DCIT, DELHI vs. RANA MOTORS PVT. LTD., DELHI

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ITA 2938/DEL/2024Status: DisposedITAT Delhi01 September 2025AY 2018-19Bench: SHRI SATBEER SINGH GODARA, JUDICIAL MEMBER, SHRI NAVEEN CHANDRA (Accountant Member)5 pages

In favour of the assessee: the Revenue's appeal was dismissed. From the AI summary of this appeal.

AI SummaryDismissed

What did the Tribunal hold?

The Tribunal held that the CIT(A) correctly deleted the addition. The source of share capital/premium was established as loans taken by the promoter directors from banks, and the AO failed to point out any discrepancy regarding identity, genuineness, or creditworthiness.

What were the facts?

The assessee, a Maruti authorized dealer, filed its return declaring income. The Assessing Officer (AO) added Rs. 3,99,99,600/- under Section 68 of the Income Tax Act, treating share premium received from two promoters as unexplained. The assessee claimed the funds were from loans taken by the promoters from banks to maintain the company's debt-equity ratio.

What were the issues?

Whether the addition of share premium under Section 68 was justified when the source was established as loans taken by promoters from banks, and whether the AO had correctly assessed the creditworthiness and genuineness of the transactions.

Which sections of the Income-tax Act were involved?

Section 68,Section 115BBE,Section 143(3)

AI-generated summary — verify with the full judgment below

Income Tax Appellate Tribunal, DELHI ‘A’ BENCH,

Before: SHRI SATBEER SINGH GODARA, & SHRI NAVEEN CHANDRA

For Respondent: Shri Anurag S. Daria, Sr. DR
Hearing: 21.08.2025Pronounced: 21.08.2025

This appeal by the Revenue is directed against the order of the ld.

CIT(A, New Delhi dated 28.02.2024 pertaining to A.Y 2018-19.

2.

The solitary grievance raised by the Revenue reads as under:

“Whether on the facts and circumstances of the case the ld. CIT(A) has erred in deleting the addition of Rs. 3,99,99,600/- u/s 68 of the Act without appreciating the fact that the credit worthiness and genuineness of transactions of the directors were not established.”

3.

None appeared on behalf of the assessee. We decided to proceed ex-parte. The ld. DR was heard at length. Case records carefully perused.

4.

Brief facts of the case is that the assessee is a Maruti authorized dealer of cars having showrooms and workshops and has filed its return of income for A.Y. 2018-19 on 31/10/2018 declaring total income at Rs. 2,80,59,046/-. The case was selected for scrutiny under CASS under E- assessment scheme 2019 for the reasons of: i Share Premium, ii. ICDS Compliance and Adjustment, iii. Income from House Property.

5. The bone of contention in the impugned year is share capital/premium of Rs 3,99,99,600/- that the assessee received from its two promoters, Shri Jaswinder Singh Rekhi and Shri Raminder Shing Rekhi. In the course of assessment proceedings, the AO enquired about the source of share capital and justification for the share premium

Page 2 of 5 a capital intensive business model, where the lender banks were always making pressure to increase the share capital to bring a little more parity in Debit Equity ratio, convincing and thereafter he passed an order u/s. 143(3) by making addition of Rs 3,99,99,600/- u/s 68 r.w.s 115BBE, to the total income of the assessee.

6.

We have heard the submission of the Ld DR and have carefully perused the materials on record. At the very outset, we find that the funds made available to the assessee from the two promoters Directors.

The Promoter Directors contributed this amount of Rs.3,99,99,600/- toward share capital/Premium to full fill the requirements of the lender banks to maintain a healthy debt/equity ratio. We further find that the CIT(A) has elaborately discussed the issue as under:

5.

The assessee during the appellate proceedings reiterated that due to capital intensive nature of business it had borrowed substantial amount form banks and financial institutions, which require to keep certain debt to equity ratio of the promoters. To facilitate this, two promoters, Shri Jaswinder Singh Rekhi and Shri Raminder Shing Rekhi have taken term loans from ICICI Banks of Rs. 2 crores each, which was invested in the assessee company as share capital. The assessee has submitted the bank accounts statement of the promoters in support of loan and transfer to the assessee. The A.O. in assessment order also has not pointed out exactly what discrepancy he had found in the documents submitted by the assessee. The A.O. conclusion of not establishing creditworthiness is found to be incorrect as the investment is sourced by loans taken from Banks. Therefore, considering these facts, the introduction to share capital is Page 3 of 5 Dy. CIT Vs. Rana Motors [A.Y 2018-19] explained by the assessee. The A.O. is directed to delete the addition made of Rs. 3,99,99,600/-. Ground Nos. 7, 8, 9 are hereby allowed.

7.

We find that the CIT(A) has given a finding that the source of share capital/premium is the loans taken by the promoter director from bank and there is no discrepancy pointed out by the AO with regard to identity, genuineness and creditworthiness of the promoters directors.

In view of the discussion above, we are therefore, not inclined to interfere with the decision of the CIT(A) and endorse the CIT(A)’s direction to delete additions made. The ground of appeal is dismissed.

Order pronounced in open court on 21.08.2025.

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