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2021 (1) TMI 1020 - AT - Income TaxReopening of assessment u/s 147 - Addition u/s 68 - treating the share premium money received by the assessee as unexplained cash credit - HELD THAT - We find that assessee has filed the necessary evidences in support of its claim before the AO as well as before the Ld. CIT(A). The evidences filed comprised of copies of ITR, annual accounts, bank statements, PAN numbers, application from share applicants, copies of board resolutions etc and even in response to summons issued under section 131, these investors filed their audited statements, ITRs and bank statement before the AO. AO has also proceeded on the basis of the statement of Shri Pravin Kumar Jain and others recorded during the course of search to doubt these transactions and has not brought on record any substantive material to prove these investments as non genuine whereas the assessee has filed all the evidences. The director Shri Dipak Singhvi has presented himself before the AO in order to examine Shri Pravin Kumar Jain and others, however, the same did not attend before the AO and cross examination could not be performed. Besides, the amendment to section 56(2)(vii)(b) of the Act is applicable from A.Y. 2013-14 and not to the year under consideration and therefore the question of issuing shares at a premium can not be examined in this year and also addition can not be made. We find that on the date of issue of shares, the intrinsic value of the share as on 31.03.2007 was 411.80 and therefore the observation of the AO that shares were issued at a very high price is wrong and against the facts of the case. We have also perused the decisions referred to and relied by the ld. AR of the assessee in support of his arguments and found them to be squarely applicable to the assessee's case. In this case, the assessee has discharged the onus cast upon it by filing the necessary documents before the AO as well as CIT(A). Moreover in absence of cross examination of the persons whose statements were relied by the AO, the addition can not be made in view of the fact that specific prayers to the AO to this effect were made before the AO. In view of the above discussion and facts of the case, we are inclined to set aside the order of Ld. CIT(A) and direct the AO to delete the addition. - Decided in favour of assessee.
Issues Involved:
1. Jurisdictional issue regarding the initiation of reassessment proceedings under section 147 read with section 148 of the Income Tax Act. 2. Confirmation of addition of ?1,80,00,000/- under section 68 of the Income Tax Act by treating the share premium money received as unexplained cash credit. Issue-wise Detailed Analysis: 1. Jurisdictional Issue on Reassessment Proceedings: The assessee challenged the jurisdiction of the Assessing Officer (AO) in initiating reassessment proceedings under section 147 read with section 148 of the Income Tax Act. The reassessment was initiated based on the information that the assessee received share premium money from entities connected to Shri Pravin Kumar Jain, who was found during a search to be involved in providing accommodation entries. The Tribunal did not explicitly address this jurisdictional issue in detail, focusing instead on the merits of the addition under section 68. 2. Addition of ?1,80,00,000/- as Unexplained Cash Credit under Section 68: The primary issue was whether the share premium money received by the assessee could be treated as unexplained cash credit. The AO had added ?1,80,00,000/- to the income of the assessee under section 68, treating the share premium as non-genuine based on the modus operandi of Shri Pravin Kumar Jain, who was found to be providing accommodation entries. Arguments by the Assessee: - The assessee argued that it had provided all necessary documents to prove the identity and creditworthiness of the investors and the genuineness of the transactions, including confirmations, PAN numbers, board resolutions, bank statements, IT returns, and audited accounts. - The assessee contended that the AO had not brought any concrete evidence to prove the transactions were non-genuine and had solely relied on the statements of Shri Pravin Kumar Jain, which were later retracted. - The assessee also argued that the amendment to section 56(2)(vii)(b) was not applicable to the relevant assessment year and that the intrinsic value of the shares justified the premium. Arguments by the Revenue: - The Revenue argued that the assessee had availed accommodation entries from entities connected to Shri Pravin Kumar Jain, who was found to be involved in providing such entries. - The Revenue contended that the transactions were not genuine and that the share premium was exorbitant given the financial position of the assessee. Tribunal’s Findings: - The Tribunal found that the assessee had provided substantial evidence to support the genuineness of the transactions, including confirmations, bank statements, and audited accounts. - The Tribunal noted that the AO had not provided any substantive material to prove that the transactions were non-genuine and had relied on retracted statements without allowing cross-examination. - The Tribunal held that the amendment to section 56(2)(vii)(b) was not applicable to the relevant assessment year and that the intrinsic value of the shares justified the premium. - The Tribunal concluded that the assessee had discharged its onus of proving the genuineness of the transactions and that the addition under section 68 was not justified. Conclusion: The Tribunal allowed the appeals of the assessee for both assessment years 2008-09 and 2009-10, setting aside the order of the CIT(A) and directing the AO to delete the addition of ?1,80,00,000/- made under section 68. Order Pronounced: The order was pronounced in the open court on 23.12.2020.
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