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Income Tax Appellate Tribunal, KOLKATA BENCH (B
Before: Shri P.M. Jagtap, AM & Shri S.S. Viswanethra Ravi, JM]
order
: July 27, 2018 ORDER
Per P.M. Jagtap, AM
This appeal is preferred by the revenue against the order of Ld. CIT(A) – 1, Kolkata dated 14.07.2016 and the solitary issue involved therein relates to the deletion by the Ld. CIT(A) of the addition of Rs. 54.70 crores made by the A.O. by treating the share capital and share premium as unexplained cash credit.
The assessee in the present case is a company which is engaged in the trading business. It did not file any return of income for the year under consideration under section 139(1) of the Act. A notice under section 148 therefore was issued by the A.O. in response to which the return of income for the year under consideration was filed by the assessee on 25.03.2010 declaring a total income of Rs. 8,870/-. Thereafter, assessment was completed by the A.O. under section 147/143(3) of the Act vide an order dated 05.05.2010 accepting the Assessment Year: 2005-06 M/s. Sankhuwala Commercial (P) Ltd. total income as declared by the assessee company in its return of income. The said assessment made by the A.O. was subsequently set aside by the Ld. CIT(A) vide an order dated 03.01.2013 passed under section 263 by treating the same as erroneous and prejudicial to the interest of the revenue with the direction to the A.O. to make the assessment afresh after examining the issue relating to share capital and share premium amount of Rs. 54.70 crores appearing in the balance sheet of the assessee in terms of section 68.
As per the direction of the A.O., notice under section 142(1) was issued by the A.O. to the assessee company on 20.01.2014. The said notice however was returned back by the postal authority unserved as the assessee company was not found at the given address. Summons issued by the A.O. under section 131 to the directors of the assessee company as well as to the directors of the shareholder companies also were returned back unserved by the postal authority. The assessee company thus failed to establish the identity as well as creditworthiness of the concerned shares-holders and also failed to establish the genuineness of the relevant transactions. The only claim made by the assessee company in this regard that the entire amount of share capital and share premium having been received in the earlier previous year ended on 31.03.2000 and not in the year under consideration was also found by the A.O. to be not substantiated by the relevant documentary evidence. The A.O. therefore treated the entire amount of share capital and share premium of Rs. 54.70 crores as unexplained cash credit and made addition to that extent to the total income of the assessee under Assessment Year: 2005-06 M/s. Sankhuwala Commercial (P) Ltd. section 68 in the assessment completed under section 147/143(3)/263/144 of the Act vide an order dated 20.03.2014.
Against the order passed by the A.O. under section 147/143(3)/263/244, an appeal was preferred by the assessee before the Ld. CIT(A) disputing the addition of Rs. 54.70 crores made by the A.O. under section 68 by treating the share capital and share premium amount as unexplained cash credit. During the course of appellate proceedings before the Ld. CIT(A), it was contended on behalf of the assessee company inter alia that the entire amount of Rs. 54.70 crores towards share capital and share premium was received by it in the year ended on 31.03.2000 and not in the year under consideration. In order to support and substantiate this claim, the following documentary evidence was filed by the assessee company before the Ld. CIT(A): “i. Audited accounts for the year ended 31.03.2000 of the appellant company. ii. Copy of Form No. 5 for increase in authorized capital. iii. Bank statement of appellant company being current account no. 2324 with Canara Bank, Rabindra Sarani Branch for the period from 01.04.1999 to 31.03.2000. iv. Share application alongwith copy of bank statement of respective shareholders of the relevant period ending 31.03.2000 alongwith their audited accounts for the year ended on 31.03.2000. v. Copy of Form No. 2 (return of allotment) alongwith list of allottees for allotment of 54,70,000 shares on 30.10.1999. vi. Annual return filed with ROC for AGM in 28.09.2000. vii. Audited accounts of appellant for the year ended 31.03.2001 to 31.03.2005.”
It was contended on behalf of the assessee company before the Ld. CIT(A) that the amount in question towards share capital and share premium having been received by it in the earlier year and not Assessment Year: 2005-06 M/s. Sankhuwala Commercial (P) Ltd. in the year under consideration, the addition made by the A.O. under section 68 by treating the same as unexplained cash credit was not sustainable. In support of this contention, reliance was placed by the assessee on the decision of Hon’ble Delhi High Court in the case of CIT vs Usha Stud Agricultural Farms Ltd. 301 ITR 384 and that of Hon’ble Rajasthan High Court in the case of CIT vs Parmeshwar Bohra 301 ITR 404.
The Submissions filed by the assessee along with the relevant supporting documentary evidence were forwarded by the Ld. CIT(A) to the A.O. for his verification and comments. In the remand report submitted to the Ld. CIT(A), the A.O. offered his comments after verifying the supporting documentary evidence filed by the assessee as under: “As directed, the assessee company was requested to furnish evidences in support of the claim made before you that share capital along with share premium for the total sum of Rs. 54,70,00,000/- was actually received during the F.Y. 1999-2000. The assessee company furnished copy of the share application, copy of Form 2 being date of allotment 31.10.1999, a copy of bank statement for the F.Y. 1999-2000 and copy of the bank statement of the share applicants for F.Y. 1999-2000, a copy of the audited accounts for the F.Y. 1999-2000 to 2004-05 along with the copy of the annual return for AGM 28.09.2000 filed with the Registrar of Companies in support of claim. The above claim of the assessee company was also verified from the subscriber companies that the share capital along with share premium for the total sum of Rs. 54,70,00,000/- was actually received by the assessee company during the F.Y. 1999-2000 relevant to A.Y. 2000-01.”
Keeping in view the categorical finding as given by the A.O. in the remand report that the amount in question received towards share capital and share premium, which was treated as unexplained cash credits in the year under consideration was in fact received by the assessee company in the earlier F.Y. 1999-2000 relevant to A.Y. Assessment Year: 2005-06 M/s. Sankhuwala Commercial (P) Ltd. 2000-01, the Ld. CIT(A) held that the same could not be treated as unexplained cash credits for the year under consideration. He accordingly deleted the addition made by the A.O. under section 68 by relying on the decision of Hon’ble Delhi High Court in the case of CIT vs Usha Stud Agricultural Farms Ltd. (supra) and that of Hon’ble Rajasthan High Court in the case of CIT vs Parmeshwar Bohra (supra). Aggrieved by the order of the Ld. CIT(A), the revenue 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. It is observed that the claim of having received the amount in question towards share capital and share premium during the earlier F.Y. 1999-2000 relevant to A.Y. 2000-01 and not during the year under consideration was not accepted by the A.O. during the course of assessment proceedings in the absence of documentary evidence filed by the assessee to support and substantiate the same. During the course of appellate proceedings before the Ld. CIT(A), the assessee company however filed such documentary evidence as additional evidence to support and substantiate its claim that the amount in question on account of share capital and share premium having been received in the earlier year and not in the year under consideration, the addition made by the A.O. by treating the same as unexplained cash credit during the year under consideration was not sustainable. The said documentary evidence filed by the assessee was forwarded by the Ld. CIT(A) to the A.O. along with the submission made by the assessee for his verification and comments. As per the direction of the Ld. CIT(A), the A.O. verified the documentary evidence filed by the assessee and Assessment Year: 2005-06 M/s. Sankhuwala Commercial (P) Ltd. found the same to in order. He also verified the claim of the assessee company from the share subscriber companies and found that the entire share capital along with share premium amounting to Rs. 54.35 crores was actually received by the assessee company during the F.Y. 1999-2000 relevant to A.Y. 2000-01. Keeping in view this categorical finding given by the Assessing Officer in his remand report after verifying the claim of the assessee company from the relevant documentary evidence as well as from the share subscriber companies, the Ld. CIT(A) held that the amount in question towards share capital and share premium having been received by the assessee company in the earlier year, the same could not be treated as unexplained cash credit for the year under consideration. To arrive at this conclusion, the Ld. CIT(A) relied on the following judicial pronouncements: “i. In CIT v. Usha Stud Agricultural Farms Ltd. 301 ITR 384 (Delhi) it was held in para (6) of the order: ‘(6) Here, the CIT(A) has deleted the addition of Rs. 15 lacs mainly on the ground that this credit balance of Rs. 15 lacs is being reflected in the accounts of the assessee over the past four to five years or so and hence this was not a fresh credit entry of the previous year under consideration and these credit entries were already made and accounted for in the A.Y.s 1995-96 and 1997-98 which were introduced in the form of advance against breeding stallions owned by the assessee and thus these credit entries did not relate to the year under consideration for being considered under section 68 of the Act. Since it is a finding of fact recorded by the CIT(A) that this credit balance appearing in the accounts of the assessee, does not pertain to the year under consideration, under these circumstances, the A.O. was not justified in making the impugned addition under section 68 of the Act and as such no fault can be found with the order of the Tribunal which has endorsed the decision of the CIT(A).’ ii. In CIT v. Parameshwr Bohra 301 ITR 404 (Rajasthan) it was held in para (5) of the order: ‘(5) On the merit of the additions made in the income of the assessee, there is a clear finding, and about which there is no dispute, that the amount added in the income of the assessee as unexplained investment or Assessment Year: 2005-06 M/s. Sankhuwala Commercial (P) Ltd. cash credit in the A.Y. 1993-94 was the same amount which was credited in the books of account of the assessee for previous year ending on 31st March, 1992. The Tribunal has categorically come to a finding, and that finding is not under challenge, that this is not a case of cash credit entered in the books of account of the assessee during the year but it is a case in which the assessee has invested the capital in the business and this amount was shown as a closing capital as on 31st March, 1992 and on 1st April, 1992 it was an opening balance. Considering this aspect, the Tribunal has come to the conclusion that what was already credited in the books of account ending on 31st March, 1992 for financial year 1991- 92 relevant to A.Y. 1992-93 cannot be an unexplained cash credit or investment in the books of account maintained for the financial year 1992-93, the accounting period of which ends on 31st March, 1993 so as to warrant its consideration as unexplained investment or cash credit for its relevant A.Y. 1993-94. It does not require any elaborate argument that a carried forward amount of the previous year does not become an investment or cash credit generated during the relevant year 1993-94.”
As held by the Hon’ble Delhi High Court in the case of Usha Stud Agricultural Farms Ltd. (supra) as well as by the Hon’ble Rajasthan High Court in the case of Parmeshwar Bohra (supra), the amount received by the assessee in the earlier year and not in the year under consideration and duly credited in the books of account of the assessee for such earlier year cannot be added under section 68 as unexplained cash credit for the year under consideration. In our opinion, the ratio of the said two judicial pronouncements is squarely applicable to the facts of the present case and the Ld. CIT(A) was fully justified in deleting the addition made by the A.O. under section 68 during the year under consideration by treating the amount in question towards share capital and share premium which was received by the assessee company in the earlier year and not in the year under consideration. At the time of hearing before us, the learned DR has not disputed this factual position or even the Assessment Year: 2005-06 M/s. Sankhuwala Commercial (P) Ltd. applicability of the ratio of the said two judicial pronouncements relied upon by the Ld. CIT(A) while deleting the addition made by the A.O. under section 68.
It is also observed that the similar issue involving identical facts and circumstances has been decided by the coordinate bench of this Tribunal vide its order dated 05.07.2018 passed in wherein the order of the Ld. CIT(A) deleting the addition made by the A.O. under section 68 by treating the share capital and share premium amount received in the earlier year as unexplained cash credit in the subsequent year was upheld by the Tribunal for the following reasons given in paragraph no 4 & 5 of its order: “4. We have heard rival submissions and gone through the facts and circumstances of the case. We note that the assessee is an income tax assessee under PAN AABCJ9581H of the Tax Ward 1(4), Kolkata. The A.O. has passed the assessment order dated 21.03.2014 u/s 147/143(3)/263/144 of the Act. The A.O. has made the addition u/s 68 of the Act, therefore, we would like to reproduce section 68 of the Act which reads as under: ‘Where any sum is found credited in the books of an assessee maintained for any previous year and the assessee offers no explanation about the nature and sources thereof or the explanation offered by him is not, in the opinion of the Assessing Officer, satisfactory, the sum so credited may be charged to income tax as the income of the assessee of that previous year.’ 5. On perusal of the aforesaid provision of law shows that an addition u/s 68 of the Act for making addition u/s 68 as unexplained cash credit the following condition has to be satisfied: a. sum must be found credited in the books of the assessee for any previous year; b. on being not satisfactorily explained, sum so credited may be treated as income of that previous year.
Assessment Year: 2005-06 M/s. Sankhuwala Commercial (P) Ltd. Therefore, for the purpose of section 68 of the Act the year in which the sum is credited in the books of the assessee is very relevant. The main contention of the assessee was that the impugned addition amount/sum was credited in the books of the assessee for financial year/previous year 1999-2000 relevant A.Y. 2000-01. We note that the amount added in the income of the assessee as unexplained cash credit in the A.Y. 2005-06 was the same amount which was credited in the books of account of the assessee in the previous year ending on 31.03.2000. It is not the case of the revenue that this amount of credit entered in the books of account of the assessee during the year ending on 31.03.2005. The assessee’s case is that this is the closing capital as on 31.03.2000 and on 01.04.2000 it was an opening balance. Therefore, the Ld. CIT(A) concluded that what was already credited in the books of account ending on 31.03.2000 for A.Y. 1999-2000 relevant to A.Y. 2000-01 cannot be an unexplained cash credit in the books of account maintained for the F.Y. 2004-05 relevant to A.Y. 2005-06 so as to warrant this consideration as unexplained cash credit for relevant A.Y. 2005-06.”
Respectfully following the decision of the coordinate bench of this Tribunal in the case of Geoletic Supply Pvt. Ltd. (supra) as well as that of Hon’ble Delhi High Court in the case of Usha Stud Agricultural Farms Ltd. (supra) and Hon’ble Rajasthan High Court in the case Parmeshwar Bohra (supra), we uphold the impugned order of the Ld. CIT(A) deleting the addition made by the A.O. under section 68 by treating the amount of share capital and share premium received during the earlier year as unexplained cash credits for the year under consideration.