ITO, WD. -1(2),, KOLKATA vs. M/S JEALOUS COMMERCIAL PVT. LTD., KOLKATA

This appeal filed by the Revenue pertaining to the Assessment Year (in short „AY‟) 2012-13is directed against the order passed u/s 250 of the Income Tax Act, 1961 (in short the „Act‟) by the Commissioner of Income Tax (Appeals)-17, Kolkata,dated 30.10.2019 arising out of Assessment Order dated 26.03.2015, passed under Section143(3) of the Act.

The Revenue has raised the following grounds of appeal:

At the time of hearing, Ld. DR stated that there is delay of 108 days in filing the appeal before the Tribunal. On this aspect revenue had filed a petition praying for condonation of such delay.

We after perusing application filed by the Revenue, find that there is a reasonable cause for the delay in filing the appeal by the Department, considering the same, we condone such delay in filing the appeal by the Revenue.

Brief facts of the case are that that the assessee is a company filed its return of income for the assessment year under consideration raising total share capital of Rs. 9 lacs including share premium of Rs. 8,91,00,000/-. The assessee issued 90,000 share with a face value of Rs. 10/- each and premium of Rs. 990/- per share to 7 applicants. During the course of assessment proceedings, the assessee submitted details documentation to support share application money raised including return of income, audited balance sheet, bank statement, confirmation from M/s Jealous Commercial Pvt. Ltd. shareholders and others relevant documents such as Form No. 2 with Ministry of Corporate Affairs. Despite the submission of documents the Ld. AO issued summons u/s 131 of the Act, the directors of the assessee company requiring their personal appearance. In response to the summons, documents were submitted but directors failed to appear in person. Additionally, the Ld. AO claimed the summons issued to the directors of the shareholders were not received by them based on these facts. The AO concluded that the identity, creditworthiness and genuineness of the transaction were not proven, and the addition of Rs. 9 Crore was made unexplained cash deposit. Accordingly, u/s 68 of the Act in the assessment order dated 26.03.2015 u/s 143(3) of the Act.

Aggrieved by the assessment order, the assessee filed an appeal before the Ld. CIT(A). Where the Ld. CIT(A) allowed the appeal of the assessee holding that the assessee had substantiated the share transaction with supporting documents that the Ld. AO‟s addition was unjustified by holding in following manner: “3. I have considered the order of the AD as well as the submission of the appellant. I have also considered the judicial decisions relied upon by the appellant. It is observed that in the year under consideration the appellant company had raised share capital of Rs. 9,00,00,000/-from 7 parties. In the course of the assessment proceedings, the appellant submitted all the details/ evidences documents in respect of the share application money alongwith confirmation letter from all the applicants (Page No. 73 to 175 of the Paper Book submitted by the appellant). In the course of the appellate proceedings, the appellant filed copy of each of the assessment orders passed in all the 7 cases of the shareholders for that year in which the share subscription amount has been received by the assessee company (Page No. 31 to 72 of the Paper Book submitted by the appellant. Besides the Income tax return filing acknowledgement. Audited balance sheet as on 11.03.2012 and bank statement. It is observed form the details & documents furnished by the appellant that in the comes of 2 shareholders, namely 11 Ms Mhort Merchants Private Limited. 2) M/s R. R. Commosale Private Limited, the Assessment Orders of the AY 2012-13 were passed us. 143(3) without taking any adverse view. Therefore, it can be assumed that the respective Assessing Officers have all verified the accounts and therefore any amount that is credited from these two companies to the appellant company is fully explained. The assessment in the case of the other 5 share holders, namely, 11 Ms Mutual Merchants Private Limited. 2) M/s. Dhanamrit Commercial Private Limited, Mis Kamna Housing Private Limited. 4) Mis Uphar Vanijya Private Limited, 5) M, Karnimata 3 M/s Jealous Commercial Pvt. Ltd. Properties Private Limited were also passed us. 143(3) where additions us 68 & 141 of the Act were made. Therefore, the entire capital of all the above mentionedshare holders had been added in its hands us 68 of the LT. Act. Thus, once an amount is already taxed, whatever investment is being made out of it in the appellant company can be treated as explained and the same cannot be taxed again. Further it is apparent from the records that the appellant submitted all the details documents evidences alongwith confirmation letter from applicants and source of land for making investment. Hence, the identity & creditworthiness of the shareholders are not in doubt. There is no doubt over the genuineness of the transactions as well smee all the share application money was received through banking channel as such, the issue for my considerations is-whether the Share capital of Rs 9,00,00,000 raised during the year by the appellant can be treated as unexplained cash credit us68 of the Act. Since all the share applicants are duly scrutinised by their respective AO for the same assessment year u/s 143(3) their identity, creditworthiness and genuineness of the transactions are not in doubt and in accordance with the decision of Apex Court in the case of Principal Commissioner of Income Tax (Central-1) VS NRA Iron & Steel Pvt. Ltd. In SLP Civil) No 29844 of 2018. The addition made which in my considered view was unjustified as where the corpus becomes technically explained since all the applicants were duly scrutinised us. 143(3) wherein creditworthiness of all the applicants were examined by the respective AOs of the applicants, credits arising out of them cannot viewed as unexplained 68 of the IT Act In view of the facts & circumstances of the save it is held that the addition of Rs 9,00,00,000- for the share capital raised by the appellant from 7 share applicants as unexplained cash credit us 68 of the Act was not justified. Ground no, 1 & 2 allowed. Ground No. 3 is general in nature don‟t require adjudication.”

Aggrieved by the order of the Ld. CIT(A), the Revenue filed an appeal before this Tribunal on multiple grounds.

Ground Nos. 1 and2 are connected, therefore, both are adjudicated simultaneously the main grievance of the Revenue is that the Ld. CIT(A) erred in deleting the addition of Rs. 9 Crore made u/s 68 of the Act as the assessee had failed to prove the genuineness of the transaction, identity and creditworthiness of the share products. The Revenue also argued that the directors of the assessee company did not appear before the AO and hence the addition should be sustained. The Ld. DR also argued that the CIT(A) was incorrect in deleting the addition without taking into account of the fact that the directors of the assessee company failed to appear before the AO which lead to the inability to prove the genuineness of the transaction. It was further argued that the CIT(A) erred in law by not M/s Jealous Commercial Pvt. Ltd. taking into account, the genuineness of the transaction and creditworthiness of shareholders which must be substantiated by the assessee.

On the other hand, the Ld. AR for the assessee submitted that the non-appearance of the directors of the assessee company cannot be a ground to treat the share capitals & share premium money as unexplained income. The AR argued that the share subscribers were duly assessed to tax u/s 143(3) of the Act for the same assessment year and their creditworthiness and genuineness of the transaction were established. Relying on the judgment of the Hon‟ble Supreme Court in the case of PCIT Vs. NRA Iron & Steel Pvt. Ltd.

We after hearing the rival submission of the parties and perusing the material available on record including documents submitted by the assessee. We find that the assessee had furnished sufficient documentation in order to establish the identity and creditworthiness of shareholders as well as genuineness of the transaction. The assessee had submitted details of all 7 shares subscribers companies(i) Confirmation of subscription of shares & sources of fund(ii)Copy of relevant Bank Statement(iii)Copyof allotment advice(iv) ITR Filing acknowledgment for AY 2012-13(v)Balance Sheet and Profit & Loss Account as on 31.03.2012(vi) Copy of assessment order, which were also furnished before the Ld. CIT(A) and before the Ld. AO while framing the assessment and those were duly examined by the authority below. Therefore, we find no merit in the Revenues contentions that share capital and share premium money should be treated as unexplained cash credit u/s 68 of the Act in the hands of the assessee.

In ground No. 3, Revenue also raised that the CIT(A) granted relief to the assessee without calling for a remand report from the AO under Rule 46A(3) of the Income Tax Rules, 1962. Therefore, the impugned order passed by the CIT(A) is not proper and liable to be set aside. On this context, the Ld. AR stated that the documents which were submitted before the Ld. CIT(A) were the same as those submitted before the AO and there was no fresh evidence furnished by the assessee in such a situation,there is no need to call a remand report from AO.

We after hearing the rival submissions of the parties and perusing the material available on record. We find that the documents submitted before the Ld. CIT(A) were the same as those submitted before the AO and there was no fresh evidence produced by the assessee before the Ld. CIT(A). Hence, the ground raised