TaxTMI 
TaxTMI 
2023 (7) TMI 604
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....of the case are that the assessee filed its return of income for the assessment year under consideration electronically declaring total income of Rs. 11,62,190/- on 20-09-2012. The assessee is engaged in the business of manufacturing of transmission line and hardware. The case of the assessee was selected for scrutiny under CASS. Notice u/s 143(2) of the Act was issued on 07-08-2013 fixing the case for hearing on 26- 08-2013 which was got served upon the assessee within required period. In compliance of notice, the assessee requested for adjournment. Subsequently, notice u/s 142(1) of the Act and other notices were issued by the then Assessing Officer. After change of incumbent, notice u/s 142(1) of the Act alongwith detailed questionnaire and other notices were issued which were duly served upon the assessee. In compliance of the notices, the ld. AR of the assessee attended the case on the required dates and required details were filed by the assessee and the same were examined on test check basis. The AO during the course of assessment proceedings noticed that the assessee received the share premium of Rs. 79,90,000/-. The assessee was required to produce the relevant details rel....
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....of particulars is not enough. Such view has been reiterated by Hon'ble High Court of Delhi in CIT vs Oasis Hospitalities Pvt. Ltd. in ITA No. 2093/2010 as well as M/s. T.S. Kishan & Co. Ltd. in ITA No. 1270/2011. The AO taking into consideration the above judgements as to share premium of Rs. 79.90 lacs received by the assessee during the year under consideration has added the same to the total income u/s 68 of the Act. Hence, the addition of Rs. 79.90 lacs u/s 68 of the Act has been made by the AO in the hands of the assessee. 2.2 In first appeal, the ld. CIT(A) has confirmed the action of the AO by observing as under:- ''6.1.3 The principles which emerges as per the averred judgement where sums of money are credited as share capital/premium are: (i) The assessee is under a legal obligation to prove the genuineness of the transaction, the identity of the creditors and creditworthiness of the investors who should have the financial capacity to make the investment in question, to the satisfaction of the AO, so as to discharge the primary onus. (ii) The Assessing Officer is duty bound to investigate the creditworthiness of the creditor/ subscriber, verif....
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....'6.1.5 Additionally, neither during assessment proceedings nor during appellate proceedings, assessee has produced any calculation as to how he arrived at the rates of shares that were sold at premium. During appellate proceedings, the assessee further did not produce any details for subsequent years in the shape of financial results that could have justified the share premium. It's common knowledge that share premium are normally backed by projections of better performance financially by the company. If there was any working available with the assessee, he could have easily submitted the same during the appellate proceedings to vouch for their reasonability.'' The ld. AR of the assessee put the main thrust on the issue in question that the share application money was received in the Financial Year 2011-12 and till that period, neither the provision of Section 56(2)(vii)(b) was there in the statute nor Rule 11U and 11UA was prescribed and thus the provision of Section 56(2)(vii)(b) cannot be made applicable. He further submitted that provisions of Section 56(2)(viib) have been brought in the statute book w.e.f. 01-04-2013 and even the Rules specified 11U and 11UA [for determinin....
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....so far as taxes are concerned because the profit will accrue and arise only when a sale is made. The ld. AR further submitted that source of funding is fully explained. The Assessee emphasizes that the addition made by the Assessing Officer under section 68 of the Act, which has absolutely no application to the facts of the case and it is incorrect. The ld. AR further submitted that section 56(2)(vii)(b) was applicable from assessment year 2013-14. In this regard, CBDT Instruction No. 2/2015 dated 29-1-2015 is clear on the issue in which it has been held that premium on share issued was on account of capital account transaction and does not give rise to income. The Board's Instruction is reproduced as under:- ''In reference to the above cited subject, I am directed to draw your attention to the decision of the High Court of Bombay in the case of Vodafone India Services Pvt. Ltd. for AY 2009-10 (WP No. 871/2014), wherein the Court has held, inter alia, that the premium on share issue was on account of a capital account transaction and does not give rise to income and hence, not liable to transfer pricing adjustment. It is hereby informed that the Board has acce....
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....the AO is required to be deleted. He further submitted that as regards the examination of justification of share premium is concerned, it is requested that the concerned provision in income tax law was brought into statute books in the form of section 56 (2)(vii)(b). This was with effect from 2013-14. Honourable jurisdictional High Court in the case of CIT Gagandeep Infrastructure (P) Ltd. (2017) 80 faxmann.com 272/247 Taxman 245/394 ITR 680 (Bom.) has duly held that the said provision is prospective. Hence the examination of this justification for the concerned assessment year is not in accordance with the jurisdictional High Court decision as mentioned above. The ld. AR of the assessee further relied on the decision cited [2020] 115 taxmann.com 119 (Mumbai- Trib) the Hon'ble ITAT MUMBAI BENCH 'G' in the case of Income-tax Officer 1(3)(2) v. General Traders (P) Ltd. vide IT APPEAL NO. 4197 (MUM) OF 2017 ASSESSMENT YEAR 2012-13 on FEBRUARY 24, 2020, wherein it was held as under- ''14. From the above decision of honourable jurisdictional High Court it is abundantly clear that in the present assessment year the assessing officer was not empowered in examining the....
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.... the addition of Rs79.90 lacs holding that the assessee was required to produce the directors of the shareholding companies and share holders but the assessee totally failed to produce the directors of the above companies and share holders. The assessee could not get the genuineness, creditworthiness, and identity of the transactions. The assessee could not discharge its onus to prove the genuineness, creditworthiness of the transactions and identity of the share holding companies. Thus the AO taking into consideration the decision of Hon'ble Calcutta High Court in the case of CIT vs Precision Finance (P) Ltd. (ITA No. 1270/2011, [1994] 208 ITR 465 and he decision of Hon'ble Delhi High Court in the case of CIT vs Oasis Hospitalities (P) Ltd. (ITA NO. 2093/2010 as well as M/s. T.S. Kishan & Co.Ltd (ITA No. 1270/2011) mad the addition of Rs. 79.90 u/s 68 lacs of the Act in the hands of the assessee. In first appeal, the ld. CIT(A) has confirmed the action of the AO holding that the addition of Rs. 79.90 lacs on account of unexplained share premium made by the AO is justified and thus the Ground No. 2 of the assessee's appeal is dismissed. From the documents made available by the ld. ....
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....ase of the assessee, the share application money was received in the financial year 2011-12 and till that period neither the provision of Section 56(2)(vii)(b) was in the statute nor Rule 11U & 11UA was prescribed and therefore, provisions of Section 56(2)(vii)(b) cannot be made applicable as it was brought in the statute books only w.e.f. 01-04-2013. We also take note of the decision of Hon'ble Mumbai High Court in the case of CIT vs Gagandeep Infrastructure (P) Ltd. 394 ITR 680. We also take note of the decision of Hon'ble Bombay Court in the case of CIT vs Apeak Infotech 397 ITR 158, the exposition by the Hon'ble High Court is summarized as under:- "Amendment to section 56(2)(vilb) of the Act by the addition of proviso thereto took place with effect from 1st April, 2013. Therefore, it was not applicable for the subject Assessment year 2012-13. So for as the pre amended Section 68 of the Act was concerned, the same cannot be invoked in this case, as evidence was led by the Respondents Assessee before the Assessing Officer with regard to identity, capacity of the investor as well as the genuineness of the investment. Therefore, admittedly, the Assessing Officer did not in....