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Facts
The assessee filed its return of income, and after a previous remand, the AO made additions under sections 68 and 69 of the Income Tax Act for the assessment year 2008-09. The CIT(A) upheld these additions, leading to the present appeal.
Held
The Tribunal held that the additions made by the AO and upheld by the CIT(A) were unsustainable. The assessee had discharged its initial onus regarding the identity and creditworthiness of the shareholders, and the AO had relied on investigation wing information without establishing a nexus.
Key Issues
Whether additions made under Section 68 and 69 for share capital and commission were justified without proper enquiry and nexus by the AO, despite assessee providing evidence.
Sections Cited
68, 69, 250, 143(3), 263, 147, 148, 151, 153C, 142(1), 131, 69C
AI-generated summary — verify with the full judgment below
Income Tax Appellate Tribunal, DELHI BENCH ‘G’: NEW DELHI
O R D E R
PER VIMAL KUMAR, JM:
The appeal filed by the Assessee is against order dated 07.08.2025 of the Learned Commissioner of Income Tax (Appeals)-Delhi [hereinafter referred to as ‘the Ld. CIT(A)’] passed u/s 250 of the Income Tax Act, 1961, [hereinafter referred to as ‘the Act’] arising out of assessment order dated 28.11.2019 of the Ld. Assessing Officer, Ward No.18(1), New Delhi [hereinafter referred as ‘the AO’] u/s 143(3)/263 of the Act for Assessment Year 2008-09.
Brief facts of the case are that assessee filed return declaring total income of Rs.7,070/- on 09.07.2008. Assessment Order dated 21.03.2016 was passed. Hon’ble ITAT vide order dated 07.06.2019 directed the AO to give more opportunity to the assessee substantiate with evidence to his satisfaction regarding the identity and creditworthiness of the share applicant companies and genuineness of the transactions. Thereafter, Notice u/s 142(1) of the Act with questionnaire dated 09.09.2019 was issued. The assessee failed to reply the notice. On completion of proceedings, the Ld. AO vide order dated 28.11.2019 made additions of Rs.30,00,000/- and Rs.60,00,000/- under section 68 and 69 of the Act.
Against order dated 28.11.2019 of Ld. AO, the assessee filed appeal before the Ld. CIT(A) which was dismissed vide order dated 07.08.2025.
Being aggrieved appellant assessee preferred the present appeal on following grounds: “
1. On facts and circumstances of the case, the authorities below have erred in upholding the reassessment proceedings ignoring the fact that impugned assessment is invalid and without Jurisdiction as the said assessment is completed without complying with legal requirements of the provisions of section 147/148/151 of the Income Tax Act therefore such assessment is void ab initio and liable to be quashed.
2. The Ld. CIT(A) on the facts and circumstances of the case has erred in upholding the validity of impugned assessment order passed u/s 143(3)/147 of the Act on the ground that the AO was 2 not entitled to take cognizance of the material seized from the third party by invoking provisions of sec 147/148 of the Act ignoring the specific provision u/s 153C of the Act dealing with such material.
3. The Ld. CIT(A) has erred both in law and circumstances of the cases in upholding the addition of Rs.30,00,000/- u/s 68 of the IT Act holding the share capital as unexplained cash credit ignoring the fact that the assessee has discharged its initial onus us 68 of the IT Act explaining nature and source of the credits by filing requisite documents proving identity and creditworthiness of the shareholders and also to establish genuineness of the transaction during assessment proceedings.
4. The Ld. CIT(A) has erred both in law and circumstances of the cases in upholding the addition of Rs.60,000/-w/s 69 of IT Act treating it as unexplained credits in form of expenditure being commission paid at the rate of 2% on accommodation entry of Rs.30,00,000/- and therefore such addition is bad in law and untenable as there was no material before AO in support of above evidence.”
At the time of hearing, the Ld. Authorized Representative for assessee stated that Grounds of appeal
No.1 & 2 are not pressed. Therefore, Grounds of appeal No.1 & 2 are dismissed as not pressed.
6. Ld. Authorized Representative for appellant assessee submitted that Ld. CIT(A) erred in upholding addition of Rs.30,00,000/- u/s 68 of the Act holding the share capital as unexplained cash credit ignoring the fact that the assessee has discharged its initial onus u/s 68 of the Act explaining nature and source of the credits by filing requisite documents providing identity and creditworthiness of the shareholders and also to establish genuineness of the transaction during assessment proceedings. All the details required to prove identity and creditworthiness of transaction were already on record of the AO being filed directly by the investor companies in response to summons issued to them in the original proceedings which fact is coming out in the discussion in para 10 and 11 of original assessment order of page
88. The documents filed are application form share certificate, bank statement, ITR and audited accounts. The above fact was also taken on record by Ld. CIT(A). 6.1 The Ld. AO despite having all the evidences relevant to prove identity of the shareholder, its creditworthiness and genuineness of the transaction and also having the proof of compliance of the summon u/s 131 on his records opted to make the addition without conducting any enquiry based on such evidences brought on records by the appellant/ shareholders. The Id AO appears to be influenced by the Information from the Investigation Wing to take adverse view regarding credits from the shareholders without establishing any nexus of the appellant with the so-called entry operator which was the premise for action u/s 147 in the case.
7. Ld. Departmental Representative relied on order of Ld. CIT(A).
8. From examination of record in light of aforesaid rival contentions, it is crystal clear that Ld. CIT(A) upheld addition of Rs.30,00,000/- u/s 68 of the Act made by Ld. AO. Assessee had filed details regarding identity and creditworthiness of transaction and establish creditworthiness of the shareholders. The Ld. AO relied on information from Investigation Wing to take the adverse view. Regarding creditworthiness of the shareholders without any nexus of assessee with so called entry operators which was the premises for action under section 147 of the Act.
8.1 Hon’ble High Court of Delhi in PCIT v. Adamine Construction (P.) Ltd. (2018) 264 taxman 280 (Dell SLP of revenue is dismissed by Apex Court in. (2018) 264 Taxman 279 wherein it was held that: "No addition can be made u/s 68 of the IT Act when AO went by only the report received and did not make the necessary further enquiries such as into the bank accounts or other particulars available with him but rather received the entire findings on the report, which cannot be considered as primary material. The assessee had discharged the onus initially cast upon it by providing the basic details which were not suitably enquired into by the AO." 8.2 In the case of Nova Promoters & Finlease (P) Ltd 342 ITR 169 (Del.) following observations made are relevant: "These quoted observations clearly distinguish the present case from CIT v Oasis Hospitalities P. Ltd. (supra). Except for discussing the modus operandi of the entry operators generally, the Assessing Officer in that case had not shown whether any link between them and the assessee existed. No enquiry had been made in this regard. Further, the assessee had not been confronted with the material collected by the investigation wing or was given an opportunity to cross examine the persons whose statements were recorded by the investigation wing.” 8.3. A Co-ordinate Bench in assessee own case in for Assessment Year 2010-11 in order dated 17.12.2024 has held as under: “13. Both sides heard. The assessee has raised multiple arguments on jurisdictional Issue challenging validity of reopening of assessment. The assessment in the case of assessee was reopened consequent to search action carried out by the Department in the case of Surender Kumar Jain Group. Surender Kumar Jain was engaged in providing accommodation entries though various companies. The assess ee is allegedly one of the beneficiary to have taken accommodation entry from one of the group companies M/s. Attractive Fin-Lease Pvt. Ltd. managed by Surender Kumar Jain. One of the documents seized during search was Annexure A- 3, the list at back page 28 of said Annexure contained the name of assesssee along with amount and the name of intermediary though whom accommodation entry was allegedly obtained by the assessee. One of the argument raised by the AR of the assessee is that during the course of assessment proceedings, the assessee had furnished various documents including share application form Board Re solutions, Confirmations, copy of e-filed ITR's, Pan Card, Bank Statement and Audited Financial Statement of shareholders of the assessee company. The AO without considering documents placed on record by the assessee made addition in the hands of assessee on two counts i.e. bogus share application money Rs.25,00,000/-and Rs.50,000/- commission paid for obtaining such bogus entries u/s. 69C of the Act. The assessee has placed on record copy of assessment order dated 28.03.2013 for AY 2010-11 in the case of M/s. Attractive Fin- Lease Pvt. Ltd. at page 53 & 54 of the paper book. A perusal of the said assessment order reveals that the AO has accepted the income return by assessee therein i.e. M/s. Attractive Fin-Lease Pvt. Ltd. Rs.58,252/-. No addition whatsoever was made by the AO in the hands of alleged recipient of commission. Once no addition has been made in the hands of recipient of alleged commission no addition could have been made in the hands of payer of such commission. The case of the Revenue that the assessee has obtained accommodation entry with regard to Share Application money against payment of cash, thus fails. In light of documents furnished by the assessee and the case laws on which reliance has been placed by the assessee, in my considered view the addition made by AO and confirmed by the CIT(A) is unsustainable. Hence, additions are directed to be deleted.”
In view of above material facts and well settled principles of law, it is held that the action of Ld. CIT(A) in upholding additions of Rs.30,00,000/- u/s 68 of the Act by holding share capital as unexplained cash credit of Rs.60,000/- u/s 69 treating it as unexplained credit in form of expenditure being illegal are set aside. Therefore, Grounds of appeal
No.3 & 4 are accepted.
10. In the result, the appeal filed by the Assessee is allowed. Order is pronounced in the Open Court on 13.03.2026.