ACIT, C.C-2(1), KOLKATA. , KOLKATA vs. SHALIMAR NUTRIENTS PVT. LTD. , KOLKATA
No AI summary yet for this case.
Income Tax Appellate Tribunal, “B” BENCH, KOLKATA
Before: DR. MANISH BORAD, HON’BLE & SHRI SONJOY SARMA, HON’BLE
PER DR. MANISH BORAD, ACCOUNTANT MEMBER:
The above captioned appeal is directed at the instance of the revenue against the order of the learned Commissioner of Income Tax (Appeals), Kolkata – 20, (hereinafter the “ld. CIT(A)”), passed u/s 250 of the Income Tax Act, 1961 (“the Act”) for the Assessment Year 2015-
The Registry has pointed out that there is a delay of 1 day in filing the present appeal by the revenue. Petition for condonation of delay is placed on record explaining the reasons. On perusing the same, we are convinced that the revenue was prevented by sufficient cause from filing this appeal in time. Accordingly, we condone the delay and proceed to admit the appeal for hearing.
2 Assessment Year: 2015-16 Shalimar Nutrients Private Limited
The revenue has raised the following grounds of appeal:
“1. On the facts and in the circumstances of the case, the Ld. CIT (A) erred in law by deleting the additions made u/s. 68 of the I.T. Act,1961 on account of share application money receipt of Rs. 2,50,00,000/- ignoring the facts that A.O. has made the addition based on the facts that all the limbs u/s. 68 of the I.T. Act. are not satisfied in this case.
Whether on the facts and circumstances of the case, the CIT (A) erred in law in deleting the addition of Rs. 2,50,00,000/- made u/s 68 of the I.T. Act, 1961 without going into the merits of the case and the facts that creditworthiness of the share applicants could not be proven as there was no rational of the fund received by the share applicants and in turn transferred the fund in the form of share application money to the assessee company who is the ultimate beneficiary.
On the facts and in the circumstances of the case, the Ld. CIT (A) erred in law by deleting the additions made u/s 69C of the I.T. Act, 1961 of Rs. 50,000/- ignoring the facts that A.O. has made the based on the evidences material on record.
Whether on the facts and circumstances of the case, the CIT (A) erred in law in ignoring the observations of the Hon’ble Apex Court in case of NRA Iron & Steel P Ltd 103 Taxmann.com 48, as the inquiry and analysis made by the AO established that assessee has failed to prove identity, creditworthiness and genuineness of the transaction.
That department carves leave to add, alter or modify any or all grounds of appeal either before or during course of Appellate Proceedings.”
Brief facts of the case are that the assessee- company has filed its return of income on 24.09.2015 declaring total loss of Rs. 4,26,24,857/-. The case of the assessee selected for limited scrutiny through CASS and notices u/s 143(2) and under section 142(1) were issued and duly served upon the assessee. As far as the issue raised in the instant appeals is concerned, the same is confined to addition u/s 68 of the Act
3 Assessment Year: 2015-16 Shalimar Nutrients Private Limited for the alleged unexplained share capital received during the year. On perusal of the record, it reveals that the assessee received share application money of Rs. 2,50,00,000/- from M/s Pratik Merchants Pvt. Ltd., during the year.
The Ld. AO issued show cause notice to the assessee dated 26.10.2017 requiring to explain as to why the amount of share application money should not be treated as unexplained cash credit. In response to the said notice, the assessee requested the share applicant to provide necessary documents in support of the identity of the share applicant and genuineness of the transaction. On request, the share applicant i.e., M/s Pratik Merchants Pvt Ltd vide its reply dated 02.11.2017 submitted documents and explanation to prove its identity, genuineness and creditworthiness as under:- “… Sl. Query Reply No. (i) Photo Identity Card except Driving License of Mr. Sameer PAN Card Agarwal, Director attached with reply dated 02.11.2017 (ii) Amount paid in connection We have not paid any amount as with the loans paid along loan to the company, however we with date and mode of have invested Rs. 2,50,00,000/- payment during FY 2014-15 in 25,00,000 equity share capital of the 4 Assessment Year: 2015-16 Shalimar Nutrients Private Limited company, details attached along with the reply dated 02.11.2017 (iii) Source of fund for making Source of fund for making payment stated above, and investment in equity share capital authenticated copy of Bank of the company and relevant statement revealing the bank statement attached along relevant transactions with reply dated 02.11.2017 (iv) The basis of charging of such We have not paid any amount huge premium towards shares premium, all equity shares have been subscribed at par i.e., Rs. 10/- per share (v) A write up on the rationale The investment in the Company of investment and benefit has been made as it belongs to a derived on such investment rising group, which is mainly into Soya Extraction Plant. The investment has been done seeing the past track record of their group companies and with a hope to get dividends and a good capital appreciation in the future (vi) Furnish copy of your Balance Copy of our Balance Sheet, Profit Sheet, Profit and Loss & loss Account, Account, acknowledgement acknowledgement of Return of of Return of Income & Form Income & Authenticated copy of 5 Assessment Year: 2015-16 Shalimar Nutrients Private Limited 3CD, Authenticated copy of PAN Card of the company PAN card of the company attached along with reply dated 02.11.2017 (vii) Copies of correspondence if The certified copy of any, with the investing correspondence attached along company with reply dated 02.11.2017 (viii) Copy of rent receipt, electric It is group company of Shalimar bill and trade license group, whose office at 9 AJC Bose Road, Ideal Group, 5th Floor, Kolkata – 700 017 …”
However, the Ld. AR of the assessee stated that the Ld. AO without considering the reply made by the share applicant, again issued another notice dated 09.11.2017 indicating that the notice issued u/s 133(6) to the share applicant returned as unidentified. In reply to the said notice, the assessee replied vide letter dated 16.11.2017, which is reproduced as under:
“1. During the relevant F.Y. 2014-15, there is increase in share capital of the company to the tune of RS. 2,50,00,000/-. The said amount of Rs. 2,50,00,000/- has been received from M/s Pratik Merchants Pvt Ltd. We have already submitted the detail and documents related to said increase in share capital related to first source vide our letter dated 02.11.2017. Please also find enclosed herewith the documents related to second source for your kind perusal.
Vide your letter dated 09.11.2017, you have stated that the Notice u/s 133(6) was issued to M/s Pratik Merchants Pvt Ltd at 2A, Ganesh Chandra Avenue, 2nd Floor, Room No. 5, Kolkata – 700 013 and the same have been returned by the postal authority with postal address upon which you have issued the notice u/s 133(6) was grossly wrong. The detail of the postal address of the said party is as under:
6 Assessment Year: 2015-16 Shalimar Nutrients Private Limited Old Postal Address : 75, Metcalfe Street, Kolkata – 700 013 New Postal Address : 9, A J C Bose Road, Ideal Centre, 5th Floor, Kolkata – 700 017 We are enclosing herewith the copy of Form No. INC-22 i.e., “Notice of situation or change of situation of registered office”. From the said form, it is very much evident that the registered office of the company has been changed w.e.f. 15.03.2017 and the information w.r.t. the said change of address has been intimated to ROC vide Form No. INC-22 on 17.03.2017. Therefore, the notice/letter issued to M/s Pratik Merchants Pvt Ltd after March, 2017 should have been issued to the current postal address. In view of the above, no adverse view may kindly be taken against the assessee company. M/s Pratik Merchants Pvt Ltd is now our group company.
Vide your letter dated 09.11.2017, you have also stated that the inspector appointed by you for the enquiry of the said company. The inspector said that he couldn’t trace out the said company on the given address i.e. at 2A, Ganesh Chandra Avenue, 2nd Floor, Room No – 5, Kolkata – 700 013. In this connection, we would like to resubmit that the current postal address of M/s Pratik Merchants Pvt Ltd is 9, AJC Bose Road, Ideal Centre, 5th Floor, Kolkata – 700 017 and therefore any enquiry being made other than on the current postal address is irrelevant.
In connection with the substantiation of the identity of the party and genuineness of the transaction, we would like to submit as under: a) M/s Pratik Merchants Pvt Ltd is an Income Tax Assessee vide PAN AADCP3927B b) M/s Pratik Merchants Pvt Ltd has got its books of accounts audited. c) The said party has filed its annual return to ROC on regular basis. d) The assessment w.r.t. M/s Pratik Merchants Pvt Ltd has been completed vide order u/s 143(3) dated 23.11.2016 w.r.t. Asst. Year 2014-15. Copy of the said order is enclosed. e) The said party is maintaining a regular bank account and the transaction w.r.t. the share application has been duly made by the said bank account. Copy of the relevant page of the bank statement has already been submitted vide letter dated 02.11.2017. Therefore, the identity of the said party to whom the department has itself allotted the PAN and has completed the assessment cannot be doubted. Hence, the identity of the said party is proved. Further, the transaction made through regular and disclosed bank account of the said party are very much genuine.
7 Assessment Year: 2015-16 Shalimar Nutrients Private Limited
Further, the Ld. AO had taken note of the investigation carried out by the Income Tax Department against Mr. Amit Kedia and observed that he was engaged in providing accommodation entries in form of share capital/share premium to various beneficiaries in lieu of commission. Ld. AO further observed that the alleged sum received by the assessee through shell company is controlled by Mr. Amit Kedia. Ld. AO also gave reference to statement of Mr. Amit Kedia. In reply to the said allegation, the assessee vide letter dated 16.11.2017, stated as under:
“5. In the said letter dated 09.11.2017, you have stated that Mr. Amit Kumar Kedia has given statement that M/s Pratik Merchants Pvt Ltd was involved in arranging accommodation entries, etc. In this connection, we would like to submit as under: a) Vide Annexure A of the said letter dated 09.11.2017, it is very much evident that Mr. Amit Kumar Kedia was director of M/s Pratik Merchants Pvt Ltd from 03.07.2006 to 11.01.2011. Therefore, Mr. Amit Kumar Kedia ceases to be the director of M/s Pratik Merchants Pvt Ltd w.e.f. 11.01.2011 and has no relation with the said company hence forth. Now, the said party has invested an amount of Rs. 2,50,00,000/- in the assessee company after 11.01.2011. Therefore, there is no relation with the said statement and amount of investment made by the said party after 11.01.2011. b) Hence, the allegation by the Ld. AO that the share capital was raised by way of accommodation entry through the entry operator Mr. Amit Kumar Kedia is grossly wrong. It is quite impossible to say that Mr. Amit Kedia had any control over the company even after cessation of directorship. Therefore, no adverse inference may kindly be drawn against the issue. c) Further, the alleged statement of Mr. Amit Kumar Kedia, even if recorded on the back of the assessee, and if relied upon by the Ld. AO, the assessee must be provided an opportunity to cross examine Mr. Amit Kumar Kedia. d) It is well settled law that an adverse finding cannot be made against an assessee on the basis of such statements without allowing opportunity to assessee
8 Assessment Year: 2015-16 Shalimar Nutrients Private Limited to cross examine the person on whose statements reliance is placed against the assessee. The same has also been decided by the Hon’ble Calcutta High Court in the case of CIT v. Eastern Commercial Enterprises (1994) 201 ITR 105 (Cal). On the issue of cross examination, we further place our reliance on the following judicial pronouncements: (i) Bangodaya Cotton Mills Ltd v CIT (2011) 330 ITR 104, Hon’ble Calcutta High Court “AO having made the impugned addition simply on the basis of some letters seized from a third party in the absence of any corroborative evidence and without issuing summons to the concerned person or making him available for cross examination, the order passed by the Tribunal upholding the addition is set aside and the matter is remanded back to the AO to consider the matter afresh” (ii) CIT v. Eastern Commerical Enterprise (2011) 210 ITR 103, Hon’ble Calcutta High Court “Revenue making addition on the basis of a witness examined at the back of the assessee, matter remanded for cross examination of the witness with opportunity to assessee to produce further evidence to rebut the aforesaid statement” (iii) Kishinchand Chellaram v. CIT (1980) 125 ITR 713 (Hon’ble Supreme Court Court) “…. IT is true that the proceedings under the IT law are not governed by the strict rules of evidence and, therefore, it might be said that even without calling the manager of the bank in evidence to prove this letter, it could be taken into account as evidence. But, before the IT authorities could rely upon it, they were bound to produce it before the assessee so that the assessee could controvert the statements contained in it asking for an opportunity to cross examine the manager of the bank with reference to the statements made by him…..” (iv) Andaman Timber Industries v. CCE (2015) 281 CTR 241 (Hon’ble Supreme Court) (v) M/s R W Promotions (P) Ltd v. ACIT, Circle-9(3) in ITAT No. 1489 of 2013 (Hon’ble Bombay High Court) (vi) Heirs and LRs of Late Laxmanbhai S. Patel v. CIR (2010) 327 ITR 290 (Hon’ble High Court of Gujarat) (vii) DCIT v. Mahendra Ambalal Patel (2010) 40 DTR (Guj) 243 Hon’ble High Court of Gujarat
9 Assessment Year: 2015-16 Shalimar Nutrients Private Limited
As far as to produce the director of M/s Pratik Merchants Pvt Ltd is concerned, it is submitted that the said company is our group company and Mr. Sameer Agarwal who is the director of the assessee company is also the director of M/s Pratik Merchants Pvt Ltd.”
Further, the assessee vide its reply dated 16.11.2017 in addition to proving the identity, genuineness and creditworthiness of the share applicant, the assessee also submitted the second source i.e. source of M/s Pratik Merchants Pvt Ltd, which was never disputed by the Ld. AO. The list of Documents submitted to prove the genuineness of the source of source, are as under: List of papers enclosed w.r.t. 2nd source submitted along with reply dated 16.11.2017 1 Shivaangan Merchandise Pvt Ltd i. Copy of Return filing Acknowledgement i.e. ITR V for the AY 2015-16 ii. Copy of PAN Card iii. Copy of relevant page of bank statement evidencing the said transaction iv. Copy of Audited Financial Statement for the FY 2014-15 2 Trove Vanijya Pvt Ltd i. Copy of Return filing Acknowledgement i.e. ITR V for the AY 2015-16 ii. Copy of PAN Card iii. Copy of relevant page of bank statement evidencing the said transaction
10 Assessment Year: 2015-16 Shalimar Nutrients Private Limited iv. Copy of Audited Financial Statement for the FY 2014-15 3 Sutapa Agencies Pvt Ltd i. Copy of Return filing Acknowledgement i.e. ITR V for the AY 2015-16 ii. Copy of PAN Card iii. Copy of relevant page of bank statement evidencing the said transaction iv. Copy of Audited Financial Statement for the FY 2014-15 4 Natural Suppliers Pvt Ltd i. Copy of Return filing Acknowledgement i.e. ITR V for the AY 2015-16 ii. Copy of PAN Card iii. Copy of relevant page of bank statement evidencing the said transaction iv. Copy of Audited Financial Statement for the FY 2014-15 5 Starshine Commercial Pvt Ltd i. Copy of Return filing Acknowledgement i.e. ITR V for the AY 2015-16 ii. Copy of PAN Card iii. Copy of relevant page of bank statement evidencing the said transaction iv. Copy of Audited Financial Statement for the FY 2014-15 6 Yamuna Vintrade Pvt Ltd i. Copy of Return filing Acknowledgement i.e. ITR V for the AY 2015-16
11 Assessment Year: 2015-16 Shalimar Nutrients Private Limited ii. Copy of PAN Card iii. Copy of relevant page of bank statement evidencing the said transaction iv. Copy of Audited Financial Statement for the FY 2014-15
The Ld. AO even after receiving complete details and disclosures from the assesses passed the assessment order u/s 143(3) of the Act observing as follows :– “9. The assessee company could not prove the identity, creditworthiness and genuineness of the transactions of the share capital raised during the year under consideration and the credit appeared in its books of accounts. In view of the above discussion, the share application money to the tune of Rs.2,50,00,000/- credited by the assessee in its books is treated as unexplained Cash Credit u/s 68 of the Income Tax Act, 1961.”
Aggrieved, assessee preferred appeal before the Ld. CIT(A). Ld. CIT(A) taking note of various facts noticed that the alleged sum have been received by the assessee from its group concern. No proper opportunity was provided to the assessee to cross examine the persons namely, Mr. Amit Kedia whose statement are used against the assessee. Assessee has filed complete details to prove the identity and creditworthiness of the shareholder and genuineness of the transactions. Ld. CIT(A) also held that the alleged share applicant is duly registered under the
