V.R.Global Energy Pvt. Ltd., CHENNAI V. ITO, CHENNAI

ITA 871/CHNY/2016

• Counselvise Citation: [2016] 131 COUNSELVISE.COM (IT) 8617 (ITAT-CHENNAI)
• Duration Of Justice: 4 month(s) 26 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 01-09-2016
• Appeal Filed By: Assessee
• Order Result: Dismissed
• Bench Allotted: C
• Next Hearing Date: 16-06-2016
• Assessment Year: 2012-2013
• Appeal Filed On: 05-04-2016
• Result in Favour of: Revenue
• Court: TRIBUNAL
• Department Lawyers: DR MILIND MADHUKAR BHUSARI
• Assessee Lawyers: V S JAYAKUMAR
• Keywords: Valuation report
• Section: 68

Judgement Text

, , IN THE INCOME TAX APPELLATE TRIBUNAL C BENCH, CHENNAI . . . , . !' , $ % BEFORE SHRI N.R.S. GANESAN, JUDICIAL MEMBER AND SHRI A. MOHAN ALANKAMONY, ACCOUNTANT MEMBER ./ ITA NO.871/MDS/2016 ' (' / ASSESSMENT YEAR : 2012-13 M/S V.R. GLOBAL ENERGY PVT. LTD., (FORMERLY KNOWN AS TTG CONSOLIDATES PVT. LTD.), NO.5, T.V. STREET, CHETPET, CHENNAI - 600 031. PAN : AABCT 3716 E V. THE INCOME TAX OFFICER, CORPORATE WARD 3(4), CHENNAI - 600 034. (*+/ APPELLANT) (,-*+/ RESPONDENT) *+ . / / APPELLANT BY : SHRI V.S. JAYAKUMAR, ADVOCATE ,-*+ . / / RESPONDENT BY : DR. MILIND MADHUKAR BHUSARI, C IT 0 . 1$ / DATE OF HEARING : 16.06.2016 2!( . 1$ / DATE OF PRONOUNCEMENT : 01.09.2016 / O R D E R PER N.R.S. GANESAN, JUDICIAL MEMBER: THIS APPEAL OF THE ASSESSEE IS DIRECTED AGAINST THE ORDER OF THE COMMISSIONER OF INCOME TAX (APPEALS) 11, CHEN NAI, DATED 25.02.2016 AND PERTAINS TO ASSESSMENT YEAR 2012-13. 2 I.T.A. NO.871/MDS/16 2. SHRI V.S. JAYAKUMAR, THE LD.COUNSEL FOR THE ASSE SSEE, SUBMITTED THAT THE ASSESSING OFFICER MADE AN ADDITI ON OF ` 90.18 LAKHS TOWARDS SHARE PREMIUM. ACCORDING TO THE LD. COUNSEL, THE ADDITION WAS MADE UNDER SECTION 68 OF THE INCOME-TA X ACT, 1961 (IN SHORT 'THE ACT'). THE LD.COUNSEL FURTHER SUBMITTED THAT THE ASSESSEE ALONG WITH ITS SUBSIDIARY COMPANY ENTERED INTO A NE W VENTURE FOR GENERATION OF ELECTRICITY FROM A TYPE OF GRASS WHIC H IS RENEWABLE AND SUSTAINABLE AS ALTERNATE SOURCE OF POWER GENERATION . CONSIDERING THE FUTURE CASH FLOW FOR THIS PROPOSED PROJECT, THE ASSESSEE- COMPANY VALUED ITS SHARES BASED ON DISCOUNTED CASH FLOW METHOD. HOWEVER, THE ASSESSING OFFICER OBJECTED TO THIS MET HOD OF VALUATION ON THE GROUND THAT THE FUTURE PROPOSAL AND EXPANSIO N OF PROFITABILITY ARE UNCERTAIN, WHICH MAY OR MAY NOT HAPPEN. THE AS SESSING OFFICER HAS ALSO FOUND THAT SHARES WERE ALLOTTED WI THOUT ANY BENEFIT FROM THE SHAREHOLDERS. 3. REFERRING TO THE OBSERVATION MADE BY THE ASSESSI NG OFFICER, THE LD.COUNSEL FOR THE ASSESSEE SUBMITTED THAT ADMI TTEDLY, THERE WAS NO PHYSICAL TRANSFER OF MONEY OR ASSET TO THE A SSESSEE- COMPANY FROM SO-CALLED SHAREHOLDERS. ON A QUERY FR OM THE BENCH, HOW THE ASSESSEE WAS ABLE TO ISSUE SHARES WITHOUT R ECEIVING ANY 3 I.T.A. NO.871/MDS/16 MONEY OR ASSET FROM THE SHAREHOLDERS AND WHAT WAS T HE NET WORTH OF THE COMPANY FOR THE PURPOSE OF ISSUING THE ADDIT IONAL SHARES TO THE SHAREHOLDERS, THE LD.COUNSEL COULD NOT CLARIFY THE QUERY. ON ANOTHER QUERY FROM THE BENCH, HOW THE VALUE OF THE SHARES HAVING FACE VALUE OF ` 10/- WAS ARRIVED AT ` 5400/- PER SHARE, THE LD.COUNSEL SUBMITTED THAT THIS WAS VALUED AS PER DISCOUNTED CA SH FLOW METHOD. HOWEVER, THE LD.COUNSEL COULD NOT PRODUCE ANY DETAI LS. ACCORDING TO THE LD. COUNSEL, WHEN, ADMITTEDLY, THERE WAS NO PHYSICAL MOVEMENT OF MONEY OR ASSET FROM THE SHAREHOLDERS TO THE ASSESSEE-COMPANY, THERE CANNOT BE ANY ADDITION UNDE R SECTION 68 OF THE ACT. FOR THE PURPOSE OF MAKING ADDITION UND ER SECTION 68 OF THE ACT, ACCORDING TO THE LD. COUNSEL, THERE SHOULD BE CASH CREDIT IN THE BOOKS OF ACCOUNT. MERELY BECAUSE THE ASSESSEE COULD NOT FURNISH ANY EXPLANATION TO THE SATISFACTION OF THE ASSESSING OFFICER, ACCORDING TO THE LD. COUNSEL, THERE CANNOT BE ANY A DDITION UNDER SECTION 68 OF THE ACT. HENCE, THE CIT(APPEALS) IS NOT JUSTIFIED IN CONFIRMING THE ADDITION MADE BY THE ASSESSING OFFIC ER. 4. ON THE CONTRARY, DR. MILIND MADHUKAR BHUSARI, TH E LD. DEPARTMENTAL REPRESENTATIVE, SUBMITTED THAT THE ASS ESSEE IN THE GUISE OF VALUING THE SHARES, WHICH HAS THE VALUE OF ` 10/- AND MARKET 4 I.T.A. NO.871/MDS/16 VALUE OF ` 171.34 PER SHARE, VALUED THE SAME WITHOUT ANY BASIS AT ` 5400/- PER SHARE. THE ASSESSEE-COMPANY INTRODUCED A SHARE PREMIUM OF ` 90.18 LAKHS AND SHARE CAPITAL OF ` 16.70 LAKHS. THIS WAS THE CREDIT FOUND IN THE BOOKS. AFTER GOING THR OUGH THE BALANCE SHEET AND OTHER BOOKS OF ACCOUNT, THE ASSESSING OFF ICER FOUND THAT THERE WAS A CREDIT TO THE EXTENT OF ` 90.18 LAKHS TOWARDS SHARE PREMIUM AND SHARE CAPITAL OF ` 16.70 LAKHS. THE LD. D.R. FURTHER SUBMITTED THAT THERE WAS NO NET WORTH IN THE ASSESS EE-COMPANY FOR ISSUING SHARES HAVING A FACE VALUE OF ` 10/-. THEREFORE, THE ESTIMATION OF VALUE OF SHARES AT ` 5400/- PER SHARE HAS NO BASIS AT ALL. THE LD. D.R. FURTHER SUBMITTED THAT THE NET WORTH OF THE COMPANY DOES NOT ENABLE THE ASSESSEE TO ISSUE ADDIT IONAL SHARES. ACCORDING TO THE LD. D.R., EVEN THOUGH SUFFICIENT O PPORTUNITY WAS GIVEN TO THE ASSESSEE TO PRODUCE THE VALUATION REPO RT BEFORE THE CIT(APPEALS), THE COPY OF VALUATION REPORT WAS NOT PRODUCED BEFORE THE CIT(APPEALS). THEREFORE, IT IS FOR THE ASSESSE E TO PRODUCE THE NECESSARY MATERIAL TO PROVE THE CREDITWORTHINESS OF CREDIT ENTRIES FOUND IN THE BOOKS. 5. THE LD. D.R. FURTHER SUBMITTED THAT THE ASSESSEE HAS ALSO CLAIMED TO HAVE ENTERED INTO A SETTLEMENT BETWEEN M /S SHRIRAM 5 I.T.A. NO.871/MDS/16 AUTO FINANCE AND MRS. VATHSALA RANGANATHAN. THIS A RRANGEMENT WITH M/S SHRIRAM AUTO FINANCE AND MRS. VATHSALA RAN GANATHAN AND AGREEMENTS WITH OTHER COMPANIES ARE ONLY COLOURABLE DEVICE FOR THE PURPOSE OF INTRODUCING CASH CREDIT BY WAY OF SHARE PREMIUM AND SHARE CAPITAL TO THE ASSESSEE-COMPANY. THEREFORE, BY PLACING RELIANCE ON THE OBSERVATION MADE BY THE APEX COURT IN MCDOWELL & CO. LTD. V COMMERCIAL TAX OFFICER (154 ITR 148), TH E CIT(APPEALS) HAS RIGHTLY CONFIRMED THE ORDER OF THE ASSESSING OF FICER. SINCE ADMITTEDLY THERE WAS ENTRY IN THE BOOKS, ACCORDING TO THE LD. D.R., THE ASSESSEE CANNOT NOW CLAIM THAT THE PROVISIONS O F SECTION 68 OF THE ACT IS NOT APPLICABLE. 6. WE HAVE CONSIDERED THE RIVAL SUBMISSIONS ON EITH ER SIDE AND PERUSED THE RELEVANT MATERIAL AVAILABLE ON RECORD. ADMITTEDLY, THERE WAS CREDIT ENTRY IN THE BOOKS OF THE ASSESSEE TO TH E EXTENT OF ` 90.18 LAKHS. THE ASSESSEE CLAIMED BEFORE THE AUTHORITIES BELOW THAT ` 90.18 LAKHS WAS A SHARE PREMIUM. APART FROM THAT, THERE WAS A CREDIT OF SHARE CAPITAL TO THE EXTENT OF ` 16.70 LAKHS. THE ASSESSEE- COMPANY FURTHER EXPLAINED BEFORE THE ASSESSING OFFI CER BY WAY OF LETTER DATED 25.03.2015 THAT A SHARE PREMIUM OF ` 64.26 CRORES WAS RECEIVED FROM MRS. VATHSALA RANGANTHAN. THIS WAS O N ACCOUNT OF 6 I.T.A. NO.871/MDS/16 TRANSFER FROM M/S SHRIRAM AUTO FINANCE AND M/S BHAR AT WIND FARM. MOREOVER, ANOTHER SHARE PREMIUM OF ` 23.76 CRORES WAS RECEIVED ON ACCOUNT OF TRANSFER OF M/S TRILOK VINCOM PVT. LT D. FROM M/S VRONE ENERGY PVT. LTD. THE ASSESSEE HAS CLAIMED BE FORE THE ASSESSING OFFICER THAT THE SHARE PREMIUM OF ` 2.16 CRORES WAS RECEIVED FROM M/S RAVISRINIVASAN (HUF). THESE ARE JOURNAL ENTRIES FOUND IN THE BOOKS. THE ASSESSEE CLAIMED THAT SHA RES WERE REVALUED AT ` 5400 PER SHARE. IT WAS NOT IN DISPUTE THAT THE FAC E VALUE OF EACH SHARE IS ` 10/- AND THE ASSESSEE ITSELF ADMITTED BEFORE THE ASSESSING OFFICER THE MARKET VALUE OF SHARE IS ` 171.34 PER SHARE. 7. FOR THE PURPOSE OF REVALUATION, THE NET WORTH OF THE COMPANY HAS TO BE EXAMINED. THE LD.COUNSEL FOR THE ASSESSE E COULD NOT EXPLAIN THE NET WORTH OF THE COMPANY FOR THE PURPOS E OF ESTIMATING THE VALUATION OF SHARE AT ` 5400/- PER SHARE. FROM THE ORDERS OF THE AUTHORITIES BELOW IT APPEARS THAT THERE WAS AGREEME NT BETWEEN ASSESSEE-COMPANY AND M/S SHRIRAM AUTO FINANCE AND M RS. VATHSALA RANGANATHAN AND THERE WAS ALSO SHAREHOLDER AGREEMENT WITH M/S CARCARE AND M/S VRONE ENERGY PVT. LTD. AND M/S TRILOK VINCOM PVT. LTD. THE ASSESSEE CLAIMED BEFORE THE C IT(APPEALS) 7 I.T.A. NO.871/MDS/16 THAT THE ASSET WAS NOTHING BUT A LOAN RECEIVED FROM M/S TTJ INDUSTRIES FOR M/S SHRIRAM AUTO FINANCE. HOWEVER, NO MATERIAL EVIDENCE WAS PRODUCED. THEREFORE, THIS TRIBUNAL IS OF THE CONSIDERED OPINION THAT AS RIGHTLY FOUND BY THE CIT (APPEALS), THESE ARE COLOURABLE DEVICE EXERCISED BY THE ASSESSEE TO REDUCE THE TAX LIABILITY. BY WAY OF INTRODUCING CASH CREDIT IN TH E NAME OF SHARE PREMIUM AND SHARE CAPITAL, THE ASSESSEE-COMPANY IS MAKING ATTEMPTS TO REDUCE THE TAX LIABILITY. IN THE ABSEN CE OF THE DETAILS OF SHAREHOLDERS AND THE BASIS FOR VALUATION OF SHARE A T ` 5400/- PER SHARE, THE CIT(APPEALS) HAS RIGHTLY CONFIRMED THE A DDITION MADE BY THE ASSESSING OFFICER. SECTION 68 OF THE ACT CLEAR LY SAYS THAT WHEN THE ASSESSING OFFICER FOUND CREDIT IN THE BOOKS OF ACCOUNT AND THE ASSESSEE COULD NOT OFFER ANY EXPLANATION OR THE EXP LANATION OFFERED BY THE ASSESSEE IS NOT SATISFACTORY, THEN THE ENTRI ES FOUND IN THE BOOKS HAVE TO BE TREATED AS INCOME OF THE ASSESSEE. THEREFORE, THIS TRIBUNAL DO NOT FIND ANY REASON TO INTERFERE W ITH THE ORDER OF THE LOWER AUTHORITY AND ACCORDINGLY THE SAME IS CONFIRM ED. 7. IN THE RESULT, THE APPEAL FILED BY THE ASSESSEE IS DISMISSED. 8 I.T.A. NO.871/MDS/16 ORDER PRONOUNCED ON 1 ST SEPTEMBER, 2016 AT CHENNAI. SD/- SD/- (. !' ) ( . . . ) (A. MOHAN ALANKAMONY) (N.R.S. GANESAN) $ / ACCOUNTANT MEMBER /JUDICIAL MEMBER /CHENNAI, 4 /DATED, THE 1 ST SEPTEMBER, 2016. KRI. . ,156 76(1 /COPY TO: 1. *+ /APPELLANT 2. ,-*+ /RESPONDENT 3. 0 81 () /CIT(A) 4. 0 81 /CIT, 5. 69 ,1 /DR 6. :' ; /GF.