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Income Tax Appellate Tribunal, KOLKATA ‘SMC’ BENCH, KOLKATA
Before: SRI SONJOY SARMA & SRI SANJAY AWASTHI
order
: September 26th, 2024 ORDER
Per Sanjay Awasthi, Accountant Member:
In this case, an amount of Rs. 25,45,379/- was added u/s 68 of the Income Tax Act, 1961 (in short the 'Act') and to appreciate the facts, the following portions from the Assessing Officer’s (hereinafter referred to as ld. 'AO') order deserve to be extracted as under: “The assessee company has been incorporated on 17/08/2015. On verification of the Balance Sheet, it is seen that the assessee company had raised share capital of Rs. 26,00,000/- during the financial year 2015-16. Notice u/s 133(6) of the Income Tax Act, 1961 was issued to the AXIS BANK seeking statement of bank a/c no. 915020046589007. On perusal of the bank statement, it is seen that out of the total share capital of Rs.
I.T.A. No.: 315/KOL/2024 Assessment Year: 2016-17 Trishan Forex Pvt. Ltd. 26,00,000/- Rs. 20,00,000/- were deposited in cash in different dates by Sheri Bablu Mudi & Sheri Debasish Mondal (both are directors of the assessee company) and thereafter Rs. 17,00,000/- were immediately withdrawn by them in cash. It is also seen that Rs. 25,45,379/ was shown as cash and cash equivalent in the asset side of the Balance Sheet. Thus, Rs. 6,00,000/- was directly invested in cash and Rs. 20,00,000/- was invested through bank by depositing cash to raise entire share capital of Rs. 26,00,000/-. To verify the transitions and claim, summons u/s 131 of the Income Tax Act, 1961 were also been issued the Directors of the assessee company on 19/11/2018 requiring personal attendance on 22/11/2018. But neither any submission was filed nor any person appeared in response to summon issued from this office. Even no business activities were made by the assessee company during the financial year 2015-16. Hence, it is crystal clear that the assessee company had capitalized its unaccounted money of Rs. 26,00,000/- by way of raising bogus share capital to evade tax.” In brief, the ld. AO was not convinced about the creditworthiness of the three shareholders who deposited sums of money in the account of the appellant company. 1.1. Thereafter, before the Commissioner of Income Tax (Appeals)-NFAC, Delhi [hereinafter referred to as ld. 'CIT(A)'] the appellant filed a number of documents in support of his contention that the amounts credited in the company’s accounts were justified and were in the nature of contribution by the three shareholders, their share of funds towards their share in proportion of their share-holding in the company. It is noteworthy that details of income tax returns, computation of income, bank account details and other relevant documents were presented before the ld. CIT(A) who asked for a remand report from the ld. AO. The result of this remand report and the conclusion of ld. AO have been summarized by the ld. CIT(A) as under: “4.3. From the remand report.it is found that the said amount was invested as share capital by the three directors of the company. The deposit was indeed made by transferring the payment through a banking channel. But it is also true that the transfers through bank cheques were done by all three directors immediately after depositing the equivalent amount of cash in their respective bank accounts. It is further brought out in the remand report that the sources of cash, which was deposited by the directors just before issuing cheques have not been explained. As regards the balance amount of share capital amounting to Rs 600000/-, the same has been contributed by the three directors in cash. Although the PAN, ITR, cash flow statements and Page 2 of 5 I.T.A. No.: 315/KOL/2024 Assessment Year: 2016-17 Trishan Forex Pvt. Ltd. balance sheets were examined by the AO during remand proceedings, it is stated that the promoter directors have received back advances during the year but no supporting evidence was furnished for the same. In this regard, the observations made by the AO in his remand report are reproduced as under: “(g) Therefore the source of cash deposits made in the bank immediately before making cheque payments to the company remained unexplained for all three directors. And the source of making cash payments by the directors to the company also could not be explained in a one-on-one basis."” 1.2. Aggrieved with the finding of ld. AO, the ld. CIT(A) is seen to have confirmed the addition. 1.3. Again, aggrieved with the action of ld. CIT(A), the assessee is in appeal before us with five grounds of appeal out of which four are substantive and will be adjudicated. The Grounds are as under:
“1. For that on the facts and in the circumstances of the case, the Ld. CIT(A) was not justified in confirming the action of the A.O of making the addition of Rs. 25,27,359/- as unexplained cash credit by wrongly invoking the provisions of sec 68 of the Act.
For that on the facts and circumstances of the case the addition of Rs. 25,45,379/- is incorrect inasmuch as framed on the inference drawn by the AO of cash deposit of Rs. 20,00,000/- in the bank account of the company which was unfounded.
For that on the facts and circumstances of the case the CIT(A) erred in confirming the addition on sets of fact different from the AO.
Without prejudice to the above, the Ld. CIT(A) ought to have accepted the explanation of the source of funds of the shareholders.
The appellant craves leave to add, alter or delete all or any of the grounds of appeal
”
2. Before us, the ld. A/R vehemently argued that all necessary compliances were made either before the ld. AO or before the ld. CIT(A) and at no stage, was there any occasion when there was any attempt to not disclose the full facts. The ld. A/R also took us through a paper book running into 162 pages to show that the bank statements, ITR forms, computation of income, cash flow statement etc. of the three directors namely Bablu Mundi, Debashis Mondal and Anup Kumar Baitalik.
Page 3 of 5 I.T.A. No.: 315/KOL/2024 Assessment Year: 2016-17 Trishan Forex Pvt. Ltd. 2.1. Ld. D/R relied on the findings given in the orders of the authorities below.
3. The main reason why the ld. CIT(A) has doubted the impugned transactions is because apparently there were cash deposits made by all the three directors in their personal accounts before issuing cheques to the company’s capital account and this action was suspected to be an exercise in routing unexplained sums of money through bank accounts. Considering the conspectus of the facts before us, it is clear that the appellant has made every effort to establish the identity of the three directors, their creditworthiness and the fact that the transactions have been routed through banking channels to establish the overall genuineness of the said transactions. A perusal of the copy of remand report supplied by the ld. A/R reveals that considerable documentation was presented for proving the impugned transactions and the concluding inference drawn by the ld. AO in this regard deserves to be extracted as under: “Based on the facts and findings stated above it is seen that the investments in share capital have been made by the promoters as per subscription undertaken by them during the course of incorporation of the assessee company as found in the Memorandum of Association of the Company. The inference drawn by the then Assessing Officer in the assessment Order passed u/s.143(3) of I.T. Act, 1961 as to cash deposit in the bank account of the assessee Company is not found. Your honour may take the aforesaid findings on record during the course of Appeal Proceedings. This is SUBMITTED for the kind consideration of the Ld. CIT(A), NFAC, Delhi as per my opinion based on the submissions and documentary evidences. I request your honor to consider whatever your honor think fit.” 3.1. It is felt that while the appellant has taken pains to provide considerable details regarding the impugned transactions, it is seen that the same was not found satisfactory by the ld. CIT(A). At this stage, there can be no hesitation in holding that the onus cast on the appellant to escape the rigors of Section 68 of the Act have been duly discharged and accordingly, the appellant cannot be visited with any addition u/s 68 of the Act.