M/S. KAVYA PROPERTIES PVT. LTD.,KOLKATA vs. I.T.O., WARD - 4(4), KOLKATA

ITA 2619/KOL/2024Status: DisposedITAT Kolkata07 October 2026AY 2012-20139 pages
AI SummaryAllowed

What did the Tribunal hold?

The Tribunal held that the assessee had discharged its onus under Section 68 by filing all the requisite documents and evidences pertaining to the share subscribers before the AO. The Tribunal noted that the AO did not conduct any independent inquiry or investigation into the evidences filed by the assessee. The addition was made solely on the ground that the subscribers did not comply with the summons issued under Section 131 of the Act. The Tribunal found this reasoning to be flawed, stating that once the assessee discharges its initial burden, the AO cannot make an addition based on the non-compliance of summons by third parties, especially when the assessee has provided substantial documentary evidence. The Tribunal relied on the jurisdictional High Court's decisions in PCIT vs. Bright Commodeal Pvt Ltd and PCIT vs. M/S Shipra Enclave Pvt Ltd, which emphasized that documented traceability through banking channels carries greater evidentiary weight than the subjective suspicion of an AO or the non-appearance of directors. The Tribunal concluded that the ratio in NRA Iron & Steel applies only to 'phantom' or 'non-existent' entities, not to active, traceable taxpayers. Therefore, the order of the CIT(A) was set aside, and the AO was directed to delete the addition. The appeal of the assessee was allowed.

What were the facts?

The assessee, M/s Kavya Properties Pvt. Ltd., is in appeal before the Income Tax Appellate Tribunal (ITAT) against the order of the National Faceless Appeal Centre, Delhi (CIT(A)) dated 21.09.2023 for Assessment Year 2012-13. The sole issue is the addition of ₹2,46,00,000/- made by the Assessing Officer (AO) and upheld by the CIT(A) on account of unexplained share capital/share premium under Section 68 of the Income Tax Act, 1961. The assessee had issued equity shares to nine subscribers. During assessment, the assessee provided details like PANs, source of funds certificates, bank statements, allotment letters, share application forms, ITRs, and audited accounts of the subscribers. The AO also issued summons under Section 131 to the subscribers, which were not complied with, leading to the addition. The CIT(A) affirmed the addition, noting that the assessee could not establish the genuineness of the share premium and that letters issued under Section 133(6) were returned.

What were the issues?

1. Whether the addition of ₹2,46,00,000/- on account of unexplained share capital/share premium under Section 68 of the Income Tax Act, 1961, is justified when the assessee has provided documentary evidence of identity, creditworthiness, and genuineness of the subscribers, and the non-compliance with summons under Section 131 by the subscribers is the sole basis for the addition? Assessee's contentions: The assessee argued that it had discharged its onus under Section 68 by furnishing all necessary details and evidences regarding the nine subscribers, including PANs, source of funds certificates, bank statements, ITRs, and audited accounts. The assessee relied on the decision of the Hon'ble Calcutta High Court in PCIT vs. Bright Commodeal Pvt Ltd and PCIT vs. M/S Shipra Enclave Pvt Ltd, which held that non-compliance with summons under Section 131 by subscribers cannot be the sole ground for addition if the assessee has provided sufficient documentary evidence. The assessee also cited other jurisdictional High Court decisions supporting its case. Revenue's contentions: The Revenue, through the AO and CIT(A), contended that the assessee failed to establish the genuineness of the share premium. The AO made the addition primarily because the subscribers did not comply with the summons issued under Section 131 of the Act. The CIT(A) also noted that letters issued under Section 133(6) were returned, hindering verification.

Which sections of the Income-tax Act were involved?

Section 68,Section 133(6),Section 131

AI-generated summary — verify with the full judgment below

Income Tax Appellate Tribunal, “A” BENCH, KOLKATA

For Appellant: Shri Manoj Kataruka, AR
For Respondent: Shri Nilkantha Chakraborty, DR
Hearing: 21.09.2026Pronounced: 07.10.2026

Per Rajesh Kumar, AM:

This is an appeal preferred by the assessee against the order of the National Faceless Appeal Centre, Delhi (hereinafter referred to as the “Ld. CIT(A)”] dated 21.09.2023 for the AY 2012-13. 2. The only issue raised by the assessee in the various grounds of appeal is against the conformation of addition of ₹2,46,00,000/- by the ld. CIT (A) as made by the ld. AO on account of unexplained share capital/ share premium u/s 68 of the Act.

3.

The facts in brief are that the assessee filed the return of income declaring total income at ₹453/-, which was selected M/s Kavya Properties Pvt. Ltd; A.Y. 2012-13 for scrutiny for large share premium received. Accordingly, notices u/s 143(2) and 1

The order continues below.

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