If proper source of capita and share premium is not shown than addition can be made under sec 68 of IT Act

IN THE INCOME TAX APPELLATE TRIBUNAL

(DELHI BENCH `D’: NEW DELHI)

BEFORE SHRI U.B.S. BEDI, JUDICIAL MEMBER AND

SHRI K.G. BANSAL, ACCOUNTANT MEMBER

ITA No.2653/Del./2011

(Assessment Year: 2007-08)

ITO, Ward 4(2),

New Delhi.

(Appellant)

Vs.

Jwalaji Propbuild Pvt. Ltd.,

373-2nd Floor, Sant Nagar,

East of Kailash, New Delhi.

(PAN/GIR No.AABCJ6879Q)

 (Respondent)

Assessee by: None

Revenue by: Shri D.K. Mishra, DR

ORDER

PER U.B.S. BEDI, J.M.

This appeal of the Revenue is directed against the order passed by the CIT (A)- VII, New Delhi, dated 11.03.2011, relevant to assessment year 2007-08, wherein following single effective ground has been raised:

“2. On the facts and in the circumstances of the case and in law, the CIT(A) has erred in deleting the addition of Rs.9,96,50,000/- made by the Assessing Officer u/s 68 of the I.T. Act, 1961 being the unexplained share capital and share premium of Rs.1,01,00,000/- and Rs.8,95,50,000, respectively.

2.1 The CIT(A) ignored the findings recorded by the Assessing Officer and the fact that the assessee did not discharge the onus of proving existence and fact that the assessee did not discharge the onus of proving existence and creditworthiness of the creditors and genuineness of the transactions.

2. The Assessing Officer in this case has made addition of Rs.9,96,50,000/- on account of share capital of Rs.1,01,00,000/- and share premium of Rs.8,95,50,000/- u/s 68 of the I.T. Act, 1961 and while making the addition, Assessing Officer observed that subscribing companies from whom the share capital was received had filed nominal income and as such capital investment cannot be accepted and made the impugned additions. In appeal, assessee submitted that Assessing Officer has just made the addition by simply holding that capital investment cannot be accepted in view of subscribing companies from whom the share capital had been received had filed nominal income. Assessee supported his plea by citing various decisions in his submissions as reproduced in para. 4 by Ld.CIT(A), who discussed the submissions and various judgments in his order from Paras. 4.1 to 4.3 and concluded to delete the impugned addition as per para.

4.4 of his order, which reads as under:

“4.4 In the present case, the assessee can be said to have discharged its onus under section 68 of the Act in proving the genuineness of the share capital in respect of the impugned 22 shareholders in the light of proposition laid down by the Supreme Court and Delhi High Court in the cases cited above. The appellant has given all the necessary details in order to establish the identity of the aforementioned share applicants. It is also observed that all the share applicants are corporate assessees, incorporated under Indian Companies Act. After considering the entire material placed on record, it is fair to conclude that the aforementioned 22 share applicants were exiting parties. It is also seen that the Assessing Officer could not point out any discrepancy in the evidences relied upon by the assessee. Further, what is the desired documentary evidence required to support the claim of the assessee as required by the Assessing Officer is not coming out of the order of the Assessing Officer. Though, the share-applicants could not be examined by the Assessing Officer, since they were existing on the file of the Income Tax Department and their income-tax details were made available to the Assessing Officer, it was equally the duty of the Assessing Officer to have taken steps to verify their assessment records and if necessary to also have them examined by the respective Assessing Officers having jurisdiction over them (share-applicants), which has not been done by him. In these circumstances, it is held that the addition of Rs.9,96,50,000/- on account of share capital and share premium u/s 68 of the Act can not be sustained and accordingly, the same is directed to be deleted.”

3. Aggrieved by this order of CIT(A), department has come up in appeal while relying upon the basis and reasoning as given by the Assessing Officer, it was pleaded for setting aside the order of CIT(A) and restoring that of the Assessing Officer.

4. Ld.DR has relied upon the judgment of Delhi High Court in CIT vs. Nova Promotor & Finlease P. Ltd. (I.T.A. No.342 of 2011), reported in 18 Taxman.Com 217 (Del.) in which Lovely Exports (P) Ltd. has duly been discussed to decide the issue in favour of the Revenue and further reliance was placed on ITO vs. Omega Biotech Ltd.(2010) 4 I.T.R. (Trib.) 72 (Del.). Therefore, following the ratio of the said judgments, Ld.DR has pleaded for reversal of the order of the CIT(A) and restoring of Assessing Officer.

5. Despite sending notice sufficiently in advance, assessee did not appear at the time when case was called up for hearing. So, we proceeded to decide this appeal of the department ex-parte qua-the-assessee on the basis of material available on record in the light of the arguments advanced by the Ld.DR.

6. We have heard Ld.DR and considered the material on record as well as precedents relied upon by the Ld.DR and find that in the case of Nova Promotors & Finlease (P) Ltd., Hon’ble Delhi High Court has discussed and distinguished the decision of Hon’ble Supreme Court in the case of CIT vs. Lovely Export Pvt. Ltd., 216 CTR (SC) 195 and various other related decisions to decide the appeal in favour of the department.

7. Since issue involved in the appeal has not been considered by the CIT(A) appropriately while giving relief to the assessee, therefore, considering the entirety of facts, circumstances and material on record, we find it just and appropriate to set aside the order of the Ld.CIT(A) and restore the matter back on his file with the direction to consider the issue afresh after giving due opportunity to the assessee as well as to Assessing Officer. We hold and direct accordingly.

8. As a result, the appeal filed by the department gets accepted for statistical purposes.

Order pronounced in open court on 05.06.2012.

                                                        Sd/-                                       Sd/-

                                            (K.G. BANSAL)                    (U.B.S. BEDI)

                                   ACCOUNTANT MEMBER   JUDICIAL MEMBER

Dated: June 05, 2012

SKB

Copy of the order forwarded to:-

1. Appellant

2. Respondent

3. CIT

4. CIT (A)-VII, New Delhi.

5. CIT (ITAT) Deputy Registrar, ITAT