INTERGLOBE EDUCATION SERVICES LIMITED vs. ASSISTANT COMMISSIONER OF INCOME TAX OFFICER AND ANR

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W.P.(C)/58/2023HC DelhiDLHC01000128202219 January 2023Bench: HON'BLE MR. JUSTICE VIBHU BAKHRU,HON'BLE MR. JUSTICE AMIT MAHAJAN5 pages
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What did the High Court hold?

The High Court found the demand raised by the Assessing Officer to be untenable. The Court noted that the Assessing Officer had added ₹46,07,78,600 as unexplained income under Section 68 of the Income Tax Act, 1961, on the ground that the basis for the issue of share capital was not explained. However, it was undisputed that the assessee had acquired leasehold rights of a property at a value of ₹46,07,78,600 and issued share capital of the same amount in consideration. The Assessing Officer's rejection of the assessee's valuation report, without a departmental valuation report being available, and the subsequent addition under Section 68 were considered questionable. The Court observed that there was no dispute as to the nature of the transaction and that the Assessing Officer seemed to have an issue with the valuation. The Court was inclined to accept the contention that the assessment order was passed without application of mind. Consequently, the Court stayed the impugned demand in its entirety and directed the Appellate Authority to dispose of the petitioner's appeal expeditiously, within four weeks.

What were the facts?

The petitioner, Interglobe Education Services Ltd., filed a writ petition challenging an assessment order dated September 30, 2021, for Assessment Year 2017-18, which raised a tax demand of ₹54.78 crores. The petitioner argued the assessment order was erroneous. The Assessing Officer made an addition of ₹46,07,78,600 as unexplained income under Section 68, stating the basis for issuing share capital was not explained. The petitioner, a subsidiary of InterGlobe Enterprises Pvt. Ltd., had acquired leasehold rights for a property valued at ₹46,07,78,600 and issued share capital of the same amount in consideration. The Assessing Officer found the valuation report submitted by the assessee unsatisfactory and noted that a departmental valuation report had not been received. The petitioner had appealed the assessment order to the National Faceless Appeal Centre and sought a stay of the demand from the Jurisdictional Commissioner, who directed payment of 20% of the demand for a stay.

What were the issues?

1. Whether the assessment order dated September 30, 2021, passed under Section 143(3)/144B of the Income Tax Act, 1961, for AY 2017-18, which added ₹46,07,78,600 as unexplained share capital under Section 68, is ex-facie erroneous and untenable in law, and consequently, whether the demand raised pursuant to this order should be stayed? Assessee's Contention: The assessment order is ex-facie erroneous and untenable. The issuance of share capital of ₹46,07,78,600 was in consideration for acquiring leasehold rights of a property valued at the same amount, supported by a valuation report. The Assessing Officer's rejection of the valuation report without a departmental report and the addition under Section 68 are unjustified. The petitioner relies on the facts of the transaction and the principles of Section 68. Revenue's Contention: The demand of ₹46,07,78,600 is erroneous. However, the petitioner might be liable for tax on the difference between the fair value of the property and the stated consideration. The matter should be examined by the Appellate Authority as the present petition is for a stay.

Which sections of the Income-tax Act were involved?

Section 68,Section 143(3),Section 144B,Section 115BBE,Section 271AAC

AI-generated summary — verify with the full judgment below

$~26 * IN THE HIGH COURT OF DELHI AT NEW DELHI + W.P.(C) 58/2023 & CM No.134/2023

INTERGLOBE EDUCATION SERVICES LTD..... Petitioner

Through: Mr. Rohit Jain & Mr. Aniket D.

Agrawal, Advs. Versus

ASSISTANT COMMISSIONER OF INCOME

TAX OFFICER AND ANR

..... Respondents

Through: Mr. Shailendera Singh, Adv.

CORAM:

HON'BLE MR. JUSTICE VIBHU BAKHRU

HON'BLE MR. JUSTICE AMIT MAHAJAN

O R D E R %

19.01.2023

CM No.135/2023 (for exemption) 1. Exemption is allowed, subject to all just exceptions. 2. The application is disposed of. W.P.(C) 58/2023 3. The petitioner has filed the present petition, inter alia, praying that the demand of tax raised pursuant to the assessment order dated 30.09.2021, passed under Section 143(3)/144B of the Income Tax Act, 1961 in respect of the assessment year 2017-18, be stayed. 4. It was the petitioner’s contention that the assessment order is ex facie erroneous and untenable in law. This Court briefly examined the said contention and, prima facie, found the same to be merited. The learned counsel appearing for the respondents had sought time to obtain instructions. The order passed on 04.01.2023 is set out below: “1. The petitioner has filed the present petition, inter alia praying that the demand pursuant to the assessment order dated 30.09.2021, passed under Section 143(3)/144B of the Income Tax Act, in respect of the assessment year 2017-2918 be stayed. 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 03/06/2026 at 13:42:48

2.

Issue notice. 3. The learned counsel appearing for the respondents accepts notice. 4. The petitioner has appealed the said assessment order dated 30.09.2021 before the National Faceless Appeal Center. The petitioner seeks that the demand of ₹54.78 crores determined pursuant to the said assessmentorder be stayed till the disposal of the appeal. 5. The petitioner had made an application to the Jurisdictional Commissioner for stay of the said demand. The Jurisdictional Commissioner passed an order dated 21.12.2022, calling upon the assessee to make a payment of at least 20 per cent of the outstanding demand. The said order further states that the stay of demand shall be granted only after the said 20 per cent of the demand is deposited by the assessee. 6. It is the assessee's case that the assessment order is ex-facie erroneous and untenable in law and no reasonable person versed with the Income Tax Act, 1961 could possibly have passed this order. The assessee had placed the relevant facts on record. However, it is seen that the order dated 21.12.2022 passed by the Jurisdictional Commissioner does not consider the said aspect. 7. We have briefly examined the assessment order in view of the petitioner's contention that the said order is ex-facie erroneous. 8. The assessee is engaged in running a training school under the name of „School of Aircraft Maintenance and Engineering‟ which provides aircraft maintenance training to students. The assessee had declared a loss of ₹2,81,59,550/- in its return for the relevant assessment year 2017-2018. However, the Assessing Officer has raised the demand by making addition of ₹46,07,78,600 as unexplained income under Section 68 of the Income Tax Act on the ground that the “basis for the issue of the share capital of ₹46,07,78,600 by the assess is not explained”. 9. The assessee is the fully owned subsidiary of InterGlobe Enterprises Pvt. Ltd. During the relevant assessment year the assessee had acquired lease hold rights of the property, Plot No.25/3, Knowledge Park- III, Gr. Noida, Dist. Gautam Budh Nagar (UP), in terms of the conveyance deed/ transfer deed dated 03.02.2017. The said property was valued at ₹ 46,07,78,600/-. It is the petitioner's case that in consideration of the said property, it had issued a share capital of ₹46,07,78,600/-. The Assessing Officer has not disputed that the assessee had acquired the said property from its holding company at a value of ₹46,07,78,600/- and had issued shares against the consideration for the said asset. However, according to the Assessing Officer, the valuation report submitted by the assessee "is 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 03/06/2026 at 13:42:48

not fulfilling the criteria of merits". The Assessing Officer had also sought a departmental evaluation report but admittedly, no such report had been received. The relevant extract of the assessment order reads as under:

“7.2 Further, the submission of the assessee in respect of issue of share of Rs.46,07,78,600/- has been duly considered but not found tenable. The submission in this regard given by assessee is not sufficient to prove the genuineness in respect of the share issued to the IGEPL. The assessee has issued 46,07,786 equity shares (face value of Rs. 100 each) on 03.02.2017 towards consideration for acquiring leasehold rights of an immovable property, as per Conveyance/Transfer Deed. The assessee has acquired lease hold rights of immovable property, i.e. Institution Plot No. 25/3, Sector Knowledge Park-III, Greater Noida, Distt- Gautam Budh Nagar, Uttar Pradesh - 201308 at declared value of Rs. 46,07,78,600/- in the financial year. Further, the assessee has submitted that the movable property has been transferred by IGEPL to the assessee company at the written down value on the date of transfer but he has not submitted satisfactory supporting documentary evidences in this regard. Further the assessee has submitted that value of immovable property has been taken at the fair market value of the land & building as computed by Government Approved Valuer. In this regard it is submitted that the valuation report submitted by the assessee is not fulfilling the criteria of merits, however, the DepartmentalValuation Report has not been received in this regard till date. In view of the same the value of the movable and immovable assets which is taken as the basis of the issue of share of Rs. 46,07,78,600/- by the assessee is not explained.

7.3 In view of the above, the value of the movable and immovable assets which is taken as the basis of the issue of share of Rs. 46,07,78,600/- by the assessee is not acceptable in toto. The submission in this regard given by assessee is not sufficient to prove the genuineness of the issue of share to the IGEPL. Hence, the issue of 46,07,786 equity shares (face value of Rs. 100 each) is not found genuine. Hence, the value of the same i.e. Rs. 46,07,78,600/- is treated as unexplained share capital and added to the total income of assessee for the A.Y. 2017-18 u/s 68 of the I.T. Act. The income assessed u/s. 68 of the Act is taxed u/s 115BBE. Penalty 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 03/06/2026 at 13:42:48

proceedings U/s. 271AAC of the I.T. Act is initiated separately.” 10. It is relevant to refer to Section 68 of the Income Tax Act reads as under:

“68. Cash credits - Where any sum is found credited in the books of an assessee maintained for any previous year, and the assessee offers no explanation about the nature and source thereof or the explanation offered by him is not, in the opinion of the [Assessing Officer], satisfactory, the sum so credited may be charged to income- tax as the income of the assessee of that previous year :

[Provided that where the assessee is a company (not being a company in which the public are substantially interested), and the sum so credited consists of share application money, share capital, share premium or any such amount by whatever name called, any explanation offered by such assessee-company shall be deemed to be not satisfactory, unless—

(a) the person, being a resident in whose name such credit is recorded in the books of such company also offers an explanation about the nature and source of such sum socredited; and

(b) such explanation in the opinion of the Assessing Officer aforesaid has been found to be satisfactory:

Provided further that nothing contained in the first proviso shall apply if the person, in whose name the sum referred to therein is recorded, is a venture capital fund or a venture capital company as referred to in clause (23FB) of section 10].” 11. Undisputedly, there is no unexplained cash credit uncovered by the Assessing Officer. We are at a loss to understand as to how the aforesaid transaction has been brought under the ambit of Section 68 of the Income Tax Act. 12. Prima facie we are inclined to accept the contention that no person familiar with the Income Tax Act, could possibly accept the said assessment order and the same is without application of mind. As noted above, there is no dispute as to the nature of the transaction. The Assessing Officer seems to harbour a view that the valuation is higher than the one disclosed by the assessee. 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 03/06/2026 at 13:42:48

13.

The learned counsel appearing for the respondent prays for some time to seek instructions. 14. In view of the above, the impugned demand is stayed till the next date of hearing. 15. List on 19.01.2023.”

5.

Mr. Singh, learned counsel appearing for the respondents, states that as far as the demand for ₹46,07,78,600/- is concerned, the same is, obviously, erroneous. He further submits that the petitioner may be liable to pay tax for the difference in the fair value of the property and the amount of ₹46,07,78,600/-, which is the stated consideration for the same, but not the entire stated consideration. However, he submits that since the petitioner has filed an appeal, it may be proper for the Appellate Authority to examine the petitioner’s challenge, as the petitioner’s prayer in the present petition is limited to seeking a stay of the impugned demand. 6. Since it is apparent that the demand raised is untenable, we find that the present petition is a fit case for staying the impugned demand in its entirety. We also consider it apposite to direct the Appellate Authority (through National Faceless Appeal Centre) to consider the petitioner’s appeal and dispose of the same as expeditiously as possible, and in any event, within a period of four weeks from today. 7. The petition is disposed of in the aforesaid terms.

VIBHU BAKHRU, J

AMIT MAHAJAN, J JANUARY 19, 2023/‘gsr’ 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 03/06/2026 at 13:42:48

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