Case Number: ITA 650/DEL/2019
Appellant: Gamut Products Pvt. Ltd (Formerly known as Vision Pipes Pvt. Ltd), New Delhi
Respondent: DCIT, Circle-26(2), New Delhi
Assessment Year: 2012-13
Result: Partly Allowed
Case Filed On: 2019-01-30
Order Type: Final Tribunal Order
Date of Order: 2022-07-11
Pronounced On: 2022-07-11
This case involves Gamut Products Pvt. Ltd., the appellant, contesting the addition made under Section 68 of the Income-tax Act, 1961, and the disallowance of foreign travel expenses by the DCIT, Circle-26(2), New Delhi, for the assessment year 2012-13. The case highlights the issues surrounding the treatment of share application money and the foreign travel expenses claimed by the appellant.
Gamut Products Pvt. Ltd. (formerly known as Vision Pipes Pvt. Ltd.), during the assessment year 2012-13, issued 65,886 shares at a premium, raising a total amount of Rs. 2,95,56,417. The Assessing Officer (AO) questioned the legitimacy of the share application money and share premium, leading to an addition under Section 68 of the Income-tax Act, 1961.
During the scrutiny assessment proceedings, the AO found discrepancies in the addresses provided for some of the share applicants and issued notices under Section 133(6) to verify the authenticity of the transactions. However, these notices were returned unserved. Consequently, the AO made an addition of Rs. 2,95,56,417 under Section 68, considering the share application money as unexplained income. Additionally, an amount of Rs. 9,77,970 was disallowed on account of foreign travel expenses.
The appellant, represented by Shri Gautam Jain, Advocate, and Shri Lalit Mohan, CA, argued that the company had provided complete details and evidences, including confirmations, income tax particulars, bank statements, and audited financial statements of the shareholder companies. They contended that the AO did not make proper inquiries and that the disallowance was unjustified.
The respondent, represented by Ms. Aashna Paul, CIT-DR, supported the AO’s findings and emphasized that the returned notices indicated incorrect addresses, justifying the addition under Section 68.
The Income Tax Appellate Tribunal (ITAT) noted that the appellant had indeed provided extensive documentation to support the legitimacy of the share application money. These included:
The ITAT found that the AO’s reliance on the unserved notices was not sufficient to disregard the extensive evidence provided by the appellant. The Tribunal cited various judicial precedents, including the Delhi High Court’s ruling in PCIT vs. Radius Industries, which stated that non-compliance of notice under Section 133(6) cannot be the sole basis for an addition under Section 68.
The ITAT observed that the share investors had confirmed their investments and no evidence suggested that the investments were not genuine. Furthermore, the AO did not establish that the funds used for the share application money were actually provided by the appellant company.
In conclusion, the ITAT directed the AO to delete the addition of Rs. 2,96,48,700 made under Section 68, considering that the appellant had successfully discharged its onus of proving the identity, creditworthiness, and genuineness of the share transactions. The Tribunal also upheld the disallowance of Rs. 9,77,970 on account of foreign travel expenses.
The appeal by Gamut Products Pvt. Ltd. was partly allowed, with the order pronounced in the open court on 11.07.2022 by Shri N.K. Billaiya, Accountant Member, and Ms. Astha Chandra, Judicial Member.
Source: Income Tax Appellate Tribunal, Delhi Bench ‘C’, New Delhi
Disclaimer: This article provides a general overview of the case and is not a substitute for professional legal advice. For detailed information, readers are encouraged to refer to the official case documents and consult with a qualified legal professional.
Gamut Products Pvt. Ltd. vs DCIT: Dispute over Addition Under Section 68 for AY 2012-13
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