DCIT Vs Vrindavan Tubes Ltd (ITAT Delhi)
ITAT Delhi held that addition under section 68 of the Income Tax Act treating share application money from undisclosed source unsustainable as burden duly discharged by filing confirmation, affidavit, copy of income tax return and bank statement of respective parties.
Facts- The assessee filed return of A.Y. 2011-12 declaring an income of Rs. 34,40,837/- and the same was processed u/s. 143(1) of the Act. Subsequently, an assessment order came to be passed u/s. 143(3) of the Act by making an addition of Rs. 1,71,00,000/- on account of share application money/share capital, Rs. 6,95,086/- disallowance on account of provision of excise duty, disallowance on the set off of brought forward losses of Rs. 34,40,838/- and also made addition on account of service tax payable of Rs. 15,06,665/-.
CIT(A) partly allowed the Appeal. Notably, CIT(A) deleted the addition of Rs. 1,71,00,000/- made by the A.O. on account of treating share application money from undisclosed sources u/s. 68 of the Act. Being aggrieved by the said deletion, revenue has preferred the present Appeal.
Conclusion- Held that the assessee had discharged its burden as per Section 68 of the Act, by filing confirmation, affidavit, copy of the income tax return and bank statement of the parties and considering the fact that the parties have furnished written reply to the A.O. confirming the investments made by them, in the absence of any material on record to controvert the evidence and explanation furnished by the assessee and also considering the facts and judicial decisions on the subject, we find no error in the order of the CIT(A) in deleting the addition made by the A.O. accordingly, we find no merit in the grounds of Appeal of the Revenue.
FULL TEXT OF THE ORDER OF ITAT DELHI
This appeal by Revenue is filed against the order of Learned Commissioner of Income Tax (Appeals)-9, New Delhi [“Ld. CIT(A)”, for short], dated 30/03/2015 for Assessment Year 2011-12 as well as the assessee has also filed Cross Objections. Grounds of appeal of the Revenue are as under:
“1 The Ld. CIT(A) has erred in deleting addition of Rs.1,71,00,000/- made by AO on account of treating share application money from undisclosed sources u/s 68 of the I.T. Act, 1961.
2. The appellant craves leave for reserving the right to amend, modify, alter or add any ground(s) of appeal at any time before or during the hearing of this appeal.”
Grounds in Cross Objection filed by the assessee.
“ That on the facts of the case and under the law, Ld. CIT(A) had erred in sustaining the addition/disallowance of Rs. 6,95,086/- being the provision of Excise Duty on finished goods.”
3. Brief facts of the case are that, the assessee filed return of the Assessment Year 2011-12 declaring an income of Rs. 34,40,837/- and the same was processed u/s 143(1) of the Act. Subsequently, an assessment order came to be passed u/s 143(3) of the Act on 31/03/2014 by making an addition of Rs. 1,71,00,000/- on account of share application money/share capital, Rs. 6,95,086/- disallowance on account of provision of excise duty, disallowance on the set off of brought forward losses of Rs. 34,40,838/- and also made addition on account of service tax payable of Rs. 15,06,665/-.
4. As against the assessment order dated 31/03/2014, the assessee preferred an Appeal before the CIT(A). The Ld. CIT(A) partly allowed the Appeal, wherein sustained the addition/disallowance of Rs. 6,95,086/- being the provision of excise duty on finished goods and further deleted the addition of Rs. 1,71,00,000/- made by the A.O. on account of treating share application money from undisclosed sources u/s 68 of the Act. Aggrieved by the above deletion of Rs. 1,71,00,000/- by the CIT(A), the Department of Revenue preferred the present Appeal in ITA No. 5114/Del/2015 and as against sustaining the disallowance of Rs. 6,95,086/- being the provision of excise duty on finished goods, the assessee preferred the C.O. No. 63/Del/2018 on the grounds mentioned above.
5. The Ld. Departmental Representative vehemently submitted that the order of the CIT(A) in deleting the addition of Rs. 1,71,00,000/- is erroneous and deserves to be set aside. Further submitted that, on perusal of the balance sheet of contributors, there are no fixed assets and there are negligible office expenses, no P & L Account has been enclosed in the paper book by the assessee and there are very normal income reflected in most of the investors companies, as per the bank account of the contributors except in the case of Intelligence Clearing Agency Pvt. Ltd., in all other companies, there were deposit in the bank accounts which were immediately transferred out living a very low balance in the account on the given day, which proves that the bank account has been used only to proved the money and source of fund as per balance sheet of the contributors are share capital and the same have been applied in share/investments and there is no other activities conducted by the Companies, therefore submitted that the CIT(A) has committed grave error in allowing the Appeal.
6. Per contra, the Ld. Assessee’s Representative submitted that all the 17 entities’ proved the confirmation of the transaction and the assessee has produced copy of the ITR, PAN Applications, copy of the Bank Statements, Copy of the Financial Statement of the Investors. Thus, the assessee has duly discharged the burden casted upon him u/s 68 of the Act. The notice issued u/s 133(6) of the Act were duly complied wherever the notices were sent to the correct address. Therefore, relying on the order of the CIT(A) sought for dismissal of the Appeal filed by the Revenue.
7. We have heard the parties and perused the material available on record. As per balance sheet of the assessee, the assessee had received the sum of Rs.1,71,00,000/- share application from following parties:
