Loading judgment…
Facts
The Revenue appealed against the CIT(A)'s order which deleted additions made by the AO. The AO had made additions under Section 68 for share capital and unsecured loans, and also made disallowances for legal & professional charges, commission, and interest expenses. The assessee had filed returns and was selected for scrutiny. During assessment, the AO observed issues with share capital, expenses, and creditors.
Held
The Tribunal noted that the assessee failed to produce necessary documents to prove genuineness and creditworthiness of parties involved in share capital and unsecured loans. Despite opportunities, the assessee did not comply. The Tribunal, in the interest of justice, remanded the matter back to the Assessing Officer to re-examine the additional evidences filed by the assessee. The grounds of appeal were partly allowed for statistical purposes.
Key Issues
Whether the CIT(A) was justified in admitting additional evidence and deleting additions/disallowances made by the AO, especially when the assessee failed to provide complete documentation and compliance. Whether the AO's actions and the assessee's compliance were sufficient to discharge the onus under Section 68.
Sections Cited
143(3), 250(6), 142(1), 133(6), 131, 68, 14A, 37, 194A, 193
AI-generated summary — verify with the full judgment below
Detected automatically from the text. The count shows how many other judgments on BharatTax rely on the same authority.
Income Tax Appellate Tribunal, DELHI BENCH ‘E’: NEW DELHI
(ASSESSMENT YEAR 2011-12) Income Tax Officer, M/s Marathon Finlease Ltd., Ward-16(2), 95-B, DDA MIG Flats, New Delhi. Vs. Shivam Enclave, Opp. Jhilmil Colony, Delhi-110095. PAN-AAACM5536C (Appellant) (Respondent) Assessee by None Department by Ms. Amisha S. Gupt, CIT-DR Date of Hearing 06/05/2025 Date of Pronouncement 09/07/2025 O R D E R
PER MANISH AGARWAL, AM:
This appeal is filed by the Revenue against the order of the Ld. Commissioner of Income Tax (Appeals)-20 (‘the CIT(A)’ in short), New Delhi in Appeal No.273/2015-16 vide order dated 27.06.2016 passed u/s 250(6) of the Income Tax Act, 1961 (‘the Act’, in short) for Assessment Year 2011-12.
Brief facts of the case are that the assessee is a Company and filed its return of income on 30.09.2011 declaring total income at Rs.5,01,985/-. The case of the assessee was taken up for scrutiny. During the course of assessment proceedings, it was observed by the AO that assessee has received share capital of Rs.4,04,50,000/- from eighteen share applicants and thus, the AO asked the assessee to prove the genuineness of the transactions. The AO also observe that they are certain expenses claimed which was not properly explained by the assessee and it is further observed by the AO that the assessee has outstanding ITO vs. M/s Marathon Finlease Ltd., creditors of Rs.13,99,77,000/- from 11 corporate entities and since assessee has failed to prove their entity and creditworthiness and finally the AO completed the order u/s 143(3) dated 30.03.2011 wherein the total income was assessed of Rs.18,43,30,554/- by making following observations/additions: (i) Disallowance out of legal or professional charges Rs.13,00,000/- (ii) Disallowance of Commission of Rs.3,50,000/- (iii) Disallowance of fee paid to ROC Rs.31,654/- (iv) Disallowance u/s 14A of the Act r.w.s Rule 8D of Rs.2.06,333/- (iv) Disallowance out of interest expenses of Rs.1,52,582/- (v) Additions u/s 68 for share capital and premium Rs.4,04,50,000/- (vi) Additions u/s 68 for unsecured loans of Rs.13,99,70,000/-.
Against the said order, assessee preferred first appeal before the Ld. CIT(A) who partly allowed the appeal of the assessee after admitting the additional evidences filed by the assessee. The Ld. CIT(A) has substantially reduced the disallowance and deleted the additions made u/s 68 of the Act.
Aggrieved by the said order, the Revenue’s is in appeal before the Tribunal in the present appeal. The grounds of appeal
taken by the Revenue read as under:- “1. Whether on the facts and circumstances of the case and in law, the Id. CIT(A) is legally justified in admitting the additional evidence despite the fact that the assessee had not fulfilled the conditions laid down under rule 46A of 1.T. Rules and even when the facts of the case were not covered within the exceptions provided under Rule 46A of the Income Tax Rules 1962 (the Rules)?
2. Whether on the facts and circumstances of the case and in law, the ld. CIT(A) is legally justified in deleting the addition of Rs. 4,04,50,000/- made u/s 68 of the I.T. Act in respect of unexplained credits introduced in the garb of share application money/share capital by to appreciating the facts the assessee did not discharge its onus of prove genuineness of the transactions, identity and creditworthiness of investors?
3. Whether on the facts and circumstances of the case and in law, the ld. CIT(A) is legally justified in deleting the addition of Rs. 13,99,77,000/- made u/s 68 of the IT Act in respect of unexplained credits introduced in the garb of unsecured loan by the appreciating the facts that the assessee did not discharge its onus to prove genuineness of the transactions, identity and creditworthiness of loan providers?
ITO vs. M/s Marathon Finlease Ltd., 4. Whether on the facts and circumstances of the case and in law, the Id. CIT(A) has erred in holding that filing details of PAN and ITR are sufficient evidence to discharge the onus of the assessee u/s 68 of the IT Act with regard to identity of creditor, genuineness of transactions and credit worthiness of the creditor? 5. Whether on the facts and circumstances of the case and in law, the ld. CIT(A) has erred in deleting the additions made u/s 68 on account of unexplained credits in respect of share application money and unsecured loans by completely ignoring the ratio decidendi laid down by Hon'ble Delhi High Court on the issue on the cases of CIT v N.R. Portfolio Pvt. Ltd. (2014) 2 ITR-OL-68, CIT v Nipun Builders and Developers Pvt. Ltd (2013) 350 ITR 407, CIT v Novodaya Castles Pvt. Ltd. (2014) 367 ITR 306 and Developers Pvt. Ltd. (2013) 350 ITR 407, CIT v Novodaya Castles Pvt. Ltd. (2014) 367 ITR 306? 6. Whether on the facts and circumstances of the case and in law, the Id. CIT(A) is legally justified in deleting the disallowance of Legal and professional charges amounting to Rs. 13,00,000/- even when the assessee has failed to discharge its onus u/s 37 of the Act and there was no evidence that the assessee had a actually received any services in lieu of payment of Rs. 13,00,000/-? 7. Whether on the facts and circumstances of the case and in law, the Id. CIT(A) is legally justified in deleting the disallowance of commission expenses of Rs. 3,50,000/- even when the assessee has failed to discharge its onus u/s 37 of the Act and there was no evidences that the assessee had a actually received any services in lieu of payment of Rs. 3,50,000/-? 8. Whether on the facts and circumstances of the case and in law, the ld. CIT(A) is legally justified in deleting the disallowance of interest of Rs. 8,56,839/- by ignoring the findings of the Tax Audit Report that TDS on payment of M/s KSB Ltd. Was not deducted ? 9. The appellant craves leave to add, amend, alter or forgo any ground(s) of appeal.”
In support of the grounds taken by the Revenue, the Ld. CIT-DR submits that the assessee has not made compliances of the notices issued u/s 142(1) during the course of assessment proceedings on many occasions and lastly though the notices were complied with however, requisite details were not filed by the assessee. The ld. CIT-DR submits that by taking adjournments or partly complying the statutory notices, the assessee has tried to delay the assessment proceedings using deliberate and willful tactics. The Ld. CIT(A) further submitted that the assessee has filed the copies of share applications forms but the creditworthiness and genuine transactions remained unproved. The summons issued u/s 133(6) of the Act to all the 19 shares applicants however, 9 were ITO vs. M/s Marathon Finlease Ltd., received unserved and with respect to the remaining, no compliance was made. Likewise, summons 133(6) that were also issued to the relevant parties from whom unsecured loans were obtained but only one party filed the documents but they were incomplete documents. The Ld. CIT-DR further submit that the assessee during the course of appellate proceedings filed additional evidences/ documents which contained share application forms, copy of return of filed before ROC, audited financial statements in some of cases alongwith their bank statements. The Ld. CIT(A) obtained the remand report without considering the observations of the AO in remand report deleted the addition made. It is therefore, submitted by Ld. CIT-DR that issue of share capital may be sent back to the file of the AO for necessary examination with reference to the details filed before the Ld. CIT(A) as additional evidences.
Regarding unsecured loans Ld. CIT-DR submitted that similarly as done in the case of share applications, assessee also filed additional evidences during the course of appellate proceedings which contained the details of unsecured loans and some cases confirmations, their ITR and their audited balance sheets were filed. The Ld. CIT(A) had admitted the same and without discussing the merits of the details filed simply on the ground that assessee had filed necessary evidences deleted the additions. Therefore, Ld. CIT-DR submitted that this issue may also be sent back to file of AO for fresh examination.
7. Regarding disallowance of various expenses made by AO and deleted by Ld. CIT-DR submit that assessee has not filed substantiate evidences to substantiate the claim nor any details were filed that TDS was made on the said expenses. In the last, Ld. CIT-DR also filed the details written submissions which read as under:
On the other hand, none appeared on behalf of the assessee nor any written submission was filed. It is seen that on earlier occasion also the case was fixed for hearing, however, none was appeared though on some occasion some counsel appeared and sought adjournment, thus, it appears that except relied upon the orders of the Ld. CIT(A), the assessee has nothing more to say.
After considering the facts and submissions advanced by the Ld. CIT-DR and from the perusal of the order of the Ld. CIT(A), we find that the assessee has filed certain additional evidences during the course of appellate proceedings under Rule 46A of IT Rules as the said details were not filed before the Assessing Officer though ample opportunities were provided to the assessee by the Ld. AO wherein the assessee had avoid the proceedings by not appearing or by taking ITO vs. M/s Marathon Finlease Ltd., adjournments. Further it is seen that summons issued u/s 133(6) to the share applications also remained un-complied with. Further the details filed in support of the unsecured loans also not sufficient to prove the genuineness and creditworthiness of the parties and no compliance was made with respect to the summons issued u/s 133(6) of the Act and the additional evidences were filed before the Ld. CIT(A) claiming that amounts were received through banking channels and companies has sufficient funds for granting the loans to the assessee. However, all these facts remained unexamined on the part of the Assessing Officer, thus, in the larger interest of justice, the matter is remand back aside to the file of the Assessing Officer to examine afresh the details filed by the assessee during the course of appellate proceedings and decide the issue in accordance with law. The assessee is also directed to file all the details and evidences in support of the claim made. With these directions, all the grounds of appeal taken by the revenue are partly allowed for statistical purposes.
In the result, the appeal filed by the Revenue is partly allowed. Order is pronounced on 09.07.2025.