TaxTMI 
TaxTMI 
2026 (7) TMI 400
X X X X Extracts X X X X
X X X X Extracts X X X X
....tset, it is noticed that the Revenue's appeal has been filed with a delay of 09 days and the assessee has filed the Cross Objection with a delay of 73 days. Separate applications supported by affidavits have been filed explaining the respective delays. 3. In support of the application for condonation of delay, the Revenue has filed an affidavit sworn by Smt. Shilpa Khanikar, Assistant Commissioner of Income Tax, Circle-6(1)(1), Mumbai. In the said affidavit, it has been explained that the impugned appellate order passed by the learned CIT(A), NFAC, Delhi dated 31.03.2025 was received by the Department and the limitation for filing the appeal before the Tribunal expired on 31.05.2025. It has been stated that the concerned office resumed functioning after a brief interruption on 15.05.2025 and efforts were immediately undertaken for tracing the assessment records pertaining to Assessment Year 2011-12, which being an old matter was time-barred and had already been transferred to the DTVSV records. It has further been stated that the scrutiny report was prepared and submitted on 28.05.2025 and the requisite authorization memo was received on 03.06.2025. Owing to the aforesaid ad....
X X X X Extracts X X X X
X X X X Extracts X X X X
.... well settled. The expression "sufficient cause" occurring in the relevant provisions governing limitation is required to receive a liberal and justice-oriented interpretation so as to advance substantial justice. The Hon'ble Supreme Court in the case of Collector, Land Acquisition v. Mst. Katiji & Ors. (167 ITR 471) has held that a pragmatic and liberal approach should ordinarily be adopted while considering applications for condonation of delay and that substantial justice should prevail over technical considerations. Similar principles have been reiterated by the Hon'ble Supreme Court in N. Balakrishnan v. M. Krishnamurthy [(1998) 7 SCC 123], wherein it was held that length of delay is not decisive and acceptability of the explanation is the primary criterion. 7. Applying the aforesaid principles to the facts of the present case, we find that the Revenue has explained the delay of 09 days by referring to administrative requirements relating to tracing of old records and obtaining statutory authorization. Likewise, the assessee has explained the delay of 73 days in filing the Cross Objection by stating that the legal grounds challenging the validity of reassessment pro....
X X X X Extracts X X X X
X X X X Extracts X X X X
....03.2016 was issued and reassessment proceedings were initiated. 12. The Assessing Officer noted that prior to reopening, notice under section 133(6) dated 29.03.2016 had been issued calling upon the assessee to justify the share premium received. Upon examination of the details furnished, the Assessing Officer observed that the assessee was continuously incurring losses and that the intrinsic value of its shares was negative. According to him, the valuation adopted by the assessee under the Discounted Cash Flow (DCF) method was not supported by the actual financial position of the company and was in sharp contrast with the value that would emerge under the Net Asset Value (NAV) method. 13. During the reassessment proceedings, the assessee submitted that during the relevant year it had issued 1,66,77,533 equity shares of face value of Rs.10/- each at a premium of Rs.67.4691 per share to its holding company, M/s. Mediavest India Private Limited. The assessee furnished the valuation report determining the issue price at Rs.77.46 per share and contended that the valuation had been carried out by an independent Chartered Accountant in accordance with the DCF method. The assessee a....
X X X X Extracts X X X X
X X X X Extracts X X X X
....s. 16. Consequently, the Assessing Officer treated the amount of Rs. 1,12,52,18,142/- received during the year towards share premium as unexplained cash credit under section 68 of the Act and added the same to the income of the assessee. Accordingly, against the assessed loss of Rs. 1,12,08,90,111/-, the total income was determined at Rs. 1,12,52,18,140/- vide order passed under section 143(3) read with section 147 of the Act dated 29.12.2017. 17. Aggrieved by the reassessment order, the assessee preferred appeal before the learned CIT(A). Before the first appellate authority, the assessee challenged both the validity of reopening as well as the addition made under section 68 of the Act. The assessee contended that the issue of share capital and share premium had already been examined during the original assessment proceedings and therefore the reopening amounted to a mere change of opinion. It was further contended that all details regarding the share premium transaction had been furnished before the Assessing Officer including valuation report, income-tax returns, assessment orders, financial statements, confirmations, bank statements and source of source details. The asses....
X X X X Extracts X X X X
X X X X Extracts X X X X
...., although extensive submissions of the assessee on the validity of reassessment proceedings were reproduced in the appellate order, the operative findings and relief granted by the CIT(A) were founded on the merits of the addition under section 68. The CIT(A) did not pass any separate operative order annulling the reassessment proceedings, but proceeded to adjudicate the issue on merits and granted relief by deleting the addition. Consequently, the appeal was allowed on merits. 23. Aggrieved by the order of CIT(A), the Revenue is in appeal before us raising following grounds of appeal: 1. On the facts and circumstances of case and in law, the Ld.CIT(A) erred in deleting the addition of Rs. 112,52,18,142/- u/s. 68 of the Act, on account of unexplained Share Premium. 2. On the facts and circumstances of case and in law, the Ld.CIT(A) erred in deleting the addition of Rs. 112,52,18,142/- being the amount received on account of Share Premium, without appreciating the fact that assessee, as recorded in the assessment order was unable to prove before the A.O. that the transaction in its books were true, genuine and justified. 24. The assessee has filed the Cross ....
X X X X Extracts X X X X
X X X X Extracts X X X X
....ily establish the creditworthiness of the investor. 27. The learned DR further submitted that the Assessing Officer had examined the valuation report furnished by the assessee and had found that the valuation was based on assumptions and projections which had no correlation with the actual state of affairs of the assessee company. Drawing support from para 4.7 of the assessment order, the learned DR contended that the Assessing Officer had rightly observed that the assessee had failed to furnish adequate evidence to establish the commercial justification for charging such a huge premium despite being a loss-making company. According to the learned DR, the Assessing Officer was justified in holding that the assessee had failed to discharge the burden cast upon it under section 68 of the Act. 28. Referring thereafter to para 4.13 of the assessment order, the learned DR submitted that the Assessing Officer had analysed the transaction by applying the test of surrounding circumstances and human probabilities. It was contended that the Assessing Officer had rightly observed that the valuation adopted by the assessee was not genuine and was founded on figures which had no nexus wit....
X X X X Extracts X X X X
X X X X Extracts X X X X
....was contended that though the Assessing Officer had raised serious doubts regarding the genuineness of the transaction, the creditworthiness of the investor and the justification for charging substantial share premium, the learned CIT(A) had deleted the addition without recording detailed findings on the evidences produced by the assessee and without dealing with the specific deficiencies pointed out by the Assessing Officer. The learned DR submitted that the learned CIT(A) merely accepted the contentions of the assessee regarding identity, genuineness and creditworthiness without undertaking any independent examination of the material available on record. According to the learned DR, there is no proper discussion in the appellate order as to how the requirements of section 68 stood satisfied in the facts of the present case. It was therefore submitted that the order of the learned CIT(A) lacks proper reasoning and does not constitute a speaking order on the issues arising for consideration. 32. The learned DR further invited our attention to the decision of the Co-ordinate Bench of in the assessee's own case for Assessment Year 2012-13 in ITA No. 4314/Mum/2017 dated 03.06.2....
X X X X Extracts X X X X
X X X X Extracts X X X X
....uld thereafter be drawn regarding the creditworthiness of the investor. 35. The learned AR further invited our attention to the balance sheet of M/s. Mediavest India Pvt. Ltd. as on 31.03.2011 placed at page no. 104 of the paper book. Referring to the said financial statements, the learned AR submitted that the investor company had raised secured loans aggregating to Rs. 90 crore from financial institutions. It was contended that the very fact that reputed financial institutions had sanctioned and disbursed substantial loans to the investor company clearly demonstrated its financial standing and creditworthiness. According to the learned AR, financial institutions undertake extensive due diligence before sanctioning loans of such magnitude and therefore the Assessing Officer was not justified in doubting the creditworthiness of the investor company in the absence of any contrary material. 36. The learned AR further submitted that the Assessing Officer has proceeded on an entirely erroneous premise by treating the valuation of shares as relevant for the purposes of section 68. It was contended that valuation of shares and determination of fair market value are matters which fa....
X X X X Extracts X X X X
X X X X Extracts X X X X
....dinate Bench found that the then appellate order did not contain any finding as to whether the details called for by the Assessing Officer had actually been furnished and whether the ingredients of section 68, including creditworthiness, stood established. The Tribunal specifically noted that the learned CIT(A) had summarily accepted the assessee's submissions without recording independent findings on those aspects. 40. The learned AR submitted that the defect noticed by the Co-ordinate Bench in Assessment Year 2012-13 does not survive in the year under consideration. Referring to para 14 of the impugned appellate order, the learned AR pointed out that the learned CIT(A) has independently examined the material placed on record and has categorically recorded a finding that the assessee has established the identity, capacity and creditworthiness of the subscriber as well as the genuineness of the transaction. The learned CIT(A) has further recorded that the assessee furnished confirmations, PAN details and bank statements of the subscriber and that the premium was supported by a valuation report. Therefore, according to the learned AR, the precise deficiency which had weighed ....
X X X X Extracts X X X X
X X X X Extracts X X X X
....nd the scope of section 68 as applicable to the year under consideration. 47. The Hon'ble Bombay High Court in SLS Energy (P.) Ltd. v. ITO (supra) has considered an almost identical situation where reassessment proceedings were initiated on the ground that the share premium charged by the assessee was excessive and not supported by intrinsic valuation of shares. The Hon'ble High Court observed as under: 21. It can be seen from the record that while disposing of the objections to the reopening, the A.O. has held asunder: "7. As far as the argument that receipt of premium on the issue of shares cannot lead one to come to the conclusion that income has escaped assessment is concerned, it is premature, as the assessment proceedings are just initiated and only after the finalization of assessment and after considering the facts of the case whether the share premium received by the assessee was genuine or not and fully explained or not would be decided. If the cash credit shown in assessee's balance sheet is found unjustified, the AO can treat the same as unexplained cash credit u/s. 68 of the I.T. Act. Therefore, on this ground, the assessee's plea c....
X X X X Extracts X X X X
X X X X Extracts X X X X
....two companies. In any case the assessing officer appears to have not been in doubt regarding the transaction having taken place between the said two companies with regard to allotment of preference shares and receipt of the share premium amount inasmuch as what was sought to be questioned, was not in fact the transaction, but only the receipt of the share premium amount which was said to be excessive and much beyond the intrinsic value of the shares of the Petitioner company. 50. Most significantly, the Hon'ble High Court concluded as under: 29. This can be guessed from the fact that the assessing officer had only flagged the share premium amount of Rs. 6,79,32,00,000/- which according to him was chargeable to tax that had escaped assessment and did not question the amount of Rs. 68 lakhs received by the Petitioner company representing the value of Rs. 68 lakhs shares of the face value of rupee 1 per share. Had the Assessing Officer any real doubts regarding the transaction itself, then there was no justification for him to question only the transaction with regard to the extent of the amount of premium charged for the said shares. 30. We therefore of the o....
X X X X Extracts X X X X
X X X X Extracts X X X X
....ify an addition under section 68 for Assessment Year 2011-12. 55. We also find no merit in the contention of the Revenue that the matter should be restored to the file of the learned CIT(A) merely because a similar issue was restored in Assessment Year 2012-13. We have carefully perused the order of the Co-ordinate Bench for Assessment Year 2012-13. The restoration was ordered because the then appellate order did not contain any finding regarding whether the details called for by the Assessing Officer had actually been furnished and whether the ingredients of section 68 stood established. In contrast, in the present year, the learned CIT(A) has recorded a categorical finding that the assessee had established the identity, capacity and creditworthiness of the subscriber as well as the genuineness of the transaction. The learned CIT(A) has further recorded that confirmations, PAN details and bank statements were furnished and examined. Thus, the very deficiency noticed by the Co-ordinate Bench in Assessment Year 2012-13 stands addressed in the impugned order. Therefore, the order for Assessment Year 2012-13 does not advance the Revenue's case. 56. Having regard to the entir....