2024 (3) TMI 103

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....ion of addition of Rs. 2,80,00,000/- by the Ld. CIT(A) as made by AO on account of unexplained cash credit u/s 68 of the Act in respect of share capital/share premium. 4. Facts in brief are that the assessee filed return of income on 13.09.2011 showing total income of Rs. 2,06,04,670/-. Thereafter the case of the assessee was selected for scrutiny and notices were duly issued and duly served on the assessee. During the course of assessment proceedings, the AO observed from the balance sheet that the assessee has issued 2,80,000 equity shares of face value of 10/- each at a premium of Rs. 990/-. Accordingly the AO called upon the assessee to furnish details in respect of share capital/share premium and justify the amount of premium received....

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....re whereas the premium at which the equity shares were issued was approximately five times higher. It was also explained that the company was incorporated in the year 2007 and value per share has increased more than 20 times over a period of four years and hence the premium of Rs. 990/- was taken. During the year, the company has returned income of more than Rs. 2.00 crores however the AO disbelieved the explanation of the assessee and without carrying out any investigation on the evidences filed by the assessee treated this amount of unexplained cash credit and added the same to the income of the assessee. 5. The Ld. CIT(A) simply affirmed the order of AO by observing and holding as under: "The Hon'ble ITAT has discussed the issue in de....

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....he growth of the company the value of the share has increased 20 times over a period of four years. The Ld. A.R submitted that the assessee was incorporated in 2007 and during the period of 4 years ,the worth of shares has gone up 20 times. It is only on this basis , the issue price of the shares has been fixed by the assessee. The Ld. A.R also stated that Section 56(2)(viib) of the Act which provides for addition of income if the shares are issued at a price which is higher than fair market value of the shares but the same is effective from AY 2013-14 and not the year under consideration which has been settled by various judicial forums. The Ld. A.R also referred to the worth of the share subscribers which was approx. forty to fifty times ....

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....f authorities below and submitted that the AO as well as Ld. CIT(A) has passed a very speaking and reasoned order stating as to how the money received by the assessee from five subscribers do not satisfy the basic three conditions as provided in Section 68 of the Act. The mere fact that subscribers have sufficient funds or net worth would not automatically proved that they have creditworthiness to invest the money and transactions are genuine. The Ld. D.R therefore prayed in view of reasoning by authorities below, the appeal of the assessee may be dismissed. 8. We have heard rival contentions and perused the material on record, we find that during the year the assessee has raised money from five subscribers by issuing equity shares of face....