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2021 (2) TMI 23 - AT - Income TaxAddition u/s 68 - share application monay - unaccounted money has been laundered by creating fagade of paper work - shares issued to sister concern i.e., sole share applicant/ subscriber - HELD THAT - We note that in this assessment year (2012-13) the assessee-company has issued 47,500 numbers of equity shares of face value of ₹ 10 each at premium of ₹ 1,990 per share to another private limited company M/s. Saibaba Finvest Pvt. Ltd. which is a sister concern as brought to our notice wherein we noted that in this relevant assessment year common director was there in assessee-company and holding company of M/s. Saibaba. We note that Sri Utkarsh Suresh Shelar was common director of the assessee-company as well as the holding company of share-subscribing company in the assessment year 2012-13 as we noted in detail at para 14 (supra) ; and Shri Ashish Kumar Pathak who was the director of the assessee-company was inducted as director of M/s. Saibaba in the assessment year 2013-14 which is evident from the master data of shareholder company M/s. Saibaba. M/s. Saibaba had creditworthiness as on March 31, 2012 to invest ₹ 9.5 crores in the assessee-company - copy of bank statement of M/s. Saibaba reveals that the share application money has been transferred from bank account of M/s. Saibaba to the assessee-company. Thus, there can be no doubt against the identity, creditworthiness and genuineness of M/s. Saibaba. Commissioner of Income-tax (Appeals) has clearly given a finding a fact that the share applicant company M/s. Saibaba had enough fund for subscribing for shares in the assessee-company which factual finding have not been challenged by the Revenue/Department in this appeal, so this finding of fact crystallizes. - Decided against revenue.
Issues Involved:
1. Justification of share premium of ?1,990 on a face value of ?10. 2. Addition of ?9.50 crores under Section 68 of the Income-tax Act, 1961. 3. Validity of transactions despite non-response to summons under Section 131. 4. Examination of identity, genuineness, and creditworthiness of the share applicant. Issue-wise Detailed Analysis: 1. Justification of Share Premium: The Revenue challenged the justification of a premium of ?1,990 on a face value of ?10 per share, arguing that no proper physical activity of the private limited company was noticed. The Commissioner of Income-tax (Appeals) (CIT(A)) held that the premium was justified based on the company's financials, including a turnover of ?373.89 crores and a profit after tax (PAT) of ?1.45 crores for the financial year 2010-11. The CIT(A) noted that the earning per share (EPS) was ?145.43, and the market value of shares capitalized at 7% would be ?1,933 per share, making the issue price of ?2,000 reasonable. The CIT(A) also referred to the net asset value (NAV) of ?1,988 per share as of March 31, 2011, supporting the premium's justification. 2. Addition under Section 68: The Assessing Officer (AO) added ?9.50 crores under Section 68, claiming the identity, genuineness, and creditworthiness of the share applicant were not proven. The CIT(A) deleted this addition, noting that the assessee had provided all necessary documents and evidence, including the identity and creditworthiness of the share applicant, M/s. Saibaba Finvest Pvt. Ltd. The CIT(A) emphasized that the share premium was a capital receipt and not taxable till March 31, 2012, and even under Section 56(2)(viib), applicable from the assessment year 2013-14, the premium was not at variance with the fair market value. 3. Validity of Transactions Despite Non-response to Summons: The AO issued a summons under Section 131 to M/s. Saibaba, but no one appeared, leading to an adverse inference. The CIT(A) found that the summons was issued at the fag end of the assessment proceedings, giving little time for compliance. The CIT(A) held that non-compliance with the summons could not be held against the appellant, especially when the identity and creditworthiness of the share applicant were established through other documents. 4. Examination of Identity, Genuineness, and Creditworthiness: The CIT(A) noted that the assessee had provided comprehensive details, including the company master data, memorandum and articles of association, PAN card, directors' PAN cards, and their income tax returns. The share subscriptions were received through banking channels, and the transactions were recorded in the balance sheets and returns filed with the respective AOs. The CIT(A) concluded that the identity, genuineness, and creditworthiness of the share applicant were beyond doubt. Conclusion: The Tribunal upheld the CIT(A)'s decision, dismissing the Revenue's appeal. It confirmed that the share premium was justified based on the company's financials and that the addition under Section 68 was unwarranted as the identity, genuineness, and creditworthiness of the share applicant were adequately proven. The Tribunal also agreed that non-compliance with the summons due to short notice could not invalidate the transactions.
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