Case Law Details
ITO Vs Bhagwat Marcom Pvt. Ltd. (ITAT Kolkata)
The issue under consideration is whether the addition u/s 68 on account of share capital and share premium by treating the same as unexplained cash credit is justified in law?
The assessee in the present case is a company which is engaged in the business of investment and trading of shares and securities. During the year under consideration, the company issued shares at premium to certain companies in lieu of shares held by those companies.
AO issued notices under section 131 to the directors of share applicant companies requiring them to appear personally along with relevant details and documents to justify investment made in assessee-company, however, none appeared before AO in response thereto. Accoringly, AO treated share application amount as unexplained credit under section 68.
The shares were issued by the assessee company during the year under consideration at premium to certain companies in lieu of the shares held by the said companies and there was thus no inflow of cash involved in these transactions. The said transactions were entered into in the books of account of the assessee company by way of journal entries and it did not involve any credit to the cash amount. Hence ITAT stated that when the cash did not pass at any stage and since the respective parties did not receive cash nor did pay any cash, there was no real credit of cash in the cash book and the question of inclusion of the amount of the entry as unexplained cash credit could not arise.
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