9911796707
|
Home
Forgot password New User/ Regiser ⇒ Register to get Live Demo
2018 (9) TMI 1779 - AT - Income TaxAddition u/s 68 - bogus investment towards share capital - Held that - AO had erroneously invoked the provisions of section 68 to the facts of the instant case which in our considered opinion are not at all applicable herein. This is a simple case of acquiring shares of certain companies from certain shareholders without paying any cash consideration and instead the consideration was settled through issuance of shares to the respective parties. In the balance sheet of the assessee company in the schedule to share capital it is very clearly mentioned by way of note that the fresh share capital was raised during the year for consideration other than cash. Hence we hold that provision of section 68 are not applicable in the instant case and accordingly the entire addition deserves to be deleted which has rightly been done by the CIT(A) which does not require any interference. Accordingly grounds raised by the revenue are dismissed.
Issues Involved:
1. Deletion of addition made under Section 68 of the Income Tax Act, 1961. Detailed Analysis: Issue 1: Deletion of Addition Made Under Section 68 of the Income Tax Act, 1961 The primary issue in this case is whether the Commissioner of Income Tax (Appeals) [CIT(A)] was justified in deleting the addition of Rs. 20,07,60,000 made under Section 68 of the Income Tax Act, 1961. The assessee, a public limited company, engaged in trading and investment in shares and securities, had raised capital by issuing shares for consideration other than cash. Specifically, the company purchased shares from six entities and issued its own shares in lieu of cash payment. The Assessing Officer (AO) observed that no cash or cheque was received for the issue of share capital and treated the entire receipt of share capital and share premium as ingenuine. The AO held that the shareholders did not have sufficient creditworthiness and that the transactions were pre-designed to introduce unaccounted money in the guise of share capital and share premium. Consequently, an addition of Rs. 20,07,60,000 was made under Section 68 of the Act. Upon appeal, the CIT(A) deleted the addition, stating that Section 68 does not apply to cases where shares are issued for consideration other than cash. The CIT(A) noted that the transactions were barter in nature, involving the exchange of shares rather than cash. The CIT(A) emphasized that the AO's measures were insufficient and did not pinpoint the utilization of unexplained money effectively. In support of the CIT(A)'s decision, the Tribunal referred to several judicial precedents. The Supreme Court in the case of Shri H.H. Rama Varma vs. CIT (187 ITR 308) held that 'any sum' means 'sum of money.' Similarly, the Allahabad High Court in CIT vs. Sohanlal Singhania (235 ITR 616) and the Calcutta High Court in Jatia Investment Company vs. CIT (206 ITR 718) supported the view that Section 68 applies to actual sums of money and not to transactions involving barter or book entries without the actual flow of cash. The Tribunal further noted that the AO had not doubted the investment made in shares by the assessee company, nor was there any dispute regarding the number and value of shares invested. The Tribunal concluded that the AO had erroneously invoked the provisions of Section 68 and that the CIT(A) was correct in deleting the addition. Consequently, the Tribunal upheld the CIT(A)'s decision, dismissing the revenue's appeal and the assessee's cross-objection, which was supportive of the CIT(A)'s order. Conclusion: The appeal of the revenue and the cross-objection of the assessee were dismissed, with the Tribunal confirming that Section 68 of the Income Tax Act does not apply to transactions involving the issuance of shares for consideration other than cash.
|
