2017 (3) TMI 1242

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....p;  THE HON'BLE JUSTICE ANIRUDDHA BOSE AND  THE HON'BLE JUSTICE ARINDAM SINHA For the Appellant: Mr. Abhratosh Majumdar, Sr. Adv. Mr. Avra Mazumder, Mr. Santanu Chatterjee, Mr. Akhilesh Gupta, Mr. Sujoy Sen, Mrs. Sudeshna Mazumder., Advocates For the Respondents: MD. Nizamuddin, Mr. Soumitra Mukherjee, Mr. Ranjan Sinha, Mr. S.N. Dutta, Mr. Vipul Kundalia, Mr. Tapas Kr. Chatterje. Mr. Debasish Chaudhuri, Advocates JUDGEMENT Aniruddha Bose. J.:- 1. These ten appeals involve identical questions of law for adjudication and the factual basis of these appeals are also broadly similar. For this reason, in this judgment, we do not consider it necessary to narrate the facts relating to each particular appeal. To appreciate the scope of these appeals, however, we shall refer to the factual context of the appeal registered as I.T.A.T No.178 of 2016 only. With each of these appeals, applications have been taken out seeking stay of operation of the Tribunal's Judgment, against which the appeal has been preferred. So far as, I.T.A.T No.178 of 2016 is concerned, the stay petition is registered as G.A No.998 of 2016. There are two applications for condonation of delay i....

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....lue of Rs. 10/- at a premium of Rs. 190/- per share. In other words, the assessee company raised a paid up share capital of Rs. 25.06 lacs with premium of Rs. 4.76 crores. It was further stated that on perusal of the assessment records it was found that requisite inquiries were not conducted regarding the issue as to what prompted the subscribers to the shares to pay such substantial premium on shares of a little known company having no or insignificant business activities. It was also observed that it was apparent that the order was passed without application of mind. The show cause notice also stated that proper inquiry was not conducted regarding the identity and creditworthiness of the shareholders. It was stated that the order was passed mechanically which was liable to turn the assessment erroneous and cause prejudice to the interest of revenue. In view of these facts, the assessee was asked to explain as to why the assessment should not be set aside u/s.263." 4. We also find from the order of the C.I.T. that notices under Section 133(6) of the Act had been sent. The C.I.T. observed in his order that on perusal of replies it was seen that the bank statements of the comp....

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.... assessee of that previous year in the event the assessing officer remained unsatisfied with explanation of the assessee given after conducting the inquiry in the manner provided in the order of the C.I.T. The assessee preferred an appeal before the Income Tax Appellate Tribunal against this order of the Commissioner issued under Section 263 of the Act. It was contended before the Tribunal that the order of the assessing officer was neither erroneous nor prejudicial to the interest of the Revenue, and sufficient inquiry was made by the assessing officer. The Tribunal dealt with several appeals pertaining to the assessment years 2008-09 and 2009-10 relating to different assessees and the appeal of Pragati was dismissed by a common order passed on 4th November, 2015. Orders in respect of other appellants were passed on different dates, but as we have already observed, reasoning in all the orders of the Tribunal has been substantially the same. The Tribunal, while dismissing the appeals followed an earlier order by which a large number of cases on similar issues were dismissed. The lead case on which reliance was placed by the Tribunal was its own decision in the case of Subhalakshmi ....

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....ll apply if the person, in whose name the sum referred to therein is recorded, is a venture capital fund or a venture capital company as referred to in clause (23FB) of section 10." 7. Along with this provision, Section 56(2) (viib) and Sections and 92BA and 92C were also amended by the Finance Act, 2012. These amended provisions were incorporated in the statute book primarily to introduce the concept of arm's length pricing in share transactions particularly in relation to closely held companies. For the purpose of adjudication of these appeals, however, reproduction of these provisions is not necessary. Since in course of hearing Mr. Abhratosh Majumdar, learned counsel for the appellants brought to our notice these amendments, we are referring to these provisions in this judgment. In the decision of Subhalakshmi Vanijya Pvt. Ltd. (supra), the Tribunal rejected the appeal of the assessee, inter alia, holding that the amended provision of Section 68 of the Act was retrospective in operation. The Tribunal specifically observed:- "We, therefore, hold that though amendment to section 56 (2) (viib) is prospective, but to section 68 is retrospective. If that is the positi....

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....ter alia:- "We are unable to accept the submission that any further investigation is futile because the money was received on capital account. The Special Bench in the case of Sophia Finance Ltd. (supra) opined that "the use of the words "any sum found credited in the books" in Section 68 indicates that the said section is very widely worded and an Income-tax Officer is not precluded from making an enquiry as to the true nature and source thereof even if the same is credited as receipt of share application money. Mere fact that the payment was received by cheque or that the applicants were companies, borne on the file of Registrar of Companies were held to be neutral facts and did not prove that the transaction was genuine as was held in the case of CIT -Vs- Nova Promoters and Finlease (P) Ltd. (supra). Similar views were expressed by this Court in the case of CIT -Vs- Precision Finance Pvt. Ltd. (supra). We need not decide in this case as to whether the proviso to Section 68 of the Income Tax Act is retrospective in nature. To that extent the question is kept open. We may however point out that the Special Bench of Delhi High Court in the case of Sophia Finance Ltd. (supr....

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....on that basis. Submission of the appellants is that the points of law urged in these appeals were not raised before the Coordinate Bench. Main argument of the appellants before us has been that the amendment to Section 68 does not have retrospective operation. According to the appellants, if it is found that the amended provisions of Section 68 of the Act do not have retrospective operation, then having regard to what has been held by the Tribunal in the case of Subhalakshmi Vanija Pvt. Ltd. (supra), the inquiry, as directed would be impermissible. 14. We have already observed that the judgment in the case of Rajmandir Estates Private Ltd. (supra) was delivered considering the unamended provision of Section 68 of the Act. In the case of the assessees before us, there is no differing feature so far as applicability of the said statutory provision is concerned, even though the Tribunal in Subhalakshmi Vanijya Pvt. Ltd. (supra) had held that the provisos to Section 68 of the Act are retrospective in their operation, and delivered the decision against the assessee in that case that reasoning. In the appeal of Rajmandir Estates Private Ltd. (supra), the Coordinate Bench did not consi....