INCOME TAX OFFICER WARD-7(1), KOLKATA V. TIRUMALA REALCON PRIVATE LIMITED, KOLKATA

ITA 409/KOL/2024

AI Insights

The case involves an appeal by the Income Tax Officer against Tirumala Relcon Private Limited concerning the assessment year 2012-13. The primary issue was the deletion of an addition of ₹15,81,84,000 made under section 68 of the Income Tax Act, which pertains to unexplained cash credits. The assessee had issued equity shares and raised this amount, which the AO initially treated as unexplained. However, the CIT (A) reversed this decision, finding that the assessee had sufficiently proved the identity, creditworthiness of the subscribers, and the genuineness of the transactions. The Revenue's appeal contested this finding, but the tribunal upheld the CIT (A)'s decision, citing various judicial precedents that supported the assessee's position.

• Counselvise Citation: [2025] 140 COUNSELVISE.COM (IT) 25028 (ITAT-KOLKATA)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 05-02-2025
• Appeal Filed By: Department
• Order Result: Allowed
• Bench Allotted: A
• Assessment Year: 2012-2013
• Other Referred Cases: CIT Vs. Orissa Corporation Pvt. Ltd., CIT Vs. Orchid Industries Ltd., Crystal Networks Pvt. Ltd. Vs. CIT, ITO Vs. M/s. Cygnus Developers India Pvt. Ltd., Joy Consolidated Pvt. Ltd. Vs. ITO, PCIT Vs. M/s Maniya Comfin Pvt. Ltd., PCIT Vs. M/s Sitka Mercantile Pvt. Ltd., PCIT Vs. M/s Hirak Vyaapar Pvt. Ltd., PCIT Vs. M/s Snowwhite Infrastructure Pvt. Ltd., PCIT Vs. Outcome Buildcom Pvt. Ltd., CIT Vs. Orchid Industries (P) Ltd
• Laws Referred To: Income Tax Act
• Result in Favour of: Revenue
• Court: TRIBUNAL
• Department Lawyers: SUBHENDU DATTA
• Assessee Lawyers: SIDDARTH AGARWAL
• Keywords: Set aside; Question of law; Unexplained cash credit; Scheme of amalgamation
• Section: 143(3); 143(1); 68; 131; 133(6)

Judgement Text

" IN THE INCOME TAX APPELLATE TRIBUNAL “A” BENCH, KOLKATA BEFORE SHRI RAJESH KUMAR, AM AND SHRI PRADIP KUMAR CHOUBEY, JM ITA No. 409/KOL/2024 (Assessment Year:2012-13) Income Tax Officer, Ward 7(1) Aaykar Bhavan, P-7, Chowringhee Square, Kolkata-700069, West Bengal Vs. Tirumala Relcon Private Limited 51, Shakespeare Sarani, 2 nd Floor,Kolkata-700017, West Bengal (Appellant) (Respondent) PAN No. AADCT7159D Assessee by : Shri Siddarth Agarwal, AR Revenue by : Shri Subhendu Datta, DR Date of hearing: 26.11.2024 Date of pronouncement : 05.02.2025 O R D E R Per Rajesh Kumar, AM: This is an appeal preferred by the Revenue against the order of the National Faceless Appeal Centre, Delhi (hereinafter referred to as the “Ld. CIT(A)”] dated 16.12.2022 for the AY 2012-13. 02. The only issue raised by the Revenue is against the deletion of addition of ₹15,81,84,000/- as made by the ld. AO u/s 68 of the Act. 03. The facts in brief are that the assessee files return of income on 30.09.2012, disclosing loss of ₹ 3,92,370/-, which were not processed u/s 143(1) of the Act. Thereafter, the case of the assessee was selected for scrutiny and statutory notices were duly issued and served upon the assessee along with questionnaire. The assessee Page | 2 ITA No.409/KOL/2024 Tirumala Realcon Private Limited; A.Y. 2012-13 replied to the questionnaires issued by the ld. AO by furnishing various evidences / details as called for by the ld. AO. During the instant assessment year the assessee has issued equity shares thereby raising share capital/share premium amounting to Rs. 15,81,84,000/-. The AO for independent verification of transactions also issued notices u/s 133(6) to the subscribers and also issued summons u/s 131 of the Act to the director of the assessee company. The notices issued u/s 133(6) were duly replied by the subscribers by furnishing all the details and information along with evidences as called for by the AO. Shri Govind Garg appeared on 24.02.2015 before the AO in compliance summons u/s 131 of the Act but his statement was not recorded as is evident from the letter dated 10.03.2015 filed before the AO. Finally , the ld. AO made the addition of ₹15,81,84,000/-/-after rejecting the contentions of the assesse by treating the share capital / share premium as unexplained cash credit on the ground that summons issued u/s 131 of the Act were not complied with besides making other additions. 04. In the appellate proceedings, the ld. CIT (A) allow the appeal of the assessee by giving a very comprehensive finding that the assessee has prove the identity, creditworthiness of the subscribers and the genuineness of the transactions, which read as under:- “9. At the assessment stage the appellant had produced several evidences to establish identity & creditworthiness of M/s Purvanchal Vinimay Pvt Ltd. & M/s Omni Vyapaar Pvt Ltd. as well the genuineness of the transactions those took place among the appellant company and these investors. Assessment order itself carries the evidence of submission of such details, as pointed out by me in my letter to the AO, reproduced herein above. AO brushed aside these to focus on the fact of non-production of the directors of M/s Purvanchal Vinimay Pvt Ltd. & M/s Omni Vyapaar Pvt Ltd. However, such non-production of the directors of investing companies alone can never be a basis of suspicion, let alone an addition u/s 68 of the Act. Page | 3 ITA No.409/KOL/2024 Tirumala Realcon Private Limited; A.Y. 2012-13 9.1. Further, it is a case pertaining to AY 2012- 13, that is before the introduction of proviso to section 68 of the Act. Nonetheless, the appellant has explained source of source at this stage. From the assessment order it appears that explanations were put forward before AO, as well. In my communications to the AO, the same were referred to for his comments. Despite several opportunities the AO chose not to reply. 9.2. However, for a fair trial, submissions made before me were sent to the AO for his verification and examination. As already pointed out, despite several opportunities the AO chose not to reply.” 05. Ld. Counsel for the assessee vehemently submitted before the bench that the order passed by the Ld. CIT(A) is very reasoned and cogent one after taking into account the submissions and evidences filed by the assessee and facts on record and after following various decisions of different judicial forum. The Ld. AR ,while referring to the evidences filed by the assessee as well as by the subscribers in response to notices issued u/s 133(6) of the Act , submitted that the assessee as well as the subscribers have filed all the evidences proving the identity and creditworthiness of the subscribers as well as genuineness of the transactions. The Ld. AR stated that where the assessee has filed all the evidences qua the subscribers consisting of names and addresses, PANs, audited accounts, bank statements etc. and AO has not carried out any further verification, then the addition cannot be made merely on the ground that there was no compliance to summon issued u/s. 131 of the Act by the directors of the assessee company. In defense of his argument he 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); Page | 4 ITA No.409/KOL/2024 Tirumala Realcon Private Limited; A.Y. 2012-13 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. vi. PCIT Vs. M/s Maniya Comfin Pvt. Ltd. ITAT/271/2023, IA No. GA/1/2023 vii. PCIT Vs. M/s Sitka Mercantile Pvt. Ltd. ITAT/68/2024, IA No. GA/2/2024 viii. PCIT Vs. M/s Hirak Vyaapar Pvt. Ltd. ITAT/242/2023, IA No.GA/1/2023 ix. PCIT Vs. M/s Snowwhite Infrastructure Pvt. Ltd. ITAT/108/2024, IA No.: GA/2/2024 x. PCIT Vs. Outcome Buildcom Pvt. Ltd. ITAT/3/2024 IA No: GA/1/1024 06. The Ld. D.R strongly controverted and opposed the arguments as put forth by the Ld. A.R by submitting that the share application money was received by the assessee from various subscribers who were not having any creditworthiness. Besides the ld DR stated that the enquiries and investigation could not be carried out by the AO when the directors of the assessee company did not appear personally in compliance to summons issued u/s 131 of the Act thoug the ld DR admitted that subscribers have replied to the notices u/s 133(6) of the Act . Therefore the Ld. D.R ,therefore, submitted that the addition was rightly made by the AO which needs to be restored. 07. After hearing the rival contentions and perusing the materials available on record, we find that in this case the assessee has raised Page | 5 ITA No.409/KOL/2024 Tirumala Realcon Private Limited; A.Y. 2012-13 share capital from two share subscribers namely; Purvanchal Vinimay Pvt Ltd & Omni Vyapaar Pvt Ltd. aggregating to ₹15,81,84,000/- qua which all the evidences were the assessee filed before the AO as well as ld. CIT (A). The ld. CIT (A) even called for the remand report from the ld. AO requiring the AO to submit a report on the evidences were not filed by the assessee before the AO. Despite several reminders. , the ld. AO did not respond at all and finally, the ld. CIT (A) disposed the case after hearing the ld. Authorized Representative and considering the facts/ evidences on record. The ld. CIT (A) discussed each and every issue on merit that assessee has filed all the evidences before the ld. AO as well as before the appellate authority and both the share subscribers have furnished all the details/evidences proving the identity , creditworthiness of the investors and genuineness of the transactions in reply to notice u/s 133(6) of the Act. However, the ld. AO has failed to carry out any meaningful investigation into the same and made the addition merely on the ground of non-compliance of summons issued to the Directors of the assessee company. We note that the ld. CIT (A) even noted that the Calcutta High Court vide order dated 09.01.2017, has approved the scheme of amalgamation in the case of these two subscribers thereby holding that there was no doubt regarding their existence and credibility. This observation has been given by the ld. CIT (A) in Para 10.5 of the appellate order. The ld CIT(A) has concluded that the assessee has furnished all the evidences which proved the three ingredient as provided u/s 68 of th4e Act and AO has not done any enquiry. Even the remand called for by the ld CIT(A) was not replied despite repeated reminders. The case of the assessee was also found force from the series of decisions of Hon'ble Calcutta High Court namely i) PCIT Vs. M/s Maniya Comfin Pvt. Ltd. (supra), ii) Page | 6 ITA No.409/KOL/2024 Tirumala Realcon Private Limited; A.Y. 2012-13 PCIT Vs. M/s Sitka Mercantile Pvt. Ltd. (Supra) iii) PCIT Vs. M/s Hirak Vyaapar Pvt. Ltd. (Supra), iv) PCIT Vs. M/s Snowwhite Infrastructure Pvt. Ltd. (Supra) and v) PCIT Vs. Outcome Buildcom Pvt. Ltd. (Supra) . 08. The Hon'ble Calcutta High Court in the case of M/s Sitka Mercantile Pvt. Ltd. (supra) held that no addition can be made where the assessee has filed all the material/ evidences for the authorizes below hence, all the above additions were deleted.Finally the ld. CIT (A) allowed the appeal of the assessee by holding that the mere non- appearance/production of directors of assessee company before the ld. AO cannot be a ground for making the addition u/s 68 of the Act. We find support from the decision of Hon’ble Supreme Court in the case of Orissa Corporation Ltd. (supra) “That in this case the respondent had given the names and addresses of the alleged creditors. It was in the knowledge of the Revenue that the said creditors were income-tax assessees. Their index numbers were in the file of the Revenue. The Revenue, apart from issuing notices under Section 131 at the instance of the respondent, did not pursue the matter further. The Revenue did not examine the source of income of the said alleged creditors to find out whether they were creditworthy. There was no effort made to pursue the so-called alleged creditors. In those circumstances, the respondent could not do anything further. In the premises, if the Tribunal came to the conclusion that the respondent had discharged the burden that lay on it, then it could not be said that such a conclusion was unreasonable or perverse or based on no evidence. I f the conclusion was based on some evidence on which a conclusion could be arrived at, no question of law as such arose. The High Court was right in refusing to state a case.” 09. The case of the assessee is also squarely covered by the decisions of Hon’ble Calcutta High Court in the case of Crystal Networks Pvt. Ltd. vs. CIT (supra ) wherein it has held that where all the evidences were filed by the assessee proving the identity and creditworthiness of the loan transactions , the fact that summon issued were returned un- served or no body complied with them is of little significance to prove Page | 7 ITA No.409/KOL/2024 Tirumala Realcon Private Limited; A.Y. 2012-13 the genuineness of the transactions and identity and creditworthiness of the creditors. The relevant portion of the decision is extracted below: “We find considerable force of the submissions of the learned Counsel for the appellant that the Tribunal has merely noticed that since the summons issued before assessment returned unserved and no one came forward to prove. Therefore it shall be assumed that the assessee failed to prove the existence of the creditors or for that matter creditworthiness. As rightly pointed out by the learned counsel that the Ld. CIT(A) has taken the trouble of examining of all other materials and documents viz., confirmatory statements, invoices, challans and vouchers showing supply of bidi as against the advance. Therefore, the attendance of the witnesses pursuant to the summons issued in our view is not important. The important is to prove as to whether the said cash credit was received as against the future sale of the product of the assessee or note. When it was found by the Ld. CIT(A) on fact having examined the documents that the advance given by the creditors have been established the Tribunal should not have ignored this fact findings. Indeed the Tribunal did not really touch the aforesaid fact finding of the Ld. CIT(A) as rightly pointed out by the learned counsel. The Supreme Court has already stated as to what should be the duty of the learned Tribunal to decide in this situation. In the said judgment noted by us at page 463, the Supreme Court has observed as follows: “The Income-Tax Appellate Tribunals performs a judicial function under the Indian Income-tax Act. It is invested with authority to determine finally all questions of fact. The Tribunal must, in deciding an appeal, consider with due care all the material facts and records its findings on all the contentions raised by the assessee and the Commissioner, in the light of the evidence and the relevant law.” The Tribunal must, in deciding an appeal, consider with due care all the material facts and record its findings on all contentions raised by the assessee and the Commissioner, in the light of the evidence and the relevant law. It is also ruled in the said judgment at page 465 that if the Tribunal does not discharge the duty in the manner as above then it shall be assumed the judgment of the Tribunal suffers from manifest infirmity. Taking inspiration from the Supreme Court observation we are constrained to hold in this matter that the Tribunal has not adjudicated upon the case of the assessee in the light of the evidence as found by the Ld. CIT(A). We also found no single word has been spared to up set the fact finding of the Ld. CIT(A) that there are materials to show the cash credit was received from various persons and supply as against cash credit also made. Hence, the judgment and order of the Tribunal is not sustainable. Accordingly, the same is set aside. We restore the judgment and order of the Ld. CIT(A). The appeal is allowed.” Page | 8 ITA No.409/KOL/2024 Tirumala Realcon Private Limited; A.Y. 2012-13 010. The case of is also covered by the decision of the coordinate bench by ITO Vs M/s Cygnus Developers India Pvt. Ltd. (supra) the operative part whereof is extracted below: “8. We have heard the submissions of the learned D.R, who relied on the order of AO. The learned counsel for the assessee relied on the order of Ld. 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 ITA No. 179/2008 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 ITA No. 208/Kol/2009 vide order dated 17.04.2009. 9. We have considered the rival submissions. We are of the view that order of Ld. CIT(A) does not call for any interference. It may be seen from the grounds of appeal raised by the revenue that the revenue disputed only the proof of identity of share holder. In this regard it is seen that for AY 2004-05 Shree Shyam Trexim Pvt. Ltd. was assessed by ITO, Ward-9(4), Kolkata and the order of assessment u/s 143(3) dated 25.01.2006 is placed in the paper book. Similarly Navalco Commodities Pvt. Ltd. was assessed to tax u/s 143(3) for AY 2005-06 by ITO, Ward-9(4), Kolkata by order dated 20.03.2007. Similarly Jewellock Trexim Pvt. Ltd. was assessed to tax for AY 2005-06 by the very same ITO, Ward-9(3), Kolkata assessing the assessee. In the light of the above factual position which is not disputed by the revenue, it cannot be said that the identity of the share applicants remained not proved by the assessee. The decision of the Hon’ble Allahabad High Court as well as ITAT, Kolkata Bench on which reliance was placed by the learned counsel for the assessee also supports the view that for non-production of directors of the investor company for examination by the AO it cannot be held that the identity of a limited company has not been established. For the reasons given above we uphold the order of Ld. CIT(A) and dismiss the appeal of the revenue.” 011. Similar ratio has been laid down by the Hon’ble Mumbai High Court in the case of CIT Vs. Orchid Industries (P) Ltd (supra) by holding that provisions of section 68 of the Act cannot be invoked for the reasons that the person has not appeared before the AO where the assessee had produced on records documents to establish genuineness of the party such as PAN ,financial and bank statements showing share application money . Page | 9 ITA No.409/KOL/2024 Tirumala Realcon Private Limited; A.Y. 2012-13 012. The facts of the assessee are squarely covered by the above decisions, wherein it has been held that addition u/s 68 of the Act cannot be made merely on the ground of non-compliance to summon issued u/s 131 of the Act when the assessee and subscribers have filed all the evidences. Pertinent to mention that the AO has not submitted the remand report before the ld. CIT(A) despite repeated reminders. Considering all these facts and circumstances , we do not find any infirmity in the appellate order and accordingly, we are inclined to dismiss the appeal of the Revenue by upholding the order of ld. CIT (A). 013. In the result, the appeal of the Revenue is dismissed Order pronounced in the open court on 05.02.2025. Sd/- Sd/- (PRADIP KUMAR CHOUBEY) (RAJESH KUMAR) (JUDICIAL MEMBER) (ACCOUNTANT MEMBER) Kolkata, Dated: 05.02.2025 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 "