ITO- 5(1)(1), MUMBAI vs. M/S. BKC ABODE PVT. LTD., MUMBAI

This appeal is filed by the learned Income Tax Officer, ward 5(1)(1), Mumbai [ the Ld. AO]against the appellate order passed by the National Faceless Appeal Centre, Delhi [ the Ld. CIT (A)] for A.Y. 2018-19, dated 10th March, 2023, wherein the appeal filed by the assessee against the assessment order passed by National e-Assessment Centre, Delhi dated 12th April, 2021, passed under Section 143(3) of the Act, was allowed.

Assessee submitted that M/s Tracstar Investment Private Limited has invested in the preference share capital of the company giving its Name, Address, Permanent Account Number details of shares, balance sheet and confirmation etc. assessee also submitted that investor company was having the identical amount of unsecured loan in the assessee company for earlier years, this unsecured loan has been repaid by the assessee to that company and on the same date that company invested in the share capital of the company. It was further stated that the source of money was from the books of accounts of the assessee company itself wherein it repaid the unsecured loan appearing in the balance sheet of the assessee company as on 31 /3/2017. Therefore, the source of the fund is the unsecured loan repaid by the assessee company of the investor company. With respect to the identity and creditworthiness assessee submitted the balance sheet and the income tax return along with the bank statement of the assessee company wherein the repayment of

Subsequently, the learned Assessing Officer issued notices under Section 133(6) of the Act to the investor company. In response to that, investor company submitted its income tax return and annual accounts as well as confirmed making investment in the assessee company. Investor also confirmed that it has invested in the redeemable preference shares in the assessee company explaining nature of transaction.

The learned Assessing Officer held that as the investors did not submit the bank statement, and as per ITR the total taxable income of the investor is only ₹42,06,110/-. The assessee has filed to prove the genuineness of the transaction and therefore, addition of ₹27,34,62,000/- was made as per assessment order dated 12th April, 2021, determining the total income of the assessee at ₹28,17,11,900/-.

The assessee aggrieved with the same preferred the appeal before the learned Commissioner of Income-tax (Appeals). The claim of the assessee is that the investor is a related company. It has received loan from the same company in the year ended 31st March, 2017 having the

The learned Departmental Representative vehemently submitted that the M/s Tracstar Investment Private Limited was already an investor in the above company by way of unsecured loan. This unsecured loan is repaid during the year. Such repaid of unsecured loan has once again invested by that company in the assessee company as preference share capital. The bank statement of the investor was not given and therefore, the learned Assessing Officer is correct in making the addition.

The learned Authorized Representative submitted the written submission as well as the paper book showing that when the identity, creditworthiness and genuineness of unsecured loan received in earlier year is not disputed and the same money has been now been introduced by the same investor showing the exact trail of funds also, without having any contrary evidence, the assessee has demonstrated and discharged its onus under Section 68 of the Act. He submits that when the bank statement of assessee and the bank statement of investors along with the annual accounts of the assessee and the investor is examined, there is a complete undisputed trail of repayment of unsecured loan and issue of preference share is demonstrated. Therefore, there is no dispute with respect to the identity, creditworthiness of the transaction. The genuineness of the transaction is also proved by the assessee by showing the source of source of the funds

We have carefully considered the rival contentions and perused the orders of the lower authorities. The fact shows that the assessee has issued the preference share capital of ₹2,73,46,200/- non-cumulative redeemable preference share of ₹10 each to M/s Tracstar Investment Private Limited. During assessment proceedings, the assessee submitted the confirmation of the investors, confirmation of accounts of the investors, balance sheet of the assessee and the investor company showing the transaction and bank statement of the assessee disclosing details of the above transaction and showing the trail of the fund. The learned Assessing Officer issued notice under Section 133(6) of the Act to the investor, which was replied to by submitting the balance sheet, confirmation and income tax return. The learned Assessing Officer says that assessee did not file the bank account of the investor and therefore, looking at the return of income, the addition was made under Section 68 of the Act. Before the learned CIT (A), the assessee submitted the bank statement of investor also. The learned CIT (A) dealt with this issue in paragraph no.4.5 and 4.6 that the bank statement of the assessee with the Punjab National Bank was available and further the bank statement submitted of the investor is merely supporting the facts stated by the assessee available and both the bank accounts in the same bank are showing complete trail of the funds from

In the result, the appeal of the learned Assessing Officer is dismissed.