PCIT Vs JPM Tools Ltd. (Delhi High Court)
The Delhi High Court adjudicated a series of income tax appeals filed by the Revenue challenging the common order of the Income Tax Appellate Tribunal (ITAT) dated 23rd December 2021. These appeals related to Assessment Years (AYs) 2008-09 to 2011-12 and concerned the addition of share capital and share premium on account of alleged bogus or accommodation entries involving multiple investor companies. The Revenue contended that ITAT erred in relying on the Court’s earlier judgment in CIT vs Kabul Chawla while ignoring a pending Supreme Court appeal in Apar Industries Ltd. The Revenue also argued that original share certificates evidencing share allotments were found at the premises of the assessee company, rather than at investor companies, and that the statements of one Rajesh Agarwal linked to the seized documents supported the claim that the investor companies were not genuine.
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The Revenue further submitted that notices issued under Section 133(6) of the Income Tax Act to the investor companies were returned unserved, implying the companies lacked genuine business operations and sufficient net worth. In contrast, the assessees argued that only photocopies of share certificates, not originals, were found. They pointed out that the Assessing Officer (AO) did not rely on the share certificates to make any additions under Section 68; rather, the AO relied on post-investigation reports and third-party statements. The ITAT observed that whether the certificates were originals or photocopies was irrelevant because they were not the basis for the additions. ITAT also noted that statements recorded under Section 132(4) of the Act do not, by themselves, constitute incriminating evidence, referencing prior decisions, including ACIT vs Moon Beverages Ltd.
