Shivam Infra Projects Pvt. Ltd. Vs ITO (ITAT, Jaipur Bench)
Share Premium Cannot Travel Across Assessment Years at Revenue’s Convenience: ITAT Deletes ₹53.10 Lakh Addition When Department’s Own Records Proved Receipt in Earlier Year
Summary: The Jaipur Bench of the Income Tax Appellate Tribunal has held that share premium allegedly representing an accommodation entry cannot be assessed in a year in which it was admittedly not received. Since the Department’s own records established that the share premium of ₹53,10,000 was received and disclosed in the preceding assessment year, the addition made in AY 2009-10 was deleted.
The Tribunal further held that the CIT(A) ought to have decided the issue on the basis of the material already available in the Department’s records instead of setting aside the assessment to the AO merely because the original order had been passed ex parte u/s 144.
Reopening Based on Alleged Accommodation Entry
The assessee-company’s assessment for AY 2009-10 was reopened on the basis of information received from the Investigation Wing. The information originated from a pilot project undertaken by the DIT (Investigation & Criminal Investigation), Mumbai, in coordination with the Registrar of Companies and the Ministry of Corporate Affairs.
The investigation allegedly revealed that certain companies had issued shares at abnormally high premiums to inflate the cost of shares in the hands of subscribers. Thereafter, bonus shares would be issued, resulting in dilution of the value of the original shares. The subscribers would then sell the original shares and claim substantial losses against their other taxable income.
Based on the information received, the AO recorded that Shivam Infra Projects Pvt. Ltd. was one of the beneficiaries and had obtained an accommodation entry by way of share premium of ₹53,10,000 during AY 2009-10. The AO alleged that the assessee had introduced its unaccounted money in the guise of share premium.
The assessment was reopened u/s 147 by issuing notice u/s 148.
Since the assessee did not participate effectively in the assessment proceedings, the AO completed the assessment ex parte u/s 144 r.w.s. 148 and treated the entire share premium of ₹53.10 lakh as income from undisclosed sources.
CIT(A) Sends the Matter Back to the AO
Before the CIT(A), the assessee furnished detailed submissions and documentary evidence. The assessee contended that the amount of ₹53.10 lakh had not been received during AY 2009-10 at all. It had been received in the preceding year, namely AY 2008-09, and was duly reflected in the return filed for that year.
The CIT(A), however, did not adjudicate the factual and legal contention. Since the evidence and explanation had not been furnished before the AO, the CIT(A) restored the matter to the AO for fresh examination.
In doing so, the CIT(A) referred to the amendment to Section 251(1), effective from 01.10.2024, under which the appellate authority was empowered to set aside an assessment where the original assessment had been completed u/s 144.
The assessee challenged this course before the Tribunal. It argued that there was no requirement to remit the matter because the relevant fact could be verified directly from the returns and balance sheets already forming part of the Department’s records.
Income Must Be Assessed in the Correct Year
Before the Tribunal, the assessee produced copies of the complete returns of income for AY 2008-09 and AY 2009-10. It demonstrated that the amount of ₹53,10,000 was reflected in the return for AY 2008-09 under Part A-BS, relating to shareholders’ funds, reserves & surplus.
The Tribunal directed both parties to produce the assessment records and the complete returns for the two years so that the year of receipt could be conclusively ascertained.
The Departmental Representative examined the assessment records and fairly acknowledged that the assessee had disclosed the share premium amount of ₹53.10 lakh in the preceding assessment year. A written report confirming this factual position was also furnished.
Thus, the fundamental assumption underlying the reopening and addition – that the share premium was received during AY 2009-10 – stood disproved by the Department’s own records.
The Tribunal held that once it was admitted that the amount was not received during the year under appeal, there could be no question of treating it as income of that year for any reason whatsoever.
If the share premium represented taxable income at all, it could be considered only in the year in which it was received or credited. Its alleged character as an accommodation entry could not permit the Department to assess it in an assessment year to which it did not belong.
CIT(A) Should Have Deleted, Not Remanded
The Tribunal also disapproved of the CIT(A)’s decision to remit the matter to the AO.
The dispute did not require any elaborate investigation into new facts. The returns and balance sheets for both years were already part of the Department’s records. A straightforward examination of those records was sufficient to establish that the share premium was received in the preceding year.
Merely because Section 251 empowered the CIT(A) to set aside a best-judgment assessment did not mean that every ex parte assessment should automatically be remanded. The appellate authority was required to examine whether the issue could be conclusively decided on the material available.
Since the Department’s own records proved that no share premium was received during AY 2009-10, the CIT(A) ought to have deleted the addition instead of prolonging the litigation through a fresh assessment.
The Tribunal accordingly directed the AO to delete the addition of ₹53,10,000 and allowed the assessee’s appeal.
Author’s Comments
The judgment reiterates the basic but frequently overlooked principle that every receipt must be examined in the correct assessment year. Even if a transaction is suspicious, lacks commercial substance or is alleged to be an accommodation entry, it cannot be taxed in an arbitrarily selected year.
In the context of Section 68, the relevant year is ordinarily the year in which the disputed sum is found credited in the books. Suspicion about the source or genuineness of the credit does not dispense with this temporal requirement.
The case also contains an important message for appellate authorities. The power to set aside an assessment is an enabling power and not an excuse to avoid adjudication. Where undisputed departmental records conclusively resolve the controversy, another round of proceedings only increases delay and litigation.
Interestingly, although the assessee had also challenged the validity of reopening on the ground that the AO proceeded on an incorrect factual assumption, the Tribunal granted complete relief by deleting the addition on the more fundamental ground that the amount did not pertain to the relevant year.
The principle is crisp: an allegedly bogus receipt may be examined, but only in the year in which it arose; taxation cannot be shifted from one year to another merely because the information report mentioned the wrong assessment year.
FULL TEXT OF THE JUDGMENT/ORDER OF ITAT JAIPUR
The present appeal has been filed by the assessee against the order passed by the National Faceless Appeal Centre, Delhi(hereinafter referred to as “Ld. CIT(A)”), dated 31.01.2025 under Section 250 of the Income Tax Act, 1961 (hereinafter referred to as “the Act”).
2. The grounds raised read as under:-
1. The impugned addition made in the order u/s 148/144 dated 29.11.2016 and confirmed by ld. CIT(A) is bad in law and on facts of the case, for want of jurisdiction and various other reasons and hence the same kindly be deleted.
2. The very action taken u/s 148 r/w 144 is bad in law without jurisdiction and being void ab-initio, the same kindly be quashed. Consequently the impugned assessment framed u/s 144/148 dated 29.11.2016 also kindly be quashed.
3. The Id. CIT(A) in confirming the addition made by ld. AO erred in law as well as on the as facts of the case in framing the asst. u/s 144 without affording adequate and reasonable opportunity and even without complying with the mandatory statutory requirement of law. The impugned order having been passed in gross breach of principles of natural justice, kindly be quashed.
4. The Id. CIT(A) has erred in law and on the facts of the case in setting aside the matter to the AO instead of adjudicating the issue on merits, despite having all relevant facts and materials on record, thereby causing undue delay and prolonging the litigation.
5. Rs.53,10,000/-: The Id. AO erred in law as well as on the facts of the case in making addition of Rs.53, 10,000/- on account of the alleged unexplained Share Premium. The addition so made and confirmed by the Id. AO, is contrary to the provisions of law and facts of the case hence, the same kindly be deleted in full.
6. The ld. AO further erred in law as well as on the facts of the case in charging interest u/s 234B of the Act. The appellant totally denies its liability of charging such interest. The interest so charged, being contrary to the provisions of law and facts, kindly be deleted in full.
7. The appellant prays your honourindulgences to add, amend or alter of or any of the grounds of the appeal on or before the date of hearing
3. The issue raised in the impugned appeal relates to the addition made to the income of the assessee of Rs.53,10,000/- being share premium treated as an accommodation entry for routing in own money /income of the assessee.
4. The case of the assessee was reopened on the basis of information available with the AO that the assessee had availed accommodation entry by way of share premium of Rs.53,10,000/- in the impugned year. The reasons for reopening the case of the assessee are reproduced at page 1 and 2 of the assessment order as under:-
…….
“During the investigation proceedings of Pilot Project for the F.Y. 2008-09, by the DIT(I&CI), Mumbai co-ordination with ROC and Ministry of Corporate Affairs, it is observed that few companies who have issued shares at unreasonable premium to inflate the cost of shares in the hands of subscriber substantially with a motive to avoid tax. After issuing share at premium, the company generally issued bonus shares resulting the cost of original shares remained very high only on paper because market value of original shares proportionately got diluted. The cost of bonus share was, as per IT Law taken at Rs. NIL. After getting bonus shares, the subscriber of shares sold his original shares (which were very small in number) and incurred loss. The quantum of such loss was generally substantial because premium at the time ofsubscribing original shares was very high. He claimed set off of losses against other income. It is further observed that there cannot be any addition in respect of share premium so long as the source of fund is explained in the hands of share holders.
As per information received it is seen that M/s. Shivam Infraprojects Private Ltd. 206, Royal World, S. C. Road, Jaipur is one of the beneficiary and has obtained accommodation share premium entry amounting to Rs. 53,10,000/- in the A.Y. 2009-10. The assessee has introduced its unaccounted cash in the form of share premium. Thus in lieu of the information in my possession, I have reasons to believe that income Rs.53,10,000/- has escaped assessment within the meaning of section 147 of the Act. Hence, it is a fit case for issue of notice u/s 148 of the Act.
…….
5. Due to non-cooperation of the assessee in the assessment proceedings, the entire amount of share premium was added to the income of the assessee as income from undisclosed source.
6. The matter was carried in appeal before the Ld. CIT(A) where the assessee filed detailed submissions and explanations. The Ld. CIT(A) noted that since the explanations were not made before the AO therefore he set aside the matter to the file of the AO for consideration of the evidence furnished by the assessee. He referred to the provisions of Section 251(1) of the Act pointing out that w.e.f. 01.10.2024 the Ld. CIT(A) had power to set aside the assessment where the original assessment was completed u/s 144 of the Act.
7. The ld. Counsel for the assessee is aggrieved with the said order of the Ld. CIT(A). He has contended before us, that there was no reason at all for the matter to be set aside to the file of the AO since it was sufficiently demonstrated before the Ld. CIT(A) that the impugned amount of Rs.53,10,000/- received by the assessee by way of share premium was not received in the impugned year but was received in the preceding year. That it was pointed out that these facts were available on the record of the Department itself wherein in the return of income filed for the preceding year, the assessee had disclosed the fact of receiving share premium of Rs.53,10,000/- in the preceding year. There was no question therefore of any evidence and explanation furnished by the assessee before the Ld. CIT(A) needing verification at the end of the AO, since the facts emanate from the records of the department itself. All these pleadings were made by the ld. Counsel for the assessee when the matter came up for hearing before us on the 04.08.2026.
8. Noting the pleadings of the assessee both the parties were directed to produce copies of complete ITR filed by the assessee both for the impugned assessment year before us i.e. AY 2009-10 and for preceding year ,so as to establish the fact of the year in which the share premium was received by the assessee. A detailed order sheet entry noting the contentions of the assessee and our directions as aforestated, was made, the contents of which are reproduced hereunder:-
The assessee has challenged the validity of the assessment framed u/s 147 of the Act on the ground that the order was passed without valid jurisdiction. His contention was that, the AO had not applied his mind on the facts relating to the escapement of income of the assessee for the impugned year while recording reopening the case of the assessee. He contended that the AO had noted the assessee to have received share premium of Rs.53,10,000/-during the impugned year which allegedly were bogus/accommodated entity, but the fact of the matter was that, the impugned shared premium was received by the assessee in the preceding year and not in the impugned assessment year. The Id. Counsel for the assessee pleaded that, he had raised this argument before the Ld. CIT(A), who noting that the order passed by the AO was ex parte, had restored the matter back to the AO for adjudication afresh. He pleaded that he had filed the copies of balance sheets of the assessee for both the impugned year and the preceding year to evidence the fact of receipt of share premium of Rs.53,10,000/-during the preceding year and not in the impugned year as also the Return of Allotment filed to ROC in the preceding year including his claim
The Ld. DR however, stated that all these documents were unverified and therefore could not be relied upon to decide the legal issue raised before us, and the matter had therefore rightly being restored back by the Ld. CIT (A) to the AO.
At this juncture, the ld. Counsel for the assessee pointed out that the balance sheet of the assessee both for the impugned year and preceding year were part of record to the Department and would easily substantiate his claim of share premium having been received in preceding year, that the said balance sheet formed part of return filed by the assessee for both the years. In lieu of the same, both the parties are directed to produce before us, complete ITR filed by the assessee both for the impugned assessment year 1.e. AY 2009-10 and for the preceding assessment year i.e. AY 2008-09, so as to establish the fact of year in which receipt of share premium was received by the assessee. The case is accordingly. adjourned to 24.08.2026, to be kept as part-heard.
Sd/-
Kuldip Singh
(Judicial Member)
Sd/-
Annapurna Gupta
(Accountant Member)
9. Today when the matter came up for hearing the ld. Counsel for the assessee filed a copy of ITR of the assessee for both the preceding assessment year i.e. AY 2008-09 and for impugned assessment year i.e. AY 2009-10 and demonstrated therefrom that the ITR for the preceding year AY 2008-09 clearly disclosed the fact of the assessee having received share premium of Rs.53,10,000/- in its ITR for the said preceding year. The same was demonstrated before us to have been reflected in part A-BS of the ITR under the head “Share holders Funds/Reserves and Surplus” disclosing the “General Reserve” of Rs.53,10,000/-.
10. Ld. DR produced before us the copy of the assessment records of the assessee for the impugned year, and the preceding year and on verification of the records he orally submitted before us that the assessee had disclosed the share premium amount of Rs.53,10,000/- to have been received in the preceding year. A report in this regard was filed by the Ld. DR also in writing.
11. Considering the above fact since the share premium amount of Rs.53,10,000/- admittedly has not been received by the assessee in the impugned year there arises no question of treating the same as income of the assessee in the impugned year for any reason at all. If at all ,the same tantamounts to income of the assessee in the year receipt. For this reason alone we concur with the ld. Counsel for the assessee that the ld. CIT(A) ought to have deleted the addition made in the hands of the assessee and not set aside the matter to the file of the AO.
12. We accordingly direct the AO to delete the addition of Rs.53,10,000/- made in the hands of the assessee.
13. In effect, the appeal of the assessee stands allowed.
Order pronounced in the Open Court on 15.09.2026
