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Facts
The Revenue appealed the deletion of an addition of Rs. 15,00,00,000/- made by the Assessing Officer (AO) under Section 68 of the Income Tax Act, 1961, for unexplained share application money. The assessee had provided details regarding the identity, creditworthiness, and genuineness of the investors.
Held
The Tribunal held that the CIT(A) had correctly deleted the addition, as the assessee had provided sufficient evidence to satisfy the conditions of Section 68. The AO had failed to rebut the evidence provided by the assessee and had not conducted independent inquiries.
Key Issues
Whether the addition made by the AO on account of unexplained share application money was justified, given the evidence provided by the assessee regarding identity, creditworthiness, and genuineness of the transactions.
Sections Cited
68, 147, 133(6), 143(3), 148, 139(1), 120(4)(b), 2(7A), 131
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Income Tax Appellate Tribunal, DELHI BENCH, ‘C’: NEW DELHI
Before: SHRI ANUBHAV SHARMA&
ORDER
PER AMITABH SHUKLA, AM,
The captioned appeal has been preferred by the Revenue against order dated 20.11.2023 of the Commissioner of Income Tax (Appeals)-3, CO No.14/Del/2024 Noida, [hereinafter referred to as ‘ld. CIT(A)’] arising out of assessment order dated 12.12.2018 passed u/s 143(3) r.w.s. 147 of the Income Tax Act, 1961 pertaining to Assessment Year 2014-15. The assessee has also filed cross objection. The appeal of the Revenue and Cross Objection of the assessee, for the purposes of convenience were heard together and are being disposed of by this common order. The word ‘Act’ herein this order would mean Income Tax Act, 1961.
Contesting the impugned order of ld. CIT(A) dated 20.11.2023, the Revenue has raised following grounds of appeal:-
“1. Whether on facts and circumstances of the case and in law, the Ld. CIT(A)-3, Noida has erred in deleting the addition of Rs.15,00,00,000/- made by the Assessing Officer u/s 68 of the Income Tax Act on account of unexplained share application money received during the F.Y. 2013-14 relevant to AY. 2014-15, without appreciating the facts elaborated by the Assessing Officer in the assessment order.
Whether on facts and circumstances of the case and in law, the Ld. CIT(A) erred in deleting the addition of Rs. 15,00,00,000/- made by the Assessing Officer u/s 68 of the Income Tax Act on account of unexplained share application money received during the year under consideration, without considering the fact that the explanations regarding capacity, genuineness and creditworthiness of investors of share application money was not found to be satisfactory by the Assessing Officer 3. Whether on facts and circumstances of the case and in law, the Ld. CIT(A) erred in not considering the fact as elaborated in the assessment order that the assessee company failed to prove the genuineness and creditworthiness of the said 23 companies from which the assessee company received share application money.”
Page 2 of CO No.14/Del/2024 3. The assessee has raised following grounds of appeal in its cross objection.
1. That the Ld. C.I.T.(A) has erred in law and on facts in dismissing the following legal grounds taken before him: i) That the Ld. A.O. has recorded vague reasons without conducting any independent enquiry and on borrowed satisfaction, therefore, the initiation of proceedings under section 147 of the Income Tax Act, 1961 is illegal and liable to be quashed. ii That the reasons were recorded by the J.C.I.T.(OSD), Central Circle Ghaziabad, without there being any order under section 120(4)(b) of the Income Tax Act, 1961, therefore, the J.C.I.T. (OSD), Central Circle Ghaziabad cannot act as an Assessing Officer defining under section 2(7A) of the Income Tax Act, 1961 and consequent the impugned reassessment order is illegal and liable to be quashed.
2. That any other relief or reliefs as your honour may deem fit in the facts and circumstances of the case, be granted.
Brief facts of the case are that the appellant assessee is a company engaged in the business of export of meat. The appellant filed original Return of Income under section 139(1) of the Act on 27.09.2014 declaring total income at Rs.32,32,700/-. However, consequent to a survey by the income tax authorities on 28.04.2015 and thereafter on taking print out from a Hard Disk found in survey a Trial Balance as at 31.03.2014 showing Share Application Money at Rs.15,00,00,000/- was noticed. On the basis of said Trial Balance the then A.O. recorded reasons and issued a notice under section 148 of the Act, dated 22.03.2018 to the appellant company. In Page 3 of CO No.14/Del/2024 response to the notice under section 148 of the Income Tax Act, 1961 the appellant company filed Return of Income on 03.04.2018 showing total income at Rs.32,32,700/- and requested the A.O. to provide reasons recorded for initiating the proceedings under section 147 of the Act. Reasons recorded under section 147 was provided to the appellant company inter alia revealed that as per the information received by the A.O. from DDIT (INV)-I, Ghaziabad, this amount of Rs.15,00,00,000/- was received from 23 Companies. Further the Ld. A.O. sent a Notice under section 133(6) of the Income Tax Act, 1961 to the persons who subscribed to the Shares. In response to these notices these companies filed replies along with copy of their ITR Acknowledgements and Bank Statements. The ld. AO concluded that the assessee had failed to prove the identity, creditworthiness and genuineness of transaction and proceeded to add the amount of Rs.15,00,00,000/- as unexplained Share Application Money received by the appellant company purportedly under section 68 of the Act. In appeal, the ld. First Appellate Authority after considering arguments made by the assessee, documents produced, remand report of the ld. AO, deleted the addition observing as under, in para 5.1.26 on page- 45 to 46 of his order:-
“Conclusion 5.1.26 The issues in the case can be summarized as under: 1. Addition u/s 68 has been made by the AO on the basis of trial balance impounded during the course of survey which Page 4 of CO No.14/Del/2024 showed that 23 entities had invested in the shares of the assessee company.
The addition was made during the first year of business and the AR has contended that the said addition is not sustainable in view of the judgments of Hon'ble Supreme Court and jurisdictional High Court discussed in the body of the order above.
The main reason for making the said addition by the AO was that the investor companies had nominal profits and large debit & credit transactions.
The investor companies in response to notices u/s 133(6) filed detailed submissions during the assessment proceedings including their ITRs, confirmations, bank account statements and the source of source.
No statement of the Directors/Employees of the investor companies is there to support the view of the AO.
Once the assessee had filed detailed evidences regarding the identity, credibility, genuineness and source of source of the investors, the onus shifted on the AO to rebut the evidence.
The three basic requirements of Section 68 were fulfilled by the appellant during the assessment proceedings.
There are enough legal precedents and decisions as discussed above in the body of the order which support the contentions of the appellant. In view of above, there appears to be no reason to consider the said credits in the books of accounts of the assessee company on account of share application money as unexplained income u/s 68 of the Income Tax Act, 1961, the said addition is liable to be deleted. Accordingly, these grounds of appeal are allowed…..”
5. Before us, the ld. Counsel for the appellant reiterated the arguments taken before the ld. CIT(A) while placing on records through a paper book, evidences and documents placed before lower authorities. It was argued
Page 5 of CO No.14/Del/2024 that the assessee has satisfied the three conditions i.e. to prove the identity, creditworthiness and genuineness of transaction prescribed under section 68 of the Act. It was stressed that this was the first year of the company and hence there was no case for making any addition under section 68 of the Act. In support of its arguments, the ld. AR reiterated reliance upon judicial precedents covering the subject. The ld. AR also argued in favour of its Cross Objection regarding the maintainability of its grounds of appeal.
The ld. DR drew our attention to para 5.3. of the order of ld. AO so as to submit that there was non-compliance to summons under section 131 issued for verification of creditworthiness and genuineness of transaction of the said 23 companies. The ld. DR placed reliance upon decision of Hon’ble Apex Court in the Sumati Dayal case.
We have heard rival submissions in the light of material placed on record. All the three grounds of appeal raised by the appellant revenue are revolving on the single of issue of deletion of addition of Rs.15,00,00,000/- by the ld. CIT(A) which was made by the learned Assessing Officer. We have noted from para-4.1 on page-21 of the order of the ld. CIT(A) that it had solicited a remand report from the ld. AO and which has been extracted in the impugned para. Perusal thereof indicates that the ld. AO merely reiterated the arguments taken in the assessment order. There is nothing on record to suggest that any enquiries were conducted by the ld. AO during
Page 6 of CO No.14/Del/2024 the remand proceedings. As evident from para-4.2 of the order of the ld. CIT(A), he had requisitioned certain information qua the 23 investor companies and vide his e-mail dated 01.11.2023 asked the ld. AO to provide information as to whether any statements of the Directors or the employees of 23 entities were recorded. Vide his reply dated 02.11.2023, the ld. AO submitted that no statements of the Directors or the employees of 23 entities were recorded. We have noted that the ld. CIT(A) has comprehensively analyzed the entire controversy from pages 24 to 46 of his order before concluding that there was no merit in the additions made by the ld. AO. He has rightly concluded that the onus was upon the ld. AO to have conducted his enquiries before drawing any negative conclusions. We have noted that the reliance of the ld. CIT(A) upon the judicial precedents covering the subject is justified. The facts of the present case are largely identical to those in the judicial precedents relied upon by the ld. CIT(A). Accordingly, we are of the considered view that there is no case made out for any intervention in the order of the ld. CIT(A) at this stage. We therefore confirm the appellate order and dismiss all the grounds of appeal raised by the appellant Revenue.
Page 7 of CO No.14/Del/2024 9. As we have dismissed the appeal of the Revenue in Cross Objection No.14/Del/2024 filed by the assessee have become academic in nature and hence are left open.
In the result, the Cross Objection of the assessee is dismissed.
Finally, appeal of the Revenue as well as Cross objection of the assessee are dismissed.
Order pronounced in the open court on 14th January, 2026 Sd/- /- Sd/- [ANUBHAV SHARMA] [AMITABH SHUKLA] JUDICIAL MEMBER ACCOUNTANT MEMBER Dated: 14.01.2026 Shekhar Copy forwarded to: 1. Appellant 2. Respondent 3. PCIT 4. CIT(A) 5. DR Asst. Registrar, ITAT, New Delhi
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