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Facts
The assessee, Ritudhara Distributors Pvt. Ltd., appealed an addition of ₹12,93,00,000/- to its income under Section 68 for share capital/premium for AY 2012-13. The Assessing Officer made the addition primarily due to non-compliance with summons by the directors of the assessee and subscriber companies, and the CIT(A) dismissed the appeal in limine. The appeal to the Tribunal was filed with a 164-day delay, which was condoned.
Held
The Tribunal ruled that the assessee had provided sufficient evidence regarding investor identity, creditworthiness, and transaction genuineness, which the AO failed to verify or find defective. It further noted that the proviso to Section 68 regarding share premium was not applicable for AY 2012-13 as it became effective from AY 2013-14. Therefore, an addition cannot be sustained merely due to non-compliance with summons when other evidence is available, leading to the deletion of the addition.
Key Issues
Can an addition under Section 68 for share capital/premium be made solely on non-compliance with summons when other documentary evidence is provided and not disputed? Is the proviso to Section 68, concerning share premium, retrospectively applicable to AY 2012-13?
Sections Cited
143(2), 142(1), 131, 143(3), 250(6), 68, 56
AI-generated summary — verify with the full judgment below
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 03.10.2023 for the AY 2012-13.
At the outset, we observe that there is a delay of 164 days in filing the appeal by the assessee. The ld. Counsel for the assessee stated that Shri R Agarwal was looking after the taxation matter of the assessee, who also appeared before the first appellate authority. The ld. AR further stated that the said Counsel was not familiar with the procedure of the Tribunal and advised the assessee not to file any appeal before the Tribunal. Thereafter, the assessee approached the present counsel in 3rd week of April, 2024, to seek consultation on
The ld. DR on the other hand stated that the reason stated by the Counsel of the assessee are not cogent and convincing and therefore, the appeal of the assessee should not be admitted by not condoning the delay.
After perusing the contents of the condonation application, we find that the delay is for bonafide and genuine reasons and hence, the the delay is condoned and appeal is admitted for adjudication,
The only issue raised in the various grounds of appeal is against the confirmation of ₹12,93,00,000/- by the ld. CIT (A) in an ex-parte order as made by the ld. AO on account of share capital/ share premium despite the assessee filing all the relevant documents/ submissions before the ld. CIT (A) thereby upholding the order of the ld. Assessing Officer.
The facts in brief are that the assessee filed the return of income on 11.02.2013, showing the total income at ₹ nil. The case of the assessee was selected for scrutiny under Computer Assisted Scrutiny Selection (CASS) for examination of large share premium received and accordingly, notice u/s 143(2) of the Act was issued and served upon the assessee along with notice u/s 142(1) of the Act and questionnaire. During the assessment proceedings, Shri Pravin Kumar appeared before the AO and furnished the details as called for from
In the appellate proceedings, the ld. CIT (A) dismissed the appeal in limine by noting that the assessee has not replied on the various opportunities allowed to the assessee that too in violation of provisions of Section 250 sub section 6 as the merits of the case were not discussed and decided, whereas, on the other hand the assessee had filed return submissions before the ld. CIT (A) along with details and evidences submitting the details in respect of share subscribers which are available at page no.858 to 873.
The ld. AR vehemently submitted before us that both the authorities below have failed to conduct an enquiry into evidences filed by the assessee qua the share subscribers as well as its own. The ld. Counsel for the assessee submitted that during the relevant financial year, the assessee has issued equity shares to 15 subscribers at a face value of (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.
9. Further, the ld. AR submitted that there was no bar in issuing equity shares at a high premium during the instant assessment year and the proviso to Section 68 of the Act has been introduced by Finance Act, 2012, with effect from 01.04.2013, and was accordingly, applicable from A.Y. 20131-4 onwards. Therefore, the observation of the AO that the equity shares were issued at a very high premium is devoid of any merits. The ld. Counsel for the assessee stated that the proviso to Section 68 of the Act has not been inserted with retrospective effect nor it is the proviso so introduced that it is for the removable of doubts or it is directory. The ld. Counsel for the assessee in defense of his argument relied on the CIT Vs. Gagandeep Infrastructure Private Limited (80 taxmann.com 272 (Bom).
The ld. DR on the other hands strongly opposed the arguments presented by the ld. AR by submitting that the ld. AO could not verify the transactions and the credentials of the investors when there was no compliance to the summons u/s 131 of the Act by the subscribers as well as by the directors of the assessee company and therefore, no deposition could be recorded.
After hearing the rival contentions and perusing the material on record, we find that the assessee has furnished before the AO as well as the Ld. CIT(A) all the evidences qua the share capital/ share premium raised during the instant financial year comprising the names , addresses ,proofs of voter IDs, Driving licenses, PAN cards, list of directors with share holders with DIN, copies of ITRs, copies of bank statements and assessment orders u/s 143(3)/143(1) of the Act etc in case of share subscribers. We find that though the directors of the assessee company and also the subscribers companies did not comply “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. The important is to prove as to whether the said cash credit was received as against the future sale of the product of the assessee or note. When it was found by the Ld. CIT(A) on fact having examined the documents that the advance given by the creditors have been established the Tribunal should not have ignored this fact findings. Indeed the Tribunal did not really touch the aforesaid fact finding of the Ld. CIT(A) as rightly pointed out by the learned counsel. The Supreme Court has already stated as to what should be the duty
“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 reliance was placed by the learned counsel for the assessee also supports the view that for non- production of directors of the investor company for examination by the AO it cannot be held that the identity of a limited company has not been established. For the reasons given above we uphold the order of Ld. CIT(A) and dismiss the appeal of the revenue.”
15. 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. Besides the investors have also furnished complete details/evidences before the AO which proved the identity , creditworthiness of investors and genuineness of the transactions. 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 24.02.2025.