STEELEX ELECTROCAST P. LTD.,KOLKATA vs. ITO, WARD - 3(2), KOLKATA, KOLKATA

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ITA 304/KOL/2018Status: DisposedITAT Kolkata30 August 2018AY 2006-073 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 of Rs. 4,00,000 under Section 68 was not justified. It relied on the jurisdictional High Court's decision that the AO should verify with the creditor's AO if the creditor is an income tax assessee, rather than disbelieving the transaction outright.

What were the facts?

The assessee received share application money of Rs. 4,00,000 from four individuals. The assessee provided their identity, addresses, income tax file numbers, and confirmed the amounts were received via crossed account payee cheques.

What were the issues?

Whether the addition of share application money under Section 68 is sustainable when the identity of the shareholders is established and they are income tax assessees, with transactions made via account payee cheques.

Which sections of the Income-tax Act were involved?

Section 68

AI-generated summary — verify with the full judgment below

Income Tax Appellate Tribunal, BENCH ‘SMC’ KOLKATA

Before: Hon’ble Shri J.Sudhakar Reddy, AM]

This is an appeal filed by the assessee directed against the order of the Commissioner of Income Tax-(A)-1, Kolkata dated 08.12.2017 passed u/s 250 of the Income Tax Act, 1961 (the ‘Act ‘) relating to A.Y. 2006-07.

2.

The sole issue that arises for adjudication is addition of Rs.4, 00,000/- u/s 68 of the Act. The assessee has received share applications money from Shri Daroga Pathak, Kalawati Pathak, Mahesh Kumar Sharma and Bishnu Kumar Sarawayi @ Rs.1 lakh each. The assessee has furnished the identity of these persons. These four share holders are income tax assesses. The details that have been filed by the assessee before the revenue authorities are a) copies of the share applications duly signed by these shareholders, b) complete adress of these persons along with their income tax file numbers. The amounts were received by way of crossed account payee cheque. Under the circumstances the addition in question cannot be made u/s 68 of the Act in view of the judgment of the Jurisdictional High Court of Calcutta in the case of CIT vs M/s Dataware Private Limited in ITAT No.263 of 2011 GA NO.2856 of 2011 dated 21.09.2011 wherein at page-4 it is held as follows :-

Steelex Electrocast Pvt.Ltd. A.Y.2006-07 2

“In our opinion, in such circumstances, the Assessing officer of the assessee cannot take the burden of assessing the profit and loss account of- the creditor when admittedly the creditor himself is an income tax assessee. After getting the PAN number and getting the information that the creditor is assessed under the Act, the Assessing officer should enquire from the Assessing Officer of the creditor as to the genuineness of the transaction and whether such transaction has been accepted by the Assessing officer of the creditor but instead of adopting such course, the Assessing officer himself could not enter into the return of the creditor and brand the same as unworthy of credence.

So long it is not established that the return submitted by the creditor has been rejected by its Assessing Officer, the Assessing officer of the assessee is bound to accept the same as genuine when the identity of the creditor and the genuineness of transaction through account payee cheque has been established”.

3.

The learned Departmental Representative relies on the orders of AO as well as CIT(A) and submits that the share holders have not been produced before the AO. In my opinion no adverse inference could be drawn as the AO had income tax details of all these share holders and he could have verified the same. In view of the above discussion this addition of Rs.4 lakhs is hereby deleted.

4.

In the result the appeal of the assessee is allowed. Order pronounced in the Court on 30.08.2018. Sd/- [ J.Sudhakar Reddy ] Accountant Member Dated : 30.08.2018. [RG Sr.PS] Copy of the order forwarded to: 1.Steelex Electrocast P.Ltd., C/o S.N.Ghosh & Associates, Advocates “SEBEN BROTHERS’LODGE”, P.O.Buroshibtala, P.S.Chinsurah, Dist. Hooghly, Pin : 712 105. 2. I.T.O., Ward-3 (2), Kolkata. 3. C.I.T.(A)- 1, Kolkata 4. C.I.T-1, Kolkata 5. CIT(DR), Kolkata Benches, Kolkata. True Copy By order,

Senior Private Secretary Head of Office/D.D.O, ITAT Kolkata Benches Steelex Electrocast Pvt.Ltd. A.Y.2006-07 3

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