Issue- On the issue of share premium money and unsecured loan, the Commissioner held that the order of the Assessing Officer suffers from several defects as the Assessing Officer has not raised any question while recording the statement with respect to the credentials of the applicant companies.
The statement recorded in stereo type and no question has been asked by the Assessing Officer with respect to the capacity of companies who have given the loan to the assessee. Thus the Commissioner has questioned the justification of payment of premium of Rs. 999 on a face value of Rs. 1 per share when the assessee company does not have any credentials in the market to attract the huge premium on its preferential share. Accordingly, the commissioner held that the order passed by the Assessing Officer is erroneous and prejudicial to the interest of revenue with respect to the claim of depreciation on revival of dormant subscribers and acceptance of unsecure loans of Rs. 487.55 crores and preference share of Rs. 139.86 crores. Therefore, the Commissioner set aside the assessment order and remanded the matter back to the file of Assessing Officer for a fresh consideration after giving reasonable opportunity to the assessee of being heard.
Held by ITAT
In the case in hand, there is no dispute that the Assessing Officer called for financial details of these companies and also examine the parties in order to satisfy himself about the genuineness of the transaction. Therefore, on the basis of the record available before him, the Assessing Officer accepted the claim of the assessee. The Commissioner has not found any fault with the details and records filed by the assessee in support of the claim but has cited the reasons that the Assessing Officer has not conducted the proper enquiry. When the entire record was available with the Commissioner then he ought to have given a concluding finding that the view taken by the Assessing Officer is contrary to the law as well as facts emerging from the records. However, the Commissioner has not given any such finding and restored the matter to the record of the Assessing Officer which is not permissible as per the provisions of section 263 when the Assessing Officer has conducted the enquiry and allowed the claim of the assessee on the basis of the examination of the record as well a the parties in person. We further note that the assessee has also filed the bank statements of these companies showing the transaction of payment of share premium as well as loans to the assessee. The transactions were also reflected in the return of income filed by these companies, therefore, in any case if the department has any doubt about the genuineness of arranging the funds by these share applicant companies, the enquiry and investigation should have been conducted in those cases as held by the Hon’ble Delhi High Court in the case of Lovely Exports (299 ITR 268) which has been confirmed by the Hon’ble Supreme Court by dismissing the SLP filed by the department.
One more reasons for setting aside the assessment order in respect of the share premium is the justification of payment of huge premium in comparison to the prospective earnings of the assessee. It is pertinent to note that as per the provisions of section 68, the addition can be made if the transaction of cash credit is not properly explained by the assessee by establishing the identity of the creditor and the capacity of the creditor and genuineness of the transactions to the satisfaction of the Assessing Officer. Therefore, the justification of payment cannot be a sole ground for addition u/s 68. Though the same may be the reason for enquiry and investigation by the assessing authorities to find out the genuineness of the transactions. There is not dispute about the identity of the parties as it was also not disputed by the Commissioner, the source and capacity of these parties were prima facie established by the assessee by producing their financial statements and bank accounts etc. The Commissioner has also found from record the source of payment of share premium as the share application money and loan generated by these companies, therefore, the availability of fund was not disputed by the Commissioner but how that fund was generated by these companies is the only reason for revising the assessment order on this issue. The Commissioner himself has not given a concluding finding about the genuineness of the transactions, therefore, the enquiry of source of source is not warranted when the identity and source as well as transaction through banking channel has already been established by the assessee in view of the decision in the case of Lovely Exports. The Commissioner has also not brought out any fact or material to suggest or cast any doubt about the genuineness of the transaction, accordingly, the setting aside of the assessment order and restoring back to the file of Assessing Officer for fresh consideration is beyond the jurisdiction u/s 263.