M/S ARIHANT TIMBERS PRIVATE LTD.,KOLKATA vs. I.T.O.,WARD-3(2), KOLKATA

order

: March 28th, 2023 ORDER

Per Manish Borad, Accountant Member:

2. The assessee is in appeal before this Tribunal raising the following grounds: “

1. On the facts and in the circumstances of the case as per Annexure, the Ld. AO erred in making and Ld. CIT(A) erred in confirming the addition u/s. 68 for Rs.100 lakhs, being the amount of increase in share capital and share premium. (Annexure to Grounds of appeal attached)

2. The assessee craves leave to adduce further grounds on or before the hearing of the appeal.”

3. Brief facts of the case as culled out from the records are that the assessee is a private limited company. Return of income was not filed during the year. On the basis of information, ld. AO issued notice u/s 148 of the Act and carried out the proceedings u/s 147 r.w.s. 143(3) of the Act. In compliance to the notice u/s 148 of the Act the assessee filed the return on 16.02.2016. During the course of assessment proceedings ld. AO observed that the assessee has raised share capital of Rs. 1,00,000/- by issuing 10,000 shares at a face value of Rs. 10/- at a premium of Rs. 990/- per share. The year under appeal is the first year of incorporation. Ld. AO called for the information u/s 133(6) of the Act addressed to all the shareholders to which reply was received. However, no bank statement evidencing the payments were filed. ld. AO was thus, not satisfied with the submissions filed by the assessee and invoked the provision of u/s 68 of the Act and made addition of Rs. 1 Cr to the income of Rs. 290/- declared by the assessee and assessed the income at Rs. 1,00,00,290/-.

I.T.A. No.: 687/KOL/2019 Assessment Year: 2012-13 M/s. Arihant Timbers Private Limited.

I.T.A. No.: 687/KOL/2019 Assessment Year: 2012-13 M/s. Arihant Timbers Private Limited. "SUSPICIOUS AND DIBIOUS TRASANCTION HOW TO BE DEALT WITH: 6.11. The tax liability in the cases of suspicious transactions, is to be assessed on the basis of the material available on record, surrounding circumstances, human conduct, preponderance of probabilities and nature of incriminating information/ evidence available with AO. 6.12. In the case of Sumati Dayal V. CIT (1995) 80 Taxman 89 (SC), the Hon'ble Supreme Court has dealt with the relevance of human conduct, preponderance of probabilities and surrounding circumstance, burden of proof and its shifting on the Department in cases of suspicious circumstances, by following observations: “……….It is, no doubt, true that in all cases in which a receipt is sought to be taxed as income, the burden lies on the department to prove that it is within the taxing provision and if a receipt is in the nature of income, the burden of proving that it is not taxable because it falls within exemption provided by the Act lies upon the assessee. But in view of section 68, where any sum is found credited in the books of the assessee for any previous year, the same may be charged to income-tax as the income of the assessee of that previous year if the explanation offered by the assessee about the nature and source thereof is, in the opinion of the Assessing Officer, not satisfactory. In such case there is prima facie evidence against the assessee, viz., the receipt of money, and if he fails to rebut the same, the said evidence being unrebutted, can be used against him by holding that it is a receipt of an income nature. While considering the explanation of the assessee, the department cannot, however, act unreasonably. Having regard to the conduct of the appellant as disclosed in her sworn statement as well as other material on the record, an inference could reasonably be drawn that the winning tickets were purchased by the appellant after the event. The majority opinion after considering surrounding circumstances and applying the test of human probabilities had rightly concluded that the appellant's claim about the amount being her winning from races, was not genuine. It- could not be said that the explanation offered by the appellant in respect of the said amounts had been rejected unreasonably and that the finding that the said amounts were income of the appellant from other sources was not based on evidence.” CIRCUMSTANTIAL EVIDENCE HOW TO BE USED Page 4 of 11 I.T.A. No.: 687/KOL/2019 Assessment Year: 2012-13 M/s. Arihant Timbers Private Limited. 6.13. It would, at this stage, be relevant to consider the admissibility and use of circumstantial evidence in income tax proceedings. . Circumstantial evidence is evidence of the circumstances, as opposed to direct, evidence. It may consist of evidence afforded by the bearing on the fact to be proved, of other and subsidiary facts, which are relied on as inconsistent with any result other than the truth of the principal fact. It is evidence of various facts, other than the fact in issue which are so associated with the fact in issue, that taken together, they form a chain of circumstances leading to an inference or presumption of the existence of the principal fact. In the appreciation of circumstantial evidence, the relevant aspects, as laid down from time to time are — (1) the circumstances alleged must be established by such evidence, as in the case of other evidence (2) the circumstances proved must be of a conclusive nature and not totally inconsistent with the circumstances or contradictory to other evidence. (3) although there should be no missing links in the case, yet it is not essential that every one of the links must appear on the surface of the evidence adduced; some of these links may have to be inferred from the proved facts; (4) in drawing those inferences or presumptions, the Authorities must have regard to the common course of natural events, to human conduct and their relation to the facts of the particular case.» (5) The circumstantial evidence can, with equal facility, be resorted to in proof of a fact in issue which arises in proceedings for the assessment of taxes both direct and indirect, circumstantial evidence can be made use of in order to prove or disprove a fact alleged or in issue. In fact, in whatever proceedings or context inferences are required to be drawn from the evidence or materials available or lacking, circumstantial evidence has its place to assist the process of arriving at the truth." 6.14. It will also be worthwhile to consider the nature of burden of proof on the AO for proving a fact or circumstance in the income tax proceedings. The questions raised about the tax liability by the AO are to be answered by the assessee by furnishing reasonable and plausible explanations. If assessee is not forthcoming with proper or complete facts or his statement or explanation is contradictory, drawing of suitable inferences and estimation of facts is inevitable. Page 5 of 11 I.T.A. No.: 687/KOL/2019 Assessment Year: 2012-13 M/s. Arihant Timbers Private Limited. Courts generally will not interfere with such estimate of facts, unless the inferences or estimates are perverse or capricious. 6.15. The Assessee's technical contentions about admissibility and reliance on material available on the AO's record are in the nature of contentions challenging criminal or civil liabilities in a court of law. We are dealing with a process of adjudication of assesses tax liability i.e. assessment under Income Tax Act rather than conducting criminal or civil court proceedings. As held by the Hon'ble Supreme Court in the case of S.S. Gadgil (supra) no ‘lis' is involved in adjudication of tax liability. The Assessee's contention that there was no new material before the AO after the CIT(A)'s setting aside order cannot be accepted. New information and material did indeed come on record. In our view, in a sensitive matter like this, even a single due or revelation can be of great importance. To reverse the order of the AO on this technical plea will amount to taking a lopsided view of the proceedings. Besides, the JPC has underlined the importance of Reports of investigation agencies like CBI, DRI, ED whose were in the offing, as the relevant investigations were in process. In view of these observations, we do not accede to the assessee's pleas in this behalf. The Assessee's contentions and objections in this behalf that the material available on record was not admissible as evidence and that it cannot be relied on by the AO, are devoid of any merit and are rejected outright.” From the foregoing discussion, I find no reason to interfere in the findings of the Ld. A.O, which stand confirmed. The Grounds taken by the appellant stand dismissed.

7. Ground No. 3 relates to the claim of the appellant to add, alter or modify the grounds of appeal

. As no such claim has been made by the appellant or the Ld A.R, there is no occasion to adjudicate in the matter. In the final result, appeal filed by the appellant is treated as "dismissed."”

5. Aggrieved, the assessee is now in appeal before this Tribunal. Ld. Counsel for the assessee submitted that the share premium was charged to avoid huge ROC fees required to be paid for increasing authorized share capital. There is no colourable device because shares have been allotted to pay off the creditor and to I.T.A. No.: 687/KOL/2019 Assessment Year: 2012-13 M/s. Arihant Timbers Private Limited. avoid ROC fees. Revenue has not brought any material on record about the existence of unaccounted money. All the shareholders have already replied to the notice u/s 133(6) of the Act. He further, submitted that since the transactions have not been carried out through banking channel provisions of Section 68 of the Act cannot be invoked. Our attention was also drawn towards the valuation certificates of various companies showing the fair market value of unquoted equity shares to justify the premium charged on the issue of shares. Financial statements of the share applicants were also submitted and prayer was made to delete the addition made u/s 68 of the Act.