SOLAPUR BIO ENERGY SYSTEMS PRIVATE LIMITED,MUMBAI vs. ACIT - CIRCLE 15(3)(2), MUMBAI

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ITA 2449/MUM/2026Status: DisposedITAT Mumbai14 August 2026AY 2015-168 pages
AI SummaryRemanded

What did the Tribunal hold?

The Tribunal found a lack of clear findings and appreciation of facts by the Assessing Officer regarding the genuineness of the transactions and the source of funds. Consequently, the matter was set aside to the Assessing Officer for de novo adjudication.

What were the facts?

The assessee company issued preference shares to its holding company at a premium. The holding company financed this investment through unsecured loans from third-party entities. The Assessing Officer reopened the assessment, suspecting the genuineness of these transactions and the creditworthiness of the lenders.

What were the issues?

Whether the reassessment proceedings were valid and whether the addition made under Section 56(2)(viib) on preference shares issued at a premium was justified, considering the doubts raised about the source of funds and the creditworthiness of lenders.

Which sections of the Income-tax Act were involved?

Section 68,Section 56(2)(viib),Section 147,Section 148,Section 151

AI-generated summary — verify with the full judgment below

Income Tax Appellate Tribunal, “E” BENCH: MUMBAI

Hearing: 19.05.2026Pronounced: 14.08.2026

IN THE INCOME TAX APPELLATE TRIBUNAL “E” BENCH: MUMBAI BEFORE SHRI VIKRAM SINGH YADAV, ACCOUNTANT MEMBER AND SHRI SANDEEP SINGH KARHAIL, JUDICIAL MEMBER ITA No. 2449/Mum/2026 (Assessment Year: 2015-16)

Solapur Bio Energy Systems ACIT - Circle 15(3)(2) Private Limited Aayakar Bhawan, Mumbai, 2nd Floor, Geeta Building, Next vs. Maharashtra, 400021 to HP Petrol Pump,Near Sion Circle,Sion East, Mumbai, Maharashtra, 400022.

PAN: AAMCS1818B (Appellant) (Respondent) For Assessee : Shri Margav Shukla & Shubham Shukla For Revenue : Shri Hemanshu Joshi, SR.DR Date of Hearing : 19.05.2026 Date of Pronouncement : 14.08.2026 O R D E R PER VIKRAM SINGH YADAV, A.M.:

This is an appeal filed by the Assessee against the order of the Learned Commissioner of Income Tax (Appeals)-National Faceless Appeal Centre (NFAC), Delhi [‘Ld.CIT(A)’], dated 30.12.2025, pertaining to Assessment Year (AY) 2015-16, wherein the Assessee has taken the following grounds of appeal: a. On the given facts and circumstances of the case and judicial precedents, Ld. NFAC erred in upholding the reassessment, even though same was not in compliance with the provisions of Chapter XIV of the Income Tax Act, 1961. Such reassessment proceedings is bad in law and liable to be quashed.

ITA No. 2449/Mum/2026; A.Y. 2015-16 Solapur Bio Energy Systems Private Limited b. On the given facts and circumstances of the case and judicial precedents, Ld. NFAC erred in confirming the action of Ld. AO by holding that reopening initiated for Unexplained Credit under Section 68 and addition made under Section 56 were valid. Such upholding of assessment despite different charge is bad in law and liable to be quashed. c. On the given facts and circumstances of the case and judicial precedents, Ld. NFAC erred in upholding the reassessment, without valid approval under section 151. Such order pursuant to invalid approval is bad in law and liable to be quashed. d. On the given facts and circumstances of the case and judicial precedents, Ld. NFAC erred in upholding the addition made under section 56(2) (viib) on preference Shares issued to Holding Company. Such confirmation of addition is bad in law and liable to be deleted. e. Without prejudice to the above, On the given facts and circumstances of the case and judicial precedents, Ld. NFAC erred in upholding the addition made under section 56(2)(viib) on preference Shares even though it was based on fair market value. Such confirmation of addition is bad in law and liable to be deleted. f. The appellant craves leave to add, amend or alter the above grounds of appeal on or before the final date of hearing.”

2.

Briefly, the facts of the case are that the assessee has filed its return of income on 30.10.2015, declaring the loss of Rs. 1,64,35,446/. The return was processed u/s. 143(1) of the Act. Thereafter, case of the assessee was reopened and notice u/s. 148 was issued on 31.03.2021. In response, the assessee filed its return of income on 17.04.2021. The reasons recorded were supplied to the assessee, objections so taken by the assessee were disposed off and after issuance of notice u/s. 143(2) and 142(1) of the Act and the show cause dated 27.03.2022, the Assessing Officer passed the order u/s. 147 r/w 143(3) of the Act on 31.03.2022, wherein a sum of Rs. 4,05,00,000/- was brought to tax invoking provisions of Section 56(2)(vii)(b) of the Act.

3.

The assessee thereafter carried the matter in appeal before the ld. CIT(A) who has since sustained the findings of the Assessing Officer. Against the said order, the assessee is in appeal before us.

ITA No. 2449/Mum/2026; A.Y. 2015-16 Solapur Bio Energy Systems Private Limited 4. We have heard the rival contentions and pursued the material available on record. Firstly, from perusal of the reasons so recorded before issuance of notice under section 148 of the Act, in para 2 of the reasons so recorded, the Assessing Officer talks about information received from Additional/JDIT(I&CI), Bhopal regarding issuance of share at a premium in the case of the assessee company. Thereafter, in para 3, the Assessing Officer talks about the selection of case for verification under a special pilot project of companies allotted shares at premium. Thereafter, he talks about the number of shares being allotted to Solapur Bio Energy Systems Private Limited on 30.10.2014, having face value of Rs. 10/- per share and premium of Rs. 90/- per share, totaling to Rs. 4.50 crore. Thereafter, Assessing Officer talks about the issuance of notice under section 133(6) to the assessee on 27.04.2017 in terms of determination of fair market value as per Rule 11UA of the Income Tax Rules. Thereafter, he talks about the submissions filed by the Chartered Accountant on behalf of the assessee company. wherein it was submitted that non-cumulative preference shares were issued to the holding company as per the requirement of bank for availing banking facilities, and as per Rule 11UA(c), the assessee has obtained a report from a Chartered Accountant dated 30.10.2014 for determining estimated price it would fetch if sold in the open market on the valuation date. The Assessing Officer further requested for furnishing of Form PAS-3 with the ROC regarding allotment of shares, which was duly submitted by the assessee company and placed on record. Thereafter, in terms of analysis of information collected/received by the Assessing Officer, we find that there is no finding regarding the fair market value of the shares issued as not in accordance with Rule 11UA of the Income Tax Rules.

5.

The Assessing Officer further refers to the source of funds invested by the holding company through unsecured loans obtained from three entities, namely, Achal Holding and Finance Private Limited, LA Fin

ITA No. 2449/Mum/2026; A.Y. 2015-16 Solapur Bio Energy Systems Private Limited Financial Services Private Limited, and Olumpus Construction Private Limited and referring to their balance sheet available on the ITBA portal, the Assessing Officer raised suspicion as to how these companies paid such huge amount of unsecured loan to the assessee company and how they are related to the holding company. Thereafter, in para 4, the Assessing Officer recorded his finding stating that as the assessee company did not provide the necessary documents/ records, hence, the amount invested in shares by unsecured loan providers amounting to Rs. 4.50 Crore needs to be added as unexplained income in the hands of the assessee company. Thereafter, in para 5, the AO records the basis of forming reason to believe, wherein he talks about the filing of return of income by the assessee, processing thereof in terms of 143(1), and referring to the earlier discussion, the Assessing Officer held that the assessee has entries of unsecured loan to the tune of Rs. 4.50 Crores from companies mentioned above whose creditworthiness was not established by the assessee company and in view of the above, he has reason to believe that income of Rs. 4.50 crores chargeable to tax has escaped assessment.

6.

We, therefore, find that the case of the assessee was reopened basis information that the assessee company has issued shares to its holding company, and which has, in turn, financed those investments by way of unsecured loans obtained from three entities, and their creditworthiness are not established by the assessee company and in view of that, the income has escaped assessment in the hands of the assessee company.

7.

Now coming to the assessment order passed under Section 147 dated 31.03.2022, the Assessing Officer talks about issuance of notice under 133(6) to the holding company as well as to the three entities who have provided unsecured loans to the assessee company, and their responses have been reproduced at pages 5 and 6 of the assessment

ITA No. 2449/Mum/2026; A.Y. 2015-16 Solapur Bio Energy Systems Private Limited order. Thereafter, Assessing Officer refers to the provisions of Section 68, and states that the submissions made by these parties clearly show that the loan extended to the holding company has been repaid by it within a year or two, and which had been utilized for further investment into the assessee company. Further, referring to the bank statement submitted by these parties, the Assessing Officer held that the money was provided by layering, as these companies themselves were not source of original money and in this regard, reference was drawn to the bank statement submitted by one of the entities, namely, Samco Holding and Finance Private Limited, where the money was deposited by Shri Jimeet Modi, and on the same day, the funds were transferred to the holding company. The Assessing Officer thereafter states that all this raises doubt on identity, creditworthiness, and genuineness of the loan, as well as the share subscription transactions. Further, the assessee has failed to prove the genuineness of the transaction by way of supporting documents or evidence and despite providing multiple opportunities and ample time, no concrete and specific evidence to prove the genuineness of the transactions or creditworthiness of the money is established. However, we find that the Assessing Officer did not record a clear and unambigious finding as to whether the nature and source of the amount so invested by the holding company has been accepted by him or not. The issue is not really about whether the addition has been ultimately made u/s 68 or not, the issue really is whether the nature and source of investment has been accepted or not.

8.

The Assessing Officer, thereafter, goes back on the issue of analyzing the share premium received by the assessee company and, thereafter, referring to the valuation report, and the financial statement of the assessee company wherein the assessee company has reported losses, the Assessing Officer held that the assessee has received an amount of Rs. 90 per share in excess of the fair market value of 4,50,000

ITA No. 2449/Mum/2026; A.Y. 2015-16 Solapur Bio Energy Systems Private Limited shares allotted during the year, and in terms of Section 56(2)(viib) of the Act, where a company, not being a company in which public are substantially interested, receives in any year from any person, being a resident, any consideration for issue of shares that exceeds the face value of such shares, the aggregate consideration received for such shares as exceeds the fair market value of share shall be chargeable to tax under the head "Income from other sources". The Assessing Officer ultimately brought to tax a sum of Rs. 4,05,00,000/- lakhs in terms of provisions of Section 56(2)(viib) of the Act.

9.

We find that there has been a shifting stand on behalf of the Assessing Officer wherein, he refers to the issue of shares at a premium on receipt of information from Additional/JDIT(I&CI) Bhopal, and the assessee was put to notice, and the necessary submissions were filed, including the Chartered Accountant’s valuation report, which apparently has been accepted by the Assessing Officer and does not form basis for reopening of the case of the assessee, however, while passing the reassessment order, the Assessing Officer has finally brought the said premium amount to tax by invoking provisions of Section 56(2)(viib) of the Act. At the same time, the very basis for reopening of the assessment where the creditworthiness of the lenders from whom the holding company has borrowed funds and invested by way of preference shares in the assessee company were doubted, we find that though during the course of reassessment proceedings, the Assessing Officer issues notices to the lenders as well as to the holding company and raises certain suspicion basis review of the bank statement provided by one of the three lenders, at the same time, does not record any conclusive finding either accepting or rejecting the nature and source of such investments.

10.

We therefore find that there is a complete lack of appreciation and understanding of the factual matrix of the case by the Assessing Officer

ITA No. 2449/Mum/2026; A.Y. 2015-16 Solapur Bio Energy Systems Private Limited and lack of clear findings on part of the Assessing officer. We therefore, deem it appropriate that the matter is set aside to the file of the Assessing Officer for de novo adjudication to thrash out all the relevant facts and thereafter, decide the matter afresh in accordance with law, after providing reasonable opportunity to the assessee.

11.

In light of the same, the various contentions raised by the ld. AR on behalf of the assessee including the transactions between the assessee company and its holding company and non-applicability of provisions of Sections 56(2)(viib) and the reliance on various authorities on the subject are left open and the assessee is at liberty to raise the same before the Assessing Officer where so advised.

12.

In the result, the appeal filed by the assessee is allowed for statistical purposes.

Order pronounced in the open court on 14.08.2026

Sd/- Sd/- SANDEEP SINGH KARHAIL VIKRAM SINGH YADAV (JUDICIAL MEMBER) (ACCOUNTANT MEMBER)

Mumbai, Dated: 14.08.2026 Karishma J. Pawar, SR. PS

Copy to : 1) The Appellant 2) The Respondent 3) The CIT concerned 4) The D.R, ITAT, Mumbai 5) Guard file

ITA No. 2449/Mum/2026; A.Y. 2015-16 Solapur Bio Energy Systems Private Limited By Order

Dy./Asst. Registrar I.T.A.T, Mumbai

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