PR. COMMISSIONER OFLNCOME TAX, CENTRAL- II vs. M/S TRN ENERGY PVT. LTD.

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ITA/837/2018HC DelhiDLHC01136464201807 February 2024Bench: HON'BLE MR. JUSTICE YASHWANT VARMA,HON'BLE MR. JUSTICE PURUSHAINDRA KUMAR KAURAV3 pages
AI SummaryDismissed

What did the High Court hold?

The High Court found no merit in the appeal filed by the Revenue and dismissed it. The Court noted that the ITAT had made specific findings of fact. The ITAT had observed that the assessee had provided the investor company's confirmation, particulars, bank statement, and income tax return. Crucially, the ITAT noted that the investor company's balance sheet showed a total capital of Rs. 40,18,20,586, which was more than sufficient for the investment. The ITAT also pointed out that the AO did not dispute the identity of the investor company and, despite noting high-value transactions in the investor company's bank account, doubted its creditworthiness solely based on its low declared income. The ITAT concluded that the assessee had produced sufficient evidence to discharge its initial onus regarding identity, creditworthiness, and genuineness. The ITAT also noted that the AO did not conduct further investigation or ask for the production of the investor company for examination under Section 131, nor did it find any adverse material. Consequently, the High Court held that the appeal failed to raise any substantial question of law warranting consideration.

What were the facts?

The Revenue, represented by the Pr. Commissioner of Income Tax, Central-II, filed an appeal against an order of the Income Tax Appellate Tribunal (ITAT) dated January 1, 2018, pertaining to Assessment Year 2012-13. The appeal challenges the ITAT's deletion of an addition of Rs. 10,63,50,000 made by the Assessing Officer (AO) under Section 68 of the Income Tax Act, 1961, concerning unexplained cash credit. The AO had made this addition after the assessee, M/s TRN Energy Pvt. Ltd., received share application money from M/s Jaisri Properties Exports Pvt. Ltd. The ITAT, in its order, noted that the assessee had provided the investor company's confirmation, particulars, bank statement, and income tax return. The AO had questioned the creditworthiness of the investor company due to its low declared income, despite noting high-value transactions in its bank account. The ITAT found that the investor company's balance sheet showed sufficient capital to make the investment.

What were the issues?

1. Whether the ITAT erred in law and facts by deleting the addition of Rs. 10,63,50,000/- made by the AO on account of unexplained cash credit under Section 68 of the Income Tax Act, 1961? 2. Whether the ITAT erred in ignoring the fact that the company failed to discharge the onus under Section 68 of the Act to prove the creditworthiness of share applicants and the genuineness of the transactions? Assessee's Contentions (as inferred from ITAT's findings): The assessee contended that it had discharged its initial onus under Section 68 by providing the investor company's confirmation, particulars, bank statement, and income tax return. The assessee also submitted the investor company's balance sheet, showing sufficient capital for the investment. The assessee argued that the AO did not dispute the identity of the investor company and that the objections raised by the AO were met. Revenue's Contentions (as inferred from the appeal grounds): The Revenue argued that the ITAT erred in deleting the addition, asserting that the assessee failed to discharge its onus under Section 68 to prove the creditworthiness of the share applicants and the genuineness of the transactions. The Revenue highlighted the low income declared by the investor company as a reason to doubt its creditworthiness.

Which sections of the Income-tax Act were involved?

Section 68,Section 131

AI-generated summary — verify with the full judgment below

$~9 * IN THE HIGH COURT OF DELHI AT NEW DELHI + ITA 837/2018

PR. COMMISSIONER OF INCOME TAX, CENTRAL- II ..... Appellant

Through: Mr.Shubhendhu Bhattacharya

for Mr.Kunal Sharma, Sr.SC for

Revenue.

versus

M/S TRN ENERGY PVT. LTD.

..... Respondent

Through: Mr.Ajay Vohra, Sr.Adv with

Mr.Rohit Jain and Mr.Aniket

D.Agrawal, Advs.

CORAM:

HON'BLE MR. JUSTICE YASHWANT VARMA

HON'BLE MR. JUSTICE PURUSHAINDRA KUMAR

KAURAV

O R D E R %

07.02.2024 1. The appellant-Revenue has instituted the instant appeal seeking to assail the order of the Income Tax Appellate Tribunal [‘ITAT'] dated 01 January 2018 for Assessment Year [‘AY’] 2012-13. The appeal is proposed to be pressed before us on the following questions of law:- A. Whether the ITAT has erred in law and on facts of the case in deleting the addition of Rs 10,63,50,000/- made by the Assessing Officer [‘AO’] on account of unexplained cash credit under Section 68 of the Income Tax Act, 1961 ["Act"]? B. Whether the ITAT has erred in ignoring the fact that the company failed to discharge the onus under Section 68 of the Act to prove the creditworthiness of This is a digitally signed order. The authenticity of the order can be re-verified from Delhi High Court Order Portal by scanning the QR code shown above. The Order is downloaded from the DHC Server on 16/12/2024 at 14:31:50

share applicants and genuineness of the transactions? 2. We note that while dealing with the issue of Section 68 of the Act, the ITAT has returned the following findings of fact:- "7. We have considered the rival contentions and perused the material on record. In this case, the assessment under section 143(3) have been passed on scrutiny assessment. The A.O. from the books of account of the assessee-company found that assessee-company has received fresh share application money of the impugned amount from M/s. Jaisri Properties Exports Pvt. Ltd., The A.O. asked the assessee-company to prove the genuineness of the transaction in the matter with supporting documentary evidence. The assessee- company filed confirmation of the Investor Company along with its particulars, bank statement and copy of the income tax return filed with the Department. The A.O. noted that there were high value transactions conducted by the Investor Company. The Investor Company has filed return of income at Rs.2,80,610 and copy of the balance sheet is not filed. The assessee-company has filed copy of the balance sheet before the authorities below. Copy of the same is also filed in the paper book . Page-53 of the paper book is balance sheet of the Investor Company to show that it has total capital of Rs.40,18,20,586 which was more than enough to make investment in share application money with the assessee-company. Thus, the objections of the A.O. have been clearly met by the assessee- company. It may also be noted that the A.O. did not dispute the identity of the Investor Company and merely on account of low income declared by the Investor Company was of the view that its creditworthiness is not explained. The A.O. on the one hand has mentioned in the assessment order that bank account of the Investor Company reveal that there are high value transactions carried out through the Bank. Therefore, creditworthiness of the Investor Company should not have been doubted. The assessee-company produced sufficient evidence before A.O. to discharge the initial onus upon it to prove the identity, creditworthiness and genuineness of the transaction in the matter. Further the A.O. did not make any investigation on the documentary evidences filed by the assessee- company. The A.O. did not ask for the production of the Investor Company for examination under section 131 of the I.T. Act. No enquiry have been made directly or indirectly by the A. O. on the documents filed by the assessee-company at the assessment stage. No adverse material was found during the course of search to prove that share application money received by the assessee-company was bogus or was an arranged affair of the assessee-company."

3.

Consequently, and in the light of the findings of fact as returned by the ITAT, we find no merit in the instant appeal. The appeal in any This is a digitally signed order. The authenticity of the order can be re-verified from Delhi High Court Order Portal by scanning the QR code shown above. The Order is downloaded from the DHC Server on 16/12/2024 at 14:31:50

case fails to raise any substantial question of law which would merit consideration. 4. It shall consequently stand dismissed.

YASHWANT VARMA, J.

PURUSHAINDRA KUMAR KAURAV, J. FEBRUARY 07, 2024/MJ This is a digitally signed order. The authenticity of the order can be re-verified from Delhi High Court Order Portal by scanning the QR code shown above. The Order is downloaded from the DHC Server on 16/12/2024 at 14:31:50

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