2016 (5) TMI 1455 - AT - Income Tax

Addition u/s 68 - Additions on account of share capital/share application/share premium - huge share capital and share premium money were received by the assessee and other group companies during the periods under assessment - discharge of burden of proving the cash credit - Held that - We find that while adjudicating the same issue in case of another group assessee namely M/s. Bhatia International Ltd. we have held that the assessee could be able to discharge the burden of proving the cash credit as contemplated u/s 68 of the Act and have directed to delete the entire addition made by the Assessing Officer on account of share capital/share premium/ share application money. We find that the facts and circumstances of the present appeals of the assessee are the same with that of the appeal for assessment year 2002-03 (supra). The argument of both the parties are also the same and therefore we direct to delete the addition made by the Assessing Officer on account of share capital/share premium/ share application money - Decided in favour of assessee

Summary

Issues:
1. Addition made under section 68 of the Income-Tax Act, 1961 based on share capital authenticity.
2. Assessment order passed without proper opportunity of being heard.
3. Upholding the addition of Rs. 6,90,00,000/- on account of share capital/share application/share premium.
4. Charging of interest under sections 234A and 234B.

Issue 1: Addition under Section 68 based on share capital authenticity:
The appeal challenged the addition of Rs. 6,90,00,000/- under section 68 of the Income-Tax Act, 1961, due to alleged non-genuineness of share application money received by the assessee company. The Assessing Officer (AO) made this addition without any incriminating material found during the search. The CIT(A) upheld the addition, citing precedents and findings in similar cases. The appellant raised detailed submissions, referring to another group assessee's case pending adjudication. However, during the hearing, the appellant did not press this issue for the assessment year 2005-06. Consequently, the issue was dismissed for that year.

Issue 2: Assessment order passed without proper opportunity of being heard:
The appellant contested the CIT(A)'s decision to uphold the AO's assessment order, claiming it was passed arbitrarily without providing a proper opportunity to be heard. The CIT(A) maintained that due opportunity was given, and the appellant did not press this ground during the proceedings. As a result, this issue was dismissed for lack of arguments presented by the appellant.

Issue 3: Addition of Rs. 6,90,00,000/- on account of share capital/share application/share premium:
The AO added Rs. 6,90,00,000/- to the total income of the assessee, alleging non-genuineness of share capital introduced through partly convertible shares. Various grounds were cited by the AO to support this addition, including concerns about the share applicant companies' identity and creditworthiness. The CIT(A) dismissed the legal ground raised by the appellant, referring to his previous findings in a similar case. The appellant made submissions, mentioning another group assessee's case pending adjudication. The Tribunal, after considering both parties' arguments and the material on record, directed the deletion of the entire addition made by the AO on account of share capital/share premium/share application money, aligning with its previous decision in a related case for the assessment year 2002-03.

Issue 4: Charging of interest under sections 234A and 234B:
The appeal also raised a concern about the charging of interest under sections 234A and 234B. However, this issue was deemed consequential in nature and did not require separate adjudication. Ultimately, the Tribunal partly allowed the appeal, directing the deletion of the addition made under section 68 regarding share capital authenticity, and dismissed the issue related to the assessment order passed without proper opportunity of being heard.

This comprehensive analysis covers the key issues raised in the legal judgment, detailing the arguments presented, decisions made by the authorities, and the final outcome of the appeal.