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Income Tax Appellate Tribunal, KOLKATA BENCH (SMC
Before: Shri P.M. Jagtap]
order : December 21, 2018 ORDER This appeal filed by the assessee is directed against the order of Ld. CIT(A) – 1, Kolkata dated 15.06.2016 and the solitary issue involved therein relates to the addition of Rs. 7,00,000/- made by the AO u/s 68 which is enhanced by the Ld. CIT(A) to Rs. 35,00,000/- by treating the share capital and share premium amount as unexplained cash credits.
The assessee in the present is a company which is engaged in the business of trading in mercury equipments and accessories, labels etc. The return of income for the year under consideration was filed by it on 30.10.2005 declaring a total income of Rs. 90,596/-. During the course of assessment proceedings, the assessee could not explain satisfactorily share capital of Rs. 7,00,000/- raised during the year under consideration in terms of section 68. The AO, therefore, treated the said amount as unexplained and made addition of Rs. 7,00,000/-
Assessment Year: 2005-06 M/s. Specgraph India Pvt. Ltd. to the total income of the assessee in the assessment completed u/s 144 vide an order dated 31.12.2007.
Against the order passed by the A.O. u/s 144, an appeal was preferred by the assessee before the Ld. CIT(A) challenging inter alia the addition of Rs. 7 lacs made by the A.O. by treating the amount of share capital as unexplained. During the course of appellate proceedings before the Ld. CIT(A), written submissions were filed by the assessee in support of its case on this issue. The said written submissions were forwarded by the Ld. CIT(A) to the A.O. and in the remand report submitted to the Ld. CIT(A) on 12.03.2015, it was admitted by the A.O. that the supporting documents furnished by the assessee at the remand stage, prima facie, corroborated the share applications, list of allottees, bank statement etc. He further stated that independent investigations or enquiry could not be conducted by him as directed by the Ld. CIT(A) due to paucity of time in view of the time barring assessment. In another report submitted to the Ld. CIT(A) on 01.05.2015, the A.O. stated that the assessee company could not produce all the shareholders with their bank statements and other relevant documents for verification/examination on the ground that the matter was more than 10 years old. When this remand report of the A.O. was confronted by the Ld. CIT(A) to the assessee, it was submitted by the assessee that the following documents were duly submitted before the A.O. during the course of remand proceedings for verification of the share capital amount of Rs. 7 lacs and share premium amount of Rs. 28 lacs received during the year under consideration:
Assessment Year: 2005-06 M/s. Specgraph India Pvt. Ltd. “i. Audited Balance Sheet, Profit & Loss Account for the F.Y. 2004-05, A.Y. 2005-06. ii. Copy of resolution of the share subscriber company authorizing them to invest in our company. iii. Copy of memorandum and articles of association of share holder companies permitting them in invest in shares of other companies. iv. Bank statement of the shareholder companies showing the source of such investment. v. Bank statement of our company where the above share application money were deposited.”
It was also submitted on behalf of the assessee company before the Ld. CIT(A) that even the premium of Rs. 40 per share charged by it was properly justified by submitting the relevant financial statements. The ld. CIT(A) did not find merit in the submissions made on behalf of the assessee company and proceeded not only to confirm the addition of Rs. 7 lacs made by the A.O. on account of share capital by treating the same as unexplained cash credits u/s 68 but also made a further addition of Rs. 28 lacs by treating the share premium amount received by the assessee also as unexplained cash credits. Aggrieved by the order of the Ld. CIT(A), the assessee has preferred this appeal before the Tribunal.
I have heard the arguments of both the sides and also perused the relevant material available on record. The learned counsel for the assessee has submitted that proper and sufficient opportunity was not given by the AO to the assessee during the course of assessment proceedings to explain the relevant cash credits in the form of share capital in terms of section 68 by producing the relevant supporting evidence. He has submitted that when such opportunity was given by the Ld. CIT(A) by remanding the matter to the Assessing Officer, the assessee filed the relevant documentary evidence to prove the identity
Assessment Year: 2005-06 M/s. Specgraph India Pvt. Ltd. and capacity of the concerned share applicants as well as the genuineness of the relevant transactions. He has contended that the AO however did not appreciate the documentary evidence placed on record by the assessee and stated in the remand report submitted to the Ld. CIT(A) that the assessee company could not produce the concerned shareholders with their bank statement for verification on the ground that the matter was more than 10 years old. He has contended that the assessee had never expressed such inability to produce the concerned shareholders for examination before the AO and the Ld. CIT(A) was not justified in relying on the remand report submitted by the AO to draw an adverse inference against the assessee. He has contended even the share premium of Rs. 40 per share charged by the assessee was duly justified by the assessee on the basis of the relevant financial statements and the Ld. CIT(A) was not justified in treating the share premium amount of Rs. 28 lacs received by the assessee as unexplained and enhancing the addition made by the AO to that extent. He has contended that the assessee is very much in a position to produce the shareholders for verification before the AO and also to produce all the relevant documentary evidence to explain the share capital as well as share premium amounts in terms of section 68 and urged that an opportunity may be given to the assessee by sending the matter back to the Assessing Officer. Although the learned DR has opposed this plea made by the learned counsel for the assessee by submitting that proper and sufficient opportunity has already been given by the authorities below to the assessee, I consider it fair and proper and in the interest of justice to give one more opportunity to the assessee to explain the relevant cash credits representing share capital and share premium amounts in terms of section 68 keeping in view all the facts and circumstances of the case. I accordingly set aside the impugned order passed by the Ld.
Assessment Year: 2005-06 M/s. Specgraph India Pvt. Ltd. CIT(A) and restore this matter to the file of the AO for deciding the same afresh after giving one more opportunity of being heard to the assessee. As undertaken by the learned counsel for the assessee, the assessee shall make due compliance before the Assessing Office and extend all possible cooperation in order to enable the AO to complete the assessment afresh on this issue expeditiously.
In the result, the appeal of the assessee is treated as allowed for statistical purpose. Order Pronounced in the Open Court on 21st December, 2018.