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Facts
The assessee's case for AY 2012-13 was selected for scrutiny due to a large share premium received. The Assessing Officer (AO) made an addition of ₹1,65,60,806/- as unexplained cash credit under Section 68 for share capital/premium, citing no justification for high premium and non-appearance of a director despite summons under Section 131. The Ld. CIT(A) upheld the AO's order, asserting that mere confirmation of investments was insufficient without verifying genuineness and creditworthiness.
Held
The Tribunal found that the assessee had furnished all necessary evidence, including ITRs, bank statements, and financial documents, proving the identity, creditworthiness, and genuineness of the share subscribers, who were existing shareholders or their relatives. The AO and CIT(A) failed to point out any defects in these evidences and relied solely on the non-compliance with summons under Section 131. The Tribunal ruled that an addition cannot be sustained merely on the ground of non-compliance with Section 131 summons when the assessee has provided robust evidence that was not disproved or further verified by the revenue authorities.
Key Issues
Whether the addition of unexplained cash credit under Section 68 for share capital and share premium can be sustained solely on the basis of non-compliance with summons under Section 131, despite the assessee providing comprehensive evidence of identity, creditworthiness, and genuineness of the transactions.
Sections Cited
68, 131, 133(6)
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Income Tax Appellate Tribunal, “D” 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 30.10.2023 for the AY 2012-13.
The only issue raised in the grounds of appeal is against the confirmation of addition of ₹1,65,60,806/- by the ld. CIT (A) as made by the ld. AO on account of unexplained cash credit u/s 68 of the Act in respect of share capital/ share premium.
The facts in brief are that the assessee filed the return of income on 27.09.2012, declaring total income of ₹37,317/-. The case of the assessee was selected for scrutiny under Computer Assisted Scrutiny Selection (CASS) for the reason of large share premium received.
In the appellate proceedings, the ld. CIT (A) confirmed the order of ld. AO on the ground that mere confirmation of investments by the subscribers did not close the matter and the genuineness and creditworthiness of the transactions remained to be verified. The assessee filed before the ld. CIT (A) the evidences qua the share subscribers’ proof of identity and creditworthiness and genuineness of the transactions. The ld. CIT (A) called for the remand report from the ld. AO on 19.09.2023, which was submitted by the ld. AO on 31.10.2023. The ld. CIT (A) confronted the same to the assessee and thereafter dismissed the appeal of the assessee by upholding the finding given by the ld. Assessing Officer.
(i) CIT Vs. Orissa Corporation Pvt. Ltd. (1986) 159 ITR 78 (SC); (ii) CIT Vs. Orchid Industries Ltd. 397 ITR 136 (Bom); (iii) Crystal Networks Pvt. Ltd. Vs. CIT 353 ITR 171 (Kol);
(iv) ITO Vs. M/s. Cygnus Developers India Pvt. Ltd.(ITA No. 282/Kol/2012) and (v) Joy Consolidated Pvt. Ltd. Vs. ITO (ITA No. 547/Kol/2020.
The ld. DR while referring to page no.49,50 and 61 of the Paper books, pointed out that the money was received by the subscribers in their bank account on a day before make the investment in the assessee company and therefore lack genuineness. However, the same was controverted by the ld. AR by submitting that it is not a accommodation entry or any bogus entry received from shell companies and it is their own money and they are having a substantial
After hearing the rival contentions and perusing the materials available on record, we find that in this case, the assessee has issued equity shares to three parties, who happened to be relative of directors/ share holders of the assessee company. The shares were issued at a face value of ₹10 at a premium of ₹492. We note that during the assessment proceedings, the assessee furnished the evidences qua these share subscribers. All these evidences were also submitted before the ld. CIT (A) and ld CIT(A) even the remand report was also called for, which was furnished on 31.10.2023. We note that the ld. AO has not pointed out any defect or deficiencies in the evidences furnished by the assessee. We further note that for independent verification of these transactions , the AO issued notice u/s 133(6) of the Act to all the subscribers which were duly complied by these subscribers by furnishing evidences/ details qua the investment made. We note that the ld. AO as well as the ld. CIT (A) have not commented on these evidences and have harped on the fact that there was no compliance by the directors of the assessee company to the summons issued u/s 131 of the Act. We have even examined the facts filed before us in the form of ITRs, bank statements, copy of computation of income , Profit and Loss account and balance sheet and find that the subscribers were having sufficient sources to invest in the assessee company. Therefore, we are not in a position to accept the conclusion drawn by the ld. CIT (A) on this issue. Moreover, the addition cannot be made merely on the ground that there was no compliance to the summons u/s 131 of the Act, where the assessee has furnished all the evidences/ details before the
In the result, the appeal of the assessee is allowed.
Order pronounced in the open court on 13.05.2025.