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Facts
The assessee, a real estate developer, filed its return for AY 2012-13 and was selected for scrutiny. The AO made an addition of Rs. 6.75 Crores under Section 68 on account of bogus share capital. The PCIT set aside the assessment, directing de novo assessment. The AO again framed the assessment with additions, including Rs. 6.75 Crores for share capital.
Held
The CIT(A) allowed the assessee's appeal partly by deleting the addition of Rs. 6.75 Crores, holding that the assessee discharged its onus under Section 68 and the AO failed to provide compelling reasons to reject the evidence. The Tribunal, after considering the facts and the CIT(A)'s order, found no infirmity and dismissed the revenue's appeal.
Key Issues
Whether the addition made by the AO under Section 68 on account of share capital is sustainable when the assessee has discharged its onus and the AO has failed to provide contrary evidence.
Sections Cited
68, 143(2), 143(3), 264, 2(24)(x), 36(1)(va), 143(1)
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Income Tax Appellate Tribunal, “A” BENCH: KOLKATA
Before: Shri Rajesh Kumar&Shri Pradip Kumar Choubey]
ORDER / आदेश Per Pradip Kumar Choubey, JM:
This is the appeal preferred by the revenue against order of Commissioner of Income Tax (Appeal)-21, Kolkata (hereinafter referred to as the Ld. CIT(A)] dated 20.05.2024 for AY 2012-13.
Assessment Year: 2012-13 Bhawani Construction Pvt. Ltd. 2. It appears from the report of the registry that the appeal is time barred by 18 days. The Ld. Counsel on behalf of the department submits to condone the delay. There is no objection on behalf of the assessee. Accordingly, the delay is hereby condoned.
Brief facts of the case of the assessee is that the assessee company M/s. Bhawani Construction Pvt. Ltd. is engaged in the business of realtors, construction & developers in real estate in different parts of the country. The assessee having presence in West Bengal, Jharkhand, Orissa and Gujrat and many other states. The company has filed his return of income in 28-09- 2012 declared in a total income of Rs. 2,99,77,990/-. The assessee'e return was selected for scrutiny under CASS. Though the mandatory notice under Section 143(2) was not served, in the proceeding under Section 143(3) the assessee's case was completed by a non-speaking order dated 31.03.2015 by adding back a sum of Rs. 6.75 Crores as bogus Share Capital under Section 68. The assessment was set aside by the PCIT, Hazaribagh vide his order u/s 264 of the Act dated 18-01- 2017, with a direction to the Assessing Officer to reframe the assessment de novo after making enquiry regarding genuineness and source of the share capital. The scrutiny assessment order was framed by the DCIT, Circle-13(1), Kolkata on 31/03/2015 a total income of Rs. 9,75,33,210/-, as a result of which an additional demand of Rs. 2,98,00,445/- was raised against the assessee. In the assessment order the A.O. made an addition of Rs. 6,75,00,000/- u/s 68 of the I.T. Act on account of unexplained share capital and share premium raised during the financial year 2011-12. The A.O. had also disallowed an expenditure of Rs. 50,000/- representing preliminary expenses (ROC filing fees) on the ground that the same constituted a capital expenditure. In addition thereto the A.O. made an addition of Rs. 5,220/- on account of delayed deposit of employees' P.F. contribution in the government account u/s 2(24)(x) read with section 36(1)(va) of the I.T. Act, 1961.
The said order has been challenged by the assessee before the Ld. CIT(A) wherein the appeal of the assessee has been allowed partly as the Ld. CIT(A) deleted the addition of Rs. 6,75,00,000/- made by the AO u/s 68 of the Act despite the fact that the assessee failed to establish the genuineness of the transaction and identity and Assessment Year: 2012-13 Bhawani Construction Pvt. Ltd. creditworthiness of the share purchased. The Ld. Counsel for the department further submits that the Ld. CIT(A) did not consider this fact that the director of the seller of the share (assessee) and the purchaser of the share (Samsung Estate Pvt. Ltd.).
Contrary to that the Ld. A.R supports the impugned order thereby submitting that the Ld. CIT(A) has fully discussed the facts and law and thereafter allowed the appeal of the assessee directing the AO to delete the addition made u/s 68 of the Act. The Ld. Counsel submits that various quarries were raised by the AO which were duly replied by the assessee from time to time. The Ld. Counsel submits that in the course of assessment proceedings, the assessee had duly discharged its onus to prove identity, creditworthiness of the share holder and genuineness of the transaction by producing the copies of ITR filing acknowledgement, final accounts, bank statements, source of funds etc. of the share subscriber company. The Ld. Counsel further argued that nothing contrary to above was brought on record by the department to prove that the documents so furnished are false and fabricated. The ld. Counsel further submits that the assessee discharged his burden of proof by successively establishing identity of the share applicant company, genuineness of the transaction all the money routed through proper and genuine banking channel, creditworthiness of the subscribers by way of their bank statement and other documentary evidence i.e. books of account of assessee in compliance of section 68 of the Act.
Upon hearing the submission of the Ld. Counsel for the respective parties, we have perused the record and the order of Ld. CIT(A). The assessee company is engaged in the business of construction and developers in real estate in different parts of the country. The share applicant company is regularly assessed to tax and its accounts are audited and it is holding valid license to party as NBFC company granted Reserve Bank of India. It is pertinent to mention herein that the share applicant company return for AY 2012-13 was accepted u/s 143(1) of the Act without any further quarry as the return for the AY 2009-10 of the applicant company was also accepted by the Department in the reassessment proceedings. There is no dispute that the share applicants audited financial statement since AY 2009-10 and 2012-13 have been filed by the assessee. We Assessment Year: 2012-13 Bhawani Construction Pvt. Ltd. further find that in the present case that the share holders are not Benamidar or fictitious person. Rather the share holder company is a prominent company holding RBI license/ There is no finding that the share holder company is a paper company or there was any adverse report from any wing of the department against the share holder company a remand report is also in the order of the Ld. CIT(A) and going over the remand report it appears to us the AO in sending the remand report has clearly held that In compliance to the said letter the Director of the assessee company Sri Anup Kr. Lakhotia appeared on the scheduled date of hearing and informed that he is also the Director of the share applicant of the assessee company i.e. Samsung Estate Pvt. Ltd Company. A statement on oath of Sri Anup Kr. Lakhotia is taken u/s 131 of the Income Tax Act. In the sworn statement when he was asked to inform about the companies where he was director. He produced a list of companies downloaded from ROC website that shows that he is director of total thirteen companies. He was asked to name the promoter directors of the company Samsung Estate Pvt. Ltd Company. He failed to remember the names. Then he was asked whether he had ever heard the name of Ramesh Poddar or not. He flatly replied 'No'. In this context it may be said that Sri Anup Lakhotia stated that he became Director of Samsung Estate Pvt. Ltd Company in the year 2012. Whereas the report of the Investigation wing shows that Ramesh Poddar was Director of the company Samsung Estate Pvt. Ltd Company upto 1st September 2010. So it is surprising to note that the Managing Director of the assessee company never heard the name of Ramesh Poddar. We further find that during the course of Remand proceedings the director of the share applicant company as well as the appellant company, Shri Anup Lakhotia appeared before the AO and his statement was recorded on oath on 09.04.2019 wherein, Shri Anup Lakhotia also stated that the source of funds of M/s Samsung Estates Pvt Ltd were already filed in the paper book and that shares issued to M/s Samsung Estates Pvt Ltd were still held by M/s Samsung Estates Pvt Ltd only. The share applicant company is active and regularly files its income tax returns. As per the details tabulated by the AO in his Remand Report,M/s Samsung Estates Pvt Ltd received such funds from the following 14 entities and the following documents regarding the 14 entities were submitted by the appellant during the course of Remand proceedings:
We further find that in order to substantiate the share premium is charged, the assessee company also submitted the CA certificate towards calculation of intrusive value per share for FY 2010-11. We further find that the Ld. CIT(A) after discussing the entire facts of the case mentioned three main points which is as follows: i.No fresh funds have been infused in SEPL since F.Y:2008-09, which does not help the AO`s case that own unaccounted funds of the appellant company were being routed in the garb of share capital, ii. The infusion of funds in the share applicant concern, SEPL during F.Y: 2008-09 has been specifically examined and accepted by the AO in the assessment order dated 15.03.2011 for AY: 2009-10, iii.The purchase of investments was accepted by the AO in earlier F.Y`s and the sale of existing investments during AY: 2012-13 and subsequent reinvestment in the assessee company also stands accepted in view of the assessment order and appellate order for AY: 2012-13. The AO, I find, has failed to bring forth any other facts supported documentary evidences to refute these facts placed by the appellant. The mere fact that funds from various entities to SEPL were paid towards the aforesaid share application on the same day or the subsequent day by SEPL cannot render the investments made by SEPL in the assessee company during AY: 2012-13 as bogus.
Assessment Year: 2012-13 Bhawani Construction Pvt. Ltd. 8. The Ld. CIT(A) after discussing the entire facts of the case, documents placed by the assessee as well as considering the judicial orders of the ITAT as well as High Court has held thus:
The fact is that in the instant case the appellant had duly produced all the ingredients prescribed u/s 68 of the Act with respect to the share application money, and while not being bound thereafter, to produce reasons and rationale for the payment of premiums, the appellant and investor nevertheless provided all the necessary reasons to the satisfaction of a prudent assessing authority. Once this was admittedly done by the appellant, he had discharged the onus cast upon him by law. Thereafter, the onus has shifted to the AO to either accept the evidence and/or reasoning adduced by the appellant, or to reject it based upon equally compelling evidence and or reasoning bringing on record why the evidence/ reasoning adduced by the appellant could not be acceptable to a prudent person. I find that while this onus has been satisfactorily discharged by the appellant, the AO has not brought on record any reasons for controverting the evidence and reasoning adduced by the appellant. The appellant, during appeal, has cited several judgements in his favour that underline the propositions of law that have driven the above discussions. These have been carefully studied and some have been cited in the earlier part of this order. Since the propositions of law relied upon in the above discussions have already become trite law, the same have been used to make the above discussions. In these circumstances and for the reasons elaborately discussed above, I cannot lend support to the action of the AO in this regard and the addition of Rs. 6,75,00,000/- u/s 68 stands deleted. This ground is therefore allowed.
Going over the entire facts of the case as well as discussion made above, we do not find any infirmity in the order of Ld. CIT(A). Accordingly, the appeal of the revenue is hereby dismissed.
In the result, the appeal filed by the revenue is dismissed .
Order is pronounced in the open court on 17th January, 2025 Sd/- Sd/- (Rajesh Kumar/राजेश कुमार) (Pradip Kumar Choubey /�द�प कुमार चौबे) Accountant Member/लेखा सद�य Judicial Member/�या�यक सद�य Dated: 17th January, 2025 SM, Sr. PS Copy of the order forwarded to: 1. Appellant- DCIT, Kolkata 2. Respondent – Bhawani Construction Pvt. Ltd., 269, G. T. Road(N), Liluah, West Bengal-711204 3. Ld. CIT(A)-21, Kolkata 4. Ld. Pr. CIT- , Kolkata 5. DR, Kolkata Benches, Kolkata (sent through e-mail)