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Facts
The assessee company received share capital and share premium aggregating to ₹3,00,00,000. The Assessing Officer made an addition of ₹2,70,00,000 under Section 68 of the Income-tax Act, treating the amount as unexplained, despite the assessee providing details of share applicants. The CIT(A) enhanced the addition.
Held
The Tribunal held that the assessee had discharged the onus under Section 68 by providing complete details of share applicants, including their identity, creditworthiness, and genuineness of transactions, supported by documentary evidence and bank statements. The Assessing Officer failed to conduct any independent inquiry. Furthermore, the amendment to Section 68 regarding 'source of source' is prospective and not applicable for the assessment year in question.
Key Issues
Whether the addition made under Section 68 for unexplained share capital and premium is sustainable when the assessee has provided sufficient documentary evidence and the Assessing Officer has not conducted independent inquiry.
Sections Cited
Section 68 of the Income-tax Act, 1961, Section 250 of the Income-tax Act, 1961, Section 143(1) of the Income-tax Act, 1961, Section 142(1) of the Income-tax Act, 1961, Section 148 of the Income-tax Act, 1961, Section 133(6) of the Income-tax Act, 1961, Section 154 of the Income-tax Act, 1961
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Income Tax Appellate Tribunal, BENCH-RANCHI
Before: Shri Sonjoy Sarma & Shri Ratnesh Nandan Sahay
order
: January 06, 2026 ORDER
Per Sonjoy Sarma, Judicial Member:
This appeal filed by the assessee is directed against the order of the CIT(A), Jamshedpur (hereinafter referred to as “ld. CIT(A)”) dated 21.08.2018 passed under Section 250 of the Income-tax Act, 1961 (hereinafter referred to as the “Act”).
Brief facts of the case are that the assessee company is engaged in the manufacturing of pig iron. It filed its return of income declaring total income of ₹1,41,05,250, which was processed under section 143(1). During the assessment proceedings, the Assessing Officer noticed that the assessee had received share capital and share premium aggregating to ₹3,00,00,000 during the relevant previous year. The Assessing Officer issued notices under sections 142(1) and 148 requiring the assessee to furnish complete details of the share applicants, including identity, creditworthiness, and genuineness of the transactions. In response, the assessee furnished complete details in respect of the share capital/share premium received from the following parties:
M/s Anjeneya Ispat Ltd Name of Share Applicant Amount (₹) Rotomac Vinimay Pvt. Ltd. 45,00,000 Singora Brothers Holding Pvt. Ltd. 20,00,000 Emkay Merchandise Pvt. Ltd. 15,00,000 Polson Tie-up Pvt. Ltd. 75,00,000 Sirodhi Home Products Pvt. Ltd. 70,00,000 Tajaswi Pvt. Ltd. 75,00,000 Uday Singh HUF 4,00,000 Ajit Singh HUF 3,00,000 The assessee submitted complete names and addresses of share applicants, PAN, ITR acknowledgements, Audited financial statements, MCA master data showing active status, Bank statements evidencing transactions through banking channels. Despite the above submissions, the Assessing Officer treated the share capital and share premium amount as unexplained and made an addition of Rs.2,70,00,000 under section 68 of the Act. The Assessing Officer, however, did not conduct any independent enquiry, nor were notices issued under section 133(6) of the Act to the share applicants.
Aggrieved by the order of the AO assessee preferred an appeal before the Ld. CIT(A) where the Ld. CIT(A), while disposing of the appeal, initially enhanced the addition at Rs.4,00,00,000 and subsequently enhanced it by 3,07,00,000/- instead of ₹4,00,00,000. Later, rectification order under section 154 of the Act was carried out, resulting in confusion regarding the exact quantum of addition.
Dissatisfied with the order of the Ld. CIT(A) the assessee challenged the impugned order before the Tribunal. At the time of hearing the Ld. Counsel for the assessee submitted that all three ingredients of section 68 of the Act, namely identity of share applicants, creditworthiness and M/s Anjeneya Ispat Ltd genuineness of transactions were fully established through documentary evidence and no independent enquiry was conducted by the Assessing Officer despite availability of complete details on record. Moreover, no material was brought on record to suggest that the share applicants were bogus or non-existent or the assessee routed its own unaccounted money through the transaction. The ld. AR submitted that during the assessment proceedings, the assessee made compliances by submitting necessary documents such as details of the share applicants, complete names and addresses of share applicants, PAN, ITR acknowledgements, Audited financial statements, MCA master data showing active status, Bank statements evidencing transactions through banking channels. The ld. AR further submitted that no enquiry was made by the Assessing Officer although all relevant documents were on record and the AO neither issued any notice u/s 133(6) to the share applicants nor made enquiry. The ld. AR also submitted that the assessee submitted the MCA master data to establish the identity of the share applicants wherein it can safely be said that the companies were active companies and their ITR Acknowledgment for the year were also submitted. The ld. AR further submitted that the investor companies have sufficient net worth to invest in the assessee company which can be proved from the audited accounts of the share applicants. In this respect, the ld. AR relied on the decision of Jurisdictional High Court in the case of PCIT Vs M/s Sidhi Vinayak Metcon Pvt Ltd in TA 39 of 2009 dated 05th April 2018.
4.1 The ld. AR further relied on the following case laws: i. Principal Commissioner of Income Tax v. Himachal Fibers Ltd - [2018] 98 taxmann.com 173 (SC) – SLP Dismissed – Cash credit (Share capital) – In course of assessment, Assessing Officer noted that assessee was a sick company during relevant year but had nevertheless collected substantial amounts to extent of Rs. 12 crores invested by two share applicants - Assessing Officer took a view that identity of shareholders and genuineness of transaction had not been established and, accordingly, brought to tax said amount -Tribunal as well High Court found that even though assessee was a sick company earlier, yet it pulled out of woods in year 2010 - It was also noticed that identity of share applicants was clearly revealed but Assessing 3 M/s Anjeneya Ispat Ltd Officer did not conduct any enquiry except resting his conclusions on surmises - Accordingly, addition made by Assessing Officer was deleted - Whether on facts, SLP filed against order passed by High Court was to be dismissed - Held, yes [Para 2] [In favour of assessee] ii. PCIT Panji Vs Paradise Inland Shipping Pvt Ltd – (2018) 93 Taxman 84 (SC) SLP Dismissed -
S. 68 Bogus share capital: Companies which invest share capital cannot be treated as bogus if they are registered and have been assessed. Once the assessee has produced documentary evidence to establish the existence of such companies, the burden shifts to the Revenue to establish their case. Reliance on statements of third parties who have not been subjected to cross examination is not permissible. Voluminous documents produced by the assessee cannot be discarded merely on the basis of statements of individuals contrary to such public documents. iii. Income-tax Officer vs. Cornerstone Property Investments (P.) Ltd. [2024] 164 taxmann.com 464 (SC)[15-07-2024] – SLP dismissed against order of High Court that where assessee allotted shares at premium to a company and assessee produced various documents including copies of investor's bank statements, copies of share certificates which showed that it had huge funds, and further, transfer of funds was made through bank, assessee had proved identity and creditworthiness of investor and genuineness of transactions and, thus, no addition under section 68 could be made on account of share premium received by assessee iv. Principal Commissioner of Income Tax vs. Rohtak Chain Co. (P.) Ltd. [2019] 110 taxmann.com 59 (SC)[05-08-2019] – High Court by impugned order held that issuing share at a premium is a commercial decision and it is prerogative of Board of Directors of a company to decide premium amount and it is wisdom of shareholder whether they want to subscribe shares at such a premium or not and, ultimately, this is a mutual decision between both companies and their shareholders; thus, once genuineness, creditworthiness and identity of investors are established, revenue should not justifiably put itself in armchair of a businessman or in position of Board of Directors and assume role of ascertaining how much is a reasonable premium having regard to circumstances of case - Thus, it held that once genuineness, creditworthiness and identity of investors were established, no addition could be made as cash credit on ground that shares were issued at excess premium - Whether Special leave petition filed against impugned order was to be dismissed - Held, yes [Paras 51 and 53] v. Principal Commissioner of Income-tax vs. Central Plastics (P.) Ltd. [2025] 176 taxmann.com 472 (Delhi)[07-07-2025] – 4
The Assessee preferred an appeal against the aforementioned assessment order before the Commissioner of Income Tax (Appeals) [CIT(A)] which was allowed vide order dated 16.09.2016. The CIT(A) held that the Assessee had discharged the initial onus under Section 68 of the Act by providing sufficient documents including bank details of the share applicants, copies of the bank statements, copies of the income tax return of the investor companies and the data from the MCA website. The said data reflected that the investor companies were live companies. The investor companies were also assessed to income tax and their final accounts indicated that sufficient funds were available with them. Thus, they had the ability to make the investments.
4.1 The ld. AR also brought to our notice that the amendment to section 68 of the Act relating to “source of source” introduced by the Finance Act, 2012 is prospective and applicable only from AY 2013–14 onwards. Accordingly, for the year under consideration, the assessee was not required to explain the source of the source. Reliance was placed on decision of the Hon’ble Bombay High Court as in the case of CIT v. Gagandeep Infrastructure Pvt. Ltd. (394 ITR 680) (Bom.)
We have heard the rival submissions and perused the material available on record. We find that the addition of Rs.3,07,00,000/- pertains to the share capital money received by the assessee during the year under consideration from the following share applicants:-
Name of the share applicant Amount Rotomac Vinimay Pvt Ltd 45,00,000/- Singora Brother Holding Pvt Ltd 20,00,000/- Emkay Merchandise Pvt Ltd 15,00,000/- Polson Tie Up Pvt Ltd 75,00,000/- Sirohi Home Products Pvt Ltd 70,00,000/- Tejaswi Vinimay Pvt Ltd 75,00,000/- Uday Singh (HUF) 4,00,000/- Ajit Singh (HUF) 3,00,000/- Total 3,07,00,000/- 5.1 We note that to verify the share applicants, the assessee during the assessment proceedings has submitted details of the share applicants, complete names and addresses of share applicants, PAN, ITR 5 M/s Anjeneya Ispat Ltd acknowledgements, Audited financial statements, MCA master data showing active status. We note that all the transactions were done through banking channels and the same was duly reflected in the audited account books of the assessee as well as share applicants. We also note that to establish the creditworthiness of the transactions, the assessee submitted the following chart which is as under:-
Name of the Turnover of the Total reserve & Total investment applicant company year surplus made in assessee company Rotomac Vinimay 6,76,76,667/- 12,81,18,300/- 45,00,000/- Pvt Ltd (3.5%) Singora Brother 6,88,43,291/- 14,83,86,100/- 20,00,000/- Holding Pvt Ltd (1.35%) Emkay 7,48,62,852/- 9,19,48,500/- 15,00,000/- Merchandise Pvt (1.63%) Ltd Polson Tie Up Pvt 11,62,412/- 30,33,35,000/- 75,00,000/- Ltd (2.47%) Sirohi Homes 23,50,650/- 26,37,80,750/- 70,00,000/- Product Pvt Ltd (2.65%) Tejaswi Vinimay 21,91,971/- 19,30,85,375/- 75,00,000/- Pvt Ltd (3.88%) 5.2 We also find that the Assessing Officer has not made any independent enquiry and has not found any defect or discrepancy to the relevant documents which were submitted by the assessee before the Assessing Officer and also the Assessing Officer neither issued any notice u/s 133(6) to the share applicants. We further find that the share applicant companies were active companies as per the MCA master data and their ITR Acknowledgment for the year were submitted and all the investor companies have sufficient net worth to invest in the assessee company which is proved from the audited accounts of the share applicants. We also find that the two HUFs were existing shareholders, filing regular return of income and had sufficient net worth and further, the assessee demonstrated business necessity for raising funds by showing that reduction in secured bank loans from Rs.11.05 crore to Rs.7.70 crore and increase in fixed assets and work-in-progress from M/s Anjeneya Ispat Ltd Rs.11.10 crore to Rs.18.53 crore assessee during the year under consideration which clearly establishes the commercial rationale for infusion of share capital. We note that in present case, no enquiry whatsoever was conducted by the Assessing Officer and the Assessing Officer merely rejected the evidence without verification, which is impermissible in law. We find reliance in the decision of Hon'ble Supreme Court in PCIT v. Himachal Fibres Ltd. wherein it was held that where identity of share applicants is established and no enquiry is conducted by the Assessing Officer addition under section 68 cannot be sustained. We also note that the reliance placed by the Revenue on the decision of NRA Iron & Steel is misplaced, as in the present case there was no investigation report, no adverse material, no finding which goes to prove that the investor companies were shell or bogus entities. We have gone through the cited decision of Hon’ble Jurisdictional High Court in the case of PCIT Vs M/s Sidhi Vinayak Metcon Pvt Ltd (supra), wherein the Hon’ble Jurisdictional High Court has held as under:
“Having heard counsels appearing for both sides and looking to the facts and circumstances of the case, we see no reason to entertain this Tax Appeal mainly for the reason that the addition made by the Assessing Officer should not have been made by him because amount received towards the share applications was by way of cheque. All the details regarding applicants were furnished by the assessee and Department could have issued notices to such applicants. Hence, there was no need for the Assessing Officer to make addition of Rs. 95,15,000/-. It appears that before the Commissioner of Income Tax (Appeals) also such prayer could have been made by the Department for issuance of Notices upon share applicants. No such application was preferred before C.I.T. (Appeals) by this appellant. Hence, we see no reason at this stage to remand the matter to the Assessing Officer for further verification of share applications. It appears that similar type of cases are coming to this court often and most of the time same type of error is committed by the Assessing Officers, either deliberately or due to "induced ignorance". This is not the first time such type of matter has been taken up by this Court It is now high time for the Commissioner, Income Tax to have orientation courses or induction courses conducted for the Assessing Officers to make them understand that whenever assessee receives any amount by cheque, there is a need for the Assessing Officer to give notice to the drawers of those cheques.”
M/s Anjeneya Ispat Ltd 5.3 We note that amendment to section 68 of the Act relating to “source of source” introduced by the Finance Act, 2012 is prospective and applicable only from AY 2013–14 onwards and in this case, for the year under consideration, the assessee is not required to explain the source of the source and we find reliance on the decision of the Hon’ble Bombay High Court as in the case of CIT v. Gagandeep Infrastructure Pvt. Ltd. (394 ITR 680) (Bom.) (supra), wherein it was held as under: “Amendment made to section 68 whereby the issuing company (assessee) becomes liable to explain the source of share application has been introduced by Finance Act 2012 and shall be applicable for AY 2013-14 onwards and does not have retrospective effect. As such, addition made by Ld. AO was deleted by CIT(A) and confirmed by Tribunal and High Court.”
5.4 In view of the above discussion and considering the judicial precedents, we hold that the assessee has duly discharged the onus under section 68 of the Act and the addition of ₹3,07,00,000 made under section 68 of the Act is hereby deleted.
In the result the appeal of the assessee is allowed. Kolkata, the 6th January, 2026.
Sd/- Sd/- [Ratnesh Nandan Sahay] [Sonjoy Sarma] Accountant Member Judicial Member