2019 (9) TMI 1622 - AT - Income Tax

Addition u/s 68 - whether the AO can make an addition of only the share premium u/s 68 while accepting the share application money at face value to be genuine? - HELD THAT - As relying on M/s. Trend Infra Developers Pvt. Ltd. 2018 (11) TMI 1131 - ITAT KOLKATA we have to necessarily hold that the addition of only share premium by accepting the face value of the shares as genuine, cannot be sustained. Thus, we uphold the order of the ld. CIT(A) and dismiss this appeal of the revenue.

Summary

Issues:
1. Appeal against order of CIT(A) regarding addition of share premium u/s 68 of the Income Tax Act, 1961 for Assessment Year 2012-13.

Analysis:
The appeal filed by the revenue challenged the order of the CIT(A) regarding the addition of share premium under section 68 of the Income Tax Act, 1961 for the Assessment Year 2012-13. The assessee, a company, had filed its return of income declaring Nil income with a loss of ?12,660. The Assessing Officer added ?1,40,21,900 under section 68 of the Act as share premium received by the assessee against allotment of shares, while accepting the face value of the shares as genuine. The CIT(A) deleted the addition, prompting the revenue to appeal. The revenue contended that the issue should be sent back to the Assessing Officer for fresh adjudication as the assessee had not submitted all details during assessment. The assessee argued that the share capital raised was genuine, with only the genuineness of the transactions being questioned. The Tribunal analyzed the case law and held that if share capital is accepted as genuine, the addition of only share premium under section 68 cannot be sustained.

The Tribunal emphasized that the identity and creditworthiness of the shareholders were not in doubt, with the only contention being the excessiveness of the share premium. Referring to previous judgments, the Tribunal highlighted that once the share capital is accepted as genuine under section 68, there is no basis to doubt the share premium component. The Tribunal also cited relevant case law, including the decision of the Hon'ble Supreme Court and the Hon'ble Delhi High Court, to support its conclusion that the addition of share premium alone cannot be upheld under section 68. The Tribunal dismissed the revenue's appeal, upholding the order of the CIT(A) and concluding that the addition of only share premium, while accepting the face value of shares as genuine, cannot be sustained. The Tribunal's decision was in line with previous judgments by co-ordinate benches, affirming that the addition of share premium in such circumstances is not justified.

Therefore, the Tribunal dismissed the revenue's appeal, affirming the order of the CIT(A) and holding that the addition of only share premium under section 68, while accepting the genuineness of share capital, cannot be upheld. The judgment provided a detailed analysis of the legal principles involved, citing relevant case law to support the conclusion reached by the Tribunal.