SHANKER CREDITS PVT. LTD.,KOLKATA vs. I.T.O., WARD - 1(2), KOLKATA, KOLKATA

क$ �त&थ Date of Pronouncement/ 29.05.2023 आदेश उ)घोषणा क$ �त&थ For the Appellant/ Shri S. M. Surana, A.R Shri Abhishek Bansal, A.R �नधा�/रती क$ ओर से For the Respondent/ Shri Subhrajyoti Bhattacharjee, CITDR राज�व क$ ओर से ORDER / आदेश Per Rajesh Kumar, AM: This is the appeal preferred by the assessee against the order of the Ld. Commissioner of Income Tax (Appeals) – NFAC, Delhi (hereinafter referred to as the Ld. CIT(A)”] dated 21.01.2023 for the AY 2008-09.

2 Assessment Year: 2008-09 Shanker Credits Pvt. Ltd. was reopened u/s 147 of the Act and assessment was framed vide order dated 27.09.2010 passed u/s 147 read with Section 143(3) wherein the issue of increase in share capital and share premium was examined by the AO after making enquiries and calling for information/details by issuing notices u/s 133(6) of the Act to the share applicants. In para 3 of the assessment order the AO specifically mentioned that inquiries were conducted and information/details were obtained ,examined and verified. The ld. PCIT upon perusal of the assessment records came to the conclusion that the AO has conducted cursory enquiry qua the increase in share capital and share premium and the show cause notice u/s 263 of the Act was issued on 21.12.2012. The said assessment was revised by the Ld. PCIT u/s 263 of the Act vide order dated 4.3.2013 by directing the AO to conduct fresh enquiries and necessary verification. Pursuant to the said directions of the Ld .PCIT the present assessment was framed u/s 143(3) read with Section 263 of the Act vide order dated 26.03.2014 wherein an addition of Rs. 26.76 crores was made on account of share capital and share premium being unexplained cash credit u/s 68 of the Act. In the assessment so framed the AO noted in para 4 that enquiry from the directors of both investors and investee company could not be carried out by issuing summons pursuant to the directions in the order passed u/s 263 of the Act dated 04.03.2013 by the ld. PCIT. Thereafter the AO noted that the burden of proof is on the assessee to substantiate the said share capital and share premium in its books of account by producing its own directors as well as directors of the investor companies. The AO noted that since the assessee has failed to discharge its onus despite several opportunities given and merely held that the transactions of share capital and share premium were sham transactions and has rooted its own money in the garb of share capital and share premium and finally added the same to the income of the assessee u/s 68 of the Act.

“3.3. Having considered the appellant submission and fact of the case it is seen that the alleged share capital introduction lacks creditworthiness because the appellant could not 3 Assessment Year: 2008-09 Shanker Credits Pvt. Ltd. substantiate the identity and creditworthiness of the directors of lending companies. Hence, the addition made by the AO is held to be valid.”

5 Assessment Year: 2008-09 Shanker Credits Pvt. Ltd. Orissa Corporation Ltd. in 159 ITR 78 (SC) wherein the Hon’ble Supreme court has held that where the assessee has filed names and addresses of the alleged creditors and it is in the knowledge of the revenue that the said creditors were income tax assessees and their index numbers were in the file of the revenue, then it is the duty of revenue to examine the source of income of the said creditors whether they were creditworthy and where no efforts were made to pursue the said creditors and the tribunal came to the conclusion that the assessee has discharged burden that lay on it then it could not be said that such a conclusion was unreasonable or perverse or based on no evidence and if the conclusion was based on some evidences on which a conclusion could be arrived at no question of law as such arose. The High Court was right in refusing to state a case. The Ld. A.R submitted that in the present case also though the assessee has placed before the AO assessment framed and furnished various information with respect to the share subscriber. The Ld. A.R also relied on the decision of Hon’ble Calcutta High Court in the case of Crystal Netwroks Pvt. Ltd. vs. CIT in ITA 158 of 2002 dated 29.07.2010, decision of Kolkata ITAT in the case of ITO vs. Cygnus Developers (I) Pvt. Ltd. in ITA No. 282/Kol/2012 dated 02.03.2016, M/s Lucky Agencies Pvt. Ltd. vs. ITO in ITA NO. 2501/Kol/2019 dated 23.02.2023. The Ld. A.R finally submitted that the order passed by the Ld. CIT(A) may be set aside and AO should be directed to delete the addition. In the conclusion of the Ld. CIT(A) the genuineness of the transaction were never doubted and it was only stated that identity and creditworthiness of the assessee could not be substantiated.

“During the Financial Year 2007-08, the authorized capital of the assessee company was raised from Rs. 2,35,00,000/- to Rs. 5,00,00,000/- and the assessee enhanced its paid-up share capital by Rs. 2,67,60,000/- from Rs. 2,28,10,000/- to Rs. 4,95,70,000/-. Along with this enhancement in its paid up share capital, and also raised its share premium Reserve by Rs. 24,08,40,000/- from Rs. 17,10,90,000/- to Rs. 41,19,30,000/-. Inquiries were conducted with the various shareholders of the assessee company by issuing notice u/s 133(6) and verifying their responses.” In the set aside proceedings, the AO issued questionnaire to the assessee which was replied with necessary evidence/details as to the share subscribers their identites, creditworthiness and genuineness. The AO however did not examine into these details or issued notices u/s 133(6)/131 of the Act on the ground that it is the responsibility of the assessee to produce these persons / investors and stated that no enquiry could be carried out as these persons were not produced before the AO but the fact remains that notices were not issued by the AO. We also note that the assessee has also placed before the AO the assessment framed u/s 143(3) / 144 read with 147 in case of investor companies copies of which are filed at page 426 to 460 of PB besides filing other details such as ITR’s, audited accounts, bank statement, master data etc. We have also examined the order sheet entries placed in the original assessment proceedings as well as in the set aside assessment proceedings and find that original assessment proceedings the issue was examined at great length by the AO whereas in the set aside assessment proceedings hardly any enquiry or investigation was carried out. We note that first questionnaire was issued on 10.02.2014 which was replied to 27.02.2014 by filing necessary details. Thereafter case was adjourned to 7.3.2014. Thereafter the AO proceeded to frame the assessment on 26.03.2014 with the observations that enquiry could not be conducted because the assessee has not produced these share investors. We note that despite having filed all the evidences, no enquiry was done and the Ld. CIT(A) has simply affirmed the finding of the AO by holding that no identity and creditworthiness of the creditors could not be proved by the assessee by ignoring all the evidences placed before him. Under the circumstances, we are not in a position to sustain the order of Ld. CIT(A). We find support from the decision of Hon’ble Supreme Court in the case of Orissa Corporation Ltd. (supra) wherein the Hon’ble Apex Court has held as under:

“That in this case the respondent had given the names and addresses of the alleged creditors. It was in the knowledge of the Revenue that the said creditors were income-tax assessees. Their index numbers were in the file of the Revenue. The Revenue, apart from issuing notices under Section 131 at the instance of the respondent, did not pursue the matter further. The Revenue did not examine the source of income of the said alleged creditors to find out whether they were creditworthy. There was no effort made to pursue the so-called alleged creditors. In those circumstances, the respondent could not do anything further. In the premises, if the Tribunal came to the conclusion that the respondent had discharged the burden that lay on it, then it could not be said that such a conclusion was unreasonable or perverse or based on no evidence. I f the conclusion was based on some evidence on which a conclusion could be arrived at, no question of law as such arose. The High Court was right in refusing to state a case.” The case of the assessee is also squarely covered by the decisions of Hon’ble Calcutta High Court in the case of Crystal Networks Pvt. Ltd. vs. CIT 353 ITR 171 (Cal ) wherein it has held that where all the evidences were filed by the assessee proving the identity and creditworthiness of the loan transactions , the fact that summon issued were returned un-served or no body complied with them is of little significance to prove the genuineness of the transactions and identity and creditworthiness of the creditors. The relevant portion of the decision is extracted below:

“We find considerable force of the submissions of the learned Counsel for the appellant that the Tribunal has merely noticed that since the summons issued before assessment returned unserved and no one came forward to prove. Therefore it shall be assumed that the assessee failed to prove the existence of the creditors or for that matter creditworthiness. As rightly pointed out by the learned counsel that the Ld. CIT(A) has taken the trouble of examining of all other materials and documents viz., confirmatory statements, invoices, challans and vouchers showing supply of bidi as against the advance. Therefore, the attendance of the witnesses pursuant to the summons issued in our view is not important. The important is to prove as to whether the said cash credit was received as against the future sale of the product of the assessee or note. When it was found by the Ld. CIT(A) on fact having examined the documents that the advance given by the creditors have been established the Tribunal should not have ignored this fact findings. Indeed the Tribunal did not really touch the aforesaid fact finding of the Ld. CIT(A) as rightly pointed out by the learned counsel. The Supreme Court has already stated as to what should be the duty of the learned Tribunal to decide in this situation. In the said judgment noted by us at page 463, the Supreme Court has observed as follows: “The Income-Tax Appellate Tribunals performs a judicial function under the Indian Income-tax Act. It is invested with authority to determine finally all questions of fact. The Tribunal must, in deciding an appeal, consider with due care all the material facts and records its findings on all the contentions raised by the assessee and the Commissioner, in the light of the evidence and the relevant law.” The Tribunal must, in deciding an appeal, consider with due care all the material facts and record its findings on all contentions raised by the assessee and the Commissioner, in the light of the evidence and the relevant law. It is also ruled in the said judgment at page 465 that if the Tribunal does not discharge the duty in the manner as above then it shall be assumed the judgment of the Tribunal suffers from manifest infirmity. Taking inspiration from the Supreme Court observation we are constrained to hold in this matter that the Tribunal has not adjudicated upon the case of the assessee in the light of the evidence as found by the Ld. CIT(A). We also found no single word has been spared to up set the fact finding of the Ld. CIT(A) that there are materials to show the cash credit was received from various persons and supply as against cash credit also made. Hence, the judgment and order of the Tribunal is not sustainable. Accordingly, the same is set aside. We restore the judgment and order of the Ld. CIT(A). The appeal is allowed.” The case of is also covered by the decision of the coordinate bench by ITO Vs M/s Cygnus Developers India Pvt. Ltd. (ITA No. 282/Kol/2012) the operative part whereof is extracted below:

“8. We have heard the submissions of the learned D.R, who relied on the order of AO. The learned counsel for the assessee relied on the order of Ld. CIT(A) and further drew our attention to the decision of Hon’ble Allahabad High Court in the case of CIT vs. Raj Kumar Agarwal vide dated 17.11.2009 wherein the Hon’ble Allahabad High Court took a view that non-production of the director of a Public Limited Company which is 9 Assessment Year: 2008-09 Shanker Credits Pvt. Ltd. regularly assessed to Income tax having PAN, on the ground that the identity of the investor is not proved cannot be sustained. Attention was also to the similar ruling of the ITAT Kolkata bench in the case of ITO vs. Devinder Singh Shant in ITA No. 208/Kol/2009 vide order dated 17.04.2009.

raised by the revenue that the revenue disputed only the proof of identity of share holder. In this regard it is seen that for AY 2004

05. Shree Shyam Trexim Pvt. Ltd. was assessed by ITO, Ward-9(4), Kolkata and the order of assessment u/s 143(3) dated 25.01.2006 is placed in the paper book. Similarly Navalco Commodities Pvt. Ltd. was assessed to tax u/s 143(3) for AY 2005-06 by ITO, Ward-9(4), Kolkata by order dated 20.03.2007. Similarly Jewellock Trexim Pvt. Ltd. was assessed to tax for AY 2005-06 by the very same ITO, Ward-9(3), Kolkata assessing the assessee. In the light of the above factual position which is not disputed by the revenue, it cannot be said that the identity of the share applicants remained not proved by the assessee. The decision of the Hon’ble Allahabad High Court as well as ITAT, Kolkata Bench on which reliance was placed by the learned counsel for the assessee also supports the view that for non-production of directors of the investor company for examination by the AO it cannot be held that the identity of a limited company has not been established. For the reasons given above we uphold the order of Ld. CIT(A) and dismiss the appeal of the revenue.” In the instant case before us also, the assessee has furnished all the evidences proving identity and creditworthiness of the investors and genuineness of the transactions but AO has not commented on these evidences filed by the assessee. Besides all the investors have also furnished complete details/evidences before the AO which proved the identity , creditworthiness of investors and genuineness of the transactions. Under these facts and circumstances and considering underlying facts in the light of ratio laid down in the decisions as discussed above , we are inclined to uphold the order of Ld. CIT(A) by allowing the appeal of the assessee.