2020 (1) TMI 910 - AT - Income Tax

Reopening of assessment u/s 147 - unexplained cash credit under section 68 - HELD THAT - AO has received information on the basis of the same reopening was done. Even now before us, the learned Counsel for the assessee only made submissions that the AO cannot reopened the assessment on the above given reasons because the only dispute is regarding share premium received at the rate of ₹ 90 per share but he could not point out how the reasons recorded are not as per the provisions of section 147. For this limited aspect, the assessee has made argument. Hence, we find no infirmity in the reopening made by AO and confirmed by CI T(A). Hence, this reopening is upheld and this issue of assessee s CO is dismissed. Addition u/s 68 - CIT(A) had elaborately dealt with the entire issue by due appreciation of the various documentary evidences submitted in respect of investor companies duly proving the three necessary ingredients of Section 68 viz. identity of the investors, creditworthiness of the investors and genuineness of the transactions. None of these documentary evidences were controverted by the AO by proceeding to make further enquiry in this regard. None of these facts were even denied by the AO or any deficiencies were found thereon by the AO and we also take note of the fact that all the investors, who had invested monies in the assessee company, have filed bank statements proving credit worthiness. CIT(A) had placed reliance on the coordinate bench decision of this Tribunal in the case of ACIT vs. Gagandeep Infrastructure Pvt. Ltd. 2014 (11) TMI 479 - ITAT MUMBAI wherein it was held that the amendment to Section 56(2)(viib) and proviso to Section 68 of the Act are only prospective in nature and applicable only from A.Y.2013-14 onwards and not earlier. We find that this judgment has been subsequently approved by the Hon ble Jurisdictional High Court. We find that the Ld. DR vehemently relied upon the decision of Hon ble Delhi High Court in the case of Navodaya Castles (P) Ltd. 2014 (8) TMI 905 - DELHI HIGH COURT . We hold that the decision of Hon ble Jurisdictional High Court would bind this Tribunal. Hence, we do not deem it fit to interfere in the said order of the CIT(A). - Decided against revenue

Summary

Issues Involved:
1. Jurisdiction for reopening of assessment under section 147 of the Income Tax Act, 1961.
2. Addition of unexplained cash credit under section 68 of the Income Tax Act, 1961.

Issue-wise Detailed Analysis:

1. Jurisdiction for Reopening of Assessment:

The assessee contested the jurisdiction of the Assessing Officer (AO) to reopen the assessment under section 147 of the Income Tax Act, 1961. The original return of income was filed on 30.09.2009, declaring a total income of ?1,14,92,500/-, and was processed under section 143(1). The AO, upon receiving information from the office of the Chief Commissioner of Income Tax (CCA), Mumbai, noticed that the assessee had raised share premium of ?2.88 crores. Consequently, a notice under section 148 was issued on 30.03.2014. The AO provided reasons for reopening, citing that the intrinsic value of the equity shares could only be considered at face value, thereby treating the share premium as unexplained cash credit under section 68. The Commissioner of Income Tax (Appeals) [CIT(A)] upheld the reopening. The Tribunal found no infirmity in the reopening process, as the AO acted within the statutory period of four years and based on credible information. Therefore, the reopening was upheld, and the assessee's cross objection was dismissed.

2. Addition of Unexplained Cash Credit:

The Revenue appealed against the CIT(A)'s order deleting the addition of ?3.68 lakhs made by the AO under section 68, treating the share capital and share premium as unexplained cash credit. The AO's primary contention was that the assessee failed to establish the identity and creditworthiness of the share applicants and the genuineness of the transactions, especially since the shares were issued at a high premium in the first year of business operations. The AO further argued that the share premium was received in cash from companies allegedly involved in providing accommodation entries.

The CIT(A), however, observed that the assessee had provided comprehensive documentation, including confirmations, PAN details, bank statements, and audited financials of the share applicants. The CIT(A) cited the Supreme Court's ruling in CIT vs. Lovely Exports (P) Ltd., asserting that the onus to prove identity, creditworthiness, and genuineness was duly discharged by the assessee. The Tribunal noted that the AO did not conduct further inquiries beyond issuing notices under section 133(6) and failed to disprove the documentary evidence provided by the assessee.

The Tribunal upheld the CIT(A)'s decision, emphasizing that the assessee had satisfactorily demonstrated the identity, creditworthiness, and genuineness of the transactions. The Tribunal also referenced the coordinate bench decision in ACIT vs. Gagandeep Infrastructure Pvt. Ltd., which held that amendments to Section 56(2)(viib) and proviso to Section 68 are prospective from AY 2013-14. Consequently, the Tribunal dismissed the Revenue's appeal.

Conclusion:

Both the assessee's cross objection regarding the reopening of the assessment and the Revenue's appeal concerning the addition of unexplained cash credit were dismissed. The Tribunal upheld the CIT(A)'s findings, affirming that the reopening was valid and the assessee had adequately substantiated the legitimacy of the share premium received. The order was pronounced in the open court on 31.12.2019.