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Facts
The assessee's assessment for AY 2012-13 was reopened due to unexplained share capital and premium totaling ₹37,50,000, which the Assessing Officer treated as unexplained cash credit under section 68. This decision was upheld by the CIT(A). The assessee contended that these funds were received in FY 2010-11 as "Share Application Money Pending Allotment" and shares were allotted in September 2011, implying no fresh receipt in the relevant assessment year 2012-13.
Held
The Tribunal held that the sum could not be treated as unexplained cash credit under section 68 for AY 2012-13, as the funds were received in FY 2010-11 (AY 2011-12) and reflected as "Share Application Money Pending Allotment" prior to the relevant assessment year. Since section 68 applies only to sums credited in the books during the *relevant previous year* and no fresh inflow occurred in FY 2011-12, the addition was without jurisdiction. Consequently, the Tribunal set aside the CIT(A)'s order and directed the AO to delete the addition.
Key Issues
Whether an addition under section 68 of the Income-tax Act, 1961, can be made for unexplained cash credit in the current assessment year when the funds were received in an earlier previous year and only shares were allotted in the current year.
Sections Cited
250, 147, 142(1), 133(6), 131, 68
AI-generated summary — verify with the full judgment below
Income Tax Appellate Tribunal, BENCH-RANCHI
Before: Shri Sonjoy Sarma & Shri Ratnesh Nandan Sahay
order
: October 10, 2025 ORDER
Per Sonjoy Sarma, Judicial Member:
This appeal by the assessee is directed against the order of the NFAC, Delhi [“CIT(A)”] dated 11.03.2025 under section 250 of the Income-tax Act, 1961 (the “Act”) for the assessment year 2012–13.
Facts of the Case are that the assessee company filed its return of income for AY 2012–13 declaring total income of ₹2,57,551. The case was reopened under section 147 on the ground that the assessee had raised share capital and share premium from certain entities, whose financial capacity and genuineness of investment remained unexplained. During assessment, the AO noted that the assessee had introduced share capital of ₹37,50,000 from the following four private limited companies:
Suvarna Pushpa Finance Pvt. Ltd. – Share capital ₹2,20,000, Premium ₹8,80,000 (2,200 shares)
Adhunik Akshat Udyog Pvt. Ltd Shree Sati Finvest Pvt. Ltd. – Share capital ₹1,30,000, Premium ₹5,20,000 (1,300 shares) Ishan Tie -Up Pvt. Ltd. – Share capital ₹4,00,000, Premium ₹16,00,000 (4,000 shares) Linton consultant Pvt. Ltd. – Share capital ₹2,00,000, Premium ₹8,00,000 (2,000 shares) The AO issued notices under sections 142(1) and 133(6) to the subscribers. Two notices were returned unserved, while in other cases, the companies were alleged to be “shell entities.” Since the assessee failed to produce directors and furnish further documents, the AO treated the entire sum of ₹37,50,000 as unexplained cash credit under section 68, and completed the assessment at ₹40,07,551.
On appeal, the CIT(A) sustained the addition. He held that the assessee failed to discharge the burden of proving identity, creditworthiness and genuineness of the transactions, and non- compliance to summons under section 131 further supported the AO’s conclusion.
Aggrieved, the assessee is in appeal before this Tribunal. At the time of hearing the learned AR contended that the entire share application money was in fact received during FY 2010–11, corresponding to AY 2011–12, and was duly reflected in the audited balance sheet of the assessee company as on 31.03.2011 under the head “Share Application Money.” It was submitted that in September 2011 (FY 2011–12), the shares were allotted out of the money already received earlier. Thus, no fresh receipt took place during AY 2012–13. The AR placed reliance on the audited balance sheet as on 31.03.2011, Schedule A, and the balance sheet as on 31.03.2012, which clearly reconciled the figures. It was argued that section 68 of the Act applies only to sums found credited in the books of account of the assessee during the Adhunik Akshat Udyog Pvt. Ltd relevant previous year. Since the impugned money was received in the earlier year, there was no credit during FY 2011–12, and therefore section 68 of the Act could not be invoked in AY 2012–13. In support, reliance was placed on the decision of the ITAT Kolkata in ACIT, Circle- 21, Kolkata vs. Pujita Merchandise Pvt. Ltd. [ITA No. 1293/Kol/2024, order dated 06.11.2024, wherein it was held that where share application money was received in earlier years and only shares were allotted in the relevant year, no addition under section 68 of the Act could be made in the current year. The ld. AR thus prayed that the addition sustained by the CIT(A) be deleted.
On the other hand, the learned DR supported the orders of the authorities below. It was submitted that the assessee failed to produce the directors or furnish fresh confirmations from the subscribers. The fact that notices were returned unserved indicates that the subscribers were non-existent entities. He argued that issuance of shares at a premium without any justification of business performance raises strong suspicion of accommodation entries. He therefore urged that the appeal be dismissed.
We have considered the rival submissions and perused the record. The central issue is whether the sum of ₹37,50,000 can be treated as unexplained cash credit under section 68 of the Act in AY 2012–13. From the balance sheet of the assessee as on 31.03.2011, we find that the said sum was already reflected under the head “Share Application Money Pending Allotment.” This fact has not been disputed by the Revenue. The shares were allotted in September 2011, out of the money already received earlier. Thus, there was no fresh inflow of funds in FY 2011–12. The language of section 68 of the Act is clear: it applies to “any sum found credited in the books of the assessee maintained for any previous year.” Unless there is a credit in the relevant previous year, section 68 of the Act cannot be applied. In the present case, since the Adhunik Akshat Udyog Pvt. Ltd amount was received in FY 2010–11, the relevant year for examination, if any, would have been AY 2011–12, not AY 2012–13. The AO erred in invoking section 68 of the Act in the present year. The ITAT Kolkata in Pujita Merchandise Pvt. Ltd. (supra) has held in identical circumstances that addition under section 68 is unsustainable when no fresh share application money is received in the current year. Further, the Hon’ble Delhi High Court in CIT vs. Usha Stud Agricultural Farms Ltd. (301 ITR 384) held that addition under section 68 of the Act cannot be made in a year in which no fresh credits appear. Respectfully following these precedents, we hold that the addition of ₹37,50,000 sustained by the CIT(A) is without jurisdiction and bad in law. In view of the above, we set aside the order of the CIT(A) and direct the AO to delete the addition of ₹37,50,000 made under section 68 of the Act. Accordingly the appeal of the assessee is allowed.
In the result, the appeal of the assessee is allowed. Kolkata, the 10th October, 2025.