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Facts
The assessee company introduced share capital and premium amounting to Rs. 25,70,224/- from Shri Tejas Mehta. The Assessing Officer (AO) made an addition of this amount to the total income, stating that the identity, creditworthiness, and genuineness of the transaction could not be established by the assessee. The CIT(A) upheld the AO's decision.
Held
The Tribunal noted that the plea of foreign remittances was raised for the first time before the CIT(A) and not before the AO. It was also observed that it was unclear whether Shri Tejas Mehta was a non-resident at the time of the transaction. The CIT(A) had not obtained a remand report from the AO regarding the additional evidence. Therefore, the Tribunal set aside the order of the CIT(A) and restored the matter to the file of the AO.
Key Issues
Whether the addition made by the AO under section 68 of the Income Tax Act, 1961, for unexplained share capital and premium is justified when the assessee failed to establish the identity, creditworthiness, and genuineness of the transaction, and whether the plea of foreign remittances raised at a later stage is admissible.
Sections Cited
Section 68, Section 133(6), Section 143(2), Section 142(1), Section 250
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Before: SHRI SANJAY GARG & SHRI BIJAYANANDA PRUSETH
आदेश / O R D E R
PER BIJAYANANDA PRUSETH, AM:
This appeal by the assessee emanates from the order passed under section 250 of the Income-tax Act, 1961 (in short, ‘the Act’), dated 12.11.2024 by the Commissioner of Income-tax (Appeals), National Faceless Appeal Centre, Delhi [in short ‘CIT(A)’] for the Assessment Year (AY) 2014-15.
Grounds of appeal
raised by the assessee are as under: “The Ld. AO has not considered various proof regarding source of share capital and share premium introduced by Shri Tejas Mehta submitted during the course of assessment proceedings and made addition of Rs.25,70,224/- in total income of the assessee company which has been further confirmed by CIT(Appeals), Valsad.”
3. The facts of the case in brief are that the assessee e-filed its return of income on 18.09.2014 for AY.2014-15, disclosing total income of Rs.21,41,820/-. The assessee is engaged in the business of manufacturing of process control /AY.2014-15 ITEC Measures Pvt. Ltd. instruments like pressure gauge and temperature gauge etc. The case was selected for limited scrutiny under CASS. In response to the notices issued u/s 143(2) and 142(1) of the Act, the assessee filed various details. The Assessing Officer (in short, ‘AO’) noticed that assessee has introduced share capital of Rs.5,12,45,000/- during the year. The shares were having face value of Rs.10/- per share and premium of Rs.8.50/- per share. The above share capital and premium includes Rs.25,70,224/- from Shri Tejas Mehta. The AO asked assessee to furnish details regarding the identity, creditworthiness and genuineness of transaction of share capital of Shri Tejas Mehta. The assessee could not furnish the bank statement, confirmation and other details of Shri Tejas Mehta. In response to the subsequent show cause notice, the assessee furnished PAN, Form No. DIN-1 and submitted that Shri Tejas Mehta was a director of the assessee-company from 06.12.2013 to 03.04.2014. Subsequently, Shri Tejas Mehta sold his shares to another person, and he has no in connection with the appellant-company. The AO, on further inquiry, found that the present residential address of Shri Tejas Mehta is Dubai. The AO issued notice u/s 133(6) of the Act to Shri Tejas Mehta via e-mail, but no reply was received by him. Hence, identity, creditworthiness and genuineness were not established by the assessee. Therefore, addition of Rs.25,70,224/- was made u/s 68 of the Act.
4. Aggrieved by the order of AO, the assessee filed appeal before the CIT(A). The assessee filed reply dated 27.11.2023 and 15.10.2024, which are reproduced at para 3 of the appellate order. The CIT(A) observed that AO /AY.2014-15 ITEC Measures Pvt. Ltd. granted various opportunities during assessment proceedings to prove the identity and creditworthiness of Shri Tejas Mehta and genuineness of the transaction, but appellant failed to prove the same. He further observed that creditworthiness of the transactions remains unexplained, and the explanation given by the appellant during appellate proceedings is not sufficient to allow claim of the assessee. The assessee failed to discharge the primary onus by producing necessary documents/evidences as called for by AO during assessment proceeding. Since the assessee failed to offer any explanation with respect of the transaction, the appeal was dismissed.
5. Aggrieved by the order of CIT(A), the assessee filed appeal before the Tribunal. The learned Authorized Representative (ld. AR) of the assessee filed a paper book containing 140 pages. In the written submission, the ld. AR submitted that Shri Tejas Mehta is currently staying at Dubai and he is a Director of Ventil Floserve Pvt. Ltd. Shri Tejas Mehta was allotted share in FY.2010-11 and 2012-13. He was holding shares of Rs.12,95,450/- up to 31.03.2013. Shri Mehta was director of company for the period from 06.12.2013 to 03.04.2014. He has sent the share application money through banking channel, i.e., Rs.23,68,743/- on 0310.2013 vide Remittances ID – 0179SXR00006314 and Rs.2,01,845/- on 18.12.2013 vide Remittances ID – 0179SXR00009314. This is reflected in ICICI bank statement, which was also submitted during the assessment proceedings (pages 104 and 105 of the paper books). It was also submitted that the appellant should not be penalized for fault of Shri Tejas /AY.2014-15 ITEC Measures Pvt. Ltd. Mehta in not replying to the notice u/s 133(6) of the Act. The ld. AR further submitted that Shri Tejas Mehta left the company due to some grievance, and he has not co-operated to give his bank account details and personal income tax details. The ld. AR further submitted that the decisions relied on by the AO are not applicable. It was also submitted that addition u/s 68 of the Act is not applicable to remittances made by non-resident. In case of the appellant, the subscriber, Shri Tejas Mehta is a non-resident Indian (NRI), settled in Dubai. It is submitted that the 2nd proviso to section 68 of the Act regarding share application money, share capital and share premium is applicable in case of resident persons and not applicable for NRI investors. For this, the ld. AR placed reliance of the Bangalore Tribunal in case of ACIT vs. Kansur Developers India Pvt. Ltd., in dated 28.10.2022. It is further submitted that the appellant has complied with all formalities as per the FDI norms such as RBI permission for FDI, FIRC copy, KYC norms certified by ICICI bank and certificate from the company secretary. The company has also complied with the FEMA regulations. It was also submitted that the assessee’s name earlier was M/s Parth Technocrafts Pvt. Ltd.
6. On the other hand, the learned Senior Departmental Representative (ld. Sr. DR) for the revenue submitted that the reliance placed by the ld. AR, on the proviso to section 68 of the Act regarding source of source will come into play after the basic requirements of section 68 of the Act regarding identity, creditworthiness and genuineness of transaction proved. The appellant has not /AY.2014-15 ITEC Measures Pvt. Ltd. given any other details apart from the name and PAN of Shri Tejas Mehta. He further submitted that the details of foreign remittances etc. were not submitted to the AO. Therefore, the issue contended before the Tribunal has not been canvassed before AO.
7. In short rejoinder, ld. AR of the assessee admitted that details of foreign remittances were submitted to CIT(A) and not to the AO. Further, it was submitted that Shri Tejas Mehta did not co-operate with the assessee. It was also submitted that provisions of section 68 of the Act are not applicable in case of the impugned share capital receipt by the appellant.
We have heard both parties and perused the materials available on record. We have also deliberated upon the decision relied upon by ld. AR. There is no dispute regarding the fact that the amount of Rs.25,70,224/- was received by the appellant from Shri Tejas Mehta towards share capital and share premium. The address of Shri Tejas Mehta at the time of completion of assessment on 13.12.2017 was Dubai. However, the appellant has received share capital and share premium much earlier on 03.10.2013 and 18.12.2013. It is not clear whether Shri Tejas Mehta was a non-resident during the said period. We also find that this plea of foreign remittances has not been taken by the assessee before the AO during the assessment proceedings. Such a contention was raised for the first time before the CIT(A), which is also admitted by the ld. AR of the assessee. We find that the CIT(A) has not given reasons for acceptance of the additional evidence filed by the assessee. He has also not called for a