M/S. KVN AUTO ENGINEERING (P) LTD.,NEW DELHI V. ITO- 1(2), HALDWANI

ITA 6446/DEL/2016

AI Insights

The case involves KVN Auto Engineering (P) Ltd., which appealed against the order of the Commissioner of Income Tax (Appeals), Haldwani, for the assessment year 2012-13. The primary contention was regarding the addition of Rs.3.30 crores as share capital and share premium, which the Assessing Officer (AO) and CIT(A) deemed bogus. The assessee admitted to window dressing the balance sheet to secure higher bank credit, which involved inflating share capital and corresponding assets. The Tribunal found that once the entries on the asset side were accepted as bogus, the corresponding entries on the liability side should also be considered as such, leading to the deletion of the addition of Rs.3.30 crores.

• Counselvise Citation: [2025] 140 COUNSELVISE.COM (IT) 298799 (ITAT-DEHRADUN)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 21-02-2025
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: DB
• Assessment Year: 2012-2013
• Other Referred Cases: DCIT vs. M/s Galss Tech India, ITO vs. Zexus Air Services (P.) Ltd., Rich Paints Ltd. ITO, ACIT vs. Shri Suren Goel, ITO vs. V.R. Global Energy (P.) Ltd.
• Laws Referred To: Income Tax Act, 1961
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: AMAR PAL SINGH; THROUGH VC
• Assessee Lawyers: RAKESH GUPTA
• Keywords: Depreciation; Wrong claim; Bogus
• Section: 68; 69A

Judgement Text

"आयकर अपीलीय अिधकरण देहराद ून पीठ “डीबी”, देहराद ून ŵी िवकास अव̾थी, Ɋाियक सद˟ एवं ŵी अवधेश क ुमार िमŵा, लेखाकार सद˟ क े समƗ IN THE INCOME TAX APPELLATE TRIBUNAL DEHRADUN BENCH “DB”, DEHRADUN (THROUGH VIRTUAL HEARING) BEFORE SHRI VIKAS AWASTHY, JUDICIAL MEMBER & SHRI AVDHESH KUMAR MISHRA, ACCOUNTANT MEMBER आअसं.6446/िदʟी/2016(िन.व. 2012-13) ITA No.6446/DEL/2016(A.Y.2012-13) KVN Auto Engineering (P). Ltd., Plot No. 62, Ramji Vihar, Near Transport Nagar, Haldwani, Uttarakhand PAN: AADCK-9080-A ...... अपीलाथᱮ/Appellant बनाम Vs. Income Tax Officer-1(2), Haldwani, Uttarakhand ..... ᮧितवादी/Respondent अपीलाथŎ Ȫारा/ Appellant by : Dr. Rakesh Gupta, Advocate ŮितवादीȪारा/Respondent by : Shri Amar Pal Singh, Sr. DR (Through VC) सुनवाई कᳱ ितिथ/ Date of hearing : 11/02/2025 घोषणा कᳱ ितिथ/ Date of pronouncement : : 21/02/2025 आदेश/ORDER PER VIKAS AWASTHY, JM: This appeal by the assessee is directed against the order of Commissioner of Income Tax (Appeals), Haldwani (hereinafter referred to as 'the CIT(A)') dated 26.10.2016, for assessment year 2012-13. 2. The assessee in appeal has raised as many as eight grounds. The gist of grounds raised in appeal is ad under: 2 ITA NO.6446/DEL/2016 (A.Y.2012-13) (i) In ground no. 1 and 2 of appeal, the assessee has assailed addition of Rs.3,30,00,000/- u/s. 68 of the Income Tax Act,1961(hereinafter referred to as ‘the Act’) (ii) Ground no. 3 and 4 of appeal are in respect of addition of Rs.61,00,000/- u/s. 69A of the Act on account of cash deposits in cash credit loan account. (iii) Ground no. 5 of appeal, the assessee has assailed addition of Rs.40,000/- on account of alleged difference in loan account. (iv) Ground no. 6 & 7 of appeal are in respect of disallowance of Rs.16,82,240/- on account of depreciation on plant & machinery. (v) Ground no. 8 of appeal is general in nature. 3. Dr. Rakesh Gupta, appearing on behalf of the assessee submits that he would be pressing only ground no. 1 & 2 of appeal i.e. qua addition of Rs.3.30 crores u/s. 68 of the Act made by Assessing Officer (AO) and confirmed by the CIT(A). The ld. Counsel submits that addition has been made on account of bogus share capital and share premium received from various persons. Narrating facts of the case, he submitted that the Chartered Accountant of assessee has window dressed the balance sheet for obtaining higher credit facilities from the bank had shown share capital and share premium to the tune of Rs.3,30,00,000/- whereas in actual no share capital was received by the assessee/appellant. It was merely a book entry this fact was admitted by auditors of the company and MD before the AO. The Assessing Officer forwarded the bank details received from assessee from where alleged share capital/share premium was received. The AO has mentioned 3 ITA NO.6446/DEL/2016 (A.Y.2012-13) the fact in assessment order that banks have confirmed that neither there was such branch or bank account number wherefrom alleged share capital was received by the assessee. The assessee had made corresponding entries on assets sides of Balance Sheet as Plant and Machinery which were in fact never purchase by the assessee. The assessee had claimed depreciation on such non-existing plant and machinery, the same was disallowed by the AO on statement made by the assessee. Once the claim of depreciation has been disallowed by the AO, on the ground that there is no such plant and machinery, no addition was warranted in respect of share capital and share premium. The AO and the CIT(A) should either have believed entire statement made by the assessee or should have rejected statement in whole. He finally submitted that in facts of the case, no addition on account share capital and share premium could have been made by the AO. To support his contentions, he placed reliance on the following decisions to contend that where the balance sheet was window dressed for obtaining higher banking facilities, no addition could have been made under the provisions of the Act: (i) DCIT vs. M/s Galss Tech India, ITA No. 6241/2017, dated 25.03.2022 (Del.); (ii) ITO vs. Zexus Air Services (P.) Ltd. (2021) 189 ITD 434 (Del.); (iii) Rich Paints Ltd. ITO, (2021) 199 DTR 249 (Ahd); and (iv) ACIT vs. Shri Suren Goel, ITA No. 1767/2011, dated 01.12.2011 (Del.). He finally submitted that entries in books of account do not create any income. To buttress his argument; he placed reliance on the decision in the case of ITO vs. V.R. Global Energy (P.) Ltd., (2020) 268 taxmann.com 392 (SC.). 4 ITA NO.6446/DEL/2016 (A.Y.2012-13) 4. Per contra, Shri Amar Pal Singh representing the department vehemently defended the order of CIT(A) and the AO. The ld. DR submits that a perusal of Audited balance sheet of the assessee shows that there is increase of share capital and share premium to the extent of Rs.3.30 crores. The explanation furnished by the assessee is merely an afterthought. He thus, prayed for upholding the impugned order and dismissing appeal of the assessee. 5. Both sides heard, orders of the authorities below examined. The solitary issue assailed by the assessee in appeal is the addition of Rs.3.30 crores u/s. 68 of the Act on account of share capital and share premium. During assessment proceedings, the AO questioned increase in share capital and share premium to the extent of Rs.3,30,00,000/-. The assessee was asked to furnish details of subscribers to prove genuineness of the said transactions and creditworthiness of subscribers. Notices sent by the Assessing Officer to the alleged subscribers of share were received back un-served. The AO made inquiries from the banks. The banks confirmed that the details of bank accounts were not genuine. Even confirmations from the so called subscribers and the statement of their bank accounts were found not to be genuine. Hence, the AO made addition of share capital and share premium of Rs.3.30 crores u/s. 68 of the Act. During First Appellate proceedings, the Chartered Accountant of the assessee Shri Saurabh Bhardwaj filed an affidavit before the CIT(A) stating that to secure higher bank credit facilities, the balance sheet of company was window dressed Rs.3.30 crores was added on both sides of Balance Sheet. On liabilities side Rs.3.30 crores was increased on account of share capital and share premium and on the assets sides equal value of plant and machinery was increased. We find that the CIT(A) deleted addition of bogus claim of deprecation, whereas confirmed the addition 5 ITA NO.6446/DEL/2016 (A.Y.2012-13) in respect of bogus entry of share capital and share premium. Once it is established that the increase in assets and liabilities in the balance sheet is on account of bogus entries, the statement with regard to bogus entries on the asset sides having been accepted corresponding effect on the liability side should also have been given. The affidavit sworn by Chartered Accountant of the assessee is either have to be accepted in whole or rejected in toto. Once it is accepted that there were bogus entries on the assets side and corresponding entire on the liability side should also have been accepted. Taking into consideration entire facts of the case, the addition of Rs.3.30 crores made on account of bogus share capital and share premium is deleted. 6. Before parting with the order we would like to observe that the addition is deleted under the provisions of Income Tax Act, however, we do not subscribe to the unscrupulous method adopted by the assessee for obtaining higher credit facilities from the bank by window dressing balance sheet. The conduct of the assessee is deplorable. 6. As regards ground no. 3 to 7 of appeal, since, no submissions were made by the Counsel for the assessee, Hence, the same are dismissed. 7. In the result, appeal of the assessee is partly allowed. Order pronounced in the open court on Friday the 21st day of February, 2025. Sd/- Sd/- (AVDHESH KUMAR MISHRA) (VIKAS AWASTHY) लेखाकार सद᭭य/ACCOUNTANT MEMBER ᭠याियक सद᭭य/JUDICIAL MEMBER िदʟी / Delhi, ᳰदनांक/Dated 21/02/2025 6 ITA NO.6446/DEL/2016 (A.Y.2012-13) NV/- ᮧितिलिप अᮕेिषतCopy of the Order forwarded to : 1. अपीलाथᱮ/The Appellant , 2. ᮧितवादी/ The Respondent. 3. The PCIT/CIT(A) 4. िवभागीय ᮧितिनिध, आय.अपी.अिध. देहरादून /DR,ITAT,Dehradun 5. गाडᭅ फाइल/Guard file. BY ORDER, //True Copy// (Dy./Asstt. Registrar) ITAT, Delhi "