MK Sons Fine jewels Share Premium Vindicated

The assessee-company, incorporated in January 2012, received share capital and share premium aggregating to Rs. 3 crores from five private companies during AY 2012-13. Based on information received from the Investigation Wing regarding alleged accommodation entry operations conducted, the assessment was reopened under Sections 147 and 148. The Assessing Officer concluded that the share capital transactions were merely accommodation entries and treated the entire amount as unexplained cash credit under Section 68.

The Assessing Officer primarily relied upon non-compliance of summons issued under Section 131, alleged association of investor companies with the entry operator, and perceived abnormality in charging premium of Rs. 190 per share despite negligible intrinsic value of shares. The CIT(A) confirmed the addition by relying heavily on the Supreme Court ruling in NRA Iron & Steel Pvt. Ltd. and the doctrine of human probabilities.

The Tribunal, however, found that the assessee had furnished extensive documentary evidence including PAN details, confirmations, bank statements, income tax returns, audited financials, ROC filings, share application forms, and allotment records of the investor companies. It held that once such primary evidences were furnished, the burden shifted to the Assessing Officer to conduct further inquiry. The Tribunal further observed that the addition rested substantially on the statement of Shri Vipul Vidur Bhatt, which was neither supplied to the assessee nor subjected to cross-examination and had allegedly been retracted subsequently. Distinguishing NRA Iron & Steel on facts, the Tribunal held that for AY 2012-13 neither the proviso to Section 68 nor Section 56(2)(viib) applied. Consequently, the addition under Section 68 was deleted in entirety.