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02-01-2019, Banas Finance, Section 68, 56(2)(viib), Tribunal Mumbai

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5 months 1 week ago #8276 by amit
Section - 68, 56(2)(viib), 133(6)
Order Date - 02-01-2019
Favouring - Assessee
Court - Tribunal Mumbai
Appellant - ITO
Respondent - Banas Finance Ltd.
Justice - MAHAVIR SINGH, JM & MANOJ KUMAR AGGARWAL, AM
Citation - 119Taxpundit73
Appeal No. - I.T.A. No.1096/Mum/2016
Asstt. Year - 2011-12

Order

PER : Manoj Kumar Aggarwal

1. Aforesaid appeal by revenue for Assessment Year [AY] 2011-12 agitate the order of Ld. Commissioner of Income-Tax (Appeals)-4, Mumbai, [CIT(A)], Appeal No. CIT(A)-4/IT-02/ITO.2(1)(1)/2014-15 dated 11/12/2015 on following sole ground of appeal: -

Whether on the facts and in the circumstances of the case and in law, the Ld.CIT(A) erred in deleting the addition made in the assessment order even though the assessee had not discharged the onus to prove the genuineness of the investment made by the parties concerned and their creditworthiness.”

The assessment for the impugned AY was framed by Ld. Income Tax Officer-2(1)(1), Mumbai [AO] in scrutiny assessment u/s. 143(3) on 28/03/2014 wherein the income of the assessee was assessed at Rs.1980.46 Lacs under normal provisions after certain additions / adjustments as against Nil return e-filed by the assessee on 30/09/2011. During impugned AY, the assessee being resident corporate entity was stated to be engaged in the business of finance, share trading and commission agent. As evident from grounds of appeal, the sole subject matter of the appeal is certain addition u/s 68.

2.1 During assessment proceedings, it transpired that the assessee issued 99 Lacs Equity Shares of face value of Rs.10/- each at a premium of Rs.10/- per share. Accordingly, the assessee was required to prove the genuineness, identify and credit worthiness of share applicant as well as justification of share premium received on the shares. The assessee submitted that the share capital was raised after complying with SEBI rules and regulations and the money so raised was used for the purpose of assessee’s business. The assessee furnished Permanent Account Number [PAN], Address of share applicants including confirmation letter, copy of share application form and allotment of shares. To verify the genuineness of the transactions, notice u/s 133(6) was issued to all share applicant with a request to furnish copy of their respective balance sheet, capital account, copy of return of income, bank statements etc. and also to prove the creditworthiness and genuineness of the transactions.

2.2 The response from the share applications was received which was duly considered by Ld. AO and the bank statements of the investor was analyzed which revealed that except for immediate debit / credit transactions, there was no major activity / regular flow in the bank accounts. The assessee, vide replies dated 08/11/2013, 11/02/2014, 25/03/2014 & 27/03/2014, submitted various details / explanations etc. in support of the transaction. The valuation of the share was sought to be justified in terms of Rule 11UA and the same was duly supported by pricing certificate dated 03/11/2010 issued by R.Soni & Co., Chartered Accountants. However, it was noted that the market value per share on the date of preferential allotment was Rs.9.37 only whereas the shares were issued at much higher prices. Consequently, the assessee, in terms of Section 68, was required to explain the nature and source of the transactions. Since the assessee, in the opinion of Ld. AO, could not justify the excessive share premium qua intrinsic value of shares and the nature and source of credit entries remained unexplained, the provisions of Section 68 were applicable to the assessee. The Ld. AO also made certain observations on the bank accounts of the share applicants which have already been given on page numbers 7 & 8 of the quantum assessment order. Finally, after relying upon certain judicial pronouncements, the aforesaid amount of Rs.19.80 Crores was treated as unexplained cash credit u/s 68 and added to the income of the assessee.

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