Loading judgment…
Facts
The Revenue appealed against the CIT(A)'s order deleting an addition of Rs. 4,75,00,000/- made by the Assessing Officer for unexplained share capital and premium. The Assessing Officer treated the entire amount as unexplained, while the CIT(A) deleted the addition, finding that the identity, capacity, and genuineness of the subscribers were established.
Held
The Tribunal held that no addition can be made in the absence of incriminating material found during a search, relying on Supreme Court and High Court precedents. The Tribunal found no infirmity in the CIT(A)'s order and dismissed the Revenue's appeal.
Key Issues
Whether the addition made by the Assessing Officer for unexplained share capital and premium is sustainable when the assessee has provided evidence of identity, capacity, and genuineness of subscribers and no incriminating material was found during a search.
Sections Cited
143(3), 153C, 133(6), 132, 68
AI-generated summary — verify with the full judgment below
Income Tax Appellate Tribunal, LUCKNOW BENCH “A”, LUCKNOW
Before: SHRI SUDHANSHU SRIVASTAVA & SHRI ANADEE NATH MISSHRA
PER ANADEE NATH MISSHRA, A.M.: The present appeal has been filed by the Revenue against the impugned appellate order dated 31.12.2014 passed by the Ld. Commissioner of Income Tax (Appeals)-III, Lucknow for the assessment year 2007-08. The grounds of appeal
of the Revenue are as under: -
1. On the facts and in the circumstances of the case that the ld. CIT(A) has erred in deleting the addition of Rs. 4,75,00,000/- made by the assessing officer on account of unexplained share capital. The ld. CIT(A) has deleted this addition on the basis of Observations which are factually incorrect and without appreciating the findings made by the A.O. as indicated in the statement of facts enclosed.
1. 2. That the order of the ld. CIT(A) deserves to be vacated and the assessment order passed by the A.O. be restored.
3. That the appellant craves to add or amend any one or more of the grounds of the appeal as stated above as and when need for doing so may arise.”
2. In this case, the assessment order dated 031.03.2013 was passed by the Assessing Officer, under section 143(3)/153C of Page 2 of 5 the Income Tax Act, 1961 (“Act”, for short) whereby assessee’s total income was determined at Rs.4,75,00,000/-. In the aforesaid assessment order, addition of was made by the Assessing Officer by treating the share capital and share premium unexplained. The relevant portion of the assessment order is reproduced as under: - “........Vide questionnaire dated 26.02.2013 and 04.03.2013 the assessee was required to furnish incidence regarding source of such share capital and share premium in view of the fact at the share capital and share premium were received in this year. In explanation some copies of confirmation of accounts purportedly in support of source of the said share capital and share premium. However, the documents furnished neither prove the identity and capacity of the persons claimed to have invested in the assessee company, nor the genuineness of such transactions, In these set of facts it is taken that the said sources of share capital and premium are not found as explained. Accordingly, the amount of share capital and share premium totaling Rs. 4,75,00,000/- is added to the assessee’s total income as unexplained credits.” 2.1 Aggrieved, the assessee filed appeal in the office of the Ld. CIT(A). Vide aforesaid impugned appellate order dated 31.12.2014, the Ld. CIT(A) deleted the aforesaid addition entirely. The relevant portion of the impugned order dated 31.12.2014 of the Ld. CIT(A) is reproduced as under: - “By way of share application money from the above mentioned subscribers and subsequently shares were allotted to’ the above companies against the amounts so received. The subscribers to the shares are income Tax Assessee and have been regularly filing return of Income for last so many years. Before the Assessing Officer the Appellant company has submitted the details that the shareholders are having PAN and are regularly filing their return of income for last so many years. The copies of returns, bank statement, identity of the share holders were filed before the Assessing Officer during the asstt. proceedings and same were also filed before me during the course of appeal Regarding the identity, the appellant has also submitted that all the shareholder are Companies registered under the Companies Act 1956. having PAN and regularly filing their return of Income in their respective ward. For the genuineness and creditworthiness of transaction it was stated that share capital had been properly recorded in the books of accounts of the company and all the transactions were routed through bank accounts and also properly mentioned in the Balance Sheet of the subscriber companies and recorded in the books of account of the companies which are being statutorily audited. For the A.Y. 2007-08 assessment of the assessee i.e. Anubhav Vyapaar Pvt. Ltd. was completed u/s 143(3) of the IT Act on an income of Rs. 443 rounded off to Rs. 440 with NIL demand on 27-04-2009. It was mentioned that the case was selected for scrutiny assessment. The notice u/s 143(2) and 142(1) alongwith requisition were issued on 25-07-2008. In response to above notices Shri Binod Agarwal, A/R of the Company appeared from time to time, filed necessary documents and evidences in support of the return of income. During the course of hearing the A/R submitted various details which have been test checked and kept on records. During the year the assessee company raised paid up share capital of Rs. 19.00 Lakhs and share premium of Rs. 4.56 Crores. Verification through query u/s 133(6) of the IT Act,1961 were made in respect of share applicants. In the block assessment proceedings nothing incriminating was found by the Assessing Officer and order u/s 143(3) has been passed after verification of 133(6) as mentioned. Therefore, the total income/loss computed as below: Net profit as per Return Rs. 443/- Rounded off Rs. 440/- In this case when return has been accepted by the department and the department agreed With the returned income Rs. 440/and no addition was made. After considering the above stated facts, it is seen that the Assessing Officer proceedings did not carry out any further enquiry about the share holders despite all details Before Him. The Assessing Officer has not challenged the identity, this means that he agrees and accepts their identity as no query was made by the Assessing Officer, therefore, this covered by the Supreme Court Case Laws of Lovel Exports Pvt 216 CTR 1955 (SC) 2008 & Divine Leasing SC en the Jurisdictional Allahabad High Court’s case of Jaya Securities Ltd. vs. CIT II of 15 May, 2007,is also on Similar facts “.. No addition under section 68 could be made in respect of the subscription amount towards the share capital of a company Limited by shares whether it is private or public and in support thereof a Division Bench decision of the Delhi High has been referred in the case of CIT v. Steller Investment Ltd which decision has been upheld by the Apex Court in the case of CIT vs Steller Investment Ltd...” Therefore, after considering the above stated facts, I respectfully follows above mentioned case laws, the addition of Rs. 4,75,00,000/- is hereby deleted. These grounds appeal are allowed.” 2.2 The present appeal has been filed by the Revenue against the aforesaid impugned appellate order dated 31.12.2014 of the Page 4 of 5 Ld. CIT(A). At the time of hearing before us, Ld. Departmental Representative strongly supported the addition made in the assessment order, relying on the assessment order. The Ld. Authorized Representative for the assessee supported the order of the Ld. CIT(A) on merits. He also submitted that no incriminating documents were found from the assessee’s premises in the course of search u/s 132 of the Act. Therefore, he submitted no addition could have been made in the case of the assessee. In view of the binding order of the Hon'ble Supreme Court in the case of PCIT Vs. Abhisar Buildwell (P.) Ltd (2023) 149 taxmann.com 399 (SC)/(2023) 293 Taxman 141 (SC)/(2023) 454 ITR 212 (SC). He further submitted that the Lucknow Bench of ITAT in the case of Smt. Shashi Agarwal vs. DCIT (2024) 167 taxmann.com 687 (Lucknow Trib.), considered aforesaid decision of Hon'ble Supreme Court in the case of Abhisar Buildwell (P.) Ltd (supra) and decided the issue in favour of the assessee relying on the same. Further, he contended that on merits also, the Ld. Departmental Representative could not point out any infirmity in the impugned order of the Ld. CIT(A).
We have heard both sides. We have perused the materials on record. On merits, no infirmity has been pointed out, in the impugned order of Ld. CIT(A). No material has been brought for our consideration to interfere with the impugned order of the Ld. CIT(A) on merits. The Ld. CIT(A) has relied on the order of the Hon'ble Supreme Court in the case of Lovely Exports Pvt Ltd 216 CTR 1955 (SC) 2008 and in the case of Divine Leasing 216 CTR 195 (SC). The Ld. CIT(A) has also relied on the order of the Hon'ble Jurisdictional Allahabad High Court in the case of Jaya Securities Ltd Vs. CIT. On the legal issue also, whether any Page 5 of 5 addition can be made in the absence of incriminating material found in the course of search u/s 132 of the Act; the matter is covered in favour of the assessee by precedents in the case of PCIT vs Abhisar Buildwell (P.) Ltd (supra) and Smt Shashi Agarwal vs DCIT (supra); as there is material on record to indicate that addition made by the Assessing Officer was based on incriminating material found in the course of search u/s 132 of the Act. In view of the foregoing and respectfully following the aforesaid precedents, we decline to interfere with the impugned appellate order dated 31.12.2014 of the Ld. CIT(A). Accordingly, grounds of appeal raised by the revenue are dismissed. In the result, the appeal of Revenue stands dismissed.
Order pronounced in the open Court on 12/03/2025.