2023 (7) TMI 1158 - AT - Income Tax

Addition towards share premium u/s. 56(2)(viib) - consideration for issue of shares that exceeds the face value of such shares - consideration received for said shares which exceeds the fair market of the shares needs to be treated as income of the assessee - HELD THAT - Assessee is part of M/s. RPP Infra Projects Ltd, who filed application before the Income-tax Settlement Commission, Chennai Benches and offered additional income towards investment with share capital of assessee company. The Income-tax Settlement Commission, Chennai Benches vide their order accepted application filed by the assessee and income disclosed therein and also allowed capitalization with respect of amount invested in M/s. Luncar Finance Pvt Ltd. From the above, it is very clear that addition made by the AO towards security premium in the hands of the assessee was already subjected to tax in the hands of M/s. RPP Infra Projects Ltd, which is evident from the order passed by the Income-tax Settlement Commission. Therefore, further addition towards very same income cannot be made in the hands of the assessee. CIT(A) rightly deleted addition - Decided against revenue.

Summary

Issues involved:
The issues involved in this case are the procedural irregularity in the reopening of assessment, deletion of addition on unexplained share premium receipt, and the admissibility of fresh evidence.

Procedural irregularity in reopening of assessment:
The revenue challenged the reopening of assessment, arguing that there was no procedural irregularity in serving the notice u/s.148. The Assessing Officer had recorded reasons for reopening, and the notice was re-served after obtaining the whereabouts of the assessee. The CIT(A) erred in not following the guidelines from the GKM Driveshafts case. The assessee had objected to the reopening upon receiving the notice. The tribunal upheld the reopening of assessment based on the facts presented.

Deletion of addition on unexplained share premium receipt:
The Assessing Officer made an addition of Rs. 15,45,81,700 on unexplained share premium receipt. The assessee provided evidence during appellate proceedings, including an application filed by M/s. RPP Infra Projects Ltd. before the Settlement Commission, which was not presented during the assessment proceedings. The CIT(A) admitted the fresh evidence and deleted the addition, citing that the income had been admitted by the assessee group before the Settlement Commission. The tribunal agreed with the CIT(A)'s decision to delete the addition.

Admissibility of fresh evidence:
The revenue contended that the CIT(A) erred in admitting additional evidence contrary to Rule 46A of I.T. Rules, 1962. The assessee had filed an application before the Income-tax Settlement Commission, Chennai Benches, disclosing additional income related to investment with M/s. Luncar Finance Pvt Ltd. The Settlement Commission accepted the income declared by the assessee group. The tribunal found that the addition made by the Assessing Officer had already been subjected to tax in the hands of M/s. RPP Infra Projects Ltd, as per the Settlement Commission's order. Therefore, the tribunal upheld the CIT(A)'s decision to delete the addition.

Final Decision:
The tribunal dismissed the appeal filed by the revenue, upholding the CIT(A)'s decision to delete the addition on unexplained share premium receipt based on the evidence presented during the appellate proceedings. The order was pronounced in the court on 26th July, 2023, at Chennai.