TaxTMI 
TaxTMI 
2018 (3) TMI 808
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....initiated proceedings under Section 147 of the 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(....
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....s to be delated. 3.2 The learned CIT [A] is not justified in holding that the appellant has not 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....
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....f opinion as the proceedings were initiated on the same grounds and for the same reasons that led to the issuance of earlier notice under Section 148 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....
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....change of opinion. Since no opinion had been formed earlier, the question of change of opinion does not arise. 5.4.3 The first notice issued under Section 148 of 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....
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.... (i) The said transaction is a genuine, bona fide transaction, as evident by the fact that the entire transaction has been through regular banking channels and is properly 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 ....
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....wed 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 Vanijya Pvt. Ltd. Vs. C.I.T. (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 assesse....
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....ve 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 position, then the assessee is always obliged to prove the receipt of share 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 ....
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....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. (supra) held that "the ITO may even be justified in trying to ascertain the source of 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. Refere....
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....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 consider it necessary to examine the question of retroactivity of the aforesaid provision. 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 p....
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....see is that no addition can be made on account of share application money received and in this regard reliance was placed by the learned Authorised Representative on the decision of the ITAT, Delhi Bench in the case of ACIT Vs. NRA Iron & Steel Pvt. Ltd. in ITA No.3611/Del/2014 dt.15.1.2017 wherein the additions were made towards unexplained share capital 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....
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....areholders. Even then it was held that Revenue should carry out a thorough probe. 6.9 However, in the case on hand, the content and factual matrix are different. A finding has been rendered that there has been routing of money for illegal purposes through a chain of companies in which the assessee is a conduit in the layering process. The Assessing Officer has highlighted 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 inv....