PRAJITA INVESTMENTS PVT. LTD,MUMBAI vs. INCOME TAX OFFICER-4(3)(1), MUMBAI, MUMBAI

Per: Smt. Beena Pillai, J.M.:

The present appeal filed by the assessee arises out of order dated 29/01/2024 passed by NFAC, Delhi, for assessment year
2012-13 on following grounds of appeal:-
“1. On the facts and circumstances of the case and law, the Ld. CIT(A) erred in confirming addition of Rs. 15000000 under section 68 of 2
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Income Tax Act, 1961 on account of share capital and share premium even though appellant had proved the identity, genuineness and creditworthiness of Shareholders
2 On the facts and circumstances of the case and law, the Ld. CIT(A) failed to considered that till AY 2013-14 the Share Capital and Share premium are out of preview of provision of section 68 of Income Tax and definition of Income
3 Appellant craves leave to add further grounds or to amend or alter the existing grounds of appeal on or before the date of hearing.”
2. At the outset the Ld. AR submitted that there is delay of 49 days in filing the present appeal before this Tribunal. It is submitted that, the directors of the assessee who was handling the affairs of the company are senior citizen and one of them was medically ill with cancer. It is submitted that due to medical reasons immediate compliance could not made in respect of the order passed by the NFAC causing delay of 49
days. The Ld.AR submitted that the assessee has made out a reasonable cause for the delay which may be considered for condonation.
2.1 On the contrary, the Ld. DR has vehemently opposed the condonation of delay could not controvert the submission of the assessee.
We have perused the submission advance by both the sides in the light of record placed before us.
2.2 It is noted that in the affidavit filed by the assessee, the director of the assessee stated that there are no regular employees and the affairs of the assessees are handle by the assessee and her husband in the capacity of directors.

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Considering the fact that the one of the director was not keeping well during the relevant period due to cancer, the lapse happened causing the delay. In the interest of justice we condone the delay as the assessee has made out a reasonable cost. Accordingly, the application filed by the assessee for condonation of delay stands allowed.
On merits of the case the issue contested by the assessee are regarding the disallowances made u/s 68 of the Act on account of share capital and share premium.
Brief facts of the case that leads to the issue are as under :
3. During the year under consideration, the assessee filed its return of income on 27.09.2012 declaring total income of Rs.
17,02,610/-. The case was selected for scrutiny and statutory notices u/s 143(2) and 142(1) was issued. From the details furnished by the assessee, the Ld. AO noted that the assessee received shares application money from 29 parties to whom the shares were allotted at the premium of 40 rupees each. The assessee was called upon to furnish PAN numbers and amount received from each applicant. It is submitted that, on 16.12.2014 the assessee furnished the name and address alongwith the amount that was contributed by respective share applicants. Assessee also furnished bank account statement of all share applicants. The Ld. AO thereafter issued notice u/s 133(6) to all the parties.
3.1 Out of 29 applicants 9 parties responded to the notice. The Balance 20 were returned by postal authorities with the remark left/unknown. The Ld. AO thus, was of the opinion that the 4
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transaction was not genuine. The Ld.AO called upon the assessee to produce the parties from whom the share application money was received. In response to the notice, the assessee submitted confirmation from the parties, copy of their pass book and balancesheet marking the investment made by them with assessee. The Ld. AO however held the transaction to be not genuine and disallowed Rs. 1,50,00,000/- u/s 68 of the Act.
4. Aggrieved by the order of the Ld. AO the assessee preferred appeal before the CIT(A).
5. The CIT(A) upheld the observation of the Ld.AO as the assessee could not comply with the requirements u/s 68 of the Act. The Ld. CIT(A) also referred to the decision of the Hon’ble
Supreme Court in the case of Sumati Dayal V/s CIT reported in (1995) 214 ITR 801 and CIT Vs. Durga Prasad More reported in (1971) 85 ITR 540. Aggrieved by the order of the CIT(A), the assessee is in appeal before this Tribunal.
6. The Ld. AR submitted that the assessee filed application of all the allottees of the share, signed by the them, PAN of the allottee, ITR computation of total income, P&L account of the allottee, Bank statement of the allottee reflecting the payment made, financial statement for subsequent assessment year in respect of all 29 allottees. It is submitted that the assessee discharged the primary onus of proving the transaction and its genuineness.
6.1 The Ld. AR submitted that the allottee have sufficient funds to invest in the assessee company and that, these allottee’s are shareholder of the assessee even today. The Ld. AR

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emphasised that out of the 29 allottees, 9 persons responded to the notice issue u/s 133(6). However, the Ld. AO disregarded the confirmation furnished by these 9 allottees without carrying out any enquiries. He submitted that, this fact that applicants continue to be shareholder of the assessee has been noted by the Ld. AO.
6.2 The Ld. AR placed reliance on the decision of Hon’ble
Supreme Court in the case of CIT Vs Divine Leasing and Finance reported in 299 ITR 268 wherein Hon’ble Court observed that when details of the applicants are available with the assessing officer and if they are found to be bogus applicant the department is free to proceed and reopen their individuals assessment in accordance with law. The Ld. AR submitted that nothing contrary to what has been submitted by the assessee has been observed by the Ld. AO except mere suspicion as the assessee could not produce the applicants during the assessment proceedings. He thus prayed for addition to be deleted.
6.3 On the contrary the Ld. DR relied on the observation of Ld.
CIT(A) is as under:
“5. I have perused the assessment order and considered the submissions of appellant. In this case, when the assessee claimed to have received money as share application and premium money and credited the sums in its books of accounts, it was its onus to prove the same to the satisfaction of AO.
Assessee merely submitted some documents like share application, return of income, PAN etc. After such production, it was AO’s onus to investigate and examine as per law of section 68. Section 68 has two limbs, viz., (a) amount found credited in books of accounts and (b) nature and source of the amount is 6
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explained to the satisfaction of AO. In this case, (a) is fulfilled. For (b), what explanation is satisfactory is not mentioned in the Act but pronounced in judgments of the Supreme Court and different
High Courts. The settled principle is that three conditions have to be fulfilled, viz., (a) genuineness of identity (b) genuineness of transaction and (c) creditworthiness. To examine these three points, AO sent notices u/s 133(6) to all 29 share applicants. But letters to 20 of them were returned by postal authorities with comments that they were not found. At this moment, AO informed assessee to prove their existence and identity by producing them.
The onus shifted to assessee. But assessee failed to do that and, thus, the first condition of proving genuineness of identity of these twenty creditors remained unfulfilled. When identity is not proved, remaining two aspects, viz., genuineness of transaction and creditworthiness also remained unfulfilled. 6. Regarding the other nine parties, they filed replies but their bank accounts showed credits of matching amounts one or two days before payment to assessee. Therefore, it was relevant to examine whether assessee got its own undisclosed money in the guise of share application and premium money. Therefore, AO asked assessee to produce these persons. But assessee never produced them. Consequently, this aspect of genuineness of transaction as well as creditworthiness remained not proved satisfactorily.
Appellant claimed that all these twenty-nine parties remained shareholders of it even during assessment proceeding. If it is so, assessee was very much in a position to produce them and satisfy the requisition of AO. It was not impossible demand by AO. Therefore, I feel that non-compliance by assessee was not reasonable. Appellant agitated that it produced so many papers but still AO rejected these and added the sum as unexplained.
[1995] 214 ITR 801 (SC) and CIT v. Durga Prasad More (1971)
82ITR 540, pp. 545, 547).”

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when all details has been given non appearance of the parties is irrelevant.
In this background, we are of the opinion that since the Ld.
AO did not even attempt to dislodge the primary evidences furnished by the assessee, addition u/s 68 cannot be made on mere suspicion.
Accordingly the ground raised by the assessee stands allowed.
In the result the appeal filed by the assessee stands allowed.

Order pronounced in the open court on 23/04/2025 (GIRISH AGRAWAL)
Judicial Member
Mumbai:
Dated: 23/04/2025
Disha Raut,
Stenographer
Copy of the order forwarded to:
(1)The Appellant
(2) The Respondent
(3) The CIT
(4) The CIT (Appeals)
(5) The DR, I.T.A.T.By order

(Asstt.