INCOME TAX ACT, 1961

Section 148

Reassessment - Notice under section 148 - Validity - Reason to believe

AO issued notice under section 148 for the reason that authorized share capital of the assessee company was Rs. 20 lakh as on 31-3-2009 and issued capital was Rs. 1,00,000. The balance capital to be issued was Rs. 19 lakhs but assessee company was received Rs. 87 crore as share application money against the pending share capital of Rs. 19 lakh meaning that assessee received a premium of Rs. 45,68,947 on face value of share of Rs. 10 i.e., 457 times the face value, while financials of assessee company did not support such high valuation and accordingly, share application money of Rs. 87 crores received had to be added to its income. Assessee challenged the notice by way of writ petition on the ground that assessee received share application money from its founder and promoter, i.e., Analjit Singh, whose identity and creditworthiness was admittedly not doubted by AO. As a part of exercise of reorganization of group and consolidation of shareholding, right to received allotment of shares against said share application money of Rs. 87 crores, was transferred by Analjit Singh to his family trust, i.e., Neeman Family Foundation through a gift. Held: No evidence to prove source of receipt of share application money was ever produced by assessee before AO. The assessee for the first time filed 'gift deed' as annexure to writ petition. A gift is one which is out of natural love and affection and not out of any compulsion. But, gift deed between Sh. Analjit Singh and Neeman Family foundation was devoid of all these ingredients of gift, as it was made for furthering the family arrangements and was thus out of compulsion. In such circumstances, doubting the genuineness of transactions could not be stated to be out of context. Also, allotment of shares vastly in excess of authorized capital, in the absence of any SEBI approval and retention of that money by assessee did not show any reason for issuing the shares and since other ingredients of section 68 (i.e. genuineness of the transaction and creditworthiness of the individual providing the money) were apparently not established. Revenue was justified in issuing notice under section 148.

Relied: Phool Chand Bajrang Lal and Anr. v. ITO & Anr., (1993) 203 ITR 456 (SC) : 1993 TaxPub(DT) 1453 (SC).

REFERRED :

FAVOUR : Against the assessees.

A.Y. :

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