DCIT Vs Snow Mount Properties Private Limited (ITAT Mumbai Bench)
₹30,000 Income Cannot Eclipse ₹475-Crore Capital: Low Returned Income & Common Address Alone Cannot Turn ₹90.42-Crore Preference Share Capital Into Unexplained Cash Credit U/s 68 – ITAT Mumbai
Summary: The assessee-company filed its return declaring income of ₹18.90 lakh. Its case was selected for scrutiny through CASS to verify the substantial increase in share capital and large investments in properties.
During the year, the assessee issued 6% optionally fully convertible non-cumulative redeemable preference shares at a face value of ₹10 each. The entire preference share capital of ₹90.42 crore was subscribed by M/s Matrika Commercials LLP [MCL], which was already the assessee’s sole shareholder.
The AO called upon the assessee to prove the identity and creditworthiness of the investor and genuineness of the transaction. The assessee furnished bank statements evidencing receipt through banking channels, confirmation from MCL, its ITR acknowledgement, Form PAS-3 evidencing allotment, Board resolution and other statutory records.
The AO was nevertheless unconvinced. He observed that MCL had returned income of merely ₹30,000, the assessee and MCL shared the same registered address and the investor’s bank statement had not been produced during assessment. According to the AO, the assessee had failed to establish how MCL generated the enormous funds invested in the assessee-company.
