ITAT Delhi Revives ₹6.30 Crore Section 68 Addition: Why Unsigned Mauritius Financials Failed the Creditworthiness Test
Case Overview
Case Name: ACIT Vs Indure Private Limited
Forum: Income Tax Appellate Tribunal, Delhi Bench
Assessment Year: 2018-19
Core Issue: Whether unsigned and unauthenticated financial statements of a Mauritius-based investor satisfy the evidentiary threshold under Section 68 of the Income Tax Act, 1961
Outcome: Revenue's appeal allowed; addition of ₹6,30,09,585/- restored
Background and Factual Matrix
The present case arose from an assessment order dated 19.04.2021 passed under Section 143(3) read with Section 144B of the Income Tax Act, 1961, for Assessment Year 2018-19. The dispute subsequently travelled to the National Faceless Appeal Centre, whose order dated 18.06.2024 became the subject of the Revenue's appeal before the Delhi ITAT.
Indure Private Limited, the assessee-company, had filed its Return of Income on 31.10.2018, declaring total income of ₹1,42,65,240/-. In the course of scrutiny assessment, the Assessing Officer observed a significant increase in the share capital of the assessee. Upon examination and inquiry, the assessee disclosed that during the relevant financial year, it had allotted 19,181 equity shares at a rate of ₹3,195 per share to M/s Energen Infra (Mauritius) Ltd., a company incorporated in the Republic of Mauritius.
The aggregate consideration received on account of this share allotment — comprising share capital and share premium — amounted to ₹6,30,09,585/-, which the Assessing Officer proceeded to examine under the lens of Section 68 of the Income Tax Act, 1961.
What the Assessing Officer Found
When the Assessing Officer called for documentary evidence to establish the identity, creditworthiness, and genuineness of the Mauritius investor, the assessee submitted financial statements of M/s Energen Infra (Mauritius) Ltd. for the years ended 31st December, 2017 and 31st December, 2018. However, a careful examination of these documents revealed serious deficiencies:
- The financial statements were plain papers with no annexures or supporting notes
- There was no company seal or auditor's seal affixed anywhere on the documents
- No director's name or signature was present on the financials
- The documents lacked any form of authentication or certification
Despite the Assessing Officer specifically directing the assessee to produce correct, complete, and duly authenticated financials, the assessee failed to comply with this requirement. The AO, faced with incomplete and unauthenticated documents that could not inspire confidence as credible evidence, invoked Section 68 of the Act and treated the sum of ₹6,30,09,585/- as unexplained cash credit, adding it to the income of the assessee.
Relief Granted by CIT(A) — And Why ITAT Disagreed
The assessee appealed before the learned Commissioner of Income Tax (Appeals) / National Faceless Appeal Centre. The CIT(A) accepted the assessee's arguments and deleted the entire addition made by the Assessing Officer, granting substantial relief to the assessee-company.
The Revenue, aggrieved by this deletion, carried the matter to the Delhi ITAT.
Before the Tribunal, the Senior Departmental Representative, Ms. Ankush Kalra, forcefully argued that the CIT(A) had erred in accepting documents that were patently deficient, incomplete, and unauthenticated. She contended that such documents could not, by any stretch, satisfy the statutory requirements of Section 68 of the Income Tax Act, 1961, and that the relief granted was both excessive and legally unsustainable.