Dayalu Fashions Private Limited vs ITO

1.

Thatthe Ld. CIT (A), NFAC has grossly erred in law as well as on facts in sustaining the addition of Rs. 80,00,000/- made u/s 68 of the Income Tax Act, 1961, on account of alleged unexplained share capital and share premium received by the assessee without appreciating: a. That complete documentary evidences have been furnished. b. That the identity and creditworthiness of the investors as well as the genuineness of the transaction has been established.

2.

That Ld. CIT(A), NFAC has erred in law as well as on facts in sustaining the order of assessment which was passed arbitrarily and without any cogent reason OR finding contrary to the claim of the assessee.

3.

That Ld.AO has erred in law as well as on facts in making addition without conducting independent enquiry and without application of mind and same is bad in law as it is solely based on conjectures and surmises.

4.

That the Ld. CIT (A), NFAC has erred in law as well as on facts in not admitting the additional evidences filed by the assessee along with the application under Rule 46A of the Income Tax Rules, 1962 during the course of appellate proceedings.

5.

The above grounds of appeals are independent of and without prejudice to each other and further the appellant craves leave to add, alter, amend OR withdraw all OR any grounds herein OR add any further grounds as may be considered necessary either before OR during the hearing of these grounds.

“The captioned appeal was filed against the order passed by the Ld. CIT(A), NFAC u/s 250 Income Tax Act, 1961 on 29.08.2025. The only issue involved in the present case is that whether The Ld. CIT(A), NFAC was correct in confirming the addition made by Ld. AO u/s 68 of the Act amounting of Rs. 80,00,000/-, on account of share capital and share premium received by the assessee company, despite furnishing all the documentary evidence for establishing identity. creditworthiness of the investors and the genuineness of the transaction.

Brief facts

1.

The return of income was processed u/s 143(1) of the Act and subsequently the aforesaid case was selected for limited scrutiny under CASS to verify that whether the funds received in the form of share capital and share premium are from disclosed sources and have been correctly offered for tax. During the course of assessment proceeding various statutory notices were issued in response to which the assessee company furnished the requisite information to the best of its ability.

2.

The assessee company before the lower authorities filed the relevant documents such as Certificate of Incorporation, MoA/AoA. Auditors report along with Balance sheet and profit and loss account, valuation report of shares, bank statements, bank ledger accounts. Further the certain documents which could not be filed during the course of assessment proceedings were filed during the course of appellate proceedings before the Ld. CIT(A). along with the application under Rule 46A of Income Tax Rules, 1962. All the aforesaid documents are forming part of the Paperbook filed beforethis Hon'ble Bench.

3.

The Ld.AO even issued notice u/s 133(6) to the investor companies requiring them to furnish relevant information and confirm the investment made in the subscription of the shares in the assessee company. In response to the same, all three investor companies i.e.. M/s Goodluck Industries Ltd., M/s Pearl Multicon Pvt. Ltd. and M/s Rishi Credit and Industries Pvt. Ltd. confirmed the investment made in the assessee company and filed the relevant documents with Ld.AO as observed by Ld. AO at Page 2, Para 4 of its order by stating that" the information u/s 133(6) was sought from all the investors. The reply from the investors have been received except M/s Abhi Soap Pvt. Ltd..". However, ignoring the submissions made by the assessee and the information given by the investor companies. the Ld.AO made the addition of the entire share application received, to the income of theassessee and raised the doubts over the credibility and identity of the investors and genuineness of the transaction.

4.

Aggrieved by the order of Ld. AO, an appeal was preferred before the Ld. CIT(A). The Ld. CIT(A), NFAC upheld the addition made by the Ld. AO for entire share application money and share premium received by the assessee company from investor companies. While dismissing the appeal of assessee Ld. CIT(A) did not accept the additional evidences which were filed in accordance with the provisions of Rule 46A of the Income Tax Rules, 1962 and further also dismissed the appeal of assessee on merits by stating that the appellant has not furnished any credible reason or explanation to rebut the categorical finding of the Ld. AO and mere reliance on filed papers without addressing the specific infirmities pointed out by the Ld. AO does not discharge the burden under section 68. Hence, aggrieved by the order of Ld. CIT(A) this appeal was preferred before this Hon'ble Bench.

5.

It is further pertinent to mention that during the course of assessment proceeding, Ld. AO observed that assessee company has not furnished the requisite documents to prove the identity and creditworthiness of the investors and the genuineness of the transaction. Against this it is necessary to state that during the course of assessment proceeding few of the documents could not be uploaded properly on the E filing portal due to technical glitches and other reasons as cited in the application under Rule 46A of the Income Tax Rules 1961, and therefore assessee was left with no other option except to re-file the evidences to avoid any controversy. Additional evidences filed before the Ld. CIT(A) were not accepted as observed by Ld. CIT(A) at Para 14 of its order.

Submissions :

7.

It is respectfully submitted that Ld. CIT(A), NFAC while dismissing the appeal of assessee Ld. CIT(A) did not accept the additional evidences which were filed in accordance with the provisions of Rule 46A of the Income Tax Rules, 1962 and further also dismissed the appeal of assessee on merits by stating that the appellant has not furnished any credible reason or explanation to rebut the categorical finding of the Ld. AO and mere reliance on filed papers without addressing the specific infirmities pointed out by the Ld. AO does not discharge the burden under section 68. In doing so, the Ld. CIT(A) has, with due respect, failed to consider or appreciate the sufficient cause due to which the documents could not be filed before the Ld. AO and all the documents which were filed before him during the course of appellate proceedings. It is a settled principle of law that once the assessee furnishes documents to establish the identity and creditworthiness of the investor companies and the genuineness of the transactions, the burden shifts to the revenue authorities to bring on record any adverse material to rebut the same.

8.

In the present case, neither the Ld. AO nor the Ld. CIT(A) has brought any contrary material or evidence on record to disprove the appellant's submissions. Accordingly, it is submitted that, upon perusal of the documents placed on record, comprising PAN details, ITR acknowledgments, bank statements, confirmation letters, valuation of shares as per the Rule 11UA(2) and other supporting evidences, no further compliance was required on the part of the appellant. The addition sustained under section 68 is, therefore, unjustified as the ingredients required u/s 68 of the Act i.e., identity, creditworthiness and genuineness of the transactions were fulfilled.

9.

In the Paperbook filed before this Hon'ble Bench the assessee has furnished all the relevant documents which were furnished before the lower authorities and further a list of documents which are placed in the Paper Book in order to prove the genuineness of the transaction, identity & creditworthiness of the investors....”