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Income Tax Appellate Tribunal, “A” BENCH, KOLKATA
Before: SHRI RAJESH KUMAR, AM & SHRI PRADIP KUMAR CHOUBEY, JM
This is an appeal preferred by the Department and CO by the assessee against the order of the Commissioner of Income-tax (Appeals), kolkata-21,(hereinafter referred to as the “Ld. CIT(A)”] dated 29.02.2024 for the AY 2013-14.
First of all, we will adjudicate the departments appeal.
The facts in brief are that the assessee filed its return of income as nil on 06.09.2013, declaring total loss of ₹14,487/-/-. The return was processed u/s 143(1) of the Act on 07.03.2014, accepting the return of income. The case of the assessee was reopened u/s 147 of the Act, after the AO received information that assessee is a beneficiary of bogus share capital of ₹1,48,00,000/- and accordingly, notice u/s 148 of the Act on 22.09.2017. The assessee complied with said notice by filing return of income on 15.09.3028. Thereafter, the statutory notices u/s 143(2) & 142(1) of the Act were issued , along with questionnaire and were duly served upon the assessee. They were replied from time to time furnishing the details called for by the ld. Assessing Officer. The assessee noted that the assessee has issued equity shares capital to four parties on face value of ₹10 each thereby raising a sum of ₹1,48,00,000/-. The ld. AO has given the details of these companies in the assessment order itself. According to the ld. AO, during search and pre-search operation, some information was collected that the assessee who is related to Saraogi Group has availed some bogus accommodation entries in the form of share capital. The assessee filed before the ld. AO in respect of three
The ld. CIT (A) allowed the appeal of the assessee by observing and holding as under:-
“Discussion & Findings I have carefully examined the impugned assessment order, the submissions of the appellant, remand report, rejoinder to remand report, the citations relevant to this appeal as well the other materials on record. Thereafter, this appeal, ground-wise, is being disposed as under: This ground agitates against the action of the AO in making addition of a sum of Rs. 1,48,00,000/- on account of share application money received on the ground that the share applicants were not found at the given address. During the year under consideration the assessee company had raised share capital & premium amounting to Rs.1,48,00,000/-. The assessee company received share capital of Rs.13,00,000/- from M/s Dynamic Sarees Pvt. Ltd., Rs.50,00,000/- from Berhampore Finance & Leasing Pvt. Ltd., Rs.73,00,000/- from M/s Pilot Barter Pvt. Ltd and Rs.12,00,000/- from M/s Swift Barter Pvt. Ltd
Name of Company No. of shares Face Share Premium Share Capital Value Raised in Rs. Dynamic Sarees P Ltd. 1,30,000 Rs.10/- Nil 13,00,000/-
Berhampur Finance & 5,00,000 Rs.10/- Nil 50,00,000/- Leasing Ltd. Pilot Barter Ltd. 7,30,000 Rs.10/- Nil 73,00,000/- Swift Barter Pvt. Ltd 1,20,000 Rs.10/- Nil 12,00,000/- Total 1,48,00,000/-
It is evident that the shares were issued at par and no premium was charged. The appellant in his submission has stated that the share application money was received through proper banking channels, and that the share holder companies had sufficient fund in their books of account for the purpose of investment & the investments are reflected in their books of account. The appellant has submitted the Bank account statements of the shareholders to confirm that the transactions were made through banking channels. In the course of assessment proceedings details of share capital raised i.e., name & address of the share applicants, no of shares allotted and amount along with Form No- 2 filed with ROC, ITR acknowledgement, relevant bank statements showing receipt of such share capital, copies of audited accounts of the share applicants, share application forms etc were submitted before the AO by the appellant. On perusal of the assessment order, it is observed that the AO made the additions on the following grounds. i. The share subscribers were not found in the given address ii. The assessee did not produce the director of the subscriber company. iii. Share applicant companies disclosed meager income The documents submitted by the appellant have been perused. The appellant has stated that the share applicant companies regularly filed their income tax returns. As per documents placed on record, it is observed that all the share applicant companies regularly file their income tax returns which are duly processed u/s 143(1). From the audited books of account of the three share subscriber companies, viz. the following facts emerge:
Name of Company Capital and Reserves Investment with assessee Dynamic Sarees P Ltd. 1,32,38,356/- 13,00,000/- Berhampur Finance & Leasing Ltd. 32,91,75,291/- 50,00,000/- Pilot Barter Ltd. 3,68,88,760/- 73,00,000/- Swift Barter Ltd. 8,82,24,382/- 12,00,000/-
Evidently all the share applicant companies had sufficient funds with them for the purpose of making such investments. In support of Genuineness of Transaction, the appellant submitted Bank statements showing the transactions through banking channel. I find that the AO has not been able to dispute these facts placed by the appellant, both during the course of assessment proceedings as well as appellate proceedings. The agitation of the appellant is further vindicated by the following statement in his submissions during the course of appeal proceedings that : “ It may be stated here that the same company m/s Berhampur finance & leasing pvt. ltd. contributed share capital in another group company of the assessee namely kohinoor sarees p ltd which case also was reopened and the Ld AO accepted the capital in respect of the said company but added only in respect of the receipt from M/s Earth Tradelink pvt. Ltd. which too was deleted by the ld CIT(A), a copy of order of Ld CIT(A) is enclosed herewith.” The said assessment order pertaining to M/s Kohinoor Sarees Pvt Ltd for A.Y: 2009-10 u/s 143(3) r.w.s 147 has been perused and it was observed that the AO had reopened the proceedings u/s 147 based upon the information received from ADIT(Inv) Unit-3(4) towards receipt of share capital to the tune of Rs.2,10,00,000/-. Out of the said amount, an amount of Rs.50 Lakhs was raised from M/s Berhampur Finance & Leasing Ltd. The AO in his assessment order, has accepted the entire share capital received from M/s Berhampur Finance & Leasing Ltd. and has not made any addition towards the same. Owing to all these reasons, a Remand Report was called for from the present Assessing Officer for her comments. However, it is observed from the Remand Report submitted by the AO, no discussion was made by the AO with regards to any further enquiries conducted in this regard especially in view of the contentions raised by the appellant. The contentions raised by the appellant has therefore not been controverted by the AO. In the said remand report, the AO has only reiterated that during the course of assessment proceedings Directors of these three share subscriber companies did not appear in response to the notices u/s 131. On the above point appellant submitted the rejoinder to the remand report. From the rejoinder, following points were noted with regard to the said ground: (a) During Assessment proceedings the appellant submitted following details to prove the genuineness of the transaction, identity & creditworthiness of the shareholders: (i) share applications (ii) allotment letters (iii) MOA and AOA of the shareholders (iv) Financial statement of the relevant Assessment years, (v) copy of bank statements (vi)
In view of the facts and the ratio laid down in the various decisions as discussed above, we find no infirmity in the order of the ld. CIT (A) and consequently uphold the same. The appeal of the Revenue is dismissed.
Coming to CO of the assessee, the assessee has raised legal issue. We find that the ld. AO in the reasons recorded referred to the material found during the course of search and based on the search enquiries that the assessee is a beneficiary of bogus share capital. We note that that the ld. AO has not made any enquiry independently and just made the conclusion as to reopening the assessment based on the search enquiries. Therefore, this is the case of borrowed satisfaction
In the result, the appeal of the Revenue is dismissed and cross objection by the assessee is allowed.
Order pronounced in the open court on 20. 12.2024.
Sd/- Sd/- (PRADIP KUMAR CHOUBEY) (RAJESH KUMAR) (JUDICIAL MEMBER) (ACCOUNTANT MEMBER) Kolkata, Dated: 20.12.2024 Sudip Sarkar, Sr.PS Copy of the Order forwarded to :
1. 1. The Appellant 2. The Respondent 3. CIT DR, ITAT, 4. 5. Guard file. BY ORDER, True Copy// Sr. Private Secretary/ Asst. Registrar Income Tax Appellate Tribunal, Kolkata