INCOME TAX OFFICER, WARD-9(1), KOLKATA, KOLKATA V. AAKASH SAREE TRADING PRIVATE LIMITED, KOLKATA

ITA 1291/KOL/2023

AI Insights

The case involves Aakash Saree Trading Private Limited, which faced scrutiny over a large share premium received, amounting to Rs. 5,25,00,000, during the assessment year 2012-13. The Income Tax Officer (ITO) added this amount as undisclosed income under section 68 of the Income Tax Act, 1961, suspecting it to be unaccounted money introduced as share capital. The Commissioner of Income Tax (Appeals) (CIT(A)) initially deleted this addition, leading to the Revenue's appeal to the Income Tax Appellate Tribunal (ITAT). The ITAT found procedural lapses in the CIT(A)'s decision-making process, including the failure to verify basic submissions and the absence of a remand report from the ITO, which led to the setting aside of both the CIT(A)'s and ITO's orders and a directive for a fresh assessment.

• Counselvise Citation: [2025] 140 COUNSELVISE.COM (IT) 36263 (ITAT-KOLKATA)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 27-02-2025
• Appeal Filed By: Department
• Order Result: Allowed
• Bench Allotted: D
• Assessment Year: 2012-2013
• Other Referred Cases: Pr. CIT (Central-1), Delhi Vs. NRA Iron & Steel Pvt. Ltd. (412 ITR 161), Sumati Dayal vs. CIT (214 ITR 801) (SC), CIT vs. Durga Prasad More 82 ITR 540 (SC)
• Laws Referred To: Income Tax Act, 1961
• Result in Favour of: Revenue
• Court: TRIBUNAL
• Keywords: Condonation of delay; Set aside; Opportunity of being heard; Unexplained cash credit
• Section: 143(3); 250; 68; 131; 133(6)

Judgement Text

"आयकर अपीलीय अधिकरण कोलकाता 'डी' पीठ, कोलकाता में IN THE INCOME TAX APPELLATE TRIBUNAL KOLKATA ‘D’ BENCH, KOLKATA श्री दुव्वुरु आरएल रेड्डी, उपाध्यक्ष (कोलकाता क्षेत्र) एवं श्री राक ेश धमश्रा, लेखा सदस्य क े समक्ष Before SHRI DUVVURU RL REDDY, VICE PRESIDENT (KZ) & SHRI RAKESH MISHRA, ACCOUNTANT MEMBER I.T.A. No.: 1291/KOL/2023 Assessment Year: 2012-13 Income Tax Officer, Ward-9(1), Kolkata Vs. Aakash Saree Trading Private Limited (Appellant) (Respondent) PAN: AAICA7219C Appearances: Department represented by : Amuldeep Kaur, Addl. CIT, Sr. DR. Assessee represented by : None. Date of concluding the hearing : February 5th, 2025 Date of pronouncing the order : February 27th, 2025 ORDER PER RAKESH MISHRA, ACCOUNTANT MEMBER: This appeal filed by the Revenue is against the order dated 25.01.2023 of the Commissioner of Income Tax (Appeals)-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 the AY 2012-13, which has been passed against the assessment order u/s 143(3) of the Act, dated 17.03.2015. Page | 2 I.T.A. No.: 1291/KOL/2023 Assessment Year: 2012-13 Aakash Saree Trading Private Limited. 1.1. The Registry has informed that the appeal filed by the Revenue is barred by limitation by 243 days. An application dated 20.11.2023 along with an ‘affidavit’ dated nil and which is not notarised but contains similar details seeking condonation of delay has been filed by the Revenue for condoning the delay stating as follows: “1. The Ld. CIT(A) NFAC, Delhi has passed order in Appeal No ITBA/NFAC/S/250/2022-23/1049103356(1) dated 25.01.2023 through ITBA. 2. The order of the Ld. CIT(A) has neither been communicated to this stakeholder nor any alert on passing the order by the Ld. CIT(A) has been sent either through SMS or through e-mail or through any other mode by the Departmental system network to this stakeholder. 3. Orders of Ld. CIT(A)s are downloaded from the Departmental system on manual checking basis. During the period from January, 2023 to May, 2023 this stakeholder was under pressure of disposing time barring matters. For this reason and due to nonavailability of sufficient system resources, the searching of appeal order in ITBA systems could not be done on regular basis. 4. The appellant submits that there were sufficient causes for non- presenting the appeal within due time and the appeal may kindly be heard on merit for the interest of Revenue.” 1.2. Considering the application for condonation of delay and the reasons stated therein, we are satisfied that the Revenue had reasonable and sufficient cause and was prevented from filing the instant appeal within statutory time limit. We, therefore, condone the delay and admit the appeal for adjudication on merit. 2. The Revenue is in appeal before the Tribunal raising the following grounds of appeal: “Ground No.-1:- Whether on the fact and in the circumstances of the case, the Ld. CIT(A) erred in deleting the addition made u/s 68 of the Income Tax Act, 1961 to the amount of Rs. 5,25,00,000/- against issue of shares as unexplained cash credit. Page | 3 I.T.A. No.: 1291/KOL/2023 Assessment Year: 2012-13 Aakash Saree Trading Private Limited. Ground No.-2:- Whether on the fact and in the circumstances of the case, the Ld. CIT(A) did not consider the case relying on recently based the verdict of the Hon'ble Apex Court on 05.03.2019 in the case of Pr. CIT (Central-1), Delhi Vs. NRA Iron & Steel Pvt. Ltd. (412 ITR 161) also suggests that if the enquiries and investigations reveals that identity of the creditors to be dubious or doubtful or lack creditworthiness, then the genuineness of the transaction would not be established. In such a case the assessee would not have discharged the primary onus contemplated by section 68 of the Income Tax Act, 1961. In facts of the case the Ld. CIT(A) completely ignored this aspect. Thus the Ld. CIT(A) erred in giving relief to the assessee and deleted the addition made by the AO. Ground No.-3:- Whether on the fact and in the circumstances of the case, the Ld. CIT(A) was incorrect in granting relief and deleted the addition made by the A.O. where the assessee failed to discharge its legal obligation to prove the receipt of share capital & share premium to the satisfaction of the AO. Ground No.4:- Whether on the fact and in the circumstances of the case, the Ld. CIT(A) was justified to delete the addition made by the AO. without considering the fact that the source of share application money including share premium were not properly explained by the assessee and it lacked any real profit making business credence. Ground No.-5:- Whether on the fact and in the circumstances of the case, the Ld. CIT(A) was justified to delete the addition, in ignoring the facts that the creditworthiness of the subscribing entities were not established before the AO during the course of the assessment proceedings through the onus of proving the identity of the creditors vests solely with the assessee. Ground No.-6:- Whether on the fact and in the circumstances of the case, the Ld. CIT(A) was justified to delete the addition, in not considering the facts that the real intention of the assessee company for introducing such a huge amount in the form of share capital and share premium in its business only to introduce its unaccounted money in the form of fresh share capital. Ground No.-7:- Whether on the fact and in the circumstances that the department craves leave to add to and/or alter, amend, modify or rescind the grounds herein above before or hearing of this appeal.” 3. Brief facts of the case are that the assessee is a company engaged in the business of share trading and investment and had filed the return of income for AY 2012-13 declaring ‘NIL’ income on 25.09.2013. The case was selected for scrutiny to examine large share premium received Page | 4 I.T.A. No.: 1291/KOL/2023 Assessment Year: 2012-13 Aakash Saree Trading Private Limited. by the company. The Ld. AO passed the order u/s 143(3) of the Act on 17.03.2015 making an addition of Rs. 5,25,00,000/- received by the assessee company as share capital. Aggrieved with the assessment order the assessee filed appeal before the Ld. CIT(A) who has allowed the appeal of the assessee after giving finding as under and deleted the addition of Rs. 5,25,00,000/-: “7. Ground No. 2: As stated above, the appellant has chosen not to furnish any replies to the notices of hearing issued u/s 250. On perusal of the assessment order it is noticed that the Ld. AO had issued notices under section 133(6) to the share holders who have applied/subscribed to the shares of the appellant company. The Ld. AO also mentions that replies have been received against the said notices issued u/s 133(6). Subsequently, the Ld. AO has issued summons u/s 131 to the director of the appellant company which as per the assessment order was returned back unserved by the postal department. It is un-understandable as to why the Ld. AO had not intimated the authorised representative appearing before him in this case about the summon issued u/s 131. Further, it is also noticed that, as per assessment order, the summon was issued on 13.03.2015 for personal appearance on 26.02.2015. Also the assessment order is dated 17.03.2015. These dates present a complex puzzle since it is not possible for the summonee to appear on 26.02.2015 if the summon itself is issued on 13.03.2015. If it is presumed the date for appearance is 26.03.2015 then it would appear that the assessment order had been passed even before letting the appellant opportunity of being heard. Further, the Ld. AO does not point out any discrepancies/adverse inferences from the replies received in response to the notices issued u/s 133(6). In view of the above, the assessment order passed by the Assessing Officer is bad in law and unsustainable. Therefore, the Assessing Officer is directed to delete the addition of Rs.5,25,00,000/- made an account of share capital received by the appellant company during the year. The appeal on this ground is allowed. 7.1. Ground No. 1 & 3: In view of the relief given at ground no. 2 supra these grounds do not require separate adjudication. 8. In the result, appeal is allowed.” Aggrieved with the order of the Ld. CIT(A), the Revenue has filed the appeal before this Tribunal. Page | 5 I.T.A. No.: 1291/KOL/2023 Assessment Year: 2012-13 Aakash Saree Trading Private Limited. 4. None appeared on behalf of the assessee, therefore, the case was heard with the assistance of the Ld. Sr. DR. It was brought to the notice of the Bench that in respect of the share subscribers, the summons issued to the directors were returned unserved by the Postal Department and the Director failed to appear before the Ld. AO for personal deposition on the given date and time. The Ld. AO relied upon the judicial pronouncements by Hon’ble Supreme Court in the case of Sumati Dayal vs. CIT (214 ITR 801) (SC), CIT vs. Durga Prasad More 82 ITR 540 (SC) and also several other judicial pronouncements and held that it was a case where the assessee had introduced its own undisclosed fund in the garb of subscription by shareholders and as the creditworthiness of the shareholders could not be satisfactorily established by the Directors of the assessee company, a sum of Rs. 5,25,00,000/- shown as share capital contribution in the books of the assessee was treated as undisclosed income and added back u/s 68 of the Act to the declared total income for the assessment year under consideration. Ld. Sr. DR informed the Bench that the order of the Ld. CIT(A) was ex-parte as the assessee had chosen not to furnish details in response to the notices issued for hearing and the appeal was disposed of after considering the facts on record and the legal provisions. However, the appellate order does not mention any judicial pronouncements relating to law on the issue. As regards the finding of the Ld. CIT(A) in para 7 that replies have been received against the said notices issued u/s 133(6) of the Act, it was informed by the Ld. Sr. DR that basic submissions were furnished. The Ld. CIT(A) had not done any verification nor any discrepancy noted by the Ld. AO was verified nor any remand report from the Ld. AO was called for and therefore, it was requested that the order of the Ld. CIT(A) may be set aside and the Page | 6 I.T.A. No.: 1291/KOL/2023 Assessment Year: 2012-13 Aakash Saree Trading Private Limited. matter may be remitted to the Ld. AO for making assessment order de novo and examination of the facts of the case. 5. We have considered the submissions made. No replies were furnished before the Ld. CIT(A) nor any of the Directors appeared before the Ld. AO. In ground no. 2 the Revenue has raised the issue that the Ld. CIT(A) did not consider the case in the case of Pr. CIT (Central-1), Delhi vs. NRA Iron & Steel Pvt. Ltd. (412 ITR 161) in which it is held that if the enquiries and investigations revealed that identity of the creditors to be dubious or doubtful or lack creditworthiness, then the genuineness of the transaction would not be established and the assessee would not have discharged the primary onus contemplated by section 68 of the Act. In the facts of the case, the Ld. CIT(A) completely ignored this aspect and erred in giving relief to the assessee and deleted the addition made by the Ld. AO. In ground no. 4 it is also agitated that the source of the share application money including share premium was not properly explained by the assessee and it lacked any profit-making business credence. 6. We have considered the submissions made by the Ld. Sr. DR and also gone through the facts of the case. The Ld. CIT(A) has passed a very cryptic order, specifically as in the 7th para and has deleted the addition of Rs. 5,25,00,000/- but has not considered the basic facts of the case that neither the source of share capital was satisfactorily explained nor even the premium charged was justified. Further, the Directors also failed to appear. Thus, in view of the facts of the matter, since neither any submission was made before the Ld. AO nor any evidence was filed before the Ld. CIT(A) yet relief has been allowed, we deem it appropriate in the interest of justice and fair play that both the orders of the Ld. Page | 7 I.T.A. No.: 1291/KOL/2023 Assessment Year: 2012-13 Aakash Saree Trading Private Limited. CIT(A) as well as of the Ld. AO are set aside and the matter is remitted to the Ld. AO for the assessment to be done de novo. The assessee shall be at liberty to file evidence in support of the justification for the share capital introduced and against the addition made and shall not seek unnecessary adjournment and the Ld. AO shall make the assessment order de novo after considering the submissions of the assessee, if any. 7. In the result, the appeal filed by the Revenue is allowed for statistical purposes. Order pronounced in the open Court on 27th February, 2025. Sd/- Sd/- [Duvvuru RL Reddy] [Rakesh Mishra] Vice President (KZ) Accountant Member Dated: 27.02.2025 Bidhan (P.S.) Page | 8 I.T.A. No.: 1291/KOL/2023 Assessment Year: 2012-13 Aakash Saree Trading Private Limited. Copy of the order forwarded to: 1. Income Tax Officer, Ward-9(1), Kolkata. 2. Aakash Saree Trading Private Limited, 15/1, Sovaram Bysack Street, Burra Bazar, Kolkata, West Bengal, 700007. 3. CIT(A)-NFAC, Delhi. 4. CIT- 5. CIT(DR), Kolkata Benches, Kolkata. 6. Guard File. //True copy // By order Assistant Registrar ITAT, Kolkata Benches Kolkata "