PCIT Central-1 Vs Wise Investment Private Limited (Calcutta High Court)
Calcutta High Court held that addition u/s. 68 of the Income Tax Act towards bogus share capital and share premium duly deleted by CIT(A) since identity and creditworthiness of the share subscribers alongwith genuineness of transactions duly proved.
Facts- In the opinion of AO, the share premium as fixed by the assessee was abnormally high and considering the financial strength of the assessee company, the genuineness of the share transaction, identity and creditworthiness has not been established and therefore it justified addition u/s. 68 of the Act.
CIT(A) allowed the appeal of the assessee and held that the assessee was able to discharge the onus of providing the identity, creditworthiness and genuineness of the share capital and therefore the premium received for the same set of share subscribers cannot be treated as unexplained u/s. 68. Being aggrieved, revenue has preferred the present appeal.
Conclusion- Held that the CIT(A) has observed that the assessing officer himself has stated that the investment take place on personal one to one contact and persuasion but did not analyze the meaning and implication of the observation by applying them to the fact and circumstances of the case. Thus, after considering the facts the CIT(A) has come to the conclusion that the assessing officer has not doubted the identity and creditworthiness of the share subscribers but has doubted the payment of high share premium. On this aspect the CIT(A) has noted the growth of the assessee company which was reported to be at 39% and the assessee was also carrying impressive inventories of quoted equity shares for company in such stages of its operation. The assessee had inventories of Rs. 8.38 crores as on 31.03.2011 and 9.36 crores as on 31.03.2012. The audited result of the assessee has shown its profits grown by over three times between assessment years 2011-2012 and the assessment year 2012-2013. Further during the same period, the earning per share of the assessee company had grown from two and half times to 16% per share of Rs. 10 and therefore the CIT(A) on facts held that the assessee company was showing good returns and were showing good profits for its investors and it is a growing company. Therefore, the submission of the revenue that the allegation that unduly high premium was charged was not examined by the CIT(A) is incorrect. In fact, this aspect was also examined by the assessing officer to certain extent as pointed out by the CIT(A). When the matter travelled on appeal to the learned tribunal at the instance of the revenue, the factual aspects were re-examined. The tribunal notes that the paper book containing 1029 pages were filed and all documents were placed before the learned tribunal and after noting the facts the learned tribunal came to the conclusion that the CIT(A) was well justified in deleting the addition made under Section 68 of the Act.
