This document provides a detailed analysis of the ITAT case ITA No. 3709/DEL/2019 for the assessment year 2015-16, involving appellant ITO Ward 21(1), New Delhi, and respondent Rajdarbar Beverages Pvt Ltd, New Delhi. The appeal addresses the deletion of an addition of Rs. 1,82,00,000/- made by the AO as unexplained investment in unlisted equities.
Rajdarbar Beverages Pvt Ltd, incorporated on 16.05.2000, filed its return of income for the AY 2015-16 on 24.10.2015 at nil income. The return was processed under section 143(1) of the Income Tax Act, 1961, on 05.11.2015. The case was selected for limited scrutiny due to a large increase in investment in unlisted equities during the year.
During assessment proceedings, the Assessing Officer (AO) required Rajdarbar Beverages Pvt Ltd to explain the source of the amount invested in the shares of unlisted equities and the Fair Market Value of the shares. The company explained that it had purchased 2,80,000 shares of M/s. Spectrum Distributors Pvt. Ltd. for Rs. 1,82,00,000/- from M/s. Kashyap Properties Pvt. Ltd. The source of investment was Rs. 42,56,000/- received from M/s. Rasaraj Sales Ltd. and Rs. 1,39,44,000/- received from M/s. Gunvardhan Vyapaar Pvt. Ltd.
Rajdarbar Beverages Pvt Ltd provided evidence that the amounts were received back from investments made in earlier financial years, specifically Rs. 84,64,000 given in FY 2011-12 to M/s. Rasaraj Sales Ltd. and Rs. 1,40,94,000 given in FY 2009-10 to M/s. Gunvardhan Vyapaar Pvt. Ltd. The AO, however, did not accept the explanation, stating that the identity, creditworthiness, and genuineness of the transactions were not established, leading to an addition of Rs. 1,82,00,000/- as unexplained investment.
Aggrieved by the AO’s decision, Rajdarbar Beverages Pvt Ltd filed an appeal before the Commissioner of Income Tax (Appeals) [CIT(A)]. During the appellate proceedings, the company furnished written submissions, including confirmation, bank statements, and Income Tax Returns (ITRs) of the entities involved. The CIT(A) noted that the transactions were between group entities and were supported by documentary evidence. The CIT(A) deleted the addition made by the AO, observing that the flow of funds was supported by bank statements and balance sheets of the respective companies.
The Revenue, dissatisfied with the CIT(A)’s order, appealed to the Income Tax Appellate Tribunal (ITAT). The tribunal, comprising N.K. Billaiya, Accountant Member, and Astha Chandra, Judicial Member, analyzed the submissions and evidence presented by both parties.
The ITAT noted that Rajdarbar Beverages Pvt Ltd had provided confirmed copies of accounts from both M/s. Rasaraj Sales Ltd. and M/s. Gunvardhan Vyapaar Pvt. Ltd. The AO had acknowledged the service of summons to these entities, confirming their existence. The ITAT found that the identity of the entities could not be doubted, and their creditworthiness was established through their balance sheets. The genuineness of the transactions was supported by documentary evidence, including bank statements and ITRs.
The ITAT concluded that the AO’s addition of Rs. 1,82,00,000/- as unexplained investment was not justified. The tribunal endorsed the findings of the CIT(A) and dismissed the Revenue’s appeal.
In the result, the appeal filed by the Revenue in ITA No. 3709/DEL/2019 was dismissed. The decision was pronounced in the open court on 6th February, 2023.
This case highlights the importance of providing comprehensive documentary evidence to support the identity, creditworthiness, and genuineness of transactions in tax assessments. The tribunal’s decision reinforces that mere non-compliance with summons does not justify additions if the transactions are otherwise well-documented and supported by credible evidence.
Case Review: ITO Ward 21(1) vs Rajdarbar Beverages Pvt Ltd – Assessment Year 2015-16
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