TMI Blog2018 (3) TMI 808X X X X Extracts X X X X X X X X Extracts X X X X ..... the reasons have not been properly recorded. Thus the issue of the second notice under Section 148 of the Act on 10.6.2013 for Assessment Year 2008-09 is valid, as all the other procedures mandated in the Act have been followed by the Assessing Officer. Also, since substantive issue in question was never examined under the proceedings in the first notice issued on 18.4.2012, the question of change of opinion does not arise. - Decided against assessee Addition of amount shown as “Share Premium” as ‘Income from other sources' - genuineness of the said transaction of purchase of 5 lakh shares of the assessee company @ ₹ 1,000 per share i.e. at a premium of ₹ 990 per share by M/s. Walden Properties Pvt. Ltd. in the year under consideration has not been established - Held that:- It is settled principle that the burden of proof lies with the assessee to prove the credits in its books of account are not its income, which onus, in our view has not been discharged by the assessee in the case on hand. Even before us, the assessee has not put forth any cogent reasons to controvert and repudiate any of the above findings rendered by the Assessing Officer. The arguments p ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d on 10.6.2013 along with copy of reasons recorded. The assessee vide reply dt.18.7.2013 submitted that since no income of the assessee had escaped assessment for the year under consideration, therefore the notice issued under Section 148 of the Act is illegal without jurisdiction, void ab-initio and consequently proceedings initiated under Section 147 of the Act be dropped. The assessee submitted that the return filed on 30.09.2008 and revised return filed on 14.10.2008 be treated as filed in response to the notice under Section 148 of the Act. The assessment was completed under Section 143(3) r.w.s. 147 of the Act vide order dt.20.3.2015 wherein the assessee's income was determined at ₹ 49,44,76,249. 2.2 Aggrieved by the order of assessment dt.20.3.2015 for Assessment Year 2008-09, the assessee filed an appeal before the CIT (Appeals) 2, Bangalore; challenging the order both on the issue of validity of notice issued under Section 148 of the Act and on merits of the addition of ₹ 49.50 Crores. The learned CIT (Appeals) dismissed the assessee's appeal on both the aforesaid issues vide the impugned order dt.24.1.2017. 3. Aggrieved by the order of CIT (App ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 4. Without prejudice to the right to seek waiver with the Hon'ble CCIT/DG the appellant denies itself liable to the charged to interest u/s. 234-B and 234-C of the Act, which under the facts and in the circumstances of the appellant's case and the levy deserves to be cancelled. 5. For The above and other grounds that may be urged at the time of hearing of the appeal, your appellant humbly prays that the appeal may be allowed and justice rendered and the apellant may be awarded costs in prosecuting the appeal and also order for the refund of the institution fees as part of the costs, 4. Ground Nos.1, 4 5 - These grounds being general in nature and not urged before us, since no adjudication is called for thereon, they are dismissed as infructuous. 5. Ground No.2 Validity of Notice u/s.148 of the Act . 5.1 From the details on record, it is seen that the assessee filed its original return of income for Assessment Year 2008-09 on 30.09.2008 declaring loss of (-) ₹ 6,84,050. Revised return was filed on 14.10.2008 revising the loss of (-) ₹ 5,23,751. The revised return was processed under Section 143(1) of the Act on 12.9.2009. The Asse ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... detailed submissions, filed Paper Book and a compilation of judicial decisions on the issue of Reason to Believe and Issue of Notice based on which the first notice was issued and dropped. 5.3 Per contra, the learned Departmental Representative for Revenue also made detailed submissions in support of the decision of the learned CIT (Appeals) and filed judicial pronouncements in support of Revenue s stand in the matter. 5.4.1 We have heard the rival contentions, perused and carefully considered the material on record; including the judicial pronouncements cited and they have been discussed wherever necessary and when the context so required. We find that this issue of the validity of notice issued by the Assessing Officer under Section 148 of the Act dt.10.6.2013 was raised before the learned CIT (Appeals), who has rendered a detailed finding in the matter. As observed by the learned CIT (Appeals) the Assessing Officer has followed the procedure necessary for issue of the notice. The Assessing Officer has recorded reasons for initiating proceedings under Section 147 of the Act after which the notice under Section 148 of the Act was issued, enclosing copy of reasons record ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d out by the learned Departmental Representative for Revenue, the Hon'ble Allahabad High Court in the case of Sukhlal Ice and Storge Co. 199 ITR 129 has upheld the issue of second notice when the first notice was found to be illegal and found wanting in jurisdiction. Therefore, in our considered view, the issue of the second notice under Section 148 of the Act on 10.6.2013 for Assessment Year 2008-09 is valid, as all the other procedures mandated in the Act have been followed by the Assessing Officer. Also, since substantive issue in question was never examined under the proceedings in the first notice issued on 18.4.2012, the question of change of opinion does not arise. In this view of the matter, as discussed above, we find no infirmity in the decision of the learned CIT (Appeals) in upholding the action of the Assessing Officer in issuing the notice under Section 148 of the Act on 10.6.2013. Consequently, Ground No.2 of assessee's appeal is dismissed. 6. Ground No.3 - Addition of ₹ 49,50,00,000 . 6.1 The only issue for consideration and adjudication on merits before us in the addition of ₹ 49.50 Crores shown as Share Premium as Income from ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... estment in the hands of the investor, i.e. M/s. Walden Properties Investment Pvt. Ltd., therefore the addition of ₹ 49.50 Crores made in the hands of the assessee is untenable. (v) It is settled principle, upheld by the Hon'ble Apex Court, that bogus share transactions cannot be added in the hands of the company in which the investment is made and therefore, the action of the Assessing Officer is bad in law. (vi) The provisions of Sec. 56(1)(viib) has been introduced by Finance Act, 2012 w.e.f. 1.4.2013 and do not apply to Assessment Year 2008-09, i.e. the year under appeal in the case on hand. 6.4 At the outset, it needs to be mentioned that the argument of the assessee that the provisions of Sec.56(1)(viib) of the Act does not apply to the case on hand for the year under consideration as it has been introduced by Finance Act, 2012 w.e.f. 1.4.2013 is a misplaced one. From a reading of the order of assessment, it is clear that the Assessing Officer has invoked the provisions of Sec. 68 of the Act. This leads us to the question of whether the provisions of Sec. 68 of the Act can be invoked for the nature of transactions involved in the case, where sums of money ar ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... receipt of share capital with premium or not. If such a course was permissible, and upon completion of the inquiry the assessee failed to satisfy the assessing officer on the identity and capacity of the subscribers and genuineness of transactions, then, the Tribunal opined, addition under Section 68 of the Act would have been called for. That would be the ultimate outcome of the inquiry directed by the C.I.T., provided of course, the assessing officer remained unsatisfied with the explanation furnished by the assessees. Section 68 of the Act permits adding the sum credited to the income of an assessee in situations specified under that provision. For the assessment years concerned, Section 68 of the Act read:- Where any sum is found credited in the books of an assessee maintained for any previous year, and the assessee offers no explanation about the nature and source thereof or the explanation offered by him is not, in the opinion of the [Assessing] Officer, satisfactory, the sum so credited may be charged to incometax as the income of the assessee of that previous year. 6. There was amendment to the aforesaid Section and following provisos were added to Section ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ier. 9. Main thrust of the appellant s case is that the provisions of Section 68 of the Act as amended could not be given retrospective operation and if that position of law was accepted, then it was not open to the C.I.T. to direct an enquiry to ascertain the source and genuineness of the sums being projected by the appellants as capital receipts. Mr. Majumdar wants us to reject the finding of the Tribunal that Section 68 of the Act, as amended, has retrospective operation. In support of his submissions on this point, he has relied on a Constitution Bench judgment of Supreme Court delivered in the case of the Commissioner of Income Tax Vs. Vatika Township Pvt. Ltd. [(2015) 1 SCC 1]. Argument of the appellant is that in the event the amendment made to section 56 (2) of the Act is given prospective effect along with provisos to Section 68, then sums received as share capital or share premium would not be taxable in the light of particulars already disclosed by each appellant, and the exercise directed by the C.I.T. would be a futile or redundant exercise. Mr. Majumdar wants the appeal to be admitted on formulating the following question, which, according to him, would involve ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... al by the assessee before the Hon ble Supreme Court by filing a petition for special leave to appeal (Petition(s) for Special Leave to Appeal (c) cc No (s) 22566-22567/2016). On 9th January, 2017, the Hon ble Supreme Court was pleased to dismiss the special leave petition finding no reason to entertain the same. A copy of the order of the Hon ble Supreme Court has been made available to us by Mr. Nizamuddin, learned counsel representing the Revenue. 13. In that judgment, the Coordinate Bench had referred to particulars of the assessee s account in detail. Reference was made specifically to its subsisting share capital, quantum rise in share capital and reserve and surplus on issue of share capital with high premium during the relevant previous year. In this judgment, we do not consider it necessary either to reproduce the particulars of accounts of individual assessees or to refer to the manner in which the capital receipts were realised. The factual background of these cases are more or less similar to the facts involved in the case of Rajmandir Estates Private Ltd. (supra), and learned counsel for the parties have also confined their submissions to points of law only. The ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the Act was retrospective in operation or not. Neither do we need to address the issue that if the inquiries, as directed, revealed that share capital infused were actually unaccounted money, whether the same could be taxed in accordance with Section 56(2) (vii b) or not. The ratio of the Constitution Bench decision of the Hon ble Supreme Court in the case of Vedika Township Private Ltd. (supra) does not apply in the legal context in which we are deciding these appeals. It is not necessary in these appeals to deal with the question of retroactivity of the aforesaid provisions, for which that authority was cited. 15. Arguments in all these appeals have been advanced in the same line, and for that reason we have not recorded in this judgment the submissions made individually in each appeal. Another decision of a Coordinate Bench in ITA No. 723 of 2008 in the case of Commissioner of Income Tax, Central II, Kolkata Vs. Shyam Sel Ltd. decided on 28th June 2016 was referred to on behalf of the appellants. This decision was cited to contend that the assessee cannot be asked to discharge the onus of proving the genuineness of transaction relating to the source of its source of share ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... f establishing the genuineness of the investment made in the share capital of the company. In the above cited case, placing reliance on the decision of the Hon'ble Delhi High Court in the case of CIT Vs. Kamadhenu Steel Alloys Ltd. (2012) 206 Taxman 54 (Delhi) the following paras 39 40 thereof were extracted by the Tribunal which indicates the thought process and line of reasoning that went into the Tribunal s decision in NRA Iron Steel Pvt. Ltd. (supra) :- 39. We may repeat what is often said, that a delicate balance has to be maintained while walking on the tight rope of sections 68 and 69 of the Act. On the one hand, no doubt, such kind of dubious practices are rampant, on the other hand, merely because there is an acknowledgement of such practices would not mean that in any of such cases coming before the Court, the Court has to presume that the assessee in questions as indulged in that practice. To make the assessee responsible, there has to be proper evidence. It is equally important that an innocent person cannot be fastened with liability without cogent evidence. One has to see the matter from the point of view of such companies (like the assessee herein) ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... any has been allotted shares at par around the same time that M/s. Walden Properties Pvt. Ltd., were allotted shares at a huge premium of ₹ 990 per share. (ii) The assessee was unable to furnish a proper valuation report to justify the high premium charged. (iii) The assessee could not substantiate the high premium, based on the manner in which such valuations are done supported by financials. (iv) Based on the financial details of the assessee, the value of the said shares is very much less and no genuine investor would buy the shares at a hefty premium of ₹ 990 per share. (v) Several discrepancies / abnormal features were highlighted which are clear pointers to the fact that the aforesaid transaction is made up to camouflage the real purpose / intention. (vi) In respect of the project for which the investor was supposed to have made the investment, even application for the same has not been made by the assessee company. 6.10 After bringing on record several facts and factors, the Assessing Officer was of the view that the genuineness of the said transaction of purchase of 5 lakh shares of the assessee company @ ₹ 1,000 per share i.e. at a pre ..... X X X X Extracts X X X X X X X X Extracts X X X X
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