INCOME TAX ACT, 1961

Section 68

Income from undisclosed sources - Addition under section 68 - Share application money/premium -

During financial year relevant to assessment year under appeal, assessee had raised share capital money to the tune of Rs. 6.70 crores from Kolkata-Howrah based Companies. Accordingly, a questionnaire, was issued and assessee was confronted with the result of investigation made by the Department in respect of share capital and assessee was also required to file certain details and the counter-foil(s) of issue of share certificates and copies of the share application forms, etc. In response to the questionnaire, assessee filed reply along with confirmations, bank statements, copies of the ITR, balance-sheet, etc., of the Investor Companies based at Kolkata-Howrah. These documents were examined, but, not found satisfactory, inasmuch as the assessee had filed copies of these companies ledger accounts as appearing in the books of account of the assessee duly confirmed by them. The copies of the ITRs filed reveal that those Investor Companies have declared NIL income in some cases or very meagre income has been declared which does not prove creditworthiness and genuineness of the transaction. AO noted that assessee did not file other reply as per query raised by him. In response to the show cause notice, assessee filed letter with confirmation of the parties which confirmations were also filed on record. No other reply has been filed. AO also noted in the assessment order that ADIT (Inv.), Kolkata had submitted its report, intimating that 48 parties were operating at Kolkata which were merely paper companies and they have no actual business activities. During the assessment proceedings a letter was sent to ADIT (Inv.), Kolkata requesting to send the final report which was submitted vide letter confirming non-existence of the parties. AO also noted that statement of some of shareholders were recorded, but, they have not been able to explain as to whom the share certificates were sold by them and for which amount and they were unable to produce the original share certificates and bank statements, etc., The AO, therefore, noted that assessee had failed to discharge its onus to prove the identity of the share applicants, their creditworthiness and genuineness of the transaction. Therefore, entire share application money of Rs. 6.70 crores was treated as unexplained in the hands of the assessee under section 68 and addition was accordingly made. CIT(A), confirmed the order of the AO. Held: Assessee proved identity of the investors and also furnished sufficient documentary evidences to prove creditworthiness of the investors, genuineness of the transaction in the matter. Therefore, initial onus cast upon the assessee to prove ingredients of section 68 stands discharged. The decisions relied upon by the Departmental Representative have also been considered in the Group cases and did not find in favour of the revenue. Assessee had been able to prove creditworthienss of the creditors and genuineness of the transactions. Considering the totality of the facts and circumstances of the case and above discussion, entire addition made by the authorities below of Rs. 6.7 crores was wholly unjustified and was liable to be set aside. In view of the above, the orders of the authorities below were set aside and the entire addition was deleted.

Followed:M.L. Singhi & Associates (P) Ltd., New Delhi v. Dy. CIT, Central Circle-7, New Delhi in ITA Nos. 3335, 3336 & 3337/Del./2017, dated 17-9-2018, for the assessment years 2006-07, 2007-08 & 2008-09 : 2018 TaxPub(DT) 6397 (Del-Trib), Brahmaputra Finlease (P) Ltd. v. Dy. CIT ITA No. 3332/Del./2017, dated 29-12-2017, for the assessment year 2007-08 : 2018 TaxPub(DT) 371 (Del-Trib), Brahmaputra Finlease (P) Ltd., New Delhi v. Dy. CIT, Central Circle-17, New Delhi in ITA No. 3332/Del./2017, dated 29-12-2017, for the assessment year 2007-08 : 2018 TaxPub(DT) 371 (Del-Trib), Brahmaputra Realtors (P) Ltd. v. Dy. CIT, Central Circle-17, New Delhi in ITA No. 3406/Del./2017, dated 23-4-2018, for the assessment year 2007-08, Brahmaputra Holdings (P) Ltd., New Delhi v. Dy. CIT, Central Circle-17, New Delhi in ITA No. 3330/Del./2017, dated 29-5-2018, for the assessment year 2007-08 : 2018 TaxPub(DT) 2879 (Del-Trib) and Brahmaputra Finlease (P) Ltd. v. Dy. CIT, Central Circle-17, New Delhi in ITA Nos. 3333 & 3334/Del./2017, dated 15-1-2020, for the assessment years 2009-10 and 2010-11 : 2020 TaxPub(DT) 479 (Del-Trib).

REFERRED : Pr. CIT v. Goodview Trading (P) Ltd. ITA No. 377/Del./2016 : 2017 TaxPub(DT) 0219 (Del-HC), ITO v. N.C. Cables Ltd. (2017) 391 ITR 11 (Del-HC) : 2017 TaxPub(DT) 264 (Del-HC), CIT v. Vrindavan Farms (P) Ltd. ITA No. 71/Del./2015 : 2015 TaxPub(DT) 4373 (Del-HC), Pr. CIT v. Ami Industries (India) (P) Ltd. (2020) 424 ITR 219 (Bom.) : 2020 TaxPub(DT) 845 (Bom-HC) CIT v. Five Vision Promoters (P) Ltd., (2015) 380 ITR 289 (Del.) : 2015 TaxPub(DT) 5289 (Del-HC), CIT v. SVP Builders (India) (2015) 238 Taxman 653 (Del.) : 2015 TaxPub(DT) 5426 (Del-HC), Pr. CIT v. Adamine Constructions (P) Ltd., 99 taxmann.com 45 (SC) Pr. CIT v. Adamine Constructions (P) Ltd. (2018) 99 taxmann.com 44 (Del.) : 2018 TaxPub(DT) 7306 (Del-HC), Pr. CIT v. Himachal Fibers Ltd., (2018) 98 taxmann.com 173 (SC) : 2018 TaxPub(DT) 5572 (SC), Pr. CIT v. Himachal Fibers Ltd., 98 taxmann.com 172 (Del.), Pr. CIT v. Oriental International Co. (P) Ltd. (2018) 401 ITR 83 (Del.) : 2018 TaxPub(DT) 291 (Del-HC), Pr. CIT v. Chain House International (P) Ltd., (2019) 262 Taxman 207 (SC) : 2019 TaxPub(DT) 1432 (SC), CIT v. Softline Creations (P) Ltd., (2016) 387 ITR 636 (Del.) : 2016 TaxPub(DT) 4531 (Del-HC), Psychotropics Leasing & Finance (P) Ltd. v. ITO ITA No. 1122/Del./2014, dated 11-10-2018 : 2018 TaxPub(DT) 7381 (Del-Trib), SRM Securities (P) Ltd. v. Dy. CIT ITA No. 7825/Del./2017, dated 11-12-2018 : 2019 TaxPub(DT) 1590 (Del-Trib), CIT v. Winstral Petrochemicals (P) Ltd. (2011) 330 ITR 603 (Del.) (HC) : 2011 TaxPub(DT) 259 (Del-HC), Anish Ahmed & Sons v. CIT (2008) 297 ITR 441 (SC) : 2008 TaxPub(DT) 1503 (SC), Pr. CIT v. NDR Promoters (P) Ltd., (2019) 2019-TIOL-172-HC-Del-IT-Delhi High Court : 2019 TaxPub(DT) 0886 (Del-HC), Pr. CIT v. NRA Iron & Steel (P) Ltd., (2019) 103 Taxmann.com 48 (SC) : 2019 TaxPub(DT) 1628 (SC), Prem Castings (P) Ltd., v. CIT (2017) 88 Taxmann.com 189 (All) : 2017 TaxPub(DT) 5245 (All-HC), CIT v. MAF Academy (P) Ltd., (2014) 361 ITR 258 (Del-HC) : 2014 TaxPub(DT) 87 (Del-HC), CIT v. Navodaya Castle (P) Ltd., (2014) 367 ITR 306 (Del-HC) : 2014 TaxPub(DT) 3789 (Del-HC), Konark Structural Engineering (P) Ltd. v. Dy. CIT (2018) 96 Taxmann.com 255 (SC) : 2018 TaxPub(DT) 4127 (SC), J.J. Development (P) Ltd., v. CIT 2018-TIOL-395-SC-IT : 2018 TaxPub(DT) 6823 (SC), CIT v. Nipun Builders & Developers (P) Ltd. (2013) 350 ITR 407 (Del.) (HC) : 2013 TaxPub(DT) 526 (Del-HC), CIT v. Nova Promoters & Finlease (P) Ltd., (2012) 342 ITR 169 (Del.) (HC) : 2012 TaxPub(DT) 1558 (Del-HC), CIT v. N.R. Portfolio (P) Ltd., (2014) 264 CTR 258 (Del.) : 2014 TaxPub(DT) 501 (Del-HC), CIT v. Ultra Modern Exports (P) Ltd., 220 Taxman 165 (Del.) (HC), CIT v. Frostair (P) Ltd., (2012) 210 Taxman 221 (Del.) (HC) : 2012 TaxPub(DT) 3185 (Del-HC), CIT v. Empire Builtech (P) Ltd., (2014) 366 ITR 110 (Del.) (HC) : 2014 TaxPub(DT) 1850 (Del-HC), CIT v. Focus Exports (P) Ltd., 228 Taxman 88 (Del.) (HC), Pr. CIT v. Bikram Singh (2017) 399 ITR 407 (Del.) (HC) : 2017 TaxPub(DT) 3937 (Del-HC), Rick Lunsford Trade & Investment Ltd., v. CIT (2016) 385 ITR 399 (Cal.) (HC) : 2016 TaxPub(DT) 3442 (Cal-HC) and Rick Lunsford Trade & Investment Ltd., v. CIT 2016 TIOL-207-SC-IT, Dwarakadhish Investment (P) Ltd. (2011) 330 ITR 298 (Del.), Rohini BuildeRs. (2002) 256 ITR 360 (Guj.) : 2002 TaxPub(DT) 0305 (Guj-HC) and (3) Zafar Ahmed & Co., 30 Taxmann.com 269 (All.), CIT v. Fair Investment Ltd., (2013) 357 ITR 146 (Del) : 2013 TaxPub(DT) 912 (Del-HC), CIT v. Lovely Exports (P) Ltd. (2008) 216 CTR 195 : (2009) 319 ITR 5 (SC) : 2009 TaxPub(DT) 261 (SC) and CIT v. Kamdhenu Steel and Alloys Ltd. & Ors. (2012) 361 ITR 220 (Del.) : 2012 TaxPub(DT) 1644 (Del-HC).

FAVOUR : In assessee's favour.

A.Y. : 2009-2010 & 2010-2011

INCOME TAX ACT, 1961

Section 2(22)(e)

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