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Facts
The assessee company received share application money and premium totaling Rs. 47,00,000/- from two entities, Sidhi Dealmark Pvt. Ltd. and Sakshi Vena Trade Pvt. Ltd. The AO added this amount to the assessee's income under Section 68 as unexplained cash credit, holding that the entities lacked financial capacity. The CIT(A) upheld this addition.
Held
The Tribunal found that the assessee had filed additional evidence, including bank statements of the share applicants, which were necessary for verifying creditworthiness. The Tribunal decided to remit the issue back to the CIT(A) for necessary verification, granting the assessee an opportunity to be heard.
Key Issues
Whether the addition of share application money and premium under Section 68 is justified when the assessee provides additional evidence to prove the creditworthiness of the investors for verification.
Sections Cited
68, 143(3), 142(1), 29
AI-generated summary — verify with the full judgment below
Income Tax Appellate Tribunal, “SMC” BENCH, MUMBAI
Before: SMT. BEENA PILLAI
Per: Smt. Beena Pillai, J.M.: The present appeal filed by the assessee arises out order dated 06/09/2024 passed by NFAC Delhi for assessment year 2012-13 on following grounds of appeal:
“1. In the facts and circumstances of the case and in law, Id. CIT(A) has erred in confirming the action of the Id. AO in making additions of Rs. 47,00,000 to the income of the assessee company under Section 68. The action of the Id. CIT(A) is illegal, unjustified, arbitrary and against the facts of case. Relief may please be granted by deleting the entire such additions made by Id. AO as confirmed by the Id. CIT(A).
2 ITA 5758/Mum/2024 A.Y. 2012-13
The assessee company craves its right to add, amend or alter any of the grounds on or before the hearing.” Brief facts of the case are as under:
2. The assessee is a private limited company and filed its return of income for the AY 2012-13 was filed on 19.09.2012 admitting Nil income. The Ld.AO noted that assessee received share application from 11 different entities. The Ld.AO completed assessment u/s.143(3) of the Act on 30.03.2015 by, assessing the total income at Rs.1,73,22,470/-. The entire share application received by the assessee was added u/s 68 of the IT Act as unexplained cash credit.
Aggrieved against the assessment order, the assessee company filed appeal before the Ld.CIT(A).
The Ld.CIT(A) granted part relief to the assessee for a sum of Rs.1,26,45,700/-. However, no relief was granted in respect of share application money and share premium received from Sidhi Dealmark Pvt. Ltd amounting to Rs.41,00,000/- arid from Sakshi Vena Trade Pvt. Ltd amounting to Rs.6,00,000/- totalling to Rs.47,00,000/-.
This order was challenged by the assessee before this Tribunal in ITA No.1643/MUM/2020. This Tribunal vide order dated 18/02/22 set-aside the order of the Ld.CIT(A) to Ld.AO for fresh assessment.
4.1. Accordingly, notice u/s 142(1) of the Act was issued by the Ld.AO and the assessee was asked to submit financials of the 3 ITA 5758/Mum/2024 A.Y. 2012-13 share applicants for the three previous years. The assessee submitted financials for only one year in respect of the share applicants. Upon perusal of the financials and profit & Loss Account, the Ld.AO noticed that, Sidhi Dealmark Pvt Ltd., had profit of Rs.1,134/- for the AY 2012-13. As per the comparative figure noticed in financial, the share applicant has declared loss of Rs.3,370/- for the AY 2011-12. In respect of M/s Sakshi Vena Trade Pvt Ltd also declared loss of Rs. 56,497/- for AY 2012-13.
4.2. The Ld.AO concluded that, these creditors did not have any financial capacity to invest in share capital of the assessee. The Ld.AO thus retained the addition of Rs.47,00,000/-.
Aggrieved by the order of Ld.AO assessee preferred the appeal before the Ld.CIT(A).
The assessee filed various documents that were necessary to consider the claim. The Ld.CIT(A) after going through the documents and directions of the Tribunal observed and held as under:
“6. I have perused the order passed by the AO, the written submissions filed by the appellant and the Paper Book submitied during the course of appeal. The appellant company submitted that, all the necessary evidences in support of receipt of share application money was submitted during the course of criginal assessment proceedings and also during the course of set-aside proceedings. The appellant, referred the decision of the Hon'ble ITAT and submitted that, they were asked to prove the identity and creditworthiness of the creditors and that has been discharged by them. It is also submitted that, they have submitted details of PAN, copy of IT Returns, Bank account statement etc., of the creditors along with audited financials. However, on the other hand the AO has called for the financials of the share applicants for the last three 4 ITA 5758/Mum/2024 A.Y. 2012-13 years to verify the credit worthiness and genuineness of the entire transaction. As the appellant did not submit the details for three AYs, the AQ has analysed the financials of the share applicants for the AY 2012-13 and recorded a categorical finding that, the share applicants did not have any credit worthiness.
During the course of appeal proceeding the appellant company was asked to submit the financial of Sidhi Dealmark Pvt Ltd and Sakshi Vena Trade Pvt Ltd for the AY 2011-12 to 2015-16 with copies of their bank account to verify the source of investment for a sum of Rs.41,00,000/- and Rs. 6,00,000/- respectively totaling to Rs.47,00,000/-. However, the appeltant company did not submit such details to verify the credit worthiness of the share applicants. It is to be mentioned here that the AO recorded in para 7.1. in assessment order that these two companies did not have any credit worthiness to invest in thé:ab‘pellant’s company in the form of share application money with share premium; In-view of the detailed order passed by the AOQ the addition of Rs.47,00,000/- is upheld” Aggrieved by the order of the Ld.CIT(A) assessee is in appeal before this Tribunal.
It is submitted that, the assessee had to furnished copy of bank statement of the two share applicants who had infused funds into the assessee in form of share capital. It is submitted that, assessee could not obtain the fianacials of the two applicants for A.Y. 2012-13, but has obtained the bank statement that is been e-filed with Tribunal. The Ld.AR filed this document with an application under Rule 29 of Income Tax Rule 1962, for admissions of additional evidences. It is submitted that, these documents are necessary to verify creditworthiness and genuiness of the entire transaction.
6.1 The Ld.DR submitted that, the additional evidences may reminded to the Ld.CIT(A) to carry out necessary verification.
5 ITA 5758/Mum/2024 A.Y. 2012-13 6.3. Considering the submissions of the both sides in the interest of justice I deem it proper to remit the issue back to the Ld.CIT(A) for necessary verification. In accordance with law Needless to say that proper opportunity of being herd must be granted to assessee in accordance with law.
Accordingly grounds raised by the assessee stands partly allowed for statistical purposes.
In the result appeal filed by the assessee stands partly allowed for statistical purposes.
Order pronounced in the open court on 21/02/2025