Search Results For: bogus share premium


Baba Bhootnath Trade & Commerce Ltd vs. ITO (ITAT Kolkata)

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DATE: April 5, 2019 (Date of pronouncement)
DATE: April 10, 2019 (Date of publication)
AY: 2012-13
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CITATION:
S. 68 Bogus Share Capital: The judgement in PCIT vs. NRA Iron & Steel 103 TM.com 48 (SC) is distinguishable on facts & does not apply to a case where the assessee has discharged its onus to prove the identity, creditworthiness and genuineness of the share applicants by producing the PAN details, bank account statements, audited financial statements and Income Tax acknowledgments and the investors have shown the source of source & personally appeared before the AO in response to s. 131 summons

The ld DR placed reliance on the recent decision of the Hon’ble Apex Court in the case of Principal CIT vs. NRA Iron & Steel (P) Ltd reported in 103 taxmann.com 48 (SC) wherein the decision on addition made towards cash credit was rendered in favour of the revenue. We have gone through the said judgement and we find in that case, the ld AO had made extensive enquiries and from that he had found that some of the investor companies were non-existent which is not the case before us. Certain investor companies did not produce their bank statements proving the source for making investments in assessee company, which is not the case before us. Source of funds were never established by the investor companies in the case before the Hon’ble Apex Court, whereas in the instant case, the entire details of source of source were duly furnished by all the respective share subscribing companies before the ld AO in response to summons u/s 131 of the Act by complying with the personal appearance of directors

PCIT vs. Chain House International (P) Ltd (Supreme Court)

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DATE: February 18, 2019 (Date of pronouncement)
DATE: April 9, 2019 (Date of publication)
AY: 2012-13
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S. 68 Bogus Share Premium: No reason to interfere. SLP dismissed. High Court held there is no limitation on the amount of premium that can be charged. The AO cannot question the transaction merely because he thinks the investor could have managed by paying a lesser amount as share premium. It is the prerogative of the Board of Directors to decide the premium and it is the wisdom of the shareholder whether they want to subscribe to shares at such a premium or not. S. 68 does not apply as the funds were received through banking channels and the identity, creditworthiness and genuineness of the investors was established

Issuing the share at a premium was a commercial decision. It is the prerogative of the Board of Directors of a company to decide the premium amount and it is the wisdom of shareholder whether they want to subscribe the shares at such a premium or not. This was a mutual decision between both the companies. In day to day market, unless and until, the rates is fixed by any Govt. Authority or unless there is any restriction on the amount of share premium under any law, the price of the shares is decided on the mutual understanding of the parties concerned. Once the genuineness, creditworthiness and identity are established, the revenue should not justifiably claim to put itself in the armchair of a businessman or in the position of the Board of Directors and assume the role of ascertaining how much is a reasonable premium having regard to the circumstances of the case

PCIT vs. Aditya Birla Telecom Ltd (Bombay High Court)

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DATE: March 26, 2019 (Date of pronouncement)
DATE: March 29, 2019 (Date of publication)
AY: -
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S. 68 Bogus Share Capital: Merely because the investment was considerably large and several corporate structures were either created or came into play in routing the investment in the assessee through a Mauritius entity would not be sufficient to brand the transaction as colourable device. The assessee cannot be asked to prove the source of source (PCIT Vs. NRA Iron & Steel 103 TM.com 48 (SC) referred)

As is well known in the context of Section 68 of the Act, the basic duty would be on the assessee to establish the genuineness of the transaction, credit worthiness of the investor and the source of funds. Equally well settled principle through series of judgments is that the Department cannot insist on the assessee establishing source of the source.

NuPower Renewables Pvt. Ltd vs. ACIT (Bombay High Court)

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DATE: March 7, 2019 (Date of pronouncement)
DATE: March 16, 2019 (Date of publication)
AY: 2011-12
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S. 147 Reopening of Bogus share capital: Though the reopening is based on information supplied by the investigation wing, the reasons do not specify that the investment was non-genuine. The AO cannot reopen to investigate into the source of genuineness and creditworthiness of the investors as it falls within the realm of fishing enquiries which is wholly impermissible in law

The reasons do not specify that the information supplied to the Assessing Officer by the Investigation Wing, suggested that such investment was nonĀ­ genuine. In this context, Assessing Officer refers to the requirement of verifying the genuineness of investor and requirement of further investigation. These observations would not further the case of the Revenue, these being no information with the Assessing Officer, prima facie, indicating that the investments were not genuine. The investigation into the source of genuineness and creditworthiness of the investor company would fall within the relam of fishing enquiries, which is wholly impermissible in law in the context of the reĀ­opening of the assessment

ITO vs. Synergy Finlease Pvt. Ltd (ITAT Delhi)

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DATE: March 8, 2019 (Date of pronouncement)
DATE: March 15, 2019 (Date of publication)
AY: 2006-07
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CITATION:
S. 68 Bogus Share Capital: Merely presenting of documents & making payment through bank or appearance by director before the AO & admitting fact of share application made is in itself not sufficient to justify the genuineness of the transaction. It is against human probability that anyone will invest and pay share premium in a company without net worth or future prospectus. All applicants with common address are being controlled remotely by one person. These applicants are all paper companies not having sufficient worth and created for providing entries of share application money or share capital or loans by way of accommodation entries (NDR Promoter 410 ITR 379 (Del) & NRA Iron & Steel 103 TM.com 48 (SC) followed)

It is against the human probability that anyone will invest and pay share premium of Rs. 50/- per share without having any net worth of the company or any future prospectus of earning by the company. The current directors have not been able to justify, why the shares were purchased at high premium, without corresponding valuation of the company, which was having meagre income. It is impossible that directors of these nine companies are having either of the two addresses of the Paharganj area of New Delhi. In normal circumstances it is not possible until unless all these companies are being controlled remotely by one person. All the circumstances manifests that these are all paper companies not having sufficient worth and created for providing entries of share application money or share capital or loans by way of accommodation entries

PCIT vs. NRA Iron & Steel Pvt. Ltd (Supreme Court)

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DATE: March 5, 2019 (Date of pronouncement)
DATE: March 6, 2019 (Date of publication)
AY: 2009-10
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CITATION:
S. 68 Bogus share capital/ premium: The practice of conversion of un-accounted money through cloak of Share Capital/Premium must be subjected to careful scrutiny especially in private placement of shares. Filing primary evidence is not sufficient. The onus to establish credit worthiness of the investor companies is on the assessee. The Assessee is under legal obligation to prove the receipt of share capital/premium to the satisfaction of the AO, failure of which, would justify addition of the said amount to the income of the Assessee

The practice of conversion of un-accounted money through the cloak of Share Capital/Premium must be subjected to careful scrutiny. This would be particularly so in the case of private placement of shares, where a higher onus is required to be placed on the Assessee since the information is within the personal knowledge of the Assessee. The Assessee is under a legal obligation to prove the receipt of share capital/premium to the satisfaction of the AO, failure of which, would justify addition of the said amount to the income of the Assessee.

ITO vs. Yadu Steels & Power Pvt. Ltd (ITAT Delhi)

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DATE: February 12, 2019 (Date of pronouncement)
DATE: February 14, 2019 (Date of publication)
AY: 2009-10
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CITATION:
S. 68 Bogus share capital: In the case of a private company, Onus is on assessee to prove identity, creditworthiness of subscribers and most importantly genuineness of transactions. Even if AO does not make inquiry, CIT(A) should do so. Relief cannot be given merely on basis of Ration Card, Share Application forms, Voter ID etc of the subscribers

Under Section 68 onus is upon assessee to prove three ingredients, i.e., identity and creditworthiness of credit entries. As to how onus can be discharged would depend on facts and circumstances of each case. It is expected of both sides – assessee and Ld.AO, to adopt reasonable approach. Assessee before us is a private limited company. It cannot issue shares in manner in which a public limited company does. It generally depend on persons known to its directors or shareholders directly or indirectly to buy its shares. Once monies are received and shares are issued, it is not as if share-subscribers and assessee lose touch with each other and become incommunicado. Onus thus is upon assessee to prove identity, creditworthiness of subscribers and most importantly genuineness of transactions under section 68

PCIT vs. NDR Promoters Pvt. Ltd (Delhi High Court)

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DATE: January 17, 2019 (Date of pronouncement)
DATE: February 9, 2019 (Date of publication)
AY: 2008-09
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CITATION:
S. 68 Bogus share capital in form of accommodation entries: The transactions are clearly sham and make-believe with excellent paper work to camouflage their bogus nature. The reasoning is contrary to human probabilities. In the normal course of conduct, no one will make investment of such huge amounts without being concerned about the return and safety of such investment. The Tribunal's order is clearly superficial and adopts a perfunctory approach and ignores evidence and material referred to in the assessment order

The transactions in question were clearly sham and make-believe with excellent paper work to camouflage their bogus nature. Accordingly, the order passed by the Tribunal is clearly superficial and adopts a perfunctory approach and ignores evidence and material referred to in the assessment order. The reasoning given is contrary to human probabilities, for in the normal course of conduct, no one will make investment of such huge amounts without being concerned about the return and safety of such investment

DCIT vs. Kargwal Products P. Ltd (ITAT Mumbai)

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DATE: September 26, 2018 (Date of pronouncement)
DATE: January 29, 2019 (Date of publication)
AY: 2009-10
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CITATION:
S. 147 Reopening for taxing Bogus share capital: Even in a s. 143(1) intimation, the AO is not entitled to reopen on the ground that the assessee has received "huge share premium" which was not "examined" by the AO. The AO cannot reopen in the absence of tangible material that shows income has escaped assessment

The assessment was processed under section 143(1). The assessment was reopened on 29.03.2014 without four year from the end of relevant Assessment Year. We have noted that the Assessing Officer nowhere mentioned in the reasons recorded that any tangible material either from assessment record or from other source has come in the notice of Assessing Officer for his reason to believe that any income has escape assessment. Therefore, the basic requirement of reopening of the assessee i.e. reason to believe was not fulfilled at the time of recording the reasons of reopening

Bharathi Cement Corporation Pvt Ltd vs. ACIT (ITAT Hyderabad)

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DATE: August 10, 2018 (Date of pronouncement)
DATE: January 17, 2019 (Date of publication)
AY: 2009-10, 2010-11
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CITATION:
S. 28(iv) /68: Bogus share premium: The fact that the premium is abnormally high as per test of human probabilities is not sufficient. The AO has to lift the corporate veil & determine whether any benefit is passed on to the shareholders/directors. Directions issued to AO to establish whether assessee company was used as a vehicle to pass on the benefit to shareholders/directors

We also cannot presume or apply test of human probabilities, we are dealing with the business transaction, it has to be based on cogent material. Considering the whole situation, in our considered view, the AO/CIT(A) have restricted themselves by stopping the investigation based on circumstantial evidence and applying test of human probabilities. In order to lift the corporate veil for the purpose of determining whether any benefit is passed on to the shareholders/directors, they have to bring on record proper evidence/cogent material

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