×Latest Case Laws on Income Tax by various Income Tax Appellate Tribunals in India
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10-04-2019, Capri Global Advisory, Section 147, 148, 68, Tribunal Mumbai
1.1 These cross appeals for Assessment Year [AY] 2009-10 contest the order of Ld. Commissioner of Income-Tax (Appeals)-2, Mumbai, [CIT(A)], Appeal No. CIT(A)-2/IT-111/2015-16 dated 25/10/2016.
1.2 The grounds raised by the assessee read as under: -
1(a) The Commissioner of Income Tax (Appeals)-2, Mumbai [CIT(A)] erred confirming the reopening of the assessment by the AO invoking the provisions of Section 147read with section 148 of the Income Tax Act, 1961. The Appellant submits that the notice issued u/s 148 and reopening of assessment u/s 147 is bad in law, illegal, ultra-vires and contrary to the provisions of the I.T.Act and shall be quashed.
(b) The CIT(A) erred in confirming the action of AO in reopening the assessment u/s 148 of the Act recording factually incorrect reasons for reopening that ‘the issue of share premium was not subject matter of verification by the A.O. and therefore no opinion has been formed on the issue in original assessment u/s 143(3).’
The Appellant submits that the issue of share premium has been verified by the AO during assessment proceedings u/s 143(3) hence the reasons for reopening is factually incorrect which renders the assessment proceedings as bad in law, ultra vires and shall be quashed.
(c) The CIT(A) erred in confirming the reopening the assessment u/s 148 merely on the basis of change of opinion on same set of facts which renders the assessment proceedings as bad in law, ultra vires and shall be quashed.
(d) The CIT(A) erred in confirming the reopening the assessment merely on the basis of information received from Investigation Wing without having any satisfaction of AO which constitutes a 'borrowed satisfaction' rendering reassessment proceeding as bad in law and ultra vires and hence same shall be quashed.
1.3 The grounds raised by the revenue read as under: -
i. Whether, on the facts and circumstances of the case and in law, whilst it is true that it is the obligation of the AO to conduct proper scrutiny of the material, given the fact that the AO did not examine whether the transactions of receipt of share capital / share premium are genuine, the obligation to conduct proper nquiry on facts would shift to Learned CIT(A) in view of the Hon'ble Delhi High Court decision in the case of CIT Vs Jansampark Advertising and Marketing (P) Ltd (ITA No. 525/2014)?
ii. Whether, on the facts and circumstances of the case and in law, the CIT(A) was justified in directing the deletion of the sum brought to tax by the AO as unexplained income under Section 68 of the Income Tax Act, 1961 in respect of moneys credited in the books as share capital, including share premium, of Rs 5,20,00,000?
iii. Whether, on the facts and circumstances of the case and in law, the CIT(A) was justified in holding that the assessee proved identity, credit-worthiness and genuineness of moneys credited in the books as share capital, including share premium, of Rs.2,85,00,000, just by submitting PAN, acknowledgment of income-tax returns filed, bank statements, the mode of payment etc of share holders, and that the share premium has been received through banking channel ?"
iv. Whether, on the facts and circumstances of the case and in law, the CIT(A) was justified in deleting the additions of Rs. 5,20,00,000/-, ignoring the facts brought out by the AO that the investor was merely a conduit having no fixed assets and no credit worthiness and had received the said amount of Rs.5,20,00,000/-on 17/03/2009 which was given to the assessee company on same date?
v. Whether on the facts and circumstances of the case and in Law the Ld.CIT(A) was correct in deciding the issue in favour of assessee by relying on the decision of Hon'ble ITAT in the case of M/s. Green Infra Vs. ITO (ITA NO 7716/MUM/2012),without appreciating the legal position that the said issue had not attained finality since departments appeal filed u/s 260A against the said decision was still pending before Hon'ble Bombay High Court?
vi. Whether, on the facts and circumstances of the case and in law, the CIT(A) was justified in allowing the appeal of the assessee by relying on the decision of Apex court in the case of CIT Vs Lovely Exports Pvt Ltd 216 CTR 195(SC) without appreciating that the facts in the instant case were different than those in the case relied upon, as in the instant case, the AO did not sit idle but made investigations with the share holder before making an adverse inference and hence the case law relied upon is not applicable in this case?" As evident from respective grounds of appeal, the assessee is challenging the reassessment proceedings on legal grounds whereas the revenue is challenging the relief granted by Ld. first appellate authority, on merits, against quantum additions.
2.1 Facts in brief are that the assessee being resident corporate entity stated to be engaged in financial advisory services, trading and investment in shares was subjected to reassessment proceedings for the impugned AY u/s 143(3) read with Section 147 on 20/03/2015 by Ld. Deputy Commissioner of Income Tax-Circle-1(1)(1), Mumbai [AO] wherein the assessee was saddled with certain addition of Rs.520 Lacs on account of Share Premium and Share Capital.
2.2 The original assessment for impugned AY was already completed u/s 143(3) on 30/12/2011 wherein the income was determined at Rs.88.43 Crores as against returned income of Rs.87.69 Crores e-filed by the assessee on 26/09/2009. The same was re-determined at Rs.87.75 Crores on 05/09/2013 after giving effect to the appellate order of first appellate authority.
2.3 Subsequently, the reassessment proceedings were triggered against the assessee by issuance of notice u/s 148 dated 27/03/2014 on the ground that the assessee was in receipt of Share Premium during the year which was not justified by the assessee and therefore, the same was believed to be the assessee’s undisclosed income. In response, the assessee offered original return filed u/s 139(1) and also requested for the reasons recorded for reopening the assessment, which were duly furnished to the assessee. Subsequently, statutory notices u/s 143(2) & 142(1) were issued directing the assessee to file the requisite details.
2.4 During reassessment proceedings, it transpired that the assessee issued 52000 equity shares of face value of Rs.100/- each at a premium of Rs.900/- per share to an entity namely Orbit Lifeline Private Limited which led to an aggregate increase of Rs.520 Lacs in Share Capital & Share Premium. Upon going through the financials of the said entity, Ld. AO came to a conclusion that the said entity was merely an accommodation entry provider with no genuine business. The valuation report furnished by the assessee to justify the share premium was also disregarded alleging the same to be bogus piece of document to cover up real nature of the transaction. Reliance was placed on the decision of Hon’ble Bombay High Court rendered in Major Metals Ltd. Vs. Union of India [19 Taxmann.com 176] to upheld the applicability of Section 68 to such transactions. It was also concluded that the assessee failed to justify high premium of Rs.900/- per share and also failed to prove the creditworthiness of the investor company. Finally, not convinced with assessee’s explanations & submissions, the aforesaid amount of Rs.520 Lacs was added back to the income of the assessee u/s 68 as unexplained cash credit.