAL GAI N DOES NOT ARISE TO BE INCLUDED IN TOTAL INCOME ON ACCOUNT OF FAILURE OF APPLICABILITY OF COMPUTATI ON PROVISION. THE HONBLE HIGH COURT REFERRED TO DECISION OF BOMBAY HIGH COURT IN THE CA SE OF CADELL WVG. MILLS CO (P) LTD. (SUPRA). V) THE HONBLE RAJASTHAN HIGH COURT IN THE CASE OF S. ZORASTER AND CO. V/S CIT 322 ITR 35 HAD ON OCCASION TO CONSIDER THE TAXABILITY OF RECEIPT O F RS.20 000 RECEIVED BY VENDEE ON DEFAULT OF THE PURCHASER AS PER AGREEMENT FOR SELL OF PREM PRA KASH TALKIES. THE HONBLE HIGH COURT AFTER REFERRING TO THE DECISION OF APEX COURT IN THE CASE OF TRAVANCORE RUBBER AND TEA CO LTD. V CIT 243 ITR 158 HELD THAT SUCH RECEIPT IS CAPITAL RECEI PT. SUCH CAPITAL RECEIPT IS NOT TAXABLE IN VIEW OF JUDGMENT OF APEX COURT IN D.P. SANDU BROS. CHEMB UR (P) LTD (SUPRA). HENCE CAPITAL RECEIPT ITA NO. 391/JP/2017 M/S. RAINBOW BUILDCON PVT.LTD. JAIPUR VS AC IT CENTRAL CIRCLE-2 JAIPUR 33 IS NOT TAXABLE UNLESS THERE IS CHARGING PROVISION F OR A CAPITAL RECEIPT AND COMPUTATION PROVISIONS ARE ALSO APPLICABLE. E) THE HONBLE BOMBAY HIGH COURT IN THE CASE OF VOD AFONE INDIA SERVICES P. LTD. V/S UOI 368 ITR 1 HAD AN OCCASION TO CONSIDER THE DIFFERENCE BE TWEEN THE SHARE PREMIUM DETERMINED BY REVENUE AND THE SHARE PREMIUM CHARGED AS DEEMED LOA N AND TAXING OF NATIONAL INTEREST ON DEEMED LOAN. THE HONBLE BOMBAY HIGH COURT HAS REFE RRED TO THE DECISION OF APEX COURT IN THE CASE OF MATHURAM AGGARWAL V/S STATE OF MP (1999) 8 SCC 667 FOR THE TEST TO INTERPRET A TAXING STATUE WHICH READS AS UNDER: THE INTENTION OF THE LEGISLATURE IS A TAXATION ST ATUTE IS TO BE GATHERED FROM THE LANGUAGE OF THE PROVISIONS PARTICULARLY WHERE THE LANGUAGE IS PLAIN AND UNAMBIGUOUS. IN A TAXING ACT IT IS NOT POSSIBLE TO ASSUME ANY INTENTION OR GOVERNING PURPO SE OF THE STATUTE MORE THAN WHAT IS STATED IN THE PLAIN LANGUAGE. IT IS NOT THE ECONOMIC RESULTS SOUGHT TO BE OBTAINED BY MAKING THE PROVISION WHICH IS RELEVANT IN INTERPRETING A FISCAL STATUTE. EQUALLY IMPERMISSIBLE IS AN INTERPRETATION WHICH DOES NOT FLOW FROM THE PLAIN UNAMBIGUOUS LAN GUAGE OF THE STATUTE. WORDS CANNOT BE ADDED TO OR SUBSTITUTED SO AS TO GIVE A MEANING TO THE STATUTE WHICH WILL SERVE THE SPENT AND INTENTION OF THE LEGISLATURE. THE STATUTE SHOULD CL EARLY AND UNAMBIGUOUSLY CONVEY THE THREE COMPONENTS OF THE TAX LAW I.E. SUBJECT OF THE TAX THE PERSON WHO IS LIABLE TO PAY THE TAX AND THE RATE AT WHICH THE TAX IS TO BE PAID. IF THERE IS AN Y AMBIGUITY REGARDING ANY OF THESE INGREDIENTS IN A TAXATION STATUTE THEN THERE IS NO TAX IN LAW. THE N IT IS FOR THE LEGISLATURE TO DO THE NEEDFUL IN TH E MATTER. HONBLE BOMBAY HIGH COURT IN THIS CASE (VODAFONE CA SE) OBSERVED THAT ISSUE OF SHARES AT A PREMIUM IS ON CAPITAL ACCOUNT AND GIVES RISE TO NO INCOME. 56( 1) PROVIDES THE INCOME OF EVERY KIND WHICH IS NOT EXCLUDED FROM THE TOTAL INCOME IS CHARGEABLE UN DER THE HEAD INCOME FROM OTHER SOURCES. HOWEVER BEFORE SECTION 56 OF THE ACT CAN BE APPLIED THERE MUST BE INCOME WHICH ARISES. IF THE RECEIPT IS CAPITAL THEN IT IS NOT INCOME. HENCE SHA RE PREMIUM IS NOT AN INCOME. F) THE CBDT VIDE CIRCULAR/INSTRUCTION NO.2 DATED 29 .01.2015 HAS STATED AS UNDER [371 ITR 6(ST)]. IN REFERENCE TO THE ABOVE CITED SUBJECT I AM DIREC TED TO DRAW YOUR ATTENTION TO DECISION OF THE HIGH COURT OF BOMBAY IN THE CASE OF VODAFONE INDIA SERVI CES PVT. LTD V UOI FOR THE ASSESSMENT YEAR 2009-10 (WP NO.871 OF 2014) WHEREIN THE COURT HAS H ELD INTERALIA THAT THE PREMIUM ON SHARE ISSUE WAS ON ACCOUNT OF A CAPITAL ACCOUNT TRANSACTI ON AND DOES NOT GIVE RISE TO INCOME AND HENCE NOT LIABLE TO TRANSFER PRICING ADJUSTMENT. IT IS HEREBY INFORMED THAT THE BOARD HAS ACCEPTED T HE DECISION OF THE HIGH COURT OF BOMBAY IN THE ABOVE MENTIONED WRIT PETITION. IN VIEW OF THE ACCEP TANCE OF THE ABOVE JUDGMENT IT IS DIRECTED THAT THE RATIO DECIDENDI OF THE JUDGMENT MUST BE AD HERED TO BY THE FIELD OFFICERS IN ALL CASES WHERE THE ISSUE IS INVOLVED. THIS MAY ALSO BE BROUG HT TO THE NOTICE OF THE ITAT DRPS AND CIT (APPEALS). IN VIEW OF ABOVE INSTRUCTION IT IS CLEAR THAT RATI O DECIDING OF TREATING OF SHARE PREMIUM AS CAPITAL RECEIPT IS BINDING ON REVENUE AUTHORITIES. ITA NO. 391/JP/2017 M/S. RAINBOW BUILDCON PVT.LTD. JAIPUR VS AC IT CENTRAL CIRCLE-2 JAIPUR 34 G) BY FINANCE ACT 2012 A NEW CLAUSE (VIIB) WAS INSE RTED IN 56(2). MEMORANDUM EXPLAINING THE PROVISIONS IN FINANCE BILL 2012 STATED AS UNDER:- SHARE PREMIUM IN EXCESS OF THE FAIR MARKET VALUE IS TO BE TREATED AS INCOME. SECTION 56(2) PROVIDES FOR THE SPECIFIC CATEGORY O F INCOMES THAT SHALL BE CHARGEABLE TO INCOME TAX UNDER THE HEAD INCOME FROM OTHER SOURCES. IT IS P ROPOSED TO INSERT A NEW CLAUSE IN 56(2). THE NEW CLAUSE WILL APPLY WHERE ACCOMPANY NOT BEING A COMPANY IN WHICH THE PUBLIC ARE SUBSTANTIALLY INTERESTED RECEIVES IN ANY PREVIOUS YEAR FROM ANY PERSON BEING A RESIDENT ANY CONSIDERATION FOR ISSUE OF SHARES. IN SUCH A CASE I F THE CONSIDERATION RECEIVED FOR ISSUE OF SHARES EXCEEDS THE FACE VALUE OF SHARES THE AGGREGATE CON SIDERATION RECEIVED FOR SUCH SHARES AS EXCEEDS THE FAIR MARKET VALUE OF THE SHARES SHALL B E CHARGEABLE TO INCOME TAX UNDER THE HEAD INCOME FROM OTHER SOURCES. THIS AMENDMENT EFFECTIVE FROM 1ST APRIL 2013 AND WI LL ACCORDINGLY APPLY IN RELATION TO ASSESSMENT YEAR 2013-14 AND SUBSEQUENT ASSESSMENT YEARS. IN THE MEM ORANDUM IT IS MENTIONED THAT PREMIUM IN EXCESS OF FAIR MARKET VALUE IS TO BE TREATED AS INC OME. THIS SUGGESTS THAT PREMIUM IN EXCESS OF FAIR MARKET VALUE WAS NOT AN INCOME BUT IS TO BE TR EATED AS INCOME DUE TO AMENDED PROVISION. BEFORE THE AMENDMENT CONSIDERATION RECEIVED AS PRE MIUM WAS NOT INCOME. THE LEGISLATURE IN ITS WISDOM REQUIRED THE SHARE PREMIUM IN EXCESS OF FAIR MARKET VALUE TO BE INCOME FROM ASSESSMENT YEAR 2013-14 AND NOT THE ENTIRE PREMIUM TO BE TREATED AS INCOME. CBDT VIDE CIRCULAR NO.3 OF 2012 DATED 12.06.2012 HAS ALSO MEN TIONED THAT PROVISIONS OF 56(2)(VII B) WILL BE APPLICABLE FOR ASSESSMENT YEAR 2013-14 ONWARD. H) SECTION 56 IS NOT A CHARGING SECTION. THIS SECTI ON STARTS WITH THE FOLLOWING SENTENCE. INCOME OF EVERY KIND WHICH IS NOT TO BE EXCLUDED F ROM THE TOTAL INCOME UNDER THE ACT SHALL BE CHARGEABLE TO INCOME TAX UNDER THE HEAD. INCOME FR OM OTHER SOURCES IF IT IS NOT CHARGEABLE TO INCOME TAX. UNDER ANY OF THE HEADS SPECIFIED IN SEC TION 14 ITEMS A TO E. FOR AN INCOME TO BE TAXED U/S 56 IT HAS TO SATI SFY THREE CONDITIONS. (A) IT SHALL BE CLASSIFIABLE AS INCOME AS PER THE C HARGING SECTION OF THE ACT. (B) IT SHALL NOT BE EXCLUDED FROM THE TOTAL INCOME (E.G. SECTION10). (C) IT IS NOT CHARGEABLE TO TAX UNDER ANY OF THE SP ECIFIED HEADS IN SECTION 14 ITEMS A TO E. THE FINANCE BILL 2012 AS PRESENTED ON 16TH MARCH 20 12 INCLUDED A NEW CLAUSE (VIIB) U/S 56(2) OF I.T. ACT [342 ITR1(ST)]. NO PROPOSAL IN THE ORIGINAL BIL L TO INSERT A NEW CLAUSE U/S 2(24). SUBSEQUENTLY NOTICE OF AMENDMENTS TO FINANCE BILL W AS GIVEN [SEE 343 ITR 37(ST)] AND AMENDMENTS ALSO INCLUDED THE IN SECTION OF CLAUSE ( XVI) IN 2(24) OF I.T. ACT AND SUCH CLAUSE IS AS UNDER: (XVI) ANY CONSIDERATION RECEIVED FOR ISSUE OF SHARE S AS EXCEEDS THE FAIR MARKET VALUE OF THE SHARES REFERRED TO IN CLAUSE (VIIB) OF SUBSECTION (2) OF 5 6. ITA NO. 391/JP/2017 M/S. RAINBOW BUILDCON PVT.LTD. JAIPUR VS AC IT CENTRAL CIRCLE-2 JAIPUR 35 THE AMENDMENT INTRODUCED IN 2(24) SIGNIFIES THAT SE CTION 56 IS NOT A CHARGING SECTION. UNLESS THE INCOME WHICH IS TO BE TAXED U/S 56(2)(VII B) IS INC LUDED IN THE DEFINITION OF INCOME THEN IT CAN BE TAXED AND BE PART OF TOTAL INCOME. NATURE OF INCOME AS MENTIONED IN SECTION 28(IIIA) (IIIB) (IIIC) (IIID) AND (IIIE) ARE ALSO INCLUDED IN DEFIN ITION OF INCOME. I) THIS AMENDMENT IF SECTION 56(2)(VIIB) OF INCOME TAX ACT 1961 EFFECTIVE FROM 1ST APRIL 2013 AND WILL ACCORDINGLY APPLY IN RELATION TO ASSESSMENT YE AR 2013-14 AND SUBSEQUENT ASSESSMENT YEARS AND THE PROVISIONS OF THIS SECTION CANNOT BE MADE A PPLY IN PREVIOUS YEARS. IN THIS REGARD THE RATIO HAS BEEN LAID DOWN IN FOLLOWING JUDGMENTS: - A) BY FINANCE ACT 1994 SECTION 55(2) WAS AMENDED T O PROVIDE THAT COST OF ACQUISITION OF A TENANCY RIGHT WILL BE TAKEN AS NIL. THE HONBLE APEX COURT IN THE CASE OF D.P. SANDU BROS. CHEMBUR (P) LTD (SUPRA) HELD THAT AMENDMENT TOOK EFFECT FROM 1 ST APRIL 1995 AND THEREFORE WILL NOT BE APPLICABLE FOR A.Y. 1987-88. SIMILAR FINDING HAS BE EN RECORDED BY HONBLE RAJ HIGH COURT IN THE CASE OF GOTAN LIME STONE KHANIJ UDHYOG. THE RATIO OF LAW IN RESPECT OF AMENDMENT IN 55(2) B EING HELD AS PROSPECTIVE IS APPLICABLE FOR 56(2)(VIBE) AND HENCE SHARE PREMIUM IN EXCESS OF FA IR MARKET VALUE CAN NOT BE HELD TAXABLE FOR A.Y. 2011-12. B) RECENTLY THE HONBLE APEX COURT IN THE CASE OF M .G. PICTURES (MADRAS) LTD V/S ACIT 373 ITR 39 HELD THAT AMENDMENT IN SECTION 40A(3) W.E.F. FRO M 1.4.1996 IS PROSPECTIVE AND CANNOT BE APPLIED TO PREVIOUS YEARS OF BLOCK PERIOD PRIOR TO F.Y. 1995-96. C) THE FIGURE OF 10 000 WAS CHANGED TO 20 000 U/S 4 0A(3) OF INCOME TAX ACT 1961 AND 269SS OF INCOME TAX ACT 1961 BY DIRECT TAX LAWS (AMENDMENT) ACT 1987 W.E.F. 1.4.1989. THE CBDT VIDE CIRCULAR NO.522 DATED 18.08.1988 STATED THAT A MENDMENT IN SECTION 40A(3) IS APPLICABLE FOR A.Y. 1989-90 AS IT IS A SUBSTANTIVE PROVISION A ND SINCE 269SS IS A PROCEDURAL PROVISION THE EFFECTIVE DATE WILL BE 1.4.89 I.E. PREVIOUS YEAR RE LEVANT TO A.Y. 89-90. D) THE FIVE JUDGE CONSTITUTION BENCH IN THE CASE OF CIT V VATIKA TOWNSHIP (P) LTD. 367 ITR 466 HAD AN OCCASION TO CONSIDER AS TO WHETHER PROVISO A DDED TO SECTION 113 OF THE I.T. ACT IS PROSPECTIVE OR RETROSPECTIVE. THE HONBLE APEX COUR T WHILE CONSIDERING THE VARIOUS DECISIONS HELD (AS PER PAGE 469 OF ITR 367). THAT SURCHARGE LEVIED BY ASSESSING OFFICER FOR THE BLOCK ASSESSMENT PERTAINING TO THE PERIOD FROM JUNE 1 2002 WAS LIABLE TO BE DELETED. AN AMENDMENT MADE TO A TAXING STATUTE CAN BE SAID T O BE INTENDED TO REMOVE HARDSHIPS ONLY OF THE ASSESSEE NOT OF THE DEPARTMENT. IMPOSING A RETROSP ECTIVE LEVY ON THE ASSESSEE WOULD HAVE CAUSED UNDUE HARDSHIP AND FOR THAT REASON PARLIAMEN T SPECIFICALLY CHOSE TO MAKE THE PROVISO EFFECTIVE FROM JUNE 1 2002. WHERE A BENEFIT IS CONFERRED BY A LEGISLATION THE RULE AGAINST A RETROSPECTIVE CONSTRUCTION IS DIFFER ENT. IN A LEGISLATION CONFERS A BENEFIT ON SOME PERSONS BUT WITHOUT INFLICTING A CORRESPONDING DETRIMENT ON SOME OTHER PERSON OR ON THE PUBLIC GEN ERALLY AND WHERE TO CONFER SUCH BENEFIT APPEARS TO HAVE BEEN THE LEGISLATORS OBJECTS THEN PRESUMPTION WOULD BE THAT SUCH A LEGISLATION ITA NO. 391/JP/2017 M/S. RAINBOW BUILDCON PVT.LTD. JAIPUR VS AC IT CENTRAL CIRCLE-2 JAIPUR 36 GIVING IT A PURPOSIVE CONSTRUCTION WOULD WARRANT I T TO BE GIVEN A RETROSPECTIVE EFFECT. THIS EXACTLY IS THE JUSTIFICATION TO TREAT PROCEDURAL PR OVISION AS RETROSPECTIVE. WHERE A LAW IS ENACTED FOR THE BENEFIT OF COMMUNITY AS A WHOLE EVEN IN TH E ABSENCE OF A PROVISION THE STATUTE MAY BE HELD TO BE RETROSPECTIVE IN NATURE. THE HONBLE APEX COURT FURTHER NOTICED THAT CBDT CI RCULAR MENTIONED THAT PROVISO IS APPLICABLE FROM 1.6.2002. IN RESPECT OF 56(2)(VII B) CBDT VIDE CIR CULAR NO.3 OF 2012 DATED 12.06.2012 HAS ALSO MENTIONED THAT PROVISIONS OF 56(2)(VII B) WILL BE A PPLICABLE FOR ASSESSMENT YEAR 2013-14 ONWARD. HENCE SHARE PREMIUM EVEN IF IN EXCESS OF FA IR MARKET VALUE IS NOT TAXABLE U/S 56(1) FOR THE A.Y. 2011-12. 9. IN VIEW OF THE ABOVE SUBMISSIONS IT IS CLEAR TH AT SHARE PREMIUM RECEIVED IS A CAPITAL RECEIPT AND CONSIDERATION RECEIVED CANNOT BE CONSIDERED AS INCO ME FOR THE YEAR UNDER CONSIDERATION. WITHOUT PREJUDICE TO OUR SUBMISSION IN THIS REGARD THIS IS TO SUBMIT IN THE IN THE SHOW CAUSE NOTICE THE LD. AO MENTIONED THAT SHARE PREMIUM/SHAR E CAPITAL SHOULD BE TAXABLE IN THE HANDS OF ASSESSEE COMPANY U/S 56(1) OF INCOME TAX ACT 1961 ON A/C OF SHARE PREMIUM/SHARE CAPITAL ALLEGED TO BE NOT IN ACCORDANCE WITH THE VALUE OF T HE SHARES. IN THIS REGARD WITHOUT PREJUDICE TO OUR SUBMISSION ON THIS ISSUE THIS IS TO SUBMIT THAT IN CASE THE SHARE PREMIUM IS MADE TAXABLE AS INCOME OF THE ASSESSEE ON THE GROUND THAT THE SAME IS NOT AS PER FAIR MARKET VALUE AND HELD AS TAXABLE THAN STILL THE AMOUNT RECEIVED AGAINST SHAR E CAPITAL AMOUNTING TO RS. 4 00 000/- CANNOT BE TREATED AS INCOME OF THE ASSESSEE. 10. IN ADDITION OF ABOVE SUBMISSION IT IS FURTHER S UBMITTED THAT THE ASSESSEE SUBMITTED SUFFICIENT DOCUMENTS TO PROVE IDENTITY CREDITWORTHINESS AND G ENUINENESS OF SHARE CAPITAL. TO SUPPORT THAT SHAREHOLDERS WERE GENUINE AND CREDITWORTHINESS IS P ROVED THE ASSESSEE ENCLOSED NECESSARY DETAILS IN RESPECT OF INCORPORATION OF SUCH COMPAN IES AND DETAILS OF CHEQUES VIDE WHICH AMOUNTS WERE RECEIVED. THE CAPACITY OF SHAREHOLDERS IS VERIFIABLE FROM THE COPY OF THE BALANCE SHEET OF THE SHAREHOLDERS. THE SHAREHOLDERS HAVE FU NDS ON A PRIOR DATE FROM THE ALLOTMENT OF SHARES GIVEN BY THE ASSESSEE COMPANY AND SUCH FUNDS WERE MORE THAN THE AMOUNT OF SHARE APPLICATION. THEREFORE THE ADDITION ON SHARE APPLI CATION RECEIVED TO THE ASSESSEE NEITHER CAN BE MADE U/S 56(1) OF INCOME TAX ACT 1961 NOR CAN BE M ADE U/S 68 OF INCOME TAX ACT 1961. THE VARIOUS JUDGMENTS AND ARGUMENTS REGARDING ADDITION MADE U/S 56(1) OF INCOME TAX ACT 1961 HAS BEEN SUBMITTED IN FORGOING PARAS. THE RELIANCE REGARDING ADDITION CANNOT BE MADE U/S 68 OF INCOME TAX CAT 1961 IS PLACED ON THE FOLLOWING DEC ISIONS: - I) SHALIMAR BUILDCON (P) LTD. VS ITO (2011) 128 ITD 0396 (JAIPUR) IN THIS CASE HONBLE ITAT JAIPUR BENCH HAS RELIED O N ITS OLD DECISION IN THE CASE OF HOTEL GAUDAVAN ITA NO. 1162 AND 1137/JP/2008 AND ADDITION ON ACCOU NT OF SHARE CAPITAL WAS DELETED. 28.5 ON IDENTICAL ISSUE THE TRIBUNAL JAIPUR BENCH IN THE CASE OF HOTEL GAUDAVAN (P) LTD. (SUPRA) HAS HELD AS UNDER : '6. AS REGARDS THE ISSUE ON MERIT IN THE DEPARTMENT AL APPEAL WE CONCUR WITH THE VIEWS OF THE LEARNED CIT(A) THAT THE AO HAS NOT CONSIDERED THE EXPLANATI ON OF THE ASSESSEE. THE AMOUNT UNDER CONSIDERATION OF RS. 1.89 CRORE HAS BEEN RECEIVED B Y THE ASSESSEE AS SHARE APPLICATION MONEY FROM M/S JALKANTA TECHNICAL & FINANCIAL SERVICE (P) LTD. (JTFSPL) AFTER A PROPER RESOLUTION PASSED BY THE BOARD OF DIRECTORS OF THE AFORESAID C OMPANY THROUGH BANKING CHANNEL. M/S JTFSPL IS HAVING PERMANENT ACCOUNT AND FILING ITS R ETURN OF INCOME REGULARLY. THE AO HAS NOWHERE MENTIONED THAT MONEY BELONGS TO THE ASSESSE E COMPANY AND THEREFORE PROVISIONS OF S. ITA NO. 391/JP/2017 M/S. RAINBOW BUILDCON PVT.LTD. JAIPUR VS AC IT CENTRAL CIRCLE-2 JAIPUR 37 68 CANNOT BE INVOKED. THE LEARNED CIT(A) HAS RIGHTL Y RELIED UPON THE DECISION OF HONBLE DELHI HIGH COURT IN THE CASE OF CIT VS. STELLER INVESTMEN T LTD. (2000) 164 CTR (SC) 287 WHICH HAS BEEN CONFIRMED BY THE HONBLE SUPREME COURT OF INDI A. THE LEARNED CIT(A) HAS ALSO RELIED UPON THE DECISION OF HONBLE JURISDICTIONAL HIGH CO URT IN THE CASE OF BARKHA SYNTHETICS LTD. VS. ASSTT. CIT (2005) 197 CTR (RAJ) 432 AND ALSO THE DE CISION OF TRIBUNAL JODHPUR BENCH IN THE CASE OF UMA POLYMERS (P) LTD. VS. DY. CIT (DT. 27TH FEB. 2006) [REPORTED AT (2006) 101 TTJ (JD)(TM) 124ED.] WHERE IT HAS BEEN HELD THAT THE A SSESSEE HAS TO PROVE THE EXISTENCE OF THE SHAREHOLDERS WHICH IN THE PRESENT CASE IS NOT UNDER DISPUTE. THEREFORE THE ASSESSEE HAS DISCHARGED THE BURDEN AND THEREFORE THE AO WAS NOT JUSTIFIED IN MAKING ANY ADDITION UNDER S. 68 OF THE ACT. THE LEARNED COUNSEL FOR THE ASSESSEE HAS REFERRED TO THE DECISION OF HONBLE SUPREME COURT OF INDIA IN THE CASE OF DIVINE LEASIN G & FINANCE LTD. DT. 21ST JAN. 2008 THE COPY OF WHICH IS PLACED ON RECORD WHERE IT HAS BEEN OBSERVED BY THE SUPREME COURT AS UNDER : CAN THE AMOUNT OF SHARE MONEY BE REGARDED AS UNDIS CLOSED INCOME UNDER S. 68 OF IT ACT 1961 ? WE FIND NO MERIT IN THIS SLP FOR THE SIMPLE REASON THA T IF THE SHARE APPLICATION MONEY IS RECEIVED BY THE ASSESSEE COMPANY FROM ALLEGED BOGUS SHAREHOLDER S WHOSE NAMES ARE GIVEN TO THE AO THEN THE DEPARTMENT IS FREE TO PROCEED TO REOPEN THEIR I NDIVIDUAL ASSESSMENTS IN ACCORDANCE WITH LAW. THEREFORE WE FIND NO INFIRMITY IN THE ORDER O F THE LEARNED CIT(A) WITH THE IMPUGNED JUDGMENT. THE SAID DECISION OF HONBLE SUPREME COURT OF INDIA HAS BEEN FOLLOWED BY THE TRIBUNAL DELHI BENCH IN THE CASE OF ITO VS. BHOR MAL DHANSI RAM LTD. IN ITA NO. 4670/DEL/2007 DT. 3RD MARCH 2006. THE COPY OF THE SAID DECISION OF TRIBUNAL DE LHI BENCH IS PLACED ON RECORD. THE LEARNED COUNSEL FOR THE ASSESSEE SHRI H.M. SINGHVI CHARTER ED ACCOUNTANT HAS ALSO RELIED UPON THE DECISION OF HONBLE SUPREME COURT OF INDIA ON THE S AID ISSUE IN THE CASE OF CIT VS. LOVELY EXPORTS (P) LTD. (2008) 216 CTR (SC) 195 : (2008) 6 DTR (SC) 308 WHEREIN IT HAS BEEN HELD THAT IF THE SHARE APPLICATION MONEY IS RECEIVED BY THE ASSESSEE COMPANY FROM ALLEGED BOGUS SHAREHOLDERS WHOSE NAMES ARE GIVEN TO THE AO THEN THE DEPARTMENT IS FREE TO PROCEED TO REOPEN THEIR INDIVIDUAL ASSESSMENTS IN ACCORDANCE W ITH LAW BUT IT CANNOT BE REGARDED AS UNDISCLOSED INCOME OF ASSESSEE COMPANY.' 28.6 THE HONBLE DELHI HIGH COURT IN THE CASE OF CI T VS. DIVINE LEASING & FINANCE LTD. (SUPRA) HAD AN OCCASION TO CONSIDER THE ADDITION ON ACCOUNT OF SHARE APPLICATION MONEY. WE ARE REPRODUCING THE HELD PORTION FROM THE DECISION OF H ONBLE DELHI HIGH COURT AS MENTIONED IN (2007) 207 CTR (DEL) 38 (SUPRA). 'INCOMECASH CREDITSHARE APPLICATION MONEYBURDEN OF PROOF CAN SELDOM BE DISCHARGED TO THE HILT BY THE ASSESSEEIF THE AO HARBOURS DOUBTS OF T HE LEGITIMACY OF ANY SUBSCRIPTION HE IS EMPOWERED NAY DUTY-BOUND TO CARRY OUT THOROUGH IN VESTIGATIONSBUT IF THE AO FAILS TO UNEARTH ANY WRONG OR ILLEGAL DEALINGS HE CANNOT OB DURATELY ADHERE TO HIS SUSPICIONS AND TREAT THE SUBSCRIBED CAPITAL AS THE UNDISCLOSED INCOME OF THE COMPANYIF RELEVANT DETAILS OF ADDRESS AND IDENTITY OF THE SUBSCRIBERS ARE FURNISHED TO TH E DEPARTMENT ALONG WITH COPIES OF THE SHAREHOLDERS REGISTERS SHARE APPLICATION FORMS SH ARE TRANSFER REGISTER ETC. IT WOULD CONSTITUTE ACCEPTABLE PROOF OR EXPLANATION BY THE ASSESSEEDEP ARTMENT WOULD NOT BE JUSTIFIED IN DRAWING AN ADVERSE INFERENCE ONLY BECAUSE THE CREDITOR/SUBS CRIBER FAILS OR NEGLECTS TO RESPOND TO ITS NOTICESTRIBUNAL HAS NOTED THAT THE ASSESSEE COMPAN Y IS A PUBLIC LIMITED COMPANY WHICH HAD RECEIVED SUBSCRIPTIONS TO THE PUBLIC ISSUE THROUGH BANKING CHANNELS AND THE SHARES WERE ALLOTTED IN CONSONANCE WITH THE PROVISIONS OF SECURITIES CON TRACT (REGULATION) ACT 1956 AS ALSO THE RULES AND REGULATIONS OF DELHI STOCK EXCHANGECOMPL ETE DETAILS WERE FURNISHEDTRIBUNAL HAS FURTHER FOUND THAT THE AO HAS NOT BROUGHT ANY POSIT IVE MATERIAL OR EVIDENCE WHICH WOULD ITA NO. 391/JP/2017 M/S. RAINBOW BUILDCON PVT.LTD. JAIPUR VS AC IT CENTRAL CIRCLE-2 JAIPUR 38 INDICATE THAT THE SHAREHOLDERS WERE BENAMIDARS OR F ICTITIOUS PERSONS OR THAT ANY PART OF THE SHARE CAPITAL REPRESENTED COMPANYS OWN INCOME FROM UNDISCLOSED SOURCES.' 28.7 THE HONBLE APEX COURT IN THE CASE OF CIT VS. LOVELY EXPORTS (P) LTD. (SUPRA) HELD THAT IF THE SHARE CAPITAL MONEY IS RECEIVED BY THE ASSESSEE COM PANY FROM ALLEGED BOGUS SHAREHOLDERS THEN THE DEPARTMENT IS FREE TO PROCEED TO REOPEN THE IND IVIDUAL ASSESSMENTS OF SUCH SHAREHOLDERS IN ACCORDANCE WITH LAW. SUCH SHARE APPLICATION MONEY C ANNOT BE REGARDED AS UNDISCLOSED INCOME OF THE ASSESSEE COMPANY. 28.8 THE HONBLE HIGH COURT IN THE CASE OF FIRST PO INT FINANCE LTD. (SUPRA) HELD THAT BURDEN OF PROOF ON THE ASSESSEE COMPANY LIES TO THE EXTENT OF MAKIN G OUT A CASE THAT INVESTOR EXISTS AND THEREAFTER IT IS NOT FOR THE ASSESSEE TO FURTHER PR OVE WHERE THEY HAVE BROUGHT MONEY FROM TO INVEST WITH IT. 28.9 THE HONBLE DELHI HIGH COURT IN THE CASE OF CI T VS. UNITED BIO-TECH (P) LTD. 2010 TIOL-533-HC- DEL HELD THAT IN CASE THE IDENTITY OF THE SHARE APP LICANTS HAS BEEN ESTABLISHED AND IT IS FOUND THAT THE SAID APPLICANTS ARE CORPORATE ASSESSEES WHO ARE ASSESSED TO TAX WITH IT DEPARTMENT THEN THERE IS NO CASE OF ANY SUBSTANTIAL QUESTION OF LAW . IN THE INSTANT CASE THE SHARE APPLICANTS ARE CORPORATE ASSESSEES. 28.10 THE HONBLE DELHI HIGH COURT IN THE CASE OF C IT VS. SAMIR BIO-TECH (P) LTD. (SUPRA) HELD THAT IF INVESTMENTS HAVE BEEN SHOWN BY THE SHARE APPLICANTS IN THEIR AUDITED BALANCE SHEET THEN THE ADDITION CANNOT BE MADE UNDER S. 68 OF THE ACT. 28.11 IN VIEW OF THE LEGAL POSITION AS DISCUSSED AB OVE THE AO WAS NOT JUSTIFIED IN MAKING THE ADDITIO N OF RS. 1.10 CRORE WITHOUT BRINGING ON RECORD ANY MA TERIAL FOR THE ADDITION. SIMPLY ON THE BASIS OF INFORMATION WHICH IS NOT SUBSTANTIATED IN THE CO URSE OF ASSESSMENT PROCEEDINGS AGAINST THE ASSESSEE THE AO COULD NOT HAVE ADDED THE AMOUNT. (II) THE HONBLE ITAT JAIPUR BENCH JAIPUR IN ITS RECENT JUDGMENT THE CASE OF M/S JADAU JEWELLERS & MANUFACTURERS PVT. LTD. B-1 TRIMUTRI CIRCLE GO VIND MARG JAIPUR IN ITA NO. 686/JP/2014 DATED 14.12.2015 GAVE THE FOLLOWING FINDINGS:- .6.1 ON FACTS ALSO THE ASSESSEE HAS PRODUCED BE FORE THE ASSESSING OFFICER COPY OF SHARE APPLICATION CONFIRMATION OF THE CASH CREDITORS CO PY OF PAN COPY OF BOARD RESOLUTION COPY OF DIRECTORS REPORT AUDITORS REPORT COPY OF BALANC E SHEET COPY OF P&L ACCOUNT COPY OF BANK ACCOUNT IN ALL THE CASES TO PROVE THE IDENTITY GEN UINENESS AND CREDITWORTHINESS OF THE CASH CREDITORS. THE LD ASSESSING OFFICER MADE ADDITION O N THE BASIS OF INVESTIGATION CONDUCTED BY THE ITO INVESTIGATION WING KOLKATA BUT THE LD ASSESSI NG OFFICER OF THE ASSESSEE HAS NOT CLARIFIED WHAT INQUIRY HAD BEEN CONDUCTED AND WHAT EVIDENCES COLLECTED WHICH GOES AGAINST THE ASSESSEE. THE NOTICE U/S 131 ISSUED BY THE ITO INVESTIGATION WING KOLKATA WERE SERVED IN CASE OF VIDYA AGENCIES PVT. LTD. AND SHIVARPAN MERCANTILES PVT. L TD. BUT COMPLIANCE COULD NOT BE MADE ON THE GIVEN DATE BECAUSE CONCERNED OFFICER WAS ON LEA VE. IN CASE OF MIDDLETON GOODS PVT. LTD. AND LACTRODRYER MARKETING PVT. LTD. NOTICES WERE S ERVED ON THE ASSESSEE AND IN COMPLIANCE TO THE NOTICE THE PARTY SUBMITTED ALL THE DOCUMENTS I N THE IT OFFICE. THE CASE LAW REFERRED BY THE LD CIT(A) I.E. DECISION OF HONBLE DELHI HIGH COURT IN THE CASE OF NIPUN BUILDERS AND DEVELOPERS PVT. LTD. VS. CIT AND VIJAY POWER GENERATOR LTD. VS CIT (SUPRA) ARE NOT SQUARELY APPLICABLE ON THE FACTS OF THE CASE AS THERE WAS SHORT TIME AVAIL ABLE WITH THE ASSESSING OFFICER AS WELL AS INVESTIGATION WING OF KOLKATA. THE COPY OF INQUIRY HAS NOT BEEN PROVIDED BY THE ASSESSING ITA NO. 391/JP/2017 M/S. RAINBOW BUILDCON PVT.LTD. JAIPUR VS AC IT CENTRAL CIRCLE-2 JAIPUR 39 OFFICER TO THE ASSESSEE. AS PER FINDINGS OF THE HON 'BLE DELHI HIGH COURT IN THE CASE NIPUN BUILDERS AND DEVELOPERS PVT. LTD. VS. CIT (SUPRA) THE INVESTIGATION OFFICER AT KOLKATA HAD NOT DEPUTED INSPECTOR TO ENQUIRE THE WHEREABOUTS OF THE COMPANY. THE CASE LAWS REFERRED BY THE ASSESSEE ARE SQUARELY APPLICABLE ON THE FACTS AND C IRCUMSTANCES OF THE APPELLANTS CASE THEREFORE WE REVERSE THE ORDER OF THE LD CIT(A) ON TECHNICAL GROUND AS WELL AS ON MERIT ALSO. (III) CIT V/S. SHREE BARKHA SYNTHETICS LTD. (2003) 182 CTR (RAJ) 175 APPEAL(HIGH COURT) SUBSTANTIAL QUESTION OF LAWCASH CREDIT VIS-A-VIS S HARE APPLICATION MONEYTRIBUNAL FOUND THAT 6 OUT OF 7 COMPANIES FROM WHICH THE SHARE APPL ICATION MONEY HAD BEEN RECEIVED WERE GENUINELY EXISTING AND NO ENQUIRY WAS CONDUCTED IN RESPECT OF THE SOURCE OF SHARE APPLICATION MONEY AT THE TIME OF MAKING THE INVESTMENT IN THE A SSESSEE-COMPANY AND THUS THE ASSESSEE HAS DISCHARGED ITS INITIAL BURDEN EXCEPT IN ONE CASEAS REGARDS INDIVIDUAL INVESTORS THE TRIBUNAL FOUND THAT IDENTITY OF 9 OUT OF 10 INVESTORS HAS BE EN ESTABLISHED AND THEY HAVE CONFIRMED THE FACT OF MAKING INVESTMENT IN THE SHARES OF THE ASSESSEE- COMPANY AND NO FURTHER ENQUIRY WAS DIRECTED BY THE AOTHUS ADDITIONS WERE SUSTAINED ONLY IN RE SPECT OF INVESTMENTS SAID TO HAVE BEEN MADE BY U AN INDIVIDUAL INVESTOR AND BY W LTD. FO R THE REASON THAT SUCH INVESTMENTS WERE NOT PROVEDFINDING OF THE TRIBUNAL IS ESSENTIALLY A FIN DING OF FACT WHICH IS NOT VITIATED IN LAWNO SUBSTANTIAL QUESTION OF LAW ARISE FOR CONSIDERATION IV) CIT VS. FIRST POINT FINANCE LTD. (2006) 206 CT R (RAJ) 626 : (2006) 286 ITR 77 (RAJ) INCOME CASH CREDITSHARE APPLICATION MONEYTRIBUNAL FOUND THAT THE INVESTORS ARE GENUINELY EXISTING PERSONS AND THEY HAVE FILED CONFIRMATIONS IN RESPEC T OF INVESTMENTS MADE BY THEM AND THEIR STATEMENTS WERE ALSO RECORDEDAMOUNT OF SHARE CAPIT AL/SHARE APPLICATION MONEY COULD NOT BE TREATED AS UNEXPLAINED CASH CREDITS AND NO ADDITION COULD BE MADE UNDER S. 68NO SUBSTANTIAL QUESTION OF LAW ARISES. (V) 2014 (8) TMI 605 - MADRAS HIGH COURT THE COMMIS SIONER OF INCOME TAX VERSUS PRANAV FOUNDATIONS LTD. T. C. (A). NO. 262 OF 2014 DATED - 12 AUGUST 2014 ADDITION U/S 68 SHARE APPLICATION AND SHARE PREM IUM AMOUNT CREDITED BUT NOT PROVED - WHETHER THE TRIBUNAL WAS RIGHT IN UPHOLDING THE ORD ER OF THE CIT(A) WHO DELETED THE ADDITION MADE U/S 68 BEING THE SHARE APPLICATION MONEY AND SHARE PREMIUM AMOUNT CREDITED BY THE ASSESSEE WHICH WAS NOT PROVED HELD THAT:- FOLLOWI NG THE DECISION IN CIT V. LOVELY EXPORTS (P) LTD. [2008 (1) TMI 575 - SUPREME COURT OF INDIA ] - ALL THE FOUR PARTIES WHO ARE SUBSCRIBERS OF THE SHARES ARE LIMITED COMPANIES AN D ENQUIRIES WERE MADE AND RECEIVED FROM THE FOUR COMPANIES AND ALL THE COMPANIES ACCEPTED THEIR INVESTMENT - THE ASSESSEE HAS CATEGORICALLY ESTABLISHED THE NATURE AND SOURCE OF THE SUM AND DI SCHARGED THE ONUS THAT LIES ON IT IN TERMS OF SECTION 68 OF THE ACT - WHEN THE NATURE AND SOURCE OF THE AMOUNT SO INVESTED IS KNOWN IT CANNOT BE SAID TO BE UNDISCLOSED INCOME - THE ADDITION OF SUCH SUBSCRIPTIONS AS UNEXPLAINED CREDIT UNDER SECTION 68 OF THE ACT IS UNWARRANTED DECIDE D AGAINST REVENUE. (VI) INCOME TAX OFFICER VS. MS. SUPERLINE CONSTRUCT ION P. LTD. ITAT BOMBAY TRIBUNAL (A) ITA NO. 3644 TO 3648 3650 3651MUM/2 014 30TH NOVEMBER 2015 (2015) 45 CCH 0281 MUMTRIB ADDITIONADDITION ON ACCOUNT OF BOGUS SHARE APPLIC ATION MONEYASSESSEE WAS IN BUSINESS OF BUILDER AND DEVELOPERASSESSMENT WAS COMPLETED U/S 143(3) R.W.S. 147RE-ASSESSMENT PROCEEDINGS WERE INITIATED ON BASIS OF INFORMATION RECEIVED FROM DIRECTORATE OF INCOME-TAX (INVESTIGATION) WITHOUT RECORDING AOS OWN SATISFAC TION AND INFORMATION WAS ACCEPTED IN MECHANICAL MANNERAFTER REOPENING OF ASSESSMENT U/S 147 AO MADE ADDITION OF RS.40 LAKHS RECEIVED BY ASSESSEE FROM VARIOUS CORPORATE ENTITIE SADDITION WAS MADE BY AO ON ACCOUNT OF BOGUS SHARE APPLICATION MONEY UNDER PROVISIONS OF S 68CIT(A) DELETED ADDITION MADE BY ITA NO. 391/JP/2017 M/S. RAINBOW BUILDCON PVT.LTD. JAIPUR VS AC IT CENTRAL CIRCLE-2 JAIPUR 40 AOHELD IN CASE OF CIT VS. M/S. LOVELY EXPORTS (PV T) LTD REPORTED IN [2008] 216 CTR 195 (SC) IT WAS HELD THAT IF SHARE APPLICATION MONEY W AS RECEIVED BY ASSESSEE COMPANY FROM ALLEGED BOGUS SHAREHOLDERS WHOSE NAME WERE GIVEN TO AO THEN DEPARTMENT WAS FREE TO PROCEED TO REOPEN THEIR INDIVIDUAL ASSESSMENTS IN ACCORDANC E WITH LAW BUT IT COULD NOT BE REGARDED AS UNDISCLOSED INCOME OF ASSESSEE COMPANYIT WAS SUBMI TTED BY ASSESSEE THAT AO HAD FAILED TO APPRECIATE STATEMENTS OF ANY PERSON RECORDED U/S 14 3(3) R.W.S. 147THAT ASSESSEE-COMPANY HAD FULLY DISCHARGED BURDEN OF PROOF ONUS OF PROOF AND EXPLAINED SOURCE OF SHARE CAPITAL AND ADVANCES RECEIVED BY ESTABLISHED IDENTITY CREDITWO RTHINESS AND GENUINENESS OF TRANSACTION BY BANKING INSTRUMENTS WITH DOCUMENTARY EVIDENCESASSE SSEE COMPANY SUBSTANTIATED DETAILS WITH DOCUMENTARY EVIDENCES AS EXTRACTED FROM WEBSITE OF MINISTRY OF CORPORATE AFFAIRS GOVERNMENT OF INDIA BEFORE AOTHESE FACTS HAD NOT BEEN REBUTTE D ON BEHALF OF REVENUEITAT WAS NOT INCLINED TO INTERFERE WITH FINDINGS OF CIT(A) WHO T HUS RIGHTLY DELETED ENTIRE IMPUGNED ADDITIONS OF RS.40 LAKHS MADE BY AO U/S 68 ON ACCOUNT OF SHAR E CAPITAL SUBSCRIPTION RECEIVED BY ASSESSEE- COMPANY HELD: IT WAS POINTED OUT IN THE CASE OF CIT VS. M/S. LOV ELY EXPORTS (PVT) LTD REPORTED IN [2008] 216 CTR 195 (SC) THAT IF THE SHARE APPLICATION MONEY IS RECEIVED BY THE ASSESSEE COMPANY FROM ALLEGED BOGUS SHAREHOLDERS WHOSE NAME ARE GIVEN TO THE AO THEN THE DEPARTMENT IS FREE TO PROCEED TO REOPEN THEIR INDIVIDUAL ASSESSMENTS IN A CCORDANCE WITH LAW BUT IT CANNOT BE REGARDED AS UNDISCLOSED INCOME OF ASSESSEE COMPANY. (PARA 2.3) IN THIS BACKGROUND IT WAS SUBMITTED ON BEHALF OF THE ASSESSEE THAT THE ASSESSING OFFICER FAILED TO APPRECIATE THAT THERE WAS NO DOCUMENTARY EVIDENC E AGAINST THE ASSESSEE-COMPANY TO SUPPORT SUCH IMPUGNED ADDITIONS. IT WAS FURTHER SUBMITTED B Y THE ASSESSEE THAT THE ASSESSING OFFICER FAILED TO APPRECIATE THAT THE STATEMENTS OF ANY PER SON RECORDED U/S 143(3) R.W.S. 147. THE ASSESSEE-COMPANY HAD FULLY DISCHARGED THE BURDEN OF PROOF ONUS OF PROOF AND EXPLAINED THE SOURCE OF SHARE CAPITAL AND ADVANCES RECEIVED BY ES TABLISHED THE IDENTITY CREDITWORTHINESS AND GENUINENESS OF TRANSACTION BY BANKING INSTRUMENTS W ITH DOCUMENTARY EVIDENCES. THE FURTHER STAND OF THE ASSESSEE HAD BEEN THAT THE ASSESSEE-CO MPANY SUBSTANTIATED THE DETAILS WITH THE DOCUMENTARY EVIDENCES AS EXTRACTED FROM THE WEBSITE OF MINISTRY OF CORPORATE AFFAIRS GOVERNMENT OF INDIA BEFORE THE ASSESSING OFFICER. T HESE FACTS HAD NOT BEEN REBUTTED ON BEHALF OF THE REVENUE. (PARA 2.4) IN VIEW OF THE FACTS AND CIRCUMSTANCES OF THE PRES ENT CASE AS WELL AS CONSIDERING THE DECISIONS AS DISCUSSED ABOVE ON THE SIMILAR ISSUE ITAT WAS NOT INCLINED TO INTERFERE WITH THE FINDINGS OF THE CIT(A) WHO HAD RIGHTLY DELETED THE ENTIRE IMPUGNED ADDITIONS OF RS.40 LAKHS MADE BY THE ASSESSING OFFICER U/S 68 OF THE ACT ON ACCOUNT OF S HARE CAPITAL SUBSCRIPTION RECEIVED BY THE ASSESSEE-COMPANY. (PARA 2.5) CONCLUSION: WHEN ASSESSEE-COMPANY HAD SUBSTANTIATED DETAILS WI TH DOCUMENTARY EVIDENCES AS EXTRACTED FROM WEBSITE OF MINISTRY OF CORPORATE AFFAIRS GOVE RNMENT OF INDIA BEFORE AO THEN ADDITIONS MADE BY AO U/S 68 ON ACCOUNT OF SHARE CAPITAL SUBSC RIPTION RECEIVED BY ASSESSEE-COMPANY WAS RIGHTLY DELETED. VII) CIT VS. ILLAC INVESTMENT (P) LTD. (2007) 207 C TR (DEL) 687; ASSESSEE-COMPANY HAS SATISFACTORILY ESTABLISHED THE IDENTITY OF THE SHAR E SUBSCRIBERS AND DELETED THE ADDITION UNDER S. 68 NO SUBSTANTIAL QUESTION OF LAW ARISES FOR CONSI DERATION. ITA NO. 391/JP/2017 M/S. RAINBOW BUILDCON PVT.LTD. JAIPUR VS AC IT CENTRAL CIRCLE-2 JAIPUR 41 VIII) CIT VS. DIVINE LEASING & FINANCE LTD. (2007) 207 CTR (DEL) 38; INCOMECASH CREDITSHARE APPLICATION MONEYBURDEN OF PROOF CAN SELDOM BE DIS CHARGED TO THE HILT BY THE ASSESSEEIF THE AO HARBOURS DOUBTS OF THE LEGITIMACY OF ANY SUBSCRI PTION HE IS EMPOWERED NAY DUTYBOUND TO CARRYOUT THOROUGH INVESTIGATIONSBUT IF THE AO FAIL S TO UNEARTH ANY WRONG OR ILLEGAL DEALINGS HE CANNOT OBDURATELY ADHERE TO HIS SUSPICIONS AND T REAT THE SUBSCRIBED CAPITAL AS THE UNDISCLOSED INCOME OF THE COMPANYIF RELEVANT DETAI LS OF ADDRESS AND IDENTITY OF THE SUBSCRIBERS ARE FURNISHED TO THE DEPARTMENT ALONG W ITH COPIES OF THE SHAREHOLDERS REGISTER SHARE APPLICATION FORMS SHARE TRANSFER REGISTER E TC. IT WOULD CONSTITUTE ACCEPTABLE PROOF OR EXPLANATION BY THE ASSESSEEDEPARTMENT WOULD NOT BE JUSTIFIED IN DRAWING AN ADVERSE INFERENCE ONLY BECAUSE THE CREDITOR/SUBSCRIBER FAIL S OR NEGLECTS TO RESPOND TO ITS NOTICES TRIBUNAL HAS NOTED THAT THE ASSESSEE-COMPANY IS A P UBLIC LIMITED COMPANY WHICH HAD RECEIVED SUBSCRIPTIONS TO THE PUBLIC ISSUE THROUGH BANKING C HANNELS AND THE SHARES WERE ALLOTTED IN CONSONANCE WITH THE PROVISIONS OF SECURITIES CONTRA CT (REGULATION) ACT 1956 AS ALSO THE RULES AND REGULATIONS OF DELHI STOCK EXCHANGECOMPLETE DE TAILS WERE FURNISHEDTRIBUNAL HAS FURTHER FOUND THAT THE AO HAS NOT BROUGHT ANY POSIT IVE MATERIAL OR EVIDENCE WHICH WOULD INDICATE THAT THE SHAREHOLDERS WERE BENAMIDARS OR F ICTITIOUS PERSONS OR THAT ANY PART OF THE SHARE CAPITAL REPRESENTED COMPANYS OWN INCOME FROM UNDISCLOSED SOURCESAS REGARDS RECEIPT OF SHARE CAPITAL ON ISSUE OF RIGHTS SHARES TO FIVE COMPANIES THESE COMPANIES WERE DULY INCORPORATED UNDER THE SIKKIMESE COMPANIES ACT AND WERE ASSESSED UNDER THE SIKKIMESE TAXATION MANUALTHEIR SHARE SUBSCRIPTIONS WERE ALSO RECEIVED THROUGH BANKING CHANNELS AND FOUND TO BE VALID BY THE JURISDICTIONAL AOTHEREFOR E NO ADDITION COULD BE MADE UNDER S. 68 IX) BHAV SHAKTI STEEL MINES (P) LTD. VS. CIT (2009) 18 DTR (DEL) 194 INCOMECASH CREDIT GENUINENESSCIT(A) NOT ONLY FOUND THAT THE IDENTITY OF EACH OF THE SHAREHOLDERS STOOD ESTABLISHED BUT ALSO EXAMINED THE FACT THAT EACH O F THEM WERE INCOME-TAX ASSESSEES AND HAD DISCLOSED THE SHARE APPLICATION MONEY IN THEIR ACCO UNTS WHICH WERE DULY REFLECTED IN THEIR IT RETURNS AS WELL AS IN THEIR BALANCE SHEETSTRIBUNAL WAS NOT THEREFORE JUSTIFIED IN COMING TO THE CONCLUSION THAT THE CIT(A) HAD NOT CONSIDERED THE M ATTER IN THE RIGHT PERSPECTIVEORDER PASSED BY TRIBUNAL REMANDING THE MATTER FOR EXAMINING THE SHARE APPLICANTS SET ASIDE AND THAT OF CIT(A) RESTORED X) MEERA ENGINEERING & COMMERCIAL CO. (P) LTD. VS. ASSTT. CIT (1997) 58 TTJ (JAB) 527 INCOMECASH CREDITSGENUINENESS OF SHARE CAPITAL OF COMPANYALL THE 51 SHAREHOLDERS FILED THEIR AFFIDAVITS AND CONFIRMATORY LETTERS AND 24 OF THEM FILED THEIR REPLIES ALSO TO NOTICE UNDER S. 133(6)NAMES OF PARTIES PURCHASING THE SHARES WITH AMOUNT SUBSCRIBED WERE FURNISHED BEFORE AOALL DOCUMENTS CLEARLY SHOW THAT SHAREHOLDERS DO EXIST ASSESSEE-COMPANY HAD DISCHARGED ITS ONUS OF EXPLAINING THE CASH CREDITS AS REQUIRED UNDER LAWIF THE COMPANY IS ABLE TO ESTABLISH THAT SHAREHOLDERS EXISTED AND THEY HAV E INVESTED MONEY FOR PURCHASE OF SHARES BURDEN OF COMPANY TO PROVE THE CREDIT IS DISCHARGED IDENTITY OF SHAREHOLDERS NOT IN DISPUTE ASSESSEE IS NOT REQUIRED TO PROVE CREDIT-WORTHINESS OF SHAREHOLDERSADDITION DELETED XI) ALLEN BRADLEY INDIA LTD. VS. DY. CIT (2002) 74 TTJ (DEL) 604 : (2002) 80 ITD 43 (DEL); INCOMECASH CREDITSUBSCRIPTION TO SHARE CAPITAL AN D LOANIN CASE OF LIMITED COMPANIES JURISDICTION OF AO WOULD BE LIMITED ONLY TO SEE WHE THER IDENTITY OF SHAREHOLDERS IS ESTABLISHED AND WHETHER THEY EXIST OR NOTONCE IDENTITY IS ESTA BLISHED THEN POSSIBLY NO FURTHER ENQUIRIES NEED TO BE MADESINCE THE SHAREHOLDERS OF ASSESSEE- COMPANY WERE IN EXISTENCE THEY WERE ASSESSED TO TAX COMPLETE DETAILS WERE AVAILABLE S HARE CAPITAL MONEY AS WELL AS LOAN WERE RECEIVED THROUGH ACCOUNT PAYEE CHEQUES AND THEY WER E CLEARED THROUGH PROPER BANKING CHANNELS AO WAS NOT JUSTIFIED IN DISBELIEVING THE CAPITAL INVESTED BY THE SHAREHOLDER COMPANIESSIMILARLY AO WAS NOT JUSTIFIED IN DISBEL IEVING THE LOAN TAKEN FROM DTL AS THE ITA NO. 391/JP/2017 M/S. RAINBOW BUILDCON PVT.LTD. JAIPUR VS AC IT CENTRAL CIRCLE-2 JAIPUR 42 CHEQUES WERE CLEARED THROUGH BANK CHANNELS AND CONF IRMATION AND SUPPORTING EVIDENCE WAS FILEDCIT(A) WAS JUSTIFIED IN DELETING THE ADDITION S. XII) CIT VS STL EXTRUSION (P) LTD. 333 ITR 269 (MP) INCOMECASH CREDITSHARE APPLICATION MONEYASSESSEE HAS DULY ESTABLISHED THE IDENTITY AN D SOURCE OF CREDITSASSESSEE HAVING DULY FURNISHED THE NAME AGE ADDRESS DATE OF FILING TH E APPLICATION OF SHARES NUMBER OF SHARES OF EACH SUBSCRIBER THERE WAS NO JUSTIFICATION FOR THE AO FOR MAKING THE IMPUGNED ADDITIONONCE THE EXISTENCE OF THE INVESTORS/SHARE SUBSCRIBERS IS PROVED ONUS SHIFTS ON THE REVENUE TO ESTABLISH THAT EITHER THE SHARE APPLICANTS ARE BOGUS OR THE I MPUGNED MONEY BELONGS TO THE ASSESSEE ITSELFADDITIONS NOT SUSTAINABLE. XIII) CIT VS ARUNANDA TEXTILES (P) LTD. 333 ITR 1 16 (KARNATAKA) INCOMECASH CREDITSHARE APPLICATION MONEYASSESSEE ABLE TO IDENTIFY THE SHA REHOLDERSIT IS NOT FOR THE ASSESSEE- COMPANY TO ESTABLISH BUT IT IS FOR THE DEPARTMENT T O ENQUIRE WITH THE INVESTORS ABOUT THE CAPACITY TO INVEST THE AMOUNT IN THE SHARES XIV) UMA POLYMER (P) LTD. 101 TTJ 124 JODHPUR IN COMECASH CREDITSHARE APPLICATION MONEYIN RESPECT OF SHARE CAPITAL MONEY THE ASSESS EE-COMPANY HAS TO PROVE ONLY THE EXISTENCE OF THE PERSON IN WHOSE NAME SHARE APPLICATION IS RE CEIVEDNO FURTHER BURDEN IS CAST ON THE ASSESSEE TO PROVE WHETHER THAT PERSON HIMSELF HAS I NVESTED THE MONEY OR SOME OTHER PERSON HAS MADE THE INVESTMENT IN HIS NAMEBURDEN TO PROVE THA T THE MONEY DID NOT BELONG TO HIM BUT TO SOMEBODY ELSE IS ON THE REVENUEDISTINCTION BETWEEN A PUBLIC COMPANY AND A PRIVATE COMPANY IS NOT VERY MATERIAL FOR THIS PURPOSEAO TREATED TH E INVESTMENTS MADE BY TEN SHAREHOLDERS IN THE ASSESSEE-COMPANY AS BOGUS AND MADE ADDITION UND ER S. 68 NOT JUSTIFIEDIN ALL THE CASES EXCEPT THAT OF V AO HAD OBTAINED THE BANK STATEMEN TS OF THE SHAREHOLDERS WHICH CLEARLY SHOW THAT THE ACCOUNTS WERE REGULARLY MAINTAINED AND THE SHAREHOLDERS HAD MADE DEPOSITSFURTHER THE SHAREHOLDERS ARE ALSO ASSESSED TO TAXSIMPLY BE CAUSE SCRUTINY ASSESSMENTS WERE NOT MADE IN THE CASE OF SHAREHOLDERS SUCH ASSESSMENTS COULD NOT BE MADE IN THE COURSE OF ASSESSMENT OF THE ASSESSEEHAVING REGARD TO THE INFORMATION COLLE CTED BY THE AO FROM THE BANKS IDENTITY OF THE SHAREHOLDERS WAS FULLY ESTABLISHEDIF ANY SHARE HOLDER IS FOUND TO HAVE MADE UNEXPLAINED INVESTMENT THEN ADDITION OF SUCH INVESTMENT IS REQ UIRED TO BE MADE IN THE HANDS OF THE SHAREHOLDER AND NOT IN THE ACCOUNT OF THE ASSESSEE U HAD INVESTED IN THE SHARE CAPITAL THROUGH CHEQUE EXCEPT FOR A SMALL SUM WHICH WAS RETURNED TO HERHER BANK ACCOUNT SHOWS SEVERAL ENTRIES BOTH CREDIT AND DEBIT WHICH HAVE NO RELAT ION WITH THE AMOUNT INVESTED WITH THE ASSESSEE-COMPANYMERELY BECAUSE SHE HAS NOT SUBMITT ED HER RETURNS AFTER THE ASST. YR. 1984- 85 IT CANNOT BE SAID THAT SHE WAS NOT ASSESSED TO TAXTHOUGH V HAS NOT BEEN SHOWN TO BE ASSESSED TO TAX HE HAD MADE MAJOR PART OF INVESTME NTS TOWARDS SHARE CAPITAL THROUGH CHEQUES AND HIS IDENTITY IS NOT DOUBTEDACCORDINGLY SHARE CAPITAL ADVANCED BY U AND V IS ALSO TO BE ACCEPTED AS GENUINETHEREFORE NO ADDITION OF SHARE CAPITAL MONEY COULD BE MADE IN THE HANDS OF THE ASSESSEE-COMPANY. 11. WITHOUT PREJUDICE TO ABOVE THIS IS TO SUBMIT TH AT THE SHARE APPLICATION MONEY CANNOT BE TREATED AS INCOME OF THE ASSESSEE. RELIANCE IS PLACED IN FO LLOWING DECISIONS: - I) CIT VS. LOVELY EXPORTS (P) LTD. (2008) 216 CTR (SC) 195 INCOMECASH CREDITSHARE APPLICATION MONEYIF THE SHARE APPLICATION MONEY IS RECEIVED BY THE ASSESSEE COMPANY FROM ALLEGED BOGUS SHAREHOLDERS WHOSE NAMES ARE GIVEN T O THE AO THEN THE DEPARTMENT IS FREE TO PROCEED TO REOPEN THEIR INDIVIDUAL ASSESSMENTS IN A CCORDANCE WITH LAW BUT IT CANNOT BE REGARDED AS UNDISCLOSED INCOME OF ASSESSEE COMPANY ITA NO. 391/JP/2017 M/S. RAINBOW BUILDCON PVT.LTD. JAIPUR VS AC IT CENTRAL CIRCLE-2 JAIPUR 43 II) CIT VS. STELLER INVESTMENT LTD. (200) 251 ITR 263 (SC) EVEN IF THE SUBSCRIBERS TO THE INCREASED SHARE CAPITAL OF ASSESSEE-COMPANY WERE NOT GENUINE THE AMOUNT COULD NOT BE REGARDED AS UNDISCLOSED INCOME OF THE ASSESSEE-COMPANY. III) COMMISSIONER OF INCOME TAX VS. BHAVAL SYNTHETI CS (RAJ HC) (2013) 84 DTR 0449 (RAJ) HELD THAT EVEN IN CASE OF DOUBT ABOUT SUBSCRIBERS TO INCREASE D SHARE CAPITAL AMOUNT OF SHARE CAPITAL COULD NOT BE REGARDED AS UNDISCLOSED INCOME OF COMP ANYAMOUNT REFERABLE TO SHARE APPLICATION COULD NOT BE ATTRIBUTED TO ASSESSEE AND COULD NOT BE ASSESSED IN ITS HANDSAPPEAL DISMISSED IV) COMMISSIONER OF INCOME TAX VS. AKJ GRANITES (P) LTD. (RAJ HC) (2008) 301 ITR 0298 HELD THAT IN RESPECT OF SHARE APPLICATIONS RECEIVED FROM DIFF ERENT PLACES ACCOMPANIED WITH SHARE APPLICATION MONEY NO PRESUMPTION CAN BE DRAWN THAT SAME BELONG TO THE ASSESSEE AND CANNOT BE ASSESSED IN HIS HANDS AS HIS UNDISCLOSED INCOME UNLESS SOME NEXUS IS ESTABLISHED THAT SHARE APPLICATION MONEY FOR AUGMENTING THE INVESTMENT IN BUSINESS HAS FLOWN FROM ASSESSEES OWN MONEYNO SUBSTANTIAL QUESTION OF LAW ARISESBARKHA SYNTHETICS LTD. VS. ASSTT. CIT (2005) 197 CTR (RAJ) 432 FOLLOWED. IN VIEW OF THE ABOVE SUBMISSION THIS IS TO SUBMIT T HAT THE ADDITION MADE BY LD. AO IS UNJUSTIFIED AND DESERVE TO BE DELETED. 3.3 I HAVE DULY CONSIDERED ASSESSEE'S SUBMISSION AND C AREFULLY GONE THROUGH ASSESSMENT ORDER. I HAVE ALSO TAKEN A NOTE OF FACTUAL MATRIX OF THE CAS E AS WELL AS APPLICABLE CASE LAWS RELIED UPON. I HAVE ALREADY GIVEN A DETAILED FINDINGS IN PARA 2.1.4.7 W HEREIN TOTAL OF RS. 8 71 97 727/= HAS BEEN SUSTAINED IN THE HANDS OF M/S MOTISONS GLOBAL PVT L TD M/S MOTISONS ENTERTAINMENT PVT LTD M/S MOTISONS BUILDTECH PVT LTD AND M/S SHIVANSH BUI LDCON PVT LTD DETAILS OF WHICH ARE AS UNDER: NAME OF APPELLANT COMPANY ITA NO AY ADDITION MADE BY AO ADDITION SUSTAINED ADDITION DELETED/ RELIEF GIVEN MOTISONS GLOBAL PVT. LTD 753/14-15 2009-10 2 75 00 000 ------------- 2 75 00 000 MOTISONS GLOBAL PVT. LTD 754/14-15 2011-12 6 96 50 000 --------------- 6 96 50 000 MOTISONS GLOBAL PVT. LTD 767/14-15 2012-13 42 07 2 9 600 5 94 47 727 36 12 81 873 MOTISONS GLOBAL PVT. LTD 755/14-15 2013-14 4 41 00 000 50 50 000 3 90 50 000 MOTISONS ENTERTAINMENT (I) PVT. LTD 760/14-15 2009-10 3 40 00 000 --------------- 3 40 00 000 MOTISONS ENTERTAINMENT (I) PVT. LTD 766/14-15 2011-12 1 95 00 000 --------------- - 1 95 00 000 MOTISONS ENTERTAINMENT (I) PVT. LTD 756/14-15 2012-13 7 78 00 000 1 41 50 000 6 36 50 000 ITA NO. 391/JP/2017 M/S. RAINBOW BUILDCON PVT.LTD. JAIPUR VS AC IT CENTRAL CIRCLE-2 JAIPUR 44 MOTISONS BUILDTECH PVT. LTD 758/14-15 2009-10 3 03 00 000 --------------- 3 03 00 000 MOTISONS BUILDTECH PVT. LTD 759/14-15 2012-13 3 68 27 500 82 00 000 2 86 27 500 GODAWARI ESTATES PVT. LTD 769/14-15 2010-11 2 00 0 0 000 -------------- 2 00 00 000 GODAWARI ESTATES PVT. LTD 768/14-15 2012-13 10 30 00 000 -------------- 10 30 00 000 BHOLENATH REAL ESTATES PVT LTD 770/14-15 2009-10 2 90 00 000 --------------- 2 90 00 000 RAINBOW BUILDCON PVT. LTD 757/14-15 2009-10 2 00 00 000 --------------- 2 00 00 000 SHIVANSH BUILDCON PVT. LTD 771/14-15 2012-13 90 00 000 3 50 000 86 50 000 TOTAL ADDITIONS 94 14 07 100 8 71 97 727 85 42 09 373 IN VIEW OF ABOVE FACTS AND CIRCUMSTANCES OF THE CAS E AS DISCUSSED ABOVE ADDITION OF RS. 2 00 00 000/= MADE ON A/C OF BOGUS SHARE CAPITAL IN THE HANDS OF ASSESSEE M/S RAINBOW BUILDCON PVT LTD IS HEREBY DELETED. ASSESSEE GET RELIEF IN GR NO. 2 & 3. PARA 2.1.4.7 READS OF LD. CIT(A)S ORDER AS UNDER:- 2.1.4.7 IN VIEW OF THE ABOVE FINDINGS IT IS ALSO SEEN THAT THIS CASH /DD WAS DEPOSITED AT 4 TH CHANNEL OF SOURCE/ STAGE. THIS MONEY CAME TO THE HANDS OF SOME OF APPELLANT COMPANIES THROUGH TH E SIX COMPANIES ASSESSED IN JAIPUR. HOWEVER ON PERUSAL OF WRITTEN SUBMISSIO NS AND COMPLIANCE TO SHOW CAUSE LETTER IT IS ALSO SEEN THAT THE ASSESSEE HAS NOT CONTROVERTED THE FACTS NARRATED BY SHRI SANTOSH CHOUBE SHRI RAJESH KR SIN GH AND SHRI AJIT SHARMA AND ALSO COULD NOT SATISFACTORILY EXPLAIN THE REASO NS OF CASH DEPOSITS MADE TO THOSE ACCOUNTS. THEREFORE DULY CONSIDERING THOSE FACTS AS EVIDENCES (BOTH DOCUMENTARY & ORAL) GATHERED DURING SEARCH AND & PO ST-SEARCH OPERATION ADDITION TO THE EXTENT OF RS. 8 71 97 727/- IS SUST AINED AND BALANCE IS DELETED DETAILS GIVEN AS UNDER:- NAME OF APPELLANT COMPANY ITA NO. A.Y. ADDITION MADE BY AO ADDITION SUSTAINED ADDITION DELETED/RELIEF GIVEN MOTISONS GLOBAL PVT LTD 753/14-15 2009-10 2 75 00 000 - 2 75 00 000 MOTISONS GLOBAL PVT LTD 754/14-15 2011-12 6 96 50 000 - 6 96 50 000 MOTISONS GLOBAL PVT LTD 767/14-15 2012-13 42 07 29 600 5 94 47 727 36 12 81 873 MOTISONS GLOBAL PVT LTD 755/14-15 2013-14 4 41 00 000 50 50 000 3 90 50 000 ITA NO. 391/JP/2017 M/S. RAINBOW BUILDCON PVT.LTD. JAIPUR VS AC IT CENTRAL CIRCLE-2 JAIPUR 45 MOTISONS ENTERTAINMENT (I) PVT. LTD 760/14-15 2009-10 3 40 00 000 - 3 40 00 000 MOTISONS ENTERTAINMENT (I) PVT. LTD 766/14-15 2011-12 1 95 00 000 - 1 95 00 000 MOTISONS ENTERTAINMENT (I) PVT. LTD 756/14-15 2012-13 7 78 00 000 1 41 50 000 6 36 50 000 MOTISONS BUILDTECH PVT. LTD 758/14-15 2009-10 3 03 00 000 - 3 03 00 000 MOTISONS BUILDTECH PVT. LTD 759/14-15 2012-13 3 68 27 500 82 00 000 2 8 6 27 500 GODAWARI ESTATES PVT. LTD 769/14-15 2010-11 2 00 00 000 - 2 00 00 000 GODAWARI ESTATES PVT. LTD 768/14-15 2012-13 10 30 00 000 - 10 30 00 000 BHOLENATH REAL ESTATES PVT. LTD. 770/14-15 2009-10 2 90 00 000 - 2 90 00 000 RAINBOW BUILDCON PVT. LTD 757/14-15 2009-10 2 00 00 000 - 2 00 00 000 SHIVANSH BUILDCON PVT. LTD 771/14-15 2012-13 90 00 000 3 50 000 86 50 000 94 14 07 100 8 71 97 727 85 42 09 373 IT IS PERTINENT TO MENTION HERE THAT M/S. MAYUKH V INIMAY PVT.LTD RECEIVED SHARE APPLICATION OF RS. 10 54 95 000/- IN AY 2009-10 WHI CH WAS ADDED AS INCOME OF M/S.MAYUKH VINIMAY PVT. LTD IN A.Y. 2009-10. THEREA FTER IN SUBSEQUENT YEARS THE PART OF THE FUNDS OWNED BY THIS COMPANY WAS INVESTE D IN THE COMPANIES UNDER APPEAL AS UNDER:- S.N. NAME OF COMPANY (UNDER YOUR APPEAL) ASSESSMENT YEAR AMOUNT 1. MOTISONS GLOBAL PVT. LTD 2012-13 6 93 49 800 2. MOTISONS GLOBAL PVT. LTD 2013-14 2 24 50 000 3. MOTISONS ENTERTAINMENT (INDIA)PVT LTD. 2012-13 1 55 00 000 ITA NO. 391/JP/2017 M/S. RAINBOW BUILDCON PVT.LTD. JAIPUR VS AC IT CENTRAL CIRCLE-2 JAIPUR 46 TOTAL 10 72 29 800 FURTHER IT IS ALSO SUBMITTED THAT ADDITION MADE BY THE AO TANTAMOUNT TO DOUBLE ADDITION. IT IS ALSO MENTIONED HERE THAT AS PER LD. ARS REQUEST APPELLATE PROCEEDINGS IN CASE OF M/S. MAYUKHVINIMAY PVT. LTD HAVE BEEN KE PT IN ABEYANCE TILL THE DISPOSTAL OF APPEAL BY HON'BLE ITAT. IN VIEW OF AFOREMENTIONED FINDINGS NOW ADDITIONS M ADE BY THE AO ARE BEING DISCUSSED WITH RESPECT TO GROUNDS OF APPEAL RAISED BY THE RESPECTIVE ASSESSEE IN PARA BELOW. 3.4 DURING THE COURSE OF HEARING THE LD. DR SUPPORTED THE ORDER OF THE AO AND SUBMITTED THAT THE ORDER OF THE LD. CIT(A) M AY BE SET ASIDE. 3.5 TO THIS EFFECT THE LD.AR OF THE ASSESSEE FILE D THE FOLLOWING WRITTEN SUBMISSION PRAYING THEREIN TO DISMISS THE APPEAL OF THE DEPARTMENT. 2.01.2 SUBMISSION OF ASSESSEE:- A) DURING THE YEAR UNDER CONSIDERATION THE ASSESSEE ALLOTTED 58 000 EQUITY SHARES OF RS. 10 EACH TO VARIOUS COMPANIES AT A PRE MIUM OF RS. 490/- PER SHARE DETAIL OF WHICH IS AS UNDER: - SR. NO. NAME NO. OF SHARES ALLOTED/ APPLIED DURING THE YEAR AMOUNT ADJUSTED AGAINST SHARE CAPITAL RATE PER SHARE AMOUNT ADJUSTED AGAINST SHARE PREMIUM RATE OF PREMIUM PER SHARE ISSUE PRICE OF THE SHARE TOTAL CONSIDERATION RECEIVED 1 ANURAJ SECURITIES PVT LTD 4 000 40 000 10 19 60 000 490 500 20 00 000 2 MATRIBHUMI DEALERS PVT LTD 5 000 50 000 10 24 50 000 490 500 25 00 000 3 NAROTTAMKA TRADE & VYAPAAR PVT LTD 3 000 30 000 10 14 70 000 490 500 15 00 000 4 PUJA DEALCOM PVT LTD 8 000 80 000 10 39 20 000 490 500 40 00 000 ITA NO. 391/JP/2017 M/S. RAINBOW BUILDCON PVT.LTD. JAIPUR VS AC IT CENTRAL CIRCLE-2 JAIPUR 47 5 TARANG SUPPLIERS PVT LTD 6 000 60 000 10 29 40 000 490 500 30 00 000 6 VANDANA DEALERS PVT LTD 6 000 60 000 10 29 40 000 490 500 30 00 000 7 PUJA TIE-UP PVT LTD 8 000 80 000 10 39 20 000 490 500 40 00 000 TOTAL 40 000 4 00 000 1 96 00 000 2 00 00 000 B). THE LD. AO HAS NOT MADE THE ADDITION UNDER THE DEEMING PROVISIONS OF SECTION 68 OF INCOME TAX ACT. THE LD AO MADE THE AD DITION BY APPLYING THE PROVISIONS OF SECTION 56(1) OF INCOME TAX ACT ON THE GROUND THAT THE ASSETS OF THE ASSESSEE COMPANY DON T COMMENSURATE TO PREMIUM CHARGED AND ANY BUSINESS ACTIVITY WAS NOT P ERFORMED OR ANY BUSINESS INCOME HAS NOT BEEN SHOWN BY THE ASSESSEE. THE LD CIT(A) HAS NOT CONFIRMED THE ADDITION MADE BY LD AO BY APP LYING THE PROVISIONS OF SECTION 56(1) OF INCOME TAX ACT ON T HE BASIS OF HIS DETAILED FINDINGS AT PAGE 39-42 OF HIS ORDER. THE ASSESSEE RELIES ON THE FINDINGS OF LD CIT(A). D ) JUSTIFICATION OF CHARGING SHARE PREMIUM THE ASSESSEE HAS SUBMITTED THE JUSTIFICATION FOR CH ARGING THE SHARE PREMIUM WHICH IS SUMMARIZED AS UNDER: - NAME OF COMPANY REASON FOR CHARGING SHARE PREMIUM RAINBOW BUILDCON PVT. LTD 1. OWNING LARGE CHUNK OF AGRICULTURAL LAND AT VILLA GE GIDANI (NEAR DUDU AT MAIN NH JAIPUR AJMER ROAD AND PLANNING DEVE LOPMENT OF TOWNSHIP THEREON. 2. THE MARKET RATE OF THIS LAND WAS VERY HIGH THAN BOOK VALUE. 3. GOODWILL OF MOTISONS GROUP. E) SHARE PREMIUM/CAPITAL IS CAPITAL RECEIPT: IF SHARES ARE ISSUED AT PREMIUM THEN CAPITAL RECEIP T AGGREGATE AMOUNT OF PREMIUM IS TO BE TRANSFERRED TO AN ACCOUNT CALLE D THE SHARE PREMIUM ACCOUNT. THIS SHARE PREMIUM ACCOUNT IS NOT DISTRIBU TABLE AS INCOME JUST LIKE AS ANY OTHER CAPITAL ASSETS. ON WINDING UP TH E SURPLUS MONIES IN ITA NO. 391/JP/2017 M/S. RAINBOW BUILDCON PVT.LTD. JAIPUR VS AC IT CENTRAL CIRCLE-2 JAIPUR 48 THE SHARE PREMIUM ACCOUNT IS TO BE RETURNED TO THE SHARE HOLDERS AS CAPITAL. SO LONG AS THE COMPANY IS A GOING CONCERN THE MONIES IN SHARE PREMIUM ACCOUNT CAN NEVER BE RETURNED TO THE SHAREH OLDERS EXCEPT THROUGH THE MEDIUM OF A REDUCTION PETITION OR IN OTHER WORDS EXCEPT UNDER EXACTLY THE SAME CONDITIONS AS THOSE UNDER WH ICH ANY OTHER CAPITAL ASSET CAN REACH THE SHAREHOLDERS HANDS. DIS TRIBUTION OF SHARE PREMIUM AMOUNT IS NOT PERMITTED THROUGH DIVIDEND. I T IS TAKEN OUT OF THE CATEGORY OF DIVISIBLE PROFITS. THE PROVISIONS I N RESPECT OF ISSUE OF SHARES AT PREMIUM ARE THE SAME IN THE OLD COMPANY A CT AS WELL AS IN THE NEW COMPANY ACT. HENCE COMPANIES ACT CLEARLY ME NTIONS THAT AMOUNT RECEIVED AS PREMIUM IS CAPITAL RECEIPT AND N OT A REVENUE RECEIPT. THE SHARE PREMIUM IS ALSO VERIFIABLE FROM RETURNS OF ALLOTMENT SUBMITTED IN ROC. AS PER DEPARTMENTAL CIRCULAR (MCA ) NO. 3/77 DATED 15.04.1977 THE MONIES IN THE SHARE PREMIUM ACCOUNT CANNOT BE TREATED AS FREE RESERVES AS THEY ARE IN THE NATURE OF CAPI TAL RESERVES. F) ON THE ISSUE OF SHARES AT PREMIUM THE LD. ITAT MUMBAI BENCH IN THE CASE OF ACIT V/S GAGANDEEP INFRASTRUCTURE PVT. LTD. 2014-T1 0L- 656-ITAT-MUM (PB PG 354-359 OF CASE LAWS) OBSERVED THAT ISSUE OF SHARES AT PREMIUM IS ALWAYS A COMMERCIAL DECISION W HICH DOES NOT REQUIRE ANY JUSTIFICATION . THE FINDING OF THE ITAT WAS CONFIRMED BY MUMBAI HIGH COURT IN ITS DECISION DATED 20.03.2017 IN APPEAL NO. 1613 OF 2014. PB PAGE 306-366 /CASE LAWS) FURTHER THE PREMIUM IS A CAPITAL RECEIPT WHICH HAS TO BE DEALT WITH IN ACC ORDANCE WITH SECTION 78 OF COMPANIES ACT 1956. FURTHER THE COMPANY IS NOT REQUIRED TO PROVE THE GENUINENESS PURPOSE OR JUSTIFICATION FOR CHARGING PREMIUM OF SHARES SHARE PREMIUM BY ITS VERY NATURE IS A CAPITAL RECEIPTS AND IS NOT INCOME FOR ITS ORDINARY SENSE . IN THE CASE BEFORE MUMBAI BENCH HAS TO CONSIDER A CASE WHERE PREMIUM O F RS.190 PER SHARE WAS CHARGED. THE TRIBUNAL OBSERVED AS UNDER ( PG 358 TO 359/CASE LAWS) : 11. WE HAVE CAREFULLY PERUSED THE ORDERS OF THE LO WER AUTHORITIES. IN OUR CONSIDERED VIEW THE ISSUE OF SHARES AT PREMIUM IS ALWAYS A COMMERCIAL DECISION WHICH DOES NOT REQUIRE ANY JUST IFICATION. FURTHER THE PREMIUM IS A CAPITAL RECEIPT WHICH HAS TO BE DEALT WITH IN ACCORDANCE WITH SEC. 78 OF THE COMPANIES ACT 1956. FURTHER THE COMPANY IS NOT REQUIRED TO PROVE THE GENUINENESS P URPOSE OR JUSTIFICATION FOR CHARGING PREMIUM OF SHARES SHARE PREMIUM BY ITS ITA NO. 391/JP/2017 M/S. RAINBOW BUILDCON PVT.LTD. JAIPUR VS AC IT CENTRAL CIRCLE-2 JAIPUR 49 VERY NATURE IN A CAPITAL RECEIPTS AND IS NOT INCOME FOR ITS ORDINARY SENSE. IT IS NOT IN DISPUTE THAT THE ASSESSEE HAD F ILED ALL THE REQUISITE DETAILS/DOCUMENTS WHICH ARE REQUIRED TO EXPLAIN CRE DITS IN THE BOOKS OF ACCOUNTS BY THE PROVISIONS OF SEC. 68 OF THE ACT . THE ASSESSEE HAS SUCCESSFULLY ESTABLISHED THE IDENTITY OF THE COMPAN IES WHO HAVE PURCHASED SHARES AT A PREMIUM. THE ASSESSEE HAS ALS O FILED BANK DETAILS TO EXPLAIN THE SOURCE OF THE SHARE HOLDERS AND THE GENUINENESS OF THE TRANSACTION WAS ALSO ESTABLISHED BY FILING C OPIES OF SHARE APPLICATION FORMS AND FORM NO. 2 FILED WITH THE REG ISTRAR OF COMPANIES. THE ENTIRE DISPUTE REVOLVES AROUND THE F ACT THAT THE ASSESSEE HAS CHARGED A PREMIUM OF 190/- PER SHARE. NO DOUBT A NON-EST COMPANY OR A ZERO BALANCE SHEET COMPANY ASK ING FOR 190/- PER SHARE DEFIES ALL COMMERCIAL PRUDENCE BUT AT THE SAME TIME WE CANNOT IGNORE THE FACT THAT IT IS A PREROGATIVE OF THE BOARD OF DIRECTORS OF THE COMPANY TO DECIDE THE PREMIUM AMOU NT AND IT IS THE WISDOM OF THE SHARE HOLDERS WHETHER THEY WANT TO SU BSCRIBE TO SUCH A HEAVY PREMIUM. THE REVENUE AUTHORITIES CANNOT QUEST ION THE CHARGING OF SUCH HUGE PREMIUM WITHOUT ANY BAR FROM ANY LEGISLATED LAW OF THE LAND. THE AMENDMENT HAS BEEN BROUGHT IN THE INCOME TAX ACT UNDER THE HEAD 'INCOME FROM OTHER SOURCES' BY I NSERTING CLAUSE (VIIB) TO SEC. 56 OF THE ACT WHEREIN IT HAS BEEN PR OVIDED THAT ANY CONSIDERATION FOR ISSUE OF SHARES THAT EXCEEDS THE FAIR VALUE OF SUCH SHARES THE AGGREGATE CONSIDERATION RECEIVED FOR SU CH SHARES AS EXCEEDS THE FAIR MARKET VALUE OF THE SHARES SHALL B E TREATED AS THE INCOME OF THE ASSESSEE BUT THE LEGISLATURE IN ITS W ISDOM HAS MADE THIS PROVISION APPLICABLE W.E.F 1.4.2013 I.E. ON AND FRO M A.Y. 2013-14. IN SO FAR AS THE YEAR UNDER CONSIDERATION IS CONCERNED THE TRANSACTION HAS TO BE CONSIDERED IN THE LIGHT OF THE PROVISIONS OF SEC. 68 OF THE ACT. THERE IS NO DISPUTE THAT THE ASSESSEE HAS GIVE N DETAILS OF NAMES AND ADDRESSES OF THE SHARE HOLDERS THEIR PAN NOS THE BANK DETAILS AND THE CONFIRMATORY LETTERS. 11.1. CONSIDERING ALL THESE UNDISPUTED FACTS IT CA N BE SAFELY CONCLUDED THAT THE INITIAL BURDEN OF PROOF AS RESTE D UPON THE ASSESSEE HAS BEEN SUCCESSFULLY DISCHARGED BY THE ASSESSEE . EVEN IF IT IS HELD THAT EXCESS PREMIUM HAS BEEN CHARGED IT DOES NOT B ECOME INCOME AS IT IS A CAPITAL RECEIPT. THE RECEIPT IS NOT IN THE REVENUE FIELD. WHAT IS TO BE PROBED BY THE AO IS WHETHER THE IDENTITY OF T HE ASSESSEE IS PROVED OR NOT. IN THE CASE OF SHARE CAPITAL IF THE IDENTITY IS PROVED NO ADDITION CAN BE MADE U/S. 68 OF THE ACT. WE DRAW SUPPORT FROM THE DECISION OF THE HONBLE SUPREME COURT IN THE CASE O F LOEVELY EXPORTS PVT. LTD. 317 ITR 218. WE THEREFORE DO NOT FIND AN Y ERROR OR INFIRMITY IN THE FINDINGS OF THE LD. CIT(A). GROUND NO. 1 IS ACCORDINGLY DISMISSED. ITA NO. 391/JP/2017 M/S. RAINBOW BUILDCON PVT.LTD. JAIPUR VS AC IT CENTRAL CIRCLE-2 JAIPUR 50 G) AS PER PROVISIONS OF SECTION 56(1) OF INCOME TAX ACT 1961 INCOME OF EVERY KIND WHICH IS NOT TO BE EXCLUDED FROM THE TOT AL INCOME UNDER THIS ACT SHALL BE CHARGEABLE TO INCOME-TAX UNDER THE HEA D 'INCOME FROM OTHER SOURCES' IF IT IS NOT CHARGEABLE TO INCOME-T AX UNDER ANY OF THE HEADS SPECIFIED IN SECTION 14 ITEMS A TO E. IN THE CASE OF THE ASSESSEE COMPANY THE AMOUNT WAS RECEIVED FROM INVESTORS WER E AGAINST SHARE APPLICATION AND THE SAME IS CAPITAL RECEIPT WHICH W AS ADJUSTED AGAINST SHARE CAPITAL AND SHARE PREMIUM. THE MONEY SO RECEI VED TO ASSESSEE COMPANY WAS CAPITAL RECEIPT AND WAS NOT REVENUE REC EIPT THEREFORE THE SAME CANNOT BE TAXED IN THE HANDS OF ASSESSEE COMPA NY UNDER SECTION 56(1) OF INCOME TAX ACT 1961 BECAUSE THIS SECTION DEAL WITH INCOME AND NOT WITH CAPITAL RECEIPTS. THE INVESTORS WHO SU BSCRIBED THE SHARE CAPITAL OF ASSESSEE COMPANY IS ALSO SHOWING THE AMO UNT PAID TO ASSESSEE AS THEIR INVESTMENT IN SHARES OF ASSESSEE COMPANY A ND NECESSARY DOCUMENTS IN THIS REGARD WAS SUBMITTED TO LD. AO. T HEREFORE THE ASSESSEE HAS PROVED WITH DOCUMENTARY EVIDENCES THAT THE AMOUNT WAS RECEIVED AGAINST SHARE APPLICATION I.E. CAPITAL REC EIPT THEREFORE THE SAME CANNOT BE TREATED AS INCOME OF THE ASSESSEE. FURTHE R FOR TREATING THE SHARE CAPITAL/SHARE PREMIUM AS INCOME OF THE ASSESS EE COMPANY NO COGENT REASON HAS BEEN GIVEN BY LD. AO. FURTHER TH ERE IS NO DEEMING FICTION HAS BEEN GIVEN IN SECTION 56(1) OF INCOME T AX ACT 1961 WHEREIN THE INCOME CAN BE TAXED UNDER DEEMING PROVI SION. H) BY FINANCE ACT 2012 A NEW CLAUSE (VIIB) WAS INSE RTED IN 56(2). MEMORANDUM EXPLAINING THE PROVISIONS IN FINANCE BIL L 2012 STATED AS UNDER:- SHARE PREMIUM IN EXCESS OF THE FAIR MARKET VALUE IS TO BE TREATED AS INCOME. SECTION 56(2) PROVIDES FOR THE SPECIFIC CATEGORY O F INCOMES THAT SHALL BE CHARGEABLE TO INCOME TAX UNDER THE HEAD INCOME FROM OTHER SOURCES. IT IS PROPOSED TO INSERT A NEW CLAUSE IN 56(2). THE NEW CLAUSE WILL APPLY WHERE ACCOMPANY NOT BEING A COM PANY IN WHICH THE PUBLIC ARE SUBSTANTIALLY INTERESTED RECEIVES IN A NY PREVIOUS YEAR FROM ANY PERSON BEING A RESIDENT ANY CONSIDERATION FOR ISSUE OF SHARES. IN SUCH A CASE IF THE CONSIDERATION RECEIVED FOR ISSUE OF SHARES EXCEEDS THE FACE VALUE OF SHARES THE AGGREGATE CONSIDERATI ON RECEIVED FOR SUCH ITA NO. 391/JP/2017 M/S. RAINBOW BUILDCON PVT.LTD. JAIPUR VS AC IT CENTRAL CIRCLE-2 JAIPUR 51 SHARES AS EXCEEDS THE FAIR MARKET VALUE OF THE SHAR ES SHALL BE CHARGEABLE TO INCOME TAX UNDER THE HEAD INCOME FR OM OTHER SOURCES. THIS AMENDMENT EFFECTIVE FROM 1 ST APRIL 2013 AND WILL ACCORDINGLY APPLY IN RELATION TO ASSESSMENT YEAR 2013-14 AND SU BSEQUENT ASSESSMENT YEARS. IN THE MEMORANDUM IT IS MENTIONED THAT PREMIUM IN EXCESS OF FAIR MARKET VALUE IS TO BE TREATED AS INCOME. THIS SUGGESTS THAT PREMIUM IN EXCESS OF FAIR MARKET VALU E WAS NOT AN INCOME BUT IS TO BE TREATED AS INCOME DUE TO AMENDE D PROVISION. BEFORE THE AMENDMENT CONSIDERATION RECEIVED AS PRE MIUM WAS NOT INCOME. THE LEGISLATURE IN ITS WISDOM REQUIRED THE SHARE PREMIUM IN EXCESS OF FAIR MARKET VALUE TO BE INCOME FROM ASSES SMENT YEAR 2013- 14 AND NOT THE ENTIRE PREMIUM TO BE TREATED AS INCO ME. CBDT VIDE CIRCULAR NO.3 OF 2012 DATED 12.06.2012 HAS ALSO MEN TIONED THAT PROVISIONS OF 56(2)(VII B) WILL BE APPLICABLE FOR A SSESSMENT YEAR 2013-14 ONWARD . THEREFORE AMENDMENT IN SECTION 56(2)(VIIB) OF INCOME TAX ACT 1961 EFFECTIVE FROM 1 ST APRIL 2013 AND WILL ACCORDINGLY APPLY IN RELATION TO ASSESSMENT YEAR 20 13-14 AND SUBSEQUENT ASSESSMENT YEARS AND THE PROVISIONS OF T HIS SECTION CANNOT BE MADE APPLICABLE IN PREVIOUS YEARS. IN THIS REGARD THE RATIO HAS BEEN LAID DOWN IN FOLLOWING JUDGMENTS: - A) BY FINANCE ACT 1994 SECTION 55(2) WAS AMENDED TO PROVIDE THAT COST OF ACQUISITION OF A TENANCY RIGHT WILL BE TAKEN AS NIL. THE HONBLE APEX COURT IN THE CASE OF D.P. SANDU BROS. CHEMBUR (P) LTD (SUPRA) HELD THAT AMENDMENT TOOK EFFECT FROM 1 ST APRIL 1995 AND THEREFORE WILL NOT BE APPLICABLE FOR A.Y. 1987-88. SIMILAR FINDING HAS BEEN RECORDED BY HONBLE RAJ HIGH COURT IN THE CASE OF GOTAN LIME S TONE KHANIJ UDHYOG. THE RATIO OF LAW IN RESPECT OF AMENDMENT IN 55(2) BEING HELD AS PROSPECTIVE IS APPLICABLE FOR 56(2)(VIBE) AND HENCE SHARE PREMIUM IN EXCESS OF FA IR MARKET VALUE CAN NOT BE HELD TAXABLE FOR A.Y. 2011- 12. B) RECENTLY THE HONBLE APEX COURT IN THE CASE OF M.G. PICTURES (MADRAS) LTD V/S ACIT 373 ITR 39 HELD ITA NO. 391/JP/2017 M/S. RAINBOW BUILDCON PVT.LTD. JAIPUR VS AC IT CENTRAL CIRCLE-2 JAIPUR 52 THAT AMENDMENT IN SECTION 40A(3) W.E.F. FROM 1.4.19 96 IS PROSPECTIVE AND CANNOT BE APPLIED TO PREVIOUS YE ARS OF BLOCK PERIOD PRIOR TO F.Y. 1995-96. C) THE FIGURE OF 10 000 WAS CHANGED TO 20 000 U/S 4 0A(3) OF INCOME TAX ACT 1961 AND 269SS OF INCOME TAX ACT 1961 BY DIRECT TAX LAWS (AMENDMENT) ACT 1987 W.E.F. 1.4.1989. THE CBDT VIDE CIRCULAR NO.522 DATED 18.08.1988 STATED THAT AMENDMENT IN SECTION 40A(3) IS APPLICABLE FOR A.Y. 1989-90 AS IT IS A SUBSTANTI VE PROVISION AND SINCE 269SS IS A PROCEDURAL PROVISION THE EFFECTIVE DATE WILL BE 1.4.89 I.E. PREVIOUS YEAR RE LEVANT TO A.Y. 89-90. D) THE FIVE JUDGE CONSTITUTION BENCH IN THE CASE OF CIT V VATIKA TOWNSHIP (P) LTD. 367 ITR 466 HAD AN OCCASION TO CONSIDER AS TO WHETHER PROVISO ADDED TO SECTION 113 OF THE I.T. ACT IS PROSPECTIVE OR RETROSPECTIVE. THE HONBLE APEX COURT WHILE CONSIDERING THE VARIOUS DECISIONS HELD (AS PER PAGE 469 OF ITR 367). THAT SURCHARGE LEVIED BY ASSESSING OFFICER FOR THE BLOCK ASSESSMENT PERTAINING TO THE PERIOD FROM JUNE 1 2002 WAS LIABLE TO BE DELETED. AN AMENDMENT MADE TO A TAXING STATUTE CAN BE SAID TO BE INTENDED TO REMOVE HARDSHIPS ONLY OF THE ASSESSEE NOT OF THE DEPARTMENT. IMPOSING A RETROSPECTIVE LEVY ON THE ASSESSEE WOULD HAVE CAUSE D UNDUE HARDSHIP AND FOR THAT REASON PARLIAMENT SPECIFICALLY CHOSE TO MAKE THE PROVISO EFFECTIVE FR OM JUNE 1 2002. WHERE A BENEFIT IS CONFERRED BY A LEGISLATION THE RULE AGAINST A RETROSPECTIVE CONSTRUCTION IS DIFFER ENT. IN A LEGISLATION CONFERS A BENEFIT ON SOME PERSONS BUT WITHOUT INFLICTING A CORRESPONDING DETRIMENT ON SOM E OTHER PERSON OR ON THE PUBLIC GENERALLY AND WHERE TO ITA NO. 391/JP/2017 M/S. RAINBOW BUILDCON PVT.LTD. JAIPUR VS AC IT CENTRAL CIRCLE-2 JAIPUR 53 CONFER SUCH BENEFIT APPEARS TO HAVE BEEN THE LEGISL ATORS OBJECTS THEN PRESUMPTION WOULD BE THAT SUCH A LEGISLATION GIVING IT A PURPOSIVE CONSTRUCTION WO ULD WARRANT IT TO BE GIVEN A RETROSPECTIVE EFFECT. THIS EXACTLY IS THE JUSTIFICATION TO TREAT PROCEDURAL PROVISION AS RETROSPECTIVE. WHERE A LAW IS ENACTED FOR THE BENEF IT OF COMMUNITY AS A WHOLE EVEN IN THE ABSENCE OF A PROVISION THE STATUTE MAY BE HELD TO BE RETROSPECTI VE IN NATURE. THE HONBLE APEX COURT FURTHER NOTICED THAT CBDT CIRCULAR MENTIONED THAT PROVISO IS APPLICABLE FROM 1.6.2002. IN RESPECT OF 56(2)(VII B) CBDT VIDE CIRCULAR NO.3 OF 2012 DATED 12.06.2012 HAS ALSO MENTIONED THAT PROVISIONS OF 56(2)(VII B) WILL BE APPLICABLE FOR ASSESSMENT YEAR 2013-14 ONWARD. HENCE SHARE PREMIUM EVEN IF IN EXCESS OF FAIR MARKE T VALUE IS NOT TAXABLE U/S 56(1) FOR THE A.Y. 2011-12 . I) SECTION 56 IS NOT A CHARGING SECTION . THIS SECTION STARTS WITH THE FOLLOWING SENTENCE. INCOME OF EVERY KIND WHICH IS NOT TO BE EXCLUDED F ROM THE TOTAL INCOME UNDER THE ACT SHALL BE CHARGEABLE TO INCOME TAX UNDER THE HEAD. INCOME FROM OTHER SOURCES IF IT IS NOT CHARG EABLE TO INCOME TAX. UNDER ANY OF THE HEADS SPECIFIED IN SECTION 14 ITE MS A TO E. FOR AN INCOME TO BE TAXED U/S 56 IT HAS TO SATIS FY THREE CONDITIONS. (A) IT SHALL BE CLASSIFIABLE AS INCOME AS PER THE C HARGING SECTION OF THE ACT. (B) IT SHALL NOT BE EXCLUDED FROM THE TOTAL INCOME (E.G. SECTION10). (C) IT IS NOT CHARGEABLE TO TAX UNDER ANY OF THE SP ECIFIED HEADS IN SECTION 14 ITEMS A TO E. THE FINANCE BILL 2012 AS PRESENTED ON 16 TH MARCH 2012 INCLUDED A NEW CLAUSE (VIIB) U/S 56(2) OF I.T. ACT [342 ITR1(ST)]. NO PROPOSAL IN THE ITA NO. 391/JP/2017 M/S. RAINBOW BUILDCON PVT.LTD. JAIPUR VS AC IT CENTRAL CIRCLE-2 JAIPUR 54 ORIGINAL BILL TO INSERT A NEW CLAUSE U/S 2(24). SUB SEQUENTLY NOTICE OF AMENDMENTS TO FINANCE BILL WAS GIVEN [SEE 343 ITR 3 7(ST)] AND AMENDMENTS ALSO MADE IN CHARGING SECTION 2(24) IN I NSERTING CLAUSE (XVI) IN 2(24) OF I.T. ACT W.E.F. 1.4.2013 READS AS UNDER: (XVI) ANY CONSIDERATION RECEIVED FOR ISSUE OF SHARE S AS EXCEEDS THE FAIR MARKET VALUE OF THE SHARES REFERRED TO IN CLAU SE (VIIB) OF SUBSECTION (2) OF 56. THE AMENDMENT MADE IN 2(24) IS ALSO APPLICABLE W.E. F. 01.04.2013 AND IT CANNOT BE APPLIED EARLIER TO 01-0 4-2013. J) THE INCOME FOR THE PURPOSE OF THE INCOME TAX ACT IS DEFINED IN SECTION 2(24) OF THE INCOME TAX ACT 1961. SECTION 2(24) OF THE INCOME ACT 1961 GIVES INCLUSIVE DEFINITION OF INCOME BUT THE I NCOME SHOULD BE LOOK INTO ITS NORMAL MEANING. THE INCOME WILL NOT INCLUD E CAPITAL RECEIPTS UNLESS IT IS SPECIFIED IN INCOME TAX ACT. THIS ARGU MENT FINDS SUPPORTS FROM THE AMENDMENT MADE BY FINANCE ACT 2012 W.E.F. 1.4.2013 IN SECTION 56(VIIB) AND CLAUSE (XVI) OF SECTION 2(24) OF INCOME TAX ACT 1961 WHEREIN CERTAIN SHARE PREMIUMS WERE MADE TAXAB LE W.E.F. 01.04.2013. IF THE SAME WERE ALREADY TAXABLE U/S 56(1)/ 2(24) OF INCOME TAX ACT 1961 THEN THERE WAS NO NEED TO MAKE THESE AMENDMENTS IN THE ACT. IN CASE THERE IS NO CHARGING PROVISION FOR SPECIFIC RECEIPT THEN IT CANNOT BE TAXED. THE FIVE MEMBER BENCH OF THE APEX COURT IN CIT V VATIKA TOWNSHIP P LTD 367 ITR 4 66 (PB PG 19/CASE LAWS) . TAX LAWS ARE CLEARLY IN DEROGATION OF PERSONAL RIG HTS AND PROPERTY INTERESTS AND ARE THEREFORE SUBJECT TO S TRICT CONSTRUCTION AND ANY AMBIGUITY MUST BE RESOLVED AGA INST IMPOSITION OF THE TAX. IN BILLINGS V U.S 232 U.S.26 1 AT PAGE 265 34 S.CT 421 (1914) THE SUPREME COURT CLEARLY ACKNOWLEDGED THIS BASIC AND LONG STANDING RULE OF S TATUTORY CONSTRUCTION. TAX STATUTES SHOULD BE STRICTLY CONSTRUED AND IF ANY AMBIGUITY BE FOUND TO EXIST IT MUST BE RESOLVED IN FAVOUR OF CITIZEN... ITA NO. 391/JP/2017 M/S. RAINBOW BUILDCON PVT.LTD. JAIPUR VS AC IT CENTRAL CIRCLE-2 JAIPUR 55 IF A PERSON SOUGHT TO BE TAXED COMES WITHIN THE LETTER OF THE LAW HE MUST BE TAXED HOWEVER GREAT T HE HARDSHIP MAY APPEAR TO THE JUDICIAL MIND TO BE. ON THE OTHER HAND IF THE CROWN SEEKING TO RECOVER THE TAX CANNOT BRING THE SUBJECT WITHIN THE LETTER OF THE LAW THE SUBJECT IS FREE HOWEVER APPARENTLY WITHIN THE SPRIT OF THE LAW THE CASE MIG HT OTHERWISE APPEAR TO BE AS OBSERVED IN PARTINGTON V ATTOMEY G ENERAL LR4HL100. SINCE FOR THE YEAR UNDER CONSIDERATION THERE WAS NO PROVISION IN INCOME TAX ACT 1961 WHEREIN THE FAIR VALUE OF SHAR E COULD BE COMPUTED AND THE EXCESS SHARE PREMIUM COULD BE TAXE D THEREFORE IN ABSENCE OF COMPUTATION PROVISION THE S AME CANNOT BE TAXED. THE RELIANCE IS ALSO PLACED ON FOLLOWING CASES: - I) THE HONBLE BOMBAY HIGH COURT IN THE CASE OF CADELL WVG. MILLS CO.(P) LTD. V CIT 249 ITR 265 (PB 22- 41/CASE LAWS) HAD AN OCCASION TO CONSIDER THE TAXABILITY OF A SUM RECEIVED IN RESPECT OF CONSIDER ATION OF TENANCY RIGHT. HONBLE HIGH COURT HELD THAT SURRENDER OF TENANCY RIGHT WHICH WAS NOT CHARGABLE TO TAX AS CAPITAL GAIN UNDER SECTION 45 COULD NOT BE T AXED AS CASUAL AND NON RECURRING RECEIPT UNDER SECTION 1 0(3) R.W. S. 56 UNDER THE HEAD INCOME FROM OTHER SOURCE S. II) THE HONBLE APEX COURT IN THE CASE OF CIT V D.P. SANDU BROS. CHEMBUR (P) LTD 273 ITR 1 (PB 42- 49/CASE LAWS) ALSO HOLD THAT AS PER 2(24)(VI) ONLY INCOME WHICH IS CHARGEABLE U/S 45 IS TO BE INCLUDED IN INCOME AND IF COMPUTATION PROVISION U/S 45 FAILS TH EN CHARGING PROVISIONS WILL FAIL. REF. TO CIT V B.C. SRINIVASA SETTY 128 ITR 294. III) THE HONBLE RAJASTHAN HIGH COURT IN THE CASE O F CIT V GOTAN LIME STONE KHANIJ UDYOG 269 ITR 399 (PB 56-65/CASE LAWS) ALSO HELD THAT IN CASE COMPUTATION PROVISION U/S 48 COULD NOT BE APPLIED F OR WANT OF ASCERTAINABLE COST OF ACQUISITION THEN CAP ITAL GAIN DOES NOT ARISE TO BE INCLUDED IN TOTAL INCOME ON ITA NO. 391/JP/2017 M/S. RAINBOW BUILDCON PVT.LTD. JAIPUR VS AC IT CENTRAL CIRCLE-2 JAIPUR 56 ACCOUNT OF FAILURE OF APPLICABILITY OF COMPUTATION PROVISION. THE HONBLE HIGH COURT REFERRED TO DECIS ION OF BOMBAY HIGH COURT IN THE CASE OF CADELL WVG. MIL LS CO (P) LTD. (SUPRA). IV) THE HONBLE RAJASTHAN HIGH COURT IN THE CASE OF S. ZORASTER AND CO. V/S CIT 322 ITR 35 (PB 66- 68/CASE LAWS) HAD ON OCCASION TO CONSIDER THE TAXABILITY OF RECEIPT OF RS.20 000 RECEIVED BY VEND EE ON DEFAULT OF THE PURCHASER AS PER AGREEMENT FOR SELL OF PREM PRAKASH TALKIES. THE HONBLE HIGH COURT AFTER REFERRING TO THE DECISION OF APEX COURT IN THE CASE OF TRAVANCORE RUBBER AND TEA CO LTD. V CIT 243 ITR 158 HELD THAT SUCH RECEIPT IS CAPITAL RECEIPT. SUCH CAPITAL RECEIPT IS NOT TAXABLE IN VIEW OF JUDGMENT OF APEX COURT IN D.P. SANDU BROS. CHEMBUR (P) LTD (SUPRA). HENCE CAPITAL RECEIPT IS NOT TAXABLE UNLES S THERE IS CHARGING PROVISION FOR A CAPITAL RECEIPT AND COMPUTATION PROVISIONS ARE ALSO APPLICABLE. V) THE HONBLE BOMBAY HIGH COURT IN THE CASE OF VODAFONE INDIA SERVICES P. LTD. V/S UOI 368 ITR 1 (PB 76-107/CASE LAWS) HAD AN OCCASION TO CONSIDER THE DIFFERENCE BETWEEN THE SHARE PREMIUM DETERMINED BY REVENUE AND THE SHARE PREMIUM CHARGED AS DEEMED LOAN AND TAXING OF NATIONAL INTEREST ON DEEMED LOAN . THE HONBLE BOMBAY HIGH COURT HAS REFERRED TO THE DECISION OF APEX COURT IN THE CASE OF MATHURAM AGGARWAL V/S STATE OF MP (1999) 8 SCC 667 FOR THE TEST TO INTERPRET A TAXING STATUE WHICH READS AS UN DER: THE INTENTION OF THE LEGISLATURE IS A TAXATION ST ATUTE IS TO BE GATHERED FROM THE LANGUAGE OF THE PROVISIONS PARTICULARLY WHERE THE LANGUAGE IS PLAIN AND UNAMBIGUOUS. IN A TAXING ACT IT IS NOT POSSIBLE TO ASSUME ANY INTENTION OR GOVERNING PURPOSE OF THE STATUTE MORE THAN WHAT IS STATED IN THE PLAIN LANGU AGE. IT IS NOT THE ECONOMIC RESULTS SOUGHT TO BE OBTAINED B Y ITA NO. 391/JP/2017 M/S. RAINBOW BUILDCON PVT.LTD. JAIPUR VS AC IT CENTRAL CIRCLE-2 JAIPUR 57 MAKING THE PROVISION WHICH IS RELEVANT IN INTERPRET ING A FISCAL STATUTE. EQUALLY IMPERMISSIBLE IS AN INTERPR ETATION WHICH DOES NOT FLOW FROM THE PLAIN UNAMBIGUOUS LANGUAGE OF THE STATUTE. WORDS CANNOT BE ADDED TO O R SUBSTITUTED SO AS TO GIVE A MEANING TO THE STATUTE WHICH WILL SERVE THE SPENT AND INTENTION OF THE LEGISLATU RE. THE STATUTE SHOULD CLEARLY AND UNAMBIGUOUSLY CONVEY THE THREE COMPONENTS OF THE TAX LAW I.E. SUBJECT OF THE TAX THE PERSON WHO IS LIABLE TO PAY THE TAX AND THE RAT E AT WHICH THE TAX IS TO BE PAID. IF THERE IS ANY AMBIGU ITY REGARDING ANY OF THESE INGREDIENTS IN A TAXATION ST ATUTE THEN THERE IS NO TAX IN LAW. THEN IT IS FOR THE LEG ISLATURE TO DO THE NEEDFUL IN THE MATTER. HONBLE BOMBAY HIGH COURT IN THIS CASE (VODAFONE CASE) OBSERVED THAT ISSUE OF SHARES AT A PREMIUM IS ON CAPITAL ACCOUNT AND GIVES RISE TO NO INCOME. 56(1) PROVIDES THE INCOME OF EVERY KIND WHICH IS NOT EXCLUDED FROM THE TOTAL INCOME IS CHARGEABLE UNDER THE HEAD INCOME FROM OTHER SOURCES. HOWEVER BEFORE SECTION 56 OF THE ACT CAN BE APPLIED THERE MUST BE INCOME WHICH ARISES. IF THE RECEIPT IS CAPITAL THEN IT IS NOT INCOME. HENCE SHARE PREMIUM IS NOT AN INCOME. I) THE CBDT VIDE CIRCULAR/INSTRUCTION NO.2 DATED 29.01 .2015 HAS STATED AS UNDER [371 ITR 6(ST)]. IN REFERENCE TO THE ABOVE CITED SUBJECT I AM DIRE CTED TO DRAW YOUR ATTENTION TO DECISION OF THE HIGH COURT OF BOM BAY IN THE CASE OF VODAFONE INDIA SERVICES PVT. LTD V UOI FOR THE ASSESSMENT YEAR 2009-10 (WP NO.871 OF 2014) WHEREIN THE COURT HAS HELD INTERALIA THAT THE PREMIUM ON SHARE ISSUE WAS ON ACCOUNT OF A CAPITAL ACCOUNT TRANSACTION AND DOE S NOT GIVE RISE TO INCOME AND HENCE NOT LIABLE TO TRANSFER PR ICING ADJUSTMENT. IT IS HEREBY INFORMED THAT THE BOARD HAS ACCEPTED T HE DECISION OF THE HIGH COURT OF BOMBAY IN THE ABOVE M ENTIONED WRIT PETITION. IN VIEW OF THE ACCEPTANCE OF THE ABO VE JUDGMENT ITA NO. 391/JP/2017 M/S. RAINBOW BUILDCON PVT.LTD. JAIPUR VS AC IT CENTRAL CIRCLE-2 JAIPUR 58 IT IS DIRECTED THAT THE RATIO DECIDENDI OF THE JUDG MENT MUST BE ADHERED TO BY THE FIELD OFFICERS IN ALL CASES WHERE THE ISSUE IS INVOLVED. THIS MAY ALSO BE BROUGHT TO THE NOTICE OF THE ITAT DRPS AND CIT (APPEALS). IN VIEW OF ABOVE INSTRUCTION IT IS CLEAR THAT RATI O DECIDING OF TREATING OF SHARE PREMIUM AS CAPITAL RECEIPT IS BIN DING ON REVENUE AUTHORITIES. J. IN VIEW OF THE ABOVE SUBMISSIONS IT IS CLEAR TH AT SHARE PREMIUM RECEIVED IS A CAPITAL RECEIPT AND CONSIDERATION REC EIVED CANNOT BE CONSIDERED AS INCOME FOR THE YEAR UNDER CONSIDERATI ON BY APPLYING THE PROVISIONS OF SECTION 56(1) OF INCOME TAX ACT. K. THE LD CIT(A) ISSUED SHOW CAUSE NOTICE TO ASSESS EE TO TAX THE SHARE CAPITAL UNDER SECTION 68 OF ITAX ACT AS AGAINST 56( 1) APPLIED BY LD AO BUT HE SATISFIED ABOUT THE INGREDIENTS OF SECTIO N 68 OF I.TAX ACT AND NO ADDITION WAS SUSTAINED FOR AY 2009-10 EVEN U /S 68 OF I.TAX ACT. THE LD AO ISSUED SEVERAL NOTICES TO ASSESSEE TO EX PLAIN THE SHARE CAPITAL. THE ASSESSEE SUBMITTED DETAILED REPLY AND DOCUMENTS FROM TIME TO TIME AS UNDER:- S.NO PARTICULARS COPY AT PB PG NO 1 COPY OF QUERY LETTER OF AO DATED 05.02.2015. 86-8 7 2 COPY OF REPLY OF ASSESSEE DATED 10/02/15 88-91 3 COPY OF SHOW CAUSE NOTICE OF AO DATED 06.02.2015. 92-95 4 COPY OF REPLY OF ASSESSEE DATED 13.02.2015 96-99 5 COPY OF REPLY OF ASSESSEE DATED 03.03.2015. 100 6 COPIES OF DOCUMENTS FILED BEFORE AO ALONG WITH VARIOUS SUBMISSION IN RESPECT OF IDENTITY CREDITWORTHINESS OF SHAREHOLDER AND GENUINENESS OF TRANSACTIONS 101-245 THE ASSESSEE HAS SUBMITTED SUFFICIENT DOCUMENTS BE FORE THE LD AO TO PROVE IDENTITY CREDITWORTHINESS AND GENUINENESS OF SHARE CAPITAL AND LD AO SATISFIED THAT ADDITION UNDER SECTION 68 CANN OT BE MADE SO HE APPLIED SECTION 56(1) OF ITAX ACT TO MAKE THE ADDIT ION. ITA NO. 391/JP/2017 M/S. RAINBOW BUILDCON PVT.LTD. JAIPUR VS AC IT CENTRAL CIRCLE-2 JAIPUR 59 THE ASSESSEE SUBMITTED DETAILED REPLY BEFORE LD C IT(A) VIDE LETTER DATED 22/08/2016 (COPY AT PB PG 246-299). LD CIT(A) WHEN SATISFIED THAT THE ADDITION U/S 56(1) CANT BE MADE HE TRIED TO SUSTAIN THE ADDITION BY APPLYING THE PROVISIONS OF SECTION 68 OF INCOME TAX ACT. HE ISSUED A SHOW CAUSE NOTICE VIDE LETTER DATE D 09/03/2017 (COPY AT PB PG 300-346). THE ASSESSEE SUBMITTED DETAILED REPLY ON THE SHOW CAUSE NOTICE OF LD CIT(A) VIDE LETTER DATED 24-03-2 017 & 28/03/2017 ALONGWITH DOCUMENTS (COPY AT PB PG 347-430) . TO SUPPORT THAT SHAREHOLDERS WERE GENUINE AND CREDITWORTHINESS IS P ROVED THE ASSESSEE HAS FILED ALL DETAILS IN RESPECT OF INCORPORATION/ EXISTENCE OF INVESTORS AND DETAILS OF CHEQUES VIDE WHICH AMOUNTS WERE RECE IVED. THE CAPACITY OF SHAREHOLDERS IS VERIFIABLE FROM THE COPY OF THE BALANCE SHEET OF THE SHAREHOLDERS. THE SHAREHOLDERS HAVE FUNDS ON A PRIO R DATE FROM THE ALLOTMENT OF SHARES GIVEN BY THE ASSESSEE COMPANY A ND SUCH FUNDS WERE MORE THAN THE AMOUNT OF SHARE APPLICATION. L) DURING THE COURSE OF ASSESSMENT PROCEEDINGS THE ASSESSEE SUBMITTED THE FOLLOWING DOCUMENTS TO PROVE THEIR IDENTITY OF SHAREHOLDERS CREDITWORTHINESS OF SHAREHOLDERS AND GENUINENESS OF TRANSACTION WITH THEM: - NAME OF SHAREHOLDER PARTICULARS OF DOCUMENTS SUBMIT TED COPY AT PB PAGE ANURAJ SECURITIES PVT. LTD SHARE APPLICATION CONTAINING THE NAME/ADDRESS/PAN O F PARTY DETAIL OF PAYMENT RECEIVED ETC. COPY OF BOARD RESOLUTION. COPY OF PAN CARD OF PARTY. COPY OF BANK STATEMENT SHOWING THE ENTRY OF PAYMENT MADE TO ASSESSEE. DECLARATION OF SOURCE OF FUNDS WITH PARTY. COPY OF ACK. OF ITR OF AY 2009-10. COPY OF AUDIT REPORT AND AUDITED BALANCE SHEET ALON G WITH ANNEXURE OF 31.03.09. COPY OF REGISTRATION CERTIFICATE ISSUED BY ROC. 102 103 104 105 106-108 109 110-125 126 ITA NO. 391/JP/2017 M/S. RAINBOW BUILDCON PVT.LTD. JAIPUR VS AC IT CENTRAL CIRCLE-2 JAIPUR 60 MATRIBHUMI DEALERS PVT. LTD SHARE APPLICATION CONTAINING THE NAME/ADDRESS/PAN O F PARTY DETAIL OF PAYMENT RECEIVED ETC. COPY OF BOARD RESOLUTION. COPY OF PAN CARD OF PARTY. COPY OF BANK STATEMENT SHOWING THE ENTRY OF PAYMENT MADE TO ASSESSEE. DECLARATION OF SOURCE OF FUNDS WITH PARTY. COPY OF ACK. OF ITR OF AY 2009-10. COPY OF AUDIT REPORT AND AUDITED BALANCE SHEET ALON G WITH ANNEXURE OF 31.03.09. COPY OF REGISTRATION CERTIFICATE ISSUED BY ROC. 127-129 130 131 132 133-134 135 136-144 145 NAROTTAMKA TRADE & VYAPAAR PVT. LTD SHARE APPLICATION CONTAINING THE NAME/ADDRESS/PAN O F PARTY DETAIL OF PAYMENT RECEIVED ETC. COPY OF BOARD RESOLUTION. COPY OF PAN CARD OF PARTY. COPY OF BANK STATEMENT SHOWING THE ENTRY OF PAYMENT MADE TO ASSESSEE. DECLARATION OF SOURCE OF FUNDS WITH PARTY. COPY OF ACK. OF ITR OF AY 2009-10. COPY OF AUDIT REPORT AND AUDITED BALANCE SHEET ALON G WITH ANNEXURE OF 31.03.09. COPY OF REGISTRATION CERTIFICATE ISSUED BY ROC. REGISTRATION CERTIFICATE WITH RBI FOR NBFC 146-147 148 149 150 151 152 153-166 167 168 PUJA DEALCOM PVT. LTD SHARE APPLICATION CONTAINING THE NAME/ADDRESS/PAN O F PARTY DETAIL OF PAYMENT RECEIVED ETC. COPY OF BOARD RESOLUTION. COPY OF PAN CARD OF PARTY. COPY OF BANK STATEMENT SHOWING THE ENTRY OF PAYMENT MADE TO ASSESSEE. DECLARATION OF SOURCE OF FUNDS WITH PARTY. COPY OF ACK. OF ITR OF AY 2009-10. COPY OF AUDIT REPORT AND AUDITED BALANCE SHEET ALON G WITH ANNEXURE OF 31.03.09. COPY OF REGISTRATION CERTIFICATE ISSUED BY ROC. 169-170 171 172 173 174 175 176-185 186 TARANG SUPPLIERS PVT. LTD SHARE APPLICATION CONTAINING THE NAME/ADDRESS/PAN O F PARTY DETAIL OF PAYMENT RECEIVED ETC. COPY OF BOARD RESOLUTION. COPY OF PAN CARD OF PARTY. COPY OF BANK STATEMENT SHOWING THE ENTRY OF PAYMENT MADE TO ASSESSEE. DECLARATION OF SOURCE OF FUNDS WITH PARTY. COPY OF ACK. OF ITR OF AY 2009-10. COPY OF AUDIT REPORT AND AUDITED BALANCE SHEET ALON G WITH ANNEXURE OF 31.03.09. COPY OF REGISTRATION CERTIFICATE ISSUED BY ROC. 187 188 189 190 191 192 193-202 203 ITA NO. 391/JP/2017 M/S. RAINBOW BUILDCON PVT.LTD. JAIPUR VS AC IT CENTRAL CIRCLE-2 JAIPUR 61 VANDANA DEALERS PVT. LTD SHARE APPLICATION CONTAINING THE NAME/ADDRESS/PAN O F PARTY DETAIL OF PAYMENT RECEIVED ETC. COPY OF BOARD RESOLUTION. COPY OF PAN CARD OF PARTY. COPY OF BANK STATEMENT SHOWING THE ENTRY OF PAYMENT MADE TO ASSESSEE. DECLARATION OF SOURCE OF FUNDS WITH PARTY. COPY OF ACK. OF ITR OF AY 2009-10. COPY OF AUDIT REPORT AND AUDITED BALANCE SHEET ALON G WITH ANNEXURE OF 31.03.09. COPY OF REGISTRATION CERTIFICATE ISSUED BY ROC. 204-205 206 207 208 209-211 212 213-224 225 PUJA TIE UP PVT. LTD SHARE APPLICATION CONTAINING THE NAME/ADDRESS/PAN O F PARTY DETAIL OF PAYMENT RECEIVED ETC. COPY OF BOARD RESOLUTION. COPY OF PAN CARD OF PARTY. COPY OF BANK STATEMENT SHOWING THE ENTRY OF PAYMENT MADE TO ASSESSEE. DECLARATION OF SOURCE OF FUNDS WITH PARTY. COPY OF ACK. OF ITR OF AY 2009-10. COPY OF AUDIT REPORT AND AUDITED BALANCE SHEET ALON G WITH ANNEXURE OF 31.03.09. COPY OF REGISTRATION CERTIFICATE ISSUED BY ROC. 226-227 228 229 230 231 232 233-244 245 M) ALL THE SHARE CAPITAL/SHARE APPLICATION WAS REC EIVED THROUGH A/C PAYEE CHEQUES AND VERIFIABLE FROM BANK STATEMENT OF ASSES SEE AS WELL AS BANK STATEMENT OF THE PARTY. THE ONUS U/S 68 OF THE ASSE SSEE IS TO PROVE THE IDENTITY CAPACITY AND GENUINENESS OF THE TRANSACTI ONS HAS BEEN DISCHARGED WHICH MAY BE SEEN FROM THE FOLLOWINGS:- I) IDENTITY:- THE ASSESSEE PROVED THE IDENTITY OF ALL THE COMPA NIES BY FILING THE SHARE APPLICATION RECEIVED FROM THE PARTIES AND THE PARTIES ARE DULY IN EXISTENCE AND THE EXISTENCE OF THE PART IES CAN BE VERIFIED FROM THE OFFICIAL WEBSITE OF MCA. THE LD. AO ALSO NOT DOUBTED THE IDENTITY OF THE ABOVE NAMED COMPANIES. FURTHER THE NOTICE ISSUED U/S 133(6) OF INCOME TAX ACT 1961 WA S DULY SERVED ON ALL THE COMPANIES WHICH ALSO PROVE THE ID ENTITY OF THE PARTIES. II) CREDITWORTHINESS ALL THE COMPANIES ARE INCOME TAX ASSESSEE AND DU LY FILING THE INCOME TAX RETURN AND BALANCE SHEETS. THERE IS SUFF ICIENT SOURCE OF FUNDS WITH ALL THE COMPANIES TO INVESTMEN T SHARE CAPITAL/SHARE APPLICATION IN THE ASSESSEE COMPANY. THE ASSESSEE SUBMITTED THE COPIES OF BANK ACCOUNT/DECLARATION OF SOURCE OF ITA NO. 391/JP/2017 M/S. RAINBOW BUILDCON PVT.LTD. JAIPUR VS AC IT CENTRAL CIRCLE-2 JAIPUR 62 FUNDS WITH THEM OF INVESTOR COMPANIES. THE BANK STA TEMENT SHOWS THE HUGE TRANSACTION OF HIGH VALUE IN THE ACC OUNTS OF THE COMPANIES. THE CHART SHOWING THE AMOUNT INVESTED BY THE ABOVE NAMED COMPANIES IN ASSESSEE COMPANY VIZ A VIZ OWN FUNDS WITH THE INVESTOR COMPANY ARE AS UNDER: - NAME OF THE INVESTOR COMPANY AMOUNT INVESTED IN ASSESSEE COMPANY SHARE CAPITAL AND RESERVE & SURPLUS WITH INVESTOR COMPANIES AS ON 31.03.2009 SHARE CAPITAL AND RESERVE & SURPLUS WITH INVESTOR COMPANIES AS ON 31.03.2008 ANURAJ SECURITIES PVT LTD 20 00 000 3 90 10 000 3 90 10 000 MATRIBHUMI DEALERS PVT LTD 25 00 000 3 16 50 000 3 16 50 000 NAROTTAMKA TRADE & VYAPAAR PVT LTD 15 00 000 33 22 10 241 33 21 86 557 PUJA DEALCOM PVT LTD 40 00 000 13 54 55 817 13 54 51 613 TARANG SUPPLIERS PVT LTD 30 00 000 2 55 00 000 2 55 00 000 VANDANA DEALERS PVT LTD 30 00 000 9 39 42 000 9 39 42 000 PUJA TIE-UP PVT LTD 40 00 000 11 95 23 840 11 95 12 729 FROM THE ABOVE CHART IT IS CLEAR THAT ALL THE INVE STOR COMPANIES WERE HAVING THEIR OWN SHARE CAPITAL AND RESERVE & S URPLUS WHICH WERE MUCH MORE THAN TO THE AMOUNT INVESTED IN THE ASSESSEE COMPANY. FROM THE AUDITED P & L ACCOUNT OF THESE COMPANIES IT IS APPARENT THAT THESE COMPANIES HAD T RADING ACTIVITIES OF LARGE AMOUNT. THE ABOVE CHART SHOWS T HAT THE INVESTOR COMPANIES WERE HAVING THEIR OWN INDEPENDEN T FUNDS AND HAVING THEIR INDEPENDENT SOURCE TO INVEST IN TH E SHARES OF THE ASSESSEE COMPANY. APART FROM THE INVESTMENT MAD E IN THE SHARES OF ASSESSEE COMPANIES THE INVESTOR COMPANIE S WERE ALSO HAVING INVESTMENTS IN SHARES OF OTHER COMPANIES OR LOANS & ADVANCES TO PARTIES WHICH IS MUCH MORE THAN TO THE AMOUNT INVESTED IN THE ASSESSEE COMPANY THEREFORE FROM TH E BANK STATEMENT AS WELL AS FINANCIALS STATEMENTS OF THE I NVESTOR COMPANIES THEIR CREDITWORTHINESS IS DULY PROVED. III) GENUINENESS THE ASSESSEE SUBMITTED THE SHARE APPLICATION FORM RECEIVED FROM ABOVE COMPANIES AGAINST THE SHARE APPLICATION RECEIVED ITA NO. 391/JP/2017 M/S. RAINBOW BUILDCON PVT.LTD. JAIPUR VS AC IT CENTRAL CIRCLE-2 JAIPUR 63 FROM THE COMPANIES. THE SHARE APPLICATION IS SUPPOR TED BY BOARD RESOLUTION PASSED IN THE INVESTOR COMPANIES. THE ASSESSEE COMPANY HAS ALLOTTED THE SHARES TO THE INV ESTOR COMPANIES. THE PROPER RETURNS WERE FILED BEFORE THE ROC AGAINST ALLOTMENT OF THE SHARES TO THESE COMPANIES. FURTHERMORE THE DEPARTMENT HAS CARRIED OUT INTENSI VE SEARCH OPERATIONS OVER THE ASSESSEE AND NO ANY INCRIMINATI NG MATERIAL WAS FOUND TO SHOW THAT THE MONEY AGAINST THE SHARE ALLOTMENT WAS OWN MONEY OF THE COMPANY. SHARES CERTIFICATES W ERE ISSUED AGAINST THE ALLOTMENT OF THE SHARES TO THESE COMPANIES WERE NOT FOUND FROM THE POSSESSION OF THE ASSESSEE COMPANY OR ITS DIRECTOR OR EMPLOYEES. THIS FACT SHOWS THAT AFT ER ALLOTMENT OF SHARES BY THE APPELLANT COMPANY SHARE CERTIFICATES WERE DISPATCHED TO THE SUBSCRIBER COMPANIES. NO ANY ENTR Y IN BOOKS OF ACCOUNT OR DOCUMENT WAS FOUND SHOWING PAYMENT OF CASH TO THESE INVESTOR COMPANIES AGAINST RECEIPT OF CHEQUES FROM THESE COMPANIES AGAINST ALLOTMENT OF SHARES. THEREFORE TH E GENUINENESS OF THE TRANSACTIONS CANNOT BE DOUBTED. N) ONUS TO PROVE SOURCE OF SOURCE FROM THE SHOW CAUSE NOTICE GIVEN BY LD CIT(A) AND EXCEL SHEET PROVIDED TO THE ASSESSEE SHOWING CHAIN OF SOURCE IT IS APPARENT THAT EVEN THERE IS NO CASH DEPOSIT TILL 4 TH STAGE OF CHANNEL SOURCE (COPY AT PB PG 669 TO 698/ AY 2012-13 FILED IN THE CASE OF M OTISONS ENTERTAINMENT (INDIA) PVT LTD ITA NO 485/JP/17) . IF THERE IS ANY CASH DEPOSITED AT 4 TH CHANNEL OR BEYOND TO THAT STAGE THEN THE INQUIRY SHOULD HAVE BEEN MADE FROM THE CONCERNS IN WHOSE BA NK A/C SUCH FUNDS FLOATED AND NECESSARY ACTION SHOULD HAVE BEEN TAKEN IN THE CASES OF SUCH CONCERN BUT THE ASSESSEE CANNOT BE HOLD RES PONSIBLE FOR CASH DEPOSIT IN SOME ACCOUNT AT 4 TH CHANNEL. UNDER SECTION 68 OF INCOME TAX ACT 1961 THE ONUS OF THE ASSESSEE IS TO PROVE THE SOURCE OF CREDIT ENTRY AND THERE IS NO ONUS OF ASSESSEE TO PR OVE THE SOURCE OF SOURCE OR SOURCE OF ALL CHANNEL SOURCES. THE AMENDM ENT IN SECTION 68 OF I. TAX WAS MADE BY INSERTING THE FOLLOWING PR OVISO TO SECTION 68 W.E.F. 01/04/2013 WHICH REQUIRE TO PROVE SOURCE OF FINDS IN THE HANDS OF SHAREHOLDER COMPANY. THOUGH NOT REQUIRED BY LAW BUT STILL THE ASSESSEE HAS PROVED SOURCE OF FINDS IN THE HAND S OF SHAREHOLDER ITA NO. 391/JP/2017 M/S. RAINBOW BUILDCON PVT.LTD. JAIPUR VS AC IT CENTRAL CIRCLE-2 JAIPUR 64 COMPANY. THE AMENDED SECTION EVEN DOES NOT REQUIRE TO PROVE SOURCE OF FUNDS IN THE HANDS OF 3 RD OR 4 TH STAGE. FURTHER THE AMENDMENT IN SECTION 68 OF I.TAX WAS MADE BY INSERTING THE FOLLOWING PROVISO TO SECTION 68 W.E.F . 01/04/2013 ' PROVIDED THAT WHERE THE ASSESSEE IS A COMPANY (NOT BEING A COMPANY IN WHICH THE PUBLIC ARE SUBSTANTIALLY INTERESTED) A ND 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 SUC H CREDIT IS RECORDED IN THE BOOKS OF SUCH COMPANY ALSO OFFERS A N EXPLANATION ABOUT THE NATURE AND SOURCE OF SUCH SUM SO CREDITED; AND (B) SUCH EXPLANATION IN THE OPINION OF THE ASSESSI NG OFFICER AFORESAID HAS BEEN FOUND TO BE SATISFACTORY: THE ABOVE PROVISO WAS INSERTED WITH EFFECT FROM THE 1ST DAY OF APRIL 2013 SO IT CANNOT BE APPLIED RETROSPECTIVELY. THEREFORE AS PER LAW THE ASSESSEE HAS NO ONUS TO PROVE SOURCE OF SOURCE. HO NBLE MUMBAI HIGH COURT IN THE CASE OF COMMISSIONER OF INCOME TAX 1 VS M/S. GAGANDEEP INFRASTRUCTURE PVT.LTD HELD AS UNDER:- (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 201314 ONWARDS AND NOT FOR THE SUBJECT ASSESSMENT YEAR. IN FACT BEFORE THE TRIBUNAL IT WAS NOT EVEN THE CASE OF THE REVENUE T HAT 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 W AS INTRODUCED FOR REMOVAL OF DOUBTS OR THAT IT IS DECLARATORY. THE REFORE 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 AC T 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 ITA NO. 391/JP/2017 M/S. RAINBOW BUILDCON PVT.LTD. JAIPUR VS AC IT CENTRAL CIRCLE-2 JAIPUR 65 OF THE ACT LAID DOWN BY THE COURTS NAMELY THE GENUI NENESS OF THE TRANSACTION IDENTITY AND THE CAPACITY OF THE INVES TOR HAVE ALL BEEN EXAMINED BY THE IMPUGNED ORDER OF THE TRIBUNAL AND ON FACTS IT WAS FOUND SATISFIED. FURTHER IT WAS A SUBMISSION ON BEH ALF 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 TH E CONTEXT TO THE PRE AMENDED SECTION 68 OF THE ACT HAS HELD THAT WHE RE THE REVENUE URGES THAT THE AMOUNT OF SHARE APPLICATION MONEY HA S BEEN RECEIVED FROM BOGUS SHAREHOLDERS THEN IT IS FOR THE INCOME T AX OFFICER TO PROCEED BY REOPENING THE ASSESSMENT OF SUCH SHAREHO LDERS AND ASSESSING THEM TO TAX IN ACCORDANCE WITH LAW. IT DO ES NOT ENTITLE THE REVENUE TO ADD THE SAME TO THE ASSESSEE'S INCOME AS UNEXPLAINED CASH CREDIT. (F) IN THE ABOVE CIRCUMSTANCES AND PARTICULARLY IN VIEW OF THE CONCURRENT FINDING OF FACT ARRIVED AT BY THE CIT(A ) AND THE TRIBUNAL THE PROPOSED QUESTION OF LAW DOES NOT GIVE RISE TO ANY SUBSTANTIAL QUESTION OF LAW. THUS NOT ENTERTAINED. BUT IN THE CASE OF THE ASSESSEE THE FACT REMAINS TH AT THE ASSESSEE HAS ALSO PROVED SOURCE OF SOURCE BY SUBMITTING THE COPY OF BANK STATEMENT OF THE SHARE APPLICANT COMPANY WHEREIN NO CASH DEPOSIT WAS MADE AGAINST THE SHARE APPLICATION MONEY. THEREFORE THE ADDITION ON SHARE APPLICATION RECEI VED BY THE ASSESSEE CAN NEITHER BE MADE U/S 56(1) OF INCOME TAX ACT 1 961 NOR U/S 68 OF INCOME TAX ACT 1961. THE VARIOUS JUDGMENTS AND ARG UMENTS REGARDING ADDITION MADE U/S 56(1) OF INCOME TAX ACT 1961 HAS BEEN SUBMITTED IN FORGOING PARAS. THE VARIOUS JUDGMENTS REGARDING ADDITION CANNOT BE MADE U/S 68 OF INCOME TAX ACT 1961 ARE A S UNDER:- A) RAJASTHAN HIGH COURT: - (I) CIT-1 JAIPUR V/S M/S. ARL INFRATECH LTD (PB P G 130 TO 143/CASE LAWS) WHEREIN HONBLE RAJASTHAN HIGH COURT HAS RECENTLY CONFIRMED THE FINDINGS OF HONBLE ITAT BY DECIDING THE APPEAL OF REVENUE IN D B ITA NO 24/2014 VIDE ORDER DATED 28/09/2016 REGARDIN G DELETION OF ADDITION OF SHARE CAPITAL MADE BY APPL YING THE PROVISIONS OF 68 OF INCOME TAX ACT 1961. ITA NO. 391/JP/2017 M/S. RAINBOW BUILDCON PVT.LTD. JAIPUR VS AC IT CENTRAL CIRCLE-2 JAIPUR 66 (II) COMMISSIONER OF INCOME-TAX JAIPUR II VERSUS MORANI AUTOMOTIVES (P.) LTD. NO.- D.B. IT APPEAL NO. 619 OF 2011 DATED.- OCTOBER 23 2013 (RAJASTHAN HIGH COURT) (PB PG 144 TO 149/CASE LAWS). THE FINDINGS OF HONBLE RAJASTHAN HIGH COURT WAS AS UNDER:- 10. THE POINTS AS SOUGHT TO BE RAISED BY THE APPELL ANT- REVENUE IN THE PRESENT CASE ARE ALL THE MATTERS REL ATING TO APPRECIATION OF EVIDENCE. THE RELEVANT FACTORS H AVE BEEN TAKEN INTO ACCOUNT AND CONSIDERED BY THE APPEL LATE AUTHORITIES BEFORE RETURNING THE FINDINGS IN FAVOUR OF THE ASSESSEE. EVEN AS REGARDS THE THREE REFERRED SHARE CAPITAL CONTRIBUTORS IT IS NOTICED THAT THEY ARE E XISTING ASSESSEES HAVING PA NUMBERS; AND ARE BEING REGULARL Y ASSESSED TO TAX. THE APPELLATE AUTHORITIES CANNOT B E SAID TO HAVE ERRED IN DELETING THE ADDITIONS IN THEIR RE GARD TOO AT THE HANDS OF ASSESSEE-COMPANY. 11. ULTIMATELY THE QUESTION AS TO WHETHER THE SOURCE OF INVESTMENT OR OF CREDIT HAS BEEN SATISFACTORILY EXPLAINED OR NOT REMAINS WITHIN THE REALM OF APPRECIATION OF EVIDENCE; AND THE COURTS H AVE CONSISTENTLY HELD THAT SUCH A MATTER DOES NOT GIVE RISE TO ANY SUBSTANTIAL QUESTION OF LAW. IN THE CASE OF CIT V. ORISSA CORPN. (P.) LTD. [1986) 159 ITR 78 (SC) THE HON'BLE SUPREME COURT HELD AS UNDER:- '13. IN THIS CASE THE ASSESSEE HAD GIVEN THE NAMES AND ADDRESSES OF THE ALLEGED CREDITORS. IT WA S IN THE KNOWLEDGE OF THE REVENUE THAT THE SAID CREDITOR S WERE INCOME-TAX ASSESSEES. THEIR INDEX NUMBERS WERE IN THE FILE OF THE REVENUE. THE REVENUE APART FROM ISSUING NOTICES UNDER S. 131 AT THE INSTANCE OF THE ASSESSEE DID NOT PURSUE THE MATTER FURTHER. THE REVENUE DID NOT EXAMINE THE SOURCE OF INCOME OF THE SAID ALLEGED CREDITORS TO FIND OUT WHETHER THEY WER E CREDIT-WORTHY OR WERE SUCH WHO COULD ADVANCE THE ALLEGED LOANS. THERE WAS NO EFFORT MADE TO PURSUE T HE SO-CALLED ALLEGED CREDITORS. IN THOSE CIRCUMSTANCES THE ASSESSEE COULD NOT DO ANY THING FURTHER. IN THE PRE MISES IF THE TRIBUNAL CAME TO THE CONCLUSION THAT THE ASS ESSEE ITA NO. 391/JP/2017 M/S. RAINBOW BUILDCON PVT.LTD. JAIPUR VS AC IT CENTRAL CIRCLE-2 JAIPUR 67 HAS DISCHARGED THE BURDEN THAT LAY ON HIM THEN IT COULD NOT BE SAID THAT SUCH A CONCLUSION WAS UNREASONABLE OR PERVERSE OR BASED ON NO EVIDENCE. IF THE CONCLUSION IS BASED ON SOME EVIDENCE ON WHICH A CONCLUSION COULD BE ARRIVED AT NO QUESTION OF LAW AS SUCH ARISES.' 12. IN THE CASE OF CIT V. CHANDRA PRAKASH RANA [200 1] 48 DTR 271 (RAJ.) THIS COURT NOTICED SIMILAR NATUR E GROUNDS URGED ON BEHALF OF THE REVENUE AND FOUND TH E SAME NOT LEADING TO ANY SUBSTANTIAL QUESTION OF LAW . THIS COURT NOTICED OBSERVED AND HELD AS UNDER:- '7. LEARNED COUNSEL FOR THE APPELLANT (REVENUE) CONTENDED THAT FIRSTLY TRIBUNAL ERRED IN ACCEPTING THE EXPLANATION OFFERED BY ASSESSEE IN RELATION TO SOURCE OF INCOME. HIS SECOND SUBMISSION WAS THAT WHAT WAS OFFERED BY ASSESSEE WAS NO EXPLANATION AND HENCE SHOULD NOT HAVE BEEN ACCEPTED AND LASTLY LEAR NED COUNSEL MADE SINCERE ATTEMPT ON HIS PART AFTER TAKI NG US THROUGH FACTUAL SCENARIO OF THE EXPLANATION AND CONTENDED THAT IT CAN NEVER BE TAKEN AS SATISFACTOR Y EXPLANATION FOR DELETING THE ADDITION MADE BY AO. W E DO NOT AGREE TO THIS SUBMISSION FOR MORE THAN ONE REASON. 8. IN THE FIRST PLACE IT IS A PURE QUESTION OF FAC T WHAT TO SAY QUESTION OF LAW MUCH LESS SUBSTANTIAL QUESTION OF LAW. SECONDLY THIS COURT CANNOT AGAIN IN THIS APPEAL UNDERTAKE THE EXAMINATION OF FACTUAL IS SUES NOR CAN DRAW FACTUAL INFERENCES ON THE BASIS OF EXPLANATION OFFERED BY ASSESSEE. THIRDLY ONCE THE EXPLANATION IS ACCEPTED BY THE TWO APPELLATE CO URTS I.E. CIT(A) AND TRIBUNAL IN THIS CASE THEN IN SUCH EVENT A CONCURRENT FINDING RECORDED ON SUCH EXPLANATION B Y TWO APPELLATE COURTS IS BINDING ON THE HIGH COURT. 9. PERUSAL OF IMPUGNED FINDING QUOTED SUPRA WOULD GO TO SHOW THAT TRIBUNAL DID EXAMINE THE EXPLANATION OFFERED BY ASSESSEE IN DETAIL AND THEN RECORDED A FINDING FOR ITS ACCEPTANCE. SUCH FINDING WHEN CHALLENGED DOES NOT CONSTITUTE A SUBSTANTIAL QUESTION OF LAW WITHIN THE MEANING OF S. 260A IBID IN AN APPEAL ARISING OUT OF SUCH ORDER. ITA NO. 391/JP/2017 M/S. RAINBOW BUILDCON PVT.LTD. JAIPUR VS AC IT CENTRAL CIRCLE-2 JAIPUR 68 10. IN OUR OPINION THEREFORE ONCE THE CIT(A) AND TRIBUNAL ACCEPTED THE EXPLANATION OF ASSESSEE A ND ACCORDINGLY DELETED CERTAIN ADDITIONS MADE BY AO HOLDING THE TRANSACTION OF SHARES TO BE GENUINE TH EN IT WOULD NOT INVOLVE ANY SUBSTANTIAL ISSUE OF LAW AS S UCH. IN OTHER WORDS THIS COURT IN ITS APPELLATE JURISDI CTION UNDER S. 260A IBID WOULD NOT AGAIN DE NOVO HOLD YE T ANOTHER FACTUAL INQUIRY WITH A VIEW TO FIND OUT AS TO WHETHER EXPLANATION OFFERED BY ASSESSEE AND WHICH FOUND ACCEPTANCE TO THE CIT(A) AND TRIBUNAL IS GOOD OR BAD OR WHETHER IT WAS RIGHTLY ACCEPTED OR NOT. IT IS ONLY WHEN THE FACTUAL FINDING RECORDED HAD BEEN ENTIRELY DE HORS THE SUBJECT OR THAT IT HAD BEEN BASED ON NO REASONING OR BASED ON ABSURD REASONING TO THE EXTE NT THAT NO PRUDENT MAN OF AVERAGE JUDICIAL CAPACITY CO ULD EVER REACH TO SUCH CONCLUSION OR THAT IT HAD BEEN FOUND AGAINST ANY PROVISION OF LAW THEN A CASE FOR FORMULATION OF SUBSTANTIAL QUESTION OF LAW ON SUCH FINDING CAN BE SAID TO HAVE BEEN MADE OUT. 11. IN OUR VIEW NO SUCH ERROR COULD BE NOTICED BY US IN THE IMPUGNED ORDER BECAUSE AS OBSERVED SUP RA THE TRIBUNAL DID GO INTO THE DETAILS OF EXPLANATION OFFERED BY ASSESSEE AND THEN ACCEPTED THE EXPLANATI ON BY PLACING RELIANCE ON THE DOCUMENTS FILED BY ASSES SEE. AS A CONSEQUENCE THEREOF THE ADDITIONS MADE BY AO CAME TO BE DELETED.' 13. IN CIT V. SHREE BARKHA SYNTHETICS LTD. [2004] 2 70 ITR 477 (RAJ.) IN A SIMILAR NATURE MATTER THIS CO URT OBSERVED THAT THE TRIBUNAL HAVING FOUND THAT THE COMPANIES FROM WHICH THE SHARE APPLICATION MONEY HA D BEEN RECEIVED BY THE ASSESSEE-COMPANY WERE GENUINEL Y EXISTING AND THE IDENTITY OF THE INDIVIDUAL INVESTO RS WERE ALSO ESTABLISHED AND THEY HAD CONFIRMED THE FACT OF MAKING INVESTMENT THE FINDING THAT ASSESSE E HAD DISCHARGED INITIAL BURDEN AND ADDITION UNDER SECTIO N 68 COULD NOT BE SUSTAINED WAS ESSENTIALLY A FINDING O F FACT. THIS COURT SAID - '19. A PERUSAL OF THE AFORESAID FINDING GOES TO SHOW THAT DELETION HAS BEEN MADE ON APPRECIATION OFEVIDENCE WHICH WAS ON RECORD FINDIN G ITA NO. 391/JP/2017 M/S. RAINBOW BUILDCON PVT.LTD. JAIPUR VS AC IT CENTRAL CIRCLE-2 JAIPUR 69 THAT THERE WAS EXISTENCE OF INVESTORS AND THEIR CONFIRMATION HAS BEEN OBTAINED WERE FOUND TO BE SATISFACTORY. ALL THESE CONCLUSIONS ARE CONCLUSIONS OF FACT BASED ON MATERIAL ON RECORD AND THEREFORE CANNOT BE SAID TO BE PERVERSE SO AS TO G IVE RISE TO QUESTION OF LAW WHICH MAY BE REQUIRED TO B E CONSIDERED IN THIS APPEAL UNDER S.260A OF THE IT AC T.' 14. THE RATIO OF THE DECISIONS AFORESAID DIRECTLY A PPLIES TO THE PRESENT CASE TOO. HEREIN AS NOTICED THE AP PELLATE AUTHORITIES HAVE RETURNED THE FINDINGS OF FACT IN FAVOUR OF THE ASSESSEE AFTER DUE APPRECIATION OF TH E EVIDENCE ON RECORD ON RELEVANT CONSIDERATIONS AND ON SOUND REASONINGS. THESE FINDINGS HAVE NEITHER BEEN SHOWN SUFFERING FROM ANY PERVERSITY NOR APPEAR ABSU RD NOR ARE OF SUCH NATURE THAT CANNOT BE REACHED AT AL L. THUS NO CASE FOR INTERFERENCE IN THE FINDINGS OF T HE APPELLATE AUTHORITIES IS MADE OUT. IN THE RESULT THE APPEAL FAILS AND IS THEREFORE DISMISSED. (III) BARKHA SYNTHETICS LTD. VS. ASSTT. CIT (005) 197 CTR (RAJ) 432. (PB PG 150 TO 156/CASE LAWS) SUBSTANTIAL QUESTION OF LAWCASH CREDIT VIS-A-VIS S HARE APPLICATION MONEYTRIBUNAL FOUND THAT 6 OUT OF 7 COMPANIES FROM WHICH THE SHARE APPLICATION MONEY HA D BEEN RECEIVED WERE GENUINELY EXISTING AND NO ENQUIR Y WAS CONDUCTED IN RESPECT OF THE SOURCE OF SHARE APPLICATION MONEY AT THE TIME OF MAKING THE INVESTM ENT IN THE ASSESSEE-COMPANY AND THUS THE ASSESSEE HAS DISCHARGED ITS INITIAL BURDEN EXCEPT IN ONE CASEAS REGARDS INDIVIDUAL INVESTORS THE TRIBUNAL FOUND TH AT IDENTITY OF 9 OUT OF 10 INVESTORS HAS BEEN ESTABLIS HED AND THEY HAVE CONFIRMED THE FACT OF MAKING INVESTME NT IN THE SHARES OF THE ASSESSEE-COMPANY AND NO FURTHE R ENQUIRY WAS DIRECTED BY THE AOTHUS ADDITIONS WERE SUSTAINED ONLY IN RESPECT OF INVESTMENTS SAID TO HA VE BEEN MADE BY U AN INDIVIDUAL INVESTOR AND BY W LTD . FOR THE REASON THAT SUCH INVESTMENTS WERE NOT PROVE D FINDING OF THE TRIBUNAL IS ESSENTIALLY A FINDING OF FACT WHICH IS NOT VITIATED IN LAWNO SUBSTANTIAL QUESTIO N OF LAW ARISE FOR CONSIDERATION. ITA NO. 391/JP/2017 M/S. RAINBOW BUILDCON PVT.LTD. JAIPUR VS AC IT CENTRAL CIRCLE-2 JAIPUR 70 (IV) CIT VS. FIRST POINT FINANCE LTD. (2006) 206 CT R (RAJ) 626 : (2006) 286 ITR 477 (RAJ HC). (PB PG 157 TO 162/CASE LAWS) INCOMECASH CREDITSHARE APPLICATION MONEY TRIBUNAL FOUND THAT THE INVESTORS ARE GENUINELY EXI STING PERSONS AND THEY HAVE FILED CONFIRMATIONS IN RESPEC T OF INVESTMENTS MADE BY THEM AND THEIR STATEMENTS WERE ALSO RECORDEDAMOUNT OF SHARE CAPITAL/SHARE APPLICATION MONEY COULD NOT BE TREATED AS UNEXPLAIN ED CASH CREDITS AND NO ADDITION COULD BE MADE UNDER S. 68NO SUBSTANTIAL QUESTION OF LAW ARISES. (V) COMMISSIONER OF INCOME TAX VS. BHAVAL SYNTHETICS ( RAJ HC) (2013) 84 DTR 0449 (RAJ) (PB PG 163 TO 165/CASE LAWS) HELD THAT EVEN IN CASE OF DOUBT ABOUT SUBSCRIBERS TO INCREASED SHARE CAPITAL AMOUNT OF S HARE CAPITAL COULD NOT BE REGARDED AS UNDISCLOSED INCOME OF COMPANYAMOUNT REFERABLE TO SHARE APPLICATION COULD NOT BE ATTRIBUTED TO ASSESSEE AND COULD NOT BE ASSE SSED IN ITS HANDSAPPEAL DISMISSED (VI) COMMISSIONER OF INCOME TAX VS. AKJ GRANITES (P ) LTD. ( RAJ HC) (2008) 301 ITR 0298 (PB PG 166 TO 168/CASE LAWS) HELD THAT IN RESPECT OF SHARE APPLICATIONS RECEIVED FROM DIFFERENT PLACES ACCOMPA NIED WITH SHARE APPLICATION MONEY NO PRESUMPTION CAN BE DRAWN THAT SAME BELONG TO THE ASSESSEE AND CANNOT B E ASSESSED IN HIS HANDS AS HIS UNDISCLOSED INCOME UNL ESS SOME NEXUS IS ESTABLISHED THAT SHARE APPLICATION MO NEY FOR AUGMENTING THE INVESTMENT IN BUSINESS HAS FLOWN FROM ASSESSEES OWN MONEYNO SUBSTANTIAL QUESTION OF LAW ARISESBARKHA SYNTHETICS LTD. VS. ASSTT. CIT (2005) 197 CTR (RAJ) 432 FOLLOWED. (VII) COMMISSIONER OF INCOME-TAX CENTRAL JAIPUR VERSUS SUPERTECH DIAMOND TOOLS (PVT) LTD. (RAJ HC) D. B. IT APPEAL NO. 74 OF 2012 DATED: - 12 DECEMBER 2013. (PB PG 169 TO 174/CASE LAWS) (VIII) COMMISSIONER OF INCOME-TAX - I JAIPUR VERSU S AL LALPURIA CONSTRUCTION (P.) LTD (RAJ HC) D.B. IT ITA NO. 391/JP/2017 M/S. RAINBOW BUILDCON PVT.LTD. JAIPUR VS AC IT CENTRAL CIRCLE-2 JAIPUR 71 APPEAL NOS. 256 OF 2010 AND 26 & 39 OF 2011 DATED: - 25 FEBRUARY 2013. (PB PG 175 TO 176/CASE LAWS) (IX) COMMISSIONER OF INCOME-TAX AJMER VERSUS HS. BUILDERS (P.) LTD. D.B. INCOME TAX (RAJ HC) APPEAL NO. 48 OF 2006 DATED: - 03 MARCH 2012. (PB PG 177 TO 185/CASE LAWS) (X) CIT VS JAI KUMAR BAKLIWAL (2014) 101 DTR (RAJ) 377 : (2014) 267 CTR (RAJ) 396 (PB PG 186 TO 192/CASE LAWS). NO LIABILITY TO PROVE SOURCE OF SOURCE. (XI) ARAVALI TRADING CO VS INCOME TAX OFFICER (2008 ) 8 DTR (RAJ) 199. (PB PG 193 TO 200/CASE LAWS) BURDEN OF THE ASSESSEE STANDS DISCHARGED WHEN THE IDENTITY OF THE CREDITORS IS ESTABLISHED AND HE CON FIRMS THE LOANS. (XII) CIT VS HEERA LAL CHAGAN LAL TANK (2002) 157 I TR 281 (RAJ) (PB PG 201 TO 202/CASE LAWS) BURDEN OF THE ASSESSEE STANDS DISCHARGED WHEN THE IDENTITY OF THE CREDITORS IS ESTABLISHED AND HE CONFIRMS THE LOANS. B) ITAT JAIPUR/JODHPUR I) SHALIMAR BUILDCON (P) LTD. VS ITO (2011) 128 ITD 0396 (JAIPUR) (PB PG 214 TO 238/CASE LAWS) IN THIS CASE HONBLE ITAT JAIPUR BENCH HAS RELIED ON ITS OLD DECISION IN THE CASE OF HOTEL GAUDAVAN ITA NO. 1162 AND 1137/JP/2008 AND ADDITION ON ACCOUNT O F SHARE CAPITAL WAS DELETED. 28.5 ON IDENTICAL ISSUE THE TRIBUNAL JAIPUR BENCH IN THE CASE OF HOTEL GAUDAVAN (P) LTD. (SUPRA) HAS HEL D AS UNDER : '6. AS REGARDS THE ISSUE ON MERIT IN THE DEPARTMENT AL APPEAL WE CONCUR WITH THE VIEWS OF THE LEARNED CIT (A) THAT THE AO HAS NOT CONSIDERED THE EXPLANATION OF T HE ASSESSEE. THE AMOUNT UNDER CONSIDERATION OF RS. 1.8 9 ITA NO. 391/JP/2017 M/S. RAINBOW BUILDCON PVT.LTD. JAIPUR VS AC IT CENTRAL CIRCLE-2 JAIPUR 72 CRORE HAS BEEN RECEIVED BY THE ASSESSEE AS SHARE APPLICATION MONEY FROM M/S JALKANTA TECHNICAL & FINANCIAL SERVICE (P) LTD. (JTFSPL) AFTER A PROPER RESOLUTION PASSED BY THE BOARD OF DIRECTORS OF THE AFORESAID COMPANY THROUGH BANKING CHANNEL. M/S JTFSPL IS HAVING PERMANENT ACCOUNT AND FILING ITS RETURN OF INCOME REGULARLY. THE AO HAS NOWHERE MENTIONED THAT MONEY BELONGS TO THE ASSESSEE COMPAN Y AND THEREFORE PROVISIONS OF S. 68 CANNOT BE INVOKE D. THE LEARNED CIT(A) HAS RIGHTLY RELIED UPON THE DECI SION OF HONBLE DELHI HIGH COURT IN THE CASE OF CIT VS. STELLER INVESTMENT LTD. (2000) 164 CTR (SC) 287 WHI CH HAS BEEN CONFIRMED BY THE HONBLE SUPREME COURT OF INDIA. THE LEARNED CIT(A) HAS ALSO RELIED UPON THE DECISION OF HONBLE JURISDICTIONAL HIGH COURT IN TH E CASE OF BARKHA SYNTHETICS LTD. VS. ASSTT. CIT (2005 ) 197 CTR (RAJ) 432 AND ALSO THE DECISION OF TRIBUNAL JODHPUR BENCH IN THE CASE OF UMA POLYMERS (P) LTD. VS. DY. CIT (DT. 27TH FEB. 2006) [REPORTED AT (2006) 1 01 TTJ (JD)(TM) 124ED.] WHERE IT HAS BEEN HELD THAT T HE ASSESSEE HAS TO PROVE THE EXISTENCE OF THE SHAREHOL DERS WHICH IN THE PRESENT CASE IS NOT UNDER DISPUTE. THEREFORE THE ASSESSEE HAS DISCHARGED THE BURDEN A ND THEREFORE THE AO WAS NOT JUSTIFIED IN MAKING ANY ADDITION UNDER S. 68 OF THE ACT. THE LEARNED COUNSE L FOR THE ASSESSEE HAS REFERRED TO THE DECISION OF HONBL E SUPREME COURT OF INDIA IN THE CASE OF DIVINE LEASIN G & FINANCE LTD. DT. 21ST JAN. 2008 THE COPY OF WHICH IS PLACED ON RECORD WHERE IT HAS BEEN OBSERVED BY THE SUPREME COURT AS UNDER : CAN THE AMOUNT OF SHARE MONEY BE REGARDED AS UNDISCLOSED INCOME UNDER S. 68 OF IT ACT 1961 ? WE FIND NO MERIT IN THIS SLP FOR THE SIMPLE REASON THA T IF THE SHARE APPLICATION MONEY IS RECEIVED BY THE ASSESSEE COMPANY FROM ALLEGED BOGUS SHAREHOLDERS WHOSE NAMES ARE GIVEN TO THE AO THEN THE DEPARTMENT IS F REE TO PROCEED TO REOPEN THEIR INDIVIDUAL ASSESSMENTS I N ACCORDANCE WITH LAW. THEREFORE WE FIND NO INFIRMIT Y IN THE ORDER OF THE LEARNED CIT(A) WITH THE IMPUGNED JUDGMENT. ITA NO. 391/JP/2017 M/S. RAINBOW BUILDCON PVT.LTD. JAIPUR VS AC IT CENTRAL CIRCLE-2 JAIPUR 73 THE SAID DECISION OF HONBLE SUPREME COURT OF INDIA HAS BEEN FOLLOWED BY THE TRIBUNAL DELHI BENCH IN T HE CASE OF ITO VS. BHOR MAL DHANSI RAM LTD. IN ITA NO. 4670/DEL/2007 DT. 3RD MARCH 2006. THE COPY OF THE SAID DECISION OF TRIBUNAL DELHI BENCH IS PLACED ON RECORD. THE LEARNED COUNSEL FOR THE ASSESSEE SHRI H .M. SINGHVI CHARTERED ACCOUNTANT HAS ALSO RELIED UPON THE DECISION OF HONBLE SUPREME COURT OF INDIA ON THE S AID ISSUE IN THE CASE OF CIT VS. LOVELY EXPORTS (P) LTD . (2008) 216 CTR (SC) 195 : (2008) 6 DTR (SC) 308 WHEREIN IT HAS BEEN HELD THAT IF THE SHARE APPLICAT ION MONEY IS RECEIVED BY THE ASSESSEE COMPANY FROM ALLEGED BOGUS SHAREHOLDERS WHOSE NAMES ARE GIVEN T O THE AO THEN THE DEPARTMENT IS FREE TO PROCEED TO REOPEN THEIR INDIVIDUAL ASSESSMENTS IN ACCORDANCE W ITH LAW BUT IT CANNOT BE REGARDED AS UNDISCLOSED INCOM E OF ASSESSEE COMPANY.' 28.6 THE HONBLE DELHI HIGH COURT IN THE CASE OF CIT VS. DIVINE LEASING & FINANCE LTD. (SUPRA) HAD AN OCCASION TO CONSIDER THE ADDITION ON ACCOUNT OF SHA RE APPLICATION MONEY. WE ARE REPRODUCING THE HELD PORT ION FROM THE DECISION OF HONBLE DELHI HIGH COURT AS MENTIONED IN (2007) 207 CTR (DEL) 38 (SUPRA). 'INCOMECASH CREDITSHARE APPLICATION MONEY BURDEN OF PROOF CAN SELDOM BE DISCHARGED TO THE HIL T BY THE ASSESSEEIF THE AO HARBOURS DOUBTS OF THE LEGITIMACY OF ANY SUBSCRIPTION HE IS EMPOWERED NAY DUTY-BOUND TO CARRY OUT THOROUGH INVESTIGATIONSBU T IF THE AO FAILS TO UNEARTH ANY WRONG OR ILLEGAL DEALIN GS HE CANNOT OBDURATELY ADHERE TO HIS SUSPICIONS AND T REAT THE SUBSCRIBED CAPITAL AS THE UNDISCLOSED INCOME OF THE COMPANYIF RELEVANT DETAILS OF ADDRESS AND IDENTITY OF THE SUBSCRIBERS ARE FURNISHED TO THE DEPARTMENT ALO NG WITH COPIES OF THE SHAREHOLDERS REGISTERS SHARE APPLICATION FORMS SHARE TRANSFER REGISTER ETC. IT WOULD CONSTITUTE ACCEPTABLE PROOF OR EXPLANATION BY THE ASSESSEEDEPARTMENT WOULD NOT BE JUSTIFIED IN DRAWI NG AN ADVERSE INFERENCE ONLY BECAUSE THE CREDITOR/SUBSCRIBER FAILS OR NEGLECTS TO RESPOND TO ITS NOTICESTRIBUNAL HAS NOTED THAT THE ASSESSEE COMPAN Y IS A PUBLIC LIMITED COMPANY WHICH HAD RECEIVED ITA NO. 391/JP/2017 M/S. RAINBOW BUILDCON PVT.LTD. JAIPUR VS AC IT CENTRAL CIRCLE-2 JAIPUR 74 SUBSCRIPTIONS TO THE PUBLIC ISSUE THROUGH BANKING CHANNELS AND THE SHARES WERE ALLOTTED IN CONSONANCE WITH THE PROVISIONS OF SECURITIES CONTRACT (REGULAT ION) ACT 1956 AS ALSO THE RULES AND REGULATIONS OF DEL HI STOCK EXCHANGECOMPLETE DETAILS WERE FURNISHED TRIBUNAL HAS FURTHER FOUND THAT THE AO HAS NOT BROU GHT ANY POSITIVE MATERIAL OR EVIDENCE WHICH WOULD INDIC ATE THAT THE SHAREHOLDERS WERE BENAMIDARS OR FICTITIOUS PERSONS OR THAT ANY PART OF THE SHARE CAPITAL REPRE SENTED COMPANYS OWN INCOME FROM UNDISCLOSED SOURCES.' 28.7 THE HONBLE APEX COURT IN THE CASE OF CIT VS. LOVELY EXPORTS (P) LTD. (SUPRA) HELD THAT IF THE SH ARE CAPITAL MONEY IS RECEIVED BY THE ASSESSEE COMPANY F ROM ALLEGED BOGUS SHAREHOLDERS THEN THE DEPARTMENT IS F REE TO PROCEED TO REOPEN THE INDIVIDUAL ASSESSMENTS OF SUCH SHAREHOLDERS IN ACCORDANCE WITH LAW. SUCH SHARE APPLICATION MONEY CANNOT BE REGARDED AS UNDISCLOSED INCOME OF THE ASSESSEE COMPANY. 28.8 THE HONBLE HIGH COURT IN THE CASE OF FIRST POINT FINANCE LTD. (SUPRA) HELD THAT BURDEN OF PROOF ON T HE ASSESSEE COMPANY LIES TO THE EXTENT OF MAKING OUT A CASE THAT INVESTOR EXISTS AND THEREAFTER IT IS NOT FOR T HE ASSESSEE TO FURTHER PROVE WHERE THEY HAVE BROUGHT MONEY FROM TO INVEST WITH IT. 28.9 THE HONBLE DELHI HIGH COURT IN THE CASE OF CIT VS. UNITED BIO-TECH (P) LTD. 2010 TIOL-533-HC-DEL HELD THAT IN CASE THE IDENTITY OF THE SHARE APPLICA NTS HAS BEEN ESTABLISHED AND IT IS FOUND THAT THE SAID APPL ICANTS ARE CORPORATE ASSESSEES WHO ARE ASSESSED TO TAX WIT H IT DEPARTMENT THEN THERE IS NO CASE OF ANY SUBSTANTIAL QUESTION OF LAW. IN THE INSTANT CASE THE SHARE APP LICANTS ARE CORPORATE ASSESSEES. 28.10 THE HONBLE DELHI HIGH COURT IN THE CASE OF CIT VS. SAMIR BIO-TECH (P) LTD. (SUPRA) HELD THAT IF INVESTMENTS HAVE BEEN SHOWN BY THE SHARE APPLICANTS IN THEIR AUDITED BALANCE SHEET THEN THE ADDITION CANNO T BE MADE UNDER S. 68 OF THE ACT. ITA NO. 391/JP/2017 M/S. RAINBOW BUILDCON PVT.LTD. JAIPUR VS AC IT CENTRAL CIRCLE-2 JAIPUR 75 28.11 IN VIEW OF THE LEGAL POSITION AS DISCUSSED ABOVE THE AO WAS NOT JUSTIFIED IN MAKING THE ADDITION OF RS. 1.10 CRORE WITHOUT BRINGING ON RECORD ANY MATERIAL FOR THE ADDITION. SIMPLY ON THE BASIS OF INFORMATION WH ICH IS NOT SUBSTANTIATED IN THE COURSE OF ASSESSMENT PROCEEDINGS AGAINST THE ASSESSEE THE AO COULD NOT HAVE ADDED THE AMOUNT. (II) THE HONBLE ITAT JAIPUR BENCH JAIPUR IN ITS JUDGMENT THE CASE OF M/S JADAU JEWELLERS & MANUFACTURERS PVT. LTD. B-1 TRIMUTRI CIRCLE GOVIND MARG JAIPUR IN ITA NO. 686/JP/2014 DATED 14.12.2015 (PB PG 239 TO 267/CASE LAWS) GAVE THE FOLLOWING FINDINGS:- .6.1 ON FACTS ALSO THE ASSESSEE HAS PRODUCED BEF ORE THE ASSESSING OFFICER COPY OF SHARE APPLICATION CONFIRMATION OF THE CASH CREDITORS COPY OF PAN CO PY OF BOARD RESOLUTION COPY OF DIRECTORS REPORT AUDITO RS REPORT COPY OF BALANCE SHEET COPY OF P&L ACCOUNT COPY OF BANK ACCOUNT IN ALL THE CASES TO PROVE THE IDENTITY GENUINENESS AND CREDITWORTHINESS OF THE C ASH CREDITORS. THE LD ASSESSING OFFICER MADE ADDITION O N THE BASIS OF INVESTIGATION CONDUCTED BY THE ITO INVESTIGATION WING KOLKATA BUT THE LD ASSESSING OF FICER OF THE ASSESSEE HAS NOT CLARIFIED WHAT INQUIRY HAD BEEN CONDUCTED AND WHAT EVIDENCES COLLECTED WHICH GOES AGAINST THE ASSESSEE. THE NOTICE U/S 131 ISSUED BY THE ITO INVESTIGATION WING KOLKATA WERE SERVED IN CAS E OF VIDYA AGENCIES PVT. LTD. AND SHIVARPAN MERCANTILES PVT. LTD. BUT COMPLIANCE COULD NOT BE MADE ON THE GIVEN DATE BECAUSE CONCERNED OFFICER WAS ON LEAVE. IN CASE OF MIDDLETON GOODS PVT. LTD. AND LACTRODRYER MARKETING PVT. LTD. NOTICES WERE SERVED ON THE ASS ESSEE AND IN COMPLIANCE TO THE NOTICE THE PARTY SUBMITTE D ALL THE DOCUMENTS IN THE IT OFFICE. THE CASE LAW REFERR ED BY THE LD CIT(A) I.E. DECISION OF HONBLE DELHI HIGH C OURT IN THE CASE OF NIPUN BUILDERS AND DEVELOPERS PVT. L TD. VS. CIT AND VIJAY POWER GENERATOR LTD. VS CIT (SUPR A) ARE NOT SQUARELY APPLICABLE ON THE FACTS OF THE CAS E AS ITA NO. 391/JP/2017 M/S. RAINBOW BUILDCON PVT.LTD. JAIPUR VS AC IT CENTRAL CIRCLE-2 JAIPUR 76 THERE WAS SHORT TIME AVAILABLE WITH THE ASSESSING OFFICER AS WELL AS INVESTIGATION WING OF KOLKATA. T HE COPY OF INQUIRY HAS NOT BEEN PROVIDED BY THE ASSESS ING OFFICER TO THE ASSESSEE. AS PER FINDINGS OF THE HON 'BLE DELHI HIGH COURT IN THE CASE NIPUN BUILDERS AND DEVELOPERS PVT. LTD. VS. CIT (SUPRA) THE INVESTIGA TION OFFICER AT KOLKATA HAD NOT DEPUTED INSPECTOR TO ENQ UIRE THE WHEREABOUTS OF THE COMPANY. THE CASE LAWS REFER RED BY THE ASSESSEE ARE SQUARELY APPLICABLE ON THE FACT S AND CIRCUMSTANCES OF THE APPELLANTS CASE THEREFORE W E REVERSE THE ORDER OF THE LD CIT(A) ON TECHNICAL GRO UND AS WELL AS ON MERIT ALSO. (III) UMA POLYMER (P) LTD. 101 TTJ 124 JODHPUR (PB PG 282 TO 318/CASE LAWS) INCOMECASH CREDIT SHARE APPLICATION MONEYIN RESPECT OF SHARE CAPITAL MONEY THE ASSESSEE-COMPANY HAS TO PROVE ONLY THE EXISTENCE OF THE PERSON IN WHOSE NAME SHARE APPLICA TION IS RECEIVEDNO FURTHER BURDEN IS CAST ON THE ASSESS EE TO PROVE WHETHER THAT PERSON HIMSELF HAS INVESTED THE MONEY OR SOME OTHER PERSON HAS MADE THE INVESTMENT IN HIS NAMEBURDEN TO PROVE THAT THE MONEY DID NOT BELONG TO HIM BUT TO SOMEBODY ELSE IS ON THE REVENUEDISTINCTION BETWEEN A PUBLIC COMPANY AND A PRIVATE COMPANY IS NOT VERY MATERIAL FOR THIS PURPO SE AO TREATED THE INVESTMENTS MADE BY TEN SHAREHOLDERS IN THE ASSESSEE-COMPANY AS BOGUS AND MADE ADDITION UNDER S. 68 NOT JUSTIFIEDIN ALL THE CASES EXCEPT THAT OF V AO HAD OBTAINED THE BANK STATEMENTS OF THE SHAREHOLDERS WHICH CLEARLY SHOW THAT THE ACCOUNTS W ERE REGULARLY MAINTAINED AND THE SHAREHOLDERS HAD MADE DEPOSITSFURTHER THE SHAREHOLDERS ARE ALSO ASSESSE D TO TAXSIMPLY BECAUSE SCRUTINY ASSESSMENTS WERE NOT MADE IN THE CASE OF SHAREHOLDERS SUCH ASSESSMENTS COULD NOT BE MADE IN THE COURSE OF ASSESSMENT OF TH E ASSESSEEHAVING REGARD TO THE INFORMATION COLLECTED BY THE AO FROM THE BANKS IDENTITY OF THE SHAREHOLD ERS WAS FULLY ESTABLISHEDIF ANY SHAREHOLDER IS FOUND T O ITA NO. 391/JP/2017 M/S. RAINBOW BUILDCON PVT.LTD. JAIPUR VS AC IT CENTRAL CIRCLE-2 JAIPUR 77 HAVE MADE UNEXPLAINED INVESTMENT THEN ADDITION OF SUCH INVESTMENT IS REQUIRED TO BE MADE IN THE HANDS OF THE SHAREHOLDER AND NOT IN THE ACCOUNT OF THE ASSES SEE U HAD INVESTED IN THE SHARE CAPITAL THROUGH CHEQUE EXCEPT FOR A SMALL SUM WHICH WAS RETURNED TO HERHE R BANK ACCOUNT SHOWS SEVERAL ENTRIES BOTH CREDIT AND DEBIT WHICH HAVE NO RELATION WITH THE AMOUNT INVES TED WITH THE ASSESSEE-COMPANYMERELY BECAUSE SHE HAS NOT SUBMITTED HER RETURNS AFTER THE ASST. YR. 1984- 85 IT CANNOT BE SAID THAT SHE WAS NOT ASSESSED TO TAXTHO UGH V HAS NOT BEEN SHOWN TO BE ASSESSED TO TAX HE HAD MADE MAJOR PART OF INVESTMENTS TOWARDS SHARE CAPITA L THROUGH CHEQUES AND HIS IDENTITY IS NOT DOUBTED ACCORDINGLY SHARE CAPITAL ADVANCED BY U AND V IS A LSO TO BE ACCEPTED AS GENUINETHEREFORE NO ADDITION OF SHARE CAPITAL MONEY COULD BE MADE IN THE HANDS OF T HE ASSESSEE-COMPANY. (IV) THE LD. JAIPUR TRIBUNAL IN THE CASE OF DCIT V M/S KAMDHENU STEEL AND ALLOYS LTD. 2014-TIOL-709- ITAT - (PB PG 203 TO 213/CASE LAWS) CASE RELATES TO SEARCH AND ISSUE OF SHARES ON PREMIUM. HELD THAT T HE ASSESSEE HAD SUBMITTED THE PARTICULARS OF REGISTRAT ION OF THE APPLICANT COMPANY THE CONFIRMATION FROM THE SH ARE APPLICANTS BANK ACCOUNT DETAILS FROM WHICH PAYMENT THROUGH ACCOUNT PAYEE CHEQUES SO THE ASSESSEE HAD DISCHARGED ITS INITIALLY ONUS. (V) M/S. ARL INFRATECH LTD. VS. THE ACIT ITA NO. 619/JP/2013 (PB PG 268 TO 281/CASE LAWS) ITAT JAIPUR. THE FINDINGS OF HONBLE ITAT WAS AS UNDER:- BEFORE WE PROCEED TO DECIDE THE ISSUE ON MERITS W E WOULD LIKE TO DISCUSS THE SCHEME OF THE ACT AND PRE CEDENTS ON THE ISSUE INVOLVED IN THIS APPEAL AS UNDER:- IN CASES WHERE SHARE APPLICATION MONEY IS FOUND R ECORDED IN THE BOOKS OF AN ASSESSEE WHICH MAY REPRESENT CRE DIT IN THE BOOKS AND THE SHARE APPLICANT IS IDENTIFIED THAT A MOUNT CANNOT BE ADDED IN THE ASSESSEE'S HANDS U/S 68 OF T HE ACT. ITA NO. 391/JP/2017 M/S. RAINBOW BUILDCON PVT.LTD. JAIPUR VS AC IT CENTRAL CIRCLE-2 JAIPUR 78 THE HON'BLE RAJASTHAN HIGH COURT HAS REPEATEDLY REI TERATED THE ABOVE LEGAL POSITION. THESE CASES ARE: (I) CIT VS. SHREE BARKHA SYNTHETICS LTD. 182 CTR 17 5 (RAJ.) (II) BARKHA SYNTHETICS LTD. VS. ACIT (2005) 197 CT R 432 (RAJ).13 IN COMING TO THE ABOVE CONCLUSION THE HON'BLE JURISDICTIONAL HIGH COURT HAS CONSIDERED AT LENGTH THE RELEVANT DECISIONS ON THE ISSUE LIKE CIT VS. STELLE R INVESTMENT LTD. (2000) 164 CTR (SC) 287 = 251 ITR 263 (SC) WHI CH HAS CONFIRMED THE DECISION OF HON'BLE DELHI HIGH COURT REPORTED IN (1992) 192 ITR 287. THE HON'BLE COURT HAS GONE T O THE EXTENT OF STATING THAT EVEN IF IT BE ASSUMED THAT T HE SUBSCRIBER TO THE SHARE CAPITAL ARE NOT GENUINE NEVERTHELESS UNDER NO CIRCUMSTANCES CAN THE AMOUNT OF SHARE CAPITAL BE RE GARDED AS UNDISCLOSED INCOME OF THE ASSESSEE. IN THIS CASE THE SHARE SUBSCRIBER IS IDENTIFIED. THERE CAN BE NO DISPUTE R EGARDING THE ABOVE STATED LEGAL POSITION. THE FOLLOWING DECI SIONS ALSO LAY DOWN THE SAME RATIO:- (I) CIT VS. LOVELY EXPORTS (P) LTD. (2008) 6 DTR 30 8 (SC) (II) CIT VS. DOLPHIN CONPACK LTD. (2006) 283 ITR 19 0 (DEL.) (III) CIT VS. GUJARAT HEAVY CHEMICALS LTD. (202) 25 6 ITR 795(SC) (IV) CIT VS. KWICK TRAVELS (1992) 199 ITR (ST.) 85 (SC) THIS ISSUE HAS BEEN DEALT AT LENGTH BY THE THIRD ME MBER IN THE CASE OF UMA POLYMERS (P) LTD. VS. DCIT (2006) 101 TTJ (JD.) T.M. 126 = (2006) 284 ITR (AT) 1 JODHPUR. 2.6 ADVERTING THE FACTS OF THE GIVEN CASE WE ARE OF THE CONSIDERED OPINION THAT ALL THE SHARE APPLICANTS ST AND IDENTIFIED. THE ASSESSEE HAS PROVIDED PANS OF THE S HARE APPLICANTS. THE MODE OF PAYMENT HAS ALSO BEEN MADE EXPLAINED. THERE IS NO DIRECT OR INDIRECT RELATION BETWEEN THE ASSESSEE COMPANY AND THE SHARE APPLICANTS. THE STAT EMENTS RECORDED DURING SURVEY HAS GOT NO EVIDENTIARY VALUE AND THE LAW IS VERY MUCH SETTLED ON THIS ISSUE. IN ANY CASE EVEN UNDER THE PROVISIONS OF SECTION 68 OF THE ACT THE ASSESSEE CANNOT BE FORCED TO PROVE THE SOURCE OF THE SOURCE. THE LAW ON THIS SUBJECT IS ALSO SETTLED BY NUMEROUS DECISIO NS. THE ALLEGED REPORT OF THE INSPECTOR OF THE DEPARTMENT W HO IS STATED TO HAVE VISITED AT THE GIVEN ADDRESSES OF TH E SHARE APPLICANTS WAS NEVER PUT OR CONFRONTED TO THE ASSES SEE. THE CUMULATIVE EFFECTS OF THESE REASONS IS THAT THE IMP UGNED ADDITION CANNOT BE ADDED IN THE HANDS OF THE ASSESS EE COMPANY. ACCORDINGLY WE ORDER TO DELETE THE ENTIRE ADDITIONS AND ALLOW THE APPEAL OF THE ASSESSEE. ITA NO. 391/JP/2017 M/S. RAINBOW BUILDCON PVT.LTD. JAIPUR VS AC IT CENTRAL CIRCLE-2 JAIPUR 79 3.0 IN THE RESULT THE APPEAL OF THE ASSESSEE STAND S ALLOWED. THE DEPARTMENT FILED APPEAL BEFORE HONBLE RAJASTHAN HIGH COURT. HONBLE RAJASTHAN HIGH COURT CONFIRMED THE FINDINGS OF HONBLE ITAT BY DECIDING THE APPEAL OF REVENUE IN DB ITA NO 24/2014 VIDE ORDER DATED 28/09/2016 (C) OTHER HIGH COURTS (I) 2014 (8) TMI 605 - MADRAS HIGH COURT THE COMMISSIONER OF INCOME TAX VERSUS PRANAV FOUNDATIONS LTD. T. C. (A). NO. 262 OF 2014 DATED - 12 AUGUST 2014 (PB PG 343 TO 346/CASE LAWS) ADDITION U/S 68 SHARE APPLICATION AND SHARE PREMI UM AMOUNT CREDITED BUT NOT PROVED - WHETHER THE TRIBUN AL WAS RIGHT IN UPHOLDING THE ORDER OF THE CIT(A) WHO DELETED THE ADDITION MADE U/S 68 BEING THE SHARE APPLICATION MONEY AND SHARE PREMIUM AMOUNT CREDITED BY THE ASSESSEE WHICH WAS NOT PROVED HELD THAT:- FOLLOWING THE DECISION IN CIT V. LOVELY EXPORTS (P) LTD. [2008 (1) TMI 575 - SUPREME COURT OF INDIA] - ALL THE FOUR PARTIES WHO ARE SUBSCRIBERS OF THE SHARES ARE LIMITED COMPANIES AND ENQUIRIES WERE MA DE AND RECEIVED FROM THE FOUR COMPANIES AND ALL THE COMPANIES ACCEPTED THEIR INVESTMENT - THE ASSESSEE HAS CATEGORICALLY ESTABLISHED THE NATURE AND SOURCE OF THE SUM AND DISCHARGED THE ONUS THAT LIES ON IT IN TERM S OF SECTION 68 OF THE ACT - WHEN THE NATURE AND SOURCE OF THE AMOUNT SO INVESTED IS KNOWN IT CANNOT BE SAID TO BE UNDISCLOSED INCOME - THE ADDITION OF SUCH SUBSCRIPT IONS AS UNEXPLAINED CREDIT UNDER SECTION 68 OF THE ACT I S UNWARRANTED DECIDED AGAINST REVENUE. (II) CIT VS. ILLAC INVESTMENT (P) LTD. (2007) 207 C TR (DEL) 687; (PB PG 341 TO 342/CASE LAWS) ASSESSEE- COMPANY HAS SATISFACTORILY ESTABLISHED THE IDENTITY OF THE SHARE SUBSCRIBERS AND DELETED THE ADDITION UNDE R S. 68 NO SUBSTANTIAL QUESTION OF LAW ARISES FOR CONSIDERATION. (III) CIT VS. DIVINE LEASING & FINANCE LTD. (2007) 207 CTR (DEL) 38; (PB PG 321 TO 340/CASE LAWS) ITA NO. 391/JP/2017 M/S. RAINBOW BUILDCON PVT.LTD. JAIPUR VS AC IT CENTRAL CIRCLE-2 JAIPUR 80 INCOMECASH CREDITSHARE APPLICATION MONEY BURDEN OF PROOF CAN SELDOM BE DISCHARGED TO THE HIL T BY THE ASSESSEEIF THE AO HARBOURS DOUBTS OF THE LEGITIMACY OF ANY SUBSCRIPTION HE IS EMPOWERED NAY DUTYBOUND TO CARRYOUT THOROUGH INVESTIGATIONSBUT IF THE AO FAILS TO UNEARTH ANY WRONG OR ILLEGAL DEALIN GS HE CANNOT OBDURATELY ADHERE TO HIS SUSPICIONS AND TREA T THE SUBSCRIBED CAPITAL AS THE UNDISCLOSED INCOME OF THE COMPANYIF RELEVANT DETAILS OF ADDRESS AND IDENTITY OF THE SUBSCRIBERS ARE FURNISHED TO THE DEPARTMENT ALO NG WITH COPIES OF THE SHAREHOLDERS REGISTER SHARE APPLICATION FORMS SHARE TRANSFER REGISTER ETC. IT WOULD CONSTITUTE ACCEPTABLE PROOF OR EXPLANATION BY THE ASSESSEEDEPARTMENT WOULD NOT BE JUSTIFIED IN DRAWI NG AN ADVERSE INFERENCE ONLY BECAUSE THE CREDITOR/SUBSCRIBER FAILS OR NEGLECTS TO RESPOND TO ITS NOTICESTRIBUNAL HAS NOTED THAT THE ASSESSEE-COMPAN Y IS A PUBLIC LIMITED COMPANY WHICH HAD RECEIVED SUBSCRIPTIONS TO THE PUBLIC ISSUE THROUGH BANKING CHANNELS AND THE SHARES WERE ALLOTTED IN CONSONANCE WITH THE PROVISIONS OF SECURITIES CONTRACT (REGULAT ION) ACT 1956 AS ALSO THE RULES AND REGULATIONS OF DEL HI STOCK EXCHANGECOMPLETE DETAILS WERE FURNISHED TRIBUNAL HAS FURTHER FOUND THAT THE AO HAS NOT BROU GHT ANY POSITIVE MATERIAL OR EVIDENCE WHICH WOULD INDIC ATE THAT THE SHAREHOLDERS WERE BENAMIDARS OR FICTITIOUS PERSONS OR THAT ANY PART OF THE SHARE CAPITAL REPRE SENTED COMPANYS OWN INCOME FROM UNDISCLOSED SOURCESAS REGARDS RECEIPT OF SHARE CAPITAL ON ISSUE OF RIGHTS SHARES TO FIVE COMPANIES THESE COMPANIES WERE DULY INCORPORATED UNDER THE SIKKIMESE COMPANIES ACT AND WERE ASSESSED UNDER THE SIKKIMESE TAXATION MANUAL THEIR SHARE SUBSCRIPTIONS WERE ALSO RECEIVED THROUG H BANKING CHANNELS AND FOUND TO BE VALID BY THE JURISDICTIONAL AOTHEREFORE NO ADDITION COULD BE MADE UNDER S. 68 (IV) CIT V/S VALUE CAPITAL SERVICES P LTD. 307 ITR 334 (DELHI) (PB PG 319-3202/CASE LAWS) HELD THAT THERE IS ADDITIONAL BURDEN ON THE DEPARTMENT TO SHOW THAT EV EN IF SHARE APPLICANTS DID NOT HAVE THE MEANS TO MAKE INVESTMENT THE INVESTMENT MADE BY THEM ACTUALLY EMANATED FROM THE COFFERS OF THE ASSESSEE SO AS TO ITA NO. 391/JP/2017 M/S. RAINBOW BUILDCON PVT.LTD. JAIPUR VS AC IT CENTRAL CIRCLE-2 JAIPUR 81 ENABLE IT TO BE TREATED AS UNDISCLOSED INCOME OF TH E ASSESSEE. (V) CIT V/S STL EXTRUSION (P) LTD. 333 ITR 269 (MP) (PB PG 347 TO 350/CASE LAWS) INCOMECASH CREDIT SHARE APPLICATION MONEYASSESSEE HAS DULY ESTABLISHED THE IDENTITY AND SOURCE OF CREDITS ADDITIONS NOT SUSTAINABLE. (VI) CIT V/S ARUNANDA TEXTILES (P) LTD. 333 ITR 116 (KARNATAKA) (PB PG 351 TO 353/CASE LAWS) SHARE APPLICATION MONEYASSESSEE ABLE TO IDENTIFY THE SHAREHOLDERSIT IS NOT FOR THE ASSESSEE-COMPANY TO ESTABLISH BUT IT IS FOR THE DEPARTMENT TO ENQUIRE W ITH THE INVESTORS ABOUT THE CAPACITY TO INVEST THE AMOUNT I N THE SHARES. (VII) BHAV SHAKTI STEEL MINES (P) LTD. VS. CIT (200 9) 18 DTR (DEL) 194 INCOMECASH CREDITGENUINENESS CIT(A) NOT ONLY FOUND THAT THE IDENTITY OF EACH OF THE SHAREHOLDERS STOOD ESTABLISHED BUT ALSO EXAMINED T HE FACT THAT EACH OF THEM WERE INCOME-TAX ASSESSEES AN D HAD DISCLOSED THE SHARE APPLICATION MONEY IN THEIR ACCOUNTS WHICH WERE DULY REFLECTED IN THEIR IT RETU RNS AS WELL AS IN THEIR BALANCE SHEETSTRIBUNAL WAS NOT THEREFORE JUSTIFIED IN COMING TO THE CONCLUSION THA T THE CIT(A) HAD NOT CONSIDERED THE MATTER IN THE RIGHT PERSPECTIVEORDER PASSED BY TRIBUNAL REMANDING THE MATTER FOR EXAMINING THE SHARE APPLICANTS SET ASIDE AND THAT OF CIT(A) RESTORED (D) OTHER BENCHES OF ITAT (I) ITO V M/S. RELIANCE MARKETING PVT. LTD. 2015- TIOL-319-TAT-DEL (PB PG 367 TO 375/CASE LAWS) IDENTITY OF THE CREDITORS/SHARE APPLICANTS BY FURNI SHING THEIR PAN NUMBER AND COPY OF ACKNOWLEDGMENT OF INCOME-TAX RETURN. THE AMOUNT ON ACCOUNT OF SHARE APPLICATION WAS RECEIVED THROUGH BANKING CHANNEL COPIES OF THE CONFIRMATION ALONGWITH AFFIDAVIT OF T HE PARTIES WERE FURNISHED. THE ASSESSEE ALSO FURNISHED THE COPY OF SHARE APPLICATION FORMS COPY OF FORM NO.2 FILED WITH REGISTER OF COMPANIES (ROC) SHOWING ITA NO. 391/JP/2017 M/S. RAINBOW BUILDCON PVT.LTD. JAIPUR VS AC IT CENTRAL CIRCLE-2 JAIPUR 82 ALLOTMENT OF SHARES TO THE APPLICANTS. THEREFORE T HE ASSESSEE DISCHARGED THE ONUS CAST UPON IT (II) INCOME TAX OFFICER VS. MS. SUPERLINE CONSTRUCTION P. LTD. ITAT BOMBAY TRIBUNAL (A) ITA NO. 3644 TO 3648 3650 3651MUM/2014 30TH NOVEMBER 2015 (2015) 45 CCH 0281 MUM TRIB. (PB PG 376 TO 392/CASE LAWS) ADDITIONADDITION ON ACCOUNT OF BOGUS SHARE APPLICATION MONEYASSESSEE WAS IN BUSINESS OF BUILDER AND DEVELOPERASSESSMENT WAS COMPLETED U/S 143(3) R.W.S. 147RE-ASSESSMENT PROCEEDINGS WERE INITIATED ON BASIS OF INFORMATION RECEIVED FROM DIRECTORATE OF INCOME-TAX (INVESTIGATION) WITHOUT RECORDING AOS OWN SATISFACTION AND INFORMATION WAS ACCEPTED IN MECHANICAL MANNERAFTER REOPENING OF ASSESSMENT U/S 147 AO MADE ADDITION OF RS.40 LAKHS RECEIVED BY ASSESSEE FROM VARIOUS CORPORATE ENTITIE S ADDITION WAS MADE BY AO ON ACCOUNT OF BOGUS SHARE APPLICATION MONEY UNDER PROVISIONS OF S 68CIT(A) DELETED ADDITION MADE BY AOHELD IN CASE OF CIT VS . M/S. LOVELY EXPORTS (PVT) LTD REPORTED IN [2008] 2 16 CTR 195 (SC) IT WAS HELD THAT IF SHARE APPLICATION MONEY WAS RECEIVED BY ASSESSEE COMPANY FROM ALLEGED BOGUS SHAREHOLDERS WHOSE NAME WERE GIVEN TO AO THEN DEPARTMENT WAS FREE TO PROCEED TO REOPEN THEIR INDIVIDUAL ASSESSMENTS IN ACCORDANCE WITH LAW BUT I T COULD NOT BE REGARDED AS UNDISCLOSED INCOME OF ASSE SSEE COMPANYIT WAS SUBMITTED BY ASSESSEE THAT AO HAD FAILED TO APPRECIATE STATEMENTS OF ANY PERSON RECOR DED U/S 143(3) R.W.S. 147THAT ASSESSEE-COMPANY HAD FUL LY DISCHARGED BURDEN OF PROOF ONUS OF PROOF AND EXPLA INED SOURCE OF SHARE CAPITAL AND ADVANCES RECEIVED BY ESTABLISHED IDENTITY CREDITWORTHINESS AND GENUINEN ESS OF TRANSACTION BY BANKING INSTRUMENTS WITH DOCUMENT ARY EVIDENCESASSESSEE COMPANY SUBSTANTIATED DETAILS WITH DOCUMENTARY EVIDENCES AS EXTRACTED FROM WEBSIT E OF MINISTRY OF CORPORATE AFFAIRS GOVERNMENT OF IND IA BEFORE AOTHESE FACTS HAD NOT BEEN REBUTTED ON BEHALF OF REVENUEITAT WAS NOT INCLINED TO INTERFER E WITH FINDINGS OF CIT(A) WHO THUS RIGHTLY DELETED EN TIRE IMPUGNED ADDITIONS OF RS.40 LAKHS MADE BY AO U/S 68 ITA NO. 391/JP/2017 M/S. RAINBOW BUILDCON PVT.LTD. JAIPUR VS AC IT CENTRAL CIRCLE-2 JAIPUR 83 ON ACCOUNT OF SHARE CAPITAL SUBSCRIPTION RECEIVED B Y ASSESSEE-COMPANY HELD: IT WAS POINTED OUT IN THE CASE OF CIT VS. M/S. LOV ELY EXPORTS (PVT) LTD REPORTED IN [2008] 216 CTR 195 ( SC) THAT IF THE SHARE APPLICATION MONEY IS RECEIVED BY THE ASSESSEE COMPANY FROM ALLEGED BOGUS SHAREHOLDERS WHOSE NAME ARE GIVEN TO THE AO THEN THE DEPARTMENT IS FREE TO PROCEED TO REOPEN THEIR INDIVIDUAL ASSESSME NTS IN ACCORDANCE WITH LAW BUT IT CANNOT BE REGARDED AS UNDISCLOSED INCOME OF ASSESSEE COMPANY. (PARA 2.3) IN THIS BACKGROUND IT WAS SUBMITTED ON BEHALF OF THE ASSESSEE THAT THE ASSESSING OFFICER FAILED TO APPRE CIATE THAT THERE WAS NO DOCUMENTARY EVIDENCE AGAINST THE ASSESSEE-COMPANY TO SUPPORT SUCH IMPUGNED ADDITIONS . IT WAS FURTHER SUBMITTED BY THE ASSESSEE THAT THE ASSESSING OFFICER FAILED TO APPRECIATE THAT THE STATEMENTS OF ANY PERSON RECORDED U/S 143(3) R.W.S. 147. THE ASSESSEE-COMPANY HAD FULLY DISCHARGED THE BURDE N OF PROOF ONUS OF PROOF AND EXPLAINED THE SOURCE OF SHARE CAPITAL AND ADVANCES RECEIVED BY ESTABLISHED THE IDENTITY CREDITWORTHINESS AND GENUINENESS OF TRANSACTION BY BANKING INSTRUMENTS WITH DOCUMENTARY EVIDENCES. THE FURTHER STAND OF THE ASSESSEE HAD BE EN THAT THE ASSESSEE-COMPANY SUBSTANTIATED THE DETAILS WITH THE DOCUMENTARY EVIDENCES AS EXTRACTED FROM THE WEBSITE OF MINISTRY OF CORPORATE AFFAIRS GOVERNMEN T OF INDIA BEFORE THE ASSESSING OFFICER. THESE FACTS HAD NOT BEEN REBUTTED ON BEHALF OF THE REVENUE. (PARA 2.4) IN VIEW OF THE FACTS AND CIRCUMSTANCES OF THE PRESENT CASE AS WELL AS CONSIDERING THE DECISIONS A S DISCUSSED ABOVE ON THE SIMILAR ISSUE ITAT WAS NOT INCLINED TO INTERFERE WITH THE FINDINGS OF THE CIT( A) WHO HAD RIGHTLY DELETED THE ENTIRE IMPUGNED ADDITIO NS OF RS.40 LAKHS MADE BY THE ASSESSING OFFICER U/S 68 OF THE ACT ON ACCOUNT OF SHARE CAPITAL SUBSCRIPTION RECEIVED BY THE ASSESSEE-COMPANY. (PARA 2.5) CONCLUSION: ITA NO. 391/JP/2017 M/S. RAINBOW BUILDCON PVT.LTD. JAIPUR VS AC IT CENTRAL CIRCLE-2 JAIPUR 84 WHEN ASSESSEE-COMPANY HAD SUBSTANTIATED DETAILS WITH DOCUMENTARY EVIDENCES AS EXTRACTED FRO M WEBSITE OF MINISTRY OF CORPORATE AFFAIRS GOVERNMEN T OF INDIA BEFORE AO THEN ADDITIONS MADE BY AO U/S 6 8 ON ACCOUNT OF SHARE CAPITAL SUBSCRIPTION RECEIVED B Y ASSESSEE-COMPANY WAS RIGHTLY DELETED. (III) MEERA ENGINEERING & COMMERCIAL CO. (P) LTD. V S. ASSTT. CIT (1997) 58 TTJ (JAB) 527 (PB PG 393 TO 399/CASE LAWS) INCOMECASH CREDITSGENUINENESS OF SHARE CAPITAL OF COMPANYALL THE 51 SHAREHOLDERS FILED THEIR AFFIDAVITS AND CONFIRMATORY LETTERS AND 24 OF THEM FILED THEIR REPLIES ALSO TO NOTICE UNDER S. 13 3(6) NAMES OF PARTIES PURCHASING THE SHARES WITH AMOUNT SUBSCRIBED WERE FURNISHED BEFORE AOALL DOCUMENTS CLEARLY SHOW THAT SHAREHOLDERS DO EXIST ASSESSEE- COMPANY HAD DISCHARGED ITS ONUS OF EXPLAINING THE C ASH CREDITS AS REQUIRED UNDER LAWIF THE COMPANY IS ABL E TO ESTABLISH THAT SHAREHOLDERS EXISTED AND THEY HAVE INVESTED MONEY FOR PURCHASE OF SHARES BURDEN OF COMPANY TO PROVE THE CREDIT IS DISCHARGEDIDENTITY OF SHAREHOLDERS NOT IN DISPUTEASSESSEE IS NOT REQUIRE D TO PROVE CREDIT-WORTHINESS OF SHAREHOLDERSADDITION DELETED (IV) ALLEN BRADLEY INDIA LTD. VS. DY. CIT (2002) 74 TTJ (DEL) 604 : (2002) 80 ITD 43 (DEL); INCOMECASH CREDITSUBSCRIPTION TO SHARE CAPITAL AND LOANIN CA SE OF LIMITED COMPANIES JURISDICTION OF AO WOULD BE LIMITED ONLY TO SEE WHETHER IDENTITY OF SHAREHOLDER S IS ESTABLISHED AND WHETHER THEY EXIST OR NOTONCE IDENTITY IS ESTABLISHED THEN POSSIBLY NO FURTHER ENQUIRIES NEED TO BE MADESINCE THE SHAREHOLDERS OF ASSESSEE-COMPANY WERE IN EXISTENCE THEY WERE ASSES SED TO TAX COMPLETE DETAILS WERE AVAILABLE SHARE CAPI TAL MONEY AS WELL AS LOAN WERE RECEIVED THROUGH ACCOUNT PAYEE CHEQUES AND THEY WERE CLEARED THROUGH PROPER BANKING CHANNELS AO WAS NOT JUSTIFIED IN DISBELIEV ING THE CAPITAL INVESTED BY THE SHAREHOLDER COMPANIES SIMILARLY AO WAS NOT JUSTIFIED IN DISBELIEVING THE LOAN TAKEN FROM DTL AS THE CHEQUES WERE CLEARED THROUGH BANK CHANNELS AND CONFIRMATION AND SUPPORTING ITA NO. 391/JP/2017 M/S. RAINBOW BUILDCON PVT.LTD. JAIPUR VS AC IT CENTRAL CIRCLE-2 JAIPUR 85 EVIDENCE WAS FILEDCIT(A) WAS JUSTIFIED IN DELETING THE ADDITIONS. (V) 2017 (3) TMI 1047-ITAT AHMEDABAD INCOME TAX OFFICER WARD 8 (1) AHMEDABAD VERSUS SEVEN STAR AVIATION SERVICES PVT. LTD (PB PG 400 TO 404/CASE LAWS) ADDITION U/S 68 - SHARE APPLICATION MONEY AND UNSECURED LOAN RECEIVED. HELD THAT: - WHE N THE DEPOSITORS ARE REGULAR TAX PAYERS AND THE ADVAN CES MADE BY SUCH DEPOSITORS AS ALSO SHARE APPLICATION MONIES PAID BY SUCH SHAREHOLDERS ARE DULY ACCEPTED IN THEIR PERSONAL ASSESSMENTS THERE CANNOT BE ANY OCC ASION TO HOLD THAT THESE AMOUNTS ARE UNEXPLAINED IN THE H ANDS OF THE COMPANY. THE CREDIT WORTHINESS OR IDENTITY CANNOT BE AN ISSUE IN SUCH A SITUATION. (VI) 2016 (10) TMI 920 - ITAT HYDERABAD M/S. HARIOM CONCAST AND STEEL PVT. LTD. VERSUS INCOME TAX OFFICER WARD-2 (2) HYDERABD (PB PG 405 TO 411/CASE LAWS) ADDITION FOR SHARES ISSUED ON PREMIUM. HELD THAT: - SHARE PREMIUM CANNOT BE BROUG HT TO TAX INVOKING THE PROVISIONS OF SECTION 68 UNLES S THERE IS A LINK WITH EITHER QUID PRO QUO TRANSACTIO N OR INVESTING BY ASSESSEE-COMPANY IN THEIR ACCOUNTS SO AS TO RECEIVE IT BACK AS SHARE CAPITAL. NO SUCH EVIDENCE WAS BROUGHT ON RECORD. (E) SUPREME COURT I) CIT VS. LOVELY EXPORTS (P) LTD. (2008) 216 CTR (SC) 195 INCOMECASH CREDITSHARE APPLICATION MONEYIF THE SHARE APPLICATION MONEY IS RECEIVED BY THE ASSESSEE COMPANY FROM ALLEGED BOGUS SHAREHOLDER S WHOSE NAMES ARE GIVEN TO THE AO THEN THE DEPARTMEN T IS FREE TO PROCEED TO REOPEN THEIR INDIVIDUAL ASSES SMENTS IN ACCORDANCE WITH LAW BUT IT CANNOT BE REGARDED A S UNDISCLOSED INCOME OF ASSESSEE COMPANY. II) CIT VS. STELLER INVESTMENT LTD. (200) 251 ITR 263 (SC) EVEN IF THE SUBSCRIBERS TO THE INCREASED SHARE CAPITAL OF ASSESSEE-COMPANY WERE NOT GENUINE THE AMOUNT COULD NOT BE REGARDED AS UNDISCLOSED INCOME OF THE ASSESSEE-COMPANY. ITA NO. 391/JP/2017 M/S. RAINBOW BUILDCON PVT.LTD. JAIPUR VS AC IT CENTRAL CIRCLE-2 JAIPUR 86 (III) CIT VS ORISSA CORPORATION (P) LTD (1986) 159 ITR 79 (SC) F) RATIO LAID DOWN IN FOLLOWING CASES NOT APPLICAB LE TO THE FACTS OF THE CASE OF ASSESSEE:- I) NOVA PROMOTERS & FINLEASE PVT. LTD (2012) 342 IT R 169 (DELHI HIGH COURT): - SUMMONS SENT TO THE COMPANIES RECEIV ED BACK UNSERVED AND OTHER SUMMONS REMAINED UNCOMPLIED WITH WHEREAS IN THE CASE OF THIS ASSESSEE COMPANY NOTI CE U/S 133(6) WAS SENT TO INVESTOR COMPANIES ALL OF WHICH WERE SERVE D AND SOME OF THEM WERE COMPLIED WITH. II) CIT V/S N. R. PORTFOLIO PVT. LTD 206 (2014) DLT (DB) (DEL)/ 264 CTR 0258 (DEL) ASSESSED U/S 144 OF ITAX ACT. IN THIS CASE THE AO ISSUED SEVERAL NOTICES AND SHOW CAUSE NOTICE WHICH WAS NOT SERVED/COMPLIED AND ASSESSMENT WAS FRAMED U/S 144 O F INCOME TAX ACT. IN OUR CASE ALL THE COMPLIANCES WERE MADE AND EVIDENCES SUBMITTED. III) N TARIKS PROPERTIES PVT. LTD 227 TAXMANN.COM 3 73 (WITH REFERENCE TO DECISION OF DELHI HIGH COURT IN 264 CT R 472) AO NOTICED THAT EXTRACTS OF BANK ACCOUNT HAD BEEN FABR ICATED AND AO FOUND THAT IMMEDIATELY BEFORE ISSUANCE OF CHEQUES FOR THE PURPOSE OF MAKING PAY ORDER OR DEMAND DRAFT THERE WAS DEPOS IT OF CASH. IN OUR CASE NO CASH DEPOSIT IN THE BANK ACCOUNT OF SHA REHOLDER COMPANY. IV) CIT V/S NAVODAYA CASTLE PVT. LTD 367 ITR 306 (D ELHI HIGH COURT) AO FOUND THAT IMMEDIATELY BEFORE ISSUANCE OF CHEQU ES FOR THE PURPOSE OF MAKING PAY ORDER OR DEMAND DRAFT THE RE WAS DEPOSIT OF CASH. IN OUR CASE NO CASH DEPOSIT IN THE BANK ACCOUNT OF SHAREHOLDER COMPANY. V) CIT V/S MAF ACADEMY PVT. LTD 206 (2014) DLT 277 (DB)(DEL)/ 361 ITR 0285 (DEL) AO FOUND THAT IMMEDIATELY BEFORE ISSUANCE OF CHEQUES FOR THE PURPOSE OF MAKING PAY ORDER OR DEMA ND DRAFT THERE WAS DEPOSIT OF CASH. IN OUR CASE NO CASH DEPOSIT IN THE BANK ACCOUNT ITA NO. 391/JP/2017 M/S. RAINBOW BUILDCON PVT.LTD. JAIPUR VS AC IT CENTRAL CIRCLE-2 JAIPUR 87 OF SHAREHOLDER COMPANY. FURTHER THE SUMMONS U/S SE CTION 131 OF I.TAX ACT WERE SENT TO THE SHAREHOLDERS WHICH WERE RECEIVED BACK UN- SERVED. IN VIEW OF THE ABOVE SUBMISSION THE HUMBLE ASSESS EE PRAYS YOUR HONOR KINDLY TO DISMISS THE APPEAL FILED BY THE DEPARTMEN T. 3.6 WE HAVE HEARD THE RIVAL CONTENTIONS AND PERUSED THE MATERIALS AVAILABLE ON RECORD. IT IS PERTINENT TO MENTION THA T THE SIMILAR ISSUE HAS BEEN DEALT WITH AND DECIDED BY THIS BENCH OF ITAT V IDE ITS ORDER DATED 30-10-2017 IN THE CASE OF ACIT CENTRAL CIRCLE-2 J AIPUR VS MOTISONS BUILDTECH PVT. LTD IN ITA NO. 481/JP/2017 (REVENUE S APPEAL) FOR THE ASSESSMENT YEAR 2009-10. SINCE THE ISSUE RAISED BY THE REVENUE IN THE PRESENT APPEAL IS SAME AS DECIDED IN THE APPEAL OF THE REVENUE IN ITA NO.481/JP/2017FOR THE ASSESSMENT YEAR 2009-10 IN TH E CASE OF ACIT CENTRAL CIRCLE-2 JAIPUR VS MOTISONS BUILDTECH PVT. LTD JAIPUR (SUPRA) WHICH SHALL APPLY MUTATIS MUTANDIS IN THE PRESENT A PPEAL OF REVENUE ALSO. THUS SOLITARY GROUND OF ITA NO.491/JP/2017 FOR THE A.Y. 2009-10 OF REVENUES APPEAL IS DISMISSED. ITA NO. 391/JP/2017 M/S. RAINBOW BUILDCON PVT.LTD. JAIPUR VS AC IT CENTRAL CIRCLE-2 JAIPUR 88 4.0 IN THE RESULT BOTH THE APPEALS FILED BY THE A SSESSEE AND BY THE REVENUE ARE DISMISSED. ORDER PRONOUNCED IN THE OPEN COURT ON 06 -11-2 017. SD/- SD/- DQY HKKJR HKKXPUN (KUL BHARAT) ( BHAGCHAND) U;KF;D LNL; / JUDICIAL MEMBER YS[KK LNL;@ ACCOUNTANT MEMBER TK;IQJ@ JAIPUR FNUKAD@ DATED:- 06 /11/ 2017 *MISHRA VKNS'K DH IZFRFYFI VXZSF'KR@ COPY OF THE ORDER FORWARDED TO: 1. VIHYKFKHZ@ THE APPELLANT- M/S. RAINBOW BUILDCON PVT. LTD. JA IPUR 2. IZR;FKHZ@ THE RESPONDENT- THE ACIT CENTRAL CIRCLE-2 JAIPUR 3. VK;DJ VK;QDRVIHY@ CIT(A). 4. VK;DJ VK;QDR@ CIT 5. FOHKKXH; IZFRFUF/K] VK;DJ VIHYH; VF/KDJ.K] T;IQJ@ DR ITAT JAIPUR 6. XKMZ QKBZY@ GUARD FILE (ITA NO. 391 /JP/2017) VKNS'KKUQLKJ@ BY ORDER LGK;D IATHDKJ @ ASSISTANT. REGISTRAR