Enormous Nivesh Pvt. Ltd. Vs ACIT (ITAT Delhi)
ITAT Delhi Deletes Over ₹1112Cr Additions: Fresh Share Allotment Not Covered by s.56(2)(viia)-Suspicion on Debtors Unsustainable; Delhi Tribunal allowed Assessees’ appeals by deleting massive additions made u/s 56(2)(viia) & on account of sundry debtors.
Background:
Both assessees filed returns for AY 2015-16 showing meagre incomes. The AO, in scrutiny assessments u/s 143(3), made huge additions:
- Enormous Nivesh Pvt. Ltd. – ₹383.79 Cr (Bhartiya Hotels shares), ₹195.52 Cr (Dunlop Properties shares) & ₹89.29 lakh (sundry debtors).
- Fragment Nivesh Pvt. Ltd. – ₹335.82 Cr (Bhartiya Hotels shares), ₹195.53 Cr (Dunlop Properties shares) & ₹69.81 lakh (sundry debtors).
Thus, the combined additions in both cases work out to Rs. 1112,26,15,925/- (Rupees 1,112 crore 26 lakh 15 thousand 925 only). AO invoked s.56(2)(viia) on ground that shares were acquired at ₹10 per share, whereas FMV exceeded ₹950 per share. CIT(A) upheld additions.
Assessee’s Arguments:
- Section 56(2)(viia) applies to transfer of shares, not to fresh allotment. For allotment, only s.56(2)(viib) could apply.
- Relied on Khoday Distilleries Ltd. Vs. CIT (SC) & PCIT Vs. Jigar Jaswantlal Shah (Gujarat HC), where it was held that shares come into existence only upon allotment & fresh issue is not covered by s.56(2)(viia).
- As regards sundry debtors, AO made additions without rejecting books & without pointing out any bogus transaction in relevant year. The issue was already decided in favour of group companies (Fabulous Nivesh Pvt. Ltd., ITA 569/Del/2019, order dated 25.04.2025).
Revenue’s Stand:
- Since shares were acquired at price far below FMV, s.56(2)(viia) applied.
- Debtors were fictitious, as seen in earlier year, & sales were non-genuine.
Tribunal’s Findings:
- Allotment of fresh shares is not “transfer”, hence provisions of s.56(2)(viia) do not apply. Such cases fall under s.56(2)(viib), which deals with issue of shares at premium.
- Additions made by AO & confirmed by CIT(A) on Bhartiya Hotels & Dunlop Properties shares were therefore illegal.
- On sundry debtors, AO failed to bring any corroborative evidence of fictitious sales in AY 2015-16. Mere suspicion based on earlier year cannot justify addition. ITAT relied on its earlier ruling in Fabulous Nivesh Pvt. Ltd. (25.04.2025).
- Thus, all additions were set aside & both appeals allowed.
Result: Both appeals of assessees were allowed; additions aggregating over ₹1112 crore were deleted.
