JSM Oilfields Services Pvt. Ltd. Vs DCIT (ITAT Delhi)
Share Capital Call-Money Addition Deleted— Statement Not Supplied or Cross-Examined; Identity, Creditworthiness & Genuineness Proven; Ad-hoc Personal-Use Disallowance Also Deleted
JSM Oilfields Services Pvt Ltd appealed against the order of CIT(A)/NFAC dated 31.07.2024, wherein the CIT(A) sustained an addition of ₹2,10,20,000 u/s 68 relating to call-money received on shares originally allotted in earlier years, and partly upheld an ad-hoc disallowance of ₹2,12,581 towards alleged personal expenses.
The Tribunal noted that the Assessee had allotted 52,550 shares in 2011 and received only call-money (₹4 face value + ₹396 premium per share) during AY 2013-14 from eight subscriber companies. Detailed documents—PAN, ITRs, bank statements, audited financials, MCA status, proof of reserves, and confirmations—were filed for all subscribers. Importantly, the Department had never questioned the application money received in earlier years nor the final call-money received in subsequent years.
The AO relied heavily on the statement of Shri Vivek Kumar Jain, alleged entry operator. However, the assessment records (as confirmed in the Remand Report) showed that:
(i) the statement was never supplied to the Assessee,
(ii) the statement was not even available in the AO’s assessment folder, and
(iii) no opportunity of cross-examination was ever given.
The Tribunal held that addition made on the basis of a third-party statement not furnished to the Assessee violates natural justice, following Krishna Chand Chela Ram (SC), Andaman Timber (SC), Odeon Builders (SC), and Ace Technologies (SC).
The Tribunal further held that for AY 2013-14, the Finance Act 2022 proviso to s.68 (source-of-source requirement) does not apply; therefore, once the Assessee establishes identity, creditworthiness & genuineness, the burden shifts to the Department. Nothing on record showed any cash-back cycle or adverse finding in subscribers’ accounts. Suspicion based on low fixed assets of the Assessee or common addresses of subscriber companies cannot override concrete documentary evidence. The principle of consistency also supported the Assessee since identical receipts in past and future years were accepted.
Thus, the entire ₹2.10 crore addition u/s 68 was deleted.
On the disallowance of ₹2,12,581 for alleged personal expenses, the Tribunal held that a private limited company cannot have “personal use” in its own hands, following Sayaji Iron & Engineering Co (Guj HC). Since the AO had made an ad-hoc estimate without pinpointing any specific non-business element, the disallowance was also deleted.
Result
Appeal allowed in full;
– Addition of ₹2,10,20,000 u/s 68 deleted;
– Disallowance of ₹2,12,581 deleted.
FULL TEXT OF THE ORDER OF ITAT DELHI
