ITO, WARD - 9(3), KOLKATA,KOLKATA vs. M/S. CYGNUS DEVELOPERS (I) PVT. LTD., KOLKATA

Grounds of appeal raised by the revenue read as follows :- “1) Whether, on the facts and in the circumstances of the case, the Ld. CIT (A) is correct in holding that the share applicants companies were in existence in spite of the fact that Departmental enquiries could not able to trace out the alleged share applicants at the given addresses. 2) Whether, on the facts' and in the circumstances of the case, the Ld. CIT (A) is correct in holding that the onus of the assessee was held to stand discharged where the identity of the alleged share subscribers were not proved even after sufficient opportunities have been provided to the assessee to produce share subscribers before the Assessing Officer for examination. 3) The appellant craves leave to add, alter and modify the grounds of appeal before or during the course of proceedings.”

In reply to the query of the AO the assessee submitted confirmation from the aforesaid three companies that they had invested in the shares of the Assessee. The assessee also gave the Income tax particulars of the aforesaid three parties. The Assessee also informed the AO that M/s. Navalco Commodities Pvt. Ltd. And Shri Shyam Trexim Pvt. Ltd., were assessed by ITO,Ward-9(4), Kolkata. The assessee also brought to the notice of the AO that M/s. Jewellock Trexim Pvt. Ltd., was being assessed by the same ITO assessing the Assessee, viz., ITO-Ward-9(3), Kolkata. Copy of the order of assessment completed u/s 143(3) of the Act for A.Y.2005-06 in the case of M/s. Navalco Commodities Pvt. Ltd., and for A.Y.2004-05 in the case of Shree Shyam Trexim Pvt. Ltd and for A.Y.2005-06 for M/s. Jewellock Trexim Pvt. Ltd., were also furnished. The financial statements of the three parties were also furnished wherein the investment made in the form of share application money in the shares of the assessee company was duly reflected in those financial statements.

The AO, however, deputed his Inspector to conduct an inquiry. According to the AO when the Inspector visited the premises of Shree Shyam Trexim Pvt. Ltd., and Navalco Commodities Pvt. Ltd., he found that there was no sign board nor any letter

On appeal by the assessee the CIT(A) deleted the addition made by the AO observing as follows :- “6) I have considered the submission of the appellant and perused the assessment order. I have also gone through the details and documents filed by the appellant company in the course of assessment: proceedings vide letter dt.03-10-2007. On careful consideration of the facts and in law 'I am of the opinion that the AO was not justified in making, the addition aggregating to Rs.54,00,000/- u/s.68 of the Act being the amount of' share application money by holding that the appellant company has failed to prove the identity, and credit worthiness of. The creditors as well as the genuineness of transactions. It is observed that all the three share applicant companies i.e. M/s. Shree Shyam Trexim Pvt. Ltd., M/s Navalco Commodities Pvt. Ltd. and M/s. Jewellock Trexim Pvt. Ltd. had filed their confirmations wherein each of them confirmed that they had applied for shares of the appellant ·company. All the three companies provided· the cheque number, copy of bank statements and their PAN. It is observed' that these companies also filed, copies of their return of income and financial statements for as well as copy of their assessment order u/s.143(3) of the I.T.Act for A.Y.2005-06. In the case of M/s. Jewellock Trexim Pvt. Ltd. the assessment for A.Y.2005-06 was completed by the ITO, Ward 9(3), Kolkata and the assessments in the case of M/s. Navalco Commodities Pvt. Ltd. and M/s. Shree Shyam Trexim Pvt. Ltd. for A.Y.2005-06 and A.Y.2004-05 respectively were completed by the ITO, Ward 9(4), Kolkata. Under the circumstances, I am of the opinion that the AO was not justified in holding that the share applicant companies were not in existence. The assessment orders were completed on the address as provided by the appellant company in the course of assessment proceedings. It is not known as to how the AO's inspector had reported that the aforesaid companies were not in existence at the given address. Since the appellant company had provided sufficient documentary evidences in support of its claim of receipt of share application money, I am of the opinion that the no addition u/s.68 could be made in the hands of appellant company. On going through the various judicial pronouncements relied upon by the appellant, it is observed that the view taken as above is also supported by them. In view of above the AO is directed to delete the addition of Rs.54,00,000/-. The ground nos.2 and 3 are allowed.”

Aggrieved by the order of CIT(A) the revenue is in appeal before the Tribunal.

We have heard the submissions of the learned DR, who relied on the order of AO. The learned counsel for the assessee relied on the order of CIT(A) and further drew our attention to the decision of Hon’ble Allahabad High Court in the case of CIT vs Raj Kumar Agarwal vide dated 17.11.2009 wherein the Hon’ble Allahabad High Court took a view that non production of the director of a Public Limited company which is regularly assessed to Income tax having PAN, on the ground that the identity of the investor is not proved cannot be sustained. Attention was also to the similar ruling of the ITAT Kolkata bench in the case of ITO vs Devinder Singh Shant in IT A No.208/Kol/2009 vide order dated 17.04.2009.

We have considered the rival submissions., We are of the view that order of CIT(A) does not call for any interference. It may be seen from the grounds of appeal