ASSISTANT COMMISSIONER OF INCOME TAX CIRCLE-6(2)(2), MUMBAI V. DILIGENT MEDIA CORPORATION LIMITED, MUMBAI

ITA 4314/MUM/2017

• Counselvise Citation: [2021] 108 COUNSELVISE.COM (IT) 3919 (ITAT-MUMBAI)
• Duration Of Justice: 3 year(s) 11 month(s) 22 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 03-06-2021
• Appeal Filed By: Department
• Order Result: Partly Allowed
• Bench Allotted: D
• Assessment Year: 2012-2013
• Appeal Filed On: 12-06-2017
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: AJIT KUMAR SHRIVASTAVA
• Keywords: Opportunity of being heard; Valuation report; Set aside
• Section: 68

Judgement Text

THE INCOME TAX APPELLATE TRIBUNAL D BENCH, MUMBAI SHRI SHAMIM YAHYA (AM) & SHRI PAVANKUMAR GADALE ( JM) I.T.A. NO. 4314/MUM/2017 (ASSESSMENT YEAR 2012-13) ACIT, CIRCLE-6(2)(2) ROOM NO. 563 5 TH FLOOR AAYAKAR BHAVAN M.K. ROAD MUMBAI-400 020. VS. M/S. DILIGENT MEDIA CORPORATION LTD. 11 TH FLOOR, TOWER 3 INDIA BULLS FINANCE CENTRE, SENAPATI BAPAT MARG, ELPHINSTON ROAD (W), MUMBAI-400 013. PAN : AACCD1338F (APPELLANT) (RESPONDENT) ASSESSEE BY SHRI DALPAT SHAH DEPARTMENT BY SHRI AJIT KUMAR S HRIVASTAVA DATE OF HEARING 07.04.2021 DATE OF PRONOUNCEMENT 03.06.2021 O R D E R PER SHAMIM YAHYA (AM) :- THIS IS AN APPEAL BY THE REVENUE AND PERTAINS TO A SSESSMENT YEAR 2012- 13. 2. THE GROUNDS OF APPEAL READ AS UNDER :- 1. 'ON THE FACTS AND CIRCUMSTANCES OF CASE AND IN LAW , THE LD.CIT(A) ERRED IN DELETING THE ADDITION OF RS.20,90,19,879/- U/S 68 OF THE ACT, ON ACCOUNT OF UNEXPLAINED SHARE PREMIUM.' 2. 'ON THE FACTS AND CIRCUMSTANCES OF CASE AND IN LAW , THE LD.CIT(A) ERRED IN DELETING THE ADDITION OF RS.20,90,19,879/- BEING THE AMOUNT RECEIVED ON ACCOUNT OF SHARE PREMIUM, WITHOUT APPRECIATING THE FAC T THAT ASSESSEE, AS RECORDED IN THE ASSESSMENT ORDER WAS UNABLE TO PROVE BEFORE THE A. O. THAT THE TRANSACTION IN ITS BOOKS WERE TRUE, GENUINE AND J USTIFIED.' 3. THE APPELLANT PRAYS THAT THE ORDER OF THE CIT (APP EALS) ON THE ABOVE GROUNDS BE SET ASIDE AND THAT OF THE AO BE RESTORED.' 4. 'THE APPELLANT CRAVES LEAVE TO AMEND OR ALTER ANY GROUND OR TO SUBMIT ADDITIONAL NEW GROUND, WHICH MAY BE NECESSARY.' 2 3. BRIEF FACTS OF THE CASE ARE THAT IN THIS CASE AS SESSEE IS ENGAGED IN THE BUSINESS OF PUBLISHING AND PRINTING OF NEWSPAPERS. THE ASSESSING OFFICER NOTED THAT FROM THE BALANCE SHEET HE HAS FOUND THAT ASSESSEE HAS RECEIVED SHARE PREMIUM THE TUNE OF RS. 20,90,19,879/-. THAT M/S. MEDIA VEST INDIA P. LTD. WAS A MAJOR SHAREHOLDER. THAT THE ASSESSEE COM PANY HAS INCURRED A LOSS OF RS. 1,80,56,17,027/-. THAT ASSESSEE COMPANY HAS CONSECUTIVELY INCURRED LOSS FOR THE LAST SIX YEARS. THE ASSESSING OFFICER QUERIED REGARDING THE BASIS OF COMPUTATION OF SHARE PREMIUM. THE ASSESSEE SUBMITTE D THAT THE SAME WAS BASED UPON ASSESSEE'S PROJECTIONS. THE ASSESSING OF FICER WANTED A COMPARISON OF THE PROJECTIONS WITH ACTUALS. THE DETAILS WERE N OT FURNISHED. FURTHERMORE, APART FROM QUESTIONING THE BASIS OF SHARE PREMIUM T HE ASSESSING OFFICER CLEARLY NOTED THAT THE CREDITWORTHINESS OF THE INVESTORS HA S NOT BEEN ESTABLISHED. THAT THE SAME WAS IN QUESTION, AND THE ASSESSEE HAS NOT FILED THE TRANSACTION DETAILS AND RELEVANT BANK ACCOUNT ALSO. HE NOTED TH AT ASSESSEE HAS STATED THAT THE DETAILS REFERRED SHALL BE FURNISHED SHORTLY. BU T TILL THE DATE OF ORDER THEY WERE NOT SUPPLIED. HENCE THE ASSESSING OFFICER PROC EEDED TO HOLD THE TRANSACTION TO BE NON-GENUINE AND IN VIEW OF ASSESS EES EVASIVE REPLIES HE CONSIDERED THE TRANSACTION TO BE A SHAM TRANSACTION . HENCE HE ADDED O THE SAME AS UNEXPLAINED UNDER SECTION 68 OF THE I.T. AC T. 4. AGAINST THE ABOVE ORDER ASSESSEE APPEALED BEFORE THE ITAT. 5. LEARNED CIT(A) PASSED A VERY SHORT ORDER AS UNDE R : IT IS SEEN THAT THE A.O. HAS ERRED IN MAKING ADDITION OF RS. 20,90/19,8797- U/S. 68 BEING THE SHARE PREMIUM ON ISSUE OF EQUITY SHARES OF 30,98,009 AT RS. 10/- EACH FULLY PAID ON A PREMIUM OF RS. 67.46 PER SHARE TO ITS HOLDING COMPANY, THAT IS, MEDIA VEST INDIA P. LTD. . IT IS SEE N THAT THE APPELLANT HAS ESTABLISHED THE IDENTITY, CAPACITY AND CREDITWORTHINE SS OF THE SUBSCRIBER AS WELL AS THE GENUINENESS OF THE SAID TRANSACTION. IT IS SEEN THAT THE APPELLANT HAS FURNISHED ALL DETAILS ALONG WITH CONFIRMATION, PA N DETAILS AND BANK STATEMENTS. IT IS ALSO SEEN THAT THE A.O. HAS NOT CONSIDER ED THAT THE FIRST PROVISO TO SECTION 68 HAS BEEN INTRODUCED FROM 1,4.2 013 AS PER FINANCE ACT 2012 AND THE APPEAL IN THIS CASE RELATES TO F.Y. 2011- 12 RELEVANT TO A.Y. 2012-13. IT IS ALSO SEEN THAT THE SAID PREMIUM HAS BEEN CHARGED BASED ON VALUATION REPORT ALSO, AND THE PREMIUM RECEIVED BY TH E APPELLANT IS CAPITAL IN NATURE AND PART OF THE SHAREHOLDER'S EQUITY. THEREFO RE, THE AMOUNT RECEIVED BY THE APPELLANT CANNOT BE A PART OF THE APPELLANT'S IN COME. RELIANCE IS 3 PLACED ON THE CBDT'S INSTRUCTION NO. 2/2015 F. NO. 500/15/2014-APA-I DATED 29.2.2015 WHEREIN CBDT HAD ACCEPTED HON'BLE M UMBAI HIGH COURT ORDER IN THE VODAFONE INDIA SERVICES LTD. CASE AND T HE FOLLOWING HON'BLE SUPREME COURT DECISIONS AND HON'BLE MUMBAI HIGH COU RT AND HON'BLE MUMBAI IT AT DECISIONS IN ALLOWING THIS GROUND OF AP PEAL. 1. CIT VS P. MOHANAKALA (2007) 161 TAXMAN 169 (SC ) 2. CIT VS M/S. GREEN INFRA LIMITED DATED 16.1.2017 OF HON'BLE MUMBAI HIGH COURT IN ITA NO. 1162 OF 2014. 3. ACIT VS M/S. GAGANDEEP INFRASTRUCTURE P. LTD. 20 14(11) TMI 479 OF HON'BLE MUMBAI ITAT. . 4. DCIT VS. M/S. OVERSEAS INFRASTRUCTURE ALLIANCE (I) P. LTD. (ITA NO. 1470/MUM/2011) OF HON. MUMBAI ITAT. THUS, SINCE THE HON. JURISDICTIONAL HIGH COURT HAS HEL D THAT SHARE PREMIUM CANNOT BE TAXED AS A TRADING RECEIPT, THE GROUND OF A PPEAL IS ALLOWED. 6. AGAINST THIS ORDER THE REVENUE IS AN APPEAL BEFO RE US. 7. WE HAVE HEARD BOTH THE PARTIES AND PERUSED THE R ECORDS. WE NOTE THAT THE ASSESSING OFFICER IN THIS CASE HAS MADE THE ADD ITION UNDER SECTION 68 OF THE ACT BY INTER ALIA OBSERVING THAT ASSESSEE HAS NOT S UPPLIED THE DETAILS CALLED FOR WHICH INCLUDED TRANSACTION DETAIL AND BANK STATEMEN T. HE HAS NOTED THAT ASSESSEE HAD SUBMITTED THAT ASSESSEE SHALL BE SUPPL YING THE NECESSARY DETAILS AS REQUIRED, BUT TILL THE DATE OF HIS ASSESSMENT OR DER THE NECESSARY DETAILS WERE NOT SUPPLIED. THE ASSESSING OFFICER HAS NOTED THAT THE TRANSACTION DETAILS AS WELL AS THE BANK STATEMENTS WERE NOT PRODUCED. THE ASSESSING OFFICER HAS DOUBTED BOTH THE VERACITY OF THE TRANSACTION AS WEL L AS THE CREDITWORTHINESS. 7. THE LEARNED CIT(A) ON THE OTHER HAND HAS SUMMARI LY ACCEPTED THE ASSESSEE SUBMISSION THAT THE DETAILS HAVE BEEN SUBM ITTED BEFORE THE ASSESSING OFFICER. SHE HAS NOT AT ALL GIVEN A FINDING THAT TH E DETAILS CALLED FOR WERE SUBMITTED BEFORE THE DATE OF ASSESSMENT ORDER OR NO T. THIS IS CLEARLY RELEVANT AS ASSESSING OFFICER HAS CLEARLY NOTED THAT ASSESSE E HAD SUBMITTED THAT THEY SHALL BE SUPPLYING THE DETAILS CALLED FOR BUT TILL THE DATE OF ASSESSMENT ORDER THEY WERE NOT SUPPLIED. FURTHERMORE ON THE BASIS OF THE SAID DETAILS SUBMITTED, 4 LEARNED CIT(A) HAS NOT GIVEN ANY FINDING WHETHER TH E INGREDIENTS OF SECTION 68 INCLUDING THE CREDITWORTHINESS ARE ESTABLISHED. 8. SHE HAS REFERRED THAT PROVISO TO SECTION 68 HAS BEEN INTRODUCED FROM 1.4.2013 AS PER FINANCE ACT 2012-13. THERE IS NO DI SCUSSION WHATSOEVER AS TO WHAT IS THE SIGNIFICANCE OF THIS OBSERVATION OF LEA RNED CIT(A). THAT HAS BEEN LEFT TO THE IMAGINATION OF THE READER OF THE APPELLATE O RDER. SHE HAS FURTHER REFERRED TO THE DECISION OF BOMBAY HIGH COURT IN THE CASE OF VODAFONE (SUPRA) AND THE CBDT CIRCULAR IN CONNECTION WITH SHARE PREMIUM FALL ING UNDER CAPITAL FIELD. THIS DECISION WAS RENDERED IN THE CASE OF FOREIGN D IRECT INVESTMENT AND HOW IT IS APPLICABLE TO THE PRESENT ASSESSEE HAS NOT AT AL L BEEN DISCUSSED BY THE LEARNED CIT(A). AS REGARDS THE DECISION OF BOMBAY HIGH COURT IN THE CA SE OF GREEN INFRA LTD. (SUPRA), GAGANDEEP INFRASTRUCTURE P. LTD. AND OTHERS NOTED BY THE LEARNED CIT(A), THESE WERE WITH REFERENCE TO SH ARE PREMIUM WHERE THAT CREDITWORTHINESS OF THE RECEIPT WAS NOT QUESTIONED. HERE AS DETAILED HEREINABOVE THE CREDITWORTHINESS HAS BEEN VERY MUCH QUESTIONED BY THE ASSESSING OFFICER AS NO DETAILS WERE AVAILABLE BEFO RE HIM. LEARNED CIT(A) HAS NOT AT ALL GIVEN ANY CATEGORICAL FINDING THAT AFTER EXAMINATION OF THE DOCUMENTS IN THIS REGARD THE CREDITWORTHINESS OF THE CREDITOR S IS ESTABLISHED. THUS LEARNED CIT(A) HAS GROSSLY ERRED IN RELYING UPON THE DECISI ONS REFERRED BY HIM. FURTHERMORE LEARNED CIT(A) HAS REFERRED TO DECISION , OF HONOURABLE SUPREME COURT IN THE CASE OF P. MOHANKALA (SUPRA). HOW THIS DECISION HELPS THE CASE OF THE ASSESSEE OR THE DECISION OF LEARNED CIT(A) HAS NOT AT ALL BEEN DISCUSSED. AS A MATTER OF FACT IN THIS DECISION OF THE HONOURABLE SUPREME COURT HAS OBSERVED THAT :- IT IS TRUE THAT EVEN AFTER REJECTING THE EXPLANATION G IVEN BY THE ASSESSEE IF FOUND UNACCEPTABLE, THE CRUCIAL ASPECT WHETHER ON THE FACTS AND CIRCUMSTANCES OF THE CASE IT SHOULD BE INFERRED THE SUMS CREDITED IN THE BOOKS OF THE ASSESSEE CONSTITUTED INCOME OF THE PRE VIOUS YEAR MUST RECEIVE THE CONSIDERATION OF THE AUTHORITIES PROVIDED THE ASSES SEE REBUT THE EVIDENCE AND THE INFERENCE DRAWN TO REJECT THE EXPLANATION OFF ERED AS UNSATISFACTORY. WE ARE REQUIRED TO NOTICE THAT SECTION 68 OF THE ACT ITS ELF PROVIDES, WHERE ANY SUM IS FOUND CREDITED IN THE BOOKS OF THE ASSESSEE FOR ANY PREVIOUS YEAR THE SAME MAY BE CHARGED TO INCOME TAX AS THE INCOME OF THE ASSESSEE OF THE 5 PREVIOUS YEAR IF THE EXPLANATION OFFERED BY THE ASSES SEE ABOUT THE NATURE AND SOURCE OF SUCH SUMS FOUND CREDITED IN THE BOOKS OF TH E ASSESSEE IS IN THE OPINION OF THE ASSESSING OFFICER NOT SATISFACTORY. SU CH OPINION FOUND ITSELF CONSTITUTES A PRIMA FACIE EVIDENCE AGAINST THE ASSESSEE , VIZ., THE RECEIPT OF MONEY, AND IF THE ASSESSEE FAIL TO REBUT THE SAID EVID ENCE THE SAME CAN BE USED AGAINST THE ASSESSEE BY HOLDING THAT IT WAS A RECE IPT OF AN INCOME NATURE. IN THE CASE IN HAND THE AUTHORITIES CONCURRENT LY FOUND THE EXPLANATION OFFERED BY THE ASSESSEE UNACCEPTABLE. THE AUTHORITIES UPHELD THE OPINION FORMED BY THE ASSESSING OFFICER THAT THE EXPL ANATION OFFERED WAS NOT SATISFACTORY. THE ASSESSEE DID NOT TAKE THE PLEA THAT EVEN IF THE EXPLANATION IS NOT ACCEPTABLE THE MATERIAL AND ATTENDING CIRCUMSTANCES AVAILABLE ON RECORD DO NOT JUSTIFY THE SUM FOUND CREDITED IN THE BOOKS TO B E TREATED AS A RECEIPT OF AN INCOME NATURE. THE BURDEN IN THIS REGARD WAS ON THE ASSESSEE. NO SUCH ATTEMPT HAS BEEN MADE BEFORE ANY AUTHORITY. ALL THE DE CISIONS CITED AND REFERRED TO HEREINABOVE ARE REQUIRED TO BE APPRECIATE D AND UNDERSTOOD IN THE LIGHT OF THE LAW DECLARED BY THIS COURT IN SUMATI DAY AL (SUPRA). 9. THUS ON THE TOUCHSTONE OF THE ABOVE DECISION LEA RNED CIT(A) HAS IN FACT NOT FOLLOWED THE ABOVE EXPOSITION. FROM THE ABOVE I T IS OBVIOUS THAT LEARNED CIT(A) HAS PASSED A VERY SHORT AND LACONIC ORDER WH ICH DOES NOT EXHIBIT PROPER APPLICATION OF MIND. ACCORDINGLY IN THE INTEREST OF JUSTICE WE REMIT THE ISSUE TO THE FILE OF LEARNED CIT(A). THE LEARNED CIT(A) IS D IRECTED TO CONSIDER THE ISSUE AFRESH AND PASS A PROPER SPEAKING ORDER AS PER LAW AFTER GIVING THE ASSESSEE PROPER OPPORTUNITY OF BEING HEARD. THE LEARNED CIT( A) WILL ALSO BEAR IN MIND OUR OBSERVATION HEREINABOVE. IN REMITTING THE MATTER TO THE FILE OF THE LEARNED CIT(A), WE ALSO DRAW SUPPORT FROM THE ORDER OF HONBLE SUPREME COURT DEC ISION IN THE CASE OF SHRI KAPURCHAND SHRIMAL VS. CIT [1981] 131 ITR 451 (SC) FOR THE PROPOSITION THAT IT IS THE DUTY OF APPELLATE AUTHORITY TO CORRECT THE ERRO RS IN THE ORDER OF AUTHORITY BELOW AND REMAND THE MATTER WITH OR WITHOUT DIRECTI ON UNLESS PROHIBITED BY LAW. 10. IN THE RESULT THIS APPEAL BY THE REVENUE STANDS PARTLY ALLOWED FOR STATISTICAL PURPOSES. PRONOUNCED IN THE OPEN COURT ON 3.6.2021. SD/- SD/- (PAVANKUMAR GADALE) (SHAMIM YAHYA) JUDICIAL MEMBER ACCOUNTAN T MEMBER 6 MUMBAI; DATED : 03/06/2021 COPY OF THE ORDER FORWARDED TO : 1. THE APPELLANT 2. THE RESPONDENT 3. THE CIT(A) 4. CIT 5. DR, ITAT, MUMBAI 6. GUARD FILE. BY ORDER, //TRUE COPY// ( ASSISTANT REGISTRAR) PS ITAT, MUMBAI