RAMESHWAR FINVEST PRIVATE LIMITED,KOLKATA vs. DCIT, CENTRAL CIRCLE 3(3),, KOLKATA

3.2. In the appellate proceedings the ld. CIT (A) confirmed the addition on the ground that identity and creditworthiness of the share applicants as well as the genuineness of the transactions was not proved and there was no basis for charging premium of ₹190/- per share.

3.3. The ld. AR vehemently submitted before us that the addition has been confirmed by the ld. CIT (A) by grossly ignoring the facts available on record right from the first round of assessment. The ld. AR vehemently submitted that even in the first round of assessment the notice u/s 143(2) of the Act and 142(1) of the Act along with questionnaire were issued to the assessee and the assessee filed the copies of audited accounts, ITRs, bank statements, etc before the AO during the reassessment proceedings which were initiated by the ld.

3.5. The learned AR submitted that in the first round of assessment, the most of the subscriber companies submitted these documents in response to summons u/s 131 of the Act and the copies of acknowledgements by these parties are available from page no.71 to 121 of the Paper Book along with replies filed by the share subscribers. The ld. AR submitted that the assessee is a NBFC since financial year 2000-01. The ld. AR also submitted that the ld. AO noted in the assessment that erstwhile director of the company Shri Rao Birendra Singh, who also happened to be director of the some subscriber companies namely; M/s Maateswari Vanijya Pvt. Ltd., M/s Nirnidhi commercial Pvt. Ltd. & M/s Poddar Agro Co. Pvt. Ltd. and his statement was recorded but the same was never confronted to the assessee and no opportunity of cross-examination was ever allowed of the director of the subscriber companies before using their statements against the assessee. The ld AR submitted that the same 3.6. The ld. AR also vehemently referred to the provisions of Section 142(1) and 143(3) of the Act and emphasized that as per provisions of Section 142(2) the ld. AO is required to make all enquiries as it deems and consider necessary for the purpose of obtaining full information in respect of loss or income of the assessee and in the very next sub section 142(3) of the Act, it is provided that in respect of material gathered on the basis of said enquiry made u/s 142(2) of the Act and which is proposed to be used for the purpose of assessment, the ld. AO has to give any opportunity of being heard qua the same to the assessee but the same has not been granted to the assessee. Therefore, the mandate of Section 142(2) and 142(3) of the Act was not followed by the ld. Assessing Officer. The ld. AR in defense of his arguments relied on a series of decisions namely M/s SPML Infra Ltd. Vs. DCIT vide order dated 17.01.2020 and ACIT Vs. Sur Buildcon Pvt. Ltd. vide order dated 15.07.2021. The ld. AR also referred to the decision of Apex court in the case of Andaman Timber Industries Vs. CCE in Civil Appeal No. 4228 of 2006, wherein it was 3.7. The ld. AR further submitted that it is not the case of the Revenue that the directors of the share applicant companies have denied transactions with the assessee company. The ld. AR submitted that they have admitted that share applicant companies have invested in the assessee company. The ld. AR also submitted in case of private entity it is no uncommon that these are closely held companies and premium is decided by the management already and parties are also known to each and every. Therefore, this cannot be stated to be averse to the assessee company. Therefore, the statement recorded of these two parties do not in any way lead to the interference that share transactions were not genuine.

3.8. The ld. AR submitted that the ld. AO relied on the decision of Hon'ble Delhi High Court in case of CIT Vs. Nipun Builders and Developers Pvt. Ltd. [2013] 30 taxmann.com 292 (Delhi), wherein it has been held that where the assessee failed to prove the identity and capacity of the subscriber companies to pay share application money. The amount so received was liable to be taxed u/s 68 of the Act. However, the said decision is distinguishable on facts vis-à-vis the facts of the present case. The ld. AR submitted in that case, the 3.9. The ld. AR also submitted that the director Shri Rao Birendra Singh, of Maateshwari Vanijya Pvt. ltd., Nirnidhi commercial P. Ltd., 3.10. The ld. AR also relied on the decision of CIT vs. Orissa Corpn, (P.) Ltd.[1986] 159 ITR 78 (SC) dated 19-03-1986, wherein the Hon'ble Court had held that where the assessee has given the names and addresses of the creditors and it was in the knowledge of the Revenue that the said creditors were income-tax assesses, then the Revenue apart from issuing notice u/s 131 of the Act at the instance of the assessee did not pursue the matter further. In that case, it was held that no addition can be made merely because there was no compliance to summons issued u/s 131 of the Act. Similarly, Delhi High Court in case of Commissioner of Income-tax-IV vs. Dwarkadhish Investment (P.) Ltd.[2011] 330 ITR 298 (Delhi) dated 02-08-2010, held that just because creditors / share applicants could not be found at the addresses given, it would not give the Revenue the right to invoke Section 68 of the Act. One must not lose sight of the fact that it is the Revenue which has all the powers and wherewithal to trace any person and assessee has not to prove the source of source. The ld. AR also relied on the decision of Kolkata High Court in case of PCIT Vs. M/s Jealous Commercial Private Limited in ITAT/138/2025 vide order dated 28.10.2025 and also, in case of CIT Vs. Naina Distributors (P.) Ltd. in ITAT No.113 of 2023 dated 28.06.2023.

3.12. The ld. DR on the other hand relied heavily on the orders of the authorities below by submitting that the assessee has raised a share capital/ share premium from subscribers whose identity, creditworthiness were doubtful and genuineness of the transactions could not be proved by the assessee and therefore, the appeal of the assessee may be dismissed by upholding the order of the ld. CIT (A). The ld. DR submitted that in this case , mere furnishing of documents along with the share subscribers details or they are replying to the notices issued u/s 133(6) of the Act or summons issued u/s 131 of the Act would not ipso facto prove that these are genuine transactions. The ld. DR submitted that it is the known fact that a huge racket is prevalent in the market in which the accommodation entries are given in organized manner in the form of unsecured loans and share capital and the modus operandi of all these companies are similar as they are maintaining all their accounts and documents as has been brought out during various searches conducted on them.

3.13. After hearing the rival contentions and perusing the materials available on record including the appellate order and paper book filed and written submission filed by the assessee, we find that this is second round of assessment pursuant to revisionary order passed by the ld. PCIT u/s 263 of the Act, which travelled to the Tribunal. In the first round, we find that the assessment was re- opened u/s 147 of the Act. Thus, the ld. AO has during the assessment proceedings called for all the evidences qua the share capital/premium and share subscribers which were duly furnished before the ld. AO and even notice issued u/s 133(6) of the Act were duly replied by the share subscribers by confirming these transactions by invoking Explanation 3 to section 147 of the Act. We note that having satisfied with the evidences filed by the assessee as well as by the subscribers the issue of share capital/premium was accepted and no addition was made on account of share capital/ share premium under Explanation 3 to Section 147 of the Act.

3.14. We further note that the ld. PCIT revised the said order by directing the ld. AO to conduct the enquires in respect of share capital/share premium afresh and thus, this is a second round of assessment pursuant to the order passed by the ld. PCIT u/s 263 of the Act. However, in the second round of assessment, we note that the ld. AO issued notice u/s 131 of the Act which was served upon these share subscribers and as many as 23 share subscribers furnished their replies in compliance. We note that the assessee has furnished all documents even in the second round of assessment before the ld. AO comprising the names, addresses, audited balance “That in this case the respondent had given the names and addresses of the alleged creditors. It was in the knowledge of the Revenue that the said creditors were income-tax assessees. Their index numbers were in the file of the Revenue. The Revenue, apart from issuing notices under Section 131 at the instance of the respondent, did not pursue the matter further. The Revenue did not examine the source of income of the said alleged creditors to find out whether they were creditworthy. There was no effort made to pursue the so-called alleged creditors. In those circumstances, the respondent could not do anything further. In the premises, if the Tribunal came to the conclusion that the respondent 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. I f the conclusion was based on some evidence on which a conclusion could be arrived at, no question of law as such arose. The High Court was right in refusing to state a case.” The case of the assessee is also squarely covered by 3.15. the decisions of Hon’ble Calcutta High Court in the case of Crystal Networks Pvt. Ltd. vs. CIT (353) ITR 171 (Kol)) 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:

“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 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.”

Further, the assessment year involved is A.Y. 2008-09 3.18. and the proviso to Section 68 of the Act as inserted by the Finance Act, 2012, with effect from 01.04.2013, is not applicable to year under consideration as the same is applicable and effective from A.Y. 2013-14 onwards as has been held by the Hon'ble Bombay High Court in case of M/s Gagandeep Infrastructure Pvt. Ltd.(supra), the relevant findings is as under:-

“(e) We find that the proviso to Section 68 of the Act has been introduced by the Finance Act 2012 with effect from 1st April, 2013. Thus, it would be effective only from the Assessment Year 2013-14 onwards and not for the subject Assessment Year. In fact, before the Tribunal, it was not even the case of the Revenue that Section 68 of the Act as in force during the subject years has to be read/understood as though the proviso added subsequently effective only from 1st April, 2013 was its normal meaning. The Parliament did not introduce to proviso to Section 68 of the Act with retrospective effect nor does the proviso so introduced states that it was introduced "for removal of doubts" or that it is "declaratory". Therefore, it is not open to give it retrospective effect."” 3.19. We have also perused the provisions of Section 142(2) and 142(3) of the Act and find that Section 142(2) of the Act deals with the obtaining full information in respect of income or loss of any person qua which the ld. AO wants enquire into as he considered “"14. To conclude: We note that none of the statements were recorded by the assessing officer of the assessee company, and no opportunity for cross examination has been provided to the assessee company. The mandate of law to conduct enquiry by the Assessing Officer on due information coming to him to verify authenticity of information was not done as per section 142 of the Act. Therefore, mere receipt of unsubstantiated statement recorded by some other officer in some other proceedings more particularly having no bearing on the transaction with the assessee does not create any material evidence against the assessee. This is because section 142(2) mandates any such material adverse to the facts of assessee collected by AO u/s 142(1) has to be necessarily put to the assessee u/s 142(3) before utilizing the same for assessment so as to constitute as reliable material evidence through the process of assessment u/s 143(3) of the Act." 3.20. Similarly, in the case of Sur Buildcon Pvt. Ltd. (supra) has held as under:-

“7.11 Applying the law to the case at hand, it is evident that the Inspector Reports, that had been relied upon by the A.O., have been reproduced in length for the first time in the Assessment Orders only. The A.O., by failing to confront the assessee with the evidence he had gathered u/s 142(2) Act, has, therefore, erroneously skipped the mandatory intermediary step prescribed u/s 142(3) of the Act. Thus, when the A.O. has directly gone on to pass the Assessment Orders u/s 147/143(3) of the Act to make the impugned additions u/s 68, the same is in direct violation of the procedure of "Statements recorded u/s 132 (4) do not by themselves constitute incriminating material. A copy of the statement together with the opportunity to cross-examine the deponent has to provided to the assessee. If the statement is retracted and/or if cross- examination is not provided, the statement har to be discarded. The onus of ensuring the presence of the deponent cannot be shifted to the assesses The omis is on the Revenue to ensure his presence” 3.22. We have also perused the decision of the Hon'ble Delhi High Court in case of Nipun Builders Pvt. Ltd (supra), which was relied by the ld. AO in order to make the addition. However, the facts of that case are distinguishable vis-à-vis the facts of the assessee’s case as in that case the summons issued u/s 131 of the Act were returned and served with remark no such company which were corroborated by the inspector report whereas in the present case 3.23. In the result, the appeal of the assessee is allowed.

Order pronounced in the open court on 23.12.2025.