Case Law Details
Principal CIT Vs. NRA Iron & Steel Pvt. Ltd. (Supreme Court)
Hon’ble SC held practice of conversion of unaccounted money through the cloak of share capital/premium must be subjected to careful scrutiny. This would be particularly so in the case of private placement of shares, where a higher onus is required to be placed on the assessee since the information is within the personal know of the assessee. The assessee is under a legal obligation to prove receipt of share capital/premium to the satisfaction of AO, failure of which, would justify addition.
In this unrepresented case by assessee, SC upheld addition under section. 68 for share capital and premium due to not satisfactorily explained source and genuineness and holding that a deeper scrutiny is desired in case of privately placed shares.
FULL TEXT OF THE SUPREME COURT JUDGEMENT / ORDER IS AS FOLLOWS:-
1. The present appeal arises out of the Judgement and Order dated 26.02.2018 passed by a division bench of the Delhi High Court in Income Tax Appeal No. 244 of 2018. The Revenue has challenged the judgement of the High Court by way of the present Appeal.
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The decision of the Supreme Court ,it is submitted with respect, is too harsh and ambiguous. It has opened the doors of the corruption and harassment for the assessing officers and CIT(A).The Supreme Court ought to have specifically laid down the list of documents on production of which the AO should be prohibited from making the addition.The decision requires reconsideration or clarification to prevent harassment and corruption.
Why the topic is SC upheld addition of Share Capital / premium received from Kolkata companies ?. Mumbai company also there. Pls correct the topic
In 1986-87, the Inspection Div. of the CBDT had conducted a study of the then fly-by-night investment companies, chiefly in Kolkata and Mumbai. The fact that these entities were incorporated with bogus/fake shareholders was duly established with evidence. It was also established that officers of the department were involved in accepting the returns of these dubious entities without any inquiries while the said companies were assisted by bank officials for opening fake accounts in the names of non existent/ bogus individuals merely for receiving cash for investment as share capital in the investment companies floated in hundreds during the early 1980s.
The exhaustive report of the Inspection Div. was submitted to the then Chairman of the CBDT with the recommendation that the same be circulated among all the commissioners for remedial action in the cases of all investment companies and for initiating suitable vigilance action too.
The chairman disagreed and hushed up the report.
This judgement only highlights the findings of the Inspn Div and corroborates its recommendations. This also indicates that the modus operandi of introducing unaccounted cash through bogus or non-existent entities continues unabated as ever.