M/S H.S.MERCANTILE LTD.,KOLKATA vs. I.T.O.,WARD-9(2), KOLKATA

The assessee in the present case is a Company, which is engaged in the business of trading. The return of income for the year under consideration originally filed by it on 29.09.2008 declaring total income of Rs.94,950/- was initially processed by the Assessing Officer under section 143(1) of the Income Tax Act, 1961 on 18.06.2009. During the Assessment Year: 2008-2009 M/s. H.S. Mercantile Limited year under consideration, the assessee-company had received share capital and share premium aggregating to Rs.15,00,000/- from M/s. Hiteshwari Marketing Pvt. Limited. As per the information received by the Assessing Officer from FIU-IND, the said transaction involving the receipt of share capital and share premium from M/s. Hiteshwari Marketing Pvt. Limited represented an accommodation entry received by the assessee. He, therefore, reopened the assessment and issued a notice under section 148 on 31.03.2015 to the assessee after recording the reasons. In reply, a letter was filed by the assesese stating that the original return filed by it on 29.09.2008 may be treated as return filed in response to notice under section 148. The assessee also filed objections to the reasons recorded by the Assessing Officer for reopening the assessment. The Assessing Officer, however, rejected the said objections and proceeded to complete the assessment under section 147/143(3) of the Act. During the course of assessment proceedings, the assessee- company was called upon by the Assessing Officer to explain the cash credit representing the receipt of share capital and share premium amounting to Rs.15,00,000/- in terms of section 68. In reply, its Bank Statement was furnished by the assessee showing the receipt of Rs.15,00,000/- by cheque from M/s. Hiteshwari Marketing Pvt. Limited on 25.09.2007 alongwith the acknowledgment of income-tax return, Board’s Resolution, Certificate of Incorporation and Memorandum of Association of M/s. Hiteshwari Marketing Pvt. Limited. In order to cross verify the said transaction, a notice under section 133(6) of the Act was issued by the Assessing Officer to M/s. Hiteshwari Marketing Pvt. Limited. There was, however, no response received by the Assessing Officer to the said notice. He, therefore, treated the amount of Rs.15,00,000/- in question received from M/s. Hiteshwari Marketing Pvt. Limited as unexplained cash credit and an addition to that extent was made by him under section 68 to the total income of the assessee in the assessment completed under section 147/143(3) vide an order dated 31.03.2016.

Against the order passed by the Assessing Officer under section 147/143(3) of the Act, an appeal was preferred by the assessee before the ld. CIT(Appeals) challenging the validity of the assessment made by the Assessing Officer as well as disputing the addition of Rs.15,00,000/- made therein under section 68 on merit. The ld. CIT(Appeals) did not find merit in the submissions made on behalf of the assesese challenging the validity of assessment made by the Assessing Officer under section 147/143(3) and rejecting the same, he upheld the validity of the said assessment. He also confirmed the addition of Rs.15,00,000/- made by the Assessing Officer under section 68 by treating the amount of share capital and share premium received from M/s. Hiteshwari Marketing Pvt. Limited as unexplained cash credit for the following reasons given in his impugned order:- “On perusal of the above order of the Apex Court, it is observed that the appellant has to offer a credible explanation for the share application money along with evidences. In this case, there is no explanation whatsoever as to why application for shares were made at such high rate of premium. The assessee has not even furnished the basis documents to substantiate its claim. Even the audited accounts of the share applicant company are not furnished. Accordingly, the genuineness of the transaction has not been established.

I have heard the arguments of both the sides and also perused the relevant material available on record. Although as many as eight grounds are raised by the assessee in this appeal challenging the validity of the assessment made by the Assessing Officer under section 147/143(3) of the Act as well as disputing the addition of Rs.15,00,000/- made therein under section 68 on merit, the limited contention raised by the ld. Counsel for the assessee is that the amount of Rs.15,00,000/- in question received by the assessee from M/s. Hiteshwari Marketing Pvt. Limited towards share capital and share premium was treated by the Assessing Officer as unexplained mainly for the reason that there was no reply received by him from the said party to the notice issued under section 133(6) of the Act. He has submitted that when the primary onus under section 68 was discharged by the assessee by filing the relevant documentary evidence in the form the Bank Statement, Income Tax return acknowledgment, Board’s Resolution, Certificate of Incorporation, etc., the Assessing Officer should have given an opportunity to the assessee to produce M/s. Hiteshwari Marketing Pvt. Limited for examination. He has submitted that the ld. CIT(Appeals), on the other hand, confirmed the addition made by the Assessing Officer under section 68 on an altogether different ground that the premium charged at a higher rate of Rs.90/- per share was not satisfactorily justified by the assessee. He has contended that no opportunity whatsoever was given by the ld. CIT(Appeals) during the course of appellate proceedings to the assessee to justify the premium of Rs.90/- per share charged by it. He has contended that the assessee-company thus was not given proper and sufficient opportunity of being heard either by the Assessing Officer or by the ld. CIT(Appeals) before making the impugned addition under section 68 and this position clearly apparent from the orders of the authorities below is not disputed even by the ld. D.R. She, however, has contended that if the assessee- company is in a position to produce the concerned shareholder M/s. Hiteshwari Marketing Pvt. Limited for verification before the Assessing Officer along with the relevant documentary evidence and also to justify Assessment Year: 2008-2009 M/s. H.S. Mercantile Limited the premium of Rs.90/- per share, the matter may be sent back to the Assessing Officer for proper verification. I find merit in this contention of the ld. D.R. and since the ld. Counsel for the assessee has also undertaken to produce M/s. Hiteshwari Marketing Pvt. Limited for examination before the Assessing Officer along with the relevant documentary evidence and also to justify the premium of Rs.90/- per share charged by the assessee-company, I set aside the impugned order of the ld. CIT(Appeals) on this issue and restore the matter to the file of the Assessing Officer for deciding the same afresh after giving the assessee an opportunity to produce M/s. Hiteshwari Marketing Pvt. Limited for examination along with the relevant documentary evidence and to justify the premium of Rs.90/- per share charged by it.

In the result, the appeal of the assessee is treated as allowed for statistical purposes. Order pronounced in the open Court on June 03, 2020.