Section 69 Inapplicable to Share Application Money Received & Recorded in Books: ITAT Raipur

ITO Vs Maa Shakambhari Infratech Private Limited (ITAT Raipur)

Share Capital Received Is Not an “Investment Made” – Section 69 Cannot Be Invoked by Turning the Provision Upside Down

The Raipur Bench of the ITAT has held that share application money received by an assessee-company cannot be treated as its unexplained investment u/s 69, particularly when the transaction is duly recorded in its books of account. Section 69 applies where the assessee has made an investment which is not recorded in the books. It cannot be invoked against a company merely because it has received an investment from another company.

The assessee, Maa Shakambhari Infratech Pvt. Ltd., had received share application money of ₹2.83 crore from Rowland Vincom Pvt. Ltd. During reassessment proceedings, the AO treated the amount as an unexplained investment and made an addition u/s 69. The allegation was apparently based on information that the investor was a shell company and that its name had surfaced during an investigation involving another entity, namely Ankush Sales Pvt. Ltd.

The assessee contended that the very foundation of the addition was legally misconceived. The assessee had not made any investment; rather, it had received share application money. Further, the receipt was admittedly recorded in its regular books of account. Therefore, both the essential conditions necessary for applying section 69 were absent.