ANDROMEDA COMMUNICATIONS PVT. LTD.,KOLKATA V. I.T.O., WARD - 7(1), , KOLKATA

ITA 2511/KOL/2024

AI Insights

The case involves Andromeda Communications Pvt. Ltd., which appealed against the order of the National Faceless Appeal Centre, Delhi, confirming the addition of \\u20b91,65,60,806 as unexplained cash credit under section 68 of the Income Tax Act concerning share capital/share premium for the assessment year 2012-13. The primary contention was the high premium at which shares were issued, which the Assessing Officer (AO) and the Commissioner of Income Tax (Appeals) (CIT(A)) found lacked justification. The Tribunal, however, found that the assessee had provided substantial evidence regarding the financial capability of the investors and the genuineness of the transactions, which the lower authorities failed to adequately address.

• Counselvise Citation: [2025] 140 COUNSELVISE.COM (IT) 315769 (ITAT-KOLKATA)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 13-05-2025
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: D
• Assessment Year: 2012-2013
• Other Referred Cases: CIT Vs. Orissa Corporation Pvt. Ltd. (1986) 159 ITR 78 (SC), CIT Vs. Orchid Industries Ltd. 397 ITR 136 (Bom), Crystal Networks Pvt. Ltd. Vs. CIT 353 ITR 171 (Kol), ITO Vs. M/s. Cygnus Developers India Pvt. Ltd.(ITA No. 282/Kol/2012), Joy Consolidated Pvt. Ltd. Vs. ITO (ITA No. 547/Kol/2020)
• Laws Referred To: Income Tax Act
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: ASHUTOSH KUMAR
• Assessee Lawyers: MANISH TIWARI
• Keywords: Unexplained cash credit; Bogus
• Section: 68; 131; 133(6)

Judgement Text

" IN THE INCOME TAX APPELLATE TRIBUNAL “D” BENCH, KOLKATA BEFORE SHRI RAJESH KUMAR, AM AND SHRI PRADIP KUMAR CHOUBEY, JM ITA No.2511/KOL/2024 (Assessment Year:2012-2013) Andromeda Communications Pvt. Ltd. 6/7A, A.J.C. Bose Road,Kolkata, West Bengal, 700017 Vs. I.T.O., Ward - 7(1), Aayakar Bhawan, P-7, Chowringhee Square, Kolkata, West Bengal, 700069 (Appellant) (Respondent) PAN No. AACCA1519K Assessee by : Shri Manish Tiwari, AR Revenue by : Shri Ashutosh Kumar, DR Date of hearing: 07.05.2025 Date of pronouncement : 13.05.2025 O R D E R Per Rajesh Kumar, AM: This is an appeal preferred by the assessee against the order of the National Faceless Appeal Centre, Delhi (hereinafter referred to as the “Ld. CIT(A)”] dated 30.10.2023 for the AY 2012-13. 02. The only issue raised in the grounds of appeal is against the confirmation of addition of ₹1,65,60,806/- by the ld. CIT (A) as made by the ld. AO on account of unexplained cash credit u/s 68 of the Act in respect of share capital/ share premium. 03. The facts in brief are that the assessee filed the return of income on 27.09.2012, declaring total income of ₹37,317/-. The case of the assessee was selected for scrutiny under Computer Assisted Scrutiny Selection (CASS) for the reason of large share premium received. Page | 2 ITA No.2511/KOL/2024 Andromeda Communications Pvt. Ltd.; A.Y. 2012-13 Accordingly, statutory notices and questionnaire were duly issued and served upon the assessee. During the assessment proceedings, the assessee partially made compliance before the ld. AO by furnishing certain evidences. The ld. AO pointed did not point out any defect or deficiency in the said evidences. In order to independently verify the transactions, the ld. AO also issued summon u/s 131 of the Act for which there was no compliance on the part of the assessee. During the year the assessee issued equity shares of face value of ₹10 each at a premium of ₹482 to three parties namely; Shri Ishwari Prasad Tantia, Smt. Laxmi Tantia, Smt. Anita Tantia, who were the existing shareholders or their relative. The ld. AO also issued notices u/s 133(6) of the Act, which were duly complied by the share subscribers but the ld. AO made the addition of the share capital/ share premium on the ground that there was no justification for issuing shares at such a high premium and that the same could not be verified as director did not appear before the ld. Assessing Officer despite being summoned u/s 131 of the Act. 04. In the appellate proceedings, the ld. CIT (A) confirmed the order of ld. AO on the ground that mere confirmation of investments by the subscribers did not close the matter and the genuineness and creditworthiness of the transactions remained to be verified. The assessee filed before the ld. CIT (A) the evidences qua the share subscribers’ proof of identity and creditworthiness and genuineness of the transactions. The ld. CIT (A) called for the remand report from the ld. AO on 19.09.2023, which was submitted by the ld. AO on 31.10.2023. The ld. CIT (A) confronted the same to the assessee and thereafter dismissed the appeal of the assessee by upholding the finding given by the ld. Assessing Officer. Page | 3 ITA No.2511/KOL/2024 Andromeda Communications Pvt. Ltd.; A.Y. 2012-13 05. The ld. AR vehemently submitted before us that the findings of both the authorities below were that the assessee lacks the credential to issue shares at a very high premium is wrong and against the facts on record. The ld. AR referred to page no. 13 of the Paper Book, which is the audited profit and loss account of the assessee. The ld. AR stated that during the year the assessee has revenue from operation of ₹47,66,767/- and other income of ₹37,317/- with net profit of ₹3,88,704/-. The ld. AR further referred to page no. 20, which is the schedule of fixed assets and submitted that the gross assets of the assessee as on 31.03.2012, was ₹7,12,75,418/-. The ld. AR therefore prayed that the observations of the authorities below that the shares were issued without any credential or justification are based on surmises and presumptions and has no substantive basis. The ld. AR further submitted that the money was raised from the existing shareholders/ directors/ relative of the directors who have sufficient resources and creditworthiness to make the investments in the assessee company. The ld. AR, while referring to the page no.45 to 72 of the Paper Book, submitted that the letters issued u/s 133(6) of the Act were also complied with by these investors by furnishing all the information/details comprising copy of ITRs, Pass Books, computation of income, profit and loss accounts/ balance sheets. The ld. AR submitted that in case of Shri Ishwari prasad Tantia, income as per ITR was ₹2,45,97,718/-, whereas in case of Smt. Laxmi Tantia it was ₹17,34,339/- and in case of Smt. Anita Tantia it was ₹5,77,918/- for A.Y. 2012-13, the copies of ITR acknowledgements are attached at page nos.51,61 and 69 of the Paper Book. The ld. AR also referred to the copy of bank statements of these subscribers and submitted that all these subscribers were having sufficient financial strength to make the investments and therefore, the order of lower authorities are Page | 4 ITA No.2511/KOL/2024 Andromeda Communications Pvt. Ltd.; A.Y. 2012-13 based on presumption and surmises. The ld. AR submitted that assessee has filed all the evidences before the ld. AO as well as ld. CIT (A) qua these share subscribers and also that notices issued u/s 133(6) of the Act were also duly complied with by filing all the details and evidences called for. However, both the authorities below have not commented on the evidences furnished by the assessee and merely relied on the fact that the summons u/s 131 of the Act were not complied with. The ld. AR submitted that it is not the case of the ld. AO that the money was received from some shell companies and therefore, the order of ld. CIT (A) may kindly be revered and AO may be directed to delete the addition. In defense of his arguments, the ld. AR relied on the following decisions:- (i) CIT Vs. Orissa Corporation Pvt. Ltd. (1986) 159 ITR 78 (SC); (ii) CIT Vs. Orchid Industries Ltd. 397 ITR 136 (Bom); (iii) Crystal Networks Pvt. Ltd. Vs. CIT 353 ITR 171 (Kol); (iv) ITO Vs. M/s. Cygnus Developers India Pvt. Ltd.(ITA No. 282/Kol/2012) and (v) Joy Consolidated Pvt. Ltd. Vs. ITO (ITA No. 547/Kol/2020. 06. The ld. DR while referring to page no.49,50 and 61 of the Paper books, pointed out that the money was received by the subscribers in their bank account on a day before make the investment in the assessee company and therefore lack genuineness. However, the same was controverted by the ld. AR by submitting that it is not a accommodation entry or any bogus entry received from shell companies and it is their own money and they are having a substantial Page | 5 ITA No.2511/KOL/2024 Andromeda Communications Pvt. Ltd.; A.Y. 2012-13 net worth/ income during the year. The ld. AR contended that the transactions cannot be coloured with taint merely on the ground that the money was credited in the bank account a day before. 07. After hearing the rival contentions and perusing the materials available on record, we find that in this case, the assessee has issued equity shares to three parties, who happened to be relative of directors/ share holders of the assessee company. The shares were issued at a face value of ₹10 at a premium of ₹492. We note that during the assessment proceedings, the assessee furnished the evidences qua these share subscribers. All these evidences were also submitted before the ld. CIT (A) and ld CIT(A) even the remand report was also called for, which was furnished on 31.10.2023. We note that the ld. AO has not pointed out any defect or deficiencies in the evidences furnished by the assessee. We further note that for independent verification of these transactions , the AO issued notice u/s 133(6) of the Act to all the subscribers which were duly complied by these subscribers by furnishing evidences/ details qua the investment made. We note that the ld. AO as well as the ld. CIT (A) have not commented on these evidences and have harped on the fact that there was no compliance by the directors of the assessee company to the summons issued u/s 131 of the Act. We have even examined the facts filed before us in the form of ITRs, bank statements, copy of computation of income , Profit and Loss account and balance sheet and find that the subscribers were having sufficient sources to invest in the assessee company. Therefore, we are not in a position to accept the conclusion drawn by the ld. CIT (A) on this issue. Moreover, the addition cannot be made merely on the ground that there was no compliance to the summons u/s 131 of the Act, where the assessee has furnished all the evidences/ details before the Page | 6 ITA No.2511/KOL/2024 Andromeda Communications Pvt. Ltd.; A.Y. 2012-13 ld. AO and there was no verification done by the ld. Assessing Officer to establish or to bring on record any contrary facts. The case of the assessee find support from a series of cases as referred to above wherein it has been held that where the assessee has furnished all the evidences qua the share transactions and the AO have not carried out any further verification or pointed out any defects in the evidences filed by the assessee, then it is not open to the AO to make addition on the ground that there was no compliance to the summons issued u/s 131 of the Act. 08. In the result, the appeal of the assessee is allowed. Order pronounced in the open court on 13.05.2025. Sd/- Sd/- (PRADIP KUMAR CHOUBEY) (RAJESH KUMAR) (JUDICIAL MEMBER) (ACCOUNTANT MEMBER) Kolkata, Dated: 13.05.2025 Sudip Sarkar, Sr.PS Copy of the Order forwarded to : 1. The Appellant 2. The Respondent 3. CIT 4. DR, ITAT, 5. Guard file. BY ORDER, True Copy// Sr. Private Secretary/ Asst. Registrar Income Tax Appellate Tribunal, Kolkata "