2016 (7) TMI 540 - HC - Income Tax

Reopening of assessment - addition u/s 68 - Held that - The petitioner has been vehemently contending that the amount received from the said three companies was only for the purpose of allotment of shares. It was only a loan which was received through Account Payee cheques and was also repaid during the same period relevant to the assessment year in question. The Assessing Officer, while disposing of these objections, never disputed these factual assertions of the petitioner. He merely reiterated that the share capital and share premium both are credit entries in the books and are subjected to the test of identity, genuineness of transaction and creditworthiness of the investor under Section 68 of the Act. With respect to this legal proposition, there can be no quarrel. As when the petitioner pointed out that no amount was received by the petitioner from these three companies by way of share application money, the question of applicability of legal proposition would pale into insignificance. If the Assessing Officer was in a position to rebut the petitioner s factual assertions that no funds were received from these companies by way of share application money, the issue would stand on a different footing. However, no such rebuttal has come-forth in the order disposing of the petition or even in reply filed before us in response to the present petition. The petitioner has, on the other hand, produced supporting material establishing its contention that what was received from these companies was loan, which was also repaid within a short time and there was no share application money in any form. If this be so, the very foundation of the reason recorded by the Assessing Officer for reopening the assessment fails. - Decided in favour of assessee

Summary

Issues:
Challenge to notice for reopening assessment for the assessment year 2008-09 based on alleged bogus share application money received by the petitioner from three companies.

Analysis:
1. The petitioner, a company, challenged a notice for reopening its assessment for the year 2008-09 based on information received regarding alleged bogus share application money from three companies. The Assessing Officer issued the notice on the premise that the petitioner received funds from sham companies operated by Pravin Kumar Jain. The petitioner objected, stating it received loans through Account Payee cheques, not share application money. The Assessing Officer failed to address this specific objection.

2. The department argued that a scandal involving accommodation entries by Pravin Kumar Jain implicated the petitioner as a beneficiary. However, the petitioner contended that it never received share application money from the mentioned companies, providing evidence of loans received and repaid during the relevant period. The Assessing Officer's response focused on the legal aspects of share capital and premium, without refuting the petitioner's factual claims of not receiving share application money.

3. The petitioner's objections highlighted the discrepancy between the alleged share application money and the actual loans received and repaid. The Assessing Officer's failure to counter the petitioner's factual assertions led the court to quash the notice for reopening the assessment. The court emphasized that the legal aspects of share capital and premium were irrelevant when the factual basis for reopening the assessment was unsubstantiated.

4. The court ruled in favor of the petitioner, finding that the notice for reopening the assessment was based on incorrect factual premises and lacked substantiation. As the Assessing Officer failed to rebut the petitioner's evidence of receiving loans instead of share application money, the court quashed the notice dated 31.03.2015. The petition was disposed of accordingly, highlighting the importance of factual accuracy in assessment proceedings.