TMI Blog2023 (4) TMI 74X X X X Extracts X X X X X X X X Extracts X X X X ..... Issue of additional shares at premium while splitting the existing shares - AO assessed the excess amount of Rs.15/- per share so received by the assessee as its income u/s. 56(2)(viib) - HELD THAT:- As the provisions of Sec. 56(2)(vii) were introduced as an antiabuse measure to prevent laundering of unaccounted money in the garb of gifts after abolition of Gift Tax Act, therefore, there is no justifiable reason to depart from the understanding that the said provisions were in the nature of counter evasion mechanism to prevent laundering of unaccounted money. What in effect transpires is that a share gets split (in the same proportion for all the shareholders). As observed by the Tribunal in its aforesaid order, such allotment of additional shares would be akin to changing a one thousand rupee note for two five hundreds rupee notes. Accordingly, as stated by the Ld. AR, and, rightly so, the provisions of section 56(2)(viib) of the Act in the backdrop of the facts of the case before us could not have been triggered. Though the aforesaid issue was specifically raised by the assesee before the CIT(Appeals) however, the latter had failed to adjudicate the same. In all fairness, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ny, as under: S. No. Name of the Applicant PAN No. of shares allotted Total application money invested (in Rs.) 1. Aayush Steelco Pvt. Ltd., 120, Lenin Sarani, 5th Floor, Kolkata. AAHCA1061B 49280 34,49,600/- In order to verify the genuineness and veracity of the aforesaid transaction of receipt of share application money, the A.O called upon the assessee company to furnish supporting documentary evidence substantiating the creditworthiness of the aforesaid investor. However, as the assessee failed to place on record the requisite documents to support the creditworthiness of the investor company, therefore, the A.O issued to the latter a notice u/s.133(6) of the Act, calling upon it to place on record certain documents which would prove its identity and creditworthiness. Although the aforesaid share applicant, viz. M/s. Aayush Steelco Pvt. Ltd. in compliance to the notice issued u/s. 133(6) of the Act furnished its reply a/w supporting documents with the A.O, however, the latter did not find the same in ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... f the entire share holding) which worked out to an amount of Rs.10.23 lacs in terms of the company s net worth. Also, in his attempt to distance the aforesaid investor company, viz. M/s. Aayush Steelco Pvt. Ltd. from the above-mentioned shareholder i.e., M/s. Abharani Vinimay Pvt. Ltd., it was submitted by the assessee that the investor company had not entered into any transaction with the said shareholder company either during the year under consideration or in the last 7 to 8 years of its operation. However, the aforesaid explanation of the assessee did not find favour with the A.O. It was observed by the AO that despite summons being issued by the DDIT (Inv.) Unit-2(3), Kolkata seeking a personal appearance of the directors of the investor company, viz. M/s. Aayush Steelco Pvt. Ltd., the latter had adopted an evasive approach with an ulterior motive to avoid surfacing of the true state if affairs. Also, it was observed by the A.O that the assessee despite specific directions had failed to produce the directors of the investor company, viz. M/s. Aayush Steelco Pvt. Ltd. for necessary examination before him. On the basis of the aforesaid facts, the A.O held a conviction that the a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nd vide his order passed u/s.143(3) dated 26.12.2017 determined the income of the assessee company at Rs.35,44,170/-. 4. Aggrieved, the assessee carried the matter in appeal before the CIT(Appeals). On a perusal of the order of the CIT(Appeals), it transpires that though he was initially convinced that the assessee had established the identity and explained the source of investment made by the investor company, but thereafter by adopting a self-contradictory view he had drawn adverse inferences qua the identity and creditworthiness of the investor company, for the reason, viz. (i) that the directors of the assessee company despite specific directions had neither personally appeared before the DDIT (Inv.)- Unit 2(3), Kolkata; or before him.; (ii) that Shri Jitendra Mishra, an infamous entry operator of Kolkata in his statement recorded u/s.131 of the Act had stated that he had, inter alia, controlled the affairs of M/s. Abharani Vinimay Pvt. Ltd., a shareholder of the investor company; (iii) that the miniscule revenue of the investor company, viz. M/s. Aayush Steelco Pvt. Ltd. of Rs.5.83 lac that resulted in profit before tax (PBT) of Rs.2.79 lac for the year under consideration ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of M/s. Sri Balaji Iron Steel Traders, Page 31 of APB. Also, our attention was drawn towards copy of the bank account of M/s. Shree Balaji Iron Steel Traders, Page 36 of APB, wherein, payment of an amount of Rs.34.50 lac in favour of the investor company, viz. M/s. Aayush Steelco Pvt. Ltd. was reflected. Our attention was also drawn by the Ld. AR towards the copy of the bank account of the investor company, viz. M/s. Aayush Steelco Pvt. Ltd., Page 45 of APB wherein receipt of an amount of Rs.34.50 lac by investor company from M/s. Sri Balaji Iron Steel Traders on 10.06.2014 a/w. the payment of the said amount on the very same date to the assessee company, viz. M/s Chhattisgarh Metaliks and Alloys Pvt. Ltd. was clearly reflected. It was stated by the Ld. AR that though the aforesaid documents were very much there before the lower authorities, however, they had either not considered the same, or had failed to consider the same in the right perspective. Adverting to the adverse inferences drawn in the hands of the investor company, viz. M/s. Aayush Steelco Pvt. Ltd., for the reason that one of its share holder, viz. M/s. Abharani Vinimay Pvt. Ltd. was allegedly on the basis of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... assessee company had placed on record the PAN a/w copies of the returns of income of the investor company, therefore, its identity was clearly established. As regards the genuineness of the transaction in question, it was submitted by the Ld. AR that as the amount of share application money was received through banking channels, therefore, the same stood duly established. On the basis of his aforesaid contentions, it was submitted by the Ld. AR that now when the identity and creditworthiness of the share applicant company, viz. M/s. Aayush Steelco Pvt. Ltd. a/w. genuineness of the transaction had been proved to the hilt by the assessee, therefore, neither the adverse inferences nor the treating of the amount of share application money as an unexplained cash credit u/s.68 of the Act could be sustained. 9. Adverting to the addition of Rs.75,000/- made by the A.O u/s. 56(2)(viib) of the Act, it was submitted by the Ld. AR that as the additional 5000 shares were issued by the assessee company to its existing shareholders on the basis of a proportionate allotment, i.e., allotment of the additional shares on a pro-rata basis, to the share holders on the basis of their existing shareho ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 200013977831 Aayush Steel Co Private Limited Primary holder 10208539 Product Description current account-Indus Blue Branch Address: Vishakhapatnam CDR Hospital, A 3 Raja Complex, Walter Main Road, Vishakhapatnam, Andhra Pradesh-530002 Statement period : 01 June-2014 to 30-June-2014 Statement Frequency : Monthly Average monthly balance required : Rs.5000/- SMS Alert No. Branch MICR Code : 530234001 Branch IFSC Code : INDB0000581 Nomination Registered : No. Date Particulars Chq. No./Ref. No. Withdrawal Deposit Balance 01-Jun-2014 Brough forward 22,261.98 10-June-2014 Transfer/ECS CREDIT/AAGCA106-1B-AY 2012-13/019407495142823617 CRNACH10061014 2,010.00 24 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... in drawing of any adverse inferences qua the said source of investment. At this stage, we may herein observe, that except for raising allegations in the thin air the department had failed to lead any iota of evidence which would persuade us to conclude that it was the unaccounted money of the assessee company which was routed back to its coffers in the garb of share application money through the investor company, viz. M/s. Aayush Steelco Pvt. Ltd. Considering the aforesaid duly substantiated explanation of the assessee as regards the source of investment of share application money made by the investor company, viz. M/s. Aayush Steelco Pvt. Ltd., we are of the considered view that the onus cast upon the assessee company for proving the nature and source of the share application money a/w the additional burden cast upon it as per the first proviso to section 68 of the Act, stands duly discharged. Accordingly, not being able to persuade ourselves to subscribe to the view taken by the lower authorities who had dubbed the share application money of Rs.34.49 lac received by the assessee company as an unexplained cash credit u/s.68 of the Act, we herein set- aside the order of the CIT(A ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nus shares, right shares and preference shares. Although the aforesaid circular was, thereafter, withdrawn, but in our considered view, as the provisions of Sec. 56(2)(vii) were introduced as an antiabuse measure to prevent laundering of unaccounted money in the garb of gifts after abolition of Gift Tax Act, therefore, there is no justifiable reason to depart from the understanding that the said provisions were in the nature of counter evasion mechanism to prevent laundering of unaccounted money. In the case of issuance of bonus shares, allotting of shares to existing shareholders in proportion to their existing shareholding (akin to issue of right shares), there is neither any increase or decrease in the wealth of the shareholder (or of the issuing company) on account of a bonus issue and his percentage holding therein remains the same. What in effect transpires is that a share gets split (in the same proportion for all the shareholders). As observed by the Tribunal in its aforesaid order, such allotment of additional shares would be akin to changing a one thousand rupee note for two five hundreds rupee notes. Accordingly, we are of the considered view, that as stated by the Ld. A ..... X X X X Extracts X X X X X X X X Extracts X X X X
|
