M/S. CANARY TRADECOM PRIVATE LIMITED,KOLKATA vs. DCIT, CENTRAL CIRCLE 2(3), , KOLKATA

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ITA 152/KOL/2026Status: DisposedITAT Kolkata28 April 2026AY 2009-201010 pages

In favour of the assessee: the assessee's appeal was allowed. From the AI summary of this appeal.

AI SummaryAllowed

What did the Tribunal hold?

The Tribunal held that the assessee had furnished sufficient evidence to prove the identity, creditworthiness of shareholders, and genuineness of the transactions. The AO had not conducted proper independent enquiries despite the evidence provided.

What were the facts?

The assessee company received share capital and premium amounting to ₹2,45,00,000. The Assessing Officer (AO) treated this as an unexplained cash credit. The Commissioner (Appeals) confirmed the addition, but the ITAT examined the evidence provided by the assessee.

What were the issues?

Whether the addition made under Section 68 for unexplained cash credit on account of share capital and premium was justified when the assessee had provided sufficient evidence of identity, creditworthiness, and genuineness of the transactions.

Which sections of the Income-tax Act were involved?

Section 68

AI-generated summary — verify with the full judgment below

Income Tax Appellate Tribunal, “A” BENCH, KOLKATA

For Appellant: Shri Sunil Surana, AR
For Respondent: Shri Manoj Kumar Pati, DR
Hearing: 16.04.2026Pronounced: 28.04.2026

Per Rajesh Kumar, AM:

This is an appeal preferred by the assessee against the order of the Commissioner of Income-tax (Appeals), Kolkata-26 (hereinafter referred to as the “Ld. CIT(A)”] dated 10.01.2025 for the AY 2009-10.

2.

The only issue pressed by the ld. Counsel for the assessee is raised in ground no. 2 which is against the order of Ld. CIT (A) confirming the addition of ₹2,45,00,000/- as made by the Ld. AO in respect of share capital and share premium by treating the same as unexplained cash credit.

3.

The facts in brief are that the assessee filed the return of income on 15.07.2010, declaring total income at ₹1,490/-, which was processed

4.

The Ld. PCIT on perusal of the assessment records observed that the Ld. AO has not conducted proper enquiry regarding the identity and creditworthiness of the shareholders and the assessment order has been passed in a mechanically without application of mind and thus, the order passed is rendered erroneous and prejudicial to the interest of the Revenue. Accordingly, the show cause notice u/s 263 of the Act was issued and finally, the assessment was revised vide order dated 11.03.2014, passed u/s 263 of the Act. The Ld. AO in the set aside proceedings, issued notice u/s 142(1) of the Act along with questionnaire, which was returned unserved by postal authorities. The Ld. AO again issued notice u/s 142(1) of the Act dated 22.09.2014, which was again returned by the postal authorities. Thus, there was no compliance on the part of the assessee even to the show cause notices. Therefore, the Ld. AO framed the assessment u/s 144 of the Act when the assessee failed to respond to various queries. The Ld. AO also noted in the assessment order that the subscribers, who invested the money in the assessee company also did not turn up for examination on oath u/s 131 of the Act and therefore, genuineness of the share capital and share premium remained unverified. Finally, addition was made to the income of the assessee as unexplained cash credit u/s 68 of the Act.

5.

In the appellate proceedings, the Ld. CIT (A) restored the matter to the file of the Ld. AO for re-adjudication by directing the Ld. AO to

6.

After hearing the rival contentions and perusing the materials available on record, we find that in the original assessment proceedings, the Ld. AO has examined the issue of share capital/ share premium. We note that the assessee has furnished before the Ld. AO, the copy of ITR, audited accounts, share allotment letter, bank statement, copy of Pan card, source of source certificate, which are available from page no.105 to 184. We even note thatin the original re-assessment proceedings, the notices u/s 133(6) of the Act were also replied, a copy of which is available at page no. 101 to 104. We note that the shares were subscribed by new applicant M/s M/s Sarang Viniyog Limited and the copy of response filed u/s 133(6) of the Act by the party is available at page no.103 of the Paper Book. We observe form the said letter that the subscriber has explained the payments through HDFC Bank vide cheque number 44180 of ₹1,70,00,000/- dated 23.03.09 and vide cheque no.44182 of ₹74 lacs dates 24.03.2009. It was also stated that the assessee had allotted 61,000/- equity shares. Further, it was stated that the said payments were made out of the money received from sale of investments. The said subscriber has also filed the balance sheet, ITR and bank statement, etc. We have also examined the balance sheet of the subscriber and find that the amount invested in the assessee company is appearing in the balance sheet under the head investment in securities. Therefore, we also note that these information / records were available before the authorities below. Therefore, we are not in agreement with the conclusion drawn by the Ld. CIT (A) on this issue as the issue stood verified already. Under this case, the enquiries have been made by the Ld. AO in the second

“We have carefully examined the reasons assigned by the learned Tribunal, more particularly from paragraph 14 of the impugned order. In paragraph 14, the learned Tribunal has noted the submissions made on behalf of the assessee by which they furnished a tabulated statement containing details about the directions issued by the PCIT and the action taken by the assessing officer and the remarks of the assessee. After noting the submissions made by the assessee, the learned Tribunal proceeded to examine in an elaborate fashion the correctness of those submissions and after taking note of the various decisions of the Hon'ble Supreme Court and this Court, held that the assessing officer in the second round did not make any independent enquiry to verify the genuineness of the transactions despite the assessee having furnished all details and documents. That apart, the assessing officer has not pointed out any discrepancy or insufficiency in the evidence and details furnished by the assessee. Therefore, the learned Tribunal came to the conclusion that the assessee having discharged the initial burden cast upon them to prove the identity and creditworthiness of the share-subscribers and the genuineness of the transactions, the burden shifted to the department to examine the evidence furnished by conducting independent enquiry and they are required to state on what account the assessing officer was not satisfied with the details and evidence furnished by the assessee and the same should be put to the assessee. The learned Tribunal took note of the decision of the Hon'ble Supreme Court in the case of Commissioner of Income - Tax, Orissa vs. Orissa Corporation P. Ltd., (1986) 159 ITR 78, wherein it was held that in the case where the assessee had given the names and addresses of the alleged creditors and it was in the knowledge of the revenue that the said creditors were income tax assessees, the revenue apart from issuing notices under Section 131 at the instance of the assessee did not pursue the matter. Further, the revenue did not examine the source of income of the alleged creditors to find out whether they were creditworthy and that there was no effort made to pursue the so-called alleged creditors. Therefore, it was held that the assessee could not do anything further and approved the finding of the learned Tribunal that the assessee 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. After taking note of the said decision, the learned Tribunal also took note of the decision of this Court in the case Principal CIT vs. Shreeleathers, (2022) 448 ITR 332 (Cal). The learned Tribunal applied the law laid down in the decision and pointed out that the asssessee has successfully explained the nature and source of the alleged investments in the share capital and share premium by proving the identity, genuineness and creditworthiness of all the 18 share applicants who are regularly assessed to income, their financial statements were duly audited and passed through scrutiny proceedings

“5. After hearing the rival contentions and perusing the materials available on record, we find that that the assessee has raised share capital from 20 share subscribers by issuing 2,79,400 equity shares of face value of Rs.10/- each at a premium of Rs.240/- per share and thus, received Rs. 6,99,50,000/-as share capital/ share premium. We note that the assessee had furnished the details of all the share subscribers, based on which the ld. AO made independent enquiries from each of them u/s 133(6) of the Act. The records placed before us revealed that the notices issued u/s 133(6) of the Act were served upon the share subscribers which substantiated that they were found existing at their given addresses. It is also seen that each of the 20 share subscribers had filed the details including PANs, ITRs, audited financial statements, allotment advices, bank statements, explanation regarding their source of payment. We find that though all the relevant details were furnished by the share subscribers, the ld. AO had conspicuously omitted to take note of the same in the impugned assessment order. Rather, the ld. AO is found to have erroneously observed that there was no compliance from the share subscribers, whereas, the contemporaneous facts showed otherwise. 5.1. Having perused the details furnished by the share subscribers, we observe that each of them held valid PAN and CIN and the proof of service of notices u/s 133(6), established the identity of the share subscribers. It is also observed that, the share subscribers were regular income-tax filers and their financials demonstrated sufficient strength to justify the amounts subscribed by them. The details of their net worth vis- à-vis the amounts paid by them is noted to be as under:

Sl No. Name of the Shareholder Amount Networth 1 AbhilashiniCommosales Pvt. Ltd. 4,50,000 10,49,00,000 2 Banke bihariVyapaar Pvt. Ltd. 35,00,000 2,91,00,000 3 Bright Tracom Pvt. Ltd. 40,00,000 4,11,50,000 4 Decent Professional services Pvt. Ltd. 20,00,000 2,49,07,744 5 Deora Finance Pvt. Ltd 57,00,000 29,80,01,588 6 Jai Mata Texo Traders Pvt. Ltd 35,00,000 7,18,14,900 7 Lahoti Agro Pvt. Ltd 40,00,000 2,01,57,000 8 Lambodar Commotrade Pvt. Ltd 25,00,000 7,15,00,000

9.

In the result, the appeal of the assessee is allowed.

Order pronounced in the open court on 28.04.2026.

Sd/- Sd/- (PRADIP KUMAR CHOUBEY) (RAJESH KUMAR) (JUDICIAL MEMBER) (ACCOUNTANT MEMBER) Kolkata, Dated: 28.04.2026 Sudip Sarkar, Sr.PS

Copy of the Order forwarded to: 1. The Appellant 2. The Respondent 3. CIT DR, ITAT, 4. 5. Guard file. BY ORDER, True Copy//

Asst. Registrar Income Tax Appellate Tribunal, Kolkata

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