AI Insights
The case involves an appeal by the Revenue against the decision of the CIT(A) which had deleted the addition made by the Assessing Officer under section 68 of the Income Tax Act, 1961. The addition pertained to Rs. 1,99,75,000 received as share application money from M/s. Jaycee Industries Ltd. The Revenue contended that the entity did not have the required creditworthiness. However, the CIT(A) found that the assessee had provided sufficient evidence to establish the creditworthiness and genuineness of the transaction, which was accepted in earlier assessments. The Tribunal agreed with the CIT(A) and dismissed the Revenue's appeal, emphasizing that the addition under section 68 could not be made as the amount was not received in the year under consideration and the necessary conditions for section 68 were met in the previous assessment years.
Appeal Details
Counselvise Citation
[2022] 140 COUNSELVISE.COM (IT) 123546 (ITAT-MUMBAI)
Assessee PAN
Bench
Appeal Number
CRN Number
Duration Of Justice
5 month(s) 26 day(s)
Appellant
Respondent
Appeal Type
Income Tax Appeal
Pronouncement Date
29-12-2022
Appeal Filed By
Department
Order Result
Dismissed
Bench Allotted
G
Next Hearing Date
19-12-2022
Assessment Year
2008-2009
Appeal Filed On
03-07-2022
Judgement Text
IN THE INCOME TAX APPELLATE TRIBUNAL MUMBAI BENCH “G” MUMBAI BEFORE SHRI ABY T VARKEY (JUDICIAL MEMBER) AND SHRI OM PRAKASH KANT (ACCOUNTANT MEMBER) ITA No. 1751/MUM/2022 Assessment Year: 2008-09 DCIT Central Circle-2(3), Room No. 803, 8 th floor, Prathishtha Bhavan, M.K. Road, Churchgate, Mumbai-400020. Vs. M/s Zarco Realties Pvt. Ltd., 1403, Godvari, Sir Pochkanwala Road, Worli, Mumbai-400025. PAN No. AAACP 6265 H Appellant Respondent Assessee by : Mr. Vijay Mehta, AR Revenue by : Mr. Satyapal Kumar, DR Date of Hearing : 20/12/2022 Date of pronouncement : 30/12/2022 ORDER PER OM PRAKASH KANT, AM The present appeal is filed by the Revenue against the order dated 08/04/2022 passed by the ld. Commissioner of Income Tax (Appeals) – 48, Mumbai [in short, ‘the Ld. CIT(A)’] for A.Y. 2008-09. 2. The grounds of appeal raised by the Revenue are reproduced as under : 1. Whether on the facts and circumstances of the case and in law, the Ld. CIT (A), is justified in deleting the addition of Rs. 1,99,75,000/ unexplained credit on accounts of sum credited in the books of accounts of the assessee who received share capital and share premium from Javcee Pvt Lid, without appreciating the fact that the entity did not have required creditworthiness. 3. Briefly, the facts of the case are that the assessee company had filed its return of income on 31.03.2006 declaring total income of Rs. 2,84,220/- for the year under consideration. The return was processed u/s. 143(1) of the Income Tax Act, 1961 [in short, “the Act”]. Later, the case of the assessee was reopened u/s. 147 of the Act and notice u/s. 148 of the Act was issued on 30.03.2015. In response to the same, the assessee filed a letter dated 27.04.2015 requesting to treat the original return of income filed for A.Y. 2008 09 as that filed u/s. 148 of the Act. Copy of the reason for reopening the assessment was supplied to the assessee and objections filed by the assessee were also disposed off by a speaking order dated 15.02.2016. Thereafter, statutory notice u/s. 143(2) was also issued to the assessee on 12.06.2015. I completed, the Assessi being share capital and share premium received from eight parties u/s. 68 of the Act. Aggrieved by the addition made, the assessee preferred appeal before the ld. CIT(A) Rs. 3,13,35,000/- on the premise that the tests prescribed u/s. 68 Whether on the facts and circumstances of the case and in law, the Ld. CIT (A), is justified in deleting the addition of Rs. 1,99,75,000/- made ws 68 of the Income Tax Act, as unexplained credit on accounts of sum credited in the books of accounts of the assessee who received share capital and share premium from Javcee Pvt Lid, without appreciating the fact that the entity did not have required creditworthiness. facts of the case are that the assessee company return of income on 31.03.2006 declaring total income for the year under consideration. The return was processed u/s. 143(1) of the Income Tax Act, 1961 [in short, “the Act”]. Later, the case of the assessee was reopened u/s. 147 of the notice u/s. 148 of the Act was issued on 30.03.2015. In response to the same, the assessee filed a letter dated 27.04.2015 requesting to treat the original return of income filed for A.Y. 2008 09 as that filed u/s. 148 of the Act. Copy of the reason for reopening the assessment was supplied to the assessee and objections filed by the assessee were also disposed off by a speaking order dated 15.02.2016. Thereafter, statutory notice u/s. 143(2) was also issued to the assessee on 12.06.2015. In the reassessment completed, the Assessing Officer made addition of Rs. being share capital and share premium received from eight parties . Aggrieved by the addition made, the assessee preferred appeal before the ld. CIT(A) who deleted the addition of on the premise that the tests prescribed u/s. 68 M/s Zarco Realties Pvt. Ltd.. ITA No. 1751/M/2022 2 Whether on the facts and circumstances of the case and in law, the Ld. CIT (A), is justified in deleting the addition of Rs. made ws 68 of the Income Tax Act, as unexplained credit on accounts of sum credited in the books of accounts of the assessee who received share capital and share premium from Javcee Pvt Lid, without appreciating the fact that the entity did not have required creditworthiness. facts of the case are that the assessee company return of income on 31.03.2006 declaring total income for the year under consideration. The return was processed u/s. 143(1) of the Income Tax Act, 1961 [in short, “the Act”]. Later, the case of the assessee was reopened u/s. 147 of the notice u/s. 148 of the Act was issued on 30.03.2015. In response to the same, the assessee filed a letter dated 27.04.2015 requesting to treat the original return of income filed for A.Y. 2008- 09 as that filed u/s. 148 of the Act. Copy of the reasons recorded for reopening the assessment was supplied to the assessee and objections filed by the assessee were also disposed off by a speaking order dated 15.02.2016. Thereafter, statutory notice u/s. 143(2) n the reassessment ng Officer made addition of Rs.3,13,35,000/- being share capital and share premium received from eight parties . Aggrieved by the addition made, the assessee who deleted the addition of on the premise that the tests prescribed u/s. 68 of the Act are satisfied by the assessee. Being aggrieved by the order passed by the ld. CIT(A), the 4. The ground of appeal of the the addition of Rs. unexplained cash credit on account of sum credited in the books of accounts of the assessee who received share capital and share premium from Jaycee Pvt. Ltd. without a the said entity did not have required creditworthiness. 5. Briefly, the facts qua the issue related to the share capital and premium received from M/s. Jaycee Pvt. Ltd. are that the assessee had received share application money of said party in A.Y. 2007 cheque wise details along with the bank statements of appellant company. The case of the assessee was selected for scrutiny u/s. 143(3) for A.Y. 2007 application money wherein the assessee had submitted the relevant details in this regard before the Assessing Officer which was verified and accepted by the then Assessing Officer. Even the party namely M/s. Jaycee Industri also made. During the course of reassessment proceedings for the year under consideration also, notice u/s. 133(6) of the Act was issued to the said party. In response the said party confirmed the investments being made in the assessee company on premium. However, the Assessing Officer doubted its creditworthiness based of the Act are satisfied by the assessee. Being aggrieved by the order passed by the ld. CIT(A), the Revenue is in appeal. The ground of appeal of the Revenue relates to the the addition of Rs.1,99,75,000/- made u/s. 68 of the Act as unexplained cash credit on account of sum credited in the books of accounts of the assessee who received share capital and share premium from Jaycee Pvt. Ltd. without appreciating the fact that the said entity did not have required creditworthiness. Briefly, the facts qua the issue related to the share capital and premium received from M/s. Jaycee Pvt. Ltd. are that the assessee share application money of Rs.1,99,75,000/ said party in A.Y. 2007-08. The assessee had submitted complete cheque wise details along with the bank statements of appellant case of the assessee was selected for scrutiny u/s. 143(3) for A.Y. 2007-08 i.e. the year of receipt / transfer of share wherein the assessee had submitted the relevant details in this regard before the Assessing Officer which was verified and accepted by the then Assessing Officer. Even the party namely M/s. Jaycee Industries Ltd. was summoned to which response was also made. During the course of reassessment proceedings for the year under consideration also, notice u/s. 133(6) of the Act was issued to the said party. In response the said party confirmed the g made in the assessee company on premium. However, the Assessing Officer doubted its creditworthiness based M/s Zarco Realties Pvt. Ltd.. ITA No. 1751/M/2022 3 of the Act are satisfied by the assessee. Being aggrieved by the order relates to the deletion of made u/s. 68 of the Act as unexplained cash credit on account of sum credited in the books of accounts of the assessee who received share capital and share ppreciating the fact that the said entity did not have required creditworthiness. Briefly, the facts qua the issue related to the share capital and premium received from M/s. Jaycee Pvt. Ltd. are that the assessee 1,99,75,000/- from the 08. The assessee had submitted complete cheque wise details along with the bank statements of appellant case of the assessee was selected for scrutiny u/s. r of receipt / transfer of share wherein the assessee had submitted the relevant details in this regard before the Assessing Officer which was verified and accepted by the then Assessing Officer. Even the party namely es Ltd. was summoned to which response was also made. During the course of reassessment proceedings for the year under consideration also, notice u/s. 133(6) of the Act was issued to the said party. In response the said party confirmed the g made in the assessee company on premium. However, the Assessing Officer doubted its creditworthiness based on the analysis of its financials and accordingly, made the addition u/s. 68 of the Act. However, the ld. CIT(A) deleted the said addition. 6. The ld. Departmental Representative appearing for the revenue argued that action of the Assessing Officer in making the addition u/s. 68 of the Act in respect of the party namely M/s. Jaycee Industries Ltd. be upheld as it has no creditworthiness at all. He drew our attention to the financials of the said company and pointed out that it has carried minimal business despite huge capital/ share premium, it has earned minimal interest income only and even the bank statement has not been filed. He therefore vehemently submitted that since the creditworthiness of the share applicant itself is not proved, the assessee has not discharged its onus casted u/s. 68 of the Act and hence, the addition of Rs. 1,99,75,000/- be confirmed. 6.1 In rebuttal, the ld. Counsel of the amount of share application money amounting to Rs. 1,99,75,000/ was received from M/s. Ja relevant to A.Y. 2007 also carried out in respect of the re then Assessing Officer and no adverse inference was drawn. Further, even in the present reassessment proceedings, the said party had duly responded to the notice u/s. 133(6) of the Act confirming the transaction done with the year under consideration, the assessee has only allotted shares to on the analysis of its financials and accordingly, made the addition u/s. 68 of the Act. However, the ld. CIT(A) deleted the said addition. ld. Departmental Representative appearing for the revenue argued that action of the Assessing Officer in making the addition u/s. 68 of the Act in respect of the party namely M/s. Jaycee Industries Ltd. be upheld as it has no creditworthiness at all. He ew our attention to the financials of the said company and pointed out that it has carried minimal business despite huge capital/ share premium, it has earned minimal interest income only and even the bank statement has not been filed. He therefore tly submitted that since the creditworthiness of the share applicant itself is not proved, the assessee has not discharged its onus casted u/s. 68 of the Act and hence, the addition of Rs. be confirmed. In rebuttal, the ld. Counsel of the assessee explained that the amount of share application money amounting to Rs. 1,99,75,000/ was received from M/s. Jaycee Industries Ltd. in F.Y. 2006 relevant to A.Y. 2007-08 and complete scrutiny u/s. 143(3) was also carried out in respect of the receipt of the said funds by the then Assessing Officer and no adverse inference was drawn. Further, even in the present reassessment proceedings, the said party had duly responded to the notice u/s. 133(6) of the Act confirming the transaction done with the assessee company. In the year under consideration, the assessee has only allotted shares to M/s Zarco Realties Pvt. Ltd.. ITA No. 1751/M/2022 4 on the analysis of its financials and accordingly, made the addition u/s. 68 of the Act. However, the ld. CIT(A) deleted the said addition. ld. Departmental Representative appearing for the revenue argued that action of the Assessing Officer in making the addition u/s. 68 of the Act in respect of the party namely M/s. Jaycee Industries Ltd. be upheld as it has no creditworthiness at all. He ew our attention to the financials of the said company and pointed out that it has carried minimal business despite huge capital/ share premium, it has earned minimal interest income only and even the bank statement has not been filed. He therefore tly submitted that since the creditworthiness of the share applicant itself is not proved, the assessee has not discharged its onus casted u/s. 68 of the Act and hence, the addition of Rs. assessee explained that the amount of share application money amounting to Rs. 1,99,75,000/- ycee Industries Ltd. in F.Y. 2006-07 08 and complete scrutiny u/s. 143(3) was ceipt of the said funds by the then Assessing Officer and no adverse inference was drawn. Further, even in the present reassessment proceedings, the said party had duly responded to the notice u/s. 133(6) of the Act assessee company. In the year under consideration, the assessee has only allotted shares to the said party and no fresh amount is received from the said party and accordingly, no addition can be made u/s. 68 of the Act. 7. We have heard the rival the material on record. The issue to be decided is whether the addition u/s. 68 of the Act can be made when the assessee has not received any amount from the alleged party in the year under consideration. In this rega CIT(A), the relevant extract of which is reproduced below: “10.9 As far as Share Application Money of Rs. 1,99,75,000/ concerned, it is explained that the appellant had allotted 850. equity shares to Jaycee Industries Limited and received amounts aggregating to Rs. 1,99,75,000 towards the same. M/s Jaycee Industries had shares in the FY 2006 along with bank statements of Appel duly submitted to the Learned AO. 10.10 Appellant Company's return was processed under scrutiny assessment W/s. 14363) for the Assessment Year 2007 - 2008, i.e., year of receipt / transfer of share application money. The Appellant had dul the details before the AO, which was verified and accepted by then AO. Moreover, Jaycee Industries also responded to summons issued by the Learned AO. the said party and no fresh amount is received from the said party and accordingly, no addition can be made u/s. 68 of the Act. We have heard the rival contentions of the parties and perused the material on record. The issue to be decided is whether the addition u/s. 68 of the Act can be made when the assessee has not received any amount from the alleged party in the year under consideration. In this regard, we agree with the findings of the ld. CIT(A), the relevant extract of which is reproduced below: 10.9 As far as Share Application Money of Rs. 1,99,75,000/- from M/Jaycee Indüstries Limited is concerned, it is explained that the appellant had allotted 850. equity shares to Jaycee Industries Limited and received amounts aggregating to Rs. 1,99,75,000 towards the same. M/s Jaycee Industries had applied for equity shares in the FY 2006-2007. Complete cheque wise details along with bank statements of Appellant Company were duly submitted to the Learned AO. 10.10 Appellant Company's return was processed under scrutiny assessment W/s. 14363) for the Assessment Year 2008, i.e., year of receipt / transfer of share application money. The Appellant had duly submitted all the details before the AO, which was verified and accepted by then AO. Moreover, Jaycee Industries also responded to summons issued by the Learned AO. M/s Zarco Realties Pvt. Ltd.. ITA No. 1751/M/2022 5 the said party and no fresh amount is received from the said party and accordingly, no addition can be made u/s. 68 of the Act. contentions of the parties and perused the material on record. The issue to be decided is whether the addition u/s. 68 of the Act can be made when the assessee has not received any amount from the alleged party in the year under rd, we agree with the findings of the ld. CIT(A), the relevant extract of which is reproduced below: 10.9 As far as Share Application Money of Rs. from M/Jaycee Indüstries Limited is concerned, it is explained that the appellant had allotted 850. equity shares to Jaycee Industries Limited and received amounts aggregating to Rs. 1,99,75,000 towards applied for equity 2007. Complete cheque wise details lant Company were 10.10 Appellant Company's return was processed under scrutiny assessment W/s. 14363) for the Assessment Year 2008, i.e., year of receipt / transfer of share y submitted all the details before the AO, which was verified and accepted by then AO. Moreover, Jaycee Industries also responded to 10.11. In my considered view, once it is established that the amount towards share allotm assessment years and only allotment has been made in the Assessment Year under consideration, there is no question of any addition u/s 68 in the impugned AY. 2008 Hence, additions related to share monies and share premium, which were received in the form of loans in earlier assessment years i.e., in the cases of M/s Bandana Sangeet Paper Private Limited, M/s Bishnauth Tea Company Limited, M/s Bismarak Exim Private Limited, M/s MahacolTrexim Private Limited, M/s Brijdham Deve Private Limited, M/s Kilburn Engineering and M/s Naviplast commerce P.Ltd. will not survive. 10.12 As far as addition in respect of M/s Jaycee Industries Limited, I find that M/s Jaycee Industries Limited has replied to the notice of the AO. The AO given any reason for non the said company or detailed submissions made by the AO in the assessment proceedings. Once identity, creditworthiness and genuineness of transactions with M/s Jaycee Industries Limited are on the AO and he is required to make specific findings as to why share monies received from the said company should be treated as non related M/s Jaycee Industries. I find that similar sit exists for seven companies mentioned above. Considering the totality of the facts and umstance, in my considered view, entire addition of Rs. 3,13,35,000/ 10.11. In my considered view, once it is established that the amount towards share allotment were received in earlier assessment years and only allotment has been made in the Assessment Year under consideration, there is no question of any addition u/s 68 in the impugned AY. 2008 Hence, additions related to share monies and share which were received in the form of loans in earlier assessment years i.e., in the cases of M/s Bandana Sangeet Paper Private Limited, M/s Bishnauth Tea Company Limited, M/s Bismarak Exim Private Limited, M/s MahacolTrexim Private Limited, M/s Brijdham Deve Private Limited, M/s Kilburn Engineering and M/s Naviplast commerce P.Ltd. will not survive. 10.12 As far as addition in respect of M/s Jaycee Industries Limited, I find that M/s Jaycee Industries Limited has replied to the notice of the AO. The AO given any reason for non-acceptance of details provided by the said company or detailed submissions made by the AO in the assessment proceedings. Once identity, creditworthiness and genuineness of transactions with M/s Jaycee Industries Limited are established, the onus shifts on the AO and he is required to make specific findings as to why share monies received from the said company should be treated as non-genuine. There is no specific finding related M/s Jaycee Industries. I find that similar sit exists for seven companies mentioned above. Considering the totality of the facts and umstance, in my considered view, entire addition of Rs. 3,13,35,000/- under section 68 M/s Zarco Realties Pvt. Ltd.. ITA No. 1751/M/2022 6 10.11. In my considered view, once it is established that the ent were received in earlier assessment years and only allotment has been made in the Assessment Year under consideration, there is no question of any addition u/s 68 in the impugned AY. 2008-09. Hence, additions related to share monies and share which were received in the form of loans in earlier assessment years i.e., in the cases of M/s Bandana Sangeet Paper Private Limited, M/s Bishnauth Tea Company Limited, M/s Bismarak Exim Private Limited, M/s MahacolTrexim Private Limited, M/s Brijdham Developers Private Limited, M/s Kilburn Engineering and M/s 10.12 As far as addition in respect of M/s Jaycee Industries Limited, I find that M/s Jaycee Industries Limited has replied to the notice of the AO. The AO has not acceptance of details provided by the said company or detailed submissions made by the AO in the assessment proceedings. Once identity, creditworthiness and genuineness of transactions with M/s established, the onus shifts on the AO and he is required to make specific findings as to why share monies received from the said company should genuine. There is no specific finding related M/s Jaycee Industries. I find that similar situation exists for seven companies mentioned above. Considering the totality of the facts and umstance, in my considered under section 68 of the IT. Act will not survive as per the tests prescribed by various judic Hence, grounds of appeal no. 2 and 3 are Allowed. 7.1 Once the amount is not received in the year under consideration, there cannot be any sum found credited in the year under consideration as required for the p Act. Hence, the addition made by the Assessing Officer u/s. 68 of the Act in respect of M/s. Jaycee Industries Ltd. deserves to be deleted and accordingly, the dismissed. 8. In the result, the Order pronounced under Rule 34(4) of the ITAT Rules, 1963 on 30/12/2022. Sd/- (ABY T VARKEY JUDICIAL MEMBER Mumbai; Dated: 30/12/2022 Rahul Sharma, Sr. P.S. Copy of the Order forwarded to 1. The Appellant 2. The Respondent. 3. The CIT(A)- 4. CIT 5. DR, ITAT, Mumbai 6. Guard file. of the IT. Act will not survive as per the tests prescribed by various judicial authorities and deserved to be deleted. Hence, grounds of appeal no. 2 and 3 are Allowed. Once the amount is not received in the year under consideration, there cannot be any sum found credited in the year under consideration as required for the purpose of section 68 of the Act. Hence, the addition made by the Assessing Officer u/s. 68 of the Act in respect of M/s. Jaycee Industries Ltd. deserves to be deleted and accordingly, the ground of appeal of the revenu In the result, the appeal of the Revenue is dismissed. Order pronounced under Rule 34(4) of the ITAT Rules, 12/2022. Sd/ ABY T VARKEY) (OM PRAKASH KANT JUDICIAL MEMBER ACCOUNTANT MEMBER forwarded to : BY ORDER, M/s Zarco Realties Pvt. Ltd.. ITA No. 1751/M/2022 7 of the IT. Act will not survive as per the tests prescribed by ial authorities and deserved to be deleted. Hence, grounds of appeal no. 2 and 3 are Allowed.” Once the amount is not received in the year under consideration, there cannot be any sum found credited in the year urpose of section 68 of the Act. Hence, the addition made by the Assessing Officer u/s. 68 of the Act in respect of M/s. Jaycee Industries Ltd. deserves to be appeal of the revenue is is dismissed. Order pronounced under Rule 34(4) of the ITAT Rules, Sd/- OM PRAKASH KANT) ACCOUNTANT MEMBER BY ORDER, //True Copy// (Sr. Private Secretary) ITAT, Mumbai M/s Zarco Realties Pvt. Ltd.. ITA No. 1751/M/2022 8 (Sr. Private Secretary) ITAT, Mumbai
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