Bestech Hospitalities Pvt. Ltd. Vs DCIT (ITAT Delhi)
Conclusion: Addition under Section 68 could not be sustained where assessee has established the genuineness of a Non-banking financial company (NBFC) investor, and the AO failed to rebut such evidence or trace any money trail linking the assessee to the invested funds.
Held: Assessee was a private limited company engaged in the hospitality business and was subjected to search and seizure proceedings under Section 132, pursuant to which the assessment was completed under Section 153A. During the assessment year (AY) 2011-12, AO observed that assessee had received share application money, amounting to ₹55 crore, including ₹25 crore from Apoorva Leasing Finance & Investment Co. Ltd. (the NBFC) and ₹30 crore from Micro Management Ltd. AO claimed that both investors were controlled by one S.K. Jain, an alleged accommodation entry provider, and that a total addition of ₹55 crore was made under Section 68 as unexplained cash credit. On appeal, CIT(A) deleted the ₹30 crore addition relating to Micro Management Ltd. but sustained the ₹25 crore addition relating to the NBFC, against which assessee preferred the present appeal. Assessee contended that it had fully discharged its onus under Section 68 by furnishing all requisite documents. It was argued that the investor was a listed NBFC with a net worth of over ₹120 crore, regularly assessed for tax, and had liquidated prior investments to fund the assessee, thus proving its genuineness. Assessee submitted PAN, ITRs, bank statements, confirmations, and other documents to establish identity, creditworthiness, and genuineness, contending that no source of source was required. Revenue relied on investigation wing reports and surrounding circumstances to allege bogus transactions. It was held that value of the share premium was already accepted by the revenue in respect of another investor and wasn’t found excessive. Therefore, once the premium was justified, it couldn’t be alleged that the investment was a bogus accommodation entry. Tribunal noted that NCLT had dismissed a winding-up petition against the NBFC, which NCLAT upheld, and that the Supreme Court had dismissed the SLP. Coordinate bench decisions in DCIT v. Garg Acrylics Ltd. and PCIT v. Modinagar Rolls Ltd., and had already accepted Apoorva Leasing as a genuine NBFC investor. Tribunal held that investments flowing from regulated NBFCs carry a presumption of genuineness unless rebutted by substantive evidence. Thus, no incriminating documents or money trail was discovered linking assessee’s funds to the NBFC. NBFC had duly responded to notices issued under sections 133(6) and 131, and its directors had appeared before the AO, thereby prima facie establishing the identity, creditworthiness, and genuineness of the transaction.
