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Income Tax Appellate Tribunal, KOLKATA ‘A’ BENCH, KOLKATA
Before: Sri Sanjay Garg & Sri Manish Borad
IN THE INCOME TAX APPELLATE TRIBUNAL KOLKATA ‘A’ BENCH, KOLKATA [Virtual Court] (Before Sri Sanjay Garg, Judicial Member & Sri Manish Borad, Accountant Member) I.T.A. No.: 1886/Kol/2016 Assessment Year: 2012-13 ITO, Ward-10(4), Kolkata........................................................Appellant Vs. M/s. R.M. Jain & Sons Enterprise Pvt. Ltd............................Respondent [PAN: AACCI 8238 B] Appearances by: None appeared on behalf of the Assessee. Sh. Biswanath Das, Addl. CIT, appeared on behalf of the Revenue. Date of concluding the hearing : February14th, 2022 Date of pronouncing the order : March 30th, 2022 ORDER Per Manish Borad, Accountant Member:
This appeal filed by the Revenue pertaining to the Assessment Year (in short “AY”) 2012-13 is directed against the order of ld. Commissioner of Income-tax (Appeals)-4, Kolkata [in short ld. “CIT(A)”] dated 01.07.2016 vide Appeal No.432/CIT(A)-4/Ward-10(4)/Kol/15-16which is arising out of the assessment order framed u/s 143(3) of the Income Tax Act, 1961 (in short the “Act”) dated 13.03.2015 by ITO, Ward-10(4), Kolkata.
The assessee is in appeal before the Tribunal raising the following grounds:
“i. Whether the Ld. CIT(A) was correct in rejecting the findings of the AO, that the assessee company has purposefully failed to discharge its onus of proving the genuineness of the transactions and identity and creditworthiness of the subscribers and in not looking into the circumstances as to whether the shares of the company really command astronomically high premium and in relying upon the submission of the assessee company despite the fact that the onus of proving the genuineness of share application money was lying on the assessee company which remained undischarged and which was an essential condition set by the Apex Court and also by the Hon’ble Calcutta High Court in the case of CIT Vs. Roseberry Mercantile (P) Ltd.? ii. That the appellant craves to add, delete or modify any of the grounds of appeal before or at the time of hearing.”
3. When the case was called for, none appeared on behalf of the assessee. On perusal of the case records we notice that since 17.07.2019
I.T.A. No.: 1886/Kol/2016 Assessment Year: 2012-13 M/s. R.M. Jain & Sons Enterprise Pvt. Ltd. the case has been fixed for 11 times and there is no appearance on behalf of the assessee. The last appearance was on 26.12.2018 and Mr. Amit Jalan appeared on behalf of the assessee and since then none has appeared to argue the case on behalf of the assessee. Since this appeal was constituted on 18.12.2016 and almost six years have passed, we are not inclined to adjourn this case any further and have decided to hear the case through the assistance of the ld. D/R and the records available before us.
Brief facts of the case as per records are that the assessee is a private limited company and filed its return of income for AY 2012-13 on 21.11.2012 showing income of Rs.315/-. The case selected for scrutiny through CASS followed by serving of notices u/s 143(2) & 142(1) of the Act. During the year the share premium of Rs.5,83,83,000/- was received. The assessee failed to satisfy the AO to prove the identity and creditworthiness of the cash creditor/share applicant and the genuineness of the transaction. Ld. AO, thus, made the addition u/s 68 of the Act at Rs.5,83,83,000/- and disallowance u/s 14A of the Act at Rs.4,980/-. Accordingly, income assessed at Rs.5,83,88,910/-. Aggrieved, the assessee appeared before the ld. CIT(A) solely raising the issue of addition made u/s 68 of the Act at Rs.5,83,83,000/- and succeeded. The ld. CIT(A) made discussion of the documents filed by the assessee and deleted the addition observing as follows (relevant extract):
“Therefore, considering the totality of the facts and circumstances of the case, I find substance in the argument of the AR that the appellant has made its case that the identity of the share applicants are established beyond doubt and on enquiries made by the AO there is no adverse finding reached on this aspect. Admittedly, all the share applicants are existing assessees under the Act which establishes the identity and authenticity of the share applicants. About the genuineness of the transactions there is no any adverse finding in the assessment order which is distinct to the facts brought on record by the appellant during the course of assessment proceeding. The creditworthiness of the share applicants as regards their subscription to the share capital is proved by submission of their return, audited annual accounts, their bank statement as depicted hereinabove. The net worth of such subscribers are in excess of the amount invested by each of them as explained hereinabove. The addition made by AO is based on extraneous parameters not germane for deciding the issue. The AO had not dealt with the issue judiciously and consistently with the evidence adduced during the course of the assessment proceedings by the appellant and the replies of the share applicants in respect of the share capital do not warrant the inference that such share application monies received is unaccounted cash credit. Hence, I am inclined to accept the arguments tendered by the A/R of the appellant in this respect. In view of the above, I have no hesitation to hold that the impugned addition made by invoking the provisions of s. 68 by the AO is not justified in the I.T.A. No.: 1886/Kol/2016 Assessment Year: 2012-13 M/s. R.M. Jain & Sons Enterprise Pvt. Ltd. facts and circumstances of the case and as such the addition of Rs.5,83,83,000/- made on this account is directed to be deleted. Thus, these grounds are allowed.”
Aggrieved, the Revenue is in appeal before the Tribunal. Ld. D/R referring to the paper book dated 25.02.2019 stated that the alleged amount of share premium was received against the issue of shares of face value of Rs.10/- and share premium of Rs.4,990/- per share. There is no basis for such valuation of the equity share to fetch the high premium of Rs.4,990/-. He also submitted that out of eleven cash creditors, ten are private limited companies which were incorporated during the period 21.02.2011 to 30.01.2012 and most of such companies were incorporated during the year under assessment. The assessee failed to prove that how such companies which are newly incorporated possessed so much funds for applying in equity share with such high premium. It was also stated that most of these companies are not having any regular source of income and very nominal income has been shown in the profit & loss account but in the balance sheet against the head ‘reserve & surplus’, the current investments have been made. Ld. D/R, further, submitted that the assessee has failed to prove three limbs of Section 68 of the Act and, therefore, the addition u/s 68 of the Act made by the AO needs to be confirmed.
Written submissions by the Revenue are reproduced below:
I.T.A. No.: 1886/Kol/2016 Assessment Year: 2012-13 M/s. R.M. Jain & Sons Enterprise Pvt. Ltd.
I.T.A. No.: 1886/Kol/2016 Assessment Year: 2012-13 M/s. R.M. Jain & Sons Enterprise Pvt. Ltd.
I.T.A. No.: 1886/Kol/2016 Assessment Year: 2012-13 M/s. R.M. Jain & Sons Enterprise Pvt. Ltd.
As regards the contention of the assessee is concerned, neither anybody has appeared in the case for the hearing nor any paper book has been filed before this Tribunal in the past since filing of the appeal in 2016.
We have heard rival contentions and perused the records placed before us and gone through the written submissions filed by the ld. D/R and detailed paper book in support of its grounds challenging the finding of the ld. CIT(A) in deleting the addition for unexplained cash credit of Rs.5,83,83,000/-. We find that the assessee is a private limited company and income of only Rs.315/- has been disclosed in the return of income filed for the AY 2012-13. During the year under appeal equity shares have been issued of face value of Rs.10/- and the share premium of Rs.4,990/- per equity share. When the matter was carried before the ld. CIT(A), various documents were shown to prove the identity of the cash creditors in the form of income tax returns, creditworthiness was claimed to be proved by showing the bank statement and the transaction being carried out through banking channel. Ld. CIT(A) has appreciated these documents stating that Page 6 of 9
I.T.A. No.: 1886/Kol/2016 Assessment Year: 2012-13 M/s. R.M. Jain & Sons Enterprise Pvt. Ltd. the assessee has filed bank statement, balance sheet, income tax returns, record of Registrar of Companies and other related documents to arrive at the finding that the addition for unexplained cash credit u/s 68 of the Act was not called for.
8.1. We, however, on perusal of the impugned order, notice that the ld. CIT(A) has not touched upon the issue following two issues:- a) Creditworthiness of the companies to have invested such a huge amount when such companies were incorporated only during the financial year 2010-11 and 2011-12. The details of such companies, the date of incorporation are mentioned below:
Sl. No. Name of the share holder Date of incorporation 1 Dhankamal Distributors Pvt. Ltd. 17.01.2012 2 Pawanshiv Sales Pvt. Ltd. 17.01.2012 3 Burgundy Suppliers Pvt. Ltd. 24.06.2011 4 Malcom Commercial Pvt. Ltd. 02.12.2011 Sidhsilver Infracom Consultancy Pvt. 5 26.05.2011 Ltd. 6 Stanley Suppliers Pvt. Ltd. 21.02.2011 7 Fairlawn Marketing Pvt. Ltd. 15.09.2011 8 Riddhika Tradecom Pvt. Ltd. 20.01.2012 9 Mojh Dyestuff Pvt. Ltd. 31.01.2012 10 Mangalrashi Shoppers Pvt. Ltd. 30.01.2012 The above details are incorporation dates which raise doubt about the creditworthiness of these companies to have genuine source to make huge investment in some other companies. b) As mentioned in the written submission filed by the Revenue, the assessee company has issued shares at a premium of Rs.4,990/- per share on face value of Rs.10/- per share issued on 12.03.3012 whereas the assessee company was incorporated on 17.01.2012. Before the ld. CIT(A) a general submission was made by the assessee that the assessee company was expected to show significant profit in the near future. He also submitted that the prospects of business were highly encouraging which promoted investors to buy the shares of the assessee company at a premium.
As rightly observed by the ld. AO, placing reliance on the judgment of Hon’ble Supreme Court in the case of Sumati Dayal vs. CIT reported in 214 Page 7 of 9
I.T.A. No.: 1886/Kol/2016 Assessment Year: 2012-13 M/s. R.M. Jain & Sons Enterprise Pvt. Ltd. ITR 801that such premium of Rs.4,990/- on a share of Rs.10/- face value is highly improbable rather unbelievable which can be justified by a company which was only a year old on the date of issuing such shares.
On going through the finding of the ld. CIT(A), we find that ld. CIT(A) has not applied any energy on this aspect and nor has made any discussion on this important issue was before coming to a conclusion that the alleged transactions are genuine. Ld. CIT(A) did not call for any details which could justify the charging of premium of Rs.4,990/- per share. No information was called for about such forthcoming project to be taken up by the assessee which could give handsome returns in the future to the investor companies. Genuineness is also in doubt as to how the companies newly incorporated could get hold of so much funds for taking a risk of making an investment in a company which itself is one year old but charging a premium of Rs.4,990/- per share.
In our considered view there is a total lack of adjudication by the ld. CIT(A) on the issue which is the very basis of the impugned addition. It was expected that the ld. CIT(A) should have given a clear finding on this aspect so as to justify the valuation of the share of Rs.5,000/- per equity share (face value of Rs.10/- and premium of Rs.4,990/- per share). Though the ld. D/R submitted a detailed submission challenging each and every finding of the ld. CIT(A) to prove that the alleged transaction of share premium received by the assessee company is bogus but still since the assessee has not appeared before this Tribunal on any of the occasions, which therefore, keeps the side of the assessee completely dark before us as it may have or may not have any merit and, therefore, in the interest of justice and being fair to both the parties, we are inclined to hold that this issue of addition for unexplained cash credit u/s 68 of the Act for the addition made at Rs.5,83,83,000/-needs to be restored to the file of the ld. CIT(A) for adjudicating the issue in detail and should call for all necessary details which could justify the share premium of Rs.4,990/- per share charged by the assessee on each equity share of face value of Rs.10/-. The ld. CIT(A) should also enquire about the capacity of the alleged cash creditors to have taken such a huge risk of paying a share premium of Rs.4,990/- on the Page 8 of 9
I.T.A. No.: 1886/Kol/2016 Assessment Year: 2012-13 M/s. R.M. Jain & Sons Enterprise Pvt. Ltd. equity share of a company which was only a year old on the date of making such investment. We direct the ld. CIT(A) to pass a speaking order on this issue in light of the discussions made hereinabove by us. Needless to mention that proper opportunity of being heard should be provided to the assessee but in case the assessee does not appear even after providing reasonable opportunities, the ld. CIT(A) should decide on merits as per law.
In the result, the appeal filed by the Revenue is allowed for statistical purposes.
Kolkata, the 30th March, 2022.