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Facts
The assessee's original assessment was revised by the PCIT under Section 263, directing the AO to re-examine the source of Rs. 6.99 crore in share capital/premium. Despite the assessee providing extensive details of 20 share subscribers, the AO treated the sum as unexplained cash credit under Section 68, primarily citing non-compliance with summons and lack of future business prospects for the assessee. The CIT(A) confirmed this addition.
Held
The Tribunal found that the assessee had discharged its initial onus by proving the identity, creditworthiness, and genuineness of the share transactions through detailed documentation and by demonstrating that notices under Section 133(6) were served. Relying on High Court precedents, the Tribunal ruled that mere non-appearance of directors for summons after a long period did not justify the addition when all other evidence was provided. Therefore, the addition made under Section 68 was ordered to be deleted.
Key Issues
Whether the addition of share capital/share premium as unexplained cash credit under Section 68 was justified when the assessee provided comprehensive evidence of the identity, creditworthiness, and genuineness of the transactions, and if alleged non-compliance with summons by investors could negate such evidence.
Sections Cited
143(1), 147, 143(3), 263, 142(1), 133(6), 131, 68
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Income Tax Appellate Tribunal, “D” BENCH, KOLKATA
Before: SHRI RAJESH KUMAR, AM & SHRI PRADIP KUMAR CHOUBEY, JM
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 05.06.2025 for the AY 2009-10.
The only issue raised by the assessee in the various grounds of appeal is against the confirmation of addition of Rs. 6,99,50,000/- by the ld. CIT(A) as made by the ld. AO in respect of share capital / share premium by treating the same as unexplained cash credit u/s 68 of the Income-tax Act, 1961 (hereinafter referred to as the Act).
The facts in brief are that, the assessee has filed the return of income on 30.03.2010, showing loss of Rs.184/-. The return was processed
In the appellate proceedings, the ld. CIT(A) dismissed the appeal of the assessee and confirmed the addition. The AR also pointed out that the ld. CIT(A) had copy pasted the findings rendered in the case of some other assessee while rejecting the grounds raised by the assessee by referring to the findings given in the appellate order.
After hearing the rival contentions and perusing the materials available on record, we find that that the assessee has raised share capital from 20 share subscribers by issuing 2,79,400 equity shares of face value of Rs.10/- each at a premium of Rs.240/- per share and thus, received Rs. 6,99,50,000/-as share capital/ share premium. We note that the assessee had furnished the details of all the share subscribers, based on which the ld. AO made independent enquiries from each of them u/s 133(6) of the Act. The records placed before us revealed that the notices issued u/s 133(6) of the Act were served upon the share subscribers which substantiated that they were found existing at their given addresses. It is also seen that each of the 20 share subscribers had filed the details including PANs, ITRs, audited financial statements, allotment advices, bank statements, explanation regarding their source of payment. We find that though all the relevant details were furnished by the share subscribers, the ld. AO had conspicuously omitted to take note of the same in the impugned assessment order. Rather, the ld. AO is found to have erroneously observed that there was no compliance from the share subscribers, whereas, the contemporaneous facts showed otherwise.
5.1. Having perused the details furnished by the share subscribers, we observe that each of them held valid PAN and CIN and the proof of Sl No. Name of the Shareholder Amount Networth 1 AbhilashiniCommosales Pvt. Ltd. 4,50,000 10,49,00,000 2 Banke bihariVyapaar Pvt. Ltd. 35,00,000 2,91,00,000 3 Bright Tracom Pvt. Ltd. 40,00,000 4,11,50,000 4 Decent Professional services Pvt. Ltd. 20,00,000 2,49,07,744 5 Deora Finance Pvt. Ltd 57,00,000 29,80,01,588 6 Jai Mata Texo Traders Pvt. Ltd 35,00,000 7,18,14,900 7 Lahoti Agro Pvt. Ltd 40,00,000 2,01,57,000 8 Lambodar Commotrade Pvt. Ltd 25,00,000 7,15,00,000 9 Lifeline Properties Pvt. Ltd 10,00,000 4,12,50,000 10 Lingard Mercantile Pvt. Ltd 25,00,000 1,60,00,000 11 Luxo Foams Pvt. Ltd 31,00,000 5,61,30,000 12 Maa Tara Vyapaar Pvt. Ltd 22,00,000 2,46,00,000 13 Paropkar Consultants Pvt. Ltd 33,50,000 15,45,00,000 14 Promising Vinimay Pvt. Ltd 45,00,000 8,98,00,000 15 Pyramid Vanijya Pvt. Ltd. 32,00,000 5,39,00,000 16 Sanghash Commercials Pvt. Ltd 45,00,000 6,04,50,090 17 Shree Dealcom Pvt. Ltd. 35,00,000 6,18,00,000 18 Sindhu Tracom Pvt. Ltd. 50,00,000 8,39,00,000 19 Sterling Commosales Pvt. Ltd. 30,00,000 7,33,92,874 20 Sydney Agencies Pvt. Ltd. 43,00,000 11,90,50,000 5.2. We have perused the decision of the Hon’ble Calcutta High Court in the case of PCIT vs. Omkar Parivahan Finance Pvt Ltd (ITAT No. 227 of 2024) dated 01.01.2025 wherein it is held that, the fact that the networth is much higher than the investments made by the share subscribers, their creditworthiness stands established. The share subscribers are found to have also furnished their bank statements, evidencing the source of payments along with a separate explanation regarding the same. It is observed that none of the lower authorities were able to point out any specific falsity therein. We thus note that the assessee was able to discharge its initial onus of establishing the 5.3. It is observed that the ld. AO had laid much emphasis on the non- compliance of summons by the share subscribers to the enquiry being conducted after more than seven (7) years from the date of transactions. The ld. AR has rightly relied on the decision of the Hon’ble Calcutta High Court in the case of PCIT vs. Jealous Commercial Private Limited (308 taxman 80) wherein on similar facts, it was held that mere non-appearance of directors before the AO cannot prompt the AO to render a finding that no satisfactory explanation u/s 68 was offered by the assessee. The relevant findings are as follows:
“18. In the facts and circumstances of the present case, the shareholders who applied for the shares in the assessee stands identified. The source of funds stands satisfied. The assessee reflected the entire issue and allotment of shares at a premium in its books of accounts and submitted the same contemporaneously to the statutory authority, namely, Ministry of Corporate Affairs.
Before the Assessing Officer, the assessee produced all such relevant materials with regard to the transaction in question. The absence/non-appearance of theDirectors of the assessee before the Assessing Officer would not prompt the Assessing Officer, to render a finding that no explanation within the meaning of Section 68 of the Act of 1961 was offered by the assessee particularly in the factual matrix of the present case.
In such circumstances, we do not find any substantial question of law involved for the purpose of consideration by this Court as contended on behalf of the appellant.” 5.4. We also rely on the decision of the Hon’ble jurisdictional High Court in the case of PCIT vs. Balaka Vinimay Pvt Ltd (GA No. 2 of 2025) dated 21.07.2025. In this case also, the assessee and the share subscribers had furnished all the relevant details in support of the share application monies before the AO. The AO however disbelieved the explanation since there was non-compliance of summons u/s 131 by the directors of the share subscribers. Taking note of the practical difficulty that the assessee cannot be called upon to produce the share subscribers after a gap of 10 to 12 years, and having regard to the “…..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 have been furnishing the audited financial statements in the portal of the Ministry. That apart, the share subscribers have also demonstrated that there was immediate source of funds available in the bank accounts which had been applied for making investments in the equity shares of the assessee company. One more particular important factor which was lost sight of is, that the matter pertains to the financial year 2007-08 and the scrutiny assessment was completed on 27.09.2021. After a gap of 13/14 years, after actual transactions had taken place and final assessment orders had been passed, proceedings was initiated. Thus, the predicament faced by the assessee was taken note by the learned Tribunal and it had observed that it is practically difficult that after a gap of 10 to 12 years, the assessee can call for the share subscribers who invested long time before and there is every possibility that the shareholders would have sold their equities and new shareholders would have taken their place. The learned Tribunal referred to the decision of the co-ordinate Bench in the case of True- Man Consultants Pvt. Ltd. vs. ITO in ITA No.1158/Kol/2023, wherein almost identical issue of unexplained share capital from various share subscribers came up for adjudication and after considering the factual aspect and following the judicial pronouncements, the appeal filed by the assessee was allowed by the Tribunal. The revenue preferred an appeal before this Court in ITAT/203/2024 and by order dated 25th April, 2025, the appeal filed by the revenue was dismissed. Thus, we find that the factual issues have been thoroughly adjudicated by the Tribunal apart from noting that the assessee had been put to multiple levels of scrutiny and the assessee was able to bring on record documents in support of their claim. Therefore, we are of the view that the addition made under Section 68 of the Act was rightly ordered to be deleted.
“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 of the assessee company failed to appear in response to the summons issued under 131 of the Act. Furthermore, the Tribunal examined the factual position and noted that the assessee has filed evidences as called for by the assessing officer in respect of the assessee as well as the investing companies. The evidences filed comprised of income tax returns, audited balance sheet, profit and loss account, audited report, bank statement and master data in respect of each of the subscribers. Furthermore, both the parties have submitted their reply pursuant to the notice issued under Section 133(6) of the Act. After noting these facts, the Learned Tribunal held that the assessing officer as well as the CIT(A) did not cause any verification or conduct any enquiry into the evidences which were filed by the assessee and merely harped on non- compliance of the summons issued under Section 131 of the Act, which is factually incorrect. Learned Tribunal placed reliance on the decision of the Hon'ble Supreme Court in CIT - Vs- Orissa Corporation Ltd. (1986) 159 ITR 78 (SC) as well as the decision of this Court in Crystal Networks Pvt. Ltd. -Vs- CIT, (353) ITR 171 (Cal). The Tribunal also noted the decision of the Co-ordinate Bench in the case of ITO -Vs- M/S Cygnus Developers India Pvt. Ltd. (ITA/282/Kol/2012) wherein the factual position was also similar to that of the case of the assessee. Thus, we find that the facts have been examined by the Tribunal and the conclusion has been arrived at and therefore, no question of law, much less substantial questions of law, arises for consideration in this appeal.” 5.6. In so far as the analysis of the assessee’s return of income undertaken by the ld. AO is concerned, we are of the view that the same was of no relevance to ascertain the identity, creditworthiness
In the result, the appeal of the assessee is allowed.
Order pronounced in the open court on 10.02.2026.