AI Drafter 
TaxTMI 
TaxTMI 
2026 (5) TMI 1482
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....ioned appeals are common, therefore, they have been heard together and accordingly, adjudicated by a common order. 3. First, we take assessee's appeal in ITA No. 7198/Del/2025 for AY 2017-18. ITA No. 7198/Del/2025 [Assessment Year 2017-18] 4. Brief facts of the case are that the assessee is a public limited company, incorporated on 19.09.1988 under the Companies Act, 1956 and listed in Bombay Stock Exchange. The company is engaged in the business of manufacturing of plastic molded toys, school furniture, playground equipment's infrastructure, and automotive and POP products. The return of income for the year under appeal was filed on 30.10.2017 declaring loss of INR 5,96,81,434/-. The case was selected under CASS for scrutiny and the statutory notice u/s 143(2) was issued on 26.09.2018 followed by the notices u/ 142(1) alongwith questionnaire from time to time. The assessee filed replies to each and every questionnaire issued by furnishing details as called for through the respective query letter and copies of all such replies are placed in the Paper book. The AO observed that during the year under appeal, assessee has received total share capital of INR 8,79,36,327.05 fro....
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....their names, addresses and PAN. It was further stated that none of the subscriber was has any relation with the promoters or their relatives. Further, vide letter dated 23.11.2019, the assessee reiterated that since it is a public limited company listed with Bombay Stock Exchange and shares were allotted through public offer in accordance with the guidelines issued by SEBI and Bombay Stock Exchange therefore, by filing the complete details of the shares allottees, the onus was discharged. The assessee further placed reliance on the judgement of Hon'ble Delhi high Court in the CIT vs Oasis Hospitalities Pvt. Ltd. reported in 333 ITR 119 (Delhi) wherein Hon'ble jurisdictional high Court has held that in case of a public issue, the company concern cannot be accepted to note every detail pertaining to the identity as well as the financial work of each of its subscribers. The company must, however, all the information contained in the statutory shares application document. It was the claim of the assessee that it is a public listed company and had filed all the particulars of the share applicants and none of the applicants was related to the company in any manner either as the promoter ....
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..... Ld. CIT DR thus, placed reliance on the judgement of Hon'ble Supreme Court in the case of PCIT Vs. NRA Iron & Steel Pvt. Ltd. reported in 103 taxmann.com 48 (SC) and requested for the confirmation of the same. 13. Heard the contentions of both the parties at length and perused the material available on record. During the year under appeal, the assessee has received a sum of INR 8,79,36,327/- from the allotment of 6,26,015 Equity shares under preferential allotment at a price of INR 140.47/- per share. Before the AO, assessee has filed all the necessary particulars of the share subscribers to establish their identity which included their complete names, PAN and addresses and nos. of shares subscribed. The assessee is a public limited company and shares were allotted through public offer of preferential allotment and none of the subscriber was related to assessee or its promoter in any manner. It was the claim of the assessee that by filing these particular of all the share subscribers, it has discharged the burden casted upon it. However, the AO has not agreed with the contention of the assessee and held that the assessee has failed to prove the genuineness of the transactions ....
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....edit has to be of a sum during the previous year; and the assessee offer no explanation about the nature and source of such credit found in the books; or the explanation offered by the assessee in the opinion of the Assessing Officer is not satisfactory, it is only then the sum so credited may be charged to income-tax as the income of the assessee of that previous year. However, there is an exception for the same i.e. it is not applicable to Public Limited companies. 14.1. As could be evident from the record that if the assessee has explained the nature and source of the credit in the books of accounts and since it is a company in which public is substantially interested therefore it is not required to establish the source of source of the sum received. 15. As observed above, the assessee company is a public limited company and it is not required to prove the source of source and once all the relevant particulars of the share subscribers were submitted alongwith return of allotment filed before the Registrar of Companies, in case AO has any doubts about the creditworthiness of the share subscribers, direct inquiry could have been made by the AO by issue summons which is not b....
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....e, the assessee cannot feign ignorance about the status of these parties." 17. In the case of CIT v. Sophia Finance Ltd. reported in [1994] 205 ITR 98 (Delhi), the Hon'ble jurisdictional High Court held that in the context of Section 68 of the Act that: (i) "The Assessee has to prima facie prove "(1) the identity of the creditor/subscriber; (2) the genuineness of the transaction, namely, whether it has been transmitted through banking or other indisputable channels; (3) the creditworthiness or financial strength of the creditor/subscriber. (ii) If the relevant details of the address of PAN identity of the creditor/subscriber are furnished to the Department along with copies of the Shareholders Register, Share Application Forms, Share Transfer Register etc., it would constitute acceptable proof or acceptable explanation by the Assessee. (iii) The Department would not be justified in drawing an adverse inference only because the creditor/subscriber fails or neglects to respond to its notices. (iv) The onus would not stand discharged if the creditor/subscriber denies or repudiates the transaction set up by the Assessee nor should the AO take ....
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....Dismissed against Decision of Delhi HC) has observed as under: "... assessee discharged the burden in proving the identity of shareholders, genuineness of the transaction and creditworthiness of the shareholders, thereafter, in case such evidence is to be discarded or it is proved that the assessee has "created" evidence, the Revenue is supposed to make thorough probe before it could nail the assessee and fasten the assessee with such a liability under Section 68 and 69 of the Act..." 23. The Hon'ble Delhi High Court in the case of CIT vs. Vrindavan Farms (P) Ltd, in ITA 71/2015, ITA 72/2015, ITA 84/2015 has held that No addition can be made when details of share applicants are furnished to the Assessing Officer complying condition of section 68. 24. It is also relevant to state that an amendment is made vide Finance Act, 2022 wherein second proviso to section 68 is added so as to provide that the nature and source of any sum, whether in the form of loan or borrowing, or any other liability credited in the books of an assessee shall be treated as explained only if the source of funds is also explained in the hands of the creditor or loan provider. However, this a....
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....is observed that in the return of income filed, the expenses for which, no separate head is provided are shown under the head 'Other Expenses', accordingly consolidated amount was mentioned which comprises of following expenses:- Sr. No. Head of Expenses Amount (Rs.) i) Fee and registration 28,77,480.04 ii) Balance written off/bad debts 1,18,803.76 iii) Donation 22,000.00 iv) Rent 14,13,274.00 v) Insurance 23,80,814.60 vi) Travelling & conveyance expenses 1,16,01,286.25 vii) Postage and Telephones 28,60,790.49 viii) Printing &stationery 10,89,825.39 ix) Legal and professional charges 1,03,40,112.48 x) Electricity and water expenses 29,00,494.94 xi) Auditors' remuneration 2,43,750.00 xii) Rates and taxes 15,81,774.19 xiii) Miscellaneous expenses 23,23,949.04 xiv) Repair and maintenance others 27,16,822.00 xv) Loss on sale of fixed assets 2,39,737.65 xvi) Advertisement others 46,396.00 xvii) Prior period items 6,18,923.19 29. From the perusal of the title of the expenses, it is apparent that these are regular business....
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....ncurred wholly and exclusively for the purpose of the business or profession, and that it was not for personal or private purposes, no adhoc disallowance is permitted. 32. Undisputedly, the assessee is a public limited company, it would have no expenses of personal in nature. The AO ought to have verified whether such expenses were incurred in the course of business and for the business of the assessee. The company being Artificial juristic person would not have any personal expenses and would not incur personal expenses unlike living being. The body corporate operates through living beings. The authorities below failed to advert to this fundamental question. Hon'ble Gujarat High Court in the case of Sayaji Iron & Engg.Co. vs CIT reported in 253 ITR 749 [Gujarat] under the similar facts held as under:- "There is one more aspect of the matter which requires to be considered. The assessee which is a private limited company is a distinct assessable entity as per the definition of "person" under section 2(31) of the Act. Therefore, it cannot be stated that when the vehicles are used by the directors, "even if they are personally used by the directors" the vehicles are perso....