ITO WARD 21(1), New Delhi V. Rajdarbar Beverages Pvt Ltd, New Delhi

ITA 3709/DEL/2019

AI Insights

The case involves the Revenue's appeal against the CIT(A)'s decision to delete an addition made by the Assessing Officer regarding unexplained investments by Rajdarbar Beverages Pvt. Ltd. in unlisted equities during the Assessment Year 2015-16. The Assessing Officer had initially added Rs 1,82,00,000 as unexplained investment, questioning the identity and creditworthiness of the entities involved in the transactions. However, the CIT(A) found that the investments were returns from group companies and were properly documented. The Tribunal supported the CIT(A)'s decision, emphasizing the lack of adverse material from the Revenue to contest the findings.

• Counselvise Citation: [2023] 140 COUNSELVISE.COM (IT) 302746 (ITAT-DELHI)
• Duration Of Justice: 3 year(s) 9 month(s) 7 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 05-02-2023
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: F
• Next Hearing Date: 30-01-2023
• Assessment Year: 2015-2016
• Appeal Filed On: 28-04-2019
• Laws Referred To: Income Tax Act, 1961
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Keywords: Unexplained investment; Fair market value
• Section: 131; 143(1)

Judgement Text

INCOME TAX APPELLATE TRIBUNAL DELHI BENCH “F”: NEW DELHI BEFORE N.K. BILLAIYA, ACCOUNTANT MEMBER AND MS. ASTHA CHANDRA, JUDICIAL MEMBER ITA No. 3709/Del/2019 Asstt. Year: 2015-16 O R D E R PER ASTHA CHANDRA, JM The appeal filed by the Revenue is directed against the order passed by the Ld. Commissioner of Income Tax (Appeals)-7, New Delhi (“CIT(A)”) dated 27.02.2019 pertaining to Assessment Year (“AY”) 2015-16. 2. The Revenue has raised the following grounds of appeal:- "1. On the facts and circumstances of the case, the Ld. CIT(A) has erred in deleting the addition of Rs 1,82,00,000/- made by A.O. as unexplained investment in unlisted equities ignoring the facts that the identity and creditworthiness of entities from whom funds were taken to invest in unlisted equities during the financial year relevant to A.Y. 2015-16 were not established by the assessee company before the A.O. ” ITO, Ward- 21(1), New Delhi Vs. M/s. Rajdarbar Beverages Pvt.Ltd. 12, Ring Road, Lajpat Nagar-IV, New Delhi. PAN : AACCR4380D (Appellant) (Respondent) Assessee by: Shri Sudesh Garg, Adv. , Sh. Sahil Agarwal, CA & Sh. Utsav Garg, Adv. Department by : Shri Vivek Vardhan, Sr. DR Date of Hearing 31/01/2023 Date of pronouncement 06/02/2023 ITA No. 3709/Del/2019 ITO vs. Rajdarbar Beverages Pvt. Ltd. 2 3. The assessee is a private limited company incorporated on 16.05.2000.It e-filed its return for A.Y. 2015-16 on 24.10.2015 at nil income. The return was processed u/s 143(1) of the Income Tax Act, 1961 (the “Act”) on 05.11.2015. The case was selected for limited scrutiny due to large increase in investment in unlisted equities during the year. During assessment proceedings the Ld. Assessing Officer (“AO”) required the assessee to explain the source of amount invested in the shares of unlisted equities and Fair Market Value of the shares. The assessee explained that during the year it has purchased 2,80,000 shares of M/s. Spectrum Distributors Pvt. Ltd. for an amount of Rs. 1,82,00,000/- from M/s. Kashyap Properties Pvt. Ltd. The source of investment is amount of Rs. 42,56,000/- received from M/s. Rasaraj Sales Ltd. and amount of Rs. 1,39,44,000/- received from M/s. Gunvardhan Vyapaar Pvt. Ltd. It was further stated that amount of Rs. 42,56,000/- was received out of the amount of Rs. 84,64,000 given in financial year 2011-12 to M/s. Rasaraj Sales Ltd. and amount of Rs. 1,40,94,000/- given in financial year 2009-10 to M/s. Gunvardhan Vyapaar Pvt. Ltd. was received back from it in this year. The above payment was advanced by the assessee as investment in shares. Shares were, however, not allotted. It was further stated that the assessee has only one bank account with HDFC bank which was opened on 02.06.2014. Certain documents in support were also filed. The Ld. AO made further queries which were replied by the assessee. The assessee’s reply finds place in para 5 of the assessment order. It was explained, inter alia ITA No. 3709/Del/2019 ITO vs. Rajdarbar Beverages Pvt. Ltd. 3 that the assessee has its own share capital of Rs. 4.55 lakhs with reserve and surplus of Rs. 2.66 crores which is carried forward from the preceding year. The assessee has not borrowed any funds for purchase of equities during the year and has sufficient share capital and reserves to purchase the above shares. Certain more documents were also furnished. 4. The Ld. AO did not accept the explanation of the assessee for the reasons, among others, that though summons issued by him u/s 131 of the Act to the Principal Officers of M/s. Rasaraj Sales ltd. and M/s. Gunvardhan Vyapaar Pvt. Ltd. on 23.10.2017 at their given address were duly served but they did not respond. He therefore held that the assessee could not prove the identity, creditworthiness and genuineness of the transaction with M/s. Gunvardhan Vyapaar Pvt. Ltd. and M/s. Rasaraj Sales Ltd. during the year. Accordingly, he added the amount of Rs. 1,82,00,000/- as unexplained investment and completed the assessment on 19.12.2017 under section 143(3) of the Act. 5. Aggrieved, the assessee filed appeal before the Ld. CIT(A). During appellate proceedings the assessee furnished written submissions which has been reproduced by the Ld. CIT(A) in para 4.1 of his appellate order. The ld. CIT(A) made the following observations in para 4.4 and 4.5 of his order ; “4.4. During the year under consideration the appellant company received the aforesaid sum of Rs. 42,56,000/- & Rs. 1,39,44,000 from M/s Rasraj Sales Ltd. and M/s Gunvardhan Vyapaar (P) Ltd. on 26.03.2015. This is evidenced among others by following documents which were produced before the AO as placed in the paper book submitted at page no: ITA No. 3709/Del/2019 ITO vs. Rajdarbar Beverages Pvt. Ltd. 4 S. No. Documents Page No. 1. Copy of confirmation along with Bank Statement & ITR of M/s Rasraj Sales Ltd. 110-112 2. Copy of confirmation along with ITR of M/s Gunvardan Vyapaar (P) Ltd. 116-117 3. Copy of Bank Statement of M/s Rajdarbar Breverages (P) Ltd. for the period from 01.04.2014-31.03.2015 118 4.5 On the same date on which the aforesaid sum was received by the appellant company, it made investment in the shares of M/s Spectrum Distributors Pvt. Ltd. by way of purchase of shares of M/s Spectrum Distributors Pvt. Ltd. from M/s Kashyap Property Pvt. Ltd. (Now known as Rajdarbar Group Pvt. Ltd.). The transactions are evidenced by the following documents which were filed before the AO and placed in paper book: S. No. Documents Page No. 1. Copy of Bank Statement of M/s Rajdarbar Breverages (P) Ltd. for the period from 01.04.2014-31.03.2015 118 2. Copy of confirmation along with Bank Statement & ITR of M/s Kashyap Property (P) Ltd. 129-131 5.1 In para 4.7 of his order, the Ld. CIT(A) has recorded his findings and deleted the impugned addition. Para 4.7 is reproduced below : “4.7 The source of investment during the year is from the funds received in return from group companies only which was invested earlier in 2009 and 2011. The flow of funds is supported by entries in book statements and reflected in Balance sheets of the respective companies. The fact that there were inter corporate adjustments between group companies routed through bank accounts and Balance sheets is not disputed. These are group concerns and non-compliance to summons is not basis for the addition. In view of the above, the disallowance of Rs.1,82,00,000/- made by the AO is directed to be deleted. These grounds of appeal are ruled in favour of the appellant” ITA No. 3709/Del/2019 ITO vs. Rajdarbar Beverages Pvt. Ltd. 5 6. The Revenue is dissatisfied and is before the Tribunal with its only ground relating thereto. 7. The Ld. DR supported the order of the Ld. AO and drew our attention to the observations and findings recorded by the Ld. AO in paras 7.1, 7.2 and 7.3 of his assessment order. The Ld. AR, on the other hand submitted that the transaction is between group entities. Both the entities is question are group NBFCs. Their existence at the given address is proved by the service of summons issued to them by the Ld. AO under section 131 of the Act. Both the entities have confirmed the transactions and in support submitted their bank statements and ITRs. He strongly supported the order of the Ld. CIT(A). 8. We have given our careful thought to the rival submissions of the parties and perused the record. The assessment order itself reveals that the assessee submitted before the Ld. AO confirmed copy of account of both the parties, namely M/s. Rasaraj Sales Ltd. and M/s. Gunvardhan Vyapaar Pvt. Ltd. and stated that both are group entities of the assessee company and furnished their complete address. In fact, the Ld. AO himself says that the summons issued by him to both the concerns u/s 131 of the Act were served at the given address. Therefore, identity of the concerns from which the assessee received the amount of Rs. 42,56,000/- and Rs. 1,39,44,000/- utilised towards purchase of 2,80,000 shares of M/s. Spectrum Distributors Pvt. Ltd. cannot be doubted. Balance sheet of these concerns for the year indicating their high networth was placed on record establishing their ITA No. 3709/Del/2019 ITO vs. Rajdarbar Beverages Pvt. Ltd. 6 creditworthiness. The shares were purchased by the assessee from M/s. Kashyap Property Pvt. Ltd. (now known as Rajdarbar Group Pvt. Ltd.). Documentary evidence, namely copy of bank statement of M/s. Rajdarbar Beverages (P) Ltd. for the period from 01.04.2014 to 31.03.2015 as also copy of confirmation along with bank statements and ITR of M/s. Kashyap Property (P) Ltd. was filed before the Ld. AO to prove the genuineness of the transaction. The Ld. CIT(A) has recorded finding of fact that amount of Rs. 42,56,000/- was received out of the amount of Rs. 84,64,000/- given in financial year 2011-12 to M/s. Rasaraj Sales Ltd. and the amount of Rs. 1,40,94,000/- given in financial year 2009-10 to M/s. Gunvardhan Vyapaar Pvt. Ltd. was received back from it in this financial year. The above payment was advanced by the assessee company as investment in shares which were, however not allotted. These findings could not be controverted by the Revenue by bringing on record any adverse material either before the Ld. CIT(A) or before us. We, therefore, endorse the findings of the Ld. CIT(A) and reject the ground taken by the Revenue before us. 9. In the result, appeal of the Revenue is dismissed. Order pronounced in the open court on 6 th February, 2023. sd/- sd/- (N.K. BILLAIYA) (ASTHA CHANDRA) ACCOUNTANT MEMBER JUDICIAL MEMEBR Dated: 06/02/2023 Copy forwarded to- 1. Applicant 2. Respondent ITA No. 3709/Del/2019 ITO vs. Rajdarbar Beverages Pvt. Ltd. 7 3. CIT 4. CIT (A) 5. DR:ITAT ASSISTANT REGISTRAR ITAT, New Delhi 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