HAPPY HOMES & HOUSES PVT. LTD.,,KOLKATA vs. ITO, WARD 9(2),, KOLKATA

PDF · subscribers
ITA 2488/KOL/2025Status: DisposedITAT Kolkata13 January 2026AY 2012-20136 pages

In favour of the assessee: the assessee's appeal was allowed. From the AI summary of this appeal.

AI SummaryAllowed

What did the Tribunal hold?

The Tribunal held that the addition under Section 68 of the Income-tax Act, 1961, cannot be made solely on the ground of non-compliance with summons issued under Section 131 of the Act, particularly when the assessee has provided all the requisite evidences to establish the identity, creditworthiness, and genuineness of the share subscribers. The Tribunal noted that the assessee had furnished documents such as PANs, ITRs, audited financial statements, share application forms, board resolutions, and confirmations of share applicants. The AO had not pointed out any defects in these documents through further inquiry. The Tribunal found support in the decisions of the Hon'ble Supreme Court in Orissa Corporation Ltd., the Hon'ble Calcutta High Court in Crystal Networks Pvt. Ltd. vs. CIT, the Hon'ble Mumbai High Court in CIT Vs Orchid Industries (P) Ltd, and a coordinate bench decision in ITO Vs M/s Cygnus Developers India Pvt. Ltd. The Tribunal concluded that the assessee had discharged its onus by furnishing sufficient evidence, and the non-compliance with summons by the investors was not a sufficient ground to treat the amount as unexplained cash credit. Therefore, the Tribunal set aside the order of the CIT(A) and directed the AO to delete the addition. No issue was expressly left undecided.

What were the facts?

The assessee, Happy Homes & Houses Pvt. Ltd., is in appeal against the order of the National Faceless Appeal Centre, Delhi (NFAC) dated 01.09.2025 for Assessment Year 2012-13. The appeal challenges the confirmation of an addition of Rs. 1,50,00,000/- made by the Assessing Officer (AO) and upheld by the CIT(A) as unexplained cash credit under Section 68 of the Income-tax Act, 1961. The assessee had filed its return declaring total income at Rs. 71,120/-. The case was selected for scrutiny due to large share premium received. The AO issued notices under Sections 143(2) and 142(1) and a questionnaire, to which the assessee provided documents including names, addresses, PANs, audited balance sheets, bank accounts, and confirmations of share subscribers. The AO, however, issued summons under Section 131 to the directors of subscriber companies, which were not complied with. Consequently, the AO treated the share capital/premium as unexplained cash credit. The CIT(A) dismissed the assessee's appeal after calling for a remand report, where the AO reiterated the non-compliance with summons.

What were the issues?

1. Whether the addition of Rs. 1,50,00,000/- as unexplained cash credit under Section 68 of the Income-tax Act, 1961, is sustainable when the assessee has provided all documentary evidence regarding the identity, creditworthiness, and genuineness of the share subscribers, despite non-compliance with summons issued to the directors of the subscriber companies? Assessee's contentions: The assessee argued that it had furnished all necessary documents to prove the identity, creditworthiness, and genuineness of the share subscribers. The non-compliance with summons by the subscriber companies should not lead to an adverse inference against the assessee, especially when the AO had not pointed out any defects in the provided documents. The assessee relied on the Supreme Court decision in Orissa Corporation Ltd. and the Calcutta High Court decision in Crystal Networks Pvt. Ltd. vs. CIT. Revenue's contentions: The revenue contended, through the AO and CIT(A), that the addition was justified due to the non-compliance with summons issued under Section 131 of the Act to the directors of the subscriber companies, which prevented independent verification.

Which sections of the Income-tax Act were involved?

Section 68,Section 131,Section 143(2),Section 142(1)

AI-generated summary — verify with the full judgment below

Income Tax Appellate Tribunal, “B” BENCH, KOLKATA

Before: SHRI RAJESH KUMAR, AM & SHRI PRADIP KUMAR CHOUBEY, JM

For Appellant: Shri Miraj D. Shah, AR
For Respondent: Shri Sandeep Kumar Mehta, DR
Hearing: 06.01.2026Pronounced: 13.0.2026

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 01.09.2025 for the AY 2012-13.

2.

The only issue raised by the assessee in the various grounds of appeal is against the confirmation of Rs. 1,50,00,000/- 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 (the Act).

3.

The assessee filed the return of income on 26.09.2012, declaring the total income at ₹1,120/-. The case of the assessee was selected for scrutiny for the reason of large share premium received. The notice

4.

In the appellate proceedings, the ld. CIT (A) dismissed the appeal of the assessee after calling for the remand report from the ld. AO in which the ld. AO again noted that the there was no compliance to the summons issued to the subscriber companies from 8 private limited companies and accordingly, the ld. CIT (A) dismissed the appeal of the assessee.

5.

After hearing the rival contentions and perusing the materials available on record, we find that that the assessee has raised share capital from 8 share subscribers by issuing 30,000 equity shares of face value of ₹10 at a premium of ₹490 and thus, received ₹1,50,00,000/- as share capital/ share premium. The assessee filed in response to questionnaire, the documents such as; PANs, ITRs, audited financial statements, share application forms, board resolutions and confirmations of share applicants. However, the ld. AO treated the said amount as unexplained cash credit for the reason that there was no compliance to the summons issued u/s 131 of the Act to all 8

5.1. We find support from the decision of Hon’ble Supreme Court in the case of Orissa Corporation Ltd. (1986) 159 ITR 78 (SC):

“That in this case the respondent had given the names and addresses of the alleged creditors. It was in the knowledge of the Revenue that the said creditors were income- tax assessees. Their index numbers were in the file of the Revenue. The Revenue, apart from issuing notices under Section 131 at the instance of the respondent, did not pursue the matter further. The Revenue did not examine the source of income of the said alleged creditors to find out whether they were creditworthy. There was no effort made to pursue the so-called alleged creditors. In those circumstances, the respondent could not do anything further. In the premises, if the Tribunal came to the conclusion that the respondent had discharged the burden that lay on it, then it could not be said that such a conclusion was unreasonable or perverse or based on no evidence. I f the conclusion was based on some evidence on which a conclusion could be arrived at, no question of law as such arose. The High Court was right in refusing to state a case.” 5.2. The case of the assessee is also squarely covered by the decisions of Hon’ble Calcutta High Court in the case of Crystal Networks Pvt. Ltd. vs. CIT 353 ITR 171 (Kol) wherein it has held that where all the evidences were filed by the assessee proving the identity and creditworthiness of the loan transactions , the fact that summon issued were returned un-served or no body complied with them is of little significance to prove the genuineness of the transactions and identity “10. We find considerable force of the submissions of the learned Counsel for the appellant that the Tribunal has merely noticed that since the summons issued before assessment returned unserved and no one came forward to prove. Therefore it shall be assumed that the assessee failed to prove the existence of the creditors or for that matter creditworthiness. As rightly pointed out by the learned counsel that the Ld. CIT(A) has taken the trouble of examining of all other materials and documents viz., confirmatory statements, invoices, challans and vouchers showing supply of bidi as against the advance. Therefore, the attendance of the witnesses pursuant to the summons issued in our view is not important. The important is to prove as to whether the said cash credit was received as against the future sale of the product of the assessee or note. When it was found by the Ld. CIT(A) on fact having examined the documents that the advance given by the creditors have been established the Tribunal should not have ignored this fact findings. Indeed the Tribunal did not really touch the aforesaid fact finding of the Ld. CIT(A) as rightly pointed out by the learned counsel. The Supreme Court has already stated as to what should be the duty of the learned Tribunal to decide in this situation. In the said judgment noted by us at page 463, the Supreme Court has observed as follows: “The Income-Tax Appellate Tribunals performs a judicial function under the Indian Income-tax Act. It is invested with authority to determine finally all questions of fact. The Tribunal must, in deciding an appeal, consider with due care all the material facts and records its findings on all the contentions raised by the assessee and the Commissioner, in the light of the evidence and the relevant law.”

11.

The Tribunal must, in deciding an appeal, consider with due care all the material facts and record its findings on all contentions raised by the assessee and the Commissioner, in the light of the evidence and the relevant law. It is also ruled in the said judgment at page 465 that if the Tribunal does not discharge the duty in the manner as above then it shall be assumed the judgment of the Tribunal suffers from manifest infirmity.

12.

Taking inspiration from the Supreme Court observation we are constrained to hold in this matter that the Tribunal has not adjudicated upon the case of the assessee in the light of the evidence as found by the Ld. CIT(A). We also found no single word has been spared to up set the fact finding of the Ld. CIT(A) that there are materials to show the cash credit was received from various persons and supply as against cash credit also made.

13.

Hence, the judgment and order of the Tribunal is not sustainable. Accordingly, the same is set aside. We restore the judgment and order of the Ld. CIT(A). The appeal is allowed.”

“8. We have heard the submissions of the learned D.R, who relied on the order of AO. The learned counsel for the assessee relied on the order of Ld. CIT(A) and further drew our attention to the decision of Hon’ble Allahabad High Court in the case of CIT vs. Raj Kumar Agarwal vide dated 17.11.2009 wherein the Hon’ble Allahabad High Court took a view that non-production of the director of a Public Limited Company which is regularly assessed to Income tax having PAN, on the ground that the identity of the investor is not proved cannot be sustained. Attention was also to the similar ruling of the ITAT Kolkata bench in the case of ITO vs. Devinder Singh Shant in vide order dated 17.04.2009.

9.

We have considered the rival submissions. We are of the view that order of Ld. CIT(A) does not call for any interference. It may be seen from the grounds of appeal

raised by the revenue that the revenue disputed only the proof of identity of share holder. In this regard it is seen that for AY 2004

05. Shree Shyam Trexim Pvt. Ltd. was assessed by ITO, Ward-9(4), Kolkata and the order of assessment u/s 143(3) dated 25.01.2006 is placed in the paper book. Similarly Navalco Commodities Pvt. Ltd. was assessed to tax u/s 143(3) for AY 2005-06 by ITO, Ward-9(4), Kolkata by order dated 20.03.2007. Similarly Jewellock Trexim Pvt. Ltd. was assessed to tax for AY 2005-06 by the very same ITO, Ward-9(3), Kolkata assessing the assessee. In the light of the above factual position which is not disputed by the revenue, it cannot be said that the identity of the share applicants remained not proved by the assessee. The decision of the Hon’ble Allahabad High Court as well as ITAT, Kolkata Bench on which reliance was placed by the learned counsel for the assessee also supports the view that for non-production of directors of the investor company for examination by the AO it cannot be held that the identity of a limited company has not been established. For the reasons given above we uphold the order of Ld. CIT(A) and dismiss the appeal of the revenue.” 5.4. Similar ratio has been laid down by the Hon’ble Mumbai High Court in the case of CIT Vs Orchid Industries (P) Ltd 397 ITR 136 (Bom) by holding that provisions of section 68 of the Act can not be invoked for the reasons that the person has not appeared before the AO where the assessee had produced on records documents to establish genuineness of the party such as PAN ,financial and bank statements showing share application money .

5.5. In the instant case before us also, the assessee has furnished all the evidences proving identity and creditworthiness of the investors

6.

In the result, the appeal of the assessee is allowed.

Order pronounced in the open court on 13.01.2026.

More judgments on Section 68

All 29,931 judgments and leading authorities on Section 68 →

Recent GST High Court judgments

Search GST case law →