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Facts
The Revenue appealed against the CIT(A)'s order deleting the addition of share application money received by the assessee from three companies, which the AO alleged were paper companies providing accommodation entries. The CIT(A) had deleted the additions, relying on previous orders for the same assessee and similar facts.
Held
The Tribunal upheld the CIT(A)'s order, finding no error in deleting the additions. It noted that the facts were identical to previous years where coordinate benches had decided in favor of the assessee, and the Revenue had failed to controvert the findings.
Key Issues
Whether the CIT(A) erred in deleting additions made by the AO on account of unexplained share application money received from alleged paper companies, and whether the assessee proved the identity, genuineness, and creditworthiness of the transactions.
Sections Cited
147, 143(3), 148, 139(1), 68
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Income Tax Appellate Tribunal, DELHI “A” BENCH: NEW DELHI
Before: SHRI YOGESH KUMAR U.S & SHRI MANISH AGARWAL
Year : 2010-11] vs P& R Engineering Services DCIT, Circle-19(1), Pvt.Ltd., 89, Lok Nayak New Delhi Apartments, Sector-9, Rohini, Delhi-110085. PAN-AACCP0484E APPELLANT RESPONDENT Revenue by Shri Sanjeev Kumar Yadav, CIT DR Assessee by Shri V. K.Agarwal, AR Date of Hearing 17.07.2025 Date of Pronouncement 14.10.2025 ORDER
PER MANISH AGARWAL, AM :
This appeal is filed by the Revenue against the order of the Commissioner of Income Tax (Appeals), Delhi -31 [CIT(A), in short] dated 01.11.2024 in appeal No. CIT(A), Delhi-7/10212/2017-18 arising out of the order passed u/s 147 r.w.s. 143(3) of the Income Tax Act, 1961 [the Act, in short] for A.Y. 2010-11.
Brief facts of the case are that assessee is a company and filed its return of income on 27.09.2010, declaring loss of Rs. 12,89,624/-. The case of the assessee was reopened in terms of the notice issued u/s 148 of the Act on 30.09.2017. In response, the assessee has declared the same income as was declared in the return filed u/s 139(1) of the Act. Thereafter the AO by alleging that the assessee has received share application money of Rs. 8,28,45,000/- from three companies namely, M/s Mansarovar Holdings Ltd. Rs. 4,09,00,000/-, M/s Olipha Trading and Investment Pvt. Ltd. of Rs. 3,27,10,000/- and from M/s Sopan Merchants Pvt. Ltd. of Rs. 92,35,000/- which companies are paper companies and made the Page | 1 addition u/s 68 of the Act of the entire amount of loan received from these three companies.
Against the said order, assessee preferred an appeal against CIT(A) who deleted the additions made in terms of order dated 01.11.2024.
Aggrieved by the said order, the revenue is in appeal before the Tribunal by taking following grounds of appeal:
1. “Whether on the facts of the case and in law, the ld. CIT(A), has erred in deleting the addition of Rs. 8,28,45,500/- for AY 2010-11 on account of unexplained share application money received u/s 68 of the I.T. Act made by AO though the assessee could not prove the identity, genuineness and creditworthiness of transactions during the course of assessment proceedings.
2. The appellant craves to be allowed to add any fresh ground(s) of appeal and or deleted or amend any of the ground(s) of appeal.”
5. Before us, ld. CIT DR for the Revenue vehemently supported the order of the AO and submits that AO received an information from the Investigation Wing, Chandigarh that the assessee has taken huge amount of share premium and share capital from these three companies which are paper companies and controlled and managed for providing accommodation entries. The ld. DR further submits that there were statements recorded of one Shri Pankaj Agarwal by the Investigation Wing, Kolkata wherein he has accepted that these companies were used for providing accommodation entries. He further submits that from the perusal of financial statements of these companies, it could be seen that they are showing meagre income and therefore has no creditworthiness and accordingly the amount of share capital and premium received from these companies remained unexplained and the AO has rightly made the addition for the same u/s 68 of the Act which order deserves to be restored. He prayed accordingly.
6. On the other hand, ld. AR of the assessee supported the order of ld. CIT(A) and submits that in case of Sopan Merchants Pvt. Ltd. and Olipha Trading & Investment Pvt. Ltd., additions were made by making similar allegations in preceding assessment years i.e. AY 2008-09 and 2009-10 which were deleted by the CIT(A) and said orders were confirmed by the coordinate Delhi Bench of ITAT in and 4774/Del/2018 for AY 2008-09 & 2009-10 respectively vide order dated 09.11.2023. With regard to the third company M/s Mansarovar Holdings Ltd., he submits that the addition with respect to the application money received from this company was deleted by ld. CIT(A) in group company’s case in AY 2013-14 which was accepted by revenue. He further submits that during the course of assessment proceedings, assessee has filed all the documentary evidences to prove the identity and creditworthiness of the applicant companies, thus it is submitted that ld. CIT(A) after considering these facts has deleted the additions made, which order deserves to be upheld. He prayed accordingly.
7. Heard the parties and perused the material available in record. In the instant case, it is seen that during the year under appeal assessee has received share application of Rs. 8,28,45,500/- from three companies which were alleged as bogus / jama kharchi companies. It is further seen that in respect of two companies i.e. M/s Mansarovar Holdings Ltd. Rs. 4,09,00,000/- and M/s Olipha Trading & Investment Pvt. Ltd. Rs. 3,27,10,000/- received during the year, share application money received in preceding year, where the additions made stood deleted by the coordinate bench in & 4774/Del/2018 by making following observations:-
8. “We have examined the reasoning given by the Id. CIT (A) and adjudication thereof of the Id. CIT(A). The Id. CIT (A) relied on the documents filed by the assessee viz., Page | 3 a. Form 2 filed before ROC b. Statements of bank account of the investor company showing payments towards share application money. c. Confirmation from M/s Sopan Merchant Pvt. Ltd. d. Share Application form duly filled by the investor company. e. Confirmation in respect of allotment of equity shares to the investor. f. Copy of PAN card of the investor company. g. Memorandum & Articles of Association of the investor company clearly depicting their corporate identity number. h. Copies of share certificates issued by the assessee company. i. A copy of the acknowledgement of the Income tax return filed for AY 2008-09 by the investor company along with its audited financial results for the year ended 31st March 2008.
9. The Id. CIT (A) held that identity of the investor is established by the name, address, PAN. PAN is enough to prove the identity, genuineness and creditworthiness of the contributing party. The Id. CIT (A) further held that genuineness of the transactions is also fully established by the fact that the transaction is duly confirmed by the investor, the amount is duly reflected in the balance sheet of the investor as investment in the appellant company. The Id. CIT (A) relied on the following case laws: - > CIT VS. Ganeshwari Metals Pvt. Ltd., 2013-TIOL-96-HC-DEL-IT > CIT vS. Kamdhenu Steel & Alloys Ltd., 2012-TIOL-236-HC-DEL -IT > CIT VS. Oasis Hospitalities Pvt. Ltd., 2011-TIOL-69-HC-DEL -IT 10. The Id. CIT(A) held that the most important being that of Kamdhenu Steels where SLP of the department was dismissed. Therefore, the contention of the AO that identity, genuineness and creditworthiness of the investors is not proved by assessee is not correct. The Id. CIT (A) also held that subsequent sale of share does not hold the impugned share capital as unexplained by relying on the decision of Delhi High Court in the case of CIT Vs SVP Builders (India) Ltd.
11. With regard to the statement of Sh. Pankaj Agarwal, who is controlling M/s Sopan Merchants Pvt. Ltd. The entry operator has been investigated by Investigation Wing, Kolkata and has admitted on oath that he is in the business of providing accommodation entries to various beneficiaries in the form of share capital or unsecured loans. It was held that the statement was not recorded by the investigation wing in the case of the appellant. Mr. Pankaj Aggarwal has nowhere mentioned the name of the appellant as the beneficiary. Copy of the statement was never provided to the appellant depriving it from the opportunity of cross examining him. Therefore, this statement has -to be excluded from the assessment proceedings.
12. The Id. CIT(A) held that the addition cannot be made without making any further verification or enquiries about the details and explanation filed by the assessee and simply relied on the information of the Investigation Wing and accepted the same as gospel truth for making impugned addition u/s 68 of the Act.
13. After duly considering the assessment order, documents/ information provided by the assessee during appellate proceedings as well as in view of the facts and law as discussed above, the addition of Rs. 2,29,00,000/- made by the AO u/s 68 of the IT Act,
1961, we hold that no infraction of the Income Tax Act could be attributed to the order of the ld. CIT (A). 14. In the result, both the appeals of the Revenue are dismissed.”
The ld. CIT(A) by following the aforesaid order of the co-ordinate bench and also after examining the financial statements of these companies, has deleted the additions. The relevant findings of ld. CIT(A) while deleting the additions are reproduced as under: 5. “I have carefully considered the facts and circumstances of the case, submissions made by the Appellant, assessment order passed by the AO as well as the orders passed by CIT(A) dated 24.11.2017 for assessment year 2008-09 and dated 24.112017 for assessment year 2009-10 in the case of the Appellant itself which the Appellant has relied upon. 6. The brief facts of the case are that the AO has made the addition of Rs. 8,28,45,500/-u/s 68 of the Act on account of share application money received from three companies, the breakup of which is as follows: 4,09,00,000/- from M/s Mansrovar Holdings Ltd, 0 3,27,10,000/- from M/s Olipha Trading and Investment Private Limited, and 92,35,000/-from M/s Sopan Merchants Private Ltd. 7. In his assessment order, the AO noted that the party from whom the Appellant has received funds was none other than the entry operator and the amount introduced through it is nothing but the Appellant's own income from undisclosed sources. From the perusal of financials of the aforesaid three companies, the AO noted that these companies have not carried out any real business activity but have merely provided bogus accommodation entries. With these observations, the rejected the contentions made by the Appellant before him and made the said addition under section 68 of the Act. 8. It is seen that all these observations of the AO and the submissions countering the observations of the AO has been dealt with in the order of CIT(A) for the said two assessment years. From the perusal of the aforesaid orders of CIT (A), it is seen that the facts involved in the instant appeal, including the names of the parties from whom the share application money has been received by the Appellant, are identical to those involved in the orders of CIT (A) for those assessment years. Since my Ld. predecessor has already taken a considered view on the identical facts and circumstances as involved in this appeal and as such the matter is covered, I am not inclined to deviate from the considered view so taken by my Ld. predecessor. Therefore, in order to maintain consistency and uniformity in the appellate orders in the case of the Appellant itself on the identical facts and circumstances of the case, respectfully following the aforesaid orders passed by my Ld. predecessor for assessment years 2008-09 and 2009-10, I allow this appeal.”
As there was no change in the facts and circumstances of the case as has been admitted by both the parties, thus by respectfully following the observations made by the co-ordinate bench in preceding years, we find no error in the order of ld. CIT(A) in deleting the additions made with respect to the share application money received from these two companies and accordingly the order of ld. CIT(A) deleting the additions made on account of share application money received from these two companies is hereby upheld.
With respect to the addition of Rs. 92,35,000/- made on account of share application money received from Sopan Merchants Pvt. Ltd., it is seen that the said company was held as genuine company by the CIT(A) in one of the group company M/s P & R Infra projects Ltd. for AY 2013-14. Before us the revenue has failed to controvert the findings given by ld. CIT(A) deleting the additions made in respect of the amount received from the said company. Thus, we find no occasion to interfere in the order of ld. CIT(A) and accordingly the same is hereby upheld. Accordingly, the only ground of appeal of the revenue is hereby dismissed.
In the result, appeal of the revenue is dismissed.
Order pronounced in the open Court on 14.10.2025.