Income Tax Appellate Tribunal - Delhi
Brash Steels Pvt Ltd, Faridabad vs Ito Ward - 1(2), Faridabad on 17 August, 2021
IN THE INCOME TAX APPELLATE TRIBUNAL
DELHI BENCH, 'SMC-2': NEW DELHI
(Through Video Conferencing)
BEFORE SHRI R.K. PANDA, ACCOUNTANT MEMBER
ITA No.6181/Del/2019
Assessment Year : 2015-16
M/s Brash Steels Pvt. Ltd. Vs. ITO,
FF-9, Vishnu Place, Near Ward-1(2),
Neelam Flyover, Sector-20B, Faridabad,
Faridabad, Haryana-121002 Haryana-121002
PAN-AAFCB0204R
(Appellant) (Respondent)
Appellant by : Sh. Rajiv Saxena, Advocate
Respondent by : Sh. Farat Khan, Sr. DR
Date of hearing : 08.06.2021
Date of pronouncement : 17.08.2021
ORDER
This appeal filed by the assessee is directed against the order dated 29.03.2019 of the learned CIT(A), Faridabad, relating to Assessment year 2015-16.
2. Fact of the case, in brief, are that the assessee is a private limited company and filed its return of income on 10.09.2015, declaring total income of Rs.1,35,560/-. The Assessing Officer during the course of assessment proceedings, noted that the assessee company has received an amount of Rs.40,07,500/- as share premium during the year on 57250 shares at a premium of Rs.70/-. He noticed that the shares have been allotted on 31.03.2015 to the following companies:-
2 ITA No.6181/Del/2019
Name of Name of Nominal Premium Amount Total amt.
person shares value per per share of paid
share (Rs.) (Rs.) Premium including
(Rs.) premium (Rs.)
Best Buildmart 12500 10 70 875000 1000000
Pvt. Ltd.
Palani 7500 10 70 600000
Buikders Pvt.
Ltd.
Texcity 25000 10 70 2000000
Constructions
(Kovai) Pvt.
Ltd.
Lekh Nath 8625 10 70 690000
Pandey
Rishi Credit & 3625 10 70 290000
Industries Pvt.
Ltd.
Total 57250 4007500 4580000
3. The AO called for information u/s 133(6) from the above referred investors. Some of the investors responded by giving various details except Mr. Lekh Nath Pandey and M/s Best Buildmart Pvt. Ltd. From the perusal of the information, the Assessing Officer observed that the covering letter of all the companies is of same font and none of the companies have any telephone number against them. The financial statement of these companies indicate that these are shell companies and have no real business. The assessee also did not file the bank statement of the above companies. From the various details furnished by these companies, the AO noted that those details are of typical paper companies having no real business but only credit and equal amount of debit entries. He, therefore, was of the view that the credit worthiness and genuineness of the transactions remain highly suspicious. He, therefore, confronted the same to the assessee and asked it to substantiate the ingredients of section 68 of the IT Act. Rejecting the various explanations given by the assessee and following the decisions of the Hon'ble 3 ITA No.6181/Del/2019 Supreme Court in the case of CIT vs. Durga Prasad More reported in 82 ITR 540, McDowell & Co. Ltd. vs. CTO (1985) 154 ITR 148 and Sumati Dayal vs. CIT (1995) 214 ITR 802, the AO made addition of Rs.45,80,000/- to the total income of the assessee u/s 68 of the IT Act being the whole of share capital and share premium. While doing so, the AO further observed that since the addition on account of share premium and share capital has already been made u/s 68 of the Act, no separate addition is being made u/s 56(2)(viib) of the Act. While holding so, he rejected the calculation made by the assessee in terms of section 11UA for calculating the share premium on the ground that the company is not having any worth of receiving any share premium.
4. So far as the addition of Rs.45,80,000/- made by the Assessing Officer u/s 68 of the IT Act 1961 is concerned, the learned CIT(A) deleted the addition to the extent of Rs.22,90,000/- and sustained an amount of Rs.22,90,000/- by observing as under:-
"However, it is noted from the perusal of material on record that amount in reference of Rs.22,90,000/- has been received by the appellant during F.Y.2013-14 and shares have been allotted on the premium to the investors during the previous year under consideration. Thus, from the facts, it has been found that no credits have been introduced in the books of account of the appellant during the year under consideration for Rs.22,90,000/-. In the circumstances, it is held that no addition u/s 68 can be made out of opening balances for Asstt. Year 2015-16. Under the facts it is held that the Assessing Officer was not justified in making addition of Rs.22,90,000/- u/s 68 of the Act. The same is hereby deleted and addition of Rs.22,90,000/- is hereby confirmed u/s 68 of the Act real with proviso. Ground No.3 and additional ground are partly allowed."4 ITA No.6181/Del/2019
5. He however, enhanced the income of the assessee by a sum of Rs.40,07,500/- by invoking provisions of section 56(2)(viib) of the Act by observing as under:-
12.10 It has been found about that the identity, creditworthiness and genuineness of the share applicants has not been proved as required u/s 68 of the Act in this case. It is further noted that the appellant has justified the share premium on the basis of valuation report under Rule 11UA(2). The said valuation report for the shares as furnished by the appellant under Rule 11UA(2) has been perused. It is noted that the appellant in the said report for the DCF has considered cash flow from the equity for Rs.90 Lacs for the financial year 2015-16 relevant to Asstt. Year 2016-17. On this basis value of each share has been determined @ Rs.40/- per share. No corroborating details have been furnished to substantiate the cash flow of Rs. 90 Lacs from the equity for the F.Y. 2015-16. From the above facts it has been noted that the appellant has no business worth. There is no tangible business activity being carried out by the appellant since incorporation.
There are no fixed assets or any other intangible assets in possession of the appellant to justify such kind of cash flow in the subsequent years. In the absence of any business worth of the appellant, the reliance of the appellant on the valuation report for the premium charged of Rs.3G/- on each share under Rule 11UA does not carry any force. Such valuation report has been found without any basis and thus is rejected. Reliance is hereby placed upon the decision of Hon'ble ITAT Delhi in the case of Agro Portfolio Pvt. Ltd. vs. ITO 2018, 171/ITD/74 (Del). In the circumstances the appellant was required to substantiate the same and was further required to explain why the share premium charged should also not be considered as income of the appellant u/s 56(2)(viib) of the Act and accordingly income enhanced u/s 251(1) of the Act. In this regard, the appellant has furnished its reply on 14.03.2018. vide written submission dated 13 23.2019, as placed on record. The same has been perused. However, there is no new fact in addition to what has been discussed as above.
12.11 Thus it is noted that the valuation report furnished by the appellant u/s Rule 11UA(2) under the DCF method has been found to be suffering from defects. In the circumstances, after considering the detailed facts of the case as discussed above, the entire share premium received has been found without any concrete basis and bogus. Therefore, such share premium received by the appellant for Rs.4007500/- during the F.Y. 2014-15, relevant to A.Y. 2015- 16 is considered as income of the appellant as defined u/s 56(2)(viib) of the Act. Accordingly income of the appellant is enhanced by Rs.4007500/- for the A.Y. 2015-16 u/s 251(1) of the Act. It is found that the appellant has furnished inaccurate particulars of its income in respect of the amount of Rs.40,07,500/- in terms of section 271(l)(c) of the Act, therefore, penalty 5 ITA No.6181/Del/2019 proceedings u/s 271(l)(c) are being initiated for furnishing inaccurate particulars of the income on the above account. Accordingly,, notice u/s 274 read with section 271(l)(c) of the Act, is being issued separately to the appellant. The AO is directed to give appeal effect on this account and issue demand notice u/s 156 of the Act after computing tax and interest payable under relevant provisions of the Act.
6. Aggrieved with such order of the learned CIT(A), the assessee is in appeal before the Tribunal by raising the following grounds of appeal:-
i. The Ld. CIT(A) has erred in law as well as on facts in confirming the assessment framed by Ld. AO u/s 143(3) of the Income Tax Act' 1961.
ii. The Ld. CIT (A) has erred in law as well as on facts in confirming the addition of Rs. 22,90,000/- u/s 68 of the Act on account of alleged unexplained share premium and share capital.
iii. The Ld. CIT(A) has erred in law as well as on facts in enhancing the income of appellant assessee by sum of Rs. 40,07,500/- by invoking section 56(2)(viib) of the Act wherein rejecting the valuation method taken by appellant assessee.
iv. The Ld. CIT (A) has erred in law as well as on facts in enhancing the income of appellant assessee by not issuing valid show cause notice as mandated.
v. The Ld. CIT(A) has erred in law as well as on facts in confirming and enhancing the addition without giving cogent reasons and by recording incorrect facts and by disregarding the all the documentary evidences furnished by assessee.
vi. That, the appellant craves leave to add, alter, amend or withdraw all or any ground either before or during the hearing of these grounds.
7. The ld. Counsel for the assessee strongly challenged the order of the CIT(A) in upholding the addition of Rs.40,07,500/- lakh u/s 56(2)(viib) of the Act. Referring to the above provision which was inserted by the Finance Act, 2012 and as existed during the relevant assessment year, the ld. Counsel submitted that as per the said provision where a company receives any consideration for issue of shares that exceeds the face value of such shares, the 6 ITA No.6181/Del/2019 aggregate consideration received for such shares as exceeds the fair market value of the shares shall be taxable as income from other sources. Further, clause (a)(i) of Explanation provides that fair market value of the shares shall be the value as may be determined in accordance with such method as may be prescribed. He submitted that for the purpose of section 56(2)(viib) of the Act, the valuation of the shares has to be done in accordance with Rule 11UA of the Income Tax Rules. The ld. Counsel also referred to the provisions of Rule 11UA and submitted that as per the aforesaid Rules, the fair market value of unquoted equity shares for the purpose of sub-clause (i) of clause (a) of Explanation to clause (viib) of sub-section (2) of section 56 shall be determined under clause (a) or clause (b) at the option of the assessee. He submitted that as per clause (b) value has to be determined by the merchant banker as per Discounted Free Cash Flow method, whereas as per clause (a) the fair market value of unquoted equity shares shall be equal to:
Book value of Assets - Book Value of Liability x Total amount of paid up Paid up value of such shares equity share capital
8. He submitted that the assessee in the instant case has issued share capital @ 80 per share, i.e., face value of 10 + premium of 70 per share) as on 31.03.2015. He submitted that the value of each share was in accordance with Rule 11UA of the IT Rules and in support of value of each share the assessee had also furnished valuation certificate of a Chartered Accountant. The ld. Counsel drew the attention of the Bench to the following details/calculation:- 7 ITA No.6181/Del/2019
"Book value of Assets - Book value of liability x Total amount of paid up Paid up value of such shares equity share capital i.e., 1,88,83,443 - 45,67,232 x 10 17,55,000 = Rs.81.57/-
Book Value of assets as on 31.03.2014:
Cash and cash equivalent- Rs. 3,62,445/-
Short term loans and advances- Rs. 1,85,20,998/-
Total Rs. 1,88,83,443/-
Book value of liability as on 31.03.2014:
Trade Payables- Rs. 46,90,000/-
Other current liabilities- Rs. 1,655/-
Short term provisions for: Rs. (-)1,24,423/-
Total: Rs. 45,67,232/-
Paid Value of shares : Rs. 17,55,000/
Total amount of paid up equity share: Rs. 10/-
9. Referring to the above, he submitted that the aforesaid valuation was furnished before the AO to justify that the shares issued by the assessee was at fair market value which was computed in accordance with the Rule 11UA(2)(a) of the IT Rules, 1962. However, the AO arbitrarily rejected the valuation furnished by the assessee by holding that the assessee is not having any worth of receiving any share premium. He submitted that the AO has adopted the FMV of shares at Rs.10/- (at the face value) without appreciating the formula provided in Rule 11UA and has completely given a go by to the value of assets and liabilities shown in the balance sheet. He has not made any attempt to compute the value of shares of the assessee in accordance with Rule 11UA of IT Rules, 8 ITA No.6181/Del/2019 1962. He submitted that the adoption of the fair market value of shares @ Rs.10 per share as against Rs.82 per share as computed by the assessee without recourse to the formula as provided in Rule 11UA is unsustainable in law as for the purpose of section 56(2)(viib) of the Act, the fair market value of the shares has to be computed only in accordance with Rule 11UA. Further, the ld. CIT(A) without considering the statutory provision and without computing the fair market value of shares as per Rule 11UA, arbitrarily upheld the finding of the AO.
10. Referring to the order of the CIT(A) as well as the assessment order, the ld. Counsel submitted that none of the authorities below has found any fault in the computation of fair market value produced in the assessment proceedings.
Both the lower authorities have summarily rejected the computation on assumption and presumption and without any basis. Referring to various decisions, the ld. Counsel submitted that the addition u/s 56(2)(viib) of the Act can be made only on the ground that consideration for issue of shares exceeds the fair market value of the shares. However, what will be the fair market value of the shares, the statute has provided a mechanism under Rule 11UA and fair market value has to be determined only on that basis and not on assumption and presumption. He submitted that when the statute provides for a particular procedure, the authority has to follow the same and cannot be permitted to act in contravention of the same.9 ITA No.6181/Del/2019
11. So far as the decision relied on by the CIT(A) in the case of Agro Portfolio Pvt. Ltd. vs. ITO vide ITA No.2189/Del/2018, order dated 16th May, 2018 is concerned, he submitted that the facts of that case is clearly distinguishable as, in that case, the shares were valued on the basis of discounted cash flow method and the Tribunal noted that the assessee did not produce any evidence to substantiate the basis of projections of cash flow but relied on the valuer's report vehemently contending that such a report cannot be disturbed by the ld. AO and at no point of time the assessee tried to explain where did the ld. AO went wrong in his comments on the figures reflected in the above valuation report of the expert. The ld. Counsel submitted that since the assessee had issued shares at fair market value computed in accordance with Rule 11UA of the Rules, no fault has been found in the method applied by the assessee and the addition u/s 56(2)(viib) was made merely on assumptions and presumptions, therefore, the addition made by the AO and sustained by the CIT(A) being not in accordance with the law should be deleted. Referring to the decision of the Co-ordinate Bench of the Tribunal in the case of Mantaram Commodities (P) Ltd. vs ITO vide ITA No.6170/Del/2019, order dated 12.02.201, he submitted that under identical circumstances, the addition sustained u/s 56(2)(viib) has been deleted.
12. So far as the addition of Rs.22,90,000/- sustained by the learned CIT(A) u/s 68 of the Act is concerned, he submitted that the assessee has discharged the onus cast on it by proving the three ingredients of section 68 i.e. the identity and creditworthiness of the share applicants & genuineness of the 10 ITA No.6181/Del/2019 transaction. The share applicants have directly responded to the Assessing Officer in their response to notice u/s 133(6) of the Act. The addition was made basically on presumption & surmises and therefore, the same is liable to be deleted.
13. The ld. DR, on the other hand, heavily relied on the order of the CIT(A).
Referring to para 12.2 of the order of the CIT(A), the ld. DR drew the attention to the same which reads as under:-
"12.2 The valuation report for the shares as furnished by the appellant under Rule 11UA(2) has been perused. It is noted that the appellant in the said report has considered share premium of Rs.1,28,28,924/- as on 31.03.2014. From the above facts it has been noted that the appellant has no business worth. There is no tangible business activity being carried out by the appellant since incorporation. There are no fixed assets or any other intangible assets in possession of the appellant to justify such kind of cash flow in the prior years. In the absence of any business worth of the appellant, the reliance of the appellant on the valuation report for the premium charged of Rs.70/- on each share under Rule 11UA does not carry any force. Such valuation report has been found without any basis and thus, is rejected. Reliance is hereby placed upon the decision of Hon'ble ITAT Delhi in the case of Agro Portfolio Pvt. Ltd, vs. ITO 2018, 171/ITD/74 (Del). Therefore, in the absence of business worth of the appellant the reliance of the appellant on the valuation report for the premium charged of Rs.70/- on each share under Rule 11UA does not carry any force."
14. Referring to the above, he submitted that the ld.CIT(A) while sustaining the addition made u/s 56(2)(viib) has given justifiable reasons and, therefore, the same should be upheld.
14.1. So far as the addition u/s 68 of the Act submitted by the learned CIT(A) is concerned, he relied on the order of the learned CIT(A) 11 ITA No.6181/Del/2019
15. I have considered the rival arguments made by both the sides and perused the orders of the Assessing Officer and CIT(A) and the paper book filed on behalf of the assessee. I have also considered the various decisions cited before me. I find, the AO, in the instant case, made addition of Rs.48 lakhs u/s 68 of the IT Act on the ground that the assessee could not substantiate with evidence to his satisfaction regarding the credit worthiness of the share applicants and the genuineness of the transaction. The AO, further held that the assessee is not having any worth of receiving of share premium and the calculation made by the assessee in terms of Rule 11UA for calculating the share premium is to be rejected. Since the AO made addition u/s 68 of the Act, he did not make any separate addition u/s 56(2)(viib) of the IT Act. I find the ld.CIT(A) deleted the addition made by the AO u/s 68 of the IT Act to the extent of Rs.22,90,000/- and sustained the balance amount of Rs.22,90,000/-, the reasons of which already reproduced in the preceding paragraph. However, the ld.CIT(A) held that the assessee has no business worth and there is no tangible business activity being carried out by the assessee since incorporation. There are no fixed assets or any other intangible assets in possession of the assessee to justify the premium charged by the assessee on issue of shares. He, therefore, held that the reliance of the assessee on the valuation report for the premium charged at Rs.70/- on each share under Rule 11UA does not carry any force. Relying on the decision of the Hon'ble Delhi High Court in the case of Agro Portfolio Pvt. Ltd. vs. ITO, 12 ITA No.6181/Del/2019 171 ITD 74, the ld.CIT(A) held that the valuation report for the premium charged of Rs.70/- on each share under Rule 11UA does not carry any force.
16. It is the submission of the ld. Counsel for the assessee that for the purpose of section 56(2)(viib) of the Act the valuation of the shares has to be done in accordance with the Rule 11UA of IT Rules, 1962. As per the said Rule, the fair market value of unquoted equity shares for the purpose of sub-clause (i) of clause (a) of Explanation to clause (viib) of sub-section (2) of section 56 shall be determined under clause (a) or clause (b), at the option of the assessee. It is his submission that the assessee in the instant case has issued the share capital @ Rs.80 per share (face value of Rs.10 per share + premium at Rs.70 per share) as on 31.03.2015 and the valuation of each share was in accordance with Rule 11UA of the Act. It is also his submission that when the statute provides for a particular procedure, the authority has to follow the same and cannot be permitted to act in contravention of the same.
17. I find merit in the above argument of the ld. Counsel. The provisions of section 56(2)(viib) of the Act reads as under:-
"(viib) where a company, not being a company in which the public are substantially interested, receives, in any previous year, from any person being a resident, any consideration for issue of shares that exceeds the face value of such shares, the aggregate consideration received for such shares as exceeds the fair market value of the shares:
Provided that this clause shall not apply where the consideration for issue of shares is received--
(i) by a venture capital undertaking from a venture capital company or a venture capital fund; or 13 ITA No.6181/Del/2019
(ii) by a company from a class or classes of persons as may be notified by the Central Government in this behalf. Explanation.--For the purposes of this clause,--
(a) the fair market value of the shares shall be the value--
(i) as may be determined in accordance with such method as may be prescribed9; or
(ii) as may be substantiated by the company to the satisfaction of the Assessing Officer, based on the value, on the date of issue of shares, of its assets, including intangible assets being goodwill, know-how, patents, copyrights, trademarks, licences, franchises or any other business or commercial rights of similar nature, whichever is higher;
(b) "venture capital company", "venture capital fund" and "venture capital undertaking" shall have the meanings respectively assigned to them in clause (a), clause (b) and clause (c) of Explanation to clause (23FB) of section 10;"
17.1 Similarly, the provisions of Rule 11UA of the ITAT Rules, 1962 read as under:-
"(2) Notwithstanding anything contained in sub-clause (b) of clause (c) of sub-rule (1), the fair market value of unquoted equity shares for the purposes of sub-clause (i) of clause (a) of Explanation to clause (viib) of sub-section (2) of section 56 shall be the value, on the valuation date, of such unquoted equity shares as determined in the following manner under clause (a) or clause (b), at the option of the assessee, namely:--
the fair market value of unquoted equity (A-L)
(a) × (PV),
shares = (PE)
where,
A = book value of the assets in the balance-sheet as reduced by any amount of tax
paid as deduction or collection at source or as advance tax payment as reduced by the amount of tax claimed as refund under the Income-tax Act and any amount shown in the balance-sheet as asset including the unamortised amount of deferred expenditure which does not represent the value of any asset;
L = book value of liabilities shown in the balance-sheet, but not including the following amounts, namely:--
(i) the paid-up capital in respect of equity shares;
(ii) the amount set apart for payment of dividends on preference shares and equity shares where such dividends have not been declared before the date of transfer at a general body meeting of the company;
(iii) reserves and surplus, by whatever name called, even if the resulting figure is 14 ITA No.6181/Del/2019 negative, other than those set apart towards depreciation;
(iv) any amount representing provision for taxation, other than amount of tax paid as deduction or collection at source or as advance tax payment as reduced by the amount of tax claimed as refund under the Income-tax Act, to the extent of the excess over the tax payable with reference to the book profits in accordance with the law applicable thereto;
(v) any amount representing provisions made for meeting liabilities, other than ascertained liabilities;
(vi) any amount representing contingent liabilities other than arrears of dividends payable in respect of cumulative preference shares;
PE = total amount of paid up equity share capital as shown in the balance-sheet; PV = the paid up value of such equity shares; or
(b) the fair market value of the unquoted equity shares determined by a merchant banker as per the Discounted Free Cash Flow method."
18. A combined reading of section 56(2)(viib) read with Rule 11UA states that for the purpose of section 56(2)(viib) of the Act the valuation of the shares has to be done in accordance with Rule 11UA and the fair market value of unquoted equity shares for the purpose of sub-clause (i) of clause (a) of Explanation to clause (viib) of sub-section (2) of section 56 shall be determined under clause (a) or clause (b), at the option of the assessee. I find, in the instant case the assessee has valued its shares at Rs.81.57 as per the valuation certificate issued by the chartered accountant. Although the said valuation report was submitted before the AO to justify that the shares issued by the assessee was at fair market value and it was computed in accordance with Rule 11UA(a) of IT Rules, 1962, however, I find, the AO rejected the same holding that the assessee is not having any worth of receiving any share premium. He has ignored the various assets shown by the assessee in the balance sheet such as cash and cash equivalent of Rs.3,62,445/- and short-term loans and advances of 15 ITA No.6181/Del/2019 Rs.1,85,20,998/-. The AO did not apply the formula provided in Rule 11UA and did not make any attempt to compute the value of shares of the assessee in accordance with Rule 11UA of IT Rules, 1962 which has been upheld by the ld.CIT(A). In my opinion, when the statute provides for a particular procedure, the authority has to follow the same and cannot be permitted to act in contravention of the same. It has been held by Hon'ble Supreme Court in the case of A.K. Roy vs. State of Punjab AIR 1986 2160 that where a statute requires to do a certain thing in a certain way, the thing must be done in that way or not at all. Other methods or mode of performance are impliedly and necessarily forbidden.
19. So far as the decision of the Tribunal in the case of Agro Portfolio Private Ltd. (supra) relied on by the Ld. CIT(A) is concerned, the same in my opinion is not applicable to the facts of the present case. In that case, the shares were valued on the basis of discounted cash flow method and it was found by the Tribunal that the assessee did not produce any evidence to substantiate the basis of projections in cash flow but relied on the valuer's report contending that such a report cannot be disturbed by the AO and at no point of time the assessee tried to explain where did the AO went wrong in his comments in the figures reflected in the valuation report. However, in the instant case, the assessee has issued the shares at fair market value computed in accordance with Rule 11UA(a) of the IT Rules 1962 and no fault has been found in the method applied by the assessee 16 ITA No.6181/Del/2019 and the lower authorities have made the addition u/s 56(2)(viib) purely on presumptions and surmises. Therefore, in my considered opinion, such action of the lower authorities being not in accordance with law is unsustainable. I, therefore, set aside the order of the CIT(A) and direct the AO to delete the addition. The grounds raised by the assessee on this issue as per grounds of appeal no. 3 to 5 are accordingly allowed.
20. So far as ground of appeal no.2 is concerned, the same relates to the addition of Rs.22,90,000/- sustained by the learned CIT(A) u/s 68 of the Act. After hearing both sides, I find the assessee during the year has received share capital and share premium of Rs.45,80,000/- from various parties, the details of which are given by the learned CIT(A) at page 34 of his order which is as under:-
Name of allottees Date Net Amount Net Amount Page No. received during received in the year earlier years Best Buildmart Pvt. 16/01/2015 10,00,000 Ltd.
Palani Builders Pvt. 17/11/2014 6,00,000 Ltd. Taxcity 10/05/2013 20,00,000 Constructions (Kovai) Pvt. Ltd. Lekh Nath Pandey 16/01/2015 6,90,000 Rishi Credit & Industries Pvt. Ltd. Total 22,90,000
21. A perusal of the above shows that he has deleted the addition of Rs.22,90,000/- received by the assessee in the preceding year but sustained the 17 ITA No.6181/Del/2019 amount of Rs.22,90,000/- received by the assessee during the year. Thus, the amount sustained by the learned CIT(A) of Rs.22,90,000/- relates to three parties namely Best Buildmart Pvt. Ltd. of Rs.10,00,000/-, Palani Builders Pvt. Ltd.
Rs.6,00,000/- and Shri Lekh Nath Pandey Rs.6,90,000/-. A perusal of the assessment order shows that there was no response to notice issued u/s 133(6) of the Act to Sh. Lekha Nath Pandey (Rs.6,90,000/-) and Best Buildmart Pvt. Ltd. (Rs.10,00,000/-).
22. So far as the Palani Builders Pvt. Ltd. is concerned, it is noted that the said company had responded to the notice u/s 133(6) of the Act. The company has paid up capital of Rs.6.56 lakhs with share premium of Rs.1.28 Crores as on 31.03.2015. The assessee has filed all the requisite details to prove the identity and creditworthiness of the share applicants and genuineness of the transactions. Merely because the equivalent amount have been received before transferring the cheques in favour of the assessee leaving very petty balance in my opinion cannot be a reason for addition u/s 68 of the Act especially when the assessee has filed requisite details to prove the identity and creditworthiness of the said party and genuineness of the transaction and the said party had directly responded to notice issued u/s 133(6) of the Act by the Assessing Officer. Entire addition made by the Assessing Officer and sustained by the learned CIT(A) in this case is merely based on presumption and surmises. The various details furnished before the Assessing Officer were neither proved to be false or untrue. 18 ITA No.6181/Del/2019 I therefore direct the Assessing Officer to delete the addition of Rs.6,00,000/- in respect of M/s Palani Builders Pvt. Ltd.
23. So far as the share capital and share premium from Mr. Lekh Nath Pandey (Rs.6,90,000/-) is concerned, neither the said party responded to the notice u/s 133(6) of the Act nor the assessee filed any supportive documents and failed to explain to the satisfaction of the lower authorities. Similarly, in the case of M/s Best Buildmart Pvt. Ltd., the said party also did not respond to the notice u/s 133(6) of the Act issued by the Assessing Officer. Although the assessee had filed certain details/documents to substantiate the identity and creditworthiness of the above two parties and genuineness of the transaction, however, the fact remains that both the parties did not respond to the notice u/s 133(6) of the Act.
24. For explaining any cash credit as genuine, the onus is always on the assessee to substantiate with evidence to the satisfaction of the Assessing Officer regarding the identity and creditworthiness of the creditors/share applicants and the genuineness of the transactions. In the instant case, the assessee has failed to discharge the same in respect of the above two parties. Although some details were furnished before the Assessing Officer, they did not respond to the notice issued u/s 133(6) nor the assessee produced them before the Assessing Officer. Considering the totality of the facts of the case and in the interest of justice, I deem it proper to restore the issue relating to the share applicants in respect of M/s Best Buildmart Pvt. Ltd. and Shri Lekh Nath Pandey to the file of the Assessing Officer with a direction to give one more opportunity to the assessee 19 ITA No.6181/Del/2019 to substantiate with evidence to his satisfaction regarding the identity and creditworthiness of the above two share applicants and genuineness of the transaction. The Assessing Officer shall decide the issue as per fact and law after giving due opportunity of being heard to the assessee. I hold and direct accordingly. Ground no.2 filed by the assessee is accordingly partly allowed for statistical purpose.
25. Ground no. 1 and 6 being general in nature are dismissed.
26. In the result, the appeal filed by the assessee is partly allowed for statistical purpose.
Order pronounced in the open court on 17/08/2021
Sd/- Sd/-
(SUCHITRA KAMBLE) (R.K. PANDA)
JUDICIAL MEMBER ACCOUNTANT MEMBER
Delhi/Dated-17.08.2021
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Copy forwarded to: -
1. Appellant
2. Respondent
3. CIT
4. CIT(A)
5. DR, ITAT By Order
Assistant Registrar,
ITAT, Delhi