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Income Tax Appellate Tribunal, “A” BENCH, KOLKATA
Before: SHRI SANJAY GARG & DR. MANISH BORAD
आदेश/O R D E R PER DR. MANISH BORAD, AM:
This appeal at the instance of the assessee is directed against the order of National Faceless Appeal Centre, Delhi [the learned CIT (A)] dated 27th December, 2023, which is arising out of the assessment order under Section 143(3) read with section 144 of the Income-tax Act, 1961 (the Act) dated 30th March, 2015.
Facts in brief are that the assessee is a private limited company and is a registered non-banking finance company (NBFC) having RBI registration certificate dated 10th April, 2021, and is engaged in the business of carrying on NBFC activities of providing loans and advances and dealing in shares and securities. For A.Y. 2013-14, e-return filed on 25th September, 2012. Case selected for scrutiny through CASS followed by validly serving notices u/s 143(2) and 142(1) of the Act. The ld. AO called for various information about the registration certificate of RBI, bank
Aggrieved assessee preferred the appeal before the ld. CIT (A) challenging the addition made u/s 68 of the Act and again filed various documents and evidences to prove the identity and creditworthiness of the share applicants and genuineness of the transactions and also submitted that replies to notice u/s 133(6) of the Act has been filed and that transactions have not carried out through banking channel. However, the ld. CIT (A) confirmed the addition based on the principle of preponderance of the probabilities observing that contention of the assessee company regarding share capital and premium cannot be accepted. The finding of the ld. CIT (A) is appearing at para 8 of the impugned order and reads as under:-
“8.0 After carefully considering the action as recorded by the Ld. A.O. as also considering the detailed submissions made by the Ld. A.R for the appellant company. I observe that the basic issue for adjudication remains as to whether the appellant has been able to establish the identity, capacity to lend and the genuineness of the transactions which have been doubted by the Ld. A.O in the impugned order. I observe that the impinged issue is regarding the addition made by the Ld. AO on account of unexplained cash credit received by the assessee
The ld. Counsel for the assessee vehemently argued referring to the written submission filed before the ld. CIT (A) and also referring to the decisions and the judgments mentioned in the written submissions filed before the ld. CIT (A). The ld. Counsel for the assessee also took us through the detailed paper book which contains 273 pages with the relevant documents of each share applicant company so as to prove that all are duly assessed to tax, registered with the Ministry of Corporate Affairs, all have replied to the notice u/s 133(6) of the Act and most of the
On the other hand, the ld. DR supported the orders of the lower authorities and stated that alleged share applicant companies are Jamakharchi / paper / shell company and the assessee with the help of entry providers has managed to arrange the accommodation entry in the form of bogus share capital and therefore, the ld. CIT (A) has rightly confirmed the addition u/s 68 of the Act.
We have heard the rival contentions and perused the records placed before us. Addition u/s 68 of the Act at ₹2,23,00,000/- has been challenged by the assessee. The said addition made by the ld. AO has subsequently, being affirmed by ld. CIT (A). The assessee company has issued 46,000/- equity shares of the face value of ₹10/- each and charge share premium of ₹490 per share. Details of the shareholders who have been issued 46,000 equity shares are as under:-
SL Name & PAN Address No. of Share Share Total shares capital premium Capital 1. Uniworth Marketing 40, Weston Street, 5,000 50,000 24,50,000 25,00,000 Pvt. Ltd. 3rd Floor, Kolkata- PAN: AABCU2603B 700 013 2. Lochan Distributors Pvt. 106, Buxarah Road, 8,000 80,000 39,20,000 40,00,000 Ltd. Howrah-700110 PAN: AACCL1024E 3. Amaresh Trading Pvt. 106, Buxarah Road, 4,000 40,000 19,60,000 20,00,000 Ltd. Howrah-700110 PAN AAJCA8084E 4. Blackberry Marketing D-2, Ananya 4,000 40,000 19,60,000 20,00,000 Pvt. Ltd. Apartment, DC 58 PAN: AAECB7709C Narayantolla Baguihati Kolkata-700059 5. Dynasty Tradelink Pvt. 137/12, 3,000 30,000 14,70,000 15,00,000 Ltd. Narikeldanga Pan: AACCD7561J Main Rod, Kolkata 700011 6. Regius Tie-Up Pvt. Ltd. 40, Weston Street, 5,000 50,000 24,50,000 25,00,000 PAN AAFCR6431G 3rd Floor, Kolkata-700 013 “Section 68 in The Income Tax Act, 1961 68. Cash credits. - 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 source thereof or the explanation offered by him is not, in the opinion of the [Assessing Officer] [ Substituted by Act 4 of 1988, Section 2, for " Income-tax Officer" (w.e.f. 1.4.1988).], satisfactory, the sum so credited may be charged to income-tax as the income of the assessee of that previous year.
Thereafter the Hon’ble Supreme court summed up the principles, which emerged after deliberating upon various case laws, as under:
“11. The principles which emerge where sums of money are credited as Share Capital/Premium are:
SL Particulars From To 3. Details of share Applicants (i) Uniworth Marketing Pvt. Ltd. Copy of reply to notice u/s 133(6) -- 27 -- Copy of IT Acknowledgement -- 28 -- Audited Financial Statement 29 38 Copy of Share application -- 39 -- Copy of allotment advice -- 40 -- Copy of relevant bank statement -- 41 -- (ii) Lochan Distributors Marketing Pvt. Ltd. Copy of reply to notice u/s 133(6) -- 42 -- Copy of IT Acknowledgement -- 43 -- Audited Financial Statement 44 -- 52 Copy of Share application 53 -- 54 Copy of allotment advice 55 -- 56 Copy of relevant bank statement 57 -- 58 Copy of assessment order u/s 144 for A.Y. 12-13 58A -- 58K (iii) Amaresh Trading Pvt. Ltd. Copy of reply to notice u/s 133(6) -- 59 -- Copy of IT Acknowledgement -- 60 -- Audited Financial Statement 61 -- 69 Copy of Share application -- 70 -- Copy of allotment advice -- 71 -- Copy of relevant bank statement -- 72 -- (iv Blackcherry Marketing Pvt. Ltd. Copy of reply to notice u/s 133(6) -- 73 -- Copy of IT Acknowledgement -- 74 -- Audited Financial Statement 75 -- 84 Copy of Share application -- 85 -- Copy of allotment advice -- 86 -- Copy of relevant bank statement -- 87 -- Copy of assessment order u/s 144 for A.Y. 12-13 87A -- 87L (v) Dynasty Tradelink Pvt. Ltd. Copy of reply to notice u/s 133(6) -- 88 -- Copy of IT Acknowledgement -- 89 -- Audited Financial Statement 90 -- 102 Copy of Share application -- 103 -- Copy of allotment advice -- 104 -- Copy of relevant bank statement -- 105 -- (vi) Regius Tie Up Pvt. Ltd. Copy of reply to notice u/s 133(6) 106 -- Copy of IT Acknowledgement 107 -- Audited Financial Statement 108 119 Copy of Share application 120 Copy of allotment advice 121 Copy of relevant bank statement 122 (vii) Shivkripa Creation Pvt. Ltd. Copy of reply to notice u/s 133(6) 123 -- Copy of IT Acknowledgement 124 -- Audited Financial Statement 125 136 Copy of Share application 137 Copy of allotment advice 138 Copy of relevant bank statement 139 Copy of assessment order u/s 144 for A.Y. 12-13 139A -- 139C (viii) Subham Commotrade Pvt. Ltd. Copy of reply to notice u/s 133(6) 140 Copy of IT Acknowledgement 141 Audited Financial Statement 142 153 Copy of Share application 154 Copy of allotment advice 155 Copy of relevant bank statement 156 Copy of assessment order u/s 144 for A.Y. 12-13 156A -- 156B (ix) Maco Distributors Pvt. Ltd. Copy of reply to notice u/s 133(6) 157 Copy of IT Acknowledgement 158 Audited Financial Statement 159 -- 170 Copy of Share application 171 Copy of allotment advice 172 Copy of relevant bank statement 173 Copy of assessment order u/s 144 for A.Y. 12-13 173A -- 173D (x) Devkripa Agency Pvt. Ltd. Copy of reply to notice u/s 133(6) 174 Copy of IT Acknowledgement 175 Audited Financial Statement 176 187 Copy of Share application 188 Copy of allotment advice 189 Copy of relevant bank statement 190 Copy of assessment order u/s 144 for A.Y. 12-13 190A 190E (xi) Navtech Aency Pvt. Ltd. Copy of reply to notice u/s 133(6) 191 Copy of IT Acknowledgement 192 Audited Financial Statement 193 205 Copy of Share application 206 Copy of allotment advice 207 Copy of relevant bank statement 208 Copy of assessment order u/s 144 for A.Y. 12-13 208A 208D (xii) Duplex Vinimay Pvt. Ltd. Copy of reply to notice u/s 133(6) 209 Copy of IT Acknowledgement 210 Audited Financial Statement 211 222
We fail to find any justification in such observation of the ld. Assessing Officer. Rather than mentioning the documents as voluminous paper work, he/ she should have move ahead to examine the correctness of those documents and should have discussed the same in the assessment order. General observation that the ld. AO is not satisfied with the documents filed by the assessee cannot meet the requirement of law. We on perusal audited the balance sheet of the alleged share applicant companies notice that they have sufficient net worth in the form of share capital and accumulated reserve and surplus to explain the source of investment made in the assessee company.
Even the provisions which entitles the revenue authorities to examine the case where a company not being a company in which public are substantially interested receive from any person in any consideration for issue of shares that exceeds the face value of such share, the aggregate consideration received for such shares as exceeds the fair market value of the share to be treated as income of other sources u/s 56(2)(VIIB) of the Act has been inserted by the Finance Act, 2012, with effect from 1st April, 2013 and is therefore not applicable for the year under consideration.
a) The Hon’ble Apex Court in the case of CIT vs. Orissa Corporation Pvt. Ltd. (supra), under identical circumstances, has held as follows:- “In this case the assessee had given the names and addresses of the alleged creditors. It was in the knowledge of the revenue that the said creditors were the income-tax assessees. Their index number was in the file of the revenue. The revenue, apart from issuing notices under section 131 at the instance of the assessee, did not pursue the matter further. The revenue did not examine the source of income of the said alleged creditors to find out whether they were credit-worthy or were such who could advance the alleged loans. There was no effort made to pursue the socalled alleged creditors. In those circumstances, the assessee could not do any further. In the premises, if the Tribunal came to the conclusion that the assessee had discharged the burden that lay on him, then it could not be said that such a conclusion was unreasonable or perverse or based on no evidence. If the conclusion was based on some evidence on which a conclusion could be arrived at, no question of law as such could arise. emphasis ours} b) The ITAT Kolkata Bench in ITO vs Cygnus Developers (I) P Ltd in dated 2.3.2016, held as follows: 9. We have considered the rival submissions., We are of the view that order of CIT(A) does not call for any interference. It may be seen from the grounds of appeal raised by the Revenue that the Revenue disputed only the proof of identity of the shareholder. In this regard it is seen that for A Y.2004
05. Shree Shyam Trexim Pvt. Ltd., was assessed by ITO, Ward- 9(4), Kolkata and the order of assessment u/s/143(3) dated 25.01.2006 is placed in the paper book. Similarly Navalco Commodities Pvt. Ltd., was assessed to tax u/s 143(3) for A Y.2005-06 by I TO, Ward- 9(4), Kolkata by order dated 20.03.2007. Similarly Jewellock Trexim Pvt. Ltd was assessed to tax for A Y.2005-06 by the very same ITO- Ward- 9(3), Kolkata assessing the Assessee. In the light of the above factual position which is not disputed by the Revenue, it cannot be said that the identity of the share applicants remained not proved by the assessee. The decision of the Hon'ble Allahabad High Court as well as ITA T Kolkata Bench on which reliance was placed by the learned counsel for the assessee also supports the view that for non production of directors of the investor company for examination by the AO it cannot be held that the identity of a limited company has not been established. For the reasons given above we uphold the order of CIT(A) and dismiss the appeal of the Revenue.
In the result, the appeal of the assessee is allowed.
Order pronounced in the Court on 3rd October, 2024 at Kolkata.