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Facts
The assessee, J.A. Infracon Pvt. Ltd., a private limited company with no business activity, filed its return claiming a loss. The Assessing Officer (AO) found that the assessee received Rs. 10.5 crores as share application money (with premium) from three parties and had given loans/advances of Rs. 10.46 crores. The AO treated the share application money as unexplained income under Section 68 and a 2.5% commission (Rs. 26,25,000) as unexplained expenditure under Section 69C, as the assessee failed to provide complete details and the share applicants did not respond to Section 133(6) notices.
Held
The Income Tax Appellate Tribunal (ITAT) upheld the CIT(A)'s decision to delete the additions. The ITAT concluded that the assessee had discharged its onus by providing comprehensive documentation regarding the identity, creditworthiness, and genuineness of the share applicants and transactions, which occurred through banking channels and were reflected in audited accounts. The AO failed to provide cogent evidence to controvert the assessee's submissions, relying on unverified statements and denying cross-examination, thus making additions based on surmises and conjectures unsustainable in law.
Key Issues
Whether share application money and related commission expenses can be treated as unexplained income/expenditure under Sections 68 and 69C of the Income Tax Act, 1961, when the assessee provides comprehensive documentation for identity, creditworthiness, and genuineness, and the Assessing Officer fails to properly controvert the evidence or allow cross-examination.
Sections Cited
143(3), 143(1), 68, 69C, 133(6), 46A, 131, 132(4A), 292C
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Income Tax Appellate Tribunal, AHMEDABAD “C” BENCH
Before: Shri T.R. SENTHIL KUMAR & Shri Narendra Prasad Sinha
The DCIT, J.A. Infracon Pvt. Ltd. Central Circle-2(4), Office No.G-4, A/4/1, Ahmedabad Vs Anison Business Centre, Nr. Stadium Five Road, SBI Lane, Navrangpura, Ahmedabad-380009 PAN: AACCJ3716F (Appellant) (Respondent) Revenue Represented: Shri A P Singh, CIT-DR Assessee Represented: Ms. Nupur Shah, A.R. Date of hearing : 21-10-2024 Date of pronouncement : 21-01-2025 आदेश/ORDER PER : T.R. SENTHIL KUMAR, JUDICIAL MEMBER:-
This appeal is filed by the Revenue as against the appellate order dated 06.04.2021 passed by the Commissioner of Income Tax (Appeals)-12, Ahmedabad arising out of the assessment order passed under section 143(3) of the Income Tax Act, 1961 (hereinafter referred to as ‘the Act’) relating to the Assessment Year 2012-13.
Brief facts of the case is that the assessee is Private Limited Company has no business activity during the financial year and filed its Return of Income for the Asst. Year 2012-13 on 27-09-2012 Page No 2 DCIT Vs. J. A. Infracon Pvt. Ltd. claiming a loss of Rs.16,301/-. The return was processed u/s. 143(1) of the Act and then after taken for scrutiny assessment. The Assessing Officer found that the assessee company has received share application money with premium from three parties of Rs.10.5 crores and has given loans and advances of Rs.10.46 crores. The Assessing Officer issued notices to provide the share applicant’s/subscribers details, proof of identity, credit worthiness, bank transaction and copy of the Returns filed by the above applicants. The assessee failed to comply with the notices and when A.O. issued notices u/s. 133(6) to the share applicants, the same were also not replied by them. Thereby the Assessing Officer treated the share application money of Rs.10.5 crores as unexplained income of the assessee and also treated the commission expenses calculated at 2.5% on the above amount of Rs.26,25,000/- as unexplained expenditure u/s. 69C of the Act and demanded tax thereon as follows:
Amount of Sr. Name of the Number Amount of share Total share No. applicant of shares share capital premium capital 1. 2000000 2,00,00,000 0 2,00,00,000 Iscon Aviation Pvt. Lid 6,50,000 6,43,50,000 6,50,00,000 130000 2. M/s. Adamina Traders Pvt. Ltd. 40000 2,00,000 1,98,00,000 2,00,00,000 3. M/s.Acacio Tradelink Pvt. Ltd. 2170000 20850000 8,41,50,000 10,50,00,000 Total Page No 3 DCIT Vs. J. A. Infracon Pvt. Ltd.
Aggrieved against the assessment order, assessee filed an appeal before Ld. CIT(A) who deleted the above additions by passing a detailed order after calling for Remand Report from the Assessing Officer and Rejoinder from the assessee by observing as follows:
"… 9.5. Against the reasons given for making the additions, the appellant company filed detailed submissions, rebuttal to the remand report of the AO as well as justification admission of additional evidence under for Rule 46-A of the 1.T Rules, 1961. With regard to the Identity of the share applicant companies / proving of subscribers in respect of amount Share capital of Rs.2,00,00,000/- and amount of share of from Iscon Aviation Pvt. Ltd premium of Rs.6,43,50,000/- M/s. Adamina Traders Pvt. Ltd and Rs.1,98,00,000/- M/s. Acacio from Tradelink Pvt.Ltd, the appellant company submitted the following documents: i) Confirmation of the party ii) Copy of Bank Statements iii) Acknowledgement copy of ITR along with copy of Annual Report. iv) Bank Statement, v) Application Form, Form No. 2 vi) Master Data with Directors Details from the website of ROC vii) Memorandum and Articles of Association. viii) Copy of Board Resolution ix) Details of Net worth The copy of summary chart of all the documents submitted along with relevant page number of Paper Book is attached herewith. 3.1. Ld CIT[A] further held that the share application money received from the above companies cannot be treated as unexplained as the amount has been received through cheques and reflected in the audited accounts of the company. There is no factual evidence to prove that the transactions were not genuine or there were some cash transactions to prove that the share application money was not genuine and relied upon Supreme Court judgement in the case of Lovely Exports as follows:
Page No 4 DCIT Vs. J. A. Infracon Pvt. Ltd. “… … 9.22. After considering the finding given by the AO, the detailed submissions given by the appellant and facts of the case, I am of the considered opinion that appellant company has duly discharge its onus of explaining the share application money received by the appellant company. In the present case, the AO has not been able to dispute the evidence furnished by the appellant company in support of share application money. Similar view has been taken in the case of Lovely Exports (P) Ltd (cited supra). In view of the aforesaid facts and settled legal position the issue in the present case of the appellant is duly covered by the decisions of the Hon'ble Bombay High Court in the case of Orchid Industries Pvt.Ltd (2017) 397 ITR 139 (Bom), wherein, the Hon'ble High Court has considered the decision of the division Bench of Bombay High Court in the case of CIT vs. Gagandeep Infrastructure Pvt. Ltd 12017) 394 ITR 680 (Bom.) and the Hon'ble Supreme Court in the case of CIT vs. Lovely Exports (P) Ltd 216 CTR 195 (SC) and held as under:- “… 5. The Assessing Officer added Rs.95 lakhs as income under section 68 of the Income tax Act only on the ground that the parties to whom the share certificates were issued and who had paid the share money had to appeared before the Assessing Officer and the summons could be served on the address given as they were not traced and in respect of some of the parties who had appeared, it was observed that just before issuance of cheques the amount was deposited in their account.
The Tribunal has considered that the Assessee has produced on record the documents to establish the genuineness of the party such as PAN of all the creditors along with the confirmation, their bank statements showing payment of share application money. It was also observed by the Tribunal that the Assessee has also produced the entire record regarding issuance of shares ie. allotment of shares to these parties, their share application forms, allotment letters and share certificates, so also that books of account. The balance sheet and profit and loss account of these persons discloses that these persons had sufficient funds in their accounts for investing in the shares of the assessee. In view of these voluminous documentary evidence, only because those persons had not appeared before the Assessing Officer would not negate the case of the Assessee. The judgment in the case of Gagandeep Infrastructure (P) Ltd (supra) would be applicable in the facts and circumstances of the present case" 9.23. The appellant company has received share application money from various entities only by account payee cheques through regular Page No 5 DCIT Vs. J. A. Infracon Pvt. Ltd. banking channels and the appellant company after observing the formalities laid down under the Companies Act as regards to the issue of share capital and allotment of shares and for which necessary forms required to be filed with the