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Facts
The assessee filed a NIL return for AY 2012-13. The Ld. AO made an addition of ₹7.11 Crores as unexplained cash credit under Section 68 for share capital/premium, framing the assessment under Section 144, citing non-compliance to summons and failure to prove identity, creditworthiness, and genuineness of subscribers. The Ld. CIT(A) confirmed this addition through a cryptic order, stating the assessee failed to establish the three conditions.
Held
The Tribunal found that the assessee had provided all necessary evidences including ITRs, audited financial statements, bank statements, PANs, and addresses for the subscribers. The Ld. AO failed to point out any defect or conduct further verification. Relying on Supreme Court and High Court precedents, the Tribunal held that non-compliance to summons by subscribers or directors does not negate the assessee's burden if sufficient evidence is provided and not disproved by the AO.
Key Issues
Whether the addition of share capital/premium as unexplained cash credit under Section 68 is justified when the assessee provides comprehensive evidence for identity, creditworthiness, and genuineness, but the AO fails to conduct further verification or identify defects, relying solely on non-compliance to summons by subscribers.
Sections Cited
68, 144, 143(2), 142(1), 131, 143(3)
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Income Tax Appellate Tribunal, “A” BENCH, KOLKATA
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 19.06.2025 for the AY 2012-13.
At the time of hearing the assessee’s counsel pressed the ground no.2, which is against the order of ld. CIT (A) confirming the addition of ₹7,11,00,000/- as made by the ld. AO on account of unexplained cash credit u/s 68 of the Act in the form of share capital/ share premium.
After hearing the rival contentions and perusing the materials available on record, we find that in this case though the ld. AO has passed the order u/s 144 of the Act but the facts on record reveal that the assessee has complied with the show cause notice issued by the ld. AO submitting all the details in respect of share subscribing companies, a copy of which is available at page no. 17 and 18 of the Paper Book. We observed from the said details that during the year the assessee has issued equity shares to ten subscribers by allotting 71,100/- equity shares of ten each at a premium of ₹990/-. We also find that the subscribers have subscribed the said amount by cheque/ “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 the decisions of Hon’ble Calcutta High Court in the case of Crystal Networks Pvt. Ltd. vs. CIT (supra ) 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.
“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.
We have considered the rival submissions. We are of the view that order of Ld. CIT(A) does not call for any interference. It may be seen from the grounds of appeal
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 11. In the instant case before us also, the assessee has furnished all the evidences proving identity and creditworthiness of the investors and genuineness of the transactions but AO has not commented on these evidences filed by the assessee. Under these facts and circumstances and considering underlying facts in the light of ratio laid down in the decisions as discussed above , we are inclined to set aside the order of Ld. CIT(A) by directing the AO to delete the addition.
In the result, the appeal of the assessee is allowed.
Order pronounced in the open court on 04.11.2025.