TMI Blog2019 (3) TMI 1560X X X X Extracts X X X X X X X X Extracts X X X X ..... answered. The reassessment notice in this case was clearly warranted. Though the assessee had sought to explain that the share application amounts were received and later the shareholding rights were transferred by Mr. Analjit Singh to his family trust. The identity of Shri Analjit Singh was known; however, looking at the transaction (i.e. allotment of shares vastly in excess of the authorized capital, in the absence of any SEBI approval and retention of that money by the assessee which did not show any reason for issuing the shares) the other ingredients of Section 68 (i.e. genuineness of the transaction or credit and the credit worthiness of the individual providing the money) were apparently not established. - Decided in favour of revenue - W.P.(C)No.11572/2017 & CM No.47153/2017 - - - Dated:- 27-3-2019 - MR. S. RAVINDRA BHAT AND MR. PRATEEK JALAN JJ. Petitioner Through: Sh. Ajay Vohra, Sr. Advocate with Sh. Gaurav Jain, Sh. Aniket. D. Agrawal and Ms. Deepika Agarwal, Advs. Respondents Through: Sh. Asheesh Jain, Sr. Standing Counsel with Sh. Sanjay Kumar, Jr. Standing Counsel and Sh. Dushyant Sarna, Adv. S. RAVINDRA BHAT, J. 1. This petition under Artic ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... oney to the declared income of the assessee as unexplained income in its hands, also holding that the benefit had been taken by the assessee till date and in future as shares were not allotted even after the expiry of 4 years. It was also held that the family trust did not get any benefit having regard to the purpose it was created which showed that it is just shifting tax burden on deemed income of trust by this route. The AO further held that the assessee had not taken any step to increase the authorized share capital to meet out the requirement of issue of shares as the present authorized share capital was of ₹ 20 lakhs against share application money of ₹ 87 crores, which was pending for allotment till the year 2015. Further, the assessee filed application to get exemption from SEBI in the year 2014-15 only after questionnaire/notice was issued by the AO. The assessee appealed to the Commissioner. The CIT(A) s order dated 09.12.2016 deleted the aforesaid addition made by the ld. AO, inter alia, on the ground that since the aforesaid share application money was not received in the relevant AY i.e. 2012-13, the provisions of Section 68 of the Act were not applicable i ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... by any evidence as these facts were never intimated to the department during the course of assessment proceedings for A.Y. 2012-13. The assessee merely relied upon its submission that it has riot received any Share application money during the relevant year i.e. 2012-13. ii. The assessee failed to submit any evidence that Sh. Analjit Singh has provided any share application money during 2009-10, 2010-11 2011-12. Contrary to this the evidences submitted, by the assessee to support its claim of Share application money provided by Sh. Analjit Singh does not stand the scrutiny of the law; iii. During the course of recovery proceeding, it has been observed that the assessee has submitted documents in support of its claim that money has been provided by Sh. Analjit Singh in 2009. But these evidences cannot be relied upon for the following reasons:- (a) The assessee submitted the copies of extract of minutes of meeting of Board of Directors of M/s Max Venture Investment Holdings Pvt. Ltd. From examination of the copies of extracts of the minutes of the meeting, of the Board of Directors It. was observed that the meeting of board of director was held on 06.01.2010 and 20 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... crores being share application money received by the assessee during financial year 2009-10. On the basis of material available with the undersigned it was clear that the transactions with respect to credits of ₹ 87 crores is not genuine and thus can be basis of reason-for formation of belief that the income has been escaped assessment. 5.2. From the documents submitted by the assessee during various proceedings for A.Y. 2012-13 and return of income for A.Y. 2010-11 it was clear that the transaction entered by the assessee relating to receipt of share application of ₹ 87 crore is under doubt. Section 68 of the Act provides that if the identity and creditworthiness of person and genuine of the transaction is not proved than the sum has to be treated as income. Prima facie on the basis of information available on records and findings of the Ld. CIT(A)-3 s order dated 09.12.2016, it was clear that the income of ₹ 87 crore being receipt of share application money has escaped assessment. 5.3 All the documents relied upon while forming the belief has been annexed and the detail of which is as under: i. Copy of extract of minute of meeting of Board dated 6 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he application dated 26.11.2014 filed by Neeman Trust for exemption from SEBI Takeover Code Regulations, which was allowed by SEBI by order dated 04.10.2016. Accordingly, the factum of investment of ₹ 87 crores by Mr. Singh in the Petitioner company has been disclosed at several places and therefore the impugned re-assessment proceedings initiated raising doubt on the source of such receipt are erroneous and illegal grounds, which deserves to be quashed. 8. It is urged that that validity of the assumption of jurisdiction under Section 147 has to be tested on the basis of reasons to believe formed before issuing notice under Section 148 of the Act. In other words, valid reasons to believe is sine qua non for assuming jurisdiction under Section 147 of the Act. If the reasons to believe are not valid or are mere pretense or lack due application of mind by the assessing officer, the re-assessment proceedings initiated under Section 147 of the Act would not be valid. Learned counsel relied on Sheo Nath Singh vs. ACIT, 82 ITR 148 (SC); Income Tax Officer vs. Lakhmani Mewal Das, 103 ITR 437 (SC) and Ganga Saran Sons (P) Ltd. vs. ITO, 130 ITR 1. The following observati ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... #8377; 19,00,000/- only. Against this ₹ 19,00,000/-, it received ₹ 87 crores meaning thereby that it might have issued the shares at a premium of ₹ 4568.95/- against the face value of ₹ 10 each thereby issuing the share at 457 times the face value of shares. But the valuation of the assessee did not justify such a high valuation. Even its Net Asset Value at the time of receipt of share application money as per Rule 11UA of the Income Tax Rule, 1962 comes at ₹ 318/-per share against the receipt of share application money at a price of ₹ 4570/- per shares. 10. It is submitted that the assessee gave various contradictory evidences to prove the genuineness of the credits of ₹ 87 crores in its books during the course of assessment proceedings for A.Y 2012-13 and also during the course of stay proceedings. It is argued that no evidence to prove the source of receipt of share application money was ever produced by the assessee. The assessee has for the first time filed the gift deed dated 06.04.2011 as Annexure G to the Writ Petition before this court. This gift deed was not filed by the assessee before Ld. A.O. Further a gift is one which ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... proceedings for further enquiry and investigation into the genuineness to the loan transaction but in our opinion his failure to do so and complete the original assessment proceedings would not take away his jurisdiction to act under Section 147 of the Act, on receipt of the information subsequently . 12. Clearly therefore, when the Revenue gets hold of information or material which tends to or has the potential of undermining its findings (previously made in the assessment proceedings) and have an important bearing, invocation of the power to reassessment is warranted. Now in the present case, the Revenue presses several such circumstances: one, that the SEBI application was made in 2014 after a questionnaire was issued by the AO; two there was nothing to justify the premium of 457 per cent over the face value of the shares even the market value of the share according to the Revenue on the date of issue of the shares was only ₹ 318/- per share. Three, the SEBI approval was given much later; four, when the authorized capital of company was ₹ 20 lakhs (mostly paid) the necessity for issuing shares worth ₹ 87 crores remained unanswered. 13. In the opinion ..... X X X X Extracts X X X X X X X X Extracts X X X X
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