Income Tax Appellate Tribunal - Mumbai
Aakash Universal Limited ( Merged ... vs Income Tax Officer Ward 13(3)(1), ... on 13 May, 2025
IN THE INCOME TAX APPELLATE TRIBUNAL
"A" BENCH MUMBAI
BEFORE HON'BLE SHRI SANDEEP GOSAIN, JUDICIAL MEMBER &
HON'BLE SHRI PRABHASH SHANKAR, ACCOUNTANT MEMBER
ITA No. 1197/Mum/2025
(Assessment Year: 2010-11)
Aakash Universal Ltd Vs. ITO, ward 13(3)(1)
(Merged entity Rajkiran 261, Aayakar Bhavan,
Textiles Pvt Ltd) Maharishi Karve Road,
15A, Bharat Insurance Bldg, Mumbai - 400 020.
3rd Floor, Horniman Circle,
Fort, Mumbai - 400 001.
PAN/GIR No. AAACA9755H (AAACR2245R)
(Applicant) (Respondent)
Assessee by Shri Vimal Punmiya
Revenue by Shri Ram Krishn Kedia, Sr. DR
Date of Hearing 07.04.2025
Date of Pronouncement 13.05.2025
आदे श / ORDER
PER SANDEEP GOSAIN, JM:
The present appeal has been filed by the assessee challenging the impugned order dt. 19.01.2024 passed u/s 250 of the Income Tax Act, 1961 ('the Act'), by the National Faceless Appeal Centre, Delhi / CIT(A), for the A.Y 2010-
11.
2. First of all we take up Ground No.2, this ground No. 2.1 to 2.4 are interrelated and interconnected to 2 ITA No. 1197/Mum/2025 Akash Universal Ltd, Mumbai challenging the order of Ld. CIT(A) in confirming the additions made by AO u/s 68 of the Act. Therefore we have decided to take up all the grounds together and to adjudicate the same through the present consolidated order.
3. Ld. AR appearing on behalf of the assessee reiterated the same arguments as were raised by him before the revenue authorities and further relied upon his written submissions which are reproduced herein below:
• The Appellant, M/s Rajkiran Textiles Pvt. Ltd. is intended to enter into the business of property during the year under assessment f iled the return of income on 10-12-2010 declaring Loss of Rs.28,419/- which was processed u/s 143(1) of the Income Tax Act, 1961 (the Act).
• The case was reopened u/s 147 of the Act by issuing notice u/s 148 of the Act on 22.03.2016 and as required by assessing officer vide notice issued u/s 143(2) and 142(1) of the Act from time to time, the Appellant f iled all the details as and when demanded by the Assessing Officer (AO). • The order u/s 143(3) r.w.s 147 of the Act was passed on 27- 12-2016 of the Act by adding a sum of Rs.2,50,00,000/- to the income of the Appellant, which was received by the Appellant towards the allotment of shares from various parties at a premium of Rs.990/- per share, on the ground that the purported share application money of Rs.2,50,00,000/-were treated as a cash credits in the books of the assessee company, whose nature and source is not explained and, therefore, deemed to be the assessee's income as envisaged in Section 68 of the Income Tax Act, 1961, without considering the details furnished by the parties in response to notices issued to them u/s 133(6) of the Act • As mentioned in the order that in case of four parties, three notices were returned with remark moved, these were never informed to the Appellant by the AO. The two parties in case of 3 ITA No. 1197/Mum/2025 Akash Universal Ltd, Mumbai notices returned unserved, the addresses of the parties have changed and are available at new addresses. However, the Appellant submitted copies of share application, copy of bank statements and copies of balance sheets of all the parties to whom the shares were allotted including these two parties where notice returned unserved.
• For that on the facts and in the circumstances of the case, the Appellant never received any show cause notice mentioned in the order and the learned assessing officer was highly unjustified in completing the assessment without considering the facts of the case and ignoring the submissions made by the Appellant.
• Aggrieved from the above assessee preferred and appeal before NATIONAL FACELESS APPEAL CENTRE (NFAC) and NFAC erred in confirming the addition made by Ld.Assessing officer. • Further aggrieved from the above assessee preferred this appeal before HON'BLE ITAT raising following grounds of appeal :
Grounds of Appeal
1. FIRST GROUND OF APPEAL: - Order Bad in Law and on Facts 1.1. The order passed by the Learned Commissioner of Income Tax (Appeals) (hereinafter referred to as (CIT(A)) u/s 250 of the Income- tax Act, 1961 (the Act) is bad in law and on facts. 1.2. The Appellant merged with Aakash Universal Limited (PAN:
AAACA9755H) vide National Company Law Tribunal order 31 October 2023 and the Appellant is no more an existing entity and the learned CIT(A) has erred in passing an order on a non existing entity
2. SECOND GROUNDS OF APPEAL: - ERRONEOUS CONFIRMATION OF UNEXPLAINED CASH CREDIT U/S 68 Of the Act 2.1. The learned (CIT(A)) has erred in confirming the order of Assessing Officer (AO), by confirming the addition of Rs.
25,000,000/- without considering the facts.
4 ITA No. 1197/Mum/2025Akash Universal Ltd, Mumbai 2.2. The learned CIT(A) has erred in upholding the addition u/s 68 of the Act, being amount received on issue of shares on premium without appreciating the details submitted by the Appellant:
2.3. The learned CIT(A) failed to consider the f act that the premium on the shares allotted was determined by the Management af ter considering various factors like future capital value and future profitability of the project the Appellant.
2.4. The learned CIT(A) erred to consider the identity, genuineness and creditworthiness of the allottees of the shares at premium
3. THIRD GROUNDS OF APPEAL:
3.1. The Appellant craves to leave to add, amend and/or alter all or any of the above Grounds of Appeal before or at any time of hearing of this Appeal.
2. SECOND GROUNDS OF APPEAL: - ERRONEOUS CONFIRMATION OF UNEXPLAINED CASH CREDIT U/S 68 Of the Act 2.1. The learned (CIT(A)) has erred in confirming the order of Assessing Officer (AO), by confirming the addition of Rs. 25,000,000/- without considering the facts. 2.2. The learned CIT(A) has erred in upholding the addition u/s 68 of the Act, being amount received on issue of shares on premium without appreciating the details submitted by the Appellant:
2.3. The learned CIT(A) failed to consider the f act that the premium on the shares allotted was determined by the Management af ter considering various factors like future capital value and future profitability of the project the Appellant. 2.4. The learned CIT(A) erred to consider the identity, genuineness and creditworthiness of the allottees of the shares at premium During the year, the appellant company has issued shares at premium to the following companies :
• In view of the aforesaid details, the Appellant submits that all the Investor companies have positive net worth and have only invested on an average 3.37% of their net worth in the Appellant.5 ITA No. 1197/Mum/2025
Akash Universal Ltd, Mumbai Hence, the creditworthiness of the Investor companies cannot be doubtful.
• The Ld. Assessing officer noted that
a) There was always nominal bank balance in their bank account.
b) There were immediate deposits in their bank account before investing into share application money of the appellant company.
c) None of the parties have enough credit worthiness as most of the share applicants are showing negligible income and they don't have accumulated profits.
• Accordingly , the LD AO treated share capital and share moneyas unexplained cash credit u/s 68 of the Act and made an addition of Rs.2,50,00,000/-
1. During the course of assessment proceedings, the Ld. Assessing Officer has asked the appellant to submit the documentary proof and evidences to substantiate the Creditworthiness of the parties who have subscribed to the shares of the appellant.
2. In response to this, appellant has submitted the following documents to prove the Identity, Creditworthiness and Genuineness of the above share transaction even though the appellant was not required to prove :
To prove the identity, appellant has submitted the addresses, PAN, certif icate of incorporation, Memorandum and Articles of Association of the above subscribers who have subscribed to the shares.
To prove the creditworthiness of the subscribers, appellant has submitted the certificate of source of fund, Balance Sheet, Profit & Loss a/c and Return of Income ofshare applicants.
To prove Genuineness of above share transaction, appellant has submitted :
a) Copy of Bank Statement of M/s Rajkiran Textiles Pvt. Ltd.
b) Copy of Share Certif icate Counterfoil 6 ITA No. 1197/Mum/2025 Akash Universal Ltd, Mumbai
c) Copy of Extract of Statement showing no. of parties along with the amount received as share application money during AY 10-11 along with board resolution
d) Copy of Source of Funds Certificate
e) Copy of ITR Acknowledgement
f) Copy of Audit Report along with Balance Sheet
g) Copy of Certif icate of Incorporation
h) Copy of Memorandum & Articles of Association
i) Company Master Data showing status active
3. The Learned AO added the share application money amounting to Rs. 2,50,00,000/- received from the above Investors under section 68 of the Act on the alleged ground that it is unexplained cash credit.
At the outset, the Appellant would like to draw Your Honour's kind attention to the text of Section 68 of the Act that reads as under:
"68.Where any sum is found credited in the books of an assessee maintained for any previous year, and the assessee offers no explanation about the nature and source thereof or the explanation offered by him is not, in the opinion of the Assessing officer, satisfactory, the sum so credited may be charged to income-tax as the income of the assessee of that previous year."
From a reading of the above section, it is evident that the assessee should be able to provide satisfactory explanations about the sum found to be credited in the books of the assessee. It is a fairly settled legal position held by various decisions discussed subsequently that if the assessee proves the following things then the addition under section 68 of the Act cannot be made:
I. Identity of the shareholder;
II. Genuineness of the transaction; III. Credit worthiness of the shareholder Your honor can refer the page nos.21-218 of the Paper Book; the details in length were submitted.Each &every share applicant has confirmed the transaction with the 7 ITA No. 1197/Mum/2025 Akash Universal Ltd, Mumbai appellant company. Therefore, the findings given by the Ld. AO were in contradiction of section 68 of the Act.
1. By submitting the above details, the appellant has discharged his primary onus of proving the Share Transaction as genuine Transaction. However, the Ld. Assessing Officer without considering the facts and circumstances of the case erred in making addition of Rs. 2,50,00,000/- being the amount received towards share capital and share premium u/s. 68 as Unexplained Cash Credit without having any jurisdiction.
2. Merely because, some of the share applicants
(i) were operating from same address,
(ii) invested from capital or borrowed fund
(iii) having low profit
(iv) maintain nominal balance in bank account , It cannot be a reason for disallowance and hence the Ld. AO has taken wrong inference of the transaction.Further, whether those companies were engaged in substantial business activities or not that was not the look out of the appellant company.
All the share applicants have enough funds to invest into the appellant company.The factual position is verifiable from the copies of balance sheet filed before your honor.
3. After going through the above chart, your honor may appreciate the fact that the share applicants had enough amounts to invest into the shares of the appellant company. And therefore, the question of creditworthiness does not arise at all.In view of the above mentioned chart, we would request your honor to distinguish the finding of the Ld. AO.
4. The additions or dis-allowances under the income tax act were governed by the specific provisions of the act and not on assumption or presumption or on human probabilities test.
5. The confirmation of share applicants, copy of acknowledgement of return of income, audit report, board resolution and compliance under the companies act duly proves the transactions were genuine and there were no infringement of any law.
In view of the above facts and contention, we would also like to place reliance on the following judicial precedents 8 ITA No. 1197/Mum/2025 Akash Universal Ltd, Mumbai wherein the addition under section 68 of the Act on account of share application money was duly deleted by the Hon'ble Supreme Court, High Court and Tribunal A. Bharat Securities (P.) Ltd Vs. PCIT [2020] 113 taxmann.com 32 (SC) order passed on 11th September, 2019 in assessee'sfavour. Held that once genuineness, creditworthiness and identity of investors are established, no addition could be made as cash credit on ground that shares were issued at excess premium B. Rohtak Chain Co. (P.) Ltd vs. PCIT [2019] 110 taxmann.com 59 (SC) order passed on 5th August, 2019 in assessee'sfavour.
Held that once genuineness, creditworthiness and identity of investors were established, no addition could be made as cash credit on ground that shares were issued at excess premium C. PCIT vs. Chain House International (P) Ltd [2019] 103 taxmann.com 435 (SC)order passed on 18th Februrary, 2019 in assessee'sfavour. It was held that No reason to interfere. SLP dismissed. High Court held there is no limitation on the amount of premium that can be charged. The AO cannot question the transaction merely because he thinks the investor could have managed by paying a lesser amount as share premium. It is the prerogative of the Board of Directors to decide the premium and it is the wisdom of the shareholder whether they want to subscribe to shares at such a premium or not. S. 68 does not apply as the funds were received through banking channels and the identity, creditworthiness and genuineness of the investors was established BOMBAY HIGH COURT :-
PCIT Vs. Ami Industries (India) P Ltd Income Tax Appeal No. 1231 of 2017 order passed on 29th January, 2020 in assessee'sfavour.
In NRA Iron & Steel (P) Ltd (supra), the Assessing Officer had made independent and detailed inquiry including survey of the 9 ITA No. 1197/Mum/2025 Akash Universal Ltd, Mumbai investor companies. The field report revealed that the shareholders were either non-existent or lacked credit- worthiness. It is in these circumstances, Supreme Court held that the onus to establish identity of the investor companies was not discharged by the assessee. The aforesaid decision is, therefore, clearly distinguishable on facts of the present case. Held that identity of the creditors were not in doubt. Assessee had furnished PAN, copies of the income tax returns of the creditors as well as copy of bank accounts of the three creditors in which the share application money was deposited in order to prove genuineness of the transactions. In so far credit worthiness of the creditors were concerned, Tribunal recorded that bank accounts of the creditors showed that the creditors had funds to make payments for share application money and in this regard, resolutions were also passed by the Board of Directors of the three creditors.
Baba Bhootnath Trade & Commerce Ltd vs. ITO (ITAT Kolkata)I.T.A. No.1494/Kol/2017 in Assessee'sfavour. It was held that the judgement in PCIT vs. NRA Iron & Steel 103 TM.com 48 (SC) is distinguishable on facts & does not apply to a case where the assessee has discharged its onus to prove the identity, creditworthiness and genuineness of the share applicants by producing the PAN details, bank account statements, audited financial statements and Income Tax acknowledgments and the investors have shown the source of source & personally appeared before the AO in response to s. 131 summons SN CITATION OBSERVATIONS
1. In the case of INCOME TAX: Where High Principal Court upheld Tribunal's Commissioner of order deleting addition Income-tax, made under section 68 in Central-1 respect of share v.Adamine application money received 10 ITA No. 1197/Mum/2025 Akash Universal Ltd, Mumbai Construction (P.) by assessee on ground that Ltd. before assessee had brought on SUPREME COURT record sufficient OF documentary evidence to INDIASPECIAL prove identity and LEAVE PETITION creditworthiness of share (CIVIL) DIARY applicants, SLP filed NOS. 29917 OF against said order was to 2018 be dismissed Section 68 of the Income-tax Act, 1961 - Cash credits (Share capital) - Assessment year 2008 09 - During relevant year assessee received share application money from share applicants Assessing Officer doubting identity and creditworthiness of those applicants, added said amount to assessee's income under section 68 -
Tribunal, however, deleted addition made by Assessing Officer - High Court noted that both assessee and later share applicants upon receiving notice under section 131, had produced documentary proof -
Documents so produced
included assessments and
returns filed by share
applicants as well as
confirmation and
acknowledgment documents - According to High court, if Assessing Officer wished to pursue matter, there were sufficient clues for him to have proceeded, for instance, 11 ITA No. 1197/Mum/2025 Akash Universal Ltd, Mumbai it could have issued notices and obtained statements from bankers of share applicants or even balance sheets which existed in records of their Assessing Officers However, Assessing Officer did not choose to pursue said course of action - High Court thus upheld Tribunal's order deleting addition made by Assessing Officer - Whether, on facts, SLP f iled against order of High Court was to be dismissed - Held, yes [Para 2] [In favour of assessee]
2. In the case of INCOME TAX : Proviso to AdhoiVyapar(P.) section 68, which provides Ltd. v. Income- that explanation furnished tax Officer IN by assessee about nature THE ITAT and source of share MUMBAI BENCH application money, etc. 'A' IT APPEAL shall be not satisfactory NOS. 7308 TO unless person in whose 7311 (MUM.) OF name such credit is 2019 recorded offers an [ASSESSMENT satisfactory explanation YEARS 2009-10 about nature and source of TO 2012-13] sum so credited, is applicable only from assessment year 2013-14 and is not retrospective in nature INCOME TAX : Where assessee had discharged initial onus of proving share application transactions and Assessing Officer could not establish that assessee generated unaccounted 12 ITA No. 1197/Mum/2025 Akash Universal Ltd, Mumbai money and routed same through banking channels in garb of share-application money, addition under sections 68 and 69C is not sustainable in law Section 68 of the Income-tax Act, 1961 - Cash credit (Proviso) - Assessment years 2009-10, 2010-11, 2011-12 and 2012-13 - Whether proviso inserted to section 68 by Finance Act, 2012 with effect from 1-4-2013, which provides that explanation furnished by assessee about nature and source of share- application money, share capital, share premium etc. shall be deemed to be not satisf actory unless person in whose name such credit is recorded also offers an explanation about nature and source of sum so credited and such explanation is found to be satisf actory, is applicable only from assessment year 2013-14 and is not retrospective in nature - Held, yes [Para 6.5] [In favour of assessee] Section 68, read with sections 69C and 147, of the Income-tax Act, 1961 - Cash credit (Burden of proof) - Assessment years 2009-10, 2010-11, 2011-12 and 2012- 13 - Whether where assessee had discharged initial onus of proving share application 13 ITA No. 1197/Mum/2025 Akash Universal Ltd, Mumbai transactions in terms of requirements of section 68, onus had shif ted on Assessing Officer to dislodge assessee's documentary evidences and bring on record cogent material to establish that assessee generated unaccounted money and routed same through banking channels in garb of share- application money - Held, yes
- Whether unless such an investigation is shown to have been carried out, additions would not be sustainable in law since it is trite law that no addition could be made on basis of mere suspicion, conjectures and surmises - Held, yes [Paras 6.4 and 6.8] [In favour of assessee]
3. In the case of INCOME TAX: Where Principal assessee received share Commissioner of application money and Income-tax v. Assessing Officer made Realvalue section 68 addition in Realtors (P.) Ltd hands of assessee on before HIGH ground that assessee had COURT OF failed to discharge onus of BOMBAYIT establishing genuineness APPEAL NO. 957 of transaction and OF 2017† creditworthiness of shareholder, since substantial amount of said loan was received in earlier year and as regards balance, sufficient evidence was produced, 14 ITA No. 1197/Mum/2025 Akash Universal Ltd, Mumbai same could not be added as unexplained investment in relevant assessment year Section 68 of the Income-tax Act, 1961 - Cash credit (Share capital) - Assessment year 2007 08 - Assessee was engaged in business of dealing in property and trading in shares and stock - Assessing Officer noted that in relevant previous year assessee had received an amount from one shareholder as share application money but had f ailed to discharge onus of establishing genuineness of transaction and creditworthiness of same
- Assessing Officer treated said amount as unexplained cash credit - Commissioner (Appeals) noted that substantial part of said sum was received in earlier assessment year and, thus, it could not be added in impugned assessment year - Further, Commissioner (Appeals) observed that as regards balance sum, sufficient evidence was produced in respect of identity and genuineness of shareholder and he, accordingly, deleted said addition - Tribunal confirmed said order - Whether on facts, no substantial question of law arose for consideration -
15 ITA No. 1197/Mum/2025Akash Universal Ltd, Mumbai Held, yes [Para 7] [In favour of assessee]
4. In the case of INCOME TAX: Where first Principal appellate authority had Commissioner of returned a clear finding of Income-tax-1 v. fact that assessee had Ami Industries discharged its onus of (India) (P.) Ltd. proving identity of before HIGH creditors, genuineness of COURT OF transactions and credit BOMBAY IT worthiness of creditors APPEAL NO. which finding of fact stood 1231 OF 2017 affirmed by Tribunal and revenue had not been able to show any perversity in aforesaid findings of fact by authorities below, Tribunal was right in holding that no addition could be made under section 68 Section 68 of the Income-tax Act, 1961 - Cash credit (Share application money) -
Assessment year 2010-11 - Assessing Officer noted that assessee had disclosed funds from three Kolkata based companies as share application money - But, since where abouts of above companies were doubtful and their identity could not be authenticated, Assessing Officer treated aforesaid funds as money from unexplained sources and added same to income of assessee as unexplained cash credit under section 68 -
16 ITA No. 1197/Mum/2025Akash Universal Ltd, Mumbai However, it was found that assessee-company had furnished PAN, copies of income tax returns of creditors as well as copy of bank accounts of three creditors through which share application money was deposited in order to prove genuineness of transactions - Further, insofar as creditworthiness of creditors were concerned, Tribunal recorded that bank accounts of creditors showed that creditors had funds to make payments for share application money and in this regard, resolutions were also passed by Board of Directors of three creditors Thus, f irst appellate authority had returned a clear finding of fact that assessee had discharged its onus of proving identity of creditors, genuineness of transactions and creditworthiness of creditors which finding of fact stood affirmed by Tribunal - Revenue had not been able to show any perversity in aforesaid findings of fact by authorities below Whether therefore, Tribunal was right in confirming order passed by Commissioner (Appeals) and holding that no addition could be made under section 68 -
Held, yes [Paras 21, 23 and 17 ITA No. 1197/Mum/2025 Akash Universal Ltd, Mumbai 24] [In favour of assessee]
5. In the case of INCOME TAX : Where Shree Veer assessee received certain Buildbest(P.) amount as share Ltd. v. Income- application money from a tax Officer IN party and documents THE ITAT furnished by assessee AHMEDABAD established identity, BENCH 'C' IT creditworthiness and APPEAL NO. 892 genuineness of share (AHD.) OF 2023 application money [ASSESSMENT received, addition under YEAR 2011-12] section 68 was not justified III. Section 68, of the Income- tax Act, 1961 - Cash credit (Share application money) Assessment year 2011-12 - Assessee received certain amount as share application money from a party -
Assessing Officer added said amount to assessee's income as unexplained under section 68 on protective basis -
Whether since documents furnished by assessee established identity, creditworthiness and genuineness of share application money received and there was no substantive addition in hands of aforesaid party and Assessing Officer's failure to provide further substantial evidence or conduct thorough investigation meant that protective addition of 18 ITA No. 1197/Mum/2025 Akash Universal Ltd, Mumbai aforesaid amount under section 68 was not justif ied - Held, yes [Paras 15, 15.2 and 15.3] [In favour of assessee]
6. In the case of INCOME TAX : Where Principal assessee received share Commissioner of application money and had Income-tax v. furnished each and every Esspal document required for International proving identity, (P.) Ltd.D.B. creditworthiness of share before HIGH applicants and COURT OF genuineness of RAJASTHAN transactions, impugned INCOME TAX addition made under APPEAL NO. 25 section 68 on ground that OF 2024 it was accommodation entry was to be deleted Section 68 of Income-tax Act, 1961 - Cash credit (Share application money) -
Assessment year 2014-15 - During a search conducted upon one SCS, it was found that he was engaged in providing accommodation entries of share capital, share premium, share application money, unsecured loans, long term capital gains, short term capital gains etc. in lieu of cash received by him and that it had also provided one-time entry of certain amount towards share application money to assessee-company through a broker and such transaction was not genuine - Assessing Officer made addition under section 68 to 19 ITA No. 1197/Mum/2025 Akash Universal Ltd, Mumbai income of assessee on account of same - It was noted that Tribunal had noted that assessee had furnished each and every document required for proving identity, creditworthiness of share applicants and genuineness of transactions, however, Assessing Officer had not been able to brought on record any evidence to show that cash was paid by assessee to any person for obtaining accommodation entries in form of share application money - Further, on a glance at materials on record, it was found that Assessing Officer assessed assessee under section 143(3) only on basis of statement given by SCS - However, it was a matter of record that SCS had retracted his statements given before Assessing Officer - Whether, on facts, impugned addition made by Assessing Officer was without any basis - Held, yes [Para 14] [In favour of assessee]
7. In the case of INCOME TAX : Provisions of Principal section 68 could not be Commissioner of invoked, more particularly Income-tax v. when addition was made Siyaram Metals on account of share Udyog (P.) before premium and share HIGH COURT OF application money by GUJRAT TAX investors whose identity, 20 ITA No. 1197/Mum/2025 Akash Universal Ltd, Mumbai APPEAL TAX creditworthiness and APPEAL NO. 508 genuineness was proved by OF 2023 assessee I. Section 68 of the Income-tax Act, 1961 - Cash credit (Share application money) Assessment year 2011-12 -
Assessee-company was
incorporated in relevant
assessment year by
converting proprietary
concern - Thereafter,
assessee-company allotted
shares at premium to
proprietor and also to other investors - During course of assessment proceedings, Assessing Officer noted that a search was conducted at premises of assessee wherein it was found that share certif icates were not issued to investors - He, thus, made additions under section 68 of entire credit of share capital and premium - On appeal, Commissioner (Appeals) deleted said additions -
Tribunal upheld said order on ground that identity of party was established by furnishing name, address and PAN detail, bank details, ITR etc. - Tribunal further held that it was first year of operation of assessee-
company and declaration of dividend by company had nothing to do with share capital received by assessee 21 ITA No. 1197/Mum/2025 Akash Universal Ltd, Mumbai and thus, assessee discharged onus cast upon it under section 68 - Whether Tribunal had rightly held that provisions of section 68 could not be invoked, more particularly when addition was made on account of share premium and share application money by investors whose identity, creditworthiness and genuineness was proved by assessee - Held, yes [Para 3] [In favour of assessee]
8. In the case of INCOME TAX : Where Abhijavala assessee received share Developers (P.) capital and unsecured loan Ltd. v. Income from several entities and Tax Officer produced documentary 9(1)(1), Mumbai evidences such as copy of IN THE ITAT confirmation of accounts, MUMBAI BENCH copy of PAN card, bank 'A' IT (APPEAL) statement ITR NO. 952 (MUM) acknowledgement and OF 2019 financial statements of all [ASSESSMENT investors/lenders so as to YEAR 2012-13] substantiate these transactions and funds were transferred to assessee through proper banking channels, no addition under section 68 could be made on basis of third party statements Section 68 of the Income-
tax Act, 1961 - Cash credit (Share capital and unsecured loan) Assessment year 2012-13 - During year, 22 ITA No. 1197/Mum/2025 Akash Universal Ltd, Mumbai assessee company received unsecured loan and share application money from six corporate entities - Assessing Officer noted that summons issued under section 131 to these entities were returned back with remarks like not known/incomplete address and assessee was unable to produce any of these parties - He further noted that an information was received from DGIT (Inv.) that all these entities were involved in providing bogus accommodation entries of varied nature - Accordingly, he held that unsecured loans as well as share application money received by assessee from all six entities was non- genuine and a sham and added these amount to income of assessee under section 68 - It was noted that assessee had furnished all documentary evidences such as copy of confirmation of accounts by lender/investor, copy of PAN Card, bank statement, ITR acknowledgement and copy of financial statements of all investor/lender entities - Further, all these six entities had f iled their return of income after paying taxes - They had also duly confirmed transactions carried out with 23 ITA No. 1197/Mum/2025 Akash Universal Ltd, Mumbai assessee - All funds were transferred to assessee through proper banking channels and there was no immediate cash deposits in their accounts before transfer of funds to assessee -
Allegations of revenue were not supported by any corroborative evidences - So far as information of DGIT (Inv.) was concerned, these were found merely third party statements which were never confronted to assessee and those statements on standalone basis could not form basis of making additions in hands of assessee - Whether, on facts, impugned additions made under section 68 to income of assessee was unjustified and same was to be deleted -
Held, yes [Para 5] [In favour of assessee]
9. In the case of Section 68, read with section NextgenVyapaar 263, of the Income-tax Act, (P) Ltd. v. 1961 - Cash credit (Revision) Principal Assessment year 2012-13 - Commissioner of Assessee company, engaged Income Tax-4, in business of dealing in KolkataIN THE shares and investments, filed ITAT KOLKATA its return of income - BENCH 'A' IT Assessing Officer passed an APPEAL NO. assessment order under 1176 (KOL.) OF section 143(3) making an 2019 addition of certain amount [ASSESSMENT under section 68 as YEAR 2012-13] unexplained cash credit on 24 ITA No. 1197/Mum/2025 Akash Universal Ltd, Mumbai account of share application money and premium received by assessee during year -
Principal Commissioner invoked revision jurisdiction under section 263 and directed Assessing Officer to carry out proper examination of books of account and bank accounts of assessee as well as investors - Assessing Officer passed an order under section 263 determining total income of assessee at lesser amount by deleting addition under section 68 on ground that source of fund, identity, genuineness and creditworthiness of share applicants were verified and found in order - Pr.
Commissioner issued another notice under section 263 on ground that income determined as per impugned order under section 263 was less than total income as assessed under earlier original assessment order under section 143(3), therefore, impugned assessment order was prejudicial to interest of revenue It was noted that assessment orders of share applicant companies were passed under section 143(3) by revenue, thus, identity and creditworthiness of share applicant companies were 25 ITA No. 1197/Mum/2025 Akash Universal Ltd, Mumbai proved - Share applicant companies had responded to notices under section 133(6) and also appeared before Assessing Officer and furnished copy of I.T. return/acknowledgement, copy of annual audited accounts, balance sheet and profit & loss account statement and copy of bank statement, etc. so as to prove genuineness of transactions - Thus, Assessing Officer had taken a plausible view in his first order passed under section 263 - Such a view could not be termed as erroneous insofar as it was prejudicial to interest of revenue Whether, on facts, impugned invocation of revision jurisdiction under section 263 second time merely because total income determined by Assessing Officer in revision order was less than income determined in original assessment proceedings, was unjustified
10. PCIT v/s In the case of PCIT v.
Himachal fibers Himachal Fibers Ltd [2018] Ltd. (2018) 98 98 taxmann.com 173 (SC) the taxmann.com 173 Hon'ble Supreme Court has (SC) observed as under:
"Where in course of appellate proceedings, High Court set aside addition made by AO under section 68 in respect of share application money by 26 ITA No. 1197/Mum/2025 Akash Universal Ltd, Mumbai holding that identity of share applicants was clearly revealed but Assessing Officer did not conduct any further enquiry except resting his conclusions on surmises, SLP f iled against said order was to be dismissed."
11. CIT vs. Steller It has been observed by the Investment Ltd. Supreme Court in the above SC. (2001)251 case that, "According to High ITR 0236 Court, even if the subscribers to the increased share capital were not genuine the amount could not be regarded as undisclosed income of the assessee company and no question of law arose for reference- Justif ied-No interference is called for.- CIT vs. stellar Investment Ltd. (1991) 99 CTR (Del) 40 :
(1991) 192 ITR 287 (SC): TC 55R.593 affirmed,."
12. M/s V. R. Global Where assessee allotted Energy Pvt. Ltd. shares to a company in v/s ITO Appeal No settlement of pre-existing 246 of 2017 liability of assessee to said dated 01.09.2016 company, since no cash was (HC) involved in transaction of said allotment of shares, conversion of these liabilities into share capital and share premium could not be treated as unexplained cash credits under section 68 PCIT (Central) - 4 Thus, the initial burden v/s M/s Acquatic was discharged by the Remedies Pvt. Ltd respondent in respect of 27 ITA No. 1197/Mum/2025 Akash Universal Ltd, Mumbai (HC) creditworthiness of the investor and nothing has been shown by the Revenue to doubt the same and/or steps taken and result thereof. Thus, this objection of lack of creditworthiness of the shareholder also does not survive. In f act, the impugned order of the Tribunal, on examination of facts, has come to the conclusion that the investment made by the shareholders is not hit by Section 68 of the Act.
13. CIT vs Oasis "11. It is clear from the Hospitalities Pvt. above that the initial Ltd. (ITA No. burden is upon the 2093 of assessee to explain the 2010),(HC) nature and source of the share application money received by the assessee. In order to discharge this burden, the assessee is required to prove:
(a) Identity of
shareholder;
(b) Genuineness of
transaction; and
(c) Credit worthiness
of shareholders.
12. In case the
investor/shareholder is an individual, some documents will have to be filed or the said shareholder will have to be produced before the AO to prove his identity. If the 28 ITA No. 1197/Mum/2025 Akash Universal Ltd, Mumbai creditor/subscriber is a company, then the details in the form of registered address or PAN identity, etc. can be furnished.
13. Genuineness of the transaction is to be demonstrated by showing that the assessee had, in fact, received money from the said shareholder and it came from the coffers from that very shareholder. The Division Bench held that when the money is received by cheque and is transmitted through banking or other indisputable channels, genuineness of transaction would be proved. Other documents showing the genuineness of transaction could be the copies of the shareholders register, share application forms, share transfer register, etc.
14. As far as creditworthiness or financial strength of the credit/subscriber is concerned, that can be proved by producing the bank statement of the creditors/subscribers showing that it had sufficient balance in its accounts to enable it to subscribe to the share 29 ITA No. 1197/Mum/2025 Akash Universal Ltd, Mumbai capital. This judgment further holds that once these documents are produced, the assessee would have satisfactorily discharge the onus cast upon him.
Thereafter, it is for the AO to scrutinize the same and in case he nurtures any doubt about the veracity of these documents to probe the matter further. However, to discredit the documents produced by the assessee on the aforesaid aspects, there has to be some cogent reasons and materials for the AO and he cannot go into the realm of suspicion."
14. CIT Vs. Divine The assessee has to prima Leasing & facie prove (1) the identity of Finance Ltd. the creditor/subscriber; (2) (2008) 299 the genuineness of the ITR0268 transaction, namely, whether it has been \transmitted through banking or other indisputable channels; (3) the creditworthiness or financial strength of the creditor/subscriber; (4) if relevant details of the address or PAN identity of the creditor/subscriber are furnished to the Department along with copies of the 30 ITA No. 1197/Mum/2025 Akash Universal Ltd, Mumbai shareholders register, share application forms, share transfer register, etc. it would constitute acceptable proof or acceptable explanation by the assessee; (5) the Department would not be justified in drawing an adverse inference only because the creditor/subscriber fails or neglects to respond to its notices; (6) the onus would not stand discharged if the creditor/subscriber denies or repudiates the transaction set up by the assessee nor should the AO take such repudiation at face value and construe it, without more, against the assessee; (7) the A0 is duty bound to investigate the creditworthiness of the creditor/subscriber, the genuineness of the transaction and the veracity of the repudiation"
15. Green infra ltd. "the transaction was tested in Vs. ITO (2014) the light of the provisions of 159 TTJ Sec. 68. As per Section 68 the 0728(Mumbai) initial onus was upon the assessee to establish identity, genuineness of the transaction and the capacity of the lender or the depositor. The subscribers to the share capital were all companies.
The confirmations of the
transactions had been
received by the AO by issuing 31 ITA No. 1197/Mum/2025 Akash Universal Ltd, Mumbai notice u/s. 133(6), therefore, identity had been established beyond all reasonable doubts.
The genuineness of the transaction could also be safely concluded since the entire transaction had been done through the banking channels duly recorded in the books of accounts of the assessee duly reflected in the financial statement of the assessee. The bank statement was exhibited in which the transactions relating to the allotment of shares were duly reflected."
16. Shree The Tribunal has considered GirirajFerromet that the Assessee has Pvt. Ltd v/s ITO produced on record the ITA No. documents to establish the 3697/MUM/2017 genuineness of the party such as PAN of all the creditors along with the confirmation, their bank statements showing payment of share application money. It was also observed by the Tribunal that the Assessee has also produced the entire record regarding issuance of shares i.e. allotment of shares to these parties, their share application forms, allotment letters and share certif icates, so also the books of account. The balance sheet and profit and loss account of these persons discloses that these persons had sufficient 32 ITA No. 1197/Mum/2025 Akash Universal Ltd, Mumbai funds in their accounts for investing in the shares of the Assessee. In view of these voluminous documentary evidence, only because those persons had not appeared before the Assessing Officer would not negate the case of the Assessee. The judgment in case of Gagandeep Infrastructure (P.) Ltd. (supra) would be applicable in the facts and circumstances of the present case.
17. Rajat Exports However, considering the Import (India) facts of the case and in the Pvt. Ltd. v/s ITO light of the above discussion, ITA No. it is clear that the initial 5637/DEL/2013 burden upon the assessee to prove identity of the investors, their creditworthiness and genuineness of the transaction have been discharged by the assessee. AO thereafter, did nothing in the matter, therefore, no addition could be made against the assessee. Therefore, in our view, it is not a fit case to remand matter to the CIT(A). We are, therefore, of the view that assessee proved identity of the investors, their creditworthiness and genuineness of the transaction in the matter. Therefore, no addition could be made against the 33 ITA No. 1197/Mum/2025 Akash Universal Ltd, Mumbai assessee.
18. DCIT 1(3)(2) v/s S. 68 Bogus share premium:
M/s Varsity The AO cannot assess the Education share premium as income Management Pvt. on the ground that it is Ltd. ITO ITA No. "excessive". The share 6991/MUM/2016 premium worked out in the Valuation Certificate is the minimum amount that can be collected by the assessee under RBI regulations. There is no bar on collecting higher amount as share premium.
There are several factors that are taken into consideration while issuing the equity shares to shareholders/investors, such as Venture capital funds and Private Equity funds. The premium is determined between the parties on the basis of commercial considerations and cannot be questioned by the tax authorities. The AO is not entitled to sit on the arm chair of a businessman and regulate the manner of conducting business (All judgements considered).
• CIT vs. Goa Sponge and Power Ltd., I.T. Appeal No. 16 of 2012 (Bom HC) • CIT Vs. Winstral Petrochemicals (P) Ltd. (2011)330ITR 0603 • CIT vs.Kamdhenu Steel &Aloys Ltd. &Ors. (2012) 80 CCH 027 Del HC • CIT vs. EMPIRE BUILTECH PVT LTD (2014) 88 CCH 033 Del. HC 34 ITA No. 1197/Mum/2025 Akash Universal Ltd, Mumbai • ACIT vs. Sankalp Corporate Pvt. Ltd., ITA NO.
118/Mum/2016 • ITO vs. Lisha Trading P. Ltd., ITA No. 5845/Mum/2016 • CIT vs. Lovely Exports P. Ltd. (2008) 216 CTR 195 (SC) • Jasamrit Constructions Pvt. Ltd. vs. ITO, ITA No. 1091/Mum/2016 • CIT vs. Alcon Biosciences P. Ltd., ITA No. 1946/Mum/2016 • CIT vs. Orchid Industries Pvt. Ltd., I.T. Appeal No. 1433 of 2014 (Bom HC) • ACIT-30(3) vs. Shreedham Builders ITO ITA No. 5589/MUM/2017 • ITO 7(1)(4) vs. Lisha Trading Pvt. Ltd. v/s ITO ITA No. 5845/MUM/2016 • Ito 2 (1)(2) vs. Diwali Developers Pvt. Ltd. ITO ITA No. 4723/MUM/2016 • ITO 10(2)(4) vs. M/s Superline Construction Pvt. Ltd. ITA No. 3645/MUM/2014 • Sunshine Metals & Alloys Industries Pvt. Ltd vs. ITO-4(3) (4), ITO ITA No. 3212/MUM/2014 • DCIT 7(3)(2) vs. Piramal Realty Pvt. Ltd. ITA No. 2317/MUM/2017 • ITO -6(1)(3), Mumbai vs. Arogya Bharti Health Park Pvt Ltd. ITA No.2943/MUM/2014 • ACIT,Circle-7(1)-1, Mumbai vs. Goldmohur Design & Apparel Park Ltd.
• Diwali Capital & Finance Private Ltd vs. DCIT CC-2(3) ITA No.2091/MUM/2018 • DCIT CC-2(2) vs. Diwali Capital & Finance Private Ltd ITA No.3986/Mum/2017 • DCIT CC-2(2) vs. Blue Stock Investment Pvt Ltd ITA No.3987/Mum/2017 • Blue stock Investments Private Ltd vs. DCIT CC-2(3) ITA No.2090/Mum/2018
1. Further, it would be relevant to take note of the decision of the Hon'ble Supreme Court in the case of CIT vs. Lovely Exports (P) Ltd. (216 CTR 195), wherein the Apex Court observed that once the assessee has given names and 35 ITA No. 1197/Mum/2025 Akash Universal Ltd, Mumbai identity of the shareholders the onus upon it gets discharged and no addition can be made in the hands of the assessee.
2. Similar view has also been taken by the Hon'ble Delhi High Court in the case of Commissioner of Income-tax vs. Dwarkadhish Investment (P.) Ltd. (194 Taxman 43) where it was held that the initial onus of burden lies with the assessee, once he provides the identity by providing PAN or Assessment Numbers then the onus of proof shift to revenue, and it would not give revenue right to invoke section 68 of the Act.
3. In the present case, the AO arbitrarily concluded the hearing and even made the additions even in respect of the investors for which the copies of director report, balance sheet, share application forms, etc. were filed during the course of assessment proceedings. In this regard, the Appellant relies on the following decisions:
Nathu Ram Premchand vs. CIT (1963) 49 ITR 561 (All); CIT vs. Ponnuswamy Naidu (1995) 214 ITR 185 (Mad); CIT vs. S P Bhatt (1974) 97 ITR 440 (Guj).
4. Lastly, assuming without accepting, the parties from whom the Appellant had received the share application money are bogus than also the addition u/s. 68 of the Act cannot be made as the Appellant has provided identity of the said shareholders and the Department is free to proceed to reopen their individual assessments in accordance with law and hence the share application money received cannot be regarded as undisclosed income under section 68 of the Act. The said ratio has been laid down by the Hon'ble Supreme Court in the case of CIT vs. Lovely Exports (P) Ltd. (supra).
5. Further, it was submitted that, if the genuineness of the transactions has to be established the AO can exercise the powers vested with him under section 131/133(6) of the Act. The AO made the additions even after giving an opportunity to the Appellant to prove the genuineness of the transactions and calling for the information required to exercise powers vested under section 131/133(6) of the Act.
6. It is settled legal position that once the Appellant has given the names and identity of the shareholders/lenders, the onus upon it gets discharged and no addition can be made in 36 ITA No. 1197/Mum/2025 Akash Universal Ltd, Mumbai the hands of the Appellant as the onus shifts to the Department [CIT vs. Lovely Exports Pvt. Ltd (216 CTR 195) (SC)]. The same principle is followed by the jurisdictional High Court in CIT vs. Creative World Telefilms Ltd. (333 ITR
110) (Bom.).
7. In the later decision in CIT Vs. Oasis Hospitalities P. Ltd. (333 ITR 119) (Del.), the Hon'ble High Court has applied the principles in Lovely Exports (supra) and has laid down basic tests which need to be fulfilled by the assessee to discharge his initial burden under section 68 of the Act.
FAILURE TO DISCHARGE DUTY TO PROVE THE TRANSACTION AS BOGUS :
The initial burden to prove that the transaction is genuine, is on the appellant which is discharged by producing the confirmation, bank statement, financials of shareholder Company, and other relevant documents etc. Thus, the burden shifts on the department to prove that transactions are bogus. However, the CIT(A) and AO have no material in possession to prove the same. They just made opinion on the basis of information from CCIT (C-oord), Mumbai and without any independent enquiry made by them. Thus, the CIT(A) and AO failed to discharge their duty. Hence, the addition cannot be made on leaps on the part of the revenue.
TRANSACTION DULY SUPPORTED BY THE EVIDENCE, CREDIT WORTHINESS AND GENUINESS OF THE PARTIES ALSO PROVED :
The only observation made by the Ld AO is that "In view of the above discussion, it is evident that the creditworthiness of these four parties are not proved and at the same time the genuineness of the transaction in the form of share application money with premium raised by the assessee company is also not provided beyond doubt. The entire gamut of transactions shows that the funds of Rs. 250,00,000/- have been brought in by way of share application money' in the name of these four entities, whose credit worthiness and genuineness could not be established by the assessee company beyond doubt along with the source of the funds received by these entities in the form of share application money. Therefore, the purported share 37 ITA No. 1197/Mum/2025 Akash Universal Ltd, Mumbai application money of Rs. 2,50,00,000/- is hereby treated as a 'cash credit' in the books of the assessee company, whose nature and source is not explained and, therefore, deemed to be the assessee's income as envisaged in Section 68 of the Income Tax Act, 1961 and accordingly the same is added to the total Income of the assessee company during the previous year relevant to A.Y, 2010-11 and the same ishereby held to be not eligible for any deduction there against" We can clearly observed that the addition is made mere on the basis of suspicion even when the assessee had given all the supporting documents to the Ld AO he made the addition without considering the same or without giving any specific reason to doubt the creditworthiness of these four parties and genuineness of the transaction.
Your appellant has already submitted the relevant details of party with their confirmations, their banks statements, their ITR Acknowledgement which is also verify by the Ld. AO. Thus the addition purported to be made is made on suspicion. In present case transactions are duly supported by the documents Therefore, the addition cannot be made.
Identity, Source of payment explained, Bank payment, Books of account accepted, Then addition of book entries cannot be take place:
Babulal C 20. Moreover, it is not the case of the revenue that Borana the investments made by the assessee are outside V/s ITO the books maintained by the assessee. It is not the [282 ITR case of the revenue that the Syndicate Bank account 251] No. 2668 in the name of M/s. Gautam Trading Co.
belongs to the assessee. It is also not the case of the revenue that the amounts withdrawn from the Syndicate Bank account No. 2668 has been received by the assessee. In the present case, the books maintained by the assessee has not been rejected by the Assessing Officer and in fact the addition is based on the entries made in the books of account maintained by the assessee. The fact that the said Bipinkumar B. Shah has not paid sales tax payable on sale of 50 M.Ts. of HDPE or the fact that the 38 ITA No. 1197/Mum/2025 Akash Universal Ltd, Mumbai assessee has paid for the goods af ter the date of search and claimed 10 M.Ts. of HDPE belatedly does not in any way affect the genuineness of the transaction. Having rejected the addition of the value of 40 M.T.s of HDPE powder, the Tribunal could not have sustained addition of the value of 10 M.Ts. of HDPE powder, when the nature and source of investment has been duly explained by the assessee.
21. For all the aforesaid reasons, we hold that the Tribunal was not justif ied in rejecting the explanation of the assessee and directing the Assessing Officer to add the value of 10 M.Ts. of HDPE as deemed income of the assessee.
Suspicious cannot take place the evidence
1. DCIT v. Shri Rajeev G. Kalathil, (Mum) (Trib) (ITA No. 6727/M/2012 dt.20/8/2014
2. K.P. Varghese v. ITO, (1981) 131 ITR 579 (SC);
3. CIT v. Roman & Co., (1968) : 67 ITR 11 (SC);
4. CIT v. Calcutta Discount Co. Ltd.', (1973) 91 ITR 8 (SC);
5. Umacharan Shaw & Bros v. CIT', (1959) 37 ITR 271 (SC Income assessed without evidence is bad-in-law.
Income assessed by revenue without supporting material is not justified.
1. CIT V. BHUVANENDRA 303 ITR 235 (MAD.)
2. VINOD SOLANKI VS. UOI (233) ELT 157 (S.C.)
3. CIT V. KASHIRAM TEXTILE MILLS (P) LTD [2006]284 ITR 61 (GUJ)-
4. SARASWATHI OIL TRADERS V. CIT [2000] 254 ITR 259 (SC) Income cannot be assessed on mere statement basis. For assessment there has to be some evidence. Income cannot be assessed on mere retracted statement If not material to prove
1. Meghraj Jain V. UOI (Bombay High Court)
2. KailashbenManharlalChokshi v. CIT [2008] 174 Taxman 466 (Guj.) 39 ITA No. 1197/Mum/2025 Akash Universal Ltd, Mumbai
3. M. Narayanan & Bros. v. Asstt. CIT [2011] 201 Taxman 207 (Mag.)
4. Bansal High Carbons (P)Ltd. 2009) 223 CTR 179 (Del).
5. Sanjeev Kumar Jain (2009) 310 ITR 178 (P&H)
6. CIT vs. K. Bhuvanendra and others (2008) 303 ITR 235 (Mad.)
7. Abid Malik Vs UOI, (2009TIOL272HC Del-FEMA)
8. CIT vs. Uttamchand Jain 320 ITR 554 (Bom),
9. SrinivasNaik (2009)117 ITD 201 (Bang) Addition cannot be made on assumption basis. There must be some material on record as evidence for addition. Addition made on the basis of presumption cannot be sustained in law.
1. CIT v. Roman & Co., (1968) : 67 ITR 11 (SC)
2. CIT v. Calcutta Discount Co. Ltd. (1973) 91 ITR 8 (SC)
3. Omar Salay Mohamed Sait V/s CIT 1959 37 ITR 151 (SC)
4. DhirajlalGirdharilal V/s CIT (26 ITR 734) (SC)
5. Dr. Anita Sahai V/s DIT (266 ITR 597) (All)
6. MODI Creations Pvt. Ltd. V/s ITO [2011] 13 taxmann.com 114 (Delhi)-It will have to be kept in mind that section 68 only sets up a presumption against the assessee whenever unexplained credits are found in the books of account of the assessee. It cannot but be gainsaid that the presumption is rebuttable. In refuting the presumption raised, the initial burden is on the assesse. This burden, which is placed on the assesse, shifts as soon as the assesse establishes the authenticity of transactions as executed between the assesse and its creditors.
7. CIT- IV v. Shree Rama Multi Tech Ltd [2013] 34 taxmann.com 32 (Gujarat):-Expenditure cannot be disallowed on account of 'bogus purchase' only on basis of assumption and presumption
8. View taken in Modi creation Pvt. Ltd. Is also taken in following decision.
i. CIT v/s Divine Leasing & Finance Ltd. 158 Taxmann 440 (Delhi) (2007).
ii. Nemichand Kothari V/s CIT (136 Taxman 216) (Gau.) (2004). iii. CIT V/s Value Capital Services (P) Ltd. 307 ITR 334 (Delhi)(2008).
40 ITA No. 1197/Mum/2025Akash Universal Ltd, Mumbai On the perusal of the above submission it will be observed and it is evident that Case Laws relied upon by the Ld. CIT(A) are distinguishable on the facts in the above matter of appellant. Similarly the share holders/ share applicants are identif iable and regular IT Assessee's. The identity of the shareholders is established and also placed on record the relevant details of source of funds.
1. FIRST GROUND OF APPEAL: - Order Bad in Law and on Facts 1.1. The order passed by the Learned Commissioner of Income Tax (Appeals) (hereinafter referred to as (CIT(A)) u/s 250 of the Income-tax Act, 1961 (the Act) is bad in law and on facts.
1.2. The Appellant merged with Aakash Universal Limited (PAN: AAACA9755H) vide National Company Law Tribunal order 31 October 2023 and the Appellant is no more an existing entity and the learned CIT(A) has erred in passing an order on a non existing entity:
SUBMISSION :
1. The order dated 19.01.2024 passed by the Learned Commissioner of Income Tax (Appeals) [CIT(A)] under Section 250 of the Income Tax Act, 1961 ("the Act") is bad in law and on facts.
2. The Appellant had already merged with Aakash Universal Limited (PAN: AAACA9755H) vide the National Company Law Tribunal (NCLT) order dated 31st October 2023, and thus, the Appellant ceased to exist as a separate legal entity prior to the passing of the CIT(A)'s order.
a) The Learned CIT(A) has committed a jurisdictional error by passing an appellate order in the name of a non- existent entity, disregarding the legal effect of the approved amalgamation.
b) The NCLT's order dated 31st October 2023, sanctioning the scheme of amalgamation, had the effect of dissolving the 41 ITA No. 1197/Mum/2025 Akash Universal Ltd, Mumbai Appellant company without winding up, in accordance with the provisions of the Companies Act, 2013.
c) The Hon'ble Supreme Court in Principal Commissioner of Income Tax vs. Maruti Suzuki India Limited (2019) 416 ITR 613 (SC) has categorically held that once an amalgamation is sanctioned, the transferor company ceases to exist, and no legal proceedings can be continued or initiated in its name.
d) Despite the merger being effective from 31st October 2023, the CIT(A) erroneously passed the order on 19.01.2024 in the name of the Appellant, which had no legal existence at the time.
e) The CIT(A) failed to appreciate that the proceedings ought to have been conducted in the name of the successor entity, i.e., Aakash Universal Limited, and not the Appellant.
3. Consequently, the impugned order dated 19.01.2024 is null and void, being passed against a non-existent entity, and deserves to be quashed.
4. Assessee relied on the following case laws :
CITATION OBSERVATION SUPREME COURT INCOME TAX : Where assessee OF INDIA company was amalgamated with Principal Commi another company and thereby lost
its existence, assessment order ssioner of Incom e Tax, New Delhi passed subsequently in name of said non-existing entity, would be v. without jurisdiction and was to be Maruti Suzuki In set aside dia Ltd.
Section 170, read with section 292B, CIVIL APPEAL NO.
of the Income-tax Act, 1961 - 5409 OF 2019 Succession to business otherwise than on death (Validity of assessment) - Assessment year 2012- 13 - Whether issuance of jurisdictional notice and assessment order thereafter passed in name of non-existing company is a substantive 42 ITA No. 1197/Mum/2025 Akash Universal Ltd, Mumbai illegality and not a procedural violation of nature adverted to in section 292B - Held, yes - Whether, therefore, where assessee company was amalgamated with another company and thereby lost its existence, assessment order passed subsequently in name of said non- existing entity would be without jurisdiction and was to be set aside - Held, yes [Paras 31, 33 and 34]In favour of assessee] IN THE ITAT INCOME TAX : Where assessment PUNE BENCH 'C' had been framed by Assessing Officer on a non-existing company Liquidhub despite knowing fact that assessee Analytics (P.) -company had ceased to exist Ltd. pursuant to its merger with v. another company, such assessment NFAC, Delhi* was invalid and was to be quashed Section 143(3), read with section 144, IT APPEAL of the Income-tax Act, 1961 - NO.1952 (PUN) OF Assessment - (In case of company) - 2024 Assessment year 2020-21 - Assessee [ASSESSMENT company filed its return on 12-2-2021 YEAR 2020-21] - Since assessee had entered into certain international transactions, Assessing Officer referred matter to TPO who proposed an upward adjustment - Thereaf ter, Assessing Officer passed draft assessment order - Before DRP, assessee challenged validity of assessment order on ground that same was passed on non-
existing entity - However, DRP upheld assessment order - It was noted that assessee company had ceased to exist pursuant to its merger with 43 ITA No. 1197/Mum/2025 Akash Universal Ltd, Mumbai another company, Capgemini with effect from 1-4-2020 which was duly approved by NCLT vide order dated 24-6-2021 - It was further noted that said fact was also brought to notice of Assessing Officer as well as DRP - Whether since assessment had been framed by Assessing Officer on a non- existing company despite knowing fact of merger, assessment on non- existent company was invalid and was to be quashed - Held, yes [Para 18] [In favour of assessee] IN THE ITAT INCOME TAX :
MUMBAI BENCH Assessment order quashed for 'I' issuing notice to a company which Assistant was amalgamated with assessee, Commissioner of particularly when fact of Income-tax 16(1) amalgamation was duly intimated v. to Assessing Officer Culver Max before passing assessment order Entertainment (P.) Ltd.* Section 143 of the Income-tax Act, IT APPEAL 1961 - Assessment - General (Merger) NO.6814 AND - Assessment years 2014-15 and 6815 (MUM) OF 2015-16 - Notice under section 143(2) 2024 was issued to a company named CO NOS.36 AND SPENI - High Court sanctioned scheme 37 (MUM) OF 2025 of amalgamation of SPENI with [ASSESSMENT amalgamated company which had YEARS 2014-15 duly notif ied and intimated to AND 2015-16] Assessing Officer about said amalgamation requesting him to drop assessment proceedings initiated in name of non-existing entity and issue a fresh notice in name of amalgamated entity - Despite such intimation, Assessing Officer passed final assessment order in name of 44 ITA No. 1197/Mum/2025 Akash Universal Ltd, Mumbai amalgamating entity - Whether assessment made in name of a non-
existent entity was without jurisdiction, and, hence, null and void ab initio and was liable to be quashed
- Held, yes [Para 8] [In favour of assessee] IN THE ITAT INCOME TAX : Where a company MUMBAI BENCH was amalgamated with assessee- 'K' company and assessee had intimated to Assessing Officer and Abbott India Ltd. DRP about fact of amalgamation, v. assessment order passed in name ACIT * of non-existent entity was void and IT APPEAL NO. liable to be quashed 7778 (MUM.) OF 2012 AND 2032 Section 143, read with section 144C, (MUM.) OF 2014 of the Income-tax Act, 1961 - [ASSESSMENT Assessment - General (Non- YEARS 2008-09 & existing company) - Assessment years 2009-10] 2008-09 and 2009-10 - Whether where a company was amalgamated with assessee-company and assessee had intimated to Assessing Officer and DRP about fact of amalgamation, assessment order passed in name of non-existent entity was void and liable to be quashed - Held, yes [Paras 21 and 22] [In favour of assessee] In light of the above, the Appellant respectfully prays that theHon'ble Tribunal be pleased to Declare the impugned order dated 19.01.2024 as null and void;Grant such other relief(s) as deemed fit in the interest of justice.
HUMBLE PRAYER On the basis of above submission, it is respectfully submitted that the Share allotment is genuine and duly supported by 45 ITA No. 1197/Mum/2025 Akash Universal Ltd, Mumbai documentary evidences. Hence, the addition of Rs.2,50,00,000/- made by the Ld. AO and confirmed by CIT(A) requires to be deleted as the same was on assumption basisand requires to be deleted.
Thanking you,
4. On the contrary Ld. DR relied upon the orders passed by the revenue authorities.
5. We have heard the counsels for both the parties, perused the material placed on record, judgements cited before us and also the orders passed by the revenue authorities.
6. From the records we noticed that the assessee had received share application money of Rs. 2.5 Cr. From four companies towards allotment of shares. But AO treated the same as cash credits in the books of the assessee, whose nature and source is not explained, therefore made additions u/s 68 of the Act. As per AO the assessee could not discharge his onus of proving the genuineness of the transactions and the creditworthiness of parties form whom the share application money was received.
7. In this regard, from the records we noticed that during the year under consideration the assessee company had issued shares at a premium to four companies, the details of which are given in the table below:
46 ITA No. 1197/Mum/2025Akash Universal Ltd, Mumbai No. Name of No of Share Premium Total Share Reserves Networth Inves investor's shares Capital @ Rs.990 Amount Capital of of IC of IC tment companies @ Rs.10 IC /Net worth % 1 Dewpoint 2500 25000 2475000 2500000 10445000 45546116 55991116 4.46 Agencies Pvt.
Ltd 2 Kasturi 7500 75000 7425000 7500000 4524000 40395034 44919034 16.7 Infrastructure 0 Pvt. Ltd.
3 Kasturi Towers 7500 75000 7425000 7500000 44174500 417690478 461864978 1.62 Ltd.
4 Mridang 7500 75000 7425000 7500000 22427500 157386378 179813878 4.17 Commerce Pvt.
Ltd. A Total 25000 250000 24750000 25000000 81571000 661018006 742589006 3.37
8. After analyzing the above details, we found that all the investor companies have positive net worth and have only invested on an average 3.37% of their total net worth in the assessee company. In order to prove the identity and creditworthiness of the subscribers and genuineness of the share transactions, the assessee had supplied / based on record all the documentary evidences which are at paper book 21 to 218 and the details of which are as under:
Dewpoint Agencies Pvt Ltd Share Application Form Copy of Bank Statement of M/s Dewpoint Agencies Pvt Ltd Copy of BanK Statement of M/s RKTPL Copy of Share Certif icate Counterfoil Copy of Extract of Minutes of BOD Meeting Copy of Source of Funds Certificate Copy of ITR Acknowledgement for AY 10-11 Copy of Audit Report along with Balance Sheet of AY 10-11 Copy of Certif icate of Incorporation 47 ITA No. 1197/Mum/2025 Akash Universal Ltd, Mumbai Copy of Memorandum & Articles of Association Company Master Data showing status active Kasturi Infrastructure Pvt Ltd Share Application Form Copy of Bank Statement of M/s Kasturi Infrastructure Pvt Ltd Copy of Bank Statement of M/s RKTPL Copy of Share Certif icate Counterfoil Copy of Source of Funds Certificate Copy of Audit Report along with Balance Sheet of AY 10-11 Copy of Certif icate of Incorporation Copy of Memorandum & Articles of Association Company Master Data showing status active Kasturi Towers Ltd.
Share Application Form Copy of Bank Statement of M/s Kasturi Towers Ltd. Copy of Bank Statement of M/s RKTPL Copy of Share Certif icate Counterfoil Copy of Source of Funds Certificate Copy of ITR Acknowledgement for AY 10-11 Copy of Audit Report along with Balance Sheet of AY 10-11 Copy of Certif icate of Incorporation Copy of Memorandum & Articles of Association Company Master Data showing status active Mridang Commerce Pvt. Ltd.
Share Application Form Copy of Bank Statement of M/s Mridang Commerce Pvt. Ltd. Copy of Bank Statement of M/s RKTPL Copy of Share Certif icate Counterfoil Copy of Source of Funds Certificate Copy of ITR Acknowledgement for AY 10-11 Copy of Audit Report along with Balance Sheet of AY 10-11 Copy of Certif icate of Incorporation Copy of Memorandum & Articles of Association Company Master Data showing status active
9. Now before proceeding further, it is necessary and imperative to evaluate the provisions of Sec. 68 of the Act, which reads as under:
48 ITA No. 1197/Mum/2025Akash Universal Ltd, Mumbai
68. Where any sum is found credited in the books of an assessee maintained for any previous year, and the assessee offers no explanation about the nature and source thereof or the explanation offered by him is not, in the opinion of the Assessing officer, satisfactory, the sum so credited may be charged to income-tax as the income of the assessee of that previous year."
10 From the plain reading of the above Section, it is clearly evident that the assessee should be able to provide satisfactory explanation about the sum found to be credited in the books of accounts. It is settled legal principles that if the assessee proves the identity and creditworthiness of the shareholders and genuineness of the transactions then in that eventuality no additions u/s 68 could be made.
11. To prove the above basic ingredients, the assessee has already placed on record sufficient documentary evidences which are at paper book page No. 21 to 218 but on the contrary the AO could not point out any defect in any of the documents, except the facts the merely some of the share applicants have low profits or maintain nominal balance in their bank account or some of the share applicants moved to other addresses. In our view this cannot be a reason for making additions. Further, if the AO wished to pursue the matter, then there were sufficient clues for him to have proceeded. For instance, it could have issued notices and obtained statements from bankers of share applicants or even balance sheet which existed in 49 ITA No. 1197/Mum/2025 Akash Universal Ltd, Mumbai the records of their AO. The AO had not even called for any report or verification from the registrar of companies record, which goes to show that AO did not choose to pursue the said course of action. Since the assessee had successfully discharged his initial onus of proving share application transactions and AO could not establish on record that assessee generated unaccounted money and routed the same through banking channel in the garb of share application money.
12. We have also noticed that all the share applicants have enough funds to invest into the assessee company, which is quite visible and verifiable from the copies of balance sheet. It is equally established truth that additions or disallowances under the Income-tax Act are governed by specific provisions of Act and not on assumptions or presumptions or on human probabilities test. In the present case the confirmation of share applicants, copy of acknowledgement of return of income, audit report, Board resolution and compliance under the companies Act duly proves that the transactions were genuine and there were no infringement of any law. Even the share application companies are active in the records of the registrar companies. Hence additions u/s 68 of the Act are uncalled for. In this regard placed reliance is placed upon the following decisions:
50 ITA No. 1197/Mum/2025Akash Universal Ltd, Mumbai D. Bharat Securities (P.) Ltd Vs. PCIT [2020] 113 taxmann.com 32 (SC) order passed on 11th September, 2019 in assessee'sfavour.
Held that once genuineness, creditworthiness and identity of investors are established, no addition could be made as cash credit on ground that shares were issued at excess premium E. Rohtak Chain Co. (P.) Ltd vs. PCIT [2019] 110 taxmann.com 59 (SC) order passed on 5th August, 2019 in assessee'sfavour.
Held that once genuineness, creditworthiness and identity of investors were established, no addition could be made as cash credit on ground that shares were issued at excess premium F. PCIT vs. Chain House International (P) Ltd [2019] 103 taxmann.com 435 (SC)order passed on 18th Februrary, 2019 in assessee'sfavour.
It was held that No reason to interfere. SLP dismissed. High Court held there is no limitation on the amount of premium that can be charged. The AO cannot question the transaction merely because he thinks the investor could have managed by paying a lesser amount as share premium. It is the prerogative of the Board of Directors to decide the premium and it is the wisdom of the shareholder whether they want to subscribe to shares at such a premium or not. S. 68 does not apply as the funds were received through banking channels and the identity, creditworthiness and genuineness of the investors was established BOMBAY HIGH COURT :-
PCIT Vs. Ami Industries (India) P Ltd Income Tax Appeal No. 1231 of 2017 order passed on 29th January, 2020 in assessee'sfavour.
In NRA Iron & Steel (P) Ltd (supra), the Assessing Officer had made independent and detailed inquiry including survey of the investor companies. The field report revealed that the shareholders were either non-existent or lacked credit- worthiness. It is in these circumstances, Supreme Court held 51 ITA No. 1197/Mum/2025 Akash Universal Ltd, Mumbai that the onus to establish identity of the investor companies was not discharged by the assessee. The aforesaid decision is, therefore, clearly distinguishable on facts of the present case. Held that identity of the creditors were not in doubt. Assessee had furnished PAN, copies of the income tax returns of the creditors as well as copy of bank accounts of the three creditors in which the share application money was deposited in order to prove genuineness of the transactions. In so far credit worthiness of the creditors were concerned, Tribunal recorded that bank accounts of the creditors showed that the creditors had funds to make payments for share application money and in this regard, resolutions were also passed by the Board of Directors of the three creditors.
Baba Bhootnath Trade & Commerce Ltd vs. ITO (ITAT Kolkata)I.T.A. No.1494/Kol/2017 in Assessee'sfavour. It was held that the judgement in PCIT vs. NRA Iron & Steel 103 TM.com 48 (SC) is distinguishable on facts & does not apply to a case where the assessee has discharged its onus to prove the identity, creditworthiness and genuineness of the share applicants by producing the PAN details, bank account statements, audited financial statements and Income Tax acknowledgments and the investors have shown the source of source & personally appeared before the AO in response to s. 131 summons SN CITATION OBSERVATIONS
19. In the case of INCOME TAX: Where High Principal Court upheld Tribunal's Commissioner of order deleting addition Income-tax, made under section 68 in Central-1 respect of share v.Adamine application money received Construction (P.) by assessee on ground that Ltd. before assessee had brought on SUPREME COURT record sufficient 52 ITA No. 1197/Mum/2025 Akash Universal Ltd, Mumbai OF documentary evidence to INDIASPECIAL prove identity and LEAVE PETITION creditworthiness of share (CIVIL) DIARY applicants, SLP filed NOS. 29917 OF against said order was to 2018 be dismissed Section 68 of the Income-tax Act, 1961 - Cash credits (Share capital) - Assessment year 2008 09 - During relevant year assessee received share application money from share applicants Assessing Officer doubting identity and creditworthiness of those applicants, added said amount to assessee's income under section 68 -
Tribunal, however, deleted addition made by Assessing Officer - High Court noted that both assessee and later share applicants upon receiving notice under section 131, had produced documentary proof -
Documents so produced
included assessments and
returns filed by share
applicants as well as
confirmation and
acknowledgment documents - According to High court, if Assessing Officer wished to pursue matter, there were sufficient clues for him to have proceeded, for instance, it could have issued notices and obtained statements from bankers of share applicants 53 ITA No. 1197/Mum/2025 Akash Universal Ltd, Mumbai or even balance sheets which existed in records of their Assessing Officers However, Assessing Officer did not choose to pursue said course of action - High Court thus upheld Tribunal's order deleting addition made by Assessing Officer - Whether, on facts, SLP f iled against order of High Court was to be dismissed - Held, yes [Para 2] [In favour of assessee]
20. In the case of INCOME TAX : Proviso to AdhoiVyapar(P.) section 68, which provides Ltd. v. Income- that explanation furnished tax Officer IN by assessee about nature THE ITAT and source of share MUMBAI BENCH application money, etc. 'A' IT APPEAL shall be not satisfactory NOS. 7308 TO unless person in whose 7311 (MUM.) OF name such credit is 2019 recorded offers an [ASSESSMENT satisfactory explanation YEARS 2009-10 about nature and source of TO 2012-13] sum so credited, is applicable only from assessment year 2013-14 and is not retrospective in nature INCOME TAX : Where assessee had discharged initial onus of proving share application transactions and Assessing Officer could not establish that assessee generated unaccounted money and routed same through banking channels in garb of share-application 54 ITA No. 1197/Mum/2025 Akash Universal Ltd, Mumbai money, addition under sections 68 and 69C is not sustainable in law Section 68 of the Income-tax Act, 1961 - Cash credit (Proviso) - Assessment years 2009-10, 2010-11, 2011-12 and 2012-13 - Whether proviso inserted to section 68 by Finance Act, 2012 with effect from 1-4-2013, which provides that explanation furnished by assessee about nature and source of share- application money, share capital, share premium etc. shall be deemed to be not satisf actory unless person in whose name such credit is recorded also offers an explanation about nature and source of sum so credited and such explanation is found to be satisf actory, is applicable only from assessment year 2013-14 and is not retrospective in nature - Held, yes [Para 6.5] [In favour of assessee] Section 68, read with sections 69C and 147, of the Income-tax Act, 1961 - Cash credit (Burden of proof) - Assessment years 2009-10, 2010-11, 2011-12 and 2012- 13 - Whether where assessee had discharged initial onus of proving share application transactions in terms of requirements of section 68, onus had shif ted on 55 ITA No. 1197/Mum/2025 Akash Universal Ltd, Mumbai Assessing Officer to dislodge assessee's documentary evidences and bring on record cogent material to establish that assessee generated unaccounted money and routed same through banking channels in garb of share- application money - Held, yes
- Whether unless such an investigation is shown to have been carried out, additions would not be sustainable in law since it is trite law that no addition could be made on basis of mere suspicion, conjectures and surmises - Held, yes [Paras 6.4 and 6.8] [In favour of assessee]
21. In the case of INCOME TAX: Where Principal assessee received share Commissioner of application money and Income-tax v. Assessing Officer made Realvalue section 68 addition in Realtors (P.) Ltd hands of assessee on before HIGH ground that assessee had COURT OF failed to discharge onus of BOMBAYIT establishing genuineness APPEAL NO. 957 of transaction and OF 2017† creditworthiness of shareholder, since substantial amount of said loan was received in earlier year and as regards balance, sufficient evidence was produced, same could not be added as unexplained investment in relevant assessment year 56 ITA No. 1197/Mum/2025 Akash Universal Ltd, Mumbai Section 68 of the Income-tax Act, 1961 - Cash credit (Share capital) - Assessment year 2007 08 - Assessee was engaged in business of dealing in property and trading in shares and stock - Assessing Officer noted that in relevant previous year assessee had received an amount from one shareholder as share application money but had f ailed to discharge onus of establishing genuineness of transaction and creditworthiness of same
- Assessing Officer treated said amount as unexplained cash credit - Commissioner (Appeals) noted that substantial part of said sum was received in earlier assessment year and, thus, it could not be added in impugned assessment year - Further, Commissioner (Appeals) observed that as regards balance sum, sufficient evidence was produced in respect of identity and genuineness of shareholder and he, accordingly, deleted said addition - Tribunal confirmed said order - Whether on facts, no substantial question of law arose for consideration - Held, yes [Para 7] [In favour of assessee]
22. In the case of INCOME TAX: Where first 57 ITA No. 1197/Mum/2025 Akash Universal Ltd, Mumbai Principal appellate authority had Commissioner of returned a clear finding of Income-tax-1 v. fact that assessee had Ami Industries discharged its onus of (India) (P.) Ltd. proving identity of before HIGH creditors, genuineness of COURT OF transactions and credit BOMBAY IT worthiness of creditors APPEAL NO. which finding of fact stood 1231 OF 2017 affirmed by Tribunal and revenue had not been able to show any perversity in aforesaid findings of fact by authorities below, Tribunal was right in holding that no addition could be made under section 68 Section 68 of the Income-tax Act, 1961 - Cash credit (Share application money) -
Assessment year 2010-11 - Assessing Officer noted that assessee had disclosed funds from three Kolkata based companies as share application money - But, since where abouts of above companies were doubtful and their identity could not be authenticated, Assessing Officer treated aforesaid funds as money from unexplained sources and added same to income of assessee as unexplained cash credit under section 68 - However, it was found that assessee-company had furnished PAN, copies of 58 ITA No. 1197/Mum/2025 Akash Universal Ltd, Mumbai income tax returns of creditors as well as copy of bank accounts of three creditors through which share application money was deposited in order to prove genuineness of transactions - Further, insofar as creditworthiness of creditors were concerned, Tribunal recorded that bank accounts of creditors showed that creditors had funds to make payments for share application money and in this regard, resolutions were also passed by Board of Directors of three creditors Thus, f irst appellate authority had returned a clear finding of fact that assessee had discharged its onus of proving identity of creditors, genuineness of transactions and creditworthiness of creditors which finding of fact stood affirmed by Tribunal - Revenue had not been able to show any perversity in aforesaid findings of fact by authorities below Whether therefore, Tribunal was right in confirming order passed by Commissioner (Appeals) and holding that no addition could be made under section 68 -
Held, yes [Paras 21, 23 and 24] [In favour of assessee]
23. In the case of INCOME TAX : Where Shree Veer assessee received certain 59 ITA No. 1197/Mum/2025 Akash Universal Ltd, Mumbai Buildbest(P.) amount as share Ltd. v. Income- application money from a tax Officer IN party and documents THE ITAT furnished by assessee AHMEDABAD established identity, BENCH 'C' IT creditworthiness and APPEAL NO. 892 genuineness of share (AHD.) OF 2023 application money [ASSESSMENT received, addition under YEAR 2011-12] section 68 was not justified III. Section 68, of the Income- tax Act, 1961 - Cash credit (Share application money) Assessment year 2011-12 - Assessee received certain amount as share application money from a party -
Assessing Officer added said amount to assessee's income as unexplained under section 68 on protective basis -
Whether since documents furnished by assessee established identity, creditworthiness and genuineness of share application money received and there was no substantive addition in hands of aforesaid party and Assessing Officer's failure to provide further substantial evidence or conduct thorough investigation meant that protective addition of aforesaid amount under section 68 was not justif ied - Held, yes [Paras 15, 15.2 and 60 ITA No. 1197/Mum/2025 Akash Universal Ltd, Mumbai 15.3] [In favour of assessee]
24. In the case of INCOME TAX : Where Principal assessee received share Commissioner of application money and had Income-tax v. furnished each and every Esspal document required for International proving identity, (P.) Ltd.D.B. creditworthiness of share before HIGH applicants and COURT OF genuineness of RAJASTHAN transactions, impugned INCOME TAX addition made under APPEAL NO. 25 section 68 on ground that OF 2024 it was accommodation entry was to be deleted Section 68 of Income-tax Act, 1961 - Cash credit (Share application money) -
Assessment year 2014-15 - During a search conducted upon one SCS, it was found that he was engaged in providing accommodation entries of share capital, share premium, share application money, unsecured loans, long term capital gains, short term capital gains etc. in lieu of cash received by him and that it had also provided one-time entry of certain amount towards share application money to assessee-company through a broker and such transaction was not genuine - Assessing Officer made addition under section 68 to income of assessee on account of same - It was noted that Tribunal had noted 61 ITA No. 1197/Mum/2025 Akash Universal Ltd, Mumbai that assessee had furnished each and every document required for proving identity, creditworthiness of share applicants and genuineness of transactions, however, Assessing Officer had not been able to brought on record any evidence to show that cash was paid by assessee to any person for obtaining accommodation entries in form of share application money - Further, on a glance at materials on record, it was found that Assessing Officer assessed assessee under section 143(3) only on basis of statement given by SCS - However, it was a matter of record that SCS had retracted his statements given before Assessing Officer - Whether, on facts, impugned addition made by Assessing Officer was without any basis - Held, yes [Para 14] [In favour of assessee]
25. In the case of INCOME TAX : Provisions of Principal section 68 could not be Commissioner of invoked, more particularly Income-tax v. when addition was made Siyaram Metals on account of share Udyog (P.) before premium and share HIGH COURT OF application money by GUJRAT TAX investors whose identity, APPEAL TAX creditworthiness and APPEAL NO. 508 genuineness was proved by OF 2023 assessee 62 ITA No. 1197/Mum/2025 Akash Universal Ltd, Mumbai I. Section 68 of the Income-tax Act, 1961 - Cash credit (Share application money) Assessment year 2011-12 -
Assessee-company was
incorporated in relevant
assessment year by
converting proprietary
concern - Thereafter,
assessee-company allotted
shares at premium to
proprietor and also to other investors - During course of assessment proceedings, Assessing Officer noted that a search was conducted at premises of assessee wherein it was found that share certif icates were not issued to investors - He, thus, made additions under section 68 of entire credit of share capital and premium - On appeal, Commissioner (Appeals) deleted said additions -
Tribunal upheld said order on ground that identity of party was established by furnishing name, address and PAN detail, bank details, ITR etc. - Tribunal further held that it was first year of operation of assessee-
company and declaration of dividend by company had nothing to do with share capital received by assessee and thus, assessee discharged onus cast upon it under section 68 - Whether 63 ITA No. 1197/Mum/2025 Akash Universal Ltd, Mumbai Tribunal had rightly held that provisions of section 68 could not be invoked, more particularly when addition was made on account of share premium and share application money by investors whose identity, creditworthiness and genuineness was proved by assessee - Held, yes [Para 3] [In favour of assessee]
26. In the case of INCOME TAX : Where Abhijavala assessee received share Developers (P.) capital and unsecured loan Ltd. v. Income from several entities and Tax Officer produced documentary 9(1)(1), Mumbai evidences such as copy of IN THE ITAT confirmation of accounts, MUMBAI BENCH copy of PAN card, bank 'A' IT (APPEAL) statement ITR NO. 952 (MUM) acknowledgement and OF 2019 financial statements of all [ASSESSMENT investors/lenders so as to YEAR 2012-13] substantiate these transactions and funds were transferred to assessee through proper banking channels, no addition under section 68 could be made on basis of third party statements Section 68 of the Income-
tax Act, 1961 - Cash credit (Share capital and unsecured loan) Assessment year 2012-13 - During year, assessee company received unsecured loan and share application money from six 64 ITA No. 1197/Mum/2025 Akash Universal Ltd, Mumbai corporate entities - Assessing Officer noted that summons issued under section 131 to these entities were returned back with remarks like not known/incomplete address and assessee was unable to produce any of these parties - He further noted that an information was received from DGIT (Inv.) that all these entities were involved in providing bogus accommodation entries of varied nature - Accordingly, he held that unsecured loans as well as share application money received by assessee from all six entities was non- genuine and a sham and added these amount to income of assessee under section 68 - It was noted that assessee had furnished all documentary evidences such as copy of confirmation of accounts by lender/investor, copy of PAN Card, bank statement, ITR acknowledgement and copy of financial statements of all investor/lender entities - Further, all these six entities had f iled their return of income after paying taxes - They had also duly confirmed transactions carried out with assessee - All funds were transferred to assessee through proper banking 65 ITA No. 1197/Mum/2025 Akash Universal Ltd, Mumbai channels and there was no immediate cash deposits in their accounts before transfer of funds to assessee -
Allegations of revenue were not supported by any corroborative evidences - So far as information of DGIT (Inv.) was concerned, these were found merely third party statements which were never confronted to assessee and those statements on standalone basis could not form basis of making additions in hands of assessee - Whether, on facts, impugned additions made under section 68 to income of assessee was unjustified and same was to be deleted -
Held, yes [Para 5] [In favour of assessee]
27. In the case of Section 68, read with section NextgenVyapaar 263, of the Income-tax Act, (P) Ltd. v. 1961 - Cash credit (Revision) Principal Assessment year 2012-13 - Commissioner of Assessee company, engaged Income Tax-4, in business of dealing in KolkataIN THE shares and investments, filed ITAT KOLKATA its return of income - BENCH 'A' IT Assessing Officer passed an APPEAL NO. assessment order under 1176 (KOL.) OF section 143(3) making an 2019 addition of certain amount [ASSESSMENT under section 68 as YEAR 2012-13] unexplained cash credit on account of share application money and premium received by assessee during year -
66 ITA No. 1197/Mum/2025Akash Universal Ltd, Mumbai Principal Commissioner invoked revision jurisdiction under section 263 and directed Assessing Officer to carry out proper examination of books of account and bank accounts of assessee as well as investors - Assessing Officer passed an order under section 263 determining total income of assessee at lesser amount by deleting addition under section 68 on ground that source of fund, identity, genuineness and creditworthiness of share applicants were verified and found in order - Pr.
Commissioner issued another notice under section 263 on ground that income determined as per impugned order under section 263 was less than total income as assessed under earlier original assessment order under section 143(3), therefore, impugned assessment order was prejudicial to interest of revenue It was noted that assessment orders of share applicant companies were passed under section 143(3) by revenue, thus, identity and creditworthiness of share applicant companies were proved - Share applicant companies had responded to notices under section 133(6) 67 ITA No. 1197/Mum/2025 Akash Universal Ltd, Mumbai and also appeared before Assessing Officer and furnished copy of I.T. return/acknowledgement, copy of annual audited accounts, balance sheet and profit & loss account statement and copy of bank statement, etc. so as to prove genuineness of transactions - Thus, Assessing Officer had taken a plausible view in his first order passed under section 263 - Such a view could not be termed as erroneous insofar as it was prejudicial to interest of revenue Whether, on facts, impugned invocation of revision jurisdiction under section 263 second time merely because total income determined by Assessing Officer in revision order was less than income determined in original assessment proceedings, was unjustified
28. PCIT v/s In the case of PCIT v.
Himachal fibers Himachal Fibers Ltd [2018] Ltd. (2018) 98 98 taxmann.com 173 (SC) the taxmann.com 173 Hon'ble Supreme Court has (SC) observed as under:
"Where in course of appellate proceedings, High Court set aside addition made by AO under section 68 in respect of share application money by holding that identity of share applicants was clearly revealed but 68 ITA No. 1197/Mum/2025 Akash Universal Ltd, Mumbai Assessing Officer did not conduct any further enquiry except resting his conclusions on surmises, SLP f iled against said order was to be dismissed."
29. CIT vs. Steller It has been observed by the Investment Ltd. Supreme Court in the above SC. (2001)251 case that, "According to High ITR 0236 Court, even if the subscribers to the increased share capital were not genuine the amount could not be regarded as undisclosed income of the assessee company and no question of law arose for reference- Justif ied-No interference is called for.- CIT vs. stellar Investment Ltd. (1991) 99 CTR (Del) 40 :
(1991) 192 ITR 287 (SC): TC 55R.593 affirmed,."
30. M/s V. R. Global Where assessee allotted Energy Pvt. Ltd. shares to a company in v/s ITO Appeal No settlement of pre-existing 246 of 2017 liability of assessee to said dated 01.09.2016 company, since no cash was (HC) involved in transaction of said allotment of shares, conversion of these liabilities into share capital and share premium could not be treated as unexplained cash credits under section 68 PCIT (Central) - 4 Thus, the initial burden v/s M/s Acquatic was discharged by the Remedies Pvt. Ltd respondent in respect of (HC) creditworthiness of the investor and nothing has been shown by the Revenue 69 ITA No. 1197/Mum/2025 Akash Universal Ltd, Mumbai to doubt the same and/or steps taken and result thereof. Thus, this objection of lack of creditworthiness of the shareholder also does not survive. In f act, the impugned order of the Tribunal, on examination of facts, has come to the conclusion that the investment made by the shareholders is not hit by Section 68 of the Act.
31. CIT vs Oasis "11. It is clear from the Hospitalities Pvt. above that the initial Ltd. (ITA No. burden is upon the 2093 of assessee to explain the 2010),(HC) nature and source of the share application money received by the assessee. In order to discharge this burden, the assessee is required to prove:
(a) Identity of
shareholder;
(b) Genuineness of
transaction; and
(c) Credit worthiness
of shareholders.
12. In case the
investor/shareholder is an individual, some documents will have to be filed or the said shareholder will have to be produced before the AO to prove his identity. If the creditor/subscriber is a company, then the details in the form of registered 70 ITA No. 1197/Mum/2025 Akash Universal Ltd, Mumbai address or PAN identity, etc. can be furnished.
13. Genuineness of the transaction is to be demonstrated by showing that the assessee had, in fact, received money from the said shareholder and it came from the coffers from that very shareholder. The Division Bench held that when the money is received by cheque and is transmitted through banking or other indisputable channels, genuineness of transaction would be proved. Other documents showing the genuineness of transaction could be the copies of the shareholders register, share application forms, share transfer register, etc.
14. As far as creditworthiness or financial strength of the credit/subscriber is concerned, that can be proved by producing the bank statement of the creditors/subscribers showing that it had sufficient balance in its accounts to enable it to subscribe to the share capital. This judgment further holds that once these documents are 71 ITA No. 1197/Mum/2025 Akash Universal Ltd, Mumbai produced, the assessee would have satisfactorily discharge the onus cast upon him.
Thereafter, it is for the AO to scrutinize the same and in case he nurtures any doubt about the veracity of these documents to probe the matter further. However, to discredit the documents produced by the assessee on the aforesaid aspects, there has to be some cogent reasons and materials for the AO and he cannot go into the realm of suspicion."
32. CIT Vs. Divine The assessee has to prima Leasing & facie prove (1) the identity of Finance Ltd. the creditor/subscriber; (2) (2008) 299 the genuineness of the ITR0268 transaction, namely, whether it has been \transmitted through banking or other indisputable channels; (3) the creditworthiness or financial strength of the creditor/subscriber; (4) if relevant details of the address or PAN identity of the creditor/subscriber are furnished to the Department along with copies of the shareholders register, share application forms, share transfer register, etc. it would 72 ITA No. 1197/Mum/2025 Akash Universal Ltd, Mumbai constitute acceptable proof or acceptable explanation by the assessee; (5) the Department would not be justified in drawing an adverse inference only because the creditor/subscriber fails or neglects to respond to its notices; (6) the onus would not stand discharged if the creditor/subscriber denies or repudiates the transaction set up by the assessee nor should the AO take such repudiation at face value and construe it, without more, against the assessee; (7) the A0 is duty bound to investigate the creditworthiness of the creditor/subscriber, the genuineness of the transaction and the veracity of the repudiation"
33. Green infra ltd. "the transaction was tested in Vs. ITO (2014) the light of the provisions of 159 TTJ Sec. 68. As per Section 68 the 0728(Mumbai) initial onus was upon the assessee to establish identity, genuineness of the transaction and the capacity of the lender or the depositor. The subscribers to the share capital were all companies.
The confirmations of the
transactions had been
received by the AO by issuing notice u/s. 133(6), therefore, identity had been established beyond all reasonable doubts.
73 ITA No. 1197/Mum/2025Akash Universal Ltd, Mumbai The genuineness of the transaction could also be safely concluded since the entire transaction had been done through the banking channels duly recorded in the books of accounts of the assessee duly reflected in the financial statement of the assessee. The bank statement was exhibited in which the transactions relating to the allotment of shares were duly reflected."
34. Shree The Tribunal has considered GirirajFerromet that the Assessee has Pvt. Ltd v/s ITO produced on record the ITA No. documents to establish the 3697/MUM/2017 genuineness of the party such as PAN of all the creditors along with the confirmation, their bank statements showing payment of share application money. It was also observed by the Tribunal that the Assessee has also produced the entire record regarding issuance of shares i.e. allotment of shares to these parties, their share application forms, allotment letters and share certif icates, so also the books of account. The balance sheet and profit and loss account of these persons discloses that these persons had sufficient funds in their accounts for investing in the shares of the Assessee. In view of these 74 ITA No. 1197/Mum/2025 Akash Universal Ltd, Mumbai voluminous documentary evidence, only because those persons had not appeared before the Assessing Officer would not negate the case of the Assessee. The judgment in case of Gagandeep Infrastructure (P.) Ltd. (supra) would be applicable in the facts and circumstances of the present case.
35. Rajat Exports However, considering the Import (India) facts of the case and in the Pvt. Ltd. v/s ITO light of the above discussion, ITA No. it is clear that the initial 5637/DEL/2013 burden upon the assessee to prove identity of the investors, their creditworthiness and genuineness of the transaction have been discharged by the assessee. AO thereafter, did nothing in the matter, therefore, no addition could be made against the assessee. Therefore, in our view, it is not a fit case to remand matter to the CIT(A). We are, therefore, of the view that assessee proved identity of the investors, their creditworthiness and genuineness of the transaction in the matter. Therefore, no addition could be made against the assessee.
36. DCIT 1(3)(2) v/s S. 68 Bogus share premium:
M/s Varsity The AO cannot assess the 75 ITA No. 1197/Mum/2025 Akash Universal Ltd, Mumbai Education share premium as income Management Pvt. on the ground that it is Ltd. ITO ITA No. "excessive". The share 6991/MUM/2016 premium worked out in the Valuation Certificate is the minimum amount that can be collected by the assessee under RBI regulations. There is no bar on collecting higher amount as share premium.
There are several factors that are taken into consideration while issuing the equity shares to shareholders/investors, such as Venture capital funds and Private Equity funds. The premium is determined between the parties on the basis of commercial considerations and cannot be questioned by the tax authorities. The AO is not entitled to sit on the arm chair of a businessman and regulate the manner of conducting business (All judgements considered).
• CIT vs. Goa Sponge and Power Ltd., I.T. Appeal No. 16 of 2012 (Bom HC) • CIT Vs. Winstral Petrochemicals (P) Ltd. (2011)330ITR 0603 • CIT vs.Kamdhenu Steel &Aloys Ltd. &Ors. (2012) 80 CCH 027 Del HC • CIT vs. EMPIRE BUILTECH PVT LTD (2014) 88 CCH 033 Del. HC 76 ITA No. 1197/Mum/2025 Akash Universal Ltd, Mumbai • ACIT vs. Sankalp Corporate Pvt. Ltd., ITA NO.
118/Mum/2016 • ITO vs. Lisha Trading P. Ltd., ITA No. 5845/Mum/2016 • CIT vs. Lovely Exports P. Ltd. (2008) 216 CTR 195 (SC) • Jasamrit Constructions Pvt. Ltd. vs. ITO, ITA No. 1091/Mum/2016 • CIT vs. Alcon Biosciences P. Ltd., ITA No. 1946/Mum/2016 • CIT vs. Orchid Industries Pvt. Ltd., I.T. Appeal No. 1433 of 2014 (Bom HC) • ACIT-30(3) vs. Shreedham Builders ITO ITA No. 5589/MUM/2017 • ITO 7(1)(4) vs. Lisha Trading Pvt. Ltd. v/s ITO ITA No. 5845/MUM/2016 • Ito 2 (1)(2) vs. Diwali Developers Pvt. Ltd. ITO ITA No. 4723/MUM/2016 • ITO 10(2)(4) vs. M/s Superline Construction Pvt. Ltd. ITA No. 3645/MUM/2014 • Sunshine Metals & Alloys Industries Pvt. Ltd vs. ITO-4(3) (4), ITO ITA No. 3212/MUM/2014 • DCIT 7(3)(2) vs. Piramal Realty Pvt. Ltd. ITA No. 2317/MUM/2017 • ITO -6(1)(3), Mumbai vs. Arogya Bharti Health Park Pvt Ltd. ITA No.2943/MUM/2014 • ACIT,Circle-7(1)-1, Mumbai vs. Goldmohur Design & Apparel Park Ltd.
• Diwali Capital & Finance Private Ltd vs. DCIT CC-2(3) ITA No.2091/MUM/2018 • DCIT CC-2(2) vs. Diwali Capital & Finance Private Ltd ITA No.3986/Mum/2017 77 ITA No. 1197/Mum/2025 Akash Universal Ltd, Mumbai • DCIT CC-2(2) vs. Blue Stock Investment Pvt Ltd ITA No.3987/Mum/2017 • Blue stock Investments Private Ltd vs. DCIT CC-2(3) ITA No.2090/Mum/2018
8. Further, it would be relevant to take note of the decision of the Hon'ble Supreme Court in the case of CIT vs. Lovely Exports (P) Ltd. (216 CTR 195), wherein the Apex Court observed that once the assessee has given names and identity of the shareholders the onus upon it gets discharged and no addition can be made in the hands of the assessee.
9. Similar view has also been taken by the Hon'ble Delhi High Court in the case of Commissioner of Income-tax vs. Dwarkadhish Investment (P.) Ltd. (194 Taxman 43) where it was held that the initial onus of burden lies with the assessee, once he provides the identity by providing PAN or Assessment Numbers then the onus of proof shift to revenue, and it would not give revenue right to invoke section 68 of the Act.
10. In the present case, the AO arbitrarily concluded the hearing and even made the additions even in respect of the investors for which the copies of director report, balance sheet, share application forms, etc. were filed during the course of assessment proceedings. In this regard, the Appellant relies on the following decisions:
Nathu Ram Premchand vs. CIT (1963) 49 ITR 561 (All); CIT vs. Ponnuswamy Naidu (1995) 214 ITR 185 (Mad); CIT vs. S P Bhatt (1974) 97 ITR 440 (Guj).
11. Lastly, assuming without accepting, the parties from whom the Appellant had received the share application money are bogus than also the addition u/s. 68 of the Act cannot be made as the Appellant has provided identity of the said shareholders and the Department is free to proceed to reopen 78 ITA No. 1197/Mum/2025 Akash Universal Ltd, Mumbai their individual assessments in accordance with law and hence the share application money received cannot be regarded as undisclosed income under section 68 of the Act. The said ratio has been laid down by the Hon'ble Supreme Court in the case of CIT vs. Lovely Exports (P) Ltd. (supra).
13. Therefore considering the totality of facts and circumstances as discussed by us above and also considering the different judicial decisions we hold that the additions in the present case u/s 68 of the Act are unwarranted and thus we direct the AO to delete the additions while allowing these grounds raised before us.
14. Since, we have allowed ground No. 2 and delete the addition, therefore other grounds raised by the assessee / appellant needs no adjudication and are academic in nature.
15. In the result the appeal filed by the assessee stands partly allowed.
Order pronounced in the open court on 13.05.2025.
Sd/- Sd/-
(PRABHASH SHANKAR) (SANDEEP GOSAIN)
ACCOUNTANT MEMBER JUDICIAL MEMBER
Mumbai, Dated 13/05/2025
KRK, PS
79 ITA No. 1197/Mum/2025
Akash Universal Ltd, Mumbai आदे श की ितिलिप अ ेिषत/Copy of the Order forwarded to :
1. अपीलाथ / The Appellant
2. थ / The Respondent.
3. सं बंिधत आयकर आयु / The CIT(A)
4. आयकर आयु (अपील) / Concerned CIT
5. िवभागीय ितिनिध, आयकर अपीलीय अिधकरण, मु बई / DR, ITAT, Mumbai
6. गाड फाईल / Guard file.
/ आदे शानुसार BY ORDER, स ािपत ित //True Copy//
1. उप/सहायक पंजीकार ( Asst. Registrar) आयकर अपीलीय अिधकरण, मु बई / ITAT, Mumbai