Loading judgment…
Facts
The assessee issued shares at a premium in AY 2009-10. The Assessing Officer (AO) treated a significant portion of the premium received as an unexplained cash credit under Section 68 of the Income Tax Act. The assessee contended that the share application money was received in an earlier year (AY 2008-09), and shares were allotted in the year under consideration.
Held
The CIT(A) accepted the assessee's argument that the addition under Section 68 could not be made in AY 2009-10 as the money was received in an earlier year. The CIT(A) directed the AO to examine the creditworthiness of the share applicants and other parties by reopening the assessment for the relevant year (AY 2008-09) in terms of Section 150 of the Act.
Key Issues
Whether the addition of share premium as an unexplained cash credit under Section 68 in AY 2009-10 is justified when the funds were received in AY 2008-09? Whether the CIT(A) was justified in directing the AO to reopen the assessment of the earlier year under Section 150?
Sections Cited
68, 150
AI-generated summary — verify with the full judgment below
Income Tax Appellate Tribunal, MUMBAI BENCH “F”, MUMBAI
Before: SHRI B.R. BASKARAN & SHRI AMIT SHUKLA
PER B.R. BASKARAN, ACCOUNTANT MEMBER :
The assessee has filed this appeal and it relates to the assessment year 2009-10. The assessee is aggrieved by the decision of Ld CIT(A) in directing the AO to examine the credit worthiness of share applicants and two other parties in assessment year 2008-09/ relevant year in which money was received.
The facts relating to the above said issue are discussed in brief. During the year under consideration, the assessee had issued shares at a premium of Rs.39/- per share. The details of shares issued and premium collected by the assessee is tabulated below:- Assessment Year: 2009-10
Name of share Face Value Premium Total receipt allottee received (Rs.) received (Rs.) (Rs.) 1. V.K.Trust 48,58,612 18,94,85,868 19.43.44.480 2. R.K.Trust 12,97,135 5,05,88,265 5,18,85,400 3, Umesh Zadgoankar 3,23,950 1,26,34,050 1,29,58,000 4. Arun Babulal Shah 25,00,000 7,75,00,000 10,00,00,000 Total 89,79,697 35,02,08,183 35,91,87,880 The assessing officer assessed the share premium amount of Rs.35.02 crores as unexplained cash credit u/s 68 of the Act.
In the appellate proceedings, the assessee furnished details relating to the share capital/premium received by it. It was submitted that the share application money was received in the earlier years and during the year under consideration, the shares were allotted. Accordingly, it was submitted that the addition u/s 68 of the Act could not have been made in this year, as there was no receipt of money during the instant year. The Ld CIT(A) called for a remand report from the AO and in the remand report, the assessing officer also accepted that the addition u/s 68, if any, is required to be examined in AY 2008-09 or relevant year in which the money was received. Based on the remand report, the Ld CIT(A) deleted the addition of Rs.35.02 crores made by the AO u/s 68 of the Act in the year under consideration, i.e., assessment year 2009-10.
The share applicants, viz., V.K.Trust and R.K.Trust have not filed return of income of AY 2009-10 on the plea that they did not have taxable income. Further, it was submitted that both these trusts have held shares in a company named M/s Asian Electronics Ltd and both the trusts have sold those shares in the earlier year. It was submitted that a part of sale consideration received was claimed to have been invested in purchasing shares of the assessee company. In view of the above said submissions and Assessment Year: 2009-10 further, since the share application money was received by the assessee from them in the year relevant to AY 2008-09, the Ld CIT(A) directed the AO to examine the creditworthiness of VK Trust and RK Trust by reopening the assessment for AY 2008-09 of the assessee company in terms of sec.150 of Income tax Act.
In respect of share application money received from Shri Arun B Shah, it was submitted that the balance outstanding in the names of M/s Pranam Ghar (India) P Ltd and M/s Raymold Lighting P Ltd were used to allot shares to Shri Arun B Shah. The Ld CIT(A) took the view that the details of receipt of money from the above said two companies require to be examined and accordingly directed the AO to examine the credit entries by reopening the assessment of the year in which money were received from the above said two companies by the assessee as per law provided in sec.150 of the Act.
The assessee is aggrieved by the above said directions given by Ld CIT(A). According to the assessee, the Ld CIT(A) should not have given such directions.
We heard the parties and perused the record. We noticed that the assessee had received share application money in the earliers and not during the year under consideration. Hence, the AO and Ld CIT(A) have accepted that the addition u/s 68 of the Act could not have been made in the year under consideration. We notice that the Ld CIT(A) has only directed the AO to examine the receipt of money in the year in which they were received by reopening the assessment of the relevant years. Even without such specific direction, it is always open for the AO to reopen the assessment of the year in which the amounts were claimed to have been received. This is so provided in sec.150 of the Act. Hence we do not find any reason to interfere with the directions so given by the Ld CIT(A). Assessment Year: 2009-10