Friday, 2 March 2018

ITAT : Hefty share premium received as 'conduit' taxable u/s 68 as unexplained cash-credit

ITAT upholds Revenue's plea that assessee (a private limited company & engaged in real estate business) received high share premium as a conduit to route the funds involved as a 'layering' process, holds that share-premium of Rs.49.5cr is taxable u/s 68 as unexplained cash credit for AY 2008-09; ITAT considers facts such as absence of proper valuation report to justify high premium, relatively weak financials compared to high valuation, issue of shares to directors at par, discrepancies / abnormal features which indicate that share issue was “made up” to camouflage the real purpose/intention of routing money;  Relying on Calcutta High Court ruling in Pragati Financial Management Pvt. Ltd. Vs. CIT, ITAT holds that share capital addition can be made u/s 68 since the initial onus was not discharged by the assessee; Also, rejects assessee's reliance on Delhi ITAT ruling in ACIT Vs. NRA Iron & Steel Pvt. Ltd., wherein funding was raised from multiple investors as against assessee's facts where a single investor was present; On the issue of jurisdiction, ITAT upholds validity of second re-assessment notice (issued within 6 days after the first reassessment was dropped) which resulted in share premium addition, ITAT holds that "since  substantive issue in question was never examined under the proceedings in the first notice issued on 18.4.2012, the  question of change of opinion does not arise" :ITAT 

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