TaxTMI 
TaxTMI 
2018 (3) TMI 808
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....e Act and after recording of reasons in this regard, the Assessing Officer issued notice under Section 148 of the Act on 18.4.2012. After receipt of the notice, the assessee filed its response thereto and on receipt of the same, the Assessing Officer dropped the proceedings initiated under Section 147 of the Act and this was communicated to the assessee vide letter dt.4.6.2013. Subsequently, proceedings under Section 147 of the Act were once again initiated in the case on hand and after recording reasons, notice under Section 148 of the Act was issued on 10.6.2013 along with copy of reasons recorded. The assessee vide reply dt.18.7.2013 submitted that since no income of the assessee had escaped assessment for the year under consideration, therefore the notice issued under Section 148 of the Act is illegal without jurisdiction, void ab-initio and consequently proceedings initiated under Section 147 of the Act be dropped. The assessee submitted that the return filed on 30.09.2008 and revised return filed on 14.10.2008 be treated as filed in response to the notice under Section 148 of the Act. The assessment was completed under Section 143(3) r.w.s. 147 of the Act vide order dt.20.3.2....
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....expaliend the nature of the amount received from M/s. Walden properties Pvt. Ltd., Under the facts and in the circumstances of the appellant's case. 3.3 The learned CIT[A] ought to have appreciated that the share premium received by the appellant was not capable of being taxed being a capital receipts and the provisions of sec. 56[1][viib] of the Act was not applicable for the year under appeal and hence, the addition sustained by the learned CIT[A] is unjustified and the same deserves to be deleted. 4. Without prejudice to the right to seek waiver with the Hon'ble CCIT/DG the appellant denies itself liable to the charged to interest u/s. 234-B and 234-C of the Act, which under the facts and in the circumstances of the appellant's case and the levy deserves to be cancelled. 5. For The above and other grounds that may be urged at the time of hearing of the appeal, your appellant humbly prays that the appeal may be allowed and justice rendered and the apellant may be awarded costs in prosecuting the appeal and also order for the refund of the institution fees as part of the costs, 4. Ground Nos.1, 4 & 5 - These grounds being general in nature and not urged before u....
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....8 of the Act on 18.4.2012 which were proceedings dropped by the Assessing Officer vide letter dt.4.6.2013. (iii) There was no reason to believe that income of the assessee liable to tax had escaped assessment for the year under consideration, as can be seen from the reasons recorded while issuing the notice under Section 148 of the Act dt.10.6.2013 for reopening the assessment for Assessment Year 2008-09. 5.2.2 In support of its contentions, the assessee made detailed submissions, filed Paper Book and a compilation of judicial decisions on the issue of "Reason to Believe" and "Issue of Notice based on which the first notice was issued and dropped." 5.3 Per contra, the learned Departmental Representative for Revenue also made detailed submissions in support of the decision of the learned CIT (Appeals) and filed judicial pronouncements in support of Revenue's stand in the matter. 5.4.1 We have heard the rival contentions, perused and carefully considered the material on record; including the judicial pronouncements cited and they have been discussed wherever necessary and when the context so required. We find that this issue of the validity of notice issued by the Assessing Offi....
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....the Act on 18.4.2012 was dropped and a second notice under Section 148 of the Act was issued on 10.6.2013. This, in itself, does not constitute "Change of Opinion." This fact comes out clearly from the Assessing Officer's letter dt.4.6.2013 wherein the Assessing Officer has mentioned that the proceedings initiated by issue of the earlier notice under Section 148 of the Act dt.18.4.2012 was dropped as the reasons have not been properly recorded. As pointed out by the learned Departmental Representative for Revenue, the Hon'ble Allahabad High Court in the case of Sukhlal Ice and Storge Co. 199 ITR 129 has upheld the issue of second notice when the first notice was found to be illegal and found wanting in jurisdiction. Therefore, in our considered view, the issue of the second notice under Section 148 of the Act on 10.6.2013 for Assessment Year 2008-09 is valid, as all the other procedures mandated in the Act have been followed by the Assessing Officer. Also, since substantive issue in question was never examined under the proceedings in the first notice issued on 18.4.2012, the question of change of opinion does not arise. In this view of the matter, as discussed above, we find n....
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.... documented. (ii) The source of funds and identity of the payee has been established; (iii) How much premium should be charged on the issue of share capital is in the domain of the decision making of the assessee company and Revenue authorities cannot dictate as to how much premium can be charged on the shares issued; (iv) Since Revenue has accepted the transaction of investment in the hands of the investor, i.e. M/s. Walden Properties Investment Pvt. Ltd., therefore the addition of Rs. 49.50 Crores made in the hands of the assessee is untenable. (v) It is settled principle, upheld by the Hon'ble Apex Court, that bogus share transactions cannot be added in the hands of the company in which the investment is made and therefore, the action of the Assessing Officer is bad in law. (vi) The provisions of Sec. 56(1)(viib) has been introduced by Finance Act, 2012 w.e.f. 1.4.2013 and do not apply to Assessment Year 2008-09, i.e. the year under appeal in the case on hand. 6.4 At the outset, it needs to be mentioned that the argument of the assessee that the provisions of Sec.56(1)(viib) of the Act does not apply to the case on hand for the year under consideration as it has b....
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..... (I.T.A No.1104/Kol/2014), which was decided on 30th July 2015, pertaining to the assessment year 2009-10. In the case of Subhalakshmi (supra), the Tribunal examined the question as to whether such an inquiry was permissible or not. While addressing this question, the Tribunal examined as to whether the assessing officer could examine genuineness of transactions of receipt of share capital with premium or not. If such a course was permissible, and upon completion of the inquiry the assessee failed to satisfy the assessing officer on the identity and capacity of the subscribers and genuineness of transactions, then, the Tribunal opined, addition under Section 68 of the Act would have been called for. That would be the ultimate outcome of the inquiry directed by the C.I.T., provided of course, the assessing officer remained unsatisfied with the explanation furnished by the assessees. Section 68 of the Act permits adding the sum credited to the income of an assessee in situations specified under that provision. For the assessment years concerned, Section 68 of the Act read:- "Where any sum is found credited in the books of an assessee maintained for any previous year, and the asse....
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....re capital with premium etc. to the satisfaction of the A.O, failure of which calls for addition U/S.69." 8. The Tribunal rejected the appeal of Pragati as well as the appeals of other appellants before us, relying on the aforesaid decision, and sustained the order of the C.I.T. directing inquiries, as we have referred to earlier. 9. Main thrust of the appellant's case is that the provisions of Section 68 of the Act as amended could not be given retrospective operation and if that position of law was accepted, then it was not open to the C.I.T. to direct an enquiry to ascertain the source and genuineness of the sums being projected by the appellants as capital receipts. Mr. Majumdar wants us to reject the finding of the Tribunal that Section 68 of the Act, as amended, has retrospective operation. In support of his submissions on this point, he has relied on a Constitution Bench judgment of Supreme Court delivered in the case of the Commissioner of Income Tax Vs. Vatika Township Pvt. Ltd. [(2015) 1 SCC 1]. Argument of the appellant is that in the event the amendment made to section 56 (2) of the Act is given prospective effect along with provisos to Section 68, then sums recei....
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....f depositor". Therefore, the submission that the source of source is not a relevant enquiry does not appear to be correct. We find no substance in the submission that the exercise of power under Section 263 by the Commissioner was an act of reactivating stale issues." 12. This judgment was carried up in appeal by the assessee before the Hon'ble Supreme Court by filing a petition for special leave to appeal (Petition(s) for Special Leave to Appeal (c) ... cc No (s) 22566-22567/2016). On 9th January, 2017, the Hon'ble Supreme Court was pleased to dismiss the special leave petition finding no reason to entertain the same. A copy of the order of the Hon'ble Supreme Court has been made available to us by Mr. Nizamuddin, learned counsel representing the Revenue. 13. In that judgment, the Coordinate Bench had referred to particulars of the assessee's account in detail. Reference was made specifically to its subsisting share capital, quantum rise in share capital and reserve and surplus on issue of share capital with high premium during the relevant previous year. In this judgment, we do not consider it necessary either to reproduce the particulars of accounts of individual assessees....
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....ision. The Coordinate Bench found the order of the C.I.T. to be valid examining the order applying the unamended provision of Section 68 of the Act only. We do not find any other distinguishing element in these appeals which would require addressing the question as to whether the amendment to Section 68 of the Act was retrospective in operation or not. Neither do we need to address the issue that if the inquiries, as directed, revealed that share capital infused were actually unaccounted money, whether the same could be taxed in accordance with Section 56(2) (vii b) or not. The ratio of the Constitution Bench decision of the Hon'ble Supreme Court in the case of Vedika Township Private Ltd. (supra) does not apply in the legal context in which we are deciding these appeals. It is not necessary in these appeals to deal with the question of retroactivity of the aforesaid provisions, for which that authority was cited. 15. Arguments in all these appeals have been advanced in the same line, and for that reason we have not recorded in this judgment the submissions made individually in each appeal. Another decision of a Coordinate Bench in ITA No. 723 of 2008 in the case of Commissioner....
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....apital and reference and reliance was placed on the decision of the Hon'ble Apex Court in the case of CIT Vs. Lovely Exports Pvt. Ltd. (2008) 216 CTR 195 and many other judicial pronouncements. In all these cases, a clear finding has been rendered that the assessee has discharged the onus of establishing the genuineness of the investment made in the share capital of the company. In the above cited case, placing reliance on the decision of the Hon'ble Delhi High Court in the case of CIT Vs. Kamadhenu Steel & Alloys Ltd. (2012) 206 Taxman 54 (Delhi) the following paras 39 & 40 thereof were extracted by the Tribunal which indicates the thought process and line of reasoning that went into the Tribunal's decision in NRA Iron & Steel Pvt. Ltd. (supra) :- " 39. We may repeat what is often said, that a delicate balance has to be maintained while walking on the tight rope of sections 68 and 69 of the Act. On the one hand, no doubt, such kind of dubious practices are rampant, on the other hand, merely because there is an acknowledgement of such practices would not mean that in any of such cases coming before the Court, the Court has to presume that the assessee in questions as indu....
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....ighlighted several factors before concluding that the real purpose of transfer of funds is not for the purpose of investment but is only a conduit to route the funds involved as a layering process. The Assessing Officer has pointed out that - (i) The Director of the assessee company has been allotted shares at par around the same time that M/s. Walden Properties Pvt. Ltd., were allotted shares at a huge premium of Rs. 990 per share. (ii) The assessee was unable to furnish a proper valuation report to justify the high premium charged. (iii) The assessee could not substantiate the high premium, based on the manner in which such valuations are done supported by financials. (iv) Based on the financial details of the assessee, the value of the said shares is very much less and no genuine investor would buy the shares at a hefty premium of Rs. 990 per share. (v) Several discrepancies / abnormal features were highlighted which are clear pointers to the fact that the aforesaid transaction is "made up" to camouflage the real purpose / intention. (vi) In respect of the project for which the investor was supposed to have made the investment, even application for the same has not b....