Income Tax Appellate Tribunal

Tirupati Energy Solution Pvt. Ltd. v. ITO 2(1) (4) Surat/I.T.A. No.573/Ahd/2017/A.Y.:12-13 of 31

आयकर अपीलीय अिधकरण,सुरत यायपीठ, सुरत IN THE INCOME TAX APPELLATE TRIBUNAL

SURAT BENCH, SURAT ी सी.एम.गग, याियक सद य तथा ी ओ.पी.मीना, लेखा सद य के सम

BEFORE SHRI C.M.GARG, JUDICIAL MEMBER AND SHRI O.P.MEENA, ACCOUNTANT MEMBER

आ.अ.स.ं/I.T.A No.573/Ahd/2017 िनधारण वष/A.Y.:2012-13

M/s. Tirupati Energy Solution Pvt. Ltd. , 1/B Ratnadham Vinay Apartment , Ratnadham Sankhul Piplod Surat PAN: AACCT 7044 G

Vs. Income Tax Officer, Ward- 2(1)(4) Surat

अपीलाथ Appellant यथ /Respondent

िनधा रती क ओर से /Assessee by Shri Sapnesh Sheth, CA

राज व क ओर से /Revenue by Shri O. P. Singh CIT (D.R.)

सुनवाई क तारीख/ Date of hearing: 23.08.2018

उ ोषणा क तारीख/Pronouncement on 16.10.2018

आदेश /O R D E R

PER O. P. MEENA, ACCOUTANT MEMBER:

1. This appeal by the Assessee is directed against the order of

learned Commissioner of Income tax (Appeals)-2, Surat (in short

“the CIT (A)”) dated 16.12.2016 pertaining to Assessment Year

2012-13, which in turn has arisen from the order passed by the

Income Tax Officer, Ward- 2(1)(4), Surat (in short “the AO”)


dated 31.03.2015 under section 143 (3) of Income Tax Act,1961

(in short ‘the Act’).

2. Ground no.1: relating to ex-parte order passed by the CIT

(A) is not pressed by the learned counsel for the assessee, in

the hearing before us, Ex-consequenti, it is treated as

dismissed as not pressed.

3. Ground No 2 & 3 states that on the facts and

circumstances of the case as well as law on the subject, the CIT

(A) has erred in confirming the action of the AO in making

addition of Rs. 4,07,25,000 as bogus share application and

share application premium money as unexplained cash credit

under section 68 of the Act. Hence, addition made by the AO

and confirmed by the CIT (A) may please be deleted.

4. Succinctly, facts as culled out from the orders of lower

authorities are that the assessee company has filed its return of

income on 11.09.2012 declaring total income of Rs. 39,600, which

was processed under section 143(1) of the Act. The case was

selected under scrutiny by issue of notice under section 143(2) of

the Act. During the year under consideration, the assessee has


received a sum of Rs.4,07,25,000/- towards investment as share

capital along with share premium from 7 companies/individuals.

In order to verify the identity, credit-worthiness and genuineness

of transaction, the AO requested the assessee to provide details

of shareholder viz number of shares issued, face value of shares ,

party-wise share capital receipts with premium , specifying the

parties which are related to directors / family members along with

value of share allotted to them, copies of share application Form

, details of payments received and assessment particular of share

applicant earning per share and dividend declared in past three

assessment year. However, the assessee had provided

acknowledgement of return of income, and ledger account in their

books and chosen not to give any submissions in this regard. The

details were also received from TVF Finance, Dhara Facility Ltd.

However, summon under section 131 was issued to director of the

assessee to attend personally and furnish copy of return, copy of

audit report, balance sheet copy of bank account of investors and

all communication of share application money received and board

resolution etc. The ld. A.R. of the assessee vide letter dated

14.02.2015 has submitted some clarification regarding number of


shares allotted, copy of offer letter and list of share allottee. The

AO also issued notice under section 133(6) to all investor

companies but received back with remarks “left” or “incomplete

address”. However, reply was received from TVF Finance Pvt. Ltd.

but this investor also not provided its balance sheet nor audit

report nor any source of premium in its books and just sent a copy

of ITR, copy of bank account. Thereafter, Inspector was sent who

did not found the party on given address. After issue of show-

cause notice, the AO made addition in respect of following

companies :

Name and address

No of shares

Share capital

Share premium

Total in Rs.

1.Dhara Facility Management Pvt.Ltd. 7/3314 Ichhabhagwan Building, Dhobhi Sheri Saiyadpura Surat

1,23,000 12,30,000 1,10,70,000 1,23,00,000

2.Ketan Kantilal Shah HUF, A401 Parshwanath Apartment Limabachiya Falia Surat

17,300 1,73,000 15,57,000 17,30,000


3.Prashant Barfiwala, 6/1249-50, Bhut Sheri Mahidharpura Surat

10,000 1,00,000 9,00,000 10,00,000

4.Saideep Trading Pvt. Ltd. Dindhoshi Mahasagar Goregaon Mumbai(E)

2,17,000 21,70,000 1,95,30,000 2,17,00,000

5.Danveer Investment (P) Ltd. 3198/15 Gali No.1, 4th floor Sangatarsha Paharganj Delhi

25,000 2,50,000 22,50,000 25,00,000

6 TVF Finance & investment Pvt. Ltd. 117/12 3rd floor Naiwal Karol Baugh New Delhi

10,000 1,00,000 9,00,000 10,00,000

7 Bajrang H. Tibrewala

49,500 4,95,000 0 4,95,000

Total 4,51,800 45,18,000 3,62,07,000 4,07,25,000 5. In the case of Dhara Facility Management Pvt. Ltd.: the AO

observed that during the course of assessment proceedings, copy

of confirmation of ledger account, number of shares purchased,

share allotment letter, copy of bank statement and copy of return


was filed. Copy of bank account with Axis Bank of investor showed

that there was deposit of Rs. 9,50,000 by RTGS from Binal Gems

on 11.04.2011, and very same day withdrawal of the same.

Again, they have deposit of Rs. 9 Lakh from Binal Gems and

withdrawal for Chintamani. Again there was deposit from Binal

Gems and withdrawal for payment made to Bakabhai C. Shah.

In same manner on 26.04.2011, they have deposit an amount of

Rs.44,12,000 by transfer and on the same day, the money is

transferred to the assessee company of Rs. 40 lakhs. Again, they

have deposited an amount of Rs. 15,86,000 and Rs. 20 Lakh is

paid to the assessee company for share application money.

Further, the investor copy has deposited a cheque of Rs. 25 lakhs

on 13.05.2011. The AO, therefore, observed that creditworthiness

of the investor company is not established. The AO further noted

that copy of acknowledgement of return for the assessment year

2011-12 and A.Y. 2012-13 showed that the investor company

declared total income at Rs. 42,790 and Rs. 80,010 respectively.

Further, the copy of ledger account of Dhara Facility Management

Pvt. Ltd. submitted duly signed by the director in which it has been

reflected as share application money amounting to


Rs.1,23,00,000 on 01.03.2012 . However, the assessee company

has allotted shares on 31.03.2012 therefore; said money should

not be share application money. Thus, there is no validity of

confirmation. Hence, Investor Company failed to furnish source of

fund invested in the assessee company.

6. In the case of Chetan Kantilal Shah, HUF, the AO observed

that during the course of assessment proceedings, copy of

confirmation of ledger account, number of shares purchased, share

allotment letter copy of bank statement were filed. The assessee

has furnished copy of acknowledgement of return showing income

of Rs.3,99,180 for the assessment year 2012-13. The copy of

ledger account confirmation duly signed by Chetan Kantilal Shah,

HUF, showed Rs.17,30,000 on 01.03.2012 as share application

money whereas shares were allotted on 31.03.2012 hence, said

money should not be said as share application money. Thus, there

is no validity of confirmation filed. Hence, investor has failed to

furnish source of funds in the investor company.

7. In the case of Prashant Barfiwala; It was noticed that the

assessee has furnished copy of contra of ledger account for

details of share application money, details of number of shares


purchased , share allotment letter copy of bank statement, copy

of return of income along with copy of full audit report were filed.

The investor company has failed to furnish copy of bank account.

The copy of return filed showed the return of income at Rs.

2,11,580 for the assessment year 2012-13. The copy of ledger

account confirmation duly signed by the proprietor Prashant

Barfiwala showed Rs.10,00,000 on 01.03.2012 as share

application money whereas shares were allotted on 31.03.2012,

hence, said money should not be said as share application money.

Thus, there is validity of confirmation filed. Hence, investor has

failed to furnish source of funds in the investor company.

8. In the case of Saideep Trading Pvt. Ltd. - the copy of

confirmation of ledger account, share application money, share

allotment letter, bank statement, copy of return with audit report

were filed. However, the AO noted that there was huge cash

deposits in bank account of ICICI and out of that; account

transaction with the assessee company has been carried out. The

AO observed that the pattern of shareholding of 2,17,000 shares

allotted to Saideep Trading Pvt. Ltd. showed that it was wrongly


bifurcated. Therefore, the assessee company failed to prove the

source of share application money along with premium received.

9. In the case of Danveer Investment (P) Ltd. details of copy of

confirmation ledger account, share application money, copy of

bank statement, copy of return of income filed. The assessee

company has furnished return of income for the assessment year

2012-13 in which total income is declared at Nil. The share

application money amounting to Rs.25,00,000 reflected on

01.03.2012 but shares allotted on 31.03.2012 as per resolution

passed by Board of Directors hence, there is not validity of

confirmation filed by the investor company hence, and same was

treated as unexplained.

10. In the case of TVF Finance & Investment Pvt. Ltd., details of

confirmation of ledger account, share application money, details

of number of shares allotted bank statement; copy of return of Inc.

were filed. However, the AO observed that income in the return

has been shown as Nil. The manner in which transaction has been

routed from Investor Company shows that these are carried out

for the benefit of the directors. Therefore, these share application

money were treated as unexplained. Similarly, investment of


Rs.4,95,000 made by the director Shri Bajrang Tibrewala was

also treated as unexplained.

11. Being aggrieved, the assessee filed an appeal before the

ld. CIT (A). However, the CIT (A) observed that number of

opportunity of being heard were provided to the appellant but

same were not availed nor any compliance is made. Therefore,

the appeal was decided without giving further opportunities. The

AO has analyzed the bank account and found that these investor

companies were not carrying out actual business activity. The AO

issued notice under section 133(6) to 7 parties, but partial

compliance was made. The appellant did not produce the

investors before the AO; hence, the appellant has failed to

discharge his burden of proof. The CIT (A) observed that the AO

has found that the trail of transaction finally resulting in receipt of

funds to the appellant company. A high premium per share on a

face value of Rs.10 has been claimed to have been paid. The

appellant has not furnished the basis of charging of share premium

during the course of appellate proceedings. In view of these facts

and circumstances and after citing and discussing number of

judicial pronouncements in the appellate order, the CIT (A) has


confirmed the findings of the AO and the appeal of the assessee

was dismissed.

12. Being, aggrieved the assessee filed this appeal before the

Tribunal. The learned counsel for the assessee submitted that the

assessee has taken share application money from seven parties. It

was submitted that the assessee has filed all the details of allotted

shares to Saideep Trading Pvt. Ltd. at Rs. 85,000 equity shares

and also clarified that the shares of Rs. 1,32,000 pertaining to

M/s. Soliel Trading Pvt. Ltd. wrongly considered in the case of

Saideep Trading Pvt. Ltd. due to typographical error. These

details are filed vide letter dated 14.02.2015 placed at Paper

Book Page No. 33-34. The assessee has also filed copy of ITR- V.,

computation of income, copy of audited balance sheet, Profit &

Loss Account for A.Y. 2011-12 and bank statement of HDFC in the

case of Saideep Trading Pvt. Ltd. The assessee company further

submitted details of name and address , PAN of the parties to

whom shares issued at premium, audited accounts, bank statement,

list of directors, shareholding vide letter dated 20.03.2015 (PB-

35-36). Therefore, observation made by the AO at Page No. 31

of the assessment order that the assessee has not filed details


about these parties is incorrect; hence, there is no question to doubt

about the identity, creditworthiness and genuineness of

transaction. The learned counsel for the assessee contended that

these details are duly appearing at Paper Book Page No. 33. It

was further, submitted that the assessee has filed details in Form

No. 20B and Form No. 23AC for filing of Annual Return and

balance sheet with other document with M. C. A. portal in respect

of Danveer Investment Pvt. Ltd., T V. Finance & Investment Pvt. Ltd.,

Saideep Trading Pvt. Ltd. , Soleil Trading Pvt. Ltd. and Dhara

Facility Management Pvt. Ltd. (PB-37). The learned counsel for

the assessee referred para 3.9 at Page No. 29 of assessment

order, wherein the AO has stated that inquiries were got

conducted by issue of commission under section 131(d) from Addl.

DIT (Inv)-1 Kolkata and two officers of his Range visited Kolkata

and obtained an report from Inspector is a factually incorrect facts

as all the parties are either based at Surat or Delhi and none is

based at Kolkata. The AO has mentioned in para 3.8 of

assessment order of the issue of show-cause notice on 16.03.2015,

however, there is no mention of any Inspector report in said show-

cause notice. Thus, the report obtained from Inspector has not been


supplied to the assessee. Therefore, placing reliance on the

judgement of Hon`ble Supreme Court in the case of Kishanchand

Chellaram v. CIT [1980] 125 ITR 713(SC); [1980] 4 Taxman 29

(SC) contended that unless the assessee has been confronted with

Inspector report, no addition can be made on the basis of Inspector

report as the burden lay on the revenue has not been discharged.

The assessee has filed reply to show-cause notice, which has been

reproduced by the AO at Page No. 26 to 29 of assessment order.

This reply shows that the assessee has duly explained and

submitted all the details of PAN, audited balance sheet, bank

statement of investor companies. Further, in the statement on oath

recorded from Shri Bajrang Tibrewala, director of the assessee

company, he has submitted the name and address, PAN and TIN

of the investor concerns. Thus, the all details are on record and

there is no material, which indicates that funds received as share

application money from investors came from the coffers of the

assessee. Thus, the onus cast upon the assessee has been

discharged. The AO carried out inquiries by issue of notice under

section 133(6) and proper details have been filed. The learned

counsel for the assessee explained that cash deposits made by the


investors in their accounts can be investigated independently in

the respective cases as the Explanation to section 68 is not

retrospective as held by Hon`ble Bombay High Court in the case

of CIT v. Gagandeep Infrastructure (P.) Ltd. [2017] 394 ITR 680

(Bom) [2017] 247 Taxman 245 (Bom), [2017] 80 taxmann.com

272 (Bom) and Pr. CIT v. Veedhata Tower Pvt. Ltd. 403 ITR 415

(Bom). The learned Counsel further, placing reliance in the case of

CIT v. Kamdhenu Steel and Alloys Ltd. [2012] 248 CTR (Del.) 33

/ 361 ITR 220 (Delhi) SLP dismissed reported CC-15640/2012

dtd. 17.09.2012 submitted that mere failure of the creditors to

respond to Department`s notices could not be a basis to conclude

that the assessee has invested its undisclosed income and invoke

the provisions of section 68 against the assessee- AO has failed

to carry his suspicion to logical conclusion by further, investigation-

more steps which should have been taken by the Revenue in order

to find out causal connection between cash deposits in the bank

account of the applicant companies and the assessee were not

taken. The learned counsel for the assessee further, relied in the

case of Jalan Hard Coke Ltd. [2018] 95 taxmann.com 331 (SC)

in which head note reads as follows: Assessing Officer required


assessee to produce all persons/share applicants for examination-

however, assessee express its inability and submitted that share

application had been received from identifiable persons having

capacity and creditworthiness of making share application- no

addition under section 68 should be made decision of High Court

in the case of CIT v. Jalan Hard Coke Ltd.[2018] 95 taxmann.com

330 (Raj) approved – The High Court in para 5 took note of ITAT

finding that alleged report of Inspector of Department who stated

to have visited addresses of share applicants was never

confronted to assessee. Therefore, the learned counsel for the

assessee contended that facts are identical in the case of the

assessee as also Inspectors report dated 24.03.2015 was never

confronted to the assessee.

13. The learned Counsel also placed reliance in the case of CIT

v. Lovely Exports (P) Ltd. [2008] 319 ITR (St.) 5 (SC) [2008] 216

CTR (SC) / 18 ITJ 717 (SC). CIT v. Ranchhod Jivabhai Nakhava

[2012] 81 CCH 193 Guj-HC / 21 taxmann.com 159 (Gujarat),

Hindustan Inks & Resins Ltd. v. DCIT [2011] 60 DTR 18, CIT v. Ujala

Dyeing and Printing Mills Pvt. Ltd. 328 ITR 437 (Gujarat) SLP

dismissed by SC in 317 ITR (ST.)(1) , CIT v. Bhavana Property


Developers Ltd. I.T.A.No. 1039 of 2009-(Gujarat), CIT v. Himatsu

Bimet Ltd. [2011] 12 taxmann.com 87 (Gujarat) , Goyal Synthetic

Pvt. Ltd. I.T.A.No. 498 of 2010 (Gujarat), CIT Central-III v. Anshika

Consultant (P) Ltd. [2015] 93CCH 0016 DelHC / [2015] 62

taxmann.com 192(Delhi), CIT v. Orchid Industries Pvt. Ltd. [2017]

397 ITR 0136 (Bom)/ (70 itxa-1433-2014.odt) (Bom), CIT v.

Gagandeep Infrastructure (P.) Ltd. [2017] 394 ITR 680 (Bom)

[2017] 247 Taxman 245 (Bom), [2017] 80 taxmann.com 272

(Bom) CIT v. Kamdhenu Steel and Alloys Ltd. [2012] 248 CTR

(Del.) 33 / 361 ITR 220 (Delhi) SLP dismissed reported CC-

15640/2012 dtd. 17.09.2012 in support of his contentions.

14. Per contra, the learned Departmental Representative (D.R.)

supporting the order of CIT (A) submitted that the assessee did not

produce the investors before the AO nor provided latest address

hence, failed to discharge burden of proof. The investor

companies have shown very meagre income hence,

creditworthiness is not proved. The investor company’s bank

statement showed deposits in their bank account before issue of

cheques. The shares were issued on high premium and parties were

not found at the given address by Inspector. Thus, identity, credit-


worthiness and genuineness of transaction of investor companies/

parties has not been proved beyond doubt. The Ld. CIT (DR) also

placed reliance on the decisions relied by the CIT (A) and in the

case of CIT v. Focus Export Pvt. Ltd. 111 DTR 12 (Delhi) and ACIT

v. Nakoda Fashion Pvt. Ltd. I.T.A.No. 1716/Ahd/2012 of

Ahmedabad Tribunal. Therefore, it was contended that the lower

authorities were justified in treating the share application money

as undisclosed income of the assessee.

15. Replaying to above, the learned counsel for the assessee the

source of source is not required to be proved. The case laws relied

by the learned CIT (D.R.) are distinguishable on facts. The decision

in the case of CIT v. Focus Export Pvt. Ltd. (supra) is not applicable

as in that case the assessee has not cooperated with inquiries and

assessment was made under section 144 of the Act and director

has not comply with the summons issued under section 131 of the

Act. Whereas in the instant case, the assessee has fully cooperated

with inquiries and assessment has been made under section 143

(3) of the Act and director of the assessee company has duly

complied with summons under section 131 and his statement on

oath was recorded during the course of assessment proceedings.


Similarly the decision in the case of ACIT v. Nakoda Fashion Pvt.

Ltd. (supra), Shri Jitendra Jain one of the director of investor

company admitted providing accommodation entries in his

statement under section 131 of the Act, whereas no such summons

issued under section 131 in the case of the assessee nor any

director of subscriber company has given any statement admitting

of providing accommodation entries. Therefore, the case laws

relied by the learned CIT(D.R.) are distinguishable on facts.

16. We have heard the rival submissions and perused the

relevant material on record. We find that the assessee has filed

all the details of allotted shares to Saideep Trading Pvt. Ltd. at

Rs. 85,000 equity shares and also clarified that the shares of Rs.

1,32,000 pertaining to M/s. Soliel Trading Pvt. Ltd. wrongly

considered in the case of Saideep Trading Pvt. Ltd. due to

typographical error. These details are filed vide letter dated

14.02.2015 placed at Paper Book Page No. 33-34. The assessee

has also filed copy of ITR- V., computation of income, copy of

audited balance sheet, Profit & Loss Account for A.Y. 2011-12

and bank statement of HDFC in the case of Saideep Trading Pvt.

Ltd. The assessee company further furnished details of name and


address , PAN of the parties to whom shares issued at premium,

audited accounts, bank statement, list of directors, shareholding

vide letter dated 20.03.2015 (PB-35-36). Therefore, observation

made by the AO at Page No. 31 of the assessment order that the

assessee has not filed details about these parties is incorrect,

therefore, the identity, creditworthiness and genuineness of

transaction is duly established as these details are duly appearing

at Paper Book Page No. 33. We observe that the assessee has

filed details in Form No. 20B and Form No. 23AC for filing of

Annual Return and balance sheet with other document with M. C.

A. portal in respect of Danveer Investment Pvt. Ltd., T V. Finance

& Investment Pvt. Ltd., Saideep Trading Pvt. Ltd., Soleil Trading

Pvt. Ltd. and Dhara Facility Management Pvt. Ltd. (PB-37). The

perusal of Page No. 29 para 3.9 of assessment order shows that

the AO has stated that inquiries were got conducted by issue of

commission under section 131(d) from Addl. DIT (Inv)-1 Kolkata

and two officers of his Range visited Kolkata and obtained an

report from Inspector is a factually incorrect facts as all the are

either based at Surat or Delhi and none is based at Kolkata. We

also notice from para 3.8 of assessment order that the show-cause


notice dtd. 16.03.2015 does not mention of any Inspector report

in this show-cause notice. Whereas the AO has obtained a report

from Inspector, which was not, been supplied to the assessee.

Therefore, unless the assessee has been confronted with Inspector

report, no addition can be made on that basis Inspector report as

the burden lay on the revenue has not been discharged as laid

down by Hon`ble Supreme Court in the case of Kishanchand

Chellaram v. CIT [1980] 125 ITR 713(SC) ; [1980] 4 Taxman 29

(SC). The assessee has filed reply to show-cause notice, which has

been reproduced by the AO at Page No. 26 to 29 of assessment

order. This reply shows that the assessee has duly filed all the

details of PAN, audited balance sheet, bank statement of investor

companies in respect of all seven investor companies/

individual/HUF. Further, in the statement on oath recorded from

Shri Bajrang Tibrewala, director of the assessee company, he has

submitted the name and address, PAN and TIN of the investor

concerns. Thus, the all details are on record and there is no

material, which indicates that funds received as share application

money from investors came from the coffers of the assessee. Thus,

the onus cast upon the assessee has been duly discharged. The AO


carried out inquiries by issue of notice under section 133(6) and

proper details have been filed. The learned counsel for the

assessee explained that cash deposits made by the investors in

their accounts could be independently investigated in their

respective case, as the Explanation to section 68 is not

retrospective. Therefore, we agree with the views of the learned

counsel for the assessee. The claim of Revenue that proviso to

section 68 is retrospective in nature, we observe that the proviso

is introduced with effect from 1st April 2013 and therefore, the

onus to prove the nature and source of such sum so credited shall

be on only on the assessee from assessment year 2013-14 and

not prior to that. This view is also fortified by the decision of

Hon’ble Bombay High Court in the case of CIT v. Gagandeep

Infrastructure (P.) Ltd. [2017] 394 ITR 680 (Bom) [2017] 247

Taxman 245 (Bom), [2017] 80 taxmann.com 272 (Bom) relied by

the learned counsel for the assessee, wherein it was observed as:

“The proviso to section 68 has been introduced by the Finance

Act, 2012 with effect from 1-4-2013. Thus, it would be

effective only from the assessment year 2013-14 onwards and

not for the subject assessment year. In fact, before the Tribunal,


it was not even the case of the Revenue that section 68 as in

force during the subject years has to be read/understood as

though the proviso added subsequently effective only from 1-

4-2013 was its normal meaning. The Parliament did not

introduced to proviso of section 68, with retrospective effect

nor does the proviso to introduced states that it was introduced

'for removal of doubts' or that it is 'declaratory'. Therefore, it

is not open to give it retrospective effect, by proceeding on

the basis that the addition of the proviso to section 68 is

immaterial and does not change the interpretation of section

68 both before and after the adding of the proviso.

In view of the matter, the three essential tests while confirming

the section 68 laid down by the Court namely the genuineness

of the transaction, identity and the capacity of the investor

have all been examined by the impugned order of the Tribunal

and on fact it was found satisfied. Further it was a submission

on behalf of the Revenue that such large amount of share

premium gives rise to suspicion on the genuineness (identity) of

the shareholders, i.e., they are bogus. The Apex Court in a case

in this context to the pre-amended section 68 has held that


where the revenue urges that the amount of share application

money has been received from bogus shareholders then it is

for the Income-tax Officer to proceed by reopening the

assessment of such shareholder and assessing them to tax in

accordance with law. It does not entitle the revenue to add the

same to the assessee's income as unexplained cash credit. [Para

3]

17. Thus, the proviso to section 68 introduced by the Finance Act,

2012 with effect from 01-04-2013 would not have any

retrospective effect. Therefore, following the decision of Hon`ble

Bombay High Court as quoted above, we are of the view that

proviso to 68 of the Act is not applicable for the present

assessment year as it would be applicable from A.Y.2013-14.

Even on merit, the Hon’ble Bombay High Court in the case of CIT

v. Gagandeep Infrastructure (P.) Ltd. (supra) has observed that in

view of the matter the three essential tests while confirming the

section 68 laid down by the Court namely the genuineness of the

transaction, identity and the capacity of the investor have all been

examined by the impugned order of the Tribunal and on fact it

was found satisfied. Further it was a submission on behalf of the


Revenue that such large amount of share premium gives rise to

suspicion on the genuineness (identity) of the shareholders, i.e.,

they are bogus. The Apex Court in a case in this context to the

pre-amended section 68 has held that where the revenue urges

that the amount of share application money has been received

from bogus shareholders then it is for the Income-tax Officer to

proceed by reopening the assessment of such shareholder and

assessing them to tax in accordance with law. It does not entitle

the revenue to add the same to the assessee's income as

unexplained cash credit. In view of these facts, we are of the view

that if the identity and other details of share applicant are

available, the share application money cannot be treated as

undisclosed income in the hands of the company. In the present

case, the assessee even has proved the source of source, therefore,

the creditworthiness was also proved, and consequently, no

addition can be made under section 68 of the Act.

18. The learned Counsel further, placing reliance in the case of

case of Jalan Hard Coke Ltd. [2018] 95 taxmann.com 331 (SC)

in which head note is as-Assessing Officer required assessee to

produce all persons/share applicants for examination- however,


assessee express its inability and submitted that share application

had been received from identifiable persons having capacity and

creditworthiness of making share application- no addition under

section 68 should be made decision of High Court in the case of CIT

v. Jalan Hard Coke Ltd.[2018] 95 taxmann.com 330 (Raj)

approved-The High Court in para 5 took note of ITAT finding that

alleged report of Inspector of Department who stated to have

visited addresses of share applicants was never confronted to

assessee. Therefore, the learned counsel for the assessee

contended that facts are identical in the case of the assessee as

also Inspectors report dated 24.03.2015 was never confronted to

the assessee. Hence, no addition can be made on this account.

19. We further find support from decision of the Hon`ble

Supreme Court in the case of CIT v. Lovely Exports (P) Ltd. [2008]

319 ITR (St.) 5 (SC) [2008] 216 CTR (SC) / 18 ITJ 717 (SC) which

clearly comes to rescue of the assessee, the relevant portion is

reproduced as under: “share application moneys received by the

company 11-01-2008- Their Lordships S.H. Kapadia and B.

Sudershan Reddy JJ dismissed the Department`s special leave

petition against the judgement dated November 16, 2006 of the


Delhi High Court in I.T.A. No. 953 of 2006 reported in 299 ITR

268 (Delhi) whereby the High Court affirmed the deletion by the

Tribunal of additions made on account of sums received from

directors of promoters and also by way of public issue.” The court

while dismissing the special leave petition held as follows:

“2. Can the amount of share money be regarded as

undisclosed income under section 68 of IT Act, 1961? We find

no merit in this Special Leave Petition for the simple reason that

if the share application money is received by the assessee

company from alleged bogus shareholders, whose names are

given to the AO, then the Department, is free to proceed to

reopen their individual assessments in accordance with law.

Hence, we find no infirmity with the impugned judgment.”

20. If the above conclusion drawn by the Hon`ble Apex Court is

kept in juxtaposition with the facts of the case present appeal, it

can be said that the identity of share applicants was proved. In

view of these facts, it can be said that if the Department still finds

such applicants to be bogus, they are free to reopen their

individual assessments but certain no addition can be made under

section 68 of the Act in the hands of the assessee company.


21. With regard to creditworthiness of the subscriber companies,

we find that the assessee company has filed bank statement,

financial accounts, confirmation letters of the subscriber

companies, which show that amount of investment as share

application money with the assessee company has been made by

account payee cheque and through banking Channel. The source

of the investment is also from share capital and share premium

reflected in their balance sheets and bank balances reflected in

their bank accounts. The AO has not produce anything on record

to show that the share application money was tainted money of

the assessee company, which was routed through the subscriber

companies. The Honourable Jurisdictional High Court of Gujarat in

the case of Hindustan Inks & Resins Ltd. v. DCIT [2011] 60 DTR 18

(Gujarat) in which referring to the decision of the Supreme Court in

case of CIT v. Lovely Exports (P.) Ltd. [Application No. 11993 of

2007, dated 11-1-2008] observed that when the Court found that

the investors were not even found to be bogus, observed that in any

case, no addition can be made in hands of the company.

22. The learned counsel for the assessee has also relied on the

latest decision of Hon`ble Bombay High Court in the case of CIT v.


Orchid Industries Pvt. Ltd. [2017] 397 ITR 0136 (Bom)/ (70 itxa-

1433-2014.odt) (Bom) wherein Hon`ble High Court has observed

as under:

´That the Tribunal has considered that the Assessee has

produced on record the documents to establish the genuineness

of the party such as PAN of all the creditors along with

confirmation, their bank statements showing payment of share

application money. It was also observed by the Tribunal that

the Assessee has also produced the entire record regarding

issuance of shares i.e. allotment letters and share certificates,

so also the books of account. The balance sheet and profit and

loss account of these person had sufficient discloses that these

persons had sufficient funds in their accounts for investing in

the shares of the Assessee. In view of these voluminous

documentary evidence, only because those person had not

appeared before the Assessing Officer would not negate the

case of the Assessee. The judgement in the case of Gagandeep

Infrastructure (P) Ltd. (supra) would be applicable in the facts

and circumstances of the present case.

23. If the totality of facts and the judicial pronouncements as

discussed hereinabove, are analyzed, we are of the considered

opinion that the onus caste upon the assessee, as provided under

section 68 of the Act, has been duly discharged by the assessee


as the identity of the share subscribers, creditworthiness and

genuineness of the transaction is not in doubt or it can be said that

the same has been proved/explained by the assessee. Now, the

onus has reverted upon the Revenue to prove otherwise. The Ld.AO

merely made addition ignoring the documentary evidence in the

form of copy of audit report, balance sheet and return and bank

statement, confirmation letters, copy of ledger account, copy of

return of income of investor companies/ individuals/ HUF were

duly filed with PAN admitting investment. The Revenue has

nowhere proved that the assessee does any malafide. Failure to

do so, vitiate the addition made under the present set of facts. The

satisfaction has to be derived from the relevant facts and that to

on the basis of proper enquiry by the Assessing Officer and such

enquiry must be reasonable and just. In the present case, the AO

has not brought on record any evidence in respect of 7 parties to

prove that the amount received is merely accommodation entries.

Whereas the assessee has filed acknowledgement of return of

income of share applicant, bank statement of share applicant,

share application form, Board resolution of board meeting, MOA

and AOA of the company. In view of these facts above also held


where the Assessee has produced on record the documents to

establish the genuineness of the party such as PAN of all the

creditors along with confirmation, their bank statements showing

payment of share application money. The balance sheet and

profit and loss account of these person had sufficient discloses that

these persons had sufficient funds in their accounts for investing in

the shares of the Assessee. In view of this voluminous documentary

evidence, only because those person had not appeared before

the Assessing Officer would not negate the case of the Assessee.

24. In view of above discussion, and reverting to facts of this

case, we observe the assessee company having received share

application money through banking channel and furnished

complete details of bank statements, copy of acknowledgement

of the returns filed by subscriber companies who are being

assessed to tax, copy of PAN, confirmation, audit report, balance

sheet relating investment in share capital, copy of accounts and

complied with notices issued, therefore, identity, credit-worthiness

and genuineness of transaction has been proved in the light of

ratio laid down by the jurisdictional High Court and other Hon`ble

High Court as well as Hon`ble Supreme Court as discussed above.


Therefore, respectfully following ratio laid down in various

decisions and facts of the case no addition can be made under

section 68 of the Act. Accordingly, we set-aside the order of

authorities below and the addition of Rs.4,07,25,000 made on

account of share application money and share premium by the

AO directed to be deleted. Accordingly, Ground no. 2 & 3 of

appeal of the assessee are allowed.

25. In the result, the appeal of the assessee is partly allowed.

26. Order pronounced in the open court on 16.10.2018.

Sd/- Sd/- (सी.एम.गग /C.M. GARG) (ओ.पी.मीना/O.P.MEENA)

याियकसद यतथा/JUDICIAL MEMBER लेखासद यकेसम /ACCOUNTANT MEMBER Surat Dated: 16 October 2018/ opm आदशे क ितिलिप अ ेिषत/Copy of the Order is forwarded to :

1. अपीलाथ / The Appellant; 2. थ / The Respondent; 3. आयकर आयु (अपील-The CIT(A), 4. Pr. CIT 5.िवभागीय ितिनिध, आयकर अपीलीयअिधकरण, सूरत/ DR, ITAT, Surat; 6. गाडफाईल-Guard file.

By order / / TRUE COPY / /

Assistant Registrar, Surat

Income Tax Appellate Tribunal

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