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2025 (5) TMI 22
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....y the Ld. AO on account of alleged Un-explained credit U/s 56(2)(viib)/68 of the act, due to lack of creditworthiness of the investors from whom the Share capital and share premium amount have been received also erred without bringing any cogent/corroborative material in support of his contention and without considering the materials and explanations. available on records in their true perspective and sense. Hence same should be deleted in toto being contrary to the provisions of the law and facts of the case, 3. The Ld. AO as well Ld. CIT(A)/NFAC have grossly erred in law and facts in making the additions and confirming the same without providing specific and proper Show Cause Notice led to violation of Natural Justice therefore complete addition should be deleted. 4. The Ld. AO as well as Ld. CIT(A)/NFAC have grossly erred in law and facts in invoking section 115BBE and confirming the same being illegal and contrary to the provision of law. 5. The Id. AO as well as Ld. CIT(A)/NFAC have grossly erred in law as well as on the facts of the case in charging the interest u/s 234A, B and C. The interest so charged is being totally contrary to the provision of....
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....bout the rationale behind issuing shares at a high premium. Typically, share premiums are justified by strong business prospects, profitability, or significant growth potential in the absence of any business activity, these justifications are missing. Issuing shares at a high premium means that the company is selling its shares for a price significantly above their nominal value. When a company with no business activity does this, it suggests that the purpose might not be genuine capital raising for business purposes but potentially for questionable motives. The investors who subscribe to these high-premium shares need to be credible and financially sound. Their creditworthiness should be established through income tax returns, financial statements, or other relevant documents. In this case, the assessee failed to prove the creditworthiness of the investors by not submitting the income tax returns or income sources of the three investor as said above. Without proof of the investors' financial capability, it becomes suspicious how they could afford to invest in high-premium shares of a non-operational company. In my view, filling income tax returns is a way to show tran....
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.... fresh share capital of Rs. 9,50,000/- and share premium of Rs. 59,41,180/-. The valuation of shares was based on the Discounted Cash Flow (DCF) method. No business activities were carried out by the company until 31.03.2015. The issuance of shares at a high premium was questioned as it did not align with the financial results of the company. The company provided details for Ms. Neha Joshi and Ms. Rashmi Verma (NRIs), which were found satisfactory. No details were provided for other investors to justify their creditworthiness. The company valued its shares at Rs. 2,179.49 per share, compared to Rs. 1,010.06 in the previous year. The valuation report submitted was not accepted as it did not adequately support the high valuation. According to Rule 11UA, the Fair Market Value (FMV) of shares was calculated to be Rs. 11.15 per share. Based on this calculation, the excess share premium amounting to Rs. 29,84,733/- was considered as income from other sources and added to the total income. The excess premium received from resident investors (Anna Lungany, Prafull Marwah, and Krishna Behari Lal Katiyar) was added as income from other sources. Due to lack of details on the creditworthiness ....
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....5200D Bank Anna Lungany P3B-154, Princeton State, DLF-V, Gurgaon, Haryana India 122002 ABVPL5502E Bank Prafull Marwah Flat No. 151, Naval Technical Officer Appt, Plot No. 3a, Sector-22, Dwarka, New Delhi AHFPM8620E Bank Krishna Behari Lal Katiyar F-307 Sarthak Apartment, Satyadeo Nagar, Gandhi Road, Gwalior, Madhya Pradesh 474011 India AYDPK7351F Bank Rashmi Verma Vijay Nagar, Paisar Dehat Bara Banki, Uttar Pradesh 225001 India AKFPV6522K Bank It is noted that out of all the investors, two investors namely Neha Joshi and Rashmi Verma were non-Investors. Accordingly, no additions were made by the AO of the amount received from such Non-Resident investors u/s 56(2)(viib) of the Act. However. AO, during the course of assessment proceedings, disregarded the Valuation Report for valuation of its CCPS, as obtained from a firm of Chartered Accountants, submitted before him and the AO determined the Fair Market Value ("FMV") of the shares by applying Net Asset Value ("NAV") method and disregarded the DCF method as originally adopted by the assessee company as per law and allowable. The AO calculated the value per share at Rs. 11.15, con....
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....res is governed by Rule 11UA(1)(c)(c). As per Rule 11UA(1)(c)(c), the FMV of unquoted shares other than equity shares, such as preference shares, shall be estimated to be price it would fetch if sold in the open market on the valuation date and the assessee 'may' obtain a report from a Merchant Banker or an Accountant in respect of such valuation. Thus, Rule 11 UA(1)(c)(c) does not prescribe any specific method for the valuation of Preference Shares. Even Hon'ble Jurisdictional ITAT (Jaipur), recently, in the case of Ginni Global (P.) Ltd v ACIT [2019] 106 taxmann. com 270 (Jaipur - Trib.) held that the valuation of the Preference Shares, the valuation should be determined as per Rule 11UA(1)(c) which required the assessee to obtain a report from a Merchant Banker or a Chartered Accountant to determine the price which preference shares would fetch if sold in the open market on the valuation date. The NAV method under Rule 11UA(2) is applicable for determination of FMV of unquoted equity shares and not preference shares. In the absence of a specific mandate, FMV of the preference shares can be determined on the basis of DCF method. Assessee company as per Rule 11UA(1)(c)(c) had ....
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....order of Rs. 30,00,000/- applied rate of 60%, as prescribed u/s 115BBE of the ITA. To this effect, the ld. AR of the assessee made following submissions ''A. At the time of receipt of share capital by the assessee company, the amended provisions wre not in place. The amendment to Section 115BBE, being onerous on the assessee company, should not be given a retroactive effect. B. Intention of the amendment to Section 115BBE was to cover cases of concealment of income, pursuant to demonetization, which was not the case of the assessee company. Each of the aforementioned contentions are elaborated hereunder. 1. At the time of receipt of share capital by the assessee company, the amended provisions were not in place. The amendment to Section 115BBE, being onerous on the assessee company, should not be given a retroactive effect. A.1 The provisions of Section 115BBE were inserted in the ITA by finance Act, 2012, with effect from 01.04.2013. Section 115BBE taxed the unexplained credits, money, investment, expenditure, etc., which were deemed as income under Section 68, Section 69, Section 69A, Section 69B, Section 69C or Section 69D, at the rate of 3....
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....ision, which might have been found to be defective, the legislature seeks to enforce its intention which was already there by removing the defect or lacuna. However, withdrawal or modification of provision with retrospective effect, depriving the assessee of the vested statutory right or which has the effect of imposing a levy with retrospective effect for the PERIOD for which there was no such levy, unless there be strong and exceptional circumstances justifying such modification, cannot be held to be reasonable or rational. A.7 The amendment, to Section 115BBE, cannot, in any way, be considered to be introduced to overcome any defects of the law, previously in place, nor it can be considered to be clarificatory in nature, explaining the intention of the law already in place. Per contra, such amendment has resulted into increase in tax burden on the assesses. A.8 Hon'ble Supreme Court in the case of Vatika Township (P) Ltd. [2014] 367 ITR 466 (SC) observed that of the various rules guiding how a legislation has to be interpreted, one established rule is that unless a contrary intention appears, a legislation is presumed not to be intended to have a retrospective ....
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.... 'all statues other than those which are merely declaratory of which relate only to matters of procedure or of evidence are prima facie prospective and retrospective operation should not be given to a statute so as to affect, alter or destroy and existing right or create a new liability or obligation unless that effect cannot be avoided without doing violence to the language of the enactment. If the enactment is expressed in language which is fairly capable of either interpretation, it ought to be construed as prospective only......." [Emphasis Supplied] A.10 Hon'ble Delhi High Court in case of New Skies Satellite BV [TS-64-HC-DEL (2016)] held that amendments though originally notified as clarificatory may turn out to be substantive in fact and such a substantive amendment is incapable of being given retrospective effect. Relevant extracts of the said order is reproduced hereunder for the sake of ready reference:- "... Undoubtedly, the legislature is competent to amend a provision that operates retrospectively or prospectively or prospectively. Nonetheless, when disputes as to their applicability arise in court, it is the actual substance of the amendment that d....
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....re Marriage of Davies (105 III App 3d 66)]..." A.11. Section 92B of the ITA setting out the meaning of International Transaction was introduced by Finance Act, 2001 w.e.f. 01.04.2002. Subsequently, an explanation was added to section 92B, increasing the scope of "InternationaI Transaction" by Finance Act, 2012 with retrospective effect from 01.04.2002. As such Explanation increased the scope of section 92B, it was considered, in the below mentioned judgments, to have a prospective effect even though introduced with a view to give a retrospective effect:- A.11.1. Rusabh Diamonds (2016) 158 ITD 0564 (Mumbai) A.11.2. Hiraco Jewellery (India) Pvt. Ltd., I.T.A. No.7297/Mum/2014 (Mumbai) A.11.3. Gitanjali Exports Corporation Limited (2016) 178 TTJ 529 (Mumbai) A.11.4. Siro Clinpharm Private Limited (2016) 177 TTJ 609 (Mumbai) A.12. Hon'ble ITAT, Jaipur Bench, in the case of KGK Enterprises [2017] 88 taxmann.com 264 (Jaipur - Trib.) accepted the above proposition and held that Explanation to section 92B enhancing its scope to be applicable from A.Y. 2013-14 onwards. A.13. It is submitted that when the assessee company rece....
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.... decide at Para 17 of the order:- "Under the new provision, i.e. Section 64(1)(iii) a new liability has been prescribed and not the rate for ascertaining the liability. Such new liability under the Income Tax Act, 1961 cannot be given a retrospective effect..." A.16.5. Hon'ble High Court held that tax rate existing as on the point of time of accrual of income would be relevant for charging the tax on such accrued income. A.17. Hon'ble Rajasthan High Court in the case of Niharika Jain [2019] 107 taxmann.com272(Rajasthan) held that Benami Transactions (Prohibition) Amendment Act, 2016, amending provisions of Benami Property Transactions Act, 1988, enacted with effect from 1.11.2016 cannot have retrospective effect. Apropos retrospectively and prospectively of any amendment it was held by the Hon'ble High Court that :- A.17.1. It is well settled law that unless a contrary intention is reflected, legislation is presumed and intended to be prospective. For in the normal course of human behavior, one is entitled to arrange his affairs keeping in view the laws for the time being in force and such arrangement of affairs should not be dislodged by retr....