Search Results For: 68


QUERY: Share application money which is taxed as Undisclosed in the hands of a private company can also be taxed as undisclosed income in the hands of applicants by issuing notice u/s. 148?
ANSWER: Click here to read the full answer of the expert
EXPERT:
SECTION(S): , ,
GENRE:
CATCH WORDS:

The broad scheme of the Act is to charge all income to tax but only in the hands of the same person.
So share application money received by Private Limited Company has to be taxed in whose hands? The Supreme Court in CIT v. Steller Investment Ltd. [251 ITR 263] has given answer by stating that even if it be assumed that the subscribers to the increased capital are not genuine, under no circumstances could the amount of share capital be regarded as undisclosed income in the hands of the company.

QUERY: When a closely held company receives share application money with premium in A.Ys. 2009-10, 2010-11 & 2011-12, he files Form 2, confirmation, address, PAN, bank account details etc during the course of assessment. AO doubts the capacity of share applicants and adds back u/s. 68 based on statement recorded of accommodation entry provider to share applicants. Assessee company asked for a copy of statement recorded and cross examination of entry provider, which was not provided by the AO. Please also refer proviso to section 68. Is the assessment valid.
ANSWER: Click here to read the full answer of the expert
EXPERT:
SECTION(S):
GENRE:
CATCH WORDS:

Assessment is not valid, as it violates the principles of natural justice. The Supreme Court in R. B. Shreeram Durga Prasad v. Settlement Commission [176 ITR 169] has held that the order made in violation of principles of natural justice is void and nullify.

QUERY: AO made addition u/s. 68 in respect of share application money received by the assessee in the very first year of its incorporation. Whether AO could have made such addition in spite of the fact that assessee had practically done no business so as to generate any such income? What proof is required for proving the genuineness of the transaction? What shall be the scenario where share application money is received from tainted entities? What is the effect of finding that promoters / directors of assessee-company later on acquired the very shares at discounted rates from such share holders?
ANSWER: Click here to read the full answer of the expert
EXPERT:
SECTION(S):
GENRE:
CATCH WORDS:

AO has right to make addition of share application money received by the assessee in very first year of incorporation, irrespective of the fact, whether the assessee has done business or not, on the basis of proviso inserted by the Finance Act, 2012 w.e.f. April 1, 2013 i.e., assessment year 2013-14.

QUERY: Assessee-company had received share application money from various companies by cheque. AO recorded statement of directors of such companies which had applied for shares of the assessee company. Such statements were recorded behind the back of the assessee and in spite of categorical request for cross examination of such directors; no such cross examination was granted. Finally, such statements were used against the assessee and addition was made u/s. 68 in respect of such share application. Whether statements of directors of concerned companies recorded behind the back of the assessee can be taken as evidence against the assessee without allowing the sufficient opportunity of cross-examination to the assessee? What are the consequences of breach of principles of natural justice? Whether self-serving statements of such directors obviate documentary evidence available on record.
ANSWER: Click here to read the full answer of the expert
EXPERT:
SECTION(S):
GENRE:
CATCH WORDS:

No. The Supreme Court in Lovely Exports Ltd. [216 CTR 195] held that when share application money received from the shareholders whose name and PA Nos. are on record then the Assessing Officer is free to proceed to reopen the assessment of the shareholders and no addition should be made in the hands of the company. Similar observation you would find in CIT v. Steller Investment Ltd. [251 ITR 263 (SC)]