In this case A finding has been rendered that there has been routing of money for illegal purposes through a chain of companies in which the assessee is a conduit in the layering process. The Assessing Officer has highlighted several factors before concluding that the real purpose of transfer of funds is not for the purpose of investment but is only a conduit to route the funds involved as a layering process. The Assessing Officer has pointed out that –
(i) The Director of the assessee company has been allotted shares at par around the same time that M/s. Walden Properties Pvt. Ltd., were allotted shares at a huge premium of Rs. 990 per share.
(ii) The assessee was unable to furnish a proper valuation report to justify the high premium charged.
(iii) The assessee could not substantiate the high premium, based on the manner in which such valuations are done supported by financials.
(iv) Based on the financial details of the assessee, the value of the said shares is very much less and no genuine investor would buy the shares at a hefty premium of Rs.990 per share.
(v) Several discrepancies / abnormal features were highlighted which are clear pointers to the fact that the aforesaid transaction is “made up” to camouflage the real purpose / intention.
(vi) In respect of the project for which the investor was supposed to have made the investment, even application for the same has not been made by the assessee company.
After bringing on record several facts and factors, the Assessing Officer was of the view that the genuineness of the said transaction of purchase of 5 lakh shares of the assessee company @ Rs. 1,000 per share i.e. at a premium of Rs. 990 per share by M/s. Walden Properties Pvt. Ltd. in the year under consideration has not been established. It is settled principle that the burden of proof lies with the assessee to prove the credits in its books of account are not its income, which onus, in our view has not been discharged by the assessee in the case on hand. Even before us, the assessee has not put forth any cogent reasons to controvert and repudiate any of the above findings rendered by the Assessing Officer. The arguments put forth by the assessee has been only to state and reiterate the principle that share premium cannot be assessed in the hands of the company. As we had already held, the facts of the case on hand are different from the facts and context in which the cited judicial pronouncements were rendered. The case on hand is one in which the Assessing Officer has examined the genuineness of the credits in the books of account, in continuation of earlier enquiries which established that the assessee is a conduit as part of a layering process. In view of the facts and circumstances of the case, as discussed above, we do not find any infirmity in the decision of the Assessing Officer in holding that the receipt of Rs. 49.50 Crores by the assessee as its income under the head “Income from Other Sources” and confirm the decision of the learned CIT (Appeals) in upholding the aforesaid addition of Rs. 49.50 Crores. Consequently, Ground No. 3 of the assessee’s appeal is dismissed.
2.3 The learned CIT[A[ ought to have appreciated that the reasons recorded merely showed a reason to suspect and there was no reasons to believe that income has escaped assessment.
3. Without prejudice to the above, the learned CIT[A] is not justified in sustaining the addition of a sum of Rs. 49,50,00,000/- as income from other sources under the facts and in the circumstances of the appellant’s case.
3.1 The addition made is totally opposed to law and facts of the appellant’s case and has been made in gross violation of the principles of natural Justice and consequently, the same deserves to be deleted.
3.2 The learned CIT[A] is not justified in holding that the appellant has not explained the nature of the amount received from M/s. Walden Properties Pvt. Ltd., under the facts and in the circumstances of the appellant’s case.
3.3 The learned CIT[A] ought to have appreciated that the share premium received by the appellant was not capable of being taxed being a capital receipts and the provisions of sec. 56[viib] of the Act was not applicable for the year under appeal and hence, the addition sustained by the learned CIT[A] is unjustified and the same deserves to be deleted.
4. Without prejudice to the right to seek waiver with the Hon’ble CCIT/DG, the appellant denies itself liable to be charged to interest u/s. 234-B and 234-C of the Act, which under the facts and in the circumstances of the appellant’s case and the levy deserves to be cancelled.
5. For the above and other grounds that may be urged at the time of hearing of the appeal, your appellant humbly prays that the appeal may be allowed and Justice rendered and the appellant may be awarded costs in prosecuting the appeal and also order for the refund of the institution fees as part of the costs.
4. Ground Nos. 1, 4 & 5 – These grounds being general in nature and not urged before us, since no adjudication is called for thereon, they are dismissed as infructuous.