2024 (1) TMI 602 - AT - Income Tax

Revenue's appeal dismissed as share premium paid by investors held legitimate business decision under Section 68

ITAT Kolkata dismissed Revenue's appeal regarding unexplained cash credit addition under Section 68. AO questioned share premium of Rs. 49 per share (face ... Unexplained cash credit - disbelieving the receipt of share capital along with share premium - addition u/s 68 - AO observed that against the face value of Rs. 1/- each share, the assessee has received the subscription money at Rs. 50/-, in other words, it received 49 rupees as premium - area of difference between the assessee and the ld. Assessing Officer is as to why the subscriber will invest in a Company, who is making losses - CIT(A) deleted addition - HELD THAT:- CIT(Appeals) has held that it is for the businessman to decide how it wants to use its funds. The subscribers have not borrowed the money for making investment with the assessee-company. The group concern might have decided to start some activity on substantial basis in the assessee-company, therefore, it could be a support from the group concern. The ld. 1st Appellate Authority has also examined whether, this excess premium paid by the subscribers is to be construed as a gift to the assessee within the meaning of section 56(2)(vib) of the Income Tax Act but held that this provision is applicable from A.Y. 2013-14 and not in A.Y. 2012-13. On due consideration of the order of ld. CIT(Appeals), we are of the view that it does not call for any interference at our end. Accordingly, the appeal of the Revenue is dismissed on merit. Issues Involved:1. Condonation of delay in filing the appeal.2. Deletion of addition of Rs. 3,00,00,000/- treated as unexplained cash credit by the Assessing Officer under section 68 of the Income Tax Act.Condonation of Delay:The Registry pointed out that the appeal of the Revenue was time-barred by 40 days. The Assessing Officer filed an application for condonation of delay, explaining that due to work pressure and insufficient system resources, the appeal order could not be regularly checked on the ITBA system. The Tribunal, after considering the explanation and the workload on the Assessing Officer, condoned the delay of 40 days and decided to proceed with the appeal on merit.Deletion of Addition under Section 68:The Revenue's primary grievance was that the CIT(Appeals) erred in deleting the addition of Rs. 3,00,00,000/-, which the Assessing Officer treated as unexplained cash credit under section 68 of the Income Tax Act. The Assessing Officer had questioned the receipt of share capital along with share premium, especially given the assessee-company's continuous losses and the high premium of Rs. 49 per share.The CIT(Appeals) found that all four share applicant companies had responded to notices and provided necessary documents to prove the genuineness of the transactions. The Directors of these companies appeared before the Assessing Officer and their statements were recorded, establishing their identity. The bank statements and audited accounts of the share applicant companies showed sufficient creditworthiness. The CIT(Appeals) noted that the Assessing Officer did not provide any evidence to substantiate the suspicion that the funds were unaccounted money. The CIT(Appeals) also highlighted that the provision for taxing excess share premium under section 56(2)(viib) was applicable from AY 2013-14 and not for the relevant assessment year 2012-13.The Tribunal, after reviewing the records and the findings of the CIT(Appeals), agreed that the addition made under section 68 was not factually and legally sustainable. It was noted that the share applicant companies were group companies with substantial net worth and had made investments through proper banking channels. The Tribunal found no justification in the Assessing Officer's suspicion and upheld the CIT(Appeals)'s decision to delete the addition.In conclusion, the Tribunal dismissed the appeal of the Revenue on merit.Order pronounced in the open Court on 08.11.2023.