Saffron Groceries Pvt. Ltd. Vs ITO (ITAT Delhi)
The Delhi Bench of the Income Tax Appellate Tribunal (ITAT) allowed the assessee’s appeal and deleted an addition of ₹45 lakh made under Section 68 of the Income Tax Act, 1961 in respect of share capital and share premium received from two investor companies.
The dispute related to Assessment Year 2016-17, where the Assessing Officer treated share application money and share premium received from M/s Pearl Multicon Private Ltd. and M/s Pearl Propcon Private Ltd. as bogus cash credits. The assessee had issued 56,250 equity shares having a face value of ₹10 each at a premium of ₹70 per share. The Assessing Officer raised doubts regarding the genuineness of the transactions and the creditworthiness of the investors and consequently made an addition of ₹45 lakh under Section 68.
The assessee argued that it had discharged the burden required under Section 68 by furnishing bank statements, tax audit reports, balance sheets, profit and loss accounts, income tax return acknowledgements, computation of income, share application forms, and confirmations from the investor companies. Notices issued by the Assessing Officer under Section 133(6) were also replied to by both investors. The assessee further submitted that the valuation of shares was carried out in accordance with Rule 11UA(2)(a) of the Income Tax Rules using the Net Asset Value method.
