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Facts
The assessee company received share capital and premium of Rs. 61 lakhs from five parties. The Assessing Officer (AO) doubted the credibility of the source of funds for two parties, Mass Securities P Ltd and Deepit Real Estate P Ltd, who had reported losses and showed suspicious bank entries.
Held
The Tribunal found that the assessee had furnished documents to prove the transaction, but the AO required further factual verification regarding the source of funds. Therefore, the issue was restored to the AO for denovo adjudication.
Key Issues
Whether the addition of Rs. 61 lakhs made by the AO under Section 68 of the Act on account of share premium and share capital received by the assessee was justified, and whether the NFAC was correct in sustaining the addition.
Sections Cited
143(3), 68, 56(2)(vii)(b), 11UA, 133(6)
AI-generated summary — verify with the full judgment below
Income Tax Appellate Tribunal, DELHI BENCH “B”: NEW DELHI
O R D E R PER M. BALAGANESH, A. M.: The appeal in AY 2016-17, arises out of the 1. order of the ld National Faceless Appeal Centre (NFAC), Delhi [hereinafter referred to as ‘ld. NFAC’, in short] in Appeal No. ITBA/NFAC/S/250/2024- 25/1065146252(1) dated 27.05.2024 against the order of assessment passed u/s 143(3) of the Income-tax Act, 1961 (hereinafter referred to as ‘the Act’) dated 29.12.2018 by the Assessing Officer, ACIT, Circle-1, Faridabad (hereinafter referred to as ‘ld. AO’).
The only issue to be decided in this appeal is as to whether the 2. Learned NFAC was justified in sustaining the addition of Rs. 61 lakhs made by the Learned AO under Section 68 of the Act on account of share We have heard the rival submissions and perused the materials 3. available on record. The return of income for the assessment year 2016-17 was electronically filed by the Assessee company on 3-10-2016 declaring taxable income of Rs. 85,43,330. The Learned AO in the scrutiny assessment proceedings observed that Assessee has received share premium from 5 parties during the year. The list of parties from whom the share capital and share premium was received are tabulated in page 2 of the assessment order. The Learned AO noted that the share premium was justified by the Assessee by placing reliance on the valuation report obtained from a chartered accountant dated 9-9-2015, wherein the fair market value of the share was determined at Rs. 66 per share as required under Section 56(2)(vii)(b) read with Rule 11UA of the Income Tax Rules. The Learned AO, however, in respect of amounts received from Mass Securities P Ltd in the sum of Rs. 21 lakhs and Deepit Real Estate P Ltd received in the sum of Rs. 40 lakhs, noted that the source of funds which are used for the share premium money are not through credible source. The Learned AO accordingly sought to verify the identity and creditworthiness of the investor together with the genuineness of the transaction by issuing notice under Section 133(6) of the Act dated 22-11- 2018, seeking the following information:- a) Confirmation whether any share was purchased of the Assessee company b) Mode of payment towards share capital and share premium c) Copy of acknowledgement of income tax return.
3.1. Both the parties submitted the requisite details in response to notice under Section 133(6) of the Act. On perusal of the details filed by the Page | 2 Baba Healthcare Pvt. Ltd parties directly before the Learned AO, the Learned AO in respect of Mass Securities private limited noted that it had returned a loss of Rs. 70,465/- and there was no credible source of income available for making investment towards share capital and share premium in the sum of Rs. 21 lakhs. Further, on perusal of the bank statement of the said investor, the Learned AO noted that before the issuance of cheque to the Assessee company, there were certain immediate credits in the form of RTGS entries in the bank statement which raised suspicion and accordingly the credibility of the source of funds was doubted by the Learned AO. With regard to Deepit Real Estate private limited, the said party had returned a loss of Rs. 25,50,340/- in its income tax return and the Learned AO made similar observations as were made for Mass Securities private limited for this investor company also and doubted the credibility of source of funds. Accordingly, the Learned AO proceeded to make addition under Section 68 of the Act treating the amounts received towards share capital and share premium as unexplained cash credit and added a sum of Rs. 61 lakhs in the assessment. This action of the Learned AO was upheld by the Learned NFAC.
We find that the Assessee on its part had furnished the following 4. documents to prove the three ingredients of section 68 of the Act:- a) ITR acknowledgement of assessment year 2016-17 of the investor companies b) Audited financial statements of investor companies for the year ended 31-3-2016 c) Bank statements of investor companies d) Confirmation of account from investor companies Baba Healthcare Pvt. Ltd e) Ledger account of Assessee as appearing in the books of investor companies f) Copy of Share Certificates The Learned AR submitted that the investor companies had advanced 5. loans to certain parties in earlier years and the same were duly recovered during the year and those amounts were duly invested in the Assessee Company towards share capital and share premium. Hence the source of source is also established beyond reasonable doubt. In our considered opinion, these facts require factual verification by the Learned AO. Hence in the interest of justice and fair play, we deem it fit and appropriate, to restore this issue to the file of Learned AO for denovo adjudication in accordance with law. The Assessee is given liberty to furnish fresh evidences, if any, in support of its contentions. The Learned AO is directed to pass a speaking order on examination of all the evidences available and placed on record by the Assessee. The grounds raised by the Assessee are allowed for statistical purposes.
In the result, the appeal of the Assessee is allowed for statistical 6. purposes.
Order pronounced in the open court on 07/01/2026.