Rs.14.93 Crores Addition u/s 68 for Share Capital Premium: ITAT Deletes AO's Addition, Upholds Genuineness of Funds [Read Order]
The AO had added the amount, believing it to be unaccounted money introduced through group companies, but the ITAT found that the subscribing companies had used their own previously recalled or encashed funds, and the genuineness of the transactions was confirmed
![Rs.14.93 Crores Addition u/s 68 for Share Capital Premium: ITAT Deletes AOs Addition, Upholds Genuineness of Funds [Read Order]](https://www.taxscan.in/wp-content/uploads/2025/05/Bombay-HC-Interest-Expenditure-Interest-Free-Surplus-Fund-Investment-TAXSCAN.jpg "Rs.14.93 Crores Addition u/s 68 for Share Capital Premium: ITAT Deletes AOs Addition, Upholds Genuineness of Funds [Read Order]")
The Delhi Bench of Income Tax Appellate Tribunal(ITAT) deleted the AO's addition of Rs. 14.93 crores under Section 68 of Income Tax Act,1961,for share capital premium, ruling that the funds came from genuine sources. East Delhi Leasing P. Ltd.,appellant-assessee,filed its return of income on 30.09.2013, declaring Rs. 3,89,400/- as income. The assessment was completed on 29.03.2016, with...
The Delhi Bench of Income Tax Appellate Tribunal(ITAT) deleted the AO's addition of Rs. 14.93 crores under Section 68 of Income Tax Act,1961,for share capital premium, ruling that the funds came from genuine sources.
East Delhi Leasing P. Ltd.,appellant-assessee,filed its return of income on 30.09.2013, declaring Rs. 3,89,400/- as income. The assessment was completed on 29.03.2016, with the AO raising the income to Rs. 14,97,26,462/-. During the assessment, the AO found that the appellant had received Rs. 14.93 crores in share capital from two group companies, issuing shares at Rs. 100 each (Rs. 10 face value and Rs. 90 premium).
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The AO looked into the accounts of M/s King Merchandise (P) Ltd. and M/s BGS Credit (P) Ltd., finding that they had received funds from five Calcutta-based companies in previous years. The AO believed these transactions were meant to inflate their reserves. After reviewing the fund flow and past case decisions, the AO decided to make an addition under Section 68 of the Act.
The AO proposed adding Rs. 14.93 crores, stating that the companies failed to provide the necessary documents, and that the funds were unaccounted money introduced through these companies. The AO concluded that the assessee could not prove the genuineness of the transactions, leading to the addition. The AO also mentioned penalties under section 271(1)(c) of the IT Act.
On appeal, the CIT(A) agreed with the AO’s decision and confirmed the addition of Rs. 14.93 crores, referring to several court rulings.
The two member bench comprising C.N.Prasad(Judicial Member) and Naveen Chandra(Accountant Member) looked at the assessee’s objection to the AO’s decision to add share capital as premium under Section 68. It found that Section 68 only allowed scrutiny of funds from the immediate subscribing companies, not the secondary sources that provided those funds.
The appellate tribunal noted that the subscribing companies used funds they already had, with no new funds being added during the assessment year. These funds came from past investments that had been recalled or encashed. This was confirmed by the Director of the subscribing companies in his statement.
It was also pointed out that the AOs of the subscribing companies had not raised any issues with their returns. Based on these facts, the ITAT decided that the AO’s use of Section 68 was wrong. It ruled that the identity, creditworthiness, and genuineness of the transactions were clear, and ordered the addition under Section 68 to be deleted.
In short,the appeal was allowed.
To Read the full text of the Order CLICK HERE
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