9911796707
TMI Blog2019 (1) TMI 528X X X X Extracts X X X X X X X X Extracts X X X X ..... 980.46 Lacs under normal provisions after certain additions / adjustments as against Nil return e-filed by the assessee on 30/09/2011. During impugned AY, the assessee being resident corporate entity was stated to be engaged in the business of finance, share trading and commission agent. As evident from grounds of appeal, the sole subject matter of the appeal is certain addition u/s 68. 2.1 During assessment proceedings, it transpired that the assessee issued 99 Lacs Equity Shares of face value of Rs. 10/- each at a premium of Rs. 10/- per share. Accordingly, the assessee was required to prove the genuineness, identify and credit worthiness of share applicant as well as justification of share premium received on the shares. The assessee submitted that the share capital was raised after complying with SEBI rules and regulations and the money so raised was used for the purpose of assessee's business. The assessee furnished Permanent Account Number [PAN], Address of share applicants including confirmation letter, copy of share application form and allotment of shares. To verify the genuineness of the transactions, notice u/s 133(6) was issued to all share applicant with a request to ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... cate of incorporation of share applicants, share application forms, letter of allotment of shares, confirmation of accounts, balance sheets of share applicants, de-mat statements, bank statements of the share applicants, assessment order u/s 143(3) of few investors, approval from Bombay Stock Exchange to issue the shares etc. and therefore, the primate onus to prove the transactions was duly discharged by the assessee. It was also noted that there were no immediate cash deposits in the bank accounts of the share applicants and the assessee was not required to prove the source of source. The valuation was also found to be justified in terms of documentary evidences and keeping in view the fact that the market price of the shares as on 31/03/2011 was Rs. 37.70. It was also held that the provisions of Section 56(2)(viib) were not applicable to the assessee since it was a listed company in which public was substantially interest. It was also observed that it was the wisdom of the shareholders whether to subscribe the shares at high premium or not. 3.2 Finally, after placing reliance on judicial pronouncements as cited by the assessee, the matter was concluded in assessee's favor by ma ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e were not genuine and laced with ulterior motive to evade the taxes in the final outcome. The Ld. DR, by way of elaborate written submissions, contended that the assessee, in a very organized and systematic manner, indulged in generating fictious Long Term Capital Gains [LTCG] for the investors by resorting to dubious method of share allotment and price manipulation on the stock exchange. It was further submitted that the financials of the assessee did not justify issue of shares at a high premium of Rs. 10/- per share whereas the market value during allotment period was much less. Our attention has also been drawn to the fact the share prices were manipulated by the assessee on the stock exchange with the connivance of the associated concerns so as to generate fictitious LTCG for the investors against certain commission. Our attention has been drawn to the documents obtained from the website of Bombay Stock Exchange as well as SEBI to buttress the arguments stated before us. 4.2 Per Contra, Ld. Authorized Representative for Assessee [AR], at the outset, submitted that the subsequent events / allegations could not be the basis for making addition in the hands of the assessee and ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... hiness to make those investment and the transactions were genuine. So far as the fulfilment of these primary ingredients of Section 68 is concerned, we find that the assessee has successfully demonstrated the fulfilment of the same which is evident from the orders of both the lower authorities. The transactions have duly been confirmed by the investors in response to notice u/s 133(6). The assessee has filed voluminous documentary evidences before both the lower authorities which prove the fulfilment of these conditions. Even the assessment order u/s 143(3) of an entity who made an investment of Rs. 290 Lacs has been placed on record wherein no adverse view has been taken against the investor. The Share allotment has been made after following due procedure of law and after obtaining statutory approval from the concerned government agencies viz. SEBI & Stock Exchanges. The complete details of the same, as required by law, has been filed with Registrar of companies and the new shares have subsequently been listed on the stock exchange. The nature of documents filed by the assessee, to support the transactions, have elaborately been given on page numbers 22 to 24 of the impugned order ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ". Therefore it is not open to give it retrospective effect, by proceeding on the basis that the addition of the proviso to Section 68 of the Act is immaterial and does not change the interpretation of Section 68 of the Act both before and after the adding of the proviso. In any view of the matter the three essential tests while confirming the pre-proviso Section 68 of the Act laid down by the Courts namely the genuineness of the transaction, identity and the capacity of the investor have all been examined by the impugned order of the Tribunal and on facts it was found satisfied. Further it was a submission on behalf of the Revenue that such large amount of share premium gives rise to suspicion on the genuineness (identity) of the shareholders i.e. they are bogus. The Apex Court in Lovely Exports (P.) Ltd. (supra) in the context to the pre-amended Section 68 of the Act has held that where the Revenue urges that the amount of share application money has been received from bogus shareholders then it is for the Income Tax Officer to proceed by reopening the assessment of such shareholders and assessing them to tax in accordance with law. It does not entitle the Revenue to add the same ..... X X X X Extracts X X X X X X X X Extracts X X X X
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