MAGNUM CREDIT & CONSULTANTS PVT. LTD.,KOLKATA vs. ITO, WARD-7(1), KOLKATA

This is an appeal preferred by the assessee against the order of ld. CIT(A), Income Tax Department, National Faceless Appeal Centre (NFAC), Delhi dated 05.01.2024 for A.Y. 2012-13.

The issue raised in ground no. 1 is against the confirmation of addition of Rs. 1,25,00,000/- by ld. CIT(A) which was added by the AO on account of unexplained cash credit u/s 68 of the Income-tax Act, 1961 (hereinafter referred to as ‘the Act’).

Facts in brief are that the assessee filed the return of income on 15.03.2013 declaring total income of Rs. 1,64,956/-. Thereafter, the case of the assessee was selected for scrutiny under CASS and statutory notices were issued and duly served on the assessee. The AO during the course of assessment proceedings observed that the assessee has issued equity shares at a very high premium and accordingly the information/details

We have heard the rival contentions and perused the material on record. The assessee has produced an affidavit before the bench dated 30.04.2024 of Shri R.K. Todi, director of the assessee-company and it was explained in the said affidavit that the proceedings before the ld. CIT(A) could not be attended due to the death of Principal Officer of the group company, Mr. S. M. Varma who was the Company Secretary and was responsible for managing all tax related litigations of the assessee. It was pleaded before us that the death of S.M. Varma was the sole reasons for not attending the appellate proceedings and thus the non-appearance before the ld. CIT(A) was not willful nor for any extraneous reason. The AR of the assessee also produced before us the copies of the audited balance sheets as on 31.03.2011 and 31.03.2012 respectively which was also available before the revenue authorities below. The ld. AR stated that the AO as well as ld. CIT have overlooked the facts on record that assessee has not received/raised any share capital/share premium during the impugned financial year relevant to A.Y. 2012-13. The ld. AR

We have perused the material available on record and find that no share capital/share premium has been received by the assessee during the instant financial year also as there was no such credit in the books of accounts. Though the assessee did not appear before either of the authorities below but in view of this being clear cut and open and shut case, we are deciding on the basis facts before us. The facts are squarely covered in favour of the assessee by the decision of the Hon’ble Calcutta High Court in the case of M/S Abhijeet Enterprise Ltd Vs PCIT wherein it has been held as under: “After we have elaborately heard the learned Advocate for the appellant we find learned Tribunal was right in allowing the assessee’s appeal to the extent indicated by taking note of the various decisions of the High Court on the very same subject. In this regard, we refer to the decision of the High Court At Madras in V.R. Global Energy (P)Ltd. vs. ITO, Corporate Ward 3(4), Chennai 407 ITR 145 (Madras). It was held that when the assessee allotted share to a company in settlement of their existing liability of assessee to the said company, since no cash was involved in the transaction of said allotment of shares. conversion of this liability in which share capital and share premium could not be treated as unexplained cash credits under Section 68 of the Act. The Revenue filed an appeal against the said judgement and the same was dismissed by the Hon’ble Supreme Court in ITO vs. V.R. Global Energy (P) Ltd. [2020] 113taxmann.com 31(SC). The decision of the Hon’ble Division Bench of the High Court of Delhi in case of CIT vs. Ritu Anurag Agarwal, 2009(7)TMI 1247, Delhi High Court, the same also stands in aid to the case of the respondent/assessee. The decision of the Hon’ble Division Bench of this Court in Jatia Investment Co.Vs. CIT (1994) 206 ITR 78 (Cal) will also support the case of the respondent/assessee.In the said decision, the Court found that cash did not pass at any stage though entries were made in cash book showing payment and receipts; but since the entries made a complete round, no passing of cash was necessary for the purpose of making entries. Further, it was held that if there was no real cash entry on credit side of the cash book

In the result, the appeal of the assessee is allowed.