SUMAN FORWARDING AGENCY PRIVATE LTD.,,HOWRAH vs. DCIT, CIRCLE 13(1),, KOLKATA

The issue raised in ground no.1 is against the order of ld. CIT (A) confirming the addition of ₹4,46,00,000/- as made by the ld. AO u/s 68 of the Act in respect of share application money received from M/s Gajmurti Agency Pvt. Ltd.

The facts in brief are that the assessee filed the return of income on 30.10.2017, declaring total income at ₹4,46,88,680/-, which was

The ld. CIT (A) in the appellate proceedings dismissed the appeal of the assessee by holding and observing as under: - “Appellate findings and Decision:- 6.1. I have considered the statement of facts, grounds of appeal, written statement and order passed by the AO. In this regard, it is apt to mention here that the appellant filed its return of income for the Assessment Year 2017-18 on 30.10.2017 declaring a total income of Rs. 4,46,88,680/-. The case was selected for scrutiny under the Computer Aided Scrutiny Selection (CASS) and accordingly, a notice under section 143(2) of the Income Tax Act, 1961 (hereinafter referred to as "the Act") was issued on 10.08.2018. Thereafter, a notice under section 142(1) of the Act along with a detailed questionnaire was issued on 14.06.2019 to which the appellant responded through online submissions. During the scrutiny proceedings, it was found that the appellant company had raised share capital amounting to Rs. 4,46,00,000/- during the relevant financial yearby issuing 74,332 shares at a face value of Rs. 100/- each with a premium of Rs. 500/- Further investigation by the AO revealed that the source of the investment in the appellant company by M/s Gajmurti Agency Pvt. Ltd. was traced to six other companies such as NavarangDealtrade Pvt. Ltd., Ascent Dealmark Pvt. Ltd., and others. These entities were also found to be operating from common addresses, with negligible business operations, and showed a pattern of circular transactions-credits and immediate debits of large amounts through RTGS and NEFT-typical of accommodation entry providers. The bank statements and ROC data of these companies confirmed the absence of genuine business activity and pointed towards a deliberate attempt at layering of funds to introduce unaccounted income as share capital. The appellant's argument that mere filing of documentary evidence is sufficient to discharge the onus under section 68 is misplaced. In C/T vs. Precision Finance Pvt. Ltd. (208 ITR 465) and Korlay Trading Co. Ltd. (232 ITR 820), the Hon'ble Calcutta High Court held that mere furnishing of PAN, ITR, or bank details is not sufficient, the appellant must establish the actual identity, financial capacity, and bona fide nature of the transaction. In light of the above, the AO rightly concluded that the share capital of Rs. 4,46,00,000/- remained unexplained and thus made the addition under section 68. which is sustained. With regard to the addition of Rs. 8,92,000/- under section 69C towards commission for availing accommodation entries, the AO estimated the payment at 2% of the share capital introduced. The nature and structure of the transaction, combined with the absence of any plausible explanation from the appellant, justify the estimation of commission paid. Section 69C allows for such an addition where the appellant fails to explain the source of an expenditure. Here, the presumption that the appellant must have paid some consideration to entry operators stands valid in absence of rebuttal, and the addition is accordingly upheld. The addition of Rs. 5,00,000/- under section 68, being the amount received from M/s Shree Shyam Trading Pvt. Ltd., was also justified. Though the appellant submitted the ledger and bank details, the said party did not respond to notices undersection 133(6), and no further supporting evidence was provided. As held by the Hon'ble Delhi High Court in CIT vs. N.R. Portfolio Pvt. Ltd. (29 taxmann.com 291). non-response by creditors, when viewed with surrounding facts, is sufficient to hold the credit as unexplained. Lastly, the addition of Rs. 35,000/- under section 69C towards commission for the alleged accommodation entry of Rs. 5,00,000/- was also based on reasonable estimation. The explanation furnished was general in nature, without any concrete proof to counter the AO's findings. In such circumstances, estimations based on available material and precedence are acceptable in law.

The ld. DR on the other hand relied on the order of the authorities below.

After hearing the rival contentions and perusing the materials available on record, we note that the assessee has issued 74332 equity shares to its group concerns namely M/s Gajmurti Agency Pvt. Ltd. at a price of Rs. 600/- per share comprising face value of ₹100/- at a premium of ₹500/-. We note that the assessee has filed a valuation report before the ld. AO as well as the ld. CIT (A) and a copy of which is available at page no.66 of the Paper Book which valued the share price at ₹566.36. We also note that the assessee has filed all the details and evidences before the ld. AO as well as before the ld. CIT (A). We note that ld. CIT (A) has recorded a finding to this effect in the appellate order that assessee has filed the copies of ITR, financial statements, bank statement, share application form and form

The issue raised in ground no.2 is against the confirmation of addition of ₹8,92,000/- by the ld. CIT (A) as made by the ld. AO in respect of unexplained commission for arranging share capital/share premium.

Since we have already treated the share capital/ share premium as genuine in ground no.1. Therefore, this ground is consequential to ground no.1 and the order of ld. CIT (A) is set aside on this issue and the ld. AO is directed to delete the addition.

The issue raised in ground no.3 is against the confirmation of ₹5.00 lacs by the ld. CIT (A) as made by the ld. AO u/s 68 of the Act in respect of unexplained cash credit received from Shree Shyam Trading Pvt. Ltd., for which the assessee has not furnished any details and notice u/s 133(6) of the Act issued to the said person was not replied. Likewise summon u/s 131 of the Act issued to the said party was also not complied. Finally, the summons was issued u/s 131 of the Act to the Director of the assessee company, again no one appeared. It was submitted that the directors were out of station and therefore, not possible to appear on the said date. Thereafter, the ld. AO noted that the said amount was a accommodation entry and added the same to the income of the assessee u/s 68 of the Act. The ld. CIT (A) also affirmed the order of the ld. Assessing Officer.

The issue raised in ground no.4 is consequential to ground no.3 which is against the confirmation of addition of ₹35,000/- as made by the ld. AO u/s 69C of the Act on account of unexplained expenditure in respect of commission paid on accommodation entries. Accordingly, we set aside the order of ld. CIT (A) and direct the ld. AO to delete the addition. The ground no. 4 is allowed.

In the result, the appeal of the assessee is allowed.