Loading judgment…
No AI summary yet for this case.
Income Tax Appellate Tribunal, KOLKATA ‘A’ BENCH, KOLKATA
Before: Shri P.M. Jagtap, Vice- & Shri A.T. Varkey
Per Shri P.M. Jagtap, Vice-President:- This appeal filed by the assessee is directed against the order of ld. Commissioner of Income Tax(Appeals)-1, Kolkata dated 25.01.2018 and the solitary issue involved therein relates to the addition of Rs.15,67,92,000/- made by the Assessing Officer under section 68 of the Income Tax Act, 1961, which is further enhanced by the ld. CIT(Appeals) by Rs.27,80,000/-.
The assessee in the present case is a Company, which is engaged in the business of share trading and investment. The return of income for Assessment Year: 2014-2015 M/s. Vasupujya Enterprises Pvt. Limited the year under consideration was filed by the assessee on 21.09.2014 declaring total income at ‘NIL’. During the course of assessment proceedings, the assessee was called upon by the Assessing Officer to explain the source of share premium amount of Rs.15,67,92,000/- received during the year under consideration. As noted by the Assessing Officer in the assessment order, the assessee, however, failed to comply with the said requirement. The Assessing Officer, therefore, treated the entire share premium amount of Rs.15,67,92,000/- received by the assessee-company during the year under consideration as unexplained cash credit and addition to that extent was made by him to the total income of the assessee under section 68.
The addition of Rs.15,67,92,000/- made by the Assessing Officer under section 68 by treating the share premium amount as unexplained cash credit was challenged by the assessee in the appeal filed before the ld. CIT(Appeals). During the course of appellate proceedings before the ld. CIT(Appeals), the following submissions in writing were made on behalf of the assessee in support of its case on this issue:- “During the year, the assessee raised share capital of Rs.27,80,000/- and securities premium of Rs.15,67,92,000/- by allotting 2,78,000 shares at a face value of Rs.I0/- per shares and premium of Rs.564/-per share. Detailed list of allottees, their addresses, PAN details, no. of shares allotted, total amount received is enclosed at page 1-2 of the paper book. It is further submitted that in the course of assessment, the assessee company was asked to submit the complete details of share capital raised during the year. In this regard, the assessee submitted its Annual Accounts, ITR Acknowledgment, Relevant Bank Statements and Form PAS-3 filed with the ROC. The above documents are again enclosed at page 4-31 of the paper book. However, the learned AO did not appreciate the documents filed by the assessee and opined that there was no basis of issuing shares at a premium of Rs.564/- per share and therefore the entire premium raised by the assessee amounting to Rs.15,67,92,000/- was added back to the income of the assessee as unexplained cash credit u/s.68 of the Act. Here, please note that the learned AO had not disputed the amount of share capital of Rs.27,80,000/- raised during the year. In other words, the identity of the creditors and the Assessment Year: 2014-2015 M/s. Vasupujya Enterprises Pvt. Limited
genuineness of the share transactions were not disputed by the learned AO. He has only disputed the premium amount of Rs.564/- per share. In this regard, please find enclosed at page 32 of the paper book, the certificate dated 27.06.2012 issued by M/s. Shanna Naresh and Co., - Chartered Accountants wherein applying the Net Assets Method the value per share was arrived at Rs.572.26. As such, the premium of Rs.564/- per share was charged taking into consideration the Net Worth of the company. Since the said certificate issued by M/s. Shanna Naresh and Co., Chartered Accountants could not be produced before the learned AO due to paucity of time, it is humbly requested before your goodself to admit the same by virtue of Rule 46A of the Rules.
Rule 46A of the Income Tax Rules, 1962 regulates the production of additional evidence before Commissioner (Appeals). It provides that the appellant shall not be entitled to produce before the Commissioner (Appeals) any evidence, whether oral or documentary, other than evidence produced by him before the Assessing Officer, except in the following circumstances: a. The Assessing Officer has refused to admit evidence which ought to have been admitted. b. The appellant was prevented by sufficient cause from producing the evidence which he was called upon to produce by the Assessing Officer. c. The appellant was prevented by sufficient cause from producing before the Assessing Officer any evidence which is relevant to any ground of appeal. d. The Assessing Officer made the order appealed against without giving sufficient opportunity to the appellant to adduce evidence relevant to any ground of appeal.
The appellant's case is clearly falling under exception (d) to Rule 46A.
It is further submitted that it is the right of Board of Directors of the company to decide the premium amount. The Board of Directors in the meeting held on 25.03.2014 resolved to issue the shares at a face value of Rs.10/- per share and premium of Rs.564/- per share. A copy of the Board Resolution is enclosed at page 2 of the paper book. More so, the premium charged was duly corroborated by the Networth of the company. Further, the company was not required to prove the genuineness, purpose or justification for charging premium of shares. To buttress the contention of the assessee, reliance is placed on the judgment of the Hon'ble Mumbai Tribunal in the case of Assessment Year: 2014-2015 M/s. Vasupujya Enterprises Pvt. Limited
ACIT vs. Gagandeep Infrastructure M. Ltd. (2014) 40 CCH 0128 Mum. Trib... CIT vs. Anshika Consultants Pvt. Ltd. (2015) 93 CCH 0016 Del. HC CIT vs. Precision Finance Pvt. Ltd. (1994) 208 ITR 465 (Cal) CIT vs. Orissa Corporation Pvt. Ltd.(1986) 159 ITR 0078 ACIT vs Govind Ram Agarwal (2000) 19 CCH 0339 Kol. Trib. CIT vs Green Infra Limited reported in [2017] 392 ITR 7 (Born) Commissioner of Income-tax v. lovely Exports P. Ltd.[299] ITR 268] Nemi Chand Kothari v. Commissioner of Income-tax [264 ITR 254] CIT v . Expo Globe India Ltd. (2014) 361 ITR 147 (Delhi) CIT vs. Oasis Hospitalities Pvt. Ltd. and others (333 ITR 119) Commissioner of Income-tax v. Suresh Kumar Kakar [2010] 324 ITR 0231(Del) CIT- vs. Steller Investment Ltd. (1991) 192 ITR 287 (Del) CIT vs Achal Investment Ltd. (2004) 268 ITR 211 Commissioner of Income-tax v. Winstral Petrochemicals P. Ltd. [330 ITR 603]
In view of the above submission and judicial precedents, it is humbly urged before your goodself to direct the learned AO to delete the addition of Rs.15,67,92,000/- made u/s.68 of the Act since the basis of premium stands explained and all the ingredients of section 68 of the Act stands established by the appellant”.
The above submissions made by the assessee along with the supporting documentary evidence were forwarded by the ld. CIT(Appeals) to the Assessing Officer for verification. The Assessing Officer in turn submitted the remand report to the ld. CIT(Appeals) giving his comments as under:- “Ground No. 1- Addition u/s.68 of the Act - Rs.15,67,92,000/- Para No.1 Facts on record - no comments. Para No.2 Facts on record - no comments.
Assessment Year: 2014-2015 M/s. Vasupujya Enterprises Pvt. Limited
Para No.3- The Assessing Officer has issued letters u/s.133(6) to the alleged share- subscribers at the given address. But there was no compliance with respect to the notice u/s.133(6) of the Act. The fact was brought to the notice of the assessee. Tne assessee did not furnish any documents so as to establish the creditworthiness/source of fund in the hands of the subscribers.
Para No. 4- It is fact that the Assessing Officer has added back the amount of Rs.15,67,92,000/- u/s.68 of the Act. However, the Assessing Officer had also noted that "no explanation regarding source of capital was received from the assessee. It appears that the Assessing Officer has omitted to include the amount of share capital with the premium of Rs.15,67,92,000/-. It is not to presume that the Assessing Officer has not disputed the amount of share capital of Rs.27,80,000/-. Regarding submission of the Valuation Report under Rule 11UA, it appears that the same was submitted on the date of assessment order but definitely after the finalization of the assessment order. Further, the same has no bearing on the addition u/s.68 in light of failure on the part of the assessee to substantiated the creditworthiness/source of fund in the hands of the share-subscribers.
Para No. 5- The submission of the assessee that the assessment was made without giving sufficient opportunity to the appellant to adduce evidence relevant to ground of appeal is not factually correct. There was utter non- compliance on the part of the assessee as noted hereinbefore. The assessee was informed about the non-compliance on the part of share- subscribers and was asked to show cause as to why the amount of share premium claimed to have been received not to be added back u/s.68 of the Act. The assessee had filed Valuation Report under Rule 11UA [though after the completion of the assessment] but did not reply to the show cause notice nor sought any adjournment for that purpose. Therefore, it is not correct that the assessee was not given reasonable opportunity of being heard,
Para No.6 - The submission of the assessee is applicable in the case of genuine subscription of shares. In this case, the assessee failed to substantiate the creditworthiness/source of fund for investment in its shares.
It is fact that the assessee had shown the credit of the amount in its bank account but did not furnish any document so as to establish the creditworthiness/source of fund in the hands of the Investors.
It is fact that the share premium is to be decided by the Board of Directors. But , since in this case, the assessee has failed to establish the creditworthiness, the reasonableness of the Assessment Year: 2014-2015 M/s. Vasupujya Enterprises Pvt. Limited premium is not an issue albeit the fact that the assessee- company had shown share holders' fund at Rs.87,04,88,434/- [after adjusting negative balance, of Reserve & Surplus (cumulative losses) of Rs.65,91,54,035] and investment of Rs.139,76,54,438/- but did not earn any "Revenue from operation."
Para No.7 -Reply to this paragraph has already been noted in comment against para No. 6 above. However, the assessee's argument regarding submission of bank details and confirmatory letters from the investors is not factually correct.
Regarding the decisions of various Hon'ble Courts (continuation of the para No, 7), it is submitted that the assessee had only submitted the names, addresses and PAN of the investors. But the assessee did not substantiate the genuineness of the transactions as none of the alleged investors had replied to letters issued u/s.133(6) to examine their creditworthiness/source of fund. In this respect, the observation of the Hon'ble jurisdictional High Court in the case of M/s. Rajmandir Estates (P) Ltd. [386 ITR 162] is considered to be very much pertinent. In that case Their lordship held that apparently, the identities of the investors are known but, having regard to the facts of the case, the creditworthiness of the investors have to be proved as genuine. The investor-companies must have their own fund. In cases, where the fund was infused buy some other company and from some other company to that company, the transactions are nominal rather than real. The onus is on the assessee to prove the creditworthiness/source of fund in the hands of the investors.
Para No.8 -Cash Credits- The main contention of the assessee was that the inflow and outflow of fund was made through banking channels and the investor companies were income-tax assessee, it is submitted that there were numerous decision against the above submission of the assessee. The befitting reply to the observations of the assessee lies in the observations of the Hon'ble Calcutta High Court in the case of M/s. Rajmandir Estates (P) Ltd.[supra].
The above comments may kindly be noted with the fact that the assessee did not furnish any documentary evidence before the Assessing Officer about the creditworthiness of the investors vis-a-vis genuineness of the transactions, in spite of the fact that the assessee was given reasonable opportunity of being heard”.
The remand report submitted by the Assessing Officer was sent by the ld. CIT(Appeals) to the assessee-company for its comments/rejoinder.
Assessment Year: 2014-2015 M/s. Vasupujya Enterprises Pvt. Limited The assessee was also called upon by the ld. CIT(Appeals) to show-cause as to why even the amount of Rs.27,80,000/- received during the year under consideration on account of share capital along with the share premium should not be added to its total income under section 68 and the income to that extent should not be enhanced. As noted by the ld. CIT(Appeals), the assessee, however, failed to offer any explanation in this regard. Keeping in view this failure of the assessee as well as for the reasons given in his impugned order, the ld. CIT(Appeals) not only confirmed the addition of Rs.15,67,92,000/- made by the Assessing Officer under section 68 by treating the share premium as unexplained cash credit but also enhanced the same by Rs.27,80,000/- by treating even the share capital amount received by the assessee during the year under consideration as unexplained cash credit. Aggrieved by the order of the ld. CIT(Appeals), the assessee has preferred this appeal before the Tribunal.
We have heard the arguments of both the sides and also perused the relevant material available on record. The main contention raised by the ld. Counsel for the assessee before us is that proper and sufficient opportunity of being heard on this issue was not given either by the Assessing Officer or even by the ld. CIT(Appeals). He has submitted that during the course of original assessment proceedings, proper and sufficient opportunity was not given by the Assessing Officer to the assessee to explain the relevant cash credit representing share premium amount in terms of section 68 by producing the relevant documentary evidence and when such documentary evidence filed by the assessee during the course of appellate proceedings before the ld. CIT(Appeals) along with the written submission was forwarded by the ld. CIT(Appeals) to the Assessing Officer for verification, the Assessing Officer did not give proper and sufficient opportunity to the assessee even during the course of remand proceedings to support and substantiate its case on the issue. He has invited our attention to the relevant portion of the remand report Assessment Year: 2014-2015 M/s. Vasupujya Enterprises Pvt. Limited submitted by the Assessing Officer to the ld. CIT(Appeals) as extracted in the impugned order of the ld. CIT(Appeals) to point out that the amount in question was treated as unexplained cash credit mainly for the reason that the notices issued by the Assessing Officer under section 133(6) during the course of remand proceedings to the share subscribers had remained un-complied with. He has contended that the documentary evidence produced by the assessee to support and substantiate its case, however, was completely overlooked by the Assessing Officer as well as by the ld. CIT(Appeals) and without affording proper and sufficient opportunity to the assessee to meet the objections raised by the Assessing Officer in the remand report, the ld. CIT(Appeals) not only confirmed the addition made by the Assessing Officer on account of share premium amount by treating the same as unexplained cash credit but also made a further addition of Rs.27,80,000/- by treating even the share capital amount as unexplained cash credit. He has contended that the assessee-company is in a position to produce all the share subscribers along with the relevant documentary evidence for the verification of the Assessing Officer and urged that an opportunity may be given to the assessee to do so by sending the matter back to the Assessing Officer keeping in view the violation of principles of natural justice by the authorities below. Keeping in view all the facts and circumstances of the case as explained by the ld. Counsel for the assessee, we consider it fair and proper and in the interest of justice to give one more opportunity to the assessee-company to explain the relevant cash credit representing share capital and share premium amount in terms of section 68 by producing the concerned share subscribers along with the relevant documentary evidence for verification before the Assessing Officer. Even the ld. D.R. has not raised any objection for sending the matter back to the Assessing Officer for verification. The impugned order passed by the ld. CIT(Appeals) on this issue is accordingly set aside and the matter is restored to the file of the Assessing Officer for deciding the same afresh after giving proper and sufficient opportunity to the assessee to support Assessment Year: 2014-2015 M/s. Vasupujya Enterprises Pvt. Limited and substantiate its case by producing the concerned share subscribers along with the relevant documentary evidence for verification.
In the result, the appeal of the assessee is treated as allowed for statistical purposes. Order pronounced in the open Court on December 11, 2019.