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DATE: May 11, 2018 (Date of pronouncement)
DATE: May 15, 2018 (Date of publication)
AY: 2012-13
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CITATION:
S. 68 Bogus share capital: The assessee has to justify the allottment of shares to outsiders at exorbitant premium with cogent material and not bald statements. The fact that s. 56(2)(viib) r.w.s. 2(24)(xvi) comes into effect from AY 2013-14 does not mean that for earlier years the assessee is not required to justify the identity, genuineness and creditworthiness of the transaction. The burden is very high for closely held companies. Mere submission of name & address, Balance Sheet & bank statement of the subscribers is not sufficient to discharge the onus (all judgements on the point considered)

The assessee did not rely on its own financial statements, business model and financial indicators as are existing in its audited financial statements to justify charging of huge share premium of Rs. 490 per share as against face value of Rs. 10 per share from these new shareholders. The problem got further aggravated when the assessee does not bring on record project report or any other cogent material justifying issue of shares at huge premium which could reflects viability, higher profitability and bright future prospects of the assessee company by implementing project for which funds were raised at huge share premium to justify chargeability of such a huge share premium. The assessee’s claim in statement of fact/written submissions as to justification of share premium / valuation etc are not substantiated through any cogent evidences on record and are merely bald statements which cannot be relied upon in the absence of cogent material/evidences brought on record by the assessee. The assessee raised funds to the tune of Rs. 300 lacs from these new shareholders and it was for the assessee to have brought on record cogent material to substantiate its contentions and if the evidences are withheld by the assessee then it is at assessee’s own peril as presumption will be drawn against the assessee.

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DATE: April 17, 2018 (Date of pronouncement)
DATE: April 21, 2018 (Date of publication)
AY: 2010-11
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CITATION:
S. 68 Bogus loans: The assessee is not required to explain the "source of source" prior to insertion of the proviso to s. 68. If the assessee has discharged the primary onus placed upon it u/s 68 by filing confirmation letters, the Affidavits, the full address and pan numbers of the creditors, the Revenue has to proceed against the persons whose source of funds are alleged to be not genuine

The proviso to Section 68 of the Act has been introduced by the Finance Act, 2012 w.e.f. 1st April, 2013 and therefore it would be effective only from Assessment Year 2013-14 onwards and not for the earlier assessment years. Where the Revenue urges that the money has been received from bogus shareholders then it is for the Revenue to proceed against them in accordance with law. This would not entitle the Revenue to invoke Section 68 of the Act while assessing the respondent for not explaining the source of its source.

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DATE: March 28, 2018 (Date of pronouncement)
DATE: March 31, 2018 (Date of publication)
AY: 2006-07
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CITATION:
S. 68 Bogus share capital: The assessee set up a devise to introduce unaccounted money through various shell companies in the form of share capital at a premium. The manner of issue of the shares through these companies, the manner of providing confirmation on the letter pad, the manner of maintaining the annual accounts and the manner of submitting the bank accounts on the letter pad or on a computerized print out to give it a semblance of originality to defraud the revenue shows the whole picture how the accommodation entries are routed through shell companies as share capital to evade taxes

The whole exercise carried out by the assessee is simply a devise to introduce unaccounted money through various shell companies in the form of share capital at a premium. The manner of issue of the shares through these companies, the manner of providing confirmation on the letter pad, the manner of maintaining the annual accounts and the manner of submitting the bank accounts on the letter pad or on a computerized print out to give it a semblance of originality to defraud the revenue, proves much more than what is under challenge before us. It shows the whole picture how the accommodation entries are routed through shell companies as share capital to evade the taxes. The whole façade created by assessee shows the real purpose of introducing the unaccounted money of the assessee without payment of taxes

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DATE: February 28, 2018 (Date of pronouncement)
DATE: March 26, 2018 (Date of publication)
AY: 2010-11
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CITATION:
S. 68 Bogus share capital: The fact that a pvt. ltd co issued shares at an exorbitant premium is irrelevant if the assessee has proved the genuineness of the transaction. If the assessee has furnished necessary evidence to prove the identity of the share applicants and their PAN details, the department is free to proceed to reopen the individual assessments of the share applicants but it cannot be regarded as undisclosed income of the assessee

As regards the AOs observation with regard to the issue of shares at a face value of Rs.10/- issued at a premium of Rs.990 per share, we find that there is no merit in the findings of the AO for the reason that the issue of shares at a premium and subscription to such shares is within the knowledge of the company and the subscribers to the share application money and the AO does not have any role to play as long as the assessee has proved genuineness of transactions

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DATE: March 19, 2018 (Date of pronouncement)
DATE: March 24, 2018 (Date of publication)
AY: 2014-15
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CITATION:
Bogus Capital gains from penny stocks: Capital gains from penny stocks cannot be assessed as unexplained cash credit u/s 68 if the assessee has produced documentary evidence to prove the source, identity and genuineness of the transaction and the AO has not found any fault with it. The fact that the investigation dept has alleged that there is a modus operandi of bogus LTCG scheme is not relevant if the same is not substantiated

I further note that the addition in dispute made by the AO and upheld by the Ld. CIT(A) u/s 68 as unexplained credit instead of long term capital gain as claimed by the assessee, however, the source, identity and genuineness of the transaction having been established by documentary evidences and there is no case for making addition u/s 68 of the Act, hence, the same deserve to be deleted. I note that in most of the case laws of the Hon’ble High Courts referred by the Ld. DR the reason on the basis of addition was confirmed was that the assessee had not tendered cogent evidence with regard to share transaction, however, in the present the case assessee has submitted all the documents / evidences, therefore, the case laws relied by the Ld. DR are based on distinguished facts and circumstances

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DATE: February 23, 2018 (Date of pronouncement)
DATE: March 6, 2018 (Date of publication)
AY: 2010-11
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CITATION:
S. 68 Bogus share capital: If the assessee has discharged the initial onus regarding the identity, creditworthiness and genuineness, the onus shifts to the AO to bring material or evidence to discredit the same. The fact that the shareholders did not respond to s. 133(6) summons is not sufficient to draw an adverse inference. There must be material to implicate the assessee in a collusive arrangement with person who are accommodation entry providers

In view of the above documents and evidences filed by the assessee, we are of the opinion that these are sufficient to discharge its initial onus regarding the identity, creditworthiness and genuineness as required under Section 68 of the Act. The assessee having discharged its onus, it was upon the AO to bring material or evidence to discredit the same. In the present case, from the assessment order, it is evident that no adverse material is available with the AO

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DATE: February 9, 2018 (Date of pronouncement)
DATE: March 3, 2018 (Date of publication)
AY: 2008-09
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CITATION:
S. 68 Bogus Share Capital: Share premium received can be assessed as undisclosed income if (a) directors are allotted shares at par while others are allotted at premium, (b) the high premium is not justified by a valuation report, (c) the high premium is not supported by the financials, (d) based on financials the value of shares is less and no genuine investor would invest at the premium, (e) there are discrepancies & abnormal features which show transaction as "made up" to camouflage real purpose

The argument of the assessee that the provisions of Sec.56(1)(viib) of the Act does not apply to the case on hand for the year under consideration as it has been introduced by Finance Act, 2012 w.e.f. 1.4.2013 is a misplaced one. From a reading of the order of assessment, it is clear that the Assessing Officer has invoked the provisions of Sec. 68 of the Act. This leads us to the question of whether the provisions of Sec. 68 of the Act can be invoked for the nature of transactions involved in the case, where sums of money are credited in the name of share premium. This question has been addressed by the Hon’ble Calcutta High Court in the case of Pragati Financial Management Pvt. Ltd. Vs. CIT in C.A. 887 & 998 of 2016 and others dt.7.3.2017. In its order (supra) on the issue of whether enquiry under Section 68 of the Act can be carried out for examining the genuineness of the share premium transaction, the Hon’ble High Court held that Sec. 68 of the Act can be invoked to conduct enquiry on the genuineness of share premium transactions

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DATE: January 18, 2018 (Date of pronouncement)
DATE: January 25, 2018 (Date of publication)
AY: 2008-09
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CITATION:
Bogus capital gains from Penny stocks: The fact that the appreciation in the value of the shares is high does not justify the transactions being treated as fictitious and the capital gains being assessed as undisclosed income if (a) the shares are traded on the Stock Exchange, (b) the payments and receipts are routed through the bank, (c) there is no evidence to indicate it is a closely held company and (d) the trading on the Stock Exchange was manipulated in any manner

The assessee purchased shares of a company during the assessment year 2006-2007 at Rs 11/- and sold the same in the assessment year 2008-2009 at Rs 400/- per share. The Assessing Officer added the appreciation to the assessees’ income on the suspicion that these were fictitious transactions and that the appreciation actually represented the assessees’ income from undisclosed sources. The Tribunal held that the Assessing Officer had not produced any evidence whatsoever in support of the suspicion. On the other hand, although the appreciation is very high, the shares were traded on the National Stock Exchange and the payments and receipts were routed through the bank. There was no evidence to indicate for instance that this was a closely held company and that the trading on the National Stock Exchange was manipulated in any manner

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DATE: January 16, 2018 (Date of pronouncement)
DATE: January 25, 2018 (Date of publication)
AY: 2008-09
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CITATION:
S. 68: If an admission of undisclosed income is made by the assessee after reference to the material found during search and seizure, it cannot be said that the admission is not based on incriminating material. The retraction of such admission of undisclosed income is not permissible especially when the retraction is by the mother and not by the assessee

As evident in the material obtained by the Revenue during search and seizure, it was only with reference to the search and seizure material that Smt. Madhu Chopra gave a specific amount to various heads wherein the undisclosed income had been utilized. The assessee had also separately accepted the same. Hence, it cannot be said that this addition is not based upon any incriminating material found or searched. Furthermore, the so called retraction is by the mother of the assessee and the Assessing Officer is correct in finding that there is no retraction whatsoever by the assessee

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