M/s. MA Projects Pvt. Ltd vs DCIT

PER M. BALAGANESH, A. M.:

The appeal in ITA No.402/Del/2025 for AY 2011-12, arises out of the order of the ld ld. Commissioner of Income Tax (Appeals)-II, New Delhi [hereinafter referred to as ‘ld. CIT(A)’, in short] dated 03.11.2014 against the order of assessment passed u/s 143(3) of the Income-tax Act, 1961 (hereinafter referred to as ‘the Act’) dated 03.03.2014 by the Assessing Officer, DCIT, Central Circle-03, New Delhi (hereinafter referred to as ‘ld. AO’).

The only issue to be decided in this appeal is as to whether the Learned CIT(A) was justified in confirming the addition of Rs 50,00,000 towards share application money under section 68 of the Act in the facts and circumstances of the instant case.

We have heard the rival submissions and perused the materials available on record. At the outset, we note that this appeal was originally dismissed by this Tribunal vide order dated 9.8.2019. Later the same was recalled vide MA No. 92/Del/2020 dated 10.10.2023 wherein the order is recalled only for the limited purpose of applicability of decision of Hon’ble Jurisdictional Delhi High Court in the case of CIT vs Gangeshwari Metal P Ltd reported in 361 ITR 10 (Del) and the decision of Hon’ble Supreme Court in the case of NRA Iron & Steel reported in 412 ITR 161 (SC) to the facts of the case.

The assessee is engaged in the business of development of real estate. The assessee had received Rs 50,00,000 as share application money from Indian Hosiery P Ltd for allotment of 50000 equity shares of Rs 10 each at a premium of Rs 90 per share. The amounts were received through account payee cheques. The assessee was directed to prove the three ingredients of section 68 of the Act i.e. identity of the investor, creditworthiness of the investor and genuineness of transactions. The Learned AO noted that assessee furnished only part of the replies called for by the Learned AO. The assessee furnished the copy of audited financial statements, copy of ITR of investor, name and address of director; confirmation from investor company together with the justification for investment at premium and board resolution authorising making investment at premium in the assessee company; copy of Form 2 for allotment of shares and bank statements of the investor. The assessee submitted that the source of investment in assessee company had emanated out of own accumulated funds of the investor company. The assessee submitted that the investor company is having net worth of Rs 300,69 lacs as on 31.3.2010 and Rs 345.95 lacs as on 31.3.2011. The source of investment of Investor Company was explained to have emanated out of receipt of loans and advances by the investor company and reinvesting in assessee company. The Learned AO noted that assessee company is not doing any genuine business; that the bank statement of investor had been furnished only for part of the period ; that on perusal of the bank statement of investor, on normal days, the investor company was only having nominal bank balance and concluded that investor company does not have own funds to make investment of Rs 50 lacs in assessee company.

The assessee company submitted that the investor company is duly assessed to income tax, furnished copy of assessment order of investor company under section 143(3) of the Act for Assessment Year 2007-08 dated 10.12.2009. The assessee submitted that in response to notice issued under section 133(6) of the Act, the investor company had duly responded to the same by furnishing the requisite replies directly before the Learned AO.

Now as stated in the MA order dated 10.10.2023, let us now see the applicability of decision of Hon’ble Jurisdictional Delhi High Court in the case of CIT vs Gangeshwari Metal P Ltd reported in 361 ITR 10 (Del) to the present case. The Learned DR vehemently argued that in the case before the Hon’ble Delhi High Court, after the furnishing of requisite documents by that assessee, the Assessing Officer did not conduct any enquiry. This fact is mentioned in para 10 of the decision. Under those circumstances, the Hon’ble High Court deleted the addition made under section 68 of the Act and whereas in the instant case, the Learned AO had indeed made enquiries to check the veracity of the documents furnished by the assessee company. We find that pursuant to the enquiries made by the Learned AO by issuing notice under section 133(6) of the Act to the investor company, the investor company had duly responded to the notice under section 133(6) of the Act by confirming the transactions and by furnishing the requisite documents directly before the Learned AO. Hence the ratio decidendi of the decision of Hon’ble Jurisdictional Delhi High Court is squarely applicable to the facts of the instant case before us.

With regard to the decision of the Hon’ble Supreme Court in the case of PCIT vs NRA Iron & Steel Pvt Ltd reported in 412 ITR 161 (SC), we find that in that case, pursuant to the enquiries conducted by the Assessing Officer, it revealed that in several cases the investor companies were found to be even non-existent and hence identity of the investor companies were not proved by that assessee. In these circumstances, the Hon’ble Supreme Court proceeded to make the observations against that assessee. This decision is factually distinguishable with that of the assessee’s instant case before us in view of the fact that investor company is duly assessed to tax and assessee had also placed on record the copy of scrutiny assessment order of the investor company. Hence the identity of the investor company cannot be doubted at all. Further notice under section 133(6) of the Act stood complied by the investor company by furnishing requisite details directly before the Learned AO together with the confirmation and justification for making investment at premium. The source of making investment in assessee company was also stated by the investor company in their confirmation which is duly supported by documentary evidences submitted by them directly before the Learned AO. Hence we have no hesitation to hold that the decision of the Hon’ble Supreme Court in the case of NRA Iron & Steel referred supra is factually distinguishable with that of the assessee’s case herein and we further hold that the decision of Hon’ble Jurisdictional Delhi High Court in the case of Gangeshwari Metal referred supra is squarely applicable to the facts of the instant case. Respectfully following the same, the addition made in the sum of Rs 50,00,000 is hereby deleted. Accordingly, the ground raised by the assessee is allowed.

In the result, the appeal of the assessee is allowed.