Addition cannot be made just because share premium is abnormally high as per test of human probabilities

Bharathi Cement Corporation Pvt. Ltd. Vs ACIT (ITAT Hyderabad)

Conclusion: In the matter f Issue of Share at High Premium AO should not resort to rely on circumstantial evidence or on test of human probabilities but on factual evidence of passing of benefit to the shareholders/directors. Hence ITAT remanded the matter  back to AO to re-assess whether the assessee was used as a vehicle to pass on the benefit to the shareholder / director.

FACTS –

Assessee, a company, is engaged in manufacture and sale of cement. Assessee issued 0% convertible preferential shares in private placement to 3 investors with face value of INR 10 per share at a premium of INR 1440 per share.

AO issued summons u/s 133(1) to the investors and brought on records various incidences in which the above investors have benefitted from the State Govt. policies and treated the receipts of share premium by the assessee as income u/s 28(iv).

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