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Income Tax Appellate Tribunal, “H” BENCH, MUMBAI
आदेश / O R D E R महावीर ससुंह, न्याययक सदस्य/ PER MAHAVIR SINGH, JM:
This appeal of Revenue and cross appeal of assessee, both are arising out of the order of the Commissioner of Income Tax (Appeals)]-12, Mumbai, [in short CIT(A)], in dated 12.05.2017. The Assessment was framed by the Income Tax Officer, Ward-6(3)(4), Mumbai (in short ITO/ AO) for the A.Y. 2007-08 vide order dated 26.03.2015, under section 143(3) of the Income-tax Act, 1961 (hereinafter ‘the Act’).
2. The only issue in this appeal of Revenue is against the order of CIT(A) deleting the addition made by AO of unexplained share premium by treating the same as unexplained and non-genuine. For this Revenue has raised the following ground No. 1 and 2: -
“1. On the facts and circumstances of case and in law, the Ld. CIT(A) erred in deleting the addition of ₹ 6,55,29,800/- under section 68 of the Act, on account of unexplained share premium without appreciating the genuineness and nature thereof.
2. On the facts and circumstances of case and in law, the Ld. CIT(A) erred in deleting the addition of ₹ 6,55,29,800/- without justifying the fact that the premium received was much higher as compared to the value of share.“
3. The AO during the course of assessment proceedings noticed that the assessee company has introduced a sum of ₹ 5,89,76,820/- on account of share application money, share capital and share premium received as under: - S. Name of No of Face Issue Premium Money received towards N the shares value price per share person with address Share Share total capital premium 1. M/s Essar 655298 10 100 90 6552980 58976820 6,55,29,800 Properties 4. According to AO this share premium is non genuine and unexplained and hence, he added under section 68 of the Act amounting to ₹ 6,55,29,800/-. (There seems to be ambiguity in the facts about the amounts of share application money / share capital and share premium. We want to clarify here that actually the share capital is amounting to ₹ 6,55,2980 and share premium of ₹ 5,89,76,820/- which are the correct amounts). Aggrieved, assessee preferred the appeal before CIT(A). The CIT(A) deleted the addition by relying on the remand report of the AO vide Para 7.2 as under: -
“7.2 During appellate proceeding, the appellant has also filed the new supporting additional evidence to support its case. The evidence does not bring any additional (acts but merely supports the (acts already on record. The said evidence was forwarded to the AO for his comments. The AO made the comments on the supporting additional evidence wherein the AC) noted that "it is seen from the financial statement that the appellant had issued optionally convertible Debenture (OCO) and fully Convertible Debenture (FCD) amounting to Rs 6,54,45,600/- out of Its 6,55,29,800/- in prior years starting from 19954-95 to 2001-2 and during the year under appeal i.e. assessment year 2007-08 these debenture were merely got converted into Equity shares at premium, as per the terms of issue of those debenture.
Front the AO's continents, it is clear that there was no fresh capital except the Rs. 84.200/- which was introduced by the appellant. The appellant has converted the debenture into equity. The debenture were never questioned before any of the preceding assessment years. Therefore, mere conversion of Debenture into Equity cannot be held as non genuine, if it has been accepted since 1994-93 to 2001-02. Further, it is seen that share application/ share capital / share premium was issued to the holding company. The AO has not noted what enquiry he has carried out to hold that the holding company NI/s Essar Properties Limited is a paper company. The AO has also not specifically noted what was the appellant's submission and for What reasons it was not acceptable, therefore, the addition is held to be merely on the basis of guess work. The AO has neither rebutted the evidence furnished by the appellant nor brought out any evidence on record to establish that the share application / share capital / share premium is not genuine. Therefore, I find force in the submission of the appellant. Accordingly, AO is directed to delete the addition u/s 68 of Rs 6,55,67,580/-. Ground no 2 of the appeal is allowed.”
Aggrieved, now Revenue is in appeal before us.
The learned Sr. Departmental Representative relied on the assessment order.
We have heard rival contentions and gone through the facts and circumstances of the case. The learned Counsel for the assessee Shri Nitesh Joshi first of all took us through the details of the issue of optional convertible debentures in prior years. The details are as under: -
Sr. Particulars Year of issue NO of Face value Amount (₹) No. debentures 1. OCD- 1st Series 1994-95 1,101 ₹ 100 Rs 110,100 2. OCD- 2nd Series 1995-96 357,764 ₹100 ₹ 35,776,400 3. ₹ 100 OCD- 3rd Series 1996-97 209,635 ₹ 20,963,500 ₹ 100 4. OCD- 4th Series 1997-98 28,671 ₹3,867,100 5. ₹ 100 OCD- 5th Series 1998-99 9,008 ₹ 900,800 6. ₹ 100 FCD- 1st Series 1999-00 7,987 ₹ 798,700 7. ₹ 100 FCD- 2nd Series 2001-02 30,290 ₹ 30,29,000 7. The learned Counsel for the assessee took us through the balance sheet of the assessee for the year ending 31.03.2012 and schedule 2, wherein these debentures are disclosed amounting to ₹ 6,54,45,600/- and the amount of debentures of ₹ 6,45,466/-. Thereby, it was contended that the total issue of share capital and share premium of ₹ 6,55,29,800/- was in prior years starting from AY 1994-95 to 2001-02. In these years only action was done that these option convertible debentures and fully convertible debentures were converted into share capital and share premium. It was contended that the entire money was received in prior years and amount credited in prior years. The learned Counsel for the assessee also drew our attention to the remand report of the AO, where he admitted that these amounts were examined during the remand proceeding and the AO giving his comments on the same, which read as under: -
“In this connection, it is to submit that comments with respect to the application of assessee for admission of additional evidence under Rule 46A of Income Tax Rules, 1962 have been called for vide above referred letter. The assessee has made application for admitting additional evidence for following grounds a. Additions of share capital and share premium of ₹ 6,55,29,800/- under section 68 of the Act.
In the assessment order under section 143(3) of the Act dated 26.03.2015 an addition of ₹ 6,55,29,800/- was made under section 68 of the Act for issue of equity shares at a premium.
Vide letter dated 19th Jan 2017, assessee has furnished copy of financial statement for FY 2001-02 along with relevant extract of financial statement from FY 1994-95 till 2001-02 and stated that the debentures amounting to ₹ 6,54,45,600/- issued in prior years were converted into equity shares at a premium during the year and therefore provisions of section 68 is not applicable. Further the assessee has stated that the balance equity share amounting to ₹ 84,200/- were issued to its holding company Essar Properties Private Limited.
It is seen from above financial statements that the assessee has issued Optionally Convertible Debentures (OSD) and Fully convertible Debentures (FCD) amounting to ₹ 6,54,45,600 out of ₹ 6,55,29,8700 in prior years starting from 1994-95 to 2001-02 and during the years under appeal i.e. assessment year 2007-08, these debentures were merely got converted into equity shares at premium, as per the terms of issue of those debentures.”
We have noted that the facts clearly reveal that the amount of ₹ 6,55,29800 is received by assessee in prior years as mentioned above hence, we find that the CIT(A) has rightly deleted the addition because in this year the addition cannot be made in any case. Hence, we confirm the order of CIT(A) on this issue. This issue of Revenue’s appeal is dismissed.
Coming to Cross Objection of the assessee which is barred by limitation by 8 days and assessee has filed condonation petition stating the reasons that the respondent had received the notice from the Tribunal for fixing the date of hearing along with copy of form No. 36 on 15.10.2018. The assessee filed Cross Objection on 22.11.2018, thereby delay of 8 days. It was contended that when Sr. Counsel was briefed only then respondent was advised that it should file Cross Objection regarding the validity of re-assessment proceedings.
When these reasons were confronted and the smallness of delay, we noted that there is a reasonable cause and hence, we condone the delay.
We noted that the assessee has challenged the issue of reopening under section 147 of the Act confirmed by CIT(A). Since, we have adjudicated the issue on merits and dismissed the Revenue’s appeal, the Cross Objection raised by the assessee on the issue of reopening has become academic.
In the result, both, the appeals of Revenue as well as CO of the assessee are dismissed.