ITO, WARD- NO. 4(4), NEW DELHI vs. BHARAT POWER TECH LTD., NEW DELHI

Rs.2,93,86,547/-. Therefore, the assessee was required to furnish

justification along with documentary evidence with respect to total

I.T.A.Nos.5157, 5226/Del/2019 & CO No. 65/Del/2022

receipts in the bank account. Since, no reply was furnished by the

assessee company an amount of Rs.4,24,77,876/- was treated as

unexplained credits of the assessee and brought to tax.

that the AO treated all credit entries in the bank statement as

income of the assessee ignoring the fact that the credits represent

amount received from release of fixed deposits, bank limits and

short term transactions with the sister company and all these credit

entries were added as income of the assessee mechanically without

any application of mind. Considering the submissions and the

remand report of AO the Ld.CIT(A) deleted the addition.

the Assessee Company who was authorized to appear before the

Tribunal vide resolution passed by the Board in the meeting held on

20.12.2019, strongly supported the orders of the Ld.CIT(A).

below. On perusal of the assessment order, we noticed that the AO

added the difference between the total credits appearing in the

bank statements and the receipts shown in the profit and loss

I.T.A.Nos.5157, 5226/Del/2019 & CO No. 65/Del/2022

account plus share application money raised during the year and the

unsecured loans received during the year as addition on account of

unexplained credits. We observed that in the course of appellate

proceedings the Ld.CIT(A) called for a remand report and

considering the remand report of the AO. The Ld.CIT(A) deleted the

addition with the following observations:

“6.4 Ground no.4: - This ground is directed against addition of Rs.4,24,77,876/- u/s 68 as unexplained cash credit as all credit entries appearing in the bank statement have been considered as cash credit. After reducing the cash credit already disclosed, the said addition was made. It appears to be made as a natural corollary to continuous non-compliance of the appellant as the case was badly documented and poorly represented. 6.5 During appellate proceedings, the appellant has made humble submission that the AR was not properly representing and prayed for deleting the same. It is submitted that all the amounts – day to day business transaction, share capital money, bank limit raised against FDR etc. have been added. 6.6 The statement shows that all credit entries appearing in the bank statement have been added due to non-cooperation of the appellant. AO has not given any description of the entries for which addition was made. Appellant has prayed to consider that all credit entries are happening in day to day business transactions, share capital money, bank limit raised against FDR etc. 6.7 During remand proceedings, no comment is received on the bank statement already furnished during assessment proceeding and addition of unexplained cash credit u/s 68 in respect of share capital etc. is already made separately, this further

I.T.A.Nos.5157, 5226/Del/2019 & CO No. 65/Del/2022

addition of all credit entries in the bank statement does not appear justified. After considering the facts and circumstances, the addition on this account is deleted. This ground is allowed.” 8. Perusal of the findings of the Ld.CIT(A) it is noticed that while

in the remand report the AO made no comments on the bank

statement and the entries therein. Considering the remand report

the Ld.CIT(A) in our opinion is rightly justified in deleting the

difference which was added by the AO as unexplained credits being

the difference between the total entries in the bank statement (-)

receipts shown in the profit and loss account. We see no valid

reason to interfere with the findings of the Ld.CIT(A) in deleting the

addition made u/s 68 of the Act in respect of credit entries

appearing in the bank statement of the assessee to the extent of

Rs.4,24,77,876/-. Grounds raised by the Revenue are rejected.

order of the Ld.CIT(A). Since, we have sustained the order of the

Ld.CIT(A) and rejected the grounds of the Revenue the Cross

Objection filed by the assessee becomes infructuous.

the assessee are as under: -

I.T.A.Nos.5157, 5226/Del/2019 & CO No. 65/Del/2022

addition made by the AO of Rs.19,81,000/- & Rs.1,87,800/-, received as share application money and loan respectively, without appreciating the fact that AO has brought no evidence on record to controvert the submissions of the assessee and the creditors.

addition of Rs.19,81,000/- as unexplained cash credit in respect of

share application money and Rs.1,87,800/- on account of unsecured

loans for the reason that the assessee has not furnished any

confirmations in the course of assessment proceedings and the

notices issued u/s 133(6) were not responded to by the share

applicants and the creditors. In the course of appellate proceedings

the assessee furnished additional evidences and provided

documentary evidences regarding share application money and

I.T.A.Nos.5157, 5226/Del/2019 & CO No. 65/Del/2022

unsecured loans. The Ld.CIT(A) after calling for remand report and

considering the comments of the AO in the remand report sustained

the addition.

submitted that out of Rs.19,81,000/- an amount of Rs. 15 lakhs

represents share application money received from M/s Titech

Engineers Pvt. Ltd. It is submitted that assessee has provided

confirmation of M/s Titech Engineers Pvt. Ltd. confirming the share

application money and as a matter of fact this company has business

dealings with assessee company and in fact Rs.15 lakhs was adjusted

against supply of materials. The Director of the assessee company

referring to page 194 of the Paper Book submits that this fact was

also brought to the notice of the AO vide letter dated 02.05.2014,

wherein the party has confirmed that they had supplied Rs.76 lakhs

worth materials in the FY 2010-11 and received payment. It was

also further stated that later on materials worth Rs.15 lakhs was

supplied which was adjusted against share application money,

therefore, it is submitted that the addition to the extent of Rs.15

lakhs is unwarranted. It is further submitted that the assessee has

not credited in books of accounts by way of cash/cheque/draft to

the extent of Rs.15 lakhs and, therefore, the provisions of Section

I.T.A.Nos.5157, 5226/Del/2019 & CO No. 65/Del/2022

68 of the Act cannot be invoked. Reliance was placed on the

decision of the ITAT Delhi in the case of Elevated Building Solutions

Pvt. Ltd. (ITA No.2498/Del/2017 dated 24.03.2021).

Rs.1,87,800/- on account of share capital and unsecured loans

respectively the Director of the assessee company submitted that all

the parties made investment for shares and loans are individuals and

related parties. It is submitted that Rs.3,08,000/- out of

Rs.4,81,000/- is received from Directors and their Son and the

remaining balance amounts are very small amount. It is submitted

that in order to prove the identity, genuineness and

creditworthiness of the transactions the assessee has submitted

confirmation letter and ITR of the parties before the Ld.CIT(A) as

additional evidence. It is submitted that only in respect of one Mr.

Ashok Kumar Sharma since he was out of India and he has paid

Rs.38,000/- against share capital. Confirmation could not be filed.

hoc disallowance was made at 10% of the total materials purchased

and site expenses incurred in spite of providing all the bills,

agreements with the parties, confirmations from the parties, copies

of bills, etc. 8

I.T.A.Nos.5157, 5226/Del/2019 & CO No. 65/Del/2022

amount of Rs.2,02,000/- was incurred towards expenses for payment

to labourers for housekeeping and security was disallowed for the

reason that they have not responded to notice issued u/s 136 of the

Act.

assessee company submitted that disallowance of Rs.87,000/- was

made towards depreciation on computers and printers for the reason

that the name of the company on the invoices was not mentioned.

The Director of the assessee company submits that these computers

were purchased from ‘Computer Emperor’ which is a shop known for

its cheapest and best market place at Nehru Place Market, Delhi.

authorities below.

regard to addition made towards share application money and

unsecured loans we observed that the assessee filed confirmation

letter from M/s Titech Engineers Pvt. Ltd., copy of ITR, bank

statement of Titech Engineers Pvt. Ltd., audited financial

statements and copy of letter requesting for allotment of shares

I.T.A.Nos.5157, 5226/Del/2019 & CO No. 65/Del/2022

against supply of materials for an amount of Rs.15 lakhs. It is also

the contention of the assessee that the notice issued u/s 133(6)

could not be replied by Titech Engineers Pvt. Ltd. as the said notice

was served on the date fixed for responding to the notice. It is also

the contention of the assessee that assessee has not received any

amount from Titech Engineers Pvt. Ltd. but was accepted the

request of the assessee towards share application money against the

liability of purchase of materials under barter arrangement.

Therefore, it is the contention that no fresh capital was brought in

to the books by way of cash/cheque/draft. Placing reliance on the

decision of coordinate bench of the Tribunal in the case of Elevated

Building Solutions Pvt. Ltd. in ITA No.2498/Del/2007 dated

24.03.2021 the assessee contended that provisions of section 68 of

the Act do not apply for cases of purchase of shares against

allotment of shares when exchanged under barter system. In so far

as the balance addition of Rs.4,81,000/- and 1,87,800/- towards

share capital and loans, it is the submission that they are all made

by directors and their relatives. The assessee has furnished

confirmations and they are all small amounts and, therefore, the

genuineness, creditworthiness of the transaction has been proved.

I.T.A.Nos.5157, 5226/Del/2019 & CO No. 65/Del/2022

application money is concerned, we hold that there is some force in

the submission. The coordinate bench in the case of Elevated

Building Solutions Pvt. Ltd. (supra) held as under:

“22. The various other decisions relied on by the Ld. Counsel for the assessee in the paper book also supports the case of the assessee that provisions of section 68 are not applicable in a case of acquiring shares of certain companies from certain shareholders without paying any cash consideration and, instead, considerations were settled through issuance of shares to the respective parties. In other words, provisions of section 68 of the Act does not apply to cases of purchase of shares and allotment of shares when the purchase and allotment are under a barter system. In this view of the matter, we do not find any infirmity in the order of the Ld.CIT(A) in deleting the addition of Rs.6,75,00,000/- (wrongly typed in the grounds as Rs.6,76,00,000/-). Therefore, the ground of appeal no.1 raised by the Revenue is dismissed.” 20. Following the said decision, we direct the AO to delete the

addition as in the case on hand the assessee allotted share

application money against liability for purchases and has not

received any cash/cheque/draft.

Rs.1,87,800/- the assessee filed confirmations as well as the Income

tax returns before the Ld.CIT(Appeals) and the details of share

I.T.A.Nos.5157, 5226/Del/2019 & CO No. 65/Del/2022

application money loan taken from the directors and their relatives

and friends are as under:

Name of Party Share Application Loan Amount Money A.K. Tiwari (Director) 80,000/- 90,025/- Rashmi Tiwari (Director) 1,24,000/- 50,025/- Abhishek Tiwari 1,04,000/- 47,750/- (Shareholder) Advocate B.P. Lathwal 95,000/- Nil Mukut-Mani Mishra 40,000/- Nil Ashok Sharma 38,000/- Nil Total 04,81,000/- 1,87,800/- 22. Perusal of the above details shows that the share application

money and the loans were taken only from the directors and their

relatives and friends. Keeping in view the smallness of the amounts

and also the evidences adduced in the form of confirmations and

Income tax returns of all these parties, we hold that the

genuineness, creditworthiness and identity cannot be doubted.

Thus, we direct the AO to delete the addition made on account of

share application money and unsecured loans u/s 68 of the Act.

Ground no.1 of grounds of appeal is allowed.

disallowance of 10% was made from materials purchased and site

expenses incurred. It is the finding of the Ld.CIT(A) that letters of

enquiries were issued u/s 133(6) of the Act to various parties and

none of the parties confirmed the payments including the associate

I.T.A.Nos.5157, 5226/Del/2019 & CO No. 65/Del/2022

parties. It is also the observation of the Ld.CIT(A) that even during

the assessment proceedings the assessee submitted only

confirmations, only consolidated bill produced and no independent

bills were submitted as to when the material was supplied and in

what quantity, the rates for the entire year. It is also the

observation that in the remand proceedings, no compliance was

made from the suppliers. With respect to other expenses, it is the

observation that assessee has given only copy of receipts for

agreement to prove the payment. It is the observation that it is

difficult to accept the genuineness of all the expenses incurred.

Therefore, in the absence of any corroborative evidences even in

the remand proceedings the adhoc disallowance of 10% made was

sustained by the Ld.CIT(A).

provided party wise details, all the bills were filed before the AO

vide replies dated 24.02.2014, 02.05.2014 and the AO has not asked

any specific confirmation with respect to site expenses also. It is

the contention that vide reply dated 24.02.2014 assessee had

provided all the bills, rent receipt, wage/salary sheet and other

documents to prove the genuineness of the expenses incurred in

spite of providing all the details the AO disallowed 10% on adhoc

I.T.A.Nos.5157, 5226/Del/2019 & CO No. 65/Del/2022

basis. It is further submitted that books are audited AO has not

rejected the books of account.

finding of the AO that assessee submitted copies of bills for

expenses, for consumption of material and number of such bills did

not bear any address. Notices were issued u/s 133(6) of the Act only

where the addresses are appearing on the bills. It is the finding that

none of the enquiries made in the form of notices support assessees

claim as either the notices were returned back un-served bearing

comments as “no such firm” or no reply has been received.

remained the same. It is also the observation of the AO that

assessee has not given copy of any receipts, any agreement proving

the payments in relation to expenses booked as rent towards staff

accommodation/guest house, rent towards equipments and vehicles,

construction of hutments, construction of office and godown, etc.

establishing the incurring of expenses by the assessee.

consideration, we restrict the disallowance to 5% which meets the

ends of justice. Ground nos. 2 & 3 are partly allowed.

I.T.A.Nos.5157, 5226/Del/2019 & CO No. 65/Del/2022

the expenses towards payment to labourers for housekeeping and

security the disallowance was confirmed for the reason that the

genuineness is not proved due to non furnishing of any evidence to

prove that the assessee has made payments to these persons. The

notices issued u/s 133(6) were returned back un-served and in view

of non verification of the persons AO made disallowance which was

sustained by the Ld.CIT(A). The contention of the assessee is that

these are all labourers who keep moving and, therefore, the

genuineness of the incurring of expenses cannot be doubted simply

because they have not responded to the notices.

do not see any good reason to interfere with the observations of the

authorities below. Ground no.4 of grounds of appeal of the assessee

is rejected.

depreciation on computers, we observe that the depreciation was

denied for the reason that the bills were not in the name of the

assessee. The assessee’s contention is that the computers were

purchased in a famous shop known for its cheapest and best market

place at Nehru Place Market where they were sold at lesser price. 15

I.T.A.Nos.5157, 5226/Del/2019 & CO No. 65/Del/2022

As the assessee could not prove that the computers were purchased

with authentic bills, we find no fault in the assessment order in

rejecting the claim for depreciation. This ground is rejected.

by the Assessee are dismissed and appeal of the assessee is partly

allowed as indicated above.

Order pronounced in the open court on 16/02/2024

Sd/- Sd/- (G.S. PANNU) (C.N. PRASAD) VICE PRESIDENT JUDICIAL MEMBER Dated: 16/02/2024 *Kavita Arora, Sr. P.S. Copy of order sent to- Assessee/AO/Pr. CIT/ CIT (A)/ ITAT (DR)/Guard file of ITAT. By order

Assistant Registrar, ITAT: Delhi Benches-Delhi