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Facts
The assessee received share application money to the extent of ₹ 6.74 crores from seven farmers, which was treated as unexplained income. The farmers had originally taken loans for pisciculture operations, but invested the money as share application in the assessee company. The funds were routed through IDBI bank.
Held
The Tribunal held that even if the farmers were unaware of applying for share application money, it could be treated as an unsecured loan. The source of funds from IDBI bank and routed through farmers' accounts was clear, and the transactions were confirmed as genuine by the farmers and the bank. The amounts were also repaid.
Key Issues
Whether the share application money received from farmers can be treated as unexplained income when the source and genuineness of the funds are established.
Sections Cited
Section 68
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Income Tax Appellate Tribunal, RANCHI BENCH, RANCHI
Before: SHRI GEORGE MATHAN & SHRI RATNESH NANDAN SAHAY
Assessee represented by Sri S.K. Gupta, A.R. Department represented by Smt. Rinku Singh, CIT-DR Date of hearing 12/06/2025 Date of pronouncement 12/06/2025 O R D E R PER: BENCH 1. This is an appeal filed by the assessee against the order of the ld. CIT(A), Ranchi in appeal No. CIT(A), Ranchi/10379/2016-17 dated 09/03/2018 for the A.Y. 2010-11.
Shri S.K. Gupta, ld A.R. is represented on behalf of the assessee and Smt. Rinku Singh, ld. CIT-DR is represented on behalf of the revenue.
It was submitted by the ld. AR that the only issue that is being contested in the assessee's appeal is in regard to the share capital received by the assessee from seven farmers which has been treated as the unexplained income of the assessee. It was a submission that the grounds in regard to reopening are not pressed and the ld. AR has also signed to this effect.
It was submitted by the ld. AR that in the course of assessment, it was noticed that the assessee had received share application money from seven farmers to K.D. Singh Poultries P Ltd. Vs ITO an extent of ₹ 6.74 crores. It was a submission that this amount of ₹ 6.74 crores was loans taken by seven farmers, whose names have been specifically identified in page 28 of the assessment order. The account numbers of the farmers were also identified. These loans were originally taken by the farmers for doing pisciculture operations. It was a submission that as the operations did not go through initially, the farmers had invested the same as share application money in the company of the assessee. It was a submission that the seven farmers had also appeared before the ADIT, Rajvardhapuram, Andhrapradesh in the course of investigation proceedings. They had also confirmed the transactions and they had also mentioned that the son of the Director of the assessee company had also stood guarantor for their loans and had agreed to repay their loans if they were unable to pay the loans. It was a submission that the loans were also repaid during the year 2016. It was a submission that as the share application money has been introduced from seven farmers, their names, their identities and their sources have also been shown. No addition is liable to be confirmed in the hands of the assessee. It was a submission that the source of the funds of the farmers were from the IDBI loan, it was routed through their loan accounts, the identity of the farmers were very much available, the farmers had also appeared before the ADIT. It was a submission that the addition is not liable to be made.
In reply, the learned CIT- DR submitted that the farmers only knew that they have given the money to the assessee company. They did not have any knowledge of what is share application money and what is a loan. It was a submission that the addition is liable to be confirmed.