BEEKAY STEEL INDUSTRIES LTD.,KOLKATA V. DCIT, CENTRAL CIRCLE 2(3), , KOLKATA

ITA 346/KOL/2025

AI Insights

Beekay Steel Industries Ltd. appealed against the order of the Commissioner of Income Tax (Appeals), which confirmed the addition of \\u20b917,00,00,000 as unexplained cash credit under Section 68 of the Income Tax Act, 1961. The addition was initially made by the AO during the assessment proceedings, suspecting that the share capital and premium raised were from shell companies and not genuine investments. The Tribunal examined the evidences provided by the assessee, including bank statements, balance sheets, and documents related to the share subscribers, and found them satisfactory. The Tribunal also noted that the assessee company was listed on recognized stock exchanges and met the criteria of a company in which the public are substantially interested, thereby exempting it from the 'source of source' requirement under Section 68.

• Counselvise Citation: [2025] 140 COUNSELVISE.COM (IT) 713038 (ITAT-KOLKATA)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 30-07-2025
• Appeal Filed By: Assessee
• Order Result: Allowed
• Assessment Year: 2012-2013
• Other Referred Cases: PCIT vs. BST Infratech Ltd. (2024) 468 ITR 111 (Cal) (HC), CIT Vs. N.R. Portfolio (P.) Ltd. (2014) 42 taxmann.com 339 (Delhi)
• Laws Referred To: Income Tax Act
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: RAJA SENGUPTA
• Assessee Lawyers: SIDDARTH AGARWAL
• Keywords: Set aside; Unexplained cash credit; Depreciation; Additional depreciation; Onus to prove; Gift; Accommodation entries; Source of fund
• Section: 143(3); 142(1); 68; 131; 14A

Judgement Text

" IN THE INCOME TAX APPELLATE TRIBUNAL “A” BENCH, KOLKATA BEFORE SHRI RAJESH KUMAR, AM AND SHRI PRADIP KUMAR CHOUBEY, JM ITA No.346/KOL/2025 (Assessment Year:2012-13) Beekay Steel Industries Ltd. C/o Subash Agarwal & Associates, Advocates, Siddha Gibson, 1, Gibson Lane, Suite 213, 2nd Floor, Kolkata-700069 Vs. DCIT, Central Circle-2(3), Aaykar Bhavan Poorva, 110, Shantipally, Kolkata-700107, West Bengal (Appellant) (Respondent) PAN No. AABCB3205A Assessee by : Shri Siddarth Agarwal, AR Revenue by : Shri Raja Sengupta, DR Date of hearing: 21.05.2025 Date of pronouncement: 30.07.2025 O R D E R Per Rajesh Kumar, AM: This is an appeal preferred by the assessee against the order of the Commissioner of Income Tax, Appeal, Kolkata -26 (hereinafter referred to as the “Ld. CIT (A)”] dated 09.01.2025 for the AY 2012-13. 02. The only issue raised in the various grounds of appeal is against the confirmation of addition of ₹17,00,00,000/- by the ld. CIT(A) as made by the AO on account of share capital/ share premium by treating the same as unexplained cash credit. 03. The facts in brief are that the assessee filed the return of income on 28.09.2012, declaring total income of ₹24,49,87,560/-, which was Printed from counselvise.com Page | 2 ITA No.346/KOL/2025 Beekay Steel Industries Ltd; A.Y. 2012-13 duly processed u/s 143(1) of the Act on 19.03.2014. The case of the assessee was selected for scrutiny under Computer Assisted Scrutiny Selection (CASS) for the reason of large commission expenses and low net profit, claim of depreciation at higher rates and higher additional depreciation. The statutory notices along with questionnaire were issued and duly served upon the assessee. During the impugned financial year, the assessee had issued equity shares of face value of ₹10/- at a premium of ₹90/-to 28 subscribers. The ld. AO during the course of assessment proceedings accepted the subscription of shares by five directors of the assessee company to the tune of ₹3 crores as genuine. The ld. AO during the course of assessment proceedings called for the various details and evidences qua these investors which were duly furnished by the assessee comprising bank statement, balance sheet, Board Resolution and Memorandum of Articles of Association, ITR acknowledgement, final accounts, list of share applicants along with address of allottees besides ITRs, audited accounts, bank statements of the share subscribers. The assessee is a listed company on the recognized stock exchange. The ld. AO discussed the general modus operandi in case of shell companies and also findings given by the investigation wing in case of shell companies without commenting on how the assessee is a beneficiary of money from the shell companies. The assessee submitted before the ld. AO that the shares were issued at a premium on the basis of financial strength of the assessee company on the basis of expert valuation. The ld. AO noted that the summons issued u/s 131 of the Act to the subscribers could not be served. The Ld. AO has merely relied on the statement of the Shri Dinesh Kumar Dhandhania recorded u/s 131 of the Act on 19.11.2014, that he was engaged in Printed from counselvise.com Page | 3 ITA No.346/KOL/2025 Beekay Steel Industries Ltd; A.Y. 2012-13 the business of advancing money as accommodation entries and not actual transactions. According to the ld. AO out of 23 subscribers, 8 subscribers were alleged to be beneficiary of accommodation entries from Shri Dinesh Kumar Dhandhania. Accordingly, the ld. AO concluded that the assessee has introduced its own money through shell companies and thus not satisfied with the creditworthiness of the investors, treated the same as unexplained credit and made an addition of ₹17.00 cr accordingly. 04. During the appellate proceedings, the ld. CIT (A) called for the remand report from the ld. AO which was confronted to the assessee and assessee replied the said remand report. The ld. AO stated in the remand report that the summons u/s 131 of the Act were not served to all the parties, as in few cases the parties was not available at the addresses given. The ld. AO mainly relied on the fact that the subscribers were not having adequate income to invest, however submitted that they were having resources but those were out of funds raised from the other companies. The ld. CIT (A), after taking into account the contentions and replies of the assessee and remand report, rejoinder filed thereto, dismissed the appeal by following the decision in the case of PCIT vs. BST Infratech Ltd. (2024) 468 ITR 111 (Cal) (HC) and CIT Vs. N.R. Portfolio (P.) Ltd. (2014) 42 taxmann.com 339 (Delhi). The ld. CIT (A) noted that assessee cold not establish the capacity of the investors to invest money for purchase of shares at high premium. The ld. CIT (A) further held that creditworthiness of these investor companies were questionable and explanation offered by the assessee was not satisfactory. Finally, the ld. CIT (A) upheld the order of the ld. AO by confirming the addition made u/s 68 of the Act. Printed from counselvise.com Page | 4 ITA No.346/KOL/2025 Beekay Steel Industries Ltd; A.Y. 2012-13 05. The ld. AR vehemently argued that the order passed by the ld. CIT(A) is wrong and against the provisions of the Act as well as against the ratio laid down in various decisions. The ld. AR in defense of his arguments filed written submission which are as under: “I. It is humbly stated that the assessee-company filed its return for the A.Y. 2012-13. Subsequently, the case of the assessee was selected for scrutiny. Thereafter, notice under section 143(2) and 142(1) were issued by the A.O and finally assessment was completed by passing the order u/s 143(3) on 30.03.2015 assessing the total income at Rs 41,52,13,220/- by adding the share capital raised by the assessee during the relevant year amounting to Rs 17,00,00,000/- and also adding Rs 2,25,659/- u/s 14A r.w.R 8D. It is pertinent to note that during the relevant year the assessee company had issued20,00,000 shares of Rs 10/- each at a premium of Rs 90/- per share totaling to Rs 20,00,00,000/-The brief facts leading to the above-mentioned addition made by the Ld. A.O. are that the assessee company raised a sum of Rs. 20 crores during the year towards share capital (@Rs 10/-) per share and share premium (@ Rs 90/- per share) from 28 share subscribers. The Ld. A.O. accepted the amount raised from the 5 directors of the assessee company to the tune of Rs 3 crore as genuine but added back the balance Rs 17 crores [raised from 23 share subscribers including two Group Companies, te. Century Vision Pvt. Ltd (Rs. 3.75 crores) & Tirumala Holdings Pvt. Ltd. (Rs. 3.75 crores)]. II. It is humbly submitted that during the assessment proceedings & first appellate proceedings, the assessee-company has submitted the following documents - (i) ITR Acknowledgement, Final account of the assessee company (ii) List of Share Applicants (iii)Allotment Advice (iv) ITR Acknowledgement, final account and Bank Statement of the share applicant companies. (These documents proved that the share capital raised by the assessee- company was genuine) It is further submitted that as per the Balance Sheets of the share applicant companies. the amount of the investment in the assessee-company was much less than their net worth. As such, the identity, genuineness and credit- worthiness all the three ingredients required were proved in the instant case. Printed from counselvise.com Page | 5 ITA No.346/KOL/2025 Beekay Steel Industries Ltd; A.Y. 2012-13 III. The Ld. CIT(A) during the course of the first appellate proceedings also called for a remand from the Ld. A.O. During the course of remand proceedings, the Ld. A.O. issued notices u/s. 131 to the shareholder companies. According to the Ld. A.O., out of the 23 parties notices had been served physically only to 11 parties. It was further alleged that one shareholder company Tirumala Holdings Pvt. Ltd. who submitted thedocuments in response to notice u/s. 131 though the said company was allegedly not found at their address. The Ld. A.O. further alleged that the shareholder companies who filed the documents in response to the notice u/s. 131, did not have creditworthiness. IV. As regards the allegation of the A.O. regarding the 12 shareholder companies to whom notices u/s. 131 could not be served, it is humbly submitted that all the shareholder companies are active and duly filed their Income Tax Return. Therefore, the allegation of non-existence of the said companies is baseless. Copies of company master data in respect of the said companies have been submitted before the Ld. A.O. and Ld. CIT(A). Further, the assessee duly discharged its onus by filing various documentary evidences in connection with the share capital raised in the relevant year. V. As regard the allegation raised by the A.O. in respect of Tirumala Holdings Pvt. Ltd. is concerned, it is humbly submitted that the office of the said company was shifted to a new address. This was submitted before the Ld. CIT(A) during the course of the appellate proceedings. Therefore, the said company could not be located at the old address though the current address of the said company is available in the public domain. However, the said company duly made compliance to the notice issued by the A.O. by filing various documentary evidences. Copies of latest IT Return Acknowledgement showing the present address along with the Form No INC - 22, Form No MGT 14 were produced and submitted. VI. (a)The Ld. A.O. further in the remand report alleged that the shareholder companies did not have creditworthiness since they had meagre income. In this regard, it is humbly submitted that merely because the income of few of the shareholders is meagre, it cannot be said that their creditworthiness is doubtful when their own funds are several times the investment made in the assessee company. In this regard, reliance is placed on the decision of the Hon'ble High Court of Delhi in the case of CIT vs. M/s. Mayawati 338 ITR 563, wherein a bench comprising of Hon'ble Justice A.K. Sikri and Hon'ble Justice Suresh Kait (at their Lordships then were) held as under - \"62. Further in the case of Mrs. Veena Jain, details of assets proved on record show that the total assets of Mrs. Veena Jain were of Rs. 1.34 crores & the liabilities wereonly of Rs. 2.11 lakhs. We have perused the assets owned by Mrs. Veena Jain and found that she had capacity to borrow first, and then to gift as per her desire. The capacity does not mean what you are earning monthly or annually. The capacity includes how much total assets a person own.\" Printed from counselvise.com Page | 6 ITA No.346/KOL/2025 Beekay Steel Industries Ltd; A.Y. 2012-13 Therefore, the above-mentioned averment of the Ld. A.O. in the Remand Report and the Ld. CIT(A)'s reliance on the same has been made on the basis of conjectures and surmises and without any material basis. (b) It is pertinent to note that the assessee submitted all the relevant documents relating to shareholder companies i.e ITR Acknowledgement, Final accounts bank statement. The above submitted documents proved all the three ingredients required to discharge burden of proof as u/s. 68 viz, identity, genuinity and creditworthiness of shareholders. All the shareholders are income tax assessees, share applications have been received through banking channel and their net worth is much more than the investment made by them in assessee company by way of share application. A Statement showing the net worth of the subscribing companies has also been submitted vide our Paper book. VII. That copies of confirmation letters from the share subscribing companies along with the details of their source of funds for investing in the shares of a listed company like the assessee company was submitted before both quasi- judicial authorities and has been annexed at Serial No. 5 of Volume II of our Paper book. That the assessment orders u/s. 143(3) for the relevant year i.e. A.Y. 2012-13 for 5 share subscriber companies has also been produced/ submitted before the quasi-judicial authorities wherein no addition on account of share subscription of the shares of the assessee company (Beekay Steel Ltd.) was made (Serail No. 6 of Volume II of our Paper Book). VIII. That it is vehemently submitted that as per the Second Proviso to section 68 of the Act, the statutory embargo of proving 'Source of Source' of funds i.e. to discharge burden of proof u/s. 68 of the Act, the source of funds of the share subscribers need not be explained in case the assessee is a company in which the public are substantially interested. The second proviso to section 68 of the Act is reproduced below: Provided further that] where the assessee is a company (not being a company in which the public are substantially interested), and the sum so credited consists of share application money, share capital, share premium or any such amount by whatever name called, any explanation offered by such assessee-company shall be deemed to be not satisfactory, unless- (a) the person, being a resident in whose name such credit is recorded in the books of such company also offers an explanation about the nature and source of such sum so credited; and (b) such explanation in the opinion of the Assessing Officer aforesaid has been found to be satisfactory. IX. That u/s. 2(18)(b)(A) of the Income tax Act, 1961, a company in which the 'public are substantially interested' is defined as under: Printed from counselvise.com Page | 7 ITA No.346/KOL/2025 Beekay Steel Industries Ltd; A.Y. 2012-13 (18) \"company in which the public are substantially interested\" - a company is said to be a company in which the public are substantially interested- (b) if it is a company which is not a private company as defined in the Companies Act, 1956 (1 of 1956), and the conditions specified either in item (A) or in item (B) are fulfilled, namely:- (A) shares in the company (not being shares entitled to a fixed rate of dividend whether with or without a further right to participate in profits) were, as on the last day of the relevant previous year, listed in a recognised stock exchange in India in accordance with the Securities Contracts (Regulation) Act, 1956 (42 of 1956), and any rules made thereunder: X. That it is humbly submitted that the assessee is a company in which the Second Proviso of section 68 of the Act does not apply because it satisfies the definition of a company in which the public are substantially interested by virtue of fulfilling conditions specified u/s. 2(18)(b)(A) of the Act. That approval for listing of the Assessee Company's equity shares on U.P. Stock Exchange Ltd. (approval dated 10.03.2011) & Calcutta Stock Exchange Ltd. (approval dated 11.03.2011) are at Serial No. 3 of ourPaperbook with Clarificatory Evidences and this ground had been pressed before quasi-judicial authorities as well. Reply before Ld. A.O. (with receiving of the Department) regarding the listing of the shares of the assessee company in a recognized stock exchange along with a detailed financial justification of the share premium on the issue of equity shares was submitted. Despite the Second Proviso to section 68 not applying to the Assessee Company, the source of source was adequately explained along with a cogent explanation for the premium charged on the issue of equity shares during the course of the quasi-judicial proceedings. XI. That the Ld. Jurisdictional High Court has adjudicated the issue of Share Capital and Premium in favour of the assessee in multiple recent pronouncements which have been submitted for the perusal of Your Honours vide our Paper Book of Judgments. That the judgement of Calcutta High Court in the case of PCIT vs. BST Infratech Ltd. does not apply to the facts of the assessee's case as there is no round tripping of funds and that the assessee has discharged its primary onus u/s. 68 of the Act effectively before both quasi- judicial authorities, who have not been able to prove the charge of round tripping of funds/accommodation entries being taken in the garb of share capital & premium. And instead, have arbitrarily made an addition on account of Share Capital & Share Premium in the hands of the Assessee Company, listed on recognized stock exchange in the year under question and having justified the premium charged on the issue of its equity shares” Printed from counselvise.com Page | 8 ITA No.346/KOL/2025 Beekay Steel Industries Ltd; A.Y. 2012-13 06. The ld. DR, on the other hand, relied on the order of the authorities below and submitted that the assessee company has raised money through dubious sources and has completely failed to prove the identity, creditworthiness of the investors and genuineness of the transactions. The ld. DR also submitted that the shares were issued at a very high premium without any justification and therefore, the appeal of the assessee may kindly be dismissed by upholding the order of ld. CIT (A). 07. After hearing the rival contentions and perusing the materials available on record, we find that the assessee is a company in which public are substantially interested in terms of provisions of Section 2(18)(b)(A) of the Act. We note that the assessee company is listed in U.P. Stock Exchange Ltd. vide approval dated 10.03.2011 and Calcutta Stock Exchange Ltd. vide approval dated 11.03.2011. During the year the assessee company raised share capital /share premium of Rs. 20.00 Cr from 28 subscribers, by issuing 20,00,000 equity shares of face value of Rs. 10/- each at a premium of Rs. 90/- per share ,the details whereof is given on page no.4 and 5 of the assessment order. We note that out of the 28 subscribers, 5 subscribers were directors of the assessee company, who invested in aggregate ₹ 3.00 Cr. The ld. AO during the course of assessment proceedings accepted the investments made by the five director subscribers to the tune of ₹3.00 crores, however, made an addition of ₹17.00 Cr. on the ground that the assessee has failed to prove the necessary conditions laid down in Section 68 of the Act. 08. We note that the assessee has duly furnished evidences qua the share investors with the ld. AO as well as the ld. CIT (A) comprising copies Printed from counselvise.com Page | 9 ITA No.346/KOL/2025 Beekay Steel Industries Ltd; A.Y. 2012-13 of ITRs, bank statements, audited financial statements and confirmations etc. from the investors. We note that out of 23 subscribers in respect of which the addition had been made by the ld. AO, two were group companies namely; Century Vision Pvt. Ltd. & Tirumala Holdings Pvt. Ltd. from whom ₹3.75 crores each had been received as investment/ subscription. We also note that during the assessment proceedings the assessee company has produced the assessment orders passed u/s 143(3) of the Act in respect of 5 subscribers for the relevant assessment year 2012-13 wherein their respective AO’s did not make any addition .on account of share subscription made in the assessee company nor made any adverse comments on the said issue. 09. As stated hereinabove, the assessee is listed company on two stock exchanges and the assessee furnished before the AO the justification for issuing share at premium which is based upon the strength of the business of the assessee company which appear to be correct. We also note that the proviso to section 68 of the Act as inserted by the Finance Act 2012 w.e.f. 1.2.2013 requires an assessee company (not being a company in which public are substantially interested) in whose book the sums are credited by way of share capital/share premium, to offer an explanation about the nature and source of such credit to the satisfaction of the AO. In other words since the assesse is a company in which public are substantially interested , therefore the proviso to section 68 of the Act has no application and the theory of source of source is not applicable. 010. We note that the ld. AO, during the remand proceedings as directed by the ld. CIT (A) following direction by the Jurisdictional Hon’ble Printed from counselvise.com Page | 10 ITA No.346/KOL/2025 Beekay Steel Industries Ltd; A.Y. 2012-13 Court in writ jurisdiction to decide the appeal of the assessee within 12 weeks from the communication of writ order. During remand proceedings, the AO issued notices u/s 131 of the Act to all investor companies out of which the notices were served only on 11 parties, whereas on the remaining the ld. AO noted that there were not traceable. The ld. AO observed that in response to notice u/s 131 of the Act, Tirumala Holdings Pvt. Ltd. which is a group company filed and furnished the documents as called though notice u/s 131 of the Act could not be served on it. The AO further observed that documents filed showed that the said subscriber did not have any creditworthiness. 011. We also note that the assessee in rebuttal to remand report submitted that the 12 subscribers on whom the notices u/s 131 of the Act could not be served were active on MCA portal and have been filing the income tax returns regularly. In respect of the group company M/S Tirumala Holdings Pvt Ltd , the reason for non service was that the office of the company was shifted but the return of income filed for the assessment year showed the correct present address of the group company. We note that the assessee has furnished the necessary evidences to testify the same. Hence the summon u/s 131 could not be served on th said group company but complied with when the assessee came to know about it. We also note that the replies received from the subscriber companies in compliance to summons u/s 131 of the Act are available in the paper book Vol-II) Sr. N0. 10. 012. We also observe that despite 12 years old transactions, the assessee furnished all the evidences/documents qua the money raised with the AO as well as Ld CIT(A) and thus discharged the onus u/s 68 of the Printed from counselvise.com Page | 11 ITA No.346/KOL/2025 Beekay Steel Industries Ltd; A.Y. 2012-13 Act. We also note that the investor companies have sufficient net worth to make investment in the assessee company which is a listed company and the share premium was also fully justified based on the standard parameters. All the investments were received through banking channels and the investor companies were active on ROC portal, regular in filing ITRs and in some cases even the assessments were framed u/s 143(3) as stated hereinabove. The case of the assessee is also squarely covered by a series of decisions of the Hon’ble Jurisdictional High Court namely i) PCIT vs M/s Maninya Comfin Pvt Ltd. ITAT/271/2023 IA No.:GA/1/2023 dated 1.5.2025, ii) PCIT vs M/s Sitka Mercantile Pvt Ltd ITAT/68/2024IA No.:GA/2/2024, iii)PCIT vs M/s Hirak Vyaapar Pvt Ltd ITAT/242/2023 IA No.:GA/1/2023 dated 3.5.2024, iv) PCIT vs M/s Snowhite Infrastructure Pvt Ltd ITAT/108/2024 IA No.:GA/2/2024 dated 15.5.2024 and v) PCIT vs M/s Outcome Buildcom Pvt Ltd ITAT/3/2024 IA No.:GA/1/2024 dated 3.5.2024 wherein it has been held that where the assessee has discharged its burden of proof by satisfying all three conditions as envisaged u/s 68 of the Act and therefore no addition u/s 68 of the Act is called for. 013. With respect to creditworthiness not being there in case of subscribers, we are of the opinion that the mere fact that they had meagre recurring income is not relevant and creditworthiness cannot be doubtful when their own funds are several times the investment made in the assessee company. The case of the assessee find support from the decision of Hon’ble Delhi High court in the case of CIT Vs M/s Mayawati 338 ITR 563(Del). Printed from counselvise.com Page | 12 ITA No.346/KOL/2025 Beekay Steel Industries Ltd; A.Y. 2012-13 014. As for as the non-compliance of summons u/s 131 of the at are concerned , the case of the assessee is squarely covered by the decision of Hon’ble Apex Court in CIT Vs Orissa Corporation Pvt Ltd. 159 ITR 78(SC) wherein it has been held that where the assessee has discharged the onus of proving the identity and creditworthiness of the of creditors and genuineness of the transactions , no addition can be made on the ground of non-compliance to the summons u/s 131 of the Act. 015. Considering the above facts in the light of the decisions as cited above we are inclined to set aside the appellate order and direct the AO to delete the addition. 016. In the result, the appeal of the assessee is allowed. Order pronounced in the open court on 30.07.2025. Sd/- Sd/- (PRADIP KUMAR CHOUBEY) (RAJESH KUMAR) (JUDICIAL MEMBER) (ACCOUNTANT MEMBER) Kolkata, Dated: 30.07.2025 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 Printed from counselvise.com "