TaxTMI 
TaxTMI 
2019 (4) TMI 63
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....pany had issued 19,25,000 preference shares, each of the face value of Rs. 10/- to one P5 Asia Holding Investment (Mauritius) Ltd (hereinafter referred to as "P5AHIML") at Rs. 10,890/- per share. Through allotment of these shares, thus, the company had received the share amount of Rs. 1,92,50,000/- and total premium of Rs. 2096.32 crores (rounded off). The company had thus received total sum of Rs. 2098.25 crores. The dividend would be paid at the rate of 0.00001% per annum on the face value of the preference shares. Upon completion of period of ten years of issuance of preference shares, the same would be converted into equity shares at a premium of Rs. 10,890/- per share. The Assessing Officer noticed that the assessee's holding company M/s. Idea Cellular Limited and its nominee owed 1,00,00,000 equity shares of Rs. 10/- each. He was of the opinion that the assessee had received share capital towards preference shares from P5AHIML at terms which were so adverse to P5AHIML, that no prudent businessman would ever agree to subscribe to preference shares on such terms. 3.2 On such basis, the Assessing Officer initiated inquiry into the assessee receiving such sum of Rs. 209....
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.... report from the Assessing Officer. The CIT(A) dismissed the appeal. Perusal of this order would show that the assessee having approached the Bombay High Court in a Writ Petition seeking stay against the recoveries, the High Court, while disposing of the Writ Petition had desired that the Commissioner should dispose of the appeal within three months. The Commissioner in the order referred to the contentions of both sides as also the decisions cited before him. He also noted that after allowing the assessee to produce additional documents which could not be produced earlier, he had called for remand report. In his concluding remark in the appellate order, he stated as under:- ".... As the documents furnished by appellant are under investigation and verification which was stated in remand report of A.O. Under these circumstances, I uphold the order of the A.O. These grounds of appeal are dismissed. Appeal order was passed to comply with Hon'ble Bombay High Court direction." The assessee thereupon approached the Tribunal. The Tribunal, by the impugned detailed judgment, allowed the assessee's appeal. 3. We will take note of the contents of the order of the Trib....
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..... The requirement of issuing shares at high premium was obvious namely in order to ensure that the holding company does not loose its majority stake in the assessee company. The Assessing Officer himself had examined the source of such investment. Further examination was conducted by the Commissioner (Appeals). The Assessing Officer in his remand report agreed that the investments were genuine. The Tribunal has given elaborate reasons for reversing the orders passed by the Revenue Authorities. Return of such investments in the form of dividend was not the only return for the investor as correctly recorded by the Tribunal. He stated that later on the investor company had exited with the sizable return on investments which itself would show the fallacy in the Assessing Officer's stand that the transaction was a colourable device. 7. As is well known in the context of Section 68 of the Act, the basic duty would be on the assessee to establish the genuineness of the transaction, credit worthiness of the investor and the source of funds. Equally well settled principle through series of judgments is that the Department cannot insist on the assessee establishing source of th....
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....hat apparently the investor was investing huge amount which may prima facie appear to be without adequate possible returns, may be fully justified. However, when all the relevant factors are properly explained, including the fact that the payment of dividend was not the sole attraction for the investor and that the investor could expect a fair return on the investment, of course, subject to vagaries of the any business decision, the Assessing Officer had to advert to all such materials on record in proper perspective. As noted by the Tribunal, all necessary permissions and clearances were granted by the Government of India and other government authorities for such investment. The source of the funds in the hands of P5AHIML was also verified. Merely because multiple corporate bodies may have been involved in the entire process of collecting funds in P5AHIML and then investing the same in the assessee company, by itself would not be sufficient to establish a sham transaction or colourable device. 10. We further notice that when the Commissioner (Appeals) had permitted additional evidence to be produced on record during the appellate proceedings, he had called for remand report fro....