AI Insights
The case involves CP Metaliks Private Limited appealing against the order of the National Faceless Appeal Centre (NFAC), which upheld the addition of Rs. 2,48,30,000 under section 68 of the Income Tax Act, 1961, for the assessment year 2009-10. The addition was made on account of share capital and share premium received, which the AO and CIT(A) found to be not substantiated in terms of creditworthiness and genuineness. The Tribunal noted the absence of proper representation and submission by the assessee at earlier stages and decided to remit the matter back to the AO for a fresh assessment.
Appeal Details
Counselvise Citation
[2025] 140 COUNSELVISE.COM (IT) 705290 (ITAT-KOLKATA)
Assessee PAN
Bench
Appeal Number
CRN Number
Appellant
Respondent
Appeal Type
Income Tax Appeal
Pronouncement Date
01-07-2025
Appeal Filed By
Assessee
Order Result
Partly Allowed
Assessment Year
2009-2010
Judgement Text
"IN THE INCOME TAX APPELLATE TRIBUNAL “B” BENCH KOLKATA BEFORE SHRI GEORGE MATHAN, JUDICIAL MEMBER AND SHRI RAKESH MISHRA, ACCOUNTANT MEMBER ITA No.1482/KOL/2024 Assessment Year: 2009-10 CP Metaliks Private Limited G.T. road Bhiringee Durgapur-713213, West Bengal (PAN: AADCC1246Q) Vs. Income Tax Officer, Ward 1(2), Durgapur-713216, City Center, West Bengal (Appellant) (Respondent) Present for: Appellant by : None Respondent by : Shri Kapil Mandal, DR Date of Hearing : 16.06.2025 Date of Pronouncement : 01.07.2025 O R D E R PER RAKESH MISHRA, ACCOUNTANT MEMBER: This appeal filed by the assessee is against the order of National Faceless Appeal Centre (NFAC), Delhi (hereinafter referred to as “the Ld. CIT(A)”) passed u/s. 250 of the Income Tax Act, 1961 (hereinafter referred to as “the Act”) for AY 2009-10 dated 13.03.2024. 02. The grounds of appeal raised by the assessee are reproduced as un- der: “1. That the Ld. AO made an error in allowing income relief, as the correct total relief amount should have been Rs. 16,880,000/- (the remaining sum of share capital and securities premium for Assessment Year 2008-09). How- ever, due to a clerical error, the relief granted by the Ld. Commissioner of Income Tax (Appeals) [Ld. CIT(A)] was only Rs. 11,770,000/-. Additionally, the AO noted that 'from the copy of the return for A.Y. 2008-09, it is evident that the appellant had a paid-up capital of Rs. 35,20,000/- and securities premium of Rs. 1,33,60,000/-. Furthermore, from the copy of the return for A.Y. 2009-10, it is apparent that the appellant had a paid-up capital of Rs. 51,10,000/- (an increase of Rs. 15,90,000/-) and securities premium of Rs. Page | 2 ITA No. 1482/KOL/2024 CP Metaliks Private Limited; AY 2009-10 1,97,20,000/- (an increase of Rs. 63,60,000/-).' The AO should have only considered Rs. 79,50,000/- as the amount received during the year under consideration as share capital/share premium. Amounts received in previous years and appearing as opening balances in the financial statements cannot be considered for addition under section 68 for the current assessment year. It is quite clear that Assessing Officer has acted blindly and added Share Capital amount received in earlier year. This also shows gross negligence on the part of Assessing Officer on applying his mind and conducting due verifi- cation while making his order dated 13.03.2024. 2. As far as Share Capital of Rs. 15,90,000/- and Share Premium Rs. 63,60,000/-received during FY 2008-09 is concerned, We would like to bring to your kind information that Allotment of shares were made by following all due procedures under the Companies Act'1956. Further, this is also to bring to your kind attention that one of the investors, Omega Fintex Pvt. Ltd. was our Sister Concern. 3. When a Company goes for expansion or sets up a new project, funds for these projects are brought from directors or from director's relatives or its sis- ter concerns or some other convenient sources. If funds are not allowed to be brought from directors or their relatives or its sister concerns then how a com- pany be able to set up new projects or expand its existing businesses. All these restrictions, if allowed will prove to be a catastrophe for business envi- ronment and may create economic crisis in the Country. Name of the Company Name of the Directors Omega Fintex Pvt. Ltd. 1) Puneet Chawla and 2) Maya Devi Chawla C.P Metaliks Pvt. Ltd. 1) Mohan Chawla, 2) Puneet Chawla and 3) Dev Chawla 4. Above table shows the directors of the Company. Maya Devi Chawla is wife of Mohan Chawla. Further, both Puneet Chawla and Dev Chawla are grandson of Maya Devi Chawla and Mohan Chawla. Hence, the both the Com- pany are sister concerns. 5. Provisions of Section 68 require explaining nature and source of sum found credited in the books of accounts. It is also settled by various judgments that the term \"nature and source of a sum found credited\" would require an as- sessee to explain three things (ingredients) viz. i) Identity of the Investor ii) Capacity of the Investor to Invest money and iii) Genuineness of the transaction. Page | 3 ITA No. 1482/KOL/2024 CP Metaliks Private Limited; AY 2009-10 6. Further, the Hon'ble Supreme Court in case of CIT vs. Lovely Exports P. Ltd. - 216 CTR 195(SC), while dealing with the issue of applicability of section 68 on receipt of share capital and burden of proof on the assessee, held that if the share application money is received by the assessee company from al- leged bogus shareholders, whose names are given to the AO, then the Depart- ment is free to proceed to reopen their individual assessments in accordance with law. 7. Thus, the said judgment in so far as, share capital etc. is concerned, in as much as, the Court held that the onus is discharged on giving names and PAN of the investor. It further held that, if at all, the Department would like to as- sess any income, the same can be done in the hands of the investor. Thus, unlike other credits, wherein one has to explain three ingredients as stated above, the onus on the assessee company is limited while explaining credit in the nature of share capital ete. 8. Based on the above grounds and the evidence submitted in CIT(A), we re- quest reconsideration of the order dated 13.03.2024. The partial allowance of relief acknowledges the merit of our submissions, yet the remaining taxable income and resultant demand appear inconsistent with the facts presented.” 03. At the time of hearing neither the assessee nor the Ld. AR appeared before the Bench to attend the hearing nor any adjournment application was moved by the assessee. Therefore, this appeal was heard with the assistance of the Ld. DR and is being disposed of accordingly. 04. Brief facts of the case are that assessee company was incorporated on 15.05.2007. During the F.Y. 2008-09, it had received share application from three different entities. The assessee filed the details before the Ld. AO. The Ld. AO held that the assessee had failed to substantiate the cre- ditworthiness and genuineness of the transaction for the introduction of ₹2,48,30,000/- (₹51,10,000/- as share capital and ₹1,97,20,000/- as share premium) in the books of account shown as share capital including share premium by issue of fresh shares, which was without any justifiable basis. Accordingly, the Ld. AO made the addition to the extent of ₹2,48,30,000/- u/s 68 of the Act. Aggrieved the assessee preferred an appeal before the Ld. CIT (A) who partly upheld the order of the Ld. AO Page | 4 ITA No. 1482/KOL/2024 CP Metaliks Private Limited; AY 2009-10 and allowed relief of ₹1,17,70,000/-. The relevant extract from the order of the Ld. CIT(A) is as under: “9.1 The appellant has challenged the addition of Rs.2,48,30,000/- u/s.68 in the assessment order. The appellant company had filed its return of income for A.Y.2009-10 on 21.01.2010 at NIL returned income. Notice u/s.148 was issued for the reason that the appellant company had received share premium of Rs.1,97,20,000/- along with the issued share capital of Rs.51,10,000/-. In response to notice u/s.148, no return was filed and no compliance was made in response to notice u/s.142(1) also. The completed the assessment by making addition of the entire share capital and the share premium of Rs.2,48,30,000/- u/s.68 of the Act. 9.2 During the appellate proceedings the appellant had filed a written submission along with additional evidences which were forwarded to the A.O. for remand report. The A.O. vide remand report dated 23.08.2023 has given comments on admissibility of additional evidence and objected to the admission of the same. The remand report of the A.O. has been forwarded to the appellant vide notices dated 07.12.2023 to offer its comments and subsequent notices u/s.250 dated 18.01.2024 and 04.03.2024 but no comments has been received from the appellant. However, considering the submission of the appellant and the remand report of the A.O. and the provisions of Rule 46A and the factual matrix of the case, I deem it fit to admit the additional evidences under Rule 46A and to consider the same on the merits to adjudicate the appeal. 9.3 The appellant has stated that the A.O. has made addition of Rs.2,48,50,000/- on account of share capital of Rs.51,10,000/- and share securities premium of Rs.1,97,20,000/- whereas share capital of Rs.15,90,000/- and share premium of Rs.63,60,000/- was received during theF.Y.2008-09 and the balance amount was already received and considered in F.Y.2007-08, as evident from financial statement attached. Thus, the amounts to be considered for F.Y.2008-09 i.e. A.Y.2009-10 was only Rs.79,50,000/-. The A.O. in para 2 of its remand report has also stated that “from copy of return for A.Y.2008-09, it is seen that assessee had paid up capital of Rs.35,20,000/- and securities premium of Rs.1,33,60,000/- and from copy of return for A.Y.2009-10 it is seen that assessee had paid up capital of Rs.51,10,000/- (growth of Rs.15,90,000/-) and securities premium of Rs.1,97,20,000/- (growth of Rs.63,60,000/-)”. In view of the above facts, the claim of the appellant is correct that the A.O. should have only considered Rs.79,50,000/- as the amount received during the year under consideration as share capital/share premium, as the amount received during the earlier year and appearing as opening balance in the financial statements cannot be considered for addition u/s.68 for the year under consideration. The A.O. is accordingly directed to delete the addition of the balance amount of Rs.1,17,70,000/- (Rs.1,97,20,000-Rs.79,50,000) on above account. 9.4 As regards the issue of addition of Rs.79,50,000/- (Rs.63,60,000/- + Rs.15,90,000) is concerned, the A.O. had made the inquiries as directed during the appellate/remand proceedings and examined the additional evidences filed Page | 5 ITA No. 1482/KOL/2024 CP Metaliks Private Limited; AY 2009-10 by the appellant and forwarded to the A.O. and the A.O. submitted the remand report dated 23.08.2023, which has been extracted in the preceding para. 9.5 As per the appellant, the above share capital/securities premium have been received from 3 companies : 1) M/s.Wondermax Tracon Pvt. Ltd. Kolkata: Rs.8,00,000+Rs.32,00,000/- =Rs.40,00,000/-. 2) M/s.Astik Suppliers Pvt. Ltd., Kolkata : Rs.2,00,000/- + Rs.8,00,000/- = Rs.10,00,000/-. 3) M/s.Omega Fintex Pvt. Ltd., Kolkata : Rs.5,90,000/- + Rs.23,60,000/- =Rs.29,50,000/-. 9.6 The A.O. has reported in the remand report that based on the directed received during the appellate proceedings and direction to the A.O. to examine the documents furnished as additional evidence and make necessary inquiries u/s.250(4) of the Act, the A.O. had issued inquiry letter to the above companies from which the above funds were received but the letters have been returned unserved in the case of M/s.Wondermax Tracon Pvt. Ltd. Kolkata and M/s.Astik Suppliers Pvt. Ltd., Kolkata (refer the remand report extracted above). The reply from M/s.Omega Fintex Pvt. Ltd., Kolkata was received on 12.07.2023 through ITBA portal. Based on the above reply, letters u/s.133(6) were issued to the companies from which the funds were reportedly received by M/s.Omega Fintex Pvt. Ltd., Kolkata to seek clarification of source of fund of Rs.29,50,000/- in the hands of M/s.Omega Fintex Pvt. Ltd., Kolkata but no replies were received. The A.O. had also issued letter dated 26.07.2023 to the appellant to clarify source of funds received from M/s.Wondermax Tracon Pvt. Ltd. Kolkata and M/s.Astik Suppliers Pvt. Ltd., Kolkata and M/s.Omega Fintex Pvt. Ltd., Kolkata. But the appellant has stated that the companies had sufficient funds in their balance sheet to make investment in the appellant company M/s. C. P. Metaliks Pvt. Ltd. for which it had provided the relevant financial statements and discharged its onus. As regards the non-compliance by the investor entities and the A.O. being unable to verify the genuineness and creditworthiness of the investor entities, it had nothing further to provide. The A.O. accordingly reported that the appellant could not proved the genuineness, identity and creditworthiness of the entities who invested funds of Rs.79,50,000/- during the year under consideration. As stated above, the above remand report was forwarded to the appellant along with the notice u/s.250 on 07.12.2023 to offer its comments. But no compliance was made. Notice u/s.250 was also issued on 18.01.2024 and 04.03.2024 but no further submission has been made by the appellant. 9.7 The appellant had earlier contended that it was not provided sufficient opportunity to provide all the documents and evidence to substantiate the transaction but when the same opportunity has again been provided in the remand proceedings through the A.O. during the present appellate proceedings, the appellant has not availed the same. When the A.O. has asked specific questions regarding the source of funds to substantiate the genuineness of the Page | 6 ITA No. 1482/KOL/2024 CP Metaliks Private Limited; AY 2009-10 transactions and the creditworthiness of the investor companies and also confronted to the appellant that the investor companies have not responded to the notices issued by the A.O., it has not chosen to explain further even though it claims that one of the investor companies is having common director and related to it as a sister concern. On perusal of the documents filed by the appellant it is seen that M/s.Wondermax Tracon Pvt. Ltd. has filed a return with gross total income of Rs.1,079/- for A.Y.2007-08 only. The company had a profit before tax of Rs.1079/- for A.Y.2017-18 and Rs.74964/- for A.Y.2008-09 as per the director’s report, in the audit report which is indicative of the financial creditworthiness of the company. The audit report and the schedules do not show from where the funds are being received and transferred to and huge reserve and surplus is shown on account of securities premium account which shows that its shares also must have been subscribed by paying huge share premium by some other investor companies. The bank account also shows that funds are received and immediately transferred to the appellant company indicative of the layering of funds through the share subscriber companies. Similar nature is also seen from the financial documents of M/s.Astik Suppliers Pvt. Ltd. and M/s.Omega Fintex Pvt. Ltd. The copy of relevant bank accounts of these three investor companies have been extracted below to show the layering of funds through these investor companies and the financials clearly indicate that these companies do not have creditworthiness of their own. The appellant has also not substantiated as to why such investor companies will pay such huge premium for the appellant company which has statedly not even started its business as stated by the appellant himself. . . . 9.9 Considering the above facts, it is held that the appellant has failed to substantiate the creditworthiness and genuineness of the transaction of the of introduction of Rs.79,50,000/- (Rs.15,90,000 as share capital and Rs.63,60,000/- as share premium) in the books of accounts statedly shown as share capital including share premium by issue of fresh shares, also without justifiable basis. The addition to the extent of Rs.79,50,000/- is accordingly upheld under section 68 of the Act. The Ground of appeal is dismissed. 10. In the result, the appeal is partly allowed.” The appeal was thus partly allowed. Aggrieved with the order of the Ld. CIT(A), the assessee is in appeal before the Tribunal. 05. We have heard the submissions made by the Ld. DR. During the course of the appellate proceedings, we note that a proper submission was not made before the Ld. AO and the assessment order was passed Page | 7 ITA No. 1482/KOL/2024 CP Metaliks Private Limited; AY 2009-10 u/s 144 read with section 147 of the Act. We find that at both the stages of assessment order before the Ld. AO as well as before the Ld. CIT(A) in the appeal, proper representation was not made on behalf of the assessee as the submission on the remand report was not made by the assessee. The Ld. DR supported the order of the Ld. CIT(A). However, we deem it appropriate in the interest of justice and fair play that another oppor- tunity needs to be provided to the assessee to represent his case properly before the Ld. AO. We, therefore, set aside the orders of the Ld. CIT(A) and of the Ld. AO and remit the matter to pass the assessment order de novo after allowing an opportunity of being heard to the assessee and thereaf- ter pass an order in accordance with law. For statistical purposes, the appeal of the assessee is allowed. 06. In the result, the appeal of the assessee is allowed for statistical purposes. Order pronounced in the open court on 1st July, 2025. Sd/- Sd/- (GEORGE MATHAN) (RAKESH MISHRA) (JUDICIAL MEMBER) (ACCOUNTANT MEMBER) Dated: 01.07.2025 Sudip sarkar, Sr. P.S. Copy to: 1. The Appellant: 2. The Respondent. 3. CIT(A), NFAC, Delhi 4. The CIT, 5. DR, ITAT, //True Copy// BY ORDER, Page | 8 ITA No. 1482/KOL/2024 CP Metaliks Private Limited; AY 2009-10 Sr. Private Secretary/ Asst. Registrar Income Tax Appellate Tribunal, Kolkata "
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