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TMI Blog2024 (7) TMI 714X X X X Extracts X X X X X X X X Extracts X X X X ..... to investigate the genuineness of the impugned transactions because of sub-par business credentials, prima facie visible in the Appellant s case. Thus there is no hesitation in holding that the findings in the authorities cited supra, especially the case of BST Infratech [ 2024 (4) TMI 989 - CALCUTTA HIGH COURT] , would apply in the assessee s case and it deserves to be held that the Appellant was not able to prove the genuineness of the transaction. Applicability of the principles of the amended provisions u/s 68 of the Act would apply to the present case, since as discussed in para 27 of the BST Infratech case (supra), the said amendments merely codified the position of law as earlier expounded in various case laws. Thus, it is held that the assessee has not been able to discharge the burden of proof cast upon him by the provisions of Section 68 of the Act. Accordingly, the ground raised by the Revenue is allowed. - Sri Rajpal Yadav, Vice-President And Sri Sanjay Awasthi, Accountant Member For the Department : Subhendu Datta, CIT D/R. For the Assessee : None ORDER PER SANJAY AWASTHI, ACCOUNTANT MEMBER: This is a departmental appeal in which the action of the Commissioner of In ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... see. Case reserved for order. It is felt that no worthwhile point would be served in prolonging this matter any further and thus, this appeal is disposed off on the basis of material available on record. 1.1. In this case, assessment u/s 147/143(3) of the Income Tax Act, 1961 (in short the 'Act') dated 29.06.2010 was set aside by the ld. CIT(A) vide his order u/s 263 of the Act dated 30.03.2013 for the AY 2008-09. A perusal of the copy of order u/s 263 of the Act (supra) shows that the said order was set aside for making detailed enquiries regarding the share premium amounts shown as received by the assessee. It is seen that during the course of assessment proceedings, the ld. AO issued detailed questionnaire to elicit responses regarding the said share capital and also directed that the directors of the said company should make a personal appearance for explaining the genuineness of the transactions. It is seen that even before the AO there was no worthwhile compliance. Thereafter, the AO has recorded that the assessee raised fresh share capital by issuing 2,31,500 shares of Rs. 10/- face value with a premium of Rs. 190/-. The total capital raised amounted to Rs. 4,63,00,0 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s a clear finding in the Ld. AO s order that he required the deposition of the Directors to verify the genuineness of the impugned transactions and this was not done. Instead the assessee took shelter behind various judicial pronouncements to canvass the point that through supply of certain documents in the shape of ITRs, accounts, etc the onus was discharged as far as he was concerned. In fact the authorities mentioned in the body of this order clearly give a wide mandate to the Assessing Officer to investigate funds received as share premium in closely held Companies, as in this case. Also, there is a finding by the Ld. AO that an analysis of the details of income of the Appellant Company revealed that there was no business activity carried out during the year under consideration. This further led to the finding that no prudent investor would pay a massive premium of Rs 190 per share of a Company which had no business activity worth the name and also there was no indication of appropriate business activity which could have a bright commercial future. In this regard a portion from the order u/s 263 of the Act dated 30.03.2013 deserves to be extracted: I have gone through the asses ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... company, high share premium was not justified and addition made u/s 68 of the Act was upheld. d) In the recent case of PCIT vs. BST Infratech Ltd. reported in [2024] 161 taxmann.com 668 (Calcutta) vide order dated 23.04.2024 the Lordships of Hon'ble Calcutta High Court have held that the mere fact that transactions were through banking channels or that investor companies were income tax assessees or registered with the Registrar of Companies could in no manner be sufficient to discharge the onus u/s 68 of the Act. Considering the relevance of this case law for the matter at hand, it would be in the fitness of things to extract the relevant portions from this judgement: 26. We also take note of the Finance Bill, 2012 which brought about certain amendments to the Act with effect from the assessment year 2013-2014 wherein under the heading Measures to Prevent Generation and Circulation of Unaccounted Money it was pointed out that the onus of satisfactory explaining such credit remains on the person in whose books such sum is credited. If such person fails to offer an explanation or the explanation is found to be satisfactory (sic) then the sum is added to the total income of the p ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... in the earlier judgments of the Hon'ble Supreme Court is equally applicable to the interpretation of Section 68 of the 1961 Act. Thus, we can very well refer to the objects behind amendment to Section 68 by Finance Bill, 2012 which has taken note of various decision of the court where the courts have drawn a distinction and emphasised that in case of private placement of shares the legal regime should be different from that which is followed in the case of a company seeking share capital from the public at large. (emphasis added) . . 33. The tribunal fell in error in holding that the CIT(A) has not pointed out any doubt or discrepancy with regard to the identity of the investors. The learned tribunal has posed a wrong question which has led to a wrong answer. The question is not whether the identity of the investor has to be established but the question was whether the investor had requisite creditworthiness and whether such creditworthiness was a make belief situation by means of a circular transaction and if the same had been established. The learned tribunal has held that the findings rendered by the CIT(A) that the assets in the form of investments have been created throug ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... sting companies as well as the genuineness of the transaction. Thus, we have no hesitation to hold that the explanation offered by the assessee is neither proper, reasonable or acceptable. 36. In Swati Bajaj, the court held that based on the foundational facts the department has adopted the concept of working backward leading to the assessee. The department would be well justified in considering the surrounding circumstances, the normal human conduct of a prudent investor, the probabilities that may spill over and then arrive at a decision. 37. Thus the CIT(A) was right in adopting a logical process of reasoning considering the totality of the facts and circumstances surrounding the allegations made against the assessee taking note of the minimum and proximate facts and circumstances surrounding the events on which charges are founded so as to reach a reasonable conclusion and rightly applied the test that a reasonable/prudent man would apply to arrive at a conclusion. On facts we are convinced to hold that the assessee has not established the capacity of the investors to advance moneys for purchase of above shares at a high premium. The credit worthiness of those investors compani ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rior to the A.Y. 2013-14 was the same inasmuch as the onus to prove the share capital by a closely held company was on it. We, therefore, hold that the amendment to section 68 by insertion of proviso is clarificatory and hence retrospective. The contrary arguments advanced by the ld. AR, being devoid of any merit, are hereby jettisoned. ii) M/s. Classic Flour Food Processing Pvt. Ltd. vs. C.I.T. in ITA No. 766/KOL/2014 order dated 05/04/2017: 22. As to whether enquiry into high share premium ought to have been made by the AO and also as to what was the justification for such high premium could to be investigated by the AO at all because the 1st proviso to Sec.68 of the Act inserted by the Finance Act, 2012 w.e.f. 1-4.2013 was only prospective in operation, we are of the view that since section 68 covers `any sum credited' in the books without any exception, which, inter alia, includes share capital, it cannot be held that the examination of share capital with premium etc. was earlier outside the ambit of section 68 and now this amendment has brought it into its purview. The amendment has simply made express which was earlier implied. We are therefore of the view that the assess ..... X X X X Extracts X X X X X X X X Extracts X X X X
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