POTENTIAL TRADE & CREDIT PVT. LTD.,KOLKATA vs. ITO, WARD - 5(2), KOLKATA, KOLKATA

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ITA 1319/KOL/2018Status: DisposedITAT Kolkata26 September 2018AY 2012-133 pages
AI SummaryPartly Allowed

What did the Tribunal hold?

The Tribunal held that the issue of share capital needed re-examination by the AO due to procedural lapses and the assessee's claim of proving identity, genuineness, and creditworthiness. The disallowance of expenditure related to exempt income was not sustainable as the assessee had not derived any exempt income.

What were the facts?

The assessee's appeal concerned the addition of share capital and premium of Rs. 12.32 lacs as unexplained and disallowance of expenditure related to exempt income. The CIT(A) had passed an ex parte order without proper verification of service.

What were the issues?

Whether the share capital addition was justified and if expenditure related to exempt income could be disallowed in the absence of exempt income.

Which sections of the Income-tax Act were involved?

Section 68,Section 14A

AI-generated summary — verify with the full judgment below

Income Tax Appellate Tribunal, “SMC” BENCH : KOLKATA

Before: Hon’ble Shri S.S. Godara, JM]

Hearing: 17.09.2018Pronounced: 26.09.2018
1.

This assessee’s appeal for assessment year 2012-13 is directed against the CIT(A)-2, Kolkata’s order dated 23.04.2018 passed in case no. 11037/CIT(A)- 2/15-16 upholding the Assessing Officer’s action adding its share capital and premium of Rs. 12.32 lacs to be unexplained u/s 68 of the Act as well as disallowing / adding expenditure of Rs. 2,65,963/- pertaining to exempt income in assessment order dated 31.03.2015, involving proceedings u/s 143(3) of the Income Tax Act, 1961 (in short the ‘ Act’ ).

Heard both the parties. Case file perused.

Potential Trade & Credit Pvt. Ltd. A.Yr. 2012-13 2. It is noticed at the outset that the CIT(A) has passed his lower appellate order ex parte against the assessee. There is no discussion in his order as to whether the assessee had actually been served the hearing notice or not. Coupled with this, I find that the Assessing Officer had added assessee’s share application money of Rs. 12,32,000/- out of Rs. 3,37,80,000/- received during the relevant previous year. It had issued 33,780 shares having face value of Rs. 10 at a premium of Rs. 990 each. It emerges that the assessee successfully proved identity, genuineness and creditworthiness of its share applicants / investor parties apart from the two entities M/s Ambition Mercantile Pvt. Ltd. and M/s Vital Mercantile Pvt. Ltd. involves sums of Rs. 5,00,000/- and Rs. 7,32,000/-; respectively. Learned counsel’s only plea before us that the assessee’s relevant evidence regarding two of its investors’ identity, genuineness and creditworthiness stood on the same footing since the difference therein was that these two entities failed to appear. Learned Departmental Representative is fair enough is not disputed this factual position. I therefore deem it appropriate that larger interest of justice would be served in case the Assessing Officer re-examines the instant issue of genuineness / creditworthiness of the share application money in question amounting to Rs. 12.32 lacs as per law. He shall also make independent enquiries within the provisions of Income Tax Act. This former substantive ground is taken as accepted for statistical purposes.

3.

Coming to latter issue of section 14A read with Rule 8D disallowance of Rs. 2,65,963/-, case file suggests that the assessee has not derived any exempt income during the relevant previous year. We quote hon’ble jurisdictional high court decision in CIT vs. Ashika Global Securities Ltd. ITAT No. 100/2014 GA No. 2122 of 2014 decided on 11.06.2018 to conclude that impugned disallowance 2

Potential Trade & Credit Pvt. Ltd. A.Yr. 2012-13 is not sustainable in absence of any exempt income. The assessee succeeds in its latter substantive ground.

4.This assessee’s appeal is partly accepted in above terms.

Order pronounced in the Court on 26.09.2018

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