Assessee is obligated to prove the source of share application money only from AY 2013-14 onwards

Last updated: 09 October 2021

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The Income Tax Appellate Tribunal has ruled that an assessee is only obligated to prove the source of share application money from Assessment Year 2013-14 onwards. This decision was made after reviewing the evidence provided by the assessee, which included details of share applicants, their addresses, investment amounts, and various supporting documents. The Tribunal distinguished the current case from previous rulings where investors had admitted to being accommodation entry providers or failed to supply necessary documentation.

Court :
ITAT Mumbai

Brief :
Aforesaid appeals by assessee for Assessment Years (AY) 2009-10 to 2012-13.

Citation :
I.T.A. No.7308/Mum/2019

IN THE INCOME TAX APPELLATE TRIBUNAL “A” BENCH, MUMBAI

BEFORE HON’BLE SHRI C.N. PRASAD, JM AND HON’BLE SHRI MANOJ KUMAR AGGARWAL, AM (Hearing Through Video Conferencing Mode)

I.T.A. No.7308/Mum/2019

Adhoi Vyapar Pvt. Ltd. A-502, 234, Manish Garden CHS, 4 Bunglow, Andheri(W), Mumbai-400 058

ITO-9(1)(1), R.No. 205, 2nd floor, Aaykar Bhavan, M.K.Road Mumbai-400 020

Assessee by: Shri Ajay Singh, Ld. AR
Revenue by : Shri Brajendra Kumar– Ld. Sr. DR

Date of Hearing: 03/09/2021

Date of Pronouncement: 01/10/2021

O R D E R

We have carefully heard the rival submissions and perused relevant material on record. We have also deliberated upon various judicial pronouncements as cited during the course of hearing. Our adjudication to the subject matter of appeal would be as given in succeeding paragraphs.

2. During the course of re-assessment proceedings, notice u/s 142(1) was issued to the assessee calling for requisite details of the share- applicants along with documentary evidences. The assessee, vide reply dated 23/12/2015, provided the details of share-applicants along with their respective addresses and the amount received from each of them during the year. It was also submitted that this was the first year of the assessee company. Vide another reply dated 18/01/2016, the assessee furnished documentary evidences in the form of Share Application Form, PAN Card, confirmation from share applicants regarding investment, relevant pages of bank passbook / statement, Income Tax Acknowledgement for the year, Statement of Income, Profit & Loss A/c & Balance Sheet as on 31/03/2009 and letter of allotment with respect to non-corporate share applicants whereas in case of corporate share applicants, in addition, the copies of Board Resolution, Memorandum and Articles of Association was also furnished.

3. The Ld. DR has cited the decision of Hon’ble Delhi High Court in Nova Promoters & Finlease Pvt. Ltd. (18 Taxmann.com 217) which is factually distinguishable since in that case, the investors made an admission that they were accommodation entry providers. No such admission has been made by the investors in the present case. The case law of Hon’ble High Court of Bombay in Royal Rich Developers (I) Ltd. V/s Pr. CIT (108 Taxmann.com 382) is a case where the investor failed to supply necessary details and documents to establish the genuineness of the investment.

4. All the appeals stand allowed in terms of our above order. Order pronounced on 1st October, 2021.

Please find attached the enclosed file for the full judgement

FAQ :

An assessee is obligated to prove the source of share application money from Assessment Year 2013-14 onwards.

The assessee provided details of share applicants, their addresses and investment amounts, Share Application Forms, PAN Cards, confirmations from applicants, bank statements, Income Tax Acknowledgements, financial statements, and letters of allotment. For corporate applicants, Board Resolutions and MOA/AOA were also submitted.

No, there were no admissions made by the investors in this case that they were accommodation entry providers.

This case is factually different because, in the Nova Promoters case, the investors admitted to being accommodation entry providers, which was not the situation here.

All appeals were allowed in terms of the Tribunal's order.