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Facts
The assessee company filed its return of income for AY 2012-13 showing a loss. The Assessing Officer (AO) made additions of Rs. 66,00,000/- for unexplained share application money and disallowed filing fees and expenses under Section 14A. The CIT(A) upheld the AO's order.
Held
The Tribunal held that the assessee had provided sufficient evidence to prove the nature and source of the share application money. The Tribunal also found that no disallowance under Section 14A was justified as the assessee did not earn any exempt income.
Key Issues
Whether the addition made under Section 68 for share application money was justified, and whether the disallowance under Section 14A was appropriate when no exempt income was earned.
Sections Cited
143(1), 131, 143(3), 68, 14A, 8D, 250
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Income Tax Appellate Tribunal, “B” BENCH KOLKATA
Before: Shri Rajesh Kumar & Shri Pradip Kumar Choubey
order
: December 08, 2025 ORDER
Per Pradip Kumar Choubey, Judicial Member:
This appeal filed by the assessee is directed against the order dated 30.04.2024 of the National Faceless Appeal Centre passed under Section 250 of the Income-tax Act, 1961 (hereinafter referred to as “the Act”) for the assessment year 2012–13.
The appeal has been filed by the assessee with a delay of 346 days. The assessee has filed a petition for condonation of the delay. After considering the reasons cited in the petition for condonation of delay, we find that the reasons are valid and consequently, the delay in filing the appeal is hereby condoned and we proceed to dispose of the appeal on merits.
Lucky Nirmaan Pvt. Ltd 3. Brief facts of the case are that the assessee filed its return of income for the A.Y 2012-13 declaring loss at Rs.2,21,055/ and return was processed u/s 143(1). During the course of assessment proceedings, it was noticed by AO that the assessee has raised capital of Rs. 66,00,000/- including share premium/ share application money by issuing its shares to different concerns with high premium. In spite of being given various opportunities to the assessee by the AO to produce books of accounts, but the assessee failed to do so. Thereafter, a summon u/s 131 of the Act was issued to the assessee for personal appearance of the director by the AO. In response to same submissions were filed by the assessee. Assessment was completed u/s 143(3) of the Act determining total income of the assessee at Rs. 65,46,410/ making the following additions: i. Addition of Rs. 66,00,000/- u/s 68 of the Act on account unexplained share application money received as the assessee failed to prove the nature and source of money received in the form of share premium. ii. Disallowance of filing fees of Rs. 71,000/-, iii. Disallowance u/s 14A r.w.s. 8D of the Act at Rs. 90,850/-
Being aggrieved by the said order, the assessee filed an appeal before the Ld. CIT(A) on two grounds i.e action of A.O on unexplained cash credit and making disallowances u.s 14A read with rule 8D where in CIT(A) dismissed the appeal .
Being aggrieved and dissatisfied by the order of the Ld. CIT(A), the assessee is in appeal before us challenging the impugned order thereby submitting that the addition u/s 68 of Rs.66,00,000/- made by the Assessing Officer confirmed by the ld. CIT(A) are erroneous as the companies from whom the above amount was received towards allotment 2 Lucky Nirmaan Pvt. Ltd of shares were confirmed their shareholding with the assessee company and filed their ITR acknowledgment, audited accounts and bank statement and that has been admitted in the assessment order. The ld. AR submits that the Assessing Officer did not take cognizance of these documents. He further submits that the assessee company did not earn any income which is claimed as exempt u/s 10, therefore, the action of the Assessing Officer to disallow Rs.90,850/- u/s 14A r.w.s. 8D(2)(iii) is not warranted keeping in view the several decisions of the Hon’ble High Court. In respect of the above submissions, the ld. AR cited the following decisions before us:
a) Pr. CIT vs. Jealous Commercial Pvt. Ltd. Hon'ble Calcutta High Court. ITAT/138/2025 [dt. 28.10.2025] b) ITO vs. Jealous Commercial Pvt. Ltd. Kolkata ITAT ITA No.: 424/K/2020 [dt. 27.09.2024] c) Pr. CIT vs. M/s. Naina Distributors Pvt. Ltd. ITAT/113/2023 & IA No. GA/1/2023 Hon'ble Calcutta High Court [Dt. 28.06.2023] d) Pr. CIT -2, Kolkata vs. M/s. Shreen Hire Purchase J Pvt. Ltd. ITAT: 196/2024 [Dt. 20.12.2024] Hon'ble Calcutta High Court e) Pr. CIT-2, Kolkata vs. M/s. Fast Flow Securities Pvt. Ltd. ITAT: 197/2024 [Dt. 20.12.2024] Hon'ble Calcutta High Court f) Pr. CIT -2, Kolkata vs. M/s. Wise Investment Pvt. Ltd. ITAT: 238/2024 [Dt. 06.05.2025] Hon'ble Calcutta High Court g) Crystal Networks (P) Ltd vs. CIT Hon'ble Calcutta High Court 353 ITR P-171 h) Pr. CIT vs. Rajshree Integrated Cold Chain Pvt. Ltd. ITAT/286/2024 Hon'ble Calcutta High Court 5.1 The ld. AR also placed documents relating to Baba Baijnath Vintrade Pvt Ltd., Trilokpati Trade Link Pvt. Ltd. and Popular Vintrade Pvt. Ltd., which are as under: 3 Lucky Nirmaan Pvt. Ltd a) ITR Acknowledgement and Final Accounts for the A.Y 2012-13 b) List of Investment as on 31.03.2012 c) Bank Statements d) Source of Fund e) Reply in Response to Notice u/s 131 6. Contrary to that, the ld. DR supports the impugned order.
Upon hearing the submissions of the counsels of the respective parties and on perusal of the impugned order, it appears that the assessee is a private limited company engaged in the business of investment and trading in shares and filed its return of income on 13.03.2013 for the A.Y 2012-13 declaring loss at Rs.2,21,055/ on the basis of books of accounts which are audited by audited. It appears to us that return was processed u/s 143(1) and the Assessing Officer observed that the assessee has raised capital of Rs. 66,00,000/- and summon u/s 131 of the Act was issued to the assessee for personal appearance of the director by the Assessing Officer and in response to notice u/s 131 of the Act, the assessee appeared and furnished various details and also documents like confirmations of share transaction, share allotment details of the shareholder-companies were furnished. Going over the aforesaid documents filed by the assessee, we find that in compliance to notice u/s 131 of the Act the shareholders has submitted their responses before the Assessing Officer and they have received the funds and they have also filed the details of bank statements and books were maintained reflecting the said transaction. Coming to the judgment of Hon'ble Calcutta High Court in Pr. CIT vs. Jealous Commercial Pvt. Ltd. (supra), the Hon'ble Calcutta High Court has held as under:
“Section 68 of the Act of 1961 allows the Assessing Officer on his subjective satisfaction arrived at and on the basis of the appreciation of the materials placed before him, to charge the sum credited in the books of 4 Lucky Nirmaan Pvt. Ltd the assessee to income tax of the assessee as income of the assessee. In other words, the Assessing Officer is required to assess the explanation given by the assessee after an opportunity is granted to the assessee to offer explanation about the nature and source of the credit shown in the account and once it arrives at a finding that, there is no explanation with regard to the nature and source of the sum involved, treat the same as income of the assessee and charge income tax for the relevant assessment year. There are three provisos to Section 68 of the Act of 1961. The first proviso deals with a loan or borrowing. The second proviso deals with share application money and the third proviso speaks about venture capital fund. In the facts and circumstances of the present case, the assessee issued allotted shares at a premium. Therefore, at the highest, the second proviso to Section 68 will come into operation, assuming though not admitting that the first part of Section 68 of the Act of 1961 stands satisfied. In the facts and circumstances of the present case, the consistent finding of the appellate authority and the income tax appellate tribunal is that, the persons who applied for the shares stand identified and that, the assessee offered sufficient explanation about the nature of the transactions in question. In course of hearing before us, the appellant is not in a position to produce any additional or new materials to substantiate that, the concurrent finding of fact by the two authorities, namely, the appellate authority and the income tax tribunal with regard to the explanation offered by the assessee is perverse. In M/s. Naina Distributors Pvt. Ltd. (supra) the co-ordinate Bench, found in the facts and circumstances of that case that, the transaction in share allotment in respect of the assessee concerned, was verified independently and that, independent verification did not render any finding so as to invoke Section 68 of the Act of 1961. In the facts and circumstances of the present case, the shareholders who applied for the shares in the assessee stands identified. The source of funds stands satisfied. The assessee reflected the entire issue and allotment of shares at a premium in its books of accounts and submitted the same contemporaneously to the statutory authority, namely, Ministry of Corporate Affairs. Before the Assessing Officer, the assessee produced all such relevant materials with regard to the transaction in question. The absence/non- appearance of the Directors of the assessee before the Assessing Officer would not prompt the Assessing Officer, to render a finding that no explanation within the meaning of Section 68 of the Act of 1961 was offered by the assessee particularly in the factual matrix of the present case. 5 Lucky Nirmaan Pvt. Ltd In such circumstances, we do not find any substantial question of law involved for the purpose of consideration by this Court as contended on behalf of the appellant. ITAT/138/2025 along with connected application being IA No.GA/2/2025 stands disposed of accordingly without any order as to costs.”
We further find that the ld. AR also submitted following documents such as ITR Acknowledgement and Final Accounts for the A.Y 2012-13, list of Investment as on 31.03.2012, Bank Statements, Source of Fund, Reply in Response to Notice u/s 131 in respect of each of the companies i.e. Baba Baijnath Vintrade Pvt Ltd., Trilokpati Trade Link Pvt. Ltd. and Popular Vintrade Pvt. Ltd. In view of the above discussion, we are of the view that the assessee discharged its onus by furnishing relevant documents to prove the identity and creditworthiness of the share- subscribers and genuineness of the transaction, whereas the ld. CIT(A) did not point out any defect or discrepancy in the same and upheld the order of the Assessing Officer in a mechanical manner. Accordingly we delete the addition.
8.1 So far as the issue of disallowance of Rs.90,850/- u/s 14A r.w.s. 8D(2)(iii) is concerned, we find that the assessee company did not earn any income during the relevant financial year to claim as exempt u/s 10, therefore, the action of the Assessing Officer to not justified to make such disallowance.
In the result, the appeal filed by the assessee is allowed.
Kolkata, the 8th December, 2025.