DREAM VALLEY BARTER PVT. LTD.,KOLKATA vs. ITO, WARD 7(3), KOLKATA

order : April 30, 2024 आदेश / ORDER संजय गग�, �या�यक सद�य �वारा / Per Sanjay Garg, Judicial Member: The present appeal has been preferred by the assessee against the order dated 26.10.2023 of the National Faceless Appeal Centre [hereinafter referred to as ‘CIT(A)’] passed u/s 250 of the Income Tax Act (hereinafter referred to as the ‘Act’).

3. A perusal of the above grounds of appeal would reveal that the assessee has agitated the addition of Rs.12,25,33,500/- made by the Assessing Officer treating share capital and share premium received by the assessee as unexplained income of the assessee u/s 68 of the Act.

4. At the outset, the ld. counsel for the assessee has invited our attention to the impugned assessment order to submit that the only observation made by the Assessing Officer in the impugned order is that the assessee during the year had received share capital/share premium of Rs.12,25,33,500/- from 9 share-subscribers and he treated the said amount as unexplained income of the assessee by way of a Assessment Year: 2012-13 Dream Valley Barter Pvt. Ltd non-speaking order and in a mechanical manner. That the assessee had duly furnished all the details such as ITRs, PANs, copies of audited financial statement for the A.Y 2012-13, copies of bank statement of the allottee companies, copy of Form 5 along with receipt filed with ROC, details of source of funds relating to the identity and creditworthiness of the creditors and genuineness of the transaction. Apart from that, it was submitted that the identity of the share subscriber was duly proved, transactions were carried out through banking channel, the source of funds of the share subscriber was duly furnished. He has further submitted that the subscribing companies were having adequate reserves and surpluses to invest in the assessee company. Further, that all these subscribers were income tax assessees and further that all the investor companies were duly incorporated with the Registrar of Companies. That there were no paper companies involved in the transactions. The Ld. Counsel has further contended that the Assessing Officer, instead of examining all the relevant documents, insisted for the personal presence of the directors of the subscribers and did not point out any defect, discrepancy or infirmity in the evidences furnished by the assessee and made the impugned addition in a mechanical manner. The ld. counsel has further invited our attention to the impugned order of the CIT(A) to submit that the assessee had made detailed submissions before the CIT(A), which have also been reproduced in the impugned order. However, the ld. CIT(A), without considering any of the submissions and evidences furnished by the assessee, confirmed the addition in a mechanical manner. The ld. counsel has further submitted that even during the appellate proceedings, the assessee furnished the relevant documents to prove the identity, creditworthiness of the share-subscribers and genuineness of transaction and the ld. CIT(A) has referred those documents to the Assessment Year: 2012-13 Dream Valley Barter Pvt. Ltd Assessing Officer and called for remand report. That even during the remand proceedings, the Assessing Officer did not bother to examine any of the documents furnished by the assessee and he has further submitted that the ld. CIT(A) confirmed the additions on the basis of such a non-speaking and vague remand report without pointing out any defect or error in the documents furnished by the assessee. The ld. counsel inviting our attention to para 7 of the impugned order of the CIT(A) has submitted that even in the remand report, the Assessing Officer has categorically admitted that in compliance to the notices issued u/s 133(6) of the Act, the respective shareholder companies had duly sent the confirmations which were duly received before completion of assessment proceedings and were duly placed on record. He has submitted that even neither the CIT(A) nor the Assessing Officer have bothered to even examine any of the documents either furnished by the assessee or received from the share-subscriber companies. Even in the remand report, the Assessing Officer without pointing out any defect, infirmity, inadequacy in any of the specific document furnished by the assessee in relation to the 9 share-subscriber companies have simply made a general observation that though the assessee has furnished the relevant documents including copy of return filed, bank statement and account copy of the allottee companies etc. However, on perusal of these documents, it was not very much clear as to whether the existence of the allottee companies were in order and that the source of investment to the assessee company were not fully verifiable. The ld. counsel further pointing out to the concluding para of the ld. CIT(A) has submitted that the ld. CIT(A) has dismissed the appeal in a mechanical manner with a two-line observation, “On this issue, the remand report from the A.O was called and these documents were sent to him for his comments. The Ld. A.O adhered to his earlier views. The addition made Assessment Year: 2012-13 Dream Valley Barter Pvt. Ltd by the Ld. A.O is confirmed and grounds of appellant are dismissed.” The ld. counsel, therefore, has pleaded that the impugned additions were not sustainable in the eyes of law and the same may be set aside.

Sl. Name of the shareholder No. 1 Aditi Sanchar Suvidha Private Limited 2 Centak Distributors Private Limited 3 Gajbadan Barter Private Limited (Presently: Aeric Ventures Private Limited 4 Goldline Comtrade Private Limited 5 J.P Engineering Corpn Private Limited 6 Nutshell Vyapaar Private Limited 7 Omega Ventures Private Limited 8 Paridhi Finvest Private Limited 9 Fresh Vyapaar Private Limited Assessment Year: 2012-13 Dream Valley Barter Pvt. Ltd 6.1 The Assessee in this case, as noted above, explained about the identity, creditworthiness and financials etc. of each of the share subscriber company. He has further submitted that following 5 companies out of the 9 investor companies are Non-Banking Finance Companies duly regulated by Reserve Bank of India. He in this respect placed reliance on the certificates issued by Reserve Bank of India: i) Aditi Sanchar Suvidha Private Limited ii) Centak Distributors Private Limited iii) J.P Engineering Corpn Private Limited iv) Nutshell Vyapaar Private Limited v) Paridhi Finvest Private Limited The ld. counsel has further relied upon assessment orders passed u/s 143(3) of the Act in case of 3 investor companies namely (i) Paridhi Finvest Private Limited, (ii) Goldline Comtrade Private Limited, (iii) Gajbadan Barter Private Limited. That the Assessing Officer, however, did not examine any of the 6.2 documents furnished by the assessee to prove the identity, creditworthiness of the share-subscribers and genuineness of the transaction. The Assessing Officer, in our view, could have taken an adverse inference, only if, he would have pointed out the discrepancies or insufficiency in the evidences and details received in his office and pointed out as to on what account further investigation was needed by way of recording of statement of the directors of the subscriber companies. Even if the directors of the subscriber companies have not come personally in response to the summons issued by the Assessing Officer, in our view, adverse inference cannot be taken against the assessee solely on this ground as it is not under control of the assessee to compel the personal presence of the directors of the shareholders Assessment Year: 2012-13 Dream Valley Barter Pvt. Ltd before the Assessing Officer. The Ld. Counsel for the assessee has rightly placed reliance upon the decision of the Hon’ble Bombay High Court in the case of PCIT, Panji vs. Paradise Inland Shipping Pvt. Ltd. reported in (2017) 84 taxman.com 58 (Bom) wherein the Hon’ble High Court has held that once the assessee has produced documentary evidence to establish the existence of the subscriber companies, the burden would shift on the revenue to establish their case. Further the jurisdictional Calcutta High Court in the case of “Crystal networks (P) Ltd. vs CIT” reported in [2013] 35 taxmann.com 432 (Calcutta) has held as under:

We find considerable force of the submissions of the learned counsel for the appellant that the Tribunal has merely noticed that since the summons issued before assessment returned unserved and no one came forward to prove. Therefore it shall be assumed that the assessee failed to prove the existence of the creditors or for that matter creditworthiness. As rightly pointed out by the learned counsel that the CIT(Appeals) has taken the trouble of examining of all other materials and documents viz., confirmatory statements, invoices, challans and vouchers showing supply of bidi as against the advance. Therefore, the attendance of the witnesses pursuant to the summons issued in our view is not important. The important is to prove as to whether the said cash credit was received as against the future sale of the produce of the assessee or not. When it was found by the CIT(Appeal) on fact having examined the documents that the advance given by the creditors have been established the Tribunal should not have ignored this fact finding.