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Facts
A search operation under Section 132 was conducted on the assessee's group, followed by a notice under Section 153A. The Assessing Officer made an addition of Rs.4,09,81,700/- as unexplained share capital under Section 68, citing the assessee's failure to prove the identity, creditworthiness, and genuineness of investors despite submissions. The Ld. CIT(A) subsequently deleted this addition, finding that the assessee had discharged its onus by providing necessary documents and that no incriminating material linking the share capital was found during the search.
Held
The Tribunal upheld the decision of the Ld. CIT(A) to delete the addition under Section 68. It held that the assessee had discharged its onus by furnishing documentary evidence for identity, creditworthiness, and genuineness of transactions, which the AO failed to rebut with contrary evidence. Furthermore, the Tribunal noted that no incriminating material related to the share capital investment was impounded during the search, a crucial factor in assessments initiated under Section 153A.
Key Issues
Whether the addition of unexplained share capital under Section 68 was justified when no incriminating material was found during a search under Section 132/153A, and whether the assessee had discharged its onus to prove identity, creditworthiness, and genuineness of the investors.
Sections Cited
132, 153A, 153C, 68
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Income Tax Appellate Tribunal, DELHI BENCH “C” NEW DELHI
Before: SHRI SHAMIM YAHYA & SHRI CHALLA NAGENDRA PRASAD
सुनवाईक�तारीख/ Date of hearing: 21.03.2025 21.03.2025 उ�ोषणाक�तारीख/Pronouncement on आदेश /O R D E R PER C.N. PRASAD, J.M.
This appeal is filed by the Revenue against the order of the Ld. CIT(Appeals)-26, New Delhi dated 04/01/2018 for the AY 2014- 15 in deleting the addition of Rs.4,09,81,700/- made by the Assessing Officer on account of unexplained share capital u/s 68 of the Act.
Brief facts are that a search and seizure operation u/s 132 of the Act was carried out on 28/03/2015 in the case of M.M. Aggarwal Group of cases. The case of the assessee was also covered in the search. Consequent to the search a notice u/s 153A was issued to the assessee on 2/11/2016 and in response to the said notice the assessee filed return on 7/11/2016 declaring loss of Rs.49,187/-.
The Assessing Officer in the course of assessment proceedings noticed that assessee received share capital during the assessment year under consideration i.e. 2014-15 from two companies namely Enrich Agro Food Products Pvt. Ltd. and Indo Gulf Infrastructure and Investment and four other individuals which are tabulated at page 5 of the assessment order. The AO required assessee to produce the shareholders and furnish necessary details. The assessee filed confirmations, bank statements, etc. from the shareholders.
However, the Assessing Officer treated the share capital received by the assessee as an unexplained credit observing that the assessee had not produced the investor and failed to furnish any documentary evidence regarding existence of such investors and further observed that mere filing of confirmations from the parties does not discharge the onus of the assessee.
On appeal the Ld. CIT(A) deleted the addition.
Ld. DR strongly supporting the orders of the Assessing Officer, submits that assessee never discharged its onus by providing the necessary details, documentary evidences, etc. to prove the identity, creditworthiness and genuineness of the transaction and therefore he submitted that the order of the Ld. CIT(A) be reversed and the addition made by the Assessing Officer be restored. On the other hand, the Ld. Counsel for the assessee strongly placed reliance on the orders of the Ld. CIT(Appeals).
Heard rival submissions, perused the orders of the authorities below. On a careful perusal of the order of the Ld. CIT(Appeals) it is observed that the addition made u/s 68 in respect of share capital has been deleted for the reason that there was no seized material impounded in the course of search linked to the share capital investment in assessee company. It is also the finding of the Ld. CIT(A) that the assessee had furnished details of financial of the investing entities and the Assessing Officer has merely accepted the appraisal report of the Investigation Wing without meeting the touchstone test of sec. 68 of the Act. Therefore, the Ld. CIT(A) was of the view that the addition cannot be sustained u/s 68 of the Act.
The Ld. CIT(A) while coming to such opinion observed as under: -
“5.1 I have considered the submissions of the Ld. AR, assessment order and case laws cited in this regard. The AO invoked the process u/s 153A after search on appellant group on 28.03.2015 and on receipt of appraisal report from the DI (Investigation) with the allegation that the appellant company has received unexplained credit in its book u/s 68 of the IT Act. All the grounds of appeal are dealt with together being of similar in nature: 5.2 Regarding the merits, as per ground of appeal no. 3,1 have gone through the assessment order passed by the A.O. and verified the material placed on paper book and was part of the assessment records atsb-. All necessary information/documents requisitioned to verify the identity, genuineness of transaction and credit worthiness of the investors were duly submitted by the appellant for respective investors. The Ld. AR submitted following documents to prove identity, genuineness and creditworthiness of the investor: a) Form PAS-3 filed before ROC b) Confirmations from the investors c) Statements of bank account of the investors showing payments towards share application money. d) Share Application form duly filled by the investors. e) Copy of PAN card of the investors. f) Memorandum & Articles of Association of the investor company clearly depicting their corporate identity number. g) A copy of the acknowledgement of the Income tax return filed for AY 2014-15 by the investors along with its audited financial results for the year ended 31st March 2014.
5.3 From perusal of the details filed by the Ld. AR along with supporting evidences, the source of the investment is duly verifiable. Further, the appellant has 4 issued its shares at face value of Rs. 10/- each and no premium was charged for allotment of equity shares. 5.4 The assessee has furnished the details of financials of the investing entities. After considering the identities, financials and creditworthiness of the investor companies and genuineness of transaction and source and availability of fund by investors, I am of the considered view that the AO has merely accepted the appraisal report of the Investigation Wing without meeting the touchstone tests of section 68 like — credit worthiness, identities and genuineness of transaction. Further A.O has made such addition stating that the income declared by the investors is lesser than the investment made by them which in my opinion has no criteria it is only source and availability of funds which remain the factor to observe. Accordingly the addition made by 1he A.O. u/s 68 of the Act is deleted. 5.5 Ld AR also placed reliance on the judgments in CIT vs. Sophia finance Ltd. (1994] 205 ITR 9g (FB) (Delhi), CIT vs. Nipuan Auto (P) Ltd. ((2014) 49 iaxmann.com 13 (Del.) 361 ITR 155 (Del.), Commissioner of Income-tax vs Winstral Petrochemicals P. Ltd. 2011330 ITR 603(Det.), CIT v. Divine Leasing and Finance Ltd. (2008) 299 ITR 268 (Delhi), CIT v. Stellar InvestmentsLtdl92ITR287(Del.)& CIT v. Stellar Investment Ltd (2001) 251 ITR 263(SC) and contended that the appellant duly discharged the initial burden to establish the identity, creditworthiness and genuineness by submitting necessary documentary evidences in respect of the share application money. Reliance is also placed on the judgments in CIT v. Lovely Exports Pvt. Ltd. 319 ITR (ST) 5 (SC), CIT v. Divine Leasing & Finance Ltd 299 ITR 268 (Del.), [SLP rejected by Hon’ble SC vide order dated 21.01.2008), CIT vs Five Vision Promoters Pvt. Ltd 65 taxmann.com 71 (Delhi HC), CIT v. Vrindavan Farms Pvt. Ltd. (ITA 71/2015) (Delhi HC), CIT V. Kamdhenu Steel & Alloys Ltd. [2004] 361 ITR 0220 (Delhi HC). 5.6 It is pertinent to refer to the recent judgment dated 01st August 2017 in the case of Principal Commissioner of Income Tax, Delhi - 2 vs Best Infrastructure India Pvt. Ltd. covers the case of the appellant on the facts. Relevant Para of the judgment is extracted below:- 31. In Principal Commissioner of Income Tax Central 2, New Delhi v. Meeta Gutgutia (supra), this Court had considered the entire ground of case law on the assumption of jurisdiction under Section 153 A of the Act. In Principal Commissioner of Income Tax Central-2, New Delhi v. Meeta Gutgutia (supra) this Court had the occasion to extensively discuss the decision in Smt. Dayawanti Gupta v. CIT (supra) to point out why the said decision was distinguishable in its application to the facts of the former case. However, since the same arguments have been advanced by the Revenue in the present case, the sold decision in Smt. Dayawanti Gupta vs. CIT (supra) is being again discussed herein.
In Smt. Day aw anti Gupta v. CIT (supra) the Assessees were dealing in the business of pan masala, gutkha, etc. Firstly, the Assessees therein were, by their own admission not maintaining regular books of accounts. Secondly, they also admitted that the papers recovered during the search contained “details of various transactions include purchase/Sales/manufacturing trading of Gutkha, Supari made in cash outside books of accounts" and they were “actually unaccounted transactions made” by two of the firms of the Assessees. Thirdly, the Court found as a matter of fact that the Assesseeswere ’’habitually concealing into “and that they were “indulging in clandestine opetations “and that such persons ’’can hardly be expected to maintain meticulous books or records for long." As pointed out by this Court in Principal Commissioner of Income Tax Central-2, New Delhi v. Meeta Gutgutia (supra) the decision in Smt. Dayawanti Gupta v. CIT (supra), therefore, turned on its own facts and did not dilute the law explained 33. At this stage, it requires to be noticed that the decision of this Court in Commissioner of Income Tax (Central-Ill) v. Kabul Chawla (supra) took note inter
alia of the decision of the Bombay High Court in Commissioner of Income Tax v. [2015] 58 taxmann.com 76 (Born), wherein it was held that if no incriminating material was found during the course of search, in respect of each issue, then no addition in respect of any such issue can be made to the assessment under Sections 153A and 153C of the Act. The decisions of this Court in CIT v. Anil Kumar Bhatia (supra) and CIT v. Chetan Das Lachman Das [2012] 254CT0392 (Del) were extensively discussed in Commissioner of Income Tax (Central-Ill) v. Kabul Chawla (supra). The Court in Commissioner of Income Tax (Central-Ill) v. Kabul Chawla (supra) had also in Commissioner of Income Tax (Central-Ill) v. Kabul Chawla (supra). Continental Warehousing Corporation (Nhava Sheva) Ltd. discussed and concurred with the decision of the Rajasthan High Court in Jai Steel (India), Jodhpur v. ACCT (2013) 36 taxman 523 (Raj) which had held that the assessment in respect of each of the six assessment years, preceding the year of search is a separate and distinct assessment. “It was further held in the said decision that” If in relation to any assessment year, no incriminating material is found, no addition or disallowance can be made in relation to that assessment year in exercise of powers under section 153A of the Act and the earlier assessment shall have to be reiterated.’’ 34. Before the learned CIT (A), the assessee has produced the copy of bank account of all the share applicant companies. The CIT (A) has admitted the same as, additional evidence and has called for the remand report from the Assessing Officer. There is no cash deposit in the bank account of any of the share applicant before the issue of cheque for share application money to the group companies of the assessed. On the other hand, the credit is by way of transaction. During remand proceedings, the Assessing Officer has made necessary verification from the bank of the share applicant and no adverse finding is recorded by hint in the remand report. Therefore, the facts on record are contrary to the allegation of the Revenue that the assessee gave cash to Shri Tarun 7
Goyal and he, after depositing the same in the bank account of various companies, issued cheques for share application money. On these facts, the decision of Hon'ble Jurisdictional High Court in the case of Harjeev Aggarwal (supra) would be squarely applicable. Therefore, we hold that the statement of Shri Tarun Goyal cannot be used against the assessee because: (i) His statement was recorded behind the back of the assessed and the assessee was not allowed any opportunity to cross-examine him. (ii) There is no corroborative evidence in support of the statement of Shri Tarun Goyal. On the other hand, the material found during the course of search and other evidences placed on record by the assessee are contrary to the allegation made by Shri Tarun Goyal in his statement. — Conclusion —
Accordingly the question framed by the Court in ATA Nos. 11, 12 and 21 of 2017 by the order dated 21st March, 2017 is answered in the negative i.e. in favour of the Assessee and. against the Revenue by holding that the additions made under Section 68 of the Act on account of the statements made by the Assessee’s Directors in the course of search under Section 132 of the Act were rightly deleted by the IT AT.” 5.7 Respectfully following the above judgment, which is on identical factual matrix, it can be reasonably inferred that since no material linking the share application money was found during the search in respect of the equity, it cannot lead to the conclusions drawn by the AO. No specific corroborative evidence has been brought on record by Assessing Officer to prove that the equity subscription is an accommodation entry. Besides, appellant has also discharged its onus and submitted all the documentary evidence ill respect of the investment.
The details submitted in this regard by the appellant have also been made part of order by Assessing officer. It is also undisputed fact that the director of the appellant companies have never made any statement regarding the share capital / share premium /share application money and no disclosure have been made with regard to share capital /share premium / share application money / unsecured loan. As such, the addition made by the Assessing officer is unsustainable on the various legal grounds and on facts of the case. The addition made in the case of the appellant is deleted. Therefore, grounds no. 3 is allowed.
On careful perusal of the order of the Ld. CIT(Appeals) we observe that the Assessee furnished all the necessary documents to prove the identity, creditworthiness and genuineness of the shareholders and the Ld. CIT(Appeals) after analyzing the evidences held that there cannot be any addition u/s 68 of the Act. We do not find any good reason to reverse the findings of the Ld. CIT(Appeals) as none of these findings of the Ld. CIT(A) were rebutted with evidences by the authorities below. Grounds raised by the Revenue are rejected.
In the result, appeal of the Revenue is dismissed.
Order pronounced in the open court on 21.03.2025