No Addition for Share Capital & Premium from Group Companies with Common Directors/Shareholders

JCIT Vs Shivm Iron & Steel Company Pvt. Ltd. (ITAT Kolkata)

The case of JCIT Vs Shivm Iron & Steel Company Pvt. Ltd. pertains to an appeal against the CIT(A)’s order for the assessment year 2012-13. The central issue revolves around the addition of Rs. 8,50,40,000 under section 68 of the Income Tax Act, related to unexplained cash credits from share application money.

The Assessing Officer (AO) had raised concerns regarding the genuineness and creditworthiness of the share application money received by Shivm Iron & Steel Company from three entities: M/s Set Square Holdings Pvt. Ltd., M/s Almal Financiers & Consultants Pvt. Ltd., and M/s Dherar Textiles Private Ltd. The AO alleged that these transactions were a means to introduce undisclosed income in the guise of share capital.

During the assessment proceedings, the AO emphasized the failure of the assessee to produce the investors for verification, leading to the addition of the entire amount under section 68. However, the CIT(A) overturned this decision, citing substantial evidence presented by the appellant.

The CIT(A) considered the appellant’s submission that the three investing entities were group companies with common directors and shareholders. Detailed documentation, including audited accounts, PAN cards, bank statements, and affidavits, were submitted to substantiate the identity, creditworthiness, and genuineness of the transactions. Each entity’s financial capability to invest was meticulously documented, showing compliance with banking norms and corporate legalities.

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