Shanker Credits Pvt. Ltd., Kolkata V. I.T.O., Ward - 1(2), Kolkata, Kolkata

ITA 132/KOL/2023

AI Insights

The case involves Shanker Credits Pvt. Ltd., which appealed against the order of the Commissioner of Income Tax (Appeals) confirming an addition of Rs. 26.76 crores to its income, attributed to unexplained share capital and share premium under section 68 of the Income Tax Act. The original assessment and subsequent proceedings had examined the increase in share capital and share premium, with the Assessing Officer initially accepting the transactions as genuine after issuing notices under section 133(6) to the share applicants. However, following a revision under section 263, the matter was re-assessed, leading to the addition of the said amount as unexplained cash credit. The Tribunal, after reviewing the extensive evidence provided by the assessee, including details of the investors and the nature of the transactions, concluded that the additions were unjustified.

• Counselvise Citation: [2023] 140 COUNSELVISE.COM (IT) 127271 (ITAT-KOLKATA)
• Duration Of Justice: 3 month(s) 9 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 30-05-2023
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: A
• Next Hearing Date: 02-04-2023
• Assessment Year: 2008-2009
• Appeal Filed On: 19-02-2023
• Other Referred Cases: CIT vs. Orissa Corporation Ltd., Crystal Networks Pvt. Ltd. vs. CIT, ITO vs. Cygnus Developers (I) Pvt. Ltd., M/s Lucky Agencies Pvt. Ltd. vs. ITO, CIT vs. Raj Kumar Agarwal, ITO vs. Devinder Singh Shant
• Laws Referred To: Income Tax Act
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Keywords: Unexplained cash credit; Revision of order; Question of law; Assessment record; Set aside
• Section: 147; 131; 68; 148; 263; 144; 143(3); 133(6)

Judgement Text

आयकर अपील य अ धकरण, कोलकाता पीठ ‘‘ए’’, कोलकाता IN THE INCOME TAX APPELLATE TRIBUNAL “A” BENCH: KOLKATA ी राजेश क ु मार, लेखा सद य एवं ी संजय शमा या यक सद य के सम [Before Shri Rajesh Kumar, Accountant Member & Shri Sonjoy arma, Judicial Member] I.T.A. No. 132/Kol/2023 Assessment Year: 2008-09 Shanker Credits Pvt. Ltd. (PAN: AAGCS 9447 N) Vs. ITO, Ward-1(2), Kolkata Appellant / (अपीलाथ ) Respondent / ( !यथ ) Date of Hearing / स ु नवाई क$ त&थ 03.04.2023 Date of Pronouncement/ आदेश उ)घोषणा क$ त&थ 29.05.2023 For the Appellant/ नधा /रती क$ ओर से Shri S. M. Surana, A.R Shri Abhishek Bansal, A.R For the Respondent/ राज व क$ ओर से Shri Subhrajyoti Bhattacharjee, CITDR ORDER / आदेश Per Rajesh Kumar, AM: This is the appeal preferred by the assessee against the order of the Ld. Commissioner of Income Tax (Appeals) – NFAC, Delhi (hereinafter referred to as the Ld. CIT(A)”] dated 21.01.2023 for the AY 2008-09. 2. The only issue raised in the various grounds of appeal is against the order of Ld. CIT(A) confirming the addition of Rs. 26.76 crores as made by the AO on account of share capital and share premium being unexplained u/s 68 of the Act. 3. Facts in brief are that the assessee filed return of income originally on 20.02.2018 declaring total income of Rs. 35,655/-. Thereafter the case of the assessee 2 I.T.A. No. 132/Kol/2023 Assessment Year: 2008-09 Shanker Credits Pvt. Ltd. was reopened u/s 147 of the Act and assessment was framed vide order dated 27.09.2010 passed u/s 147 read with Section 143(3) wherein the issue of increase in share capital and share premium was examined by the AO after making enquiries and calling for information/details by issuing notices u/s 133(6) of the Act to the share applicants. In para 3 of the assessment order the AO specifically mentioned that inquiries were conducted and information/details were obtained ,examined and verified. The ld. PCIT upon perusal of the assessment records came to the conclusion that the AO has conducted cursory enquiry qua the increase in share capital and share premium and the show cause notice u/s 263 of the Act was issued on 21.12.2012. The said assessment was revised by the Ld. PCIT u/s 263 of the Act vide order dated 4.3.2013 by directing the AO to conduct fresh enquiries and necessary verification. Pursuant to the said directions of the Ld .PCIT the present assessment was framed u/s 143(3) read with Section 263 of the Act vide order dated 26.03.2014 wherein an addition of Rs. 26.76 crores was made on account of share capital and share premium being unexplained cash credit u/s 68 of the Act. In the assessment so framed the AO noted in para 4 that enquiry from the directors of both investors and investee company could not be carried out by issuing summons pursuant to the directions in the order passed u/s 263 of the Act dated 04.03.2013 by the ld. PCIT. Thereafter the AO noted that the burden of proof is on the assessee to substantiate the said share capital and share premium in its books of account by producing its own directors as well as directors of the investor companies. The AO noted that since the assessee has failed to discharge its onus despite several opportunities given and merely held that the transactions of share capital and share premium were sham transactions and has rooted its own money in the garb of share capital and share premium and finally added the same to the income of the assessee u/s 68 of the Act. 4. In the appellate proceedings, the Ld. CIT(A) dismissed the appeal of the assessee by making four line orders which is extracted below: “3.3. Having considered the appellant submission and fact of the case it is seen that the alleged share capital introduction lacks creditworthiness because the appellant could not 3 I.T.A. No. 132/Kol/2023 Assessment Year: 2008-09 Shanker Credits Pvt. Ltd. substantiate the identity and creditworthiness of the directors of lending companies. Hence, the addition made by the AO is held to be valid.” 5. The Ld. A.R vehemently submitted before the bench that both the authorities below have failed to appreciate the facts incorrect perspective as both the authorities have not carried out any enquiry into evidences filed by the assessee before the AO as well as Ld. CIT(A). The Ld. A.R while referring to the original assessment order stated that in para 3 of the assessment order dated 27.09.2010 passed u/s 147 read with Section 143(3) it was clearly stated by the AO that the increase in share capital and share premium was examined by calling upon the assessee to furnish the evidences which were furnished and examined by the AO. The ld AR also submitted that besides notices were issued u/s 133(6) to the investor companies and the replies furnished by the investor companies were also cross verified and examined. The Ld. A.R also referred to the order sheet entries of the original assessment proceedings a copy of which is placed before us and submitted that in the original assessment proceedings the issue was examined at great length and even the notices were issued u/s 133(6) to all the share applicants and the replies/details filed by the share applicants were examined. The Ld. A.R also placed before the bench the order sheet entries in the set aside proceedings and pointed out that on 10.02.2014 the questionnaire was issued. The ld AR stated that on 27.02.2014 the counsel Shri Rajesh Agarwal appeared before the AO and furnished information and the AO then called for some more information and case was adjourned to 7.3.2014 when no one appeared. The ld AR vehemently stated that thereafter on 26.03.2014 the assessment was framed u/s 143(3) of the Act as mentioned in the order sheet entry of that date. The Ld. A.R by placing two sets of order sheet entries before the bench tried to explain that in the first scrutiny proceedings the issue was examined at great length whereas in the second set aside proceedings, the AO has passed the order within a period of 44 days which start commenced on 10.02.2014 with the issuance of first questionnaire and ended with the passing of assessment order on 26.03.2014. The Ld. A.R submitted that in the first round of assessment proceedings, the AO carried out detailed investigations by calling for evidences and details from the assesse and even notices were issued u/s 133(6) of 4 I.T.A. No. 132/Kol/2023 Assessment Year: 2008-09 Shanker Credits Pvt. Ltd. the Act to all the share applicants. The ld AR submitted that it is only after examining and analyzing the replies/details received from the investors companies as well as from the assesse the receipt of money in the form of share capital and share premium was accepted whereas in the second set aside proceedings, the AO has not done any investigation or inquiries the assessee placing all the evidences before the AO and even the notices u/s 133(6)/131 were not issued to the share applicants and he simply added the amount by stating that the burden is on the assessee to produce the directors of the assessee company as well as the directors of the share subscriber companies. The Ld. A.R has also filed copies of assessments framed u/s 143(3)/147 of the Act in respect of following share applicants namely Balaji Turnkey Project Solutions Pvt. Ltd. page 426-429, Blackberry Vyapaar Pvt. Ltd. 430-440, Chakdana Motor Finance Pvt. Ltd. page 441-442, Khera Motor Finance Pvt. Ltd page 443-447, Nirupama Commerce Pvt. Ltd. 448-450, Rooprekha Vyapaar Pvt. Ltd. 451-454, Sigma Vyapaar Pvt. Ltd. 455-457 and Tarama Apartment Pvt. Ltd. 458-460. The Ld. A.R submitted that the assessee has filed all the necessary evidences vide written submission dated 11.03.2014 which was filed in reply to notice u/s 148 with questionnaire dated 27.02.2014 and the details filed commenced from 67 to 400 pages comprising documents such as bank statements, master data, signatory details, annual audited accounts. The ld AR stated that the assessee has also filed documents relating to source of share applicants namely acknowledgments of return of income, audited financial statements, List of investments, copies of bank statements, master data and signatory details etc. The Ld. A.R submitted that despite having furnished all evidences the AO has failed to conduct any enquiry and simply relied on the direction issued by the Ld. PCIT and in the assessment order the AO even stated that no enquiry could be conducted by issuing notice u/s 131 of the Act as it is the responsibility of assessee to produce the directors of the assessee company as well as of investor companies . The Ld. A.R submitted that the order passed by the AO as confirmed by the Ld. CIT(A) by passing four line’s order is contrary to the facts on records and also contrary to the ratios laid down in the various decisions. The Ld. A.R in defense of his arguments relied on the decision of Hon’ble Apex Court in the case of CIT vs. 5 I.T.A. No. 132/Kol/2023 Assessment Year: 2008-09 Shanker Credits Pvt. Ltd. Orissa Corporation Ltd. in 159 ITR 78 (SC) wherein the Hon’ble Supreme court has held that where the assessee has filed names and addresses of the alleged creditors and it is in the knowledge of the revenue that the said creditors were income tax assessees and their index numbers were in the file of the revenue, then it is the duty of revenue to examine the source of income of the said creditors whether they were creditworthy and where no efforts were made to pursue the said creditors and the tribunal came to the conclusion that the assessee has discharged burden that lay on it then it could not be said that such a conclusion was unreasonable or perverse or based on no evidence and if the conclusion was based on some evidences 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. The Ld. A.R submitted that in the present case also though the assessee has placed before the AO assessment framed and furnished various information with respect to the share subscriber. The Ld. A.R also relied on the decision of Hon’ble Calcutta High Court in the case of Crystal Netwroks Pvt. Ltd. vs. CIT in ITA 158 of 2002 dated 29.07.2010, decision of Kolkata ITAT in the case of ITO vs. Cygnus Developers (I) Pvt. Ltd. in ITA No. 282/Kol/2012 dated 02.03.2016, M/s Lucky Agencies Pvt. Ltd. vs. ITO in ITA NO. 2501/Kol/2019 dated 23.02.2023. The Ld. A.R finally submitted that the order passed by the Ld. CIT(A) may be set aside and AO should be directed to delete the addition. In the conclusion of the Ld. CIT(A) the genuineness of the transaction were never doubted and it was only stated that identity and creditworthiness of the assessee could not be substantiated. 6. 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. The Ld. D.R submitted that in the first round the AO has simply issued notices u/s 133(6) of the Act and had not mentioned whether the subscribers have replied to the said notices or failed to file their reply and also not stated as to how this case was dealt with. The ld DR stated that the AO has stated in page1 para 3 in assessment order that the increase in share capital and share premium were examined and enquired after issuing notices u/s 133(6) of the Act and thus accepted the transaction as 6 I.T.A. No. 132/Kol/2023 Assessment Year: 2008-09 Shanker Credits Pvt. Ltd. genuine. The Ld. D.R submitted that in the set aside assessment proceedings, the AO gave a couple of opportunities to proof the share capital/ share premium by furnishing the necessary evidence which nonetheless were furnished by the assessee however the director of the assessee company as well as investor were not reproduced and no enquiry could be held and passed the order u/s 263 of the act. Therefore the Ld. D.R submitted that the addition was rightly made by the AO and also confirmed by the Ld. CIT(A) after taking into account the reply of the assessee and the various circumstantial evidences. 7. We have heard the rival contentions and perused the material on record. We observe that the assessee has raised share capital/ share premium to the tune of Rs. 26.76 crores form various share subscribers who are private limited companies. The issue was also examined in the assessment proceedings which culminated in passing of order dated 27.09.2010 u/s 147 read with Section 143(3) wherein in para 3, the AO has stated that the issue of share capital / share premium was examined and the notices were issued u/s 133(6) and replies were received which were also examined. The said part of the AO’s order is extracted below: “During the Financial Year 2007-08, the authorized capital of the assessee company was raised from Rs. 2,35,00,000/- to Rs. 5,00,00,000/- and the assessee enhanced its paid-up share capital by Rs. 2,67,60,000/- from Rs. 2,28,10,000/- to Rs. 4,95,70,000/-. Along with this enhancement in its paid up share capital, and also raised its share premium Reserve by Rs. 24,08,40,000/- from Rs. 17,10,90,000/- to Rs. 41,19,30,000/-. Inquiries were conducted with the various shareholders of the assessee company by issuing notice u/s 133(6) and verifying their responses.” In the set aside proceedings, the AO issued questionnaire to the assessee which was replied with necessary evidence/details as to the share subscribers their identites, creditworthiness and genuineness. The AO however did not examine into these details or issued notices u/s 133(6)/131 of the Act on the ground that it is the responsibility of the assessee to produce these persons / investors and stated that no enquiry could be carried out as these persons were not produced before the AO but the fact remains that notices were not issued by the AO. We also note that the assessee has also placed before the AO the assessment framed u/s 143(3) / 144 read with 147 in case of investor companies copies of which are filed at page 426 to 460 of PB besides filing 7 I.T.A. No. 132/Kol/2023 Assessment Year: 2008-09 Shanker Credits Pvt. Ltd. other details such as ITR’s, audited accounts, bank statement, master data etc. We have also examined the order sheet entries placed in the original assessment proceedings as well as in the set aside assessment proceedings and find that original assessment proceedings the issue was examined at great length by the AO whereas in the set aside assessment proceedings hardly any enquiry or investigation was carried out. We note that first questionnaire was issued on 10.02.2014 which was replied to 27.02.2014 by filing necessary details. Thereafter case was adjourned to 7.3.2014. Thereafter the AO proceeded to frame the assessment on 26.03.2014 with the observations that enquiry could not be conducted because the assessee has not produced these share investors. We note that despite having filed all the evidences, no enquiry was done and the Ld. CIT(A) has simply affirmed the finding of the AO by holding that no identity and creditworthiness of the creditors could not be proved by the assessee by ignoring all the evidences placed before him. Under the circumstances, we are not in a position to sustain the order of Ld. CIT(A). We find support from the decision of Hon’ble Supreme Court in the case of Orissa Corporation Ltd. (supra) wherein the Hon’ble Apex Court has held as under: “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.” 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 353 ITR 171 (Cal ) 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 8 I.T.A. No. 132/Kol/2023 Assessment Year: 2008-09 Shanker Credits Pvt. Ltd. prove 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.” The case of is also covered by the decision of the coordinate bench by ITO Vs M/s Cygnus Developers India Pvt. Ltd. (ITA No. 282/Kol/2012) 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 9 I.T.A. No. 132/Kol/2023 Assessment Year: 2008-09 Shanker Credits Pvt. Ltd. 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.” In the instant case before us also, the assessee has furnished all the evidences proving identity and creditworthiness of the investors and genuineness of the transactions but AO has not commented on these evidences filed by the assessee. Besides all the investors have also furnished complete details/evidences before the AO which proved the identity , creditworthiness of investors and genuineness of the transactions. Under these facts and circumstances and considering underlying facts in the light of ratio laid down in the decisions as discussed above , we are inclined to uphold the order of Ld. CIT(A) by allowing the appeal of the assessee. 8. In the result, the appeal of the assessee is allowed. Order is pronounced in the open court on 29 th May, 2023 Sd/- Sd/- (Sonjoy Sarma /संजय शमा ) (Rajesh Kumar/राजेश क ु मार) Judicial Member/ या यक सद य Accountant Member/लेखा सद य Dated: 29 th May, 2023 SB, Sr. PS 10 I.T.A. No. 132/Kol/2023 Assessment Year: 2008-09 Shanker Credits Pvt. Ltd. Copy of the order forwarded to: 1. Appellant- Shanker Credits Pvt. Ltd., C/o Rajesh Mohan & Associates, Unit No. 18, 5 th Floor, Bagati House, 34, Ganesh Chandra Avenue, Kolkata-700013 2. Respondent – ITO, Ward-1(2), Kolkata 3. Ld. CIT(A)-NFAC, Delhi 4. Ld. PCIT- , Kolkata 5. DR, Kolkata Benches, Kolkata (sent through e-mail) True Copy By Order Assistant Registrar ITAT, Kolkata Benches, Kolkata