DCIT, CIRCLE- I, FARIDABAD vs. INTUITENT ONLINE VENTURE P. LTD., FARIDABAD
ITA No.2687/Del/2018
IN THE INCOME TAX APPELLATE TRIBUNAL
DELHI BENCH “C” NEW DELHI
BEFORE SHRI CHALLA NAGENDRA PRASAD, JUDICIAL MEMBER
AND SHRI NAVEEN CHANDRA, ACCOUNTANT MEMBER
आ.अ.सं/.I.T.A No.2687/Del/2018
िनधा रणवष /Assessment Year:2013-14
DCIT
Circle-1, Faridabad,
Haryana.
बनाम
Vs.
Intuitent Online Venture P. Ltd.,
Villa No.440, Achievers Villa,
Kalandi Hills, Sector-49, Faridabad,
Haryana.
PAN No.AACCI4694K
अपीलाथ Appellant
यथ/Respondent
Assessee by None
Revenue by Shri Om Prakash, Sr. DR
सुनवाईकतारीख/ Date of hearing:
01.01.2025
उोषणाकतारीख/Pronouncement on 24.01.2025
आदेश /O R D E R
PER C.N. PRASAD, J.M.
This appeal is filed by the Revenue against the order of the Ld. Commissioner of Income Tax (Appeals), Faridabad dated
17.01.2018 for the AY 2013-14 in deleting the addition made towards estimation of net profit and also the addition made u/s 68
in respect of share application money received by the assessee.
2
Several notices were issued to the assessee on the address given in Form 36 by the Revenue by speed post, registered post with acknowledgement due and most of the notices have come back un- served with the postal authorities endorsement that the address is either incomplete or wrong address. The assessee also sought time on several occasions. Assessee as well as Revenue also sought several adjournments in this case. Therefore, we dispose of this appeal on hearing the Ld. Departmental Representative (DR). 3. In so far as the addition made by the Assessing Officer estimating the net profit by rejecting the books of account is concerned, Ld. DR strongly supported the orders of the Assessing Officer. On perusal of the assessment order we observed that the books of accounts of the assessee were rejected and net profit was estimated at 4.5% of the turnover on the ground that there were no proper bills available and no stock register was produced. One more reason for rejection of books of account was that the assessee incurred huge losses and therefore, book results were not accepted. Ld. CIT(Appeals) deleted addition observing that the Assessing Officer himself has admitted in the assessment order that the assessee had produced the books of account. Further CIT(A) observed that incurring of losses by the assessee cannot be a ground 3
for rejection of books of accounts. While deleting the addition made towards net profit the Ld. CIT(A) observed as under:
“7. I have considered the facts of the case together with the submissions of the appellant. The basic issue to be dealt with in this ground is in the context of the rejection of books of accounts and an estimated income being substituted by the AO in place of the returned loss.
Primarily the AO has made two reasons for resorting to the provisions of section 145(3). The first being that the books of accounts were not produced before the AO. The same is evident from page one (last line of the assessment order). In this regard I find that in para 2 on page 2 the AO has himself stated that the books of accounts, bills and vouchers were examined and it was found that proper bills and stock register was not available. Hence there is a contradiction in the assessment order of the AO when page land page 2 of the assessment order is compared. On the other hand, during the course of appellate proceedings, the appellant has filed a copy of the submissions made before the AO and a perusal of the same (page 239 to 299 of the paper book) reveals that the ledger accounts of all expenses above Rs. 1 Lakhs have been furnished to the AO on 27.01.2016 and the details of the purchases and indirect expenses have been furnished on 08.01.2016. In view of these facts, I find that it cannot be held that the books of accounts were not produced before the AO.
8. The second reason cited by the AO for rejection of books of accounts is that the appellant has incurred a loss of Rs.3.67 Crores on a turnover of Rs.1.95 Cr. In this regard, I find that merely because the appellant has incurred a loss cannot be a reason for rejection of books of accounts. It is pertinent to keep in mind that the appellant company is an online retailer company and to the best of my knowledge none of the online retailers in the country have made a single paisa profit till date.
9. Thus considering the above facts, I find that the AO has erred in rejecting the books of accounts of the appellant and estimating the profit of the appellant
4
company at 4.5% and thereby making an addition of Rs.3,76,71,364/-
(Rs.8,78,000/- as the profit and disallowing the loss of Rs.3,67,93,364/-). Thus, the addition so made is deleted and this Ground of the appellant is allowed.”
Findings of the Ld.CIT(A) are based on appreciation of facts and we do not see any valid reason to interfere with the same. Thus, we sustain the order of the Ld.CIT(A) and reject ground no. 1 & 3 of the Revenue. 5. Coming to the addition made with respect to share capital, we find that identical issue came up for consideration before the Tribunal in assessee’s own case for the AY 2012-13 in ITA No.1859/Del/2016 dated 25.10.2022, wherein the Tribunal deleted the addition and sustained the order of the Ld.CIT(A) observing as under: - “6. During the course of assessment proceedings, AO noticed that assessee had raised share application money of Rs.2 crore which was pending for allotment as on 31.03.2012. AO noted that share application was received from 3 parties which are listed at para 3 of his order, of which 02 parties are based in Mauritius. A.O. was of the view that since Foreign Direct Investment was involved, the assessee was required to furnish the details about the compliance with the relevant guidelines. Assessee inter alia submitted that it was a start-up company which has already established a name on the internet by the name “DONEBYONE”. It was submitted that for increasing the sale and requirement of funds, the company had approached the investors for the money and they in turn had transferred the money through normal banking 5
channel as per RBI Rules. The submissions of the assessee was not found acceptable to AO. According to AO, assessee did not furnish the copy of the share application form and also failed to justify as to how the investors came to know about the assessee company. AO noted that assessee had failed to report about the receipt of money within the 30 days to the Foreign Exchange Department of RBI and it also failed to comply with the guidelines issued by FEMA as well as RBI with respect to reporting of RBI about the allotment of shares. AO also noted that financial position of the investor showed huge loss of U 20,75,586 but had invested in a company at a high premium whose turnover only of Rs.6,89,035/- and accumulated loss of Rs.1,00,62,858/-. With respect to the investment made by Seedfund 2 India, he noted that as per ITR for A.Y. 2012-13 it had declared loss amounting to Rs.13,35,302/- but had made investments of Rs.6,88,766/- which was also not reflected in the bank statement of the assessee company. AO therefore, held whole of the investment of Rs.2 crore to be a bogus claim and accordingly treated it as income of the assessee from unexplained sources and made its addition u/s 68 of the Act. Aggrieved by the order of AO, assessee carried the matter before CIT(A). CIT(A) after considering the submissions of the assessee deleting the addition made by AO by observing as under:
“12. Having examined the submissions of the appellant and the arguments of the AO as reproduced above, I am of the considered opinion that the AO has been unable to justify the addition made by him u/s 68 in the assessment order. The identity of the share applicants (venture funds) is not in doubt. The creditworthiness of these is well established and the genuineness of the transaction has not been disproved by the AO. The AO has made the addition u/s 68
based on his unsubstantiated beliefs and has not brought out any argument to counter the plethora of documentary evidence furnished by the appellant.
Under these circumstances I hold that the addition deserves to be deleted and these grounds of the appellant are allowed.”
6
Aggrieved by the order of CIT(A), Revenue is now in appeal before us. 8. Before us, Learned DR supported the order of AO. 9. We have heard the Ld. D.R. and perused the material available on record. We find that CIT(A) while deleting the addition has given a categorical finding that during the course of assessment proceedings assessee had filed various documents to point out the receipt of application money which clearly proved that money was invested by 2 investors based in Mauritius which are the companies registered under Companies Act and also registered Securities and Exchange Board of India (“SEBI”) under SEBI (Venture Capital Fund) Regulation 1996 (“SEBI VC REGS”). He has further given a finding that Seedfund 2 International is a trust registered under the SEBI (Venture Capital Fund) Regulation and it files its tax return in India. He has further given a finding that the identity of the share application was not in doubt, the creditworthiness was well established and the genuineness of the transaction was not disputed by the AO. He has further given a finding that AO has not brought any argument to account the plethora of documentary evidence submitted by assessee. Before us, Revenue has not pointed any fallacy in the findings of CIT(A) and, therefore, we find no reason to interfere with the order of Ld. CIT(A) and thus, the Ground of Revenue is dismissed.”
Perusal of the Ld.CIT(A) order, we noticed that the issue of addition towards share capital was decided in favour of the assessee on identical circumstances for the AY 2012-13 and the Ld. CIT(A) followed his order and findings given for the AY 2012-13 as the facts are identical. For the AY 2012-13 the Tribunal sustained the order of the Ld.CIT(A) as already extracted above. Therefore, facts being 7
identical following the order of the Tribunal for the AY 2012-13, we sustain the order of the Ld.CIT(A) in deleting the addition made towards share capital u/s 68 of the Act and reject ground no. 4 of grounds of appeal of the Revenue for the assessment year under consideration.
7. In the result, appeal of the Revenue is dismissed.
Order pronounced in the open court on 24.01.2025 (NAVEEN CHANDRA) (C.N. PRASAD)
ACCOUNTANT MEMBER JUDICIAL MEMBER
Dated: 24.01.2025
*Kavita Arora, Sr. P.S.
Copy of order sent to- Assessee/AO/Pr. CIT/ CIT (A)/ ITAT
(DR)/Guard file of ITAT.
By order