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Income Tax Appellate Tribunal, DELHI BENCH “G” NEW DELHI
Before: SHRI AMIT SHUKLA & SHRI PRASHANT MAHARISHI
The aforesaid appeals have been filed by the Revenue against the impugned order dated 31.07.2014, passed by CIT (Appeals)-XXXI, New Delhi, for the quantum of assessment passed u/s.143(3) for the Assessment Years 2011-12. In the grounds of appeal, the Revenue has challenged the deletion of addition of Rs.37,00,000/- made by the Assessing Officer u/s.68 of the IT Act.
The facts in brief are that, during the course of the assessment proceedings, it was noticed that assessee has forfeited the partly paid shares amounting to Rs.37 lacs which was received in the Financial Year 1999-2000 and was shown under the head ‘Reserve on Share Forfeiture’. The Assessing Officer required the assessee to furnish the details regarding partly paid shares, names and addresses of the concern persons. After getting the details, he issued notice u/s.133 (6) to the share applicants, which either could not be served or no compliance was made. In absence of any information coming forward, he added the amount of Rs.37 lacs u/s 68.
Ld. CIT(A) has deleted the addition on the ground that Assessing Officer has no jurisdiction to assess the amount received during the Financial Year 1999-2000 and same cannot be brought to tax u/s.68 in this year. The relevant observations and the findings of the ld. CIT (A) reads as under:-
“4.2.5 I have considered the submissions of the AR, the assessment order and the laws relied upon the AR. It is not in dispute that the amount in question has been received by the appellant during the F.Y. 1999-2000. If the said amount is unexplained cash credit the same is liable to be assessed u/s 68 of the Act for the A.Y. 2000-01. However, as on the date of search as well as on the day of assessment order, no action could have been taken in respect of the said assessment year as such action is time barred as on those dates. Therefore, there is no merit in the AO’s action in trying to bring to tax the said amount u/s 68 during the present assessment year. It is the date of credit into the books of account which is relevant for determining the assessibility of income u/s. 68 and not the time on which such amount has been forfeited by the assessee. In case it was a trade liability, for which any deduction had been allowed in the past, the amount, if any, could have been brought to tax as cessation of liability u/s 41 of IT Act 1961. However, in the present case the amount received as share capital is neither a trading receipt nor a trading liability. The case laws relied upon by the AR are directly applicable in the present case. Due to non receipt of call money, the assessee has forfeited the partly paid up shares which is a capital receipt. Therefore there is no merit in the AO’s action. In view of this addition of Rs.37 lacs made to the total income is hereby deleted.”
None appeared on behalf of the assessee despite service of notice, therefore, we are hearing the appeal exparte qua the assessee.
After hearing the learned DR and considering the relevant findings given in the impugned orders, we find that it is not disputed that the assessee has received sum of Rs.37 lacs in the Financial Year 1999-2000, which was lying in the share capital reserve as partly paid up shares. During the previous year relevant to the current assessment year, assessee had forfeited this partly paid up shares for non- receipt of call money and the same was credited to capital reserve account as per the provisions of Companies Act. The Assessing Officer in absence of any response from the said parties has made the addition u/s.68, which ostensibly could not have made when amount of credit was received during the Financial Year 1999-00 relevant to Assessment Year 2000-01. Apart from that, the said amount cannot be brought to tax as cessation of liability u/s.41 as the amount received as share capital is neither a trade receivable nor trading liability as the share application was received on capital account. Thus, we do not find any infirmity in the order of the ld. CIT (A) and the same is confirmed.
In the result, the appeal of the Revenue is dismissed.
Order pronounced in the open Court on 8th May, 2018.