INCOME TAX OFFICER, WARD-9(1), KOLKATA, KOLKATA vs. LITTLESTAR SECURITIES PRIVATE LIMITED, KOLKATA
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Income Tax Appellate Tribunal, “B” BENCH, KOLKATA
Before: SHRI RAJESH KUMAR, AM & SHRIPRADIP KUMAR CHOUBEY, JM
Per Rajesh Kumar, AM:
This is an appeal preferred by the Revenue against the order of the National Faceless Appeal Centre, Delhi (hereinafter referred to as the “Ld. CIT(A)”] dated 08.08.2024 for the AY 2012-13.
At the outset, we note that the appeal of the assessee is barred by limitation by 153 days. At the time of hearing the counsel of the assessee explained the reasons for delay in filing the appeal. The Ld. D.R did not raise any objection in condoning the delay. After hearing the rival contentions and perusing the materials available on record, we find that the delay is for bonafide and genuine reasons and hence, we condone the delay and admit the appeal for adjudication.
The facts in brief are that the assessee filed the return of income on 23.09.2013, which was selected for scrutiny through CASS for large share capital/ share premium received by the assessee. The assessment was completed u/s 143(3) of the Act vide order dated 13.03.2015, assessing the total income at ₹27,63,00,680/- by making addition u/s 68 of the Act. The said order was challenged before the ld. CIT (A) who confirmed the addition and the matter travelled to ITAT. The Tribunal set aside the order of the ld. CIT (A) and restored the issue to the file of the ld. AO for deciding the issue afresh after affording reasonable opportunity of hearing to the assessee. In the set aside proceedings, the ld. AO again called for the details qua the share capital/ share premium from assessee which were duly furnished by the assessee before the ld. AO (faceless assessment scheme) on 25.01.2021. The assessee furnished before the ld. AO all the details /evidences, vide written submissions dated 23.02.2021, submitting that the assessee had issued 1,42,62,200/- equity shares of ₹1 each of which 1,40,00,000/- shares were issued to two companies at par and balance 2,62,200/- shares at a premium of ₹999/ per share thereby raising share capital/ share premium from 14 companies the details whereof is extracted by the ld. AO in Para no.6 of the assessment order. The assessee filed before the ld. AO copies of share application letters, share allotment letters , ITR acknowledgements of share applicants, audited accounts, bank statements and source of the applicants along with email id.
In the appellate proceedings, the ld. CIT (A) after taking into consideration the submissions of the assessee along with the evidences filed by the assessee allowed the appeal of the assessee by directing the ld. AO to delete the addition by categorizing the investors in the four categories as discussed in the following paras.
5.1. In the first category the ld. CIT (A) deleted the addition made in respect of money received from Shri Ganesh Mal Singhi and Anil Sharma by issuing 50,000/- equity shares to each party thereby receiving ₹1 lacs by holding that the ld. AO has not conducted any enquiry into the source of these individuals nor made any reference qua the investment made by them. Therefore, ld. CIT(A) deleted the addition of ₹1 lacs.
5.2. In the second category, the ld. CIT (A) deleted the addition in respect of share capital/ share premium from 8 subscribers by deleting the addition of ₹19,13,00,000/- by observing and holding as under:-
Name of the Applicant No of shares Face Share Amount Addition in SL No Value Premium received (Rs) scrutiny (as per (Rs) (Rs) assessment table) (Rs Crores) 2) INTIMATE SECURITIES P. 6 1/- 999 2,33,00,000 27.93 LIMITED 23,300 7 IMAX SECURITIES PVT LTD 1/- 999 2,80,00,000 36.42 28,000 8 ROVER SECURITIES PVT LTD 1/- 999 1,78,00,000 23.63 17,800 11 PALAK HIRISE PVT LTD 1/- 999 3,86,00,000 12.19 38,600 LIMELIGHT PROMOTERS PVT LTD 12 999 2,60,00,000 15.08 26,000 13 EVERSAFE SECURITIES PVT LTD 1/- 999 3,11,00,000 14.48 31,100
15 MICRO INFRA PROPERTIES P. LTD 1/- 999 81,00,000 13.25 8,100 16 SEASIDE SECURITIES PVT LTD 1/- 999 1,84,00,000 12.09 18,400 Total 191300 19,13,00,000 (ii) Clearly the source of share application money received by the Applicant has already been brought to tax by the department by making additions in the hands of the above mentioned “Corporate Investors at-premium” of much higher amounts than have been invested by them in the Appellant company; and therefore again adding the same in the hands of the Appellant as being unexplained sum of money would tantamount to double addition of the same sum, which is not permissible. (iii) To support this view reliance is placed on the decision of the Jurisdictional Tribunal and Jurisdictional High Court, viz., Honble ITAT, Koklkata and Hon’ble Calcutta HC in the case of : Deputy Commissioner of Income-tax v. Narsingh Ispat Ltd [2023] 156 taxmann.com 344 (Kolkata - Trib.) – In this case on perusal of the details of share capital raised during the year, the Assessing Officer noted that the assessee had raised share capital from two share applicants H and S, both of which were companies. The Assessing Officer held that the assessee entered into sham transactions with the investors to introduce unaccounted income in the form of share application. He observed that the assessee did not have any regular business transactions or regular acquaintance with the
5.4. In the fourth category, the ld. CIT (A) observed that these were the two corporate investors at a serial no.1 and 2 in table no.2 in the appellate order to whom the shares were issued at par. The ld. CIT (A) noted that these subscribers had produced before the ld. AO all the details/evidences and therefore, the addition made by the ld. AO qua these two entities are also bad in law and accordingly deleted the addition. The ld. CIT (A) thus, deleted entire addition to the tune of ₹27,63,00,000/- by allowing the appeal of the assessee.
After hearing the rival contentions and perusing the materials available on record, we find that the assessee has issued shares to various entities as are dealt with by the appellate authority in four categories. The ld. CIT (A) has discussed the details as to their identity, creditworthiness and genuineness in detail qua each entity while deleting the addition. We note that all these subscribers have filed all the evidences before the ld. AO comprising their PANs, audited balance sheets, confirmations, majority of the subscribers responded to the notices issued u/s 133(6) of the Act filing all the details before the ld. AO as well as before the ld. CIT (A) the details whereof are as under:-
SL Name Category 133(6) notice 133(6) notice Amount issued replied Subscribed (₹) 1. Ganesh Mal Singh Subscriber to MOA No NA 1,00,000 2. Anil Sharma Subscriber to MOA No NA 1,00,000
Table B_Subscribers name, amount subscribed and status of assessment u/s 143(3) 1. Names of the Assessed Capital & Capital & Amount Parties u/s 143(3) Reserves added Reserves subscribed accepted 2. Palak Hirisepvt. 2012-13 Yes NA 3,86,00,000 Ltd. 3. NA Limelight 2012-13 Yes 2,60,00,000 Promoters Pvt. Ltd. 4. NA Eversafe Securities 2012-13 Yes 3,11,00,000
6.3. The case of the assessee is also covered by the decision of the jurisdictional Hon'ble Calcutta High Court in the case of PRINCIPAL
"3. We have heard Mr. Soumen Bhattacharjee, the learned Advocate for the Revenue and Mr. Subash Agarwal, the leamed Advocate for the respondent-assessee. 4. The focal point of the Revenue's grievance is that the learned Tribunal failed to appreciate the "Test of Human Probability." It is contended that the nine subscriber companies, while being income-tax assessees, declared meagre income which bore no rational proportion to the high share premium paid. Further, the Revenue places heavy reliance on the non-appearance of the directors of these companies in response to summons issued under Section 131 of the Act. 5. We have carefully perused the records and the findings of the learned Tribunal. It is observed that the respondent-assessee had placed a voluminous "Paper Book" before the authorities, which included PAN details, share application forms, allotment advices, bank statements, ITR acknowledgments, and audited financial statements of all nine corporate subscribers. 6. The law on Section 68 is no longer res integra. Once the assessee offers a reasonable explanation supported by "Cast Iron" documentary evidence of identity and banking flow, the initial statutory onus stands discharged. The burden then shifts squarely to the Revenue. The AO cannot merely brush aside audited balance sheets and PAN details as "paper compliance" without bringing on record contrary evidence to impeach the veracity of such documents. 7. A significant portion of the Revenue's argument rests on the non- appearance of the subscribers' directors. We reiterate our settled view that personal appearance is not a statutory substitute for documented financial traceability. The AO is vested with co- terminus powers under Section 131. If the AO fails to utilize these powers to compel attendance or to seek verification from the creditors' respective Assessing Officers, the Revenue cannot visit the consequences of such investigative failure upon the assessee. Suspicion, however strong, cannot replace evidence. 8. Regarding the Revenue's reliance on the decision of the Hon'ble Supreme Court in PCIT vs. NRA Iron & Steel (P) Ltd., we find the same to be fundamentally misplaced. That case dealt with "phantom" entities where notices were returned unserved. In the present case, the investors are traceable taxpayers who confirmed the transactions through Section 133(6) responses. To equate "traceable investors" with "phantom entities" is a leap in logic that this Court cannot countenance. 9. Furthermore, for the Assessment Year 2009-10, the "Source of Source" doctrine remains inapplicable as the proviso to Section 68, introduced by the Finance Act, 2012, is prospective. The Tribunal noted that the subscribers possessed substantial Net Worth (Reserves and Surplus) far exceeding the investment amounts, thereby satisfying the creditworthiness test.
".....It is not in dispute that the assessee had filed complete details of each of the shares to prove the identity and creditworthiness of the shareholders and the genuineness of the transactions was proved by producing copies of the confirmation letters, bank statements, audited financial statements, identity proofs, source of funds, investments by the share subscribers in the assessee company, replies which were given to the notice issued under Section 133(6) of the Act and various other details to show that most of the share subscribers have also passed through scrutiny proceedings. These details were placed before the learned Tribunal by way of paper books in three volumes. The learned Tribunal has in extenso referred to the details which have been furnished. Furthermore, the shareholders have responded to the notice under Section 133(6) of the Act directly to the Assessing Officer and their respective assessment orders framed under Sections 147/143(3) of the Act were also placed before the Assessing Officer as well as before the learned Tribunal. Thus, it is evident that the assessee has produced all the documents before the Assessing Officer not once but twice and the authority except indicating a theory of routine entries of paper companies/shell companies, no discrepancies had been pointed out in the financials of the alleged cash creditors. Furthermore, all the share subscribers are private limited companies duly registered with the Ministry of Corporate Affairs and
"We have perused the reasons assigned by the learned Tribunal for allowing the assessee's appeal. It is seen that the assessing officer issued notice under Section 133 (6) of the Act to the investing companies and both the parties have complied with the said notice and furnished the requisite details. Summons under Section 131 of the Act was issued to the Director of the assessee company to be personally present and also to produce the Directors of the investing company for examination of genuineness of the transaction, identity and creditworthiness of the lenders. The Tribunal noted that the Directors appeared pursuant to the summons but the assessing officer wrongly recorded that the Directors
The factual matrix, as can be gleaned from the records, reveals that the respondent-assessee is a Non-Banking Financial Company (NBFC) duly registered with the Reserve Bank of India. For the relevant Assessment Year, its retum was selected for scrutiny specifically to examine the receipt of a large share premium. During the assessment proceedings, the Assessing Officer (AO) noted that the assessee had raised share capital and premium from fifteen corporate entities. 4. It is seen from the record that the assessee had placed before the AO a voluminous "Paper Book" containing all requisite documents, including PAN details, Income Tax Retum acknowledgments, and audited financial statements of all fifteen subscriber companies. Notwithstanding the availability of this documentary evidence, the AO issued summons under Section 131 of the Act to the directors of these companies. When they failed to appear personally, the AO proceeded to brand these companies as "shell entities" and added the entire amount of Rs 6,22,00,000/- as unexplained cash credit. This view was subsequently affirmed by the CIT (Appeals). 5. The leamed Tribunal, however, reversed this finding, noting that the subscribers were active taxpayers who had confirmed the transactions in response to notices issued under Section 133(6) of the Act.
In the result, the appeal of the Revenue is dismissed.
Order pronounced in the open court on 06.03.2026.
Sd/- Sd/- (PRADIP KUMAR CHOUBEY) (RAJESH KUMAR) (JUDICIAL MEMBER) (ACCOUNTANT MEMBER) Kolkata, Dated: 06.03.2026 Sudip Sarkar, Sr.PS Copy of the Order forwarded to: 1. The Appellant 2. The Respondent 3. CIT DR, ITAT, 4. 5. Guard file. BY ORDER, True Copy//
Sr. Private Secretary/ Asst. Registrar Income Tax Appellate Tribunal, Kolkata
