Raw Pressery Private Limited Vs ACIT (ITAT Mumbai)
Conclusion: Addition made by the lower authorities to the extent of opening balance of share premium of Rs.63,32,28,987/- u/s 68 in AY 2018-19 was unjustified as share premium received in earlier years had already been examined and verified in the income-tax assessments framed u/s 143(3) and the explanation furnished by assessee had been accepted. The remaining addition to the extent of Rs.48,21,36,180/- being the share premium received from foreign investors was set aside back to the file of the AO/NFAC for de-novo assessment in respect of the credit in assessee’s book, in a fair and reasonable manner and in accordance to law.
Held: Assessee-company had filed its return of income declaring a total loss of Rs.41,85,61,758/-. Before AO, assessee had furnished a brief background of the PE investors, M/s S Capital India Investments IV and Saama Capital III Ltd along with their financial statements. Copies of the relevant Foreign Inward Remittance Certificates (‘FIRCs’) were furnished before the NFAC. AO/NFAC however did not agree with the submissions of the assessee. According to AO/NFAC, the valuation reports furnished by assessee were not reliable as the financials of the company did not justify the high valuations arrived at by the Chartered Accountant. AO/NFAC observed that the huge share premium received from foreign investors was ‘hawala’ and that provisions of the Black Money Act were applicable. Referring to the decision of the Supreme Court in the case of Pr.CIT Vs NRA Iron & Steel Pvt Ltd, AO added the closing balance of share premium of Rs.115,56,95,385/- as unexplained cash credit u/s 68. Aggrieved by the order of AO/NFAC, assessee preferred an appeal before CIT(A), NFAC. CIT(A) confirmed the addition made by AO. It was noted that during the year, the company had received share premium of Rs.52,24,66,398/- from five (5) shareholders, out of which four (4) were existing shareholders who had infused capital in earlier years as well and the remaining one (1) was a new shareholder but to her the shares were issued in discharge of her consideration for rendering of services. From the material on record, it was clearly discernible that the impugned addition of Rs.115,56,95,385/-comprised of opening balance of share premium of Rs.63,32,28,987/- brought forward from earlier years. Share premium received in earlier AYs 2016-17 & 2017-18 had already been examined and verified in the income-tax assessments framed u/s 143(3) and the explanation furnished by assessee had been accepted. Thus, the addition made by the lower authorities to the extent of Rs.63,32,28,987/- u/s 68 in AY 2018-19 was unjustified. With respect of the share premium received from three (3) foreign investor, the revenue ought not to have simply pushed the entire burden on to the assessee to provide the details and documents of foreign share holders, particularly when the CBDT empowered them to make independent enquiries from them. With these observations, the addition to the extent of Rs.48,21,36,180/- being the share premium received from foreign investors was set aside back to the file of the AO/NFAC for de-novo assessment in respect of the credit in assessee’s book, in a fair and reasonable manner and in accordance to law. As far as the share premium of Rs.4,02,44,630/- relating to Ms. Jaqualine Fernandez was concerned, AO/NFAC was directed to confine their inquiries only to the genuineness of the arrangement by enquiring as to whether the agreed consideration had indeed been subjected to Goods Service Tax [GST] and TDS, as claimed by assessee; and also the manner in which the consideration had been accounted by the assessee and the share-holder in their respective books. If the arrangement was found to be in accordance to law, then no addition shall be made on this count. AO/NFAC may make enquiries directly from the share-holder as well, but at the same time, AO/NFAC should allow sufficient opportunity of being heard to the assessee.
FULL TEXT OF THE ORDER OF ITAT MUMBAI
This is an appeal preferred by the assessee against the order of the Ld. Commissioner of Income Tax (Appeals)/(NFAC), Delhi dated 12.01.2022 for the assessment year 2018-19.
2. The main grievance of the assessee is against the action of the Ld. CIT(A) confirming of addition of Rs.115,56,95,385/- under Section 68 of the Income Tax Act, 1961 (hereinafter “the Act”).
3. The brief facts of the case are that, the assessee company had filed its return of income on 30.10.2018 declaring total loss of Rs.41,85,61,758/-. Later, the case of the assessee was selected for scrutiny under the CASS in which one of the parameters was fresh issue of share capital during the year under consideration. Before the AO[NFAC], the assessee vide submission dated 08-12-2020 had furnished the details of the shareholders to whom shares were issued along with the relevant valuation report. Vide notice dated 06-04-2021, the AO, NFAC proposed a draft assessment order, wherein it observed that merely because the assessee had filed all primary evidences regarding the investors, it could not be said that the onus stood discharged u/s 68 of the Act. The AO noted that, the losses incurred by the company had increased over the years in contradiction to the valuation reports furnished by the Chartered Accountants, and therefore according to them, the share premium charged upon issuance of shares was unreasonable. Relying on the decision of the Hon’ble Supreme Court in the case of Pr. CIT Vs NRA Iron & Steel Pvt Ltd (103 taxmann.com 48), the NFAC proposed to add back Rs.115,56,95,385/- under Section 68 of the Act. In response the assessee furnished its rebuttal/submission vide letter dated 12-04-2021. It explained that, the assessee company was a start-up promoted by Mr Anuj Raykan, with the intent to Make-in-India fresh health beverages/juices using cold-pressed technology. It was brought to the notice of the AO that this idea was supported by marquee PE investors such as Sequoia Capital, Saama Capital, DCGP Consumer Partners, who had invested with the assessee. It was also explained that the entire closing amount of Rs.115,56,95,385/- was not received in the relevant year, but it comprised of opening balance of Rs.63,32,28,987/- and fresh share premium of Rs.52,24,66,399/-received during the year. Accordingly, the opening figure of Rs.63,32,28,987/- was claimed to be not amenable to Section 68 of the Act. The details of the receipt of fresh share premium during the year, as furnished by the assessee, are as follows:
