D.C.I.T.,CIRCLE--8(2), KOLKATA vs. M/S NEWAGE VINIMAY PRIVATE LIMITED , KOLKATA

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ITA 2235/KOL/2019Status: HeardITAT Kolkata16 October 2026AY 2013-1429 pages

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

AI SummaryAllowed

What did the Tribunal hold?

The Tribunal held that the CIT(A) was correct in deleting the additions made under Section 68 of the Income Tax Act, 1961. The Tribunal noted that the CIT(A) had thoroughly examined the factual position, analyzed the pattern of transactions in the bank accounts of the investor companies and the assessee, and found that the funds were routed through banking channels. The CIT(A) observed that the investor companies, despite having negligible revenue or losses, had invested in the assessee's shares at a high premium. The Tribunal agreed with the CIT(A)'s finding that these transactions appeared to be a 'round tripping' of funds and that the bank accounts acted as a 'highway' for the movement of money to create a façade of genuine transactions. However, the Tribunal emphasized that the mere fact that transactions were through banking channels or that the investor companies were registered with the tax authorities did not automatically validate the genuineness of the credit. The Tribunal ultimately upheld the CIT(A)'s deletion, implying that the Revenue had not sufficiently demonstrated the lack of genuineness or the nature of the credit as undisclosed income.

What were the facts?

The Revenue filed appeals before the Income Tax Appellate Tribunal (ITAT) challenging the orders of the Commissioner of Income Tax (Appeals) [CIT(A)] for Assessment Years (AYs) 2013-14 and 2014-15. The appeals concerned the deletion of additions made by the Assessing Officer (AO) under Section 68 of the Income Tax Act, 1961, on account of cash credits in the form of share capital. The AO had made additions ranging from Rs. 17,60,00,000/- to Rs. 89,50,00,000/- across various assessee companies. The CIT(A) had deleted these additions, finding that the transactions, though appearing suspicious, were conducted through banking channels and involved companies registered with the tax authorities. The Revenue contended that the CIT(A) erred in deleting the additions without considering the specific source of investment and the capacity of the investor companies.

What were the issues?

1. Whether, on the facts and in the circumstances of the case and in law, the CIT(A) erred in deleting the addition made under Section 68 of the Income Tax Act, 1961, on account of cash credit in the form of share capital, when the investor companies allegedly lacked the capacity to invest and the source of funds was not adequately explained by the assessee. Assessee's Contention (implied by Revenue's grounds): The assessee provided explanations regarding the source of investment and the creditworthiness of the share allottees, and the transactions were conducted through banking channels. Revenue's Contention: The CIT(A) erred in deleting the additions because the investor companies had no capacity to invest their own funds, received funds from third parties, and the assessee failed to explain the specific source of investment from the end fund provider against the share capital with premium. The CIT(A) allegedly drew general conclusions without thoroughly examining the source of investment and creditworthiness of all share allottees. The Revenue also highlighted suspicious patterns of fund rotation and arbitrary premium fixation.

Which sections of the Income-tax Act were involved?

Section 68,Section 250

AI-generated summary — verify with the full judgment below

Income Tax Appellate Tribunal, KOLKATA ‘D’ BENCH AT KOLKATA

Before: SHRI YOGESH KUMAR US & SHRI RAKESH MISHRA

For Appellant: CA. सुनवाई की तिति/

आयकर अपीलीय अधिकरण कोलकाता ‘डी’ बेंच कोलकाता मे IN THE INCOME TAX APPELLATE TRIBUNAL KOLKATA ‘D’ BENCH AT KOLKATA Before SHRI YOGESH KUMAR US, JUDICIAL MEMBER & SHRI RAKESH MISHRA, ACCOUNTANT MEMBER ITA No(s). 2095/KOL/2019 & 2096/KOL/2019 Assessment Year(s) 2013-14 & 2014-15 I.T.O., Ward-8(1), Kolkata M/s Mangal Crystal Coke Pvt. Ltd. Aayakar Bhawan, P-7, 22, Camac Street, Block-C, Vs. Chowringhee Square, 5th Floor, 5th Floor, Kolkata, West Room No.10, Kolkata, West Bengal, 700016 Bengal, 700069 (अपीलार्थी/Appellant) (प्रत्यर्थी/Respondent) स्र्थायी खाता संख्या/PAN: AAECM4926A ITA No(s). 2097/KOL/2019 Assessment Year(s) 2013-14 I.T.O.,Ward-8(1), Kolkata M/s Mahanidhi Vyapaar Pvt. Ltd. Aayakar Bhawan, P-7, 22, Camac Street, Block-C, Vs. Chworinghee Squre, 5th Floor, 5th Floor, Kolkata, West Room No.10, Kolkata, West Bengal, 700016 Bengal, 700069 (अपीलार्थी/Appellant) (प्रत्यर्थी/Respondent) स्र्थायी खाता संख्या/PAN: AAGCM3856P ITA No(s). 2162/KOL/2019 Assessment Year(s) 2013-14 I.T.O.,Ward-8(2), Kolkata M/s Wonga Traders Pvt. Ltd. Vs. Aayakar Bhawan, P-7, Block-C, 5th Floor, 22, Camac Chworinghee Squre, 5th Floor, Street, Kolkata, West Bengal, Room No.10, Kolkata, West 700016

IV. ITA No. 2162/KOL/2019; AY 2013-14: “1. Whether on the facts and in the circumstances of the case, the ld.CIT(A) erred in deleting the addition of Rs. 19,98,00,000/- u/s.68 of the I.T. Act, 1961, when the share allottees companies had failed to provide any explanation of the source to invest in share of appellant company with high premium? 2. Whether on the facts and in the circumstances of the case, the ld.CIT(A) erred in deleting the addition made by the A.O. of Rs. 19,98,00,000/- on account of unexplained cash credit u/s.68 of the Act when the assessce company has failed to established the ultimate source provider for investment in share capital with high premium? 3. Whether on the facts and in the circumstances of the case, the ld.CIT(A) erred in deleting the addition considering the transactions as genuine merely for the reason that they were carried out from the banking channel? In this connection the theory of preponderance of human probability as pronounced by the Hon'ble Apex Court in the case of CIT vs. Durga Prasad More (1971) 82 ITR 540 and Sumati Daya vs. CIT(1995) 80 Taxman 89/214 ITR 801(SC) is of the utmost importance. 4. The appellant craves the leave to make any addition, alteration, modification of grounds at the appellate stage.” V. ITA No. 2176/KOL/2019; AY 2013-14: “(i) Whether on the facts and circumstances of the case, the Ld. CIT(A) erred in not noticing that, the motive of investment in assessee company by share subscriber was not profit making, as evident from reply of directors of share subscriber companies and the fact that assessee company hardly had any operational business and income from fixed financial assets, thereby the motive of entire transaction being dubious. (ii) Whether on the facts and circumstances of the case, the Ld. CIT(A) erred in not considering the fact, pointed out in the assessment order and also in remand report that analysis of bank statement of the share subscriber company shows that almost all credit entries are followed by matching debit entries (not noticed in normal business standard), not only questioning credit worthiness of share subscriber but also giving character of paper based accommodation entry. provider companies to share subscriber company.

Face No of value Share Total amount Sl Name of the assessee shares per premium share capital & No alloted share per share share premium (₹) M/s Bhachau Traders 1. 2000000 1 79 16,00,00,000/- Pvt Ltd M/s Khambhalia Traders 2. 2000000 1 79 16,00,00,000/- Pvt Ltd 3. M/s Bullli Coke Ltd 2000000 1 79 16,00,00,000/- M/s Wonga Traders Pvt 4. 2000000 1 79 16,00,00,000/- Ltd M/s Mahanidhi Vyapaar 5. 1687500 1 79 13,50,00,000/- Pvt Ltd M/s Russell Vale Traders 6. 1500000 1 79 12,00,00,000/- Pvt Ltd Total 11187500 89,50,00,000/-

4.

On the basis of above details, the notices were issued u/s 133(6) of the Act in response to which the subscriber companies filed details. Summons were also issued to the allottee companies and in response to the summons issued the directors appeared and filed the details. However, since the genuineness of the share capital was not established, therefore, a sum of ₹89,50,00,000/- was treated as un- explained cash credit u/s 68 of the Act and the total income was assessed at ₹89,50,08,920/- by the Assessing Officer [Ld. 'AO'].

“VI. The Ld. AO in response to the letter issued by this office submitted a remand report dated 09.11.2018, the relevant portion of which is reproduced below: In the instant case an assessment w/s. 143(3) dt. 17.03.2016 was passed determining a total income of Rs. 89,50,08,920/-. While passing the assessment order the Share Capital & Share Premium of Rs. 89,50,00,000/- (Rs.I,I1,87,500/-+Rs.88,38,12,500/-) was disallowed and added back to the total income of the assessee company treating it as unexplained credit. Being aggrieved with the assessment order the assessee company filed an appeal before the Ld. CIT(A)-3, Kol. In the course of appellate proceedings the assessee company filed a written submission along with some copy of documents which are forwarded to this office for verification and to furnish the remand report. On perusal of the copy of documents as forwarded to this office by the office of Ld. CIT(A)-3,Kol. it reveals that most of the documents were furnished by the appellant during the course of assessment proceedings and the assessment has been completed after taking into consideration of the above documents. However, an opportunity was given to the assessee company by issuing a letter vide dt. 17.10.2018 with a request to substantiate its claim with documentary evidences. In response to that letter the Accountant of the assessee company appeared and explained that source of source/ Money Trail has been filed before the Ld. CIT(A)-3,Kol and no other documents are available with him. However, on perusal of Flow Chart and relevant page of bank statement as submitted by the appellant before the Ld. CIT(A)-3,Kol., showing the source

6.

Aggrieved with the order of the Ld. CIT(A), the Revenue has filed the appeal before the Tribunal.

7.

Rival contentions were heard and the submissions made have been examined. The Ld. DR submitted that in this case the SFIO had investigated the group matter of Gujarat NRE Coke Ltd. as there was a failure to repay the loan of ₹6085 Crore which was siphoned off. The chart showing flow of funds is as under:

Sl. ITA No. Name of Asst. Addition/Issue Amount Assessee Year 1) ITA Mangal Crystal AY Share Application 89,50,00,000 2095/Kol/ Coke Pvt. Ltd. 2013 Money (F.V of .1/-) 2019 -14 with Share Premium of .79/-)

Sl. ITA No. Name of Asst. Addition/Issue Amount Assessee Year 2) ITA Mangal Crystal AY Share Application 17,60,00,000 2096/Kol/ Coke Pvt. Ltd. 2014 Money (F.V of .1/-) 2019 -15 with Share Premium of 79/-) 3) ITA Mahanidhi AY Share Application 25,02,00,000 2097/Kol/ VyapaarPvt. 2013 Money (F.V of .1/-) 2019 Ltd. -14 with Share Premium of 59/-) 4) ITA Wonga Traders AY Share Application 19,98,00,000 2162/Kol/ Pvt. Ltd. 2013 Money (F.V of .1/-) 2019 -14 with Share Premium of 59/-) 5) ITA Khambhalia AY Share Application 24,00,00,000 2176/Kol/ Traders Pvt. 2013 Money (F.V of .1/-) 2019 Ltd. -14 with Share Premium of 59/-) 6) ITA Newage AY Share Application 26,95,00,000 2235/Kol/ VinimayPvtLtd. 2013 Money (F.V of .1/-) 2019 . -14 with Share Premium of .79/-) 7) ITA Russel Vale AY Share Application 33,52,00,000 2236/Kol/ Traders Pvt. 2013 Money (F.V of .1/-) 2019 Ltd. -14 with Share Premium of 89/-) 8) ITA Russel Vale AY Share Application 16,01,70,000 2237/Kol/ Traders Pvt. 2014 Money (F.V of .1/-) 2019 Ltd. -15 with Share Premium of 94/-) 9) ITA Gaurav AY Share Application 29,55,00,000 441/Kol/2 VinimayPvtLtd. 2013 Money (₹) 021 . -14 19,80,00,000

Other Current Liabilities(₹) 9,75,00,000 10 ITA Bhachau AY Share Application 48,99,00,000 521/Kol/2 Traders Pvt. 2013 Money(₹) 021 Ltd. -14 23,94,00,000

Sl. ITA No. Name of Asst. Addition/Issue Amount Assessee Year Other Current Liabilities(₹) 25,05,00,000

“■ The Commissioner (Appeals) has analysed the three principles which are required to be fulfilled namely identity, creditworthiness and genuineness of the transaction. It is not in dispute that the investors whose details have been referred are all either group companies or having a common set of directors. Further the assessee has not been able to dislodge the factual findings recorded by the Commissioner (Appeals) that the share application money was received from independent legal entities. By way of illustration if the case of GTPL is taken, it is found that they have invested Rs. 8.10 crores in the assessee-company. The said company receives a total of Rs. 1.65 crores on 1-6-2011 and 2-6-2011 from eight private limited companies/entities. Out of the said amount, Rs. 1.50 crores was remitted to the assessee’s bank account on 2-6-2011 by three cheques of Rs. 50 lakhs each. The balance remained at Rs. 15.09 lakhs. On 2-6-2011, an amount of Rs. 38 lakhs was remitted to the account by a private limited company and the balance rose to Rs. 53.09 lakhs out of this an amount of Rs. 50 lakhs was remitted to the assessee-account on the same day. On 4-6-2011, DSPL deposited another sum of Rs. 60 lakhs of which Rs. 50 lakhs was remitted to the assessee on 6-6-2011. On 6-6-2011 HGPL transferred a sum of Rs. 10 lakhs to this account by taking a closing balance to Rs. 23.08 lakhs. On the same day an amount of Rs. 20 lakhs was remitted to the assessee- account. On 6-6-2011 DSPL transferred Rs. 25 lakhs, Rs. 38 lakhs and Rs. 37 lakhs to this account and out of this amount Rs. 1 crore was remitted to the assessee’s account in two transactions on 7-6-2011. On 14-6-2011, MDPL remitted an amount of Rs. 35 lakhs to the account which was immediately transferred to the assessee’s account. On 18-7-2011, SRPL credited an amount of Rs. 50 lakhs to the account which was remitted to the assessee’s account on 19-7-2011. On 20-7-2011 amount of Rs. 30 lakhs was received through RTGS in the account and the amount was transferred to the account of the assessee on the same day. On 2-1-2012 an amount of Rs. 40 lakhs was deposited into account by two companies and this was remitted to the assessee’s account on 3-1-2012. On 3-1-2012 SGTPL

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