LAXMI SRIJAN PVT. LTD.,KOLKATA vs. I.T.O., WARD-9(3), KOLKATA, KOLKATA

16.03.2023 Date of Hearing / सुनवाई क$ �त&थ Date of Pronouncement/ 29.03.2023 आदेश उ)घोषणा क$ �त&थ For the Appellant/ Shri Akkal Dudhwewala, FCA �नधा�/रती क$ ओर से For the Respondent/ Shri Vijay Kumar, Addl. CIT 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 13.12.2022 for the AY 2012-13.

3 Assessment Year: 2012-13 Laxmi Srijan Pvt. Ltd. during the year. The Ld. A.R also stated that the assesse filed a detailed reply before the authorities below by furnishing all the evidences of 13 investors as attached from page no. 79 to 331 of PB which comprised of income tax return acknowledgments , PAN cards, audited annual accounts, share allotment letters and bank statements of the applicants and thus proved that this money raised by the assessee by way of share application /share premium was genuine as all the documents proving identity, creditworthiness of the investors and genuineness of the transactions. The Ld. A.R submitted that both the authorities below, instead of pointing out any specific defect in the documents furnished by the assesse, relied on circumstantial evidences without any specific observation with regard to the fact that as to how the share application/share premium received by the assessee is bogus and unexplained. The Ld. A.R submitted that since the assessee has proved all the three ingredients of Section 68, the order of Ld. CIT(A) is wrong and may kindly be reversed by allowing the appeal of the assesse. The Ld. A.R also stated that assessmentswere framed in the case of few investors namely Jaldham Merchandise pvt. Ltd., Khushi Merchandise Pvt. Ltd. , Amritvani Distributors Pvt. Ltd., Singhvahini Sales Pvt. Ltd., Paramdham Vinimay Pvt. Ltd., Viswaroop Marketing Pvt. Ltd., Sanskar Vinimay Pvt. Ltd., for AY 2012-13 and contended that how the authorities could doubt the investment made by the investors where the assessments were framed u/s 143(3) of the Act wherein investments by those subscribers were duly accepted. The Ld. A.R. submitted that the summon issued u/s 131 to the directors of the assessee company were duly complied with and all the details were duly filed and therefore the order passed by the Ld. CIT(A) is wrong and against the facts on record and also against the ratio laid down in the judicial precedents. In defense of his arguments the Ld. A.R. relied on the following decisionsof Co-ordinate bench of Kolkata: i) ITO vs. M/s Kemex Engineering Pvt. Ltd. in for AY 2012-13 dated 01.02.2023 ii) M/s Starland Vinimay Pvt. Ltd. vs. ITO in ITA No. 574/Kol/2020 for AY 2012-13 dated 24.01.2023

4 Assessment Year: 2012-13 Laxmi Srijan Pvt. Ltd. iii) M/s Lucky Agencies Pvt. Ltd. vs. ITO in ITA No. 2501/Kol/2019 for AY 2012-13 dated 23.02.2023 iv) M/s Lalbaba Seamless Tubes Pvt. Ltd. vs. DCIT in ITA No. 2641/Kol/2019 for AY 2012-13 dated 21.10.2022 v) ITO vs. M/s Coxis Finance & Investment Pvt. Ltd. in ITA No. 649/Kol/2020 for AY 2012-13 dated 10.11.2022 The Ld. A.R finally prayed before the Bench in view of the above decisions and the facts of the case, the instant appeal of the assessee may kindly be allowed by setting aside the order of Ld. CIT(A) and the AO may be directed to delete the addition.

“7. After hearing the rival contentions and perusing the material on record, the undisputed facts are that the assessee filed various evidences/records before the AO as called for during the assessment proceedings. The evidences comprised of share application forms, board resolutions passed by the subscriber companies, bank statements of the subscribers, PAN nos, incorporation certificates, audited annual accounts, loan confirmations, share allotment certificates etc. We note that the assessee has also filed annual report of the assessee, Form 20 and form 2 filed with ROC, bank statement etc. The only reason given by the AO for making the addition is the non-compliance to summons u/s 131 of the Act to the directors of the assessee company as well as of the subscribers however no defects or deficiency was point out in the evidences/details filed before the AO. We also note that the investors/subscribing companies were having sufficient net worth and resources to invest in the equity capital of the assessee. Considering these facts and circumstances , we are of the view that the assessee has discharged its onus by filing all the necessary evidences and addition was made on the ground that neither assessee nor the subscribers complied with the summon issued u/s 131 of the Act and thus the identity and creditworthiness of the investors and genuineness of the transactions cannot be verified. In our considered view, the mere non compliance to summons issued u/s 131 of the Act or non appearance of the directors of the subscribing companies before the AO cannot be basis for making addition as the assessee has filed all the necessary documents before the authorities below proving the identities , creditworthiness of the investors and genuineness of the transactions. The case of the assessee is 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 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.

9. We have considered the rival submissions. We are of the view that order of Ld. CIT(A) does not call for any interference. It may be seen from the grounds of appeal

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.” Similarly the Co-ordinate Bench in the case of Lalbaba Seamless Tubes Pvt. Ltd. (supra) has decided similar issue in favour of the assessee. The operative part is reproduced as under:

7. After hearing the rival contentions and perusing the material on record, we find that the assessee has raised share capital from seven investors by issuing equity shares at premium the details whereof are given at page 2 in para 3 of assessment order . We note that during the course of assessment proceedings the AO called for various details/documents from the assessee in respect of investments and the investors which were duly supplied to the AO. Besides the AO issued notice u/s 133(6) to these companies calling for certain information/evidences which were duly furnished by all the investors and are available on record. We note that AO has not issued summons u/s 131 of the Act to the directors of the investor companies however made an addition on the basis that directors were not brought or produced by the assessee. We note that the assessee has furnished all the evidences during the assessment proceedings which are available at page 1 to 631 of PB-2 which comprised of ITR’s, audited financial statements, bank statements, source of investments etc. We also note that these investors were too selected for scrutiny assessments and assessment were framed u/s 143(3) of the Act and no addition was made in the hands of the investors except M/s Clubside Dealcom Pvt. Ltd. in which the entire amount of money raised to the tune of Rs. 36.53 Cr was added to the income, out of which the said company had invested in the share capital of the assessee. Therefore ,we find merit in the contentions of the Ld. A.R that once the addition made in the hands of subscribing company, no further addition could be made as this amounts to double addition of the same amount. The case of the assessee finds support to the decision of Kolkata bench in the case of ITO Vs Happy Structure A.Y. 2012-13 order dated 22.05.2019 which referred and relied on the another decision of coordinate bench in the case of DCIT Vs M/S Maa Amba Towers ITA No. 1381/Kol/2015 A.Y. 2012-12 order dated 10.10.2018. Similar ratio has been laid down by the coordinate bench recently in the case of Steelex India (P) Ltd Vs ITO ITA No. 2666/Kol/2019 A.Y. 2012-13 order dated 09.09.2022.

8. We note that share subscribers have also filed sworn affidavits confirming the said investments and source of investments copies whereof have been filed at page 109 to 113. We further note that all the companies are active and have invested the money out of their own resources as is apparent from the details filed by the assessee as comprised in from page 58 to 67 of PB. It is also undisputed that a survey was conducted on Shri K.M. Naita who controlled the M/s Clubside Dealcom Pvt. Ltd. and during survey it was revealed that the said company was providing accommodation entries. However the said fact was never brought to the notice of the assessee during the assessment proceedings of the assessee. We also note that Mr. Sushil Kumar Naita has given a sworn affidavit a copy of which is filed at page 110 of PBstating that no accommodation entry was ever provided to the assessee. We note that said affidavit was available before both the authorities below but has remained uncontroverted. Mr. K.M. Naita was neither examined by the AO nor any cross-examination was afforded to the assessee. It is settled legal position that the statement given during survey cannot be used to make addition in the hands of the assessee unless the assessee was allowed to cross-examine the person who gave statement which was used against the assessee to make the addition. The case of the assessee finds support from the decision of Hon’ble Supreme Court in the case of Kishinchand Chellaram (supra) and Hon’ble Allahabad High Court in the case of CCE vs. Shyam Traders (supra). We note that the assessee has proved the source and source of source of all these investors even though the same is not required to be proved in the instant assessment year as the amendment is applicable prospectively as has been held by the Hon’ble Bombay High Court in the case of Gangadeep Infrastructure (supra).

9. Finally we note that both the authorities have reached and based their conclusions to make addition on the fact that the directors of the subscribing companies were not produced before the AO which in no way could not be the basis for making addition as the assessee has filed all the necessary documents before the authorities below proving the identities , creditworthiness of the investors and genuineness of the transactions. The case of the assessee is squarely covered by the decisions of Hon’ble Calcutta High Court in the case of Crystal Networks Pvt. Ltd. vs. CIT(Supra) wherein it has held that where all the evidences were filed by the assesse 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. (supra) 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 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 assesse has furnished all the evidences proving identity and creditworthiness of the investors and genuineness of the transactions but neither AO nor ld CIT(A) commented on these evidences filed by the assessee. Considering these facts in the light of ratio laid down in the decisions as discussed above , we set aside the order of Ld. CIT(A) and direct the AO to delete the addition.

10. In the result, the appeal of the assessee is allowed. We further note that similar issue has decided by the Co-ordinate Benches in the case of M/s Starland Vinimay Pvt. Ltd. (supra) and M/s Coxis Finance & Investment Pvt. Ltd. (supra) in favour of the assessee. We further note that the department has framed assessments u/s 143(3) of the Act in most of the investors/share subscribers and also 10 Assessment Year: 2012-13 Laxmi Srijan Pvt. Ltd. furnished copies of assessment orders before us wherein investments made by the the said subscribers have duly been accepted by the Department. In view of the facts in the instant case and the decisions of the various judicial forums, we set aside the order of Ld. CIT(A) and direct the AO to delete the addition.

Order is pronounced in the open court on 29th March, 2023