TaxTMI 
TaxTMI 
2021 (2) TMI 23
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....d in facts in holding that Rs. 9,50,00,000 added under section 68 of the Income-tax Act, 1961 is not maintainable when identity, genuineness and creditworthiness of the share applicant was not proved. 3. Whether in the facts and circumstances of the case, the learned Commissioner of Income-tax (Appeals) has erred in law and in facts in holding that even when no response is made against summon under section 131 is issued for personal examination to prove the identity, genuineness and creditworthiness, "the transaction is still valid". 4. Whether in the facts and circumstances of the case, the learned Commissioner of Income-tax (Appeals) has erred in law and in facts in holding that without examinations of the identity, genuineness and creditworthiness of the share applicant from his end, "the transaction is still valid". 5. That the appellant craves for leave to add, delete, amend or modify any ground before or at the time of appellate proceedings. 3. From the perusal of the aforesaid grounds of appeal, it is discerned that the Revenue is aggrieved by the action of the learned Commissioner of Income-tax (Appeals) in ordering deletion of the addition of ....
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....d. From the profit and loss account and balance-sheet of the said M/s. Saibaba produced by the assessee it is evident that no business activity has been carried on justifying the huge premium". Thereafter he was of the opinion that unaccounted money has been laundered by creating fagade of paper work and then after citing few case law of the apex court held that since there was no compliance on the part of the subscribing company (M/s. Saibaba) and since they have not been forthcoming in its reply to the summons under section 131 of the Act, he (Assessing Officer) held that identity, creditworthiness of the share subscriber and the genuineness of the transaction has not been proved and therefore, addition was made under section 68 of the Act of the entire share capital and share premium collected by the assessee. 5. Aggrieved by the aforesaid action of the Assessing Officer, the assessee preferred an appeal before the learned Commissioner of Income-tax (Appeals) who was pleased to delete the addition by holding as under : "I have considered the submissions of the authorised representative of the appellant as well as the assessment order framed in the light of the materi....
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....th the fair market value. The authorised representative of the appellant further placed his reliance on various judgments as mentioned in the submissions and considered. The learned Assessing Officer did not bring out any deficiencies in the details, documents and evidence filed by the appellant. In spite of the same the learned Assessing Officer assessed the share capital and premium as unexplained cash credit. The Assessing Officer has made observation that no business activity has been carried on justifying the huge premium. It appears that the Assessing Officer not gone through the accounts of the appellant. The details of the share capital, reserves and surpluses, turnover, income, profit before tax and return of income of the appellant are given below which clearly indicated the justification of the huge premium of the appellant. As on 31-3-2010 As on 31-3-2011 As on 31-3-2012 As on 31-3-2013 Share capital 1,00,000 1,00,000 5,75,000 19,75,000 Reserves and surplus 78,43,438 1,98,81,167 12,76,33,667 29,47,41,143 Turnover 3,73,73,163 41,04,20,455 2,27,87,05,302 50,68,02,547 Income 3,76,68,....
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....are residents of Madhya Pradesh. As such they could not comply with the same at such short notice towards the end of the financial year. The appellant filed company master data which showing the address of both the directors residing in Madhya Pradesh. In spite of that the summon was duly served. Evidence were filed. As such mere non-compliance of the summon by the creditor cannot be held against the appellant. In this regard the appellant placed his reliance on the judgment of Delhi High Court in case the of CIT v. Victor Electrodes Ltd. [2010] 329 ITR 271 (Delhi), the hon'ble Income-tax Appellate Tribunal, Kolkata, in Cygnus Developers (I) Pvt. Ltd. v. ITO and the Gujarat High Court in the case of Dy. CIT v. Rohini Builders [2002] 256 ITR 360 (Guj) ; [2003] 127 Taxman 523 (Guj). The authorised representative has also filed his reply on the case law which were relied on by the Assessing Officer and submitted that the facts are not similar to that case as mentioned above. I find that the authorised representative has submitted, regarding identity of the investor the appellant filed copies of master data, memorandum and articles of association, permanent account number ....
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....accordingly, the Assessing Officer is directed to delete the addition made on this account. These grounds of appeal are allowed." 6. Aggrieved by the aforesaid action of the learned Commissioner of Income-tax (Appeals) giving relief to the assessee, the Revenue has preferred this appeal before us. 7. Assailing the decision of the learned Commissioner of Income-tax (Appeals), the learned Commissioner of Income-tax, Departmental representative Shri Sandeep Chaube contended that M/s. Saibaba (sole share applicant) was only incorporated on February 26, 2010 and has subscribed to the shares at a face value of Rs. 10 along with share premium of Rs. 1,990 which cannot be believed. According to him, standard of proof accepted in the field of taxation law is based on the principle of "preponderance of probability" and per se this transaction looks improbable. He drew our attention in page 47 of paper book wherein the bank statement of M/s. Saibaba is found placed. According to the learned Departmental representative a perusal of the same, it could reveal money coming in and going out from the account in regular interval ; and thereafter he drew our attention to page 105 of the balance....
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.... proceedings had asked for full details and evidence of the capital raised vide notice under section 142(1) dated March 4, 2015 and fixing date of hearing on March 13, 2015. According to him, the assessee had filed all the replies, explanations and details asked for vide letter dated March 11, 2015 which is placed at paper book pages 40 and 41 and also drew our attention to the paper book serial numbers 5, A to O (pages 46 to 116 of paper book) which according to him also includes the proof of source of the investment. It was pointed out by the learned authorised representative that the Assessing Officer had also raised query about the applicability of section 56(2)(viib) which was also explained vide page 41 of paper book and brought to our notice that in this relevant assessment year (i. e., assessment year 2012-13) as per the law prevailing in this assessment year, the premium received could be treated only as a capital receipt. 10. In respect of non-appearance of directions of M/s. Saibaba, which led to the Assessing Officer taking an adverse view against the assessee-company, the learned authorised representative pointed out that the Assessing Officer had issued summons und....
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....r notice that later on the directors in fact had appeared before the Assessing Officer ; however their statements were not recorded by the Assessing Officer on the plea that assessment was completed on March 26, 2015. The learned authorised representative challenged the following conclusion of the Assessing Officer "From profit and loss account and balance-sheet of the said Saibaba Finvest Pvt. Ltd. produced by the assessee, it is evident that no business activity has been carried on justifying the huge premium". However, according to the learned authorised representative, the Assessing Officer missed the vital point that the share premium is to be decided on the basis of business activity and breakup value of the shares of company which issues the same, (i. e., in this case the assessee-company) and not on the basis of the business of the share applicant (M/s. Saibaba). According to the learned authorised representative, the Assessing Officer misdirected himself on the issue before him and thereafter the Assessing Officer referred to certain decisions of the hon'ble apex court namely Sumati Dayal v. CIT [1995] 214 ITR 801 (SC), CIT v. Durga Prasad More [1971] 82 ITR 540 (SC), ....
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....ding to the learned authorised representative, the learned Commissioner of Income-tax (Appeals) noted the net worth of the assessee-company was to the tune of Rs. 38,03,17,000 (as on March 31, 2011) which fact is evident from perusal of paper book page 105. The learned Commissioner of Income-tax (Appeals) took note of the fact that M/s. Saibaba was incorporated on January 10, 1996 and is registered NBFC which fact is evident from perusal of page 105 whereby statutory reserve under section 45C of the Reserve Bank of India (RBI) Act has been created and the auditor's report at page 100 clearly spells out that this company (M/s. Saibaba) is registered NBFC and that it is regularly assessed to tax and had undergone scrutiny assessment which were completed under section 143(3) of the Act and that too without any adverse remark which fact is evident from paper book pages 170 to 175. 12. So, according to the learned authorised representative that it cannot be denied that numerous details were asked by the Assessing Officer during assessment from the assessee and the assessee had filed all the details called for by the Assessing Officer. And from the documents filed before the Asses....
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....r the relevant assessment year 2012-13 is concerned. According to him, the share premium credited by the assessee could be treated only as a capital receipt and could not be taxed till March 31, 2012, because there was no provision to tax the same. And according to him, the provision for taxation of share premium was inserted by the Finance Act, 2012 with effect from April 1, 2013 and so is applicable from next assessment year, i. e., the assessment year 2013-14 and not in this assessment year, i. e., the assessment year 2012-13. Moreover, it was pointed out to us that even after the amendment was made in law it came into force from the next assessment year 2013-14 onwards, and that too only the excess share issue price, that is over and above the market price could only be taxed under section 56(2)(viib) of the Act which was also inserted by Finance Act, 2012 with effect from April 1, 2013 for the assessment year 2013-14 and not in this assessment year 2012-13. Even though this was the legal position and the assessee as per law was not bound to justify the share premium price of Rs. 1,900, however the assessee demonstrated before the Assessing Officer that even the fair market val....
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....aba, (i. e., M/s. Sanrise Holdings Pvt. Ltd.) as well as the director of the assessee-company during the assessment year 2012-13. There after he drew our attention to page Nos. 71 to 76 of paper book wherein we note that the annual return of the assessee-company have been placed from where we note that the assessee-company has been registered on March 19, 2008 and perusal of page 76 reveals that Shri Ashish Kumar Pathak who was the director of the assessee-company was inducted as director of M/s. Saibaba which fact is revealed from perusal of page No. 91 of paper book which is the company's master data of M/s. Saibaba from which it is noted that Shri Ashish Kumar Pathak is director from May 30, 2012 to February 11, 2016 (refer page No. 92 of paper book). Thus, the learned authorised representative submitted that M/s. Saibaba, the sole share applicant/holder was a sister concern in the relevant assessment year, i. e., the assessment year 2012-13 and subsequent assessment years and therefore, no adverse view ought to have been taken against the assessee-company for subscribing for shares. So in the aforesaid facts and circumstances, the learned authorised representative does not ....
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.... 4. Documents in support of the identity and creditworthiness of the share capital and genuineness of the transaction a. Company master data b. Signatory detail c. Certificate of incorporation d. Statement of source of fund e. Permanent account number card f. Acknowledgment of return of income g. Audited financial statement And it is noted that in response to the same the assessee had filed all the details and documents and explanations as called for by the Assessing Officer including documents in support of the identity and creditworthiness of the share capital and genuineness of the transaction and explanation regarding the justification of share premium with reference to earning per share capitalisations method and net asset value method ; and the Assessing Officer has acknowledged that the learned authorised representative of the assessee had appeared before him and furnished requisite documents. However, taking note that the assessee had issued share capital plus premium of Rs. 9.5 crores, he thereafter issued summons to the share subscribing company M/s. Saibaba under section 131 ....
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.... shares as computed as per rule 11UA of the Rules as on March 31, 2011 was Rs. 1,988 per share and thus the issue price of Rs. 2,000 cannot be said to be high. Even though the assessee had filed all the details and documents called for by the Assessing Officer under section 142(1) of the Act, the Assessing Officer has drawn adverse view against the share capital and premium while framing the assessment on March 26, 2015 just because the director of M/s. Saibaba (share subscribing company) did not turn up before him (Assessing Officer) on March 17, 2015. It was brought to our notice that all the directors except one who resides at Pune, are residents of State of Madhya Pradesh and therefore, could not come on short notice. It was also brought to our notice that the summons issued under section 131 of the Act was duly served upon the address of company. According to the learned authorised representative, no adverse view ought to have been taken against the assessee since it had filed all the details/explanations/ documents asked for by the Assessing Officer under section 142(1) of the Act which is found placed at pages 40 and 137 of paper book. In this context we note that the assess....