DHRUV VANIJYA PRIVATE LIMITED,KOLKATA vs. INCOME TAX OFFICER, WARD 8(2) , KOLKATA

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ITA 867/KOL/2024Status: DisposedITAT Kolkata18 November 2024AY 2012-13Bench: SRI RAJPAL YADAV, VICE-PRESIDENT & SRI SANJAY AWASTHI (Accountant Member)5 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 assessee had provided sufficient documentation, including audited financial statements, sales invoice, and bank statements, to establish the genuineness of the transaction. Therefore, the addition made by the AO was unjustified.

What were the facts?

The Assessing Officer (AO) received information that the assessee company obtained accommodation entries and received Rs. 10 Lakh from M/s. Pelican Dealers Pvt. Ltd., which was identified as a 'strike off company'. The AO added this amount as unexplained cash credit under Section 68, which was upheld by the CIT(A).

What were the issues?

Whether the amount received from a 'strike off company' for the sale of shares can be treated as an unexplained cash credit under Section 68 without proper inquiry and providing relied-upon material to the assessee.

Which sections of the Income-tax Act were involved?

Section 68

AI-generated summary — verify with the full judgment below

Income Tax Appellate Tribunal, KOLKATA ‘A’ BENCH, KOLKATA

Before: SRI RAJPAL YADAV, VICE- & SRI SANJAY AWASTHI

order

: November 18th, 2024 ORDER

Per Sanjay Awasthi, Accountant Member:

1.

In this case, a perusal of the impugned order reveals that some information was received by the Assessing Officer (hereinafter referred to as ld. 'AO') from the Investigation Wing indicating that the appellant company was obtaining accommodation entries and had received Rs. 10 Lakh during FY 2011-12 from one M/s. Pelican Dealers Pvt. Ltd. As per the said information M/s. Pelican Dealers Pvt. Ltd. was a shell company and as per the official website of Ministry of Corporate Affairs, the said M/s. Pelican I.T.A. No.: 867/KOL/2024 Assessment Year: 2012-13 Dhruv Vanijya Private Limited. Dealers Pvt. Ltd. was a "strike off company" indicating sub-par credentials. It is understood that a "strike off company" is allegedly a defunct company the name of which has been struck off by the ROC. It is seen from a perusal of the orders below that an amount of Rs. 10 Lakh (impugned amount) was received from this M/s. Pelican Dealers Pvt. Ltd. against sale of 10,000 equity shares of one Chandrima Vintrade Pvt. Ltd. during FY 2011-12. Thereafter, it is seen that reasons were recorded and thereafter, proceedings were initiated for reassessment u/s 147 of the Act. It is observed that the reasons for reopening were duly communicated to the appellant and thereafter, the appellant is seen to have provided documents in the shape of audited financial statements, computation of income, bank statement, sales invoice and ledger confirmation to indicate that the said transaction was duly accounted for and reflected in the books of accounts. It is observed that ITR acknowledgement of M/s. Pelican Dealers Pvt. Ltd. and bank statement were also supplied to the ld. AO. However, the ld. AO doubted the transaction considering the status of M/s. Pelican Dealers Pvt. Ltd. Vis-à-vis the official website and added Rs. 10 Lakh u/s 68 of the Act. 1.1. Before the ld. CIT(A), while the appellant kept on insisting that he had not been supplied with the material relied upon and details of any enquiries made by the ld. AO before arriving at an adverse conclusion leading to the impugned addition, the ld. CIT(A) basically relied on the finding of the ld. AO and upheld the order. Aggrieved with this action, the assessee is in appeal before us through the following grounds of appeal:

1. For that the assessment order passed by the Ld. AO is bad in law as well as on facts.

2. For that the assessment order passed by the Ld. AO without providing the assessee copies of material relied upon, inquiries made and approval obtained before initiating the reassessment proceedings is bad in law.

3. For that the Ld. CIT(A)- NFAC erred in confirming the action of the Ld. AO in assessing Rs. 10 Lakh received during the year on account of sale of investments as unexplained cash credit in spite of the fact that the assessee

Page 2 of 5 I.T.A. No.: 867/KOL/2024 Assessment Year: 2012-13 Dhruv Vanijya Private Limited. filed evidences in support of the same and no deficiencies were found therein.

4. For that the Ld. CIT(A)- NFAC erred in confirming the action of the Ld. AO in assessing For that the Ld. AO erred in assessing Rs. 10 Lakh received during the year on account of sale of investments as unexplained cash credit in spite of the fact that the notice issued to the party to whom the investments were sold was duly served and complied with by it confirming the transaction with the assessee and filing details and documents as called for.

5.

For that even otherwise, as the amount of Rs. 10 Lakh was received on account of sale of investments, the provisions of Sec. 68 does not apply at all.

6.

For that under the facts and circumstances of the case, the additions made by the Ld. AO and confirmed by the Ld. CIT(A) are merely based on surmises and conjectures and without any adverse material on record.

7.

For that the appellant craves leave to add, alter or withdraw any grounds of appeal

on or before hearing of the appeal.”

2. Before us, the ld. A/R has strenuously argued that the identity, creditworthiness and genuineness aspects pertaining to the impugned transaction were duly proved before the ld. AO and hence, the action of invoking Section 68 of the Act on the impugned amount was unjustified. The ld. A/R also averred that all along the appellant had been asking for material on the basis of which M/s. Pelican Dealers Pvt. Ltd. was taken adverse note of and the impugned transaction was thereby held to be tainted. The ld. A/R filed copies of audited accounts and invoice and bank accounts pertaining to the said transaction. 2.1. The ld. D/R while relying on the orders of the authorities below mentioned that the said transaction was justifiably treated u/s 68 of the Act since it pertained to a one-on-one transaction between the assessee and M/s. Pelican Dealers Pvt. Ltd. in the shares of an unlisted company and hence, the appellant should have proved the bona fide of the said transaction to the satisfaction of the ld. AO.

Page 3 of 5 I.T.A. No.: 867/KOL/2024 Assessment Year: 2012-13 Dhruv Vanijya Private Limited. 3. We have considered the rival contentions and also gone through the orders and documents placed before us. In the paper book filed before us the invoice pertaining to the impugned transaction has also been presented for examination. The same is extracted as under:

3.1. It is seen that the invoice pertained to an off-market transaction in an unlisted company. It is evident that the factual matrix around the impugned transaction has been duly established in this case as it is felt that the appellant could have done no better than produce the kind of documentation Page 4 of 5 I.T.A. No.: 867/KOL/2024 Assessment Year: 2012-13 Dhruv Vanijya Private Limited. that he did actually do so before the ld. AO to establish the genuineness of the transaction. Accordingly, the additions made by the ld. AO are directed to be deleted.

4.

In the result, appeal of the assessee is allowed. Order pronounced in the open Court on 18th November, 2024. Sd/- Sd/- [Rajpal Yadav] [Sanjay Awasthi] Vice President Accountant Member Dated: 18.11.2024 Bidhan (P.S.) Copy of the order forwarded to:

1. 1. Dhruv Vanijya Private Limited, 82/B, Monoshatolla Lane I-Plaza, 3rd Floor, Kolkata, West Bengal, 700023.

2. ITO, Ward 8(2), Kolkata. 3. CIT(A)-NFAC, Delhi. 4. CIT- 5. CIT(DR), Kolkata Benches, Kolkata.

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