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2019 (9) TMI 44 - AT - Income TaxAddition u/s 68 - share application money received by the assessee company from alleged bogus share holders - Addition based on statement made u/s 131 - HELD THAT:- AO, except issue of 133(6) notices nothing has been done to find out, the nature of transactions between the parties. Therefore, we are of the considered view that when, assessee has filed complete details to prove identity, genuineness of transactions and creditworthiness of the parties, then there is no reason for the AO to came to the conclusion that share capital and share premium is unexplained only for the reason that during the survey proceedings, the director of the company had admitted that those five companies are shell companies ignoring the fact that such admission has been retracted by filing affidavit along with letter explaining reasons fro such admission during survey proceedings. It is a settled position of law that once, any third party information/statements is relied upon to make additions, it is the obligation of the AO to provide copies of such statements/information and also to provide an opportunity of cross examination of the person, who gave the statement, when such opportunity has been availed by the person against whom, such statements are used. The Hon’ble Supreme Court in the case of Andaman Timber Industries Ltd Vs CCE, Kolkata II [2015 (10) TMI 442 - SUPREME COURT] had also upheld a similar legal position and held that not allowing the assessee to cross-examine the witnesses by the adjudicating the authority, though the statements and those witnesses were made the basis of the impugned order is a serious flaw, which makes the order nullity in, as much as, it amount to violation of principle of natural justice, because of which, the assessee was adversely affected. Therefore, on this count also the additions made by the AO cannot be sustained. Additions invoking the provisions of section 56(2)(viib) - We find that the said provision has been inserted by Finance Act, 2012 w.e.f 10.04.2013, where it provides that where a closely held company issues its shares at a price which is more than its fair market value, then amount received in excess of fair market value will be charged to tax in the hands of the company as income from other sources. On perusal of amendments brought out by Finance Act 2012, w.e.f. 01.04.2013 to the provisions of section 56(2)(viib) and section 68 it is very clear that where the assessee has issued shares at premium and also received share capital and if such company do not offer any explanation about the nature and source, then sum so received may be regarded as income of the assessee from undisclosed sources. In this case, from the facts on record, it is clear that the assessee has proved identity and genuineness of the transactions by filing necessary evidences. The assessee has filed valuation report from registered valuer as per which the share price of the company is over and above premium charged by the assessee.Therefore, we are of the considered view that provisions of section 56(2)(viib) has no application. - Decided against revenue
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