ABHAY MINERAL (P) LTD. ,KOLKATA vs. ITO,WD-12(1),KOLKATA, KOLKATA
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Income Tax Appellate Tribunal, “A” BENCH, KOLKATA
Before: SHRI SANJAY GARG, HON’BLE & DR. MANISH BORAD, HON’BLE
PER DR. MANISH BORAD, ACCOUNTANT MEMBER :
The captioned appeal has been filed by the assessee is directed against the order of the National Faceless Appeal Centre (hereinafter ‘the ld. CIT(A)’) passed u/s 250 of the Income Tax Act, 1961 (hereinafter ‘the Act’), dt. 23/06/2023, for Assessment Year 2012-13. 2. The sole grievance of the assessee is that the ld. CIT(A) erred in confirming the addition for unexplained cash credit at Rs.2,13,30,000/- u/s 68 of the Act. The facts in brief are that the assessee is a private limited company and engaged in investment business. Income of Rs. 74,460/- was declared in the e-return filed on 21/09/2012. Case selected for scrutiny through CASS followed by issuance of notice u/s 143(2) and 142(1) of the Act. The ld. Assessing Officer noticed that Assessment Year: 2012-13 Abhay Mineral Pvt. Ltd. 2 during the year, the assessee has received share capital and share premium totalling to Rs. 2,13,50,000/-. For the purposes of proper verification and examination of the existence and creditworthiness of the share subscribers and the genuineness of the share subscription transactions, the ld. Assessing Officer issued summons u/s 131 of the Act. Though various details were filed by the assessee in support of its contentions that the alleged share application money is duly explained but there was not personal presence of the directors. The ld. Assessing Officer observed that the assessee has not been able to discharge its burden of proof and thus, made addition for unexplained cash credit u/s 68 of the Act at Rs.2,13,50,000/- and assessed income at Rs.2,14,24,460/-.
Aggrieved the assessee preferred appeal before the ld. CIT(A) and again filed all the details including financial statements, identity proofs, confirmations but again failed to succeed.
Aggrieved the assessee is now in appeal before this Tribunal.
The ld. Counsel for the assessee reiterated the submissions filed before the lower authorities and referring to the paper book containing various documentary evidences, stated that the alleged cash creditors except one individual are non-banking finance companies (NBFCs) duly registered with the Reserve Bank of India and have been assessed to tax u/s 143(3) of the Act for the same year and the source of fund is duly explained which has been made through banking channels and the share subscribers have sufficient capital and reserves and surplus to make investment in the assessee company. Reliance placed on Assessment Year: 2012-13 Abhay Mineral Pvt. Ltd. 3 various decisions including one in the case of Mahacol Tie Up (P) Ltd., Kolkata vs I.T.O. in I.T.A No.2269/Kol/2019, order dt. 12/10/2022. 5. On the other hand, the ld. D/R vehemently argued supporting the orders of the lower authorities and stated that impugned addition may be confirmed as the share subscriber companies are merely providing accommodation entries and do not have any sufficient financial worth to justify the alleged investment in the equity share capital of the assessee company. He also stated that in spite of several notices, directors of the assessee company as well as share subscriber company have not appeared.
We have heard rival contentions and carefully gone through the material placed on record. The addition u/s 68 of the Act for unexplained share capital and share premium is in dispute before us. We notice that during the year under consideration, assessee received the alleged sum of Rs.2,13,50,000/- from six share subscribers which included one individual, namely, Abhay Kumar Jain and the remaining are private limited companies, namely, Abhay Commerce Pvt. Ltd., JCC Holding Pvt. Ltd., Madhuvan Dealers Pvt. Ltd., Mahacoal Tie-up Pvt. Ltd. and R.R. Coal Agencies Pvt. Ltd.. We observe that the assessee filed complete financial documents and identity proof to explain the identity and creditworthiness of the share subscribers and genuineness of the transactions and the ld. Assessing Officer without finding any fault or discrepancy in such documents has made the addition merely for the non-appearance of directors/promoters of the assessee company as well as share Assessment Year: 2012-13 Abhay Mineral Pvt. Ltd. 4 subscribers. We observe that the assessee has furnished the following details in the paper book pertaining to the alleged share subscribers before the lower authorities along with financials of the assessee company:- Assessment Year: 2012-13 Abhay Mineral Pvt. Ltd. Assessment Year: 2012-13 Abhay Mineral Pvt. Ltd. 6
Further we observe that the share subscriber companies are NBFCs duly registered with the RBI and have been assessed u/s 143(3) of the Act for the very same Assessment Year 2012-13. We also that all the share subscribers have replied to the notice u/s 133(6) of the Act directly to the Assessing Officer along with relevant documents called for in such notices. We also notice that share subscribers have sufficient funds in the form of share capital and reserve and surplus so as to justify the investment in the assessee Assessment Year: 2012-13 Abhay Mineral Pvt. Ltd. 7 company. Both the lower authorities have only focused on the point of non-appearance but no discrepancy has been observed in the documents filed by the assessee. We observe that under similar set of circumstances, this Tribunal in the case of Mahacol Tie Up (P) Ltd. (supra), which co-incidentally is one of the alleged share subscriber company, has dealt with the very same issue and under the similar set of facts and circumstances decided in favour of the assessee as follows:- “2. The brief facts of the case are that the assessing officer during the assessment proceedings noted from the accounts of the assessee that the assessee during the year has shown receipt of share capital including share premium of Rs. 2.15 crores from seven different private limited companies. To verify the identity and creditworthiness of the shareholders and also about the genuineness of the transaction, the assessing Officer issued summons u/s 131 of the Act to the directors of the share subscriber companies. Since the said summons were not complied with, the AO held that the assessee had failed to discharge the burden of proof to substantiate the identity and creditworthiness of the share subscribers and genuineness of the transaction. He therefore made the impugned addition of share capital and share premium as unexplained income of the assessee u/s 68 of the Income Tax Act. The LdCIT(A) confirmed the additions so made by the AO.
We have heard the rival contentions of the ld. Representatives of the parties. The ld. Counsel for the assessee in support of his case has made the following submissions :
Share Capital of 2.15 Crores raised from 7 companies at premium of 2490 per share. Details are annexed in paper book page 22- 22A. Complete details of identity and creditworthiness of the shareholders and genuineness of the transactions were filed before the AO as annexed in paper book page 37-107. 2. All share applicants issued notices u/s 133(6) and in response, compliances made by all of them vide paper book page 23- 29 whereby their financials, bank statement, source of "source of funds", ITR etc. were submitted. However the assessment order is silent and does not narrate the fact on this point. The AO added the same in the assessment made u/s 143(3) only on the ground that the shareholders did not appear personally in response to notice u/s 131 nor assessee could produce the shareholders. Assessment Year: 2012-13 Abhay Mineral Pvt. Ltd. 8 However the shareholders duly complied with the summons by filing their reply- vide paper book page 148-160. 3. Shareholders had substantial "Net worth" in comparison to investment made by way of share subscription In appellant company as depicted in their balance sheet- OyesterCommotrade Pvt Ltd having net worth of more than 1.42 crores Vide paper book page 38, Skyhigh Minerals Pvt Ltd having net worth of more than 2.47 crores vide paper book page 47, Mahalaxmi Promotion Pvt. Ltd having networth of more than 7.98 crores vide paper book page 56, Niknar Commodities Pvt Ltd having networth of more than 5.09 crores Vide paper book page 68, R.R.Coal Agencies Pvt Ltd having networth of more than 12 crores vide paper book page 80, Rosemary Dealcom Pvt Ltd having networth of more than 1.87 crores vide paper book page 91 and Newtown Mercantile Pvt Ltd having networth of more than 12.79 crores vide paper book page 100. 4. Three share applicants assessed u/s 143(3) on substantive basis. Copies of their assessment orders annexed in paper book page 131-147. In case of Mahalaxmi Promotion and Nikhar Commodities Pvt Ltd the share capital being the source of funds invested in assessee company were already taxed u/s 68. Hence once any addition made in hands of share subscribers, there cannot be double addition in hand’s of Appellant company. Judgement of Coordinate bench of Kolkata Tribunal in the case of Happy Structure in ITA No. 1977/Kol/2016 enclosed which has relied on another Kolkata ITAT in the case of MaaAmba and CP Rerollers. Recently ITAT Kolkata Bench in the case of Steelex India Pvt Ltd pronounced on 9th September, 2022 copy enclosed has also taken same View.
All the shareholder companies are 'Active compliant under MCA records not only at the time of allotment but even till today as per MCA database annexed in paper book page 124-130. 6. Moreover although the assessee has explained the source of source of share capital but the same is not required to be explained for the Asst. Year 2012-13 prior to the amendment which was prospective and applicable from Asst Year 2013-14 as held by Bombay High Court in the case of Gagandeep Infrastructure, copy enclosed.
Even otherwise plethora of judgments that non-appearance of directors cannot be ground to make the additions once all documentary evidences w.r.t genuineness, creditworthiness etc filed on record. Pls. refer Calcutta High Court in the case of Crystal Networks, copy enclosed. Kolkata ITAT in the case of Cygnus Developers copy enclosed.
The Ld. Counsel reiterating his above submissions has contended that in this case, the assessee had filed all evidences to prove the identity and creditworthiness of the subscribers and genuineness of the transaction including the address, PAN & Form 2 & Form 5 filed with
