ACIT v. S.P. Singla Construction (P) Ltd.

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The Tax Publishers2021 TaxPub(DT) 0894 (Del-Trib)

INCOME TAX ACT, 1961

Section 68

There were sufficient funds available in bank accounts of investors to make investment in assessee-company and investors were assessed to tax and had filed their return of income and all the transactions were carried out through banking channel. Accordingly, assessee had proved creditworthiness of investors and genuineness of transaction in the matter and, therefore, addition made under section 68 could not be upheld.

Income from undisclosed sources - Addition under section 68 - Receipt of share capital and premium thereon - AO doubted creditworthiness of investors because of low income declared in return of income

Assessee-company received share capital and premium thereon. AO doubted creditworthiness of investors because low income was declared in the return of income by investors and credits were appearing in the bank accounts of investors through banking channel before making investment in assessee-company. Accordingly, AO taxed amount received by assessee as unexplained credit under section 68. Held: Assessee in respect of investors filed their confirmation, PAN, ITR and bank statements and wherever applicable filed copies of balance-sheet of investor companies. AO did not doubt documentary evidences filed by assessee. No investor was asked to appear before AO for recording their statements regarding genuineness of the transaction in the matter. No cash was found to have been deposited in the accounts of investors before making investment in assessee company. AO did not make any investigation or enquiry with regard to worth of the investors, whether they were able to make investment in assessee-company. Merely because low income was declared in the return of income by investors same could not be a ground to reject explanation of assessee and documentary evidences, particularly when no enquiry or investigation was made with regard to worth of investor companies. AO had also not brought any evidence on record that even if share applicants did not have the means to make investments, the investmens made by them actually emanated from coffers of assessee so as to enable it to be treated as undisclosed income of assessee. There were sufficient funds available in bank accounts of investors to make investment in assessee-company and investors were assessed to tax and had filed their return of income and all the transactions were carried out through banking channel. Accordingly, assessee had proved creditworthiness of investors and genuineness of transaction in the matter and, therefore, addition made under section 68 could not be upheld.

Relied:Dwarkadhish Investment (P) Ltd. (2011) 330 ITR 298 (Del.-HC) : 2011 TaxPub(DT) 374 (Del-HC), Rohini Builders (2002) 256 ITR 360 (Guj-HC) : 2002 TaxPub(DT) 305 (Guj-HC) Zafar Ahmed & Co. 30 Taxman.com 269 (All.), Pr. CIT v. Laxman Industrial Resources Ltd. ITA No. 169 of 2017, dated 14-3-2017 : 2017 TaxPub(DT) 4088 (Del-HC), CIT v. Vrindavan Farms (P) Ltd. [ITA No. 71 of 2015, dated 12-8-2015 (Del.)] : 2015 TaxPub(DT) 4373 (Del-HC), CIT v. M/s. Peoples General Hospital Ltd. (2013) 356 ITR 65 : 2013 TaxPub(DT) 1865 (MP-HC), CIT v. Fair Finvest Ltd. (2013) 357 ITR 146 (Del) : 2013 TaxPub(DT) 0912 (Del-HC), CIT v. Kamdhenu Steel & Alloys Ltd. 2011 361 ITR 220 (Del.) : 2012 TaxPub(DT) 1644 (Del-HC), CIT v. Winstral Petrochemicals (P) Ltd. (2011) 330 ITR 603 (Del) : 2011 TaxPub(DT) 0259 (Del-HC), M/s. Earthmetal Electricals (P) Ltd. v. CIT & Anr. [Special Leave to Appeal (Civil) No(s).21073/2009, dt. 30-7-2010], CIT v. M/s. Lovely Exports (P) Ltd. (2009) 216 CTR 195 (SC) : 2009 TaxPub(DT) 0261 (SC) and Pr. CIT v. Kurele Paper Mills (P) Ltd. 380 ITR 571 (Del-HC) : 2016 TaxPub(DT) 1068 (Del-HC).