Joint Commissioner Of Income Tax, OSD vs AFP Manufacturing Co. P. Ltd.

PER VIKAS AWASTHY, JM:

This appeal by the Revenue is directed against the order of Commissioner of Income Tax (Appeals), National Faceless Appeal Centre (NFAC), Delhi (hereinafter referred to as 'the CIT(A)') dated 29.03.2025, for AY 2018-19.

The solitary ground raised by the Revenue in appeal is against deleting addition of Rs.1,44,34,290/- made u/s.68 of the Income Tax Act, 1961 (hereinafter referred to as 'the Act').

Shri Om Prakash, representing the Department submits that the CIT(A) has erred in deleting the addition without considering the fact that the assessee has failed to prove genuineness of the transactions and the creditworthiness of the persons from whom the assessee had allegedly received share premium/share capital during the period relevant to assessment year under appeal. The ld. DR submits that the assessee received share capital and share premium aggregating to Rs.2,10,00,000/- during the year under consideration. The assessee was asked to furnish the names, PAN, and amounts received from each of the investors from whom the share premium was received. The assessee furnished the names, PAN, and amounts of premium received; however, it failed to prove creditworthiness of the investors. The CIT(A), without ascertaining the creditworthiness of the investors, deleted the addition. In support of his submissions, the ld. DR placed reliance on various decisions, some of them are as under:-

Per contra, Shri Neeraj Jain appearing on behalf of the assessee vehemently supporting the impugned order submits that during the period relevant to assessment year under appeal, the shares were allotted by the assessee to the following persons:-

The shares have been allotted to the aforesaid parties against the unsecured loans received from them by the assessee in the preceding assessment years. Thus, there was no infusion of fresh funds, it was only a book entry against the unsecured loans taken from the related parties in the preceding year. Since, unsecured loans from the said persons were accepted by the Revenue in preceding assessment year, the same cannot be questioned in subsequent assessment year. The CIT(A) after examining the facts of the case has thereafter, allowed appeal of the assessee deleting the addition.

Both sides heard, orders of the authorities below examined. The Assessing Officer (AO) had made an addition of Rs.1,44,34,290/- on account of share premium received by the assessee from investors. It is relevant to mention that the AO has not questioned the valuation of the share premium but has raised doubts regarding the creditworthiness of the parties to whom shares were allotted at a premium. The assessee furnished additional documents before the CIT(A), on which a remand report was called from the AO vide letter dated 25.09.2024. However, no report was furnished by the AO. Reminders were issued by the CIT(A) on 11.10.2024 and 17.10.2024. Despite repeated reminders, no report was received till passing of the order on 29.03.2025. The CIT(A), after examining the submissions and documentary evidence, concluded that the share capital/share premium credited in the books of the assessee during the year under consideration from the three persons—Anil Kumar Aggarwal, Raj Bala (business), and Puneet Aggarwal (business)—who are directors or their relatives, was merely a book entry against unsecured loans from earlier years. There was no fresh infusion of funds from any outsider during the relevant year. These findings of the CIT(A) remain uncontroverted. The Id. AR of the assessee has also drawn our attention to the Balance Sheet of the assessee for the Financial Year ended on 31.03.2018. A perusal of Note 3 to the Balance Sheet shows reduction in unsecured loans in F.Y. 2017-18 as compared to the earlier Financial Year, and increase in share capital and share premium during FY 2017-18. In view of the above facts, we find no infirmity in the order of the CIT(A) deleting the addition. Accordingly, the solitary ground raised by the Revenue is dismissed as devoid of merit.

In the result, impugned order is upheld and appeal of the Revenue is dismissed.