Case Law Details
ITO Vs Anand Enterprises Ltd. (ITAT Kolkata)
The issue under consideration is whether the deleting the addition of Rs. 20,07,60,000/- made u/s 68 of the Act by CIT(A) is justified?
The brief facts of this issue is that the assessee is a public limited company engaged in the business of trading and investment in shares and securities and the assessee company was incorporated on 30.04.1981. The return of income for assessment year 2012-13 was filed by the assessee on 3 1.3.2013 declaring total income of Rs. Nil. The ld. AO in para 2 of his assessment order in page 1 observed that the details called for from the assessee were duly submitted together with the relevant information and The same were also subjected to cross verification u/s 133(6) of the Act and summons u/s 131 of the Act were also issued where ever necessary. The ld. AO observed that during the year the assessee company has raised capital by issue of shares. From the accounts of the assessee company, he observed that the assessee had made investment of Rs. 20 crores approximately in shares during the year. The primary facts involved herein are that the assessee company purchased shares of another company from some parties. The assessee company did not pay any cash consideration for making these investments in shares and instead issued shares from its company to the aforesaid shareholders in lieu of purchase consideration for investment in shares.
The ld. AO ignored the contentions of the assessee and proceeded to treat the entire receipt of share capital and share premium as ingenuine by holding the shareholders did not have sufficient creditworthiness to make investment in share capital by the assessee. The ld. AO however observed in his order that there was no receipt of cash consideration of share capital and the transaction had happened for the same only through book entries. Accordingly, the ld. AO observed that the assessee had actually introduced unaccounted money in its company through issue of bogus shares to various shareholders. He observed that the entire set of transactions entered into by the assessee shareholder, the assessee or company in which the assessee has invested, as a pre-designed set of transactions executed to introduce unaccounted money in the garb of share capital and share premium. He held that the three necessary ingredients of section 68 of the Act viz. identity of shareholder; creditworthiness of the shareholder and genuineness of the transactions are not proved in the instant case.
In view of the aforesaid observations, in the facts and circumstances of the case and respectfully following the aforesaid judicial precedents relied upon hereinabove, ITAT hold that the ld. AO had erroneously invoked the provisions of section 68 of the Act to the facts of the instant case, which, in their considered opinion, are not at all applicable herein. This is a simple case of acquiring shares of certain companies from certain shareholders without paying any cash consideration and instead the consideration was settled through issuance of shares to the respective parties. Moreover, in the balance sheet of the assessee company in the schedule to share capital, it is very clearly mentioned by way of note that the fresh share capital was raised during the year for consideration other than cash. Hence ITAT hold that provision of section 68 of the Act are not applicable in the instant case and accordingly the entire addition deserves to be deleted which has rightly been done by the ld. CIT(A) which does not require any interference. Accordingly, grounds raised by the revenue are dismissed.
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