2017 (10) TMI 826 - AT - Income Tax

Unexplained share capital/share premium - proof of genuine investors - Held that - It may be noted here that investor companies have confirmed making investments in assessee-company who were having sufficient net worth to make investment in assessee-company. Assessee filed I.T. returns, PAN, Bank Statements of investor Company to prove they are existing assessees of Department and are genuine parties. No efforts are made by A.O. for production of investors at assessment stage. Therefore, the assessee has been able to prove identity of the share applicants, their creditworthiness and genuineness of the transactions in the matter. CIT(A), on examination of the material on record, further found that the only reason for the Revenue to goes for further verification was the report relating to survey conducted at the premises of the assesseecompany which forms part of satisfaction recorded for reopening of the assessment proceedings. From the said report, Ld. CIT(A) found that the business premises of the assessee actually belong to M/s. Bhushan Steel Ltd., and several other Companies having their Registered Offices at the same address. This created a suspicion in the mind of the Revenue. CIT(A) therefore, rightly noted that there is no law that more than one Company cannot have its Registered Office at one address. The Companies could have change their address later on. It is also an admitted fact that source of the capital investment companies were established during their respective assessment proceedings including in the case of the present assessee-company as per the findings of the Ld. CIT(A). Ld. CIT(A) also found that no evidence was found during the course of survey to indicate introduction of unaccounted cash/funds in the form of share capital in these companies. These findings of fact recorded by the Ld. CIT(A) have not been rebutted through any evidence or material on record. No evidence has been brought on record that money so invested in assessee-company came from coffers of assessee-company. All objections of A.O. have been considered by Ld. CIT(A) and various case law referred to above support the findings of Ld. CIT(A) that addition has been correctly deleted. - Decided in favour of assessee.

Summary

Issues Involved:
1. Deletion of addition on account of unexplained share capital/share premium.
2. Reopening of the assessment under section 148 of the I.T. Act, 1961.

Issue-wise Detailed Analysis:

1. Deletion of Addition on Account of Unexplained Share Capital/Share Premium:

The Revenue challenged the deletion of ?17.60 crores added by the A.O. as unexplained share capital/share premium. The A.O. had issued a detailed questionnaire regarding the share capital and the assessee provided necessary details, including confirmations, income tax return acknowledgments, and bank accounts of the investor companies. The assessee argued that the share application money was received through normal banking channels and the identity, genuineness, and creditworthiness of the investors were established. The A.O., however, found that some companies did not respond to notices, and some addresses were incorrect, leading to the addition of ?17.60 crores.

The Ld. CIT(A) deleted the addition, noting that the assessee had filed requisite documents establishing the identity of the shareholders and the source of the money. The CIT(A) found no evidence of unaccounted cash/funds being introduced as share capital and concluded that the Revenue's suspicion was premature. The CIT(A) relied on case laws, including the Delhi High Court's decision in CIT vs. Steller Investment Ltd. and the Supreme Court's decision in CIT vs. Lovely Exports Pvt. Ltd., which held that if the share application money is received from alleged bogus shareholders, the Department is free to reopen their individual assessments but cannot assess it as the company's income.

The ITAT upheld the CIT(A)'s decision, noting that the assessee had discharged its primary onus by providing confirmations, bank statements, and PAN details of the investor companies. The Tribunal referenced its decision in ACIT vs. M/s. Adamine Construction Pvt. Ltd., where similar facts and parties were involved, and the addition was deleted. The Tribunal also cited several judgments, including CIT vs. Kamdhenu Steel & Alloys Ltd. and CIT vs. Vrindavan Farms P. Ltd., which supported the deletion of the addition when the assessee had provided adequate evidence of the identity, creditworthiness, and genuineness of the transactions.

2. Reopening of the Assessment under Section 148 of the I.T. Act, 1961:

The assessee challenged the reopening of the assessment. The A.O. had issued a notice under section 148 after recording reasons for reopening. The assessee argued that the return already filed should be treated as filed in response to the notice. The CIT(A) confirmed the reopening, noting that the issue was academic since relief was granted on merit.

The ITAT confirmed the reopening of the assessment, referencing its decision in ACIT vs. M/s. Adamine Construction Pvt. Ltd., where the reopening was upheld on similar facts. The Tribunal noted that the CIT(A) had not provided detailed reasoning for confirming the reopening since the addition was deleted on merit. The Tribunal found no reason to interfere with the reopening and dismissed the cross-objection of the assessee.

Conclusion:

The ITAT dismissed the Revenue's appeal, upholding the CIT(A)'s deletion of the ?17.60 crores addition on account of unexplained share capital/share premium. The Tribunal found that the assessee had adequately discharged its onus by providing necessary documents and evidence. The ITAT also dismissed the assessee's cross-objection, confirming the reopening of the assessment under section 148.