Relief to Raw Pressery: ITAT sets aside Addition of Rupees 115 Cr [Read Order]

Raw Pressery - ITAT - taxscan

The Income Tax Appellate Tribunal (ITAT), Mumbai granted relief to Raw Pressery Private Limited thereby setting aside an addition of Rupees 115 Crores.

The main grievance of the assessee is against the action of the CIT(A) confirming of addition of Rs.115,56,95,385/- under Section 68 of the Income Tax Act, 1961. The assessee company, Raw Pressery Private Limited had filed its return of income on 30.10.2018 declaring a total loss of Rs.41,85,61,758/-. Before the AO, the assessee had furnished a brief background of the PE investors, M/s Sequoia Capital India Investments IV and Saama Capital III Ltd along with their financial statements. Copies of the relevant Foreign Inward Remittance Certificates (‘FIRCs’) were furnished before the NFAC.

The AO/NFAC however did not agree with the submissions of the assessee. According to AO/NFAC, the valuation reports furnished by the assessee were not reliable as the financials of the company did not justify the high valuations arrived at by the Chartered Accountant. The AO/NFAC observed that the huge share premium received from foreign investors was ‘hawala’ and that provisions of the Black Money Act were applicable. Referring to the decision of the Supreme Court in the case of Pr.CIT Vs NRA Iron & Steel Pvt Ltd, the AO added the closing balance of share premium of Rs.115,56,95,385/- as unexplained cash credit u/s 68 of the Act.

Aggrieved by the order of the AO/NFAC, the assessee preferred an appeal before the CIT(A), NFAC. Before the CIT(A), the assessee filed written submissions along with a paper book. The CIT(A) confirmed the addition made by the AO.

The Bench consisting of observed that “It is noted that during the year, the company had received share premium of Rs.52,24,66,398/- from five shareholders, out of which four were existing shareholders who had infused capital in earlier years as well and the remaining one was a new shareholder but to her, the shares were issued in discharge of her consideration for the rendering of services. From the material on record, it is clearly discernible that the impugned addition of Rs.115,56,95,385/- comprises of the opening balance of share premium of Rs.63,32,28,987/-.”

“Further, as pointed out to us, the share premium received in earlier AYs 2016-17 & 2017-18 has already been examined and verified in the income-tax assessments framed u/s 143(3) of the Act and the explanation furnished by the assessee has been accepted. We thus agree that the addition made by the lower authorities to the extent of Rs.63,32,28,987/- u/s 68 of the Act in AY 2018-19 was unjustified.”

“In view of our above discussions and findings, and having regard to the entire conspectus of the facts of the case, we set aside the impugned order of the CIT(A) confirming the addition of Rs.115,56,95,386/- made u/s 68 of the Act and restore the issue back to the file of AO” the Tribunal added.

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