INCOME TAX OFFICER, WARD-7(1), KOLKATA, KOLKATA vs. VIKASH FASTNERS PRIVATE LIMITED, KOLKATA

The captioned appeal filed by the assessee, pertaining to assessment year 2012-13 is directed against the order passed by the Learned Commissioner of Income Tax (Appeal), NFAC, Delhi (hereinafter referred to as the ‘ld. CIT(E)’) dated 31.03.2023.

The sole grievance of the revenue is against the deletion of addition made u/s. 68 of the Act at Rs.2,60,08,000/-.

At the outset, Ld. Counsel for the assessee referring to the order of Ld. AO dated 01.02.2024 giving effect to the order passed by Ld. CIT(A) u/s. 250 of the Act stated that the only observation of Ld. CIT(A) is that the assessee failed to prove the identity of alleged cash creditor for which directions were given to AO to verify and who carried out the proceedings by issuing notice u/s. 133(6) as well as summons u/s. 131 of the Act and was satisfied with the identity of the share applicant company and deleted the impugned addition. He further submitted that the appeal of the revenue deserves to be dismissed as infructuous because prior to filing the appeal before this Tribunal Ld. AO has already given relief to the assessee in view of the direction given by the Ld. CIT(A).

On the other hand, Ld. DR referring to the impugned order submitted that the assessee in order not to fall u/s. 68 of the Act has to explain the identity and creditworthiness of the share applicants and genuineness of the transaction. However, Ld. CIT(A) has only referred to one limb i.e. identity and, therefore, since the genuineness of the transactions and creditworthiness of the share applicant is not proved the impugned addition deserves to be confirmed.

We have heard rival contentions and carefully perused the material placed before us. We observe that the assessee is a private limited company which was subjected to scrutiny proceedings u/s. 143(3) of the Act for AY 2012-13. The assessment proceedings were concluded making various additions including addition u/s. 68 of the Act at Rs.2,60,08,000/- for the alleged unexplained share application money. Since the instant appeal only relates to the addition u/s. 68 of the Act, we will deal it only. The assessee challenged the addition made by Ld. AO before the Ld. CIT(A) and furnished all the details with evidence including ITR, audited balance sheet, bank statement, share application and allotment letter and confirmation letter from all the share applicants who have been allotted the equity shares during the year for a total sum of Rs.2,60,08,000/-. All these details were placed before the Ld. CIT(A) and who after examining the same only made an observation about few share applicants who had common address but the notice remained unserved. The Ld. CIT(A) has held that the addition is upheld if the assessee is unable to prove the identity of the share applicant. We observe that Ld. AO in direction to the finding of the Ld. CIT(A) carried out the proceedings by issuing notice u/s. 133(6) and 131 of the Act to the alleged share applicants and the directors and after being satisfied with all these details gave relief to the assessee by reducing the addition of Rs.2,60,08,000/- in the following manner:

From going through the above order giving effect by the AO and also considering the details submitted by the assessee before Ld. CIT(A), we find that the assessee has successfully discharged its primary onus by explaining the nature and source of the alleged share application money by proving the identity and creditworthiness of the share applicant and genuineness of the transaction to the satisfaction of the AO and, therefore, Ld. AO has rightly given the relief. Therefore, the instant appeal of the revenue deserves to be dismissed as infructuous because when the Ld. AO has himself deleted the impugned addition, the instant appeal has no legs to stand.

In the result, the appeal of the revenue is dismissed.