M/s. OK Play India Ltd. vs DCIT

PER MANISH AGARWAL, AM :

The captioned appeals are filed by the assessee against the separate orders dated 30.09.2025 and 09.10.2025 by Ld. Commissioner of Income Tax (A), National Faceless Appeal Centre (“NFAC”), Delhi [“Ld. CIT(A)”] passed u/s 250 of the Income Tax Act, 1961 [“the Act”] arising from the different assessment order dated 27.11.2019 passed u/s 143(3) of the Act and assessment order dated 28.03.2024 passed u/s 143(3) r.w.s. 144B of the Act pertaining to Assessment Year 2017-18 & 2022-23 respectively. Apart from this, a stay petition is also filed by the assessee for AY 2017-18 in ITA No.7198/Del/2025.

Since some of the issues involved in both captioned appeals are common, therefore, they have been heard together and accordingly, adjudicated by a common order.

First, we take assessee’s appeal in ITA No. 7198/Del/2025 for AY 2017-18.

Brief facts of the case are that the assessee is a public limited company, incorporated on 19.09.1988 under the Companies Act, 1956 and listed in Bombay Stock Exchange. The company is engaged in the business of manufacturing of plastic molded toys, school furniture, playground equipment’s infrastructure, and automotive and POP products. The return of income for the year under appeal was filed on 30.10.2017 declaring loss of INR 5,96,81,434/-. The case was selected under CASS for scrutiny and the statutory notice u/s 143(2) was issued on 26.09.2018 followed by the notices u/ 142(1) alongwith questionnaire from time to time. The assessee filed replies to each and every questionnaire issued by furnishing details as called for through the respective query letter and copies of all such replies are placed in the Paper book. The AO observed that during the year under appeal, assessee has received total share capital of INR 8,79,36,327.05 from made preferential issue of 6,26,015 Equity shares of the face value of INR 10/- each at a price of INR 140.47/- per share. During the course of assessment proceedings, the AO asked the assessee to submit complete details of share subscribers to which it was replied that the assessee is a public limited company and preferential issue of share was made after getting the approval from the Regulatory Authorities and assessee further filed all the necessary details such as return of allotment filed before the ROC and the details of shares subscriber containing their names, addresses, PAN, no. of shares allotted. The AO alleged that the assessee has failed to prove the creditworthiness of the share subscribers and thus, made the addition of entire share capital received during the year. Besides this, adhoc disallowance @ 25% of other expenses claimed at INR 11,22,29,531/- was made which comes to INR 2,80,57,382/-. Accordingly, total income of the assessee was assessed at INR 11,59,93,710/- as against the loss of INR 5,96,81,434/-.

Against the said order, the assessee preferred appeal before Ld. CIT(A) who vide impugned order dated 30.09.2025, has confirmed the order of AO and dismissed the appeal of the assessee.

Aggrieved by the order of Ld. CIT(A), the assessee filed present appeal before the Tribunal by taking various Ground of appeal mentioned in the appeal memo.

Ground of appeal No.1 raised by the assessee is general in nature.

Before us, Ground of appeal No.2 taken by the assessee is regarding issue of notice u/s 143(2) of the Act without specified forma however, this ground of appeal was not pressed therefore, the same is dismissed.

Ground of appeal Nos. 3 to 3.7 raised by the assessee are with respect to the addition made u/s 68 of the Act on account of share capital of INR 8,79,36,327/- received during the year alleged as unexplained.

Before us, ld. AR for the assessee submits that it is a public limited company listed with Bombay Stock Exchange and during the year under appeal, issued shares under preferential allotment to 12 allottees, details of which were filed before the AO in terms of letter dated 28.09.2019 alongwith Form No.PAS-3 i.e. return of allotment filed with before the Registrar of companies on 02.12.2016. The assessee vide letter dated 25.10.2019 has again filed the list of the subscribers containing their names, addresses and PAN. It was further stated that none of the subscriber was has any relation with the promoters or their relatives. Further, vide letter dated 23.11.2019, the assessee reiterated that since it is a public limited company listed with Bombay Stock Exchange and shares were allotted through public offer in accordance with the guidelines issued by SEBI and Bombay Stock Exchange therefore, by filing the complete details of the shares allottees, the onus was discharged. The assessee further placed reliance on the judgement of Hon’ble Delhi high Court in the CIT vs Oasis Hospitalities Pvt. Ltd. reported in 333 ITR 119 (Delhi) wherein Hon’ble jurisdictional high Court has held that in case of a public issue, the company concern cannot be accepted to note every detail pertaining to the identity as well as the financial work of each of its subscribers. The company must, however, all the information contained in the statutory shares application document. It was the claim of the assessee that it is a public listed company and had filed all the particulars of the share applicants and none of the applicants was related to the company in any manner either as the promoter r their relatives, the assessee has discharged the burden casted upon it. Further the AO has not issued summons for making further verifications from the subscribers. In this regard, reliance is placed on the judgment of Hon’ble Supreme Court in the case of CIT vs Orissa Corporation P. Ltd. reported in 159 ITR 78 (SC). The assessee further placed reliance on various judgments which are as under:-

Besides this, it was the claim of the assessee that fresh allotment of the shares capital in FY 2014-15 relevant to AY 2015-16 of INR 2,24,75,000/- was accepted as genuine in the assessment completed u/s 143(3) and no doubts were raised with respect to the fresh allotment of share capital. Likewise in AY 2019-20, further fresh share capital of INR 8,42,82,000/- was issued and subscribed though assessment was completed u/s 143(1) however, till date, no action was taken by the Revenue with regard to fresh share capital issued. The assessee thus, prayed that as a principal of consistency, no addition should be made in the year under appeal also. It is further claimed that AO placed reliance on the amendment made by Finance Act, 2012 u/s 68 with respect to the receipt of share capital where it is provided that the creditworthiness of the shares subscribers should be explained to the satisfaction of the AO. As per ld. AR, this provision is applicable to the company in which public is not substantially interested. However, since the assessee is a public limited company thus this amendment is not applicable. Ld. AR thus, requested to delete the addition made.

On the other hand, Ld. CIT DR for the Revenue vehemently supported the orders of the lower authorities and submits that assessee has failed to fulfil the conditions provided u/s 68 of the Act of establishing the identity, genuineness and creditworthiness of the share applications. Ld. CIT DR thus, placed reliance on the judgement of Hon’ble Supreme Court in the case of PCIT Vs. NRA Iron & Steel Pvt. Ltd. reported in 103 taxmann.com 48 (SC) and requested for the confirmation of the same.

Heard the contentions of both the parties at length and perused the material available on record. During the year under appeal, the assessee has received a sum of INR 8,79,36,327/- from the allotment of 6,26,015 Equity shares under preferential allotment at a price of INR 140.47/- per share. Before the AO, assessee has filed all the necessary particulars of the share subscribers to establish their identity which included their complete names, PAN and addresses and nos. of shares subscribed. The assessee is a public limited company and shares were allotted through public offer of preferential allotment and none of the subscriber was related to assessee or its promoter in any manner. It was the claim of the assessee that by filing these particular of all the share subscribers, it has discharged the burden casted upon it. However, the AO has not agreed with the contention of the assessee and held that the assessee has failed to prove the genuineness of the transactions and creditworthiness of the share subscribers. In this regard, it is observed that assessee is a public limited company and its share are listed in Bombay Stock Exchange. As observed above, the assessee has filed all the relevant particulars of the share subscribers and thus, discharged the burden casted upon it u/s 68 of the Act. For the sake of convenience, Section 68 of the Act is reproduced as under:-

That a bare reading of Section 68 suggests that there has to be credit of amounts in the books maintained by an assessee; such credit has to be of a sum during the previous year; and the assessee offer no explanation about the nature and source of such credit found in the books; or the explanation offered by the assessee in the opinion of the Assessing Officer is not satisfactory, it is only then the sum so credited may be charged to income-tax as the income of the assessee of that previous year. However, there is an exception for the same i.e. it is not applicable to Public Limited companies.

As observed above, the assessee company is a public limited company and it is not required to prove the source of source and once all the relevant particulars of the share subscribers were submitted alongwith return of allotment filed before the Registrar of Companies, in case AO has any doubts about the creditworthiness of the share subscribers, direct inquiry could have been made by the AO by issue summons which is not been done in the instant case. The Hon’ble Supreme Court in the Orissa Corporation P. Ltd. (supra) has held as under:-

With respect to the share capital issued by a public limited company, the onus of the assessee is to file the primary details of the share subscriber which has been discharged. The Hon’ble Delhi High Court in the case of Oasis Hospitalities Pvt. Ltd.(supra) has considered this issue and decided as under:-

In the case of CIT v. Sophia Finance Ltd. reported in [1994] 205 ITR 98 (Delhi), the Hon'ble jurisdictional High Court held that in the context of Section 68 of the Act that:

In the case of CIT v. Steller Investment Ltd. reported in [1991] 192 ITR 287 (Delhi) it was observed as under:

In view of the Full Bech decision of Hon’ble Jurisdictional High Court in the case of CIT v. Sophia Finance Ltd. (supra), Furthermore, the hon’ble court has considered the distinction between a private limited company and a public limited company and it is noted that the onus in the case of a private limited company is different and significantly higher than say in the case of public issue made by a public limited company, as was the case in some of the cases relied upon by the appellant.

Both the aforementioned decisions of the Hon’ble Delhi High Court were again considered by the Division Bench of Hon'ble Delhi High Court in CIT v. Lovely Exports Ltd. (Supra) and in the case of CIT v. Nova Promoters & Finlease (P.) Ltd. reported in [2012] 342 ITR 169 (Delhi) it was observed as under:

The Hon’ble Supreme Court in the case of CIT vs Lovely Exports Pvt. Ltd. (supra) has further held as under:-

The Hon'ble Supreme Court of India in the case of CIT vs. Kamdhenu Steel & Alloys Ltd., SLP (CC) No. 15640 of 2012 (SLP Dismissed against Decision of Delhi HC) has observed as under:

The Hon'ble Delhi High Court in the case of CIT vs. Vrindavan Farms (P) Ltd, in ITA 71/2015, ITA 72/2015, ITA 84/2015 has held that No addition can be made when details of share applicants are furnished to the Assessing Officer complying condition of section 68.

It is also relevant to state that an amendment is made vide Finance Act, 2022 wherein second proviso to section 68 is added so as to provide that the nature and source of any sum, whether in the form of loan or borrowing, or any other liability credited in the books of an assessee shall be treated as explained only if the source of funds is also explained in the hands of the creditor or loan provider. However, this additional onus to prove satisfactorily the source in the hands of the creditor, would not apply if the creditor is a well-regulated entity, i.e., it is a Venture Capital Fund, Venture Capital Company registered with SEBI. This amendment has taken effect from 1^stApril, 2023 and accordingly applies in relation to the assessment year 2023-24 and subsequent assessment years. The year before us is AY 2013-14 thus, this amendment is not applicable, yet the assessee has been able to establish the same as per the table reproduced herein above.

As observed above, in the instant case assessee has filed all the relevant details of the entities from whom money was received and the AO has not made any enquiry from any of the subscriber company. Thus, the judgement of Hon’ble Supreme Court relied upon by the revenue in the case of NRA Iron & Steel Pvt. Ltd. is distinguishable on facts and is not applicable to the present case.

In view of the overall discussions made herein above and considering the material available on record, we are of the considered opinion that the assessee company is a public limited company and filed all the necessary particulars of the share subscribers including the return of allotment filed before the ROC and the shares were issued under the supervision of the regulatory authorities like SEBI and stock Exchange and the AO has failed to make any independent inquiries and therefore, the share capital received during the year cannot be doubted merely on assumption. Thus, by respectfully following the judgments of Hon’ble Supreme Court and Hon’ble jurisdictional High Court as stated (supra), the additions made of INR 8,79,36,327/- on account of share capital alleged as unexplained credit u/s 68 is hereby, deleted. Ground of appeal Nos. 3 to 3.7 raised by the assessee are allowed.

Ground of appeal Nos.4 to 4.1 raised by the assessee are with respect to the disallowance of 25% out of various expenses claimed totaling to INR 11,22,29,531/-.

Heard the contentions of both the parties at length and perused the material available on record. During the course of assessment proceedings, AO asked the assessee to file details of ‘other expenses’ which were submitted alongwith the copies of the respective ledger accounts before the AO in terms of the replies filed during the course of assessment proceedings on various occasions. It is observed that in the return of income filed, the expenses for which, no separate head is provided are shown under the head ‘Other Expenses’, accordingly consolidated amount was mentioned which comprises of following expenses:-

From the perusal of the title of the expenses, it is apparent that these are regular business expenses. Further the AO without pointing out any error/defect in the details filed by the assessee, the lumpsum disallowance could not be made in the hands of the company. It is further observed that in AY 2015-16, expenses of similar nature of INR 28.80 crores were claimed and the disallowance made by the AO stood deleted by Ld. CIT(A). Thus, looking to the entirety of the facts and circumstances of the case, we are of the considered opinion that AO has made the disallowance without appreciating the nature of expenses and the copies of the accounts submitted alongwith necessary details. It is further observed that part of the some expenses have already been added back to the total income by the assessee itself and, therefore, any further disallowance of the same is double addition which fact is ignored by the AO.

Section 37(1) of the Act provides that:

From the plain reading of the section 37(1), the main prerequisite for claiming deduction under the provision of Section 37 is that expenditure should be wholly and exclusively for business or profession. Expenditure could be incurred by the assessee voluntarily without any necessity; however, the same should be for the purpose of his business or profession. In the instant case, the Ao has failed to make out a case that the expenses claimed were not for the purpose of business. Further in order for an expense to be allowed as a deduction under section 37(1), it must be incurred for the purpose of carrying on a business or profession and must be of a revenue nature. The principle of commercial expediency is also applied, which means that an expense must be considered necessary or reasonable for the conduct of the business or profession. This principle helps to ensure that expenses claimed as deductions are not frivolous or unreasonable. Once the assessee discharges the burden of proving that an expense is incurred for the purpose of carrying on a business or profession and demonstrate that the expense was incurred wholly and exclusively for the purpose of the business or profession, and that it was not for personal or private purposes, no adhoc disallowance is permitted.

Undisputedly, the assessee is a public limited company, it would have no expenses of personal in nature. The AO ought to have verified whether such expenses were incurred in the course of business and for the business of the assessee. The company being Artificial juristic person would not have any personal expenses and would not incur personal expenses unlike living being. The body corporate operates through living beings. The authorities below failed to advert to this fundamental question. Hon’ble Gujarat High Court in the case of Sayaji Iron & Engg.Co. vs CIT reported in 253 ITR 749 [Gujarat] under the similar facts held as under:-

Therefore, respectfully following the judgement of Hon’ble Gujarat High Court in the case of Sayaji Iron & Engg.Co. vs CIT (supra), the findings of the Ld. CIT(A) cannot be sustained as same is without any specific finding about any of the expenses under question. It is well-settled that a bald assertion would not be sufficient concluding that the expenditure incurred are not for the purpose of business or not verifiable.

It is further observed that disallowance out of various expenses by making similar allegations were made in AY 2015-16 which stood deleted by ld. CIT(A). Thus, as a principal of consistency, no disallowance should be made in this year without pointing out any specific instance of incorrect claim.

In the light of the above discussion, Ground of appeal No. 4 to 4.1 raised by the assessee are accordingly, allowed and the impugned addition is hereby, deleted.

In the result, appeal of the assessee is allowed.

Now we take assessee’s appeal in ITA No. 7199/Del/2025 for AY 2022-23.

Since we have already deleted the additions made on account of share capital alleged as unexplained u/s 68 of the Act and allowed the appeal of the assessee in ITA No. 7198/Del/2025 for AY 2017-18. Before us, both the parties fairly agreed that the facts in the present appeal are similar to the facts in ITA No. 7198/Del/2025 for AY 2017-18, thus, by following the aforesaid observations in ITA No. 7198/Del/2025 for AY 2017-18 which are Mutatis Mutandis applicable to the facts of this case also, the disallowance made in this year are deleted. In view of the above, all Grounds of appeal raised by the assessee in the captioned appeal, are allowed.

In the result, appeal of the assessee is allowed.

As we have already allowed the appeal of the assessee in ITA No.7198/Del/2025 for AY 2017-18, the stay filed by the assessee become infructuous hence, disposed off accordingly.

In the final result, both captioned appeals of the assessee in ITA Nos. 7198 & 7199/Del/2025 for Assessment Years 2017-18 & 2022-23 respectively, are allowed.