INCOME TAX APPELLATE TRIBUNAL
DELHI BENCH “G”: NEW DELHI

BEFORE SHRI H.S.SIDHU, JUDICIAL MEMBER
AND

SHRI PRASHANT MAHARISHI, ACCOUNTANT MEMBER
(Through Video Conferencing)

ITA No. 8339/Del/2019

(Assessment Year: 201-17)

Usekiwi Infolabs Private Limited, Vs. ITO,

Block-B1/D4, Mohan Co- Ward-27(2),

Operative Estate, Mathura Road, New Delhi

New Delhi

PAN: AABCU884G

(Appellant) (Respondent)

Assessee by : Shri Hiren Mehta, CA
Revenue by: Ms. Aman Preet, Sr. DR
Date of Hearing
Date of pronouncement 02/11/2020
07/12/2020

O R D E R
PER PRASHANT MAHARISHI, A. M.
1. This is an appeal filed by the assessee USEKIWI INFOLABS PVT LTD [ The

Assessee/ Appellant] against the order of the Commissioner of Income Tax
(Appeals) – 9, , New Delhi [ld CIT(A)] dated 30.09.2019 for the AY 2016-17
wherein the appeal of the assessee filed against the order passed u/s 143 (3)
of The Income Tax Act (The Act) on 31/5/2019 by the income tax officer
Ward – 27 (2) New Delhi (The Learned AO) is dismissed. The only issue in
this appeal is the addition u/s 68 of The Income Tax Act of Rs.
1,67,50,000/– received by the assessee as share capital and share premium
from Messer’s KStart LLC, Mauritius.
2. The assessee has raised the following grounds of appeal:-
“1. That on the facts and circumstances of the case and in law, the order

passed by CIT (A)-9, New Delhi (hereinafter referred to as CIT (A)), is
contrary to the facts and bad in law.

2. That on the facts and circumstances of the case and in law the CIT (A)
was not justified in sustaining the addition made by the A.O. of Rs
l,67,50,000/- received from Kstart LLC of Mauritius on account of issue

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of shares by appellant company by holding that the same is
unexplained credit u/s 68 of the I T Act on the basis of surmises and
conjectures.

2.1 The CIT-A has erred in not considering the submission of
appellant which proves the identity, creditworthiness of the
investor and genuineness of the transaction. Documents include
audited financial statements of Kstart LLC, Certificate of
Incorporation of Kstart LLC granted by ROC Mauritius, Bank
Statement of Kstart LLC, Income Tax return filed with Mauritius
Authority, List of directors for the financial year 2015-16.

3. That on the facts and circumstances of the case and in law the Id. CIT
(A) was not justified in not adjudicating on the ground taken by the
appellant that the order passed by the Id. AO is not in accordance with
the direction given by the Id. Addl. CIT u/s 144A of the Act directing the
Id. AO to take a fair and judicious view.”

3. The fact shows that assessee is a company, it filed its return of income on
17/10/2016 declaring loss of ₹ 886,908/–. The case of the assessee was
selected for scrutiny Under computer assisted scrutiny selection as limited
scrutiny on the point of examination of the large share premium received
during the year to verify applicability of Section 56 (2) (viib) of the income
tax act and whether the funds received in the form of share premium are
from disclosed sources and have been correctly offered for tax. Therefore
notice u/s 143 (2) was issued on 16/9/2017.

4. The learned assessing officer noted that Assessee Company was
incorporated on 28/12/2015 and this is the first year of the assessee
company. As per the balance sheet filed by the assessee it was noted that
the funds raised in the form of share capital and share premium has been
shown at Rs 1, 68,50,000 comprising of ₹ 1 lakh for issue of 10,000 equity
shares of ₹ 10 each, ₹ 2 lakhs for issue of 20,000 compulsorily convertible
cumulative preference shares of ₹ 10 each and a security premium of Rs 1
65,50,000/-. As per the information given in the balance-sheet share capital
and share premium of Rs. 167,50,000 has been shown received from K

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Start LLC. The assessee was asked to furnish the necessary detail and also
to explain the applicability of provisions of Section 56 (2) (viib) of the act.

5. The assessee explained that it has received above sum on issue of 20,000
compulsorily convertible cumulative preference shares at the face value of
Rs 10 each and a premium of Rs 827.50 from K start LLC of Mauritius. It
was further stated that K start LLC is a seed fund created by Kallari capital,
a leading Indian venture capital firm, unique seed program for the next
generation of Indian and entities with disruptive ideas. K start LLC aims to
provide to empower start-ups and accelerate disruptive ideas to become
market leading companies. It was further stated that Kallari capital has $
650 million in its assets under the management. Assessee also submitted
the copy of the bank account of the investor. It also submitted the copy of
form FC GPR furnished. It also furnished the tax residency certificate of K
start LLC issued by Mauritius authorities. It was further stated that the
provisions of Section 56 (2) (viib) applies only in the case where the money is
received from a resident. In the present case it was stated that the money
has been received from a non-resident therefore, those provisions do not
apply. The assessee submitted the relevant copy of the bank statement of K
start LLC to show that the transaction has been entered into through
banking channel. With respect to the quantum of the premium it was shown
that it was decided by the company internally on the basis of the valuation
report. Assessee also filed the details of RBI approval and foreign Inward
remittance certificates (FIRC). However, assessee stated that it will not be
possible to share the balance-sheet et cetera of the investor as it will show
the holding portfolio of the investor. It was stated that this is a case of an
investment by a fund in a start-up in the normal business course.

6. The learned assessing officer noted that assessee has not submitted the
complete copy of the bank statement of Kstart LLC of Mauritius but
enclosed only copy of extract of DBO transaction summary of account
number 02MCR502499 maintained by K start LLC with Deutsche Bank
showing only for transactions on 3/2/2016. He further noted that assessee
has not submitted any income tax return or copies of correspondence that
took place between the Assessee Company and K start LLC.

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7. The learned assessing officer noted that as the alleged transaction of receipt
of share capital and share premium of Rs 1 67,50,000 from Messer’s K start
LLC of Mauritius is suspicious, he referred the matter to the FT & TR,
Ministry of Finance (foreign tax and tax research division), exchange of
information Cell , India New Delhi by letter dated 19/8/2018 seeking
information Under Exchange Of Information from the Mauritius tax
authorities in case of the assessee company for assessment year 2016 – 17.
The necessary information was received from Mauritius authorities stating
the list of directors of the company, copy of company have audited financial
statement from 30 November 2015 to 31st of December 2016 and the copy of
the bank statement of the company stating the investment made in the
Indian entity during the period 30th member 2015 to March 31, 2016. It was
further informed by the Mauritius revenue authorities that the only
beneficial shareholder of the company for the period 30 November 2015 that
is the date of incorporation to 31 March 2016 was Kallari capital Partners
III LLC having its registered office at IFS court, bank street, 28 cyber city,
Ebene 72201, Mauritius. Based on this information , learned assessing
officer further wrote a letter to the assessee on 9/05/2019 u/s 142 (1)
stating that that the matter was referred to FTD Section of the CBDT in
connection with the receipt of money from Mauritius. The copy of the bank
account of Mauritius party as also the balance-sheet as also the copy of the
return has been received. Based on this information the learned assessing
officer noted that the balance sheet of K start LLC total is only $ 1007. The
only source of income of that company is gain on disposal/revaluation of
fixed assets including securities amounting to $ 294,461/–. Thus that
company does not have any reasonable income to purchase shares of
assessee. On the bank statement he noted that it has received a cheque and
thereafter issued the cheque to the assessee and there are no other
transactions in this account. He noted that this is sufficient evidence to
prove that this account is not a regular account order there are no
transactions during the year. Therefore he noted that the receipt of proceeds
of share is not genuine. Therefore assessee was asked to show cause why
the above sum shall not be added u/s 68 of the income tax act.

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8. In response to the above letter the assessee once again explained the
detailed fact about the receipt of the money stating that it is an investment
by the K start LLC into a start-up which is on behalf of Kallari capital. It
was stated that it has received investment firm of that private equity venture
for Indian start-ups. It was also explained that K start LLC would only earn
income from sale of investment and therefore that is the only source of
income. With respect to the bank statement it was stated that the money is
transferred from Kallari capita to K start LLC as and when the investment is
approved by Kallari Capital in India in start-ups. Assessee also mentioned
that it is an innovative financial service platform that combines healthcare
and FinTech to provide health saving solution to its clients. It is that kind of
a company that K start LLC through Kallari capital proposes to build their
investment portfolio. It was further stated that from the perusal of K start
LLC’s financial statements it can be seen that they have invested in various
companies in India. Assessee submitted the list of the companies in which K
start LLC has invested. It was also stated that this is the investment in all
these companies in the initial/1st year of their operation, assessee also
submitted that that Kallari capital is investing in India and it has also
invested in companies like Myntra, Snapdeal, PopXo, ScoopWhoop, Rbbic,
Haptik, Bluestone et cetera which are the well-known names. The assessee
also submitted the permanent account number of K start LLC and Kalari
capital partners. Assessee further stated that now before the assessing
officer confirmation, the balance-sheet, certificate of incorporation, details of
money transfer through banking channel, tax residency certificate issued by
Mauritius authorities, FIRC with respect to inward remittance of foreign
currency, FC GPR report submitted to the reserve bank of India. In view of
this, it was stated that assessee has discharged its onus of the identity,
creditworthiness and the genuineness of the transaction. It was also noted
that the learned assessing officer has also got due enquiry done through the
government of India under the Exchange of Information provisions. It was
stated that there is no adverse inference or information available with the
assessing officer. Therefore the addition u/s 68 of the income tax act cannot
be made.

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9. As it seems the AO was not satisfied with the above explanation of the
assessee, the assessee company filed an application u/s 144A of the act on
16/05/2019 to The Additional Commissioner of Income Tax, Range – 27,
New Delhi. He passed a direction on 29/05/2019 stating that on the facts
and circumstances of the case does not warrant to issue any direction u/s
144 of the act as it is not necessary or expedient so to do on respect of the
amount of ₹ 1.67 crores received by the assessee company in the form of
share capital and share premium for which the assessee company is prayed
for not making an addition to the income of the assessee. However he
directed the learned assessing officer to take a fair and judicial view in
accordance with the provisions of the income tax act.

10. The learned assessing officer noted following reasons and made the
addition u/s 68 of the income tax act:-

i. the assessee company was incorporated on 28/12/2015 and this is
the first year of the assessee company

ii. the investor M/s K start LLC was incorporated on 1/12/2015 and
this is the first year of the investor company

iii. the assessee company has issued 10,000 equity shares to 2 different
individuals at par and the rate of ₹ 10 per share

iv. he considered the resolution passed at the meeting of the assessee
company, explanatory statement pursuant to Section 102 of The
Companies Act 2013 on issue of preferential shares, details of the
shareholders resolution passed and the resolutions of the board
meeting of the appellant company and thereafter noted that two
shareholders have renounced their right in the issue of 20,000
compulsorily convertible cumulative preference shares and thereafter
renouncement made by them resulted into investment from K start
LLC. Based on this sum of ₹ 1.67 crores was received in the bank
account of the assessee maintained with the Yes bank on 3/2/2016
towards allotment of 20,000 compulsorily convertible cumulative
preference shares of Rs 10 each at a premium of Rs. 827.50 on
05/2/2016.

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v. The assessee has not furnished copies of all correspondence that took
place between the assessee and K start LLC of Mauritius regarding
the said application money and premium determination

vi. The balance-sheet received of the investor company merely shows a
current asset of $ 1007 and the net assets of $ 12,580. There is no
fixed assets available with the investor company

vii.the bank statement with Deustch bank Mauritius of the investor there
is an opening balance of ₹ 0 and there is one credit entry of US dollar
2,60,000 on 3/2/2016 and on the same that there is a debit entry of
US dollar 2,45,962.54

11. Therefore the learned assessing officer held that in view of the facts and
figures, creditworthiness and genuineness of the transaction cannot be said
to have been proved and therefore he made an addition of ₹ 1,67,50,000
introduced by the assessee in the guise of share capital and share premium
from Kstart LLC of Mauritius as unexplained credit in the books of account
of the assessee company u/s 68 of The Income Tax Act. Accordingly the
assessment order was passed u/s 143 (3) of the act on 31/05/2019
determining the total taxable income of the assessee at Rs. 1 58,63,092
against the returned loss of ₹ 886,908.

12. The assessee aggrieved with the order of the learned assessing officer
preferred an appeal before the learned CIT – A. The learned CIT – A further
noted that the pattern of unavailability in the transfer thereof, absence of
any substantial base of own fund with K start LLC, does not prove the
genuineness and creditworthiness of the above transaction. He relied upon
the decision of the coordinate bench in ITA number 1716/AHD/2012 dated
18/8/2016 in case of Nakoda fashions Ltd, the decision of the honourable
Delhi High Court in case of CIT versus Novadaya castles private limited, and
N R portfolio private limited, CIT versus Nipun builders and developers
private limited (350 ITR 407) and confirmed the addition holding that
assessee has failed to discharge of onus with respect to creditworthiness
and genuineness of the transactions.

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13. Assessee aggrieved with the order of the learned CIT has preferred this
appeal before us. The learned authorised representative submitted before us
that assessee has submitted following information before the learned
assessing officer to show the identity, creditworthiness and the genuineness
of the transaction:-

i. certificate of incorporation of K start LLC granted by the registrar of
Companies Mauritius which is the proof of the identity

ii. permanent account number allotted by the income tax Department

iii. financial statement of K start LLC for the year ended on 31st of
December 2016

iv. Bank statement of K start LLC reflecting transfer of funds aggregating
to US dollars 2,45,962.54 to the appellant’s account

v. foreign inward remittance certificate dated 5/2/2016 certifying receipt
of funds aggregating to Rs 1,67,50,000 through normal banking
channels

vi. KYC form dated 4/2/2016 issued by the bank confirming the
information about the non-resident investor

vii.form number FC GPR dated 8/3/2016 filed with the reserve bank of
India intimate in receipt of equity shares/preference shares Under
automatic route or FIPB approval within 30 days

viii. letter dated 13/file/2016 received from RBI acknowledging filing

of form number FC GPR

ix. form number PAS 3 filed with the registrar of Companies regarding
allotment of shares by the appellant to K start LLC

x. brief write-up about K start LLC and Kallari capital

xi. tax residency certificate of K start LLC issued by Mauritius tax
authorities

xii.valuations report dated 1 February 2016 valuing the shares of
appellant at ₹ 7 90/– per share

14. On the basis of above submission of information the assessee submitted
that it has discharged the initial onus cast upon the assessee to prove the
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identity, creditworthiness and genuineness of the transaction. With respect
to the financial statement of K start LLC he submitted that it has invested
into multiple start-up company is located in India as well as abroad. He
further stated that K start LLC catalysts include the name of Mr Ratan Tata,
Mr Rajan Ananth, MS Zia Modi and Manu Jain among others. He submitted
that these are the well-known names of the Indian corporate world that are
behind the above investment. He submitted that absence of any revenue in
case start LLC it would not hampered the genuineness of the transaction as
the above entity was created by Kallari capital for investment only. Therefore
the revenue that would generate in the above form would only be capital
gain on sale of all time best of investment made. He further submitted that
as soon as the decision for investment is taken by caloric capital, the money
would be transferred from that entity to the case start LLC as it is merely a
of vehicle (SPV) for investment. He further submitted that whatever
information assessee could not have furnished has already been obtained by
the learned assessing officer under the exchange of information provisions
from Mauritius tax authorities. None of the information received is against
the assessee or the investor. Therefore there is no reason to doubt the
creditworthiness and genuineness of the investor.

15. On the legal arguments, he referred to the decision of coordinate bench in
37 taxmann.com 400 (2013) of Russian technology Centre private limited
versus Deputy Commissioner Of Income Tax wherein it has been held that
where the money is remitted by a non-resident, whose identity is not in
question, through their bank accounts outside India held to be a capital
receipt not eligible to tax and cannot be treated as deemed income u/s 68 or
69 of the income tax act. He referred extensively paragraph number 11.7 of
that decision. He further relied upon the decision of the coordinate bench in
19 taxmann.com 268 in Bye cell telecommunications India private limited
versus principal Commissioner of income tax New Delhi wherein it has been
held that the assessing officer has made detailed enquiry by seeking
information from Switzerland tax authorities through proper channel Under
the exchange of information provision the addition could not have been
made u/s 68 of the income tax act. He further relied upon the decision of
Saurashtra Ferrous private limited versus Deputy Commissioner Of Income

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Tax 55 taxmann.com 344 wherein it has been held that assessee was
required to discharge initial burden of proof placed upon it u/s 68 in
respect of loan received in form of debentures even if it was received from a
foreign company. He submitted that assessee has already discharged its
onus. He further relied upon the decision of the honourable Bombay High
Court in Principle Commissioner Of Income Tax versus Aditya Birla telecom
Ltd 105 taxmann.com 206 wherein it was held that when there was no
suspicious movement of funds and all necessary permissions and clearance
were granted by the government of India and other government authorities
for such investment merely because investor was investing a huge amount
on Multi corporate bodies were involved in entire process of collecting funds
same cannot be made subject to income tax u/s 68 of the income tax act.
He further referred to the decision of the honourable Bombay High Court in
Nupower renewable private limited versus Asst Commissioner of income tax
104 taxmann.com 307 and Income Tax Officers versus Chiripal private
limited 104 taxmann.com 172 of the coordinate bench. Therefore he
submitted that the addition made by the learned assessing officer and
confirmed by the learned CIT – A deserves to be deleted.

16. The learned departmental representative payment please supported the
order of the learned AO and CIT – A and stated that assessee has failed to
prove the genuineness and creditworthiness of the whole transaction and
therefore the addition deserves to be confirmed. He further relied upon the
decision of the honourable Supreme Court of India in Principle
Commissioner Of Income Tax (central) – 1 versus NRA Iron and steel private
limited 412 ITR 161 (SC) stating that this was the decision relied upon by
the learned CIT – A which has been confirmed by honourable Supreme
Court. In view of this it was submitted that appeal of the assessee does not
have any merit.

17. During the course of the hearing bench asked the learned authorised
representative to prove the rationale of the investment made in the assessee
company by the investor in the form of financial due diligence report, legal
due diligence report, investment committee meeting of the investor or its
holding company and the details of other investment made by investor in
other companies. In response to this learned today are submitted the brief
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snapshot of the assessee in the form of business model of the assessee as a
digital payment platform for affordable healthcare. He also stated that the
assessee has the right solution for a country like India where 96%
population is not insured. Therefore the investment in the assessee
company is an attractive opportunity. He also submitted a copy of proposal
given by the assessee to the investor showing in the executive summary that
assessee is an alternative finance platform that honourable is healthcare
affordability through personalized prepayment plans. It is also positioned at
intersection of financial technology and healthcare. Further the assessee
has signed up three institutions such as a chain of four oncology centers,
oncology diagnostic labs and a multi-specialty hospital. The presentation
also shows that assessee is ready to be launched commercially in February
2016. He also submitted an investment memorandum of the assessee
company. Before us assessee also submitted a project plan in the form of
financial due diligence conducted by PricewaterhouseCoopers and are legal
due diligence by a law firm Shardul Amarchand Mangaldas. He submitted
that above information clearly shows that all the requisite parameters for
investment are in place.

18. We have carefully considered the rival contentions and perused the orders of
the lower authorities. We have also considered the various information
furnished by the assessee before the learned AO as well as information
received by the learned assessing officer under exchange of information
provisions. The facts clearly shows that assessee has got an investment
from Kstart LLC, Mauritius as a contribution towards issue of 20,000
compulsorily convertible preference shares having face value of ₹ 10 each at
a premium of ₹ 827.50 per share. For this proposition the bank account of K
start LLC with Deustch bank account number 02 MCR502499 shows that a
sum of US dollar 2,45,962.54 were transferred on 3 February 2016 in the
bank account of the assessee company. On the same date of there was a
capital contribution of US$ 260,000 in the same bank account from the
holding company Kaalari Capital Partners III LLC Mauritius. For the above
investment it is apparent that KYC form submitted by Duestch Bank AG
shows that Kstart LLC is having a global commercial license i.e. 1/GBL
having its registered office at IFS, IFS court, Bank Street, 28, cyber city,

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EBENE72201, Mauritius and the bank account of the remitter is 502499.
The above sum was received in the Yes bank account of the assessee. The
banker of the assessee, Yes Bank limited was provided the above declaration
in the FIRC dated 3 February 2016 by the banker of the investor. The
investment was under the automatic route for issue of 20,000 compulsorily
convertible cumulative preference shares of Rs 10 each at a premium of Rs
827.50 per share under the right issue. The above investment was also
documented in the meeting of the board of directors of the assessee
company on 23rd of January 2016 wherein the above investment was
authorised. After such authorization the investment has been made. No
doubt the existing shareholders of the assessee company renounced the
rights available to them for application towards these instruments in favour
of the investor. However that does not make the investment by the investor
or in the assessee company as non genuine. The assessee also submitted a
brief write-up before the assessing officer about the introduction of K start
LLC, Which is found to be seed fund created by kaallari capital, a leading
Indian venture capital firm which has the asset base of US$ 650 million.
Assessee also supported the investment with extract of livemint which
shows that K start LLC is a start-up accelerator run by venture capital firm
Kaalari capital and has invested $ 5 lakh each in three start-ups in
healthcare, financial services and online video content management. It also
shows that Kalari capital has taken Unicorns such as Flipkart Ltd, a
snapdeal and also launched K start putting aside US$ 20 million for the
program over the next two years. K start will invest US$ 1 lakh-US$ 5 lakh
in 6-9 other start-ups this year. For its start-ups, K start has gathered a set
of notable advisors such as former Tata group chairman Ratan Tata, Ms
Zia Modi managing partner at law firm AZB partners , senior Ranjan
Anandan, managing director of south-east Asia and India Google
incorporation and Varsha Rao head of global operation at home rental start-
up Airbnb. Further as per information received by foreign tax and tax
research division of government of India under the exchange of information
under article 26 of the Double Taxation Avoidance Convention between
India and Mauritius, Kstart LLC was having three different directors. As per
the directors report of K start LLC, it is to operate as an investment holding

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company. It has investment as its fair market value having the cost of US
dollar 33,51,414 and equity of class A shareholders of US dollar 35,31,823.
A note to financial statements of the report clearly shows that Kstart LLC is
a limited liability company and subsidiary of kalalri capital III, LLC of
Mauritius private limited life Co Ltd by shares. With respect to the income
stream of K start LLC, it is also stated that company is organized for the
purpose of realizing returns through long-term capital appreciation of
investments made by the company, primarily in technology and service
companies located in with significant business activity in having Nexus to
the Indian subcontinent. Therefore the only stream of income of that
company is profit or loss generated on sale of the investments. As on 31st of
March 2016 it has invested in unlisted privately held equity and preferred
securities of US$ 3,630,954. On looking at the investment and associated
risk wherein the summary of investment is shown, it has invested in four
different entities in India, one entity in Singapore and three different entities
in United States of America. It also shows that shareholders have made
capital commitment to the company amounting to US$ 11.2 million as on
December 31, 2016. The class B shares are issued to only one entity i.e.
Kalaari capital Partners III LLC. Investor has also paid US$ 146,302 as
management fee to Kaalari capital advisors private limited. In view of the
above facts it is apparent that creditworthiness and genuineness of the
above investment cannot have any doubt. The learned assessing officer also
could not point out for what reasons he is having any doubt about the
creditworthiness and genuineness of the above investment when such an
extensive details are made available by the assessee and he himself
obtained information under Exchange of Information provisions of DTAA.

19. However, we would also like to deal with the argument of the learned
authorised representative that in case of a non-resident investor the
assessee is not required to prove anything other than the identity of the
shareholders. We have carefully perused the provisions of Section 68 of the
income tax act which speaks about taxing any sum credited in the books of
account of the assessee for which assessee could not satisfy the learned
assessing officer about the nature and source of such credit. It does not
make any distinction whether the sum is found credited from a resident

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shareholder or a non-resident shareholder. Further the compliance with the
reserve bank of India guidelines as applicable under The Foreign Exchange
Management Act neither proves nor disproves the nature and source of
credit from a non-resident as per Income Tax Act, those evidences may have
persuasive value. On careful perusal of para number 11.7 of the decision of
the coordinate bench in case of Russian technology centers private limited
(supra) it does not say that in case of a non-resident shareholder only the
identity is to be proved. In that particular case also the coordinate bench
has held that the primary onus is to be weighed on the scale of evidence
available on the record and the discharge of burden by the assessee on the
basis of the documents on facts and circumstances of the each case.

20. Further looking at the provisions u/s 56 (2) (viib), it clearly applies to the
resident and not to a sum received from a non-resident. Therefore, this
section does not apply to the impugned transaction.

21. Therefore, looking at the various evidences produced by the assessee,
evidences obtained by the learned assessing officer in terms of article 26 of
the Double Taxation Avoidance Convention between India and Mauritius,
the annual financial statement of the investor, the background of the
investor as mentioned in the financial statements, the amount of
investments made by the investor in other companies across the globe, the
amount of share capital introduced by the holding company of the investor,
the financial operations of the investor deciphered from the financial
statements of the investor, Financial and Legal Due diligence by investors,
we do not find that there is an iota of doubt about the creditworthiness and
genuineness of the about transaction of allotment of 20,000 compulsorily
convertible redeemable shares resulting into allotment of shares worth Rs 1,
67,50,000 from K start LLC of Mauritius.

22. We have also carefully perused the various judicial precedents relied upon
by the learned CIT – A and the learned assessing officer supporting the
above addition made by the learned assessing officer. We find that those are
not applicable to the facts of this case as in this case assessee has proved
identity, creditworthiness of the investor as well as the genuineness of the
whole transaction. Further various decisions cited by the learned authorised

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representative are also not required to be dealt with as those were rendered
under different context.

23. In view of these facts, we allow ground number two of the appeal of the
assessee and direct the learned assessing officer to delete the addition of Rs
167,50,000 made u/s 68 of the income tax act with respect to the about
transaction.

24. In view of our above fund finding in ground number 2, ground number 3 is
not required to be adjudicated upon.

25. Ground number 1 and 4 are general in nature and therefore those grounds
are dismissed.

26. In the result appeal of the assessee is partly allowed.

Order pronounced in the open court on 07/12/2020.

-Sd/- -Sd/-
(H.S.SIDHU) (PRASHANT MAHARISHI)
JUDICIAL MEMBER ACCOUNTANT MEMBER

-Sd/- -Sd/-

Dated:07/12/2020 ASSISTANT REGISTRAR
A K Keot ITAT, New Delhi

Copy forwarded to

1. Applicant
2. Respondent
3. CIT
4. CIT (A)
5. DR:ITAT

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