2019 (4) TMI 557 - AT - Income Tax

Addition u/s 68 - fresh issue of share capital and share premium - Case selected for scrutiny under section 143(3) - year of assessment - HELD THAT - Section 68 of the Act provides that if any sum found credited in the year in respect of which the assessee fails to explain the nature and source shall be assessed as its undisclosed income. In the facts of the present case, both the nature & source of the share application received was fully explained by the assessee. We note that the share application money and share premium money which were received by the assessee company from the two share applicant companies viz M/s. Prism Vintrade Private Limited, and M/s. Gannet-Vintrade Private Limited, during the period December, 2012 to March, 2013 had already been suffered disallowance under section 68 of the Act. As these two share applicant companies invested the same money in the assessee company, therefore, no further disallowance is warranted in the hands of the assessee company. Once taxed income cannot be taxed again. In the case of third company, M/s Haven Vincom Pvt. Ltd the identity, creditworthiness and genuineness have been proved beyond doubt. All documents that is, the PAN details, bank account statements, audited financial statements, balance sheet, profit and loss account, Income Tax acknowledgments, and ROC statements etc were placed on AO s record. One of the directors of share applicant companies appeared before the AO in response to summon u/s 131 of the Act and explained the genuineness of three share applicants. Therefore, considering this factual position and precedents relied on the subject, as noted above, we delete the addition made by the assessing officer U/s 68 - Decided in favour of assessee.

Issues Involved:
1. Addition under Section 68 of the Income Tax Act, 1961.
2. Identity, genuineness, and creditworthiness of share applicants.
3. Double addition of the same amount.

Detailed Analysis:

1. Addition under Section 68 of the Income Tax Act, 1961:
The main grievance of the assessee was that the Commissioner of Income-tax (Appeals) [CIT(A)] erred in confirming the addition of ?17,49,95,000/- made by the Assessing Officer (AO) under Section 68 of the Income Tax Act, 1961. This addition was related to the fresh issue of share capital and share premium.

2. Identity, Genuineness, and Creditworthiness of Share Applicants:
The AO scrutinized the share application money and share premium received by the assessee from three companies: M/s. Prism Vintrade Private Limited, M/s. Gannet Vintrade Private Limited, and M/s. Haven Vincom Private Limited. The AO issued notices under Section 131 to verify the identity, genuineness, and creditworthiness of the shareholders. The common director of the share applicant companies, Mr. Kumar Chand Chawla, appeared before the AO and provided the necessary documents and explanations.

The AO, however, concluded that the share applicants did not have sufficient creditworthiness and that the transactions were not genuine, citing reasons such as:
- No agreement or contract notes for the sale of unquoted shares.
- The share applicant companies had no significant business activities or fixed assets.
- The share application money and share premium were treated as income from other sources in the hands of the share applicant companies in earlier assessments.

3. Double Addition of the Same Amount:
The assessee argued that the share application money and share premium received from M/s. Prism Vintrade Private Limited and M/s. Gannet Vintrade Private Limited had already been disallowed under Section 68 in their respective assessments for the assessment year 2010-11. Therefore, adding the same amount again in the hands of the assessee would result in double taxation. For M/s. Haven Vincom Private Limited, the assessment was carried out under Section 147/143(3) without any addition under Section 68, indicating that the share capital and share premium were accepted as genuine.

Conclusion:
The Tribunal concluded that the assessee had discharged its onus to prove the identity, genuineness, and creditworthiness of the share applicants by providing:
- PAN details, ROC returns, balance sheets, profit and loss accounts, and bank statements of the share applicants.
- Evidence of the source of funds and the transactions being conducted through banking channels.
- The appearance of a common director before the AO in response to the notice under Section 131.

The Tribunal noted that the share application money and share premium received from the two companies (M/s. Prism Vintrade Private Limited and M/s. Gannet Vintrade Private Limited) had already been taxed under Section 68 in their respective assessments. Therefore, no further addition was warranted in the hands of the assessee. As for M/s. Haven Vincom Private Limited, the Tribunal found that the share capital and share premium were accepted as genuine in its assessment, and thus, no addition was required.

The Tribunal relied on various judicial precedents to support its decision, emphasizing that once the identity, genuineness, and creditworthiness of the share applicants are established, the onus shifts to the Revenue to disprove the same. The Tribunal also highlighted that double taxation of the same amount is not permissible.

Final Judgment:
The Tribunal deleted the addition of ?17,49,95,000/- made by the AO under Section 68 of the Income Tax Act, 1961, and allowed the appeal of the assessee.

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