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Facts
The assessee company filed its income tax return for AY 2012-13, which was processed u/s 143(1) and subsequently selected for scrutiny u/s 143(2). The Assessing Officer made additions totaling Rs. 28,14,655, comprising Rs. 20 lakhs for share capital/premium u/s 68, Rs. 14,655 for expenses u/s 14A, and Rs. 7,21,400 for a mismatch in AIR data (related to Section 50C). The CIT(A) dismissed the assessee's appeal, leading to this further appeal before the Tribunal.
Held
The Tribunal deleted the addition u/s 68, finding that the share application money was received in the preceding year and later converted to share capital or refunded, citing relevant judicial precedents. The addition u/s 14A was also deleted as no exempt income was earned by the assessee during the year. The issue regarding the AIR mismatch/Section 50C, which pertained to assets treated as stock-in-trade and the applicability of Section 43(A), was remitted back to the Assessing Officer for fresh adjudication after hearing the assessee.
Key Issues
Whether the additions made u/s 68 for share capital and premium were justified; whether the disallowance u/s 14A was valid in the absence of exempt income; and the correctness of the addition u/s 50C for AIR data mismatch regarding assets treated as stock-in-trade.
Sections Cited
68, 14A, 50C, 143(1), 143(2)
AI-generated summary — verify with the full judgment below
Income Tax Appellate Tribunal, “ बी” BENCH: KOLKATA
Before: Shri Rajesh Kumar&Shri Pradip Kumar Choubey]
ORDER / आदेश Per Pradip Kumar Choubey, JM: This is the appeal preferred by the assessee against the order of Commissioner of Income Tax (Appeals)- NFAC, Delhi (hereinafter referred to as the Ld. CIT(A)] dated 10.05.2024 for AY 2012-13.
Assessment Year: 2012-13 Mayfair Villa Pvt. Ltd.
Brief facts of the case of the assessee is that the assessee being a company filed its return of income for AY 2012-13 declaring total income of Rs. 94,16,560/-. The case was accordingly processed u/s 143(1) accepting the return of income. The case of the assessee was selected for scrutiny, notice u/s 143(2) of the Act was also issued. The AO after going over the submission made by the assessee following additions have been made: i) Disallowance of share capital including premium Rs. 20,00,000/- ii) disallowance expenses u/s 14A Rs. 14,655/- iii) Disallowance on account of mis-match in AIR data Rs. 7,21,400/-
Aggrieved by the said order, the assessee preferred an appeal wherein the appeal of the assessee has been dismissed.
Being aggrieved and dissatisfied the assessee preferred an appeal before us.
The Ld. Counsel appeared on behalf of the assessee challenges the very impugned order thereby submitting that the Ld. CIT(A) erred in law as well as on facts in confirming the addition in respect of share capital including premium to the tune of Rs. 20,00,000/- ignoring the reality that amount of share capital and premium received in preceding year i.e FY 2010-11 and share application money and converted into share capital during the year under scrutiny. The Ld. Counsel submits that the details of subscribers to the share capital was provided along with all the requisite details such as bank statement, allotment form, company approval as per MCA but the Ld. CIT(A) ignored everything. Further submission of the Ld. AR is that there was no inflow of cash during the year under scrutiny and the identity, genuineness of the transaction and creditworthiness of the subscribers was already provided by the assessee. His further submission is that no exempt income earned so the addition u/s 14A is unwarranted. It has further been argued by the Ld. AR that addition u/s 50C had been made in respect of stock-in-trade, section 43(A) not in operation during the year under scrutiny. The Ld. Counsel cited following decisions: ii) ITO vs. VP Global Energy Pvt. Ltd. [2020] 113 taxmann.com 31 (SC) iii) PCIT vs. Abhijit Enterprises Ltd. (Cal-HC)
Contrary to that the Ld. D.R supports the impugned order.
Upon hearing the submission of the counsel of the respective parties. We have perused the order of Ld. CIT(A) as well as the AO and find that there are additions u/s 68 of the Act, disallowance u/s 14A and u/s 50C of the Act as there was mis-match in the AIR. i) First issue regarding addition u/s 68 of the Act:
On perusal of the paper book filed by the assessee it appears to us that the assessee company received share application money during FY 2010-11 to the tune of Rs. 25,20,000/- that was shown as share application money pending allotment in the group share holder fund in the audited balance sheet for the year 2010-11 which is as follows:
Assessment Year: 2012-13 Mayfair Villa Pvt. Ltd. During the year under scrutiny the allotment made to the tune of Rs. 20,00,000/- out of this assessed figure of Rs. 25,20,000/- and the assessed amount of Rs. 5,20,000/- was , as per the assessee, refunded to the assessee without allotment. It is apparent from the ledger copy of the share application account for the year 2010-11 and 2011-12 which is herein below:
Apart from the above, we find that the assessee has submitted following documents:
Assessment Year: 2012-13 Mayfair Villa Pvt. Ltd. a) Duly filled up share application. b) Bank statement regarding the payment c) Copy of PAN card of subscriber company d) Copy of Article of Memorandum of Association e) Master Data from MCA Portal
Now look at the judgement cited by the assessee. Going over the judgment of the Hon’ble High Court passed in PCIT vs. Abhijit Enterprises Ltd. wherein the Hon’ble High Court held thus: iii) Whether the Learned Tribunal has erred in law and fact in deleting the addition under section 68 of the Act, without appreciating the fact that section 68 not only includes cash credit but also include a credit representing the value of shares on credit? After we have elaborately heard the learned Advocate for the appellant we find learned Tribunal was right in allowing the assessee's appeal to the extent indicated by taking note of the various decisions of the High Court on the very same subject. In this regard, we refer to the decision of the High Court At Madras in V.R. Global Energy (P) Ltd. vs. ITO, Corporate Ward 3(4), Chennai 407 ITR 145 (Madras). It was held that when the assessee allotted share to a company in settlement of their existing liability of assessee to the said company, since no cash was involved in the transaction of said allotment of shares. conversion of this liability in which share capital and share premium could not be treated as unexplained cash credits under Section 68 of the Act. The Revenue filed an appeal against the said judgement and the same was dismissed by the Hon'ble Supreme Court in ITO vs. V.R. Global Energy (P) Ltd. [2020] 113 taxmann. corn 31 (SC). The decision of the Hon'ble Division Bench of the High Court of Delhi in case of CIT vs. Ritu Anurag Agarwal, 2009(7)TMI 1247, Delhi High Court, the same also stands in aid to the case of the respondent/ assessee. The decision of the Hon'ble Division Bench of this Court in Jatia Investment Co. vs. CIT (1994) 206 ITR 78 (Cal) will also support the case of the respondent/assessee. In the said decision, the Court found that cash did not pass at any stage though entries were made in cash book showing payment and receipts; but since the entries made a complete round, no passing of cash was necessary for the purpose of making entries. Further, it was held that if there was no real cash entry on credit side of the cash book by merely an emotional or fictitious cash entry, as admitted by the Income Tax Officer, there is no real credit to cash, to its cash book the question of inclusion of the amount of the entry as unexplained cash credit cannot arise. In the light of the above decision, the view taken by the learned Tribunal was perfectly in order and sustainable."
Going over the above discussion we find substance in the argument of Ld. Counsel of the assessee that the addition made by the AO confirmed by the Ld. CIT(A) u/s 68 is not at all tenable. Accordingly, the same is hereby directed to be deleted.
Going over the computation of taxable income filed by the assessee which is herein below:
It appears that no exempt income earned during the year under scrutiny hence addition is unwarranted, accordingly deleted iii) The third issue regarding the mismatch in AIR:
Going over the balance sheet and fixed asset it appears to us that there was no sale of fixed asset during the year under scrutiny. The purported assets were part of his stock- in-trade and sale consideration of the same forms a part and parcel of the revenue. The submission of the assessee is that the addition u/s 50C had been made in respect of stock-in-trade and section 43(A) not in operation during the year under scrutiny. In our view, this issue has to be reverified by the AO after hearing the assessee. Accordingly, this issue is hereby remitted back to the file of AO for fresh adjudication.
Assessment Year: 2012-13 Mayfair Villa Pvt. Ltd. In the result, the appeal of the assessee is allowed for statistical purposes regarding issue no.3 and allowed with respect to issue no.1 and 2 as discussed above.
Order is pronounced in the open court on 24th April, 2025