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Income Tax Appellate Tribunal, “B” BENCH KOLKATA
Before: SHRI SANJAY GARG & SHRI GIRISH AGRAWAL
IN THE INCOME TAX APPELLATE TRIBUNAL “B” BENCH KOLKATA BEFORE SHRI SANJAY GARG, JUDICIAL MEMBER AND SHRI GIRISH AGRAWAL, ACCOUNTANT MEMBER ITA No.677/Kol/2023 Assessment Year: 2012-13
Dominant Sales & Services Pvt. Income Tax Officer, Technical- Ltd. 2, Kolkata. Vs. B/9/H/1, Rajab Ali Lane, Kolkata-700023. (PAN: AAACD9695D) (Appellant) (Respondent)
Present for: Appellant by : N o n e Respondent by : Shri Abhijit Kundu, CIT, DR Date of Hearing : 13.12.2023 Date of Pronouncement : 01.01.2024 O R D E R PER GIRISH AGRAWAL, ACCOUNTANT MEMBER: This appeal filed by the assessee is against the order of Ld. CIT(A), National Faceless Appeal Centre (NFAC), Delhi vide order no. ITBA/NFAC/S/250/2023-24/1053557636(1) dated 05.06.2023 passed against the assessment order by ITO, Technical-2, Kolkata u/s. 143(3) of the Income-tax Act, 1961 (hereinafter referred to as the “Act”) for AY 2012-13 dated 23.03.2015.
Grounds taken by the assessee are reproduced as under: “1 For that the Ld. CIT(A) erred in confirming the order of the AO in adding back the share capital including premium of Rs.35,00,00,000/ - raised during the year as unexplained cash credit u/s. 68 when all the details and evidences were filed to prove the identity and creditworthiness of the party and genuineness of the transactions, the AO verified the same by issue of notice u/s 133(6), the onus that lay on the assessee was discharged and the AO simply made the addition on surmises & suspicions without bringing any cogent material on record.
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For that the Ld. CIT(A) erred in doubting the value of share premium amount determined by the assessee company for issue of shares when neither the provisions of section 56(2)(viib) came into force from the assessment year under consideration nor the source of source as required under the amended provisions of section 68. 3. For that on the facts and circumstances of the case, the Ld. CIT(A) erred in confirming the order of the AO In adding back Rs.35,00,00,000/ - which was unjustified and not In accordance with law. 4. For that on the facts and circumstances of the case, the Ld. CIT(A) erred in confirming the addition u/s. 14A of the I T Act amounting to Rs 18,63,477/- where as there were no exempt income earned by the assessee in the relevant year.”
From the records it is observed that this appeal has been listed for hearing on several occasions and on all such occasions, none appeared to represent the assessee except for filing of an application seeking adjournment without any one attending on the date of hearing. The said adjournment applications were allowed and dates were granted. Despite all such accommodation, no one has come up from the assessee to represent its case. Based on these facts, we find it proper to take up the matter ex parte qua the assessee with the assistance of Ld. CIT, DR, considering the observation made by the authorities below in their respective orders and statement of facts as well as other material available on record.
3.1. From the statement of fact available on record, it is noted that assessee is a private limited company engaged in business of non- banking financial and is in operation since 1994. Reserve Bank of India had granted registration certificate vide no. B.05.06849. Assessee had filed its return of income reporting total income of Rs.10,895/-. Case of the assessee was selected for scrutiny under CASS with the reasons “large share premium received”. Statutory notices were issued and served on the assessee. During the year under consideration, assessee had issued 8,75,000 shares having face value of Rs. 10/- each and share premium of Rs.390/- each, raising
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total share capital of Rs.35 Cr. Ld. AO completed the assessment by treating the share capital including share premium as unexplained cash credit u/s. 68 of the Act. He also made a disallowance of Rs.18,63,477/- u/s. 14A. Aggrieved, assessee went in appeal before the Ld. CIT(A).
3.2 Before him, written submissions along with various judicial pronouncements were placed. Ld. CIT(A) observed that Ld. AO provided ample opportunities to the assessee to establish the creditworthiness of companies but assessee could not furnish confirmations therefor. He also observed that Ld. AO issued notice u/s.133(6) to the directors of share applicant companies which were returned back unserved. He thus, held that assessee did not discharge its burden casted u/s. 68 of the Act to prove the identity of the investor, their creditworthiness and genuineness of the transaction. He thus sustained the addition so made by the Ld. AO in respect of share capital including share premium. Disallowance made u/s. 14A was also confirmed by the Ld. CIT(A) and the appeal was dismissed. Aggrieved, assessee is in appeal before the Tribunal.
From the perusal of the orders of the authorities below, we note that assessee had made submissions in respect of the primary documents and details. Considering these primary submissions, further enquiries and investigations were required to be made and accordingly, show cause notices were issued so as to confirm the veracity of the transaction of raising of share capital including share premium. However, there was no compliance or cooperation by the assessee to support or enable the investigation and examination at the end of the authorities below. In the first appellate stage, Ld. CIT(A) had even remanded the matter to the Ld. AO based on the primary
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submission made before him by the assessee. According to the Ld. CIT(A), Ld. AO had specifically pointed certain points in the remand report about the different companies which is noted as under:
(i) They are in their initial years of operation. (ii) Are basically investment companies. (iii) Income tax returns showing a nominal income/loss (iv) No business activity (v) Investor companies received share capital with huge premium was in turn invested in the assessee company and similar other companies as well.
Thus, considering the observations of the authorities below in their respective orders as narrated above, we do not find any reason to interfere with the findings arrived at for making the addition of Rs.35 Cr. towards share capital including share premium. Grounds taken by the assessee in this respect are dismissed.
In respect of grounds taken for a disallowance made u/s. 14A of Rs.18,63,4877/-, it is claimed by the assessee that there is no exempt income which was earned during the year and, therefore, no disallowance u/s. 14A is called for. This claim of earning of not exempt income during the year has not been controverted in the proceedings before the authorities below nor by the Ld. CIT, DR before us by bringing any cogent material on record. Since the assessee has not earned exempt income during the year, no disallowance under section 14A is called for in view of the decision of Hon’ble Delhi High Court in the case of PCIT Vs. Era Infrastructure (India) Ltd. in ITA No. 204/2022 & C. M. Application No. 31445/2022 which has been followed by the coordinate bench of ITAT, Kolkata in the case of Babul Fiscal Services (P) Ltd v. ACIT in ITA No. 318/Kol/2022 dated
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02.08.2022 holding that no disallowance is required to be made in the case of the assessee because it has not earned any tax-free income and allowed the appeal of the assessee by deleting the addition so made. Considering this, the disallowance made in this respect is deleted. Accordingly, ground taken by the assessee in this respect is allowed.
In the result, appeal of the assessee is partly allowed.
Order is pronounced in the open court on 01.01.2024
Sd/- Sd/- (Sanjay Garg) (Girish Agrawal) Judicial Member Accountant Member Dated: 01.01.2024 JD, Sr. P.S. Copy to: 1. The Appellant: 2. The Respondent. 3. CIT(A), NFAC, Delhi 4. ITO, Technical-2, Kolkata 5. DR, ITAT, Kolkata Bench, Kolkata //True Copy// By Order
Assistant Registrar ITAT, Kolkata Benches, Kolkata