TaxTMI 
TaxTMI 
2026 (6) TMI 1452
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....hich is the lead matter, reads as under: "(a) Whether in the facts and circumstances of the case and in law, the learned ITAT has erred in deleting the addition of Rs. 96,34,99,801/- made on account of bogus share capital/premium u/s. 68 of the Income Tax Act, 1961 despite there being clear findings of the Assessing Officer that the assessee failed to prove creditworthiness of the party and the genuineness of the transactions? (b) Whether in the facts and circumstances of the case and in law, the learned ITAT has erred in holding that Section 68 has no applicability in the present case, without appreciating the fact that under Section 68, all the three criteria i.e. identity & creditworthiness of payer, and genuineness of transaction need to be proved, with no exception to a transaction with non-resident? (c) Whether in the facts and circumstances of the case and in law, the learned ITAT has erred in deleting the addition of Rs. 14,30,00,000/- being 10% of certain expenses claimed by the assessee, without considering the facts of the case that the assessee failed to prove the genuineness of the expenses by submitting party-wise details and supporting docu....
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.... ITAT has erred in deleting the addition of Rs. 144,23,99,920/ made on account of bogus share capital/premium u/s. 68 of the Income Tax Act, 1961 despite there being clear findings of the Assessing Officer that the assessee failed to prove creditworthiness of the party and the genuineness of the transactions? (b) Whether in the facts and circumstances of the case and in law, the learned ITAT has erred in holding that Section 68 has no applicability in the present case, without appreciating the fact that under Section 68, all the three criteria i.e. identity & creditworthiness of payer, and genuineness of transaction need to be proved, with no exception to a transaction with non-resident? (c) Whether in the facts and circumstances of the case and in law, the learned ITAT has erred in deleting the addition of Rs. 17,37,00,000/- being 10% of certain expenses claimed by the assessee, without considering the facts of the case that the assessee failed to prove the genuineness of the expenses by submitting party-wise details and supporting documentary evidences? (d) Whether in the facts and circumstances of the case and in law, the learned ITAT has failed to app....
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...., the Assessing Officer observed that the assessee had issued equity shares to its foreign holding Company Mayora Singapore Pte. Ltd. and received premium @ Rs.55-56 per share on various dates during the year under consideration. The Assessing Officer held that the valuation report submitted by the assessee Company in respect of share premium was not reliable since the Company had been incurring losses regularly. It was also held by the Assessing Officer that the assessee Company did not produce previous three years Income Tax Return of foreign shareholder to substantiate its creditworthiness for making investment in the assessee Company. 4.2 It was also found from the bank statements of M/s. Mayora Singapore Pte. Ltd. that they had received amounts from M/s. United Brands International Ltd. as loans which had been invested in the assessee Company and, therefore, the Assessing Officer was of the view that the assessee was unable to explain the source of source of the amount invested by the investor being M/s. Mayora Singapore Pte. Ltd. in the assessee Company. 4.3 Accordingly, addition was made by the Assessing Officer of the share premium received by the assessee Company und....
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....facts of the instant case, the following factual aspects are noteworthy. Similar assessment order was passed for A.Y. 2013-14 under Section 263 r.w.s. 143(3) of the Act in which after verifying the details through the FT&TR Report of the share application money received from the same foreign holding company, no further additions were made. Secondly, in this case, we observe that the investor is the foreign holding /parent company of the assessee itself and therefore, the identity creditworthiness and genuineness of the transaction per se are not under doubt. It is not a case where shares have been issued by the assessee to a third party for the first time, but in this case shares have been only issued to the foreign parent/holding company of the assessee, based out of Singapore. Thirdly, it would be useful to reproduce the Section 68 of the Act: "Where any sum is found credited in the books of an assessee maintained for any previous year, and the assessee offers no explanation about the nature and source thereof or the explanation offered by him is not, in the opinion of the Assessing Officer, satisfactory, the sum so credited may be charged to income-tax as the income of ....
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....ns in question could not be regarded as bogus or sham transactions and thus, impugned addition made under Section 68 was to be set-aside." 7. Learned Senior Standing Counsel Mr. Dev Patel for the appellant submitted that the Assessing Officer has recorded the findings to the effect that the assessee Company as well as the investor Company failed to place on record the source of the investment made in the assessee Company. It was, therefore, submitted that the CIT(A) and the Tribunal committed error by deleting the addition made by the Assessing Officer. 8. Having considered the facts of the case as well as the concurrent findings arrived at by the CIT(A) as well as the Tribunal to the effect that the transaction of the investment made in the share of the assessee Company is not in dispute, it is also not in dispute that the share had been issued by the assessee Company to the third party for the first time. Even in the 2013-14, the assessee Company had received share application money from its foreign holding Company and no further addition was made even after passing of the Assessment Order under Section 263 read with Section 143(3) of the Act. 9. It was further held by t....
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....o offers an explanation about the nature and source of such sum so credited; and (b) such explanation in the opinion of the Assessing Officer aforesaid has been found to be satisfactory: Provided also that nothing contained in the first proviso or second proviso shall apply if the person, in whose name the sum referred to therein is recorded, is a venture capital fund or a venture capital company as referred to in clause (23FB) of section 10. 11. A bare perusal of the above provision as well as the intention of the legislature to incorporate Section 68 of the Act regarding the deeming fiction of making addition of amount credited in the books of assessee, where assessee fails to offer an explanation, is brought on statute only with a view to see that unaccounted income is brought out of the tax net. As far as the facts of this case is concerned when a nonresident Company or entity makes investment in the Indian Company or a Company, there is no question of unaccounted income having been left out from the tax net. 12. In such circumstances, the proviso to Section 68 of the Act, which stipulates that where the assessee is a Company, (not being a Company in whi....
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....d no discrepancies have been found in the audited financial statements of the assessee. The AO has also not pointed any specific abnormality in these expenses and there is no allegation also that expenses have been inflated. 19. We have heard the rival contentions and perused the material on record. 20. On going through the facts of the instant case, we observe that the assessee has given break-up of expenses along with supporting evidences, as and when called for by the AO. The assessee, in the instant facts has given as many details as possible with respect to these expenses and had also furnished justification for increase / decrease in expenses wherever applicable. The AO has not found any specific fault in such details /evidences / justification furnished by the assessee for these expenses. Further, from the contents of the assessment order, we observe that the AO has not given any reason for adopting 10% rate of tax for making the disallowance in the hands of the assessee. 21. In the case of R.G. Buildwell Engineers Ltd. 99 taxmann.com 284 (SC), in course of assessment, assessee claimed deduction of expenses towards bricks, machinery repair, cartage....