IN THE HIGH COURT FOR THE STATE OF TELANGANA AT HYDERABAD THE HON’BLE SRI JUSTICE P.SAM KOSHY AND THE HON’BLE SRI JUSTICE SUDDALA CHALAPATHI RAO ITTA.Nos. 245, 246, 366 & 367 of 2019 U Dt. 06.03.2026 U ITTA.No.245 and 246 of 2019 U Between:

The Prl. Commissioner of Income Tax-2, Hyderabad.

…. Appellant and Bharathi Cement Corporation Pvt. Ltd.

…Respondent ITTA.No.366 and 367 of 2019 U Between:

Bharathi Cement Corporation Pvt. Ltd.

…. Appellant and The Pr. Commissioner of Income Tax-2, Hyderabad.

…Respondent COMMON JUDGMENT:(PertheHon’bleSriJusticeSuddalaChalapathiRao U U

1. The instant batch of appeals in ITTA Nos.245 and 246 of 2019 are filed by the revenue and ITTA Nos.367 and 366 of 2019 are filed by the assessee, challenging the very same common order passed by the Income Tax Appellate Tribunal, Hyderabad, Bench ‘B’ ITA No.696/2014 and 697/2014, dt.10.08.2018, for the respective assessment years are

2009-10 and 2010-11.

2. Since all the appeals preferred by both the Revenue and the Assessee arise from the same common order passed by the learned ITAT, though on distinct factual grounds, they were heard together analogously and decided by a common order.

3. The brief facts of the case are that the assessee is engaged in the business of manufacture and sale of cement. For the Assessment Year 2010–11, it filed its return of income on 15.10.2010 declaring a loss of Rs.189,75,94,495/-. The assessment was completed by the Assessing Officer by making addition of Rs.182,00,00,000/- under Section 68 of the Income Tax Act, 1961 (for short ‘the Act’).

4. During the assessment year 2010-11, the assessee claimed to have received share premium aggregating to Rs.182,00,00,000/- from five companies i.e., India Cements, Dalmia Cements (Bharat) Limited, Gilchrist Investment Pvt. Ltd., Alpha Villas Pvt. Ltd. and Alpha Avenue Pvt. Ltd. and pursuant to the said investments, the assessee allotted 0% convertible preference shares numbering about 1,08,27,490 at a premium of Rs.94/-, Rs.110/-, Rs.175/- and Rs.1,440/- per share to the said companies.

5. The Assessing Officer passed assessment orders dt.30.12.2011 (AY-2009-10) and dt.31.03.2013 (AY 2010-11) stating that despite investing Rs.185 crores, the above investor companies were allotted only 0.3% of the equity shareholding, whereas the main promoter of the company i.e., Sri Y.S. Jagan Mohan Reddy and the other promoter namely M/s Silicon Builders, who had invested about Rs.45 crores, held

99.7% of the shareholding.

6. The Assessing Officer recorded statements of key personnel of the investor companies, to examine the justification for such substantial investments, more particularly when the assessee had not even commenced commercial production during the relevant period and although the face value of each share was Rs.10/-, the shares were allotted at a high premium of Rs.94/-, Rs.110/-, Rs.175/- and Rs.1,440/- per share without any prior valuation of the equity shares in the company, which had no operational track record at the relevant point of time.

7. Further, the Assessing Officer held that the said investments were not genuine commercial transactions of purchase of equity shares and the said amount was deposited by the investor companies, who had derived certain benefits such as sanctions and approvals from the Government of Andhra Pradesh, as a quid pro quo deal as the then Chief Minister was the father of the main promoter, by showing the said amount as investment of purchase of equity shares. The Assessing Authority further held that the assessee adopted the said mechanism and received the said amount s towards a mutual arrangement and cleverly designed it as purchase of equity shares and thus, the Assessing Officer, added Rs.182,00,00,000/- to the income of the assessee under Section 68 of the Act and the Assessing Officer has also assessed the said amount as income from other sources and passed the impugned assessment orders . Challenging the said assessment orders, the assessee preferred app