DCIT, CC, , DEHRADUN vs. SRIVAAS PROJECTS PRIVATE LTD, RISHIKESH

This is a bunch of six appeals and cross objections relating to

the same assessee. These appeals and cross objections arise out of

a consolidated order dated 12.02.2019 of learned Commissioner of

Income-tax (Appeals)-IV, Kanpur, pertaining to the assessment years

2012-13, 2013-14 and 2014-15.

ITA No. 21/DDN/2019 (Revenue’s appeal for A.Y. 2012-13):

admission of additional evidences by learned first appellate authority

in violation of Rule 46A of the Income-tax Rules, 1962.

the first appellate authority, the assessee did furnish certain

additional evidences, however, before admitting them, learned first

appellate authority has provided full opportunity to the Assessing

Officer to examine those evidences and furnish his report. A reading

of Rule 46A makes it clear that for effective disposal of the appeal,

learned first appellate authority has power to admit additional

evidences. However, he has to provide a fair opportunity to the

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Assessing Officer to examine the additional evidences. In the facts of

the present appeal, learned first appellate authority has complied with

the conditions of Rule 46A before admitting the additional evidences.

Therefore, in our considered opinion, grounds raised by the Revenue

challenging violation of Rule 46A are unsustainable. Accordingly, we

dismiss the grounds raised.

of addition of Rs.2,33,08,000/- made under section 68 of the Income-

tax Act, 1961.

engaged in real estate business. Pursuant to a search and seizure

operation conducted in case of the assessee and other group entities,

proceedings u/s. 153A of the Act were initiated. In course of

assessment proceedings, the Assessing Officer, while examining the

balance sheet as on 31.03.2011 of the assessee, noticed that the

share capital, which stood at the beginning of the year at

Rs.5,00,000/-, has increased to Rs.8,46,000/-. Whereas, in the

reserves and surplus, the assessee has shown receipt of share

premium amounting to Rs.3,39,08,000/-. Noticing the above, the

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Assessing Officer called upon the assessee to furnish details of share

application money and share premium received in the year. In this

context, the Assessing Officer directed the assessee to furnish the

names and complete addresses of the parties from whom share

application money and share premium was received, purpose of

transactions, income-tax particulars of the party and bank statements

of the parties. As alleged by the Assessing Officer, the assessee did

not furnish the details called for. Thus, the Assessing Officer

proceeded to complete the assessment by adding back amount of

Rs.3,44,08,000/-, being share premium, to the income of the

assessee under section 68 of the Act.

first appellate authority. In course of proceedings before first

appellate authority, the assessee furnished additional evidences to

prove the genuineness of share capital/share premium received. The

additional evidences furnished are, confirmation letters from the

investor, bank statements and Income-tax Return copies of the

investor etc. Based on the additional evidences furnished and

submissions made, learned Commissioner (Appeals) directed the

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Assessing Officer to examine the additional evidences and submit a

report. After examining the additional evidences, the Assessing

Officer furnished two reports to learned Commissioner (Appeals).

After considering the submissions of the assessee in the context of

facts and materials on record as well as the remand reports furnished

by the Assessing Officer, learned Commissioner (Appeals) concluded

that the conditions of section 68 of the Act are not satisfied.

Accordingly, he deleted the additions made by the Assessing Officer.

However, in so far as the receipt of share premium is concerned,

learned first appellate authority called upon the assessee to

demonstrate as to how the share premium reflects the fair market

value of the shares as per section 56(2)(viib) of the Act read with

Rule 11UA of the Rules. After examining the submissions of the

assessee, learned Commissioner disallowed amounts of

Rs.42,74,9900/- and Rs.6,74,250/- for the assessment years 2013-14

and 2014-15 respectively by invoking the provisions of section

56(2)(viib) of the Act. Being aggrieved, the Revenue is before us.

on record. Undisputedly, in course of assessment proceedings, for

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whatever may be the reason, the assessee did not furnish the

requisite details regarding share application money and share

premium received by it. Therefore, in absence of any details, the

Assessing Officer proceeded to treat the share application money

and share premium received as unexplained cash credits under

section 68 of the Act and added back to the income of the assessee.

However, before first appellate authority, assessee did furnish all the

requisite details/supporting evidences in respect of share application

money/share premium by way of additional evidences. From the

details furnished, it is observed that the assessee had received share

capital and share premium from its holding company, M/s. Srivaas

Infrabuild Pvt. Ltd. (SIPL). The additional evidences were forwarded

to the Assessing Officer for factual verification. In remand

proceedings, the Assessing Officer made enquiries with the investing

company, M/s. Srivaas Infrabuild Pvt. Ltd. and called for various

details. In response to the query raised, the investing company

furnished the details such as copies of share certificates allotted by

the assessee company, bank statement copy, ledger account copy,

Income-tax return copy etc. Additionally, the investing company also

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furnished a confirmation letter accepting the fact that it has advanced

share capital and share premium to the assessee. After considering

the evidences furnished by the assessee, learned Commissioner

(Appeals), having found that the transaction relating to receipt of

share capital and share premium is genuine, has deleted the addition

observing as under :

6.6 The undersigned has carefully gone through the assessment order, written submission, inquiry report filed by AO, rejoinder as well as verbal arguments of the Id. A.R. of the appellant. It is seen that, appellant company has received credits in the form of share capital/share premium from only one creditor company i.e. M/s. Srivaas Infrabuild Pvt. Ltd. (SIPL), It is seen that, this creditor company is the holding company of the appellant company and management of both of them are members of one and same family. The AO of the creditor company and the appellant company is also the same i.e. DCIT - CC, Dehradun. It is also seen that, for A.Y. 2012-13 & A.Y. 2013-14, there was opening balance in the account of share capital/share premium amounting to Rs. 1,11,00,000/- and Rs. 3,46,000/- respectively out of addition made by the AO at Rs. 3,44,08,000/- and Rs. 5,42,50,000/- respectively. As, opening balance of Rs. 1,11,00,000/- and Rs. 3,46,000/- for A.Y. 2012-13 A A.Y. 2013-14 respectively undisputedly does not represent the credits for these relevant assessment years the same cannot be added. Therefore addition of Rs. 1,11,00,000/- and Rs. 3,46,000/- for A.Y. 2012-13 & A.Y. 2013-14 respectively stands deleted.

6.7 It is a settled law u/s 68 of the Act that, initial burden lies on the appellant to discharge its onus to prove identity, credit capacity of the creditor and genuineness of the transaction. Admittedly, appellant has not submitted any details, during the course of scrutiny proceedings. However, during these appeal proceedings, all the details in the form of confirmation of share capital/share premium the bank statements of the appellant as well as the creditor company, copies of the ITR and audited financial statements filed by the creditor company share allotment as disclosed to registrar of companies etc. were submitted by the Id. A.R. of

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the appellant. Further, it is an admitted fact that, AO of the appellant and AO of the creditor company is same. It is also, an undisputed fact that, creditor company is the holding company of the appellant company and management of both of them are members of one and same family. These credits in the form of share capital/share premium are through the banking channels and transactions of share allocation are reported by both these companies to the register of the company. Financial statement and accounts of both the creditor company and appellant company are audited in accordance with law. Further, during this appeal proceeding, Id. A.R. of the appellant was asked to substantiate to source of the credit in the hands of creditor company. Ld. A.R. of the appellant has filed the datewise details of the source of funds received by the SIPL for all these relevant assessment years. It is seen that, the parties, who advanced funds to SIPL are also the key persons of this appellant company and their sister concerns entities, who are assessed with the same AO i.e. DCIT-CC, Dehradun. The financial statements of the appellant and the creditor company are audited in accordance with the law and reflect the transactions of share capital/share premium. Therefore, considering the totality of the factual matrix of the case, it is concluded that, appellant company has discharged it initial onus to substantiate the identity, credit capacity of the creditor and the genuineness of the transaction. On the other hand, no cogent material is brought by the AO to controvert the additional evidences submitted by the Id. A.R. of the appellant to prove the credits in the form of share capital/share premium. It is not the case of the AO that the creditor company is the company engaged in providing the accommodation entries. In fact, creditor company is the holding company with same management and assessed by same AO. In view of the above discussion, the alleged credits in the form of share capital/share premium are treated as substantiated and explained. Therefore, addition made by the AO is deleted and grounds of appellant of the appellant are allowed for each assessment year i.e. A.Y. 2012-13 to A.Y. 2014-15, subjected to observation in para 6.8 of this order.”

appellate authority, it is very much clear that not only it is a

transaction between the holding company and subsidiary but both the

companies are under the management of one and same family.

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Therefore, the identity of the investing company is established.

Further, as rightly observed by learned first appellate authority, the opening balances on 1st day of the financial year could not have been

treated as the credit for the relevant year. Additionally, the investing

company has not only furnished confirmation confirming the

investment of money in share capital and share premium, but has

also furnished its bank statements, income tax return copies, audited

financial statements etc., which demonstrate the source from which

the investment has been made. It is also a fact that the entire

investment has been made through banking channel. It is also a fact

that shares have subsequently been allotted against share

application money and share premium. Thus, not only the identity and

creditworthiness of the investing company has been established, but

the genuineness of the transaction cannot be doubted.

admittedly, it has been paid by the holding company to a subsidiary.

Therefore, if holding company intends to infuse additional fund in the

subsidiary through share premium, there is nothing wrong in it. In any

case of the matter, learned first appellate authority has made

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disallowance under section 56(2)(viib) of the Act, in so far as, the

share premium paid is not as per the fair market value of the shares.

It is also a fact on record that the authenticity of the additional

evidences brought on record has not been disputed by the Assessing

Officer through any contrary evidence brought on record. In view of

the aforesaid, we do not find any reason to interfere with the decision

of learned first appellate authority. Accordingly, grounds are

dismissed.

the result, appeal is dismissed.

C.O. No. 20/DDN/2019 (By assessee for A.Y. 2012013):

21/DDN/2019, the cross objection has become infructuous, hence,

dismissed.

ITA No. 22/DDN/2019 (Revenue’s appeal for A.Y. 2013-14):

ITA No. 21/DDN/2019 decided by us in earlier part of the order.

Following our decision therein, we dismiss these grounds.

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ITA Nos. 21 to 23/DDN/2019 C.O. Nos. 20 & 21/DDN/2019 ITA No. 3077/Del/2019

raised in ground Nos. 4 & 5 of ITA No. 21/DDN/2019 decided by us in

earlier part of the order. Following our decision therein, we uphold the

decision of learned Commissioner (Appeals) on the issue. Grounds

are dismissed.

6 & 7 have become infructuous and dismissed.

C.O. No. 21/DDN/2019 (By assessee for A.Y. 2013-14):

assessee, on instructions, sought withdrawal of the cross objection.

Learned Departmental Representative did not express any objection.

In view of the aforesaid, cross objection is dismissed as withdrawn

ITA No. 23/DDN/2019 (Revenue’s appeal for A.Y. 2014-15):

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ITA No. 21/DDN/2019 decided by us in earlier part of the order. Following our decision therein, grounds are dismissed.

addition of Rs.2,25,75,650/- made under section 68 of the Act. This

issue is identical to the issue raised in ground No. 4 & 5 of ITA No.

21/DDN/2019 decided by us in earlier part of the order. Facts, being identical, our decision in ITA No. 21/DDN/2019 will apply mutatis mutandis. Accordingly, grounds are dismissed.

issue raised in assessee’s appeal, being ITA No. 3077/Del/2019, they

will be taken up together while considering assesee’s appeal in ITA No. 3077/Del/2019 for the assessment year 2014-15.

ITA No. 3077/Del/2019 (Assessee’s appeal for A.Y. 2014-15):

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ITA Nos. 21 to 23/DDN/2019 C.O. Nos. 20 & 21/DDN/2019 ITA No. 3077/Del/2019

“On the facts and in the circumstances of the case and in law the Ld. (CIT(A) has erred in denying the set off of current year business loss of Rs.34,10,540/- against the surrendered business income of Rs.49,50,000/-. The action of authorities is wrong, illegal, misconceived, unjustified and bad at law therefore, it should be quashed.”

whether the current year’s business loss can be set off against the

business income surrendered at the time of search and seizure

operation.

operation in case of the assessee and other group entities was

carried out on 21.11.2013. In course of search and seizure operation,

certain incriminating document was found indicating advance made in

cash against land amounting to Rs.49,50,000/-. The assessee offered

the amount as additional income by crediting it to the profit & loss

account as advance written off. However, against the said income,

the assessee set off the current year’s business loss. Firstly, the

Assessing Officer held that, while crediting the additional income to

the profit and loss account, the assessee has claimed expenses,

which is not allowable. Accordingly, he again made addition of

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Rs.49,50,000/-. Having held so, he also disallowed assessee’s claim

of set off of current year’s loss against the surrendered business

income. The assessee contested the addition before learned

Commissioner (Appeals). After considering the submissions of the

assessee, though, learned Commissioner (Appeals) held that since,

the Assessing Officer has not found anything adverse in respect of

the expenses claimed, he cannot again make addition of the

surrendered income, however, in so far as assessee’s claim of set off

of current year’s business loss against surrendered income, learned

Commissioner (Appeals) held that since, the addition of surrendered

business income has been made under section 69 of the Act, the

provisions of section 115BBE of the Act will automatically come into

play, which debars the assessee from claiming set off of expenses or

loss against surrendered income. Accordingly, he disallowed the

claim of the assessee.

on record. On a careful reading of section 115BBE, it is observed that

prior to 01.04.2017, there was no restriction in section 115BBE in

respect of set off of losses. Only through an amendment made to

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sub-section (2) of section 115BBE by the Finance Act, 2016 w.e.f.

01.04.2017, restriction in respect set off of losses was introduced.

Thus, the restriction imposed applies only on or after the assessment

year 2017-18 and not prior to that. This has further been clarified by

the Central Board of Direct Taxes in circular No. 11/2019 dated

19.06.2019, wherein, it has been clearly and categorically stated that

the amendment to section 115BBE(2) would be applicable from

01.04.2017 and an assessee is entitled to claim set off of losses

against income determined u/s. 115BBE of the Act till the assessment

year 2016-17. The aforesaid proposition has been accepted in the

following judicial precedents :

(i) Prashanti Surya Construction Co. P. Ltd. vs. DCIT (2017) 88 taxmann.com 804 (Chandigarh Tribunal) (ii) ACIT vs. Sri Balaji Forgings (P) Ltd. (2022) 144 tamann.com 126 (Delhi Tribunal) (iii) Rajendra Kumar Anand vs. ITO (2022) 140 taxmann.com 340 (Delhi Tribunal) (iv) Ace Infracity Developers (P) Ltd. vs. DCIT (2021) 127 taxmann.com 264 (Delhi Tribunal) (v) Bajaj Sons Ltd. vs. DCIT (2021) 128 taxmann.com 406(Chandigarh Tribunal) (vi) PCIT vs. Acharan Enterprises Pvt. Ltd. (2020) 117 taxmann.com 745 (Raj.)

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laid down in the decisions cited before us, we are inclined to uphold

assessee’s claim of set off of current year’s business loss against

surrendered business income. Consequently, ground raised by the

assessee in this appeal is allowed. Whereas, ground Nos. 8 & 9

raised by the Revenue in ITA No.23/DDN/2019 are dismissed.

objections are dismissed. Whereas, assessee’s appeal in ITA No.

3077/Del/2019 is allowed.

Order pronounced in the open court on 23/06/2023. Sd/- Sd/- (M. BALAGANESH) (SAKTIJIT DEY) ACCOUNTANT MEMBER VICE-PRESIDENT

Dated: 23.06.2023 *aks/-

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