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Facts
For A.Y. 2009-10, the assessment was reopened under Section 148, and the Assessing Officer added Rs.2,99,50,000/- (share capital and premium) under Section 68, doubting genuineness and creditworthiness, which the CIT(A) deleted. For A.Y. 2012-13, the Revenue challenged the CIT(A)'s deletion of additions related to share capital/premium, various unsecured loans, and commission/brokerage, and its treatment of share capital increase expenses as revenue.
Held
For A.Y. 2009-10, the Tribunal upheld the CIT(A)'s deletion of the Section 68 addition, finding the assessee discharged its onus; the Revenue's appeal and assessee's cross-objection were dismissed. For A.Y. 2012-13, the Tribunal upheld the CIT(A)'s deletions for share capital/premium, unsecured loans, and commission/brokerage, but reversed the CIT(A) regarding Rs.35,000/- share capital increase expenses, confirming it as capital expenditure.
Key Issues
Whether additions under Section 68 for share capital/premium and unsecured loans were justified; the tax treatment of expenses incurred for increasing share capital; and the validity of disallowing commission/brokerage expenses.
Sections Cited
68, 147, 148, 143(3), 143(2), 151, 133(6)
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Income Tax Appellate Tribunal, AHMEDABAD “A” BENCH, AHMEDABAD
Before: SHRI SANJAY GARG & SHRI NARENDRA PRASAD SINHA
PER NARENDRA PRASAD SINHA, ACCOUNTANT MEMBER:
1. & 1776/Ahd/2024 are filed by the Revenue against the order of the National Faceless Appeal Centre (NFAC), Delhi (in short “the CIT(A)”) dated 14.08.2024 and 19.08.2024 for the Assessment Years (A.Y.) 2009-10 & 12-13 respectively. The Cross Objection No.42/Ahd/2025 is filed by the assessee in Appeal No.1775/Ahd/2024 for the A.Y. 2009-10. As the facts involved in these appeals and cross objection were identical, all the matters were heard together and are being disposed of vide this common order for the sake of convenience.
We will first take up the appeal in & C.O. No.42/Ahd/2025 for the A.Y. 2009-10.
& 1776/Ahd/2024 & C.O. No.42/Ahd/2025 (Assessment Years: 2009-10 & 2012-13) DCIT vs. Truform Techno Products Pvt. Ltd. Page 3 of 22 3. The grounds taken by the Revenue and the assessee in this appeal and the cross objection are as under:-
ITA No.1775/Ahd/2024 – A.Y. 2009-10
“(i) On the facts and circumstances of the case and in law, the Ld. CITA) erred in deleting the addition of Rs.2,99,50,000/- made under Section 68 of the I.T. Act, 1961, without appreciating the fact that the assessee failed to prove the genuineness and creditworthiness of the alleged investors with documentary evidences.
(ii) On the facts and circumstances of the case and in law the Ld. CIT(A) erred in deleting the addition of Rs.2,99,50,000/- made under Section 68 of the I.T. Act, 1961, without considering the provisions of Section 78(2) of the Companies Act.
(iii) The appellant craves leaves to add, modify, amend or alter any grounds of appeal at the time of, or before, the hearing of appeal.”
C.O. No.42/Ahd/2025 – A.Y. 2009-10
On Legality of the Order:
It is submitted that the Show Cause Notice u/s.148 dated 30-03-2016 for A.Y.2009-10 is beyond limitation and time barred and therefore the proceedings initiated u/s.147 are invalid and against principles of Law,
2. The Ld. CIT(A) has erred both in Law and in fact in upholding Reopening of Assessment u/s.147 as well as issue of notice which is non- compliance of procedure laid down before issue of Show Cause Notice u/s.148.
It is further submitted that Reasons Recorded by the AO are general and does not show his independent application of mind to justify initiating proceedings u/s.148 void Pr. CIT(A) has failed to satisfy.
The proceedings & permission before Pr. CIT and void since he has failed to satisfy himself about applicability of sec. 151 and provisions of Act and his not signing the documents personally and not putting the date on Documents goes against the root of necessary formalities required as per Law and therefore it is submitted that the Ld. CIT(A) ought to have held that the Reopening is bad in Law and Void.
& 1776/Ahd/2024 & C.O. No.42/Ahd/2025 (Assessment Years: 2009-10 & 2012-13) DCIT vs. Truform Techno Products Pvt. Ltd. Page 4 of 22
Your Appellant further submits that as per copy of Asst. Order in response to filing Return of Income on 19-09-2009 no Assessment Order is passed. Further it also appears from Asst. Order that though in Response to Notice u/s.148 Return of Income was not filed the AO issued notice u/s. 143(2) and if it relates to ROI filed on 19-09-2009 it is belated making Reasons void & infective and in the circumstance Asst. Order u/s.143(3) is void On Merits (a) Without prejudice on merits it is submitted that the Ld. CIT(A) has considered facts of the case provisions of Law, details submission made before him and necessary proof evidences and details produced correctly held that Sec.68 is not applicable and that the Ld. CIT(A) has passed a Speaking Order considering all the facts and the said order be upheld and Departmental Appeal claiming deletion of Rs.2,99,50,000/- be deleted. (b) However, by any chance if it is held that sec.68 is applies then the amount of Rs 2,99,50,000/- being Business Income of your Appellant as held by Hon. Guj. H.C. & S.C. only not possible be added as income and as per various order only 2% or actual Net Profit be added. It is therefore submitted that relief claimed above be allowed and the order of the Assessing Officer be modified accordingly. Your Appellant reserves right to add, alter, amend, to withdraw any or all Ground of Appeal.”
4. The brief facts of the case are that the assessee had filed its return of income for the A.Y. 2009-10 on 19.09.2009 declaring income of Rs.43,42,910/-. The case of the assessee was reopened under Section 148 of the Act on the basis of information in respect of issue of 599000 shares of face value of Rs.10/- at a premium of Rs.40/- per share, thereby bringing in Rs.2,99,50,000/- as share capital and share premium during the year. In the course of assessment, the Assessing Officer had made enquiry about the share capital received during the year but he was not satisfied about the genuineness and credit worthiness of the share capital & 1776/Ahd/2024 & C.O. No.42/Ahd/2025 (Assessment Years: 2009-10 & 2012-13) DCIT vs. Truform Techno Products Pvt. Ltd. Page 5 of 22 transactions. Therefore, the entire share capital and share premium of Rs.2,99,50,000/- was considered as unexplained and added under Section 68 of the Income Tax Act, 1961 (hereinafter referred to as ‘the Act’). The assessment was completed under Section 143(3) of the Act on 29.12.2016 at total income of Rs.3,42,92,910/-.
5. Aggrieved with the order of the Assessing Officer, the assessee had filed an appeal before the First Appellate Authority which was decided by the Ld. CIT(A) vide the impugned order and the appeal of the assessee was allowed.
Shri B. P. Srivastava, the Ld. Sr. DR explained that the share capital and premium of Rs.2,99,50,000/- was received from 4 companies and 14 individual shareholders. He explained that the AO had doubted the creditworthiness of the share applicants for the reason that the four corporate entities had disclosed negative profits and the other investors also did not have the financial capability to make the contribution towards share capital. Further, the assessee had not furnished copy of Income- tax return and Balance Sheet of all the shareholders. As the Assessing Officer was not satisfied about the creditworthiness of the share applicants as well as the genuineness of the transactions, the entire credit on account of share capital and share premium was rightly held as bogus. The Ld. Sr. DR further submitted that in some of the bank accounts, credit by way of cheque receipts was appearing just prior to the payment of share application money to the assessee, the source of which was not explained by the assessee. He further submitted that the assessee did not furnish the details about the use of share premium and, therefore, the & 1776/Ahd/2024 & C.O. No.42/Ahd/2025 (Assessment Years: 2009-10 & 2012-13) DCIT vs. Truform Techno Products Pvt. Ltd. Page 6 of 22 provision of Section 78(2) of the Companies Act was not complied and, therefore, the Assessing Officer had rightly treated the entire share premium contribution as revenue receipt.
Per contra, Ms. Kinjal Shah, Ld. AR of the assessee submitted that the assessee had furnished all the evidences to establish the identity, creditworthiness and genuineness of the transactions which was correctly appreciated by the Ld. CIT(A) and the addition made by the Assessing Officer was rightly deleted by him. She explained that the Assessing Officer did not make any enquiry with the shareholders and had placed the onus on the assessee to establish the source of source, which was not the law in the A.Y. 2009-10, to which the present appeal pertains. In this regard, she relied on the judgement of Hon’ble Supreme Court in the case of CIT vs. Lovely Exports (P) Limited, 216 CTR 195 (SC) and submitted that the Department was free to proceed with the individual assessment of the shareholders, if the source of source was not explained. The Ld. AR submitted that the assessee had discharged the initial burden to establish the identity of the shareholders and also established their creditworthiness. Therefore, no addition on account of share capital contribution was called for. She has also placed reliance on various other judicial decisions which are part of the paper-book filed by the assessee.
We have considered the rival submissions. It is found that the share capital contribution to the extent of Rs.2,40,00,000/- was made by the following four corporate entities: - 1) Abhi Commercial & Finvest Pvt. Ltd. Rs.40,00,000/- 2) Jeenma Business Pvt. Ltd. Rs.25,00,000/- & 1776/Ahd/2024 & C.O. No.42/Ahd/2025 (Assessment Years: 2009-10 & 2012-13) DCIT vs. Truform Techno Products Pvt. Ltd. Page 7 of 22 3) Kalindi Tie Up Pvt. Ltd. Rs.75,00,000/- 4) Unnati Vinimoi Pvt. Ltd. Rs.1,00,00,000/- 8.1 The identity of the above 4 corporate entities was duly established. The Assessing Officer had doubted the credit worthiness of these companies for the reason that they had disclosed nil or negative profit in their Income-tax returns. The creditworthiness of a company cannot be judged only on the basis of income or loss as declared in their Income-tax returns. The overall availability of the funds has to be examined vis-a-vis the Balance Sheet and the availability of the funds/entries in the bank accounts. It is found that the Assessing Officer had doubted the credit worthiness only on the basis of profit/loss disclosed in the Income-tax returns without making any enquiry with the corporate applicants. This aspect was examined in detail by the Ld. CIT(A) and the finding given by him in respect of four corporate entities are found to be as under: -
5.3.2.3. To establish the identity, genuineness and creditworthiness of the company investors, the appellant had submitted the details of the investors like their PAN and Address. Further, the appellant had also submitted the copies of their relevant bank account statements, ITRs of many of the investors for AY 2009-10/AY 2008-09 and their audited balance sheets. The appellant had also submitted copies of the share application forms and acknowledgement copies for the share applications, minutes of the meeting of Board of Directors authorizing the Directors for entering into share investment transaction, and assessment order u/s 147/143(3) for AY 2009-10 in respect of the company investors. By furnishing the above details in respect of the company investors, the appellant company had contended that it had discharged the onus which lied on the appellant company as per provisions of section 68 of the Act by producing on record all the evidences for proving the genuineness of the parties with identity and sources as well as creditworthiness thereof. Accordingly, the appellant had contended that no addition u/s 68 was warranted in the instant case of the appellant. I have perused and examined the supporting documents furnished by the appellant in respect of the company investors, and the merits in the appellant's contentions are adjudicated as hereunder.
& 1776/Ahd/2024 & C.O. No.42/Ahd/2025 (Assessment Years: 2009-10 & 2012-13) DCIT vs. Truform Techno Products Pvt. Ltd. Page 8 of 22
5.3.2.3.1. In respect of the company investor Abhi Commercial & Finvest Pvt. Ltd., the appellant had submitted the details of PAN, Address, Memorandum and Articles of Association of the company investor Abhi Commercial & Finvest Pvt. Ltd.. share application form, acknowledgement copy for the share application, and the Vijaya Bank account statement for the relevant period, minutes of the meeting of Board of Directors authorizing the Directors for entering into share investment transaction, copy of the income tax return for AY 2009-10 along with the audited financial statements, and the assessment order u/s 147/143(3) for AY 2009-10 in respect of the investor company Abhi Commercial & Finvest Pvt. Ltd. From the company's Balance Sheet for A.Y. 09- 10 it is clearly evident that as per Schedule 'E there are Inventories (Shares & Securities) as on 31-03-2009 to the tune of Rs.2,16,14,136/- whereas shares of Truform Techno Products Ltd. grouped under Inventories Unquoted shares appear as Rs.40,00,000/-. Further, from the Vijaya Bank account statement it is clearly seen that the investor company had vide cheque no. 177949 dated 24.03.2009 subscribed to Rs.40,00,000/- of shares. At this juncture, it is also pertinent to note that this investor company was also subject to assessment proceedings u/s 147 for A.Y. 09-10 i.e. the same year as the appellant and no aspersions have been cast on the books or fund deployment of the company, as could be seen from the assessment order submitted by the appellant, which also substantiates the genuineness of accounts of the investor company. Therefore, the identity, genuineness and creditworthiness of share subscription by Abhi Commercial & Finvest Pvt. Ltd. is proved and thus doesn't warrant any addition u/s 68. 5.3.2.3.2. In respect of the company investor Jeenma Business Pvt. Ltd., the appellant had submitted the details of PAN, Address, Memorandum and Articles of Association of the company investor Jeenma Business Pvt. Ltd., share application form, acknowledgement copy for the share application, and the Bank account statement of the investor in State Bank of Bikaner & Jaipur for the relevant period, minutes of the meeting of Board of Directors authorizing the Directors for entering into share investment transaction, copy of the income tax return for AY 2009-10 along with the audited financial statements, and the assessment order u/s 147/143(3) for AY 2009-10 in respect of the investor company Jeenma Business Pvt. Ltd.. From the company's Balance Sheet for A.Y. 09-10 it is clearly evident that as per Schedule 'D' there are Inventories (Shares & Securities) as on 31-03-2009 to the tune of Rs.5,36,85,718/- whereas shares of Truform Techno Products Ltd. grouped under Inventories Unquoted shares appear as Rs.25,00,000/-. Further, from the bank account statement of the investor in State Bank of Bikaner & Jaipur, it is clearly seen that the investor company had vide cheque no. 351957 dated 20.03.2009 subscribed to Rs.25,00,000/- of shares. At this juncture, it is also pertinent to note that this investor company was also subject to assessment proceedings u/s 147 for A.Y. 09- 10 i.e. the same year as the appellant and no aspersions have been cast on the books or fund deployment of the company, as could be seen from the assessment order submitted by the appellant, which also substantiates the genuineness of accounts of the investor company. Therefore, the & 1776/Ahd/2024 & C.O. No.42/Ahd/2025 (Assessment Years: 2009-10 & 2012-13) DCIT vs. Truform Techno Products Pvt. Ltd. Page 9 of 22 identity, genuineness and creditworthiness of share subscription by Jeenma Business Pvt. Ltd. is proved and thus doesn't warrant any addition u/s 68. 5.3.2.3.3. In respect of the company investor Kalindi Private Tie Up Ltd., the appellant had submitted the details of PAN, Address, Memorandum and Articles of Association of the company investor Kalindi Private Tie Up Ltd., share application form, acknowledgement copy for the share application, and the Bank account statement of the investor in Induslnd Bank for the relevant period, minutes of the meeting of Board of Directors authorizing the Directors for entering into share investment transaction, copy of the income tax return for AY 2008-09 along with the audited financial statements in respect of the investor company Kalindi Private Tie Up Ltd. Further, from the bank account statement of the investor in IndusInd Bank, it is clearly seen that the investor company had vide cheque no.s 161311, 161312, and 161313 dated 24.03.2009, 25.03.2009, and 30.03.2009 respectively subscribed to Rs.75,00,000/- of shares. Therefore, the identity, genuineness and creditworthiness of share subscription by Kalindi Private Tie Up Ltd. is proved and thus doesn't warrant any addition u/s 68. 5.3.2.3.4. In respect of the company investor Unnati Vinimoy Pvt. Ltd., the appellant had submitted the details of PAN, Address, Memorandum and Articles of Association of the company investor Unnati Vinimoy Pvt. Ltd., share application form, acknowledgement copy for the share application, and the Bank account statement of the investor in Indusind Bank for the relevant period, minutes of the meeting of Board of Directors authorizing the Directors for entering into share investment transaction, copy of the income tax return for AY 2008-09 along with the audited financial statements for AY 2008-09 in respect of the investor company Unnati Vinimoy Pvt. Ltd. Further, from the bank account statement of the investor in Indusind Bank, it is clearly seen that the investor company had vide cheque no.s 258352, 258353, 258354, 258355, 258357, 258359, and 258360, on various dates between 10.11.2008 and 18.03.2009 subscribed to Rs.1,00,00,000/- of shares. Therefore, the identity, genuineness and creditworthiness of share subscription by Unnati Vinimoy Pvt. Ltd. is proved and thus doesn't warrant any addition u/s 68.
8.2 It is thus found that the Ld. CIT(A) had examined in detail the credit- worthiness of the four corporate applicants and given a categorical finding that their identity, genuineness and credit worthiness towards share capital contribution to the assessee company was duly established. The Revenue has been unable to controvert the findings as given by the Ld. CIT(A) and we have, therefore, no reason to interfere with his order.
& 1776/Ahd/2024 & C.O. No.42/Ahd/2025 (Assessment Years: 2009-10 & 2012-13) DCIT vs. Truform Techno Products Pvt. Ltd. Page 10 of 22 8.3 As regards, share capital of Rs.59,50,000/- received from 14 individual shareholders, the assessee had furnished the details of their PAN, address, bank account statement and Income-tax returns. Thus, the identity and creditworthiness of the share subscription made by them was also duly established. The Assessing Officer did not make any enquiry with the shareholders to dispute their creditworthiness. The explanation of the assessee was rejected by the Assessing Officer on capricious and arbitrary grounds without bringing anything credible, cogent and legal evidence to disbelieve the submission of the assessee. The assessee had already discharged the initial burden of proving the genuineness of the transactions and for the year under consideration the assessee was not required to explain the source of the source. The assessee had brought on record the share application form of the share applicants, copy of the Balance Sheet & accounts and also copy of their assessment orders and thus discharged its initial burden to prove the identity, creditworthiness and the genuineness of the transactions. For the individual applicants, a copy of their Income-tax return/bank statement as well as the confirmation was brought on record, which were not disproved by the Revenue. The Ld. CIT(A) had rightly held that the assessee had fulfilled all the three ingredients and established the identity, genuineness and creditworthiness of the share subscriptions and, therefore, no addition under Section 68 of the Act was warranted.
8.4 As regarding reference to Section 78(2) of the companies Act, the Assessing Officer had made the addition for share capital/share premium received during the year under Section 68 of the Act. There is no provision under the Act corresponding to provisions of Section 78(2) of the & 1776/Ahd/2024 & C.O. No.42/Ahd/2025 (Assessment Years: 2009-10 & 2012-13) DCIT vs. Truform Techno Products Pvt. Ltd. Page 11 of 22 Companies Act which require addition in respect of share premium received by the assessee. The Assessing Officer had not invoked any charging section in the assessment order to make the addition for contravention of provisions of Section 78(2) of the Companies Act. Otherwise also, addition was made by the Assessing Officer under Section 68 of the Act, which we have already discussed earlier.
8.5 In view of the above facts and discussions, we are of the considered opinion that the Ld. CIT(A) had rightly deleted the addition of Rs.2,99,50,000/- in respect of share capital and share premium received during the year, as the assessee had discharged its onus to establish the identity, genuineness and creditworthiness of the share applicants. Therefore, the grounds taken by the Revenue in this regard are dismissed.
C.O. No.42/Ahd/2025 – A.Y. 2009-10
The grounds taken by the assessee in the cross objection on merits, are in support of the order of the Ld. CIT(A). As the order of the Ld. CIT(A) has been upheld, the grounds taken by the assessee on merits are dismissed. Further, considering the fact that the assessee has got relief on merits, we do not find it necessary to adjudicate the grounds taken by the assessee on the reopening of the case under Section 147 of the Act.
In the result, the appeal of the Revenue as well as the cross objection of the Assessee, both are dismissed.
& 1776/Ahd/2024 & C.O. No.42/Ahd/2025 (Assessment Years: 2009-10 & 2012-13) DCIT vs. Truform Techno Products Pvt. Ltd. Page 12 of 22 11. The grounds taken by the Revenue in this appeal are as under: -
“(1) On the facts and circumstances of the case and in law, the Ld. CITIA) erred in deleting the addition of Rs.1,20,00,000/- being disallowance on account of share capital and share premium u/s.68 of the Act without appreciating the fact that the assessee failed to substantiate the identity, creditworthiness and genuineness of the transaction.
(2) On the facts and circumstances of the case and in law, the Ld. CITA) erred in deleting the addition of Rs.35,000/- being expenses incurred in connection with the issue of share to increase the capital base.
(3) On the facts and circumstances of the case and in law, the Ld. CIT(A) erred in deleting the addition of Rs.1,10,97,785/- made u/s.68 of the Act in respect of unsecured loan taken from the Director, Shri Kaushal Mohta, without appreciating the fact that the assessee failed to establish the creditworthiness and genuineness of the transaction.
(4) On the facts and circumstances of the case and in law, the Ld. CIT(A) erred in deleting the addition of Rs.60,00,000/- made u/s.68 of the Act in respect of unsecured loan taken from M/s. Jeenma Business Pvt. Ltd., without appreciating the fact that the assessee failed to substantiate the identity, creditworthiness and genuineness of the transaction.
(5) On the facts and circumstances of the case and in law, the Ld. CIT(A) erred in deleting the addition of Rs.50,00,000/- made u/s.68 of the Act in respect of unsecured loan taken from M/s. Matruchaya Mercantiles Pvt. Ltd. and M/s. Budhiya Commercials Pvt. Ltd., without appreciating the fact that the assessee failed to establish the creditworthiness and genuineness of the transaction.
(6) On the facts and circumstances of the case and in laws, the Ld. CIT(A) erred in deleting the disallowance of Commission & Brokerage of Rs.20,49,22/- without appreciating the fact that the assessee failed to substantiate its claim before the AO.
(7) The appellant craves leaves to add, modify, amend or alter any grounds of appeal at the time of, or before, the hearing of appeal.”
12. The first ground pertains to addition of Rs.1,20,00,000/- on account of share capital and share premium received in the year.
& 1776/Ahd/2024 & C.O. No.42/Ahd/2025 (Assessment Years: 2009-10 & 2012-13) DCIT vs. Truform Techno Products Pvt. Ltd. Page 13 of 22 13. Shri B.P. Srivastava, Ld. Sr. DR submitted that the share application was received in this year from 4 corporate entities, out of which one Jeenma Business Pvt. Ltd. was common with A.Y. 2009-10. He submitted that the genuineness and creditworthiness of the share applicants was not established by the assessee in the course of assessment and, therefore, the Assessing Officer had rightly made the addition under Section 68 of the Act.
On the other hand, Ms. Kinjal Shah, Ld. AR submitted that the assessee had furnished all the relevant details to establish the identity, genuineness and creditworthiness of the share applicants and considering the evidences brought on record, the Ld. CIT(A) had rightly deleted the addition.
We have considered the rival submissions and also gone through the facts and materials brought on record in the assessment order as well as in the appellate order. During the year the assessee had received share application and share premium of Rs.1.20 Crores from 4 companies as under: - 1) Jeenma Business Pvt. Ltd Rs.21,60,000/- 2) Jeenma Merchants P. Ltd. Rs.30,00,000/- 3) Sahal Traders P. Ltd Rs.45,00,000/- 4) Galaxy Abasan Pvt. Ltd. Rs.23,40,000/- Total Rs.1,20,00,000/- 15.1 The assessee had brought on record PAN, address, ledger account duly confirmed by the share applicants, bank statement of the share applicants, copy of audited financial statement (Auditor’s Report, Balance Sheet and Profit & Loss Account) of all the share applicants; in order to & 1776/Ahd/2024 & C.O. No.42/Ahd/2025 (Assessment Years: 2009-10 & 2012-13) DCIT vs. Truform Techno Products Pvt. Ltd. Page 14 of 22 establish the identity, creditworthiness and genuineness of the transactions. Further, the Assessing Officer, in the course of assessment proceeding, had issued notice under Section 133(6) to the share applicants, which was responded by them. Thus, the identity of the share applicants was duly established. The investment in share capital made by the 4 corporate entities in the shares of assessee company was found duly reflected in their respective Balance Sheet under the head “Inventory of Unquoted Shares”. The amount received from them towards share capital and share premium was also found reflected in their bank statements. Thus, all the three ingredients of identity, creditworthiness and genuineness of the transactions are found to be duly established by the assessee company. Merely because the income disclosed by the share applicants was found to be nominal or a loss figure, that cannot be a reason to doubt the creditworthiness and genuineness of the transactions. It is found that the Ld. CIT(A) had analysed all the evidences brought on record in detail and given a categorical finding in this regard which is reproduced below: - 5.2.3.1. The appellant had furnished the four investor companies' details like address and PAN and had accordingly established the identity of the investor company. Further, the appellant had also submitted a copy of ledger A/c from the books of the investor companies, copy of ITR of A.Y. 12-13 along with computation of total income of the investor companies, copy of bank statements for relevant period and copy of audited financial statement (i.e. Auditors Report, Balance Sheet and Profit & Loss A/c) for the relevant year ending 31.3.2012 (AY 2012-13) of the investor companies. The appellant had also established that as per audited annual accounts of the above investor company, shares of the appellant were duly accounted for in the stock summary under the head "inventory of unquoted shares". Accordingly, from the ledger accounts, bank statements and the audited accounts of these investor companies, the appellant company had also established the genuineness and creditworthiness of the share capital/share premium transactions. 5.2.3.2. I have perused the above supporting documents submitted by the appellant and had examined the merits in the appellant's contentions. Accordingly, the addition made in respect of the share application money/share premium of Rs.1,20,00,000/- u/s 68 is & 1776/Ahd/2024 & C.O. No.42/Ahd/2025 (Assessment Years: 2009-10 & 2012-13) DCIT vs. Truform Techno Products Pvt. Ltd. Page 15 of 22
adjudicated as hereunder. The appellant had clearly established the identity, genuineness and creditworthiness of the share application money/share premium transactions of Rs.1,20,00,000/- in respect of the four investor companies, viz., Jeenma Business Pvt. Ltd., Jeenma Merchants P. Ltd., Sahal Traders P. Ltd., and Galaxy Abasan Pvt. Ltd. At this juncture, it is pertinent to note that the assessing officer himself had observed in the assessment order that during the assessment proceedings notice u/s 133(6) dated 13-02-2015 was issued to all the above four parties and they were duly served on them. Accordingly, the appellant's contention that the identity of the parties has been proved from the fact that the notices have been served is correct. 5.2.3.3. Further, from examining the copies of bank statements and annual accounts of the investor companies submitted by the appellant, I am convinced that the sources and genuineness of the transaction were duly explained by the appellant. It therefore transpires that the assessing officer had made this huge addition of Rs.1,20,00,000/- without considering independent and corroborative evidences submitted by appellant, vide reply to various notices issued during the course of assessment proceedings. The appellant's explanations given above with all supporting documents attached therewith were complete in all respect and clearly explain the identity, source and creditworthiness of the investors and genuineness of the transactions with various investors viz., Jeenma Business Pvt. Ltd., Jeenma Merchants P. Ltd., Sahal Traders P. Ltd., and Galaxy Abasan Pvt. Ltd. from whom share capital of Rs.1,20,00,000/- has been received during the year. 5.2.3.4. The appellant had discharged the onus cast upon it since all the relevant documents of the investor companies to prove the identity and credit worthiness of the parties and genuineness of the transactions as per the provisions of Section 68 of the. Act were duly submitted during the course of assessment proceedings itself. It therefore appears that the addition has been made purely on the basis of surmises and conjectures because the appellant had already proved the genuineness of the credit entries. No addition can be made on the basis of assumptions and presumptions and that no document can be disregarded or ignored without proving otherwise. Accordingly, no addition u/s 68 was warranted in respect of the share application money/share premium of Rs.1.20,00,000/- received by the appellant company from the four investor companies viz., Jeenma Business Pvt. Ltd., Jeenma Merchants P. Ltd., Sahal Traders P. Ltd., and Galaxy Abasan Pvt. Ltd. For the above conclusion, reliance is placed on the decisions of the H'ble jurisdictional High Court of Gujarat rendered in CIT vs. Apex Therm Packaging Pvt. Ltd. [2014] 42 taxmann.com 473 (Guj.) and in CIT vs. Ranchhod Jivabhai Nakva [2012] 21 taxmann.com 159 (Guj.). Further, rellance is also placed on the decision of the H'ble jurisdictional Ahmedabad ITAT in the case of M/s. Jindal (India) Textiles V. Income Tax Officer, Ward-2(2), Surat in I.T.A No. 125/Ahd/2012. 5.2.3.5. While rendering the above decision, reliance is also placed on the following judicial pronouncements: (i) Orissa Corporation Pvt. Ltd - 159 1TR 88 (SC); (ii) Hanuman Agarwal - 151 ITR 150 (Pat.); (ii) ACIT vs. Govind Ram Agarwal - 76 ITD 120 (Cal.). In all the above cases, it has been stated by the Courts of Law that only the & 1776/Ahd/2024 & C.O. No.42/Ahd/2025 (Assessment Years: 2009-10 & 2012-13) DCIT vs. Truform Techno Products Pvt. Ltd. Page 16 of 22 initial burden rests upon the appellant to prove credit entries u/s 68 of the Act. Once it is discharged by the appellant, it is for the department to prove that the cash credit actually represents suppressed income of the appellant. At this juncture, it is relevant to quote the decision of the H'ble Patna High Court in the case of Sarogi Credit Corp. v. CIT (1976) 103 ITR 344 (Pat.) wherein the h'ble High Court has held that "...Unlike credit entries appearing in the accounts of the assessee in his own name or in the name of her husband, children, relation or employees, the onus on the assessee in respect of the credit in the names of the third parties stands discharged if he establishes the identity of those parties and satisfies the ITO that the entries are real and not fictitious. Thereafter. it will not be for the assessee to explain how or in what circumstances, the third party obtained money and how or why they come to come to make a deposit of the money with the assessee. The burden thereafter will shift on the department to prove why the assessee's case cannot be accepted..." 5.2.3.6. Further it is pertinent to note that the appellant is not required to explain the source of source as held by the judicial forums in the following decisions: (i) CIT v. Daulatram Rawatmull (1973) 87 ITR 349 (SC); (ii) Sarogi Credit Corp. V. CIT (1976) 103 ITR 344 (Pat.); (iii) Tolaram Daga v. CIT (1966) 59 ITR 632 (Ass.); (iv) ITO v. Suresh Kalmadi (1998) 32 TTJ 300 (Pune ITAT). The appellant's prima facie reasonable explanation cannot be rejected on capricious or arbitrary ground or on mere suspicious or on imaginary or irrelevant grounds as held by the Courts in the following judicial pronouncements: (i) R.B.N.J. Naldu v. CIT (1956) 29 ITR) 194(Nag.); (ii) Kanpur Steel Co. Ltd. v. CIT (1957) 32 1TR 56(AlI.); (iii) Lajwani Sial v. CIT (1956) 30 1TR 228 (Nag.). 5.2.3.7. It is further relevant to state that even on merits, the appellant had discharged the initial burden of proof cast upon it as held in the following decisions: (i) CIT v. Orissa Corporation Pvt. Ltd. (1986) 159 ITR 78 (SC); (ii) Sarogi Credit Corporation v. CIT (1976) 103 1TR 344 (Pat.); (iii) ITO v. Suresh Kalmadi (1988) 32 TTJ 300 (Pune); (iv) M/s. Odedara Construction 362 ITR 338 (Gujarat). Accordingly, I hereby conclude that no addition u/s 68 was warranted in respect of the share application money/share premium of Rs.1,20,00,000/- received by the appellant ofInc COmpany from the four investor companies, viz., Jeenma Business Pvt. Ltd., Jeenma com Merchants P. Ltd., Sahal Traders P. Ltd., and Galaxy Abasan Pvt. Ltd. Therefore. since the identity, genuineness and creditworthiness of the lender M/s. Jeenma Business P. Ltd. having been proved, any addition u/s 68 is not warranted at all. At this juncture, it is significant to mention that the H'ble jurisdictional Ahmedabad ITAT in appellant's own case for the AY 2010-11, that in respect of addition u/s 68 pertaining to share capital/share premium subscribed/invested by M/s. Jeenma Business Pvt. Ltd. in the appellant company, had ruled that the identity, genuineness and creditworthiness of M/s. Jeenma Business Pvt. Ltd. was clearly established and had adjudicated that no addition u/s 68 was warranted in the case of the appellant for the AY 2010-11. This further strengthens the proposition that the identity. genuineness and creditworthiness of one of the investor companies viz., M/s. Jeenma Business Pvt. Ltd. in this assessment year 2012-13 as well & 1776/Ahd/2024 & C.O. No.42/Ahd/2025 (Assessment Years: 2009-10 & 2012-13) DCIT vs. Truform Techno Products Pvt. Ltd. Page 17 of 22 are proved beyond doubt. Accordingly, I, hereby, direct the assessing officer to delete the addition of Rs. 1,20,00,000/- made u/s 68 in respect of the share capital {share application money/share premium} received from M/s. Jeenma Business P. Ltd., Jeenma Merchants P. Ltd., Sahal Traders P. Ltd., and Galaxy Abasan Pvt. Ltd. for the AY 2012-13, and, therefore, I, hereby, allow all the grounds in this regard filed by the appellant in favour of the appellant.
15.2 The Revenue has been unable to controvert the findings of the Ld. CIT(A). It is found that the assessee had discharged its onus and brought evidences on record to establish the identity, genuineness and credit worthiness of the share applicants. In the year under question, the law did not require the assessee to establish the source of source. Considering the evidences as brought on record, the addition made by the Assessing Officer was not proper, which was rightly deleted by the Ld. CIT(A). We, therefore, uphold the order of the Ld. CIT(A) on this issue and the ground taken by the Revenue is dismissed.
Ground no.2 pertains to addition of Rs.35,000/- in respect of increase in the share capital. The Assessing Officer had treated this expenditure as capital in nature and made the disallowance. On the other hand, the Ld. CIT(A) has held that the expenditure was revenue in nature.
We have heard the Ld. Sr. DR and Ld. AR. It is found that the sum of Rs.35,000/- represented fee paid to ROC for issuance of fresh shares during the year. Thus, expenditure incurred by the assessee was linked to the issue of share capital which cannot be categorized as revenue expenditure. The Assessing Officer had rightly treated the expenditure as capital in nature and disallowed the same. Accordingly, the addition Rs.35,000/- on account of share capital expenses, is confirmed. The ground taken by the Revenue is allowed.
& 1776/Ahd/2024 & C.O. No.42/Ahd/2025 (Assessment Years: 2009-10 & 2012-13) DCIT vs. Truform Techno Products Pvt. Ltd. Page 18 of 22 18. Ground no.-3 pertains to addition of Rs.1,10,97,785/- made in respect of unsecured loan taken from Shri Kaushal Mohta, Director. The Ld. Sr. DR submitted that the genuineness and creditworthiness of the loan creditor was not established and, therefore, the Assessing Officer had rightly made the addition.
On the other hand, the ld. AR submitted that all the evidences to establish the identity, creditworthiness and genuineness of the loan transaction was brought on record, therefore, she strongly supported the order of the Ld. CIT(A).
We have considered the rival submissions. The Assessing Officer had treated the unsecured loan of Rs.1,10,97,785/- taken by Shri Kaushal Mohta, Director of the Company as bogus for the reason that Shri Kaushal Mohta had disclosed income of Rs.9,53,220/- only in his return of income. Further that this loan was not evidenced by any Balance Sheet of the debtor. It is found that PAN, copy of bank statement, copy of Income-tax return and all other evidences to establish the identity, genuineness and creditworthiness of Shri Kaushal Mohta was brought on record. Merely because Shri Kaushal Mohta had disclosed income of Rs.9,53,204/- in his Income-tax return for the A.Y. 2012-13, this cannot be considered as valid reason to disbelieve the genuineness of the transaction. The availability of funds with Shri Kaushal Mohta to advance the loan of Rs.1,10,97 ,785/- was not disproved vis-a-vis the funds available in his bank account as well as other investments as appearing in his Balance Sheet. It is found that the account of Shri Kaushal Mohta was a running account with total credit of Rs.1,49,53,095/- and total debit of Rs.38,55,310/- during the year.
& 1776/Ahd/2024 & C.O. No.42/Ahd/2025 (Assessment Years: 2009-10 & 2012-13) DCIT vs. Truform Techno Products Pvt. Ltd. Page 19 of 22 Further, the assessee had also paid interest on the loan taken from the Director on which TDS at applicable rate was also deducted. Considering the evidences as brought on record by the assessee, the Ld. CIT(A) had rightly deleted the addition of Rs.1,10,97,785/- in respect of loan taken from Shri Kaushal Mohta. Accordingly, the order of the Ld. CIT(A) is upheld and the ground taken by the Revenue is dismissed.
21 Ground nos.4 & 5 pertain to addition of bogus loan of Rs.60,00,000/- from M/s. Jeenma Business Pvt. Ltd. and of Rs.50,00,000/- from M/s. Matruchaya Mercantiles Pvt. Ltd. and M/s. Budhiya Commercials Pvt. Ltd. The Ld. Sr DR explained that the Assessing Officer made the addition for the reason that the creditworthiness and the genuineness of the loan transactions was not established.
On the other hand, the Ld. AR strongly supported the order of the Ld. CIT(A).
We have considered the rival submissions. The assessee had taken loan of Rs.60,00,000/- from M/s. Jeenma Business Pvt. Ltd. and Rs.25,00,000/- each from M/s. Matruchaya Mercantiles Pvt. Ltd. and M/s. Budhiya Commercials Pvt. Ltd. The creditworthiness and genuineness of the transaction with M/s. Jeenma Business Pvt. Ltd. has already been examined and discussed earlier while adjudicating ground no.1. The assessee had established the genuineness of the loan transactions by filing confirmation, copy of Income Tax return etc. in the course of assessment. From the copy of ledger account brought on record, it is seen that the assessee was having regular transaction with M/s. Jeenma & 1776/Ahd/2024 & C.O. No.42/Ahd/2025 (Assessment Years: 2009-10 & 2012-13) DCIT vs. Truform Techno Products Pvt. Ltd. Page 20 of 22 Business Pvt. Ltd. and loan transaction of Rs.60,00,000/- was not an isolated transaction. The Ld. CIT(A) has rightly held that the identity, genuineness and creditworthiness of M/s. Jeenma Business Pvt. Ltd. was duly proved and, therefore, he had deleted the addition. The decision of the Ld. CIT(A) on this issue is upheld. The ground taken by the Revenue is dismissed.
23.1 Regarding the loan of Rs.25,00,000/- each taken from M/s. Matruchaya Mercantiles Pvt. Ltd. and M/s. Budhiya Commercials Pvt. Ltd. also, the assessee has discharged its primary onus by bringing on record the loan confirmation, copy of returns and bank statements to prove the genuineness and creditworthiness of these transactions. Further, the assessee had also paid interest to all the loan creditors on the closing balance outstanding at the end of the year on which TDS was also deducted. Thus, the assessee had discharged the onus to establish the identity, genuineness and creditworthiness of the transactions. We, therefore, uphold the order of the Ld. CIT(A) deleting the addition of Rs.50,00,000/- in respect of bogus loans taken from M/s. Matruchaya Mercantiles Pvt. Ltd. and M/s. Budhiya Commercials Pvt. Ltd. The ground taken by the Revenue is dismissed.
Ground no.6 pertains to disallowance of commission/brokerage of Rs.20,49,222/-. The Ld. Sr. DR submitted that the disallowance was made by the Assessing Officer for the reason that the bills did not show name of the agent to whom commission/brokerage was paid. The Ld. AR, on the other hand, submitted that the complete details of name and address of the parties, PAN, amount of commission/brokerage paid, TDS made & 1776/Ahd/2024 & C.O. No.42/Ahd/2025 (Assessment Years: 2009-10 & 2012-13) DCIT vs. Truform Techno Products Pvt. Ltd. Page 21 of 22 thereon in respect of commission/brokerage, was filed before the Assessing Officer and considering the evidences brought on record, the Ld. CIT(A) had rightly deleted the addition.
We have considered the rival submissions. It is found that the complete details in respect of commission and brokerage paid by the assessee was brought on record in the course of assessment. Merely because the name of the agent was not appearing in the bills, this cannot be a reason to disallow the commission and brokerage. If the Assessing Officer was not convinced about the correctness of the claim, he should have made direct enquiry with the parties to whom commission/brokerage was paid. The assessee had established the payment of commission with reference to his bank account and also deducted TDS wherever applicable. Considering the evidences brought on record, the Ld. CIT(A) had rightly deleted the addition of Rs.20,49,222/- in respect of commission/brokerage. The order of the Ld. CIT(A) on this issue is, therefore, upheld. The ground taken by the Revenue is dismissed.
In the result, the appeal of the Revenue is partly allowed.
In the final result, the appeal of the Revenue in and the Cross Objection of the assessee in C.O. No.42/Ahd/2025 for the A.Y. 2009-10 are dismissed, while the Revenue’s appeal in A.Y. 2012-13 is partly allowed. Order pronounced in the open Court on this 18th September, 2025.