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Facts
The assessee received share capital of ₹1.5 crore from five parties. The Assessing Officer (AO) made an addition of ₹90 lacs under Section 68, treating it as unexplained cash credit, because three subscribers either did not respond to Section 133(6) notices in time or submitted documents for an incorrect financial year. The CIT(A) upheld this addition.
Held
The tribunal found the assessee had discharged its onus by providing identity, creditworthiness, and genuineness of transactions for all subscribers, noting they had sufficient funds. Citing Supreme Court and High Court precedents (Orissa Corporation Pvt. Ltd. and Rohini Builders), the tribunal held that additions are not justified merely due to delayed or incorrect-FY documents from subscribers, especially when the Revenue has powers to pursue inquiries. The tribunal set aside the CIT(A)'s order and directed the AO to delete the addition.
Key Issues
Whether an addition under Section 68 for unexplained cash credit is justified when some share subscribers fail to respond to Section 133(6) notices in time or provide documents for an incorrect financial year, despite the assessee furnishing evidence of identity and creditworthiness.
Sections Cited
68, 133(6), 131, 143(3), 69
AI-generated summary — verify with the full judgment below
Income Tax Appellate Tribunal, “C” 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 14.10.2024 for the AY 2017-18.
The only issue raised in the various grounds of appeal is against the confirmation of addition of ₹90 lacs by the ld. CIT (A) as made by the ld. AO towards share capital by the ld. AO by treating the same as unexplained cash credit u/s 68 of the Act.
The facts in brief are that the assessee filed the return of income on 31.10.2007, declaring total income at ₹8,63,420/-. The case of the Sl No. Name of Allottee No. of shares Amount allotted invested 1. Good Point Traders Pvt. Ltd. 50,000 30 Lac 2. Innova Commercial Pvt. Ltd. 50,000 30 Lac 3. Aakansha Advisory Services Pvt. 1,00,000 30 Lac Ltd.
Sunirmiti Mercantile Pvt. Ld. 40,000 20 lac 5. Arihant Enterprises Ltd. 30,000 18 lac Total 2,70,000 162 Lac 04. During the course of assessment proceeding, the assessee filed in responses/replies to questionnaires issued by the ld. AO filing the copies of PAN Nos, Postal addresses of the subscribers, etc. Besides, the assessee filed its ITR audited accounts, bank statements showing receipt of payments through banking channel, form no.2 for allotment of shares, etc. The ld. AO also issued notice u/s 133(6) of the Act to share subscribers and out of 5 share subscribers only two subscribes namely; Good Point Traders Pvt. Ltd. and Innova Commercial Pvt. Ltd., furnished the reply with the remaining three parties’s replies namely; Aakansha Advisory Services Pvt. Ld., Sunirmiti Mercantile Pvt. Ltd and Arihant Enterprises Ltd. , were received in the office of the ld. AO on 23.12.2019, whereas the assessment was framed vide order dated 21.12.2019. Accordingly, the ld. AO issued show cause notice to the assessee on 17.12.2019, to
Aggrieved assessee preferred an appeal before the ld. CIT (A). However, the same was dismissed by the ld. CIT (A) on the ground that the replies to the notices issue du/s 133(6) of the Act from three parties as stated above, were received on 23.12.2019. However the balance sheet, Profit and Loss account furnished by the parties related to F.Y. 2015-16 instead of F.Y. 2016-17. Since, the application money was received in F.Y. 2016-17, the ld. CIT (A) dismissing the appeal of the assessee by observing as under:-
“"vii. The appellant assessee has stated that, the three share applicants namely Akansha Advisory Services Pvt Ltd, Sunirmiti Mercantiles Pvt Ltd, Arihant Enterprises Ltd has submitted their replies to notice u/s 133(6) of the Income Tax Act 1961 but the said replies reached the Ld AO's officerafter the passing of the impugned order. But then it is noted that, the documents which-were-given to the Assessing officer like Balance sheet, Profit and loss account are pertaining to the FY 2015-16 (for all the three parties) and whereas the Appellant assessee's case is of FY 2016-17. Thus, In this scenario also the appellant assessee has not provided the documents/information asked by the Assessing officer for the relevant AY and in absence of which the Assessing officer has gone ahead and made the addition. Moreover, the contention of the appellant assessee that these parties have sent their replies to the Ld AO after passing of the assessment order cannot be accepted as neither they have submitted the documents in time in response to notice u/s 133(6) of the Act. Further, even the documents/information claimed to have been submitted after the passing of the assessment order by the AO are not relevant to the case for this AY.
The ld. DR on the other hand strongly opposed the arguments of the ld. DR by submitting that the notices issued u/s 133(6) of the Act were replied only by two subscribers out of total five subscribers and three subscribers who replied the notices u/s 133(6) of the Act were received after passing the order u/s 143(3) of the Act. Even if the reply of the subscribers were presumed to have been received in time
After hearing the rival contentions and perusing the materials available on record, we find that in this case the assessee has raised share capital of ₹1,50,000/- through five subscribers during the year. Although the assessee has filed all the evidences as called for by the ld. AO during the assessment proceedings and notices u/s 133(6) of the Act were issued to the subscribers of the shares. We note that out of 5 share subscribers, only two of them replied to the notices and the remaining three subscribers replies were received after the assessment was framed by the ld. Assessing Officer. The ld. CIT (A) simply dismissed the appeal of the assessee on the ground that the replies of three subscribers contained the information i.e. the balance sheet and Profit and Loss account for F.Y. 2015-16, and not for F.Y. 2016-17. The assessee has filed all these information before us for F.Y. 2016-17. After examining the balance sheets of three subscribers namely; Aakansha Advisory Services Pvt. Ld., Sunirmiti Mercantile Pvt. Ltd and Arihant Enterprises Ltd. We find that they have adequate creditworthiness to make investments in the assessee company. Even on the basis of balance sheet and Profit and Loss account for F.Y. 2015-16, the creditworthiness of the assessee’s subscribers could be judged. Therefore, considering the facts on record, we are of the view that assessee has discharged its onus cost upon it by the statute and in our opinion, addition cannot be made mainly on the ground that "The assessee 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 number was in the file of the Revenue. The Revenue, apart from issuing notices under s. 131 at the instance of the assessee, 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 credit-worthy or were such who could advance the allowed loans. There was no effort made to pursue the so-called alleged creditors. In those circumstances, the assessee could not do any further. In the premises, if the Tribunal came to the conclusion that the assessee has discharged the burden that lay on him then it could not be said that such a conclusion was unreasonable or perverse or based on no evidence. If the conclusion is based on some evidence on which a conclusion could be arrived at, no question of law as such arises. It cannot, therefore, be said that any question of law arose in these cases. The High Court was, therefore, right in refusing to refer the questions sought for."
Similarly, the Hon'ble Gujarat High Court in the case of Dy. CIT Vs. Rohini Builders [2002] 256 ITR 360, after following the decision of Hon'ble Apex court has held as under:-
“"Merely because summons issued to some of the creditors could not be served or they failed to attend before the Assessing Officer, cannot be a ground to treat the loans taken by the assessee from those creditors as non-genuine in view of the principles laid down by the Supreme Court in the case of Orissa Corporation (1986) 159 ITR 78. In the said decision the Supreme Court has observed that when the assessee furnishes names and addresses of the alleged creditors and the GIR numbers, the burden shifts to the Department to establish the Revenue's case and in order to sustain the addition the Revenue has to pursue the enquiry and to establish the lack of creditworthiness and mere non- compliance of summons issued by the Assessing Officer under section 131, by the alleged creditors will not be sufficient to draw and adverse inference against the assessee. in the case of six creditors who appeared before the Assessing Officer and whose statements were recorded by the Assessing Officer, they have admitted having advanced loans to the assessee by account payee cheques and in case the Assessing Officer was not satisfied with the cash amount deposited by those creditors in their bank accounts, the proper course would have been to make assessments in the cases of those creditors by treating the cash deposits in their bank accounts as unexplained investments of those creditors under section 69."”
In the result, the appeal of the assessee is allowed.
Order pronounced in the open court on 31.01.2025.