This case involves the appellant, Jingle Bells Aluminium Pvt. Ltd., and the respondent, Income Tax Officer (ITO) Ward – 13(3), New Delhi. The dispute pertains to the assessment year 2012-13. The primary issues in this case revolve around the addition of Rs. 62 crores as unexplained cash credit under Section 68 of the Income Tax Act. The case was filed on June 14, 2019, and the final tribunal order was pronounced on March 18, 2021.
The appellant, Jingle Bells Aluminium Pvt. Ltd., had raised share capital and share premium amounting to Rs. 62 crores during the assessment year 2012-13. The ITO issued notices under Section 133(6) to verify the identity, creditworthiness, and genuineness of the transactions from the investors. The replies received were incomplete and raised doubts about the legitimacy of the transactions.
The appellant argued that all transactions were genuine, and necessary documents such as tax returns, bank statements, and confirmations from the investors were provided. The appellant contended that the share premium was justified based on future business prospects and that the investments were made through banking channels.
The ITO contended that the investors lacked creditworthiness as the funds in their accounts seldom rested and were immediately transferred. The ITO argued that the appellant failed to produce the directors of the investor companies, and the nature of transactions suggested that they were accommodation entries.
The tribunal noted that although the documentation was in place, the inability to produce directors, the lack of business activity by the investor companies, and the immediate transfer of funds raised suspicions. It was observed that these transactions were part of a larger scheme involving routing funds from Bhushan Steel Ltd. through various entities, including the appellant.
The tribunal held that the basic requirements to justify the identity, creditworthiness, and genuineness of the transactions were prima facie established. However, considering the overall circumstances and the involvement of Bhushan Steel Ltd., the tribunal concluded that the transactions were not genuine business investments but rather a means to route funds. Consequently, the tribunal sustained an addition of Rs. 1.24 crores, representing 2% of the total transaction amount, as undisclosed income for providing such entry services. The balance addition of Rs. 60.76 crores was deleted.
This case highlights the importance of not just having documentary evidence but also the necessity to substantiate the genuineness and creditworthiness of transactions in the eyes of tax authorities. The tribunal’s decision reflects a balanced approach, recognizing the formal compliance by the appellant while also addressing the underlying substance of the transactions.
Case Summary: Jingle Bells Aluminium vs. ITO Ward – 13(3), New Delhi, Assessment Year 2012-13
Manage the increasing number of hearings effortlessly by leveraging the legal AI revolution We are India's Leading revolutionary AI-powered legal platform where you can get enough insights into top cases and judgements.
Research Platform