In a significant ruling, a two-judge bench of the Supreme Court has confirmed an addition in respect of bogus share application money and premium and bogus capital gain.
The Income Tax Department finally won the case after the CIT (Appeal), the Tribunal and the Delhi High Court all decided this matter in favour of the assessee.
The Assessee Company in its Return showed that money aggregating to Rs. 17,60,00,000/- had been received through Share Capital/Premium during the Financial Year 2009-10 from the companies situated at Mumbai, Kolkatta, and Guwahati. The shares had a face value of Rs. 10 per share, were subscribed by the investor companies at Rs. 190 per share.
The Assessing Officer held that the amount of Rs. 17,60,00,000/-allegedly raised by the Respondent through share capital/premium were not genuine transactions and made additions under section 68 of the Act.
Before the Supreme Court, the assessee submitted that that entire Share Capital had been received by the Assessee through normal banking channels by account payee cheques/demand drafts, and produced documents such as income tax return acknowledgements to establish the identity and genuineness of the transaction. It was submitted that, there was no cause to take recourse to Section 68 of the Act, and that the onus on the Assessee Company stood fully discharged.
Justice Uday Umesh Lalit and Justice Indu Malhotra noted that the lower appellate authorities appear to have ignored the detailed findings of the AO from the field enquiry and investigations carried out by his office.
“The authorities below have erroneously held that merely because the Respondent Company – Assessee had filed all the primary evidence, the onus on the Assessee stood discharged,” the bench said.
“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 the addition of the said amount to the income of the Assessee,” the Apex Court said.
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