TaxTMI 
TaxTMI 
2026 (7) TMI 1813
X X X X Extracts X X X X
X X X X Extracts X X X X
....d in law, the ld. CIT(A) erred in deleting the addition of unexplained share premium and share application money amounting to Rs. 39,41,67,600/- made under section 68 of the Income Tax without appreciating the finding the Assessing Officer on the basis of Investigation Wing wherein share subscribers in the present case is being operated by Shri Jagdish Purohit who had control over a number of companies that do not conduct any real business but are mainly involved in providing accommodation entries to the other business concerns. 2. "On the facts and circumstances of the case and in law, the Id. CIT(A) erred in deleting the addition of unexplained share premium and share application money amounting to Rs. 39,41,67,600/- made under section 68 of the Income Tax, holding that the appellant has proved the genuineness of the transaction in the form of confirmation, PAN, Bank Statement etc, ignoring the recent decision of the Hon'ble Supreme Court of India in the case of Navodaya Castle (P) Ltd. [2015] 56 taxmann.com18 (SC), wherein the Hon'ble Apex Court has upheld the decision of the Hon'ble Delhi Court holding that certificate of incorporation, PAN etc were not suf....
X X X X Extracts X X X X
X X X X Extracts X X X X
....application money from four entities as under: SN Name of Investor's companies Date of Incorporation Income-tax Jurisdiction Qty. Amount of share capital Amount of premium Total Amount 1 Ruchi Power Corporation Limited 07-09- 1994 Ward 33(1) Mumbai 1131546 1131546 101839140 113154600 2 Ruchi Integrate (India) Steels Limited 17-08- 1995 Ward 3 3(1) Mumbai 988209 9882090 8893881 9882090 3. Devine Infracreation and Trading Pvt. Ltd 17-03- 2004 ITO 1(3) ITO Indore 1087443 1087443 9786987 108774300 4 Morya Erectors Private Limited 25-04- 1995 Ward 3 3(3) Mumbai 7344780 7344780 66103020 73447800 5.1 The AO asked the assessee to give the method adopted for arriving at the premium at which the shares were to be issued. The assessee contended that the book value of the company as on 30.03.2010 was Rs. 468/- and the shares had been issued at Rs. 100/-only. The reason given for selling the shares at lesser than the book value was the loss made from operations during the year and the unenthusiastic position of the company. The AO was not convinced with the explanation of t....
X X X X Extracts X X X X
X X X X Extracts X X X X
.... above amounts after multiple layering of share capital and share premium receipt and the source was not explained. He relied upon the decision of the hon'ble Bombay High Court in the case of Major Metal vs. Union of India and made an addition of Rs. 39,41,67,600/- which included share capital of Rs. 3,94,16,760/-and premium of Rs. 35,47,50,840/-. 5.3 It was further stated that during assessment proceedings, the AO in this regard asked the assessee furnish certain details which were provided i.e. i. Name, address, date of incorporation, PAN details, Income-tax jurisdiction of investor companies (PAN of all investor companies is not available as the same was not taken due to non-existence of any legal requirement at that time); ii. Company's Master Data like company name, Company Identification Number (CIN), date of incorporation, registered address, e-mail ID, etc. of Investor's companies downloaded from www.mca.gov.in; iii. Certificate of Incorporation of the Investor's companies; iv. Form of application for equity shares filled by the Investor's companies; v. Copies of Allotment Advices given by the Appellant to the ....
X X X X Extracts X X X X
X X X X Extracts X X X X
....e shareholder, it had filed the following information/documents during the assessment proceedings to the Assessing Officer vide: i. Name, address, date of incorporation, PAN details, Income-tax jurisdiction of investor companies; ii. Company's Master Data like company name, Company Identification Number (CIN), date of incorporation, registered address, e-mail ID, etc. of Investor's companies do unloaded from www.mca.gov.in: iii. Certificate of Incorporation of the Investor's companies; iv. Form of application for equity shares filled by the Investor's companies; v. Copies of Allotment Advices given by the Appellant to the Investor's companies; vi. Copy of Director Report, Audit Report and Balance Sheet of the Investor's companies; vii Details of share capital, reserve and surplus, net worth of investor companies. 5.6 The Company's Master Data, Income-tax Jurisdiction details and financials of the Investor's companies clearly proved the identity of the Investor's companies. Hence, it was concluded that the aforesaid documents proved the identity of the investor companies. 5.7 As ....
X X X X Extracts X X X X
X X X X Extracts X X X X
....conducted by the DDIT (Inv.), Unit-1(3), Pune, it was ascertained that Mr. Purohit had effective control over a number of companies that did not conduct any real business but are mainly involved in providing accommodation entries to other business concerns. Investigations revealed that on 31.03.2006, BFIPL issued 135553 shares at face value of Rs. 10/- each and premium of Rs. 990 per share, to dubious companies of Mr. Jagdish Purohit. However, the Balance sheet and business activity of BFIPL did not justify such huge premium. 6.1 The ld.CIT(A) observed that the assessee had explained the sources along with producing the details of the name and address, date of incorporation, companies master data, certificate of incorporation, Income Tax Return with acknowledgement of all investor companies, Board resolutions regarding allotment of share capital to investor companies, valuation report of the chartered accountant and other details. According to the assessee, it had produced sufficient evidence to establish the genuineness of the transaction as well as the creditworthiness of the creditor. The identity of the creditor was not in question. The genuineness of the transaction had als....
X X X X Extracts X X X X
X X X X Extracts X X X X
....n this regard. The ld.CIT(A) finally concluded that in view of the above judgement of the jurisdictional ITAT and also in view of the judgements relied upon by the assessee and also the fact that the AO had not brought anything contrary on record, the addition made could not be sustained. Accordingly,the additions on account of share application money of Rs. 3,94,16,760/-and share premium of Rs. 35,47,50,840/-were deleted. 7. The ld.DR relied on the assessment order claiming that the impugned share application was merely accommodation entry and the assessee failed to justify the huge premium charged on the share which carried little value considering no business activity carried out by the assessee. 8. The ld.AR on the other hand has placed reliance on the appellate order claiming that the assessee effectively discharged the onus of proving the identity, creditworthiness and the genuineness of the transactions. As such, no addition u/s. 68 of the Act was justified. It is further claimed that the assessee proved even the source of source of impugned share application amounts even though it was not expected to do so as the amended provisions were not applicable in the impugned ....
X X X X Extracts X X X X
X X X X Extracts X X X X
....ineness of the transaction was also established by filing copies of share application forms and Form No. 2 filed with the Registrar of Companies. The entire dispute revolves around the fact that the assessee has charged a premium of 190/- per share. No doubt a non-est company or a zero balance sheet company asking for 190/- per share defies all commercial prudence but at the same time we cannot ignore the fact that it is a prerogative of the Board of Directors of the company to decide the premium amount and it is the wisdom of the share holders whether they want to subscribe to such a heavy premium. The Revenue authorities cannot question the charging of such huge premium without any bar from any legislated law of the land. The amendment has been brought in the Income Tax Act under the head "Income from other sources" by inserting Clause (viib) to Sec. 56 of the Act wherein it has been provided that any consideration for issue of shares, that exceeds the fair value of such shares, the aggregate consideration received for such shares as exceeds the fair market value of the shares shall be treated as the income of the assessee but the legislature in its wisdom has made this provision....
X X X X Extracts X X X X
X X X X Extracts X X X X
....om 1st April, 2013. Thus it would be effective only from the Assessment Year 201314 onwards and not for the subject Assessment Year. In fact, before the Tribunal, it was not even the case of the Revenue that Section 68 of the Act as in force during the subject years has to be read/understood as though the proviso added subsequently effective only from 1st April, 2013 was its normal meaning. The Parliament did not introduce to proviso to Section 68 of the Act with retrospective effect nor does the proviso so introduced states that it was introduced "for removal of doubts" or that it is "declaratory". 10.3 Therefore, it is not open to give it retrospective effect. In any case, the three essential tests while confirming the pre proviso Section 68 of the Act laid down by the Courts, namely, the genuineness of the transaction, identity and the capacity of the investor have all been examined in the impugned order by the ld.CIT(A) and on facts, he was found satisfied. The Apex Court in Lovely Exports (P) Ltd. (supra) in the context to the pre amended Section 68 of the Act has held that where the Revenue urges that the amount of share application money has been received from bo....