Facts of the Case

The Revenue filed an appeal under Section 260A of the Income-tax Act, 1961 challenging the order dated 14.05.2024 passed by the Income Tax Appellate Tribunal for Assessment Years 2016–17 and 2018–19.

A survey under Section 133A was conducted on the BDR group on 13.12.2018, pursuant to which information was received by the Assessing Officer alleging that share capital and share premium received by the respondent assessee had escaped assessment. A notice under Section 148 dated 31.03.2021 was issued and assessment was completed under Section 147 read with Section 143(3) on 31.03.2022, making an addition of ₹52,26,00,000 under Section 68 on account of unexplained share capital and premium.

The Commissioner of Income Tax (Appeals), by order dated 19.06.2023, deleted the addition. The Revenue’s appeal before the ITAT was dismissed, leading to the present appeal before the High Court.

Issues Involved

Whether the assessee had discharged the onus under Section 68 of the Act by establishing the identity, creditworthiness and genuineness of the shareholders, whether non-compliance by some shareholders to notices under Section 133(6) justified the addition, and whether any substantial question of law arose from the concurrent findings of the appellate authorities.

 

Appellant’s Arguments

The Revenue contended that the Assessing Officer had rightly made the addition under Section 68 as some shareholders had not responded to notices under Section 133(6), the investors had negligible returned income, peculiar banking patterns, and had not carried out any substantive business. It was argued that merely being existing shareholders did not establish creditworthiness or genuineness. Reliance was placed on the Supreme Court decision in Principal Commissioner of Income Tax vs. NRA Iron and Steel Pvt. Ltd.

Respondent’s Arguments

The assessee submitted that exhaustive documentary evidence was furnished to establish identity, creditworthiness and genuineness of each shareholder, including confirmations, bank statements, income-tax returns, assessment orders and details of immediate sources of funds. It was contended that the CIT(A) and ITAT recorded concurrent findings of fact after detailed examination and that the scope of interference under Section 260A was limited.

Court Order / Findings

The Delhi High Court held that Section 68 requires satisfaction of three conditions—identity, creditworthiness and genuineness—and that what constitutes sufficient evidence depends on the facts of each case. The Court noted that both the CIT(A) and the ITAT had minutely examined voluminous material placed on record and had returned concurrent findings that all three tests were satisfied.

The Court observed that the appellate authorities had considered detailed evidence showing immediate sources of funds, including sale of listed and unlisted shares, refunds of loans and advances, dividend income, and past transactions, and that shareholders were existing assessees regularly assessed to tax. The Court found that the Assessing Officer’s conclusions were largely unsupported by reasons and that the appellate authorities were justified in reappreciating the material.

The Court distinguished the decision in NRA Iron and Steel Pvt. Ltd., noting that in the present case the assessee had furnished complete documentation and proper explanations, unlike the facts before the Supreme Court. Relying on the principle laid down in CIT vs. Divine Leasing & Finance Ltd., the Court held that once the assessee discharges its initial burden, the onus shifts to the Revenue to bring contrary material, which was absent in the present case.

The Court further held that the appeal raised no substantial question of law and that reappreciation of evidence was impermissible under Section 260A.

Important Clarification

The Court clarified that where the CIT(A) and ITAT record concurrent findings of fact after detailed examination of evidence establishing identity, creditworthiness and genuineness under Section 68, such findings are not to be interfered with in an appeal under Section 260A unless shown to be perverse.

 

Final Outcome

The appeal filed by the Revenue was dismissed. The Delhi High Court upheld the orders of the Commissioner of Income Tax (Appeals) and the Income Tax Appellate Tribunal deleting the addition of ₹52,26,00,000 made under Section 68, and held that no substantial question of law arose for consideration, thereby deciding the matter in favour of BDR Builders and Developers Pvt. Ltd. and against the Revenue.

Link to download order - https://www.mytaxexpert.co.in/uploads/1769686489_PR.COMMISSIONEROFINCOMETAXCENTRAL2VsBDRBUILDERSANDDEVELOPERSPVT.LTD..pdf

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