Case Law Details

Case Name : CIT Vs Anshika Consultants Pvt. Ltd. (High Court of Delhi)
Appeal Number : ITA Appeal No. 467/2014
Date of Judgement/Order : 16/04/2015
Related Assessment Year : 2006-07
Courts : All High Courts (4258) Delhi High Court (1296)

Addition u/s 68 merely for reason of higher premium claimed is not valid if assessee has proved its onus of creditworthiness and genuineness of transaction

Brief facts of the Case

The assessee in the instant case issued shares at a premium ranging from Rs.24000-39000 to some applicant companies. During the assessment proceedings, AO sought details of such applicants which in turn was provided by the assessee in the form of their bank account statements, the Memorandum and Articles of Association, Income Tax Return, Balance Sheets, PAN details etc. However, the notices issued by the AO to concerned share applicant companies u/s 133(6) were returned un-served. After considering the submissions and materials placed on the record, AO added back the sum of Rs.12,78,60,000/- u/s 68 of the Income Tax Act, 1961 which was set aside concurrently by the CIT(A) and the ITAT. Aggrieved revenue filed the appeal before the Hon’ble High Court.

Contention of the Revenue

The AO had relied on the inquiry of the Inspector that the concerned companies were not found existing on the given addresses.

Contention of the Assessee

It was contended that all necessary documents to establish the identity of the share applicants, their creditworthiness and genuineness of the transaction had been placed on record. In these circumstances, the AO could not have on the basis of suspicion fueled by the higher premium claimed by the assessee and the lack of response of the notices issued, added back the amounts to the assessee’s income.

Held by High Court

Hon’ble High Court relied on the below mentioned findings and decisions recorded by ld. CIT(A) and ITAT wherein it was held:-

  • That the assessee had received share capital from 3 companies who are regularly assessed to tax,
  • That the companies have submitted the copies of the share application forms, the minutes of the Board’s resolution authorizing the companies to make the application for shares, copy of certificate of incorporation, copy of PAN etc.
  • That these companies are regularly doing the business and filing their tax returns on regular basis. The taxes are paid by them on the income so earned by them.
  • That the Principal Officers from the companies attended before the ADIT, Investigation in Kolkata and submitted that the investment in the appellant company has been made from the realisation of sale of earlier investments held by the companies.
  • That the investigation report made available to the revenue authorities by the investigation wing of the Kolkata Income Tax Department transpires the sources of investments made by the applicant companies was out of sale of stock-in-trade, sale of investment, receipt from sundry debtors and the amount received from loan debtors outstanding as on 31.03.2005.
  • That the balance sheets of the investors showed that the share applicants were possessed of considerable means and had been existing for a long period of time prior to the transaction in question.
  • That the learned counsel for the assessee has placed on record the details of shareholding pattern as on 31.3.2013, which reveals that these companies are still keeping the shares of the assessee.
  • That the search had been conducted at the premises of the assessee u/s 132 of the Act and no incriminating documents or other assets were found or seized to indicate that the assessee had in fact routed its own money through these companies.

Whether the assessee company charged a higher premium or not, should not have been the subject matter of the enquiry in the first instance Instead, the issue was whether the amount invested by the share applicants were from legitimate sources. Therefore, the emphasis is on genuineness of all the three aspects, identity, creditworthiness and the transaction. In the light of observations of the Hon’ble Supreme Court in the case of CIT Vs. Lovely Exports (P) Ltd. reported in 216 CTR 295, the onus on the appellant has been duly discharged.

For the above reasons, the Court opined that the concurrent findings of fact, as to the true identity of the share applicants, their creditworthiness and genuineness of the transaction, are based on sound reasoning and do not call for interference. No substantial question of law arises. The appeals of revenue dismissed.

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