Case Law Details
MA Projects Pvt. Ltd Vs DCIT (ITAT Delhi)
The Income Tax Appellate Tribunal (ITAT) Delhi allowed the assessee’s appeal for Assessment Year 2011-12 and deleted an addition of Rs. 50 lakh made under Section 68 of the Income-tax Act in respect of share application money received from an investor company.
The appeal arose from an order of the Commissioner of Income Tax (Appeals)-II, New Delhi, which had confirmed the addition made by the Assessing Officer. The dispute concerned whether the share application money received by the assessee company from Indian Hosiery Pvt. Ltd. could be treated as unexplained cash credit under Section 68 of the Act.
The assessee, engaged in real estate development, had received Rs. 50 lakh towards allotment of 50,000 equity shares of Rs. 10 each at a premium of Rs. 90 per share. The payments were received through account payee cheques. During assessment proceedings, the assessee was required to establish the identity of the investor, its creditworthiness, and the genuineness of the transaction.
The assessee submitted several documents including audited financial statements of the investor company, income tax return copies, confirmation letters, board resolution approving the investment, Form 2 relating to allotment of shares, and bank statements. It was also stated that the investment had been made from the investor company’s accumulated funds. The assessee further pointed out that the investor company had a net worth of Rs. 300.69 lakh as on 31 March 2010 and Rs. 345.95 lakh as on 31 March 2011. According to the assessee, the investor company had generated the investment funds through loans and advances received by it.
However, the Assessing Officer held that the assessee company was not carrying on genuine business activities and observed that the bank statement of the investor reflected only nominal balances during normal periods. The Assessing Officer concluded that the investor lacked sufficient own funds to make the investment of Rs. 50 lakh.
The assessee argued that the investor company was regularly assessed to tax and also produced a copy of the investor’s scrutiny assessment order passed under Section 143(3) for Assessment Year 2007-08. It was also submitted that the investor company had directly responded to the notice issued under Section 133(6) by the Assessing Officer and had furnished all required details.
The Tribunal examined the applicability of the Delhi High Court ruling in CIT vs Gangeshwari Metal Pvt. Ltd. and the Supreme Court ruling in PCIT vs NRA Iron & Steel Pvt. Ltd. The Department argued that the Delhi High Court decision was distinguishable because, in that case, the Assessing Officer had not conducted any enquiry after receiving documents from the assessee. In the present case, enquiries had been made.
The Tribunal observed that the investor company had duly complied with the notice issued under Section 133(6) and had directly confirmed the transaction before the Assessing Officer along with supporting documents. Therefore, the Tribunal held that the ratio of the Delhi High Court judgment in Gangeshwari Metal Pvt. Ltd. applied to the present case.
While considering the Supreme Court decision in NRA Iron & Steel Pvt. Ltd., the Tribunal noted that, in that case, several investor companies were found to be non-existent, and their identities could not be established. In contrast, the investor company in the present matter was assessed to tax, had complied with statutory notices, and had furnished documentary evidence supporting the source and genuineness of the investment. The Tribunal therefore held that the Supreme Court decision was factually distinguishable.
Accordingly, the Tribunal deleted the addition of Rs. 50 lakh made under Section 68 and allowed the assessee’s appeal. The order was pronounced on 13 May 2026.
FULL TEXT OF THE ORDER OF ITAT DELHI
1. The appeal in ITA No.402/Del/2025 for AY 2011-12, arises out of the order of the ld ld. Commissioner of Income Tax (Appeals)-II, New Delhi [hereinafter referred to as ‘ld. CIT(A)’, in short] dated 03.11.2014 against the order of assessment passed u/s 143(3) of the Income-tax Act, 1961 (hereinafter referred to as ‘the Act’) dated 03.03.2014 by the Assessing Officer, DCIT, Central Circle-03, New Delhi (hereinafter referred to as ‘ld. AO’).
2. The only issue to be decided in this appeal is as to whether the Learned CIT(A) was justified in confirming the addition of Rs 50,00,000 towards share application money under section 68 of the Act in the facts and circumstances of the instant case.
3. We have heard the rival submissions and perused the materials available on record. At the outset, we note that this appeal was originally dismissed by this Tribunal vide order dated 9.8.2019. Later the same was recalled vide MA No. 92/Del/2020 dated 10.10.2023 wherein the order is recalled only for the limited purpose of applicability of decision of Hon’ble Jurisdictional Delhi High Court in the case of CIT vs Gangeshwari Metal P Ltd reported in 361 ITR 10 (Del) and the decision of Hon’ble Supreme Court in the case of NRA Iron & Steel reported in 412 ITR 161 (SC) to the facts of the case.
4. The assessee is engaged in the business of development of real estate. The assessee had received Rs 50,00,000 as share application money from Indian Hosiery P Ltd for allotment of 50000 equity shares of Rs 10 each at a premium of Rs 90 per share. The amounts were received through account payee cheques. The assessee was directed to prove the three ingredients of section 68 of the Act i.e. identity of the investor, creditworthiness of the investor and genuineness of transactions. The Learned AO noted that assessee furnished only part of the replies called for by the Learned AO. The assessee furnished the copy of audited financial statements, copy of ITR of investor, name and address of director; confirmation from investor company together with the justification for investment at premium and board resolution authorising making investment at premium in the assessee company; copy of Form 2 for allotment of shares and bank statements of the investor. The assessee submitted that the source of investment in assessee company had emanated out of own accumulated funds of the investor company. The assessee submitted that the investor company is having net worth of Rs 300,69 lacs as on 31.3.2010 and Rs 345.95 lacs as on 31.3.2011. The source of investment of Investor Company was explained to have emanated out of receipt of loans and advances by the investor company and reinvesting in assessee company. The Learned AO noted that assessee company is not doing any genuine business; that the bank statement of investor had been furnished only for part of the period ; that on perusal of the bank statement of investor, on normal days, the investor company was only having nominal bank balance and concluded that investor company does not have own funds to make investment of Rs 50 lacs in assessee company.
5. The assessee company submitted that the investor company is duly assessed to income tax, furnished copy of assessment order of investor company under section 143(3) of the Act for Assessment Year 2007-08 dated 10.12.2009. The assessee submitted that in response to notice issued under section 133(6) of the Act, the investor company had duly responded to the same by furnishing the requisite replies directly before the Learned AO.
6. Now as stated in the MA order dated 10.10.2023, let us now see the applicability of decision of Hon’ble Jurisdictional Delhi High Court in the case of CIT vs Gangeshwari Metal P Ltd reported in 361 ITR 10 (Del) to the present case. The Learned DR vehemently argued that in the case before the Hon’ble Delhi High Court, after the furnishing of requisite documents by that assessee, the Assessing Officer did not conduct any enquiry. This fact is mentioned in para 10 of the decision. Under those circumstances, the Hon’ble High Court deleted the addition made under section 68 of the Act and whereas in the instant case, the Learned AO had indeed made enquiries to check the veracity of the documents furnished by the assessee company. We find that pursuant to the enquiries made by the Learned AO by issuing notice under section 133(6) of the Act to the investor company, the investor company had duly responded to the notice under section 133(6) of the Act by confirming the transactions and by furnishing the requisite documents directly before the Learned AO. Hence the ratio decidendi of the decision of Hon’ble Jurisdictional Delhi High Court is squarely applicable to the facts of the instant case before us.
7. With regard to the decision of the Hon’ble Supreme Court in the case of PCIT vs NRA Iron & Steel Pvt Ltd reported in 412 ITR 161 (SC), we find that in that case, pursuant to the enquiries conducted by the Assessing Officer, it revealed that in several cases the investor companies were found to be even non-existent and hence identity of the investor companies were not proved by that assessee. In these circumstances, the Hon’ble Supreme Court proceeded to make the observations against that assessee. This decision is factually distinguishable with that of the assessee’s instant case before us in view of the fact that investor company is duly assessed to tax and assessee had also placed on record the copy of scrutiny assessment order of the investor company. Hence the identity of the investor company cannot be doubted at all. Further notice under section 133(6) of the Act stood complied by the investor company by furnishing requisite details directly before the Learned AO together with the confirmation and justification for making investment at premium. The source of making investment in assessee company was also stated by the investor company in their confirmation which is duly supported by documentary evidences submitted by them directly before the Learned AO. Hence we have no hesitation to hold that the decision of the Hon’ble Supreme Court in the case of NRA Iron & Steel referred supra is factually distinguishable with that of the assessee’s case herein and we further hold that the decision of Hon’ble Jurisdictional Delhi High Court in the case of Gangeshwari Metal referred supra is squarely applicable to the facts of the instant case. Respectfully following the same, the addition made in the sum of Rs 50,00,000 is hereby deleted. Accordingly, the ground raised by the assessee is allowed.
8. In the result, the appeal of the assessee is allowed.
Order pronounced in the open court on 13/05/2026.
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