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03-01-2019, Niyojit Financial Consultancy, Section 147, 68, Tribunal Mumbai

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2 months 1 week ago #8279 by amit
Section - 147, 68, 133(6), 148, 151(2)
Order Date - 03-01-2019
Favouring - Assessee
Court - Tribunal Mumbai
Appellant - Niyojit Financial Consultancy Pvt . Ltd.
Respondent - ITO
Justice - MAHAVIR SINGH, JM & MANOJ KUMAR AGGARWAL, AM
Citation - 119Taxpundit76
Appeal No. - I.T.A. No.1543/Mum/2017
Asstt. Year - 2009-10

Order

PER : Manoj Kumar Aggarwal

1. Aforesaid appeal by assessee for Assessment Year [AY] 2009-10 contest the order of Ld. Commissioner of Income-Tax (Appeals)-22, Mumbai, [CIT(A)], Appeal No. CIT(A)-22/IT/93/2015-16 dated 10/01/2017 on following effective Grounds of appeal: -

1. To delete addition of Rs.3,59,70,275/- u/s.68 of the Act on account of Securities Premium received from Investors.

2. To declare the assessment order as null and void as re-opening of the assessment u/s. 147 of the Income tax Act is bad in law.”

The assessee being resident corporate entity stated to be engaged in rendering services in the area of financial & management consultancy was subjected to reassessment proceedings vide order u/s 143(3) read with Section 147 on 26/03/2015 wherein the income of the assessee was determined at Rs.349.72 Lacs after certain additions as against returned loss of Rs.15.33 Lacs filed by the assessee on 26/09/2009 which was processed u/s 143(1). As evident from grounds of appeal, the sole subject matter of appeal before us is certain additions u/s 68 for Rs.359.70 Lacs as made by Ld. AO and upheld by first appellate authority. The assessee has also contested the validity of the reassessment proceedings on legal grounds.

2.1 Pursuant to receipt of certain specific information regarding issue of shares at a high premium, the assessee was subjected to reassessment proceedings vide notice u/s 148 dated 18/03/2014. In response, the assessee offered the original return of income and sought reasons for reopening, which were duly supplied to the assessee. During assessment proceedings, it transpired that the assessee issued 3025 shares at a premium of Rs.11,891/- per share [wrongly referred to as Rs.11,894/- in quantum order] amounting to Rs.359.70 Lacs to six persons, the details of which have already been extracted at para-3 of the quantum assessment order. Accordingly, the assessee was asked to justify the premium on the shares including nature and source of share application money.

2.2 In justification of share premium, it was submitted that the assessee was incorporated during 2008 and the shares were issued to high net-worth non-resident angel investors who made the investment on the basis of business projections. It was further submitted that the business model of the assessee was based on existing successful business already in existence run by one of the promoters with a realistic plan which promised good return on investment. The valuation was justified on the basis of projected earnings of the assessee.

2.3 In support of share allotment, the assessee, vide reply dated 02/03/2015 submitted return of allotment of shares in Form 2 filed with Registrar of Companies, Board resolution for allotment of shares, list of investors filed with ROC, Annual Return in Form No. 20B filed with ROC with details and challans etc. Further documentary evidences in the shape of details / mode of receipt of share application money, a note on justification of high premium, valuation of shares, source and nature of the receipts, account confirmations, tax related documents of investors, details / documen s relating to creditworthiness of investors and correspondence with investors were also filed during the assessment proceedings to establish the genuineness of the transactions.

2.4 However, Ld. AO suspected the high premium and valuation of shares and was not satisfied with the workings submitted by the assessee. Finally, Ld. AO opined that the assessee failed to satisfy the three primary ingredients viz. identity, creditworthiness and genuineness of the transactions as envisaged by Section 68 and therefore, treating an amount of Rs.359.70 Lacs as unexplained cash credit, added the same to the income of the assessee.

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