MA Projects Pvt. Ltd Vs DCIT (ITAT Delhi)
The Income Tax Appellate Tribunal (ITAT) Delhi allowed the assessee’s appeal for Assessment Year 2011-12 and deleted an addition of Rs. 50 lakh made under Section 68 of the Income-tax Act in respect of share application money received from an investor company.
The appeal arose from an order of the Commissioner of Income Tax (Appeals)-II, New Delhi, which had confirmed the addition made by the Assessing Officer. The dispute concerned whether the share application money received by the assessee company from Indian Hosiery Pvt. Ltd. could be treated as unexplained cash credit under Section 68 of the Act.
The assessee, engaged in real estate development, had received Rs. 50 lakh towards allotment of 50,000 equity shares of Rs. 10 each at a premium of Rs. 90 per share. The payments were received through account payee cheques. During assessment proceedings, the assessee was required to establish the identity of the investor, its creditworthiness, and the genuineness of the transaction.
The assessee submitted several documents including audited financial statements of the investor company, income tax return copies, confirmation letters, board resolution approving the investment, Form 2 relating to allotment of shares, and bank statements. It was also stated that the investment had been made from the investor company’s accumulated funds. The assessee further pointed out that the investor company had a net worth of Rs. 300.69 lakh as on 31 March 2010 and Rs. 345.95 lakh as on 31 March 2011. According to the assessee, the investor company had generated the investment funds through loans and advances received by it.
