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Income Tax Appellate Tribunal, “E” BENCH, MUMBAI
Before: SHRI SHAMIM YAHYA, AM & SHRI AMARJIT SINGH, JM
per Assessing Officer proves that the investor has not been genuinely doing any kind of business. On the other hand, the ld. Commissioner of Income Tax (Appeals) has
(A.Y. 2012-13) Asst. CIT vs. M/s. Sankalp Corporate Pvt. Ltd. noted that all the requisite details including the bank statement of the investor company have been submitted. He has noted that the Assessing Officer has accepted the genuineness of the share capital but has added the share premium amount as undisclosed income. The ld. Commissioner of Income Tax (Appeals) has also noted that the assessee has received share premium amount of Rs.2,16,00,000/- during the current year and balance of Rs.2,07,00,000/- has been received during the earlier year, i.e., assessment year 2010-11 and assessment year 2011-12. The ld. Commissioner of Income Tax (Appeals) has held that there is no justification of adding the share premium of earlier years during the current year. Furthermore, the ld. Commissioner of Income Tax (Appeals) has noted that the assessee has discharged its onus and the Assessing Officer has not brought any contrary documentary evidence to dispute the transaction and involvement of unaccounted money belonging to the assessee. The ld. Commissioner of Income Tax (Appeals) has further observed that the Assessing Officer has not even issued the notice u/s. 133(6) in this regard to verify the source of the funds. Hence, placing reliance upon certain decisions from the ITAT, Hon'ble jurisdictional High Court and Hon’ble Apex Court, the ld. Commissioner of Income Tax (Appeals) has deleted the addition.
At the outset, we agree with the ld. Commissioner of Income Tax (Appeals) that earlier years share premium accounts cannot be added during the present assessment year. Secondly, we note that for addition on account of unjustified share
(A.Y. 2012-13) Asst. CIT vs. M/s. Sankalp Corporate Pvt. Ltd. premium and examination of the source of source of share capital and share premium, etc. & section 56 (viib) was bought in statute and section 68 was amended by Finance Act, 2012 w.e.f. 01.04.2013. Hence, addition on account of unjustified share premium alone cannot be made by placing reliance upon these amended provisions as they are not applicable to the concerned assessment year. This was held by the Hon'ble jurisdictional High Court in the case of Gagandeep Infrastructure Pvt. Ltd. (supra).
The observation by the Hon'ble jurisdictional High Court in this regard may be gainfully referred 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 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 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 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 of the Act 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 of the Act laid down by the Courts 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 facts 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 Lovely Exports (P.) Ltd. (supra) in the context to the pre-amended Section 68 of the Act 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 (A.Y. 2012-13) Asst. CIT vs. M/s. Sankalp Corporate Pvt. Ltd. shareholders 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. 13. Furthermore, we note that the amount has been received from the associate concern of the assessee company. The only reason for the Assessing Officer’s opinion that the investor company lacks creditworthiness is that it has received share capital and share premium account from other concerns. The Assessing Officer has not made any enquiry in this regard. As noted by the ld. Commissioner of Income Tax (Appeals), he has not even issued the notice u/s. 133(6) of the Act to make any enquiry in this regard. Without any enquiry, there cannot be any presumption that the share capital and share premium account of the investor company are bogus transaction. Hence, in our considered opinion, the above Hon'ble jurisdictional High Court which also refers to the Hon’ble Apex Court decision duly supports the finding of the ld. Commissioner of Income Tax (Appeals) that the addition in this case is not sustainable. The various case laws referred by the ld. Counsel of the assessee referred hereinabove also supports the assessee’s case.
In the grounds of appeal, the Revenue has only placed reliance upon the decision of Hon'ble jurisdictional High Court in the case of Major Metals (supra) and has urged that the addition u/s. 68 on account of share premium is justified on the basis of the said case law. We find that in the said case law, the Hon'ble jurisdictional High Court has affirmed the settlement commission finding and noted that the (A.Y. 2012-13) Asst. CIT vs. M/s. Sankalp Corporate Pvt. Ltd. settlement commission has considered all the materials on record including the material which had bearing on the creditworthiness and financial standing of the alleged subscribing companies to the share capital of the assessee. None of the companies was held to be of financial standing or creditworthiness which would justify of making such a large investment of Rs.6 crores at a premium of Rs.990/- per share. Thus, from the above it is evident that the Hon'ble jurisdictional High Court has not interfered with the finding of the settlement commission regarding the lack of creditworthiness of the share applicants. In the present case, we note that no enquiry whatsoever has been done by the Assessing Officer. Hence, without any enquiry there cannot be any presumption that the investor company had no creditworthiness to make the share application for the shares at a premium. Hence, this case law does not fructify the case of the Revenue.
15. Accordingly, in the background of the aforesaid discussion and precedent, we do not find any infirmity in the order of the ld. Commissioner of Income Tax (Appeals). Accordingly, we uphold the same.