ATITHI RETAIL PRIVATE LIMITED,. V. ITO WARD 1(1), FBD, .

ITA 562/DEL/2024

AI Insights

Atithi Retail Pvt. Ltd appealed against the order of the National Faceless Appeal Centre (NFAC), which sustained an addition of Rs. 87,50,000 as unexplained credit under section 68 of the Income Tax Act, 1961. The addition was initially made by the Assessing Officer (AO) due to doubts about the genuineness and creditworthiness of the investor companies that contributed share capital. The CIT(A) upheld the AO's decision. The Tribunal noted that the lower authorities had not properly considered the additional evidence provided by the assessee and had not examined the claim that the share capital received was from previous years' outstanding trade payables. The Tribunal directed a fresh examination of these issues by the AO.

• Counselvise Citation: [2024] 140 COUNSELVISE.COM (IT) 470713 (ITAT-DELHI)
• Duration Of Justice: 8 month(s) 17 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 25-10-2024
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: A
• Next Hearing Date: 08-08-2024
• Assessment Year: 2016-2017
• Appeal Filed On: 08-02-2024
• Other Referred Cases: Dayalu Iron & Steel Pvt Ltd ITA No. 6173/DEL/2019, Dayalu Fashion Pvt Ltd ITA No. 6174/DEL/2019, Devesh Cinemas Pvt Ltd ITA No. 6184/DEL/2019, M/s Sparsh Beauty Care Pvt Ltd ITA No. 170/DEL/2022, Zhilmil Electronics Pvt Ltd ITA No. 6172/DEL/2019, Punyah Building Material Pvt Ltd ITA No. 6171/DEL/2019, Balgopal Cold Storates Pvt Ltd ITA No. 6176/DEL/2019, Makhan Milk Products Pvt Ltd ITA No. 6180/DEL/2019, Movefast Automobiles Pvt Ltd ITA No. 6183/DEL/2019
• Laws Referred To: Income Tax Act
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: KANV BALI
• Assessee Lawyers: RAJEEV SAXENA
• Keywords: Additional evidence; Unexplained cash credit; Principle of natural justice; Source of fund
• Section: 68; 133(6)

Judgement Text

"IN THE INCOME TAX APPELLATE TRIBUNAL, DELHI ‘A’ BENCH, NEW DELHI BEFORE SHRI VIKAS AWASTHY, JUDICIAL MEMBER AND SHRI NAVEEN CHANDRA, ACCOUNTANT MEMBER ITA No. 562/DEL/2024 [A.Y 2016-17] Atithi Retail Pvt. Ltd Vs. The Income –tax Officer H-35, 1st Floor, Jangpura Ward -1(1) Extension, New Delhi Faridabad PAN – AALCA 0775C (Applicant) (Respondent) Assessee By : Shri Rajeev Saxena, Adv Ms. Sumangla Saxena, Adv Shri Shyam Sunder, ADv Department By : Shri Kanv Bali, Sr. DR Date of Hearing : 08.08.2024 Date of Pronouncement : 25.10.2024 ORDER PER NAVEEN CHANDRA, ACCOUNTANT MEMBER:- This appeal by the assessee is preferred against the order of the NFAC, Delhi dated 08.01.2024 pertaining to A.Y 2016-17. 2 2. The assessee has raised as many as 6 grounds of appeal. However, the solitary issue pertains to the sustenance of the addition of Rs. 87,50,000/- by the ld. CIT(A) made u/s 68 of the Act on account of alleged unexplained share premium and share capital despite furnishing all the documentary evidence for establishing identity, creditworthiness of the investors and genuineness of the transaction. 3. The representatives of both the sides were heard at length, the case records carefully perused with the assistance of both the counsels. 4. Briefly stated the facts of the case are that the assesseea registered company incorporated on 20.09.2012 with an object of carrying on the business ofretailing, wholesale, B2B marketing, import, export and selling product lines based onfashion and handicraft like clothing, fashion jewellery, accessories, bags, footwear etc.The company filed its return of income for the year under consideration declaring total income of Rs. 1,81,040/- on 27.8.2016. 5. During the course of the assessment proceedings, the return of income was taken up for scrutiny under CASS. In the course of assessment proceedings, the Assessing Officer noticed that the 3 assessee company has received share capital from the following 9 investor companies for a share with face value Rs 10 at a premium of Rs 30/- during the year as follows: 1. M/s Best Propcon Pvt. Ltd Rs. 10,00,000/- 2. M/s Best Realcon India Pvt. Ltd. Rs. 15,00,000/- 3. M/s Goodluck Industries Ltd. Rs.5,00,000/- 4. M/s Cee Aar décor Pvt. Ltd. Rs.10,00,000/- 5. M/s Metalcity Construction Kovai Pvt. Ltd. Rs.22,50,000/- 6. M/s Pearl Homebuild Pvt. Ltd. Rs.2,00,000/- 7. M/s Pearl Nestbuild Pvt. Ltd. Rs.10,00,000/- 8. M/s RSM Construction Pvt. Ltd. Rs.10,00,000/- 9. M/s Tulsi Colonisers Rs.3,00,000/- Total Rs 87,50,000/- 6. The Assessing Officer doubted the genuineness of the transactions, and source of funds invested. The AO investigation with the assessee yielded part response. Thereafter, the AO issued notices u/s 133(6) to 7 of the investor companies out of which only three investor companies responded with partial information.The AO also made spot verification from his inspector and notice server who found no physical existence of the investor companies. The Assessing Officer finally concluded that the investor companies did not have creditworthiness to fund the assessee company. Accordingly, the 4 Assessing Officer made the addition totaling to Rs. 87,50,000/- u/s 68 of the Act as unexplained credit. 7. Aggrieved, the assessee went in appeal before the ld. CIT(A) who upheld the action of the Assessing Officer and dismissed the appeal filed by the assessee. 8. The assessee is further aggrieved and has come in appeal before us. 9. Before us, the ld. counsel for the assessee submitted that during the year under consideration, the assessee company, desirous of reviving the business activities, arranged funds/capital to be invested in the business. In this regard, during the FY 2015-16 relevant to AY 2016-17, the assessee company allotted Rs. 2,18,750 equity shares of Rs. 10/- per share at a premium of Rs. 30/- per share to NINE entities. 10. The ld. counsel for the assessee stated that 8 out the 9 investor companies had paid the money amounting to Rs 77,50,000/- in earlier assessment years whereas the shares were allotted in AY 2016-17. The ld AR vehemently argued thatas the amount of Rs 77,50,000/- out of Rs 5 87,50,000/- pertain to previous years, the same cannot be considered for addition in the current year. It was argued that only an amount of Rs 10,00,000/- was received in the instant year from M/s Pearl Nestbuild Pvt. Ltd. It was argued that notices u/s 133(6) issued to the parties gave a small time period to attend and submit the details. It was submitted by the ld AR that the assessee filed all the requisite documents as also the factum of funds being received in the previous years. It was also submitted that for personal appearance of the parties, the assessee had requested the AO to use powers under the law to take necessary action. 11. It was submitted that the assessee submitted various documents on 11.07.2018 in which bank statements, PAN, ITR, address, details of allotment of shares, confirmation of accounts were filed, but the same were ignored by the Assessing Officer. It was submitted that the Assessing Officer did not make any efforts to examine their records from the websites of MCA and Income Tax Department after/before issuing Show Cause Notice and the assessee could not devote time due to various reasons of Director KYC verification and compliances of Companies Act, 2013. It was further submitted that the assessee could not notice that some of the documents were not uploaded on the 6 website and it came to its knowledge only after the assessment had taken place.It was also argued that the information could not be furnished during the month of October, 2018 as desired by the Assessing Officer as the ITBA e-assessment portal did not allow the assessee to furnish the requisite information. 12. It was the say of the ld AR that the Assessing Officer did not make any enquiry from 3 companies i.e M/s Radha Ballabh Builders (P) Ltd., M/s Radha Ballabh Construction (P) Ltd. and M/s Rupa Promoters (P) Ltd. 13. The ld AR argued that the entire set of documents were furnished as additional evidence in nature of supporting documents as per the Rule 46A of Income Tax Appellate Rules, 1962 before the CIT(A) which has not been considered. 14. The ld. counsel for the assessee has relied on the following judicial pronouncement to support his case: a) Dayalu Iron & Steel Pvt Ltd ITA No. 6173/DEL/2019 Dayalu Fashion Pvt Ltd ITA No. 6174/DEL/2019 Devesh Cinemas Pvt Ltd ITA No. 6184/DEL/2019 7 b) M/s Sparsh Beauty Care Pvt Ltd ITA No. 170/DEL/2022 c) Zhilmil Electronics Pvt Ltd ITA No. 6172/DEL/2019 d) Punyah Building Material Pvt Ltd ITA No. 6171/DEL/2019 e) Balgopal Cold Storates Pvt Ltd ITA No. 6176/DEL/2019 f) Makhan Milk Products Pvt Ltd ITA No. 6180/DEL/2019 g) Movefast Automobiles Pvt Ltd ITA No. 6183/DEL/2019 15. Per contra, the ld DR strongly relying on the orders of AO and the CIT(A), argued that the AO has not made the addition arbitrarily. The ld DR stated that the case was selected under CASS to examine ‘whether the funds received in the form of share premium are from disclosed sources’. The ld DR submitted that the AO has discharged its onus of conducting enquiry through issue of notices under section 142(1) to the assessee where he received partial response. The AO’s further enquiry with the investor companies u/s 133(6) also could not yield complete and satisfactory response. Thereafter the AO also conducted spot verification from his inspector and notice server who found no physical existence of the investor companies. It was submitted that summons were also issued by the AO to the Directors of the investor companies which remained uncompiled with. The ld DR averred that it was only after completing the due process, the AO finally concluded that the investor companies did not 8 havecreditworthiness to fund the assessee company and hence the addition u/s 68 be sustained. 16. We have given thoughtful consideration to the orders of the authorities below. We have also carefully verified the evidences brought on record in respect of share capital received by the assessee. We find that the assessee has furnished partial documentary evidences before the assessing officer. We are of the considered view that reasons of Director KYC verification and compliances of Companies Act, 2013 and facing difficulties in uploading the requisite information ontothe ITBA e-assessment portal are valid reasons as to why the complete evidences were not filed before the AO. We also find that a set of documents has been filed before the CIT(A) as additional evidence under Rule 46A of the IT Rules. We also note that the CIT(A) has not given his findings on the acceptance or negation of the additional evidences furnished under rule 46A before him. The claim of the assessee that Rs 77,50,000/- out of the total Rs 87,50,000/- of share capital was received in previous assessment years have neither been examined by the AO nor the CIT(A). The assessee before us has explained that the outstanding trade payables of FY 14-15 has been 9 converted as Share Capital with premium in FY 2015-16. This claim has also not been examined by the lower authorities. 17. In the light of the above discussion, we are of the considered view that the evidences filed by the assessee have not been judicially appraised by the lower authorities. The assessee has also taken a ground 3 where it has agitated that the CIT(A)/NFAC erroneously sustained the addition without calling for remand report from the AO against the additional evidences filed under rule 46A. We therefore are of the opinion that in the interest of natural justice and fair play, the issue ofestablishing identity, genuineness and creditworthiness in respect of share capital in the context of section 68 of the I T Act should be restored to the file of the Assessing Officer for fresh adjudication. The assessee is directed to produce all necessary documents/evidences before the assessing officer for verification and investigation. The Assessing Officer is simultaneously directed to examine/investigate the same and decide the issue as per the provisions of law after affording reasonable and sufficient opportunity of being heard to the assessee. 10 18. In the result, the appeal of the assessee in ITA No. 562/DEL/2024 is allowed for statistical purposes. The order is pronounced in the open court on 25.10.2024. Sd/- Sd/- [VIKAS AWASTHY] [NAVEEN CHANDRA] JUDICIAL MEMBER ACCOUNTANT MEMBER Dated: 25th October, 2024. VL/ Copy forwarded to: 1. Assessee 2. Respondent 3. CIT 4. CIT(A) 5. DR Asst. Registrar, ITAT, New Delhi 11 Date of dictation Date on which the typed draft is placed before the dictating Member Date on which the typed draft is placed before the Other Member Date on which the approved draft comes to the Sr.PS/PS Date on which the fair order is placed before the Dictating Member for pronouncement Date on which the fair order comes back to the Sr.PS/PS Date on which the final order is uploaded on the website of ITAT Date on which the file goes to the Bench Clerk Date on which the file goes to the Head Clerk The date on which the file goes to the Assistant Registrar for signature on the order Date of dispatch of the Order "