Facts of the Case

The Revenue filed appeals under Section 260A against a common order of the ITAT concerning six assessment years (AY 2012–13 to AY 2017–18).

The case involved three major additions:

  1. Share Capital / Share Premium (Section 68):
    The Assessing Officer (AO) treated large amounts received as share capital and premium as unexplained.
  2. Bogus Purchases:
    AO disallowed 25% of alleged bogus purchases.
  3. Cash Deposits (Demonetization Period):
    Cash deposited during November–December 2016 was treated as unexplained.

A search and seizure operation (21.03.2017) was conducted, and assessment was made under Section 153A.

The Tribunal deleted most additions, leading to the present appeal by the Revenue.

Issues Involved

  1. Whether additions under Section 68 for share capital/share premium were justified.
  2. Whether alleged bogus purchases warranted disallowance.
  3. Whether cash deposits during demonetization could be treated as unexplained income.
  4. Whether completed assessments can be disturbed without incriminating material under Section 153A.

Petitioner’s (Revenue) Arguments

  • Investor companies lacked creditworthiness and were accommodation entry providers.
  • Share premium transactions were sham and involved routing of unaccounted money.
  • Statement of entry operator indicated bogus investments.
  • Tribunal wrongly relied on absence of incriminating material.
  • Additions for bogus purchases and demonetization deposits were supported by evidence.
  • CIT(A) findings regarding artificial transactions and suppressed profits were ignored.

Respondent’s (Assessee) Arguments

  • Tribunal is the final fact-finding authority; no substantial question of law arises.
  • AO acted under the influence of the Investigation Wing, violating quasi-judicial independence.
  • All transactions were through banking channels and recorded in books.
  • No incriminating material was found during search.
  • Statement under Section 132(4) was retracted within 48 hours.
  • Purchases were supported by bills, stock records, and audited accounts.
  • Cash deposits matched recorded cash sales during the demonetization period.

Court’s Findings / Order

1. On Section 153A & Incriminating Material

  • Completed assessments cannot be disturbed without incriminating material.
  • Statement under Section 132(4) did not reveal undisclosed income.
  • Photocopies of documents were not incriminating evidence.
  • Therefore, additions for AY 2012–13 to 2014–15 were invalid.

2. On Share Capital (Section 68)

  • Assessee proved:
    • Identity of investors
    • Creditworthiness
    • Genuineness of transactions
  • Funds were routed through banking channels and properly recorded.
  • No evidence of unaccounted income was found.
  • Addition under Section 68 deleted.

3. On Bogus Purchases

  • No evidence found during search to support bogus purchases.
  • Sales corresponding to purchases were accepted.
  • Books were audited and supported by documents.
  • Disallowance not justified.

4. On Demonetization Cash Deposits

  • Cash deposits aligned with recorded cash sales.
  • AO made computational errors and included valid currency.
  • No proof of fictitious sales.
  • Addition deleted.

Final Outcome

  • Revenue appeals dismissed.
  • Tribunal order upheld.

Important Clarifications

  • Mere routing of own funds through entities does not attract Section 68 without proof of unaccounted income.
  • Motive to reduce tax liability is irrelevant if transactions are legally valid.
  • Statement under Section 132(4) must clearly indicate undisclosed income to qualify as incriminating material.
  • Photocopies or incomplete documents are not sufficient evidence.
  • Under Section 153A, completed assessments can only be reopened with incriminating material.

Link to download the order -.https://delhihighcourt.nic.in/app/case_number_pdf/2022:DHC:234-DB/RAS19012022ITA682021_142140.pdf

Disclaimer

This content is shared strictly for general information and knowledge purposes only. Readers should independently verify the information from reliable sources. It is not intended to provide legal, professional, or advisory guidance. The author and the organisation disclaim all liability arising from the use of this content. The material has been prepared with the assistance of AI tools.