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Facts
The assessee received Rs. 1,70,00,000/- as share capital and share premium. The Assessing Officer made an addition under Section 68, treating it as unexplained cash credit, after the assessee failed to comply with notices under Sections 143(2) and 131. The assessment was completed ex parte under Section 144, and the Ld. CIT(A) upheld the addition.
Held
The ITAT observed that funds were received through banking channels and share applicants were income tax assessees regularly filing returns. It noted that the AO and CIT(A) did not provide specific findings on defects or adequately consider the evidences provided regarding identity, creditworthiness, and genuineness. Citing judicial precedents, the Tribunal held that non-production of directors in person cannot be the sole basis for adverse inference, and directed the Assessing Officer to delete the addition.
Key Issues
Whether the addition of share capital and share premium as unexplained cash credit under Section 68 was justified when the assessee provided evidence of identity, creditworthiness, and genuineness of transactions, and the non-compliance was partial or due to failure of authorities to consider evidence.
Sections Cited
68, 144, 143(2), 131, 133(6)
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Income Tax Appellate Tribunal, “C” BENCH, KOLKATA
Before: Shri Rajesh Kumar, AM & Shri Pradip Kumar Choubey, JM]
ORDER Per Shri Rajesh Kumar, AM
The appeal filed by the assessee is against the order of Ld. CIT(A), NFAC, Delhi dated 13.02.2024 for AY 2012-13 arising out of assessment order passed u/s. 144 of the Income Tax Act, 1961 (hereinafter referred to as the “Act”) by ITO, Ward-7(1), Kolkata dated 11.02.2015.
The only issue raised by the assessee is against the confirmation of addition of Rs.1,70,00,000/- by Ld. CIT(A) as made by the Assessing Officer u/s. 68 of the Act on account of unexplained cash credit in respect of share capital and share premium.
The facts in brief are that the assessee filed its return of income on 30.09.2012 declaring a total income of Rs.11,11,570/-. Thereafter, the case of the assessee was selected for scrutiny through CASS with the reason of “large share premium received”. Accordingly, Assessing Officer issued notice u/s. 143(2) along with questionnaire to the assessee which were duly served on the assessee. The assessee did not comply with the said notice and finally, the Assessing Officer completed the assessment on the basis of information available on record. The assessee issued equity shares of a face value of Rs. 10/- at a premium of Rs.990/- per share and received Rs.1,70,00,000/- towards share capital/share premium. The Assessing Officer also issued notice u/s. 131 of the Act to the director of the assessee company which also remained un-compiled. Finally, the Assessing Officer treated the share application/share premium to the extent of Rs.1,70,00,000/- as unexplained cash credit and added the same to the total income of the assessee.
In the appellate proceedings before the ld. CIT(A), the assessee filed all the evidences and details of the transactions in respect of the share subscribers on which the Ld. CIT(A) called for the remand report which was duly filed before the Ld. CIT(A) by the Assessing Officer. The Ld. CIT(A), after confronting the same to the assessee and after taking into account the submissions of the assessee, dismissed the appeal by upholding the order of the Assessing Officer.
After hearing both the parties and perusing the material on record we find that in this case the assessment was framed ex parte by the Assessing Officer when the assessee failed to file necessary details/evidences in support of the share capital/share premium of Rs.1,70,00,000/- raised by the assessee by issue of shares by face value of Rs.10/- at premium of Rs.990/- per share. We also note that summon issued u/s. 131 of the Act to the directors of the assessee company were not complied with resulting into passing an ex parte order u/s. 144 of the Act by the Assessing Officer. In the appellate proceeding the Ld. CIT(A) called for remand report from the Assessing Officer on the evidences filed by the assessee in support of its raising of share capital/share premium. We note that during the course of the assessment proceedings, the Assessing Officer issued notice u/s. 133(6) of the Act to all the 8 parties. Some of them responded and some did not respond to the notices issued u/s. 133(6) of the Act. We also note that the Assessing Officer called for the details of evidence qua these 8 parties which were duly furnished comprising ITR, audited financial account, PANs of applicants of equity shares, extract of minutes of board meeting, certificate of incorporation, certificate of registration by all the parties. Ld. CIT(A) has not discussed anything about the identity, creditworthiness and genuineness of the transactions based on the evidences furnished by the assessee, however, dismissed the appeal in a generalized manner. We note that the Ld. Assessing Officer and the Ld. CIT(A) have not given any specific finding on the defects in the documents filed by the assessee. The Assessing Officer in the remand report has drawn an adverse inference on the ground that these subscribers have not responded to the notices issued u/s. 133(6) of the Act. We have examined the documents furnished before us in respect of the subscribers, copies of remand report, reply to the remand report and find that the funds were moved through banking channel and all the share applicants were income tax assessees and have been filing their returns of income regularly besides being active on ROC website. Considering these facts and circumstances, we are not in agreement with the findings given by the ld. CIT(A). The case of the assessee finds support from the following decisions passed by the Jurisdictional High Court wherein similar issue has been decided in favour of the assessee:
(i) PCIT Vs. M/s. Maniya Comfin Pvt. Ltd., ITAT/271/2023 dated 01.05.2024 (Cal) (ii) PCIT Vs. M/s. Sitka Mercantile Pvt. Ltd., ITAT/68/2024 dated 19.06.2024 (Cal) (iii) PCIT Vs. M/s. Hirak Vyaapar Pvt. Ltd., ITAT/242/2023 dated 03.05.2024 (iv) PCIT Vs. M/s. Snowhite Infrastructure Pvt. Ltd., ITAT/108/2024 dated 15.05.2024 (v) PCIT Vs. M/s. Outcome Buildcom Pvt. Ltd., ITAT/3/2024 dated 03.05.2024
Moreover, the non-production of directors in person cannot be the basis of drawing adverse inference against the assessee as the case of the assessee is squarely covered by the decision of the Hon’ble Apex Court in the case of CIT Vs. Orissa Corporation Pvt. Ltd. 159 ITR 78 (SC) and the decision of Hon’ble Calcutta High Court in the case of CIT Vs. Sagun Commercial Pvt. Ltd. of 2001 dated 17.02.2011. Considering the facts of the assessee’s case, in the light of aforesaid decisions, we are inclined to set aside the order of the Ld. CIT(A) and direct the Assessing Officer to delete the addition.
In the result, appeal of the assessee stands allowed.