TaxTMI 
TaxTMI 
2023 (2) TMI 847
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.... 2. That the learned Commissioner of Income Tax (Appeals)-11, Kolkata erred in confirming the addition of Rs. 25,044)0,000/- made by the Assessing Officer under section 68 of the Income Tax Act, 1961 on the basis of judgments which are distinguishable on facts as well as on law. 3. That the learned Commissioner of Income Tax (Appeals)-11, Kolkata erred in confirming the addition of share capital of Rs. 25,04,00,000/- made under section 68 of the Income Tax Act, 1961 in disregard of the binding judgments of Hon'ble Apex Court, Hon'ble High Courts and the Hon'ble ITATs which directly lays down ratio on the merits of the addition of share capital under section 68 of the Income Tax Act, 1961. 4. That the appellant craves leave to add, alter or delete all or any of the grounds of appeal." 3. Brief facts of the case as culled out from the records are that assessee is a private limited company engaged in the business of investment in shares. Income of Rs. 23,257/- disclosed in the e-return filed for AY 2012-13 on 30.09.2012. Case selected for scrutiny through CASS followed by serving of notices u/s 143(2) & 142(1) of the Act. Ld. AO noticed that the assessee has iss....
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....emium of Rs. 9,990/- each. Thus, share premium is almost 100 times of the face value of the share. It is not in dispute that the assessee company has earned a meagre income and does not possess any fixed assets nor it carries out any regular business activity. Nothing has been placed before us to indicate that the assessee company is planning to start a new project which will be very profitable in the future and the projected figures justify the charging of share premium of Rs. 9,990/- on the equity share of face value of Rs. 10/-. So, we find that there is no concrete ground which could justify the charge of premium of Rs. 9,990/- on the equity share of face value of Rs. 10/- by the assessee company. 9. Now, even for the sake of argument it is considered that the assessee company has taken a decision in its Board meeting and it is purely a business decision to charge premium on the issue of equity share capital, we need to consider that who are the share applicants who venture to make a huge investment in the assessee company. During the course of assessment proceedings, the following details were filed by the assessee company with regard to share applicants and the same are al....
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....its own undisclosed fund in the garb of subscription by shareholders. As the identity as well as the creditworthiness of the shareholders could not be established by the Directors of the assessee company. On verification of 1TD Database it was seen that company has raised capital this year under the head 'equity share issued' to the tune of Rs.25,04,00,000/-. This sum of Rs. 25.04.00,000/- shown as share capital raised in the books of the assessee is treated as undisclosed income and added back U/s 68 of the Income Tax Act'61 to the declared total income for the A.Y. under consideration. Accordingly, penalty proceedings U/s 271(1) (c) have also been initiated separately for non compliance with the statutory notice and concealment of particulars of income respectively." 11. Further, we notice that when the matter travelled before ld. CIT(A), the issue has been thoroughly examined. Ld. CIT(A) also minutely observed the financials of the share applicant companies and following observations are worth noting which has a direct bearing on the creditworthiness of the share applicants. Such observations are mentioned in para 7.6 of the impugned order which reads as follows: ....
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.... further investments at high premiums in other companies. They also issue unsecured loans to other companies. (vii) Thus, money obtained from the route of share premium is rerouted for supplying sources of receipt of money to other companies. The circuit of investment remains within a group of companies. In this manner, through a circular routing of funds, the capital of each of the companies is enhanced. The 'inflated' capital is then used for providing loans etc. to desiring entities. (viii) The bank accounts of the above concerns show that huge sums are received from one concern through cheques or through RTGS and are immediately diverted to another company of the group. The bank balances remain negligible before and after such transfers. (ix) Each of these companies invest in each other at a very high premium even though there is no business being conducted. (x) There is no reason or logic provided by any of these companies as to on what basis and which calculation did they arrive at the value of premium on share to be issued. Neither the appellant company nor its investors have followed any RBI or IGAI or any other guide line for determining....
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....ich premium as high as Rs. 9,990 on a share of face value of Rs.10 could be charged. There is no logic or rationale behind this decision on the part of the appellant. A company having no revenue from business operation and having shown no future prospects could garner such huge investments exceeding 24 crores in one year eludes all human probabilities. As a result, the appellant's case fails miserably in its bid to establish the genuineness of share transactions. Therefore, its arguments are held worthy of rejection." 13. As far as the contentions of ld. Counsel for the assessee are concerned, they are repetitive in nature only indicating that all the documents including the bank statement, ITR, balance sheet, PAN card have been filed and the transactions have taken through banking channel and thus, all the three ingredients to explain the identity, creditworthiness and genuineness of the said transaction of share capital and share premium are fulfilled. 14. We, however, after considering the facts of the case as well as the detailed finding of ld. CIT(A), are of the considered view that firstly the financials of the assessee company itself are so poor that by no stretch of i....