Ritebane Agritech Solution Vs DCIT (ITAT Mumbai)
Share Capital & Loan Treated as Bogus: Appeals Dismissed for Complete Failure to Prove Creditworthiness and Genuineness
The assessee companies issued shares at a huge premium based on a valuation report that relied on “confirmed project orders”. However, as noted from the project table reproduced in the order (page 4), most of those projects had not even commenced and only one project was under implementation, that too with related parties. The Assessing Officer found that group concerns operating from the same premises were routing funds in a circular manner to create artificial share capital and premium.
Bank statements of the investor company showed circular movement of funds from related Arch group companies as interest-free loans, which were then invested in the assessee as share application money. The assessee could not produce any real evidence of project execution such as project reports, work commencement or material delivery to justify the high valuation.
Despite multiple opportunities before the AO, CIT(A) and the Tribunal, the assessee remained completely non-compliant and failed to file any supporting documents to prove identity, creditworthiness of the investor or genuineness of the transactions. The primary onus under section 68 was therefore not discharged.
On a connected issue, an alleged interest-free loan of ₹1.40 crore from another company was also held bogus since that creditor was under liquidation, had not filed returns for years, could not be located at its address, and the funds were immediately transferred by the assessee to its own director, indicating a circular accommodation entry.
In absence of any credible evidence and considering the clear signs of round-tripping and related-party fund routing, the Tribunal upheld the additions under section 68 for both share capital/premium and the unsecured loan.
FULL TEXT OF THE ORDER OF ITAT MUMBAI
