2021 (7) TMI 732 - AT - Income Tax

Addition on account of share application and share premium money u/s 68 - assessee has received share application and share premium money from eleven investor companies - HELD THAT - We find that all money either on account of share application or share premium has been received during the financial year 2007-08, relevant to AY 2008-09. We further find that despite bringing this fact in the notice of lower authorities, the lower authorities treated this amount as unexplained cash credit and made the addition in the financial year 2008-09. Since no money either on account of share application or share premium is received in the current financial year, therefore the amount cannot be taxed in the financial year 2008-09 i.e,. relevant to AY 2009-10. We find that on similar set of facts and on similar contention the co-ordinate of this Tribunal in DCIT vs. Brijwasi Developers 2017 (5) TMI 1741 - ITAT SURAT upheld the order of Ld. CIT(A) holding that the no amount can be taxed when no such amount were received during the current financial year. Further the Hon ble Bombay High Court in Ivan Singh Vs ACIT 2020 (2) TMI 850 - BOMBAY HIGH COURT also held that when the credit in the account of the assessee was found in the books of account, so credit can be charged to the income of the assessee in that previous year and the said credit cannot be brought to tax in subsequent assessment year. Considering the aforesaid factual and legal discussions and respectfully following the order of Hon'ble High Court and coordinate bench of Tribunal, no addition can be made during the A.Y. 2009-10. The case laws relied by Ld. DR for the revenue is not helpful to the department as all the case laws relates the validity of reopening on the basis of information from investigation wing of the department. On the contrary, we held that the share application money and premium was not received in the current financial year, which is the subject matter under appeal. Therefore, the assessee succeed. Considering the fact that no addition on account of share application and share premium is sustainable in the year under consideration. Therefore, the addition on account of alleged commission payment is also not sustainable. - Decided in favour of assessee.

Summary

Issues Involved:
1. Validity of reopening assessment under section 147 by issuing notice under section 148 of the IT Act, 1961.
2. Addition of ?1,05,00,000 under section 68 of the IT Act.
3. Addition of ?1,05,000 under section 69C of the IT Act.

Detailed Analysis:

1. Validity of Reopening Assessment:

The assessee contested the reopening of the assessment under section 147, arguing that there was no tangible material to form the belief that income had escaped assessment. The reopening was based on information received from the Director of Income Tax (Intelligence & Criminal Investigation), Ahmedabad, which indicated that the assessee received an unreasonable premium as per details from the Registrar of Companies (ROC). The assessee argued that this information was vague, irrelevant, and not definite, and that the assessment cannot be reopened merely on suspicion. The Tribunal noted that the Assessing Officer (AO) had not conducted an independent inquiry and had proceeded on borrowed satisfaction without tangible material. The Tribunal cited several case laws to support its conclusion that the reopening was not valid.

2. Addition under Section 68:

The AO added ?1,05,00,000 under section 68 of the IT Act, treating the share capital and premium received by the assessee as unexplained cash credits. The AO issued notices under section 133(6) to the investors, some of which were returned unserved, and no responses were received from others. Physical inquiries revealed that the companies did not exist at the given addresses. The AO relied on statements from directors of some investor companies, who allegedly stated that they were engaged in providing accommodation entries. The assessee provided documentary evidence, including share applications, bank statements, PANs, and certificates of incorporation, to prove the identity, creditworthiness, and genuineness of the transactions. The Tribunal found that the share application and premium money were received in the previous financial year (2007-08) and not in the year under consideration (2008-09). Therefore, the addition under section 68 was not sustainable for the assessment year 2009-10.

3. Addition under Section 69C:

The AO also added ?1,05,000 under section 69C, presuming that the assessee paid a 1% commission to the investor companies for accommodation entries. The Tribunal noted that there was no evidence on record to support this presumption, and the addition was based purely on assumptions. Consequently, the addition under section 69C was also not sustainable.

Conclusion:

The Tribunal allowed the appeal of the assessee, holding that no addition on account of share application and share premium money could be made in the assessment year 2009-10, as the amounts were received in the previous financial year. The Tribunal also deleted the addition under section 69C, as it was not based on any evidence. The Tribunal did not find it necessary to adjudicate on the validity of the reopening, as the primary additions were deleted on merit.