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Facts
The Revenue appealed against the CIT(A)'s order deleting an addition made on account of unexplained credit under Section 68 of the Act. The assessee had introduced share premium of ₹1,93,50,000/-. The AO made the addition citing failure to establish identity, creditworthiness, and genuineness of subscribers.
Held
The Tribunal held that the CIT(A) was correct in deleting the addition. The CIT(A) noted that the assessee had provided all necessary documents to the AO and that the AO had not conducted sufficient inquiry. The Tribunal concurred that the addition could not be solely based on non-compliance with summons under Section 131 of the Act, especially when the AO had not conducted independent inquiries.
Key Issues
Whether the addition under Section 68 for unexplained share capital/premium is sustainable when the assessee has submitted documentary evidence and the AO has not conducted adequate inquiry beyond non-compliance with summons?
Sections Cited
68, 143(2), 142(1), 131, 143(3)
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Income Tax Appellate Tribunal, “D” BENCH, KOLKATA
This is an appeal preferred by the Revenue against the order of the National Faceless Appeal Centre, Delhi (hereinafter referred to as the “Ld. CIT(A)”] dated 19.11.2024 for the AY 2012-13.
At the outset, we observe from the appeal folder that there is a delay of 63 days in filing the appeal by the department in support of which a condonation petition was filed. It was stated in the condonation petition that the delay has occurred due to obtaining the administrative approval from the competent authorities, which took quite a long time and accordingly, the delay may be condoned. The ld. AR, on the other hand, did not oppose the condonation of delay.
The only issue raised by the Revenue is against the deletion of addition of ₹1,93,50,000/- by the learned CIT (A) as made by the learned AO on account of unexplained credit u/s 68 of the Act in respect of share application / share premium raised by the assessee during the year.
The facts in brief are that the assessee filed the return of income on 30.09.2012, declaring total income at ₹12,71,540/-. The case of the assessee was selected for CASS for scrutiny of large share premium. Accordingly, the notice u/s 143(2) and 142(1) of the Act along with questionnaire were issued to the assessee. The assessee filed before the learned AO the details of share subscribers comprising names, addresses, copies of ITRs, Bank statements, sources of funds, bank statement of the subscribers explaining source of income in the hands of the subscribers, copy of audited balance sheets, etc. The learned AO also issued summons u/s 131 of the Act to the Director of the assessee company, which were not complied with by making a personal appearance due to medical issue. Accordingly, the learned AO noted that the assessee has failed to establish the three ingredients namely; identity of the subscribers, creditworthiness of the subscriber and genuineness of the transactions and thereafter discussing and relying on the decisions of Sumati Dayal Vs. CIT 214 ITR 801 (SC) and CIT Vs. Durga Prasad More 82 ITR 540 (SC), treated the entire share capital/ share premium of ₹1,93,50,000/- as unexplained cash credit in the books of the assessee and added to the income of the assessee in the assessment framed u/s 143(3) of the Act dated 20.03.2015.
After hearing the rival contentions and perusing the materials available on record, we find that in this case the assessee company is engaged in trading in services. We note that during the year the assessee issued 1,93,500 equity shares of face value of ₹10 each at a premium of ₹90 to four entities, details whereof were given by the learned CIT (A) on page no.13 of the appellate order. We also note that the learned CIT (A) on page no.15 has given the investible sources available with the investors and noted that investments ranging from 3.30% to 35.76 % were made of their investible sources. The learned CIT (A) also noted that in the case of four subscribers namely; 1. Davesh Commercial Pvt. ltd. 2. F.M Fashion Pvt. ltd. 3. Siddhi Management pvt. ltd. 4. Sidhanta Sales Pvt. Ltd. the orders u/s 143(3) were framed by the Revenue/ Department. We also concur with the opinion of the ld CIT(A) that the addition cannot be made solely on the ground that the director of the assessee company
In the result, the appeal of the Revenue is dismissed.
Order pronounced in the open court on 15.10.2025.