2024 (8) TMI 427 - AT - Income Tax

Validity of reassessment proceedings - addition on account of receipt of share capital/share premium - unexplained money of the assessee company u/s. 68 - HELD THAT - Since in the present case during the course of original assessment proceedings, the AO had not formed any opinion in respect of receipt of share capital/share premium, it cannot be said that the reassessment proceedings are prompted by mere change of opinion. Therefore, we uphold the validity of the reassessment proceedings in view of law laid down in the case of Tech Span India Pvt. Ltd. 2018 (4) TMI 1376 - SUPREME COURT Cross objection filed by the assessee company is dismissed. Addition u/s 68 - Mere production of incorporation details, PAN Numbers, etc. receipt of money through banking channel prove the Identity and creditworthiness of investors but not the genuineness of the transaction is not established by merely contending that transaction was done through banking channel or account payee instrument. The assessee company has to discharge the onus cast upon it by demonstrating as to how the two parties are known to each other, the manner and mode by which the parties approached each other, whether transaction was entered through written agreement to protect the investment, creditworthiness, objects and purpose for which the investment was made. In the present case, these facts and information are within the exclusive knowledge of the assessee company. The fact that the assessee company received huge share capital/share premium when the Rainbow Ventures Limited is a loss making company triggered the doubts in the mind of the AO as to the genuineness of the very transaction. AO gave a finding that it is nothing but unaccounted money of the assessee company. This allegation had not been proved to be wrong by the assessee company. In the circumstances, the order of the CIT(A) is bereft of factual discussion on the above aspects. Nor the assessee company filed any evidence or material in an attempt to discharge the onus cast upon it in terms of provisions of section 68 of the Act. Therefore, the finding of the CIT(A) to the extent of deleting the addition on account of share capital/share premium from the above parties is reversed. In the absence of any material on record discharging the onus cast upon the assessee company in terms of provisions of section 68 of the Act, we are not inclined to remand the matter to the lower authorities. Accordingly, the assessment order is restored and the appeal filed by the Revenue stands allowed.

Summary

Issues Involved:
1. Validity of reassessment proceedings.
2. Addition of share capital/share premium as unexplained money under Section 68 of the Income-tax Act, 1961.

Detailed Analysis:

1. Validity of Reassessment Proceedings

The assessee challenged the validity of the reassessment proceedings initiated by the Assessing Officer (AO). The original assessment was completed under Section 143(3) of the Income-tax Act, 1961. The AO later issued a notice under Section 148, believing that income had escaped assessment due to the issuance of shares at a high premium.

The Tribunal upheld the validity of the reassessment proceedings, noting that the issue of share capital/share premium was never examined by the AO during the original assessment. Therefore, it could not be said that the reassessment was based on a mere change of opinion. The Tribunal referred to the Supreme Court's decision in ITO Vs. Tech Span India Pvt. Ltd., which states that if the original assessment order is non-speaking, cryptic, or perfunctory, it is difficult to attribute any opinion to the AO on the matter being reassessed. Thus, the reassessment proceedings were deemed valid.

2. Addition of Share Capital/Share Premium as Unexplained Money

The AO added the share capital/share premium received from Rainbow Ventures Limited and Ambit Pragma Fund Scheme as unexplained money under Section 68 of the Act. The AO found that the assessee failed to prove the identity, creditworthiness, and genuineness of the transactions.

The Commissioner of Income Tax (Appeals) [CIT(A)] deleted the addition, stating that the essential ingredients of identity, creditworthiness, and genuineness were satisfied. The CIT(A) relied on the financial statements of Rainbow Ventures Limited and the SEBI registration of Ambit Pragma Fund Scheme. However, the Tribunal found these findings to be bald and lacking in factual discussion.

The Tribunal emphasized that the mere production of incorporation details, PAN numbers, or the fact that transactions were made through banking channels does not satisfy the requirements under Section 68. The Tribunal referred to multiple judicial precedents, including the Calcutta High Court's decision in PCIT Vs. BST Infratech Ltd., which held that the assessee must demonstrate the relationship between the parties, the manner of approach, and the purpose of the investment to prove the genuineness of the transaction.

The Tribunal noted that the AO's finding that the share capital/share premium was unaccounted money of the assessee was not disproved. The CIT(A) failed to discuss how the enquiries revealed the identity, creditworthiness, and genuineness of the transactions. Therefore, the Tribunal reversed the CIT(A)'s order and restored the assessment order, allowing the Revenue's appeal.

Conclusion:

The Tribunal upheld the validity of the reassessment proceedings and allowed the Revenue's appeal, reversing the CIT(A)'s deletion of the addition of share capital/share premium as unexplained money. The cross-objection filed by the assessee was dismissed. The Tribunal emphasized the necessity for the assessee to provide cogent evidence to satisfy the requirements under Section 68 of the Income-tax Act, 1961.