TaxTMI 
TaxTMI 
TaxTMI 
2019 (4) TMI 401
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.... determined at Rs. 349.72 Lacs after certain additions as against returned loss of Rs. 15.33 Lacs filed by the assessee on 26/09/2009 which was processed u/s 143(1). As evident from grounds of appeal, the sole subject matter of appeal before us is certain additions u/s 68 for Rs. 359.70 Lacs as made by Ld. AO and upheld by first appellate authority. The assessee has also contested the validity of the reassessment proceedings on legal grounds. 2.1 Pursuant to receipt of certain specific information regarding issue of shares at a high premium, the assessee was subjected to reassessment proceedings vide notice u/s 148 dated 18/03/2014. In response, the assessee offered the original return of income and sought reasons for reopening, which were duly supplied to the assessee. During assessment proceedings, it transpired that the assessee issued 3025 shares at a premium of Rs. 11,891/- per share [wrongly referred to as Rs. 11,894/- in quantum order] amounting to Rs. 359.70 Lacs to six persons, the details of which have already been extracted at para-3 of the quantum assessment order. Accordingly, the assessee was asked to justify the premium on the shares including nature and source of s....
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.... in CIT Vs. Lovely Exports Ltd. [299 ITR 268]. It was also contended that the assessee came into existence only during the year 2008 & its business operations commenced at a later stage and therefore, the impugned addition, by no stretch, could be held to be unaccounted money of the assessee. However, not convinced, Ld. AO confirmed the stand of Ld. AO by making following observations: - 4.5 I have considered the facts of the case and the appellant's submissions. Section 68 of the income tax act, 1961 reads as under: "Where any sum is found credited in the books of an assessee maintained for any previous year, and assessee offers no explanation about the nature and source thereof or the explanation offered by him is not, in the opinion of the assessing officer satisfactory, the sum so credited may be charged to income tax as the income of the assessee of that previous year." It is clear from a plain reading of the section as above that the nature and source of any sum found credited in the books of any assessee has to be explained to the satisfaction of the assessing officer. The appellant has contended that in respect of the share application money received from investors, t....
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....The root of reassessment proceeding lies in the reasons recorded for reopening the assessment, the relevant portion of which could be extracted in the following manner: - M/s Niyojit Financial Consultancy Pvt. Ltd. AY 2009-10 Reasons for reopening the case In this case the assessee company has filed return of income for AY 2009-10 and the same was processed under section 143(1) of the IT Act and no scrutiny assessment was completed for the said AY 2009-10 in the case of above named assessee. In the case of the above named assessee there was information and details available with regard to issue of shares at huge premium per share to the following parties as per details given below: Sr. No. Share type issue on cash Dt. Of issue - issued in cash No. of shares issued on premium on cash Nominal value per shareissued on cash Share premium per share Total premium amount on cash issue 1 Equity 10.04.2008 3025 10 11891 3,59,70,275 The said shares were issued to the following persons as per details below: Sl No. Name of investor No. of shares Premium per share Amount of share premium 1. Ananth Doraswamy 210 11894 2497900 2. Kira....
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....e to invoke reassessment proceedings is that fact that notices u/s 133(6) issued to certain parties during assessment proceedings for AY 2010-11 remained unserved and therefore, the claim of the assessee for AY 2009-10 with respect to issue of shares at huge premium was required to be examined with regard to genuineness, identity and creditworthiness. However, it is difficult to accept the inference that mere non-service of notice u/s 133(6) in subsequent years in the case of Share Allottees would automatically lead to an inference that assessee's income for AY 2009-10 had escaped assessment particularly when there was no other tangible material in the possession of revenue so as to draw such an inference. 5.2 The Ld. AR has also contended that the approval by sanctioning authority was given in a mechanical manner without due application of mind and therefore, the jurisdiction acquired by Ld. AO was bad in law. The form for recording the reasons for initiating proceedings u/s 148 & for obtaining the Approval of the Addl. Commissioner of Income Tax - 2(2), Mumbai, as placed on record, could be extracted in the following manner: - Form for recording the reasons for initiating proc....
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....ame must reflect due application of mind by the sanctioning authority. This becomes all the more important when the only material available in the hands of the revenue to invoke the reassessment proceedings was the fact that notices issued u/s 133(6) during AY 2010-11 on certain Share Allottees remained unserved and therefore, assessee's claim as to Share Allotment in AY 2009-10 was required to be examined. This being the case, we find certain force, although not conclusive, in the legal arguments raised by Ld. AR before us. 5.3 So far as the merits of the case is concerned, we find that the impugned additions have been made as unexplained cash credit u/s 68 which casted on onus upon the assessee to demonstrate fulfilment of three primary conditions viz. the identity of the investor, creditworthiness of the investors and lastly the genuineness of the transactions. Upon perusal of orders of both the lower authorities, it is noted that in support of the transactions the assessee filed voluminous documentary evidences in the shape of return of allotment of shares in Form 2 filed with Registrar of Companies, Board resolution authorizing allotment of shares, list of investors filed wi....
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.... 272] wherein it has been held as under: - (e) We find that the proviso to section 68 of the Act has been introduced by the Finance Act 2012 with effect from 1st April, 2013. Thus it would be effective only from the Assessment Year 2013-14 onwards and not for the subject Assessment Year. In fact, before the Tribunal, it was not even the case of the Revenue that Section 68 of the Act as in force during the subject years has to be read/understood as though the proviso added subsequently effective only from 1st April, 2013 was its normal meaning. The Parliament did not introduce to proviso to Section 68 of the Act with retrospective effect nor does the proviso so introduced states that it was introduced "for removal of doubts" or that it is "declaratory". Therefore it is not open to give it retrospective effect, by proceeding on the basis that the addition of the proviso to Section 68 of the Act is immaterial and does not change the interpretation of Section 68 of the Act both before and after the adding of the proviso. In any view of the matter the three essential tests while confirming the pre-proviso Section 68 of the Act laid down by the Courts namely the genuineness of the tran....