ITO, WARD - 5(4) , KOLKATA vs. FORCEFUL ESTATES PVT. LTD., , KOLKATA

The Revenue in this appeal is aggrieved by the action of the CIT(A) in deleting the additions made by the Assessing Officer in respect of receipt of Rs.7,60,00,000/- by the assessee company which was treated by the Assessing Officer as unexplained income of the assessee u/s 68 of the Act on the ground that the assessee had failed to establish the identity, genuineness and creditworthiness of the share subscribers.

Assessment Year: 2012-13 Forceful Estates Pvt. Ltd. 3. At the outset, the ld. counsel for the assessee has invited our attention to para 3 of the impugned assessment order to submit, wherein, the Assessing Officer has noted as under:

The ld. counsel has further invited our attention to the impugned assessment order to submit that despite specifically noting that the assessee has furnished all the details and evidences to prove the identity and creditworthiness of the share subscribers and genuineness of the transaction, the Assessing Officer did not bother to examine the details and evidences furnished by the assessee. That the impugned addition has been made by the Assessing Officer solely on the ground that the directors of the shareholder companies did not appear before the Assessing Officer in response to the summons issued u/s 131 of the Act.

The ld. counsel has further invited our attention to the impugned order of the CIT(A) to submit that the ld. CIT(A) has categorically noted that the assessee during the year had raised share capital including share premium amounting to Rs.7,60,00,000/- from six share subscribers. The Assessing Officer had issued notices u/s 133(6) of the Act to the share applicants and in response, they all confirmed the transactions and furnished details/documents as called for including source of fund in their hands. The ld. CIT(A) has considered the evidences and details on record and found that the assessee has been able to prove the identity and creditworthiness of the share subscribers Assessment Year: 2012-13 Forceful Estates Pvt. Ltd. and genuineness of the transaction. The relevant part of the order, for the purpose of ready reference, is reproduced as under:

A perusal of the above concluding part of the order of the CIT(A) reveals that the ld. CIT(A) has not only taken note of the accounts of the share subscribers but also, noted that all the six share subscribers were assessed u/s 143(3) of the Act. Out of which, no additions were made in case of two share subscribers. However, in the case of other four share subscribers, the additions were made regarding their source of income. Now, it is settled law, once the addition has been made in the hands of the share subscribers, the investments by which share subscribers in the hands of the other company whose shares have been subscribed stood explained then no additions in such a case would be warranted in the hands of the assessee company as it would amount to double additions of the same amount. Even if the said addition stand Assessment Year: 2012-13 Forceful Estates Pvt. Ltd. confirmed in the appeal or stand deleted, in both the instances, the investment in the hands of the assessee company will stand proved. Reliance has been placed in this respect on the decision of the Coordinate Kolkata bench of the Tribunal in the case in the case of DCIT vs. M/s Maa Amba Towers Ltd. in vide order dated 12.10.2018. The aforesaid decision has been further relied upon by the coordinate Kolkata bench of the Tribunal in the case of “Steelex India (P) Ltd vs. ITO, Ward-3(2), Kolkata”I.T.A. No.2666/Kol/2019 decided vide order dated 09.09. 2022.

Further, a perusal of 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 Assessment Year: 2012-13 Forceful Estates Pvt. Ltd. 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 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: