ITA 1178/DEL/2021: DCIT vs. BDR Builders & Developers on Unexplained Share Capital and Premium

Background of the Case

The appeal by the Revenue is directed against the order of the ld. CIT (Appeals)-26, New Delhi dated January 5, 2021, for the assessment year 2009-10, challenging the deletion of an addition of Rs.2,25,00,000 made by the Assessing Officer on account of unexplained source of Share Capital and Share Premium under section 68 of the Income Tax Act, 1961.

Details of the Case

This is the second round of appeal before the ITAT. Initially, the matter had been remanded back to the file of the AO with specific directions in the first round of ITAT proceedings. The contentious issue revolves around the assessee’s receipt of share capital amounting to Rs. 2,25,00,000 during the year, which included a share premium of Rs. 1,96,00,000 from various companies and individuals.

Arguments Presented

The Revenue contended that the companies providing share capital were merely providing accommodation entries, and were not conducting any substantial business. The assessee, on the other hand, supported the genuineness of the transactions by submitting detailed documents including bank statements, PAN details, and confirmations from the investors.

Findings of CIT (Appeals)

The CIT (A) found the assessee’s transactions to be genuine and deleted the additions made by the AO. The decision was based on thorough documentation provided by the assessee that demonstrated the identity and creditworthiness of the shareholders and the genuineness of the transactions.

ITAT’s Observations

The ITAT noted that subsequent to their earlier remand, no adverse findings were noted against the assessee in the post-search investigations or in the 153A proceedings. They upheld the CIT (A)’s order, emphasizing that the assessee had successfully demonstrated the genuineness of the share capital and share premium received.

Conclusion

The tribunal’s decision highlights the importance of maintaining comprehensive and verifiable records in substantiating the genuineness of significant transactions. The outcome of this case serves as a precedent for similar cases where the authenticity of financial transactions is in question.

ITA 1178/DEL/2021: DCIT vs. BDR Builders & Developers on Unexplained Share Capital and Premium