ITO v. Balaji Infra Solutions (P) Ltd.

SUBSCRIBE FOR FULL CONTENT

The Tax Publishers2021 TaxPub(DT) 2089 (Del-Trib)

INCOME TAX ACT, 1961

Section 68

AO merely doubted capacity of investors because they had reported low income in their return of income. This could not be the sole basis to doubt the explanation of assessee. It might be a suspicion of AO without bringing any evidence on record. Rather, documentary evidences produced on record clearly supported the explanation of assessee. Hence, there was no basis for AO to hold that assessee failed to prove creditworthiness of investors, especially, when Bank statements of both the Investors showed that they had sufficient funds with them to make investment in assessee, company and no cash was found to have been deposited in their bank accounts before making investments thus addition under section 68 was deleted .

Income from undisclosed sources - Addition under section 68 - Receipt of share capital - AO doubted creditworthiness of investors due to low income offered by them in their returns--Assessee furnished supportive evidences

Assessee-company received share capital/premium from 6 parties, out of which AO had accepted the explanation of assessee as regards 04 Investors on the basis of reply under section 133(6). In the case of remaining 02 Investors. AO noticed that Investor Companies had shown meager income in their return of income for the year. Therefore, AO doubting creditworthiness of investors, treated amount claimed to be received by assessee from those companies as unexplained credit and made addition under section 68.Held: Bank statements of both the Investors showed that they had sufficient funds with them to make investment in assessee company and no cash was found to have been deposited in their bank accounts before making investments. They had explained source with them to make investment in assessee company which was further strengthened by the share capital and reserve and surplus available with both the Investor Companies. AO merely doubted capacity of Investors because they had reported low income in their return of income. This could not be the sole basis to doubt the explanation of assessee. It might be a suspicion of AO without bringing any evidence on record. Rather, documentary evidences produced on record clearly supported the explanation of assessee. Hence, there was no basis for AO to hold that assessee failed to prove creditworthiness of investors and thus addition was deleted.

Distinguished:Pr. CIT (Central)-1 v. NRA Iron & Steel (P) Ltd. (2019) 103 Taxmann.com 48 (SC) : 2019 TaxPub(DT) 1628 (SC). Relied:CIT v. Dwarakadhish Investment (P) Ltd. (2011) 330 ITR 298 (Del.) (HC) : 2011 TaxPub(DT) 374 (Del-HC), Rohini Builders 256 ITR 360 (Guj.) : 2002 TaxPub(DT) 305 (Guj-HC), Zafar Ahmad & Co. 30 Taxmann.com 269 (All-HC), CIT v. Fair Investment Ltd. 357 ITR 146 : 2013 TaxPub(DT) 912 (Del-HC), CIT v. Lovely Exports (P) Ltd. (2008) 216 CTR 195 : 2009 TaxPub(DT) 261 (SC) and CIT v. Kamdhenu Steel and Alloys Ltd. & Ors. 361 ITR 220 (Del.) : 2012 TaxPub(DT) 1644 (Del-HC). Supported by:CIT v. Vrindavan Farms (P) Ltd., etc. ITA. No. 71 of 2015, dated 12-8-2015 (Del.) : 2015 TaxPub(DT) 4373 (Del-HC), CIT v. Laxman Industrial Resources (P) Ltd. ITA. No. 169 of 2017, dated 14-3-2017 : 2017 TaxPub(DT) 4088 (Del-HC), Earth Metal Electric (P) Ltd. v. CIT, dated 30-7-2010 SLP.No. 21073 of 1999, Divine Leasing & Finance Ltd., (2008) 299 ITR 268 : 2008 TaxPub(DT) 400 (Del-HC), CIT v. Peoples General Hospital Ltd., (2013) 356 ITR 65 : 2013 TaxPub(DT) 1865 (MP-HC), CIT v. Winstral Petrochemicals (P) Ltd. 330 ITR 603 : 2011 TaxPub(DT) 259 (Del-HC), CIT v. Value Capital Services (P) Ltd. (2008) 307 ITR 334 (Del-HC) : 2008 TaxPub(DT) 1946 (Del-HC), Pr. CIT v. Kurele Paper Mills (P) Ltd. 380 ITR 571 (Del.) : 2016 TaxPub(DT) 1068 (Del-HC), CIT v. Orissa Corporation (P) Ltd. (1986) 159 ITR 78 (SC) : 1986 TaxPub(DT) 1425 (SC) and Pr. CIT v. Chain House International (P) Ltd. 98 Taxmann.com 47 (HC-MP) 408 ITR 561 (HC-MP) : 2018 TaxPub(DT) 5193 (MP-HC).