TaxTMI 
TaxTMI 
2015 (4) TMI 842
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....1.12.2013 of the Income Tax Appellate Tribunal (ITAT) rejecting its appeal is erroneous. The Assessing Officer (AO) had added back a sum of Rs.12,78,60,000/- under Section 68 of the Income Tax Act, 1961 (hereinafter referred to as "the Act"). This was set aside concurrently by the CIT (Appeals) and the ITAT. 2. During the relevant Assessment Year (AY) 2006-07, the assessee had issued shares at a premium ranging from Rs.24000-39000 to applicants which were companies. In the course of assessment proceedings, the AO had sought, details in particular of such share applicants. The assessee had provided the various details of such share applicants i.e. (Star Pleat Vincon Pvt. Ltd., Shree Mahavir Management Services Pvt. Ltd,. Bhuwania Brothers....
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....ansaction. The share capital amounting to Rs. 12,78,60,000/- was assessed as income of the appellant u/s 68 'of the Act." 3. After noticing the relevant case law on Section 68 of the Act, the CIT(Appeals) concluded as follows: "9. In the light of aforesaid judicial precedents, it is held that the appellant had received share capital from 3 companies who are regularly assessed to tax, the companies have submitted the copies of the share application forms, the minutes of the Board's resolution authorizing the companies to make the application for shares, copy of certificate of incorporation, copy of PAN etc. The AO had relied on the inquiry of the Inspector that the concerned companies were not found existing on the given addres....
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....y the investigation wing of the Kolkata Income Tax Department. The report specifically looked into the allegations to determine whether the share applicants/investors companies were genuine. The relevant part of the said investigation report dated 17.12.2007 is extracted below: "From the documents submitted by the above mentioned Kolkata based parties. It transpires that M/s. Bhuwania Brothers Pvt. Ltd. and M/s. Shri Mahabir Management & Services Pvt. Ltd. created the source of investment out of sale of stock-in-trade as on 31.03,2005, sale of investment, receipts from sundry debtors etc. whereas M/s. Star Pleat Vincom Pvt. Ltd. and M/s. Manush Marketing Pvt. Ltd. did so with the amount received from loan debtors outstanding as on 31.3.2....
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....in the A.R. Leasing Pvt Ltd. In the case of Star Pleat Vincom, the sundry debtors as on 31.3.2005 are of Rs. 1120,00,000. These were realized and a sum of Rs. 3.99 crores was invested in the A.R. Leasing. Thus, the companies have sufficient balance in their balance sheets in the shape of investment as well loan and advances. These companies are existing more than 10 years. Learned DIT has also verified this aspect and did not report any particular irregularity. The next issue is about the genuineness of the transaction. The assessee has produced the details of bank account. All the share application money have been issued through baking channel. The ADIT, Calcutta has pointed out that these companies were still holding the share i.e. on Dec....
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....y in the first instance. Instead, the issue was whether the amount invested by the share applicants were from legitimate sources. The objective of Section 68 is to avoid inclusion of amount which are suspect. Therefore, the emphasis on genuineness of all the three aspects, identity, creditworthiness and the transaction. What is disquieting in the present case is when the assessment was completed on 31.12.2007, the investigation report which was specifically called from the concerned department in Kolkata was available but not discussed by the AO. Had he cared to do so, the identity of the investors, the genuineness of the transaction and the credit worthiness of the share applicants would have been apparent. Even otherwise, the share applic....