TMI Blog2009 (12) TMI 713X X X X Extracts X X X X X X X X Extracts X X X X ..... at the provision of section 68 shall equally apply even in the case of amount stated to be received towards share capital. Since the assessee failed to prove even the basic identity as also the creditworthiness and the genuineness of the transaction in the form of share premium, the addition was rightly made by the Assessing Officer. In the result, the appeal is dismissed. - Order Deepak R. Shah (Accountant Member).-This appeal by the assessee is directed against the order of the learned Commissioner of Income-tax (Appeals)-XIII, New Delhi, dated December 3, 2008, in an appeal against assessment framed under section 143(3) of the Income-tax Act, 1961 ( the Act ). The appellant is dealing in various unlisted securities. The assessee filed a return of income declaring total income of ₹ 11,820. The Assessing Officer noted that as per the balance-sheet there is addition of ₹ 7,40,500 in the share capital and ₹ 66,64,500 under the head Share premium account . The assessee submitted that it has received an amount of ₹ 74,05,000 (being the total of share capital and share premium) being issue of 74,050 equity shares of ₹ 10 each at a premium of &# ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... opportunities to the appellant to appear. The notices issued by the Commissioner (Appeals) were returned with the remark by the postal authorities no such person . The Commissioner (Appeals) therefore, decided the appeal on the merits. The learned held as under : The appellant was provided various opportunities to substantiate this ground of appeal with documents and arguments and opportunities were provided on September 18, 2008, October 6, 2008, October 19, 2008, November 19, 2008 and December 3, 2009. All these opportunities were not availed of by the appellant also because the notices were received back with recordings of `no such person'. After going through the facts and circumstances of the case, it is seen that there was specific information on the basis of which the Assessing Officer confronted the appellant with regard to the amounts received through share capital. The appellant did not provide details regarding the various parties which could establish the identity and genuineness of the transactions. Even during the appellate proceedings, the appellant-company itself appears to have become either `non-existing', shifted its office or does not have any ar ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tted that the assessee is a private limited company and even the primary share application is not filed. Thus no share could have been issued in the absence of any share application itself. It is also not forthcoming as to how the share premium was fixed and why the invitation was given to only such nine parties. The assessee being a private limited company cannot make an invitation to the public for allotment of shares as the same is contrary to the very basic nature of a company which is a private limited company. Since the existence itself has not been proved, leave apart creditworthiness of the share applicants and genuineness of transaction. The Full Bench of the Delhi High Court in the case of CIT v. Sophia Finance Ltd. [1994] 205 ITR 98 held that the provision of section 68 shall equally apply even in respect of cash credit stated to be by way of share capital. Therefore, the assessee is not merely required to prove the identity of the shareholders but also the creditworthiness of the creditors and genuineness of the transaction. The observation of the hon'ble Supreme Court in the case of CIT v. Lovely Exports P. Ltd. [2009] 319 ITR (St.) 5 ; 216 CTR 195, is only at the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... sic structure of a private limited company is such that a private limited company cannot make an invitation for issue of shares to the public. The private limited company is/ are prohibited from making any invitation to the public to subscribe for any shares in the company. This provision is contained in section 3 of the Companies Act, 1956, whereby sub-clause (iii) of sub-section (1) of section 3 defines a private company . The primary document to hold that the amount was received by way of share application itself is missing, i.e., the application for allotment of shares itself. As per the balance-sheet of the assessee-company, as per its profit and loss account for the year ended March 31, 2004, there were neither any business nor any income. It only incurred administrative expenses of ₹ 24,356 and the unabsorbed losses stood at ₹ 51,512. Neither was there any business plan nor any instance which affects the profitability of the company to an extent that it can command a premium nine times its face value. As a common perception prevailing even in case of listed companies, the price is generally related to the earning per share and such profit earning ratio is genera ..... X X X X Extracts X X X X X X X X Extracts X X X X
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