M/S MAHALAKSHMI VINIMAY (P) LTD.,KOLKATA vs. I.T.O.,WARD-4(2), KOLKATA

1. That under the facts and circumstances of the case the Ld. CIT(A) erred in confirming addition of a sum of Rs.9,67,00,000/- for the share capital raised by the assessee during the year, holding the same to be unexplained cash credit in terms of section 68 of the Income Tax Act, 1961. The addition is unjustified and need to be deleted.

We have heard the rival contentions and gone through the record. The Ld. Counsel for the assessee 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 Registrar of Companies of the share subscriber companies, their audited financial statements, acknowledgement of filing their Income Tax Return, copy of bank statement of the allottee company highlighting the payment of the entire amount of share capital . That all the transactions were done through banking channel and duly confirmed by the share subscribers. That even the notices u/s 133(6) of the Act were issued by the AO which were duly complied with by the shareholders and requisite documents were furnished evidencing their identity, and creditworthiness and that even source of investment was also provided. The Ld. Counsel for the assessee has submitted that the assessee, otherwise, had provided all the details to the assessing officer to prove the identity and creditworthiness of the subscribers and genuineness of the transaction, as noted above. He has further submitted that the subscribing companies were having adequate reserves and surpluses to invest in the assessee company. Further, that all these subscribers were income tax assessees and further that all the investor companies were duly incorporated with the Registrar of Companies. That there were no paper companies involved in the transactions. The Ld. Counsel has further contended that the AO, however, instead of examining the relevant documents, insisted for the personal presence of Assessment year: 2008-09 M/s Mahalakshmi Vinimay (P) Ltd the directors of the subscribers which was not in the hands of the assessee. He therefore, has submitted that the identity and creditworthiness of these companies was duly established. He has further submitted that the AO could not point out any defect or discrepancy in the evidences/documents submitted by the assessee to prove the identity and creditworthiness of the subscribers and genuineness of the transaction. He has further submitted that instead of pointing out any defect or discrepancy in the evidences and the details furnished by the assessee, the AO proceeded to take adverse inference only on the ground that the directors of the subscriber companies did not appear personally before the AO. The ld. Counsel for the assessee in this respect has relied upon the decision of the Jurisdictional Calcutta High Court in the case of Crystal networks (P) Ltd. vs CIT (supra). The ld. Counsel has also relied upon the decision of the Co-ordinate Kolkata Bench of the tribunal in the case of ‘M/s Satyam Smertexpvt. ltd. vs. DCIT’, vide order dated 29.05.2020, wherein, the coordinate bench of the tribunal, while further relying upon the decision of the Hon’ble Allahabad High Court in the case of CIT vs Raj Kumar Agarwal vide ITA No.179/2008 dated 17.11.2009 has held that non production of the director of the company, which is regularly assessed to income Tax having PAN, on ground that the identity of the subscriber is not proved, cannot be sustained.

The ld. D/R on the other hand, has relied upon the observations made by the AO. He has further relied upon the impugned order of the ld. CIT(A).

We have considered the rival submissions of the ld. representatives of the parties and also gone through the record. In this case a perusal of Assessment year: 2008-09 M/s Mahalakshmi Vinimay (P) Ltd the Assessment order would reveal that the AO has duly acknowledged the receipt of the relevant documents/evidences not only from the assessee, but also from the subscriber companies. However, he insisted for personal appearance of the directors of the subscriber companies without even going through and discussing about the discrepancies, if any, in the documents furnished by the assessee as well as by the share subscriber companies to prove the identity and creditworthiness of the subscribers and the genuineness of the transaction. The AO has not pointed out in the Assessment Order as to what further enquiries he wanted to make from the directors of the subscribers to insist for their personal presence. The Assessee in this case, as noted above, explained about the identity, creditworthiness and financials etc. of each of the share subscriber company individually. However, we note that in the assessment order that the AO has not even mentioned the names of the share subscriber companies and even has not mentioned a word as to which of the share subscriber company or the corresponding transaction thereof was not genuine and on what grounds. The AO, in our view, could have taken an adverse inference, only if, he would have pointed out the discrepancies or insufficiency in the evidences and details received in his office and pointed out as to on what account further investigation was needed by way of recording of statement of the directors of the subscriber companies. Even if the directors of the subscriber companies have not come personally in response to the summons issued by the AO, in our view, adverse inference cannot be taken against the assessee solely on this ground as it is not under control of the assessee to compel the personal presence of the directors of the shareholders before the AO. The Ld. Counsel for the assessee has rightly placed reliance upon the decision of the Hon’ble Bombay High Assessment year: 2008-09 M/s Mahalakshmi Vinimay (P) Ltd Court in the case of PCIT, Panji vs. Paradise Inland Shipping Pvt. Ltd. reported in (2017) 84 taxman.com 58 (Bom) wherein the Hon’ble High Court has held that once the assessee has produced documentary evidence to establish the existence of the subscriber companies, the burden would shift on the revenue to establish their case. Further the jurisdictional Calcutta High Court in the case of “Crystal networks (P) Ltd. vs CIT” (supra) has held as under: