Case Law Details
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.
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